oversight

Tactical Aircraft: DOD Needs to Better Inform Congress about Implications of Continuing F/A-22 Cost Growth

Published by the Government Accountability Office on 2003-02-28.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                United States General Accounting Office

GAO             Report to the Honorable John F.
                Tierney, House of Representatives



February 2003
                TACTICAL AIRCRAFT

                DOD Needs to Better
                Inform Congress
                about Implications of
                Continuing F/A-22
                Cost Growth




GAO-03-280
                                               February 2003


                                               TACTICAL AIRCRAFT

                                               DOD Needs to Better Inform Congress
Highlights of GAO-03-280, a report to          about Implications of Continuing F/A-22
Representative John F. Tierney
                                               Cost Growth



In 1991, the Air Force began                   The Department of Defense (DOD) has identified about $18 billion in
developing the F/A-22 aircraft                 estimated production cost growth over the last 6 years. Even though the Air
with advanced features to make it              Force has designed cost reduction plans to offset a significant amount of this
less detectable to adversaries                 estimated cost growth, DOD still estimates that the cost of production will
and capable of high speeds for                 exceed the cost limit established by Congress in 1997. Furthermore, the Air
long distances. After a history
of program cost increases,
                                               Force has not fully funded certain cost reduction plans called production
Congress limited the cost of F/A-22            improvement programs (PIPs), and as a result, these PIPs may not achieve
production to $37.5 billion in 1997.           their estimated $3.7 billion in offsets to cost growth.
Congress has remained interested
in the potential cost of production.           In addition to the cost growth estimated by DOD, GAO identified areas
As requested, we (1) identified                where, in the future, F/A-22 production cost growth is likely to occur. First,
the latest production cost                     the Office of the Secretary of Defense’s current production cost estimate
estimate and assessed the planned              does not include about $1.3 billion in costs that should be considered in
offsets from cost reduction plans,             future cost estimates. Second, schedule delays in developmental testing
(2) identified areas where                     could delay the start of a multiyear contract designed to control costs. These
additional cost growth is likely to            delays could also result in additional costs owing to the expiration of an Air
occur, and (3) determined the
extent that DOD has informed
                                               Force agreement with the contractor designed to help control production
Congress about production costs.               costs in fiscal year 2005. Last, other risk factors may increase future
                                               production costs, including the dependency of certain cost reduction plans
                                               on the availability of funding and a reduction in funding for support costs.

GAO recommends that the                        DOD has not fully informed Congress (1) about what the total cost of the
Air Force fund production                      production program could be if cost reduction plans do not offset cost
improvement programs at the                    growth as planned or (2) about the aircraft quantity that can be procured
planned level to maximize its                  within the production cost limit. If the cost limit is maintained and estimated
potential for cost reductions. To              production costs continue to rise, the Air Force will likely have to procure
help ensure proper congressional               fewer F/A-22s.
oversight, GAO recommends that
DOD provide Congress with
documentation (1) showing that
the Air Force is funding production
improvement programs as planned
and (2) reflecting the potential
cost of production if offsets are
not achieved as planned and the
aircraft quantity that can be
procured with the cost limit.
DOD did not concur with GAO’s
recommendations. GAO believes
that DOD’s position lessens the
opportunity to create greater
production efficiencies and better
inform Congress.
www.gao.gov/cgi-bin/getrpt?GAO-03-280.

To view the full report, including the scope
and methodology, click on the link above.
For more information, contact Allen Li at
(202) 512-4841.
Contents


Letter                                                                                 1
               Results in Brief                                                        2
               Background                                                              3
               DOD’s F/A-22 Estimated Production Costs Exceed Cost Limitation          5
               Estimated Production Costs Are Likely to Increase                       8
               DOD Has Not Fully Informed Congress about Potential Impact of
                 Reduced Offsets to Estimated Cost Growth                            12
               Conclusions                                                           12
               Recommendations for Executive Action                                  13
               Agency Comments and Our Evaluation                                    13
               Scope and Methodology                                                 15

Appendix I     Comments from the Department of Defense                               18



Appendix II    Amounts Associated with Cost Reduction
               Plan Categories                                                       21



Appendix III   F/A-22 Estimated Production Cost Growth in 1997                       22



Appendix IV    Cost Reduction Plan Categories and Planned Offsets
               to Estimated Cost Growth                                              23



Appendix V     Estimated F/A-22 Production Cost Growth in 2001                       24



Appendix VI    Estimated Cost Reduction Plan Offsets for Future
               Production Lot Contracts                                              25



Appendix VII   GAO Staff Acknowledgments                                             26




               Page i                                         GAO-03-280 F/A-22 Aircraft
Related GAO Products                                                                                             27



Tables
                       Table 1: Comparison of Planned versus Implemented Cost
                                Reduction Plan Offsets for Awarded Production Contracts                          6
                       Table 2: F/A-22’s Production Cost Growth Not Included in OSD’s
                                Latest Estimate                                                                  9
                       Table 3: Current Amounts Associated with Cost Reduction
                                Plan Categories                                                                  21


Figures
                       Figure 1: Planned versus Actual F/A-22 Production Improvement
                                Program Investment for Production Lots 1 and 2                                   7
                       Figure 2: Planned Offsets to Cost Growth from Investing in and
                                Implementing Production Improvement Programs                                      8




                       Abbreviations

                       DAB       Defense Acquisition Board
                       DOD       Department of Defense
                       GAO       General Accounting Office
                       OSD       Office of the Secretary of Defense
                       PIPs      production improvement programs




                       This is a work of the U.S. Government and is not subject to copyright protection in the
                       United States. It may be reproduced and distributed in its entirety without further
                       permission from GAO. It may contain copyrighted graphics, images or other materials.
                       Permission from the copyright holder may be necessary should you wish to reproduce
                       copyrighted materials separately from GAO’s product.




                       Page ii                                                       GAO-03-280 F/A-22 Aircraft
United States General Accounting Office
Washington, DC 20548




                                   February 28, 2003

                                   The Honorable John F. Tierney
                                   House of Representatives

                                   Dear Mr. Tierney:

                                   The Air Force is developing the F/A-22 aircraft1 with advanced features
                                   designed to allow it to be less detectable to adversaries, capable of high
                                   speeds for long ranges, and able to provide the pilot with improved
                                   awareness of the surrounding situation.2 Development of the aircraft,
                                   which started in 1991, is expected to be completed in early 2004. The
                                   Air Force approved the start of low-rate production in August 2001.

