David M. Moore

(Editor)

Comparative US -

UK Defence Acquisition Case

Studies

Dedication

This book is dedicated to the many attendees at the annual International Defence Educational and Acquisition Arrangement (IDEAA) Conferences held

in France, the United States, the United Kingdom, Germany and Spain, which have been extremely successful in enabling those attending to understand more about key issues that affect defence acquisition in

different countries. With the conference having been held at Shrivenham (United Kingdom) in 2010 and the 2011 seminar scheduled to be held in

Mannheim (Germany), the continued spread of knowledge through participation in IDEAA will be assured.

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USA 12

United Kingdom 15

USA 21

Using the Cases 11

Abstracts 12

About the Seminar 10

About IDEAA 8

About the Authors 21

Preface 6

Foreword 5

Contents

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United Kingdom 24

F -38C Air-Frame Testing Richard T Shipe 28

F-117 Aircraft International Version John Horn 37

PM-Combatant Tom Siemsen 43

Amphibious Assault Vehicle (AAV): “The Color of Money” Steve Israel & revised by John Horn 50

Apache Helicopter International Version Chris Roman & revised by John Horn 58

AF Tanker Programme International Version John Driessnack & revised by John Horn 65

Rapier – The Acquisition Story Peter Tatham, Stuart Young & Trevor Taylor 71

Phoenix- UAV David Moore 80

The Long, Slow Path to Capability: The Case of the

SA80 David Moore & Peter Antill 85

Thoughts 0n A400M David Moore 91

A Case Study of Project BARRT: BATUS Alternative Replacement Red-Top (Safety Vehicle) Ian McPherson & David Moore 98

Challenger II – The Acquisition Story

Chapter I: USA Defense

Acquisition Case Studies 27

Chapter II: UK Defense Acquisition Case Studies 70

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Peter Tatham & Trevor Taylor 103

Project CRISP: Challenger II Main Battle Tank Innovative Spares Provision Ian McPherson 114

AS90 – The Acquisition Story Peter Tatham & Trevor Taylor 120

Mastiff – UK Light AFV Procurement Jeremy Smith & Peter Antill 129

Logistics Issues in UK Tactical Airlift David Moore 142

Logistics Issues in High Intensity Operations David Moore 151

Looking for a Quick Fix – Urgent Operational Requirements David Moore & Peter Antill 158

Concluding Remarks 166

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While a number of the following case studies are actually based on contemporary or historical events and programmes, there are some that, although based on factual information contain names, characters and

events that are entirely fictional and any references to actual events are entirely coincidental.

The United States case studies were produced in the Department of Defense (DoD) school environment in the interest of academic freedom and the

advancement of national defense-related concepts. The views expressed in this case are those of the authors and do not reflect the official position or policy of the DoD or those of the United States Government. References in

this case to the DoD 500 series and life cycle phases reflect the use of terminology at the time the research was conducted on the program in

question. The United Kingdom case studies were produced in the Centre for Defence

Acquisition (CfDA) of Cranfield University, at the Defence Academy of the United Kingdom. They are based upon material that is freely available in the

public domain; while the views and comments within these cases are those of the authors and do not reflect the official policy and position of the Ministry of Defence or those of the United Kingdom Government.

Foreword

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I have, for some time been convinced of the value of case studies to assist people in the gaining of knowledge. This comes from experience both as a practitioner and as an academic involved with, and responsible for, a range

of training, education and career development programs. With a move into the defence-focused world of Cranfield University, at what was then the

Royal Military College of Science and is now the Defence Academy of the United Kingdom, it became apparent to me that there was a considerable potential for the use of case studies in respect of defence acquisition

education. I had also begun to attend the IDEAA Conferences (which at that time were

known under the acronym of IDEA), which were being held at that time in the four participating countries of Germany, France, the United States and

the United Kingdom (who have subsequently been joined by Spain in 2004 and Australia and Sweden in 2006). When the conference was held in Paris, France in June 2002, I was fortunate to meet two kindred spirits in John

Horn and Tom Seimsen. John was the Course Director of the Program Managers (401) Course at the Defence Acquisition University in Washington

D.C. Tom was a key member of his team. I was delighted to learn that not only did they both believe strongly in the use of case studies, but it was the primary teaching method that they used on the course. Put simply, their

perspective on learning through the use of case studies mirrored my own views. It was pleasing to learn that others in the defence acquisition sphere were using cases and I was excited by the possibility of working together to

develop cases that would allow our students to gain valuable insights into our respective acquisition systems. So well had this alliance worked, that

the International Case Studies Day became an integral element of the annual IDEAA Conference. During the Case Studies Day, case studies from the countries of Germany, Spain, France, USA and UK, relevant to the

theme of the conference had been made available to the conference delegates to read, consider and discuss. Frequently, especially in view of differing

perspectives from different countries, these discussions are informative and interesting and of course provide valuable learning opportunities for all those attending.

With both John and Tom, contact was made with Michael Neubold of the Federal Academy of Defence Administration and Technology, Germany, who

had become a valuable working colleague, Jean Tisnés, Chief Engineer, Armament Corps, France, who always provides valuable and insightful

material, and more recently colleagues from Spain who had bought refreshing perspectives to the work that by then we were undertaking in respect of case studies in international defence acquisition.

Preface

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From the time that the IDEAA conference was held in the UK (June 2004), we agreed to publish the case studies that we had utilised. It has taken me

some time, as the editor, to get these together, so I have taken the opportunity to include a number of cases that were written for more recent

conferences. I am particularly grateful to Peter Antill, without whose assistance, these case studies would not have been published.

Some of these cases cover a long time period, and whilst they are not all based on current equipment or capability, they provide an excellent opportunity to consider critical concepts and applications that frequently

reoccur. It is my belief that we (as a collective acquisition community) do not always learn from past experience and some of these not-so-new cases

reinforce this aspect. These cases are interesting in their own right and as learning ‗vehicles‘, I

believe are superb opportunities to gain meaningful insights into the key issues that affect performance of other countries approaches to acquisition.

Through these insights, we can all gain greater knowledge and understanding that will enable us to perform more effectively within our own working environments.

Dr David M. Moore Director

Centre for Defence Acquisition Cranfield University Defence Academy of the United Kingdom

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The International Defence Educational Arrangement (IDEA) was formed in November 1989, when the Commandant of the Defense Systems

Management College (DSMC) in the USA, the Commandant of the Royal Military College of Science (RMCS) in the UK and the President of the Federal Academy of Defence Administration and Technology in Germany

signed an agreement to "improve common understanding of Defence Acquisition challenges and practices, and the economy, efficiency and effectiveness of international training and education, by active cooperation

among national defence educational and acquisition / procurement institutions with similar goals." France came ‗on board‘ in July 1991 with a

letter signed by their equivalent to the US Undersecretary of Defense (Acquisition, Technology and Logistics) and represented by the Directeur, Centre d'Enseignement et de Formation d'Arcueil in Paris.

The names and designations of the responsible organisations have changed

over time, but in the last ten years, three additional countries have joined, these being Spain, Sweden and Australia. Early seminars were held in various European capitals such as London, Bonn and Paris but in 1993, the

IDEA Board of Directors decided that the seminars would be held at the participating educational establishments. As a result therefore, the fifth seminar was held at the BAKWVT (Bundesakademie für Wehrverwaltung

und Wehrtechnik – Federal Academy of Defence Administration and Technology) in Mannheim, Germany. In 1994 it was held in the Centre

d'Enseignement et de Formation d'Arcueil in Paris, France and in 1995, hosted for the first time by the US Defence Systems Management College, Fort Belvoir, Virginia. In 1996, it returned to Europe and the Royal Military

College of Science, Shrivenham, UK. Recent years have seen it being held in the United Kingdom (2004 and 2010); Berlin, Germany (2005); Toledo, Spain (2006); and by the Defense Acquisition University in Fort Belvoir, Virginia

(2007 and 2009).

The next event will be held at the BAKWVT in Mannheim, Germany during 2011. This is a particularly relevant time for them as this will mark the 50th Anniversary of the creation of their college.

The underlying principle of IDEAA is cooperation. Through IDEAA it has

been possible to develop a greater understating of the processes, applications and decision-making that is undertaken in the defence acquisition environment. Despite differences in size and scale, whether in

terms of geography, budget, personnel or operational commitment, it never ceases to surprise that the underlying concepts and practical approaches

About IDEAA

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have considerable resonance between each country. Indeed, the growing need to work together, both in terms of operational and business

imperatives mean that closer collaboration will be a hallmark of future defence acquisition activities. An example of this currently is the Joint Strike

Fighter programme, although looking towards the future, it may well be that in future, the predominant approach taken in the defence acquisition environment is one of bi-lateral cooperation rather than large, complex

multi-lateral projects.

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The 21st International Defence Educational and Acquisition Arrangement (IDEAA) Seminar, was held in 2010 at the Defence Academy of the United

Kingdom, Shrivenham. The following will provide an insight into the content and methodology typically undertaken in delivering a relevant seminar.

It was designed to provide a broad overview of defence acquisition and in 2010, an international perspective on the management of capability, a topic that has come to the fore in recent times, was prevalent. It also addressed

the future contexts in which key decisions are being made and the implications for acquisition, particularly the challenges facing those involved

with capability management. The seminar reviewed national and international industry responses to the concept and the consequences of these developments for both education and training. The 20th IDEAA

Seminar, held at the Defense Acquisition University in the USA in 2009, saw seventy-seven delegates from the United States, UK, France, Germany,

Singapore, South Korea and Taiwan interact and listen to speakers from academia, industry and government from the United States, UK, France, Germany, Singapore, India and Canada. The 21st seminar was, for the first

time, open to non-IDEAA attendees so that they can register and attended the events and discussions on Days Two and Three.

On Day One of the 2010 seminar, the event began with an overview of national approaches to the management of capability in the acquisition

environment. On Day Two, it developed the context in which acquisition operates (the changing international defence environment) and the impact of current operations on acquisition. It continued with insights into capability

management and further discussion of its potential. Day Three provided a range of perspectives from prominent commentators on acquisition, covering such issues as capability management, operations, acquisition organisation,

and acquisition tools and techniques. This was then followed by an industry panel. Day Four focused upon methodologies for training and education

plus approaches to research that will enable skills development and enhanced competencies. This was brought together as a consideration of acquisition issues and challenges that will need to be addressed. The fifth

and final day highlighted similar issues and challenges, but addressed them from a differing contextual setting.

By the seminars in 2009 and 2010, there was no longer a full day dedicated to case studies, however, the consideration of case studies still formed an

important element of the event.

About the Seminar

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This collection of eighteen cases covers a range of scenarios, based on reality to a greater-or-lesser extent. All of them are set in the context of a ‗real‘

situation, although some of the detail provided and certainly some of the personnel portrayed are fictitious. Nevertheless, the whole point of these cases is that they allow the reader to consider a real situation and the type

of challenges that may arise during the course of an acquisition project. At this point, it is useful to note that there are differing definitions of

acquisition. In the UK, it is understood as encompassing all of the activities in the acquisition cycle from the concept of the capability required through

procurement, contracting, support and ultimately, to disposal. In the USA, such an overarching concept would be called acquisition and logistics. This will explain why a number of the UK cases covered here, specifically focus

upon logistics issues. It should also be noted that other countries have slightly differing views as to what constitutes acquisition.

These cases have been carefully developed to enable the reader to examine key issues that underpin modern concepts and applications of acquisition

(however defined). Although these can be considered by the individual reader, the cases will have greater credence and impact if they are undertaken on a group basis. It may well be that the group could be split to

take the parts of, for example, supplier and contractor, or the position of some of the personnel noted in the cases. There are no ‗right‘ answers to the

questions, however, there are some issues that will be more relevant than others. Within groups, these matters can be discussed and considered from the perspective of relevance to the case itself, relevance to other, similar

projects or activities within one country, or on a wider basis where there are different approaches to similar challenges in other countries. It may be that these could be organisational, that processes are different, differing judicial

circumstances apply or that there are considerable cultural differences. Equally, discussion about the cases may identify that there are many

similarities and challenges that all countries face in respect of acquisition. Ideally, the cases should be read individually, the class split into small

groups to identify key issues and challenges, then consider the questions and seek to answer them on a bullet point basis leading to a discussion and

comparison as part of the larger class. The questions are self explanatory and whilst a specific knowledge of the details of each case might be useful, it is by no means essential as each case is designed as a standalone, learning

vehicle.

Using the Cases

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F -38C Air-Frame Testing

The F-38C was to be an updated, ‗multi-role‘ version of the F-38 fighter jet. This case study assesses the options available to the project manager in

respect to the plane‘s airframe testing. Bypassing certain tests on the aircraft‘s airframe would generate cost

savings in the region of $5million and reduce the project time by three months. However, instances in the past have demonstrated that

sidestepping vital tests can have catastrophic repercussions during both production and operational usage. The case study assesses the trade-offs faced by the F-38C Project Manager regarding the aircraft‘s airframe testing

and striking the right balance between cost, time and quality.

F-117 Aircraft

The F117 Aircraft program was a project based on reducing costs by outsourcing particular duties to a contractor. The government personnel previously responsible for these jobs were to be dismissed with the planned

manning reduction from 226 to just 20. The program was managed under Total System Performance Responsibility (TSPR), a management process

designed to reduce total ownership costs by expanding the contractor‘s role in areas traditionally performed by the government. These areas included acquisition and sustainment support, systems engineering, flight test

support, depot modification, material management and logistics support. This process allows for a ‗just-in-time‘ inventory and eliminated the need and cost of the government item manager and the inventory storage costs.

The projected savings for the Air Force stood at approximately $82 million.

This case study highlights some pertinent managerial challenges arising when government powers demand cost-cutting and personnel reductions but also demand the same levels of out-put.

Abstracts

USA

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PM - Combatant

Equipping the modern soldier is no mean feat. While much attention is paid to the hi-tech equipment, the less romantic necessities such as web gear,

gloves and liners, sand goggles, knives, body armour, etc are often overlooked. The PM- Combatant Programme Management Office deals with somewhere in the region of 300 different projects procuring equipment

necessary for a soldier to not only survive, but conduct his or her war-fighting tasks. While no individual soldier would carry all of the items at once, it was necessary for all the items to be compatible with one another

and that they would work in a variety of different situations and terrain.

This case study examines the relationship between PM- Combatant and its customer, the soldiers of the armed forces. The study highlights an apparent lack of communication concerning the distribution of equipment and how

equipment that is available to one soldier is not necessarily available to another.

Amphibious Assault Vehicle (AAV): “The Color of Money”

The AAV7 has been the workhorse of the US Marine Corps for a quarter of a century and this program concentrated on the necessary upgrades to the

AAV7 and the introduction of the next generation vehicle, the Advance Amphibious Assault Vehicle (AAAV).

This case study assesses the financial problems and constraints facing the AAAV Project Manager. The study demonstrates how failure to make one

payment could result in its termination or perhaps worse, charges of misappropriation of funds.

Apache Helicopter

The Apache Prime Vendor Support (PVS) contract was designed to cut the maintenance costs of supporting the Apache fleet while also providing

gradual upgrades through the process of ‗modernising with spares‘. The contract, a joint-venture between numerous aeronautical industrial powers,

promised 16% savings to the army over a five year period. As the case study demonstrates, it was promised that the process would not

only deliver cost reductions but would, imperatively, transfer risk to industry. It was also believed that Apache PVS would provide greater availability and readiness of the fleet. However, there were some within the

military that were highly critical of the measures and believed that not only would the project be costly and increase the price of other weapons systems,

but it would also lead to the loss of jobs. Military logisticians also questioned the project, believing that PVS would not respond well to surge requirements in a war situation.

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AF Tanker Programme

By late 2001, the US Air Force was faced with a dilemma; could its ageing and increasingly costly fleet of KC-135 refuelling aircraft continue in service

until 2040 as first planned, or would they need to be replaced with the new Boeing B-767 or Airbus A-330? The military were faced with a number of dilemmas in this situation which the case study addresses, including; the

issue of leasing Vs buying; the leasing of aircraft or the leasing of the re-fuelling service; conversion of the current fleet or the procurement of both commercial and government off-the-shelf alternatives

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Rapier – The Acquisition Story

The Rapier family of surface to air missile systems began its development some 50 years ago with the original design studies being carried out by the

then British Aircraft Corporation (BAC) and the Royal Signals and Radar Establishment (RSRE) in the late 1950s. Although grounded in the Cold War, the requirement for air portable defence against aircraft is enduring –

albeit the UK‘s current military deployments are not taking place in the context of a significant threat from this quarter. As a result, and as will be

discussed later in this Case Study, the requirement for this capability is currently at a lower priority, and the reductions in operational firing platforms reflect this. Nevertheless, in other ways, such as the novel

support arrangement, Rapier remains at the forefront of acquisition developments and is one of the last significant complex weapons systems to be developed indigenously within the UK.

Phoenix- UAV

The Phoenix Unmanned Aerial Vehicle (UAV) was designed as a state-of-the-

art surveillance and target acquisition system aircraft. During its acquisition process, Phoenix faced numerous obstacles which almost led to its

termination. This case study examines many of the issues of Phoenix‘s acquisition, such

as the constant confrontations concerning its technical specifications leading to regular changes to its In-Service date. Relationships were tested, the customer‘s requirements were not met and the MoD was failing to

properly co-ordinate with the contractor. With the project facing disaster and probable termination, legal parties became involved in order to salvage

the faltering Phoenix. It was however unable to rise from the ashes of the programme with its last flight in May 2006 and was eventually replaced by Watchkeeper.

The Long, Slow Path to Capability: The Case of the SA80

The SA80 is the main personal weapon used by the British armed forces.

When it was unveiled in the 1980s, the SA80 was classed as a radical new weapon thanks to its 'bullpup' design, making it an ideal weapon for close-quarter, urban policing, synonymous with one of Britain‘s main military

operations of the time, Northern Ireland.

United Kingdom

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The case study examines the problems associated with the SA80's development, production, and in-service use. For instance, the early stages

of the project were hampered by design issues, most notably the change of the standard NATO round. The program was further slowed by the transfer

of production from Enfield to Nottingham. In terms of service use, although the rifle was generally effective in Northern Ireland, when it was used in desert combat operations, the SA80 was found to be seriously unreliable in

semi-automatic mode. After intense media scrutiny, the SA80 underwent a £92 million overhaul in an attempt to deliver a rifle of which the British Army could be proud.

Thoughts 0n A400M The A400M project is a collaborative program between the UK and its

European neighbours and was procured under the banner of the Future Large Aircraft (FLA) project by the partnering body; Organisation Conjoint de

Co-operation en matiere d‘Armament (OCCAR). The A400M was designed to replace, in part, the UK‘s ageing C-130K Hercules fleet and sought to provide a plethora of tactical and strategic mobility to all three services.

The study highlights some of the significant problems that can arise when countries conduct collaborative projects, and how differences in opinion,

interests and requirements can produce huge barriers for the stake-holding nations to overcome. The case study also examines communication and

political problems that occurred between the A400M IPT in the UK and the OCCAR base in France. The Future Large Aircraft was seen as an alternative to past co-operative projects that suffered cost overruns, delays and

performance compromises; the study highlights many of the key issues surrounding the acquisition of the A400M before its projected In-Service date of 2014.

Project BARRT The UK MoD has a unique live firing armoured vehicle training area, which

it leases and jointly uses with the host nation in Alberta, Canada. To enable the exercising forces to operate in a safe environment, a safety fleet of

vehicles was established which are painted in a distinctive red colour and which effectively chase the live firing fleets and are able to ‗Check fire‘ if any scenario becomes dangerous to the exercising troops.

The case study demonstrates that the existing fleet was not cost effective and required the use of vehicles that are not designed for the purpose, were

fitted with numerous illegal modifications and were inherently dangerous. This was coupled with the fact that the old fleet was not capable of meeting

the stringent mobility or communications requirements in Alberta. Without the resources to fully replace the fleet with either Land Rovers that were currently used by the MoD or brand new ones, a COTS strategy was adopted

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with General Motors (GM) in North America. This allowed for cost reductions in shipping as well as the transfer of responsibility to GM, whilst the

contract included a Contractor Logistics Support package.

Challenger II – The Acquisition Story

In November 1986, shortly after Vickers Defence Systems (VDS) had acquired the former Royal Ordnance Factory (ROF) in Leeds (for £11M), the company began work on the design and development of a new tank which,

they proposed, would replace the ageing fleet of Centurions (dating from the 1960s) and also the newer Challenger 1s (first ordered in 1978) which were

both unreliable and had poor gunnery accuracy. The first nine turrets were built (7 at Leeds and 2 at VDS‘ original factory in Newcastle) on a private venture basis prior to the issue of the Staff Requirement.

The perceived requirement for a new Main Battle Tank (MBT) took place

against the backdrop of the ―Levene‖ reforms to UK defence procurement which placed a premium on achievement of value for money through competition and taut contract conditions. Although in the pre-contract

discussions VDS argued that there was a need to provide the new fleet of tanks quickly (to fill a capability gap), and that a single tender contract would safeguard employment (some 2000 jobs) at both Leeds and Newcastle,

the company‘s reputation was poor having delivered unreliable tanks over budget and late in previous contracts. As a result, a full competition was

unavoidable and this took place at the end of the decade, with the final tank being delivered in 2002.

Project CRISP

The British Army needed an improved consumable spares support solution for its Challenger II Main Battle Tank, which addressed the issues of poor

spares availability, costly disposal of redundant stocks and poor pipeline provision. The resulting contract was Project CRISP, an outsourced solution provided by the Original Equipment Manufacturer (OEM), via a third party

logistic specialist for the provision, procurement, storage and distribution of all equipment specific consumable spares.

The case describes the background to the decision, the benefit analysis and the risk management considered. It highlights the potential savings whilst

taking consideration of the surge requirements of the MoD.

AS90 – The Acquisition Story

Following the Second World War, the UK, along with other European

countries had relied on the US M109 self-propelled howitzer to provide long range, large calibre, battlefield artillery support. However, the M109 was

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based on the technology of the 1950s and, following the successful international collaboration that saw the development of the FH70 towed field

howitzer, the UK, Germany and Italy began a collaborative project in the late 1960s to develop a self-propelled howitzer designated ―SP70‖.

Although it was hoped that the multi-national project would capitalise on the success of the FH70 programme, the reality was that the overall

management of the project was extremely weak and the integration of the three separate Design Authorities fraught with tensions. In addition, there was a clear political dimension to the project which saw a determination of

each Nation to retain the agreed percentage of the work share. The SP70 project eventually foundered when the UK withdrew from the consortium in

late 1986.

Mastiff – UK Light AFV Procurement

During the recent conflicts in both Iraq and Afghanistan, the problems of providing protected mobility to soldiers on the ground have become well known and have received a great deal of attention. Existing equipment like

the ―Snatch‖ Land Rover provided excellent speed and agility but was poorly protected, particularly against mines and Improvised Explosive Devices (IED). More heavily armoured tracked vehicles such as Bulldog and Warrior

could have provided the necessary levels of protection but were relatively slow and have relatively high running costs and support overheads. Given

this high profile, there was a pressing need, politically and militarily, for ―something to be done‖, and quickly.

Given the (mainly political) urgency, there was insufficient time to prepare a comprehensive User Requirement Document. It was therefore clear that the requirement could only be met by a Military-Off-The-Shelf (MOTS) purchase

and so, after a swift review of what was available in the market, including visits to the USA and South Africa by the key staff involved, a list of just five

Key User Requirements (KUR) was produced. The KUR were influenced as much by what was available in the timescale set, as by the user requirement. The MoD began to look at the vehicles available . . .

Logistics Issues in UK Tactical Airlift

This case study is based on National Audit Office (NAO) Report, Hercules C-

130 Tactical Fixed Wing Airlift Capability, dated 27 June 2008. The background below consists of extracts from this report, which have been selected to help answer the questions. The full report is available at

www.nao.org.uk/publications/0708/hercules_c-130_tactical_fixed.aspx and students may well find it helpful to use the full report.

Students need to be aware of some of the changes being made to acquisition practice as a result of the Enabling Acquisition Change Report, specifically

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those which relate to the through life management of all Defence Lines of Development (DLoDs). The capability delivered by the user can be optimised

by the most appropriate combination of DLoDs and managing these through life. The trade off between DLoDs should be considered to provide the most

cost effective solution; for example spending on logistics may result in higher availability for each piece of equipment and so the number of equipments can be reduced. Further information can be found in Defence

Acquisition and the Defence Acquisition High Level Blueprint. The aim of this case study is to explore the concept of through life

management of DLoDs and how it could be applied to tactical fixed wing airlift capability.

Logistics Issues in High Intensity Operations

This case study is based on National Audit Office (NAO) Report, Support to High Intensity Operations, dated 14 May 2009. The background below consists of information taken from this report, which has been selected to help answer the questions. The full report is available at

http://www.nao.org.uk/publications/0809/high_intensity_operations.aspx and students may well find it helpful to use the full report.

The aim of this case study is to explore the nature and effectiveness of the supply chain which supports operations in Afghanistan. Potential measures

to improve the performance of the supply chain are considered, including the likely impact on performance and cost. The design of future equipment

is considered, and what could be done to reduce the load it places on the supply chain.

Looking for a Quick Fix – Urgent Operational Requirements

This case study is based on the National Audit Office (NAO) Report, Support to High Intensity Operations, dated 14 May 2009. The background below

consists of information taken from this report, which has been selected to help answer the questions and some cost information taken from other

sources. In recent conflicts the acquisition of Urgent Operational Requirements

(UORs) have made an important contribution to the success of these operations. UORs are, by definition, a response to a theatre-specific requirement. In the Falklands campaign, many merchant ships were

modified to undertake a military role, which often included the fitting of helicopter landing platforms. In the first Gulf War, tanks were fitted with

additional armour to reduce their vulnerability as they passed over Iraqi sand bank defences. The longer duration of operations in Iraq and Afghanistan has allowed the enemy to adopt new tactics and many UORs

have been used to counter this evolving threat.

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The aim of this case study is to explore the use of UORs to help provide the

military capability required for operations in Iraq and Afghanistan. The potential use of alternative design approaches for future systems, to reduce

the need for UORs, are considered. Some problems experienced with the support of UORs and what could be done to reduce them are also explored.

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John D. Driessnack

John Driessnack has over 20 years experience in Department of Defense (DoD) leadership positions and is the senior director of the Executive Consulting Group, responsible for Integrated Program Management support

across MCR, LLC. As senior director, John led consultant efforts and workshops for industry, federal agencies, including DoD, Federal Aviation

Administration, and Intelligence programs. Efforts concentrate on improving customer-integrated program management processes. He continues to lecture during executive courses at Defense Acquisition University (DAU) on

Risk Management and is an adjunct faculty member at the American University teaching graduate level Program Management course.

He received a Bachelor of Science degree in Industrial Engineering from Pennsylvania University, a Master of Science degree in Economics from

Wright State University, and has completed course work for a PhD in Economics from George Mason University.

Mr. John F. Horn John Horn is currently a Professor of Financial Management at Defense Acquisition University. He teaches courses in Financial Management,

Earned Value Management, Cost Analysis and Contractor Finance. He has written over 15 case studies on a myriad of subjects and programs and

published three articles on Critical Thinking in the Defense Acquisition Quarterly.

Prior to this position, he served as Lockheed Martin‘s (LM) Center for Performance Excellence‘s Deputy for Curriculum Development. In this

capacity he oversaw all course development efforts for LM Corporate Program Performance courses. He personally developed the 6-hour case study based Advanced Earned Value Management Course to enhance the

analytical capability of LM‘s senior Program Managers. John is a recognized DoD expert in Critical Thinking and Decision-Making.

He managed lead the development and administration of DAU‘s Flagship Course the Program Manager‘s Course for seven years. This 10-week

residence course was designed to develop Critical Thinking and Decision-

About the Authors

USA

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Making skills of Acquisition Category I Program Managers. He has taught graduate and undergraduate courses at six private universities over a

twelve-year period. He holds a Bachelor of Science and Masters degree in Business Administration and has earned DAWIA Level III Certification in

Program Management and Financial Management.

Rear Admiral Stephen S. Israel, U.S. Navy (Ret)

Steve Israel led the team that developed DAU‘s flagship course, the senior-level Program Manager‘s Course, working in collaboration with Harvard University and the University of Western Ontario, Canada. From concept

development through launch of the first 10 week offering in March 2002, Mr. Israel led the team of DAU professors that researched and authored over one

hundred DoD cases from which the original course schedule was selected. In addition to serving as the first Course Manager, he personally researched, authored and taught several cases.

He also taught cost estimating, business, financial and acquisition management at DAU. His innovative accomplishments in those subject

areas included development of a game board simulation which taught the student basic manufacturing business cycles. Prior to coming to DAU, Mr.

Israel held production management positions in construction, manufacturing and defence contractor firms. He retired from industry in 1999 as Director of Marketing for a Texas-based defence electronics

company, and subsequently joined DAU.

Steve retired from Defense Acquisition University in 2006 as Professor of Financial Management with DAWIA Level III Certificates in both Program Management and Financial Management. He has a Bachelor‘s Degree in

Engineering from the United States Naval Academy and a Master‘s Degree in Acquisition Management from the Naval Post Graduate School.

Dr. Chris Roman Dr. Roman was a Professor of Software Management at Defense Acquisition

University. He taught a variety of software courses focusing on software risk management and cost elimination. As an instructor and case writer for DAU‘s Program Manager‘s Course, he wrote over 12 acquisition case studies.

He had completed research on software risks, computer performance, and expert systems technology and lectures on software acquisition strategies

including evolutionary and spiral development strategies. His special interest area was in technology of the automation of software development

processes. Dr. Roman retired from Defense Acquisition University in 2006 as Professor

of Software Management. He earned a Ph.D. from George Washington University in Information and Decision Systems. He won the President‘s

Award for the DAU Alumni Association. He consulted widely including with

23

the Federal Bureau of Investigation on acquisition and software development strategies for the Fingerprint Identification Systems.

Dr. Richard Shipe Dr. Richard Shipe is a Professor of Acquisition at the Industrial College of

the Armed Forces. Prior to this position, he was on the faculty of DAU and a member of the course development team. Dr. Shipe entered the Army as a

Transportation Corps officer in 1984. After serving as a strategic mobility planner at the Military Traffic Management Command and commanding a transportation company in the 2nd Infantry Division, he joined the Army

Acquisition Corps. His acquisition assignments include tours with the Program Executive Officer for Tactical Wheeled Vehicles, Army Test and

Evaluation Command, Department of Army Staff, and Defense Acquisition University.

He holds a Bachelors degree in Economics and Geography from Radford University, a Master of Science Degree in National Resource Strategy from the National Defense University, and a Ph.D. in Economics from the

University of Virginia. He is also a graduate of the Advanced Program Management Course and the Air Command and Staff College.

Mr. Thomas I. Siemsen Tom Siemsen was the Deputy Course Manager DAU‘s flagship course, the

Program Manager‘s Course, and was a member of the course development team. Prior to that he taught in several contracting and program management courses. Mr. Siemsen wrote more than a dozen cases dealing

with a variety of subjects related to defence acquisition programs.

Prior to coming to DAU, he worked at the Air Force Plant Representative‘s Office at TRW, Redondo Beach, California, and at the Air Force Space and Missile Center (SMC) in Los Angeles, California as a Contracts Negotiator

and Procurement Contracting Officer. Subsequently he worked in a staff capacity at both the Pentagon (SAF/AQC) and the Procurement Policy Office

of the Department of Commerce. He was a member of the Defense Systems Management College's Defense Acquisition University faculty from June 1993 to February 2005. Since retiring from federal service in 2005, he has

worked as an independent consultant and trainer. He has a Bachelor‘s Degree in Politics, a Master‘s Degree in Political Science and a Master‘s Degree in International Business.

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Mr. Ian A. McPherson

Ian served in the British Army for 30 years reaching the rank of Lieutenant Colonel where he specialised in supply chain management and

procurement. He has commanded at troop, squadron and regimental level and served throughout the globe including 2 tours in multi-national

Headquarters at SHAPE and in the 2 star Logistics HQ in Zagreb. He has held two senior procurement posts in the Local Government Sector before moving into the Private Sector where he was most recently the Commercial

Director for Tribal Consulting and is about to take up his new post as a Director in BDO an international Accountancy and Consultancy House. Ian

has been a visiting lecturer at Cranfield University for the last seven years. He lives in the beautiful Northamptonshire countryside with his wife Helen, a clinical Hypnotherapist and their young son Finlay, his interests are

Rugby Union and Cricket.

