Joint Strike Fighter: DOD Plans to Enter Production before	 
Testing Demonstrates Acceptable Performance (15-MAR-06, 	 
GAO-06-356).							 
                                                                 
The Joint Strike Fighter (JSF) is DOD's most expensive aircraft  
program. The program represents 90 percent of the remaining	 
planned investment for recapitalizing DOD's aging tactical	 
aircraft fleet. GAO is required by law to review the program	 
annually for 5 years, beginning in fiscal year 2005. This is our 
second report and GAO assessed the program's acquisition	 
approach--in terms of capturing knowledge for key investment	 
decisions--and identified an alternative to improve outcomes.	 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-06-356 					        
    ACCNO:   A49118						        
  TITLE:     Joint Strike Fighter: DOD Plans to Enter Production      
before Testing Demonstrates Acceptable Performance		 
     DATE:   03/15/2006 
  SUBJECT:   Defense procurement				 
	     Fighter aircraft					 
	     Military aircraft					 
	     Operational testing				 
	     Procurement planning				 
	     Product evaluation 				 
	     Program evaluation 				 
	     Tactical air forces				 
	     Concurrent development and production		 
	     B-2 Aircraft					 
	     B-2A Aircraft					 
	     Comanche Helicopter				 
	     Crusader Artillery System				 
	     F-16 Aircraft					 
	     F-22 Aircraft					 
	     F/A-18E/F Aircraft 				 
	     Hornet Aircraft					 
	     Joint Strike Fighter				 
	     Joint Strike Fighter program			 
	     Osprey Aircraft					 
	     Stealth Aircraft					 
	     V-22 Aircraft					 

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GAO-06-356

     

     * Results in Brief
     * Background
     * JSF Acquisition Strategy Will Begin Procurement before Testi
          * Key Testing Events Will Not Be Completed before Significant
               * Initial Procurement Decisions Will Be Made before the Basic
               * Mission Capabilities Will Not Be Tested until 4 Years after
               * Aggressive Software Development Schedule May Cause Delays
          * The Current Acquisition Strategy Requires Prolonged Reliance
     * Evolutionary Acquisition Strategy Provides a Less Risky Alte
          * JSF Program Is Designed to Deliver Full Required Capability
          * Funding Needs Could Increase Given the Level of Risk to Comp
          * An Incremental Development Approach Provides an Alternative
     * Conclusions
     * Matters for Congressional Consideration
     * Recommendations for Executive Action
     * Agency Comments and Our Evaluation
          * Order by Mail or Phone

Report to Congressional Committees

United States Government Accountability Office

GAO

March 2006

JOINT STRIKE FIGHTER

DOD Plans to Enter Production before Testing Demonstrates Acceptable
Performance

Joint Strike Fighter Acquisition 

GAO-06-356

Contents

Letter 1

Results in Brief 2
Background 4
JSF Acquisition Strategy Will Begin Procurement before Testing
Demonstrates the Aircraft's Performance 6
Evolutionary Acquisition Strategy Provides a Less Risky Alternative for
the JSF Program 13
Conclusions 22
Matters for Congressional Consideration 23
Recommendations for Executive Action 24
Agency Comments and Our Evaluation 24
Appendix I Scope and Methodology 29
Appendix II Changes in JSF Program Purchase Quantities and Costs 31
Appendix III Comments from the Department of Defense 32

Table

Table 1: Military Services' Planned Use for the Joint Strike Fighter 5

Figures

Figure 1: Overlap of Low-Rate Initial Production Investments and Testing
Demonstrations of the JSF Variants 9
Figure 2: JSF Program Acquisition 14
Figure 3: JSF's Annual Funding Requirements, as of December 2004 16
Figure 4: F-16 Incremental Development Approach 18
Figure 5: Planned JSF Blocks 19
Figure 6: Potential Application of an Incremental Development Approach to
the JSF Program 21

Abbreviations

DOD Department of Defense

JSF Joint Strike Fighter

OSD Office of the Secretary of Defense

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separately.

United States Government Accountability Office

Washington, DC 20548

March 15, 2006

Congressional Committees

Since the Joint Strike Fighter (JSF) program began in 1996, Congress has
appropriated nearly $25 billion for its development. It is the Department
of Defense's (DOD) most expensive aircraft acquisition program. As the
program is currently planned, DOD estimates it will spend $257 billion to
develop and procure about 2,443 aircraft and related support equipment by
2027 and an additional $347 billion to operate and support these aircraft
once they have been fielded.

JSF program goals are to develop and field a family of stealthy, strike
fighter aircraft for the Navy, Air Force, and Marine Corps, and United
States allies. Design plans call for three variants of the aircraft, but
the program aims to provide maximum commonality to minimize life cycle
costs. JSF is a central part of DOD's overall recapitalization strategy
for its tactical aircraft fleet, representing 90 percent of the remaining
planned investment for its major tactical aircraft programs. How DOD
manages the JSF program in the future will be critical for getting the
most out of this remaining large investment and for success in replacing
the aging fleet of tactical aircraft.

The Ronald W. Reagan National Defense Authorization Act for Fiscal Year
2005 (P.L. 108-375) requires GAO to review the JSF program annually for 5
years.1 In March 2005, we reported the JSF's original business case was
unexecutable and recommended that DOD establish an executable program
consistent with best practices and DOD policy regarding evolutionary
acquisitions.2 We also recommended that this new business case be
accompanied by a knowledge-based acquisition approach 3-an approach that
ensures attainment and use of demonstrated product knowledge before making
future investments. In commenting on our report, DOD stated that JSF's
restructured acquisition plan would incorporate a knowledge-based,
evolutionary approach consistent with DOD policy. This is our second
report. Specifically, we (1) determined whether the JSF program
acquisition strategy captures critical knowledge in time to make
production investment decisions and (2) identified an alternative to the
current acquisition strategy to improve JSF program outcomes.

1Section 213 of the act requires us to assess the extent to which the
system development and demonstration program is currently meeting key
cost, schedule, and performance goals; the likelihood that the program
will be completed within estimated costs; and the program's current
acquisition plan leading to production.

2GAO, Tactical Aircraft: Opportunity to Reduce Risks in Joint Strike
Fighter Program with Different Acquisition Strategy, GAO-05-271
(Washington, D.C.: Mar. 15, 2005).

The act also requires us to certify whether we had access to sufficient
information to make informed judgments on the matters contained in our
report. We were provided sufficient information to assess the plans to
capture technology, design, and manufacturing knowledge for the three JSF
variants, the evolutionary nature of the acquisition strategy, and the
opportunities to improve outcomes. At the time of our review, the Office
of the Secretary of Defense (OSD) was still preparing its fiscal year 2007
budget request as well as conducting its independent assessment of the
program cost estimate, which is not expected to be completed until
sometime in 2006. Additionally, the Quadrennial Defense Review was ongoing
during our review, and we did not have insights into the potential
outcomes or how the results of the study might affect the JSF program. We
performed our work from June 2005 through March 2006 in accordance with
generally accepted government auditing standards. For more on our scope
and methodology, see appendix I.

