```
Airlift Requirements: Commercial Freighters Can Help Meet Requirements at
Greatly Reduced Costs (Letter Report, 07/11/94, GAO/NSIAD-94-209).

This report examines some of the assumptions underlying the conclusions
of a cost and operational effectiveness analysis of the C-17 air
transport program conducted by the Institute for Defense Analysis (IDA),
and discusses Defense Department ongoing studies to determine the
minimum number of C-17s needed to perform unique military missions. IDA
concluded that a fleet of 120 C-17s was the preferred choice, despite
the fact that it was more expensive than a mixed fleet of C-17s and
modified commercial freighters. GAO found that IDA's conclusion that the
C-17 was the preferred air transport was based on questionable
assumptions and believes that Congress should not consider this analysis
as a basis for authorizing 120 C-17s. The minimum number of C-17s needed
to fulfill military requirements has yet to be determined.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  NSIAD-94-209
     TITLE:  Airlift Requirements: Commercial Freighters Can Help Meet 
             Requirements at Greatly Reduced Costs
      DATE:  07/11/94
   SUBJECT:  Military aircraft
             Combat readiness
             Defense capabilities
             Defense contingency planning
             Cost effectiveness analysis
             Military airlift operations
             Logistics
             Defense cost control
             Commercial aviation
             Short takeoff/landing aircraft
IDENTIFIER:  C-17 Aircraft
             C-5 Aircraft
             C-141 Aircraft
             DOD Mobility Requirements Study
             Korea
             C-130 Aircraft
             Desert Shield
             Saudi Arabia
             
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Cover
================================================================ COVER

Report to Congressional Requesters

July 1994

AIRLIFT REQUIREMENTS - COMMERCIAL
FREIGHTERS CAN HELP MEET
REQUIREMENTS AT GREATLY REDUCED
COST

GAO/NSIAD-94-209

Airlift Requirements

Abbreviations
=============================================================== ABBREV

  COEA - cost and operational effectiveness analysis
  DOD - Department of Defense
  IDA - Institute for Defense Analyses
  MRS - Mobility Requirements Study
  MOG - maximum-on-the-ground
  NDAA - nondevelopmental airlift aircraft

Letter
=============================================================== LETTER

B-257743

July 11, 1994

The Honorable Sam Nunn
Chairman, Committee on Armed
Services
United States Senate

The Honorable Strom Thurmond
Ranking Minority Member,
Committee on Armed Services
United States Senate

The Honorable Ronald V.  Dellums
Chairman, Committee on Armed
 Services
House of Representatives

The Honorable Floyd Spence
Ranking Minority Member,
Committee on Armed Services
House of Representatives

This report responds to your request for information on the C-17 cost
and operational effectiveness analysis (COEA) and to the Fiscal Year
1994 Defense Authorization Act conference report requirement that we
report on various aspects of the C-17 program.  The report examines
some of the assumptions underlying the COEA's conclusions and
discusses the Department of Defense's (DOD) ongoing studies to
determine the minimum number of C-17s needed to perform unique
military missions. 

   BACKGROUND
------------------------------------------------------------ Letter :1

While recognizing the need for airlift, Congress has directed DOD to
explore alternatives to the 120-aircraft C-17 program.\1 The Fiscal
Year 1993 Defense Authorization Act restricted the release of C-17
funds, pending a special Defense Acquisition Board review that was
held in the fall of 1993.  As part of the review, Congress directed
that a federally funded research and development center conduct a
C-17 COEA, taking into consideration complementary mixes of other
aircraft. 

The COEA, conducted by the Institute for Defense Analyses (IDA), was
submitted to Congress in May 1994.  Alternatives to the full C-17
program included (1) restarting the C-5 line, (2) extending the
service life of the C-141, and (3) procuring modified commercial
freighter aircraft.  IDA examined the delivery capability of
different airlift fleets to meet the 30-day moderate risk requirement
identified in DOD's 1992 Mobility Requirements Study (MRS) for
concurrent major regional conflicts in Southwest Asia and Korea.\2
Operational data for range and payload were used for all aircraft
except the C-17, which is still undergoing test and evaluation.  IDA
based the C-17's range/payload performance on Air Force estimates of
the aircraft's capability based on an operational methodology, rather
than the more stringent traditional methodology reflected in the
current contract.  (See app.  I for a discussion of other aspects of
the COEA.)