Dr. David M. Moore

David Moore worked in purchasing and supply chain management within public sector and commercial organisations prior to joining academia. This

included British Gas as the manager responsible for purchasing, contracts, inventory management, distribution and the development of logistics IT. From 1988, he was with the University of Glamorgan, where he developed

and managed CIPS courses for organisations such as British Airways, London Underground and the Civil Service College. These were followed by the development and leadership of the MBA full time and part time

programmes, as well as the MBA by Directed Learning in Bahrain. In 1996, he joined Cranfield University. Here he initiated the BSc (Hons) Management

and Logistics course and then the MSc Defence Logistics Management and MSc Defence Acquisition Management courses. He has undertaken training and consultancy assignments in the UK, USA, Europe, Middle East and Far

East for organisations such as Shell, British Gas, NHS, Welsh Office, Coca-Cola, Qatar Steel and the Arab Ship Repair Yard. He has written a number of books, book chapters, journal articles and conference papers. David

served in the RLC (TA) until 1999 and held both staff and CO appointments as Lt Colonel. David has also held External Examiner positions at a number

of universities, including Strathclyde, Salford and Caen. For the MBA programs at Coventry University, the University of Wales Institute, Cardiff and Salford University.

David completed his doctoral research, which focused upon knowledge as

the basis for Professionalism within Defence Acquisition in 2004.

UK

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Mr. Peter D. Antill Peter Antill is currently a research assistant working for Cranfield University

at the Defence Academy's College of Management and Technology in Shrivenham. Peter has practical experience in the service industry as well as the civil service. A degree holder from Staffordshire University and the

University College of Wales, Aberystwyth he also holds a PGCE (Post Compulsory Education) from Oxford Brooks University. A published author,

he is currently conducting post-graduate research into British defence policy, historical procurement programmes and expeditionary operations as well as having just started a PhD. He is also privately collaborating with two

colleagues in a military history project, located at http://www.historyofwar.org.

Prof. Trevor Taylor Formerly Head of the Department of Defence Management and Security

Analysis at Cranfield University‘s faculty at the Royal Military College of Science in the UK. He was previously Professor of International Relations at Staffordshire University and between 1990 and 1993 was Head of the

International Security Programme at the Royal Institute of International Affairs in London. He is also a past Chairman of the British International

Studies Association and has been Visiting Professor at the National Defence Academy in Tokyo. He was educated at the London School of Economics (B.Sc(Econ) and PhD) and Lehigh University (MA) in Pennsylvania. He has

published extensively on European security and defence industrial issues, and is currently working on the political and defence implications of defence restructuring in Europe. He is now Professor Emeritus with Cranfield

University and is a Senior Research Fellow at the Royal United Services Institute.

Dr. Peter H. Tatham Peter joined the Royal Navy in 1970 and served in a variety of appointments

during his career of some 35 years. Highlights include Logistics Officer of the Aircraft Carrier HMS Invincible in 1994/5 during Operations in Bosnia

against the Former Republic of Yugoslavia, and Chief Staff Officer responsible for all high level Personnel and Logistics issues emanating from the 10,000 sailors and 30 surface ships in the Royal Navy (1999-2000). His

final three years in the Service were spent in the UK‘s Defence Logistics Organisation where he was responsible for key elements of the internal programme of Change Management (2000-2004). During this period, he also

gained an MSc in Defence Logistic Management. Following his retirement from the RN, he joined the staff of Cranfield University where he lectured in

Human Systems and Humanitarian Logistics. He has recently been awarded his PhD for research into the issues surrounding the role of shared values within military supply networks, in 2009. He is now a Senior Lecturer at

Griffith University in Queensland, Australia.

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Mr. Stuart Young Stuart joined Cranfield University in 2008 as a Deputy Director in the

Centre for Defence Acquisition where he has a particular interest in the relationship between the MoD and Industry across the supply chain and the development of strategies for major acquisition programmes. Stuart joined

the Royal Navy in 1977 as a Maritime Engineer Officer, doing a post-graduate level qualification at the Royal Naval Engineering College in

Plymouth. He has served in a variety of operational posts at sea but also a number of acquisition-related appointments in the Ministry of Defence. This has included spending three years as the Defence Equipment Marine

Engineer with the Defence Staff at the British Embassy in Washington DC and serving as the Electric Ship Programme Manager in the Defence

Procurement Agency with direct responsibility for a major UK-France technology development programme. He has also been involved in the selection of innovative technologies for the Type 45 destroyer and CVF

programmes and served in the DLO, the Defence Electronic Commerce Service and in the Defence Management and Leadership Centre in Shrivenham.

Mr. Jeremy C. D. Smith

Jeremy Smith retired from the Army in 2007 after 25 years as a logistician and Ammunition Technical Officer. Before joining Cranfield University in April 2008 he project managed the development of an ILS learning blend

under the DACP‘s Upskilling Initiative. During his military career he commanded a variety of supply units and a transport regiment. His operational experience includes Northern Ireland, the Gulf and the Balkans.

Amongst his staff appointments he managed complex weapons in the Quartermaster General‘s business area, completed weapons staff training at

Shrivenham, served as the Army SO1 Plans in HQ DLO and as Head of Technical Services in the DLO‘s Munitions Corporate Business Unit (MCBU). His final Army appointment was as SO1 Combat Service Support

Commitments in HQ Land Command during which he led the force generation of logistic, medical and equipment support resources for

Afghanistan and Iraq. He manages: the Supply Network Management in Defence module of the

DAM MSc; the HEfA Defence Strategic Support Management Course; the one week Support Practitioner module of the Acquisition Employment Training Course; and the ILS Practitioner Workshops co-delivered by Cranfield

University and Defence Acquisition Learning. He also lectures to a number of other MSc and short courses and supports TLS and Contracting for

Availability Symposia.

Most case studies, written and produced by the authors of each respective nation, have been kept in their original version of English.

All supporting text is in UK English wherever possible.

27

Chapter I USA Defence

Acquisition Case Studies

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LTC Richard T. Shipe Defense Acquisition University Defense Systems Management College

Background On 17th May 1997, Dan McPherson, PM for the F-38C Fighter, was facing a

tough decision on the ground test program. McPherson‘s chief engineer, Ben Hammond, in collaboration with the F-38C contractor, had proposed

deleting planned design load and fatigue testing of the tail section during ground testing. This proposal would save $4-6 million and reduce the program‘s critical path by three months. Ken Bernal, his test director,

however, believed the proposed cut in ground testing would expose the program to unacceptable risks. If McPherson wanted to proceed with the

test he needed to make a decision by the end of the month to reserve the test site and ensure there was sufficient time for the contractor to build the tail assemblies.

Test Planning The F-38C was to be a ‗multi-role‘ version of the F-38. The ‗C‘ model was to

be equipped with a larger engine and stronger wings to enable stores (ordinance, pods etc) carrying capacity as well as improved avionics to

support ground attack capabilities. Because multi-role fighter operations would impose greater loads, other parts of the airframe besides the wings had to be structurally redesigned. The plan was to acquire 500 F-38Cs at a

total acquisition cost of approximately $20 billion ($1 billion for development and $19 billion for procurement).

The developmental test program for the F-38C required a number of tests during a ‗ground‘ test phase before assembling prototypes for use during a

‗flight‘ test phase. The purpose of ground testing was to uncover design problems economically and safely prior to investing a substantial amount of funds and time assembling ‗flight‘ prototypes. This risk reduction was to be

accomplished by testing various components and assemblies of the plane, including the airframe, to ensure they met design requirements and

performed in a manner consistent with the modeling and simulation (M and S) tools used by the contractor in designing the ‗C‘ model.

The tail assembly on the ‗C‘ model was to be identical to those used on earlier versions of the F-38. Because of changes to other sections of the airframe and the addition of the ground attack missions to the plane‘s

operational envelope, the load forces exerted on the tail section of the ‗C‘ model would be different from those exerted on earlier models. The

F -38C Air-Frame Testing

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contractors design engineers however, had studied the M and S of the changes in load forces and did not consider the changes a problem. The M

and S results clearly indicated no significant change in load force magnitude. Load forces had simply changed from being a tension to being a

compression. Bernal had a great deal of confidence in the F-38 M and S tools; they had

been validated and perfected to ‗the nth degree‘ over the years. He was concerned however, that the subtle details of the tail section omitted from the finite element analysis model of the F-38, such as the presence of screws

and bolts, could result in actual load forces being significantly different from predicted load forces. In the instant case, Bernal was uneasy with the

model‘s assumption that a given level of load force on certain parts of the tail section would have the same impact on stress and fatigue rather than compression and vice versa. For this reason, Bernal believed there was a

small but significant probability that the expected changes in the load forces exerted on the F-38C tail section could not result in unexpected structural

failures or fatigue cracks during the life of the plane. The consequence of a structural failure or fatigue cracks in the tail section

was potentially catastrophic. It could result in the loss of planes and pilots. The cost of correcting such a defect, post production, through rework, modification or replacement, would likely range in the hundreds of millions

of dollars and/ or the operational envelope of the plane could be severely restricted.

In preparing the developmental test plan in 1994-95, Bernal had advocated reducing the risk of stress-related defects in the tail section by subjecting

non-flying tail sections to design limit load and fatigue testing representative of the F38C mission profile. This was to be done as part of ground testing. Hammond had disagreed. In his mind, the probability of stress problems in

the tail section was too low to warrant the expense and added schedule time involved in conducting load and fatigue testing. The tail section had been

tested extensively during ground and flight testing of earlier models of the F-38 and there had been no tail section stress problems experienced with more than 600 F-38s that had been put in service. Hammond had been

more concerned about focusing T and E resources on areas of the plane that were being changed.

During test planning, McPherson had not weighed in on the tail section testing issue specifically but was adamant that ground testing not exceed

the 12 months planned in the integrated program schedule. A longer ground test phase would drive up program costs, delay IOC and possibly require significant reprogramming of funds.

After consulting with the T and E and Risk management IPTs, Bernal and

Hammond arrived at a solution that both found acceptable. They agreed that load testing of the tail assembly would be scheduled as the last critical path event for the ground test phase. Testing of those areas of the plane that

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were undergoing design changes (e.g. engine, wings, avionics) would be given priority on testing resources since both believed there was a greater

probability of design problems with the changed areas than with the trail section. Corrections of any design problems with changed areas could then

be worked concurrent with tail section testing, which was expected to yield ‗peace of mind‘ for Bernal and no design issues for Hammond.

Test Execution Ground testing had started in October 1996 and was scheduled to be completed by the end of September 1997. For various reasons including

delays in building assemblies, delays in accessing test facilities and unexpected technical glitches, ground testing was more than three months

behind schedule and $10 million over budget (contractor cost related to schedule delay and direct testing costs). Most of the problems occurred during the first months of testing. After January 1997 things improved but

by May it was clear that the ground phase would not be completed until the end of the calendar year.

In response to these developments, McPherson had requested his staff and the contractor review ground and flight test plans and determine if there

were ways to make up the three-month slip and reduce testing costs without exposing the program to unreasonable risks. McPherson did not want the program to be showing significant cost and schedule problems this early in

the testing program if possible. He knew such problems would serve as an invitation for additional outside help in running his program.

Hammond‟s Proposal In early May 1997, Hammond informed Bernal that he intended to propose

to McPherson that the government delete design load and fatigue testing of the tail section during testing to save time and money. Hammond and the contractor‘s engineers believed that, in the light of current budget and

schedule constraints, extensive ground testing of the tail assembly, a low risk area, was no longer affordable. They argued that although stress data

collected during upcoming flight testing would not be as robust as data collected during ground testing, the data would nevertheless be adequate to confirm the integrity of the design. Bernal disagreed with this proposal. The

test budget and schedule had already been cut several times during the three years the F38-C program had been in existence. From Bernal‘s perspective, any further cuts in testing would expose the program to

unacceptable risks. His preference was for McPherson to seek additional funding or cut other areas of the program‘s schedule and budget.

After lengthy discussion, Bernal and Hammond both concluded that they were both in general agreement concerning most of the facts related to

Hammond‘s proposal but had different judgments concerning the reliability of the finite element analysis model and what was an acceptable risk. They

agreed to jointly present their positions on the proposal to McPherson.

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McPherson had been favorably impressed with the presentation. Bernal and

Hammond had both advanced good arguments in support of their positions. They had presented the following information:

Deleting the tail-section ground test would shorten the ground phase

by three months and allow building of the flight test prototypes to begin in October as originally planned. It would also reduce test-related costs by $4-6 million ($1 million from avoiding the direct cost

of conducting the test i.e. test site expenses and cost of test articles, and $3-5 million in reduced contractor costs derived from shortening the length of ground testing from 15 to 12 months and the overall

schedule program by three months).

Hammond believed that the probability that the M and S had not uncovered a major tail section problem (i.e. had indicated a false pass)

was in the order of 1-2%. Bernal on the other hand, believed there was a 5-10% probability that the M and S had not uncovered a major tail section stress problem. Both acknowledged that their probabilities

were subjective estimates based on professional judgment and experience working with modeling and simulation. McPherson had

great confidence in the professional integrity and technical competency of both men and accepted their judgments as sincere representations of their points of view.

Bernal and Hammond judged that there was a 1-5% probability of

failing to detect a major tail section stress problem (not already indicated by M and S) during flight testing. Both agreed that collection of stress data during flight-testing was of minimal cost ($100,000) and

not a schedule driver, since the data would be collected independently to the performance of other flight test events. Both also agreed that

flight testing would be less robust than ground testing in detecting stress problems.

In their judgment there was a 0.1- 0.5% probability of not detecting a major tail section stress problem (not already indicated by M and S)

during ground testing. Bernal and Hammond both believed that testing the tail section during the ground phases would provide

extremely robust design data, far superior to what could ever be ascertained from data collected during flight testing. During ground testing, the tail section would be exercised to the breaking point, thus

revealing the design‘s load and fatigue limits. Stress data collected during flight testing could be used to tweak and validate M and S and possibly reveal stress problems within portions of the operational

envelope flown during testing, but would not yield definitive information on design load and fatigue limits.

In their judgment, the probability of not detecting a major tail section

stress problem (not already indicated by M and S), if both test events

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(ground and flight) were conducted was effectively zero (0.001- 0.025%).

If major tail section stress problems were detected during flight testing

it would cost about $25-50 million to fix and re-test the prototypes. The test program would also incur a schedule delay of three to six

months.

If major tail section stress problems were detected after the production

and fielding of 500 planes it would cost about $500 million to $1 billion to fix the planes and/ or the war fighter would have to make do

with a less capable (i.e. lower g‘s and reduced stores carrying capacity) and less durable plane.

Hammond had advanced six basic reasons for deleting ground testing of the tail assemblies. First, circumstances, namely cost and schedule constraints,

had changed significantly since the test planning was conducted in 1994-95. As a result of current cost and schedule overruns, Hammond agreed that it was necessary to ask whether the program could afford ground

testing the tail section simply to reduce the risk from very low to nil. Skipping ground testing and relying solely on flight testing to reveal any

stress problems not detected close up by M and S would reduce the ‗worst case‘ risk of an undetected problem to a range of 0.1% (Hammond‘s worst case) and 0.5% (Bernal‘s worst case). That put worst case odds between one

in 200 and one in 1,000. Second, when the test plans and integrated program schedule were

originally put together, testing of the low risk tail assembly was scheduled for the end of the ground phase. It was contemplated that any fixes and re-

testing necessary to resolve design issues, identified during testing of the higher risk ‗changed areas,‘ would be worked concurrent with tail assembly testing. It was for this reason that Hammond had eventually acquiesced on

Bernal‘s desire to ground test the tail assembly before building flight test prototypes. Therefore, elimination of tail section testing would allow the

program to complete ground phase testing and commence with assembly of flight test prototypes by the end of September as originally planned.

Third, on the basis of expected value, it was difficult to justify ground testing the tail section prior to assembling the flight prototypes. Hammond, using his probabilities for the existence of a defect not already indicated by M and

S, had calculated the expected value (assuming no ground for testing) of the cost of fixing prototypes if a stress problem was detected during flight-

testing as being in the range of $250,000 to $1 million. It was Hammond‘s position that the program would be better off self-insuring against the small probability of incurring $25-50 million in prototype re-work expense and a

three to six month delay rather than paying $4-6 million for the ground tests and adding three months to the schedule simply to reduce the probability of incurring the loss to effectively zero. Hammond had argued that gambles of

this nature were implicit in many F-38C program decisions and, although

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one or two may turn out unfavorably, overall the program benefited in terms of cost, schedule and performance from bearing risks on favorable terms. He

also stated that ground testing of the tail section could not be justified on the basis of expected value even if McPherson was inclined to accept

Bernal‘s judgment of a 5-10% probability that M and S had failed to indicate a defect in the tail section. Even under Bernal‘s worst case probability (10% chance of M and S not indicating a defect) and worst case outcome ($50

million) would the decision to do or not to do ground testing become an even gamble.

Fourth, Hammond conceded that stress data collected during flight testing would sufficiently reduce the risk of an undetected defect in the tail section

to a level that would make deletion of ground testing a favorable gamble on the basis of expected value. Using his probabilities of an undetected defect after completion of flight testing, Hammond calculated the expected value of

the cost to fix the F38C fleet as being in the range of $50,000 to $1 million. Again, Hammond argued that only under Bernal‘s worst case probabilities

and outcomes would the decision whether to do ground testing become an even gamble.

Fifth, the F38-C TEMP did not mention ground testing of the tail section. Nor did the F-38C Developmental Test and Evaluation (DT&E) Plan approved by the OSD‘s DT&E oversight office (Deputy Director for Strategic

and Tactical Systems, Developmental Test and Evaluation (DDST&S (DT&E)) specifically require ground testing of the tail section. The F-38C DT&E Plan

explicitly called for ground testing of the wings and other areas of the air frame undergoing change. Ground testing of unchanged areas was to be conducted ‗as needed‘ as determined by the PM. To Hammond, this

indicated that the DT&E community did not view ground testing of the tail section as necessarily being consistent with the best use of the programs T&E resources. The fact that ground testing the tail section was beneficial

was merely a necessary condition for doing the test and not a sufficient condition. Spending time and money would be available to satisfy other

testing needs of the program. It was Hammond‘s opinion that the benefits of ground testing the tail section was relatively low and the resources could be put to better use addressing unknown unknowns that would surface during

developmental testing.

Sixth, Hammond suggested that perhaps Bernal was somewhat biased towards testing things that the T&E community knew how to test well, such as the structural integrity of air frames, while paying less attention to things

that it did not know how to test well, such as avionics software. Hammond had expressed concern that the program was falling into the trap of testing for reasons of orthodoxy rather than risk management. He averred that

some in the test community seemed to have a paternal disposition towards eliminating virtually all risks associated with performance requirements

testers knew how to test, while accepting significant risks with performance requirements for which well developed testing methodologies did not exist.

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Bernal had offered three basic reasons for why ground testing should be conducted. First, Bernal believed it was unwise to invest the time and

money building flight prototypes when there was a significant probability of there being tail section design problems undiscovered through M&S. It was

better to invest $4-6 million and three months of critical path time confirming the integrity of design at this stage than taking the risk that a problem would crop up during flight testing. Even worse was the possibility

that the tail section would pass flight testing with an undetected defect that wouldn‘t show up until the fielded planes had accumulated significant service life.

Second, although Bernal acknowledged the utility of expected value

analysis, he argued that other factors such as program reputation and risks to pilots had to be considered. He questioned whether the program could survive if tail section problems surfaced during flight testing, resulting in

$25-50 million of additional cost and 3-6 months of delay. Furthermore, he did not believe expected value analysis was very useful when dealing with

the catastrophic outcomes the program itself could not guard against, i.e. $500 million- $1 billion to fix 500 planes with defective tail sections.

Third, Bernal stated that it was prudent to eliminate almost all risk of airframe defects. For the F-38C to have a long service life it was necessary to make sure the air frame was rock solid. As Bernal had explained, the life of

the F-38C would always be extended with upgrades to the engine, avionics etc. But such upgrades would not be feasible unless the air frame was

highly durable. It was extremely difficult and almost always uneconomical to modify or rebuild an air frame. Bernal offered the long life of the B-52 as an exemplar of the benefits of a durable air frame.

McPherson observed that during the presentation, Hammond had emphasized the probability of the F-38C not passing ground loads testing

was very low and thus cast doubt on the utility of investing money and time on this testing. Bernal, on the other hand, did not dispute Hammond‘s

confidence in the F-38C‘s tail section passing the flight testing but seemed more concerned that the F-38C could pass flight testing but still have a potentially catastrophic design flaw. To Bernal, ground phase testing was

necessary to reduce the probability of a false pass to an acceptable level.

Decision

McPherson did not enjoy having to make decisions of this type. He understood all to well however, that making such decisions was an

important aspect of his PM duties. This would be just one of the many risk management decisions he made thus far on the program and he knew there would be many more.

As McPherson ruminated over the decision, the spectre of the C-5A program

loomed in his mind. McPherson did not want a C-5A type disaster on his hands. To meet an aggressive late 1960s delivery schedule, the C-5A

35

program was executed using McNamara-era acquisition initiatives such as ‗total package procurement‘ and ‗concurrent development and production.‘

One consequence of this approach was that design limit load and fatigue testing of the C-5A did not occur until production was well underway; it was

impossible to make test articles and complete design limit load and fatigue testing without delaying production milestones for months. Hence, when it was discovered that the wings failed at 126% of design limit load and cracks

appeared during fatigue testing after less than half the 30,000 hour service life, there was little that could be done but impose severe payload restrictions on an airlifter that was being procured specifically for advanced

range and payload capability. The wings of the airlifter were eventually modified during the 1970s at a cost of $1.5 billion, allowing the airlifter to

meet payload performance requirements. McPherson realized that the circumstances of F-38C program were vastly

different than the C-5A. The C-5A program was a full-scale development effort of an entirely new plane in an era before the advent of powerful M&S

design tools such as finite element analysis. In contrast, the F-38C was a variation of an existing aircraft for which there existed an abundance of test and performance data. The risk and unknown unknowns associated with

the structural integrity of the F-38C air frame were immensely smaller than those related to the C-5A during its development. Nevertheless, the saga of the C-5A did serve as a stark reminder to McPherson that structural

problems do, in fact, occur.

McPherson could not dismiss Bernal‘s concerns about the possibility of there being structural problems undetected by M&S. He recalled that the C-17 airlifter had been designed in the late 1980s and early 1990s with all the

benefits of contemporary M&S design tools. The M&S results clearly indicated that the C-17 wing design would meet the 150% design limit load. Yet, when tested in 1992, the wing failed at 119% of the design limit load.

The wing design had to be improved and retested before the program proceeded to production. Again however, the C-17 was a completely new

plane and not a variation of an existing plane. McPherson understood there was never enough time and money to test

everything. He knew the world would little note a decision not to ground test the tail section if things turned out well. On the other hand, if there were

any bad consequences such a decision would no doubt become part of the lore of the acquisition community and frequently cited as an example of imprudent program management. He could just imagine some acquisition

academic droning on about how a reckless PM screwed up the F-38C program by trying to take shortcuts.

Although there were no areas of the F-38C program schedule or budget that could easily serve as a bill payer to offset the program‘s current cost and

schedule overruns, all the low hanging fruit had been plucked by his predecessors, McPherson was confident that he could forge an alternative solution (take a little here, cut a little there, compress some here etc) if

36

ground testing the tail section was truly the right thing to do. The program of course would have to pay the price of such a decision by bearing the risks

associated with ratcheting up the tautness of the program‘s budget and schedule. Although the tail section test wasn‘t overly momentous in light of

the overall size of the program, McPherson understood that he could tinker with the budget and schedule for only so much before putting program execution in serious jeopardy. More importantly, he knew there were

unknown unknowns that would appear in the future presenting additional budget and scheduling problems.

McPherson wished he knew how the costs and risks associated with the tail section decision compared with those of the yet unknown future budget and

schedule decisions he would have to make. Then he could better decide whether to do the test or assume the risk of not doing the test and preserve ‗tinkering‘ space for future contingencies. Although experience and history

afforded him a vague notion of the range of possibilities it was impossible to have such foreknowledge. To McPherson, it was not just the risks associated

with the tail section, but also the irreducible uncertainty of the future that made his decision so vexing. He fretted over the possibility of finding himself confronting future cost and schedule overruns and regretting he had not

been more aggressive in saving money and time by assuming risks such as those presented by the tail section. Or would he find himself contending with the performance problems late in the program that could have been

resolved at a far lower cost if they had been identified early in testing?

Questions

Drawing from your own knowledge and experience, can you

think of other pros and cons to Hammond‟s proposal not mentioned in the case?

Does McPherson have any other alternatives than the two presented by Bernal (undertake the design load and fatigue

testing on the tail section prior to building the flight test prototypes) and Hammond (delete the tail section ground

test from the test program completely)?

If you were in McPherson‟s position, what criteria would you

use for evaluating the alternatives?

If you were in McPherson‟s position, what decision would you make?

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Mr. John F. Horn Defense Acquisition University Defense Systems Management College

Background June 11th, 2000 was a dismal day at Wright-Patterson Air Force Base, Ohio,

both outside and within the office. Colonel Arnold Gooding, Program Director for the F-117 Aircraft System Program Office (SPO), was concerned. He was scheduled to brief Ms. Rebecca Williams, Assistant Secretary of the

Air Force for Acquisition (SAF/AQ), on his plan to meet the agreed upon 91% SPO manning reduction on Wednesday. By transferring the tasks that were not inherently government tasks to the prime contractor, Lockheed

Martin Aerospace-Palmdale (LM Aero-P) and reducing program oversight. He already had whittled the program office‘s assigned personnel from 226

down to 55. But how was he going cut another 35 people and reach the final goal of 20? ‗As the SPD [the program‘s single manager],‘ he thought, ‗I‘m responsible for managing the development and acquisition of aircraft

modifications along with the logistics tail necessary to operate the system. The workload requirements have changed dramatically since the plan was

established three years ago, yet I'm being held to the out-dated goal.‘

Colonel Charles Gooding

F-117 Aircraft International Version

38

As a career program manager, Col Gooding had spent most of his career successfully working at various aspects of Air Force acquisition process. He

was a seasoned professional who had served as a program manager at four different SPOs and had developed and implemented lean organizational

structures at two previous SPOs.

Total System Performance Responsibility (TSPR) Program

The F-117 Aircraft program was being managed under TSPR, an innovative management process designed to reduce total ownership costs by expanding the contractor‘s role in areas traditionally performed by the government. The

government retained certain "inherently government" roles: program direction, requirements determination, budgeting/financial execution,

contract management, product/service acceptance, and security. The remainder of the functions were transferred to the contractor; acquisition and sustainment support, system engineering, flight test support, depot

modification, material management and logistics support. By contracting out these functions, the government would be able to reduce the SPO manning.

Another tenet of the program was reduced government oversight, again

reducing SPO personnel and their associated salary costs. As an example of this new partnership, the contractor became responsible for the procurement of spares. Under the historical logistics philosophy, a

government supply technician or item manager was responsible for monitoring the spares inventory. When the inventory reached the reorder

point, the item manager placed a procurement order to obtain the item. Inventory and item management costs along with the cost of the spare parts were borne by the government. Under TSPR, the contractor was given the

responsibility to assure that whenever a government maintainer reached for a spare part, it would be available. This allowed for ‗just in time‘ inventory and eliminated the need and cost of the government item manager and the

inventory storage costs.

The theory was that by assuming maintenance responsibility, industry would be motivated to invest in upgrading equipment to make it more reliable and cheaper to maintain, as long as the contractor had a stake in

the savings. This required the contracts to be structured for a win-win situation for the contractor and the government. A high level of performance would be guaranteed through profit incentives.

The F-117 TSPR Contract

Using the five-year (w/three-year option) contract, the SPO transferred a great deal of responsibility to LM-Aero-P, the F-117 program prime contractor. The TSPR contract was structured as a Cost Plus Incentive Fee

contract with an award fee feature. The contract had an award fee pool of three percent and two incentive provisions. There was a seven percent

performance incentive plus a 50/50 cost sharing incentive. Any savings

39

would be split between the contractor and Air Combat Command (ACC). The government‘s interest was protected through the contract structure. The

incentive fee portion was determined by an objective evaluation of LM Aero-P‘s performance around key metrics of importance to the war-fighter that

were within the contractor's control. For example, for the parts LM Aero-P provided, they would be required to achieve a Not Mission Capable Rate (NMCR) equal to or less than 5%. Their incentive fee would be based on their

performance in meeting that goal. The award fee was based on subjective evaluations of their performance in the areas of technical, management, subcontracting, and customer satisfaction.

The contract structure was simplified to reduce oversight. The previous

contract had contained 33 Contract Line Item Numbers (CLINs) and 180 Contract Data Requirements List items (CDRLs). The entire TSPR contract contained only four CLINs and 11 CDRLs.

The September 1997 Program Strategy Panel decided that only six functions

were inherently government: program direction, requirements determination, budgeting/financial execution, contract management, product/service acceptance and security. Further, it set an aggressive

manpower reduction goal of reducing SPO personnel from 226 to 20 by FY 2002. The sole responsibility of the SPO team was to perform those inherently government functions. All the other work normally accomplished

by the program office would be absorbed by other organizations or the contractor.

Overall, the TSPR approach offered the Air Force $82 million in cost savings if the contractually guaranteed funding levels were maintained. In addition,

$90 million in personnel costs would be saved if the 20-person SPO goal were achieved. Additional savings were realized when the TSPR contract had a $7.8 million under run in the first year. The Program Office saved $7.14

million in personnel costs by meeting the manpower glide-path; reducing to 55 people. Unfortunately, higher headquarters and Congress were unable to

guarantee full funding for the TSPR contract. The SPO had a $55 million Operations and Maintenance (O&M) shortfall over the next six years.

Program Office Workload Study Col Gooding tasked Robert Hislop, his Deputy Program Manager, to prepare a workload study. While reviewing the study, Col Gooding quickly realized

he had a dilemma. The study showed that the workload for 2000 to 2006 would initially require 61 people but it could be drawn down to 54 if LM-

Aero-P would accept an additional nine man-years of effort within the scope of the current contract. But any way you looked at it, 54 was a far cry from the FY 2002 goal of 20 persons.

Hislop had outlined a theoretical approach to fulfilling the SPO‘s mission

with 20 people through a combination of ASC functional home office support, greater assumption of tasks by LM Aero-P, increased support

40

contractor assistance, or deletion of external taskings. Another option to fulfill the manning reduction requirements was for the SPO to use non-

program office ASC graybeard committees and functional experts to monitor/work the modification projects. Both these approaches assumed

that ASC would exempt the SPO from any external taskings and that additional funding would be available to purchase additional support contractor assistance.

Col Gooding shook his head as he completed his review of the plan. "This plan is flawed on several counts. First, the functional home offices agreed

the tasks were appropriate and worthwhile, but they lacked the budget or people to provide the additional support needed by the F-117 SPO. Second,

the SPO‘s beleaguered O&M funding could not afford any additional support contractors and only two people were presently under contract. Third, the external taskings, although often of low-value to the F-117 weapon system,

were both difficult to turn off and unpredictable in nature and scope. Experience told Gooding that even if the Air Force Materiel Command and

ASC Commanders agreed to exempt the SPO from external taskings, over time the taskings would reappear. The SPO might possibly transfer the equivalent workload of nine people to LM Aero-P within the TSPR contract

scope, but that might not be in the best interest of the government. Reducing program oversight introduced additional risk, and, finally, the O&M budget was already under funded.

Robert Hislop's package also documented the successes and failures of the

TSPR effort. The core government functions were refined by balancing the risk associated with very limited oversight into the LM Aero-P Cost Estimating and Systems Engineering Systems. The review highlighted areas

where additional focus and people were needed. The SPO was not maintaining a good interface with the user/warfighter and some of the necessary modifications were falling behind schedule. A tremendous amount

of time was spent on non-F-117 related tasks. The study clearly showed the current workload required 61 man-years of effort. Reading this, Col Gooding

thought, ‗It is no wonder the 55 SPO personnel feel overworked.‘ There was an innate problem with the method used to calculate the 61-

person requirement. The aggregate of 61 was a combination of pieces of people, i.e., 20% of a person on task one, 30% of a person on task two, and

50% of a person on task three combined together to make one authorization. Because each task requires a specialized skill or knowledge, the SPO really needed three different people, since it wasn‘t physically possible to hire 50%

of a person and finding highly-qualified part-time personnel wasn‘t likely. Another major concern was the skill set of the actual people assigned. The

Air Force (AF) personnel system was not very judicious in assigning people. If the SPO needed an aeronautical engineer, assigning any kind of an

engineer was good enough for the system. If a budget person was needed, anyone with a financial specialty code (budget, cost, or earned value) could be assigned. Col Gooding knew the job could possibly be accomplished with

41

20 folks if he could handpick the people. Then again, all the authorizations would probably not be filled, or there could be a five to six month lapse

between when a person departed and another arrived. Normally, SPOs only got 80% of their authorized slots filled, so 55 authorizations would turn into

44 people, and 20 authorizations could possibly result in only 16 people being assigned.

