pogo.org Preying on the Taxpayer: The F-22A Raptor 07/25/2006 Project On Government Oversight

The Troubled F-22A

In recent years, POGO has questioned the ability of Lockheed Martin to meet its goals for the troubled F-22 fighter jet program. Since its conception in 1986, the Air Force’s F-22A Raptor fighter jet has been the focus of continued debate. The aircraft was originally intended to replace the aging F-15 fighter and create superiority in air-to-air combat operations. The F-22A, originally called the Advance Tactical Fighter (ATF), was designed to combat air threats posed by the Soviet Union. As the program took shape, the Kremlin fell and the air superiority threat from the Soviet Union vanished. With a diminishing air-to-air combat mission, the Air Force has assigned the F-22A new roles of air-to-ground combat and intelligence gathering. As a result, the aircraft continues to undergo modernization, and will for several more years.

But even if the F-22A were already adequately designed for today’s missions, the program has faced multiple set-backs, and continues to do so. Problems range from technical flaws (despite 20 years of research and development) to a cost that is higher per aircraft than any other in history, totaling over $65.4 billion dollars to date.² The Air Force’s original intent had been to acquire 750 aircraft for their inventory. Today, that number is 183.³ This drop in numbers is due primarily to the technical difficulties and repeated cost overruns in the program. The cost of the aircraft has tripled while, in response, the number of aircraft requested has decreased.

In addition to an exorbitant cost-per-aircraft, the Pentagon recently completed a Follow-on Independent Test and Evaluation (FOT&E) on the F-22A’s existing systems that found 75 unresolved deficiencies. (Appendix B) New problems that have cropped up include faulty cockpit actuators – which trapped a pilot in the jet, and he had to be rescued from his cockpit with chainsaws; uncommanded nose landing gear retractions, which recently caused an aircraft to fall on its main weapons bay doors – literally falling on its face; and concerns about the heat treatment of the booms, which may cause structural cracking. These problems have been reported to Congress by CRS, GAO, and even the Air Force. Problems have also been identified by the Pentagon’s Director of Operational Test and Evaluation (DOT&E).

According to CRS, the F-22A has historically experienced problems with the Avionics, Airframe, Engine, Cockpit Canopy, and Maintenance and Support Requirements. These problems do not incorporate the cost of Class A mishaps to the aircraft. (A Class A mishap is one that results in over $1 million dollars in damage.) The F-22A has had three Class A mishaps over the past two years. (Appendix G)

The Misleading Lockheed Email

With this troubled history as a backdrop, on June 15, 2006, Lockheed Martin Vice President of Legislative Affairs Jack Overstreet sent an email to senior Senate staff members titled “Chambliss F-22 Multiyear Amendment.” (Appendix D) In a shockingly transparent sign of how the nation’s military industrial complex functions, the email contained a copy of Senator Saxby Chambliss’( R-GA) amendment, even though Senator Chambliss had not yet introduced it. The email requested, “PLEASE VOTE ‘YES’ ON THE PROPOSED CHAMBLISS AMENDMENT ON F-22 MULTIYEAR PROCUREMENT.”

The email further states that IDA found that the F-22A meets all six of the entrance criteria for MYP. The email contained multiple attachments, including the text of the amendment in normal legislative format, talking points, and fast fact sheets to which Senators could refer. The email, of course, did not include the evidence from CRS, GAO, CBO, DCAA, or even the Air Force, challenging the program’s compliance with the legal requirements for MYP status.

Lockheed’s claim in its email that IDA concluded the F-22A meets all MYP requirements appears to have been based on a misinterpretation of the IDA report. IDA limited its analysis to only one requirement – that there be cost savings. However, IDA attached two unattributed documents at the end of its report that assert the F-22A meets all six requirements. Because the author of these documents is not clearly identified, the wrong impression appears to have been reached that they are IDA conclusions. In fact, however, these are Pentagon exhibits for the FY2007 President’s Budget and not independent analyses by IDA.

Shortly after Lockheed’s email was sent, Senator Chambliss introduced the amendment to the National Defense Authorization Act for Fiscal Year 2007 to grant the F-22A multiyear procurement status. (Appendix F) Based on the timing of the email and its content, it appears that Lockheed Martin was involved in the process and likely drafted the amendment themselves.