IDA concluded that, based on throughput (tons of cargo delivered in a
given time frame), a fleet of 120 C-17s was the preferred choice,
despite the fact that it was more expensive than a fleet comprised of
C-17s and modified commercial freighters.  This conclusion was based
on three major assumptions: 

  airfield availability for airlift use would be constrained to
     Operation Desert Shield levels;

  the C-17 would achieve a 15.2-hour a day utilization rate while
     commercial freighters would achieve only a 12.5-hour a day rate;
     and

  the C-17 would be used routinely in place of the C-130 to
     accomplish intratheater delivery, so C-130 operating and support
     costs should be added to non-C-17 alternatives. 

IDA also concluded that, based on alternative assumptions, a mixed
fleet of 40 C-17s and 64 modified commercial freighters could meet
the MRS requirement.  IDA's analysis showed that this mixed fleet
would cost $6 billion less than the C-17 fleet.  We focused our
review efforts on comparing the 120-aircraft program to the mix of 40
C-17s and 64 modified Boeing 747 freighters because this alternative
was substantially less expensive than others and met airlift
requirements.\3

The COEA was not intended to assess the capability of the airlift
fleets to fulfill unique military missions such as direct delivery to
small, austere airfields.  However, DOD has several new studies
underway to determine the minimum number of C-17s needed to perform
these unique military missions. 

--------------------
\1 The Air Force plans to acquire 120 C-17s.  However, as the result
of a 1993 Defense Acquisition Board review, the Deputy Secretary of
Defense reduced the program to 40 aircraft for a provisional period,
pending another Board review in November 1995.  The provisional
40-aircraft program is estimated to cost about $21.3 billion. 

\2 This moderate risk requirement is based on the delivery capability
of the airlift fleet assumed available for the MRS.  That fleet
included 80 C-17s, excluding backup and training aircraft.  The MRS
moderate risk requirement fell below the theater commanders'
preferred requirement, which was fiscally unachievable. 

\3 For commercial freighters to be viable alternatives to the full
C-17 fleet, they must be able to accommodate the Army's new 2.5- and
5-ton trucks.  The aircrafts' floors would need to be strengthened
and, in addition, the side doors would need to be widened or the
trucks would have to be fitted with collapsible cab tops.  The COEA
reflects the estimated cost and performance of these modifications. 

   RESULTS IN BRIEF
------------------------------------------------------------ Letter :2

IDA's conclusion that the C-17 was the preferred choice was based on
three assumptions that favored the C-17 and significantly reduced the
cost-effectiveness of proposed alternatives to the fleet of 120
C-17s.  First, the assumption concerning airfield availability does
not reflect the probability that an aggressive enemy attack would
likely overcome the Saudi Arabian government's reluctance during
Desert Shield to permit greater use of airlift airfields.  The result
would be much less constrained airfield availability, thus increasing
the potential contribution of commercial freighters.  Second, the
utilization rate assumptions credit the C-17 with an undemonstrated
rate, while holding commercial aircraft to a rate that is lower than
has been demonstrated in commercial use.  Third, because the Air
Force no longer plans to use the C-17 in place of the C-130 for
routine intratheater deliveries, the $4.7 billion in C-130 operating
and support costs added to the 40 C-17/64 commercial freighter option
is not valid.  Adjusting for these three questionable assumptions
would result in the C-17 fleet being less capable and a mixed fleet
more capable and more cost-effective than IDA's conclusions indicate. 

   AIRFIELD CONSTRAINTS AFFECT
   FLEET CAPABILITY
------------------------------------------------------------ Letter :3

Because of the C-17's projected ability to back up, its relatively
small physical size, and its ability to land and take off from
austere, short airfields, the C-17 is expected to use available space
more efficiently than a C-5 or a 747.  IDA reported that, when
considering delivery of outsize cargo--the largest items in the
Army's inventory--the C-17 retained its delivery capability better
than the alternative fleet mixes when airfield availability was
extremely limited.  (See app.  I for a discussion of the different
cargo types.)

The number of aircraft that can be simultaneously parked and serviced
at a given airfield is known as maximum-on-the-ground (MOG). 
