Ellen M. Lord, undersecretary of defense for acquisition and sustainment, and Robert F. Behler, the Defense Department’s director of operational test and evaluation, testify at a joint hearing of the House Subcommittees on Readiness and Tactical Air and Land Forces. Air Force Lt. Gen. Eric T. Fick, F-35 program executive officer, will also testify. The subject of the hearing is the Sustainment, Production, and Affordability Challenges of the F-35 Program, Nov 13, 2019.
Transcript
(mumbles) begin our second panel now and we have two witnesses. Mr. Greg Ulmer, Vice President and General Manager of the F-35 program for Lockheed Martin and Matthew Bromberg, President of Military Engines at Pratt & Whitney. So, Mr. Ulmer if you’d like to start, you were here to listen to the previous panel?
[Ulmer] I was
We’ll start wherever you want and then we’ll have our turn.
[Ulmer] Thank you Chairman. Chairman Norcross, Chairman Garamendi, Ranking Member Hartzler, Ranking Member Lamborn, distinguished Members of the committee, I appreciate this opportunity to testify on behalf of Lockheed Martin and the F-35 Lighting II industry team. I thank you for your support and your continued partnership in advancing this critical program and for your steadfast support of our men and women in uniform. Before I take your questions today, I would like to provide a brief update on the F-35 program from industry’s perspective. While we continue to face challenges, there is no doubt the program is beginning to hit its stride and we will continue to work with the Services, the Joint Program Office, our international partners and Congress, to ensure the program remains on track. I’ve submitted my full statement to the committee, which I ask be made part of the hearing record at this time. The F-35 stealth, technology, supersonic speed, advanced sensors, weapons capacity and increased range, make it the most lethal, survivable and connected aircraft operating in the world today, and with more than 455 aircraft now deployed on operational missions and conducting advanced training exercises we are seeing users deploy the aircraft and weapons system beyond what was ever first envisioned. F-35s now operate from 20 bases, three ships and nine countries operating aircraft on their own home soil. The F-35 has and is transforming coalition operations today. The F-35 is also empowering economic growth. The program has 1500 Tier 1 suppliers, with more than 1400 of those in the United States spanning 45 states and Puerto Rico, and supports more than 220,000 direct and indirect jobs. In the United States alone, the economic impact is more than 44 billion dollars annually. The industry team is ready for full rate production. Our plan is to deliver 131 aircraft this year, currently we are delivering at a rate of 12 aircraft per month, which positions us to meet next year’s aircraft delivery rate of more than 140 aircraft, and we have additional capacity to accommodate increased production rates atop of that. Lockheed Martin and the U.S. government recently announced the agreement for Lots 12 through 14 contract which achieved the shared government and industry challenge of delivering a less than 80-million-dollar aircraft one year earlier than originally planned, and reduced costs on all three variants by an average of 12.7 percent. As operational deployments continue to increase, we’re keenly focused on the need to reduce sustainment costs and improve mission readiness. We believe with the same disciplined approach we can deliver cost reductions similar to those that we’ve realized in production. Sustainment costs will continue to decrease as operational lessons learned are implemented. Data-informed predictive health monitoring improves, spares parts availability increases in a more robust repair capacity as realized within our military depots and across the original equipment manufacturers. We firmly believe a five year performance-based logistics contract structure coupled with 1.5 billion dollars in advanced funding from Lockheed Martin, will provide stability in funding needed to accelerate cost savings and improve readiness rates for the F-35, while allowing the program to operate within its existing budget today. Today we’re developing and leveraging and integrating new technology to ensure the F-35 stays ahead of ever-evolving threats while widening the gap over fourth generation aircraft. In conclusion, we are on a positive glide path with the F-35 and we are quickly solidifying its role as the backbone of fighter fleets of our nation and well, and those as well of our closest allies. On behalf of the men and women at Lockheed Martin we thank those in uniform and their families, for all that they do today, and every day, to keep us safe, and we appreciate the critical role Congress plays to ensure our war fighters are ready to succeed on the battlefields of not only today, but of tomorrow. I thank you for this opportunity and your strong support for the F-35 and I stand ready to answer your questions, thank you.
[Chairman] Thank you very much Mr. Ulmer, Mr. Bromberg?
