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Report to the Chairman, Committee on Small Business, House of 
Representatives:

United States General Accounting Office:

GAO:

May 2004:

Joint Strike Fighter Acquisition:

Observations on the Supplier Base:

GAO-04-554:

GAO Highlights:

Highlights of GAO-04-554, a report to the Chairman, Committee on Small 
Business, House of Representatives 

Why GAO Did This Study:

As the Department of Defense’s (DOD) most expensive aircraft program, 
and its largest international program, the Joint Strike Fighter (JSF) 
has the potential to significantly affect the worldwide defense 
industrial base. As currently planned, it will cost an estimated $245 
billion for DOD to develop and procure about 2,400 JSF aircraft and 
related support equipment by 2027. In addition, the program expects 
international sales of 2,000 to 3,500 aircraft. If the JSF comes to 
dominate the market for tactical aircraft as DOD expects, companies 
that are not part of the program could see their tactical aircraft 
business decline. Although full rate production of the JSF is not 
projected to start until 2013, contracts awarded at this point in the 
program will provide the basis for future awards.

GAO was asked to determine the limits on and extent of foreign 
involvement in the JSF supplier base. To do this, GAO (1) determined 
how the Buy American Act and the Preference for Domestic Specialty 
Metals clause apply to the JSF development phase and the extent of 
foreign subcontracting on the program and (2) identified the data 
available to the JSF Program Office to manage its supplier base, 
including information on suppliers of critical technologies.

DOD provided technical comments on a draft of this report, which GAO 
incorporated as appropriate.

What GAO Found:

The Buy American Act and Preference for Domestic Specialty Metals 
clause implementing Berry Amendment provisions apply to the 
government’s purchase of manufactured end products for the JSF program. 
Currently, only one of the three JSF prime contractors is under 
contract to deliver manufactured end products to the government in this 
phase of the program. The Buy American Act will apply to manufactured 
end products delivered to DOD during subsequent phases, but it will 
have little impact on the selection of suppliers because of DOD’s use 
of the law’s public interest exception. DOD, using this exception, has 
determined that it would be inconsistent with the public interest to 
apply domestic preference restrictions to countries that have signed 
reciprocal procurement agreements with the department. All of the JSF 
partners have signed such agreements. DOD must also apply the 
Preference for Domestic Specialty Metals clause to articles delivered 
under JSF contracts. All three prime contractors have indicated that 
they will meet these Specialty Metals requirements.

While the JSF Program Office maintains more information on 
subcontractors than required by acquisition regulations, this 
information does not provide the program with a complete picture of the 
supplier base. The program office collects data on subcontract awards 
for international suppliers and U.S. small businesses. In addition, it 
maintains lists of the companies responsible for developing key or 
critical technologies. However, the lists do not provide visibility 
into the lower-tier subcontracts that have been issued for developing 
or supplying these technologies.

JSF Development Phase Subcontract Awards to the United States and Other 
Partner and Nonpartner Countries: 

[See PDF for image]

[End of table]

www.gao.gov/cgi-bin/getrpt?GAO-04-554.

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Katherine V. Schinasi at 
(202) 512-4841 or schinasik@gao.gov.

[End of section]

Contents:

Letter:

Results in Brief:

Background:

Buy American Act and Specialty Metals Requirements Apply but Will Have 
Little Effect on JSF Subcontracting Decisions:

JSF Program Office Maintains Subcontract Information on Specific Areas 
of Interest:

Conclusions:

Agency Comments and Our Evaluation:

Scope and Methodology:

Appendix I: Joint Strike Fighter Partner Financial Contributions and 
Estimated Aircraft Purchases:

Appendix II: Joint Strike Fighter System Development and Demonstration 
Subcontract Awards:

Tables:

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

Table 2: JSF Development Phase Subcontract Awards to the United States, 
Qualifying Countries, and Nonqualifying Countries:

Table 3: JSF Development Phase Subcontract Awards to the United States 
and Other Partner and Nonpartner Countries:

Figure:

Figure 1: Example of Specialty Metals Clause Application:

Abbreviations:

DCMA: Defense Contract Management Agency:

DFARS: Defense Federal Acquisition Regulation Supplement:

DOD: Department of Defense:

FAR: Federal Acquisition Regulation:

GAO: General Accounting Office:

JSF: Joint Strike Fighter:

