U.S.-JA COI>EV ILeview of the FS-X Pmgrm i ’ United States General Accounting OfTice Washington, D.C. 20548 National Security and International Affairs Division B-236070 February 6,199O The Honorable Jeff Bingaman The Honorable Alfonse M. D’Amato The Honorable Alan J. Dixon .r. The Honorable Wendell H. Ford The Honorable JesseA. Helms United States Senate .“__,l. ._. This is an/uncla&fied ‘~~- version 1rf.,Te-.“.*..’ I - of a,classified reportthat responded to ^,.I, your, r&iest,$o review the Support _,.. Fighter .“._ (FS-x)codevelopmentpro- gram between the U.S.government I.and~.the _. government of Japan. We assessed(1) the extent to which the Department of Defense(DOD) coor- dinated and consulted 1.1I. with the Department of Commercewhen negotiat- ,IXII.““l.-._.“II*.“_” ,_I_ ‘Ing%e F&Xagreement,(2) the principal provisions of the government- to-government and commercial-^...”. licensing agreements,(3) the processfor transferring .” “” . U.S. F-16 technology~ to Japan, (4) the Japanesecomposite w@g andIphased..i*m .,.. array * I,__.l I_II,” radar _” .,I, . _ techno!ogi,es,and .“I^ ~ US. requirements for these technologies,and (6) costs and scheduled _ ._I,* ., delivery dates for the F‘S-xcompared to the cost of purch~ing an F-16. Between &larch and May i989, we ‘briefed your staffs on the status of our work; this report summarizes those briefings and presents the final results of our work. Although the fiscal year 1989 DOD authorization legislation required DOD Results in Brief to consult with Commercein negotiating such agreements,DOD provided only a cursory briefing on the %x agreementto-Commercepersonnel. As negotiated and concluded,the U.S.-JapanFS-xarrangement involves the joint development of an F-16 derivative &&e.r..&c~.,and produc- tion of six prototypes. Under the agreement,Japan will receive U.S. design and development assistance,and the United States will receive a 40-percent work share of Japan’s estimated $1.2 billion F&X develop- ment budget. The U.S. government is limiting the releaseof certain tech- nical data to protect national security and industrial base interests. The United States will have accessto (1) all F-16 derived technologies, including composite wing technologies,at no cost, and (2) solely Japanese-developedFS-xtechnologies,such as the active phased array radar, at an undetermined price. While DOD did not consider accessto the wing and radar technologiesto be a key issue in the arrangement, it Y believed these technologies could be useful to the United States. Availa- ble information indicates that the United States is currently superior in composites and phased array radar technologies. Page 1 GAO/NSIAD-BO-77BR U.S. Japan FSX Codevelopment I I I ---T-- c J I R-226070 The codevelopmentand production of 130 F&Xaircraft are estimated to cost Japan about twice as much as an off-the-shelf purchase of F-169 from the United States would cost. iating the N-X agreement with the government of Japan, DOD did lnsultation and with or solicit the views of the Department of Commerce. Iordination ational DefenseAuthorization Act of Fiscal Year 1989, approved Sedember 29, 1988, requires DOD to consider the effects of each-Memo- randum of Understanding on the US. industrial base and to regularly solicit and consider information and recommendationsfrom the Secre- tary of Commerce.In responseto the law, DOD provided a cursory brief- ing to Commerceon the rs-x program in late October 1988 near the conclusion of the bilateral negotiations. In early 1989 Membersof Congressand the economic agencies,including the Department of Commerce,expressedconcern about the equity of the I%x agreement and technology to be transferred. In responseto these concerns,the President commissionedan interagency review in Febru- ary 1989, co-chaired by Defenseand Commerce,to study the arrange- ment. Basedon the results of the review, the U.S. government sought and received from Japan clarifications to the agreement,including a commitment to about a 40-percent work share for the United States if the program enters into a production phase. Proceduresare being devel- oped by DOD and Commerceto ensure coordination and consultation on future programs. Although national security interests were said to be of paramount lknefits to the United importance in the FS-xprogram, during the negotiations, DOD recognized States US. economicand industrial interests as well. The U.S. work share will amount to 40 percent of Japan’s estimated $1.2 billion developmental budget-about $480 million. Additionally, the United States will obtain cost-free FS-xtechnology that is derived from U.S.-provided F-16 tech- nology. For example, General Dynamics, the prime U.S. contractor, will obtain from Japan the technology to produce four composite wings for the program. The United States is also guaranteed the option of purchasing technology that is solely developedby the Japanese. Y Page 2 GAO/NSIAD-QO-77BR U.S.Japan FS-X Codevelopment B4a6o70 Unlike previous F-16 coproduction agreements,which have released F-l i Technology operations, maintenance, and production data, the FE-Xprogram will Rel a-- releasecertain F-16 design and software data as well. The US. govern- ment will limit the releaseof sensitive software source codesfor the F-16’s avionics systems but will not releasesource codesfor the digital flight control system.’ In addition, the United States will not release any manufacturing or design data on the engines,which must be purchased from a US. manufacturer during the developmental phase of the program. A joint U.S.-JapaneseTechnical Steering Committee was established to monitor key aspectsof the FS-xprogram, including the transfer of tech- nology. The Department of Commercewill have a representative on the Committee. The Committee will consider requests from Japan for techni- cal data. DOD did not pursue the I%-xprogram with the primary objective of Japanese FS-X obtaining accessto Japanesetechnology; however, once Japan agreed in Tedhnologies I principle to codevelopthe F&X,DOD stressedthe importance of obtaining accessto the new aircraft’s technologies.DOD officials emphasizedthe potential value of the Japanesetechnology, including compositesand airborne radar. DOD believes that the F&Xprogram sets a precedent for two-way exchangesof military technology. Active Phased Array Japan is developing an active phased array radar for the F&X,and DOD is Radar Technology interested in evaluating and possibly acquiring the manufacturing tech- nology used to produce the radar’s transmitter/receiver modules. U.S. industry is developing similar radar technology for the next-generation fighter aircraft. The modules are very expensive to produce, and both the United States and Japan are working to develop a manufacturing processthat produces affordable, quality modules. U.S. industry is making considerable progress toward reducing module costs.According to one company’s estimates, the module’s unit cost has declined from about $12,000 to about $8,300 (1985 dollars) over the past 4 years. Anticipated full-rate production costs are estimated to be about $400 per module by 1997 to 2005. According to U.S. government Y ‘A sourcecodeis a seriesof human-readablestatementsthat describethe operations/functionsof a particular computerprogram.The sourcecodeprovides accessand insight into the methodsand anal- ysesusedto developa specificprogram. Page 3 GAO/NSIAD=90-77BR U.S.-Japan FSX &development B-233070 \, c and industry sources,the United States is ahead of Japan in overall radar development. C mposite Technology Japan is planning to produce composite wings for the I%-xusing a proc- essknown as co-curing. This processreducesthe need for fasteners that ” hold the wing together. The Japaneseapproach appears to be high risk becauseof manufacturing and quality control uncertainties and damage repair problems. The United States expended significant research and development efforts in the 1970sto test and evaluate the basic co-cured composite design that will be used for the FS-X wing. Air Force engineers told us that the designswere rejected for combat aircraft wings, which carry fuel and withstand significant stress. The US. industry’s basic knowledge of advanced compositesis superior to Japan’s, The United States has a demonstrated and proven capability in composite production and application to military aircraft. For exam- ple, the U.S. AVSB has composite wings, but fasteners are used to ensure high confidence in the joints. The United States uses co-curing techniques on structures like tails, which are subject to less stress than wings. The U.S. trend is toward the use of thermoplastics, a different type of composite material from that proposed for the FS-X. Thermoplastics are more heat resistant than FS-xwing composites.Future U.S. military air- craft will need the more heat resistant materials becauseof expected performance requirements, The U.S. military requirement for the Japa- nesecomposite technology appears to be modest at this time. The Air Force has indicated that the prime use for this technology would be on future versions of the F-16, if the wing proves affordable. Developing the F&Xwill cost Japan more than purchasing F-16s from the Cost United States. According to an Air Force estimate, the most advanced version of the F-16 produced in the United States would cost Japan about $28.6 million per aircraft (U.S. 1988 dollars), if purchased through foreign military salesprocedures. The unit cost of the I%-xis estimated to be about $61 million (US. 1988 dollars). These matters are discussedin more detail in sections 1 through 7. Y Page 4 GAO/NSlAD-90-77BR US. Japan FSX &development xtcy Comments and We obtained written commentson a draft of this report from the Departments of Defenseand Commerce(see app. II and III). The Depart- YEvaluation ment of State had no comments.DOD agreed with the information and conclusionspresented in the report but made technical commentsthat have been included, as appropriate. Commerceagreed with most of the information presented but reemphasizedthe successof the interagency review processand noted the administration’s concernsabout trade, economic,and industrial competitiveness implications of agreements such as the FSX agreement.Commercealso emphasizedthat it remains actively involved in reviewing technology releasein the program. Finally, Commercestated that our analysis of the two Japanesetechnol- ogies-composites and phased array radar-was speculative becauseit remains to be seenwhether or not these technologies will be of value to the United States. Regarding this last point, we recognized,and noted in our draft report, that somebenefits may be derived from these Japanesetechnologies. Nevertheless,numerous U.S. government and industry aerospaceand electronics engineersagreedthat the United States maintains an advan- tage in the overall development and application of these technologies. Copies of this report are being sent to interested congressionalcommit- tees; the Secretariesof Defense,State, and Commerce;and other inter- ested parties. Major contributors to this briefing report are listed in appendix IV. If you have further questions about this report, please call me on (202) 2754128. Joseph E. Kelley Director, Security and International Relations Issues Y Page 6 GAO/NSIAD-90.77BR U.S. Japan FSX &development I Leitter Se(ction1 10 B ckground Summary 10 Japan’s FS-X Program StressedDomestic Development 10 ” DODConsideredJapaneseOff-The-Shelf Purchaseof U.S. 10 Aircraft Unlikely I DOD Position Separated Trade IssuesFrom Defense 11 Issues DODQuestionedJapan’s FS-X Requirements 12 FS-X Not Pursued With Primary Objective of Obtaining 12 Accessto JapaneseTechnology DOD’sNegotiating Position StressedQuality and Quantity Work-Share and Technology Flowback 16 16 DOD’sConsultation With CommerceWas Minimal 16 Cbordination Previous U.S. Attention to Economic Implications of 16 Coproduction WasInadequate S&tion 3 18 Government-To- Summary 18 Under the Agreement, Japan Will Take Lead in FS-X 18 Government and CodevelopmentProgram Commercial United States Will Receive40 Percent of Development 19 Arrangements and About 40 Percent of Production Work Share Technology Flowback Provisions Allow U.S. Accessto 19 JapaneseTechnologies Program Strives to Maintain Interoperability 19 Third-Party Salesof U.S.