[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]





                           F-22 COST CONTROLS

=======================================================================

                                HEARING

                               before the

                   SUBCOMMITTEE ON NATIONAL SECURITY,
                  VETERANS AFFAIRS, AND INTERNATIONAL
                               RELATIONS

                                 of the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                               __________

                            DECEMBER 7, 1999

                               __________

                           Serial No. 106-144

                               __________

       Printed for the use of the Committee on Government Reform


  Available via the World Wide Web: http://www.gpo.gov/congress/house
                      http://www.house.gov/reform

                                 ______

                     U.S. GOVERNMENT PRINTING OFFICE
66-465 CC                    WASHINGTON : 2000





                     COMMITTEE ON GOVERNMENT REFORM

                     DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York         HENRY A. WAXMAN, California
CONSTANCE A. MORELLA, Maryland       TOM LANTOS, California
CHRISTOPHER SHAYS, Connecticut       ROBERT E. WISE, Jr., West Virginia
ILEANA ROS-LEHTINEN, Florida         MAJOR R. OWENS, New York
JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
STEPHEN HORN, California             PAUL E. KANJORSKI, Pennsylvania
JOHN L. MICA, Florida                PATSY T. MINK, Hawaii
THOMAS M. DAVIS, Virginia            CAROLYN B. MALONEY, New York
DAVID M. McINTOSH, Indiana           ELEANOR HOLMES NORTON, Washington, 
MARK E. SOUDER, Indiana                  DC
JOE SCARBOROUGH, Florida             CHAKA FATTAH, Pennsylvania
STEVEN C. LaTOURETTE, Ohio           ELIJAH E. CUMMINGS, Maryland
MARSHALL ``MARK'' SANFORD, South     DENNIS J. KUCINICH, Ohio
    Carolina                         ROD R. BLAGOJEVICH, Illinois
BOB BARR, Georgia                    DANNY K. DAVIS, Illinois
DAN MILLER, Florida                  JOHN F. TIERNEY, Massachusetts
ASA HUTCHINSON, Arkansas             JIM TURNER, Texas
LEE TERRY, Nebraska                  THOMAS H. ALLEN, Maine
JUDY BIGGERT, Illinois               HAROLD E. FORD, Jr., Tennessee
GREG WALDEN, Oregon                  JANICE D. SCHAKOWSKY, Illinois
DOUG OSE, California                             ------
PAUL RYAN, Wisconsin                 BERNARD SANDERS, Vermont 
HELEN CHENOWETH-HAGE, Idaho              (Independent)
DAVID VITTER, Louisiana


                      Kevin Binger, Staff Director
                 Daniel R. Moll, Deputy Staff Director
           David A. Kass, Deputy Counsel and Parliamentarian
                    Lisa Smith Arafune, Chief Clerk
                 Phil Schiliro, Minority Staff Director
                                 ------                                

Subcommittee on National Security, Veterans Affairs, and International 
                               Relations

                CHRISTOPHER SHAYS, Connecticut, Chairman
MARK E. SOUDER, Indiana              ROD R. BLAGOJEVICH, Illinois
ILEANA ROS-LEHTINEN, Florida         TOM LANTOS, California
JOHN M. McHUGH, New York             ROBERT E. WISE, Jr., West Virginia
JOHN L. MICA, Florida                JOHN F. TIERNEY, Massachusetts
DAVID M. McINTOSH, Indiana           THOMAS H. ALLEN, Maine
MARSHALL ``MARK'' SANFORD, South     EDOLPHUS TOWNS, New York
    Carolina                         BERNARD SANDERS, Vermont 
LEE TERRY, Nebraska                      (Independent)
JUDY BIGGERT, Illinois               JANICE D. SCHAKOWSKY, Illinois
HELEN CHENOWETH-HAGE, Idaho

                               Ex Officio

DAN BURTON, Indiana                  HENRY A. WAXMAN, California
            Lawrence J. Halloran, Staff Director and Counsel
                Thomas Costa, Professional Staff Member
                           Jason Chung, Clerk
                    David Rapallo, Minority Counsel




                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on December 7, 1999.................................     1
Statement of:
    Druyun, Darleen A., Principal Deputy Assistant Secretary of 
      the Air Force for Acquisition and Management...............    32
    Schneiter, Dr. George, Director of Strategic and Tactical 
      Systems, Department of Defense.............................    22
Letters, statements, et cetera, submitted for the record by:
    Barr, Hon. Bob, a Representative in Congress from the State 
      of Georgia, prepared statement of..........................     8
    Druyun, Darleen A., Principal Deputy Assistant Secretary of 
      the Air Force for Acquisition and Management, prepared 
      statement of...............................................    38
    Schneiter, Dr. George, Director of Strategic and Tactical 
      Systems, Department of Defense, prepared statement of......    25
    Tierney, Hon. John, a Representative in Congress from the 
      State of Massachusetts, prepared statement of..............     4



 
                           F-22 COST CONTROLS

                              ----------                              


                       TUESDAY, DECEMBER 7, 1999

                  House of Representatives,
       Subcommittee on National Security, Veterans 
              Affairs, and International Relations,
                            Committee on Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:10 a.m., in 
room 2154, Rayburn House Office Building, Hon. Christopher 
Shays (chairman of the subcommittee) presiding.
    Present: Representatives Shays, Mica, and Tierney.
    Also present: Representative Chambliss.
    Staff present: Lawrence Halloran, staff director and 
counsel; J. Vincent Chase, chief investigator; Thomas Costa, 
professional staff member; Jason Chung, clerk; David Rapallo, 
minority counsel; and Earley Green, minority staff assistant.
    Mr. Shays. Good morning. I would like to call this hearing 
to order.
    Last February, in response to our request to describe high-
risk programs in the Department of Defense [DOD], the General 
Accounting Office [GAO], testified that unrealistic costs, 
schedule and performance estimates continued to plague major 
weapons systems acquisitions. GAO pointed specifically to cost 
overruns in the program to design and build the next-generation 
air superiority jet fighter, the F-22.
    In March, GAO told Congress it was unlikely the Air Force 
would be able to keep the F-22 engineering and manufacturing 
development [EMD] program, within cost limits. They cited 
persistent EMD spending growth not addressed by controlled 
strategies and testing delays that could push costs higher 
still.
    At that time, DOD assured the subcommittee that cost 
control continues to be a primary emphasis in the F-22 program 
and congressional mandated spending caps would not be exceeded. 
The Department's top acquisition reform official described, 
``comprehensive measures to track and control F-22 program 
costs.'' DOD promised close monitoring of Air Force efforts to 
cut $660 million in projected development expenses and $16 
billion in estimated production spending from the $60 billion 
program. Nevertheless, defense authorization and appropriations 
bills this year reflected growing congressional unease over the 
price and pace of the F-22 program. A commitment to F-22 
production was delayed and made contingent on sufficient 
preproduction testing and completion of delayed avionics 
development.
    So today, on the 58th anniversary of the bombing of Pearl 
Harbor, we revisit the issues of F-22 cost control and 
development delays, asking how spending control strategies are 
being implemented and how program managers are meeting leaner 
budgets and tighter schedules. We do so in pursuit of our broad 
oversight mission to monitor programs identified as vulnerable 
to waste and mismanagement.
    This hearing affords the subcommittee and DOD an 
opportunity to assess the progress and the problems of a major 
acquisition effort hailed by some as a model of advanced 
technical development, but scorned by others as vintage 
wasteful cold war procurement, out of sync with post-cold war 
national security needs.
    In order to focus on current F-22 cost controls, we invited 
only Defense Department witnesses to testify today. At the 
subcommittee's request, GAO will provide testimony in specific 
aspects of F-22 production cost savings at a future hearing.
    I want to acknowledge the work of our subcommittee 
colleague from Massachusetts, Congressman John Tierney, who is 
to my right, who has been dedicated and articulate in 
expressing his concerns over F-22 costs and who has been a full 
partner in our oversight of DOD acquisition reforms. The future 
of U.S. air power will be shaped by our past.
    I would like to say that before we start this hearing, I 
would like a few moments of silence in remembrance for the 
2,403 Americans and their precious families who lost their 
lives 58 years ago today at Pearl Harbor.
    [Moment of silence.]
    Mr. Shays. Mr. Tierney.
    Mr. Tierney. Thank you, Mr. Chairman. Thank you for calling 
this hearing and following up on this issue.
    Let me also welcome our witnesses here this morning. I also 
want to thank the General Accounting Office for providing an 
official statement for the record.
    The Department of Defense currently is operating three 
aircraft development programs that some have projected to cost 
more than $350 billion. Many experts seem to agree that the 
Pentagon cannot afford all three of these programs under any 
reasonable potential scenario. As a result, experts from all 
sides have raised questions with each of these programs, such 
as the necessity and relevance of each program in today's post-
cold war environment, the ability of each aircraft to operate 
between and among the various services, the continued viability 
of strategic uses for these aircraft and, of course, the cost 
of each program.
    In addition to focusing on the continued increases in costs 
for development and production of the F-22, this hearing is 
also directed toward analyzing the measures utilized by the Air 
Force and the Department of Defense to predict and control 
these costs.
    Although I understand the Air Force has achieved some of 
its performance goals for the F-22, it appears from the written 
statement by the General Accounting Office that program costs 
are continuing to rise despite the implementation of cost 
control measures. The broad question raised is whether the Air 
Force should be more realistic in terms of anticipating delays 
in construction, in subcontractor performance, and in software 
development. Looking at the record of the past 10 years, it 
appears that the Air Force has consistently underestimated the 
length of delays and increases in costs.
    At some point, repeated upward adjustments cease to be 
unexpected. At some point, they reveal a strategy that is 
overly optimistic.
    As with any prioritization analysis, cost concerns with the 
F-22 program must inform the larger questions, such as the 
relevance of the F-22 program in light of other ongoing 
aircraft development programs. Essentially, as the costs for 
the F-22 program continue to increase, the value of each 
aircraft decreases compared to other alternatives. For these 
reasons, I look forward to hearing from both of our witnesses 
about measures they are taking to predict more accurately 
future cost increases, as well as measures being implemented to 
reduce current cost estimates.
    Once again, I thank the witnesses for being here and thank 
the chairman for conducting this hearing.
    [The prepared statement of Hon. John Tierney follows:]

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    Mr. Shays. Before swearing our witnesses, we just have a 
little housekeeping.
    I ask unanimous consent that all members of the 
subcommittee be permitted to place any opening statement in the 
record and that the record remain open for 3 days for that 
purpose. Without objection, so ordered.
    I ask further unanimous consent that all witnesses be 
permitted to include their written statement in the record; and 
without objection, so ordered. And I ask further unanimous 
consent that written statements submitted by the General 
Accounting Office by Representative Bob Barr of Georgia and by 
Representative Saxby Chambliss of Georgia be printed in the 
hearing record.
    Without objection, so ordered.
    [The prepared statement of Hon. Bob Barr and the 
information referred to follow:]

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    Mr. Shays. At this time I will call our witnesses. Dr. 
George Schneiter, Director of Strategic and Tactical Systems, 
Department of Defense; and then Darlene Druyun, Deputy Air 
Force Under Secretary, U.S. Air Force, Department of Defense.
    If I could, I would invite both witnesses to stand up. As 
you know, we swear all our witnesses and even Members of 
Congress who testify before the committee. If you would raise 
your right hands, please.
    [Witnesses sworn.]
    Mr. Shays. I would note for the record that both our 
witnesses have responded in the affirmative.
    Dr. Schneiter, I think you are going first.
    Mr. Schneiter. Yes, sir.
    Mr. Shays. My understanding is that you have a shorter 
testimony. I am going to put the clock on for 5 minutes, but 
you just go on. I will just turn it over again.
    I understand, Ms. Druyun, that your statement will be about 
20 minutes, which we are happy to have you put on the record 
and to listen to.
    Mr. Chambliss, you are more than welcome to be up here if 
you would like. We would be happy to have you.
    We will allow you to speak for the 20 minutes. After the 20 
minutes, we will give you a warning. We would just note for the 
record that Mr. Chambliss is here and it is nice to have you 
here.
    Thank you for coming. Dr. Schneiter, thank you for being 
here.

