F-35 Aircraft Sustainment:

DOD Needs to Address Challenges Affecting Readiness and Cost Transparency

GAO-18-75: Published: Oct 26, 2017. Publicly Released: Oct 26, 2017.

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What GAO Found

The Department of Defense (DOD) is sustaining over 250 F-35 aircraft (F-35) and plans to triple the fleet by the end of 2021, but is facing sustainment challenges that are affecting warfighter readiness (see table). These challenges are largely the result of sustainment plans that do not fully include key requirements or aligned (timely and sufficient) funding. DOD is taking steps to address some challenges, but without more comprehensive plans and aligned funding, DOD risks being unable to fully leverage the F-35's capabilities and sustain a rapidly expanding fleet.

Table: Key Department of Defense (DOD) Challenges for F-35 Aircraft Sustainment

Key challenge

Description

Limited repair capacity at depots

DOD's capabilities to repair F-35 parts at military depots are 6 years behind schedule, which has resulted in average part repair times of 172 days—twice the program's objective (see figure 1).

Spare parts shortages

Spare parts shortages are degrading readiness. From January through August 7, 2017, F-35 aircraft were unable to fly about 22 percent of the time due to parts shortages.

Undefined technical data needs

DOD has not defined all of the technical data it needs from the prime contractor, and at what cost, to enable competition of future sustainment contracts. Technical data include the information necessary to ensure weapon system performance and support.

Unfunded intermediate-level maintenance capabilities

The Marine Corps' initial F-35 deployments on ships in 2018, and potentially the initial ship deployments for the Navy, will not include required intermediate-level maintenance capabilities. Such capabilities provide a level of support between the squadron and the depots, so that repairs can be done at sea. DOD has identified initial intermediate capabilities that it plans to implement, but funding to do so is not yet in place.

Delays in ALIS development and uncertain funding

The Autonomic Logistics Information System (ALIS) is a complex system supporting operations and maintenance that is central to F-35 sustainment, but planned updates will likely be delayed, and requirements for ALIS development are not fully funded.

Source: GAO analysis of DOD data. | GAO-18-75

Figure 1: Average Time for Depot-level Repair of an F-35 Part as Compared with the Objective

Table: Key Department of Defense (DOD) Challenges for F-35 Aircraft Sustainment

DOD's plan to enter into multi-year, performance-based F-35 sustainment contracts with the prime contractor has the potential to produce costs savings and other benefits, but DOD may not be well positioned to enter into such contracts by 2020. To date, DOD has not yet achieved its desired aircraft performance under pilot (i.e., trial) performance-based agreements with the prime contractor. In addition, the level of performance DOD has contracted for is generally below what the services desire (see figure 2 for Marine Corps example). Also, the three performance metrics DOD is using to incentivize the contractor under these pilot agreements may not be the appropriate metrics to achieve desired outcomes, in part because they are not fully reflective of processes for which the contractor has control. This can make it difficult for DOD to hold the contractor accountable. Further, due to system immaturity, DOD does not have full information on F-35 sustainment costs and technical characteristics such as reliability and maintainability, which could hinder its ability to effectively negotiate performance-based contracts with the contractor by 2020. Without examining whether it has the appropriate metrics to incentivize the contractor or a full understanding of the actual costs and technical characteristics of the aircraft before entering into multi-year, performance-based contracts, DOD risks overpaying the contractor for sustainment support that does not meet warfighter requirements.

Figure 2: F-35B Aircraft Performance Relative to Contracted and Marine Corps' Desired Performance Targets from March through June 2017

Table: Key Department of Defense (DOD) Challenges for F-35 Aircraft Sustainment

DOD has taken actions to reduce F-35 sustainment costs, but estimated life cycle costs have increased and are not fully transparent to the military services (see figure 3). Specifically, the services do not fully understand how the costs they are being charged by the program office are linked to the capabilities they are receiving, citing unexplained cost increases and difficulty in tracking their requirements to contracts. For example, the Marine Corps received an initial funding requirement for fiscal year 2017 sustainment of $293 million, which then increased to $364 million in the execution year. This lack of transparency is due in part to insufficient communication between the program office and the services, and it puts the services in a difficult position as they consider critical trade-offs that may make F-35 sustainment more affordable. Without improving communication with the services about the costs they are being charged, the services may not be able to effectively budget for long-term sustainment.

Figure 3: Growth in F-35 Aircraft Life-Cycle Sustainment Cost Estimates

Table: Key Department of Defense (DOD) Challenges for F-35 Aircraft Sustainment

Why GAO Did This Study

The F-35 aircraft represents the future of tactical aviation for the U.S. military, and is DOD's most expensive weapon system, with sustainment costs alone estimated at more than $1 trillion over a 60-year life cycle. As the F-35 program approaches full-rate production, DOD is working to deliver an affordable sustainment strategy that is able to meet the needs of the military services. This strategy is being tested as DOD stands up military depots, trains personnel, and supports its first operational squadrons—with plans to establish multi-year, performance-based contracts by 2020.

The National Defense Authorization Act for fiscal year 2017 includes a provision for GAO to review the F-35 program's sustainment support structure. This report assesses (1) the status of DOD's efforts to sustain the F-35 fleet and any challenges it has faced; (2) the extent to which DOD is positioned to enter into multi-year, performance-based F-35 sustainment contracts; and (3) the progress, if any, DOD has made toward reducing F-35 sustainment costs and the extent to which costs are transparent. GAO reviewed DOD and contractor documentation, analyzed data, and interviewed relevant officials.

What GAO Recommends

GAO recommends that DOD revise sustainment plans, re-examine metrics and ensure that it has sufficient knowledge of costs and technical characteristics before entering into performance-based contracts, and improve communication with the services about sustainment costs. DOD concurred with these recommendations.

