Joint Strike Fighter: Progress Made and Challenges Remain
Published: 2007-03-15T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Joint Strike Fighter (JSF) program--a multinational acquisition program for the Air Force, Navy, Marine Corps, and eight cooperative international partners--is the Department of Defense's (DOD) most expensive aircraft acquisition program. DOD currently estimates it will spend $623 billion to develop, procure, and operate and support the JSF fleet. The JSF aircraft, which includes a variant design for each of the services, represents 90 percent of the remaining planned investment for DOD's major tactical aircraft programs. In fiscal year 2004, the JSF program was rebaselined to address technical challenges, cost increases, and schedule overruns. This report--the third mandated by Congress--describes the program's progress in meeting cost, schedule, and performance goals since rebaselining and identifies various challenges the program will likely face in meeting these goals in the future.
section_title: What GAO Found
paragraphs: The JSF program has delivered and flown the first development aircraft. However, cost and schedule goals established in the fiscal year 2004 rebaselined program have not been met. Total JSF program acquisition costs (through 2027) have increased by $31.6 billion and now DOD will pay 12 percent more per aircraft than expected in 2004. The program has also experienced delays in several key events, including the start of the flight test program, delivery of the first production representative development aircraft, and testing of critical missions systems. Delays in the delivery of initial development aircraft were driven by incomplete engineering drawings, changes in design, manufacturing inefficiencies, and parts shortages. Despite these delays, the program still plans to complete development in 2013, compressing the amount of time available for flight testing and development activities. Also, the program projects it will meet all but one key performance requirement--line of sight communications--that is currently dependent on other capabilities being developed outside the JSF program. Accurately predicting JSF costs and schedule and ensuring sufficient funding will likely be key challenges facing the program in the future. JSF continues to pursue a risky acquisition strategy that concurrently develops and produces aircraft. While some concurrency may be beneficial to efficiently transition from development to production, the degree of overlap is significant on this program. Any changes in design and manufacturing that require modifications to delivered aircraft or to tooling and manufacturing processes would result in increased costs and delays in getting capabilities to the warfighter. Low-rate initial production will begin this year with almost the entire 7-year flight test program remaining to confirm the aircraft design. Confidence that investment decisions will deliver expected capability within cost and schedule goals increases as testing proves the JSF will work as expected. The JSF program also faces funding uncertainties as it will demand unprecedented funding over the next 2 decades--more than $12.6 billion a year on average through 2027.

section_title: Letter
paragraphs: The Joint Strike Fighter (JSF) is the Department of Defense’s (DOD) most  expensive aircraft acquisition program. The JSF aircraft design includes  three variants to be used by the Air Force, Navy, Marine Corps, and eight  cooperative international partners. JSF is a central part of DOD’s overall  recapitalization strategy for its tactical aircraft fleet, representing 90  percent of the remaining planned investment for its major tactical aircraft  programs. DOD currently estimates it will spend $276 billion to develop  and procure about 2,443 aircraft and related support equipment by 2027  and an additional $347 billion to operate and support these aircraft once  they have been fielded.
The Ronald W. Reagan National Defense Authorization Act for Fiscal Year  2005 (P.L. 108-375) requires GAO to review the JSF program annually for   5 years. In the past 2 years, we issued reports identifying opportunities for  the program to reduce risks and improve the chance for more successful  outcomes. We recommended DOD pursue an acquisition strategy  consistent with best practices and DOD policy preferences regarding  evolutionary and knowledge-based acquisitions including deferring  production investments until the aircraft have been proven to work in  flight testing. DOD has taken no direct actions in response to these  recommendations and has stated that its current acquisition approach  fulfills the intent of DOD policy and further limits on production are  unnecessary. In 2006 Congress reduced the number of production aircraft  to be funded in fiscal year 2007 and the number of aircraft to receive  advanced procurement funds for aircraft to be procured in fiscal year  2008.
This report assesses the progress of the JSF program since it was  rebaselined in fiscal year 2004 to add resources needed to address  technical problems. Specifically, we (1) determined the JSF program’s  progress in meeting cost, schedule, and performance goals; and   (2) identified the challenges and risk the program will face in meeting  these goals in the future. We performed our work from June of 2006 to  March of 2007 in accordance with generally accepted government auditing  standards. For more information on our scope and methodology, see  appendix I.
