[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]





  IS DOD MEETING JOINT STRIKE FIGHTER [JSF] INTERNATIONAL COOPERATIVE 
                             PROGRAM GOALS?

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

                                HEARING

                               before the

                   SUBCOMMITTEE ON NATIONAL SECURITY,
                   EMERGING THREATS AND INTERNATIONAL
                               RELATIONS

                                 of the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 21, 2003

                               __________

                           Serial No. 108-94

                               __________

       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



                                 ______

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                     COMMITTEE ON GOVERNMENT REFORM

                     TOM DAVIS, Virginia, Chairman
DAN BURTON, Indiana                  HENRY A. WAXMAN, California
CHRISTOPHER SHAYS, Connecticut       TOM LANTOS, California
ILEANA ROS-LEHTINEN, Florida         MAJOR R. OWENS, New York
JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
JOHN L. MICA, Florida                PAUL E. KANJORSKI, Pennsylvania
MARK E. SOUDER, Indiana              CAROLYN B. MALONEY, New York
STEVEN C. LaTOURETTE, Ohio           ELIJAH E. CUMMINGS, Maryland
DOUG OSE, California                 DENNIS J. KUCINICH, Ohio
RON LEWIS, Kentucky                  DANNY K. DAVIS, Illinois
JO ANN DAVIS, Virginia               JOHN F. TIERNEY, Massachusetts
TODD RUSSELL PLATTS, Pennsylvania    WM. LACY CLAY, Missouri
CHRIS CANNON, Utah                   DIANE E. WATSON, California
ADAM H. PUTNAM, Florida              STEPHEN F. LYNCH, Massachusetts
EDWARD L. SCHROCK, Virginia          CHRIS VAN HOLLEN, Maryland
JOHN J. DUNCAN, Jr., Tennessee       LINDA T. SANCHEZ, California
JOHN SULLIVAN, Oklahoma              C.A. ``DUTCH'' RUPPERSBERGER, 
NATHAN DEAL, Georgia                     Maryland
CANDICE S. MILLER, Michigan          ELEANOR HOLMES NORTON, District of 
TIM MURPHY, Pennsylvania                 Columbia
MICHAEL R. TURNER, Ohio              JIM COOPER, Tennessee
JOHN R. CARTER, Texas                CHRIS BELL, Texas
WILLIAM J. JANKLOW, South Dakota                 ------
MARSHA BLACKBURN, Tennessee          BERNARD SANDERS, Vermont 
                                         (Independent)

                       Peter Sirh, Staff Director
                 Melissa Wojciak, Deputy Staff Director
                      Rob Borden, Parliamentarian
                       Teresa Austin, Chief Clerk
              Philip M. Schiliro, Minority Staff Director

 Subcommittee on National Security, Emerging Threats and International 
                               Relations

                CHRISTOPHER SHAYS, Connecticut, Chairman

MICHAEL R. TURNER, Ohio
DAN BURTON, Indiana                  DENNIS J. KUCINICH, Ohio
STEVEN C. LaTOURETTE, Ohio           TOM LANTOS, California
RON LEWIS, Kentucky                  BERNARD SANDERS, Vermont
TODD RUSSELL PLATTS, Pennsylvania    STEPHEN F. LYNCH, Massachusetts
ADAM H. PUTNAM, Florida              CAROLYN B. MALONEY, New York
EDWARD L. SCHROCK, Virginia          LINDA T. SANCHEZ, California
JOHN J. DUNCAN, Jr., Tennessee       C.A. ``DUTCH'' RUPPERSBERGER, 
TIM MURPHY, Pennsylvania                 Maryland
WILLIAM J. JANKLOW, South Dakota     CHRIS BELL, Texas
                                     JOHN F. TIERNEY, Massachusetts

                               Ex Officio

TOM DAVIS, Virginia                  HENRY A. WAXMAN, California
            Lawrence J. Halloran, Staff Director and Counsel
                Thomas Costa, Professional Staff Member
                        Robert A. Briggs, Clerk
                    David Rapallo, Minority Counsel


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on July 21, 2003....................................     1
Statement of:
    Hudson, Major General John L. ``Jack'', Program Manager, 
      Joint Strike Fighter [JSF] Program, Department of Defense..    48
    Patrick, Suzanne, Deputy Under Secretary, Acquisition, 
      Technology and Logistics (Industrial Policy), Department of 
      Defense....................................................    40
    Schinasi, Katherine V., Director, Acquisition and Sourcing 
      Management, U.S. General Accounting Office, accompanied by 
      Brian Mullins, Senior Defense Analyst, Acquisition and 
      Sourcing Management, U.S. General Accounting Office........    10
    Volkman, Al, Director, Acquisition, Technology and Logistics 
      (International Cooperation), Department of Defense.........    33
Letters, statements, etc., submitted for the record by:
    Hudson, Major General John L. ``Jack'', Program Manager, 
      Joint Strike Fighter [JSF] Program, Department of Defense, 
      prepared statement of......................................    50
    Kucinich, Hon. Dennis J., a Representative in Congress from 
      the State of Ohio, prepared statement of...................     6
    Patrick, Suzanne, Deputy Under Secretary, Acquisition, 
      Technology and Logistics (Industrial Policy), Department of 
      Defense, prepared statement of.............................    43
    Schinasi, Katherine V., Director, Acquisition and Sourcing 
      Management, U.S. General Accounting Office, prepared 
      statement of...............................................    14
    Shays, Hon. Christopher, a Representative in Congress from 
      the State of Connecticut, prepared statement of............     3
    Volkman, Al, Director, Acquisition, Technology and Logistics 
      (International Cooperation), Department of Defense, 
      prepared statement of......................................    35

 
  IS DOD MEETING JOINT STRIKE FIGHTER [JSF] INTERNATIONAL COOPERATIVE 
                             PROGRAM GOALS?

                              ----------                              


                         MONDAY, JULY 21, 2003

                  House of Representatives,
Subcommittee on National Security, Emerging Threats 
                       and International Relations,
                            Committee on Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 11 a.m., in 
room 2154, Rayburn House Office Building, Hon. Michael R. 
Turner (vice chairman of the subcommittee) presiding.
    Present: Representatives Shays, Turner, Schrock, and 
Kucinich.
    Staff present: Lawrence Halloran, staff director and 
counsel; J. Vincent Chase, chief investigator; Thomas Costa, 
professional staff member; Robert A. Briggs, clerk; Joe 
McGowen, detailee; Chris Skaluba, fellow; David Rapallo, 
minority counsel; and Jean Gosa, minority assistant clerk.
    Mr. Turner. Good morning. A quorum being present, the 
Subcommittee on National Security, Emerging Threats and 
International Relations hearing entitled, ``Is DOD Meeting 
Joint Strike Fighter [JSF], International Cooperative Program 
Goals,'' is called to order.
    The Joint Strike Fighter [JSF], could be a model for 21st 
century system acquisition, promising three-planes-in-one 
jointness, low risk development strategies, and unprecedented 
international participation. Or it could fall prey to the same 
cost growth, schedule delays, and inter-service disputes that 
plagued so many cold war procurements.
    In previous hearings on the JSF programs, we examined 
efforts to implement a knowledge-based development cycle, 
allowing technology maturity and design stability, not external 
funding deadlines, to drive the program forward. Today, we ask 
whether international participation and technology sharing are 
being managed so as to maximize benefits and minimize risk to 
the Department of Defense's largest cooperation program.
    At our request, the General Accounting Office [GAO], 
examined the complex set of relationships between the JSF 
program and its eight international partners. They assessed how 
DOD measures expected cost-sharing benefits, manages foreign 
partner expectations, and mitigates the risks of significant 
technology transfers. Their report, which has been released, 
finds the JSF program in need of stronger management and 
oversight, because international participants currently have no 
requirement or incentive to share in cost growth. GAO also 
found that the Department of Defense has insufficient knowledge 
about contractor activities to anticipate and mitigate risks 
associated with technology transfers. And the countries that 
are currently our eight international are the United Kingdom, 
which is a full collaborative level 1 partner, Italy and the 
Netherlands are level 2 partners, Turkey, Norway, Australia, 
Canada, and Denmark are level 3 partners.
    In meeting our national and global security obligations, 
collaborative programs with allies offer the potential for 
common doctrine, shared training, and far greater operational 
integration in combat. That level of collaboration also demands 
greater access to sensitive defense technologies than we are 
accustomed. It also may demand technology transfers at a pace 
and volume our current laws, regulations, and management 
systems cannot handle safely.
    Others in the Department of Defense and defense ministries 
in other nations are watching the JSF for signs that 
collaboration is worth emulating in other programs.
    For the Joint Strike Fighter to fly as the new standard for 
efficient, affordable, truly joint acquisition, management of 
international participation and technology transfers must be 
improved. As vice chairman of this subcommittee as well as a 
member of the Armed Services Committee, I am very interested in 
the continued monitoring of this program.
    Today, witnesses from GAO and the Department of Defense 
will discuss these important issues and efforts to strengthen 
management of the Joint Strike Fighter program. We welcome 
them, and we look forward to their testimony.
    And we have with us today Mr. Kucinich, who is the ranking 
member on this subcommittee, and Mr. Schrock, who is also in 
attendance and a member of the subcommittee. The individuals 
testifying for us today are Katherine Schinasi, Director, 
Acquisition and Sourcing Management, U.S. General Accounting 
Office. She is accompanied by Brian Mullins, who is the Senior 
Defense Analyst, Acquisition and Source Management, U.S. 
General Accounting Office. Mr. Al Volkman, Director, 
Acquisition, Technology, and Logistics, International 
Cooperation, Department of Defense. Ms. Suzanne Patrick, Deputy 
Under Secretary, Acquisition, Technology and Logistics, 
Industrial Policy, Department of Defense. And Major General 
John L. Hudson, Program Manager, Joint Strike Fighter [JSF], 
Program, Department of Defense.
    Mr. Kucinich, would you have an opening statement?
    [The prepared statement of Hon. Christopher Shays follows:]

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    Mr. Kucinich. Thank you very much, Mr. Chairman. I want to 
thank you for calling this hearing on the Joint Strike Fighter 
program, and welcome the witnesses to this hearing.
    I would like to raise two issues regarding this topic that 
I hope our witnesses can address. First is the issue of cost 
sharing.
    As we learned in earlier hearings on this program and the 
F-22, the increasing cost of aircraft development and 
production programs is one of the most reliable events in 
Washington. As we have seen over and over again, DOD is not 
capable of accurately predicting cost increases, and its 
efforts to effectively control them are, frankly, lacking 
intent and competence. I believe any serious person examining 
DOD's track record would agree.
    For example, as we learned at our last hearing, F-22 
production costs have increased by nearly $20 billion since 
1996, and the number of planes the Pentagon can afford within 
the congressional cost cap for this program has plummeted to 
less than a third of their original goal.
    Today, the subcommittee will focus on the Joint Strike 
Fighter program. I look forward to the testimony of the U.S. 
General Accounting Office, which will release a new report on 
the implications of the international cost sharing agreement of 
the JSF program.
    As the GAO report demonstrates, international involvement 
in the program has benefits and risks. On the one hand, foreign 
governments will share at least some of the cost of the 
program. However, the GAO report concludes that this cost 
sharing arrangement is by no means ideal. While the inclusion 
of international partners is intended to defray some costs, the 
GAO report finds that partner countries are not required to 
share any future program cost increases.
    As we know from our past experience, staggering cost 
increases are a guarantee in aircraft development programs. For 
the JSF cost sharing arrangement to allow foreign partners to 
be exempt from future cost increases seems to ignore reality 
and submit the American taxpayer to an unfair burden.
    Indeed, GAO concluded that if costs increase, which is a 
virtual certainty, ``the burden may fall almost entirely on the 
United States.'' I hope our witnesses can address this concern.
    My second concern is that the Pentagon's current plan for 
developing and producing aircraft will do nothing to address 
the fundamental problem with our military's rapidly aging 
fleet. As the average age of our fleet continues to grow, 
maintenance costs will continue to soar, and the effectiveness 
of the U.S. military will decline.
    Buying only a few hundred expensive planes from the F-22 
and JSF programs will not decrease the average age of our 
planes. To the contrary, under the Pentagon's current plan, the 
average age of U.S. aircraft will continue to grow.
    Mr. Chairman, these may seem like obvious problems, but I 
have yet to hear an obvious explanation for how the Pentagon 
intends to address them. And, until I do, I cannot support the 
administration's current plan for aircraft development and/or 
acquisition.
    I thank you, Mr. Chairman. And, once again, thank you for 
making this hearing possible.
    [The prepared statement of Hon. Dennis J. Kucinich 
follows:]

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    Mr. Turner. I ask for 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 statements in the record. And without objection, so 
ordered.
    Turning then to the administration of the oath. If the 
witnesses would stand.
    [Witnesses sworn.]
    Mr. Turner. Note for the record that the witnesses 
responded in the affirmative. Thank you.
    During the testimony, the lights that appear before you 
will mark off 5-minute increments. Each of you will have 10 
minutes for your presentation before the committee. We will 
begin with Katherine Schinasi. Thank you.

