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United States Government Accountability Office: 
GAO: 

Report to Congressional Committees: 

March 2013: 

F-35 Joint Strike Fighter: 

Current Outlook Is Improved, but Long-Term Affordability is a Major 
Concern: 

GAO-13-309: 

GAO Highlights: 

Highlights of GAO-13-309, a report to congressional committees. 

Why GAO Did This Study: 

The F-35 Lightning II, the Joint Strike Fighter, is DOD’s most costly 
and ambitious aircraft acquisition. The program is developing and 
fielding three aircraft variants for the Air Force, Navy, Marine 
Corps, and eight international partners. The F-35 is critical to long-
term recapitalization plans as it is intended to replace hundreds of 
existing aircraft. This will require a long-term sustained funding 
commitment. Total U.S. investment is nearing $400 billion to develop 
and procure 2,457 aircraft through 2037. Fifty-two aircraft have been 
delivered through 2012. The F-35 program has been extensively 
restructured over the last 3 years to address prior cost, schedule, 
and performance problems. GAO’s prior reviews of the F-35 made 
numerous recommendations to improve outcomes, such as increasing test 
resources and reducing annual procurement quantities. 

This report, prepared in response to the National Defense 
Authorization Act of 2010, addresses (1) F-35 program performance 
during 2012, including testing, technical risks, and software; (2) 
manufacturing performance indicators, production results, and design 
changes; and (3) acquisition and sustainment costs going forward. 
GAO’s work included analyses of a wide range of program documents and 
interviews with defense and contractor officials. 

What GAO Found: 

The F-35 program achieved 7 of 10 key management objectives for 2012 
and made substantial progress on one other. Two objectives on aircraft 
deliveries and a corrective management plan were not met. Also in 
2012, the program conducted more developmental flight tests than 
planned and made considerable progress in addressing critical 
technical risks, such as the helmet-mounted display. With about one-
third of development flight testing completed, much testing remains to 
demonstrate and verify F-35 performance. Software management practices 
are improved, but with significant challenges ahead as software 
integration and testing continue to lag behind plans. 

Manufacturing and supply processes are also improving—-indicators such 
as factory throughput, labor efficiency, and quality measures are all 
positive. While initial F-35 production overran target costs and 
delivered aircraft late, the latest data shows labor hours decreasing 
and deliveries accelerating. The program is working through the 
continuing effects from its concurrent acquisition strategy that 
overlapped testing and manufacturing activities. For example, the 
program is continuing to incur substantial costs for rework to fix 
deficiencies discovered in testing, but the amount of rework needed on 
each aircraft is dropping. 

Going forward, ensuring affordability—-the ability to acquire aircraft 
in quantity and to sustain them over the life cycle—-is of paramount 
concern. With more austere budgets looming, F-35 acquisition funding 
requirements average $12.6 billion annually through 2037 (see below). 
The new F-35 acquisition baseline incorporates the Department of 
Defense’s (DOD) positive restructuring actions taken since 2010, 
including more time and funding for development and deferred 
procurement of more than 400 aircraft to future years. These actions 
place the F-35 program on firmer footing, although aircraft will cost 
more and deliveries to warfighters will take longer. The program 
continues to incur financial risk from its plan to procure 289 
aircraft for $57.8 billion before completing development flight 
testing. Meanwhile, the services are spending about $8 billion to 
extend the life of existing aircraft and to buy new ones to mitigate 
shortfalls due to F-35 delays. 

Figure: F-35 Joint Strike Fighter Acquisition Funding Requirements: 

[Refer to PDF for image: vertical bar graph] 

Then -year dollars: 

Average: $12.6 billion. 

Fiscal year 2013: $9.1 billion. 

Fiscal year 2014: $9.0 billion. 

Fiscal year 2015: $9.9 billion. 

Fiscal year 2016: $11.6 billion. 

Fiscal year 2017: $12.4 billion. 

Fiscal year 2018: $14.1 billion. 

Fiscal year 2019: $13.3 billion. 

Fiscal year 2020: $14.0 billion. 

Fiscal year 2021: $16.1 billion. 

Fiscal year 2022: $15.8 billion. 

Fiscal year 2023: $15.8 billion. 

Fiscal year 2024: $16.1 billion. 

Fiscal year 2025: $16.4 billion. 

Fiscal year 2026: $16.6 billion. 

Fiscal year 2027: $16.2 billion. 

Fiscal year 2028: $14.2 billion. 

Fiscal year 2029: $11.4 billion. 

Fiscal year 2030: $10.5 billion. 

Fiscal year 2031: $10.8 billion. 

Fiscal year 2032: $10.7 billion. 

Fiscal year 2033: $10.8 billion. 

Fiscal year 2034: $10.9 billion. 

Fiscal year 2035: $11.1 billion. 

Fiscal year 2036: $10.7 billion. 

Fiscal year 2037: $8.6 billion. 

Source: GAO analysis of DOD data. 

[End of figure] 

What GAO Recommends: 

GAO is not making recommendations in this report. DOD’s restructuring 
of the F-35 program and other actions are responsive to many prior 
recommendations. 

View [hyperlink, http://www.gao.gov/products/GAO-13-309]. For more 
information, contact Michael J. Sullivan at (202) 512-4841 or 
sullivanm@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

Program Made Progress in 2012, but Majority of Testing Still Ahead: 

After a Slow Start, Aircraft Manufacturing and Deliveries Are 
Beginning to Catch Up to Plans: 

Costs and Funding for Acquisition and Sustainment Remain Very 
Challenging Moving Forward: 

Concluding Observations: 

Agency Comments and Our Evaluation: 

Appendix I: Prior GAO Reports and DOD Responses: 

Appendix II: Scope and Methodology: 

Appendix III: Comments from the Department of Defense: 

Appendix IV: GAO Contact and Staff Acknowledgment: 

Related GAO Products: 

Tables: 

Table 1: Changes in Reported F-35 Program Quantity, Cost, and 
Deliveries, 2001-2012: 

Table 2: F-35 Program Results for 2012 Objectives: 

Table 3: Procurement Contract Costs as of September 2012: 

Table 4: F-35 Procurement Investments and Flight Test Progress: 

Figures: 

Figure 1: F-35 Flight Test Points Progress in 2012: 

Figure 2: Percent of Sensor Fusion Development in Each Software Block: 

Figure 3: F-35 Deliveries Compared to Contract Dates: 

Figure 4: F-35 Engineering Design Changes: 

Figure 5: Mean Flying Hours between Failures: 

Figure 6: F-35 Program Budgeted Development and Procurement Funding 
Requirements, Fiscal Years 2013-2037: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

March 11, 2013: 

Congressional Committees: 

At a cost approaching $400 billion, the F-35 Lightning II--also known 
as the Joint Strike Fighter--is the Department of Defense's (DOD) most 
costly and ambitious acquisition program. The program is developing 
and fielding three aircraft variants for the Air Force, Navy, and 
Marine Corps and eight international partners. The F-35 is the 
linchpin of U.S. and partner plans to replace existing fighters and 
support future combat operations. In a time of more austere federal 
budgets, the F-35 program as planned will require long-term sustained 
funding in the billions of dollars while, at the same time, competing 
against other expensive defense items. Over the last 3 years, DOD has 
extensively restructured the program to address relatively poor cost, 
schedule, and performance outcomes. 

We have reported on F-35 issues for a number of years.[Footnote 1] 
While a program as complex and technically challenging as the F-35 
would be expected to have setbacks, we have reported that the 
magnitude and persistence of the program's cost and schedule problems 
can be largely traced to (1) a highly concurrent acquisition strategy 
that significantly overlapped development, testing, and manufacturing 
activities; and (2) decisions at key junctures made without adequate 
product knowledge.[Footnote 2] We have made numerous recommendations 
in our prior reports aimed at reducing risks and improving chances for 
successful outcomes. DOD has taken actions on these recommendations to 
varying degrees. Our June 2012 report concluded that the department's 
recent, extensive restructuring actions were positive improvements 
that should lead to more achievable and predictable outcomes, albeit 
at higher costs and extended times to test and deliver capabilities to 
warfighters.[Footnote 3] Given likely future budget constraints and 
pressures, we recommended that DOD analyze cost and program impacts 
from potentially reduced future funding levels. We also recommended 
that DOD assess the capability and challenges facing the F-35's global 
supply chain that will be critical to supporting efficient and quality 
production at higher annual rates expected in the future. Our June 
2012 and prior reports, recommendations, and DOD actions are 
summarized in appendix I. 

The National Defense Authorization Act for Fiscal Year 2010 requires 
GAO to review the F-35 acquisition program annually for 6 years. This 
is the 4th report under this mandate, and in it, we address (1) 
program performance during 2012, including testing results, software, 
and technical risks; (2) manufacturing and supply performance 
indicators, production results, and design changes; and (3) 
acquisition and sustainment costs going forward. To conduct this work, 
we reviewed program status reports and briefings, management 
objectives, test plans and results, and internal DOD analyses with a 
focus on accomplishments in calendar year 2012 compared to original 
plans for that year. We obtained manufacturing data and cumulative 
outputs from the start of production in 2007 through the end of 2012, 
discussed development and production issues and results to date, 
future expansion plans, and improvement efforts with DOD, F-35 
program, and contractor officials. We toured the aircraft 
manufacturing plant, obtained production and supply performance 
indicators, identified cumulative and projected engineering changes, 
and discussed factory improvements and management controls with 
members of the contractor's work force and DOD plant representatives. 
We evaluated DOD's restructuring actions and impacts on the program, 
tracked cost and schedule changes from program start to the new 
baseline, and determined factors driving the changes. We obtained 
current projections of acquisition funding needs through 2037 and 
ongoing efforts to project life cycle sustainment funding 
requirements. Appendix II contains a more detailed description of our 
scope and methodology. 

We conducted this performance audit from August 2012 to March 2013 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. 

Background: 

The F-35 Joint Strike Fighter program is a joint, multinational 
acquisition intended to develop and field an affordable, highly common 
family of next generation strike fighter aircraft for the United 
States Air Force, Navy, Marine Corps, and eight international 
partners.[Footnote 4] The F-35 is a single-seat, single-engine 
aircraft incorporating low-observable (stealth) technologies, 
defensive avionics, advanced sensor fusion, internal and external 
weapons, and advanced prognostic maintenance capability. There are 
three variants. The conventional takeoff and landing (CTOL) variant, 
designated the F-35A, will be an multi-role, stealthy strike aircraft 
replacement for the Air Force's F-16 Falcon and the A-10 Thunderbolt 
II aircraft, and will complement the F-22A Raptor. The short takeoff 
and vertical landing (STOVL) variant, the F-35B, will be a multi-role 
stealthy strike fighter to replace the Marine Corps' F/A-18C/D Hornet 
and AV-8B Harrier aircraft. The carrier-suitable variant (CV), the F-
35C, will provide the Department of Navy a multi-role, stealthy strike 
aircraft to complement the F/A-18 E/F Super Hornet. Lockheed Martin is 
the aircraft contractor and Pratt & Whitney is the engine contractor. 

