GAO

United States General Accounting Office

Report to Congressional Requesters

July 1999 AIR FORCE 

LOGISTICS

C-17 Support Plan 

Does Not Adequately 

Address Key Issues

GAO/NSIAD-99-147

Page 1 GAO/NSIAD-99-147 Depot Maintenance

United States General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-282640 Letter

July 8, 1999

The Honorable John Warner

Chairman

The Honorable Carl Levin

Ranking Minority Member

Committee on Armed Services

United States Senate

The Honorable Floyd Spence

Chairman

The Honorable Ike Skelton

Ranking Minority Member

Committee on Armed Services

House of Representatives

In 1998, Congress mandated1 that the Secretary of the Air Force submit a 

plan to Congress by March 1, 1999, identifying core2 logistics capabilities 

for the C-17 aircraft consistent with the requirements of 10 U.S.C. 2464.3

 

Congress also mandated that we review the Air Force’s C-17 plan and 

submit a report to Congress evaluating its merits. This report addresses 

the extent to which the Air Force’s plan (1) identifies core logistics 

capabilities, (2) provides assurance of the cost effectiveness of the planned 

support strategy, and (3) allows implementation under current law. 

Results in Brief The Air Force is working to pilot test a new logistics support concept for 

the C-17 that places increased reliance on the private sector for support. 

The Air Force plan incorporating this concept was provided to the 

1 Section 351 of the Strom Thurmond National Defense Authorization Act for Fiscal Year 1999 

(Public Law 105-261). 

2Section 2464 of title 10 requires that the core logistics capability be government-owned and operated 

and sufficient to ensure a source of technical competence and resources necessary to ensure an 

effective and timely response to mobilization, national defense contingency situations, and other 

emergencies. 

3 This provision calls for core requirements to be identified within 4 years of a mission-essential 

weapon system attaining initial operating capability. Initial operating capability represents the date 

when a service determines that a new system has been fielded at its first operating base in sufficient 

numbers.
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Congress. The plan has three key shortcomings that need to be addressed 

so the pilot’s merits can be adequately assessed. These shortcomings relate 

to identifying 

C-17 core requirements, the strategy’s cost-effectiveness, and the Air 

Force’s ability to implement the plan under current law.

The plan the Air Force submitted to Congress did not identify C-17 core 

requirements or provide information on a process for establishing the 

specific capabilities needed to support such requirements. The Air Force 

outlined its current process for analyzing core requirements and 

capabilities and indicated that its current approach to such analysis is not 

weapon-system specific. To date, requirements for the C-17 aircraft have 

not been included in the Air Force’s core process. Further, the Air Force 

stated that it does not expect to complete a core analysis incorporating the 

C-17 requirements until 2002. This would be 8 years after the C-17 achieved 

its initial operational capability. 

The 1999 Air Force plan’s conclusion that C-17 depot maintenance would 

be less cost-effective in Air Force depots is not adequately supported. Our 

first concern is that the analysis is based on 1996 data, and more current 

information should have been used. The Air Force plans to complete an 

updated cost analysis in 2002. However, work remains to fully develop the 

methodology, metrics, criteria, and data sources that will be used in making 

any future sourcing decisions for C-17 logistics work. Secondly, the 

conclusions drawn from the 1996 data about the cost-effectiveness of the 

private sector under the flexible sustainment approach are based on 

incomplete analysis. Finally, the Air Force is not programming the funds 

that would be required to establish in-house logistics support capabilities, 

without which there may not be a viable in-house alternative.

We question whether the Air Force plan can be implemented under current 

law. The Air Force plan envisions that the C-17 contractor will contract 

with public depots for selected maintenance services for some C-17 

systems and equipment. Under applicable law, the Air Force must 

determine that the services to be obtained from public depots are not 

commercially available. Past assessments by the Air Force have shown 

that commercial sources are available to perform depot maintenance on 

the same or similar commodities for other aircraft.

This report includes recommendations concerning the Air Force’s 

approach to conducting a cost analysis and implementing its planned 

support approach.
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Background For many years the Air Force has relied on contractors to provide logistics 

support for commercial derivative systems such as the KC-10 aircraft as 

well as for some high-cost, highly classified systems produced in small 

quantities, such as the U2. In recent years the Department of Defense 

(DOD) and the services have initiated actions to expand contractor 

logistics support to other military systems that were not derived from 

similar commercial systems. 

The Air Force has designated the C-17 as 1 of the 10 Air Force systems that 

will be used as a pilot to implement a DOD initiative that will emphasize 

contracting with the private sector for support services as a part of its 

logistics reengineering efforts. This designation of the C-17 as a pilot 

project is consistent with defense reform initiatives, which called for a 

strategic shift toward increased reliance on the private sector to meet 

support needs.

Overview of C-17 Program The C-17 is a four-engine, wide-bodied, strategic airlift aircraft designed to 

accomplish a wide variety of tasks, including (1) transporting vehicles, 

equipment, cargo, and personnel over intercontinental ranges and 

(2) landing at small, austere airfields. The aircraft has a demanding and 

diverse worldwide mission, and it is designed to provide significant 

improvements in performance and reduced operational costs relative to 

other strategic air-lifters. The number of aircraft to be bought has changed 

over time, ranging from an initial quantity of 210 to the currently approved 

quantity of 120. Although the Air Force had originally determined that the 

C-17 would largely use in-house support, the reduction in fleet size 

prompted officials to reconsider support options. Forty-nine aircraft have 

been produced and will be based at four operating locations. C-17 

production is expected to extend through 2005. 