 STATEMENT OF KATHERINE V. SCHINASI, DIRECTOR, ACQUISITION AND 
     SOURCING MANAGEMENT, U.S. GENERAL ACCOUNTING OFFICE, 
     ACCOMPANIED BY BRIAN MULLINS, SENIOR DEFENSE ANALYST, 
 ACQUISITION AND SOURCING MANAGEMENT, U.S. GENERAL ACCOUNTING 
                             OFFICE

    Ms. Schinasi. Thank you, Mr. Chairman, and members of the 
subcommittee. I am pleased to be here today to discuss the 
Joint Strike Fighter program's international acquisition 
strategy. With your permission, I would like to summarize my 
statement, and then, as you indicated, have the entire text put 
in the record.
    DOD views the Joint Strike Fighter program as both a model 
for acquisition reform and as an example for the future of 
international cooperation. We have previously reported to the 
subcommittee on how the Joint Strike Fighter program is being 
managed relative to best practices for product development. 
Today, I would like to focus my remarks on the international 
structure of the Joint Strike Fighter program, the benefits and 
challenges cooperative development brings to the overall 
acquisition approach, and the opportunity DOD has to achieve 
critical program goals.
    As we found in our earlier assessments of how well the 
Joint Strike Fighter program is meeting its cost schedule and 
performance goals, we have again determined that one of the 
keys to lowering risks of managing the international 
participants in this program is having sufficient knowledge on 
which to base decisions. The Joint Strike Fighter program is 
structured on a multi-tiered set of relationships involving 
both government and industry from the United States and eight 
partner countries. We prepared a chart that illustrates the 
significant relationships between the participants.
    At the top level, there is a framework MOU and supplemental 
memorandums of agreement between the Department of Defense and 
each of the partner countries' departments of defense that 
identify the roles, responsibilities, and expected benefits for 
all participants. And I would be happy to answer questions 
about this chart as we go through the Q and A session.
    The current agreement covers only the system development 
and demonstration phase, which was begun with the contract 
award to Lockheed Martin, the prime contractor, in October 
2001, and is scheduled to run about 10 years at an estimated 
cost of $33 billion. Additional agreements will need to be 
negotiated for the production phase of the Joint Strike Fighter 
program.
    The United States and its foreign partners expect to 
realize a variety of benefits from cooperation on the Joint 
Strike Fighter program. The United States expects to benefit 
from partner contributions and potential future aircraft sales 
through access to industrial capabilities in partner countries 
and through improved interoperability with allies once the 
aircraft is fielded. Partner governments expect to obtain an 
aircraft that they could not afford to develop on their own and 
to benefit from increased access to Joint Strike Fighter 
program data and technology transferred from U.S. aerospace 
companies to their national industries.
    Because of the significant expectations partners have 
regarding government and industry return, the Joint Strike 
Fighter Program Office and Lockheed Martin face significant 
challenges in balancing these expectations against other 
program goals. Achieving program goals for cost, schedule, and 
performance requires that subcontracts be awarded to companies 
who can deliver quality products on time and at cost. In 
addition, the Program Office and DOD must balance the need to 
transfer sufficient technology to foreign companies to perform 
successfully in a timely fashion while adhering to the broader 
U.S. disclosure and export control safeguards.
    Although the Program Office and Lockheed Martin have 
anticipated some of these challenges and are developing plans 
to address them, some decisions have already been taken that 
depart from early goals. Let me briefly address these.
    First, industrial participation. As the prime contractor, 
Lockheed Martin makes the key subcontracting decisions and 
therefore bears the primary responsibility for managing partner 
expectations. The approach Lockheed Martin has put in place is 
referred to as best value. Best value is meant to differentiate 
this program from earlier cooperative ventures in which a share 
of work was guaranteed for a certain level of investment. Best 
value is meant to focus more heavily on the use of competition.
    Lockheed Martin performed assessments for many of the 
partners to determine the ability of their industries to 
compete for JSF contracts, and then signed agreements with some 
partner governments and suppliers to document the opportunities 
they would have to bid for JSF contracts as well as the 
potential value of those contracts.
    Lockheed Martin has modified that concept a bit, and has 
now adopted what they call a strategic best value sourcing 
plan, which appears to modify the original best value approach 
by allowing work packages to be directly awarded to industry 
and partner countries where contract awards to date have not 
met partner expectations. While there are predetermined cost 
goals under these strategic awards, there are concerns that 
this represents a departure from the competitive approach.
    The second set of expectations in this Joint Strike Fighter 
program relates to technology. The United States has committed 
to design, develop, and qualify aircraft for the partners that 
are as common to the U.S. Joint Strike Fighter configuration as 
possible, within national disclosure policy boundaries. DOD, 
the Joint Strike Fighter Program Office, and Lockheed Martin 
have taken a number of steps to anticipate and solve problems 
associated with technology transfers, including requests for 
exceptions from the national disclosure policy. However, 
partners continue to express concern about the pace of 
information sharing and decisionmaking, particularly relating 
to the Joint Strike Fighter support concept.
    In addition to timely and favorable disclosure decisions, 
the Joint Strike Fighter contractors must receive authorization 
to transfer data and technology through the export licensing 
process. Export authorizations for critical suppliers need to 
have timely planning, preparation, and disposition to help 
avoid schedule delays and cost increases. Without proper 
planning, there could be pressure to expedite reviews and 
approvals to support program schedules. Planning could also 
help identify alternative sources for critical contracts to 
prevent problems in the event that technology transfer 
approvals are disallowed. Lockheed Martin has already added 
resources to address the volume of authorizations, but it has 
not yet completed a required long-term industrial participation 
plan that could help identify mitigation strategies.
    Finally, let me touch briefly on the impact of technical 
issues in the program. At its recent preliminary design review, 
the Joint Strike Fighter program uncovered problems with regard 
to aircraft weight, design maturity, and weapons integration. 
These problems with their resulting cost increases are common 
in DOD programs. However, partners have less control over 
program decisions that both cause and result from a lack of 
knowledge, while the impact may be more substantial as they 
cannot as easily adjust to these changes.
    In summary, the Joint Strike Fighter program is not immune 
to problems that have historically plagued DOD systems 
acquisitions. International participation in the program, while 
providing benefits, makes managing these challenges more 
difficult and places additional risk on DOD and the prime 
contractor. Because Lockheed Martin bears the responsibility 
for managing partner industrial expectations, it will be forced 
to balance its ability to meet partner expectations, which 
could be key to securing future sales and profitability, 
against program milestones and the company's ability to collect 
award fees.
    In turn, DOD must be prepared to balance risks resulting 
from contractor decisions against the national obligations set 
forth in agreements with partner governments and the need to 
protect some of the most sensitive U.S. military technology. 
While some steps have been taken to position the JSF program 
for success, given its size and importance, additional 
attention from DOD and the Program Office would help decrease 
the risks associated with implementing the international 
program.
    In the report we are releasing today to this subcommittee, 
we recommend that DOD ensure that the JSF Program Office and 
its prime contractors have sufficient information on 
international supplier planning to fully anticipate and 
mitigate the risks associated with technology transfer, and 
that information concerning the selection and management of 
suppliers is available, closely monitored, and used to improve 
program outcomes. Toward this end, DOD and the Joint Strike 
Fighter Program Office need to maintain a significant knowledge 
base to enable adequate oversight and control.
    Mr. Chairman, this concludes my summary, and I would be 
happy to take your questions.
    [Note.--The GAO report entitled, ``Joint Strike Fighter 
Acquisition, Cooperative Porgram Needs Greater Oversight to 
Ensure Goals Are Met,'' may be found in subcommittee files.]
    [The prepared statement of Ms. Schinasi follows:]

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    Mr. Turner. Thank you very much.
    Mr. Volkman.

STATEMENT OF AL VOLKMAN, DIRECTOR, ACQUISITION, TECHNOLOGY AND 
  LOGISTICS (INTERNATIONAL COOPERATION), DEPARTMENT OF DEFENSE

    Mr. Volkman. Mr. Chairman, members of the panel, thank you 
for this opportunity to share my views regarding the Joint 
Strike Fighter program. The Joint Strike Fighter program is a 
new benchmark for cooperative research, development, and 
production between the Department of Defense and our allies. 
DOD concurs with the GAO report, agrees with the report's 
recommendations, and will work closely with the Joint Strike 
Fighter Program Office, our partner nations, and JSF 
contractors to achieve effective program oversight.
    The core objectives of armament cooperation for programs 
like JSF are to increase military effectiveness through 
standardization and interoperability, and to reduce weapon 
acquisition costs by avoiding duplication of development 
efforts with our allies. The United States will benefit from 
sharing JSF program costs, improving interoperability with key 
allies, gaining access to selected foreign industrial 
capabilities, and increasing international sales potential. Our 
Joint Strike Fighter partners will benefit from cooperatively 
developing and acquiring an affordable next generation strike 
fighter weapons capability, participating in the day-to-day 
management of the program, and building long-term industrial 
relationships with U.S. aerospace companies.
    The JSF international program structure is based on a 
complex set of relationships involving both government and 
industry from the United States and our eight partner nations. 
Foreign and domestic suppliers compete for JSF work under a 
best value approach implemented through the three prime 
contractors, Lockheed Martin, Pratt and Whitney, and General 
Electric. The benefits obtained through the JSF international 
program are substantial. However, DOD recognizes that 
successfully implementing JSF cooperation will be challenging.
    Three challenges are mentioned in the GAO report: Possible 
future program cost increases. The JSF Program Director has and 
will continue to use various program management tools, frequent 
partner meetings and discussions, and contract incentives to 
keep the system development and demonstration effort under the 
cost ceiling of $33.23 billion. DOD's experience indicates that 
international cooperative system development programs such as 
JSF have usually been successful in equitably sharing proposed 
cost ceiling increases if DOD is able to make a good case to 
Congress and the partners that the additional funds provided 
will result in the fielding of a needed defense capability.
    Technology transfer. DOD is using available NATO exemptions 
in expediting and precoordinating reviews of individual export 
licenses to ensure timely, comprehensive JSF export 
authorizations take place. Additionally, in October 2002, the 
Department of State approved Lockheed Martin's global project 
authorization request to accelerate export approvals for 
nonsensitive, unclassified, technical data associated with JSF 
subcontracting activities. None of our export control 
mechanisms have been compromised, but rather have been 
streamlined and transformed into a more workable process that 
all JSF stakeholders have agreed to follow.
    Participant return on investment expectations. If partner 
industrial expectations conflict with program costs, schedule, 
and performance goals, the JSF Program Director and the Under 
Secretary of Defense for Acquisition, Technology, and Logistics 
in concert with prime contractors will employ their best 
efforts to identify, assess, and resolve partner industrial 
participation issues.
    DOD's leadership is fully committed to ensuring the success 
of the Joint Strike Fighter. The Joint Strike Fighter is DOD's 
largest international cooperative program by any measure, and 
has the full support of the Secretary of Defense and my boss, 
Mike Wynne, our Acting Under Secretary of Defense for 
Acquisition, Technology, and Logistics. Mr. Wynne, Ms. Patrick, 
and I will continue to work closely with Major General Hudson 
and his program team as well as other key U.S. Government 
stakeholders to ensure that the GAO's recommendations are 
implemented and that the program meets or exceeds DOD and 
partner objectives.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Volkman follows:]

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    Mr. Turner. Thank you, Mr. Volkman.
    I want to acknowledge that our chairman, Chris Shays, has 
joined us. We will now move on to Ms. Patrick.

     STATEMENT OF SUZANNE PATRICK, DEPUTY UNDER SECRETARY, 
  ACQUISITION, TECHNOLOGY AND LOGISTICS (INDUSTRIAL POLICY), 
                     DEPARTMENT OF DEFENSE

    Ms. Patrick. Good afternoon, Mr. Chairman, and members of 
the committee. I appreciate the opportunity to share with you 
my assessment of international industrial participation in the 
JSF program as well as my thoughts on the importance of this 
program for the global defense industrial base and coalition 
warfare.
    As you highlighted in your letter asking us to testify, Mr. 
Chairman, the Joint Strike Fighter program was conceived as an 
international cooperative development and acquisition program 
in order to attract financial investment to share the cost 
burden, to enhance interoperability with allies, to leverage 
technological innovation from partner countries, and to promote 
the eventual foreign sales of the aircraft.
    With affordability as the linchpin of the program, it was 
critical at the outset to take extraordinary and unprecedented 
measures to control costs. This program's international 
contracting strategy is a fundamental departure from offsets. 
Its best value sourcing strategy where foreign companies have 
to compete their way on to the program on an equal basis with 
U.S. companies has in fact elicited complaints by foreign 
governments and defense firms. That said, we believe that this 
program is providing appropriate access and great potential to 
partner countries.
    The JSF international acquisition strategy is unprecedented 
in the program investment it was able to attract from partner 
countries, and companies in the case of Denmark, and in the 
opportunity it presents for partner companies to participate in 
the global industrial base supporting a state-of-the-art, cost 
effective, and well-funded program. This program provides the 
opportunity for participating companies to produce components 
of JSF not only for their own or consortia operational 
requirements, the F-16 model, but also near-term, for the much 
larger United States and United Kingdom JSF inventories with 
the promise of content on all worldwide JSF inventories 
produced well into the first half of this century.
    Our assessment of the impact of the JSF program on the 
partner countries and companies has made clear some of the 
challenges associated with its revolutionary international 
acquisition strategy. Partner countries that had early active 
and far-reaching government involvement in structuring an in-
country industrial strategy for the JSF program have had the 
most success in gaining program content to date, Canada and the 
United Kingdom. The extent to which partner countries were 
committed to purchasing JSF for their own forces also made for 
better results. Countries committed to purchasing the aircraft 
for themselves have greater incentive in helping to market the 
aircraft elsewhere for reasons of investment recoupment, return 
levies from nonpartner sales, and larger incremental revenues 
for their participating companies. In addition, in the cases 
where a mix of JSF and Eurofighter aircraft are envisioned, 
countries with clear plans such as Italy were better able to 
referee industrial interests attached to the two platforms.
    Finally, in these countries, the government, the military 
services, and the industry were able to most effectively lobby 
their parliamentary bodies on behalf of the program.
    That said, the program is still bedeviled by the strategies 
of industrial interests that would be better served by the 
purchases of the Eurofighter which has made for something less 
than a level playing field for the JSF program. In discussions 
with partner countries and their companies, they complain that 
the single most important factor to develop the playing field 
has been the lateness and ineffectiveness of the global project 
authorization. This had the greatest impact on those suppliers 
that did not have well-established relationships pre-existing 
with U.S. primes and first tier suppliers. Even Canada's 
statutory advantage of exemption from U.S. ITAR regulations did 
not eliminate their need for TAAs. Export control issues have 
indeed plagued virtually all of the JSF international partners, 
but in no case have these issues caused program schedule delays 
or cost increases.
    However, I hasten to point out that some of the strategies 
used by partner countries and companies in their approaches to 
JSF indicate that their strategies are no less revolutionary. 
The Netherlands identified the JSF program as one of two 
pillars on which it expects to build a world class aerospace 
industry. Danish industry was so impressed with the 
opportunities the program affords, that it invested in the 
Systems Development and Demonstration Phase along with the 
Danish government. Canada provides prized quality and business 
certifications to JSF contractors, and Canadian company bids on 
program opportunities will surpass 100 in its first year or so 
as an SDD partner. Major Italian companies are sending about 
100 of their engineers to be part of six Lockheed integrated 
product teams in Dallas-Fort Worth and El Segundo. The Danish 
firm Systematic has stationed several of its engineers at 
Lockheed to demonstrate their expertise.
    JSF Canada surveyed the U.S. JSF industrial base, visiting 
the primes as well as second and third tier suppliers. The U.K. 
Department of Trade and Industry surveyed its own potential 
supplier base early in the program, as did Australia's JSF 
Industry Advisory Council. In addition, Australia established 
integrated capability teams to parallel Lockheed's IPTs for 
maximum program conductivity.
    To oversee industrial participation in the program, the 
United Kingdom, Canada, and the Netherlands established JSF 
organizations in their countries. Many partner countries have 
also sponsored or cosponsored JSF industry base for their 
suppliers.
    The massive return potential to partner countries and 
coalition warfighters from the program is already apparent. 
Surely, a time traveler to 2030 would report back to present 
government and corporate decisionmakers their successors' 
disbelief that the international opportunities for the JSF 
program were not clearly seen early in the program's history. 
We also believe that some of the JSF programs' most important 
disciples will be other U.S. program managers who refine their 
international acquisition strategies based on the JSF program's 
early lessons learned.
    Evidence already abounds that the program is reshaping the 
global defense industrial base. U.K. industry is undoubtedly 
already reaping benefits from the substantive role they had in 
some of the most challenging aspects of the JSF development. 
Countries that chose to fund and focus discretionary R&D 
investments on the program and have done well speak volumes 
about the importance of R&D investment for innovation and 
competitiveness. Transnational links are already being forged 
among the partner countries and their companies which will 
yield untold international defense industrial alliances, market 
access, and technology spin-offs.
    Finally, the program will dramatically increase the scale 
of many small and mid-sized companies in the global defense 
industrial base.
    Above all, however, it is imperative to remember the 
promise and importance of the JSF program to the American, 
British, and other partner country warfighters. If we stay the 
course with minor rudder adjustments, JSF will provide great 
benefits to the U.S. and global defense industrial base and 
warfighters alike. Not to do so would undermine U.S. 
credibility in the global marketplace and among our most 
important friends and allies.
    Thank you, Mr. Chairman.
    [The prepared statement of Ms. Patrick follows:]

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    Mr. Turner. Thank you, Ms. Patrick.
    Major General John L. Hudson. General.

