This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its May 2019 report entitled Defense Acquisitions: Observations on the F-35 and Air Force’s Advanced Battle Management System, the U.S Government Accountability Office (GAO) found that poor planning was resulting in further delays and cost increases in its ongoing F-35 fighter jet program.
By way of background, the GAO reported detailed that “DOD is now in its 18th year of developing the F-35—a family of fifth-generation strike fighter aircraft for the United States Air Force, MarineCorps, and Navy, as well as eight international partners” and that the “F-35 program has developed and is delivering three variants; the F-35A conventional takeoff and landing variant for the Air Force, the F-35B short takeoff and vertical landing variant for the Marine Corps, and the F-35C carrier-suitable variant for the Navy.” The report also noted that the “F-35 is DOD’s largest acquisition program in U.S. military history, with total acquisition costs expected to exceed $406 billion to develop and procure more than 2,400 aircraft through fiscal year 2044” and that the government estimates that “the F-35 program’s sustainment costs to operate and maintain the fleet over the next 52 years to be $1.12 trillion.
In its report, the GAO noted that the Department of Defense (DOD) failed to implement prior GAO recommendation regarding the need to implement a reliability and maintainability (R&M) business case to help manage the pending $10.5 billion “Block 4” fighter jet modernization phase of the project:
What GAO Found
The Department of Defense (DOD) wrapped up the F-35 development program in April 2018 and expects to complete operational testing in December 2019. DOD has turned its attention to modernization efforts—referred to as Block 4—to add new capabilities to address evolving threats. The program office estimates Block 4 to cost at least $10.5 billion through 2024. DOD plans to start Block 4 development without a complete business case identifying baseline cost and schedule estimates. Key documents for establishing a business case, such as an independent cost estimate, will not be ready before the program plans to award Block 4 development contracts in May 2019.
Furthermore, the GAO found that DOD was not adequately managing the cost-related risks associated with its $1.2 trillion F-35 sustainment budget, noting that the F-35s were failing half of the established reliability and maintainability metrics and how this compromised operational capacity:
Three F-35 Modernization Business Case Documents That Will Not Be Ready Before the Planned Development Contract Awards
Without a business case—consistent with acquisition best practices—program officials cannot be confident that the risk of committing to development has been reduced adequately prior to planned contract awards.
The program made slow, sustained progress in improving the F-35’s reliability and maintainability (R&M). F-35 aircraft are assessed against eight R&M metrics, which inform how much time the aircraft will be in maintenance rather than operations. Half of these metrics are not meeting targets. While the program office has a plan for improving R&M, its guidance is not in line with GAO’s acquisition best practices or internal control standards as it does not include specific, measurable objectives, align improvement projects to meet those objectives, and prioritize funding to match resources to R&M requirements. If the R&M requirements are not met, the warfighter will have to settle for a less reliable and more costly aircraft than originally planned. This contributes to the F-35’s $1.12 trillion estimated sustainment costs and challenges with maintaining an expanding fleet that also has supply chain and logistics system problems.
More specifically, the GAO found that the failure to meet R&M metrics resulted in some of the F-35s being mission-ready only 52 percent of the time, which was far lower than the 88 percent readiness target established by the Secretary of Defense. The GAO found that these failures could be attributable to problems in obtaining spare parts for the fighter jets:
In addition, DOD faces substantial supply chain challenges that are lowering F-35 aircraft performance. In April 2019, we reported that F-35 aircraft performance was falling short of warfighter requirements—that is, aircraft could not perform as many missions or fly as often as required. Specifically, F-35A aircraft were mission capable only 52 percent of the time from May through November 2018—far short of the 80 percent target set by the former Secretary of Defense. This lower-than-desired aircraft performance is due largely to F-35 spare parts shortages and limited part repair capabilities. For example, during this time period, F-35 aircraft were unable to fly about 30 percent of the time due to spare parts shortages.
Additionally, DOD’s capabilities to repair F-35 spare parts at its depots are years behind schedule, which has resulted in an average of 188 days to repair an F-35 part and a backlog of about 4,300 spare parts awaiting repair at military depots or manufacturers. We also reported that DOD faces challenges managing, moving and maintaining accountability of F- 35 parts within the supply chain. We made eight recommendations to DOD, including that DOD determine what actions are needed to close the gap between warfighter requirements for aircraft performance and F-35 supply chain capabilities. DOD concurred with the recommendations and identified actions that it was taking or planned in response.
As this report illustrates, the failure to implement appropriate long-term planning to better ensure full life-cycle maintenance can expose major projects to significant failures risks in the areas of cost control, timely delivery, and sustainable operational performance.
