The F/A-22 is the Air Force’s next-generation air superiority fighter aircraft and incorporates a low observable (stealth) and highly maneuverable airframe, advanced integrated avionics, and a new engine capable of sustained supersonic flight without the use of afterburners. It was originally designed to counter threats posed by the Soviet Union and was intended to replace the F-15 fighter in the air-to-air combat role. Over the years, the Air Force decided to add a more robust air-to-ground capability not previously envisioned but now considered necessary to increase the utility of the aircraft. In 2002, the F-22 aircraft was redesignated the F/A-22, with the “A” representing the expanded ground attack capabilities. Officials initiated a modernization program to develop and integrate these new capabilities. The F-22 acquisition program started in 1986 with an intended development period of 9 years and an initial operational capability in March 1996. The Air Force’s plan at that time was to procure 750 aircraft. In the years since, the original business case has been severely weakened as threats, missions, and requirements have changed. Further, the program milestones have slipped, the development period lengthened to more than 19 years, development costs more than doubled, and a modernization program was added. The initial operational capability date is now December 2005. Amidst concerns about escalating costs and schedule, Congress placed cost limitations on both development and production budgets in 1997, later removing the development cost cap. (The current production cost cap is $37.3 billion.) Concomitantly, the planned procurement quantity has steadily decreased due to affordability concerns and changes in missions and combat requirements. Two major reviews of defense force structure and acquisition plans, the 1993 Bottom-Up Review and the 1997 Quadrennial Defense Review, both significantly reduced F/A-22 quantities. In addition, OSD’s “buy to budget” acquisition strategy, which essentially placed a ceiling on the total program costs, has resulted in further cuts to quantity as development cost increased. In December 2004, OSD issued Program Budget Decision 753, which reduced F/A-22 funding by $10.5 billion and cut 96 aircraft from the planned procurement quantity. The decision ends procurement in 2008, instead of 2011, and would reduce total procurement quantity to 178 aircraft. Figure 1 illustrates the downward trend in procurement quantity over the years juxtaposed with a rise in program acquisition unit costs, which has resulted in a significant loss in buying power. Program acquisition unit costs have increased largely due to (1) increased development and production costs; (2) decreased procurement quantities; and (3) increased costs to modernize and enhance capability. The current plan supporting the fiscal year 2006 defense budget request submitted in February 2005 is to acquire 178 aircraft for about $63.8 billion. Appendix II illustrates other changes in cost, quantity, and schedule experienced by the program since its commencement. Our March 2004 report discussed the significant changes in cost, quantity, capabilities, and mission since F-22 development began in 1986. We reported continued problems and delays in the development and testing schedules. We recommended that DOD complete a new business case that justifies the continued need for the F/A-22 and the quantities needed to carry out the air-to-air versus air-to-ground missions. The business case was to also consider alternatives within the constraints of future defense spending. Later in testimony, we stated that there are competing priorities both internal and external to DOD’s budget that require a sound and sustainable business case for DOD’s acquisition programs based in clear priorities, comprehensive needs assessments, and a thorough analysis of available resources. DOD partially concurred with our report recommendation but did not prepare a new business case, stating that it evaluates the F/A-22 business case elements as part of the routine acquisition and budget processes with the results reflected in the defense budget. We did not think these kinds of activities sufficiently analyzed and addressed the specific business case elements—analysis of need for original and new capabilities, assessment of alternatives, justification of needed quantities, and evidence that planned quantities were affordable. The Air Force, in the face of significant changes to the F/A-22, has not prepared a new business case to justify the resources needed to add a much more robust ground attack capability and to assume new missions. The requirements for the F/A-22 have changed significantly since its original business case and the available resources are in flux—both are key components of a business case needed to support further investments. A December 2004 budget decision reduced procurement funding and quantities but did not cut funding for modernization. This has made the current modernization plan obsolete as key ground attack and intelligence gathering enhancements had been slated for aircraft that have now been eliminated from the F/A-22 procurement program. While its total cost is not clear at this time and program content is subject to change, in 2003 OSD cost analysts estimated the modernization program would cost about $11.7 