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Testimony:

Before the Subcommittee on Tactical Air and Land Forces, Committee on 
Armed Services, House of Representatives:

United States General Accounting Office:

GAO:

For Release on Delivery Expected at 9: a.m. EST:

Thursday, March 25, 2004:

Tactical Aircraft:

Status of the F/A-22 and Joint Strike Fighter Programs:

Statement of Allen Li, Director, Acquisition and Sourcing Management:

GAO-04-597T:

GAO Highlights:

Highlights of GAO-04-597T, a testimony before the Subcommittee on 
Tactical Air and Land Forces, Committee on Armed Services, House of 
Representatives 

Why GAO Did This Study:

The Department of Defense’s (DOD) two major tactical aircraft fighter 
programs, the F/A-22 and the Joint Strike Fighter, represent an 
investment of about $280 billion. Problems in the F/A-22 development 
program have led to a 10-year delay in delivering the initial 
capability and development cost increases of $16 billion. The Joint 
Strike Fighter, which experienced problems early in the program, is 
now at a critical crossroad in development. Any discussion of DOD’s 
sizeable investment that remains in these programs must also be viewed 
within the context of the fiscal imbalance facing the nation within 
the next 10 years.

GAO was asked to testify on the status of the F/A-22 and draw 
comparisons between both F/A-22 and Joint Strike Fighter programs’ 
acquisition approaches.


What GAO Found:

The F/A-22 program has experienced several significant challenges 
since it began development in 1986. First, the Air Force had 
originally planned to buy 750 aircraft, but it now estimates it can 
only afford about 218 aircraft. Second, in order to develop an 
expanded air-to-ground attack capability, DOD estimates that the Air 
Force will need $11.7 billion in modernization funding. Third, the Air 
Force has determined that new avionics computer processors and 
architecture are needed to support most planned enhancements, which 
will further increase program costs and risk. Lastly, the development 
test program continues to experience problems and risks further delays 
primarily due to avionics failures and problems meeting reliability 
requirements.

Because of the risks of future cost increases and schedule delays, a 
congressional subcommittee requested that DOD provide business case 
information on the F/A-22. However, the information DOD provided did 
not address how many aircraft the Air Force needs to accomplish its 
missions, how many the Air Force can afford considering the full life-
cycle costs, whether investments in new air-to-ground capabilities are 
needed, and what are the opportunity costs associated with purchasing 
any proposed quantities of this aircraft. 

The Joint Strike Fighter program started system development and 
demonstration in 2001 and has already encountered some cost and 
schedule problems. It is now working toward maturing the aircraft 
design and is considering delays in its critical design reviews to 
attain greater knowledge before making a decision to increase its 
investment significantly. In contrast, the F/A-22 program encountered 
poor cost and schedule outcomes because it had not gathered the 
appropriate knowledge at critical junctures in the program. The Joint 
Strike Fighter program is still early in its development program, with 
a greater opportunity to efficiently apply knowledge to its critical 
investment decisions. 

GAO is not making recommendations. In a recently issued report on the 
F/A-22 (GAO-04-391), GAO recommended that DOD complete a new business 
case for the F/A-22 to justify its need and the quantities necessary 
and affordable to carry out its mission. GAO also recommended that DOD 
provide plans and costs for resolving problems identified during 
initial operational testing to the defense committees before the DOD’s 
full rate production decision. DOD partially concurred with both 
recommendations.

www.gao.gov/cgi-bin/getrpt?GAO-04-597T.

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

[End of section]

Mr. Chairman and Members of the Subcommittee:

I am pleased to be here today to participate in the Subcommittee's 
hearing on the status of the Department of Defense's (DOD) major 
tactical aircraft fighter programs, the F/A-22 and the F-35, also known 
as the Joint Strike Fighter (JSF). Both programs are intended to 
replace aging tactical fighter aircraft with highly advanced, stealthy 
aircraft. The F/A-22 and JSF represent a substantial potential 
investment for DOD--about $280 billion.

Any discussion of DOD's sizeable investment that remains in the F/A-22 
and JSF programs must also be viewed within the context of the fiscal 
imbalance facing the nation within the next 10 years. There are 
important competing priorities, both within and external to DOD's 
budget, that require a sound and sustainable business case for DOD's 
acquisition programs based on clear priorities, comprehensive needs 
assessments, and a thorough analysis of available resources. Funding 
specific programs or activities will undoubtedly create shortfalls in 
others.

The federal government's future resource needs are staggering. For 
example, efforts to ensure homeland security has resulted in the 
creation of the Department of Homeland Security--the largest government 
reorganization in more than 50 years, involving 170,000 employees and a 
$40 billion budget. Also, legislation was enacted to modernize the 
Medicare program to include a prescription drug benefit, at a potential 
cost of more than $500 billion over the next 10 years alone. Given 
these and other important national priorities and relatively weak 
economic performance, historic budget deficits have returned and are 
projected to continue for the next decade. These important demands on 
our nation increasingly require policymakers to distinguish wants from 
needs and to judge what the nation can afford, both now and in the 
longer term.

