Defense Acquisitions: Strategic Airlift Gap Has Been Addressed, but Tactical Airlift Plans Are Evolving as Key Issues Have Not Been Resolved
Published: 2009-11-12T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Department of Defense (DOD) used nearly 700 aircraft, as well as commercial and leased aircraft, to carry about 3 million troops and 800,000 tons of cargo in support of wartime, peacetime, and humanitarian efforts in 2008. C-5s and C-17s move troops and cargo internationally (strategic airlift) and C-130s are the primary aircraft that moves them within a theater of operation (tactical airlift). Over the next 4 years, DOD plans to spend about $12 billion to modernize and procure airlifters and is currently studying how many it needs. The Government Accountability Office (GAO) was asked to (1) identify the status of DOD's modernization and acquisition efforts and (2) determine how well DOD is addressing any capability gaps and redundancies. In conducting this work, GAO identified the cost, schedule, and performance of airlift programs, as well as DOD's plan for addressing gaps and redundancies. GAO also discussed mobility study efforts with DOD, Institute for Defense Analysis (IDA), and RAND Coporation officials.
section_title: What GAO Found
paragraphs: DOD has recently revamped airlift investments due to modernization cost increases and requirement changes. For strategic airlift, the number of C-5s that will be fully modernized were cut in half because of substantial reengining cost increases and C-17 quantities were increased from 180 to 213 aircraft. These twin changes resulted in a net cost increase of about$3 billion. Additional costs and force structure changes are possible pending decisions on C-5 retirements, other modifications, the potential need for more C-17s to meet tactical airlift needs, and the planned shutdown of C-17 production. For tactical airlift, substantial cost increases for modernizing C-130 avionics tripled unit costs, delayed its schedule, and resulted in almost 60 percent fewer aircraft being modernized. There have been large increases in the C-130J quantity to replace older C-130s, but modest increases in unit costs. The joint Army-Air Force C-27J program was recently transferred to the Air Force and quantities were cut from 78 to 38 aircraft, with an uncertain effect on the Army's airlift missions. The Army and Air Force must also resolve fundamental differences in operating requirements and employment strategy for the Joint Future Theater Lift (JFTL). DOD appears to have addressed its strategic airlift gap, but there is a potential future tactical airlift gap for moving medium weight equipment. Also, questions regarding how the Air Force will meet the Army's direct support mission have not been resolved. DOD is using $5.5 billion appropriated by Congress to procure 23 additional C-17s, which DOD officials believe more than offsets the strategic airlift gap associated with the restructured C-5 modernization program. However, there is a potential gap in the tactical airlift of medium weight loads beyond the capability of the C-130s. The C-17 is the only aircraft capable of moving this type of Army equipment within a theater of operation, although not to austere, short, or unimproved landing areas. The JFTL is envisioned to provide this capability, but will not be available for 15 years or more under the current acquisition strategy. While the various mobility studies acknowledge the C-17's significant dual role, they did not comprehensively evaluate the expanded use of the C-17 to transport medium weight equipment in theater and how this could impact the force structure, the C-17's service life, and decisions related to when to shut down the production line. In addition, questions remain about the number of C-130s and C-27Js needed to fulfill Army direct support missions. Two studies reached somewhat different conclusions about the cost effectiveness of using C-130Js and C-27Js for this mission. The Air Force and Army have not completed a plan for meeting Army direct support requirements, which could affect future decisions on both the C-27J and the C-130J. DOD's recently established portfolio management structure is supposed to provide a useful forum to address the broad range of airlift investment decisions. However, efforts so far have primarily focused on new programs rather than addressing gaps and making other airlift decisions such as when and how many C-5s to retire or the appropriate mix of C-130s and C-27Js needed to perform Army missions.

section_title: Letter
paragraphs: The Department of Defense (DOD) employs over 700 aircraft to move  troops and cargo in support of wartime operations, peacetime missions,  and humanitarian aid efforts. In 2008, these airlifters along with  commercial and leased aircraft flew more than 160,000 sorties, moving  about 800,000 tons of cargo and 3 million troops. The Air Force’s C-5s and  C-17s perform the intertheater movement of troops and cargo, referred to  as strategic airlift, and its C-130s provide most intratheater transport,  referred to as tactical airlift.
The department plans to spend about $12 billion over the next 4 years to  modernize and recapitalize its airlift fleets. This includes upgrading the  avionics on C-5s and selected C-130 models, replacing engines on about  half of the C-5 fleet, and acquiring additional C-17s and C-130Js. DOD is  also procuring C-27J Joint Cargo Aircraft and has begun initial planning  efforts on the Joint Future Theater Lift (JFTL), both slated for tactical  airlift. Growing fiscal pressures, however, may cause DOD to reexamine or  restructure programs that exceed cost and schedule targets. Because of  the costs, complexities, and interrelationships of airlift programs and the  need for greater insight, we examined, at your request (1) the cost,  schedule, and performance status of modernization efforts and new airlift  programs and (2) how well DOD is managing the airlift portfolio to make  investment decisions that address any capability gaps and redundancies.  This report builds and expands upon information reported to you on  strategic airlift issues in November 2008 and provides new information on  tactical airlift programs and issues.
In conducting our work, we interviewed and obtained documentation from  officials within the Office of the Secretary of Defense and U.S.  Transportation Command related to the ongoing Mobility Capabilities and  Requirements Study 2016 and portfolio management activities. DOD  officials did not provide a copy of or detailed information about the study  results because the analysis had not been completed. Instead, officials  provided status updates and answered questions about potential gaps and  redundancies.  We met with officials from each of the weapon system  program offices to obtain current cost, schedule, and performance  information. When appropriate, we discussed reasons for variances from  cost, schedule, and performance targets and upcoming acquisition,  modernization, or retirement decisions related to their particular program.  In addition, we met with Institute for Defense Analysis (IDA) and RAND  Corporation (RAND) officials to discuss the results of their DOD- sponsored mobility studies. We also relied on our previous reports related  to portfolio management, DOD mobility studies, and various weapon  systems for information. A list of these reports is included in the Related  GAO Products section at the end of this report. We conducted this  performance audit from January 2009 to November 2009 in accordance  with generally accepted government auditing standards. Those standards  require that we plan and perform the audit to obtain sufficient, appropriate  evidence to provide a reasonable basis for our findings and conclusions  based on our audit objectives. We believe that the evidence obtained  provides a reasonable basis for our findings and conclusions based on our  audit objectives.
subsections: section_title: Background
paragraphs: DOD uses a variety of aircraft to move weapons, equipment, and troops  from the United States to and within theaters of operation. C-5s and C-17s  are used for strategic airlift. They carry weapons and equipment too large  for any other DOD aircraft from the United States to staging locations  throughout the world. The family of C-130 aircraft, which includes the       C-130E, C-130H, and C-130J aircraft, is then the primary asset used to  move weapons, equipment, and troops within a theater of operation. The  C-17 is dually capable of performing both strategic and tactical airlift  missions and supplements the C-130 for tactical airlift. All of these aircraft  are owned and operated by the Air Force and are considered part of the  common user pool of aircraft that can be used to support any of the  services’ missions. DOD also relies on the Air Force’s aerial refueling  tankers (KC-10 and KC-135), commercial aircraft, and leased aircraft to  supplement airlift capabilities. Officials at the U.S. Transportation  Command and its Air Force component, the Air Mobility Command,  decide on how best to use the assets on a daily basis. Often, these aircraft  are scheduled for departure when they have a full load, to ensure assets  are used cost-effectively. The services may also use their own airplanes  and helicopters that are not in the common user pool to move people and  cargo within a theater of operation. For example, these assets include the  Army’s C-23 Sherpas and the Marine Corps’ V-22 Osprey aircraft. These  aircraft are used to perform time-sensitive, mission-critical requirements  and may take off without full loads since urgency is the primary driver for  the mission, not efficiency or cost-effectiveness.
The Air Force is in the process of modernizing its C-5 and C-130H aircraft  and acquiring C-17s, C-130Js, and C-27Js to meet its future strategic and  tactical airlift requirements and improve aircraft availability. It plans to  retire C-130Es from the tactical airlift fleet by 2014. C-5s are being  modernized in two phases. During the first phase, known as the Avionics  Modernization Program (AMP), aircraft receive upgraded avionics  capabilities and an all-weather flight control system. During the second  phase, known as the Reliability Enhancement and Reengining Program  (RERP), aircraft engines are replaced and electrical, fuel, and other  subsystems are modified. Together, the two modifications will help  improve the C-5s wartime mission capable rate. C-130H aircraft are also  receiving an AMP modification and will undergo a center wing box  replacement because of severe cracking discovered in that area.