DOD began the Joint Strike Fighter program in October 2001 with a 
highly concurrent, aggressive acquisition strategy with substantial 
overlap between development, testing, and production. The program was 
rebaselined in 2004 following weight and performance problems and 
rebaselined again in 2007 because of additional cost growth and 
schedule slips. Following an extensive department-wide review, the 
Secretary of Defense in February 2010 announced a major restructuring 
of the program due to poor cost and schedule outcomes and continuing 
problems. DOD added time and money for development, provided 
additional resources for testing, and reduced the number of aircraft 
to be procured in the near-term. In March 2010, the department 
declared that the program exceeded critical cost growth thresholds 
established by statute--a condition known as a Nunn-McCurdy breach--
and subsequently certified to the Congress in June 2010 that the F-35 
program should continue.[Footnote 5] Due to the cost breach, the Under 
Secretary of Defense for Acquisition, Technology, and Logistics 
rescinded the program's approval to enter system development and DOD 
began efforts to establish a new acquisition program baseline. The 
department continued restructuring actions during 2011 and 2012 that 
added more cost, extended schedules, and further reduced aircraft 
procurement quantities in the near-term. The quantity of F-35 aircraft 
to be procured in total was not changed, but restructured plans have 
deferred to future years the procurement of 410 aircraft originally 
planned to be procured through 2017 based on the 2007 revised 
baseline. Through the end of calendar year 2012, the contractor has 
delivered a total of 52 aircraft-14 test and 38 production aircraft. 

In March 2012, DOD established a new acquisition program baseline for 
the F-35 program that incorporated the numerous positive and more 
realistic restructuring actions taken since 2010. Officials also 
reauthorized continuation of system development, approved continuation 
of low rate initial procurement, divided the program for reporting 
purposes into aircraft and engine subprograms, and took other actions 
required due to the Nunn-McCurdy cost breach. The March 2012 baseline 
is the F-35's fourth, including the original estimate at the start of 
development in October 2001. Table 1 shows changes in cost, quantity, 
and major schedules associated with each baseline and also a June 2010 
interim estimate at the time of Nunn-McCurdy breach. The causes of 
cost growth and schedule delays from 2001 to 2012 are documented in 
past GAO reports (see appendix l and Related Products). 

Table 1: Changes in Reported F-35 Program Quantity, Cost, and 
Deliveries, 2001-2012: 

Expected quantities: 

Development quantities: 
October 2001 (system development start): 14; 
December 2003 (approved baseline): 14; 
March 2007 (approved baseline): 15; 
June 2010 (Nunn-McCurdy): 14; 
March 2012 (approved baseline): 14. 

Procurement quantities (U.S. only): 
October 2001 (system development start): 2,852; 
December 2003 (approved baseline): 2,443; 
March 2007 (approved baseline): 2,443; 
June 2010 (Nunn-McCurdy): 2,443; 
March 2012 (approved baseline): 2,443. 

Total quantities: 
October 2001 (system development start): 2,866; 
December 2003 (approved baseline): 2,457; 
March 2007 (approved baseline): 2,458; 
June 2010 (Nunn-McCurdy): 2,457; 
March 2012 (approved baseline): 2,457. 

Cost estimates (then-year dollars in billions): 

Development: 
October 2001 (system development start): $34.4 billion; 
December 2003 (approved baseline): $44.8 billion; 
March 2007 (approved baseline): $44.8 billion; 
June 2010 (Nunn-McCurdy): $51.8 billion; 
March 2012 (approved baseline): $55.2 billion. 

Procurement: 
October 2001 (system development start): $196.6 billion; 
December 2003 (approved baseline): $199.8 billion; 
March 2007 (approved baseline): $231.7 billion; 
June 2010 (Nunn-McCurdy): $325.1 billion; 
March 2012 (approved baseline): $335.7 billion. 

Military construction: 
October 2001 (system development start): $2.0 billion; 
December 2003 (approved baseline): $0.2 billion; 
March 2007 (approved baseline): $2.0 billion; 
June 2010 (Nunn-McCurdy): $5.6 billion; 
March 2012 (approved baseline): $4.8 billion. 

Total program acquisition: 
October 2001 (system development start): $233.0 billion; 
December 2003 (approved baseline): $244.8 billion; 
March 2007 (approved baseline): $278.5 billion; 
June 2010 (Nunn-McCurdy): $382.5 billion; 
March 2012 (approved baseline): $395.7 billion. 

Unit cost estimates (then-year dollars in millions): 

Program acquisition: 
October 2001 (system development start): $81 million; 
December 2003 (approved baseline): $100 million; 
March 2007 (approved baseline): $113 million; 
June 2010 (Nunn-McCurdy): $156 million; 
March 2012 (approved baseline): $161 million. 

Average procurement: 
October 2001 (system development start): 69; 
December 2003 (approved baseline): 82; 
March 2007 (approved baseline): 95; 
June 2010 (Nunn-McCurdy): 133; 
March 2012 (approved baseline): 137. 

Estimated delivery and production dates: 

First production aircraft delivery: 
October 2001 (system development start): 2008; 
December 2003 (approved baseline): 2009; 
March 2007 (approved baseline): 2010; 
June 2010 (Nunn-McCurdy): 2010; 
March 2012 (approved baseline): 2011. 

Initial operational capability: 
October 2001 (system development start): 2010-2012; 
December 2003 (approved baseline): 2012-2013; 
March 2007 (approved baseline): 2012-2015; 
June 2010 (Nunn-McCurdy): TBD; 
March 2012 (approved baseline): TBD. 

Full-rate production: 
October 2001 (system development start): 2012; 
December 2003 (approved baseline): 2013; 
March 2007 (approved baseline): 2013; 
June 2010 (Nunn-McCurdy): 2016; 
March 2012 (approved baseline): 2019. 

Source: GAO analysis of DOD data. 

Note: TBD means to be determined. 

[End of table] 

Program Made Progress in 2012, but Majority of Testing Still Ahead: 

The F-35 program made progress in 2012 on several fronts. The program 
met or substantially met most of its key management objectives 
established for the year. Also, development flight testing exceeded 
the planned number of flights by a good margin for 2012, but did not 
quite accomplish the planned number of test points.[Footnote 6] The 
program made considerable progress in addressing significant technical 
risks needing resolution, such as the helmet mounted display. 
Furthermore, software management practices improved, but this area 
continued to require more time and effort than planned. While the F-35 
program made progress in 2012, the bulk of development testing and 
evaluation is ahead, is planned to continue into 2016, and is expected 
to identify additional deficiencies impacting aircraft design and 
performance. To date, slightly more than 11 percent of development 
contract performance specifications have been verified as met and the 
development flight test program has cumulatively accomplished just 
over one-third of the test points and test flights planned. The 
operational test community raised concerns about the F-35 readiness 
for training, development test plans and results, and the schedule and 
resources for starting initial operational testing in 2017. 

F-35 Program Met Most of Its 2012 Key Management Objectives: 

The F-35 program office annually establishes major management 
objectives it wants to achieve in the upcoming year. The program 
achieved 7 of the 10 primary objectives (70 percent) it established 
for 2012 and made substantial progress on one other. Table 2 
summarizes the 2012 objectives and accomplishments. 

Table 2: F-35 Program Results for 2012 Objectives: 

Objective: Test; 
Complete Block 1A and 1B Development Test and Evaluation (DT&E); 
Was objective met? Yes; 
Accomplishments: Block 1A DT&E was completed in January 2012 and Block 
1B in March 2012. 

Objective: Test; 
Complete Block 3 Critical Design Review (CDR) #1; 
Was objective met? No; 
Accomplishments: Block 3 preliminary design review closed in November 
2012. Block 3 CDR #1 was conducted in late January 2013. 

Objective: Test; 
Begin Lab Testing of Dual Path Helmet Mounted Display Systems; 
Was objective met? Yes; 
Accomplishments: Both helmets are undergoing extensive testing. 

Objective: Training; 
Begin F-35A and F-35B Pilot Training at Eglin Integrated Training 
Center; 
Was objective met? Yes; 
Accomplishments: F-35A first flight at Eglin in March and F-35B in 
May. Operational utility evaluations completed by November 2012. 
Maintenance training also under way. The Air Force declared 'Ready for 
Training' in December 2012. 

Objective: Contract; 
Conduct Defense Acquisition Board to recertify the start of system 
development; 
Was objective met? Yes; 
Accomplishments: Defense Acquisition Board met in February and 
recertified the F-35 program in a March 2012 acquisition decision 
memorandum. 

Objective: Contract; 
Complete Restructured Development Contract Negotiations; 
Was objective met? Yes; 
Accomplishments: Contract negotiations were completed in December 2012. 

Objective: Cost/Schedule; 
Improve F-35 Production Cost Performance; 
Was objective met? Yes; 
Accomplishments: Cost indices improved for lot 4 compared to previous 
lots. Labor hours also decreasing. 

Objective: Cost/Schedule; 
Objective: Deliver 40 F-35 Aircraft during 2012; 
Was objective met? No; 
Accomplishments: Due to manufacturing delays, labor strike, and other 
reasons, the contractor delivered 30 aircraft during 2012. 

Objective: Cost/Schedule; 
Successful Completion of Defense Contracting Management Agency (DCMA) 
Earned Value Management System (EVMS) Audit; 
Was objective met? No; 
Accomplishments: DCMA rejected the aircraft contractor's EVMS 
corrective action plan in November for lack of progress. Contractor 
resubmitted its plan in January 2013 and DCMA is currently assessing 
it. 

Objective: Cost/Schedule; 
Mature F-35 Supplier Network; 
Was objective met? Yes; 
Accomplishments: Performance measures such as parts shortages, out of 
station work, and scrap rates are improving. 

Source: GAO analysis of DOD data. 

Note: Blocks refer to increments of software capability. There are 3 
major software blocks. 

[End of table] 

In addition to the 7 objectives met, the F-35 program substantially 
met one more-the block 3 critical design review was completed in late 
January 2013 following the preliminary design review in November 2012. 
The remaining two objectives that were not met: (1) the contractor 
delivered 30 production aircraft compared to the program goal of 40 
and (2) its Earned Value Management System (EVMS) corrective action 
plan was not approved. EVMS compliance is a long-standing issue and 
concerns all Lockheed Martin aircraft produced for DOD, not just the F-
35. In 2007, the Defense Contract Management Agency, the agency 
responsible for auditing defense contractors' systems, found Lockheed 
Martin's process did not meet 19 of 32 required guidelines and, in 
October 2010, withdrew the determination of compliance. While 
acknowledging that Lockheed Martin has made improvements, DCMA in 2012 
found the company still deficient on 13 guidelines. EVMS is an 
important, established tool for tracking costs, controlling schedule, 
identifying problems early, and providing accurate product status 
reports. DOD requires its use by major defense suppliers to facilitate 
good insight and oversight of the expenditure of government dollars. 

Development Flight Test Program Made Progress: 

The F-35 development flight test program also substantially met 2012 
expectations with some revisions to original plans. The program 
exceeded its planned number of flights by 18 percent, although it fell 
short of its plan in terms of test points flown by about 3 percent, 
suggesting that the flights flown were not as productive as expected. 
[Footnote 7] Test officials had to make several adjustments to plans 
during the year due to aircraft operating and performance limitations 
and late releases of software to test. As a result, none of the three 
variants completed all the 2012 baseline points as originally planned. 
However, the test team was able to add and complete some test points 
that had been planned for future years. In this manner, the program 
was actually able to accomplish more test points in total than 
planned. Figure 1 compares the total baseline flight test points 
accomplished in 2012 against the initial plan for each test vehicle. 

Figure 1: F-35 Flight Test Points Progress in 2012: 

[Refer to PDF for image: horizontal bar graph] 

Mission Systems: 
Actual points accomplished in 2012: 1,376; 
Points planned for 2012: 1,407. 

CV flight sciences: 
Actual points accomplished in 2012: 1,967; 
Points planned for 2012: 1,872. 

