[Senate Hearing 111-823]
[From the U.S. Government Publishing Office]
S. Hrg. 111-823
THE JOINT STRIKE FIGHTER
=======================================================================
HEARING
before the
COMMITTEE ON ARMED SERVICES
UNITED STATES SENATE
ONE HUNDRED ELEVENTH CONGRESS
SECOND SESSION
__________
MARCH 11, 2010
__________
Printed for the use of the Committee on Armed Services
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__________
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COMMITTEE ON ARMED SERVICES
CARL LEVIN, Michigan, Chairman
ROBERT C. BYRD, West Virginia JOHN McCAIN, Arizona
JOSEPH I. LIEBERMAN, Connecticut JAMES M. INHOFE, Oklahoma
JACK REED, Rhode Island JEFF SESSIONS, Alabama
DANIEL K. AKAKA, Hawaii SAXBY CHAMBLISS, Georgia
BILL NELSON, Florida LINDSEY GRAHAM, South Carolina
E. BENJAMIN NELSON, Nebraska JOHN THUNE, South Dakota
EVAN BAYH, Indiana ROGER F. WICKER, Mississippi
JIM WEBB, Virginia GEORGE S. LeMIEUX, Florida
CLAIRE McCASKILL, Missouri SCOTT P. BROWN, Massachusetts
MARK UDALL, Colorado RICHARD BURR, North Carolina
KAY R. HAGAN, North Carolina DAVID VITTER, Louisiana
MARK BEGICH, Alaska SUSAN M. COLLINS, Maine
ROLAND W. BURRIS, Illinois
JEFF BINGAMAN, New Mexico
EDWARD E. KAUFMAN, Delaware
Richard D. DeBobes, Staff Director
Joseph W. Bowab, Republican Staff Director
(ii)
C O N T E N T S
__________
CHRONOLOGICAL LIST OF WITNESSES
The Joint Strike Fighter
march 11, 2010
Page
Carter, Hon. Ashton B.,Under Secretary of Defense for
Acquisition, Technology, and Logistics......................... 6
Fox, Hon. Christine H., Director of Cost Assessment and Program
Evaluation, Department of Defense; Accompanied by Fred Janicki,
Director, Weapon Systems Cost Analysis Division, Cost
Assessment and Program Evaluation, Department of Defense....... 17
Gilmore, Hon. J. Michael, Director of Operational Test and
Evaluation, Department of Defense.............................. 22
Sullivan, Michael, Director of the Acquisition and Sourcing
Management Team, Government Accountability Office.............. 26
(iii)
THE JOINT STRIKE FIGHTER
----------
THURSDAY, MARCH 11, 2010
U.S. Senate,
Committee on Armed Services,
Washington, DC.
The committee met, pursuant to the notice at 11:11 a.m., in
room SR-228, Russell Senate Office Building, Senator Carl Levin
(chairman) presiding.
Committee members present: Senators Levin, Lieberman, Bill
Nelson, McCaskill, McCain, Chambliss, Thune, LeMieux, and
Collins.
Committee staff members present: Richard D. DeBobes, staff
director; and Leah Brewer, nominations and hearings clerk.
Majority staff members present: Creighton Greene,
professional staff member; Gerald J. Leeling, counsel; and
Peter K. Levine, general counsel.
Minority staff members present: Joseph W. Bowab, Republican
staff director; Pablo E. Carrillo, minority investigative
counsel; David M. Morriss, minority counsel; and Christopher J.
Paul, professional staff member.
Staff assistants present: Paul J. Hubbard, Christine G.
Lang, Brian F. Sebold, and Breon N. Wells.
Committee members assistants present: James Tuite,
assistant to Senator Byrd; Christopher Griffin, assistant to
Senator Lieberman; Joel Spangenberg, assistant to Senator
Akaka; Madeline Otto, assistant to Senator Bill Nelson; Patrick
Hayes, assistant to Senator Bayh; Gordon Peterson, assistant to
Senator Webb; Tressa Guenov, assistant to Senator McCaskill;
Roosevelt Barfield, assistant to Senator Burris; Clyde Taylor
IV, assistant to Senator Chambliss; Jason Van Beek, assistant
to Senator Thune; Brian Walsh, assistant to Senator LeMieux;
and Rob Epplin and Molly Wilkerson, assistants to Senator
Collins.
OPENING STATEMENT OF SENATOR CARL LEVIN, CHAIRMAN
Chairman Levin. The committee will come to order for a
hearing on the F-35. I want to just check with you, Secretary
Carter, do you wish to go through your entire opening statement
and, if so, about how long is your opening statement?
Dr. Carter. Mr. Chairman, I'm at your disposal. If I did
give the entire statement, it would take about 10 or 12
minutes. The only reason I mention that is because of the size
of the program and all the different pieces, but I'm at your
disposal.
Chairman Levin. I understand. If you can just keep that
down to 10 minutes, no more, it would be welcomed.
We're now going to shift to the second hearing of the
morning, the F-35 Joint Strike Fighter (JSF) program. First, I
want to thank Senator McCain for suggesting that we have a
hearing on the JSF program promptly, for keeping a focus on
this program so that we can get on top of what the Department
of Defense (DOD) found in various independent reviews of the
JSF program, what actions the DOD has taken to ameliorate
problems that it found with the program, and what is the best
judgment available as to how effective these actions will be in
preventing problems with the program, including cost overruns
and delays.
We have with us today Dr. Ashton Carter, Under Secretary of
Defense for Acquisition, Technology, and Logistics; Christine
Fox, Director of the Office of Cost Assessment and Program
Evaluation (CAPE); Michael Gilmore, Director, Operational Test
and Evaluation (OT&E); General Clyde Moore II, the Air Force
Acting Program Executive Officer for the JSF program; and
Michael Sullivan, Director, Acquisition and Sourcing Management
Team of the U.S. Government Accountability Office (GAO).
So first, let me extend a welcome to our witnesses. We
thank each of you for coming before this committee today.
We had a closed briefing for the committee on the JSF
program in December 2009 in which Secretary Carter and Director
Fox briefed the committee. We discussed the JSF program, the
potential scope of the problems facing the DOD, and some of the
options DOD had for dealing with these problems.
While both Senator McCain and I would have preferred to
have an open hearing at that time, we agreed to hold a closed
briefing mainly because of the sensitive nature of some of the
contractor data that was discussed.
The F-35 JSF program is currently the largest acquisition
program within the DOD's portfolio with an expected acquisition
cost before the recent announced cost growth of nearly $300
billion.
Any perturbation of the cost, schedule, or performance of a
program that intends to buy more than 2,400 aircraft for Air
Force, Navy, and Marine Corps will have significant
implications for the rest of DOD's acquisition programs and for
the DOD budget as a whole.
I would also note that this committee's strong effort on
acquisition reform, which became law on May 22 of last year,
included changes to the acquisition procedures requiring
implementation of the Weapons Systems Acquisition Reform Act
(WSARA), will not be judged positively unless we can
demonstrate some success with the largest of the DOD's
acquisition programs.
Merely to say that the F-35 program started before we
enacted the acquisition reform is not going to be an acceptable
answer if there continues to be major disruptions and cost
overruns in the program. Delays in producing the F-35
developmental aircraft have caused an estimated 13-month slip
in the program for completing the testing.
We have heard estimates that the delay in initial operating
capability in the Air Force could slip by as much as 2 years.
That delay has both cost implications for the F-35 program
itself and cost implications for the Services as they try to
manage their current force structure of legacy aircraft.
We know that Secretary Gates announced that he's asking
that Lockheed Martin and the rest of the F-35 contractor team
share in paying for cost growth in the program. We want to hear
more about the situation and whether this might be a way of
ensuring that contractor teams will be more cautious before
bidding low on future acquisition programs with the hope that
they'll be more than able to make it up at the government's
expense later on down the road in that program.
It's not enough merely to say that the JSF program will
live within its means by shifting production funding to pay for
the increased development costs because delayed deliveries of
aircraft and/or buying fewer aircraft will have a seriously
negative impact on unit procurement costs as well as a
significant effect on our ability to support the current force
structure.
For instance, the Department of the Navy is already facing
a potential shortfall that last year could have totaled some
250 aircraft in the middle of the next decade. A shortfall
that's large enough that if it were realized could cause us to
tie up aircraft carriers at the pier for lack of aircraft to
send with them.
Two years ago the Air Force testified that they could be
facing shortfalls even larger than the Navy's in the 2024
timeframe, with a fighter shortage of as many as 800 aircraft.
Secretary Gates specifically mentioned last year that the
Quadrennial Defense Review (QDR) was going to evaluate fighter
requirements so that could have caused those deficits to change
somewhat.
However, the QDR did not change the force structure
requirements, and even if the DOD were to decide that
requirements should be changed, that is unlikely to erase those
kinds of deficits. We need to understand what some of the
options are that the DOD may be evaluating to deal with those
problems.
Another particularly troubling matter was revealed in some
of the documentation from the various independent reviews of
the JSF program. One observation from the Independent
Manufacturing Review Team (IMRT) Report on the JSF program said
the following: ``Affordability is no longer embraced as a core
pillar.''
Well, that surely raises great concerns not only about the
potential for a Nunn-McCurdy breach now, but for continuing
problems for the JSF program. This committee has been a strong
supporter of the JSF program from the beginning. However,
people should not conclude that we're going to be willing to
continue that strong support without regard to increased costs
coming from poor program management or from a lack of focus on
affordability. We cannot sacrifice other important acquisitions
in the DOD investment portfolio to pay for this capability.
Those are a few issues that this committee will be hearing
more about today. I now call on Senator McCain.
STATEMENT OF SENATOR JOHN McCAIN
Senator McCain. Thank you, Mr. Chairman. I would ask that
my full statement be included in the record and I want to thank
the witnesses. I'll try to be brief.
I've been a strong supporter of this aircraft and this
weapon system, but I'm deeply concerned about the cost overruns
and the problems that have been associated with the JSF.
Could I just remind you that just last August, after
meeting with the program's prime contractor in Texas, Secretary
Gates said that his impression is that, ``most of the high risk
elements associated with JSF's developmental program are
largely behind us,'' and he went on to say that, ``there was a
good deal of confidence on the part of the leadership here that
the manufacturing process, the supply chain, and the issues
associated with all of these have been addressed or are being
addressed.'' That was certainly not the impression that we got
in the closed meeting that we just had in December.
Press reports are saying that the program would need at
least $15 billion more in funding through fiscal year 2015;
that the aircraft test and production would slip by at least 2
years; that the JSF program would most certainly suffer a Nunn-
McCurdy cost breach. The media reports, Mr. Chairman, have been
very stark. Whereas this committee, although our staff has been
briefed from time to time, has certainly not been notified.
Now, according to Secretary Carter's statement, it's a
comprehensive statement, but it should have been the opening
paragraph, I would say, Secretary Carter, this means that the
average price of a JSF aircraft as estimated by the Joint
Estimating Team (JET), the overall cost of the program averaged
over all the years of production divided by the number of
aircraft would be more than 50 percent higher in inflation-
adjusted dollars than it was projected to be back in 2001 when
the program began. Then you go on to say, ``I expect that Air
Force Secretary Donley will formally notify Congress of JSF's
Nunn-McCurdy breach within days.''
I have to tell the witnesses that we have not been kept up
to speed as much as we should have been. It's been very clear
from media reports that there are serious problems, but the
most important thing is, much of this was predicted.
It is so much, Mr. Chairman, in keeping with the cost
overruns that we've had with literally every major weapons
system lately in the last 10 years of cost overruns, being
behind schedule, and the impact that has on the existing legacy
aircraft, the ability to replace them, and the strain. All of
those have been based on certain assumptions that clearly we
are not aware of.
It's a bit frustrating to hear the Secretary of Defense as
short a time ago as last August tell us that everything's okay,
but when we're reading media reports that tell us they are not.
I would respectfully ask, Secretary Carter, that you would
begin your statement by saying how much over cost is this
program going to be and what will be the delay so the American
people will know.
The taxpayers are a little tired of this and I can't say
that I blame them and so I thank you, Mr. Chairman, for holding
this hearing, and I welcome the witnesses.
[The prepared statement of Senator McCain follows:]
Prepared Statement by Senator John McCain
Mr. Chairman, thank you for holding this important hearing on the
F-35 Joint Strike Fighter (JSF) Program.
At an expected total cost of about $1 trillion--almost $300 billion
to buy nearly 2,500 aircraft and another $760 billion for future
operation and support costs--the JSF program is the largest and most
complex acquisition program in the Department of Defense (DOD). Even
more importantly, because the JSF is the next generation fighter-bomber
for the Air Force, Navy, and Marine Corps, it will serve as the
backbone of the tactical combat aircraft fleet that will be used by the
United States and many of our allies for decades to come.
I have been a strong supporter of the DOD and its requests for
funding and accelerated development of the JSF, but I am deeply
concerned about the program's stability. Much of my concern comes from
conflicting information from the DOD and what I see as reluctance by
senior DOD officials to share the real story about the JSF's problems
in a timely manner with Congress so we can make informed decisions.
Last August, after meeting with the program's prime contractor in
Texas, Secretary Gates said that ``[his] impression is that most of the
high-risk elements associated with [JSF's] developmental program are
largely behind us'' and that there was ``a good deal of confidence on
the part of leadership here that the manufacturing process, that the
supply chain, that the issues associated with all of these have been
addressed or are being addressed.''
However, press reports painted a different picture. By July 2009,
the Deputy Secretary of Defense had already directed a second Joint
Estimating Team (JET II) reassessment of the program, which found that
the JSF program would need at least $15 billion more in funding through
fiscal year 2015 and that the aircraft production and test schedule
would slip by at least 2 years. Soon thereafter, the media reported
that another Pentagon-directed review of the program called the
Independent Manufacturing Review Team found that the rate at which the
program planned to ramp-up producing JSFs would likely not be achieved
within the planned timeframe.
Furthermore, Secretary Gates told this committee last month that
the initial operating capability (IOC) dates would not change despite
restructuring and development delays in the program. Within a matter of
days, however, the civilian and military leaders of the Air Force said
that the IOC date for the Air Force would probably slip from 2013 to
2015 and that the JSF program would almost certainly suffer a ``Nunn-
McCurdy'' cost breach that will require recertification of the need for
the program and its affordability.
I am frustrated with the piecemeal, time-late process by which the
DOD has notified the committee of the results of its risk assessments
and the changes it has directed in the program. Learning about these
developments first from press reports rather than from the DOD
frustrates the ability of this committee to exercise proper
congressional oversight and does not serve the program well.
As for the merits of DOD's restructuring of the JSF program, it
appears that the DOD has embraced the major tenets of our acquisition
reform legislation by putting more emphasis on developmental testing,
while slowing aircraft production. Also, the DOD's strategy aims to
turn the JSF program around by assigning a premium to robust systems
engineering and getting reliable and independent cost estimates to
better understand what is driving costs. These, too, are consistent
with the principles of our acquisition reform legislation and are a
move in the right direction. I am also pleased that the DOD intends to
better incentivize contractor performance in this program by
eliminating award fees and that it is taking steps now to ensure that a
fixed-price type contract will be used for the follow-on procurement of
these aircraft.
However, even after all the planned restructuring steps have been
taken, there is still a lot of concurrency built into the current
plan--in other words, we are still trying to design, develop, test, and
build production models of the aircraft on overlapping schedules. So, I
continue to be concerned about the impact on cost and schedule if we
determine during testing that major redesign of this complex aircraft
program is required. I am also concerned that if the Services need to
replace legacy aircraft, they may be forced to accept aircraft for
``initial operating capability'' that don't have the operational combat
capability the JSF program promised--resulting in the need to buy back
capability later through expensive upgrades. Lastly, I'm concerned that
delays in the program will cause real problems with our legacy fighter
aircraft fleet that have been used more than what was planned over the
last 20 years, resulting in the need to extend the service lives of
those old airplanes or retire them without replacement--worsening what
has been described as a ``fighter gap.''
On these and other important issues, I look forward to hearing the
testimony of our witnesses.
Thank you, Mr, Chairman.
Chairman Levin. Thank you, again, Senator McCain, for your
focus on this. It reflects the concerns of every member, surely
most members of this committee and the concerns which we've
talked about in our opening comments, I hope, will be addressed
in the early part of your statement, Secretary Carter, so we
can summarize it and then perhaps expand, if you would, as to
how are you going to deal with these questions and how did we
get to where we're at.
Secretary Carter.
STATEMENT OF HON. ASHTON B. CARTER, UNDER SECRETARY OF DEFENSE
FOR ACQUISITION, TECHNOLOGY, AND LOGISTICS
Dr. Carter. Thank you, Mr. Chairman, Senator. I will give a
very abbreviated version of the statement, but let me just cut
to the chase to follow up on what Senator McCain said.
When we met in December, I described to you that there were
two estimates before the leadership in the DOD of where the
program was going. One provided by the Program Office and the
contractor, another one provided independently by Ms. Fox's
office, the JET estimate stated that there was a wide
discrepancy between those two and that we were trying to
understand why it is we had one picture on the one hand and one
picture on the other hand.
We came to the view and Secretary Gates came to the view
that the JET estimate was credible, was carefully done, and
should be the basis for our budgeting and program planning
going forward and that's the gist of the report I'm going to
give you today. It underlies the disappointing news that there
will be a critical Nunn-McCurdy breach in this, our largest
program.
If there's any kind of silver lining to this story, it is
only this, that as between this story which was optimistic and
the story that I painted last time of the JET estimate. By
addressing the reason for this difference, why you guys say
this and you guys say that, understand better what it is that
is driving poor performance in the program and we have found
some steps, managerial steps that we can take, some have been
described by Secretary Gates, to do better.
Senator McCain mentioned one, which is steps taken to
compress the development program that was stretching and
costing us more money and taking more time than it ought to
have. Those investments, as I think you, Mr. Chairman, noted,
are investments that we don't think the taxpayer ought to
assume solely and so we have asked the contractors to share in
those investments required to get us back on schedule.
By beginning a process of aggressive management of this
program, we're trying to get to a point where the full
consequences of the JET estimate, which as I repeat, are very
credible. That's a world that I believe is a realistic estimate
of where this program is going.
I'd like to do better and I'd like to challenge the
contractors to do better, more jets, faster, cheaper, and in
the statement I'll describe the managerial steps we're trying
to do to take in the development phase, in the ramp-up to full
production, in full production itself, and in sustainment
which, though it's many years in the future, is worth planning
for now to try to do better.
Chairman Levin. Mr. Carter, could I ask again if you could
provide us now with a cost overrun, the amount of cost overrun
and the months of delay you estimate now?
Dr. Carter. Yes, absolutely. The measure of delay that I've
focused on is a good measure of the technical performance of
the program and the slip in the time to completion of
developmental testing.
That is the number I'm sure you've heard which originally
when I first talked to you, we were projecting a 30-month slip.
Now, as a result of these remedial steps that the Secretary
directed there is a 13-month slip in the completion of system
development and demonstration (SDD).
As regards to costs, I think I'm going to ask Ms. Fox,
since she does those estimates, and I assume you're asking
principally about the calculation that drives the Nunn-McCurdy
breach. Which is the unit cost that is the total cost of the
total program as we now project it going forward divided by the
total number of airplanes.
Then secondarily, not to make it more complicated than it
has to be, in every year of ramp-up, that is, as we negotiate
as we are now the Low Rate Initial Production (LRIP) 4
contract, there will be a certain number of aircraft and a
price. As with LRIP 5 next year, with the fiscal year 2011
funding that we are asking you for this year.
In those early years, as the ramp goes up, the order
numbers are smaller. The line is immature and so the unit costs
there are different and obviously higher earlier in the
program. We have both the costs in the early ramp years and
integrated over the entire program.
Since she is the keeper of those estimates, let me ask Ms.
Fox to address that, if I may.
Ms. Fox. Certainly. Senator, the Milestone B 2001 estimated
average procurement unit cost----
Senator McCain. Ms. Fox, could I just ask what was the
original estimate of the cost of the program and the estimate
now? Could we just start with that?
Ms. Fox. Yes, sir.
Senator McCain. Thank you.
Ms. Fox. I'm sorry. I was trying to do that, sir. It was
$50 million per copy in 2002 dollars.
Senator McCain. $50 million?
Ms. Fox. $50 million in 2002 baseline-year dollars. That
was the Milestone B 2001 estimate. The current program
estimate, based on JET II numbers, will be somewhere between
$80 million and $95 million in constant-year 2002 baseline
dollars. We are refining that estimate now. The $80 million at
the bottom----
Senator McCain. This will be the overall. The Air Force is
asking for $205 million for one aircraft in the supplemental
budget request?
Ms. Fox. Sir, I'm sorry, I can't address that.
Senator McCain. All right. Go ahead, I'm sorry.
Dr. Carter. I think I may be able to explain that. That
is----
Chairman Levin. Is that unit costs for the 2,400 planes?
Dr. Carter. That's unit cost but it's again at this early
ramp.
Chairman Levin. Is that the unit cost at a particular ramp
or is that the overall unit cost for the entire production?
Dr. Carter. I think the number Senator McCain was pointing
to was the unit cost in that particular lot which would have
been the LRIP 3 lot.
Chairman Levin. Is that what you were asking for?
Senator McCain. Yes, thank you.
Chairman Levin. Is LRIP 3 the same number of planes?
Dr. Carter. No, the ramp goes up with every--I'm sorry, no.
LRIP 3 is 30 planes.
Chairman Levin. Is that changed from the 2002 estimate, the
number in that segment? Was it 30 planes and 30 planes now or
has that number changed?
Dr. Carter. Absolutely the ramp moved even before today.
Chairman Levin. I'm not talking about that. I'm talking
about the number of planes in that particular segment. In other
words, are you dividing by the same number of planes?
Dr. Carter. She is, yes.
Ms. Fox. For the average unit cost, we're dividing by 2,443
planes and that has been the number we've used since 2002.
Chairman Levin. Okay.
Ms. Fox. The LRIP numbers, I believe, have changed, and I'm
sorry I don't have those.
Senator McCain. I take it because--and I'm sorry, Mr.
Chairman, but I think maybe this could be helpful. I take it
that the reason why that the aircraft is now $205 million in
the supplemental request is because you're looking at the
overall costs which means that the cost of the aircraft will
decrease in later years as you ramp up production.
So the early cost of these aircraft in the first couple
blocks are much, much higher, is that correct?
Dr. Carter. That's absolutely correct.
Senator McCain. Thank you, Mr. Chairman.
Chairman Levin. Do you have a number to compare to the $205
million? What would it have been if those early predictions
held?
Dr. Carter. Not off the top of my head, but I can get you a
number, sir.
[The information referred to follows:]
The Fiscal Year 2011 Overseas Contingency Operations (OCO)
Supplemental request included $205 million for one F-35A Conventional
Take-Off and Landing variant aircraft, to replace an F-15 combat
attrition loss. The $205 million includes the airframe, engine,
electronics, support and training equipment, technical publications and
contractor services required to be procured to support the weapon
system. The requested aircraft would be produced as part of the Low
Rate Initial Production Lot 5, which would be among the first 100
aircraft produced. Aircraft procured early in production necessarily
cost more as the manufacturing process is still maturing and cost moves
down the learning curve.
The Average Procurement Unit Cost (APUC) costs provide a similar
comparison to the costs associated with the fiscal year 2011 OCO
aircraft request, as they include all procurement costs but do not
include facilities or developmental costs. The APUC for the 2,443
aircraft planned to be procured for the U.S. Services is estimated in
the December 2009 F-35 Selected Acquisition Report to be between a
range of $114 million to $134 million in then-year dollars.
The APUC estimate will likely be refined as part of the anticipated
F-35 Nunn-McCurdy review. If the APUC estimate changes, that
information will be provided to Congress with the Nunn-McCurdy
certification results.
Chairman Levin. Good. Why don't you continue then?
Dr. Carter. Okay. I'll just go back to the beginning and
agree with what was said in both of your----
Senator McCain. I'm sorry if I knocked you off script
there.
Dr. Carter. No, not at all.
Senator McCain. I apologize.
Dr. Carter. Getting to the heart is what it's about. I just
wanted to agree this is the DOD's largest acquisition program.
It's obviously immensely important to the DOD. It's going to be
the backbone of our air combat superiority for a long time. At
the same time, however, this committee and Secretary Gates have
emphasized performance in our programs. Not just the necessity
to have them, but that they perform.
As I'll describe in more detail, the JSF program's fallen
short on performance over the last several years and this is
unacceptable. It's unacceptable to the taxpayer, to the
warfighters of the Air Force, the Navy, the Marine Corps, and
all the international partners that are depending on this
aircraft.
We described this situation preliminarily in December when
we met with you and in his presentation of the President's
fiscal year 2011 budget, Secretary Gates described some of the
steps he has taken to restructure the program and notably to
put it on a more realistic schedule and budget.
These are important steps. I will give you more detail
about them today, but I'd also like to emphasize that it's
taken a couple of years for the JSF program to fall behind and
the DOD's going to need to aggressively manage this program
years into the future and particularly in these coming critical
years as it transitions from development and test and into
production.
We're going to be looking for the program, as I know this
committee will, to show progress against a reasonable set of
objectives according to a realistic overall plan and I'll
describe the elements of that plan.
The emphasis must be on restoring a key aspect of this
airplane. When the JSF program was first launched over a decade
ago and you've spoken this word already, Senator McCain, and
that's affordability. You know that we've conducted several
reviews. You and your staffs have those reviews. I won't repeat
what they indicated at this time.
Just to rewind the clock a little bit and remind you that
the very first JET estimate was done in October 2008. At that
time it projected essentially the same thing that this one is
projecting; namely, that the SDD phase of the program is taking
longer and is costing more than was projected. In response to
that October 8 JET estimate, Secretary of Defense Gates added
$476 million in fiscal year 2010 to the SDD program for JSF in
order to hopefully begin the process of catching it up.
What we got in October 2009 was JET II, the second JET
analysis. It was substantially similar to the one of a year
before; namely, it said that the JSF SDD program continues for
a second straight year to take longer than we thought and cost
more than we thought.
It was on the basis of this news 2 years in a row that we
determined that we should have a department-wide in-depth
review of the program to try to get to the bottom of what was
going on and why there was this vast difference between the JET
II estimate and what we were hearing from the Joint Program
Office (JPO) and the contractor at that time.
It was also abundantly clear now that back in October and
November that if the JET estimate were true, as we have come to
believe, that it was credible that the JSF program would be in
critical Nunn-McCurdy breach. So that review started in
November and I had the opportunity to meet with you and give
you some of the results in December.
The Secretary of Defense gave you some of his decisions
based on that review and I'd like to briefly recap them in
three phases. First, the JSF development phase, then the
transition to full-rate production, as one comes up the ramp,
and then the full-rate production itself.
Just to repeat, the JET II forecasted, speaking now to the
development program, a longer by 30 months and more expensive
by $3 billion over the Future Years Defense Program (FYDP)
development phase than the JPO was forecasting last summer.
As I indicated, Secretary Gates determined that the JET II
estimate regarding the development program was credible. He
directed several steps to try to partially restore the SDD
schedule to what it was supposed to be.
He didn't get all the way there but, first, he directed the
procurement of an additional carrier version aircraft to be
used for flight testing. If you have more aircraft for flight
testing, obviously you can get through all the tests you need
to get done faster, so that's just a matter of adding resources
to the test program.