Good morning, thank you Chairman. Chairman Garamendi, Chairman Norcross, Ranking Member Lamborn, Ranking Member Hartzler and distinguished Members of the House to Arms Services Committee, thank you for the opportunity to appear before you today to share Pratt & Whitney’s role in the production and sustainment of the F135 and propulsion system for the Joint Strike Fighter. Also, thanks for the constant congressional support of this program. I also want to acknowledge under Secretary Lord, General Fick and Lockheed Martin for their partnership. From the 369,000 Wasp engines produced in World War II, to the nearly 200 F135 engines we’ll deliver in 2020, every Pratt & Whitney engine bears a seal that proclaims two words, “dependable engines.” Our focus today and tomorrow, remains squarely in supporting the war fighter and doing so in a manner that safeguards the American taxpayer. The F135 propulsion system is the world’s most powerful and advanced operational fighter engine. The F135, developed with our international partners, provides unmatched performance, safety, reliability, and affordability, all of which contribute to the National Defense Strategy. Production and affordability are top priorities. To date, we have produced more than 500 F135 engines and in 2019 we’re on track to produce our contracted engines, doubling our output over the past two years. In 2020, we aim to achieve a production rate of approximately 200 engines and modules per year, which will remain steady for the program of record. We are also investing in surge capacity to support increases in production and sustainment. Through a jointly funded “War on Cost, Pratt & Whitney has reduced the average production cost of the F135 by 50 percent. While we are pleased with our progress to date, we recognize the imperative to do more. Looking forward, we have the opportunity to invest in longer-term cost reduction projects such as developing alternative suppliers, and leveraging advanced manufacturing technologies in digital automation in additive. These activities require long-term vision and consistent funding. With a worldwide fleet of more than 500 F135 engines, Pratt & Whitney is driving towards world-class sustainment. As the fleet grows, we’re committed to reduce sustainment costs by 50 percent. The most important factor is reliability and fortunately, the F135 has consistently exceeded 94 percent mission capability. Pratt & Whitney drives high mission capability through advanced digital analytics, prognostics and health monitoring. In addition, the Component Improvement Program is critical funding priority to maintain levels of reliability and low-cost sustainment. Effective sustainment requires collaboration between the government and Pratt & Whitney. We have a strong history of public-private partnerships, and working across government agencies, sustainment is a core competency. We support more than 100,000 engines around the world between our commercial military franchises and we’re committed to sustaining the F135. With development of the baseline Joint Strike Fighter Program complete, focus is now on modernization. It’s important to assure that the growth in aircraft capability is matched with propulsion growth. Fortunately, the F135 has ample design margin to permit agile upgrades. We are again, working closely with the Joint Program Office to develop propulsion upgrade roadmap. In conclusion, the F135 is an integral part of the National Defense Strategy. The F135’s unique capabilities of power and stealth provide the war fighter vital advantages. The F135 supports more than 33,000 high technology jobs across 31 states. We remain laser focused on meeting our commitments production, cost, readiness, life cycle affordability, and propulsion growth. We are committed to delivering the most capable engine to the war fighter or providing the best value to the taxpayer. Thank you again for the opportunity to appear before the sub-committees, I too have a written record, which will be submitted in, I look forward to your questions.
I almost want to invite Ms. Maurer to join us at the table. So as you come up, we may ask some questions, cause we’re gonna go right back at issues we talked before. Prerogative of the Chair to change things if, if the Chair thinks its important, and I do. We had a lot of questions that were asked of the previous panel, all of which are questions that should be asked of the two of you and Ms. Maurer, you may want to comment along the way, or may be asked to comment along the way. Where to start? Lockheed Martin, Mr. Ulmer, you own ALIS, what are you gonna do about it not working?
Yes sir, we’ve been working for some time now to improve the ALIS system,
Let’s go right to the heart, are we headed for a new architecture?
Yes sir.
And how long will it take and what will it be to bring that new architecture on and will it be secure?
Lockheed Martin is working with the Joint Program Office and our international partners relative to establishing as you heard in the previous panel from General Fick, that we’re targeting September of 2020 relative to implementation of that new architecture, and it will have the security requirements, from cyber security as well as sovereign data management.
Your original contract called for ALIS to work, it doesn’t. Are you paying for the upgrade?
We are spending about 15 million dollars relative to internal funds to improve ALIS, as General Fick alluded to, classic ALIS. We’re also implementing additional company funds in the order of 120 million dollars in terms of the new architecture investments to support the path forward.
I’m going to turn the remaining 3 minutes 43 seconds over to Ms. Escobar.
Chairman,
Plus,
Thank you so much
Plus five if you need it.
Well thank you so much, and good morning, thank you all for your testimony and for your time here today. Mr. Ulmer, I really appreciated that you laid out exactly how you have been able to ramp up and prepare and plan ahead, and I actually would like to know a little bit more about your plan going forward. Now The G.A.O. Report talked about some trade complications with regard to parts and would like to know about your long-term plan for the parts and would you be using U.S. sourcing, do you have a five year timeline, ten year timeline, sort of a vision, does Lockheed have a vision for assisting us, and if so, if you wouldn’t mind laying that out, in a little bit more detail than your testimony, please.
Okay, a little clarification on the question, are you talking about, from like a Turkey alternate resource,
[Escobar] Yes.
from a Turkey alternate resource?