STOVL flight sciences: 
Actual points accomplished in 2012: 2,142; 
Points planned for 2012: 2,102. 

CTOL flight sciences: 
Actual points accomplished in 2012: 2,003; 
Points planned for 2012: 2,344. 

Source: GAO analysis od DOD data. 

Notes: This compares baseline points accomplished and planned. It does 
not include added points from future year plans. CV = carrier-suitable 
variant, STOVL = short takeoff and vertical landing, and CTOL = 
conventional takeoff and landing. 

[End of figure] 

Results from flight testing in 2012 included the following: 

* Aircraft dedicated to testing mission systems exceeded the number of 
planned flights and fell just short of accomplishing the total test 
points planned. Testing supported development of software providing 
training and initial warfighting capability as well as baseline 
signature testing. Overall progress in verifying and fielding enhanced 
capabilities was limited, largely because of late and incomplete 
software. 

* The Navy's F-35C carrier-suitable variant exceeded its number of 
planned flights and planned test points for 2012. Testing verified the 
basic flight envelope (demonstrating ranges of speed and altitude), 
flight with external weapons, and prepared the aircraft for simulated 
carrier landings. The program also accomplished shore-based tests of a 
redesigned arresting hook (the hook engages the landing wires on 
aircraft carriers). 

* The Marine Corp's F-35B short takeoff and vertical landing variant 
exceeded the number of flights and test points. It successfully 
completed the first weapons release, engine air start tests, fuel dump 
operations, expanded flight envelope with weapons loaded, and radar 
signature testing. It also tested re-designed air inlet doors in 
vertical lift operations. 

* The Air Force's F-35A conventional takeoff and landing variant 
accomplished high angle of attack testing, initial weapons separation, 
and engine air start. It also evaluated flying qualities with internal 
and external weapons, and expanded the envelope for airspeed and 
altitude. This variant did not accomplish as many flights as planned 
and fell short of planned test points by about 15 percent. Operating 
restrictions and deficiencies in the air refueling system were the 
main constraints. 

F-35 Program Made Progress Addressing Significant Technical Risks: 

Flight, ground, and lab testing has identified significant technical 
and structural concerns that, if not addressed, would substantially 
degrade the F-35's capabilities and mission effectiveness. The F-35 
program made considerable progress in 2012 to address these major 
technical risks: 

* The helmet mounted display (which provides flight data, targeting, 
and other sensor data to the pilot) is integral to the mission systems 
architecture, to reduce pilot workload, and to achieve the F-35's 
concept of operations. The original helmet mounted display encountered 
significant technical deficiencies and did not meet warfighter 
requirements. The program is pursuing a dual path by developing a 
second, less capable helmet while working to fix the first helmet 
design. Both helmets are being evaluated and program and contractor 
officials told us that they have increased confidence that the helmet 
deficiencies will be fixed. DOD may make a decision as to which helmet 
to procure in 2013, but the selected helmet is not expected to be 
integrated into the baseline aircraft until 2015. 

* The Autonomic Logistics Information System (ALIS) is an important 
tool to predict and diagnose maintenance and supply issues, automating 
logistics support processes and providing decision aids aimed at 
reducing life cycle sustainment costs and improving force readiness. 
ALIS is developed and fielded in increments. Limited capability ALIS 
systems are in use at training and testing locations. More capable 
versions are being developed and program and contractor officials told 
us that the program is on track to fix identified shortcomings and 
field the fully capable system in 2015. Limited progress was made in 
2012 on developing a smaller, transportable version needed to support 
unit level deployments to operating locations. 

* During 2012, the carrier variant Arresting Hook System was 
redesigned after the original hook was found to be deficient, which 
prevented active carrier trials. During shore-based tests, the program 
accomplished risk reduction testing of a redesigned hook point to 
inform this new design. The preliminary design review was conducted in 
August 2012 and the critical design review in February 2013. Flight 
testing of the redesigned system is slated for late 2013. 

* Ground testing also made continued progress in 2012, including 
structural and durability testing to verify that all three variants 
can achieve expected life and identify life-limited parts. Over time, 
testing has discovered bulkhead and rib cracks. The program is testing 
some redesigned structures and planning other modifications. Officials 
plan to retrofit test and production aircraft already built and make 
changes to the production line for subsequent aircraft. Current 
projections show the aircraft and modifications remain within weight 
targets. 

While Software Development Continues to Provide Significant 
Challenges, Software Management Has Improved: 

The F-35 software development effort is one of the largest and most 
complex in DOD history. It is essential to achieve capabilities such 
as sensor fusion, weapons and fire control, maintenance diagnostics, 
and propulsion. Recent management actions to refocus software 
development activities and to implement improvement initiatives appear 
to be yielding benefits, but software will continue to be a very 
challenging and high risk undertaking for this program, especially for 
mission systems. Over time, software requirements have grown in size 
and complexity and the contractor has taken more time and effort than 
expected to write computer code, integrate it on aircraft and 
subsystems, conduct lab and flight tests to verify it works, and to 
correct defects found in testing. 

The aircraft contractor and F-35 program office have recently taken 
steps to improve software management and output. In addition to 
completing most work on the first major software block, other 
significant management actions should enhance future software and 
mission system outcomes. These actions include: 

* starting up and operating a second system integration lab, adding 
substantial testing and development capability; 

* prioritizing and focusing resources on the next block of software 
and decreasing concurrent work on multiple blocks; 

* implementing improvement initiatives recommended by an independent 
software review; and: 

* evaluating the possible deferral of some capabilities, either to 
later blocks or moving them outside the current F-35 program to follow 
on development efforts. 

Our April 2011 report discussed the need for several of these actions. 
For instance, we recommended that DOD undertake an independent 
software review.[Footnote 8] Subsequently, an independent review was 
conducted and contractor software managers implemented several 
improvement initiatives recommended by that review. These are yielding 
benefits. For example, program officials reported that the time span 
to fix defects has decreased from180 days to 55 days, allowing the 
program to keep better pace even though the number of defects has 
increased. In addition, the time taken to build and release software 
to testing has decreased from 187 hours to 30 hours due to new 
automated processes. Contractor officials currently plan to broaden 
the assessment's initiatives to other software development efforts, 
including logistics and training. Our 2011 report also discussed the 
need to reduce concurrent block work and to evaluate the possible 
deferral of the most advanced capabilities to future increments; 
program officials are actively pursuing these areas as discussed above. 

These recent management actions are positive and encouraging, but 
overall, software development activities in 2012 lagged behind plans. 
Most software code has been developed, but a substantial amount of 
integration and test work remains before the program can demonstrate 
full warfighting capability. Software capabilities are developed, 
tested and delivered in three major blocks and two increments--initial 
and final--within each block. The status of the three blocks is 
described below: 

* Block 1.0, providing initial training capability, was largely 
completed in 2012, although some final development and testing will 
continue. Also, the capability delivered did not fully meet expected 
requirements relating to the helmet, ALIS, and instrument landing 
capabilities. 

* Block 2.0, providing initial warfighting capabilities and limited 
weapons, fell behind due to integration challenges and the 
reallocation of resources to fix block 1.0 defects. The initial 
increment, block 2A, delivered late and was incomplete. Full release 
of the final increment, block 2B, has been delayed until November 2013 
and won't be complete until late 2015. The Marine Corps is requiring 
an operational flight clearance from the Naval Air Systems Command 
before it can declare an initial operational capability (IOC) for its 
F-35B force. IOC is the target date each service establishes for 
fielding an initial combat capable force. 

* Block 3.0 providing full warfighting capability, to include sensor 
fusion and additional weapons, is the capability required by the Navy 
and Air Force for declaring their respective IOC dates. Thus far, the 
program has made little progress on block 3.0 software. The program 
intends initial block 3.0 to enter flight test in 2013, which will be 
conducted concurrently with the final 15 months of block 2B flight 
tests. Delivery of final block 3.0 capability is intended to begin 
nearly 3 years of developmental flight tests in 2014. This is rated as 
one of the program's highest risks because of its complexity. 

In particular, the development and testing of software-intensive 
mission systems are lagging, with the most challenging work ahead. 
[Footnote 9] About 12 percent of mission systems capabilities are 
validated at this time, up from 4 percent about 1 year ago. Progress 
on mission systems was limited by contractor delays in software 
delivery, limited capability in the software when delivered, and the 
need to fix problems and retest multiple software versions. Further 
development and integration of the most complex elements--sensor 
fusion and helmet mounted display--lie ahead. Sensor fusion integrates 
data from critical subsystems and displays the information to the 
pilot. Figure 2 depicts the percentage of sensor fusion work 
associated with each software block. About 36 percent of the sensor 
fusion work was completed in software block 1. Final verification and 
closure of remaining fusion requirements through block 3 will not be 
completed until 2016. 

Figure 2: Percent of Sensor Fusion Development in Each Software Block: 

[Refer to PDF for image: pie chart] 

Block 1: 36%; 
Block 2A: 22%; 
Block 2B: 25%; 
Block 3: 17%. 

Source: GAO analysis od DOD data. 

[End of figure] 

The Bulk of Testing, Demonstration, and Verification of F-35 
Performance Is Ahead: 

The critical work to test and verify aircraft design and operational 
performance for the F-35 program is far from complete. Cumulatively 
since the start of developmental flight testing, the program has flown 
2,595 of 7,727 planned flights (34 percent) and accomplished 20,495 of 
59,585 test points (34 percent). For development testing as a whole, 
the program has verified 11.3 percent of the F-35 development contract 
specifications (349 of 3,094 specifications) through November 2012. 
Contract specifications include specific design parameters and 
operating requirements such as speed and range that the F-35 aircraft 
are expected to meet. Three-fourths of the total contract 
specifications cannot be fully evaluated, verified, and approved until 
the final increment of software is released and fully tested. Testing 
of the final increment is expected to begin in 2014 and continue 
through 2016. 

Initial operational test and evaluation (IOT&E) is scheduled to begin 
in 2017. This date is dependent on successful completion of 
development test and evaluation. IOT&E evaluates the combat 
effectiveness and suitability of the aircraft in an operationally 
realistic environment. Its successful completion is a prerequisite for 
DOD's plans to approve the F-35 for full rate production in 2019. 
Operational testers have raised concerns about F-35's current 
operational capabilities and suitability, readiness for training 
activities, and the progress of developmental testing. Further, the 
testing offices in the Office of the Secretary of Defense (OSD) have 
not approved the latest revision to the test and evaluation master 
plan because of concerns about the timing and resources available for 
IOT&E and unacceptable overlap of development with the start of IOT&E. 
We will continue to monitor the concerns and progress of operational 
testing during future F-35 reviews. 

Achieving key performance parameters are critical to the F-35 meeting 
the warfighter's operational requirements. They include measures such 
as range, weapons carriage, mission reliability, and sortie rates. 
These parameters also cannot be fully verified until the end of IOT&E 
in 2019. Based on limited information, DOD is currently projecting 
that the F-35 program is either meeting or close to meeting at least 
threshold (minimum) performance requirements. 

