oversight

Defense Acquisitions: Progress in Meeting F-22 Cost and Schedule Goals

Published by the Government Accountability Office on 1999-12-07.

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

                       United States General Accounting Office

GAO                    Testimony
                       Before the Committee on Government Reform,
                       Subcommittee on National Security, Veterans Affairs, and
                       International Relations, House of Representatives


For Release Expected
at 10:00 a.m. EST
Tuesday,
                       DEFENSE ACQUISITIONS
December 7, 1999


                       Progress in Meeting F-22
                       Cost and Schedule Goals
                       Statement for the Record by Louis J. Rodrigues, Director,
                       Defense Acquisitions Issues, National Security and
                       International Affairs Division




GAO/T-NSIAD-00-58
                   Mr. Chairman and Members of the Subcommittee:

                   Thank you for the opportunity to submit this statement for the record. The
                   Subcommittee requested that we provide information on the status of cost
                   and schedule issues of the Air Force’s F-22 aircraft development and
                   procurement program.

                   As directed by the National Defense Authorization Act for Fiscal Year 1998,
                   we reported to the Congress in March 1999 about the extent to which cost,
                   schedule, and performance goals were being met in the F-22 engineering
                   and manufacturing development (EMD) program. 1 That report was
                   supplemented by testimony before the Subcommittee on Airland Forces of
                   the Senate Armed Services Committee in March 1999. 2 This statement
                   summarizes the relevant parts of that report and testimony, describes the
                   congressional actions on the fiscal year 2000 budget request, updates the
                   information we provided to the Congress in March 1999, and discusses Air
                   Force and contractor initiatives to control production costs. Appendix I
                   lists products we have issued that relate to the F-22 program.

                   The National Defense Authorization Act for Fiscal Year 1998 established
                   cost limits for F-22 EMD and production. The act instructed the Secretary
                   of the Air Force to adjust the cost limits for economic inflation and
                   compliance with changes in federal, state, and local laws. In December
                   1999, the cost limits, as adjusted, were $18.880 billion for EMD and
                   $39.759 billion for production. The production cost limit does not specify a
                   quantity of aircraft.



Results in Brief   In March 1999 we reported that it was unlikely the Air Force would be able
                   to keep the F-22 EMD program, as planned, within the cost limit
                   established by the Congress. In addition, we expressed concern about the
                   significant reduction the Air Force had made in the testing it planned to
                   complete before awarding contracts to initiate advance procurement to
                   accelerate F-22 production.



                   1
                     F-22 Aircraft: Issues in Achieving Engineering and Manufacturing Development Goals
                   (GAO/NSIAD-99-55, Mar. 15, 1999).
                   2
                    Defense Acquisitions: Progress of the F-22 and F/A-18E/F Engineering and Manufacturing
                   Development Programs (GAO/T-NSIAD-99-113, Mar.17, 1999).




                   Page 1                                                               GAO/T-NSIAD-00-58
                     Both authorization and appropriations acts for fiscal year 2000 established
                     further congressional direction for the F-22 program. For example, the
                     authorization act required certification by the Secretary of Defense, prior
                     to beginning low-rate initial production, that the EMD test plan is adequate
                     for determining F-22 operational effectiveness and suitability. The
                     appropriations act did not approve the beginning of F-22 low-rate initial
                     production but approved funding for acquisition of additional flight-test
                     aircraft with research, development, test, and evaluation funding.

                     The F-22 program has made progress in manufacturing and testing aircraft.
                     However, there continues to be several important issues regarding the cost
                     of the EMD and production programs and the schedules for completion of
                     EMD activities leading to production of F-22s in higher quantities. For
                     example, preliminary indications from our ongoing review of the EMD
                     program’s status show that, compared to the program’s status in March
                     1999, sufficient cost reductions have not been implemented to ensure that
                     EMD activities, as planned, can be completed within the cost limitation,
                     and completion dates for testing F-22 aircraft may be further delayed. Our
                     evaluation of the Air Force’s progress in meeting cost, schedule, and
                     performance goals is continuing as directed in the National Defense
                     Authorization Act for Fiscal Year 1998. We plan to issue a report to the
                     Congress concerning our current evaluation by March 15, 2000.

                     In 1997, the Air Force indicated that the most probable cost for production
                     of 438 F-22 aircraft would exceed its cost estimate by $13 billion. The Air
                     Force plans to implement initiatives to offset this projected cost increase.
                     As requested by this Subcommittee, we have initiated a review of the Air
                     Force’s and prime contractor’s efforts to reduce production costs.



