2

Presentations and Comments

The workshop participants heard a series of presentations on sustainment challenges and initiatives within the military services and in private sector companies representing the aircraft industry. Abstracts of these presentations are provided in Appendix D. A brief summary of the main points of the presentations and the ensuing discussion is given next, in chronological order of presentation.

TUESDAY, DECEMBER 4, 2012

Lt Gen Judith Fedder, Deputy Chief of Staff for Logistics, Installations and Mission Support, Headquarters, U.S. Air Force

Lt Gen Judith Fedder, Deputy Chief of Staff for Logistics, Installations and Mission Support, Headquarters, U.S. Air Force, is responsible for weapon system sustainment (WSS) for the Air Force. Lt Gen Fedder noted that the elements of life-cycle WSS costs are spares/consumables, manpower, sustaining support, and depot maintenance.1 These costs can be put in four categories: depot purchased equipment maintenance (33 percent), contractor logistics support (CLS; 61 percent), technical orders (1 percent), and sustaining engineering (5 percent). WSS baseline funding with supplementals has been about 80 percent of current requirements, but future funding is expected to fall further and further behind requirements.

CLS costs are driving overall WSS cost growth; CLS is growing at 7.9 percent per year, compared with 4.3 percent per year for WSS generally. The recent emphasis on intelligence, surveillance, and reconnaissance (ISR) aircraft is one driver, since these are contractormaintained. In general, sustainment of newer weapon systems tends to be more contractorheavy. Speed in acquisition also tends to work against organic sustainment.2 Lt Gen Fedder concluded by listing some initiatives to enhance sustainment cost management:

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1Lt Gen Judith Fedder, Deputy Chief of Staff for Logistics, Installations and Mission Support, Headquarters, U.S. Air Force, “Air Force Studies Board Workshop: Zero-Sustainment Aircraft,” presentation to the workshop on December 5, 2012.

2For the purposes of this workshop summary “organic sustainment” is defined in the following way: “Organic logistics infrastructure refers to U.S. government entities (principally DoD organizations) such as inventory control



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2 Presentations and Comments The workshop participants heard a series of presentations on sustainment challenges and initiatives within the military services and in private sector companies representing the aircraft industry. Abstracts of these presentations are provided in Appendix D. A brief summary of the main points of the presentations and the ensuing discussion is given next, in chronological order of presentation. TUESDAY, DECEMBER 4, 2012 Lt Gen Judith Fedder, Deputy Chief of Staff for Logistics, Installations and Mission Support, Headquarters, U.S. Air Force Lt Gen Judith Fedder, Deputy Chief of Staff for Logistics, Installations and Mission Support, Headquarters, U.S. Air Force, is responsible for weapon system sustainment (WSS) for the Air Force. Lt Gen Fedder noted that the elements of life-cycle WSS costs are spares/consumables, manpower, sustaining support, and depot maintenance. 1 These costs can be put in four categories: depot purchased equipment maintenance (33 percent), contractor logistics support (CLS; 61 percent), technical orders (1 percent), and sustaining engineering (5 percent). WSS baseline funding with supplementals has been about 80 percent of current requirements, but future funding is expected to fall further and further behind requirements. CLS costs are driving overall WSS cost growth; CLS is growing at 7.9 percent per year, compared with 4.3 percent per year for WSS generally. The recent emphasis on intelligence, surveillance, and reconnaissance (ISR) aircraft is one driver, since these are contractor- maintained. In general, sustainment of newer weapon systems tends to be more contractor- heavy. Speed in acquisition also tends to work against organic sustainment. 2 Lt Gen Fedder concluded by listing some initiatives to enhance sustainment cost management: 1 Lt Gen Judith Fedder, Deputy Chief of Staff for Logistics, Installations and Mission Support, Headquarters, U.S. Air Force, “Air Force Studies Board Workshop: Zero-Sustainment Aircraft,” presentation to the workshop on December 5, 2012. 2 For the purposes of this workshop summary “organic sustainment” is defined in the following way: “Organic logistics infrastructure refers to U.S. government entities (principally DoD organizations) such as inventory control 6

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Strategy guidance/tools/governance to life-cycle management community for building affordable/effective product support strategies; Enterprise-level initiatives such as NextGen CLS; and Individual program initiatives, including sustainment partnerships. 3 Following the presentation, one observer noted that the F-22 was supposed to need only one-half of the maintenance required by the F-15 and asked, what happened? According to Lt Gen Fedder, the F-22 was envisioned to not need low observable maintenance specialists, just a “mech-tech” provided by the OEM. This turned out not to be the case. In addition, the Air Force added an egress system and other specialties and had to buy back the manpower to support these. There is a higher confidence that the F-35 will not need so many specialties, and this should result in large savings compared with the F-22. Several participants raised critiques of the way the Air Force estimates the total costs of sustainment. One suggested a better breakdown of costs into five components that captures 95 percent of the costs: (1) maintenance, repair, and overhaul; (2) training; (3) personnel; (4) energy; and (5) modifications and upgrades. Because costs are incurred in so many different places, controlled by different authorities, rules, and colors of money, intelligent investment decisions cannot be made. A participant noted that the Air Force needs to view sustainment from a fleet perspective. The first question needs to be, What is the best way to deliver support? This participant offered as an example a similar situation in the Army. The M1 tank upgrade and fuel accounts were in different places, so when the question arose as to whether to put diesel in the tank, it was not possible to consider this from a business perspective. How can these components be brought together under one person? Another participant remarked that data systems are not available that would serve as the basis for making smarter sustainment decisions. Knowing what people are actually doing is the key to cutting costs. Focusing on budgets is not the same as focusing on costs. Budgets reflect expenditures, not costs. The Air Force is budget-driven, but costs are more important. He noted that with respect to the growth of CLS costs, the Air Force dug itself a hole when it failed to purchase technical data at acquisition, which would have allowed the option to bring sustainment in-house. At the same time, the Air Force has lost technical expertise due to increase reliance on contractors, so the Air Force does not have access to what is driving CLS costs higher. On the organic side, this participant noted that another piece of the problem is that the supply chain and the depot are separate. “Which drives the bus?” The airlines have the same problem of knowing actual cost, but operationally the supply chain is under control of a points, maintenance depots, distribution warehouses, and transportation facilities. Like the garden variety organic farmer who uses only natural or self-produced products, organic infrastructure sustainment uses the government’s ability to support a product’s mechanical and structural demands, such as those seen by the C-17, over the course of its life.” Albert Barnes and Capt Lewis Johnson, U.S. Air Force, Going Organic: The C-17 Depot Maintenance Activation Working Group, Defense AT&L Magazine, September-October, 2010. Available at http://www.dau.mil/pubscats/ATL%20Docs/Sep-Oct10/Barnes%20sept-oct10.pdf. Accessed January 15, 2013. 3 Lt Gen Judith Fedder, Deputy Chief of Staff for Logistics, Installations and Mission Support, Headquarters U.S. Air Force, “Air Force Studies Board Workshop: Zero-Sustainment Aircraft,” presentation to the workshop on December 5, 2012. 7