These two fighter programs require substantial investments as shown in 
the figure 1. They must compete inside DOD with other important DOD 
major acquisition investments that will likely dominate future budget 
calls, including missile defense systems, the Army's Future Combat 
Systems, and larger investments in space programs to transform 
communication, intelligence, surveillance and reconnaissance 
capabilities.

Figure 1: Current F/A-22 and Joint Strike Fighter Assumptions for 
Development and Procurement:

[See PDF for image]

[End of figure]

My statement today is primarily based on our recently issued report on 
the F/A-22.[Footnote 1] Specifically, I will highlight significant 
changes in the development program, the readiness to begin initial 
operational testing and full rate production, and the sufficiency of 
DOD's current business case to justify the need for and the 
affordability of quantities necessary to carry out intended missions. 
Additionally, based on more limited work we have completed on the JSF, 
I will discuss the status of the JSF program, make some observations 
based on broad comparisons of its current acquisition approach to the 
acquisition experiences of the F/A-22 program, and identify additional 
challenges attendant with international cooperation. We performed the 
work associated with this statement in accordance with generally 
accepted government auditing standards.

In summary, because of the many changes that have occurred in the F/
A-22 program and the remaining investment still to be made, we believe 
decision makers would benefit from a new business case that justifies 
the need for the full air-to-air and air-to-ground capabilities and the 
quantities needed that DOD can afford. Regarding the JSF, we understand 
that program managers are considering a delay in its critical design 
review to attain greater design stability in its airframe. In addition 
to seeking greater design stability, leadership in DOD could reap the 
benefits of its new acquisition policy that embraces the best practice 
concepts of knowledge-based, evolutionary acquisition by actively 
promoting and maintaining a disciplined approach to its acquisitions 
throughout the remaining critical decision points over the next few 
years.

Background:

The Air Force began the F/A-22 development program in 1986 and expected 
to complete development in 9 years for an estimated cost of 
$12.6 billion. Today, after being in development for almost two 
decades, the estimated development cost is $28.7 billion, a 127 percent 
increase. The average unit procurement cost to buy the F/A-22 has also 
increased 122 percent. The result of these changes has been a loss of 
buying power that has reduced the initial buy quantity from 750 to 277 
aircraft. Table 1 shows the changes in the development program from 
1986 to 2002.

Table 1: Changes in F/A-22 Program Estimates Since It Started in 1986:

Development cost; 
1986--Start of demonstration and validation: $12.6 billion; 
1991--Start of engineering and manufacturing development: $19.5 
billion; 
2002--Current available Selected Acquisition Report information: $28.7 
billion.

Development cycle time; 
1986--Start of demonstration and validation: 9 years; 
1991--Start of engineering and manufacturing development: 16 years; 
2002--Current available Selected Acquisition Report information: 19 
years.

Development test and evaluation; 
1986--Start of demonstration and validation: Not estimated; 
1991--Start of engineering and manufacturing development: 51 months; 
2002--Current available Selected Acquisition Report information: 99 
months.

Initial operational capability; 
1986--Start of demonstration and validation: March 1996; 
1991--Start of engineering and manufacturing development: Not shown in 
report; 
2002--Current available Selected Acquisition Report information: 
December 2005.

Quantities; 
1986--Start of demonstration and validation: 750; 
1991-- Start of engineering and manufacturing development: 648; 
2002--Current available Selected Acquisition Report information: 
276[A]. 

Sources: Selected Acquisition Reports and Air Force documents.

Note: All references to F/A-22 costs in this report are in then-year 
dollars in order to maintain consistent reporting with our prior 
reports on the F/A-22 aircraft.

[A] In fiscal year 2003, the Air Force increased the number of F/
A-22 aircraft it planned to buy from 276 to 277.

[End of table]

We have reported in the past that the F/A-22 acquisition approach was a 
major contributor to the cost increases and delays in schedule that led 
to reduced buying power. In testimony last year,[Footnote 2] we 
identified lessons to be learned in the F/A-22 program, which did not 
follow a knowledge-based acquisition approach used by successful 
commercial firms. Leading commercial firms that we studied employ an 
acquisition approach that evolves a product to its ultimate 
capabilities on the basis of mature technologies and available 
resources. These firms then ensure that high levels of knowledge exist 
at three critical junctures in a development program. First, a match 
must be made between a customer's needs and the available resources--
technology, engineering knowledge, time, and funding--before a new 
development program is launched. Second, a product's design must 
demonstrate its ability to meet performance requirements and be stable 
about midway through development. Third, the developer must show that 
the product can be manufactured within cost, schedule, and quality 
targets and is demonstrated to be reliable before production begins. 
DOD issued new acquisition policy in May 2003 that governs the 
development of major acquisition systems. This new policy embraces the 
best practice concepts of knowledge-based, evolutionary acquisition and 
represents a good first step toward achieving better outcomes from 
major acquisition programs.