After a Slow Start, Aircraft Manufacturing and Deliveries Are 
Beginning to Catch Up to Plans: 

While initial F-35 production overran target costs and delivered late, 
there are several encouraging signs indicating better outcomes in the 
coming years. Overall, manufacturing and supply operations are 
improving with the latest data showing labor hours to build the 
aircraft decreasing, deliveries accelerating, quality measures 
improving, and parts shortages declining. That said, the program is 
working through the continuing effects from the F-35's highly 
concurrent acquisition strategy. For example, the program is 
continuing to incur substantial costs for rework to fix deficiencies 
discovered in testing, but the amount per aircraft is dropping. 
Nevertheless, continuing discoveries in testing will likely drive 
additional changes to design and manufacturing processes at the same 
time production rates increase. DOD's substantial reductions in near-
term procurement quantities have decreased-but not eliminated-the risk 
from investing billions of dollars on hundreds of aircraft before 
testing proves the aircraft design and verifies that its performance 
and reliability meet requirements. 

Manufacturing Is Becoming More Efficient: 

Analyses of labor, parts, and quality data, observations on the 
manufacturing floor, and discussions with defense and contracting 
officials provide signs that F-35 manufacturing and supply processes 
are improving. The aircraft contractor is moving down a steep learning 
curve, which is a measure that the work force is gaining important 
experience and that processes are maturing as more aircraft are built. 
Other indicators of improvement include the following: 

* The decrease in labor hours needed to complete aircraft at the prime 
contractor's plant as the labor force gains experience. For example, 
the first Air Force production jet was delivered in May 2011 and 
required about 149,000 labor hours at the prime's plant to build, 
while an Air Force jet delivered in December 2012 only required about 
94,000 labor hours. Overall, the contractor reported a 37 percent 
reduction in direct labor during 2012. 

* The improvement in the contractor's labor efficiency rate, a measure 
of how long it is taking to complete certain work tasks against 
engineering standards. Labor efficiency on the first production 
aircraft was 6 percent and improved to 13 percent for the 31st 
production aircraft. While still low, Defense Contract Management 
Agency officials stated that the rate should continue to improve with 
increased production due to work force learning and factory line 
enhancements. 

* The decrease in span times--the number of calendar days to 
manufacture aircraft in total and in specific work staging areas. The 
aircraft contractor is altering assembly line processes to streamline 
factory flow. As a result, for example, span time in the final 
assembly area declined by about one-third in 2012 compared to 2011. 

* The increase in factory throughput as the contractor delivered 30 
production aircraft in 2012 compared to 9 in 2011. During our plant 
visit in 2012, we observed an increased level of activity on the 
manufacturing floor as compared to 2011. The contractor had more 
tooling in place, had altered and streamlined processes, and had 
factory expansion plans underway. 

* The decrease in traveled work (work done out of sequence or 
incomplete items moving to the next work station), parts shortages on 
the line, and product defects. For example, traveled work declined 90 
percent and the defect rate declined almost 80 percent in 2012 
compared to 2011. Other quality indicators such as scrap rates and non-
conformances also improved from prior years and are trending in a 
positive direction. These have all been major contributors to past 
cost increases and schedule delays. 

* The accomplishment of a schedule risk analysis to improve the 
contractor's master schedule and related schedules. A schedule risk 
analysis is a comprehensive evaluation that uses statistical 
techniques to examine the fidelity of schedule estimates and the 
likelihood of accomplishing work as scheduled. It provides better and 
timelier insight into program performance to help identify and resolve 
schedule roadblocks. 

* The improvement in aircraft contractor manufacturing processes, 
although not fully mature compared to best practice standards. The 
aircraft contractor is using statistical process control to bring 
critical manufacturing processes under control so they are repeatable, 
sustainable, and consistently producing parts within quality 
tolerances and standards. The best practice standard is to have all 
critical manufacturing processes in control by the start of 
production. Just over one-third of manufacturing processes are 
currently judged to be capable of consistently producing quality parts 
at the best practice standard. The contractor has a plan in place to 
achieve the best practice standard by the start of full-rate 
production in 2019. We have observed this quality practice on only a 
few DOD programs. 

Going forward, effective management of the global supply chain is 
vital to boost production rates to planned levels, to control costs, 
and maintain quality. The aircraft contractor is developing a global 
supply chain of more than 1,500 suppliers. Effective supplier 
management will be critical to efficient and quality manufacturing at 
higher annual rates. Currently, a relatively small number of suppliers 
provide most of the material, but that is expected to change in the 
future, especially as international firms get more of the business. 
Management of international supplier base presents unique challenges, 
including (1) differing U.S. and foreign government policies, (2) 
differences in business practices, and (3) foreign currency exchange 
rates. These can complicate relationships and hinder effective supply 
chain integration. 

The aircraft contractor is implementing stringent supplier quality 
management practices. For example, Lockheed Martin officials assess 
the overall performance of key component suppliers against program 
goals for production affordability, contract cost growth, delivery 
times, part shortage occurrences, and field performance, as well as 
the number of corrective action reports filed against the supplier. In 
total, key component suppliers are assessed and rated across 23 
measures, as applicable and the contractor works with suppliers to 
improve performance. 

Production Costs Are Trending Toward Targets and Aircraft Deliveries 
Are Accelerating: 

As discussed earlier, aircraft labor hours to build aircraft are 
decreasing with more experience and the program is moving down the 
learning curve as projected. The fifth annual low rate initial 
production (LRIP) contract was recently negotiated with cost targets 
reflecting additional gains in efficiency. DOD and contractor 
officials also expressed confidence that contracts for the 6th and 7th 
annual buys will be negotiated by this summer and reflect similar 
performance. The first four LRIP contracts, however, over-ran their 
target costs, in total by $1.2 billion. According to program 
documentation, the government's share of the total overrun is about 
$756 million under the sharing incentive provisions in these 
contracts. Cost increases range from 6.5 percent to 16.1 percent more 
than negotiated costs. LRIP 4, the largest by dollar and number of 
aircraft, had the smallest percent increase in cost, indicating better 
performance. Contract costs and increases are summarized in table 3. 

Table 3: Procurement Contract Costs as of September 2012: 

Contract: LRIP 1; 
Number of aircraft: 2; 
Contract cost at award: $511.7 million; 
Current contract cost estimate: $561.6 million; 
Cost increase: $49.9 million; 
Percent increase: 9.7%. 

Contract: LRIP 2; 
Number of aircraft: 12; 
Contract cost at award: $2,349.6 million; 
Current contract cost estimate: $2,671.6 billion; 
Cost increase: $322.0 million; 
Percent increase: 13.7%. 

Contract: LRIP 3; 
Number of aircraft: 17; 
Contract cost at award: $3.179 billion; 
Current contract cost estimate: $3.691 billion; 
Cost increase: $512.3 million; 
Percent increase: 16.1%. 

Contract: LRIP 4; 
Number of aircraft: 32; 
Contract cost at award: $5.036 billion; 
Current contract cost estimate: $5.363 billion; 
Cost increase: $326.6 million; 
Percent increase: 6.5%. 

Contract: Total; 
Number of aircraft: 63; 
Contract cost at award: $11.076 billion; 
Current contract cost estimate: $12.287 billion; 
Cost increase: $1.211 billion; 
Percent increase: 10.9%. 

Source: GAO analysis of DOD data. 

Note: Total aircraft includes 58 for the United States and 5 for 
international partners. 

[End of table] 

The contractor has delivered 39 aircraft under LRIP contracts through 
the end of December 2012-nine in 2011 and 30 in 2012. Figure 3 tracks 
actual delivery dates against the dates specified in the contracts. 
Deliveries were late an average of 11 months compared to the 
contracted dates, but the data shows that the delivery rate has 
improved considerably. For example, the first two production aircraft 
were late 16 and 15 months, respectively, whereas the last two 
delivered were each 2 months late. Fluctuations in some deliveries 
during mid-2012 are impacts from the labor strike last summer that the 
contractor does not expect to continue. Other factors contributing to 
late deliveries include design changes to the aircraft; traveled work; 
scrap, repair, and rework hours; and parts shortages. 

Figure 3: F-35 Deliveries Compared to Contract Dates: 

[Refer to PDF for image: multiple line graph] 

Aircraft: AF-06; 
Original contractual delivery month: January 2010; 
Actual delivery month: June 2011. 

Aircraft: AF-07; 
Original contractual delivery month: February 2010; 
Actual delivery month: May 2011. 

Aircraft: AF-08; 
Original contractual delivery month: April 2010; 
Actual delivery month: July 2011. 

Aircraft: AF-09; 
Original contractual delivery month: May 2010; 
Actual delivery month: 

Aircraft: AF-10; 
Original contractual delivery month: June 2010; 
Actual delivery month: August 2011. 

Aircraft: AF-11; 
Original contractual delivery month: July 2010; 
Actual delivery month: August 2011. 

Aircraft: AF-12; 
Original contractual delivery month: August 2010; 
Actual delivery month: September 2011. 

Aircraft: AF-13; 
Original contractual delivery month: September 2010; 
Actual delivery month: October 2011. 

Aircraft: BF-06; 
Original contractual delivery month: September 2010; 
Actual delivery month: January 2012. 

Aircraft: BF-07; 
Original contractual delivery month: October 2010; 
Actual delivery month: January 2012. 

Aircraft: BF-08; 
Original contractual delivery month: November 2010; 
Actual delivery month: January 2012. 

Aircraft: BF-09; 
Original contractual delivery month: December 2010; 
Actual delivery month: May 2012. 

Aircraft: BF-10; 
Original contractual delivery month: January 2011; 
Actual delivery month: May 2012. 

Aircraft: BF-11; 
Original contractual delivery month: January 2011; 
Actual delivery month: May 2012. 

Aircraft: BF-12; 
Original contractual delivery month: April 2011; 
Actual delivery month: June 2012. 

Aircraft: AF-14; 
Original contractual delivery month: May 2011; 
Actual delivery month: June 2012. 

Aircraft: BF-13; 
Original contractual delivery month: May 2011; 
Actual delivery month: July 2012. 

Aircraft: AF-15; 
Original contractual delivery month: July 2011; 
Actual delivery month: June 2012. 

Aircraft: BF-14; 
Original contractual delivery month: July 2011; 
Actual delivery month: July 2012. 

Aircraft: AF-16; 
Original contractual delivery month: August 2011; 
Actual delivery month: July 2012. 

Aircraft: BK-01; 
Original contractual delivery month: August 2011; 
Actual delivery month: July 2012. 

Aircraft: AF-17; 
Original contractual delivery month: August 2011; 
Actual delivery month: November 2012. 

Aircraft: AF-18; 
Original contractual delivery month: September 2011; 
Actual delivery month: November 2012. 

Aircraft: BK-02; 
Original contractual delivery month: September 2011; 
Actual delivery month: August 2012. 

Aircraft: AF-19; 
Original contractual delivery month: September 2011; 
Actual delivery month: November 2012. 

Aircraft: BF-15; 
Original contractual delivery month: October 2011; 
Actual delivery month: August 2012. 

Aircraft: AF-20; 
Original contractual delivery month: October 2011; 
Actual delivery month: November 2012. 

Aircraft: BF-16; 
Original contractual delivery month: November 2011; 
Actual delivery month: August 2012. 

Aircraft: BF-17; 
Original contractual delivery month: January 2012; 
Actual delivery month: August 2012. 

Aircraft: BF-18; 
Original contractual delivery month: January 2012; 
Actual delivery month: September 2012. 

Aircraft: BF-19; 
Original contractual delivery month: July 2012; 
Actual delivery month: October 2012. 

Aircraft: BF-20; 
Original contractual delivery month: July 2012; 
Actual delivery month: October 2012. 

Aircraft: AF-21; 
Original contractual delivery month: July 2012; 
Actual delivery month: November 2012. 

Aircraft: CF-05; 
Original contractual delivery month: August 2012; 
Actual delivery month: November 2012. 

