C-17 Aircraft: Cost and Performance Issues
Published: 1995-01-26T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Pursuant to a legislative requirement, GAO reviewed the Department of Defense's (DOD) C-17 program, focusing on: (1) the aircraft's ability to achieve its original program requirements; and (2) whether further procurement of C-17 aircraft is justified.
section_title: What GAO Found
paragraphs: GAO found that: (1) although the C-17 was intended to operate routinely in an intratheater shuttle role, perform direct delivery missions to forward airfields, airlift substantial amounts of outsize cargo, provide low-level parachute extractions, and perform strategic airdrops, it has not been able to meet its original operational requirements and will not be used as intended; (2) DOD concluded that the C-17 fleet was its preferred choice for meeting its military airlift requirements because of significant utilization and delivery advantages; (3) recent DOD cost and operational effectiveness analyses showed that a mixed fleet comprised of 40 C-17 aircraft and 64 commercial freighters could be more effective and procured at cost savings of at least $10.7 billion when compared to a fleet of 120 C-17 aircraft; and (4) the 120 C-17 fleet is not the most cost-effective way to meet intratheater military airlift requirements.

section_title: Letter
paragraphs: The fiscal year 1994 conference report on the Department of Defense’s authorization act contains a provision calling for us to assess the C-17’s original justification and the effect of technical problems and cost increases on the aircraft’s ability to achieve original program requirements. This report responds to that provision and also discusses some of the assumptions underlying the conclusions in the recent C-17 cost and operational effectiveness analysis.
This report was prepared under the direction of Louis J. Rodrigues, Director of Systems Development and Production Issues, who may be reached on (202) 512-4841 if you or your staff have any questions. Major contributors are listed in appendix II.
subsections: section_title: Introduction
paragraphs: In the event of a conflict or crisis overseas, the United States must be able to deliver the troops, equipment, and supplies necessary to meet the threat. The Department of Defense (DOD) relies on airlift, sealift, and prepositioned assets to accomplish this mission. Airlift, the vital component that provides rapid mobility to combat forces, delivers Army light forces, equipment, initial resupply and bulk ammunition, and nearly all precision munitions and time-critical items. Airlift can also rapidly transport troops and supplies to link up with prepositioned equipment, thus speeding the deployment of heavier units early in a conflict.
subsections: section_title: C-17 Expected to Modernize Airlift Fleet
paragraphs: Airlift is classified as either intertheater (from one theater of operation to another) or intratheater (operations within a theater). Intertheater airlift services are provided by the Air Force’s Air Mobility Command (AMC), which has a fleet of C-5, C-141, and KC-10 aircraft to carry out that mission. AMC also relies on the Civil Reserve Air Fleet to supplement its military airlift capacity during contingencies. The Air Combat Command is responsible for operating C-130 aircraft, which provide intratheater airlift.
In July 1982, the Air Force contracted with McDonnell Douglas Corporation to develop and produce the C-17, which is an air refuelable, four-engine jet transport, designed to operate in both the intertheater and intratheater roles (see fig. 1.1). The C-17 is currently contracted to carry a maximum payload of 160,000 pounds 2,400 nautical miles unrefueled and perform the full range of airlift missions, including unique military missions such as direct delivery to forward airfields, potentially near the battle zone; routine operations into small, austere airfields in an intratheater role; airlift of outsize cargo such as tanks; and airdrop.
The Air Force originally planned to acquire 210 C-17 aircraft. However, in April 1990, as a result of DOD’s Major Aircraft Review, the Secretary of Defense reduced the program to 120 aircraft. The C-17 is still undergoing test and evaluation, with the flight test program scheduled to be completed in June 1995. DOD plans to have a fleet of 120 C-17s delivered by 2004.
section_title: Provisional 40-Aircraft Program Implemented
paragraphs: In recent years, Congress has expressed concern with the C-17’s growing cost and continuing technical problems. The Fiscal Year 1993 Defense Authorization Act required DOD to conduct a special Defense Acquisition Board review of the program. In December 1993, as a result of the review, the Secretary of Defense announced that the program would be stopped at 40 aircraft unless McDonnell Douglas could demonstrate that program cost, schedule, and performance warranted completing the 120 aircraft program. As we recently testified, DOD has proposed lowering the C-17’s payload/range specifications. DOD has also proposed relaxing the aircraft’s contracted short field landing specifications to levels that the C-17 can probably achieve. DOD plans to assess the contractor’s improvements in November 1995, at the scheduled full-rate production decision milestone.
