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entitled 'Joint Strike Fighter: Management of the Technology Transfer 
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Report to the Chairman, Subcommittee on National Security, Emerging 
Threats, and International Relations, Committee on Government Reform, 
House of Representatives: 

United States Government Accountability Office: 

GAO: 

March 2006: 

Joint Strike Fighter: 

Management of the Technology Transfer Process: 

GAO-06-364: 

GAO Highlights: 

Highlights of GAO-06-364, a report to the Chairman, Subcommittee on 
National Security, Emerging Threats, and International Relations, 
Committee on Government Reform, House of Representatives: 

Why GAO Did This Study: 

The Joint Strike Fighter (JSF) program is the Department of Defense’s 
(DOD) largest international cooperative effort to develop and produce a 
major weapon system. Due to the breadth of international participation, 
the number of export authorizations needed to share information with 
partner governments, solicit bids from suppliers, and execute contracts 
is expected to far exceed past transfers of advanced military 
technology. 

In July 2003, GAO reported that managing these transfers and partner 
expectations while avoiding delays has been a key challenge and 
recommended that industrial planning tools be developed and used to 
anticipate time frames for national disclosure and technology transfer 
decisions. This report examines DOD’s response to this recommendation 
and identifies the practices DOD is using to expedite license 
processing and avoid program delays. 

What GAO Found: 

Agencies have taken four key actions to expedite the processing of 
licenses for transferring technology to partner countries and foreign 
suppliers. Each of these practices is intended to anticipate time 
frames needed for the processing of licenses or avoid delays to the JSF 
program schedule. 

* In response to GAO’s 2003 recommendation, the JSF Program Office 
instructed the prime contractor to develop an international industrial 
plan that identifies the type of license needed to transfer certain 
technologies to foreign industry. The contractor’s plan provides 
mechanisms for anticipating “need” dates for submitting license 
applications and for identifying and addressing potential issues 
related to the releasability of classified information, technologies, 
or systems. In addition to the contractor’s plan, DOD has developed 
guidance calling for industrial planning tools in all programs with 
significant international involvement. 

* Agencies involved in the JSF program are expediting the processing of 
license applications by dedicating staff to the JSF licensing process, 
providing consultation to applicants on draft licenses, administering a 
prescreening process for the transfer of low technology and 
nonsensitive items, and allowing addendums to be attached to license 
applications. 

* The JSF prime contractor and agency officials have used options 
available to them under the International Traffic in Arms Regulations, 
such as Global Project Authorization (GPA) and an exemption used in 
obtaining foreign contractor bids and proposals, to help facilitate the 
export control process and avoid program delays. While GPA is designed 
to approve exports within 5 days, its use has been limited. 

* Due to the early involvement of international partners in the design 
phase of the program, decisions related to the releasability of 
classified information, technologies, or systems to partner countries 
have been addressed as they arise throughout the development of the 
system. 

Joint Strike Fighter: 

[See PDF for image] 

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[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

Actions Taken to Expedite License Processing and Avoid Program Delays: 

Agency Comments: 

Appendix I: GAO Contact and Staff Acknowledgments: 

Related GAO Products: 

Table: 

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

Abbreviations: 

AECA: Arms Export Control Act: 

DDTC: Directorate of Defense Trade Controls: 

DOD: Department of Defense: 

DTSA: Defense Technology Security Administration: 

FAR: Federal Acquisition Regulation: 

GPA: Global Project Authorization: 

ITAR: International Traffic in Arms Regulations: 

JSF: Joint Strike Fighter: 

MOU: memorandum of understanding: 

NDPC: National Disclosure Policy Committee: 

United States Government Accountability Office: 

Washington, DC 20548: 

March 14, 2006: 

The Honorable Christopher Shays: 
Chairman, 
Subcommittee on National Security, Emerging Threats, and International 
Relations: 
Committee on Government Reform: 
House of Representatives: 

Dear Mr. Chairman: 

The Joint Strike Fighter (JSF) program is the Department of Defense's 
(DOD) largest experiment to collaboratively develop and produce a major 
weapon system with international partners to date with an estimated 
cost of over $250 billion for the development and production phases of 
the program. It is a joint program among the Air Force, Navy, Marine 
Corps, and eight international partners for developing and producing a 
next-generation fighter aircraft to replace aging inventories. Due to 
the degree of international participation at both the government and 
industry levels, a large number of export authorizations are necessary 
to share project information with governments, solicit bids from 
partner suppliers, and execute contracts. The transfer of technologies 
necessary to achieve aircraft commonality goals in the JSF program is 
expected to far exceed past transfers of advanced military technology. 
A key challenge for the program has been managing the technology 
transfer process and partner expectations while avoiding delays to the 
program. 