  STATEMENT OF MAJOR GENERAL JOHN L. ``JACK'' HUDSON, PROGRAM 
  MANAGER, JOINT STRIKE FIGHTER [JSF] PROGRAM, DEPARTMENT OF 
                            DEFENSE

    General Hudson. Mr. Chairman and other distinguished 
members of the panel, I would like to thank you for inviting me 
here today to share with you my views on the international 
aspects of the Joint Strike Fighter program. I will give you a 
brief summary of my statement, which will be entered into the 
record.
    Joint Strike Fighter will field, affordably, a weapons 
system for the United States and our allied warfighters that 
will be highly interoperable and enhance our future ability to 
conduct coalition warfare in a highly effective manner. The 
Joint Strike Fighter program has been international since the 
concept demonstration phase of the program. As we entered the 
current system development and demonstration phase of the 
program in October 2001 by awarding of contracts to Lockheed 
and Pratt and Whitney and the ongoing General Electric program, 
we have continued that relationship with our close allies. 
International cooperation has brought foreign investment to the 
program which has saved U.S. taxpayers approximately $4.5 
billion.
    The international strategy we employed for the Joint Strike 
Fighter program was vetted by the executive branch of our 
government and coordinated with the Congress. We had as a 
result a coordinated effort for the System, Development and 
Demonstration phase which we are currently in. We have eight 
cooperative partners on board, which includes the United 
Kingdom, Italy, the Netherlands, Turkey, Australia, Canada, 
Denmark, and Norway. These countries have invested their scarce 
R&D resources into our program. We broke the old traditional 
paradigm, and instead of offsets we are using a best value 
approach so the weapons system will truly be affordable to 
develop, procure, own, and operate.
    Integrating our partners is indeed challenging. It started 
out to be and will continue to be a win-win proposition for 
both sides. Although complex, I can assure you that we have 
found a proper balance between the benefits that our partners 
derive from the program and the benefits that we incur as a 
result of the relationship.
    We are in full compliance with national disclosure policy, 
and have arrangements in place that protects sensitive U.S. 
technology while at the same time allowing prudent levels of 
technology transfer to occur. A global project authorization is 
in place. This allows a streamlined approval process for 
unclassified and nonsensitive technology transfer. Department 
of Defense and Department of State still fully focus on 
requests for transfer of sensitive, unclassified and classified 
information through the TAA process. Technology transfer is a 
two-way street, and we the United States have been the 
beneficiaries of these transfers by affording our companies the 
opportunity to seek innovative and affordable technologies 
anywhere in the world. We are working within the global 
marketplace, and it has paid dividends for us.
    An example of this reversion technology transfer is the 
technology that our U.K. partner industries have brought to the 
table in the form of short takeoff and vertical landing 
expertise and know-how. Unlike most past cooperative 
development programs, the Joint Strike Fighter Program Director 
makes all final decisions on the program. The Program Director 
consults with partner countries and ensures they have good 
situational awareness of the program environment and 
appropriate decision processes. The international agreements 
provide a good balance of responsibilities and obligations.
    A key enabler of affordability is the high commonality 
designed into the Joint Strike Fighter weapons system between 
the conventional short takeoff and landing, short takeoff and 
vertical landing, and carrier variance. Another key enabler of 
the affordability is the active, ongoing process to use cost as 
an independent variable [CAIV], as a means to control cost. A 
third is our well-founded requirements document in a joint 
configuration steering board within DOD which manages and 
controls Joint Strike Fighter requirements.
    In summary, I would like to say that we are currently 
meeting our international commitments utilizing a well-
structured international strategy that has found a proper 
balance between national disclosure policy, affordability, 
interoperability, and transformation for future coalition 
warfare. We have a good understanding of the risks associated 
with technology transfer, and we have risk mitigation plans in 
place. We have implemented security agreements with our 
partners on a government-to-government basis, and we are in 
full compliance with national disclosure policy. We have a 
full-time export compliance officer as well. It is a complex 
arrangement, but our partnership is working and benefiting the 
collective group.
    I look forward to your questions and your continued support 
of this superb weapons system.
    [The prepared statement of General Hudson follows:]