Program Management 

Organization

Since program inception in 1981, C-17 development and production has 

been managed by the C-17 System Program Office at Wright-Patterson Air 

Force Base, Ohio. In 1984 the San Antonio Air Logistics Center became the 

C-17 systems support manager, responsible for sustainment management 

functions4 such as materiel management, depot maintenance, and 

4 Sustainment management is the support of a system after it becomes operational. Recently proposed 

changes in DOD’s sustainment management process would retain more of these functions in the 

acquisition program office rather than transferring them to the system support management office, 

which is generally collocated with the responsible Air Force depot. 
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configuration control. After the San Antonio Air Logistics Center was 

identified for closure during the 1995 Base Realignment and Closure 

process, the Air Force designated Warner Robins Air Logistics Center as 

the new C-17 systems support manager, with some C-17 functions 

previously performed at San Antonio transferring to Warner Robins, while 

others are to be performed by contract. 

Flexible Sustainment Strategy On November 1, 1996, the Air Force C-17 program office issued its analysis 

of alternative long-term support options for the C-17. This report estimated 

in-house and contractor support costs for the materiel management and 

depot maintenance functions. The report summary stated that certain 

subsystems are more economical to accomplish organically and others by 

contractors and the addition of materiel management costs shows that a 

significant savings may be gained by consolidating functions at a 

contractor location.

In 1997, based on this conclusion and on uncertainties surrounding the 

future Air Force depot maintenance structure, the Air Force postponed its 

final decision on where both materiel management and depot maintenance 

activities would be performed and it adopted a support strategy for the 

C-17 referred to as “flexible sustainment.”5 Under flexible sustainment, the 

Air Force expected to rely principally on contractor supported logistics for 

the C-17, at least through 2003. The contractor, Boeing Company, would be 

expected to provide materiel management,6 depot maintenance, and 

engineering support for the total system during this time. At the same time, 

the contractor could use the military depot system to provide some 

support. 

The Air Force’s C-17 flexible sustainment strategy involves

• having Boeing, the C-17 aircraft manufacturer, retain responsibility for 

depot maintenance;

• moving materiel management—including inventory management, 

engineering, data management, and some program management—from 

5 Although the C-17 support program is the only Air Force system that is referred to as using flexible 

sustainment, it is similar to traditional contractor logistics support or the newer concept of total system 

program responsibility, except that it is approved for a limited period of time rather than for the life of 

the system. 

6 Materiel management involves the determination of requirements for spare and repair parts, stock 

issuance and supply parts support, and engineering. 
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the closing San Antonio Air Logistics Center to Boeing between 

1998 and 2000;7

• moving remaining systems support management responsibilities to 

Warner Robins Air Logistics Center;

• evaluating the flexible sustainment approach between 2001 and 2002; 

and

• conducting a final depot support decision process in 2003.

Air Force Plan in Response 

to Congressional Mandate 

In response to the congressional mandate for a plan addressing C-17 core 

capabilities, the Air Force submitted a plan consisting of two volumes: 

• a resubmission of an October 10, 1997, report sent to the Senate 

Appropriations Committee entitled Depot Support Strategy: Flexible

Sustainment and 

• the March 1, 1999, report to Congress entitled Depot Support Strategy:

Flexible Sustainment Strategic Plan.

The first volume had previously been issued in response to a requirement in 

Senate Report 104-286 on the Department of Defense Appropriations Bill 

of 1997. It pointed out that the C-17 Flexible Sustainment strategy takes 

advantage of the strengths of both industry and the government by 

establishing an “intelligent partnership.” It defines this strategy as a joint 

venture between the public and private sector that relies on support from 

the source providing the best value, based on technical competence and 

economic factors. Air Force officials said that, under flexible sustainment, 

Boeing could award specific depot maintenance work to the most costeffective provider from the private or public sector. 

The second volume of the Air Force plan stated that the Air Force intends 

to postpone the C-17 source-of-repair decision until 2003—2 years prior to 

7 The conversion of non-depot commercial functions, such as materiel management, to contractor 

performance is generally subject to OMB Circular A-76. The C-17 program office believes that A-76 

does not apply to the materiel management services because the circular provides for a waiver for 

functions performed at installations scheduled for closure. Further, the program office believes that 

the study and notification provisions of 10 U.S.C. 2461 do not apply to the C-17 materiel management 

function since the law applies only to functions that were being performed by DOD civilian employees 

as of October 1, 1980. The program office states that the C-17 full-scale engineering and development 

contract was not awarded until 1982 and that the first sustainment contract for the C-17 did not begin 

until 1995. Given the limited time available for this review, we were unable to fully evaluate these 

issues.
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the projected end of C-17 production. This process would be accomplished 

using three separate but related subprocesses: 

• a core determination process; 

• a cost-benefit analysis comparing costs of in-house and contractor 

support options over the life of the C-17 and including both recurring 

and non-recurring costs; and

• an analysis providing an assessment of the current and projected 

balance of depot maintenance workloads between the public and 

private sectors for purposes of addressing requirements of 

10 U.S.C. 2466, which provides that not more than 50 percent of the 

depot maintenance funding may be used for maintenance performed by 

nongovernmental personnel.8

At the current time, the interim contractor support arrangement that was 

established with Boeing is being extended under the flexible sustainment 

strategy. Additionally, materiel management work is being moved to 

Boeing from the San Antonio Air Logistics Center, where the C-17 system 

support manager currently is located. 