                                Results in Brief

Despite recent program restructuring, the JSF program continues to base
its acquisition strategy on a highly concurrent approach that makes
significant investments in manufacturing capabilities and production
aircraft before flight testing demonstrates the JSF's performance. As a
result, significant development risk remains, and it is likely that
current cost and schedule goals will not be met. The program plans to
proceed into low-rate initial production in 2007 with inadequate testing
to prove a mature design for any of the three basic JSF variant airframes,
without developing critical software, or without a fully integrated
aircraft with advanced mission systems and prognostic maintenance
capabilities. All three production representative variants4 will not be in
flight testing until 2009, and a fully configured, integrated development
aircraft will not begin flight testing until 2011-4 years after production
begins. By this time, DOD plans to have ordered 190 aircraft at a cost of
about $26 billion. By 2013, when initial operational testing is expected
to be complete, the program plans to have procured 424 aircraft at an
expected cost of $49 billion. Because it will lack necessary technology,
design, and performance knowledge, DOD plans to procure early production
aircraft using cost-reimbursable-type contracts. This type of contract
places a significantly greater cost risk on DOD.

3A business case provides demonstrated evidence that (1) the warfighter
need exists and that it can best be met with the chosen concept and (2)
the concept can be developed and produced within existing
resources-including proven technologies, design knowledge, adequate
funding, and adequate time to deliver the product when needed.
Establishing a business case calls for a realistic assessment of risks and
costs; doing otherwise undermines the intent of the business case and
invites failure.

DOD has revised its acquisition policy to embrace evolutionary
acquisition, allowing managers to develop and evolve a product through
small, time-phased development increments-an alternative still available
to the JSF program. Instead of establishing time-phased requirements for
aircraft to be delivered in sequence that could first meet DOD's need to
recapitalize its aging fleet of aircraft and then evolve the aircraft to
eventually achieve improved capabilities in future increments, DOD chose a
single-step approach to develop and deliver the JSF with ultimate
capabilities in a single 12-year system development program. The large
amount of uncertainty in this approach has already led to poor cost and
schedule estimates for the JSF program and a reduction in DOD's buying
power. The length and scope of work remaining continue to make it
difficult to predict the cost and time needed to complete the program. The
Air Force's JSF predecessor, the F-16 Fighter program, provides a model
for a less risky alternative JSF acquisition strategy that delivers
weapons to the warfighter more quickly and that recapitalizes tactical
aircraft forces sooner. The F-16 program successfully delivered 2,200
aircraft with incremental improvements as technology became available over
the span of about 30 years. An initial F-16 capability was delivered to
the warfighter within about 4 years after development began and
substantial quantities were purchased with each increment to meet
warfighter needs, including the replacement of aging legacy tactical
fighter aircraft.

4A production representative aircraft is one that is built using
production-like tooling and methods and using production workers and is of
the design expected be built to satisfy the requirements of the
warfighter. Flight-testing a production representative prototype that
incorporates all critical software is the primary method to capture key
design knowledge that indicates the system will work as planned, is
reliable, and is ready for production. The higher the percentage of
testing completed, the lower the risk of investing in production.

To improve the chances for a successful outcome, we are recommending the
JSF program delay production and investments in production capability
until the aircraft design qualities and integrated mission capabilities of
the fully configured and integrated JSF aircraft variants have been proven
to work in flight testing. We are also recommending the Secretary of
Defense report to the Congress by July 2006 on the feasibility of an
incremental acquisition approach that follows the intent of DOD
evolutionary acquisition policy and delivers a first increment that limits
new content to proven technologies and design.

DOD partially concurred with our recommendations stating that the current
JSF acquisition strategy and management practices will be able to achieve
the objectives of our recommendations, and therefore, further limits on
production are unnecessary. DOD also stated that the program's strategy
balances technical risk, financial resources, and operational needs to
reduce program risk and is based on a knowledge-based, incremental
approach. We continue to believe DOD's planned strategy to make
significant investments in production concurrent with testing is very
risky and is similar to strategies of past programs with poor outcomes. We
believe that DOD has an opportunity to reduce risk by adopting an
acquisition strategy based on capturing technology, design, and
manufacturing knowledge. We also believe that smaller, more manageable
commitments in capabilities would make JSF program cost and schedule more
predictable and deliver needed capabilities to the warfighter sooner.
Because DOD does not plan to make changes as a result of our
recommendations, we believe Congress should consider delaying
authorizations and appropriations for JSF procurement until DOD develops a
new business case and demonstrates the aircraft design qualities and
integrated mission capabilities of the fully configured and integrated JSF
variants work as designed based on actual flight testing.

                                   Background

JSF is a joint, multinational acquisition program for the Air Force, Navy,
Marine Corps, and eight cooperative international partners. The program
began in November 1996 with a 5-year competition between Lockheed Martin
and Boeing to determine the most capable and affordable preliminary
aircraft design. Lockheed Martin won the competition, and the program
entered system development and demonstration in October 2001.

DOD has set major expectations for the program. The program's objective is
to develop and deploy a technically superior and affordable fleet of
aircraft that support the warfighter in performing a wide range of
missions in a variety of theaters. The single-seat, single-engine aircraft
is being designed to be self-sufficient or part of a multisystem and
multiservice operation, and to rapidly transition between air-to-surface
and air-to-air missions while still airborne. To achieve its mission, JSF
will incorporate low observable technologies, defensive avionics, advanced
onboard and offboard sensor fusion,5 internal and external weapons, and
advanced prognostic maintenance capability. According to DOD, these
technologies represent a quantum leap over legacy tactical aircraft
capabilities. At the same time, the JSF aircraft design includes three
variants: a conventional takeoff and landing variant for the Air Force; an
aircraft carrier-suitable variant for the Navy; and a short takeoff and
vertical landing variant for the Marine Corps, the Air Force, and the
United Kingdom. JSF is intended to replace a substantial number of aging
fighter and attack aircraft in DOD's current inventory (see table 1).

Table 1: Military Services' Planned Use for the Joint Strike Fighter

Service      Planned use                                             
Air Force    Replacement for the F-16 and A-10; complement the F-22A 
Marine Corps Replacement for the AV-8B and F/A-18 A/C/D              
Navy         Complement the F/A-18 E/F                               

Source: DOD data.