                                   Congress established a production cost limitation in the National Defense
                                   Authorization Act for Fiscal Year 19983 following a history of program
                                   cost increases. The limitation, which allows for inflation adjustments,
                                   is currently $37.5 billion.4 The act does not specify the total number of
                                   aircraft to be procured for this amount. During a high-level review by the
                                   Department of Defense’s (DOD) Defense Acquisition Board5 in August
                                   2001, the Department of Defense estimated that production program costs




                                   1
                                    “F/A” stands for fighter/attack aircraft. The Air Force changed the designation from F-22 to
                                   F/A-22 in September 2002 to reflect the aircraft’s air-to-surface attack capability.
                                   2
                                   These features are expected to permit the F/A-22 to penetrate adversary airspace, operate
                                   with limited interference, and destroy targets on the ground as well as in the air.
                                   3
                                    Section 217, P.L.105-85, Nov. 18, 1997.
                                   4
                                    The cost limitation, before adjustment under the act’s provisions, was $43.4 billion.
                                   The cost limitation does not include $1.575 billion associated with six aircraft
                                   labeled Production Representative Test Vehicles, which are excluded from the
                                   production cost limitation. Those aircraft are funded mostly with appropriations
                                   for research, development, test and evaluation as approved by Congress.
                                   5
                                    A DOD senior–level forum for advising the Under Secretary of Defense
                                   (Acquisition, Technology and Logistics) on critical decisions concerning major weapon
                                   systems programs.



                                   Page 1                                                          GAO-03-280 F/A-22 Aircraft
                   would be $43 billion6 and therefore exceed the production cost limit of
                   $37.5 billion.

                   As requested, we reviewed the Air Force’s F/A-22 production program and
                   the service’s efforts to offset estimated production cost growth through
                   various cost reduction plans. Specifically, we (1) identified the F/A-22’s
                   latest production cost estimate acknowledged by DOD, including an
                   assessment of the planned offsets from cost reduction plans; (2) identified
                   areas where additional cost growth is likely to occur; and (3) determined
                   the extent to which DOD has informed Congress about the effect of not
                   achieving cost reduction plans, particularly on the number of aircraft that
                   can be procured within the existing production cost limit.


                   DOD has identified about $18 billion in estimated production cost
Results in Brief   growth over the last 6 years. Even though the Air Force has designed
                   cost reduction plans to offset a significant amount of this estimated cost
                   growth, DOD still estimates that the cost of production will exceed the
                   cost limit of $37.5 billion established by Congress in 1997. In addition,
                   the Air Force has not fully funded certain cost reduction plans; therefore,
                   these plans may not achieve their planned offsets to cost growth. For
                   example, the Air Force has not been able to fully fund improvements to
                   production processes. As a result, the Air Force may not be able to achieve
                   the planned $3.7 billion in offsets from improvements to
                   production processes.

                   In addition to the cost growth estimated by DOD, we identified areas
                   where F/A-22 production cost growth is likely to occur in the future. First,
                   the current Office of the Secretary of Defense’s production cost estimate
                   does not include about $1.3 billion in costs that should be considered in
                   future cost estimates. Second, schedule delays in developmental testing
                   could delay the award of a multiyear contract designed to help control
                   production costs. As a result of schedule delays, the Air Force has
                   already delayed the effective date of this contract to fiscal year 2006.
                   Consequently, the aircraft planned for fiscal year 2005 will not be included
                   in any agreements with the contractor designed to help control production
                   costs. Last, several risk factors may increase future production costs,


                   6
                    The F/A-22 President’s Budget for fiscal year 2004 would transfer $876 million in
                   production funding to help fund estimated cost increases in development. As a result, the
                   current production cost estimate is $42.2 billion, an amount that still exceeds the cost limit
                   of $37.5 billion.




                   Page 2                                                          GAO-03-280 F/A-22 Aircraft
             including the dependency of certain cost reduction plans on the
             availability of funding and a reduction in funding for support costs.

             DOD has not fully informed Congress about the potential cost of the
             production program if cost reduction plans do not offset cost growth as
             planned. Moreover, DOD has not informed Congress about the quantity of
             aircraft that can be procured within the existing production cost limit. If
             the production cost limit is maintained and estimated production costs
             continue to rise, the Air Force will likely have to procure fewer than the
             276 planned F/A-22s.

             We are providing recommendations aimed at improving the Air Force’s
             implementation of cost reduction plans and enhancing congressional
             oversight of the F/A-22 program. In written comments on a draft of this
             report, DOD stated that it did not concur with our recommendations.


             The F/A-22 is an air superiority8 aircraft with advanced features to make
Background   it less detectable to adversaries (stealth characteristics) and capable of
             high speeds for long ranges. It is being developed under contracts with
             Lockheed Martin Corporation for the aircraft and Pratt & Whitney
             Corporation for the engine.

             Because of potential cost increases, the Air Force established a team—the
             Joint Estimating Team—to review the total estimated cost of the F/A-22
             program in 1996. This team reported that the cost of the F/A-22 production
             program could grow by $13.1 billion from the amount planned. In response
             to identified cost growth, Congress, in the National Defense Authorization
             Act for Fiscal Year 1998 established cost limits for the development and
             production phases of the F/A-22 program. The current production cost
             limit is $37.5 billion.

             In August 2001, during a review by DOD’s Defense Acquisition Board
             (DAB), DOD estimated that the production program would cost
             $43 billion, or $5.4 billion more than the production cost limit. However,
             the two major parties involved in DAB, the Office of the Secretary of


             7
              “Air superiority” is the degree of air dominance that allows the conduct of operations by
             land, sea, and air forces without prohibitive interference by enemy aircraft.
             8
              P.L.105-85, Nov. 18, 1997. The cost limit is adjusted for inflation and for compliance with
             changes in federal, state, and local laws.




             Page 3                                                          GAO-03-280 F/A-22 Aircraft
    Defense (OSD) and the Air Force, disagreed over how many aircraft could
    be purchased for $43 billion. OSD believed that only 297 aircraft could be
    purchased for $43 billion while the Air Force believed 333 aircraft could be
    purchased for the same amount. DOD informed Congress of these
    divergent viewpoints in September 2001. The F/A-22 President’s Budget for
    fiscal year 2004 would transfer $876 million in production funding and
    reduce the number of aircraft to 276 to help fund estimated cost increases
    in development. As a result, the current production cost estimate is $42.2
    billion, an amount that still exceeds the cost limit of $37.5 billion.

    To fully offset the $13.1 billion in estimated cost growth, the Air Force
    and contractors designed cost reduction plans. Since 1997, the Air Force
    has been identifying and implementing these plans. (See appendix IV for a
    list of the major categories of cost reduction plans designed to offset the
    cost growth estimated in 1997.) A direct relationship cannot be established
    between the cost reduction plans and specific areas of cost growth. The
    reason is that the plans generally offset cost growth in broad areas by
    enhancing production technology, improving manufacturing techniques,
    and improving acquisition practices.