His Dilemma The program executive officer (PEO), Major General Lovell, had made it clear to Colonel Gooding that the primary thrust of his efforts should be aimed at

reducing the F-117's Total Ownership Cost. He outlined five major performance objectives for 2000: (1) continue SPO downsizing to reduce AF

personnel costs, (2) meet the Total System Performance Responsibility (TSPR) incentive metrics to keep the fleet flying, (3) satisfy the customer, (4) obtain the necessary funding for these efforts, and (5) spend the funding

appropriately to reduce the Total Ownership Cost (TOC). Col Gooding was acutely aware that Major General Lovell desired cost savings.

As Colonel Gooding looked out the window, a million thoughts and questions ran through his mind. ‗How can I do my job with 20 people when I

can‘t get it done with 55? How many people do I really need? What tasks really need to be accomplished?‘ He narrowed his alternatives down to three different approaches.

Gooding thought he could build a 20-person SPO solution that relied on

realigning and outright eliminating tasks, probably in the acquisition development and customer support areas. This option would only work with the full support from higher headquarters in terms of team selection,

funding and direction, as the Centre‘s functional offices wouldn‘t voluntarily accept the additional workload. The manpower saving would be about $90 million. Because the F-117 program is a TSPR pilot program and Rebecca

Williams has already proclaimed success, this would be the most politically correct option and my boss' preference.

‗Still,‘ he thought, ‗I can make a strong case for a 55-person SPO. We're not quite getting the job done now with 55 folks and I'm pushing them hard. It

would be a challenge to maintain this level of effort over the long-term, especially considering I'm projecting the workload to increase. I might be able to improve morale and the workload if I can eliminate or realign some

tasks. This option would save $82 million in manpower costs; not as good as option one but better than option three ... it is the status quo.‘

The bottom-up manpower study showed a 61-person workload. ‗The study results and the CSAF survey are both strong arguments for increasing

authorizations because I have the workload. How can I expect any more from my folks -- especially since my TSPR contract isn‘t fully funded in the

FYDP? Who is going to do the work if my $55 million shortfall isn't resolved?‘ Gooding knew it was very unlikely that LM Aero-P would take on additional

42

work without additional dollars. This option still saves $78 million, that's only $12 million less than the best option.

Questions

Would you support a TSPR initiative in your program office?

Why? Why Not?

What are the major difficulties in implementing a TSPR concept?

Are all these alternatives available in your country‟s

acquisition process?

How would the policies and procedures of your country‟s

acquisition process affect this decision?

43

Mr. Tom I. Siemsen Defense Acquisition University Defense Systems Management College

Background Lieutenant Colonel Richard Murty looked up at the clock in his office and

thought to himself, ‗I‘m going to go home. I‘m not going to solve this problem tonight and I should probably get some rest and make a decision when I‘m more clear-headed than I am now.‘ The ‗problem‘ that Murty

referred to had arisen shortly after he arrived early in September 2001 at PM-Combatant to assume the duties of the Deputy Program Manager. Having spent most of his Army career in the infantry, he was intimately

familiar with the strengths and weaknesses, or (too often) the absence of material solutions to the needs of individual soldiers. The Army spent huge

sums of money every year on the ‗headliner‘ equipment that caught the eyes of the media and the ‗action-thriller‘ novelists. But the individual soldier also needed more mundane pieces of equipment – web gear, gloves and

liners, sand goggles, knives, body amour, etc. – and this often did not achieve the highest level of priority among decision-makers. With the

anticipated deployment of large numbers of personnel to Afghanistan the sense of urgency among the troops regarding such equipment had gone up markedly, but the acquisition system continued to move at a snail‘s pace.

Murty knew how he could legally acquire much of the equipment the individual soldiers were calling for on an expedited basis, but there were substantial obstacles to doing so, as well as potential consequences for

Murty himself.

Lieutenant Colonel Richard Murty Lt. Col. Murty had been in acquisition for just over three years. Prior to that he had been an infantry officer, with a tour in Somalia and more recently a

tour in Kosovo. He was Ranger-qualified and had no plans to leave the infantry, but a training accident in 1998 had put him in a hospital for several weeks and, upon being released, he was told that his days in

operational commands were over. As a result, Lt. Col. Murty was assigned as a Deputy PM to Special Operations Command (SOCOM) at MacDill Air

Force Base, Florida. As a transitional assignment – from operations to support – the SOCOM tour

was a good one. The organization was comparatively small, which meant that someone in acquisition could actually see the acquired item being used

by those who had initiated the requirement. It also meant that the chain of

PM-Combatant

44

command, something Murty had learned was essential to a well-run military organization, was fairly short. Consequently, co-ordination cycles and

approvals were relatively easy to negotiate. Murty had always believed that those ‗at the top‘ would support actions and decisions that were in the best

interest of the Army; the problem was getting through the bureaucracy that separated those trying to do a good job from those in command (who genuinely wanted a good job to be done). At SOCOM the bureaucracy

appeared to have been minimized and that meant that one had a better chance of getting to the man or woman with the authority to make or approve decisions.

All of these SOCOM characteristics reinforced Murty‘s identification with the

men and women who were periodically required to deploy and defend the nation. ‗Are you supporting the troops by doing this?‘ was a question he often asked those who worked for him and when the person asked could not

immediately reply ‗Yes, sir‘ and explain how that was the case, he or she could expect a rapid redirection. Indeed, that question became the central

guiding tenet for Murty as an acquisition professional. He often told those he worked with, ‗If I can no longer lead others in the field, I can at least ensure that they will have the equipment they need to do the job they have

been assigned.‘ In September 2001 Lt. Col. Murty was reassigned to the PM-Combatant

program management office (PMO) located at Ft. Belvoir, VA, as the Deputy Program Manager (DPM).

PM-Combatant The mission of PM-Combatant was to arm and equip the individual soldier.

Literally everything the individual soldier might wear or carry was the responsibility of the PMO. As such, the purpose of the organization was enhancement of the soldier‘s ability to survive as well as his ability to

capture or kill the enemy. Although any one program might be comparatively small (most were valued at less than $1 million), the total

annual budget for all PM-Combatant programs was approximately $260 million. That dollar amount however, did not begin to tell the entire story. Altogether, the PMO was responsible for more than 300 programs/projects,

all of which were focused on the individual soldier. While no one individual would be expected to carry or use all of the items being developed and procured, various combinations of items were possible and therefore many,

if not all, of the items had to be compatible with one another. The compatibility and interface issues were enormous. Every program had its

own ORD (Operational Requirements Document) and many programs had multiple contracts intended to satisfy those sets of requirements.

Despite its mission‘s importance and complexity, however, those assigned to PM-Combatant felt that soldier equipment was a ‗bill payer‘ for the larger

and better known Army systems. There were two reasons for this. First, Army officers are judged on their readiness levels, and boots were not a part

45

of that measurement. Money would therefore almost always be taken from individual equipment items to pay for systems spares. Second, most soldier

equipment was produced by relatively small suppliers and these firms lacked the lobbying capabilities of large diffuse contractors like Boeing or

Lockheed-Martin. This, coupled with the fact that no Congressman‘s re-election was dependant upon the well-being of these small suppliers, meant that the natural political pressure for support was often absent.

In a program office environment of this sort it was essential that communication within and between various programs be maintained.

Moreover, the PMO‘s management had to be kept informed of the major developments on numerous projects. Ultimately they were responsible for

ensuring not only that individual projects stayed on track, but also that the PMO itself did not lose sight of the ―big picture‖, since that could result in one or more projects developing in directions that were incompatible with

other projects or somehow counterproductive with regard to the overall goals of the PMO. As a result, nearly all of the contractors supporting PM-

Combatant had fairly substantial reporting requirements, and the project officers flowed much of that information to the Program Manager and Deputy Program Manager.

Additionally, since every item acquired by the PMO bore upon the survivability and lethality of the individual soldier, nearly every item

required extensive testing. While many of the major systems being acquired by other PMOs had comparatively limited potential operating environments

(the Abrams tank would not be expected to operate in either rugged mountains or swamps, for example), the individual soldier could be deployed to any and every sort of operational environment and much of the

equipment he/she might use would be expected to have a comparable operational range as well. As a consequence, testing was frequently extensive and prolonged.

9/11 and Afghanistan

Richard Murty understood all of this, but he found it frustrating nevertheless. Assigned to PM-Combatant on 1st September 2001, Murty had barely begun to get his feet on the ground when the tragedy of 9/11 struck.

Like almost every other American, the personnel of PM-Combatant spent most of the morning of September 11th glued to a television screen in their building cafeteria. At 13.30 hours, however, Col. Christoper Legg, Program

Manager for PM-Combatant, called a meeting of the key members of his management staff, Murty among them. ‗I don‘t have any more information

than the rest of you at this moment,‘ Legg said, ‗but the events of this morning are obviously going to change everything. How long it will be before we know for sure who has done this, no one in this room can say. But once

we do know for sure it‘s going to mean U.S. Army combat on a larger scale than we‘ve seen in years, and that‘s going to mean that our procurement

processes are going to have to change. We‘re going to have to buy more and at a much faster rate than planned. I‘m going to have an ‗all hands‘ first

46

thing tomorrow morning, but I want all of you to begin thinking right now about how we‘re going to accomplish our mission in light of what has

happened.‘

Notwithstanding the sense of urgency that ran throughout the organization and the entire Department of Defense, Murty saw relatively little change in the way acquisition was being done. Early in October, limited Central

Intelligence Agency and Special Operations Forces had begun operating inside Afghanistan, largely in support of Afghan Northern Alliance forces, and air strikes had begun to hit Taliban and al Qaeda targets, particularly in

the south of the country. No major U.S. ground forces, however, had been deployed into Afghanistan. Then, late in December, Murty received a phone

call from a senior NCO he had served with some years previously and known again at SOCOM. The man had told Murty that he was deploying with the 101st Airborne to Afghanistan in the near-term and that he was wondering

if his ‗old boss‘ might be able to come up with a pair of the new boots that Special Ops personnel were now being issued. ‗Sir, we‘re hearing that the

standard issue boot lasts about six weeks in the mountains over there and I was wondering if, now that you‘re in acquisition, you might be able to get some of the new ones for us.‘ Murty‘s initial reaction was one of mild

surprise. ‗Sergeant, are you saying that your unit isn‘t issuing the new boot to everyone?‘ ‗No sir. The Air Force seems to have something very similar to them, but the Army doesn‘t have any.‘ When Murty asked what else his

former NCO needed, he was given a fairly substantial list. At the end of their conversation Murty said, ―Let me do some checking for you, Sergeant;

I‘ll get back to you.‖

Murty‟s Dilemma

The ‗checking‘ Murty did yielded some disturbing results. The list Murty had been given in the telephone conversation included the extra rugged mountain boots, highly scratch resistant wind/sand goggles, a new belt and

web harness, battery heated gloves and liners, thermal weapon sights, and knives for assorted functions. None of these items had completed testing or

were being issued to the 101st troops, but Murty knew that all of them (and more) had been issued by SOCOM, the Marine Corps, the Army Special Forces, the Air Force, or Navy Seals. Moreover, during that same

conversation the Sergeant had stated that some of his personnel were buying equipment – ‗camelback‘ water carriers were apparently popular items - from various ‗outdoor‘ firms and some were even purchasing ‗body

armor‘ protective gear from ‗surplus‘ websites. After two days of checking Murty had determined that there were three principal obstacles to simply

buying the items on his list: the requirements people said that every item Murty mentioned was already in development and that, while many of the items Murty had identified were similar to the items called for in the various

ORDs, the Army‘s actual requirements were different; the testing community said that, although the items on Murty‘s list had undoubtedly been tested,

they had not been tested to the specific requirements of the ORDs in question; lastly, the logistics people said that the simple purchase of various

47

items did not address the problem of how each of those items would be supported and replaced, once they were in the field.

All of this made sense to Murty and came as no surprise, but what everyone

was failing to understand was that troops were being deployed in combat without the equipment that they needed – equipment that was available from either government or commercial sources. ‗Why can‘t they see that

circumstances have changed?‘ Over the next two weeks Ron Murty made several phone calls, either to

people with whom he had previously worked or to people at organizations he knew were purchasing items similar to those PM-Combatant was developing.

In each instance, he arranged to have a single item shipped to his office. For more expensive items the shipment was made with the understanding that it would be returned within thirty days. Friday afternoon, at the end of

the two week period, Murty put everything he had received into three duffel bags, put the bags in the trunk of his car, submitted his leave request for

approval and drove to Fort Campbell, KY. At 10.00 hours the next day Murty met with his former NCO, five other

senior NCOs and four junior officers. As he emptied the contents of the bags onto the large conference room table he said, ‗Tell me how much of this stuff would satisfy your needs better than the equipment you already have.‘

Three hours later Murty was driving back to Ft. Belvoir, trying to figure out what he was going to do. The consensus among the 101st officers and

NCOs was that fifteen of the eighteen items Murty had brought would fulfill their needs better than what was normally issued. At the same time, he kept recalling the warnings he had been given by the requirements people,

the testers he had spoken with, and the logistics people assigned to PM-Combatant: ‗The troops don‘t fully understand their own needs. There is a process for defining the performance requirements of an item and if you skip

that process users are going to come up short. Moreover, if you give someone an item and he or she relies upon it and it doesn‘t do what he

expects it to do, someone might die or, at best, a mission may not be successful. Finally, how are you going to fix or replace an item that is damaged or lost? You may be able to come up with a sufficient quantity to

initially outfit a unit, but suppliers don‘t have unlimited production capabilities and if you‘re talking about sustaining an entire division or more,

you‘re probably talking about a much larger quantity than the supplier planned for or may have the capacity to produce.‘ The one bit of good news came from the funds management department. It was clear, after several

conversations, that PM-Combatant did have the authority to acquire off-the-shelf equipment to satisfy specific soldier needs. Some existing development efforts could be impacted, depending upon how much adjustment was

required to absorb the loss of funds, but the right color and year of money was available.

After two days of checking, Murty went to see Col. Legg. ‗Sir, I don‘t really know why, but apparently there are elements of personal gear that our folks

48

need and that have already been developed and purchased by other organizations, but for some reason our PMO is not buying it for Army

personnel.‘ He then went on to explain the background for his assertion. Legg looked over Murty‘s list and tossed the paper onto his desk. ‗Richard,

do you realize that nearly every one of these items is currently in development by this organization? This is the sort of thing I was talking about the other day. We‘ve got to find a way to speed up the processes that

are currently taking us so long to get things from the drawing board to the field. Do some digging on these items. Find out the status of each one and see if there are things we can do to speed up the process.‘

‗I‘ll get on that immediately. But I guess that my frustration at this point is

that every one of these things has already been acquired and is in use by other forces – in some cases other Army personnel. Why are we reinventing the wheel?‘

‗It‘s not as simple as that, Richard. Others may have things that look like

the stuff we‘re developing on the surface, but the requirements are different. Otherwise we would have done a ―me too‖ and acquired the same thing. Obviously, off the top of my head I can‘t say what the specific differences

are, but the solution to our problem is not to drop those projects in mid-stream and try to head down a completely different river. How would we spare and replace items lost or damaged in the field? I‘ll guarantee you that

SOCOM or one of these other organizations does not have the capacity to supply the numbers of people that are going to be deployed in the near

future. Moreover, if we decide now to satisfy Army requirements by buying off-the-shelf items, we jeopardize our on-going development efforts, and just at a time when our funding is secure for the first time in years. No, we‘ve

got to find ways to get through the acquisition cycle a lot faster than we‘ve done in the past. That‘s what I want you to look into: Why does it take so long and what can we do to shorten it?‘

‗Yes sir.‘

Late that afternoon Richard Murty was feeling deeply troubled. On the one hand, soldiers were being deployed to combat with less capable gear than

was otherwise available. The better equipment could be acquired on an expedited basis, even if for only a portion of the entire force expected to be

deployed. On the other hand, doing so could jeopardize the future possibility of equipping the entire force with the best equipment by causing the Army‘s senior command to kill current development programs in order to

shift money to higher visibility weapons systems. If existing equipment was ‗good enough‘ for the 101st, why wasn‘t it good enough for the rest of the Army? That would be their argument. Moreover, it was clear that his boss

wanted no part of any plan that might cause anyone in the Pentagon to think along those lines. Murty looked up at the clock in his office and

thought to himself, ‗I going to go home. I‘m not going to solve this problem tonight and I should probably get some rest and make a decision when I‘m more clear-headed than I am now.‘

49

Questions:

What are the options that Lieutenant Colonel Murty has before him?

What are some of the possible consequences of the

alternatives he is contemplating?

What would you do if you were Richard Murty?

Are the alternatives available to Lieutenant Colonel Murty available in your country‟s acquisition process?

50

Steve S. Israel Revised by John Horn Defense Acquisition University Defense Systems Management College

Background ‗What does Don expect me to do? This work has to get done-I can‘t wait.

These money guys don‘t understand the pressures that I live under.‘ Colonel Bob Hahnemann was muttering to himself as he waited for the elevator. As the Marine Corps Amphibious Assault Vehicle (AAV) program manager (PM),

Bob was responsible for two jobs. He had to make necessary upgrades to the operational fleet of AAVs (called AAV7s). He also had to lead the next generation of AAV (called the Advanced AAV or simply AAAV) through

completion of concept development. For the AAAV, he had to come up with a plan to continue developing the necessary test vehicles to support the

Marine Corps‘ follow-on program. New test platforms were needed to evaluate/demonstrate the water jet technology, the new suspension and hull design, and the state-of-the-art integrated diesel engine and gas turbine

propulsion system for the follow-on program. Bob was agitated at himself and his staff. ‗How could I have planned so

poorly? The financial management system is not very flexible or forgiving. You either have the right color of funding or the party is over.‘ The more he

thought about it, the more frustrated he became. ‗I don‘t have time for games; I have ten days to get $650,000 to our contractor to maintain the design and testing schedule for the advanced technology PSD (Propulsion

System Demonstrator).‘ If Bob couldn‘t obligate the funds, the contractor would stop work and the team would disband. ‗Trying to revive the effort

later will be a debacle—I won‘t be able to reassemble the same team, and valuable corporate knowledge will be lost.‘ Bob had seen it happen before; if a complex engineering effort was interrupted for one year, it actually set

things back two years.

The AAV7 Program

The AAV7 had been a workhorse for the Marine Corps for twenty-five years. It was an amphibious assault vehicle that transported a squad of Marines

from an off-shore Landing Ship Tank (LST) to the beach at a speed of 6 knots. The AAV7‘s tracks then allowed it to transport the squad over land at a speed up to 35 mph. It was armed with a 50-calibre machine gun and a

Amphibious Assault Vehicle (AAV): „The Color of Money‟

51

40-millimetre grenade launcher. The AAV7 was a proven system that had recently undergone a Service Life Extension Program (SLEP), but it was still

older technology that was inherently more difficult and expensive to maintain. The AAV7 also had operational deficiencies such as slow water

speed.

The Follow-On Program

The AAAV had successfully completed two critical concept development phases and was immersed in the third.

The Automotive Test Rig (ATR). This phase showed the merits of the new hydraulic suspension system along with an innovative propulsion

subsystem utilizing water jet technology. The subsystem concept was validated and the program was authorized to proceed.

The High Water Speed Technology Demonstrator (HWSTD): the goal of this phase was to develop and test a unique planning hull design. The HWSTD testing showed that a planning hull design was a practical design. This effort

was funded with ‗applied research‘ dollars.

The PSD was the third phase. The program management office (PMO) had spent the last two years working with the Navy‘s Jim Shorey Model Basin (Mr. Steve Zickler) to design and fabricate the PSD full-up high speed

system. The upcoming test was politically important; failure could erode confidence and support among the DoD leadership.

Colonel Bob Hahnemann Bob was a veteran of the Vietnam conflict and had dedicated his last years

in the Marine Corps to developing amphibious vehicles. He believed in supporting the troops and was concerned that his vision of a high-speed amphibious vehicle could be subverted by the complex restrictions on his

program funds.

In a telephone conversation the week before, the Commandant of the Marine Corps, General Graham, had told Bob, ‗The AAAV is vital to the future Corps. I‘m counting on you to make it happen.‘ A decorated combat Marine

who had led his troops through the jungles of Vietnam, Bob wasn‘t about to fail at managing an acquisition/ development program.

The Funding Process Marine Corps PMs in the 1970s and ‗80s, and into the ‗90s, had a difficult

task. Their offices generally resided within Navy System Commands. As part of the Navy‘s Acquisition Corps, they reported to the Navy Component Acquisition Executive (CAE) through a Navy System Commander, and

followed the Navy‘s milestone decision procedures and processes. On the other hand, their program‘s funding requests were submitted via the Marine

52

Corps budget channels. Each PM was held personally responsible by the Commandant of the Marine Corps to develop the weapons that meet the

Corps‘ specific amphibious needs. So each Marine Corps PM had two bosses.

All PMs were required to identify and request funding needs/requirements for the PMO for each of the six appropriation areas over the future years

defense program (FYDP):

Research, Development, Test, and Evaluation (RDT&E)

Procurement

Operations and Maintenance (O&M)

Military Personnel (MILPERS)

Military Construction (MILCON)

Other

The type of work funded by each appropriation was based on statutory definitions. Each appropriation was further subdivided into various budget elements, i.e., RDT&E into program elements; procurement into line items;

O&M and MILPERS into budget activities; and MILCON into projects. It was at this level that budget authority was appropriated and controlled by

Congress. Appropriations also were subdivided into eleven major program (MP)

categories or mission areas:

Strategic Forces (MP-1)

General Purpose Forces (MP-2)

Command, Control, Communications, Intelligence, and Space (MP-3)

Mobility Forces (MP-4)

Guard and Reserve Forces (MP-5)

Research and Development (MP-6)

Central Supply and Maintenance (MP-7)

Training, Medical and Other General Personnel Activities (MP-8)

Administration and Associated Activities (MP-9)

Support of Other Nations (MP-10)

Special Operating Forces (MP-11)

For budgeting purposes and accounting control within the Department of Defense, the seven-digit program element (PE) numbers were the basic

building blocks. Each had a specific symbology to identify the type and purpose of the funds. The first two digits of the PE number reflected the MP number (01 to 11). Thus, a PE number of 06XXXXX designated that the

funds would be used for Research and Development (MP-6) while a PE number of 02XXXXX specified that the funds would support the General Forces (MP-2).

53

DOD APPROPRIATIONS

RDT&

E

Procu

rem

ent

Mili

tary

Const

ruct

ion

Mili

tary

Per

sonnel

Ops

& M

ainte

nance

Oth

er

Strategic Forces (1)

General Purpose Forces (2)

Command, Control, Communications, Intell & Space (3)

Mobility Forces (4)

Guard & Reserve Forces (5)

Research and Development (6)

Central Supply & Maintenance (7)

Training, Medical, and Other Personnel Activities (8)

Administration and Associated Activities (9)

Support of Other Nations (10)

Special Operations Forces (11)

MAJOR PROGRAMS

NAVY

DEF

AGENCIES

OTHER

AIR

FORCE

ARMY

CO

MPO

NEN

TS

Future Years Defense Program (FYDP)

Research Categories

01 – Research (6.1)

02 - Exploratory Development (6.2)

03 - Advanced Development (6.3)

04 - Demonstration / Validation (6.4)

05 - Engineering Development (6.5)

06 - Management and Support (6.6)

MP-2 Funds

MP-6 Funds

For greater visibility, Congress specified that Research and Development (MP-6) be further subdivided into six categories:

Research (01)

Exploratory Development (02)

Advanced Development (03)

Demonstration/Validation (04)

Engineering Development (05)

Management and Support (06)

The third and fourth digits of the PE number thus indicated the research category number (01 to 06). A PE number of 0604XXX indicated the funds

would be used for a research & development effort in the demonstration and validation phase. Informally, the program funding symbology was referred to

as ‗the color of money.‘ Annually, each program management office (PMO) financial team submitted

a budget request. That request was denied, modified, or approved as it progressed up the chain. The request was then integrated into the macro-

budget as it in turn progressed through the program executive office, the major command (MACOM), and Service, until it reached the Office of the Secretary of Defense (OSD). The OSD budget for DoD was included in the

President's Budget and then the latter is forwarded to Congress. The annual Appropriations Laws (passed by Congress and signed by the President) allocated a specific level of funds (budget authority) to each PE (line items,

budget activities, and projects) by appropriation and by major program category.

The resulting budget authority or program funding could be used only for the purpose specifically authorized by Congress based on its specific

54

subdivisions and stated purpose. Congress monitored DoD expenditures to ensure that Congressional direction was followed. From the point of view of

an individual member of Congress, this all made perfect sense. A member may have worked very hard to secure a particular appropriation that would

bring economic benefits to his district. After a hard struggle, the last thing he wanted to see was the money being redirected by DoD for other purposes. So the finely partitioned colors of money that were the bane of a PM‘s

existence were entirely appropriate from a Congressional viewpoint. Because the program‘s annual budget request was developed, justified and

submitted one to one-and-a-half years before the funds were appropriated, PMs sometimes miscalculated how much money by appropriation they

would need at a particular time or for a particular project. The miscalculation could then cause a funding shortfall; not necessarily because the PMO was out of money, but because it was out of the right color of

money.

The Funding Execution Statutes

Misappropriation Act: Title 31, U.S. Code, Section 1301, dealing with the application of monies appropriated by Congress, required that funds be

used only for the programs and purposes for which the appropriation was made. An example of a violation of the Misappropriation Act would be the use of a procurement appropriation to purchase low-rate initial production

(LRIP) articles which should be purchased using an RDT&E appropriation. Another example would be using operations and maintenance (O&M) funds

to buy an item for which the system unit cost exceeds the $100,000 threshold set by Congress. Such an item should be purchased using a procurement appropriation.

Antideficiency Act: Title 31, U.S. Code, Sections 1341 and 1517, were probably the most important statutes affecting spending obligations at the

activity level. The main provisions of these sections:

Prohibited any officer or employee from making or authorizing an obligation in excess of the amount available in an appropriation or in

excess of the amount permitted by agency regulations.

Forbade the government from obligating funds in advance of

appropriations.

Required the head of each agency to issue regulations establishing an administrative control system both to keep obligations within the amount

of apportionment and to enable the agency to fix responsibility for making obligations in excess of the apportionment.

Bona Fide Need Rule: Section 1502(a) of Title 31, U.S. Code included the following:

55

The balance of an appropriation or fund limited for obligation to a definite period is available only for payment of expenses properly incurred during

the period of availability, or to complete contracts properly made within that period of availability and obligated consistent with section 1501 of this title.

Simply stated, this Bona Fide Need rule required that appropriated funds be used only to obtain goods and services for which a need arose during the

period of the appropriation‘s availability for obligation.

AAV Funding

The AAV7 product improvement program had followed a normal acquisition and funding strategy. Various product improvement subsystems had

progressed through the development phase funded with an RDT&E appropriation for MP-2 General Purpose Forces funds (PE number 0206XXX).

The PSD effort, including testing, was to be funded with 0603XXX funds (RDT&E Appropriation, MP-6 Research and Development, Category 03

Advanced Development). During the course of the fiscal year, PSD design and testing accelerated, and the need for additional funds arose.

Unfortunately, the program had insufficient 0603XXX funds approved or available for that purpose.

All Bob‘s other RDT&E funds (0206XXX) were obligated for use on product improvements of the current AAV7 vehicle. Bob could not understand, given

the critical importance of AAAV, why some of this money could not be spent on PSD design and testing.

When Bob briefed his team on his plan to use the MP-2 funds for the PSD testing effort, Lt. Col. Don Hunter exclaimed, ‗That would be a misuse of government funds! It borders on misappropriation!‘ Don was Bob‘s program

requirements officer, who had been assigned to the PMO because the Marine Corps had no better place to park him until retirement. Major Jack

Houghton, the AAAV project officer, was quiet and didn‘t offer an opinion. Bob Hahnemann and Don Hunter never saw eye-to-eye. Bob felt Don was a

sea-lawyer, someone who delighted in telling his boss what he couldn‘t do, instead of finding a way to get it done. Besides, Bob realized that Don didn‘t have any acquisition background. On this occasion, Bob lost his temper and

shouted, ‗Why don‘t you call the General Accounting Office (GAO) and request an investigation--or better yet, just call the Naval Investigative

Service and turn me in!‘ In the face of the verbal attack by his boss, Don fell silent.

Bob stormed out of the office. While waiting for the elevator, he reflected on

the events that just occurred. ‗It wasn‘t my finest hour. I shouldn‘t have said

56

that to Don. It wasn't very professional--but I‘ll have to deal with rebuilding the team later.‘

His thoughts moved on to the urgent problem at hand. ‗What am I going to

tell the Comptroller? Can I stretch the AAV7 product improvement definition of work enough to convince him and all concerned that the MP-2 funds are legitimate for the PSD effort?‘ It seemed to Bob that this might be a possible

solution. ‗It would be quite a stretch, and it would require some creative writing, but it‘s not entirely implausible. I could argue that the PSD can be used to spin-off product improvements for the AAV7.‘

Bob knew that both Congress and the Commandant wanted the AAAV. They

had fully funded it. It was just that he and his team had somehow underestimated the PSD design and test requirements when they prepared the POM and budget. ‗But the follow-on vehicle is absolutely critical for the

mission! Congress will back me on this-they want to save lives.‘ Bob pondered his funding profile and wondered how he should proceed.

Line

Number

Program

Element Number

Item Budget

Activity

FY 1999 FY 2000 FY 2001

21

PSD

0603340M

MARCOR Advanced

Tech. Demo (ATD)

3 $1,250K $1,300K $1,350K

176

AAV7 (P3I)

0206623M

MARCOR Ground

Combat Systems

Product Improvement

7 $6,300K $6,350K $6,400K

57

Questions

If you were Colonel Bob Hahnemann:

What would you tell the Comptroller?

How would you deal with Don?

If you were Don:

What would you do?

What are the ethical values that would dominate your own judgment if you had to make this decision?

58

Dr. Chris Roman Revised by: John F. Horn Defense Acquisition University Defense Systems Management College

Background

‗How can such a good idea be considered bad by so many?‘ wondered James Osborn, deputy program manager for the Apache helicopter. It was October

1999; James thought the contract, called Apache Prime Vendor Support (PVS), was a clear winner: it would increase fleet readiness while lowering maintenance costs and it would provide technology updates to the Apache

fleet at no extra cost to the Army. But over the last three months, a few influential stakeholders in the Army were trying to scuttle the contract.

When James heard that the Army Comptroller would oppose PVS, his first impulse was to somehow fight back and revitalize the PVS idea. But he told himself that he needed to take a few days to think about the issue. ‗Are the

PVS critics wrong? Or have I been so close to this project that I‘ve lost my objectivity?‘

The Prime Vendor Support Idea

Apache Helicopter International Version

59

In April 1997, in the environment of rising O&M costs, the Army received an

unsolicited proposal for a completely different way of maintaining the Apache fleet. Team Apache Systems (TAS), a joint venture of Boeing,

Lockheed, and General Electric, proposed a firm fixed price contract to take over, in its entirety, wholesale logistics support of the Apache fleet. The contract would provide nose to tail logistics support at a price per flight hour

less than the Army was currently paying. Better yet, TAS guaranteed a steady decline in price year to year, while maintaining guaranteed levels of readiness.

But James Osborn thought that the most compelling feature of the TAS

proposal was its provisions for technology upgrades to the Apache fleet. TAS believed that by selectively replacing broken parts with newer technology components, it could drive down O&M costs at an even steeper rate. This

process of upgrading technology through parts replacement was called ‗modernizing with spares.‘ The modernization with spares strategy would

employ new technology with the same form, fit, and function as the old part (for example, replacing metal helicopter rotors with corrosion-resistant composite materials). TAS indicated in its proposal that the intent of

modernizing with spares was not to increase capabilities of the Apache; it was simply to drive down future O&M costs. However TAS acknowledged that some new-technology spares might (as a by-product) also enhance

Apache capabilities. If TAS were able to drive down costs (below its already guaranteed price drops) by modernizing with spares, it promised to return

50% of the resultant savings to the Army.

Fixed Prices and Performance Fees

The following table shows the fixed price bid from TAS for each year of Apache support. The table depicts the guaranteed price drops (not including potential further reductions from modernizing with spares):

Year 1 $361 million

Year 2 $338 million

Year 3 $316 million

Year 4 $294 million

Year 5 $302 million

Table 1 – Apache PVS Fixed Prices

The table depicts a 16% decline in price between Year 1 and Year 5. Army

Headquarters had established a goal of 20% reduction in weapon system O&M costs (aggregate across all Army systems) for this same period, so the PVS proposal was not far from the Army‘s target.

The PVS contract also had performance incentives. The fixed price per year

in Table 1 above assumed the contractor would earn the maximum performance fees.