In July 2003, we reported that due to the early involvement of 
international partners in developing the system, the JSF program has 
had to mitigate a particular set of challenges related to technology 
transfers. We recommended that the JSF program ensure that industrial- 
planning tools are developed and used to anticipate time frames for 
national disclosure and technology transfer decisions.[Footnote 1] 
Subsequently, you asked us to examine issues raised in our 2003 work 
related to technology transfer and the JSF program and describe the 
status of DOD planning efforts designed to address technology transfer 
and export control requirements among the U.S. government, JSF prime 
contractors, foreign partners, and foreign industry. Specifically, we 
identified the practices DOD is using to expedite license processing 
and avoid program delays. 

In carrying out our work, we reviewed the prime contractor's newly 
developed international industrial plan and compared it to a prior GAO 
recommendation. To determine the manner in which U.S. export control 
processes are being applied in the JSF program, we interviewed and 
gathered data from export control and JSF officials from DOD, the 
Department of State, and the prime contractor. The international 
partners did not discuss issues related to technology transfer with us 
due to the status of current negotiations on a memorandum of 
understanding for the production phase of the program. The partners 
generally expressed the opinion that comments by them during 
negotiations would not be appropriate. We conducted our review from 
March 2005 to January 2006, in accordance with generally accepted 
government auditing standards.[Footnote 2] 

Results in Brief: 

Agencies have taken a number of actions to address technology transfer 
issues associated with the JSF program. In response to our 2003 
recommendation, the JSF Program Office tasked the prime contractor to 
develop an international industrial plan to anticipate time frames for 
national disclosure and technology transfer decisions. The Office of 
the Secretary of Defense also issued guidance calling for the use of 
similar industrial-planning tools for other development programs that 
include foreign partners. Further, DOD is using a variety of practices 
to expedite the processing of export control licenses for the JSF 
program. For example, agencies have staff specifically dedicated to the 
JSF licensing process to focus agency resources on the JSF program. In 
addition, agency stakeholders provide consultation to license 
applicants on draft licenses, and all formal license applications are 
prescreened to determine if they are eligible for an abbreviated review 
process. The JSF prime contractor and agency officials have also used 
options available to them under the International Traffic in Arms 
Regulations, such as a Global Project Authorization and an exemption 
used in obtaining bids and proposals from foreign contractors.[Footnote 
3] The Global Project Authorization was intended to be a mechanism for 
approving the transfer of low technology, nonsensitive items between 
pre-approved U.S. and foreign companies in about 5 days; however, this 
mechanism's use has been limited. Additionally, to avoid program 
delays, the JSF program office has certified 350 requests from U.S. 
contractors to use the "bid and proposal exemption," allowing the 
transfer of information without a license between approved U.S. and 
foreign contractors for purposes of obtaining bids and proposals. 
Further, due to the involvement of international partners in the early 
design phase of the program, issues related to the releasability of 
classified information, technologies, and systems will continue to be 
addressed as they arise. 

Background: 

The JSF program began in 1996 and is the largest DOD acquisition 
program to date with an estimated cost of over $250 billion for the 
development and production phase of the program. The program's goals 
are to develop and field a family of stealthy fighter aircraft for the 
Navy, Air Force, Marine Corps, and U.S. allies. To achieve its mission, 
JSF will incorporate low observable technologies, defensive avionics, 
advanced onboard and offboard sensor fusion, internal and external 
weapons, and advanced prognostic maintenance capability. The program 
intends to produce three variants. The carrier suitable variant will 
complement the Navy's F/A-18 E/F. The conventional take-off and landing 
variant will primarily be a replacement for the Air Force's F-16 and A- 
10 aircraft and will complement the F-22A. The short take-off and 
vertical landing variant will replace the Marine Corps' F/A-18 and AV- 
8B aircraft. 

