1. C-17 SYSTEM PROGRAM OFFICE NINETEENTH QUARTERLY REDUCTION IN TOTAL OWNERSHIP COST (RTOC) FORUM
Col Gregg Sparks
Director, C-17 Logistics
August 4, 2004

2. OVERVIEW C-17 Aircraft and its Success
Institutionalizing RTOC in the C-17
Globemaster III Sustainment
Partnership (GSP) Contract
Summary 2 51

3. OVERVIEW C-17 Aircraft and its Success
Institutionalizing RTOC in the C-17
Globemaster III Sustainment
Partnership (GSP) Contract
Summary 2 51

4. C-17 SPO MISSION Deliver & Sustain Quality C-17 Fleet
Improve C-17 Capability and Support
Lower C-17 Life Cycle Cost
Improve C-17 Readiness 32
149
148

5. COMBINES ATTRIBUTES OF SEVERAL AIRLIFTERS INTO ONE
Direct Delivery
Airdrop
Air Refueling
Small Austere Airfields
Oversize/Outsize Cargo
Combat Offload
- The C-17 Is Designed To Be The Nation’s Core Airlifter Well Into The Next Century
-- Airlift Is An Instrument Of Power Projection For The Army And The Nation
- The C-17 Was Designed With The Army In Mind
-- Specific Capabilities Enable The Air Force To Serve The Army’s Needs
-- Outsize Cargo Capability For Large Army Equipment: M1-A1 Tank, Patriot Missile Battery, Apache
Helicopters, Etc
-- Airdrop, SAAF Operations, Combat Offload, And LAPES Capabilities Are Crucial Differences Between
The C-17 And Any Proposed Non-Developmental Aircraft (NDAA)
- Congress Has Made The C-17 a Frequent Target
-- We Are Working Closely With Army Reps To Solve Problems
-- We Need Continued Army Support To Help Defend The C-17’s Unique Capabilities
-- Work Together To Keep Lines Of Communication Open
--- Keep Air Force Informed As Army Requirements Change
Roll-On/Roll-Off
Survivability
Ground
Maneuverability 55 8

6. PROVIDES A UNIQUE CAPABILITY

7. OPERATION ENDURING FREEDOM (OEF)/ OPERATION IRAQI FREEDOM (OIF)
SUCCESSES
Highest Operational C-17 Airdrop
High Altitude Airdrop of 2.4M Humanitarian Rations
First Air Land Delivery of Combat Loaded M1A1 Main Battle Tank
First C-17 Combat Personnel Airdrop
Opened Northern Front, Inaccessible by Land
Largest C-17 Combat Formation Ever Flown
Assembled a Complete Brigade in Just Under
1 Week
Flown 214,000 hours delivering
253,000 pax and 338,000 STONs
(as of 30 Jun 04)
Airmen from the 16th Special Operations Wing at Hurlburt Field, Fla., offload a MH-53J Pave Low III helicopter from a C-17A Globemaster III at an Operation Enduring Freedom location. The C-17 can carry nearly every type of Air Force and Army air-transportable equipment.

8. CURRENT AND FUTURE C-17 BASING CONCEPT
Elmendorf AFB, AK (Apr 07)
March AFB 0 of 8
McChord AFB,WA
48 of 44
McGuire AFB, NJ (Sep 04) UK
4 of 4
Travis AFB, CA (Jun 06)
C-17 SPO
Dover AFB, DE
(Jul 07)
Edwards AFB, CA T-1
HQ AMC
Altus AFB, OK 10 of 15
March AFB,CA (Jun 05)
WR-ALC
Charleston AFB,SC
53 of 50
Jackson, MS
8 of 8
Hickam AFB, HI
(Dec 05)
New Bases
Existing Bases
As of: 30 Jun 04

9. AIRCRAFT DELIVERY PROFILE
MYI: P-120 delivers May 04
MYII: P-180 delivers Apr 08
+42 : P-222 delivers Jan 2011 5 6 4
MY – multi year program 12 13 8 16 17 11 15 16 15 9 15 15 6 1 1

10. OVERVIEW C-17 Aircraft and its Success
Institutionalizing RTOC in the C-17
Globemaster III Sustainment
Partnership (GSP) Contract
Summary 2 51

11. C-17 RTOC Activity Before 1999 PRODUCTION AFFORDABILITY PROGRAM
Affordability program has become a way of life for C-17 aircraft cost reduction
$ Per Unit
Aircraft Unit
Omnibus Investments
Affordability ‘95
EOQ
Must Cost
Affordability 180
‘94
‘07
initiatives:
1) Omnibus Investments (‘94/‘95)
$101M Gov’t and Boeing funds under Omnibus Agreement
2) Affordability (‘95)
$249M Gov’t funds to reduce unit cost
under FPI production contract
3) Economic Order Quantity (EOQ) (‘96)
$300M Gov’t funds to perform aircraft cost reduction efforts, savings factored into MYP I contract
4) Must Cost (‘99)
$212M Gov’t funds with purpose of reducing future aircraft MYP II procurement costs
5) Affordability 180 (‘01/‘02)
Boeing funds to ensure 60 aircraft follow-on cost targets can be achieved
In 1994, the C-17 program was in trouble. To help correct the situation, John Deutsch, Under Secretary of Defense, and John McDonnell, CEO of MDC, in Jan 94 signed an Omnibus Agreement as an initial 2-year program to introduce major management and manufacturing changes to deliver on schedule and at affordable cost.
This was followed up in 1995 with a $249M government investment to improves the engine thrust reversers and identify other affordability projects.
EOQ ‘96 was an effort to _____
The vision of Must Cost ‘99 was to achieve a unit fly away cost of $150M (TY) under the Multi-Year Program 1.
Although Affordability 180 started in ‘01, we will not see the results until ‘07. This is a company funded effort to make the 42 aircraft in MYP III even more affordable than the MYP II Program.