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    Mr. Turner. General, thank you very much.
    We will now proceed with a 5-minute round of questions. And 
we will go first to Mr. Schrock, who in addition to being a 
member of this Subcommittee on National Security is also a 
member of the Armed Services Committee.
    Mr. Schrock. Thank you, Mr. Chairman. Thank you all for 
being here. I am very interested in the Joint Strike Fighter 
because I believe the finished product will no doubt be sited 
in the district that I'm privileged to represent. And I know 
nothing about airplanes, except when I get on them I fasten my 
seat belt and get off at the end. But I was privileged to sit 
in the simulator over in Crystal City, and I think even an 
idiot like me who knows nothing about flying could fly that 
thing. It is an absolutely amazing machine.
    I read some of the information that was sent to us before 
we came in here, and on page 5 of one of the statements it 
said: U.S. policymakers have become increasingly interested in 
pursuing acquisition and procurement programs with allies.
    Help me understand that. I'm guessing some of the parts 
that are going to go into the Joint Strike Fighter can only be 
produced in a certain country, and they aren't produced here. 
Why can't--I'm not trying to be isolationist, but why can't 
producers in our country provide all the parts and systems that 
are going to be needed in this new aircraft? I guess that would 
be for the DOD folks.
    Mr. Volkman. We are interested in cooperating with our 
allies, because one of the benefits of cooperation with allies 
is that we acquire the same equipment and we expect that in the 
future that we will be operating in conflicts around the world 
with allies, with our closest allies. And by acquiring--by 
cooperating together, of course a major advantage of that is 
that we have interoperability with our allies by result of 
having the same equipment.
    Certainly, another factor that goes into our desire to 
cooperate in the development and production of equipment with 
allies is the fact that in fact we would like our allies to 
have a high military capability. One of the things that came 
out of President Bush's NATO summit last November was an 
agreement on the part of allies to engage in something called 
the Prague Capabilities Commitment, which essentially is a 
commitment on the part of our allies to try to increase--our 
European allies, to try to increase their military capability. 
And, clearly, programs like the Joint Strike Fighter will 
contribute to a very high level of military capability with our 
allies. And, as I said, the interoperability of equipment is 
important.
    And I could go on, but just to briefly finish, clearly the 
fact that our allies contribute to the cost of an expensive 
development program has been recognized by the General 
Accounting Office as a major benefit of the Joint Strike 
Fighter program, and the technology that comes from our allies 
is very important. As General Hudson said in his statement, 
much of the vertical takeoff and landing technology that will 
be used for that aspect of the Joint Strike Fighter program in 
fact originated in the United Kingdom and still resides there. 
So these are all reasons why we believe it is important to have 
cooperative programs with our allies.
    Mr. Schrock. And I completely agree with that. And I agree 
with the cost sharing, but I think Mr. Kucinich mentioned some 
of the cost overruns. And as I read some of the information 
here--and correct me if I'm wrong--if there are cost overruns, 
the United States is the one--the United States company is the 
one who bears the burden of that cost increase. Is that true? 
And how do we assure ourselves that technology--we are not 
going to be transferring technology that we don't want some bad 
guy to get somewhere because our friend today could be our 
enemy tomorrow? How do we balance that to make sure that 
doesn't happen? The cost overruns concern me, too. Why aren't 
the other countries and those companies sharing in the burden 
of that as well?
    Mr. Volkman. I think I would like General Hudson to share 
in my answer. But I will just answer briefly by saying that 
regarding cost overruns, we will make a decision in 
consultation with the other partner nations. We will try to 
avoid cost overruns. That cost overruns would not be borne by 
the contractors who are participating in the program, so far as 
I know, but would be governments would have to decide whether 
to fund those cost overruns. We would try to minimize the 
opportunity for a cost overrun. Clearly, if we had to fund an 
overrun or thought it was the right thing to do, we would have 
to come to the Congress; then Congress would have to approve 
the funding of the overrun for the U.S. share. And then, of 
course, we would consult with our allies and come to some 
determination as to whether they would fund their share of the 
cost overrun just as the United States will have to make a 
decision as to whether to share--to fund a share of the cost 
overrun.
    Technology transfer. We are being extremely thorough in 
working with the Department of State who has, in most cases, 
the final say in what technologies are transferred. So we have 
gone through a very deliberative process in deciding which 
technology should be transferred, and we will in the future.
    Mr. Schrock. Answer me if I am correct or wrong on this 
one. I'm guessing the overruns are created because, from the 
time somebody has the concept, the thought in their brain about 
the Joint Strike Fighter, to the time it lands at a base 
somewhere is many, many, many years because of all the 
technology increases that occur. Why put an old piece of 
technology in something that is going to be flying in eight or 
9 or 10 or 11 years. And isn't that the reason for a lot of 
those cost overruns?
    General Hudson. Yes, sir. If I may, I would like to 
followup on Mr. Volkman's answer.
    Mr. Schrock. Sure.
    General Hudson. In terms of the development cost, what the 
GAO reported about is accurate. The partner countries are not 
obliged to share with us any potential future cost overruns. 
However, we have the option to go to them, DOD can go to them 
and ask for their sharing in this. It is----
    Mr. Schrock. Why would they do that?
    General Hudson. Well, it would be to their benefit, sir, to 
ensure that we indeed have an affordable effective weapons 
system to be able to be deployed to the fleet. There are a 
couple other things that we bring to the table here to help 
control costs. One of them is, the application of cost is an 
independent variable. For example, if we are going through the 
development program and we see that we can meet 90 percent of 
one of our 430 specification points with a certain amount of 
costs and that the last 10 percent is really expensive, we 
would look at the operational analysis there and maybe we 
wouldn't go for that last 10 percent and that helps us avoid 
excessive cost on the program.
    Mr. Schrock. I see.
    General Hudson. The other is, we have a joint and 
international configuration steering board that meets several 
times each year. We look at evolving requirements and study 
their potential cost impact on the program. That gives us a 
very disciplined and rigorous method to control requirements on 
the program, and we ensure that we are doing the right thing in 
terms of transmitting those requirements to our prime 
contractors.
    I would also like to mention that both Lockheed and Pratt 
and Whitney and General Electric conducted market surveys if 
capabilities exist in other countries in order to figure out 
where the world class capabilities are that exist in companies 
outside the United States. For example, the short takeoff and 
vertical landing technology that comes from the United Kingdom, 
the lift fan technology that powers the Marine Corps variant 
are examples of things that come to the table from companies in 
other countries. We find that there are indeed niche 
capabilities out there in other countries. I hold Lockheed, 
Pratt and Whitney, and General Electric accountable for their 
cost, schedule, and technical performance on the programs. So 
it is to their advantage to indeed find the companies out there 
that help them provide the best value to the United States and 
our coalition allies.
    Mr. Schrock. Thank you, very much.
    Thank you, Mr. Chairman.
    Mr. Turner. Mr. Kucinich.
    Mr. Kucinich. Question to Ms. Schinasi. In GAO's opinion, 
is it likely that costs will rise in the JSF program?
    Ms. Schinasi. Yes.
    Mr. Kucinich. And then, based on GAO's past experience with 
this and other aircraft development and production programs, 
how good is the Pentagon's record on predicting and controlling 
cost increases?
    Ms. Schinasi. We have reported on many occasions that the 
Department continually underestimates the costs associated with 
its major systems acquisition.
    Mr. Kucinich. How much are we talking about in terms of 
increased costs over the long run? Billions of dollars?
    Ms. Schinasi. I cannot predict that.
    Mr. Shays. If you could move your mic closer.
    Ms. Schinasi. Move your mic closer.
    Mr. Turner. We are looking for proximity.
    Ms. Schinasi. Right. In terms of the order of magnitude, I 
can't address that on this program. There have been some things 
done for cost control purposes on the Joint Strike Fighter 
program that we have not seen in other programs. At the same 
time, however, in a report that we issued to this subcommittee 
in October 2001 I believe, we recommended that the program not 
go forward into its current phase because a number of the 
critical technologies needed to get, not just the performance, 
but the costs--many of the technologies were not mature.
    Mr. Kucinich. Recognizing the virtual certainty of cost 
increases, why did the Defense Department negotiate cost 
sharing agreements that ignored these realities?
    Ms. Schinasi. That question may be better addressed to the 
DOD witnesses to answer.
    Mr. Kucinich. Well, then let me ask the Defense Department 
then. I will ask General Hudson. Would you like to respond? Do 
you agree with GAO's finding that foreign partners are 
currently not required to submit additional funding when costs 
increase for the program?
    General Hudson. Yes, sir. I agree, they are not required to 
do that.
    Mr. Kucinich. So what is the Department's justification for 
completely exempting foreign partners from sharing in these 
increased costs? And what's the rationale for giving them this 
wholesale exemption?
    General Hudson. Sir, they actually are not exempt from it. 
While they do not have to provide additional funds, if we were 
to ask them, they have the same interests in providing an 
effective and affordable system to their warfighters. And 
depending on what the nature of the cost issue is, it might be 
greatly in their benefit to help us share the costs for the 
capability in the airplane.
    Mr. Kucinich. Well, it seems that we have a condition here 
where U.S. taxpayers may be sharing a disproportionate cost 
burden.
    Now, Ms. Schinasi, DOD claims it can manage costs and 
therefore alleviate the need to ask partner countries for 
additional funds by using a variety of tools. These include 
program management tools, frequent partner meetings and 
discussions, and contract incentives. Do you believe these 
measures will guarantee that costs will not increase?
    Ms. Schinasi. We have found consistently that when programs 
move forward on a schedule-driven basis rather than a 
knowledge-driven basis, that the risk mitigation and other 
plans that are always in place on these programs are not 
sufficient to control costs.
    Mr. Kucinich. That was very well put.
    Now, with foreign countries contributing to the program, do 
they require offsets, Ms. Schinasi?
    Ms. Schinasi. This can be seen as another type of offset, 
actually, this program.
    Mr. Kucinich. Jobs, technology transfer?
    Ms. Schinasi. Yes. And we have seen trends in the offset 
arrangements that defense companies enter into expand over time 
to include many of the same kinds of arrangements that we will 
see in these cooperative programs.
    Mr. Kucinich. You know, Mr. Chairman, and Mr. Shays, I 
think it would be useful for this committee to be able to probe 
ever more deeply into this issue of offsets, because it may be 
that the peculiarities of the structure of this system result 
in loss of jobs in our country; and as we transfer technology, 
it then enables manufacturers like Lockheed Martin to push 
forward with the development of even newer models to be able to 
be more competitive with the models that they just transferred 
to other countries. And I think it would be useful to be able 
to see if we are not setting in place here a system which 
guarantees ever escalating expenditures for ever evolving 
technologies.
    I thank the Chair. Thank you.
    Mr. Turner. Thank you.
    Our chairman, Chairman Shays.
    Mr. Shays. Thank you. It is nice to be here. I appreciate 
that we are discussing what I think is a very important, 
obviously a very important issue for a country. I was told when 
I was first elected 16 years ago that the decisions I make for 
the Defense Department won't show up for 10 years. And so as 
well as I thought about how we had conducted the first Gulf war 
and all the equipment that we had and so on, I mentally gave 
credit to those who voted in 1980, not 1990.
    Having said that, I want to just understand a few things. 
And I realize some of this you have already said, but I am not 
quite sure what we are saying here. First off, it is my 
understanding we have the Joint Strike Fighter, the Air Force 
F-22 Raptor, and the Navy FA-18EF Super Hornet. Those are the 
planes that we are going to develop in the future. And, that 
when we are talking about the Joint Strike Fighter, we are 
looking in current dollars at a cost of $1.197 trillion. Is 
that an accurate cost?
    General Hudson. Sir, I would have to take that one for the 
record. I don't know where that figure comes from.
    Mr. Shays. What is the cost of the Joint Strike Fighter 
going to be when we do our 200,457 aircraft?
    General Hudson. Sir, in today's dollars, what we submitted 
to Congress with the most recent select acquisition report 
which came in at the start of this year was it is in the high 
30's for the--high $30 million per copy. That's an average unit 
recurring fly away cost for the conventional takeoff and 
landing variant. And it is between the high $40 and low $50 
million per copy figure for the short takeoff and vertical 
landing variant.
    Mr. Shays. Isn't that based on 1994 dollars?
    General Hudson. That's today's dollars. It's actually 2002 
dollars.
    Mr. Shays. So, please do the math for me. How many planes 
are we ordering, and what is it going to cost us?
    General Hudson. Sir, those averages are based on 2,953--
2,593, which is 1,763 for the U.S. Air Force, 150 for the 
United Kingdom, and the balance for the U.S. Navy and the U.S. 
Marine Corps. The final split between the short takeoff and 
vertical landing variant, the carrier variant----
    Mr. Shays. You're telling me a little more than what? I'm 
just going to start basic and then we are going to go out with 
the details. What is this program going to cost? How many 
planes are we going to order? And what is this program going to 
cost in today's dollars?
    General Hudson. The number of planes that the U.S. 
currently intends to order is 2,443.
    Mr. Shays. And what is it going to cost?
    General Hudson. It's in the high 30's. It's about----
    Mr. Shays. No, I don't want to know per plane. What is this 
program going to cost us?
    General Hudson. Sir, I don't have the grand total of that 
procurement figure.
    Mr. Shays. Why not? I mean, this isn't a strange question 
to ask. I want to know what the program is going to cost.
    General Hudson. Yes, sir.
    Mr. Shays. Can anybody tell me what the program is going to 
cost? Is there anyone behind you who can tell me what the 
program is going to cost?
    General Hudson. Well, sir, I can give you in rough terms. 
The total procurement figure is approximately $200 billion.
    Mr. Shays. Will GAO answer this? I'm just a little--Mr. 
Volkman, you can't tell me what this program is going to cost?
    Mr. Volkman. [Shaking head.]
    Mr. Shays. Why not?
    Mr. Volkman. We could get the information for the record, 
Mr. Chairman. But off the top of my head, I don't know what 
this is.
    Mr. Shays. This is a hearing on the Joint Strike Fighter. 
Correct? I am asking the basic questions: What does the program 
cost us? Why would I have a difficult time getting a question 
answered like that? And why would someone have to come back to 
me? Why is that not important?
    General Hudson. Sir, I can give you that figure. It is 
roughly----
    Mr. Shays. I know what it is says there.
    General Hudson. It is roughly $200 billion for the entire 
procurement program for that 2,443 number.
    Mr. Shays. I will tell you what. Before this hearing ends, 
I want someone to tell me what the program is going to cost--I 
want you to do that--because I have a document that tells me 
and I want to know if it is right or not. But I am not going to 
tell you, because you are the people that are doing it. Would 
GAO tell me what this program is going to cost?
    Ms. Schinasi. The number--the support costs have not yet 
been defined. But for R&D and procurement, for the numbers that 
the General mentioned, we have said about $200 billion.
    Mr. Shays. I am going to ask GAO: Do you know what this 
program is supposed to cost when we build how many planes and 
do we know what it is supposed to cost? I feel like I'm going 
through a game here. I mean, if you tell me the F-22, you tell 
me we are going to build this many planes and it's going to 
cost us this amount of dollars. And then the next hearing we 
have, you tell me it's going to cost us more dollars and we're 
going to build less planes. And the next hearing we have after 
that, they say it's going to even cost more and we're going to 
build less planes. It strikes me that the reason why you don't 
want to tell me is we don't want to put a number to it is 
because we don't want to be held accountable to it.
    Basic question: What is this going to cost?
    General Hudson. Sir, I have the answer for you here in my 
documents. For the 2,443 number, it is $162 billion. And that's 
consistent with the Select Acquisition Report that came over 
early this year.
    Mr. Shays. General, I'm sorry, I want to know what the 
program is going to cost us, total, when we are all done, when 
we have ordered all our planes, when we've ordered--what my 
briefing paper tells me is that we estimate we are going to 
order 2,457 aircraft. I'm told its estimated cost in current 
dollars for those aircraft is going to be $1.197 trillion.
    General Hudson. Sir, the figures I have immediately 
available here are the cost of the development program, which 
is baselined at $33 billion, plus the $162 procurement. That is 
$195. The large figure that you cite would include some 
assumptions about the operating and support costs over the 
lifetime of the airplane, and I don't have those immediately 
with me.
    Ms. Schinasi. The information that we rely on----
    Mr. Shays. A little louder, please.
    Ms. Schinasi. The information that we rely on is in the 
December 2002 Selective Acquisition Report. Those are the most 
current dollars that we have.
    Mr. Shays. What does that mean?