EMD Program Status   In March 1999, the Air Force estimated it could complete the F-22 EMD
                     program within the congressional cost limit of $18.880 billion. However,
as of March 1999     during 1998, contractor costs had exceeded budgets; in addition, work had
                     not always been completed as scheduled. The Air Force and F-22
                     contractor had identified potential cost growth totaling $667 million. We
                     reported that F-22 EMD costs would rise above the cost limit if this
                     potential cost growth was not addressed. At that time, the Air Force and
                     contractor were developing ways to reduce the costs, such as improving
                     efficiency and deferring or reducing program activities to keep EMD costs
                     within the congressional limit.




                     Page 2                                                     GAO/T-NSIAD-00-58
                         Our March 1999 report and testimony also identified several other issues
                         that could affect the Air Force’s ability to complete the program within the
                         cost limit:

                         • The contractor had notified the Air Force that F-22 program costs could
                           increase further if sales of C-130J aircraft, which are manufactured in
                           the same plant as the F-22, were lower than anticipated because the F-22
                           program would have to absorb a higher than planned share of the plant’s
                           overhead costs.
                         • First flights of the third through the sixth test aircraft were expected to
                           be late, reducing the time available to accomplish flight-tests before
                           planned completion of EMD and potentially requiring extension of EMD.
                         • Development of the F-22’s integrated avionics systems had been delayed
                           and the schedule for completing avionics development appeared
                           unrealistic. If EMD completion were to be extended to complete
                           avionics development, additional costs would be incurred.
                         • Completing static and fatigue tests on the airframe structure had been
                           delayed. Problems identified during these tests could require additions
                           to planned EMD activities.

                         In addition, we reported that the Air Force had substantially reduced the
                         flight-testing hours it had planned to accomplish before awarding
                         production contracts. This would increase the risk of entering production.



Authorization and        For fiscal year 2000, the Air Force requested $1.6 billion for low-rate initial
                         production of six F-22 aircraft. Both authorization and appropriations acts
Appropriations Actions   for fiscal year 2000 established further congressional direction for the F-22
Associated With Fiscal   program. The authorization act required that, before beginning low-rate
                         initial production, the Secretary of Defense must certify that the EMD test
Year 2000 Budget         plan is adequate for determining F-22 operational effectiveness and
Request                  suitability; and that both EMD and production can be executed within the
                         respective cost limits. The appropriations act, among other provisions
                         affecting the F-22 program, did not approve the beginning of F-22 low-rate
                         initial production but approved funding for acquisition of additional flight-
                         test aircraft with research, development, test, and evaluation funding. The
                         appropriations act restricted award of a fully funded contract to begin low-
                         rate initial production until (1) the first flight of an F-22 incorporating block
                         3 avionics software has been conducted; (2) the Secretary of Defense
                         certifies to the congressional defense committees that criteria identified in
                         the act for the award of low-rate initial production have been met; and
                         (3) the Director of Defense Operational Test and Evaluation reports on the



                         Page 3                                                         GAO/T-NSIAD-00-58
                                adequacy of testing to date to measure and predict performance of F-22
                                avionics systems, stealth characteristics, and weapons delivery systems.



Current EMD Program             Before I discuss the current EMD program, I need to point out that the
                                congressional actions on the fiscal year 2000 budget for the F-22 program
Status                          could require changes to the F-22 program that have not, at this time, been
                                fully defined. Accordingly, our comments regarding the program may
                                change as the Air Force and Department of Defense change the program
                                and the relationships between EMD activities and initiation of the
                                production phase of the F-22 program. The F-22 program has made
                                progress in manufacturing and testing aircraft; however, there continues to
                                be several important issues regarding the cost of the EMD and production
                                programs, and the schedules for completion of EMD activities that are
                                intended to lead to production of F-22s in higher quantities. Preliminary
                                indications from our ongoing review of the EMD program’s status are that,
                                compared to the program’s status in March 1999, (1) sufficient cost
                                reductions have not yet been implemented to ensure that EMD activities, as
                                planned, can be completed within the cost limitation; (2) the impact on the
                                F-22 program of lower than planned C-130J sales has not been determined;
                                (3) deliveries of F-22 test aircraft have been further delayed; (4) fiscal year
                                2000 actions by the Congress increased the time available to test F-22s
                                before beginning low-rate initial production; (5) some avionics milestones
                                have been further delayed; (6) the avionics schedule planned by the Air
                                Force still appears to be unrealistic; and (7) completion dates for testing of
                                ground test articles have been further delayed. I will now discuss each of
                                these areas in greater detail.