Air Force Plan Does 

Not Identify Core 

Capability 

Requirements for the 

C-17

While the Air Force C-17 plan provided information about its support 

strategy and plans for long-term decision-making, it did not identify any 

current core capability requirements for the C-17. Since specific core 

requirements were not identified, there was also no information provided 

on a plan for establishing the capabilities needed to support the core 

requirements. The Air Force outlined its current process for analyzing core 

requirements, which, to date, have not included consideration of the C-17. 

The Air Force stated that it did not expect to complete a core analysis 

incorporating the C-17 until 2002. This will be 8 years after the C-17 

achieved an initial operating capability. A core assessment of the C-17 is 

necessary to identify specific C-17 maintenance capabilities needed in 

military depots to support DOD core logistics capability now or in the 

future. For several reasons we question the Air Force’s rationale for 

postponing the core logistics assessment. Delaying making this 

assessment could create the risk that some maintenance capabilities might 

not be available when needed. 

8 Section 2460 of title 10 provides that depot maintenance includes overhaul, upgrading, or rebuilding of 

parts regardless of the source of funds for the maintenance or repair. It also specifies that depot 

maintenance includes all aspects of depot-level software maintenance. 
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Department of Defense 

Core Methodology 

The Department of Defense’s core determination process is designed to use 

the Joint Chiefs of Staff strategic planning scenario to identify contingency 

requirements for tasked systems and ensure that in-house maintenance 

capabilities can surge and expand to meet wartime requirements. 

However, DOD’s core policy, which was modified in 1996, does not require 

that a DOD depot have repair capabilities for each tasked system.9 The 

policy requires that depots have the capability to be able to support all 

tasked systems, unless an analysis of private sector capability determines 

that sufficient reliable commercial sector capability exists. For example, 

the DOD policy states that if the facilities, equipment, and skilled personnel 

to perform maintenance on one type of aircraft enable a depot to be 

capable of performing maintenance on other types of aircraft, then the core 

capability does not necessarily have to include each individual system. 

Air Force Postponed Core 

Determination 

Incorporating C-17 Aircraft

The Air Force’s March 1999 plan stated that the Air Force has postponed 

the incorporation of C-17 surge requirements into its core determination 

process until 2002. The plan indicates that it would be premature to do 

such an analysis now given the limited number of C-17 aircraft in the active 

inventory. The plan does describe how the Air Force expected to address 

core logistics capabilities related to the C-17. However, by the time such an 

analysis is completed, the Air Force will have relied largely on the 

contractor to support the C-17 for 8 years after achieving initial operational 

capability. If, at that later date, the Air Force were to identify the need for 

establishing C-17 specific capability in an Air Force depot, some additional 

period of time could be required to develop that capability. For example, 

the C-17 Program Director indicated the need for surge capability at the 

Warner Robins depot to complement the contractor’s capacity. He stated 

that the C-17 fleet might require a mission-unique modification to perform 

in a specific theater of operations, such as adding enhanced defense 

systems. Given such a requirement, the program director said that because 

of the (1) time that would be required to increase capacity and 

(2) limitations on support equipment and hangar space at the Boeing 

facility, a fleet-wide modification would take significantly longer without 

Warner Robins Air Logistics Center as an immediately available source. 

Meanwhile, the C-141 workload—the in-house workload that the Air Force 

says is supporting much of the current, large airframe surge 

9 Under this policy, the Air Force identified core capability requirements by commodity (i.e., airframe, 

engine, landing gear, avionics, etc) versus whole new weapons. 
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requirements—is declining as the aircraft is being phased out of the 

inventory.10

Given the requirement in 10 U.S.C. 2464, the Air Force’s past practices, and 

workload considerations, the Air Force’s position that it is premature to 

include the C-17 into the current core determination process is not 

reasonably supported. For example, and most importantly, the Air Force is 

required by statute to identify a core logistics capability not later than 

4 years after a mission-essential weapon system achieves an initial 

operating capability. The C-17 achieved this capability in January 1995. 

Also, while the Air Force is delaying assessing core requirements for its 

military unique C-17 aircraft system, it has already made a core assessment 

for the C-17’s commercial engine. Further, the Air Force has previously 

completed other core assessments as a normal part of the logistics 

planning process during the systems acquisition phase.11 Lastly, the Air 

Force is contracting out depot maintenance workloads from its closing 

Sacramento and San Antonio depots that are valued at about $238 million 

annually. With this transfer the Air Force is moving increasingly toward the 

limit in 10 U.S.C. 2466 that prohibits contracting out more than 50 percent 

of its depot maintenance workload. As this happens, the Air Force could 

be faced with difficult choices regarding what workloads it wants to retain 

in-house and contract out. Given the mandate in 10 U.S.C. 2466, the Air 

Force’s past practices, and workload considerations, it is unclear why the 

Air Force maintains it is premature to include the C-17 into the current core 

determination process.

