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, the JSF will incorporate low observable technologies, defensive avionics, advanced onboard and offboard sensor fusion, and internal and external weapons. The JSF aircraft design has three variants: conventional takeoff and landing variant for the Air Force, aircraft carrier-suitable variant for the Navy, and short takeoff and vertical landing variant for the Marine Corps, the United Kingdom, and the Air Force. These aircraft are intended to replace aging fighter and attack aircraft currently in the inventory (see table 1). In 2004, DOD extended the JSF program schedule to address problems discovered during systems integration and the preliminary design review. Design efforts 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. Program officials 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. As a result, the initial operational capability date was delayed. DOD is in the process of reestablishing resource levels needed to deliver capabilities, given current and expected future conditions. The new business case will be presented to the Office of the Secretary of Defense (OSD) decision makers this spring. A key to successful product development is the formulation of a business case that matches 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, development does not go forward. If the business case measures up, the organization commits to the development of the product, including the financial investment. This calls for a realistic assessment of risks and costs; doing otherwise undermines the intent of the business case and invites failure. Program managers in organizations employing best practices are incentivized to identify risk early, be intolerant of unknowns, and be conservative in their estimates. Ultimately, preserving the business case strengthens the ability of managers to say no to pressures to accept high risks or unknowns. A key objective of the JSF acquisition program is to develop and produce fighter aircraft with greater capabilities and lower acquisition and ownership costs than previous fighter aircraft and to deliver the aircraft in time to replace DOD’s aging fleet. However, since the program began in 1996, several program decisions have resulted in increased program costs, reduced procurement quantities, and delayed delivery dates—making the original business case unexecutable. Continued program uncertainties about the aircraft redesign, software development, flight test program, and procurement quantities make it difficult to estimate the total amount of resources needed. Given the uncertainties, the program needs more time to gain knowledge before committing to a new, more accurate business case. The current pause to replan JSF development and production provides the program this opportunity. Finally, frequent changes in JSF program management, if continued, will compromise efforts to execute the business case agreements. Several significant changes to the JSF acquisition program have made DOD’s original business case unexecutable. Purchase quantities have been reduced by more than 500 aircraft, total program costs have increased by about $12 billion, and delivery of the aircraft has been delayed by about 2 years (see table 2 and app. IV for more details). These changes have effectively reduced DOD’s buying power for its investment, as it now plans to buy fewer aircraft with a greater financial investment. The JSF acquisition program’s estimated development and procurement costs have increased. In addition, the number of aircraft it plans to deliver has been reduced. As a result, unit costs for the JSF aircraft have increased substantially, thereby reducing the program’s buying power. The most significant quantity reduction occurred after system development began in 2001, when the program reduced the number of aircraft it plans to procure from 2,852 to 2,443, or by 14 percent. The Navy—concerned that it could not afford the number of tactical aircraft it planned to purchase—reduced the number of JSF aircraft for joint Navy and Marine Corps operations from 1,089 to 680 by reducing the number of backup aircraft needed. However, the Navy has not indicated to the developer the exact mix of the carrier and short takeoff and vertical landing variants it intends to purchase. The cost estimate to fully develop the JSF has increased by over 80 percent. DOD expected that by using a joint development program for the three variants instead of three separate programs, JSF development costs could be cut by about 40 percent. However, cost increases have nearly eroded all of the estimated savings. Development costs were originally estimated at $24.8 billion. By the 2001 system development decision, these costs had increased by $9.6 billion largely because of a 36-month schedule extension to allow more time to mature the mission systems and a more mature cost estimate. By 2004, costs increased an additional $10.4 billion to $44.8 billion. The program office cited several reasons, including efforts to achieve greater international commonality, optimize engine interchangeability, refine the estimating methodology, and extend the schedule for unexpected design work. Almost half of this increase, $4.9 billion, was a result of an approximately 18-month delay for unexpected design work caused by increased aircraft weight that degraded the aircraft’s key performance capabilities. Figure 1 compares the original and latest development cost estimates. Current estimates for the program acquisition unit cost are about $100 million, and the total estimated cost to own an aircraft over its life cycle is $240 million—an increase of 23 percent and 11 percent, respectively. In 1996, the program established unit flyaway cost goals for each variant, expecting the variants to have a high degree of commonality and to be built on a common production line. However, commonality among the variants has decreased, and the cost to produce the aircraft has increased (see table 3). The unit flyaway cost for the conventional takeoff and landing variant has increased by 42 percent; the cost for the short takeoff and vertical landing variant has increased by a range of 37 to 55 percent; and the cost for the carrier variant has increased by a range of 29 to 43 percent. According to program data, a large part of the cost increase since the start of development can be attributed to labor costs for building the airframe and to the costs for producing the complex mission systems. With reduced quantities and increased program costs, the JSF program is now buying fewer aircraft at a higher cost, thereby reducing the program’s buying power. How effectively DOD manages its JSF funds will determine whether it receives a good return on its investment. A sound and executable business case is needed to effectively do this. Our reviews over the past 20 years have consistently found that DOD’s weapon system acquisitions take much longer and cost more than originally planned, causing disruptions and increasing pressures to make unplanned trade- offs to accommodate the resulting budget needs. The timely delivery of the JSF to replace aging legacy aircraft was cited as a critical need by the warfighter at the program start. When the program was initiated, in 1996, it planned to deliver initial operational capabilities to the warfighter in 2010. However, largely because of technical challenges, the program has delayed the delivery of operational aircraft, and current estimates put delivery at 2012 to 2013. Because of these delays, the services may have to operate legacy aircraft longer than expected. These challenges have also delayed interim milestones such as the start of system development, design reviews, and production decisions. Figure 2 illustrates changes to the overall program schedule since it began in 1996 through 2004. The full impact on costs, schedules, and aircraft performance brought about by recent design changes and aggressive software development and flight test programs add risks that may not be fully understood for some time. Continuing uncertainties about total quantities and types of the three JSF variants that the services and the international partners expect to purchase in the future also make it difficult to accurately estimate costs and schedules. In December 2003, DOD estimated program costs based on a notional idea of a restructured program. The cost estimates not only lacked detail but were based on a different aircraft design, development schedule, and procurement plan than what is now being considered. Over the past year, DOD has been working to restructure the JSF program to accommodate changes in the aircraft’s design; until this restructuring is completed, it will be difficult to accurately estimate program costs. The need for design changes largely resulted from the increased weight of the short takeoff and vertical landing variant and the impact it was having on key performance parameters. The other JSF variants’ designs were affected as well. The program plans to have a more comprehensive cost estimate in the spring of 2005.