    Ms. Schinasi. The 2002 base-year dollars. It means the 
costs change, I won't say continually, but change frequently.
    Mr. Shays. Well, unless we are willing to state the 
numbers, it is kind of hard to know how things change. Does GAO 
have a--have they looked at the total number of planes we want 
to build and the total cost that we anticipate it is going to 
require us to spend?
    I had lots of questions, but I want to get by this one 
first. I mean, I am looking at people looking at me like I am 
asking something I shouldn't be asking. I am, like, mystified 
by it. It is a hearing on the Joint Strike Fighter. We don't 
have a lot of hearings on it. It would seem to me that this 
would be like, this is what it is costing now, and then we may 
have to change it later and so on. And these are the reasons 
why we are changing it.
    So before the hearing is over, I would like DOD to ask 
someone to call someone to tell me how much these planes are 
all going to cost and have a sense of it. That is what I would 
like.
    Why don't we do this. While that is being done----
    Mr. Turner. Mr. Chairman, would you like to even recess for 
a few minutes?
    Mr. Shays. No. You can ask them your questions second. They 
have someone else that can get the answer. Someone can get up 
and make a phone call or something. I don't mean to sound 
arrogant, I am kind of amazed.
    Let me ask you this: How much has the program increased 
since we locked in prices with our allies, and which allies did 
we lock in the prices with? Mr. Volkman, maybe you can answer. 
Which allies have we locked in the price with so far?
    Mr. Volkman. The allies who are participating in the 
systems design and demonstration phase of the program are the 
UK, Australia, Netherlands, Italy, Norway, Denmark, Turkey and 
Canada.
    Mr. Shays. I must have old data. I have that we have three 
tiers. We have UK is one tier. The two tiers, Italy and 
Netherlands, and three tiers, Turkey, Norway, Australia, Canada 
and Denmark. Is that correct?
    Mr. Volkman. That is correct.
    Mr. Shays. So we have three tiers, correct?
    Mr. Volkman. Yes, sir.
    Mr. Shays. Are we locked into the price with the UK?
    Mr. Volkman. The UK has agreed to a contribution of $2 
billion to the systems design and development demonstration 
phase.
    Mr. Shays. Is that a yes? Are we locked into a price? If 
the price goes up, do they have to pay the increased price?
    Mr. Volkman. There is no agreement on--as the GAO report 
mentions, there is no agreement that if the program exceeds the 
current estimate for systems design and development, of about 
$33 billion, there is no obligation for the UK to fund a share 
of the--of any overruns.
    However, we expect that they would if it was necessary.
    Mr. Shays. So the bottom line is, they have agreed to a 
price, but we are hoping that the price--if it costs more, that 
they will pay their share. Is that correct?
    Mr. Volkman. They have agreed to contribute $2 billion. In 
the event that there is an overrun to this phase of the 
program, we would negotiate with them to share in the costs of 
that overrun.
    Mr. Shays. How about with Italy and the Netherlands?
    Mr. Volkman. It is the same.
    Mr. Shays. How about with Turkey, Norway, Australia, Canada 
and Denmark?
    Mr. Volkman. We would do the same thing.
    Mr. Shays. Explain to me the difference of these three 
tiers.
    Mr. Volkman. Well, the differences in the three tiers have, 
of course, to do with the amount of money that is contributed 
to the program by the particular partner. So in the case of the 
UK, it is a $2 billion contribution to the program, in the 
case--which is Tier 1. In the case of Italy and the 
Netherlands, who are at Tier 2, it is approximately--it is $1 
billion on the part of Italy, over $800 million on the part of 
the Netherlands. And then the remaining Tier 3 partners have 
contributed approximately $150 million each to the program.
    Mr. Shays. Let me just follow this one point up, Mr. 
Chairman, if I could. Let me understand. What does being a one 
tier versus a two versus a three tier give you? What do you buy 
when you are a one tier versus a three tier?
    Mr. Volkman. What the partners will receive as a result of 
their participation in the program is a voice in the conduct of 
the program. So they will have--each of the partners has 
representation in the program office. In the case of the United 
Kingdom, they have a National Deputy. They will have 10 staff 
who are fully integrated into the Joint Strike Fighter Program 
office.
    In the case of--I mean, I can go through all of them if you 
like.
    Mr. Shays. No. Is it basically if you are one tier, you get 
to have a little bit more say how this plane turns out? If you 
are third tier you basically buy whatever was made? Is that the 
difference?
    Mr. Volkman. Well, all of the partner nations have some 
voice in the management of the program. And, in fact, I mean 
General Hudson would probably be better able to answer the 
specific role that they have in the program.
    Mr. Shays. Let me just tell you then, I will come back for 
the second round. General, if you can just write this down, or 
someone on your staff. This is information I have. I would like 
to know if it is true. I have that the cost of the program in 
current dollars is estimated ultimately to be $1.197 trillion, 
that it amounts to $81 million per aircraft, that we are 
anticipating building 2,457 of these aircraft, that the Air 
Force is going to ultimately have 1,763, that the Navy and the 
Marines ultimately will have about 680, and that adds up to 
2,443. And the difference--I basically made an assumption, was 
prototype--between the 2,457 total aircraft that I had 
originally said versus adding up the Air Force, the Navy and 
Marines at 2,443 as prototypes.
    Now, if what I have is bad, we can blame it on bad 
staffwork. But, if it is not wrong, I want to know. And so 
before we adjourn, in fact, we are not adjourning today, Mr. 
Chairman, with your permission, until we get this information. 
We may recess. But--and we will go from there for me. Thank 
you.
    Mr. Turner. I am assuming, although I have not seen a whole 
lot of activity occur behind the table where you are all 
sitting, that someone is currently working to get this done for 
our chairman?
    General Hudson. Yes, sir. That is correct.
    Mr. Turner. Great. Obviously, there were two focuses of 
this hearing. The first being the issue of cost sharing with 
our international partners. The second being technology 
transfer. We are all aware of the overall arching issues of the 
cost overruns of the program and the issues of the management 
of the program.
    Obviously, there are some positives to the program. This is 
a learning program. And there has never been anything of this 
size in a program, both in international partners and DOD cross 
services that has been done before. And certainly the lessons 
that are learned here are going to be very valuable.
    But, what is obviously important is as we go through the 
process of learning is implementing and incorporating what we 
are learning into what we are doing as we are moving forward.
    With that, GAO's comments are certainly very important and 
have been very helpful. I am very much intrigued by the issue 
of the foreign partners not being required to share in cost 
overruns while also having an opportunity to participate in the 
program during the phases where we have already experienced 
cost overruns.
    And my understanding in this program, is that in addition 
to the United States companies and contractors, that there are 
also foreign companies and contractors that are participating 
in this. Is that correct, Mr. Volkman?
    Mr. Volkman. Yes, sir, that is correct.
    Mr. Turner. Could you please tell me what percentage of the 
overall cost overruns can be attributed to the foreign 
companies and the foreign participation? Obviously, there is a 
breakdown as to where those dollars go. Do we know to what 
extent the foreign companies are enjoying the benefits of the 
cost overrun, while at the same time those foreign countries 
are not being burdened with the cost overruns?
    General Hudson. To my knowledge, sir, international 
industrial participation has not caused any change in the 
program or our cost estimate, either for development or for 
production.
    Mr. Turner. Now, that is really interesting. Why is that? 
Where are the cost overruns coming from then?
    General Hudson. Well, sir, I believe that you are referring 
to the change in the estimate for the development program 
between the Milestone B cost, which was from October 2001, 
submitted to the Congress in early 2002, and the estimate that 
was submitted early this year. That was a change from the $30 
billion baseline to $33 that accounted for two items.
    One was the cost to do the nonrecurring work on the weapons 
system, to ensure that we were technically--that is on the 
airplane and its associated elements--in full compliance with 
national disclosure policy for procurement of airplanes by 
international partners.
    And the other was a change in the estimate to do the 
development work on the General Electric engine program. Back 
at the Milestone B in October 2001, the estimate for the 
General Electric engine work was for a limited 
interchangeability qualification of that engine. By 
interchangeability, I mean the ability of either the General 
Electric or the Pratt engine to operate within the airplane on 
an equivalent basis without any change in common hardware or 
interfaces between the engine and the airplane.
    Since that point, DOD decided that the qualification 
program would be for the full GE engine. So there was some 
additional design work, ground test and flight-test work that 
would be required to ensure that the full GE and Pratt engine 
were interchangeable within the JSF. So those two things were 
the reason for the change in the development price from the 
Milestone B to the SAR that was submitted earlier this year. 
Almost nothing else changed.
    Mr. Shays. Can I just ask I question? Do you agree with 
what was just said?
    Ms. Schinasi. I would only note that GE is partnered with--
--
    Mr. Shays. But the cost numbers and the increases. Your 
numbers were different than his numbers, the General's numbers.
    Ms. Schinasi. No. Ours are the same for that period of 
time.
    Mr. Shays. From what period of time?
    Ms. Schinasi. From October 2001, when the estimate was 
submitted, until today.
    Mr. Shays. Thank you, Mr. Chairman.
    Mr. Turner. OK. Well, let's take one aspect of the 
positive. In this process there are lessons that are being 
learned in managing programs that are across DOD departments 
and then also internal. In addition to the Joint Strike 
Fighter, there is an opportunity for these lessons learned, 
both in management procurement and also in relations, that--and 
policies that might be helpful.
    Could you tell us some of the things that have been learned 
that may have not been known before, since this is an enormous 
undertaking that can be applied to future systems for all of 
our benefit?
    General Hudson. Yes, sir. A couple of those lessons would 
be in the area of requirements. A little over 3 years ago, the 
U.S. Air Force, the U.S. Navy, the U.S. Marines Corps and the 
United Kingdom signed a joint operational requirements 
document. This has been one of the real success stories in the 
program. That is one that, I believe, that would be a good 
lesson learned for other programs in the sense that we worked 
for about 5 years on that requirements document.
    We got a good solid set of requirements that looked at not 
only combat capability that was needed in the post-2010-threat 
environment, but also considered affordability for development, 
for procurement and for owning and operating the airplane. So 
that was a very positive one. The other lesson I would provide 
is in the area of looking forward in terms of technology 
transfer. We have done a great deal of work over the last 
almost 2 years now to look at technology transfer and the risk 
and benefits associated with that, not only from government-to-
government perspective but from industry-to-industry 
perspective.
    As you know, the first global project authorization was 
approved by Congress at the end of this past year. This was the 
first global project authorization. It did take some time to 
implement, but it is working successfully and State Department 
is working the implementing agreements in less than or equal to 
the 5-day goal that they signed up for.
    So although that one took a good while and much work was 
put into that, that is a very, very positive lesson learned for 
programs of this type in the future.
    Mr. Turner. Thank you, General. Mr. Schrock.
    Mr. Schrock. I am not sure that I have any questions as 
much as a comment. I guess I kind of understand where they are 
all coming from. I was, in my two and a half decades in the 
Navy, I saw every program that ever hit the street had cost 
overruns. I guess I asked why then, and I ask even more so now.
    I don't know how we get our hands around it, unless, as I 
said earlier, from the time a concept is put on the table, 
until the time it hits the water in the case of the Navy, or in 
the air in the case of the Air Force, so much happens, so much 
technology changes, so many ideas flow into the process, look 
into your office, General, that that is what causes the cost 
overruns. Is that right? Am I way offbase on that?
    General Hudson. One of the things we know, sir, as you have 
pointed out, is that technology can change over time. And if 
requirements, that is new requirements, are allowed to flow 
unabated into a program, that that does indeed drive cost. That 
is why we have had, since the start of the development program 
here, what we call a Configuration Steering Board, which is in 
charge of working with the DOD acquisition communities and the 
warfighter representatives who set the requirements.
    Those two together work to ensure that we have a 
disciplined approach to any potential changes that we might 
entertain in the program, because it will drive costs.
    Mr. Schrock. I am just wondering if there are ways to 
shorten the time lines. I know Admiral Vern Clark, Chief of 
Naval Operations, is trying to get the LCS, the Littoral Combat 
Ship, in the water in just a couple of years to hopefully 
prevent some of this, but to have a system that is plug and 
play, so if there are technology changes, you unplug one thing 
and plug in another.
    I think that is a unique concept, and I think it is going 
to work. Is that a possibility for some of the new aircraft 
coming down the pike?
    General Hudson. Yes, sir, it is. And, in fact, we designed 
that exact capability into this airplane in terms of the 
avionics and software. We did it from the ground up. We worked 
about 5 years in what we call an open architecture, because we 
know that, just as we see in personal computers at home, we see 
fast changes in technology where the technology gets better, 
and in fact cheaper, and it works better. We know the same 
thing happens within avionics that go into military airplanes.
    So what we designed into the backbone of the Joint Strike 
Fighter was what we call this open architecture. And what that 
does is it gives us a capability to cope with obsolescent 
parts. It gives us the capability to insert technology into 
this airplane in a way that we have to do an absolute minimum 
of regression testing, and we have the capability to change 
software modules, and, in fact, complete those modules if we 
like, due to the way the architecture is designed and 
implemented within the airplane.
    And in many ways, the avionics and software on this 
airplane, that is the sensors, how the data from the sensors is 
processed and displayed to the pilot and used in combat is the 
heart and soul of lethality and survivability. So the open 
architecture is something new for us for the complete system 
within a tactical jet. It will provide us tremendous 
flexibility in the long term and cut down the cost to insert 
new technology, and to play it into the field.
    Mr. Schrock. This may be an unfair question, but I can 
understand how you can shorten the time to land on a ship, to 
get it in the water. Why can't we do that--when was the--when 
did the Joint Strike Fighter--when did somebody first say Joint 
Strike Fighter? I should know the year? How long ago was that?
    General Hudson. I am sorry, sir. I didn't understand the 
question.
    Mr. Schrock. When the Joint Strike Fighter concept first 
went to paper and people started developing that, how long ago 
was that?
    General Hudson. The concept demonstration phase, which was 
the competitive phase between Boeing and Lockheed, started in 
November 1996. There was a very short competition before that, 
but that was the main competitive phase.
    Mr. Schrock. And then, I guess, they will be in the Fleet 
and your squadrons in the Air Force in 2008? That is 12 years. 
That is what I am talking about. I am not criticizing or 
complaining, but I am saying in ships now, you can do it in a 
few years. Why can't that same concept, why can't that same 
mentality be put into the development of some of those new air 
systems? There may be a totally logical reason.
    General Hudson. Yes, sir. Well, we have done some things to 
cut down the cycle time and ensure that we don't overrun this 
time line that we have now. For example, when Lockheed and 
Boeing competed for the contract award for Joint Strike 
Fighter, each company had to fly and demonstrate a conventional 
takeoff and landing variant, short take off and landing and 
carrier variant. They did that. And those--each company built 
two airframes that flew the three variants and proved that.
    Those were not prototypes, however, they were just concept 
demonstrators. So they didn't have a representative set of 
avionics or low-observable coatings or things like that on the 
airplane. So the fact that we flew those concept demonstrators 
helps us tremendously for understanding what capability we have 
and being able to have confidence in the time line that we have 
now.
    And, in fact, 2 years from this fall, we will fly the first 
of our full-up developmental airplanes that will have the 
required 8,000 hours of structural life; these airlines will 
have the representative avionics in them, the weapons bays and 
everything that the operational airplane will have.
    In 2008, our first production airplanes hit the ramp, and 
we begin testing and getting them ready for full-up operational 
capability in the Marine Corps in 2010, the Air Force in 2011, 
and the Navy and the UK in 2012. This fall we have our first 
engine in the test cell. So it does take a few years to put all 
of the piece parts together to bring the airplane into the 
field and ensure it is correct.
    But, with the time lines that we have, it all fits together 
and it is not too far away.
    Mr. Schrock. The first demonstration phase, I guess, was to 
prove that it wouldn't fall out of the air?
    General Hudson. Yes, sir. It was designed to prove that, 
whether or not the competing companies had the ability to 
design and fly an airplane that would meet the fundamental 
needs of the services.
    Mr. Schrock. My time has expired.
    Thank you, Mr. Chairman.
    Mr. Turner. Mr. Chairman.
    Mr. Shays. I am pretty much a fan of this program. It may 
not seem evident from the way I feel right now. But, I think it 