[Escobar] Yes sir.
Yes ma’am. We’re on a trajectory to resolve all the alternate resource parts by March of 2020. As General Fick alluded to in the previous testimony, there are a handful of parts on the order of magnitude of 20, that are beyond that March 2020 timeline, but by December of 2020, we will have the ability, as, on the air frame side, to completely resource all material from Turkey. There is approximately 850 parts, we understand each one of those parts in terms of what alternate resource requirements are doing, we’re approaching those within the United States’s capacity and ability, approaching the supply chain to manage those parts. We’re also in some cases, in the international environment, we have supply that is already being provided by current international participants that produce similar or same parts. We’re taking advantage of that relative to risk reduction of those parts. So it’s a full enterprise approach relative to managing those parts, but I want to assure you, that by the end of next year all of those parts will be resourced, and we’re well on our way. Many of the 800 or 50 so, have already been resourced and are protected.
Thank you so much sir, Chairman I yield back.
Thank you, Ms. Escobar, thank you very much, Mr. Lamborn?
Thank you, and I’m gonna follow up on some of these major issues that we’ve been talking about, but first I want to bring up an issue, I don’t think we’ve touched on yet, and that is simulator servers, and my understanding is that we’ve had an unusually high failure rate among the simulator servers, and that many locations have had to wait months to receive repaired servers. So Mr. Ulmer, given the severe impact that this has on training, what is Lockheed Martin doing to ensure that this will not be a problem in the future?
So we have had infant mortality issue with the blade servers and we’ve modified those servers. That modification occurred in May of 2019. We’ve seen significant improvement from that modification. Today we’re currently going to each site to update those servers. We’re doing it in a fashion such that, as we remove a server for use, we rework that server and we have a return pool, to try to rapidly backfill those parts back into the supply base. So our approach is really to get a supply pool that’s being worked, as we pull parts from the sites and then we position those parts back in as quickly as we can.
So I realize, security concerns are paramount here, but you are producing enough spares, that you can quickly do replacements when one breaks?
Yes sir. We’ve worked with Collins, a supplier relative to that, and we’re buying additional spare capacity on top of the requirements, just to sustain and maintain the units.
Okay, thank you. And for both of you, when it comes to intellectual property, I’m really concerned about the issues that we’ve had so far you know, the taxpayer paid, ultimately, for the intellectual property, so what are your two companies’ current positions on intellectual property, within the F-35 program, and will the government have access to all of the IP that it needs, to sustain and operate the F-35?
Chairman, I would offer that, data rights and intellectual property as we heard from the first panel, is a significant issue. The beginning of the F-35, the approach for data rights was really focused on four tenants, to support operations, to support maintenance, line maintenance, to support the stand up of the bases, and to support training. As the programs matured and progressed, the U.S. government position on data rights and IP has matured and progressed, relative to that. So we have work to do as an enterprise, relative to that data rights associated with the F-35. I also would like to emphasize the supply base for the F-35. Lockheed Martin’s responsible for approximately 30 to 40 percent of that intellectual property. The other is third-party suppliers. And so Lockheed Martin’s working with those third-party suppliers to establish data rights required to support the enterprise going forward.
Mr. Bromberg?
[Bromberg] Yes sir, thanks for the question. First, for the F135, our development, production and sustainment contracts have data right packages included in them, and we’re compliant with those. Secondly, when we designed the engine and produced the engine, we designed it with sustainment in mind. And when we had planned to sustain the F135, we will do so initially at the Tinker Heavy Maintenance Center in Oklahoma City, where we sustain many other U.S. service engines, and there we provide all the tactical data for those maintainers, to ensure they can deliver and support the F135. We’re incentivized to do that, based on the mission capability metrics of the performance basic logistics contract, it’s how we’ve done every other engine program and how we’ll execute this one.
Okay, thank you. Mr. Ulmer, I’ll finish up with this question; given the challenges we’ve seen with the management of the F-35 supply chain, isn’t it premature to jump into a five year contract performance-based logistics contract, as opposed to going on a one year cycle where we make sure all the bugs are worked out, before we go to a five year cycle?
That’s the discussion we’re having with the OSD and JPO today relative to, what’s the appropriate approach to a performance-based logistics contract. The benefit of stepping to a performance-based logistics contract today, is today we do annualized contracts, and within those annualized contracts, industry does not have a long time to make an investment relative to cost saving initiatives to get cost out, to bring improvements forward relative to a new part on the aircraft. We have examples where we have resourced parts on the airplane to take advantage of life cycle cost savings, in particular the digital, the Distributed Aperture System, where we resourced it, a completely new component on the aircraft. It’s forecasted to save 3 point billion dollars, across the life of the program. It’ll be 45 percent more reliable. It has twice the capability of the current, and that’s the kind of investment we want to make over a longer-term horizon, is that kind of opportunity to make those kinds of investments to bring the price down.
