Military Aircraft

Congress slashed the Air Force's fiscal year 1991 budget request for the C-17 because of concerns that the C-17's prime contractor, the Douglas Aircraft Company, was behind schedule and was unready to boost production. Fears that this action would damage the C-17's subcontractor base and cause suppliers to leave the program appear to have been unwarranted. Only six of the 33 major suppliers reported any adverse effects, and none has left the C-17 program. Similarly, the major suppliers said that none of their subcontractors had complained of being affected by the budget cuts. The Air Force and Douglas Aircraft admit that their earlier concerns may have been overblown. Although Douglas Aircraft has corrected some of the supplier management problems since June 1990, progress has been slow and problems remain, including a number of overage, undefinitized contracts; inadequate cost and price analyses of purchase orders; and slow release of purchase orders to suppliers. Douglas Aircraft officials asked for a review of the purchase system two years after it was first disapproved. They are now analyzing the results to identify remaining weaknesses.

GAO found that: (1) reductions in the FY 1991 budget had little discernible effect on the subcontractor base, since only 6 of the 33 major suppliers reported any adverse effects, and none left the C-17 program; (2) six suppliers indicated that they had benefited from the budget reductions since the stretchout of their delivery schedules accommodated schedule slippages they had already experienced; (3) Air Force and contractor officials were not able to support their contention that the budget cut would damage the C-17 supplier base; (4) since June 1990, the contractor's actions to correct supplier management problems have resulted in some improvements, although progress has been slow and several areas remain that will require additional effort, including a number of overage, undefinitized contracts, inadequate cost and price analyses of purchase orders, and slow release of purchase orders to suppliers; and (5) contractor officials requested a review of their purchasing system to identify remaining weaknesses, and are currently analyzing the results.