Joint Strike Fighter Acquisition: Observations on the Supplier	 
Base (03-MAY-04, GAO-04-554).					 
                                                                 
As the Department of Defense's (DOD) most expensive aircraft	 
program, and its largest international program, the Joint Strike 
Fighter (JSF) has the potential to significantly affect the	 
worldwide defense industrial base. As currently planned, it will 
cost an estimated $245 billion for DOD to develop and procure	 
about 2,400 JSF aircraft and related support equipment by 2027.  
In addition, the program expects international sales of 2,000 to 
3,500 aircraft. If the JSF comes to dominate the market for	 
tactical aircraft as DOD expects, companies that are not part of 
the program could see their tactical aircraft business decline.  
Although full rate production of the JSF is not projected to	 
start until 2013, contracts awarded at this point in the program 
will provide the basis for future awards. GAO was asked to	 
determine the limits on and extent of foreign involvement in the 
JSF supplier base. To do this, GAO (1) determined how the Buy	 
American Act and the Preference for Domestic Specialty Metals	 
clause apply to the JSF development phase and the extent of	 
foreign subcontracting on the program and (2) identified the data
available to the JSF Program Office to manage its supplier base, 
including information on suppliers of critical technologies. DOD 
provided technical comments on a draft of this report, which GAO 
incorporated as appropriate.					 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-04-554 					        
    ACCNO:   A09901						        
  TITLE:     Joint Strike Fighter Acquisition: Observations on the    
Supplier Base							 
     DATE:   05/03/2004 
  SUBJECT:   Buy national policy				 
	     Defense capabilities				 
	     Defense procurement				 
	     Fighter aircraft					 
	     Military aircraft					 
	     Program evaluation 				 
	     Subcontracts					 
	     Joint Strike Fighter				 

******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO Product.                                                 **
**                                                              **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced.  Tables are included, but    **
** may not resemble those in the printed version.               **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
******************************************************************
GAO-04-554

                    United States General Accounting Office

GAO

Report to the Chairman,

             Committee on Small Business, House of Representatives

May 2004

JOINT STRIKE FIGHTER ACQUISITION

                       Observations on the Supplier Base

GAO-04-554

May 2004

JOINT STRIKE FIGHTER ACQUISITION

Observations on the Supplier Base

The Buy American Act and Preference for Domestic Specialty Metals clause
implementing Berry Amendment provisions apply to the government's purchase
of manufactured end products for the JSF program. Currently, only one of
the three JSF prime contractors is under contract to deliver manufactured
end products to the government in this phase of the program. The Buy
American Act will apply to manufactured end products delivered to DOD
during subsequent phases, but it will have little impact on the selection
of suppliers because of DOD's use of the law's public interest exception.
DOD, using this exception, has determined that it would be inconsistent
with the public interest to apply domestic preference restrictions to
countries that have signed reciprocal procurement agreements with the
department. All of the JSF partners have signed such agreements. DOD must
also apply the Preference for Domestic Specialty Metals clause to articles
delivered under JSF contracts. All three prime contractors have indicated
that they will meet these Specialty Metals requirements.

While the JSF Program Office maintains more information on subcontractors
than required by acquisition regulations, this information does not
provide the program with a complete picture of the supplier base. The
program office collects data on subcontract awards for international
suppliers and U.S. small businesses. In addition, it maintains lists of
the companies responsible for developing key or critical technologies.
However, the lists do not provide visibility into the lower-tier
subcontracts that have been issued for developing or supplying these
technologies.

JSF Development Phase Subcontract Awards to the United States and Other
Partner and Nonpartner Countries

Countries Subcontract awards Percentage

United States $10,361,670,423 73.9

Partner countries: $3,620,103,309 25.8 United Kingdom, Italy, Netherlands,
Turkey, Australia, Norway, Denmark, Canada

               Nonpartner countries:             $44,586,392          0.3 
          France, Germany, India, Israel,                        
        Poland, Russia, Spain, Switzerland                       
             Total subcontract awards         $14,026,360,123a      100.0 

Highlights of GAO-04-554, a report to the Chairman, Committee on Small
Business, House of Representatives

