In October 2001, the Department of Defense (DoD) awarded a contract for System Development and Demonstration (SDD) of the Joint
Strike Fighter (JSF) to the Lockheed Martin Aeronautics Company.
The JSF program, which is expected to run for more than two decades and cost $300 billion, 1 will deliver 3,002 fighter/attack aircraft to the U.S. Air Force, Navy, and Marine Corps, as well as to the
UK Ministry of Defence. The JSF will replace U.S. Air Force F-16s and
A-10s and complement the F-22; complement carrier-based U.S.
Navy F/A-18E/Fs; replace U.S. Marine Corps AV-8Bs and F/A-
18C/Ds; and replace UK Harrier aircraft.
The primary reason for developing a single aircraft with three variants to fulfill the missions of the different services was to minimize cost. The result of having a single program will be considerable commonality among the three variants (conventional takeoff and landing [CTOL], carrier variant [CV], and short takeoff/vertical landing [STOVL]). This commonality will reduce both initial procurement and ongoing life-cycle costs, relative to having three unrelated aircraft.
Many companies spread across the United States and the world will be building the various components and subassemblies of the JSF.
Lockheed Martin plans to assemble the major components of the JSF
______________
1
Then-year dollars.
xv

xvi FACO Alternatives for the Joint Strike Fighter and test the aircraft at its Fort Worth, Texas, plant, in a process called final assembly and checkout, or FACO. The U.S. Congress has directed DoD to examine alternatives to the single-site FACO plan.
This examination is to include a determination of potential locations for FACO and an analysis of the implications of carrying out the process at multiple locations. DoD asked RAND’s National Defense
Research Institute to carry out the study. This report describes the methodology and results of that study.
Although the legislation was quite clear about examining the implications of spreading the FACO work across multiple sites, it did not specify precisely how that should be done. Multiple options exist.
All aircraft variants could be assembled at one site or another, different variants could be assembled at each site, or there could be some combination. Four sites were analyzed in this study, including the
Lockheed Martin plants at Fort Worth; Marietta, Ga.; and Palmdale,
Calif., and a Northrop Grumman plant, also at Palmdale. We considered the nine options shown in Table S.1, comparing the cost of each against the baseline of having Fort Worth conduct FACO for all JSF aircraft. These options do not represent all possible approaches, of
Alternative
3
4
1
2
5
6
7
8
9
Table S.1
FACO Strategies Considered
Description
100% of FACO at Lockheed Martin–Fort Worth (Baseline)
100% of FACO at Lockheed Martin–Palmdale
100% of FACO at Lockheed Martin–Marietta
100% of FACO at Northrop Grumman–Palmdale
50% of FACO at Lockheed Martin–Fort Worth, and 50% at
Lockheed Martin–Palmdale
50% of FACO at Lockheed Martin–Fort Worth, and 50% at
Northrop Grumman–Palmdale
50% FACO at Lockheed Martin–Fort Worth, and 50% at
Lockheed Martin–Marietta
All CTOL at Lockheed Martin–Fort Worth, and all CV and
STOVL at Lockheed Martin–Marietta
One-third of all production at each of the Lockheed
Martin sites

Summary xvii course, but represent a reasonable sample of the potential alternatives.
In our analysis of the alternatives, we found no efficiency, effectiveness, or cost reasons to split FACO operations between two sites or across multiple sites.
Moving some or all JSF FACO from Fort Worth to another location would result in additional costs to DoD. Table S.2 compares the costs of the alternatives listed in Table S.1. The numbers in Table S.2
represent the differences in cost from the baseline case of doing all the work in Fort Worth (in 2002 dollars). Because sites have more than one defense program and because the effects among programs interact, we show two sets of comparative costs. One includes only the effects on JSF FACO; the other includes the effects on all DoD programs at all affected sites. The second column represents the costs to DoD as a whole and better portrays the overall budget implications of various FACO strategies.
All the alternatives that divide the work across one or more additional sites increase costs, due to loss of learning and duplicate facilities and tooling. Furthermore, moving FACO activity from Fort
Table S.2
FACO Option Cost Comparisons
(millions FY02$)
Alternative JSF FACO Costs DoD Costs a
3
4
1
2
0.0
4.0
132.1
199.0
0.0
256.9
74.1
656.7
7
8
5
6
310.3
328.4
331.8
419.1
221.5
386.4
117.1
134.7
9 501.7
a Includes cost effects from JSF FACO.
277.6
NOTE: For description of alternatives, see Table S.1 on the previous page.