DOD periodically assesses global threats, the national military strategy,  and its force structure to determine future airlift requirements and to  judge the sufficiency of its acquisition and modernization plans. The  analytical basis for DOD’s current airlift requirements is the Mobility  Capabilities Study completed in December 2005. Officials used the study  results to report in the 2006 Quadrennial Defense Review that 180 C-17s  and 112 fully modernized C-5s (those that received the AMP and RERP  modifications) would be sufficient to meet the national military strategy  for strategic airlift with acceptable risk.  This could change pending the  completion of the ongoing DOD Mobility Capabilities and Requirements  Study 2016, two other DOD-sponsored airlift studies conducted by IDA  and RAND, the 2010 Quadrennial Defense Review, and potential changes  in threat assumptions and the national security strategy. The IDA study  has already been completed and the remaining studies are expected to be  completed by January 2010.
section_title: Airlift Acquisition and Modernization Programs Have Been Restructured to Address Rising Costs and Changes in Airlift Needs
paragraphs: Over the last 2 years, DOD has restructured its airlift investments,  primarily due to sharp cost increases for modernization programs and  changes in requirements. The Air Force now intends to fully modernize  less than one-half of the C-5s it originally planned and will procure  additional C-17s.  C-130 avionics modernization quantities were also cut  more than half and the schedule was delayed due to cost increases. The  Air Force is procuring more C-130J models than planned, due in part to a  decision to retire the older C-130E model. Pending decisions on aircraft  retirements, additional modifications, and new acquisitions could further  affect future costs and the force structure. Furthermore, changing needs  and uncertain strategies could lead to cost, schedule and performance  variances on two new airlift programs, the C-27J and the JFTL. Appendix 1  contains more in-depth cost, schedule, and performance information on  the department’s strategic and tactical airlifters that we reviewed.
subsections: section_title: Strategic Airlift: DOD Is Modernizing Fewer C-5s, but Acquiring More C-17s
paragraphs: DOD has cut its C-5 modernization efforts by more than half and is  acquiring additional C-17s. Significant cost increases on the C-5 RERP and  AMP programs drove up unit costs and delayed schedules.  These  problems, along with additional congressional appropriations that DOD is  using to procure more C-17s, led to a decision to fully modernize only 52  C-5 aircraft instead of the entire fleet. Congress has provided enough  funding for DOD to procure 33 more C-17s. The last one will be delivered  in March 2011.
Substantial C-17 production line shutdown costs—ranging from about  $465 million to about $1 billion by Air Force and Boeing estimates,  respectively—have yet to be determined, but will need to be funded soon.  Table 1 summarizes changes in cost and quantities from original estimates.
DOD has nearly completed its C-17 acquisition program and is about  midway through the C-5 AMP modernization program. According to  program officials, 24 C-17s are yet to be delivered and 57 C-5s still need the  AMP modification. The C-5 RERP modernization program is just beginning  the low rate initial production phase. Only 3 of 52 C-5s have received the  RERP modification as part of the development program. DOD has already  spent about $69.2 billion on research, development, test and evaluation  (RDT&E) and procurement funds on these programs and program officials  project they will need to invest about $7.7 billion to complete the  programs as currently planned (see table 2).
The department planned to spend about $12 billion to make AMP and  RERP modifications to the fleet of C-5 aircraft by 2020. However, the Air  Force declared a Nunn-McCurdy cost breach in the RERP program in  September 2007, due to increased labor and parts costs. The AMP effort  required additional software development to address deficiencies found  during developmental testing. Development costs would have been higher  except that the Air Force decided not to address 250 deficiencies and 14  operational requirements in this program. These events resulted in revised  plans to provide the AMP upgrade to all C-5 aircraft and the RERP  modification to 52 aircraft. The combined cost for both modifications was  reduced to $9.1 billion, but now less than one-half of the fleet will be fully  modernized and at a much higher unit cost than originally estimated— $160.5 million for both modifications versus $96.1 million. The portion of  the fleet that does not get both modifications will continue to experience  mission capable rates of around 50 percent compared to about 75 percent  for the portion that does get both modifications.  The last modifications  are supposed to be finished in 2015.
Additional costs and changes in the force structure for the C-5 and C-17  are possible pending decisions on future modifications and retirements of  older C-5s. For example, program officials said that many of the  deficiencies and requirements dropped from the current C-5 AMP effort  will be addressed in annual AMP software upgrades, the C-5 RERP, or a  new block upgrade program that is scheduled to begin in fiscal year 2010.   The C-17 is also addressing modernization through a series of aircraft  upgrades designed to address emerging issues such as international  airspace access requirements and critical operational/safety issues.
Significant C-5 cost growth and further delays are possible if the RERP  program is not adequately funded. We previously reported that, according  to the department’s Cost Analysis Improvement Group, the RERP program  was underfunded by about $294 million, with additional funding needed in  fiscal years 2012 and 2013. Replacement engines are the costliest portion  of the RERP upgrade, and DOD officials said if funding is insufficient to  meet yearly production quantities in existing purchase agreements,  anticipated price breaks will not occur and could likely result in another  Nunn-McCurdy unit cost breach and program restructure. Department  officials said the Air Force is committed to fully funding the RERP  modification of 52 aircraft, but did not provide us with new budget data  for fiscal years 2011 and beyond.
Planned quantities of C-17s have fluctuated over the years. C-17  procurement began in 1988 and the Air Force initially planned to acquire  210 aircraft. Following a major acquisition review in 1990, the program  was reduced to 120 aircraft because of technical problems and funding  shortfalls during the full-scale development program, which resulted in  higher than expected cost increases and schedule delays. In subsequent  years, DOD expanded the program from 120 aircraft to 180 aircraft and, in  the past 3 fiscal years, Congress has provided funding that would allow  DOD to procure 33 additional aircraft: 10 in fiscal year 2007, 15 in fiscal   year 2008, and 8 in fiscal year 2009. This would bring the total number of  C-17s DOD plans to procure to 213. As of July 2009, DOD had taken  delivery of 190 aircraft. The program is expected to end with the delivery  of the 213th aircraft in March 2011, at which time the production line  could be shut down if Boeing does not receive additional international  orders for the aircraft. The Air Force’s fiscal year 2010 budget includes  $91.4 million to fund some of the shutdown costs and a DOD official stated  that additional funding would be included in future budgets.  However,  final shutdown costs have not been negotiated between the Air Force and  Boeing, the prime contractor. Last year we reported that the Air Force  estimated the costs to be around $465 million and Boeing’s estimate was  about $1 billion.
section_title: Tactical Airlift: C-130 AMP Modernization Program Has Been Cut and Uncertainty Surrounds New Programs
paragraphs: DOD’s tactical airlift investments have also experienced cost and schedule  fluctuations and continue to experience significant uncertainty. The AMP  program to modernize the C-130H fleet has been substantially reduced,  although officials are examining a possible follow-on effort to include  more aircraft. Procurement quantities for the C-130J have increased to  replace retiring C-130E models and plans, quantities, and employment  strategies for the newest tactical aircraft, the C-27J, have yet to be  finalized following a decision to transfer the joint program entirely to the  Air Force. Table 3 summarizes changes in cost and quantity for current  tactical aircraft. The JFTL, expected to augment the C-130 fleets, is in  concept development and cost and quantity estimates are unavailable.
DOD has not yet begun its C-130 AMP production program and has only  taken delivery of 2 C-27Js as of July 2009. The department has more than  half of its C-130J acquisitions—95 aircraft—yet to procure. DOD has  already spent $10.1 billion in RDT&E and procurement funds on these  programs.  Program officials project it will cost about $12.6 billion to  complete the programs as currently planned (see table 4).
The C-130 AMP entered system development in 2001, but funding  instability and problems integrating hardware and software, as well as an  Air Force decision to exclude C-130E aircraft from the program, triggered  a Nunn-McCurdy unit cost breach in February 2007. The program was  subsequently restructured to include far fewer aircraft—221 instead of  519—at a cost $1.8 billion greater than the original program estimate. In  spite of the restructuring, incomplete production decision documentation  and software integration problems, as well as senior leadership concerns  about the acquisition strategy, have delayed a low-rate production  decision by more than a year from the revised baseline—a slip of more  than 4 years from the initial estimate. As of July 2009, the program was still  awaiting approval from the Under Secretary for Acquisition, Technology  and Logistics to award a production contract. The Air Force is considering  another program restructure as well as a follow-on effort to modernize  avionics on additional C-130 aircraft, but officials did not provide us an  estimate of costs and quantities.
The department is now procuring more C-130J aircraft than originally  expected, in part because of a decision to retire C-130Es. Production  quantities for J-model aircraft have grown significantly over the last  several years, from an initial baseline of 11 aircraft in 1996 to a current  estimate of 168 aircraft, but according to program estimates, program unit  costs have remained relatively stable. Program officials estimate a total  program cost of $15 billion. As of July 2009, 73 C-130Js have been  delivered.
Recently, the department took delivery of the first two C-27J airlifters as  part of the Joint Cargo Aircraft program to provide direct support for  Army time-sensitive, mission-critical troop resupply. In June of 2007, the  Under Secretary for Acquisition, Technology and Logistics approved an  acquisition program baseline for the joint program of 78 aircraft, with the  Army planning to buy 54 aircraft, and the Air Force 24. However, as part of  its fiscal year 2010 budget request, the department transferred the  program, along with the resupply mission it supports, exclusively to the  Air Force and reduced the program from 78 to 38 aircraft.  Air Force  operational plans for the fleet and employment concepts for meeting Army  direct support requirements have not been finalized.