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single manager/user. The same participant stated that a recent analysis suggested that a typical time required to get an ordered part in the Air Force is 17 days.4 Another comment related to the organization of the Air Force, to the effect that the Air Force looks at problems through discrete views, or soda straws (e.g., AF/A1-A4), and cannot combine these views to link smart sustainment choices with acquisition decisions. The Air Force cannot get its arms around costs and, therefore, has no ability to influence the acquisition side. The Air Force cannot win the battle looking through these lenses. In Figure 2-1, for example, what are the options for cutting? Where can the Air Force cut to minimize risk? The answers are not clear. Yet, another participant asked rhetorically how much it costs to fly the F-15, all elements of cost together, fully burdened. The answer is that the Air Force does not know. The cost per flying hour may be known, but these data are not inclusive. The goal is to bring all of the communities together to agree on a metric. And if the Air Force has the data, does it have a decision mechanism to set priorities? Another participant asked if the organic sustainment piece is going down as CLS goes up. He stressed that if the Air Force does outsourcing correctly, it needs to do it in a way that reduces internal staff levels to reduce costs. Related to that, he asked if the Air Force has a depot strategy. He answered his own question by commenting that Air Force should look at ISR and decide what skill set to keep in house, but that this strategy has not been developed. According to the participant, with platforms rushed to deployment during wartime, such as certain ISR platforms or the Army mine-resistant, ambush protected vehicle, DoD needs to plan up front for how these platforms will be brought into the regular sustainment system after the war is over. A final topic of discussion related to the need to bring life cycle considerations into the acquisition process from the beginning. Lt Gen Fedder stated that the Air Force is well aware of the need to do better in this regard. One participant observed that the Air Force does not have the decision tools to make trade-offs early in the acquisition process. In the last 25 years, the division between acquisition and sustainment has gotten worse. In his view, program managers (PMs) should be fleet life-cycle managers and work closely with logistics experts. The Air Force currently does not have the authority, tools, or visibility to affect other parts of the product life cycle. This issue was recognized in the 1970s, but 40 years later has not been resolved. Katherine Stevens, Director, Materials and Manufacturing Directorate and Capability Lead for Agile Combat Support, Air Force Research Laboratory Katherine Stevens, Director, Materials and Manufacturing Directorate and Capability Lead for Agile Combat Support, Air Force Research Laboratory (AFRL), gave an overview of the AFRL’s role in science and technology (S&T) for sustainment in the near term, mid-term, and far term. She also cited a number of examples of successful development and transition of sustainment technologies. Near-term activities address challenges in the maintenance of the current fleet, such as improved nondestructive inspection tools and expertise in support of the 4 For a commercial airline of approximately 350 aircraft, cutting 1 day in the work-in-progress cycle—that is, from removal to repair to return to service—could save $7 million in inventory investment. This could be as simple as returning a failed part to a repair facility faster, cutting repair time, among other factors. 8

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Air Force corrosion enterprise. Mid-term goals are to support “condition-based maintenance” in part by improving life prediction tools and sustainability models. Far-term goals include reducing sustainment costs by integration of data, models, and simulations throughout the life cycle. 5 When a physical aircraft arrives for maintenance, a digital model of the aircraft—specific to that tail number, including deviations from the nominal design—is intended to be delivered as well. The model is planned to continually reflect the current state of the actual aircraft. Dr. Stevens believes the central reason behind increasing sustainment costs is the increasing age of the Air Force fleet; the average aircraft has been in service for 23 years. Problems associated with aging include fatigue cracking, corrosion, parts unavailability, material degradation, and wear. AFRL develops solutions to technology readiness level 6 and then hands them off to depots or program offices. Asked about where AFRL’s requests for S&T support come from, Dr. Stevens indicated that signals come from both major commands (MAJCOMs) and program offices on warfighter needs. Projects from the program offices tend to focus on specific problems. The core function master plans provide more general guidance, and the MAJCOMs provide sustainment technology plans. Dr. Stevens indicated that it is challenging to decide how to invest in S&T for long-term (25-year) payback. The fidelity of cost-benefit analysis is inconsistent. The Air Force does not have a base process to track return on investment. One participant noted that in fairness, the commercial aircraft industry does not do this very well either. An important issue raised was that of whether there are appropriate incentives for reducing sustainment costs. Dr. Stevens noted that there is no incentive for a program office to, for instance, cut in half the replacement times for landing gear on the F-22 unless it is given a requirement. Sometimes there are contractor incentives for improvements, but these are rare. It would also be possible to incentivize organic depots to find innovative ways to reduce sustainment costs, but this is not currently part of the culture. She observed that contract structure is the key to providing incentives—for example, a fixed-cost contract with a 50/50 cost share of any documented savings. Cost-plus contracts do not provide these incentives. Dr. Stevens believes that current contracting practices hold back full industry participation in reducing sustainment costs. One participant noted that it had been about 2 years since the publication of the NRC’s report on Air Force sustainment. It appeared to him from the presentation that big changes were happening at AFRL, but he questioned whether the sustainment budget at AFRL was still in the range of 5-8 percent of the overall budget. Dr. Stevens responded that in the past, AFRL focused exclusively on S&T research, but now sustainment is part of the mission. While it was true that many AFRL staff feel that it is more exciting to work on the cutting edge of technology, there are also AFRL people who are passionate about keeping the Air Force flying. This is a continuing challenge in AFRL culture. In response to a question about whether there is duplication of effort between AFRL engineers and life-cycle engineers in the program offices, one participant felt that a bigger issue was retaining good life-cycle engineers in the program offices because they can receive higher 5 Katherine Stevens, Director, Materials and Manufacturing Directorate and Capability Lead for Agile Combat Support, Air Force Research Laboratory, “USAF Science and Technology for Sustainment,” presentation to the workshop on December 4, 2012. 9

