	Background

The F-35 program is a joint, multinational acquisition to develop and field  an affordable, highly common family of stealthy, next-generation strike  fighter aircraft for the United States Air Force, Marine Corps, Navy, and  eight international partners. The JSF is DOD’s largest cooperative  program. These  actions, effectively implemented, should result in more predictable and  achievable program outcomes, but restructuring comes with  consequences—higher upfront development costs, fewer aircraft received  in the near term, training delays, and extended times for testing and  delivering the capabilities required by the warfighter. Affordability for the  U.S. and our allies is challenged because unit prices are about double what  they were at program start and with new forecasts that the aircraft may  cost substantially more to operate and maintain over the life cycle than the  legacy aircraft they replace. Going forward, the program requires  unprecedented levels of funding in a period of more austere defense  funding. Key program changes (1) added $4.6 billion to  the development program through completion for a total development  program estimate of $56.4 billion (an increase of 26 percent against the  current baseline and 64 percent from the original baseline at program  start); (2) extended the development test period to 2016 (a 4-year slip from  the current baseline); and (3) reduced near-term procurement quantities  by 124 aircraft in addition to the 122 aircraft cut announced in February  2010; and (4) lowered the annual  rate of increase for boosting future  production. We expect total  procurement costs will be somewhat higher than the estimate submitted in  the Nunn-McCurdy certification (refer to table 1). The JSF is the linchpin in DOD’s tactical aircraft recapitalization plans,  replacing hundreds of legacy aircraft. It had mixed  success, achieving 6 goals and making varying degrees of progress on the  other 6. The development flight test program significantly ramped up operations in  2010, accomplishing three times as many test flights as the previous   3 years combined. The  Ike Skelton National Defense Authorization Act for Fiscal Year 2011  established this requirement and we understand the Department is  working on its implementation. Program Has Still Not Fully Demonstrated a Stable Design and Mature Manufacturing Processes as It Enters Its Fifth Year of Production

After completing 9 years of system development and 4 years of  overlapping production activities, the JSF program has been slow to gain  adequate knowledge that its design and manufacturing process are fully  mature and ready for greater levels of annual production. Specifically, the program has not  yet stabilized aircraft designs—engineering changes continue at higher  than expected rates long after critical design reviews and well into  procurement, and more changes are expected as testing accelerates. Also,  the aircraft and engine manufacturing processes are not yet mature  enough to support efficient production at higher annual rates and  substantial improvements in the global supply network are needed. In addition, changes  to drawings have not decreased and leveled off as planned. The most significant incomplete recommendation is improving global  supply chain management. Testing Has Been Slow and Has Not Demonstrated That the Aircraft Will Work in Its Intended Environment

The JSF program is still very early in demonstrating aircraft design and  testing to verify it works as intended. As of December 2010, about four  percent of JSF capabilities have been completely verified by flight tests,  lab results, or both. Only 3 of 32 ground test labs and simulation  models critical to complement and, in some cases, substitute for flight  tests, are accredited to verify and ensure the fidelity of results. Software  development—essential for achieving about 80 percent of the JSF  functionality—is significantly behind schedule as it enters its most  challenging phase. Focused individual attention on  STOVL apart from the other two variants could allow each variant to  proceed through development and testing at its own pace. 2. Establish criteria for the STOVL probation period and take additional  steps to sustain individual attention on STOVL-specific issues,  including independent F-35B/STOVL Progress Reviews with Senior  Leadership to ensure cost and schedule milestones are achieved to  deliver required warfighter capabilities. 3. DOD concurred with the recommendations as amended. We are sending copies of this report to the Secretary of Defense; the  Secretaries of the Air Force and Navy; the Commandant of the Marine  Corps; and the Director of the Office of Management and Budget. To assess plans, progress, and risks in test activities, we examined  program documents and interviewed DOD, program office, and contractor  officials about current test plans and progress. In February 2010, the  Department announced a  major restructuring of the JSF  program, including reduced  procurement and a planned  move to fixed-price contracts. GAO-10-382.
Why GAO Did This Study

The F-35 Lightning II, also known as the Joint Strike Fighter (JSF), is the Department of Defense's (DOD) most costly and ambitious aircraft acquisition, seeking to simultaneously develop and field three aircraft variants for the Air Force, Navy, Marine Corps, and eight international partners. The JSF is critical for recapitalizing tactical air forces and will require a long-term commitment to very large annual funding outlays. The current estimated investment is $382 billion to develop and procure 2,457 aircraft. This report, prepared in response to a congressional mandate in the National Defense Authorization Act for Fiscal Year 2010, discusses (1) program cost and schedule changes and their implications on affordability; (2) progress made during 2010; (3) design and manufacturing maturity; and (4) test plans and progress. GAO's work included analyses of a wide range of program documents and interviews with defense and contractor officials.

What GAO Found

DOD continues to substantially restructure the JSF program, taking positive actions that should lead to more achievable and predictable outcomes. Restructuring has consequences--higher up-front development costs, fewer aircraft in the near term, training delays, and extended times for testing and delivering capabilities to warfighters. Total development funding is now $56.4 billion to complete in 2018, a 26 percent increase in cost and a 5-year slip in schedule compared to the current baseline. DOD also reduced procurement quantities by 246 aircraft through 2016, but has not calculated the net effects of restructuring on total procurement costs nor approved a new baseline. Affordability for the U.S. and partners is challenged by a near doubling in average unit prices since program start and higher estimated life-cycle costs. Going forward, the JSF requires unprecedented funding levels in a period of more austere defense budgets. The program had mixed success in 2010, achieving 6 of 12 major goals it established and making varying degrees of progress on the others. Successes included the first flight of the carrier variant, award of a fixed-price aircraft procurement contract, and an accelerated pace in development flight tests that accomplished three times as many flights in 2010 as the previous 3 years combined. However, the program did not deliver as many aircraft to test and training sites as planned and made only a partial release of software capabilities. The short take off and landing variant (STOVL) experienced significant technical problems and did not meet flight test expectations. The Secretary of Defense directed a 2-year period to evaluate and engineer STOVL solutions. After more than 9 years in development and 4 in production, the JSF program has not fully demonstrated that the aircraft design is stable, manufacturing processes are mature, and the system is reliable. Engineering drawings are still being released to the manufacturing floor and design changes continue at higher rates than desired. More changes are expected as testing accelerates. Test and production aircraft cost more and are taking longer to deliver than expected. Manufacturers are improving operations and implemented 8 of 20 recommendations from an expert panel, but have not yet demonstrated a capacity to efficiently produce at higher production rates. Substantial improvements in factory throughput and the global supply chain are needed. Development testing is still early in demonstrating that aircraft will work as intended and meet warfighter requirements. Only about 4 percent of JSF capabilities have been completely verified by flight tests, lab results, or both. Only 3 of the extensive network of 32 ground test labs and simulation models are fully accredited to ensure the fidelity of results. Software development--essential for achieving about 80 percent of the JSF functionality--is significantly behind schedule as it enters its most challenging phase.

What GAO Recommends

To sustain a focus on accountability and facilitate tradeoffs within the JSF program, GAO recommends that DOD (1) maintain annual funding levels at current budgeted amounts; (2) establish criteria for evaluating the STOVL's progress and make independent reviews, allowing each variant to proceed at its own pace; and (3) conduct an independent review of the software development and lab accreditation processes. DOD concurred.