United States General Accounting Office:

Washington, DC 20548:

May 3, 2004:

The Honorable Donald A. Manzullo: 
Chairman: 
Committee on Small Business 
House of Representatives:

Dear Mr. Chairman:

As the Department of Defense's (DOD) most expensive aircraft program, 
and its largest international program, the Joint Strike Fighter (JSF) 
has the potential to significantly affect the worldwide defense 
industrial base. As currently planned, it will cost an estimated 
$245 billion for DOD to develop and procure about 2,400 JSF aircraft 
and related support equipment by 2027. In addition, the program expects 
international sales of 2,000 to 3,500 aircraft. If the JSF comes to 
dominate the market for tactical aircraft as DOD expects, companies 
that are not part of the program could see their tactical aircraft 
business decline. Although full-rate production of the JSF is not 
projected to start until 2013, contracts awarded at this point in the 
program will provide the basis for future awards, if companies continue 
to meet cost and schedule goals.

The JSF program is viewed by many within DOD as a model for cooperative 
development and production between DOD and U.S. allies. The eight 
foreign countries participating in the program are contributing over 
$4.5 billion in the development phase. These countries expect to 
realize a significant return on their investment in the form of JSF 
contract awards to their defense industries. To meet these 
expectations, the JSF program office has encouraged the three JSF prime 
contractors--Lockheed Martin, Pratt & Whitney, and General Electric--
and their suppliers to provide opportunities for companies from partner 
countries to bid on contracts. In our July 2003 report on the JSF 
international program, we recommended that the program office collect 
and monitor information on the prime contractors' selection and 
management of suppliers to identify and address any potential conflicts 
between partner expectations and program goals.[Footnote 1]

In July 2003 you requested that we review the extent of foreign 
supplier involvement in the JSF program and its effect on the U.S. 
defense industrial base. To do this, we (1) determined how the Buy 
American Act[Footnote 2] and the Preference for Domestic Specialty 
Metals clause[Footnote 3] implementing Berry Amendment[Footnote 4] 
provisions apply to the development phase of the JSF program and the 
extent of foreign subcontracting on the program; and (2) identified the 
data available to the JSF Program Office to manage its supplier base, 
including information on the suppliers of critical technologies. On 
February 12, 2004, we briefed you and your staff on our work.[Footnote 
5] This report summarizes that briefing and provides updated data on 
JSF subcontract awards. We performed our review from August 2003 to 
March 2004 in accordance with generally accepted government auditing 
standards.

Results in Brief:

The Buy American Act and Preference for Domestic Specialty Metals 
clause implementing Berry Amendment provisions apply to the 
government's purchase of manufactured end products for the JSF program. 
Currently, only one of three JSF prime contractors is under contract to 
deliver manufactured end products to the government in this phase of 
the program. The Buy American Act will apply to manufactured end 
products delivered to DOD during subsequent phases, but its domestic 
preference restrictions will have little impact on the selection of 
suppliers because of DOD's use of the law's public interest exception. 
DOD, using this exception, has determined that it would be inconsistent 
with the public interest to apply domestic preference restrictions to 
countries that have signed reciprocal procurement agreements with the 
department. All of the JSF partners have signed such agreements. DOD 
must also apply the Preference for Domestic Specialty Metals clause to 
articles delivered under JSF contracts. All three prime contractors 
have indicated that they will meet these Specialty Metals requirements. 
Although the Buy American Act will have little impact on the selection 
of suppliers, the large majority of subcontracts (in dollar terms) that 
we obtained data on have been placed with U.S. firms.

While the JSF program office maintains more information on 
subcontractors than is required by acquisition regulations, this 
information does not provide the program with a complete picture of the 
supplier base. The JSF Program Office collects and maintains data on 
subcontract awards for two specific areas of interest--international 
suppliers and U.S. small businesses. In addition, the program office 
maintains lists of the companies responsible for developing the JSF's 
key or critical technologies. The program office is required to compile 
these lists as part of its program protection strategy. However, the 
lists do not provide visibility into the lower-tier subcontracts that 
have been issued for developing or supplying these technologies.

DOD has recognized the need for the JSF Program Office to assume a more 
active role in collecting information on and monitoring the prime 
contractors' selection of suppliers. The Department concurred with a 
recommendation in our July 2003 JSF report that stated this information 
could help the program office identify and address potential conflicts 
between the international program and other program goals. Increased 
visibility into the supplier base could also aid the program office's 
management of other areas and provide DOD with the means to monitor the 
effects of the JSF program on the defense industrial base.

