1. Life cycle cost Objectives
Lesson objective - to discuss the fundamentals of
Life cycle cost
to include…
What does it include?
Why is it important?
Expectations -
You will understand why life cycle cost is so important and what kinds of issues it addresses
At the end of this lesson, you should understand (1) the fundamental issues and (2) how to make life cycle cost estimates
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Life Cycle Cost
13-1

2. Parametric cost estimates Development Procurement UAV application
Discussion subjects
Review
Parametric cost estimates
Development
Procurement
UAV application
Operations and support
Manned aircraft
UAV applications
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Life Cycle Cost
13-2

3. Review - Life cycle cost
Development cost
The cost of developing a system
Considered a “non-recurring” cost
Occurs only once (hopefully)
Procurement cost
The cost to buy a system once it is developed
Includes a lot of “recurring” cost
Costs incurred every time a system is produced
Operations and support cost (Q&S)
The cost to maintain and operate a system after purchase
Includes the cost of maintaining crew proficiency
Excludes the cost of combat operations
Development + procurement + O&S  Life cycle cost
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Life Cycle Cost
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4. Customers want this to be as small as possible
Review - cost issues
Development cost
Customers want this to be as small as possible
New systems are expensive
Most of the cost is associated with risk reduction, engineering and test
Programs need “margin” to cover uncertainty
Procurement cost
This cost is sensitive to procurement quantity
Repetitive tasks become more efficient
Also sensitive to the size and complexity
Aircraft empty weight is considered a cost driver
Operations and support cost
Most of the life cycle cost of an aircraft is the “O&S”
O&S cost can be reduced by good up-front design
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Life Cycle Cost
13-4

5. Review - LCC importance
Pre-concept design
Key technical issues addressed during this phase include:
Overall needs and objectives
Concepts of operation
Potential design concepts
Initial cost and schedule
Effectiveness estimates
Analysis of alternatives
The technical work done during the pre-concept design phase establishes the initial cost and schedule estimate that the project will have to live with for the rest of its life
The product of this phase is a set of initial requirements and cost, risk and schedule estimates
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Life Cycle Cost
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6. The cost driver - early decisions
Cumulative Percent Of Life Cycle Cost
Milestones I II III IOC Out of Service
100 95 85 70 50 10
Detailed
Design
Preliminary
Design
Concept
Design
Pre-concept
Design
Source – Defense Systems Management College, 3 Dec. 1991
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Life Cycle Cost
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7. Parametric cost estimates Development Procurement UAV application
Next subject
Review
Parametric cost estimates
Development
Procurement
UAV application
Operations and support
Manned aircraft
UAV applications
© LM Corporation
Life Cycle Cost
13-7

8. Parametric cost estimates
Parametric models or cost estimating relationships (CERs) are used widely for aircraft cost estimating
- By industry for initial cost estimates
- By customers for proposal evaluation
Used when little is known about the design
- But also used to check internal consistency of detailed estimates
Methodology updates occur periodically
- Need to capture technology benefits and costs
Most recent updates focused on advanced structural materials
- Composite airframe materials drive airframe cost
Although no CERs yet exist for UAVs, they will exist someday and we need to understand the approach
* (1) Advanced Airframe Structural Materials, a Primer and Cost Estimating Methodology, RAND R-4016-AF, Resetar, Rogers and Hess, c1990
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Life Cycle Cost
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9. Material utilization trends
Aluminum
Titanium
Steel
Composites
Other
F-111
(1967)
59% 5%
33% 1% 2%
F-15
(1972)
52%
40%
F-16
(1976)
79% 4%
10%
F-18
(1978)
48%
14%
15%
11%
12%
(E/F)
27%
23% ?
22%
13%
F-22
16%
39%
25%
20%
C-17
70% 9% 8%
AV-8B
47% ?%
26%
B-2
37%
RAND data
USAF/AFRL data
RAND Data - Advanced Airframe Structural Materials, a Primer and Cost Estimating Methodology, RAND R-4016-AF, Resetar, Rogers and Hess, c1990
AFRL Data – Evolution of U.S. Military Aircraft Structures Technology, AIAA Journal of Aircraft, Paul,Kelly,Venkaya,Hess, Jan-Feb 2003
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Life Cycle Cost
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10. CERs capture overall air vehicle cost drivers
1. Size including airframe and empty weight, area, etc.
2. Performance including speed, specific power, etc.
3. “Construction” including load factor, engine location, area ratios, wing type, avionics weight ratio, etc.
4. Program including number of test aircraft, new vs. existing engines, contractor experience, etc.
Of these, a few emerge statistically as real drivers*
- Airframe unit weight (AUW)
- Empty weight (EW)
- Maximum speed (Vmax)
- Number of test aircraft (NTA)
- Airframe material type and composition
Software should also be a driver (no data in 1990?)
* (2) RAND N-2283/2-AF, Aircraft Airframe Cost Estimating Relationships : Fighters, December 1987
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Life Cycle Cost
13-10