 STATEMENT OF DR. GEORGE SCHNEITER, DIRECTOR OF STRATEGIC AND 
            TACTICAL SYSTEMS, DEPARTMENT OF DEFENSE

    Mr. Schneiter. Thank you, Mr. Chairman. I appreciate the 
opportunity to discuss today the Department of Defense's 
efforts to control the costs and adhere to the schedule of the 
F-22 aircraft program. I would just comment on a few things 
from my written statement, which will go into the record, as 
you said earlier.
    The F-22 is a technically challenging program. The F-22 is 
intended to have unprecedented capabilities in the areas of low 
observability, the ability to fly supersonically without 
afterburner and advanced avionics and sensors. It is intended 
to ensure that our air forces remain dominant in the 21st 
century.
    Such a program naturally gives us challenges regarding cost 
and schedule performance. We have several oversight and 
budgeting processes within the Department that we use to 
address such challenges, and I will summarize the principal 
ones of these. These tools are intended to provide the 
Secretary of Defense and his staff the information that he and 
they need to monitor, control, and reduce costs and to maintain 
program schedules.
    The first process I would mention is where all programs 
begin, with the requirements process. The senior military 
leadership on the Joint Requirements Oversight Council address 
cost and schedule in establishing the military justification 
for an acquisition program. This Joint Requirements Oversight 
Council, which is chaired by the vice chairman of the Joint 
Chiefs of Staff and includes military service vice chiefs, 
focuses on ensuring that the programs are affordable and can be 
fielded in a timely manner. They now require that costs be a 
required parameter among the formal requirements for weapons 
systems. That is the requirements process.
    The second has to do with the acquisition process and, in 
particular, the Defense Acquisition Board. This is chaired by 
the Under Secretary of Defense for Acquisition, Technology, and 
Logistics, my boss, Dr. Gansler. It includes other senior 
officials in the Office of the Secretary of Defense, and the 
vice chairman of the Defense Acquisition Board is the vice 
chairman of the Joint Chiefs of Staff, who also chairs the 
Joint Requirements Oversight Council. So we have his 
participation from a requirements point of view in this 
acquisition forum.
    The Defense Acquisition Board [DAB], meets before major 
transition points, or milestones, as the program progresses 
through each phase of development and production. Cost and 
schedule considerations are a major focus of a DAB review. 
Different offices within the Department bring material to be 
considered at those meetings.
    Foremost among these in the cost area is the Office of the 
Secretary of Defense's Cost Analysis Improvement Group. They 
provide an independent cost estimate. By ``independent,'' we 
mean it is independent of the military service, it is 
independent of the program office. This ensures that senior 
officials receive the most candid and complete information 
about the cost of weapons acquisition programs.
    We also conduct, as part of such milestone reviews, an 
affordability analysis which looks at the cost of the program 
in the context of the overall budget and, particularly, the 
mission area for that program. So that is the DAB process, 
which is geared to milestones in a program.
    A third process is a more routine process of review of 
programs. This is the Defense Acquisition Executive Summary 
process. This, on a quarterly basis, highlights to the Under 
Secretary the cost, schedule, technical performance, 
management, and other key parameters of major defense 
acquisition programs. It includes examining what is called an 
``earned value management system,'' which is a way of tracking 
cost and schedule according to the plan to complete distinct 
packets of work. Mrs. Druyun will show you some examples of 
such tracking information.
    The fourth Department review is our review of the adequacy 
of the overall defense program in what we call the ``Planning, 
Programming and Budgeting System.'' This is the system whereby 
we prepare the annual budget which we bring to the Congress 
each year. This is not just for 1 year, but includes the Future 
Years' Defense Program of 5 or 6 years.
    Initial proposals for this budget come to us from the 
military departments. We then evaluate those in our summer 
program review and, finally, the Defense Resources Board, which 
the Deputy Secretary of Defense chairs, considers alternative 
approaches that might provide improved overall effectiveness 
within the available funds. These reviews consider the balance 
among force structure modernization, such as the F-22 readiness 
and sustainability, and seek to accomplish the established 
policy goals within the available funds. The Department's 
tactical aircraft programs are often included in detail in 
these reviews. These are all parts of the Department's internal 
process.
    We also report to Congress on program costs, and annually 
we send over the Selected Acquisition Report, which provides 
cost, schedule and other major information about our programs. 
Dr. Gansler also holds program reviews more often than the 
processes I just described for high-priority programs. The F-22 
falls in this category, and in fact he has a review of the F-22 
scheduled for this coming Thursday, 2 days from now.
    When Dr. Gansler decided in December 1998, a year ago, to 
approve the go-ahead for two aircraft, he reiterated the 
importance of maintaining continued emphasis on the F-22 
program within the congressional cost caps. He challenged the 
Air Force and its contractors to continue efforts to reduce 
costs; and he directed the Air Force to provide him with 
quarterly briefings on development and production cost status. 
In this manner, he has been able to track cost and schedule 
variances, the cost of each development aircraft being produced 
compared to the projected cost, and the status of individual 
cost-reduction plans for both development and production.
    To date, trends in cost and schedule have shown some 
improvement, but I think it is fair to say the jury is still 
out on the ability of these cost-reduction plans to produce all 
the savings we need to stay within the caps. Continuation of 
these quarterly reviews will give us added confidence that the 
decisionmakers have the best information at each milestone 
decision on the ability of the Air Force to execute the F-22 
program as planned.
    Mr. Chairman, those are the points I wanted to highlight. I 
will be happy to respond to any questions you may have.
    Mr. Shays. Thank you very much.
    [The prepared statement of Mr. Schneiter follows:]

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    Mr. Shays. Ms. Druyun. Am I pronouncing your name 
correctly?
    Ms. Druyun. It is Druyun, yes.
    Mr. Shays. You are going to be given 20 minutes. We will 
let you know after that if we need to cut you shorter.

  STATEMENT OF DARLEEN A. DRUYUN, PRINCIPAL DEPUTY ASSISTANT 
   SECRETARY OF THE AIR FORCE FOR ACQUISITION AND MANAGEMENT

    Ms. Druyun. Thank you, Mr. Chairman.
    To try to explain the F-22 program and give you a better 
understanding of the management and cost oversight that we have 
in this program, I have prepared a series of charts. I have 
laid out in front of you an outline that I am going to 
basically follow and I am going to basically skip that to 
really get into the meat of the material.
    The first issue I wanted to just very briefly cover is the 
issue of why do we need the F-22. The F-22 provides air 
dominance over the battlefield. It is optimized for the air-to-
air environment. Today, the F-22 is scheduled to replace the F-
15 which is not able to operate in an advanced surface-to-air 
missile environment. The F-15 is at rough parity today with the 
Su-27 and the MiG fighter aircrafts. The F-22 attributes of 
stealth, supercruise, maneuverability and integrated avionics 
are absolutely essential for enabling dominance over the 
battlefield. More importantly, the F-22 complements the Joint 
Strike Fighter, which is optimized for ground attack.
    In looking at the next chart, in looking at the current EMD 
cost estimate, I have broken this up into the airframe, the 
engine and other government costs. The total cap that we have 
today on the development program is $18.9 billion. What I would 
like to do is to peel that back further so you can understand 
how we are carefully managing this program to stay within the 
development cost cap established by the Congress back in 1998.
    My next chart basically lays out a cost track history which 
I think is important for this committee to understand. When the 
original airframe development contract was awarded back in 
1992, the original value was approximately $10.3 billion. 
Today, our current estimate to complete this program is $14.3 
billion. I think it is important for this committee to 
understand what has caused the cost growths within this 
program. As you can see, I have three columns where I basically 
have laid out the various growths that we have experienced.
    The first column is called rephase. This was driven by 
changes made both within the defense budget as well as within 
the congressional budgets that in essence stretched the program 
out. A total of $803 million was removed from the program which 
drove an overall cost increase in the range of about, almost 15 
percent. The actual cost growth experienced by the contractor 
and which we are projecting through the completion of 
development is in the range of approximately 18.7 percent.
    The last column entitled, ``Other'' is basically the work 
scope changes that have been laid into this program since its 
inception.
    Turning to the development engine contract, you will see 
that I have laid it out in a similar fashion. Original contract 
value was approximately $1.5 billion. Today, our estimate to 
complete that program is at roughly $2.4 billion. You can see 
that the rephases caused by program funding instability through 
the congressional and defense budget cycles caused a growth of 
approximately 23 percent, and the contractor experienced an 
actual growth in the range of approximately 33 percent. I would 
tell you that half of this cost growth experienced by the 
contractor was in the hot turbine section redesign that we 
entered into back in 1994 because this was a durability issue.
    We basically viewed it as pay-me-now or pay-me-later. For 
long-term operation and support cost, it made much greater 
sense to go back and to redesign that hot turbine section so 
that it would have the durability for the life of the engine.
    My next chart deals with F-22 EMD costs. Back in March 1999 
in front of the SASC tactical air hearing, I basically reported 
that our worst-case analysis in terms of cost growth above the 
congressionally imposed development ceiling was about $660 
million. I also reported at that time that we had laid in a 
number of initiatives to vigorously manage this program and to 
offset those potential cost growths.
    Back in March 1999, I reported we had offsets, dollar for 
dollar, for the potential cost growth. Today, I am able to 
report to this committee that we have identified an additional 
$200 million for now a total of $860 million worth of offsets 
to handle this worst-case shortfall that we predicted back in 
March 1999.
    What I would like to highlight for you are the two areas 
that have helped to basically build on our confidence and to 
build a larger offset, the first one, and it is in next chart, 
called ``Development Cost Reduction Status.'' Back in March 
1999, I reviewed with the SASC tactical air hearing a process 
that we had laid in place in July 1998 to rigorously control 
costs. Basically what we have laid in place--as you can see, in 
1999 I was predicting cost reduction savings from a variety of 
projects such as revamping processes to eliminate overhead, 
reusing EMD assets as opposed to having new assets built, some 
new technical approaches such as GPS. We reported about $80 
million in offsets. Today, that number, as you can see, in 
September 1999 has grown to approximately $154 million.
    I have approximately 70 projects that we carefully track, 
and the offset column, which is about 79 percent today, we are 
very, very confident of and it is actually built into our 
development estimate.
    The next chart tracks some of the metrics that we use on a 
monthly basis. I would tell you that within the Air Force, for 
example, I conduct what we call a MER, a monthly executive 
review, a very detailed review with the contractor team and 
with our program office, and I basically drill down into 
multiple levels of metrics to understand exactly where we are 
in terms of cost, in terms of schedule and in terms of meeting 
the technical requirements in the program.
    What this chart basically shows you is, through the 
completion of development, we basically have laid out a curve 
where we are actively managing to in terms of cost and 
schedule, and you would see in tracking that all the way back 
to August 1998 to where I am today in terms of my schedule 
variance, my schedule variance continues to improve. That is 
