Tactical Aircraft: DOD Should Present a New F-22A Business Case
before Making Further Investments (20-JUN-06, GAO-06-455R).
The F-22A is the Air Force's next generation air superiority
fighter aircraft. It incorporates a low observable (stealth) and
highly maneuverable airframe, advanced integrated avionics, and a
new engine capable of sustained supersonic flight without the use
of afterburners. It was originally designed to counter threats
posed by the Soviet Union and was intended to replace the F-15
fighter in the air-to-air combat role. However, the Air Force now
plans to add a more robust ground attack and intelligence-
gathering capability not previously envisioned but now considered
"necessary" to increase the utility of the aircraft. In December
2005, the Air Force changed designations from the F/A-22 to the
F-22A. The aircraft maintained all current capabilities as well
as the expanded ground attack capabilities. Officials have
initiated a modernization program to develop and integrate these
new capabilities. In March 2005, we reported that despite
substantial changes to the F-22A program since it started in
1986, Air Force leaders have not developed a new business case
for investing billions more dollars to modernize the aircraft.
Over time quantities have been reduced, and in recent years both
funding and quantities have been in a state of flux. Given
significant changes in quantities and planned capabilities, the
large investments still planned, and the potential for further
changes, Congress requested that we review the F-22A program.
Specifically, we assessed the need for a new business case before
further investments are made in the F-22A program and statutory
criteria the Air Force is required to meet to enter a multiyear
contract for the remaining aircraft. To assess the Air Force's
business case for further investments in the F-22A program, we
reviewed recent Office of the Secretary of Defense Program Budget
Decisions (PBDs) and F-22A requirements documents. We also
reviewed F-22A planned modernization schedules and documents and
interviewed program officials from the F-22A program office, Air
Combat Command, and the Air Force Program Executive Officer for
Tactical Air. To assess the Air Force's proposed use of a
multiyear contract for the remaining F-22As, we compared program
documentation on cost, schedule, and performance with statutory
criteria for entering into a multiyear contract. We conducted our
review between August 2005 and April 2006 in accordance with
generally accepted government auditing standards.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-06-455R
ACCNO: A55786
TITLE: Tactical Aircraft: DOD Should Present a New F-22A
Business Case before Making Further Investments
DATE: 06/20/2006
SUBJECT: Air Force procurement
Comparative analysis
Cost analysis
Defense capabilities
Fighter aircraft
Military aircraft
Military cost control
Multiyear contracts
Procurement planning
Eagle Aircraft
F-15 Aircraft
F-22 Raptor Aircraft
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GAO-06-455R
United States Government Accountability Office
Washington, DC 20548
June 20, 2006
The Honorable C.W. Bill Young
Chairman
Subcommittee on Defense
Committee on Appropriations
House of Representatives
Subject: Tactical Aircraft: DOD Should Present a New F-22A Business Case
before Making Further Investments
Dear Mr. Chairman:
The F-22A is the Air Force's next generation air superiority1 fighter
aircraft. It incorporates a low observable (stealth) and highly
maneuverable airframe, advanced integrated avionics, and a new engine
capable of sustained supersonic flight without the use of afterburners. It
was originally designed to counter threats posed by the Soviet Union and
was intended to replace the F-15 fighter in the air-to-air combat role.
However, the Air Force now plans to add a more robust ground attack and
intelligence- gathering capability not previously envisioned but now
considered "necessary" to increase the utility of the aircraft. In
December 2005, the Air Force changed designations from the F/A-22 to the
F-22A. The aircraft maintained all current capabilities as well as the
expanded ground attack capabilities. Officials have initiated a
modernization program to develop and integrate these new capabilities.
In March 2005,2 we reported that despite substantial changes to the F-22A
program since it started in 1986, Air Force leaders have not developed a
new business case for investing billions more dollars to modernize the
aircraft. Over time quantities have been reduced, and in recent years both
funding and quantities have been in a state of flux. Given significant
changes in quantities and planned capabilities, the large investments
still planned, and the potential for further changes, you requested that
we review the F-22A program. Specifically, we assessed the need for a new
business case3 before further investments are made in the F-22A program
and statutory criteria the Air Force is required to meet to enter a
multiyear contract for the remaining aircraft.
To assess the Air Force's business case for further investments in the
F-22A program, we reviewed recent Office of the Secretary of Defense
Program Budget Decisions (PBDs) and F-22A requirements documents. We also
reviewed F-22A planned modernization schedules and documents and
interviewed program officials from the F-22A program office, Air Combat
Command, and the Air Force Program Executive Officer for Tactical Air. To
assess the Air Force's proposed use of a multiyear contract for the
remaining F-22As, we compared program documentation on cost, schedule, and
performance with statutory criteria for entering into a multiyear
contract. We conducted our review between August 2005 and April 2006 in
accordance with generally accepted government auditing standards.