In recent years, DOD has revised its acquisition policy to embrace an
evolutionary, or incremental, approach to improve program outcomes. The
acquisition policy states evolutionary acquisition is the preferred DOD
strategy for rapid acquisition of mature technology for the user by
delivering capability in increments, recognizing up front the need for
future capability improvements. The objective is to balance needs with
resources in order to put capability into the hands of the warfighter more
quickly. The policy states that a product enters system development and
demonstration when an affordable increment of militarily useful capability
has been identified, technology has been demonstrated in a relevant
environment, and a system can be developed for production in a short time
frame (normally less than 5 years). Each increment of an evolutionary
acquisition will have its own decision milestones and baseline-cost,
schedule, and performance requirements. In commenting on our March 2005
JSF report, DOD stated that JSF's restructured acquisition plan would
balance technical, cost, and schedule risk and incorporate a
knowledge-based, evolutionary approach to system acquisition consistent
with DOD policy.

5Sensor fusion is the ability to take information from both multiple
onboard and offboard aircraft sensors and display the information in an
easy-to-use format for the pilot. It is vitally important, because the JSF
is a single-seat aircraft, and the pilot needs support to carry out
multiple types of missions.

JSF Acquisition Strategy Will Begin Procurement before Testing Demonstrates the
                             Aircraft's Performance

DOD's acquisition strategy for JSF has not substantially changed as a
result of the program's restructuring last year. In May 2005, DOD
leadership approved the program's plan, which intends to start production
in 2007-more than 2 years before all three JSF variants have completed
some flight testing of the aircraft's basic design, 4 years before a fully
configured and integrated aircraft is expected to be flight tested, and 6
years before development and initial operational testing are scheduled to
be completed.6 Before development has ended, DOD will have potentially
signed procurement contracts for 424 JSF aircraft at an estimated cost of
$49 billion. Starting production before ensuring the design is mature
through flight testing significantly increases the risk of costly design
changes that will push the program over budget and behind schedule.
Evidence of the risk associated with concurrently developing, testing, and
producing the JSF aircraft can be seen in the program office strategy to
place initial production orders on a cost reimbursement contract, placing
an unusually high risk burden on the government during the early
production phase.

Key Testing Events Will Not Be Completed before Significant Procurement
Investments Are Made

The JSF program plans to begin low-rate initial production of the aircraft
before many of JSF's technology advances and basic flying qualities are
flight-tested and to produce substantial quantities of aircraft before
initial operational testing is completed. According to JSF program plans,
DOD's low-rate initial production quantities will increase from 5 aircraft
a year in 2007 to 133 a year, before development and initial operational
testing are completed in 2013.7 This production rate will require DOD to
invest significantly in tooling, facilities, and personnel. Initial
contractor cost estimates indicate that close to $1 billion of new tooling
will be needed to support low-rate initial production rates. Early
contractor data also show that the program will need to double its
manufacturing workforce by 2008 and will need six times the number of
manufacturing personnel before low-rate initial production ends. Total
monthly spending for production activities in 2013 is expected to approach
$1 billion, a significant increase from $100 million a month when
production is scheduled to begin in 2007.

6Initial operational testing consists of field tests intended to
demonstrate a system's effectiveness and suitability for military use.

7These figures do not include the potential for orders for international
partners during low-rate initial production. Preliminary data indicate
that these orders could significantly increase this rate.

The cost of discovering design problems during production could be
significant if testing shows that large, structural components of the
aircraft require modifications. Design changes needed in one variant could
also ripple through the other two variants, reducing efficiencies
necessary to lower production and operational costs with common parts and
manufacturing processes for the three variants. Some industry officials
have indicated that the cost of design changes such as these could be 10
to 1,000 times greater, depending on how far the product has progressed
into production.

When the JSF program is expected to begin low-rate initial production in
2007,8 the program will have completed less than 1 percent of the flight
test program and none of the three JSF variants will have a production
representative prototype built and in flight testing. Features critical to
JSF's operational success, such as the low-observable and highly common
airframe and the advanced mission systems, will not have been demonstrated
in a flight test environment. The program plans to proceed into low-rate
initial production without demonstrating that (1) the aircraft's flying
qualities function within the parameters of the flight envelope-that is,
the set limits for altitude, speed, and angles of attack; (2) the aircraft
design is reliable; or (3) a fully integrated and capable aircraft system
can perform as intended. These are key indicators of a program's readiness
for entering production and making significant investments in tooling,
facilities, and materials. When the first fully integrated and capable
development JSF is expected to fly, in 2011, DOD will have committed to
buy 190 aircraft at an estimated cost of $26 billion under current plans.
By the time testing is planned to be completed, in 2013, DOD will have
procured more than double that amount-424 aircraft at an estimated cost of
about $49 billion. Figure 1 shows the significant overlap in development
and testing and the major investments in production capability and
aircraft that inject additional cost and delivery risks that could delay
delivery of a proven capability to the warfighter.

8DOD policy contains three critical milestone decision points in its
acquisition process. One of these, referred to as milestone C, authorizes
entry into low-rate initial production. However, the JSF program is
deviating from that milestone framework and has delayed this critical
milestone decision point to the full-rate production decision point in
2013-more than 6 years after entering low-rate initial production. This
delay compromises the controls expected in the DOD acquisition policy for
the start of production.

Figure 1: Overlap of Low-Rate Initial Production Investments and Testing
Demonstrations of the JSF Variants

aFlight testing data reflect the percentage of the total flight tests
completed at the time of the planned investment decision, which is
currently planned for January of each year.

Under the current schedule, the JSF program plans to manufacture and
deliver 15 flight test aircraft and 7 ground test (nonflying) articles in
5 years-an aggressive schedule when compared with schedules of other
programs with fewer variables. Current JSF schedules are already showing
delivery of early test aircraft could be later than the planned delivery
date. Unplanned manufacturing and technical problems can delay the
completion of a flight test program, increase the number of flight test
hours needed to verify that the system will work as intended, and affect
when key knowledge will be available for making investment decisions. For
example, when the B-2 program began flight testing in July 1989, it
estimated that the flight test program would last approximately 4.5 years
and require about 3,600 flight test hours. When the test program ended in
1997, the flight test hours had grown to 5,000 hours, or by 40 percent,
over an 8-year period. Program officials cited several causes, including
difficulties in manufacturing test aircraft and correcting deficiencies
from unanticipated problems discovered during testing. The F-22A
encountered similar delays, increasing a planned 4-year flight test
program to about 8 years and affecting the program's ability to conduct
operational testing and move into production on schedule.

