1). Reliability and Maintainability (R+M). Technical Data Rights. DOD Is Currently Developing an F-35 Sustainment Strategy, but It May Not Be Affordable

DOD has a number of sustainment planning documents that will make up  the F-35 program’s overall sustainment strategy, including the Life Cycle  Sustainment Plan, which, according to DOD policy, will provide the basis  for sustainment activities. However, the current sustainment strategy that DOD is developing may  not be affordable. However, the department has not taken steps to fully address  these risks, which could affect the development of the sustainment  strategy. The  F-35 is the most software-intensive fighter aircraft DOD has procured to  date. Improved Assumptions and Additional Analyses Could Increase Reliability of F-35 O&S Costs

DOD’s most recent O&S cost estimates are comprehensive in that they  include all DOD-required program elements and are organized according  to a standard O&S cost-estimating structure; but weaknesses exist with  respect to a few of the assumptions, and the estimates did not include all  analyses necessary to make them fully reliable. After 2015, the Marine Corps  is planning on using the aircraft’s increased capability, which will likely  result in more fuel being used. In addition, the JPO estimate does not include reasonable assumptions  about part-replacement rates and depot maintenance. To help DOD address key risks to F-35 affordability and operational  readiness, and to improve the reliability of its O&S cost estimates for the  life cycle of the program, we recommend that the Secretary of Defense  direct the F-35 Program Executive Officer to take the following five  actions:
To enable DOD to better identify, address, and mitigate performance  issues with the Autonomic Logistics Information System (ALIS) that  could have an effect on affordability, as well as readiness, establish a  performance-measurement process for ALIS that includes, but is not  limited to, performance metrics and targets that (1) are based on  intended behavior of the system in actual operations and (2) tie  system performance to user requirements. To improve the reliability of the Cost Assessment and Program Evaluation  (CAPE) F-35 O&S cost estimate, we recommend that the Secretary of  Defense direct the Director of CAPE to take the following two actions for  future F-35 O&S cost estimates:  clearly document assumptions related to intermediate-level  maintenance and revise fuel burn assumptions to better reflect the  current and future state of the F-35 program and  conduct uncertainty analyses to understand the potential range of  costs associated with its estimates to reflect the most likely costs  associated with the program. We acknowledge that the  department established affordability targets for sustainment in March  2012, but these actions do not fully address the intent of our  recommendation because, as we note in our report, these affordability  targets may not be representative of what the services can actually afford  because the methodology for determining the targets was not informed by  resource constraints within military service budgets. DOD concurred with the recommendation that the Program Executive  Officer conduct uncertainty analysis on future F-35 O&S cost estimates. To assess the extent to which DOD has developed a sustainment  strategy for the F-35 program and addressed potential risks related to  affordability and operational readiness, we reviewed documentation of  program plans and analyses with relevant sustainment elements,  including the F-35 Life Cycle Sustainment Plan, the Weapon System  Planning Document, the F-35 Future Support Construct, the F-35  Autonomic Logistics Global Sustainment Concept of Operations, and the  F-35 Operational Requirements Document. To determine the extent to which DOD has developed a reliable operating  and support (O&S) cost estimate for the F-35 program, we evaluated both  DOD’s Joint Program Office (JPO) and its Cost Assessment and Program  Evaluation (CAPE) office 2013 O&S cost estimates using GAO’s Cost  Estimating and Assessment Guide.
Why GAO Did This Study

The F-35 Lightning II is intended to replace a variety of existing aircraft in the Air Force, Navy, and Marine Corps, while providing the most supportable, technologically advanced, lethal, and survivable aircraft to date. The F-35 is DOD's most expensive weapon system, with estimated sustainment costs of about $1 trillion. With the military services planning for the ability to deploy and maintain the F-35 within 4 years, DOD is working to develop a sustainment strategy that will be both affordable and executable for the program's life cycle.
GAO was mandated to review DOD's F-35 sustainment planning efforts. This report addresses the extent to which DOD has (1) developed an F-35 sustainment strategy and addressed potential risks related to affordability and operational readiness and (2) developed a reliable O&S cost estimate for the program's life cycle. GAO analyzed documented plans and cost estimates and interviewed DOD and contractor officials.

What GAO Found

The Department of Defense (DOD) currently has or is developing several plans and analyses that will make up its overall F-35 sustainment strategy, which is expected to be complete in fiscal year 2019. The annual F-35 operating and support (O&S) costs are estimated to be considerably higher than the combined annual costs of several legacy aircraft (see fig.). DOD has begun some cost-savings efforts and established sustainment affordability targets for the F-35 program, but DOD did not use the military services' budgets to set these targets. Therefore, these targets may not be representative of what the services can afford and do not provide a clear benchmark for DOD's cost-savings efforts. In addition, DOD has not fully addressed several issues that have an effect on affordability and operational readiness, including aircraft reliability and technical-data rights, which could affect the development of the sustainment strategy.
It is unclear whether DOD's O&S cost estimates for the F-35 program reflect the most likely costs that the F-35 program will incur. DOD has two primary F-35 O&S estimates that each total around $1 trillion over a 56-year life cycle. These cost estimates are comprehensive in that they include all DOD-required program elements and are organized according to a standard O&S cost-estimating structure; however, weaknesses exist with respect to a few of the assumptions, and the estimates did not include all analyses necessary to make them fully reliable. For example, the estimates did not use reasonable fuel burn rate assumptions that reflect the likely future F-35 fuel usage. Further, one of the estimates did not use reasonable assumptions about part replacement rates and depot maintenance. Finally, while DOD took some steps to mitigate the uncertainties inherent in cost estimates, DOD officials did not conduct key analyses to determine the level of risk associated with the estimates.

What GAO Recommends

GAO recommends that DOD develop better informed affordability constraints; address three risks that could affect sustainment, affordability, and operational readiness; and take steps to improve the reliability of its cost estimates. DOD concurred with all but one recommendation and partially concurred with the recommendation to conduct uncertainty analysis on one of its cost estimates, stating it already conducts a form of uncertainty analysis. GAO continues to believe that the recommended analysis would provide a more comprehensive sense of the uncertainty in the estimates.