Introduced in 1993, the AV-8B aircraft with night attack and radar capabilities enhances pilots’ abilities to locate and destroy targets under conditions of marginal weather, limited visibility (smoke, dust, or haze), and darkness. The two previously produced models had significant limitations. The day attack model, the first version of the aircraft procured by the U.S. Marines in 1982, has limited capability during the hours of darkness because the pilots cannot refer to the terrain and horizon to assist in maneuver, navigation, and attack. The night attack version, introduced into the fleet in 1989, has increased capabilities over the day attack version but still has limitations. Its Angle Rate Bombing System, used by the day and night attack models for weapons aiming and delivery, is not effective at night or during adverse weather conditions. In addition, the night attack version’s forward looking infrared system, which assists in navigation during hours of darkness, is degraded by air moisture. All the prior upgrades to the AV-8B—from day to night attack models and then to models with the improved radar configuration—have been made by producing new models. Aircraft have not been rebuilt or modified. The Marines plan to deviate from this practice with REMAN. Under REMAN, the Marines plan to award single-year contracts to remanufacture 72 of the day attack model aircraft and convert them to aircraft with night attack and radar capabilities over a 10-year period. The day attack aircraft are to be transported to the Naval Aviation Depot (NADEP) in Cherry Point, North Carolina. There, the aircraft are to be tested for flight worthiness and then disassembled. About $6 million worth of parts from each aircraft are to be returned to the supply system and about $11.3 million of designated components and assemblies from each aircraft are to be either used in their current condition, refurbished, or modified for reuse in the REMAN program. The components and assemblies are to be sent to the contractor, McDonnell Douglas Aerospace Company in St. Louis, Missouri. The contractor is to integrate these used components and assemblies, along with a new fuselage, a new engine, and an APG-65 radar system, to produce the final REMAN aircraft. The first REMAN aircraft is scheduled for delivery in February 1996. Considering the costs associated with inducting an aircraft into the REMAN program, disassembling, refurbishing, and modifying components and assemblies; the value of components and assemblies furnished to the contractor; and economies available through multiyear procurement, our review indicated that the REMAN program is not the most cost-effective procurement approach. It would be feasible for the Navy to revise its acquisition strategy because the contractor’s production line and facilities are still in place and ready for continued production of radar model AV-8B aircraft. During our review, we compared past procurement cost figures (adjusted for inflation) with current REMAN program cost estimates. We also assessed the impact of multiyear procurement on new production cost estimates due to recommendations by the Department of Defense (DOD) Inspector General and recent congressional interest. Twenty-one radar aircraft were procured in 1991 at an average unit flyaway cost of $22.4 million. Six more were procured in 1992 to replace aircraft lost during Desert Storm at an average unit flyaway cost of $31.9 million—a 42-percent increase that the program office explained was due to the small quantity procured. Table 1 shows the procurement history of the AV-8B program. The AV-8B program office does not have a current cost estimate for producing additional radar aircraft. Therefore, to facilitate a comparison of REMAN and probable new production costs, we used the fiscal year 1991 flyaway cost as a baseline because of its more efficient production rate (21 aircraft). Using Navy indexes, we escalated the average unit cost of fiscal year 1991 procurement ($22.4 million) by 7.5 percent ($24.1 million) to account for inflation. Then, using DOD data on potential savings from a multiyear procurement strategy for engines, we determined that the cost of new aircraft would be about $23.6 million per aircraft, without having provided the contractor the additional $11.3 million worth of reused, government-furnished components and assemblies. We discussed this methodology with DOD officials and they did not disagree. According to program documents, under the REMAN acquisition strategy, the Navy expects to pay between $23 million and $29.5 million for each aircraft, exclusive of the value of reused government-furnished equipment. “The remanufacture program commenced in fiscal year 1994 and has not completed a full manufacturing cycle. Therefore, process performance is not yet fully validated and extrapolation of cost savings are estimates based on the prime contractor’s manufacturing process used in past production of new AV-8B aircraft of the same configuration. While total quantities appear firm and the requirement remains valid, a