11. Cost categories and elements
RAND defines CERs in two major overall cost categories: non-recurring and recurring costs*
- Non-recurring (development) cost elements are:
- Non-recurring engineering hours (NRE)
- Non-recurring tooling hours (NRT)
- Development support cost (DS)
- Flight test cost(FT)
- Recurring (production) cost is normalized for 100 air vehicles and made up of the following elements:
- Recurring engineering hours (RE100)
- Recurring tooling hours (RT100)
- Recurring manufacturing labor hours (RML100)
- Recurring manufacturing material cost (RMM100)
- Recurring quality assurance hours (RQA100)
* Their methodology does not include engines, avionics, armament, training, support equipment and spares. These elements must be added.
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Life Cycle Cost
13-11

12. RAND starts with an aluminum baseline cost estimate
Baseline CERs
RAND starts with an aluminum baseline cost estimate
- Non-recurring cost elements
NRE(hrs) = (EW^.747)(Vmax^.800) (13.1)
NRT(hrs) = (EW^.810)(Vmax^.579) (13.2)
DS = (EW^.630)(Vmax^1.30) (13.3)
FT = 1.54(EW^.325)(Vmax^.823)(NTA^1.21) (13.4)
- Recurring cost elements
RE100(hrs) = (EW^.880)(Vmax^1.12) (13.5)
RT100(hrs) = (EW^.707)(Vmax^.813) (13.6)
RML100 (hrs)= 0.141(EW^.820)(Vmax^.484) (13.7)
RMM100 = 0.54(EW^.921)(Vmax^.621) (13.8)
RQA100 (hrs-cargo acft) = 0.076*RML (13.9)
RQA100 (hrs-non-cargo) = 0.133*RML (13.10)
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Life Cycle Cost
13-12

13. RAND example, hypothetical all-aluminum fighter EW (lb) 27000
Typical application
RAND example, hypothetical all-aluminum fighter
EW (lb)
Vmax (kt)
NTA
Structure (lb)
Production quantity
Typical labor rates (1999 $/hr)*
Engineering $86
Tooling $88
Manufacturing $73
Quality Assurance $81
* From Raymer, page Inflation factors can be used to adjust these to current year prices (also required for material costs)
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Life Cycle Cost
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14. From equations 13.1 through 13.10 NRE(Khrs) = 10634 NRE($) = $914.5M
Baseline cost
From equations 13.1 through 13.10
NRE(Khrs) = 10634
NRE($) = $914.5M
NRT(Khrs) = 4611
NRT($) = $405.7M
DS($) = $389.4M
FT($) = $577.6M
Nonrecurring = $2,287M
Total program (from NR + R) = $5.44B
RE100(Khrs) = 7463
RE100($) = $642M
RT100(Khrs) = 3636
RT100($) = $320.0
RML100(Khrs) = 19502
RML100($) = $1423.7
RMM100 ($) = $559M
RQA100(Khrs) = 2594
RQA100($) = $210.0
Recurring($) = $3,155M
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Life Cycle Cost
13-14

