Over $85M in F-35 parts are unaccounted for, GAO says — and that number could be much larger

WASHINGTON — The government cannot account for more than $85 million in F-35 Joint Strike Fighter spare parts, a number that is likely far smaller than the actual total of untracked components, the Government Accountability Office has found in a new report.

But worse than the unknown number of “lost, damaged or destroyed” taxpayer-funded equipment is fact that the F-35 Joint Program Office lacks the ability even to be aware of what spare parts are out in the world, thanks to how the supply chain for the fighter is set up.

As with almost all aspects of the F-35, the supply chain arrangement is uniquely complicated by the international structure of the program. “Rather than owning the spare parts for their aircraft, the program participants share a common, global pool of spare parts that DOD owns and the prime contractors manage. These spare parts are held in over 50 domestic and international non-prime contractor facilities,” GAO explained.

The result is that the JPO does not track or have visibility into parts that are located outside of prime contractor facilities — parts ranging from big ticket items like engines, wheels and landing gear down to basic items like fasteners and screws.

“Without DOD taking steps to ensure that these spare parts are accountable under a contract, the F-35 Joint Program Office will be unable to either gain or maintain accountability over these spare parts and will not have data, such as locations, costs, and quantities, needed for financial reporting or to ensure that government interests are protected,” GAO warned.

The report comes at a time that the Pentagon and primary contractor Lockheed Martin are hashing out the future of the program’s supply chain. The two sides are expected to transition by the end of the year to a new five-year, performance-based logistics (PBL) agreement, which Lockheed has pushed for over the years.

However, program officials are making a drive for more rights to the data underpinning the sustainment picture as part of the PBL, so that more upkeep can be performed directly by the military services rather than contracted out. Lockheed, whose business model on the F-35 has always been predicated on a lucrative, decades-long sustainment tail, has traditionally pushed back.

GAO auditors, attempting to understand the full risks of the supply chain setup, dove into one particular test case of a subcontractor from May 2018 through October 2022. In that timeframe, GAO found that the subcontractor “incurred losses of over 1 million spare parts from the global spares pool totaling over $85 million.” But of those losses, the subcontractor only informed the JPO of “approximately 60,000 losses worth approximately $19 million” — meaning the JPO was made aware of less than two percent of the total quantity of lost items.

“Because, as previously reported, the F35 JPO does not have an independent record of the global spares pool, and the values of the lost spare parts are not the fully burdened cost, the $85 million of identified losses by [the subcontractor] may not accurately represent the full quantity and value of lost spare parts,” GAO added. “According to DOD officials, the full quantity and value of these spare parts may be significantly higher.”

The issue isn’t the subcontractor trying to hide anything, GAO said, but rather that there is a disagreement at a fundamental level about what these companies have to report back to JPO. Hence, the GAO calls for four changes moving forward to how the F-35 manages its supply lines. Quoting directly:

• The Under Secretary of Defense for Acquisition and Sustainment, in coordination with the F-35 Program Executive Office, should take steps to ensure that all spare parts in the global spares pool are categorized appropriately and are accountable under a contract.
• The Under Secretary of Defense for Acquisition and Sustainment, in coordination with the Under Secretary of Defense (Comptroller), should review all applicable guidance and policies for asset accountability and update as necessary to ensure clarity regarding when an asset is considered government-furnished property.
• The Under Secretary of Defense for Acquisition and Sustainment, in coordination with the F-35 Program Executive Officer, should develop and document a process for contractors to report government-owned global spares pool losses of spare parts that are not accountable under a contract, until all spare parts in the global spares pool are made accountable under a contract and losses are entered into the GFP Module for DCMA’s adjudication.
• The Under Secretary of Defense for Acquisition and Sustainment, in coordination with the F-35 Program Executive Officer, should develop and document interim procedures to ensure that disposition instructions are provided, consistent with federal regulations, for the disposition of spare parts in the global spares pool that are excess, obsolete, or unserviceable, until such spare parts are entered into the GFP Module for disposition.

In a response included with the report, undersecretary of defense for acquisition and sustainment Bill LaPlante concurred with the GAO’s findings.

A Lockheed spokesperson told Breaking Defense in a statement that the company “manages F-35 spare part inventory in compliance with contract requirements. We continue to partner with the Joint Program Office to increase insight into spare part availability and support fleet readiness.”

In a statement, JPO spokesman Russ Goemaere said that “Although the F-35 JPO concurs with the recommendations it is important for the American people and our global partners to understand that we know where the vast majority of F-35 spare parts are in the global supply chain.  At this time, our error rate is around 1%, and while this is considered much better than the government goal of 5%, we will continue to work with the services and our industry partners to improve spare parts accountability and drive readiness for our warfighters.

“Accountability of F-35 spare parts is currently managed through a non-government system;  however, we are working with industry to move this data to a government system,” Goemaere added.