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salaries in the private sector. A different participant noted that a key element of reducing maintenance costs is to be able to identify the part that needs to be replaced right away, rather than having to follow a fault isolation tree. This requires good data on current component performance. Comparisons with the commercial airlines are not fair because the airlines have much younger fleets, and most aircraft are still in production. This is a big advantage for maintenance and parts replacement. A final comment relating to personnel was that, in years past, development planning tools existed with which the Air Force defined capability gaps in the next 20 years, and experts ran models and simulations on all weapon systems, which became the basis for the program objective memorandum submission to Congress. This all went away when Congress zeroed out funding. The funding has now been restored, but the experts have now retired. Steven Brown, Professor, Defense Acquisition University Steven Brown, a professor at Defense Acquisition University and a former Air Force crash investigator, began by observing that flight safety is a passion in the Air Force. In his view, the Air Force could solve its sustainment problems if it had the same passion. The key is to institutionalize progressive change. His presentation was organized around five key areas of sustainment: cost, performance, management, contracting, and training. In each area, he described the current state of affairs, recent innovations, and, finally, suggestions for institutionalizing these changes. 6 He estimated that about 65 percent of total ownership cost of an aircraft is operating and support (O&S) cost. It is very difficult to get a handle on total cost because the Air Force does not have data on life-cycle cost (LCC). In the acquisition process, O&S cost is a key system attribute (KSA) and must be estimated to check a box, but there is no hardcore requirement pertaining to it (it is not a key performance parameter, or KPP), and it is not tracked. Dr. Brown remarked that acquisition and LCC are not connected in the Air Force. They are managed by two completely separate organizations at the system program offices (SPOs). He suggested that improved analysis and tracking of LCC could be made a requirement. Some participants related two anecdotes about poor decisions that were made because of a failure to consider life-cycle costs up front. In the F-22, the decision was made not to carry a ladder on board in order to save weight. This necessitated every airfield to have deployable ladders on hand to serve the F-22s, at much higher cost. In another example, the Army proposed that the future combat system carry bottled water, since the cost of delivering water to the vehicles was so large. However, the cost of delivery was borne by a different office, and it proved impossible to make a business case for the vehicles to carry the extra weight. Some participants noted that the lesson drawn is that program offices must have the tools available to make the correct decisions where these kinds of life-cycle trade-offs are involved. One participant agreed that if money is important, the Air Force has to track it in order to make proper decisions, and the Air Force has to have appropriate metrics. A common metric is dollars per flying hour, but that does not account for capability. The Air Force needs to know 6 Steven Brown, Professor, Defense Acquisition University, “Institutionalizing Low Sustainment Aircraft,” presentation to the workshop on December 4, 2012. 10

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what elements of cost are included in the estimates in order to compare with industry. In the airline industry, maintenance cost per available seat mile is the metric. Utilization is also key. In the airline industry, aircraft commonly fly 3,000-4,500 hours per year, much more than Air Force aircraft. Dr. Brown suggested that the Air Force look outside for best practices to benchmark against. The Navy has been emphasizing “gate reviews” early in the acquisition process that have been demonstrated to reduce O&S cost uncertainty, and the Air Force could learn from this. Pratt and Whitney and others have developed useful cost models. Finally, other countries such as the United Kingdom and Canada realize lower sustainment costs because they have historically operated under tighter dollar constraints, and there are likely to be lessons to be learned there. On the performance issue, Dr. Brown noted that system availability (measured as percent time available) is typically a KPP, while system reliability (measured in terms of mean time between failures) is often a lower level KSA. This was the case with the Joint Strike Fighter (JSF), where “mission reliability” (availability) was the KPP. He believes that this decision is one reason that the growth in system reliability of some versions of the JSF has lagged behind what was planned. One participant questioned what the availability metric really means. It is not clear in the field what the “fudge factors” are. At the strategic level, this is not a concern. Is the aircraft flying or not? But at the tactical level, it is likely that different metrics are being used for example, for aircraft moving through the depots. To institutionalize improvements to sustainment performance, Dr. Brown recommends establishing system requirements for reliability and maintainability. On the management issue, DoD Instruction 5000 describes a systems engineering process for weapons programs in which the PM is also the “life-cycle systems manager,” with no dedicated logistician in the loop. However, a new key leadership position of product support manager (PSM) has now been established for all acquisition category I and II (ACAT I and II) programs. This life-cycle logistician, who works directly for the PM, is OSD-certified at level 3 and is also supposed to be acquisition-certified. To institutionalize this advance, Dr. Brown recommended filling the PSM positions with highly qualified life-cycle logisticians and benchmarking sustainability readiness levels against maturity models in the other services, industry, and allied initiatives. On the contracting issue, Dr. Brown noted the trend away from the PM being involved in the details of repairs, parts, and engineering toward a focus on performance-based logistics— availability, reliability, and mission effectiveness. The details of product support are increasingly being managed by product support integrators (PSIs) who work for the PSM. The PSIs are given contract incentives such as fees and 50/50 gain sharing as rewards for saving sustainment dollars. This strategy has been shown to work well for the F-117 and the F/A-18. The Defense Logistics Agency (DLA) has also initiated pilot programs that combine existing performance- based contracts for sustainment of common items (e.g., auxiliary power units (APUs), helicopter engines) managed by the different services into a single DoD contract. This enterprise approach to sustainment contracting is estimated to save about 20 percent on costs. On the training issue, DoD is estimated to have nearly 17,000 life-cycle logisticians— some in the program offices, some in the supply chain, and some at the three Air Logistics 11

