As we have previously reported, DOD began the F-35 acquisition program in October 2001 without adequate knowledge about the aircraft’s critical technologies or design. In addition, DOD’s acquisition strategy called for high levels of concurrency or overlap among development, testing, and production. In our prior work, we have identified the lack of adequate knowledge and high levels of concurrency as major drivers of the significant cost and schedule growth as well as performance shortfalls that the program has experienced since 2001. The program has been restructured three times since it began: first in December 2003, again in March 2007, and most recently in March 2012. The most recent restructuring was initiated in early 2010 when the program’s unit cost estimates exceeded critical thresholds established by statute—a condition known as a Nunn-McCurdy breach. DOD subsequently certified to Congress in June 2010 that the program was essential to national security and needed to continue. DOD then began efforts to significantly restructure the program and establish a new acquisition program baseline. These restructuring efforts continued through 2011 and into 2012, during which time the department increased the program’s cost estimates and extended its testing and delivery schedules. Since then costs have remained relatively stable. Table 1 shows the cost, quantity, and schedule changes from the initial program baseline and the relative stability since the new baseline was established. As the program has been restructured, DOD has also reduced near-term aircraft procurement quantities. From 2001 and through 2007, DOD deferred the procurement of 931 aircraft into the future, and then again from 2007 and through 2012, DOD deferred another 450 aircraft. Figure 1 shows how planned quantities in the near term steadily declined over time. The F-35 is DOD’s most costly acquisition program, and over the last several years we have reported on the affordability challenges facing the program. As we reported in April 2016, the estimated total acquisition cost for the F-35 program was $379 billion, and the program would require an average of $12 billion per year from 2016 through 2038. The program expects to reach peak production rates for U.S. aircraft in 2022, at which point DOD expects to spend more than $14 billion a year on average for a decade (see fig. 2). Given these significant acquisition costs, we found that DOD would likely face affordability challenges as the F-35 program competes with other large acquisition programs, including the B-21 bomber, KC-46A tanker, and Ohio Class submarine replacement. In addition, in September 2014, we reported that DOD’s F-35 sustainment strategy may not be affordable. Through 2016, DOD had awarded contracts for production of 9 lots of F- 35 aircraft, totaling 285 aircraft (217 aircraft for the U.S. and 68 aircraft for international partners or foreign military sales). At the time of this report, the contract for lot 10 had not been signed. In 2013, the Departments of the Navy and the Air Force issued a joint report to the congressional defense committees providing that the Marine Corps and Air Force would field initial operating capabilities in 2015 and 2016, respectively, with aircraft that had limited warfighting capabilities. The Navy did not plan to field its initial operating capability until 2018, after the F-35’s full warfighting capabilities had been developed and tested. These dates represented a delay of 5 to 6 years from the program’s initial baseline. As planned, the Marine Corps and Air Force declared initial operational capability (IOC) in July 2015 and August 2016, respectively. DOD will need more time and money than expected to complete the remaining 10 percent of the F-35 development program. DOD has experienced delays in testing the software and systems that provide warfighting capabilities, known as mission systems, largely because the software has been delivered late to be tested and once delivered has not worked as expected. Program officials have had to regularly divert resources from developing and testing of more advanced software capabilities to address unanticipated problems with prior software versions. These problems have compounded over time, and this past year was no exception. DOD began testing the final block of software— known as block 3F—later than expected, experienced unanticipated problems with the software’s performance, and thus did not complete all mission systems testing it had planned for 2016. As a result, the F-35 program office has noted that more time and money will be needed to complete development. The amount of time and money could vary significantly depending on the program’s ability to complete developmental and operational testing. We estimate that developmental testing could be delayed as much as 12 months, thus delaying the start of initial operational testing, and total development costs could increase by nearly $1.7 billion. In addition, the Navy’s IOC and the program’s full-rate production decision could also be delayed. DOD continues to experience delays in F-35 mission systems testing. Although mission systems testing is about 80 percent complete, the complexity of developing and testing mission systems