60

These fees were as follows:

Performance Year Performance Fee Pool

1 $ 7.3 million

2 $ 6.3 million

3 $ 5.7 million

4 $ 5.5 million

5 $ 5.5 million

Table 2 – PVS Performance Fees

The contract was renewable for up to fifteen additional years. The provisions for pricing optional years six to 20 were complex, but essentially insured the

Army would continue to enjoy steadily declining maintenance costs. How much of these performance fees the contractor received each year

would depend on its measured performance in filling requisitions for spare parts. To get the maximum fee, the contractor would have to achieve an average of less than seven days in filling routine requisitions. For urgent

requisitions (part that is needed to achieve mission capable) the contractor would have to supply the part within 24 hours, 95% of the time. The share

of performance fee rapidly declined to zero when these targets were missed. Performance fees withheld from TAS for poor performance would result in lower overall costs to the Army (lower than the baseline prices in Table 1).

Role of Corpus Christi, Texas Army Depot Under the current Apache maintenance system, workers at the Corpus

Christi, Texas Army Depot repaired Apache parts and conducted scheduled overhauls. These workers were understandably concerned that PVS would

endanger their jobs. The PVS contract attempted to allay such concerns by guaranteeing to purchase 85,000 hours of labor per year from the depot. Under the PVS contract provisions, Corpus Christi Depot would essentially

become a TAS subcontractor. This would protect most (but not all) of the endangered jobs. The jobs that would be eliminated were within reductions

already decreed by the Defense Department‘s Quadrennial Defense Review.

Modernization with Spares

For modernization with spares, TAS promised to make certain technology updates required to prepare the Apaches for upgrade to next-generation forward-looking infrared radar (FLIR). The contractor would expend:

Year 1 $ 36,900,000

Year 2 $ 58,300,000

Year 3 $ 58,500,000

Year 4 $ 44,500,000

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Year 5 $ 54,100,000

Table 3 – Guaranteed Modernization for FLIR

These changes were required for introducing second-generation FLIR (note that the second-generation FLIR itself was not to be provided under this

clause, just hardware and software changes to enable an easy upgrade). James Osborn was relieved to see these incorporated in the PVS contract, since he had not been able to identify separate funding for these

improvements.

But the provisions for modernization with spares went even further. The PVS contract stated that, if TAS were able to drive its costs down further, the Army would receive 50% of the savings. (The actual contract language

specified a target cost on which the fixed prices were based. Also, the 50% savings would not actually be credited back to an Army appropriation account, but would be collected in a TAS-administered pool for future

enhancements). The Apache program management office (PMO) viewed this arrangement as ideal: the user community had a long list of needed

enhancements for which funding had not been available. Crediting savings back to the Army‘s appropriation would make them vulnerable to budget cutting, but leaving them with TAS would insure that they would be

ploughed back into Apache improvements.

The beauty of the savings through modernization with spares was that the Army bore no performance risk. If TAS lost money on the contract by over-running its own fixed prices, it would be responsible for 100% of the

overruns. Alternatively, if it succeeded in under-running its target cost, the Army would split the realized savings. In contract parlance, PVS was a fixed price incentive contract with a 50/50 share ratio for under runs and a

0/100 share ratio for overruns.

The Army Working Capital Fund (AWCF) A major portion of the O&M funds appropriated each year for Apache maintenance flowed through the Army Working Capital Fund (AWCF). For

many years, the Department of Defense had used working capital funds to finance industrial activities such as Army depots and arsenals. The wholesale inventory of Apache spare parts was capitalized within the AWCF,

and the operational costs of running the Corpus Christi repair depot were paid from the fund. The fund sold reparable parts to Army activities and

issued credits for return of broken parts. The fund also paid for its own entire overhead through a surcharge of about 25% on total sales. For FY 1999, sales attributable to Apache were $543 million, of which $136 million

was surcharge.

The AWCF was not directly supported by appropriated funds; it charged its customers for parts, supplies, and services purchased. The customers used their O&M appropriations to pay the working capital fund. Over time, the

62

working capital fund was expected to break even by recovering all of its costs through customer charges. Managing the break-even was

accomplished by readjusting the surcharge as necessary. Money in the working capital fund had no fiscal year restrictions, and assets in the fund

could be carried across fiscal year boundaries until they were expended.

Supporters of PVS

The principal supporters of PVS were:

Team Apache Systems, who originally proposed the idea.

The Apache program manager (PM), an Army Colonel, who saw PVS as a

way of driving down costs and transferring risk to industry. The PM reported to the Aviation PEO.

The Aviation PEO (a 2-star General), who perceived that money saved on

Apache maintenance could be used for Comanche and other critical Army aviation initiatives. The PEO reported to the Assistant Secretary of the

Army for Acquisition, Logistics, and Technology (ASAALT).

The Army Deputy Chief of Staff for Operations and Plans (DCSOPS) (a 3-

star General) who perceived that PVS would bring greater availability and readiness. The DSCOPS also strongly desired second generation FLIR for

the Apaches, and felt PVS would help achieve that capability faster and at a lower cost.

The military deputy to the Army Acquisition Executive, LTG Philip

Caskey, vocally supported PVS and similar initiatives, saying ‗The concept consists of a partnering of government and industry to provide the functions and resources required to support Army customers

worldwide.‘

The pilots and support personnel in operational units, because of

expected higher availability and readiness, and because PVS would provide contractor technical representatives for each operational unit.

Congress - The Armed Services committees generally supported PVS,

since DoD had designated it as a pilot for acquisition and logistics reform.

Jeff Cox, the DoD civilian acquisition chief, was not directly involved in

PVS; however in public venues he often cited PVS as a prime example of logistics reform. Cox reported directly to the Deputy Secretary of Defense.

Opponents of PVS

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As with any initiative that dramatically alters the status quo, PVS also had its detractors.

The Army Comptroller - Hayley McCarthy, the Assistant Secretary of the

Army for Financial Management, was the comptroller for the Army and directly managed the AWCF. She reported directly to the Secretary of the

Army. She objected strongly to PVS because it would remove capital from the fund. The inventory of Apache spare parts constituted about 20% of the fund‘s capital and Apache parts sales comprised 18% of total fund sales.

The PVS contract called for removing spare parts from AWCF and giving them to TAS as ‗government furnished equipment.‘ On paper, this would show up as an immediate de-capitalization of 20% of the fund. Even worse,

decoupling Apache from the Army Working Capital Fund would mean a loss to the fund of $136 million per year in surcharges that were collected on

Apache sales. These surcharges still had to be collected, and the absence of Apache meant that the surcharge for other weapon systems would rise to make up the difference. For these reasons, McCarthy opposed PVS.

The DoD Comptroller - Although the DoD comptroller had not weighed in, it

was generally assumed the financial community would stick together, and that the DoD comptroller would support the position of the Army

Comptroller.

The Corpus Christi Army Depot - The depot that accomplished repairs of

spare parts was opposed because PVS would cost jobs, and from their perspective would bring no advantages to the depot.

Army Logisticians - Members of the Army logistics community generally

opposed the PVS plan. They worried that PVS would not respond well to surge requirements that would occur in wars and other conflicts. Sentiments of the uniformed logistics community were communicated

through the Army Aviation and Missile Command (2-star) to the Army Material Command (4-star).

PM Abrams and PM Bradley - The program managers (both Army Colonels)

for two of the Army‘s other major weapon systems, the Abrams tank and the Bradley fighting vehicle, if not opponents, were certainly not supporters of PVS. They did not want to be saddled with the inevitable rise in surcharges

that would result from Apache pulling out of the AWCF. They communicated their concerns through the Tank and Automotive Command (2-star

command) to the Army Material Command in Alexandria, Virginia (4-star command).

Base Commanders - Surprisingly, base commanders objected to PVS because it would remove some discretionary funds from their purview. They

communicated their concerns to Army Forces Command (FORSCOM) (4-star). Echoing their concerns, the FORSCOM chief of staff (3-star) said in a 1998 memorandum, ‗The loss of $103 million of FORSCOM‘s FY 1999 flying

64

hour program funding to PVS seriously impacts our commanders‘ flexibility to balance readiness and maintain quality of life for our soldiers.‘

Questions

What are the major risks in implementing prime vendor

support?

What are the major advantages of implementing prime vendor support?

Are all these alternatives available in your country‟s

acquisition process?

How would the policies and procedures of your country‟s acquisition process affect this decision?

65

John D. Driessnack Revised by John Horn Defense Acquisition University Defense Systems Management College

Background Dr Ryan Johnson walked out of the Director‘s office thinking his workload

for the next couple of days was going to be crazy. He had just been asked to put together a briefing that would go to the Air Force Service Acquisition

Executive (SAE) which could recommend a revision to the KC-X tanker program acquisition strategy. The tanker program had been in the news lately with many options being considered. Johnson had to narrow those

various options and make a recommendation before the start of the December 2001 holiday season.

The various alternatives had strong political ramifications. Should the Air Force continue with the current planned tanker aircraft replacement

starting in FY07? Would the replacement be a commercial aircraft converted to a tanker or would it be a new design? If a converted

AF Tanker Program International Version

66

commercial aircraft were selected, should it be a sole source or competed source selection? What about Boeing, EADS (The US arm of Airbus) or

Frigate International Airways? He knew that he must consider the issue of leasing versus buying. Would he lease aircraft or lease a refueling service?

Johnson had only a couple of days to come up with a solid recommendation. He could not believe this type of an issue had hit his desk just before the holidays. 9/11 had changed the focus of national defense and had touched

a lot of people. It looked like it had just reached out and touched him. Many more studies had been done which showed various concerns with the

ability of the KC-135 aircraft to continue service to 2040. The aircraft was aging and reliability and maintenance costs were becoming a significant

factor. In 1999-2000, over 40% of the fleet was grounded for six months when degraded stabilizer trim actuators were detected. In 2000, 32% of the fleet was unavailable due to depot level maintenance and modification. The

annual depot price per aircraft had grown in the past 12 years by 18% per year and future growth was anticipated (see Figure 1).

The tanker requirements were in turmoil during 2001. The users at Air

Mobility Command (AMC) had continually demanded that any new tanker must meet the performance of the current KC-135. During February 2001,

Boeing submitted an unsolicited proposal for the purchase of 36 KC-767 tanker aircraft at $124.5 million each. About the same time, the Air Force issued a study stating that the KC-135 tankers were viable to 2040. The

study stated that no new planes were needed until 2010. Also in 2001, Frigate International Airways proposed a lease program for tankers; however, the principle deputy to the Service Acquisition Executive (SAE)

dismissed the proposal. In October 2001, Senator Michael Quinn inserted

67

language into a bill authorizing the lease of Boeing commercial aircraft and in November, AMC issued a revised need statement wherein KC-135 aircraft

would retire beginning in 2013 with the concurrent fielding of a replacement air fuelling platform.

The Current Tanker Program The current Air Force tanker program showed the initial stage of

development starting in fiscal year 2007 with $14.622 million in Research, Development, Test and Evaluation (RDT&E) to start work on a replacement for the aging KC-135. Alternatives currently under consideration included

converting the remaining KC-135Es to KC-135Rs, conduct a service life extension, procuring a government off-the-shelf derivative tanker (KC-17),

and procuring a commercial off-the–shelf tanker derivatives. Of the commercial derivatives, the Boeing B-767 and Airbus A-330 were the most suitable for a KC-135 replacement because they had tanker/transport plans

under development. Due to competing AF priorities and budgetary constraints, a COTS derivative

was seen by many as an ideal way to accelerate recapitalization. Advantages of COTS were seen as 1) short developmental cycle - as little as three years,

2) minimum RDT&E investment, 3) demonstrated cost effectiveness and 4) mitigation of the risk of KC-135 fleet-wide system failure. But, no changes to the new tanker (KC-X) program or schedule had occurred. In fact,

General Morley testified to the Senate Appropriation Committee regarding Boeing‘s offer to sell 36 KC-767. The AF Chief of Staff said, ―We‘re looking

out in about the next 15 years‘ time frame to begin that replacement.‖ Had enough changed in the past six months to change the current strategy?

The Lease Approach Consideration of a lease concept was partially driven by the congressional language. The language stated, ―a multi-year pilot program for leasing

general purpose Boeing 767 aircraft and Boeing 737 aircraft in commercial configuration‖. The language made it clear that the lease needed to strictly

adhere to the government‘s standard leasing procedures and constraints. It gave authority to ―lease not more than a total of one-hundred Boeing 767 aircraft and four Boeing 737 aircraft.‖

The language did not exactly match what Johnson had read in press releases. A Sept 25, 2001 press report stated that Representative Andrew

Swailes, a member of the defense subcommittee of the House Appropriation Committee, planned to ―insert an amendment into a defense appropriation

bill to jump-start the Air Force‘s purchase of hundreds of Boeing 767 tankers and electronic surveillance planes.‖ Johnson remembered reading an October 12, 2001 interview with Air Force Secretary Charles Parkinson

expressing support for leasing one-hundred 767s and explained the AF‘s rationale for the proposal as ―We have a unique business opportunity to get

the best pricing possible to address our critical need for a multi-mission

68

aircraft that can carry gas and also do all kinds of other things…This is not a bail out, but taking advantage of a buyer‘s market.‖

The opponents of the leasing concept argued that the Air Force could not

afford the additional cost associated with the leasing of the aircraft. The overhead costs on this $25 billion asset lease were estimated to total about $5 billion for the anticipated 15 year period. These extra costs would be

paid by the Air Force and require an offsetting reduction elsewhere in the budget.

Acquisition Strategies Johnson had a lot to think about; he could recommend staying with the

current KC-X development program and building a newly-designed tanker. This would be similar to the old KC-135 program in which the plane was based on a commercial design, but was substantially modified and built

specifically for the tanker mission. Another option was a commercial variant where a commercial aircraft would be purchased and then modified to be a tanker. It would not be optimal for the tanker mission, but it would cost

less, it would be available to the user sooner, and could be procured using a purchase or a lease approach. Then the competition or sole source decision

must be made. Because the congressional language identified a specific Boeing aircraft, it could be used to help justify a sole source acquisition, thereby shortening the procurement time-line. Boeing had been working on

a 767 tanker for Japan and Italy, and other countries were looking at buying commercial variants of tankers. This introduced the possibility of an

international effort. Johnson tried to think of other options. What about a Tanker Service

contract like the Navy‘s? The Navy had a five-year arrangement with a private company to refuel Navy and Marine Corps aircraft participating in exercises or flying between the Atlantic and Pacific coasts. The Navy does

not own or lease the aircraft; the contract was for refueling service. The Navy was satisfied with the company‘s costs, which had run about half that

of military aerial refueling costs and the reliability had been good. Johnson had also heard that the United Kingdom was thinking about doing a similar deal. The Air Force had not yet hired such a service for exercises or

training. Maybe this type approach would relieve the pressure, and the AF could stick to the current KC-X program plan.

As he walked out of the office, he started to think about the schedule. How fast could any of this be accomplished and what should be the order of

events? As he got into his car, he wondered about funding to expand the program office to cover this workload. Where was that money going to come from in the year of execution?

69

Questions

Which alternative would you select?

What factors impacted your decision and why?

Are all these alternatives available in your country‟s

acquisition process?

How would the policies and procedures of your country‟s acquisition process affect this decision?

70

Chapter II

UK Defence Acquisition Case

Studies

71

Peter Tatham, Stuart Young and Trevor Taylor Cranfield University DA – CMT

Background The Rapier family of surface to air missile systems began its development some 50 years ago with the original design studies being carried out by the

then British Aircraft Corporation (BAC) and the Royal Signals and Radar Establishment (RSRE) in the late 1950s. Although grounded in the Cold War, the requirement for air portable defence against aircraft is enduring –

albeit the UK‘s current military deployments are not taking place in the context of a significant threat from this quarter. As a result, and as will be

discussed later in this Case Study, the requirement for this capability is currently at a lower priority, and the reductions in operational firing platforms reflect this. Nevertheless, in other ways, such as the novel

support arrangement, Rapier remains at the forefront of acquisition developments and is one of the last significant complex weapons systems to

be developed indigenously within the UK.

Doctrine Rapier was always perceived as being in support of world wide deployments

and as such it was imperative that it was capable of swift strategic

Rapier – The Acquisition Story

72

deployment into all climates to provide air defence in support of the operations of the main force. Given the potentially fluid nature of the battle,

the requirement was for a mobile installation with a short reaction time, compactness and low weight, a high rate of fire and kill potential, and good

defensive coverage. As a result, the initial concept was to be able to intercept aircraft flying at up to Mach 1.5 and 3,000 metres with a medium range Surface-to-Air missile (Thunderbird) taking on higher level targets.

Although these metrics have changed with the advent of increasingly agile aircraft and cruise missiles, and associated challenges such as the need to provide sophisticated electronic counter-measures (ECM) and significantly

improved system availability, the underpinning doctrinal imperative remains unchallenged.

Equipment Although the basic requirement for surface to air defence is enduring, the

capabilities of the resultant system have had to be modified to reflect the developing threat as discussed above. This section of the Case Study is, therefore, structured to reflect the three generations of Rapier – Field

Standard A (FSA), Field Standard B1, B1M & B2 (FSB) and Field Standard C (FSC).

Rapier Field Standard A (FSA)

The original FSA project began in 1959 but, in the absence of any significant MOD interest, it was subsequently cancelled in 1962. However it was

revived in 1965 as a result of studies which showed that the existing radar controlled gun system was not particularly effective and was very expensive in terms of manpower and logistics. The project continued with live firings

in 1967 and it achieved its Initial Operating Capability (IOC) in 1973 – i.e. the initial phases of what would now be described as the CADMID cycle took slightly over 10 years which, for such a system incorporating a considerable

number of new technologies, processes and doctrine (it is still the only true Shorad system where the missile is a two man lift), was exceptional. The

basic FSA system consisted of an Optical Tracker and a Fire Unit with 4 missiles, to which was added a Radar Tracker from 1977. In addition to the UK market, it achieved respectable export success – it has been estimated

that 600 launcher, 350 radar systems and 25,000 missiles (of all variants) have been sold worldwide over the 35 years in which Rapier family has been in service.

This latter point was demonstrated when, in 1972, an Iranian FSA system

achieved its first recorded success by shooting down an Iraqi ―Blinder‖ Supersonic Bomber. Twelve FSA Fire Units (subsequently rising to 32) were also deployed during the 1982 Falklands War and it was estimated that

these achieved 1 confirmed and 4 assisted kills from sixty firings. More importantly, the presence of Rapier forced Argentinean pilots to avoid low

level sorties and, thereby, reduced the effectiveness of the air threat.

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Notwithstanding its success in the Falklands Conflict, Rapier FSA suffered from four major operational constraints:

It was necessary for the tracker (optical or radar) to follow the target until

impact before engaging a further target.

It had limited all weather capability.

The missile warhead was less than fully effective and the system had a limited rate of fire.

It was difficult to keep it operationally available in a light weight

deployment without maintenance support vehicles. Rapier Field Standard B (FSB)

The result was the development of FSB which, as indicated above,

incorporated a series of improvements including the ―Blindfire‖ radar system that provided an all weather capability, upgrades to the system‘s computers and the introduction of more sophisticated ECCM capability, a 6 round

launcher. FSB also included the MK2 missile that was developed for the FSC but backwardly compatible with FSB. This missile not only had a 20% increase in range over the Mk 1 but it also had a vastly improved lateral

acceleration capability that allowed it to prosecute faster and more agile targets. The missile came in two variants – the Mk2A that was detonated

on contact in the same way as the Mk1, and the Mk2B that contained an infra red proximity fuse optimised against cruise missiles. FSB2 (48 systems) was also a risk reduction exercise to demonstrate the Electro-Optic

(EO) and Built In Test Equipment (BITE) capabilities for FSC whereas B1MLI went only to the RAF with enhanced availability and countermeasures modifications. A tracked variant (originally developed for the Shah of Iran

but subsequently taken over by the UK MOD) was also used to equip two regiments based in Germany. This system, which entered service in 1990,

had the benefit of being mobile and, therefore, able to follow the armoured forces. However, it did not include a tracked radar, and so it had a limited all weather capability, although with the advent of the electro-optic sight, it

achieved a good night time capability.

Rapier Field Standard C (FSC) In parallel with the interim ―quick fixes‖ of FSB to the shortcomings of FSA

identified in the Falklands conflict, a formal feasibility study for an improved system (subsequently designated FSC) took place in the period 1977-1979, and these were followed by a project definition study between 1979 and

1983, the total cost of these two phases being £80M at 1987 prices (some £150M in 2007). It is interesting to note that the British Aerospace-led

feasibility study identified technical solutions to all the new requirements and saw no problems in achieving an In-Service Date (ISD) in 1986 (the

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study even proposed bringing forward the ISD by one year). As will be seen, this was not borne out in practice.

In reality, FSC included a number of major changes to FSB and was at the cutting edge of missile, computing and radar technology. As a result, it was not clear at the time what might be technically achievable (and at what

cost). Almost inevitably, such an open-ended approach ran into difficulties, and as part of the subsequent enquiry by the House of Commons Defence Committee (HCDC), the MOD admitted that the project was ―very high risk‖

and that ―Full development began without the certainty that key aspects of the requirement would be feasible…‖. The HCDC also noted that ―The

absence of a [firm and precise] specification before development of Rapier FSC was far from satisfactory‖.

In practice, once full development began in 1983, it was progressed on a ―cost plus‖ basis. Whilst this enabled control on expenditure, the contractor

(BAe) had limited incentive to minimise costs. Furthermore, because of the innovative and technologically risky nature of the programme, there was no formal milestone plan and, as a result, the ISD slipped by some 4 years. By

1986, however, the technical risks had been sufficiently identified to allow a new contract to be negotiated on a ―Target Cost plus Incentive Fee with a Maximum Price‖ basis. But this was only signed following agreement to

increase the original price estimate by some £57M and also to take out some requirements such as reliability proving.

As a result, the overall cost of the system‘s development (including the cost of slippage caused by the failure of the MOD to supply key components and

test range facilities, which in themselves represented a complex project management task) rose from £445M to £733M (a rise of £288M or 65%). Fortuitously, it was possible to accommodate this major price increase by

restricting numbers to the 57 fire units in the initial order as opposed to the aspiration for a total of 204 units, reflecting the end of the Cold War and the

reducing requirement for anti-aircraft area defence. This was complemented by a reduction in the system‘s operational capability (saving £46M), a reduction in the level of support (saving £150M), and a further slippage of 2

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years in the ISD - in essence, a classic example of the juggling of the Performance, Cost & Time envelope.

Initial deliveries of FSC eventually took place in 1995 (i.e. some 20 years

after the start of the feasibility studies and almost 10 years after the initial forecast ISD), with the system being declared operational in 1995. Its current out of service date is understood to be around 2020, and so the

system will have actually achieved some 25 years of operational life. It is also important to appreciate that the FSC contract represents an example of the use of a prime contractor to manage the activities of a number of other

companies each of which is, in its own right, a major player in the defence sector. Thus MBDA (which is, itself, a joint venture between BAE Systems

(37.5%), EADS (37.5%) and Finmeccanica (25%)) acts as the prime to:

BAE Systems (CS&S): Blindfire (Targeting) Radar

BAE Systems (Insyte): Dagger (Surveillance) Radar

BAE Systems (Land): Warhead

Roxel (A merger of CELERG of France and the former Royal Ordnance

Rocket Motors Division – and 50% owned by MBDA): Missile

Raytheon: SIFF (Selective Identification of Friend or Foe)

Lex Multipart Defence: Logistics:

Interestingly, during the development phase of the FSC variant of Rapier, the complexity of the sub-contractor matrix was rather less complex, and

this made the developmental task simpler for both the MOD and Prime Contractor easier to manage.

Organisation Although 204 FSC Fire Units were originally planned, as discussed above,

following the end of the Cold War and the consequential reduction in the need for wide area anti-air defence, this was reduced to 57. This was sufficient to arm two Royal Artillery Air Defence batteries and three RAF Air

Defence Squadrons. In 2004, the RAF Air Defence Squadrons were disbanded and only 24 Fire Units are currently maintained in an operational status.

Training

Training requirements were developed after extensive human factors work which examined the role of the human operator in achieving system effectiveness. Unfortunately, procurement of training systems before

operational systems, and subsequent funding restrictions on updates, meant that training systems were not fully representative of in-service systems.

Three types of trainer were used:

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Part Task Trainer. Utilised actual Rapier system electronics. Used for

individual operator training and enabled smooth transition to real systems. The Trainers were allocated at the Battery/Squadron level.

Detachment Engagement Trainer. This utilised a full replicated system housed within a dome and provided team training for full detachments.

Three units procured – two Army, one RAF.

Maintainer Trainer. Full scale mock-up of Rapier FSC used for fault finding. Enables replacement of electronic units

In addition, live firings were carried out on the Hebrides range. These were of limited training value as they were carried out under technical rather

than operational conditions.

Logistics

The logistic support for the FSA, FSB and early stages of the FSC systems followed the standard approach in which the MOD managed and executed

the process by purchasing spares to meet defined stock and availability levels, warehousing the spare parts and distributing them as necessary. However, in 2004 the £740K TRADERS (The RApier Direct Exchange of

Repairables Scheme) initiative was implemented through the prime Contractor (MBDA) and its sub-contractor Lex Multipart Defence (LMD).

LMD became responsible for the total management, warehousing, distribution and replenishment of all consumable and repairable stocks. This contract required direct delivery to units in their peacetime or training

locations (in UK, Germany or Canada), together with calibration and maintenance of all 2nd Line test equipment. The contract was subsequently externally audited and it had achieved 97% on time in full delivery against

the requirement of 85%.

In 2007, the TRADERS contract was replaced by the ADAPT (Air Defence Availability Project Team) contract. This is a Contracting for Availability (CfA) arrangement that includes total fleet management, a joint management

team and obsolescence management. It is anticipated that ADAPT will lead to savings of £175m over the 12 years until the planned out of service date (2020). The ADAPT contract includes a gain share arrangement that

increases towards the end of the contract life as a means of helping to ensure that MBDA continues to search for efficiencies and improvements.

In addition, operational support is provided at two levels:

Unit Repair (1st Line) – carried out by a Forward Repair Team equipped with a 4-tonne truck with crane, a small workshop and spare Line

Replaceable Units (LRUs)

Field Repair (2nd Line) – for more extensive repairs. Comprises:

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o Shop Equipment Electronic Repair – containerised on a 14-tonne truck. Provides full facilities for test and repair of LRUs.

o Electronic Repair Support Equipment – containerised on a 4-

tonne truck with application test packages for more extensive fault finding.

o Shop Equipment Repair – containerised on a 4-tonne truck for testing the hydraulic and cooling systems.

Personnel

The ADAPT support contract (see above) also incorporates the use of Sponsored Reserves (SPO RES) to provided deployed 2nd Line support.

Under this model, two team of 8 MBDA personnel, together with their associated test, maintenance and spares support can be deployed to an operational theatre at short notice as Reserve personnel (rather than as

Contractors on Deployed Operations – CONDO). This arrangement has the support of the Front Line Command who welcome the engagement of staff with specific and detailed knowledge of the operation and support of the

Rapier system. In parallel, it has also been welcomed by the REME as it reduces the requirement for skilled craftsmen who are in short supply.

Information

Integration with external systems to achieve a networked capability is

currently limited. At an early stage in its development, networked operation of FSC utilising the Clansman radio system in its data-linked mode was

investigated but never incorporated. Connectivity with Bowman could be achieved but this requirement has not yet been defined.

Infrastructure

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The TRADERS support arrangement incentivised the prime contractor to maintain a support infrastructure and manufacturing jigs. It is yet to be

seen whether this will continue under ADAPT.

Apart from the original Bedford site used for final integration testing, no further infrastructure is required.

Summary

The RAPIER family offers a classic story of the technical capability of a system developing over time to meet an increasingly challenging operational requirement with similar improvements in both reliability and availability.

But, at about the time the RAPIER FSC achieved the necessary technical capability, real world events (i.e. the end of the Cold War) reduced the

priority for the requirement. As a result, it was possible to reduce the number of planned fire units and the consequential reduction in expenditure more than covered the earlier cost over-runs.

In parallel, however, the support arrangements have developed in line with the DE&S strategy and, indeed, present an excellent illustration of the

planned support concepts. As a result, the current capability represents a technologically sophisticated system, with high reliability and availability,

underpinned by an equally high quality support contract.

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Questions

What lessons do you feel can be usefully learned from the

experience with the acquisition of Rapier?

How important a skill in a prime contractor would you assess

supply chain management to be? How would you measure whether a bidding company possessed appropriate skills in

this area?

Does the Rapier acquisition experience challenge the

perception that efficient acquisition is relatively straightforward in the case of replacement systems?

What lessons does the Rapier experience offer about the

IDEAA that technical risk in a project diminishes over time? Does it suggest that important attention should be paid to

Engineering Readiness Levels as well as Technology and System Readiness levels?

In the light of the information in this case study, and of any other relevant information in your possession, would you

count the Rapier as a well-managed, successful acquisition?

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David M. Moore Cranfield University DA – CMT Background The Phoenix was a unique mythological bird that ‗burned itself every 500

years or so and rose rejuvenated from its ashes‘. Its namesake was an Unmanned Aerial Vehicle (UAV) that was intended to be a unique state-of-

the-art piece of equipment which proved extremely difficult to bring into service. The project was riddled with problems and delays, which almost resulted in the project being cancelled. However, like its namesake, it rose

from the near-disaster of abject failure, was salvaged and managed to achieve operational status. Having such a procurement situation so close to

the Nimrod upgrade would have been very serious to the Ministry of Defence (MOD) and so it is poignant that the project was saved and turned around at the last minute.

Concept

Phoenix- UAV

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Phoenix was designed as medium range (six to fifty kilometres) surveillance and target acquisition system intended primarily for use with modern

artillery systems such as the Multiple Launch Rocket System (MLRS) and the AS90 self-propelled gun (SPG). The system revolves around a ground

launched, remotely piloted UAV carrying a thermal image sensor fitted with a zoom telescope. Whilst in flight, the UAV passes back data through the Battlefield Artillery Target Engagement System (BATES). In addition,

Phoenix can undertake reconnaissance for unit and formation commanders.

The Requirement

By the mid-1980s, an urgent requirement was beginning to develop for the replacement of the ‗Midge Drone‘ that had entered service in 1969

(Westland had been awarded a contract to develop a medium range unattended surveillance and target acquisition system in 1976, but this was cancelled in 1979 due to technical weaknesses and cost inflation).

A General Staff Target (GST) was written in July 1980 (after a 12 month feasibility study) and left many technical issues unclear with a noticeable

lack of precision in quantification and detail. In particular, there was a failure by the MOD to specify testing of requirements. An engineering study

was conducted shortly after the GST was produced and although many discussions were held with industrial manufacturers and issues requiring further assessment identified, no specific actions or responsibilities were

detailed.

Selection of the Contractor

After short-listing four companies, GEC Marconi Avionics (GMAv), Ferranti, BAe and Westland, from the thirteen design submissions, the MOD

proceeded with a Competitive Engineering Definition (CED) phase between the GMAv and Ferranti models, which GMAv won in September 1984. Subsequently, their tender/bid was found to be based on ambiguous

information and their accompanying technical data contained key typographical errors that were not discovered until after the contract had

been let. For the MOD‘s part, advice (from the Royal Aircraft Establishment – RAE)

concerning more detailed technical specification, was not incorporated into the technical specification due to a belief that it would place unnecessary constraints on the manufacturer. The MOD made their selection of the

‗best‘ supplier based upon the lowest price provided by the various competing suppliers with little note appearing to be taken of whole life cost

aspects, the necessary ‗balance‘ between commercial and technical issues, and the need for detailed risk assessment in respect of each design and specification submitted. The contract was awarded on a ‗fixed price‘ basis

for both development and production of the product.

The Contract and Relationships

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The contract to produce 200 Phoenix was let in February 1985. The project

was slow to develop between 1985 and 1993 and the In-Service Date (ISD) continually slipped. It appeared that there were differing views on what the

technical specification concerned and how commercial issues were to be resolved. Although many interested parties within the contractor and the MOD had met and discussed various challenges and opportunities these

were not on an integrated, joint or common problem-solving basis. Relationships were kept at arms length; documents and communications failed to reflect the customer‘s requirements and there was no customer

approval regime; indeed it appeared that the concept of customer and supplier did not exist, with both customer and supplier continuing along

different paths. The MOD adopted an approach of ‗eyes on, hands off‘ particularly in the

early stages of the project, generally taking the view that ‗… the contractor agreed to and accepted the contract based on what they quoted for … so

they can sort themselves out‘. In short it was felt that it was the contractor‘s problem!

The contractor submitted a very low bid in order to ensure that they gained the contract, hence budget funding was limited for them and as the technical difficulties began to increase so the pressure for ‗trade offs‘ in

design grew. It was the contractor that was developing technical solutions to problems which did not necessarily take into account the customer‘s

requirements. The ‗eyes on, hands off‘ approach led to an ‗avoidance of culpability‘ culture in the MOD staff. There was therefore no commitment to ensure that the pertinent changes were implemented or referred to the

appropriate level. On the other hand, there was no MOD power of censure and so the contractor was under no obligation to act on MOD advice.

The contract stipulated the cost but left delivery time open ended. This resulted in the focus being on the avoidance of cost-growth at the expense of

equipment capability and time into service. This was exacerbated by an unrealistic In-Service Date (ISD).