In October 2001, Lockheed Martin was awarded a contract to develop the 
airframe and integrate the system components. Subsequently, Lockheed 
Martin awarded multi-billion-dollar subcontracts to its development 
teammates--Northrop Grumman and BAE Systems--for work on the center and 
aft fuselage, respectively. In addition to the Lockheed Martin 
contract, DOD has contracts with both Pratt & Whitney and General 
Electric to develop two interchangeable aircraft engines. The program 
is currently in the fifth year of an estimated 12-year development 
phase. The current estimated cost for the development phase is about 
$41.5 billion. 

The JSF program is an international cooperative program consisting of 
the U.S. and eight foreign partners: the United Kingdom, Italy, the 
Netherlands, Turkey, Denmark, Norway, Canada, and Australia. The JSF 
program structure was established through a framework memorandum of 
understanding (MOU) and individual supplemental MOUs between each of 
the partner country's defense department or ministry and DOD, 
negotiating on behalf of the U.S. government. These agreements identify 
the roles, responsibilities, and expected benefits for all 
participants. Currently DOD is negotiating one MOU for all partner 
countries related to the production phase of the program. 

The JSF program allowed foreign countries to become partners at one of 
three participation levels during the system development and 
demonstration phase of the program, based on financial contribution. In 
return for their contributions, partner countries receive proportionate 
benefits, such as number of staff represented in the program office, 
access to program data and technology, and membership on management 
decision-making bodies. As shown in table 1, the foreign partners plan 
on contributing over $4.5 billion, or about 11 percent, for the system 
development and demonstration phase and are expected to purchase over 
700 aircraft beginning in the 2012 to 2015 time frame. Israel and 
Singapore are involved as security cooperation participants, a 
nonpartner arrangement, which offers limited access to program 
information. According to DOD, foreign military sales to these and 
other nonpartner countries could include an additional 1,500 to 3,000 
aircraft. 

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

Dollars in millions. 

Partner country: United Kingdom; 
System development and demonstration: Partner level: Level I; 
System development and demonstration: Financial contributions[A]: 
$2,056; 
System development and demonstration: Percentage of total costs: 5.0%; 
Productions: Projected quantities[B]: 150; 
Productions: Percentage of total quantities: 4.7%. 

Partner country: Italy; 
System development and demonstration: Partner level: Level II; 
System development and demonstration: Financial contributions[A]: 
$1,028; 
System development and demonstration: Percentage of total costs: 2.5%; 
Productions: Projected quantities[B]: 131; 
Partner country: Productions: Percentage of total quantities: 4.1%. 

Partner country: Netherlands; 
System development and demonstration: Partner level: Level II; 
System development and demonstration: Financial contributions[A]: $800; 
System development and demonstration: Percentage of total costs: 1.9%; 
Productions: Projected quantities[B]: 85; 
Productions: Percentage of total quantities: 2.7%. 

Partner country: Turkey; 
System development and demonstration: Partner level: Level III; 
System development and demonstration: Financial contributions[A]: $175; 
System development and demonstration: Percentage of total costs: 0.4%; 
Productions: Projected quantities[B]: 100; 
Productions: Percentage of total quantities: 3.2%. 

Partner country: Australia; 
System development and demonstration: Partner level: Level III; 
System development and demonstration: Financial contributions[A]: $144; 
System development and demonstration: Percentage of total costs: 0.3%; 
Productions: Projected quantities[B]: 100; 
Productions: Percentage of total quantities: 3.2%. 

Partner country: Norway; 
System development and demonstration: Partner level: Level III; 
System development and demonstration: Financial contributions[A]: $122; 
System development and demonstration: Percentage of total costs: 0.3%; 
Productions: Projected quantities[B]: 48; 
Productions: Percentage of total quantities: 1.5%. 

Partner country: Denmark; 
System development and demonstration: Partner level: Level III; 
System development and demonstration: Financial contributions[A]: $110; 
System development and demonstration: Percentage of total costs: 0.3%; 
Productions: Projected quantities[B]: 48; 
Productions: Percentage of total quantities: 1.5%. 

Partner country: Canada; 
System development and demonstration: Partner level: Level III; 
System development and demonstration: Financial contributions[A]: $100; 
System development and demonstration: Percentage of total costs: 0.2%; 
Productions: Projected quantities[B]: 60; 
Productions: Percentage of total quantities: 1.9%. 

Total partner; 
System development and demonstration: Financial contributions[A]: 
$4,535; 
System development and demonstration: Percentage of total costs: 10.9%; 
Productions: Projected quantities[B]: 722; 
Productions: Percentage of total quantities: 22.8%. 