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Complexes (ALCs)—94 percent of whom are civilians. 7,8 Defense Acquisition University (DAU) offers three levels of logistics certification and in 2013 will offer a new course in “business acumen” that will help acquisition personnel develop techniques for negotiating better business deals. In 2014, a senior seminar will be offered to current and selected PSMs that highlights the keys to PSM and PM success. A final comment following this talk was that DoD does not have the tools to measure return on investment or life-cycle cost, and instead of chief executive officers, chief financial officers, and quarterly reports, there is a political process that makes it hard to run sustainment in a businesslike manner. James Yankel, Technical Director, Directorate of Logistics, Air Force Materiel Command James Yankel, Technical Director, Directorate of Logistics, Air Force Materiel Command (AFMC), provided a perspective on sustaining aging aircraft from AFMC. Average growth of total aircraft sustainment costs is 6.5 percent per year, driven by increasing failure rates and maintenance man-hours associated with an aging fleet. 9 Funding is falling further and further behind WSS requirements. The biggest cost growth area is CLS. In the 1960s, the majority of sustainment was organic. Today, the majority is commercial contracts. In the future, the plan is to make sustainment more of a public-private partnership. Mr. Yankel described recent initiatives aimed at reducing sustainment costs and approaching sustainment more from an enterprise point of view. He explained that AFMC recently reorganized itself to achieve efficiencies by consolidating 12 centers down to the following 5: Air Force Research Laboratory (AFRL); Air Force Life Cycle Management Center (AFLCMC); Air Force Sustainment Center (AFSC); Air Force Test Center; and Air Force Nuclear Weapons Center. In addition, processes for sustainment at AFMC are increasingly taking a life cycle and command-wide approach. These processes are undergoing performance reviews that 7 The number of DoD personnel who are responsible for life-cycle logistics, which is defined as “developing, fielding, and improving system sustainment,” is large; however, this number is relatively small when compared to the number of people (~600,000) who are responsible for broader DoD logistics (Steven Brown, Defense Acquisition University, “Institutionalizing Low Sustainment Aircraft,” presentation to the workshop on December 4, 2012). 8 “The U.S. Air Force (USAF) currently has three Air Logistics Centers [Complexes] (ALCs), operating under the Air Force Materiel Command (AFMC), which provide acquisition, modification, and maintenance support for the Air Force aircraft fleets, end items, commodity parts, and some missile systems. The ALCs are complex, multi- faceted organizations. They provide support to the Air Force and other components of the Department of Defense (DoD) on numerous product lines.” Excerpted from NRC, Examination of the U.S. Air Force’s Aircraft Sustainment Needs in the Future and Its Strategy to Meet These Needs, Washington, D.C.: The National Academies Press, 2011. 9 James Yankel, Technical Director, Directorate of Logistics, Air Force Materiel Command, “Sustaining Aging Aircraft,” presentation to the workshop on December 4, 2012. 12

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emphasize standardized reporting across all weapon systems, requirements cost drivers, and technology insertion needs and opportunities. Following the presentation, some participants raised questions about whether what is driving the cost of sustaining each weapon system is truly understood by the Air Force. The issue is not whether sustainment is accomplished by CLS or depot-level repair (DLR), but rather what is the best cost solution for the Air Force. Other participants pointed out that discussions of rising costs should consider operational tempo as a factor to determine if costs are reasonable. One participant opined that flight hours should be the common denominator, not average age. In the commercial airline industry, aircraft availability (or its opposite, downtime) based on the need for structural repairs is the cost driver, not repair cost. A final topic of discussion was the AFMC reorganization and whether it is likely to produce the desired efficiencies. Some participants noted that this was an open question so soon after the reorganization, with the reorganization still in the “sausage-making” phase. Several observers saw a potential conflict between the responsibilities of the AFLCMC and the AFSC. There was sentiment expressed by some participants that there should be a strong cooperative relationship between the two centers and that the two complementary responsibilities should be clearly articulated and institutionalized to produce a common approach. Joann Berrett, Director, Aerospace Sustainment Directorate, Air Force Sustainment Center Joan Berrett, Director, Aerospace Sustainment Directorate, AFSC, began by stating that there is a high level of effort directed toward maintaining good communication between AFSC and AFLCMC. All elements of AFSC organic costs are being investigated, although she was not sure when the results would be available. The three major Air Logistics Complexes (ALCs)— Oklahoma City ALC; Warner Robins ALC; and Ogden ALC—are organized under AFSC.10 She noted that the number of dollars needed to satisfy readiness requirements are projected to increase while the budget for WSS is expected to be flat from FY2012 to FY2018. AFSC’s aim is to produce higher efficiencies through better processes and a higher level of integration. She cited some success stories in which average work flow days had been reduced through implementation of high-velocity manufacturing principles—for example, improved knowledge of an aircraft’s condition before it arrives at the depot, and “gated production,” in which all relevant repairs on an aircraft are completed before it can move on to the next gate. Following this talk, there was a discussion of the Defense Logistics Agency’s role. While some of DLA’s successes were acknowledged by some participants—especially in the area of contracting, one participant claimed that it takes a very long time—17 days on average—to get an ordered part. Another observed that one reason is that the DLA does not own all the assets it needs—e.g., transportation—and that the Army’s record is even worse. A final comment on DLA was that there is no integrated supply chain planning across the enterprise. DLA needs to be more agile and remove compartmentalization. Ms. Berrett was asked whether the “not invented here” syndrome still prevailed at the three ALCs. She answered that Lt Gen Litchfield 10 Joan Berrett, Director, Aerospace Sustainment Directorate, Air Force Sustainment Center, “Driving to Cost Effective Readiness,” presentation to the workshop on December 4, 2012. 13