very, very positive.
    We are seeing a cost variance running around $5.5, $6 
million a month. You would note that between September and 
October, I had a bump-up in cost of about $11 million. The 
majority of that bump-up in cost was tied in with a union 
settlement at the Boeing Seattle facility with both their 
commercial and military work. Basically that represents a one-
time charge in which they paid all of their employees a bonus. 
That is why you basically see that bump-up in the cost arena.
    This is something that we watch very, very closely. As I 
explained to you, sir, we drill down into it to really 
understand what is driving these costs and what we need to do 
to make sure they remain contained.
    My next chart is called EMD equivalent headcount. I refer 
to this basically as our ``Slimfast'' plan. As we complete each 
portion of the development program, it is very important that 
we get rid of personnel associated with the program. They have 
to be off-loaded from the program as their work is completed. 
We cannot afford to carry them along.
    What we have done in this program, this is an additional 
set of metrics that we have laid in place, we basically have 
laid through the entire program, where we need to ensure that 
we remain within the cost cap for development. As you can see, 
this is a good example, Lockheed Martin Fort Worth. Basically 
we are tracking right along where we should be in terms of the 
equivalent headcount to stay within the cost cap.
    I think another good news story is that overtime used to 
run as high as 11 percent. Today, that is running in the 
neighborhood of 5 to 6 percent. There have been very specific 
guidance and controls laid in place to control overtime. You 
only use it when you absolutely need to use it to be able to 
meet key schedule commitments.
    The next chart is entitled, ``Production Cost Estimate.'' 
Today, our cost cap in our production program estimate is $39.8 
billion. What I have done is to break this up between Lockheed 
Martin and Pratt & Whitney and to track it back to the original 
Joint Estimate Team, that was put together in the 1996-1997 
timeframe, to show you the changes in profile and quantities of 
airplanes we are buying through the QDR. Then I am going to 
specifically address the cost reduction initiatives that were 
laid in place and that we have been very actively tracking 
along since completion of the JET.
    If you would turn to the next chart, it is entitled, 
``Production Cost Reduction Plan Savings.'' When we concluded 
the JET in June 1997, we had identified approximately $9 
billion, almost $10 billion worth of production cost reduction 
initiatives that were being laid in place. As you can see, 
since June 1997 to where we are today--my data shows through 
July 1999--that number has climbed to $16.9 billion.
    Mr. Chairman, I would tell you that we have identified 
every project, we are tracking every project, we are folding 
them into our baseline as they become reality. And I think it 
is important to point out, if you turn back to the production 
cost estimate on the previous chart, I identified $15.1 billion 
worth of initiatives that we needed to lay in place. As you can 
see, I am basically tracking to $16.9 billion worth of 
initiatives.
    If I could give you an example of what some of these cost 
reduction initiatives are, as we go through looking at various 
aspects of the program, contractors are able to, for example, 
in the area of materiel efficiency, by rolling the materiel up 
into larger quantities and using the leveraging power of the 
Lockheed Martin Corp., and the Boeing Corp., they roll it into 
much larger buys, for example, buys of materiel that would be 
needed to make, for example, commercial aircraft; and we are 
able to obviously garner much larger savings when you can go 
out with a much larger buy of materiel. That is just one of 
many, many examples.
    In the engine itself, back in the June 1997 timeframe, we 
identified approximately $3.2 billion worth of cost reduction 
initiatives that Pratt was laying very aggressively into the 
program. Today, that number is approximately $4.1 billion. Once 
again, I would remind you that the offsets needed to keep this 
program on the engine side on track was approximately $2.5 
billion, so we have obviously a lot of initiatives built in 
there that will ensure that we make that requirement.
    I want to give you an example of one specific initiative. 
It is the hollow fan blade. This is something that is built by 
Pratt & Whitney. This is a key technology that Pratt also needs 
to merge into its commercial engine program as well. We laid 
out a plan about 3 years ago to turn the hollow fan blade into 
reality and actually incorporate it into this program. It is 
tracking to plan. The cost of a hollow fan blade has been 
reduced approximately threefold. When I look at the average 
savings per aircraft engine when we actually incorporate the 
hollow fan blade, it is approximately $185,000 savings per 
engine.
    The next chart really gives you the big picture of what we 
are doing to manage the production costs. When we concluded the 
Joint Estimate Team back in the 1997 timeframe, we felt it was 
very important that we lay in some target price commitment 
curves into the development contract to really have the 
contractors focus in and make the right investments up-front to 
ensure we could deliver an airplane at $84.7 million flyaway 
unit cost. I would tell you for the first contract that we have 
written, the PRTV contract that was a firm fixed price 
contract, I track that very, very closely; and we expect that 
the original estimate we had for this program in terms of 
assembly hours, for example, that it is going to do better than 
what we had projected.
    We are also tracking the same data for the production 
representative test vehicle two efforts, which will be six 
aircraft that will be put on contract later this month. We have 
tied this into a target price commitment curve. Basically the 
contractors have made up-front investments, not government 
investments, but up-front investments from their own corporate 
funds to ensure that we can stay within the target price of 
this program. If they are able to stay within the target price 
curve that we have laid out here, they not only recoup their 
investments, but they also make a return on their investment. 
This is contractually laid out within the development contract 
and will be carried out and executed as we move through this 
program.
    Next, I would like to talk about avionics software for a 
moment. When I testified at the SASC tac air hearing on March 
17, 1999, we had delivered at that time the two top blocks, 
Block 0 and Block 1.0 in terms of avionics software. Avionics 
software has always been viewed as the high-risk portion of 
this program. I am very pleased to report to this committee the 
tremendous progress that we are making in this arena. As you 
can see, we have already delivered down through Block 2; and 
the block that is colored green that says, ``5 months early,'' 
that was projected to be delivered on January 15, 2000 in fact 
was delivered 1 month early. It was delivered last Friday. It 
is today in aircraft number 4004 on the development line. We 
consider this to be just an extremely good news story.
    If I were to show you some of the metrics, Mr. Chairman, I 
think you would be amazed that we track for each one of these 
blocks. My latest review of the metrics--and I look at them 
every single month--shows that for Block 2/3S and for Block 3, 
as well as for Block 3.1, we are on schedule and in fact are 
ahead of schedule, which is why we are now able to accelerate 
the full sensor fusion portion of the software 6\1/2\ months 
early, and we are now projecting to deliver that to the 
aircraft October 30, 2000.
    I asked the Software Engineering Institute of Carnegie-
Mellon University to go in and do an in-depth review of how 
well we are doing in the whole software arena in the avionics. 
I would tell you that the software institute gave us very high 
marks. In fact, they call what we are doing within the F-22 
program as best practices, a pioneer within the Air Force, that 
we have outstanding tools, outstanding metrics, a very solid 
architecture.
    The bottom line is that I believe that we will be able to 
meet the schedule that we have clearly laid out here. It is a 
schedule that has a very reasonable risk based on what we have 
seen to date.
    I would tell you, Mr. Chairman, that with the delivery of 
Block 1.2 and Block 2, that represents 50 percent of the 
software that needs to be delivered and each of that has been 
delivered as we have predicted, or actually a little bit ahead 
of schedule.
    The next chart talks about Software Quality Metrics which 
is a very important metric that I monitor on a monthly basis. 
This chart shows you the software errors found per 1,000 lines 
of code. It shows you what the industry standard is, and it is 
basically 5.5 errors per thousand lines of code. It shows you 
what we are actually tracking within Block 1 and Block 2. We 
are well below the industry standard, which is good news. I 
would tell you for Block 2 and Block 3S, you would see similar 
types of data.
    Now, I would like to turn to F-22 testing for a moment. I 
have to take you back in history to the original development 
program at its inception. This program was designed to change 
the paradigm of how we do testing. This program has employed 
modelling and simulation unlike any other fighter aircraft in 
the history of the Defense Department. We have used a 
philosophy to test at the lowest subcomponent, benefit 
component, work it up to the subsystem and then to the system 
level. As you can see, this chart lists the amount of testing 
that we have accomplished to date. Over 45,000 hours of wind 
tunnel testing, over 60,000 hours of subsystems laboratory 
testing, over 10,000 hours of radar testing, and 14 live fire 
tests on aircraft components.
    Today, our flight test hours in our two development 
aircraft are around 480 hours. Actually that number changes 
every day; by December 2000, we predict that we will have over 
1,000 flight test hours underneath our belt.
    I believe it is very important that I point out to you that 
we have seen much efficiency in how we do our sorties. We had 
planned for each of our sorties to take approximately 1.8 
hours. We are actually able to achieve 2.4 hours, which 
represents a 25 percent increase in productivity. We have 
basically replanned parts of the test program to make up for 
time that we had lost. The climatic test chamber is a good 
example of where we were able to recapture much of the test 
time that we had originally laid out in the program.
    Turning to the next chart looking at Full Scale Static 
testing, the primary purpose of Full Scale Static testing is to 
support the certification of the full F-22 operating envelope. 
This test is conducted in two phases. We call it the limit 
phase and the postlimit phase.
    We have completed the limit load testing as of September 
1999 successfully, and this test demonstrated that there is no 
permanent structural damage at the max loads level expected 
during the life of this aircraft. We entered the postlimit 
loads testing on December 2nd. This test will basically 
demonstrate the strength up to 1\1/2\ times the maximum load 
levels expected during the life of this aircraft. Today, I am 
at 1.2 times the max load level.
    In talking to our structural engineers, we are following a 
very, very deliberate program, validating our analysis tools as 
we move to complete this test before the LRIP decision. I would 
also point out that almost 29 percent of our test points have 
been completed for the flying qualities on this aircraft.
    A question we are often asked, my next chart, is, can we 
afford all of this? What I have laid out for you is what I call 
our ``sand chart.'' This is the average U.S. Air Force aircraft 
RDT&E and procurement investment over a 30-year history. As you 
can see, the historic norm for this history runs about 16 
percent of our Air Force TOA. And if you see where we are with 
respect to our President's budget, I am well below that 
historic norm. In fact, I am in the range of 11 to 12 percent.
    In conclusion, Mr. Chairman, I would like to reiterate to 
you that F-22 development and production costs are very 
carefully managed, and I can continue to report today that they 
are within the congressional cost caps. This is a very tough 
program to manage. I think that I have the best team within the 
Air Force and within the contractor community aggressively 
working this program. Our avionics is very much on track, and 
all blocks are meeting or exceeding the JET delivery dates.
    The F-22 has completed our planned flight test activities 
for this phase of the program. We had laid out approximately 
480 to 500 hours, and we will complete that by the end of this 
month. The F-22 program, as you can see, is affordable if you 
look at the total obligation authority and look at what the 
historic norms have been.
    Thank you, Mr. Chairman. I look forward to responding to 
your questions.
    [The prepared statement of Ms. Druyun follows:]

