PARIS --- An audit by the DoD Inspector General found that “DoD received F-35 RFI spare parts that did not meet contract requirements, and paid performance incentive fees on sustainment contracts based on inflated and unverified F-35 aircraft availability hours,” Theresa S. Hull, Assistant Inspector General for Audit Acquisition, Contracting, and Sustainment, told the House Committee on Oversight and Reform during a July 22 hearing.
We reproduce below selected excerpts of her testimony. A link to the full text of her statement is posted at the foot of the page.
“The F-35 Joint Program Office (JPO) did not conduct adequate oversight of Lockheed Martin’s performance related to receiving F-35 spare parts and verifying aircraft availability hours.
As a result, the DoD received non-RFI spare parts and has spent up to $303 million between 2015 and 2018 on labor costs for DoD personnel to bring the spare parts to RFI condition.
Furthermore, until Lockheed Martin consistently delivers RFI spare parts that meet the contract requirements, the DoD will continue to pay an estimated cost of up to $55 million annually to resolve issues related to non-RFI parts.
In addition, by not independently collecting and verifying aircraft availability hours, the DoD has potentially overpaid $10.6 million in performance incentive fees.
Due to the number of non-RFI spare parts that Lockheed Martin provided to F-35 sites, the JPO issued guidance in October 2018 allowing aircraft to be flown with spare parts that had EEL issues, contradicting previous JPO guidance that required spare parts with EEL issues to be quarantined and not used until the issues were resolved.
The DoD is in an environment in which it is dependent on Lockheed Martin for information related to the F-35, including contractor performance, because the Government did not maintain its own data.
Because the JPO has not directed F-35 site personnel to track non-RFI spare parts, the DoD has no way to determine the total number of hours that F-35 aircraft have flown with non-RFI spare parts and inflated aircraft availability hours. Furthermore, the JPO relied solely on contractor-reported information on availability hours to pay Lockheed Martin $32 million of the $38 million in performance incentive fees for 2017 and 2018. The JPO validated the hours by comparing availability hours on one Lockheed Martin-generated report to another Lockheed Martin-generated report because the JPO did not track or collect aircraft availability hours.
According to JPO officials, on any given day, 50 percent of the F-35 fleet is flying with non-RFI spare parts.
After being told by Lockheed Martin personnel that the EEL issue was improving, DCMA officials visited three F-35 sites, beginning in February 2018, to determine whether Lockheed Martin’s completed corrective actions had fixed the non-RFI spare part issues.
However, DCMA officials found that Lockheed Martin was still providing non-RFI spare parts, and the number of spare parts with EEL issues was actually increasing. Furthermore, DCMA officials found that DoD officials at the F-35 sites had increased the use of ad hoc manual processes and had reassigned DoD personnel to correct non-RFI issues.
According to DCMA, the total DoD labor cost resulting from receiving non-RFI parts between 2015 and 2018 could be as much as $303 million. In addition, the DoD will continue to pay an estimate of up to $55 million annually in labor costs to fix non-RFI spare parts until the EEL issue is resolved.
F-35 aircraft are already proving to be more expensive to sustain than originally planned. In 2016, the JPO awarded the first full-year F-35 sustainment contract to Lockheed Martin for approximately $646.6 million to sustain the 211 aircraft in the fleet at that time. In only 2 years, sustainment costs for the F-35 fleet more than doubled to $1.4 billion to sustain 349 aircraft. (The sustainment cost per aircraft increased by one-fourth over those two years, from $3.06 million per aircraft in 2016 to $4.11 million per aircraft in 2018—Ed.)
According to DCMA officials, each F-35 aircraft includes more than 8,000 parts that require an EEL.
-- EEL: Electronic Equipment Logbook
-- RFI: Ready For Issue
-- DCMA: Defense Contract Management Agency
Click here for the full statement (13 Pdf pages), on the Pentagon website.