The Act also requires us to certify whether we had access to sufficient  information to make informed judgments on the matters contained in our  report. We were provided sufficient information to measure the program’s  progress in meeting its goals based on cost data provided in April 2006 as  well as the challenges that remain for the program. At the time of our  review, DOD was still preparing its new cost estimate to be included in the  program’s Selected Acquisition Report dated December 31, 2006, expected  to be delivered to the Congress by April 2007. Because the new cost  estimate for the JSF program will not be available until after this report is  issued we are unable to make informed judgments on those estimated  costs. It should be noted that after our 2006 report was issued on March  15, 2006, DOD released its December 2005 Selected Acquisition Report,  which showed an increase of over $19 billion in estimated JSF program  costs.
subsections: section_title: Background
paragraphs: JSF is a joint, multinational acquisition program for the Air Force, Navy,  Marine Corps, and eight cooperative international partners. The program  began in November 1996 with a 5-year competition between Lockheed  Martin and Boeing to determine the most capable and affordable  preliminary aircraft design. Lockheed Martin won the competition, and the  program entered system development and demonstration in October 2001.
The program’s objective is to develop and deploy a technically superior  and affordable fleet of aircraft that support the warfighter in performing a  wide range of missions in a variety of theaters. The single-seat, single- engine aircraft is being designed to be self-sufficient or part of a  multisystem and multiservice operation, and to rapidly transition between  air-to-surface and air-to-air missions while still airborne. To achieve its  mission, JSF will incorporate low observable technologies, defensive  avionics, advanced onboard and offboard sensor fusion, internal and  external weapons, and advanced prognostic maintenance capability.  According to DOD, these technologies represent a quantum leap over  legacy tactical aircraft capabilities. At the same time, the JSF aircraft  design includes three variants: a conventional take-off and landing variant  for the Air Force; an aircraft carrier-suitable variant for the Navy; and a  short take-off and vertical landing variant for the Marine Corps and the  United Kingdom. JSF is intended to replace a substantial number of aging  fighter and attack aircraft in DOD’s current inventory.
In 2003 the JSF program system integration efforts and a preliminary  design review revealed significant airframe weight problems that affected  the aircraft’s ability to meet key performance requirements. Software  development and integration also posed a significant development  challenge. The program’s inability to meet its ambitious goals resulted in  the Department’s failing to deliver on the business case that justified initial  investment in JSF. As a result, purchase quantities have been reduced,  total program costs have increased, and delivery of the initial aircraft has  been delayed. These changes have effectively reduced DOD’s buying  power for its investment as it will now be buying fewer aircraft for a  greater financial investment. It is too late for the program to meet these  initial promises. To its credit, in fiscal year 2004, DOD rebaselined the  program extending development by 18 months and adding resources to  address problems discovered during systems integration and the  preliminary design review. Program officials also delayed the critical  design reviews, first flights of development aircraft, and the low-rate initial  production decision to allow more time to mitigate design risk and gather  more knowledge before continuing to make major investments. Table 1  shows the evolution of cost and delivery estimates from the start of the  program up to the latest official program information as of December  2005.
section_title: Program Cost Estimates Have Increased Significantly and Critical Milestones Have Been Delayed Since the JSF Was Rebaselined
paragraphs: Since establishing a new program baseline in fiscal year 2004, JSF program  costs have risen and key events have been delayed. JSF program costs  have increased by $31.6 billion since the program’s decision to rebaseline  in fiscal year 2004. This includes a $19.8 billion increase in costs since our  report last year in March 2006. The program has experienced delays in  several key events including delays in the start of the flight test program,  manufacturing and delivery of the first development aircraft, and delays in  the testing of critical missions systems. These delays reduce the amount of  time available for completing flight testing and development activities. The  program projects that it will meet its key performance requirements  except for one dealing with the warfighter’s ability to fully interoperate  with other platforms. Projections are based largely on engineering  analysis, modeling, and laboratory testing, and a 7-year test program to  demonstrate performance just started in December 2006.
subsections: section_title: Total Program Cost Estimates Have Increased
paragraphs: JSF program cost estimates have increased by $31.6 billion since the  program’s decision to rebaseline in fiscal year 2004. During this period,  estimates in some cost areas grew by $48 billion but were offset by   $16.4 billion due to quantity changes and the proposed termination of an  alternate engine program. According to the program, the cost estimate is  still mostly based on cost estimating relationships—like cost per pound— not actual costs and, therefore, is subject to change as the program  captures the actual costs to manufacture the aircraft. Also, the official  program estimate is based on the program’s December 31, 2005, Selected  Acquisition Report delivered to Congress in April 2006. We could not  review the most recent estimated costs of the JSF program. This  information is being used by the Office of the Secretary of Defense in  preparing its fiscal year 2008 budget request as well as for the program’s  Selected Acquisition Report dated December 31, 2006, expected to be  delivered to the Congress in early April 2007. Although the most recent  estimates were not available for this review, we expect that, unless  program content is changed, future cost estimates will be higher based on  the history of similar acquisition programs and the risks that remain in the  program. Table 2 shows the changes to the program’s costs since the  rebaseline in fiscal year 2004.