Uncertainties 

Regarding Cost 

Effectiveness of the 

Current Plan

The 1999 Air Force plan’s conclusion that C-17 depot maintenance would 

be less cost-effective in Air Force depots is not adequately supported. Our 

first concern is that the analysis is based on 1996 data and more current 

information should have been used. The Air Force plans to complete an 

updated cost analysis in 2002. However, work remains to fully develop the 

methodology, metrics, criteria, and data sources that will be used in making 

any future sourcing decisions for C-17 logistics work. Secondly, the 

conclusions drawn from the 1996 data about the cost-effectiveness of the 

10 The last programmed C-141 depot maintenance work will be performed in 2004. Unless other large 

airframe workloads are designated as core, C-17 core may be needed.

11 For example, the Joint Stars program office made decisions regarding depot maintenance and 

materiel management support in 1988, during the acquisition process and prior to the initial operating 

capability being established.
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private sector under the flexible sustainment approach are based on 

incomplete analysis. Additionally, the Air Force is not programming the 

funds that would be required to establish in-house logistics support 

capabilities, without which there may not be a viable in-house alternative.

Improved Cost Data Needed The Air Force used its 1996 cost analysis to support its 1999 plan. In 

completing its 1996 cost analysis, an Air Force cost team collected 

projected usage data (failure rates, repair times, repair parts requirements, 

etc.) and overlaid a projected flying hour program to estimate repair and 

maintenance requirements in direct labor hours for the C-17 over a 30-year 

life cycle. The team applied then current labor rates for the appropriate 

contractor or DOD depot to develop recurring cost estimates for the 

projected depot repair requirements. They did not include the cost of 

material, which they assumed would be the same for both providers. They 

also identified nonrecurring cost estimates for both the contractor and 

DOD depots. 

 The basic methodology employed by the Air Force to develop the cost data 

is sound. However, we are concerned about the lack of more recent data 

for the 1999 plan. Air Force officials said they plan to collect data during 

the C-17 flexible sustainment contract period that will allow a more 

up-to-date assessment in support of its planned 2003 source-of-repair 

decision. The Air Force will use a cost benefit analysis to determine 

whether continued contractor or public sector support would be the most 

cost-effective, long-term support option. However, the Air Force has not 

identified the methodology, for estimating recurring and nonrecurring cost 

elements or the metrics, criteria, and data sources that will be used in 

making any future sourcing decisions for non-core C-17 logistics work. Air 

Force officials said they recognize the need to develop cost metrics to be 

used in the future C-17 sourcing assessment, but they have not yet done so. 

The information is needed to ensure the Department will be in a position to 

make the most cost-effective decision; for example, to ensure that it has 

data available to evaluate in-house costs. 

DOD’s March 1999 update to its November 1997 Defense Reform Initiative 

report said that the Department intends to increase the competitiveness of 

its depot maintenance contracts. While the program office has not yet 

determined if a competition will be conducted to determine the long-term 

C-17 source of support, they believe they have acquired the necessary 

technical data to conduct a competition. We have reported in the past that 

it is difficult to control costs for sole source contracts. We also reported 
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that 91 percent of the depot maintenance contract actions we reviewed—

representing 69 percent of the DOD non-ship depot maintenance 

contracts—were awarded on a sole source basis.12 One of the major 

factors inhibiting competition was not having required technical data.

Weaknesses in Air Force 

Analysis

The Air Force based its increased reliance on the private sector in the 

flexible sustainment concept on data in its 1996 depot support strategy 

study. However, the Air Force’s analysis of data in that study produced 

some conclusions about the cost-effectiveness of the materiel management 

and depot repair functions that were not adequately supported. 

The 1996 Cost Study Conclusions 

Are Inaccurate

The Air Force’s March 1999 plan concluded that there is an insignificant 

cost difference when comparing government and private sector 

performance of the materiel management function. The Air Force’s plan 

reached a different conclusion than the 1996 Depot Support Strategy Study. 

The 1996 study concluded that significant savings could be achieved by 

consolidating materiel management and depot maintenance with the 

contractor. The 1996 conclusion was a key factor in the Air Force’s 1997 

decision to implement the flexible sustainment concept. Air Force officials 

told us that its 1996 conclusion was not supported by its cost data. 

Nevertheless, its 1999 plan indicated that the Department still plans to 

transfer materiel management to the contractor by the end of fiscal year 

1999.

Weaknesses in 1999 Plan 

Methodology Gave Incomplete 

Results on Cost-Effectiveness of 

Public Sector Maintenance 

The 1999 plan did not provide a complete analysis of the share of C-17 

depot maintenance workload estimated to be more cost-effectively 

performed in Air Force depots. The analysis assessed the maintenance 

requirements for C-17 subsystems by aggregating the number of systems 

being evaluated, but did not consider the dollars associated with the 

maintenance. The analysis approach gives an incomplete picture of the 

optimum mix of depot maintenance workload between the public and 

private sectors. 

As indicated in figure 1, the 1999 study concluded that 33 percent of the 

C-17 depot maintenance work would be performed more cost-effectively by 

the private sector and 29 percent more cost-effectively by Air Force depots. 