The MOD was referred to as ‗multi-headed monster‘ – differing parts of the MOD involved themselves with the project at differing times and at different

levels, representing different agendas and without an understanding of the whole picture. This was exacerbated by the less than ideal internal relationships between some of the elements of the MOD, (such as between

the Procurement Executive and Operational Requirements Branch, and the inability to fully utilise the RAE‘s technical expertise).

MOD bureaucracy and a ‗fear of failure‘ meant that there was inability to recognise the dangers that were inherent in certain issues. These issues

were therefore not dealt with in a timely manner at the correct level and thus resulted in MOD acquiescence, financial penalties and delays. There was also a ‗fear of failure‘ within GEC, which meant that the senior

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management were not fully aware of the serious technical shortcomings in the project. GEC also had a lack of experience at being a Prime Contractor

and failed to manage their sub-contractors which in turn resulted in delays.

Repercussions and Action

Claim and counter-claim resulted, with the MOD withholding payments in 1989 due to a lack of progress whilst GMAv formally claimed against the

MOD in 1992 for failing to define the interface with a particular system (frozen by the MOD in 1987) and failing to develop a Training Interface Kit (a low cost training interface for Intelligence Corps image analysts). The issues

were finally settled in November 1993 when a new contractual package was announced which resulted in an increase of the cost to the MOD of the

project, from £182 million to £228 million but included the full settlement of claim and counter claim, 2 years worth of spares and an agreed delivery schedule.

Phoenix was awarded its provisional design certification in September 1993 but the MOD continued to express reservations over particular design

issues, notably the levels of damage sustained on landing, the drift of the focus of the thermal imaging sensor, the supportability of the vehicle and

performance of the propeller. The EAC noted the difficulties in October. By now the old ‗Midge Drone‘ could no longer be supported without further investment and so was withdrawn from service in December 1993, thus

opening a capability gap. In January 1994, flight trials confirmed the MOD reservations and thus the MOD claimed that GMAv had failed to deliver to

contract and that Phoenix was not fit for purpose. The MOD was on the verge of cancellation of the project but the matter was

referred to a QC Leading Council (senior lawyer) who received pleas from both sides and then gave advice. On one side GEC, GMAv‘s parent, with a new Managing Director, could not afford to lose the contract and, on the

other side, the MOD was faced with a capability gap having invested significant amounts of public money in the project.

Taking the legal advice, the EAC recommended an ‗Agreed Programme of Work‘ (APW) and authorised a study into alternate systems. GEC agreed to

conduct the APW at its own expense (without admitting liability) and the contract was renegotiated with the MOD continuing to provide RAE support and range space. During the APW, a support contract was negotiated that

incentivised the reliability and availability of the system.

The House of Commons Defence Committee (HCDC) made its second enquiry into the program and was heavily critical of the MOD for its complacency and for the lack of commitment on the part of GMAv and was

‗appalled that Phoenix has reached the stage where cancellation has to be considered after some £170 million been spent‘ (HCDC, Reconnaissance,

Intelligence, Surveillance and Target Acquisition, 7th Report, 21 June 1995, HC319).

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As the APW progressed, the PE and GMAv worked well together, and as

there were no viable alternatives, it was recommended by the EAC that work continue on developing Phoenix in June 1996. First deliveries were

accepted in late 1997 and the logistic support date was established as 30 September 1998. Phoenix entered service in December and in 1999 was deployed to Kosovo. It has subsequently been used in Iraq in 2003 and was

finally withdrawn from service in March 2008. It is to be replaced by the Watchkeeper system, built by Thales and based around the Elbit Hermes 180 tactical UAV and Hermes 450 endurance UAV.

Additional information can be found at:

http://www.spyflight.co.uk/phoenix.htm

http://en.wikipedia.org/wiki/BAE_Systems_Phoenix

http://www.mod.uk/DefenceInternet/DefenceNews/EquipmentAndLogistics/UnmannedAirVehicleRegimentBidsfarewellToThePhoenix.htm

or http://webarchive.nationalarchives.gov.uk/tna/+/http://www.mod.uk:80/

DefenceInternet/DefenceNews/EquipmentAndLogistics/UnmannedAirVehicleRegimentBidsfarewellToThePhoenix.htm

Questions

Why did the program have so many problems?

What role did culture, organization, processes and

relationships have to play?

Could this have happened in the US system (i.e. an entirely US acquisition project for a UAV)?

If this had been a joint US/UK acquisition project, would it

have been more effectively managed?

Would this be any different using the new UK SMART ACQUISITION philosophy (more a class discussion than an

individual question)

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David M. Moore and Peter D. Antill Cranfield University DA – CMT

Background The 1960s saw a major change in the way western armies expected to fight

and in the way soldiers could manoeuvre in the battlespace, particularly in relation to a potential campaign in North West and Central Europe against

the Warsaw Pact. The increased emphasis on mobility, on the closeness of the combat and on weight of fire led to hybrid requirements – for a rifle that was reliable and accurate but that was also capable of fully automatic fire.

What was needed was a flexible weapon with the ability to suppress the enemy at medium range (300 metres plus) and the close-in firepower of a

sub-machine gun (SMG). Such a weapon required a smaller calibre round to reduce weight and to make the weapon easier to control on full automatic, as the recoil from full power rifle cartridges would cause the weapon to

climb. One expression of this change was the development of the SA80 (Small Arms

for the 1980s) system. This process began when the UK Ministry of Defence decided to develop a new weapon capable of replacing its L1A1 Self-Loading

Rifle (SLR), the L4A9 Bren Light Machine Gun (LMG), the L7A2 General Purpose Machine Gun (GPMG), which were chambered for the 7.62mm NATO cartridge and the L2A3 Stirling SMG which was chambered for 9mm

Parabellum. This process led first to the development of the Enfield Individual Weapon (EIW) system and then eventually to the SA80 system,

known officially as the L85 IW (Individual Weapon) and the L86 LSW (Light Support Weapon), which was very similar to the rifle but with a longer, heavier barrel and a built-in folding bipod. The two weapons were intended

to maximise the cross-compatibility of components, use an identical round, and come from an identical manufacturing process to reduce development, production and logistic support costs.

The SA80 design originally came about in response to the NATO

standardisation trials, held in 1977-79, to establish a rifle and machine gun cartridge to replace the 7.62mm NATO round. The British developed and proposed a small, light and accurate 4.85mm cartridge (fired by the EIW).

However, the winner of the trials was the round that the United States had been using since the early 1960s and so the new standard NATO round

became the 5.56mm cartridge, although it was the Belgian SS109 semi-armour-piercing round that was adopted, rather than the American M193

The Long, Slow Path to Capability: The Case of the SA80

86

cartridge. This meant the SA80 needed to be redesigned to fire the new round. Components within a radical design that had already been squeezed

into tight spaces had to be squeezed still further.

Design Issues

Until the late 1980s the British Armed forces used the semi-automatic L1A1 SLR (based on the FN FAL) which had a traditional layout, a full power rifle

round and a long barrel for accuracy.

Its replacement, the SA80, was a bullpup design i.e. the action and magazine are behind the pistol grip. This saves space making the rifle easier to point at a target and better for use in confined situations, without

sacrificing barrel length. This layout was chosen to make the weapon very compact and easy to handle. This requirement was accentuated by the need to reduce the weapons length for greater ease of entering and leaving

armoured vehicles and helicopters, or in urban fighting, where space was at a premium.

The main theatre of operations over this period was Northern Ireland where

weapon accuracy and ease of handling were felt most suitable for an urban policing type of operation. Over the intervening years, the layout has been

incorporated into the design of a significant number of new weapons (such as the Steyr AUG, the French FAMAS, and the Israeli Tavor). Indeed, the UK looked at replacing its long-serving rifle, the Lee Enfield, in the years

immediately following World War II with a bullpup design, the EM-2, firing what is known as an 'intermediate' calibre cartridge, the .280/30 round

(7mm). Despite a very good performance during the first set of NATO standardisation trials during the early 1950s, it was the US-developed 7.62mm cartridge (a version of their .30-06 cartridge) that was adopted. The

EM-2 could not be usefully re-designed to accept this cartridge (as it was too

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powerful for controllable fully-automatic fire) and so the British adopted the Belgian FN FAL rifle.

However, the bullpup layout shifts the centre of balance to the rear of the

weapon making it harder to keep on target during fully automatic fire and makes the weapon unsuitable (without adaptation) to left-handed shooting as the spent cases would be ejected into the left-handed person‘s face. Even

more recent weapon designs that allow for conversion to left-handed use, do not allow occasional shoulder switching for firing around corners of buildings etc. Similarly, the rear magazine location makes it harder to

replace when firing because of its proximity to the body.

Production Issues The SA80 was the last weapon developed at the Royal Small Arms Factory at Enfield and was to be a compact, accurate gun, made out of pressed steel

and plastic - cheap, simple, and modern. But the designers failed to grasp the difficulties of making a cheap, mass-produced gun using new production technologies, a failure that would cause difficulties in moving from the EIW

to the SA80. The precision components of the SLR and its predecessor, the Lee Enfield, were hand-machined out of solid metal, with other parts made

of wood or plastic. The new method was to press thin sheet steel with powerful stamping machines then weld the parts together. When British Aerospace shifted production to Nottingham, they took the concept of cheap,

mass-produced guns to its logical conclusion by bringing in assembly-line experts from the car manufacturer Rover. At the same time, they outsourced

most of the rifle's components to sub-contractors. Only 15 of the 230 parts previously made in-house by Enfield were made at the Nottingham factory. In place of the skilled craftsmen of Enfield, producing weapons that were

virtually hand-built, semi-skilled workers were employed to assemble the guns.

Once in service, early indications suggested that the development and testing had been inadequate, resulting in major manufacturing difficulties.

Most obviously the production version of the weapon had not been sufficiently tested in realistic conditions before being accepted into service. One officer involved in trials of the gun in the 1980s said it should never

have been rushed into service in the way that it was. ‗It takes a lot of guts for someone to stand up and put their career on the line and say: ―I'm sorry, it's not ready, I'm going to stop it.‖‘

‗The problem started right at a very early stage, where there was a

requirement that dwelt mainly on the accuracy of the weapon, rather than anything else, ‗like mechanical strength or reliability,‘ says an officer involved in trials in the 1980s. ‗Also, there was a budget set for the weapon

that was, from memory, £250 as a unit cost price, at a time when a comparable rifle was costing £500. You get what you pay for.‘

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Over the years that the design was developed, a succession of army officers rotated through the dozens of posts involved in supervising the project, and

requirements were frequently changed. ‗There were any number of damn committees,‘ says the officer. ‗When you have a weapon with a procurement

cycle as long as the SA80, great chunks of corporate knowledge disappear when people move on... we never fought the war we were going to fight.‘

Performance Issues The first years of the weapon‘s service life were troubled. Design problems merged with production and assembly problems to produce a long list of

small faults and errors.

The army realised, too late, that there was a vast difference between the guns in the pre-acceptance trials, which had been hand-built by technicians in the Enfield tool room using traditional techniques, and the mass-

produced ones rolling off the assembly line. None of the problems were in themselves serious but had a cumulative effect, undermining service personnel‘s confidence in the weapon. This embarrassingly came to the

notice of the public when the SA80 went to war in early 1991 (during Operation Granby) and encountered environmental conditions that were

outside its designed operational envelope (predominantly Northern and Central European conditions). The ingress of sand and dirt in the Gulf led to the weapons being seriously unreliable in semi-auto mode. For the first

time, the SA80's problems went beyond the military and into the public arena. The headlines told the public that the British Army had a

dangerously inadequate weapon; the popular press demanded change.

Corrective Action

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In 1997, after years of public denial, private corrective action and poor

publicity, the MoD commissioned Heckler and Koch to undertake a thorough rework of the SA80. The changes were expensive (£92 million) and

comprehensive:

Internal machining to clear feed and extraction paths.

New breech block and bolt.

New extractor and ejector with spring.

New recoil springs.

New firing pin.

New cocking handle.

Entirely new magazine made from pressed steel.

New gas plug and cylinder.

New hammer.

New barrel extension.

New barrel (LSW only).

About 200,000 rifles were upgraded into the new A2 configuration, out of 320,000 or so original A1 rifles produced. Much confidence was publicly expressed that the problems had been resolved and the British Army now

had a rifle to be proud of. The first of the A2s were rushed into action in Afghanistan late in 2001. However, reports started to emerge that the A2

was still jamming, despite all of the modifications. This spurred further press derision and attempts by the Army to explain that the soldiers had not been taught the new cleaning procedure were dismissed as vain attempts to

pass the buck onto the soldiers themselves. Public speculation assumed that the SA80's remaining life was short and focused on which weapon might replace it. In Iraq and Afghanistan, British troops have now been

equipped with the FN-Herstal Minimi LMG - a move that has finally meant the end of the LSW, a weapon that, as a light machine gun, suffered from

split groups, a non-changeable barrel that overheated and a limited ammunition supply. It is rumoured that it could be retired from service after 2015.

Summary There seems little doubt that the L85A1 and companion L86A1 designs were

flawed. While they performed adequately in their designed environments (Northern European), in the adverse conditions of desert warfare their

weaknesses were clearly highlighted. However, they are compact and accurate (particularly with the SUSAT (Sight Unit Small Arms Trilux) four-power telescopic sight, standard issue for front-line combat units). The LSW

is even more accurate because of its longer, heavier barrel and is effective out to 600m (although not at the high rate of fire initially envisaged).

Total reliability is not something expected of a military weapon and harsh conditions will test any equipment. Keeping high performance weapons

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clean is made harder by operational factors such as disembarking from helicopters and operating in dirty, dusty conditions. The MoD has continued

testing the A2 in adverse conditions, and has reported that it consistently beats the competition (i.e. the M16) for reliability. There have been no

reports so far of significant problems in the current theatres of operation. It seems likely that the A2 is now at least as reliable as any other small-to-intermediate calibre weapon (with the exception of the Kalashnikov AK-47

that was designed to operate when neglected by untrained troops). Two of the downsides have already been mentioned; it can only be shot right-handed, and the weight is concentrated to the rear. However, it retains the

benefit of a short overall length and excellent accuracy.

Questions

Identify what problems are presented in the case.

Identify where in the procurement process the problems occur, and where in the process they manifested themselves.

Could the problems have been foreseen? Would better project

management have alleviated or avoided the problems?

Could such problems occur in your country‟s acquisition system?

How would your country‟s acquisition system manage the

development of such a piece of equipment?

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David M. Moore Cranfield University DA – CMT

Background John Thompson was both sad and happy. He was on the plane back to the UK after his last meeting at OCCAR. As the outgoing IPT Leader for the

A400M aircraft he was happy and proud to have led a small team, in his view, effectively and wisely. Yet he was disappointed and a little sad because he felt so much more could have been achieved. As he was now at

the end of his appointment as an Integrated Project Team Leader he couldn‘t help thinking back over his time in the position.

His thoughts concerned whether key issues could have been better managed and whether he could and should have undertaken a different approach. He

dozed in his seat, remembering the situation in which he found himself five years ago…….

Program Insight

Thoughts 0n A400M

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As a program that involved a number of European partner nations, what was then called (in the mid 1990s) the Future Large Aircraft (FLA), was

intended to be undertaken differently to previous co-operative programs. Each nation had a differing mix of interests, all of which had a significant

part to play, including:

Military Capability,

Industrial,

Economic,

Technology,

Intellectual Property Rights

Ownership, and (inevitably)

Political factors.

Airbus (then a consortium – including 20% from BAE Systems) identified the ‗Commercial Approach‘ as the means by which an effective European

industrial model could be used. But the UK and three other partners insisted on competition to ensure ‗Value for Money‘ and so A400M was

compared with C-17 and C-130J. Once A400M was selected, the contract was negotiated with Airbus through an Interim International Programme Office. In parallel with this activity, OCCAR, the European Arms Agency

was forming and took over the program once the necessary Inter-Government Arrangements and Memoranda of Understanding (IGA-MOU,

etc) were signed. The program is now well into development, the first flight is imminent and the UK ‗In Service Date‘ is 2014.

Program History – UK Perspective The UK Future Transport Aircraft (FTA) requirement seeks to provide tactical and strategic mobility to all three Services. The capabilities required of FTA

include: the ability to operate from well established airfields and semi-prepared rough landing areas in extreme climates and all weather by day

and night; to carry a variety of vehicles and other equipment, freight, and troops over extended ranges; to be capable of air dropping paratroops and equipment; and to be capable of being unloaded with the minimum of

ground handling equipment. Furthermore, the 1998 Strategic Defence Review confirmed a requirement for an airlift capability to move large single items such as attack helicopters and some Royal Engineers‘ equipment and

concluded that this requirement would be met, in the latter part of this decade, by FTA.

Capability Balance The Government announced in December 1994 that it would replace its

ageing C-130K Hercules fleet, in part by procuring twenty-five C-130J‘s from Lockheed Martin and in addition, subject to certain conditions, by rejoining the next phase of the collaborative Future Large Aircraft (FLA) program.

‗Initial Gate‘ approval was achieved in July 1997 and in the same year the

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solution that was assumed for costing purposes was changed to an initial lease of four C-17 and subsequent procurement of twenty-five FLA. A

‗Request For Proposals‘ (RFP) was issued to Airbus in September 1997 on behalf of the seven FLA nations (UK, France, Germany, Italy, Spain,

Belgium, Turkey). Subsequently, in July 1998, four nations (UK, France, Spain, and Belgium) issued a ‗competitive RFP‘ for a Future Transport Aircraft to Airbus Military Company (A400M), Boeing (C-17) and Lockheed

Martin (C-130J). Proposals were received on 29th January 1999 and parallel national and international assessments were undertaken.

These covered Combined Operational Effectiveness and Investment Appraisal, technical and commercial compliance, risk assessment, and an

appraisal of the international and industrial dimensions. This work also led to parallel negotiations and clarification with the three bidders. At the direction of the Equipment Approvals Committee (EAC) in December 1999,

additional work was undertaken to inform the Main Gate submission. On 16th May 2000, the Government announced their decision to procure

twenty-five A400M aircraft to meet the FTA requirement.

OCCAR

OCCAR (Organisation Conjoint de Co-operation en matiere d‘Armement) was established by Administrative Arrangement on 12th November 1996 by the Defence Ministers of France, Germany, Italy and the UK. This was based on

the December 1995 ‗Baden-Baden‘ founding principles:

Cost Effective Equipment Programmes

Efficient Procurement Practices

Workshare (global balance preferred to ‗Juste retour‘)

Participation to Additional Partner Countries

Looking to the Future (meeting long-term equipment requirements)

Belgium joined in May 2003 on the launch of A400M and Spain became a full member in January 2005. It appeared that OCCAR and A400M were

IDEAAlly suited. There is now a 23-strong A400M program division based alongside Airbus Military in Toulouse.

The Commercial Approach Derived from Airbus‘ commercial aircraft practice and enshrined in the

A400M MOU is the following: ‗The Prime Contractor will have the sole responsibility for the design and

manufacturing sources for airframe, engine, equipment, support products and services choosing those which provide best value for money together

with acceptable capability and quality so that the A400M meets the requirements of the Participants as set out in the Prime Contract, …The

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optimum civil aircraft standards/procedures will be employed except where it is essential for military standards to be used.‘

The program is to follow the timeline of Airbus commercial programs.

It is expected the Commercial Approach will satisfy the OCCAR founding principles and deliver the program to time, cost and performance as defined

by the Contract.

A Slow Launch

Following the Summer 2000 statements of intent to commit to A400M, there followed 18 months of detailed work to agree the terms of the contract and

prepare the Inter-Governmental Agreement (IGA). An Interim International Programme Office (IIPO) was formed to negotiate the contract and this became the OCCAR A400M Programme Division. Despite the pressing need

and evolving European airlift capability gap, it was still necessary for each partner to secure the funding before commitment could be made and the contract launched. On 18th December 2001, the IGA was signed by Defence

Secretaries and Armaments Directors whilst the Prime Contract was signed by OCCAR and Airbus Military in what should have been a splendid launch

ceremony. As it happened circumstances led to all these papers being made subject to

‗Condition Precedent‘ pending final Bundestag Approval.

There followed a lengthy delay (17 months) during which time the total requirement was reduced from 196 to 180 (Germany from 73 to 60 and the departure of Portugal with its requirement for 3 aircraft). The contract was

re-negotiated and the IGA‘s re-written (eventually in 4 languages) and Bundestag Approval was achieved on 21st May 2003. The resigning of the MOU involved the documents travelling from Madrid to Brussels to Ankara,

then on to Berlin, then London before finally arriving in Paris.

With the IGA‘s having travelled some 25,000km in order to gain a complete set of signatures, the partners were committed to the program and OCCAR could sign the fixed price contract for the development and production of

180 A400M aircraft. From a UK MoD perspective, Main Gate Approval was achieved (in May 2000) before the UK could commit to the final contract preparation; this was before the delay mentioned above, hence the Major

Projects Report will always show the program as running more than a year late.

Future Program At the time this case study was written, the program was continuing to

generally meet contractual milestones and major equipment selection decisions had been made. Indicators were that Airbus Military would deliver

on time, so the Commercial Approach was on track to break new ground for

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European co-operative defence acquisition. Recent news was the December 2004 commitment of South Africa to buy 8-14 A400M. This sets the scene

for further sales of what is expected to be a highly capable aircraft.

Issues for the UK

As a figure of twenty-five aircraft does not make a viable program, the UK had a choice between buying COTS from the USA or working within Europe

to develop a new product. The fundamental aspect of this joint program was in working together with other nations in order to gain a meaningful requirement specification. Another important aspect was in adopting the

Commercial Approach in order to use a highly capable development and manufacturing base, which is now driving the program against a challenging

timeline. The result should be a highly capable aircraft that provides both tactical and strategic airlift capability.

The UK approvals process was not developed to take account of such co-operative programs, although it was successful in considering, by means of a Review Note, the delay to ISD as a result of the time lost in launching the

contract. It could be argued that the UK should not seek final (national) approval until the contract is ready for signature, in the way German

constitutional law requires. (Nevertheless if all partner nations did this, commencement of co-operative programs could be difficult.)

Co-operative programs have, in the past experienced some challenges, for example with delays, cost growth and performance compromise. The

Commercial Approach adopted for A400M with a single-phase, fixed-price development and production contract was intended to break this mould and could be seen as a possible model for the future…

‗Would you like something to drink; tea or coffee?‘ It was the flight attendant waking John Thompson from his uncomfortable slumber.

‗I‘d rather have a whisky‘ he replied, still deeply concerned about his, and

the A400M project team‘s, achievements. Sipping his whisky he thought back . . . we could have bought more C-17s;

after all, the four, soon to be five that we lease from the USA, work well and have shown that they are effective in recent operations. The C-130 certainly is a useful and well liked aircraft, or even the Antonov, which is really a very

useful transport aircraft, could have been chosen.

Of course each aircraft has benefits and disadvantages but it wasn‘t just the aircraft that was best suited for the job – it was also about meeting political agendas. The UK works well with the USA and is unlikely to undertake any

big operations unless it is with US involvement. However, the UK wants to be seen as a committed European partner and in addition surely collating

requirements from a number of countries would help to keep costs down?

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John was pondering these factors when his thoughts slipped to the Integrated Project Team (IPT) at Abbey Wood. Only 15 of us were there –

and some of those were purely administrative support. He broke into a grin as he remembered the many times he had to rush, at the last minute, to

physically take a document to each member asking them to sign in order for a particular action to take place. Then the grin faded. But I did that so many times – it couldn‘t have been efficient, he thought.

‗Another whisky sir?‘ It was the flight attendant again.

He sipped yet another whisky and thought about the IPT at the Defence Procurement Agency. I had a small team and yet the project was

considerable. This was because the procurement had been handed to OCCAR, the idea being that OCCAR would take over all of the procurement responsibilities. That in reality was difficult to achieve, inevitably there was

communication from OCCAR to the IPT and vice versa seeking confirmation and clarification of issues that often brought tension between national and

the (overall) multinational picture. Above all, he mused, if only we had the best skills represented at OCCAR. I am sure that sometimes an appointment was made (for example – as an ILS manager) to ensure

equilibrium in national representation rather than the best person for the job, irrespective of nationality, being appointed to the position. The whole issue of the knowledge and skills that were present or necessary was one

that constantly taxed his mind and, he felt, affected the performance of the program.

And another thing, he thought to himself – why can‘t we all speak the same language? Communication would be so much easier!

Thoughts about nationalities and language brought to mind the way in which decisions about operational risk were taken into consideration.

Particularly in respect of some of the capability requirements of the A400M, he thought to himself, we can‘t all have exactly the same capability

requirement as we often do different things and on quite different scales! His mind was really racing now - whilst on the subject of being

multinational – why wasn‘t there a greater focus on common support – for example, with a pooling of spares, but then again he remembered that

although some countries had a greater share of the numbers of aircraft, this was not necessarily represented in the number of flying hours that the aircraft would undertake. As an example, the UK might not have the largest

number of aircraft but could have more than twice the flying hours of other countries aircraft put together. And to what standard? What about airworthiness? What about…? He couldn‘t doze any longer; he couldn‘t

make up his mind whether he was pleased or sad… … Which was probably just as well as there was an announcement over the

plane‘s PA system that they were coming into Heathrow.

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As he walked towards immigration, he remembered ….that the whole project was to be based upon ‗Best Commercial Practice‘. In fact, it was to be a

defining feature of the way that the project was to be awarded and managed. Did political decision making get in the way of this, he started to consider

when … unfortunately he was stopped by a customs officer who was interested in just how many bottles of whisky he was bringing into the country.

Questions

What do you think would influence the decision whether to

buy such an aircraft from the US or from Europe?

What skills do you think would be necessary in order for a multinational team to be effective?

Many decisions could be made that have an impact upon an

element of this program – what do you think the impacts could be?

Emphasis was placed upon commercial best practice – what

could this have been and does it take into account all aspects of decision making?

What do you see as the advantages or disadvantages of common support e.g. pooling of spares?

Would the same sort of issues, and indeed questions, be

raised in your country?

Had there been NEC aspects to this case would the same

approach be taken?

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Ian A. McPherson and David M. Moore Cranfield University DA – CMT

Background The British Army Training Unit Suffield (BATUS) is a large training area in

Suffield, Canada, some 30 miles from Medicine Hat and 120 miles North of Calgary. The training area is the only training area where the British Army can carry out large scale Brigade level live firing exercises combining

Armour, Infantry, Artillery, Engineer and Helicopter operations simultaneously. At 2,690km², it is larger than the combined training areas

available to the British Army in the whole of the UK and Europe, some seven times larger than Salisbury Plain.

To enable the exercising forces to operate in a safe environment a safety fleet of vehicles was established which are painted in a distinctive red colour

(hence the name ‗Red Top‘) which effectively chase the live firing fleets and are able to ‗Check fire‘ if any scenario becomes dangerous to the exercising troops.

The ‗red top‘ fleet, of 118 vehicles, was based on the standard issue Land Rover and there were two variants:

A Chase Vehicle which was based on the standard Land Rover and was

required to traverse extremely rugged country at speed to enable them to shadow armoured vehicles. These variants are required to offer the commander of the vehicle 360 degree visibility provided via a cupola.

Additionally the Infantry variants are require to carry 2 further safety staff in a standing position in the back, to enable them to dismount quickly to direct

dismounted infantry live firing. A General Purpose Vehicle, which is also required to traverse the same

rugged country, but not at the same speed. They carry goods and personnel, primarily dismounted safety staff, around the training area.

The use of the current Land Rover fleet of 118 vehicles has always been costly, with an annual attrition rate in excess of 20%. This is becoming

unsustainable for the following reasons:

A Case Study of Project BARRT:

BATUS Alternative Replacement Red-Top (Safety Vehicle)

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The increasing technology requirements, primarily battlefield instrumentation, for the ‗red top‘ fleet and the subsequent power needs is

beyond that of the current Land Rover. The burning out of wiring looms is now a regular occurrence.

The increased speed and mobility of the Armour which the ‗red tops‘ are required to follow, is beyond the capability of the Land Rover, which was not

designed for such a purpose. This drastically increases the risks taken by the safety staff.

The Land Rover fleet employed in BATUS are all beyond planned life, which make them ever more costly to maintain in both spares and manpower. As

an example BATUS consumed 33% of the total usage of rear axles on less than 1% of the fleet.

There is a severe shortage of Land Rovers to issue to BATUS, and to issue them any more vehicles would have a detrimental effect on the operational

capability of units. The military inventory does not offer any alternative solution and therefore if

vital training is not to be severely interrupted then an innovative solution to the challenge must be found.

Procurement Strategy A number of factors and options were considered and because of time

constraints, the current fleet could only sustain one more training year, and it had to be funded from the training budget, it was therefore decided after much benchmarking and supplier investigation that the clear business

decision was to procure an indigenous, North American, mass production vehicle adapted to meet our specific needs.

This option had a number of advantages:

No spares shipping costs.

No primary vehicle shipping costs.

In theatre support for the fleet, if required.

Choosing a COTS main vehicle chassis would produce a drastic reduction in cost.

Design and configuration control issues would be the responsibility of an in-theatre manufacturer.

Further investigation and possible supplier visits demonstrated that General

Motors was the only manufacturer of a vehicle with the suitable cross country capability, with the necessary high profile that allows the vehicle crew to see and be seen. They were also the only manufacturer who had the

capacity to ramp up output of an in-production commercially available

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vehicle than can be modified in time to meet the time constraints of the project.

GM were able to roll out a redesigned fleet through use of a third party body

shop (US Trailers) to the following timescales: Statement of User requirement confirmed by user, in consultation with GM

and US trailers Jul 01.

Mobility trials at BATUS – Dec 01.

Production of 4 x prototype vehicles Dec 01 – Mar 02.

User trials Apr 02 – May 02.

Project board review trials and approve project Jun 02.

Final contract award Aug 02.

GM vehicle production Aug 02 – Feb 03.

Vehicle deployment and training Feb – Mar 03.

Operation of the Contract

The requirement, in outline, is simpler than most defence contracts, as by the very nature of the fleet a safety fleet does not deploy on operations, therefore the maintenance of the operational support chain ceases to be an

issue. The contract transfers the responsibility, and risk, from the MoD to GM for the provision (calculation of requirement) procurement, storage,

distribution of spares, maintenance, repair and servicing. The MoD only retained the responsibility for low level daily maintenance and recovery from the training area back to base location.

The additional advantage is the simplicity of the contract as it is restricted to one geographic location and this makes contract management and

accountability far easier.

The contract sets challenging targets on to the manufacturer and established that it is an output based contract for a service, in other words GM are required to provide a precise number of safety vehicles for each

training day throughout the exercise season, which runs from April to October every year. It is in effect a capability based Contractor Logistic Support contract.

The plan for Contractor Logistic Support is as follows:

BATUS military manpower continues to carry out first aid on vehicles

(level one repair), in the field.

Level Two repair is carried out at the BATUS repair facility, by a mix of

BATUS employed civilians and military manpower, after relevant training from GM.

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Level Three and Four repairs and winter rehabilitation of the fleet is

carried out under contract by GM.

Spares provision, labour costs, technical training, driver training, STTE

and publications are all provided by GM under the terms of the CLS package.

Benefit Analysis

The benefits are summarised as follows: A purpose built solution that can be sourced that meets the needs of the

user, rather than the ad-hoc approach of making major modifications to existing equipments, with the consequent cost and safety implications.

A ‗non military‘ special sourced equipment is less expensive to purchase and maintain because it benefits from mass production methods and does not

require the ‗deployable special fits‘ required of the standard military Land Rover fleet.

The leasing of an Indigenous North American fleet eases spares procurement, availability and negates shipping costs.

A new purpose-built equipment is easier to maintain in the early years of its life and, there is a consequent reduction in spares, Resource Accounting

and Budgeting (RAB} and manpower costs. It demonstrates manpower savings as those who had previously been

deployed to support the ‗red top‘ fleet, some 20 tradesman, will no longer be required and can be made available for other tasks.

Reduced Stock Levels and therefore reduced obsolescence.

BARRT also meets the 5 C‘s test:

Cost (Considered).

Configuration Control (Improvement).

Capability (Not diminished).

Confidence (Customer or user confidence in the system).

Continued Life Support.

Investment Appraisal An ‗output based‘ Investment Appraisal was employed to confirm the

financial benefits using the Process and Performance Cost Model. Without BARRT the operating cost was £2.24m per annum for the ‗red top‘

fleet. The cost of the BARRT contract is £1.9m per annum.

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The saving of staff posts cannot be measured in monetary terms, but has

significant benefit.

Summary

BARRT is supporting a discreet fleet deployed to only one location and only in peacetime.

The previous system was not cost effective and required the use of vehicles that are not designed for purpose, and were fitted with a plethora of illegal

modifications and were inherently dangerous and the fact that the old fleet was not capable of meeting the stringent mobility or communications

requirements of BATUS. The project identified a replacement fleet with all the required capability,

that enable safety staff to operate in an environment that allows them to concentrate on their role, whilst greatly reducing the risks to which they themselves are exposed and at a reduced cost.