-Origin Technology Are 20 Restricted Commercial Arrangement Implements Government-To- 20 Government Agreements I Section 4 22 TechnologyII Transfer Summary 22 FS-X Involves Greater Releaseof F-16 Technical Data 22 Than Previous Coproduction Programs Safeguarding Technology Posesa Challenge 23 Page 6 GAO/NSIAD-96.77BR U&Japan FSX &development Content.6 DOD Has Proceduresfor Reviewing Technology Release 23 and Is Currently Reviewing Data Lists DOD Plans to Limit Releaseof Flight Control and Avionics 24 Software Sanitized Fire Control Computer Software SourceCodes 25 to Be Released Physical SafeguardsAre Planned to ReducePotential for 25 Inadvertent Disclosures The Technical Steering Committee Will Monitor 26 Technology Flow Commercial Application of FS-X Technology Is Uncertain 26 Selction 28 A4tive Phased Array Summary 28 DOD Is Interested in JapaneseRadar Module Production 28 RzfdarTechnology Technology U.S. Knowledge of JapaneseRadar 28 U.S Industry Is Making Significant Advances in Reducing 30 Module Cost Benefits to the United States Are Questionable 30 Sektion 6 31 Ctimposite Wiv?i Summary Japan Claims Its ProposedComposite Wing for the FS-X 31 31 Technology Is 25 Percent Lighter Than a Metal Wing JapaneseWing Has Potential Merits and Disadvantages 32 The United States’ CompositesCapability Is Excellent and 33 Superior to Japan’s The United States Has Produced All Composite Wings but 33 Has Chosento Employ Fastenersto Increase Confidence The U.S. Requirement for JapaneseTechnology Is Modest 33 Section 7 35 Summary 35 Off-The-Shelf PurchaseIs More Cost-Effective 35 Appendixes Appendix I: Objectives,Scope,and Methodology 36 Appendix II: CommentsFrom Department of Defense 38 Appendix III: CommentsFrom the Department of 45 b Commerce Appendix IV: Major Contributors to This Report 60 Page 7 GAO/NSIAD-90-77BR U.&Japan FS-X &development Abbreviations DOD Department of Defense Fs-x Support Fighter JDA Japan DefenseAgency Page 8 GAO/NSuD-ga77BR U.S.Japan F&X &development .I Y Page9 GAO/NSLUMO-77BR U.S.Japan ITS-X Chdevelopment I Sectjon 1 , Bbckground 1 Summary . Japan’s I%-xprogram stresseddomestic development. . DOD consideredJapaneseoff-the-shelf purchase of US. aircraft unlikely. l DOD position separated trade issuesfrom defenseissues. l DOD questioned Japan’s B-x requirements, I l not pursued with primary objective of obtaining accessto Japanese FS-x / technology. / I . DOD’s negotiating position stressedquality and quantity work-share and technology flowback. / In the late 197Os,the Japan DefenseAgency (JDA) began considering Jdpan’s FS-X Program replacing its fleet of domestically produced F-l fighter support aircraft.’ StbessedDomestic At about the sametime, JDA began funding next-generation fighter stud- D ’velopment ies, primarily to identify requisite technologies.Attention was focused & on and funding provided for advancedmetallurgy, composite materials, I/ stealth technology, and advanced avionics. Japan considered various options for its replacement candidate, includ- ing an off-the-shelf purchase and domestic development. Advocates of domestic development organized quickly and included JDA’S Air Staff Office, private industry, and JDA’S research and development arm, the Technical Researchand Development Institute. In 1985, the Institute announcedthat Japan possessedthe domestic capability to develop- except for the engine- an advanced fighter for about $1 billion. Starting in 1985 DOD, with the Department of State’s assistance,took DOD Considered steps to persuade the government of Japan not to develop its own air- JapaneseOff-The- craft. DOD preferred that Japan purchase an off-the-shelf U.S. aircraft Shelf Purchase of U.S. but recognizedthat such a purchase was highly unlikely. DOD made sev- era1attempts to encourageJapan to buy a U.S. aircraft such as the F-16 Aircraft Unlikely or F/A-18. At the sametime, WD recognizedthat Japan, as a sovereign nation, could not be forced to purchase an aircraft from the United States. In the past, Japan had rejected direct purchase marketing efforts by US. airframe manufacturers. Further, Japan had been producing U.S. aircraft under license since the mid-1960s including most recently the F-16. In February 1989, DOD stated that there has never been any realistic possibility that Japan would buy a U.S. aircraft off the shelf. Y ‘The F-l was producedby Mitsubishi Heavy Industries from 1977to 1984.It is usedby the Japanese Air Self-DefenseForcefor ground and ship attack. Page 10 GAO/NSIAD90-77BR US. Japan FS-X &development Section 1 Background Japan considered economicfactors that precluded an off-the-shelf pur- chase.DOD noted that Japan intended to keep its aerospaceindustry active and ensure continued employment of its engineers.DOD officials believed that from Japan’s perspective, it made no senseto buy current U.S. aircraft or even produce them under license due to Japan’s invest- ment in the research and development of componentssuch as radar, avi- onics display systems, and composites.An additional factor was that Japan had obtained considerable manufacturing know-how over the years from various licensed production programs with the United States. Through these programs, however, Japan had not acquired the critical knowledge that is derived from designing and developing a sophisticated military aircraft. In 1986 DOD established a policy position that offered a compromise, since Japan was not interested in purchasing a US. fighter aircraft or producing one under license. The policy suggestedthat a cooperative venture-codevelopment- between the United States and Japan could be a viable alternative. DOD noted that Japan seemedto be interested in codevelopmentif it could retain leadership of the project. The policy statement set the tone for future government and industry discussions with Japan. DOD separated trade and economicissuesfrom national security issues DOD Position during preliminary FS-x discussions.DOD believed that Japan’s pursuit of Separated Trade the domestic development option would blur the distinction between Is&es From Defense trade and defense and elevate congressionalconcernsabout the pro- gram. Further, DOD believed that domestic development would signal Issues Japan’s commitment to a program that would not be cost-effective, would have considerable risks associatedwith the development of a new aircraft, and would lead to potential delays in deployment. In a series of meetings, high-level U.S. government and Japaneseoffi- cials discussedthe need to keep trade and defense issuesseparate. These discussionswere part of a continuing U.S. effort to encourage Japan to reject domestic development. In August 1987 DOD and JDA agreedto cooperate in the development of the B-X aircraft and to base the new aircraft on a modified version of an existing U.S. fighter. In October 1987 JDA selectedthe General Dynamics F-16 as the baseline air- craft for the FS-x. Page 11 GAO/NSIAD-90-77BR U.S. Japan FS-X Codevelopment Se&on 1 Background and someof the proposed performance requirements unrealistic. Some DQD officials believed that Japan had developed such performance goals to exclude U.S. aircraft from consideration and justify domestic develop- ment. These officials believed that Japan had designedthe FS-X in part to accommodatevarious domestic technologieswithout adequately analyz- ing other available options. After considerable urging, JDA agreed to hear DOD'S presentation of its assessmentof the threat and mission requirements and to consider U.S. industry proposals for modifying an existing U.S. fighter aircraft to meet Japan’s requirements. In April 1987, a DOD team presented its assessmentof the threat and operational requirements to JDA. The team advanced DOD'S position that an existing or modified U.S. fighter would meet most of the FS-X'S mission and operational requirements and at the sametime save a considerable amount of time and money. The United States was primarily concernedwith finding a compromise 2 -X Not Pursued /ith Primary Objective of Obtaining solution for the IV-Xthat would maintain the overall bilateral security relationship with Japan. According to DOD, its priorities were to (1) ensure that the FS-xmaintained interoperability with U.S. forces in the region and (2) maximize the capability Japan received for its Akess to Japanese defenseexpenditures. DOD officials recognized,however, that the pro- Technology gram would create the opportunity to gain insight into and derive poten- tial benefits from Japanese&x-related technologies. Becauseacquiring Japanesetechnology was not paramount, DOD did not extensively review Japan’s m-x-related technologies,In April 1987 a DOD team made a 3-day visit to various Japaneseindustries to learn more about the technologies identified by Japaneseofficials as significant for the FS-x.These technologies included the active phased array radar and composites.The team concluded that these technologies were significant and of high quality but not unique. (Seesections 6 and 6 for further details about the Japaneseradar and composites.) Page 12 GAO/NSIALI-90-77BR U.S.Japan FS-X Codevelopment Section 1 Background Government-to-governmentnegotiations for the B-X program beganin DQD’s Negotiating November 1987. The primary objectives of the U.S. negotiating team Po$ition Stressed were to Qublity and Quantity obtain an adequate U.S. development work share, both in quantity and W&k-Share and ’ quality (an initial 40- to 60-percent goal was established); Tebhnology / Flowback . obtain free and automatic flowback of any technical improvements that Japan made to the baseline aircraft, for example, rights to F-16 derived technology at no cost and accessto all Japanese-developedFS-x technology; establish a joint DOD-JDA steering group to implement, oversee,and man- agethe program; and obtain provisions for a 30- to ‘IO-percentU.S. production work share (excluding the engine). In a May 1988 report accompanying the Fiscal Year 1989 Defense Authorization Act, the SenateArmed ServicesCommittee urged DOD to obtain a meaningful work share for U.S. industry and acquire without charge any technological improvements substantially derived from tech- nology provided by the United States. Further, the report stated that the US. government should not enter into a memorandum of understanding with the Japanesegovernment on the m-x/F-16 that simply transferred American technology and jobs to Japan with nothing more than a license fee in return. According to a high-level DOD official, this recommendation reinforced DOD'S negotiating position and emphasizedthe requirement to obtain Japanesetechnologies. Initially, Japan was unwilling to allow General Dynamics to produce any composite wings, citing increased program costs and reduced program efficiency. According to DOD, wing production becamethe symbol of a meaningful two-way exchangeof technology. Additionally, the U.S. Air Force believed that the Japaneseco-curedcomposite technology was the single most important item of technology that would be created during the FS-xprogram. Without transfer of this technology, the United States would reap few benefits from participating in the program. A high-level DOD official said that our government was prepared to walk away from the program if there was no wing production in the United States. Japan concededthis point and agreed to permit the U.S. contractor to partici- pate in the production of wings. Page 13 GAO/NSlAD-BO-77BR U.S.Japau FS-X &development Section 1 Background The memorandum of understanding was signed on November 29,1988. During later discussions,Japan agreedon the overall level of US. par- ticipation in the development program, including the production of B-X composite wings. Page 14 GAO/NSIAD-!Hl-77BR U.S.Japan FS-X &development 3n 2 bX Consultation and Coordination l DOD’S consultation with Commercewas minimal. l Previous U.S. attention to economicimplications of coproduction was inadequate. In negotiating the FS-xagreementwith the government of Japan, DOD did DO D’sConsultation not coordinate with or solicit the views of the Department of Commerce. Wii #hCommerceWas &on 824 of the National DefenseAuthorization Act, Fiscal Year 1989 Mb lima1 .L. lOO-466),September 29, 1988, requires DOD to consider the effects “of each government-to-governmentmemorandum of understanding on the U.S. industrial base and to regularly solicit and consider information and recommendations from the Secretary of Commerce. In responseto the law, DOD provided a cursory briefing to Commerce officials in late October 1988 near the conclusion of the bilateral negoti- ations. In November 1988 DOD denied Commerce’srequests for a copy of the memorandum. According to Commercerecords, DOD argued that the briefing sufficiently allowed Commerceto comment on the project’s effect on the industrial base and therefore satisfied the statutory requirement for consultation. After a series of discussionsbetween DOD and Commercelegal officials, the memorandum was forwarded to Com- merce in mid-December 1988. DOD officials told us that it was inappropriate to initiate full consultation and coordination with Commerceon E-X becausethe negotiations were virtually complete by October 1988. Subsequentto the signing of the memorandum, Members of Congress and the economic agencies,including Commerce,raised questions about the equity of the proposed agreement and the technology to be trans- ferred to Japan. In February 1989, the President commissionedan inter- agency review of the F&Xarrangement, co-chaired by Defenseand Commerce,to study the agreement.’ The review focused on the impact that production of the FS-xwould have on the US. industrial base and competitiveness and sought to establish interagency procedures for coordination and consultation of defensecooperative agreements. Basedon the review, DOD agreedto notify the Secretary of Commerceof its intent to begin negotiations on a memorandum of understanding prior P ‘Other membersof the interagencyreview included the Departmentsof State,Labor,and Energy;the Office of the United StatesTrade Representative,the Office of Scienceand TechnologyPolicy; the National Security Council; and the Central IntelligenceAgency. Page 15 GAO/NSIADM-77BR U.S.Japan FS-X Codevelopment , Sectlon 2 FS-X conrnltation and Coordination to the opening of discussionswith foreign governments. Throughout future negotiations, Commercewill have full access(as an adviser) to negotiations, documents,memorandums of understanding, industry-to- industry agreements,and other relevant documents. Commercewill ana- lyze the impact of the proposed agreementon the industrial base and provide assessmentsto DOD on a continuing basis. No agreement will be concluded until full consultation with Commercehas been completed. At the time of our review, procedures to implement this processwere being developed. DOD is now providing Commercewith proposed memorandums of under- standing for comment. In commenting on our draft report, Commerce stated that it has established a cooperative relationship with DOD on the FB-xprogram and is reviewing other defense-relatedcooperative agree- ments as well. Prior to the fiscal year 1989 legislative requirement and the subsequent Pkevious US. interagency review of the B-X arrangement, major defenseitems were Aktention to Economic transferred without full consultation with the economic agencies.In I$plications of 1982 we reported that when negotiating a coproduction agreement with Japan on the U.S. F-16 aircraft-and on other military coproduction Cbproduction Was programs as well-non and State separated the US. defense and foreign Inadequate policy interests from the domestic economic,industrial, and labor con- siderations.” DOD and State did not systematically draw upon the avail- able expertise of other federal agencieswhen considering coproduction requests or when negotiating and implementing these programs. On the other hand, Japan and other countries included such interests in their decisionsto coproduce rather than purchase off-the-shelf US. aircraft. We stated that it is appropriate for U.S. allies to consider their economic interests when addressing defenseissues,but it is just as appropriate for the United States to do the same. We noted that national security objectives were of prime consideration when the United States entered into coproduction arrangements and did not take exception to these objectives. We expressedthe view that DOD and State had too narrow a perspective to adequately addressthe eco- nomic, industrial, trade, and labor interests and concluded that increased interagency and government-industry coordination was neededprior to making coproduction commitments. Y “U.S.Milita CoproductionProgramsAssist Japanin DevelopingIts Civil Aircraft Industry (II)-8&23,l%r. 18, 1982). Page 16 GAO/NSlAD-90-77BR U.&Japan FS-X &development We recommendedthat the Secretary of State take the lead, in coopera- tion with DOD and pertinent civilian agencies,to form a clearer and more comprehensivemilitary coproduction policy that would fully recognize the trade and economicimplications of these arrangements, as well as the political and military goals to be achieved. We further recommended that these agencies(1) establish procedures to coordinate consideration of allies’ requests to coproducehigh-technology items; (2) develop, with input from industry, criteria for conducting economic assessments-to include the impact of impending transfers on US. industry-before approving and negotiating coproduction agreements;and (3) participate with DOD in determining the releasability of high’technology originally denied in memorandums of understanding. The Departments of Commerce,Treasury, and Labor and the Office of the U.S. Trade Representative generally agreed with our conclusions and recommendations.Although the State Department had somereser- vations about our analysis of the relationship between coproduction and Japan’s civil aircraft industry, it agreed that the US. government should more carefully consider the economic implications of coproduc- tion and that greater interagency coordination was needed.DOD agreed with the need for interagency coordination but noted that the existing system provided for careful review of all coproduction requests. DOD stated that a formal mechanism was neither necessarynor desirable. Our recommendations were not implemented. We believe that had these measuresbeen followed, someof the questions concerning technology transfer and the resultant economicimpact on the U.S. industrial base would have been considered and addressedbefore the FS-xmemorandum of understanding was negotiated and signed. Y Page 17 GAO/NSIAD-90-77BR U.S.Japan FSX &development ‘I &vernment-To-Government and + mmercial Arrangements Under the agreement,Japan will take lead in FS-xcodevelopment ary l I program. l United States will receive 40 percent of development and about 40 per- cent of production work share. l Technology flowback provisions allow U.S. accessto Japanese technologies. l Program strives to maintain interoperability. l Third-party salesof U.S.-origin technology are restricted. l Commercial arrangement implements government-to-government agreements. Udder the Agreement, The United States and Japan will cooperate to develop the FS-xaircraft. The FS-x is to be based on the F-16 C/D aircraft, will incorporate U.S. Japan Will Take Lead and Japanesetechnology, and will be significantly modified to meet id FS-X requirements established by JDA. Japan will develop and manufacture the following advanced technology avionics systems: the active phased C&development array radar, the mission computer, the inertial reference system, and Pbogram the integrated electronic warfare system. Japan will purchase the enginesto be installed in the prototype aircraft from a U.S. manufacturer. U.S. industry, led by General Dynamics, will participate in development of the wing and in the development and integration of the aircraft’s avi- onics systems. Certain integration of systems is reserved solely for U.S. industry becauseof the sensitivity of the data or techniques involved or due to proprietary rights. In these instances,Japan can either integrate the systems without U.S. assistanceor accept U.S. assistancewith cer- tain technology transfer restrictions. For example, as discussedin sec- tion 4, the United States has determined that source codesfor the F-16 flight control computer will not be releasedto Japan. Japan has the option of accepting this restriction or developing the data on its own. JDA is responsible for leading the FS-xprogram. It will have final author- ity over the aircraft’s configuration, scheduling, cost, and other proce- dures neededto meet system requirements. JDA plans to develop and produce six prototype aircraft-four for flight testing and two for ground testing. JDA will bear all the necessarycosts for the IB-x within the amount of its budget authorization, estimated to be $1.2 billion, and will pay the U.S. government a research and development recoupment Y charge for each FSX manufactured. Nothing in the agreement obligates the U.S. government to expend funds. Page 18 GAO/N&W-90-77BR U.S. Japan FS-X &development Section 9 GwernmentTdiovernment and CommerehI Arrangements Japan agreed that the U.S work share will reach 40 percent of the entire United States Will FSX development budget. For budgeting purposes, the U.S. work share is R CCiVC 40 PCIXXnt Of $480 million. The 40 percent remains constant despite any currency D velopment and fluctuations. The agreement did not make a firm production work share commitment. In an exchangeof letters dated April 28, 1989, between the A out 40 Percent of Secretary of State and the JapaneseAmbassador to the United States, Pr, i duction Work Japan agreed that if the program entered into production, the United States would receive approximately 40 percent of the value of the total Sljare / production work. I JDA will transfer to the United States, at no cost, technology derived T$chnology Flowback from the F-16. DOD will also have accessto non-derived technology, that Pdovisions Allow US, is, data developed solely by Japan. Thesetechnologies can be purchased A(xess to Japanese through established procedures.1In the April 28, 1989, exchangeof let- ters, Japan identified four non-derived technologies associatedwith the Ttchnologies project-radar, electronic countermeasures,inertial reference system, 1I and mission computer hardware. If the use of U.S. technology is essen- II tial to the development of these Japanesetechnologies,they will be con- sidered derived and available to the United States at no cost. Further, Japan agreed that the United States will have accessto all technology associatedwith the rs-x that it wishes to obtain, Japan agreedthat the FS-xshould achieve, to the degreepossible, inter- Program Strives to operability with existing U.S. military systems. DOD believes that the I%-x Maintain will be interoperable with the F-16 and other U.S. weapon systems;that Interoperability is, it will use the sameground support equipment, have compatible com- munications and data link systems, and be capable of in-flight refueling from the sameequipment. Certain FS-xcomponents,such as the engines, will be interchangeable with US. aircraft. DOD recognizesthat the major- ity of the FS-xstructure and the major avionics systems, such as the radar and the mission computer, will be different from those in the F-16. ‘In November1983,the governmentof Japanagreedto permit the export of military technologyto the United States.All U.S.requestsfor Japanesemilitary technologymust be addressedthrough diplomatic channelsto a Joint Military TechnologyCommission.The Commissionconsistsof senior representativesof the various Japanesegovernmentagenciesand U.S.Embassyofficials. According to DOD,few transfers of Japanesemilitary technologyhave beenmadeunder this agreement. Page 19 GAO/NSIAD-90-77BR U.S.Jspan FS-X Codevelopment ‘. .* Section 8 Governmen~To-Govennt and Chnmercial Arrangementi Japan agreedthat all technical data, information, and documentation Third-Party Salesof provided by US. manufacturers or DOD will be used only for develop- U.S.