Joint Strike Fighter:

Implications of Program Restructuring and Other Recent Developments on Key Aspects of DOD's Prior Alternate Engine Analyses

GAO-11-903R: Published: Sep 14, 2011. Publicly Released: Sep 19, 2011.

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After supporting a Joint Strike Fighter (JSF) acquisition strategy that called for a competitive engine development of the F135 and F136 engines, the Department of Defense (DOD) stopped requesting funding for the F136 alternate engine in its fiscal year 2007 budget request, but the Congress continued to fund it through the 2010 budget. In February 2010, DOD projected that it would cost an additional $2.9 billion through 2016 to support an alternate engine program. DOD decided that an engine competition would not likely generate enough long-term savings to justify this up-front investment and subsequently terminated the alternate engine program. In 2010, at congressional request, we reviewed the basis for DOD's $2.9 billion funding projection and reported that the projection did not include the same level of fidelity and precision normally associated with a detailed, comprehensive cost estimate and that the amount of up-front investment needed could be lower if two key assumptions in DOD's analysis were changed. Moreover, since DOD's projection and our last review, several fundamental changes in the JSF aircraft and engine programs have taken place. We examined the potential implications of these changes to the $2.9 billion funding projection. We also examined the potential implications for DOD's broader cost-benefit analysis that captures the long-term costs and benefits of the competitive engine program.

In early 2010, DOD determined that it would need an additional $2.9 billion to support an alternate engine program up to the point where it believed it could begin competition in 2017. Since then, there have been major changes to the JSF aircraft and engine program costs, schedules, and procurement plans. Specifically, (1) defense officials substantially restructured the JSF program, adding cost and time to development and changing the procurement profile to buy fewer aircraft and engines over the next 5 years; (2) more engine production cost data are available; and (3) the F136 alternate engine contractor offered to fund development costs for 2011 and 2012 with its own corporate funds. These and other changes could affect portions of the department's $2.9 billion projection and would have to be addressed and quantified in order to make a more up-to-date and complete funding projection. While there have been significant changes made to the JSF aircraft and engine programs, DOD has not updated its funding projection and has no plans to do so. DOD has not done a complete analysis of the potential life-cycle costs and benefits of the competitive engine strategy in over 4 years. A cost-benefit analysis is an important tool for making investment decisions. DOD's $2.9 billion funding projection through 2016 comprises only a portion of the information that would be needed for such an analysis. DOD maintains that while there have been significant changes made to the JSF aircraft and engine programs, there is still not a compelling business case to continue supporting both engines, and DOD does not plan to update its cost-benefit analysis. Thus, whether a more current, comprehensive analysis that includes all life-cycle costs, benefits, and risks would result in a more definitive business case--one way or another--remains an unanswered question. In commenting on a draft of this report, DOD reiterated its position that the up-front costs to support the alternate engine were not affordable and that a new analysis reflecting recent changes would not likely alter its position. We continue to believe that acquisition decisions should weigh both near-term and long-term costs and benefits and that an updated analysis would provide important information for making these decisions. We are not making recommendations in this report.

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