For more information, contact Cary Russell at (202) 512-5431 or russellc@gao.gov.

Recommendations for Executive Action

  1. Status: Open

    Comments: DOD concurred with this recommendation. As of June 2018, officials from the Office of the Under Secretary of Defense for Acquisition and Sustainment (USD (A&S)) said that USD(A&S) and the F-35 Program Executive Officer (PEO) are focusing actions and resources towards achieving key production, development and sustainment objectives by 2025. For sustainment, the two primary objectives are to increase F-35 availability and reduce sustainment costs. According to these officials, the PEO, with Industry- and Department-level input, is updating sustainment plans to accelerate depot repair capacity, reduce spares demand and improve the stability, security, and mission capabilities of the Autonomic Logistics Information System. These efforts and others, will inform the Fiscal Year 2020-2024 Program Budget decisions, to ensure that investments return the most in terms of increased availability and reduced cost. Officials said that these actions, strategy updates and investments will continue over the Future Year's Defense Plan. We will continue to monitor DOD's efforts to revise its sustainment plans and align its future budgets to support those plans, but it is too soon to determine the extent to which these efforts--when completed--will address the concerns that we identified our report.

    Recommendation: The Under Secretary of Defense for Acquisition, Technology, and Logistics, in coordination with the F-35 Program Executive Officer, should revise sustainment plans to ensure that they include the key requirements and decision points needed to fully implement the F-35 sustainment strategy and aligned funding plans to meet those requirements. (Recommendation 1)

    Agency Affected: Department of Defense

  2. Status: Open

    Comments: DOD concurred with this recommendation. As of June 2018, officials from the Office of the Under Secretary of Defense for Acquisition and Sustainment (USD (A&S)) said that the F-35 Program Executive Officer (PEO) re-examines sustainment metrics every year, so that the department can objectively measure and hold the contractor accountable for delivering increased availability and reduced cost, and to align sustainment processes and deliverables to those which the contractor controls. In the Fiscal Year 2018 annual sustainment contract, the PEO established a fee structure to better motivate the contractor to deliver threshold performance values, an improved metric compared to the 2017 contract, and initiated a new fee for delivery of supply chain performance metrics directly under the contractor's control. Officials said that the PEO will continue to re-examine metrics annually to ensure that they align government and industry interests, drive desired behavior and increase F-35 availability and reduce cost. GAO recognizes the Department's progress related to this recommendation, but the key metrics being used by the F-35 program to incentivize the contractor remain a concern as they are not fully reflective of processes over which the contractor has control. This could make it difficult to hold the contractor accountable under performance based contracts, as we reported. We will continue to monitor DOD's efforts to re-examine metrics to ensure that they are objectively measureable, fully reflective of processes over which the contractor has control, and drive desired behaviors by all stakeholders.

    Recommendation: The Under Secretary of Defense for Acquisition, Technology, and Logistics, in coordination with the F-35 Program Executive Officer, should re-examine the metrics that it will use to hold the contractor accountable under the fixed-price, performance-based contracts to ensure that such metrics are objectively measurable, are fully reflective of processes over which the contractor has control, and drive desired behaviors by all stakeholders. (Recommendation 2)

    Agency Affected: Department of Defense

  3. Status: Open

    Comments: DOD concurred with this recommendation. As of June 2018, officials from the Office of the Under Secretary of Defense for Acquisition and Sustainment (USD (A&S)) said that the F-35 Program Executive Officer (PEO) is overseeing a Sustainment Actual Cost Working Group, made up of representatives from both the Office of the Secretary of Defense and the F-35 Joint Program Office. The working group is striving to improve DoD's insight into the actual cost of F-35 sustainment. According to these officials, to date, the working group has identified a number of gaps in the cost data that the Department receives from prime and subcontractors and is now collaborating with the vendors and with contracting officials to find ways to improve the quality, granularity, and timeliness of the actual F-35 cost data that the Department receives. In addition, the F-35 system has not yet completed key operational tests or reached system maturity. Until DOD has a full understanding of the actual costs of sustainment and technical characteristics of the aircraft at system maturity, DOD may not be well positioned to enter into a long-term, fixed-price, performance-based contract. We will continue to monitor DOD's efforts in this area.

    Recommendation: The Under Secretary of Defense for Acquisition, Technology, and Logistics, in coordination with the F-35 Program Executive Officer, should, prior to entering into multi-year, fixed-price, performance-based contracts, ensure that DOD has sufficient knowledge of the actual costs of sustainment and technical characteristics of the aircraft after baseline development is complete and the system reaches maturity. (Recommendation 3)

    Agency Affected: Department of Defense

  4. Status: Open

    Comments: DOD concurred with this recommendation. As of June 2018, officials from the Office of the Under Secretary of Defense for Acquisition and Sustainment (USD (A&S)) said that USD(A&S) is currently undertaking a study on F-35 Sustainment Affordability and Transparency, in response to the 2018 Senate Armed Services Report, accompanying the Fiscal Year 2018 National Defense Authorization Act. According to these officials, the study examines affordability and transparency issues between the Services and the F-35 Joint Program Office, which inhibit the Services' visibility into expected F-35 costs versus budgets, what they are paying for in sustainment, and what they are getting for that money. Work on this study is ongoing, and officials said that USD(A&S) expects to deliver a final report to the congressional defense committees by September 2018. We will review DOD's report, once completed, to determine the extent to which DOD's efforts address our recommendation.

    Recommendation: The Under Secretary of Defense for Acquisition, Technology, and Logistics, in coordination with the F-35 Program Executive Officer, should take steps to improve communication with the services and provide more information about how the F-35 sustainment costs they are being charged relate to the capabilities received. (Recommendation 4)

    Agency Affected: Department of Defense

 

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