12. OVERALL C-17 ACQUISITION AIRFRAME PRICE STORY (TY$)
Should Cost
Reductions
$268M
Avg Unit Price
Warranty,
Aggressive
Omnibus (PICRP)
Afford 95, NEAT
Lot 8 and Beyond
$229M
Should Cost
Buy Profile
Avg Unit Price
Lot 8 and Beyond
Multi-Year
Reductions
$208M
Should Cost
Buy Profile
Must Cost
Avg Unit Price
$178M
Lot 8 and Beyond
Affordability 180
Avg Unit Price
Should Cost
Buy Profile
Lot 9 and Beyond
$163M
ADM
Buy Profile
This chart is a Boeing representation of the per unit cost as the program has implemented cost reduction initiatives.
Avg Unit Price
Should Cost Baseline
Should Cost Migrated
7 Year
Multi-year
60 Aircraft
Follow-on
Single Year

13. C-17 RTOC Activity Before 1999 C-17 AVERAGE UNIT FLYAWAY COST

14. Institutionalizing RTOC in C-17 PROJECTED RTOC SAVINGS
RTOC Approved Business Case Analyses (BCA) 1 1

15. Institutionalizing RTOC in C-17 C-17 SUPPORTABILITY MODEL
Prioritizes Projects for the Material Improvement
Program (MIP)
Aircraft deficiencies are submitted from the field
Root causes are evaluated, solutions identified
Resources are applied to resolve the problem
Supportability Model rank orders the Deficiency Reports/MIPs
The Model rank orders DRs/MIPs based on OSS&E, Mission Capable Rate and Real Hazard Index
Results are presented to AMC and highest priority MIPS are
elevated to “fenced funding” category
52 FY04 MIP projects to raise MC rate 0.8 % providing
a value of nearly $400M over the 30 year life of the
program
C-17 RTOC IPT made up of representatives from various program IPTs
Support Systems
Production Operations
Air Vehicle
Business & Integration

16. Institutionalizing RTOC in C-17 RTOC O&M BASELINE
FY04
117
FY05
132
FY06
148
FY07
163
FY08
179
FY09
180
C-17 Program is improving capability and reducing O&M cost per aircraft
* FY04 is Baseline Year

17. OVERVIEW C-17 Aircraft and its Success
Institutionalizing RTOC in the C-17
Globemaster III Sustainment
Partnership (GSP) Contract
Summary 2 51

18. New Features and Incentives
GSP OVERVIEW
GSP Introduction
New Features and Incentives
Contract Metrics
Summary

19. Builds upon a successful history of superior contract support
GSP Introduction
Covers all the labor and material support provided by the successful Flexible Sustainment Contract
In addition to covering all the requirements of the previous Flex Contract, the new GSP Contract:
Doubles the number of supported bases (5 to 10 MOBs)
Supports 30% more aircraft (covers 185 C-17s)
Includes support for three new customers (ANG, AFR, and PACAF)
Expands an already successful depot strategy
Incorporates new innovations for engineering and supply practices (MIP, PBL…)
Guarantees of increased fleet availability in yearly increments
Increases the standard for issue effectiveness
Increased TSSR responsibility for contingency and Depot planning
Growing logistics partnership
Builds upon a successful history of superior contract support

20. GSP Introduction (Cont)
5-year Contract valued at $4.94B
Contract Type
FFP/AF (65%) includes P&W engine subcontract and agreed upon labor hours
CPIF (35%) includes inter-department Boeing hours and all material support – procurement and component repair
T&M efforts include MIP, UK safety investigations and O&A
Boeing Investment in Air Logistics Centers
$62M, primarily in form of capital equipment
Invest in all 3 ALCs at no increased price to sustainment contract
Supplement to the $94M AF investments in ALCs
Contract signed 22 Jul 04

21. FFP New Features and Incentives
The award fee - 5% of FFP pool
The profit rate is 13%
Customer satisfaction has an increased emphasis
Two Award Fee metrics
Non-empirical: 15% Customer Satisfaction
Empirical: 85% Aircraft Availability
Twice a year feedback and award fee determination
Mid Year pool is 35% (70% of 50%)
End Year Award fee pool is the remaining 65% plus any unawarded pool from the mid year review
User influence & increased performance

