	F-35 Program Performance Improved in 2012

The F-35 program made progress in 2012 on several fronts. Most Management and Development Testing Objectives Were Achieved

The F-35 program met or substantially met most of its key management  objectives established for calendar year 2012. The F-35 development flight test program also substantially met 2012  expectations with some revisions to original plans. Progress Made in Addressing Key Technical Risks

In 2012, the F-35 program also made considerable progress in  addressing four areas of technical risk that could substantially degrade  the F-35’s capabilities and mission effectiveness. 2. Manufacturing Process Metrics Improved

Key manufacturing metrics and discussions with defense and contracting  officials indicate that F-35 manufacturing and supply processes improved  during 2012. While initial F-35 production overran target costs and  delivered aircraft late, the latest data through the end of 2012 shows labor  hours decreasing and deliveries accelerating. F-35 Program Still Faces Risks

Ensuring that the F-35 is affordable and can be bought in the quantities  and time frames required by the warfighter will be of paramount concern  to the Congress, U.S. military and international partners. The acquisition  funding requirements for the United States alone are currently expected  to average $12.6 billion per year through 2037, and the projected costs of  operating and sustaining the F-35 fleet, once fielded, have been deemed  unaffordable by DOD officials. In addition, the program faces challenges  with software development and continues to incur substantial costs for  rework to fix deficiencies discovered during testing. As testing continues  additional changes to design and manufacturing processes will likely be  required, while production rates continue to increase. Long-Term Affordability Remains a Concern

The March 2012 acquisition program baseline places the F-35 program  on firmer footing, but aircraft are expected to cost more and deliveries to  warfighters will take longer than previously projected. The new baseline  projects the need for a total of $316 billion in development and  procurement funding from 2013 through 2037, or an average of $12.6  billion annually over that period (see figure 2). Software Development Challenges Remain

Over time, F-35 software requirements have grown in size and complexity  and the contractor has taken more time and effort than expected to write  computer code, integrate it on aircraft and subsystems, conduct lab and  flight tests to verify it works, and to correct defects found in testing. While most of the aircraft’s  software code has been developed, a substantial amount of integration  and test work remain before the program can demonstrate full warfighting  capability. Thus far, the program has made little progress on block 3.0 software. Design Changes and Rework Continue to Add Cost and Risk

Although F-35 manufacturing, cost, and schedule metrics have shown  improvement, the aircraft contractor continues to make major design and  tooling changes and alter manufacturing processes while development  testing continues. Going forward, ensuring affordability is of paramount concern as  more austere budgets are looming. The program continues to incur  financial risk from its plan to procure 289 aircraft for $57.8 billion before  completing development flight testing. F-35 Joint Strike Fighter: Current Outlook Is Improved, but Long-Term  Affordability Is a Major Concern. GAO-13-309. Joint Strike Fighter: Restructuring Added Resources and Reduced Risk,  but Concurrency Is Still a Major Concern. Joint Strike Fighter: Implications of Program Restructuring and Other  Recent Developments on Key Aspects of DOD’s Prior Alternate Engine  Analyses. GAO-10-382.
Why GAO Did This Study

The F-35 Lightning II, the Joint Strike Fighter, is DOD's most costly and ambitious aircraft acquisition. The program is developing and fielding three aircraft variants for the Air Force, Navy, Marine Corps, and eight international partners. The F-35 is critical to long-term recapitalization plans as it is intended to replace hundreds of existing aircraft. This will require a long-term sustained funding commitment. Total U.S. investment is nearing $400 billion to develop and procure 2,457 aircraft through 2037. Fifty-two aircraft have been delivered through 2012. The F-35 program has been extensively restructured over the last 3 years to address prior cost, schedule, and performance problems. DOD approved a new acquisition program baseline in March 2012. GAO's prior reviews of the F-35 made numerous recommendations to improve outcomes, such as increasing test resources and reducing annual procurement quantities.
This testimony is largely based on GAO's recently released report, GAO-13-309 . This testimony discusses (1) progress the F-35 program made in 2012, and (2) major risks that program faces going forward. GAO's work included analyses of a wide range of program documents and interviews with defense and contractor officials.

What GAO Found

The new F-35 acquisition baseline reflects positive restructuring actions taken by the Department of Defense (DOD) since 2010, including more time and funding for development and deferred procurement of more than 400 aircraft to future years. Overall, the program progressed on several fronts during 2012 to further improve the current outlook. The program achieved 7 of 10 key management objectives and made substantial progress on one other. Two objectives on aircraft deliveries and a corrective management plan were not met. The F-35 development test program substantially met expectations with some revisions to flight test plans and made considerable progress addressing key technical risks. Software management practices and some output measures improved, although deliveries to test continued to lag behind plans. Manufacturing and supply processes also improved--indicators such as factory throughput, labor efficiency, and quality measures were positive. While initial F-35 production overran target costs and delivered aircraft late, the latest data shows labor hours decreasing and deliveries accelerating.
The F-35 program still faces considerable challenges and risks. Ensuring that the F-35 is affordable and can be bought in the quantities and time required by the warfighter will be a paramount concern to the Congress, DOD, and international partners. With more austere budgets looming, F-35 acquisition funding requirements average $12.6 billion annually through 2037. Once fielded, the projected costs of sustaining the F-35 fleet have been deemed unaffordable by DOD officials; efforts to reduce these costs are underway. Software integration and test will be challenging as many complex tasks remain to enable full warfighting capability. The program is also incurring substantial costs for rework-currently projected at $1.7 billion over 10 years of production-to fix problems discovered during testing. With two-thirds of development testing still to go, additional changes to design and manufacturing are likely. The program continues to incur financial risk from its plan to procure 289 aircraft for $57.8 billion before completing development flight testing.

What GAO Recommends

GAO has made prior recommendations to help reduce risk and improve outcomes, which DOD has implemented to varying degrees.