	Background

The F/A-22 is an air superiority aircraft with advanced features to make  it less detectable to adversaries (stealth characteristics) and capable of  high speeds for long ranges. The current production cost  limit is $37.5 billion. To fully offset the $13.1 billion in estimated cost growth, the Air Force  and contractors designed cost reduction plans. As a result,  the estimated cost of the production program currently exceeds the  congressional cost limit despite the establishment of cost reduction plans  designed to offset a significant amount of this estimated cost growth. The  effectiveness of these cost reduction plans has varied. It is unlikely that the Air Force will achieve the estimated $3.7 billion in  cost growth offsets from the implementation of these PIPs if investment  continues to be less than planned. Estimated Production Costs Are Likely to Increase

We found indications that, in the future, F/A-22 production costs are  likely to increase more than the latest $5.4 billion in cost growth recently  estimated by the Air Force and OSD. First, the current OSD production  estimate does not include all costs. Second, schedule delays in  developmental testing could delay the start of a multiyear contract  designed to help control production costs. Last, we found several risk factors that may increase future production  costs, including the dependency of certain cost reduction plans on  congressional action and a reduction in funding for support costs. Delays in production and multiyear procurement would likely increase  production costs. Furthermore, the Air Force reduced estimated funding for F/A-22 support  costs by $1.8 billion in its latest production cost estimate. DOD Has Not Fully Informed Congress about Potential Impact of Reduced Offsets to Estimated Cost Growth

DOD has not fully informed Congress about specifics related to the total  cost of the F/A-22 production program or the quantity of aircraft that  can be purchased within the cost limitation. To ensure proper congressional oversight of the F/A-22 program, we  also recommend that the Secretary of Defense provide Congress with  documentation    showing that funding for PIPs is being invested at the planned level  each fiscal year, and if not, explaining the reasons why and the potential  consequences of not fully investing and potentially not offsetting cost  growth as planned;  reflecting the potential cost of F/A-22 production if cost reduction plans do  not offset cost growth as planned; and  reflecting the quantity of aircraft DOD believes can be procured with the  existing production cost limit. To identify areas where additional production cost growth has occurred  and may occur, we reviewed several aspects of the F/A-22 program that  were likely to contribute to future cost growth.
Why GAO Did This Study

In 1991, the Air Force began developing the F/A-22 aircraft with advanced features to make it less detectable to adversaries and capable of high speeds for long distances. After a history of program cost increases, Congress limited the cost of F/A-22 production to $37.5 billion in 1997. Congress has remained interested in the potential cost of production. As requested, we (1) identified the latest production cost estimate and assessed the planned offsets from cost reduction plans, (2) identified areas where additional cost growth is likely to occur, and (3) determined the extent that DOD has informed Congress about production costs.

What GAO Found

The Department of Defense (DOD) has identified about $18 billion in estimated production cost growth over the last 6 years. Even though the Air Force has designed cost reduction plans to offset a significant amount of this estimated cost growth, DOD still estimates that the cost of production will exceed the cost limit established by Congress in 1997. Furthermore, the Air Force has not fully funded certain cost reduction plans called production improvement programs (PIPs), and as a result, these PIPs may not achieve their estimated $3.7 billion in offsets to cost growth. In addition to the cost growth estimated by DOD, GAO identified areas where, in the future, F/A-22 production cost growth is likely to occur. First, the Office of the Secretary of Defense's current production cost estimate does not include about $1.3 billion in costs that should be considered in future cost estimates. Second, schedule delays in developmental testing could delay the start of a multiyear contract designed to control costs. These delays could also result in additional costs owing to the expiration of an Air Force agreement with the contractor designed to help control production costs in fiscal year 2005. Last, other risk factors may increase future production costs, including the dependency of certain cost reduction plans on the availability of funding and a reduction in funding for support costs. DOD has not fully informed Congress (1) about what the total cost of the production program could be if cost reduction plans do not offset cost growth as planned or (2) about the aircraft quantity that can be procured within the production cost limit. If the cost limit is maintained and estimated production costs continue to rise, the Air Force will likely have to procure fewer F/A-22s.