  Initial Procurement Decisions Will Be Made before the Basic Aircraft Design Is
  Demonstrated

While each JSF variant is similar-all are being designed to have stealth
airframes, fly at supersonic speeds, shoot air-to-air missiles, and drop
bombs on a target-there are subtle airframe design differences to support
the services' different operational concepts and environments. Test
officials acknowledge that each airframe variant will require flight
testing to demonstrate that each will fly as intended. Yet at the time the
JSF program expects to begin low-rate initial production, only 1 of 15
flight test aircraft is expected to have started testing. Further, the
aircraft's test flights are not scheduled to begin until August 2006, less
than 6 months before the planned decision to begin low-rate initial
production,9 and will not assess the aircraft in more demanding
operational environments, such as high angles of attack. Moreover, the
first flight test aircraft will not include a large number of design
changes that resulted from an effort to significantly reduce aircraft
weight over the past 2 years and, therefore, will not represent the
planned production configuration. The first demonstration of a production
representative airframe that includes the latest design changes is
scheduled for late 2007-after production has been initiated-with first
flight of the short takeoff and vertical landing variant.

9During this approximately 6-month period of initial tests, which includes
about 30 planned flights, the program intends to demonstrate the
aircraft's flight qualities in limited flight conditions, takeoff and
landing, and initial air refueling. However, recent program data indicate
that the first flight may be delayed until October 2006, reducing the
number of flights that may be completed before the production decision.

All three variants will not be in flight testing until 2009, when the
carrier variant is expected to have its first flight. Several key test
events identified by the contractor to demonstrate the flight
characteristics of these aircraft in the intended operational environment
are not scheduled until 2009 or later. These include shipboard operations
for the carrier and short takeoff and vertical landing variants. According
to the contractor, the full-flight envelope for all three variants will
not be fully demonstrated until 2011 or 2012-4 to 5 years after low-rate
initial production is scheduled to begin.

According to DOD, modeling and simulation will be used to evaluate the
performance of the aircraft's flying qualities and to support decisions to
invest in production. However, the Rand Corporation recently reported in a
study on testing and evaluation that modeling is not a substitute for
flight testing.10 Rand found that even in performance areas that are well
understood, it is not unusual for flight testing to uncover problems that
were not apparent in simulations. Examples include flight effects on the
wing of the F/A-18 EF and buffeting of stores externally carried on
various aircraft when flown in certain conditions. Additionally, OSD
testing officials indicated that flight testing of each variant is
necessary to demonstrate designed capabilities. Our past work has found
that flying quality problems were identified during actual flight testing
on programs like the F-22A, B-2A, and V-22.

Finally, two major ground tests of the airframe's structural
integrity-fatigue and static testing-will be in their very early stages or
not have started when production begins. Fatigue testing, which measures
the aircraft's durability over its expected life, is slated to begin in
2008 with testing to show structural fatigue over one lifetime of flying
to be completed in 2009 and a second lifetime completed by 2010. Fatigue
testing uses actual JSF airframe structures that are subjected to the
long-term stresses expected over the aircraft's life. Standards require
this testing to be done to represent the stresses expected over two
lifetimes. Static testing, which measures the aircraft's ability to
withstand the stresses expected to be encountered throughout the
aircraft's flight regime, is slated to begin in 2007 and last through
2009. These tests are important to reduce the risk of structural problems
emerging during production or after aircraft are fielded.

10Rand Corporation, Test and Evaluation Trends and Costs for Aircraft and
Guided Weapons (Santa Monica, California, 2004).

  Mission Capabilities Will Not Be Tested until 4 Years after Procurement Has
  Begun

In addition to late design testing, many of the mission systems planned
for JSF will not be available for initial flight testing either. Although
laboratory tests are under way, DOD does not plan to flight-test several
of the new technologies needed for the JSF to perform its intended
missions until 2009 at the earliest. Defense Operational Test and
Evaluation officials have stated that flight-testing capabilities in a
production representative test aircraft and in the operational environment
planned for the new system are important to reducing risk. This actual
environment differs from what can be demonstrated in a laboratory and has
historically identified unexpected problems. For example, the F-22A
software worked as expected in the laboratory, but when tested in the
aircraft, significant problems were identified. These problems delayed
testing and the delivery of a proven capability. The different levels of
mission capability will be tested in JSF aircraft as follows.

           o  Block 1, an initial air interdiction capability, is scheduled
           to begin testing in 2009, with initial operational testing
           scheduled for 2011-4 years after DOD plans to begin production.

           o  Block 2, an improved air interdiction and close air support
           capability, is scheduled to begin testing in 2010, with initial
           operational testing scheduled for 2012. This block will include
           several critical technologies that are not fully mature, such as
           the advanced missions systems and prognostics and health
           maintenance, but are critical to meeting requirements like sortie
           generation and mission capabilities.

           o  Block 3, the fully integrated and capable JSF, is scheduled to
           begin testing in 2011. At this time less than 50 percent of the
           planned mission capability testing will have been completed. This
           is close to the same point that the F-22A and other past programs
           experienced difficulties integrating all the complex software and
           hardware components into the aircraft. Flight testing to evaluate
           the effectiveness and suitability of the fully integrated system
           is expected to continue until the full-rate decision in late 2013.

  Aggressive Software Development Schedule May Cause Delays

JSF's expected performance is largely dependent on demonstrating software
that supports vehicle, mission system, and other capabilities. The program
plans to develop over 19 million lines of code-substantially more than the
lines of code needed for the F-22A. The software is planned to be
developed in five blocks. The first block is scheduled for completion in
2006, and the last block is scheduled for completion in 2011. At the time
the program enters low-rate initial production, the program will have
completed less than 35 percent of the software needed for the system's
functionality. Past programs have encountered difficulties in developing
software, delaying flight test schedules. Data provided by the program
office indicate that the program is already showing early signs of falling
behind its software delivery schedule. JSF program officials recognize the
risk associated with this large software effort.

The Current Acquisition Strategy Requires Prolonged Reliance on Cost
Reimbursement Contracts That Place an Increased Risk on DOD

According to program officials, the uncertainties inherent in concurrently
developing, testing, and producing the JSF aircraft prevent the pricing of
initial production orders on a fixed price basis. Consequently, the
program office plans to place initial production orders on a cost
reimbursement basis. Cost reimbursement contracts provide for payment of
allowable incurred costs, to the extent prescribed in the contract. Such
contracts are generally used only when the uncertainties involved in
contract performance do not permit costs to be estimated with sufficient
accuracy to use any type of fixed price contract. Cost reimbursement
contracts place substantial risk on the buyer-in this case DOD-because the
contractor's responsibility for performance costs is minimized or reduced.
In contrast, a fixed price contract provides for a pre-established price,
and places more risk and responsibility for costs and resulting profit or
loss on the contractor and provides more incentive for efficient and
economical performance.

The program plans to transition to fixed-price-type contracts once the air
vehicle has a mature design, has been demonstrated in flight test, and is
producible at established cost targets. According to program officials,
this transition will occur sometime before full-rate production begins in
2013. The program office believes the combination of the early concept
development work, the block development approach, and the relatively small
numbers of aircraft in the initial production buys allow decisions to be
made earlier than normal with an acceptable level of risk.