The Army and the Air Force are jointly pursuing the JFTL to replace the   C-130H airlifter and augment the rest of the C-130 fleet. The joint concept  development effort was initiated in January 2008 following a decision by  the Army and Air Force Chiefs of Staff to merge requirements for separate  heavy lift efforts in progress at the time. The JFTL is anticipated to have a  payload capacity of up to 36 tons, with a combat mission radius of           500 nautical miles. However, the services have different concepts for the  aircraft. The Army concept is for a vertical take-off and landing tiltrotor  that could provide sustainment of forces at the point of need and enable  the maneuver of a mounted force (i.e., forces deployed with combat  vehicles) by air. The Air Force is pursuing a fixed wing concept that would  address the need to operate on short, soft, or rough airfields and the need  for greater speed. Officials from both services stated they would like to  have the JFTL initial capabilities document validated and begin work on  an analysis of alternatives in the late summer of 2009, to help ensure a  sufficient basis for budget deliberations in March 2010. As of July 2009,  this had not occurred. Documents provided by these officials indicate that  system development for whichever concept is selected is not expected to  begin until at least 2014, with the new system to be fielded beginning  around 2024.
section_title: Strategic Airlift Gap Has Been Addressed, but a Potential Tactical Airlift Gap for Moving Medium Weight Equipment and Other Questions Have Not Been Resolved
paragraphs: Additional funds provided by Congress for C-17 procurement more than  offset the strategic airlift gaps associated with reduced C-5 modernization  plans. However, there is a potential future gap in tactical airlift capabilities  for transporting medium weight Army equipment that cannot fit on C-130  aircraft. The C-17 fleet, in its dual role of providing both strategic and  tactical airlift, currently provides this capability and is anticipated to  continue to do so for many years. The JFTL is envisioned to eventually  replace the C-130H and perform this and other roles, but will not be  available for 15 years or more under the current acquisition strategy. While  the various mobility studies acknowledge the C-17s’ significant dual role,  they did not comprehensively evaluate an expanded future use of the C-17  for the transport of medium weight equipment and how this could affect  the force structure, the C-17s’ service life, and when to shut down the C-17  production line. For example, the studies do not quantify current and  anticipated future use of the C-17 for tactical airlift. This is because DOD  officials do not consider the C-17 to be a suitable substitute for the JFTL.   In addition, there are differing opinions about the transport of small loads  in direct support of Army units, which could call into question the quantity  of C-27Js needed to perform the Army mission. Two studies reached  somewhat different conclusions about the cost effectiveness of using C- 130Js and C-27Js for this mission. The Air Force and Army are working on  a plan for how the Air Force will meet Army direct support requirements,  but the details have not been finalized. DOD’s recently established  portfolio management structure is supposed to provide a useful forum to  address the broad range of airlift investment decisions. However, efforts  so far have been primarily focused on new programs rather than  addressing gaps and redundancies across the current portfolio, as well as  making other airlift decisions, such as when and how many C-5s to retire  or the appropriate mix of C-130s and C-27Js needed to perform Army  missions.
subsections: section_title: Acquisition of Additional C-17s Addresses Strategic Airlift Gap
paragraphs: Following DOD’s decision to reduce the number of C-5s that will be fully  modernized from 111 to 52 aircraft, Congress has appropriated around  $5.5 billion that DOD plans to use to procure up to 23 additional C-17s.  This would bring the total number of C-17s the Air Force now plans to  acquire to 213 aircraft. DOD and Air Force officials believe this current  quantity of C-17s more than adequately addresses their strategic airlift  requirements in terms of the number of aircraft needed and the collective  delivery capabilities. Table 5 shows the changes in the strategic airlift mix  since the time the 2005 Mobility Capabilities Study was completed and the  impact the different mixes have had on DOD’s ability to meet strategic  airlift requirements for the timely inter-theater transport of required  equipment and supplies.
A recent IDA study concluded that 316 strategic airlifters, which include  205 C-17s, 52 fully modernized C-5s, and 59 partially modernized C-5s,  meets DOD’s strategic airlift requirements established in the 2005 Mobility  Capability Study. Further, if additional airlift capacity is needed above  what the current mix of aircraft can deliver, it could be achieved without  procuring additional C-17s or modernizing C-5s.  Specifically, IDA found  that additional capacity could be obtained by    using C-5s at Emergency Wartime Planning levels  transporting some small oversize as well as bulk cargo using Civil Reserve  Air Fleet aircraft    making use of host nation airlifters to the maximum extent possible and    using tankers not involved in tanker missions to carry cargo in theater.
In the event that even more capacity is needed, the IDA study states that it  would be more cost-effective to provide the RERP modification to more   C-5s than to procure additional C-17s because the near-term acquisition  costs are offset by reduced operation and support costs. IDA also  concluded that retiring older C-5As to free up funds to buy and operate  more C-17s would result in a less capable force at comparable overall cost  and thus would not be cost-effective.
section_title: Potential Tactical Airlift Gap Exists in Movement of Medium Weight Equipment on the Battlefield
paragraphs: A potential future capability gap exists in the deployment and  redeployment of Army medium weight weapon systems within a theater of  combat. The C-17 is the only aircraft currently capable of transporting  heavier equipment, such as combat configured armored Strykers and Mine  Resistant Ambush Protected vehicles, within a theater of operations as  these are too large and bulky for C-130s to carry.  However, the C-17  cannot transport this equipment into austere, short, or unimproved landing  areas.  DOD’s long-term plan is to use the JFTL, the planned C-130H  replacement, to transport these vehicles in theater, including to such  access-challenged locations. However, it will not be available for at least  15 years as currently planned. While the various mobility studies  acknowledge the C-17 can perform both strategic and tactical airlift  missions, none of the three recently completed or ongoing studies  comprehensively considered the C-17 in the tactical force structure, even  though about 20 percent of the tactical sorties flown by the C-17 fleet in  fiscal year 2007 were for missions where loads were too large for C-130s.   As such, DOD has not evaluated the impact the increasing tactical heavy  lift mission will have on future tactical airlift requirements, the C-17’s  service life, its availability to perform strategic airlift and other tactical  airlift missions, and the impact it could have on C-17 production shutdown  plans.
DOD officials do not believe that the C-17 is a suitable substitute for the  JFTL mission.  A DOD official stated that preliminary results of the  Mobility Capabilities and Requirements Study 2016 show that in the worst  case planning scenario there would be enough C-17s to perform its  primary role as a strategic airlifter, as well as some tactical missions  through 2016.  This is because the study analysis shows the peak demand  for the C-17 and the C-130 occurs at different times and the C-17 is aging as  planned.  However, officials indicated that none of the current mobility  studies analyzed the need for the C-17 to perform additional tactical heavy  lift missions for the 8-year period between 2016 and 2024, when the JFTL  is expected to be fielded. Furthermore, because we were not granted  access to the preliminary study information, we could not ascertain the  extent to which the C-17’s heavy lift mission had been considered in DOD’s  analysis through 2016.  C-17 production is scheduled to end in March 2011.  As we previously reported a well-reasoned, near-term decision on the final  C-17 fleet size could help DOD avoid substantial future costs from ending  production prematurely and later restarting production. For example, the  Air Force has estimated that restoring the production line could cost $2  billion. Costs and challenges associated with such a course include hiring  and training a workforce of nearly 3,100 people, reinstalling and restoring  production tooling, and identifying suppliers and qualifying their parts and  processes.
Although it is too early to comment on JFTL program outcomes, we  believe DOD officials will need to exercise caution to avoid pitfalls we  have previously identified in connection with developing new weapon  systems so the new system will be delivered on time and within cost  estimates. These pitfalls include taking a revolutionary versus an  evolutionary approach for weapon system development, over promising  performance capabilities; increasing requirements; and understating  expected costs, schedules, and risks associated with developing and  producing the weapon. DOD understands many of the problems that affect  acquisition programs and has revised its acquisition policy as a foundation  for establishing sound, knowledge-based business cases for individual  acquisition programs.  For example, the policy recommends the  completion of key systems engineering activities before the start of  development, including a requirement for early prototyping, and  establishes review boards to evaluate the effect of potential requirements  changes on ongoing programs.  The policy also supports evolutionary  acquisitions and states that increments should be fully funded, include  mature technologies, and normally be developed in less than 5 years.   However, to improve outcomes, DOD must ensure that its policy changes  are consistently implemented and reflected in decisions on individual  programs.
Both Air Force and Army science and technology officials indicated that  no new technology invention is needed for either of their concepts.  However, tiltrotor technology has never been applied to a system of the  size needed to carry all the Army’s ground vehicles (excluding the M-1  tank). In fact, the Army envisions the JFTL’s payload capacity will be  nearly 5 times that of the V-22, the world’s first production tiltrotor aircraft  and nearly 3 times that of the CH-47 Chinook, a heavy lift helicopter used  to transport ground forces, supplies, and other critical cargo. In addition,  the Senate Armed Services Committee recently noted that to support the  JFTL initial operational capability, a prototype would need to be flying by  2015. Yet, the committee could not identify any DOD funds budgeted for  accomplishing this objective, and further observed that waiting to conduct  a competitive prototyping effort as part of an acquisition program would  take years to begin. As such, the committee requested the Under Secretary  for Acquisition, Technology and Logistics to, among other things, assess  the merits of initiating a low-cost, highly streamlined competitive  prototyping effort immediately, determine whether cost and performance  goals can be met, help define requirements, and sustain the industrial base.
section_title: Mix of C-130s and C-27Js Needed to Support Army Missions Has Not Been Determined
paragraphs: Questions remain about the number of C-130s and C-27Js needed to  support Army direct support missions.  As stated earlier, as part of its  fiscal year 2010 budget request, the department transferred the C-27J  program, along with the resupply mission it supports, exclusively to the  Air Force and reduced the program from 78 to 38 aircraft. In a recent  hearing, congressional leaders questioned the Secretary of Defense about  how the Air Force will fulfill this mission with fewer aircraft than initially  anticipated.  In response, the Secretary of Defense stated that the  reduced number of C-27Js was based on the number needed to recapitalize  the Army’s fleet of C-23 Sherpas and that uncommitted C-130 aircraft can  be used to complement the C-27Js to fulfill the Army’s mission. In addition,  he said there needs to be a change in the Air Force’s culture with respect  to how the direct support mission is accomplished.