Numerous factors affect MOG, such as the size and shape of the ramp
space; the availability of maintenance and materiel handling
equipment, personnel, and fuel; the degree to which other U.S.  and
allied assets, such as fighters, occupy available ramp space; and the
time required to unload and service each aircraft type.  During
wartime, MOG at a given airfield often fluctuates, depending on how
these factors interrelate.  During Desert Shield/Storm, for example,
airfields had a different daily MOG value for every aircraft type.\4

IDA examined three MOG cases in the COEA.  The first case reflected
the airfield assumptions used in the MRS Southwest Asia scenario, in
which a sizeable infrastructure would be available to accommodate
aircraft unloading, refueling, and servicing.  The second case
reflected the limited airfield availability in Saudi Arabia that was
experienced during the first
45 days of Desert Shield.  The third case coupled the Desert Shield
MOG condition in Saudi Arabia with severely reduced MOG in the Korean
scenario. 

--------------------
\4 At the request of the Office of the Secretary of Defense, the RAND
Corporation is evaluating MOG, with the intent of establishing a
well-defined and accepted methodology for understanding and
calculating MOG values. 

      C-17 FARES BETTER WITH
      LIMITED AIRFIELD
      AVAILABILITY
---------------------------------------------------------- Letter :3.1

The C-17 fared best relative to the alternative fleets when MOG was
extremely constrained.  Under IDA's analysis of the MOG assumption
based on the airfield availability used in the MRS Southwest Asia
scenario, the mixed fleet of 40 C-17s and 64 747s met the airlift
requirement and cost about $6 billion less than the fleet of 120
C-17s.  Under the more severe airfield constraints, the C-17 fleet
met the requirement, but the mixed fleet was not able to deliver all
required outsize equipment in the compressed time frame set forth in
the MRS.  This case reflects the experience of Desert Shield, when
only one major airlift airfield was available during the first
6 weeks of that deployment.  The limited airfield availability was
due primarily to the Saudi Arabian government's reluctance to allow
U.S.  access to multiple airfields and the U.S.  Army's preference to
deploy to only one major airfield.  In Desert Shield/Storm, Iraqi
troops became entrenched shortly after the invasion of Kuwait and did
not invade Saudi Arabia.  The MRS scenario, on the other hand,
postulated that an aggressive enemy was moving directly into Saudi
Arabia and that, therefore, the Saudi reluctance to open additional
airlift airfields was overcome.  IDA's conclusion that the C-17 was
the preferred choice was based on Desert Shield airfield assumptions. 
However, the COEA was based on the imminent threat assumed in the
MRS.  Therefore, we believe the MRS airfield availability assumptions
are more realistic than those based on Desert Shield experience. 
Under the MRS airfield case, the effectiveness of the C-17 fleet
declines, relative to the mixed C-17/commercial fleet.  Figure 1
illustrates the effect of reduced MOG on the delivery capability of
the airlift alternatives for outsize cargo. 

   Figure 1:  The Effect Of
   Reduced MOG On Outsize Delivery
   Capability

   (See figure in printed
   edition.)

\a MRS airfield availability. 

\b Desert Shield airfield availability. 

Under the scenario where airfield access was severely constrained in
Southwest Asia and Korea, both alternatives fell short of the MRS
requirement, but the C-17 fleet delivered substantially more outsize
cargo. 

   C-17'S COST-EFFECTIVENESS
   DEPENDS ON HIGH UTILIZATION
   RATE
------------------------------------------------------------ Letter :4

IDA's analysis indicates that the C-17 performs better relative to
alternative fleets when its projected 15.2 hour per day utilization
rate is assumed.  An aircraft's utilization rate is the planned
average daily flying hours per aircraft for the entire fleet.  The
rate is comprised of numerous elements and is a critical element in
cost-effectiveness assumptions.  Factors affecting a utilization rate
include mission capable rate, number of aircraft in the fleet and
number of aircrews per aircraft, funding for spares, time required to
load and unload the aircraft, number and type of airfields available
in a given scenario, distance to the theater of operations, and
number of aircraft the Joint Chiefs of Staff plans to withhold to
perform other critical missions. 