Evolutionary Acquisition Strategy Provides a Less Risky Alternative for the JSF
                                    Program

The JSF acquisition strategy currently plans a single-step approach to
deliver a quantum leap in tactical fighter capability by 2013 and has
already felt the negative cost and schedule impacts from the executing
this approach. The length and scope of the remaining effort in the JSF
program make it even more difficult to accurately estimate cost and
delivery schedules. The JSF funding profile-which requires an average of
$11 billion annually for the next two decades-is also at risk to increase
if costs continue to grow or schedules are further delayed to develop the
ultimate JSF capabilities. An alternative acquisition strategy, such as
used by the F-16 program, that sequences capabilities over time based on
proven technologies and design would reduce risk and deliver aircraft
sooner. This evolutionary approach is actually the preferred approach in
DOD's acquisition policy for acquiring new systems for more rapid delivery
of incremental capabilities to the warfighter.

JSF Program Is Designed to Deliver Full Required Capability in a Single-Step
Development Program

Instead of establishing time-phased requirements for aircraft to be
delivered in sequence that could first meet DOD's need to recapitalize its
aging fleet of aircraft and then evolve the aircraft to eventually achieve
improved capabilities in future system development increments, DOD chose a
single-step development approach to deliver the full required capability
by the end of system development in 2013. That approach is now planned to
last 17 years (5 years in concept development and 12 years in system
development)-including the development of immature, undemonstrated
technologies and will take at least two to three times longer than the
development time of leading commercial firms or that suggested by defense
acquisition policy. The JSF acquisition strategy is shown in figure 2.

Figure 2: JSF Program Acquisition

aThe bar for production is not drawn to scale. JSF production lasts for 20
years.

While JSF's acquisition strategy calls for delivering a small number of
aircraft with limited capabilities, the program has committed to deliver
the full required capability by the end of system development and
demonstration in 2013. For JSF, this includes a set of objectives that
exceeds those of aircraft development programs of the past. JSF will use
cutting-edge technology to fuse data from the aircraft itself and other
sources, from all aspects of the aircraft, and display the information to
the pilot. The aircraft must be able to rapidly transition from ground
attack to air-to-air missions while airborne. JSF also expects advances in
technologies for mission systems, prognostics, and autonomic logistics
support requiring hardware development as well as extensive and complex
software development and integration to have lower cost of ownership than
the legacy aircraft while being able to deploy rapidly, sustain high
mission reliability, and maintain a high sortie generation rate.

Past single-step development programs have been unsuccessful in predicting
acquisition costs and delivery schedules. For example, development costs
for the F-22A fighter, B-2 bomber, Crusader artillery vehicle, and
Comanche helicopter skyrocketed, and production quantities were either
substantially reduced or the program was canceled. Such outcomes are a
poor return on investment and a failure to recapitalize aging legacy
systems. So far the JSF program is experiencing similar results. Since the
program's start, development cost has increased 84 percent, the
development schedule has increased by almost 5 years, and planned delivery
of capabilities to the warfighter has been delayed. DOD now plans to buy
535 fewer aircraft than originally planned. As a result, DOD's buying
power has been significantly reduced-program acquisition unit costs have
increased by 28 percent, or $23 million, since first estimates. See
appendix II for more details on JSF outcomes.

Funding Needs Could Increase Given the Level of Risk to Complete the JSF Program

Despite a lengthy restructuring effort that added over $7 billion and 18
months to the development program, JSF officials have stated that the
restructured program has little or no flexibility for future changes or
unanticipated risks. Furthermore, the length and scope of the remaining
effort make it even more difficult to accurately estimate cost and
completion schedules. While it has been over 9 years since the program
started, the first flight test aircraft still has not been delivered. The
program has planned almost 8 years to complete the remaining activities of
the system development and demonstration phase. These remaining activities
include

           o  fully maturing 7 of the 8 critical technologies;

           o  completing the designs and releasing the engineering drawings
           for all three variants;

           o  manufacturing and delivering 15 flight test aircraft and 7
           ground test articles;

           o  developing 19 million lines of software code; and

           o  completing a 7-year, over 12,000-hour flight test program.

The JSF program's latest planned funding profile for development and
procurement, produced in December 2004, expects annual funding
requirements to hover close to $13 billion in between 2012 and 2022,
peaking at $13.8 billion in 2013. If the program fails to achieve its
current estimated costs, funding challenges could be even greater than
they are today. Thus, even a modest cost increase would have dramatic
impacts on funding. For example, a 10 percent increase in production costs
would amount to over $21 billion (see fig. 3).

Figure 3: JSF's Annual Funding Requirements, as of December 2004

The current cost estimate reflects the position of the JSF program office.
The Office of Secretary of Defense Cost Analysis Improvement Group was to
update its formal independent cost estimate in the spring of 2005, and the
Navy and the Air Force were expected to fully fund the program consistent
with the estimate. The group now does not expect to formally complete its
estimate until the spring of 2006, but its preliminary estimate was
substantially higher than the program office's. According to Cost Analysis
Improvement Group officials, an assessment of the software and mission
systems requirements based on more recent information could further
increase the estimate of JSF costs.

An Incremental Development Approach Provides an Alternative Model for Reducing
JSF Risks

An incremental development approach consistent with DOD's policy on
evolutionary acquisition and best practices has potential to deliver
warfighter capabilities in planned product increments that would increase
JSF capabilities over time. The F-16 fighter program, the Air Force's JSF
predecessor, successfully evolved capabilities over the span of about 30
years, delivering increases of capabilities quickly and often, as
technologies became available. That program may provide a model for a
possible alternative acquisition strategy for the JSF program. Structuring
the program into separate and manageable increments based on what is
achievable now and in the future would allow more predictable cost and
delivery estimates.

Over the past three decades, the Air Force successfully procured more than
2,200 F-16s. The F-16 acquisition approach allowed the timely and
affordable delivery of aircraft and capability to meet the warfighter's
needs, including the recapitalization of aging aircraft. By using an
evolutionary approach to develop the aircraft, the program was able to
quickly deliver new and improved capabilities to the warfighter and
increase the aircraft's capability as new technologies were matured and
added to the aircraft. The first increment, developed during the 1970s,
provided a "day fighter" aircraft with basic air-to-air and air-to-ground
capabilities. This allowed the developer to deliver new and useful
military capability to the warfighter in less than 4 years. With each
subsequent increment, new technology was used to improve the engine,
radar, structure, avionics, and other systems that allow the aircraft
today to perform close air support, ground attack, air defense, and
suppression of enemy defense missions (see fig. 4). The evolutionary
approach also enriched the industrial base capabilities by extending the
life of the production over the length of this incremental approach.