makes sense to try to have three branches use the same plane. I 
think there is logic, that if you can use 80 percent of the 
same part in a plane, that makes sense.
    But, in the chairman's statement, he pointed out that this 
could be a model for 21st century weaponry acquisition or it 
could fall prey to the same cost growth, scheduling delays, and 
interservice bickering that has plagued so much in the cold 
war. That is one thing he pointed out. That is one thing we 
want to get a handle on.
    Then he said, today we ask whether international 
participation and technology sharing are being managed so as to 
maximize benefits and minimize risks to the Department of 
Defense, DOD's larger program. That is one thing we also want 
to have a sense of.
    And he pointed out, at the request of GAO's Accounting 
Office, at our request, we asked them to examine the complex 
set of relationships between the Joint Strike Fighter Program 
and its eight international partners? We want to know about the 
cost-sharing benefits that go in this program.
    He pointed out in their report, and I would like GAO to 
speak to this, released today finds the JSF Program is strongly 
in need of management and oversight because the international 
participants currently have no requirement or incentive to 
share in cost growth.
    Now, I am not sure how that has been answered. And then, he 
pointed out the level of collaboration also demands greater 
access to sensitive defense technologies than we are accustomed 
to, and we are trying to sort that out. So that is kind of our 
objective. I mean, it would have been nice, and we will get it, 
to know what this program is supposed to cost based on our 
numbers today. We know it will be different, but it gives us a 
target to then begin to say, well, why is it going to cost 
more, why it is going to cost less? What are all of those new 
things that have changed?
    So I would like to know from GAO, what are you saying about 
this program? Am I to feel good about it? Bad about it? Or 
somewhere in between?
    Ms. Schinasi. As you know, Mr. Chairman, we believe that 
the program went forward into this phase before it was ready to 
do that, because its technologies were not mature. That time 
has already passed.
    Mr. Shays. That is a criticism that you have also had with 
the F-22.
    Ms. Schinasi. That is correct.
    Mr. Shays. Your point is that we are actually starting to 
produce before we have the technology? That is one criticism. I 
would like that addressed by the rest here. So what is the 
answer to that issue? Did you hear her point or were you 
talking about something else? The first criticism and concern 
was, both with the F-22 and the Joint Strike Fighter, we are 
going into production before the technology is there to support 
the production. What is the response that we have in that 
regard?
    General Hudson. Well, sir, the Department of Defense, prior 
to the Milestone B, which is in October 2001, as part of the 
requirements to go through the Defense acquisition board 
review, which Mr. Aldridge chaired at that time, we did a 
report that looked at the readiness of the system to enter the 
system development and demonstration phase.
    And the review of the documents and the work that DOD did 
showed that it was ready to go. I know that----
    Mr. Shays. OK. So the answer is, you disagree that you 
think that your production, the technology was there to support 
the production based on this study. Is that your answer?
    General Hudson. Yes, sir.
    Mr. Shays. OK. What is the second one?
    Ms. Schinasi. You are back to me. The issues that we raised 
in this report are more of a prospective nature than they are 
of something that has actually happened. But, what we are 
looking at, first the--the basis upon which you enter into a 
cooperative program has to do with equitable sharing, which is 
not defined very well, but it is still is a concept that 
underlies----
    Mr. Shays. You are concerned about who is going to 
ultimately pay, and will they pay the full cost of the program?
    Ms. Schinasi. We think it should be recognized that the 
financial contribution that was part of the basis for having a 
cooperative program will change over time. There are 
percentages that have been established. It was originally 
established in a percentage range. So for example, a Level 1 
partner was going to contribute roughly 10 percent. A Level 2 
partner, roughly 3 to 5 percent. A Level 3 partner, roughly 1 
to 2 percent. These were the guidelines that were laid down as 
we started into this program.
    Mr. Shays. OK. In my way of looking at it, and maybe Mr. 
Volkman you can respond to this. I would just think, and tell 
me why there is a reason, or that I just don't know it, I would 
think you would basically figure out the cost to produce this 
plane, and then you would set the price based on the cost, and 
then whoever wanted this plane, would pay this cost. I mean, 
that is kind of the way that I would like at it. But, I mean, 
there is a reason we are not doing it that way because----
    Mr. Volkman. Well, I am not really sure how to answer the 
question. We arranged--our goals at the outset were to have a 
Level 1 partner contribute 10 percent to the systems design and 
demonstration costs as we knew it at the time. Obviously, as a 
result of our negotiations, not all of our partners or 
prospective partners were able to meet a strict 10 percent 
goal. So we----
    Mr. Shays. How did we come up with that 10 percent?
    Mr. Volkman. Maybe I should explain that. It was 
recommended I explain this. The phase of the program we are in 
right now, is to develop the airplane and demonstrate that it 
is ready to go into production. So it is a very lengthy part of 
the program where we are designing the plane so it is ready to 
be manufactured.
    Mr. Shays. We have seen both planes. We saw them both 
together before they were chosen. I mean, I am talking about 
the Boeing plane versus Lockheed. So we have had a little bit 
of knowledge on the contest that has taken place. But, what I 
am trying to understand, there is a reason, and it may be a 
very good reason, that you went out on the hearing.
    Was there the thought that somehow we might develop this 
plane, but never ultimately produce it? I mean, in other words, 
that we would go through this process and decide we couldn't 
afford it. We ultimately figured we were going to build this 
plane. Is that correct?
    Mr. Volkman. That is correct.
    Mr. Shays. So just get me by this hurdle. Why wouldn't we 
say to whoever wants to buy this plane, you have to pay this 
cost? And why did we decide we wanted someone to pay 10 
percent? There is a reason, but we don't know it.
    Mr. Volkman. I think it was a judgment at the time as to 
what the likely participation would be among various partner 
nations who might be interested in participating with us in the 
program. I mean, clearly, most nations cannot afford to join as 
partners in a program at the--at the same extent that the 
United States can.
    So I think, you know, we made a judgment that a Level 1 
partner would likely to be able to contribute the approximately 
$2 billion into the program that the United Kingdom has agreed 
to pay. We made some other judgments as to what----
    Mr. Shays. Does that give them the right to buy the plane 
less than a third tier would pay?
    Ms. Patrick. No. I have been listening to this, and maybe I 
can help with this. The condition for being a Level 1, 2 or 3 
partner has to do with the level of contribution those 
countries want to make to the SDT phase. It does not at all 
require them to buy aircraft. And it also does not stipulate 
anything about the price at which they will buy aircraft if 
they come to decide to buy aircraft later on.
    Mr. Shays. Tell me why would they do it. Why even bother to 
participate? I am trying to see what both sides get here. I 
don't know what people get out of this.
    Ms. Patrick. A number of the countries were interested, 
because they do think that they will buy the Joint Strike 
Fighter aircraft. So they wanted to be present at the creation, 
as it were. The UK is probably the very best example of that. 
Where the UK decided that it was willing to forego developing 
its own tactical fighter industry to the extent that would be 
required if they had to develop this aircraft on their own, and 
they would partner with us instead.
    A very early, very robust, tight working relationship, and 
the most funding into SDD. Also, perhaps not surprisingly, one 
of the most important features of the technological innovation 
of the Joint Strike Fighter came from the UK, the lift-fan 
technology, a lot of the work that has to do with the Marine 
Corps variant.
    Other countries saw this program as an opportunity to learn 
about tactical aviation, whether they decided to buy the 
airplane or not. The Netherlands, for instance, decided that 
their knowledge and insight based on this investment in the 
program, would help allow their aerospace industry to be a 
major pillar in their own country. So they wanted to learn, to 
the maximum extent available, keeping in mind the foreign 
disclosure requirements, etc., about this program.
    Mr. Shays. Do you understand why we are asking these 
questions? I mean, what you are describing now raises good 
questions for us to ask. And it raises, you know, some real 
concerns as well. I mean, we are trying to have a sense of, our 
partners, are they going to be paying the costs that that they 
should be paying? And what do they get out of this? What do we 
get out of it?
    Well, one of the things they get out, it seems to me, is 
they get our technology. One of the things you are suggesting 
to me is that we have gained and learned some technologies from 
them.
    Ms. Patrick. Correct.
    Mr. Shays. I think that needs to be put on the table. But, 
I am still--it seems to me what you are saying, is if you are 
either 1, 2 or 3, you get to participate in the program, and 
you get to have some influence as to how the program goes.
    So now I am going to ask a logical question. Does being 1 
give you more ability to influence the program than being 3?
    Ms. Patrick. I think, General Hudson, you can answer that 
because you have worked that day to day.
    General Hudson. Yes, sir, it does. The primary way that it 
does that is that in the joint operation requirements document 
that I mentioned earlier, there are four signatories on it. 
That was signed in the spring time of the year 2000. The 
signatories are the U.S. Air Force, the Marine Corps, and the 
United Kingdom. So there is an advantage to being a signatory 
on the requirements document.
    They also have, the UK has 10 people that work for me in my 
office. So they have people spread throughout my team, working 
various jobs on the team.
    Mr. Shays. OK. Now, Mr. Chairman, do you mind if I keep 
going?
    Mr. Turner. Please, proceed.
    General Hudson. Sir, I have the numbers that you asked for 
earlier.
    Mr. Shays. Why don't we hold off on them. I am not going to 
forget about them. So what you have said is they get to have 
some say. If you are one tier, you got to have a little more 
say than 2 or 3. Correct?
    General Hudson. Yes, sir.
    Mr. Shays. Now, does that allow them to be able to have an 
aircraft sooner than some other countries? In other words, are 
they first--do they get to jump us? The number I gave you of 
2,443, do we get all our airplanes and then they get theirs? Or 
do we do a kind cost sharing, not cost sharing, but they get so 
many if we get so many? How does that work?
    General Hudson. The United States buys the first production 
airplanes, sir, planned now for 2006. The U.S. procurement 
profile will go probably for about 20 years past that. What 
will happen is that, as the United States buys airplanes and 
deploys them into the fleet, there will be enough production 
capacity to allow for airplanes to be built for partner 
nations.
    Mr. Shays. You are missing my question. You gave me a long 
answer, I think with all respect, to what can be shorter. I am 
just simply asking, do the Brits, basically because of their 
participation, get to be able to say, well you get the first 
100, then we get 10, you get the next and so on.
    Is it that kind of arrangement? Otherwise, I am wondering 
why they would participate.
    General Hudson. Well, it goes by priority. They, as the 
Level 1 partner, they are able to procure first amongst the 
partner countries. And they start in 2008.
    Mr. Shays. I understand the United States comes first. I 
understand that. We are putting up most of the cost, with all 
due respect. And I just wanted to know, this has to be 
something that has been talked about. Is this classified 
information?
    General Hudson. Well, they do have an advantage in 
procurement, because they are earlier----
    Mr. Shays. Is there an agreement in writing that says how 
many planes they get at a certain time, or is this still to be 
decided?
    General Hudson. It is still to be decided, sir. The UK has 
a--they have a goal which they have stated of 150 Joint Strike 
Fighters. We know that they intend to begin procurement in 
2008. The exact number of airplanes year by year, over the life 
of their procurement, is yet to be determined.
    Mr. Shays. OK. Why don't you give me those numbers.
    General Hudson. These are the numbers that I have here. You 
were correct, 1,763 for the Air Force, and 680 for the Navy and 
the Marine Corps. That makes the 2,443 that you cited earlier.
    Now, there are 14 jets that will be flown in a development 
program.
    Mr. Shays. Right.
    General Hudson. At one time, there used to be 13. This goes 
back about 3 or 4 years----
    Mr. Shays. So it is 14?
    General Hudson. Yes.
    Mr. Shays. What are we looking at now? What are we looking 
at the cost of this?
    General Hudson. For the SOD development program here, $33 
billion. For the production program, this is just the U.S. 
Airplanes, $162 billion. And our estimate for the operating and 
support costs for the U.S. airplanes is $332 billion.
    Mr. Shays. So this number that I have of $1.1 is way off, 
$1.1 trillion is just totally off.
    General Hudson. Yes, sir. I don't know what the basis for 
that is. I would love to see those numbers and try to figure 
out where they come from, but these are the numbers that we 
carry in my office.
    Mr. Shays. OK. If I add up all of those numbers, what did 
you get to? I need it in your words, not mine. So I don't want 
to add it up and put it the on the record. I want you to put it 
on the record.
    General Hudson. Yes, sir. I get $527, sir.
    Mr. Shays. OK. So you are saying $527 buys 2,457 aircraft.
    General Hudson. Yes, sir. It does the development, it buys 
them, and it supports them over the life of the fleet.
    Mr. Shays. Supports them. You mean, it is not just the cost 
of them, it is the operation? I just want to know the cost of 
this plane.
    General Hudson. Yes, sir. The $33 billion does the 
development work.
    Mr. Shays. The $162 is production?
    General Hudson. Yes, sir.
    Mr. Shays. I will take those two. So that is--basically, 
that is the cost of the aircraft?
    General Judson. Yes, sir. The $33 and $162.
    Mr. Shays. Do you want to put it on the record?
    General Hudson. Yes, sir. To do the ongoing development and 
to procure the airplanes.
    Mr. Shays. It is $195 billion.
    General Hudson. Yes, sir.
    Mr. Shays. For 2,457 aircraft?
    General Hudson. Yes, sir.
    Mr. Shays. Maybe one of your folks could put on the cost 
per aircraft from that, just division. There is an average. 
Could I ask one last question?
    Mr. Turner. Certainly.
    Mr. Shays. I would just like to clarify a question I asked 
earlier to GAO. When you were giving me costs, General, I seem 
surprised by your number versus GAO. I am looking at page 13. 
Maybe I misunderstood you, because I wasn't listening as well 
as I should have. But, on page 13 in the second paragraph, it 
says DOD--this is in the Joint Strike Fighter acquisition 
report. It says, DOD and the program office officials told us 
there could be instances where the partners would not be 
expected to share cost increases. For example, cost estimates 
for the system development and demonstration phase have 
increased on multiple occasions since the program started in 
1996.
    During that time, the expected cost for this phase went 
from $21.2 billion to $33.1 billion. And I get a difference of 
$12.9 billion. And I thought you gave me a $3 billion. I am 
just--that is why I asked GAO if those numbers--and you said 
you agreed with the $3 billion.
    General Hudson. Sir, the $3 billion number I gave was from 
the Milestone B in October 2001, to the report that came over 
here early this year.
    Mr. Shays. So I used a different timeframe?
    General Hudson. Yes, sir.
    Mr. Shays. So you agree with GAO that it is $12.9 since?
    General Hudson. Yes.
    Mr. Shays. OK. Thank you.
    Ms. Schinasi. Mr. Chairman, could I add something to that? 
We came up with, instead of the $195, the roughly $200 billion 
for the total cost, because we added the additional development 
of about $4 billion that was in the concept demonstration 
phase.
    Mr. Shays. So you added the $5 billion more. Do you concur 
with that number?
    Ms. Schinasi. Well, it was $4 something.
    General Hudson. Yes, sir. That is correct, if you count the 
competitive phase.
    Mr. Shays. OK. Thank you. Appreciate it. Thank you for 
getting those numbers to me, General. Thank you.
    Mr. Turner. Well, Chairman Shays said that he is a fan of 
this program, and certainly I can tell you that I am also. And 
I think in looking at this, the Joint Strike Fighter people are 
very excited about its capabilities and what it is going to be 
able to do for the military.
    And I have a series of questions, but first I would like to 
pause for a second, General. If you could highlight some of 
these for us, as to the Joint Strike Fighter, what are we 
talking about in trying to achieve here?
    General Hudson. Well, sir, there are several very important 
things that I would like to highlight for you briefly. First 
off is the ability to design, develop and deploy an airplane 
that is highly common between a variant that not only works off 
the U.S. aircraft carrier, but off an expeditionary airfield, 
such as the Marine Corps might use, and have from a 
conventional runway that the Air Force might use.
    This gives us, by means of high commonalty within the 
airframe and within the avionics and software in the airplane, 
a very affordable airplane to buy and also to operate. Within 
any system, the largest expense in the life-cycle cost is a 
cost of owning and operating the airplane. With high 
commonality, we can certainly make inroads into what we know is 
the high cost of operating and owning most systems.
    The other thing is that we will be able to do is, we have 
an airplane that is multi-role in nature, that is, can 
accomplish both the air-to-ground mission, and it has inherent 
air-to-air capability. And we have been able to design that 
such that it is highly common, which also gives us a broad base 
of operations to cut into operating and support costs.
    And we have interoperability as one of our key performance 
parameters. We know that in coalition warfare, we want to have 
this plane to be able to interoperate, in other words, pass 
voice and data information with ships at sea, with the 
facilities on the ground, with other airplanes in the air and 
with spaceborne assets. So we designed this capability up 
