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

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Presentation on theme: "C-17 SYSTEM PROGRAM OFFICE NINETEENTH QUARTERLY REDUCTION IN TOTAL OWNERSHIP COST (RTOC) FORUM Col Gregg Sparks Director, C-17 Logistics August 4, 2004."— Presentation transcript:

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


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