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Is a New Sustainment Model the Next Step in Defense Acquisition Reform?

By Chris Brumitt, VP Aviation, Aerospace & Defense at Maine Pointe

Brumitt is a Warrior Maven Contributor

(Washington, D.C.) 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.

The question is: What needs to be done to bring sustainment cost under control and drive a more effective sustainment supply chain to meet the ‘right part at the right place at the right time’ expectation and better serve the warfighter?

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.

A recent US Government Accountability Office (GAO) assessment determined that readiness of the F-35 program was being affected by several issues. These include limited availability of critical spare parts, having the wrong parts on-hand, and an inadequate logistics network for parts distribution. The GAO stated, “DOD is not maintaining a database with information on F-35 parts the US owns, and it lacks the necessary data to be able to do so. Without a policy that clearly defines how it will keep track of purchased F-35 parts, DOD will continue to operate with a limited understanding of the F-35 spare parts it owns and how they are being managed.”

This lack of connectivity and integration of the supply chain from key suppliers to the OEM and through to the customer (military branches and the warfighter) is being repeated on many different aircraft platforms in all branches of the military and is a major contributing factor for the overall inadequate readiness rates of military aircraft weapons systems.

In the case of the F-35, this lack of readiness may have an impact on the program moving from Low Rate Initial Production (LRIP) to Full Rate Production (FRP) because, as of June 2019, the operational readiness of the 23 aircraft in the test fleet was an extremely low 8.7%. If the aircraft cannot complete its combat readiness testing, the program cannot legally go into FRP.

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 warfighting 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 costly and disruptive, but it is imminent, considering deficiencies in sustainment are extremely costly and can have a direct impact on military readiness and even 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

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· 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 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

At the DoD Human Capital Symposium, Ellen Lord, Undersecretary of Defense for Acquisition and Sustainment said, “we need to start thinking about sustainment more when we design systems, so that we are designing [them] to be maintainable. “To be able to change out parts quickly, we need to make sure that we think about the costs of sustaining systems.”

Too often, sustainment does not get as much attention in the early stages of development of a system because the OEM is so focused on ‘winning the bid’. The result is that sustainment becomes more prevalent after the contract is awarded and production begins. If the sustainment element were built into the design of the system in the development phase, it would align the OEM and its suppliers to deliver critical parts better in the future.

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 maintenance 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 industries 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, which 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 and low availability rates, and an overall crisis in military readiness.

For the US DoD, there’s no time to waste, as 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 in current 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.

About the author:

Chris Brumitt is VP Aviation, Aerospace & Defense atMaine Pointe, a global supply chain and operations consultancy which helps military and commercial clients break through silos to accelerate improvements in costs, quality, cash and throughput across the entire value chain*****.*** Chris has more than 30 years of experience and has a track record of helping senior executives realize the accelerated execution of significant strategic and operational goals.