Second, he directed that we take three early production
jets that were planned for operational tests and loan them to
developmental tests, again, with the objective of hastening the
developmental tests.
Third, he directed that the JPO and the contractor add
another software integration line to the program. This was to
prevent a situation in which we compressed, again, the flight
test program but then found that the long pole in the tent was
the delivery of mission systems software. We didn't want to get
into that situation, so we wanted proactively to add to the
software integration capability of the contractor so that that
wouldn't become a limiting factor in the future and the
Secretary of Defense did that.
On that basis the JET Team said now let's look at that
program as restructured by Secretary Gates. Let's go through
the math again and when they did that same methodology, they
found that the slip was 13 months rather than 30 months. So a
13-month slip is better than the 30-month slip but it's not as
good as no slip, but that's as far back as we could get.
Let me just emphasize something I said earlier. It didn't
seem reasonable to the Secretary or to any of us that the
taxpayer should bear the entire cost of this failure of the
program to meet expectations. These additions of additional
aircraft and software integration capability, it seemed that
costs should be shared between us and the contractor and that
is the reason why the Secretary decided to withhold $614
million in award fee from the Lockheed Martin SDD contract.
The second thing I ought to say on this development phase
before getting to the early production, is that while it's a
constructive result of this JET process that we got 30 months
down to 13 months. I just want to emphasize that these are
still estimates and reality gets a vote here. However good we
are and they are very good in Ms. Fox's shop at estimating,
reality gets a vote.
The next 2 years are going to be critical ones, lots of
activity in the JSF program. We have delivery of test aircraft
at Patuxent River Naval Air Station and Edwards Air Force Base,
completion of the analysis of hundreds of test flights and
commencement of flight training at Eglin Air Force Base just
this year.
If we go on to 2011, that is when we'll have the first
short take-off and vertical landing (STOVL) training and sea
trials aboard an actual amphibious ship. The STOVL version is
the Marine Corps version, completion of land-based catapult,
Senator McCain will appreciate this better than I can, but
catapult and arrested landing testing at Lakehurst Naval Air
Station and Patuxent River, release of the Block II software to
flight test which is a critical software-related milestone,
completion of static structural testing of all three of the
variants, and so forth. So both 2010 and 2011 are event-filled
years and as I said reality gets a vote.
The current program plan, now estimated, as revised, stands
up the first training squadron at Eglin in 2011 and delivers
production aircraft to the Marine Corps in 2012, Air Force in
2013, and Navy in 2014. Those are the first delivery of
aircraft. That is not IOC and I want to address, if I may, Mr.
Chairman, IOC simply because there's been so much confusion
surrounding what IOC is in the press.
The IOCs are determined by the Services based on both the
program's performance and how each of the Services define IOC.
Each Service has a somewhat different definition, depending on
what capabilities they intend to have at IOC, their operational
test and training requirements, and the number of aircraft they
require for IOC, and since the restructuring, the Services have
specified these definitions.
At this time, based on the revised JET II schedule for the
end of developmental and operational tests and their
definitions of IOC, the Services are estimating IOCs of 2012
for the Marine Corps and 2016 for the Air Force and Navy.
Let me now speak to the initial production process. The
IMRT Report which my office commissioned was mentioned already.
That report examined this critical transition from development
to full-rate production as one goes up the ramp. The JSF has an
unprecedented amount of concurrency in the program. That is a
period of time in which the development activities are still
continuing and testing even as production begins.
What the IMRT, when it reported back, said in essence that
there were a large number of conditions that would have to be
met for this program to achieve the ramp that was then planned
and they recommended a somewhat flatter and smoother ramp.
That, together with the slip in SDD, means that we are now,
and this is the essence of the CAPE projection for this phase
of the program, expecting a later and somewhat lower production
ramp. Secretary Gates, accordingly, decided to budget to this
revised JET II production ramp and that is why the fiscal year
2011 budget submission forecasts a later, slower ramp.
We are, therefore, budgeting to an independent cost
estimate (ICE). This is consonant with your legislation, the
WSARA; and doing so has three important consequences for this
program.
First, it reduces risk because it reduces concurrency.
Second, the earlier aircraft will be more expensive since
they are produced in smaller annual lots.
Third, this is, just to say it again, an estimate.
Obviously, we would like the program to perform better than
the revised JET II estimate. That's why we're protecting the
option to produce 48 aircraft and not 43 in fiscal year 2011.
This will be determined in negotiations with the contractor
which are ongoing. These negotiations include the transitioning
of the LRIP contracts for JSF to a fixed price at an earlier
date. This is again something this committee in the acquisition
reform legislation emphasized.
Obviously, we think the taxpayer would want us to get more
and cheaper aircraft in those years than the JET II estimates.
So we're going to try to do better in our negotiations with the
contractor than the estimate.
Finally, I'll conclude on this point, we go up the ramp and
then we're in full-rate production. After several years of
LRIP, the program will enter full-rate production and, as was
noted earlier, that's 2,443 American jets and 730 jets for our
international partners.
The JSF program's been approaching the Nunn-McCurdy
threshold for several years and, as I mentioned earlier, it was
obvious back in November that if the JET II estimate was
accepted, then it would, indeed, breach the Nunn-McCurdy
threshold.
Since we do accept and the Secretary accepts the revised
JET II estimate as credible and the basis of our program plan,
the Secretary of the Air Force will inform Congress within days
of a Nunn-McCurdy breach and we will then begin the process of
considering the certification of the JSF program.
I guess the only good thing I can say about it at this
juncture is that what the thorough process called for in the
Nunn-McCurdy legislation, is the very process we began back in
November. We have been acting as though we're in Nunn-McCurdy
breach since we realized back in November that that's probably
where we are going to end up.
We have some of the work behind us and some of that work is
represented in what I'm able to tell you today. Ms. Fox can
describe all the factors that go into the cost growth. There
are a number of them in the airframe, in the engines, in the
materials, and other things. Many factors go into that cost
growth.
Let me just conclude by looking ahead now. Several
management measures are going to be critical over the next few
years and Secretary Gates has elevated the position of JSF
program Executive Officer (PEO) to three-star rank to reflect
this need for experienced and vigorous management.
The JPO, with oversight from the Office of the Secretary of
Defense (OSD), will need to take a number of critical steps in
the next few years and once again I divide them into
development, ramp-up, and addressing Nunn-McCurdy.
In regard to the developmental test program, the lead up to
IOC, it's important to provide the new test assets and software
capability to the development program as directed by Secretary
Gates so that there won't be any further delays.
Second, the contractor must be held to account to meet or
exceed a defined set of milestones connected to earn fee on the
development contract. All those events in 2010 and 2011 that I
named are now on a schedule and they constitute a set of
targets for the program. The remaining fee on the SDD contract
will be tied to the achievement of all of those milestones and
those negotiations are underway.
Finally, the program's going to need to deal promptly with
the issues that arise during flight testing. We're going into
flight testing and experience shows that issues will surface in
flight testing.
With respect to the ramp-up to full-rate production, the
LRIP 4 contract, which covers fiscal year 2011, should provide
for pricing that meets or exceeds the JET II-based plan of 43
aircraft and these negotiations are also underway.
LRIP contracts should transition, as I mentioned earlier,
to a fixed price structure, reflecting the need for the
contractor to control costs and not simply pass them on to the
government.
The Director of Defense Procurement and Acquisition Policy,
who's with me here today, will be conducting a should-cost
analysis in preparation for LRIP 5 so that we, too, on the
government side will have a view on what the aircraft should
cost in LRIP 5 which will be the fiscal year 2012 buy.
In regard to addressing the Nunn-McCurdy cost growth,
affordability must be aggressively and relentlessly pursued by
all three airframe contractors, Lockheed Martin, Northrop
Grumman, BAE Systems, and the F135 engine prime which is Pratt
& Whitney. We will be looking at the cost structure of the JSF
in all its aspects; assembly, part supplies, staffing,
overheads and indirect costs, cash flows, contract structures,
fees, and life cycle costs.
More fundamentally, the program management contractors in
the DOD need to surface candidly and openly issues with this
program as they arise so that we can deal with them
managerially, so that Congress is aware of them and they can be
addressed.
I pledge that we will keep this committee fully and
promptly informed of this program's progress. We will keep our
international partners fully and promptly informed. As I said,
the program will benefit from the fresh eyes and experienced
managerial hand of a three-star PEO.
Military capability of JSF will ensure that this aircraft
will be the backbone of U.S. combat air superiority for the
next generation and, as I stated earlier, the technological
capabilities of the aircraft are sound, but its affordability
must be restored.
Thank you.
[The prepared statement of Dr. Carter follows:]
Prepared Statement by Dr. Ashton B. Carter
Mr. Chairman, Senator McCain, members of the committee: I am
pleased to meet with you and my colleagues to discuss the F-35 Joint
Strike Fighter (JSF) program.
The JSF is the Department of Defense's (DOD) largest acquisition
program, and its importance to our national security is immense. As
Secretary Gates has said publicly, ``we cannot afford, as a nation, not
to have this airplane.'' The JSF will form the backbone of U.S. air
combat superiority for the next generation. It will replace the legacy
tactical fighter fleets of the Air Force, Navy, and Marine Corps with a
dominant, multi-role, fifth-generation aircraft, capable of projecting
U.S. power and deterring potential adversaries. Furthermore, the JSF
will have the capability to effectively perform missions across the
full spectrum of combat operations. For our international partners who
are participating in the program, the JSF will become a linchpin for
future coalition operations and will help to close a crucial capability
gap that will enhance the strength of our security alliances.
At the same time, Secretary Gates has insisted upon performance in
acquisition programs, as has this committee. The JSF program has fallen
short on performance over the past several years. This is unacceptable
to the taxpayer and to the warfighters of the U.S. Air Force, Navy, and
Marine Corps, and to the international partners who also plan to deploy
the JSF. We described this situation to the committee when we met with
you in December 2009.
In his presentation of the President's fiscal year 2011 defense
budget, Secretary Gates described some of the steps he has taken to
restructure the program, and, notably, to put it on a more realistic
schedule and budget. These are important steps, and we will be giving
the committee more detail on them today. But I would like to emphasize
that it has taken a couple of years for the JSF program to fall behind,
and the DOD will need to aggressively manage the program over the
coming critical years as it transitions from development and test into
production. The DOD will be looking to the program, as I know this
committee will, to show progress against a reasonable set of objectives
according to a realistic overall plan. The emphasis must be on
restoring a key aspect of this airplane when the JSF program was first
launched over a decade ago: affordability.
reviews of the jsf program
DOD has conducted several reviews of the JSF program: two Joint
Estimating Team (JET) reviews, an Independent Manufacturing Review Team
(IMRT) review, and a F135 Joint Assessment Team (JAT) review. Let me
clear up something right at the beginning: all of these reviews have
been provided to your staffs.
The Cost Assessment and Program Evaluation (CAPE) office led the
JET I and II reviews. Ms. Fox can describe the documentation and
briefings made available to your staff. Acquisition, Technology, and
Logistics commissioned the IMRT and the JAT.
In October 2008, the JET I estimate projected that the System
Development and Demonstration (SDD) phase of the program would take
longer and cost more than both the JSF Joint Program Office (JPO) and
the contractor were projecting. Based on the JET I estimate, Secretary
Gates directed in October 2008 that $476 million be added to the SDD
program in fiscal year 2010 to mitigate the schedule risk and cost
growth forecast.
In July 2009, Deputy Secretary Lynn directed that a second JET
estimate, JET II, be prepared by October 2009. The JET II estimate was
substantially similar to the JET I estimate. It found that the factors
noted in the JET I estimate in October 2008 had persisted for another
year. These factors were driven by substantially higher contractor
Class 2 change traffic (that is, changes in design not resulting from
changes in requirements or capability), which led to increased
engineering and software staffing, extended manufacturing span times,
and delayed delivery of aircraft to flight test. The overall effect of
these factors, the JET II said, would be a 30-month slip in the
completion of flight test relative to the JPO plan from the summer of
2009.
Additionally, the IMRT review identified a large number of
conditions that would need to be satisfied in order for the production
ramp-up planned at that time by the JPO and the contractor to be
achieved. At about the same time, the JAT review noted substantial cost
growth in the F135 JSF engine program and identified measures to
arrest, and possibly reverse, that cost growth.
None of these reviews discovered fundamental technological or
manufacturing problems with the JSF program, or any change in the
aircraft's projected military capabilities. However, all of these
inputs suggested that a DOD-wide review of the JSF program was
warranted. Further, it was clear that if the JET II estimate was
correct, the JSF program would have a critical Nunn-McCurdy breach.
The review, which began in November 2009, was therefore undertaken
as though JSF was in Nunn-McCurdy breach. I will describe some of the
findings of the review and the management steps taken to date as a
result. Most of the important ones were described by Secretary Gates in
his budget testimony to this committee. They are organized according to
their respective stages in the life of the program: development,
initial production, and full-rate production. I will also describe how
the actions we are taking reflect the DOD's acquisition reform focus,
and the intent of the Weapon Systems Acquisition Reform Act (WSARA)
spearheaded by this committee.
jsf development program
When we met with the committee in December, we described how the
DOD's leadership was presented with two different forecasts about how
the JSF program would unfold in the next few years: one from the JPO
and contractor, and another from the CAPE-led JET II.
The JET II forecasted, among other things, a longer (by 30 months
as measured to the end of developmental flight testing) and more
expensive (by $3 billion over the Future Years Defense Program)
development phase than the JPO. We explained that the DOD was trying to
reconcile these two forecasts.
As part of the budget process, Secretary Gates determined that the
JET II estimate, suitably revised, was the more realistic forecast to
use for budgeting purposes and directed that the program be
restructured around the JET II forecast. The use of this independent
cost estimate (JET II) is consistent with the WSARA of 2009.
Secretary Gates also directed several steps to partially restore
the SDD schedule. First, he directed the procurement of an additional
carrier version aircraft to be used for flight testing. This additional
asset will help complete the required flight tests sooner and more
efficiently. Second, he directed that three early production jets
planned for operational test be loaned to developmental test, adding
further assets to the flight test program. We are still working on the
details of this loan of aircraft to ensure that it does not have an
impact on operational test, as Dr. Gilmore will discuss.
Third, Secretary Gates directed the addition of another software
integration line to the program. This is intended to prevent the
building of the mission systems software from becoming a limiting
factor on the development schedule.
The JET II team estimates that these three steps, taken together,
can restore 17 months to the development schedule; that is, reverse
what would have been a forecasted 30-month delay in the completion of
flight test to 13 months, meaning that it will complete in March 2015.
This revised JET II forecast, then, became the final basis for the
DOD's budget submission.
I would like to emphasize two things about this restructuring of
the development program. First, adding aircraft, software engineering
capability, and other resources to the development program to arrest
the trend identified by the revised JET II forecast costs money. It did
not seem reasonable that the taxpayer should bear the entire cost of
this failure of the program to meet expectations. That is why Secretary
Gates decided to withhold $614 million in fee from the Lockheed Martin
SDD contract.
Second, while recovering 17 of the 30 months of projected
development program timeline stretch is a constructive result of the
JET process's look over the past 2 years of the JSF's performance,
these are estimates, and reality will get a vote. The next 2 years will
be critical ones for JSF, with delivery of test aircraft to Patuxent
River and Edwards AFB, completion and analysis of hundreds of test
flights, and commencement of flight training at Eglin AFB this year,
and a number of key milestones in 2011, including:
Initial Marine Short Take Off and Vertical Landing
(STOVL) sea trials with Navy amphibious assault ship (Landing
Helicopter Dock);
Completion of initial land-based carrier catapult and
arrested landing testing at Lakehurst, NJ and Patuxent River,
MD.
Release of Block 2 software to flight test;
Completion of static structural testing of all three
variants;
Mission training initiated at Eglin AFB with Block 1
software;
Delivery of all LRIP 2 (12 aircraft) and at least 13
of 17 LRIP 3 U.S. and Partner aircraft.
The DOD has challenged the contractor to improve upon the revised
JET II estimate, and they have accepted that challenge. The current
program plan, as revised, stands up the first training squadron at
Eglin AFB in 2011, and delivers operational aircraft to operational
squadrons for the Marine Corps 2012, the Air Force in 2013, and the
Navy in 2014.
One final note regards Initial Operating Capability (IOC). The IOCs
are determined by the Services based on both the program's performance
and how the Services define IOC. Each Service has a somewhat different
definition, depending on what capabilities they intend to have at IOC,
their operational test and training requirements, and the number of
aircraft they require for IOC. Since the restructuring, the Services
have specified these definitions.
At this time, based on the revised JET II schedule for the end of
developmental and operational test, and their definitions of IOC, the
Services are projecting IOCs of 2012 for the Marine Corps, and 2016 for
the Air Force and Navy.
jsf initial production
The IMRT examined the transition from development to production.
For JSF, there is a great deal of ``concurrency,'' meaning that
development activities like flight testing are still going when
production begins. The IMRT identified a large number of conditions
that would have to be satisfied in order for the planned production
ramp to be achieved, and recommended that the program adopt a somewhat
flatter and smoother ramp. The JET II accepted this revised ramp and
then moved it later in time in accordance with the delayed progress of
the development program.
Secretary Gates decided to budget to the revised JET II ramp, and
the fiscal year 2011 budget submission reflects this later, slower
ramp-up to full-rate production for JSF. As mentioned above, budgeting
to this revised JET II estimate is consonant with the WSARA. This
approach has three consequences:
First, it lowers risk by reducing concurrency.
But second, the early aircraft will be more expensive, since they
will be produced in smaller annual lots.
Third, this is--again--an estimate. Obviously we would like the
program to perform better than the revised JET II estimate. That is why
we are protecting the option to produce 48 aircraft, not 43, in fiscal
year 2011. This will be determined in negotiations with the contractor,
which are ongoing. These negotiations include the transitioning of the
LRIP contracts for JSF to fixed price at an earlier date. Obviously we
think the taxpayer would want us to get more and cheaper aircraft than
the JET II estimates.
The pattern here is the same as noted above for development: DOD is
budgeting to the independent cost estimate, but challenging the
contractor to do better than the estimate.
jsf full-rate production and nunn-mccurdy breach
Finally, I would like to address full-rate production and the JSF
program's breach of the critical Nunn-McCurdy threshold for unit cost.
After several years of low-rate initial production (LRIP), JSF will
enter full-rate production and produce 2,443 jets for the U.S. and 730
for international partners.
The JSF program has been approaching the Nunn-McCurdy threshold for
several years. As the DOD began reviewing the program in detail in
November 2009, it became apparent that if the JET II estimate was
right, the cost increases it was projecting, together with other
factors, would cause the JSF program to breach the threshold.
This means that the average price of a JSF aircraft as estimated by
the JET--the overall cost of the program averaged over all the years of
production divided by the number of aircraft--would be more than 50
percent higher (in inflation-adjusted dollars) than it was projected to
be back in 2001 when the program began.
I expect that Air Force Secretary Donley will formally notify
Congress of JSF's Nunn-McCurdy breach within days. The thorough review
of a program required under the Nunn-McCurdy law will be a continuation
of the process begun in November, when the JET II estimate indicated
the shortcomings of the program over the past years.
There are a number of factors contributing to the cost growth
estimate: larger than-planned development costs driven by STOVL variant
weight growth and longer forecasted development schedule; increase in
labor and overhead rates; degradation of airframe commonality; lower
production quantities; increases in commodity prices (particularly
titanium); and major subcontractor cost growth. Ms. Fox will describe
the CAPE's estimate of these costs during her testimony.
the way forward
Mr. Chairman, Senator McCain, and members of the committee, clearly
the JET II and other studies conducted over the past year indicate that
the JSF program fell short of expectations and must be restored to
affordability and a stable schedule.
Looking ahead to the coming years, several management measures will
be critical, and Secretary Gates has elevated the position of the JSF
Program Executive Officer to three-star rank to reflect a need for
experienced, vigorous management. The JPO, with oversight from the
Office of the Secretary of Defense, will need to take a number of
critical steps in three areas:
1. The developmental test program and the lead-up to IOC.
2. The ramp-up to full-rate production; and
3. Addressing the Nunn-McCurdy cost growth.
In regard to the developmental test program and the lead up to IOC:
First, as I noted earlier, it is important to provide the new test
assets and software capabilities to the development program, as
directed by Secretary Gates, so there will not be further delays in the
completion of flight test. Second, the contractor must be held to
account to meet or exceed a defined set of milestones connected to fee
on the development contract. These negotiations are underway. Third,
the program will need to deal promptly with issues that arise during
flight testing--and experience shows there will be such issues.
In regard to the ramp up to full-rate production: the LRIP 4
contract covering fiscal year 2011 should provide for pricing that
meets or exceeds the JET II-based plan of 43 aircraft. These
negotiations are also underway. LRIP contracts should transition to a
fixed-price structure reflecting the need for the contractor to control
costs and not simply pass them on to the DOD. The Director of Defense
Procurement and Acquisition Policy will be conducting a ``should-cost''
analysis to prepare for LRIP 5.
In regard to addressing Nunn-McCurdy cost growth: Affordability
must be aggressively and relentlessly pursued by all three airframe
contractors--Lockheed-Martin, Northrop Grumman, and BAE Systems--and
the F135 engine prime, Pratt & Whitney. As part of our continuing
``should cost'' analysis, we will be looking at the cost structure of
JSF in all its aspects--assembly, parts supplies, staffing, overheads
and indirect costs, cash flows, contract structures, fees, and
lifecycle costs.
More fundamentally, the program management, contractors, and the
DOD need to surface candidly and openly issues with this program as
they arise, so that Congress is aware of them and they can be
addressed. I pledge that we will keep this committee fully and promptly
informed of this program's progress. We will also keep our
international partners fully and promptly informed. The program will
benefit from the fresh eyes and experienced managerial hand of a three-
star Program Executive Officer.
The military capability of JSF will ensure that this aircraft will
be the backbone of U.S. combat air superiority for the next generation
and, as I stated earlier, the technological capabilities of the
aircraft are sound. But its affordability must be restored.
Thank you and I look forward to answering any questions you might
have.
Chairman Levin. Thank you, Secretary Carter. Are there any
other opening statements from any of the other panelists?
Ms. Fox.
STATEMENT OF HON. CHRISTINE H. FOX, DIRECTOR OF COST ASSESSMENT
AND PROGRAM EVALUATION, DEPARTMENT OF DEFENSE; ACCOMPANIED BY
FRED JANICKI, DIRECTOR, WEAPON SYSTEMS COST ANALYSIS DIVISION,
COST ASSESSMENT AND PROGRAM EVALUATION, DEPARTMENT OF DEFENSE
Ms. Fox. Thank you, Mr. Chairman. Mr. Chairman, Senator
McCain, and distinguished members of the committee, thank you
for the opportunity to appear before you to discuss the
analytic basis for the restructuring of the JSF program that
Dr. Carter has just described.
The analysis has been led by the CAPE directorate and the
study team's lead, Fred Janicki, is here with me. Today I
will----
Chairman Levin. Let me interrupt you if I could.
Ms. Fox. Yes, sir.
Chairman Levin. Give us an idea as to how long your opening
statement will be?
Ms. Fox. Less than 5 minutes, sir.
Chairman Levin. Are there any other opening statements?
Ms. Fox. Yes, sir.
Chairman Levin. One other opening?
Dr. Gilmore. Less than 5 minutes.
Chairman Levin. Less than 5 minutes.
Dr. Gilmore. I can do it in a minute if that's what you
want.
Chairman Levin. That would be fine. Is that all right?
If you can boil them down and as I mentioned before, in
terms of the Senators, we're going to call on Senators in the
same order as they arrived for the first hearing, so
everybody's not confused hopefully by the order of recognition.
So, Ms. Fox, please.
Ms. Fox. Let me try to shorten my statement, sir. A couple
things about the ICE process that I would like you to know. We
built, of course, on the methodologies that the CAPE and former
Cost Analysis Improvement Group organization have used for many
years, but for JSF, I think it's important for you to know that
we went one step further and built a team of experts from the
defense tactical aircraft community.
So this review was not done just in CAPE alone, but instead
we involved multi-governmental experts drawn from the Navy, Air
Force, and OSD staffs. The members of that team provided
technical expertise across the areas of air vehicle and mission
systems engineering, test, and cost estimation. So this was
quite an expert team that looked at this.
Dr. Carter has gone through the JET I/JET II history, so I
won't do that again, but I would like to talk about what the
estimate actually means. It is difficult to mathematically
calculate the precise confidence levels associated with ICEs
prepared for major acquisition programs.
Based on the rigor of the methods used in building the
estimate, the strong adherence to the collection, use of
historical cost information, and the review of applied
assumptions, we project that it is about equally likely that
the JET II estimate will prove too low or too high for
execution of the restructured program as described.
I would also like to comment here on the documentation of
the JET II work. Normally, we would document the results of an
ICE, such as JET II, in a written report. In the case of JET
II, however, we pulled the results into a summary-level
briefing as quickly as possible to present to DOD leadership.
That briefing, the same briefing that has been provided to
you, immediately prompted Dr. Carter to create a JSF Task
Force. From that point forward, these same analysts were deeply
engaged in guiding the program restructuring and have not been
given the opportunity to write a report.
I believe that this combination of cost estimation as an
independent activity and then using it to guide the program
restructuring is a direct result of the WSARA legislation and
something new for CAPE to grapple with. We prefer to document
our work in written reports and hope to return to that practice
in the future as we add staff and time permitting.
I was going to briefly summarize the restructuring that Dr.
Carter has already gone through, but in the interest of time,
let me focus just a minute again on the costs, just to be sure
that my answer earlier was clear, if I might.
The program restructuring, based on the JET II cost
estimate and the production rates estimated by the IMRT, will
result in a critical Nunn-McCurdy breach of greater than 50
percent when measured from the original acquisition program
baseline established for the program in 2001.
We have been preparing for this breach ever since the JET
II results became available in October 2009. Even though that
formal declaration has not been made to you, we anticipate it
will be made to you within days and the DOD plans to complete
the recertification review of the restructured program by June
2010.
Let me go over some of these numbers again. In 2001, at the
time of the Milestone B approval for the program, the JSF
average procurement unit cost was projected to be $50.2 million
in constant base-year 2002 dollars. This figure was based on a
total anticipated U.S. procurement of 2,852 JSF aircraft,
including all three variants, Air Force, Navy, Marine Corps.
The number to be procured was revised in August 2002 to
2,443. That number, 2,443, holds to this day. The revision was
in response to Navy/Marine Corps tactical aircraft (TACAIR)
integration. The latest JSF acquisition program baseline, dated
March 2007, projected an average procurement unit cost of $69.2
million in baseline 2002 dollars.
We currently anticipate that that average procurement unit
cost for the restructured program, based on the total still of
2,443 jets, will fall in the range of $80 to $95 million base
year 2002. We are in the process of determining that number and
it will be included in the restructured program in the Nunn-
McCurdy review that has been initiated already.
I would like to focus a minute on the perceptions of the
program that result from the restructuring and make clear to
you that the projected delay in completion of the Developmental
Flight Test Program in our view in CAPE should not be
interpreted as a signal that the JSF program has insurmountable
technical problems. The result of our reviews instead reflect
the program's complexity and the risks remaining in its
development activities.
I know that this is not the goal. However, development
delays such as the ones that JSF is experiencing have been
experienced by other aircraft programs, and these programs
ultimately produced aircraft that are valuable to the DOD.