    F/A-22 cost reduction plans are categorized as either “implemented” or
    “not yet implemented.” The Air Force’s and contractors’ criteria for
    determining if a cost reduction plan is implemented include whether

•   the contractor has submitted a firm, fixed price proposal that recognizes
    the impact of the cost reduction;
•   the impact of the reduction has been reflected in a current contract price
    or negotiated in an agreement; or
•   the contractor has reduced the number of hours allocated to a task.

    Currently, $14 billion in cost reduction plans is considered “implemented.”

    Cost reduction plans are categorized as “not yet implemented” if the plans
    are well defined but none of the criteria listed above are met. Table 3 in
    appendix II shows the amounts the Air Force currently considers
    “implemented” and “not yet implemented.”




    Page 4                                             GAO-03-280 F/A-22 Aircraft
                         Over the last 6 years, $17.7 billion in estimated production cost growth
DOD’s F/A-22             has been identified during the course of two program reviews. As a result,
Estimated Production     the estimated cost of the production program currently exceeds the
                         congressional cost limit despite the establishment of cost reduction plans
Costs Exceed Cost        designed to offset a significant amount of this estimated cost growth. The
Limitation               effectiveness of these cost reduction plans has varied.


DOD’s Estimates of       During a review in 1997, the Air Force estimated cost growth of
Production Costs         $13.1 billion.9 The major contributing factors to this cost growth were
Have Risen               inflation, increased estimates of labor costs and materials associated with
                         the airframe and engine, and engineering changes to the airframe and
                         engine. These factors made up about 75 percent of the cost growth
                         identified in 1997. (See appendix III for a complete list of cost growth
                         categories identified in 1997.)

                         In August 2001, DOD estimated an additional $5.4 billion in cost growth
                         for the production of the F/A-22, bringing total estimated production costs
                         to $43 billion.10 The major contributing factors to this cost growth were
                         again due to increased labor costs and airframe and engine costs. These
                         factors totaled almost 70 percent of the cost growth. According to
                         program officials, major contractors’ and suppliers’ inability to achieve
                         the expected reductions in labor costs throughout the building of the
                         development and early production aircraft has been the primary reason for
                         estimating this additional cost growth. (See appendix VI for a complete list
                         of the categories and sources of cost growth identified in 2001.)


Cost Reduction Plans     The effectiveness of cost reduction plans has varied. The Air Force
Achieve Varied Results   was able to implement cost reduction plans and offset cost growth in the
                         first four production lot contracts awarded.11 Air Force projections for
                         cost reduction plans show that expected offsets are also planned for the



                         9
                         Based on a plan to procure 438 aircraft.
                         10
                           The F/A-22 President’s Budget for fiscal year 2004 would transfer $876 million in
                         production funding to help fund estimated cost increases in development. As a result,
                         the current production cost estimate is $42.2 billion.
                         11
                           These four production lots include: Production Representative Test Vehicle lot 1—
                         fiscal year 1999, Production Representative Test Vehicle lot 2—fiscal year 2000, lot 1—
                         fiscal year 2001, and lot 2—fiscal year 2002. Future production lots are planned annually
                         from fiscal year 2003 to fiscal year 2011.




                         Page 5                                                         GAO-03-280 F/A-22 Aircraft
                             future production lot contracts to enable the production program to
                             be completed within the current production cost estimate. However,
                             the Air Force has not fully funded production improvement programs
                             (PIPs), which are designed to offset cost growth by improving production
                             processes. Consequently, planned offsets may not be achieved in the
                             amount expected.

Implemented Cost Reduction   The Air Force was able to implement cost reduction plans and offset
Plans Are Offsetting         cost growth in the first four production contracts awarded. The total
Cost Growth                  offsets for these contracts slightly exceeded earlier projections by about
                             $0.5 million. Table 1 compares previous planned offsets with implemented
                             cost reduction plan offsets in the first four production contracts.

                             Table 1: Comparison of Planned versus Implemented Cost Reduction Plan Offsets
                             for Awarded Production Contracts

                              Dollars in millions
                                                                       Planned       Implemented
                              Production lot                            offsets           offsets           Difference
                              Fiscal year 1999 (2 aircraft)              $199.0            $200.5                  $1.5
                              Fiscal year 2000 (6 aircraft)               329.3             336.4                   7.1
                              Fiscal year 2001 (10 aircraft)              580.2             611.1                  30.9
                              Fiscal year 2002 (13 aircraft)              827.2             788.2                (39.0)
                              Total                                    $1,935.7          $1,936.2                  $0.5
                             Source: U.S. Air Force.



                             Cost reduction plans exist but have not yet been implemented for
                             subsequent production lots planned for fiscal years 2003 through 2010
                             because contracts for these production lots have not yet been awarded.
                             If implemented successfully, the Air Force expects these cost reduction
                             plans to achieve billions of dollars in offsets to estimated cost growth
                             and allow the production program to be completed within the current
                             production cost estimate of $43 billion.12 However, as we noted earlier in
                             this report, this amount exceeds the congressionally imposed production
                             cost limit of $37.5 billion.




                             12
                              The F/A-22 President’s Budget for fiscal year 2004 would transfer $876 million in
                             production funding to help fund estimated cost increases in development. As a result, the
                             current production cost estimate is $42.2 billion.




                             Page 6                                                        GAO-03-280 F/A-22 Aircraft
Not Fully Funding Production   A production improvement program is a type of cost reduction
Improvement Programs May       plan whereby the government must make an initial investment to realize
Reduce Expected Offsets        savings. The earlier the Air Force implements PIPs, the greater the impact
                               on the cost of production. Examples of PIPs previously implemented by
                               the Air Force include manufacturing process improvements for avionics,
                               improvements in the fabrication and assembly processes for the airframe,
                               and the redesign of several components to enable lower production costs.

                               The Air Force reduced the funding available for investment in PIPs
                               because of cost growth in production lots 1 and 2.13 The Air Force
                               subsequently used funding that it planned to invest in PIPs to cover the
                               cost growth in production lots 1 and 2. As a result, there has not been as
                               much funding available for investment in these PIPs as planned. Figure 1
                               shows that funding was reduced $61 million in fiscal year 2001 and $26
                               million in fiscal year 2002.

                               Figure 1: Planned versus Actual F/A-22 Production Improvement Program
                               Investment for Production Lots 1 and 2




                               13
                                 Production lot 1 was awarded in fiscal year 2001, and production lot 2 was awarded in
                               fiscal year 2002.