22. Other Features and Incentives
Opportunity for faster execution of T&M and Class II requirements
Attempting to bake in a ceiling for MIP and UK airworthiness
Without RFP, Boeing can submit cost volumes for class II changes
Hub and Spoke support to USAF bases to reduce personnel footprint
Expanded Total System Support Responsibilities
More latitude to respond to USAF contingency
RSP and HPMSK spares kits support
More Field Teams
More Site Activation program management
Recurring Enroute and BASC spares procurement planning
More Latitude for Engineering and supply cost saving initiatives

23. GSP is Performance Based Logistics
Boeing’s TSSR role includes C-17 item management and depot-level repair of C-17 airframe and sub-components
Six contract performance metrics
Continuously raised benchmark levels
Boeing granted TSSR while committing to performance guarantees
Support To UK and USAF Users Is Paramount

24. GSP Summary Contract signed 22 Jul 04
Builds on a successful sustainment contract history by adding more requirements, more incentives, more responsibility, and more performance
More user feedback and influence on award fee
Challenges will require constant user feedback and agile contract processes

25. OVERVIEW C-17 Aircraft and its Success
Institutionalizing RTOC in the C-17
Globemaster III Sustainment
Partnership (GSP) Contract
Summary 2 51

26. SUMMARY Deliver & Sustain Quality C-17 Fleet
C-17 SPO achieving its
mission
Deliver & Sustain Quality C-17 Fleet
Improve C-17 Capability and Support
Lower C-17 Life Cycle Cost
Improve C-17 Readiness
Marines from the 26th Marine Expeditionary Unit line up to board a C-17A Globemaster III at an operating location in support of Operation Enduring Freedom

27. Backup

28. A few hard hitting Metrics part of long term strategy
Metrics Strategy •
Globemaster Sustainment Aircraft Availability (GSAA) –
health of the fleet •
Depot Maintenance Scheduling Effect –
depot level maintenance •
Flying Hours Achievable (FHA) –
wartime preparedness •
Issue Effectiveness
peacetime and wartime supply support •
MICAP Service Effectiveness –
critical parts shortages
Customer Satisfaction •
Contract Compliance –
A few hard hitting Metrics part of long term strategy

29. CP New Features and Incentives
Incentivizes costs control from the negotiated target cost using a 70/30 share ratio
Should Boeing demonstrate a cost savings of 14% in FY04 and FY05, the CPIF contract converts to FFP in FY07 and FY08 at a lower cost to government ($134M) and higher profit to Boeing (13% with 5% award fee)
Low Cost Estimate (LCE)
$ 1,325M
15.65% cost underrun
High Cost Estimate (HCE)
$ 1,781M
13.32% cost overrun
Target Fee
9.0%
Target cost
Max Fee
13.7%
15.65% cost underrun or less
Min Fee
5.0%
13.32% cost overrun or more
Incentivizes Cost Control per flying hour and BASC Events

30. Sustainment Timeline We Are Here FY04-11 Contract Award
(FY09-11 Unpriced Options)
Contract
Award
Contract
Award
Assess-
ment
Transition
Proof of Concept
Implementation
Number of Aircraft 42 54 66 75 92
109
125
140
156
171
180 ? 98 99 00 03 04 09
McChord
Jackson
March
Travis
Dover
McGuire
Hickam
Elmendorf
Contractor assumes responsibility,
risk, and higher performance requirements
Contractor continues Total
System Support Responsibility, meets more challenging requirements per ORD objective and partners with the ALCs
Incremental transition of government responsibilities

31. GSP Relationships C-17 PROGRAM GSP Contract TSSR BOEING
Program Management
Asset Repair
Depot Maintenance
Technical Orders
Support Equipment
Supply Management
Sustaining Engineering
Engine Management
Direct Sales Partnering Agreement
Subcontracts
ALCs
Boeing / Vendors
DSPA signed/coordinated with AFMC/CC Nov 02

32. Metrics Comparison Flexible Sustainment
Globemaster Sustainment Partnering
Flexible Sustainment Aircraft Availability (FSAA)
Flying Hours Achievable (FHA)
Forward Supply Location Replenishment (FSLR)
Issue Effectiveness (XD
& “all others”)
MICAP (USAF- 48 hrs,
UK - 96 hrs)
Depot Maintenance Schedule Effectiveness(DMSE)
Cost
Subjective Customer Satisfaction
*Increased Impact to Cash Flow
Modify
Globemaster III Sustainment Aircraft Availability (GSAA)
Increase requirements
Flying Hours Achievable (FHA)
Issue Effectiveness (XD & “all others”)
Increase Requirements
MICAP (USAF- 48 hrs, UK - 96 hrs)
Depot Maintenance Schedule Effectiveness(DMSE)
Cost
Subjective Customer Satisfaction*
Same
Delete
Modify
Same
C17 Flexible Sustainment concept was to eventually have one system level metric to measure contract performance The flexible sustainment contract was a performance based contract starting with 17 metrics to measure performance. This was our transition phase from organic to contractor support. Over time the metrics were gradually reduced to 12. Some metrics didn’t provide the desired results and others were deleted when performance tasks were complete. For the contract, from was our proof of concept phase, we reduced to 6 performance measures planning to reduce to a single system level metric after the 03 decision.
Same
Same
Same