Defense Acquisitions

Aircraft operating and support costs include fuel, repair parts, maintenance, contract services, and the cost of military and civilian personnel. The Air Force spent more than $16 billion to operate and support its aircraft in 1999. These costs are rising at about four percent per year at a time when total numbers of aircraft, flight crews, and maintenance are decreasing. Higher costs for repair parts were the main cause of the increasing costs. Aircraft operating and support costs are projected to exceed $20 billion by fiscal year 2005. The Air Force has developed a standardized methodology for assessing operating and support costs, identifying and proposing areas for cost reduction, and tracking savings. Projected cost reductions average only about $343 million a year, short of the $2.6 billion to $7 billion needed to achieve DOD's goals. Costs for the F-22 and the Joint Strike Fighter could be higher than those of the aircraft they are intended to replace and could jeopardize attempts to control operating and support costs well into the future. New programs focus on improvements in reliability, supportability, and maintainability, not establishing and operating an operating and support cost requirement.

GAO noted that: (1) Air Force operating and support costs are growing at about 4 percent per year, even though the total number of aircraft, the number of hours these aircraft are flown, and the number of personnel who fly and maintain them have been declining for years; (2) from fiscal year (FY) 1997 to FY 1999, operating and support costs for aircraft increased from about $15.3 billion to $16.6 billion; (3) higher costs for repair parts were the principal cause of these increasing costs, and about 25 fault-prone parts on each system GAO examined were the biggest cost drivers; (4) to help reduce the operating and support costs of fielded systems, the Air Force has established several initiatives, including the Reduction in Total Ownership Cost program; (5) under this program, the Air Force developed a standardized methodology for assessing operating and support costs, identifying likely areas for cost reduction, proposing cost reduction projects, and tracking associated savings; (6) initially applied to several pilot programs in 1999, including the F-16 and B-1B, the program is now being expanded to other systems, as experience with the pilots increases; (7) however, the projected cost reductions from these efforts average only about $343 million each year, well short of the $2.6 billion to $7 billion needed to achieve DOD's goals; (8) several factors hinder greater operating and support cost reductions; (9) the Air Force does not give operating and support cost management the same high priority it assigns to other program concerns such as weapon performance during system development or improved combat capability after fielding; (10) instead of establishing an operating and support cost requirement and managing to meet it, new programs focus on initiatives to improve reliability, supportability, and maintainability; (11) although these initiatives do help lower operating costs, their impact on a system's operating and support costs is not tracked; (12) projects that could lower these costs in fielded systems cannot complete effectively for funding against projects that enhance safety, readiness, or combat capability; (13) because they are not given the same management priority, operating and support costs are not emphasized; (14) poor visibility of operating and support costs has been a key factor inhibiting management of operating costs, but the establishment of the new Air Force Total Ownership Cost data system appears to be overcoming this barrier; and (15) despite program managers' limited authority and low incentives, some programs, such as the B-1B, continue to champion cost reduction projects.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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