Weapons Production:

Impacts of Production Rate Changes on Aircraft Unit Costs

NSIAD-91-12: Published: Dec 18, 1990. Publicly Released: Jan 16, 1991.

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Pursuant to a congressional request, GAO reviewed the sensitivity of estimated procurement costs for military aircraft to reductions in the quantity of aircraft purchased.

GAO found that: (1) aircraft procurement unit costs generally increased as their procurement rates decreased, but some mature Air Force and Navy procurement programs did not show a significant unit cost increase compared to other aircraft programs; (2) contractors reported that the procurement unit cost was especially sensitive to sudden unanticipated changes in production rates; (3) unit costs were less sensitive when the military planned rate reductions and reduced such fixed costs as overhead and facilities; and (4) contractors needed sufficient advance notice of procurement rate decreases, so that they could eliminate unnecessary facility, overhead, and other costs before the production rate decreases began.

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