From the U.S. Government Accountability Office, www.gao.gov

Transcript for: F-35 Joint Strike Fighter Improved Cost Estimates
Needed

Description: Audio interview by GAO staff with Cary Russell, Director,
Defense Capabilities and Management 

Related GAO Work: GAO-14-778: F-35 Sustainment: Need for Affordable 
Strategy, Greater Attention to Risks, and Improved Cost Estimates

Released: September 2014

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[ Narrator: ] Welcome to GAO's Watchdog Report, your source for news and
information from the U.S. Government Accountability Office. It’s
September 2014. The F-35 Joint Strike Fighter is intended to replace a
variety of existing aircraft in the Air Force, Navy, and Marine Corps
within the next four years. Sustaining the F-35 program over its
lifecycle carries an estimated cost of approximately $1 trillion. A team
led by Cary Russell, a director in GAO's Defense Capabilities and
Management team, recently reviewed sustainment planning efforts for the
F-35. GAO's Sarah Kaczmarek sat down with Cary to talk about what they
found.

[ Sarah Kaczmarek: ] The F-35 is DOD's most expensive weapons system.
And your report even states it might not be affordable. Could you talk a
bit more about that?

[ Cary Russell: ] Sure. Well the F-35 Joint Strike Fighter is the most
technologically advanced aircraft DOD has built to date. But all this
technology has a very high price tag. The cost to design and build it is
about $400 billion. And on top of that is another $1 trillion in
estimated operating and maintenance costs over the lifecycle of the
F-35. In fact, senior DOD officials have raised concerns about the
affordability. And this does raise significant questions about the
affordability of the F-35 over the long term.

[ Sarah Kaczmarek: ] Let me ask you then, are DOD's current cost
estimates a reliable expectation of how much money this program's
actually going to cost?

[ Cary Russell: ] Well we have found some significant limitations in the
estimates, which raises questions about how much the program will
ultimately cost. DOD has produced two different estimates. One by the
Joint Program Office -- which is the office responsible for designing
and building the aircraft. And the other by DOD's independent cost
assessment office. And both of these estimates have come in around $1
trillion to sustain the F-35 over the lifecycle. We've looked at both of
those estimates, and we've found that generally they're comprehensive in
terms that they include all the types of costs that you might expect to
see in such an estimate. However, we have seen some significant
limitations as well. For example, DOD has not conducted uncertainty
analyses on these estimates in order to gauge the level of confidence
that the estimates actually reflect the most likely costs. It also
hasn't established the range of likely costs or likely variances that
might be expected. So as a result, DOD can't be sure how much risk there
is, that the cost and the estimates will actually model the actual
sustainment costs once the aircraft is operational. In fact, we've
identified some weaknesses and several assumptions that could cause the
actual cost to go higher than the estimate. A good example of that is
fuel rates -- or fuel burn rates. A significant cost driver in the
estimate is the cost of fuel. The F-35 uses an awful lot of fuel, and
the cost estimates have an assumption for the fuel burn rates that will
be expected over the various wide range of operations that the aircraft
is expected to perform. So basically what we're saying is that some of
the more fuel-intensive operations, such as landing on a carrier, taking
off on a carrier, or high-speed maneuvers haven't yet been realized.
That means that the actual fuel cost could be significantly higher than
what we are seeing in the estimates.

[ Sarah Kaczmarek: ] So does GAO then have a calculation or an estimate
of what we think the sustainment costs would be? Or how much they may be
off from what DOD is reporting?

[ Cary Russell: ] No that's very difficult to do. We weren't able to go
through and assess a benchmark of what the actual cost would be. We've
looked at the individual assumptions, but because some of those costs
haven't materialized yet, it's very difficult to pinpoint an exact cost.
Let me give you a good example about the fuel burn rate. We know that a
5% increase, based on the current data of fuel usage can translate into
a cost of over $4 billion over the lifecycle of the F-35, just for the
Air Force fleet alone. So we're able to get some of those specific
costs, but we can't tell across the board what the total cost is going
to be.

[ Sarah Kaczmarek: ] What recommendations is GAO making, then, to help
control costs here?

[ Cary Russell: ] Well we've identified several recommendations to DOD
as it continues to develop its sustainment strategy. For example, we're
recommending that DOD improve the reliability of its sustainment cost
estimates by conducting uncertainty analyses and addressing the
weaknesses and assumptions that we identified. We're also recommending
that DOD establish affordability constraints, so it's in a better
position to know exactly what the military services can afford with
regards to operating and maintaining the F-35. And also we're making
several recommendations to address some risks that we identified to
affordability.

[ Sarah Kaczmarek: ] Finally, what do you see as the bottom line of this
report?

[ Cary Russell: ] Well, as we've talked, the F-35 is the most expensive
and most sophisticated aircraft the DOD has developed to date. So having
an affordable and executable sustainment strategy is critical. Right
now, DOD has some limitations in its ability to know exactly what the
sustainment costs of this F-35 are going to be to maintain and operate
over its lifecycle. And is also limited in being able to know how much
it can really afford. But having this information is extremely important
to decision makers, both inside DOD and outside, in order to effectively
monitor and oversee this highly complex program [music].

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