F–35 JOINT STRIKE FIGHTER ENSURING SAFETY AND ACCOUNTABILITY IN THE GOVERNMENT’S TRILLION DOLLAR INVESTMENT HEARING BEFORE THE COMMITTEE ON OVERSIGHT AND REFORM HOUSE OF REPRESENTATIVES ONE HUNDRED SIXTEENTH CONGRESS SECOND SESSION JULY 22 2020 Serial No 116–105 Printed for the use of the Committee on Oversight and Reform Available on govinfo gov oversight house gov or docs house gov U S GOVERNMENT PUBLISHING OFFICE 41–184 PDF WASHINGTON 2020 COMMITTEE ON OVERSIGHT AND REFORM CAROLYN B MALONEY New York Chairwoman ELEANOR HOLMES NORTON District of Columbia WM LACY CLAY Missouri STEPHEN F LYNCH Massachusetts JIM COOPER Tennessee GERALD E CONNOLLY Virginia RAJA KRISHNAMOORTHI Illinois JAMIE RASKIN Maryland HARLEY ROUDA California RO KHANNA California KWEISI MFUME Maryland DEBBIE WASSERMAN SCHULTZ Florida JOHN P SARBANES Maryland PETER WELCH Vermont JACKIE SPEIER California ROBIN L KELLY Illinois MARK DESAULNIER California BRENDA L LAWRENCE Michigan STACEY E PLASKETT Virgin Islands JIMMY GOMEZ California ALEXANDRIA OCASIO-CORTEZ New York AYANNA PRESSLEY Massachusetts RASHIDA TLAIB Michigan KATIE PORTER California JAMES COMER Kentucky Ranking Minority Member JIM JORDAN Ohio PAUL A GOSAR Arizona VIRGINIA FOXX North Carolina THOMAS MASSIE Kentucky JODY B HICE Georgia GLENN GROTHMAN Wisconsin GARY PALMER Alabama MICHAEL CLOUD Texas BOB GIBBS Ohio CLAY HIGGINS Louisiana RALPH NORMAN South Carolina CHIP ROY Texas CAROL D MILLER West Virginia MARK E GREEN Tennessee KELLY ARMSTRONG North Dakota W GREGORY STEUBE Florida FRED KELLER Pennsylvania DAVID RAPALLO Staff Director KRISTA BOYD Chief Counsel AMY STRATTON Clerk CONTACT NUMBER 202-225-5051 CHRISTOPHER HIXON Minority Staff Director II C O N T E N T S Page Hearing held on July 22 2020 1 WITNESSES The Honorable Ellen Lord Under Secretary for Acquisitions and Sustainment U S Department of Defense Oral Statement Lieutenant General Eric T Fick Program Executive Officer F-35 Joint Program Office U S Department of Defense Oral Statement Ms Diana Maurer Director Government Accountability Office Defense Capabilities and Management Oral Statement Ms Theresa Hull Assistant Inspector General U S Department of Defense Oral Statement Mr Greg Ulmer Vice President and General Manger F-35 Lightning II Program Lockheed Martin Corporation Oral Statement Written opening statements and witnesses’ written statements are available at the U S House of Representatives Repository docs house gov INDEX OF DOCUMENTS The documents listed below are available at docs house gov Press Release Lockheed Martin 2019 Q4 Full Year Earnings submitted by Ranking Member Comer Press Release Lockheed Martin 2020 Q2 Earnings submitted by Ranking Member Comer Questions for the Record to Ms Lord submitted by Chairwoman Maloney Questions for the Record to Mr Ulmer submitted by Chairwoman Maloney Questions for the Record to Mr Ulmer submitted by Rep Foxx Questions for the Record to Mr Ulmer submitted by Rep Gosar Questions for the Record to Mr Fick submitted by Rep Higgins Questions for the Record to Mr Ulmer submitted by Rep Higgins Questions for the Record to Mr Ulmer submitted by Rep Norman Questions for the Record to Ms Hull submitted by Rep Porter Questions for the Record to Ms Lord submitted by Rep Porter Questions for the Record to Mr Ulmer submitted by Rep Porter III 6 8 10 12 13 F–35 JOINT STRIKE FIGHTER ENSURING SAFETY AND ACCOUNTABILITY IN THE GOVERNMENT’S TRILLION DOLLAR INVESTMENT Wednesday July 22 2020 HOUSE OF REPRESENTATIVES COMMITTEE ON OVERSIGHT AND REFORM Washington D C The committee met pursuant to notice at 10 08 a m in room 2154 Rayburn House Office Building Hon Carolyn Maloney chairwoman of the committee presiding Present Representatives Maloney Norton Lynch Connolly Krishnamoorthi Rouda Khanna Wasserman Schultz Welch Speier Kelly DeSaulnier Plaskett Tlaib Porter Comer Jordan Foxx Massie Hice Grothman Cloud Gibbs Higgins Norman Miller Armstrong Steube and Keller CHAIRWOMAN MALONEY Welcome everyone to today’s hybrid hearing Pursuant to House rules some members will appear in person and others will be remotely via WebEx Since some members are appearing in person let me first remind everyone that pursuant to the latest guidance from the House attending physician all individuals attending this hearing in person must wear a face mask This is something that I believe very strongly in I am from New York We have lost over 30 000 souls We still do not understand the virus It is terribly contagious and it is easy for us to go home and infect our families So it really is a life and death issue and so we will not recognize anyone unless they are wearing a face mask Let me also make a few reminders for those members appearing in person You will only see members and witnesses appearing remotely on the monitor in front of you when you are speaking what is known in WebEx as active speaker view A timer is visible in the room directly in front of you For members appearing remotely I know you are all familiar with WebEx by now But let me remind everyone of a few points First you will be able to see each person speaking during the hearing whether they are in person or remote as long as you have your WebEx set to active speaker view If you have any questions about this please contact staff immediately Second we have a timer that should be visible on your screen when you are in the active speaker with thumbnail view Members 1 2 who wish to pin the timer to their screens should contact committee staff for assistance Third the House rules require that we see you So please have your cameras turned on at all times Fourth members appearing remotely who are not recognized should remain muted to minimize background noise and feedback Fifth I will recognize members verbally But members retain the right to seek recognition verbally in regular order Members will be recognized in seniority order for questions Last if you want to be recognized outside of regular order you may identify that in several ways You may use the chat function to send a request You may send it email to the majority staff Or you may unmute your mic to seek recognition Obviously we do not want people talking over each other So my preference is that members use the chat function or email to facilitate formal verbal recognition Committee staff will ensure that I am made aware of the request and I will recognize you We will begin the hearing in just a few moments when they tell me they are ready to begin the live stream Chairwoman MALONEY The committee will come to order First of all I would like to congratulate Ranking Member Comer This is his first full committee hearing as ranking member and I am pleased that it is one that we can work in a bipartisan manner I believe we all want a strong military a strong private sector and a strong government that is wisely tracking taxpayers’ money and spending it efficiently for the purposes that it was meant for I look forward to working with the ranking member in the future and I am so pleased that he is with us here today Without objection the chair is authorized to declare a recess of the committee at any time and I now recognize myself for an opening statement Good morning Today’s hearing will focus on the F–35 Joint Strike Fighter a highly technical stealth fighter that is the Pentagon’s largest and most costly acquisition program Since the F–35 program began more than 20 years ago the Department of Defense has spent more than $350 billion on its development Total cost to sustain the program are estimated at more than $1 trillion Unfortunately this expensive program has been plagued by challenges for years including major problems with maintenance of the aircraft This hearing will address the money time and manpower our military is being forced to spend to address problems with equipment logs for spare parts from the primary contractor Lockheed Martin In June 2019 the DOD inspector general found that over a three-year period more than 15 000 spare parts for the F–35 lacked an electronic equipment log that maintains important information on the history of the spare part and the hours flown This information is critical for the military to determine the age of a part and whether it is safe to keep using In late 2019 and early 2020 committee staff from the majority and the minority visited multiple military bases and interviewed personnel who maintained the F–35 fleet 3 During these visits staff confirmed that the problems identified by the IG still have not been resolved This is unacceptable As a result of Lockheed Martin’s failure to provide spare parts that meet contract requirements the military has been forced to divert personnel to troubleshoot these issues and use extensive work arounds to keep F–35 planes flying and this costs American taxpayers millions of dollars they should not have to pay For example last year the IG estimated that more than $300 million was spent on additional labor costs between 2015 and 2018 as a result of Lockheed Martin’s failure to provide spare parts with electronic logs The inspector general estimates that taxpayers will have to continue paying up to $55 million a year if we do not fix these problems That does not even include an additional $10 million in unwarranted and sensitive payments Lockheed Martin received in 2017 and 2018 Since then the Defense Contract Management Agency has refined this estimate to determine how many missing and delayed electronic logs can be attributed specifically to Lockheed Martin After this process the Defense Contract Management Agency determined that Lockheed Martin is responsible for at least $183 million in missing and delayed electronic logs from 2015 to early 2020 That is $183 million that the American taxpayers were forced to pay because Lockheed Martin failed to meet the requirements of its contract That is why today’s hearing is so important This money belongs to the American people These are funds that could have been used to train our war fighters upgrade older airplanes or support service members and their families In the 2020 National Defense Authorization Act Congress required DOD to seek and I quote ‘‘compensation for costs incurred by the Department of Defense as a result of the contractor’s failure to deliver compliant ready-for-issue spare parts under the contract ’’ end quote I believe Lockheed Martin needs to pay this money back Lockheed Martin is currently in negotiations with DOD to compensate the government for all the defective spare parts it provided It is imperative that Lockheed acknowledge that it failed to meet contract requirements and pay back the American people for these failures Lockheed is going to tell us that they have made improvements to ensure F–35 parts arrive on base with electronic logs Improvements have been made but parts are still being delivered without electronic logs and missing and corrupt electronic logs occur throughout a spare part’s lifecycle not just when they are delivered to a base In documents provided to the committee DOD itself identified nine points of failure in the life cycle of a spare part You are also going to hear that missing electronic logs have never resulted in an accident or a fatality and that is very good news So far But the Government Accountability Office warned that every time DOD disregards a warning about a missing electronic log military personnel are at risk of ignoring real problems with that aircraft We cannot simply hope that these accidents never occur 4 These problems must be addressed for our military personnel and we must address it now The U S Government is a major client of Lockheed Martin In 2019 alone Lockheed expected to earn $41 billion in revenue from the U S Government business paid for by the American taxpayers For that much money we can expect Lockheed to deliver products that work and that keep our service members safe Anything else is unacceptable I also plan to look at whether legislation is needed to ensure that F–35 is meeting performance expectations I want to thank our witnesses for testifying on this important issue and I really want to thank Ranking Member Comer and his staff for their cooperation and assistance on this hearing and the numerous meetings that we had beforehand This truly is a bipartisan investigation I now yield to the distinguished ranking member from the great state of Kentucky for his opening statement Mr COMER Well good morning and thank you Madam Chair for those nice words and for holding this important hearing I appreciate each of our witnesses here today and I want to extend my personal thank you to Lieutenant General Fick for his continued service to this country and to Ms Ellen Lord for all her hard work at the department I want to note that Mr Ulmer wished to be here today but the Democrat majority declined that request and forced him to testify virtually I understand the current public health situation but I truly believe it to be vitally important to hear from witnesses in person Further since the majority began an investigation into Lockheed Martin I feel it is inappropriate for their representative to be questioned virtually Even though the minority did not invite a witness to this hearing I fear that what we see today could be used to suppress future minority participation We have seen denial of minority witnesses in the Select Subcommittee It is important that this committee operate in a fair and equitable manner and I ask the chairwoman to commit to give all future witnesses the choice to appear in person if they wish and not force their virtual testimony But today we are here to discuss the F–35 fighter jet the most advanced weapons system in the world which brings significant war fighting capabilities to our great military The three variants are used by the Air Force Marines and the Navy to fly missions without detection by enemy radar and are equipped with sophisticated electronic components that aid the pilot in effectuating his or her mission These jets let us gather information engage targets at longer ranges with sophisticated precision-guided munitions while avoiding detection These planes don’t come cheap and although the cost per plane is always decreasing we must be vigilant to ensure that the government is using all the tools in its belt to keep costs down while maintaining a mission-ready F–35 fleet 5 Even though the cost to acquire an F–35 aircraft is significant that is not the end of the story Our military must keep that plane mission ready while performing routine maintenance and replacing parts when their life cycle is over The cost of this sustainment is significant The Department of Defense inspector general found that many spare parts were delivered to the military lacking or with a defective electronic equipment logbook or EEL meaning that the spare parts were not considered ready for issue Even though these parts are genuine and ready for use on the aircraft the inability to track the part with the EEL means that flight crews have to manually track those parts for wear and tear which can lead to increased costs human error and potentially a threat to life and safety Fortunately the government and Lockheed Martin entered into a massive collaborative effort to reduce the incidents of nonreadyfor-issue spare parts I am encouraged to hear progress is being made both in reducing the frequency of EEL deficiencies and in identifying previous deficiencies If there are instances of unsatisfactory contract performance those issues must be remedied But we must also find the root cause Government contracting can be burdensome and expensive driving innovative companies away from the market We must work together to ensure we get the best products quickly and at the least expensive to the taxpayer Increasing commercial item acquisition competition transparency and end-user input may all help with that I look forward to hearing from our witnesses today about their hard work supporting the F–35 fleet and ways that Congress can help increase contracting efficiency With that I yield back Chairwoman MALONEY Thank you Now I would like to introduce our witnesses Our first witness today is the Honorable Ellen Lord who is the under secretary for acquisitions and sustainment at the Department of Defense Then we will hear from Lieutenant General Eric T Fick who is the program executive officer of the F–35 Joint Program Office at the Department of Defense Next we will go to Ms Diana Maurer who is the director of defense capabilities and management at the Government Accountability Office We will also hear from Ms Theresa Hull who is the assistant inspector general at the Department of Defense Office of Inspector General Finally we will go to Gregory M Ulmer who is the vice president and general manager of the F–35 Lightning II Program at Lockheed Martin Corporation The witnesses will be unmuted so that they can be sworn in Please raise your right hand Do you swear or affirm that the testimony you are about to give is the truth the whole truth and nothing but the truth so help you God Chorus of ayes 6 Chairwoman MALONEY Let the record show that the witnesses answered in the affirmative Thank you and without objection your written statements will be made part of the record and with that Under Secretary Lord you are now recognized for your testimony STATEMENT OF ELLEN LORD UNDER SECRETARY FOR ACQUISITIONS AND SUSTAINMENT U S DEPARTMENT OF DEFENSE Ms LORD Good morning Chairwoman Maloney Ranking Member Comer and other distinguished members of the committee thank you for the opportunity to update you on the department’s F–35 sustainment efforts to improve the F–35 ready-for-issue parts for the war fighter and to ensure comprehensive oversight of our contractor support I am pleased to be joined by my fellow witnesses today to brief the committee on the progress the department has made on these issues The F–35 program is a key enabler of all three pillars of the National Defense Strategy first rebuilding military readiness as we build a more lethal joint force second strengthening alliances as we attract new partners and third reforming the department’s business practices for greater performance and affordability The fifth-generation stealth and battlefield networking capabilities clearly delivers the lethality needed to meet war fighter requirements As such our international partner nations and foreign military sales customers have chosen the F–35 to be at the core of their future airpower planning Last the F–35 program is a focus of the department’s reform efforts to provide affordable war fighter capability Today I would like to focus my remarks on three main topics to address congressional concerns increasing accountability within the F–35 sustainment enterprise the department’s management response to the DOD inspector general’s report on ready-for-issue parts and my efforts to promote effective oversight within the F–35 program A core focus area of my tenure as undersecretary for acquisition and sustainment has been strengthening accountability within the acquisition systems and particularly for the F–35 enterprise The department has made significant improvements in fleet availability over the past year The department currently uses two main measures of fleet availability for the F–35 mission-capable rate and full mission capable rate The department has increased the overall mission-capable fleet for the F–35 from roughly 60 percent at the beginning of the year to nearly 70 percent in June The department has similarly improved the full mission-capability fleet rate from below 35 percent at the beginning of the year to nearly 40 percent in June While more work remains to be done to meet