more appropriate time to consider a multi-year procurement acquisition strategy would be after the remanufacturing costs are substantiated, and we are comfortable that no system degradation has occurred as a result of remanufacture. We will then be in a position to make a recommendation with regards to a multiyear procurement plan for fiscal year 1998.” If the program continues as planned, by 1998, procurement contracts will have been initiated to remanufacture 50 percent of the 72 aircraft planned for the REMAN program. Further, our review of the Navy’s procurement history for this aircraft (see table 1) showed that the contractor has demonstrated the capability to produce new AV-8B aircraft at a more efficient rate than the procurement schedule for the REMAN program shown in table 2. Accelerated production to the fiscal year 1991 level would be a more cost-effective approach than the low rate being requested by the Navy, and would provide the Marine Corps with increased combat capability at a more efficient production rate. On the other hand, NADEP does not have the ability to disassemble the aircraft or refurbish and modify components and assemblies for reuse by the contractor under the REMAN program at the rate needed to support a production rate comparable to that available under new production. The NADEP at Cherry Point, North Carolina, has been tasked to disassemble the day attack aircraft removed from the fleet, ensure that the components and assemblies to be reused in the process of producing the radar version are in ready-for-use condition, and deliver these parts to the contractor. Each of the reused components and assemblies has a defined delivery schedule, which if not met will delay production at the contractor’s facility and increase program costs. The Navy’s ability to deliver the components and assemblies on schedule is questionable. According to NADEP officials, since the remanufacture program was not prototyped, the depot is experiencing many unanticipated problems. Each aircraft has some unique differences that must be resolved in terms of modification, replacement, or repair before a particular component is sent to the contractor for integration in the REMAN aircraft. If the depot does not have a replacement part on hand or the capability to modify or fabricate particular parts and assemblies, it must contract out for the capability or purchase the necessary new parts. All of these options would lead to delays and increased costs. The depot has experience in disassembling the AV-8B aircraft from its Age Exploration Program, which evaluates the structural integrity of the aircraft. However, the Age Exploration Program does not require the detailed level of dismantling that is required for the REMAN program. Additionally, unlike in the Age Exploration Program, under the REMAN program the depot is required to make over 30 new modifications to components that it has no previous experience making. In planning support to the REMAN program, the depot budgeted 2,879 staff hours per aircraft for the disassembly functions. However, the process has taken up to 5,100 staff hours for the first aircraft inducted into the program, and the next three aircraft are expected to consume about the same level of effort. Officials at the depot told us that the increase in the time required for the disassembly process was due to the fact that there had not been an opportunity to prototype the process, including the handling of various modifications. This increase in staff hours causes increases in costs and delays in schedule for the program. The fiscal year 1994 depot labor rate was $47.05 per hour. With the increase in required staff hours, the cost per aircraft inducted into the program will increase by about $104,000. Officials at the depot anticipate that the other three aircraft inducted into the REMAN program during fiscal year 1994 will also take about the same level of effort. As the depot technicians and mechanics gain more experience with the disassembly, refurbish, and modification operations, they expect the process to level off at about 4,000 staff hours per aircraft. Due to an increase in the Defense Business Operating Fund rates, the depot labor rate for fiscal year 1995 was much higher ($91.59 per hour) than fiscal year 1994 rates. Officials at the depot are optimistic that the rate for fiscal year 1996 will drop to about $66 per hour. If the labor rates drop to $66 per hour and stay constant for the remainder of the REMAN program and the depot achieves the estimated level of 4,000 staff hours per aircraft for disassembly, rework, and modification before shipping the kits to McDonnell Douglas, the results would still be an added cost to the program of about $74,000 per aircraft. To begin the disassembly process, four aircraft were inducted into the REMAN program between June and November 1994. The disassembled, modified, and reused-as-is components were scheduled for delivery to the contractor between July 1995 and May 1996, to meet a production delivery schedule of February through November 1996.