For example, the C-17 experienced significant development
problems beginning in the late 1980s and continuing through the
1990s. These problems raised questions about cost
effectiveness. In response, DOD restructured the program and
reduced the aircraft order until the problems were resolved in
the mid-1990s.
Similarly, the F-22 program repeatedly failed to meet key
performance, schedule, and cost goals. In response, DOD
restructured the development program and reduced production
aircraft quantities. Ultimately, the contractor was able to
overcome these challenges and produce a capable aircraft.
We are restructuring the JSF program in a very early stage,
and we believe that is consistent with the goals of WSARA. The
ICEs and the results of the IMRT were taken very seriously and
were acted upon by Secretary Gates as soon as we heard about
them. DOD now has a realistic fiscal path and plan for this
important TACAIR program.
Thank you again for the opportunity to appear before you.
[The prepared statement of Ms. Fox follows:]
Prepared Statement by Christine H. Fox
Mr. Chairman, Senator McCain, and distinguished members of the
committee, thank you for the opportunity to appear before you to
discuss the analytic basis for the restructuring of the JSF program.
The analysis has been led by analysts and managers in Cost Assessment
and Program Evaluation (CAPE). Today, I will give you a sense for how
the analysis was conducted, its overall findings, and the implications
for the program going forward.
CAPE conducts independent cost estimates for major weapons systems.
Your Weapons System Acquisition Reform Act recently increased the
responsibility and authority of our organization in the conduct of
these independent cost estimates. Our work is building on the
experience and expertise of the Cost Analysis Improvement Group, who
has been conducting these reviews since 1972. Independent cost
estimates are conducted by using a combination of historical
precedence, results of extensive site visits for all major components
of the program, and the actual performance of that program to date. It
is a careful, painstaking analysis that looks at all aspects of a
program.
For JSF, we went one step further and built a team of experts from
the defense tactical aircraft community. Specifically, the Joint
Estimating Team (JET) was composed of multifunctional government
experts drawn from the Navy, Air Force, and OSD staffs. The members of
the team provided technical expertise across the areas of air vehicle
and mission systems engineering, testing, and cost estimation.
The JET conducted two reviews. The first, JET I, was conducted in
2008. The results of JET I informed the fiscal year 2010 President's
budget. The full cost of development in fiscal year 2010 as predicted
by JET I was submitted in the fiscal year 2010 President's budget. To
inform the 2011 program review and budget submission, the Deputy
Secretary of Defense asked CAPE to lead an update of the original JET
report last summer. This team, JET II, began its review in July 2009.
Given that the aircraft is still in the early stages of flight testing,
the group focused its efforts on examining the resources required by,
and the planned schedule for completing, the System Development and
Demonstration (SDD) phase of the program. Additionally, the team
updated the previous JET estimates of JSF production, fielding, and
support costs. Consistent with the methodologies used in independent
cost estimation, the JET II conducted comprehensive on-site reviews
with the prime contractor and each of the major subcontractors in the
JSF program. Through those discussions, the team obtained detailed
information on the program's progress to date, enabling it to
incorporate the most current information into its cost estimate. The
team compared the data gleaned from these interviews with the
development and production costs and schedules of previous Department
of Defense (DOD) manned tactical fighter aircraft programs. As with any
cost estimate developed in CAPE, our objective was to forecast the
likely path of events going forward, given the capability requirements
and the current status of the program. The JSF cost and schedule
estimates developed by the JET II team are based directly on DOD's
experience in developing and procuring comparable manned tactical
fighter aircraft such as the F-22 and the F-18, adjusted to reflect the
actual costs incurred in the JSF program to date and the program's
projected acquisition schedule.
It is difficult to calculate mathematically the precise confidence
levels associated with CAPE life-cycle cost estimates prepared for
major acquisition programs. Based on the rigor in methods used in
building CAPE estimates, the strong adherence to the collection and use
of historical cost information, and the review of applied assumptions,
we project that it is about equally likely that the JSF joint estimate
will prove too low or too high for execution of the restructured
program as described.
I would like to comment here on the documentation of the JET II
work. Normally, we would document the results of an important
independent cost estimate such as JET II in a written report. In the
case of JET II, however, we pulled the results into a summary level
briefing as quickly as possible to present to DOD leadership. This
briefing, the same briefing that has been provided to your staff,
prompted Dr. Carter to create a JSF Task Force as soon as the JET II
results became available. From that point forward, these same analysts
were deeply engaged in guiding the program restructuring and have not
been given an opportunity to write a report. We prefer to document our
work in written reports and hope to return to that practice for the JSF
program in the future, time-permitting.
The restructuring led by CAPE also considered results of the
Independent Manufacturing Review Team, commissioned by the Under
Secretary of Defense for Acquisition, Technology, and Logistics, and
discussed in Dr. Carter's testimony. In summary, the Independent
Manufacturing Review Team assessed that the rate of production of F-35s
in the Future Years Defense Program (FYDP) years should be slower than
originally planned, and that fewer aircraft should be acquired in the
early years until specific manufacturing processes and management tools
are put in place and demonstrated in the program. Like the JET
estimate, the IMRT ramp is an estimate and we would like the contractor
to exceed that ramp if possible.
Given the results of both JET I and JET II as well as the IMRT, we
found it necessary to significantly restructure the program in the
preparation of the fiscal year 2011 President's Budget request.
Specifically, we:
1. Extended the development phase through completion of
developmental testing to March 2015.
This is a 13-month extension over the contractor's development
schedule plans from Summer, 2009. We included the acquisition of one
additional developmental carrier-based JSF test aircraft, allocated
three additional production aircraft to the JSF development program to
accelerate completion of developmental flight testing, and provided
funding for an additional software development and testing line in the
program. These actions are all necessary to achieve the new March 2015
date for completion of the development testing. The additional cost to
this development phase of the program is $2.8 billion. The contractor
will incur a portion of these additional costs as Dr. Carter described.
2. Delayed an increase in the production ramp.
In accordance with the IMRT recommendations, we reduced the planned
procurement of JSFs by 122 aircraft in the fiscal years 2011-2015 FYDP.
Given the additional time necessary for the development program, this
reduction in aircraft procurement quantities in the FYDP reduces the
number of aircraft delivered prior to completion of testing. The
contractor team will be given the opportunity to exceed this prediction
and produce more aircraft than planned in the restructured program
based on demonstrated progress in implementing and maturing
manufacturing processes, and a demonstrated ability to produce and
deliver JSF aircraft to the government at lower cost.
3. Will declare a critical Nunn-McCurdy breach.
The program restructuring, based on the JET II cost estimate and
the production rates recommended by the IMRT, will result in a critical
Nunn-McCurdy breach of greater than 50 percent when measured from the
original acquisition program baseline established for the JSF program
in 2001. We have been preparing for this breach ever since the JET II
results became available in October 2009. The formal declaration of the
breach to Congress is anticipated by April 1, and DOD plans to complete
certification review of the restructured JSF program by June 2010.
In 2001, at the time of Milestone B approval for the program, the
JSF average procurement unit cost was projected to be $50.2 million in
constant, base-year 2002 dollars. This figure was based on a total
anticipated U.S. procurement of 2,852 JSF aircraft, including all three
variants--for Air Force, Marine Corps, and Navy. The number of aircraft
to be procured was revised in August 2002 to 2,443. This revision was
in response to plans for Navy/Marine Corps tactical aircraft
integration. The latest JSF acquisition program baseline, dated March
2007, projected an average procurement unit cost figure of $69.2
million (budget year 2002 $).
We currently anticipate that average procurement unit cost figure
for the restructured JSF program in the fiscal year 2011 President's
budget, based on a total planned U.S. procurement of 2,443 JSFs,
including all variants, will fall in the range of $80-$95 million (BY
2002 $). DOD is in the process of determining the specific average
procurement unit cost figure to be included in the restructured JSF
program baseline based on the Nunn-McCurdy review process that has
already been initiated in DOD. The specific average procurement unit
cost figure will be determined based on review of the latest program
plans and cost information for those aspects of the program that affect
primarily the years beyond 2015--including requirements for full-rate
production tooling, support equipment, sparing of critical subsystems,
and the effects of high annual procurement and production rates on
efficiencies and costs. The specific APUC figure will be included in
the final JSF Nunn-McCurdy certification package to be delivered to
Congress in early June 2010.
Finally, I would like to focus a minute on the perceptions of the
JSF program that result from this restructuring. The projected delay in
completion of the developmental flight test program should not be
interpreted as a signal that the JSF program has insurmountable
technical problems. The results of our reviews instead reflect the
program's complexity and the risks remaining in its development
activities.
Development delays such as the ones the JSF program is currently
experiencing have been experienced by other aircraft programs. These
programs ultimately produced aircraft that are valuable to the DOD. For
example, the C-17 program experienced significant development problems
beginning in the late 1980s and continuing through the early 1990s.
These problems raised questions about cost effectiveness. In response,
DOD restructured the program and reduced the aircraft order until the
problems were resolved in the mid-1990s. Similarly, the F-22 program
repeatedly failed to meet key performance, schedule, and cost goals
throughout its development program. In response, DOD restructured the
development program and reduced production aircraft. Ultimately, the
contractor was able to overcome these challenges and produce a capable
aircraft.
We believe that the restructuring of the JSF program at this early
stage is consistent with the goals of WSARA. The independent cost
estimates and the results of the IMRT were taken very seriously and
acted upon by Secretary Gates. DOD now has a realistic fiscal plan for
this important tactical aircraft program. Thank you again for the
opportunity to appear before you today.
Chairman Levin. Thank you very much, Ms. Fox. Dr. Gilmore,
you wanted to go next.
Dr. Gilmore. I will make it brief.
Chairman Levin. Thank you.
STATEMENT OF HON. J. MICHAEL GILMORE, DIRECTOR OF OPERATIONAL
TEST AND EVALUATION, DEPARTMENT OF DEFENSE
Dr. Gilmore. Mr. Chairman, Senator McCain, members of the
committee, my primary concern has been assuring that we can
begin operational testing on whatever schedule was
contemplated. Currently, that would be right around January
2015, completed in a reasonable amount of time.
Currently, we'd anticipate completing it in April 2016, and
that the testing can be sufficiently robust to demonstrate that
the Air Force, Navy, and Marine Corps are getting aircraft that
will provide the combat capability they need.
To do that, we'd need to make sure that we have a robust
developmental test program. If we do not have that robust
developmental test program, the problems that should have been
discovered in developmental testing and fixed in developmental
testing will instead be discovered during operational testing
which, unfortunately, has been the case in many of our programs
when they are much more expensive and time consuming to fix.
In that regard, the direction that Secretary Carter has
given to provide additional flight test aircraft, provide
additional resources and time to develop, deliver, and test
software effectively and to account realistically in the
restructured program for the inevitable discovery of problems
during flight test. To provide the additional engineering and
other resources needed to maintain an adequate pace of testing
are just absolutely key. The 13-month schedule extension in the
restructured program is absolutely key, in my view, to having
that robust developmental test program that will enable us to
not discover a bunch of problems at operational testing.
Thank you.
[The prepared statement of Dr. Gilmore follows:]
Prepared Statement by Dr. J. Michael Gilmore
Good morning Mr. Chairman, Senator McCain, and members of the
committee. Thank you for the opportunity to appear before you today to
discuss the Joint Strike Fighter (JSF) program.
In my view, the primary issues in the JSF program have been late
delivery of test aircraft and the failure to adjust to that reality by
building and resourcing realistic system development and test plans, as
well as plans for producing and delivering aircraft. These problems
have increased concurrency between testing and production beyond what
was originally expected and beyond historical precedent. The resultant
delays relative to unrealistic plans and the associated increase in
costs to complete development created the need to restructure the
program, which is in progress. In my fiscal year 2009 Annual Report, I
assessed that completion of Initial Operational Test and Evaluation
(IOT&E) of the most capable combat capability now formally planned (the
so-called Block 3 aircraft) could occur in early to mid-2016, provided
certain changes are made to specific aspects of the program. Key
changes needed include providing sufficient flight test aircraft,
providing the resources and time needed to develop, deliver, and test
effective software, accounting realistically for the inevitable
discovery of problems during flight testing, and providing the
engineering and other resources needed to maintain an adequate pace of
testing. I would like to review the status of these issues as I
understand them today:
Sufficient flight test aircraft. In the past fiscal
year the program failed to meet the planned goals for testing,
primarily due to the late delivery of test aircraft. As of
today, 3 of the 12 previously planned flight test aircraft
operate at one of the government test centers. Expectations at
this time last year were that 10 flight test aircraft would
have begun productive flight test activity by now, with the
final 2 following in the next 90 days. The program office now
projects that all 12 of the previously planned developmental
flight test aircraft will ferry to test centers by February,
2011. More test aircraft, generated from production lots, are
needed to complete Block 3 development. I agree with the
assessment of the Joint Estimating Team that 2 C-model
aircraft, 1 A-model aircraft, and at least 1 B-model aircraft
are needed in addition to the 12 previously planned
developmental test aircraft to complete developmental testing
in March 2015. Using production aircraft as developmental
flight test assets, however, needs to be carefully managed to
assure the original purposes for those aircraft, including
operational test and evaluation, can still be met, either by
returning the borrowed aircraft, or replacing them with other
production aircraft.
Software development and test. The delivery schedules
for the remaining mission systems software Blocks 1, 2, and 3
have recently been extended by more than 1 year each compared
to the plans existing at this time last year. The late delivery
of test aircraft has, so far, masked the effect of delays in
software development. Extending the Cooperative Avionics Test
Bed availability through the end of developmental testing was a
good decision, as the test bed will continue to provide risk
reduction. I understand the contractor has also proposed
creating a new, additional software integration and test line.
Although a lack of software integration and test resources was
not identified previously as a problem by program management,
the new test line will be very useful provided the contractor
has the manpower to operate it and simultaneously accomplish
multiple integration activities. However, the reality is that
flight test of the essential warfighting capabilities has yet
to start. Mission systems flight test in F-35 aircraft begins
when aircraft BF-4, the first of four previously planned
mission systems test aircraft, ferries to a test center. This
is currently planned to occur in May of this year. Only one of
the remaining three previously planned aircraft is expected to
ferry before the end of 2010, with the final two delivering
early in 2011. By mid-2011, flight test is planned to
transition from Block 1 to Block 2 capabilities--this will be
an important point where the program will deal with the
realities of software performance in the first significant
combat capability available. Throughout this testing, the
program needs to assure software is released to flight test
only when it is ready and prepare to cope with the many
problems that will be discovered during flight testing; this
has been the case with all complex programs of this kind.
Realistic Schedules and Sufficient Resources. The
program's ability to maintain an adequate pace of testing is
dependent on how the government and contractors manage several
aspects of the planned verification strategy.
Integration of multiple test venues. The
fundamental test strategy is to integrate multiple test
venues, including the corporate labs and the
Cooperative Avionics Test Bed, while using F-35 flight
test as a ``capstone'' event. Effective orchestration
of these venues and this build-up process is critical
to assure efficient use of flight test sorties. We have
yet to see how the process being put in place will cope
with multiple events for three different variants
operating at two flight test centers. Ultimately, those
responsible for issuing, or rescinding, flight
clearances will need time and resources to examine the
data and, if necessary, request and receive additional
information. This has already been the case with the
Short-Takeoff/Vertical-Landing (STOVL) aircraft testing
being conducted at Patuxent River. The contractor
predicted early last December that full STOVL flight
clearance would be achieved by the end of 2009. That
clearance had not yet been achieved as of March 9,
2010, although we hope it is imminent. The decision
cycle for understanding flight test results and
achieving flight clearance will be under considerable
pressure in the coming months, and will require
continual supervision in order to meet test goals.
Accreditation of models. The testing strategy
puts a high premium on accreditation of the labs and
models that the program plans to use in the build-up to
flight test. As of November 2009, about 40 percent of
the currently-planned model accreditation activities
are planned to complete in 2013 or thereafter. While
this gives the program time to incorporate performance
data from flight tests in the accreditation process, it
also highlights the limited margin available if the
models and labs cannot play the intended role of
limiting flight test sorties to a minimum amount.
Resources at the flight test centers. Flight
test center resources are also a specific area for
continued examination. Adequate spare parts, trained
personnel, and training/mission rehearsal tools are
essential to reaching the eventual pace of flight test
events totaling over 140 per month. While early results
in the area of spare parts usage and availability for
the three aircraft now flying at Patuxent River are
encouraging, managing adequate resources at two flight
test centers after the upcoming test aircraft
deliveries requires considerable focus and early
response as issues arise; again, this has been the case
with other programs of this complexity. A high fidelity
mission simulator located at the primary flight testing
center, which I understand is being considered by the
program office, will also be key to sustaining an
adequate pace of testing.
Margin for discoveries. While it is difficult
to determine what level of additional schedule is
needed for issues yet to be identified, it is important
to acknowledge that this is the reality of testing--we
will discover problems and need to make adjustments.
Engine performance in ground tests, deficiencies in the
flight control surface actuators, and slow progress
towards the first vertical landing are examples that
have already occurred. A more recent example is the
need to modify C-model test aircraft and change the
design of the keel beam area for production aircraft. I
understand the program is now incorporating short
periods of downtime in its revised test plans for
modifying test aircraft based on discovery of problems.
Combined with planning for a realistic number of refly
and regression test sorties, these components of
planning are the margin for discovery. I note that,
while the planned flight testing refly and regression
rates were recently increased by a modest amount, they
remain below historical experience.
I want to briefly mention a system vulnerability issue. The program
office is executing a comprehensive, robust, and fully funded live fire
test plan. However, the program's recent removal of shutoff fuses for
engine fueldraulics lines, coupled with the prior removal of dry bay
fire extinguishers, has increased the likelihood of aircraft combat
losses from ballistic threat-induced fires. F-35 live-fire testing to
date has shown that threat impact into fuel tanks results in sustained
fires. In addition, the F-35 will be more vulnerable to typical non-
combat fires caused by fuel leaks and other system failures without the
fire-suppression systems. At present, only the integrated power plant
bay has a fire suppression system. Though the configuration control
process has approved the program office's request to remove these
safety systems as an acceptable system trade to balance weight, cost,
and risk, I remain concerned regarding the aircraft's vulnerability to
threat-induced and safety-related fires.
In conclusion, establishing realistic plans and adjusting to new
realities revealed through flight test is essential as we move forward
in the JSF program. Restructuring the test program and funding
development consistent with the Joint Estimating Team's analysis are
essential steps being taken now. In my view, the program needs to
adjust continually to balance the pressure to complete testing on
schedule and the need to demonstrate that the combat performance needed
by the Navy, Marines, and Air Force has been achieved. The demonstrated
performance of the aircraft should have the greatest influence on the
decisions and adjustments that need to be made as the program
progresses.
______
[The prepared statement of General Moore follows:]
Prepared Statement by Maj. Gen. C.D. Moore, USAF
Mr. Chairman and distinguished members of the committee, I
appreciate your invitation to present an update on the F-35 Lightning
II Program status.
The F-35 is the Department of Defense's (DOD) largest cooperative
program, with eight other Partner countries participating under
Memorandums of Understanding for System Development and Demonstration
(SDD) and for Production, Sustainment and Follow-on Development. The
eight Partner countries include the United Kingdom, Italy, The
Netherlands, Turkey, Canada, Australia, Denmark, and Norway. In
addition, Israel submitted a Letter of Request in July 2009 for unique
development scope and acquisition of 75 aircraft beginning no earlier
than Low Rate Initial Production (LRIP) 6. Several other Foreign
Military Sales type study efforts continue for other nations outside
the Partnership. Through fiscal year 2010, the eight International
Partners will have provided approximately $4.4 billion of their $4.5
billion commitment to the SDD phase of the program.
The F-35 program has made progress towards providing the Air Force,
Navy and Marines as well as our Partners a stealthy, long-range, multi-
role 5th generation fighter. As a multi-role fighter, the F-35 will
greatly enhance operational capability and tactical flexibility of the
combatant commanders by providing a 5th generation fighter family that
can be deployed from main operating bases, austere bases and aircraft
carriers. The F-35's design incorporates leading edge stealth,
propulsion, mission systems sensors, interoperability and
supportability technology. It is these technologies and capabilities
that will provide the warfighters with a long-range, day-one, strike
fighter that is capable of executing the essential missions of
Strategic and Tactical Suppression/Destruction of Enemy Air Defenses,
Strategic Attack, Interdiction, Offensive and Defensive Counter Air,
Tactical Intelligence, Surveillance and Reconnaissance and Close Air
Support.
The F-35 is in its ninth year of the SDD phase. The program
continues technical progress focused on developing and delivering a
phased block implementation of software-intensive mission systems
capabilities. Technical risks are understood and being addressed. All
variants are projected to meet their respective key performance
parameters. The program has issued procurement contracts for three lots
of LRIP aircraft and will commence LRIP 4 negotiations soon. We have
experienced manufacturing delays in completing the developmental test
aircraft; however, the metrics indicate the production line is maturing
and we expect deliveries to recover to contractual schedule by LRIP 3
completion in late 2011. We also expect to start training operations at
Eglin Air Force Base in late 2010 with LRIP 1 aircraft.
Along with many important accomplishments, the program has
experienced challenges and disappointments in the transition from
development to production. Development program shortfalls, notably late
delivery of aircraft to flight test and related test schedule delays,
drove the program restructure announced last month. Key aspects of the
restructure include: extending the development test schedule to March
2015 and moving Milestone C (Full-Rate Production) to April 2016,
commensurate with completion of Initial Operational Test and
Evaluation; extending LRIP production further; adding one incrementally
funded carrier variant to the SDD program in order to expand
development testing capacity; expanding JSF software integration
capability by adding an additional software integration line; utilizing
three LRIP aircraft in support of development testing; fully funding
the SDD program to the OSD Joint Estimating Team's (JET) estimate; and
lowering the planned procurement quantity profile through 2015. The
remaining fee pool on the SDD air system prime contract will be
converted to a performance incentive construct. The new fee construct
will establish a balanced and objective incentive structure based on
the contractor's performance in attaining milestone schedule events and
cost targets. It is important to note that the DOD did not uncover any
technology or manufacturing show-stoppers in its review, and did not
descope performance requirements during the restructure process.
I'm confident and optimistic in the wake of the restructure--
technical progress remains sound based on all key indicators, and I
believe the added time and resources will alleviate schedule pressures
that have been building for the past few years. The program's near-term
focus will be refinement of the restructure to include establishing a
revised flight test schedule, negotiating over target baselines with
the prime contractors, and incentivizing them to meet their commitments
below target costs.
A snapshot of technical progress follows:
SDD airframe and vehicle systems design is 100 percent
complete.
Five SDD jets have flown a total of 216 hours over 160
flights through March 8, 2010.
Fifteen of the 19 ground and flight test articles have
completed fabrication and been delivered from the factory to
final assembly or the test team at Fort Worth, and all SDD
aircraft will be ferried to their respective test centers
inside the coming year. In total, 43 SDD and LRIP aircraft
(including 3 International Partner LRIP jets) are completed or
in-work. We await Defense Acquisition Board approval for LRIP 4
full funding this spring.
Approximately 82 percent (15.4M lines of code) of all
F-35 software is coded. The first SDD aircraft (AA-1) with its
Block 0.1 configuration has more code than was developed for
the F-22 during its SDD phase. We have completed the
qualification testing for the avionics and flight systems
components for the three variants, and are 63 percent complete
with the full life durability testing of those components.
Systems integration testing continues on plan via the flying
test beds, a Cooperative Avionics Test Bed, and extensive
ground-lab testing, with over 150,000 hours of ground-lab
testing completed to date. Those facilities, part of the large
upfront investment in F-35 design and development, are reducing
risk faster than any previous legacy program at the same point.
Specifically:
All variants are within the 3 percent weight growth
projection.
BG-1, the STOVL structural test article, has completed
test faster than legacy systems with only one minor finding.
AG-1, the conventional take-off and landing structural
test article began testing 31 July 2009 and is now 76 percent
complete with no problems discovered to date.
The full-scale pole model has completed testing with
no issues, and has verified the accuracy of the F-35 signature
predictions and indicated satisfactory margin to the key
performance parameter for signature.
Software productivity has surpassed expectations
according to all measures including the JET's assessment, and
is demonstrating orders of magnitude better software stability
at equivalent points compared to legacy programs.
The F135 engine development program has completed over
13,000 ground test hours and has flown without incident over
160 times. The prior third-turbine blade failure has been
effectively addressed as have other lesser significant test
findings. In addition, we are executing the F136 engine
development program in accordance with appropriated funding
while recognizing that DOD does not intend to continue the
development next year. The F136 pre-SDD engines have completed
over 500 hours of test to reduce risk on their design; the
first two SDD engines, while experiencing some test problems
last year, have now completed 114 hours of test and advanced
the knowledge of their design.
There is no doubt that the initial SDD jets have taken longer to
build and ferry to the test centers than originally planned. I believe,
however, the prime contractor teams have improved their manufacturing
processes and are poised to demonstrate stable and efficient
production, a robust design, a highly reliable and sustainable system,
and most importantly, an extremely lethal and survivable 5th generation
fighter.
Joint development of the F-35 is providing the Services and
coalition partners with an affordable weapon system that meets the
needs of the warfighters. Analyses show F-35 will exceed legacy
capability before delivery of our final software spiral.
Thank you again for this opportunity to appear today. I am looking
forward to working with you on behalf of the entire F-35 team and more
importantly, our ultimate customer, the F-35 warfighter.
Chairman Levin. Thank you very much.
Mr. Sullivan.
STATEMENT OF MICHAEL SULLIVAN, DIRECTOR OF THE ACQUISITION AND
SOURCING MANAGEMENT TEAM, GOVERNMENT ACCOUNTABILITY OFFICE
Mr. Sullivan. Thank you. I'll be very brief, as well.
GAO has looked at the restructuring efforts that DOD has
undertaken and we think they do go a long way to getting at
what the problems are.
However, we still believe there's substantial overlap
across development, test, and production activities and there's
still significant risk on the program. Slowed by late aircraft
deliveries, technical problems, and low productivity, the
flight test program, for example, only completed 10 percent of
the sorties that they had planned for in 2009.
The problem that we see with the aircraft now is not
necessarily technological in nature and it's not necessarily
unknowns, if you will, but it's about manufacturing the
aircraft. The estimates that they had for the time and the
manpower it would take to manufacture the aircraft were very
optimistic.
I think the JET analysis is finally getting the actuals
that they have in the program now are finally beginning to
appear more--I think the cost and schedule estimate is now a
lot more reasonable.
I will just throw one metric out. Back when they started
engineering and manufacturing development in 2001, I think that
they were estimating somewhere around a million labor hours to
complete the development program and manufacture aircraft and
the estimate is well over 2 million labor hours today. So
that's one example of what's happened on this program.
The flight test program is still nascent, it hasn't really
begun and once that begins, there's going to be more design
changes. There will probably be more delays as a result of
that.
So just to summarize, I think that the JET Team got as
realistic as they can get at this time. However, there's still
a lot of risks in the manufacturing of development aircraft.
One other thing I think that's important is that the DOD did
take more aircraft out of the near-term years which we think is
a way to mitigate risk. However, they're still going to be
purchasing about 300 procurement aircraft before they're done
with development tests.
