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. 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. 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. 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. 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.