Joint Hearing Of The Subcommittee On Air And Land Forces And The Subcommittee On Seapower and Expeditionary Forces Of The House Armed Services Committee - Department Of The Navy And Air Force Combat Aviation Programs

Statement

"The hearing will come to order. The subcommittee meets today to receive testimony on the Department of the Navy and the Department of the Air Force budget requests for combat aircraft programs for fiscal year 2011.

"We welcome our witnesses for today. Panel one: The Honorable Ashton Carter, Under Secretary of Defense for Acquisition, Technology and Logistics, Office of the Secretary of Defense; The Honorable Christine H. Fox, Director of the Office of Cost Assessment and Program Evaluation, Office of the Secretary of Defense; The Honorable J. Michael Gilmore, Director, Operational Test and Evaluation, Office of the Secretary of Defense and Mr. Michael J. Sullivan, Director of Acquisition and Sourcing, Government Accountability Office.

"Panel two: The Honorable Sean Stackley, Assistant Secretary of the Navy for Research, Development and Acquisition; Lieutenant General George Trautman, Deputy Commandant of the Marine Corps for Aviation, Rear Admiral Deke Philman; Director of the Air Warfare Division for the U.S. Navy; Mr. David M. Van Buren, Acting Assistant Secretary of the Air Force for Acquisition and Lieutenant General Philip M. Breedlove, Deputy Chief of Staff for Operations, Plans and Requirements, U.S. Air Force.

"We have scheduled this hearing to give members the opportunity to address issues related to all combat aircraft programs of the Navy, Marine Corps and Air Force. There will be a subcommittee hearing in late April to address mobility aircraft programs.

"We have a number of issues to cover today, but my opening remarks will focus on the F-35. The F-35 is an incredibly complex program and there is no question significant technology and manufacturing capabilities have been demonstrated. The thousands of people working at the major contractors as well as the many suppliers and vendors deserve a great deal of credit for their achievements.

"But one cannot say that with the tens-of-billions-of-dollars invested to date, that the program is proceeding according to plan. There have been several master schedules and even more test flight schedules. The F-35 program is projected to field 14 test aircraft. Three production representative test aircraft have been delivered, resulting in only 16 of a planned 168 test flights being completed last fiscal year.

"All of the test aircraft are not projected for delivery until 2011 and the first Naval development variant aircraft will not be able to be used for catapult test launches as intended because of a structural design issue, unless it goes through a 2-3 month modification. Two thousand, four hundred and forty three U.S. Navy, Marine Corps and Air Force aircraft as well as 730 aircraft for 8 international partners are planned. No production aircraft have been delivered of the 58 production aircraft approved by Congress over the past 4 years.

"Two production aircraft are projected for delivery late this year, approximately 9 months later than projected. Funding for 550 production aircraft will be requested from Congress by the Department of Defense before initial operational test and evaluation is scheduled to be completed in 2016. Aircraft deliveries to date have come at a significant cost. This year's budget alone is $10.7 billion for research and development and procurement of 43 F-35 aircraft.

"The projected total program acquisition cost is currently estimated at well over $300 billion, a 55 percent increase over the original baseline estimate. The average projected F-35 procurement unit cost has increased 80 percent to $125 million per aircraft. In addition, the GAO has noted that engine cost growth and development delays are also contributing substantially to overall programs costs.

"The GAO, in its recent report noted, "The F135 primary engine development effort…is now estimated to cost $7.3 billion, a 50 percent increase over the original contract award. This includes an $800 million contract cost overrun in 2008.' The total flight time logged on the F-35 baseline engine is approximately 250 hours -- far less than the 200,000 hours required to demonstrate engine maturity.

"Nine years into development, the F-35 remains a highly dynamic and unpredictable program. Secretary Gates, while visiting the F-35 production facility last August was quoted as saying, "My impression is that most of the high-risk elements associated with this developmental program are largely behind us, and I felt a good deal of confidence on the part of the leadership here that the manufacturing process, that the supply chain, that the issues associated with all of these have been addressed or are being addressed.'

"Within two months of Secretary Gates' comments, three different Pentagon assessments concluded the F-35 faced significant cost growth and further delays, adding $46 billion in total acquisition costs and 2 ½ years to the 2007 approved program baseline.

"As part of the Pentagon assessments, a Manufacturing Review team determined that the production plan projecting increasing annual production was too aggressive and that large cost overruns were probable.

"Last month, Secretary Gates testified that even with the significantly restructured F-35 program, the service initial operational capability -- or I-O-C dates remained unchanged. However, this month, two of the three services procuring the F-35, slipped their service I-O-C dates, with the AF slipping its projected initial operational capability date from 2013 to 2016.