Mitigation of Identified Cost   According to the Air Force, $536.7 million (about 80 percent) of the
Growth in EMD Program           identified $667 million in F-22 EMD cost growth has been mitigated through
                                implementation of various cost reduction initiatives. These initiatives are
                                designed to reduce costs by improving efficiency and deferring or reducing
                                program activities. However, the cost growth to be mitigated could be
                                larger than previously determined. The Air Force provided us information
                                showing that the potential cost growth may increase. We are reviewing the
                                Air Force’s identification of and plans to mitigate this additional cost
                                growth.




                                Page 4                                                        GAO/T-NSIAD-00-58
Potential Impact if C-130J    Because of the lower than anticipated sales of the C-130J cargo aircraft by
Sales Are Lower Than          Lockheed Martin, the F-22 program may have to absorb a higher share of
                              the Lockheed Martin plant’s overhead costs. Lockheed Martin produces
Planned
                              both the C-130J cargo aircraft and the F-22 aircraft in its Marietta, Georgia,
                              plant. The agreement in effect in March 1999 between Lockheed Martin and
                              the Air Force concerning the distribution of plant overhead costs for both
                              the C-130J and the F-22 program was predicated on the production of 24 to
                              25 C-130J aircraft per year. However, 19 C-130J aircraft were produced in
                              calendar year 1999, and production for calendar years 2000-2003 is
                              estimated at about 17 aircraft per year. Reductions in C-130J aircraft
                              produced could result in higher amounts of overhead costs being absorbed
                              by the F-22 program.


Delays in Delivering Test     The 1997 flight-test plan included about 250 flight-test months.3 In March
Aircraft                      1997, we testified that because of manufacturing problems, several
                              flight-test aircraft would be delivered late, resulting in 16.9 fewer flight-test
                              months available through scheduled completion of EMD. In June 1999, the
                              Air Force acknowledged further delays in the delivery of most of the
                              flight-test aircraft due to continuing wing delivery problems. As a result of
                              the further delay, there are now almost 29 fewer flight-test months
                              available. If the test program were to be extended, the cost of EMD would
                              increase.

                              We are concerned that additional delivery delays may further reduce
                              flight-test months available to complete flight-testing. For example,
                              Lockheed Martin recently reported that wing deliveries may be further
                              delayed. Flight-test time is essential for the program to test and prove
                              specific features of the aircraft as well as to reduce the risk to the
                              government as commitments are made to production.


Congressional Actions         Because of delays in the EMD program, the Air Force substantially reduced
Allow for More Testing Time   the amount of flight-testing planned before beginning production. At the
                              beginning of 1999, the program goal was to complete a total of 519
Prior to Low-rate Initial
                              flight-test hours by the end of 1999. Even though the Air Force is close to
Production                    reaching this goal, as we reported in March 1999, earlier plans scheduled
                              many more flight-test hours for completion by December 1999, which at the


                              3
                                  A flight-test month is one flight-test aircraft available for 1 month.




                              Page 5                                                                       GAO/T-NSIAD-00-58
                               time, was the planned date of the first low-rate initial production contract
                               award. The actions of the Authorization and Appropriations Committees on
                               the fiscal year 2000 budget delayed the beginning of production until
                               certain conditions are met. As a result, more time is available to complete
                               flight-tests, therefore reducing risks before the decision is made to commit
                               to low-rate initial production. As the Air Force makes changes to the F-22
                               program to reflect fiscal year 2000 congressional actions, we will continue
                               evaluating the relationships of EMD, testing, and production commitments.


Avionics Milestones Are        We reported in March 1999 that development of avionics systems for the
Further Delayed                F-22 was behind the schedule established in 1997. Development problems
                               with the communication, navigation and identification system, and, to a
                               lesser extent, the electronic warfare system caused schedule delays and
                               cost growth in avionics development. Because of these problems, the Air
                               Force did not complete the first major avionics segment, known as block 1,
                               until May 1999, 4 months behind schedule. Furthermore, we reported in
                               March 1999 that the first flight of the first avionics test aircraft with block 1
                               avionics was scheduled for February 2000, but this event is now scheduled
                               for May 2000. Flight-testing of the next scheduled avionics segment, known
                               as block 2, is also expected to be delayed.