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    Mr. Shays. Thank you very much for your comprehensive 
testimony. I am going to start the questions by just making a 
quick statement, but first I want to recognize that we have not 
only Mr. Saxby Chambliss who is going to participate in the 
hearing--he doesn't serve on this committee, but he serves on 
the Armed Services Committee; we welcome him and are happy to 
have him here. We also have John Mica who serves on the 
Government Reform Committee, serves on this committee and also 
is the chairman of the Government Reform Subcommittee on 
Criminal Justice, Drug Policy, and Human Resources.
    I would also point out that Mr. Chambliss is the 
leadership's representative on the Budget Committee. I take a 
general assumption that our job in Congress is to make sure 
that our military are never involved in a fair fight--in other 
words, we always have superior equipment--that in every 
instance the training is better, so that when we ask our men 
and women to risk their lives, they in fact have all the 
advantages possible.
    I have less concern about the concept of the F-22 than the 
general recognition that because we need it and the 
manufacturing--and the Air Force knows we need it--there isn't 
the competition that says, well, someone else is going to 
replace us. It's really the only show in town; at least that is 
the way it strikes me.
    I would also say that I have always appreciated the Air 
Force's cooperation with this committee and DOD in general. We 
have a good relationship. But this is a program, since there 
isn't the competition, that Congress needs to do a better job 
of oversight and put people's feet to the fire.
    I would ask you, Mr. Schneiter, first, that--you gave a 
whole host--your presentation was solely based on the various 
groups that were involved in helping to control costs. I was 
struck by the fact that there were so many, and I began to 
wonder who ultimately holds the accountability and I began to 
wonder what kind of coordination exists between--among these 
various groups. Maybe you could respond to that.
    Mr. Schneiter. Certainly.
    The accountability for the acquisition programs rests with 
the Under Secretary of Defense for Acquisition, Technology and 
Logistics, Dr. Gansler. He participates in all of those 
activities that I mentioned with the exception of the Joint 
Requirements Oversight Council, which is the purview of the 
military and the Joint Staff. Many of the same participants are 
in all of those activities, but the activities do different 
things. The Defense Acquisition Board process deals with 
milestones: Is a program ready to go into Engineering and 
Manufacturing Development, is it ready for production? So 
typically the Defense Acquisition Board will meet every few 
years or so on a program.
    The process that I described after that involves many of 
the same people, but it is a more routine process that occurs 
every 3 months. Whether or not a program is about to come to a 
milestone, we examine how well it is doing.
    Then the third thing I described in that nature is the 
annual budget process. Again, Dr. Gansler very much 
participates in that process. Ultimately the Secretary and the 
Deputy Secretary are the decisionmakers with regard to that.
    Mr. Shays. Ms. Druyun, why were EMD aircraft flight dates 
delayed again due to wing manufacturing problems in June 1999, 
3 months after DOD testified that the problems had been solved?
    Ms. Druyun. If you were to look, sir, at the approved DAB 
schedule that we had in terms of the performance of this 
program--and the baseline that we are following is the baseline 
that was set out in December 1998--we have been meeting all of 
the revised wing delivery schedules. They have been delivered 
on time since we were able to basically solve that problem. 
They are all coming in on time with the exception of, I believe 
it is the last one.
    This is an issue where Boeing overdrilled some holes, and 
so there are going to have to be some repairs done to those 
holes that they overdrilled.
    But the fact remains, our data will show you, that we are 
tracking to the revised delivery schedule for both--for all of 
the wings.
    Mr. Shays. So your point is that there is not a problem 
with the----
    Ms. Druyun. My point, sir, is there was a problem. This 
problem was worked very aggressively and this problem has been 
solved. We are tracking it on a monthly basis to ensure that 
those wings are delivered to the schedule that we have in place 
today, and they in fact are being delivered to that schedule in 
place today. That was a problem that we had approximately 2 
years ago. As I said, a problem very aggressively worked.
    Mr. Shays. Let me interrupt you a second. There are so many 
revisions or there appear to be so many revisions, I am 
wondering which revision am I at?
    Ms. Druyun. It is the current baseline of the program.
    Mr. Shays. Let me stop you for a second. In June, we were 
told that the problems had been solved. Were the problems 
solved when we were told they were solved or were there new 
problems that existed afterwards?
    Ms. Druyun. The schedule that I am referring to is the 
approved baseline schedule.
    Mr. Shays. Dated when?
    Ms. Druyun. This is 1998.
    Mr. Shays. When?
    Ms. Druyun. When in 1998? I would have to get that for the 
record, sir.
    I would say sometime in mid-1998, but I will officially 
supply that for the record.
    The problems that we had with the wing itself were solved. 
We actually--we have had to do a titanium casting, for example.
    Mr. Shays. Let me just be clear, though. Is the information 
that I have that--in June we were told the problem was solved, 
and then are you saying you kept on the schedule of the 1998 
schedule, or did we have a new schedule that occurred after 
that?
    Ms. Druyun. Master Schedule 24 is what I have been 
basically referring to. We laid in a plan for late wing 
delivery, as well as a plan for boom repair, and we are 
basically tracking to that plan in terms of wing deliveries.
    I think there has been a lot of confusion in this subject, 
sir. We had a problem with our ability to manufacture these 
wings. It was a problem that was very aggressively worked. Once 
they were able to demonstrate that they had a fix laid in 
place, we have since tracked them to ensure that those wings 
are being delivered on time.
    It is a very dynamic program. It is a living, breathing 
program. As you encounter problems, you work them and then you 
lay in a schedule to track them to it.
    Mr. Shays. I don't have any question that it is 
extraordinarily dynamic. I want us to make sure that when we 
are hearing that we are on schedule, we know which schedule 
we're on and when the schedule has been revised and how many 
times we have revised the schedule so that we have actually 
ended up meeting it.
    Let me just ask another question as it relates to this. If 
you are being forced to delay flight tests and aircraft 
production, why are long-range goals also not being pushed 
back?
    Ms. Druyun. I'm not sure I follow your question, sir.
    Mr. Shays. Particularly as it relates to avionics. I mean, 
we have a tremendous delay there. And so you have revised your 
schedule in the short run, but we are being told we're going to 
meet all the scheduled production in the future. It would seem 
to me, if you revise in the beginning, everything has to be 
revised. You seem to be pushing everything up, it seems to me, 
and into an unrealistic limited time.
    Ms. Druyun. If you look at where we are in terms of the 
build of the aircraft themselves, aircraft 4003, this has been 
a schedule that I have been tracking since March 1999 very, 
very carefully. Aircraft 4003 is scheduled to be delivered 
February 16, 2000; 4004 is scheduled to be delivered May 2000. 
Aircrafts 4005 and 4006 were scheduled to be delivered in late 
June 2000 and August 2000, and there I am tracking, and this--
--
    Mr. Shays. This is your revised schedule, not the master 
schedule?
    Ms. Druyun. This is the master schedule. It has been in 
effect since March 1999. That is the schedule that I am 
tracking to.
    Mr. Shays. So it was revised when?
    Ms. Druyun. Our schedule, sir, is adjusted on an annual 
basis to accommodate where we are in the program. For example, 
as we have received earlier delivery of some of the avionics--
--
    Mr. Shays. My time is running out. We're going to have 
plenty of time to talk about this, but let me just ask you, the 
avionics is behind schedule by how much?
    Ms. Druyun. The avionics, to the schedule that we are 
tracking, it is not behind schedule, it is actually meeting or 
ahead of schedule.
    Mr. Shays. Based on which revision?
    Ms. Druyun. That is an excellent question, sir. If I took 
you back to the Joint Estimation Team back in the 1997 
timeframe, when I look at where I am with Block 2 and Block 3, 
I am going to deliver ahead of the 1997 schedule. In fact, that 
one chart that I showed you in my presentation to you shows 
that we have been able to draw in that schedule because we have 
such outstanding tools and personnel working on the program 
that we are actually able to finish the coding and the 
integration and the sensor fusion sooner than we thought. That 
was really a good news story.
    I can understand your confusion, because I had had the same 
confusion.
    Mr. Shays. There is going to be a lot of confusion, but we 
have lots of time to sort it out. There are going to be good 
stories here and there are going to be bad stories. It is 
helpful for you not to just want to make me hear the good 
stories, because eventually the bad stories come out. It is 
better to have it all come out now, and we know, this is the 
first of a few hearings that this committee will have.
    We just want the broad picture. But my sense is that we 
have not gotten--we are behind in our testing and that is 
pushing--it would strike me that it would push back other 
elements to your whole program.
    Let me call on Mr. Tierney, and I will come back.
    Mr. Tierney. Thank you, Mr. Chairman.
    Given the fact that Congress removed about $500 million 
from the fiscal year 2000 budget request, which was originally 
about $3 billion, can you tell us whether or not the Air Force 
intends to make up that shortfall in some way?
    Ms. Druyun. What Congress did in the fiscal year 2000 
budget that was passed and signed into law was to require us to 
incrementally fund the PRTV 2 aircraft buy of six aircraft. In 
terms of incrementally funding it, we are laying into our 
budget today, and obviously our budget is not complete within 
the Department, but we are laying in the funds for fiscal year 
2001 and fiscal year 2002 to finish incrementally funding those 
six aircraft.
    Mr. Tierney. Do I interpret it correctly to say you're 
increasing your funding request over the next 2 years?
    Ms. Druyun. Yes, and you should see that hopefully in the 
budget submission when it comes over the end of January, the 
first part of February.
    Mr. Tierney. There was some suggestion in yesterday's 
edition of the Defense News that the Air Force is leaning 
toward delaying the purchase of C-130J transports to make up 
the shortfall.
    Are you considering that option?
    Ms. Druyun. Sir, that is an issue that is very much under 
review today within our budget. There have not been any final 
decisions made. I do not expect any final decisions on that 
will be made until the budget is closed out.
    Mr. Tierney. What other program sources are you considering 
to make up that shortfall?
    Ms. Druyun. The C-130J was never--was not really laid in 
this soon in our budget, so we're not taking from the C-130J to 
pay for the F-22.
    Mr. Tierney. And nowhere do you project that you are going 
to consider doing that at all?
    Ms. Druyun. To use the C-130J which was not in the 2001 
budget we sent over last year to pay for the F-22?
    Mr. Tierney. To delay the purchase of the C-130Js.
    Ms. Druyun. That is a subject that is very much under 
review today.
    Mr. Tierney. So you are considering delaying the C-130Js?
    Ms. Druyun. If you had looked at the budget that we 
submitted last year, I believe we really did not start buying 
those aircraft, I believe, until around the year 2003. But that 
is all under deliberation and will be vetted through the budget 
process and will conclude by the end of December.
    Mr. Tierney. I think GAO estimated that if the C-130J 
purchases ceased, overhead costs for the F-22 that Lockheed 
Martin also makes at their facility would increase as much as 
$150 to $160 million per year; is that correct?
    Ms. Druyun. That's an area that I have personally gone down 
twice to review at the Marietta facility. As I recall, I did 
not see any immediate impact to the 2000 budget. Potentially, 
we could see some cost growth in that arena.
    I would tell you that Lockheed is very aggressively 
managing that and looking at some alternative plans to see how 
we could manage the issue of any increase in overhead rates.
    Mr. Tierney. But the fact of the matter still remains, that 
it may increase their overhead rate and that may increase the 
cost $150 to $160 million?
    Ms. Druyun. I don't think my numbers were that high.
    Mr. Tierney. How high were your numbers?
    Ms. Druyun. I do not recall. I can supply that for the 
record if you would like, but I believe my number was lower. 
The fact that there was going to be a number of management 
actions laid in on the part of Lockheed, it is hard to predict 
because of their aggressive management what that number would 
finally look like; we could do some estimates, and that's what 
we tried to do.
    Mr. Tierney. We're going to assume that their promises of 
aggressive management are going to save money and just factor 
in that savings; is that the way this is going?
    Ms. Druyun. I think that that is part of the equation that 
Lockheed is dealing with.
    Mr. Tierney. Historically it seems that whenever we have 
cost increases, they are significantly higher than what we are 
now estimating. Why don't we use the historical models to 
determine the future costs, what the increases are going to be?
    Ms. Druyun. If you look at the various cost estimating 
methodologies that are available to us, they basically are 
based on history, kind of looking in your rear-view mirror, so 
to speak. If you look at initiatives started by the 
Massachusetts Institute of Technology, such as lean aircraft 
initiatives, there are obviously some new paradigms to be laid 
in there as to how you can--for example, I will use the F-16 as 
a real live example.
    We had a multiyear procurement that was 180 airplanes a 
year delivery to the U.S. Air Force. We broke that multiyear 
procurement around the year 1990-1991, and our number of 
aircraft, as I recall, dropped down around a quantity of 12 a 
year. If you had used traditional estimating models, it would 
have told you that the price of those airplanes would have gone 
up, when in fact that did not occur.
    When you look at CAD/CAM, computer-aided design, computer-
aided manufacturing, robotics, and really leaning out your 
production line, it will have a dramatic impact on the cost of 
whatever it is that you are building. And we have been able to 
demonstrate that in terms of when you look at travel time and 
an assembly line, when you relay it out, you can reduce costs 
significantly. And your cost models today do not have that type 
of data in them. They are continually being updated as we 
acquire that type of data.
    Mr. Tierney. Well, historically in this program, we have 
underestimated what the costs are going to be. But now you're 
telling me that, looking forward, we are going to use these 
models and we are going to have a more optimistic view?
    Ms. Druyun. No. What I'm telling you is I have production 
cost reduction initiatives laid in place.
    If I can give you an example. The Weapon Bay Door project, 
this is what we call a lean aircraft initiative--it's one of 
our production cost reduction initiatives--we've been able to 
actually realize operator-distance travel has been reduced by 
76 percent, parts-distance travel reduced by 52 percent, 
direct-touch labor reduced by 44 percent, and through-put time 
reduced by 58 percent.
    When you take lean aircraft initiatives and go through your 
whole production cycle, you really look at what am I doing 
today and what do I need to do differently to reduce travel 
time, to reduce touch labor, and to significantly reduce 
through-put time. And those are the types of activities that 
are ongoing today not only in F-22, C-130J.
    If you were to go out to the Marietta facility today, you 
would see a new manufacturing line that has been laid out that 
has significant efficiencies laid into it and you can see the 
one area where they haven't finished laying it out, and it is 
the difference between night and day.
    Those are the types of lean aircraft initiatives that we're 
laying into all of our programs within the Defense Department, 
whether it is F-22, JSF, and even our satellite programs.
    Mr. Tierney. Let me broaden this out for a second.
    The Congressional Research Service estimates that executing 
all three of the current aircraft development programs could 
generate a projected cost of $350 billion.
    Are you telling us that you think the Pentagon can afford 
that kind of spending?
    Ms. Druyun. What I'm telling you, sir, is what I showed you 
