TFX CONTRACT INVESTIGATION (Second Series) TUESDAY, APRIL 28, 1970 U.S. SENATE. PERMANENT SUBCOMMITTEE ON INVESTIGATIONS OF THE COMMITTEE ON GOVERNMENT OPERATIONS, Washington, D.C. The subcommittee met at 10:15 a.m., in room 3302, New Senate Office Building, pursuant to Senate Resolution 308, agreed to February 16, 1970, Senator John L. McClellan (chairman of the subcommittee) presiding. Members of the subcommittee present: Senator John L. McClellan, Democrat, Arkansas; and Senator Lee Metcalf, Democrat, Montana. Members of the professional staff present: Jerome S. Adlerman, general counsel; John J. Walsh, investigator; John Brick, investigator; Charles H. Cromwell III, investigator; Philip W. Morgan, chief counsel to the minority; Thomas E. Nunnally, accountant; and Ruth Y. Watt, chief clerk. The CHAIRMAN. The committee will come to order. (Members of the subcommittee present at time of reconvening: Senators McClellan and Metcalf.) The CHAIRMAN. Mr. Staats, we welcome you this morning. I believe you have a prepared statement. Mr. STAATS. I do have, Mr. Chairman. The CHAIRMAN. I might say this: How long have you been Comptroller General? Mr. STAATS. Since March 8, 1966. The CHAIRMAN. I don't remember the time the committee first requested you to give us some assistance in connection with this inquiry in the TFX program, but you have, from time to time, assisted the committee in securing information, and particularly with respect to the cost of the program; have you not? Mr. STAATS. We have, Mr. Chairman. The General Accounting Office was involved before I became Comptroller General, working with the committee since 1963. I believe that since I have been Comptroller General we have had five or six different requests in which we have supplied the committee with information, beginning on August 15, 1966, I believe. The CHAIRMAN. You have a prepared statement, I note. Before proceeding, I would be glad to have you identify your associates who accompany you this morning. Mr. STAATS. To my immediate left is Mr. Robert F. Keller, Assistant Comptroller General; to his left, Mr. Paul G. Dembling, General Counsel of the General Accounting Office; to my immediate right, Mr. Richard W. Gutmann, the Deputy Director of our Defense Division, and Mr. Hassell B. Bell, to his right, is head of the major acquisitions group within our Defense Division. The CHAIRMAN. You were sworn when you testified before the committee before, but we are administering the oath again in this particular series of hearings. If you will, please stand and be sworn. If any of the rest of you will testify Mr. STAATS. I think we will all be testifying. The CHAIRMAN. You and each of you do solemnly swear the evidence you shall give before this Senate subcommittee shall be the truth, the whole truth, and nothing but the truth, so help you God? Mr. STAATS. I do. Mr. KELLER. I do. TESTIMONY OF ELMER B. STAATS, ROBERT F. KELLER, PAUL G. DEMBLING, RICHARD W. GUTMANN, AND HASSELL B. BELL Mr. STAATS. I hope you will feel free to interrupt for questions if you like. The CHAIRMAN. Very well. Mr. STAATS. I am pleased to appear before this subcommittee today and participate in your continuing investigation into the F-111 program. The record of the procurement of the F-111 weapon system, established through hearings by your subcommittee and other committees of the Congress, clearly shows this program has experienced a multitude of problems. Over the past 10 years, we have made many studies relating to the acquisition of weapon systems. The studies have pointed up a number of basic problems that have continued to cause the cost of weapon systems to grow, schedules to slip, and anticipated performance to suffer. My comments today will highlight the results of studies of the F-111 aircraft program since early 1963, and relate the problems encountered on that program to similar problems encountered on other weapon systems. We will also review for you, generally, some of our current thoughts on the subject of weapon systems acquisitions. Our work on the F-111 program started early in 1963, when this subcommittee asked us to make an independent review of the cost estimates prepared by the Air Force for use by the Department of Defense in making its decision on the award of the F-111 contract. Since that time, we have furnished reports to this subcommittee and other committees particularly the House Appropriations Committee on various aspects of the F-111 program in which an interest had been expressed. Our most recent report on the F-111 program was done as part of our work on the status of the acquisition of selected major weapon systems which was reported to the Congress on February 6, 1970. In that report (B-163058) the status of 57 individual programs, including the F-111 program, is presented in 10 separate classified volumes, together with our observations on the completeness and accuracy of cost, schedule, and performance information accumulated to June 30, 1969. The data on the F-111 program presented here today has been updated to December 31, 1969. The CHAIRMAN. Have you submitted the F-111 reports to us? The CHAIRMAN. I am going to let that be marked exhibit No. 27 for reference so it will be part of the record. (The document referred to was marked "Exhibit No. 27, 2d Series" for reference and is classified.) Mr. STAATS. Air Force cost estimates on the F-111 program at December 31, 1969, indicate a total cost of $8.652 billion to complete the current Air Force program encompassing 547 aircraft. This includes $1.185 billion which the Air Force considers as nonacquisition costs comprised mostly of estimates for future modifications, replenishment spares, and war consumables. The CHAIRMAN. This does not include any expenditure for the Navy plane? Mr. STAATS. It does not. If you add that to it, the figure is something over $9 billion. The CHAIRMAN. When you add the Navy cost, it is a little over $9 billion? Mr. STAATS. That is right. The CHAIRMAN. All right. Mr. STAATS. These estimates exclude some $523 million identified principally with the abandoned Navy F-111B and estimates to modify 24 F-111A's to reconnaissance aircraft. The CHAIRMAN. To modify the 24 F-111A's to reconnaissance aircraft, what is that cost estimate, do you know? Mr. STAATS. The breakout of the $523 million between these two groups is $378 million