                               Page 7                                                        GAO-03-280 F/A-22 Aircraft
                       It is unlikely that the Air Force will achieve the estimated $3.7 billion in
                       cost growth offsets from the implementation of these PIPs if investment
                       continues to be less than planned. Figure 2 shows the remaining planned
                       investment in PIPs through fiscal year 2006 and the $3.7 billion in
                       estimated cost growth that can potentially be offset through fiscal year
                       2010 if the Air Force invests as planned in these PIPs.

                       Figure 2: Planned Offsets to Cost Growth from Investing in and Implementing
                       Production Improvement Programs




                       In the past, Congress has been concerned about the Air Force’s practice of
                       requesting fiscal year funding for these PIPs but then using part of that
                       funding for F/A-22 airframe cost increases. Recently, Congress directed
                       the Air Force to submit a request if it plans to use PIP funds for an
                       alternate purpose.


                       We found indications that, in the future, F/A-22 production costs are
Estimated Production   likely to increase more than the latest $5.4 billion in cost growth recently
Costs Are Likely       estimated by the Air Force and OSD. First, the current OSD production
                       estimate does not include all costs. Second, schedule delays in
to Increase            developmental testing could delay the start of a multiyear contract
                       designed to help control production costs. Third, as a result of schedule
                       delays that have already occurred, the Air Force has already delayed the
                       awarding of this contract to fiscal year 2006. As a consequence, the aircraft



                       Page 8                                                 GAO-03-280 F/A-22 Aircraft
                            planned for fiscal year 2005 are not currently included in any agreements
                            with the contractor that are designed to help control production costs.
                            Last, we found several risk factors that may increase future production
                            costs, including the dependency of certain cost reduction plans on
                            congressional action and a reduction in funding for support costs.


Current OSD Production      OSD’s latest cost estimate does not include costs identified by the
Cost Estimate Does Not      Air Force during the development of the Air Force’s current F/A-22
Include All Costs           acquisition plan. The Air Force developed this acquisition plan after
                            OSD completed its estimate. Table 2 shows some areas of additional costs
                            that the Air Force believes the program will incur.

                            Table 2: F/A-22’s Production Cost Growth Not Included in OSD’s Latest Estimate

                                Dollars in millions
                                Reason for cost growth                                                                       Cost growth
                                Delayed award of multiyear contract                                                                 $390
                                Inflation increases because new acquisition plan delays some early
                                aircraft purchases                                                                                    350
                                                                                             a
                                Decreased savings expected from Joint Strike Fighter program                                          300
                                Change in avionics subcontractor                                                                      250
                                Total                                                                                              $1,290
                            Source: GAO’s analysis of Air Force and OSD Cost Analysis Improvement Group data.
                            a
                             Resulting from changes in the prime contractor’s accounting system and the calculation of
                            overhead costs.


                            According to an OSD official, these additional costs should be considered
                            in any future OSD production cost estimate, which would increase OSD’s
                            estimate by $1.29 billion.

Additional Program Delays   If the F/A-22’s developmental testing program experiences additional
May Further Delay           delays, there is a greater risk that operational testing, full-rate
Multiyear Procurement       production, and multiyear procurement will be delayed as a result.
                            Delays in production and multiyear procurement would likely increase
                            production costs. The Air Force has not addressed ongoing problems with
                            the developmental testing and therefore remains at high risk for further
                            schedule delays.

                            For example, in March 2002, we reported that the Air Force’s plan to
                            complete the developmental airframe testing necessary for the start of
                            operational testing was at high risk because (1) the planned number of test
                            objectives per flight-hour was not being achieved and (2) most of the



                            Page 9                                                                              GAO-03-280 F/A-22 Aircraft
                          planned flight-test program was essentially being performed by only one
                          test aircraft rather than the three originally planned.14 Air Force officials
                          told us they understood that completing the tests as scheduled with only
                          one development test aircraft was high risk. As a result of this strategy, in
                          late 2001, the Air Force delayed the F/A-22’s schedule, including the start
                          of a multiyear contract designed to save production costs.


Acquisition Plan          The cost of the fiscal year 2005 production lot could increase because it
Contains Gap in Methods   is currently not included in plans to help control production costs. In late
to Control Costs          1996, as part of a major program review, the Air Force and major F/A-22
                          contractors entered into a Target Price Curve agreement designed to
                          help reduce production costs and ensure production affordability. The
                          agreement established production cost goals for the first five production
                          lots (fiscal years 1999-2003) and provided the contractors with incentives
                          if they achieved these cost goals. Previously, the Air Force planned to
                          transition directly to multiyear procurement starting with the next
                          production lot. However, since the Air Force delayed the start of multiyear
                          procurement from fiscal year 2004 to fiscal 2006, fiscal 2005 is now not
                          covered by either the agreement with the contractor or the planned
                          multiyear procurement contract. Therefore, there is less assurance that
                          the cost of the fiscal year 2005 production lot will match the current
                          estimate for this production lot. If a method to help control costs is not
                          implemented for the fiscal year 2005 production lot, the cost of this
                          production lot could increase more than expected.

Other Factors Could       We found several additional risk factors that may increase production
Increase Future           costs in the future. As we have also previously reported, the Air Force
Production Costs          is depending on both multiyear procurement and the Joint Strike
                          Fighter initiatives to achieve offsets to estimated cost growth.15 Multiyear
                          procurement, because of the cost reductions available through long-term
                          commitments such as a 5-year contract, make it possible for the
                          contractors and subcontractors to charge lower prices for the aircraft
                          being procured. Joint Strike Fighter-related savings are planned



                          14
                           See U.S. General Accounting Office, Tactical Aircraft: F-22 Delays Indicate Initial
                          Production Rates Should Be Lower to Reduce Risks, GAO-02-298 (Washington, D.C.: Mar.
                          5, 2002).
                          15
                           See U.S. General Accounting Office, Defense Acquisitions: Recent F-22 Production Cost
                          Estimates Exceeded Congressional Limitation, GAO/NSIAD-00-178 (Washington, D.C.:
                          Aug. 15, 2000).




                          Page 10                                                    GAO-03-280 F/A-22 Aircraft
because the Air Force plans to use many of the same contractors and
subcontractors as with the Joint Strike Fighter in the F/A-22 program,
thereby lowering overhead rates and increasing buying power.