United States; 
System development and demonstration: Financial contributions[A]: 
$36,946; 
System development and demonstration: Percentage of total costs: 89.1%; 
Productions: Projected quantities[B]: 2,443; 
Productions: Percentage of total quantities: 77.2%. 

Source: DOD and JSF Program Office. 

[A] Chart values do not reflect nonfinancial contributions from 
partners. 

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

[End of table] 

DOD has stated that the core objectives of armaments cooperation are to 
increase military effectiveness through standardization and 
interoperability and to reduce weapons acquisition costs by avoiding 
duplication of development efforts with U.S. allies. According to DOD 
and the program office, through its cooperative agreements, the JSF 
program contributes to armaments cooperation policy in four areas: 

* political/military--expanded foreign relations; 

* economic--decreased JSF program costs from partner contributions; 

* technical--increased access to the best technologies of foreign 
partners; and: 

* operational--improved mission capabilities through interoperability 
with allied systems. 

Under the Arms Export Control Act (AECA), DOD is provided the authority 
to enter into cooperative programs with certain U.S. allies.[Footnote 
4] In March 1997, the Secretary of Defense directed that DOD engage 
allies in discussions as early as possible to determine the potential 
for collaboration to meet coalition needs and ensure interoperability 
among allied systems. DOD guidance states that the department will give 
favorable consideration to transfers of defense articles, services, and 
technology consistent with national security interests to support these 
international programs. Unlike other international cooperative 
programs, the JSF program does not guarantee foreign or domestic 
suppliers a predetermined level of work based on a country's financial 
contribution to the program. Instead, foreign and domestic suppliers 
will generally bid competitively for JSF work. DOD and the JSF Program 
Office use the term "best value" to describe this competitive 
approach.[Footnote 5] 

The AECA also provides statutory authority for the control of defense 
articles and services.[Footnote 6] The Department of State oversees the 
export of military items and services.[Footnote 7] The Directorate of 
Defense Trade Controls (DDTC) within the Department of State has been 
delegated the authority to regulate arms exports and administer the 
arms export-licensing system. The Defense Technology Security 
Administration (DTSA) represents DOD on export control issues. DTSA 
provides technical and national security reviews of and coordinates 
DOD's position on export license applications referred or reviewed by 
DDTC. Due to the degree of international participation at both a 
governmental and an industry level in the JSF program, a large number 
of export authorizations are necessary to share project information 
with governments, solicit bids from partner suppliers, and execute 
contracts. The transfer of technologies necessary to achieve aircraft 
commonality goals for the JSF program is expected to far exceed past 
transfers of advanced military technology for other systems. 

Before transfers are approved, the U.S. government must first determine 
if weapons or technologies are releasable to the requesting country 
according to the National Disclosure Policy. The National Disclosure 
Policy establishes procedures and criteria for releasing classified or 
sensitive military information to other countries. The National 
Disclosure Policy Committee (NDPC) is responsible for managing the 
National Disclosure Policy, making determinations whether to grant 
exceptions to the policy, conducting security surveys of foreign 
governments including defense industries, and determining delegated 
authority among the services.[Footnote 8] In cases where a request for 
transfer exceeds that authority, the service can forward the request to 
the NDPC for its review. For some sensitive technologies, such as 
stealth, the case is also forwarded for review to a special committee 
that focuses on that particular technology. 

Actions Taken to Expedite License Processing and Avoid Program Delays: 

DOD and the JSF program office have taken the following four key 
actions to avoid the potential negative effects on the program from 
delays in obtaining licenses for transferring technology to partner 
countries and foreign suppliers: 

* In response to our 2003 recommendation, the JSF Program Office 
directed the prime contractor to develop an international industrial 
plan to anticipate time frames for national disclosure and technology 
transfer decisions. 

* Agencies involved in the JSF export-licensing process are expediting 
the processing of license applications by dedicating staff to the JSF- 
licensing process, providing consultation to applicants on draft 
licenses, administering a prescreening process for the transfer of low 
technology and nonsensitive items, and by allowing addendums to be 
attached to license applications. 

* The JSF prime contractor and agency officials have used options 
available to them under the International Traffic in Arms Regulations 
(ITAR), such as Global Project Authorization (GPA) and an exemption 
used in obtaining foreign contractor bids and proposals, to help 
facilitate the export control process and avoid program delays. The GPA 
was intended to allow for technology transfer decisions regarding 
certain technologies to be made in 5 days or less; however, its use has 
been limited. Use of the bid and proposal exemptions is intended to 
avoid program delays by providing foreign contractors with information 
needed to compete for contracts without first obtaining an export 
license. 