The Air Force and Army are in the process of developing plans on how the  Air Force intends to fulfill the direct support mission, which would include  important decisions on employment concepts, basing, and life-cycle  support. The plans are in various stages of development and are expected  to be completed by October 2012.  However, congressional concerns  remain regarding the service’s commitment to that mission. This concern  is based on historical instances in which the Air Force assigned lesser  priority to direct delivery missions compared with traditional airlift  operations, most notably during the Vietnam War when the Air Force  assumed ownership of the Army’s C-7 Caribou aircraft and subsequently  dropped some missions. It is also unclear what effect this program change  will have on the Air Force’s C-130 fleet operations.
In recent studies, IDA and RAND assessed the use and roles of the C-130s  and C-27Js in performing tactical missions.  Although the study parameters  were different, they both looked at the tactical movement of cargo. IDA’s  analysis focused on the use of these aircraft within the context of major  combat operations as well as persistent global involvement in numerous  smaller operations.  IDA found that the tactical fleets they examined were  equally cost-effective at transporting cargo in major combat operations.  Whereas C-130s are more cost effective than the C-27Js in specific  missions that demand full loads, the opposite is true when missions  require small loads.  Further, in non-major combat operations, IDA found  that the global demand for small loads on numbers of aircraft in different  locations made additional C-27Js more cost-effective than additional C- 130s.
According to RAND officials, RAND work on this topic has been underway  for several years.  The first RAND study focused on determining the most  cost-effective way to recapitalize the C-130 fleet in order to meet the  official wartime requirement.  This study concluded that acquisition of the  extended version of the C-130J was the most cost effective option to  perform tactical missions defined in the officially approved wartime  requirement.  The C-27J provides about 40 percent of the cargo capacity  (in terms of pallets) as the extended C-130J at about two-thirds the cost,  based on net present value total life cycle costs.  In addition, the study also  concluded that the extended C-130J and the C-27J were equally cost- effective at conducting the ongoing resupply missions in Iraq and  Afghanistan.  RAND was then asked to consider the cost-effectiveness of  the C-27J in eight additional missions that were not part of the official  requirement.  The study concluded that the C-27J was not cost-effective or  appropriate for five of those missions and was comparable to the C-130J in  three of the missions.  RAND also found that the C-130J and the C-27J have  comparable performance under operationally consistent circumstances of  delivering the same amount of cargo at the same distances.
It should be noted that neither of these studies addressed recent C-27J  program decisions that resulted in the transfer of the program to the Air  Force and a reduction in aircraft quantities. Likewise, neither of the  studies considered the number of C-130s that may be necessary to  supplement these missions or the impact the missions may have on the     C-130 fleet. Furthermore, because the C-27J was not initially considered  part of the common user pool, the ongoing DOD Mobility Capabilities and  Requirements Study 2016 did not include the C-27J in the common user  pool in its analysis.  Following the restructuring, an Air Force official told  us that, while the C-27J’s primary use is expected to be for direct support  of the Army, it would also be available for movement of cargo in the  common user pool.
section_title: New Portfolio Management Initiative Offers Opportunities to Better Manage Airlift Investments
paragraphs: In September 2008, the department instituted a new process for helping  senior leaders make investment decisions, including those for airlift.   Known as capability portfolio management, the new process enables the  department to develop and manage capabilities, as opposed to simply  individual programs, and enhance the integration and interoperability  within and across sets of capabilities. Previously we reported that leading  commercial companies use portfolio management to collectively address  all of their respective investments from an enterprise level rather than as  independent and unrelated initiatives.  This approach, among other  things, allows the companies to weigh the relative costs, benefits, and  risks of potential new products and helps the companies balance near- and  future-term market opportunities.
According to DOD officials, airlift issues fall under the purview of the  logistics portfolio and are included in the deployment and distribution  subgroup, along with sealift and ground transportation. Figure 1 shows the  major capability areas included in the logistics portfolio.
The new capability portfolio management directive states that DOD shall  use capability portfolio management to advise the Deputy Secretary of  Defense and the heads of DOD components on how to optimize capability  investments across the defense enterprise and minimize risk in meeting  the department’s capability need in support of strategy.  The Under  Secretary of Defense for Acquisition, Technology and Logistics and the  Commander of U.S. Transportation Command share responsibilities for  managing the logistics portfolio. They are expected to identify airlift  issues, priorities, and capability resources and mismatches (gaps,  shortfalls, and redundancies). According to officials that assist with  logistics capability portfolio management activities, logistics portfolio  managers now have access to the Deputy’s Advisory Working Group that  they may not have had access to before to discuss unresolved logistics  issues, including the Deputy Secretary of Defense and the Vice Chairman  of the Joint Chiefs of Staff.
We believe portfolio management offers DOD an opportunity to address  the full range of airlift issues, but DOD’s implementation thus far has not  had a big impact on the way airlift assets are managed. Officials we spoke  with stated that the Under Secretary of Defense for Acquisition,  Technology and Logistics and U.S. Transportation Command continue to  focus on activities they were already performing prior to the establishment  of the portfolio, mainly concerned with new weapon system programs and  future capabilities but not as much on modification programs on legacy  aircraft. For example, the U.S. Transportation Command has been and  continues to be responsible for developing an integrated priorities list that  details the top new capabilities needed and identifying capability gaps and  shortfalls for airlift. The Under Secretary of Defense for Acquisition,  Technology and Logistics continues to play an advisory role for addressing  these gaps and shortfalls.
Officials stated that to date, the logistics portfolio managers have not  provided input to recent or upcoming airlift decisions related to the  appropriate mix of strategic and tactical airlifters, changes in  modernization programs, C-5 retirements, C-17 production shutdown, and  changes in the Air Force’s roles and missions for airlift. In addition, no  airlift issues have been brought to the working group for resolution. Given  this approach, we believe the department is still at risk of continuing to  develop and acquire new airlift systems and modernization programs  without knowing whether adequate resources are available to complete  programs within cost and schedule estimates.
section_title: Conclusions
paragraphs: Growing fiscal pressures are forcing DOD leaders to look closely at  weapon system investments.  DOD has to make tough investment and  programmatic decisions regarding strategic and tactical airlift in the near  future. However, the path forward is not clear because recently completed  and ongoing mobility studies lack some crucial information that would  help department officials make sound airlift investment decisions. Namely,  the studies do not quantitatively account for the increasing tactical role of  the C-17, especially in light of the fact that C-130s are not capable of  delivering heavier equipment demanded by our warfighters and that the  JFTL, which is envisioned to perform this mission, will not be available for  15 years. Further, the studies do not explore the possible use of C-27Js in a  common user role or the impact on the fleet and number of C-130s needed  to support Army time-sensitive, mission-critical requirements.
While Congress and DOD appear to have addressed the strategic airlift  capability gap, some fundamental questions remain: Can the Air Force  adequately fund the C-5 RERP modification program over the next              5 years? When should C-5s be retired and how many? And how many C-5s  would need the AMP modification if some of the aircraft are retired? Even  larger questions exist for tactical airlift:  Are 213 C-17s enough to perform  both strategic and tactical missions? What are the potential impacts on C- 17 service life, maintenance, and availability from its expected increased  use in the future for the tactical airlift of heavier and bulkier Army  equipment? How will the Air Force meet the Army’s time-sensitive  mission-critical requirements with 40 fewer C-27J aircraft? Will there be a  fundamental shift in the Air Force’s roles and mission that would require  the Air Force to assume more Army-specific missions? Can the department  set technically realistic requirements for the JFTL and follow an  evolutionary acquisition strategy that includes selecting mature  technologies, normally developing increments in less than 5 years and fully  funding each increment?