Okay thank you, and since you’re here Ms. Maurer could you comment on this before I yield back?
[Maurer] Sure real quickly,
[Lamborn] The indulgence of the Chairman,
Yeah thank you for the question. From a G.A.O. perspective, we think that there are potential benefits of going to multi-year performance-based contracting approach for sustainment, that’s a general proposition, however, in a report that we issued last year we expressed some concerns about DOD’s ability to enter into such multi-year contracts, in part because the Department lacks good information about the overall cost of sustainment, as well as the unresolved nature of many of the data rights intellectual property issues. We think that these issues need to be resolved before DOD can enter into a long-term sustainment contract, multi-year sustainment contract.
Okay thank you. Mr. Chairman?
We’re coming down to a smaller group here, so we’re gonna be a little less formal. Mr. Lamborn raised an extraordinarily important issue. Ms. Maurer you commented on that, and the Department and the negotiations are underway for a multi-year contract, and I want you to go back to what you were saying, and go into more detail about the issues that need to be resolved, or at least a pathway to resolution, before we move to a multi-year contract, if you will hone in on that.
Sure absolutely. So in the report that we issued last year, we talk specifically about the Department’s lack of good information about what the true costs are for sustaining the F-35, and we think that’s an important part of the Department’s ability to negotiate with a contractor for the, to get the best bargain, the best value for their money that the taxpayers will ultimately be responsible for these costs. DOD at that, at the time of our report, did not have good visibility and understanding of their overall costs of sustainment. That’s one issue.
This is an issue that has, that requires our attention. We’re talking a trillion, four hundred billion dollars over the next 25 years or so. An extraordinary amount of money that is really going to be controlled by two companies, both of whom are at this table. Now that’s a pile of money. Obviously you have subcontractors that are, and others that are involved in this, including the military portion of the trillion four hundred billion or so. This, our committees, Mr. Norcross and I are not going to back away from getting into the detail and for my point here, I don’t see a multi-year contract going forward until the fundamental questions that have been asked thus far, and several that have not yet been put on the table are resolved and, heretofore, the contractors have had the long end of the lever, and the government has been on the short end of the lever. That’s going to change. That’s going to change because thus far, this program has not worked well. It’s made progress, no doubt about it, but we got some very very serious problems that have to be resolved. And so the power is shifting, so that the government will have at least that fulcrum moving closer to the government’s side as we go into these years out ahead, so be aware gentlemen, be aware. We’ve got to solve these problems, and there’s a whole list of em. Mr. Norcross, it’s your turn.
Thank you, Mr. Ulmer, just quick, let me follow up, I don’t wanna dwell too much on it, you said 30 to 40 percent of the intellectual rights are within Lockheed Martin, assuming the others are with who, the gentleman to your left? Subcontractors that you control, or subcontractors that others control?
It’s a mix, there’s GFE, Government Furnished Equipment on the aircraft, there is additional sub tiers under Lockheed Martin that control that. The different industry elements of the program.
So you’ll have control over your subcontractors
[Ulmer] Yes sir. in this issue, the ones that obviously we have, okay, just putting that aside. So we heard a lot today about issues that have gone on and I think its important to talk about those, but I also want to say, bringing down the cost per unit, is a very good thing, but those costs, when we accelerate those, even though we’re bringing them down, we’re shifting over to Mr. Garamendi’s committee those sustainment costs, and that’s a big issue. The part supply has always been a challenge for you, things that you control versus things that we control or certain the engine compartment. When we’re setting up the 850 parts that Turkey was involved in, who is making the actual decision, who’s going to stand up with which companies, and for both of you, I assume you make the decision for your engine components and who, how do you make that decision, versus oversight from others. We put you in that position by pulling Turkey out.
So we follow our normal resource acquisition process, and which we do, each and every day. So we’re constantly looking at, do we have the appropriate supply base, do we need to seek alternate sources for other reasons than political, it might be financial performance, it might be poor health of a company, it might be poor forming equipment. We have a very detailed process relative to how we resource our material or source our material.
But for the Turkey, you’re following,
We’re following our normal process in conjunction with sharing that information with the Joint Program Office.
Okay so when we start dealing with that, were you anticipating that the parts that you’re getting today from Turkey, were going to continue to this point, were you surprised in your planning for moving forward?
I don’t quite understand the question, were we,
The initial question when Turkey was gonna be informed that they were suspended from the program, there’s potential for the parts to stop that day.
[Ulmer] Yep.
Which would have put us in a very precarious situation and throw our schedule way off. They’re still supplying and, is there reason to believe that they might stop anytime soon?