Through fiscal year 1995, Congress has appropriated almost $18 billion for the C-17 program, including (1) $5.8 billion for research, development, test, and evaluation; (2) $12 billion for procurement; and (3) $163 million for military construction. Congress has also authorized the procurement of 32 C-17 aircraft and advance procurement funds for another 8 aircraft. As of December 1994, 17 production C-17s had been delivered to the Air Force.
section_title: Objective, Scope, and Methodology
paragraphs: The Fiscal Year 1994 Defense Authorization Act conference report contains a provision calling for us to assess whether (1) the original C-17 justification remains valid and (2) the C-17 can still achieve its original program requirements, given cost increases and technical problems. This report responds to that provision. It also discusses the nature of the performance problems, the extent of the cost growth, and the results of DOD’s recent C-17 cost and operational effectiveness analysis (COEA), which was conducted by the Institute for Defense Analyses (IDA).
To determine if the C-17’s original justification has changed, we reviewed program documents, including past and current system specifications, operational requirements documents, concepts of operation, and Army field manuals and doctrine. We also used our past work on the Major Aircraft Review, Operation Desert Shield/Storm, the Mobility Requirements Study (MRS), and the C-17 program. We interviewed officials from the Office of the Secretary of Defense, the Joint Chiefs of Staff, Air Force Headquarters, AMC, Army Headquarters, and the Army’s Training and Doctrine Command.
We used information from our continuing work to monitor cost, schedule, and performance issues related to the program at the McDonnell Douglas plant, Long Beach, California, and C-17 developmental and operational testing by the Air Force at Edwards Air Force Base, California. We also reviewed a recent Defense Science Board report on the C-17 and spoke with members of the Board’s working groups regarding the C-17’s payload/range performance and other aspects of the program.
To determine whether cost-effective alternatives to the full C-17 program exist, we reviewed the COEA. We also interviewed officials from IDA, the Office of the Secretary of Defense, AMC, McDonnell Douglas Corporation, Boeing Corporation, and Lockheed Corporation.
We conducted our review between April 1993 and December 1994 in accordance with generally accepted government auditing standards. We obtained DOD comments on a draft of this report, which are discussed at the end of each of the following chapters and are presented in their entirety in appendix I along with our detailed evaluation of them.
section_title: C-17’s Planned Role Has Changed
paragraphs: The Air Force justified the C-17 in the early 1980s on the aircraft’s planned capabilities to operate routinely in an intratheater shuttle role; perform direct delivery missions to forward airfields, potentially in hostile areas; and airlift substantial amounts of outsize cargo such as tanks and helicopters. The C-17 was also intended to provide the capability to conduct low-level parachute extractions of the Army’s heavy equipment and to airdrop troops and equipment. However, the C-17’s envisioned role has changed, and these capabilities will not be used as originally intended.
subsections: section_title: Justification for the C-17
paragraphs: DOD’s 1981 Congressionally Mandated Mobility Study addressed the U.S. policy objective of concurrently supporting a major North Atlantic Treaty Organization-Warsaw Pact conflict and a lesser contingency involving a Soviet-backed threat in the Persian Gulf region. DOD recommended increasing U.S. airlift capacity by about 20 million ton-miles per day (MTM/D) to 66 MTM/D—the capacity to lift the required amount of cargo and troops to Europe and Southwest Asia to counter an imminent threat. The 1981 mobility study highlighted the need for a new airlifter that could land on small, austere airfields; perform both intertheater and intratheater airlift missions; and carry outsize cargo—the largest items in the Army’s inventory. Outsize cargo includes, for example, M1 tanks, Patriot battery radar, and Apache helicopters.