More information is needed to help the department address these  questions and avoid the unnecessary expenditure of billions of dollars on  redundant capabilities or a potentially premature C-17 production line  shutdown. The airlift portfolio management team has the requisite  authority to address these questions and influence budget decisions, but  greater attention must be paid to all facets of the airlift life cycle—from  cradle to grave. Making sound modernization and retirement decisions is  just as important as deciding when and what type of new programs to  start. Moreover, approaching these decisions from a portfolio perspective  rather than on a weapon system by weapon system basis and considering  new roles and missions for the Air Force may help the department strike  the right balance for its airlift investments.
section_title: Recommendations for Executive Action
paragraphs: We are making five recommendations to help improve DOD’s management  of strategic and tactical airlift assets.  We recommend that the Secretary of  Defense direct  the portfolio management team, consisting of U.S. Transportation  Command and the Under Secretary of Defense for Acquisition, Technology  and Logistics, to provide more comprehensive advice to senior leaders on  the full range of airlift investment decisions, including new program starts,  modernization efforts, and retirement decisions. This would also include  identifying alternatives for using existing common user aircraft to meet  service-specific missions and considering new roles and missions for the  Air Force;  the Office of the Secretary of Defense (Cost Assessment and Program  Evaluation) and Commander, U.S. Transportation Command to develop a  specific airlift plan that would identify when C-5s will be retired and  identify the total number of additional C-17s, if any, that would be needed  to replace C-5s or perform tactical heavy lift missions until the time the  JFTL is fielded;  the Commander, Air Mobility Command, to determine the appropriate mix  of C-27Js and C-130s that are needed to meet Army time-sensitive, mission- critical requirements and common user pool requirements; the Air Force and Army to reach agreement on plans detailing how Army  time-sensitive, mission-critical requirements will be addressed and  prioritized against other Air Force priorities; and the joint Air Force and Army program office to develop a plan to follow an  evolutionary approach for developing the JFTL based on DOD acquisition  policy that includes selecting mature technologies, normally developing  increments in less than 5 years, and fully funding each increment.
section_title: Agency Comments and Our Evaluation
paragraphs: DOD provided us with written comments on a draft of this report; these  are included in appendix II.  DOD partially concurred with all five  recommendations, stating that it either has plans and processes in place or  ongoing efforts to address our concerns.  During the course of our review,  DOD officials explained the steps they were taking to make strategic and  tactical airlift decisions, but in some cases did not provide us with  supporting documentation and, in other cases, the plans were in the initial  stages of development and there was not yet sufficient detail for us to  determine the extent to which they addressed our concerns. Despite the  positive actions DOD described, we believe that the department’s efforts  in some cases still fall short and that our recommendations are warranted  to help guide subsequent actions and transition plans to effective  implementation. DOD officials also provided technical comments on our  draft and we revised our report where appropriate.
In response to our first recommendation about the portfolio management  team providing more comprehensive advice to senior leaders on the full  range of investment decisions, DOD says it has a structured process in  place for assessing its mobility capabilities and requirements that includes  strategic and tactical airlift decisions.  We understand that DOD has a  process in place to make airlift decisions, but they are not being made  from a comprehensive portfolio management perspective, per DOD  regulation. DOD officials could not provide us with any evidence that the  portfolio management team had even discussed airlift issues from a  portfolio perspective, even though the logistics portfolio began as a pilot  program for portfolio management 2 years ago. We believe DOD portfolio  managers need to take a broader perspective on airlift issues to ensure  that the appropriate amount of attention and resources are available to  address the most pressing issues for new and legacy programs and to  avoid unnecessary expenditure of funds for modernizations or  acquisitions. Therefore, we do not believe that DOD’s response adequately  addresses our recommendation.
The department agreed with our second recommendation on the need to  develop a plan for strategic airlift that identifies the number of C-5s that  will be retired and the number of additional C-17s, if any that might be  needed.  In its comments, DOD stated that the Secretary of the Air Force,  in coordination with the Office of the Secretary of Defense (Cost  Assessment and Program Evaluation) and U.S. Transportation Command  has already developed this plan based on the current level of  congressional funding for the C-17 and preliminary results of the Mobility  Capabilities Requirements Study 2016 and the Quadrennial Defense  Review.  Specifically, DOD officials believe an adequate number of C-17s  have been procured to cover all necessary missions to satisfy the National  Defense Strategy and will retire some C-5s.  We were not provided any  details about this plan for strategic airlift, the ongoing mobility study or  the Quadrennial Defense Review to comment on the adequacy of the  analysis, but believe that a thorough analysis is needed for senior leaders  to make sound investment decisions. We are concerned about the  adequacy of the plan because during the course of our review, DOD  officials told us that the Mobility Capabilities Requirements Study 2016  does not specifically quantify the use of the C-17 in a tactical role or  evaluate the impact on its service life resulting from the increased use in  that regard.  In 2007, over 20 percent of the C-17 missions were for tactical  missions and this could grow given that it is the only aircraft that is  capable of moving certain types of equipment within a theater of  operations that are too large or bulky for the C-130.  Further, it is unclear  whether DOD has identified how many C-5s need the AMP modification  since additional C-17s are being procured or when and how many C-5s will  be retired. In addition, we previously reported on deficiencies in how DOD  conducted its previous mobility capabilities study and we do not know if  DOD has addressed these flaws in the current study. As a result, we do  not know the extent to which the new study will provide clear answers for  senior leaders regarding strategic and tactical airlift or engender more  questions.
DOD commented that it believes it has fulfilled the requirements for our  third and fourth recommendations by recently tasking the Air Force and  Army to determine the appropriate mix of C-27Js and C-130s to perform  Army time-sensitive, mission-critical requirements and common user pool  requirements, as well as develop plans detailing how Army requirements  will be prioritized against Air Force priorities.  These are good first steps.   However, the plans are still in development and, according to an Air Force  briefing to the Deputy’s Advisory Working Group, more work needs to be  done. Critical details, including a concept for employment, a final basing  plan, and a decision on the maintenance concept will have to be worked  out over the next several years. These issues have also generated much  debate within the department and in Congress concerning aircraft  quantities and employment strategies. As we stated earlier, the Air Force  has historically had trouble balancing Army priorities with its own and,  according to the Secretary of Defense, the Air Force will need to change  its culture to successfully meet both requirements.  In addition to  completing the plans, we believe DOD may need to exert sustained  oversight by senior leaders, including the portfolio management team, to  ensure the Air Force is able to perform these missions over the long-term.
Finally, DOD believes that it has fulfilled the requirement for our fifth  recommendation related to using an evolutionary approach for developing  the JFTL that includes selecting mature technologies, developing  increments in less than 5 years, and fully funding each increment.  DOD  stated that the Air Force and Army are currently engaged in approving a  JFTL initial capabilities document and commencing with a formal analysis  of alternatives to consider all viable options for addressing capability gaps.   We believe these start-up actions are appropriate and, if accomplished  according to policy, should provide a solid foundation to inform  subsequent decisions for a new weapon system acquisition program.  Our  recommendation, however, is geared not only to these initial planning  steps but also looking forward to the smooth transition to system  development and effective acquisition program management.  This  recommendation will take several steps and years to complete, and we  believe senior leaders, including the portfolio management team, need to  ensure that the JFTL program has a solid business case at the start of  development with mature technologies, adequate funding, and an  incremental plan for development. Our previous work on many other  weapon systems programs has shown that without these, programs are  likely to encounter significant cost and schedule growth that will, if  realized on the JFTL program, impact the department’s ability to move  medium weight equipment within a theater of operations directly to the  warfighter.  It may also have an impact on the C-17 program as these  aircraft may be used more frequently than planned for tactical missions.   We therefore believe that DOD will need to take additional steps to be  fully responsive to this recommendation.
We are sending copies of this report to the Secretary of Defense and  interested congressional committees. The report is also available at no  charge on the GAO Web site at http://www.gao.gov.
If you have any questions about this report or need additional information,  please contact me at (202) 512-4841 or sullivanm@gao.gov. Contact points  for our Offices of Congressional Relations and Public Affairs may be found   on the last page of this report. Key contributors to this report were Bruce  Fairbairn, Assistant Director; Cheryl Andrew; Marvin Bonner; Andrew  Redd; Kristine Heuwinkel; and Robert Swierczek.
section_title: Appendix I: A Summary of Strategic and Tactical Airlift Systems—Ongoing and Future Efforts
paragraphs: This appendix provides more details on strategic and tactical airlift new  and modernization programs to expand upon summary information  provided in the body of this report. We include a brief description of each  aircraft’s mission, program status, and our observations on upcoming  program decisions. Where applicable, we highlight our recent work on  some systems. The appendix also includes a funding table for each  aircraft.  Because the fiscal year 2010 budget did not include funding  projections beyond fiscal year 2010, we used information from the Fiscal  Year 2010 Defense Budget for funding data related to fiscal years 2008  through 2010 and the Fiscal Year 2009 Defense Budget for fiscal years 2011  through 2013 when possible. Since the C-5 Reliability Enhancement and  Reengining Program (RERP) and C-27J programs were restructured, we  relied on information from the Air Force for fiscal years 2011 through 2013  data. The budget information in each table is expressed in current (then  year) dollars and the totals may not add exactly because of rounding.
subsections: section_title: Strategic Airlifters
paragraphs: The Department of Defense (DOD) uses a mix of modernized C-5s, which  were manufactured 30 to 40 years ago, and newer C-17s to complete the  strategic airlift mission. Both strategic airlifters possess intercontinental  range with aerial refueling and can carry weapons and equipment too large  for any other DOD aircraft. Each also has some complementary  characteristics that favor a mixed fleet. The larger C-5 can carry more  cargo than the C-17 and is the only aircraft capable of handling some  equipment, such as the Army’s 74-ton mobile scissors bridge. The C-17 is  more modern, has a higher mission capable rate, and is more flexible in  that it also provides tactical airlift to forward-deployed bases. Figure 2  compares the two strategic airlifters.
section_title: Mission
paragraphs: The C-5 is one of the largest aircraft in the world and is used by DOD for  strategic airlift purposes. It can carry outsize and oversize cargo over  intercontinental ranges and can take off or land in relatively short  distances. With aerial refueling, the aircraft’s range is limited only by crew  endurance. The C-5 can carry nearly all of the Army’s combat equipment,  including large heavy items such as the 74-ton mobile scissors bridge.  Ground crews can load and off-load the C-5 simultaneously at the front  and rear cargo openings. The landing gear system permits lowering of the  parked aircraft so the cargo floor is at truck bed height to facilitate vehicle  loading and unloading.
section_title: Program Status
paragraphs: The Air Force acquired a total of 126 C-5s in two production batches.  Aircraft designated C-5A were built between 1969 and 1974 and given new  wings in the 1980s. Aircraft designated C-5B were built in a second  production run in the 1980s. Since then, the Air Force has retired 14 C-5As  and 1 C-5B crashed, leaving a total of 111 C-5 aircraft (60 C-5As, 49 C-5Bs,  and 2 C-5Cs).