in my sand chart. We have carefully laid out a program of 
modernization that lives within the total obligation authority 
that we have seen and that we are actually below that total 
obligation authority within the aircraft arena.
    When you look at it from historical terms----
    Mr. Tierney. Well, let me just give you an example. Back in 
March of this year, the Air Force General, Joseph Ralston, was 
quoted as saying one of those three planes might have to be 
canceled or the number of each plane reduced by as much as 
half. Was he wrong?
    Ms. Druyun. I don't think I really am prepared to answer a 
question like that. I think that would be something that I 
would be happy to go get you for the record. But, you know, it 
depends on how he said that and the context in which he said 
it.
    Mr. Tierney. Well, it is a pretty wide variance with what I 
think I'm hearing from you today. You seem to be telling us 
that $350 billion for all three of these is no problem--it 
comes right within your budget--and yet he is telling us that 
it would cause you serious reductions or cancellations.
    Ms. Druyun. Well, I'm specifically talking to the F-22 
program, as well as the Joint Strike Fighter program and our 
other aircraft programs. And what I have shown you is what has 
historically been there and what is laid out in the President's 
budget today. And it is very affordable, and it's based on a 
certain TOA assumption, which is based on the President's 
budget. That's what I'm saying to you, sir.
    Mr. Tierney. Are you familiar with General Ralston's 
earlier comment?
    Ms. Druyun. No, I am not.
    Mr. Tierney. I've been told by some that the Department of 
Defense is scheduled to meet this month to perform a 
comparative analysis of the F-22 and some cheaper alternatives.
    Are you familiar with that, and is that meeting still 
planned?
    Ms. Druyun. There has been a study that has been undergoing 
since I guess around, what, George, July 1999? I have not yet 
seen the results of that study. And I will look forward to 
seeing it, I believe, next week when it is presented to Dr. 
Gansler.
    Perhaps Dr. Schneiter could better address that.
    Mr. Schneiter. The study is going on. It was asked for by 
Dr. Gansler as part of, if you will, a what-if drill, which we 
do quite often within the Department. We have great hope that 
the F-22 program will be carried out within the cost estimates 
and the cost caps. One has to look at eventualities if that 
should not come about.
    What we have done is set forth on a study that looks at 
what might be alternatives, should that happen; and we are 
looking at other aircraft, such as modifications, improvements 
to the F-15. We are looking at the Joint Strike Fighter. I've 
seen some preliminary results from this, and the results show 
to me pretty strongly that the F-22 has a very important place 
in the future of our tactical aviation program.
    Getting back to the point that Congressman Shays made early 
on, in terms of that capability, the F-22 is the only show in 
town. And that's part of our intent to make sure that we don't 
have a fair fight in the future.
    So we believe we are looking at such alternatives, but the 
analysis that I looked at thus far indicates that very strongly 
that we do need the F-22.
    Mr. Tierney. Would you excuse me 1 second.
    Well, you're talking about having a fair fight. I mean, I 
think it's fairly indisputable at this point in time that there 
is no fair fight going on between what the United States has 
for systems and what any projected enemy might have. I know 
that you said there is a rough parity today with the SU-27 and 
the MiG-29.
    If you upgraded the F-15, that would certainly put a 
stronger balance between any rough parity, would it not?
    Mr. Schneiter. There's only so much you can do with the F-
15. The thing that the F-22 particularly brings is a very low 
radar cross-section. That is a tremendous advantage in air-to-
air combat as well as in protecting you against surface-to-air 
threats. The F-15 will never be able to be improved to anywhere 
near the capability of the F-22. And this is the sort of thing 
that we feel our forces need to have in order to be able to 
operate with a great advantage on our part.
    Mr. Tierney. The way things are moving along right now, are 
you telling me that all of the testing will have been completed 
before the first production is done, the first models come 
online?
    Ms. Druyun. No, sir. We have a test program that is laid 
out through the completion of EMD. The final testing that is 
done in this aircraft--right now we're in what's called 
development testing--the final testing will occur in mid-2002 
or 2003 and it's called operational test and evaluation 
conducted by the AFO TEC organization within the Air Force.
    What I can say to you is, if you look at the schedule that 
we had back in 1997 and you look at our current schedule today, 
yes, we have replanned our test program. It has been reviewed 
with all of our testers. They're the ones that have actually 
helped us put it together. We have been able to rephase and do 
some things smartly with respect to our test program.
    For example, I mentioned the climatic labs. We had 
scheduled at the airplane, one of our test airplanes would have 
gone in there on two different occasions; and we were able to 
streamline that and get all the testing done, you know, with 
one visit to the climatic lab instead of two visits.
    That alone, for example, helped us to recapture 6 months of 
some lost test time.
    Mr. Tierney. Are you telling me that all the developmental 
testing will be done before the first models are produced?
    Ms. Druyun. No, all of the developmental testing will not 
be accomplished before the first models are produced.
    Mr. Tierney. So we're ahead of ourselves on that, we're 
going to be building things before the developmental testing is 
done.
    Has experience in the past not shown us that sometimes that 
is a little over-optimistic and we end up with systems that 
don't meet the requirements that we had hoped for?
    Ms. Druyun. If you were to look at other programs, like the 
F-18 for example, the F-15, the F-16, you would find when you 
enter into low-rate initial production you have not completed 
all developmental tests.
    What you would find, though, is that you have completed a 
sufficient amount of tests that you have confidence that the 
airplanes are going to be produced will, in fact, meet the war 
fighters' needs.
    Mr. Tierney. So your testimony is we have never run into 
difficulty before in completing the production before we have 
done the development?
    Ms. Druyun. No. I would never say we have never run into 
difficulty in any of our programs. I believe it was either the 
F-15 or F-16 that had some problems. F-18 had some problems. 
But the problems that we have seen to date, with the testing 
that we have done on the F-22, including our flight testing, 
are well within the spectrum of what we expected.
    The airplane is performing exceedingly well and to date 
meeting all of its requirements.
    Mr. Tierney. Thank you.
    Mr. Shays. Thank you. At this time, we would ask for Mr. 
Mica. What we're doing is we're doing 10-minute segments. We 
don't seem to get a red on the time, but we'll roll it over 
twice.
    Mr. Mica. Thank you, Mr. Chairman. I appreciate your 
conducting this hearing on a very important subject tied into 
really our national security since we're trying to develop an 
aircraft that will give us air superiority.
    And I might say at the outset that I am committed to this 
program. I mean, just the one page that's presented to us that 
says that the F-15, which I believe is almost 25 years old, is 
unable to operate in an advanced surface-to-air missile 
environment is certainly sufficient for us to be expending 
these taxpayer resources to develop superior capability.
    I think we found in the past there aren't too many of our 
friends willing to help us. As the last superpower in the 
world, we're left to bear not only some of the costs but also 
provide the technology and equipment to get the job done when 
we have people coming after us or threatens world stability or 
regional stability in the world.
    The major question before us is trying to contain the costs 
and the development of this program.
    Dr. Schneiter, first of all, there have been cost overruns 
and I've been told that it's about a 5 percent cost overrun. Is 
that a fair estimate of the total amount, or is it a larger 
figure we're looking at now, just in a ball park range?
    Mr. Schneiter. I suspect that, if you look at cost 
estimates at the time we started development, you would find a 
somewhat larger percentage overrun than that at this point. As 
Ms. Druyun's chart showed, however, you have to watch out how 
you define ``overrun.'' In some cases this is caused by bad 
estimating on our part. We just don't know well enough what to 
do; we run into difficulties we didn't anticipate. A large part 
on the development cost increase on the F-22 was inefficiencies 
caused by having to replan the program.
    Mr. Mica. Well, this program, as I understand, started out 
around 1991; is that correct?
    Ms. Druyun. Yes, that is.
    Mr. Mica. And if we're going to look at what has caused us 
to have cost overruns, there are going to be some various areas 
that have been responsible for driving the cost up. One of the 
things that concerns me is the way that Congress has sort of 
jerked this program around and Congress has changed both the 
requirements several times. Is that not correct?
    Mr. Schneiter. I think the changes have been less in 
requirements than in funding.
    Mr. Mica. We started out with what? Wasn't it an initial 
procurement of 700 or something? And where are we now, 300?
    Mr. Schneiter. Oh, as far as the numbers to be procured, 
that has decreased; and we are 339 at this point. That will 
affect your average unit cost quite a bit, but should not have 
an effect on the development cost.
    Mr. Mica. With the question of congressional changes in 
funding and commitment to the program, it's also been estimated 
to me that about 40 percent, 41 percent of some of the increase 
in costs could be attributed again to the congressional 
instability in supporting the program or changes.
    Is that a fair estimate?
    Mr. Schneiter. I would have to give you an answer for the 
record to be precise on that. My guess would be that the part 
that was caused by congressional changes would be a little bit 
less than that.
    There were also some changes, frankly funding 
instabilities, that the Department caused itself.
    Mr. Mica. Well, if we look at again congressional 
responsibility for some of the cost overruns, management 
responsibility, and I won't ask you that because you're really, 
I guess, in charge of the management or administration, another 
important factor would be contractor cost overruns.
    As a percentage or as a factor in the total cost overruns, 
where does the contractor fit into this?
    Mr. Schneiter. I think roughly about 50/50. Is that right?
    Ms. Druyun. Yeah, I think it's close to that. If I could 
try to answer your question, Congressman Mica.
    Mr. Mica. And I want to divide that up, because I think the 
contractor would have certain responsibility in funding 
overruns and that we could probably document. Of course, some 
of that may be based on changes in technical requirements and 
that would be the other part of the question. And I know it's 
hard to get a handle on all of these exact figures. But since 
1991, we've had great advances in technology. And I have also 
known that all of the Federal agencies are prone to change the 
procurement requirements, at least from the technical 
standpoint, as projects of this nature go along.
    So maybe you could give us a little bit of information 
about cost overruns attributed to these two factors.
    Ms. Druyun. Yes, I'd like to do that. If I could have my 
EMD airframe contract cost track back up on the monitor.
    What I explained earlier--and I think that perhaps you 
arrived a little bit late at the time--is when you look at the 
original contract value back in the 1991, early 1992 timeframe 
when we awarded the development contract, it was $10.3 billion. 
Today my estimate of completion of the airframe--this is the 
Lockheed contract--is basically $14.3 billion.
    What you would see is a difference in $4 billion from my 
original value to where I am today. And when I break that down, 
I broke it down into what I term three possibilities. One was 
called rephasing the program, and these were a combination of 
congressional cuts; and they added out to $559 billion in 
defense cuts, which added out to $244 million, for a grand 
total of $803 million.
    What you would find is that when you have to rephase a 
program, you have to stretch it, you have a standing army you 
have to keep in place, the programming becomes more expensive. 
So 15 percent of that cost growth that we see is because of the 
instability in funding, whether it was by the Defense 
Department or the Congress.
    Mr. Mica. Did you say 15 percent?
    Ms. Druyun. Fifteen percent for Lockheed. And Lockheed's 
actual cost growth is in the neighborhood of 18.7 percent.
    I would like to put that in its proper context. If I had 
written the fixed-price incentive ceiling-type contract instead 
of a cost-type contract and I had set my ceiling at 140 percent 
or even 135 percent, I would still be under that ceiling today.
    When you consider the technology that we have developed in 
this program, a very, very complex program, cost growth in an 
area of 18 and 19 percent is actually a good record.
    I could point out other programs to you where we have seen 
much more significant cost growth. If you look at the engine 
contract, it was a smaller contract. Its original value was 
about $1.5 billion. Today my estimate to complete that program 
is about $2.4 billion. Once again, 23 percent of that cost 
growth that we saw was because of program-funding instability. 
Thirty-two percent of that was contractor cost growth.
    And part of that was a collected decision made on the 
Department's part and I believe a correct decision. We, 
basically, back in 1994, as a result of testing on the hot 
section of the turbine, saw potential durability issues. And 
it's very important you build an engine that's durable and that 
will have low life-cycle costs. And so we decided to go ahead 
and redesign that portion of the engine to ensure we have long-
term durability and that drove about half of that cost.
    And the other bucket that you see over there, basically, 
refers to requirement changes. I think that is something I 
track on an annual basis to understand what has exactly 
happened within this program.
    Mr. Mica. Before the Defense Appropriations Act delayed the 
decision on low-rate production, that decision was to have been 
made this month, I understand. In your estimation, would this 
program have been ready to enter production this month, as was 
originally scheduled?
    Ms. Druyun. And my answer, sir, is yes, it absolutely was 
ready to enter into low-rate initial production of six 
airplanes.
    We have demonstrated supercruise. We have conducted weapons 
bay open testing. By the end of December, I will have 500 
flight hours of testing. You saw my previous chart, which laid 
out the thousands of hours of sub-system and component and sub-
component testing that has taken place to date.
    We've been able to demonstrate high angle of attack, post-
stall flight with thrust vectoring. We've demonstrated flight 
at 50,000 feet. And we've greatly expanded the flying envelope 
of the F-22.
    The fact remains, all of the criteria established in 1998 
by Dr. Gansler we satisfied.
    Mr. Mica. Well, I guess finally, do you believe that this 
program can be executed within the congressionally mandated 
cost caps?
    Ms. Druyun. Yes. That's something that I track very 
carefully on a monthly basis that I drill down and understand. 
And our estimate today is, when you look at the EMD development 
cost cap, yes, we have cost pressures; but we have also laid in 
initiatives to ensure that we stay within that cost cap. The 
service cost estimate basically agrees that I can deliver 
within that cost cap. And for production, I believe that if our 
target price commitment curves and all of the other production 
cost production initiatives we have laid in place, we are 
aggressively managing them; and we believe we can bring this 
program in under the congressionally imposed cap.
    And this is something we watch every single month and we 
report all the way through the senior Air Force management as 
well as to OSD and will continue to very carefully watch this 
and understand what is happening within the program.
    Mr. Mica. Thank you.
    Thank you, Mr. Chairman.
    Mr. Shays. Thank you.
    We're going to go through another round of Members. But Mr. 
Chambliss will ask questions, has 10 minutes; and then we'll do 
another round.
    Mr. Chambliss. Thank you, Mr. Chairman.
    I want to tell you that I appreciate the opportunity that 
you have given me to be here today and to participate in this 
hearing on an issue that I am very sensitive to and, frankly, 
very supportive of. And your reputation of fairness and 
objectivity is well known to me, so I particularly appreciate 
your approach to this issue.
    I would also say that, while I do represent the State of 