As the Department of Defense's (DOD) most expensive aircraft program, and
its largest international program, the Joint Strike Fighter (JSF) has the
potential to significantly affect the worldwide defense industrial base.
As currently planned, it will cost an estimated $245 billion for DOD to
develop and procure about 2,400 JSF aircraft and related support equipment
by 2027. In addition, the program expects international sales of 2,000 to
3,500 aircraft. If the JSF comes to dominate the market for tactical
aircraft as DOD expects, companies that are not part of the program could
see their tactical aircraft business decline. Although full rate
production of the JSF is not projected to start until 2013, contracts
awarded at this point in the program will provide the basis for future
awards.

GAO was asked to determine the limits on and extent of foreign involvement
in the JSF supplier base. To do this, GAO (1) determined how the Buy
American Act and the Preference for Domestic Specialty Metals clause apply
to the JSF development phase and the extent of foreign subcontracting on
the program and (2) identified the data available to the JSF Program
Office to manage its supplier base, including information on suppliers of
critical technologies.

DOD provided technical comments on a draft of this report, which GAO
incorporated as appropriate.

www.gao.gov/cgi-bin/getrpt?GAO-04-554.

To view the full product, including the scope and methodology, click on
the link above. For more information, contact Katherine V. Schinasi at
(202) 512-4841 or [email protected].

Sources: JSF prime contractors-Lockheed Martin, Pratt & Whitney, and
General Electric-and their self-identified teammates-BAE Systems, Northrop
Grumman, Rolls Royce plc, Hamilton Sundstrand, and Rolls Royce Corporation
(data); GAO (analysis).

Note: Information is based on subcontracts awarded for the System
Development and Demonstration phase between October 26, 2001 and December
31, 2003. These awards include the first-tier of the JSF supplier base and
portions of the second-tier.

aTotal does not add because of rounding.

Contents

  Letter

Results in Brief
Background
Buy American Act and Specialty Metals Requirements Apply but

Will Have Little Effect on JSF Subcontracting Decisions
JSF Program Office Maintains Subcontract Information on Specific

Areas of Interest
Conclusions
Agency Comments and Our Evaluation
Scope and Methodology

1

2 3

5

9 10 11 11

Appendix I	Joint Strike Fighter Partner Financial Contributions and
Estimated Aircraft Purchases

Appendix II	Joint Strike Fighter System Development and Demonstration
Subcontract Awards

  Tables

Table 1: Joint Strike Fighter Partner Financial Contributions and
Estimated Aircraft Purchases 13
Table 2: JSF Development Phase Subcontract Awards to the United
States, Qualifying Countries, and Nonqualifying Countries 14
Table 3: JSF Development Phase Subcontract Awards to the United
States and Other Partner and Nonpartner Countries 14

  Figure

Figure 1: Example of Specialty Metals Clause Application 8

Abbreviations

DCMA Defense Contract Management Agency
DFARS Defense Federal Acquisition Regulation Supplement
DOD Department of Defense
FAR Federal Acquisition Regulation
GAO General Accounting Office
JSF Joint Strike Fighter

This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. However, because this
work may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this material
separately.

United States General Accounting Office Washington, DC 20548

May 3, 2004

The Honorable Donald A. Manzullo
Chairman
Committee on Small Business
House of Representatives

Dear Mr. Chairman:

As the Department of Defense's (DOD) most expensive aircraft program,
and its largest international program, the Joint Strike Fighter (JSF) has
the
potential to significantly affect the worldwide defense industrial base.
As
currently planned, it will cost an estimated $245 billion for DOD to
develop
and procure about 2,400 JSF aircraft and related support equipment by
2027. In addition, the program expects international sales of 2,000 to
3,500 aircraft. If the JSF comes to dominate the market for tactical
aircraft
as DOD expects, companies that are not part of the program could see
their tactical aircraft business decline. Although full-rate production of
the
JSF is not projected to start until 2013, contracts awarded at this point
in
the program will provide the basis for future awards, if companies
continue to meet cost and schedule goals.