In 1999, the Air Force began modernizing its C-5 aircraft. Modifications are  intended to improve operational capability while improving flight safety,  reliability, and maintainability. The two primary modifications are as  follows    The Avionics Modernization Program (AMP), which upgrades capabilities,  including Global Air Traffic Management, navigation and safety  equipment, modern digital equipment, and an all-weather flight control  system.
The Reliability Enhancement and Reengining Program (RERP), which  replaces engines and modifies over 70 electrical, fuel, and other  subsystems.
Together, these two upgrades were expected to improve the fleet’s  wartime mission capable rate to at least 75 percent, thereby increasing  payload capability and transportation throughput, and to reduce total  ownership costs over the life cycle through 2040 by about $14 billion in  2008 dollars.
DOD initially expected to spend about $12 billion on the C-5 AMP and  RERP efforts. However, both modernization efforts experienced cost and  schedule problems since going into development. AMP development costs  increased by approximately 20 percent and would have been higher had  the Air Force not reduced requirements and deferred some development  activities to other programs. Officials waived 14 operational requirements  and deferred the correction of 250 deficiencies identified during testing,  many of which will be addressed and funded in RERP or future efforts. In  addition, the C-5 RERP experienced a Nunn-McCurdy cost breach.  The  program was restructured and the Air Force now plans to RERP 52  aircraft—47 C-5 B aircraft, both C-5 Cs, and 3 aircraft that had already  been modified during system development and demonstration (two C-5Bs  and one C-5A). While the Air Force is expected to spend $3.4 billion (then- year dollars) less under the restructured RERP program, ultimately, less  than one-half of the aircraft will be modernized and at a much higher unit  cost than originally estimated—$160.5 million for both modifications  versus $96.1 million originally estimated in then-year dollars. DOD now  expects that the C-5 AMP modification of 112 aircraft and the C-5 RERP  modification of 52 aircraft will reduce total ownership costs over the life  cycle through 2040 by about $8.9 billion base year 2000 dollars.
According to program officials, as of July 2009, 55 of the C-5s have  received the AMP modification. The last B model received the  modification in August 2009.  All focus is now on the A models. Many of  the deficiencies found during testing have been corrected. Other  deficiencies and waivers will be addressed in the RERP program or a  planned block upgrade that is slated to begin in fiscal year 2010. According  to program officials, only 3 C-5 aircraft used during systems development  and demonstration have received the RERP modification thus far. The first  production aircraft will enter modification in August 2009. The Air Force  has received low rate initial production approval for the first 3 lots,  totaling 9 aircraft. The full rate production decision is scheduled for  December 2010.
section_title: GAO Observations
paragraphs: It is unclear whether the Air Force is going to adequately fund the  restructured C-5 RERP program because the fiscal year 2010 budget does  not include funding details for the program through 2015. Further,  program officials could only comment on the fiscal year 2010 budget. On  the basis of the fiscal year 2009 budget however, DOD’s Cost Analysis  Improvement Group concluded that the restructured C-5 RERP program  was underfunded by about $294 million then-year dollars across the  Future Years Defense Plan for fiscal years 2009 through 2013.  Approximately $250 million then-year dollars less is needed in fiscal years  2009 through 2011, and $544 million then-year dollars more is needed in  fiscal years 2012 and 2013. DOD officials stated that if the budget is not  sufficient to meet agreed-upon quantities, then anticipated price breaks  would not occur, resulting in increased cost to the program and  government.
In June 2009, the Air Force was granted authority by Congress to begin  retiring C-5A aircraft. Air Mobility Command officials told us that fiscal  and personnel demands require that the command limit overall fleet size  once warfighting risk is reduced to a reasonable level. Therefore, the Air  Mobility Command will consider retiring C-5s, as the law and requirements  allow, on a one-for-one basis after 205 C-17s have been procured, to  ensure the right combination of aircraft and capability is balanced against  cost and risk. According to program officials, operational testing for an A  model will take place between October 2009 and January 2010. The final  report will be issued in July 2010. A decision on whether and when to  retire C-5s will not likely be made until after the Mobility Capabilities and  Requirements Study 2016 has been completed.
If DOD decides to retire C-5A aircraft, it may not need to provide the AMP  modification to all of its C-5 fleet. The Air Force plans to have 40 of the 60  C-5A AMP modification kits on contract by the end of 2009 and at least 8  C-5A models will have actually received the modification by that time.
section_title: Mission
paragraphs: The C-17 is a multi-engine, turbofan, wide-body aircraft that improves the  overall capability of the United States Air Force to rapidly project,  reinforce, and sustain combat forces worldwide. It is used by DOD for  both strategic and tactical missions. For example, the C-17 is capable of  rapid strategic delivery of troops and all types of cargo to main operating  bases or directly to forward bases in the deployment area. The aircraft can  perform tactical airlift and airdrop missions and can also transport  ambulatory patients during aeromedical evacuations when required. The  inherent flexibility and performance of the C-17 force improve the ability  of the total airlift system to fulfill the worldwide air mobility requirements  of the United States.
section_title: Program Status
paragraphs: The Air Force originally planned to procure 120 C-17s, with the last one  being delivered in November 2004. The Air Force’s current plans are to  acquire a total of 213 C-17s for $68 billion, with the last one being  delivered in March 2011. The Air Force has taken delivery of 190 aircraft  through July 2009. This includes one aircraft that is dedicated to provide  airlift capability to a consortium of European nations, effectively setting  the Air Force’s operational force at 212.
The Air Force has a number of ongoing improvement efforts for the C-17,  including  improving C-17 airdrop system operations,  integrating an advanced situational awareness and countermeasures  system,    upgrading mission planning by integrating a new joint precision airdrop  system,  replacing the core integrated computer processor, and    providing advanced defensive capability.
section_title: GAO Observations
paragraphs: In recent years, the two prominent issues surrounding the C-17 program  have been determining how many C-17s are needed to meet strategic airlift  requirements as well as determining when to begin shutting down the C-17  production line. Following a C-5 RERP restructuring in 2008, the U.S.  Transportation Command identified a need for 205 C-17s, 25 more than  were authorized at the time the 2005 Mobility Capabilities Study was  completed. Subsequent to the study, Congress provided additional funding  that the Air Force used to procure 10 more C-17s in 2007, 15 more in 2008,  and 8 more in 2009, bringing the total that will now be procured to 213.  According to Air Mobility Command officials, the command will consider  retiring C-5s, as the law and requirements allow, on a one-for-one basis  after 205 C-17s have been procured, to ensure the right combination of  aircraft and capability is balanced against cost and risk.
According to program officials, a decision when to shut down the C-17  production line along with the associated costs has not been finalized. In  our November 2008 report we reported that plans called for the C-17  production line to shut down in September 2010. This was based on the  Air Force acquiring 205 aircraft. Now that the Air Force will be acquiring  213 aircraft, the last delivery is now expected to be in March 2011. We also  reported that the total cost to shut down the line has not been determined.  The Air Force estimated the costs to shut down production to be $465  million whereas Boeing (the prime contractor) estimated $1 billion.  Officials reported that while the Air Force and Boeing continue to  negotiate the final cost to shut down the C-17 production line, the Air  Force did include $91 million in its fiscal year 2010 President’s budget  submission to begin these activities.