-Origin ment and are prohibited from transfer to a third party without the U.S. government’s prior approval. Further, no defensearticles or technical data provided or developed from information provided by the United States will be sold or transferred to a third party without prior approval. The memorandum of understanding has been implemented under a com- Wnmercial mercial license and technical assistanceagreement,which was signed on Atrangement January 121989, by General Dynamics and Mitsubishi Heavy Indus- Itiplements tries. Mitsubishi will be the prime contractor, and General Dynamics will provide technical assistanceand produce certain parts of the FS-x.Gen- Gbvernment-To- era1Dynamics’ work share will be 30 percent of the FS-xdevelopment Gbvernment cost. The remaining 10 percent is reserved for other U.S. contractors. Apements Included in General Dynamics’ work share is a license fee of $60 million. General Dynamics’ technical assistanceincludes (1) explaining the tech- nical data provided under the agreement;(2) providing advice on the design, development, and production of the F&X;and (3) making recom- mendations on the effect of changesto the F-16 design. Other tasks include * leading in the design, development, and manufacture of the aft fuselage and certain hardware and software systems; l participating (extent still to be determined) in the development of the modified F-16 digital flight control system’s hardware and software; and . designing, developing, and manufacturing the wing’s leading edge flaps. General Dynamics will provide qualified personnel to Mitsubishi for engineering, design, and production support. Both contractors will establish program offices in the United States and Japan to support the technical representatives of their respective companies.General Dynam- ics officials expect to have as many as 70 people in Japan during the program. General Dynamics will have an in-depth, fully integrated, and involved role in all significant aspectsof the overall F&Xwing project, including design, development, manufacture, and testing. Japaneseindustry will Y be the overall project leader. General Dynamics will manufacture 4 of Page 20 GAO/NSIADW77BR U.S.Japan l%-X &development Bwtion 8 Govenunentnt and Chunerdal Arrangement.43 the 14 co-cured composite wing boxes.2The wing boxesmanufactured by General Dynamics will be subjected to the samelevel of testing as the Japanese-manufacturedwing boxes to ensure an equivalent level of quality. ‘The wing box is the majorstructural portion of the stationary wing. It includesthe internal frame and wing skins,or top and bottomcovers. Page 21 GAO/NSLAD-BO-77BR U.S.Japan F’S-X Codevelopment Section I 4 I Thhnology I Transfer / involves greater releaseof F-16 technical data than previous Summary l FS-x coproduction programs. l Safeguarding technology posesa challenge. l DOD has procedures for reviewing technology releasesand is currently reviewing data lists. l DOD plans to limit releaseof flight control and avionics software. l Sanitized fire control computer software source codesto be released. l Physical safeguards are planned to reduce potential for inadvertent disclosures. l The Technical Steering Committee will monitor technology flow. . Commercial application of E-X technology is uncertain. The E-X codevelopmentprogram will involve a greater releaseof F-16 F$-X Involves Greater technical data than previous coproduction agreements.Previous F-16 R&easeof F-16 coproduction programs have releasedoperations, maintenance, and pro- Tdchnical Data Than duction data to Denmark, the Netherlands, Norway, Belgium, and Tur- key. A key distinction between these coproduction programs and the Pr/eviousCoproduction ITS-X is that the E-X will require the releaseof certain F-16 design data, Programs such as wind tunnel test data, used for wing design and development. The releaseof the design data is required to enable Japan to develop an aircraft basedon the F-16 design. During the interagency review, Com- merce and DOD agreed to minimize the releaseof design data and jointly developed a list of sensitive F-16 technical data to be withheld to protect US. national security and industrial competitiveness. The I%-xprogram will require the releaseof certain F-16 software that will help the Japaneseincorporate their avionics systems into the air- craft. General Dynamics will provide systems integration assistanceto Japan to accomplish this complicated task. For example, General Dynamics will help integrate Japan’s mission computer with other avi- onics systems, such as the radar and inertial navigation system. This integration assistancewill require a closeworking relationship between U.S. and Japaneseengineers.According to DOD, the integration process represents a significant departure from other aircraft coproduction pro- grams, which generally involve the foreign country’s manufacturing and/or assemblingexisting U.S.-designedand integrated components. Page 22 GAO/NSIAD-90-77BR U.S.Japan FSX &development Section 4 Technology Transfer : Sa‘eguarding Safeguarding the transfer of technology to Japan during the course of the program posesa significant challenge. According to DOD, the volume Te :hnology Posesa of data to be provided will be greater than would be transferred under Cl- Bllenge coproduction or_.direct _ purchase. _ The FS-xwill use the F-16 Block 40 air- craft as a baseline for development. Someof the F-16 technical data that will be provided to Japan include F-16 production drawings, perform- ance data for the 376 square-foot wing considered for the Agile Falcon (F-16 derivative), engineering changesadopted to enhancethe safety of the Block 40 aircraft, and sanitized computer software interface and integration data. Becauseof US. security and proprietary reasonsand becauseJapan will incorporate many of its own avionics componentsin the m-x, numerous items and componentswill not be included in the F-16 technical data package.Someof the excluded items include radios, landing gear, radar, electronic warfare systems, an inertial navigation system, and a central mission computer. For these items, only data that describescommunica- tions between aircraft computer systems, known as interface data, will be provided. Japan has the option of either developing these systems and componentsor buying them from US. vendors. Engines for the development phase aircraft will be sold as end items. Only integration and cost data neededto select and install engineswill be provided. DOD will consider releasing engine production technical data after a production memorandum of understanding is negotiated. DOD will not consider releasing certain technical data for parts of the engine, such as the digital fuel control system and the “hot section” (where combustion occurs). DOD has established procedures for determining the releaseof military DOD Has Procedures technology and data to foreign countries. Proceduresare in place to con- for Reviewing sider the types of technical data eligible for releasebasedon industrial Technology Release and security-related criteria. Within DOD, technology releasereviews are conducted through a multilayered processthat includes the Defense and Is Currently Technology Security Administration, the National Disclosure Policy Reviewing Data Lists Committee, and the military services.’ These organizations established guidelines for controlling the releaseof F-16 technical data. ‘The DefenseTechnologySecurity Administration reviews the international transfer of defense- Y relatedtechnology,goods,and services,consistentwith national security and foreign policy objec- tives. The National DisclosurePolicy Committeeformulatesand administersspecificcriteria and con- ditions that must be satisfied beforea decisionis madeto releaseclassifiedmilitary information to foreign governmentsand international organizations. Page 23 GAO/NSIAD-90-77BR U.S.Japan FS-X &development Section 4 Technology Transfer The Air Force, in coordination with the DefenseTechnology Security Administration, drafted a Delegation of Disclosure Authority Letter, which provides criteria on what technical data can and cannot be releasedto Japan in support of the program. A team of Air Force engi- neers is reviewing the F-16 technical data list-item by item-to deter- mine releasability of specific information. The team is identifying data that must be sanitized to remove sensitive elements prior to release basedon military security or industrial baseconcerns.Selectedkey data will also be reviewed by technical personnel from the DefenseTechnol- ogy Security Administration prior to its release.Commercealso reviewed the releasibility guidelines and will continue to review technol- ogy release issues. The releaseof F-16 systems integration data has been closely scrutinized D D Plans to Limit by DOD and other executive branch agencies.Specifically, the releaseof R lease of Flight F-16 digital flight control and fire control computer software source C%ntrol and Avionics codeswas given special consideration. Scjftware The digital flight control computer software-the fly-by-wire system- t enablesthe F-16 to maintain stability and maneuver quickly and safely. The flight control software is considered state of the art, is unique in its sophistication, and can have direct application to commercial aircraft. DOD has not released digital flight control software source codesto any nation Japan is no exception. DOD and Commerceagreedthat if Japan choseto request US. assistance,General Dynamics would develop the flight control software for the m-x in the United States, and the resulting software object codes2would be provided to Japan only as an end item. A limited number of Japaneseengineerswill be permitted to observe the development and tests of the software for the F&Xso that Mitsubishi Heavy Industries can ensure the validity and readinessof the software for the flight test, DOD plans to withhold source codesduring the devel- opment stage and, more importantly, to deny hands-on experience and participation in the development processof the software for the digital flight control computer. After completion of the FS-xflight test program and after a production memorandum of understanding has been negotiated, releaseof the source codesmay be reconsideredto allow Japan to maintain and Y ‘The objectcodeis derived from the sourcecode.It consistsof a seriesof numbers(OSand 1s)that a computerreadsto perform designatedfunctions and operations.The objectcodedoesnot provide insight or accessinto analysesor methodsusedby software engineersto developa particular com- puter program. Page 24 GAO/NSIAJMO-77BR U.S.Japan F&X &development y’, ., i . - I I . I I Section 4 , Technology Transfer update the developed software. At the time of our review, it was uncer- tain whether or not Japan would agreeto these restrictions. If not, Japan will probably develop its own software for the FS-xflight control computer. DOD will releasesanitized F-16 fire control computer software source Sdnitized Fire Control codesto help Japan develop and integrate its mission control computer Cdmputer Software into the FS.X.The F&Xmission control computer performs the functions Schrce Codesto Be of the F-16 Block 40 fire control computer. The fire control computer is a critical part of the F-16 avionics system. It integrates various on-board R&eased systems that enable the pilot to effectively fire weapons at the target. During the February-March 1989 interagency review of the FS-xpro- gram, DOD and Commercedisagreed on releasing F-16 fire control com- puter source codesto Japan. DOD believed certain portions of the source codesshould be released,while Commercemaintained that all the source codesshould be withheld, DOD'S position was acceptedby the National Security Council. In the April 28, 1989, exchangeof letters, the United States informed Japan that it will receive accessto the source codesnecessaryto develop the mission control computer. According to DOD, the source codeswill be sanitized, giving Japan the “know what” but not the “know why,” In other words, the sanitized source codesprovide the out- comebut not the methods used to arrive at the outcome. According to General Dynamics, its engineerswill work with Japanese engineersduring the development and integration of the mission com- puter. They noted that U.S. contractor assistancewill enable Japan to develop the system more quickly, but the United States will gain access to Japanesesystems as a result. Physical safeguards are planned to minimize inadvertent disclosuresof Physical Safeguards withheld technical data and know-how, General Dynamics and Mitsu- Ahe Planned to Reduce bishi Heavy Industries engineerswill be located in a separate area of the Potential for F-16 plant at Fort Worth, Texas. Contractor engineering teams will