Document created: 2 September 03
Air University Review, May-June 1975

The purpose of this article is to provide an insight into the organization and responsibilities of the Air Force Logistics Command's Deputy Chief of Staff for Acquisition Logistics and to discuss some things that need to be done to support the driving objective of my organization. I will touch on our mission, how we go about our business, some obstacles we are encountering in doing our job, and how we intend to solve some of these problems.

Our job is to drive down the ownership costs of new weapon systems. As is well known, the last decade has witnessed a steady increase in that portion of the Air Force budget earmarked for operating and supporting the force in-being. The task we have is certainly not easy; but it is essential if we are to reverse the budget trends and provide the funds needed for modernization of the force. In short, my main job, in concert with the Air Force Systems Command, is to see that appropriate actions are taken during the acquisition process that will reduce the cost of ownership without degrading support.

To best accomplish this important task, it is necessary to examine the decision patterns affecting life cycle costs. (Chart A)

This chart, based on a Boeing Company study, indicates that 70 percent of the decisions affecting life cycle cost are locked in by Defense Systems Acquisition Review Council (DSARC) I and 95 percent by DSARC III. This indicates that if we are to be effective in reducing costs of ownership, we must concentrate our activities at "the front end," or prior to the production decision. We are organized to do just that.

The operational portion of my organization consists of directors of logistics, collocated at each of the Air Force Systems Command product divisions, and deputy program managers for logistics (DPML), collocated in system program offices. The logistics directors provide support to less-than-major systems, interface with the laboratories, and work with the Systems Command planning activities up through the conceptual phase, or DSARC I decision point. They also provide initial logistics support to system program office cadres, pending assignment of a DPML. The DPML's have the job of getting the hard-core logistics requirements into each program and making sure the program manager understands the cost-of-ownership impact of all important decisions. These individuals can and do call upon resources throughout the command to get this job done right and responsibly. Reporting directly to me gives them the leverage and priority needed. The staff, located in AFLC headquarters at Wright-Patterson Air Force Base, consists of a Directorate of Integrated Logistics Management, whose principal responsibility is to develop the necessary tools and techniques to be used by our operational people in the field, and a small Test and Evaluation Office, which interfaces with the Air Force Test and Evaluation Center at Kirtland AFB.

At DSARC I, or sooner if warranted, a management Air Logistics Center is assigned system management responsibilities. Also at this time the DCS for Materiel Management, the DCS for Personnel, and I review nominations for the DPML job and recommend to the AFLC Commander an individual for appointment to that position.

The DPML also wears the hat of system manager. He is supported at the Air Logistics Center by an assistant. When the decision to enter into production is made at DSARC III, the operational responsibility shifts from the Headquarters to the management Air Logistics Center. Then, as the program matures and system management activities at the Air Logistics Center become predominant, the DPML will physically transfer to the Air Logistics Center. A small logistics contingent will remain in the system program office.

Obviously, the DPML plays a very important role; therefore, we are firmly committed to putting the very best people in these positions, and we have the full backing of the AFLC Commander on this. We are in the process of formulating a career development program to insure a broad range of candidates for the curriculum and attendance require for these jobs. In addition, we are reviewing the curriculum and attendance requirements for the Defense Systems Management School and the Air Force Institute of Technology to insure that proper emphasis is placed on logistics.

The DPML depends on help from many people to get his job done, and a large part of this help must come from the requirement originators, the operating command. The operating command logisticians must be actively involved in acquisition cycle, starting with an early scrub-down of the requirement for logistics impacts. Realistic, well-defined operational requirements in which logistics considerations have been included can head off a lot of our problems before they start. The operating command logisticians must also be heavily involved in development of the maintenance concept and in a thorough assessment of the supportability of the system the production decision. It is to realize that the tough job of including logistics as a primary consideration the acquisition of new systems a unified, documented, supportable stand by all logistics elements involved, including the people in the operating commands.

