Joint Strike Fighter:
Accelerating Procurement before Completing Development Increases the Government's Financial Risk
GAO-09-303: Published: Mar 12, 2009. Publicly Released: Mar 12, 2009.
The Joint Strike Fighter (JSF) is the Department of Defense's (DOD) most complex and ambitious aircraft acquisition, seeking to simultaneously produce and field three different versions of the aircraft for the Air Force, Navy, Marine Corps, and eight international partners. The total investment required now exceeds $1 trillion--more than $300 billion to acquire 2,456 aircraft and $760 billion in life cycle operating and support costs, according to program estimates. The Ronald W. Reagan National Defense Authorization Act for Fiscal Year 2005 requires GAO to review the JSF program annually for 5 years. This is the fifth and final report under the mandate in which GAO (1) determines the program's progress in meeting cost, schedule, and performance goals; (2) assesses manufacturing results and schedule risks; and (3) evaluates development test plans, progress, and risks. GAO's work included analyses of a wide range of program documents, cost data and interviews with defense and contractor officials.
JSF development will cost more and take longer than reported to the Congress last year, and DOD wants to accelerate procurement. Two recent estimates project additional costs ranging from $2.4 billion to $7.4 billion and 1 to 3 more years to complete development. Despite cost and schedule troubles, DOD wants to accelerate JSF procurement by 169 aircraft from fiscal years 2010 through 2015; this could require up to $33.4 billion in additional procurement funding for those 6 years. DOD plans to procure hundreds of aircraft on cost-reimbursement contracts, magnifying the financial risk to the government. Ongoing manufacturing inefficiencies and parts problems have significantly delayed the delivery of test assets. The prime contractor has extended manufacturing schedules three times and delivered 2 of 13 test aircraft. The program is still recovering from earlier problems that resulted in design changes, late parts deliveries, and inefficient manufacturing. The contractor is taking positive steps to improve operations, the supplier base, and schedule management. Schedule risk analyses could further enhance management insight into problem areas and inform corrective actions. Officials expect to deliver all test aircraft and fix many problems by 2010. By then, DOD plans to have purchased 62 operational aircraft and will be ramping up procurement. Procuring large numbers of production jets while still working to deliver test jets and mature manufacturing processes does not seem prudent, and looming plans to accelerate procurement will be difficult to achieve cost effectively. DOD's revised test plan adds a year to the schedule, better aligns resources and availability dates, and lessens the overlap between development and operational testing, but it still allows little time for error discovery and rework. DOD's decision late in 2007 to reduce test aircraft and flight tests adds to risks while any additional delays in delivering test aircraft will further compress the schedule. The revised plan relies on state-of-the-art simulation labs, a flying test bed, and desk studies to verify nearly 83 percent of JSF capabilities. Only 17 percent is to be verified through flight testing. Despite advances, the ability to so extensively substitute for flight testing has not yet been demonstrated. Significant overlap of development, test, and procurement results in DOD making substantial investments before flight testing proves that the JSF will perform as expected. Under the accelerated procurement plan, DOD may procure 360 aircraft costing an estimated $57 billion before completing development flight testing.
Recommendations for Executive Action
Status: Closed - Implemented
Comments: GAO recommended in 2009 that the Secretary of Defense direct that the Under Secretary of Defense for Acquisition, Technology and Logistics (AT&L) report to the congressional committees regarding the risks associated with cost reimbursable contracts for JSF's low rate production quantities, the program's plans for managing those risks, and plans for transitioning to fixed price contracts. In February 2010, AT&L issued an acquisition decision memorandum stating that future aircraft and engine production contracts should move to fixed-price incentive fee structures as soon as possible. In March 2010, AT&L further noted that it was discussing the issue with JSF prime contractors and professional staff members from all four defense committees reiterating that the Department planned to move to fixed price contracts as soon as possible and earlier than expected. Finally, as part of the Nunn McCurdy certification of the program in June 2010, the Under Secretary of Defense for Acquisition, Technology and Logistics informed the Congress that contracts for low rate production would be fixed price beginning in November 2010. We believe DOD's actions meet the intent of the recommendation.
Recommendation: To enhance congressional oversight, increase the likelihood of more successful program outcomes, and maintain confidence that the program is on track to meet planned cost, schedule, and performance goals, the Secretary of Defense should direct the Under Secretary of Defense for Acquisition, Technology and Logistics to report to the congressional defense committees by October 1, 2009. This report should include, at minimum (1) an explanation of the cost and other risks associated with a cost-reimbursable contract as compared to a fixed-price contract for JSF's future low-rate production quantities, (2) the program's strategy for managing and mitigating risks associated with the use of cost contracts, and (3) plans for transitioning to fixed-price contracts for production to include time frames and criteria.
Agency Affected: Department of Defense
Status: Closed - Implemented
Comments: DOD concurred with this recommendation and implemented it in the summer of 2011. The Undersecretary of Defense for Acquisition Technology and Logistics specifically directed the JSF program office to conduct a comprehensive schedule risk assessment in an Acquisition Decision Memo dated June 2, 2010. The program completed a schedule risk assessment in 2011 as part of the overall process to establish its new acquisition program baseline (APB). The program will continue to do schedule risk assessments every 6 months.
Recommendation: To enhance congressional oversight, increase the likelihood of more successful program outcomes, and maintain confidence that the program is on track to meet planned cost, schedule, and performance goals, the Secretary of Defense should direct the JSF Program Office to ensure that the prime contractor performs periodic schedule risk analyses for the JSF program to provide better insight into management reserve, production efficiencies, and schedule completion to allow for corrections as early as possible.
Agency Affected: Department of Defense