The initial F-22 acquisition strategy did not employ an evolutionary 
approach. Instead, it sought to develop revolutionary capabilities from 
the outset of the program taking on significant risk and onerous 
technology challenges. Three critical technologies were immature at the 
start of the program--low-observable materials, propulsion, 
and integrated avionics. Integrated avionics has been a source of major 
schedule delays and cost increases in the F/A-22 program. Starting the 
program with these immature technologies prevented the program from 
knowing cost, schedule, and performance ramifications until late in the 
development program, after significant investments had already been 
made. Efforts to mature technology cascaded into development, delaying 
attainment of design and production maturity.

The JSF, which started in 1996, is not as far along in its development, 
but is experiencing problems that could similarly threaten DOD's 
investment. It is at a critical crossroad, one that, based on our prior 
work, was approached and passed by several other DOD programs without 
capturing the appropriate knowledge for the sizable investment 
decisions being made. While the JSF program started with higher risks 
by failing to mature its technologies, it is considering a delay to its 
investment decision that determines the need to invest in tooling, 
labor, and facilities to manufacture aircraft until the airframe design 
has become more stable.

Significant Changes Require Additional Investments to Expand F/A-22 
Capability:

The basic mission of the F/A-22, initially focused on air-to-air 
dominance, has changed to include a significantly greater emphasis on 
attacking ground targets. To accomplish this expanded mission, the Air 
Force will need additional investments to develop and expand air-to-
ground attack capabilities for the F/A-22. Moreover, the efforts to 
expand its capability will also add risks to an already challenged 
program. To accommodate planned changes will also require a new 
computer architecture and processor to replace the current less capable 
ones.

The expanded air-to-ground attack capability will allow the F/A-22 to 
engage a greater variety of ground targets, such as surface-to-air 
missile systems, that have posed a significant threat to U.S. aircraft 
in recent years. This was not previously considered a primary role for 
the aircraft as it was intended to be primarily an air-to-air fighter 
to replace the F-15. From the outset the F/A-22 was built to counter 
expected large numbers of new advanced Soviet fighter aircraft, but 
this expected threat never materialized.

The Air Force has a modernization program to improve the capabilities 
of the F/A-22 focused largely on a more robust air-to-ground 
capability. It intends to do so using five developmental spirals 
planned over more than a 10-year period, with the initial spiral 
started in 2003. In March 2003, the Office of Secretary of Defense's 
Cost Analysis Improvement Group (CAIG)[Footnote 3] estimated that the 
Air Force would need $11.7 billion for the planned modernization 
program. The CAIG estimate included costs for development, production, 
and the retrofit of some aircraft. As of March 2003, the Air Force F/
A-22 approved program baseline did not include estimated costs for the 
full modernization effort. Instead, the Air Force estimate included 
$3.5 billion for modernization efforts planned through fiscal year 
2009. Table 2 shows each spiral as currently planned.

Table 2: Planned Modernization Enhancements for the F/A-22 Program:

Developmental spiral; 
Fiscal year expected to incorporate enhancements; 2007: 
Global Strike Basic; 
Fiscal year expected to incorporate enhancements; 2011: 
Global Strike Enhanced[A]; 
Fiscal year expected to incorporate enhancements; 2013: 
Global Strike Full; 
Fiscal year expected to incorporate enhancements; 2015: 
Enhanced intelligence, surveillance, and reconnaissance.

Examples of enhancements to be added; 
Fiscal year expected to incorporate enhancements; 2007: 
Capability to launch Joint Direct Attack Munition at faster F/A-22 air 
speeds and at longer distances and update to air-to-air capabilities; 
Fiscal year expected to incorporate enhancements; 2011: 
Improved radar capabilities to seek and destroy advanced surface-to-
air missile systems and integrate additional air-to-ground weapons; 
Fiscal year expected to incorporate enhancements; 2013: 
Increased capability to suppress or destroy the full range of air 
defenses and improve speed and accuracy of targeting; 
Fiscal year expected to incorporate enhancements; 2015: 
Capability for full intelligence, surveillance, and reconnaissance 
integration for increased target sets and lethality.

Cost Analysis Improvement Group's estimate through fiscal year 2015; 
Fiscal year expected to incorporate enhancements; 2007: [Empty]; 
Fiscal year expected to incorporate enhancements; 2011: [Empty]; 
Fiscal year expected to incorporate enhancements; 2013: [Empty]; 
Fiscal year expected to incorporate enhancements; 2015: $11.7 billion. 

Sources: Air Force and Office of Secretary of Defense.

[A] The Global Strike Enhanced includes two developmental spirals to 
achieve the planned enhanced capability.

[End of table]

To complete the planned enhancements, the F/A-22 will also need a new 
computer architecture and avionics processors. Current architecture and 
processors will be upgraded to support enhancement through the Global 
Strike Enhanced development spiral. However, because the current 
architecture and processors are old and obsolete and do not have 
sufficient capacity to meet the increased processing demands required 
for planned new air-to-ground capabilities beyond the Global Strike 
Enhanced spiral, they must be replaced.

Rather than start a new development program, the F/A-22 program office 
plans to leverage two other ongoing Air Force development or 
modification programs for this new processing capability: the new 
architecture being developed for the JSF and the new commercial 
off-the-shelf general-purpose processors designed for newer versions of 
the F-16. According to F/A-22 program officials, they do not expect the 
new architecture to be fully developed and ready for installation in 
the F/A-22 for at least 5 to 6 years.