Figure 4: F-16 Incremental Development Approach

Note: This gives the number of aircraft delivered to the U.S. Air Force
only, no foreign military sales or other allied government sales included.

In contrast, JSF's fully configured design represents a quantum leap in
capability that far exceeds the capability of legacy systems that JSF is
intended to replace. While the program is using a block structure-where
each block adds capabilities over the proceeding block-the blocks are part
of a single development effort, and DOD is on contract with the developer
to deliver the warfighter the full capability (see fig. 5). The program's
block structure provides for an escalating capability, but DOD already
plans to buy 95 percent of JSF aircraft with the ultimate capability
(block 3). Unlike the approach used with the F-16, this risky approach
will likely be like past programs that have encountered significant
increases in cost and time, not allowing DOD to quickly recapitalize the
aging legacy aircraft.

Figure 5: Planned JSF Blocks

An evolutionary approach would entail delivering a first product increment
with at least as much capability as currently operating legacy aircraft
with sufficient quantities to allow DOD to retire older planes sooner and
reduce operating inefficiencies. DOD has repeatedly raised concerns about
the age of its fighter aircraft fleet, which was bought largely in the
1970s and 1980s and will need to be replaced around 2010. Delays in
fielding JSF aircraft may increase costs to maintain legacy aircraft to
meet force structure requirements. Limiting development to 5-year
increments or less, as suggested in the DOD acquisition policy, would
force smaller, more manageable commitments in capabilities and make costs
and schedules more predictable. Some of the more challenging JSF
capabilities, such as the advanced mission systems or prognostics
technologies, would be deferred, kept in the technology base (off the
critical path of the JSF program), and added to follow-on increments once
they are demonstrated in the more conducive technology development
environment.11 In addition to considering available resources-including
technology and design knowledge, budget, and time-each increment should be
based on the warfighter's most immediate needs and the number of aircraft
needed to maintain a viable fleet. Figure 6 shows what an incremental
approach might look like for JSF.

11These technologies are not expected to be fully mature until 2011.

Figure 6: Potential Application of an Incremental Development Approach to
the JSF Program

aThe bar for production is not drawn to scale. JSF production lasts for 20
years.

Because an incremental approach would reduce the amount of risk in each
development phase, it would make the program manager and contractor
accountable for a lower-risk system development phase with precise cost
and schedule targets. A shorter system development phase also makes it
more feasible to align a program manager's tenure to the completion of the
phase, holding the program manager accountable for decisions made. It also
would enable the use of fixed-price-type contracts for production that
contains a pricing structure that reduces government risk.

                                  Conclusions

While the JSF program plays a critical role in DOD plans to recapitalize
the services' aging tactical aircraft fleet, DOD's current acquisition
approach for the JSF program continues to be risky and could further
jeopardize meeting this important objective. The JSF program has already
encountered increases to estimated development costs, delays to planned
deliveries, and reductions in the planned number of JSF to be procured
that have eroded DOD's buying power. We believe the current acquisition
strategy to begin production in 2007 is too risky. By committing to
procure large quantities of the aircraft before completing testing that
demonstrates that the design is mature and reliable, DOD has significantly
increased the risk of further compromising its return on investment-as
well as adding more cost and delaying the delivery of critical
capabilities to the warfighter. Also, making sizable investments in
tooling and other manufacturing capability needed to produce JSFs at
higher rates before a fully integrated aircraft is demonstrated in testing
places the program at risk for expensive design changes as testing
uncovers problems. Deferring production decisions until all three
variants' performance has been demonstrated throughout their flight
envelopes and with the full integrated capability would allow additional
time to capture knowledge and help to significantly minimize these risks.

To continue with the current plan to deliver the ultimate JSF capability
will require (1) execution of a 7-year test program without further
schedule delays, (2) development of 5 major blocks of software (19 million
lines of code), and (3) new and yet undemonstrated technologies for
advanced mission systems that must collect, analyze, and synthesize
information from other platforms or sensors not all a part of the JSF
aircraft. These are necessary to ensure the JSF has increased situational
awareness to destroy enemy air defenses and perform deep strike missions
with advanced weapons. The JSF program will also need, annually, an
average of $11 billion of development and procurement funding for the next
two decades.

All of these factors add to the challenges faced by DOD in trying to
manage this highly concurrent program, increasing the risk it will have
the same poor outcomes experienced by similar major acquisition programs
with significant cost and schedule growth and delayed modernization and
recapitalization of aging systems. DOD has an alternative. With 90 percent
of DOD's remaining planned investment in JSF, it can adopt a
knowledge-driven and evolutionary acquisition approach to reduce JSF
program risks, recapitalize its aging tactical air force sooner, and
deliver needed capabilities to the warfighter more quickly. The
experiences of the F-16 program-evolving and improving capabilities over
time while providing the warfighter combat capability-provide a precedent
for this. Requirements for the first increment of JSF under this
evolutionary approach would match a level supported by current knowledge
of technologies and design. This would allow the testing of those reduced
requirements to support a knowledge-based low-rate production decision
sooner and allow delivery of a useful product and in sufficient quantities
to start replacing the aging legacy fighter force. Capabilities that
demand as yet undemonstrated technologies, for example, advanced mission
systems and software, would be included as requirements in subsequent
future JSF aircraft increments-managed as separate development programs-as
technology is demonstrated in the technology base and becomes available.

                    Matters for Congressional Consideration

DOD does not plan to change its business case or acquisition plan for
developing and buying the JSF. Without changes, the acquisition plan will
put at risk $50 billion for procuring JSF aircraft at the same time the
program develops and tests the aircraft's expected performance
capabilities over a 7-year, 12,000 hour flight test program. The JSF
program has continually missed its cost and schedule targets over the 5
years it has been in development. If DOD were to make smaller, more
manageable commitments in capabilities, it would make cost and schedule
more predictable and deliver needed capabilities to the war fighter
sooner. For these reasons, Congress may want to consider delaying
authorizations and appropriations for procuring JSF aircraft until

           1. DOD develops a knowledge-based business case that matches
           requirements with proven technologies and design knowledge and
           available funding. Capabilities that demand technological advances
           not yet demonstrated should be part of future increments that are
           funded and managed separately once demonstrated.
           2. DOD demonstrates the aircraft design qualities and integrated
           mission capabilities of the fully configured and integrated JSF
           variants work as designed based on actual flight testing.