According to a DOD official, the C-17s are currently being employed to fill  a capability gap existing in the department’s ability to airlift medium- weight vehicles within a theater of operations using dedicated tactical  airlifters. DOD officials do not consider the C-17 to be a viable long-term  solution as it cannot access short, austere, or unimproved landing areas in  close proximity to combat operations.  The JFTL is expected to provide  this long-term solution; however, the JFTL is not expected to be available  until 2024.
section_title: Tactical Airlifters
paragraphs: As of April 2009, DOD’s tactical airlift fleet consisted of 92 C-130E aircraft,  268 C-130Hs, 53 C-130Js, and 2 C-27Js—a total of 415 aircraft. DOD plans  to retire its aging C-130E fleet by the end of fiscal year 2014, and according  to its Air Mobility Master Plan, looks to meet its tactical airlift needs with a  mix of approximately 406 C-130H and C-130J airlifters through the end of  the next decade. The Army and Air Force are working on concepts for the  Joint Future Theater Lift (JFTL)—an eventual replacement for the C-130H  that is projected to be capable of carrying most of the Army’s large  vehicles into forward operating locations, which C-130s currently cannot  do. Additionally, the Joint Requirements Oversight Council has validated  the Army’s time-sensitive, mission-critical resupply requirements that  provide the basis for the Joint Cargo Aircraft program to procure 38          C-27Js. These missions are comprised of relatively small payloads that are  needed in forward locations within tight time frames. Table 8 compares  the capabilities of the C-130H, C-130J-30, and C-27J airlifters.
section_title: Mission
paragraphs: The C-130 is the principal combat delivery aircraft for the U.S. military and  is employed primarily as a tactical airlift aircraft for the transport of cargo  and personnel within a theater of operation. C-130s also have the  capability to augment strategic airlift forces, as well as support  humanitarian, peacekeeping, and disaster relief operations. The C-130J is  the latest addition to DOD’s fleet of C-130 aircraft, providing performance  improvements over legacy aircraft in the series. Variants of the C-130J are  being acquired by the Air Force, Marine Corps, Coast Guard, and several  foreign militaries to perform their respective missions.
section_title: Program Status
paragraphs: The C-130E and C-130H fleets are nearly 30 years old and have serious  reliability, maintainability, and supportability issues, and some are  reaching the end of their service life. For example, aircraft maintainers  discovered severe cracking in the center wing box on some aircraft early  in fiscal year 2005. The program office recommended retiring or grounding  aircraft with more than 45,000 flying hours, and restricting aircraft with  more than 38,000 hours from flying with cargo or performing tactical  maneuvers. In response to these recommendations, the Air Force is using  some operations and maintenance funding to extend the service life of  some C-130 aircraft by 3 to 5 years, including part of the C-130E fleet,  which the Air Force plans to retire by the end of fiscal year 2014.  In  addition, the Air Force is currently funding the replacement of the center  wing box on older C-130 aircraft, and plans to replace the wing structure  on the remainder of the C-130H fleet in a later phase of the program. The  cost of the replacement is approximately $6.5 million per aircraft, and  according to Air Force officials, the program is meeting all cost, schedule,  and performance goals.
The Air Force also has several other modification efforts underway for the  C-130H fleet that will address known capability shortfalls. Efforts include  a Large Aircraft Infrared Countermeasures program, a Surface-to-Air Fire  Look-out Capability modification, and a number of communications  upgrades. The largest modernization effort is the Avionics Modernization  Program (AMP) to standardize cockpit configurations and avionics, as  well as provide for increased reliability, maintainability, and sustainability.  Initially, the Air Force planned to upgrade all C-130E and C-130H aircraft,  including special operations aircraft. However, after the program entered  system development in 2001, it experienced funding instability and  hardware and software integration issues. These problems, as well as an  Air Force decision to retire C-130E aircraft, triggered a Nunn-McCurdy  cost breach in February 2007. The program was subsequently restructured  to include far fewer aircraft—221 instead of 519—and assume less  developmental risk. Under the revised plan, only a portion of the C-130H  fleet would receive the modification. Since that time, the program’s  production decision has been delayed 13 months because of  documentation and software integration problems and senior leadership  concerns about the program’s acquisition strategy. A low rate production  decision has not been scheduled as the department is considering another  program restructure. Program officials further stated that a second phase  of the AMP is now being considered that will modernize C-130s not  included in the first phase.
DOD is in the process of procuring 168 C-130J airlifters to replace the  retiring C-130E fleet. According to program officials, as of July 2009, 73     C-130J aircraft have been delivered of 117 on contract. One program  official said all C-130J aircraft currently being purchased by the Air  Mobility Command are the C-130J-30 model which, compared to the base  model, has an extended fuselage and is capable of carrying 2 additional  cargo pallets, for a total of 8 pallets. The C-130J fleet is also receiving a  number of upgrades to meet communications, navigation, and  surveillance, as well as air traffic management requirements. These efforts  are being funded and developed in partnership with other countries as part  of the International Cooperative Block Upgrade Program. A C-130J  program official reports that aircraft availability rates continue to exceed  the fleet standard and are better than rates for C-130H models.
section_title: GAO Observations
paragraphs: Recently, the Secretary of Defense testified that DOD could use  “uncommitted” C-130 aircraft to complement C-27Js in order to fulfill  Army time-sensitive, mission-critical requirements. However, according to  an Air Force official, the impact to the C-130 fleet of supplementing C-27Js  in direct support missions is not clear, including how it would affect C-130  availability for other missions. The Air Force has drafted a concept of  employment for direct support of Army time-sensitive, mission-critical  missions that addresses a number of coordination issues between the  services, but the potential impact of these missions on the C-130 fleet has  not been assessed, such as fuel costs, maintenance to address potential  wear on landing gear and other components, and addressing flight  restrictions for runway length.
section_title: Mission
paragraphs: The C-27J Spartan is a mid-range, multifunctional aircraft. Its primary  mission is to provide on-demand transport of time-sensitive, mission- critical supplies and key personnel to forward deployed Army units,  including those in remote and austere locations. It can also be used for  humanitarian relief and homeland security efforts. The aircraft is capable  of carrying up-armored High Mobility Multipurpose Wheeled Vehicles and  heavy, dense loads such as aircraft engines and ammunition.
section_title: Program Status
paragraphs: The Joint Cargo Aircraft program began in late 2005 when the Under  Secretary for Acquisition, Technology and Logistics directed the Army and  Air Force to merge their requirements for small intra-theater airlifters. In  June 2007 the Under Secretary of Defense for Acquisition, Technology and  Logistics issued an Acquisition Decision Memorandum certifying the  program with approval to proceed to low rate initial production. This  memorandum set the acquisition program baseline at 78 aircraft: 54 for the  Army and 24 for the Air Force. The Army primarily viewed the C-27J as on- call airlift directly tied to the tactical needs of ground commanders,  sometimes referred to as transporting cargo the “last tactical mile.” The  Air Force planned to use its C-27J assets to provide “general support”  airlift for all users, but also views the delivery of time-sensitive, mission- critical Army cargo as its role.
The joint Army/Air Force program office selected the C-27J as the Joint  Cargo Aircraft in a full and open competition and awarded a firm-fixed  price contract to L-3 Communications, Integrated Systems in June 2007.  Two aircraft of a total of 13 the Army has ordered through fiscal year 2009  have been delivered and according to program officials are being used to  conduct training and developmental testing.  In May 2009, as part of  budget deliberations, the Army and Air Force Chiefs of Staff agreed to  transfer responsibility for the C-27J program to the Air Force, along with  the task of fulfilling the Army’s time-sensitive, mission-critical resupply  mission. As part of this restructuring, program quantities were reduced by  about 50 percent, from 78 to 38 aircraft. The 13 ordered aircraft, including  the 2 already delivered, will be transferred to the Air Force, who will  procure an additional 25 aircraft between 2010 and 2012.
C-27J aircraft are currently built in Turin, Italy. Manufacturer Alenia  Aeronautica (primary sub contractor to L-3 Communications, Integrated  Systems) had planned to break ground on a manufacturing facility in  Jacksonville, Florida, in April 2009, but according to an Alenia Aeronautica  official, this decision has been presently postponed. According to program  officials, Alenia Aeronautica had planned to assemble C-27J aircraft 16  through 78 at the Jacksonville facility, in addition to those ordered by  foreign customers. With DOD’s decision to procure fewer aircraft, it is  unclear whether Alenia will proceed with construction of the facility.
section_title: GAO Observations
paragraphs: The Air Force has offered some insight into how it will meet the Army’s  time-sensitive, mission-critical resupply requirement and is in the process  of further developing concepts of operation and employment for the C-27J.   Although the service is buying only 38 C-27J aircraft, it is investigating  possibilities for fulfilling the direct support mission requirement at least in  part from a common user pool fleet construct. For example, an Air Force  official said C-130s are already used for some time-sensitive, mission- critical operations. The Secretary of Defense has indicated that the 38 C- 27Js can be complemented by any of about 200 “uncommitted” C-130s,  which he noted can access 99 percent of the landing strips that C-27Js can  access. However, it is unclear if or how such an approach will affect the  number of C-130Js the service plans to buy, or the availability of C-130  aircraft to meet other requirements associated with major combat  operations. The Mobility Capabilities and Requirements Study 2016 may  help shed light on this issue.
There is also concern about the Air Force’s commitment to direct support  of the time-sensitive, mission-critical requirement. Over the past several  decades, the Air Force has retired its direct support assets, including the  Vietnam-era C-7 Caribou and an earlier version of the C-27. At issue are  basic roles and missions philosophies which DOD recognizes need to be  updated to reflect lessons learned in ongoing combat operations. The  Secretary of Defense testified in May 2009 that there needs to be a change  in the Air Force’s culture with respect to how the direct support mission is  accomplished. Similarly, the department’s Quadrennial Roles and Missions  Review Report for January 2009 notes that the services need to  standardize the airlift process by sharing aircraft employment and  availability data and adjust concepts of operations to allow traditionally  general support assets to be used for direct support and vice versa.  However, the Quadrennial Roles and Missions Review Report also  determined that the service responsibilities for intratheater airlift  operations were appropriately aligned and the option that provided the  most value to the joint force was to assign the C-27J to both the Air Force  and the Army. An Air Force official said the service has drafted a platform- neutral concept of employment for direct support of the time-sensitive,  mission-critical mission. The vision is to use the capabilities of the entire  mobility airlift fleet (i.e., C-130, C-17, C-5, Operational Support Airlift) to  supplement the 38 C-27Js as required in time-sensitive, mission-critical  operations abroad.