Additional risks are likely because the new processor and architecture 
are being developed by other major aircraft programs and will require 
extensive integration and operational testing to ensure that the F/A-22 
program does not encounter similar problems that have delayed 
integration and testing of the F/A-22's current avionics suite. F/A-22 
program officials acknowledge that this mass changeover of the F/A-22 
computer architecture and avionics processor will be a time-consuming 
and costly effort and will likely create additional program risks. Air 
Force cost estimates are not yet available, but program officials 
estimate the nonrecurring engineering costs alone could be at least 
$300 million. At the time of our review, the Air Force had not made 
a decision about retrofitting aircraft equipped with the old 
microprocessor.

Further Delays in Initial Operational Testing Could Impact Planned Full 
Rate Production Decision:

The Air Force schedule includes plans to make the full rate production 
decision in December 2004, but initial operational test and evaluation 
(IOT&E) has not started. The Air Force's efforts to stabilize avionics 
software and improve its performance have not been sufficiently 
demonstrated to start IOT&E, and the planned entrance criterion was 
changed. In addition, the F/A-22 program is not performing as expected 
in some other key performance areas like system reliability. These 
problems have contributed to the need for a new test schedule and an 
additional 7-month delay in the start IOT&E. Together these problems 
increase the potential for additional development costs and delays 
in the full rate production decision. Since our report in March 2003, 
the Air Force has corrected some key design problems identified at that 
time, but others remain.

Avionics Do Not Meet Criterion to Start Operational Testing:

The stability and performance of F/A-22 avionics has been a major 
problem causing delays in the completion of developmental testing and 
the start of IOT&E. Because the F/A-22 avionics encountered frequent 
shutdowns over the last few years, many test flights were delayed. As a 
result, the Air Force Operational Test and Evaluation Center wanted 
assurances that the avionics would work before it was willing to start 
the IOT&E program. It established a requirement for a 20-hour 
performance metric that was to be demonstrated before IOT&E would 
begin. This metric was subsequently changed to a 5-hour metric that 
included additional types of failures, and it became the Defense 
Acquisition Board's[Footnote 4] criterion to start IOT&E. In turn, 
Congress included the new metric, known as Mean Time Between Avionics 
Anomaly or MTBAA, in the National Defense Authorization Act for Fiscal 
Year 2004.[Footnote 5] As of January 2004, the Air Force had not been 
able to demonstrate that the avionics could meet either of these 
criteria.

Testing as of January 2004 showed the program had achieved 2.7 hours--
54 percent of the 5-hour stability requirement to begin IOT&E. While 
the Air Force has not been able to meet the new criteria, major 
failures, resulting in a complete shutdown of the avionics system, have 
significantly diminished. These failures are occurring only about once 
every 25 hours on average. This is the result of a substantial effort 
on the part of the Air Force and the contractor to identify and fix 
problems that led to the instability in the F/A-22 avionics software. 
However, less serious failures are still occurring frequently.

Reliability Requirements Not Being Met:

The F/A-22 program is not meeting its requirements for a reliable 
aircraft, and it is not using a knowledge-based approach. The Air Force 
established reliability requirements to be achieved at the completion 
of development and at system maturity.[Footnote 6] As a measure of the 
system's overall reliability, the Air Force established a requirement 
for 1.95-hours mean time between maintenance by the completion of 
development and 3-hours mean time between maintenance at system 
maturity. This measure of reliability represents the average flight 
time between maintenance actions. As of October 2003, the Air Force had 
only been able to demonstrate a reliability of about 0.5 flying hours 
between maintenance actions or about 26 percent of the development 
requirement and 17 percent of system maturity requirement. This has led 
to test aircraft spending more time than planned on the ground 
undergoing maintenance.

In addition to the high level of maintenance required, failures in F/
A-22 parts and components also caused reliability problems. During 
2003, the Air Force identified 68 parts that had a high rate of failure 
causing them to be removed or replaced and affecting the F/A-22 system 
reliability. The contractor has initiated programs to eliminate the 
high failure rates experienced by these parts. The canopy has also been 
experiencing failures during testing, allowing it to achieve only about 
15 percent of its expected 1,600-hour life. The Air Force is 
considering using a second manufacturer for canopies, but until it has 
passed qualification testing, it cannot be used as an alternative 
source for the high-failing canopies.

The F/A-22 program began limited production before demonstrating 
reliability. Our work has shown that product development engineers from 
leading commercial firms expect to achieve reliability requirements 
before entering production. They told us reliability is attained 
through an iterative process of design, testing, analysis, and 
redesign.[Footnote 7] Commercial firms understand that once a system 
enters production, the costs to achieve reliability through this 
iterative design change process become significantly more expensive. 
The F/A-22 aircraft has been in production since fiscal year 1999, and 
the Air Force has on contract 52 production aircraft, and an additional 
22 aircraft on long lead contracts representing 27 percent of the 
planned buy quantity. With 83 percent of the reliability requirement 
yet to be achieved through this iterative design change process, the 
Air Force can expect to incur additional development and design change 
costs. If the Air Force fails to improve the F/A-22's reliability 
before fielding the aircraft, the high failure rates will result in 
higher operational and support costs to keep the aircraft available for 
training or combat use.