Since our last report, the program estimated a $19.8 billion net increase in  its total program costs. The majority of the cost growth, over 95 percent,  was for procurement. According to the program office, several factors led  to an increase in the procurement cost estimate. The most significant  increases include:    $10.3 billion—result of design and manufacturing changes to large  bulkheads in the wing section of the aircraft, need for 6 times more  aluminum and almost 4 times more titanium than originally estimated.  At the same time, titanium costs almost doubled.    $3.5 billion—result of reduced manufacturing efficiency because of  plans to build a certain number of wings at a new subcontractor.    $5.5 billion—result of changing the business relationship of the prime  and two major subcontractors.    $4.4 billion—result of projected higher support costs.    $14.7 billion—result of changing assumptions for estimating labor rates  and inflation.
The increases in procurement costs were offset by two main factors. First,  the cost estimate reflects production efficiency benefits of $9.2 billion  from producing 508 international partner aircraft that were not included in  previous estimates. Secondly, the program reduced procurement costs by  $5.1 billion as a result of the proposed elimination of the alternate engine  program. According to the program office, it expected savings from  manufacturing efficiencies by having one engine contractor producing a  larger quantity of engines. Program officials stated that they have had  difficulty quantifying cost savings that might accrue from competing  engine buys between contractors. For now Congress has reinstated the  alternate engine program and has required further analysis from DOD and  others on the costs of the program.
The program also reported that development costs decreased by   $1.2 billion. The reduction in development costs was due almost entirely to  the removal of the remaining estimated costs to complete the alternate  engine’s development. Again, Congress has since reinstated funding for the  alternate engine program.
The net effect of the JSF program cost increases is that DOD will pay more  per aircraft than expected when the program was rebaselined. The average  procurement unit costs have increased from $82 million to almost   $95 million and the program acquisition unit costs has increased from   $100 million to over $112 million.
section_title: Delays in Key Program Events Have Compressed the Development Schedule
paragraphs: Since the JSF program was rebaselined, it has experienced delays in  several key development activities but without corresponding changes to  the end of development. Holding firm to these dates forces the program to  find ways to complete development activities in less time, especially if  problems are discovered in the remaining 6 years of development. The  program office is evaluating different ways to reduce the risk of this  compression by being more efficient in its flight test activities. The first  JSF flight was scheduled for August 2006 but did not occur until mid  December 2006—about 4 months later than expected. According to the  program office, the first flight was successful but was shortened because  of a problem with instrumentation on the aircraft. Although the first  aircraft will be able to demonstrate some performance—limited flying  qualities, propulsion, and vehicle subsystems—it is not a production  representative aircraft with fully functioning critical mission systems or  the design changes from the rebaselined program that reduced airframe  weight.
The first flight of a production representative aircraft has been delayed   8 months to May 2008. This aircraft will be a short take-off and vertical  landing variant and will incorporate the design changes from the  rebaselined program. According to the latest program information, the  first fully integrated, capable JSF is scheduled to begin testing in the early  2012 time frame, a delay of several months. The first flight of a JSF with  limited mission capability has been delayed 9 months. The estimate for  first flight of a production representative conventional take-off variant has  been delayed 11 months to January 2009 and the first flight of a carrier  variant has been delayed by as much as 4 months to May 2009.
The flying test bed, also critical to reducing risk in the flight test program,  has been delayed about 14 months to late 2007. This aircraft is a modified  Boeing 737 that will be equipped with the sensors and mission system  software and hardware. The test bed will allow the program to test aircraft  mission systems such as target tracking and detection, electronic warfare,  and communications. Figure 2 shows schedule delays and the  compression in the development schedule.
section_title: Design and Manufacturing of Development Aircraft Has Been a Major Source of Delay
paragraphs: The program has completed manufacturing of its first development  aircraft and manufacturing data indicates that the program did not meet its  planned labor hour goals. Manufacturing data on subsequent development  aircraft that have begun manufacturing indicate these aircraft are not  currently meeting their planned manufacturing efficiencies either.  According to contractor data as of November 2006, the first development  aircraft had required 35 percent or 65,113 more labor hours than expected.  The program encountered most of the inefficiencies in the mate and  delivery phase and with the fabrication of the center fuselage and wing.
Figure 3 shows the planned hours versus the actual hours needed for  completing the first test aircraft.