Even though the Air Force is depending on both the multiyear
procurement and Joint Strike Fighter initiatives to achieve offsets to
estimated cost growth, approval to proceed with multiyear procurement is
determined from the availability of funding.16 Thus, if entry into a multiyear
procurement contract does not occur as planned, offsets from the
implementation of multiyear procurement cannot be achieved. Similarly,
the success of the Joint Strike Fighter cost reduction plan is dependent on
the schedule of the Joint Strike Fighter program and the quantity of the
aircraft procured, which are determined by Congress and OSD. In an
earlier report, we cautioned that if the Joint Strike Fighter program were
not approved or were delayed, then the F/A-22 production program would
not achieve the estimated cost reductions.17

Furthermore, the Air Force reduced estimated funding for F/A-22 support
costs by $1.8 billion in its latest production cost estimate. Support costs
are for such items as spare components for the aircraft and engines, spare
engines, and equipment used to support and maintain aircraft. F/A-22
program officials explained that the latest support costs estimate is a
detailed, requirements-based estimate that is more accurate than previous
estimates, but they could not provide us with the detailed rationale for this
new estimate. At the same time, we also observed that the Air Force added
about $1.8 billion to the estimated production costs associated with the
aircraft and engine. If it is determined the F/A-22 program will require the
same level of support cost funding identified by the Defense Acquisition
Board’s review, the production cost estimate will increase.




16
 Under 10 U.S.C. 2306b, a multiyear contract must meet specific criteria and be approved
by Congress. The criteria must include the following: (1) the contract must result in
substantial savings compared with the awarding of annual contracts, (2) the item being
bought must have a stable design and not have excessive technical risks, and (3) the
estimated cost of the system and the estimated cost avoidance from the multiyear
procurement are to be realistic.
17
 See GAO/NSIAD-00-178.




Page 11                                                      GAO-03-280 F/A-22 Aircraft
                       DOD has not fully informed Congress about specifics related to the total
DOD Has Not Fully      cost of the F/A-22 production program or the quantity of aircraft that
Informed Congress      can be purchased within the cost limitation. DOD uses selected acquisition
                       reports and the President’s budget submissions to inform Congress
about Potential        about weapon systems programs.18 Since 1999, neither the F/A-22 selected
Impact of Reduced      acquisition reports nor the President’s annual budget submissions to
                       Congress have included details about the amount of cost reduction plans
Offsets to Estimated   identified to offset cost growth. More importantly, these documents have
Cost Growth            not included the potential cost of the F/A-22 production program if cost
                       reduction plans do not offset cost growth as planned. From 1996 to 1998,
                       selected acquisition reports did inform Congress about the potential cost
                       of production if cost reduction plans did not offset cost growth as planned.
                       If cost growth is not offset as planned, the cost of F/A-22 production could
                       be several billion dollars higher than currently estimated.

                       Furthermore, recent documentation, including the latest selected
                       acquisition report (December 2001) and Fiscal Year 2003 President’s
                       Budget submission have also not provided Congress with information
                       about the quantity of aircraft DOD believes can be procured under the
                       existing production cost limitation. Even though the production cost
                       limitation remains, as adjusted, at $37.5 billion, the official documentation
                       provided to Congress to date has not provided the number of aircraft that
                       can be purchased for this amount. Even at the higher cost estimate of
                       $43 billion,19 OSD and the Air Force have not been able to agree on the
                       aircraft quantity that can be purchased. In July 2001, we projected that the
                       Air Force would have to buy 85 fewer F/A-22s rather than the 333 that it
                       planned to buy to stay within the cost limit.20


                       Despite the success of early cost reduction plans, we identified estimated
Conclusions            cost growth beyond the amounts recognized by the Air Force and DOD.


                       18
                         The U.S. Code (10 U.S.C. Sec. 2432) requires DOD-selected acquisition reports to report
                       the status of all the costs of production, and the President’s budgets are meant to do the
                       same on an annual basis.
                       19
                        The F/A-22 President’s Budget for fiscal year 2004 would transfer $876 million in
                       production funding to help fund estimated cost increases in development. As a result, the
                       current production cost estimate is $42.2 billion, an amount that still exceeds the cost limit
                       of $37.5 billion.
                       20
                        See U.S. General Accounting Office, Tactical Aircraft: Continuing Difficulty Keeping F-
                       22 Production Costs Within the Congressional Limitation, GAO-01-782 (Washington D.C.:
                       July 16, 2001).




                       Page 12                                                         GAO-03-280 F/A-22 Aircraft
                         Therefore, it is important for the Air Force to take advantage of every
                         opportunity to offset cost growth. PIPs can be an important mechanism
                         for offsetting this cost growth. However, the Air Force is not investing
                         funding as planned in F/A-22 PIPs designed to offset estimated cost
                         growth. The failure to invest in PIPs at the planned level will likely not
                         allow estimated cost growth to be offset as planned and therefore may
                         affect the quantity of aircraft that can be acquired.

                         The F/A-22 production program has experienced a number of schedule
                         delays and problems that have increased the estimated costs of a program
                         that already requires a significant investment. DOD has not fully informed
                         Congress about the amount of cost reduction plans identified to offset cost
                         growth, the potential cost of production if cost reduction plans are not as
                         effective as planned, or the quantity of aircraft that can be produced
                         within the production cost limit. Congress would be able to utilize this
                         information to help exercise proper program oversight.


                         For the Air Force to achieve planned offsets to estimated cost growth, we
Recommendations for      recommend that the Secretary of the Air Force make the funding of PIPs
Executive Action         at the planned level a priority.

                         To ensure proper congressional oversight of the F/A-22 program, we
                         also recommend that the Secretary of Defense provide Congress with
                         documentation

                     •   showing that funding for PIPs is being invested at the planned level
                         each fiscal year, and if not, explaining the reasons why and the potential
                         consequences of not fully investing and potentially not offsetting cost
                         growth as planned;
                     •   reflecting the potential cost of F/A-22 production if cost reduction plans do
                         not offset cost growth as planned; and
                     •   reflecting the quantity of aircraft DOD believes can be procured with the
                         existing production cost limit.

                         In written comments on a draft of this report, DOD stated that it did
Agency Comments          not concur with either of our recommendations. Regarding our first
and Our Evaluation       recommendation on making investments in PIPs a priority, DOD said
                         that while it believes that PIP investments in general are a good idea,
                         the Department intends to implement PIPs on a case-by-case basis, using
                         expected return-on-investment criteria. DOD also commented that our
                         report does not provide evidence that investments in PIPs reduce costs.




