PBL Has Worked Wonders For C-17
While the C-17 program has long been a leader in performance-based logistics (PBL), for many defense contractors PBL still represents a “paradigm shift” that they have yet to understand, let alone implement. For the C-17, PBL dates from 1998, when the U.S. Air Force first signed up for what is now known as the Globemaster III Integrated Sustainment Program (GISP). All seven international customers for the C-17 have since joined the innovative scheme. “We have provided tailored support solutions, maintaining the highest level of aircraft readiness,” said Gus Urzua, Boeing’s vice president and general manager, C-17 GISP. “There’s no other weapon system in the U.S. inventory that has reduced the flight-hour cost as we have–and while improving performance,” he claimed. The C-17 fleet has enjoyed an 86-percent mission-capable rate in recent years, while flight hours costs dropped by 29 percent from fiscal year 2004 to 2011. “We measure monthly against 11 performance metrics. Boeing has exceeded every one by huge amounts,” said Lt. Col. Jeff Hayden, C-17 chief of program integration for the U.S. Air Force.
In the GISP, Boeing provides guaranteed availability to the USAF and is paid by the flight hour. Most of the contract is firm fixed-price, although there is some target-cost-incentive fee pricing. There is an annual renegotiation.
The international customers have bought into the USAF’s GISP contract, but not via traditional foreign military sales procedures. The customers specify the level of availability that they require, the number of hours they expect to fly, and their types of missions and concepts of operation. This affects the pricing–for instance, some operators fly their engines harder than others.
Therefore, there are various annexes to the agreement. One of them provides Boeing personnel for flight-line maintenance of the three NATO strategic airlift capability (SAC) aircraft at their home base in Papa, Hungary. The operators of all the other C-17s retain this task: the USAF (216 aircraft, with seven to come), Australia (five, with one to come), Canada (four), Qatar (two), the UAE (six) and the UK (eight). India is joining the GISP next year, when the first of its 10 C-17s is due for delivery. The GISP has sustained a doubling of the airlift workload every year since 2006.
Interestingly, as the sole source provider of C-17 support, Boeing subcontracts the main USAF C-17 depot at Warner-Robins U.S. Air Force Base in Georgia where about 14 C-17s are undergoing work at any one time. About the same number can be found at Boeing’s own large maintenance facility at San Antonio, Texas, at any one time. The workforce at Warner-Robins will carry out more than one million hours of work on C-17s in Fiscal Year 2012.
The five USAF commands and the international customers share a common spare-parts pool. Urzua provided an interesting comparison between the traditional, transactional methods of support in which suppliers bill the customer for new or overhauled parts, and the PBL approach. “Every time I saw a part coming into the shop, I saw revenue. Now I see cost,” Urzua explained. Hayden noted that Boeing has the responsibility to incentivize the suppliers. “It’s a win-win situation,” he said. “The USAF is buying an outcome; they give up some control,” Urzua noted.
Urzua said Boeing has spent about $100 million on IT support for the GISP: modeling and forecasting tools, asset visibility, supply chain management and “military airplane health management.” An accruals-based accounting system is used.
Boeing has some 300 staff deployed to the 19 locations where C-17s are based. They have also worked in the field to recover damaged aircraft, including those involved in four serious mishaps in Afghanistan: a Taliban shoulder-fired SAM damaged the engine of one aircraft; the nose landing gear of another collapsed when it veered off a runway; a third made a wheels-up landing after the crew forgot the extend the landing gear. In the most recent accident, at forward operating base Shank last January, serious damage was sustained when an aircraft overran the runway.
Trevor Burke, the C-17 technical manager for the NATO Airlift Management Agency, provided an international perspective on the GISP. He admitted that international customers are inevitably tempted to mandate the development of local support, including heavy maintenance, to boost their domestic industrial base. But in the C-17 case, this “competing agenda” was outweighed by the capabilities and cost savings that were on offer via the GISP. All C-17s go to San Antonio or Warner-Robins for upgrades and a corrosion check and repaint every five years. But the two-year inspections are done at the home bases.
The foreign buyers of the C-17 enjoy access to “a virtual fleet,” with all the attendant economies of scale. “Of course, the USAF is the biggest partner and we must trust that our voice is heard,” he noted. But each foreign customer has staff located within the program office, “not on the other side of the runway as is usual in the FMS acquisition model,” Burke added. This provides unprecedented oversight and accountability, he said. All aircraft are built and upgraded to a common standard; the fleet is currently being modified to the Block 17 standard, which then requires only a software upgrade to reach the current production Block 18 configuration. The virtual-fleet concept has allowed the foreign buyers to achieve “50 to 80 percent savings” on management support costs, Burke claimed.
Hayden noted that customers for a PBL contract should take care when specifying the standards that their contractor should meet. For instance, the GISP contract with Boeing calls for only 69 percent availability. “I could mandate 85 percent but I don’t need it,” he said. The limiting factors include downtime for modifications and the availability of trained crews. The aircraft is capable of flying 1,400 hours per annum and crews are definitely the limiting factor, Burke agreed.
According to Hayden, in 2009 the USAF evaluated whether or not to take C-17 support back to traditional methods. “But the savings achieved by the PBL model amounted to $400 million over five years and $12.8 billion over the expected 30-year life of the program,” he said.
A new 10-year deal for the GISP was therefore negotiated from Fiscal Year 2011. However, the USAF intends to cut a direct contract with Pratt & Whitney for F117 engine overhauls from 2014. Urzua admitted that the engines account for 50 percent of the GISP contract and the USAF “will save on our ‘pass-through’ costs.” The product support management role will also return to the USAF, with a combined Boeing-USAF program office to be established at Warner-Robins.