1 Air superiority is the degree of air dominance that allows the conduct
of operations by land, sea, and air forces without prohibitive
interference by the enemy.
2 GAO, Tactical Aircraft: Air Force Still Needs Business Case to Support
F/A-22 Quantities and Increased Capabilities, GAO-05-304 (Washington,
D.C.: Mar. 15, 2005).
3 A 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-technologies, design, funding, and time. 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.
Summary
Based on our review, in our opinion, the DOD has not demonstrated the need
or value for making further investments in the F-22A program. The Air
Force's current stated "need" is for 381 F-22As to satisfy air-to-air
missions and recently added requirements for more robust ground attack and
intelligence-gathering capabilities. However, because of past cost
overruns and current budget constraints, the Office of the Secretary of
Defense (OSD) states that it can now afford only 183 F-22As. This leaves a
198-aircraft gap between the Air Force's stated need and what is currently
affordable. The Air Force is planning to invest about $4.4 billion through
2011 to add more robust ground attack and intelligence gathering
capabilities for the F-22A. However, because of the large aircraft gap
between stated Air Force requirements and current and future budget
realities, it may not be prudent to make additional investments for these
new missions and capabilities. Furthermore, alternatives such as the Joint
Strike Fighter and F-15 might be able to execute ground attack more
cost-effectively given the substantially fewer numbers of F-22As that OSD
has committed to buy.
In December 2005, OSD restructured the F-22A program by extending
production to 2010, adding 4 aircraft for a total planned procurement of
183 F-22As and adding $1 billion to the procurement program. Under the
restructured acquisition program, the Air Force is planning to procure a
total of 60 F-22As in a multiyear procurement. However, in the Air Force's
multiyear procurement justification package sent to Congress on May 16,
2006, it stated that an additional $674 million is needed to fully fund
the multiyear program being proposed. Our work led us to make observations
on issues that could affect the Air Force's ability to satisfy several of
the statutory criteria for entering into a multiyear contract, including
the documentation of savings, a stable design, and available funding.
We believe the Congress should consider withholding additional funding for
procurement and modernization until the Department completes a
comprehensive business case that addresses the concerns we have raised
herein. In response to a draft of this report, the Department stated that
a recently completed Joint Air Dominance (JAD) study conducted by DOD
adequately identified the quantity and mix of tactical aircraft needed and
thus already satisfied the intent of our recommendation. We have asked OSD
to provide us access to the JAD study, but it has not yet done so. We plan
to pursue this matter with the Department. However, because Congressional
deliberations on this issue are ongoing, we believe it is important to
provide the data and analysis in the report at this time. Given the way
this program has unfolded, with frequently changing OSD-approved
requirements, repeated cost overruns, and given that DOD did not object to
the data and analysis contained in the report, we are not changing our
matter for Congressional consideration. If Congress does decide to provide
more funding for the F-22A program, that funding should be conditioned on
DOD providing the JAD study and subjecting it to independent review to
ensure that it provides adequate justification for sound investment of
taxpayer resources.
Background
The F-22A began development in 1986 to replace the F-15 air superiority
aircraft. The continued need for the F-22A, the quantities required, and
modification costs to perform its mission have been the subject of a
continuing debate within DOD and the Congress. Supporters cite its
advanced features-stealth, supercruise speed, maneuverability, and
integrated avionics-as integral to the Air Force's Global Strike
initiative and for maintaining air superiority over potential future
adversaries.4 Critics argue that the Soviet threat the fighter was
originally designed to counter no longer exists and that its remaining
budget dollars could be better invested in enhancing current air assets
and acquiring new and more transformational capabilities that will allow
DOD to meet evolving threats. The Air Force has already committed funds to
acquire 122 F-22As. To complete the procurement program, it now plans to
buy the remaining F-22As using a 3-year multiyear contract that ends
procurement in 2010. To begin the multiyear strategy, the Air Force has
included $2.0 billion for advance procurement of parts and subassembly
activities in its fiscal year 2007 budget request. Additionally, it has
included $800 million for continuing development and modifications of
existing aircraft.