15. R(propul) = 2251*(0.043*Tmax + 243.25Mmax + 0.969*TiT -2228) (13.11)
Other costs
Engine cost
- Raymer’s cost discussion (Chapter 18) includes an equation for engine procurement cost in 1999$
R(propul) = 2251*(0.043*Tmax Mmax
*TiT -2228) (13.11)
where
Tmax = Maximum thrust (lb)
Mmax = Maximum Mach
TiT = Turbine inlet temperature (degR)
≈ degR
- For other propulsion cycles we will use $/lbm(engine)
Avionics cost
- Raymer recommends a weight based approximation of $3000-$6000 per pound ($1999)
- We will use $5000/lb for both avionics and payloads
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Life Cycle Cost
13-15

16. - Other quantities are adjusted for the “learning curve”
Quantity effects
RAND recurring cost methodology is based on production quantities of 100 aircraft
- Other quantities are adjusted for the “learning curve”
- A term used to describe the efficiencies that result from learning repetitive processes and tasks
- Learning curve effects are generally expressed by exponential forms such as the following from RAND
Cost (Qn) = Cost(Q100)*(Qn/100)^exp (13.12)
exp(engineering hours) =
exp(tooling hours) =
exp(manufacturing hours) =
exp(manufacturing material) =
exp(tooling hours) =
exp(total program) =
where
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Life Cycle Cost
13-16

17. Advanced material effects
Advanced materials effects are applied to the aluminum baseline as separate cost factors
Effects of advanced materials vary by element
- Tooling (both nonrecurring and recurring) has twice the sensitivity to material type as engineering
- Tooling focuses primarily on airframe structure
- Engineering hours are driven by a wider range of design and manufacturing issues such as, design, integration, test, evaluation, etc.
Overall effects are captured by historical Structural Cost Fractions (SCF) for airframe structure
Nonrecurring Recurring
NRE - 45%
NRT - 87%
RE - 42%
RT - 82%
RML - 67%
RML - 67%
RMM - 58%
RQA - 69%
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Life Cycle Cost
13-17

18. Complexity factors
Used to capture labor hour and cost effects of different design and manufacturing processes
- RAND uses complexity factors (CFs) to determine material effects by structural cost element
NRE NRT RE RT RML RMM RQA Al
Al-li Ti
Steel
GrExp
GrBi
GrTP
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Life Cycle Cost
13-18

19. Advanced material effects are applied to each cost element
Methodology
Advanced material effects are applied to each cost element
MWC (j) = SCF(j)*[CF(i,j)*SW(i)/ SF(I)]+[1- SCF(j)]
(13.13)
where
MWC(j) = Material weighted cost element j
SCF(j) = Structural cost fraction for cost element j (chart 24-18)
CF(i,j) = Complexity factor (chart 24-19)
SW(i) = Structural weight by material type
See RAND Report R-4016-AF, Advanced Airframe Structural Materials, a Primer and Cost Estimating Methodology, for more application information
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Life Cycle Cost
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20. - Such a study is beyond the scope of this course
UAV cost issues
Unfortunately, there are no known UAV CERs and no consistent UAV cost data bases. An example:
- Total procurement cost projected by the Defense Airborne Reconnaissance Organization (DARO) for Predator in 1996 was $118M for 13 systems.
- In Predator systems were listed as $512M or $42.7M per system
- The same document budgeted $23.9M for one system for delivery in 1998
These contradictions exist across a number of UAV types and it is clear that a comprehensive cost study is needed to resolve the issues
- Such a study is beyond the scope of this course
We will take a simpler approach
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Life Cycle Cost
13-20

