Better Cost Estimates Needed for Extending the Service Life of Selected F-16s and F/A-18s
GAO-13-51: Published: Nov 15, 2012. Publicly Released: Nov 15, 2012.
What GAO Found
The Air Force plans to upgrade and extend the service life of 300 F-16 aircraft and the Navy 150 F/A-18 aircraft, at a combined cost estimated at almost $5 billion in fiscal year 2013 dollars.
The Air Force plans to extend the service life of selected F-16s by 2,000 flying hours each as well as install capability upgrades such as an improved radar. The Air Force estimates that it will complete this work by 2022 at a cost of $2.61 billion. About 28 percent of the projected costs are included in the Air Force's spending plans through 2017, with the remainder expected to be incurred in 2018-2022.
The Navy plans to extend the service life of selected F/A-18s by 1,400 flying hours each and may install capability upgrades on some of the 150 aircraft--such as adding the ability to integrate with newer aircraft. The Navy projects that it will complete the life extension by 2018 at a cost of $2.19 billion, with most of these costs included in its spending plans through 2017, but costs associated with any upgrades are not included in the Navy estimate or in its spending plans.
Air Force and Navy officials told GAO that they could ultimately extend the service life of up to 650 F-16s and 280 F/A-18s if needed to attain desired inventory levels.
The Air Force's and Navy's cost estimates to upgrade and extend the service life of selected fighter aircraft exhibit some characteristics of a high-quality cost estimate but do not reflect all potential costs. The estimates were: well-documented since they identified data sources and methodologies; accurate since they accounted for inflation and were checked for errors; and mostly comprehensive since they included the work planned and identified key assumptions. However, the estimates were not fully credible in part because they did not assess the extent to which the total costs could change if additional work is done or more aircraft are included in the programs. Another factor affecting the credibility of the estimates is that they have not been compared to an independently developed estimate. GAO's past work has shown that such an independent cost estimate is one of the best validation methods since an independent cost estimate tends to be higher and more accurate than a program office estimate. Air Force and Navy officials told GAO that they use Department of Defense and military department guidance that allows for some variation in how the estimates are developed depending on the dollar value and maturity of the program. However, these programs--which are critical to maintain fighter capability and capacity as current inventory ages--total almost $5 billion and the costs will increase if program quantities and scope increase. Without fully credible cost estimates, including an analysis of how much total costs may increase, decision makers will not have visibility into the range of potential costs, which could hinder their ability to formulate realistic budgets and make informed investment decisions.
Why GAO Did This Study
Fighter aircraft are important to achieve and maintain air dominance during combat operations as well as to protect the homeland. DOD plans to replace many of its current fighter fleet with the F-35; however, the F-35 program has experienced numerous delays and cost increases. To maintain fighter capabilities and capacity, the Air Force and Navy have decided to upgrade and extend the service life of selected F-16 and F/A-18 aircraft. In this context, two subcommittees of the House Armed Services Committee asked GAO to (1) describe the Air Force and Navy plans to upgrade and extend the service life of selected F-16 and F/A-18 aircraft; and (2) assess the extent to which cost estimates for these upgrades and life extensions exhibit characteristics of a high-quality cost estimate. GAO obtained documentation of the plans and estimates, compared the estimates to best practices outlined in the GAO Cost Estimating Guide, and assessed factors that could affect total costs.
What GAO Recommends
GAO recommends that the Air Force and Navy follow all best practices to enhance the credibility of the cost estimates for the F-16 and F/A-18 upgrades and life extensions including an assessment of the potential range of costs and seeking independent cost estimates.
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Recommendations for Executive Action
Status: Closed - Implemented
Comments: DOD concurred with the recommendation. In July 2014, DOD canceled the capability upgrade program as part of the fiscal year 2015 budget development process. In May 2016, the Air Force held a milestone review for the F-16 service life extension program. To support this review, the Air Force revised its cost estimate. The revised cost estimate included a sensitivity analysis on changes in cost for various quantities of aircraft. Also, the Air Force Cost Analysis Agency developed an independent cost estimate which was close to, and thereby validated, the Program Office's estimate. After reviewing the documentation on the revised estimate, sensitivity analysis, and independent estimate, we concluded that the Air Force?s actions meet the intent of this recommendation.
Recommendation: To improve future updates of Air Force and Navy cost estimates for upgrading and extending the service life of selected F-16s and F/A-18s and to improve the ability of decision-makers to assess the potential total costs, the Secretary of Defense should direct the Secretary of the Air Force to update its cost estimates, and in doing so: (1) include in its sensitivity analysis an assessment of the range of possible costs if the capability-upgrade and service-life extension programs are expanded to more than 300 aircraft including up to the maximum of 650 aircraft, and (2) obtain an independent review of the updated cost estimates.
Agency Affected: Department of Defense
Status: Closed - Implemented
Comments: DOD concurred with these recommendations. The Navy updated its estimate in February 2014 which included a sensitivity analysis and independent review. The sensitivity analyses included extending the service life to varying numbers of flight hours, configurations of capability upgrades, and estimates for changes due to obsolescence. Also the Navy obtained an independent review in accordance with department policy and the results were reviewed by the Deputy Assistant Secretary of the Navy for Aviation.
Recommendation: To improve future updates of Air Force and Navy cost estimates for upgrading and extending the service life of selected F-16s and F/A-18s and to improve the ability of decision-makers to assess the potential total costs, the Secretary of Defense should direct the Secretary of the Navy to update its cost estimates and in doing so: (1) include in its sensitivity analysis an assessment of the range of possible costs for extending the service life of other nonstructural components that are becoming obsolete and capability upgrades that may be required for some of the 150 aircraft, and (2) obtain an independent review of the updated cost estimates.
Agency Affected: Department of Defense