Joint Strike Fighter:

Recent Decisions by DOD Add to Program Risks

GAO-08-388: Published: Mar 11, 2008. Publicly Released: Mar 11, 2008.

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The Joint Strike Fighter (JSF) program seeks to produce and field three aircraft variants for the Air Force, Navy, Marine Corps, and eight international partners. The estimated total investment for JSF now approaches $1 trillion to acquire and maintain 2,458 aircraft. Under congressional mandate, GAO has annually reviewed the JSF program since 2005. GAO's prior reviews have identified a number of issues and recommended actions for reducing risks and improving the program's outcomes. This report, the fourth under the mandate, focuses on the program's progress in meeting cost, schedule, and performance goals; plans and risks in development and test activities; the program's cost-estimating methods; and future challenges facing the program. To conduct its work, GAO identified changes in cost and schedule from prior years and their causes, evaluated development progress and plans, assessed cost-estimating methodologies against best practices, and analyzed future budget requirements.

Since last year's report, the JSF program office estimates that total acquisition costs increased by more than $23 billion, primarily because of higher estimated procurement costs. The JSF development cost estimate stayed about the same. Development costs were held constant by reducing requirements, eliminating the alternate engine program, and spending management reserve faster than budgeted. Facing a probable contract cost overrun, DOD implemented a Mid-Course Risk Reduction Plan to replenish management reserves from about $400 million to about $1 billion by reducing test resources. Progress has been reported in several important areas, including partner agreements, first flights of a JSF prototype and test bed, and a more realistic procurement schedule. The midcourse plan carries the risk of design and performance problems not being discovered until late in the operational testing and production phases, when it is significantly more costly to address such problems. The plan also fails to address the production and schedule concerns that depleted management reserves. Cost and schedule pressures are mounting. Two-thirds of budgeted funding for JSF development has been spent, but only about one-half of the work has been completed. The contractor is on its third, soon to be fourth, manufacturing schedule, but test aircraft in manufacturing are still behind, the continuing impacts of late designs, delayed delivery of parts, and manufacturing inefficiencies. We believe that JSF costs will likely be much higher than reported. The estimates do not include all costs, including about $6.8 billion for the alternate engine program. In addition, some assumptions are overly optimistic and not well documented. Three independent defense offices separately concluded that program cost estimates are understated by as much as $38 billion and that the development schedule is likely to slip from 12 to 27 months. Discrepancies in cost estimates add to program risks and hinder congressional oversight. Even so, DOD does not plan for another fully documented, independent total program life-cycle cost estimate until 2013. As JSF finalizes the three designs, matures manufacturing processes, conducts flight tests, and ramps up production, it faces significant challenges. JSF's goal--to develop and field an affordable, highly common family of strike aircraft--is threatened by rising unit procurement prices and lower commonality than expected. The program also makes unprecedented funding demands--an average of $11 billion annually for two decades--and must compete with other defense and nondefense priorities for the shrinking federal discretionary dollar. Further, expected cost per flight hour now exceeds that of the F-16 legacy fighter, one of the aircraft it is intended to replace. With almost 90 percent (in terms of dollars) of the acquisition program still ahead, it is important to address these challenges, effectively manage future risks, and move forward with a successful program that meets our and our allies' needs.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Our March 2008 report criticized DOD's mid-course risk reduction plan, in particular, the cuts made to flight test assets and test plans and its failure to address root causes depleting management reserves. We recommended that the plan be revisited and revised, if appropriate. DOD partially concurred--they did not change the decision but agreed to monitor its execution. Since that report was issued, JSF cost and schedule continued to deteriorate and management reserves were again depleted. DOD finally acknowledged a need to change and, amidst wide criticism, the tenets of the mid-course risk reduction plan have mostly been abandoned. In February 2010, DOD announced a major restructuring of the JSF program that directly addresses the issues in our recommendation. Chief among these actions are the restoration of one of the two test aircraft dropped by the mid-course plan and the addition of three production aircraft to supplement development testing. The restructuring also added time and more flight tests to the development test period and another software integration line to further address test capacity issues and integration of ground and flight tests. Furthermore, the Independent Manufacturing Review Team (aircraft production) and the Joint Assessment Team (engine manufacturing) recommended numerous actions that were adopted by DOD to address manufacturing delays and inefficiencies, including problems related to the depletion of management reserves and earned value management system. The June 2010 ADM directed further actions along these lines and other changes related to the Nunn-McCurdy certification recently issued.