12 Defense Depot Maintenance: Contracting Approaches Should Address Workload Characteristics

(GAO/NSIAD-98-130, June 15, 1998).
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For the remaining 38 percent, it concluded that there was no meaningful 

cost difference between public and private sector sources of repair.

Figure 1: Air Force Analysis of Optimum C-17 Depot Workload Mix

Source: Air Force March 1999 Plan to Congress on C-17 Flexible Sustainment.

The plan indicated that the mix was based on total life cycle cost. Our 

analysis showed the Air Force calculations were based on the number of 

systems or subsystems that would fall in each category, but did not include 

the total dollar value represented in each category. (See app. I for the 

analysis showing individual subsystems categorized as performing more 

cost-effectively by the private and public sectors or not having a clear 

difference.) We recomputed the public-private sector mix percentages 

using the cost data from the study. The results are shown in figure 2.

Contractor

No Clear

Advantage

Government

38%

33%

29%
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Figure 2: GAO Analysis of Optimum C-17 Depot Workload Mix

Source: GAO calculations based on data from 1996 C-17 Depot Support Strategy Study.

The results indicate that 30 percent of the dollar value of the depot 

maintenance work would be performed more cost-effectively by the private 

sector and 55 percent more cost-effectively by Air Force depots. For the 

remaining 15 percent, the cost team’s data showed there was no meaningful 

cost difference between public and private sector sources of repair. These 

figures include repair costs for the C-17’s commercial engine, which has 

been designated for contractor logistics support for the life of the system.

Funding Not Currently 

Programmed for 

Maintaining a C-17 In-house 

Option

While the Air Force C-17 support strategy calls for postponing a depot 

maintenance support decision until 2003, maintaining a viable Air Force 

depot option requires that the Air Force program funds to establish depot 

capabilities. Program officials said that some funds had been programmed, 

but were shifted to support other flexible sustainment needs. Without 

programming funds in a timely manner to support depot activation, the Air 

Force may not be able to pursue an in-house option, even if otherwise 

determined to be the most cost-effective alternative. Air logistics center 

officials said that funds should be programmed to preserve the option to 

revert to in-house depot support.

Contractor

No Clear

Advantage

Government

15%

30%

55%
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Additional Authority 

Needed to Implement 

the Plan

The Air Force plan also envisions that the C-17 contractor will contract 

with public depots for selected maintenance services for some C-17 

systems and equipment. Under current law, the Air Force must determine 

that the services to be obtained from public depots are not commercially 

available. Past assessments by the Air Force of the same or similar 

commodities have concluded that commercial maintenance services are 

available. Given these assessments, additional statutory authority would 

likely be required to implement the Air Force’s planned strategy to have 

military depots sell maintenance services to the support contractor. 

Commercial Nonavailability 

Requirements Under 10 

U.S.C. 2553 Could Limit 

Public Depot Participation

Boeing expects to purchase services from military depots using the sales 

provisions of 10 U.S.C. 2553. Section 2553 of title 10 authorizes sales under 

certain conditions of services and articles by DOD industrial facilities— 

including depots—to the private sector. 13 This authority is predicated on 

an agency determination that these services or articles are not available 

commercially in the United States.

To what extent capabilities to perform C-17 maintenance workloads are not 

available in the private sector is unclear given conflicting historical 

information available on this subject. For example, in 1996, as a part of its 

core determination process for workloads at the closing Sacramento depot, 

the Air Force performed repair base analyses to assess private sector 

capabilities and capacities for repairing flight instruments, electrical 

accessories, hydraulics, and software engineering maintenance work. The 

assessment determined that considerable private sector capability was 

available for these commodities; therefore the Air Force determined that it 

did not need to retain these capabilities in-house. It should also be noted 

that the C-17 workloads initially identified as candidates for private sector 

performance were identified based on cost rather than on an assessment of 

commercial availability. Given this information, it is uncertain to what 

extent a market assessment for similar items on the C-17 would produce 

different results. 

13 Air Force officials originally had anticipated using 10 U.S.C. 2474 as a basis for Boeing to contract 

with military depots for some depot maintenance workloads, but did not since DOD has not 

implemented the legislation. As we previously reported [Defense Depot Maintenance: Public-Private

Partnering Arrangements (GAO/NSIAD-98-91, May 7, 1998)], the statute does not contain any specific 

sales or leasing authority. 
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According to program officials, they recognize the limitations of selling 

goods and services under 10 U.S.C. 2553, but they believe it is the only 

option available at this time. These officials said they plan to acquire 

services from public depots in support of the C-17 program under 

10 U.S.C. 2553, and initially they are pursuing two private-public partnering 

projects.

Conclusions The Air Force is implementing a pilot for a new logistics support approach 

for its C-17 aircraft. However, the support plan it submitted to Congress 

had several key shortcomings. These issues must be addressed before the 

pilot program’s merits can be adequately assessed.

