PROGRAMSWASHINGTON – The U.S. Air Force’s and Navy’s price estimates to bolster current fighter fleets in the wake of F-35 slips fail to capture all the costs likely involved, says a recent U.S. Government Accountability Office (GAO) report. “The Air Force’s and Navy’s cost estimates to upgrade and extend the service life of selected fighter aircraft exhibit some characteristics of a high-quality cost estimate but do not reflect all potential costs,” says the GAO report, “Better Cost Estimates Needed for Extending the Service Life of Selected F-16s and F/A-18s,” released Nov. 15.

The estimates were well-documented, GAO notes. “They identified data sources and methodologies; accurate since they accounted for inflation and were checked for errors; and mostly comprehensive since they included the work planned and identified key assumptions. However, GAO says, “The estimates were not fully credible in part because they did not assess the extent to which the total costs could change if additional work is done or more aircraft are included in the programs.”

For example, GAO says, Air Force leaders indicated in March 2012 that they intend to upgrade and extend the service life of 50 additional F-16s beyond the original 300, but the Air Force has not assessed how much the cost might increase if more aircraft are added to the program.

The Navy plans to upgrade the capabilities of some aircraft at the same time as the service-life extension, but this cost is not included in the Navy estimates, GAO says.

“The Navy may extend the life of or replace other aircraft components that are becoming obsolete, but these costs — which could add an average cost of $5.64 million per aircraft — were also not included in the original $2.19 billion estimate.

Another factor affecting the credibility of the estimates, GAO says, is that they have not been compared to an independently developed estimate. “GAO’s past work has shown that such an independent cost estimate is one of the best validation methods since an independent cost estimate tends to be higher and more accurate than a program office estimate,” GAO contends.

Air Force and Navy officials told GAO that they use Department of Defense and military department guidance that allows for “some variation in how the estimates are developed depending on the dollar value and maturity of the program.”

However, GAO says, “These programs — which are critical to maintain fighter capability and capacity as current inventory ages — total almost $5 billion and the costs will increase if program quantities and scope increase. Without fully credible cost estimates, including an analysis of how much total costs may increase, decision makers will not have visibility into the range of potential costs, which could hinder their ability to formulate realistic budgets and make informed investment decisions.”

The Pentagon agreed with GAO recommendations that the Air Force and Navy follow all best practices to enhance the credibility of the cost estimates for the F-16 and F/A-18 upgrades and life extensions, including an assessment of the potential range of costs and seeking independent cost estimates.