The Air Force’s 1983 Airlift Master Plan concluded that, in addition to new C-5B and KC-10 aircraft, procuring 210 C-17s was the most cost-effective way to reach the goal of 66 MTM/D while providing necessary military utility. Military utility included the ability to operate from austere airfields in an intratheater airlift role, perform direct delivery missions to forward operating locations, carry all types of combat equipment, and airdrop combat equipment and troops. Figure 2.1 depicts the C-17’s concept of operations.
section_title: C-17’s Intended Role Has Changed
paragraphs: The C-17’s role has been modified from that envisioned in the 1983 Airlift Master Plan. The C-17 will not routinely conduct intratheater shuttle missions, will not routinely perform direct delivery missions, and will rarely land near the battle front. Furthermore, the dissolution of the Soviet threat has resulted in a reduced requirement for outsize cargo. In addition, the number of airfields open to the C-17 but not the C-5 is much less than the Air Force has previously stated. Finally, the C-17’s unique  60,000 pound low-altitude parachute extraction system (LAPES) capability is not needed, and the aircraft cannot meet original airdrop requirements.
subsections: section_title: C-17 Will Not Perform Intratheater Shuttle Missions Routinely
paragraphs: The C-17’s planned intratheater capability was key to its anticipated cost-effectiveness. Intratheater missions are needed when sealifted cargo arrives in the theater or when deployed forces need to be repositioned quickly. These missions are typically carried out by C-130s or ground transportation. Because the C-17 would perform the workload of the C-130s, the Air Force’s 1983 Airlift Master Plan stated that 198 C-130s would be retired and not replaced, a key factor in establishing the C-17’s cost-effectiveness. Current Air Force policy, however, reflects a substantially diminished intratheater role for the C-17. For example, AMC’s 1993 Air Mobility Master Plan does not discuss using the C-17 in an intratheater role or retiring a significant number of C-130s.
The Air Force initially anticipated that the C-17 would routinely perform intratheater missions during contingencies. However, as a result of the 1990 Major Aircraft Review, the Secretary of Defense reduced the number of C-17s from 210 to 120, citing the changing strategic environment and diminished Soviet threat. Under the current 120-aircraft program, the intertheater airlift flow would be adversely affected if C-17s were diverted to perform intratheater missions on a routine basis. AMC officials acknowledge that while C-17s will provide theater commanders additional flexibility when needed, the aircraft will not routinely perform intratheater missions as originally planned.
section_title: Direct Delivery Role May Not Be Used Routinely
paragraphs: The C-17 was also intended to offer an extended direct delivery capability by landing at forward airfields near the battle front. However, the Air Force’s current C-17 operational concept states that the aircraft will rarely land near the battle front. Moreover, current Army doctrine calls into question the extent to which the C-17’s direct delivery capability will be used. The Army—the primary user of airlift—prefers to deploy to main operating bases rather than directly to final destination airfields.
subsections: section_title: C-17 Will Rarely Deliver Cargo to Forward Areas
paragraphs: The C-17’s operational concept has changed from one that emphasizes direct delivery to forward airfields at the brigade rear area to one that stresses more standard airlift operations at the corps support area. The 1986 C-17 System Operational Concept stated that “the C-17’s capability to deliver directly to small, austere airfields close to the battle area will reduce delivery times, reduce congestion at main operating bases, and enhance operational flexibility by increasing the number of airfields that can be used.” This document also stated that the C-17’s routine destination airfields would likely be located at the brigade rear area. Figure 2.2 provides an illustrative example of this concept.
Recently, the Air Force has downplayed the extent to which the C-17 will fly into forward areas near the front. The 1993 C-17 Employment Concept of Operations states that the C-17 will rarely deliver cargo to the brigade support area. The brigade support area is typically near the boundary between the brigade rear area and the division rear area. Figure 2.3 illustrates the current concept.