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had initiated a big push to standardize work processes and metrics at the ALCs, from the mechanic on the shop floor up to the senior managers. Mike Jennings, Deputy Director of Logistics (Acting), Air Force Life Cycle Management Center Mike Jennings, Deputy Director of Logistics (Acting), Air Force Life Cycle Management Center, described the makeup of AFLCMC, which focuses on acquisition and includes the program executive offices (PEOs). With the new five-center construct described above, Lt Gen C.D. Moore has more visibility across the enterprise, although no one person is empowered to execute an enterprise sustainment strategy. A Life Cycle Management Working Group was established that reviewed more than 160 processes and identified needs in the following six key areas owned by AFLCMC: Develop human capital. There is currently no standard training for specialties. There is now only a very limited capability to identify needed competencies and what AFLCMC now has, although there is an implementation plan for competency of the new PSM positions and other logisticians. Developmental planning. AFLCMC already possesses an “executive” role. This will be critical to having the ability to influence product support. Product support business case analyses (BCAs). Standard processes have been defined but, according to Mr. Jennings, still need oversight. Repair sources. Cross-program efficiencies need to be identified (for example, common radios on different platforms). Centralized asset management and WSS prioritization. Requirements standardization and justification are needed, as is a standard methodology for looking across platforms at engineering requirements. Logistics health assessments (LHAs). There is currently no ability to roll up sustainment data to the enterprise level; assessment and reporting are not lined up. A tool for milestone B to C exists (engineering and manufacturing development). 11 The common thread among all of these needs is that there are many functional communities—engineering, budget, and so on—that need to work together. Processes need to be integrated—e.g., BCAs with depot source of repair. In Mr. Jennings’ view, Lt Gen Moore needs to have power over the product support enterprise, that is, influence over PEOs. Mr. Jennings stated that the overall objective of AFLCMC is to provide affordable, effective product support. Metric number one is system availability, although the definition of availability is still under discussion. Affordability is judged by looking at the acquisition program baseline and comparing to actual expenditures. This will help in estimating future expenditures. Metric number two is LHAs, although he stressed that the Air Force must have the necessary data. 11 Mike Jennings, Deputy Director of Logistics (Acting), Air Force Life Cycle Management Center, “Product Support Responsibilities and Cost Reduction Initiatives,” presentation to the workshop on December 4, 2012. 14

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Mr. Jennings was asked who measures actual costs. He responded that currently the issue is not resolved and needs to be tied to firm data and updated when major events occur. This is still part of the “sausage making” at AFMC. A participant stressed that it is very important to check the BCA against actual costs. This need not be complicated, and it should not be necessary to clear the results with everyone unless there is a big deviation from forecasts. He noted that the fundamental challenge is to define an Air Force life-cycle cost model that will be used to plan and track costs. To be truly useful, it must be tied to budgets. Final Thoughts—Day 1 Following this presentation, the chair asked for final thoughts from individual participants based on the presentations and discussions from the first day. The following individual views, which do not necessarily reflect the consensus of the workshop participants and speakers as a group, were expressed: Based on the positive discussion, it appears that the Air Force has the right leaders and the right people on the ground to address the sustainment problem. With regard to the aging fleet, the Air Force has not done a good job of going to the people who have worked these issues for three decades to learn lessons of how they have succeeded. In particular, the Air Force Security Assistance Center (AFSAC) supports more aircraft than are in the Air Force inventory. AFSAC’s inventory includes WWII vintage aircraft all the way to the most modern aircraft. AFSAC has developed the expertise to mitigate a number of sustainment issues that the operational Air Force is facing. When asked whether or not AFSAC expertise had been tapped, the answer on three different occasions throughout the first day was no. The emphasis on standardization across the organization is positive. Implementing the “Lean” approach is not a short-term process—it is likely to take 8 years. The structural changes at AFMC are encouraging, but the Air Force lacks the right data and information to do a top-notch sustainment job. The challenge is all the more difficult with rotations of personnel. The problems caused by colors of money are discouraging and getting worse. They are also self-inflicted. This would be a good subject for further study. The discussion is reminiscent of the 1960s. The Air Force needs to track costs, and the life-cycle management effort should focus on a few low-hanging fruit. It needs a near-term success. The Air Force needs to define a life-cycle cost model for sustainment and disseminate it. There have been enormous changes in the past 2 years, and it appears that the recommendations of the NRC’s sustainment report have been heard. However, continuity of leadership remains a problem. How can the Air Force institutionalize change? 15

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WEDNESDAY, DECEMBER 5, 2012 Maj Mark Blumke, Deputy Chief, Mx Systems and Integration Branch, Directorate of Logistics, Air Mobility Command Maj Mark Blumke, Deputy Chief, Mx Systems and Integration Branch, Directorate of Logistics, Air Mobility Command (AMC), reviewed AMC initiatives to reduce maintenance and sustainment costs. 12 He listed the top cross-cutting drivers, in order of effects on operational availability or non-mission-capable hours (these do not reflect direct labor hours, but instead are measured on a 24-hour clock). Engines appear second on the list, but in fact are the top cost driver. He stated that engine initiatives at AMC are driven by fuel-efficiency programs but also have the secondary effect of reducing sustainment costs. He presented several BCAs for engine upgrades in which the avoided maintenance costs were projected to yield savings on the same order as the fuel savings. However, one participant noted that no actual cost data was presented and stressed the importance of following up with actual data to compare with projected data. Furthermore, specific fuel consumption needs to be measured in a test cell, since a lot of extraneous factors come into play when trying to measure fuel consumption on a flying airplane. Another participant noted that constraints on the modifications budget were preventing cost-effective engine projects from going forward. Another AMC effort that is intended to increase fuel efficiency and reduce maintenance is to reduce the use of APUs on aircraft when they are on the ground, since external generators are five times more efficient. One participant observed that putting clocks on APUs—and making them easy to read—would help in this effort. Maj Blumke went on to discuss structure- related initiatives at AMC, the most important of which is corrosion. He cited the 2010 report Impact of Corrosion on Cost and Availability to DoD that estimated that Air Force aviation and missile corrosion consumes 35 percent of maintenance costs, roughly $6.5 billion. 13 Many AMC aircraft are high on the list. Initiatives include funding development of corrosion prediction and growth models (particularly corrosion under paint) and sensors to monitor corrosion initiation and propagation. Corrosion is a serious issue, and AMC takes it seriously. AMC stands ready to work with other entities within the Air Force and DoD to advance corrosion prevention/control capabilities. Many observers commented that if corrosion truly accounts for 35 percent of costs, it should be the object of a major cross-cutting S&T effort. Several noted that many studies by AFRL, the NRC, and others have already been done, and there was a funded program managed by the Joint Logistics Command to address corrosion across the Air Force. A participant questioned, What happened? One participant familiar with the effort said a lot of coatings were developed but that the initiative appeared to lose steam after awhile as ideas got used up. 12 Maj Mark Blumke, Deputy Chief, Mx Systems and Integration Branch, Directorate of Logistics, Air Mobility Command, “AMC Initiatives to Reduce Maintenance and Sustainment Cost Drivers,” presentation to the workshop on December 5, 2012. 13 Logistics Management Institute, 2010, Impact of Corrosion on Cost and Availability to DoD. Available at http://www.sae.org/events/dod/presentations/2012/impact_of_corrosion_on_cost_and_availability_to_dod.pdf. Accessed February 22, 2013. 16