Aircraft: AF-22; 
Original contractual delivery month: August 2012; 
Actual delivery month: November 2012. 

Aircraft: BF-21; 
Original contractual delivery month: August 2012; 
Actual delivery month: November 2012. 

Aircraft: AF-23; 
Original contractual delivery month: September 2012; 
Actual delivery month: November 2012. 

Aircraft: AF-24; 
Original contractual delivery month: September 2012; 
Actual delivery month: November 2012. 

Aircraft: BF-22; 
Original contractual delivery month: September 2012; 
Actual delivery month: November 2012. 

Source: GAO analysis of DOD data. 

Note: The numbered aircraft are in order of delivery. AF= U.S. Air 
Force F-35A, BF = U.S. Marine Corps F-35B, CF = U.S. Department of the 
Navy F-35C; and BK = United Kingdom F-35B. 

[End of figure] 

In addition to contract cost overruns, the program is incurring 
substantial costs to retrofit (rework) produced aircraft needed to fix 
deficiencies discovered in testing. These costs are largely 
attributable to the substantial concurrency, or overlap, between 
testing and manufacturing activities. The F-35 program office projects 
rework costs of about $900 million to fix the aircraft procured on the 
first four annual procurement contracts. On average, rework adds about 
$15.5 million to the price of each of the 58 U.S. aircraft under these 
contracts. 

Substantial rework costs are forecast to continue through the 10th 
annual contract (fiscal year 2016 procurement), but at decreasing 
amounts annually and on each aircraft. The program office projects 
about $827 million more to rework aircraft procured under the next 6 
annual contracts. Government liability for these costs depends on 
share ratios to be negotiated. The government and Lockheed Martin 
reached agreement under the LRIP 5 contract that costs for known 
changes due to concurrency will be shared 50/50. Other cost overruns 
under this contract will be shared 55/45 until the contract ceiling is 
reached, at which point the contractor assumes total responsibility 
for overruns. The lagging cost and schedule performance on the first 
four production contracts and the high costs of rework can be largely 
attributed to the continuing effects of the F-35’s highly concurrent 
acquisition strategy. The program started manufacturing aircraft 
before designs were stable, before establishing mature manufacturing 
processes, and before sufficiently testing the design and aircraft 
performance. A November 2011 report on concurrency by senior level DOD 
officials confirms these observations. The report states that F-35 
testing continues to find technical issues with significant design and 
production impacts and requiring rework on produced aircraft. It 
expresses a lack of confidence in the design stability that was lower 
than expected given the quantities of aircraft procured and potential 
for more rework costs. 

Aircraft Design Changes Continue to Impact Efficiency and Add to Risk: 

Even with the positive trends in manufacturing, cost, and schedule 
discussed above, the government continues to incur risk by procuring 
large quantities of aircraft with the majority of testing still ahead. 
The contractor continues to make major design and tooling changes and 
alter manufacturing processes concurrent with development testing. 
Engineering design changes from discoveries during manufacturing and 
testing are declining in number, but are still substantial and higher 
than expected from a program this far into production. With extensive 
testing ahead, discoveries in testing will drive more design changes, 
possibly impacting manufacturing processes and the supplier base. 
Figure 4 graphically depicts monthly engineering change "traffic." The 
forecast indicates that about one-third of projected design changes in 
total are to come and will hover around 200 per month through the end 
of system development, initial operational testing, and start of full 
rate production in 2019. 

Figure 4: F-35 Engineering Design Changes: 

[Refer to PDF for image: line graph] 

Number of actual design changes to date: 

2006: 

January: 251; 
February: 283; 
March: 362; 
April: 281; 
May: 373; 
June: 447; 
July: 347; 
August: 520; 
September: 385; 
October: 515; 
November: 505; 
December: 378. 

2007: 

January: 620; 
February: 567; 
March: 598; 
April: 647; 
May: 697; 
June: 634; 
July: 681; 
August: 739; 
September: 744; 
October: 876; 
November: 678; 
December: 578. 

2008: 

January: 606; 
February: 594; 
March: 645; 
April: 560; 
May: 387; 
June: 459; 
July: 605; 
August: 590; 
September: 590; 
October: 621; 
November: 527; 
December: 508. 

2009: 

January: 573; 
February: 655; 
March: 716; 
April: 629; 
May: 522; 
June: 568; 
July: 493; 
August: 492; 
September: 482; 
October: 480; 
November: 415; 
December: 302. 

2010: 

January: 342; 
February: 323; 
March: 363; 
April: 376; 
May: 353; 
June: 356; 
July: 314; 
August: 302; 
September: 345; 
October: 271; 
November: 322; 
December: 250. 

2011: 

January: 276; 
February: 250; 
March: 314; 
April: 301; 
May: 298; 
June: 358; 
July: 281; 
August: 348; 
September: 301; 
October: 285; 
November: 266; 
December: 235. 

2012: 

January: 243; 
February: 257; 
March: 233; 
April: 205; 
May: 215. 

Forecasted number of design changes: 

June: 249; 
July: 248; 
August: 248; 
September: 267; 
October: 251; 
November: 265; 
December: 245. 

2013: 

January: 243; 
February: 244; 
March: 240; 
April: 242; 
May: 224; 
June: 241; 
July: 235; 
August: 260; 
September: 252; 
October: 273; 
November: 271; 
December: 279. 

2014: 

January: 281; 
February: 265; 
March: 257; 
April: 259; 
May: 255; 
June: 232; 
July: 228; 
August: 224; 
September: 210; 
October: 203; 
November: 187; 
December: 176. 

2015: 

January: 168; 
February: 175; 
March: 157; 
April: 154; 
May: 144; 
June: 134; 
July: 126; 
August: 120; 
September: 113; 
October: 109; 
November: 109; 
December: 109. 

2016: 

January: 112; 
February: 123; 
March: 132; 
April: 140; 
May: 147; 
June: 152; 
July: 154; 
August: 161; 
September: 163; 
October: 166; 
November: 174; 
December: 184. 

2017: 

January: 185; 
February: 189; 
March: 194; 
April: 196; 
May: 205; 
June: 208; 
July: 218; 
August: 223; 
September: 232; 
October: 232; 
November: 239; 
December: 243. 

2018: 

January: 248; 
February: 250; 
March: 249; 
April: 247; 
May: 247; 
June: 243; 
July: 243; 
August: 246; 
September: 248; 
October: 250; 
November: 249; 
December: 249. 

2019: 

January: 256; 
February: 260; 
March: 259; 
April: 262; 
May: 235; 
June: 211; 
July: 184; 
August: 156; 
September: 132; 
October: 108; 
November: 80; 
December: 55. 

2020: 

January: 31. 

Source: GAO analysis of DOD data. 

[End of figure] 

Demonstrating the reliability of a system is another indicator that 
the design is stable and ready for production. During system 
acquisition, reliability growth improvements should occur over time as 
problems are identified, tested, and fixed, usually through design 
changes and manufacturing process improvements. We have reported in 
the past that it is important to demonstrate that the system 
reliability is on track to meet goals before production begins as 
changes after production commences can be inefficient and 
costly.[Footnote 11] One key indicator of F-35 reliability is the mean 
flying hours between failures, that is, the average time an aircraft 
can fly before a maintenance action is required to repair a component 
or system that is not performing as designed. Figure 5 projects F-35 
performance on this indicator compared to 2012 plans and eventual 
goals. Compared to data from one year ago, each variant demonstrated 
some reliability growth in 2012, but each is lagging behind its plan. 
The Marine Corps' STOVL demonstrated the biggest increase-from 0.5 
hours in 2011 to 1.4 hours currently--but it is also the furthest 
behind plans. We also note that the rates planned by October 2012 were 
little changed from those established for October 2011.[Footnote 12] 

Figure 5: Mean Flying Hours between Failures: 

[Refer to PDF for image: vertical bar graph] 

Variant: CTOL; 
Demonstrated as of October 2012: 3.2 hours; 
Planned by October 2012: 3.6 hours; 
Goal at maturity: 6 hours. 

Variant: STOVL; 
Demonstrated as of October 2012: 1.4 hours; 
Planned by October 2012: 2.1 hours; 
Goal at maturity: 4 hours. 

Variant: CV; 
Demonstrated as of October 2012: 2.2 hours; 
Planned by October 2012: 2.3 hours; 
Goal at maturity: 4 hours. 

Source: GAO analysis of DOD data. 

[End of figure] 

DOD is investing billions of dollars on hundreds of aircraft before 
the design is stable, testing proves that it works and is reliable, 
and manufacturing processes mature to where aircraft can be produced 
in quantity to cost and schedule targets. The department's substantial 
reductions in procurement quantities in the past few years lowered 
this risk, but did not eliminate it.[Footnote 13] DOD has already 
invested about $28 billion in procuring 121 aircraft through the 2012 
buy (the 6th annual procurement lot). According to the new acquisition 
baseline and flight test schedule, DOD will procure 289 aircraft for 
$57.8 billion before the end of developmental flight testing (see 
table 4). 

Table 4: F-35 Procurement Investments and Flight Test Progress: 

Cumulative procurement (then-year dollars): 
2007: $0.8 billion; 
2008: $3.5 billion; 
2009: $7.1 billion; 
2010: $14.3 billion; 
2011: $21.3 billion; 
2012: $27.6 billion; 
2013: $33.8 billion; 
2014: $40.1 billion; 
2015: $47.9 billion; 
2016: $57.8 billion; 
2017: $69.0 billion. 

Cumulative aircraft procured: 
2007: 2; 
2008: 14; 
2009: 28; 
2010: 58; 
2011: 90; 
2012: 121; 
2013: 150; 
2014: 179; 
2015: 223; 
2016: 289; 
2017: 365. 

Percent total flight test points completed: 
2007: 0; 
2008: less than 1%; 
2009: less than 1%; 
2010: 2%; 
2011: 9%; 
2012: 22%; 
2013: 34%; 
2014: 54%; 
2015: 74%; 
2016: 91%; 
2017: 100%. 

Source: GAO analysis of DOD data. 

Notes: Years listed denote fiscal years. Flight test data reflects the 
percentage of total flight test points completed in time to inform the 
next year's procurement decision. For example above, the F-35 program 
accomplished about 22 percent of total planned flight test points 
through the end of calendar year 2011 that could help inform the 
fiscal year 2012 procurement decision. The program intends to complete 
developmental flight test points in 2016 and would be in a position to 
fully support the 2017 procurement buy. 

[End of table] 

Costs and Funding for Acquisition and Sustainment Remain Very 
Challenging Moving Forward: 

Ensuring that the acquisition costs of the F-35 are affordable so that 
aircraft can be bought in the quantities and time required by the 
warfighter will be of paramount concern to the Congress, U.S. 
military, and international partners. Annual acquisition funding 
requirements for the United States currently average $12.6 billion per 
year through 2037. Once acquired, the current forecasts of life cycle 
sustainment costs for the F-35 fleet are considered unaffordable by 
defense officials. Efforts are under way to try and lower annual 
operating and support costs. Uncertainties and delays in the F-35 
program are forcing new plans for recapitalizing fighter forces and 
the military services are incurring increased costs to buy, modify, 
and sustain legacy fighters. 