When the first aircraft began manufacturing, the program had released  about 20 percent of the engineering drawings needed for building the  aircraft. This led to a backlog of drawings, negatively impacting the  availability of parts needed for efficient manufacturing operations. To  compensate for delays and parts shortages for production, components of  the aircraft were manufactured out of sequence and at different  manufacturing workstations than planned. For example, the wing section  was mated to the center fuselage before work on the wing was completed.  The wing was only 46 percent complete and still required more than   18,500 hours of work. Because this remaining work was completed at a  different workstation than was planned, contractor officials stated that  major tooling—such as a stand that supports the wing structure upright to  allow workers to install wiring and other parts—was not available for use.  As a result, workers were required to lie on the ground or bend under or  over the wing structure to complete the wing assembly, significantly  increasing the number of hours needed to complete this effort. According  to Defense Contract Management Agency, out-of-station work performed  on the wing required an additional 46 percent more hours than planned.  Late delivery of parts and late qualification of subsystems were the major  drivers to the mate and delivery inefficiencies, more than doubling the  hours needed to complete this activity.
Lockheed Martin, the prime contractor, appears to be focused on  developing an efficient and effective manufacturing process for the JSF,  but it is still very early in that process. The development aircraft now in  manufacturing are not currently meeting their planned efficiencies. As  with the first test aircraft, the program does not expect to manufacture the  development aircraft in the planned manufacturing sequence. The program  expects to move some wing fabrication activities to final assembly and do  both fabrication and final assembly concurrently. Early development  aircraft are already experiencing inefficiencies and delays. As of December  2006, wing manufacturing data for one of these aircraft shows the program  had completed less than 50 percent of the activities expected at this time  while requiring 41 percent more hours than planned. According to the  contractor and program officials, these inefficiencies are largely due to  late delivery of the wing bulkheads because of a change in their  manufacturing process. The Defense Contract Management Agency has  rated manufacturing as high risk, stating that the primary cause of risk is  the late delivery of parts to properly support the manufacturing work flow.  It projects further delays to schedule, increased costs, and subsequent out- of-sequence work.
An early indicator of design stability is the completion of design drawings  at the critical design review. In February 2006, the program held its critical  design review for production representative conventional and short take- off and vertical landing aircraft. At that time, the program had completed  47 percent of the short take-off aircraft design and 3 percent of the  conventional aircraft design. Our previous best practices work suggests  that completion of 90 percent of a product’s engineering drawings  provides tangible evidence that the design is stable. As with the first  aircraft, the program has experienced late releases of engineering  drawings, which has delayed the delivery of critical parts from suppliers to  manufacturing for the building of the initial aircraft. For example, based  on program data as of October 2006, more than one-third of the drawings  needed to complete these two variants are expected to be released late to  manufacturing.
Although the first aircraft encountered manufacturing inefficiencies, the  JSF Program and the contractor have pointed to some successes in this  initial manufacturing effort. For example, they have stated the mate of the  major sections of the aircraft was more efficient than in past aircraft  programs because of the state-of-the-art tools used to design the aircraft  and develop the manufacturing process. Likewise, they have indicated that  they have experienced fewer defects in this first aircraft than experienced  on legacy aircraft.
We would agree that the contractor has made progress in demonstrating  the use of several large tools and fabrication processes in building the first  test aircraft. However, a key factor in developing an efficient and effective  manufacturing process is a mature aircraft design. Major design  modifications can cause substantial and costly changes in the  manufacturing process. For example, since the first aircraft entered  production, the manufacturing process has had to be altered due to  redesigning required to resolve weight and performance problems.  According to Defense Contract Management Agency officials, some tools  already bought and in place were either no longer useful or being used less  efficiently. New tools had to be procured and the manufacturing process  had to change. The Defense Contract Management Agency noted that  these additional tooling costs were about $156 million. Contractor officials  stated that the current manufacturing capacity is sufficient to produce  about 24 aircraft per year.  Given that only one aircraft has been built and  essentially all of the flight and static and durability testing remains to be  done there is still significant risk that the JSF design for each of the three  variants will incur more changes as more design knowledge is gained.
section_title: The JSF Program Projects Key Performance Parameters Will Be Met Based on Modeling and Simulations
paragraphs: Currently, the JSF program estimates that by the time the development  program ends the aircraft design will meet all but one of its key  performance parameters. The performance estimates to date are based on  engineering analyses, computer models, and laboratory tests. Key  performance parameters are defined as the minimum attributes or  characteristics considered most essential for an effective military  capability—for the JSF there are eight parameters. The program office  estimates that seven of the eight key performance parameters are being  met. The aircraft is currently not meeting its full interoperability  performance parameter due to a requirement for beyond-line-of-sight  communications. Meeting the full interoperability required is currently  dependent on other capabilities being developed outside the JSF program.  Most ground and flight tests will have to be completed before all the key  performance estimates are confirmed. At this time, the program has  completed less than 1 percent of the flight test program and no structural  or durability tests have been started. According to the program’s test and  evaluation master plan, the key performance parameters will be verified  during testing from 2010 to 2013. Table 3 shows the program’s estimate for  each key performance parameter.