DOD provided only technical comments on a draft of this report, which 
we incorporated as appropriate.

Background:

The JSF program is a joint program between the Air Force, Navy, and 
Marine Corps for developing and producing next-generation fighter 
aircraft to replace aging inventories. The program is currently in year 
3 of an estimated 11-year development phase. The current estimated cost 
for this phase is about $40.5 billion. In October 2001 Lockheed Martin 
was awarded the air system development contract now valued at over 
$19 billion.[Footnote 6] Lockheed Martin subsequently awarded multi-
billion-dollar subcontracts to its development teammates--Northrop 
Grumman and BAE Systems--for work on the center and aft fuselage, 
respectively. Lockheed Martin has also subcontracted for the 
development of major subsystems of the aircraft, such as the landing 
gear system. This is a departure from past Lockheed Martin aircraft 
programs, where the company subcontracted for components (tires, 
brakes, etc.) and integrated them into major assemblies and subsystems 
(the landing gear system).

In addition to the Lockheed Martin contract, DOD has prime contracts 
with both Pratt & Whitney and General Electric to develop two 
interchangeable aircraft engines.[Footnote 7] Pratt & Whitney's 
development contract is valued at over $4.8 billion. Rolls Royce plc 
(located in the United Kingdom) and Hamilton Sundstrand are major 
subcontractors to Pratt & Whitney for this effort. General Electric is 
currently in an early phase of development and has a contract valued at 
$453 million. Rolls Royce Corporation (located in Indianapolis, Ind.) 
is a teammate and 40 percent partner for the General Electric engine 
program. The General Electric/Rolls Royce team is expected to receive a 
follow-on development contract in fiscal year 2005 worth an estimated 
$2.3 billion.

All the prime contracts include award fee structures that permit the 
JSF Program Office to establish criteria applicable to specific 
evaluation periods. If, during its regular monitoring of contract 
execution, the program office identifies the need for more emphasis in 
a certain area--such as providing opportunities for international 
suppliers or reducing aircraft weight--it can establish related 
criteria against which the contractor will be evaluated to determine 
the extent of its award fee.

Buy American Act and Specialty Metals Requirements Apply but Will Have 
Little Effect on JSF Subcontracting Decisions:

The Buy American Act and Preference for Domestic Specialty Metals 
clause implementing Berry Amendment provisions apply to the 
government's purchase of manufactured end products for the JSF program. 
Currently, only one JSF prime contractor--Pratt & Whitney--will deliver 
manufactured end products to the government in this phase of the 
program. Under its current contract, Pratt & Whitney is to deliver 
20 flight test engines, 10 sets of common engine hardware, and certain 
other equipment. The other engine prime contractor, General Electric, 
will not deliver manufactured end products under its current contract. 
However, its anticipated follow-on development contract will include 
the delivery of test engines that will be subject to Buy American Act 
and Specialty Metals requirements. Finally, Lockheed Martin will not 
deliver any manufactured end products under its development contract. 
The company is required to deliver plans, studies, designs, and data. 
Lockheed Martin will produce 22 test articles (14 flight test aircraft 
and 8 ground test articles) during this phase of the program, but these 
are not among the items to be delivered.[Footnote 8]

Although the Buy American Act will apply to manufactured end products 
delivered to DOD during the JSF program, its restrictions will have 
little impact on the selection of suppliers because of DOD's use of the 
law's public interest exception.[Footnote 9] This exception allows the 
head of an agency to determine that applying the domestic preference 
restrictions would be inconsistent with the public interest. DOD has 
determined that countries that sign reciprocal procurement agreements 
with the department to promote defense cooperation and open up defense 
markets qualify for this exception.[Footnote 10] The eight JSF partners 
have all signed these agreements and are considered "qualifying 
countries." Under defense acquisition regulations implementing the Buy 
American Act, over 50 percent of the cost of all the components in an 
end product must be mined, produced, or manufactured in the United 
States or "qualifying countries" for a product to qualify as 
domestic.[Footnote 11] Our analysis of JSF development subcontracts 
awarded by prime contractors and their teammates showed that nearly 
100 percent of contract dollars awarded by the end of 2003 went to 
companies in the United States or qualifying countries. (See 
appendix II for Joint Strike Fighter System Development and 
Demonstration Subcontract Awards to the United States, Qualifying 
Countries, and Nonqualifying Countries).

