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6-21-2006

Billions Lost in Aircraft Acquisition

There is a large national debt for many reasons, but among all of these reasons, there is one easy way to reduce spending. The Department of Defense regulates and controls all military acquisitions, including those of aircraft. In today's military realm of cost cutting and tough decision-making, the high cost of building, developing, and activating a military aircraft is extreme. These self-imposed price increases are losing the United States Government billions of dollars every year. This lost money, used to support unnecessary costs, needs to be eliminated from the budget. The Department of Defense needs to do this by making major reforms to the development of future weapons systems at lower prices. Major reform should occur by correcting mistakes, reducing oversight policies, and improving contract requirements to better support the soldiers defending this country with better equipment at lower cost.

When the government makes a mistake, it tries to hide it from the public, costing taxpayers untold amounts of money. One prime example comes from Ben Rich, the former head of Lockheed's Advanced Development Products. His division has been responsible for such notable aircraft as the U-2, SR-71, F-117, and F-22. This example occurred in 1964 with the development of the SR-71 Blackbird. When President Johnson announced the existence of this spy plane to the world, he accidentally transposed the two letters in its designation. Originally called the RS-71 the president called it the SR-71. A simple mistake, but the Air Force required Lockheed to spend thousands of dollars to change the name on 29,000 blueprints and drawings. The Department of Defense also required an engine intended for at 85,000 feet to test for protection from dust and dirt while flying over dirt roads (327). These changes and tests cost large sums of money, which if used differently, could have helped the Defense Department in other more important areas. One can only imagine how many mistakes the military has made since 1964 and then covered up. Everyone makes mistakes, including the government, but tax dollars do not need to go to waste covering up that fact.

Along with simple government mistakes, another reason that Department of Defense contractors often go over budget is the high level of oversight involved in a government contract. The military often requires several inspectors and officials, watching and, in general, interrupting the manufacturing processes. According to the book Skunk Works by Ben Rich, there were two major projects going at Lockheed in 1958. One was a civilian project and the other a military aircraft, both with the exact same speed and altitude requirements. The Military's project took three times longer then the civilian aircraft due to the constant supervision by around ten times as many inspectors and engineers. Even with the increased complexity of a military aircraft, it was not ten times as complex as the civilian project (330).

In a recent magazine by the United States Air Force, there is a startling list of over budget and overdue projects. There are 36 major weapons systems over budget by around twenty-five billion dollars. One project on that list is the Joint Strike Fighter Program. This Program's prices rose by almost eight percent in the last year alone (Wagner 24). Ben Rich best illustrates why this occurs with defense projects in the following example. "General Electric's jet engine plant at Evendale, Ohio, sells its engines to the commercial airlines for 20 percent less to the Air Force. Price gouging? No. But the Air Force insists on having three hundred inspectors working the production line for its engines. The commercial airlines have no outside inspectors slowing down production and escalating costs. Instead, the airline industry relies entirely on GE's engine warranty, a guarantee that the engine will function properly or GE will be required to pay a penalty as well as all costs for replacement, repairs, and time lost. Why can't the Air Force operate with similar guarantees and save 20 to 30 percent on engine costs and eliminate three hundred unnecessary jobs to boot?" (325). If the government can learn to rely more on contractor's guarantees, oversight and cost would decrease dramatically. These guarantees work well for the rest of the aviation industry why cannot the military rely on these same guarantees. This single policy change would result in savings in both time and money for the government and contractor. Unfortunately, the Department of Defense has stated the opposite. "Effectively balancing cost, technical risk and management realities would require closer integration of the Department's joint capabilities identification, resource allocation and acquisition processes, with clear responsibilities defined for each" (United States, Quadrennial 71). This means that the Defense Department seeks to increase oversight and continue to interrupt the production process. As this trend towards continued micromanaging continues, the problems involved will continue to worsen with more significant project overages in the future.

One of the greatest wastes of money in aircraft acquisition is the basic contract requirements of the Department of Defense. The statistics listed by Ben Rich are amazing. There are 500 procurement regulations, 12,000 contract clauses, and 50,000 individual specifications. This can lead to an entire shelf full of 300 page books, just for a single program's contract (329). He continues with an example that shows how the sea of paperwork increases the price of military aircraft projects. The F-16 fighter program had to rent a warehouse to store the 92,000 boxes of data for that project. Even now, the common citizen is paying for that warehouse full of documents no one will ever read to be store stored and guarded (328). That is just one fighter aircraft developed in 1979 and the problem is only expanding. If the Department of Defense would only require the needed paperwork to be stored, the savings of vast amounts of money would result. This money could buy more parts, fund better training, or even buy another whole aircraft.