The amendment states that the F-22A program is in accordance with Section 2306(b) of Title 10 of the United States Code (USC), which sets forth the six legal requirements that must be met to qualify for MYP status.

Multiyear Procurement Requirements

A multiyear procurement is, according to the Defense Acquisition University, a “method of competitively purchasing up to 5 years’ requirements in one contract, which is funded annually as appropriations permit.”⁴

But there are significant risks to using an MYP for procurement:

A multiyear contract in comparison to a series of successive annual contracts offers cost savings and a stable procurement rate. However, this form of contracting also bears significant risks. MYP reduces congressional budgetary flexibility, both for the instant program and across other programs within the defense portfolio. Though multiyear programs are funded on an annual basis, they tend to require greater budgetary authority in the earlier years of the procurement. The Government also bears the risk of program cancellation, which can be quite high in the earlier years of the program. In certain cases, the requirement for design stability can also be a barrier to technology insertion. (Appendix C, page 9)

To mitigate these risks, the government established Title 10 U.S.C. §2306 (b),⁵ which sets forth six legal criteria that must be met for MYP status to be granted. The criteria are:

(1) That the use of such a contract will result in substantial savings of the total anticipated costs of carrying out the program through annual contracts.

(2) That the minimum need for the property to be purchased is expected to remain substantially unchanged during the contemplated contract period in terms of production rate, procurement rate, and total quantities.

(3) That there is a reasonable expectation that throughout the contemplated contract period the head of the agency will request funding for the contract at the level required to avoid contract cancellation.

(4) That there is a stable design for the property to be acquired and that the technical risks associated with such property are not excessive.

(5) That the estimates of both the cost of the contract and the anticipated cost avoidance through the use of a multiyear contract are realistic.

(6) In the case of a purchase by the Department of Defense, that the use of such a contract will promote the national security of the United States.

Evidence That The F-22A Program Is Not Ripe For MYP Status

With the exception of IDA, the analysts tasked with evaluating the F-22A program for MYP status found, to varying degrees, that the program does not meet all of the requirements for MYP. This includes the Air Force itself.

Requirement 1: That the use of such a contract will result in substantial savings of the total anticipated costs of carrying out the program through annual contracts.

GAO –

“We do not believe this condition has been met. The Air Force has not yet completed an estimate of multiyear procurement savings but has stated that it expects a maximum savings under its “best case” scenario of about 5 to 6 percent. It is expected to provide a final estimate to the Congress in May 2006. According to the CBO, substantial savings was defined in the past as at least 10 percent; however, the current law does not define substantial. We would point out, however, that the unit cost to procure remaining F-22As has increased 8 percent when comparing the fiscal year 2007 budget (using multiyear procurement) to the fiscal year 2006 budget (without multiyear procurement). The unit procurement costs to complete the F-22A program in fiscal year 2006 was $166 million per aircraft for 56 aircraft. The unit procurement cost to complete the program in fiscal year 2007 using multiyear procurement increased to $179 million for 60 aircraft. The multiyear plan proposes buying 20 aircraft each in fiscal years 2008 through 2010 whereas the fiscal year 2006 budget terminated procurement in 2008. The inefficiencies connected with extending the program by 2 years will add over $1 billion to the budget.” [Emphasis added] (Appendix A)

CRS –

“There may be reasons for some to question the feasibility of achieving IDA’s estimated $225 million MYP savings. For example,

There has been consistent and noteworthy disagreement between the Air Force and the Office of the Secretary of Defense (OSD) on F-22 cost estimating. Congress requested an independent cost estimate, which DoD hired IDA to execute.

IDA’s estimate of F-22 costs is different from OSD’s and the Air Force’s estimates.

In the December 31, 2004, Selected Acquisition Report (SAR) DoD reported that a two-year MYP (for production lots seven and eight) the Air Force anticipated pursuing would have saved $458.9 million over annual procurement. This level of estimated savings for a two-year MYP is approximately twice the figure IDA estimates the Air Force may save through a three-year MYP. Such disparity in estimates may suggest to some observers poor assumptions, tools, or methodologies for MYP cost savings estimates.

The basis of some Air Force cost estimates is unclear. For example, the Air Force plans to acquire two additional F-22 aircraft with the anticipated $225 million in MYP savings. According to DoD’s latest estimate, the F-22's Average Procurement Unit Cost is $185.4 million in FY2005 dollars. By this figure, two F-22's would cost $370.8 million.