"The Director of Operational Test and Evaluation December 2009 report states that, "Continued production concurrent with the slow increase in flight testing over the next two years will commit DOD and Services to test, training, and deployment plans with substantial risk.'

"The GAO notes that the test program relies much more heavily than previous weapons systems on its modeling and simulation labs to verify aircraft and subsystem performance. The program plans to verify 83 percent of JSF capabilities in its ground labs, flying test bed, and desk studies -- and only 17 percent through flight testing.

"Yet, only two of 35 models and simulations have been accredited and many of the remaining will not be accredited until late 2012 or 2013. It therefore remains to be seen whether, as Secretary Gates observed, that "most of the high-risk elements associated with this developmental program are largely behind us.'

"The result of the Pentagon reviews is a restructured program that transfers some funding planned for procurement to development, adds one new test aircraft, and adds 13 months and $2.8 billion to complete the development schedule. Although the committee notes that the test aircraft assets added to the test program do not align with the test aircraft assets recommended by the Department's F-35 Joint Estimating Team.

"The restructured program reduces projected F-35 procurement over the next five years by 122 aircraft to a total of 362 aircraft. The level of research and development and procurement concurrency remaining, even with a restructured program, has been characterized as unprecedented.

"Under the current F-35 procurement plan, the Pentagon will be requesting congressional authorization for the highest annual rate of F-35 production to be achieved at any time during the program, one year before the full rate production decision is even made by the Department. The engine acquisition strategy continues to be a point of contention between the Pentagon and Congress.

"While competition is said by Pentagon officials to be a guiding principle for defense procurement, the Pentagon refuses to apply that principle to F-35 engine procurement. The Pentagon's engine acquisition strategy is to procure, through a sole source contract, several thousand F-35 engines over the next 25 years at a life cycle cost of well over $100 billion.

"Congress has maintained that a competitive engine development program would better ensure an affordable, reliable engine, and protect against the operational risk of having 95 percent of the entire U.S. fighter fleet dependent on one engine.

"The GAO has and continues to indicate that competition could be expected to yield enough savings to offset additional investments required to sustain a second engine source. The GAO also notes that prior studies indicate a number of non-financial benefits from competition, including better contractor performance, increased engine reliability, and improved contractor responsiveness.

"The Pentagon budgeted for and funded the F135 baseline engine and the F136 alternate engine through fiscal year 2006. Section 213 of Public Law 110-81 requires the Secretary of Defense to ensure the obligation and expenditure, from the amounts appropriated for the Joint Strike Fighter each year, of sufficient annual amounts for the continued development and procurement of two options for the propulsion system in order to ensure the development and competitive production of the F-35 propulsion system.

"The Pentagon has not complied with this statute and maintains that its business case does not justify an alternate engine program. Congress has funded the alternate engine for the last four years, but has only been able to fund the alternate engine at approximately 80 percent of the required level to maintain the F-35 Joint Program Office proposed schedule.

"The unwillingness of the Department to comply with statute, properly budget for the alternate engine program, and fully execute the alternate engine funds provided by the Congress for alternate engine, is unhelpful.

"Further, the failure of the Department to execute authorized and appropriated alternate engine funding is contrary to the commitment to the committee by the former Undersecretary for Acquisition, who testified that all funds authorized and appropriated for the alternate engine would be executed.

"The F-35 program office specified to Congress the need for $70 million in procurement funding, $35 million each, in the last two fiscal years, to properly execute the alternate engine program.

"Congress authorized and appropriated the $70 million, yet the Pentagon continues to fail to execute or reprogram the $70 million to research and development for the program.

"What the Pentagon does obligate for the alternate engine, it does so in an unpredictable and piecemeal manner, making the program extremely difficult to manage. Then when the Pentagon slips the out year schedule and increases the estimated costs to complete the alternate engine development, it infers the alternate engine program is at fault.

"While past F-35 program managers have provided congressionally requested information on annual funding levels required to support the engine, the current, acting program manager has declined to do so.

"Ultimately it is the responsibility of Congress to provide the funding for defense programs. We require the best information we can get to execute that responsibility.

"Further, misleading statements by senior Pentagon officials and congressional supporters of a sole-source contract for engine procurement make objective discussion of the F-35 engine issue difficult.

"Secretary Gates' Fiscal Year 2011 annual posture statement indicates that the F-35 alternate engine is 3-4 years behind the baseline F-35 engine. The F-35 alternate engine is 3-4 years behind the baseline engine primarily because that was the acquisition strategy for the alternate engine -- the development contract for the alternate engine was signed 46 months after the contract was signed for the baseline engine.