war fighter needs these improvements in fleet availability driven primarily by improvements in maintainability and supply chain efficiency demonstrate the department’s efforts and are having a significant and measurable impact 7 On the ready-for-issue parts concerns raised by the DOD inspector general their July 2019 report found that the department did not ensure that the contractor was providing spare parts in a ready-for-issue state The report also indentified that the department did not ensure that payments to Lockheed Martin were properly tied to performance against ready-for-issue metrics The department concurred with all of the Department of Defense’s inspector general’s recommendations and has aggressively implemented corrective actions based on a followup status report provided to DOD IG in January 2020 and subsequent conversations with DOD IG representatives The issues raised in the DOD IG report are primarily issues of electronic records management related to known deficiencies and the ability of the F–35 Autonomic Logistics Information Systems or ALIS’s ability to accurately and reliably track and transmit electronic equipment log EEL files The department has taken near-term action to address key degraders of ready-for-issue or RFI rate But the long-term solution to the problem depends on the already underway effort to replace ALIS with a more stable capable system As a result of those near-term actions the department has increased the RFI rate at Hill Air Force Base Luke Air Force Base and Marine Corps Air Station at Yuma from 43 percent in February to exceeding the RFI threshold metric rate of 70 percent in every month since April achieving a high of 83 percent in June In May this committee spoke to unit commanders from the three services about the effects that ready-for-issue parts issues were having on the units under their command I have also spoken directly with these F–35 commanders to hear their feedback and suggestions for improvement As a result I will ensure that corrective actions will drive a system architecture and capability that meets war fighter needs and enables our maintainers to spend their time keeping aircraft available rather than manually working around the flawed electronic records systems On January 14 2020 I announced to the House Armed Services Committee members the transition from ALIS to a new government-owned system Operational Data Integrated Network called ODIN The department will introduce the first tranche of ODIN capability fleet wide by the end of 2021 In the interim the department has been working to develop solutions to the legacy ALIS system to improve EEL’s accuracy tracking and transmission performance to reduce maintenance work arounds and to mitigate potential risks to the fleet The DOD IG’s report also identified that existing contract terms were not sufficient to hold the prime contractor accountable for the EEL’s deficiencies DCMA has been working closely with the F–35 JPO to negotiate fair consideration to the government from the prime contractor for these deficiencies DCMA notified Lockheed Martin of its intent to seek consideration on April 2 and formal discussions began on May 7 DCMA’s task is to seek consideration for non-RFI parts delivered between 8 the beginning of 2015 and April 30 2020 and to incorporate terms into the next annualized statement contract The F–35 JPO has also been working to negotiate more comprehensive contract terms in future sustainment contracts to ensure the contract has defined EEL and RFI metrics to measure performance As we have worked to negotiate contracts to better align incentives with performance and accountability the department recognizes the need to enable more robust and effective oversight on major issues that decrease availability and increase cost My staff and I are personally engaged on these issues in a number of venues I have been meeting weekly with F–35 JPO service and other stakeholder leadership to ensure management oversight Furthermore I have been meeting monthly with the vice chairman of the Joint Chiefs of Staff and military service leaders to drive performance improvement I have also been meeting regularly with the CEO of Lockheed Martin to address key issues facing the F–35 enterprise I am keenly aware of congressional interest in the F–35 program and my staff has been working closely with the congressional Defense Committees to ensure that they receive timely information on key issues of interest My staff has provided quarterly updates to the congressional Defense Committees on a range of F–35 development production and sustainment issues including the status of the ALIS to ODIN transition I appreciate the opportunity to have these meaningful discussions with this committee as we work together to strengthen the F–35 enterprise and to continue to provide safe reliable and capable F–35s for our war fighters Thank you very much for your time and I look forward to answering your questions Chairwoman MALONEY We will now turn to Lieutenant General Fick Lieutenant General Fick you are now recognized STATEMENT OF ERIC T FICK LIEUTENANT GENERAL PROGRAM EXECUTIVE OFFICER F 0935 JOINT PROGRAM OFFICE U S DEPARTMENT OF DEFENSE Mr FICK Chairwoman Maloney Ranking Member Comer and distinguished members of the committee it is my distinct honor to serve as your F–35 program executive officer and program director leading the F–35 enterprise through the development production and sustainment of this amazing air system On behalf of the 2 100 men and women of the F–35 Lightning II Program it is my privilege to update you on the hard work that continues daily across the F–35 global enterprise I am encouraged by the real progress we have made as an enterprise but remain keenly aware that much work remains before us In the past year our program has matured rapidly Annual production rates reached an all-time high We delivered our five-hundredth aircraft Unit costs continue to come down and mission-capable rates continue to rise 9 We remain committed to delivering the capabilities our war fighters need at a price our taxpayers can afford Over the past six months we reshaped the F–35 program office to a product-aligned organization with cross-functional talent embedded within each project management team I am seeing the benefits of this change through improved communication with F–35 stakeholders and rapid issue resolution across the organization I have focused this team on four lines of effort to continue the positive momentum we have seen in readiness over the last year Those four areas are reliability and maintainability or keeping the part on the aircraft longer supply posture which ensures parts are available repair capacity which means the capability to repair the part and finally repair velocity which means fixing parts quickly to get the jets flying again My remarks today address ready-for-installation or RFI parts and electronic equipment logs or EELs as requested in your invitation An F–35 EEL is similar to a digital medical record It tells the story of the part from cradle to grave Each part with an EEL roughly 1 000 of the 50 000 parts on an F–35 is managed by the F–35 Autonomic Logistics Information System or ALIS When a part arrives with an incorrect or missing EEL that part is not ready for installation or non-RFI It takes a significant effort and time for maintainers to reconstruct the part history and create a digital record for that part This activity diverts time from scheduled maintenance increases the probability of human error and in costs to the program The bottom line is we must receive our parts on time and with all the required identification markings and electronic records Aided by insights from the Government Accountability Office the DOD inspector general and my active dialog with commanders in the field we are aggressively targeting the root cause of EEL and non-RFI parts issues We have improved contracting language to ensure that industry compensation is based upon delivery of parts that are ready to be installed We worked closely with the Defense Contract Management Agency to assess the impacts from parts with missing or incomplete EELs and are evaluating what if any excess incentive fee may have been paid to Lockheed Martin when our war fighters compensated for non-RFI parts My team conducted site visits and quality inspections working side by side with maintainers on the ground We developed corrective action plans with industry to address supply system degraders and we are monitoring to ensure that the supply chain is responsive to these corrective actions We updated ALIS to improve parts accountability redesigned ALIS modules to make data entry more intuitive and revamped training and quality oversight at F–35 locations to catalog discrepancies and reduce human error These measures are paying off As Ms Lord mentioned last month our EEL parts ready-for-install rate reached 83 percent with a target goal of 90 percent this year 10 Beginning in 2021 the contracted requirement for parts readyto-issue will be 99 percent To be clear we heard the DOD IG We heard the GAO We are taking actions and these actions are making a difference In the next two years the program will also sunset the Autonomic Logistics Information System and introduce a more modern sustainment management tool called the Operational Data Integrated Network or ODIN Led by the government ODIN starts with a new underlying integrated data environment and brings modern hardware and software to the F–35 sustainer and will leverage agile development practices and interactions in response to the evolving needs of our customers and global operations ODIN will decrease maintenance workload improve readiness levels and be portable and easily deployable My team of experts and I continue to work tirelessly to deliver the war fighting capability our Nation needs We will do it smartly efficiently and as cost effectively as possible and we will do it with the highest regard for those we serve and those who put their trust in us As the son of an airman and the father of two airmen nothing is more important to me than giving our service members the tools they need to do their job in harm’s way and to bring them back home safely every time I appreciate the opportunity to appear before you today and I look forward to your questions Chairwoman MALONEY Thank you Next is Ms Maurer Ms Maurer you are now recognized STATEMENT OF DIANA MAURER DIRECTOR GOVERNMENT ACCOUNTABILITY OFFICE DEFENSE CAPABILITIES AND MANAGEMENT Ms MAURER Thank you very much Good morning Chairwoman Maloney Ranking Member Comer—— Chairwoman MALONEY We can’t hear you right now You have to speak up louder Ms MAURER Good morning Chairwoman Maloney Ranking Member Comer and other members and staff I am pleased to be here—pleased to testify today about GAO’s body of work on the Autonomic Logistics Information System or ALIS Over the years we have found a number of significant problems and challenges with ALIS which are summarized in my prepared statement for today Most concerning is the lack of trust the pilots maintainers and commanders have in key aspects of the system Getting ALIS to work requires cultural work arounds and forces commanders to assume the risk of allowing planes to fly when ALIS says they should stay on the ground Over the past six years we have issued a series of recommendations to DOD to help address these concerns and we are encouraged that Under Secretary Lord and General Fick are taking our recommendations seriously as they chart a new path ahead 11 transitioning from ALIS to ODIN and as you have heard ODIN is the fix for ALIS So rather than walk through the list of problems we have identified with ALIS over the years I will instead focus on key questions stemming from those findings that can assist congressional oversight Question one what is ODIN supposed to do That was not clearly defined for ALIS There was general agreement that it should diagnose maintenance problems and form a global logistics chain reduce sustainment costs and help keep aircraft—put more aircraft in the air But years ago DOD gave Lockheed essentially no specific requirements beyond create a logistics information system and then did not adequately build users and to develop a process As the system evolved over time there are often gaps between what users needed and what was delivered So for example having a deployable system meant one thing to Lockheed and something very different to the war fighter To avoid similar disconnects in the future it is important to clearly define and agree on what ODIN is meant to do informed by user needs Which leads to the second question After defining what ODIN should do how will you know it has done it Six years ago you recommended DOD develop ways to determine whether ALIS was performing as intended That never happened Instead over the years we have heard consistently that ALIS has a lot of problems but it is getting better However lacking some kind of measures it was never clear what success looked like or how far off it was The F–35 program can learn from its history by developing a clear understanding of how ODIN impacts mission execution Is it helping putting planes in the air or keeping them on the ground and how well is ODIN meeting the needs of pilots maintainers and commanders That leads to the third question Who is going to make this happen Years ago DOD handed responsibility for F–35 sustainment including ALIS to Lockheed That is not inherently bad and if done properly it can save money and lead to better outcomes But at the time DOD did not think through of the downstream applications of giving nearly complete control of software hardware and intellectual property to the contractor and as DOD pivots now from ALIS to ODIN there is an opportunity to reconsider who will do what That includes DOD’s access to technical data whether maintainers will be able to correct missing or incorrect information without having to pay a contractor and how Lockheed the Joint Program Office the U S military services and international partners will work together to implement use maintain and upgrade ODIN Fixing ODIN—fixing ALIS by transitioning to ODIN will not be quick and it will not be easy Fully implementing GAO’s recommendations will help DOD’s efforts in its duty and its ongoing efforts However this transition from ALIS to ODIN is only one item on a much longer list of F–35 sustainment challenges The F–35 is the 12 foreseeable future of combat aviation for this country and many of our allies but it cannot achieve its full potential until the program can address sustainment challenges associated with ALIS spare parts operating costs supply chain and mission capability Chairwoman Maloney and other members your continued focus and action on sustainment issues not just production can help ensure the F–35 is able to meet our national security goals for decades to come Thank you for the opportunity to testify this morning and I look forward to your questions Chairwoman MALONEY Thank you Next is Ms Hull Ms Hull you are now recognized STATEMENT OF THERESA HULL ASSISTANT INSPECTOR GENERAL U S DEPARTMENT OF DEFENSE OFFICE OF THE INSPECTOR GENERAL Ms HULL Chairwoman Maloney Ranking Member Comer and distinguished members of the committee thank you for inviting me to appear before you today to discuss the Department of Defense Office of Inspector General report on F–35 ready-for-issue spare parts and sustainment performance incentive fees I am the assistant inspector general for audit acquisition contracting and sustainment the DOD IG directorate that conducted the audit of the F–35 RFI spare parts and sustainment performance incentive fees With the DOD expecting to spend over $1 trillion to operate and maintain the fleet for 66 years our report findings highlight the importance of ensuring that F–35 program costs are affordable and sustainable long term Lockheed Martin is required to deliver RFI F–35 spare parts RFI spare parts should be ready for aircraft maintenance personnel to install on the aircraft and should be assigned an electronic equipment logbook or EEL During the audit we found that Lockheed Martin has been providing a significant number of non-RFI spare parts to F–35 sites since 2015 when sustainment efforts began Despite being aware of this problem the Joint Program Office did not resolve the issue or require DOD personnel to track the number of non-RFI spare parts received DOD personnel submitted more than 15 000 action requests from December 2015 to June 2018 to correct the non-RFI issues To maintain the volume of non-RFI parts that Lockheed Martin provided F–35 sites reassigned DOD personnel to focus full time on informally resolving the EEL issues In some cases this preempted the need to create an action request and therefore created an inaccurate impression that the issue of Lockheed Martin delivering the parts without EELs was improving If reassigned DOD personnel were unable to resolve the problem they still had to contact Lockheed Martin representatives or submit an action request incurring additional charges 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 13 personnel to bring the spare parts to RFI condition and will continue to pay an estimated $55 million annually until Lockheed Martin consistently delivers RFI spare parts that meet the contract requirements The DOD paid performance incentive fees on the sustainment contracts based on inflated and unverified F–35 aircraft availability hours 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 Personnel at the F–35 sites resorted to using white boards and spreadsheets to track flight hours when non-RFI spare parts were used on aircraft The DOD’s use of local guidance and ad hoc manual processes allowed aircraft to fly and complete missions instead of the DOD grounding aircraft due to receiving non-RFI parts This practice inadvertently inflated 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 However the Joint Program Office does not require F–35 site personnel to collect aircraft availability hours and track the hours that aircraft fly with non-RFI spare parts installed Therefore the DOD has no way to determine the total number of hours the F–35 has flown with non-RFI spare parts Lockheed Martin is receiving incentive fee payments that were earned through the use of DOD labor rather than the contractors’ ability to meet its performance metrics As a result the JPO potentially overpaid performance incentive fees on the 2017 and 2018 sustainment contracts Furthermore the JPO relied solely on contractor-reported information on availability hours to pay Lockheed Martin performance incentive fees for 2017 and 2018 The JPO compared availability hours on one Lockheed Martingenerated report to another Lockheed Martin-generated report because the JPO did not track or collect aircraft availability hours As a result the DOD has potentially overpaid $10 6 million in performance incentive fees F–35 aircraft are already proving to be more expensive to sustain than originally planned If the DOD and Lockheed Martin do not address the concerns discussed issues related to non-RFI spare parts will continue to compound as the fleet expands escalating sustainment costs reducing mission-capable rates and increasing the life and safety risks that occur when life-limited non-RFI spare parts are installed and flown without an EEL Additionally until the JPO independently collects data to verify contractor performance the DOD may continue to overpay performance incentive fees on the 2018 and future sustainment contracts Thank you for the opportunity to testify this morning