xviii FACO Alternatives for the Joint Strike Fighter
Worth changes the overall DoD costs because of the effect on indirect costs for other DoD work. The costs of the rest of the JSF work under way at that plant, as well as of the other programs there, will increase because these programs will have to bear a greater fraction of the Fort Worth overhead costs. This indirect cost increase is not offset by a corresponding decrease for programs at the alternative
FACO sites.
Cost differences from the baseline strategy are actually a combination of many potential factors, such as effects on overhead rates, inefficiencies in splitting production from loss of learning, additional investments that the baseline site may not require (because of SDD facilities and tooling being in place at Fort Worth), differing manufacturing costs (e.g., rates for labor, power, management, taxes), stricter environmental regulations, and additional management and oversight effort required to manage an additional manufacturing location that is not required for the baseline facility. It should also be noted that even the most expensive alternative adds less than 10 percent to the cost of FACO, which is only two percent of the total JSF unit recurring flyaway cost.
We assessed some reasons for splitting FACO that might reflect benefits not included in our cost analysis and discuss them below.
These included inducing competition among alternate sites, avoiding capacity constraints, maintaining the military aircraft industrial base, maintaining excess capacity for surge or as insurance against natural or man-made disasters, and extending the local economic benefits associated with FACO to more than one region. We did not find any of these to be compelling enough to split JSF FACO.
At the contract award, DoD reaffirmed that the JSF will be a “winner take all” program. Thus, it has already decided not to induce competition among different potential manufacturers in the production phase.
Another reason for splitting FACO might be that a single site lacks the capacity to produce on the desired schedule. Lockheed Martin’s analysis indicates that Fort Worth can deliver the required number of aircraft on schedule and, therefore, there appears to be no capacity argument for opening another FACO site.

Summary xix
Some might argue that establishing another FACO site would help maintain a more robust industrial base. However, our analysis indicates that design and overall aircraft program management are the most complex tasks in military aircraft acquisition and the ones for which maintaining a robust industrial base is likely most critical.
These tasks are not under study here. Maintaining the capability to do the tasks involved in final assembly and checkout is less at risk because it is maintained by other manned and unmanned aircraft in production and, to a certain extent, by normal maintenance activities. Thus, multiple FACO sites do not appear to be critical to the industrial base.
The arguments for having multiple sites that focus on the maintenance of extra capacity as a buffer against possible future production surges—or in case of natural or man-made disasters at one or another location—also do not provide compelling arguments in favor of splitting FACO.
Arguably, a case could be made to extend FACO operations to more than one site so that a broader segment of the population would reap the economic benefits of the project. Although FACO operations represent a relatively small portion of the overall contract award, even a modest segment of a $300 billion program could amount to significant economic activity over the life of the contract. We offer three observations in this regard. First, the locales where FACO operations are feasible are not economically depressed. The unemployment rate at each is either less than the national average or about the same. Second, the number of new jobs created by FACO operations is not very large in terms of a regional workforce. FACO involves about 1,200 workers and, thus, the net gain in total employment in any given area would be relatively modest. Third, the rationale underpinning the JSF contract—a single development and production program producing three variants with many common characteristics—was to allow DoD to procure the aircraft at the lowest possible cost. Splitting FACO may provide economic benefit to some limited locality, but the costs must be borne by all taxpayers.
Splitting FACO operations seems to be at odds with this rationale, as well as with the spirit of acquisition reform, which calls for a

xx FACO Alternatives for the Joint Strike Fighter reduction in the amount of unnecessary government oversight and control of the specifics of military procurements.