Chris Brumitt, VP Aerospace & Defense, discusses the vital importance of sustainment and acquisition model reform to the defense mission.
Military and defense acquisition reform has been a top priority for the Department of Defense for years and the benefits are already evident, saving billions of dollars as well as taking years off program timelines. These reforms have allowed the warfighter to get new systems faster and at lower cost. The, often undervalued, companion to acquisition reform is sustainment reform, with 60 to 70 cents on every dollar spent going towards product and system sustainment over the lifetime after the initial purchase. It has become clear that these two related issues are of vital importance
1. Gaining control over sustainment and readiness
The Department of Defense is under pressure to gain control of aircraft sustainment costs as part of the next step of acquisition reform. Despite better and more efficient acquisition, DoD is still facing a readiness crisis that results from an antiquated sustainment model.
2. Reinvigorating the process of modernizing existing military platforms
Deficiencies in Maintenance, Repair & Overhaul (MRO) and significant parts shortages have led to the grounding of aircraft and availability rates that are not adequate to meet global mission requirements. The result can be devastating. In some cases, deficiencies in sustainment leads to a less efficient war fighting effort, not being prepared to deploy to war zones on a timely basis, and a sharp rise in accident rates (40 percent from 2013 to 2017).
A better approach to sustainment is important to the defense mission and would yield tremendous benefits, not just in terms of cost, but also delivering greater military readiness and lower instances of failures and accidents.
The long-term view of sustainment reform
Sustainment reform may prove more difficult to enact and implement than acquisition reform given that contractors rely on sustainment and MRO for much of their revenue stream. Defense is already meeting strong headwinds as industry-leading companies resist moves to lease back or buy back intellectual property to allow the military to take a more direct hand in sustainment.
Reform may be expensive and disruptive, but it is imminent, considering that deficiencies in sustainment are extremely costly and can have a direct impact on military readiness and the safety of personnel. In addition to the more immediate benefits of improved readiness, such reform would also move the entire industry towards a more clearly-defined focus on R&D and greater innovation. This would enhance the ability to operate on a more equal footing with China, which is rapidly becoming a leader in innovation (due in part to its looser adherence to intellectual property). To achieve the next level of military readiness and next-generation aircraft and weaponry, DoD is giving every indication it is prepared to go outside the norm in terms of sustainment and drive defense contractors to push R&D to the forefront.
The readiness dilemma
- The 2019 National Defense Authorization Act reported four times as many members of the military died in training accidents in 2017 as were killed in combat.
- As of the end of 2018, the F/A-18 Super Hornet fleet was only 50 percent mission-capable according to the US Navy, with only 260 aircraft out of 546 ready to deploy. It is not expected to raise the readiness rate to the DoD goal of 80% until at least September of 2019.
- Readiness rates have declined significantly over the past several years, with readiness rates for aircraft including the F-22, F-35, F-16 and others at or below average. Sixty percent of Navy and Marine fighters were out of service in 2017, and Army aviation also suffered with about half of the 101st Airborne Division sidelined in 2017.
The problem doesn’t stop at fewer aircraft being available to deploy; it also means training is impacted with shorter periods and less missions – indirectly contributing to higher accident rates. While a lack of funding for flying hours is part of the problem, the biggest issue is simply too few aircraft being available for training missions because of parts shortages and ongoing maintenance issues.
First steps towards a new sustainment model
Some steps are already being taken. Best practices learned from the commercial aerospace industry show the place to start is with optimizing the supply chain through better collaboration and integration. In response to the F/A-18 Super Hornet issue, the Navy has launched two separate initiatives; the Navy Sustainment System to increase spare part maintenance capability and reduce maintenance lead times, and the Depot Readiness Initiative to synchronize depot maintenanc and calendar inspection maintenance to reduce flow days.
The Navy Sustainment System is the tip of the spear in what sustainment reform should look like – ultimately a closer partnership between industry and defense. According to recent reports, the system brings in experts and defense industry engineers who will work with their Navy counterparts, leveraging best practices that have already proven successful in addressing sustainment in the commercial aircraft industry.
An Air Force proposal to buy or lease back intellectual property rights on military platforms has also been floated. While the idea may not gain traction, since defense contractors rely on long-term revenues from sustainment contracts, it is indicative of the need for the Air Force to think outside of the box and restructure the industry. This would require some industry incentives, such as replacing the sustainment revenues with more research and development initiatives. This would also contribute towards greater innovation, modernization of existing platforms and drive new products through the acquisition process.
What sustainment reform looks like
Acquisition reform has already yielded significant benefits for defense, now the Department of Defense is moving to address reform in military sustainment as well. For some time, the DoD has felt the current sustainment model is inefficient, resulting in constant shortages, low availability rates and an overall crisis in military readiness.
For the US DoD there’s no time to waste; the outdated aerospace sustainment model represents a risk to the US military. The military is now taking action to address end-to-end supply chain issues to solve the existing parts shortages and low availability rates of aircraft fleets, which would go a long way towards improving readiness.
Commercial aviation best practices call for 90 percent availability rates for aircraft, and commercial contractors providing MRO services are able to consistently provide a much higher availability rate than their military counterparts. With the military is currently in talks with the large OEM defense contractors on sustainment reform, there may be a new sustainment model in the making that could be the next major change to how the US government manages weapons systems.
If you would like to discuss any of the topics raised in this article, contact us for a no-obligation chat. Email: email@example.com
Calculate the value potential for your business. Complete our TVO Self Assessment Tool ™ and receive an automated Value Opportunity Report. This provides an indicative quantification of the value improvement potential (EBITDA & cash) across your buy-make-move-fulfill supply chain.
Maine Pointe is a global supply chain and operations consulting firm trusted by many chief executives and private equity firms to drive compelling economic returns for their companies. We achieve this by delivering accelerated, sustainable improvements in EBITDA, cash and growth across their procurement, logistics and operations. Our hands-on implementation experts work with executives and their teams to rapidly break through functional silos and transform the buy-make-move-fulfill supply chain to deliver the greatest value to customers and investors at the lowest cost to business. We call this Total Value Optimization (TVO)™.
Maine Pointe’s engagements are results-driven and deliver between 4:1-8:1 ROI. We are so confident in our work and our processes that we provide a unique 100% guarantee of engagement fees based on annualized savings. www.mainepointe.com