and I look forward to your questions Chairwoman MALONEY We will now conclude with Mr Ulmer Mr Ulmer you are now recognized 14 STATEMENT OF GREG ULMER VICE PRESIDENT AND GENERAL MANAGER F 0935 LIGHTNING II PROGRAM LOCKHEED MARTIN CORPORATION Mr ULMER Thank you Chairwoman Chairwoman Maloney Chairman Lynch Ranking Member Comer Ranking Member Grothman distinguished members of the committee I appreciate the opportunity to testify on behalf of Lockheed Martin and our industry teammates to provide you with an update on the F–35 program My preference would be to testify in person but as you know I have been asked to speak to you virtually due to COVID I want to thank you for your interest in the program and commitment to ensuring it delivers the best value to the taxpayer but more importantly to our war fighters As the F–35 vice president and general manager I appreciate the opportunity to meet with Congress and engage in meaningful dialog concerning the program At this time I would like to submit my full written statement and ask that it be made part of the hearing record Now I would like to provide a brief update on the state of the F–35 program The committee has asked specifically that I address F–35 sustainment focusing on electronic equipment logbooks or EELs as well as ready-for-issue or RFI parts These are important issues for the maintainers on the flight line who keep the F–35 flying and we remain steadfast in our commitment to make their job seamless and without issue The F–35 stealth technology supersonic speed advanced sensor suite weapons capacity and increased range make it the most lethal survivable and connected aircraft operating in the world today We have delivered more than 540 aircraft trained more than a thousand pilots and 9 000 maintainers and flown nearly 300 000 flight hours Currently the F–35 operates from 20 bases and force ships with nine nations operating the jets from their own home soil Five countries have flown operational missions including the United States Air Force which has been in continuous deployment overseas for more than a year War fighters tell us the aircraft provides game-changing capabilities providing unprecedented situational awareness maneuverability and connectivity The F–35 program is also a powerful economic driver The program currently has 1 900 suppliers 1 800 of which are in 48 states plus Puerto Rico generating 254 000 jobs which results in a U S economic impact of $49 billion annually The F–35 program continues to make great strides in the area of sustainment We quickly scaled from development to production to fielding at an unprecedented rate In the last three years Lockheed Martin has delivered more than 300 aircraft and invested over $270 million improving our supply chain through data analytics and automation along with leveraging both production and sustainment elements to improve performance at reduced cost 15 Lockheed Martin and the JPO have been working diligently to improve sustainment performance with an emphasis on affordability Within the last 24 months the mission-capable rate for the fleet has increased from the low 50 percentile to the mid–70’s Additional sustainment metrics that measure the health of maintenance due to supply and other associated maintenance activities have also significantly improved Over the past five years Lockheed Martin has reduced the cost per flying hour that we control by approximately 40 percent and we project that with our further investments we will be able to drive that down—drive down our costs per flying hour aspect another 50 percent over the next five years We acknowledge EELs have been a challenge but significant improvements have been realized Lockheed Martin has applied diagnostic and engineering resources to resolve the issue These challenges do not indicate that a part is flawed nor are EEL issues caused exclusively by industry alone U S services have confirmed a market improvement in ready-for-issue parts in 2020 These gains are a direct result of the concerted joint government industry effort to identify root cause and implement corrective actions Substantial progress has been achieved since the release of the DOD IG report more than a year ago Since then Lockheed Martin has demonstrated a 45 percent point improvement in EEL performance while simultaneously growing the fleet by more than a third This year RFI parts have improved to approximately 83 percent We will accelerate two more rounds of improvements this year which we expect will result in the 90 percent RFI threshold targets specified by our customer Lockheed Martin is committed to transparency and partnership and the resolution of the challenges associated with EELs and we will continue to be compliant with our contractual obligations on the program and look forward to a continued partnership with the committee the DOD and the Joint Program Office to resolve this issue In conclusion the F–35 is performing and operating as we envisioned from an operational sustainment perspective The F–35 has proven itself in combat and is quickly becoming the centerpiece of the U S military fighter fleet and that of our allies It is a privilege to lead the F–35 industry team and on behalf of Lockheed Martin I thank the men and women of our U S services and their families for their selfless service to our Nation Again thank you for this opportunity to update you on the F– 35 program I am happy to answer any questions you may have Thank you Chairwoman MALONEY I want to thank all the panelists and I do want to respond to the items that my friend Representative Comer raised and we are in person today because DOD insisted on testifying in person So the witnesses in person are all from DOD and we could only have three to conduct the hearing safely We did try to work with your staff and the medical staff of the Capitol to have in-person hearings as you requested It was very 16 difficult to make this happen and meet the health standards to ensure people don’t get infected One thing I know from New York is we don’t know enough about this virus I have talked to friends and they seem fine The next day they are dead They told us it doesn’t affect children One day 35 children came down with it One of them died And you hear the heartbreaking stories of medical professionals who believe they are decontaminated They come home and they infect their entire families So it is a deadly deadly disease and we have to put health first But the next hearing we could have Lockheed in person and have DOD remotely I am going to instruct the staff to work even harder with your staff to meet the accommodations and the concerns that you have I deeply respect the position you hold and want to work with you I think we are united in wanting to have a strong military a strong private sector a strong government all getting a quality product and protecting taxpayers’ money So I sincerely would like to try to accommodate and next time we will have Lockheed testify in person and others will be remotely So right now I would like to recognize myself for five minutes Ms Hull according to the DOD IG report issued last year they said that DOD incurred more than $300 million a staggering amount in excess labor costs between 2015 and 2018 due to Lockheed Martin not delivering spare parts that met the requirements of the contract The IG also estimated if these problems go unaddressed that it will continue to pay the department DOD $55 million each year in extra labor cost Your office recommended that the Defense Department seek compensation from Lockheed Martin dating back to 2015 Why did your office recommend that DOD seek to be reimbursed for these parts Ms HULL Chairwoman we recommended that DOD be—seek reimbursement for that because by definition in the contract the parts should have arrived ready for issue which means they should have been ready to go on the aircraft along with an electronic equipment log book So to keep in terms with the contract our recommendation speaks to the need for compensation Chairwoman MALONEY OK And according to the IG report the Defense Department previously sought payment from Lockheed Martin for these electronic log defects in November 2018 but Lockheed Martin and I quote ‘‘refused to sign the proposed modification on the sustainment contract ’’ Ms Hull is that right Ms HULL Based on the information that we had at the time that is true Chairwoman MALONEY And according to the IG’s report based on a similar contract modification the proposed change would have cost Lockheed Martin $7 000 for each problem identified with a spare part and according to DOD Lockheed Martin refused to sign 17 the modification because it would cost less to fix each individual problem than it would to reimburse the government Is that correct Ms HULL The range of cost per EEL issue is in $7 000 to $11 000 and yes according to what we found as from our work Lockheed Martin found that it would be cheaper to address this on a sustainment contract Chairwoman MALONEY OK Lieutenant General Fick let us turn our attention to you Congress mandated the 2020 National Defense Authorization Act that the departments follow the IG’s recommendation by seeking compensation for defective parts and I understand the discussion between Lockheed Martin and the Defense Contract Management Agency began in April and that DOD worked with Lockheed to identify specific problems between 2015 and 2020 that are attributable to Lockheed Martin What is the current status of the negotiations with Lockheed Martin now Mr FICK Those discussions are ongoing as we speak My understanding is that the team has come to an agreement relative to the magnitude of the issue and the problem but that the consideration offered or demanded has not yet been agreed to Chairwoman MALONEY OK And Mr Ulmer of Lockheed Martin Lockheed Martin is responsible for fully executing the contract that American taxpayers are paying for and that our military is counting on your company to safely and effectively deliver We don’t need further delays or excuses from Lockheed Martin about these problems Will you commit to paying the Defense Department back for every defective electronic log in the Defense Contract Management Agency that has been identified No response Chairwoman MALONEY Mr Ulmer Counsel They lost the audio from us so you may have to repeat it Chairwoman MALONEY OK Mr Ulmer can you hear me now He has left I guess Counsel No he is on He is on They are—they have problems with our audio Chairwoman MALONEY OK Counsel Go on to the next question and come back Chairwoman MALONEY OK All right We are going to go to another question But my questions are of Mr Ulmer So I now yield to the ranking member for his questioning Mr COMER Thank you Ms Lord I understand the EELs are a major issue but what are some other issues in the program and how are you and the department responding to them Ms LORD From a sustainment point of view we are trying to look at Lockheed Martin’s performance particularly in terms of earning incentive fee by implementing some of the measures we took on the production program where we very clearly link what is goodness for the war fighter to what are those incentives that are paid So that is contractually what we are doing 18 Second EELs are a significant issue but we do have a challenge with visibility in parts being transferred also in terms of maintaining warehouses and making sure that obsolete equipment is moved out So there are a variety of other things as well Mr COMER General Fick and Ms Lord we have heard from servicemen on the ground that they are following DOD and JPO directives to fly aircraft that may be missing an EEL I believe that—well I trust our commanders to make the proper decision regarding the health and safety of our pilots and our jets But I believe that Lockheed is incentivized to keep jets in the air and keep them at least partially mission capable notwithstanding the directives from DOD and JPO If a jet were missing an EEL would it be allowed to fly Mr FICK Yes sir it could and let me tell you the circumstances under which a jet that is missing an EEL could fly the circumstances in which that EEL does not contain a safety—is not associated with a safety-critical part nor a life-limited part So when I spoke with my maintenance group commanders five of them on the phone on Monday of this week each of them confirmed to me that if the EEL—I am sorry if a part that is missing an EEL is safety critical or is life limited in any way that part will not be installed on the aircraft and that aircraft will not fly Mr COMER So if a jet were not allowed to fly would it count positively toward aircraft availability or the mission-capable rate Mr FICK It would count negatively Mr COMER OK Should a contractor be incentivized for performance that would otherwise not happen without the hard work of U S Government personnel such as allowing a plane to fly without an EEL Mr FICK Sir in general I would say no But at the end of the day we put blue suiters and green suiters and brown suiters in the cockpit to fly those missions So no aircraft takes off without some form of government assistance The magic is finding where in the middle—where is the—what is the right answer for responsibility Mr COMER Ms Lord are EELs required by a contract to be delivered by Lockheed to the government Ms LORD Yes sir it could Mr COMER Is Lockheed delivering EELs intact 100 percent of the time Ms LORD No Mr COMER Have they failed to deliver just a few parts or are we talking thousands of parts Ms LORD We are talking significant numbers of parts I believe General Fick can confirm it is thousands Mr COMER OK Is Mr Ulmer back online yet Mr Ulmer can you hear me Chairwoman MALONEY Mr Ulmer can we—can we ask you a question Are you online Mr Ulmer Mr COMER OK I have two minutes left All right I will yield back until we get him back online I had questions as well Madam Chair Chairwoman MALONEY Is he back online now COUNSEL He is on He is on Mr COMER Oh he is on OK 19 Mr ULMER Madam Chairwoman can you hear me Mr COMER Yes we can hear you now Chairwoman MALONEY We can hear you but I can’t see you Mr COMER All right There we go Good deal All right Chairwoman MALONEY OK Great You are back OK OK Why don’t you finish Mr Comer because—— Mr COMER OK Thank you Mr Ulmer when was your last quarterly earnings call at Lockheed Mr ULMER Yesterday Congressman Mr COMER How much revenue was reported Mr ULMER I believe $41 billion Mr COMER So that is—what about revenue for all of Fiscal Year 2019 Mr ULMER I don’t have that figure off the top of my head Congressman Mr COMER How much is—how much of your revenue is from government accounts Mr ULMER I will have to get that information for you and provide that Congressman Mr COMER OK Our research indicates it is—— Mr ULMER But it is the majority Mr COMER Right Somewhere around 75 percent Do you know roughly what percentage of your revenues came from the F–35 program Mr ULMER Approximately 30 to 40 percent Mr COMER OK With all this profit why is Lockheed failing to fulfill the contract and deliver EELs intact and on time Mr ULMER Congressman those figures are orders and sales not profit and we are very engaged relative to resolving this problem concurrently with our customer Mr COMER OK Well Ms Lord and General Fick I look forward to working with you all on this issue and continuing our efforts to make contracting less burdensome and safeguard the American taxpayer I mean it is—the taxpayers want and expect us to have the best military in the world The Congress is committed to ensuring that our troops and our military have the best and have everything they need and I for one certainly want to work with the private sector to ensure that we have the best But we also expect the private sector to deliver on the contracts that the American taxpayer expects So I look forward to working with you and Lockheed through this process and hopefully we will continue to see improvements Madam Chair I yield back Chairwoman MALONEY Thank you and I would like to be associated with your comments about wanting to see improvements We had a prior briefing with the military leaders that were running this program and working with the men and women who were flying the planes and I have never seen a military person not in combat who was so frustrated wanting to make—have a product that was great for our country and not having the support or the technology or even the parts that worked for the plane This is a tremendous problem So I really want to ask you Mr Ulmer will you commit to paying the Defense Department back for 20 every defective electronic log the Defense Contract Management Agency identified Mr ULMER Congresswoman it is a complex problem as we have discussed It is not all associated with Lockheed Martin performance There are many aspects relative to not ready for issue This is not simply—this electronic file we are making—we are innovating as we go through this process with our customer This has been a concurrent program So we concurrently have developed produced and sustained this aircraft and the products that we utilized to do that An electronic equipment logbook contains quite a bit of sophisticated engineering information It doesn’t simply just track a part It includes technical data graphical data ITAR data It contains a lot of different information Through the business process there are—there are elements that we can corrupt this data It can be presented that way or a customer can miss input information So there are a lot of complexities relative to the electronic EEL book We have been working wholeheartedly with the DCMA and the JPO to resolve and understand these technical issues We have seen significant improvement in the last six months in particular—as we have mentioned an improvement up to 83 percent ready for issue—and I am fully committed to supporting that continued engagement to resolve those issues going forward I am also committed to meeting with the Defense Contract Management Agency as well as the JPO to sit down and reconcile the concerns and adjudicate the cost appropriately Chairwoman MALONEY Well I appreciate your concern But I come from a military family and every time a pilot gets in those planes and flies up into the sky they are risking their life And I know many widows and children that have lost their father because of faulty equipment and 85 percent isn’t good enough for the U S military It has got to be 100 percent and a contract is a contract and the contract says you will deliver a plane which you have done beautifully It is a beautiful plane But it also says that the material that is needed to fly that plane has to be delivered too Our military managers don’t want to be sending people up in the air when they don’t have everything perfectly there that is in that contract That is only fair So I hope that you will change your mind and at the next hearing have an update on how you are now at 100 percent and how you have worked out the understanding of this equipment so that it is working for the military One of the most heartbreaking things to me in the last meeting is that one of the managers said—he said—I can’t even repeat it It is too upsetting I would now like to say Mr Ulmer I sent you a letter or Lockheed Martin a letter on June 18 2020 and I appreciate Lockheed Martin’s cooperation so far in producing documents and getting back to us with some answers 21 But many documents have not been provided So do you commit that Lockheed Martin will produce all of the remaining documents before the end of the month I must tell you it is upsetting to me if you can’t deliver a document I have no trust