                         Page 13                                             GAO-03-280 F/A-22 Aircraft
Our recommendation that the Air Force make the funding of PIPs at
the planned level a priority is based on evidence from both the Air Force
and OSD that investment in PIPs at the planned level will generate a
significant return-on-investment. In addition, during the course of our
review, Air Force officials told us they planned to make up for not fully
investing in PIPs during the last 2 fiscal years by investing more in
subsequent years in order to achieve the planned savings. The Air Force’s
plan appears to recognize that it has moved beyond a case-by-case
approach. Our recommendation would support such a plan. Finally, the
reluctance to embrace PIPs in DOD’s comments appears to be contrary to
the position taken within the Department. The potential benefits of
investing in PIPs continue to be highlighted in high-level F/A-22 meetings21
and correspondence to Congress. A September 2001 letter to Congress
from the Under Secretary of Defense for Acquisition, Technology and
Logistics estimates that the quantity of F/A-22 aircraft will need to be
reduced, but more aircraft can be procured if cost reduction plans
(which include PIPs) prove more successful than OSD’s estimates. We
believe our recommendation to make the funding of PIPs at the planned
level a priority puts DOD in a better position to enhance the affordability
of the F/A-22. Conversely, by not funding PIPs at the planned level, DOD
may lose opportunities to create greater production efficiencies and as a
result, have to acquire fewer aircraft.

Regarding our second recommendation related to providing
documentation to Congress on cost reduction plans, the implications of
not investing in PIPs as planned, and the aircraft quantities that can be
acquired within the existing production cost limit, DOD stated that our
recommendation is inconsistent with its decision to use a “buy-to-budget”
approach for the F/A-22 (buying the highest quantity of aircraft possible
each year on the basis of appropriated funding each year). DOD also
stated that providing this information to Congress would not provide a
reliable projection of the number of aircraft possible because (1) there are
other factors that affect cost and (2) the projected savings are uncertain
and may not materialize as the estimator expects.

We continue to believe that the Secretary of Defense should provide
Congress with this documentation. As we have discussed in this and




21
  PIPs were highlighted in the most recent F/A-22 Defense Acquisition Board meeting
involving both Air Force and OSD officials.




Page 14                                                      GAO-03-280 F/A-22 Aircraft
              several earlier reports,22 we agree that there are indeed many factors that
              can cause F/A-22 production costs to rise. And, as we have also noted,
              projected offsets generated by PIPs and other cost reduction plans are
              uncertain and may not all materialize, even if investments are made as
              planned. Shifts in these realities are frequent and create a constantly
              changing picture of F/A-22 production costs, offsets, and aircraft
              quantities. This is particularly the case when PIP investments are not made
              as planned. Hence, it is important that updated and accurate information
              be regularly and routinely made available to Congress as the picture
              changes. DOD’s argument that it is implementing a “buy-to-budget”
              approach makes our recommendation more compelling because aircraft
              quantities planned each fiscal year can change in the few months between
              when fiscal year funding is appropriated and when a production contract
              is negotiated with the prime contractor and awarded. Providing visibility
              to the projection of how many aircraft can be acquired within the cost
              limitation would enhance program oversight.

              DOD has several extant reporting options that can be used to provide this
              information. A new report is not required. For example, DOD could return
              to its former practice of using annual selected acquisition reports to
              inform Congress about the potential cost of production if cost reduction
              plans do not offset cost growth as planned. This information was included
              in these reports from 1996 to 1998. In addition, the President’s Budget
              submission could be used as a vehicle to provide Congress with updated
              information about the quantity of aircraft DOD believes can be acquired
              under the existing production cost limitation. Finally, requests to
              reprogram PIP investment funds could be expanded to include this
              information along with justification for PIP reprogramming.


              To identify the F/A-22 production cost growth, we examined documents
Scope and     related to the Joint Estimating Team’s review completed in January 1997
Methodology   and received clarification on some review conclusions from the F/A-22
              program office. We also reviewed documentation and discussed with
              program officials the results of the 2001 F/A-22 Defense Acquisition
              Board’s review that estimated $5.4 billion more in production cost growth.


              22
                See U.S. General Accounting Office, Tactical Aircraft: Continuing Difficulty Keeping
              F-22 Production Costs Within the Congressional Cost Limitation. GAO-01-782
              (Washington D.C.: July 16, 2001), and Defense Acquisitions: Recent F-22 Production Cost
              Estimates Exceeded Congressional Limitation, GAO/NSIAD-00-178 (Washington D.C.:
              Aug. 15, 2000).




              Page 15                                                     GAO-03-280 F/A-22 Aircraft
To evaluate the planned effectiveness of cost reduction plans designed to
offset production cost growth, we assessed the reliability of a contractor’s
and the Air Force’s database on cost reduction plans to ensure that the
data were complete, sufficient, and relevant to our work. We reviewed
information from this database on implemented and not yet implemented
cost reduction plans. We compared estimated cost reduction plan offsets
from fiscal years 2000 and 2002 to determine current versus planned
estimated offsets for F/A-22 production lots. We also analyzed cost
information from the Air Force to determine the amount of planned and
actual funding invested in PIPs designed to offset estimated cost growth
by improving production processes.

To identify areas where additional production cost growth has occurred
and may occur, we reviewed several aspects of the F/A-22 program that
were likely to contribute to future cost growth. We examined previous and
current OSD and Air Force production cost estimates, expected delays in
the F/A-22 program’s completion of operational testing, aircraft unit price
estimates and controls, and funding for support costs.

To evaluate the degree to which DOD has informed Congress about the
potential cost of F/A-22 production, we examined the content of recent
official documentation (selected acquisition reports and President’s
budgets) provided to Congress and compared them with required content
and content that would be expected considering the congressionally
imposed F/A-22 production cost limitation.

In performing our work, we obtained information or interviewed officials
from the Office of the Secretary of Defense, Washington D.C.; the F/A-22
Program Office, Wright-Patterson Air Force Base, Ohio; and the Defense
Contract Management Agency, Marietta, Georgia. We performed our work
from March 2002 through February 2003 in accordance with generally
accepted government auditing standards.


As agreed with your office, unless you publicly announce the contents of
this report earlier, we plan no further distribution of it until 30 days from
the date of this report. At that time, we will send copies to interested
congressional committees; the Secretary of Defense; the Secretary of the
Air Force; and the Director, Office of Management and Budget. We will
also make copies available to others upon request. In addition, the report
will be available at no charge on the GAO Web site at http://www.gao.gov.




Page 16                                              GAO-03-280 F/A-22 Aircraft
Please contact me at (202) 512-4841 or Catherine Baltzell at (202) 512-8001
if you or your staff have any questions concerning this report. Major
contributors to this report are listed in appendix VII.

