Floor Statements
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FLOOR STATEMENT BY SENATOR JOHN McCAIN ON THE F-35 JOINT STRIKE FIGHTER PROGRAM
December 5, 2011
“Last week, AOL Defense published an interview with Vice Admiral David J. Venlet, who heads-up the F-35 ‘Lightning II’ Joint Strike Fighter (JSF) program for the Department of Defense. In this interview, Admiral Venlet candidly offered his concerns about where the JSF program stands today. His professional judgment, while welcome in its forthrightness, is deeply troubling. His concerns, which I share, are what bring me to the floor this morning. I’d like to introduce for the record a copy of Admiral Venlet’s remarks.
“Before I get to Admiral Venlet’s comments, however, let me briefly summarize the history of the JSF program that has taken us to where we are today.
“In a nutshell, the JSF program has been both a scandal and a tragedy. The JSF program has been in the development phase for ten years. Over that time, it has been the beneficiary of an estimated $56 billion of taxpayer investment. And yet after so much time and so great an investment by the taxpayers, we still don’t have an aircraft that provides the Air Force, Navy, and Marine Corps with the combat capability they need. In fact, flight testing sufficient to demonstrate the full mission systems and weapons delivery capability of the F-35 aircraft has not even started. At this point, this most advanced phase of flight testing won’t begin any sooner than 2015.
“Developing and buying these jets, and building the facilities to support them, was originally supposed to cost $233 billion. However, according to the April 2011 Government Accountability Office (GAO) report on the JSF, these costs are now estimated to be closer to $383 billion. Unfortunately, this 61% increase in total development and acquisition costs will only get worse when the Department announces a new baseline cost estimate, which resulted from a second restructuring of the F-35 program over the last two years. Overall, the schedule for the end of the development phase and the start of full-rate production has slipped five years since the current baseline was set in 2007 and is now planned for 2018.
“In 2001, the Department of Defense told Congress that the JSF would cost about $69 million per aircraft. But, according to the GAO’s report from April, the cost of each F-35 aircraft has now risen to about $133 million per plane. Including the cost of research, development and testing across the entire program, the unit cost of each individual jet goes up to $156 million. In inflation-adjusted dollars, that’s about double the original 2001 estimate. Unfortunately, we know that estimate will go up substantially when the Pentagon releases its latest projections, with the costs of restructuring the program factored in and a new cost baseline is established for the program.
“If these costs of developing and buying the aircraft were not high enough, the Pentagon now estimates that operating and sustaining these new aircraft may cost as much as $1 trillion over their planned service life. Thankfully, we have reason to believe that this jaw-dropping number may be artificially high and can be reduced. But, keep in mind, the rule of thumb is that the cost of developing and buying a major weapons system tends to be only one-third of its total cost; the other two-thirds are in operating and sustaining it. So, with the development and procurement costs of the F-35 already approaching $400 billion, it would not be unreasonable to expect sustainment costs of at least $800 billion over the F-35’s life span. That amounts to about a $1.2 trillion investment of taxpayer resources, which makes the F-35 the most expensive weapons program in history.
“Over the nearly 10-year life of the F-35 program, Congress has authorized and appropriated funds for 113 of these jets, but as of today the program has delivered just 18 aircraft, most of which are being used for flight testing. The first production aircraft intended for training just started to be delivered this summer – three years late.
“In July, the numbers came in on how much these early production model jets will cost compared to original estimates. That was a shocking $1 billion over the original estimate of about $7 billion. Under the ‘cost-plus’ contracts for these early production aircraft, taxpayers will be on the hook for $771 million to cover their share of this cost overrun for these first twenty-eight aircraft – and Lockheed Martin will absorb the cost of $283 million. That’s a 15% cost overrun when you total up everybody’s share. So, for about $8.1 billion, we get twenty-eight aircraft at a cost per aircraft of about $289 million each. That is, needless to say, unacceptable.
“Just last week, we learned that the costs associated with the fourth lot of these early production aircraft may be as high as 10 percent over that contract’s $3.46 billion target cost. That's a $350 million overrun, with only about 40% of that work completed to date. That tells us that the costs of the program have still not been contained, despite two years of very concentrated effort by the Pentagon to bring costs under control – knowing that the future of the program hangs in the balance.
“This brings us to where we are today and the context of Admiral Venlet's remarks. The Pentagon has recently completed its analysis of how much the next lot (the fifth lot) of early production aircraft ‘should cost’ and is negotiating with Lockheed Martin on who will bear the cost of changes to the design and manufacturing of the aircraft that could result from thousands of hours of flight testing that lie ahead.