front.
    Mr. Turner. This weekend, I led a congressional delegation 
of 11 Members that went to Wright-Patterson Air Force Base. It 
included the chairman of the Armed Services, Duncan Hunter, the 
chairman of Airland, who is also the vice chairman of the 
overall Armed Services Committee, Kurt Weldon, to look at the 
development of science and technologies and research and 
development.
    We had a focus of the technology of tomorrow that is going 
to be for the battlefields of tomorrow. One of the phrases that 
we heard from Ms. Schinasi, is that the technology has not been 
mature, but yet you moved forward into different phases. And 
one of the things that I find in this whole process is that to 
some extent, when you are talking about research and 
development, you are talking about inventions, you are talking 
about creativity, you are talking about doing something that 
someone hasn't done before, we don't want to go buy something 
that is yesterday's technology, we don't even want to buy 
today's technology, we want to buy tomorrow's technology.
    And managing how we incorporate tomorrow's technology into 
a process that is being managed today is a difficult one 
financially. The phrase mature technology, though, is one that 
I would like you to respond to, General, in that it does seem 
to me that this is a process, specifically of the Joint Strike 
Fighter, which is one at the same time that we want to manage 
costs, we are talking about innovation, and we are talking 
about projecting toward the technology of tomorrow in this and 
the inherent impact that that is going to have on cost.
    General Hudson. Yes, sir. One of the significant challenges 
that we have in this development program is to integrate the 
technologies that we identified the last phase of the program 
into our design. So, I would like to give you a couple of 
examples of work that we did in the last phase of the program 
that we are now integrating into the design.
    The first one is in the radar. We did some work in the last 
phase of the program on technology maturation, so that we could 
build a high-performing radar in a very affordable fashion. 
That technology demonstration work we did in the last phase has 
paid off handsomely. In fact, approximately next April, we will 
have our first radar hit the test bench.
    So that is a good example of technology maturation work 
that was done in that last phase. We are building that now. And 
we will begin testing it next year. But it gives us the 
capability to put the technology we need in the airplane in an 
affordable manner. There is an example in the subsystems in the 
airplane. We did a project where we took an F-16, and tore out 
the traditional hydraulic flight controls in the airplane and 
replaced it with what we call--it is actually a system that 
runs by digital control to actuators located at the flight 
control services, eliminating the usual lines and hydraulic 
requirements in an airplane.
    We demonstrated this. This it is now part of our baseline 
design. It is brand new technology that was never used like 
this in a fighter before. So we have captured that in our 
design process. So we have attempted to focus in this phase on 
the integration of those technologies, which we know need to be 
in airplane to make sure that it is survivable, lethal, 
supportable and affordable, but yet allow us to keep ourselves 
on track for schedule and performance and cost in this phase of 
development.
    Mr. Turner. In the materials that we have for this hearing 
from the staff of the committee, they highlight some of the 
costs savings that we will experience, or have experienced, as 
a result of the Joint Strike Fighter Program's structure. And 
its goals being one, that the services anticipate that the size 
of their order will hold down production costs because a common 
base or common craft that is being designed, that the 
acquisition program's affordability is impacted by reducing the 
development production and ownership costs of the program, 
relative to other fighter procurements and that you have 
incorporated various DOD and commercial best practices in the 
Joint Strike Fighter program.
    Still, obviously that is not enough to have warded off the 
cost increases that everyone wants to avoid. And the program 
can be open to criticism as we have looked to others that have 
not shared in those cost increases. But I think that, I would 
like you to clear this up for me, because as we have had this 
discussion, the--when we talk about costs and the different 
phases and what the partners will pay for their various portion 
of costs, once this plane actually gets into production, the 
full cost of production of the plane will be paid by anyone 
non-United States who purchases that plane, correct?
    General Hudson. Yes, sir. That is correct.
    Mr. Turner. So that the concern, though, is that the 
initial cost, the development costs, the invention costs are 
not at a 100 percent basis going to be placed or burden onto 
that purchase price cost of a copy. That is what I am getting 
from this hearing. So there will not be a recovery of the 
overall expectation of what we are going to have spent to come 
up to the level of production?
    General Hudson. Yes, sir. It is correct that partner 
countries are not required. We have the option of going to them 
for additional funds, but they are not required to share in 
development cost increases.
    Mr. Turner. And I guess that is where it begins to defy 
what people's normal common sense expectation would be of how 
cost and prices are set. Because, you know, generally if 
someone is going to go set about doing research and development 
for a product that they are going to put in production, they 
include those costs, as to what it took them to get to that 
point. I think that that is where people are struggling here is 
that not only are they not going to be included, but they are 
also, even though they shared in a portion of those, other 
countries, they are not sharing in the escalation of those 
costs as we get to the production point.
    Now, is that correct? Is that a correct description of 
basically what people are struggling with?
    General Hudson. Yes, sir. I think you have described that 
correctly. It is correct that when we come to the production of 
the airplanes, the partner countries or whoever else would 
procure the airplane, they pay the full price of the airplane. 
And also for operating and support, they would pay the costs of 
spare parts and the cost of training and so on and so forth, 
just like the United States would.
    Mr. Turner. But they will not be paying the costs that have 
been expended prior, in research and development that takes it 
up to the point of production?
    General Hudson. No, sir. Not unless, if there are cost 
overruns in the development phase that the United States went 
to them for additional funds, and if they produced those 
additional funds, they would, of course, share in an increase 
in the cost of development. If they did not, they would not.
    Mr. Turner. So then the sharing of those costs, though, 
does not bear a relationship to the per unit number that they 
will be acquiring?
    General Hudson. That is correct, sir.
    Mr. Turner. Let's shift just a second, Mr. Chairman, if you 
don't mind, to the issue of technology transfer. We are almost 
coming to the planned ending point of the hearing, although I 
understand from the chairman that we may continue it.
    General, could you speak about the issue of technology 
transfer. Here you are in a partnership where you are sharing 
technology internationally, and you are sharing in technology 
because you want your product to be responsive to your 
customers, which also may be your partners on battle fields. So 
you also want the sharing of knowledge there in technology as 
this is developed, so that as a team, when these countries get 
together, they will be more effective.
    I think one of the concerns that was raised, of course, is 
that your friend today may be your foe tomorrow. But in the 
group that you have put together, perhaps the degree of concern 
is not as high of those individuals. But, there may be in the 
next level of that, you know our friends may not necessarily be 
our friends. And could you talk about that, expanding on 
distribution of technology transfer and what--how that might be 
being addressed in this program?
    General Hudson. Yes, sir. We spent some years developing 
and working on the process for Joint Strike Fighter. There is a 
rigorous process in place to determine which technologies can 
be transferred on an industry-to-industry basis, let's say for 
example from Lockheed Martin or one of their subs or suppliers 
to a company who would be performing Joint Strike Fighter work 
from another country.
    So that process is in place. We adhere to it very 
carefully. There are measures in place to ensure that that 
technology is appropriate for transfer. We worked that through 
the national disclosure policy community. And it is defined by 
what kind of authorizations exist for that technology transfer, 
either within the global project authorization, or the various 
TAAs that might be put in place for this program.
    There are also equivalent agreements in place between the 
government of the United States and other participating 
governments as there would be for any type of cooperative 
development program. These security agreements are in place. 
They are carefully structured within each one of our partner 
countries to ensure that any information that might be provided 
to these countries is carefully protected, and that the 
individuals who get access to that information are properly 
vetted within their own systems as they are in ours.
    So we have that disciplined system in place for government-
to-government as well as industry-to-industry. And the 
importance of the technology transfer, I think, is illustrated 
very well by the time that it took to get the global project 
authorization in place. It was very carefully done.
    It covers only unclassified information, and only 
unclassified information that is not very sensitive. The rest 
is all done by the normal TAA process. So there is agreements 
and procedures in place to govern the transfer of this 
information on both sides.
    Ms. Schinasi. Mr. Turner, can I add to that?
    Mr. Turner. Yes, please.
    Ms. Schinasi. I think one of the things that we tried to 
raise in our report is the concept of expectations, and how 
there may be differing expectations on this program. What we 
have seen and heard from some of the partner countries in here 
is that there is an expectation that they will have access to 
certain technology that they believe they need, to not just 
develop and produce, but also to support this airplane.
    And that those expectations are probably, if not certainly, 
going to run into conflict with previous decisions that the 
United States has made on transferring technology.
    The partner expectations for what technology they will have 
access to are not always going to be in accord with what the 
United States has certainly not done in the past, and maybe is 
not willing to do right now. So one of the issues that we have 
looked at is this idea of supportability of this aircraft.
    Many of the partner countries want the ability to maintain 
and support the aircraft. There are significant technology 
transfer issues associated with that. And we have not yet 
determined what the support plan is going to look like. So what 
we have tried to do is say this is--the General described a set 
of safeguards in place--but, there will continue to be pressure 
pushing on the policy level about how much technology we are 
going to transfer.
    I would say the GPA that has been referred to, the Global 
Project Authorization, is more a matter of process, how quickly 
can we get it through, not what the decision should be as to 
whether or not to release it.
    Mr. Turner. Very good. That is a good point as to how we 
operationally do this and that being overly restrictive may 
impact our overall goals. I appreciate you making that point, 
Mr. Chairman.
    Mr. Shays. Thank you. We are getting toward the end here. 
But let me go through a few questions as it relates to the 
issue of strategic best value sourcing, as some call it.
    I am going to read you the explanation before I read you 
the questions. Because I want to make sure the explanation is 
accurate. DOD and the Joint Strike Fighter Program Office have 
said that the use of competitive contracting is central to 
meeting partner expectations for industrial return and will 
assist in controlling program costs. Two things. In other 
words, one advantage is controlling program costs. Another is 
we participate, and we get to have our industry make some of 
the product that goes into making the airplane.
    Joint Strike Fighter officials use the term ``best value'' 
to describe this approach, which is a departure from other 
cooperative development programs that guarantee predetermined 
levels of work based on contribution.
    I guess I was kind of in the old world. I figure you 
contribute so much, then you get to make so much. Partner 
representatives generally agree with the Joint Strike Fighter 
competitive approach to contracting, but some emphasize that 
their industry's ability to win Joint Strike Fighter contracts 
whose total value approaches or exceeds their financial 
contributions for the Joint Strike Fighter's system development 
and demonstration phase is important for their continued 
involvement in the program.
    So I would like to ask Mr. Volkman and General Hudson to 
describe the relationship between the strategic best value 
sourcing, as described in the DOD Industrial Impact Study, and 
the best value concept that has been promoted since the 
beginning of the system development and demonstration phase.
    Mr. Volkman. Well, I think what we do in the award of 
subcontracts, generally, is we expect our prime contractors to 
make subcontract decisions on a best value basis.
    Mr. Shays. So if they can make it overseas, you make it 
overseas.
    Mr. Volkman. Well, what I am trying to do initially is to 
say that we ordinarily expect our contractors to make a 
decision as to who they subcontract with on what would be 
characterized as a best value basis.
    Mr. Shays. I am trying to understand it. Maybe I jumped in 
too quick. But since I already jumped in, what I am hearing you 
say to me is, wherever they can make the project the best at 
the lowest cost, you want them to make it there.
    Mr. Volkman. Right. So if there were foreign sources that 
can make it at the best value, at the best cost, we would 
expect that they would go to foreign sources. Now, of course, 
it is a lot more complicated than that, because of limitations 
on certain foreign sourcing that are contained in laws and 
regulations. But as a general rule yes, we would expect that 
they would do that.
    Mr. Shays. Conceptually, I understand that. Now what?
    Mr. Volkman. So in the case of the Joint Strike Fighter 
Program, clearly, one of the things that we would like to see 
is our partner countries who are participating in the program, 
for their industries to benefit on a best value basis.
    Mr. Shays. Right.
    Mr. Volkman. So there is--I am now going to the strategic 
sourcing concept. There is some value in the prime contractors 
making decisions to award work in a particular country on a 
best value basis.
    Mr. Shays. Is it accurate to say that if you are 10 percent 
of the total production--excuse me, of the development costs, 
that you don't--aren't guaranteed that you will have 10 percent 
of the production contracting? That is not--you won't.
    Mr. Volkman. Well, at this phase of the program, we are not 
making any commitments as far as----
    Mr. Shays. But the answer to the question is really yes? I 
am repeating what I think you told me. And tell me if I am 
wrong. You are going to, wherever you can make the product the 
best, the best product at the lowest cost, as a general rule 
that is the concept that guides you. So if the Brits contribute 
10 percent of the development cost, if they did, they are not 
guaranteed that they get 10 percent of the production?
    Mr. Volkman. That is correct.
    Mr. Shays. OK. Now, in a helicopter that Sikorski makes in 
my district, as I was viewing the plant, the frame was built by 
the Japanese, the tanks that are going to be on the outside of 
this aircraft are built by the Brazilians. And the arguement to 
me now is, but the value added, the real, you know, expensive 
value-added stuff is still going to be done in the United 
States. And so it was intriguing to see this case brought in 
and these various parts coming in from all over the world.
    I make an assumption that the Joint Strike Fighter is going 
to be made all over the world and that we hope that more than 
eight countries buy it. Is that an accurate statement?
    Mr. Volkman. That is correct.
    Mr. Shays. OK. Ms. Patrick, do you want to add anything? 
You are nodding your head. It doesn't get on the transcript.
    Ms. Patrick. No. I do agree with all that you have said.
    Mr. Shays. OK.
    Ms. Patrick. It is really a very radical departure from the 
offset paradigm, in that really never before have countries 
made investments in the SDT phase of a program, in the way that 
the Joint Strike Fighter is structured. And they make those 
investments without any guarantee of a proportionate amount of 
business in return for that.
    And so it could be more, it could be less than their 
proportion.
    Mr. Shays. I think you kind of sense where I am going. 
Conceivably, first off, I would in a chauvinistic way, like to 
think that Americans would make the best no matter what part it 
is. We wouldn't necessarily make the cheapest, but I would also 
make an assumption that we would make the best. Now, maybe that 
is an assumption that I shouldn't make.
    Having said that, I also make an assumption that when we 
are making a plane, that it is my obligation to make sure the 
best part is in every place, so that if for instance the 
Brazilians can do something that makes the plane lighter and 
safer or whatever, I owe it to the men and women and to our 
country to make sure that that is what we buy. I would like to 
think again, though, that we can do it ourselves.
    But I know that in some cases it might be built at less 
cost and maybe even superior in some instances. What I am 
wondering, though, is now I am back to where I was in the 
beginning. I don't understand--you have to explain to me in a 
way that I can understand why we are seeing a 1-percent 
investment in production with the Phase 3.
    Ms. Schinasi. Level 3 was originally roughly 1 to 2 
percent.
    Mr. Shays. OK. I don't understand that. Unless it is to 
say, I mean, I can understand wanting to buy it at 1 percent. 
That is a pretty good deal. I like that part of the deal. I can 
understand why they want it. I don't quite--it seems to me that 
it gives them a plane before someone else who hasn't 
participated, logically, though, you are saying that hasn't 
been resolved yet. Is that true, Ms. Patrick?
    Mr. Volkman. I think your questions earlier were, do 
partner nations have some priority in receiving airplanes? I 
think that is what you asked earlier. The answer is yes.
    Mr. Shays. What you told me hasn't been resolved is, how we 
phase in our 2,400 plus planes with what the Brits want and the 
others. So before we get our final 2,400, the Brits are going 