"Secretary Gates' statement also indicates many of the likely buyers of the F-35 are unable or unwilling to purchase from two engine manufacturers. This statement is not supported by the experience with the previous alternate engine, where eight countries have purchased from both engine manufacturers.

"In addition, the U.S. Navy purchased 359 of the Air Force alternate engines for its F-14 because of unsatisfactory performance with the F-14's baseline engine. Secretary of the Navy, John Lehman testified in 1984 that the Air Force alternate engine was "a far a superior engine…at prices about 10 percent below the old engine that's in the F-14 now.' This would suggest that military services and countries buy engines for many different reasons, some of which are performance, price, contractor responsiveness, maintainability and durability.

"The head of public affairs for the Pentagon recently stated that, "Revisionist history would suggest that the previous alternate engine competition resulted in some great savings to the taxpayer. I think the actual analysis shows that, if there was a benefit, it was negligible.'

The 2007 DOD engine study clearly indicated that engine competition caused a reversal in price trends for the baseline F-16 engine. It further is the case that after competition was introduced, engine reliability and maintainability improved significantly, and accidents due to engine problems, decreased significantly.

"We requested that the Pentagon provide further information on the public affairs statement. No information has been forthcoming. It has been stated in floor debate in the other body that the engine for the F-35 was competed and the alternate engine contractor "simply wants another bite at the apple.' This is not supported by fact. There has never been a competition between the F135 and F136 engines for the F-35 aircraft.

"The Pentagon's current position on the alternate engine continues to be difficult to understand. When, during internal Department of Defense budget deliberations for the fiscal year 2006-2011 budget, the Navy did not fund its portion of the alternate engine development, the Office of the Secretary of Defense directed the funding and countered with, "Without a second engine, future tactical aircraft inventory will be dependent on a single engine. Interchangeable, but different engines ensure that a single design problem won't simultaneously affect the bulk of the inventory. Funding the alternate engine also retains the industrial base.'

"A May 2008 study of Fighter Engine Industrial Capability by the Defense Contract Management Agency, completed at the request of the Assistant Secretary of the Air Force for Acquisition, recommended that the F-35 alternate engine be fully funded at the fiscal year 2006 planned program, i.e., to achieve production deliveries in fiscal year 2010 -- this fiscal year.

"Past F-35 program managers supported an alternate engine program. Former under Secretaries of Defense for Acquisition support the F-35 alternate engine program. The former Secretary of the Air Force and Chief of Staff of the Air Force both aggressively supported the F-35 alternate engine.

"The current Secretary of the Air Force says funding or not funding the alternate engine is, "a close call.' Even if the most recent information cited by the Pentagon for the near-term cost of completing development and completing directed procurement of the alternate engine are correct, this cost represents less than 3 percent of the estimated life cycle cost of the F-35 engine.

"And again, the GAO projects that funding the alternate engine would be cost neutral over the program's life time. I can appreciate the position of Secretary Gates on the F-35 program. But we ask the Secretary consider our position on the alternate engine. The potential ramifications of this decision will play out over the next two - three decades.

"Not funding the alternate engine program will change the fighter engine industrial base that has been in place since World War II, making it a class of one company. Ninety-five percent of the total U.S. fighter force would dependent on a single-engine F-35 aircraft, dependent on one company. DOD needs to have an explicit strategy for the fighter engine industrial base. At the completion of development of the F-35 engine, the U.S. fighter industrial base will be without a major fighter engine development program for the first time in over 35 years.

"Secretary Gates will not likely be the Secretary of Defense for the 2-3 decades the F-35 is projected to be the mainstay of the U.S. fighter force. I may not be a member of Congress for two- three decades.

"But I don't believe it is the responsible course of action to not fund both F-35 engines, given what we know and don't know about the F-35 engine and where we are in the evolution of the test program -- with all of 250 flight test hours having been flown.

"Each of the F-35 engines has, to varying degrees, had development issues. These engines are being required to do what no other fighter engine has ever been expected to do. Technical challenges can be expected. However, it is important that when technical issues do develop that contractors respond in a timely way and they have their A teams addressing the issues. It has been demonstrated that competition is the only way to achieve that.

"All competitive programs require up-front investment to achieve the long term benefits that competition brings. In the case of the alternate engine, the up-front investment cost has been projected by the GAO to be recoverable over the life of the engine program. By funding the alternate engine, the Department has the opportunity to hedge against the operational risk of wide-spread fleet groundings due to engine problems, sustain the fighter engine industrial base, effect contractor responsiveness, and encourage technical innovation at no additional cost to the Department. The Department's engine acquisition strategy is inexplicable."

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