The low volume of military electronics purchases does not provide sufficient economic incentives for commercial manufacturers. Pilot officials currently estimate that producing the modules commercially will save about 40 percent compared to the F-22 program cost estimates. Expected Benefits Extend Beyond Pilot

The most important benefit foreseen from the pilot is not from lower costs for the specific pilot components, but from future electronics procurement. In turn, wider participation by commercial entities in military production may reduce military-unique production costs. Unless waivers or workarounds are granted for many of these government-unique requirements, the pilot will be limited in demonstrating the benefits of commercial practices, including the savings associated with high-volume material purchases. While analyzing the differences in requirements, pilot officials found that barriers to commercial production are not created by the Air Force alone. Integrated Production Pilot Has Not Benefited From Acquisition Reform

Although DOD has actively proposed and implemented acquisition reform measures, key reform efforts have not helped move the pilot forward. Accordingly, we recommend that the Air Force, in consultation with TRW, identify those government-unique requirements that prevent the pilot from demonstrating that military items can be produced at equal or better quality on commercial production lines at substantially lower prices and then seek Secretary of Defense waivers. DOD indicated that (1) providing a waiver for the pilot would not necessarily accomplish the project’s objective of demonstrating the feasibility of building military products on commercial lines in the future and (2) designating this pilot as a DOD acquisition pilot would be contrary to one of the TRW pilot’s objectives, which is to identify barriers and then develop and demonstrate business practices to nullify those barriers. GAO Comments

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Why GAO Did This Study

GAO provided information on the Department of Defense's (DOD) Military Products from Commercial Lines Pilot Program, focusing on the: (1) program's potential for achieving benefits sought from acquisition reform; and (2) barriers to achieving these benefits.

What GAO Found

GAO found that: (1) the pilot program has demonstrated that redesigning military components for commercial production appears technically feasible; (2) pilot program officials believe that if the use of commercial practices and policies is permitted, military production costs could be reduced by an average of 40 percent and the Air Force's requirements for the F-22 could be met; (3) other expected benefits from the pilot program include accelerated assembly, a more technically advanced and lighter weight product, and valuable lessons learned for future large electronic procurements; (4) for the pilot program to be successful and to encourage commercial participation, significant differences in commercial and military business practices have to be overcome; (5) although the pilot program has been successful in identifying government-unique requirements that present barriers to the most efficient use of commercial production lines, acquisition reform measures have not removed these barriers; (6) DOD must also overcome an acquisition culture that has historically resisted change and does not provide sufficient incentives for acquiring products from commercial producers; and (7) unless waivers are granted for many of the defense-unique requirements or workarounds, the pilot program will be limited in demonstrating that military items can be produced commercially at substantially lower prices.