Sincerely yours,




Allen Li
Director
Acquisition and Sourcing Management




Page 17                                            GAO-03-280 F/A-22 Aircraft
             Appendix I: Comments from the Department
Appendix I: Comments from the
             of Defense



Department of Defense




             Page 18                                    GAO-03-280 F/A-22 Aircraft
Appendix I: Comments from the Department
of Defense




Page 19                                    GAO-03-280 F/A-22 Aircraft
Appendix I: Comments from the Department
of Defense




Page 20                                    GAO-03-280 F/A-22 Aircraft
              Appendix II: Amounts Associated with Cost
Appendix II: Amounts Associated with
              Reduction Plan Categories



Cost Reduction Plan Categories

              F/A-22 cost reduction plans are categorized as either “implemented”
              or “not yet implemented.” The Air Force and contractors’ criteria for
              determining if a cost reduction plan is implemented include (1) whether
              the contractor has submitted a firm-fixed price proposal that recognizes
              the impact of the cost reduction, (2) whether the impact of the reduction
              has been reflected in a current contract price or negotiated in an
              agreement, or (3) whether the contractor has reduced the number of hours
              allocated to a task.

              Cost reduction plans are categorized as “not yet implemented” if the plans
              are well defined but none of the criteria listed above are met.

              Table 3: Current Amounts Associated with Cost Reduction Plan Categories

               Dollars in billions
               Cost reduction plan category                                             Amount
               Implemented                                                                $14.0
               Not yet implemented                                                         13.3
               Total                                                                      $27.3
              Source: U.S. Air Force.




              Page 21                                                GAO-03-280 F/A-22 Aircraft
                                          Appendix III: F/A-22 Estimated Production
Appendix III: F/A-22 Estimated Production Cost Growth in 1997



Cost Growth in 1997


 Dollars in billions
                                                                                                         Cost     Cost growth
 Category of cost growth                Source of cost growth                                          growth as a percentage
 Inflation                              Inflation                                                         $5.8            43.3
 Airframe labor and materials           Increased estimates of the cost of labor and materials             2.4            17.9
 All categories                         Increase in fee provided to contractor                             1.1             8.2
 Airframe and engine                    Engineering changes to airframe and engine                         1.8            13.4
 Analysis and integration of            Increased costs associated with analysis and integration
 components and training                of aircraft components                                             0.6               4.5
 Defensive countermeasure and a         Funding for defensive countermeasures and a classified
 classified program                     program                                                            0.6               4.5
 Equipment provided to contractor by    Increased costs of equipment
 the government and equipment used to
 support the aircraft                                                                                      0.4               3.0
 Avionics                               Increased cost associated with buying large quantities of
                                        parts that industry may not continue to produce                    0.3               2.2
 Aircraft utilities and subsystems      Increased estimate of the cost to produce aircraft utilities
                                        and subsystems                                                    0.2                1.5
 Contractor costs                       Increased estimate of the cost of contractor support              0.1                0.7
 Mission support requirements           Increased estimate for mission support requirements               0.1                0.7
 Total cost growth (aircraft)                                                                            13.4
 Engine and materials                   Not purchasing a training engine and outsourcing a wiring
                                        harness                                                          (0.2)
                          a                                                                                  b
 Net cost growth                                                                                        $13.1
Source: U.S. Air Force.
                                          a
                                           Based on a plan to procure 438 aircraft.
                                          b
                                           Does not add because of rounding.




                                          Page 22                                                      GAO-03-280 F/A-22 Aircraft
                                            Appendix IV: Cost Reduction Plan Categories
Appendix IV: Cost Reduction Plan            and Planned Offsets to Estimated Cost
                                            Growth


Categories and Planned Offsets
to Estimated Cost Growth

 Dollars in billions
                                                                                          Planned offsets to estimated cost growth
 Cost reduction plan category                                                                  Dollar amount            Percentage
 Lean manufacturing—Improving manufacturing processes and incorporating new
 technology                                                                                             $9.1                  33.7
 Production improvement programs—Improving production processes                                          8.4                  30.8
 Acquisition reform—Applying performance-based contracting practices                                     0.5                   2.9
 Material efficiencies—Improving material procurement strategies                                         1.0                   3.7
 Diminishing manufacturing sources—Resolving obsolescence and diminishing
 sources issues                                                                                          1.5                    5.5
 Production support—Defer or avoid government investment in depot maintenance
 capability                                                                                              3.0                  11.0
 Multiyear procurement—Award a production contract for multiple years                                    2.2                   8.1
 Joint Strike Fighter—Manufacturing Joint Strike Fighter and F/A-22 components in the
 same plants                                                                                              1.1                   4.0
 Strategic sourcing—Procurement initiatives to identify suppliers to reduce costs                         0.3
 Additional learning—Various methods and process improvements                                             0.1
 Total                                                                                                 $27.3a                 100a
Source: U.S. Air Force.
                                            a
                                            Does not add because of rounding.




                                            Page 23                                                      GAO-03-280 F/A-22 Aircraft
                                           Appendix V: Estimated F/A-22 Production
Appendix V: Estimated F/A-22 Production    Cost Growth in 2001



Cost Growth in 2001


 Dollars in billions
                                                                                                     Cost Cost growth as a
 Category of cost growth                Source of cost growth                                      growth      percentage
 Airframe and engine                    Increased estimated labor costs of prime contractors and
                                        subcontractors                                              $4.60                 69
 Inflation                              Adjustments for inflation                                    0.95                 14
 Risk                                   Increased estimate for risk                                  0.50                  8
 Avionics                               Change in contractor required revised cost estimate          0.25                  4
 Tools to produce airframe and engine   Increase in production rate required more tooling            0.20                  3
 Other government costs                 Production of pilot helmet designed to help fire short-
                                        range missiles more effectively                              0.14                  2
 Total cost growth                                                                                  $6.64                100
 Spare parts                            Reassessment of quantity of spare parts needed             (0.80)a
 Production rate savings                Lowered production rate charges by using new
                                                                                                         a
                                        accounting system                                          (0.30)
 Cost reduction plans                   Change is estimated offset amount                          (0.13)a
 Net cost growth                                                                                   $5.40b
Source: U.S. Air Force.
                                           a
                                           Expected offsets to estimated cost growth.
                                           b
                                           Does not add because of rounding.




                                           Page 24                                                  GAO-03-280 F/A-22 Aircraft
              Appendix VI: Estimated Cost Reduction Plan
Appendix VI: Estimated Cost Reduction Plan
              Offsets for Future Production Lot Contracts



Offsets for Future Production Lot Contracts


               Dollars in billions
               Production lot                                      Estimated offsets
               Lot 3 (fiscal year 2003)                                         $1.1
               Lot 4 (fiscal year 2004)                                          1.5
               Lot 5 (fiscal year 2005)                                          1.9
               Lot 6 (fiscal year 2006)                                          2.5
               Lot 7 (fiscal year 2007)                                          2.9
               Lot 8 (fiscal year 2008)                                          2.8
               Lot 9 (fiscal year 2009)                                          2.8
               Lot 10 (fiscal year 2010)                                         1.7
               Total                                                           $17.2
              Source: U.S. Air Force.