that you can deliver a plane that is going to operate and that has all of the equipment True it is a complicated plane You have complicated equipment But the contract for a trillion dollars to maintain it the contract calls for the supportive equipment to be delivered and operating and how can you expect our military to respond This is in peacetime I hate to think what would happen if we were in a war and our men and women had to fly a plane that didn’t have the technology working or the pieces working that are supposed to be working with this plane So this is really I would say not just a money issue I think it is a life and death issue and we have to get this plane—what good is a plane that can’t fly according to some of the managers because all the equipment is not working So I look forward to following up with you on this request for the documents and also on the request that Lockheed Martin live up to its contract The American people have paid a lot of taxes to live up to our contract with producing this important plane But Lockheed is not responding to my requests for documents It is not responding to the military’s request for equipment that they feel that they need to fly this plane So I now yield to the distinguished lady Mr ULMER Madam Chairwoman Chairwoman MALONEY I am going to Ms Norton from the District of Columbia OK Ms NORTON Thank you Madam Chair and I want to thank you for this hearing I want to say Mr Ulmer of Lockheed in explaining the cost overruns indicating innovations and the rest I just want to say for the record that—can you hear me Chairwoman MALONEY Yes we can hear you Mr ULMER Yes Congresswoman Ms NORTON I want to say for the record that we signed a contract We didn’t sign to pay for innovations We signed—we didn’t sign to pay for cost overruns and that is what is happening We are paying for cost overruns and that is something that has simply got to stop I have a question beginning with Ms Maurer of the GAO because the committee staff also visited the F–35 bases and they pointed at that time that ALIS was the root cause of the problems with the electronic logs and that the—they lose track the logs do sometimes overnight after maintenance crews have already cleared the F–35 to fly the next day Talking about dangerous Is what the committee staff found in its visit Ms Maurer consistent with what the GAO has found in its work Ms MAURER Thank you for the question and yes those findings are consistent with what we found in our work and we summarized those findings in our report that was issued back in March as part of our audit work last year 22 Our team visited five different installations within the United States where they had F–35s deployed We heard a great deal of frustration from pilots and from maintainers and from commanders There was a grave amount of concern that the—and frustration frankly with the problems with EELs and with the problems with the interface with ALIS itself These are longstanding problems We have noted them in our reports going as far back as 2014 Much of this is rooted in the fact that this is an old system and we hope that DOD fully implements our various recommendations as they move toward implementing ODIN I will be watching that carefully to make sure that these problems do not continue in the futures It is definitely a problem with the past definitely a problem in the present Ms NORTON Thank you Ms Maurer Mr Ulmer of Lockheed Lockheed of course has acknowledged flaws in ALIS and it provided the committee with a presentation In its presentation you indicated that ALIS is currently looking at its manpower hardware increased labor costs decreased readiness What steps—when you consider all of these flaws in ALIS what steps is Lockheed taking now—this is for Mr Ulmer—what steps is Lockheed taking now to improve ALIS until that system can be replaced Mr ULMER Congresswoman we have gone to an agile software development process with the ALIS system Just to let everybody know ALIS is an IT infrastructure that was developed in the early 2000’s before the iPhone existed So it is an antiquated hardware software system We have implemented agile software updates We have improved processing time significantly on the order of 50 percent or more We have gone to quarterly releases It was taking us 12 to 18 months to provide software updates We are now concurrently with the JPO releasing software updates every three months We are receiving positive feedback reduced wait times significant processing time You can get all of the information in front of you significantly reduced button clicks to get to information to process data So quite a bit of improvement has occurred on the ALIS system recently Ms NORTON Madam Chair I hear concern even discussed on both sides of the aisle I can only hope that this hearing moves us ahead to at least get a new system so the taxpayers aren’t continuing to pay for these redundant flaws My time is out and I thank you Mr LYNCH Presiding The chair now recognizes the gentlelady from North Carolina Ms Foxx for five minutes Ms FOXX Thank you Mr Chairman Mr Ulmer and Lieutenant General Fick the DOD Inspector General report notes that ready-for-issue means the spare parts supplied by the contractor are ready to install on the aircraft and have an electronic equipment log or EEL assigned 23 Can you explain in layman’s terms what an electronic equipment log is and its importance to overall maintenance and sustainment of an aircraft such as the F–35 Mr FICK Yes ma’am I can So an electronic equipment log I like to think of as a personal health record associated with that specific part It follows the part digitally or electronically and some of the functions we ask of that EEL are to track life limits associated with that part to track implementation of TCTDs to look at part number and tail number compatibility to manage complex assemblies like an ejection seat that may have an EEL at the top level and then lower embedded or indentured EELs below that We look at the EEL also for export control as well as inspection requirements for those parts Ms FOXX Thank you Mr Ulmer would you like to respond Mr ULMER Yes ma’am I concur with General Fick’s review of a description of an EEL To be clear ma’am it is an electronic file In 2016 we implemented quarantines such that when we release materiel that we ensure the EEL is in fact in place and appropriate So here in Fort Worth where we produce the aircraft in late 2016 early 2017 we implemented we could not deliver aircraft without EELs being compliant As the aircraft delivers and then that EEL delivers on with the airplane it is consumed within the ALIS system The information that General Fick described populates the information structure that informs the maintenance system how to operate and sustain the airplane The business processes behind that transfer of that information the communication of that information the input of that information is what is resulting with the EEL issues to date and that is where we are very focused on creating solutions from an IT business process point of view to resolve these issues and that is where we have seen in the last six months in particular the significant increase of ready-for-issue parts Ms FOXX Thank you This question is also for both Lieutenant General Fick and Mr Ulmer What challenges are the F–35 program experiencing on electronic equipment logs and what is being done to identify and understand the root causes of sustainment issues with the F–35 program Mr FICK I will speak to them in general terms ma’am I think there is basically three problems One would be does it exist and Mr Ulmer addressed that in his comment relative to the initial existence of an EEL on delivery The second would be both of those really have more to do in my mind with ALIS and with the IT systems and how the EELs are passed around than they do with the actual instantiation of the EEL itself and that is they may be corrupted or they may be removed or stripped inadvertently as the electronic footprint of that part works its way through the system from Lockheed to a supply point in a country and then eventually to a squadron 24 Ms FOXX Mr Ulmer if you think that Mr Fick’s—General Fick’s answer is sufficient then if you would just say so My time is running out and I have one more question Mr ULMER Congresswoman Foxx I concur with the PEO Ms FOXX Thank you Mr Ulmer what actions has Lockheed Martin taken to address the nonready-for-issue parts and ensure accuracy of electronic equipment logs more than what you have already stated—if there is something else you need to state And then Lieutenant General Fick have you seen improvements in issue—ready-for-issue parts If your question is yes or no then that would be easy General Fick Mr FICK We have seen an improvement associated with RFI parts that require an EEL Now remember EELs are only required in about a thousand out of the overall 50 000-part count on an aircraft So it is a very small number of parts that actually require EELs And to that point and to my earlier point relative to whether an EEL is truly required we are actively looking to reduce the number of parts that have EELs Ms FOXX Right Mr FICK So we reduce this problem Ms FOXX Mr Ulmer Mr Ulmer Mr ULMER Congresswoman Foxx we have invested $30 million relative to improving the ready-for-issue parts That improvement as we have described the EEL and the engineering content associated with that the complexity of that content we have done a very formal systems engineering approach When I say we I am talking the enterprise—JPO Lockheed Martin—with our war fighter We have conducted events where we have gone out to the war fighter We have heard the concerns We have witnessed the concerns We document the concerns and then we come back and go through a very formal systems engineering process to determine root cause and corrective action and those actions then play forward relative to the improvements we are seeing We still have two more formal initiatives this year as we work to raise the bar relative to issue effectiveness Ms FOXX Thank you both Madam Chair—Mr Chair I yield back Mr LYNCH The gentlelady yields I am going to yield myself five minutes Ms Hull at the beginning of your testimony you mentioned the term of the current contract with the—— Mr COMER Mr Chairman point of order It is—now it is the Republicans’ turn Mr LYNCH Ms Foxx just spoke Mr COMER Oh Ms Foxx Mr LYNCH She is still a Republican right Laughter Mr COMER Yes Mr LYNCH OK All right Mr COMER I thought you said you were yielding yourself 25 Mr LYNCH That is OK Reclaiming my time We are going to start the clock again for five minutes But I respect the gentleman’s right Ms Hull at the beginning of your testimony you mentioned the term or the length of the Lockheed Martin contract on the F–35 How long was that Ms HULL The contracts they are annual contracts Some have gone beyond a year As part of our review we looked at on the EEL issue the time period of 2015 until about April 2019—or sorry the 2018 contract goes until April 2019 but our EEL review covered a portion of 2015 through 2018 Mr LYNCH OK Is there—are there problems—and I know Ms Lord and Lieutenant General Fick you were both on board back in 2019 when we went with this larger contract I think it is—is this Lot 12 we are doing now or Lot—— Mr FICK Yes sir We are delivering Lot 12 now Mr LYNCH OK and that is 149 aircraft Is that correct roughly Mr FICK It is 147 I believe Mr LYNCH OK All right All right I trust you All right Close enough Is there a problem with the way we have framed this contract that makes Lockheed Martin less responsive to issues like this do you believe Mr FICK I don’t believe so I know that on the sustainment contracts starting with—— Mr LYNCH OK Let me—let me—and I don’t have a whole lot of time Mr FICK Yes sir Mr LYNCH But are they—is Lockheed Martin still getting incentives despite the fact that they are delivering noncompliant parts Mr FICK So we assess Lockheed Martin’s performance against the specific incentive fee criteria that we build into both the production contract the—— Mr LYNCH But isn’t that on flight time So if you fix—if you fix a noncompliant part and get that up in the air does Lockheed get the bonus Get the—— Mr FICK Yes Mr LYNCH Yes they get the incentive So that is what I am getting at Is there a way we could—and Mr Ulmer I would like you to consider this seriously That part of the contract the fact that you are getting an incentive bonus because DOD personnel have spent approximately $300 million in a work around on your noncompliant parts to allow you to receive a bonus for work that you know you didn’t do correctly So you need to—you need to go back and figure that out You can work with the Defense Contracting Management Agency That portion of the benefits you are receiving is not fair and just under the contract and I would highly recommend if you want to avoid reputational damage you need to rethink the terms of that contract and come back to the table and work something out that is fair for the American taxpayer Lockheed Martin has had a long strong history in the defense sector and we respect that But I don’t believe based on the facts 26 here that the American people are being treated fairly and that will be to the detriment—if that continues that will be to the detriment of Lockheed Martin So we got to look at that really hard I do believe that the F– 35 is probably one of the finest aircraft out there when it flies When it flies And that is the problem that we have got this whole work around in terms of you know this whole program So you are on notice Mr Ulmer and I would like to ask you some questions Do you believe—Mr Ulmer do you believe that we are—we are in the process of fixing this problem I have a report right now that tells me that the inspector general of DOD in addition to the Government Accountability Office and the bipartisan Committee of Staff Delegation Republican to Democrat—we agree on this This is not a partisan issue That because of pervasive problems with the F–35 spare parts missing electronic logs military personnel must be reassigned to troubleshoot problems Pilots must fly F–35s on a near daily basis with defective spare parts and maintenance personnel are at risk of allowing aircraft to fly with potentially dangerous issues So we got a problem according to DOD our unified staff and the Government Accountability Office So what are you going to do about it and how quickly do we get this thing fixed Mr Ulmer Mr ULMER Congressman I take—Congressman I take this extremely serious We are very focused on manufacturing and sustaining the F–35 and safety is at the forefront as well as airworthiness of the vehicle And for the record I would like to state to the chairwoman to my knowledge all documents have been provided So I would like to connect with your staff to make sure that that occurs to your satisfaction But my belief is we are doing that Congressman you asked if we are taking—— Mr LYNCH We will followup We will followup on that Mr ULMER Thank you sir Sir you asked me what have we done So I indicated we have spent $30 million to resolve this issue to date We continue to meet directly We have had six direct meetings with the DCMA since April 2 We were meeting with the DCMA prior to April 2 to work on this issue together We continue to have regular engagements with the Joint Program Office We continue to make adjustments to the ALIS system to improve the system not just from an EELs—electronic equipment logbook— point of view but from an ALIS all up point of view We are participating with the JPO relative to taking the lessons learned from the ALIS experience and informing the ODIN experience as we go forward So we are taking several different approaches relative to problem resolution We have seen marked improvement We have more to go We understand we have more to go and we will continue to support and you have our resolve to fix this problem 27 Mr LYNCH OK As you know this is the largest single contract we have got This is an important part of U S readiness and you know we have got unanimity here Democrat and Republican that we got to get this right The chair now recognizes the gentleman from Texas Mr Cloud for five minutes Mr CLOUD Thank you Chairman This is quite the ordeal It is amazing to think that 20 years into this program this is still where we are at You know no doubt the F–35 is an amazing piece of technology We are glad to have it in our force and we certainly want to make sure that the United States stays preeminent when it comes to race of technology and dominance But when it comes to the battle space the battle space is not just collateral and especially today as we look to the threats from China it is also economic It is cyber It is multifaceted And when nations have risen and fallen through history it wasn’t just because they didn’t have the latest technology on the battlefield It is because they collapsed from internally through economic restraint So it is extremely important that we get this right but it is extremely important that we get it efficient as well We have spent $1 trillion in the last five years on this and at least the estimates that we have here and it is—you know that could have gone to a lot of different places You know we have China invading our cyber and doing other different things and so it is just important that we get this right So where we are at now it seems we have a shipping system that doesn’t work I have talked to people in the boots on the ground and they will say that when the parts come in they are not even labeled correctly You know sometimes up to 30 percent half of them aren’t even labeled correctly Now I know that the system is complicated It is not like Amazon where you are just delivering the part you are trying to track it and all that other kind of stuff But it seems like not being able to get the part to them correctly is a problem As has been mentioned we have $300 million in excess labor costs just since 2015 that is going in this When Lockheed—it was just mentioned by the chairman when they—they are incentivized for having planes flying It is a great idea But when they don’t fly and then we have to fix them they still get paid for incentives and so it is hard to see how this keeps going on You know it has been said that insanity is doing the same thing over and over and expecting different results Here it just seems like another day in Washington DC So I appreciate the work that has been done to move this forward but it seems like we still have a whole lot of work to do Seventy percent I don’t think is a benchmark for excellence in anyone’s I know that is not—you are here and I know many of you came into this program You haven’t been in your positions for 20 years certainly Recently we paid $30 million to store and maintain six 35s originally destined for Turkey which makes we wonder what is the general cost of not flying an F–35 28 So when an F–35 isn’t ready to fly what cost is associated with this How much does it cost Because $30 million to not fly six planes seems like a lot of money Mr FICK So the—sir respectfully the $30 million cost for those six planes accounted for the induction of those aircraft into longterm storage and the work required to preserve them in that condition So that is not work that we normally would do to an aircraft on a flight line because ultimately our goal—our objective there is to continue to fly them I can certainly get you a breakdown of the cost associated with that entry into long-term storage and then what the annual costs are associated with the storage of those Turkish jets