21. - Cursory checks show this not a bad assumption
UAV cost approach
We will assume that manned aircraft CERs apply to UAV air vehicles and propulsion
- Cursory checks show this not a bad assumption
Global Hawk development cost ≈ $350M
- The RAND aluminum baseline development cost CER for EW + payload = 11,100 lb, Vmax = 360 kts and two flight test aircraft predicts a development cost of $313M in $1999 (less engines and avionics)
- Avionics development costs are not available
Global Hawk procurement cost goal = $10M
- The RAND aluminum baseline procurement cost CER predicts a unit 20 development cost of $15.7M
- The customer acknowledged in 1998 that Global Hawk unit cost would be about $13M
- Latest reports are that the airframe costs $16-20M
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Life Cycle Cost
13-21

22. Other UAV system elements
Little information is available on UAV control station and communications development and no CERs
- Available data indicates Tactical Control Station (TCS) development costs exceed $100M
Development costs for the Global Hawk/Dark Star common ground station (GCS) appear ≈ $250M
We will assume, therefore, that control station development (including communications) ≈ 70% of air vehicle development cost
Ground station procurement is harder to determine
- Predator ground and communications station costs appear about equal at around $3M each
- Global Hawk/DarkStar initial GCS procurement ≈ $25M each for 3 units. Latest reports = $45M
- We will assume control station procurement including communications ≈ 1 air vehicle + payload procurement
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Life Cycle Cost
13-22

23. Other system elements - cont’d
We have no good information on UAV payload development costs
- However, there are many payloads available off the shelf and we will assume development cost is limited to integration, which is covered under the air vehicle
We also have no good information on UAV payload procurement costs
- We will use Raymer’s assumed $5000 per pound parametric until something better comes along
- This would imply that predator payload (450lb) costs are about $2.25M, far more than airframe cost
- At a payload weight of 1900lb, Global Hawk payload cost would be $9.5M, about equal to original airframe estimate (recent USAF data cites payload at $11M)
Despite the fact that some of these estimates are guesses, we will use them until something better comes along
- It is better to guess than to leave something out
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Life Cycle Cost
13-23

24. Parametric cost estimates Development Procurement UAV application
Next subject
Review
Parametric cost estimates
Development
Procurement
UAV application
Operations and support
Manned aircraft
UAV applications
© LM Corporation
Life Cycle Cost
13-24

25. O&S costs are driven by 2 factors
Manned aircraft data
O&S costs are driven by 2 factors
2/3 by manpower (pilots, operations, maintenance, logistics and other personnel)
1/3 by flight hours - Flight hours (and numbers of missions) drive maintenance and fuel consumption
Average annual O&S ≈ 10% unit procurement cost
- Typical SE fighter ≈ $3M/yr or $9000/flight hour
Typical manned fighter O&S cost breakdown
- Direct personnel (pilots, maintenance, etc.) = 40-45%
- Pilots (10%), ops support (15%), maintenance (75%)
- Approximately maintainers per aircraft
- Indirect (security, medical, facilities etc.) = 20-25%
- Fuel and spare parts = 25-35% (≈ $2K/FH for fighter)
- Other = 5-10%
O&S data shows USAF average annual squadron personnel costs at about $45K per person
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Life Cycle Cost
13-25

26. Direct aircraft operating costs
This is the portion of the O&S cost that is directly related to flight hours (fuel and spare parts)
- Direct operating costs are key figures of merit for commercial operators
- Airlines typically quote direct operating costs in terms of cost per seat mile
- Others including the military use cost per flight hour ($/FH) and it appears to correlate with empty weight and speed
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Life Cycle Cost
13-26

27. Other direct operating costs
There is no information available on O&S cost for payloads, communications equipment and ground stations
- We can assume that the equipment is reliable but that it undergoes regular upgrade and refurbishment at least every 10 years
- We will assume, therefore, annual O&S cost to be about 8% of initial procurement cost
Once again, we are simply making an educated guess but it is better to do so than to leave out an important element of cost
- If our guesses are incorrect, we can improve them when we get more data
- If we leave something out, there is no chance for improvement
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Life Cycle Cost
13-27