The JSF program is viewed by many within DOD as a model for
cooperative development and production between DOD and U.S. allies.
The eight foreign countries participating in the program are contributing
over $4.5 billion in the development phase. These countries expect to
realize a significant return on their investment in the form of JSF
contract
awards to their defense industries. To meet these expectations, the JSF
program office has encouraged the three JSF prime contractors-
Lockheed Martin, Pratt & Whitney, and General Electric-and their
suppliers to provide opportunities for companies from partner countries to
bid on contracts. In our July 2003 report on the JSF international
program,
we recommended that the program office collect and monitor information
on the prime contractors' selection and management of suppliers to

identify and address any potential conflicts between partner expectations
and program goals.1

In July 2003 you requested that we review the extent of foreign supplier
involvement in the JSF program and its effect on the U.S. defense
industrial base. To do this, we (1) determined how the Buy American Act2
and the Preference for Domestic Specialty Metals clause3 implementing
Berry Amendment4 provisions apply to the development phase of the JSF
program and the extent of foreign subcontracting on the program; and (2)
identified the data available to the JSF Program Office to manage its
supplier base, including information on the suppliers of critical
technologies. On February 12, 2004, we briefed you and your staff on our
work.5 This report summarizes that briefing and provides updated data on
JSF subcontract awards. We performed our review from August 2003 to March
2004 in accordance with generally accepted government auditing standards.

                                Results in Brief

The Buy American Act and Preference for Domestic Specialty Metals clause
implementing Berry Amendment provisions apply to the government's purchase
of manufactured end products for the JSF program. Currently, only one of
three JSF prime contractors is under contract to deliver manufactured end
products to the government in this phase of the program. The Buy American
Act will apply to manufactured end products delivered to DOD during
subsequent phases, but its domestic preference restrictions will have
little impact on the selection of suppliers because of DOD's use of the
law's public interest exception. DOD, using this exception, has determined
that it would be inconsistent with the public interest to apply domestic
preference restrictions to countries that

1 U.S. General Accounting Office, Joint Strike Fighter Acquisition:
Cooperative Program Needs Greater Oversight to Ensure Goals Are Met,
GAO-03-775 (Washington, D.C.: July 21, 2003).

2 41 U.S.C. sections 10a-10d.

3 Defense Federal Acquisition Regulation Supplement (DFARS) 252.225-7014,
Alternate I.

4 10 U.S.C. section 2533a.

5 The February 12 briefing reported on four questions: (1) How do the Buy
American Act and Berry Amendment apply to the development phase of the JSF
program? (2) How does DOD oversee JSF subcontracting? (3) What JSF
subcontracts have been awarded? (4) What foreign technologies are critical
to the JSF program? These four questions have been consolidated into two
objectives for this report.

have signed reciprocal procurement agreements with the department. All of
the JSF partners have signed such agreements. DOD must also apply the
Preference for Domestic Specialty Metals clause to articles delivered
under JSF contracts. All three prime contractors have indicated that they
will meet these Specialty Metals requirements. Although the Buy American
Act will have little impact on the selection of suppliers, the large
majority of subcontracts (in dollar terms) that we obtained data on have
been placed with U.S. firms.

While the JSF program office maintains more information on subcontractors
than is required by acquisition regulations, this information does not
provide the program with a complete picture of the supplier base. The JSF
Program Office collects and maintains data on subcontract awards for two
specific areas of interest-international suppliers and U.S. small
businesses. In addition, the program office maintains lists of the
companies responsible for developing the JSF's key or critical
technologies. The program office is required to compile these lists as
part of its program protection strategy. However, the lists do not provide
visibility into the lower-tier subcontracts that have been issued for
developing or supplying these technologies.

DOD has recognized the need for the JSF Program Office to assume a more
active role in collecting information on and monitoring the prime
contractors' selection of suppliers. The Department concurred with a
recommendation in our July 2003 JSF report that stated this information
could help the program office identify and address potential conflicts
between the international program and other program goals. Increased
visibility into the supplier base could also aid the program office's
management of other areas and provide DOD with the means to monitor the
effects of the JSF program on the defense industrial base.

DOD provided only technical comments on a draft of this report, which we
incorporated as appropriate.