[The prepared statement of Mr. Sullivan follows:]
Prepared Statement by Michael Sullivan
Mr. Chairman and members of the committee:
Thank you for the opportunity to discuss our work on the F-35
Lightning II, also known as the Joint Strike Fighter (JSF). The JSF is
the Department of Defense's (DOD) most costly and ambitious aircraft
acquisition. DOD is seeking to simultaneously develop and field three
aircraft variants for the Air Force, Navy, Marine Corps, and eight
international partners. The JSF program is to provide critical
replacement aircraft that will serve as the heart of future tactical
air forces. It will require a long-term commitment to very large annual
funding outlays. The current estimated investment is $323 billion to
develop and procure 2,457 aircraft.
Through March 2009, GAO has issued five annual reviews of the JSF
program under congressional mandate.\1\ We have consistently reported
on the elevated risk of poor program outcomes from the substantial
overlap of development, test, and production activities and our
concerns about the Government investing in large numbers of production
aircraft before variant designs are proven and performance verified in
testing. In our March 2009 report,\2\ we again noted development cost
increases, additional delays in manufacturing and testing schedules,
and the government's increased financial risk from plans to increase
procurement in advance of testing. DOD concurred with, but has not yet
implemented, our two recommendations to report on plans for
transitioning from cost-reimbursement to fixed-price contracts for
aircraft procurement and to ensure that the prime contractor performs
detailed schedule risk analyses to provide important insight into use
of management reserve funds and manufacturing progress.
---------------------------------------------------------------------------
\1\ Ronald W. Reagan National Defense Authorization Act for Fiscal
Year 2005, Pub. L. No. 108-375, Sec. 213 (2004).
\2\ GAO, Joint Strike Fighter: Accelerating Procurement before
Completing Development Increases the Government's Financial Risk, GAO-
09-303 (Washington, DC: Mar. 12, 2009).
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This testimony is based on our sixth annual review, which will be
released later this month. GAO's work for this report began under a
request from the Chairman and Ranking Member of the House Armed
Services Air and Land Subcommittee. Subsequently, we received a new
mandate in the National Defense Authorization Act for Fiscal Year 2010
to annually review the JSF program through 2015.\3\ We examined: (1)
program cost, schedule, and performance; (2) manufacturing plans and
results; and (3) test plans and progress. To conduct this work, we
tracked and compared current cost and schedule estimates with those of
prior years, identified changes, and determined causes. We obtained
program status reports, manufacturing data, and test planning
documents. We conducted our own analyses of the information. We
discussed results to date and future plans to complete JSF development
and move further into procurement with DOD, JSF, and contractor
officials. We conducted this performance audit from May 2009 to March
2010. Our work was performed in accordance with generally accepted
government auditing standards. Those standards require that we plan and
perform the audit to obtain sufficient, appropriate evidence to provide
a reasonable basis for our findings and conclusions based on our audit
objectives. We believe that the evidence obtained provides a reasonable
basis for our findings and conclusions based on our audit objectives.
---------------------------------------------------------------------------
\3\ National Defense Authorization Act for Fiscal Year 2010, Pub.
L. No. 111-84 Sec. 244 (2009).
---------------------------------------------------------------------------
In brief, Mr. Chairman, our work has found that, although the
department has recently directed a number of strong actions that should
improve JSF program outcomes in the future, development costs have
continued to increase and key events were missed. Although improving,
manufacturing inefficiencies and parts problems persist, slowing
delivery of test aircraft and, in turn, delaying development flight
tests. DOD's restructuring actions should help, but there is still
substantial overlap of development, test, and production activities
while DOD continues to push ahead and invest in large quantities of
production aircraft far ahead of completing testing. In light of these
circumstances, we are recommending in our forthcoming JSF report that
DOD: (1) make a new, comprehensive and independent assessment of the
costs and schedule to complete the program, including military
construction, JSF-related expenses in other budgets, and life cycle
costs; and (2) reassess warfighter requirements and, if necessary,
defer some capabilities to future increments. GAO will also suggest
that Congress consider requiring that DOD establish a management tool
for tying annual procurement requests to demonstrated progress in
testing and manufacturing. The report is currently at DOD for comment
which we expect to receive soon.
cost increases and schedule delays increase risk of not meeting
warfighter requirements on time
The JSF program continues to struggle with increased costs and
slowed progress--negative outcomes that were foreseeable as events have
unfolded over several years. Total estimated acquisition costs have
increased $46 billion and development extended 2\1/2\ years, compared
to the program baseline approved in 2007. DOD is now taking some
positive steps that, if effectively implemented, should improve
outcomes and provide more realistic cost and schedule estimates.
Officials increased time and funding for system development, added 4
aircraft to the flight test program, and reduced near-term procurement
quantities by 122 aircraft. Restructuring is not done and further cost
growth and schedule extensions are likely. There is a substantial risk
that the program will not deliver the expected number of aircraft and
required capabilities on time. Dates for achieving initial operational
capabilities may have to be extended or some requirements deferred to
future upgrades. Also, aircraft unit costs will likely exceed the
thresholds established by the statutory provision commonly referred to
as Nunn-McCurdy \4\ and require the Department to certify the need for
the JSF to Congress. Program setbacks in costs, deliveries, and
performance directly impact modernization plans and retirement
schedules of the legacy aircraft the JSF is slated to replace.
---------------------------------------------------------------------------
\4\ 10 U.S.C. Sec. 2433 establishes the requirement for DOD to
perform unit cost reports on major defense acquisition programs or
designated major defense subprograms. If a program exceeds cost growth
thresholds specified in the law, this is known as a Nunn-McCurdy
breach. DOD is required to report breaches to Congress and, in certain
circumstances, DOD must reassess the need for the program and submit a
certification to Congress in order to continue with acquisition.
---------------------------------------------------------------------------
Table 1 summarizes changes in program cost, quantities, and
schedules at key stages of acquisition. The 2004 replan estimates
reflect a quantity reduction and a major restructuring of the program
after integration efforts and design review identified significant
weight problems. The 2007 data is the current approved acquisition
baseline and the 2011 budget request reflects cost increases stemming
from a major reassessment of the program by a joint team comprised of
OSD, Air Force, and Navy representatives.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Table 2 shows the extension of major milestone dates for completing
key acquisition activities. The February 2010 restructure reflects the
direction ordered by the Secretary in an acquisition decision
memorandum issued on February 24 and revised on March 3. Completing
system development and approving full-rate production is now expected
in April 2016, about 2\1/2\ years later than planned in the acquisition
program baseline approved in 2007.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
manufacturing and engineering challenges continue to slow aircraft
deliveries and hold the production schedule at risk
Manufacturing JSF test aircraft continues to take more time, money,
and effort than budgeted. By December 2009, only 4 of 13 test aircraft
had been delivered and total labor hours to build the aircraft had
increased more than 50 percent above earlier estimates. Late deliveries
hamper the development flight test program and affect work on
production aircraft, even as plans proceed to significantly ramp-up
annual procurement rates. Some improvement is noted, but continuing
manufacturing inefficiencies, parts problems, and engineering technical
changes indicate that design and production processes may lack the
maturity needed to efficiently produce aircraft at planned rates. An
independent manufacturing review team determined that the planned
production ramp rate was unachievable absent significant improvements.
While the restructuring has reduced near-term procurement, annual
aircraft quantities are still substantial. In addition, the program is
procuring a substantial number of low rate production (LRIP) aircraft
using cost-reimbursement contracts, a contract type that places most of
the cost risk on the government.\5\ Continued use of cost reimbursement
contracts beyond initial LRIP quantities indicate that uncertainties in
contract performance exist that do not permit costs to be estimated
with sufficient accuracy for the contractor to assume the risk under a
fixed-price contract. Figure 1 compares labor hour estimates for test
aircraft in 2007 and the revised manufacturing plan in 2009.
---------------------------------------------------------------------------
\5\ According to the Federal Acquisition Regulation, this contract
type is suitable for use only when uncertainties in contract
performance do not permit costs to be estimated with sufficient
accuracy to use a fixed-price contract. Federal Acquisition Regulation
Sec. 16.301-2.
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[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
little progress in development testing while program continues to face
technical challenges
Although DOD's restructuring actions should help, there is still
substantial overlap of development, test, and production activities
while DOD continues to push ahead and invest in large quantities of
production aircraft before variant designs are proven and system
performance verified. Given the extended development time and reduced
near-term procurement, DOD still intends to procure up to 307 aircraft
at an estimated cost of $58.2 billion before completing development
flight testing by the beginning of fiscal year 2015 (see figure 2). At
the same time, progress on flight testing is behind schedule--slowed by
late aircraft deliveries and low productivity, the flight test program
completed only 10 percent of the sorties planned during 2009. Other
technical challenges include: (1) relying on an extensive but largely
unproven and unaccredited network of ground test laboratories and
simulation models to evaluate system performance; (2) developing and
integrating very large and complex software requirements; and (3)
maturing several critical technologies essential to meet operational
performance and logistical support requirements. Collectively, testing
and technical challenges will likely add more costs and time to
development, slowing delivery of capabilities to warfighters and
hampering start up of pilot and maintainer training and initial
operational testing.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
concluding remarks
The JSF is DOD's largest and most complex acquisition program and a
linchpin of the United States and its allies' long-term plans to
modernize tactical air forces. It will require exceptional levels of
funding for a sustained period through 2034, competing against other
defense and non-defense priorities for the federal discretionary
dollar. DOD leadership has taken some recent positive steps that, if
effectively implemented, should improve outcomes and provide for a more
realistic, executable program. However, we believe additional steps are
needed to ensure the JSF program is able to meet warfighter
expectations. To date, the Department does not have a full,
comprehensive cost estimate for completing the program. Credible cost
and schedule estimates are critical because they allow DOD management
to make sound trade-off decisions against competing demands and allow
Congress to perform oversight and to hold DOD accountable. Because of
the significance that the JSF is expected to have on the future of the
tactical aircraft fleet, the services should have a high degree of
confidence in their ability to meet their initial operational
capability requirements and to acquire JSFs in quantity so that DOD can
plan its overall tactical aircraft force structure strategy. However,
the Department has not defined what are reasonable expectations for
achieving initial operational capabilities for each of the services
given the substantial changes to the program already experienced and
future changes directed by the recent restructuring.
Finally, while the Department has reduced near-term procurement
quantities, there is still substantial overlap of development, test,
and production activities now stretching into 2016. Constant program
changes and turbulence have made it difficult to accurately and
confidently measure progress and maturity of the aircraft system. The
program has often fallen short of expectations in regards to its annual
plans. Tying annual investments more directly to demonstrated progress
in developing, testing, and manufacturing aircraft may be a prudent
fiscal measure for ensuring government funds are invested wisely.
In light of these circumstances, we are recommending in our
forthcoming JSF report that DOD: (1) make a new, comprehensive and
independent assessment of the costs and schedule to complete the
program, including military construction, JSF-related expenses in other
budgets, and life cycle costs; and (2) reassess warfighter requirements
and, if necessary, defer some capabilities to future increments. GAO
may also have a matter for congressional consideration to address some
of the issues raised in this testimony.
Mr. Chairman, this completes my prepared statement. I would be
pleased to respond to any questions you or other members of the
committee may have.
For further information on this statement, please contact Michael
Sullivan at (202) 512-4841 or [email protected]. Contact points for our
Office of Congressional Relations and Public Affairs may be found on
the last page of this statement. Individuals making key contributions
to this statement are Bruce Fairbairn, Ridge Bowman, Charlie Shivers,
David Adams, Lindsay Taylor, W. Kendal Roberts, Matt Lea, and Greg
Campbell.
Chairman Levin. Thank you very much, Mr. Sullivan. Let's
try an 8-minute first round and I'll yield to Senator McCain.
Senator McCain. I thank you, Mr. Chairman, and I appreciate
it.
Very briefly, Ms. Fox, you give as examples of success the
C-17 and the F-22. Both of them had significant cost overruns,
but you also mention that they resulted in decreased production
numbers.
Do you anticipate the same thing to happen with the JSF?
Ms. Fox. Sir, I'm not trying to suggest that we're going to
decrease production.
Senator McCain. You suggested that they were successful
programs and both of them resulted in less numbers produced and
higher unit costs.
Ms. Fox. Yes, sir, absolutely. The only comparison was that
the program is not based on a technical problem. Those programs
looked very troubled in the same stages and they developed
capable aircraft in the end game.
Senator McCain. They developed capable aircraft, Ms. Fox,
but with incredibly high costs, far higher than initial
estimates which is one of the reasons why we've been as engaged
as we have. I'm astonished you would use that as some kind of
success story because they overcame technical problems but the
unit costs almost doubled or more, is that right, Mr. Sullivan?
Mr. Sullivan. Well, I----
Senator McCain. Of the F-22 and C-17 and the delays were
enormous.
Mr. Sullivan. Yes, sir.
Senator McCain. So you know, I don't get it.
Ms. Fox. Sorry, sir. I was not trying to suggest that this
is the goal. In fact, I tried to say the cost is clearly a
tremendous problem and I believe that the costs that we have
estimated are as realistic as we can be and are trying to put
that forward for everyone to look at. It's merely that the JSF
program is producing technically capable aircraft.
Senator McCain. If you follow the example of the F-22 and
the C-17, the units' numbers produced go down and the unit
costs continues way up.
Mr. Sullivan, you indicated in your remarks that basically
this reduction in official timeline to 17 months versus the 30-
month delay savings is fraught with risk, is that correct?
Mr. Sullivan. Yes. What the GAO has looked at is that
there's still incredible risk in just manufacturing the
aircraft and in having a test program that really hasn't
started yet.
Senator McCain. Basically what we're doing here to reduce
this delay is putting aircraft out into operational mode
without having completed the originally planned testing and
evaluation, is that correct?
Mr. Sullivan. I think as they ramp up, as I said, they'll
have procured about 300 aircraft, even given the restructuring
here, before they've completed developmental flight testing. So
to us, that's still significant risk in the program.
This is a mitigated risk, I think, because they added--the
other thing they did was they added test assets. So they'll be
able to burn down the test points, the tasks, probably a little
bit faster but still very risky.
Senator McCain. Could I just again go through this cost
thing, you're asking $205 million for one strike fighter in the
additional budget request, yet we're alleging that the cost
will be $80 to $90 million per copy.
Isn't it a bit elusive to say that when clearly in the
first couple of blocks the costs will be very high and the
examples that Ms. Fox just stated, we will purchase less than
we had originally planned. Easily these unit costs could not be
at $85 or $90 million, they would be dramatically higher, if
precedent holds true here?
Mr. Sullivan. I would argue that they really don't know yet
because one good indicator of that at this point is that
they're still operating under cost-plus contracts to procure
these aircraft. That means that the contractor's not willing to
commit to a unit price at this time.
Senator McCain. I wonder, Secretary Carter, when the
contractor is willing to submit a unit cost?
Dr. Carter. It's a good question and a good indicator of
how--of the contractor's own estimation of the stability of the
line and we're in discussions about that. Not later than LRIP 5
will I require a fixed price.
Senator McCain. How long will that be?
Dr. Carter. That will be next year. So you're right. Up
until now, the LRIP contracts have been cost-plus. I think it's
time, and good discipline suggests, that we transition the LRIP
contracts to fixed price.
That puts a burden, obviously, on the manufacturer to
control costs and to be able to know what these unit costs are
because then if they overrun, it's on their budget, not on our
budget, which is the whole point of fixed-price contracting at
this stage. It's the healthy thing to do.
Senator McCain. I thank the chairman for allowing me this
time.
General Moore, you're confident in the plans that have been
described to this committee, that you're going to buy 2,400
planes and then some and that the unit costs will not increase
further, and you will have the OT&E successfully completed
while the aircraft are in an operational mode without having to
go back and retrofit it rather significantly and expensively?
General Moore. Senator, if I can take on those questions.
First of all, for the unit cost. I am confident as the program
manager that we will be able to do better based on those cost
estimates. That's what I've been challenged to do by the DOD
and I intend to do so.
Senator McCain. You're confident we will buy this number?
General Moore. I'm sorry, sir?
Senator McCain. You're confident we will buy this number of
aircraft?
General Moore. I'm confident that we'll be able to continue
reducing the costs, as we've projected, as we negotiate the
future contracts as we're doing right now with LRIP 4.
Senator McCain. You're confident there will be no further
delays?
General Moore. I'm confident that, given the schedule
that's been laid out, that we now have reasonable margin to
deliver the full capability of the aircraft within the schedule
and within the budget that's been allocated.
Senator McCain. I thank the witnesses and I thank you, Mr.
Chairman, for holding this hearing. Obviously we have a lot of
monitoring to do and I am very grateful that you held this
hearing. I think it's been very helpful and I would like to
submit follow- up questions to the witnesses.
Chairman Levin. Thank you. We will keep the record open for
your questions and questions of other Senators. Let me begin my
questioning with looking backward in time.
What caused these huge errors in these estimates? These are
60 to 90 percent increases. These breaches are 50 percent plus
and that, of course, triggers Nunn-McCurdy, but there's more
than 50 percent increases. They're somewhere between 60 and 90
percent increases.
How do we deter this? Who's accountable for that? Whose
mistakes are those and who's paying a price?
Dr. Carter. If I may, let me do some of the diagnosis first
and then the treatment. In the development phase--what's
basically been going on for the past couple years is that when
it comes time to put the pieces together down in Fort Worth, on
occasion they don't quite fit together.
That's because when they were designed, the matchup wasn't
done just right and all of this is perfectly normal and that
leads to what I refer to in here as the Class 2 change traffic,
meaning that the pieces, the design of the pieces has to be
changed.
You're not changing the capabilities of the aircraft in any
way. You're just trying to make the thing fit together. There
has been a lot of change traffic on the line. Every time----
Chairman Levin. I don't know what that means, ``change
traffic on the line.''
Dr. Carter. I'm sorry, it just means----
Chairman Levin. You're changing the design, the
requirements?
Dr. Carter. Changing the design of the pieces so that they
fit together and then it takes engineers to do those changes.
It takes time to do those changes. Everybody else waits around
while those changes are made. So it introduces inefficiency on
the line. It may seem mundane, but this is the kind of thing
that has driven the slow delivery of aircraft to test and----
Chairman Levin. I'm not talking about slow delivery. I'm
talking about these huge cost overruns here.
Dr. Carter. I'm sorry. Then I was going to get to the
second part.
Chairman Levin. Since March 2007, it's gone up from 15 to
35 percent. In other words, in 2007 it was about $70 million a
copy in 2002 constant dollars, now it's $80 to $95 million. So
it's gone up from $10 to $25 million estimate constant dollars
in the last 3 years.
Dr. Carter. Yes.
Chairman Levin. Is that still your----
Dr. Carter. Yes, yes, that's right.
Chairman Levin. Are you satisfied with that?
Dr. Carter. I'm not satisfied with it, but the--I'm sorry.
You were asking then the contributory causes to the unit cost
growth in the aircraft and there again, there are several of
those.
First, and very significantly was the larger than planned
development costs for the STOVL version because of the weight
growth in that variant. That occurred several years ago, and
the longer than forecasted development schedule which I've
already described, increase in labor and overhead rates, and
degradation of airframe commonality.
Chairman Levin. Increase in labor and overhead rates, now
weren't they foreseeable?
Dr. Carter. They were not foreseen.
Chairman Levin. No, I said were they foreseeable?
Was there a buy-in here? Is this a historic, traditional
buy-in that someone bids low, gets a huge contract, and then we
pay the price down the line? Is that what's going on here?
Dr. Carter. That has certainly been something that's
occurred in the past.
Chairman Levin. No, in this one?
Dr. Carter. It may have been the case with this one.
Chairman Levin. On this one, Secretary Carter.
Dr. Carter. It's a pattern that would match that but I
can't speak to that in this instance.
Chairman Levin. Who's going to determine whether that's
true and what action will we take against people who bought it
in?
Dr. Carter. For this program, we're going to aggressively
manage from this point forward. For new programs we're going to
follow the instructions you gave us in the WSARA and do
independent cost estimating from the very beginning.
So when the program starts out there isn't an opportunity
for buy-out, buy-in because Ms. Fox's organization has already
done the cost estimate. But we are where we are in the JSF
program and from where we are now we need to try to wrestle
these costs down.
Chairman Levin. Now there was great concurrency that you
made reference to in this program and that means that there's
great risks. That concurrency, I gather, has been somewhat
reduced by the sloping, reduced by the number of--I believe the
other way was that what we're going to have more planes that
are going to be tested.
Dr. Carter. Correct.
Chairman Levin. But in any event, let me ask you, Dr.
Gilmore, is the level of concurrency now have acceptable risk?
Dr. Gilmore. The level of the concurrency, I think, is
still unprecedented in these kinds of programs. We'll have
bought, even with the reduction and the production ramp, more
aircraft here at a given point in time since the beginning of
flight testing than we did, for example, in the F-16 program
where we bought a couple thousand aircraft. So I would demure
on judging whether the amount of concurrency----
Chairman Levin. Who's going to give us the judgment if not
you?
Dr. Gilmore. I think that's up to the Defense Acquisition
Executive and the Secretary. I'm the evaluator of the
capability of the aircraft and I know I'm passing the buck
but--I think I have to, otherwise I won't be viewed as
objective.
Chairman Levin. That's okay. All right. Is the level of
concurrency acceptable here, Secretary Carter, and why?
Dr. Carter. The level of concurrency is unprecedented. It
is reduced as a result of these actions. We are judging that
the schedule that we're giving you is realistic, it's not
optimistic. I think Ms. Fox has emphasized this is not the
worst case estimate. This is the 50 percent estimate on her
part.
I don't want to leave anybody with the wrong impression.
The concurrency that remains in the program, though less, is
worrying and has to be managed. The theory of the case here, a
perfectly reasonable one in general, was that we have gotten to
the point now in modeling and simulation that we should be able
to confidently enter production before we have completed
testing fully.
That's the theory of the case that's been with the JSF
program from the very beginning, unprecedented. We have found
that in some respects that aspiration, so far in the program
has not always been achieved. That's why we're trying to take
some of the aggressiveness out of the program at this point,
but it's still aggressive. As I said earlier, reality will have
a vote here and----
Chairman Levin. Yes, but you shorten the development period
without--it seems to me that if anything, that increases the
concurrency, it doesn't usually decrease it. You knew how much
modeling and simulation was going to be going on in this
program right from the beginning I assume. Why isn't the
shortening of that development period, that 30 months to 13
months, why isn't that an increase in the concurrency level?
Dr. Carter. The reduction from 30 to 13 months, it just
means doing exactly the same testing that we were going to do
in 30 months in 13 months. That's good.
Chairman Levin. So the number of tests----
Dr. Carter. The number of test points is the same. One
progresses through them more rapidly because you have more
tester sources.
Chairman Levin. I guess Senator Thune is next according to
my list.
Senator Thune. Thank you, Mr. Chairman. Secretary Carter, I
support the F-35 and the program. I believe it's an extremely
important program and that we have to do everything that we can
to prevent or mitigate the so-called fighter gap that we have
coming at us in the not too distant future.
I'm very concerned about these development delays and
potential reductions in the number of aircraft that are planned
for the program. I'm consistently told by my South Dakota Air
National Guard constituents that their F-16s aren't going to
last forever. So I want to do everything I can to have the F-35
program reach full-rate production with its fully designed
combat capability as soon as is reasonably possible.
The question is, when do you see actually having full
strength squadrons of training jets for the various training
wings? When do you realistically foresee this program actually
reaching full-rate production?
Dr. Carter. I don't want to speak for the Services who will
determine where, how, when, and if they actually field their
aircraft. From the program's point of view, for the Air Force
we will begin delivering aircraft to the Air Force in 2013. As
I mentioned, the Air Force's current intention based upon the
revised schedule is to go to IOC in 2016.
Senator Thune. Okay.
Dr. Carter. That is with the full capability that they
always intended which is now the mission systems capability
embodied in the Block III software. But that capability and
after completion of OT&E, that's how they are defining IOC in
the Air Force.
Senator Thune. There's been a lot said and will be said
about the effect of the JSF on the Air Force. It's sometimes
easier to forget, though, the importance and what it means to
the Navy and Marine Corps.
The JSF represents the future of both the Navy and Marine
Corps strike fighter force. We know about the significant
delays and cost overruns. But there are recent news reports
that also indicate an increase in aircraft operating costs once
they're finally delivered.
In fact, there was a recent article in Defense News that
stated that, ``each flight hour flown by Navy and Marine Corps
versions of the F-35 will cost about $31,000 in 2029 compared
with about $19,000 per flight hour for the Services, the
current F/A-18 Hornets and the Harriers.''
Admiral Roughead at a recent Navy Association's annual
symposium was quoted as saying, ``we must ensure that we do not
deliver an unaffordable fleet to the next generation of leaders
less they burn us in effigy at this dinner 20 years from now.''
At the same time Lockheed Martin is claiming that support costs
for the F-35 will be significantly lower than those for the F-
16, F/A-18, and the AV-8B.
Can you set the record straight about what you really
expect the operating costs to be compared to current fighters?
Will DOD be able to afford those operations and maintenance
costs in the future?
Dr. Carter. I can't as I sit here right now because I--you
are pointing to, for the sustainment costs the same kind of
discrepancy that I was describing for the development costs
that we have. I know Naval Air Systems Command has done an
estimate of the total ownership cost of the F-35 and then there
is a contractor and JPO estimate and what I--these are for the
out years. So it seems in the distant future.
But what we do now will determine how much we pay then and
we owe it to the taxpayer then to control those costs. CAPE,
and Ms. Fox may wish to speak to this, is having the same ICE
done now for the sustainment phase as we've done and are doing
for the production phase, the ramp-up to production and then
development phase.
So I cannot give you an answer now. I hope to give you a
credible answer in the future. That's a lot of money out there
to maintain a fleet even as it costs a lot of money to make the
fleet in the first place. We owe it to you to control those
costs.
Senator Thune. Ms. Fox, do you have anything to add to
that?
Ms. Fox. Yes, sir. I would just like to add that an
assessment of operations and support (O&S) will be part of the
certification review we'll do for the Nunn-McCurdy. We will
have as good an estimate as possible for you as soon as we've
finished that.
Senator Thune. Okay, thanks. Over the past several years
the trend I've noticed is that these increasing costs of
procurement along with an increased timeline in obtaining a lot
of these systems. This isn't a unique phenomenon to the JSF. It
inevitably causes an increase in costs and thereby reduces the
number of items we can buy. This year, like any other, we have
substantial procurement initiatives including the JSF and a new
tanker for example.
My question is, and this is the broader, bigger picture. It
obviously pertains to the JSF but other procurement programs as
well, and that is, what steps is the DOD taking in order to
control costs on these systems and increase numbers of units
versus the increasing costs and decreasing numbers of the
weapons systems that it procures?
Dr. Carter. Good question and two answers to it. You are
rightly speaking about what we are doing in acquisition reform
at the back end of programs. You know we have a lot of good
practice and that was the principle intent of the WSARA, to
help us start programs better so they don't get into trouble.
We have what we have now, our portfolio of programs, what are
we doing to make sure that they deliver. JSF is a perfectly
good example. We're past the beginning point now in many ways
of JSF.
Senator Thune. Right.
Dr. Carter. We are looking very carefully now and very
aggressively at the cost structure of our programs, the
contract structure as between cost-plus and fixed-price. I
mentioned earlier our overheads and indirects. All the ways
that we can squeeze 2 percent here and 3 percent there and 4
percent there, and pretty soon you're talking about a very
serious amount of money. So management acuity and
relentlessness in the middle part of the programs is very
important.