to the F-111B and $118 million to the reconnaissance aircraft. The CHAIRMAN. The $523 million covers the cost of both the Navy and the F-111A's? Mr. STAATS. Yes. In November 1963, the Air Force estimated the unit cost of the F-111A to be $3.97 million. At December 31, 1969, the Air Force's unit cost estimate for the F-111 was $13.32 million. In October 1965, the Air Force estimated the unit cost of the FB111A (bomber) at $6.75 million; at December 31, 1969, this estimate was $15.67 million. The CHAIRMAN. In October 1965, the Air Force estimated the unit cost of the FB-111A at $6.75 million per unit? Mr. STAATS. That is right. The CHAIRMAN. But in December 1969, 4 years later, this estimate was $15.67 million per unit, is that right? Mr. STAATS. That is correct. The CHAIRMAN. Is there any immediate explanation—well, I see you follow with the explanation. Proceed. Mr. STAATS. The increases in unit cost can be attributed to five different elements: 1. Decreases in the number of aircraft to be produced; 2. Increase in the number of versions (models) of the planes including those later abandoned; 3. Weapon systems capability improvements; 4. Inflation; and 5. Technical problems. The CHAIRMAN. What do we mean by technical problems? Mr. STAATS. These are unanticipated problems that they have run into on the development of the wing, on the airframe, and various other parts of the airplane, and on the avionics. The CHAIRMAN. That would include inherent defects in the design and other things that they were trying to correct? Mr. STAATS. That is correct. Program costs were undoubtedly increased by an effort to procure an aircraft with a high degree of commonality to serve the needs of both the Air Force and the Navy. The CHAIRMAN. Did you find that that effort to maintain a high degree of commonality prevailed throughout your examination of this contract? Mr. STAATS. Yes. Of course, as you well know, the commonality was abandoned at the direction of the Congress. The CHAIRMAN. It wasn't abandoned. One version of the plane was abandoned after they had failed to build a weapon using this standard or requirement of commonality. Mr. STAATS. That is correct. The CHAIRMAN. One phase of the whole program failed completely. Did you attribute that in any great degree or measure-and I don't know whether you pass on this or not-to the insistence on commonality? Mr. STAATS. Yes; we did. The CHAIRMAN. Did you find that was a major factor in the failure? Mr. STAATS. It was a major factor. I don't believe it would be possible for anyone to specify a particular cost figure which results from that because it would be impossible to segregate out all those costs. But there is no question about it, the commonality determination was a factor in the increased cost and in the delay in obtaining an operable aircraft. The CHAIRMAN. And in the ultimate failure to get a weapon? What do you say about that? Mr. STAATS. I develop that in the next few paragraphs, Mr. Chair man. The CHAIRMAN. Very well. Mr. STAATS. While the Department of Defense believed that the development and production of a common aircraft could save as much as a billion dollars-that was their initial estimate-I am of the opinion that the effort contributed to increased costs and to delays in development of an operational aircraft for both services. For example, the concern on the part of the Navy with increases in the weight of the aircraft-a matter of considerably lesser concern to the Air Force-undoubtedly delayed the availability of an operational aircraft. I should add that still we do not have an operable aircraft for either the Air Force or the Navy at the present time. The CHAIRMAN. You would say as of now, and this is nearly 8 years later-712 years later-we don't have an operational aircraft, an operational weapon, for either the Navy or the Air Force? Mr. STAATS. We do not, and it is 8 years after we made this decision. The CHAIRMAN. We have the potential of an operational weapon for the Air Force. That is, we have what is hoped will prove ultimately to be a weapon. We may call it an effective weapon, but it is not the weapon that we bought, not the weapon that was guaranteed. So we still do not know about that. Mr. STAATS. That is correct. There have been 230 airplanes delivered. The CHAIRMAN. We all hoped that we would get a weapon that could be used. The decision to pursue it further is not for this committee to make, but a decision primarily for the Armed Services Committee and the Appropriations Committee to make with respect to whether this program has deteriorated to the point where it shouldn't be pursued or whether we should still put some more money into trying to salvage something from the time, effort and money we have already expended. Mr. STAATS. In testimony before the House Committee on Appropriations in May 1969, the Navy estimated its total cost for the F-111B to be $335 million, of which $115 million was considered by the Navy to be "lost cost." The CHAIRMAN. What is "lost cost"? Mr. STAATS. That figure, as we understand it, is the Navy's estimate as to the amount of money which the government lost as a result of having made the effort to achieve a common aircraft which turned out to be unsuccessful. Mr. Chairman, if I may, I would like to elaborate a bit here. We say in the next sentence that we have not been able to make a detailed analysis of the computations lying behind this estimate. The reason we haven't been able to do this is the difficulty of isolating out various factors which are involved. I specify three in my statement: The extent to which performance problems were caused by these compromises to achieve commonality; how much of an estimate would we make for the F-14; that is, how much would the cost of that plane be reduced by virtue of any research and development performed on the F-111? The CHAIRMAN. In other words, it is hard to say what we have learned from this research that we can take and apply to a future weapon program. Mr. STAATS. I don't know how you can put a price tag on it. The CHAIRMAN. There is no way to know that. I am confident they got some good from it. Mr. STAATS. I would think that is right. The CHAIRMAN. But there is no way simply to say you got this much or that much. One thing we didn't get is a weapon that we were supposed to have had at this period in time. |