Background 	The JSF program is a joint program between the Air Force,
Navy, and Marine Corps for developing and producing next-generation
fighter aircraft to replace aging inventories. The program is currently in
year 3 of an estimated 11-year development phase. The current estimated
cost for this phase is about $40.5 billion. In October 2001 Lockheed
Martin was

awarded the air system development contract now valued at over
$19 billion.6 Lockheed Martin subsequently awarded multi-billion-dollar
subcontracts to its development teammates-Northrop Grumman and
BAE Systems-for work on the center and aft fuselage, respectively.
Lockheed Martin has also subcontracted for the development of major
subsystems of the aircraft, such as the landing gear system. This is a
departure from past Lockheed Martin aircraft programs, where the
company subcontracted for components (tires, brakes, etc.) and
integrated them into major assemblies and subsystems (the landing
gear system).

In addition to the Lockheed Martin contract, DOD has prime contracts
with both Pratt & Whitney and General Electric to develop two
interchangeable aircraft engines.7 Pratt & Whitney's development contract
is valued at over $4.8 billion. Rolls Royce plc (located in the United
Kingdom) and Hamilton Sundstrand are major subcontractors to Pratt &
Whitney for this effort. General Electric is currently in an early phase
of
development and has a contract valued at $453 million. Rolls Royce
Corporation (located in Indianapolis, Ind.) is a teammate and 40 percent
partner for the General Electric engine program. The General
Electric/Rolls Royce team is expected to receive a follow-on development
contract in fiscal year 2005 worth an estimated $2.3 billion.

All the prime contracts include award fee structures that permit the
JSF Program Office to establish criteria applicable to specific evaluation
periods. If, during its regular monitoring of contract execution,
the program office identifies the need for more emphasis in a certain
area-such as providing opportunities for international suppliers or
reducing aircraft weight-it can establish related criteria against which
the
contractor will be evaluated to determine the extent of its award fee.

6 Lockheed Martin's development contract has been modified multiple times
since it was signed in October 2001. These modifications have increased
the value of the base contract by hundreds of millions of dollars.

7 The F135 (Pratt & Whitney) and F136 (General Electric/Rolls Royce
Corporation) engines integrate with common propulsion system components to
form the complete JSF propulsion systems. In addition to the F135 engine,
Pratt & Whitney is also responsible for developing certain common
propulsion system components that will interface with both engine cores.
These include the lift fan system, roll posts, three bearing swivel duct,
conventional exhaust duct, and exhaust nozzles, among other components.

  Buy American Act
  and Specialty Metals
  Requirements Apply
  but Will Have
  Little Effect on
  JSF Subcontracting
  Decisions

The Buy American Act and Preference for Domestic Specialty Metals clause
implementing Berry Amendment provisions apply to the government's purchase
of manufactured end products for the JSF program. Currently, only one JSF
prime contractor-Pratt & Whitney- will deliver manufactured end products
to the government in this phase of the program. Under its current
contract, Pratt & Whitney is to deliver 20 flight test engines, 10 sets of
common engine hardware, and certain other equipment. The other engine
prime contractor, General Electric, will not deliver manufactured end
products under its current contract. However, its anticipated follow-on
development contract will include the delivery of test engines that will
be subject to Buy American Act and Specialty Metals requirements. Finally,
Lockheed Martin will not deliver any manufactured end products under its
development contract. The company is required to deliver plans, studies,
designs, and data. Lockheed Martin will produce 22 test articles (14
flight test aircraft and 8 ground test articles) during this phase of the
program, but these are not among the items to be delivered.8

Although the Buy American Act will apply to manufactured end products
delivered to DOD during the JSF program, its restrictions will have little
impact on the selection of suppliers because of DOD's use of the law's
public interest exception.9 This exception allows the head of an agency to
determine that applying the domestic preference restrictions would be
inconsistent with the public interest. DOD has determined that countries
that sign reciprocal procurement agreements with the department to promote
defense cooperation and open up defense markets qualify for this
exception.10 The eight JSF partners have all signed these agreements and
are considered "qualifying countries." Under defense acquisition
regulations implementing the Buy American Act, over 50 percent of the cost
of all the components in an end product must be mined, produced, or
manufactured in the United States or "qualifying countries" for a product

8 According to program officials, the 22 test articles acquired under the
Lockheed Martin development contract are government-owned assets in
possession of the contractor. Under a cost-type contract, the government
acquires ownership as it pays the contractor.