Finally, there's a form of acquisition reform that
Secretary Gates has emphasized also, which is the discipline to
stop doing things that we have enough of or that aren't working
or that are single purpose capabilities. This year we'll be
proposing to end some programs and that's always a difficult
thing to do.
Every time we can stop buying something we don't need it
frees up money for exactly what you say, more money for the
things that we do need. More units of a program that is
performing well and that we could buy more of.
So acquisition reform has to go across the whole spectrum,
not just at the birthing of programs but right through and into
having the discipline to stop doing something when it's time to
stop doing something.
Senator Thune. It just seems like this has become a
recurring theme and a recurring story. It's unfortunate that if
you have programs that are coming in way over budget and that
you don't need, we shouldn't be funding them.
At the same time, you hate to not fund programs because
other programs are so far over budget and these increasing
costs and over runs and delays, it seems like your acquisition
process is in desperate need of a new model.
I wanted to make that observation for the record and raise
that question with you. So thank you. Thank you, Mr. Chairman.
Chairman Levin. Thank you, Senator.
Senator Lieberman.
Senator Lieberman. Thanks, Mr. Chairman. Thanks to the
witnesses. I apologize that I had a couple of other meetings
that I've been running back and forth from. But I think I have
the drift of the testimony.
Secretary Carter, I wanted to ask you first a question that
is probably simple but I think essential which is, what will
the $2.8 billion increase in the JSF programs budget bring
total SDD costs to? What degree of confidence do you now have
in that estimate for total SDD costs by the April 2016
completion date you've set?
Dr. Carter. Senator, I'm going to ask General Moore, do you
have that number?
General Moore. The total cost in this will be $50 billion,
for the total SDD cost.
Senator Lieberman. The total cost will be $50 billion.
That's by that April 2016 date that we're talking about?
General Moore. Yes, sir.
Senator Lieberman. Okay, thank you.
Dr. Carter. Just to be clear General Moore is talking about
the total cost from the beginning of the program all the way to
the end of SDD.
Senator Lieberman. Right.
Dr. Carter. The $2.8 billion is in addition to the program
relative to what was projected over the FYDP, sorry about the
technicality----
Senator Lieberman. That's okay.
Dr. Carter.--but just reconciling----
Senator Lieberman. I understand and I thank you for that
clarification.
Second, as you all know very well, alongside the consensus
of support there has been for the JSF here in Congress, there
is a subpart that has been much in conflict and that is the
question of whether there's an alternative engine built. It
looks like we're going to have that conflict again this time.
I want to make a general statement and ask some questions.
Which is, that this conflict and the idea of building an
alternate engine and the costs associated with it, it seems to
me gets more exacerbated or at least the argument against the
alternate engine gets stronger because of the cost increases in
the overall program.
Ms. Fox, I'm going to quote from the information memorandum
that you did on this question a short while ago: ``The
Department has not funded an alternate engine for the JSF
program since 2007 because in the Department's view a second
engine is unnecessary and too costly. This position is most
recently reflected in the fiscal year 2011 President's budget
submission which once again does not include funding for the
JSF F136 alternate engine. The Department's position is based
in part on updated analyses which continue to show that the
business case for a JSF alternate engine is not compelling and
that the alternate engine program would require a significant
DOD investment of additional resources within the FYDP.''
Later on in the report you say CAPE analysis shows that it
would require a DOD investment of $2.9 billion over the next
years to get the alternate engine in position for competition.
Incidentally, that is set alongside the estimate of your
predecessor in 2007 who said that the alternate engine would
require another $1.2 billion at that point in development
funding before it was ready to compete.
In the 3 years since then we have spent $1.3 billion on the
alternate engine and now you're estimating an additional $2.9
billion in the coming FYDP. So have I got that all right?
Ms. Fox. Yes, sir, you do. There's a few changes. First of
all, in apples to apples, assuming competition in 2014----
Senator Lieberman. Right.
Ms. Fox.--when you account for the additional funds
Congress has given, we now estimate that it's at a break-even
point for cost in terms of the long-term procurement of a
second engine.
But the initial investment that would be required, and now
we project with the restructured program, that competition
would move to 2017. So I'm sorry for the difference in dates.
But to account for that, that additional investment is
necessary not only to complete the development program for the
alternate engine but also to fund the component improvement
program you would need to maintain the engine's currency.
You would need to perform directed buys from the engine's
primary and second sources to prepare for a competition. You'd
have to procure tooling, support equipment, and spares. That's
all in the $2.9 billion.
Senator Lieberman. That's all in the $2.9 billion?
Ms. Fox. Yes, sir.
Senator Lieberman. When Admiral Roughead was before the
committee a couple of weeks ago, he said he had real space
concerns; what would be necessary to employ the back-up and
support for the alternate engine for the Navy and Marine Corps.
Okay, I want to end with a broader question to you
Secretary Carter, and maybe it's been touched on. But just to
give you a chance to talk more generally.
Obviously you served in the DOD before you were in this
position. We have continued to be troubled, hounded,
frustrated, and infuriated by the fact that these systems that
we need so much are costing so much more than we expect, hoped,
estimated, let alone arrive late.
Forgive this question, but to the best of your ability what
the heck is going on? In other words, is this happening
because, as some of us think, probably conventionally,
simplistically speaking that we ought to be moving along the
spectrum much more toward fixed-price contracts from cost-plus?
Is it happening because DOD and we are accepting estimates,
initial estimates of a cost of programs that are simply not
realistic? At this point, in this round of your service, what's
your explanation of what's happening? Because I know you want
very much to stop it from happening.
Dr. Carter. It is pervasive. Secretary Gates says about
acquisition reform, there's no silver bullet, I wish there
were. It is pervasive. We've always had problems with the
acquisition reform system as long as I've been associated with
it.
I think there are two things that are critically important
to attend to now. One is, that it seems to me that the last
decade of double digit year-on-year growth in the Defense
budget, which has been terrific in lots of ways for DOD in
terms of being able to buy more capability and enhance our
military capabilities, has also engendered, and this is human
nature, an erosion of discipline.
It's been easy to solve problems with money. You see that
in programs where they slip a little bit, throw a little bit
more money, a technological problem, throw a little bit more
money in. We need to be much more vigilant about how we use
money to solve our problems.
You know Einstein said his work was 90 percent perspiration
and 10 percent inspiration as opposed to an acquisition
executive's is 99 percent perspiration and 1 percent
inspiration. You just have to keep hammering away at these
things and be disciplined and be willing to say as Ms. Fox's
organization does, ``hey, wait a minute, this doesn't look
right.''
I don't mean to sound too abstract about it but we have to
have good people. In the last 10 or 15 years, and this has been
widely reported and documented, the acquisition cadre in both
the civilian side and uniformed side has been allowed to
dwindle away and our workforce is older than it ought to be.
Nothing wrong with that, they're experienced but older
people at some point leave the DOD and then what do we have. So
I'm trying to pay a lot of attention to drawing into service
the people we need, the program managers, the cost estimators,
the engineers, the systems engineers, and so forth that will
make the system better. Then there are all the changes to the
system itself, including those that were included in the WSARA
legislation.
I guess what I was going to say is, you can have the best
system in the world and if it's not populated by the right
people and you don't have the discipline to recognize and
surface problems when they arise and try to address them, you
can have milestones, landmarks, this kind of independent
estimate, that kind of independent estimate, and you're not
going to get anywhere. We're trying to just do the blocking and
tackling that delivers value to the taxpayer.
Senator Lieberman. I appreciate that answer. I think it was
important and candid and the obvious reality in terms of the
mentality that you solve every real problem with more money is
that with the enormous deficits and long-term debt the country
is running, we're just coming to a point where the broad
consensus in support of defense spending is going to begin to
break or at least be under real pressure that's going to deny
the kind of funding that's been available.
I'm fearful up until now and so the work that you're doing
is really critically important. Of course every dollar you save
is a dollar that might be spent for instance on additional
personnel which I think we still need.
So anyway, my time's up. I thank you very much.
Chairman Levin. Thank you, Senator Lieberman. Since we
claim Thomas Edison as a son of Michigan, the perspiration/
inspiration comment we claim and believe it was Edison's not
Einstein's.
Dr. Carter. I'm sorry, I'm sure you're right.
Chairman Levin. Senator Chambliss.
Senator Chambliss. Thank you, Mr. Chairman. Secretary
Carter, as I hear you talk about the average age of the
workforce in the acquisition department, and I think about the
average age of the U.S. Senate, we're both headed in that
direction, I guess.
Chairman Levin. That's off the record by the way.
[Laughter.]
Senator Chambliss. We're all dealing with experience, Mr.
Chairman.
Chairman Levin. That's on the record. [Laughter.]
Senator Chambliss. Mr. Sullivan, your statement relative to
the cost of this airplane being unknown is not new. You've
testified to that effect over and over particularly last year
as we were going through the defense authorization process as
well as the appropriation process, and with the ongoing debate
over the F-22.
You noted in your written statement that DOD does not have
a full comprehensive cost estimate for completing the program.
You validated that statement again today and in fact, in April
of last year you made a statement on National Public Radio (aka
NPR) that when all is said and done that the price of the
nearly 2,500 F-35s could approach $140 million for each plane.
Do you still stand by that statement?
Mr. Sullivan. Frankly, right now, I don't remember having
said that. I'm not sure what you're referring to.
Senator Chambliss. Okay.
Mr. Sullivan. But at any rate, no, I don't think that
sounds right.
Senator Chambliss. Okay, would you concur with the JET's
estimate that Ms. Fox alluded to, relative to the plane in 2001
dollars, I believe, Ms. Fox, you said.
Ms. Fox. 2002, sir.
Senator Chambliss. 2002 dollars would be in the range of
$80 million. Is that a fair statement in your opinion?
Mr. Sullivan. Right now, I have numbers here that are then-
years. So I don't--it would be apples to oranges. But the
average procurement unit cost that we've calculated is about
$112 million.
Senator Chambliss. Okay, well that----
Mr. Sullivan. So that would be----
Senator Chambliss. You've answered my question because that
was going to be my point. When we talk about today's dollar----
Mr. Sullivan. Right.
Senator Chambliss.--we're looking at somewhere $112
million, and that's an average cost?
Mr. Sullivan. Yes.
Senator Chambliss. That's assuming that the perfect storm
occurs and that every timeline is met and the test phase is
conducted within the times that we've talked about here.
Finally then, Mr. Sullivan, let me ask you about this
timeline of reducing 30 months of testing down to 13 months.
This is a very sophisticated airplane, we know that. You've had
experience with other weapons systems at the DOD. Do you know
of any other weapons system that has been able to reduce its
testing time from 30 months down to 13 months?
Mr. Sullivan. Just to qualify that a little bit, it's an
increase to an existing plan. The way that they came about
that--the pull back was by adding new assets.
Senator Chambliss. So actually it's an increase----
Mr. Sullivan. --not increase----
Senator Chambliss. --it seems relatively optimistic to me
though.
I think it will be a challenge for them especially given
this aircraft is laden with software. I think that's going to
be one of the long poles in the tent.
Dr. Gilmore. Senator, could I just observe in that regard?
Senator Chambliss. Sure.
Dr. Gilmore. The total testing program is not going to span
in excess of 60 months. The question was, whether we would
extend from 53 months, which had been planned as of about a
year ago to 80 months versus expand from 50 months to over 60
months. 60 months is in line with past experience in these
kinds of complex programs. I hope that clarifies what the
duration of the testing program is going to be.
Senator Chambliss. Right, I understand that. Dr. Carter, in
your written statement you state that the current IOC dates for
the Marine Corps and the F-35 is 2012. The Navy is 2016, the
Air Force 2016, is that correct? Dr. Carter, that's a 2-year
delay for the Navy and a 3-year delay for the Air Force over
what was advertised only a month ago, isn't that right?
Dr. Carter. If you're referring to testimony given, I'm not
quite sure what the baseline is. It certainly is an increase
over what you--what I'm saying today is an increase over what
you've heard in the past because the Services have taken the
revised JET II estimate as the most realistic plan we can give
them for when we'll deliver them jets.
Then they have done their separate things with respect to
defining IOC. So they have adjusted their IOC dates in
accordance with the change in the program. So I'm sure it's
different from what has been said before.
Senator Chambliss. Why did it take OSD over a year to
validate the JET report of October 2008?
Dr. Carter. There were actually two separate JET reports,
both of them valid now, I think.
Senator Chambliss. Both of them were basically the same,
they reached the same conclusion.
Dr. Carter. Exactly, what made the second one, although it
had the similar content, more serious, Senator, was that it was
a year later. So the problems noted in the fall of 2008 had
continued into the fall of 2009. It was reporting essentially
the same dynamic going on on the assembly line but since it
came a year later it was saying that this has been going on not
just for 1 year, which is what DOD knew in October 2008, but 2
years.
Two years is much more serious than 1 year. Same content
but a year later you're still getting the same news, you really
need to be more worried than you were earlier.
Senator Chambliss. When did you become aware of the 2008
JET report?
Dr. Carter. Shortly after I got into office which was a few
months before--it was around the same time that the Deputy
Secretary of Defense ordered up a new JET estimate recognizing
that the 2008 estimate was serious. Bill Lynn, the Deputy
Secretary of Defense, said we'd better do it again.
It was done again in October by Ms. Fox's, or under her
leadership, and it showed what it showed. Which is, whoops,
this wasn't just something that--you know it was true in
October 2008, it's October 2009, it's still true. That's why it
was more serious this year.
Senator Chambliss. Was that 2008 report pretty widely known
throughout the DOD?
Dr. Carter. It certainly was known to my office. I believe
it was, my understanding is it was also briefed to Congress
last year as well. I think it was pretty widely circulated.
Senator Chambliss. My concern is, that during the debate
over the F-22 last year two issues were front and center. One
being, that the cost of the F-22 got way out of line. The last
contract on the F-22, the last lot was $140 million per copy.
Certainly that's $28 million difference in what Mr. Sullivan
estimates that today's dollars is going to be for the purchase
of the F-35.
But it's not materially different when you consider that
the F-22 has significantly more capability particularly from an
air superiority standpoint. I'm curious as to why that wasn't
talked about during the debate last year on the F-22. Do you
have any recollection of that?
Dr. Carter. I can't speak to that because I wasn't in
office at the time. I do know from the records what transpired
after the first JET estimate, which was that Secretary Gates
added, recognizing that there had been this poor performance in
the program, added $476 million to the fiscal year 2010. Said
oops, we'd better adjust our budget in fiscal year 2010 to take
account of the CAPE estimate.
He did not adjust the entire out-year budget as we are
doing this year because he only had the first JET estimate
which showed that there was trouble going on for a year. This
year, knowing that trouble's gone on for 2 years, he directed
that we adjust the budget to reflect the CAPE estimate not only
in fiscal year 2011 but throughout the out-years.
It's a more serious action taken in response to more
serious news which is a second JET estimate that says the same
thing that the first one did a year earlier. So he took actions
in both years, they were different actions but proportional to
the information he had at the time.
Senator Chambliss. I have some additional questions, Mr.
Chairman, I want to submit for the record. But I think it's
pretty obvious to all of the panel members how serious this
issue is to us. We're committed to this program, it's a great
airplane and we have to have it. We, Ms. Fox, don't want to go
down that trail that Senator McCain talked to you about of
reducing the buy. We can't afford to reduce the buy.
We just had testimony that the reduction in TACAIR for
Northern Command has already caused us to have to call on the
Canadians. If we don't get these costs under control then who
knows where we're going to go. But we can't do without this
airplane. The assets of this airplane are so superior to any
other asset that we have outside the F-22.
With the Russians now coming out with an airplane that they
say is comparable to the F-22, and it didn't even mention the
F-35. They assume it's superior to the F-35.
It's imperative that we continue down the track of trying
to get these costs under control. I appreciate all of you
working as hard as you have and being as frank as you have with
respect to this program. So thank you, Mr. Chairman.
Chairman Levin. Thank you, Senator Chambliss.
Senator McCaskill.
Senator McCaskill. I know that there's been talk about unit
cost and I was here for the previous testimony about unit cost,
Ms. Fox, but I've not heard an estimate for the entire program
including military construction (MILCON). Can somebody give me
that number?
Ms. Fox. Yes, ma'am, I'm sorry I don't have that number. We
will get back to you, I don't believe we have that number with
us today.
[The information referred to follows:]
In base year 2002, the current estimate for military construction
(MILCON) costs is $0.5 billion. These are system-specific MILCON costs
and would not include broader costs such as establishing new bases.
This is less than a quarter of 1 percent of the total of development,
production, and MILCON cost which is currently estimated to range from
$239 billion to $278 billion. MILCON costs will be evaluated as part of
the Nunn-McCurdy cost recertification.
Senator McCaskill. I think we need to know that number. I'm
a little worried that you would come to this hearing without
that number, to be honest with you. Knowing that this was going
to be all about the costs and the problems associated with this
program.
I think everybody having a handle on what the overall costs
are compared to what they were predicted to be. We're stuck.
I'm sure this is going to be a great jet but we better learn
from this. We don't want to do this again.
You know we have the potential if we don't have
competition, which you know I'm a big fan of the product that
Boeing puts in the air. But we have the tanker coming up and
just for accountability purposes I think whenever this group of
people assembles you ought to have a number of what the overall
program's going to be.
Let me talk about two things briefly. First is the
shortfall. As you might imagine, the home of the F/A-18s in St.
Louis, I know what that tactical aircraft means to our Services
now. I know that as you talked about more and cheaper,
Secretary Carter, there is a shortfall.
It has been difficult to get a handle on the shortfall but
now learning today that the initial operational planes are not
going to be until 2016 for the Navy, and knowing we have 11
carriers to fill, it's just hard for me to believe that you all
are still maintaining that there's only 100 shortfall. Do you
have a number that you all are comfortable with having a
shortfall?
Dr. Carter. Let me ask Ms. Fox specifically to address the
shortfall issue because she's done a lot of analysis on that.
Let me just back up to the point you made. You're absolute
right except the point about total ownership cost.
We have to take into account and manage the fielding, your
point about MILCON and the other associated total ownership
costs of the JSF, not just the cost to build it. We've been
addressing the cost to build it mostly in this hearing.
To be quite honest and your question reveals this,
internally we are going to turn to the total ownership cost. We
have a couple estimates of that that differ among themselves
and we need to try to reconcile them. Not just so that we have
a number, but so that we have a plan for reducing that number
because somebody is going to end up owning these things and
they ought to have a reasonable cost of ownership.
With respect to the F/A-18 and the JSF issue, we've done a
lot of analysis on that question. Let me ask Ms. Fox if she
would address that.
Senator McCaskill. You know I'm headed towards the ultimate
question here, with multi-year we'll save money. We have a big
enough shortfall--I know you all have asked for an extension.
We need to get to the multi-year. You know you will end up
buying that many jets, you know you are.
I mean this thing has gotten moved and it would be great if
I could go to lunch today with you all saying, yes, we think
multi-year is the right way to go.
Dr. Carter. Why don't you speak to that--and then I'm happy
to speak to the multi-year issue.
Senator McCaskill. Thank you.
Ms. Fox. Yes ma'am, we are concerned about the JSF
shortfall for all the Services as a result of the
restructuring. We're in the process of doing an analysis there.
The number you quote of 100 is an old number, it doesn't
reflect the restructuring. We're looking at that right now.
Again, I apologize, but I don't have a final analysis for you.
Back to the overall costs, we will have an assessment of
O&S costs of the JSF program in the Nunn-McCurdy certification.
You added MILCON, I think that's a very good thing to add, but
I just wanted to alert you that these are challenging things to
estimate this early in the program, but we owe everyone an O&S
estimate for sure. We owe everyone an estimate working with the
Services on the implications of the restructuring on their JSF
inventory.
Senator McCaskill. Since we don't know, we know it's not
100 now, but we don't have a number. Secretary Carter, multi-
year?
Dr. Carter. If I may address the question of multi-year
procurement for the F/A-18 arises anew and appropriately
because we have made the decisions in the program review
to procure more F/A-18E/F versions and also the Growler
electronic attack version in order to recapitalize the
expeditionary electronic attack fleet now represented by the
Prowlers.
Since we're buying more, we have asked the question of the
manufacturer, give us a price. We've indicated that the
threshold of interest is 10 percent, that's just the threshold
of interest. We would look for savings in the teens in order
for that to be an interesting proposition to the DOD and for
the taxpayer. Given that it's a multi-year commitment, there
would have to be savings there. The Department of the Navy is
in discussions with Boeing over that very point.
Senator McCaskill. I'm glad you're in discussions and you
know, I know that 10 is the threshold but with all due respect,
I hate to say I told you so. But you know, I kind of knew that
100 wasn't real. If you just look, if you step back with common
sense and look at the JSF program, and looking at my friend
from the GAO here because I know he wants to nod right now. It
wasn't going to be on time and it was going to keep getting
pushed back. We have those 11 carriers.
Frankly, if we save money with a multi-year we ought to
save the money if we're going to buy the jets. This notion that
we have to get into the teens of savings for multi-year, I
don't know what we accomplish if we end up buying them anyway.
If it's going to save money to do multi-year and we know we're
going to buy them, by all means let's do it.
My final question is hard. I need somebody to do an
estimate on the problems associated with this program. We're
going to have a Nunn-McCurdy breach. I need to know whose fault
it is.
You know this is too big to fail, this program. We're going
to push money across the table, we're going to push back
timelines, we're going to push money across the table.
I need to figure out, I think we all need to figure out
whose fault is it? Is it the contractor's fault? How much of
the fault is the military's? Were they changing things during
the process, were there delays that the military is responsible
for? Is anybody in charge of figuring out whose fault this was?
Second, if it's the contractor's fault, I know we've
withheld one payment. Are there other penalties that you're
envisioning that the contractor pays for these mistakes? You
know this isn't no harm, no foul.
Somebody needs to be held accountable. What worries me, is
we all sit around and shrug: ``well we can't do anything about
it, well, we got to spend more.'' No one ever is held
accountable. I want to know who is going to be held accountable
and whose fault it was.
Dr. Carter. I will address that. First of all, whose fault
it was, who's accountable for it? I actually think that there
is responsibility on both the government's side and the
contractor's side.
It's our job to get the best business deal. It's our job to
surface problems. It's our job to tell the truth and not an
optimistic story. That has not always been done in the course
of this program. Then it's the contractor's job to perform. So
there have been failures on both sides.
I will say that as soon as I got the JET II estimate I went
to the contractor and the leadership of that contractor, who
recognized immediately as I did the seriousness of the analysis
represented by CAPE, rolled up his sleeves in the same spirit I
was. I have to commend him for that.
It would have been better if we didn't have to find this
out in October 2009. But there was immediate recognition of the
importance of the problem and a willingness to acknowledge it
and get on with solving it. I wanted to say that because I'm
grateful that was the response of the contractor to the JET
report.
Senator McCaskill. If would indulge one more question and I
know Mr. LeMieux you're waiting, and it's lunchtime.
Is it unreasonable for us to ask for someone to give us
names? Is somebody being demoted? Has someone lost their job?
Is there something happening on the contractor side in terms of
accountability?
These are multi-million dollar mistakes. We need every
penny of that money right now in terms of the economic strength
of this Nation. While our economic strength is sapped, our
strength is not just military. I'm very proud of our military
and the work all of you do. But this really--I mean, can't we
get some names and whose fault it is?
Dr. Carter. On the government side, Secretary Gates has
taken some steps to strengthen the program management and
specifically to upgrade the program manager on the JSF to a
three-star position. We'll be continuing to try to strengthen--
--
Senator McCaskill. I don't want to know about who's getting
promoted. I want to know about who's getting demoted. That's
what I want to know about. I want to know if anybody has been
held accountable. If you all would get back to me with that I
would appreciate it. Thank you, Secretary Carter. Thank you,
Mr. Chairman.
[The information referred to follows:]
The major personnel action relative to the Joint Strike Fighter
(JSF) program was the Secretary elevating the JSF Program Executive
Officer (PEO) to a three-star billet. The two-star PEO was removed and
now a three-star Admiral is in charge. Having a three-star flag officer
as the PEO affords the billet the appropriate level of experience and
responsibility for this large, important, and very challenging program.
The Department concluded the JSF Nunn-McCurdy review and certified to
Congress on June 1, 2010. The thorough review included a comprehensive
root cause analysis of the causes of the Nunn-McCurdy cost breach. The
root cause analysis identified the major factors which led to the
increase over the baseline cost estimates from 2001. These factors
occurred and accumulated over many years and involved programmatic,
technical, and executive decisions made on the government and
contractor side. No individuals from the government were demoted as a
result of the Nunn-McCurdy review. The review resulted in numerous
management and programmatic recommendations that we are currently
executing.
Chairman Levin. Thank you. Is it not true that General
Heinz was relieved of duty as the----
Dr. Carter. The program manager, Senator, was removed and
that is why a three-star program manager will be appointed in
his place.
Chairman Levin. If I could just take from Senator LeMieux
10 seconds further on this because I was pressing them for the
same question before. I interrupted Secretary Carter when he
gave me the first two reasons for these huge cost overruns.
He listed two and I would, following what you're pressing
for ask you, Secretary Carter, for the record, to give us all
of the causes that you began to identify, you said there were
engineering changes. You then said there were labor costs that
went up. Give us all of the reasons, if you would, for the
record as to this 60 to 90 percent increase in the unit cost.
[The information referred to follows:]
The reasons for the Unit Cost Growth included larger-than-planned
development costs driven by weight growth and a longer forecasted
development schedule, increases in engineering and manufacturing labor
hours, increase in labor and overhead rates, degradation of airframe
commonality, lower production quantities, increases in commodity prices
(particularly titanium), major subcontractor cost growth, and the
impact of revised inflation indices all contributed to the unit cost
increases. In addition, factors that were driven by substantially
higher contractor change traffic (i.e., changes in design not resulting
from changes in requirements or capability), which led to increased
engineering and software staffing, extended manufacturing span times,
and delayed delivery of aircraft to flight test, led to a further slip
of the development and flight test program.
If additional causes of cost growth are discovered in the
anticipated Nunn-McCurdy review they will be detailed as a result of
that review process, and those results will be provided to Congress.
Chairman Levin. Senator LeMieux.
Senator LeMieux. Thank you, Mr. Chairman. I want to commend
Senator McCaskill on always being vigilant on these cost
issues. We need more of that in this chamber. I'm new to the
Senate so you will forgive me for not being an expert on these
topics.
My understanding of this project and, Mr. Secretary,
perhaps you can make sure that I have my numbers straight, is
that this project started in 1995? We're 38 percent over
budget, $18 billion?
Dr. Carter. We're more than that on the SDD program if
you're talking about--more than that on the SDD program.
Senator LeMieux. Do you know what it is?
Dr. Carter. I'm going to ask Ms. Fox.
Ms. Fox. I'm sorry sir, I don't have the data back to 1995.
The SDD program is at $50 billion in the current estimate. We
added $3 billion, $2.8 billion to it for this review, but I
believe it had gone up before. So I'd have to get you a total.
[The information referred to follows:]
Pre-System Development and Demonstration (SDD) activities did begin
in the mid-1990s; however, the program was baselined in October 2001 at
the time of the SDD contract award. At that time, the development costs
were estimated to be $32 billion (FY$02). The current estimate is $45
billion (FY$02), an increase of about 40 percent.
Senator LeMieux. So it's more. If you could submit that for
the record. You know we're very excited in Florida about
getting this JSF, getting it to Eglin. You know we're very
proud of our military bases in Florida with the world's largest
Air Force base, we look forward to getting them there.