* Issues related to the releasability of classified information, 
technology, or systems to foreign partners are addressed as they arise 
in the JSF program because of the involvement of international partners 
in the early design phase of the program. According to DOD officials, 
they are incorporating new practices, such as stakeholder meetings, 
that are intended to facilitate a timely and collaborative decision- 
making process. 

Anticipating Technology Transfer Needs: 

In July 2003, we reported that due to the early involvement of 
international partners in developing the system, the JSF program has 
had to mitigate a particular set of challenges related to technology 
transfers. To address these challenges, the prime contractor needs to 
anticipate time frames for national disclosure and technology transfer 
decisions. The anticipation of these needs would allow for a timely 
submission of license applications as well as providing time to 
identify potential back-up suppliers, if necessary. Accordingly, we 
recommended that the JSF Program Office direct the prime contractor to 
complete an international industrial plan that: 

* identified current and potential contracts involving the transfer of 
sensitive data and technology to partner suppliers, 

* evaluated the risks that unfavorable export decisions could pose for 
the program, and: 

* developed alternatives to mitigate those risks, such as using U.S. 
suppliers. 

In response to our recommendations, in 2003 the JSF program office 
instructed the prime contractor to complete an international industrial 
plan. According to the prime contractor, the plan provides a roadmap 
that represents potential licensing activities as a subset of the 
program schedule. Specifically, the plan identifies the need for a 
license to transfer certain technologies to foreign industry. It 
provides a mechanism for the prime contractor to anticipate "need" 
dates for receiving export licenses and provides a mechanism for 
identifying issues that may arise concerning the releasability of 
information, technologies, or systems so that early action can be taken 
to determine if an exception to the National Disclosure Policy or an 
appropriate committee review should be pursued. 

In addition to the creation of the JSF prime contractor's international 
industrial plan, DOD has added guidance to the Office of the Secretary 
of Defense's Acquisition Guidebook calling for the development of 
similar industrial-planning tools in all programs with significant 
international involvement prior to the system design and demonstration 
phase. The guidance further states that the plan should project when 
export licenses will be required in support of the acquisition process 
and when critical milestones regarding National Disclosure Policy 
implementation will need to be addressed. 

These plans are intended to provide for early planning for the 
program's proposed technology releases to foreign industry. They also 
are intended to provide early planning for higher level special 
technical reviews and approvals in support of proposed technology 
releases to foreign industry.[Footnote 9] Further, they are intended to 
establish a detailed export license approval-planning process for U.S.- 
foreign industry cooperation to meet critical program and contract 
timelines. The guidance recommends the plan include: 

* a timeline that maps key projected export licenses against the 
program acquisition schedule; 

* a definition of the technologies involved in each export license; 
and: 

* a list of U.S. contractors (exporters) as well as foreign contractors 
(end users) for each license. 

Expediting the JSF Licensing Process: 

Agencies involved in the export-licensing process have employed a 
variety of methods to expedite the processing of license applications. 
The Directorate of Defense Trade Controls (DDTC) within the Department 
of State has dedicated one staff member to the JSF program. 
Additionally, the Defense Technology Security Administration (DTSA) 
within DOD has dedicated staff to specifically deal with issues related 
to licensing, technical aspects, and policy matters for the JSF 
program. These staffs coordinate directly with JSF program office staff 
dedicated to the licensing process. 

According to DTSA officials, along with dedicated staff, a new strategy 
is being used to accelerate processing export licenses for the JSF 
program. Officials across DOD provide advice and resolve issues with 
license applicants through stakeholder meetings prior to formal 
submission of license applications. DTSA officials described these 
stakeholder meetings as a proactive measure to ensure that the license 
applications are ready to be assessed when they are received. DTSA 
officials stated that this process evolved in response to the concern 
that licensing delays could affect the JSF program schedule and that 
while stakeholder consultation could take up to six months, it usually 
resulted in a shorter approval process. According to DTSA officials, 
these stakeholder meetings were created because of the JSF program and 
are currently unique to the program but would likely be incorporated 
into future large scale international cooperative programs. 

