Defense Acquisitions:

Timely and Accurate Estimates of Costs and Requirements Are Needed to Define Optimal Future Strategic Airlift Mix

GAO-09-50: Published: Nov 21, 2008. Publicly Released: Nov 21, 2008.

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The Department of Defense's (DOD) C-5 Galaxy and C-17 Globemaster III aircraft play key roles in transporting weapons and other cargo. Since September 2001, these aircraft have delivered over 2.4 million tons of cargo to staging and operating bases in Iraq and Afghanistan. Yet determining the number and mix to meet current and future airlift requirements has become increasingly challenging given distinct differences between the two aircraft. While the C-5 can carry more cargo, the newer C-17 is more flexible since it can deliver to forward-deployed bases and has a higher mission capable rate. GAO was asked to identify the impact C-5 modernization cost increases have had on the mix of aircraft; assess the current C-5 modernization cost estimate; and identify C-17 production plans and issues related to production line shutdown. To conduct its work, GAO reviewed options DOD considered to meet its current and future strategic airlift requirements, and evaluated C-5 modernization and C-17 production line shut down cost estimates.

The Air Force has cut the number of C-5s it plans to fully modernize by more than half because of substantial cost increases in the C-5 Reliability Enhancement and Reengining Program (RERP) and plans to acquire more C-17s, with additional congressional funding. Currently, the Air Force plans to provide avionics upgrades to all 111 C-5s, limit RERP to 52 C-5s, and acquire 205 C-17s. However, this mix may change again, based in part on the results of a new mobility capabilities study, the findings of which DOD plans to release in May 2009. While the new study is expected to consider transport needs for the future force, DOD has not identified specific metrics it will use to make strategic airlift decisions--a concern GAO raised about DOD's previous mobility capabilities study and one DOD agreed to address in future studies. The Air Force currently estimates it will spend $9.1 billion on upgrading the C-5s. However, this estimate may be understated because DOD did not apply risk or uncertainty analyses to its RERP major cost drivers. Moreover, the current RERP is underfunded by almost $300 million and may be unachievable if the engine production schedule is not met. At the same time, the Air Force has not priced or budgeted for a new upgrade program it plans to begin in fiscal year 2010 to address certain modernization deficiencies and to add new capabilities. Some future costs, however, may be avoided should the Air Force justify retirement of some older C-5s and forego planned modifications. Careful planning is needed to ensure C-17 production is not ended prematurely and later restarted at substantial cost. Current production plans call for shutting down the C-17 production line in September 2010. However, results from the new mobility capabilities studies and potential C-5 retirements could lead to decisions to extend C-17 production beyond the 205 now authorized. Both the manufacturer and Air Force agree that shutting down and restarting production would not be feasible or cost effective due to the costs to reinstate a capable workforce, reinstall tooling, and reestablish the supplier base. At some point, the C-17 production line will shut down, and DOD will have to pay substantial costs that have not yet been budgeted. The manufacturer and Air Force shutdown estimates differ significantly--about $1 billion and $465 million, respectively--in large part because the manufacturer's estimate included assumptions about demolishing facilities and environmental remediation, while the Air Force's did not.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: To better inform decision makers and provide improved and quantifiable projections of airlift mobility requirements and investment needs, the Secretary of Defense should direct the Office of the Secretary of Defense (Program Analysis and Evaluation) and U.S. Transportation Command to ensure that the new mobility capabilities study specifies the ton-mile per day metric and other relevant metrics to support sound strategic airlift decisions, including (1) the cost-effective mix of C-5 and C-17 aircraft consistent with national security strategy; (2) the number of C-5s required to airlift equipment that can only be carried by that aircraft; (3) C-5A retirement schedules, if warranted by analysis; (4) the number of C-17s needed to accomplish both its strategic and tactical roles; and (5) future procurement and modernization needs.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: DOD intended not to calculate and use the ton-mile per day metric in its mobility study to help determine the required lift capacity. However, this metric was an important measure used in prior studies and by the Congress. We recommended DOD include this in its study and they concurred. Subsequently, DOD issued the mobility capabilities study in March 2010 and included the ton-mile per day metrics for various war time scenarios. In each of the scenarios, the current mix of C-5 and C-17 aircraft exceeded the million ton mile per day requirement. DOD concluded that it does not need any more C-5s or C-17s to perform strategic airlift. The department does not plan to procure any more C-17s and expects to retire 22 C-5s because of the excess capacity they identified during the study.

    Recommendation: The Secretary of Defense should direct the Secretary of the Air Force to prepare updated, reliable, and comprehensive cost estimates for C-5 modernization to include risk and sensitivity analyses on major cost drivers for the RERP, the costs of a new modernization program, and potential savings should some C-5A retirements be warranted.

    Agency Affected: Department of Defense

    Status: Closed - Not Implemented

    Comments: DOD did not concur with the recommendation to prepare updated C-5 modernization cost estimates. DOD stated that the modernization is being accomplished in two phases--the Avionics Modernization Program (AMP) and Reliability Enhancement and Reengining Program (RERP)--and that the third modernization effort we identified that is slated to begin in fiscal year 2010 is a sustainment program that would fall below the ACAT II threshold. Further, department officials believe that the most recent cost estimates for the AMP and RERP are sufficient and areas of concern and mitigating factors related to the RERP estimate were identified during the Nunn-McCurdy process. In follow-up discussions during the 2011 budget cycle, program officials stated that DOD does not plan to develop a new, comprehensive cost estimate for C-5 modernization. Officials believe the C-5 RERP estimate is sufficient and that the department is committed to meeting the agreed upon quantities that was the basis for the CAIG estimate. The AMP program will procure the last installation kits in FY10 and install the kits in FY 11. DOD's FY 11 budget also reflects a decision to retire 22 C-5A aircraft that are not part of the RERP effort. We are therefore closing this recommendation as not implemented.

    Recommendation: The Secretary of Defense should direct the Secretary of the Air Force to identify and budget for the full costs to shut down the C-17 production line in the time frame consistent with final decisions on the future size of the C-17 fleet.

    Agency Affected: Department of Defense

    Status: Open

    Comments: DOD concurred with our recommendation to identify and budget for the full costs to shut down the C-17 production line consistent with final decisions on the future size of the C-17 fleet. Since our report, Congress has provided additional funding that DOD is using to procure more C-17 aircraft, bringing the total to 223. In FY12, Congress added another C-17 for the operational loss replacement of an aircraft. The Air Force's FY 13 budget still does not include shutdown funding. Procurement budget provides for spares and support equipment costs as well as activities designed to transition the line to post production support.

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