Mr CLOUD Mm-hmm Now I have been surprised to find that we have these contracts being renewed every year and then still the contracts don’t seem to be getting any better Are there performance metrics that are required penalties for not meeting them I mean these are things that seem basic in the corporate world that we seem to have a hard time doing when it comes to military contracting Ms LORD Congressman I would like to address that I was in industry for 33 years before taking this job about three years ago and my primary energy has been put into rewriting the acquisition system for the Department of Defense So we used to have one large one-size-fits-all system and we have broken that system down into six individual pathways So for instance we are talking about ODIN which is the upgrade from ALIS We are using modern software techniques on that So we are tailoring To your specific questions about sustainment what we are doing is refining the incentive fee structure going back and getting the voice of the customer understanding what it takes to get aircraft operational and making sure that as we write incentive fees there is a very clear linkage there Additionally we have said multiple times this morning that one of the root causes of the EELs problems and the RFI problems are ALIS the software system we use to collect data and maintain the information That is an out of date system and what we are doing in developing ODIN its replacement is going directly to the maintainers and getting the voice of the customer to make sure we drive software requirements from the front line the user what they need versus someone sitting in a lab deciding that for them Mr CLOUD Thank you My time has expired I will just say it is extremely important that we owe it to the American taxpayer It is a patriotic duty to do this right efficiently and to require Lockheed to pay penalties when they don’t get it right I yield back Mr LYNCH The gentleman yields back The chair recognizes Ranking Member Mr Comer Mr COMER Mr Chairman I ask for unanimous consent to clarify Mr Ulmer’s response to my questions First your second quarter profit is $1 6 billion Second your Fiscal Year 1919 profit was $6 2 billion So I renew my question 29 which was why is Lockheed failing to fulfill the contract and deliver EELs intact and on time and I ask for these documents to be in the record Mr LYNCH And you repeat your question right Mr COMER Yes Mr LYNCH OK So Mr Ulmer I hope you heard that Without objection the documents are accepted The information follows SA2 Mr ULMER Understood Mr LYNCH The chair now recognizes the gentleman from Virginia Mr Connolly for five minutes Mr CONNOLLY Thank you Mr Chairman and thank you to our panel today I am going to try to ask a few rapid-fire questions Ms Maurer what is unique about the F–35 program Ms MAURER There is a long list of things that make it a unique program but among many different things it is—one it is an international program It is not just a U S program So international partners including some of our closest allies like the British and the Dutch and the Australians have a voice in decisions including what is going to happen—— Mr CONNOLLY Let me interrupt But isn’t there something else The J–35 is—I mean the F–35 is replacing all our Strike Fighters right Ms MAURER Yes It is designed to replace a number of legacy fighters across three different services The Marine Corps the Navy and the Air Force Mr CONNOLLY Have we ever done that before Ms MAURER We have never—we have never had a single system that was designed to replace three different—— Mr CONNOLLY Correct So that is what is unique The stakes here are enormous They affect all of our services We have never done this before and it is a critical piece of U S defense and offensive capability as well GAO Ms Maurer going back to 2014 provided a number of recommendations to DOD the project manager which we haven’t focused on a lot yet including trying to create a performance measurement for ALIS back in September 2014 Were those recommendations adopted by DOD Ms MAURER That specific recommendation has not been adopted Repeated again in our March 2020 report and sent it over to Congress and suggested that Congress take action to ensure that that happens Mr CONNOLLY So why did it happen I mean given all the problems today you would think with the stakes this high on this unique program DOD would run not walk to make corrections to a system that was defective and you documented it back in 2014 six years ago Ms MAURER I completely agree we definitely want to see DOD implement all of our recommendations as quickly as possible—— Mr CONNOLLY But my question is—— Ms MAURER continuing And it is a concern that they haven’t done it yet Mr CONNOLLY Why not 30 Ms MAURER Well over the years we have heard from them that they have a number of other issues to address for the F–35 program What we are talking about today is one of many sustainment challenges that they are facing It is also a very difficult thing for them to do But we think it is vital because—what happens they will never know what is good enough when it is going to be done Mr CONNOLLY Yes but now we are in a place where sustainment is the major problem—— Ms MAURER Yes Mr CONNOLLY continuing In the F–35 program because they ignored it your recommendations and those of the DOD IG Ms Hull were your recommendations over the years implemented by the Project Management Office Ms HULL The Joint Program Office agreed to our recommendations in our June 2019 report However we are waiting for supporting documentation to validate that they have implemented the recommendations Mr CONNOLLY But in your testimony you gave us a long laundry list of issues that were seemingly cavalierly ignored by the Joint Program Office over the years Is that not correct Ms HULL Yes I touched on the EEL issues sir and then also the incentive fees Mr CONNOLLY Right And even when they were getting feedback from the field from pilots from command centers and the like they still didn’t implement changes that would have gone some way to ameliorating the problem Is that correct Ms HULL The Joint Program Office in October 2018 issued guidance allowing the parts to go on the aircraft without the electronic equipment logbooks and additional labor—DOD labor was used with work arounds to make sure the parts could get on the aircraft for it to fly Mr CONNOLLY The ALIS program we are talking about that was created by Lockheed just for this program Is that correct Ms HULL While ALIS wasn’t a direct focus of our report it is my understanding that that is true Mr CONNOLLY Is that your understanding Ms Maurer Ms MAURER Yes ALIS was created specifically for the F–35 program Mr CONNOLLY And it was approved by the Joint Project Office Is that correct Ms MAURER That is correct It was approved nearly 20 years ago Mr CONNOLLY Twenty years ago So has it been updated Ms MAURER It has been updated several times It did not go fully—ALIS did not go fully operational until two years ago until 2018 They had a number of problems on the way in getting it rolled out There have been a number of updates But the central problem is it has never met user needs You know we have heard some comments today about how it has gotten better and certainly it is downloading faster and they can—users can click things faster 31 But the bottom line is there are no performance measures in place to assess whether users are getting what they need So until that is in place we are not going to know when it is good enough Mr CONNOLLY And for the record you advised the Department of Defense six years ago that it needed such performance metrics Ms MAURER Yes we did Mr CONNOLLY And—— Ms MAURER We have recommended that to the department Mr CONNOLLY And they did not act on that recommendation Ms MAURER They have taken some actions but it has not been sufficient to close the recommendation Mr CONNOLLY My final question Mr Chairman Ms Maurer had they accepted that recommendation when you made it do you believe that some of the problems we are chronicling today in this hearing could have been avoided Ms MAURER Yes I think if they had fully implemented the recommendations in 2015 or 2016 they could have potentially mitigated a number of the problems we talked about today Mr CONNOLLY I would just say Mr Chairman we are focused on correctly you know the shortcomings of the contractor But we also as the Oversight Committee need to focus on the shortcomings of the management of contracting and the contractor And I think this hearing and this testimony we have just heard from Ms Hull and Ms Maurer certainly should give us pause about how competent the oversight and management of the single most important new fighter aircraft in the history of the United States has been I yield back Mr LYNCH Thank you The gentleman yields back The chair now recognizes the gentleman from Ohio Mr Gibbs for five minutes Mr GIBBS Thank you Mr Chairman Mr Ulmer I hope you are still there Do legacy aircraft have EELs Mr ULMER I am sorry Congressman Repeat the question Mr GIBBS Do legacy aircraft have EELs Mr ULMER No sir No Congressman Mr GIBBS So I guess my thought is because the F–35 is such a sophisticated complicated highly technological aircraft is that the reason why you have the program for EELs How do you—or how do you do it with legacy aircraft for parts Mr ULMER Yes sir The maintenance system for legacy airplanes are more segregated not integrated systems that support specific platforms So this is an attempt at the ALIS and the electronic equipment logbook approach relative to the technology really is about an integrated sustainment—IT sustainment system for a platform Mr GIBBS OK General Fick do the EELs pose any safety concern or risk Is that—— Mr FICK Sir my understanding from talking to the maintenance group commanders in the field that authorize their aircraft to fly in the event that a part is not RFI There is not a safety concern associated with flying aircraft with those parts They will 32 not—they will not allow a part to be installed in the aircraft if that EEL—— Mr GIBBS OK OK I got that Mr FICK Yes sir Mr GIBBS So the issue is not getting those parts readily available and in place so the aircraft can fly That is what the issue is Mr FICK Yes Mr GIBBS So I guess the next thought would be how much delay or you know F–35s have been grounded You know where are we on that because of that—because of the—— Mr FICK So we have—we have mixed data from our—from those commanders in the field relative to the times which they have allowed those aircraft to fly without EELs We have really good error information from one of the installations in particular that we are using to kind of sort through and figure out what I will call an adjudication of what the real impact would be from a cost and incentive perspective We have other information from other wings that is less clear and then still other wings—I will say the Navy and the Marine Corps in particular are not allowing their aircraft to fly period with non-RFI parts So there is not an issue with them Mr GIBBS OK I just heard I guess the person in their office talk about the ALIS program just rolled out two years ago But then I heard earlier in testimony that it was a program that started way before that Is that—— Mr FICK So ALIS has been around for a long long time I don’t know—I think 2000 or—— Mr GIBBS Then I did hear it doesn’t have the technology of an iPhone you know the newer softwares and stuff Mr FICK Correct Mr GIBBS So whose fault is that I mean is that just government bureaucracy or is that—I mean where is that—where had that happened at The program has been around for a long time but it just got rolled out two years ago with technology that is 10 years outdated Mr FICK So the first—I can get you the exact date sir but the first ALIS versions I believe rolled out in the 2006–2007 timeframe and have been updated on a 12-to 18-month kind of a cadence since then We had a substantial update to the ALIS system as we entered IOT E and we have continued to update from—when I entered the program a couple years back it was ALIS 2 0 We moved to 2 4 We moved to 3 0 or 3 1 The version in the field today that 87 percent of the units have is ALIS 3 5 2 which is the most recent iteration Greg mentioned that we are going to quarterly releases Mr GIBBS OK I am out of time I want to ask another question Whoever wants to answer I guess This F–35 the whole system as we know is highly sophisticated very complicated high technology—technological Is it fair for Lockheed Martin on the contract because you are in a whole new you know area of sophistication 33 You know was it right to have a contract they couldn’t do because there were so many unknowns you know bringing the system online I guess Ms Lord that might be a question to you Ms LORD We have different contract types that correlate with the risk involved When there is a high level of development and unknown we do cost plus type contracts where we pay for what is needed and there is a different level of fee than when it is more known When you get into full rate production for instance those are fixed price contracts with incentive fees for meeting certain criteria So where we are in the Department of Defense is really working to make sure all of our contracting officers have all the different techniques and procedures to deal with that Mr GIBBS So—OK so since the F–35 has been developing for quite a while now and they are starting to do a lot more planes—— Ms LORD Correct Mr GIBBS continuing So are we moving in that second phase—— Ms LORD For production Mr GIBBS For production Ms LORD And then what we are in the midst of doing is developing sustainment contracts that are better tailored to the—— Mr GIBBS And are you seeing—are you seeing better results now since it has gone along with working with the manufacturer Lockheed Martin Ms LORD Well we started out when I got involved with the program three years ago Absolutely from a production point of view we got much much more fidelity around what was happening on the manufacturing floor I will say that the Department of Defense has an enormous amount of data now relative to that versus where we were three weeks ago I would say we are just turning our real focus on sustainment now and just beginning to build that robust data set So we have a number of teams working on the ALIS to ODIN transition as well as the annual sustainment Mr GIBBS So are you confident and optimistic that cost overruns and all that things are going to get better improving Ms LORD I am confident that we are making progress But I think we still have a way to go in sustainment Mr GIBBS OK Thank you I am out of time I have to yield back Mr LYNCH The gentleman yields back The chair now recognizes the gentleman from California Mr Rouda for five minutes Mr ROUDA Thank you Mr —thank you Mr Chair and thank you to all of our participants We appreciate your commitment to the security of our country And I have got a few questions I would like to ask One of my main concerns with the F–35 program that if left unaddressed problems with defective F–35 spare parts will only get worse as the fleet grows 34 If my numbers are correct as of February 2020 the global F–35 fleet was about 500 aircraft But the fleet is expected to double by 2023 The U S alone plans to purchase about 2 500 F–35s from Lockheed Martin over the life of the program as was pointed out earlier to really replace our entire fleet That growth may be great for Lockheed Martin’s bottom line but if problems with the F–35 software such as ALIS and electronic logs on spare parts are not thoroughly addressed and fixed of course the headaches for U S pilots and maintenance crews will only grow So Ms Hull is it a fair assumption that the problems you identified in your June 2019 report will only get worse as the F–35 fleet expands Ms HULL It is true that unless the ready-for-issue spare part and EEL issue is addressed it will continue to perpetuate and we have seen from the Joint Program Office you know guidance to fly aircraft with EELs With the fleet continuing to grow the problems will become more pervasive unless addressed Mr ROUDA Ms Maurer would you agree with that assessment Ms MAURER I definitely agree that the F–35 program faces a number of challenges on the sustainment front Those challenges are only exacerbated by the continued growth of the size of the overall fleet both here in the United States and with our allies So they have a lot of challenges ahead We are encouraged that they have agreed with our recommendations on sustainment for large starting emission levels Mr ROUDA Fair enough Thank you Air Force personnel also told committee staff that if not addressed current issues with electronic logs and spare parts will likely compound as the F–35 fleet expands and additional aircraft deploy on combat missions For example when committee staff visited Hill Air Force Base in Utah they were told that an F–35 squadron had received an immense amount of support when the squadron deployed in the Middle East in April 2019 This in fact was the F–35’s first time flying combat missions and everyone wanted to see the mission succeed without a hitch That deployment had only a handful of F–35s compared to the eventual size of the anticipated fleet and many staff were told that it would be difficult to maintain that level of support as the F–35 fleet grew and the demand for pilots maintainers and support personnel grew along with it Mr Ulmer the most recent combat deployment of F–35s from Hill Air Force Base left at the beginning of June If their deployment follows past ones they should be home I think in about six months Mr Ulmer can you commit today that the problems with electronic logs on spare parts will be fixed by the time that squadron comes home Mr ULMER Congressman it will take us more than that time to resolve these issues But we are focused to resolve these issues Mr ROUDA I appreciate your candor 35 Lieutenant General Fick if Mr Ulmer and Lockheed Martin can’t meet that commitment how will the Joint Program Office and Defense Department ensure our pilots are fully supported under future deployments Mr FICK So Mr Congressman we have put language in place in our 1919 and 1920—our Fiscal Year 1919 and 1920 spares contract that requires EELs and—I am sorry that requires parts to be RFI upon delivery So we have set the stake in the sand relative to the delivery of those parts We are committed to working with the services with Lockheed Martin and with other industry best partners to instantiate ODIN as the solution to the problems that we continue to have in ALIS and I firmly believe that the instantiation of ODIN is the—is the intervention required to most completely address the issue with non-RFI parts Mr ROUDA Thank you We all know these problems have to be fixed and they need to be fixed before the F–35 fleet is so large that problems with missing electronic logs defective spare parts and continuing software glitches are not so overwhelming it cannot be fixed With that I yield back Thank you Mr Chair Chairwoman MALONEY Presiding I now recognize Mr Higgins Mr Higgins Mr HIGGINS Thank you Madam Chair Ranking Member—— Thank you Madam Chair General Fick Americans want air dominance worldwide from our military forces and the parents and families of our pilots want those pilots to have total confidence in their aircraft We are focused primarily today on talking about issues we have with the electronic equipment logbook the EEL and the classification of missing EEL data in replacement parts for the F–35 platform would be considered non-RFI or