U.S. Air Force on a Mission to Save Money

By Sandra I. Erwin
The U.S. Air Force is going after the nation’s biggest enemy — not by building the shiniest weapons that money can buy, but by cutting expenses. Fiscal discipline is what is needed for the United States to defeat its toughest national security challenge today, which is its soaring debt, said Air Force Gen. Donald J. Hoffman.
“It’s a little bit embarrassing perhaps to say that our number-one threat is not some rising peer or some rogue nation or increasing terrorism around the world. Our number-one threat is ourselves … our lack of fiscal responsibility,” said Hoffman, who is the commander of Air Force Materiel Command, at Wright-Patterson Air Force Base, Ohio. AFMC oversees $69 billion annually in research, development, testing, acquisition management services and logistics support of weapon systems.
By racking up an enormous debt, “We have put the nation on an unsustainable path,” he said June 22 at an Air Force Association meeting in Arlington, Va.
The defense budget, which makes up just 20 percent of all government expenditures but 60 percent of federal non-entitlement spending, will be in play as a contributor to reducing the nation’s debt.
Within the Air Force, several efforts already are under way to cut costs, said Hoffman. Just at AFMC alone, there are plans to reduce the size of the work force. “We are hiring one for every two empty slots,” said Hoffman.
A number of business reforms also are in the works.
After spending years in the defense procurement doghouse as a result of the troubled $40 billion refueling tanker program, the Air Force is ready to prove that it has learned from past mistakes. The new tanker, called the KC-46, will be a “model” program for how to save money and gain efficiency in military acquisitions, Hoffman said.
The Air Force awarded a tanker production contract to The Boeing Co. on a “firm fixed price” arrangement for all 179 aircraft. That means the government has set strict cost caps, and any budget overruns would have to be absorbed by the contractor. The current cost caps, Hoffman said, may be lowered over time, as the Air Force finds ways to squeeze savings out of the manufacturing process. The government, for instance, is looking at procuring major aircraft components such as engines and delivering them to Boeing as “government furnished equipment,” rather than pay a premium “pass through” cost to the manufacturer for buying the engines. A similar method may be used for other components of the aircraft.
Another money-saving scheme for the Air Force will be to make sure it owns the “technical data rights” to its weapon systems. That would allow the service to seek competitive bids for maintenance and support work without having to be concerned that the original manufacturer of the equipment owns the rights to the designs and can prevent sensitive data from being released to competitors.
In future acquisitions of new hardware, the Air Force will “procure and price the data rights during the competitive phase,” said Hoffman. In existing “legacy” programs, the Air Force most likely will not be able to afford to buy the data rights. “We couldn’t pay the price because there is no competition anymore.” Once the Air Force begins to acquire these data packages, it will be able to save money, for example, by maintaining and repairing aircraft in government-owned depots, if that happens to be the lower-cost option. “If we want to do it commercially, we can compete it. We will have the hooks in the program to do that,” he said. “That is a model of how more acquisitions will be done.”
A consolidation of buying offices also is under way. A new “enterprise sourcing group” was launched a year ago at Wright Patterson to oversee the management of contracts that previously had been performed by disparate organizations. Many commodities — such as medical supplies, civil engineering and information technology equipment — were being bought through several agencies. “We brought them together,” Hoffman said. A similar effort is being pursued for support service contracts at Air Force bases. Instead of having each installation contract for its own grounds keeping or snow removal services, the Air Force will consolidate those operations to save money, he said. “We found that every Air Force base was starting from scratch.” The new enterprise organizations from now on will provide “templates, market research” and other guidance for how to go about hiring support contractors. “We expect to get significant savings,” said Hoffman. There are 17 “strategic sourcing” opportunities going on that are worth $5 billion. He said half-a-billion in savings already has been achieved, and forecasts an additional $2 billion in the coming years.  “This simplifies the contracting business,” said Hoffman.
New ways of upgrading weapons also will yield savings. The Air Force typically spends billions of dollars modifying aircraft electronics every time a new weapon joins the fleet. Rewriting software code alone is hugely expensive and time consuming. The service several years ago began to design a “universal armament interface” that allows plug-and-play addition of new weapons. The F-15E aircraft and the small-diameter bomb are the first systems to use the new interface. This technology should dramatically reduce the cost of the F-35 Joint Strike Fighter program, which is expected to add many new weapons over the course of several decades.
Air Force leaders are hopeful that these measures will help free funds to shore up the service’s modernization accounts. It is not unusual to find cargo and refueling tanker aircraft that are more than 50 years old, and still in operation. Hoffman said some airplanes that are in service today have been out of production for decades, and many are grounded because there are no spare parts available.

Topics: Business Trends, Doing Business with the Government, Defense Contracting, Defense Department, DOD Budget

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