	Background

The F-35 Joint Strike Fighter program is a joint, multinational acquisition  intended to develop and field an affordable, highly common family of next  generation strike fighter aircraft for the United States Air Force, Navy,  Marine Corps, and eight international partners. In March 2012, DOD established a new acquisition program baseline for  the F-35 program that incorporated the numerous positive and more  realistic restructuring actions taken since 2010. Furthermore, software  management practices improved, but this area continued to require more  time and effort than planned. While the F-35 program made progress in   The program made  2012, the bulk of development testing and evaluation is ahead, is planned  to continue into 2016, and is expected to identify additional deficiencies  impacting aircraft design and performance. The program  achieved 7 of the 10 primary objectives (70 percent) it established for  2012 and made substantial progress on one other. The F-35 program made  considerable progress in 2012 to address these major technical risks:
The helmet mounted display (which provides flight data, targeting, and  other sensor data to the pilot) is integral to the mission systems  architecture, to reduce pilot workload, and to achieve the F-35’s  concept of operations. These recent management actions are positive and encouraging, but  overall, software development activities in 2012 lagged behind plans. After a Slow Start, Aircraft Manufacturing and Deliveries Are Beginning to Catch Up to Plans

While initial F-35 production overran target costs and delivered late, there  are several encouraging signs indicating better outcomes in the coming  years. Overall, manufacturing and supply operations are improving with  the latest data showing labor hours to build the aircraft decreasing,  deliveries accelerating, quality measures improving, and parts shortages  declining. That said, the program is working through the continuing effects  from the F-35’s highly concurrent acquisition strategy. For example, the  program is continuing to incur substantial costs for rework to fix  deficiencies discovered in testing, but the amount per aircraft is dropping. DOD’s substantial reductions in near-term  procurement quantities have decreased–but not eliminated– the risk from  investing billions of dollars on hundreds of aircraft before testing proves  the aircraft design and verifies that its performance and reliability meet  requirements. According to the new acquisition baseline and flight test  schedule, DOD will procure 289 aircraft for $57.8 billion before the end of  developmental flight testing (see table 4). Costs and Funding for Acquisition and Sustainment Remain Very Challenging Moving Forward

Ensuring that the acquisition costs of the F-35 are affordable so that  aircraft can be bought in the quantities and time required by the warfighter  will be of paramount concern to the Congress, U.S. military, and  international partners. These actions  place the F-35 program on firmer footing, but aircraft are expected to cost  more and deliveries to warfighters will take longer than in previous  baselines. The rebaselined program will require an average of $12.6 billion annually  through 2037, an unprecedented demand on the defense procurement  budget. Because of F-35 delays and uncertainties, the military services are  extending the service life of legacy aircraft to bridge the gap in F-35  deliveries and mitigate projected shortfalls in fighter aircraft force  requirements. Many of the restructuring actions—more time and  resources for development flight testing, reduced annual procurements,  the recognition of concurrency risks, independent cost and software  assessments, and others—are responsive to our past recommendations. As a  result, we are not making new recommendations in this report. DOD concurred with the report’s findings and conclusions. To assess manufacturing and supply performance indicators, production  results, and design changes, we obtained and analyzed manufacturing  contract cost, aircraft delivery, and work performance data through the  end of calendar year 2012 to assess progress against plans.
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. 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 report, prepared in response to the National Defense Authorization Act for 2010, addresses (1) F-35 program performance during 2012, including testing, technical risks, and software; (2) manufacturing performance indicators, production results, and design changes; and (3) acquisition and sustainment costs 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 F-35 program achieved 7 of 10 key management objectives for 2012 and made substantial progress on one other. Two objectives on aircraft deliveries and a corrective management plan were not met. Also in 2012, the program conducted more developmental flight tests than planned and made considerable progress in addressing critical technical risks, such as the helmet-mounted display. With about one-third of development flight testing completed, much testing remains to demonstrate and verify F-35 performance. Software management practices are improved, but with significant challenges ahead as software integration and testing continue to lag behind plans.
Manufacturing and supply processes are also improving--indicators such as factory throughput, labor efficiency, and quality measures are all positive. While initial F-35 production overran target costs and delivered aircraft late, the latest data shows labor hours decreasing and deliveries accelerating. The program is working through the continuing effects from its concurrent acquisition strategy that overlapped testing and manufacturing activities. For example, the program is continuing to incur substantial costs for rework to fix deficiencies discovered in testing, but the amount of rework needed on each aircraft is dropping.
Going forward, ensuring affordability--the ability to acquire aircraft in quantity and to sustain them over the life cycle--is of paramount concern. With more austere budgets looming, F-35 acquisition funding requirements average $12.6 billion annually through 2037. The new F-35 acquisition baseline incorporates the Department of Defense's (DOD) positive restructuring actions taken since 2010, including more time and funding for development and deferred procurement of more than 400 aircraft to future years. These actions place the F-35 program on firmer footing, although aircraft will cost more and deliveries to warfighters will take longer. The program continues to incur financial risk from its plan to procure 289 aircraft for $57.8 billion before completing development flight testing. Meanwhile, the services are spending about $8 billion to extend the life of existing aircraft and to buy new ones to mitigate shortfalls due to F-35 delays.

What GAO Recommends

GAO is not making recommendations in this report. DOD's restructuring of the F-35 program and other actions are responsive to many prior recommendations. DOD agreed with GAO's report findings and conclusions.