9 41 U.S.C. section 10d.

10 "Qualifying countries" include Australia, Belgium, Canada, Denmark,
Egypt, France, Germany, Greece, Israel, Italy, Luxembourg, the
Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, and the
United Kingdom. Acquisitions from Austria and Finland may also be exempted
from the Buy American Act on a case-by-case basis. DFARS 225.872-1.

to qualify as domestic.11 Our analysis of JSF development subcontracts
awarded by prime contractors and their teammates showed that nearly 100
percent of contract dollars awarded by the end of 2003 went to companies
in the United States or qualifying countries. (See appendix II for Joint
Strike Fighter System Development and Demonstration Subcontract Awards to
the United States, Qualifying Countries, and Nonqualifying Countries).

The Preference for Domestic Specialty Metals clause applies to articles
delivered by Lockheed Martin, Pratt & Whitney, and General Electric under
JSF contracts. Generally, this clause requires U.S. or qualifying country
sources for any specialty metals,12 such as titanium, that are
incorporated into articles delivered under the contract. This restriction
must also be included in any subcontract awarded for the program. To meet
Specialty Metals requirements, Lockheed Martin and Pratt & Whitney have
awarded subcontracts to domestic suppliers for titanium; and Lockheed
Martin has also extended to its subcontractors the right to buy titanium
from its domestic supplier at the price negotiated for Lockheed Martin.
General Electric does not exclusively use domestic titanium in its defense
products. However, in 1996, the company received a class deviation from
the clause that allows it to use both domestic and foreign titanium in its
defense products, as long as it buys sufficient domestic quantities to
meet DOD contract requirements.13 For instance, if 25 percent of the
General Electric's business in a given year comes from DOD

11 To comply with the Buy American Act, companies must certify in their
contract proposals that the manufactured end products they are offering to
the U.S. government qualify as domestic end products. To qualify as a
domestic end product, the product must meet two criteria. The end product
must be manufactured in the United States, and the cost of its U.S. and
qualifying country components must exceed 50 percent of the cost of all
its components. DFARS 225.101.

12 Specialty metals are defined as certain metal alloys, steel alloys,
titanium and titanium alloys, and zirconium and zirconium base alloys
produced in the United States, U.S. possessions, or Puerto Rico. U.S.
possessions include American Samoa, the Commonwealth of Northern Mariana
Islands, Guam, and the U.S. Virgin Islands, among other areas.

13 Class deviations are deviations from the Federal Acquisition Regulation
or the Defense Federal Acquisition Regulation Supplement that affect more
than one contract action. FAR 1.404.

contracts, then at least 25 percent of its titanium purchases must be
procured from domestic sources.14

Similar to the Buy American Act, the Specialty Metals clause contains a
provision related to "qualifying country" suppliers. It provides that the
clause does not apply to specialty metals melted in a qualifying country
or incorporated in products or components manufactured in a qualifying
country.15 As a result, a qualifying country subcontractor would have
greater latitude under the clause than a U.S. subcontractor. Specifically,
the specialty metals incorporated into an article manufactured by a
qualifying country may be from any source,16 while an article manufactured
by a U.S. subcontractor must incorporate specialty metals from a domestic
or qualifying country source. (See fig. 1.)

14 According to the Defense Contract Management Agency (DCMA), in granting
this class deviation, it determined that the DFARS specialty metals clause
was more stringent than the statute it implements. DCMA granted this class
deviation on a "permanent" basis and is responsible for monitoring General
Electric's compliance with its terms.

15 These are the same qualifying countries that are mentioned in reference
to the Buy American Act. (See footnote 10.)

16 Potential sources would not include those prohibited under FAR
52.225-13, Restrictions on Certain Foreign Purchases. Such prohibited
sources would include, for example, Cuba and North Korea.

