The F-35 program is a joint, multinational acquisition to develop and field an affordable, highly common family of stealthy, next-generation strike fighter aircraft for the United States Air Force, Marine Corps, Navy, and eight international partners. The JSF is a single-seat, single-engine aircraft incorporating low-observable (stealth) technologies, defensive avionics, advanced sensor fusion, internal and external weapons, and advanced prognostic maintenance capability. There are three variants. The F-35A conventional takeoff and landing (CTOL) variant will provide air-to-ground attack capabilities to replace the Air Force’s F-16 Fighting Falcon and the A-10 Thunderbolt II aircraft, and will complement the F-22A Raptor. The F-35B short takeoff and vertical landing (STOVL) aircraft will be a multi- role strike fighter to replace the Marine Corps’ F/A-18C/D Hornet and AV- 8B Harrier aircraft. The F-35C carrier-suitable variant (CV) will provide the Navy and Marine Corps a multi-role, stealthy strike aircraft to complement the F/A-18E/F Super Hornet. The JSF is DOD’s largest cooperative program. Our international partners are providing about $5.1 billion toward development, and foreign firms are part of the industrial base producing aircraft. DOD’s funding requirements for the JSF assume economic benefits from partner purchases in reducing unit costs for U.S. aircraft. JSF concept development began in November 1996 with a 5-year competition between contractors to determine the most capable and affordable preliminary aircraft design. Lockheed Martin won the competition and the JSF program entered system development and demonstration in October 2001. Pratt and Whitney is the primary engine manufacturer, while General Electric has been developing a potential second source for the engine. System integration efforts and a preliminary design review then revealed significant airframe weight problems impacting key performance requirements. In March 2004, DOD rebaselined the program, adding time and money for development and delaying key milestones. The Navy and Marine Corps also reduced their planned procurement by 409 jets, reducing the total U.S. buy to the current 2,457 quantity. The program was again rebaselined in March 2007 to reflect additional cost increases and schedule slips and the procurement period was extended by 7 years to 2034 with reduction in annual quantities. Because of continuing problems and poor outcomes, the Secretary of Defense announced another comprehensive restructuring of the JSF program in February 2010. The restructuring followed an extensive Department-wide review initiated in 2009 and considered the findings and recommendations from three independent groups chartered to assess the program: the Joint Estimating Team (JET) evaluated program execution and resource requirements; the Independent Manufacturing Review Team (IMRT) assessed contractor capabilities and plans for ramping-up and sustaining production at maximum rates; and the Joint Assessment Team (JAT) reviewed engine costs and affordability initiatives. Key restructuring actions included adding $2.8 billion for development, extending flight testing by 13 months, adding flight test resources (one new test jet and use of 3 production jets), reduced near-term procurement by 122 aircraft, and review of the military services’ capability need dates. The Under Secretary of Defense for Acquisition, Technology and Logistics stated that the department-wide review would continue under new program management and cited 2010 as a critical year for assessing progress against the new plans and the expected delivery of all test aircraft, completion of hundreds of test flights, and meeting other key milestones. We supported these actions in our March 2010 report and subsequent testimonies. We noted the likelihood of additional cost growth and schedule extensions as the restructuring continues. In March 2010, the Department declared that the program experienced a breach of the critical cost growth statutory thresholds. The Department subsequently certified to Congress in June 2010 that the JSF program should continue. Table 1 summarizes the evolution of JSF cost and schedule estimates at key junctures in its acquisition history through the current Nunn-McCurdy certification. Since then, in January 2011, the Secretary of Defense announced additional development cost increases and further changes consequent to the ongoing restructure, but has not yet established a new approved acquisition program baseline. Ongoing JSF restructuring continues to add more cost and time for developing, testing, and delivering aircraft to the warfighter. These actions, effectively implemented, should result in more predictable and achievable program outcomes, but restructuring comes with consequences—higher upfront development costs, fewer aircraft received in the near term, training delays, and extended times for testing and delivering the capabilities required by the warfighter. Affordability for the U.S. and our allies is challenged because unit prices are about double what they were at program start and with new forecasts that the aircraft may cost substantially more to operate and maintain over the life cycle than the legacy aircraft they replace. Going forward, the program requires unprecedented levels of funding in a period of more