Dutch Court of Audit: Information about F-35 Lightning II insufficient

On 3 February 2009 the Court of Audit published a report on the procurement of the Joint Strike Fighter (JSF). The report outlines developments in the Netherlands' participation in the JSF project. The Court found that the House of Representatives should be informed more fully and more promptly about the cost of the JSF programme.

Conclusions 
We found that the Ministry of Defence's project organisation for the replacement of the F-16 was geared towards the arrival of the JSF. The Ministry had prepared the government's decision on the replacement of the F-16 in 2006. Owing to the fall of the government in June 2006 the decision was postponed to 2010 but preparations for the introduction of the JSF logically continued. The suitability of the air force base in Leeuwarden for the JSF was assessed, for example, and the Ministry worked on the implementation of the Autonomic Logistic Information System (ALIS), an ICT system to support mission planning and maintenance of the JSF. The Ministry of Defence does not seem to be anticipating the consequences of introducing another aircraft. It has barely analysed the financial consequences of the Netherlands withdrawing from the JSF programme. 

We also identified, as we had in 2007 (see Monitoring the Procurement of the Joint Strike Fighter; Situation in 2007), financial risks in the Netherlands' participation in the JSF programme and in the Ministry of Defence's preparations for the JSF. 

Costs 
• A full overview of comparable costs for the JSF programme is not available. 
• The Ministry of Defence has not updated the procurement budget for the F-16 replacement project from 2005 price levels to current price levels. In other material projects, the Ministry uses the most recent price level. 
• The Ministry of Defence is seeking an alternative to the horizontal line price: the consortium buy. 
• The cost of withdrawing from the JSF programme could rise from at least € 316 million to at least € 430 million (indicative cost levels). 

Business case 
We informed the Minister of Economic affairs of our findings on the recalculation of the remittance rate in a confidential letter of 25 November 2008. Copies of the letter were sent to the State Secretary for Defence and the Minister of Finance. Dutch manufacturers instituted an arbitration case on 15 December 2008. 

Project management 
• We found that the limited staff numbers in the project organisation created risks regarding the necessary project preparations, such as the transition from the F-16 air bases to air bases that can handle the JSF. 
• The audit departments of the Ministries of Defence and Economic Affairs asked questions about the project management. They related to staffing, organisation, the role of the group controller, the provision of information and filing. 
• The F-16 replacement project team has analysed the risks surrounding ALIS, the JSF information system: introduction of ALIS and its connection to future Ministry of Defence systems represents a high risk to the timely operationalisation of the JSF. 

Recommendations 
In view of our conclusions in 2007 and 2008 and the fact that the House of Representatives' decision on a successor to the F-16 (in 2010) is coming ever closer, the State Secretary for Defence should provide the House with greater clarity about: 
• the total cost of the JSF programme; 
• the procurement budget in the internal investment plan; 
• the budgetary consequences of the alternative to the horizontal line price (the consortium buy); 
• the withdrawal costs. 

The State Secretary should also provide more information on bottlenecks in the project organisation. 

Response of the Ministers 
In response to our report, the State Secretary for Defence wrote on behalf of the Ministers of Finance and Economic Affairs and himself that the information the House of Representatives received satisfied the applicable criteria. The recently published comparison of candidates provided additional information. He noted that improvements had been made in the project management in the past year. He thought the risk of using ALIS was low. 

Current status 
The report was submitted to the House of Representatives on 3 February 2009.

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