Figure 1: Example of Specialty Metals Clause Application

The data we collected on JSF subcontracts show that by December 31, 2003,
the prime contractors and their teammates had awarded over $14 billion in
subcontracts for the development phase of the program. These subcontracts
were for everything from the development of subsystems-such as radar,
landing gear, and communications systems-to engine hardware, engineering
services, machine tooling, and raw materials. The recipients of these
contracts included suppliers in 16 foreign countries and the United
States; 73.9 percent of the subcontracts by dollar value went to U.S.
companies and 24.2 percent went to companies in the United Kingdom (the
largest foreign financial contributor to the JSF program). (See appendix I
for Joint Strike Fighter Partner Financial Contributions and Estimated
Aircraft Purchases and appendix II for Joint Strike Fighter System
Development

  JSF Program Office Maintains Subcontract Information on Specific Areas of
  Interest

and Demonstration Subcontract Awards). Finally, 2,597 of 4,488
subcontracts or purchase orders we obtained information on went to U.S.
small businesses. Although these businesses received only 2.1 percent of
the total dollar value of the subcontracts awarded, DOD and contractor
officials have indicated that all companies in the development phase are
in good position to receive production contracts, provided that cost and
schedule goals are met.17

The gathering of these data, which most of the contractors have made
available to the JSF Program Office and DCMA, has increased the breadth of
knowledge available to DOD and the program office on the JSF supplier
base. Neither DOD nor the JSF program office previously collected this
information because, according to program officials, this information is
not necessary in order to manage the program. At least one major
subcontractor, on its own initiative, is now separately tracking JSF
subcontracts on a monthly basis.

While the JSF Program Office maintains more information on subcontractors
than required by acquisition regulations, this information does not
provide the program with a complete picture of the supplier base. The JSF
Program Office collects and maintains data on subcontract awards for
specific areas of interest-international suppliers and U.S. small
businesses. The program office has used the award fee process to
incentivize the prime contractors to report on both small business awards
through the third tier and subcontract opportunities and awards to
international suppliers.18 In addition, the program office has some
visibility over certain subcontracts through mechanisms such as monthly
supplier teleconferences, integrated product teams, informal notifications
of subcontract awards, and DCMA reports on the performance of major

17 The JSF Program Office has requested that the prime contractors strive
for 20-30 percent small business participation through the third tier of
the supplier base for the life of the JSF program (including the
development phase and production). This small business participation
percentage is based on "eligible subcontract dollars" and does not include
certain subcontracts, such as those awarded to or awarded by international
suppliers, in its calculations. We included all the subcontracts and
purchase orders we obtained information on in our small business
calculations.

18 This small business reporting includes information on six small
business categories and subcategories-small disadvantaged businesses,
woman-owned small businesses, historically underutilized business zones,
historically black colleges and universities/minority institutions,
veteran-owned small businesses, and service-disabled veteran-owned small
businesses.

suppliers. Finally, the JSF Program Office maintains limited information
on the companies responsible for supplying critical technologies.

The JSF Program Office's information on the suppliers of key or critical
technologies is based on lists that the prime contractors compile as part
of the program protection strategy. These program protection
requirements-not the supplier base-are the focus of DOD's and the JSF
Program Office's approach toward critical technologies. DOD acquisition
regulations require program managers to maintain lists of a program's key
technologies or capabilities to prevent the unauthorized disclosure or
inadvertent transfer of leading-edge technologies and sensitive data or
systems. The lists include the names of key technologies and capabilities,
the reason the technology is sensitive and requires protection, and the
location where the technology resides. The lists do not provide visibility
into the lower-tier subcontracts that have been issued for developing or
supplying these technologies. Given the limited supplier information these
lists provide, the JSF Program Office is aware of two instances where a
foreign company is the developer or supplier of an unclassified critical
technology for the program.19 In both cases, a U.S. company is listed as a
codeveloper of the technology.

The JSF program has the potential to significantly impact the U.S. defense
industrial base. Suppliers chosen during the JSF development phase will
likely remain on the program through production, if they meet cost and
schedule targets, and will reap the benefits of contracts potentially
worth over $100 billion. Therefore, contracts awarded now will likely
affect the future shape of the defense industrial base.

