	JSF Restructuring Improves Program, but Affordability Is Challenged by Rising Costs and Delays

Over the past year, DOD has substantially restructured the JSF program,  taking positive actions that should lead to more achievable and  predictable outcomes. Restructuring has consequences—higher  development costs, fewer aircraft in the near term, training delays, and  extended times for testing and delivering capabilities to warfighters. Key  restructuring changes include the following:    The total system development cost estimate rose to $56.4 billion and  its schedule was extended to 2018. This represents a 26 percent  increase in cost and a 5-year slip in schedule compared to the current  approved program baseline established in 2007. Near-term procurement quantities were reduced by 246 aircraft  through 2016; the annual rate of increase in production was lowered;  and the full-rate production decision moved to 2018, a 5-year slip from  the current baseline. To address technical problems and test deficiencies for the short  takeoff and landing (STOVL) variant, the Department significantly  scaled back its procurement quantities and directed a 2-year period for  evaluating and engineering technical solutions to inform future  decisions on this variant. The net effect was  increased development funding and decreased procurement funding in the  near term. Also, the estimated average unit procurement price for the  JSF has about doubled since program start and current forecasts indicate  that life-cycle costs will be substantially higher than the legacy aircraft it  replaces. Rising JSF costs erode buying power and may make it difficult  for the U.S. and its allies to buy and sustain as many aircraft as planned. Going forward, the JSF will require unprecedented demands for funding in  a period of more austere defense budgets where it will have to annually  compete with other defense and nondefense priorities for the  discretionary federal dollar. Progress In Achieving the JSF Program’s 2010 Goals Was Mixed

The JSF program established 12 clearly stated goals in testing, contracting,  and manufacturing for completion in calendar year 2010. It had mixed  success, achieving 6 goals and making varying degrees of progress on the  other 6. Although still hampered by the late delivery of test aircraft to testing sites,  the development flight test program significantly ramped up operations in  2010, accomplishing 3 times as many test flights as the previous 3 years  combined. Program Has Still Not Fully Demonstrated a Stable Design and Mature Manufacturing Processes as It Enters Its Fifth Year of Production

After completing 9 years of system development and 4 years of  overlapping production activities, the JSF program has been slow to gain  adequate knowledge to ensure its design is stable and the manufacturing  process ready for greater levels of annual production. Specifically, the program has not yet  stabilized aircraft designs—engineering changes continue at higher than  expected rates long after critical design reviews and well into  procurement, and more changes are expected as testing accelerates. Also,  manufacturing cost increases and delays in delivering test and production  aircraft indicate need for substantial improvements in factory throughput  and performance of the global supply chain. Testing Has Been Slow and Has Not Demonstrated That the Aircraft Wil in Its Intended

Since the first flight in December 2006, only about 4 percent of JSF  capabilities have been completely verified by flight tests, lab results,  both. Furthermore, only a small portion of the extensive network of ground te labs and simulation models are fully accredited to ensure the fidelity of  results. Software development—essential for achieving about 80 percent is significantly behind schedule as it enters its  of the JSF functionality— most challenging phase. Officials underestimated the time  and effort needed to develop and integrate the software, substantially  nd  contributing to the program’s overall cost and schedule problems a testing delays, and requiring the retention of engineers for longer periods Significant learning and development work remains before the program  can demonstrate the mature software capabilities needed to meet  warfighter requirements. Flight testing and production activities are increasing and contractors are improving  supply and manufacturing processes, but deliveries are still lagging. Tactical Aircraft: DOD’s Cancellation of the Joint Strike Fighter  Alternate Engine Program Was Not Based on a Comprehensive Analysis.
Why GAO Did This Study

The F-35 Lightning II, also known as the Joint Strike Fighter (JSF), is the Department of Defense's (DOD) most costly and ambitious aircraft acquisition, seeking to simultaneously develop and field three aircraft variants for the Air Force, Navy, Marine Corps, and eight international partners. The JSF is critical for recapitalizing tactical air forces and will require a long-term commitment to very large annual funding outlays. The estimated total investment cost is currently about $385 billion to develop and procure 2,457 aircraft. Because of a history of relatively poor cost and schedule outcomes, defense leadership over the past year has directed a comprehensive restructuring of the JSF program that is continuing. This testimony draws substantially from our extensive body of work on the JSF, including the current annual review mandated in the National Defense Authorization Act for Fiscal Year 2010, Pub. L. No. 111-84 244 (2009). Our draft report is being reviewed by the Department and we expect to issue it early next month. That report and this testimony discusses (1) program cost and schedule changes and their implications on affordability; (2) progress made during 2010; (3) design and manufacturing maturity; and (4) test plans and progress. GAO's work included analyses of a wide range of program documents and interviews with defense and contractor officials.

What GAO Found

DOD continues to restructure the JSF program, taking positive, substantial actions that should lead to more achievable and predictable outcomes. Restructuring has consequences--higher up-front development costs, fewer aircraft bought in the near term, training delays, and extended times for testing and delivering capabilities to warfighters. Total development funding is now estimated at $56.4 billion to complete in 2018, a 26 percent cost increase and a 5-year schedule slip from the current baseline. DOD also reduced procurement quantities by 246 aircraft through 2016, but has not calculated the net effects of restructuring on total procurement costs nor approved a new baseline. Affordability for the U.S. and partners is challenged by a near doubling in average unit prices since program start and higher estimated life-cycle costs. Going forward, the JSF requires unprecedented funding levels in a period of more austere defense budgets. The program had mixed success in 2010, achieving 6 of 12 major goals and progressing in varying degrees on the rest. Successes included the first flight of the carrier variant, award of a fixed-price aircraft procurement contract, and an accelerated pace in development flight tests that accomplished three times as many flights in 2010 as the previous 3 years combined. However, the program did not deliver as many aircraft to test and training sites as planned and made only a partial release of software capabilities. The short takeoff and landing (STOVL) variant had significant technical problems and deficient flight test performance. DOD directed a 2-year period to evaluate and engineer STOVL solutions. After more than 9 years in development and 4 in production, the JSF program has not fully demonstrated that the aircraft design is stable, manufacturing processes are mature, and the system is reliable. Engineering drawings are still being released to the manufacturing floor and design changes continue at higher rates than desired. More changes are expected as testing accelerates. Test and production aircraft cost more and are taking longer to deliver than expected. Manufacturers are improving operations and implemented 8 of 20 recommendations from an expert panel, but have not yet demonstrated a capacity to efficiently produce at higher production rates. Substantial improvements in factory throughput and the global supply chain are needed. Development testing is still early in demonstrating that aircraft will work as intended and meet warfighter requirements. About 4 percent of JSF capabilities have been completely verified by flight tests, lab results, or both. Only 3 of the extensive network of 32 ground test labs and simulation models are fully accredited to ensure the fidelity of results. Software development--essential for achieving about 80 percent of the JSF functionality--is significantly behind schedule as it enters its most challenging phase.