The plan did not identify the core logistics capabilities for the C-17 or 

provide specifics about establishing the in-house workload necessary to 

maintain such capabilities. Also, the plan’s cost effectiveness conclusions 

are not adequately supported due to the age of the data and incomplete 

supporting analysis. The Air Force plans to reassess C-17 support options 

and make a long-term support decision in 2003. However, it has not 

identified the methodology, metrics, criteria, and data sources that will be 

used in making such an assessment. Also, funds have not been 

programmed for public depot support for the C-17, which may limit the 

viability of a public sector alternative in 2003. These issues need to be 

resolved quickly so all needed data can be identified and gathered as the 

Air Force moves toward the 2003 decision-making timeframe. Further, 

current law does not provide the required authority to implement the Air 

Force’s C-17 plan to have the military depots sell services to the support 

contractor for some of the C-17 depot maintenance work.

Recommendations We recommend that the Secretary of Defense direct the Secretary of the Air 

Force to 

1. update the Air Force’s core analysis to include the C-17 airframe and 

subsystems and provide this information with the fiscal year 2001 

president’s budget ,

2. develop a more specific logistics resourcing plan that includes a 

comprehensive cost effectiveness analysis and evaluation metrics prior to 

the submission of the 2001 budget, and
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3. develop budget requirements for public depot funding consistent with 

having this capability as a support option, including incorporating 

requirements in the fiscal year 2001 Program Objective Memorandum.

Also, if DOD decides to implement the current support plan, we also 

recommend that the Secretary of Defense seek legislative authority to 

allow military depots to sell depot maintenance goods and services to the 

C-17 support contractor, notwithstanding the commercial availability of 

those repair services. 

Agency Comments In providing oral comments on a draft of this report. Air Force officials said 

that they generally agreed with the intent of our recommendations, but 

they also said the Air Force plans already address these recommendations. 

Regarding our recommendation to update the Air Force’s core analysis to 

include the C-17 requirements, the Air Force stated that its plan to 

complete the C-17 core analysis by 2002 dovetails precisely with the 

flexible sustainment approach leading to a final support decision in 2003. 

Air Force officials noted that the flexible sustainment approach was 

implemented prior to the fiscal year 1998 National Defense Authorization 

Act changes to 10 U.S.C. 2464, which added the requirement that DOD 

identify core logistics capability within 4 years of a mission-essential 

system attaining initial operating capability. While we recognize that the 

Air Force implemented its flexible sustainment program prior to the fiscal 

year 1998 amendment to 10 U.S.C. 2464, there is no provision that would 

exempt the C-17 aircraft system. Consequently, we believe that the Air 

Force must comply with the 10 U.S.C. 2464 requirement. By maintaining 

the existing schedule for performing a C-17 core workload assessment in 

2002, the Air Force is delaying compliance with the requirement. Therefore 

we have modified our recommendation to specify an earlier core 

determination. 

In commenting on our recommendation that the Air Force develop a more 

specific logistics resource plan that includes a comprehensive costeffectiveness analysis and evaluation metrics, the Air Force stated that it 

will use the source-of-repair assignment process methodology, which 

includes a cost-benefit analysis. The Air Force also stated it will use a best 

value criteria for making a source-of-repair decision for the C-17 should it 

not be designated as a core workload. Although the Air Force’s source-ofrepair decision process requires a cost analysis, as we pointed out, it does 

not identify the recurring and non-recurring cost elements, data sources, or 

methodology for performing the required cost analysis. The intent of our 
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Page 16 GAO/NSIAD-99-147 Depot Maintenance

draft recommendation was to focus on developing a cost analysis 

methodology earlier than the 2003 source-of-repair decision to ensure that 

the appropriate cost data are collected during the flexible sustainment 

period and thereby available at the time of the final support decision. 

Therefore we modified our recommendation to clarify the actions we 

believe are needed.

In response to our recommendation that the Air Force develop budget 

requirements for public depot funding consistent with the plan to have this 

capability as a support option at the time of the final support decision, the 

Air Force stated that it will ensure full funding to establish depot 

maintenance capabilities wherever dictated by the long-term depot 

decision. However, during further discussions with Air Force officials we 

determined that funding has not yet been included in the Air Force 

Program Objective Memorandum (POM). Officials said that during the 

fiscal year 2002 POM development, the Air Force plans to include an 

undetermined amount of funding for fiscal years 2004 and 2005. They 

noted that this allowance could represent about 10 percent of the estimated 

funding requirement for developing depot capability. We question whether 

the timing of such a funding decision or the level of funding, if approved, 

would be adequate to ensure timely public depot activation if in-house 

maintenance were determined to be the more cost-effective alternative. 

We continue to believe that adequate funds should be programmed to 

preserve the option to revert to in-house depot support. Thus, we modified 

our recommendation to more specifically represent that view.

Regarding our recommendation on seeking legislative authority to allow 

military depots to sell goods and services to the C-17 support contractor, 

the Air Force stated that presently-identified contracting opportunities can 

be implemented under current law. Nevertheless, they said the Air Force 

would support an amendment to allow military depots to sell depot 

maintenance goods and services to the C-17 support contractor, 

notwithstanding the commercial availability of those repair services. We 

continue to believe it is unclear whether a determination of non-availability 

could be made for potential C-17 maintenance work the contractor may 

wish to obtain from a government depot. 