                      Recommendations for Executive Action

We are making the following recommendations to reduce program risk and
increase the likelihood of successful program outcomes by delivering
capabilities to the warfighter when needed and within available resources.
Specifically, we recommend that the Secretary of Defense:

           1. Delay the investment in production aircraft until sufficient
           testing has at least demonstrated the basic airframe design of
           each JSF variant in important parts of the flight envelope,
           including combinations of critical altitudes, speeds, and angles
           of attack.
           2. Once the basic airframe design has been demonstrated, limit
           production quantities to the number of aircraft needed for
           operational testing and that can be produced using the current
           production capability (based on existing tooling, materials, and
           personnel) until a fully integrated aircraft (with advanced
           mission systems and predictive maintenance systems) demonstrates
           through flight testing the required capabilities.
           3. Plan an incremental acquisition strategy that follows the
           intent of DOD evolutionary acquisition policy and delivers a first
           increment that limits new content to proven technologies and
           design. The plan should be completed and reported to the Congress
           by July 2006, and include adjustments in associated programs as
           necessary to maintain needed capabilities.

                       Agency Comments and Our Evaluation

DOD provided us with written comments on a draft of this report. The
comments appear in appendix III.

DOD partially concurred with our recommendation that the Secretary of
Defense delay the investment in production aircraft until sufficient
testing has at least demonstrated the basic airframe design of each JSF
variant in important parts of the flight envelope, including combinations
of critical altitudes, speeds, and angles of attack. DOD agreed that a
knowledge-based approach is critical to making prudent decisions and that
this type of approach is being used by JSF. However, DOD's response did
not provide a plan of action to show how it will ensure flight testing
demonstrates acceptable performance before significant production
investments are made. In the past, Congress has raised concerns about the
costly outcomes of highly concurrent development and production efforts
that are not "flying before buying." DOD points out that the JSF program
is in its fifth year of a 12-year development, but starting production
with nearly 7 years of development and testing remaining leaves a high
probability that, because it is not flying before buying, it will incur
costly design changes and delay getting capability to the warfighter.
Until there has been testing to demonstrate that all three variants will
work as intended, we believe entering production in 2007 places financial
investments at significant risk. The risk increases as spending for
production goes from about $100 million a month in 2007 to over $500
million a month just 2 years later.

DOD partially concurred with our recommendation to the Secretary of
Defense to limit production quantities to the number of aircraft needed
for operational testing and that can be produced using the current
production capability until a fully integrated aircraft demonstrates the
required capabilities through flight testing. DOD stated it is limiting
production until aircraft capabilities are fully demonstrated and that
further limits are not necessary. It stated that various program reviews
to assess performance, including test objectives, are conducted to ensure
associated program risks are understood and mitigated. We believe DOD's
plan to invest almost $50 billion to buy over 400 aircraft concurrent with
testing is very risky. Significant efforts remain in the JSF program to
demonstrate the aircraft will perform as expected. A number of major DOD
acquisition programs have employed highly concurrent acquisition
strategies in the past and experienced significant cost increases and
schedule delays. DOD stated its use of modeling and simulation and
laboratory testing reduces risk. However, DOD operational test officials
have stated that demonstrations need to occur in the actual aircraft in an
operational environment to verify that the system works as intended. For
example, the F-22A avionics software performed successfully in the
laboratory but experienced significant problems that delayed the program
and increased costs once it entered actual flight testing in the F-22A
aircraft. JSF software and advanced electronics are more complex than the
F-22A's. While DOD believes it can manage program risk by holding regular
program reviews, DOD's own experience has shown this approach is not
effective. Accepting and managing risk instead of capturing technology,
design, and manufacturing knowledge, as suggested in DOD policy, has made
it difficult for DOD to make informed decisions at key points.

DOD partially concurred with our recommendation to the Secretary of
Defense to plan an incremental acquisition strategy that follows the
intent of DOD evolutionary acquisition policy and delivers a first
increment that limits new content to proven technologies and design and to
report this plan to Congress by July 2006. It stated the JSF Acquisition
Strategy fully complies with policy and is a knowledge-based, incremental
approach that includes three blocks of increasing degrees of warfighter
capability. We believe DOD's strategy does not provide the benefits of an
evolutionary approach, as suggested by DOD's policy and best practices. In
commenting on our report, DOD did not address the salient points
concerning the true significance of adopting an incremental acquisition
approach-reducing program risk, delivering needed capabilities to the
warfighter quicker, and recapitalizing the aging tactical aircraft fleet
sooner. The JSF strategy resembles other past major acquisition programs
that have attempted to achieve the ultimate capability in a single
development increment, producing nearly all of the fleet with the fully
required capability from the outset. DOD has allowed technology
development to spill over into product development, weakening the
foundation for program cost or schedule estimates. This has led to
disastrous outcomes for other major acquisition programs in the past. We
continue to believe the successful F-16 program can serve as a model for
the JSF program. The F-16 program evolved capabilities over a 30-year
period, buying substantial quantities of each increment in order to
recapitalize aging tactical aircraft and provide new capabilities to the
warfighter more quickly. If DOD were to make smaller, more manageable
commitments in capabilities, it would make cost and schedule more
predictable and deliver needed capabilities to the warfighter sooner.

We are sending copies of this report to the Secretary of Defense; the
Secretaries of the Air Force, Army, and Navy; and the Director of the
Office of Management and Budget. We will also provide copies to others on
request. In addition, the 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 concerning this report, please
contact me at (202) 512-4841. Contact points for our offices of
Congressional Relations and Public Affairs may be found on the last page
of this report. Other staff making key contributions to this report were
Michael Hazard, Assistant Director; Lily Chin; Matthew Drerup; Matthew
Lea; Gary Middleton; Karen Sloan; and Adam Vodraska.

Michael J. Sullivan Director Acquisition and Sourcing Management

List of Congressional Committees

The Honorable John Warner Chairman The Honorable Carl Levin Ranking
Minority Member Committee on Armed Services United States Senate

The Honorable Ted Stevens Chairman The Honorable Daniel K. Inouye Ranking
Minority Member Subcommittee on Defense Committee on Appropriations United
States Senate

The Honorable Duncan L. Hunter Chairman The Honorable Ike Skelton Ranking
Minority Member Committee on Armed Services House of Representatives

The Honorable C.W. Bill Young Chairman The Honorable John P. Murtha
Ranking Minority Member Subcommittee on Defense Committee on
Appropriations House of Representatives

Appendix I: Scope and Methodology Appendix I: Scope and Methodology

To determine if the Joint Strike Fighter (JSF) program will capture
critical product knowledge before making production investments, we
compared the program's plans and results to date against best practice
standards for applying knowledge to support major program investment
decisions. The best practice standards are based on a GAO body of work
that encompasses nearly 10 years and visits to over 25 major commercial
companies. Our work has shown that valuable lessons can be learned from
the commercial sector, as well as successful Department of Defense (DOD)
cases, and can be applied to the development of weapon systems. We
reviewed JSF management reports, acquisition plans, test plans, risk
assessments, cost reports, independent program assessments, and program
status briefings. We identified gaps in product knowledge at the
production decision points, reasons for these gaps, and the risks to
program cost and schedule associated with moving forward. We reviewed
DOD's acquisition policy to determine whether JSF's approach met its
framework and intent. We interviewed officials from the DOD acquisition
program management office and prime contractor to gain their perspectives
on program risks and their approaches to managing risks.