According to Air Force and Army officials, the C-17 would be very unlikely to use an airfield not protected by a corps. However, AMC officials stated that the C-17 will provide theater commanders the flexibility to operate in forward areas if necessary.
section_title: Army Doctrinal Change Required to Use Direct Delivery Routinely
paragraphs: The Army’s current method of deployment does not use direct delivery, even to well-developed airfields. The Army trains and fights based on a “mass and maneuver” strategy, with forward movements planned from major bases in the theater of operations. Desert Shield/Storm experience and the 1992 MRS indicate that the Army remains reluctant to use direct delivery.
During Desert Shield/Storm, numerous well-developed airfields eventually became accessible to military airlifters in Saudi Arabia. However, the Army preferred to use the two main operating bases and was opposed to sending units directly to other airfields. AMC had to convince some Army units to use direct delivery to bypass these bases and send troops and cargo directly to the final destination airfields on C-5s and C-141s. For example, 3 months after the Desert Shield deployment began, the Army was still requesting that over 75 percent of its missions go to a main operating base.
When preparing its deployment database for the MRS, which assumed a fleet of 80 C-17s would be available, the Army again did not make use of direct delivery. For example, in the Southwest Asia scenario, the Army planned to send all troops and cargo to the two main operating bases that had been used in Desert Shield/Storm. AMC persuaded the Joint Chiefs of Staff to add more locations to increase delivery capability.
Army, Air Force, and other DOD officials agree that doctrinal changes will be needed if the Army is to deploy using the direct delivery concept on a routine basis.
section_title: C-17 Can Land at Fewer Small, Austere Airfields Than Air Force Has Reported
paragraphs: The Air Force has reported that the C-17’s capability to land on short airfields would enable it to land at about 6,400 more airfields in the free world (less the United States) than the C-5. However, the 6,400 figure is overstated because it did not take into account runway strength and included all types of airfields, ranging from concrete and asphalt to gravel, dirt, and grass, many of which are not suitable for either aircraft. When wartime landing requirements, including minimum runway strength, are considered, the C-17’s wartime airfield advantage decreases from 6,400 to about 1,400 airfields. More importantly, DOD’s 1992 MRS identified only three such airfields that would likely be used by the C-17 in the major regional contingency scenarios. Two are located in Korea and one in Saudi Arabia.
section_title: Outsize Cargo Requirements Have Decreased
paragraphs: The 1983 Air Force decision to buy the C-17 was based largely on the aircraft’s ability to carry outsize cargo. In the North Atlantic Treaty Organization-Warsaw Pact scenario examined in DOD’s 1981 Congressionally Mandated Mobility Study, 27 percent of the airlifted equipment was outsize. The post-Cold War scenarios examined in DOD’s recent MRS, however, require a smaller percentage of outsize cargo than the Soviet-based scenarios. In the most lift-intensive scenario in the 1992 MRS—simultaneous deployments to Southwest Asia and Korea—about 15 percent of the cargo was outsize. Recent deployment experience also reflects a smaller outsize cargo requirement. During Desert Shield/Storm, only 12 percent of the airlifted cargo was outsize.
An Air Force and DOD analysis shows that fewer than 120 C-17s would be needed, in conjunction with the existing aircraft fleet, to meet the outsize airlift delivery requirement in the 1992 MRS. The MRS moderate risk airlift requirement, judged acceptable by DOD, was accomplished with a fleet that included 80 C-17s. DOD did not determine the minimum number of C-17s that would be needed to meet the moderate risk requirement. DOD is currently preparing a new MRS, scheduled to be completed by the end of January 1995, that will reflect the recommendations in the Department’s 1993 Bottom-up Review. Preliminary AMC data indicate that the percentage of outsize cargo will not change significantly from the 15 percent assumed in the 1992 MRS.
section_title: Unique C-17 LAPES Capability No Longer Required
paragraphs: LAPES is a means of extracting equipment while an airlifter flies at low levels. At present, the C-130 is the only aircraft capable of LAPES operations, and it is limited to extracting 42,000 pounds of equipment. In 1981, the Army identified an “urgent need” to develop a LAPES capability up to 60,000 pounds. According to Army officials, this capability was needed to extract armored artillery pieces, ammunition, and towing vehicles from the same LAPES platform, which would minimize dispersion over the drop zone. The C-17 was intended to provide this unique capability.