The C-17's planned utilization rate of 15.2 hours per day exceeds
that of any other military airlifter and will not be demonstrated
under the contract.  The Air Force plans to attain the planned rate
by fully funding C-17 spares and maintaining a 5 to 1 aircrew to
aircraft ratio.  The Air Force has historically underfunded wartime
spares for its other strategic airlifters, and those airlifters have
a lower crew ratio than that planned for the C-17.  In addition, the
COEA is based on a lower utilization rate for commercial aircraft
than has been demonstrated in commercial use and that could be
attained if aircrews for these aircraft were funded to levels
projected for the C-17.  We believe that using comparable utilization
rates for the C-17 and alternative aircraft would be a more realistic
comparison. 

The COEA showed that the C-17's effectiveness declines when the
utilization rate is lowered, and the mixed C-17/commercial fleet's
effectiveness increases as the rate for commercial freighters is
increased.  IDA found that, based on a 15.2-utilization rate, a fleet
of 120 C-17s would deliver about 9 percent more outsize cargo than a
mixed fleet of 40 C-17s and 64 commercial freighters.  However, the
mixed fleet also met the MRS requirement and cost $6 billion less. 
If the C-17's contracted utilization rate of 12.5 hours were assumed,
the C-17 would deliver only about 4 percent more outsize cargo than
the mixed fleet, at a cost of about $4 billion more.\5 Under this
case, both alternatives fell short of the MRS requirement. 
Figure 2 shows outsize deliveries under different utilization rate
assumptions. 

   Figure 2:  Outsize Deliveries
   With Varying C-17 Utilization
   Rates

   (See figure in printed
   edition.)

\a 15.2 hour utilization rate. 

\b 12.5 hour utilization rate. 

--------------------
\5 As the utilization rate decreases, the life-cycle cost also
decreases due to the reduced need for spares and aircrews. 

      C-17'S PROJECTED UTILIZATION
      RATE MAY NOT BE ACHIEVABLE
---------------------------------------------------------- Letter :4.1

To sustain the Air Mobility Command's 15.15 hour\6 utilization rate,
the C-17 must achieve predicted reliability, maintainability, and
availability parameters needed to maintain a planned mission capable
rate.  In addition, the Air Force must fully fund C-17 spare parts
and aircrews at levels substantially higher than those of other
strategic airlifters. 

The Command bases its 15.15 hour utilization rate projection on a
mission capable rate of 90 percent.  However, the C-17 contract
specification requires the C-17 to demonstrate a mission capable rate
of only 82.5 percent, compared to a rate of 80 percent for the C-141
and 75 percent for the C-5.  An 82.5-percent mission capable rate
would yield a 13.77-hour per day utilization rate for the C-17. 
While we cannot precisely quantify the impact of the lower mission
capable rate, we believe the delivery capability would decrease. 

Reliability, maintainability, and availability factors are critical
determinants for an aircraft's mission capable rate.  As we recently
reported,\7 the C-17 has fallen short of predicted reliability goals
during the flight test program.  C-17 reliability data show that a
large variety of different failures have occurred, with no one
particular item causing the low reliability numbers.  To improve
reliability, the contractor will have to implement corrective
solutions for a substantial number of failures.  If the reliability
does not improve, the C-17 is not likely to achieve its planned
mission capable rate. 

Another significant contributor to utilization rate is the degree to
which spares and aircrews are funded.  In 1990, we reported\8

that shortages of serviceable peacetime operating spares to support
the Air Force's C-5 and C-141 flying hour programs had led the Air
Force to rely on war reserve spares to support peacetime operations. 
As a result, the level of war reserve spares had decreased to a point
at which the aircrafts' ability to sustain projected wartime
utilization rates was questionable.  Data for 1993 show that the C-5
and C-141 had only 60 percent and 61 percent, respectively, of their
required readiness spares packages filled.  Air Force officials
acknowledge that spares have not been adequately funded in the past. 
However, they expect that the spares levels for the C-17 will be
fully funded, in part, because spares funding has recently been made
a higher priority for the Air Force. 

An aircrew to aircraft ratio of 5 to 1 is planned for the C-17.  The
ratios for the C-141 and C-5 are 3.29 to 1 and 3 to 1, respectively. 
The higher the aircrew ratio, the more hours per day the aircraft can
be flown.  Therefore, the relatively higher C-17 aircrew ratio
contributes to the C-17's ability to maintain a higher utilization
rate than other strategic airlifters.  For the C-17 to maintain the
planned aircrew to aircraft ratio, Air Force funding requirements
will have to be fully met. 