The Preference for Domestic Specialty Metals clause applies to articles 
delivered by Lockheed Martin, Pratt & Whitney, and General Electric 
under JSF contracts. Generally, this clause requires U.S. or qualifying 
country sources for any specialty metals,[Footnote 12] such as 
titanium, that are incorporated into articles delivered under the 
contract. This restriction must also be included in any subcontract 
awarded for the program. To meet Specialty Metals requirements, 
Lockheed Martin and Pratt & Whitney have awarded subcontracts to 
domestic suppliers for titanium; and Lockheed Martin has also extended 
to its subcontractors the right to buy titanium from its domestic 
supplier at the price negotiated for Lockheed Martin. General Electric 
does not exclusively use domestic titanium in its defense products. 
However, in 1996, the company received a class deviation from the 
clause that allows it to use both domestic and foreign titanium in its 
defense products, as long as it buys sufficient domestic quantities to 
meet DOD contract requirements.[Footnote 13] For instance, if 
25 percent of the General Electric's business in a given year comes 
from DOD contracts, then at least 25 percent of its titanium purchases 
must be procured from domestic sources.[Footnote 14]

Similar to the Buy American Act, the Specialty Metals clause contains a 
provision related to "qualifying country" suppliers. It provides that 
the clause does not apply to specialty metals melted in a qualifying 
country or incorporated in products or components manufactured in a 
qualifying country.[Footnote 15] As a result, a qualifying country 
subcontractor would have greater latitude under the clause than a U.S. 
subcontractor. Specifically, the specialty metals incorporated into an 
article manufactured by a qualifying country may be from any 
source,[Footnote 16] while an article manufactured by a U.S. 
subcontractor must incorporate specialty metals from a domestic or 
qualifying country source. (See fig. 1.):

Figure 1: Example of Specialty Metals Clause Application:

[See PDF for image]

[End of figure]

The data we collected on JSF subcontracts show that by 
December 31, 2003, the prime contractors and their teammates had 
awarded over $14 billion in subcontracts for the development phase 
of the program. These subcontracts were for everything from the 
development of subsystems--such as radar, landing gear, and 
communications systems--to engine hardware, engineering services, 
machine tooling, and raw materials. The recipients of these contracts 
included suppliers in 16 foreign countries and the United States; 
73.9 percent of the subcontracts by dollar value went to U.S. companies 
and 24.2 percent went to companies in the United Kingdom (the largest 
foreign financial contributor to the JSF program). (See appendix I for 
Joint Strike Fighter Partner Financial Contributions and Estimated 
Aircraft Purchases and appendix II for Joint Strike Fighter System 
Development and Demonstration Subcontract Awards). Finally, 2,597 of 
4,488 subcontracts or purchase orders we obtained information on went 
to U.S. small businesses. Although these businesses received only 
2.1 percent of the total dollar value of the subcontracts awarded, DOD 
and contractor officials have indicated that all companies in the 
development phase are in good position to receive production contracts, 
provided that cost and schedule goals are met.[Footnote 17]

The gathering of these data, which most of the contractors have made 
available to the JSF Program Office and DCMA, has increased the breadth 
of knowledge available to DOD and the program office on the JSF 
supplier base. Neither DOD nor the JSF program office previously 
collected this information because, according to program officials, 
this information is not necessary in order to manage the program. At 
least one major subcontractor, on its own initiative, is now separately 
tracking JSF subcontracts on a monthly basis.

JSF Program Office Maintains Subcontract Information on Specific Areas 
of Interest:

While the JSF Program Office maintains more information on 
subcontractors than required by acquisition regulations, this 
information does not provide the program with a complete picture of the 
supplier base. The JSF Program Office collects and maintains data on 
subcontract awards for specific areas of interest--international 
suppliers and U.S. small businesses. The program office has used the 
award fee process to incentivize the prime contractors to report on 
both small business awards through the third tier and subcontract 
opportunities and awards to international suppliers.[Footnote 18] In 
addition, the program office has some visibility over certain 
subcontracts through mechanisms such as monthly supplier 
teleconferences, integrated product teams, informal notifications of 
subcontract awards, and DCMA reports on the performance of major 
suppliers. Finally, the JSF Program Office maintains limited 
information on the companies responsible for supplying critical 
technologies.

