Tactical Aircraft:

Restructuring of the Air Force F-22 Fighter Program

NSIAD-97-156: Published: Jun 4, 1997. Publicly Released: Jun 9, 1997.

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Pursuant to a congressional request, GAO reviewed the Air Force's February 1997 plans to restructure the F-22 program, focusing on the: (1) estimated cost of the restructured program and viability of cost reduction initiatives; (2) planned timing for realization of benefits from initiatives; and (3) criteria for approving initiation and continuation of production.

GAO noted that: (1) GAO's reviews of various weapon system acquisitions have shown that initial program schedules and cost estimates have historically been optimistic and have not often been achieved; (2) the F-22 program is not an exception; (3) further, GAO believes the February 1997 restructuring plan reflects revised cost goals that may be optimistic because: (a) the planned reductions in F-22 production unit costs are greater than those experienced by prior fighter programs; and (b) actions intended to reduce production costs have not been fully defined and validated; (4) GAO's comparison of the projected reduction in F-22 production unit costs with the historical unit costs of the F-15, F-16, and F-18 programs indicates that the F-22 reductions exceed those that have been achieved on these other programs; (5) also, to achieve the overall cost avoidance projected by the Joint Estimate Team, the unit cost of full-rate aircraft must be reduced by 54 percent from the unit cost of the low-rate initial production (LRIP) aircraft instead of by 27.9 percent, as projected before the program restructure; (6) an aspect of cost reduction that has been previously reviewed and should continue to be considered is the potential savings from reducing F-22 performance requirements; (7) Joint Estimate Team members told GAO that, although they considered performance reductions in the study as a means of reducing costs, and that potential reductions had been considered in at least a dozen past reviews, no performance reductions were made as a result of their study; (8) the cost reduction initiatives are not planned to achieve significant net savings until F-22 full-rate production, now planned to begin in fiscal year (FY) 2004; (9) the F-22 cost estimate developed by the Joint Estimate Team and endorsed by the Air Force recognizes unit cost increases of 40 percent in F-22 LRIP aircraft through FY 2003; (10) the program exit criteria that were required before awarding each lot of LRIP aircraft and the first full-rate production contract have been revised as part of the program restructuring; and (11) although aircraft performance parameters are reported in the Selected Acquisition Report and other Air Force and Department of Defense reports, GAO believes specific aircraft performance parameters should be included in the exit criteria for each low-rate initial production lot to: (a) maintain visibility of aircraft performance as production rates are accelerated; and (b) ensure that adequate progress is being made to fully demonstrate the aircraft's capabilities.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: DOD's actions have been partially responsive to the recommendation. The projected cost savings are inherently incorporated in a December 1998 production contract between the Air Force and Lockheed Martin. The contract includes a target price curve that essentially defines the prices for the first five lots of F-22s. If the contractor fails to meet the target prices projected in the target price curve, it will not be possible to achieve the planned production within the Congressional cost limitation. The target price curve is used for budget preparation. Although the details of cost savings were not provided as GAO recommended they are inherently incorporated into budget projections, and details of the projected cost savings are available from Lockheed Martin. DOD indicated it would consider performance tradeoffs against costs if problems were identified during the flight test program, but said it would not actively seek reductions of F-22 performance characteristics.

    Recommendation: Since the Air Force plans to request approval for the first production lot of F-22 aircraft in FY 1999, the Secretary of Defense, as part of the budget justification for FY 1999, should provide financial plans and cost estimates that clearly identify the basis for cost savings initiatives that have been approved for the program at that time. Because of the potential for cost growth in the F-22 program, the Secretary should also reconsider the potential savings that can be achieved by reducing the performance requirements of the F-22, as previously suggested by the Defense Science Board.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: Although DOD did not concur with the recommendation the Undersecretary for Acquisition and Technology restated and expanded the exit criteria, and the Congress levied certain criteria to be met before initiation of production.

    Recommendation: The Under Secretary of Defense for Acquisition and Technology should reevaluate the exit criteria for the F-22 to ensure that the integrity of the prior criteria are maintained.

    Agency Affected: Department of Defense: Office of the Under Secretary of Defense for Acquisition


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