    Recommendation: Because of the elevated risks and the valid objections raised by the test community and other DOD offices, the Secretary of Defense should direct elements of the department to revisit and, if appropriate, revise the Mid-Course Risk Reduction plan recently approved. This should be supported by an intensive analysis that includes causes of management reserve depletion, an evaluation of progress against the baseline manufacturing schedule, and the progress made in correcting deficiencies in the contractor's earned value management system. It should also include an in-depth examination of alternatives to the current plan and address the specific concerns raised by officials regarding testing capacity, the integration of ground and flight tests, and backup plans should capacity become overloaded.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: The JSF Program Office updated its cost estimate in July 2008. The updated cost estimate includes funding requirements for fiscal years 2010 though 2015, which should cover the remainder of the program's development efforts as currently planned. The updated estimate was used by the services and DOD in formulation of the fiscal year 2010 President's Budget.

    Recommendation: So that DOD may have an accurate picture of JSF cost and schedule requirements, and that Congress may have an accurate understanding of future funding requirements, the Secretary of Defense should direct that the JSF program office to update its cost estimate using best practices, so that the estimate is comprehensive, accurate, well documented, and credible. Specifically, the JSF program office should (1) include costs that were inappropriately omitted from the estimate; (2) identify performance requirements that have been traded off in development; (3) fully document assumptions, data sources and methodologies in the cost model; and (4) perform a risk and uncertainty analysis to focus on key cost drivers and reduce the risk of cost overruns.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: GAO recommended that the Department of Defense direct the Joint Strike Fighter (JSF) program to perform schedule risk assessments, an important tool to improve management insight on cost and schedule execution and risks. DOD concurred. Due to DOD's inaction, we issued a similar recommendation in GAO-09-303. Subsequently, the Undersecretary of Defense for Acquisition Technology and Logistics specifically directed the JSF program office to conduct a comprehensive schedule risk assessment in an Acquisition Decision Memo dated June 2, 2010. The program completed a schedule risk assessment in the summer of 2011 as part of the overall process to establish its new acquisition program baseline (APB). The program will continue to do periodic schedule risk assessments every six months.

    Recommendation: So that DOD may have an accurate picture of JSF cost and schedule requirements, and that Congress may have an accurate understanding of future funding requirements, the Secretary of Defense should direct that the program conduct a full Schedule Risk Analysis to ensure that its schedules are fully understood, manageable, and executable.

    Agency Affected: Department of Defense

  4. Status: Closed - Implemented

    Comments: DOD directed an independent joint cost assessment be performed by a joint team of Navy, Air Force, and Office of the Secretary of Defense cost experts. The joint team reported the results of their assessment in September 2008. The cost estimate included funding requirements for fiscal years 2010 though 2015, which should cover the remainder of the program's development efforts as currently planned. The estimate was used to help formulate 2010 budget plans.

    Recommendation: So that DOD may have an accurate picture of JSF cost and schedule requirements, and that Congress may have an accurate understanding of future funding requirements, the Secretary of Defense should direct that DOD conduct a full, independent cost estimate that should be conducted according to the highest standards of any DOD cost estimating organization, based on a comprehensive review of program data; that this cost estimate be reviewed by an independent third party such as the Cost Analysis Improvement Group; and that the results of these estimates be briefed to all interested parties in DOD and Congress.

    Agency Affected: Department of Defense


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