Scope and 

Methodology

In conducting our work, we contacted officials at Headquarters, United 

States Air Force, Washington, D.C.; Headquarters, Air Force Materiel 

Command, Wright Patterson Air Force Base, Ohio; Headquarters Air 

Mobility Command, Scott Air Force Base, Illinois; the San Antonio Air 
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Page 17 GAO/NSIAD-99-147 Depot Maintenance

Logistics Center, Kelly Air Force Base, Texas; the Warner Robins Air 

Logistics Center, Robins Air Force Base, Georgia; the Air Force Audit 

Agency, Wright Patterson Air Force Base; as well as the Boeing Company, 

Long Beach California; PEMCO, Birmingham, Alabama; American Airlines, 

Tulsa, Oklahoma; and BF Goodrich Aerospace, Everett, Washington. 

To evaluate the merits of the Air Force’s C-17 March 1999 report, we 

interviewed officials and collected relevant corroborating documents from 

Headquarters, Department of the Air Force; Headquarters, Air Force 

Materiel Command; Air Force C-17 System Program Office team members. 

We reviewed the methodology for the cost analysis underlying the first 

volume of the Air Force’s report and analyzed the summary cost estimates 

to test the resulting conclusions. 

To determine the optimum public-private mix of depot workloads based on 

the projected maintenance costs for the C-17 subsystems, we sorted the 

costs for each alternative and calculated the resulting percentage shares. 

We also collected actual cost data from the contractor for depot repairs 

accomplished during 1998 and 1999 and compared the data to cost 

estimates in the 1996 depot support strategy report. We were not able to 

analyze differences between the actual contract data and the earlier 

estimates because the data were in incompatible formats.

 To assess the Air Force decision to postpone its determination of core 

logistics capabilities for the C-17 aircraft until 2002, we collected 

information on DOD and Air Force policies and procedures for determining 

core logistics capabilities. We also reviewed projected depot maintenance 

workloads currently supporting Air Force core capacities for cargo aircraft 

and surge requirements for the C-17 aircraft. To assess assertions in the 

second volume of the report regarding adequate technical data that would 

be procured and be available, we discussed and reviewed the technical 

data for both repair and procurement of spare parts available with both the 

Air Force Audit and C-17 managers for engineering configuration and 

technical data. 

To determine whether the Air Force’s C-17 flexible sustainment plan is 

compatible within the existing legal framework, we performed a legal 

assessment. To test the sufficiency of the Air Force’s determination 

regarding non-commercial availability, we reviewed the Air Force’s 

determination and findings documentation; interviewed officials from the 

Boeing Company, PEMCO, American Airlines, and BF Goodrich Aerospace; 

and reviewed all additional documentation provided to support Boeing’s 
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Page 18 GAO/NSIAD-99-147 Depot Maintenance

market research. We performed our review between February 1999 and 

April 1999 in accordance with generally accepted government auditing 

standards. 

We are sending copies of this report to the Honorable William S. Cohen, 

Secretary of Defense; the Honorable F. Whitten Peters, Acting Secretary of 

the Air Force; the Honorable Jacob J. Lew, Director, Office of Management 

and Budget; and to interested congressional committees. Copies will be 

made available to others upon request. If you have any questions regarding 

this report, please call the contacts listed in appendix II.

David R. Warren, Director

Defense Management Issues
Page 19 GAO/NSIAD-99-147 Depot Maintenance
Page 20 GAO/NSIAD-99-147 Depot Maintenance

Contents

Letter 1

Appendix I

Potential for Public 

Support to Private 

Sector Contractors 

Sorted by Subsystems

22

Appendix II

GAO Contacts 

and Staff 

Acknowledgements

23

Related GAO Products 28

Tables Table I.1: C-17 Subsystems Sorted by Most Cost-effective Source of Repair 

22

Figures Figure 1: Air Force Analysis of Optimum C-17 Depot Workload Mix 11

Figure 2: GAO Analysis of Optimum C-17 Depot Workload Mix 12

Abbreviations

DOD Department of Defense

GAO General Accounting Office

POM Program Objective Memorandum
Page 21 GAO/NSIAD-99-147 Depot Maintenance
Page 22 GAO/NSIAD-99-147 Depot Maintenance

Appendix I

Potential for Public Support to Private Sector 

Contractors Sorted by Subsystems ApenxIdi

In its 1996 depot support strategy report, which is part I of its March 1999 

Flexible Sustainment Plan submitted to Congress, the Air Force identified 

types of workload that it believed could be performed more cost-effectively 

in public and private facilities, and some workloads where they did not 

believe the cost difference was significant between the two. The results of 

the 1996 study were used to justify the Air Force’s flexible sustainment 

strategy. 

Table I shows subsystems for which the private or public sector would 

likely be the most cost-effective source of repair. It also shows the extent 

to which the Air Force concluded that a determination could not be made 

where there was less than a 10 percent difference between the cost 

estimates for the public and private sector providers.

Table I.1: C-17 Subsystems Sorted by Most Cost-effective Source of Repair

Source: Air Force C-17 Depot Support Strategy Study, November 1, 1996.