Operational Testing Delayed and Divided into Two Phases:

Avionics and reliability problems were the major contributors to delays 
in F/A-22 flight-testing in 2003. As a result, the start of IOT&E was 
delayed an additional 7 months. Realizing the Air Force would not be 
ready to enter initial operational testing as previously planned, the 
Office of the Secretary of Defense requested the F/A-22 program to 
establish a new operational test plan that includes measures to ensure 
the aircraft and its avionics are ready before entering operational 
testing. In response, the Air Force put in place a two-phase 
operational test program.

* Phase 1, also called an operational assessment, is not the official 
start of operational testing. It is intended to assess the F/A-22's 
readiness for IOT&E. Started in October 2003, it calls for testing two 
F/A-22 aircraft.

* Phase 2 testing is considered the actual start of IOT&E. To begin 
this phase, the Air Force must meet a number of criteria. Perhaps most 
importantly, it must demonstrate that the F/A-22's integrated avionics 
will be able to operate for sufficient lengths of time, without 
shutting down.

Figure 2 compares the changes in the planned test program since our 
March 2003 report.[Footnote 8]

Figure 2: F/A-22 Flight Test Schedule Changes:

[See PDF for image]

[End of figure]

According to Air Force test officials, results of some phase 1 tests 
could be used to satisfy IOT&E requirements if the aircraft and 
software configurations do not change for IOT&E testing. This could 
reduce the scope of the test effort planned during IOT&E. The Defense 
Acquisition Board is scheduled to review the F/A-22's readiness for 
IOT&E later this month.

At the present time, the Air Force expects to complete IOT&E in 
October 2004, before the full rate production decision, now expected in 
December 2004. The time allotted to complete IOT&E under the new test 
plan, however, has been compressed by 4 months, assuming phase 1 
testing results are not permitted to be used for IOT&E. This means the 
Air Force would have less time than previously planned to complete the 
same amount of testing. If the Air Force continues to experience delays 
in testing prior to IOT&E, then the full rate production decision would 
also have to be delayed until IOT&E is complete and the Beyond Low Rate 
Initial Production Report is delivered to Congress.[Footnote 9]

Past Design Problems Corrected:

The Air Force has corrected design problems discussed in our March 2003 
report. To correct the movement or buffeting of the vertical fins in 
the tail section of the aircraft, the Air Force designed and 
implemented modifications, which strengthen the fin and hinge 
assemblies. Because of this problem, the Air Force placed restrictions 
on flights below 10,000 feet. Testing was done above and below 
10,000 feet, and the flight restrictions were removed. Likewise, the 
Air Force modified the aircraft to prevent overheating concerns in the 
rear portion of the aircraft by adding thermal protection and 
strengthened strategic areas in the aft tail sections. The Air Force 
also plans to modify later production aircraft using a new venting 
approach to resolve the heat problems. We reported that the Air Force 
had also experienced separations in the horizontal tail materials. 
After additional testing, the Air Force deemed that the original tails 
met requirements established for the life of the airframe. However, the 
Air Force redesigned the tail to reduce producibility costs. Tests will 
be performed on the redesigned tail in late 2004.

Business Case Information Did Not Justify Current Aircraft Quantities 
or Modernization Investment Plans:

The business case made to justify the F/A-22 program at its outset is 
no longer valid. Since that time, program cost and schedule have grown 
substantially and affordable quantities have been reduced by 60 
percent. The expected threat, for which this aircraft was originally 
designed, never materialized, and new, more demanding ground threats, 
like surface-to-air missile systems, have evolved, requiring expanded 
capabilities that will require significant new developmental 
investments. In addition, technical problems have not been resolved, 
and uncertainty about the outcome of operational testing could lead to 
additional development costs and further delays.

Today, the Air Force estimates the total F/A-22 acquisition program 
will cost about $72 billion, excluding about $8 billion estimated by 
the CAIG to complete modernization activities. Including these costs 
brings the estimated total investment for the F/A-22 program to about 
$80 billion. Through fiscal year 2004, about one-half of this 
investment has been funded, leaving key investment decisions in the 
near future on the remaining $40 billion for aircraft production and 
upgrades in capability.

Last year, in light of the changes in the program and investments that 
remained, the Subcommittee on National Security, Emerging Threats, and 
International Relations of the House Committee on Government Reform 
asked DOD to provide a new business case justifying the Air Force's 
planned number of F/A-22s (276 at that time) as well as how many F/
A-22s are affordable. In its response, DOD did not sufficiently address 
key business case questions such as how many F/A-22s are needed, how 
many are affordable, and if alternatives to planned investments 
increasing the F/A-22 air-to-ground capabilities exist.