austere defense funding. Defense leaders stated that the JSF program lost its focus on affordability and that restoring the focus is paramount to improving program outcomes. Defense leadership continued to restructure the JSF program following the Nunn-McCurdy certification. In January 2011, the Secretary of Defense directed additional changes, stemming in large part from the results of a comprehensive technical baseline review under new government and contractor management. Key program changes (1) added $4.6 billion to the development program through completion for a total development program estimate of $56.4 billion (an increase of 26 percent against the current baseline and 64 percent from the original baseline at program start); (2) extended the development test period to 2016 (a 4-year slip from the current baseline); and (3) reduced near-term procurement quantities by 124 aircraft in addition to the 122 aircraft cut announced in February 2010; and (4) lowered the annual rate of increase for boosting future production. Because of the lingering technical issues on the STOVL, the most complex variant, the Secretary decoupled STOVL flight tests from the combined test plan and scaled back STOVL production to only 3 in fiscal year 2011 and to 6 per year for fiscal years 2012 and 2013. This represents a total cut of 37 STOVL aircraft during this 3-year period compared to the fiscal year 2011 budget plans. In announcing these changes, the Secretary also noted the STOVL’s significant testing problems which include lift fan engine deficiencies, and poor durability test results, which could require redesigns and add weight to aircraft’s structure and propulsion system. While the Secretary decoupled STOVL from the flight test program, STOVL was not further separated from the rest of the JSF program for management and reporting activities. It remains a part of the combined JSF program for milestone decisions and cost, schedule, and performance reporting. Resolving STOVL problems and moving forward at an affordable cost is essential to the Marine Corps’ future plans, which depend upon acquiring the STOVL in quantity to directly accompany, protect, and provide firepower to its ground expeditionary forces. The recently submitted fiscal year 2012 Defense Budget reflects the financial impacts from restructuring actions through 2016. Compared to estimates in the fiscal year 2010 future years defense program for the same 5-year period, the Department increased development funding by $7.7 billion and decreased procurement funding by $8.4 billion reflecting plans to buy fewer aircraft. Table 2 summarizes the revised development and procurement funding requirements and annual quantities following the Secretary’s reductions. Even after decreasing near-term quantities and lowering the ramp rate, JSF procurement still rapidly increases. Annual funding levels more than double and quantities more than triple during this period. These numbers do not include the additional orders expected from the international partners. Additional changes to cost and schedule are likely as restructuring continues. At the time of this report, the Secretary had not yet granted new milestone B approval nor approved a new acquisition program baseline. Originally planned for November 2010, program officials now expect the new acquisition program baseline in late 2011. Also, cost analysts are still revising procurement funding requirements for the period fiscal year 2017 through completion of procurement in 2035. Accordingly, the net effect of reducing near-term procurement quantities and deferring these aircraft to future years is uncertain and depends upon the assumptions made about future unit prices, annual quantities, and inflation. We expect total procurement costs will be somewhat higher than the estimate submitted in the Nunn-McCurdy certification (refer to table 1). Reduced quantities and use of production aircraft in testing will also limit training activities for the near-term and delay deliveries of new capabilities to the warfighters. Officials now forecast that the completion of system development, completion of initial operational testing, and the full rate production decision will extend into 2018. This represents slips of about 5 years in these important milestones against the current program baseline approved in 2007. The military services are evaluating the impacts from restructuring on their initial operational capability (IOC) milestones, the critical need dates when the warfighter must have in place the first increment of operational forces available for combat. In response to the initial set of restructuring actions, the Air Force and Navy tentatively extended these milestones to 2016, but the Marine Corps slightly adjusted its IOC date by 9 months to December 2012. It is all but certain that the Marine Corps will be delaying its IOC date in the wake of the Secretary’s STOVL actions. Air Force and Navy dates may also be adjusted to reflect the newest developments. Affordability—both in terms of the investment costs to acquire the JSF and the continuing costs to operate and maintain it over the life-cycle—is at risk. A key tenet of the JSF program from its inception has been to deliver an affordable, highly common fifth generation aircraft that could be acquired by the warfighters in large numbers.