Other than politically, no. The Turkish industry is very much a part of F-35, they are strong performers, they produce high quality at a low cost, they’re very interested in, if in a political environment able, to remain within the F-35 program, they desire to do so. Other than politically, we are not concerned relative to that supply.
So they could continue, hypothetically to supply us up to what point, are you planning now, to cut them off, or them be cut off,
Per direction, we’ve been directed to target March, end of March 2020, to terminate our relationship relative to Turkish supply.
And that
our approach, our approach to date
does not postpone any of the production line, by that standard?
No sir, our approach to date was, we are not opening any new additional purchase orders or ordering additional material beyond the March of 2020 time frame. If Turkey has the capacity and ability to produce additional parts within that time slot, between now and March in 2020, industry will take advantage of getting that supply.
That was a best-case scenario, when we were talking about this over a year ago.
[Ulmer] Yes sir.
So when the sole source contracts for those 850 parts, is it a competitive contract with you? Or does that have more to do with who can get that to us quicker?
Chairman, first off, it’s not just single source, we have actual single source, dual source, and even triple source
Right, I’m just talking about the single source replacements for the Turkey parts.
Yep, restate the question please?
When you go for the single source which I think there’s only maybe a half dozen critical items in there, is that a competitive contract to you or is it, who can supply that part in that time frame we need?
In this specific circumstance, if there is competition to be had, we will approach that from a competitive situation. If there is a industry participant that has that capability, a subject matter expertise that gets to a quick solution, we will procure it immediately that way to protect the risk, against the risk, and then over time we will competitively bid that work beyond this period of performance.
So its a short-term, it’s a risk, long-term it’s a price.
[Ulmer] Yes sir.
And Chairman I’d just like to add from a Pratt & Whitney perspective, we have 200 parts that have been sourced in Turkey. The Turkish suppliers are actually high performing suppliers as you’ve heard today, low cost high quality, on time delivery. We’ve been coordinating our actions with the Joint Program Office for actually the past couple years, and like Lockheed Martin we’re on track to handle a separation in March of 2020 with potential for final separation in December of 2020. To your question of how we resourced it, we actually sourced about 80 percent of those parts back into the United States, for the sake of speed, in order to protect the program’s schedule, and many of the most critical parts are actually back into Pratt & Whitney where we have the capability to ramp up much faster than working anywhere else, so we did that for the sole reason in conjunction with the Joint Program Office, to protect the speed of the production line.
Just real quickly, are all the new suppliers, U.S. based, or do any of our partners get a taste.
Initially we saw, we from a Lockheed Martin perspective we sought U.S. forces, there were some specific cases where international partners already were sourcing the same exact material. So to reduce risk, we went those international companies.
Exactly the same position for Pratt & Whitney, about 80 percent were sourced in the United States where we had existing capacity, or the capability to do the work. 20 percent went to international suppliers that already did similar work and can ramp up quickly.
Ms. Hartzler?
Thank you, Mr. Chairman, let’s talk about parts a little bit here. Reliability and maintainability is really important, that the part is reliable, it does what it’s supposed to do, and we’re able to maintain it, and I understand that we’ve been making steady progress on both of those fronts, so how is reliability, maintainability improvement projects how are they progressing, and to what extent are these projects having any impact, positive or negative, on the manufacturing floors? So, Mr. Ulmer?
Yes Ma’am. If we look over the course of the procurement of the aircraft, in particular, from lot six annually to today, reliability maintainability has improved significantly lot over lot. So the aircraft today that we’re delivering today, are a lot more reliable than the ones we delivered six years ago, seven years ago. We continue to focus on reliability maintainability improvement on the program. I will tell you in comparison to other programs, the enterprise has not necessarily funded reliability maintainability improvements. To give you an example, on the F-22 program, which has a fleet of approximately 185 aircraft, that program funds approximately 70 million dollars in support of reliability maintainability improvements on that fleet. This year in this FY, the F-35 program has funded 7 million dollars for a fleet of 455 aircraft. That said, industry has made a significant investment, relative to reliability maintainability improvements on the platform and that really is the reason why lot over lot we’ve seen that significant improvement as those parts become more reliable in the fleet.
[Hartzler] Great thank you, Mr. Bromberg?
Yes ma’am, so from an engine perspective the F135 is our most reliable fighter engine we’ve ever produced. In 237,000 hours of operation, it’s maintained an average mission capability of north of 94 percent. And in fact at this milestone in service, 200 thousand hours, it’s ten times more reliable than the F100 was at the same milestone. So I think that’s a testament to the fantastic engineers and technicians in Pratt & Whitney that know how to design dependable engines. However, we have to be vigilant and just as Mr. Ulmer said, we’re firmly supporting the Component Improvement Program which has a proven track record on all our engines in addressing reliability issues early, when it can be done cost effectively and ensure sustainment and mission capability.