DTSA also prescreens all license applications to expedite the 
processing of licenses that do not require review by other DOD 
entities. Once an application is received from DDTC, it is prescreened 
by DTSA officials to determine if it meets eligibility criteria for an 
abbreviated review process. DTSA officials stated that criteria for 
determining eligible items include low technology, nonsensitive items; 
items widely available worldwide; and items that have previously been 
approved through the process, among others. According to DTSA 
officials, prescreening has been taking place for 1 year to 2 years, 
and the typical time frame for a license in the abbreviated review 
process is 2 days to 5 days. 

The use of addendums to supplement license applications is another 
initiative that evolved in an effort to avoid delays in the JSF 
program. When additional information or clarification is needed before 
a license can be approved, officials from DDTC and DTSA have agreed to 
allow the applicant to attach addendums that include more specific 
technical information than initially provided. The addendums provide 
context and clarity to the application. Previously, the license would 
have been returned with no action, requiring a resubmission and restart 
of the license process. 

Implementing Global Project Authorization and Making Use of Bid and 
Proposal Exemptions: 

Another mechanism for expediting license processing is the use of a 
Global Project Authorization (GPA). The GPA is a comprehensive export 
authorization for international cooperative projects authorized by the 
ITAR.[Footnote 10] An approved U.S. company submits an "Implementing 
Agreement" request to DDTC for authorization to export to an approved 
foreign company. DDTC can evaluate the request and based on compliance 
with an established set of conditions may authorize the transfer 
without sending the request through the formal licensing process. An 
implementing agreement under the GPA is expected to be approved in 
about 5 days. 

The Department of State, DOD, and the prime contractor agreed to the 
GPA for the JSF program based on the following conditions: 

* Technologies available for transfer through a GPA implementing 
agreement are based on a predetermined list of unclassified, low 
technology, nonsensitive items. 

* In using the GPA, both domestic and foreign companies must be on an 
approved list. The approved list was developed by the Department of 
State and DOD. There are currently 46 U.S. companies and 446 foreign 
companies that have been authorized to utilize implementing agreements 
under the GPA for the JSF program. 

* Approved companies must follow a standard agreement format and 
special application process. 

While the GPA is designed to approve transfers within 5 days, its 
usefulness has been limited. Of the 46 U.S. companies eligible to use 
the GPA, only 3 have exercised that option. In 2005, only two 
implementing agreements were approved, and they were actually submitted 
in 2004. Only one implementing agreement was submitted in 2005, and it 
was returned without action. Approved companies that wish to use the 
GPA must meet a special set of compliance requirements, imposed by the 
State Department, related to electronic record keeping and securing 
data. Officials from the JSF program office, DTSA, and the prime 
contractor said that many companies have chosen to use the traditional 
license process instead of the GPA to avoid the extra costs and 
administrative burdens associated with these compliance requirements, 
such as the investment associated with the development of electronic 
databases. These issues also make the GPA especially difficult to use 
for smaller companies. Further, the GPA was authorized only for the 
system development and demonstration phase of the program and would 
need to be reauthorized for the production phase. 

Another practice used by the JSF program office to avoid program delays 
and provide for competition among U.S. and foreign suppliers is the use 
of an exemption under the ITAR for the purpose of obtaining bids and 
proposals from foreign contractors. On March 8, 2004, DTSA issued 
guidance to the military departments on how to certify the use of ITAR 
exemptions. The guidance identifies five sections under the ITAR by 
which the U.S. government may certify exemptions.[Footnote 11] Section 
125.4(b)(1) of the ITAR[Footnote 12] provides that technical data, 
including classified information, may be disclosed pursuant to an 
official written request or directive from the U.S. Department of 
Defense without obtaining an export license. This exemption has been 
unofficially labeled the "bid and proposal exemption" by the JSF 
program office, because the primary use has been in the process of 
obtaining bids and proposals from foreign contractors. According to Air 
Force officials, the bid and proposal exemption is only certified for 
use to export unclassified technical data to a foreign contractor if it 
is in the interest of the U.S. government. 

Under this exemption, the JSF program allows approved U.S. contractors 
to transfer technical data on proposed work to foreign contractors. The 
Air Force periodically publishes an exemption certification that 
provides scope and limits on the transfers, such as limiting the 
defense services and technical data included in these exemptions to: 

* build to print --a defense article can be produced from engineering 
drawings without any technical assistance from a U.S. exporter--and: 

* build/design to specification --a foreign consignee can design and 
produce a defense article from requirement specifications without any 
technical assistance from the U.S. exporter. 