--------------------
\6 While the utilization rate used in the COEA was 15.2 hours, the
Command is planning for an actual utilization rate of 15.15 hours. 

\7 Military Airlift:  The C-17 Proposed Settlement and Program Update
(GAO/T-NSIAD-94-172, Apr.  28, 1994). 

\8 Military Airlift:  Peacetime Use of War Reserve Spares Reduces
Wartime Capabilities (GAO/NSIAD-90-186, June 25, 1990). 

      HIGHER UTILIZATION RATE FOR
      COMMERCIAL AIRCRAFT
      INCREASES CAPABILITY
---------------------------------------------------------- Letter :4.2

The projected utilization rate for alternative aircraft is as
important as the rate for the C-17.  The COEA assumed a 12.5-hour
utilization rate for the 747 freighter, based on a 3.5- to 1-aircrew
to aircraft ratio.  However, DOD officials agree that the 747 has
demonstrated a higher rate in commercial use.  A recent Air Mobility
Command analysis shows that the utilization rate could increase to at
least 15.2 if a 5 to 1 aircrew ratio were funded. 

IDA analyzed the effect of increasing the 747's rate to 15.2 hours.\9
The results showed a significant increase in the C-17/commercial
fleet's ability to deliver outsize and oversize cargo.  The mixed
fleet exceeded the MRS outsize cargo requirement by about 1,000 tons
and cost about $6 billion less.  This mixed fleet also delivered
about 8,000 more tons of oversize cargo than the C-17 fleet, well
above the MRS requirement.  IDA, however, did not examine cases with
a utilization rate of 15.2 for the 747 coupled with a lower C-17
rate. 

--------------------
\9 When IDA began its analysis, it used primary authorized aircraft
numbers, which excluded backup and training aircraft.  The 747
utilization rate excursions were based on 40 C-17 and 47 747 primary
authorized aircraft, or a total fleet of 47 C-17s and 49 747s.  As a
result of the Defense Acquisition Board's discussions, however, IDA
began using total aircraft inventory numbers, which included all
aircraft in the fleet.  Subsequent IDA analysis, therefore, was based
on a total fleet of 40 C-17s and
64 747s. 

   INTRATHEATER AIRLIFT
   ASSUMPTIONS DO NOT REFLECT
   C-17'S PLANNED ROLE
------------------------------------------------------------ Letter :5

The C-17 was designed to deliver cargo to small, forward airfields
typically used by the C-130.  Consequently, past Air Force studies
have presumed that, as the C-17 fleet became operational, some C-130s
would be retired.  IDA's analysis assumed, therefore, that the
alternative with only 40 C-17s would need 80 additional C-130s to
provide about the same intratheater movement capability as the fleet
of 120 C-17s.  Thus, IDA added C-130 operating and support costs of
$4 million per aircraft per year to the mixed fleet alternative.\10
However, we believe it was inappropriate for IDA to do so, because
the C-17's planned intratheater role has been largely limited and the
Air Force does not plan to replace C-130s with C-17s for intratheater
missions. 

--------------------
\10 Past studies, such as the 1983 Airlift Master Plan, added C-130
procurement and operating and support costs to non-C-17 options. 

      C-17'S INTRATHEATER ROLE
      WILL BE LIMITED
---------------------------------------------------------- Letter :5.1

When a program of 210 C-17 aircraft was planned, the Air Force
anticipated that, during a contingency, C-17s would routinely deploy
to the theater of operations to conduct intratheater missions as
needed.  These missions are typically carried out by C-130s or ground
transportation.  Current Air Force policy, however, reflects a
substantially diminished intratheater role for the C-17.  The
Command's 1993 Airlift Master Plan makes no mention of the C-17's
potential to conduct intratheater missions.  Air Force officials
acknowledged that while C-17s will provide additional intratheater
delivery of outsize cargo when needed, they will not routinely
perform intratheater missions as originally planned. 

The C-17's diminished intratheater role is due primarily to the
Secretary of Defense's 1990 decision to reduce the number of C-17s
from 210 to 120 aircraft because of the diminished Soviet threat. 
Under the current 120-aircraft program, the intertheater airlift
flow--missions from the continental United States to the operational
theater, for example--would be adversely affected if aircraft were
diverted to perform intratheater missions.  A diversion would be
particularly damaging during the critical first 30 days of a
conflict. 