The JSF supplier base information currently maintained by the JSF Program
Office is focused on specific areas of interest and does not provide a
broad view of the industrial base serving the program. In our July 2003
report, we recommended that the JSF Program Office assume a more active
role in collecting information on and monitoring the prime contractors'
selection of suppliers to address potential conflicts between the
international program and other program goals. DOD concurred with our
recommendation, but did not specify how it plans to collect and monitor
this information. Collecting this information will be an important

19 We did not obtain information on classified critical technologies as
part of this review.

  Conclusions

first step for providing DOD with the knowledge base it needs to assess
the impact of the program on the industrial base.

Agency Comments 	We provided DOD a draft of this report for review. DOD
provided only technical comments, which we incorporated as appropriate.

and Our Evaluation Scope and Methodology

To obtain information on the Buy American Act and the Preference for
Domestic Specialty Metals clause implementing Berry Amendment provisions,
we reviewed applicable laws and regulations. We interviewed DOD officials
in the JSF Program Office, the Office of the Deputy Under Secretary of
Defense (Industrial Policy), the Office of the Director of Defense
Procurement and Acquisition Policy, and the Defense Contract Management
Agency to obtain information on the applicability of the Buy American Act
and other domestic source restrictions, critical foreign technologies, and
DOD oversight of subcontracts. We reviewed prime contracts for the JSF
program and met with JSF prime contractors, including Lockheed Martin and
the engine contractors, Pratt & Whitney and General Electric, to discuss
the applicability of the Buy American Act and other domestic source
restrictions and to collect data on first-tier subcontract awards for the
System Development and Demonstration phase. Furthermore, we collected data
on subcontract awards for the JSF System Development and Demonstration
phase from companies that were identified as partners or teammates by
Lockheed Martin, Pratt & Whitney, and General Electric. These companies
included Northrop Grumman, BAE Systems, Rolls Royce plc, Hamilton
Sundstrand, and Rolls Royce Corporation. We did not independently verify
subcontract data but, instead, relied on DCMA's reviews of contractors'
reporting systems to assure data accuracy and completeness. We performed
our review from August 2003 to March 2004 in accordance with generally
accepted government auditing standards.

As arranged with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days
after the date of this report. We will then send copies of this report to
interested congressional committees; the Secretary of Defense; the
Secretaries of the Navy and the Air Force; the Commandant of the Marine
Corps; and the Director, Office of Management and Budget. We will also
make copies available to others upon request. In addition, this report
will be available at no charge on the GAO Web site at http://www.gao.gov.

If you or your staff have any questions regarding this report, please
contact me at (202) 512-4841; or Thomas J. Denomme, Assistant Director, at
202-512-4287. Major contributors to this report were Robert L. Ackley,
Shelby S. Oakley, Sylvia Schatz, and Ronald E. Schwenn.

Sincerely yours,

Katherine V. Schinasi, Managing Director Acquisition and Sourcing
Management

Appendix I: Joint Strike Fighter Partner Financial Contributions and Estimated
Aircraft Purchases

Table 1: Joint Strike Fighter Partner Financial Contributions and
Estimated Aircraft Purchases

                              Dollars in millions

 System development and demonstration Production Partner country Partner level

Financial contributionsa

Percentage of total costs

Projected quantitiesb

Percentage of total quantities

      United Kingdom         Level I        $2,056        5.1         150     
           Italy            Level II        $1,028        2.5         131     
        Netherlands         Level II         $800         2.0         85      
          Turkey            Level III        $175         0.4         100     
         Australia          Level III        $144         0.4         100     
          Norway            Level III        $122         0.3         48      
          Denmark           Level III        $110         0.3         48      
          Canada            Level III        $100         0.2         60      
       Total partner                        $4,535        11.2        722     
       United States                        $35,965       88.8       2,443    

Sources: DOD and JSF Program Office.

aChart values do not reflect nonfinancial contributions from partners.

bPartner quantities are preliminary and were developed for U.S. planning
purposes. The estimates were developed by the United States in
collaboration with partner countries, but no specific national agreements
or arrangements have been established with partner countries for
production; therefore, these projected production quantities are subject
to change.

