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3

Current Successes in the Integration of Commercial and Military Manufacturing

Several programs have successfully integrated commercial and military manufacturing, supporting the essential finding that ICMM can succeed and provides worthwhile benefits. Successful ICMM implementations exist in electronics, aircraft engines, unmanned vehicle structures and guidance systems, and others, but they represent only a small fraction of expenditures.

Some of the cases the committee studied were demonstration efforts (e.g., MALD 1 and TRW MPCL 2 ). Others were ongoing production programs and long-term initiatives (e.g., Rockwell-Collins, 3 GEAE, 4 and SCI Systems 5 ). Table 3-1 summarizes the results the various cases achieved. Winner and Griffin (1998) detail all the cases in this table, unless otherwise specified.

Many significant lessons and conclusions can be drawn from the cases the committee studied. The first of these is that opportunities are increasing for the defense industry to outsource manufacturing services for both electronic and



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Page 14 3 Current Successes in the Integration of Commercial and Military Manufacturing Several programs have successfully integrated commercial and military manufacturing, supporting the essential finding that ICMM can succeed and provides worthwhile benefits. Successful ICMM implementations exist in electronics, aircraft engines, unmanned vehicle structures and guidance systems, and others, but they represent only a small fraction of expenditures. Some of the cases the committee studied were demonstration efforts (e.g., MALD 1 and TRW MPCL 2 ). Others were ongoing production programs and long-term initiatives (e.g., Rockwell-Collins, 3 GEAE, 4 and SCI Systems 5 ). Table 3-1 summarizes the results the various cases achieved. Winner and Griffin (1998) detail all the cases in this table, unless otherwise specified. Many significant lessons and conclusions can be drawn from the cases the committee studied. The first of these is that opportunities are increasing for the defense industry to outsource manufacturing services for both electronic and

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Page 15structural/mechanical assemblies. The commercial world recognizes the economic and competitive benefits of outsourcing manufacturing to facilities capitalized to operate at larger scale. For example, a large new sector has emerged: flexible electronics manufacturing services (EMS) companies. These EMS companies— for example, SCI Systems, which is mentioned in Table 3–1—are expanding from manufacturing services into engineering design for large commercial companies. Security clearances to permit access to classified data and designs are obtainable where necessary, and some manufacturers are willing to get them and abide by security rules. TABLE 3–1 Benefits of ICMM Performer—Project Actions (Summary) Results DARPA/US AF—miniature air-launched decoy (MALD), overall a Used existing systems and subsystems; CAIV fly-away target cost; COTS and GOTS equipment; commercial practices and standards, low-cost manufacturing approach; design for flexibility; nontraditional production industry Reduced payload material costs 72%; achieved average unit cost target of $30,000; performance better than predicted DARPA/USAF—miniature air-launched decoy (MALD), airframe a Automobile manufacturing process for airframe; commercial sheet molding compound materials Reduced development, tooling, recurring costs; average unit cost $4,500; simplified assembly; light weight; vibration dampening DARPA/USAF miniature air-launched decoy (MALD), engine a Used nontraditional manufacturers for engine; design for reduced touch labor; catalog parts Reduced from 121 detailed parts in traditionally designed engine to 33; 4 hours touch labor General Electric Aircraft Engines (GEAE) —COTS engines b Commercial engines used in military applications Costs reduced, e.g., in KC135R, E-3, KC-10, E-4, Air Force One, ABL, C-5 GEAE—J85 Propulsion Modernization Program b Using commercial design components from CJ610/CF700: stator casting, spooled rotor, cast mainframe, combustion liner assembly Longer life, lower unit and maintenance costs

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Page 16 Performer—Project Actions (Summary) Results GEAE—shared commercial and military practices b TF39, TF34, J85, LM2500 determined commercial; government source inspection eliminated; engines on performance-based payments, spares on delivery-based payment; engines and spares catalogs on price analysis In 2000, more than 40 percent of military sales on commercial basis, with more planned 21 MIL-STDs replaced with GEAE processes USAF—Arnold Engineering Development Center b Military facilities used for commercial turbine engine testing; repeatable processes; automated test facilities Very high fraction of U.S. commercial and military turbine engine altitude tests performed in integrated facilities Motorola Communications Systems Division—overall Subcontracts 80% of 1997 circuit board production to commercial suppliers (vs. 5% in 1985) Higher quality, lower costs, QA workforce reduced 60–70% Motorola Communications Systems Division—JSTARS common ground station Military parts and production transition to COTS parts and subsystems, commercial production Cost reduced from $6 million to about $1.4 million Litton Amecom—NASA satellite control system Interactive design process involving customers; commercial bus-interface standards used; design for use of commercial space parts Cost reduced 25% from predecessor; next generation reduction projected to be 33% less than current (for total of 50% reduction) Rockwell Collins—single process initiatives Rated and nonrated components purchased together 50% reduction in purchase orders Rockwell Collins—single process initiatives Evaluation of all military and civilian processes All product-flow processes very near or same as previous commercial processes; operating costs reduced $30 million in first year; another $30 million anticipated for second year; flexible dynamic assignment of personnel across plants; workload balancing raised utilization rates to over 90%