Instead, DOD stated it planned to buy 277 F/A-22s based on a "buy to 
budget" concept that determines quantities on the availability and 
efficient use of funds by the F/A-22 program office. Furthermore, 
justification for expanding the capability to a more robust air-to-
ground attack capability was not addressed in DOD's response. While 
ground targets such as surface-to-air missile systems are acknowledged 
to be a significant threat today, the response did not establish a 
justification for this investment or state what alternatives were 
considered. For example, the JSF aircraft is also expected to have an 
air-to-ground role, as are planned future unmanned combat air vehicles. 
These could be viable alternatives to this additional investment in F/
A-22 capability.

While the business case information submitted to the subcommittee 
called for 277 aircraft, DOD stated it could only afford to acquire 
between 216 and 218 aircraft within the congressionally imposed cap on 
production costs--currently at $36.8 billion. DOD expects improvements 
in manufacturing efficiencies and other areas will provide it with 
sufficient funds to buy additional F/A-22 aircraft. However, this seems 
to be an unlikely scenario given the program's history. Previously, 
DOD, under its "buy to budget" approach, used $876 million mostly from 
production funds to cover increases in development costs, thus 
reducing aircraft quantities by 49. With testing still incomplete and 
many important performance areas not yet demonstrated, the possibility 
for additional increases in development costs is likely.

The analysis and conclusions in our recent report led us to recommend 
that DOD complete a new business case that justifies the need for the 
F/A-22 and that determines the quantities needed and affordable to 
carry out its air-to-air and air-to-ground mission. In preparing the 
business case, we also recommended DOD look at alternatives to the F/
A-22 for dealing with the ground threats that were driving the need for 
an expanded air-to-ground capability. In response to a draft of that 
report, DOD partially concurred, stating that it evaluates the F/A-22 
business case elements as part of the annual budget process. 
Additionally, DOD's response acknowledged that this year the department 
is undertaking a broader set of reviews under the Joint Capabilities 
Review process and that the F/A-22 will be a part of that review. In 
our report, as part of the evaluation of DOD's comments, we noted that 
an independent and in-depth study of the F/A-22 program has been 
requested by the Office of Management and Budget and that such a study 
provided an opportunity for completing a business case analysis.

JSF Joint Strike Fighter Program Is Approaching a Decision Point:

The JSF acquisition program is approaching a key investment decision 
point in its development as it prepares to stabilize the design for its 
critical design reviews. The program has many demands and requirements 
to satisfy before it is completed. It is the most expensive acquisition 
program in DOD's history with plans to buy almost 2,500 aircraft for an 
estimated acquisition cost of about $200 billion. The design plans are 
for three variants for the Air Force, Navy, and Marine Corps, with 
development partners and potential customers that span the globe. 
Upcoming investment decisions will be a prominent indicator of the risk 
program management and senior leadership will assume for this program. 
The program's size--in terms of funding, number of aircraft, and 
program participants--will create challenges for decision makers over 
the next several years. They will face decisions that need to be guided 
by a sound business case and an evolutionary, knowledge-based 
acquisition process that will provide more predictable cost, schedule, 
and performance outcomes.

The JSF is a joint, multi-national acquisition program for the Air 
Force, Navy, Marine Corps, and eight cooperative international 
partners.[Footnote 10] The program's objective is to develop and deploy 
an affordable weapon system that satisfies a variety of war fighters 
with different needs. The system is intended to consist of a family of 
highly common and affordable strike aircraft designed to meet an 
advanced threat and a logistics system to enable the JSF to be self-
sufficient or part of a multisystem and multiservice operation. This 
family of strike aircraft will consist of three variants: conventional 
takeoff and landing, aircraft carrier suitable, and short take off and 
vertical landing. The JSF program began in November 1996. After a five-
year competitive concept demonstration phase between Boeing and 
Lockheed-Martin, DOD awarded Lockheed-Martin a contract in October 2001 
to begin system development and demonstration.

Current Status of the Joint Strike Fighter Program's Cost, Schedule, 
and Funding:

We are aware that program managers are contemplating changes to the 
program that could delay the schedule and increase costs, but 
confirmation and details are not yet available. Nonetheless, current 
program office estimates do provide some insights. Since the JSF 
acquisition program began in 1996, the cost of development has grown by 
about 80 percent. As shown in figure 3, the majority of this cost 
growth, from an estimated $24.8 to $34.4 billion, was recognized at the 
time the program transitioned from concept development to system 
development and demonstration in 2001. The program office cited 
schedule delays, implementation of a new block development approach 
that extended the program by 36 months, and a more mature cost estimate 
as the major causes for the increase. Since the start of system 
development and demonstration, the estimate has increased by an 
additional $10.3 billion because of continued efforts to achieve 
international commonality, optimize engine interchangeability, further 
refinements to the estimating methodology, and schedule delays for 
additional design work.

Figure 3: Joint Strike Fighter Cost of Development from Fiscal Year 
1996 to 2004:

[See PDF for image]

[End of figure]

In both 2000 and 2001, when the program was making the critical 
decision to move into system development and demonstration, we reported 
and testified that technologies had not been sufficiently demonstrated 
to reduce risk to a level commensurate with a decision to commit major 
capital and time to product development.[Footnote 11] While some of 
these technologies continue to be troublesome, in March 2003, the 
program's preliminary design review revealed significant issues related 
to aircraft design maturity.

