Written Testimony for the Senate Appropriations Defense Subcommittee, June 19, 2013 Hearings on F-35 Budget(Selected excerpts)
(Source: Senate Appropriations Defense Subcommittee; issued June 19, 2013)
COMBINED STATEMENT OF:
- Mr. Frank Kendall, Undersecretary of Defense for Acquisition, Technology and Logistics;
- Lieutenant General Christopher Bogdan, Program Executive Officer F-35


Chairman Durbin, Vice Chairman Cochran, and distinguished Members of the Subcommittee,

Thank you for the opportunity to address this subcommittee regarding the F-35 Joint Strike Fighter.

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The President’s FY14 budget request includes a total of $8.3 billion for continued system development ($1.8 billion) and procurement ($6.5 billion) of an additional 29 F-35 aircraft.

To ensure the F-35 maintains its effectiveness against continually evolving threats, this request also includes resources to deliver advanced weapons and sensors to the F-35 fleet in the years following Initial Operational Capability for our Services. The Department also endeavored to protect the development of the F-35 Program this year as it adjusted its budget to execute the mandates of sequestration. The Department has requested a reprogramming of $75 million to keep the development program on schedule and we urge the subcommittee’s support for this request.

Ensuring the success of the F-35 development program and achieving a stable design that will permit increased and more economical production rates have been among my top priorities. I would also ask this subcommittee to help us maintain funding stability in the F-35 Program as you review the FY 2014 President’s Budget request.

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International Partnerships

In addition to development and production with our international partners, there is robust activity in the Foreign Military Sales (FMS) arena.

Delivery of Israel’s first of nineteen (19) F-35A aircraft is scheduled to begin in 2016, with current plans for seventy-five (75) Israeli F-35’s.

Japan signed a Letter of Offer Acceptance (LOA) for four F-35A variant aircraft in June 2012 to be delivered from the Lockheed Martin assembly line in 2016. Thirty-eight (38) follow-on aircraft will be produced in a Final Assembly and Check-out Facility (FACO) built in Japan, with deliveries beginning in 2017, for a total of forty-two (42) aircraft. Japan’s Ministry of Defense continues to plan for additional production to replace their aging fighter fleet; and a decision on the replacement aircraft is expected by 2017.

Last June the F-35 team provided a proposal to the Republic of Korea, which is also competing for the acquisition of its future fighter. We expect Korea’s decision by the end of this month. Should the F-35 be selected, deliveries would commence in 2017.

The Singapore Air Force is currently working with the F-35 program through a Studies and Analysis FMS case leading to a potential request for acquisition later this year.

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Where we are now

The F-35 program continues to make steady progress. I believe we have a realistic plan in place. We are seeing progress close to plan but challenges and risks remain. We still have a long way to go in the flight test program, with over 50% of the flight test remaining, and have a good deal of development to complete, particularly software and weapons integration.

While the program did experience significant schedule and cost growth prior to the 2010 Nunn-McCurdy cost breach, the Department’s actions and our experience over the last three years reflect that the program is on a more stable footing. Our focus now is on completing development, which will permit ramping up to increased economies of scale in production, and on getting support costs down.

Cost, Schedule and Performance

The Department is focused on executing the development program with discipline to ensure the program delivers the planned for capabilities within the time and funding that has been budgeted.

Unit Recurring Flyaway (URF) costs are on track to meet the affordability targets that I established during the MS B recertification in 2012. The transition to fixed price production contracts is helping with this positive trend, but to meet our cost goals the Department must ramp up the production profile. In 2012, I flattened production because of excessive concurrency risk and concern about the stability of the design. The situation today has improved to the point that I am cautiously optimistic that we will be able to increase production in 2015 as planned, provided development and test progress continues to show improvement and costs risks associated with concurrency continue to decline.

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While software development and integration is the highest risk the program faces as we complete development, there are other risks we are tracking that warrant management attention. Among these are the Helmet Mounted Display System (HMDS), the Arresting Hook System (AHS) for the F-35C (carrier variant), and the Autonomic Logistic Information System (ALIS).