billion. The Air Force embarked on the expensive and wide-ranging modernization program without a new business case to support investments of billions of dollars to develop and deliver new capabilities and missions. The modernized F/A-22 would differ so significantly from the original aircraft in capabilities and missions that it should have been developed in an entirely separate acquisition program. Instead, the Air Force opted to incorporate modernization efforts within the existing acquisition program. A business case should match requirements with resources— proven technologies, sufficient engineering capabilities, time, and funding—when undertaking a new product development. First, the user’s needs must be accurately defined, alternative approaches to satisfying these needs properly analyzed, and quantities needed for the chosen system must be well understood. The developed product must be producible at a cost that matches the users’ expectations and budgetary resources. Finally, the developer must have the resources to design and deliver the product with the features that the customer wants and to deliver it when it is needed. If the financial, material, and intellectual resources to develop the product are not available, a program incurs substantial risk in moving forward. The original business case for the F/A-22 was made in 1986 to support acquiring large quantities of air superiority fighters to engage in conventional warfare and counter Cold War-era threats. These threats never materialized as expected. Because the program was in development for over 19 years, tactical fighter requirements, projected threats, and operational war plans changed. To enhance the utility of the F/A-22 for today and the future, the Air Force now plans to develop a robust air-to- ground attack capability to allow the aircraft to engage a greater variety of ground targets, such as surface-to-air missiles systems, that pose a significant threat to U.S. aircraft. It also plans to equip most of the F/A-22 fleet with improved capabilities to satisfy expanded warfighter requirements and to take on new missions, including intelligence data gathering and the suppression of enemy air defenses and interdiction. The Air Force established a time-phased modernization program to develop and insert new capabilities required to implement the Air Force’s Global Strike concept of operations. Table 1 shows how the Air Force intended to integrate new capabilities incrementally before the December 2004 budget decision reduced quantities by 96 aircraft. At the time of our review, officials were still determining the impacts of the budget decision on the modernization program content and quantities. Initial development work on modernization enhancements started in 2003 and is planned to extend over a 12-year period with the first set of new capabilities inserted into the production line in fiscal year 2007. By the end of development in 2015, the Air Force plans to have three different configurations (or blocks) of F/A-22s, each with distinct operational capabilities. Based on the current modernization road map, the Global Strike Basic configuration (block 20) will include 56 F/A-22s built primarily to perform air-to-air missions but with limited air-to-ground capability. The Global Strike Enhanced configuration (block 30) includes 91 aircraft that will perform the bulk of air-to-ground and electronic attack missions using advanced radars to track targets and small diameter bombs to destroy them. Block 40 encompasses both the Global Strike Full and Enhanced Intelligence, Surveillance, and Reconnaissance increments. This configuration of 128 aircraft is expected to perform such missions as suppression of enemy air defenses and gathering up-to-date information on potential adversaries’ locations, resources, and personnel to improve target identification and increase kill capabilities. According to program officials, these latter two increments are still conceptual in nature and subject to revision. The modernization program as currently planned is much in doubt because of the recent budget cut and the likely prospects for more changes. The instability in F/A-22 resources and upcoming DOD-wide reviews of capabilities and requirements may result in further revisions and cutbacks, further impacting modernization plans. Budget and programmatic decisions also cause ripple effects on other resource plans tied to the modernization, which may open up budgeted funds for other uses. In March 2003, OSD’s Cost Analysis Improvement Group (CAIG) estimated that the Air Force would need $11.7 billion for the planned modernization programs through fiscal year 2018. The CAIG estimate included costs for development, procurement, and retrofit of modernized aircraft. The Air Force’s latest estimated cost for the modernization program is about $5.4 billion through 2011. Future modernization costs beyond 2011 have not been definitized and are subject to change. The modernization program manager projected annual funding of $700 million to $750 million would be needed for the currently planned modernization program after 2011. The December 2004 budget decision places much of the modernization program in doubt, particularly the latter stages. OSD substantially reduced the F/A-22 budget, which will require another strategy for the modernization program.