Appendix II: Joint Strike Fighter System Development and Demonstration
Subcontract Awards

Table 2: JSF Development Phase Subcontract Awards to the United States,
Qualifying Countries, and Nonqualifying Countries

                    Countries Subcontract awards Percentage

United States $10,361,670,423

Qualifying countries: $3,664,193,630

United Kingdom, Italy, Netherlands, Turkey, Australia, Norway, Denmark,
Canada, France, Germany, Israel, Spain, Switzerland

Nonqualifying countries: $496,071 India, Poland, Russia

                Total subcontract awards $14,026,360,123a 100.0

Sources: JSF prime contractors-Lockheed Martin, Pratt & Whitney, and
General Electric-and their self-identified teammates-BAE Systems, Northrop
Grumman, Rolls Royce plc, Hamilton Sundstrand, and Rolls Royce Corporation
(data); GAO (analysis).

Note: Information is based on subcontracts awarded for the System
Development and Demonstration phase between October 26, 2001 and December
31, 2003. These awards include the first-tier of the JSF supplier base and
portions of the second-tier.

aTotal does not add due to rounding.

Table 3: JSF Development Phase Subcontract Awards to the United States and
Other Partner and Nonpartner Countries

                    Countries Subcontract awards Percentage

United States $10,361,670,423

Partner countries: $3,620,103,309

United Kingdom, Italy, Netherlands, Turkey, Australia, Norway, Denmark,
Canada

Nonpartner countries: $44,586,392 France, Germany, India, Israel, Poland,
Russia, Spain, Switzerland

                Total subcontract awards $14,026,360,123a 100.0

Sources: JSF prime contractors-Lockheed Martin, Pratt & Whitney, and
General Electric-and their self-identified teammates-BAE Systems, Northrop
Grumman, Rolls Royce plc, Hamilton Sundstrand, and Rolls Royce Corporation
(data); GAO (analysis).

Note: Information is based on subcontracts awarded for the System
Development and Demonstration phase between October 26, 2001 and December
31, 2003. These awards include the first-tier of the JSF supplier base and
portions of the second-tier.

aTotal does not add due to rounding.

(120275)

  GAO's Mission

Obtaining Copies of GAO Reports and Testimony

The General Accounting Office, the audit, evaluation and investigative arm
of Congress, exists to support Congress in meeting its constitutional
responsibilities and to help improve the performance and accountability of
the federal government for the American people. GAO examines the use of
public funds; evaluates federal programs and policies; and provides
analyses, recommendations, and other assistance to help Congress make
informed oversight, policy, and funding decisions. GAO's commitment to
good government is reflected in its core values of accountability,
integrity, and reliability.

The fastest and easiest way to obtain copies of GAO documents at no cost
is through the Internet. GAO's Web site (www.gao.gov) contains abstracts
and fulltext files of current reports and testimony and an expanding
archive of older products. The Web site features a search engine to help
you locate documents using key words and phrases. You can print these
documents in their entirety, including charts and other graphics.

Each day, GAO issues a list of newly released reports, testimony, and
correspondence. GAO posts this list, known as "Today's Reports," on its
Web site daily. The list contains links to the full-text document files.
To have GAO e-mail this list to you every afternoon, go to www.gao.gov and
select "Subscribe to e-mail alerts" under the "Order GAO Products"
heading.

Order by Mail or Phone 	The first copy of each printed report is free.
Additional copies are $2 each. A check or money order should be made out
to the Superintendent of Documents. GAO also accepts VISA and Mastercard.
Orders for 100 or more copies mailed to a single address are discounted 25
percent. Orders should be sent to:

U.S. General Accounting Office 441 G Street NW, Room LM Washington, D.C.
20548

To order by Phone: 	Voice: (202) 512-6000 TDD: (202) 512-2537 Fax: (202)
512-6061

To Report Fraud,	Contact: Web site: www.gao.gov/fraudnet/fraudnet.htm

  Waste, and Abuse in E-mail: [email protected]

Federal Programs Automated answering system: (800) 424-5454 or (202)
512-7470

Jeff Nelligan, Managing Director, [email protected] (202) 512-4800

Public Affairs 	U.S. General Accounting Office, 441 G Street NW, Room 7149
Washington, D.C. 20548
*** End of document. ***