Great, let’s talk about availability, cause that has been an issue, the availability of parts and flight lines are just down, waiting and even our forces are having to cannibalize some of the parts from other aircraft to keep them flying. So what are you doing to work with DOD and the Joint Program Office to improve the management of Ready-to-Issue spare parts and I would also say, not just the management, but the availability of the parts?
Several different aspects in terms of our approach to improve reliability of parts on the aircraft and availability of parts on the aircraft. First, in the lots, again back to lot sixteen, we went to what was called a Tech Refresh 2, configuration for the F-35. We have some units that we needed to accelerate those updates to those air frames to get more reliable parts. An example is Eglin Air Force Base had a fleet of aircraft that did not have that Refresh in them, and so as part of the acceleration process, we went in and accelerated the implementation of that Tech Refresh into those fleets, such that they have newer more reliable parts. We also have a reliability improvement program where we identify the top poor performers on the aircraft, in terms of those items need to be improved. And so we understand what those are and we have historically worked those top performers down. We’re also improving the health diagnostic system on the aircraft. Many times from an availability perspective, we were telling the mechanic or the technician, the flight line technician, to remove a part when in fact it was not broken, and so the health diagnostic system on the airplane, when we went from the development program to the 3F configuration, we saw a 60 percent improvement of no false alarms, of those parts on the aircraft. So we’re no longer having the mechanic take that part off the airplane, it’s staying on the airplane.
So the question was more, not so much issues with parts that are already on, but the availability, that they’re available to begin with. So what are the parts that you seem to have a shortage of the most? Isn’t the canopy an issue? What are some other parts that you’re short?
So the primary drivers alluded to by General Fick is the canopy, the wingtip lens is another part from affordability perspective, we understand each and every one of those parts. Ready-For-Issue-ness has also been, the issue has been with the electronic digital file that’s associated with those parts. The G.A.O. report, it indicates that as an issue on the platform. In the last two years we’ve done several things to resolve that problem. One is, any parts coming out of the facility when we deliver an aircraft, we ensure that those electronic files are correct and appropriate. For the parts coming out of the warehouse, we’re ensuring that those parts from a digital pedigree are appropriate and can be consumed by the war fighter without issue. There are parts within the supply that still have that issue that were issued prior to our corrective actions. Within the last two years, we’ve cleansed that data by approximately 50 percent. And so we’ve taken an extreme effort relative to cleansing the data associated with those parts such that when the mechanic goes to reach that item off the shelf and implement it, it is in fact capable of doing so.
Great, could I?
[Bromberg] Do you mind if I also answer the question ma’am?
No way, no sure, absolutely.
You know I think from an engine perspective again, we contract separately from the air frame we plan our production systems separately from the air frame, and we’re gonna maintain sustainment separately from the air team, we collaborate in many areas, but there’s some differences. In terms of how we think about the demand for production and sustainment, from the inception, we design our engines for sustainment as I mentioned before, so we’d loaded the capacity requirements to produce parts, we loaded all those for new engines modules and spare parts. As a result, we actually have a fairly significant stock of spare parts, both in Pratt & Whitney and military facilities around the world, and part of our mission capabilities, because our non-mission capability due to supply, when the part is not available, is averaging less than two percent.
[Hartzler] That’s great.
So I think the team has done a nice job, we need to remain vigilant, because as we’ve talked about in the prior panel, that forecasting and stocking problem changes over time, but we’ve got dedicated sustainment professionals, and that’s what they do.
Great, Mr. Chairman, can I ask one more question here?
[Garamendi] You need more time?
I do. Any more time?
[Garamendi] Go for it.
So Mr. Ulmer, recent Department Defense inspection general report titled “Audit of F-35 Ready-For-Issue “Spare Parts and Sustainment Performance Incentive Fees” found that the DOD did not receive Ready-For-Issue F-35 spare parts in accordance with contract requirements and paid performance incentive fees on the sustainment contracts based on inflated and unverified F-35A aircraft availability hours. So, do you plan to reimburse DOD for these paid performance incentive fees?
Ma’am the current, recent, sustainment contracts to have those incentives now embedded in them relative to our performance. So previously, prior to that report we did not have that kind of incentive. We do now, in terms of issue effectiveness, part availability, those kinds of metrics. Separately from that, on our own accord, we’re off cleansing the data, as I just testified, relative to resolving that problem, at our expense to cleanse those parts.
So going forward, this isn’t going to be an issue, and just to clarify, going back, what this audit was on. You say you have paid back those fees?
No ma’am we haven’t paid back those fees. Prior to the implementation of those incentive fees, we did not have that in terms of the contract performance, we do today. So I don’t earn fee today, if I have those issues.
Okay, all right, I yield back.