Questions

Is this type of procurement also possible with operational

fleets?

The MoD took the early decision to partner with the manufacturer, what are the risks and advantages of such a

strategy?

The MoD has found that since the deployment of the fleet

estimated mileages have been significantly exceeded and the driver training budget has been cut. Both of these factors

have put a significant strain on the relationships involved in the contract, how are these issues best addressed?

Would your nation consider such a strategy? If not why?

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Peter Tatham and Trevor Taylor Cranfield University DA – CMT

Background In November 1986, shortly after Vickers Defence Systems (VDS) had

acquired the former Royal Ordnance Factory (ROF) in Leeds (for £11M), the company began work on the design and development of a new tank which,

they proposed, would replace the ageing fleet of Centurions (dating from the 1960s) and also the newer Challenger 1s (first ordered in 1978) which were both unreliable and had poor gunnery accuracy. The first nine turrets were

built (7 at Leeds and 2 at VDS‘ original factory in Newcastle) on a private venture basis prior to the issue of the Staff Requirement.

The perceived requirement for a new Main Battle Tank (MBT) took place against the backdrop of the ―Levene‖ reforms to UK defence procurement

which placed a premium on achievement of value for money through competition and taut contract conditions. Although in the pre-contract discussions VDS argued that there was a need to provide the new fleet of

tanks quickly (to fill a capability gap), and that a single tender contract would safeguard employment (some 2000 jobs) at both Leeds and Newcastle,

the company‘s reputation was poor having delivered unreliable tanks over budget and late in previous contracts. As a result, a full competition was unavoidable and this took place at the end of the decade, with the final tank

being delivered in 2002.

Challenger II – The Acquisition Story

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CR2 - Doctrine Whilst the decision to procure a new MBT coincided with the fall of the

Berlin Wall in 1989 and then the Conventional Forces in Europe Treaty of 1990, there was perceived to be a continuing (but reduced) requirement for such a system. This will be discussed in greater detail later in this Case

Study. The procurement decision also coincided with the doctrinal developments that saw the introduction of the manoeuvrist concept. Thus,

whilst the Chieftain and, to a lesser extent, the Challenger 1 MBTs had a movement capability, unlike Challenger 2 (CR2), they could not be seen as a key component of the implementation of manoeuvrist doctrine.

CR2 - Organisation The introduction of CR2 took place at the same time as the major revision in

the role and modus operandi of the Armed Forces and, as part of this, the MOD‘s Planning Assumption was that a large scale conflict would entail a

―warning time‖ of 10 years. As a result, the number of armoured regiments in the Army was under severe pressure and, as part of the conditions tied by the MoD to the introduction of the CR2, the tank fleet was reduced from

some 900 Chieftain/Challenger I to 386 CR2. This was formally achieved as part of the 1990 ―Options for Change‖ reductions in the size of the Armed

Forces which, in effect, saw the loss of 5 Armoured Regiments.

CR2 - Equipment

The provision of the CR2 MBT proved to be a complex undertaking that reflected, to a large extent, a number of external influences such as the

emergence of a number of larger entities within the Defence Industrial Sector, and the influence of the Levene reforms mentioned above. As a result, this section of the Case Study will be broken down into the phases of

today‘s CADMID Cycle (although the Downey Cycle was formally in place then).

The Concept Phase

As indicated above, VDS anticipated the requirement for a new MBT and, furthermore, concluded that it was a ―must win‖ competition. To achieve this, they built a new factory at Leeds (at a cost of some £14M), and planned

for production to be split equally between this and the existing Newcastle facility. Recognising the implications of the Levene reforms, they also began to identify their own core competencies, and to review what should be sub-

contracted. As a result of this work, VDS approached the competition by selecting the high value subcontractors based on value for money and

confidence in their reliability. This represented a major change of strategy for the company which had

previously relied on UK companies with whom they had operated for many years but, having changed their procurement approach, VDS did little in the

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way of up-skilling their Purchasing Department to deal with the new challenges. The result was a list of over 500 sub-contractors and, although

some were mandated by the MOD (e.g. the 120mm rifled gun from Royal Ordnance (part of BAE Systems) and the engines from Rolls Royce (part of

Caterpillar Inc), other major parts were brought from Canada and France. This exemplified the growing internationalisation of the arms sector, but also placed VDS at a disadvantage in some instances – for example, the 386

fire control systems for the CR2s bought from CDC of Canada (now part of General Dynamics) were dwarfed by a parallel order of 8,000 systems by the US for the M1 Abrams tanks.

As a result, VDS moved from a previous position in which only 50% of their

production was ―bought in‖ to 80% - in effect changing the nature of their work from ―production‖ to ‗assembly‘. Furthermore, many of the ―sub‖ contractors were actually significantly larger companies than VDS and as a

result, VDS was unable to flow down the MOD‘s Terms & Conditions as the large suppliers would not accept them and VDS could not enforce

compliance. The Assessment Phase

The formal competition for the new MBT was held between:

• VDS (UK): Challenger 2 • General Dynamics (USA): M1A2 Abrams

• Krauss Maffei (Germany): Leopard 2 • GIAT (France): Leclerc

It is interesting to note that, given the perceived wisdom that National Governments would always prefer their National arms companies, it proved necessary for the MOD to subsidise the bids from USA, France & Germany

in order to achieve the desired competition.

As a result of the Invitation to Tender (ITT), the MOD (unusually) made a qualified recommendation to buy either the Leopard 2 (elderly, but proven and reliable) or the Abrams (modern, but with a novel and expensive gas

turbine engine). The MOD did not shortlist the CR2 as they did not believe that VDS had the capacity to deliver to time and cost. When this decision

was taken to cabinet in 1991, the views of the key players are summarised below:

Prime Minister (Margaret Thatcher)

Why do we need a new tank at all? If one is necessary, would VDS be able to deliver to

cost/time?

Defence Secretary (Tom King)

No strong defence differentiators between the two short listed bidders

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Foreign Secretary

(Douglas Hurd)

Some potential export benefit from CR2.

Neutral over short listed bidders.

Trade Secretary (Peter Lilley)

Indigenous MBT production capability gave huge political kudos.

Embodied spirit of national engineering excellence. Major political benefit in an election year (Leeds

constituencies were marginals).

It is interesting to note that none of these four decision makers appeared to be particularly concerned with price and, much to the surprise and consternation of the MoD Project Team, the Trade Secretary‘s view

eventually prevailed with VDS emerging as the declared competition winner.

The final MoD contract presented VDS with three key issues:

First, the main contract set new standards and conditions for a prime

contractor in terms of the scope of what had to be delivered and how. The contract penalties for failure were severe.

Secondly, the package of contracts that made up the CR2 programme

amounted to almost £2bn (at the peak over 90 percent of the VDS order book) making it the largest Armoured Fighting Vehicle (AFV) programme in Europe. But the financial size of VDS and even Vickers plc (the parent

company) were quite small compared to a contract of this magnitude.

Third, the complex technical and programme risks were new to VDS, the AFV supply chain and the MoD. Unlike virtually all previous major

defence contracts the risks were to be managed entirely by the prime contractor who was also held to be totally responsible and accountable. Furthermore, in line with the Levene model, very demanding conditions were

placed on VDS and, given that the advice of the MOD CR2 team on the winning bid had been overturned, it is unsurprising that these conditions

were robustly enforced in the subsequent contract.

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CR2 – Development & Manufacture

Previous MBTs built by VDS followed a recognisable technical design, namely a mechanically simple layout with a diesel engine, 105mm or 120mm rifled gun, fixed sights (all pointing in the same direction as the gun)

with rudimentary night observation functions, a simple fire control computer to calculate gun pointing and the capability to hit a moving target

whilst the tank itself was static. However, the requirements for CR2 were an order of magnitude more complex and well outside the traditional capabilities of VDS. For example, the design of the CR2 included a

computer-controlled diesel engine management system, a high performance 120mm gun, a panoramic stabilised commander‘s sight linked to a gunner‘s

sight including a high performance night sight, two laser rangefinders and a sophisticated NBC system. Furthermore, VDS had never designed an MBT for contracted levels of reliability which were to be incorporated in the first-

off production tank through to the last tank produced, with no variations in quality across the production run.

The six-year development phase started in earnest immediately after contract signature for an initial 140 tanks in June 1991 and, in order to

achieve success, VDS conducted a completely new type of development programme for the prototype vehicles. The most notable feature was the use of reliability growth trials (RGT) which required vehicles to undertake a set

trials regime of mobility and firing based on a typical war profile called a battlefield day. The RGT was the single most expensive part of the

development programme requiring three MBTs full time over three years conducting hundreds of battlefield days.

The development phase ostensibly went well with MoD concluding a follow-on contract for around 260 tanks, and with the NAO reporting no time or cost overruns in 1994 or 1995. Indeed, VDS managed to develop initial

vehicles that met the specified tests, however the first completed production-standard CR2 MBTs delivered to the British Army were discovered in

October 1995 to be well below the reliability requirement. This led, under the contract terms, to the stopping of payment and the imposition of Liquidated Damages. These included the cost of keeping existing Challenger

1s in-service until the CR2 problems were fixed - however long that took the company. In turn, the lack of payments meant that the vehicles already under construction either had to stop until the reliability problems had been

solved, or would continue being built but would be known to be unreliable and fixed an undefined later date - all at the company‘s expense.

Potentially, the financial penalties were sufficient to cause the parent company, Vickers plc, to be at risk of declaring bankruptcy.

The operational impact of this failure was considerable, for example the first Regiment that was planned to migrate to CR2 had already disposed of their

Challenger 1 tanks but had to have them re-issued. More broadly, the image of VDS, British tank engineering and defence industry in general were

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at an all time low particularly with the MoD, Army and NAO. That said, there was no doubt that the MoD used the CR2 programme as a very public

example of their strict adherence to the new competitive environment wherein the prime contractor, rather than the customer (i.e. the MOD), took

the technical and financial risks. In the face of the severe financial difficulties faced by the company, it

undertook a major re-structuring programme. This included the freezing of all salaries (from Board level downwards) until the performance improved. In addition, the shopfloor workers had their long-standing arrangement for

‗piece-rate‘ pay stopped and replaced with a flat hourly rate. Nevertheless, despite the dire financial position of the company, the Trades Unions held a

ballot for strike action which received overwhelming support. The strike arrangement consisted of a one day a week stoppage for one month. In response, the MoD Project Team were furious and blamed the VDS

management team for this situation, and there were even rumours in the MoD and NAO of cancelling the entire contract and buying the American

M1A2 Abrams. The crisis developed further when the VDS Board announced the closure of

the entire Leeds factory (that had only been built some 5 years earlier) with the loss of some 900 staff, and the movement of the outstanding CR2 production from Leeds to Newcastle. This was aimed at reducing the

company‘s overheads that were judged to be excessive due to the ‗unnecessary‘ duplication of manufacturing between the Leeds and

Newcastle sites. The financial situation was, indeed, difficult as the MoD had, by this stage, stopped paying VDS for CR2 and the tanks themselves were being stored as they were finished in a purpose built shed on the Leeds

site all at VDS expense. Fortunately, the changes to the business produced quick results. Within a

few months the MoD agreed to a new accelerated development programme, and VDS agreed to take responsibility for the reliability failures as the prime

contractor. As an example, although the company had planned to select their contractors on the basis of proven reliability, in practice they had to cast the net rather wider and this resulted in much of the estimated 82

percent by value of each CR2 being bought-in from relatively unknown or inexperienced sub-contractors. As part of this process, VDS developed a

number of improved supplier management teams which, working closely with their quality control colleagues (itself an innovation), resulted in greater supplier control and communication as well as quality improvement groups

both in VDS and with the suppliers. Joint VDS/supplier closed loop action systems were introduced involving an electronic system to jointly track and identify problems at source thereby implementing corrective and

preventative action.

With a two year programme of business change, CR2 re-testing and re-building, progress was good and reliability improvements were recorded from July 1996. The MoD was sufficiently satisfied to allow the formal

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handover of CR2 to the Army in 1998, with the final tank being delivered in 2002. However, the financial impact on the business was considerable and

it is estimated that the original £2bn CR2 contract finishing with an overall profit margin of 1.5% compared with the planned 9%.

CR2 – In Service

The original CR2 fleet was purchased in two tranches:

June 1991: 127 MBTs and 13 Driver Training Tanks (DTTs)

July 1994: 259 MBTs and 9 DTTs

As part of the latter decision, it was decided to mandate the use of 230 120mm rifled barrels that had already been ordered from the then Royal Ordnance factory so that they could be retro-fitted to the Chieftain tanks. It

was argued that these barrels were available ―at no cost‖ when it was decided to replace the whole Chieftain fleet with CR2. However, in doing so, the UK was out of step with most other European armies that had adopted a

120mm smooth bore barrel as standard.

It is understood that the Challenger 2 Capability Sustainment Programme (CSP) (that is designed to maintain the system‘s capability until 2035) will incorporate the Challenger Lethality Improvement Programme (CLIP) which

includes the replacement of the rifled barrel with a smooth bore version. This would have the benefit of allowing the use of ammunition available

from a wider range of sources as well as, potentially, allowing the same smooth bore barrel to be used as part of the direct fire unit of Group 2 of FRES.

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CR2 – Training As noted above, previous generations of MBTs built by VDS followed a

recognisable technical design with fixed gun sights pointing in the same direction as the gun and rudimentary night observation functions. They

incorporated a simple fire control computer to calculate gun pointing, and the capability to hit a moving target whilst the tank itself was static (but with relatively low probability of success). Whilst this form of design led to

comparatively high training requirements and crew skill, the requirements for CR2 were an order of magnitude more complex. The intention was that tank crews, with little training background, should be able to engage a

moving target whilst on the move themselves with a high probability of a hit, rapid target switching and high speed of subsequent engagement. A key

element was that the commander should have the means to identify and prioritise the next target while the gunner was busy engaging the last one. This clearly generated technical requirements (a sight giving the commander

broad field of vision), training needs and considerable trust of the gunner‘s performance by the commander.

However, within the Land Environment, the support for CR2 is seen as the first successful application of the ―systems approach to training‖. The result

was a suite of training aids that provide the necessary understanding and experience to allow the various crew roles to be filled successfully. One of the more recent developments is the use of a live firing solution called the

Enhanced Capability for Armoured Training System (ECATS) which allows a sub-calibre round to be fired within a certain range bracket in which the

trajectory is a close approximation to that of the full effect charge. The key reason for this approach (apart from reduced barrel wear) is that the ECATS round costs some £7 – versus some £1,200 for the standard Armour

Piercing Fin Discarding Sabot (APFDS) round.

CR2 – Logistics

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Although originally supported by a traditional MOD-managed arrangement, the ChallengeR Innovative Spares Provision (CRISP) contract was signed in

2000 with BAE Systems as the Prime Contractor and Lex Multipart Defence (LMD) as the key sub-contractor. Through this contract, LMD was

appointed the ―custodian‖ of the legacy consumable spares inventory; whilst future stock is procured by LMD based on their assessment of the MOD‘s demand forecasts and their own inventory management routines that have

been developed in a variety of non-military contexts. In 2007, it was estimated that CRISP has delivered:

89% reduction in the MOD inventory under LMD custodianship.

27% increase in spares availability

95% on time in full delivery direct to units in barracks or on exercise

90% reduction in lead time.

33% reduction in costs.

Moving forward from this success, the future support to CR2 arrangements

are being developed by the IPT as part of the broader proposed contract between the MOD and BAE Systems called the Armoured Support Vehicle

Initiative (AVSI).

Personnel, Information and Infrastructure

Although there were undoubtedly a number of changes associated with the remaining lines of development, not least those relating to the introduction of the Bowman communications system (that deserves a Case Study in

itself), the main acquisition lessons can be gleaned from the LODs were discussed above.

Summary In summary, the chequered story of the acquisition of Challenger 2 took

place in parallel with a sea change in a number of significant areas. Firstly, the platform was procured against the background of the development of the manoeuvrist doctrine and the end of the Cold War. Whilst it might be

argued that the latter did not have a direct effect on the acquisition process per se, in practice it might have meant that Challenger was seen as a less

pressing capability and, therefore, one that could be used as means of demonstrating the government‘s resolve to get to grips with defence procurement. It should not be overlooked that even the much criticised

Challenger 1 was operated with considerable success in the 1991 war against Iraq, albeit after extensive preparations

This determination to improve defence procurement reflected the Thatcherite free market vision, and was exemplified by the Levene reforms which

emphasised the need to deliver Value for Money for taxpayers through arms‘ length competition. This, in turn, led to a determination on the part of the

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MOD that the prime contractor should shoulder a greater burden of the risk in delivery of the system within the agreed price.

Unfortunately, VDS was ill-prepared to take on this role. The company itself

reflected the down-sizing the Defence Industrial Base and the sale by the government of some its former nationalised assets (ie the Royal Ordnance Factories). At the same time, it was attempting to transform itself from a

relatively low technology ―metal bashing‖ company to one which created value through the integration of the best in breed equipment from around the world. However, it is clear that the early stages of the CR 2 procurement

reflected the lack of preparedness for the challenges of the new roles in many areas of the company and these were reflected in the poor quality of

the initial production tanks. Nevertheless, after considerable readjustment, including the reduction of

some 50% of the workforce and the closure of the Leeds factory, the company was able to improve its performance across the board, and CR2

proved its worth as a key element of the Army‘s ORBAT in March 2003.

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Questions

What lessons do you feel can be usefully learned from the

experience with the acquisition of the CR2?

How important a skill in a prime contractor would you assess supply chain management to be? How would you measure

whether a bidding company possessed appropriate skills in this area?

Does the CR2 acquisition experience challenge the perception that efficient acquisition is relatively straightforward in the

case of replacement systems?

What lessons does the CR2 experience offer about the IDEAA

that technical risk in a project diminishes over time and

should be minimal as the production stage approaches? Does it suggest that important attention should be paid to Engineering Readiness Levels as well as Technology and

System Readiness levels?

In the case of the CR2 significant industrial effort apparently

went into development prior to the MOD‟s formal announcement of a competition to replace

Chieftain/Challenger 1. Can the MOD expect to see this kind of industrial advance commitment very often, and if so,

under what circumstances?

In the light of the information in this case study, and of any

other relevant information in your possession, would you count the CR2 as a well-managed, successful acquisition?

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Ian A. McPherson OBE BEM MCIPS

Cranfield University DA – CMT

Background Challenger II replaced Challenger I as the Main Battle Tank for the British Army in 1998. The full fleet deployment is set at 386 Main Battle Tanks

with an additional 22 Driver Training Tanks; these Driver Trainer Variants are common with the Main Battle Tank below the turret ring. It is anticipated that Challenger II will have an operational life of 25 years.

The support to the Challenger I variant was historically poor, involving £30

million spend per annum with over 300 separate suppliers in an adversarial, ‗arms reach‘ procurement approach. This was coupled with the following additional weaknesses:

Storage at primary depots of less than £34 million of stock, thereby

attracting a CAPITAL Resource Account Budgeting charge of £2 million per annum.

Poor overall availability of <71%.

Project CRISP:

Challenger II Main Battle Tank

Innovative Spares Provision

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Costly repetitive tendering to a vendor base in excess of 300.

Routine pipeline times exceeding six to ten days.

Poor overall usage against purchase of Challenger I spares, which

resulted in the disposal of £4 million worth of stock per annum throughout the life of the tank.

Procurement Strategy Vickers Defence Systems (VDS), both the Design Authority and Prime

Manufacturer, were selected as a partner to provide the specific spares support. The reasons for this include:

Future design and technological changes or improvements could be more easily, and incrementally, introduced at less risk with Design Authority

involvement. The risk of maintaining obsolescent stock is considerably reduced.

Tank production ended in 2000, although delivery of stockpiles and retrofitted tanks continued through 2002. Some urgent spares

requirements may still be met from production stockpiles. The MoD can also draw benefit from existing long term supply agreements between VDS and their subcontractors, which include supply chain quality assurance

standards and production improvements.

VDS already has a 25 year agreement to supply spares for the Omani Challenger II ‗E‘ variant. Many spares are common to the UK version. Future export orders will be based on whole life support agreements. If

these orders are forthcoming, the MoD could benefit from economies of scale. There is also future development of Challenger Armoured Repair and Recovery Vehicle (CRRARV), which shares power train similarity with

Challenger II. In addition there was a feasibility study being conducted, which was reviewing the use of the Challenger II chassis, for the Future

Engineer Tank (FET), thus providing the possibility of further economies of scale and contract enlargement.

VDS have substantial reliability experience of Challenger II, which can be used to predict spares consumption.

UK industrial expertise may be lost if VDS‘ involvement is reduced to conventional Post Design Tasks only. Maintaining involvement in whole life

support substantially improves the ability of VDS to compete for further orders.

The position over Intellectual Property Rights is, as ever, complex, and would impair the timely letting of breakout contracts.

Project CRISP has explored these IDEAAs in an open, no commitment basis. A framework agreement, establishing a partnering arrangement was

accordingly signed in May 1999.

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The initial requirement and proposed contract provides for the supply of

Challenger II specific consumable spares, a range of 2493 items; this includes the provision of track, which in itself is a major (up to 40%) cost

driver.

Operation of the Contract

The requirement, in outline, seeks to maintain the operational support chain and provide for a core of consumable items, all of which are peculiar to Challenger II. It further establishes a procedure to include additional items

as user experience matures. The contract transfers the responsibility, and risk, from the MoD to VDS for the provision (calculation of requirement)

procurement, storage and distribution of spares. The responsibility for the distribution of spares is restricted to peacetime

locations in Germany and UK. Spares for the British Army Training Unit Suffield (Canada) and operational units will be delivered to a chosen entry point into the operational supply chain, at any specified node, Distribution

Outlet or Point of Embarkation.

The contract sets challenging targets to reduce stocks and increase availability. Units continue to demand in the normal method via their unit G4 and onwards via a Secondary Depot to the Supply Chain Operations

Centre; all changes are invisible to the users, accepting that they have experienced a substantially improved availability.

In recognising that they have little direct experience of spares provision and supply, of the scale necessary to support the fleet, and following MoD

advice, VDS have, (following a competitive tendering action), chosen a major third party logistic services provider, ‗Multipart‘ as their partner in the project. NB - The MoD was party to, and informed at every stage of, the

tender process, although did not interfere with it, nor did they influence the decision.

In effect the demands for spares are trapped at the Supply Chain Operations Centre on arrival at its Bicester location and forwarded electronically to VDS‘

Supply Chain Partner – ‗Multipart‘. These demands are trapped by employment of unique Domestic Management Codes (DMC) of ‗4CR2T‘ for turret items and ‗4CR2A‘ for items below the turret ring. These DMC codes

prefix every NATO 13 digit part number.

‗Surge‘ requirements to meet operational needs and sustainability targets are included in the contract. The ability to meet these ‗surges‘ is a mandatory requirement within given lead time notice; such ‗surges‘ are

costed separately to the main contract price.

Pricing Strategy

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To incentivise both the quality of service and overall cost, the contract includes a ‗Target Cost Incentive Fee‘ pricing mechanism, with annual target

costs and a target fee that will be paid in full or in part according to the level of service received. The incentives are comprised of the following:

A reduction in the amount paid as a fee, commensurate with any

failure to meet availability targets.

The opportunity to earn a larger fee, should efficiency lead to a

reduction in stock levels at first and second line.

A share in the savings on capital (Resource Account Budgeting) costs

if the scheme is extended to cover additional items.

The underpinning contract is an enabling arrangement for the supply

of spares. The annual target cost is the unit cost of the spares, multiplied by the estimated usage, plus an additional percentage for delivery and management. Adjustments to reflect the level of

availability reached are made on a quarterly basis.

Benefit Analysis

The operational benefits are summarised as follows:

Improved availability.

Reduced Stock Levels and therefore reduced obsolescence.

Reduced Pipeline times.

Better asset tracking, leading to identification of the true fleet costs.

Identified surge capability for mission essential items.

CRISP also meets the 5 C‘s test:

Cost (Considered).

Configuration Control (Improvement).

Capability (Not diminished).

Confidence (Customer or user confidence in the system).

Continued Life Support.

Investment Appraisal

An ‗output based‘ Investment Appraisal was employed to confirm the financial benefits using the Process and Performance Cost Model.

Without CRISP the operating cost was £133.6 million on Challenger II specific spares. The cash cost (gross less depreciation and interest) was

£111.3 million. The basic spares cost was £77.6 million. Put simply the true cost of each spare to the MoD is 1.76 x basic price (gross) or 1.43 x basic price if cash costs only are included. With CRISP, the maximum price

is 1.30 x basic, this would indicate savings of £25.4 million over seven years. Additionally a cash ‗holiday‘ of £10 million will be gained as existing

stock is drawn down and not replaced.

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For example, Year One cost the MoD £11 million as it experienced the ability

to procure previously unobtainable spares and fill shelves to support training in BATUS. Year Two costs reduced to £9.6 million.

Risks A risk analysis was undertaken. The procurement strategy is relatively high

risk when compared to present procurement methods. VDS are unproven as a spares provisioning agency; additionally the commercial viability of VDS was at some risk with an empty order book and rumours of takeover.

However, sub-contractors and not VDS physically produce the vast majority

of the spares. A professional third party logistic organisation (Multipart) carry out the provision, procurement, supply and distribution functions and have a proven track record in this field. VDS input concentrates on overall

responsibility, product quality, design changes, technological insertions, configuration control and the provision of reliability data to the provisioning algorithms.

It was the combination of sharing risk and the partnering approach of three

key stakeholders, the MoD, VDS and Multipart together with the key sub-contractors in the supply chain that have enabled CRISP to produce the efficiencies.

Summary CRISP is supporting a discreet fleet deployed to only seven locations in

peacetime and involving only circa 2,500 NATO Stock Numbers with only 31 items having a Forecast Quarterly Demand of less than 15; therefore it is an

easily measured and controlled environment into which to introduce a novel approach to contracting.

The previous system produced low availability of more than 71%, with costly disposal issues and poor pipeline provision. CRISP is currently running at

less than 95% and is exceeding savings targets. It is significantly offering the following value added benefits:

Improved second and third tier supplier relationship which has drastically reduced production lead times.

A better understanding of the MoD position by suppliers.

Improved surge capacity.

Improved flexibility.

Drastically reduced pipeline times.

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Questions

Why do you think the previous system had so many problems?

What role did culture, organization, processes and

relationships have to play?

What has been the experience of the USA in the acquisition of

similar types of equipment?

How important was effective contract negotiation in this process?

Would this be any different using the new UK SMART

ACQUISITION philosophy (more a class discussion than an individual question)?

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Peter Tatham and Trevor Taylor Cranfield University DA-CMT

Background

Following the Second World War, the UK, along with other European countries had relied on the US M109 self-propelled howitzer to provide long

range, large calibre, battlefield artillery support. However, the M109 was based on the technology of the 1950s and, following the successful

international collaboration that saw the development of the FH70 towed field howitzer, the UK, Germany and Italy began a collaborative project in the late 1960s to develop a self-propelled howitzer designated ―SP70‖.

The Memorandum of Understanding (MOU) reflected the current thinking around international projects which saw each country taking responsibility

for one or more aspects. Thus, under the MOU signed in 1973, Germany took responsibility for the ordnance, chassis, hull and loading systems; the

UK for the turret (including the gun itself), magazine, ammunition handling and the gun sighting systems; and Italy for the elevating mass and auxiliary power systems.

A number of prototypes were manufactured and subsequently used in an

extensive programme of tests and trials, and these revealed a significant series of problems with the basic design of the SP70 platform based on the Leopard tank chassis. The use of a tank chassis with a rear mounted

engine required the introduction of a complex mechanical handling system to take the heavy shells up and over the engine and into the turret. This, in turn, required the employment of a series of micro-switches to control the

shell‘s movements, and these proved to be insufficiently robust to withstand the shock waves that followed the act of firing the gun. In addition, the

design of the chassis meant that the barrel of the gun had to be trained to the rear of the vehicle whilst it was moving and this introduced a significant delay in the training and elevation to a forward firing position necessary

when bringing the gun into action.

Although it was hoped that the multi-national project would capitalise on

the success of the FH70 programme, the reality was that the overall management of the project was extremely weak and the integration of the

three separate Design Authorities fraught with tensions. In addition, there was a clear political dimension to the project which saw a determination of each Nation to retain the agreed percentage of the work share. The SP70

AS90 – The Acquisition Story

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project eventually foundered in when the UK withdrew from the consortium in late 1986.

AS90 - Doctrine Although the SP70 project effectively ended in 1986, the requirement to

replace the 30 year old M109s remained. In developing the formal specification for the successor to the SP70, it will be appreciated that this

reflected Cold War doctrinal considerations which included:

A 24Km range which would enable targets to be engaged well ahead of

the forward line of one‘s own troops, whilst increasing the ability to survive counter-battery fire.

The ability to ―shoot and scoot‖ which led to the requirement for the gun

to be able to be brought into action in <2 minutes and to fire 3 rounds in 10 seconds.

An ―intense‖ rate of fire 6/min for 3 min, and ―sustained‖ rate of 2/min

for 60 min both of which were predicated on the best estimate of the gun‘s employment in the defence of the North German plain.

The resultant two page ―Cardinal Point Specification‖ (CPS) (in effect the forerunner to what is known under Smart Acquisition as the User

Requirement Document (URD)) was very much based on what was known to be available on the international market and, in turn, had been very much influenced by the SP70 development process.

AS90 - Equipment

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Four contenders for the new competition were quickly down-selected, and a new competition organised extremely quickly, with the winner (AS90) being

announced in June 1989. This, in theory, represented an extremely fast procurement but, in practice, much of the groundwork in terms of the

requirement and the testing and evaluation of the potential platforms had been completed under the SP70 project. The actual competitors in the new competition were:

AS90 (manufactured by the Armaments Division of Vickers Shipbuilding

& Engineering Ltd (VSEL)).

An upgraded M109 offered by Royal Ordnance.

An improved version of SP70 called VDS 91 offered by Vickers Defence

Systems

The M109A2 offered by Bowen-McLaughlin-York.

It is both interesting and symptomatic of the aggregation of the UK defence industrial base that three out of the four companies now form part of BAE

Systems. The AS90 design which won the revised competition is based on the GBT

155 gun (which was, itself, developed from the existing towed FH70 155mm howitzer). VSEL had in fact started to design the GBT 155 in 1982 on a

private venture basis as the company had correctly judged that the SP70 project would not be successful. As a result, when SP70 project did actually implode in 1986, VSEL had already built a prototype gun and demonstrated

it on a number of chassis (including Vickers Mk3, Chieftain, Centurion and T-72). Conversion of this to a full blown self-propelled howitzer was a relatively simple job – but it included a number of novel features such as

hydro-pneumatic suspension rather than torsion bars, which not only provided significantly more room to operate in, but also a much smoother

ride. As part of the selection process, an extensive but rapid period of trials and

testing was undertaken that led to clearance by the Ordnance Board in 1987 with final MoD approval and a formal contract being placed in 1989. The

trials included travelling >3,000km and firing >1,500 rounds without a mission-relevant failure. Following the placing of the order for 179 systems, a further round of Reliability Growth Trials was undertaken, and by Spring

1991, the two prototype systems had travelled 28,630Km and fired 6,170 rounds.

The first production systems were delivered in 1992, and the first regiment to be armed with AS90 became operational in 1993 with the final system

being delivered in 1995 at an estimated total cost of production of £300M. Thus, in theory, the system was designed and delivered in some 10 years (1986-1995) – albeit, this discounts the benefits of the design work that

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underpinned the SP70 project. In 1994, a 5 week In Service Reliability Demonstration (ISRD) took place which was designed to simulate 80

battlefield days, and included >6,000Km travel and 11,200 rounds fired.

Apart from the improved hydro-pneumatic suspension that both improved the crew ride and increased the space available in the rear of the vehicle, the key feature of the AS90 was the Automatic Gun Laying System (AGLS).

Prior to the introduction of the AGLS, each gun position had to be located to a high degree of accuracy using a specially trained Survey Team. However, the AGLS incorporated a highly accurate laser gyro system that allowed the

gun‘s position to be fixed at a distance from the battlefield. Any subsequent movement of the gun is tracked by the gyro and, in effect, wherever the gun

is actually fired from becomes a known location. The use of the AGLS1 led to significant improvements in the time to action;

the subsequent rate of fire (it made the target of 3 rounds in 10 seconds achievable); the overall accuracy of the gun and crew resilience (any member

of the crew could operate the AGLS); and training. Interestingly, however, the AGLS had not formed part of the original CPS and, indeed, the IPTL equivalent of the day was averse to its introduction as he deemed it to be too

risky (especially in the light of the capability gap following the demise of the SP70 project).