Avionics Schedule Still        In 1997, an evaluation team concluded that avionics development could
Appears Unrealistic            take more time than planned because of delays in avionics blocks 1, 2, 3,
                               and 3.1. Even though block 1 was completed4 behind schedule and block 2
                               is expected to be completed behind schedule, the current avionics
                               schedule shows blocks 3 and 3.1 avionics being completed 6 and 3 months,
                               respectively, before the completion dates the Air Force and the evaluation
                               team considered realistic in 1997. If blocks 3 and 3.1 take longer than
                               planned to be completed, additional costs will be incurred.


Further Delays in Testing of   Two major tests of F-22 airframe structural integrity continue to be
Ground Test Articles           delayed. These are static testing, designed to ensure the aircraft can
                               withstand flight stresses, and fatigue testing, which involves subjecting the
                               aircraft to the structural stresses expected within its planned life. Static
                               tests have been delayed 12 months and fatigue tests have been delayed

                               4
                                That is, completed to the point it is placed on an EMD aircraft in preparation for flight-
                               testing.




                               Page 6                                                                    GAO/T-NSIAD-00-58
                        14 months. These are longer delays than the Air Force expected in March
                        1999. The following table shows the continuing delays in completing these
                        tests by comparing the schedules in 1997, March 1999, and as of November
                        1999.



                        Table 1: Delayed Completion Dates for Static and Fatigue Testing
                                                                                  Schedule as of
                        Test           1997 schedule       March 1999 schedule    November 1999
                        Static         October 1999        February 2000          October 2000
                        Fatigue        December 1999       September 2000         February 2001




F-22 Production Cost    Concerned about growing costs of the F-22 program, the Assistant
                        Secretary of the Air Force for Acquisition, in June 1996, established a team
Reduction Initiatives   to estimate the most probable costs of the F-22 EMD and production
                        programs. The team estimated, in January 1997, that the production costs
                        for 438 F-22s would increase by $13.1 billion to about $61.2 billion. The
                        team identified cost reduction initiatives that it expected to offset the
                        production cost increase. DOD subsequently reduced the planned
                        procurement quantity to 339 aircraft.

                        On November 23, 1999, this Subcommittee asked us to review the progress
                        the Air Force and the contractors have made in implementing cost
                        reduction initiatives needed to remain within the production cost limit for
                        the program. We have initiated the requested review.


                        This concludes our statement. We appreciate the opportunity to have it
                        placed in the record.


Contact and             For future contacts regarding this statement, please contact Louis J.
Acknowledgments         Rodrigues at (202) 512-4841. Individuals making key contributions to this
                        statement included Marvin Bonner, Todd Brannon, Edward Browning,
                        Leonard Benson, Allen Li, Robert Murphy, and Don Springman.




                        Page 7                                                             GAO/T-NSIAD-00-58
Related GAO Products


                   Fiscal Year 2000 Budget: DOD's Procurement and RDT&E Programs
                   (GAO/NSIAD-99-233R, Sept. 23, 1999).

                   Budget Issues: Budgetary Implications of Selected GAO Work for Fiscal
                   Year 2000 (GAO/NSIAD-99-233R, Apr. 16, 1999).

                   Defense Acquisitions: Progress of the F-22 and F/A-18E/F Engineering and
                   Manufacturing Development Programs (GAO/T-NSIAD-99-113,
                   Mar. 17, 1999).

                   F-22 Aircraft: Issues in Achieving Engineering and Manufacturing
                   Development Goals (GAO/NSIAD-99-55, Mar. 15, 1999).

                   F-22 Aircraft: Progress of the Engineering and Manufacturing Development
                   Program (GAO/T-NSIAD-98-137, Mar. 25, 1998).

                   F-22 Aircraft: Progress in Achieving Engineering and Manufacturing
                   Development Goals (GAO/NSIAD-98-67, Mar. 10, 1998).

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

                   Defense Aircraft Investments: Major Program Commitments Based on
                   Optimistic Budget Projections (GAO/T-NSIAD-97-103, Mar. 5, 1997).

                   F-22 Restructuring (GAO/NSIAD-97-100BR, Feb. 28, 1997).

                   Tactical Aircraft: Concurrency in Development and Production of
                   F-22 Aircraft Should Be Reduced (GAO/NSIAD-95-59, Apr. 19, 1995).

                   Air Force Embedded Computers (GAO/AIMD-94-177R, Sept. 20, 1994).

                   Tactical Aircraft: F-15 Replacement Issues (GAO/T-NSIAD-94-176,
                   May 5, 1994).

                   Tactical Aircraft: F-15 Replacement Is Premature as Currently Planned
                   (GAO/NSIAD-94-118, Mar. 25, 1994).




(707467)   Leter   Page 8                                                     GAO/T-NSIAD-00-58
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