But I think the American people, if they knew about this,
would be shocked about how long it's taken to build this plane
and get it in the air. We don't yet have one ready to operate
as I understand, we just have test planes, is that correct?
Dr. Carter. There are aircraft flying, they are all test
aircraft.
Senator LeMieux. Right. We're hoping to get a plane to the
Marines by 2012?
Dr. Carter. That is correct.
Senator LeMieux. That's still a good target date?
Dr. Carter. For the Marines, yes, sir.
Senator LeMieux. So we started this program in 1995 and
we're going to get a plane delivered in 2012. It occurs to me
that we went to the moon faster then developing this plane. To
be this far over budget, more than $18 billion, more than 38
percent, I appreciate the comments of my colleagues about
accountability.
Mr. Chairman, it bespeaks to a larger problem with
procurement. I appreciate your comments about using business
models but this would not happen in the business world. If it
did, a company would fail if they did this.
I commend the chairman and you may have done this before so
if you have, I apologize for not knowing about it, but for us
to have a hearing on procurement, to bring in large companies
who buy billions of dollars of goods and services and bring our
friends from the DOD in to have them hear what's being done in
the private sector.
I can just tell you from my private sector experience, I've
had the opportunity and the honor to run a large law firm,
nothing comparable, we talked in millions not billions. But
when you do procurement there's carrots and there's sticks. In
these processes the vendor should be held accountable.
I understand there's mission creep problems, too, which
caused these overruns but defining a goal and setting a
specification that stays static and not creeping with that
specification. Then when the vendor comes in over, they bear
the responsibility unless it's our responsibility, which we
have to work on that side of it also.
This is a needed plane. We need to get them as quickly as
we can and I'm supportive of the plane. But these types of
numbers in this environment, when this country is going broke
with $12.4 trillion in debt and we we are going to add another
$10 trillion to the debt this decade, is not sustainable.
You have a very difficult job and I'm appreciative of your
service. It seems like we have to do better. So I'm sorry,
that's not a question, that's more of a comment. But I'm
becoming increasingly concerned about this as I watch it.
Give me some hope, Secretary Carter, about where we are
with this program and where we'll be with procurement going
forward.
Dr. Carter. I can give you realism and I think that's what
we're trying to do with the revised JET II estimate, to be
realistic about what we can project to you and about the
progress of this program.
I have the aspiration, we all ought to have the aspiration
to do better than the projection if we possibly can. That will
be a matter of discipline. It'll be a matter of negotiation and
performance.
I agree with you, the picture that we painted at the
beginning of our testimony today is unacceptable. We're paying
more than we said and asking you to pay more then we said you
were going to have to pay. That's unacceptable and we need to
wrestle this back into some sort of realistic box. I think the
best I can offer you, or what we're trying to offer is realism,
not optimism but realism.
Senator LeMieux. In going forward, learning the lessons of
this plane as well as the F-22 and other procurement, are we
going to change the way that we do procurement in the DOD?
Dr. Carter. I think we have to, in fact, we are making a
number of changes that were written into law. The WSARA last
year that prescribed a number of changes to improve the
acquisition system, all of those are in process now. Some of
them are in my office, some of them are in Ms. Fox's office.
In a sense what you see today is a reflection of what was
written in the legislation that came out of this committee last
year. Namely, that we should start doing ICEs and taking them
seriously. That's what we're trying to do, perhaps belatedly,
but that's what we're trying to do here in the JSF program.
Senator LeMieux. Now, Secretary Carter and Ms. Fox, is
there something that you have not yet implemented that you need
to implement when we get to the next procurement? I'm sure you
don't and I'm know that the chairman doesn't ever want to be
here in the future with another program that's over budget and
not on time.
Do you have all the tools you need? Are all the mechanisms
in place? Have we learned enough to know that that's not going
to happen again?
Dr. Carter. I think that the sort of bureaucratic structure
is there to do better. All the structure, all the boxes don't
matter unless you have two other things.
One is the discipline to surface problems and solve them in
a candid manner. Again, we're trying to do that here on the JSF
program, maybe belatedly, but surface them and solve them.
The other thing, as I mentioned earlier, is good people.
That is something that we're still working on that will take
years to rebuild the acquisition cadre in the DOD so that they
have all the engineering skills, systems engineering skills,
contracting officers, pricers, and all the things that it takes
to replicate what you rightly suggest in the private sector
would be a matter of course.
Senator LeMieux. Do we need to pay these folks more? We'd
be a lot more efficient to put together a squad of the best and
brightest people in the world working for us. If it cost us
some millions of dollars and we saved billions, it'd be good
for the taxpayer. When you say rebuild, do we not have the
talent we need?
Dr. Carter. We don't either on the civilian side or on the
uniformed side, I think it's widely recognized. On the civilian
side, we reduced the numbers about a decade ago without
adequate care to preserving key skills and quality. We're
trying to rebuild. Something similar happened in the armed
services.
What's important there is that a major or colonel who has
acquisition expertise as something they think they're pretty
good at and an aspiration to become a general officer can see a
pyramid that they can go up in the acquisition field.
We're having a lot of experience now with seeing what the
market is like for people wanting to come into government work
and acquisitions because of some initiatives that came out of
this committee; we are hiring or in-sourcing 20,000 people into
the acquisition workforce.
We can't pay them what they can get outside. We take too
long to hire them and it's a cumbersome system to join the
government. But what we have going for us, what you see again
and again and again is the mission, the mission.
They come in and say, ``boy, now I'm doing something that
really matters, contributing to national security.'' That's our
hook, that's all we have. We can't pay them a lot. It's
frustrating to work in the government and all the rest of it.
But the mission, that's our hook.
Senator LeMieux. Thank you, Mr. Chairman.
Chairman Levin. Thank you very much, Senator LeMieux. We as
a committee, as Secretary Carter said, adopted, led the way to
get the major acquisition reform into law last year. It's
hopefully just about fully implemented now.
Ms. Fox is here because her office was created for exactly
this reason, to do the same kind of work in the area of cost as
Dr. Gilmore's office does in terms of OT&E. So these were major
changes that took place.
You're absolutely right, we were not doing business the way
businesses would do it. We're trying through that law and
hopefully through full implementation of that law as you point
out is so essential, to change not just the words on a page
that will hopefully make a big difference but the culture in
the building.
That 20,000 figure comes as a startling number to a lot of
people. When we talk about adding 20,000 government employees,
that has a very negative effect in the minds of some folks. But
we know how badly this acquisition corps was damaged and was
reduced during the previous decade.
We're going to reverse that. The President's determined to
reverse it. Our law reverses it. We put some provisions in that
law that will strongly promote the rebuidling of that
acquisition capability.
One of the things that is critically important here in
terms of keeping costs down is competition. The whole argument
now on the second engine for that JSF is, are we going to have
competition or not and the value of the competition is
critically important.
Those of us that favor the second engine do it not because
we have any back-home interest. I don't. It's because we
believe that without competition we're going to see that same
kind of upward curve on that engine if it's going to be sole-
sourced, which it is, as we see now with the JSF.
We're basically at the mercy of a contractor. We all want
the plane for the reasons you give. We want that plane but the
number hasn't changed in the last 2 years. Once you tell a
contractor we're buying 2,417 planes, okay, now what? Where's
the leverage?
I don't know what the leverage is on this contractor
myself, I don't see the leverage. You know you testified, Dr.
Carter, that--and by the way, one other thing about
competition, we wrote that right into our law that we passed
here last year.
The Secretary of Defense shall ensure the acquisition
strategy for each major defense acquisition program includes
measures to ensure competition or the option of competition at
both the prime contract level and the subcontract level
throughout the life cycle of such a program.
Now one of the questions I was going to ask is to what
extent we're going to do that at least at the subcontract
level. In this case we've done that with some shipbuilding now
where the Secretary has decided he's going to sole source two
ships.
The problem with that is, where's the competition going to
be with those two ships, with those shipyards? If you don't
have two shipyards, but you only have one, you're at their
mercy again. That's what my fear is here.
Dr. Carter in his testimony said that we're going to ask
Lockheed Martin to share in some of the cost increases. We're
going to ask them. Where's the leverage, Secretary Carter?
Dr. Carter. We don't have to ask about award fees. That was
a specific reference to an award fee that is at the will of the
government. That was a polite way of saying that the award fee
was being withheld.
In general, I'll be very candid for this program. It's in
the interests of the performers to have a successful program.
Because otherwise, the international customers and the Services
are going to buy fewer jets.
The danger of poor performance is that you sell less. It's
obviously in the interests of the performers of the program to
sell more jets sooner and therefore to move that ramp over,
that I spoke of earlier, and get up that ramp as soon as
possible. That is the principle reason why performance of a
kind that we seek is also, if we set the circumstances right,
in the interests of the performers as well.
Chairman Levin. That has not historically stopped buy-ins
in the past and I'm afraid it continues that way. I just worry
greatly about where we're going with this program. I'm
appreciative of the effort that you are making now to be
realistic on these numbers.
We might as well know the facts of this program. You've
given them to us the best you can. The facts are painful
because you have a 60 to 90 percent increase in the projected
cost each plane at the 2,400 number in constant dollars.
That is, as Senator LeMieux says, a painful bit of news
that the taxpayers are not going to be particularly happy to
hear. It's better that we not sugar-coat it, however. It's
better that we let them know, let the country know, and that's
what this hearing is all about, exactly what kinds of problems
that we foresee in an honest way and we think you've done that
now.
I understand your answer earlier, Ms. Fox, you were
attempting when you made reference to the earlier planes and
the fact that their numbers were reduced, you were not holding
that up as a role model here.
What you're saying was, that we have produced planes that
cost us more than planned, took us longer than planned, but
were able to carry out their mission in an effective way.
That's what I gather you were pointing to.
But my question is in relation to that. This $200 million
figure for these developmental planes, if you estimate in
constant dollars a plane will be costing $80 to $95 million,
and your first planes are costing two to three times that much,
is that about normal for these kinds of programs?
Are your first planes generally that much more than when
you get to full-rate production? Do you have any way of
measuring that for us?
Ms. Fox. We do have a way of measuring that. I don't have
the measurements with me, but we will get back to you. My short
answer would be yes. There are 2,443 aircraft overall, but
we've reduced the ramp very sharply in restructuring, so the
initial buy is actually much, much smaller.
[The information referred to follows:]
It is typical in a unique military aircraft production line that
early production units will cost more than latter production units.
This reflects the effects of learning curves--as a production line
matures, production processes become increasingly efficient. In
addition, fixed costs are increasingly spread over larger aircraft
quantities. These collective effects create downward pressure on unit
prices. As an illustration, the current average procurement unit cost
is estimated to fall within a range of $79 million to $95 million
(FY$02) for the total production buy. In contrast, the unit cost of
early production aircraft procured in fiscal year 2015 and prior years
is $141 million (FY$02).
Ms. Fox. One of the leverage points we actually have on the
contractor is that ramp. They want to push the ramp up, get the
unit cost down, and push jets out. We are holding them back
based on the analysis we've done, the review of the IMRT, and
the desire to keep pressure on this unprecedented concurrency.
So it is about right.
Sir, if I could add, in my short time in this position, one
of the most important things I think about the WSARA
legislation is the----
Chairman Levin. That's the Acquisition Reform Bill you're
referring to?
Ms. Fox. Yes sir, I'm sorry.
Chairman Levin. It's all right.
Ms. Fox. The ICE at the beginning of a program, I think, is
going to prove in the future to be a very critical thing for us
all to look at. Because based on historical performance, the
JSF program is actually not inconsistent with what's been
achieved in the past. An ICE at the very beginning would have
allowed us to look at this and understand what we were going
toward.
Chairman Levin. Now is in place?
Ms. Fox. Yes, sir.
Chairman Levin. I made reference in my opening statement to
the IMRT that late last summer said that on the JSF program,
``affordability is no longer embraced as a core pillar''. That
is a completely unacceptable premise for us to proceed on.
Secretary Carter, you today said that you're going to be
relentlessly pursuing affordability. Which means, I think, that
you've rejected that quote from the IMRT's presentation. Is
that correct? Were you familiar with that comment?
Dr. Carter. Absolutely, and that review was charted by my
office. What they were reporting was that the program had lost
sight of affordability as a key ingredient and I couldn't agree
more. Their report and that statement in their report was
important input to us as we restructured the program.
Chairman Levin. The IMRT identified a series of milestones
called Production Integrated Transition Implementation Plan. I
will not try to even pronounce that acronym.
That plan was intended to get the program back on a
reasonable schedule. Among the action items were completing a
program risk management plan, completing a business systems
modernization plan, a Pratt & Whitney milestone action plan,
and a Pratt & Whitney risk management plan.
Those were, I think, to be completed or were scheduled to
be completed, General, I think, this question goes to you, by
the end of last month. Where are those?
General Moore. Senator, there are actually 20 action items
associated with the IMRT. Some are process related, some are
product related, some are government, some are contractor. As
far as the risk management activities, those did occur on
schedule. We have a comprehensive risk management program
tracking over 300 technical risks on the program to include
engines and aircraft. That has occurred.
Chairman Levin. What I made reference to, those plans were
filed on schedule?
General Moore. Yes, sir, we understand all the risks on the
program and we are tracking those to closure as well as the
other 19 actions on the IMRT.
Chairman Levin. Okay, but more specifically, were those
plans completed on schedule?
General Moore. Yes, sir, they were completed last month.
Chairman Levin. Thank you, Senator LeMieux.
Senator LeMieux. Thank you, Mr. Chairman, and I appreciate
the law that was passed and thank you for providing that
information to me. I just want to make a couple quick points.
When I talk to people who are on the vendor side and they
talk to me off the record, the view that they have is that the
DOD gets gamed on these bids. That they bid low knowing that
there's going to be mission creep. This is not unfamiliar to
other parts of the world. Then they know there's going to be,
for lack of a better term, change orders. That's where they can
make up the difference.
When I was speaking with you earlier about how we can
control costs, making sure that the mission doesn't creep,
certainly seems to be a big part of this. When something goes
on for 15, 17 years, you're going to have change because the
technology's going to change, the demands of the current time
are going to change. The longer the project goes the more it
seems like it's going to be cost overruns.
I want you to address that in a moment if you would about
how you keep these project static if you can and without
sacrificing safety, make sure that we try to end these projects
in the future quicker.
The second thing I wanted to mention is putting pressure on
the vendor. What will be done in the future to make sure that
these contracts we negotiate give you the opportunity to put
pressure on the vendor?
In the business world, like manufacturing and suppliers for
manufacturers, in the automobile industry, the prime vendors
are constantly going back to them and saying you have to make
it for less; to the point where they don't think they can make
any money.
Constantly beating them up over price. Constantly saying
I'm going to go to another company. Constantly putting pressure
on them which spurs innovation for that company to find a way,
to wring out inefficiencies and get something done as quickly
as possible.
Are there people working for you who have that experience,
who are going to the vendor over time and pressuring the heck
out of the vendor to wring out inefficiencies and do things
cheaper?
Do you have the flexibility in your contract to make them
do things cheaper? Will your contracts going forward give you
all of the tools that you need to put you more in a setting as
if you were a large company so that we can get the most cost
effective product possible?
Dr. Carter. Senator, you put your finger on just about
every major issue of acquisition policy and practice. I'll try
to address the three major ones that you pointed to.
The first was the practice, which does occur, of bidding
low. Then you have yourself a program which the country depends
upon and then the cost goes up, but we still have the program.
That dynamic is one that the WSARA was intended to
interdict by having us--requiring us--to do a realistic cost
estimate up front so that we wouldn't be just buying the, so to
speak, cost estimate of the vendor. We need to keep at that,
and we now have a mechanism for doing that.
About changing requirements, that's something we also have
to be vigilant about so that you don't come in and decide later
that that wasn't really what you wanted, you want more and
it'll cost you more. That's connected to your point about
pressure on the vendor.
In one way at least it's worth noting which is in contract
structure. That is the dynamic between the government and the
contractor in a cost-plus contract versus a fixed-price
contract. Both contract types are appropriate in different
circumstances.
But if you're in a circumstance where you know pretty much
on the government side on what you want and you're not going to
change that and it's a fairly well-defined article, then it's
reasonable to ask the vendor to give a fixed price. Then the
burden is on them to control their costs.
Senator LeMieux. Which is great.
Dr. Carter. Correct, and we want to do more and more of
that. That is unreasonable when we don't know what we want.
Sometimes we don't know what we want for a good reason because
we're doing a development and an exploratory development of a
new military capability. It's fine to have that be a cost plus
environment.
But elsewhere we're trying to do more of our transactions
in a fixed price way for just the reason you say because that
requires everybody to get real. We have to get real about what
we want and not change it. The contractor needs to get real
about what it costs to deliver it.
Senator LeMieux. Can I interrupt you for 1 second?
Dr. Carter. Absolutely.
Senator LeMieux. When we don't know what we want but we're
in the developmental stage, are we making the vendor bear some
of that cost? Because you know if I'm a big defense contractor
and I know that I have an opportunity to get the F-35 for 20 or
30 years, this becomes the signature program of this contractor
if they win this award. I would think that they, just like any
company that's doing research and development (R&D), they have
to bear some of that expense. You have a big prize out there
that should give them some incentive to bear some of those
costs on their own.
Dr. Carter. The traditional practice for a development that
really requires some invention and therefore whose future
unfolding is legitimately uncertain, is to audit and reimburse
the contractor's costs and add to that a fee. As I said, that's
appropriate in a circumstance when it's not reasonable to
expect the vendor to give you a price because you don't know
exactly what you want or whether you can even get it.
As where we are coming in the JSF program, to the ramp-up
to production, it is now reasonable to say to the contractor,
give me a price for the next lot of jets. You figure it out and
then we'll hold you to that price. Because the line is now
mature enough that it should be possible to price its
performance in advance.
Senator LeMieux. There are two points. One is, and then
I'll conclude, Mr. Chairman, is that the traditional practice
of paying them for their development of a product that they're
going to then sell to us doesn't seem to make a lot of sense to
me looking at it from a private sector perspective.
I understand that sometimes that might have to be the way
it is because it's just too big an expense for them to bear.
But I would encourage you in the future, these contractors want
this work, to use your power as the purchaser to extract
concessions out of them on the front side too to see if they'll
help finance some of this R&D.
On the question of creep and making sure that we don't have
scope creep. Are we at a disadvantage on our side in that the
vendor stays constant but folks like you and others similar to
you rotate out and there will be a new Secretary so-and-so, and
a new Ms. so-and-so, and a new General so-and-so, and we don't
have the constancy on our side? Do we need to think and maybe
it has already been done creatively to make sure there's
something on our side that gives us continuity as well?
Dr. Carter. Excellent point, people do change jobs rapidly,
more rapidly in government than in industry. Programs take a
long time and the commitments need to remain solid over that
time. So it's important that as people come into these jobs,
respect the commitments that were made by predecessors in the
interests of stability in a program unless there's really
something wrong or the circumstances have changed.
It gets back to another point you made though that's
important which is how long these programs take. I think that
time is the variable that we do not manage enough, in general,
in our programs.
The dynamic is this: if you have a program that runs into
trouble, the first thing to do is come and get more money for
it. But there's only so much money every year, that only goes
so far. Then your next step, if you can't get more money, is to
slip the program to the right. So these things stretch out to
the right. An 11-year program is 10 percent more expensive than
a 10-year program. In general they run at a kind of level of
effort.
That's concerning to me. So not only by the time you get
the thing, it might not be what you want or we've forgotten why
we bought it in the first place, or it's more expensive than it
should be. So managing to the variable of time is an important
idea. I appreciate your raising it.
Senator LeMieux. I thank you all and I thank you for your
service and your focus on these important issues. Thank you,
Mr. Chairman.
Chairman Levin. Thank you very much, Senator LeMieux. On
that important point that Senator LeMieux raised about the
creep of requirements--those increases, what we did in this
bill was to put--we created a board, a Configuration Board it's
called, to make sure that if there is a proposed change in a
mission or in a requirement, it goes to the board for approval,
so it doesn't creep the way Senator LeMieux pointed out.
We understand it's pretty slow getting those boards going.
I just wanted to remind you that my staff has looked into this
and it's not moving as quickly as we would like. If you want to
comment you can but I want to just let you know that's been our
concern.
Dr. Carter. My only comment is that it's an incredibly
important idea and I will look into it and get back to you.
[The information referred to follows:]
Consistent with section 814 of the Duncan Hunter National Defense
Authorization Act for Fiscal Year 2009, the Department of Defense (DOD)
acquisition policy requires the Acquisition Executive of each DOD
component to establish and chair a Configuration Steering Board (CSB)
with broad executive membership from the office of the Under Secretary
of Defense (Acquisition, Technology, and Logistics and the Joint Staff.
CSBs are required to meet at least annually to review all requirements
changes for ACAT 1 and 1A programs in development that have the
potential to result in cost and schedule impacts on the program. Such
changes will generally be rejected, deferring them to future blocks or
increments. On a roughly annual basis, program managers (PMs) and
program executive officers (PEOs) are also required to identify and
propose descoping options to the CSB that reduce program cost or
moderate requirements. This policy has been actively implemented at the
component level. Examples follow:
Army acquisition policy directs a CSB to be conducted
whenever an event is anticipated that could cause significant
deviation from parameters in a program's approved Acquisition
Program Baseline (APB). In the absence of a triggering event,
programs undergo a yearly ``descoping'' CSB where PEOs and PMs
present options for reducing cost or moderating requirements
for the Milestone Decision Authority's consideration. In
calendar year 2009, the Army conducted 13 CSBs.
The Air Force applies a similarly aggressive CSB
policy in a two-tier approach based on monthly program analysis
to conduct either ``event driven'' or yearly CSBs. The CSB
requirement for all Air Force Aircraft Major Defense
Acquisition Program (MDAP) and MAIS programs was met for
calendar year 2009.
The Navy requires a CSB for each MDAP annually. In
calendar year 2009, the Navy conducted 33 CSBs out of 45
possible for ACAT I programs. So far in calendar year 2010, the
Navy has conducted 14 CSBs out of 44 possible ACAT I programs.
The Navy has another 30 CSBs scheduled to be conducted in the
next 3 months.
Chairman Levin. All right, thank you. Then also, Ms. Fox,
you said that now an engine competition under your business
case will achieve a break even point which is important news.
It's also important that we know the assumption that you made
relative to the savings of competition. What percent savings
did you assume?
Ms. Fox. Sir, let me ask my colleague if we have that
number. Perhaps I could invite Mr. Janicki to answer your
question since he did the analysis.
Chairman Levin. Sure. Can you just tell us who you are?
Mr. Janicki. I'm Fred Janicki. I led the JET team and I
work for Ms. Fox.
Chairman Levin. Okay.
Mr. Janicki. The 2007 study, we evaluated that we would
need 21 percent to break even. Now for the updated study, we
did not go in and determine what savings would be needed. For
the new study, the 2010 study we have not determined that.
Chairman Levin. Have not, okay.
Mr. Janicki. No, sir.
Ms. Fox. But in the past study, we assume the 21 percent,
sir.
Chairman Levin. From what? 21 percent----
Ms. Fox. Percent of savings from competition.
Chairman Levin. Over the----
Ms. Fox. For a competition that would start in 2014.
Chairman Levin. Over the life of the contract?
Ms. Fox. That's right.
Chairman Levin. Are you all set, George? We're set, okay.
Thank you all. It's been a long hearing, we want to
particularly thank our reporter. We don't often do that but
it's a little longer than planned so once in a while we
remember to say thanks to people who keep us going here.
We appreciate your coming to visit us today and there will
be questions for the record and we'll stand adjourned.
[Questions for the record with answers supplied follow:]
Questions Submitted by Senator Carl Levin
Cost Sharing
1. Senator Levin. Secretary Carter, Secretary Gates announced that
you have asked Lockheed Martin to share in some of the cost increases
that the independent reviews are predicting for the F-35 program. Where
do you stand in these negotiations?
Dr. Carter. Relative to the System Development and Demonstration
(SDD) Program, the Department of Defense (DOD) is challenging Lockheed
Martin to meet program needs through application of the remaining fee
to reward accomplishment of key schedule and cost objectives. The
previous SDD incentive structure is being restructured and the
remaining $614 million is being converted to event-based fee that will
reward measurable progress against significant schedule events and
ensure event-based fees, to include completion at or under the estimate
at completion, are paid only if the events are accomplished in order to
support the restructured contract performance. $379 million of the fee
has been allocated to meeting objective contract performance
milestones. The balance of the potential fee may be earned only if the
contractor's cost at completion is at or below the restructured
contract cost.
The Low Rate Initial Production (LRIP) Lot 4 fiscal year 2010
procurement contract is being negotiated as a fixed-price-type
contract. The transition to a fixed-price contract is earlier than
previously planned and shifts the burden of contract performance risk
to the contractor.
2. Senator Levin. Secretary Carter, what, if any, commitment has
Lockheed Martin made to sharing in any increased costs?
Dr. Carter. Relative to the SDD Program, DOD is challenging
Lockheed Martin to meet program needs through application of the
remaining fee ($614 million) to reward accomplishment of key schedule
and cost objectives. The previous SDD incentive structure is being
restructured and the remaining $614 million is being converted to
event-based fee that will reward only key schedule and cost goals/
events that support successfully finishing the development program
within the current estimate. If the contractor fails to meet the
criteria established by the Government, it will forfeit fee.
The LRIP Lot 4 fiscal year 2010 procurement contracts are being
negotiated as fixed-price incentive-fee-type contracts. The transition
to a fixed-price contract is earlier than previously planned and shifts
the burden of contract performance risk to the contractor.
3. Senator Levin. Secretary Carter, will you award the fiscal year
2010 production contract without such an agreement?
Dr. Carter. The Acquisition Decision Memorandum authorizing full
funding for Lot 4 is currently being reviewed for my signature, and I
anticipate that the contract will be awarded this summer. Intensive
negotiations are underway to strike a deal in the best interest of the
Government. With the LRIP 4 contract, the program will transition to
fixed-price incentive fee contracts reflecting the maturity of the
airframe and engine, as well as signifying a commitment on the part of
the contractors to control costs and maintain a focus on affordability.
independent manufacturing review team-affordability
4. Senator Levin. Secretary Carter, in my opening statement, I
mentioned that the Independent Manufacturing Review Team (IMRT) had
observed that, on the Joint Strike Fighter (JSF) program,
``Affordability is no longer embraced as a core pillar.'' Why should
Congress, or DOD for that matter, continue to support a program that
has lost the affordability upon which the program was sold as the
solution to modernizing all three components of our tactical fighter
force structure?
Dr. Carter. The IMRT review was helpful in identifying areas that
the contractor and the government needed to refocus on to ensure the
success of the JSF program. Affordability was a core pillar of the JSF
program at inception and the Department is taking the necessary actions
to ensure that the government and contractor team restore affordability
as a core pillar as the program moves forward. Additionally, the
program is undergoing a significant restructure as a result of the
findings and recommendations from the Nunn McCurdy review. Paramount
among those recommendations is a renewed focus on restoring program
affordability. In the Nunn McCurdy Acquisition Decision Memorandum,
dated June 3, 2010, Dr. Carter directed the IMRT to update their 2009
assessment with particular emphasis on a fully integrated comprehensive
affordability plan, maximum achievable and optimal ramp rate goals and
restrictions, and the contractor organization and skill sets required
in key enterprise activities to achieve those ramp rates. He also
directed the Services and JSF Program Executive Officer to more closely
manage affordability with a focus on successful management of cost and
manufacturing risks identified by the IMRT as well as the F135 Joint
Assessment Team (JAT). Additionally, it was directed that the LRIP Lot
4 contract for air systems and engines transition to a Fixed Price
Incentive Firm Target contract. Dr. Carter has taken an active and
aggressive role in making sure that this contract meets our
affordability goals and provides a best value for the government. The
costs have gradually been built into the program over time, partly as a
result of a loss of focus on affordability.