Acquiring F-35 Aircraft at Required Annual Quantities Will Be 
Expensive: 

The March 2012 acquisition program baseline incorporates the 
department's positive restructuring actions since 2010. These actions 
place the F-35 program on firmer footing, but aircraft are expected to 
cost more and deliveries to warfighters will take longer than in 
previous baselines. In terms of acquisition funding requirements, the 
new baseline projects total development and procurement budget 
requirements of $316 billion from 2013 through 2037. Figure 6 shows 
these budget projections. The rebaselined program will require an 
average of $12.6 billion annually through 2037, an unprecedented 
demand on the defense procurement budget. Maintaining this level of 
sustained funding will be difficult in a period of declining or flat 
defense budgets and competition with other "big ticket items" such as 
the KC-46 tanker and a new bomber program. 

Figure 6: F-35 Program Budgeted Development and Procurement Funding 
Requirements, Fiscal Years 2013-2037: 

[Refer to PDF for image: stacked vertical bar graph] 

Then-year dollars: 

Fiscal year average: $12.6 billion; 

Fiscal year: 2013; 
Air Force research, development, test and evaluation: $1.2 billion; 
Air Force procurement: $3.7 billion; 
Navy research, development, test and evaluation: $1.5 billion; 
Navy procurement: $2.7 billion. 

Fiscal year: 2014; 
Air Force research, development, test and evaluation: $1.0 billion; 
Air Force procurement: $3.7 billion; 
Navy research, development, test and evaluation: $1.3 billion; 
Navy procurement: $3.0 billion. 

Fiscal year: 2015; 
Air Force research, development, test and evaluation: $0.6 billion; 
Air Force procurement: $5.1 billion; 
Navy research, development, test and evaluation: $1.0 billion; 
Navy procurement: $3.2 billion. 

Fiscal year: 2016; 
Air Force research, development, test and evaluation: $0.4 billion; 
Air Force procurement: $6.5 billion; 
Navy research, development, test and evaluation: $0.7 billion; 
Navy procurement: $4.0 billion 

Fiscal year: 2017; 
Air Force research, development, test and evaluation: $0.2 billion; 
Air Force procurement: $6.5 billion; 
Navy research, development, test and evaluation: $0.5 billion; 
Navy procurement: $5.3 billion. 

Fiscal year: 2018; 
Air Force research, development, test and evaluation: $0.1 billion; 
Air Force procurement: $6.6 billion; 
Navy research, development, test and evaluation: $0.1 billion; 
Navy procurement: $7.3 billion. 

Fiscal year: 2019; 
Air Force procurement: $6.3 billion; 
Navy procurement: $7.0 billion. 

Fiscal year: 2020; 
Air Force procurement: $6.8 billion; 
Navy procurement: $7.1 billion. 

Fiscal year: 2021; 
Air Force procurement: $8.6 billion; 
Navy procurement: $7.5 billion. 

Fiscal year: 2022; 
Air Force procurement: $8.8 billion; 
Navy procurement: $7.0 billion. 

Fiscal year: 2023; 
Air Force procurement: $8.8 billion; 
Navy procurement: $7.0 billion. 

Fiscal year: 2024; 
Air Force procurement: $9.1 billion; 
Navy procurement: $7.1 billion. 

Fiscal year: 2025; 
Air Force procurement: $9.1 billion; 
Navy procurement: $7.3 billion. 

Fiscal year: 2026; 
Air Force procurement: $9.4 billion; 
Navy procurement: $7.3 billion. 

Fiscal year: 2027; 
Air Force procurement: $9.6 billion; 
Navy procurement: $6.7 billion. 

Fiscal year: 2028; 
Air Force procurement: $9.7 billion; 
Navy procurement: $4.5 billion. 

Fiscal year: 2029; 
Air Force procurement: $10.1 billion; 
Navy procurement: $1.4 billion. 

Fiscal year: 2030; 
Air Force procurement: $10.5 billion. 

Fiscal year: 2031; 
Air Force procurement: $10.8 billion. 

Fiscal year: 2032; 
Air Force procurement: $10.7 billion. 

Fiscal year: 2033; 
Air Force procurement: $10.8 billion. 

Fiscal year: 2034; 
Air Force procurement: $10.9 billion. 

Fiscal year: 2035; 
Air Force procurement: $11.1 billion. 

Fiscal year: 2036; 
Air Force procurement: $10.7 billion. 

Fiscal year: 2037; 
Air Force procurement: $8.6 billion. 

Source: GAO analysis of DOD data. 

Note: Development and procurement of the Marine Corps variant is 
included in the Department of the Navy budget accounts. 

[End of figure] 

When approving the new 2012 program baseline, the acting 
Undersecretary of Defense for Acquisition, Technology, and Logistics 
established affordability unit cost targets for each variant to be met 
by the start of full-rate production in 2019.[Footnote 14] To meet 
these targets, the program will have to reduce unit costs by about 26 
percent (STOVL), 35 percent (CTOL), and 39 percent (CV) from the unit 
costs in the fiscal year 2012 budget request. Our analysis indicates 
that these targets are achievable if the future year prices and 
quantities used to construct the new baseline are accurate. 

Some international partners are also expressing concern about F-35 
prices and schedule delays. Besides the consequences for international 
cooperation and fighter force commonality, there are at least two 
other important financial impacts. First, U.S. future budgets assume 
the financial quantity benefits of partners purchasing at least 697 
aircraft. Second, the current procurement profile for the F-35 
projects a rapid buildup in partner buys--195 aircraft through 2017 
that comprise about half the total production during the 5-year period 
2013 through 2017. If fewer aircraft are procured in total or in 
smaller annual quantities, unit costs paid by the U.S. and partners 
will likely rise. 

To better understand the potential impacts on prices from changes in 
quantities, OSD's Cost Assessment and Program Evaluation (CAPE) office 
did a sensitivity analysis to forecast impacts on F-35 average 
procurement unit costs assuming various quantities purchased by the 
United States and international partners. For example, if the United 
States bought its full quantity of 2,443 aircraft and the partners did 
not buy any aircraft, CAPE calculated that the average unit cost would 
increase by 6 percent. If the United States bought 1,500 aircraft and 
the partners bought their expected quantity of 697, unit costs would 
rise by 9 percent. If the United States bought 1,500 and the partners 
0, unit costs would rise 19 percent. 

Controlling Sustainment Costs Is a Major Concern: 

In addition to the costs for acquiring aircraft, significant concerns 
and questions persist regarding the cost to operate and sustain F-35 
fleets over the coming decades. The current sustainment cost 
projection by CAPE for all U.S. aircraft, based on an estimated 30 
year service life, exceeds $1 trillion. This raises long-term 
affordability concerns for the military services and international 
partners. F-35 operating and support costs (O&S) are currently 
projected to be 60 percent higher than those of the existing aircraft 
it will replace. Using current program assumptions of aircraft 
inventory and flight hours, CAPE recently estimated annual O&S costs 
of $18.2 billion for all F-35 variants compared to $11.1 billion spent 
in 2010 to operate and sustain the legacy aircraft. DOD officials have 
declared that O&S costs of this magnitude are unaffordable and are 
actively engaged in evaluating opportunities to reduce F-35 life-cycle 
sustainment costs, such as basing and infrastructure reductions, 
competitive sourcing, and reliability improvements. 

F-35 Delays Have Increased Recapitalization Costs for Existing 
Fighters: 

IOC dates are critical milestones for the F-35 program because these 
are the target dates for fielding initial combat capable forces as 
required by the warfighters when justifying the need for the new 
weapon system. As shown earlier in table 1, these dates have slipped 
over time and have not been reset in the new baseline. The military 
services have been reassessing their needs for several years and have 
deferred setting new target dates for acquiring warfighting 
capabilities until operational test plans are better understood. Based 
on service criteria espoused earlier in the program, it would appear 
that the earliest possible IOC dates are now 2015 for the Marine Corps 
and 2017 for the Air Force and Navy. 

Because of F-35 delays and uncertainties, the military services are 
extending the service life of legacy aircraft to bridge the gap in F-
35 deliveries and mitigate projected shortfalls in fighter aircraft 
force requirements. In November 2012, we reported current cost 
estimates of almost $5 billion (in 2013 dollars) to extend the service 
life of 300 Air Force F-16s and 150 Navy F/A-18s, with additional 
quantities possible if needed to maintain inventory levels.[Footnote 
15] At the Congress's behest, the Navy is also buying 41 new F/A-18 
E/F Super Hornets at a budgeted cost of about $3.1 billion (then-year 
dollars). The services will incur additional future sustainment costs 
to support these new and extended-life aircraft. F-35 delays and 
uncertainties continue to make it difficult for the services to 
establish and implement retirement schedules for existing fleets and 
to develop firm basing and manpower plans for housing and supporting 
future forces. 

Concluding Observations: 

Overall, the F-35 Joint Strike Fighter program is now moving in the 
right direction after a long, expensive, and arduous learning process. 
It still has tremendous challenges ahead. The program must fully 
validate design and operational performance against warfighter 
requirements, while, at the same time, making the system affordable so 
that the United States and partners can acquire new capabilities in 
the quantity needed and can then sustain the force over its life 
cycle. Recent restructuring actions have improved the F-35's prospects 
for success, albeit at greater costs and further delays. Many of the 
restructuring actions--more time and resources for development flight 
testing, reduced annual procurements, the recognition of concurrency 
risks, independent cost and software assessments, and others--are 
responsive to our past recommendations. Recent management initiatives, 
including the schedule risk analysis and the software assessment, also 
respond to prior recommendations. As a result, we are not making new 
recommendations in this report. DOD and the contractor now need to 
demonstrate that the F-35 program can effectively perform against cost 
and schedule targets in the new baseline and deliver on promises. 
Until then, it will continue to be difficult for the United States and 
international partners to confidently plan, prioritize, and budget for 
the future; retire aging aircraft; and establish basing plans with a 
support infrastructure. Achieving affordability in annual funding 
requirements, aircraft unit prices, and life-cycle operating and 
support costs will in large part determine how many aircraft the 
warfighter can ultimately acquire, sustain, and have available for 
combat. 

Agency Comments and Our Evaluation: 

DOD provided comments on a draft of this report, which are reprinted in
appendix III. DOD concurred with the report’s findings and conclusions. 

We are sending copies of this report to appropriate congressional 
commmittees; the Secretary of Defense; the Secretaries of the Air 
Force, Army, and Navy; the Commandant of the Marine Corps, and the 
Director of the Office of Management and Budget. The report is 
available at no charge on the GAO website at [hyperlink, 
http://www.gao.gov]. 

If you or your staff have any questions about this report, please 
contact me at ((202) 512-4841 or sullivanm@gao.gov. Contact points for 
our Offices of Congressional Relations and Public Affairs may be found 
on the last page of this report. Staff members making key 
contributions to this report are listed in Appendix IV. 

Signed by: 

Michael J. Sullivan: 
Director: 
Acquisition and Sourcing Management: 

List of Committees: 

The Honorable Carl Levin: 
Chairman: 
The Honorable James Inhofe: 
Ranking Member: 
Committee on Armed Services: 
United States Senate: 

The Honorable Dick Durbin: 
Chairman: 
The Honorable Thad Cochran: 
Ranking Member: 
Subcommittee on Defense: 
Committee on Appropriations: 
United States Senate: 

The Honorable Howard P. McKeon: 
Chairman: 
The Honorable Adam Smith: 
Ranking Member: 
Committee on Armed Services: 
House of Representatives: 

The Honorable C.W. Bill Young: 
Chairman: 
The Honorable Pete Visclosky: 
Ranking Member: 
Subcommittee on Defense: 
Committee on Appropriations: 
House of Representatives: 

[End of section] 

Appendix I: Prior GAO Reports and DOD Responses: 

GAO report: 2001; GAO-02-39;
Est. dev. costs, dev. length, aircraft unit cost: $34.4 Billion; 10 
years; $69 Million; 
Key program event: Start of system development and demonstration 
approved; 
Primary GAO message: Critical technologies needed for key aircraft 
performance elements not mature. Program should delay start of system 
development until critical technologies mature to acceptable levels; 
DOD responses and actions: DOD did not delay start of system 
development and demonstration stating technologies were at acceptable 
maturity levels and will manage risks in development. 