In March 1994, the Army acknowledged that “LAPES has been an expensive, unused, untrained capability and is potentially of limited battlefield use.” The Army stated that the current C-130 42,000-pound LAPES capability “appears to more than adequately address foreseeable Army requirements.” The Army intends neither to maintain the material systems and rigging required for the 60,000-pound LAPES platform nor to conduct C-17 LAPES training. Thus, the C-17 will not be used for this mission. However, AMC officials noted that testing of a 42,000-pound C-17 LAPES capability is currently underway.
section_title: C-17 Cannot Meet Original Airdrop Requirements
paragraphs: The ability to airdrop troops and equipment is one of DOD’s most critical requirements. Currently, only the C-141 and C-130 aircraft are capable of routinely performing airdrop missions. The Joint Chiefs of Staff recently revalidated the requirement for a strategic airdrop of a brigade’s worth of troops and equipment. Because the C-130 cannot fly the long distances required for this mission and the C-141 fleet is being retired, the C-17 is expected to fulfill this requirement. However, the C-17 has not been able to meet initial requirements because of airflow problems caused by its design. As a result, the Army is lowering its airdrop requirements.
The contracted specifications call for the C-17 to airdrop 102 combat-equipped paratroopers using static line deployed parachutes, preceded by at least 8, 500-pound equipment bundles, within 55 seconds. The bundles are to be dropped out of the cargo ramp door while the paratroopers jump from the two troop doors on the aircraft’s sides. The Army considers combination drops critical to early entry lethality and survivability on the battlefield. However, testing has shown that the C-17 has severe airflow problems when the side troop doors and the rear cargo door and ramp are open.
In March 1994, the Army notified AMC that, due to the C-17’s airflow problems, it had revised its airdrop requirement in terms of “desired” and “required” capabilities. The Army’s new desired objective for the combination airdrop is to drop 102 paratroopers and 8 bundles in  70 seconds. The required capability is to drop 102 paratroopers and  2 bundles in 55 seconds. However, AMC officials told us that this is an unrealistic requirement because 102 paratroopers cannot exit the C-17 within this time frame. Accordingly, AMC plans to reduce the C-17 airdrop requirement.
Another specification requires airdropping 40 containerized delivery system bundles, weighing 2,350 pounds each. However, the C-17 has been restricted to dropping only 30 bundles because of safety concerns. The C-17 program office is making design changes to eliminate this safety hazard and enable the C-17 to drop 40 bundles.
section_title: Conclusion
paragraphs: The C-17’s anticipated role has changed and the aircraft will not be used as originally envisioned. The C-17 was justified on the basis of its unique capability to routinely deliver the full range of Army combat equipment to locations inaccessible to other strategic airlifters. The C-17 is not likely to conduct routine intratheater and direct delivery missions as planned, and it is no longer expected to operate into forward airfields near the battle front. Furthermore, the number of airfields in the free world open to the C-17, but not the C-5, is significantly less than the Air Force claimed in justifying the C-17. While the C-17 is capable of carrying outsize cargo, a DOD analysis indicates that a fleet of 120 C-17s may not be necessary to fulfill outsize delivery requirements. Finally, one of the aircraft’s unique capabilities—using LAPES to deliver a 60,000-pound platform—will not be used, and its airdrop capability does not meet the Army’s original requirements. The aircraft is likely to operate primarily in a routine intertheater airlift role.
section_title: Agency Comments and Our Evaluation
paragraphs: DOD’s position in commenting on a draft of this report is that (1) the role of the C-17 has not changed, (2) the C-17 can and will perform routine direct delivery and intratheater shuttle missions, and (3) the airfield accessibility advantage of the C-17 over the C-5 is significant.