5. Senator Levin. Secretary Carter, what specific actions have you
taken, or do you intend to take, to restore affordability to the center
of the program?
Dr. Carter. DOD is restructuring the remaining $614 million in
award fee and revising the SDD contract structure to reward measurable
progress against significant schedule events and ensure event-based
fees, to include completion at or under the estimate at completion, are
paid only if the events are accomplished in order to support the
restructured contract performance. DOD is also focused on transitioning
to a fixed price structure for procurement contracts sooner than
originally planned, specifically the LRIP Lot 4 contract. Finally, the
program restructure was premised on introducing more realistic cost
estimates for development and production. Having a better understanding
of what the various elements of the program should cost is a critical
step in managing affordability.
6. Senator Levin. Secretary Carter, is this lack of focus a major
reason for the potential Nunn-McCurdy breach on this program?
Dr. Carter. Subsequent to this hearing, I directed a review of the
JSF program using the Nunn-McCurdy criteria. As called for in the
Weapon Systems Acquisition Reform Act (WSARA), the Department conducted
a root cause analysis and assessment. The JSF program's estimated
average procurement unit cost has increased significantly over the past
8 years, and this is the reason the program is in Nunn-McCurdy breach.
The increase in estimated unit cost is driven by a combination of
flawed programmatic and technological assumptions at program inception
that led to artificially low initial cost and schedule estimates,
higher material costs, a decrease in the quantity of aircraft planned
for purchase, and changes in inflation assumptions. Production
planning, contractor commitments, production process improvement,
quantity changes, material cost, international partner commitments,
foreign military sales, overhead rates, and interest rates will
ultimately affect unit cost more than the development and test
challenges the program is currently addressing. The cost estimates in
this Nunn-McCurdy review are being conducted at a time when the program
is just beginning to produce aircraft and before development and
testing are complete. These estimates are therefore forecasts of a
future production process that will unfold over the next 25 years. They
therefore carry with them the uncertainty inherent in such a long-term
forecasting process, but I believe they provide the most realistic
foundation available for our planning and management. At the same time,
the JSF program under its new management structure should strive to
reduce the program costs forecast in these estimates. I believe that
costs have gradually been built into the program over time, and that
with disciplined management they can be removed.
government accountability office access to independent reviews
7. Senator Levin. Mr. Sullivan, to what extent have you and your
team had visibility into the efforts of the various reviews that DOD
conducted on the JSF independent of the program office in the past
year?
Mr. Sullivan. The team generally had poor visibility into the
independent reviews conducted by the Joint Estimating Team (JET), IMRT,
and the F135 Engine JAT until very late. We made repeated requests for
this information starting in November 2009, but were not briefed and
provided supporting documentation by DOD until February 25, 2010. This
occurred while our draft report was in processing and we ended up
delaying issuance by 1 week, in part, so we could provide more current
and accurate information about these important reviews. We did not,
however, have sufficient time to do the necessary follow-up work and
analysis to fully evaluate the reviews and their significance to the
JSF program.
8. Senator Levin. Mr. Sullivan, are there particular conclusions
from the independent reviews with which you and your team particularly
agree or disagree?
Mr. Sullivan. While we have not yet fully evaluated the independent
reviews, we largely agree with each review's overall conclusions, major
findings, and recommended improvements. Each review helped confirm our
own assessments of issues related to cost and schedule, manufacturing,
and the primary engine. Our next annual review to begin soon will look
in more detail at the results and improvement plans from these three
reviews.
We agree with the JET's conclusion that the program
assessments of cost, schedule, manufacturing span times, and
flight test plans were over-optimistic. We have reported
increasing costs and delayed schedules for a number of years
and a need for a comprehensive, independent assessment of total
program costs, one that the Department is now doing. We've also
reported increases in time and labor hours needed to
manufacture test aircraft that have delayed deliveries and the
development flight test program. We agree with the JET's
assertion that development will take more time than the program
was estimating and its findings on the program's overly
optimistic assumptions. As we reported in March 2010, the
program had completed only 10 percent of its planned flight
test for fiscal year 2009 and only 3 percent of the program
overall. We had noted in our March 2008 report that the
program's decision to cancel two test aircraft as a result of
the Mid-Course Risk Reduction Plan would add significant risk
to the program. The recent addition of another test aircraft
back into the development program and the allocation of up to
three LRIP aircraft effectively confirmed our own earlier
concerns about the risk reduction plan. The JET also noted the
program's overly optimistic plan for reducing engineering
staffing levels and projections for software productivity. We
support the JET's assumptions which are based more on actual
program performance and legacy aircraft experience.
Furthermore, we have previously reported on the risks of
concurrency and that the procurement rate should be slowed and
were pleased to note the JET's recommendation--and DOD's
subsequent action--to reduce near-term production quantities.
The IMRT analysis also effectively confirmed many of
our previous concerns regarding the JSF manufacturing program.
The IMRT reported that the program's planned increase in
production was unachievable based on the program's past
performance and current manufacturing processes. Further, the
IMRT concluded that the prime contractor would need to address
a large number of conditions in order to achieve its planned
full-rate production ramp-up. The manufacturing effort has been
plagued by parts shortages caused largely by design changes and
an immature supplier base. Given all of the challenges facing
the program, we said that moving forward with the current plan
for ramping up production does not seem prudent.
While we have not reviewed the JAT findings in detail
nor talked to the principals involved in the study, our work
identified escalating engine costs, reduced management
reserves, and slowed technical progress and would agree with
the JAT that substantial cost reduction initiatives are needed.
9. Senator Levin. Mr. Sullivan, have you had sufficient time to
assess the restructured program, and if so, what are your conclusions?
Mr. Sullivan. Given that we did not obtain the information on the
restructuring and the related independent reviews until recently and
only a short time before our report was issued, we have not had
sufficient time to fully assess the restructured program. Nonetheless,
we are encouraged by the positive steps taken by DOD and testified that
these actions, if effectively implemented, should significantly improve
program outcomes and provide more realistic cost and schedule
projections. In particular, reducing near-term procurement quantities,
extending development, and adding four aircraft to support the
development test program (one new test jet and use of three production
jets) increases the chance of successful outcomes. However, the
production ramp-up remains overly optimistic considering program
problems. Also, the program is still highly concurrent. Due to the
program's recent critical Nunn-McCurdy breach, the program is
processing a complete Independent Cost Estimate. We plan to more fully
assess the restructuring as it unfolds over the next year and provide
more details in our March 2011 report.
independent manufacturing review team-short takeoff/vertical landing
immaturity
10. Senator Levin. Dr. Gilmore, the IMRT highlighted a concern
about maturity of the short takeoff/vertical landing (STOVL), variant
of the aircraft, the F-35B. This is the aircraft slated for the Marine
Corps, and is scheduled to achieve initial operational capability (IOC)
before the Air Force variant F-35A, which was the next variant
scheduled to achieve IOC. The IMRT expressed a concern about the
immaturity of the F-35B flight testing capability. I presume this to
mean that the IMRT considers the F-35B variant to be closer in the
development process than the conventional takeoff and landing (CTOL)
variant for the Air Force F-35A. This might lead one to the conclusion
that we could reduce concurrency and risk by fielding the F-35A before
we field the F-35B. From your perspective as the Director of
Operational Testing and Evaluation, is this a concern for you?
Dr. Gilmore. The test program is designed for concurrent flight
sciences testing of the F-35B and F-35A in order to take advantage of
common flight sciences test points. F-35B flight test is intended to
lead CTOL flight testing in these common test point regimes. It is not
clear at this point that reversing this relationship would necessarily
reduce risk in the program. However, the F-35B, due to the STOVL
system, is inherently more complex than the F-35A CTOL variant. F-35B
flight test has achieved the first vertical landing and short takeoff
within a limited, developmental flight test envelope with a significant
amount of envelope expansion yet to be accomplished. The first
production representative F-35A SDD flight test aircraft (AF-1), has
not yet ferried to the Edwards AFB, California test center; that is
planned to occur by early May 2010. It would be prudent to evaluate the
progress made in flight testing of the two variants near the end of
this year, and determine on the basis of that evaluation which variant
can make better progress as the lead system.
11. Senator Levin. Dr. Gilmore, do you believe that shifting the
program to field the Air Force F-35A variant first would reduce
concerns about the testing program?
Dr. Gilmore. Referring to the answer to question 10, it is not
clear at this time that shifting the program to field the F-35A first
would reduce concerns about the ability to execute the test program.
The test strategy depends on commonality between the two variants in
certain (but not all) disciplines of flight sciences testing, with the
F-35B leading the F-35A. The F-35B is, however, more complex than the
F-35A CTOL variant. It would be prudent to reevaluate the test strategy
towards the end of this year to determine whether the current leader-
follower relationship remains the best approach.
12. Senator Levin. Secretary Carter, did you consider delaying the
F-35B and proceeding with the F-35A as a means of simplifying the
program and increasing its chances of staying on some overall schedule?
Dr. Carter. All aspects of the program were reviewed and considered
during the Department's recent review that resulted in the current
restructure. At this point in the development program, delaying the F-
35B, or any of the variants, would not necessarily improve schedule
performance. In fact, the design of the F-35B is more mature than the
F-35 A and C. Delays in the manufacture of the test aircraft is
primarily due to the later than planned delivery of parts from
suppliers. Those late parts are consistent across the three variants
and delaying the build of one of the variants would not help regain
schedule, in and of itself. As with any acquisition program, there is
also the question of requirements. In the case of the F-35B, the Marine
Corps is counting on the 5th generation capability that will be
provided by JSF to replace legacy AV-8B and F/A-18 aircraft.
13. Senator Levin. General Moore, what would be the implications
from the program's perspective of streamlining the program to bring the
F-35A along faster than the F-35B?
General Moore. At this point in the program, there are very limited
options to accelerate development of the F-35A. The primary remaining
effort is developmental flight testing and our flight test capacity at
Edwards Air Force Base and Naval Air Station Patuxent River is
sufficient to enable testing of all three variants concurrently. There
would be little or no benefit to optimizing or prioritizing test of one
variant at the expense of the others.
supply chain management
14. Senator Levin. Secretary Carter, one of the challenges the
private sector has faced and continues to face is dealing with a new
business model incorporating a much greater contribution of the global
supply chain to build weapons systems. The much publicized delays of
Boeing on the B-787 have been attributed to the growing pains of
managing this global supply chain, particularly as you are designing
the aircraft. The IMRT concluded that managing the global supply chain
process is a huge challenge for the JSF contractor team. It also
concluded that the current funding process within DOD does not support
a complex, large-scale international partner, global supplier program.
What steps should the contractor team take to become better at global
supply chain management?
Dr. Carter. First, the contractor's Global Supplier Executive
should develop and provide a plan for including long-lead advance
procurement funding requirements in each year's budget to properly fund
those globally manufactured parts that take a considerable time to
manufacture and ensure their availability to the production line. The
contractor should also develop a transition plan for the global supply
chain with associated metrics for each critical capacity issue. In
addition, the contractor needs to ensure the global supplier team has
adequate resources as the program transitions to higher production
rates. The entire global supply chain must be advised immediately of
any engineering changes in order to take appropriate and timely action
to support the production line. Finally, the contractor should develop
international and domestic transportation plans (after an appropriate
level of study) for their suppliers, factoring into their production
schedule an appropriate amount of ``slack'' material/parts reserve to
account for issues that arise from international transportation.
15. Senator Levin. Secretary Carter, what steps should DOD take to
be a better manager of such a program?
Dr. Carter. DOD should develop the necessary expertise to recognize
whether the prime contractor has the appropriate processes and
resources in place to succeed with their global supply chain. We have
already done that to some extent with the IMRT we chartered. DOD will
continue to examine this particular issue with the appropriate
expertise to make this part of the F-35 program a success.
new f-35 program risks
16. Senator Levin. Secretary Carter, we understand that there may
be some new risks that were first identified this year by the latest
JET II. One of these was that expected delays in the schedule are
apparently raising concerns about the maturity of the aircraft to
support training of new pilots. Are there other new risks this year
that have been identified by the JET and if so, is maturity of the
aircraft to support training one of these?
Dr. Carter. The JET II did not introduce any new risks. In general,
they validated the risks previously identified. The JET II (and JET I)
estimate did highlight development schedule risk, driven primarily by
aircraft deliveries to the lest program and the ability of the test
program to validate aircraft performance within that schedule. Delays
in flight test do impact the maturity of the aircraft when training
begins. The ongoing re-plan is feeding the pilot training syllabus to
ensure the pilots going through F-35 training receive the safest, most
robust training possible while the aircraft capabilities are expanded
and validated through flight test.
17. Senator Levin. Secretary Carter, what have you proposed in this
restructured program to mitigate this risk?
Dr. Carter. We have reduced the number of aircraft across the
Future Years Defense Program (FYDP), thereby reducing the concurrency
of the F-35 program. In addition, we added test aircraft and properly
resourced the development program in funds and schedule to account for
the various risks identified by JET I and II. We have delayed the
Milestone C decision to April 2016, and the Navy and Air Force are
moving their IOCs commensurate with this schedule extension. This will
provide the program with an appropriate amount of time to recover from
aircraft delivery delays and fully develop the F-35's maturity to
appropriate levels.
weapon systems acquisition reform act of 2009
18. Senator Levin. Secretary Carter, leaving aside for the moment
the issue of competition of the JSF alternate engine, the WSARA of 2009
says the following about competition: ``The Secretary of Defense shall
ensure that the acquisition strategy for each major defense acquisition
program includes measures to ensure competition, or the option of
competition, at both the prime contract level and the subcontract level
(at such tier or tiers as are appropriate) of such program throughout
the life-cycle of such program as a means to improve contractor
performance . . .''
I understand that you have taken a position on the alternate engine
issue. However, there are a whole multitude of other prime contractor
systems and subcontractor systems that would fit the mandate of the
WSARA competition provision.
What is the Department's plan for complying with this competition
language in WSARA for all of the rest of the JSF program, including
such items as logistics, training systems, ejections seats, avionics,
or other major subsystems of the JSF?
Dr. Carter. Suppliers throughout the world are competing to be part
of the JSF program. We expect the competition to expand as JSF moves
into full-rate production under fixed price contracts. The F-35 program
will be continuing for many years, giving us ample opportunity to
address this area, though there are many areas where competition, for a
variety of reasons, wouldn't make sense for the Department or
taxpayers.
software maturity
19. Senator Levin. General Moore, one of the typical things that is
done on complex software programs that run into performance or schedule
troubles is for the software developers to delay functional capability
to later releases of the software. From the outside, the software
developers have maintained the schedule for software release X, but
they have not maintained the content of software release X that they
promised. This tends to paint too rosy a picture to the outside world
of how well the development is going. Is this the case on the F-35?
General Moore. While there has been some minor functionality
shifted between software block releases, we are maintaining our planned
capability releases while taking additional time to deliver and test
those capabilities. This was a major consideration in the program
restructure. Rather than deferring or deleting capabilities, the
Department added resources (i.e., software personnel and an additional
software test line) to our software development effort. The
restructured SDD program provides the necessary resources and schedule
margin to deliver full block capabilities to meet the warfighters'
objectives.
20. Senator Levin. General Moore, have the program and the
contractor been delaying any functional capability to later software
releases?
General Moore. The basic block capabilities have remained stable
during SDD. While there have been some minor functionality shifts
between software block releases, we are maintaining our planned
capability releases while taking additional time to deliver and test
those capabilities. This was a major consideration in the program
restructure. Rather than deferring or deleting capabilities, the
Department added resources (i.e., software personnel and an additional
software test line) to our software development effort.
21. Senator Levin. Mr. Sullivan, does your review find that there
have been delays in functional capability to later software releases?
Mr. Sullivan. Yes, our review has found that there have been delays
in delivering functional capability, including deferral of work to
later software releases. Software is developed, integrated, tested, and
released in five block increments. While approximately three-fourths of
total expected software has been developed, only about 40 percent has
completed the more challenging phase of integration and testing. During
this overall development, software capabilities have been deferred or
deleted due to software growth and integration challenges. The JSF
program has experienced 40 percent software growth since the
preliminary design review and 13 percent since critical design review.
The JET reported that some growth has been offset by software deferral
or deletion--up to 10 percent of program of record software content--in
order to address schedule pressures. The program has also deferred
capabilities to future blocks due to significant technical and
integration challenges. Mission systems software, in particular, is
behind schedule and has moved the communications, navigation, and
identification subsystem from block 0.5 to block 1.0 due to integration
challenges. In addition, Defense Contract Management Agency officials
stated that voice recognition capabilities planned for block 0.5 BF-4
first mission system aircraft would be deferred. JSF program officials
also reported that 38 software severity 1 and 2 defects were moved from
Block 0.5 to 1.0. This deferment strategy to meet schedule is doubtful
given the consequences and probability of software risk being realized
later in flight test. It also extends the overall schedule for
completing and maturing related capabilities while adding costs to
future efforts.
22. Senator Levin. General Moore, General Fraser, head of the Air
Force's Air Combat Command (ACC), has been quoted as saying that he
could be forced to delay the Air Force's IOC date by 2 years or more,
based not on delayed aircraft deliveries, but based on a lack of
sufficient capability in the software delivered with those early
aircraft. When will the JSF program be able to deliver the software to
ACC that General Fraser believes is needed to achieve IOC?
General Moore. Block 3 is planned to deliver to operational testing
in late 2014. We expect Block 3 operational testing to complete in
early 2016. I defer to the Services on their respective IOC plans.
defense contract management agency problems
23. Senator Levin. Secretary Carter, the IMRT highlighted a concern
about a lack of consistent Defense Contract Management Agency (DCMA)
engagement across the contractor sites. This would have been bad enough
when we were building aircraft the old-fashioned way, but when we are
trying to take advantage of a global supply chain to build an aircraft,
such a situation is intolerable. What steps are you taking to correct
this problem with DCMA?
Dr. Carter. The DCMA has developed a new strategic plan for fiscal
years 2009-2013 to address the lack of consistent engagement across
contractor sites. This plan defines the key focus areas and specific
steps being taken to improve the Agency's support to the DOD
Acquisition Enterprise. To address increased customer demand for
specialized skills, the DCMA is expanding their analytical capabilities
in the areas of pricing, earned value management, and supply chain
management. The Agency is continuing to improve management controls and
consistency of operations and contractor engagement through deployment
of a new organization alignment which establishes an Operations
Directorate replacing the divisional structure and functionally
realigning its core business activities into three functional
Directorates: Contracting, Quality Assurance, and Engineering and
Analysis. The Agency concept of operations implementing this
realignment incorporates well-defined roles, responsibilities, and
infrastructure to promote standardization, ensure proper alignment, and
enhance mission performance. To provide focused and integrated
acquisition insight to the Agency's customers, a Portfolio Integration
and Analysis Directorate has also been established under the new
organizational design. This new Directorate includes an Integration
Support Division whose duties include integration and analysis of
functional data to provide predictive strategic products and corporate
technical and business system profiles to the Agency's customers. This
overarching strategic approach is designed to ensure the Agency
executes standard business processes and drives consistent supplier
engagement activities.
fighter force structure
24. Senator Levin. Ms. Fox, in my opening statement, I mentioned
the possible impact that the delays in the F-35 program could have on
the Air Force, Navy, and Marine Corps. Even under the last announced F-
35 schedule, the Services were already anticipating sizeable force
structure gaps. What effect will the F-35 program delays have on the
fighter force structure of the Services?
Ms. Fox. The PB11 JSF restructure deferred the procurement of 122
of the 483 aircraft planned for fiscal years 2011 through 2015 in PB10.
55 of the 122 were Navy aircraft and 67 were Air Force aircraft. CAPE
and the Services are assessing a potential capacity gap in the years
prior to full delivery of the JSF. This effort will also examine the
feasibility of mitigating a shortfall. These measures include achieving
depot efficiencies to increase aircraft availability and service life
extensions of existing aircraft.
25. Senator Levin. Ms. Fox, why didn't the Quadrennial Defense
Review (QDR) reach any conclusion about requirements for fighter force
structure?
Ms. Fox. The 2010 QDR identified 6 air superiority wing equivalents
and 10-11 theater strike wing equivalents for the Air Force and 10 Navy
carrier air wings and 6 Marine Corps fixed-wing Marine Air Groups (5
Active Duty and 1 Reserve) for the Navy.
joint assessment team review of the pratt & whitney engine program
26. Senator Levin. Secretary Carter, earlier this year, you
announced that you were commissioning a JAT to review cost and schedule
issues with the Pratt & Whitney F135 engine program. What were the
conclusions or recommendations of the JAT?
Dr. Carter. The JAT determined that the cost growth projections are
to a significant degree reversible. The JAT also determined that with
investment in affordability and a commitment by the contractor, Pratt &
Whitney (P&W) could realistically achieve their cost goals. The JAT
recommendations focused on affordability investment, contracting
actions, the Component Improvement Program, and risk management and
readiness for production of the prime and subs, as well as other more
detailed areas. The results of the JAT were briefed to professional
staff members of the four congressional defense committees on February
22, 2010. The backup information was provided to the congressional
defense committees on March 5, 2010.
27. Senator Levin. Secretary Carter, what part, if any, is the F135
program playing in the cost, schedule, or performance issues with the
F-35 program?
Dr. Carter. The F135 program, from program baseline in 2001, is
approximately 7.5 percent of the Average Unit Procurement Cost. From
SAR 07 to SAR 09, the F135 program accounts for approximately 4.4
percent of the increase in Average Unit Procurement Cost and 3.5
percent of the Program Acquisition Unit Cost. While the F135 program
has experienced delays, to date none of those delays have created a
delay in the overall F-35 program. Initial Service Release was
accomplished earlier this year and the engine has accumulated 13,400
ground test hours and 219 flight test hours.
28. Senator Levin. Secretary Carter, what, if any, commitment do
you have from Pratt & Whitney leadership to correct the problems, or
share in the additional costs of the F135 program?
Dr. Carter. Pratt & Whitney leadership has committed to assist the
Department in correcting the cost growth concerns on the F135 engine.
In addition, they have agreed, from corporate funds, to fund a number
of affordability initiatives that require investment in order to
further reduce the cost of the F135 engine. The JAT proposed that with
commitment and funding, the cost growth trends can be reversed, and I
have challenged Pratt & Whitney to do so.
______
Question Submitted by Senator Bill Nelson
f-35 program delays
29. Senator Bill Nelson. Secretary Carter and General Moore, both
of your written statements to the committee state that you expect F-35
training operations to begin at Eglin Air Force Base in late 2010 with
LRIP 1 aircraft. Have the F-35 program delays impacted the number of
aircraft that will arrive and train at Eglin over time? Please provide
a revised estimate of the total number of aircraft that will be based
there and the arrival timeframe for each.
Dr. Carter. The total number of aircraft to be based at Eglin Air
Force Base (AFB) has not changed; however, program delays have impacted
the delivery dates of the aircraft. The initial Record of Decision for
Eglin AFB is for the beddown and limited operations of 59 aircraft (24
CTOLs, 20 STOVLs, and 15 CVs). The first aircraft, Air Force CTOLs, are
scheduled to arrive at Eglin before the end of calendar year 2010.
Marine Corps STOVLs begin to arrive in early 2011 and Navy CVs will
start arriving in mid-2012. Aircraft will continue arriving through
2014.
General Moore. Delays in production have had a direct impact on the
timing of aircraft arrival at Eglin so that training will start later.
However, the total number of planned aircraft remains the same and is
restricted by the current Environmental Impact Statement. Approximate
projections for cumulative aircraft at Eglin Air Force Base by year are
as follows: 4 (2010); 30 (2011); 37 (2012); 51 (2013); and 46 (2014).
______
Question Submitted by Senator Mark Udall
service life extension program
30. Senator Udall. Secretary Carter, based on recent testimony
before the House of Representatives, it appears the Air Force plans to
modernize and renovate fourth generation aircraft using a Service Life
Extension Program (SLEP) in order to bridge the capability gap until
the F-35 becomes available. What does this year's budget request do to
meet that goal and what would a SLEP include for the Nation's F-16s?
Dr. Carter. The Air Force is closely monitoring fighter capability
and capacity shortfalls. The Air Force is currently conducting full
scale fatigue tests (FSFT) on the A-10 and F-15C, and starting a FSFT
on the F-16 Block 50 in fiscal year 2011. These tests will increase the
accuracy of determining the remaining service life of aircraft and
continue to inform SLEP. SLEP combined with sustainment upgrades and a
capability enhancement package for the F-16 Block 40-52 aircraft
provides essentially the same capability as all-new ``4.5 Generation''
fighters at 10 to 15 percent of the cost.
______
Questions Submitted by Senator Roland W. Burris
f-35 delay to marine corps
31. Senator Burris. Secretary Carter and General Moore, the Air
Force reports that the introduction of the F-35 to their operating
forces is going to be delayed up to 24 months. Is the IOC of the F-35
for the Marine Corps going to have to be delayed as well?
Dr. Carter. The Marine Corps plans to IOC with a multi-mission
support capable Block 2B aircraft as defined in the JSF operational
requirements document (ORD) change 3. The aircraft, support, and
ancillary equipment for training, test, and the first operational
squadron were procured in fiscal years 2008, 2009, and 2010. With the
recent program restructuring, IOC is now projected for December 2012
for the Marine Corps. This is based on operational requirements and the
associated metrics that encompass capabilities, equipment, training,
and support. We will track and measure the progress of the program to
meet Marine Corps requirements between now and December 2012 and ensure
the Marine Corps has all the elements required for operational use of
the F-35B. An IOC declaration will be dependent upon meeting these
requirements.
The F-35B Block 2B is far superior to any aircraft in the Marine
Corps inventory. With VLO survivability, a powerful integrated sensor
suite, fused information displays, interoperable joint connectivity, a
precision weapon capability, and self protect anti-air weapons, it is a
total package of capabilities. It will revolutionize our expeditionary
Marine Corps air-ground combat power in all threat environments while
enabling joint interoperability and reducing the reliance on supporting
aircraft, tankers, and electronic warfare jammers.
General Moore. I defer to the Services on their respective IOC
plans.
32. Senator Burris. Secretary Carter and General Moore, if the
delay is 24 months, what is the plan to recapitalize the current F-18
and AV-8B aircraft fleet for the Marine Corps?
Dr. Carter. We are closely managing the flight hours and fatigue
life of our tactical aircraft. Since 2004, we have provided guidance
and actions to optimize aircraft utilization rates while maximizing
training and operational opportunities. The F-18 A-D Inventory
Management Forecasting Tool is used to project the combined effects of
TACAIR transition plans, retirements, attrition, and pipeline
requirements on the total F-18 A-D aircraft inventory. The model is
updated with the most recent data and forecasts the strike fighter
inventory compared to the existing requirements. Critical model
variables include JSF deliveries, force structure, usage rates, life
limits, depot turnaround time, fatigue life expended, catapult launches
and arrested landings, and field landings.