The HMDS is a major technological advance for pilot situational awareness but it has presented design challenges. HMDS issues faced by the program over the past year were “green glow,” or insufficient helmet display contrast; latency of the displayed information;, “jitter,” or lack of stability of the displayed symbology as the aircraft maneuvers; night vision acuity; and alignment of the displayed symbology.

Last year the program made significant progress against these challenges using dedicated HMDS flight testing to identify and analyze acceptable HMDS performance. As a result of testing, the program has successfully mitigated the effects of four of these HDMS issues. More work is planned this summer to ensure that the night vision camera is effective for Marine Corps operations.

All of these systems still pose moderate risk, but the program has well-planned and resourced mitigation plans in place for each. I would categorize these as typical of challenges associated with a complex weapon system development program, but design and production concurrency have rendered them more acute in the F-35’s case.

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Concurrency Costs

As I mentioned, structural fatigue testing is proceeding according to plan and one of the biggest concurrency risks – that of a significant structural redesign – is decreasing accordingly. The quantity and significance of test findings to date have been consistent with or better than what we have seen on past fighter programs.

Predicted concurrency costs are coming down with the execution of flight testing. Additionally, the projected concurrency costs per aircraft are being revised downward due to a number of initiatives. In the summer of 2012, the F-35 Joint Program Office (JPO) and Lockheed Martin (LM) created a joint JPO-LM Concurrency Management Team. Their first tasks were to identify the key drivers of concurrency costs, develop a discrete bottoms-up cost estimate, and work collaboratively to mitigate expected concurrency impacts.

The new cost model reflects a detailed engineering approach informed by the remaining F-35 qualification, flight test, and ground test events. The F-35 program has taken measures to improve management of concurrency risk and minimize the costs of delivering warfighting capability to the Services by reducing the time required to implement changes to the production line, where these modifications are cheapest, and ensure that fewer aircraft need post-production retrofits.

These included introducing incentives to the Lot 5 and beyond production contracts so that Lockheed Martin absorbed a reasonable share of the risk and cost of discovering and implementing concurrency changes during production.

Sustainment Costs

The operation and sustainment (O&S) costs estimate reported in this year’s Selected Acquisition Report (SAR) to Congress is unchanged from the independent cost estimate the Director of the Cost Assessment and Program Evaluation office (D, CAPE) provided to support the Defense Acquisition Board’s 2012 Milestone B Nunn-McCurdy recertification review. It will be updated for the fall 2013 Interim Program Review DAB, based in part on the program’s cost data gained from operations at Eglin AFB and MCAS Yuma.

The SAR reflects O&S costs that total $617B in Constant Year 2012 dollars or $1,113B in Then-Year dollars; the Then-Year estimate highlights the inflationary impacts of operating those aircraft beyond the year 2065.

The Cost Per Flight Hour (CPFH) reflected in the SAR is also the unchanged D, CAPE estimate. I established CPFH affordability targets during the MS B recertification, and we are working to achieve reductions that will bring the program in below these targets to ensure the F-35 is affordable as we transition to the operations and sustainment phase.

The Department, Services, and F-35 Program Office have undertaken numerous initiatives to explore ways to reduce total O&S costs. At this point, the O&S costs represent the best remaining opportunity to reduce program costs. These initiatives include:
-- Conducting a Sustainment Business Case Analysis using independent reviewers
-- Injecting competition in sustainment areas to include managing the global supply chain, producing support equipment, operating our training centers and administering ALIS in each of our bases and squadrons.
-- Instituting a robust Reliability and Maintainability program to systematically identify parts and systems on the aircraft today that require repairs too frequently.
-- Standing up the organic depots to improve the quality, throughput, and turn-around times for parts repairs.

While we are being aggressive in our efforts to reduce overall O&S costs, our current estimates are just that – estimates. My confidence in our cost estimates will improve when we have actual costs based on sustaining broad operational employment and can benefit from the learning and experience of our warfighters. (end of selected excerpts)


Click here for the complete version of the above statement

Click here all the prepared witness statements

Click here for a webcast of the hearing, both on the Subcommittee website.


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