$2.9 Billion "Not A Detailed, Comprehensive Estimate"

A new government report concludes that development of the F136 alternate engine for the F-35 JSF may come in significantly less that the estimated $2.9 billion, but leaves open the possibility that it could cost more as well.

In a letter to Senate Armed Services Committee Chair Carl Levin (D-MI) posted Wednesday on the GAO website, the agency says "DOD analysts relied largely on data, assumptions, and methodologies from an analysis done 3 years ago and have characterized the $2.9 billion projection as having an equal chance of being too high or too low. Therefore, this projection should be viewed as one point within a range of possible costs depending on the factors and assumptions used, and not as an absolute amount.

"Different assumptions and more detailed information could either increase or decrease the $2.9 billion funding projection. That said, we found two key assumptions made by DOD in developing the $2.9 billion funding projection that have a significant impact on the estimated amount of upfront investment needed. These assumptions were that 4 years of noncompetitive procurements of both engines would be needed to allow the alternate engine contractor sufficient time to gain production experience and complete developmental qualification of the engine, and the government would need to fund quality and reliability improvements for engine components. Past studies and historical data we examined indicate that it may take less than 4 years of noncompetitive procurements and that competition may obviate the need for the government to fund component improvement programs. If these conditions hold true for the alternate engine, the funding projection for the alternate engine could be lower than DOD's projection."

F136 Test Engine

The GAO goes on to say that the DOD's alternate engine cost projection is not a detailed, comprehensive estimate. "DOD cost analysts stated the projection provides a general-level sense of the budget required to put the alternative engine on a competitive level with the primary engine. The analysts noted that DOD was in the midst of a complex and comprehensive restructuring of the total JSF acquisition program and they were unable to invest the time or resources that normally would be part of a more detailed, comprehensive estimate. Accordingly, they relied largely on data, assumptions, and methodologies from their 2007 analysis.

"Using the GAO Cost Estimating and Assessment Guide, DOD's estimate would be characterized as a "rough order of magnitude" cost analysis. This type of analysis is typically developed when a quick estimate is needed and limited information is available, and does not include the same level of fidelity and precision normally associated with a detailed, comprehensive cost estimate. Table 1 summarizes DOD's projection of additional development and procurement costs to enable JSF engine competition."

Pentagon officials have said for the last several years that the F136 engine was unaffordable, and that the money allocated to its development could be better spent elsewhere. President Obama has consistently threatened to veto defense appropriations bills containing funding for the F136 engine, but has not so far followed through on that threat, and Congress continues to place funding for the alternate engine in its defense appropriations bills.

FMI: www.gao.gov