The last year in which the AS90 was covered in the NAO Major Projects Report was 1994. Then it was noted the total estimated development cost

had increased by £3 million to £27 million between 1989 and 1994, and that the total estimated production cost had gone up by £30 million to £465 million over the same period.

AS 90 – Training As discussed above, the introduction of the AGLS reduced the level of

training required for the crew to aim the turret successfully and, in doing so, increased the level of redundancy inherent within the gun crew. On the

other hand, the requirement to be able to operate the gun safely – especially when firing at ―burst‖ or ―intense‖ rates – has increased the demands on the crew as the re-loading machinery, when operated at speed, has the potential

to seriously damage the hands and arms of the crews. This helps to explain why most accidents within the AS90 fleet have been down to drill rather than equipment failures. However, although there are 5 AS90 Regiments in

the Army, there are only two specialist pieces of training equipment where crews can learn the skills without endangering themselves (one in UK; one

in Germany).

1 Unsurprisingly, the AS90 system has since been modified to allow the use of GPS data to

fix the gun‘s position – but, at the time, the AGLS represented a revolution in gun command

and control.

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AS90 – Personnel The introduction of the AGLS has not only reduced the training requirement,

but its relative simplicity also meant that an improved operational capability could be achieved without an increase in intellectual challenge.

Separately, the weight of the AS90‘s operational ammunition round at 45Kg, and the need for this to be manually loaded onto the shell tray, formally

does not preclude the presence of female personnel in the gun crew. However, the upper body strength required to achieve this militates against females. More broadly, given the weight of the operational round, a

permanent Health & Safety waiver has had to be signed to allow peacetime training to continue on this ammunition nature.

AS90 – Logistics Overall, by common consent, the AS90 system has performed well, although a number of issues have had to be managed over its period In Service.

These include:

Spares. The poor level of spares support that has affected availability.

However, the advent of the Joint Project Team (JPT) between BAE Systems and the DLO FASS IPT (now merged with the DPA FAWS IPT to

create the AWS IPT) has done much to improve matters with greater spares availability and faster investigation of defects being reported.

Propellant. Whilst there have been some issues around the quality of

the propellant, a further issue is being raised over the value for money of meeting the policy directive to develop and use insensitive munitions (IM). Essentially, these cost twice as much (shell for shell), but to date

there have been no accidents that the use of IM would have avoided.

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Enhancement Programmes. There have been two major enhancement

programmes – the first to buy out obsolescence in Line Replacement Units (LRUs); the second to ―desertize‖ 32 guns. The latter has led to a ―fleets within fleets‖ problem.

Gun Barrels. In the longer term, the issue of ensuring the availability of

replacement barrels for large calibre guns (e.g. Light Gun; AS90; Challenger tank & Naval 4.5‖) is emerging as an interesting example of

current MOD/industry challenges. Such gun barrels are not classified as a core area which should be retained under national sovereignty as part of the 2005 Defence Industrial Strategy (DIS). But, although not seen as

a core competence that must be retained, given the IPR issues, provision of such barrels by a third party might be seen as problematic. On the positive side, the system is considered to be relatively easy to work on,

and a barrel change can regularly be completed inside 1 hour.

Support Interoperability v Maintainability. AS90 provides a neat

example of the pressures that can occur between two desirable features – in this case interoperability and maintainability. The MOD, for reasons

of interoperability at both the UK and the NATO levels, originally insisted that the 10 batteries on the AS90 platform should be standard lead acid

accumulators. However, such batteries require regular checking and topping up – a process that, in view of their physical location within the chassis, required some disassembly and reassembly work. Given this

situation, VSEL recommended the use of maintenance free batteries, but was over-ruled. However, in light of the initial experience, the MOD eventually accepted that the lead acid batteries should be replaced, and

this was achieved by retro-fitting the entire fleet.

More broadly, the number of platforms required to support the field army is currently being reviewed and, in parallel, this will take account of both the Whole Fleet Management (WFM) approach that is being adopted across the

land environment as well as the potential that the planned out of service date (currently 2023, i.e. 30 years from ISD of 1993) could safely be

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extended (based on the experience of the Light Gun that is currently planned to have an in service life of 45 years (1977-2022)).

AS90 - Information The introduction of the AGLS has altered the passage of information within the AS90 C2 system significantly. Using this system, the Battery

Commander (who may well be located at some distance from the firing position) is able to pass targeting coordinates to the ―No 1‖ of the gun and through the use of the AGLS (either fed by the laser gyro or GPS) the

training and elevation of the gun is automatically calculated.

AS90 - Infrastructure The introduction of the AS90 has resulted in few infrastructure challenges other than the need to enhance previous accommodation to accept the

heavier weight of the system (45mt v 32mt for M109) and its larger footprint.

AS90 - Organisation

Given that the AS90 was replacing a similar equipment (M109), there were no major higher level organisational issues to be overcome. Since the

introduction of the system into service, however, there have been significant changes to its support regime including the development of the Integrated Project Team (IPT) construct within the Defence Logistic Organisation (DLO).

This was followed by the development of a ―partnering‖ arrangement with the Original Equipment Manufacturer (OEM) in which a Joint Project Team (JPT) formed. Within the JPT, BAE Systems personnel were placed under

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the managerial oversight of MOD staff, and vice versa. The JPT has also acted as the ―pathfinder‖ project for even closer integration under the

Armoured Vehicle Support Initiative (AVSI) which is developing the partnering approach across all armoured vehicles.

Summary AS90 project represents a project that, notwithstanding its relatively difficult

origins as a failed multi-national venture, has subsequently demonstrated the effective integration of the DLODs to deliver an effective capability. Indeed, the relatively bounded nature of the project has allowed it to be used

as the pilot for a number of changes within the defence acquisition environment such as the emerging partnering construct.

To some extent this success must reflect the relatively minor conceptual changes between the previous (M109) and current (AS90) howitzers and the

consequentially limited nature of the technical risk. Nevertheless, AS90 clearly does have a number of novel features that have been accommodated

within and managed through the DLOD framework, and to this end, the case represents a good example of this process at work.

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Questions

What lessons do you feel can be usefully learned from the UK

experience with the acquisition of the AS90?

Do the AS90 acquisition experience underline that efficient acquisition is much more straightforward in the case of

replacement systems and does it provide little guidance for the introduction of radical systems that do not have a clear predecessor?

In the case of the AS90 significant industrial effort apparently

went into development prior to the MOD abandoning the SP70 and announcing a new competition? Can the MOD expect to see this kind of industrial advance commitment very often,

and if so, under what circumstances?

Summarise the impact on the DLODs of the decision to pursue the introduction of an AGLS.

What questions would you ask to ascertain whether the

commitment to the AGLS represented either a prudent or a rash approach to technical innovation and risk?

In the light of the information in this case study, and of any other relevant information in your possession, would you

count the AS90 as a well-managed, successful acquisition?

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Jeremy C. D. Smith and Peter D. Antill Cranfield University DA-CMT

Background

During the recent conflicts in both Iraq and Afghanistan, the problems of providing protected mobility to soldiers on the ground have become well

known and have received a great deal of attention (some of it ill-informed), from the Media, from Coroners and in Parliament. Existing equipment like

the ―Snatch‖ Land Rover provided excellent speed and agility but was poorly protected, particularly against mines and Improvised Explosive Devices (IED). More heavily armoured tracked vehicles such as Bulldog and Warrior

could have provided the necessary levels of protection but were relatively slow and have relatively high running costs and support overheads. Moreover, in counter-insurgency operations, tracked armoured vehicles

(often inaccurately described in the news media as ―tanks‖) can appear as an unhelpfully aggressive response. Wheeled vehicles are inherently less

intimidating, have greater range, higher top speed and present a lower maintenance burden. Given this high profile, there was a pressing need, politically and militarily, for ―something to be done‖, and quickly, and so

decisions which might otherwise have been questioned or challenged were pushed along by pressure, explicit and implicit, from the Prime Minister

and, especially, from Lord (Paul) Drayson, then Minister for newly-created Defence Equipment & Support (DE&S).

The original operational requirement was for a protected troop-carrying vehicle to ferry passengers from Kuwait to Iraq in order to reduce the requirement for air transport, whether in C-130 aircraft or helicopters. The

journey was mainly on metalled roads with some mileage on good tracks. So benign was the situation that consideration was given to the procurement of

baggage trailers. Unusually, there was considerable disagreement as to what the precise requirement was and a sense in some quarters (including the Operation TELIC Equipment Capability staff) that a solution, to a problem

they did not believe existed, was being foisted upon them.

Meeting the Requirement

Given the (mainly political) urgency, there was insufficient time to prepare a comprehensive User Requirement Document. However, it was clear that the

requirement could only be met by a Military-Off-The-Shelf (MOTS) purchase and so, after a swift review of what was available in the market, including

Mastiff – UK Light AFV Procurement

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visits to the USA and South Africa by the key staff involved, a list of just five Key User Requirements (KUR) was produced. This compares with, for

example, the Future Rapid Effects System – Utility Vehicle (FRES UV) which has 303 User Requirements, eleven KUR and 1,272 System Requirements.

The KUR were influenced as much by what was available in the timescale set, as by the user requirement. At this stage, support planning was hardly considered. Indeed, the initial concept was to buy, use, and then gift to Iraq.

The requirement was met by an initial purchase of 108 Mastiff 1. This vehicle was based on the US Cougar mine resistant ambush protected

(MRAP) vehicle produced by Force Protection Industries Incorporated (FPI Inc.) and in-service mainly with the US Marine Corps (USMC). In order to

meet a political commitment to have Mastiff in theatre within twenty-three weeks, basic vehicles were upgraded to a UK specification by contractors from Coventry-based NP Aerospace (NPA) in the British military facility at

Akrotiri in Cyprus. Some Royal Logistics Corps (RLC) drivers and Royal Electrical and Mechanical Engineers (REME) mechanics were also trained in

Cyprus. The initial tranche of ten vehicles was then flown to Iraq in order to meet the deadline. This was a classic Urgent Operational Requirement (UOR) procurement where urgency (arguably more political than operational)

outweighed economy or a full assurance process. The original ―quick and dirty‖ Mastiff 1 procurement was followed by various

upgraded versions of Mastiff 1 and 174 Mastiff 2 as well as a slowly increasing number of Mastiff 3 (thirty-six have been ordered since February

2010). When deployment is complete in late 2010, total fleet size will be over 360. As well as Mastiff, the Cougar-based family now includes approximately 151 Ridgeback (4x4) and ninety-seven Wolfhound (6x6

logistic load carrier) vehicles. At around 741 strong, the whole Cougar-based family now makes a considerable contribution to Protected Mobility and represents a major investment in initial procurement and continuing

support costs.

The Acquisition Context Throughout the Mastiff project, Ministry of Defence (MoD) and Army support has sometimes wavered – influenced on the one hand by doubts about the

advisability of having something quite so large and lumbering in this role and on the other, by the desire to avoid increasing equipment programme pressure on the FRES UV project. Other factors included:

Commercial Environment – NPA took on the task at significant (£M) commercial risk, pending the award of a MoD contract. There were

several other obvious and more experienced candidates for the Systems Integrator (SI) role but they were either not prepared to take on this risk, or could not decide quickly enough. In practice the role was more

systems coordination than SI. Initially, the MoD project team (then the Specialist & Utility Vehicles Integrated Project Team (SUV IPT)) was the

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Design Authority, but this role has passed to NPA with Mastiff 2 and will pass onto Integrated Survivability Technologies Limited (IST – a joint

venture between FPI Inc. and NPA) when contract novation occurs.

Procurement Strategy – Given the timescale, this was virtually guaranteed to look for a MOTS solution. Key issues were choice of base

vehicle, development of enhanced protection and systems integration – particularly communications and electronic counter-measures (ECM). The choice of base vehicle depended very much on the enthusiasm, drive

and knowledge of a small number of key players, including Lord Drayson, Deputy Director, Equipment Capability – Ground Manoeuvre (DDEC GM) and the SUV IPT Leader, all of whom understood the nature and role of

Cougar. The Defence Vehicle Dynamics (DVD) trade show, sponsored by the SUV IPT and held annually at Millbrook in Bedfordshire, was pivotal,

with a number of Mine Protected Patrol Vehicle (MPPV) concept demonstrators on display. Work was also commissioned from QinetiQ and the Defence Science and Technology Laboratory (DSTL), to assemble

information about contenders. Meanwhile, NPA has established strong credentials for responsiveness and innovation from its work on

armouring the much-maligned Snatch Land Rovers. It is of note that the major armoured vehicle players missed the opportunity, although General Dynamics (UK) was engaged, because of their Bowman

involvement. But since there was no need follow the Official Journal of the European Union (OJEU) process, there were no public cries of ―foul‖ and decisions which might otherwise have been questioned or challenged

were pushed along by implicit pressure from Lord Drayson.

Innovative Support – Given the pace of procurement and the relative inexperience of NPA, there was little opportunity to consider innovative

support arrangements - Contracting for Availability (CfA) or even Contracting for Capability (CfC). However, some potential providers, notably Raytheon, made some effort later on to engineer a CfA

arrangement.

International Context – Procurement of Mastiff was influenced by the international nature of the operations, first in Iraq and then more

obviously in Afghanistan. Several of the coalition partners had deployed or were considering deploying Cougar-based vehicles. While this might have led to exploration of opportunities for interoperability and shared

support, in practice it simply resulted in unhelpful competition for resources and priorities. This was particularly so with the US Marine Corps (USMC). Initial purchase of Cougar was arranged through the

USMC as a Foreign Military Sale (FMS) in order to avoid any International Traffic in Arms (ITAR) impediments and delays. This has led to some

protective behaviour by the USMC which feels, quite understandably, that the ―home team‖ should have the highest priority. Note that while Mastiff 1, Mastiff 2 and Ridgeback are FMS, Wolfhound is a Direct

Commercial Sale (DCS) which allows the UK to exercise a little more leverage on relative priority issues.

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Development History

The main characteristics of the Mastiff family of vehicles are set out in the

Combat Wheels Group brochure and further details are readily available on the British Army Website – the Mastiff 2 information sheet is attached as Appendix 1.

In UK service, the Mastiff family of vehicles consists of:

Mastiff 1: Contract award – August 2006; Deployed – December 2006; First used operationally – March 2007.

Mastiff 2: Deployed – June 2009; Main enhancements were additional

armour, improved lights and more capable brakes.

Mastiff 3: Deliveries were beginning in Q4 2010; Main enhancements are a seven-inch increase in height and an integrated radio installation kit.

Ridgeback (4x4): Based on Mastiff 2; Deployed – Summer 2009; Variants

include a troop carrier, battlefield ambulance and a command and control vehicle. It is intended for use in urban and urban fringe areas.

Wolfhound (6x6): Current fleet size is around ninety-seven with an order for another twenty-eight to be confirmed. The main variants are Utility

and EOD vehicles.

There was some initial resistance to Mastiff 1, particularly from those who were concerned to protect the programme position of FRES UV and this led to criticism of its capability shortcomings. However, when allowances are

made for the speed with which it was procured, Mastiff meets its capability requirements pretty well. This of course is partly due to the ―reverse

engineering‖ of some of the Key User Requirements (KUR). Other issues included:

Capacity: Met in full.

Tactical Mobility – Limitations are a known problem; Mastiff was procured for protected troop movement on roads but is now used in a

Fire Support role and, predictably, is having trouble coping with cross-country travel. Note that Oshkosh has developed and offered an independent suspension solution which will enhance both tactical

mobility and crew comfort, but it was rejected mainly on the grounds of cost.

Protection – Mastiff was initially procured as a troop carrier, so protection

had primacy. The base vehicle offers excellent protection from mines because of its v-shaped hull and the UK-special enhancements from NPA

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further enhance protection.

C4I – Systems Integration was carried out by NPA, who were very much learning 'on the job'. Mastiff cannot meet ―Land Class A‖ Electromagnetic

Compatibility (EMC) requirements and this has exacerbated well-publicised issues surrounding the limited performance of Bowman.

Legal and Environmental – Mastiff does not meet European emission

standards and cannot legally be driven on European Union roads. However, in this respect it is no worse than tracked armoured vehicles already in service.

Reputation and Performance – Mastiff has received a good press. For

example, in Defence Management Journal, Issue 40 (dated February 2008), editor Matthew D'Arcy said:

―The procurement of Mastiff has largely been a real success story for the MOD and, in particular, former Minister for Defence Equipment and Support Lord Drayson. His challenge for reducing acquisition time cycles by 50%, something viewed by many as a crucial aspect of future defence procurement, has been taken firmly in the stride of those responsible for procuring Mastiff. Taking just 23 weeks to procure, from the initial assessment phase through to the contracting process, production of the vehicles and equipping them appropriately to deliver to the front line, satisfying the Mastiff UOR has proven remarkably fast.‖ The positive reputation is supported by performance. As at 4th August

2010, Mastiff had received 174 mine or IED strikes across the fleet (seventeen in Iraq; the remainder in Afghanistan) but fewer than ten

hulls have been written off.

Support History

The four Key Support Areas (KSA) for the Mastiff are set out in the Support Solutions Envelope (SSE) – an online tool for monitoring the progress of a support contract – and are:

KSA 1 – Logistics Readiness and Sustainability

KSA 2 – Supportability Engineering

KSA 3 – Supply Chain Management

KSA 4 – Logistic Information

Logistic Readiness and Sustainability embraces three elements:

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Logistic Readiness and Sustainability

Contractors on Deployed Operations (CONDO)

Support Continuity

With the exception of CONDO, which is widely used in support of Mastiff,

KSA 1 has little applicability to an Urgent Operational Requirement (UOR) placed in support of continuing operations.

Supportability Engineering comprises eight elements:

Reliability & Maintainability – Neither had been specified; neither is measured; but neither presents a problem. Operational availability has

not been an issue and most (87%) of the repair done to vehicles comes under Battle Damage Repair (BDR). There is no Health and Usage Monitoring System (HUMS) and no Oil Health Monitoring (OHM).

Repair Planning – In-theatre repair planning is sensitive to the number,

nature and accessibility of Forward Operating Bases (FOB). ―Repair forward‖ is a sound equipment support principle but a large number of

widely spread and relatively inaccessible FOB greatly increases the requirement for special tools and test equipment (STTE) and for dedicated spares packs. Repair is much more efficient if concentrated on a single

Main Operating Base (MOB).

Battle Damage Repair – There is a major supply and repair effort in

repairing battle damaged vehicles, which can require between 300 - 400 items to effect a repair, which distorts inventory planning. However,

compare the cost of a new vehicle (around £1.1 million) to the cost of a full set of rebuild spares (around £100k -£150k). It is not known whether

there is any formal repair cost estimation or economic repair limit but one REME battalion commander has produced a workshop repair study which is likely to be adopted as policy.

Safety – Safety is looked at by both the Protected Mobility Team (PMT)

and Headquarters, Land Forces (HQLF) as a major issue. The Safety Case is ―owned‖ by the Team Leader. Current issues include dealing with water

hazards (canals are common in parts of Helmand Province) with issues of emergency crew egress and the potential for drowning.

Fleet Management – There is no effective Management Information System (MIS) for Mastiff fleet management. FEMIS is not used in the

FOBs and could not respond to spares usage for want of spares codification. JAMES (Land) has the necessary functionality but there is insufficient communications bandwidth in theatre to allow information to

be passed. Usage, condition and modification information is woefully thin. There is a pressing need for an empowered, informed, global fleet

manager but a broad agreement that this post is best placed in HQLF. At present, more attention is paid to managing the UK training fleet than the operational fleet simply because more management information is

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available for the former. There is a great deal of variation across the fleet and no effective configuration control (there are at least fifteen known

variants). Modifications are designed and produced but ―Mod Kits‖ sit on shelves unfitted.

Regeneration – The establishment of the ―Equipment Sustainability

System‖ (ESS) in Camp BASTION, which had an Initial Operating Capability being achieved in December 2009 and a Full Operating Capability due in late 2010, should encourage the introduction of better

fleet management, the project being led by the Permanent Joint Headquarters (PJHQ). Regeneration (overhaul to Level 3 or 4) of Mastiff in theatre is due to start in 18 months time. The initial repair effort is being

run by KBR (formerly Kellogg, Brown & Root), with the Defence Support Group (DSG) due to take over in 2011. Planning assumptions are based

on time-based base overhaul (Level 3 every 2 years; Level 4 every 8 years) but repair decisions for individual vehicles will be based on the Condition Based Maintenance regime favoured by the Defence Support Review. The

ESS base overhaul programme will provide the opportunity to restore the Configuration Control order.

Through-Life Capability Management (TLCM) – There is no Through-Life

Management Plan (TLMP). The production and maintenance of a TLMP will be part of the Post-Delivery and Sustainment (PDS) contract to be let to IST. At present, modifications and upgrades are developed (e.g. to

sights, communications fits and weapons) in response to continuing operational experience. No plans have been made to deal with obsolescence let alone disposal, and none is likely until Mastiff is taken

into the core programme and subject to the tighter planning discipline that management by a Programme Board entails.

Support Costs – At the moment, very little cost information is gathered,

which presents a particular problem for plans to bring some or all of the fleet into the Core Programme. HQLF could not acquire data for Mastiff, even for the training fleet. The necessary information simply does not

exist – mainly due to the lack of codification. The annual spend on spares and repairables is running at around [##]. There has been little

opportunity to date to assess whether these costs could be reduced without any detriment to the level of support provided, i.e. to gauge whether support could be provided more efficiently. Logistic data is very

thin and cost capture widely distributed and incomplete.

Supply Chain Management consists of four areas:

Inventory Management – Inventory is planned, (provisioned) procured,

stored, managed and delivered to the Purple Gate by IST (NPA). Issues of codification mean that spares visibility is poor (especially in-theatre) and

MoD/IST coordination is by ―swivel chair‖ in Telford (Land Supply Business Unit (LSBU), now part of DSG) although the new ―Electronic

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Business capability‖ will improve matters.

Spares Visibility – Lack of spares visibility has made repair management in-theatre difficult, but there is evidence that visibility in-theatre is now

improving. Inventory now appears on Global. IST/NPA holdings are still not automatically visible - a ―swivel chair‖ at DSG Telford is still required.

There continue to be significant difficulties / issues with source, store and all the spares.

Spares Availability – Improving global availability is being affected by local (in-theatre) earmarking and stockpiling, assembly of Priming

Equipment Packs (PEPs – for the training fleet) and distortions caused by the ESS base overhaul facility in Camp BASTION. Problems continue to be caused by the USMC, which has issues with priorities and conflicts of

interest. Hence the drive to form ITS and source spares from non-US suppliers (currently 416 from 800 critical/fast moving spares are sourced

elsewhere) and so address commercial sensitivities and conflicting priorities.

Codification – There were early problems with the translation of manufacturers‘ parts lists, some related to the vehicle manufacturer (FPI

Inc.) having no visibility of the chassis manufacturer‘s parts list. Most of these problems have now been overcome. There is some disagreement

regarding how much codification is enough – Protected Patrol Vehicle Team Leader (PPV TL) feels that there is now too much emphasis on total codification.

Logistic Information has two main factors:

FEMIS is not used further forward than Camp BASTION, while equipment information is not fed back. Equipment Failure Reports (EFR)

are not used. Raytheon has conducted trials of an information system (KARRUS) which has been adopted by IST and could provide the basis for

an effective, bespoke Logistic Information System, although bespoke information systems can be counter-productive.

Repair activity for the UK training fleet is recorded on JAMES (Land).

Other issues include:

Safety – What has now come to be called the 'Haddon-Cave' Effect (after Charles Haddon-Cave who produced the report on Nimrod XV230 which

blew up over Iraq) highlights the changing relationship between safety and engineering.

Environmental – Compliance with EU and UK regulations has become critical and includes Emissions and the Road Traffic Acts.

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HQ Land Forces – Impact of its structure is important as Engineering is

separated from Supply.

DE&S DT Manpower – The PMT is short of manpower. It is currently sixty

strong, but the Team Leader estimates that he needs a further eighteen personnel. Two new OF4 posts have been created (SO1 Equipment

Support Programme Manager and SO1 Through Life Support) and are to be filled shortly, which will help plug the gaps in support planning.

Flexible resourcing is not helping as much as initially promised and the manpower and skills situation is made worse by the fact that those in the re-deployment pool tend not to have the skills required.

Defence Lines of Development (DLoD) Considerations – Pan-DLoD

activities are led by the Capability Integration Working Group (CIWG) which worked very well. Success has been dependent on the maturity of the approach adopted by key individuals, particularly the Assistant

Director, Equipment Capability in the Director of Infantry's office who chairs it. Note that the contribution of key, empowered individuals is a

common thread running through the Mastiff story. There have been significant and enduring tribal issues, for example, which Trials and Development Unit (TDU) should lead – Combat Service Support (CSS),

Director of Infantry or Director, Royal Armoured Corps (DRAC)? Which Arm/Service should provide the drivers and commanders?). The relaxed

approach adopted keeps the contenders happy but attracts additional cost.

Training – Driver training is a success story, with a well-developed package, including infrastructure and resources, at the Defence School of

Transport, Leconfield. REME Training was, as usual, low on the list of priorities. Training is thin, with few training aids. ―Train the trainer‖ training has been contracted to FPI Inc.

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Questions

Which aspects of the specification and procurement of Mastiff

serve as an example of good practice and could be used more widely?

Which aspects of the specification and procurement of Mastiff

do you think could have been handled better and how would you have done that?

Given the rapid pace of procurement for Mastiff, there was little time to explore the possibility of innovative support

solutions. With the benefit of hindsight, how do you think support might have been improved and provided more efficiently? What could be done now?

What might be done to improve Support Chain Optimization in

order to mitigate risk and ameliorate cost increases?

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Appendix One: Mastiff 2

Mastiff 2 is a heavily armoured, 6 x six-wheel-drive patrol vehicle which carries eight people, plus two crew. It joined operations in June 2009,

succeeding the Mastiff armoured patrol vehicle.

It is suitable for road patrols and convoys and is the newest in a range of protected patrol vehicles being used for operations. With a maximum speed of 90 kph Mastiff 2 is armed with the latest weapon systems, including a

7.62 mm general purpose machine gun, 12.7 mm heavy machine gun or 40 mm automatic grenade launcher.

These wheeled patrol vehicles have a less intimidating profile than tracked

vehicles and give commanders on the ground in Afghanistan more options to deal with the threats they are facing.

They have Bowman radios and electronic countermeasures and are fitted with additional armour beyond the standard level to ensure they have the

best possible protection.

Mastiff 2 is just one of a whole range of protected vehicles being used on operations, including Challenger 2, Viking, Bulldog, Warrior, Vector and

Snatch.

Improvements on the Mastiff 2 include:

o Bigger axles o Up-rated suspension o Increased electrical power from the alternator 400A vs 200A

o Increased crew capacity 2 + 8 as opposed to 2 + 6 (plus an occasional 7th)

o Increased CES/stowage locations o Blast attenuating seats o Fold up seats allowing easier stowage if the vehicle is not full of crew

o New Situational Awareness system incorporating a Thermal Imager for the driver

o Redesigned gunners step

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o Electronic Turret Traverse Mechanism o Engine and fuel tank fire suppression systems.

The vehicles are based on the US Cougar made by Force Protection with the

UK integration work carried out by NP Aerospace, based in Coventry.

Appendix Two: Mastiff Team List

Activity Lead

Requirement Cap GM

Supportability Engineering TLS

Support Solution Coherence & Integration to the Deployed space

ACDS (Log Ops)

Regulatory Compliance D S&E

Commercial/Industry D LE (BST)

Supply Chain Management & Management of ES Materiel

SCM

Store & Manage DSDA

UK Platform Delivery & Integration D LE (OVO)

Security Classification DSCOM

In-Theatre Platform Integration & Delivery HQ LF

Purple Gate DSDA

Movement DSCOM

Consignment Tracking SCM

Materiel Accounting/Asset Visibility SCM

Training, Training Fleet & Support HQLF

UK Infrastructure Requirements HQLF

Force Primary Depot DSCOM

Campaign Support Planning PJHQ

In-Theatre ES CONOPS (Level 1-3+) DEME(A)

DSG DSG

Configuration Control D S&E

Contractor Support to Operations ACDS (Log Ops)

In-Theatre Fleet Management PJHQ

Capability Review and Transition to Core Cap GM

Attrition & Regeneration Fleet Cap GM

Regeneration/Disposal HQ LF

Support Continuity ACDS (Log Ops)

Logistic Information Systems Log NEC

Appendix Three: Glossary

BDR – Battle Damage Repair C4I – Command, Control, Communications, Computers and Intelligence

CfA – Contracting for Availability CfC – Contracting for Capability CIWG – Capability Integration Working Group

CONDO – Contractors on Deployed Operations CSS – Combat Service Support

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DCS – Direct Commercial Sale DDEC – Deputy Director Equipment Capability

DE&S – Defence Equipment & Support DLoD – Defence Lines of Development

DSG – Defence Support Group DRAC – Director, Royal Armoured Corps DSTL – Defence Science and Technology Laboratory

DVD – Defence Vehicle Dynamics EMC – Electromagnetic Compatibility ESS – Equipment Sustainability System

FOB – Forward Operating Base FMS – Foreign Military Sale

FOC – Full Operating Capability FPI – Force Protection Industries FRES – Future Rapid Effects System

GM – Ground Manoeuvre HQLF – Headquarters Land Forces

HUMS – Health & usage Monitoring System IED – Improvised Explosive Device IOC – Initial Operating Capability

IPT – Integrated Project Team IST – a joint venture between FPI and NPA KSA – Key Support Areas

KUR – Key User Requirement LSBU – Land Supply Business Unit

MIS – Management Information System MOB – Main Operating base MoD – Ministry of Defence

MOTS – Military-Off-The-Shelf MPPV – Mine Protected Patrol Vehicle NPA – NP Aerospace

OHM – Oil Health Monitoring OJEU – Official Journal of the European Union

PDS – Post-Delivery and Sustainment PEP – Priming Equipment Pack PJHQ – Permanent Joint Headquarters

PMT – Protected Mobility Team PPV – Protected Patrol Vehicle

REME – Royal Electrical and Mechanical Engineers RLC – Royal Logistic Corps SSE – Support Solutions Envelope

STTE – Special Tools and Test Equipment SUV – Specialist and Utility Vehicles TDU – Trials and Development Unit

TELIC – codename for the invasion of Iraq TLCM - Through-Life Capability Management

TLMP – Through-Life Management Plan UOR – Urgent Operational Requirement USMC – United States Marine Corps

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David M. Moore Cranfield University DA – CMT

Background This case study is based on National Audit Office (NAO) Report, Hercules C-130 Tactical Fixed Wing Airlift Capability, dated 27 June 2008. The

background below consists of extracts from this report, which have been selected to help answer the questions. The full report is available at www.nao.org.uk/publications/0708/hercules_c-130_tactical_fixed.aspx and

students may well find it helpful to use the full report.

Students need to be aware of some of the changes being made to acquisition practice as a result of the Enabling Acquisition Change Report, specifically those which relate to the through life management of all Defence Lines of

Development (DLoDs). The DLoDs are the facilities provided under the following categories:

Training

Equipment

Personnel

Information

Concepts & Doctrine

Organisation

Infrastructure

Logistics

Interoperability

The capability delivered by the user can be optimised by the most appropriate combination of DLoDs and managing these through life. The

trade off between DLoDs should be considered to provide the most cost effective solution; for example spending on logistics may result in higher

availability for each piece of equipment and so the number of equipments can be reduced. Further information can be found in Defence Acquisition and the Defence Acquisition High Level Blueprint.

The aim of this case study is to explore the concept of through life management of DLoDs and how it could be applied to tactical fixed wing

airlift capability.

Logistics Issues in UK Tactical Airlift

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Main Points Summary Para 1 - The Ministry of Defence‘s key tactical airlift assets are its

43 Hercules aircraft, although they are also used for some strategic tasks. It costs the Ministry of Defence (the Department) £245 million annually to operate and maintain the current Hercules fleet.

Summary Para 2 - Operating at a high tempo and in harsh environmental

conditions in Afghanistan and Iraq is taking a toll on many parts of the aircraft and in particular on the underbelly and propellers. Four Hercules have been lost during current operations, the most recent in August 2007.

Recuperation funds from the Treasury have contributed towards the purchase of two additional C-17 aircraft to increase the Department‘s

capacity for long range airlift rather than replacement Hercules.

Summary Para 3 - Over the next decade the Department faces a period of

transition. It is consolidating all fixed wing air transport aircraft on a single base at RAF Brize Norton. The Hercules C-130K fleet will be retired, the specialist operations role will be transferred to the newer Hercules C-130J

fleet and the A400M will be introduced into service.

Summary Para 5 - The Department is meeting the requirement for Hercules aircraft to be deployed in Afghanistan and Iraq, despite a declining fleet size

resulting from the retirement of the Hercules C-130K aircraft and losses on operations. This performance has been achieved through collaborative working and innovations to fleet planning, especially in allocating tasks for

the Hercules aircraft and prioritising the fitting of new equipment to increase availability. The current nature and scale of operations is reflected

in the increasing cost of running and maintaining the Hercules fleet. There are also difficulties with the provision of spares in the Hercules C-130J fleet. With the continued focus on operations, there has been a reduction in

aircrew training and non-operational airlift tasks in support of wider Defence activities.