A comparison of the C-17’s envisioned role as discussed in the 1986 C-17 System Operational Concept, the 1983 Airlift Master Plan, the 1993 C-17 Employment Concept of Operations, and the 1993 Air Mobility Master Plan shows that the role of the C-17 has clearly changed. For example, the Air Force no longer plans to use the C-17 to routinely conduct intratheater shuttle missions. Further, while direct delivery is still a part of the concept for the C-17, the C-17’s operational concept has changed from one that emphasized direct delivery to forward airfields near the battle front to one that emphasizes more standard airlift operations at or near a main operating base. The Army is changing its doctrine to incorporate the use of direct delivery, but these doctrinal changes do not call for routine direct delivery to forward airfields near the battle front.
Although the C-17 can land on more airfields than the C-5, the C-17’s airfield advantage is significantly less than the 6,400 airfields originally claimed, and the 1992 MRS identified only three small austere airfields that would likely be used by the C-17 in major regional contingencies.
section_title: Alternatives to the C-17 Can Help Meet Airlift Requirements at Significantly Lower Cost
paragraphs: DOD’s COEA showed that the C-17 is the preferred military airlifter because, when considering delivery of outsize cargo, the C-17 retains its throughput ability better than the C-5 if (1) airfield constraints are encountered and (2) the C-17’s planned utilization rate (higher than the C-5’s experienced rate) is achieved. However, the COEA also showed that alternative airlift fleets, such as a combination of 40 C-17s and 64 modified commercial freighters, can meet airlift requirements at a significantly lower cost if alternative—in our opinion, more reasonable—assumptions are made. In addition, C-17 program costs have continued to increase, and potential savings from adopting an alternative to the 120-aircraft fleet could approach $4 billion more than the $10.7 billion (in constant fiscal year 1993 dollars) we identified in our earlier report.
subsections: section_title: C-17 COEA
paragraphs: DOD’s COEA examined alternatives to the full C-17 program, including (1) restarting the C-5 line, (2) extending the service life of the C-141, and (3) procuring new commercial freighter aircraft. The capability of Boeing 747 freighters was assessed to determine how commercial aircraft would contribute to airlift missions. The COEA’s conclusion was that an airlift fleet with 120 C-17s was the preferred choice to meet the requirements set forth in the 1992 MRS, 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 extremely constrained.
The C-17 would achieve a 15.2-hour per day utilization rate while commercial freighters would achieve only a 12.5-hour per day rate.
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.
Our review indicated that alternative assumptions pertaining to airfield availability, utilization rates, and intratheater capability are more realistic. Adjusting for these assumptions would result in the C-17 fleet being less capable and a mixed C-17/commercial fleet being more capable and more cost-effective than the COEA’s conclusions indicate.
subsections: section_title: Airfield Constraints Affect Fleet Capability
paragraphs: The COEA was based on the threat scenario portrayed in the 1992 MRS, which postulated that an aggressive enemy was moving directly into Saudi Arabia. Based on this threat, several airfield assumptions were examined. The COEA showed that the C-17 had a better delivery capability for outsize cargo than the mixed C-17/commercial aircraft fleet when airfield availability was extremely limited. Under the assumption that airlift deliveries would be equivalent to the first 45 days of Desert Shield, when only one major airlift airfield would be available, the C-17 fleet could meet the MRS delivery requirement, but the mixed fleet could not. However, under the airfield assumptions used in the MRS Southwest Asia scenario, in which more airlift airfields were assumed to be available, the COEA showed that the mixed fleet of 40 C-17s and 64 747s could deliver the required amount of cargo. This mixed fleet would cost about $6 billion less than the fleet of 120 C-17s.