The JSF Program Office's information on the suppliers of key or 
critical technologies is based on lists that the prime contractors 
compile as part of the program protection strategy. These program 
protection requirements--not the supplier base--are the focus of DOD's 
and the JSF Program Office's approach toward critical technologies. DOD 
acquisition regulations require program managers to maintain lists of a 
program's key technologies or capabilities to prevent the unauthorized 
disclosure or inadvertent transfer of leading-edge technologies and 
sensitive data or systems. The lists include the names of key 
technologies and capabilities, the reason the technology is sensitive 
and requires protection, and the location where the technology resides. 
The lists do not provide visibility into the lower-tier subcontracts 
that have been issued for developing or supplying these technologies. 
Given the limited supplier information these lists provide, the JSF 
Program Office is aware of two instances where a foreign company is the 
developer or supplier of an unclassified critical technology for the 
program.[Footnote 19] In both cases, a U.S. company is listed as a 
codeveloper of the technology.

Conclusions:

The JSF program has the potential to significantly impact the U.S. 
defense industrial base. Suppliers chosen during the JSF development 
phase will likely remain on the program through production, if they 
meet cost and schedule targets, and will reap the benefits of contracts 
potentially worth over $100 billion. Therefore, contracts awarded now 
will likely affect the future shape of the defense industrial base.

The JSF supplier base information currently maintained by the JSF 
Program Office is focused on specific areas of interest and does not 
provide a broad view of the industrial base serving the program. In our 
July 2003 report, we recommended that the JSF Program Office assume a 
more active role in collecting information on and monitoring the prime 
contractors' selection of suppliers to address potential conflicts 
between the international program and other program goals. DOD 
concurred with our recommendation, but did not specify how it plans to 
collect and monitor this information. Collecting this information will 
be an important first step for providing DOD with the knowledge base it 
needs to assess the impact of the program on the industrial base.

Agency Comments and Our Evaluation:

We provided DOD a draft of this report for review. DOD provided only 
technical comments, which we incorporated as appropriate.

Scope and Methodology:

To obtain information on the Buy American Act and the Preference for 
Domestic Specialty Metals clause implementing Berry Amendment 
provisions, we reviewed applicable laws and regulations. We interviewed 
DOD officials in the JSF Program Office, the Office of the Deputy Under 
Secretary of Defense (Industrial Policy), the Office of the Director of 
Defense Procurement and Acquisition Policy, and the Defense Contract 
Management Agency to obtain information on the applicability of the Buy 
American Act and other domestic source restrictions, critical foreign 
technologies, and DOD oversight of subcontracts. We reviewed prime 
contracts for the JSF program and met with JSF prime contractors, 
including Lockheed Martin and the engine contractors, Pratt & Whitney 
and General Electric, to discuss the applicability of the Buy American 
Act and other domestic source restrictions and to collect data on 
first-tier subcontract awards for the System Development and 
Demonstration phase. Furthermore, we collected data on subcontract 
awards for the JSF System Development and Demonstration phase from 
companies that were identified as partners or teammates by Lockheed 
Martin, Pratt & Whitney, and General Electric. These companies included 
Northrop Grumman, BAE Systems, Rolls Royce plc, Hamilton Sundstrand, 
and Rolls Royce Corporation. We did not independently verify 
subcontract data but, instead, relied on DCMA's reviews of contractors' 
reporting systems to assure data accuracy and completeness. We 
performed our review from August 2003 to March 2004 in accordance with 
generally accepted government auditing standards.

As arranged with your office, unless you publicly announce its contents 
earlier, we plan no further distribution of this report until 30 days 
after the date of this report. We will then send copies of this report 
to interested congressional committees; the Secretary of Defense; the 
Secretaries of the Navy and the Air Force; the Commandant of the Marine 
Corps; and the Director, Office of Management and Budget. 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; or Thomas J. Denomme, Assistant Director, 
at 202-512-4287. Major contributors to this report were Robert L. 
Ackley, Shelby S. Oakley, Sylvia Schatz, and Ronald E. Schwenn.