Faced with an increased shortfall, the Navy has continued to
identify further opportunities to reduce its impact. The Marine Corps
has modified its F-35 transition plan by transitioning some Hornet
squadrons earlier and leveraging the service life remaining in the AV-
8B fleet. Management ``levers'' have been identified: accelerating the
transition of five legacy F-18C squadrons to F-18 E/F; transitioning
two additional F-18 C squadrons to F-18E/F using the remaining
attrition F-18 E/F Reserve aircraft; and reducing the Navy Unit
Deployment Program and Marine Corps Expeditionary F-18 A+/C/D squadrons
from 12 to 10 aircraft per squadron. Some of these measures are
dependent on reduced demand in Global Force Management requirements.
We do not anticipate procuring fewer than 680 JSF aircraft for the
Navy. Recapitalizing the Navy TACAIR inventory with the F-35B and F-35C
aircraft provides a survivable ``Day One'' strike capability in a
denied access environment that cannot be accomplished by current legacy
aircraft. The Navy's desire is to acquire the JSF program of record at
the programmed ramp to standup squadrons in the most efficient manner
possible.
General Moore. I defer to the Services on their respective IOC
plans.
f-35 delay costs to national security
33. Senator Burris. Secretary Carter and General Moore, as the gap
for fighter aircraft grows, when will our national security position be
seriously degraded?
Dr. Carter. The Department has the necessary fighter aircraft
capacity in the near-term to support our Nation's security needs.
However, ongoing assessments forecast a potential decrease in our
strike fighter capacity during JSF transition, unless further
mitigation measures are implemented. Management initiatives being
implemented by the Department prudently balance operational risks and
requirements today, while seeking to fulfill future projected capacity
and capability requirements. They also allow the Department to closely
monitor progress toward reducing the shortfall and enable adjustments
to the plan before making unnecessary and premature investments or
force structure decisions. Additionally, the Department continues to
assess the projected threats, capabilities, and geo-political (actors
that combine to constitute our strike fighter requirements. On balance,
I believe the force structure represented by our 30-year aviation plan
maintains our national security position across the spectrum of
challenges we are likely to face throughout the time period of the
report, albeit with prudent risk where appropriate.
General Moore. The Air Force is taking numerous steps to mitigate
the fighter shortfall. These steps include options to maximize the
service life of our legacy fighters while we aggressively manage the
procurement of the F-35. We are confident these steps will ensure our
national security risk never reaches the point where it is seriously
degraded.
contractor costs
34. Senator Burris. Ms. Fox, part of the JSF program overhaul
includes adding $2.8 billion, while withholding $614 million in
performance award fees. If we are injecting another $2.8 billion, what
is really being withheld?
Ms. Fox. JSF award fees are contractual incentives available to the
Joint Program Office to reward desired contractor performance,
according to the terms of the contract. These fees are normally awarded
when the contractor meets or surpasses key performance goals.
The Department decided to withhold the $614 million in award fees
that were available for distribution for recent contract performance.
This withhold applies to past performance.
The $2.8 billion added to the JSF program will be budgeted to
address critical developmental requirements going forward, beginning in
fiscal year 2011. The Joint Program Office will review contract
performance at appropriate times in the future in order to determine
whether the contractor qualifies for and receives award fees.
______
Questions Submitted by Senator John McCain
restructure plan
35. Senator McCain. Secretary Carter, in 2008, the JET I estimated
that the JSF program was 2 years behind the latest schedule; the 2009
JET II revised that estimate and predicted a 30-month delay. Now, the
DOD predicts that its plan to restructure the program, by reducing
production numbers and providing additional funds for development, will
extend the official timeline by only 13 months, not the 30 months the
JET II team predicted the slip would be. Exactly where does that 17-
month savings come from? In other words, exactly how does adding the
additional test aircraft and funding shorten the flight test schedule
by 17 months?
Dr. Carter. The Department has stated they want more realism in
program estimates, but will refuse to accept the cost and operational
consequences of a longer development program without doing everything
possible to minimize them. The JET II projected an additional 30 months
would be required to complete SDD because of F-35 schedule delays that
resulted in an increasingly pressurized flight test schedule and other
program execution assessments (e.g., engineering and software staffing,
manufacturing span times, etc.). To mitigate that potential outcome,
the Department is adding another SDD carrier variant flight test
aircraft, adding a software integration line, and borrowing up to four
LRIP aircraft for development flight test. Taking these factors into
consideration, JET II revised its estimate.
The Department believes these steps will help reduce the 30 months
of additional JET-projected schedule requirements while providing
adequate schedule margin. Under the restructured program, development
test (DT) is planned to complete in March 2015, with Milestone C (full-
rate production) planned in April 2016 commensurate with the completion
of initial operational test and evaluation (IOT&E). In PB11, the
Department also added $2.8 billion RDT&E through the FYDP to fully fund
to the JET II development estimate for the restructured program. The
Department plans to incentivize the contractor to further improve on
the revised cost and schedule position.
capability
36. Senator McCain. General Moore, since 2006, have there been any
changes in the planned block capabilities or overall planned
capabilities for any variant of the JSF? In answering this question,
please provide a comparison of planned capabilities circa 2006 with
capabilities associated with each planned block today. Please also
highlight which of those planned capabilities circa 2006 are either no
longer planned or have been moved to later blocks.
General Moore. The basic approach to the overall functionality of
the block plan has not changed markedly since 2006. Block 0.5 provides
mission system functionality for basic flight; Block 1 supports initial
training; Block 2 supports the Marine Corps IOC with basic close air
support, interdiction, and initial air-to-air capability; and Block 3
provides ORD mission coverage, which includes full suppression/
destruction of enemy air defenses, and offensive and defensive counter
air.
While there have been some minor functionality adjustments within
blocks in the basic block plan, none have had a significant impact on
the overall operational objectives of Blocks 1, 2, or 3. For example,
the functionality moved from Block 2 to Block 3 was primarily advanced
functionality to support the destruction of enemy air defense missions,
and other functions that required the core processing technology
refresh associated with LRIP 5 (Block 3 configuration).
initial operating capability
37. Senator McCain. Secretary Carter, the Marine Corps expects to
take delivery of its version of the JSF with IOC on 2012. You testified
that the Navy and the Air Force are projecting IOC dates of 2016. Given
the likelihood that development will probably not be completed until
2017, exactly what kind of capabilities will those aircraft have?
Dr. Carter. Block 0.5 provides mission system functionality for
basic flight; Block 1 supports initial training; Block 2 supports
Marine Corps IOC with basic close air support, interdiction, and
initial air-to-air capability; and Block 3 provides ORD mission
coverage, which includes full suppression/destruction of enemy air
defenses, and offensive and defensive counter air. Navy and Air Force
IOC dates are based on completion of IOT&E of Block 3 capability.
38. Senator McCain. Secretary Carter, how meaningful will those
capabilities be, given the fighter gaps the Departments of the Navy and
the Air Force are forecasting?
Dr. Carter. The capabilities of the F-35 will be very meaningful to
the Department. The F-35 will provide fifth generation strike fighter
capability and will be the backbone of the tactical aviation fleet not
just for the Services but also for our international partners and
allies.
The Marine Corps will declare IOC with Block 2 software and basic
close air support, interdiction, and initial air-to-air capability.
These capabilities will exceed the capabilities of Their current AV-8B
aircraft and will be upgradable to full Block 3 capability.
When the Air Force and Navy declare IOC with Block 3, the F-35A and
F-35C will have full air-to-air, interdiction, CAS, suppression of
enemy air defenses, and tactical and strategic destruction of enemy air
defenses capability. Further weapons capability will be limited by test
asset capacity, and the Services are prioritizing new weapons and
external weapon certifications to be completed within the schedule and
budget constraints.
39. Senator McCain. Secretary Carter, exactly when does the JSF
exceed weapons-carrying capabilities of the fourth-generation aircraft
they are replacing?
Dr. Carter. The Marine Corps will declare IOC with Block 2 software
and basic close air support, interdiction, and initial air-to-air
capability, These capabilities will exceed the capabilities of their
current AV-8B aircraft and will be upgradable to full Block 3
capability. When the Air Force and Navy declare IOC with Block 3, the
F-35A and F-35C will have full air-to-air, interdiction, CAS,
suppression of enemy air defenses, and tactical and strategic
destruction of enemy air defenses capability. Further weapons
capability will be limited by test asset capacity, and the Services are
prioritizing new weapons and external weapon certifications to be
completed within the schedule and budget constraints.
low-rate initial production
40. Senator McCain. Dr. Gilmore, you noted recently that the
concurrency structured into the JSF program's test, production, and
training plans has obscured the mission capability of LRIP aircraft and
support systems. Do you believe that the revised plan improves the
process by which the mission capability of LRIP systems will be
accurately and credibly predicted well before delivery? Please explain
your answer.
Dr. Gilmore. By adding time and somewhat reducing the planned buys
of production aircraft, the restructure provides the opportunity to
better tie deliveries of aircraft to demonstrated progress in the
flight test program. An Integrated Test Review (ITR) begins this week
to analyze the new schedule and determine the critical paths to
complete development goals and enter two mission-level tests, including
IOT&E. The review process will yield insight into and provide a basis
for how LRIP capabilities will be verified prior to delivery. During
the ITR process, DOT&E will work to improve the users' understanding of
the mission capability of each LRIP lot as well as assure that the test
plans in place will verify what capability exists before delivery.
fixed-price contracting
41. Senator McCain. Secretary Carter, exactly by when do you expect
that the program will transition into using fixed-price-type production
contracts?
Dr. Carter. The program is attempting to transition to fixed-price
production contracts for the LRIP Lot 4 contracts.
42. Senator McCain. Secretary Carter, in 2008, the DOD concurred
with a Government Accountability Office (GAO) recommendation that the
Under Secretary of Defense for Acquisition, Technology, and Logistics
(AT&L) report on a strategy to transition to a fixed-price-type
contract. As GAO pointed out, without such a report, Congress will be
unable to assess the extent to which the taxpayer could be exposed to
production cost increases. Mindful of the substantial amount of
concurrency that will remain in the test plan even after your Risk
Mitigation Strategy is executed, what is your strategy to transition
the program into fixed-price-type production contracting?
Dr. Carter. The program is transitioning to fixed-price production
contracts for the LRIP Lot 4 contracts. Negotiations are ongoing and
are expected to be completed this summer.
award fees
43. Senator McCain. Secretary Carter, on the JSF program, what is
the history of award fees paid to the program's prime contractor since
the beginning of SDD? Please express that as both a dollar amount and a
percentage of the total fee available.
Dr. Carter. For the Lockheed Martin development contract, the total
fee available through the end of the October 2009 award fee period was
$1.862.4 million and the total fee awarded is $1,528.3 million, so the
contractor was awarded approximately 82 percent of the available award
fee.
44. Senator McCain. Secretary Carter, how much of the available
fee, if any, remains to be earned on the prime contractor's efforts to
develop the aircraft?
Dr. Carter. The remaining fee for the contractor's development
effort is $614 million. We are restructuring that $614 million and
revising the SDD contract structure to reward measurable progress
against significant schedule events and ensure event-based fees, to
include completion at or under the estimate at completion, are paid
only if the events are accomplished in order to support the
restructured contract performance.
operational test and evaluation
45. Senator McCain. Dr. Gilmore, what concerns, if any, do you have
about the potential impact that the new plan to restructure the JSF,
essentially comprised of reducing production numbers and adding funds
for developmental testing, have on the proper conduct of operational
testing?
Dr. Gilmore. The restructure provides the opportunity to conduct
the robust developmental test program that is a prerequisite for
successful operational testing. As the restructured program proceeds,
DOT&E will work to address the following concerns:
Since the LRIP aircraft being added to the SDD flight
test fleets were originally intended for training and
operational test functions, we need to assure that they are
returned to the operational test team in time to meet the
operational test entry criteria.
The training center will also have fewer aircraft to
accomplish the planned training of operational test crews;
therefore, the impact of this change needs to be clearly
understood and mitigated.
An additional test line for software integration must
be procured to enable timely delivery of the remaining software
blocks. The contractor is acquiring equipment for the U.S.
Reprogramming Lab (USRL) that will be used to develop the
operational mission data load. The contractor intends to use
the USRL equipment for some software integration testing in
parallel with preparation of the equipment for delivery to the
USRL. We need to assure that use of the USRL to develop the
operational mission data load is not disrupted by this
approach.
The plans for the Block 2 operational test and the
Block 3 IOT&E are not adequate without full accreditation of
the verification simulation for operational scenarios. The
opportunity exists during the restructure to correct resource
shortfalls associated with this important man-in-the-loop
simulation.
earned value management
46. Senator McCain. Secretary Carter, what is your assessment of
the prime contractor's earned value management system (EVMS) and how
close the DOD is to formally allowing the DCMA to decertify the system
or take other remedial action, pending a demonstration of progress in
fixing documented deficiencies?
Dr. Carter. Lockheed Martin Fort Worth is currently non-compliant
with 19 of 32 EVMS guidelines. The Department considers this
unacceptable. Lockheed Martin had developed a Corrective Action Plan
that fell short of the Department's expectations. I have directed the
DCMA to supplement the F-35 Joint Program Office's team with EVMS
experts in working with Lockheed Martin to make sure we get this right.
We are proactively working to obtain an improved, executable plan by
June 30, 2010. If this date is not met, I will consult with the JPO and
DCMA on what contractual or other remedies can be employed to achieve
results we seek.
risk software development and testing
47. Senator McCain. Dr. Gilmore, while the test plans associated
with the initial software blocks, which provide relatively modest
capability, are sufficiently defined, those associated with the later
software Blocks 2 and 3 appear to lack fidelity. With their delivery
delayed by more than a year, your observation that ``[t]he late
delivery of test aircraft has, so far, masked the effect of delays in
software development'' is salient. How significant is the possibility
of a hidden software risk, that is, software and integration risks that
no one can really see right now because flight testing has barely
begun?
Dr. Gilmore. The risk in developing, integrating, and flight
testing software in the time allotted remains high. While recent
developments such as accomplishing first flight of the first mission
systems test aircraft, BF-4, are positive, all missions systems flight
test remains to be accomplished. Recognition of the need for an
additional software systems integration and test line and including it
in the program restructure is an acknowledgement of that risk. Flight
test of Block 1, which is planned to begin by the fourth quarter of
this year, will provide the next key indication of the ability of the
program to perform to schedule and meet requirements for delivered
capability.
international partners and cost, schedule, and performance
48. Senator McCain. Secretary Carter, please describe what price
effect any change in the procurement quantity of JSF aircraft sought by
each of the program's international partners will have on the unit cost
of the JSF under the overall program. In other words, please explain as
specifically as possible, how elastic the unit cost of buying JSF
aircraft under the overall program is to any change in the number of
JSF aircraft that each of the program's international partners
ultimately decide to buy.
Dr. Carter. The elasticity of JSF prices to changes in
international buy assumptions depends on how these changes are modeled.
As a general approximation, we considered 25 percent, 50 percent, 75
percent, and 100 percent reductions in international quantities and
computed how the Program Acquisition Unit Cost (PAUC) and Average
Procurement Unit Cost (APUC) would change in response to these
reductions. We found that PAUC and APUC increased on average 1 percent
for each 25 percent reduction in total partner procurement quantities.
Smaller total production quantities imply less opportunity for cost
improvement from worker learning and consequently, higher unit costs.
In addition, program fixed costs are increasingly spread over a smaller
base which increases average unit costs.
A table showing the results of this analysis is attached.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
49. Senator McCain. Secretary Carter, what impact, if any, will the
new plan to restructure the JSF program have on the dates by which each
of the program's international partners can expect to take delivery of
the aircraft and the cost at which each will ultimately buy them?
Dr. Carter. The JSF restructure will not impact the dates by which
each of the program's international partners can expect to take
delivery of their planned aircraft procurements. The Department's
restructure did revise the procurement profile, which does impact
procurement costs. However, the partner's costs for aircraft will
ultimately be determined by when each partner decides to actually
execute their planned procurements.
50. Senator McCain. Secretary Carter, does the new restructure plan
have any impact on the capabilities of any JSF aircraft that any of the
program's international partners intend to buy?
Dr. Carter. The restructuring of the JSF program will not have any
impact on the capabilities of the (JSF) aircraft the program's
international partners intend to buy. The revised JSF program schedule
may affect some countries' original plans regarding introduction of JSF
capability into their force structure.
______
Questions Submitted by Senator Saxby Chambliss
initial operational capability for the joint strike fighter
51. Senator Chambliss. Ms. Fox and Mr. Sullivan, in Secretary
Carter's written testimony for this hearing, he announced that
projected IOC dates for the three F-35 variants are as follows: the
Marine Corps in 2012 and the Navy and the Air Force in 2016. Do you
think these dates will be met and, if not, what do you expect the
actual IOC dates for the three variants will be?
Ms. Fox. Yes, in light of the changes to the program, the Services
have reassessed their IOC dates. Each Service defines IOC depending on
what capabilities it intends to have at IOC, operational test and
training requirements, and the number of aircraft required.
Specifically, the Marine Corps will reach IOC in 2012 and the Navy and
the Air Force will reach IOC in 2016.
Mr. Sullivan. Our March 2010 report states that JSF cost increases
and schedule delays increase the risk that the program will not be able
to meet warfighter capability and quantity requirements on time. At
that time, the Marine Corps IOC date was March 2012, the Air Force's
March 2013, and the Navy's March 2015. We recommended, and DOD
concurred, that the military services conduct a detailed review of IOC
requirements and reasonable, realistic timeframes for achieving them.
Shortly after the Department announced it was restructuring the JSF
program to add more time for development and to reduce near-term
procurement, the Air Force and Navy indicated their intent to extend
IOC dates, while the Marine Corps did not. We seriously question the
Marine Corps ability to meet the 2012 IOC date, as it was previously
defined as requiring 30 operational STOVL aircraft with interim
warfighting capability.
The likelihood of the Air Force and Navy meeting their extended IOC
dates will depend on several factors. First, the program must continue
to mature its manufacturing processes and speed up the production of
aircraft. Development test aircraft are taking longer than planned to
manufacture and the prime contractor has not come down the
manufacturing learning curve as projected. As of January 2010, the
program has only delivered four development flight test aircraft and
has a backlog of production aircraft on order. The Air Force requires
51 operational aircraft and the Navy 28 aircraft at IOC, all with full
warfighting capability. Given that the program is still struggling to
mature its production processes we believe it optimistic that it will
be able to produce sufficient assets and fully test these quantities in
time to meet even the extended service IOC dates.
Another key factor is the progress of the development and initial
operational flight test programs. Specifically, real progress must be
made in the development flight test program demonstrated by the burning
down of test flights, flight test hours, and test points. The flight
test program has experienced significant delays because of late
aircraft deliveries, technical problems, and low productivity. Only 3
percent of its planned flight tests were completed as of the end of
2009. The program does not expect to complete development flight
testing of Block 2 capabilities-required for Marine Corps IOC--until
mid-2012. The program does not expect to complete development flight
testing of Block 3 full warfighting capabilities--required for the Air
Force and Navy IOCs--until March 2015. Restructuring also extended
operational testing. The Director of Operational Test and Evaluation
(DOT&E) is now projecting completion of initial operational testing of
the full warfighting capability by mid-2016, but only if additional
test aircraft are added, software is delivered on time, and a strenuous
pace of testing is maintained, something that both DOT&E and the JET
question. DOT&E also reported that the mission capability of the
initial production aircraft is unclear, creating planning problems for
the Services that depend on these aircraft to meet IOC. Our report
concluded that these actions, coupled with plans to reduce procurement
in the near-term and utilize some production aircraft in development
testing, could impinge on concurrent efforts to begin training pilots
and maintainers, and could significantly overlap operational testing--
all efforts important to stand up the first operating units and meet
warfighter capability and quantity requirements.
An unknown factor is the number of problems to be discovered in
testing and the program's ``success'' in fixing deficiencies. Past
programs have shown that many problems are not discovered until flight
testing. As such, the program is likely to experience setbacks as it
discovers and completes the necessary technical or design fixes to
address the problem. This could, in turn, delay the start or completion
of operational testing. In this way, the likelihood of meeting IOC
dates will depend to a large degree on the number and severity of
problems discovered in development testing. While the restructuring
adds new test assets and extends testing, the test schedule is still
aggressive with little schedule margin for error. In addition, while
the program's simulation labs may reduce the risk of discovering major
issues in flight testing, the labs are unproven as a substitute for
flight testing and most have yet to be accredited. Furthermore, while
approximately three-fourths of software has been developed, only about
40 percent has completed the more challenging phase of integration and
testing.
52. Senator Chambliss. Ms. Fox and Mr. Sullivan, do you expect it
will be necessary to eliminate or defer certain capabilities on the
different variants in order for those variants to meet the now
advertised IOC dates?
Ms. Fox. No. The Services define the deliveries and capability
required to declare IOC. The Navy and Air Force have decided to declare
IOC in 2016 after the conclusion of operational test, which is
consistent with the restructured schedule. The Marine Corps remains
committed to an interim capability in 2012.
Mr. Sullivan. As discussed above, the Air Force and Navy are
projecting an extension of their respective IOCs to 2016, while the
Marine Corps' IOC date remains the same. The determination of IOC is
primarily a Service responsibility. The progress of the schedule will
largely determine what capabilities are available when each Service
ultimately declares IOC. While the deferred Air Force and Navy IOC
dates will provide more time for testing and fixing problems, we are
not in a position to determine whether or not it will be necessary to
eliminate or defer certain capabilities on the different variants.
Based on prior test performance to date, with significantly less
progress accomplished than planned, the program will have to improve to
provide sufficient capabilities for IOC dates. In our March 2010
report, we recommended that DOD reassess warfighter requirements and if
necessary, defer some capabilities to future increments.
______
Questions Submitted by Senator David Vitter
alternate engine for the f135
53. Senator Vitter. Secretary Carter and Ms. Fox, I understand that
the current projected cost of the F135 is in significant excess of its
target value and has had continued cost growth. It seems to me that the
competition would hold down the cost growth that you are experiencing
now, and would hold down cost growth in future years. Why then is the
DOD so adamant about abandoning competition by proposing to eliminate
the alternate engine?
Dr. Carter. The Department is firm in our view that the interests
of the taxpayers, our military, our partner nations, and the integrity
of the JSF program are best served by not pursuing a second engine.
There is no guarantee that having two engines will create significant
long-term savings to outweigh the significant near-term investment. The
additional costs and the burden of maintaining two logistical systems
are not necessarily offset by the potential savings generated through
competition.
Ms. Fox. While it is true that competition can be effective in
managing major acquisition programs, it is not the only tool that the
Department has available to manage key supplier relationships, as well
as costs, in acquiring major systems. As part of the restructuring of
the JSF program proposed in the fiscal year 2011 President's budget, we
plan to improve the implementation of proven contract management
principles and incentives related to costs, as well as insight into
actual contractor cost performance, in the management of the entire JSF
program, including the propulsion system.
acquisition shortfalls
54. Senator Vitter. Secretary Carter, according to a McKinsey study
released this month analyzing 33 major militaries in the world, the
United States scored last in combat gear output per dollar spent. Do
you agree with the study's assertions that the United States is one of
the lowest performing countries in output per dollar spent?
Dr. Carter. I do not agree with the study's assertion that the
United States is one of the lowest performing countries in output per
dollar spent. We do not agree with the methodology that was used to
derive this conclusion.
For instance, the ``Military Equipment Output'' metric used to
calculate ``output'' per dollar spent does not adequately reflect the
superior capabilities of the equipment used by the U.S. Armed Forces.
For example, the study states that an F-22 or F-35 is equivalent to 3.6
MiG-19s, first flown in 1953. We believe our newest fighters are much
more capable than this comparison would suggest.
Furthermore, the study's methodology uses France and the United
Kingdom as having the ``ideal'' equipment mix, and then judges other
countries' mixes against this benchmark. This does not take into
account the very different types of global missions the United States
prepares for that other countries do not.
Due to inadequate consideration of U.S. capability advantages and
the different mix of capabilities needed by the United States, the
study incorrectly finds that the U.S. output per dollar spent ratio is
lower than other countries'.
These factors prevent the study from forming a reliable qualitative
or quantitative judgment about the U.S. output per dollar spent.
55. Senator Vitter. Secretary Carter, how do you plan on getting
better value for the money DOD spends while still maintaining high
quality weapon systems?
Dr. Carter. First let me say that many programs do well in terms of
cost, schedule, and performance, providing value to the warfighter and
the taxpayer. But for those programs that do have cost and schedule
growth or performance issues, one of the biggest drivers is unstable
requirements.
We are addressing requirements instability through increased
partnering with the Joint Staff on requirements and through
Configuration Steering Boards (CSBs). CSBs review all proposed
requirements changes and any proposed significant technical
configuration changes that could potentially impact cost and schedule
for an MDAP. Such changes will generally be rejected, deferring them to
future blocks or increments. Changes may not be approved unless funds
are identified and schedule impacts mitigated. CSBs also create a
collaborative forum for program managers to propose and describe
reductions in requirements that can significantly lower cost without
substantially reducing capability.
The Department maintains high quality weapon systems by rigorously
testing the capabilities that have been developed to assure that the
system performs as advertised, and that we are adequately equipping the
warfighter. Testing and evaluation is a critical process that must be
thoroughly executed before entering into the more costly production
phases. DOD acquisition policy requires the Director of Operational
Test and Evaluation to conduct independent testing of all MDAPs to
determine the operational effectiveness and suitability of a system
under realistic operational conditions. The demonstration of critical
technologies on which the system design is based is embedded in the
overarching evaluation of operational effectiveness. Operational
testing must be completed and the results assessed before a program may
proceed to a full-rate production decision.
Fostering greater use of CSBs and implementing robust testing and
evaluation are just two areas among many where the Department is
demonstrating its commitment to getting better value in its acquisition
programs while still delivering high quality capabilities to the
warfighter.
56. Senator Vitter. Secretary Carter, what immediate reforms can
you implement to get better value for acquisitions?
Dr. Carter. There is no ``silver bullet'' strategy for reforming
the acquisition system. The QDR identified several broad areas where
the Department is focusing its reform efforts, including: setting
reasonable requirements for new systems that do not stretch to the far
limit of current technological boundaries; and maintaining budget
stability through demanding cost, schedule, and performance realism
while holding industry and ourselves accountable. Consistent with the
Weapon Systems Acquisition Reform Act of 2009, the Department is
implementing changes in the early, middle, and end phases of a
program's lifecycle.
In the early phases, the Department is addressing requirement
overreach by subjecting each major program to a Materiel Development
Decision before Milestone A, which will ensure early on that programs
are based on approved requirements and a rigorous assessment of
alternatives. Furthermore, through competitive prototyping and
preliminary design reviews before Milestone B, technical risks will be
reduced before progressing to the more costly phases.
To foster budget stability through cost, schedule, and performance
realism, the Department is implementing a number of tools to focus on
the middle and end phases of a program's lifecycle. These include
greater use of fixed-price, competitively awarded contracts where
technological requirements are mature and well defined; forming
Configuration Steering Boards to prevent requirements creep; initiating
independent peer review processes to ensure consistency of approach,
quality of contracting, and information sharing; and improving life
cycle management and sustainment policy procedures with attention
toward accurately estimating long-term ownership costs.
These reforms will improve outcomes for our customer--the
warfighter--and provide better value to the taxpayer.
[Whereupon, at 1:35 p.m., the committee adjourned.]