DOD Has Not Completed a New Business Case to Justify Further Investments
in the F-22A Program
The Air Force's business case for the F-22A program is unexecutable as
planned because there is a significant mismatch between the Air Force's
stated "need" for the F-22A aircraft and the resources OSD is willing to
commit. According to Air Force officials, a minimum of 381 F-22A aircraft
are needed to satisfy today's national security requirements, yet OSD
states it can only afford to buy 183 F-22A aircraft. This results in a
198-aircraft gap in capability. Additionally, the Air Force now states a
"need" for greater ground attack and intelligence-gathering capabilities,
not included in the existing business case that will require an extensive
modernization program. The value of this planned investment in
modernization is highly questionable absent a new business case that
supports the minimum capability-based need, given credible current and
future threats, and that considers various options that are both
affordable and sustainable over time.
The Air Force states a need for one squadron of 24 F-22A aircraft for each
of the 10 Air Expeditionary Forces, the planned organization of the Air
Force aircraft and personnel for operations and deployments. This
requirement is established to carry out missions including support in
major regional conflicts, home land security, and others. According to the
Air Force, this requires a total of 381 F-22As, 240 primary aircraft and
141 aircraft for training, attrition, and to allow for periodic aircraft
depot maintenance.
OSD has restructured the F-22A acquisition program twice in the last 2
years (in December 2004 and December 2005) to free up funds for other
priorities. These decisions have created a mismatch between the Air
Force's stated requirements and what OSD considers an affordable quantity
of F-22As. In December 2004, OSD reduced the program to 179 F-22As to save
about $10.5 billion. This budget decision also terminated procurement in
2008. Then in December 2005, OSD changed the F-22A program again, adding
$1 billion to extend production for 2 years to ensure a 5th generation
fighter5 aircraft production line would remain in operation in case the
Joint Strike Fighter experienced delays or problems. OSD also added 4
aircraft for a total planned procurement of 183 F-22As.
The Air Force is currently planning to provide the F-22A with greater
ground attack and intelligence-gathering capabilities. It estimates these
will cost about $4.4 billion between 2005 and 2011. It is also planning
additional modernization efforts for more of these capabilities in the
future, but the cost, content, and timing has not yet been determined.
However, the 198- aircraft gap between the Air Force's stated
"requirement" and the planned procurement quantities raises questions on
whether the F-22A will be able to carry out its planned missions. The Air
Force is buying less than half the required 381 aircraft to fill out its
planned organizational structure-necessary to carry out planned
air-to-air, ground attack, and intelligence-gathering missions. Other
alternatives could be available to carry out the ground attack and
intelligence gathering capabilities. For example, DOD is also investing
billions of dollars to develop the Joint Strike Fighter aircraft-a 5th
generation fighter-intended for ground attack and billions of dollars to
develop intelligence, surveillance, and reconnaissance platforms and
sensors.
4 Global Strike is one of six complementary concepts of operations laying
out the Air Force's ability to rapidly plan and deliver limited-duration
and extended attacks against targets.
5 F-22A and F-35 are considered 5th generation fighter aircraft as
compared to the F-15, F-16, F/A-18 and F-117. The primary characteristics
are Very Low Observable (VLO) stealth and information fusion capabilities
that make 5th generation aircraft more survivable and lethal.
Air Force Is Requesting to Use a Multiyear Contract for the F-22A
The Air Force is proposing to buy the remaining 60 F-22As over a 3 year
period with a multiyear contract and submitted its justification to the
Congress on May 16, 2006.6 To enter into a multiyear contract the Air
Force must first meet the statutory criteria listed in 10 U.S.C. S: 2306b
(a). Table 1 shows the six criteria that must be satisfied before entering
into a multiyear contract and our observations on issues that could affect
the Air Force's ability to satisfy several of the criteria.
6 The Air Force needs statutory authorization for its proposed multiyear
contract under 10 U.S.C. S: 2306b and the annual DOD appropriations act.
Table 1: Observations of F-22A Multiyear Contract Criteria as of April
2006
Multiyear criteria GAO observations
Contract will result in The Air Force has not completed an estimate
substantial savings of savings, but its preliminary indications
are a maximum of 5 percent savings.
However, when the unit procurement costs
for the planned multiyear approach is
compared to how the Air Force had
previously planned to buy the remaining
aircraft, the unit procurement costs
increase under multiyear.
Minimum need expected to Quantities have continually been in a state
remain substantially unchanged of flux in the F-22A program including
during contract period in changes in the last two budget submissions.
terms of production rates and
total quantities
Reasonable expectation agency The Air Force has indicated that its
head will request funding at multiyear budget is currently under funded
required level to avoid by $674 million. Further, it is proposing
contract cancellation to use incremental funding rather than
fully funding each aircraft lot.