Sincerely yours,

Signed by: 

Katherine V. Schinasi, 
Managing Director: 
Acquisition and Sourcing Management:

[End of section]

Appendix I: Joint Strike Fighter Partner Financial Contributions and 
Estimated Aircraft Purchases:

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

Dollars in millions.

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: 5.1%; 
Production: Projected quantities[B]: 150; 
Production: Percentage of total quantities: 4.7%. 

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%; 
Production: Projected quantities[B]: 131; 
Production: Percentage of total quantities: 4.1%. 

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: 2.0%; 
Production: Projected quantities[B]: 85; 
Production: Percentage of total quantities: 2.7%. 

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%; 
Production: Projected quantities[B]: 100; 
Production: Percentage of total quantities: 3.2%. 

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: 0.4%; 
Production: Projected quantities[B]: 100; 
Production: Percentage of total quantities: 3.2%. 

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%; 
Production: Projected quantities[B]: 48; 
Production: Percentage of total quantities: 1.5%. 

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%; 
Production: Projected quantities[B]: 48; 
Production: Percentage of total quantities: 1.5%. 

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%; 
Production: Projected quantities[B]: 60; 
Production: Percentage of total quantities: 1.9%. 

Total partner; 
System development and demonstration: Partner level: ; 
System development and demonstration: Financial contributions[A]: 
$4,535; 
System development and demonstration: Percentage of total costs: 11.2%; 
Production: Projected quantities[B]: 722; 
Production: Percentage of total quantities: 22.8%. 

United States; 
System development and demonstration: Financial contributions[A]: 
$35,965; 
System development and demonstration: Percentage of total costs: 88.8%; 
Production: Projected quantities[B]: 2,443; 
Production: Percentage of total quantities: 77.2%. 

Sources: 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]

[End of section]

Appendix II: Joint Strike Fighter System Development and Demonstration 
Subcontract Awards:

Table 2: JSF Development Phase Subcontract Awards to the United States, 
Qualifying Countries, and Nonqualifying Countries:

Countries: United States; 
Subcontract awards: $10,361,670,423; 
Percentage: 73.9%. 

Countries: Qualifying countries: United Kingdom, Italy, Netherlands, 
Turkey, Australia, Norway, Denmark, Canada, France, Germany, Israel, 
Spain, Switzerland; 
Subcontract awards: $3,664,193,630; 
Percentage: 26.1%. 

Countries: Nonqualifying countries: India, Poland, Russia; 
Subcontract awards: $496,071; 
Percentage: 0%. 

Countries: Total subcontract awards; 
Subcontract awards: $14,026,360,123[A]; 
Percentage: 100.0%. 

Sources: JSF prime contractors--Lockheed Martin, Pratt & Whitney, and 
General Electric--and their self-identified teammates--BAE Systems, 
Northrop Grumman, Rolls Royce plc, Hamilton Sundstrand, and Rolls Royce 
Corporation (data); GAO (analysis).

Note: Information is based on subcontracts awarded for the System 
Development and Demonstration phase between October 26, 2001 and 
December 31, 2003. These awards include the first-tier of the JSF 
supplier base and portions of the second-tier.

[A] Total does not add due to rounding.

[End of table]

Table 3: JSF Development Phase Subcontract Awards to the United States 
and Other Partner and Nonpartner Countries:

Countries: United States; 
Subcontract awards: $10,361,670,423; 
Percentage: 73.9%. 

Countries: Partner countries: United Kingdom, Italy, Netherlands, 
Turkey, Australia, Norway, Denmark, Canada; 
Subcontract awards: $3,620,103,309; 
Percentage: 25.8%. 

Countries: Nonpartner countries: France, Germany, India, Israel, 
Poland, Russia, Spain, Switzerland; 
Subcontract awards: $44,586,392; 
Percentage: 0.3%. 

Countries: Total subcontract awards; 
Subcontract awards: $14,026,360,123[A]; 
Percentage: 100.0%. 

Sources: JSF prime contractors--Lockheed Martin, Pratt & Whitney, and 
General Electric--and their self-identified teammates--BAE Systems, 
Northrop Grumman, Rolls Royce plc, Hamilton Sundstrand, and Rolls 
Royce Corporation (data); GAO (analysis).

Note: Information is based on subcontracts awarded for the System 
Development and Demonstration phase between October 26, 2001 and 
December 31, 2003. These awards include the first-tier of the JSF 
supplier base and portions of the second-tier.