During the first 45 days of Desert Shield, airfield availability was limited to only one major airlift base, due primarily to the Saudi Arabian government’s reluctance to allow U.S. access to multiple airfields and the U.S. Army’s preference for deploying to only major operating bases. In Desert Shield/Storm, Iraqi troops became entrenched shortly after the invasion of Kuwait and did not invade Saudi Arabia. We believe that, given the threat scenario on which the COEA was based, the MRS assumption that the Saudi government would open additional airlift airfields is more realistic than the airfield assumption based on early Desert Shield experience. Under the MRS airfield assumption, the mixed C-17/commercial fleet meets the airlift requirement.
section_title: C-17’s Cost-Effectiveness Depends on High Utilization Rate
paragraphs: The COEA indicated that the C-17 would perform better than mixed fleets if a 15.2-hour per day utilization rate were assumed for the C-17. An aircraft’s utilization rate is the planned average daily flying hours per aircraft for the entire fleet and is based on numerous elements, such as mission capable rate, number of aircrews per aircraft, and availability of spares. The COEA showed that, based on a 15.2-hour utilization rate for the C-17 and a 12.5 rate for the 747, both alternatives would meet the stated airlift requirement. The fleet of 120 C-17s could deliver more outsize cargo than the mixed fleet but would cost $6 billion more. If the 747’s utilization rate is increased to 15.2, a rate AMC officials acknowledge is feasible, the results show a significant increase in the mixed fleet’s ability to deliver outsize and oversize cargo.
The C-17’s 15.2-hour utilization rate is undemonstrated. To sustain this rate, the C-17 must demonstrate a mission capable rate of 90 percent, and the Air Force must sufficiently fund C-17 spares and aircrews. The level of war reserve spares for airlift aircraft has historically been less than required to sustain projected wartime utilization rates. Air Force officials told us they believe that the spares level for the C-17 will be fully funded, in part, because spares funding has recently been made a higher priority. The Air Force also plans to maintain a higher aircrew to aircraft ratio for the C-17 than for other strategic airlifters. The relatively higher C-17 aircrew ratio contributes to its ability to maintain a higher utilization rate.
section_title: COEA Underestimates Potential Savings Associated With Mixed Fleet Alternative
paragraphs: Because the C-17 was designed to deliver cargo to small, forward airfields typically used by the C-130, the COEA assumed 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, the life-cycle cost of the mixed fleet alternative was increased by $4.7 billion over 25 years (in constant fiscal year 1993 dollars). However, as discussed in chapter 2, 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. Therefore, it was inappropriate to assume the mixed fleet alternative should include this added $4.7 billion. If this cost is subtracted from the mixed fleet, the cost of a fleet of 120 C-17s increases from about $6 billion to about $10.7 billion more than the mixed fleet alternative.
section_title: C-17’s Program Cost Continues to Increase
paragraphs: In its May 1994 paper, “Department of Defense Airlift Acquisition Strategy,” DOD included average cost figures that indicate that C-17 program cost estimates continue to increase. In December 1992, total program costs were estimated to be $39.5 billion (in then-year dollars) at a maximum rate of 16 aircraft per year. In January 1994, the C-17 program director estimated that total program costs would increase to $43 billion because of a reduced procurement rate of 12 aircraft per year and increased estimates for production and support costs.
DOD’s paper indicated that, at a maximum production rate of 12 aircraft per year, total program costs would be $45.4 billion. This increase is attributable to increased production and support costs and the cost of a recently approved business settlement between DOD and McDonnell Douglas. If the maximum procurement rate were reduced to eight aircraft per year, DOD’s paper estimated that total program costs would increase another $2.6 billion, to about $48 billion. In recent years, due to ongoing development and production problems, Congress has reduced funding to slow the C-17’s production rate to reduce the level of concurrency in the program. While the Air Force’s desired procurement rate may eventually be achieved, the program has been significantly more stretched out than originally planned.