There is stable design, and While the design for the baseline F-22A
technical risks are not aircraft, designed primarily for an air
excessive superiority role, is stable, the design for
the ground attack capability to be added
has not been demonstrated and thus cannot
be considered "stable."
Estimates of contract cost and The Air Force has not completed its
cost avoidance are realistic analysis of contract cost or cost avoidance
at this time.
Use of contract will promote No observation.
national security of the
United States
Source: GAO Analysis and 10 U.S.C. 2306b.
The Air Force has requested statutory authorization for a multiyear
contract for the remaining F-22As as part of the fiscal year 2007
authorization and budget process in order to award the contract in early
2007. As shown in the table above, we believe there are some critical
considerations that need to be addressed before the multiyear plan can be
justified. These include the following considerations:
Savings-The Air Force stated in its May 16, 2006, multiyear justification
package that cost avoidance would approximate $225 million or about 2.7
percent. This is based on comparing three annual contracts to a single
multiyear contract to buy 56 aircraft. The document also identifies a need
for an additional $674 million to fully fund a 60 aircraft multiyear
contract as was proposed in the fiscal year 2007 President's budget. While
building an estimate for three separate annual contracts provides a basis
to compare to a multiyear approach, it is not how the Air Force had
previously planned to buy the aircraft remaining in the F-22A program. The
fiscal year 2006 President's Budget included procurement costs to buy the
remaining 56 F-22As in two lots-29 F-22As in 2007 and 27 F-22As in 2008.
If the unit procurement costs of this previous plan are compared to the
planned multiyear procurement unit costs for 60 aircraft as proposed in
the fiscal year 2007 President's Budget, the unit costs increase by 10
percent. In other words, the unit procurement costs increase from $166
million per aircraft to $183 million per aircraft for the proposed
multiyear contract.
Funding-The Air Force has stated that the proposed multiyear plan for 60
aircraft is under funded by about $674 million. The Air Force believes it
will need these funds in fiscal years 2009 and 2010. Additionally, the Air
Force has proposed using incremental funding to pay for the multiyear
contract. Instead of fully funding the buy for each fiscal year, it plans
four funding increments-economic order quantity, advanced buy, subsystem,
and final assembly. Incremental funding for multiyear procurement is
neither permitted by the annual DOD appropriations act,7 nor the multiyear
authorizing statute which requires that funds only be obligated under a
multiyear contract "for procurement of a complete and usable end item."8
However, the Air Force is seeking an exception to these requirements in
its request to Congress for statutory authorization for the multiyear
contract. The Air Force's proposed F-22A multiyear strategy includes an
increment of funding in each fiscal year to begin manufacturing
subsystems, not considered a complete and useable end item. For example,
the fiscal year 2007 budget request includes $1.5 billion for
subassemblies. It would not be until fiscal year 2008 that the final
assembly would be fully funded.
Design Stability-The baseline F-22A aircraft, designed primarily for the
air superiority role, has successfully completed development and initial
operational testing, and its design is stable for that particular mission.
However, the Air Force has stated that to be "effective" in the future a
more robust ground attack capability is needed for the F-22A. It plans to
spend several billions of additional dollars to add this ground attack
capability. A key to the success of this effort is the development and
integration of a new radar. The Air Force expects to take delivery of the
first aircraft with the new radar in November 2006 but the software needed
to provide the robust ground attack capability will not be completed until
2010. According to a representative of the Director, Operational Test and
Evaluation (DOT&E), the key to achieving a more robust ground attack
capability will center on the integration of this new radar. A December
2005 report issued by the Defense Contract Management Agency stated that
problems encountered during the test and integration of the new radar has
added risk to the development program. Until software and integration
testing in the F-22A have been successfully completed, we consider the
design unstable creating the potential for significant cost overruns and
schedule delays.
Conclusions
The F-22A development has spanned more than a 19-year period during which
time requirements have changed both in terms of the quantity of aircraft
needed and the capabilities that would be incorporated. At the same time,
new budgetary constraints have grown and other priorities have come to the
forefront in DOD, including the need for funding the war on terrorism.