not ready for issue Absent those problems as we work through those issues General Fick do you consider the F–35 to be the platform that delivers air dominance for the United States of America worldwide Mr FICK I absolutely do Mr HIGGINS Thank you because that is what we are looking for and as we address the problems we are discussing today which I have complete confidence that Lockheed Martin is dedicated to resolve So I turn my question to Mr Ulmer Mr Ulmer are sustainment costs for the F–35 steadily coming down Mr ULMER Congressman for every dollar of sustainment approximately $0 39 is—Lockheed Martin contributes to About 13 percent—$0 13—has to do with the propulsion system and the remainder has to do with operational sustainment costs for the government Lockheed Martin—— Mr HIGGINS Yes sir Mr Ulmer in the interest of time let me just—America needs to know You know we recognize that there are problems with the full deployment manufacture and perfection of this—of this worldclass aircraft that Lockheed Martin is delivering for our Nation and 36 for freedom’s purpose across the world We need to know are sustainment costs steadily coming down yes or no Mr ULMER Yes they are The Lockheed Martin elements of sustainment cost have come down 44 percent from a cost per flying hour in the last five years There are other contributors on the—on the government side Mr HIGGINS Thank you sir And is the EEL—the EEL non-RFI issues is that being aggressively addressed by Lockheed Martin Mr ULMER Yes sir We are aggressively engaged to resolve that issue with our—with our customer Mr HIGGINS All right And a part or component that is missing EEL data and considered non-RFI—my colleagues have referred to it as defective—does the part work Will the plane fly if that technician manually updates that data Mr ULMER Congressman there is no issue with the part The part is not defective The issue is with the electronic file associated with the part Mr HIGGINS Understood We are just—yes sir and we are clarifying for America It is important that we know Regarding the progress that Lockheed Martin has made can you clarify According to my research production since 2017 has shown the ability to consistently deliver zero-defect aircraft since 2017 Mr ULMER Yes sir We have a very strong track record actually multi years relative to zero-defect deliveries We are less than one defect per delivery for the last several years Mr HIGGINS And thank you for that response sir And General Fick in his—in his opening statement and I quote He said ‘‘The bottom line is we need parts delivered on time with all required electronic identification markings and records right upon arrival ’’ Mr Ulmer when can we get there Are you optimistic that we are moving in that direction and getting there quickly Mr ULMER Sir we are optimistic we can get above 90 percent by the end of this year As General Fick alluded to we are going to be challenged to achieve 99 percent ready for issue and we are taking the actions necessary to support that metric and requirement by our customer Mr HIGGINS Thank you for your response Madam Chair let me say that my father was a Navy pilot in World War II I am a veteran and yesterday I spoke with a dear friend of mine whose son is a pilot for the Navy and he shared the concern of parents and families across the country that their concern is that their—that our pilots are flying planes that they can depend upon I thank you for holding this meeting today I thank the ranking member and I thank the witnesses for testifying today We are working through these issues and I have total faith in the F–35 jet and Lockheed Martin And I yield Chairwoman MALONEY I thank the gentleman for his questions and his statement and I now yield five minutes to Congresswoman Speier—Jackie Speier Ms SPEIER Thank you Madam Chair Thank you all for participating today 37 Let me ask you a question Lieutenant General there is no question that the ALIS system has underperformed correct Mr FICK Yes ma’am Ms SPEIER Ms Lord Ms LORD Absolutely Ms SPEIER Mr Ulmer is it true that it has underperformed Mr ULMER Ma’am it is not meeting our customer war fighter requirement Ms SPEIER It has underperformed It has been anticipated that there is $183 million that Lockheed Martin owes the taxpayers of this country for this underperformance How much time has been spent negotiating with Lockheed Martin and how long and how much time Lieutenant General Fick Mr FICK So my recollection ma’am is that the negotiations specifically associated with the consideration on EELs began in earnest in April of this year and it continues marching forward Ms SPEIER How many hours have been put into it Mr FICK I don’t have that number off the top of my head Ms SPEIER Ms Lord Ms LORD I would estimate tens of hours Ms SPEIER Tens of hours Ms LORD By the government Ms SPEIER By the government Ms LORD It is DCMA that is doing that for us Mr FICK Yes Ms SPEIER Thank you Mr Ulmer you continue to say you are negotiating on something that is clearly established that—you have underperformed It has been estimated that it is $183 million The U S Government the taxpayers of this country are paying 75 percent of your budget and your profits I want to know when you are going to pay the $183 million and stop nickel and diming the U S Government and the taxpayers Mr ULMER Congresswoman as we have identified in this testimony the number has changed from $303 million to $183 million which is a new number to me today So I think we have due diligence to do amongst ourselves relative to the contributors that influence the issues associated with electronic EELs We know that it is not all Lockheed Martin Ms SPEIER All right Sir I have very little time How much time are you going to take before we are going to have an answer as to whether or not you are going to repay the government Mr ULMER Congresswoman we continue to negotiate in good faith across the table ongoing Ms SPEIER All right Let me—let me move on Are we absolutely committed to doing ODIN Ms LORD ODIN Ms SPEIER Yes Ms LORD Absolutely We have the dates rolling out right now We will have—— Ms SPEIER All right Let me ask you this question As I calculated it if we continue to just do work arounds over the course 38 of the next 66 years it will cost us $3 6 billion to just do work arounds with the existing ALIS system Are we going to end up paying more for ODIN than $3 6 billion Ms LORD We are developing ODIN so that we don’t have to do work arounds where you can—— Ms SPEIER I understand that But—— Ms LORD So we are doing it for the same amount that we had budgeted just for baseline ALIS Ms SPEIER How much is it going to cost Mr FICK So ma’am there is $547 million across 1921 through 1925 in the budget associated with ODIN I am sorry—associated with ODIN We believe there is also on the order of about $70 million a year between now and 2022 that we will continue to put into ALIS Ms SPEIER OK Who is going to own the intellectual property of—— Mr FICK The U S Government Ms SPEIER No question Mr FICK No question Ms SPEIER And that will then allow us to have others fix it so we are not negotiating with the prime contractor over easily $183 million when we pay a half a billion dollars for every plane we purchase from them I would like to say to Mr Ulmer you are not a good actor in this This is just one component We already know that there are nine flaws on the F–35 that are identified as critical as priority ones that to my knowledge have still not been addressed So we are looking at one component of the F–35 We have had lots of problems of the F–35 We have had problems with the seats We have had problems with the oxygen system And for you not to come to the table and negotiate this $183 million really aggravates me and should aggravate every taxpayer in this country Owning this system outright should have been the case initially and we wouldn’t be in this situation and for all those that think that somehow the F–35 is the safest plane around I have got news for you We have had problems with this plane and we continue to have problems with this plane and we should be very concerned about this EEL system not being accurate because it draws that whole issue into question With that I yield back Chairwoman MALONEY I thank the gentlelady for her passion and knowledge on this issue And I now would like to call on Congressman Hice Congressman Hice Mr HICE Thank you Madam Chair I think it is important that we state that the end result is we want to see this program succeed and the purpose of oversight is to ultimately get to that end And there are some glitches in the road here so to speak and we need to address those issues But we want to thank you for your work and acknowledge the purpose of oversight is to get some of these issues resolved So I just want that on record 39 Let me ask you Ms Lord within that context a lot of the argument is that we need to see Lockheed write a check and go from that perspective Unfortunately if that were to happen the check just ends up going to Treasury and it does not help the program It doesn’t help anything Are there other forms of compensation that might be more beneficial Ms LORD Absolutely We are now negotiating the next annual sustainment contract and the two-year options after that We could very well look for consideration in that contracting Mr HICE OK So there are other options here and I think those other options need to be on the table They need to be considered Also I do have another concern that I want to bring up for IG Hull and let me just say as I understand this we have got about 353 of these jets that have been built out of about 500 since 2015 and yet ballpark of a trillion dollars has been spent on operation and sustainment Now I just did a little math That comes to $566 million per plane per year That is a staggering amount to me If we are talking a trillion dollars in five years for these planes again that is just my math but let us—can I get some clarification on this Mr FICK Sir we are going to have to go back and help you with the math I don’t understand where the trillion dollars over the last five-year quote came from I don’t understand that number The most recent life cycle cost estimate for the entirety of the program over 60 years is $1 6 trillion So I find it hard to believe that we spent a trillion dollars in the last five years Mr HICE Well that figure is out In fact the Selected Acquisition Report actually didn’t—I don’t recall seeing that number but they did say that the amount of spending now going per year per plane is going to strain future service operation and sustainment I mean so whatever the actual cost is this is an enormously expensive program here So I want to know kind of how does the annual O S cost compare to other fighter jet programs in the past Mr FICK So I can’t speak specifically to the O S cost of other fighter jet programs but I know that we are aggressively targeting getting our O S cost to $25 000 per flight hour by Fiscal Year 1925 That is our—that is a—that is a stretch goal that I am working hard—— Mr HICE So are we—are we trending in that direction Are we trending to cost savings Mr FICK We are We are making—we are making deliberate progress To get to $25 000 by 1925 will be a huge—will require significant—— Mr HICE If you could provide some comparison of past programs to where we are now as well as the goal Goals are great—— Mr FICK Yes Mr HICE continuing But I want to know the trends to get to those goals Ms LORD Excuse me That should approach the fourth-generation sustainment cost Mr FICK Yes Ms LORD That was the way we derived the target of $25 000 per flight hour 40 Mr HICE OK I would like—if you could provide that to me I would appreciate that Ms Lord let me go with you and I appreciate the conversations we have had in the past We have got problems with the ALIS system the transfer to the ODIN system Can you kind of walk us through some of the expectations of ODIN and how this is going to play out Ms LORD Absolutely First of all ODIN is going to be deployed on much more modern hardware So for instance the ALIS system today for one system you have about 891 pounds of hardware For ODIN you are going to only have about 50 pounds of hardware So the footprint is very different and in fact as we move toward the first deployment of ODIN in September 2021 an interim step is this fall to actually move ALIS onto the new hardware as the first step We will own all of the data rights in the government for ODIN versus ALIS It is going to be deployed in the cloud It is being developed using requirements in large part from the actual maintainers So for instance I was on the phone yesterday with the maintenance unit leads at five different locations making sure that their voice had been heard by the actual team doing the coding for ODIN We also as opposed to using the old waterfall software development techniques we are using agile and DevSecOps to do that So we are in essence coding every night—I am sorry coding every day and testing every night We have deliverables from the team the government and industry team every single day so we can measure those deliverables and we can measure them against the baseline requirements So a very very different system than ALIS’s Mr HICE OK Thank you And Madame Chair I will yield back But I do want to just say to Mr Fick I do have some more questions particularly that I would like to get some answers for specific to modified training that we are seeing at Hill and Luke Air Force Bases and why that is happening So I will get with you later on that But thank you Madam Chair I will yield back Mr FICK Absolutely Chairwoman MALONEY I thank the gentleman and now recognize Representative Wasserman Schultz Ms WASSERMAN SCHULTZ Thank you Madam Chair Madam Chair I want to ask my questions through a fiscal lens as a senior member of the Appropriations Committee because I am deeply concerned about what I am hearing and seeing The waste and mismanagement of Federal dollars is really—seems to be paramount here There have to be oversight mechanisms in place to keep costs in check as DOD and Lockheed Martin are moving forward on replacing ALIS which is as we know the main F–35 software system So Ms Lord in 2016 the Defense Department told GAO that the ALIS software system would cost an estimated $17 billion and 41 GAO found that estimate quote ‘‘not fully credible ’’ since the department had not performed a full analysis of these costs What is DOD’s current estimate of how much money has been spent on ALIS Ms LORD We are spending on ODIN the same amount that we are spending on ALIS and if you give me a moment here I have the amount over the next five years Mr FICK It is $547 million for the next five years But the tenet of—— Ms WASSERMAN SCHULTZ So what has already been spent on ALIS What has already been spent on ALIS I am not asking you for a cost projection Ms LORD Oh sunk cost Ms WASSERMAN SCHULTZ I am asking you what has already been spent Ms LORD We don’t have that right here but we can certainly get that to you very shortly Ms WASSERMAN SCHULTZ OK Suffice it to say is it more than $17 billion Ms LORD I don’t believe so That seems like a very large number But we can get that for you shortly Ms WASSERMAN SCHULTZ Respectfully that is the amount that the Defense Department told GAO that the ALIS software system would cost and that was deemed not fully credible because the department had not performed the full analysis So my suspicion is that it has cost more than that already and now you are projecting another $547 billion Earlier this month on July 10 the department announced it would pay Lockheed Martin $87 5 million to begin the development of ODIN and start the transition from ALIS What will—I want to ask you a series of questions at once and then if you would answer those What will that initial work by Lockheed Martin include And the $87 5 million contract to transition from ALIS is really only the beginning You expect I would imagine ODIN to cost a lot more than that You just said it would be $547 million And since this program has had cost—significant cost overruns in the past how do you plan to ensure that the cost of ODIN is not excessive Ms LORD The way ODIN is being contracted for is very different than what we have done in the past We are actually defining the architecture and releasing app by app We just released the first contract to Lockheed Martin in July and the work is actually being done in a government-owned cloud environment and we have total visibility to what is delivered every day Ms WASSERMAN SCHULTZ OK Just interrupting—OK If I can ask you to pause for a moment My initial question was the $87 5 million contract to transition from ALIS is just the beginning You expect it to cost more than that don’t you And what will the initial work by Lockheed Martin include Ms LORD Well we have about $550 million over the next five years and the initial work is a series of codings done by app But I am going to pass to Lieutenant General Fick for more specifics 42 Mr FICK Ma’am that is accurate Lockheed Martin will be coding three specific applications for ODIN and this is the early work associated with those apps Ms WASSERMAN SCHULTZ General do you think the DOD should move forward with any of the design plan without knowing how much the plan or any component of that plan will cost Mr FICK Ma’am my team continues to refine the cost estimate for ALIS and ODIN moving forward The $547 million was money that had been previously allocated to an ALIS rearchitecture effort We believe that we can fully instantiate ODIN over the course of the next five years within that budgetary cap But we know that over the course of the 50 years remaining in the program that to remain viable we will need to continue to update the software as issues are found as the program evolves and as maintenance practices change Ms WASSERMAN SCHULTZ Thank you Before my time expires—— So I do anticipate more funds will be required beyond the FYDP Ms WASSERMAN SCHULTZ GAO’s March 2020 report recommended that Ms Lord in consultation with you General develop a detailed strategy Ms Maurer can you comment on my question about the uncertainty that is looming on how much this is going to cost for the redesign of ALIS that includes the costs of redesigning the whole system Ms LORD Well we—— Ms MAURER Yes Ms LORD continuing Plan to have ODIN deployed fully by December—— Ms WASSERMAN SCHULTZ I am sorry—I am sorry The question is for Ms Maurer Ms MAURER Thank you Yes we share your concern about the ability to track the overall approach on the strategy for implementing ODIN as well as the costs associated with that ODIN is a relatively new initiative It is designed to replace something that has been around for almost 20 years and there are going to be significant challenges and significant costs associated with doing that and it is important that it be done right and be done in a cost effective way Ms WASSERMAN SCHULTZ Thank you Madam Chair I yield back the balance of my time Chairwoman MALONEY I thank the gentlelady for her questions And we now recognize Representative Norman Mr NORMAN Thank you Madam Chairman Inspector Hull in your testimony you stated the quote ‘‘While a missing EEL does not mean a part is defective it can create life and safety concerns for air crews ’’ Yet you also state that quote ‘‘The DOD’s use of local guidance and ad hoc manual processes allowed aircraft to fly and complete missions instead of the DOD grounding the aircraft ’’ This suggests to me that if anyone put lives at risk it was individuals at the DOD not Lockheed Martin Is this your opinion 43 