section_title: Challenges Remain in Executing the Balance of the JSF Program
paragraphs: The JSF program’s acquisition strategy includes significant challenges to  achieve projected cost and schedule goals. The program has begun  procurement but not yet demonstrated that the aircraft design is mature,  can be manufactured efficiently, and delivered on time. The flight test  program has just begun, and there is always risk of problems surfacing and  causing further delays. The degree of concurrency between development  and production in the JSF program’s acquisition strategy still includes  significant risks for cost and schedule overruns or late delivery of  promised capabilities to the warfighter. The program also faces  uncertainties with the amount of funding that will be available to support  the program’s plan. Other DOD review and oversight organizations have  also expressed concern over the level of risk in the program and the  resulting costs that will be incurred to complete this acquisition program.
subsections: section_title: Challenges to Complete Flight Testing
paragraphs: The program has planned a 7-year flight test program that includes over  11,000 hours of testing and over 6,000 flights. This is 75 percent more than  the F-22A’s flight test program and more than double the F/A-18E/F testing  efforts. As of this report, the flight test program was only beginning with  essentially all critical flight testing remaining to confirm that the aircraft  will indeed deliver the required performance. Figure 4 shows the planned  flight tests by major test categories.
The JSF variants possess significant similarities—all designed to have low  observable airframe characteristics, fly at supersonic speeds, shoot air-to- air missiles, and drop bombs on target—but each variant has unique  performance goals to support the services’ different operational concepts  and environments. Test officials acknowledge that each variant will  require separate flight testing to demonstrate that it will fly as intended.  About two-thirds of the flight tests are planned for demonstrating the  performance of each aircraft design. The other one-third of the flight tests  are expected to confirm shipboard operations, mission systems,  survivability, and armament.
Manufacturing and technical problems can delay the completion of a flight  test program, increase the number of flight test hours needed to verify that  the system will work as intended, and affect scheduled delivery to the  warfighter. Under the current testing schedule, the JSF program plans to  manufacture and deliver 15 flight test aircraft and 7 ground test articles in  5 years—an aggressive schedule when compared with other programs  with fewer variables. For example, the F-22A program took almost 8 years  to manufacture and deliver nine flight test aircraft and two ground test  articles of a single aircraft design. When the B-2 program began flight  testing in July 1989, it estimated that the flight test program would last  approximately 4.5 years and require about 3,600 flight test hours. When the  test program ended in 1997, the flight test hours had grown to 5,000 hours,  or by 40 percent, over an 8-year period. Program officials cited several  causes, including difficulties in manufacturing test aircraft and correcting  deficiencies from problems discovered during testing. The F-22A  encountered similar delays increasing a planned 4-year flight test program  to about 8 years, affecting the program’s ability to conduct operational  testing and move into production on schedule. As discussed earlier,  current JSF schedules are already showing that delivery of early test  aircraft will be later than the planned delivery date.
The flight test program will also hinge on the delivering aircraft with the  expected capabilities. JSF’s expected capabilities are largely dependent on  software that supports vehicle and mission systems. The program plans to  develop over 22 million lines of code—more than 6 times the lines of code  needed for the F-22A—in five blocks. The first block is nearly complete  and the last block is scheduled for completion in late 2011. The program  has completed less than 40 percent of the software needed for the system’s  full functionality. Most of the completed software is designed to operate  the aircraft’s flying capabilities, while much of the remaining software  development includes software needed for mission capability, including  weapons integration and the fusion of information from onboard sensors  and sources off the aircraft. Past programs have encountered difficulties in  developing software, which delayed flight test schedules. JSF program  officials acknowledged that the software effort will become particularly  challenging during 2007 and 2008 when all five software blocks will be in  development at the same time.
section_title: Challenges Created by Continued Concurrent Development and Production
paragraphs: The concurrency between development and production in DOD’s  acquisition strategy for JSF did not substantially change as a result of the  program’s rebaseline in fiscal year 2004. Therefore, the program is entering  low-rate initial production without demonstrating through flight testing  that (1) the aircraft’s flying qualities function within the parameters of the  flight envelope—that is, the set limits for altitude, speed, and angles of  attack; (2) the aircraft design is reliable; or (3) a fully integrated and  capable aircraft system can perform as intended. Starting production  before ensuring design maturity through flight testing significantly  increases the risk because of the of costly design changes that will push  the program over budget and behind schedule. Failure to capture key  design knowledge before producing aircraft in quantity can lead to  problems that eventually cascade and become magnified through the  product development and production phases. Figure 5 is a notional  illustration showing the impacts that can result from a highly concurrent  acquisition strategy to one with less concurrency and that captures key  design and manufacturing data before production begins.