Weight has become the most significant design risk for the program as 
it approaches its critical design review. The increased weight of each 
variant design could degrade aircraft range and maneuverability if not 
brought under control. According to the program office, the airframe 
design has matured more slowly than anticipated and software 
development and integration is posing a significant design challenge. 
Also, in a 2003 annual report, the Director of Operational Test & 
Evaluation stated that weight growth is a significant design risk for 
all the variants, that the development schedule is aggressive, and that 
efforts to reduce weight have eroded a large part of the schedule.

We also note that the program's funding profile assumes almost 
$90 billion of funding over the next 10 years, an average of almost 
$9 billion a year. This will require the JSF program to compete with 
many other large programs for scarce funding during this same time 
frame. Sustaining this level of high funding for such a long period 
will be a challenge. The JSF program's latest planned funding profile 
for development and procurement--as of December 2002--is shown in 
figure 4.

Figure 4: Current Joint Strike Fighter Funding Assumption for 
Development and Procurement:

[See PDF for image]

[End of figure]

Knowledge-Based Decisions Are Needed for the Road Ahead:

The JSF program faces critical decisions over the next 24 months. 
Decisions made today will greatly influence the efficiency of the rest 
of its funding--almost 90 percent of the total. As a result of current 
concerns over system integration risk, the program office is currently 
restructuring the development program, which will add significant cost 
and delay the development schedule. For example, it is considering 
delaying its critical design reviews, its first flights of development 
aircraft, and its limited rate production decision to allow more time 
to mitigate design risk and gather more knowledge before moving forward 
with continued major investments.

While no one wants to delay critical reviews, now is the time to get 
the design right rather than later. Going forward with an incomplete 
review may cause more problems later in the effort. Indeed, based on 
our past best practices work and lessons learned from the F/A-22 
development effort, we have seen many examples where programs moved 
forward past their critical design review without gathering the 
knowledge needed to verify that their design was stable. This has led 
to poor cost and delivery outcomes for these programs. We have also 
seen the reverse, where programs have gathered appropriate knowledge 
before their critical design review. These programs had much more 
predictable cost and schedule outcomes.

The F/A-22 program held its critical design review in 1995 with only 
about 26 percent of its design drawings complete. Best practice 
criteria calls for 90 percent of drawings to be complete before a 
design can be considered stable enough to commit to additional 
significant investments of time, labor, material, and capital. Figure 5 
shows the engineering drawing completion history of the F/A-22 along 
with changes to development cost estimates as the program progressed.

Figure 5: F/A-22 Engineering Design Drawing History and Development 
Costs:

[See PDF for image]

[End of figure]

An incomplete F/A-22 critical design review contributed to several 
design and manufacturing problems that resulted in design changes, 
labor inefficiencies, cost increases, and schedule delays. Since the 
time of its critical design review, the F/A-22's development costs have 
increased by about 50 percent. The JSF program has the opportunity to 
avoid a similar situation. We believe that, given the apparent design 
challenges at this point in the program, a delay to gather more 
knowledge before increasing the investment is warranted and may help to 
reduce turbulence later in development, before the program begins 
"bending metal" for development aircraft. The JSF program is at a 
pivotal point, one in which the effort will turn from a paper design to 
actually manufacturing a product, something that requires considerably 
more money. While we believe the program moved forward with too much 
technology risk up to this point, it has an opportunity now to achieve 
critical design knowledge by taking the time to develop a mature design 
before moving into manufacturing. The program can use lessons learned 
from the F/A-22 acquisition right now to keep on track and deliver an 
affordable, high quality weapon system sooner rather than later.

Additional Challenges Attendant with International Cooperation:

The JSF program is based on a complex set of relationships among all 
three services and governments and industries from eight foreign 
partners. The program is expected to benefit the United States by 
reducing its share of development costs, increasing future aircraft 
sales, giving it access to foreign industrial capabilities, and 
improving interoperability among the services and allies. For their 
part, partner governments expect to benefit from relationships with 
U.S. aerospace companies, access to JSF program data, and influence 
over aircraft requirements. They will also benefit financially by 
obtaining waivers of nonrecurring aircraft costs on an aircraft they 
could otherwise not afford to develop on their own. The partners expect 
a return on their investment through JSF contract awards for their 
industries that will improve their defense industrial capability, a 
critical condition for their participation. They have agreed to 
contribute about $4.5 billion to the JSF development program and are 
expected to purchase several hundred aircraft once it enters 
production.