The C-17 procurement cost estimates reported in DOD’s paper are significantly higher than those in the C-17 COEA. DOD’s paper indicates that estimated procurement costs have increased by $2.8 billion to $4 billion (in constant fiscal year 1993 dollars) since the C-17 COEA. Consequently, the potential savings from adopting an alternative to the 120-aircraft fleet would be significantly greater than the $10.7 billion we previously reported. While estimating the exact amount of savings would be very difficult because of the many variables involved, we believe the increase in savings could approach $4 billion. However, this estimate does not take into account changes that may have occurred in the estimated costs of modified commercial aircraft.
section_title: Minimum Number of C-17s Needed to Fulfill Unique Military Requirements Not Yet Determined
paragraphs: Determining whether a mixed fleet is a viable alternative to a 120-aircraft C-17 program depends on the fleet’s capability to fulfill certain unique military requirements such as direct delivery to forward airfields, routine operations into small, austere airfields in an intratheater role, airlift of outsize cargo, and airdrop. The COEA was not intended to address this issue in detail. DOD has several studies underway, scheduled to be completed before the November 1995 Defense Acquisition Board decision on C-17 full-rate production, that will assess the capability of various fleet mixes and identify the minimum number of C-17s needed to fulfill unique military airlift requirements. As currently planned, nondevelopmental airlift aircraft 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 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.
section_title: Conclusion
paragraphs: Serious concerns about the C-17’s cost-effectiveness have prompted Congress to direct DOD to explore alternatives to the full C-17 program. The COEA identified less costly alternatives that could meet airlift requirements and save billions of dollars. In addition, the C-17’s program cost continues to increase. Therefore, the savings associated with a mixed fleet of C-17s and commercial freighters could be significantly greater than the COEA reported.
section_title: Matter for Congressional Consideration
paragraphs: In light of changes in the C-17’s intended role, its less than anticipated performance, the results of DOD’s COEA, and continued program cost growth, we continue to believe that Congress should not support the C-17 program beyond the minimum number needed to fulfill unique military requirements. That number has not yet been determined but is the subject of several ongoing studies.
section_title: Agency Comments and Our Evaluation
paragraphs: In commenting on a draft of our report, DOD stated that (1) a direct invasion of Saudi Arabia would still likely result in extremely constrained theater airfield availability in contrast to that reflected in the 1992 MRS, (2) two C-17s flew missions to Kuwait and demonstrated higher utilization rates than required, and (3) its COEA estimate of potential savings associated with the mixed fleet alternatives was not understated.
While the precise extent of airfield availability in any future contingency is unknown, the MRS threat suggests that more airfields will be available than was the case during Desert Shield, when allied forces had the advantage of a 5-month deployment period. We believe that using the Desert Shield-type airfield situation juxtaposed against an MRS threat gives the C-17 an inappropriate advantage over alternative airlifters. In our opinion, a more valid basis on which to compare the C-17 to alternative airlift fleets is the COEA’s examination of the MRS airfield availability assumption.
The recent missions to Kuwait are not an adequate basis for establishing the appropriate sustainable utilization rate because these missions were of extremely limited duration. DOD has not yet determined how to extrapolate an inherent utilization rate from the results of the planned July 1995 reliability, maintainability, and availability evaluation. Our position remains that the projected C-17 utilization rate of 15.2 is, as yet, undemonstrated and that comparing this rate to a 12.5-hour utilization rate for commercial airlifters that have demonstrated higher utilization rates inappropriately favored the C-17 in the COEA.
DOD’s position that the C-17’s intratheater role is unchanged from that depicted in the 1983 Airlift Master Plan, despite an almost 50-percent reduction in the number of aircraft, is untenable. DOD’s position also contradicts the comments of Office of the Secretary of Defense and AMC officials on our July 1994 report on the COEA, as well as the comments of AMC officials on this report. These officials acknowledged that the C-17’s intratheater shuttle role has been substantially diminished in the wake of the reduction from 210 to 120 aircraft. Moreover, they concurred with our finding that the COEA should not have assumed a cost saving to the C-17 to account for this intratheater role.