Georgia and the F-22 is to be manufactured in Georgia, that it 
is not manufactured in my district; nor is there any 
subcontractor manufacturing for the F-22 in my district. So my 
interest is not parochial. It is simply one of the fact that, 
as a member of the Committee on Armed Services, I have come to 
know and understand that, if we are to maintain air dominance, 
that the F-22 is a critical weapon system and that it is simply 
vital to the future of national security of the United States.
    I'd also just like to point out that Ms. Druyun and I are 
very well acquainted because she testifies before my committee 
on a fairly regular basis, and she has had jurisdiction over 
the last 5 years that I've been a Member of Congress on any 
number of issues that I'm very interested in and sensitive to. 
And she'll be the first one to tell you that we've not always 
agreed on issues. But, as she knows, I have great respect for 
her abilities, particularly in the area of acquisitions. She 
has done amazing things in the area of acquisition and is well 
regarded and well respected in the Department of Defense and 
certainly before our committee.
    Ms. Druyun, I just wanted to confirm a couple of things in 
the record. You alluded to this in your written statement and 
oral statement earlier. With respect to the need of the F-22--I 
don't want you to go into great detail about it, but there are 
some general statements that I think or general facts that are 
well known that I think should be brought out today. And you 
referred to the fact that we have been able to maintain air 
superiority or air dominance in our last several conflicts and 
if we're going to continue to do that, that the F-22 is 
essential.
    You also stated that the F-15, which has been the vehicle 
by which we have maintained that air superiority, is now 
compared to with the SU-27, which is a Russian-made tactical 
air fighter. Is it not a fair statement that, while we're on 
parity today, that the Russians also have ready for production 
the SU-37, which is going to be far superior to the current F-
15 and would even be superior to the F-15 with the 
modifications that have been alluded to as an upgrade to the F-
15?
    Ms. Druyun. Yes, I believe that's correct, sir.
    Mr. Chambliss. And is it not also generally known that, 
while the cold war may be over, that the economy of Russia is 
certainly not a booming economy but one of their biggest 
sources of income is the sale of military hardware?
    Ms. Druyun. Yes, that's also correct. I was just there 
during the month of November.
    Mr. Chambliss. And there are other nations out there who 
manufacture aircraft that also have on the drawing board 
aircraft that are superior to the current F-15 and superior to 
the proposed upgraded F-15?
    Ms. Druyun. That's also correct.
    Mr. Chambliss. Now, we have online--and Mr. Tierney alluded 
to this and it is an excellent area of discussion, and that is 
the area regarding the collision course we've been headed down 
from a tactical air, tac-air perspective.
    We have the F-18-E and F, which is the most modern aircraft 
that's in the inventory of the Navy. We have the F-22 online. 
We also have the Joint Strike Fighter, which is still in R&D 
but is projected to come on board subsequent to the F-22.
    The JSF is going to have certain assets that are also on 
the F-22. And is it a fair statement to say that the projected 
cost of the Joint Strike Fighter depends on our production of 
the F-22?
    Ms. Druyun. Yes, that's absolutely correct. When you look 
at avionics, the F-22 will have the most sophisticated avionics 
system ever in any fighter aircraft. When you look at the F-119 
engine, the F-119 core is being used by the Joint Strike 
Fighter.
    Those are just two areas where these programs are dependent 
upon each other, yes.
    Mr. Chambliss. And at the same time, isn't it correct that 
the F-22 is going to be the first-day, first-strike, first-kill 
aircraft, as opposed to the JSF, not having the supercruise, 
not having all the sophisticated integrated avionics, so that 
the Joint Strike Fighter is not going to have the capabilities 
of penetrating behind the enemy lines to fire that first shot 
before the enemy ever knows they are there, which is an asset 
that the F-22 possesses?
    Ms. Druyun. And clearly, the F-22 is there for air 
dominance, yes.
    Mr. Chambliss. Now also, Mr. Tierney's question related to 
the expense of all of these tactical aircraft, which is an 
issue that we have discussed within the Armed Services 
Committee a number of times, and it's a very legitimate 
question. But I want to just make very clear today that what 
you're here talking about is the F-22, which is not going into 
the inventory of the Navy, it's not going into the inventory of 
the Marine Corps, which the F-18 is in inventory of both those 
services, the Joint Strike Fighter will be going into the 
inventory of all three branches. And what you're talking about 
today and what your charts reflect is the purchase of the F-22 
by the Air Force and we're not discussing the other services 
today?
    Ms. Druyun. My charts reflect the purchase of the F-22 
aircraft. But my charts also show those conventional takeoff 
and landing, we call them CTL, variant of Joint Strike Fighter. 
That is also built into our Presidential POM and it very much 
fits within the historical levels that we have seen over the 
past 30-year period.
    Mr. Chambliss. You also alluded to the per-copy cost of the 
F-22. And I want to make sure that everybody understands that, 
when this airplane was originally decided upon several years 
ago, that the schedule was to purchase some 750-plus aircraft.
    Ms. Druyun. 750.
    Mr. Chambliss. That it was subsequently reduced to about 
550 aircraft and then ultimately reduced down to about 339 
aircraft, I believe is the now-scheduled purchase.
    Ms. Druyun. Yes.
    Mr. Chambliss. All of those decreases contributed to an 
increase per-copy cost. Is that a fair statement?
    Ms. Druyun. Yes, that is correct.
    As a matter of fact, what I would add to that is I've done 
some unit fly away cost comparisons using base year 1999 
dollars; and today, with the maximum production rate of 36 
aircraft a year, we are projecting 84.7 million per aircraft. 
If I were to put that back up to its original number of 750, 
with a maximum rate of 48 aircraft a year, it would lower its 
cost from 84.7 million to 63.4 million.
    The point is, you know, all of these aircrafts are very 
sensitive to their costs as to the quantity and the rate buy 
you do per year.
    Mr. Chambliss. And another method that we commonly use to 
lower that cost per copy is a multiyear buy. Is that a fair 
statement?
    Ms. Druyun. Yes, that is correct.
    Mr. Chambliss. And do we have some experience to show that 
the multiyear buy does, in fact, lower that per-copy cost?
    Ms. Druyun. Yes. I think the best example I can give the 
committee today is the C-17 program. The C-17 program entered 
into a multiyear procurement with the express approval of 
Congress, and we were able to take out approximately 5\1/2\ 
percent of the recurring cost of that airplane.
    I think it's a very good example of what you can do when 
you have stability, funding stability in a program. And part of 
the F-22 program, when we reach 1 of 4, is by then we will have 
completed all operational testing and development testing, is 
to be able to enter into a multiyear procurement; and our 
estimate is that we'll be able to achieve at least a 5\1/2\ 
percent savings.
    Mr. Chambliss. And is it a fair statement that the F-22 
program, from a cost perspective, is now at a very high profile 
in the Department of the Air Force?
    Ms. Druyun. Absolutely. But I will tell you that it has 
been a very high profile for a fair number of years. I have 
conducted monthly execution reviews on this program before it 
ever came under a cost cap.
    What I have found in my own experience in managing complex 
programs in terms of my oversight responsibilities is I meet 
every single month with the contractor and my program 
management team and I drill down into, you know, where are we 
in performing this contract, what is driving the costs, what is 
driving the schedule and are we meeting the technical 
requirements. And I find that when you do this month after 
month after month, you really get a team working and focusing 
together and understanding what it is that they need to do to 
be able to bring a program, in this case the F-22, within the 
cost cap.
    Mr. Chambliss. Did you go through a similar procedure with 
the C-17 program?
    Ms. Druyun. Yes, I did. And I think the C-17 is a great 
example of a program that turned around because of that and 
took tremendous focus and efforts not only on the Air Force's 
part but also on OSD's part. And you are seeing the same type 
of teamwork today on the F-22.
    Mr. Chambliss. And are you comfortable again that you're 
going to be able to meet these caps that have been imposed by 
Congress on the F-22 program?
    Ms. Druyun. In all the data that I have seen to date, yes, 
I am. And I have said that, I think, very clearly in my 
statement, as well. And this will be a program that we will 
continue to monitor on a monthly basis, lay in the right 
metrics, and ensure that we have the right mechanics in place 
to be able to turn this into reality. And it's hard work. This 
is not easy.
    Mr. Chambliss. Mr. Chairman, that's all I have. And again, 
I thank you for allowing me to participate.
    Mr. Shays. I'm having trouble knowing what the benchmark 
is. And because I have trouble knowing what the benchmark is, 
it's harder for me to have a sense of quite where we are. And I 
think partly legitimately the benchmark has changed. And I 
realize there are benchmarks within the overall benchmark. So 
I'm just going to make a reference first to the GAO report that 
was dated March 1998, and I'm on page 8 of that.
    Do you have that report? It's entitled, ``F-22 Aircraft, 
Progress in Achieving Engineering and Manufacturing Development 
Costs.''
    Ms. Druyun. We're looking to see if we've got it with us.
    Mr. Shays. Take your time. Time is something we have today.
    Do you have that report?
    Ms. Druyun.  Yes, we have found it.
    Mr. Shays. Thank you.
    I'm looking at the chart, table 2. Do you have that?
    Ms. Druyun.  Yes, I do.
    Mr. Shays. In 1997, we passed the 1998 Defense 
Authorization Act; and it was basically the schedule that came 
under that; and that was a recognition that we were going to be 
$1.5 billion over costs, and for a variety of reasons, 
production levels changing and so on. And this chart points out 
that we were actually from that schedule of 1997 in the Defense 
Authorization Act we were actually 16.9 months behind on 
testing vehicles. And it's entitled, ``Expected First Flight as 
of January 1998.'' and I think we refer to that as the Master 
Schedule 24; is that correct?
    Ms. Druyun. No. That was a previous master schedule.
    Mr. Shays. No. I'm talking the middle column. That's when 
you testified, you testified before the Senate committee and we 
were looking at 667 overruns then.
    Ms. Druyun. Right.
    Mr. Shays. So $1.5 billion overrun. And I'm going to accept 
there are going to be some overruns. So just because I say the 
word ``overrun,'' I'm not losing sleep about it right yet; but 
I just want the full picture.
    So from the first schedule, it's $1.5 billion. And then the 
second schedule we're looking at $666 million. And that really 
to me becomes the target that we're having to deal with, and 
it's 16.9 months. And then we're looking now at the current 
schedule done in June 1999 and that 16.9 months has become 
28.89 months. Is that correct?
    So we've gone from the first one we call the Joint 
Estimating Team schedule that was basically done in the defense 
authorization and the Joint Estimating Team anticipated a $1.5 
billion overrun. Is that correct?
    Ms. Druyun. That's what the GAO report is laying out, yes.
    Mr. Shays. Well, but you don't disagree with that part of 
it?
    Ms. Druyun. Well, he arrives at his 29.9 months--I believe 
that's the number--based on the 1997 schedule.
    Mr. Shays. Which is the Joint Estimating Team schedule.
    Ms. Druyun. Yes. That was the best schedule that--I led the 
Joint Estimating Team that we put together.
    Mr. Shays. I understand. Everyone has an estimate, and 
every year we have new estimates; but we've got to have some 
benchmark. And that was the benchmark. We were looking at $1.5 
billion of overruns.
    Ms. Druyun. That's correct.
    Mr. Shays. And then 6 months later to a year later, we then 
said, well, basically in March 1999 we were looking at an 
additional $667 million, maybe all justified.
    Ms. Druyun. And that $667 million number was identified by 
the Air Force and provided to GAO along with the cost-reduction 
initiatives and the offsets that we set in place back in June 
1998. I gave them that data in March 1999.
    Mr. Shays. I just want to know what the benchmark is. I 
just don't want us to lower the bar or raise the bar. I want us 
to know what the benchmark is.
    So we went from the Joint Estimating Team in 1997 of $1.5 
billion, and then we went to what I'm told is referred to as 
the Master Schedule 24.
    You're nodding your head. The reporter can't write that.
    Ms. Druyun. Yes. We're using now, I believe, Master 
Schedule 24.
    Mr. Shays. OK. And so when GAO did its report in March 
1998, they were looking at and you and the Air Force and DOD 
were looking at 16.9 months at that particular time, is that 
correct, of delays?
    Ms. Druyun. If you used the Joint Estimating schedules.
    Mr. Shays. That's what I'm doing.
    Ms. Druyun. Yes.
    Mr. Shays. And if we use the master plan, then what, we 
have no overrun at that point then. I mean, what's the point 
you're trying to make to me? I'm trying to understand.
    Ms. Druyun. The point I'm making to you, sir, is that we 
went through a DAB review in 1998. We set a new baseline.
    Mr. Shays. Can you explain that?
    Ms. Druyun. We went through a Defense Acquisition Board 
review with Dr. Gansler, the Under Secretary of Defense for 
Acquisition. At that point in time he approved a new baseline, 
the revised schedule that we laid in place. And that's where 
some of this confusion takes place.
    Mr. Shays. I'm not really confused. I'm just trying to 
understand it. The difference is that I just want to understand 
what the benchmark is, and I want to understand and then how we 
evaluate what you're doing to that benchmark.
    Ms. Druyun. Yes.
    Mr. Shays. And what you want me to know is that the Joint 
Estimating Team's benchmark, the $1.5, we're beyond that point 
now, so you want me to just discard it and you want me to go to 
the Master Schedule 24 and use that as the benchmark.
    Ms. Druyun. Well, I would never want anyone to disregard 
reality. We had a $1.5 billion cost overrun that we put 
together under the Joint Estimating Team. We also, as part of 
the Joint Estimating Team, sent out some revised schedules. And 
if you were to read further on, you would find, I think, a 
little more confusion in the avionics arena.
    Mr. Shays. Why do you keep referring to it as confusion? 
We're trying to sort out facts. You keep saying ``confusion.''
    Ms. Druyun. Well, I think the GAO testimony, I read it I 
believe last night, indicates that we're not meeting the JET 
schedule that we had laid out in terms of our software avionics 
program; and my point to you that I tried to make earlier is 
that we are meeting that schedule. In some cases we are 
exceeding it. We're doing better by as much as 6\1/2\ months.
    Mr. Shays. You want to talk about a particular element of 
avionics. Why do you want to jump into that point? Why are you 
jumping into that point now? I just want to establish some 
basic points.
    Ms. Druyun. The point I want to make, sir, when you go back 
and look at what was baseline in 1997 and what was the new 
baseline established in 1998, the facts and the data obviously 
change, for very solid reasons. We have gone back. Yes, his 
number of 29.9 months is correct if I look at the 1997 baseline 
he was operating off of.
    This is a very dynamic program. We have gone back and 
rebuilt our test schedule with the test community. We have 
found efficiencies in that test schedule. I gave you an example 
of the climatic lab. If you looked in the 1997 schedule, you 
would have found I took two different aircraft into the 
climatic lab at Eglin Air Force Base.
    Mr. Shays. Wait a minute. You're telling me something you 
want me to know, which I haven't asked; and I want to 
understand why you want me to know this right now. What is your 
bottom line point?
    Ms. Druyun. My bottom line point is I think we, frankly, 
when you talk about the 29.9 fewer flight test months that we 
are missing what has happened since the GAO made their comment 
with respect to June 1997.
    Mr. Shays. Would you hear me for a second? Debate this 
issue after I established that's the issue and then tell me 
that. But I'll be confused if I allow you to just keep doing 
that because I'm just trying to establish some basic points and 
then tell me those points are irrelevant. But I want to 
understand if they exist as a point to be discussed. And so I 
want to just first establish is that in the Defense 
Authorization Act of 1998, passed admittedly in 1997, we had 
the Joint Estimating Team say we are going to be $1.5 billion 