28. UAV data Three O&S data points
In 1997 DARO budgeted Hunter UAV operations and support costs were at about $17.5 million for about 2000 flight hours or $8750/FH (almost the same as as a typical manned fighter)
In 1999 the VTUAV program established an O&S cost goal of 25% less than Pioneer at $6500 per flight hour
Published lifetime (10yr?) O&S cost for 11 Predator systems (44 air vehicles) = $697M in $FY97
Other data
- UAV squadron manning data provides insight to adjust manned aircraft O&S data for UAV applications
- A 4 air vehicle Predator squadron, for example, deploys with 55 people, of which 30 are operators and analysts and 24 are maintainers (13.75 total people or 6 maintainers per aircraft)
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Life Cycle Cost
13-28

29. UAV air vehicle application
The minimum data required are number of personnel (maintenance and operators), flight hours (FH), direct cost per FH, other direct cost and indirect personnel
Predator for example has persons per air vehicle. At $45K per person per year (FY 97 est.), personnel costs would be $620K/year per air vehicle
Also assuming an indirect personnel cost ratio of 25%, annual indirect costs would be $155K
Assuming 1000 FH per year at $75/FH (chart 100 kts), air vehicle operating costs would be $75K
Payload O&S is estimated at 8% procurement cost/year = .08*(450lb*$5000/lb) = $180K
Ground station plus comms is also estimated at 8% or cost/year = 0.08*(≈$6M) = $480K
Estimated annual O&S cost for Predator, therefore, would be about $1.5M per air vehicle
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Life Cycle Cost
13-29

30. 11-12 System LCC (Base-year FY 1996 $M) * RDT&E = $ 213
Comparison
From Defense Airborne Reconnaissance Office (DARO) 1996 Annual Report - Predator
11-12 System LCC (Base-year FY 1996 $M)
* RDT&E = $ 213
* Production = $ 512
* O&S, etc. = $ 697
* Total = $1,422
At 3% inflation
= $761M in FY99$
Our estimate for systems (44-48 vehicles) would be $660 - $720M
- O&S/production = 1.36 or 14% of production cost per year (assuming a 10 year Life Cycle)
- Average manned fighter ratio = 11%
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Life Cycle Cost
13-30

31. Development - Equations 13.1 - 13.4
System cost - summary
Airframe
Development - Equations
Procurement - Equations
Propulsion (procurement) - Eq 13.11
Ground Station + communications
Development - 70% air vehicle development
Procurement ≈ 1 air vehicle + sensor payload
Payload (procurement) - $5000/lb
Operations and support
Air vehicle & payload operators - estimate number
Maintenance personnel - chart 12-30
Other personnel - add 25%
Air vehicle operating costs (inc. engine) - chart 24-27
Ground station + communications - 8% procurement/yr
Payload - 8% procurement/yr
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Life Cycle Cost
13-31

32. Operations and support
Expectations
You should now understand the basic concept design cost issues including
Development
Procurement
Operations and support
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Life Cycle Cost
13-32

33. Raymer, Aircraft Design - A Conceptual Approach
Reading assignment
Raymer, Aircraft Design - A Conceptual Approach
Chapter 3 – Sizing from a conceptual sketch
Chapter 3.1 : Introduction
Chapter 3.2 : Takeoff weight buildup
Chapter 3.3 : Empty weight estimation
Chapter 3.4 : Fuel fraction estimation
Chapter 3.5 : Takeoff weight calculation*
Total : 25 pages
Note – Use Raymer as a reference book. It is not necessary to memorize or derive any of the equations. Read the sections over for general understanding of the concepts.
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Life Cycle Cost
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34. Intermission
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Life Cycle Cost
13-34