has been troublesome. For the F-35 program, DOD is developing and fielding mission systems capabilities in software blocks: (1) Block 1, (2) Block 2A, (3) Block 2B, (4) Block 3i, and (5) Block 3F. Each subsequent block builds on the capabilities of the preceding block. Over the last few years, program officials have had to divert resources—personnel and infrastructure—from developing and testing of more advanced software blocks to address unanticipated problems with prior software blocks. Over time, this practice has resulted in compounding delays in mission systems testing. Blocks 1 through 3i are now complete, and the program is currently focused on developing and testing Block 3F, the final software block in the current development program. Figure 3 illustrates the mission systems software blocks being developed for the program, the percentage of test points completed by block, and the build-up to full warfighting capability with Block 3F. Program officials spent some of 2016 addressing problems with Block 3i mission systems unexpectedly shutting down and restarting—an issue known as instability—which delayed Block 3F testing. In early 2016, officials were developing and testing Block 3i concurrently with Block 3F. In order to ensure that the Block 3i instability was addressed in time for the Air Force’s planned IOC in August 2016, officials diverted resources from Block 3F.That decision delayed subsequent testing that had been planned for Block 3F. Further delays resulted from the discovery of instability and functionality problems with Block 3F. To mitigate some schedule delays, program officials implemented a new process to introduce software updates quicker than normal. Although the quick software releases helped to ensure that testing continued, the final planned version of Block 3F, which was originally planned to be released to testing in February 2016, was not released until late November 2016, nearly a 10-month delay. As a result, program officials have identified the need for additional time to complete development. Program officials now project that developmental testing, which was expected to be completed in May, will conclude in October 2017, 5 months later than planned. However, based on our analysis, the program’s projection is optimistic as it does not reflect historical F-35 test data. Program officials believe that going forward they may be able to devote more resources to mission systems testing, which could lead to higher test point completion rates than they have achieved in the past. According to GAO best practices, credible schedule estimates are rooted in historical data. As of November 2016, program officials estimated that the program will need to complete as much as an average of 384 mission systems test points per month in order to finish flight testing by October 2017—a rate that the program has rarely achieved before. Our analysis of historical test point data as of December 2016 indicates that the average test point execution rates are much lower, at 220 mission systems test points per month. In addition, historical averages suggest that test point growth—additions to the overall test points from discovery in flight testing—is much higher than program officials assume, while estimated deletions—test points that are considered no longer required—are lower than assumed. Using the historical F-35 averages, we project that developmental testing may not be completed until May 2018, a 12-month delay from the program’s current plan. Table 2 provides a comparison of the assumptions used to determine delays in developmental testing. Our estimation of delays in completing developmental testing does not include the time it may take to address the significant number of existing deficiencies. The Marine Corps and Air Force declared IOC with limited capability and with several deficiencies. As of October 2016, the program had more than 1,200 open deficiencies, and senior program and test officials deemed 276 of those critical or of significant concern to the military services. Several of the critical deficiencies are related to the aircraft’s communications, data sharing, and target tracking capabilities. Although the final planned version of Block 3F software was released to flight testing in November 2016 and contained all 332 planned warfighting capabilities, not all of those capabilities worked as intended. In accordance with program plans, it was the first time some of the Block 3F capabilities had been tested. According to a recent report by the Director, Operational Test and Evaluation (DOT&E), fixes for less than half of the 276 deficiencies were included in the final planned version of Block 3F software. Prime contractor officials stated that additional software releases will likely be required to address deficiencies identified during the testing of the final planned version of Block 3F software, but they do not yet know how many releases will ultimately be needed. Delays in developmental testing will likely drive delays in current plans to start F-35 initial operational test and evaluation. Program officials have noted that according to their calculations developmental testing will end in October 2017 and initial operational testing will begin in February 2018.