to get some along the way. And what I am hearing you say under 
oath in this committee is there is no agreement yet as to when 
they start to get their planes. That still has to be resolved. 
Is that correct, Ms. Patrick?
    Ms. Patrick. That is correct, as well. The final quantities 
or intents of the partner countries have not been set yet.
    Mr. Shays. But have the phase-ins of when they start to get 
planes been? This is a digression, but I want to clear the 
record for that.
    General? This is a trick question. What is on the record 
right now is there is no agreement, which is a little hard for 
me to accept, because it would seem to me that there would be 
some general agreement, that, you know, you don't get 2,000 
planes before we get 50. If I were the Brits, I would want to 
make sure that somewhere--I was going to get my planes when I 
wanted them.
    General Hudson. Sir, the only firm time we have is from the 
UK, which would start in 2008. That would be their first 
procurement of an airplane.
    Mr. Shays. We don't know how many planes--in 2008 is when 
we get our planes too?
    General Hudson. Yes, sir. Our first delivery is in 2008. 
The UK will procure their first airplane planes in 2008, with 
the first delivery in 2010.
    Mr. Shays. How many will they get?
    General Hudson. Nominally, 150 total over a certain number 
of years.
    Mr. Shays. Has that been determined? I am not asking what 
it is. I am not asking you to tell me what that is, but has 
that been determined?
    General Hudson. The number per year in each and every year? 
No.
    Mr. Shays. OK. That was somewhat of a digression, but we 
seemed to be on that topic. I want to come back to the issue of 
best value. Tell me what we get having the Turks, the 
Norwegians, the Australians, the Canadians and Denmark with 
their 1 percent participation. What do we get for that?
    Mr. Volkman. Well----
    Mr. Shays. In each case.
    Mr. Volkman. Well, first of all, we get a financial 
contribution from those nations to participate in the 
development phase. And they share in the risks associated with 
developing the airplane. They are putting money up with no 
guarantee that the product that comes out the other end is 
going to be an airplane that is usable. Now, we have high 
confidence that that is the case.
    But since development of high performance airplanes are 
risky, what we have asked, and what our partners have agreed to 
do, is to share in that risk by putting up costs.
    Mr. Shays. I guess if I was in Turkey, I would want to be 
able to explain why I invested $150 million into this. Tell me 
what they tell their constituents.
    Mr. Volkman. Well, I mean the reason why these countries 
are interested in investing $150 million or $2 billion into 
this program is because they will be in a position at some 
point in the future, like us, to have a high performance 
aircraft. They also believe that----
    Mr. Shays. Let me just--it relates to my question, so allow 
me to do this. But based on the way we are going to develop the 
plane, there is no promise that they get to make any part of 
the production, because their investment does not guarantee 
them any production. Is that correct for the record?
    Mr. Volkman. Their investment in the systems design and 
demonstration program does not guarantee them any portion of 
the production program.
    Mr. Shays. Because we are going to go to the strategic best 
value sourcing, correct?
    Mr. Volkman. We have--the way in which contracts will be 
awarded for the present phase of the program, systems design 
and demonstration----
    Mr. Shays. I am not talking about buying the plane 
contracts. I am talking about the production. I asked the 
question, that their participation in the $150 million does not 
guarantee them any production contracts.
    Mr. Volkman. No, it does not.
    Mr. Shays. So the only thing it seems to me that they have 
bought is that if there are 12 countries in line, these 1, 2, 
3, 4, 5, Tier 3 comes before those who didn't participate at 
all. I am not fishing around. I just want some logic here.
    Ms. Patrick. Well, let me see if I can take a shot at this. 
For all of the countries who have made partnership investments, 
in addition to some of the motivations having to do with the 
spot in line for buying airplanes if they decide to do it, 
their hope is that by learning more about the aircraft, 
learning more about which contracts are going to be let, being 
closer, having closer ties to the program office and to the 
contractor team, their industries will be in a better position 
to bid effectively on a best value basis.
    We call it best value, not low cost. Best value. In other 
words, best technology at, you know, the appropriate cost.
    On components on this aircraft program. And your example of 
Turkey was very much to the point, in that for a number of the 
companies, a number of the countries rather, they are having 
trouble explaining this to their parliamentarians because they 
have not been sourcing a proportionate return yet on their 
investment. And so----
    Mr. Shays. And the fact is----
    Ms. Patrick. And that shows that the best-value principle 
is in fact working as advertised.
    Mr. Shays. OK. Thank you for putting it in the record. I 
mean it's very logical to me. For 150 million, you're--and this 
is not a bad thing--you're on the inside track. You are there 
as the plane is being developed. You begin to know where the 
needs are. You make contacts. So all things being equal, you've 
got a better shot at knowing, to say--you know, you can point 
out to the people, to Lockheed in particular, we can make that 
for you. You can go to your people back home and say, we can do 
it for you. OK. That makes sense.
    So I guess the last thing that I would want to do--thank 
you. I think I should have asked you first, why did you keep 
that a secret in any way? Is there anything else you want to 
tell me that you----
    Ms. Patrick. Well, I think the other--I mean, since you 
asked.
    Mr. Shays. I mean, you know, what I've been wrestling with; 
if you can end my agony here, we could have the hearing end a 
lot sooner.
    Ms. Patrick. I would be delighted to do that, sir. But I 
think it's very important to understand how these contracts 
have actually worked and how the competitions have worked.
    Mr. Shays. I would like to understand.
    Ms. Patrick. Because it really has worked as a level 
playing field in that, you know, the RFPs go out and all 
bidders bid: numerous U.S. companies, some foreign companies. 
And it's not as if there's any direction to a foreign supplier 
or if, you know, there's anything other than full and open 
competition. And as I said earlier, a number of the foreign 
countries and companies have been very disappointed that they 
haven't won each time; that at the current stage of the 
program, their return is not equal to their investment.
    But in my office we studied some of those issues pretty 
carefully because we wanted to learn those lessons quickly. And 
there were instances where companies submitted their bids late, 
you know, foreign companies. Well, that's a noncompliant bid. 
There were issues where they bid in terms of ship sets instead 
of units. You know, the contracting system is working on a 
best-value basis. So, you know, I think that----
    Mr. Shays. Are you going to have anything to do with the 
purchase of the Presidential helicopter? Because if so, I'd 
like to put in a good word for Sikorsky.
    Let me end with this, if I could. There are three different 
numbers now--two different numbers on the record. One I put on 
the record, which was 1.1--I put in the record $1.1 trillion 
for total cost of these planes. General, you put on the record 
3 point--excuse me, $332 million, billion, or $332 trillion. 
And I misspoke, because where we got the number--and help me 
out here. We got the number from the ``CRS Report for Congress 
Joint Strike Fighter, JSF, Program Background Status'' and 
issues updated June 16, 2003. And in that report I'll read you 
this first paragraph, because the numbers there, unless I'm 
just missing something and deserve to be embarrassed here, this 
is what I'm reading: ``It's under funding and project cost. The 
Defense Department's quarterly Select Acquisition Report, SAR, 
of December 30, 2002 estimated the Joint Strike Fighter program 
at $1.997 trillion.'' So it wasn't $1.1; they had $1.9 in 
current year dollars for 2,457 aircraft, which equates to a 
program unit acquisition cost of $81 billion per aircraft. So 
am I adding some other number? Are they adding other numbers 
that are not--or are they just way off the chart?
    General Hudson. I don't know sir. I'm going to have to go 
back and look at that and figure it out. What you said earlier 
about the $332, that was the cost of owning and operating the 
airplanes over the fleet life.
    Mr. Shays. Oh I'm sorry. Right. It's $195. I'm sorry.
    General Hudson. Yes, sir. I gave you $145; and the GAO is 
correct, if you count the $4 billion that was spent on the----
    Mr. Shays. I understand. But you understand my problem is 
when I'm looking at a document from the congressional report--
and I just read it to you--and we are at this unbelievable 
number of $1.9 trillion versus your $195 billion, you can 
understand--I like the Library of Congress you know. So they're 
way off or I'm just reading it wrong.
    So anyway, that's on the record, we need to clarify. OK. I 
just wanted you to know where staff got our information from. 
Does anybody need to speak to that issue at all?
    Ms. Schinasi. Do you want to say something, Brian?
    Mr. Shays. Yes, thank you.
    Mr. Mullins. Yes, sir. I have a copy of the Selected 
Acquisition Report that you referenced from your report, and I 
haven't seen the CRS report so I don't want to comment on 
anything they've done. But in the SAR it says that the total 
cost for the quantity you mention was $199 billion, like we 
referenced before, you may have.
    Mr. Shays. Which is your number with the--and it's your 
number, General, with the 4. OK.
    Mr. Mullins. I think you might have a decimal, or comma, in 
the wrong place there.
    Mr. Shays. Who might?
    Mr. Mullins. Somebody might. I'm sorry. Not you. They might 
have. But I haven't seen their report so I don't know.
    Mr. Shays. Could we--and by the way, if they're doing a 
report that's so inaccurate, I hope they show them to you and I 
hope you review them because it needs to be straightened out. 
Would you get back to us as to the dialog with the Library of 
Congress? I'll ask the GAO to do that.
    Ms. Schinasi. Yes.
    Mr. Shays. I appreciate, Mr. Chairman, the time you have 
given me. I think I've asked the questions I've wanted to ask. 
Do you have others?
    Mr. Turner [presiding]. No, Mr. Chairman and I'm assuming 
at this point, not at this instant, but that we would proceed 
to adjourn rather than just continue.
    Mr. Shays. Right. Now we would definitely adjourn. But if 
you could do the question that you and I both ask--if I could 
ask it.
    Is there anything that you were prepared to answer that we 
should have asked you? Is there anything that we should have 
asked that you didn't want to answer but I'd still like you to 
answer? No, bottom line is I learn a lot from the something 
that we left out that you put on the record.
    I'll give you an example. At one of the hearings we had on 
biological warfare, we were about to adjourn and one of our 
witnesses said, well, I just want to tell you what weighs on my 
mind a lot. He said--and this was an editor of a major medical 
magazine. He said, My biggest fear is that a small group of 
dedicated scientists will create an altered biological agent 
that will wipe out humanity as we know it.
    Now, I'm not asking for a show stopper like that, but that 
was important he put on the record. Is there anything that 
needs to be put on the record? And, Mr. Mullins and Ms. 
Schinasi, is there anything that was said that was not the way 
you view it? Otherwise I'm going to assume that everything 
we've learned from DOD has basically been as you see it. Is 
there anything, any disagreement?
    Ms. Schinasi. I don't know about a disagreement, but I 
would like to restate what I see is the issue. I'm not sure 
it's been stated exactly this way. We went into this program 
with a certain set of assumptions. One of those is that we 
would have increased interoperability with our allies. You can 
get interoperability in ways that don't require them to have 
the same kind of equipment we do. That's one.
    But the other is that there are a set of expectations that 
the partner governments have here and the partner industries 
that will continue to push most heavily on Lockheed Martin as 
the prime supplier. They are the ones who have to look at 
future sales and profitability, and so the decisions that they 
make now will be geared, you know, obviously toward their 
continued well-being.
    And so I would just like to caution that there are places 
where their well-being may in fact deviate from the well-being 
of the Department of Defense in terms of its own goals and the 
broader U.S. technology base in terms of what we would pay to 
develop the technologies that we provide to the military. And 
so I would just like to say that the pressures are going to be 
on Lockheed Martin, and I think it is important, even though 
our work was prospective, to continue to look at the decisions 
that get made in this program to make sure that we stay on 
track with our original goals.
    Mr. Shays. I'll tell you my concern. My concern is that in 
the process of their--of all of us looking at cost, that 
conclusions are made that too much of this plane can be made 
overseas, and that in fact we make too much of it overseas in 
spite of the fact that the United States is the major purchaser 
of it. You could argue, well, we're getting a cheaper plane; 
but the problem is we're not getting our men and women making 
this plane.
    And I'm not supporting the requirement that 75 percent of 
something or 50 percent has to be U.S. content. But I hope that 
somehow, General, you have the ability to say, you know, no, 
this product, this part of the plane is going to be made in the 
United States. I don't know, ultimately, I mean is it 
conceivable that--well, I--you know, I'm opening up another 
door. But the bottom line is I'm looking at three people 
looking at me, and I'm thinking, what were they thinking? The 
bottom line to this, is there a danger that too much of this 
plane will be made overseas if it's based on price and quality, 
but price? Yes.
    Mr. Volkman. Well, I'll ask Ms. Patrick to address that. 
But one of the things that I would like to say before the 
hearing closes is it seems to me that the Joint Strike Fighter 
is a program that we in the Department of Defense should be 
proud of and in fact are proud of.
    Mr. Shays. Right.
    Mr. Volkman. I think we've done and General Hudson has done 
a remarkable job of putting together what so far is a highly 
successful international program. And my hope is that in the 
future, more of our major programs are conducted with partners 
like we're doing on the Joint Strike Fighter program, where we 
share the benefits and share the risks and the costs associated 
with developing a complex piece of military equipment with 
partners, so that in fact they will also have the military 
capability that we feel is essential for our allies to have so 
that they can participate with us as equal partners in military 
operations around the world.
    In the final analysis, the Department of Defense is about 
military capability, and we want our allies to have similar 
military capabilities to ours so that we can operate 
effectively with them. I think that our allies are not 
concerned about having too much of the airplane built overseas. 
They're concerned that in fact they will get a fair--what they 
consider to be a fair amount of aircraft in their countries. 
And I think that that's really going to be the balancing act.
    Mr. Shays. But there is some irony if they never buy the 
plane but they get to make a lot of it. It does raise some 
questions.
    But I do want to agree with Mr. Volkman. I've had a number 
of hearings and I've been much more comfortable with the Joint 
Strike Fighter program than I have been on a number of other 
our defense programs, which I think some have been quite good. 
So I think so far I have a view that we're doing pretty well. 
And I do want to thank you, General, and Ms. Patrick as well. I 
think it is a program that is working fairly well.
    Anything, Ms. Patrick. General.
    General Hudson. Yes, sir. Just a point for clarification. 
Three of our eight key performance parameters are in this area 
of supportability. We talked a little bit about that, but that 
was done up front to have the right emphasis on design such 
that the airplane would be affordable to own and operate. The 
production MOUs that we expect to sign starting with the U.K., 
that's an ongoing process that will take another year to 2 
years before we get all that in place. There's much discussion 
about that timing, but that's work yet to come.
    This program has all the potential to give us the 
advantages we need in coalition warfare with interoperability 
and other things so that our sons and daughters can fly and 
fight in the future and win successfully.
    So thank you for the additional time, sir.
    Mr. Shays. I thought you were going to close by saying that 
you think it's very important that an American President be 
flown in an American-built helicopter. Thank you very much.
    Mr. Turner. Thank you, Mr. Chairman. Well, I know one thing 
for certain, that both--for the chairman, myself as vice 
chairman, Mr. Schrock, and other members of this committee, the 
committee certainly supports this program regardless of what 
other individual members might say. The purpose of this hearing 
is in the aspect of oversight by this committee, is not a 
position of opposition to the program. And in that process of 
oversight, what we're looking at is, you know, what are we 
doing? What are we learning? Are our policies correct? Are our 
past policy decisions correct? Is there anything that needs to 
be modified?
    We know that that is a very difficult program, both 
technologically, the relationships internal to DOD and the 
joint services and the foreign partnerships, and certainly the 
financial issues and the staggering numbers of the actual costs 
that we're dealing with both in research and development and 
ultimately in production. We appreciate your participation.
    Mr. Shays. Mr. Chairman, just one last thing. I'm going to 
save GAO the trouble of verifying with the Library of Congress. 
They've called us and they said a decimal point was in the 
wrong place. So therefore it wasn't, you know, 1.997 billion. 
And they also said therefore the 81 is wrong. So to their 
credit, they're allowing us to say that. A wrong decimal point, 
amazing what it can do. Thank you all very much.
    Mr. Turner. Excellent. Which illustrates that as we go 
through this process----
    Mr. Shays. At least someone was watching.
    Mr. Turner. As we go through this process of oversight, 
making certain that the information that everyone has is 
correct, and that was occurring is occurring. We do know that 
there are a tremendous amount of successes and we certainly 
look forward to your success. And with that we'll be adjourned. 
Thank you.
    [Whereupon, at 1:20 p.m., the subcommittee was adjourned.]

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