	Background

The Air Force and the Navy plan to replace many of their current fighter  aircraft with the Joint Strike Fighter, also called the F-35. Air Force and Navy Programs Would Extend the Service Life of 450 Aircraft at a Cost of Nearly $5 billion

The Air Force currently plans to upgrade and extend the service life of  300 F-16 aircraft at an estimated cost of $2.61 billion and the Navy plans  to extend the service life of 150 F/A-18 aircraft at an estimated cost of  $2.19 billion. Finally, Air Force officials said that they could  expand these programs to include up to 650 aircraft if needed to attain  desired inventory levels. Air Force and Navy Cost Estimates Exhibit Many Characteristics of a High-Quality Cost Estimate but Do Not Reflect Some Significant Potential Costs

The Air Force’s and Navy’s cost estimates to upgrade and extend the  service life of selected F-16 and F/A-18 aircraft exhibit many cost- estimating characteristics and best practices of a high-quality cost  estimate, but do not reflect all the potential total costs that may occur. We  assessed the Air Force estimate for capability upgrades and the Air Force  estimate for the service-life extension of selected F-16 aircraft, which  were prepared for the fiscal year 2013 budget request; and the Navy  estimate for the service-life extension of selected F/A-18 aircraft. As a result, decision-makers do  not have visibility of how much the total costs will be and how they may  increase if program quantities increase or additional work is required on  some aircraft, which could hinder their ability to assess budgets and  affordability. However, the estimates were not  fully credible because the Air Force’s analysis did not clearly show the  potential range of total costs that would occur if more aircraft are included  in the programs and the estimates were not compared to an  independently developed estimate. Further, our past work has shown that  an independent estimate tends to be higher and more accurate than a  program office estimate. Specifically, the Navy told us it will assess on an aircraft-by-aircraft basis  whether the F/A-18s also need capability upgrades to maintain mission  effectiveness, such as adding the ability to integrate with newer aircraft. Given the uncertainties, the costs associated  with this additional work are not included in the Navy’s $2.19 billion  estimate nor are they included in the Navy’s spending plans through fiscal  year 2017. In our prior work, we have found that an  independent cost estimate is considered to be one of the most reliable  validation methods. Conclusions

The Air Force and the Navy decided to upgrade and extend the service  life of selected F-16 and F/A-18 aircraft to provide a capability and  capacity “bridge” until the F-35 is available in sufficient numbers. Specifically, we found the estimates to be well-documented and accurate  and mostly comprehensive. Recommendations for Executive Action

To improve future updates of Air Force and Navy cost estimates for  upgrading and extending the service life of selected F-16s and F/A-18s  and to improve the ability of decision-makers to assess the potential total  costs, we recommend that the Secretary of Defense take the following  four actions:  Direct the Secretary of the Air Force to update its cost estimates, and in  doing so:  include in its sensitivity analysis an assessment of the range of  possible costs if the capability-upgrade and service-life extension  programs are expanded to more than 300 aircraft including up to the  maximum of 650 aircraft, and obtain an independent review of the updated cost estimates. Appendix I: Scope and Methodology

To describe the Air Force’s and the Navy’s plans to upgrade and extend  the service life of selected F-16s and F/A-18s, we reviewed the services’  documentation of the programs’ purpose and scope including the  underlying analysis of alternative approaches. To assess the extent to which the cost estimates exhibited characteristics  of a high-quality cost estimate, we compared how the estimates were  developed to the cost estimating best practices outlined in the GAO Cost  Estimating and Assessment Guide.
Why GAO Did This Study

Fighter aircraft are important to achieve and maintain air dominance during combat operations as well as to protect the homeland. DOD plans to replace many of its current fighter fleet with the F-35; however, the F-35 program has experienced numerous delays and cost increases. To maintain fighter capabilities and capacity, the Air Force and Navy have decided to upgrade and extend the service life of selected F-16 and F/A-18 aircraft. In this context, two subcommittees of the House Armed Services Committee asked GAO to (1) describe the Air Force and Navy plans to upgrade and extend the service life of selected F-16 and F/A-18 aircraft; and (2) assess the extent to which cost estimates for these upgrades and life extensions exhibit characteristics of a high-quality cost estimate. GAO obtained documentation of the plans and estimates, compared the estimates to best practices outlined in the GAO Cost Estimating Guide, and assessed factors that could affect total costs.

What GAO Found

The Air Force plans to upgrade and extend the service life of 300 F-16 aircraft and the Navy 150 F/A-18 aircraft, at a combined cost estimated at almost $5 billion in fiscal year 2013 dollars.
The Air Force plans to extend the service life of selected F-16s by 2,000 flying hours each as well as install capability upgrades such as an improved radar. The Air Force estimates that it will complete this work by 2022 at a cost of $2.61 billion. About 28 percent of the projected costs are included in the Air Force's spending plans through 2017, with the remainder expected to be incurred in 2018-2022.
The Navy plans to extend the service life of selected F/A-18s by 1,400 flying hours each and may install capability upgrades on some of the 150 aircraft--such as adding the ability to integrate with newer aircraft. The Navy projects that it will complete the life extension by 2018 at a cost of $2.19 billion, with most of these costs included in its spending plans through 2017, but costs associated with any upgrades are not included in the Navy estimate or in its spending plans.
Air Force and Navy officials told GAO that they could ultimately extend the service life of up to 650 F-16s and 280 F/A-18s if needed to attain desired inventory levels.
The Air Force's and Navy's cost estimates to upgrade and extend the service life of selected fighter aircraft exhibit some characteristics of a high-quality cost estimate but do not reflect all potential costs. The estimates were: well-documented since they identified data sources and methodologies; accurate since they accounted for inflation and were checked for errors; and mostly comprehensive since they included the work planned and identified key assumptions. However, the estimates were not fully credible in part because they did not assess the extent to which the total costs could change if additional work is done or more aircraft are included in the programs. Another factor affecting the credibility of the estimates is that they have not been compared to an independently developed estimate. GAO's past work has shown that such an independent cost estimate is one of the best validation methods since an independent cost estimate tends to be higher and more accurate than a program office estimate. Air Force and Navy officials told GAO that they use Department of Defense and military department guidance that allows for some variation in how the estimates are developed depending on the dollar value and maturity of the program. However, these programs--which are critical to maintain fighter capability and capacity as current inventory ages--total almost $5 billion and the costs will increase if program quantities and scope increase. Without fully credible cost estimates, including an analysis of how much total costs may increase, decision makers will not have visibility into the range of potential costs, which could hinder their ability to formulate realistic budgets and make informed investment decisions.

What GAO Recommends

GAO recommends that the Air Force and Navy follow all best practices to enhance the credibility of the cost estimates for the F-16 and F/A-18 upgrades and life extensions including an assessment of the potential range of costs and seeking independent cost estimates.