              Page 25                                       GAO-03-280 F/A-22 Aircraft
                  Appendix VII: GAO Staff Acknowledgments
Appendix VII: GAO Staff Acknowledgments


                  Catherine Baltzell, Marvin Bonner, Edward Browning, Gary Middleton,
Acknowledgments   Sameena Nooruddin, Robert Pelletier, and Don M. Springman made key
                  contributions to this report.




                  Page 26                                         GAO-03-280 F/A-22 Aircraft
             Related GAO Products
Related GAO Products


             Tactical Aircraft: F-22 Delays Indicate Initial Production Rates Should
             Be Lower to Reduce Risks. GAO-02-298. Washington, D.C.: March 5, 2002.

             Tactical Aircraft: Continuing Difficulty Keeping F-22 Production Costs
             within the Congressional Limitation. GAO-01-782. Washington, D.C.:
             July 16, 2001.

             Tactical Aircraft: F-22 Development and Testing Delays Indicate Need
             for Low-Rate Production. GAO-01-310. Washington, D.C.: March 15, 2001.

             Defense Acquisitions: Recent F-22 Production Cost Estimates
             Exceeded Congressional Limitation. GAO/NSIAD-00-178.
             Washington, D.C.: August 15, 2000.

             Defense Acquisitions: Use of Cost Reduction Plans in Estimating
             F-22 Total Production Costs. GAO/T-NSIAD-00-200. Washington, D.C.:
             June 15, 2000.

             Budget Issues: Budgetary Implications of Selected GAO Work for
             Fiscal Year 2001. GAO/OCG-00-8. Washington, D.C.: March 31, 2000.

             F-22 Aircraft: Development Cost Goal Achievable If Major Problems Are
             Avoided. GAO/NSIAD-00-68. Washington, D.C.: March 14, 2000.

             Defense Acquisitions: Progress in Meeting F-22 Cost and Schedule Goals.
             GAO/T-NSIAD-00-58. Washington, D.C.: December 7, 1999.

             Fiscal Year 2000 Budget: DOD’s Procurement and RDT&E Programs.
             GAO/NSIAD-99-233R. Washington D.C.: September 23, 1999.

             Budget Issues: Budgetary Implications of Selected GAO Work for
             Fiscal Year 2000. GAO/OCG-99-26. Washington, D.C.: April 16, 1999.

             Defense Acquisitions: Progress of the F-22 and F/A-18E/F Engineering
             and Manufacturing Development Programs. GAO/T-NSIAD-99-113.
             Washington, D.C.: March 17, 1999.

             F-22 Aircraft: Issues in Achieving Engineering and Manufacturing
             Development Goals. GAO/NSIAD-99-55. Washington, D.C.: March 15, 1999.

             F-22 Aircraft: Progress of the Engineering and Manufacturing
             Development Program. GAO/T-NSIAD-98-137. Washington D.C.:
             March 25, 1998.


             Page 27                                           GAO-03-280 F/A-22 Aircraft
           Related GAO Products




           F-22 Aircraft: Progress in Achieving Engineering and Manufacturing
           Development Goals. GAO/NSIAD-98-67. Washington, D.C.: March 10, 1998.

           Tactical Aircraft: Restructuring of the Air Force F-22 Fighter Program.
           GAO/NSIAD-97-156. Washington, D.C.: June 4, 1997.

           Defense Aircraft Investments: Major Program Commitments Based on
           Optimistic Budget Projections. GAO/T-NSIAD-97-103. Washington, D.C.:
           March 5, 1997.

           F-22 Restructuring. GAO/NSIAD-97-100BR. Washington, D.C.:
           February 28, 1997.

           Tactical Aircraft: Concurrency in Development and Production of F-22
           Aircraft Should Be Reduced. GAO/NSIAD-95-59. Washington, D.C.:
           April 19, 1995.

           Tactical Aircraft: F-15 Replacement Issues. GAO/T-NSIAD-94-176.
           Washington, D.C.: May 5, 1994.

           Tactical Aircraft: F-15 Replacement Is Premature as Currently Planned.
           GAO/NSIAD-94-118. Washington, D.C.: March 25, 1994.




(120128)
           Page 28                                           GAO-03-280 F/A-22 Aircraft
                         The General Accounting Office, the audit, evaluation and investigative arm of
GAO’s Mission            Congress, exists to support Congress in meeting its constitutional responsibilities
                         and to help improve the performance and accountability of the federal
                         government for the American people. GAO examines the use of public funds;
                         evaluates federal programs and policies; and provides analyses,
                         recommendations, and other assistance to help Congress make informed
                         oversight, policy, and funding decisions. GAO’s commitment to good government
                         is reflected in its core values of accountability, integrity, and reliability.


                         The fastest and easiest way to obtain copies of GAO documents at no cost is
Obtaining Copies of      through the Internet. GAO’s Web site (www.gao.gov) contains abstracts and full-
GAO Reports and          text files of current reports and testimony and an expanding archive of older
                         products. The Web site features a search engine to help you locate documents
Testimony                using key words and phrases. You can print these documents in their entirety,
                         including charts and other graphics.
                         Each day, GAO issues a list of newly released reports, testimony, and
                         correspondence. GAO posts this list, known as “Today’s Reports,” on its Web site
                         daily. The list contains links to the full-text document files. To have GAO e-mail
                         this list to you every afternoon, go to www.gao.gov and select “Subscribe to daily
                         E-mail alert for newly released products” under the GAO Reports heading.


Order by Mail or Phone   The first copy of each printed report is free. Additional copies are $2 each. A
                         check or money order should be made out to the Superintendent of Documents.
                         GAO also accepts VISA and Mastercard. Orders for 100 or more copies mailed to a
                         single address are discounted 25 percent. Orders should be sent to:
                         U.S. General Accounting Office
                         441 G Street NW, Room LM
                         Washington, D.C. 20548
                         To order by Phone:     Voice:    (202) 512-6000
                                                TDD:      (202) 512-2537
                                                Fax:      (202) 512-6061


                         Contact:
To Report Fraud,
                         Web site: www.gao.gov/fraudnet/fraudnet.htm
Waste, and Abuse in      E-mail: fraudnet@gao.gov
Federal Programs         Automated answering system: (800) 424-5454 or (202) 512-7470


                         Jeff Nelligan, managing director, NelliganJ@gao.gov (202) 512-4800
Public Affairs           U.S. General Accounting Office, 441 G Street NW, Room 7149
                         Washington, D.C. 20548