GAO has consistently argued that the F-22 program should have conducted more thorough testing before entering production. For example, the GAO has argued that “The F-22 entered production without ensuring production processes were in control.” If true, this less-than-mature production process could be responsible for the F-22's current technical problems, which add to program cost, and may reduce projected MYP savings.” (Appendix G)

CBO –

“Deferring recognition of the full cost of the assets being purchased would understate the nature of the government’s obligations, potentially distorting budgetary choices by making the program appear less expensive than it is, and would constrain budgetary flexibility in subsequent years.” ⁶

IDA –

“For the MYP BCA [Business Case Analysis] IDA estimated the savings to be 2.2 percent of procurement costs. We present MYP savings in the context of total procurement cost.” [Emphasis in original] (Appendix C)

Requirement 2: That the minimum need for the property to be purchased is expected to remain substantially unchanged during the contemplated contract period in terms of production rate, procurement rate, and total quantities.

GAO –

“We do not believe this condition has been met. The planned quantities of F-22As have changed substantially over time starting with a requirement for 750 at program start to the current planned quantity of 183. The Air Force still includes the F-22A as one of its highest priority systems and continues to state a need for 381 aircraft, leaving a gap of 198 aircraft. However, in the last two years the quantities have changed twice. In December 2004, OSD determined that procurement of F-22As had to be terminated in fiscal year 2008 in order to save $10.5 billion. OSD stated this was all the F-22s that could be afforded. Then in December 2005, OSD changed the quantities again increasing them to 183 aircraft, adding over $1 billion to the F-22A budget. This tension between OSD and the Air Force will apparently continue into future budgets and quantities and could change again given the potential for further demands on limited government resources through the 2010 timeframe (War on Terror, future natural disasters, aging population, and many others). This disconnect between quantities needed and quantities that can be afforded is a major contributor to the broken F-22A business case and we believe it needs to be resolved before additional funds are authorized for procurement or modernization. Until the disconnect between needs and affordability can be solved and quantities are firmly established, it is difficult to determine what role the F-22A should have. Other alternatives (JUCAS, F-15s, JSFs) might provide sufficient ground attack capabilities and could result in further reductions in F-22A if its primary role is air superiority.” [Emphasis added] (Appendix A)

CRS –

“... the F-22A program has experienced noteworthy turbulence between the FY05 and FY07 budget requests. Total program budget, annual budget requests, total inventory, annual procurement rate, and program duration have all changed. ... Considering the changes to the F-22A program that have occurred, and changes which are being proposed, some may question the Air Force’s ability to comply with some provisions of 10 USC 2306(b)(a), including provision (2) ... .”(Appendix G)

Requirement 3: That there is a reasonable expectation that throughout the contemplated contract period the head of the agency will request funding for the contract at the level required to avoid contract cancellation.

GAO –

“We do not believe this condition has been met.” The GAO further stated, “The Air Force has indicated that its multiyear budget is currently under funded by $674 million.” [Emphasis added] (Appendix A)

CRS-

“Considering the changes to the F-22A program that have occurred, and changes which are being proposed, some may question the Air Force’s ability to comply with some provisions of 10 USC 2306(b)(a), including provision (2) ... and (3).” [Emphasis added] (Appendix G)

CBO –

“... the funding provided each year would not be sufficient to complete the aircraft ordered that year, and the Air Force would have to seek additional appropriations in the future to obtain functional aircraft. ... The Air Force would commit to the purchase of 20 aircraft per year for three years, with the right to cancel the remainder of the order at the end of each year. But it is not requesting appropriations sufficient to cover the potential cancellation liability. Under that proposal for multiyear procurement, the Air Force would have to seek additional appropriations in the future even if a decision was made to cancel the contract.”⁷ [Emphasis added]

Air Force –


	July 25, 2006 Preying on the Taxpayer: The F-22A Raptor Summary In June 2006, the Senate authorized the government to purchase 20 F-22A Raptor fighter jets each year for 2008, 2009, and 2010 using a multiyear procurement (MYP) strategy. If Lockheed, the aircraft’s manufacturer is able to secure MYP status, it would essentially lock the government into buying the 60 additional troubled F-22A’s and minimize the possibility that the program could suffer further funding cuts. An MYP would also result in the American taxpayers paying Lockheed $1 billion more than they would under the normal annual procurement process.