Ms HULL The staff the maintainers and the commanders at the depot had a very difficult decision They either had to conduct a work around to get parts onto the aircraft so they could continue their training and operational missions or they had to quarantine a part and potentially impact that ability So we—although you said earlier that for quality and safety we were aware of a part that was a seat survival kit assembly that was—that is a critical safety item that was flown and tracked through manual processes such as a white board Mr NORMAN Thank you General Fick do EELs pose a safety concern or is it a risk in your opinion Mr FICK Sir my opinion—the answer is it depends There are some parts that are safety critical and are life limited and those parts have EELs And those EELs must be in place for that part to be installed on an aircraft So in those cases yes it is safety critical For other parts who also have EELs those parts are not safety critical and those parts are not life limited It is those parts we are actually looking at to try to find a way to remove the requirement for any EEL so that this discussion of EEL or no EEL comes off the table Does that make sense Mr NORMAN Yes Can you give me an example of a part that— to demonstrate what you are talking about Mr FICK I don’t have a specific part number or nomenclature for you But I know that as of right now we are looking at eliminating close to 600 of them across the airplane that have EELs But they are not safety critical nor are they life limited parts So a thousand Roughly 600 Mr NORMAN OK So there is a distinction Mr FICK Yes sir Mr NORMAN Ms Lord and I guess General Fick as well how quickly will we get the ODIN operational and what is the estimated cost to develop and deploy the ODIN Ms LORD So the initial delivery of the system is targeted for September 2021 and to develop it will be several hundred million dollars over the next couple years and then a couple hundred million dollars for the few years after that to continue that deployment Mr NORMAN OK General Mr FICK So we intend to declare what we call initial operational capability which is the capability at one squadron in September 2021 By December 2022 our intent is to have ODIN spread across the entire fleet with the exception of units that might not decide to transition because they are currently deployed or otherwise need to continue to use the legacy ALIS system We will get those as soon as operational constraints allow Mr NORMAN Thank you Mr Ulmer what has Lockheed Martin done to ensure that the F–35 sustainment meets the war fighter needs Mr ULMER Congressman there are several avenues relative to sustainment So we have been working on reliability maintainability improvements on the platform 44 We have been working to improve the prognostic system on the platform We have gone advance of contract requirements to procure materiel to ensure that we have the spare parts when the customer needs them There are just several different aspects We have been working to improve the ALIS system So there are many different levers across the enterprise that we apply to improve sustainment performance on F–35 Mr NORMAN Well thank you And I think like Congressman Hice mentioned that the—what we need to be doing is looking at the—to solve the issue I know the question about the money has come up to be paid back but also the question that in fact that that doesn’t solve any problems Lockheed Martin does a great job of producing airplanes and I think will continue to and we are trying to find any problems that exist and you all are trying to find a solution to them I am out of time I yield back Chairwoman MALONEY I thank the gentleman and now recognize Congressperson Steube He is online OK He was online Congressman are you with us No response Chairwoman MALONEY We are going to go to Congress Member Keller as we wait for Mr Steube OK Congress Member Keller Mr KELLER Thank you Madam Chair and I would like to thank the panelists for being here today or the witnesses A couple questions that I had but I want to sort of followup on some questions that my colleague from Georgia was asking regarding the cost per hour of—or flight hour is that you say by 2025 we want to get to $25 000 per flight hour Mr FICK Sir we consider that a stretch goal Yes sir Mr KELLER OK What is the current cost Mr FICK I believe current cost per flight hour is on the order of $35 000 per flight hour Mr KELLER OK So there is a schedule each year to get to that Mr FICK So I mentioned in my opening comments that we have—we have pivoted the program office into lines of effort associated with five different divisions to include the air vehicle the engines the maintenance systems the combat data systems and the training systems I have allocated cost savings targets to each one of those offices that they need to pursue to get to that overall cost per flying hour goal Mr KELLER And when did we start this goal or when was this goal established and we started to begin work on it Mr FICK So the $25 000 by 1925 goal first I think hit the Program Office about two years ago we started to talk about it and move the program in that direction Looking holistically across a number of initiatives from—principally from a sustainment perspective but also respecting the fact that development influences sustainment cost as well looking at those opportunities Mr KELLER So two years ago was it at $35 000 a flight hour or what was it when you started 45 Mr FICK No sir It was—it was higher I don’t know the number off the top of my head Mr KELLER So we don’t know what we gained or could we find out what we gained—— Mr FICK Absolutely Mr KELLER continuing In the first two years to make sure we are on track of hitting that goal Mr FICK Absolutely Mr KELLER I realize it is a stretch goal but I think it is important to know where we are Mr FICK Yes Mr KELLER So if we could get that information I would appreciate it The other thing I wanted to sort of followup on we all know that it is important—an important program and looking at what we are doing but I want to go back to the EELs and we know there has been reported issues and I guess this would be for Ms Lord There is you know issues associated with the electronic equipment logs and some of the data inaccuracies is due to human interface and you know some of those items and we know that is going to happen no matter what you are doing when you are dealing with that Are there any strategies that have been identified that might help cut down on the manual inputting of data so that there might be accuracy any kind of reducing the human interface Ms LORD Absolutely There are two different pieces to that One is ALIS has been relatively user unfriendly a lot of training to get—to be able to learn how to use it Our latest release helps that significantly However in ODIN what we are doing is making sure it is much more automated in terms of data feeds and also prompting the user to input So those two things should be very helpful Mr KELLER And that is—you are going to be having this totally implemented or is there a phase in that we can see how this is working How soon do you anticipate being able to see the benefits of this Ms LORD We will have the first system deployed in September 2021 A lot of testing will go on before that point in time and then it will be throughout the fleet by December 2022 except for units that might be deployed on aircraft carriers for instance who are in very remote austere areas Mr KELLER OK Also there has been a lot of talk about different things but can you speak to actions the department has taken in response to Section 192 of the fiscal 2020 NDAA related to the relief from failure to deliver ready-for-issue spare parts Ms LORD Absolutely What we have done is put a whole team together to look at that We have worked with the contractor We have really gone back to look at what is the root cause what is the fundamental issue And we believe although there are many many issues it fundamentally comes down to ALIS and that is part of what has really incentivized us to accelerate to the ODIN transition Mr KELLER OK So when we are talking about ALIS and the issues we are having have these been issues that we have experi- 46 enced since the beginning of the implementation of the ALIS program Ms LORD Yes Mr KELLER So over time we should have—when we look at moving away from that we should not be repeating the same issues or—— Ms LORD No we should not and in fact there actually have been large gains made with ALIS There have been multiple releases and if you talk to the maintenance units they will tell you that particularly 3 5 2 that we just put out has made a lot of difference But still it is not as streamlined as it could be It is not as easy to use Mr KELLER So when did we begin using ALIS if I can ask that question Ms LORD ODIN will start in 2021 We have an updated version of ALIS that just went out about a month ago Mr KELLER But when did the department start using ALIS I mean—— Ms LORD Back in 2012 or—I defer to the program office Mr FICK I thought it was prior to that Earlier I said 2006 I will confirm sir for reference when we started actually operationally using it Mr KELLER I am just sort of—— Ms LORD It has been at least 10 years Mr KELLER Yes I am just sort of curious of how quickly we can implement procedures and if it has taken us this long I want to make sure that when we go over—you know when we transition over that it doesn’t take us that period of time Ms LORD But there are—— Mr FICK So we will actually have the benefit in this case with ODIN of understanding what we don’t like and using that to build what we do So as the team collects metrics from the users associated with the performance of ALIS we are using that to inform the capability needs statement associated with ODIN So we have a better idea to the point that was made previously of what—of what good looks like and what we really need ODIN to look like from a maintainer’s and a war fighter’s perspective and we are driving that train this time We are not leaving it up to somebody else Ms LORD But there were—— Mr KELLER So in other words we have learned from our past history of things we have done inappropriately to make sure that we don’t repeat those same failures Mr FICK Yes sir Mr KELLER All right Thank you I yield back Chairwoman MALONEY Thank you very much I now recognize Representative Tlaib and she is remote online Are you with us Ms TLAIB Thank you Yes thank you Chairwoman MALONEY OK Great Ms TLAIB Yes I am Can you hear me OK Chairwoman MALONEY Yes we can 47 Ms TLAIB Thank you Chairwoman Thank you for allowing me to serve my residents in a safe environment and I just want to appreciate everyone being available to us I know and I apologize if some of this was asked but I think it is really important especially these are things that I am hearing from my community but only about two days ago the House adopted my amendment to the NDAA focused on care for crew members who have experienced unexplained psychological episodes while operating the F–35 So Lieutenant Fick do you know what is causing these psychological episodes And again if you would answer because I think it is really important for folks to understand that And then the second question what has Department of Defense done to protect the service members from some of these safety issues Mr FICK So we are working very closely with the services and with the medical community to understand each and every one of the physiological events that occurs We have seen over the course of the last three years I think I would characterize as a decrease in the occurrence of PE within the F–35 enterprise But to say there is a common root cause between all of them I think—I don’t think that we have come to that—to that conclusion at this time More work to go Ms TLAIB Ms Lord as we know the F–35 sustainment contracts included a clause that said the government may require the contractor to replace or correct any supplies that are nonconforming at the time of delivery So Ms Lord problems with the electronic logs—this is really important here—can happen through the life cycle of a part correct Ms LORD Yes and that is why we need to look at contract language and make sure it reflects the experience that we have had so that as you point out at the time of delivery is not the entirety of the time it goes through the EEL system We have to recognize that Ms TLAIB Well if a problem developed following delivery would it be even be possible for the Department of Defense to reject that spare part or would DOD need to keep that part and wait for Lockheed Martin personnel to fix it Ms LORD We have ongoing discussions about those kinds of issues But if it is after the point at which we initially accept it that becomes more complicated Ms TLAIB Well in order to be cleared for flight F–35 policy states that an aircraft must be electronically complete—quote ‘‘complete’’—in ALIS meaning that all the electronic records from each installed F–35 part must be functioning in ALIS When a part missing its electronic log ALIS signals that the aircraft should be grounded According to Joint Program Office officials quote—this is what they said—‘‘On any given day over 50 percent of the F–35 fleet is flying with non-RFI spare parts ’’ Do you find that concerning Ms Lord Ms LORD I have faith in our maintenance unit leaders who look at each part and determine whether the aircraft is fit to fly They are well versed in safety and would never make any safety compromises 48 All of that being said I have faith in all of our maintainers I would like our systems to be 100 percent correct and effective Ms TLAIB Yes No and I think the American public would agree Ms Maurer in March the GAO reported that it is common for F–35s to fly with over 20 inaccurate or missing electronic records even though ALIS signals that the plane should be grounded So Ms Maurer briefly how can service members be 100 percent sure that ALIS signals are due to defective electronic logs and not a potentially dangerous issue within the aircraft Ms MAURER I think that gets to the heart of the matter I think what we found is when we talked to folks maintainers on the flight line who work on the aircraft in the flight line is that they are—I agree with Under Secretary Lord on this—they are doing their level best to ensure that the plane—that the plane is safe to fly Having said that when the system that we have spent hundreds of millions of dollars to develop and deploy that is designed to help tell them with the system the plane can be allowed to fly isn’t trusted that is the problem So we are using these cuff records We are using spreadsheets It injects another level of risk into those decisions and that is one of the many reasons why ALIS needs to be improved Ms TLAIB Well I think it is—so essentially our pilots are being forced to fly aircraft that neither the DOD or Lockheed Martin can verify are 100 percent safe due to electronic log problems and ALIS coupled with potential or human error and work around the tracking I simply think it is outrageous that after spending millions of dollars and thousands of hours in manpower that our pilots are still being asked to risk their lives because of malfunctioning equipment So in case anything here wasn’t clear fix this now I think my chairwoman would agree before you have blood on your hands I think it is really important that you have actual lives human beings that are behind these flights that we are—it is our responsibility to make sure they are safe With that I yield the rest of my time Chairwoman Thank you so much Chairwoman MALONEY Thank you so very much for your important observations I would now like to recognize Congressman Steube Congressman Steube—is he here or online Pardon Mr STEUBE Yes I mean I am virtual Chairwoman MALONEY OK Great Mr STEUBE Thank you Madam Chair Mr Ulmer first I would like to give you the opportunity to respond to what Ms Tlaib just said as it regards to the safety of the aircraft Mr ULMER Congressman as we have mentioned the parts are not of concern It is the electronic file associated with the part So we have processes in place The maintainers have processes in place relative to part integrity 49 We are—each part is delivered DD–250’d It goes through a formal inspection process relative to that The aircraft also has diagnostic systems onboard relative to the health of the platform itself once the parts are installed So there are several layers of protection relative to part integrity Mr STEUBE Can Lockheed Martin ARRW solve the EELs functionality and data issues on its own or is that a broader issue Mr ULMER It needs to be done as an enterprise and I think we collectively have engaged that issue relative to we need to listen to the war fighter how they operate sustain and maintain the aircraft We need to incorporate that information that learned information relative to the implementation within ALIS and as we go forward into ODIN’s system So those requirements need to be defined by the user and then industry and government needs to understand that requirement and then we can—we can work to solve that problem We will be able to do that Mr STEUBE The F–35 program has been referred to as a concurrent development program How does concurrent development affect the sustainment portion of the program Mr ULMER So as the product has been developed we have also begun production So in the early phases of the program development was ongoing while we still produced the aircraft Just two years ago we received what is called full war fighter capability with a 3–F capability So as that capability was released the fleet has grown approximately 300 aircraft in the last three years So there has been a lot of planning of how we plan to sustain the aircraft and now there is a lot of learning as we actually implement and sustain the airplane in the fleet We then take and apply that learning relative to the experience that has occurred and update the system accordingly and we have seen significant improvement I made comments in my opening remarks the sustainment from a mission capable rate in the last two years has increased from the low 50’s to the mid–70 percentile from a mission capable release and we also see the other sustainment metrics in terms of health of supply and maintenance activities also significantly improved So we can measure our performance at a system level relative to how the system is improving Mr STEUBE General Fick can you—how do you feel about our pilots being safe and flying the F–35 Mr FICK Sir I have full faith and confidence in our maintenance group commanders and the troops that they command and giving a ready-for-flight aircraft to our aircraft I mentioned in my opening remarks I have a son who is flying for the Air Force He doesn’t fly F–35s to his dismay But I know that he trusts his maintainers implicitly and explicitly to deliver to him an aircraft that is safe to fly I believe that as the maintenance group commanders assess the parts that are put onto the aircraft they are making sure that any aircraft they clear to fly is safe to fly Mr STEUBE General can you please provide to the committee an overview of how the F–35 is performing when deployed and talk to 50 the capabilities that the aircraft is providing to the men and women in uniform Mr FICK So as a fifth generation Strike Fighter platform the F–35 relies upon stealth sensor fusion and interoperability to allow it to penetrate and persist and to punish in a way that no other air system is capable of doing today I think if you talk to a war fighter who flies the F–35 in operations