be limited to using a reference library of releasable documents and will be Inadvertent required to display distinctive badges. Disclosures Y The U.S. engineerswill be given periodic disclosure awarenessbriefings by Air Force representatives. The U.S. engineerslocated in Japan will be similarly briefed by the Air Force I%-xliaison officers stationed there. Page 25 GAO/NSIAD-90.77BR U.S.Japan @‘S-X&development &&ion 4 Technology Transfer General Dynamics will prepare a Technology Control Plan that will be approved by DOD. The plan is designedto ensure that unauthorized data or methods are not revealed at the General Dynamics facility in the United States or by contractor personnel in Japan. General Dynamics officials recognized,however, that it would be difficult to guard against inadvertent disclosures becauseof the close working relationship among the engineers. A Technical Steering Committee was established to overseethe imple- Tl ! Technical Steering mentation of the FS-X program. The Committee, which is co-chaired by CC nmittee Will high-ranking U.S. and Japanesemilitary officers, will have a representa- M Gtor Technology tive from the Department of Commerce.U.S. membership primarily includes technical/program managers from the F-16 System Project Fl iv Office. The Committee will, among other things, monitor the transfer of techni- cal data to Japan. According to high-level DOD officials, the Committee will be the forum for all requests for releaseof technical data made by Japan during the course of the development program. The requests for consideration will be channeled to the appropriate technical officials at the Air Force’s System Project Office and Foreign Disclosure Policy Office. Requeststhat fall within the guidelines of the Delegation of Dis- closure Letter may be approved, Requeststhat are outside the estab- lished guidelines will be staffed by the Air Force Vice Chief of Staff’s Disclosure Policy Office and reviewed by Defenseand Commerce Department officials. According to DOD officials, this processwill elevate releasability issuesto better ensure full and complete review and reduce the opportunities for imprudent disclosures. Japan has targeted aerospaceas one of its key technologies for the 21st Commercial century. U.S. government officials informed us that the skills and Application of FS-X knowledge acquired from the F&Xprogram can generally be applied to Technology Is other aviation-related programs. Japaneseengineerswill gain valuable experience in systems integration. Systemsintegration consists of com- Uncertain bining various aircraft componentsto work with each other to perform mission-related functions. Japan will integrate various avionics compo- nents and subsystemsinto the FS-X. For example, if Japan decidesto develop its own digital flight control system, significant integration 6 skills will be acquired and applied to complete the task. DOD and civilian agency officials stated that Japan has had limited experience in systems Page 26 GAO/NSIAD-90.77BR U.S.Japan FS-X &development I --..L- i fbctlon4 Technology ‘Ibander - integration, and these officials consider it an art learned only through the “school of hard knocks.” The extent to which these systems integration-related skills are directly transferrable to commercial aircraft development is uncertain. Informa- tion available to us indicates that no individual project in the series of U.S.-Japancoproduction programs over the past 30 years gives Japan the technological keys to bridge the competitive gap, However, the cumulative knowledge gained from a broad range of successfuljoint ventures between the United States and Japan may reduce the time and expenseit will take Japanesefirms to catch up and becomemeaningful competitors in the aerospace/aircraft manufacturing industry. Page 27 GAO/NSIAD-BO-77BR U.S.Jepan F’SX &development S&ion 6 &tive Phased Array Radar Technology . DUD is interested in acquiring Japaneseradar module production technology. l U.S. knowledge of Japaneseradar. l U.S. industry is making significant advancesin reducing module cost. l Benefits to the United States are questionable. As part of the FS-xprogram, Japan has been developing an active Is Interested in phased array radar that useselements called transmitter/receiver mod- Qmnese Radar ules located in the radar’s antenna.’ These modules can improve range, Ipdule Production increase the number of targets tracked simultaneously, reject jamming, and enhancereliability. The critical challenge is to develop manufactur- ‘&chnology ing processesto produce efficient, quality modules that are affordable. / There are about 2,000 modules in a radar antenna, and each module cur- I / rently costs U.S. industry about $8,300 (fiscal year 1986 dollars) to pro- / duce. Thus, the cost of a single antenna would be about $16.6 million. / US, companiesare currently developing active phased array radars and modules for advanced fighter aircraft-the Advanced Tactical Fighter and the Advanced Tactical Aircraft. U.S. industry’s goal is to reduce module costs to about $400 per module. The active phased array radar technology is well known. The ability to reduce the size of the modules and produce them at affordable costs is a significant task that remains to be accomplished.DOD would like to acquire from Japan the manufacturing technology for the radar’s mod- ules. The government-to-governmentagreement enablesthe United States to evaluate and purchase the radar technology that will be devel- oped by Japan under the program. The United States doesnot know what the cost of procuring the technology will be at this time. DOD’S efforts to obtain adequate data to assessperformance of the Japa- US. Knowledge of neseradar, including test and evaluation results, have been largely Japanese Radar unsuccessful.In April 1987, a DOD team visited the Mitsubishi Electric Corporation’s facility, which is producing the transmitter/receiver mod- ules. The team saw the modules and described them as impressive, although DOD did not have a radar specialist there. Part of the team also visited the facility where the entire radar was being flight-tested, ‘Transmitter/receiver modulesare comprisedof circuits using gallium arsenidesemi-conductorchips. Y Although the production of gallium arsenidematerialsand devicesis still maturing, their usecan surpassconventionalsilicon devicesin speed,power,efficiency, and resistanceto radiation effects. Both the United Statesand Japanare using gallium arsenidetechnologyin the developmentof their active phasedarray radar’s modules. Page 28 GAO/NSIAD-@O-77BR U.S.Japan FS-X Codevelopment ‘. Section 6 , Active Phased Array Radar Technology expecting to seethe radar. According to the DOD team leader, the Japa- neserefused the team permission to view the radar due to performance problems. The team requested test and evaluation data on the radar, but Japaneseofficials refused to releasethis information as well. In January 1988 DOD attempted to obtain additional information about Japaneseradar technology to assessits potential benefits. Detailed tech- nical questions were submitted prior to the trip, but little information was provided. A DOD technician was not permitted to seethe radar and was told by Japaneseindustry officials that the information was propri- etary, classified, and not releasable. In March 1989 the Air Force’s Wright Researchand Development Center described Japan’s radar as a “quick development aimed at drawing even with the U.S. technology base.” The Center stated that Japan appeared to have less radar experience than the United States and lacked vital knowledge in terms of defining module performance. U.S. industry rep- resentatives had told the Center that they had not witnessed any new Japaneseradar technology, only good engineering. In their view it was unlikely that any significant technology flow from Japan would result from the FS-xagreement.US. government and industry officials explained that the size of the modules must be reduced to fit in the nose of high performance interceptor aircraft. The Center noted, for example, that Japan’s modules were about 6 inches long, which resembled U.S. industry development in about 1983, In 1988, one U.S. company’s dem- onstration/evaluation modules were about 2-l/2 inches long. An official from the Center’s Electronic Technology Laboratory received information from a knowledgeable U.S. industry representative who had observed the Mitsubishi Electric Corporation’s production facility and had discussionswith its officials in March 1989. The industry represen- tative stated that Japan did not have a phased array radar module pro- duction facility similar to anything in the United States. He observed that the Japanesefacility was of “soldering iron vintage.” Mitsubishi established a cost goal of $1,260 per module for the array and a maxi- mum production rate, with a relatively low level of automation, of only 1,000 modules per month. Mitsubishi officials admitted to the U.S. industry official that their prior claims of the radar’s successfuldevel- opment were “all hype” and that their concern was that if they did not make these claims, their own government would likely purchase an array from the United States. Page 29 GAO/NSIAD-QO-77BR U.S. Japan FS-X &development Section 5 Active Phased Array Radar Technology These observations parallel other U.S. government reports, which state that Japan is having difficulty reducing the overall costs of the radar. Indications are that high costs may limit the number of modules in each Japaneseradar; limiting the number of modules will reduce the radar’s capabilities. This information also contrasts sharply with earlier, opti- mistic claims of the Japanesegovernment and industry. From our discussionswith U.S. industry officials and observations of UjS Industry Is module production facilities, we concluded that the United States is Making Significant making significant advancesin reducing the cost of the modules. Offi- A6lvancesin Reducing cials from various U.S. companiessaid that the key will be to reduce the modules’ cost through high-volume production. According to one com- Mpdule Cost pany’s estimates, the unit cost of the modules has been reduced from I about $12,000 to about $8,300 over the past 4 years, a decreaseof / 31 percent. The companiesanticipate that the cost will continue to 1 decline steadily as production increases.For example, by 1992, the unit I I/ cost should be about $3,100. Anticipated full-rate production costs are I about $400 per module by 1997 to 2005 for about 2.3 million modules. 1 This cost is generally acceptedby U.S. industry as the cost that would / make the antenna and radar affordable. These cost figures are in fiscal year 1986 dollars. According to DOD, Japan has becomea world leader in the design and Bnefits to the United manufacture of consumer electronics. Its ability to apply new designsto States Are production is well developed. If Japan’s knowledge of manufacturing Questionable technology is applied to the transmitter/receiver module production, sig- nificant advancesare likely. Further, the Wright ResearchDevelopment Center’s Deputy Director said it would be wrong to assumethat the United States is significantly ahead of Japan. He stated that the Japa- neseare extremely skilled and have a proven capability in electronics. He stressedthe importance of obtaining accessto their module technol- ogy to evaluate the manufacturing process. Available information indicates that the United States is ahead of Japan in developing the manufacturing technology necessaryto reduce the costs of the radar’s transmitter/receiver modules. As a result, the Japa- neseradar and associatedmanufacturing processesare of questionable value to the United States in the near term. Y Page 30 GAO/NSIAD-90.77BR U.S.Japan F’S-X &development Is: ‘. ‘.. I’ /’ ; ,I’ ,a.’ , ’A Ccfnposite Wing Technology 9 Japan claims its proposed composite wing for the FS-xis 26 percent lighter than a metal wing. l Japanesewing has potential merits and disadvantages. . The United States’ compositescapability is excellent and superior to Japan’s l The United States has produced all composite wings but has chosento employ fasteners to increase confidence. . The US. requirement for Japanesetechnology is modest. Japan is offering critical compositestechnology related to the wing i Ja j an Claims Its structure, called the wing box. Japan proposesto make the long stiffen- I Pr7posed Composite ing pieces(spars) and the short cross pieces(ribs) out of strong plastics Wi g for the FS-X Is called composites.The strength of the compositescomesfrom the stringy filaments made of carbon fibers, which are held in place with an 25 rPercent Lighter epoxy glue. Tuan a Metal Wing I The top and bottom layers of the wing (skins) will also be of composites /I but will be made in a different way from the spars and ribs. The skins will have thin composite “cloth,” or tape, laid in arranged directions !/ with varying thicknesses.In someplaces there will be up to 160 layers. Composite wing skins are built up, as contrasted with metal wings, which are cut down from a thick piece of metal. According to DOD and industry officials, the B-X wing spars, ribs, and bottom skin will not be fastened together with bolts. Rather, the spars and ribs will be carefully placed on the bottom skin. All of the parts contain epoxy and are held in position with special tooling. The struc- ture will be inserted into an oven (autoclave), where the pieceswill becomebonded. This processis called co-curing; the epoxy becomeshard and stiff. This composite is termed a thermoset. The upper skin also has to be cured, either alone or in conjunction with the structure. If cured alone, the upper skin would need to be fastened to the structure. With this design, the Japanesehope to save 25 percent in weight compared to a new, all-metal wing. DOD and US. industry officials do not have good information as to whether or not the Japanesecan produce the wing as planned. Through its participation in the FS-x program, General Dynamics will be able to evaluate and verify the Japanesedesign and capability. DOD noted that the Japaneseco-curedcompositestechnology had never been demonstrated on a full-size, wet (fuel inside), contoured wing box. Page 31 GAO/NSIAD-90.77BR U.S.Japan F&X Codevelopment I I Section 6 I Compo&e Wing Technology JDA admitted that the co-cured composite wing technology was not mature and that Japaneseindustry could not manufacture the proposed I%-xwing. JDA believes that the technology will becomemature enough to be incorporated into the FS-xwing within 2 years. Although Japan coproducessignificant parts of the F-15, the aircraft has very little in the way of compositesand does not have a composite wing. Japan did someresearch and development on the 757 tail under contract to Boeing. Boeing planned the 757 as its next generation civil airliner. The tail was to be a large structure made from composites,but Boeing postponed the 757 program becauseof changing commercial demand. U.S. personnel have seenan F&Xwing specimen,US. government and industry officials do not know exactly what compositeswill be used or how the Japaneseplan to tool for the production operation. Further, the Japanesehave not made data on design, manufacture, and testing avail- able to the United States. This data would permit evaluation of the wing or specimen. According to U.S. government and industry design engineers,the Japa- neseapproach is high risk. The United States expended significant research and development effort in the 1970sto test the basic co-cured composite designsnow being consideredby Japan for the FS-X wing. According to Air Force engineers,the design-tested on small struc- tures-was rejected becauseof manufacturing and quality control problems. The proposed Japanesedesign has both advantagesand shortcomings. If JapaneseWing Has Japan is successful,the composite wing may have advantagesover Potential Merits and metal wings: perhaps better performance in terms of reduced weight Disadvantages and increased durability, perhaps lower costs in the long run considering there could be fewer parts. One of the merits of co-curing is the avoid- ance of problems and complexities associatedwith drilling many holes and using expensive fasteners. Co-curing also overcomesthe problem of leaks that can occur when fasteners are used. There are potential prob- lems: it is difficult to maintain quality control with respect to the bonds over a long production run, tooling for production at low cost is very complex, and production inspection of small corners and large areas requires innovative procedures. Additionally, accessto fuel control equipment is restricted, and damagerepair may be limited. Y Page 32 GAO/NSIAD4O-77BR U.S. Japan FSX Codevelopment # ( Section 0 I Composite Wing Technoloey I I1 Available evidence indicates that the U.S. industry’s basic knowledge of Thd United States’ advanced compositesfor aerospaceis excellent and superior to Japan’s, co&?oSiteS Capability The United States has many suppliers and fabricators and is skilled in xcellent and aircraft applications. While fundamental principles of compositesare available worldwide in handbooks, there are many “tricks to the trade,” erior to Japan’s especially for manufacturing. These tend to be company proprietary. There are varying levels of maturity in the U.S. industry. The consensus among industry experts is that General Dynamics is behind someother U.S. aircraft manufacturers in compositestechnology becausethe F-16 aircraft has few composite components. The United States has a demonstrated and proven capability in the pro- duction of composites.Industry has co-curedmany parts of aircraft, especially “secondary” structures such as rudders and ailerons. The United States currently produces composite rib/spar/skin secondary structures for fighters and has co-curedthe large AV-8B horizontal tail, a primary structure. The United States has manufactured large skins for aircraft tails and for combat aircraft wings. The Marines have extensive fleet experience with the AVSB under high stress. That aircraft has wavy spars and a wet wing like those proposed by Japan. The biggest difference between the U.S. work and that planned for the Tlie United States Has E-X lies in co-curing the substructure to the bottom skin. For example, Produced All while the AV-8B has composite spars and ribs, they are fastened to the Composite Wings but bottom and top skins. This practice is currently preferred to ensure high confidence in the joints. While secondary structures and tails have been Has Chosen to Employ co-cured,wings of combat aircraft require a substantially different con- Fasteners to Increase sideration. The latter must withstand far more stress (g’s) and carry Confidence fuel. The X-29 and the A-6, which have composite skins, were designed with somemetal substructure becauseof their loads. The US. requirements for Japanesecomposite technology for military The U.S. Requirement aircraft and civilian aircraft may be different. In the caseof military for Japanese aircraft, there is always a requirement if the wing can be made lighter Technology Is Modest and cheaper, and the trend is toward increased use of composites.The US, Air Force has indicated that the prime use for co-curedthermoset wings would be future versions of the F-16, if the wing proves afford- able. The Japaneseco-curedthermoset technology may not be in much s demand for the next generation of fighters, partly becausethe flight schedulesfor the Air Force’s prototype Advanced Tactical Fighter and the Navy’s Advanced Tactical Aircraft are ahead of the FS-xand partly Page 33 GAO/NSIAD4O-77BR U.S.Japan F&X Codevelopment )r Section 6 Campoaite Wing Temhology t ir t becausethe Air Force’s performance requirements may pose problems for thermosets. To meet the higher temperature requirements for future aircraft, the US. trend is toward the use of thermoplastics. This material is formed under pressure in warm molds and becomeshard when cooled. Auto- claves are not used to set the composites.According to industry experts, thermoplastics currently have very high costs but will have some future application. Composite requirements for civilian airliners are more difficult to assess,since there are many aircraft customers.It is not likely that the Japanesecomposite technology would be applied to current airliners like the MD-80 and the B-767/767, since they are already being produced at a high rate. By the year 2000, compositesmay be useful in airliners like the MD-91X and the B-7J7 propfan (for example, the tails) if the costs are low. Thermoset compositesare not expected to be widely used for the next generation of supersonic aircraft replacing the Concordedue to the high temperatures at high speed.For the samereason, the ther- mosetswould not be applicable to the future hypersonic aircraft, of which the X-30 is a technical demonstration experiment program. Page 34 GAO/NSIAD-90-77BR U.S.Japan FS-X Codevelopment . ! Se&i& 7 st ” . Off-the-shelf purchase is more cost-effective. s+w I ,I Developing the FS-xwill cost Japan more than purchasing F-16s from the Of&The-Shelf United States would cost. The Air Force has estimated that it would cost Pu ‘chase Is More cost- t he J apaneseabout $28.6 million (U.S. 1988 dollars) to purchase each Ef f’lective F-16 Block 60 (most advancedversion) from the United States through foreign military salesprocedures. Under these procedures,the total unit flyaway cost of the F-16 is about $17.2 million per aircraft. This includes a research and development recoupment charge of about $1.2 million. Additional support costs of about $11 million are factored into the estimate. These support costs include spares,maintenance, and , training. According to the U.S. Air Force, Japan would probably require this level of support for the aircraft. This cost estimate does not include any modifications that the Japanese would want to meet performance requirements similar to those for the FS-x.Most foreign countries like to have special modifications, which add to the cost of the aircraft. (This estimate is like buying a car with no options.) According to the Air Force, initial F-16 deliveries could occur about 36 to 42 months after a government-to-government agreement is signed. According to the contractor, delivery of all 130 aircraft would take about 2 years. According to DOD, Japan’s estimates of total FS-xprogram costs are pre- liminary and subject to change as the program develops. These early cost estimates include $1.2 billion for the development phase and about $5 billion for the production phase. General Dynamics has roughly esti- mated the FS-xunit cost to be about $61 million (U.S. 1988 dollars). The procurement cost for each aircraft is anticipated to be about $46 million, and the unit estimate for development, potential flight test, and program growth is about $15 million per aircraft. Page 35 GAO/NSIAD-90-77BR U.S.Japan FS-X Codevelopment bendix I t Objectives,Scope,and Methodology -i In letters dated January 30, 1989, and March 21, 1989, Senators Jesse Helms, Jeff Bingaman, Alan Dixon, Wendell Ford, and Alfonse D’Amato expressedconcern about the proposed FS-xcodevelopment program between the U.S. government and the government of Japan. They were concernedthat the program signaled a greater Japaneseinterest in obtaining research and development experience rather than in providing effectively and efficiently for their own defense. In responseto the Senators’ requests, we assessed(1) the extent to which DOD coordinated and consulted with the Department of Commerce when negotiating the FS-xagreement,(2) the principal provisions of the government-to-government and commercial licensing agreements,(3) the processfor transferring US. F-16 technology to Japan, (4) Japanese composite wing and phased array radar technologies and U.S. require- ments for these technologies, and (6) costs and scheduled delivery dates for the FSXcompared to the purchase of an F-16. In doing our work, we obtained information from various US. govern- ment and industry sources.We primarily reviewed program files and had extensive discussionswith DOD and U.S. Air Force program and technical officials in Washington, D.C., and the F-16 System Project Office, Dayton, Ohio. From these records and discussions,we obtained background information, including the negotiating history; assessed F-16 technology releasability issuesand procedures; analyzed cost data; and reviewed the government-to-government and commercial licensing agreements. To assessthe technology issues,we met with structural, design, and electronics engineers at the Air Force’s Wright Researchand Develop- ment Center, Dayton, Ohio. We also met with industry representatives from HughesAircraft Corporation, WestinghouseElectric Corporation, Texas Instruments, Inc., McDonnell Aircraft, and General Dynamics Cor- poration. In addition, we contacted numerous other industry technical officials to further assessU.S. capabilities and obtain information, to the extent available, about Japanesecapabilities. We also met with officials from the Departments of State, Commerce, Energy, Labor, and the National Aeronautics and SpaceAdministration to obtain information on the consultation processand other general background information on the FS-x. Y Due to the continuing bilateral negotiations to clarify certain aspectsof the program, we did not visit Japan to obtain the views of appropriate Page 36 GAO/NSLAMlO-77BR U.S.