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A final comment on the presentation made three points. First, in the commercial airline industry, every time a panel is opened (e.g., during an inspection) the mechanic uses a basic corrosion protection spray. This has been in place for 15 years and should be routine. Does the Air Force have a comparable procedure? Second, if the Air Force is really focusing on cost to the enterprise, it should have a cost-related metric such as man-hours, as opposed to non-mission- capable hours. Third, the engine initiatives described appeared to be related to occasions on which major modifications were undertaken, but there was less emphasis on the smaller things that can be done. There are not that many modifications performed on old aircraft. SMSgt Kevin Mead, Air Force Element Vehicle and Equipment Management Support Office SMSgt Mead’s organization is chartered to execute enterprise vehicle fleet management and sustainment for the Air Force. It is customer-focused at the base level and has authority to act without going through any MAJCOM. He described several initiatives that have saved man- hours and sustainment costs, including validating fleet requirements and rightsizing, utilizing a standard algorithm for budget forecasting, and introducing fleet health metric with an algorithm to measure the health and effective ages of the 97,000-vehicle fleet. The Vehicle and Equipment Management Support Office (VEMSO) has developed a fleet management decision support system with utilization criteria and validation processes. In addition, there is a program called automotive information module (AIM-2), to be completed by the end of FY2013, in which an installed module collects data on the vehicle usage characteristics, fuel type, etc., and transmits the information wirelessly to a worldwide database that is searchable by customers. This is enabling a condition-based maintenance approach. The initiatives described in this presentation were praised in comments made by many participants who thought the fleet management perspective and the enterprise approach as refreshing. SMSgt Mead was asked if any other Air Force programs had come in to see the tools he was using. He responded that he had been visited by the construction and civil engineering communities and that tools are available on the community website. VEMSO reports directly to headquarters of the Air Force, which is very unusual. One participant stressed that automated reporting of problems on ground vehicles is far in advance of the situation with aircraft. Aircraft need to be made “smart” so that they can tell engineers of any problems. Another observer said that the bigger problem is that everyone looks differently at metrics. The key metric is dollars for the enterprise. The best investment might be an anti-corrosion spray, not an engine modification. The PSMs recommend where to spend the next dollar in a particular program; the Air Force must create an environment where these recommendations can be made enterprise-wide. An example of the problem is the inability to change configuration and buy a new engine that would be better in all respects than doing a modification. In addition, the constraints associated with using specific funding areas are extremely burdensome. These funding rules are counterproductive to reducing sustainment and maintenance costs. A participant argued that the Air Force must empower fleet managers with the ability to expedite moving money from one area to another if the business case can be made. 17

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Lt Col Brian Godfrey, Chief, Airborne Branch (A4CA), Air Combat Command Headquarters Lt Col Brian Godfrey, Chief, Airborne Branch (A4CA), Air Combat Command Headquarters, gave an overview of sustainment from an Air Combat Command (ACC) perspective. The biggest cost drivers are structural cracks/corrosion, wing repairs/replacements, wiring faults, and low observable (LO) maintenance. These problems are exacerbated by fewer maintainers available, increasing operational tempo, and fleet aging. Sustainment cost successes include better fleet management—e.g., balancing the time spent by F-15s and F-16s in high- and low-corrosion environments— and shifting F-22 maintenance from contractor to organic. In his view, contractor logistical support is not a panacea. In the future, he believes S&T can be harnessed to save on maintenance in several ways: common/standardized testers; leveraging information technology (e.g., having mobile maintenance applications on a tablet carried by the mechanic to be able to troubleshoot, order parts, and close jobs at the aircraft); alternative fuels; and “cold spray” of metal onto surfaces to repair corrosion, cracks, and holes. Lt Col Godfrey was enthusiastic about the young, tech- savvy workforce at the depots and felt that they were an asset that could help implement new maintenance technologies. One participant asked why the Air Force is still having problems with LO maintenance. Participants asked, Will the Air Force continue to have problems with the F-35? Did the Air Force learn the appropriate lessons from experience with the F-117 and the B-2 structures? The speaker remarked that one problem was that the Air Force did not have enough people then, and this is still true. Lt Col Godfrey was also asked whether he was proposing a standard test program. He responded that there had been such a program years ago that was a big failure. The lesson was to be careful of global information technology solutions. Another participant responded that the Air Force needs to define common data architectures across the enterprise, not common testers. The discussion then centered around enterprise resource planning (ERP) systems that are designed to improve business processes but are not designed specifically to enhance decision making. The data ERPs generate do enable better decisions, but the ERP itself is not a good decision-support tool. One participant noted that what would aid significantly in decision making would be an Air Force “app store” that would offer easy-to-use applications that would run off of the ERP, much like applications for today’s smart phones. Another comment was that the Air Force should make a business case for putting a “black box” on legacy aircraft, with sensors that tell where and when problems arise. The problem is how to fund this if it competes with funding for aircraft performance. A response by one participant was that there is money dedicated to the sustainment community that does not compete with performance—you just have to figure out where the money is. If corrosion is the most important problem, the Air Force needs to figure out how to put money against it. Who in the Air Force could make this decision? Program offices put out requirements for brochures on depot-level maintenance for that weapon system, but the Air Force does not have that at the corporate level. Centralized asset management just orchestrates the process program by program, but the Air Force is missing opportunities unless the Air Force looks across the board and implements changes broadly. Lt Col Godfrey offered that the core function lead integrator (CFLI) construct is one way to do this, but it is core function by core function, not enterprise wide. There is a disconnect between programs and the enterprise. In the commercial world, 18