While some concurrency may be beneficial to efficiently transition from  the development stage of a program to production, the JSF is currently  planned to be significantly more concurrent than the F-22A program that  failed to deliver the warfighting capability on time and at predicted costs.  Table 4 provides a more detailed comparison between the JSF and F-22A  development programs and the accomplishments and requirements before  starting production in each program.
As a result of the risk associated with highly concurrent development and  production, the JSF program plans to place initial production orders on  cost reimbursement contracts. Cost reimbursement contracts provide for  payment of allowable incurred costs, to the extent prescribed in the  contract. Such contracts are used when costs cannot be estimated with  sufficient accuracy to use any type of fixed price contract. Cost  reimbursement contracts place a substantial risk on the buyer—in this  case DOD—because the contractor’s responsibility for the cost risks of  performance has been minimized or reduced. As knowledge is gained over  time, the program office intended to shift the contract type to one where  more cost risk is placed on the contractor. However, DOD materials  supporting the President’s fiscal year 2008 budget show that all low rate  production orders will be placed on cost reimbursement contracts.
section_title: Unprecedented Funding Requirements Could Challenge Program Execution
paragraphs: To execute its current plan, the JSF program must obtain unprecedented  levels of annual funding—on average over $12.6 billion annually in  acquisition funds over the next 2 decades. Regardless of likely increases in  program costs, the sizeable continued investment in JSF—estimated at  roughly $252 billion over 20 years—must be viewed within the context of  the fiscal imbalance facing the nation within the next 10 years. The JSF  program will have to compete with many other large defense programs,  such as the Army’s Future Combat System and the Missile Defense  Agency’s ballistic missile defense system, for funding during this same  time frame. There are also important competing priorities external to  DOD’s budget. Fully funding specific programs or activities will  undoubtedly create shortfalls in others.
Funding challenges will be even greater if the program fails to achieve  current cost and schedule estimates for the revised program baseline. The  consequences of an even modest cost increase or schedule delay on a  program this size is dramatic. For example, since the program rebaseline  in fiscal year 2004, the estimated annual funding requirements have  increased every year from 2012 to 2027 by at least $1 billion and in some  cases by $3 to $7 billion. These funding increases would be enough to fund  several major programs’ activities. Figure 6 shows growth in estimated  annual funding requirements from December 2003 to December 2005.
Due to affordability pressures, DOD is beginning to reduce procurement  budgets and annual quantities. The just-released fiscal year 2008 defense  budget shows declining procurement quantities for the first years of  production. To meet future constrained acquisition budgets, Air Force and  Navy officials and planning documents suggest a decrease in maximum  annual buy quantities from 160 shown in the current program of record to  about 115 per year, a 28 percent decrease. While this will reduce annual  funding requirements, it will also stretch the procurement program at least  7 years to 2034, assuming buy quantities are deferred rather than  eliminated.
section_title: DOD Organizations Have Raised Concerns about Program Risks and Estimated Costs
paragraphs: DOD’s military service operational test organizations, the Cost Analysis  and Improvement Group (CAIG), and the Defense Contract Management  Agency (DCMA) have expressed concerns over the level of risk and  estimated costs of the program. These oversight and testing organizations  highlight some of the program risks and the challenges the JSF program  must overcome to avoid further slips in schedule and more cost growth.
A February 2006 operational assessment of the JSF program by Air Force,  Navy and United Kingdom operational test officials noted several areas of  risk. According to the test report, several of these issues, if not adequately  addressed, are likely to pose substantial or severe operational impact to  the JSF’s mission capabilities. Key concerns raised in the report include  the following:    Software development and testing schedules are success-oriented and  have little margin to accommodate delays.
Developmental flight test schedule provides little capability to respond  to unforeseen problems and still meet scheduled start of operational  testing. This threatens to slip operational testing and initial operational  capability.
Predicted maintenance times for propulsion system support, integrated  combat turn, and gun removal and installation do not meet  requirements.
Design requirements to preserve volume, power, and cooling for future  growth are in jeopardy and will limit capability to meet future  requirements.
Certain technical challenges in the aircraft or its subsystem design that  could impact operational capability.