-Japan PS-X &development // ’ / / Appendix 1 I/ , ObJectbee, Boope, and Methodolo@ government and industry officials. Further, we did not specifically assessthe commercial application of the FSXcodevelopmentprogram. In our discussionswith US, government and industry officials, we did, however, solicit their views on the issue. We conducted our review between February and May 1989 in accord- ante with generally acceptedgovernment auditing standards. Page 37 GAO/NSlAD@O-7TRR U.S.Japan FS-X Development I Ap&ndix II Cbments From Department of Defense I Notel: GAO comments sup(Slementing those in the repo t text appear at the end bf this appendix. GAO DRAFT REPORT- DATEDAUGUST29, 1989 (GAD CODX463776) OSD CASE 8000-G "U.S.-JAPAR CODXVXWPMEWJ!IREVIEWOF TIiB FS-X PROGRAM" DEPARTMENT OF DEFENSEC-S ****** D Enoov to PuEEhape an Off-the- @ykt: lg&g. The GAO reported that, in the late 19708, Japan b,eqan to consider replacement of ita domestically produced fighter. The GAO reported that the Japanese Technical Reeearch and Development Institute, the department responsible for R&D within the Japan Defense Agency, believed that Japan had the domestic capability to develop the new fighter--except for the engines. The GAO observed that Japan considered economic factors such as employment in its aerospace industry and the knowledge gained from various licensed production programs with the U.S. The GAO also observed that, while DODmade several attempts to encourage Japan to buy a U.S. fighter off-the-shelf, it generally assumed that there was not any realistic possibility of this occurring. The GAO reported that, ultimately, as a compromise between U.S. and Japanese interests, DODproposed a cooperative venture between the two countries. The GAO noted that, in August 1987, the DODand the Japan Defense Agency agreed to cooperate on the development of the FS- X aircraft--to be based on a modified version of an existing U.S. fighter. The GAO found that DODanalysts influenced Japan to consider broader requirements for the aircraft than Japan had initially defined --and also convinced Japanese officials that an existing or modified U.S. fighter could meet most of these requirements. Now on pp, 8.10. (pp. 11-16/GAO Draft Report) Mp Resoonsar concur. The GAO reported that the DODand the Department of State did did not solicit the views of the Department of Commerce or other economic policy-making agencies in negotiating the agreement-- despite the requirement to do so in the Defense Authorization Act for Fiscal Year 1989. However, the GAOdid note that, in Enclosure Page 38 GAO/NSlAD-90-77BR U.S. Japan FS-X &development 2 October 1988, the DODdid provide a cursory briefing to Commerce. The GAO reported that, subaequently, in February 1989, the President commissioned an interagency review to study the agreement --which was co-chaired by DODand Commerce. The GAO found, based on the review, the U.S. Government sought and received clarifications to the agreement, including the stipulation that the U.S. would receive approximately 40 percent of the workshare if the FS-X goes into production. The GAO reported that, for future agreements, the DODagreed to (1) notify Commerce prior to initiating discussions on a Memorandum of Understanding with a foreign government, (2) provide full access (as an advisor) to negotiations and to relevant documents, and (3) not to conclude agreements until consultation with Commerce was completed. Now pp, 1-2, 13-14 (p. 1, p. 3, pp. 20-24/GAO Draft Report) QQDResnonser Concur. The a relationship with Japan. The GAO found that the highest U.S. priorities were (1) to ensure that the N-X maintained interoperability with U.S. forces in the region and (2) to maximize the capability that Japan received from its defense expenditures. In the government-to-government negotiations, the GAO noted the U.S. team's primary objectives were (1) to obtain an adequate development and production workshare and (2) to establish a joint DOD/Japan Defense Agency steering group to manage the program. The GAO noted that, while access to Japanese technology was not a primary consideration, DOD realized that the FS-X program provided an opportunity to gain insight and access to Japanese FS-X related technologies. The GAO noted that the agreement established that the U.S. workshare shall reach 40 percent of the entire FS-X development budget-- and an April 28, 1989, exchange of letters stated that, if the program entered production, the U.S. would receive approximately 40 percent of the total production workshare. The GAO also found that, under the Memorandum of Understanding, the Japanese Defense Agency will seek interoperability with similar U.S. Air Force systems. The GAOnoted that DODbelieves that the FS-X will be interoperable with the F-16 and other U.S. weapon ayetema. Now on pp. 1, 10-11, 17-18. (p. 2, pp. 16-18, pp. 27-3O/GAO Draft Report) DOD Reanoaz Concur. Page 39 GAO/NSIAD-99-77BR U.S. Japan FSX &development ii’ .’ Appendix II Cbnmentu From Department of Defeme / / -I 3 BIWDIWa: -v. U.8. - wtb.BtoJppgII 1 previou8 F-16 coproduction igreements which have made available operations, maintenance, and production data, the FS-X program will also release certain F-16 design and software data that was not previouely released. However, the GAO found that, in order to protect U.S. national security and industrial competitiveness, during the interagency review the DODand the Department of Commerce agreed to minimize the transfer of F-16 design data and other sensitive technical data to Japan. The GAO reported that the U.S. will not release any manufacturing or design data for the engines --although the DODwill consider providing some engine production technical data after a production Memorandum of Understanding is negotiated. The GAO also found that numerous items and components will not be included in the F-16 technical data package. The GAO reported that the release of the F-16 digital flight control and fire control computer software source codes were given special consideration by the DOD and other Executive Branch Agenciee. The GAO observed that the former is state-of-the-art and could have application to commercial aircraft, and that Commerce believed that the later would greatly aid Japan in system integration of fighter aircraft. The GAO found that, because the integration of Japanese avionics into the aircraft requires the release of certain F-16 fire control computer software source codes, the U.S. Government decided that sanitized fire control computer source codes would be transferred to Japan-- but, due to its commercial applicability, that the F-16 digital flight control software source codes would not be transferred. The GAO also noted that, after a production Memorandum of Underetanding is negotiated, tranefer of the digital flight control computer software source codes may be reconsidered. The GAO also reported that a joint U.S.-Japanese Technical Steering Committee has been established, with a Department of Commerce representative as a member, to monitor key aspects of the program, including technology transfer. In addition, the GAO found that DODtechnology transfer/release reviews are conducted through a multi-layered process. The GAO also noted that, for U.S. industry, physical safeguards are planned which will minimize inadvertent disclosures; but, General Dynamics recognizes that it will be difficult to prevent all such disclosures because of the close working relationships between U.S. and Japanese engineers. The GAO reported that under the terms of the agreement, all technical data, information, and documentation provided by U.S. manufacturers or the DODwill be used only for development of the FS-X and are prohibited from transfer to a third party without the U.S. Government's prior approval. Page 40 GAO/NSIAD-90-77BR US. Japan FSX Codevelopment Appendix II Comments From Department of Defense 4 Finally, the GAO reported that Japan has targeted aerospace aa one of its key technologies for the 21at century. The GAO concluded that the Japanese will gain some aviation system8 integration skills from the program; however, the extent to which the systems integrated-related skills are directly traneferrable to commercial aircraft development is uncertain. The GAO concluded that, over time, the cumulative knowledge gained during a broad range of successful joint ventures with the U.S. may reduce the time and expense required for Japan's aircraft industry to become meaningful competitors to U.S. industry. Now 01) pp. 3, 20-25. (pp. 4-5, pp. 32-41/GAO Draft Report) DODResnonsgr Concur. IrI#DIIIQs The GAO reported that, while the U.S. did not pursue the FS-); program with the primary objective of obtaining access to Japanese technology, once Japan agreed in principle to the program, the DOD stressed the importance of obtaining access to the new aircraft's technologies. In addition, the GAO pointed out that it is the DODposition that the program sets a precedent for two-way exchanges of military technology between the U.S. and Japan. The GAO noted the agreement provides that the U.S. will have access (1) to all F-16 derived technologies, including composite wing technologies, at no cost, and (2) to solely Japanese-developed FS-X technologies, such as the active phaeed array radar, at an undetermined price. mArrav The GAO reported that Japan is developing an active phased array for the FS-X, and that the DOD is interested in evaluating and possibly acquiring the manufacturing technology used to produce the radar's transmitter/receiver modules. The GAO found both the U.S. and Japan are working to develop a manufacturing process that produces affordable, quality modules--with the U.S. induetry making considerable progress. The GAO observed, however, that to date, the DODefforts to obtain adequate data to access performance of the Japanese radar, including test and evaluation results, have been largely unsuccessful. The GAO reported that, based on the limited information available, current Japanese module technology is comparable to where U.S. industry's technology was in about 1983. The GAO further observed that, according to the DOD, Japan's ability to transition new designs into production is well developed and if Japan's knowledge of manufacturing technology is applied to the transmitter/receiver module production, significant advances are likely. Based on the available information, the GAO concluded that the U.S. is ahead of Japan in Page 41 GAO/NSMD-90.77BR U.S.Japan FS-X Codevelopment : ‘I. ; ,’ .,. .,.I $,,.L ’ : ‘,, AppendlxII CommentaFromDepartmentofDefenae b I i k 5 developing the manufacturing technology necessary to reduce the costs of the radar's transmitter/receiver modules. As a result, the GAO also concluded that the Japanese radar and associated manufacturing processes are of questionable value to the U.S. in the near-term. -* The GAO also reported that Japan is planning to produce composite wings for the FS-X using a process known as co-curing. The GAOobserved that the Japanese approach appears to be high risk because of manufacturing and quality control uncertainties and damage repair problems. The GAO found that U.S. industry's basic knowledge of advance composites is superior to that of Japan. Furthermore, the GAO found that future U.S. military aircraft will need more heat resistant materials to meet expected performance requirements and noted that thermoplastics are more heat resistant than