Now let’s consider some problems associated with the Office of the Secretary of Defense (OSD) management techniques of integrated logistics support (ILS), design to cost (DTC), and life cycle cost (LCC). Integrated logistics support is recognized throughout the Department of Defense as an essential part of the acquisition process. The pulling together of the logistics considerations necessary to achieve effective and economical support is not a well-defined procedure, but it is certainly a goal toward which we must all strive. If we are to achieve this in a meaningful way, we must give the contractor economic incentives to design for supportability and to investigate and recommend design changes that will enhance supportability. Today these incentives simply do not exist, but we have made a start in the right direction on the A-10 program. An award fee of $3.5 million ($2.9 million for the airframe and $.6 million for the engine) is related directly to operating and support costs during the initial operational usage. The lack of demonstrated results, however, makes it extremely difficult to convince everyone in the chain that they should put up money today to save money five to ten years hence.

Adding to the problem are production-oriented, design-to-cost goals. Although the regulatory material states that the design-to-cost goals will consider cost of ownership, I know of no satisfactory means currently existing to do this realistically. We are, however, developing the necessary techniques to provide tradeoffs between design-to-cost and cost of ownership. As these are perfected, there will be a need to provide trade-off flexibility. This will not be an easy task because there are tremendous pressures on program managers to stay within development and acquisition dollars, as depicted first in development concept papers and subsequently in the selected acquisition reports. In the early 1960s, as Program Control Chief of the Minuteman System Program Office, I strongly advocated the need to balance performance, schedule, and cost. Today, that triangle is a part of the program manager's creed. "Cost" then encompassed, and still does, research and development and acquisition costs. It is time we change the triangle to a square, with support cost getting equal consideration.

A vehicle by which this can be accomplished is life cycle cost. Training is a critical area; I find very few personnel who really understand life cycle cost. There have been a number of two-day seminars, but one does not learn a process as complicated as life cycle costing during a two-day seminar. We are working with the Air Force Institute of Technology to develop a comprehensive, four-week life cycle costing course. We are also working with the civilian academic community to inject into university design engineering courses a thrust that will cause support, as well as performance, to be viewed as basic design criteria.

The quality and usefulness of our ownership costing techniques are poor in the conceptual phase but improve greatly as we progress into engineering development. During the conceptual phase, we use parametric methods that have produced very weak results at system level. The key is improvement at the subsystem level and relating types of materiel and their physics of failure. We have a joint AFLC and AFSC Life Cycle Cost Working Group that is pursuing this by bringing in development engineers from the various laboratories and technology areas to work on the problem. During the engineering development phase, we have a range of good practical models for evaluating design trade-offs and for planning the supply, maintenance, and distribution aspects of logistics. We are putting these tools to work on the F-15, B-1, and A-l0 programs. When it comes to estimating total cost of ownership, we have no good analytical models and must depend on parametric estimates that offer little in confidence or accuracy.

In the data systems area, the maintenance documentation problems faced in the operational commands are also of concern to us in the acquisition business. As is well known, we have more problems than solutions at the present time. The data we collect at base level and in our centers are not weapon-system-related, they do not capture complete and total costs, and they are far from accurate. I am sure that all the people involved are vitally concerned with improving this situation, including top management in the Department of Defense. The lack of an inclusive data base for existing systems makes it extremely difficult, if not impossible, to accurately project or predict total costs of ownership for new systems coming into the inventory. One of the improvement efforts under way is headed by the OSD Comptroller and is directed toward coming up with a cost-effective system to identify maintenance and operations cost by weapon system. In addition, the Joint Logistics Commanders have been working hard to develop and standardize the way depot maintenance costs will be accounted for by system, and they are putting out a manual on this now.

The concept of life cycle costing realistically illustrated by our current effort to implement the concept on acquisition of the air combat fighter (ACF). Of particular importance are the progressive provisions being incorporated within the contract to motivate the contractor toward providing a system with full recognition of long-term ownership costs.