To evaluate whether the current acquisition plan follows an evolutionary
or incremental approach, a key best practice for meeting business case
goals, we examined the JSF program's acquisition framework and the actions
taken by DOD to address the recommendations made in our 2005 report. We
compared the JSF program's approach with the approaches used by leading
companies and successful DOD programs to evolve products to their ultimate
capabilities. We also reviewed DOD guidance on structuring evolutionary
acquisition programs. To determine the JSF program outcomes to date, we
used the program estimates that justified the program when it started in
1996. This was the point JSF transitioned from a technology development
environment to an acquisition program environment, with the commitment to
deliver a family of strike aircraft that meets the Air Force, Navy, and
Marine Corps needs. At that time, total production, acquisition, and
ownership costs had not been estimated. The total production, acquisition,
and ownership cost estimates were first established to support the
decision to enter the system development and demonstration phase in 2001.
We used these estimates as the baseline for these costs. We also obtained
information on past DOD programs from Selected Acquisition Reports and
prior work conducted by GAO over the past 25 years.

To identify opportunities to improve JSF program outcomes, we assessed the
potential of applying an incremental development approach to the JSF
acquisition program based on the commercial model and DOD guidance. We
also examined the program history of the F-16 fighter, the JSF
predecessor, which applied an incremental approach over its 30-year
acquisition. The F-16 acquisition has been touted by DOD and others as a
successful program and a model for others to follow. To examine the
program history of the F-16, we met with F-16 program officials and
analyzed acquisition plans, management reports, and program outcomes.

In performing our work, we obtained information and interviewed officials
from the JSF Joint Program Office, Arlington, Virginia; Lockheed Martin
Aeronautical Systems, Fort Worth, Texas; Defense Contract Management
Agency, Fort Worth, Texas; and offices of the Director, Operational Test
and Evaluation, and Acquisition, Technology and Logistics, Program
Analysis and Evaluation-Cost Analysis Improvement Group, which are part of
the Office of Secretary of Defense in Washington, D.C. We also obtained
information from the F-16 program office and Rand Corporation, Santa
Monica, California.

Appendix II: Changes in JSF Program Purchase Quantities and Costs Appendix
II: Changes in JSF Program Purchase Quantities and Costs

                                             October 2001             Changes 
                              November 1996       (system     As of     since 
                                   (program   development  December   initial 
                                     start)        start)      2005  estimate 
Expected quantities       
Development quantities                10            14        15        50 
Procurement quantities             2,978         2,852     2,443      (18) 
(U.S. only)                                                      
Total quantities                   2,988         2,866     2,458      (18) 
Cost estimates (then year dollars in billions)
Development                        $24.8         $34.4     $45.7        84 
Procurement                Not available        $196.6    $210.7         7 
Other                      Not available          $2.0       $.2      (90) 
Total program acquisition  Not available        $233.0    $256.6        10 
Unit cost estimates (then                                        
year dollars in millions)                                        
Average procurement        Not available           $69       $86        25 
Program acquisition        Not available           $81      $104        28 
Unit recurring flyaway costs (fiscal year 2002 dollars in millions)
Conventional takeoff and           $31.5         $37.0     $44.5        41 
landing                                                          
Short takeoff and             $33.7-39.3         $45.8     $58.7     49-74 
vertical landing                                                 
Carrier                       $34.9-42.7         $47.8     $61.7     44-77 

Source: GAO analysis of DOD data

Appendix III: Comments from the Department of Defense Appendix III:
Comments from the Department of Defense

(120450)

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Highlights of GAO-06-356 , a report to congressional committees

March 2006

JOINT STRIKE FIGHTER

DOD Plans to Enter Production before Testing Demonstrates Acceptable
Performance

The Joint Strike Fighter (JSF) is DOD's most expensive aircraft program.
The program represents 90 percent of the remaining planned investment for
recapitalizing DOD's aging tactical aircraft fleet.

GAO is required by law to review the program annually for 5 years,
beginning in fiscal year 2005. This is our second report and GAO assessed
the program's acquisition approach-in terms of capturing knowledge for key
investment decisions-and identified an alternative to improve outcomes.

What GAO Recommends

The Congress should consider delaying authorizations and appropriations
for JSF procurement until a new business case is developed and flight
testing demonstrates the design and integrated mission systems work. GAO
included this matter for consideration because DOD did not plan to make
changes as a result of recommendations.

GAO is recommending that DOD delay investing in production until flight
testing shows that the JSF performs as expected, and that the program
develop a plan, consistent with DOD's preferred policy, to adopt an
evolutionary approach that limits new content for each increment to proven
technologies and design. DOD partially concurred, but believes that its
current practices achieve our recommendations' objectives.

DOD is investing heavily in procuring JSF aircraft before flight testing
provesit will perform as expected. For example, the JSF program plans to
produce 424 low-rate initial production aircraft, at a total estimated
cost of more than $49 billion, by 2013-the same time at which the program
plans to complete initial operational testing. Producing aircraft before
testing demonstrates the design is mature increases the likelihood of
design changes that will lead to cost growth, schedule delays, and
performance problems. Because the program will lack key design and testing
knowledge, DOD plans to use cost reimbursement contracts to procure early
production aircraft. This type of contract places a substantially greater
cost risk on DOD and the taxpayers. Confidence that investment decisions
will deliver expected capability within cost and schedule goals increases
as testing proves the JSF will work as expected.

Overlap of Production Investments and Testing

At the same time, the JSF program has not adopted an evolutionary approach
to acquiring the aircraft-despite DOD policy that prefers such an
approach. Instead, the JSF program has contracted to develop and deliver
the aircraft's full capability in a single-step, 12-year development
program-a daunting task given the need to incorporate the technological
advances that, according to DOD, represent a quantum leap in capability.
DOD's buying power has already been reduced. Since initial estimates,
program acquisition unit costs have increased by 28 percent, or $23
million. Development costs have increased 84 percent, planned purchases
have decreased by 535 aircraft, and the completion of development has
slipped 5 years, delaying delivery of capabilities to the warfighter. With
more than 90 percent of the JSF investment remaining, DOD officials have
the opportunity to adopt a knowledge-based and evolutionary acquisition
strategy that would maximize DOD's return on its investment. The
acquisition approach used for the F-16 fighter, the Air Force's JSF
predecessor, could provide a model for delivering JSF capabilities to the
warfighter sooner and recapitalizing tactical aircraft forces more quickly
while lowering risk. The F-16 program successfully evolved capabilities
over the span of about 30 years, with an initial capability delivered to
the warfighter about 4 years after development started.
*** End of document. ***