[A] Total does not add due to rounding. 

[End of table]

FOOTNOTES

[1] U.S. General Accounting Office, Joint Strike Fighter Acquisition: 
Cooperative Program Needs Greater Oversight to Ensure Goals Are Met, 
GAO-03-775 (Washington, D.C.: July 21, 2003).

[2] 41 U.S.C. sections 10a-10d.

[3] Defense Federal Acquisition Regulation Supplement (DFARS) 252.225-
7014, Alternate I.

[4] 10 U.S.C. section 2533a.

[5] The February 12 briefing reported on four questions: (1) How do the 
Buy American Act and Berry Amendment apply to the development phase of 
the JSF program? (2) How does DOD oversee JSF subcontracting? (3) What 
JSF subcontracts have been awarded? (4) What foreign technologies are 
critical to the JSF program? These four questions have been 
consolidated into two objectives for this report.

[6] Lockheed Martin's development contract has been modified multiple 
times since it was signed in October 2001. These modifications have 
increased the value of the base contract by hundreds of millions of 
dollars.

[7] The F135 (Pratt & Whitney) and F136 (General Electric/Rolls Royce 
Corporation) engines integrate with common propulsion system 
components to form the complete JSF propulsion systems. In addition to 
the F135 engine, Pratt & Whitney is also responsible for developing 
certain common propulsion system components that will interface with 
both engine cores. These include the lift fan system, roll posts, three 
bearing swivel duct, conventional exhaust duct, and exhaust nozzles, 
among other components.

[8] According to program officials, the 22 test articles acquired under 
the Lockheed Martin development contract are government-owned assets in 
possession of the contractor. Under a cost-type contract, the 
government acquires ownership as it pays the contractor.

[9] 41 U.S.C. section 10d.

[10] "Qualifying countries" include Australia, Belgium, Canada, 
Denmark, Egypt, France, Germany, Greece, Israel, Italy, Luxembourg, the 
Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, and 
the United Kingdom. Acquisitions from Austria and Finland may also be 
exempted from the Buy American Act on a case-by-case basis. DFARS 
225.872-1.

[11] To comply with the Buy American Act, companies must certify in 
their contract proposals that the manufactured end products they are 
offering to the U.S. government qualify as domestic end products. To 
qualify as a domestic end product, the product must meet two criteria. 
The end product must be manufactured in the United States, and the cost 
of its U.S. and qualifying country components must exceed 50 percent of 
the cost of all its components. DFARS 225.101.

[12] Specialty metals are defined as certain metal alloys, steel 
alloys, titanium and titanium alloys, and zirconium and zirconium base 
alloys produced in the United States, U.S. possessions, or Puerto Rico. 
U.S. possessions include American Samoa, the Commonwealth of Northern 
Mariana Islands, Guam, and the U.S. Virgin Islands, among other areas.

[13] Class deviations are deviations from the Federal Acquisition 
Regulation or the Defense Federal Acquisition Regulation Supplement 
that affect more than one contract action. FAR 1.404.

[14] According to the Defense Contract Management Agency (DCMA), in 
granting this class deviation, it determined that the DFARS specialty 
metals clause was more stringent than the statute it implements. DCMA 
granted this class deviation on a "permanent" basis and is responsible 
for monitoring General Electric's compliance with its terms.

[15] These are the same qualifying countries that are mentioned in 
reference to the Buy American Act. (See footnote 10.)

[16] Potential sources would not include those prohibited under FAR 
52.225-13, Restrictions on Certain Foreign Purchases. Such prohibited 
sources would include, for example, Cuba and North Korea.

[17] The JSF Program Office has requested that the prime contractors 
strive for 20-30 percent small business participation through the third 
tier of the supplier base for the life of the JSF program (including 
the development phase and production). This small business 
participation percentage is based on "eligible subcontract dollars" and 
does not include certain subcontracts, such as those awarded to or 
awarded by international suppliers, in its calculations. We included 
all the subcontracts and purchase orders we obtained information on in 
our small business calculations.

[18] This small business reporting includes information on six small 
business categories and subcategories--small disadvantaged businesses, 
woman-owned small businesses, historically underutilized business 
zones, historically black colleges and universities/minority 
institutions, veteran-owned small businesses, and service-disabled 
veteran-owned small businesses.

[19] We did not obtain information on classified critical technologies 
as part of this review.

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