While the Mobility Capabilities and Requirements Study 2016 and other  studies consider tactical airlift requirements into the future, officials  involved with the study have not indicated that they address the impact of  potential departures from traditional roles and missions constructs—such  as changing how the services will approach time-sensitive, mission-critical  resupply. As such, it is not known how these changes may affect overall  requirements for tactical airlifters. Moreover, there is speculation that the  2010 Quadrennial Defense Review will establish priorities based on one  major combat operation, rather than two simultaneous ones. Considered  together, these points raise the question of how many C-27Js DOD needs.
section_title: Mission
paragraphs: DOD plans to replace C-130H aircraft and augment the remaining C-130s  with the Joint Future Theater Lift (JFTL). Currently, it is still at the  conceptual stage and is not yet a formal acquisition program. The Army  and Air Force have independently engaged in laboratory efforts to develop  competitive technology solutions including a large tiltrotor, vertical  takeoff and landing aircraft, and a versatile fixed wing, short takeoff and  landing aircraft, respectively. A draft Initial Capabilities Document notes  that the JFTL must be capable of transporting current and future medium- weight armored vehicles into austere locations with unprepared landing  areas. According to an Army official, another capability under  investigation is the ability to operate from naval vessels (seabasing) to  enhance access to remote areas and to reduce predictability. The JFTL is  anticipated to have a payload capacity of 20 to 36 tons and a combat  mission radius of 500 nautical miles. The Air Force Air Mobility Command  expects the JFTL to be fielded sometime around 2024.
section_title: Program Status
paragraphs: JFTL concept development became a joint effort in January 2008 following  a decision by the Army and Air Force Chiefs of Staff to merge  requirements for separate heavy lift efforts in progress at the time.  The  Air Force was designated as the administrative lead for the development  of the Initial Capabilities Document for the JFTL, and submitted a draft  into DOD’s Joint Capability Integration and Development System earlier  this year; however, the Army did not agree with the draft, citing critical  disagreements. According to an Army program official, a recent general  officer meeting between the two services appears to have resolved the  Army’s remaining critical comments, and the services could potentially  seek approval of the Initial Capabilities Document at the Joint  Requirements Oversight Council by late summer 2009. Both Army and Air  Force officials stated they would like to have the Initial Capabilities  Document validated and begin work on the analysis of alternatives in the  summer of 2009, to provide a sufficient basis for budget deliberations in  March 2010.
Disparate views on requirements are at the heart of the disagreement  between the services. According to an Army official, there were  foundational differences in anticipated usage of the aircraft that led to  initial disagreements between the services. The land component (i.e., the  Army, Marine Corps, and special operations forces) saw a critical need for  an airlift capability that would enable expeditionary, mounted (i.e. forces  deployed with combat vehicles) ground operations into access-challenged  environments. The airlift community was pursuing a larger, longer range  transport to better meet the current set of traditional airlift missions. The  Army official said the two perspectives resulted in different technologies  and system investigations. The land component, led by the Army, has been  pursuing vertical takeoff and landing concepts that are less infrastructure- constrained, allow faster force buildup, and can more easily sustain  maneuvering forces from either land or sea bases. The Air Force has been  pursuing advanced lift system technology for turbofan fixed wing aircraft  to improve operations on short, soft, or rough airfields while increasing  cruise speed over current tactical transports. However, the Army official  said development of the JFTL Initial Capabilities Document has combined  these perspectives into one requirements document and served to  converge the services into a more cohesive vision of future operations.
Both the Army and Air Force have continued to fund technology  development efforts that support their previously separate programs.  Army technology development efforts are focused on a high-efficiency  tiltrotor concept that could become a candidate for the JFTL once  requirements are established. According to an Army lab official, the  aircraft would be nearly as aerodynamically efficient as a fixed wing  aircraft and would have about the same fuel efficiency as a C-130J. While  the concept is still “all on paper,” the official said no new inventions are  needed—that the component technologies all have an existing lineage and  could be practically implemented on an aircraft of the size anticipated (the  maximum payload would be 36 tons). The Army has three contractors or  contractor teams working on different tiltrotor configurations that could  potentially meet the joint capability needs. A number of technology  development/risk reduction efforts, including a tiltrotor test rig and a  number of specialized studies, have been funded by the Army, Special  Operations Command, National Aeronautics and Space Administration,  Defense Advanced Research Projects Agency, and Office of Naval  Research.
An Air Force official said the service’s technology development efforts are  focused on a fixed wing concept that combines speed and agility to  provide enhanced lift for short takeoffs.  According to the Air Force  official, three contractors have done work on this speed agile concept,  with one—Lockheed Martin—on contract to develop a demonstrator  model. The Air Force Research Laboratory has also, in partnership with  Lockheed Martin, developed the Advanced Composite Cargo Aircraft,  which utilizes composite materials in the fuselage and tail, and which  completed a successful test flight in June 2009. An Air Force Research Lab  official said this technology significantly reduces the number of parts  needed, as well as tooling and touch labor needs in the manufacturing  process. He said these processes and materials could potentially be used  for the JFTL.
section_title: GAO Observations
paragraphs: A potential capability gap exists in the department’s ability to airlift  medium-weight vehicles to access-challenged areas within a theater of  operations using dedicated tactical airlifters. C-17 aircraft have been  employed to transport medium weight vehicles in theater, but cannot  access austere, short, or unimproved landing areas.  In 2007 C-17s flew  15,436 tactical sorties, 3,102 of which—approximately 20 percent— involved carrying objects too large for a C-130 to carry. Nevertheless, DOD  officials do not consider the C-17 to be a viable long-term solution given  access issues noted above.  JFTL is expected to provide this long-term  solution.
We believe the JFTL effort presents the department an opportunity to  address a critical capability gap using the evolutionary, knowledge-based  approach outlined in DOD acquisition policy. However, DOD officials will  need to exercise caution to avoid pitfalls we have identified in connection  with developing new weapon systems, including taking a revolutionary  versus an evolutionary approach for weapon system development;  overpromising performance capabilities; and understating expected costs,  schedules, and risks associated with developing and producing the  weapon.
Fielding the new capability may be a challenge for two reasons. First,  although the services have reached agreement on operational  requirements in developing the Initial Capabilities Document, the potential  exists for future disagreements that could adversely affect program  outcomes. The Army would like a tiltrotor aircraft that can be used in  direct support of its maneuver and sustainment operations, and the Air  Force favors a fixed wing aircraft to support common-user needs as well  as the Army’s direct support mission. An Army official said the decision to  pursue a tiltrotor or a fixed wing aircraft will be made during the analysis  of alternatives, and that he expected a more cooperative relationship  between the services once that is decided. However, we feel that if such a  relationship does not emerge or continue throughout system development,  program outcomes could be jeopardized. Our previous work has found  that unstable requirements in conjunction with long development cycles  can lead to considerable cost growth and schedule delays.
Second, the JFTL was intended to transport medium-weight vehicles,  including Future Combat Systems vehicles; however, DOD recently  cancelled the manned ground vehicle portion of the program with plans to  re-launch a new vehicle modernization program incorporating lessons  learned in recent operations in Iraq and Afghanistan. We believe the design  of the new vehicles, including size and weight, could be an important  factor in determining the type of aircraft best suited for the JFTL mission,  primarily because the Army’s tiltrotor concept already envisions a  rotorcraft much larger than any ever produced. However it could be  several years before the Army has a good understanding of the size and  weight of the new vehicles.
section_title: Appendix II: Comments from the Department of Defense
section_title: Related GAO Products
paragraphs: Defense Acquisitions: Charting a Course for Lasting Reform.  GAO-09-663T. Washington, D.C.: April 30, 2009.
Defense Acquisitions: Assessments of Selected Weapon Programs.  GAO-09-326SP. Washington, D.C.: March 30, 2009.
Defense Acquisitions: Timely and Accurate Estimates of Costs and  Requirements Are Needed to Define Optimal Future Strategic Airlift  Mix. GAO-09-50. Washington, D.C.: November 21, 2008.
Defense Transportation: DOD Should Ensure that the Final Size and  Mix of Airlift Force Study Plan Includes Sufficient Detail to Meet the  Terms of the Law and Inform Decision Makers. GAO-08-704R.  Washington, D.C.: April 28, 2008.
Best Practices: An Integrated Portfolio Management Approach to Weapon  System Investments Could Improve DOD’s Acquisition Outcomes.  GAO-07-388. Washington, D.C.: March 30, 2007.
Defense Transportation: Study Limitations Raise Questions about the  Adequacy and Completeness of the Mobility Capabilities Study and  Report. GAO-06-938. Washington, D.C.: September 20, 2006.