GAO report: 2005; GAO-05-271; 
Est. dev. costs, dev. length, aircraft unit cost: $44.8 Billion; 12 
years; $82 Million; 
Key program event: The program undergoes re-plan to address higher 
than expected design weight, which added $7 billion and 18 months to 
development schedule; 
Primary GAO message: We recommended that the program reduce risks and 
establish executable business case that is knowledge-based with an 
evolutionary acquisition strategy; 
DOD responses and actions: DOD partially concurred but did not adjust 
strategy, believing that its approach is balanced between cost, 
schedule and technical risk. 

GAO report: 2006; GAO-06-356; 
Est. dev. costs, dev. length, aircraft unit cost: $45.7 Billion; 12 
years; $86 Million; 
Key program event: Program sets in motion plan to enter production in 
2007 shortly after first flight of the non-production representative 
aircraft; 
Primary GAO message: The program planned to enter production with less 
than 1 percent of testing complete. We recommended program delay 
investing in production until flight testing shows that F-35 performs 
as expected; 
DOD responses and actions: DOD partially concurred but did not delay 
start of production because it believed the risk level was appropriate. 

GAO report: 2007; GAO-07-360; 
Est. dev. costs, dev. length, aircraft unit cost: $44.5 Billion; 12 
years; $104 Million; 
Key program event: Congress reduced funding for first two low-rate 
production buys thereby slowing the ramp up of production; 
Primary GAO message: Progress was being made but concerns remained 
about undue overlap in testing and production. We recommended limits 
to annual production quantities to 24 a year until flying quantities 
are demonstrated; 
DOD responses and actions: DOD non-concurred and felt that the program 
had an acceptable level of concurrency and an appropriate acquisition 
strategy. 

GAO report: 2008; GAO-08-388; 
Est. dev. costs, dev. length, aircraft unit cost: $44.2 Billion; 12 
years; $104 Million; 
Key program event: DOD implemented a Mid-Course Risk Reduction Plan to 
replenish management reserves from about $400 million to about $1 
billion by reducing test resources; 
Primary GAO message: We believed new plan increased risks and DOD 
should revise it to address testing, management reserves, and 
manufacturing concerns. We determined that the cost estimate was not 
reliable and that a new cost estimate and schedule risk assessment is 
needed; 
DOD responses and actions: DOD did not revise risk plan or restore 
testing resources, stating that it will monitor the new plan and 
adjust it if necessary. Consistent with a report recommendation, a new 
cost estimate was eventually prepared, but DOD refused to do a risk 
and uncertainty analysis. 

GAO report: 2009; GAO-09-303; 
Est. dev. costs, dev. length, aircraft unit cost: $44.4 Billion; 13 
years; $104 Million; 
Key program event: The program increased the cost estimate and adds a 
year to development but accelerated the production ramp up. 
Independent DOD cost estimate (JET I) projects even higher costs and 
further delays; 
Primary GAO message: Moving forward with an accelerated procurement 
plan and use of cost reimbursement contracts is very risky. We 
recommended the program report on the risks and mitigation strategy 
for this approach; 
DOD responses and actions: DOD agreed to report its contracting 
strategy and plans to Congress and conduct a schedule risk analysis. 
The program completed the first schedule risk assessment with plans to 
update semi-annually. The Department announced a major restructuring 
reducing procurement and moving to fixed-price contracts. 

GAO report: 2010; GAO-10-382; 
Est. dev. costs, dev. length, aircraft unit cost: $49.3 Billion; 15 
years; $112 Million; 
Key program event: The program was restructured to reflect findings of 
recent independent cost team (JET II) and independent manufacturing 
review team. As a result, development funds increased, test aircraft 
were added, the schedule was extended, and the early production rate 
decreased; 
Primary GAO message: Costs and schedule delays inhibit the program's 
ability to meet needs on time. We recommended the program complete a 
full comprehensive cost estimate and assess warfighter and IOC 
requirements. We suggest that Congress require DOD to tie annual 
procurement requests to demonstrated progress; 
DOD responses and actions: DOD continued restructuring, increasing 
test resources and lowering the production rate. Independent review 
teams evaluated aircraft and engine manufacturing processes. Cost 
increases later resulted in a Nunn-McCurdy breach. Military services 
are currently reviewing capability requirements as we recommended. 

GAO report: 2011; GAO-11-325; 
Est. dev. costs, dev. length, aircraft unit cost: $51.8 Billion; 16 
years; $133 Million; 
Key program event: Restructuring continued with additional development 
cost increases; 
schedule growth; further reduction in near-term procurement 
quantities; and decreased the rate of increase for future production. 
Primary GAO message: The Secretary of Defense placed the STOVL variant 
on a 2 year probation; decoupled STOVL from the other variants; and 
reduced STOVL production plans for fiscal years 2011 to 2013; 
The restructuring actions are positive and if implemented properly, 
should lead to more achievable and predictable outcomes. Concurrency 
of development, test, and production is substantial and provides risk 
to the program. We recommended the program maintain funding levels as 
budgeted; establish criteria for STOVL probation; and conduct an 
independent review of software development, integration, and test 
processes; 
DOD responses and actions: DOD concurred with all three of the 
recommendations. DOD lifted STOVL probation, citing improved 
performance. Subsequently, DOD further reduced procurement quantities, 
decreasing funding requirements through 2016. The initial independent 
software assessment began in and ongoing reviews are planned through 
2012. 

GAO report: 2012; GAO-12-437; 
Est. dev. costs, dev. length, aircraft unit cost: $55.2 Billion; 18 
years; $137 Million; 
Key program event: The program established a new acquisition program 
baseline and approved the continuation of system development, 
increasing costs for development and procurements and extending the 
period of planned procurements by 2 years; 
Primary GAO message: Extensive restructuring places the program on a 
more achievable course. Most of the program's instability continues to 
be concurrency of development, test, and production. We recommend the 
Cost Assessment and Program Evaluation office conduct an analysis on 
the impact of lower annual funding levels; F-35 program office 
conducts an assessment of the supply chain and transportation network; 
DOD responses and actions: DOD partially concurred with conducting an 
analysis on the impact of lower annual funding levels and concurred 
with assessing the supply chain and transportation network. 

Source: GAO. 

[End of table] 

[End of section] 

Appendix II: Scope and Methodology: 

To evaluate F-35 Joint Strike Fighter program performance during 
calendar year 2012, we compared key management objectives on testing, 
training, contracting, cost and schedule activities to progress made 
during the year on each objective. On development flight testing, we 
interviewed F-35 program office, the aircraft contractor, and the 
office of the Director of Operational Test and Evaluation (DOT&E) 
officials on development test plans and results against expectations. 
We obtained and analyzed data on flights and test points, both planned 
and accomplished during 2012, and also compared progress against the 
total plans to complete. We obtained officials' comments and reports 
on technical risks. We evaluated progress made and work to complete on 
major technical risks, including the helmet, logistics system, carrier 
arresting hook, and structural cracks. We reviewed status of software 
development and integration, contractor management improvement 
initiatives, issues on data fusion, and the impacts of late releases 
of software on the test program. We reviewed key documents related to 
this objective, including DOT&E's annual F-35 assessment, the Joint 
Strike Fighter Operational Test Team Report, and the Independent 
Software Assessment. 

To assess manufacturing and supply performance indicators, production 
results, and design changes, we obtained and analyzed manufacturing 
contract cost, aircraft delivery, and work performance data through 
the end of calendar year 2012 to assess progress against plans. We 
reviewed data and briefings provided by the program office, aircraft 
contractor, and the Defense Contract Management Agency (DCMA) in order 
to identify issues and assess impacts on supplier performance, costs 
of rework, manufacturing labor and quality data, and maturity of 
design and manufacturing process controls. We also determined reasons 
for manufacturing cost overruns and delivery delays, discussed program 
and contractor plans to improve, and projected the impact on 
development and operational tests. We interviewed contractor and DCMA 
officials to discuss the Earned Value Management System (EVMS) and 
Lockheed's progress in improving its system. We did not conduct our 
own analysis of EVMS since the system has not yet been re-validated by 
DCMA. We also reviewed the Office of the Secretary of Defense's F-35 
Joint Strike Fighter Concurrency Quick Look Review. 

To determine acquisition and sustainment costs going forward, we 
received briefings by program and contractor officials and reviewed 
financial management reports, budget briefings annual Selected 
Acquisition Reports, monthly status reports, performance indicators, 
and other data through the end of calendar year 2012. We identified 
changes in cost and schedule, and obtained officials' reasons for 
these changes. We reviewed total program funding requirements in the 
Selected Acquisition Reports since the program's inception and 
analyzed fiscal year 2013 President's Budget data. We used this data 
to project annual funding requirements through the expected end of the 
F-35 acquisition in 2037. We obtained and discussed the life cycle 
operating and support cost projections made by the Cost Assessment and 
Program Evaluation office and discussed future plans of the Department 
to try and reduce life cycle sustainment costs. 

In performing our work, we obtained financial data, programmatic 
information, and interviewed officials from the F-35 Joint Program 
Office, Arlington, Virginia; Lockheed Martin Aeronautics, Fort Worth, 
Texas; Defense Contract Management Agency, Fort Worth, Texas; and the 
Under Secretary of Defense for Acquisition, Technology, and Logistics, 
the Director of Operational Test and Evaluation, and the Cost 
Assessment and Program Evaluation office, all organizations within the 
Office of the Secretary of Defense in Washington, D.C. 

We assessed the reliability of DOD and Contractor data by: reviewing 
existing information about the data, and interviewing agency officials 
knowledgeable about the data. We determined that the data were 
sufficiently reliable for the purposes of this report. We conducted 
this performance audit from August 2012 to March 2013 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. 

[End of section] 

Appendix III: Comments from the Department of Defense: 

Assistant Secretary of Defense: 
Acquisition: 
3015 Defense Pentagon: 
Washington, DC 20301-3015: 

March 11, 2013: 

Mr. Michael J. Sullivan: 
Director, Acquisition and Sourcing Management: 
U.S. Government Accountability Office: 
441 G Street, N.W. 
Washington, DC 20548: 

Dear Mr. Sullivan: 

This is the Department of Defense (DoD) response to the Government 
Accountability Office (GAO) Draft Report, GA0-13-309, "F-35 Joint 
Strike Fighter: Current Outlook is Improved, but Long Term 
Affordability is a Major Concern," dated February 20, 2013 (GAO Code 
121080). 

The DoD values the GAO's analysis of the F-35 program. We agree with 
GAO's concluding observations and appreciate the recognition of the 
Department's responsiveness to previous recommendations. The 
Department will continue to be supportive of the annual GAO review of 
the F-35 program. 

Sincerely, 

Signed by: 

Katrina McFarland: 

[End of section] 

Appendix IV: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Michael Sullivan (202) 512-4841 or sullivanm@gao.gov: 

Acknowledgments: 

In addition to the contact name above, the following staff members 
made key contributions to this report: Bruce Fairbairn, Assistant 
Director; Marvin Bonner; Dr. W. Kendal Roberts; Erin Stockdale; Jungin 
Park; Megan Porter and John Lack. 