These exemptions must not include: 

* design methodology --the underlying engineering methods and design 
philosophy utilized; 

* engineering analysis --analytical methods and tools used to design or 
evaluate an article's performance against operational requirements; 
and: 

* manufacturing know-how --information that provides detailed 
manufacturing processes and techniques needed to translate a detailed 
design into a finished article. 

The JSF Program Office must review, authorize in advance, and maintain 
a record of all JSF technical data released under the authority of the 
certification. So far, 350 requests from U.S. contractors to use the 
"bid and proposal exemption" have been certified by the JSF program 
office. 

Addressing Disclosure Issues Early in the Program: 

To prevent potential delays, decisions related to the releasability of 
classified information, technologies, or systems to partner countries 
are addressed as they arise throughout the development of the system. 
While the Air Force, designated as the executive agent for disclosure 
for the JSF program, has a certain level of delegated authority to 
disclose classified military information to foreign governments and 
international organizations, some requests exceed this authority. When 
a request exceeds its delegated authority, the Air Force must submit a 
request to the National Disclosure Policy Committee (NDPC) for an 
exception to the National Disclosure Policy. Other committees that may 
approve transfers include the Low Observable/Counter Low Observable 
Committee that adjudicates requests to sell or transfer stealth 
technology and the Committee on National Security Systems that 
adjudicates requests to sell or transfer cryptologic information and 
technology. 

According to DOD officials, planning for foreign disclosure issues is 
challenging because there are numerous processes among multiple U.S. 
government agencies and committees with delegated authority for 
management of foreign disclosure and export control requirements. There 
are additional difficulties in a cooperative program like the JSF 
program because of the involvement of the international partners early 
in the design phase. In the JSF program, the prime contractor's 
international industrial plan is used to anticipate licensing needs and 
identify when discussions of releasability of classified information, 
technologies, and systems are necessary. In addition, the stakeholder 
meetings initiated by DTSA have provided a mechanism for disclosure 
issues to be discussed prior to the formal submission of a license. As 
a result, these discussions are held as the concerns arise so they do 
not become major obstacles to the program schedule. These practices are 
intended to resolve issues related to the releasability of classified 
information, technologies, and systems and to ensure decisions are made 
by the proper committees in a timely manner to avoid delays to the 
license process. 

For example, in cases where a request for transfer exceeds the Air 
Force's delegated disclosure authority for a particular country, the 
Air Force can seek an exception to the National Disclosure Policy. The 
National Disclosure Policy establishes criteria and conditions for 
releasing classified information, technology, or systems to other 
countries. The NDPC determines if it is in the United States' interest 
to allow for the transfer of information, technologies or systems by 
granting an exception to National Disclosure Policy.[Footnote 13] The 
NDPC is composed of members of the State Department, DOD (Joint Staff, 
Army, Navy, and Air Force) and special members such as Department of 
Energy and the Central Intelligence Agency, among others. In order for 
a disclosure exception to be granted, it must be: 

* consistent with U.S. foreign policy, 

* consistent with U.S. military and security objectives, 

* provided the same degree of security protection by the recipient, 

* beneficial to the U.S., and: 

* limited to information necessary for the purpose. 

Although the NDPC seeks consensus within 10 days of a request, if any 
member votes against approval of a request, there is a negotiation 
period for no more than 20 days. If agreement still cannot be reached, 
the NDPC chairman can make a decision. That decision can also be 
appealed to the Deputy Secretary or Secretary of Defense. As of January 
2006, the NDPC has granted six exceptions, as amended, to the National 
Disclosure Policy for the JSF program. 

Agency Comments: 

A draft of this report was reviewed by the Department of Defense and 
the Department of State. The agencies did not provide written comments 
on the report. We received separate technical comments from the 
Department of Defense and incorporated them as appropriate. 

We are sending copies of this report to interested congressional 
committees; the Secretary of State; the Secretary of Defense; the 
Secretaries of the Navy and the Air Force; and the Commandant of the 
Marine Corps. We will also make copies available to others upon 
request. In addition, this report will be available at no charge on the 
GAO Web site at http://www.gao.gov. 

If you or your staff have any questions regarding this report, please 
contact me at (202) 512-4841. Key contributors to this report are 
listed in appendix I. 