With these mutual benefits come challenges. Support for the program 
from our international partners hinges in large part on expectations 
for financial returns, technology transfer, and information sharing. If 
these expectations are not met, that support could deteriorate. In 
addition, a large number of export authorizations are needed to share 
information and execute contracts. These authorizations must be done in 
a timely manner to maintain schedule and ensure competition. Finally, 
transfer of sensitive U.S. military technologies needed to achieve 
commonality and interoperability goals will push the boundaries of U.S. 
disclosure policies.[Footnote 12]

Conclusions:

DOD is not immune to efforts to address the fiscal imbalance 
confronting the nation and will continue to face challenges based on 
competing priorities, both within and external to its budget. This will 
require decisions based on a sound and sustainable business case for 
DOD's acquisition programs based on clear priorities, comprehensive 
needs assessments, and a thorough analysis of available resources. In 
addition, it will require an acquisition process that provides for 
knowledge-based decisions at critical investment junctures in order to 
maximize available dollars. DOD has instituted a new acquisition policy 
that embraces evolutionary and knowledge-based acquisition concepts. 
However, policy alone will not solve the problems DOD faces. This will 
also require disciplined actions on the part of DOD's leadership to 
employ the concepts established in its new policy.

While it is too late for the F/A-22 to go back and follow these 
concepts, there still is time to evaluate the need for additional 
aircraft; over fifty F/A-22's are presently on contract. Because of the 
nation's fiscal challenges, tough choices will need to be made 
regarding future spending priorities, including the remaining potential 
$40 billion investment in the F/A-22. In light of this substantial 
investment and the many changes that have occurred in the F/A-22 
program, we believe decision makers would benefit from a new business 
case that justifies the need for the full air-to-air and air-to-ground 
capabilities and the quantities needed and affordable.

The JSF program has a greater opportunity to make critical investment 
decisions using a knowledge-based approach. While the program started 
off with a high-risk approach by not maturing technologies before 
starting system development, it has the opportunity to manage the 
system development phase and stabilize the design before committing to 
large investments in manufacturing capability--tooling, labor, and 
facilities--to build test aircraft. The JSF program is considering a 
delay in its critical design review to attain greater design stability 
in its airframe. In addition to seeking greater design stability, 
leadership in DOD can reap the benefits of its new acquisition policy 
by actively promoting and maintaining a disciplined approach throughout 
the remaining critical decision points over the next few years. With 
these activities in place, DOD will be in a better position to request 
continued JSF funding and support.

Mr. Chairman, this concludes my prepared statement. I would be happy to 
respond to any questions that you or other members of the Subcommittee 
may have. If you have future questions about our work on the F/A-22 or 
JSF, please call Allen Li at (202) 512-4841.

FOOTNOTES

[1] U.S. General Accounting Office, Tactical Aircraft: Changing 
Conditions Drive Need for New F/A-22 Business Case, GAO-04-391 
(Washington, D.C.: Mar. 15, 2004).

[2] U.S. General Accounting Office, Best Practices: Better Acquisition 
Outcomes Are Possible If DOD Can Apply Lessons from F/A-22 Program, 
GAO-03-645T (Washington, D.C.: Apr. 11, 2003). We testified on the 
failure to use best practice acquisition concepts and used the F/A-22 
program as a case study to show lessons to be learned had the F/A-22 
applied this best practice approach in its development and procurement 
activities.

[3] The Office of Secretary of Defense CAIG acts as the principal 
advisory body to the milestone decision authority on cost.

[4] The Defense Acquisition Board is DOD's senior-level forum for 
advising the Under Secretary of Defense Acquisition, Technology, and 
Logistics on critical decisions concerning major defense acquisition 
programs.

[5] Pub. L. 108-136 (Nov. 24, 2003), section 133.

[6] System maturity is defined by the Air Force as a point when the F/
A-22s have accumulated 100,000 flying hours, expected to occur in 2008 
after most F/A-22s are to be procured.

[7] U.S. General Accounting Office, Best Practices: Capturing Design 
and Manufacturing Knowledge Early Improves Acquisition Outcomes, GAO-
02-701 (Washington, D.C.: July 15, 2002).

[8] U.S. General Accounting Office, Tactical Aircraft: DOD Should 
Reconsider Decision to Increase F/A-22 Production Rates While 
Development Risks Continue, GAO-03-431 (Washington, D.C.: Mar. 14, 
2003).

[9] 10 U.S.C. 2399 provides that a major defense acquisition program 
may not proceed beyond low-rate initial production until initial 
operational test and evaluation is completed and the defense committees 
have received the report of testing results from the Director of 
Operational Test and Evaluation.

[10] International partners include the United Kingdom, Italy, the 
Netherlands, Turkey, Canada, Australia, Denmark, and Norway.

[11] U.S. General Accounting Office, Joint Strike Fighter Acquisition: 
Development Schedule Should Be Changed to Reduce Risks (GAO/T-NSIAD-00-
132, Mar. 16, 2000); Joint Strike Fighter Acquisition: Development 
Schedule Should Be Changed to Reduce Risks (GAO/NSIAD-00-74, 
May 9, 2000); Defense Acquisitions: Decisions on the Joint Strike 
Fighter Will Be Critical For Acquisition Reform (GAO/T-NSIAD-00-173, 
May 10, 2000); Joint Strike Fighter Acquisition: Mature Critical 
Technologies Needed to Reduce Risks (GAO-02-39, Oct. 19, 2001).

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