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Page 17 Performer—Project Actions (Summary) Results Rockwell Collins—single process initiatives Reinvestment of savings Tracking state-of-the-art process technologies while maintaining competitive prices Rockwell Collins—Army precision lightweight GPS receiver (PLGR) Single process; commercial parts; commercial process; maintenance and availability are contractor's responsibility Direct labor content, 3–4% (rivals best commercial, high- volume rate); eliminated parts obsolescence problem Rockwell Collins—Navy ARC-210 radio Redesign for commercial parts and processes; annual design reviews; maintenance and availability responsibility with contractor Price reduced 42%; field reliability (MTBF) increased from 500 flight hours to 807 (+62%); annual cost reduction and reliability improvement; eliminated parts obsolescence Rockwell Collins—USAF Pacer CRAG Design for commercial parts and processes; dual-use Savings (est.) of $90 million on award of about $235 million USAF/TRW—military products from commercial lines (MPCL) program—CIM Developed flexible high-volume commercial and low-volume military CIM and improved design-manufacturing interface Design release to production reduced labor 90% (200 hours to less than 20) USAF/TRW MPCL—radio frequency front-end controller (RF/FEC) modules for F-22 and RAH-66 CNI Redesign for civilian (automotive division) production 73% cost reduction ($40,000 to $10,800) USAF/TRW MPCL—pulse narrow-band preprocessor (PNP) Redesign for civilian (automotive division) production 54% cost reduction ($34,000 to $15,500) USAF/TRW MPCL—general Civil-military manufacturing process integration and quality improvement via design of experiments 11 of 14 (so far) critical processes at Cpk > 1.33; PWA assembly 100% automated USAF/TRW MPCL—new business model Developed, documented detailed business model acceptable to government and many commercial contractors Survey of 1,340 companies estimated 68% cost savings from military baseline for sample modules Table continued on next page

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Page 18 Performer—Project Actions (Summary) Results U.S. Army ManTech/CPI, Northrop Grumman, Teledyne—radars Military and civilian radar dual production line cost reduction; $1.6 million invested $19 million PAC-3 cost avoidance U.S. Army ManTech—PEM protection Adapted commercial IC chips for harsh environment and long-term storage; $5.8 million invested $357 million cost avoidance over six aviation and missile systems USAF ManTech—C-17 horizontal stabilizer outer torque box c Combined commercial and military production; reduced government oversight and reporting Greater than 50% cost avoidance USAF Electronic Systems Center (ESC)—generic PWA manufacturing process Integrated civil and military processes via evaluation of critical control elements for each process step Of 156 military and commercial specs and standards, 49 retained, 20 recommended for replacement, 87 not needed USAF Electronic Systems Center (ESC)/Rockwell-Collins—test of above PWA process Compared military-specific, commercial, and new dual-use process using military and commercial components on digital control board from GRC-171 radio 25–35% reduction in assembly, labor, and overhead costs for dual-production and commercial processes; additional 20–30% cost reduction predicted feasible with commercial flat-pack components; dual-production and commercial processes equal to or better than quality of military process; production throughput increased approx. 30%; no process-related failures in accelerated thermal test (17 lifetimes) USAF ESC—North warning system unattended radar (AN/FPS-24) signal processor (ground environment) Substituted commercial plastic encapsulated microcircuits (PEM) for military parts No failures in >6 million operating hours (2/1995); still operating (8/1998) with no commercial PEM failures; 87% average cost reduction for microcircuits (range = 85–92%)

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Page 19 Performer—Project Actions (Summary) Results USAF ESC/Rockwell-Collins—JTIDS receiver/synthesizer PWA (uninhabited fighter environment) Evaluated military certified parts, commercial parts meeting military temperature requirements, and commercial parts using both military and commercial assembly Military assembly costs 15% higher; using mil-temp passive and 10 commercial (of 33) active components reduced material cost by 23%; quality as good as or better than for commercial process; commercial component failure rate lower than military; process-related failures equal, even with more inspection in military process USAF ESC/GEC-Marconi—PLSR RF module Commercial parts and processes substituted for military 65% reduction in material cost, 30% reduction in labor for assembly, test; same electrical performance Boeing/SCI Systems—Longbow Apache helicopter computer and intercom d Built-in dual production facilities using commercial and military parts 1997–2002 scheduled delivery: 2,800+ computers and 707 intercom units SCI Systems—catalog parts d Dual production and design builds catalog of standard products Used in AAR47 microprocessor, joint tactical terminal, flight simulators, radar-controlled chassis, B52 pylon tester computer, Navy databus couplers, and Firefinder radar processor USN/SCI/Eaton—Virginia class nuclear propulsion controls d Military subsystems built in dual-use facilities Backplanes, module assemblies, circuit card assemblies built in SCI's integrated facility M/A-COM—common RF microwave and millimeter wave technology manufacturing base e Designed boards, assemblies, products, and manufacturing processes for dual use Produce in dual-use facilities: GaAs MMIC amplifiers, ballgrid arrays for base station switching and phased-array radars, radar front-ends, radio circuit boards, microwave cable assemblies, millimeter-wave transceivers, voice over IP radio systems, etc.