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there is an FAA-approved manual that prescribes how to remove paint, and this is used for all products. One participant remarked that LCMC should prescribe standards by which programs are managed—standard data elements that allow the Air Force to do what it needs to do. Another commented that LCMC should establish a task force on corrosion to synergize efforts; it might require 5 years to figure out how to do it, but the Air Force would know what it is spending on it. The Air Force can use information technology to streamline and customize tasks in such a way that users will inform the enterprise—the opposite of the traditional military chain of command. One observer noted that PMs are generally not in the life-cycle cost business. In the Army, through engine designs that took advantage of modules and quick disconnects, it would be possible to change out a Humvee engine in 2 hours instead of the current 32 hours, but who would pay for it? DoD needs to create a global supply chain; this is not just an Air Force problem. A final comment was that data mining is a powerful tool for figuring out where to position spare parts or services most efficiently. It was found, for example, that by mining data of people googling “cold and flu,” this was the best predictor of where flu vaccines should be sent. BG Edward Dorman III, Director for Logistics Operations, Readiness, Force Integration and Strategy, Office of the Deputy Chief of Staff, G-4 BG Edward Dorman III, Director for Logistics Operations, Readiness, Force Integration and Strategy, Office of the Deputy Chief of Staff of the Army, G-4, addressed two topics: (1) operational energy consumption and (2) condition-based reset. Soldiers are using more fuel and battery energy than ever before, and energy drives operational capability—maneuver, awareness, communication, etc. The fully burdened cost of fuel ranges from $3.95/gallon to more than $56/gallon in Afghanistan. Batteries carried by soldiers are an important weight issue. The Army G4, chief of staff, and the secretary of the Army are leading a variety of initiatives to promote energy conservation and energy efficiency, including soldier-worn integrated power enhancement systems, wheeled vehicle systems to recharge batteries, and engine upgrades to improve efficiency. However, making soldiers more energy-aware requires training and changing the culture of senior non-commissioned officers and soldiers; the officers must not be the only ones to see the benefits. Condition-based reset is an effort to get back to soldier maintenance in the field— toward organic unit-based as opposed to institution-based sustainment of equipment to save money. The examples given tended to focus on ground equipment rather than aviation. Condition-based reset has secondary impacts on reducing operational energy by reducing “tooth to tail” the entire logistics snake. One participant noted that sustainment solutions are not always materiel solutions; he liked the emphasis on gathering more information and the “condition-based” concept. Another participant stressed the importance of institutionalizing this approach, so that it would survive personnel rotations, and getting buy-in, down to the foxholes. 19

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Joe Guenther, Vice President and General Manager, Evandale Turbofan and Turbojet Engines, General Electric Aviation Joe Guenther, Vice President and General Manager, Evandale Turbofan and Turbojet Engines, General Electric Aviation, explained that factors driving engine sustainment costs are the operating environment, which is not under the warfighter control, the aircraft mission (for example, the decision to use the 4-engine B-2 bomber for close air support in Afghanistan), and thrust de-rate—only using full thrust when the airplane is full. Factors that can strongly affect maintenance costs are engine health monitoring, inspection practices, and regular engine washes. It is important to have the analytical capability to monitor engines that should come off the airplane today rather than fail in 3 weeks. If GE has a performance-based logistics contract, it monitors trends in engine health with electronic controls wirelessly. In fact, Mr. Guenther showed examples where sustainment managed by the original equipment manufacturer (OEM) resulted in lower cost per shop visit and longer time on wing. Engine fleet management is also important. The best engines are not needed for an easy route. One sees a lot of “tired” engines in the Air Force. As engines age, they become more expensive to restore. New turbine engine technology will reduce fuel consumption and increase thrust-to- weight ratio. To take advantage of emerging capabilities, Mr. Guenther recommended continuing to expand the component improvement program, funding upgrades to the legacy fleet, re-engineering, and continuing investment in new technology/materiel. The discussion following this presentation was wide-ranging. Several observers related problems with the interpretation of existing regulations—e.g., what could be funded by 3400 (operations and maintenance) money versus 3010 (modifications) money. One participant opined that the challenge is to determine how sustainment translates into things that matter to the warfighters/operators. The platforms meet the mission but cost more dollars than they should. The participant commented that declining budgets should be viewed as opportunity to effect change. Another observer commented on the effects of the new CFLI construct on sustainment. Each quarter, “red” and “yellow” (non-combat ready) aircraft are reported up to the CFLI. One core function, agile combat support, represents 70 percent of the inventory, but the current process only addresses segments of the problem. Raymond Valeika, Retired Senior Vice President for Technical Operations, Delta Airlines Raymond Valeika, Retired Senior Vice President for Technical Operations, Delta Airlines, drew lessons from his management experience in the commercial airline industry for the Air Force. He explained that effective sustainment depends on transparent information, based on the following: Manufacturers’ data. The relationship between the military and the OEMs is not as close as the relationship between the commercial airlines and the OEMs. There needs to be constant communication. 20