The COEA increased the life-cycle cost of the alternative with 40
C-17s and 64 747s by $320 million per year to reflect operating and
support costs for 80 C-130s.  Over a 25-year life-cycle, this
alternative would incur an additional cost of $4.7 billion.  When
this cost is subtracted from the mixed fleet, the cost savings as
compared to a fleet of 120 C-17s increases from about $6 billion to
about $10.7 billion. 

   COEA WAS NOT INTENDED TO ASSESS
   MINIMUM NUMBER OF C-17S NEEDED
   TO FULFILL UNIQUE MILITARY
   REQUIREMENTS
------------------------------------------------------------ Letter :6

Determining the proper mix of C-17s and commercial freighters depends
on the fleet's capability to fulfill certain unique military
requirements that the COEA was not intended to address in detail. 
These missions include strategic brigade airdrop;\11 combat offload;
direct delivery to small, austere airfields; intratheater airlift of
outsize cargo; aerial refueling; and aircraft survivability.  DOD has
several studies underway, scheduled to be completed by the November
1995 Defense Acquisition Board decision on C-17 full-rate production,
that will assess the capability of various fleet mixes to fulfill
unique military airlift requirements. 

The Air Force is conducting a multifaceted study to provide DOD
decisionmakers with information necessary to determine the type and
number of nondevelopmental airlift aircraft (NDAA) to procure.  The
study will determine the cost-effectiveness of airlift fleet mixes
comprised of C-17s and military and commercial NDAAs, based on the
airlift requirements identified in a new MRS, expected to be
completed in December 1994.  This study will consider the need for
unique military airlift capabilities that the COEA did not address. 

The Air Force study will also assess the operational use of wide-body
commercial aircraft in moving bulk and oversize cargo.  A key
component of this assessment was a loadability study, conducted in
May 1994, to determine the time required to load oversize vehicles
onto commercial freighters such as the 747.  The Air Force is
compiling the results of the study. 

As currently planned, NDAA source selection and quantity will depend
on the C-17 full-rate production decision.  The Defense Acquisition
Board will consider several factors in deciding whether or not to
continue the C-17 program, including C-17 flight test and reliability
results, contractor performance, and the findings of the Air Force's
airlift fleet mix study. 

--------------------
\11 IDA asserts that each fleet mix assessed in the COEA is capable
of performing the strategic brigade airdrop mission, a Joint Chiefs
of Staff requirement.  For the mixed C-17/commercial fleet to fulfill
this mission, the existing C-5s would have to be modified.  The Air
Mobility Command is currently determining the feasibility of the
necessary modifications. 

   MATTER FOR CONGRESSIONAL
   CONSIDERATION
------------------------------------------------------------ Letter :7

IDA's conclusion that the C-17 was the preferred airlifter was based
on assumptions that are questionable.  Therefore, Congress should not
consider the COEA as a basis for authorizing 120 C-17s.  The minimum
number of C-17s needed to fulfill military requirements has yet to be
determined. 

   VIEWS OF AGENCY OFFICIALS AND
   OUR OBSERVATIONS
------------------------------------------------------------ Letter :8

As agreed with your offices, due to time constraints, we did not
obtain written agency comments on this report.  However, we discussed
our findings with agency officials.  We also shared the results of
our work with IDA officials, who stated that our depiction of the
COEA was accurate and offered minor technical observations that have
been incorporated in the report. 

Air Force and Air Mobility Command officials believed that the Desert
Shield/Storm MOG condition in the COEA should be considered the
baseline airfield case.  DOD officials noted that, because many
factors affect MOG, it cannot be assumed that the airfields used in
the MRS will be available in future contingencies.  The officials
noted that likely airfield availability may, in reality, lie between
the Desert Shield/Storm and the MRS MOG conditions.  However, this
MOG value has not yet been quantified.  While we agree that MOG is a
complex formula that encompasses many factors, we believe that one of
the key constraining factors demonstrated in Desert Shield--Saudi
reluctance to grant U.S.  access to numerous airfields--is unlikely
to occur in an MRS-type Southwest Asia scenario.  In our opinion,
Saudi reticence would be much less likely in the face of an imminent
threat as postulated in the MRS.  In Desert Shield, because Iraqi
forces did not invade Saudi Arabia, allied forces had the advantage
of a 5-month deployment period.  Therefore, the rigorously restricted
Desert Shield MOG assumption is, in our opinion, not a valid basis
for comparing the C-17 to alternative airlift fleets. 