or in training you will find that they are very very happy with the plane They are very very happy with the system that they have got They always want more and we need to give them more because the threat is not slowing down The threat is not stopping We need to continue to move the program forward from a development perspective from a production perspective and from a sustainment perspective Mr STEUBE And what do you think can be done to take on—to ensure that the F–35 is ready to take on emerging threats Mr FICK So sir we are deliberately moving the program into a new paradigm for development that you may have heard of referred to as continuous capability development and delivery working to transition a legacy departmental or a legacy industry style of development and delivery in huge tranches into a more incremental and agile focus development paradigm where we bring capabilities to the war fighters faster That is going to be important as we work our way forward and the threat continues to change Our ability to be agile or to not overuse that word to be nimble in the things that we can do with and on the platform will be critical Mr STEUBE My time has expired Thank you General for your service to our country Chairwoman MALONEY The chair now recognizes Congresswoman Porter Ms PORTER Hello Mr Ulmer does Lockheed Martin owe the government money—the Federal Government money Mr ULMER Congresswoman we are negotiating that today with the Defense Contract Management Agency relative to the issues associated with electronic EELs Ms PORTER You are negotiating today How much does Lockheed Martin owe taxpayers Mr ULMER Congresswoman we are going through that The figures that were provided $303 million have been reduced—$183 million I heard today So I think we are collectively working to understand from an accountability point of view what those numbers are Ms PORTER Why were the figures reduced The Federal Government found that the F–35 defective parts cost the government $300 million Why is that amount being reduced Mr ULMER I don’t know the specifics ma’am But I do know that not—— Ms PORTER Is it the government’s idea to reduce the amount you owe them or is it Lockheed Martin’s idea to try to pay less Mr ULMER Ma’am that came from the government It came from the government 51 Ms PORTER OK Then I will ask Ms Lord about this in a minute So you are negotiating over what was $300 million to $350 million but has somehow been reduced to about half that How is Lockheed doing financially Mr ULMER Ma’am we just released our quarterly earnings yesterday So net sales $16 2 billion net earnings $1 6 billion and our cash $2 2 billion Ms PORTER OK I want to make sure I have this right From that quarterly investor call which we also listened to profit is up 15 percent over this time last year more than $3 5 billion in profit so far in 2020 Ten times that $3 5 billion in profit is ten times what you owe the taxpayers One recent headline—I hope you saw this good publicity for your company—one recent headline called Lockheed Martin a pandemic star for your ability to be earning money even as taxpayers and everyday families and small businesses struggle So I am not sure why the amount is being reduced I am going to ask Ms Lord about that But I also want to know more about why given that Lockheed is a pandemic star Lockheed is writing a letter to the White House—just wrote a letter to the White House asking taxpayers to give Lockheed bailout funds Mr ULMER I am not aware of that letter Congresswoman Ms PORTER So you are telling me that it is Lockheed Martin’s statement on the record that there is no request for additional money related to things like the Main Street Lending Program or the money set aside specifically in CARES for national security companies Mr ULMER Ma’am I am not aware of a specific letter I am aware relative to COVID–19 in the CARES Act relative to the disruption to aerospace and defense I don’t know the specifics of the letter you are mentioning ma’am Ms PORTER Did Lockheed Martin request money under the CARES Act Mr ULMER Yes ma’am Ms PORTER Why Mr ULMER Because of the disruption associated with COVID– 19 Ms PORTER Because of the disruption that caused you to have a profit of 15 percent over the prior year when we didn’t have COVID–19 That doesn’t—maybe making gobs of money is disruption for you but I think for most everyday Americans if they see their income go up 15 percent this year if they were making—if they were making $3 5 billion in profit in 2020 they wouldn’t call that a disruption They would call that a miracle and they would not be coming to the government trying to take more taxpayer dollars at the same time that you are failing to pay the U S taxpayers back what you owe for breach of contract with regard to the F–35 Joint Strike Force I am unable to understand why you need this additional money when your profits are up and you have breached your contracts 52 with regard to producing defective parts Why should the taxpayer foot the bill the help Lockheed Martin at this time Mr ULMER Ma’am the disruption associated with COVID–19 requires many different aspects relative to health and welfare of employees the supply base associated with—— Ms PORTER Use—pardon me Reclaiming my time Use your 15 percent increase in profit to pay to protect your workers during COVID Mr ULMER Congresswoman we are doing that Ms PORTER Why are we footing the bill to help a company that is having an uber profitability moment and is a pandemic star Mr ULMER Congresswoman no funds have been provided relative to the CARES Act Ms PORTER But you have asked Mr ULMER Yes just like many aerospace and defense companies Ms PORTER One wrong doesn’t make a right With that I yield back Chairwoman MALONEY The gentlelady yields back And I now recognize Representative Grothman Mr GROTHMAN Ms Hull we will start with you Your report found that as a result of receiving not-ready-for-issue spare parts the Department of Defense spent $303 million in labor costs since 2015 If that figure is right that is kind of a big number Can you explain how you arrived at that number Ms HULL The $303 million is just the cost of DOD labor So it costs about $7 000 to $11 000 per issue to fix or to resolve So that figure is just for the labor attributed to the action request at the time Mr GROTHMAN So it is really a larger number in cost overall Ms HULL Yes It only reflects DOD labor It does not take into account the additional amount that Lockheed charged back to the government to get the parts that—you know back ready for issue Mr GROTHMAN Do you know how much that was Ms HULL Unfortunately because of the way data was not tracked regarding that we were unable to obtain that information Mr GROTHMAN OK Hmm are you trying to get it or they are just—would Lockheed give you the information or—— Ms HULL We requested the information from Lockheed Martin during the course of the audit But they did not provide it Mr GROTHMAN Hmm Do you have recourse or you just got to tolerate it Ms HULL Lockheed Martin shared with our audit team that they do not track the information in a manner in which they could provide that cost to us Mr GROTHMAN Well they are—I guess they are saving costs huh In the year since your report has been released have you continued to monitor the delivery of non-RFI parts Ms HULL Since our issue—since our report was issued we are currently tracking the recommendations that we made to the Joint Program Office 53 The Joint Program Office agreed with all four recommendations and we are in the process of waiting for information to validate the actions taken Mr GROTHMAN Do you have any update for us or just we got to keep waiting Ms HULL Currently we are waiting for documentation to validate actions taken Mr GROTHMAN OK We will give General Fick a question here What has your office done to address that problem and what type of changes do you think we need as we move forward Mr FICK So relative to the EEL issue and non-RFI parts we have worked very very closely with the field and with Lockheed Martin to put process and practice in place to ensure that the number of parts that are arrive are—that require an EEL actually have that EEL One of the specific technical moves that the group made was to provide what they call an advanced shipping notice that in some ways significantly reduces the errors associated with manual entry of data when a part arrives at a base So it effectively prepopulates the system to allow for an easier transmittal of the EEL and the easier acceptance and arrival of that EEL on the base That is a large part of the reason that we are now at an 83 percent EEL RFI number Mr GROTHMAN OK Well can I ask a similar question Mr Ulmer From your perspectives have the issues that were raised on non-RFI spare parts in the June 2019 Inspector General report seen improvements Mr ULMER Yes sir they have As we alluded to in the opening comments ready-for-issue effectiveness rate has increased from I believe 43 percent—45 percent to about 83 percent the last six months Mr GROTHMAN OK Thank you very much I yield the rest of my time Chairwoman MALONEY The gentleman yields back and the chair recognizes Congresswoman Miller Mrs MILLER Thank you Madam Chairman and Ranking Member Comer and thank you all for being here today to testify before our committee As all of my committees today understand—all of my colleagues today understand the F–35 program is one of the most essential tools in our Nation’s armed forces disposal I strongly support the continued investment in the F–35 program and I believe that it will play a major role in defending the United States and our allies for decades to come I applaud the work that the Department of Defense Lockheed Martin and the thousands of suppliers around the country including those in my home state of West Virginia have done to ensure that the F–35 program will continue to be cost efficient mission capable and effective I am encouraged by the progress that has been made especially in the last year to reduce the cost per flight and to ensure readyfor-issue parts compliance are at a much higher rate 54 Again I want to thank you all for being here today for questions and showing the committee and the American people the importance of the F–35 program Mr Ulmer how has the coronavirus pandemic and the shutdown and the sustained economic shutdown impacted the supply chain for the F–35 program Mr ULMER Congresswoman it is a bit of a mixed bag So we have suppliers that have shut down for periods of time I think weeks I think a month We have had suppliers that have had little impact We have had suppliers that their work force has been significantly impacted For example we have had a supplier that have reduced their work force for periods of time from 100 percent down to 20 or 30 percent So it has been a bit of diverse impact to our supply base We have also had suppliers that provide commercial material as well as military hardware to the platform So from a commercial aviation point of view they have been significantly impacted from a finance health point of view There are just many different aspects of how COVID has impacted supply base and industry across the aerospace and defense sector Mrs MILLER Thank you General Fick how does the mission-capable rate for the F–35 fighters compare to a year ago or even six months ago Mr FICK Ma’am the mission-capable rate of the F–35 over the course of the last year has come up from as I recall in the mid– 50’s to the low to mid–70’s As I look back at the data today it actually seems relatively flat in the mid–70’s at the fleet level Below the fleet level as we look individually at the F–35A which is doing a little bit better than the B and the C which are doing a little bit worse we do see variations caused by differences in the—in some of the systems on the aircraft and we see the impact of different fleet sizes as well on the mission-capability rates We are taking a wide variety of initiatives and issues that are articulated in our life cycle sustainment plan to drive mission-capability rates and to drive F–35 sustainment outcomes in the right direction Fixing ALIS is only one of those issues We have 12 different lines of effort that we are undertaking to include the establishment and the accelerated standup of organic depots the use of increased maintenance authorities on the flight line and a wide variety of other issues that all together will continue to move the needle in the right direction Mrs MILLER Good General Fick and Mr Ulmer what does the future look like for the F–35 production and how does Lockheed and your suppliers think you will be able to scale Mr FICK So we are—as you are aware ma’am we signed the Lot 12 through Lot 14 production contracts over the course of the last fall and we are currently entering negotiations for the Lots 15 through 17 contracts I can’t talk to the specific details of those negotiations But I will tell you that overall as you look into the service budgets and as 55 you look into the service spend plans we see the numbers of aircraft in those years are not rising as they did over the course of Lots 10 through 14 But they are a little bit more flat Some of the flatness of the profile in those years is going to challenge our ability to continue to drive price down by tail But we are committed to continuing to work hard with the department to establish the best value for our taxpayers and war fighters Mrs MILLER Thank you Mr Ulmer Mr ULMER Congresswoman over the last three years we really have been ramping upward So in 2017 we delivered 61 In 2018 we delivered 91 Last year we delivered 134 This year prior to COVID we were on track to deliver 141 aircraft So you can see the progression of production rate and then we will actually continue that production rise as we go forward to approximately 165 aircraft and then as General Fick alluded to we will see a slight decline in production quantities probably around 155 or so in the three lots coming after that So just kind of an overview Within that production rate we have been able to reduce the price of the airplane significantly So we were on a plan or a trajectory to get to what we call an $80 million aircraft by Lot 14 We were able to achieve that one lot early in Lot 13 and what that really—what that allows is we are now able to produce and deliver a fifth gen capability aircraft really at the price of what a fourth gen legacy fighter would cost Mrs MILLER Thank you I yield back Chairwoman MALONEY Well I want to thank everybody This is the last questioner and I want to thank our panelists for their remarks and I also want to commend my colleagues on both sides of the aisle for their really informed and passionate concern and for participating in this important conversation I would like to yield to my colleague and good friend Ranking Member Comer for his closing remarks Mr COMER Thank you Madam Chair and again I want to thank all of our witnesses who were here Our side of the aisle here has been focused on oversight It is good to have a bipartisan hearing where we all share the same goals and those goals are No 1 to ensure that our troops have the absolute best No 2 is to ensure that the taxpayers get their dollar’s worth and you will find no group in Congress more in support of the private sector than our side of the aisle We know that parts and contracting and aircraft can be produced in the private sector significantly more—significantly cheaper than the government could Having said that we expect the private sector to deliver on their end of the bargain And with respect to Lockheed Martin I appreciate the fact that Lockheed Martin has a significant footprint in America Lockheed Martin employs a lot of people and they pay excellent wages to their employees It is a great place to work I appreciate that 56 But Mr Ulmer we have had this discussion about the issues with the EELs and the issues with the F–35s and considering the significant percentage that this product is with your total sales for Lockheed Martin I certainly hope that moving forward we can get these issues resolved for the sake of our military for the sake of our servicemen and women and for the sake of the American taxpayer So I am confident that we can get this resolved But I will look forward to continued discussions with Lockheed Martin with our United States military and with the majority in this committee With that Madam Chair I yield back Chairwoman MALONEY Well I really want to thank you and your staff and all of your members for joining us in a bipartisan way to work on this challenge and I join my colleagues in saying that I am very pleased that Lockheed Martin has said they are dedicated to resolving these challenges And Mr Ulmer mentioned that he or rather Lockheed Martin had already spent over $30 million trying to correct this problem But I want to point out that that is just a small percentage of the cost of one plane especially when you add the $50 million that they say is needed to maintain the program yearly now because of the challenges I do want to say how pleased many of us are to learn about the ODIN contract that the government will be putting forward and that the intellectual property and the data components will be owned by the American taxpayer and the American government I believe this should be the standard for any military contract going forward I consider this a national security challenge because there have been so many reports that the information has been stolen from our contractors through hacking including allegations that the F–35 has been compromised and the information stolen So to have it controlled by the government to protect this information I believe is a very good step in the right direction We are looking forward to learning more about the ODIN program and the contract and exactly how you are going to spell it out so that these challenges do not happen in the future in order to first of all protect the safety of our men and women in the Air Force but also to protect the dollars of our taxpayers Our next meeting will be held in September on the F–35 and I am hopeful that the DCMT who reported that there was $183 million owed to the American taxpayers that the report said they are in negotiations I hope by September this issue will be resolved and that we can learn more about what DOD is doing to modernize our military contracting process It is important first and foremost for the safety and security of our men and women in uniform but also the safety and security of the tax dollars in this country I really want to thank again all of the panelists for their life’s work for their dedication their testimony today and I must say I believe this is the best participation of any hearing this year that I have seen on both sides of the aisle showing deep concern and commitment to resolving this issue in a positive way for the private sector the military the government and the taxpayer 57 I yield back And I thank the staff on both sides of the aisle This was a joint effort Every single meeting was held in conjunction with both parties Every interview every report has been a bipartisan effort on this important issue In closing I want to thank our panelists for their remarks and I want to commend my colleagues for participating With that and without objection all members will have five legislative days within which to submit additional written questions for the witnesses to the chair which will be forwarded to the witnesses for their response I ask our witnesses to please respond as promptly as you are able This hearing is adjourned Whereupon at 1 p m the committee was adjourned Æ