[Maurer] Mr. Chairman, could I have 30 seconds in relatability
[Garamendi] Yes, please do.
[Maurer] It’s directly relevant to the Ranking Member’s question. A good thing for their oversight, is to recognize the fact that the operational requirements document that underlies the F-35 has eight reliability maintainability requirements. Four of those eight are being met. Those are the four that are contractually required. The other four that are not contractually required are not being met, and that’s an issue we’ve reported on extensively over the last couple of years.
[Garamendi] So it helps to have a contract?
Absolutely, and put it into the contract, yes.
Well I’ve got so many questions. I’m gonna turn to Mr. Brown, and try to control myself. So, Mr. Brown.
[Brown] Thank you Mr. Chairman. Once again I want to thank both Chairs and both Ranking Members for conducting today’s hearing as we conduct our responsibility, our congressional responsibility, our oversight responsibility of 35 programs, sustainment production and affordabilities, and I’m especially pleased that for today’s hearing, and this panel here, because this is the first time in my three years as a Member of the House Armed Services Committee, that I can recall, that we’ve invited our Defense Industrial Base partners, to present and make themselves available to questioning for Members of Congress and I think that it’s important. I do also want to once again, thank Ms. Maurer, you and your colleagues at the Government Accountability Office. I can tell you that, I frame my positions, I’ve based many of the decisions that I make as a Member of this committee, based on the good work that you do, you are our watchdogs, and you do fantastic work. I had an opportunity to visit on July 30th the F-35 production line, I hope perhaps to get out to the F135 production line at Pratt & Whitney in the near future, and I want to certainly take the opportunity to thank Lockheed Martin, but more particularly, the members of the team, the members on that production line who I had an opportunity to meet with. The machinists, the assemblers, the mechanics, the coders, and from the engineers, to the back office, that’s a group of dedicated men and women who do in their very best, to make sure that our war fighters have the systems, the platforms that they need to do their job, to do effectively and to come home safely to their families. So to Lockheed Martin and to, I’m sure the same can be said about the men and women at Pratt & Whitney, I thank that dedicated workforce. Ms. Maurer, maybe we can do another sort of back and forth this time, with you and Mr. Ulmer. You had in the G.A.O. reports sort of four categories where you grouped your recommendations. One was DOD lacks critical information to effectively plan for long-term F-35 sustainment, and one of the recommendations there, was that the DOD needs to obtain comprehensive cost information for F-35 spare parts. Can you just sort of flush that out a little bit, what was the problem, what’s the recommendation, and then perhaps Mr. Ulmer can be responsive to your remarks.
Sure absolutely. So I think its well known when the program was first launched it was launched under a very different construct than programs are typically launched today. Back when it was started almost 20 years ago, the idea was that the government was going to hand over logistic support almost entirely to the contractor. So that’s the way the program was formulated and executed for a number of years. Fast forward to now, when the Defense Department is trying to get a clean financial opinion, one of the big challenges it’s facing right now to get that clean financial opinion, is putting a dollar value on the parts that it’s purchasing, for the F-35 program. One of the the things we found in our report earlier this year, is that DOD currently, literally doesn’t know where the parts are, and they can’t match up the dollars that they spent back to specific major end items and major parts. That makes it very difficult for them to get a clean financial opinion. I know that right now the Joint Program Office and OSD is working closely with Lockheed and the other contractors to resolve that issue, but since that wasn’t built into the contract, it wasn’t built into the structure of the program, it’s a pretty major undertaking.
So Mr. Ulmer what is industry doing to assist the Department in addressing that recommendation?
First off, I’d like to say, I believe we have a very solid working relationship with G.A.O., we do a annual review on the program, a deep dive on the program, and then we support any specific audit or requests with full transparency with the G.A.O.. Relative to the parts, Lockheed Martin has a property management system that’s accredited by DCMA, the Defense Contract Management Agency. We are working right now with the JPO relative to the Program Office setting up their own property management system. We are supporting that effort as we speak across the entire F-35 enterprise. So we will help, and we are helping the JPO Program Office acquire all that information as alluded to.
Ms. Maurer, are you, do you have anything that you want to add, or,
We’re aware that this is an ongoing initiative. It’s something that’s gonna take awhile to dig out from, it’s not something that’s gonna resolve very quickly, but we’re encouraged by the progress we’ve seen from the JPO and we want to see them work closely with Lockheed as well.
Thank you. Mr. Bromberg, let me ask you, what is Pratt & Whitney doing to help the government reduce its procurement costs for engines and subsequent sustainment costs after fielding?