the composites used for the FS-X wing. The GAO reported that the U.S. Air Force indicated that the prime use for the FS-X composite wing technology would be on future versions of the F-16, if it proves to be affordable. The GAO further noted that the Japanese have not yet released co-cured composite wing design, manufacture, and testing data to the U.S. The GAO concluded that, based on available evidence, the U.S. industry's basic knowledge of advanced composites for aerospace is excellent and superior to Japan--and the U.S. military requirements for the Japanese composite technology appears to be modest at this time. Niw on pp. 1, 3-4, IO, 26- (p.2, pp. 5-7, pp. 16-19, pp. 25-32, pp. 42-54/GAO Draft 321 Report) DODS Even though the GAO concluded that the value of the FS-X radar ia "questionable" and the value of the FS-X composite wing is "modest," one would have to assume that a technically advanced country like Japan has something to offer the U.S. in these areas. Both the DODand General Dynamics also believe that, during the course of the program, there will be other Japanese technologies which will be of benefit to the U.S. 0 Devq&p the FS X The GAO reported that developing the FS-X will cost Japan-m&e than purchasing F-168 from the U.S. The GAO observed that, according to a U.S. Air Force estimate, the most advanced version of the F-16 produced in the U.S. would cost Japan about $28.6 million per aircraft (in U.S. 1988 dollars)--assuming that it were purchased through Foreign Military Sales procedures. From limited information obtained during its review, the GAO Page 42 GAO/NSIAD-90.77BR U.S.JapanFSXCodevelopment AppenruX II Ckmmenta From Department of Defembe 6 estimated that the unit coet of the FS-X will be about $61 million (in U.S. 1988 dollars). Now on hp. 2, 4, 33. (p. 8, pp. 55-57/GAO Draft Report) / POD mt Concur. Page 43 GAO/NSL4D-BO-77BR U.S.Japan FS-X Chlevelopment A&endix III From the Department of Commerce‘ 1, * wwtmo m-rdwmm O~PARTM~NT oc CIOMM~RCIW l urrmu of Export Admlnlm8t-melon Wsehlngton, DC. 20230 Mr. Frank C. Conahan Aaei8tant Comptroller General National Security and International Affairs Division United States General Accounting Office Waehington, D.C. 20548 Dear Mr. Conahan: is an unclassified version of the off&&l October 3. ta to draft GAO reoort. in the (U) Thank you for your letter requesting the Department's comments on the draft General Accounting Office report entitled "U.S. - JAPAN CO-DEVELOPMENT: Review of the FS-X Program." (V) I would like to compliment you and your staff for producing a comprehensive and generally well-balanced draft report which refleCta a thorough review of the FS-X Memorandum of Understanding. while we believe the report presents an accurate portrayal of the negotiation and subsequent interagency review of the FS-X Fighter Co-development agreement between the United States and Japan, we do have a number of comments on the draft report. (U) Fir&, we believe that the subsection entitled "B u S AmI0f.f D,, TO E,.O@JMICIMPLICATIONS OF Now on pp. 14-15. COPRODUCTION 11 (seepages 22-24) does not present a balanced view of the Administration~s actions in reviewing the FS-X agreement. See pp, 5, 14, and It is not true, as the tone of this section suggests, that no comment 1. analyais of the technology transfer or industrial impacts of the FS-X agreement was performed. During the interagency review of the agreement, a very detailed analysis of the technology transfer and industrial competitiveness impacts of the FS-X program warn jointly performed by Defense and Commerce with full @upporting participation from other civilian agencies including NASA, USTR, TreaSury, the Department8 of Energy and Labor, and the Office of the Science Advisor to the President. (U) Am a result of this process, Defense and Commerce agreed to an extensive list of technologies that would be withheld from the Japanese to protect U.S. national security interests and protect the U.S. defense industrial base. The Presidentially-mandated 7S Ycarr Stimulrling America’s UN&ASSlFlEB Progrcrs * 1913-1988 Page44 GAO/NSIAD-90-77BRU.S.JapanFSXCodevelopment I) ,. Apwndlx II ‘” CommentsFromDepartmentof Defense / UHASSIFIEII -2- review procese did address technology transfer and industrial competitiveness concerns, and had a material effect in placing limits on the scope of technology transfer. j See p, !f (U) We believe this section of the draft report would be more balanced if it etated that since the earliest days of 1989, the I trade, economic, and industrial competitiveness implications of defense cooperation agreements such as the FS-X have been a central concern of the Administration. See p. j14 and comment 2. (U) Defense and Commerce have established a cooperative working I relationship on the FS-X program, and are now jointly reviewing defense cooperation memoranda of understanding. Commerce is also participating in the formulation of the U.S. negotiating position for programs such as the FX Korean Fighter Program. Now or/ pp, 21-22 (U) Our second comment relates to the subsection entitled QQQ FOR m TECBBOLOCY REVS U#-T.g@@ (oee pages 34-35). This section fails to mention that Defense has fully involved Commerce in overseeing technology transfer to Japan in the FS-X program, in keeping with the intent of SeCtiOn 825 of the Defense Authorization Act of 1988. At the request of Defense, Commerce fully reviewed the Delegation of Dinclosure Authority Letter, a comprehensive technical document which identifies which specific technologies can and cannot be disclosed to the Japanese under the FS-X program. This document See p, 22 and comment 3. defines allowable technology transfer under the FS-X program, and is the guiding policy document for the team of Air Force engineers who do the day-to-day work of technical information release to the Japanese. We believe the draft report would be more balanced if it mentioned the fact that Commerce is fully involved in reviewing technology release under the FS-X program, (U) Our next comment relates to a technical point'presented in the subsection of your draft report entitled I'- Now on pp. 24-25. IS -'I (see page 40). This subsection states: "U.S. government officials informed us that the skills and knowledge acquired from the FS-X program can generally be applied to other aviation-related programs; Japanese engineers will gain valuable experience in systems integration. DOD and civilian agency officials stated Japan has had limited experience in systems integration and these officials consider it an art learned only through the O1school of hard knocks". This paragraph is misleading. Ul(eLIISSlFlEC Y Page45 GAO/NSLAD90-77BRU.S.JapanFSXCodevelopment Appendix III CommentsFromthe Department of Commerce UNMASSlFlEli -3- (U) The FS-X program systems integration of the digital flight' control system to the airframe of the FS-X will be performed by the U.S. contractor, General Dynamics, Unless the Japanese decide to independently develop their own digital flight control system. The Delegation of Disclosure Authority Letter governing technology transfer from the United States to Japan specifically prohibits the transfer of digital flight control computer hardware. (U) Therefore, the Japanese will not gain any significant systems integration knowledge or experience from the digital flight control computer. The systems integration experience gained by Z/ee p. 24 and comment 4. the Japanese in the program will be limited to either unsophisticated systems, or to those such as the mission control computer (i.e., fire control computer), which have no direct aommercial application. We believe, therefore, that this subsection of the draft report should be revised to reflect this substantive correction. (U) The Department's comments on Section 5 of your draft report VE PHASEI)." (See pages 42-47) and Iho; on pp, 26.28 and 29. Section 6, "COMPOSITEWINGTECHNOLOGY"(See pages 48-54), are necessarily broad, because we believe the analyses presented in these sections are speculative. It remains to be seen whether or not Japanese technologies will be of value to the United States. No one au yet detailed specific knowledge of the state of See p. 5 and comment 6. development of Japanese phased array radar and composite wing technologies. We believe, therefore, that these sections should be revised to clearly state that assessment of Japanese phased array radar and wing technologies at this point in time is by nature an exercise in speculation. (U) Our final comment is that the draft report does not mention See p. 16 and comment 5. the fact that the U.S. Government will receive a research and development recoupment cost fee. This benefit of the program to the U.S. taxpayer should be referenced in the discussion of program costs and U.S. workshare. (U) We appreciate this opportunity to comment on the draft report. Sincerely, nh UNIIASSIFIED Page 46 GAO/NSL4D-90-77BR U.S.Japan FS-X &development Appendix III Comments From the Department of Commerce The following are GAO’S comments on the letter dated December28, 1989, from the Department of Commerce. 1. Although this section of the draft report was intended to provide a GA(I)Comments historical perspective on the matter, we have revised the languageto clarify and reiterate that coordination among the executive branch agenciesdid occur in early 1989. As we have noted in our report, how- ever, the coordination resulted only after considerable pressure was applied by membersof Congressand executive branch agencies,includ- ing Commerce.The interagency review of the FS-xarrangement was ulti- mately commissionedby the President of the United States. The objectives of the interagency study are discussedin the report. 2. We note that a cooperative relationship now exists between DOD and Commerce. 3. We revised the report to reflect Commerce’srole in reviewing the Del- egation of Disclosure Letter and noted that Commercewill continue to monitor and review technology releaseissues. 4. We have modified the example of how Japaneseengineersmight obtain systems integration experience.If Japan decidesto develop its own digital flight control system, there may be direct commercial appli- cation This is why the U.S. government will withhold source codesand will require the U.S. contractor to develop the data with minimal Japa- neseparticipation. The B-X program will enable Japaneseindustry to buiid and integrate a sophisticated military aircraft. The extent to which specific systems integration skills acquired will be directly absorbed,assimilated, and transferred into commercial aircraft develop- ment is uncertain and impossible to quantify. 5. We have revised the report to reflect that the U.S. government will receive a research and development recoupment fee for each FS-x air- craft manufactured. 6. Our assessmentof the two Japanesetechnologies-composites and phased array radar- is basedon numerous discussionswith U.S. gov- ernment and industry aerospace,structural, design, and electronics engi- neers. We also reviewed documentary evidencethat was available from various US. government and industry sources.This information indi- cates that the United States is ahead of Japan in the development and overall application of these two advancedtechnologies.The potential Page 47 GAO/NSIAD90-77BR U.S.Japan F’SX &development ‘,, , , :., :’ I I * Appendix III Comment9 From the Department of Commerce application and usefulness of these technologieswill be determined once they have been made available to the United States for testing and evaluation. Page 48 GAO/NSIAD-90.77BR U.S.Japan PS-X &development j l i ! ,;I Appeqdix IV 1 : M ’ ‘or Contributors to This Report w Stewart L. Tomlinson, Assistant Director Nationa1 Security and Glen Levis Evaluator _in _Charge International Affairs Blake Ainiworth, Evaluator Division, Washington, Calvin Chin, Evaluator GeorgeSousa,Electronics Engineer Adviser DC. Dr. John Barmby, AerospaceEngineer Adviser Richard Felner, Electronics Engineer Adviser Y (46337783 Page 49 GAO/NSLAD-90.77BR U.S. Japan FS-X Codevelopment -- ” e A - - = -2 -T ,7 -- = E % 7 = - = z : : 2. - = = - ” ‘:- - z = =. r --
U.S.-Japan Codevelopment: Review of the FS-X Program
Published by the Government Accountability Office on 1990-02-06.
Below is a raw (and likely hideous) rendition of the original report. (PDF)