These excessively long and complex contracts cause other cost inducing policies. One example given by Ben Rich is how current acquisitions laws will actually penalize a contractor if a project finishes early or under budget (334-335). Clauses like these lead to overdue and over budget programs because the contractor has no reason to attempt to save money and time. In addition, these aerospace companies do not have the administrative workers needed to fulfill every single requirement and clause. However, the government does have the resources to enforce and pursue every clause in its contracts. When this happens, fines result and contractors lose money and incentive to sign a government contract ever again. This is one of the many reasons that there has been a major reduction in military contractors since the Second World War. If the Department of Defense would reduce these over complex contracts to a reasonable length and a reasonable set of regulations, aircraft acquisition prices could drop considerably. This price drop could then help facilitate other, more worthy causes of the military's budget.

Along with complex contracts, the government also reserves the right to change the number of aircraft ordered as a project takes shape. While this is a reasonable policy, the government takes this to an extreme. The next generation frontline fighter, the F-22 Raptor, is a perfect example of how the government works. According to the Defense Department the Air Force needs a minimum of 183 F-22 fighter aircraft, while the Air Force Leadership believe the minimum is 381 (Tirpack 20). The original contract was for 700 copies at an asking price of sixty million each (Rich 322). Unfortunately, a recent independent study for the Defense Department has concluded that the number of F-22s needed could change again (Tirpak 20).

The major problem with ever-changing unit numbers is how it triggers supply chain issues that directly influence the final pricing of the project and each unit's price. As the number of units on order change, the price per unit goes up for several reasons. Expensive final products have expensive parts. Every time the number of units the government orders drops, the whole supply chain bogs down. All manufacturers involved in a project have to order ahead raw materials to fulfill their part of the contract. Imagine a company's problems when told that it will only need one-fourth of the supplies it already has on order and has paid for. For this reason, these large contracts initially offer many companies the ideal promise of work for years to come. However, when a contract is suddenly drawn and quartered, the promised work quickly disappears. The ensuing nightmare of labor, parts, and cost overages has lead to the demise of several defense contractors. If the Department of Defense would give more realistic unit numbers and not randomly change its requirements in contracts, military expenses would decrease, while aerospace profits would increase. This change would also give contractors more incentive to sign up for a government contract, increase competition in the field, and thereby help produce more new concepts and ideas at better prices.

Often in an argument like this, the most important reason to change is lost. Aside from losing time and money, the best and most important reason to reform the aircraft acquisition process is to better support the soldiers protecting national freedom. With the increase in aircraft acquisition time and price, the men and women of the military have to deal with more maintenance on older weapons systems coupled with the stresses of battle. Eventually the resulting problems will grow enough that these legacy aircraft will fail to perform the missions assigned to them in a time of need. America cannot afford to lose the air superiority that has served the soldiers on the ground since the First World War. In the words of Ben Rich, "In answer to the question do we really need the F-22, comes another question: do we really want our combat pilots putting their lives on the line in a fighter now more than twenty-two years old?" (322). Those questions do not just apply to the F-22, but to all other aircraft in development. In fact, Air Force magazine shows the average age of all active duty aircraft combined is now over twenty-two years old, some aircraft averaging almost forty-four years old (United States, "Equipment 2006" 28). These older legacy aircraft are straining maintenance crews and putting the America's defenders in a bad situation only getting worse. The only way to fix this problem is for the Department of Defense to fulfill its mandated responsibility, reduce the unnecessary costs of aircraft acquisition, and use these saving to give soldiers the tools they need now instead of later.

The Department of Defense has a responsibility to make certain the United State Armed Services has the needed tools to complete its mission. Only by a range of sweeping aircraft acquisitions reforms, can ground troops do their job without the danger of foreign attack from the skies above. The costs of aircraft acquisition can become significantly lower and save money, time, and lives as a result. The Defense Department can avoid the loss of billions of dollars by admitting its mistakes, reducing oversight, and loosening contract regulations. Doing these things will reduce spending and increase the productivity of the defense aerospace industry. These cuts will have very little negative tradeoffs and will help reduce the economic stress felt by the Department of Defense in rough times while allowing it to better support freedom.

Works Cited

Rich, Ben R., and Leo Janos. Skunk Works. Boston: Little, 1994.
Tirpak, John A. "Washington Watch." Air Force Magazine June 2006: 16-20.
United States. Department of Defense. Quadrennial Defense Review Report. 6 Feb. 2006. 14 June 2006 http://www.defenselink.mil/qdr/report/Report20060203.pdf.
United States. United States Air Force. "Equipment 2006 USAF Almanac." Air Force Magazine May 2006: 63-68.
Wagner, Breanne. "Aerospace World." Air Force Magazine June 2006: 22-30.