over. And now we're saying, OK, now we don't want it to be 
worse. And there may have been reasons why it's worse, and it 
may have been no fault of the Air Force. It may have been all 
of Congress's fault. I just want to understand that.
    When you came before the Senate in 1998, we had a revised 
estimate; and we were looking at changes in dates, maybe all 
caused by Congress; and those changes in date I just want to 
understand are referred to as the Master Schedule 24. Yes?
    Ms. Druyun. I believe Master Schedule 24 is what we're 
operating off of today, yes.
    Mr. Shays. OK. By comparing that Master Schedule to the 
Joint Estimating Team, we found that we were 16.9 months behind 
in the opportunity to test a plane before we go into mass 
production. In other words, this is not an irrelevant bit of 
information. It may have been justified, but it's not 
irrelevant. Is that true? I mean, every month that we can test 
this plane before we go into production is an important month 
to have.
    Ms. Druyun. That is correct, sir.
    Mr. Shays. Now, what I'm looking at now--and tell me if I'm 
incorrect in that--is that we are from the baseline and we'll 
subtract it, too, from the baseline of joint estimation of 
1997, we are 28.89 months, or basically 29 months behind. If 
you want me to use the Master Schedule 24, I would basically 
just take the 16.9 from the 28.9, say, and then I'd have had my 
number that we're basically, what, about 12 months behind that 
schedule? Is that accurate?
    Ms. Druyun. It turns out to be about 9 months.
    Mr. Shays. Well, we have one thing that we're going to have 
to look at. Because if I look at the JET estimates, the Joint 
Estimating Team estimates, to what you're providing us now, we 
come up with 28.89 months. And if you don't want me to use that 
baseline, I'll subtract the 16.9 from that and, I guess, 
basically a number. But whatever you say, your estimate is 9, 
we'll clarify that, 12, that bottom line we are going to use as 
the benchmark the master plan, we're going to use the Master 
Schedule 24 as the baseline; is that correct?
    Ms. Druyun. Yes, that is correct.
    Mr. Shays. Thank you.
    Would you look at under the F-22 Production Cost Plan, this 
one here. They are not numbered. I wrote its the 11th on my 
page.
    Ms. Druyun. Yes, I have two charts, one for Lockheed and 
one for Pratt & Whitney.
    Mr. Shays. I have the F-22. It's the chart you showed.
    Ms. Druyun. One is entitled, ``F-22 Production Costs 
Reduction Plan Savings.''
    Mr. Shays. Yes. Let's put that one up.
    Ms. Druyun. And that refers to Lockheed Martin's program 
for the airframe.
    Mr. Shays. Oh, it is the airframe.
    Ms. Druyun.  Yes.
    Mr. Shays. Now, let me just, since you introduced that, 
just ask you. There's the engine. You have Pratt & Whitney. The 
other participants in the construction of this aircraft, the 
major participants, would be who?
    Ms. Druyun. We have two development contracts, one for the 
airframe. Lockheed Martin is the prime contractor. Boeing is a 
major subcontractor that builds part of the airplane. And then 
we have an engine contract with Pratt & Whitney. Those are the 
two major development contractors.
    Mr. Shays. Who's doing the avionics? Or is it many doing 
the avionics?
    Ms. Druyun. Avionics is under the Lockheed Martin contract. 
Boeing has lead for much of the avionics under that contract.
    Mr. Shays. Would you just explain to me, of the airframe 
and the engine, who's at this point able to stay within 
production costs and meet the timeframes? Can you compare the 
two?
    Ms. Druyun.  If I look at the production-cost reduction 
initiatives that have been laid in place by Lockheed, in July 
1999 this chart shows you that I was looking at savings in the 
range of approximately $16.9 billion. When you go back to the 
previous chart, the point that I had was that I needed at least 
$15.1 billion in cost-reduction initiatives to stay within the 
cap portion of the production program. And for Pratt, I need 
$2.5 billion. And to date they have $4.1 billion worth of 
production initiatives laid in place.
    We're very actively tracking these. You have to put the two 
of them together to arrive at the total production cap.
    Mr. Shays. I was asking another question. It might have 
been hard to follow my train of thought. I was getting 
distracted. But since you have brought it up, I'm just curious 
to know has Pratt & Whitney, for the most part, kept on 
schedule? Has it kept on schedule? Is the engine the biggest 
challenge, the least challenge in your whole effort?
    Ms. Druyun. The engine, if I took you back in history, was 
a challenge back in 1994 and 1995. Since that time, if I were 
to show you the earned value charts that I look at on a monthly 
basis, their schedule looks good and their costs are holding 
within the spectrum that we had laid out.
    Mr. Shays. Is the avionics the area where we have the 
greatest delay?
    Ms. Druyun. If you look--and I will go back to the JET 
schedule that was laid out in June 1997--no. We are actually 
doing better than what we thought we would do under the 
original JET schedule and avionics. We had problems back in 
1997, for example, with the wings, for example. These were 
large titanium castings that attach the wings to the aircraft 
body. We, in fact, had casting problems. We have those problems 
behind us. We went out and qualified a second source. We now 
have two sources who are successfully building those large 
titanium castings.
    And I think that's where perhaps we tend to get a little 
bit confused. Back in 1997 we did have problems with the wings. 
We laid a new schedule in place once we were confident, and we 
had proven that we had qualified a second source who, in fact, 
could help produce these castings.
    Mr. Shays. The whole purpose of this hearing is to not get 
confused. So you can keep saying, ``confused, confused, 
confused,'' but we hope to sort it out.
    On this chart that we had on 11, which is the ``F-22 
Production Cost Reduction Plan Savings,'' just describe to me 
what the $16.9 billion means; and then I want to ask you two 
questions.
    Ms. Druyun.  OK. The $16.9 billion basically lays out the 
cost-reduction initiatives that we have laid in place since the 
JET concluded its activities in June 1997. They are broken up. 
If I can walk you through some of these areas, Production Cost 
Reduction Initiatives. That's kind of the blue-green. It's 
basically producibility improvement projection. We have 
Diminished Manufacturing Sources. You have an area that is 
called ``Lean.'' This is where you apply lean principles to the 
factory. We have Material Efficiencies. This is where I 
described, instead of just buying material for the F-22, you 
roll it into all the material that Boeing, for example, or 
Lockheed would require across the board in their aircraft 
factories, and you're able to leverage much greater pricing 
with your suppliers, get much better pricing.
    We have something called PBC, Performance Based 
Contracting. This is where you take your single performance 
spec and all the acquisition reform concepts that we have laid 
into place. Product Support. This is where you would rely on 
contractor logistics support as well as comprehensive training 
and a much stronger warranty program before we actually begin 
establishing our depots.
    We are looking at a multiyear procurement, which would 
start at high-rate production, and we're looking at using ways 
basically about a 5 percent savings a year. That's what that 
represents.
    And then rate savings due to Joint Strike Fighter. 
Regardless of who wins the Joint Strike Fighter competition, 
there will be rate savings, and that is basically what we have 
laid in there.
    Mr. Shays. Is that primarily the engine?
    Ms. Druyun. Yes, that's also true for the engine as well, 
for both airframe and engine.
    Mr. Shays. Then the last is the multiyear?
    Ms. Druyun. The last is the multiyear.
    Mr. Shays. Which is?
    Ms. Druyun. This would be once we have satisfied all the 
requirements in development, successfully completed it, we 
would be able to write a multiple year contract like we have 
for the C-17, to get stability--funding and stability in the 
production line, and you are able to reduce the average 
recurring price by approximately 5 percent. That's what that 
represents.
    Mr. Shays. Both the multiyear and the Joint Strike Fighter 
rates are gigantic assumptions, correct? You don't know what 
the multiyear contracts will be?
    Ms. Druyun. If you were to use historical models, sir, 5 
percent is right in line with those historical models. That 
would be dependent upon the Congress approving a multiyear 
procurement. That authority does not rest with us.
    Mr. Shays. I understand that. And I understand you have to 
make assumptions, believe me.
    Ms. Druyun. Yes.
    Mr. Shays. And I understand that when Congress votes out 
weapons systems that are greater than our 5-year budget allows, 
Congress decides--and Defense goes along with it--decides to 
push it to the 6th and 7th year, and we increase costs 
tremendously. But frankly that happens because both Congress 
and Defense want these weapons systems, and they don't want to 
see a 5-year budget because we would be over our weapons 
systems. So it's kind of an agreement that occurs between 
Congress, the administration and the Defense Department.
    Would you turn please back to the chart that was on the 
board, Avionics Software Delivery Dates. I'm interested to know 
why you didn't put the JET schedule in there. You put everybody 
else's schedule in. Was there just an oversight?
    Ms. Druyun. I tried to simplify the chart. I find you can 
only put so much stuff on a chart. But if I could take you back 
to the JET schedule, for Block 2.0, we had projected the--the 
JET laid out July 2000. The JET for Block 3.0 laid out April 
2001. And for Block 3.1, the JET laid out September 2001.
    Mr. Shays. If I am looking at the third Block, Block 1.1, 
based on the JET schedule, would be 4 months behind?
    Ms. Druyun. No. No, sir. It has already been delivered.
    Mr. Shays. January 1999?
    Ms. Druyun. Its need date, according to the JET, was June 
11, 1999, and it was delivered May 28, 1999.
    Mr. Shays. So you're saying it's 1 month ahead?
    Ms. Druyun. Yes.
    Mr. Shays. On Block 2/3, the seventh Block--sixth Block 
down, what was the schedule on that? Didn't the JET say January 
2000, it anticipates it?
    Ms. Druyun. Are you referring to the Block that says 
``Sensor Physics?''
    Mr. Shays. Yes.
    Ms. Druyun. This was a change to the JET. This was an 
additional Block of software that we added in to put it into 
the avionics integration lab and into the flying test bed. This 
was a risk reduction Block that we laid in.
    Mr. Shays. Let me put it in my words. Are you saying the 
JET doesn't even have this estimate?
    Ms. Druyun. The JET, that's correct, did not have something 
for a Block 2/3S.
    Mr. Shays. The last two blocks, do they reflect the delays 
that already occurred?
    Ms. Druyun. The last two blocks, I assume you're referring 
to Block 3.0 and 3.1?
    Mr. Shays. Yes.
    Ms. Druyun. Taking you back to the JET estimate, to the JET 
schedule, we are ahead of the JET schedule for Block 3.0. The 
JET schedule was April 17, 2001. We believe we will deliver 
that by October 30, 2000. And the metrics I am tracking show 
that we are very much on track for that to occur.
    The Block 3.1, the JET said September 2001, and we believe 
that we will be able to deliver it in June 2001 which is on or 
ahead of schedule.
    Mr. Shays. They both would be. Let me just ask you one last 
chart and I thank my colleague for his patience. If you would 
look at chart, Air Vehicle October 1999 Final CPR.
    Ms. Druyun. Is this the GAO report, sir?
    Mr. Shays. I'm looking at your report. I'm looking at page 
8--not page 8, I just numbered it. It's just helpful to have 
page numbers.
    You have got it on the board there.
    Ms. Druyun. OK.
    Mr. Shays. The December number for commitment, which is the 
projection, is $225. Your number in October is $222. These are 
in dollars, $222 million. The cost variation now is $238 
million. What do you think it is going to be in December?
    The bottom line, the number will go up from $238, we are 
already going to be above it, from $225 to $238. The question I 
have is, is it going to be much higher than $238?
    Ms. Druyun. I laid out projections through really the end 
of the program. I don't remember what my December projection 
was, but I expect I will be slightly above it. Some months I am 
above it, other months I come within it.
    Mr. Shays. Above $238?
    Ms. Druyun. I would have to get you the exact number, but I 
think it was around $245 million.
    Mr. Shays. About $20 million over, give or take?
    Ms. Druyun. Yes.
    Mr. Shays. Is that significant?
    Ms. Druyun. No, I don't think it's significant. Part of the 
bump-up that you saw from $227 in September, the real cost 
variance, to October, to $238, that's $11 million, the bulk of 
that is a one-time charge because of a bonus that Boeing paid 
to all of its employees when they wrote a new union agreement. 
So that's a one-time charge. That's why you see this bump-up 
that occurs like that. But we have typically--what we have 
typically experienced is in the neighborhood of a $6 million a 
month variance from the previous month.
    Mr. Shays. You just triggered a question. I make an 
assumption that estimates are allowed to vary by the cost of 
living. So as the cost of living goes up, we can change 
estimates.
    How does it work--what is the incentive to Boeing to 
control costs if they can basically pass on the costs to you 
and me and everyone else?
    Ms. Druyun. That's a very good question. If I could try to 
explain how we do inflation estimates on this program--actually 
we do it in all defense programs--we have our own inflation 
rate that we use in building our budget. It is passed down to 
us, I believe, from the Office of Management and Budget. The 
inflation rate that we have basically built into this budget is 
less than--I believe it's less than 1 percent. So when we put 
together the estimate, we had to use Department of Defense 
inflation rates.
    If you look at, and this is an interesting anomaly, when 
you look at the DRI, this is the data resource organization 
that captures all the labor statistics, for this type of work 
typically the inflation rate that you see with your workers, 
they get an average of 3 to 4 percent increase per year. The 
way we have to price it out, I basically have to price it out 
at less than 1 percent a year. And we track very carefully the 
recent agreements that Boeing has struck up, that Lockheed has 
struck up, that all of their major subs have entered into, and 
they are very much in line with the Data Resources Institute 
percentage.
    This is a challenge to us on this program, and that's why 
these cost reduction initiatives are so important, because 
these cost reduction initiatives have to offset the difference 
between the standard inflation rate versus the inflation rate 
that we use.
    Mr. Shays. Just let me ask that question, part of the 
question again. You answered part of it.
    If Boeing ends up passing on, agreeing with its employees 
to give them a bonus or salary increases, we're pretty much 
locked into Boeing right now. So do we just absorb that cost?
    Ms. Druyun. In a cost-type contract, you do. EMD, our 
development contract, is a cost-type contract.
    Now, when I look at my PRTV contract No. 1 and my PRTV 
contract No. 2, those are firm, fixed price contracts. I do not 
absorb those costs; that contractor absorbs those costs.
    Mr. Shays. Thank you very much.
    Thank you, my friend. You have the floor as long as you may 
want.
    Mr. Tierney. I will not want it that long.
    Can you just repeat for me again what the cost per F-22 is 
anticipated to be at this time?
    Ms. Druyun. Our estimate today of the average unit flyaway 
cost is $84.7 million apiece.
    Mr. Tierney. As of this time, what are the number of F-22s 
that the Air Force has committed to procure?
    Ms. Druyun. Our development program, we are receiving nine 
air vehicles and two ground test vehicles, the first production 
readiness test vehicle contract, two vehicles, and the second 
production readiness test vehicle contract, six vehicles. So it 
is 8 and 9; it's a total of 17 vehicles.
    Mr. Tierney. Nine plus two plus two plus six, right?
    Ms. Druyun. Right. I really don't count the ground test 
vehicles as air vehicles.
    Mr. Tierney. So you have 17 vehicles that are committed for 
right now.
    What is the Air Force commitment to procure long lead 
materials, for how many more F-22s?
    Ms. Druyun. We have a DAB review, a DAE review scheduled, 
as Dr. Schneiter mentioned, this Thursday, the day after 
tomorrow, and we will review the status of the program; and we 
have been authorized by the Congress to obligate $277 million 
of procurement funding for long lead of 10 aircraft for next 
year.
    Mr. Tierney. So the answer is 10?
    Ms. Druyun. Yes, 10 aircraft, $277 million long lead.
    Mr. Tierney. So we planned originally for, what, 4,337 
hours of flight tests overall for this project?
    Ms. Druyun. I don't recall, sir. I would have to get that 
for the record.
    Mr. Tierney. Does that sound about right to you?
    Ms. Druyun. Yes, that's about right.