“It is at this exact moment that the excessive overlap between development and production that was originally structured into the JSF program (called, ‘concurrency’) is now coming home to roost: on the one hand, the Department –quite rightly – says that it will not sign any contract for this next lot until the Lockheed Martin agrees to pay a reasonable share of these ‘concurrency costs.’ But, on the other, Lockheed Martin doesn't want to bear the risk of new discoveries that may require retrofit or redesign of the aircraft.
“Based on the in-depth studies that the Department has conducted to date, Admiral Venlet told AOL Defense last week that the JSF program needs to slow down production and deliveries of the aircraft. He explained that this was necessary to open up the aircraft and install fixes to numerous structural cracks and ‘hot spots’ that the program has discovered in the plane over the last year or so. He estimated that the work needed to remedy these cracks could add an additional $3 to $5 million per jet.
“Now, bear in mind that this revelation comes on top of the fact that the Department just reduced the latest F-35 purchase, what will be Lot 5, by five jets. Admiral Venlet concluded that even as the Pentagon negotiates with Lockheed Martin on Lot 5 of the aircraft under the terms of a fixed-price contract, there is much ‘heavy learning’ that remains in the program. Specifically, he observed:
‘The analyzed hot spots that have arisen in the last 12 months or so in the program have surprised us at the amount of change and at the cost. Most of them are little ones, but when you bundle them all up and package them and look at where they are in the airplane and how hard they are to get at after you buy the jet, the cost burden of that is what sucks the wind out of your lungs. I believe it’s wise to sort of temper production for a while here until we get some of these heavy years of learning under our belt and get that managed right. And then when we’ve got most of that known and we’ve got the management of the change activity better in hand, then we will be in a better position to ramp up production.’
“So, Admiral Venlet, who oversees the JSF program for the Pentagon, is basically saying that, even after the program was restructured two years ago by Secretary Gates to add $7.3 billion and 33 more months to development, there is still too much ‘concurrency’ baked into this program. In other words, the overlap between development and production is still too great to assure taxpayers that they will not have to continue paying for costly redesigns or retrofits due to discoveries made late in production. In that context, ramping up production – even under the program’s revised schedule – would not be a move in the right direction. I absolutely agree.
“When the head of the most expensive, highest-profile weapon systems program in U.S. history effectively says, ‘Hold it! We need to slow down how much we are buying!’ We should all pay close attention.
“So, what does this mean in terms of the pending negotiations for the next production lot? Well, as I said a few days ago during my opening remarks on Senate consideration of the Fiscal Year 2012 National Defense Authorization Act, I strongly support the Department's position.
“I think Admiral Venlet’s concerns are completely consistent with the view reflected in the Senate Armed Services Committee’s markup of the defense authorization bill. As we negotiate to buy more early production jets at a time when most of the developmental testing of the aircraft has yet to be done, Lockheed Martin must be held increasingly accountable for cost overruns that come as a result of wringing out necessary changes in the design and manufacturing process for this incredibly expensive aircraft.
“For this reason, I expect that the Department will negotiate a fixed-price contract for this next lot of aircraft that requires Lockheed Martin to assume an increased share of any cost overruns. And, I expect that this contract negotiation will reflect unit costs that are lower than for the last lot purchased, and that the contract will ensure shared responsibility for reasonable concurrency cost increases. Put simply, the deal we negotiate on this next production lot must be at least as good, if not better, than the deal we negotiated under the previous one. Otherwise, I can only conclude that we are moving in the wrong direction and it will be only a matter of time before the American people and the U.S. Congress lose faith with the F-35 program – which is already the most expensive weapons program in history.
“One thing is clear: the culprit here is, among other things, ‘excessive concurrency,’ which is the overlap of trying to develop an advanced aircraft at the same time as you buy production model aircraft intended for training and operations. The danger of excessive concurrency is the grand, enormously expensive lesson of the Joint Strike Fighter program – a lesson that we continue to overlook at our peril: trying to execute a strategy for the acquisition of a major weapon system that has too much concurrency baked into it, under a cost-type contract is absolutely a recipe for disaster. We have to do everything we can to ensure that this doesn’t happen again.
“Mr. President, in so many different respects, the F-35 program truly represents is a tragedy. The Air Force, Navy and Marine Corps desperately need new aircraft to take the place of the current strike and fighter jets that have been at war for most of the last 10 years. These well-worn legacy aircraft are coming to the end of their service lives. But, we are saddled with a program has little to show for itself after 10 years and $56 billion in taxpayer investment that has produced less than 20 test and operational aircraft, a bill for three-quarters of a billion dollars, and the promise of considerable ‘heavy learning’ yet to go.
“Admiral Venlet’s message last week clearly conveyed that the path we are on is neither affordable nor sustainable. On that fact, he and I are in total agreement. But, that agreement provides very little solace. If things do not improve – quickly – taxpayers and the warfighter will insist that all options will be on the table. And they should be. We cannot continue on this path.
“Thank you, Mr. President.”
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