Private sector Public depots Not clear

Engine Automatic test equipment Environmental control systems

Quick engine change Operational flight programs Structures

Auxiliary power units Heavy aircraft maintenance Mechanical flight controls 

Electrical Landing gear Lighting

Fuel Fuselage Recorders

Hydraulics Instruments Utilities

Oxygen Integrated flight controls Navigation

Composites Intercom

Misc. communications
Page 23 GAO/NSIAD-99-147 Depot Maintenance

Appendix II

GAO Contacts and Staff Acknowledgements ApenxIdi

GAO Contacts David Warren, (202)512-5581

Julia Denman, (202)512-4290

Acknowledgements In addition to those named above, John Strong, Larry Junek, Pam 

Valentine, and John Brosnan. made key contributions to this report.
Page 24 GAO/NSIAD-99-147 Depot Maintenance
Page 25 GAO/NSIAD-99-147 Depot Maintenance
Page 26 GAO/NSIAD-99-147 Depot Maintenance
Page 28 GAO/NSIAD-99-147 Depot Maintenance

Related GAO Products

Depot Maintenance: Improvements Still Needed in Workload Allocation

Reporting (GAO/NSIAD-99-154, July 1999).

Army Logistics: Status of Proposed Support Plan for Apache Helicopter

(GAO/NSIAD-99-140, July 1999).

Navy Ship Maintenance: Allocation of Ship Maintenance Work in the

Norfolk, Virginia Area (GAO/NSIAD-99-54, Feb. 24, 1999).

Army Industrial Facilities: Workforce Requirements and Related Issues

Affecting Depots and Arsenals (GAO/NSIAD-99-31, Nov. 1999).

Public-Private Competitions: Processes Used For Sacramento Depot

Maintenance Award Appear Reasonable (GAO/NSIAD-99-42, November 23, 

1998).

Navy Depot Maintenance: Weaknesses in the T406 Engine Logistics

Support Decision (GAO/NSIAD-98-221, Sept. 14, 1998). 

Defense Depot Maintenance: Public and Private Sector Workload

Distribution Reporting Can Be Further Improved (GAO/NSIAD-98-175, 

July 23, 1998).

Defense Depot Maintenance: Contracting Approaches Should Address

Workload Characteristics (GAO/NSIAD-98-130, June 15, 1998).

Defense Depot Maintenance: Use of Public-Private Partnering

Arrangements (GAO/NSIAD-98-91, May 7, 1998).

Public-Private Competitions: DOD's Additional Support for Combining

Depot Workloads Contains Weaknesses (GAO/NSIAD-98-143, Apr. 17, 

1998).

Defense Depot Maintenance: DOD Shifting More Workload for New

Weapon Systems to the Private Sector (GAO/NSIAD-98-8, Mar. 31, 1998).

Public-Private Competitions: DOD's Determination to Combine Depot

Workloads Is Not Adequately Supported (GAO/NSIAD-98-76, Jan. 20, 1998).

Public-Private Competitions: Processes Used for C-5 Aircraft Award

Appear Reasonable (GAO/NSIAD-98-72, Jan. 20, 1998).
Related GAO Products

Page 29 GAO/NSIAD-99-147 Depot Maintenance

Defense Depot Maintenance: Information on Public and Private Sector

Workload Allocations (GAO/NSIAD-98-41, Jan. 20, 1998).

Air Force Privatization-in-Place: Analysis of Aircraft and Missile System

Depot Repair Costs (GAO/NSIAD-98-35, Dec. 22, 1997).

Outsourcing DOD Logistics: Savings Achievable But Defense Science

Board's Projections Are Overstated (GAO/NSIAD-98-48, Dec. 8, 1997).

Navy Regional Maintenance: Substantial Opportunities Exist to Build on

Infrastructure Streamlining Progress (GAO/NSIAD-98-4, Nov. 13, 1997).

Air Force Depot Maintenance: Information on the Cost-Effectiveness of

B-1 and B-52 Support Options (GAO/NSIAD-97-210BR, Sept. 12, 1997).

Navy Depot Maintenance: Privatizing Louisville Operations in Place Is Not

Cost- Effective (GAO/NSIAD-97-52, July 31, 1997).

Defense Depot Maintenance: Challenges Facing DOD in Managing Working

Capital Funds (GAO/T-NSIAD/AIMD-97-152, May 7, 1997).

Defense Depot Maintenance: Uncertainties and Challenges DOD Faces in

Restructuring Its Depot Maintenance Program (GAO/T-NSIAD-97-112, 

May 1,1997)and (GAO/T-NSIAD-97-111, Mar. 18, 1997). 

Navy Ordnance: Analysis of Business Area Price Increases and Financial

Losses (GAO/AIMD/NSIAD-97-74, Mar. 14, 1997).

Defense Outsourcing: Challenges Facing DOD as It Attempts to Save

Billions In Infrastructure Costs (GAO/T-NSIAD-97-110, Mar. 12, 1997).

High-Risk Series: Defense Infrastructure (GAO/HR-97-7, Feb. 1997).

(709393) Letr
Related GAO Products

Page 30 GAO/NSIAD-99-147 Depot Maintenance
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Contents

Tables Table I.1: C-17 Subsystems Sorted by Most Cost-effective Source of Repair 

22
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Contents

Figures Figure 1: Air Force Analysis of Optimum C-17 Depot Workload Mix 11

Figure 2: GAO Analysis of Optimum C-17 Depot Workload Mix 12
Contents

Page 35 GAO/XXXX ???