While the Air Force's stated need is 381 F-22As, OSD will commit to fund
only 183. The Air Force also states the basic capabilities developed for
the F-22 are not sufficient to be effective in the current and future
national security environment. The conditions facing the F-22A program are
significantly different than those addressed by the original business
case, yet despite these significant changes the Air Force has not
developed a new business case to justify currently planned and proposed
additional investments in the F-22A. Given our nation's growing fiscal
challenges, the changing security threats, and prevailing best business
practices for acquisitions, it is highly questionable whether it is
prudent to continue in the current path proposed by the Air Force. DOD
must begin to make the difficult choices required to counter current and
credible future threats at current and expected future resource levels
because it will not have enough money to purchase everything that it
wants. Furthermore, going to a multiyear procurement strategy appears to
be more costly than previous Air Force plans and would tie up significant
amounts of funds at a time when DOD already has more wants than it is
likely to be able to afford and sustain over time. The Department needs to
reevaluate the value delivered by continuing production of the F-22A past
what it has already committed to by examining the likely future threat and
risk environment, the funding it can make available relative to other
demands, and the alternative ways to achieve air-to-air and air-to-ground
military superiority.
7 Section 8008 of the fiscal years 2005 and 2006 Department of Defense
Appropriations Acts (Public Laws 108-287 and 109-148, respectively)
require full funding of units to be procured.
8 10 U.S.C. S: 2306b (i)(4)(A). This restriction was added by section 820
of the Bob Stump National Defense Authorization Act for Fiscal Year 2003
(Public Law 107-314).
Matters for Congressional Consideration
Because of the large disparity between what the Air Force wants for the
F-22A program and what OSD has committed to fund, there is a significant
break in the business case to justify buying more F-22As. For this reason,
Congress may want to consider withholding additional funding for
procurement and modernization until the Department completes a
comprehensive business case that addresses the concerns we have raised
herein. The additional issues surrounding this matter and our reporting
are discussed in the Agency Comment section of this report.
Recommendation
Because of the significant and continuing changes in the F-22A program
that have created an environment of investment uncertainty as well as the
significant mismatch between stated Air Force needs and wants and future
resource levels, we recommend that Secretary of Defense delay further
investments in F-22A procurement and modernization until it completes a
comprehensive business case analysis that adequately considers
alternatives, justifies the need for further investments, and reconciles
the numbers of F-22As that are needed (i.e. based on credible current and
future threats and considering other alternative approaches) as well as
affordable and sustainable (i.e., based on current and expected DOD
resource levels).
Agency Comments and Our Evaluation
In written comments on a draft of this report, DOD stated that it did not
concur with our recommendation that the Secretary of Defense delay further
investments in F-22A procurement and modernization until it completes a
new business case analysis that adequately considers alternatives,
justifies the need for further investments, and reconciles the numbers of
F-22As that are needed. They stated a Joint Air Dominance (JAD) study
conducted by DOD adequately identified the quantity and mix of tactical
aircraft needed. DOD stated that delaying investments in the F-22A would
disrupt production and create program instability. DOD also stated that
keeping the F-22A production line active, preserves the Department's
options and sustains the industrial base for efficient transition to Joint
Strike Fighter production.
Preserving options and the industrial bases will be costly. The 2007
future year's defense plan added $1.05 billion for a 60 aircraft multiyear
procurement contract and subsequently the Air Force identified an
additional $674 million needed to fully fund this plan. Therefore, the
total additional multiyear procurement cost is $1.724 billion.
Furthermore, it will add two years to the F-22A procurement program. This
represents significant opportunity cost. That is, the funding used here
will not be available to support other DOD priorities. If preserving
options and the industrial base are primary reasons for these added costs
and the extension of the procurement program, DOD should make them more
transparent to the Congress as it seeks authorizations and appropriations
to execute this plan.
As to the Department's position that they have already conducted the
business case called for in our recommendation, we asked OSD to provide us
access to the JAD study, but they have not yet done so. Because
Congressional deliberations are ongoing, we believe it is important to
provide the data and analysis in the report at this time. Given the way
this program has unfolded, with frequently changing OSD-approved
requirements, repeated cost overruns, and delays in fielding capability to
the warfighter, and given that DOD did not object to the data and analysis
contained in the report, we are not changing our matter for Congressional
consideration. If Congress does decide to provide more funding for the
F-22A program, that funding should be conditioned on DOD providing the JAD
study and subjecting it to independent review to ensure that it provides
adequate justification for sound investment of taxpayer resources.
- - - - -
We are sending copies of this report to the Secretary of Defense; the
Director, Office of Management and Budget; and interested congressional
committees. We will also make copies available to others upon request. In
addition, the report will be available at no charge on the GAO Web site at
http://www.gao.gov .
Should you or your staff have any questions on matters discussed in this
report, please contact Michael Sullivan on (202) 512-4163 or Michael
Hazard on 937-258-7917. Principal contributors to this report were Marvin
Bonner and Daniel Chen.
Sincerely
David M. Walker
Comptroller General
Of the United States
Enclosure
Enclosure
Comments from the Department of Defense
(120558)
*** End of document. ***