DOD and Air Force officials acknowledged that the C-17 will not
demonstrate a 15.2-hour utilization rate until the fleet is mature. 
However, they believe that if the program is adequately funded, the
C-17 is capable of achieving this rate.  They also noted that the
12.5-utilization rate required in the contract applies only to the
reliability, maintainability, and availability evaluation.  Air
Mobility Command officials commented that, if commercial NDAA are
procured, almost all will be kept in the Associate Reserves, as
opposed to active duty squadrons.  Therefore, they stated that it
will not be feasible to increase the 747's utilization rate to levels
comparable to the C-17's.  We recognize that, operationally, the C-17
may be able to demonstrate a 15.2-utilization rate and the 747 may be
held to a lower rate than it could theoretically achieve.  However,
we believe that for the purposes of a COEA, comparable utilization
rates for the C-17 and the 747 would be a more legitimate basis for
comparison. 

DOD and Command officials agreed with our findings regarding the
C-17's intratheater airlift role.  However, some Air Force officials
stated that, because the C-17 is capable of performing intratheater
missions, it should be credited with some cost savings as a result,
even though this role has been limited.  We continue to believe that,
given the reduced number of C-17s, it is unlikely that the C-17 will
perform routine intratheater missions during the first 30 days of an
MRS-type conflict.  Therefore, C-130 operating and support costs
should not be added to alternative fleets in a COEA. 

   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :9

We reviewed the COEA and discussed it with officials from IDA, the
Office of the Secretary of Defense, the Air Force, and the Air
Mobility Command.  We also referred to our past and ongoing work on
airlift and various aspects of the C-17 program.  We focused on those
assumptions that, in our opinion, were most significant in
determining the relative cost-effectiveness of the C-17 and the most
cost-effective alternative fleet mixes. 

We conducted our review from May to June 1994 in accordance with
generally accepted government auditing standards. 

---------------------------------------------------------- Letter :9.1

As you requested, we plan no further distribution of this report
until 7 days after its issue date.  At that time, we will send copies
to the Secretaries of Defense and the Air Force; the Director, Office
of Management and Budget; and other interested parties.  Copies will
also be made available to others on request. 

Please contact me at (202) 512-4841 if you or your staffs have any
questions concerning this report.  Major contributors to this report
were Thomas J.  Denomme and Michele Mackin. 

Louis J.  Rodrigues
Director, Systems Development
 and Production

ADDITIONAL INFORMATION ON
REQUIREMENTS AND COST DATA IN THE
COST AND OPERATIONAL EFFECTIVENESS
ANALYSIS
=========================================================== Appendix I

All alternatives examined in the cost and operational effectiveness
analysis (COEA) included a common core of airlifters--existing C-5s,
KC-10s, and the Civil Reserve Air Fleet aircraft that would be
activated in a contingency.  The COEA distinguished between the
ability of the various airlift fleets to deliver outsize and oversize
cargo.  Delivery of these types of cargo is critical in the first 30
days of a contingency.  The C-5 and C-17 are the only aircraft
capable of carrying outsize cargo.  Figure I.1 shows the percentage
of outsize, oversize, and bulk cargo required to be delivered in 30
and 90 days, as well as examples of each. 

   Figure I.1:  Breakdown of cargo
   types over 30 and 90 days

   (See figure in printed
   edition.)

IDA developed independent acquisition and annual operating cost
estimates for all military and commercial aircraft fleets examined in
the COEA.  Life-cycle costs were analyzed over a 25-year period,
discounted at 4.5 percent per year using fiscal year 1993 constant
dollars.  However, the COEA's cost estimates were more conservative
than the C-17 System Program Office's.  Thus, the COEA's cost
estimates are higher ($35.1 billion versus $31.4 billion total
program cost).  Acquisition costs for the first
20 C-17s (fiscal year 1993 and prior years) were excluded from the
COEA because these aircraft had already been procured and were
included in all fleet alternatives examined in the COEA.  The time
frame for the COEA was the year 2005, when 120 C-17s are planned to
be operational. 

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