[End of section] 

Related GAO Products: 

Joint Strike Fighter: DOD Actions Needed to Further Enhance 
Restructuring and Address Affordability Risks. [hyperlink, 
http://www.gao.gov/products/GAO-12-437]. Washington, D.C.: June 14, 
2012. 

Defense Acquisitions: Assessments of Selected Weapon Programs. 
[hyperlink, http://www.gao.gov/products/GAO-12-400SP]. Washington, 
D.C.: March 29, 2012. 

Joint Strike Fighter: Restructuring Added Resources and Reduced Risk, 
but Concurrency Is Still a Major Concern. [hyperlink, 
http://www.gao.gov/products/GAO-12-525T]. Washington, D.C.: March 20, 
2012. 

Joint Strike Fighter: Implications of Program Restructuring and Other 
Recent Developments on Key Aspects of DOD's Prior Alternate Engine 
Analyses. [hyperlink, http://www.gao.gov/products/GAO-11-903R]. 
Washington, D.C.: September 14, 2011. 

Joint Strike Fighter: Restructuring Places Program on Firmer Footing, 
but Progress Is Still Lagging. [hyperlink, 
http://www.gao.gov/products/GAO-11-677T]. Washington, D.C.: May 19, 
2011. 

Joint Strike Fighter: Restructuring Places Program on Firmer Footing, 
but Progress Still Lags. [hyperlink, 
http://www.gao.gov/products/GAO-11-325]. Washington, D.C.: April 7, 
2011. 

Joint Strike Fighter: Restructuring Should Improve Outcomes, but 
Progress Is Still Lagging Overall. [hyperlink, 
http://www.gao.gov/products/GAO-11-450T]. Washington, D.C.: March 15, 
2011. 

Tactical Aircraft: Air Force Fighter Force Structure Reports Generally 
Addressed Congressional Mandates, but Reflected Dated Plans and 
Guidance, and Limited Analyses. [hyperlink, 
http://www.gao.gov/products/GAO-11-323R]. Washington, D.C.: February 
24, 2011. 

Defense Management: DOD Needs to Monitor and Assess Corrective Actions 
Resulting from Its Corrosion Study of the F-35 Joint Strike Fighter. 
[hyperlink, http://www.gao.gov/products/GAO-11-171R]. Washington D.C.: 
December 16, 2010. 

Joint Strike Fighter: Assessment of DOD's Funding Projection for the 
F136 Alternate Engine. [hyperlink, 
http://www.gao.gov/products/GAO-10-1020R]. Washington, D.C.: September 
15, 2010. 

Tactical Aircraft: DOD's Ability to Meet Future Requirements is 
Uncertain, with Key Analyses Needed to Inform Upcoming Investment 
Decisions. [hyperlink, http://www.gao.gov/products/GAO-10-789]. 
Washington, D.C.: July 29, 2010. 

Defense Acquisitions: Assessments of Selected Weapon Programs. 
[hyperlink, http://www.gao.gov/products/GAO-10-388SP]. Washington, 
D.C.: March 30, 2010. 

Joint Strike Fighter: Significant Challenges and Decisions Ahead. 
[hyperlink, http://www.gao.gov/products/GAO-10-478T]. Washington, 
D.C.: March 24, 2010. 

Joint Strike Fighter: Additional Costs and Delays Risk Not Meeting 
Warfighter Requirements on Time. [hyperlink, 
http://www.gao.gov/products/GAO-10-382]. Washington, D.C.: March 19, 
2010. 

Joint Strike Fighter: Significant Challenges Remain as DOD 
Restructures Program. [hyperlink, 
http://www.gao.gov/products/GAO-10-520T]. Washington, D.C.: March 11, 
2010. 

Joint Strike Fighter: Strong Risk Management Essential as Program 
Enters Most Challenging Phase. [hyperlink, 
http://www.gao.gov/products/GAO-09-711T]. Washington, D.C.: May 20, 
2009. 

Defense Acquisitions: Assessments of Selected Weapon Programs. 
[hyperlink, http://www.gao.gov/products/GAO-09-326SP]. Washington, 
D.C.: March 30, 2009. 

Joint Strike Fighter: Accelerating Procurement before Completing 
Development Increases the Government's Financial Risk. [hyperlink, 
http://www.gao.gov/products/GAO-09-303]. Washington D.C.: March 12, 
2009. 

Defense Acquisitions: Better Weapon Program Outcomes Require 
Discipline, Accountability, and Fundamental Changes in the Acquisition 
Environment. [hyperlink, http://www.gao.gov/products/GAO-08-782T]. 
Washington, D.C.: June 3, 2008. 

Defense Acquisitions: Assessments of Selected Weapon Programs. 
[hyperlink, http://www.gao.gov/products/GAO-08-467SP]. Washington, 
D.C.: March 31, 2008. 

Joint Strike Fighter: Impact of Recent Decisions on Program Risks. 
[hyperlink, http://www.gao.gov/products/GAO-08-569T]. Washington, 
D.C.: March 11, 2008. 

Joint Strike Fighter: Recent Decisions by DOD Add to Program Risks. 
[hyperlink, http://www.gao.gov/products/GAO-08-388]. Washington, D.C.: 
March 11, 2008. 

Tactical Aircraft: DOD Needs a Joint and Integrated Investment 
Strategy. [hyperlink, http://www.gao.gov/products/GAO-07-415]. 
Washington, D.C.: April 2, 2007. 

Defense Acquisitions: Analysis of Costs for the Joint Strike Fighter 
Engine Program. [hyperlink, http://www.gao.gov/products/GAO-07-656T]. 
Washington, D.C.: March 22, 2007. 

Joint Strike Fighter: Progress Made and Challenges Remain. [hyperlink, 
http://www.gao.gov/products/GAO-07-360]. Washington, D.C.: March 15, 
2007. 

Tactical Aircraft: DOD's Cancellation of the Joint Strike Fighter 
Alternate Engine Program Was Not Based on a Comprehensive Analysis. 
[hyperlink, http://www.gao.gov/products/GAO-06-717R]. Washington, 
D.C.: May 22, 2006. 

Defense Acquisitions: Major Weapon Systems Continue to Experience Cost 
and Schedule Problems under DOD's Revised Policy. [hyperlink, 
http://www.gao.gov/products/GAO-06-368]. Washington, D.C.: April 13, 
2006. 

Defense Acquisitions: Actions Needed to Get Better Results on Weapons 
Systems Investments. [hyperlink, 
http://www.gao.gov/products/GAO-06-585T]. Washington, D.C.: April 5, 
2006. 

Tactical Aircraft: Recapitalization Goals Are Not Supported by 
Knowledge-Based F-22A and JSF Business Cases. [hyperlink, 
http://www.gao.gov/products/GAO-06-487T]. Washington, D.C.: March 16, 
2006. 

Joint Strike Fighter: DOD Plans to Enter Production before Testing 
Demonstrates Acceptable Performance. [hyperlink, 
http://www.gao.gov/products/GAO-06-356]. Washington, D.C.: March 15, 
2006. 

Joint Strike Fighter: Management of the Technology Transfer Process. 
[hyperlink, http://www.gao.gov/products/GAO-06-364]. Washington, D.C.: 
March 14, 2006. 

Tactical Aircraft: F/A-22 and JSF Acquisition Plans and Implications 
for Tactical Aircraft Modernization. [hyperlink, 
http://www.gao.gov/products/GAO-05-519T]. Washington, D.C: April 6, 
2005. 

Tactical Aircraft: Opportunity to Reduce Risks in the Joint Strike 
Fighter Program with Different Acquisition Strategy. [hyperlink, 
http://www.gao.gov/products/GAO-05-271]. Washington, D.C.: March 15, 
2005. 

[End of section] 

Footnotes: 

[1] See related GAO products at the end of this report. 

[2] We have an extensive body of work looking at knowledge-based best 
practices in successful private and public acquisitions of new 
technology. Defense policy and the Weapon Systems Acquisition Reform 
Act of 2009 incorporate elements of the knowledge-based approach. For 
an overview of the best practices criteria and methodologies, and how 
current defense programs including the F-35 fared, see GAO, Defense 
Acquisitions: Assessments of Selected Weapon Programs, [hyperlink, 
http://www.gao.gov/products/GAO-12-400SP] (Washington, D.C.: Mar. 29, 
2012). 

[3] GAO, Joint Strike Fighter: DOD Actions Needed to Further Enhance 
Restructuring and Address Affordability Risks, [hyperlink, 
http://www.gao.gov/products/GAO-12-437] (Washington, D.C.: June 14, 
2012). 

[4] The international partners are the United Kingdom, Italy, the 
Netherlands, Turkey, Canada, Australia, Denmark, and Norway. These 
nations contributed funds for system development and signed agreements 
to procure aircraft. In addition, Israel and Japan have signed on as 
foreign military sales customers. 

[5] Commonly referred to as Nunn-McCurdy, 10 U.S.C. § 2433 establishes 
the requirement for DOD to submit unit cost reports on major defense 
acquisition programs or designated major subprograms. Procurement and 
acquisition unit costs are tracked against the current and original 
baseline estimates for a program. Increases in unit costs over certain 
thresholds constitute breaches in unit cost growth and, when the 
critical cost growth threshold is breached, DOD is required under 10 
U.S.C. §2433a to take certain steps to explain and justify 
continuation of the program. 

[6] Flight test points are specific, quantifiable objectives in flight 
plans that are need to verify aircraft design and performance. 

[7] Cumulatively since the start of F-35 developmental flight testing 
in December 2009, the program is ahead of plans by 12 percent for the 
number of flights and 4 percent for test points flown. 

[8] GAO, Joint Strike Fighter: Restructuring Places Program on Firmer 
Footing, but Progress Still Lags, [hyperlink, 
http://www.gao.gov/products/GAO-11-325] (Washington, D.C.: Apr. 7, 
2011). 

[9] Mission systems are critical enablers of F-35's combat 
effectiveness employing next generation sensors with fused information 
from on-board and off-board systems (i.e. electronic warfare, 
communication navigation identification, electro-optical target 
system, electro-optical distributed aperture system, radar, and data 
links). 

[10] F-35 Joint Strike Fighter Concurrency Quick Look Review, Office 
of the Undersecretary of Defense for Acquisition, Technology and 
Logistics, November 29, 2011. 

[11] GAO, Best Practices: Capturing Design and Manufacturing Knowledge 
Early Improves Acquisition Outcomes, [hyperlink, 
http://www.gao.gov/products/GAO-02-701] (Washington, D.C.: July 15, 
2002). 

[12] [hyperlink, http://www.gao.gov/products/GAO-12-437]. 

[13] Since 2005, a recurring theme in our body of work on the F-35 has 
been a concern about this substantial concurrency and the risks it 
poses to achieving good program outcomes. We previously recommended in 
several reports that annual procurement quantities be reduced to 
provide more time for testing to verify aircraft design and 
performance (refer to Appendix I). 

[14] Affordability targets were established for the unit recurring 
flyaway costs. These are budgeted procurement costs associated with 
buying the aircraft itself, including the airframe, engine, 
electronics, and armament. Targets do not include procurement of non-
recurring production items, ancillary ground support equipment, and 
spares. 

[15] GAO, Fighter Aircraft: Better Cost Estimates Needed for Extending 
the Service Life of Selected F-16s and F-18s, [hyperlink, 
http://www.gao.gov/products/GAO-13-51] (Washington, D.C.: Nov. 15, 
2012). 

[End of section] 

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