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Page 20 Performer—Project Actions (Summary) Results M/A-COM Northrop Grumman—ALQ-135 e Redesign for technology insertion, best-value manufacturing, IPPD, strategic partnership to address commercial and military markets 52% cost reduction Navy/Lockheed Martin—FBM Program (TRIDENT) f Open system architecture—COTS insertion to address technology, obsolescence, supportability, and cost issues Increased COTS products as a percent of parts to 60%, attained a 75% parts count reduction, a 50% development cycle time reduction, and a cost avoidance of $1.2 billion NOTE: The source of all information for unfootnoted projects is Winner and Griffin (1998). a LTC W.Price, U.S. Air Force, Miniature Air Launched Decoy (MALD) Program, presentation to the committee on January 25, 2001. b L.Trowel, General Electric Aircraft Engines, Military and Commercial Turbine Engines, presentation to the committee on January 25, 2001. c S.Linder, Office of Naval Research, Overview of ManTech Program and Sponsor's Goals, presentation to the committee on October 13, 2000. d S.Werner and J.Thomas, SCI Systems, Circuit Board Manufacturing at SCI Systems, presentation to the committee on January 25, 2001. e J.Fallon and J.Thomas, M/A-COM, A Common Manufacturing Base for Dual-Use Applications, presentation to the committee on January 25, 2001. f Lockheed Martin (2001). A second observation is that ICMM promotes the exploitation of emerging technologies and enables their rapid delivery to the customer; however, buyers, users, and industry must cooperate closely to accomplish this. This is exemplified by almost all of the cases in Table 3–1. As noted above, several of the cases the committee studied were demonstrations, with the associated benefits and issues. Demonstration programs, pilots, prototypes, and the like are useful to discover what is possible, prove out new approaches and processes, and learn lessons. However, almost every case required extraordinary contracting actions. For example, in the USAF/TRW MPCL case, a contracting officer had to make an unprecedented determination that the circuit boards in question were “commercial parts” in order for TRW automotive to be willing to manufacture them on its commercial lines. The DOD needs to capture the procedures used in these demonstrations and develop guidelines or standard approaches for similar activities. Demonstration projects should include

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Page 21 the development of results and how-to documents; their dissemination is critical but not currently well done. The committee observed the important point that demonstration programs are often underfunded, causing them to take years longer than needed. They should be funded for 2-year completion, at most. Commercial and military design processes differ substantially, because design objectives and schedules differ. The demonstrations illustrate that to make ICMM work, integrated product and process development (IPPD) can and must be used to make sure that military designs are producible at reasonable cost in commercial facilities. For example, in electronics, commercial and dual-use capacity exists, as does the willingness to make ICMM work. Low-lot-size, high-mix facilities are available, but site-specific design rules must be followed from concept on, an example of IPPD. One substantial problem in both electronics and other product types is that many defense designs unnecessarily preclude commercial manufacturing by specifying tolerances and traceability requirements more stringent than those used in commercial processes rather than relying on design for robustness and mature production processes (Winner and Griffin, 1998; GAO, 1998). Another lesson is that appropriate incentives-such as in the ARC-210 case in Table 3-1-can achieve substantial success for both the military customer and the industrial supplier. In the ARC-210 program, the contractor has configuration control within the system as long as it meets availability and form, fit, and function interface requirements. A multiyear descending price curve was contracted in advance, and the contractor has maintenance responsibility as well as all the incentive necessary to decrease the cost and increase the reliability of the system as rapidly as possible. From the listed cases, the committee members' experience, and some informal enquiries in the industry, the committee observed a trend toward defense contractors increasing their outsourcing of electronic board manufacturing (both fabrication and populating) and their use of commercial components. (See, for example, Motorola and SCI in Table 3-1.) The same kinds of forces that took defense industries out of the integrated circuit business, especially the capital cost of keeping up with technology and competitiveness, lead to outsourcing at higher levels of assembly. The military acquisition commands can and should accelerate this trend. Some of the programs reported in the table were ManTech projects. ManTech is chartered by Congress and enjoys unique authorities that can be used to address aspects of a transition to greater use of ICMM (see Appendix E). However, the program is not adequately funded or tasked to implement further significant ICMM demonstrations. Early successes highlight the potential for ManTech to play a pivotal role, through demonstration efforts in technology, business practices, and partnerships, in realizing a more efficient ICMM industrial base.