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Operational data. Having proper metrics is important. At Delta, the goal was to have no more than 12 aircraft undergoing unscheduled maintenance and 18 in scheduled maintenance out of a fleet of 600. These numbers were tracked daily. Cost data. It is critical to understand all elements of cost, including inventory, labor, aircraft downtime, overhead, and staff. Application of good sustainment management principles, such as focusing comprehensively on one aircraft at a time, saves money. Cost data also allow one to make trade-offs; e.g., one-engine taxi can save fuel but can hasten the failure of the other engine due to lack of warm-up time. If saving money is the goal, it is critical to manage costs rather than manage budgets. Performance data. One must understand and validate error rates. How many aircraft are out of service, and what does that mean? These data help determine training needs— typically 1 week per employee per year at Delta. Sick leave and absentee rates are key labor metrics that are tracked because they reflect employee attitudes toward work. Mr. Valeika stated that transparent information drives organizational effectiveness. The organization must be integrated in order to capture the gains made by either operations or sustainment personnel. There has to be a place where authority comes together to resolve conflicts. The Air Force has a matrix structure that does not provide measures across the boundaries. For example, the user of a part is not responsible for having the part delivered. Cost is looked at in stovepipes. Landing gear on the F-15s were taken from spares and put on operational aircraft, leaving a field full of aircraft with no feet. This was done to get the mission accomplished, but at what cost? Following this presentation, one observer noted that Gen Wolfenbarger, head of AFMC, is seeking an enterprise viewpoint of all centers in order to be able to tell the chief of staff what is going on. The three ALCs were once commanded by two-star flag officers and saw one another as competitors. With the recent reorganization, they now all report to Lt Gen Bruce Litchfield, commander of AFSC, who now has more clout, budget, and access. In this observer’s view, this is a big opportunity. Mark Buongiorno, Director, Military Engine Aftermarket Business Development, Pratt and Whitney Mark Buongiorno, Director, Military Engine Aftermarket Business Development, Pratt and Whitney (P&W), reviewed life cycle cost management practices at P&W. He noted that engine design largely determines sustainment requirements. In terms of the life cycle, he estimated that development is 11 percent of the cost, production 23 percent, and sustainment 66 percent. Cost drivers change over the life cycle, with depot-level repair being about 30 percent of 5-year recurring costs but nearly 75 percent of 50-year recurring costs. He stressed that active life-cycle management is required in all program phases and cited examples of cases where P&W’s approach had saved the Air Force money. P&W works with the depots to determine when engines get overhauled. It presents metrics and cost drivers to the operators— a very rich data exchange. Finally, P&W has an investment program to continuously improve its products through technology insertion. Following this talk, one observer commented on the 21

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differences between military and commercial aircraft engine utilization. Military aircraft are flown much differently than commercial aircraft, leading to shorter engine life on the military side. Effective sustainment requires a serial-number-specific sustainment work program. Final Thoughts—Day 2 Following this presentation, the chair asked for final thoughts from individual participants based on the presentations and discussions from the first day. The following individual views, which do not necessarily reflect the consensus of the workshop participants and speakers as a group, were expressed: There is a perceived deterioration in relationships between industry contractors and government acquisition personnel compared to the past. This theme recurred several times during the workshop. Depots have developed clever workarounds when they encounter problems with the system. These lessons should be captured. The Air Force does not have a simple answer to the question of what its mission is. The Navy, on the other hand, knows. The Air Force corporate structure is now organized around core functions, but the CFLI process has not been internalized yet. Color of money is a major issue. A process is lacking for converting cost-saving opportunities into a business case. The resources may be available if the business case is made. The Air Force does not have a meaningful cost tool to translate sustainment issues into the budget framework. It does not have to be complex and should begin with “small c” cost. THURSDAY, DECEMBER 6, 2012 VADM Walter Massenburg (USN, Ret.), Senior Director, Mission Assurance Business Execution, Raytheon Company VADM Walter Massenburg (USN, Ret.), Senior Director, Mission Assurance Business Execution, Raytheon Company, recounted a situation in naval aviation in the 1999-2001 period in which aviation depot-level repairable (AVDLR) costs were rising by double digits each year, and spare aircraft were being cannibalized to support deployed aircraft. Only 30 percent of the fleet was flyable. Appalled by this situation, the chief of naval operations (ADM Clark at that time) instituted an enterprise vision of naval aviation on a cross-functional, cross-organizational behavior model aligned to the “greater good.” The model used was a commercial one, with a chief executive officer, a chief operating officer, and a chief financial officer managing the aircraft fleet according to Lean management principles. In the beginning, the Navy had no clue as to what was driving their costs. Strong egos were trying to protect individual programs. There was a culture oriented toward consumption; e.g., the metric being used on carriers was the number of arrested landings in a given time 22

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period. It took 4 years to break through the stovepipes and get rid of impediments, and they began to look at readiness differently. There was a single process owner (keeper of the metric). The metric adopted was “aviation units ready for tasking based on missions completed.” This overall metric has a number of supporting metrics involving inventory, reliability, cycle time reduction, and total cost (all dollars/all financial stovepipes). Consistent with Lean principles, the goal is to achieve the metrics and no more. It is important to decide how much is enough; going beyond is not necessarily good and may be costly in both financial and personnel terms. The metric must be aligned with end-user value. One must (1) understand the outcome to be achieved, (2) define processes to achieve the outcome, and (3) reorganize only to the extent it affects the outcome. VADM Massenburg cited a number of examples where this enterprise approach resulted in better fleet readiness at lower cost. Managers had to subordinate personal priorities for the greater good. Money left over at the end of the fiscal year was returned to the enterprise rather than spent. NAVAIR became the only organization recapitalizing its force, to the tune of $4 billion per year. This represented a “life spiral” rather than a death spiral. Much of the latter part of the presentation was devoted to encouraging productivity in the workforce. People are the source of capability to perform the mission and to achieve program success. It is the role of leadership to get the incentives right and inspire people. The culture should emphasize subordination to the metric, not collaboration per se. Work needs to be driven by demand pull, and worker talents need to be matched to the tasks. By emphasizing productivity, staff costs can be reduced without threatening the delivery of end products. VADM Massenburg concluded with a list of best practices and behaviors: Identify domains and assign single process owners. Assemble the right enterprise teams and gain commitment. Operate in support of a single fleet-driven metric (what the enterprise values). —Get agreement on scope, outputs, and linked metrics; —Make data transparent to promote trust and monitor performance; —Share knowledge on issues and key problems affecting the domain; —Recognize, nurture, and support technical authority; and —Identify entitlements (what’s needed, when, and how much and no more). Agree on the desired output (e.g., readiness over cost), with focus on the trade space involving current and future readiness. Operate with discipline, governance, and a regular (timely) “drumbeat.” Baseline every dollar, all the people, all the stuff, and all the capability within the domain, with assigned accountability for outcomes. Establish entitlements. Continually measure gaps to entitlement. Remove barriers to productivity. 14 14 Two books were recommended for further discussion of these principles: Gary Connors’ Lean Manufacturing for the Small Shop (Society of Manufacturing, 2001) and Joel Levitt’s Lean Maintenance (Industrial Press, 2008). 23