In a follow-up discussion on the report, test officials stated that these  concerns were still current and they had not been informed by the  program office of planned actions to address them. The December 2006  Annual Report of DOD’s Director, Operational Test and Evaluation  recommended that the JSF program follow up on these issues.
The CAIG has expressed concerns about the reality of estimated program  costs. Its preliminary cost estimate in 2005 was substantially higher than  the program office estimate. The CAIG cited costs associated with mission  systems, system test, engines, and commonality as drivers in the  difference between its estimate and that of the program office. According  to discussions in 2006 with CAIG officials, they still have concerns and  continue to expect program costs to be much higher than the program  office’s current estimate. The CAIG is not required to submit its next  formal independent cost estimate until the preparations for Milestone C,  which for the JSF program is full-rate production. For major defense  acquisition programs, this milestone generally should occur before low- rate initial production. Milestone C is scheduled for late 2013.
DCMA’s concerns focus on the prime contractor’s ability to achieve its  cost and schedule estimates. DCMA, responsible for monitoring the prime  contractor’s development and procurement activities, found that delays in  aircraft deliveries and critical technical review milestones put at risk the  contractor’s ability to meet the current schedule. DCMA also identified  manufacturing operations as a high-risk area highlighting issues with parts  delivery, raw material availability, and subcontractor performance. Finally,  it raised concerns with contractor cost growth stating that the contractor  has shown continuing and steady increases since development started,  even after the contract’s target price was increased by $6 billion as part of  the program’s rebaseline. As of November 2006, DCMA projects that the  contractor’s current estimated development costs will increase by about  $1 billion.
section_title: Conclusions
paragraphs: The JSF is entering its 6th year of a 12-year development program and is  also entering production. The development team has achieved first flight  and has overcome major design problems found earlier in development. In  addition, the department counts on this aircraft to bear the brunt of its  recapitalization plans. Therefore, we believe the program is critical to the  department’s future plans and is viable, given progress made to date.  However, the current acquisition strategy still reflects very significant risk  that both development and procurement costs will increase and aircraft  will take longer to deliver to the warfighter than currently planned. Even  as the JSF program enters the mid point of its development, it continues to  encounter significant cost overruns and schedule delays because the  program has continued to move forward into procurement before it has  knowledge that the aircraft’s design and manufacturing processes are  stable. Although some of the additional costs were predictable, other  costs, especially those resulting from rework, represent waste the  Department can ill afford.
Flight testing began just a few months before the decision to begin low- rate initial production. The challenges and risks facing the program are  only expected to increase as the program begins to ramp up its production  capabilities while completing design integration, software design, and  testing. DOD’s approval to enter low-rate initial production this year  committed the program to this high risk strategy. If the program is unable  to mitigate risks, its only options will be to reduce program requirements  or delay when the program achieves initial operational capability. We see  two ways this risk can be reduced: (1) reducing the number of aircraft for  procurement before testing demonstrates their performance capabilities,  thereby reducing the potential for costly changes to the aircraft and  manufacturing processes or (2) reexamining the required capabilities for  initial variants with an eye toward bringing them up to higher capability in  the future.
Last year Congress reduced funding for the first two low-rate production  lots of aircraft thereby slowing the ramp up of production. This was a  positive first step in lowering risk during the early years of testing.  However, a significant amount of ground and flight tests remains over the  next 6 years.  All three variants need to demonstrate their flight  performance.  The carrier variant will be the last of the three variants to be  delivered to the flight test program.  It is now scheduled to start flight  testing in May 2009 and has nearly 900 flight tests planned to demonstrate  its flight performance.  If the program executes its plan for a steep ramp  up in production before proving the basic flying qualities of each aircraft  variant, the likelihood of costly changes to its significant investment in  production will remain high.
section_title: Recommendation for Executive Action
paragraphs: To improve chances of a successful outcome, we are recommending that  the Secretary of Defense limit annual low-rate initial production quantities  to no more than 24 aircraft per year, the current manufacturing capacity,  until each variant’s basic flying qualities have been demonstrated in flight  testing now scheduled in the 2010 time frame.
section_title: Agency Comments and our Evaluation
paragraphs: DOD provided us with written comments on a draft of this report. The  comments appear in appendix II.