    Mr. Tierney. What percentage of that planned flight testing 
will we have completed when all this production has taken place 
for these 17 plus 10?
    Ms. Druyun. By the end of this month, I expect we will have 
500 flight hours, flight test hours. By the end of December 
2000, it will be over 1,000 flight test hours.
    Mr. Tierney. Given the complexity of this system, are you 
comfortable that that is a sufficient testing prior to 
production?
    Ms. Druyun. Yes, I am, particularly given the test 
philosophy we laid into this program at its inception. Testing 
at the lowest component and working your way up to the system 
level, extensive modelling and simulation, and if you were to 
compare this airplane today with respect to an F-15 and F-16 or 
an F-18, we actually today have more flight test hours than 
they did when they entered into low rate initial production.
    Mr. Tierney. Earlier you and Mr. Chambliss were having a 
nice little discussion back and forth, you mentioned the 
dependency of the Joint Strike Fighter and the F-22, and you 
mentioned it again on your Production Cost Reduction Plan 
Savings chart under the orange where you had JSF rates, you 
said to be a greater savings in both the airframe and the 
engine. Would you explain that a little more for me?
    Ms. Druyun. The decision was made when we began the Joint 
Strike Fighter program to use the same core engine that we're 
using on the F-22. As you know, the engine is still in 
development for F-22. But that core engine is what is being 
used by two competing contractors with Pratt for their designs 
on Joint Strike Fighter.
    The avionics system that we have laid in place, as I said, 
is the most complex avionics system in any fighter aircraft 
manufactured to date. When it is all said and done, my avionics 
system will have about 2 million, 2.2 million lines of code. 
The Joint Strike Fighter is looking at obviously an even more 
complex avionics system, and theirs could be perhaps double 
that amount. It depends on the individual contractor's design. 
But being able to do things like full sensor fusion, would be 
the first time ever we will have demonstrated this on the F-22, 
and it will be a key part of what they will be doing in Joint 
Strike Fighter.
    Mr. Tierney. This would be true whether you are moving 
directly to the JSF and just doing all of this research and 
development for that alone and not producing the F-22, right?
    Ms. Druyun. I guess my point is, the work we're doing today 
on development, proving out that you can do this complex sensor 
fusion and that you can take the core engine that we have 
developed in F-22 is a great risk mitigator for the Joint 
Strike Fighter program.
    Mr. Tierney. All the risk goes into the F-22, but if you 
went straight into the JSF, it would go into the JSF, right?
    Ms. Druyun. No, I think very clearly the two programs 
complement each other in terms of the warfighters' needs.
    Mr. Tierney. That may be the case, but in terms of 
production and the cost, if you were going to go directly to 
the JSF, you would just do all of the research and development 
for the avionics and for the engine and whatever directly for 
that jet?
    Ms. Druyun. That's correct.
    Mr. Tierney. The savings come only because you decide to 
double up, you're going to use the same for the F-22, the same 
for the JSF, have larger numbers and spread the cost over that. 
But if you didn't have the production of the F-22, then 
obviously you would save all of that and you would be moving 
right to the JSF.
    Ms. Druyun. I think you would have a more complex 
development program with the Joint Strike Fighter.
    Mr. Tierney. Somewhat, sure.
    Ms. Druyun. Yes.
    Mr. Tierney. But other than that, basically I am on point?
    Ms. Druyun. Yes, it just adds to the complexity and to the 
risk.
    Mr. Tierney. Dr. Schneiter, we talked a little bit earlier 
about the F-15 Eagle and upgrading it and not upgrading it. 
What upgrades on the F-15 Eagle could reasonably be 
contemplated?
    Mr. Schneiter. If you were going to upgrade it, probably 
one of the first things you would do is give it an improved 
radar. You would also do some things to upgrade other aspects 
of the avionics. You might do some things, if you could, to 
reduce its observability.
    Mr. Tierney. If you did all of those improvements, all 
those upgrades on that, how would it compare to what your 
projections are for the F-22 in terms of maneuverability?
    Mr. Schneiter. I don't think it would be much different in 
terms of maneuverability. The thing you would not have, though, 
in the case of the improved F-15 is anywhere near as small a 
radar cross-section. You would also not have the ability to fly 
supersonically without using afterburner. And the big advantage 
of that is, if you have to use afterburner to go 
supersonically, your fuel flow is extremely high, and so you 
can only do that for a very short amount of time.
    What the F-22 allows you to do is to use supersonic flight 
for a longer period of time, because it uses far less fuel than 
you would need with afterburner.
    Mr. Tierney. Is it projected that the JSF will have those 
capabilities?
    Mr. Schneiter. The JSF will have a low radar cross-section. 
It will have, we expect, an excellent avionics suite. We do not 
expect that it will have the so-called supercruise capability, 
and that is one of the reasons that it does not do nearly as 
well in an air-to-air role.
    Mr. Tierney. And in the view of the Department of Defense, 
is it not possible to give it that supercruise capability?
    Mr. Schneiter. I don't think it would be possible to do it 
and still keep within the cost targets which we have for the 
Joint Strike Fighter. We expect to build a very large number of 
Joint Strike Fighters. We need them to replace aging aircraft 
in the Air Force, in the Navy, and in the Marine Corps. Since 
we will be building very large numbers, it's very important 
that we keep the cost down, and so we give it only the 
requirements that it needs to do its principally air-to-surface 
role. That does not include supersonic flight without 
afterburner.
    Mr. Tierney. If you had a savings in the F-22, production 
of the F-22, would it not make it more reasonable to then 
adjust the cost of the JSF to maybe include some things that 
may be a little more costly?
    Mr. Schneiter. I think the savings we're talking about in 
the F-22, that Ms. Druyun was referring to, were savings that 
we need to accomplish in order to buy the aircraft----
    Mr. Tierney. The savings I'm talking about, just 
hypothetically, if we skipped over the F-22 and went to the 
JSF, you would have substantial savings from the F-22 and then 
might it not be reasonable to do some other things with the 
JSF?
    Mr. Schneiter. You would have some amount of money left. 
The development program, though, on the F-22 is getting close 
to complete.
    Mr. Tierney. When you say ``some money left,'' you would 
have a lot of money left, right?
    Mr. Schneiter. You would have a lot of money left, but if 
you then take that money and divide it by 3,000 aircraft, you 
would find you wouldn't want the cost of the aircraft to go up 
very much. So I think you would be very disinclined to give a 
lot of that additional capability to the Joint Strike Fighter.
    Mr. Tierney. What countries do you think right now are 
going to have anything even close to, comparable with the F-15, 
as you have talked about it might be modified or upgraded?
    Mr. Schneiter. I think the Russian aircraft that were 
referred to earlier certainly fall in that category.
    Mr. Tierney. Does it exist or the ones that are on the 
board?
    Mr. Schneiter. I believe they exist. The SU-27 does exist.
    Mr. Tierney. They are under parity with an existing F-15, 
but not with an upgraded F-15, right?
    Mr. Schneiter. I think parity is a rough term here. The 
thing we're talking about in the F-22 is something that is a 
large step difference.
    Mr. Tierney. I'm talking about an upgraded F-15.
    Mr. Schneiter. You would still expect to have rough parity 
among the F-15 class of fighter and the fighters that you would 
expect to have from other countries.
    Mr. Tierney. Maybe I'm not being clear, maybe I'm not 
hearing you correctly.
    You have the so-called ``rough parity'' according to the 
report we were given this morning, rough parity between the Su 
and the MiG and the F-15 as it exists now?
    Mr. Schneiter. Yes.
    Mr. Tierney. If you were to upgrade the F-15 Eagle to some 
of the points you made just a few moments ago, then do you see 
anything that exists now that even is close or at rough parity 
with it?
    Mr. Schneiter. I would expect if we would improve our 
aircraft, others would improve their aircraft as well. I think, 
in any event, we would not have the degree of superiority that 
we need to have in order to have air dominance, even with the 
improved F-15.
    Mr. Tierney. Do you feel we had air dominance in the last 
conflict that we had?
    Mr. Schneiter. I think we did, yes.
    Mr. Tierney. I don't have any further questions.
    Thank you, Chris.
    Mr. Shays. I don't have many more but I have a few.
    The F-22, the EMD cost, it is No. 6, page No. 6 of mine.
    Would you identify the Government Management Reserve 
number? That seems to be a new number for us. We're not used to 
that number. You have the chart. Take your time. It is what you 
were going through, I believe, and what you showed us. We 
wanted you to go through all your charts without our 
interrupting you, but we wanted you to make reference to them 
now.
    We appreciate sincerely the information you are providing. 
It helps us ask our questions. What is the Government 
Management Reserve? It is $1.3 billion or $130 million? That's 
a new number for us, or we are just being exposed to that.
    Ms. Druyun. When I testified at the SASC TACAIR hearing on 
March 17th, I showed the figure $666 million. What you see here 
in March 1999.
    Mr. Shays. That is the overall chart?
    Ms. Druyun. Yes.
    Mr. Shays. And that number is based since the Joint 
Estimating Team, that $667?
    Ms. Druyun. That's correct. The $130 million management 
reserve I alluded to at my hearing back in March.
    What we have done because the Congress has capped this 
program and development in particular, normally I have to tax 
all of my programs for small business innovative research 
taxes. They are across-the-board taxes that you have to do; 
whenever we cap a program in development, we exempt it from 
having to pay those costs. That has generated another $130 
million worth of management reserve for a program manager to 
use as we complete the development program.
    Mr. Shays. When you say ``alluded to,'' that's a dangerous 
word. What does that mean?
    Ms. Druyun. I did not come out and state what the exact 
number was, because at the time there were a number of 
contractors, both of my contractors, Lockheed and Pratt, were 
sitting in the audience, and I did not feel it was appropriate 
at that time to openly speak to it. I made reference to the 
fact that we had additional Government Management Reserve, and 
that's what I am showing, sir.
    Mr. Shays. That's not a savings. That's just basically a 
way to meet the cost. It's an added fund that you can draw on?
    Ms. Druyun. Right. Because the Congress capped this 
program. Whenever you cap a program, it does not make good 
management sense to us to tap into that to pay some of the 
taxes that are required on an annual basis. I'm doing the same 
thing right now in the Joint Strike Fighter program as well.
    Mr. Shays. Would you just--I am just trying to think of the 
impact. I just want to make sure I understand it. The bottom 
line is, it's a reserve that you can tap into, so you're not 
making a savings--and I'm not saying you should, I'm just 
trying to understand it--you are not making a savings in the 
program, an offset in the program, you're drawing on reserve to 
help meet your numbers?
    Ms. Druyun. That's correct, to offset the worst-case cost 
growth that I identified back in March 1999.
    Mr. Shays. Thank you. When I look at external stores 
deferral, deferral means you didn't save, but you postponed. 
That is still in that chart there?
    Ms. Druyun. Yes, that's correct.
    Mr. Shays. It is $140 million?
    Ms. Druyun. Yes.
    Mr. Shays. So the answer to the question is yes to my 
question.
    So it is $140 million that we are going to incur, but we 
are going to incur later, outside the caps?
    Ms. Druyun. That's correct. That was a decision that we 
made with Air Combat Command.
    Mr. Shays. But we're going to have to come up with that 
money some way, sometime.
    Ms. Druyun. It's laid into the program. We always do what 
we call follow-on test and evaluation. And these airplanes will 
continually go through additional testing as long as we have 
them in inventory.
    What we agreed we would do----
    Mr. Shays. This primarily was weapons systems? Does this 
include the deferral of the weapons?
    Ms. Druyun. No, it does not include the deferral of 
weapons. It only includes--excludes--let me tell you what we 
are doing as part of the development program so you can 
understand it.
    We're going to certify the full compliance of weapons 
systems--AMRAAMs, M9X, our gun, the thousand-pound JDAM, which 
is all internal carriage which you need so you can have stealth 
performance. You hang that stealth on the outside of the 
airplane, you don't have stealth performance. This represents 
the go-to-war scenario configuration that our warfighters will 
take with the F-22.
    So as part of the development program, we're going to 
certify the full stealth combat configuration and the basic 
ferry configuration. What we're going to postpone and do as 
part of follow-on test and evaluation, because we would never 
take this airplane to war that way is the external carriage of 
AMRAAMs or JDAMs, basically the external carriage of additional 
munitions or missiles that you would carry.
    Mr. Shays. That won't be stealth?
    Ms. Druyun. That's correct. As long as you hang that on the 
bottom of the airplane, it is no longer stealth.
    Mr. Shays. Let me be clear. So what comprises the external 
stores deferral?
    Ms. Druyun. The cost to go through the full op test 
certification is $140 million and that is what we have deferred 
to follow-on test and evaluation.
    Mr. Shays. But it wasn't included in the original EMD 
estimates, originally?
    Ms. Druyun. I believe it was.
    Mr. Shays. OK. Are there any other deferrals that show up 
in any of these other numbers or are deferrals only in this 
number of $140?
    Ms. Druyun. To the best of my recollection, it is only in 
this number.
    Mr. Shays. Let me just conclude with an observation, and 
I'm happy to have you make a response to it.
    You use a per plane cost, per copy cost of $84 million. If 
we used all the research and development, we would come up with 
$184 million. Make your argument as to why we should look at 
$84 million and not $184 million.
    Ms. Druyun. We have always reported the average unit 
flyaway cost with respect to all of our aircraft. I would tell 
you every single year when we brief the House Appropriations 
Committee and have hearings, I basically show three sets of 
numbers.
    Would you pull out my backup chart.
    Mr. Shays. Do I have that chart?
    Ms. Druyun. I believe you do.
    Mr. Shays. It was part of this one?
    Ms. Druyun. It should have been. Did we include backups?
    Mr. Shays. I can't read it there, so if someone could give 
us a chart.
    Do you have any other backup charts you want to show us? 
They may be the most interesting.
    Ms. Druyun. No. I had a couple of other backup charts, but 
I don't think you would find them to be as interesting.
    What we basically do on an annual basis is report the 
flyaway cost, the unit procurement cost and the program 
acquisition unit cost. We show that in fiscal year 1999 dollars 
as well as then-year dollars. We give that every single year to 
the appropriations and authorization committees.
    Mr. Shays. So the program acquisition unit cost would be 
your entire cost of everything divided by the number of planes?
    Ms. Druyun. Yes, and it includes your RDT&E, your military 
construction, anything that was ever spent with respect to the 
F-22 program.
    But a true measure of a program is really its flyaway cost. 
This is the actual recurring cost and nonrecurring startup 
charges to actually build an airplane.
    Mr. Shays. Thank you.
    I thank you. I would invite each of you to respond to any 
question we didn't ask that you wanted to answer or any other 
comment you want to make.
    Mr. Schneiter. I have nothing more.
    Ms. Druyun. I have nothing more. Thank you, sir.
    Mr. Shays. Thank you both very much. I really appreciate 
both of you being here and your testimony.
    I would also like to thank our court reporters; we had Ryan 
Jackson and Bill Odom. On loan to us, Major Mike Mueller, who 
was assisting us in the charts, and I thank you for doing that. 
I thank you for having the charts; it was very helpful. Don 
Springman, who is the senior evaluator, GAO, he was helpful 
too, and I thank him.
    All of you have a beautiful day, a Merry Christmas, a Happy 
New Year, a Happy Hanukkah, and a lovely day today. Thank you.
    [Whereupon, at 12:45 p.m., the subcommittee was adjourned.]

                                
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