Yes sir, thanks for the question. As indicated in our remarks, we’re pleased with the 50 percent reduction of the unit price of an F135 to date, but we’re not satisfied that that’s enough going forward. We recognize that the strategy we use to achieve the 50 percent reduction needs to evolve. The program I alluded to, was a jointly funded government Pratt & Whitney program called “Pratt’s War on Cost.” 200 million dollars of investment that yielded 2000 different actions that took 50 percent of a unit price of an F135 down, resulting in seven, eight billion dollars of program savings to the government. Very successful program. However, where we are now with 500 engines in service, a very stable engine configuration in achieving that 94 percent mission capability that we talked about, we need to shift to a different strategy that allows us to leverage the long-term procurement plan for the F135, and maintain a stable configuration for the engine so we can maintain the reliability. So the way we’ll do that is by leveraging two primary areas. One, advances in manufacturing technologies that did not exist when we launched the program, such as digital automation in additive, and secondly, developing alternative suppliers where we find we don’t have enough of a competitive landscape, so that we can get true value to the taxpayer. Those are both long-term strategies, but strategies that we’re working with the Joint Program Office to embrace. That cost reduction I talked about will lend directly to sustainment cost reduction. In terms of a depot visit, 60 percent of the cost is from new materials, so the more we reduce the price of an engine, and the materials that go into it, the more cost effective the maintenance is. Secondly it goes to the Component Improvement Programs that we talked about earlier, make sure you maintain reliability, and finally it’s effective management at the operational level and the depot level, something Pratt & Whitney takes very near and dear to its heart. We have thousands of sustainment professionals and we’re gonna work collaboratively with the government to do that.
Mr. Chairman, if I could have the benefit of the same indulgence that you showed to my colleagues, I just have one more question.
[Garamendi] You’re stretching it.
Short question, hopefully short answer, just for Mr. Ulmer, how confident are you that you’ll get to 25,000 dollars cost per flight hour by 2025, as you’ve stated, and what tools do you need from the Department or Congress to help you get there?
The confidence is high if we resource load the approach, and what does that mean? The resource load of the approach as General Fick and Miss Lord indicated, we have a life cycle sustainment plan. We need to make sure that we apply the necessary resources to that plan, to allow the cost savings on the back side of that plan. And then the other element I would add, is the performance-based logistics contract. We need a long-term contract relative to allowing industry to make those investments over a longer period of time that have those cost savings reductions on the back side. We have a history and blueprint for affordability on the F-35 program, two different cycles. The BFA 1 cycle, with a 500-million-dollar investment over the life cycle of the program, with 6 billion dollar savings across that life cycle. That’s the approach and the benefit relative to that.
Always sufficient time for good questions, and thank you for the good questions. We’re really out of time. The next hearing is about to commence in less than an hour and they’re gonna bring the doggies in here to make sure that none of you are leaving some of your equipment behind to snoop on what the next classified hearing will have. Going forward, heads up, if you haven’t figured it out, The Readiness Sub-Committee together with The Tactical Air and Land, will be coordinating our efforts in the months ahead, to drive out of this F-35 program, the known problems. There’s a long list of em. G.A.O., Ms. Maurer, you and your team are extraordinarily important to us, to this program, and to the contractors for their attention to issues that they may not observe or be willing to observe. And so, we’re gonna really rely heavily on you. Also, I want to point out that the professional staff here, Ms. Harris from my staff, and the professional staff on Mr. Lamborn’s side, Mr. Norcross, have done an extraordinary job following this along. We’re going to come back at this in January, and we’re gonna go at it in additional detail. We didn’t get into the cataloging issue, into the issue of parts, which fortunately Mr. Brown has brought up together with Ms. Hartzler, we’re going to go at those in more detail. There’s a transition underway here, from total reliance upon the contractors to a shared responsibility into the future. It seems to me, and I’ll put this on the table, cause I’m sure it’s gonna happen, is that the Services, now that they are getting these planes and being held accountable for the operational readiness of the planes, are going to demand more authority and responsibility, and that’s going to shift the nature of the Joint Program Office in the future, and shift the relationship between the contractors and the Department of Defense, Joint Program Office, and the various Services. That shift is already underway. The Defense Logistics Agency is going to be playing a major role going forward. Thank you, Ms. Maurer for pointing out that there’s 7000 parts that the Defense Logistic Agency has on various shelves somewhere around the world. 6300 of those are parts that fit various tranches of the F-35. So how does that fit into this? What are the roles of these various agencies, going forward? We’re looking at, I was reminded, that I will not be here for the end of this program, which is apparently, not 20 years from now, which was my personal time horizon, but 58 years from now. Not likely be my responsibility then. However for us, this is our here and now. We gotta get this right. And so we’re going to rely on everybody going forward and I want to particularly thank my colleagues here, for their questions, for their attention to this matter. We’ll see you in mid-January. Thank you so very much, this hearing is adjourned.
[Ulmer] Thank you Chairman.
And by the way, please clear the room quickly, or else you’ll get to know one of the doggies that’s coming in.