DOD non-concurred with our recommendation stating that the current JSF  acquisition strategy provides an effective balance of technical risk,  financial constraints, and operational needs of the services. However, we  believe DOD’s actions to reduce aircraft quantities in the fiscal year 2008  President’s Budget are in line with our recommendation to limit  production to current manufacturing capacity until each variant’s flying  qualities have been demonstrated in flight testing.  In the 2008 budget,  DOD reduced the number of production aircraft it plans to buy during the  flight test program by about 35 percent as compared to its previous plan  for the JSF.  Under this new plan DOD does not substantially increase its  buy quantities of production aircraft until 2011. We continue to believe  that limiting production quantities until the design is demonstrated would  reduce the overlap in production and development while still allowing the  efficient transition from development to production. It would also make  cost and schedule more predictable and lessen the risk to DOD’s  production investment. The JSF program is still only in its sixth year of a  12-year development program with significant challenges remaining such  as completing the design, software development, and flight testing. As  such, there is continued risk that testing will not go as planned and  demonstrating the aircraft’s capability could be delayed beyond the  current plan.  Therefore, we maintain our recommendation and will  continue to monitor the progress in the test program and the resulting  dynamics between development and production.
We are sending copies of this report to the Secretary of Defense; the  Secretaries of the Air Force, Army, and Navy; and the Director of the  Office of Management and Budget. We will also provide copies to others  on request. In addition, the report will be made available at no charge on  the GAO Web site at http://www.gao.gov.
If you or your staff have any questions concerning this report, please  contact me at (202) 512-4841. Contact points for our offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. Other staff making key contributions to this report were  Michael Hazard, Assistant Director; Lily Chin; Matthew Lea; Gary  Middleton; Daniel Novillo; Karen Sloan; Brian Smith, Adam Vodraska; and  Joe Zamoyta.
section_title: Appendix I: Scope and Methodology
paragraphs: To determine the status of the Joint Strike Fighter (JSF) program’s cost,  schedule, and performance, we compared current program estimates  against estimates established after the program rebaselined in fiscal year  2004. Current official program cost estimates are based on the program’s  December 31, 2005, Selected Acquisition Report to Congress. At the time  of our review, the Office of the Secretary of Defense was still preparing its  new cost estimate to be included in the program’s Selected Acquisition  Report dated December 31, 2006, expected to be delivered to the Congress  in April 2007. Because the new official cost estimate for the JSF program  will not be available until after this report is issued we are unable to make  informed judgments on those estimated costs. It should be noted that after  our 2006 report was issued on March 15, 2006, DOD released its December  2005 Selected Acquisition Report, which showed an increase of over $19  billion in total estimated JSF program costs.
We identified changes in the program’s cost, schedule, and performance  since the program rebaseline and analyzed relevant information to  determine the primary causes of those changes. We reviewed JSF  management reports, acquisition plans, test plans, risk assessments, cost  reports, independent program assessments, and program status briefings.  We interviewed officials from the DOD acquisition program management  office and prime contractor to gain their perspectives on the performance  of the program.
To identify the challenges the program will face in the future, we  compared the programs plans and results to date with future plans to  complete development. We analyzed design and manufacturing data from  the program office and the prime contractor to evaluate performance and  trends. We reviewed program risk reports, earned value management data,  and manufacturing data to identify uncertainties and risks to completing  the program within the new targets established by the program rebaseline.  We analyzed test program and software data to understand the readiness  and availability of development aircraft for the test program. We also  obtained information on past DOD programs from Selected Acquisition  Reports and prior work conducted by GAO over the past two decades. We  interviewed officials and reviewed reports from several DOD independent  oversight organizations to gain their perspectives on risk in the program.
To assess the likely impacts of concurrently developing and manufacturing  JSF aircraft we compared the program’s plans and results to date against  best practice standards for applying knowledge to support major program  investment decisions. The best practice standards are based on a GAO  body of work that encompasses 10 years and visits to over 25 major  commercial companies. Our work has shown that valuable lessons can be  learned from the commercial sector and can be applied to the  development of weapons systems. We identified gaps in product  knowledge at the production decision, reasons for these gaps, and the  risks to the program. We also examined the F-22A program’s acquisition  approach. We interviewed officials from the DOD acquisition program  management office and prime contractor to gain their perspectives on  program risks and their approaches to managing risks.
In performing our work, we obtained information and interviewed officials  from the JSF Joint Program Office, Arlington, Virginia; F-22A Program  Office, Wright-Patterson Air Force Base, Ohio; Lockheed Martin  Aeronautics, Fort Worth, Texas; Defense Contract Management Agency,  Fort Worth, Texas; and offices of the Director, Operational Test and  Evaluation, and Acquisition, Technology and Logistics, Program Analysis  and Evaluation-Cost Analysis Improvement Group, which are part of the  Office of Secretary of Defense in Washington, D.C. We performed our  work from June of 2006 to March of 2007 in accordance with generally  accepted government auditing standards.
section_title: Appendix II: Comments from the Department of Defense