Sincerely yours, 

Signed by: 

Ann Calvaresi-Barr, 
Director, 
Acquisition and Sourcing Management: 

[End of section] 

Appendix I: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Ann Calvaresi-Barr (202) 512-4841: 

Staff Acknowledgments: 

In addition to the individual named above, Tom Denomme, Matthew Ebert, 
Kevin Heinz, Karen Sloan, and Adam Vodraska made key contributions to 
this report. 

[End of section] 

Related GAO Products: 

Tactical Aircraft: Status of the F/A-22 and JSF Acquisition Programs 
and Implications for Tactical Aircraft Modernization. GAO-05-390T. 
March 2005. 

Tactical Aircraft: Opportunity to Reduce Risks in the Joint Strike 
Fighter with Different Acquisition Strategy. GAO-05-271. March 2005. 

Defense Trade: Arms Export Control System in the Post-9/11 Environment. 
GAO-05-234. February 2005. 

Joint Strike Fighter Acquisition: Observations on the Supplier Base. 
GAO-04-554. May 2004. 

Defense Acquisitions: DOD Needs to Better Support Program Managers' 
Implementation of Anti-Tamper Protection. GAO-04-302. March 2004. 

Joint Strike Fighter Acquisition: Managing Competing Pressures Is 
Critical to Achieving Program Goals. GAO-03-1012T. July 2003. 

Joint Strike Fighter Acquisition: Cooperative Program Needs Greater 
Oversight to Ensure Goals Are Met. GAO-03-775. July 2003. 

Defense Trade: Better Information Needed to Support Decisions Affecting 
Proposed Weapons Transfers. GAO-03-694. July 2003. 

Export Controls: Processes for Determining Proper Control of Defense- 
Related Items Need Improvement. GAO-02-996. September 2002. 

Joint Strike Fighter Acquisition: Mature Critical Technologies Needed 
to Reduce Risks. GAO-02-39. October 2001. 

Defense Acquisitions: Decisions on the JSF Will Be Critical for 
Acquisition Reform. GAO/T-NSIAD-00-173. May 2000. 

Joint Strike Fighter Acquisition: Development of Schedule Should Be 
Changed to Reduce Risks. GAO/NSIAD-00-74. May 2000. 

FOOTNOTES 

[1] GAO, Joint Strike Fighter Acquisition: Cooperative Program Needs 
Greater Oversight to Ensure Goals Are Met, GAO-03-775 (Washington, 
D.C.: July 21, 2003) and GAO, Joint Strike Fighter Acquisition: 
Managing Competing Pressures Is Critical to Achieving Program Goals, 
GAO-03-1012T (Washington, D.C.: July 21, 2003). 

[2] The DOD Inspector General is also currently examining the JSF 
licensing process. 

[3] The unofficial term "bid and proposal exemption" is what the JSF 
program office refers to in utilizing a regulatory exemption for 
disclosing technical data pursuant to DOD authorization. 

[4] Section 27 of the AECA, 22 U.S.C. § 2767 (2000). 

[5] This is not necessarily the same as "best value" under the Federal 
Acquisition Regulation (FAR), which is the expected outcome of an 
acquisition that, in the Government's estimation, provides the greatest 
overall benefit in response to the requirement. 48 C.F.R. §§. 2.101 
(2005). Such a procurement is conducted competitively under FAR 
procedures for contracting by negotiation using any one or a 
combination of source selection approaches., 48 C.F.R, §§ 15.002(b), 
15.101 (2005). 

[6] Section 38 of the AECA, 22 U.S.C. § 2778 (2000). 

[7] The statutory authority of the President to regulate exports of 
defense articles and services was delegated to the Secretary of State 
by Executive Order 11958, as amended. The International Traffic In Arms 
Regulations implement that authority 22 C.F.R. parts 120-130 (2005). 

[8] The NDPC is composed of members of the State Department, DOD (Joint 
Staff, Army, Navy, and Air Force) and special members such as 
Department of Energy and the Central Intelligence Agency, among others 
(industry is not represented on the NDPC). 

[9] Such reviews could be related to areas such as low 
observable/counter low observable, anti-tamper, or cryptology. 

[10] 22 C.F.R. § 126.14 (2005). 

[11] The executive agent for disclosure is the Air Force for the JSF 
program. 

[12] 22 C.F.R. § 125.4(b)(1) (2005). 

[13] The NDPC is also responsible for managing the National Disclosure 
Policy, conducting security surveys of foreign governments including 
defense industries, and determining delegated authority among the 
services. 

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