First of all, we have required the airframe and engine contractors to submit data to enable us to evaluate the potential impact of logistics support cost of each design during source selection. These data consisted mainly of the predicted reliability, maintainability, and component price characteristics of some 200 to 300 items. Also, as part of his proposal, each contractor was required to submit recommendations for design-to-cost LCC trade studies affecting both producibility and supportability. But one of the key issues in LCC is our capability to verify contractor estimates while still in a competitive situation. In the Air Combat Fighter we have some favorable conditions that can help. First of all, we have flyable prototypes, which provide a reasonable basis to estimate the transition into a production aircraft. In addition, the avionics components that normally drive maintenance costs are an achievable evolution from equipment we already have in the inventory. In line with this, we asked the contractors to scale their predictions from existing equipment. We also asked for a design supportability summary to tell why we can expect improvements and explain how the proposed system will overcome problems we now have in existing equipment. A joint AFLC/AFSC/TAC team has evaluated this information and provided a basis for assessing the reasonableness of contractor estimates. We will also be able to identify those potential high burners on the ACF. About 15 to 17 items that are expected tribute about half of the total logistic support cost for the system will be subject to a possible award fee, if performance is better than expected. On required to submit a priced option for a reliability improvement warranty (RIW).

Those high-burner items to be included under the RIW will be selected at the end of full-scale development. Commitment of organic maintenance resources will be deferred on those selected items, while the contractors perform maintenance and submit no-cost engineering change proposals to improve performance. Under these provisions, the contractor will be required to perform maintenance for up to four years or 300,000 flying hours. The focus of the RIW concept, however, is to motivate the contractor to initiate "no cost to the government" engineering changes to improve item performance and thus reduce his own expenses in carrying out the recurring maintenance under the warranty.

During full-scale development, the contractor will conduct a logistics support analysis to define the aerospace ground equipment (AGE), tech orders, training requirements, and other elements of the support system. We intend to maintain a continuous track of life cycle costs as the system design evolves.

Our deputy program manager for logistics will monitor design trade studies conducted during the full-scale development to make sure the LCC area has been adequately addressed. Just prior to Critical Design Review, the contractors may earn an initial award fee based primarily on possible design cost reduction on the air vehicle. They are eligible for a fee of up to $1.15 million at this point. A second award fee of $3.45 million is oriented toward supportability. This will consider cost reductions affecting AGE, training, and maintenance reflected in the DTC/LCC trade studies conducted prior to the flight of the first development, test, and evaluation (DT&E) aircraft.

Shortly after the aircraft enters the operational inventory, we want to see how well the system stands up to the support predictions and negotiated agreements made with the contractor at source selection. The items not under RIW and other system-level costs and components will then be evaluated during operational test. This test will begin six months after full activation of the first operational unit. The test will be conducted for 3500 flying hours and will be used to determine the field supportability characteristics of those items not under RIW. If the group of items being evaluated performs better than predicted, the contractor is eligible for an award fee of up to $12 million. If the items do not perform as well as expected, then the contractor must provide product improvement or additional assets at no cost to the government.

This is the first time we have sought such an extensive commitment related to life cycle costing on a program. For the first time, we are requiring contractual commitments on some form of LCC during source selection, establishing a tracking mechanism and appropriate fees to orient the contractor during full-scale development, and measuring and enforcing support performance once the product is in the field.

Our number one objective is to get credible ways of giving the program manager visibility of the impact his decisions will have on the operating and support costs. I know our program managers; and I know if we give them the facts, we will get the right decisions to drive down the costs of supporting our new weapons. We are going to do whatever is necessary to achieve this objective. The goal is being given priority consideration by the Air Force. It will take highly qualified people to develop the tools that are necessary to effect meaningful reductions in logistics support costs. To this end, it is a command effort of both the Air Force Logistics Command and Air Force Systems Command. We are jointly working toward this goal, and we need all the help we can get from idea-producers throughout the Air Force.