Summary Para 6 - Going forward, there are significant risks for the

Department because demand for tactical fixed wing airlift is likely to remain high in the near future. The specialist operations role must be transferred to the Hercules C-130J whose service life is being reduced by the intensity of

current operational flying. These factors will restrict the Department‘s ability to provide sufficient airlift to the Armed Forces. The problem is exacerbated by the late delivery of the A400M aircraft which is intended to replace the

older Hercules C-130Ks when they retire in 2012. If availability of Hercules aircraft is reduced as a result of these changes to the fleet, opportunities for

training will be limited, potentially eroding aircrew skills and restricting their ability to operate the Hercules in the wide variety of operational situations that may occur in the future. Extra aircraft could be purchased,

leased or chartered but cost and restrictions around their use may prevent this from being a realistic and affordable option. There are some low cost or

cost neutral solutions which the Department could undertake to improve

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availability of the newer aircraft and increase training; but these may not be sufficient to cover the likely shortfall.

Summary Para 7 – Two committees have brought together all the parties

with a role in providing or using Hercules aircraft into pan-Departmental working groups to prioritise tasks. Two groups, the Air Allocation Committee

and the Commitments Area Requirements and Availability of Air Transport Team have successfully contributed to ensuring that the highest priority, for aircraft to be deployed on operations, was met despite a declining fleet size.

Summary Para 8 - The Department has to balance operational imperatives

with risk and, with the creation of the Capability Delivery Steering Group, has formalised the process for prioritising upgrades to minimise the impact

on availability and maintenance time.

Summary Para 9 - Aircraft on operations in Afghanistan and Iraq are available to fly planned missions at least 85 per cent of the time, which is in excess of both the expected level and that achieved in the United Kingdom,

although the flying is more severe and the environmental conditions are harsh.

Summary Para 10 - The Department has obtained over 3,000 flying hours

from other nations‘ spare airlift assets in exchange for air-to-air refuelling services or strategic airlift.

Summary Para 11 - On operations in Afghanistan and Iraq aircrews are flying 60 hours per month on average, whereas pilots in the United Kingdom

are typically flying fewer than 13 hours a month. The Department is concentrating on training that is considered essential to prepare crews for

flying on operations, so the amount of training for other conditions and manoeuvres is restricted. When the number of aircraft available is fewer than expected it is the non-operational tasks and training and exercises that

are cancelled. There has been a tenfold increase in the number of training flights cancelled in 2007 compared to 2005. Simulators for both aircraft variants have limitations, particularly because their software has not kept

pace with aircraft modifications, especially defensive aids, and they are therefore not able to replicate flying the Hercules accurately. All these

factors are contributing to the erosion of the skills base and currency of the Hercules aircrews.

Summary Para 13 - Fatigue, which decreases the life span of the wings, is accumulating more rapidly on the aircraft than in the past. The cost of

recovering the wings has caused the Department to retire nine of the older Hercules C-130K aircraft early, with a further five being retired as intended

at their extended out of service date of 2010. These retirements have resulted in a planned gap in capability. Nine will continue to fly, and of these, five will have their wings replaced at a cost of £15.3 million to ensure

that they have sufficient life to last until 2012.

Summary Para 16 - Given the significant stresses to which the aircraft are being subjected on operations, initial indications suggest that the worst

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affected Hercules C-130Js may need their centre wings replaced or refurbished from 2012 in order to reach their planned out of service date of

2030. This requirement combined with other activities to upgrade the fleet will further reduce availability around 2012.

Summary Para 17 - With real experience of spares use, in different

operational circumstances than originally assumed, spares estimates have proved inaccurate. The resultant shortages have not been allowed to affect the aircraft deployed in Afghanistan and Iraq. Under the Department‘s plans

it will cost less than £8 million to rectify these problems.

Summary Para 18 - The first batch of the new A400M aircraft is unlikely to be delivered to the United Kingdom before the end of 2011. To mitigate this

risk in part, the Department has extended the service life of the Hercules C-130K until the end of 2012 at the cost of £41 million.

Summary Para 19 - The entire Hercules fleet and all related support and RAF maintenance activity will now be moved to RAF Brize Norton. The

Department has not yet quantified the impact on the Hercules Integrated Operational Support contract. For example, there may be a lack of repair

bays, insufficient parking space for aircraft and aircraft may have to be towed some distance to the repair hangars.

Summary Para 20 – The Department has created the Strategic Mobility – Capability Planning Group which aims to provide an overview along the lines

described above, but this Group is still in its infancy.

Recommendation A - The Hercules simulators have not kept pace with aircraft modifications, especially defensive aids and so they are not able to

replicate flying conditions accurately. The Department should prioritise resources to install the necessary software on the Hercules C-130J simulator at the cost of £4.25 million to increase the hours crews spend

training, reducing the erosion of the skill base, and increase its flexibility to divert aircraft to undertake additional tasks. For example, by using the simulator intensively the Department could provide an additional 300 days

of aircraft availability – the equivalent of one aircraft per year for other purposes.

Recommendation B - On average a Hercules C-130J can be unavailable to

fly due to a lack of spare parts for 24 days a year. The Department has identified pinch points in spares provision and it should take forward the actions it has identified to resolve these problems. It should now develop

meaningful performance data to provide assurance that there are no other fundamental problems with the supply chain. If the Department can

improve the provision of spares for the Hercules C-130J to the same levels as the Hercules C-130K, then the fleet would be available for an extra 168 aircraft days in a year.

Recommendation C - If the Department were to build an all-weather natural

runway at RAF Keevil, Wiltshire, instead of landing on a beach it could reduce the time aircraft need washing to remove salt water. This runway

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would cost approximately £2 million, but would save around £230,000 per annum and provide 41 extra days of Hercules availability to undertake

Defence tasks.

Recommendation D - Repair and maintenance is taking up to 25 per cent longer on some parts of the Hercules fleet. A Departmental review has

identified a shortfall in engineering staff. In response, an additional 54 personnel are being provided to RAF Lyneham with individuals drawn from less operationally-loaded units. This re-deployment has been effective

to date but is only a temporary solution and the Department needs to provide the levels of personnel recommended in the review if it is to support current levels of flying. Aircraft will always need some additional

maintenance beyond that routinely scheduled, but the RAF estimates that additional engineering personnel could release an additional 300 days of

aircraft availability for other purposes.

Recommendation F - Analysis of the rate of accumulation of fatigue on the Hercules C-130J fleet shows that some aircraft‘s wings may reach the end of their life as early as 2012. The Department should complete its investigation

into the most cost-effective method for extending the life of the Hercules C-130J wings. By assessing the practicalities of changing the method of fleet

management to mitigate accumulation of fatigue and the feasibility, cost, funding and source for procuring new centre wings or refurbishing existing ―J‖ wings, the Department will be able to mitigate the risk to availability of

Hercules C-130Js.

Recommendation G - insight into the key issues, which affect both the Hercules aircraft and the personnel who fly and support it, and the level and

nature of the risk is now being addressed by the Strategic Mobility – Capability Planning Group, which is still in its infancy but tasked with developing the requisite means for managing the key issues. By having a

single group actively considering training, equipment, personnel, information, concepts and doctrine, organisation, infrastructure and logistics, the Department should improve the visibility of the risks, manage

them more coherently and identify opportunities to increase availability.

Recommendation H - Delays to the introduction of A400M aircraft could prevent the Department sustaining current levels of tactical airlift. One

potential solution is to halt the retirement of the remaining Hercules C-130Ks in 2010 but there is a point at which measures to extend the life of these aircraft, including major depth repair and re-winging, are not practical

or economic. The Department should determine the costs and benefits of extending the life of the Hercules C-130Ks compared to alternative solutions

to cover this capability gap. Progress on the A400M procurement should determine the trigger dates for the sourcing of funds and submission of a business case to the Investment Approvals Board so that the solution can be

introduced within the necessary timescales.

Para 1.3 - Currently the fleet is based at RAF Lyneham, although the aircraft and all related support and maintenance activity will transfer to RAF Brize

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Norton from 2011, and comprises two variants: the ―K‖ and newer ―J‖ models. There are 19 Hercules C- 130K aircraft which entered into service in

1967. They are crewed by two pilots, a navigator, a flight engineer and a loadmaster. The 24 Hercules C-130Js entered service in 1999, are crewed by

two pilots and the loadmaster and compared to the Hercules C-130K, it is a more modern aircraft. The ―J‖ incorporates a digital flight deck (removing the need for a navigator and a flight engineer), an integrated avionics system,

new engines and propellers.

Figure 2 – Key Events in the operational history of the Hercules Fleet.

Para 1.6 - Maintenance work on the Hercules fleet is divided between repair and basic maintenance work conducted at RAF Lyneham – known as

forward maintenance; and more substantial maintenance conducted at Marshall Aerospace – known as depth maintenance (Figure 4 on page 13). The current arrangements were put in place in April 2006 when the

Department, Marshall Aerospace, Lockheed Martin and Rolls-Royce agreed the Hercules Integrated Operational Support contract whereby industry is paid to make aircraft available for use, as opposed to being paid for spare

parts and repair. The contract was signed in May 2006. Figure 5 on page 13 sets out the responsibilities of each of the key players involved in the

partnering arrangement under this contract. Co-location of the staff from the Department and industry, at Marshall Aerospace‘s site in Cambridge and at RAF Lyneham, has been central to enabling more effective team

working to resolve issues.

Para 2.6 - In addition to its own aircraft, the Department has provided airlift by using other nations‘ aircraft in return for air-to-air refuelling or strategic

lift services. The Movements Control Centre Europe co-ordinates the use of spare air and sea lift assets belonging to 15 nations (the United Kingdom, Belgium, Canada, Denmark, France, Germany, Hungary, Italy, Latvia,

Netherlands, Norway, Slovenia, Spain, Sweden and Turkey). It is based on a ‗Hercules flying hour‘ and member nations can be in credit or debit by up to 500 Hercules hours, as long as they are in credit once every three years. For

example, by providing a C-17 for one hour to another nation the Department can claim back seven hours of Hercules flying time.

Figure 6 – Fleet size and availability.

Figure 13 – A year in the life – breakdown of how days spent.

Figure 16 – cost of operating and maintaining fleet.

Para 3.24 - A400M is a collaborative programme involving Germany, France,

Turkey, Spain, Belgium, Luxembourg and the United Kingdom. A total of 180 aircraft are planned to be procured through a contract with Airbus

Military and the United Kingdom‘s potential share is 25 aircraft. When the project began, the Department expected the first seven A400M aircraft to be delivered in December 2009. The project has been delayed subsequently by

a variety of contractual and budgetary difficulties affecting all partner nations and the Department does not now expect the first seven aircraft to

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be in use until December 2011, with the final aircraft delivered four years later. The Department plans that the A400M fleet will deliver the full range

of operational benefits by 2018.

Para 3.25 - The delays present a risk that is difficult for the Department to mitigate. The procurement is managed by the Organisation for Joint

Cooperation in Armaments, a multi-national administrative body for the management of collaborative programmes based in France. The Department does not have a direct contractual relationship with, or access to, Airbus

Military which means that visibility of progress is limited, and makes it very challenging for the Department to plan effectively. It is unlikely that the Department will obtain payments for the late delivery of A400M aircraft at a

sufficiently early time in order to purchase additional airlift capability. In the short-term delays to the introduction of the A400M have cost £41 million

with the extension of the life of some of the Hercules C-130Ks. Airlift capacity will be compromised after the Hercules C-130Ks retire in 2012 and a decision must be taken soon to reduce the impact of long lead times

required for some solutions.

Para 3.26 - Crew training on Hercules C-130s has declined due to a lack of available aircraft. Understandably, training has focused on preparing for

current operations. Flight simulators are used extensively by the aviation industry for the training of pilots and other cockpit crew to supplement hours in the aircraft itself. For the RAF however, the simulators for both

aircraft variants have limitations, particularly because their software has not kept pace with aircraft modifications, especially defensive aids, and they

are therefore not able to replicate flying the Hercules accurately. From a sample provided by 30 Squadron for 2007, pilots used the simulators for the Hercules C-130J for fewer than nine hours per month while based in the

United Kingdom. These limitations necessitate training on actual aircraft.

Para 3.30 - RAF Lyneham will close as the Hercules operating base by 2012. The Hercules fleet and all related forward maintenance and support activity will be relocated to RAF Brize Norton, which will become the single airport

for arrival and departure to and from the United Kingdom for equipment and service personnel, during 2011.

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150

Questions

Identify the Defence Lines of Development (DLoD) which

combine to provide tactical fixed wing airlift capability at the time the report was written. Describe the problems which

have been experienced.

Assuming the operations continue at a similar level as at the

time the report was written, consider planned and expected changes to the DLoDs which impact on capability. Plot the

expected capability in terms of the number of aircraft available for operational use, over a period between 2008 and 2018. Identify the risks to this availability and make

assumptions on the expected impact of these risks. For this part of the exercise assume the fleet is managed in a similar

way to existing practice and the recommendations in the report are not implemented.

The Enabling Acquisition Change report initiated more effective through life management of DLoDs, as indicated in

the Introduction above. The formation of the Availability of Air Transport Team and the Capability Delivery Steering

Group have started to achieve these aims. Assuming the same operational commitments as detailed in question 2, how do you think the DLoDs could be best managed over the period

2008 to 2018? What benefits would be gained in terms of aircraft availability for operational use?

The NAO report does not include all the information that would be required to effectively manage DLoDs through life

and this information is not currently available for acquisition projects. What information would be required to do so?

151

David M. Moore Cranfield University DA – CMT

Background This case study is based on National Audit Office (NAO) report, Support to High Intensity Operations, dated 14 May 2009. The background below consists of information taken from this report, which has been selected to

help answer the questions. The full report is available at http://www.nao.org.uk/publications/0809/high_intensity_operations.aspx

and students may well find it helpful to use the full report. The aim of this case study is to explore the nature and effectiveness of the

supply chain which supports operations in Afghanistan. Potential measures to improve the performance of the supply chain are considered, including

the likely impact on performance and cost. The design of future equipment is considered, and what could be done to reduce the load it places on the supply chain.

The Supply Chain The following diagram shows the generic supply chain to operations

overseas:

Logistics Issues in High Intensity Operations

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In dust ry

In tegrated P roject

Team (I PT)St orage Depot

Coupli ng Bridg e

It em DemandedDefence S upply Chain O perations

and Movement s ( DSCOM)

Main Operat ing Base

In Theatr e Distribu tion

End User

UK Theatre

The Defence Equipment & Supply (DE&S) organisation is the single process owner for end-to-end logistics activity, but is dependent on other

organisations for parts of the supply chain e.g. Chief of Joint Operations for the Coupling Bridge. Within DE&S, The Joint Supply Chain organisation is

responsible for storage and distribution of materiel within the UK, and supply chain operations from the UK to operational theatres. Defence Supply Chain Operations and Movements (DSCOM) co-ordinates day-to-day

logistic supply and support to operations. Integrated Project Teams are also part of DE&S, who liaise with industry to maintain stocks of materiel.

Item Demanded – the supply process is initiated by someone In-Theatre demanding an item. Between July 2007 and October 2008 the total number

of demands placed was 218,000 – 123,000 for Afghanistan and 95,000 for Iraq. Each demand is given a Priority Code based on the urgency, which for Afghanistan is:

01 Immediate – Target Supply Time within 5 days

02 Priority – Target Supply Time within 20 days

03/04 Routine - Target Supply Time within 87 days

Defence Supply Chain Operations and Movements (DSCOM) responds to

about 500 demands per day, liaising with storage depots to form consignments which are dispatched to airports and sea ports. It is the single

focal point, pan defence, for the co-ordinated delivery of support to operations. In recent years, Asset & Consignment Tracking Systems have been improved, to enable effective management of stocks of materiel in

theatre and in transit. These information systems track consignments as they pass through nodes in the supply chain, such as points of embarkation.

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The MOD has Storage Depots at several locations in the UK, such as

Donnington and Bicester. They hold stocks of materiel, form consignments and dispatch consignments, by road or rail, to airports and sea ports.

Integrated Project Teams (IPTs) liaise with Industry to maintain stocks of materiel at Storage Depots and respond to urgent demands when stock is

not available to satisfy demands. The Coupling Bridge is the air and sea routes used to transport materiel

from the UK to Theatre. Sea transport is a lot more cost effective than air transport, so sea transport is used unless timeframe, security or safety

reasons require air transport. The following categories are transported by air:

Personnel

Medical supplies

Priority 01 and 02 demands

Munitions for Afghanistan but not always for Iraq

Fresh food supplements for Afghanistan

Classified materiel

As Afghanistan is landlocked the sea route is to a port in Pakistan, from where the materiel proceeds by road to Camp Bastion, which is a Main

Operating Base. All transport through Pakistan is provided by a UK contract with Seafast Logistics, who in turn contract with a local transport provider, who has achieved a high level of success. Roll-on Roll-off ferries

are used for the sea transport, some of which are MOD owned and others chartered.

Military aircraft, with defensive aids, can fly direct from the UK to the coalition airfield at Kandahar in Afghanistan. To minimise the load on the

limited number of military aircraft, civilian chartered flights are used from the UK to the Middle East and only the final leg to Kandahar being

undertaken by military aircraft (e.g. C-17). The UK MOD has the following fleet of aircraft which can be used for transport of personnel and or materiel:

Aircraft Role Fleet Size Average Available

VC-10 Personnel & Materiel

10 5

Tristar Personnel 7 4

C-130 Personnel &

Materiel

39 22

C-17 Personnel &

Materiel

6 4

Total 62 35

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The age of some of the aircraft, level of operational usage in harsh environments and fit of capability enhancements to match threat, means

that availability is rather low. From February 2007 to October 2008 the MOD chartered 1,412 aircraft at a cost of £228 million. Another limitation is

that Kandahar is shared with other coalition countries, so there are limited landing slots available for the UK. Flights of personnel to and from Afghanistan are often subject to delay because of weather, enemy action and

availability of landing slots at Kandahar, with about 15 % of flights delayed by more than six hours.

Sea and air routes to Iraq are similar to those for Afghanistan, they are not described here but are in the NAO report.

At the Main Operating Base stocks of key materiel are held and consignments formed for In-Theatre Distribution.

Contractors supply fuel, fresh food and water to the Main Operating Base,

but have no responsibility for In-Theatre Distribution which is a dangerous military task. Contractors also provide a wide range of services at the Main Operating Base in Afghanistan and there were 2,660 contractor staff

working there in November 2008. The MOD spends £42 million on contracts let in Afghanistan, which are predominantly with companies in Afghanistan and the surrounding region. In addition, there are UK-let contracts such as

the three year ―soft multi-activity contract‖ which includes catering, laundry, waste management, vermin control and provision of gym assistants at Camp

Bastion. The contract was placed with KBR (UK) on 1 January 2008 and is worth about £42 million. Commanders in Afghanistan have indicated that the contractors are performing well.

Stocks of essential materiel are held at the Main Operating Bases to accommodate fluctuating demand and protect against interruptions in the

supply chain. There have been examples of stocks falling to dangerously low levels. In July 2008, holdings of bottled water were just 10% of the

mandated target, which was corrected by reviewing demand and increasing production in country. At the same time, fuel stocks were about 5% of the mandated target, which was corrected by a more rigorous approach to

predicting fuel usage and more robust contingency plans.

About half of the In-Theatre Distribution in Afghanistan is undertaken by combat logistics patrols and half by helicopter. Helicopters completely avoid the threat of Improvised Explosive Devises (IED) and are quick, so are used

for priority 01 and 02 demands. A combat logistics patrol consists of logistic transport vehicles, force

protection vehicles, recovery vehicles and other support vehicles. Due to the threat from IEDs all vehicles are fitted with electronic counter-measures

devices and aircraft provide support to the patrols. The patrols are made up of about 150 vehicles. In delivering materiel to a number of forward operating bases a patrol can cover up to 200km, which can take up to three

155

days. The patrol also takes equipment and vehicles requiring maintenance or repair back to the Main Operating Bases. The Logistics Regiment in

Afghanistan has a rolling programme which aims to re-supply each of the forward operating bases once every few weeks. A picture of a typical combat

logistics patrol:

Performance of the Supply Chain The following table shows the average length of time a unit waits for

demands in Afghanistan:

Priority 01 (Days)

Priority 02 (Days)

Priority 03/04 (Days)

September 2007 43 69 112

January to October

2008 (Average)

14 22 94

Target 5 20 87

The following table shows the percentage of demands meeting priority 01 and 02 targets for Afghanistan:

Percentage Meeting Target

Priority 01

59

Priority 02

57

Failure to meet target can be caused by failed Provisioning, Transport or a

combination of both. A Provisioning failure means that the MOD either has no stock or a lack of visibility which has required a manual search in order to locate it. A Transport failure means an item has not been transported in

the appropriate time. The following table indicates the causes of failure to meet target:

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Cause of

Failure

Percentage

Provisioning 33

Transport 28

Combination 38

The following table shows the percentage of demands sent by air and sea to

Afghanistan:

Air 72%

Sea 28%

There has been a considerable improvement between 2007 and 2008, but the MOD is still some way short of meeting its targets.

Measures to Improve Performance Effective logistics is dependent on predicting demand for material, holding

appropriate levels of stock in the UK and Main Operation Bases, and knowing what is in transit. Early estimates of demand for material enables

timely supply, greater use of sea transport and reduced demand for stretched air transport to theatre and helicopter distribution in theatre.

The MOD seeks to have a reliable buffer of in-theatre stocks and optimise the replenishment process, but quality logistic information and processes are a prerequisite. The MOD currently relies on information systems

developed for each of the three services. The MOD is planning to replace these systems with the Management of the Joint Deployed Inventory (MJDI),

which is expected to offer the following:

Visibility of material in the supply chain and demands for particular

items.

Tracking of items returned to the UK for repair and overhaul, the ―reverse supply chain‖.

Better management of supply to and from the theatre.

MJDI will cost £72 million and is being pursued as a priority.

The MOD plans to introduce a new equipment repair facility at Camp Bastion, which will reduce the need to return vehicles to the UK for depth

repair. The capital cost of doing so, £32 million, is expected to be repaid within two years. Initial capability is expected to be in place from September 2009 and full capability from September 2010, which will reduce the

demand on air transport.

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Questions

Notes: In answering these questions assume the following:

a. Most troops will be withdrawn from Iraq during 2009, but

support to the Iraqi Government and Armed Forces (e.g. training) is expected to continue for the next ten years.

b. Troop levels in Afghanistan will increase, at least over the period of elections in August 2009.

c. For the purposes of the exercise assume the load on the supply chain will remain at the 2008 level for the next five years, but

there will be a shift from Iraq to Afghanistan. Students should use the information given in the Case Study, their

own knowledge and make subjective judgments where appropriate. All assumptions made should be stated.

1. Assess the effectiveness of the existing supply chain for

Afghanistan and identify where there is potential for improvement.

2. Identify potential enhancements to the supply chain for Afghanistan, including those already identified by the MOD.

Assess the potential benefit each of these enhancements is likely to have in terms of target supply time and cost effectiveness.

3. It is expected that future conflicts will involve long and complex

supply chains, similar to those for Afghanistan. What system design features should future equipment, which is expected to be deployed on future operations, have to minimise the demand

placed on the supply chain?

158

David M. Moore and Peter D. Antill Cranfield University DA – CMT

Background

This case study is based on the National Audit Office (NAO) Report, Support to High Intensity Operations, dated 14 May 2009. The Background below

consists of information taken from this report, which has been selected to help answer the questions and some cost information taken from other sources. The full report is available at

http://www.nao.org.uk/publications/0809/high_intensity_operations.aspx and students may well find it helpful to use the full report. Operations in Iraq started in 2003 and most military personnel had been withdrawn by

July 2009. British forces have operated in Afghanistan since October 2001, with the number of military personnel reaching about 3300 in 2006, about

7300 in 2007 and 8300 in 2009. In recent conflicts the use of Urgent Operational Requirements (UORs) has

made an important contribution to the success of these operations. UORs are, by definition, a response to a theatre-specific requirement. In the

Falklands campaign, many merchant ships were modified to undertake a military role, which often included the fitting of helicopter landing platforms. In the first Gulf War, tanks were fitted with additional armour to reduce

their vulnerability as they passed over Iraqi sand bank defences. The longer duration of operations in Iraq and Afghanistan has allowed the enemy to adopt new tactics and many UORs have been used to counter this evolving

threat.

The aim of this case study is to explore the use of UORs to help provide the military capability required for operations in Iraq and Afghanistan. The potential use of alternative design approaches for future systems, to reduce

the need for UORs, are considered. Some problems experienced with the support of UORs and what could be done to reduce them are also explored.

Capability Planning & Equipment Design The Ministry of Defence (MOD) requires a range of land vehicles, ships,

aircraft and other equipment in order to respond successfully to a range of potential future operational scenarios. In identifying this equipment, the MOD constructs potential future scenarios and matches the required

equipment capabilities against them. The MOD then procures these

Looking for a Quick Fix? Urgent Operational Requirements

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equipments against a generic set of requirements. These requirements cover the majority, but not all, of the expected ways in which the equipment

should perform on future operations. These equipments are procured from the MOD‘s own budget under what is termed the Equipment Plan.

In preparing for an operational deployment the MOD selects the appropriate equipments to meet the military tasks that may occur. It is clear that not all

equipment in the MOD‘s inventory can be used on every operation, in part because the capabilities provided by some equipment will not be needed.

On operations, threats and requirements can evolve quickly and the MOD may need to develop or adapt technology and equipment in response. In

some circumstances the MOD‘s existing equipment may be unsuitable for the task because: the equipment presents an undesirable force posture for the operation; the protection of personnel needs to keep pace with the

evolving and increasing threat posed by enemy forces; or because the terrain and / or climatic conditions reduce equipment performance to an

unacceptable level. In these circumstances the MoD uses UORs to provide the required

capability and they are funded by the Treasury‘s Reserve for Operations and Peacekeeping. The MOD will pursue a UOR if the following conditions are met:

The requirement cannot be met thorough the redeployment of existing in-

service assets.

The requirement is theatre-specific.

The UOR can be deployed in time to make a contribution to the operation.

The quality of equipment can match what is required to support the

operation. The current approach is to design equipment for the majority of potential

future operational scenarios and use UORs to match the specific requirements of individual operations. The following alternative approaches

could be adopted for future equipment acquisitions and these will be considered in Question 4:

A. Design for all possible future operational scenarios. This would involve designing all equipment for world-wide use and for all possible operational scenarios. Thus equipment could be immediately deployed to

any future operation and fulfil its role effectively.

B. Design for the majority of potential future operational scenarios and have ready designed ―UORs‖ to cover all possible operational scenarios. As with the current approach, equipment would be designed and built for

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the majority of potential future operational scenarios, but at the same time ―UORs‖ would be designed to cover all possible operational

scenarios. Thus when a particular operation required a particular ―UOR‖, it would be built and fitted.

C. Modular design. The equipment is designed so that modules can be

added to a basic equipment fit, to provide the appropriate capability for a

particular operational scenario. By using the appropriate mix on modules, the equipment is made suitable for all possible scenarios.

UORs for Iraq & Afghanistan This exercise will explore four main categories of UOR introduced into Iraq

and Afghanistan, which are Land Vehicles, Helicopters, Unmanned Aerial Vehicles and Electronic Counter Measures. The exercise will also consider the operation and support of UORs, including spares, impact of added

weight, training prior to deployment and provision of equipment for training. Land Vehicles. The nature of insurgency tactics employed by the enemy in

Iraq and Afghanistan means that personnel moving on the ground, almost anywhere in the theatre, are under threat from Improvised Explosive Devices

(IEDs). The level of threat has increased with time, as illustrated by the number IED detonations in the UK‘s area of operation in Afghanistan in the following years:

2006 – average of about 25 per month

2007 – average of about 45 per month

2008 – average of about 80 per month

In response to this threat, UORs were pursued to upgrade the protection

provided by existing vehicles and introduced new vehicles with suitable protection. The upgrade to protection provided in existing vehicles generally

centred on improvements to side and under-belly armour, which are shown on the following time line. The introduction of new vehicles and subsequent upgrade in response to increased level of threat, are also shown on the time

line:

Year Upgrade New vehicles

2005 Combat Vehicle

Reconnaissance (Tracked)

Warrior

2006 Bulldog

Combat Vehicle Reconnaissance (Tracked)

Mastiff

2007 Warrior

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Vector

Mastiff

2008 Land Rover Snatch

Vixen

Jackal

Further information on these vehicles can be found at

www.army.mod.uk/equipment/fighting-vehicles. These UORs have enhanced protection against the increasing threat from

IEDs, but it has to be accepted that they are not a perfect solution and it is unlikely that a perfect solution could be achieved. Mastiff, Jackal and upgraded Warrior have performed well and the confidence of Armed Forces

personnel in the protection provided is high.

The additional weight associated with the upgrade of existing vehicles has had a detrimental effect on performance and mobility, with many vehicles near to or exceeding their designed weight-carrying capacity. Availability of

some vehicles has suffered as a result of problems with spares supply and this is discussed later. The reliability of some vehicles though, has exceeded stated targets:

Jackal – 81 % against target of 80%

Warrior – 91% against target of 85%

Bulldog – 86% against target of 85%

During 2009, the MOD began to deploy to Afghanistan a total of 564 new protected vehicles and augment the existing proven vehicle fleet at an approved cost of about £800 million. These include vehicles such as Jackal,

Mastiff, Ridgeback, Panther, Wolfhound, Husky and Coyote. Helicopters provide essential capabilities in Iraq and Afghanistan, including

transporting personnel and supplies, surveillance, medical evacuation and fire support. They are often the preferred method of transport because of the

rough terrain, absence of suitable roads and the IED threat to movement on the ground. Apache, Chinook, Lynx and Sea King helicopters were deployed to Afghanistan, while Merlin, Lynx and Puma were deployed to Iraq. Further

information can be found at www.army.mod.uk/equipment/aircraft/default.aspx and

www.raf.mod.uk/equipment/helicopters.cfm on these essential items of equipment.

None of these helicopter types were designed for the hot and dusty conditions of Iraq and Afghanistan. The mountainous nature of Afghanistan also means that helicopters fly at higher altitudes where the air is thinner

and greater engine and rotor-blade performance is required. The Apache, Puma, Merlin and Chinook helicopters have coped with the harsh

environmental conditions, while Lynx has struggled with the intense

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midsummer heat in both theatres and Sea King has not performed well in the high altitude conditions found in Afghanistan.

A UOR has been undertaken to overcome Sea King performance limitations

in Afghanistan. This UOR involves an upgrade to the engine, new rotor blades and new tail rotor. It is expected to achieve a 25% increase in speed in Afghanistan and so enable it to operate in conjunction with the Apache

and Chinook. The upgraded helicopters began operations in Afghanistan in November 2008.

In December 2008 the MOD announced a £70 million UOR to upgrade Lynx with new engines, which will provide a year-round capability. The first

helicopter should be available by the end of 2009. The dry, dusty and sandy conditions experienced in Iraq and Afghanistan

causes the erosion of metal surfaces and attacks the internal parts of engines. Rotor blade and engine life can be between 75% and 83 % shorter

than for comparable flying in the UK. The MOD has developed the following preventative measures:

Anti-erosion tape and paint applied to rotor blades.

Filters to reduce dust and sand entering avionics compartments.

Measures to reduce contamination of hydraulic oil.

Shields to minimise damage to drive shafts.

Enhanced ballistic windscreen protection.

Improved wash down facilities.

Measures to reduce dust and sand entering engines.

Unmanned Aerial Vehicles (UAV) provide commanders with live video

images of the battlefield and so are particularly valuable in the surveillance of small groups of insurgents. They provide a vital capability for Iraq and

Afghanistan. The MOD is developing the Watchkeeper UAV, but it is still in development and hence the following UAVs have been procured as UORs:

The Reaper, also known as Predator B, began operations in Afghanistan in October 2007 and the capability continues to build up. It can carry

weapons, weighs 4500 kg and has a 20 metre wingspan.

Hermes 450 is an off-the-shelf procurement and is related to Watchkeeper. It has operated in Iraq and Afghanistan since mid 2007. It

weighs 450 kg and has a 10.5 metre wingspan.

The Desert Hawk was first deployed to Iraq in 2003 and to Afghanistan in

July 2006, and has since been upgraded to increase range and payload. It weighs 5 kg and has a 2 metre wingspan.

The UAV manufacturers are small companies with limited production capacity and a small pool of spares is used to support the needs of several

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nations. Support is provided by prime contractors with high levels of availability being maintained.

Electronic Counter-Measures (ECM) systems have been developed to

protect vehicles and personnel from the threat of IEDs. Whilst effective, these systems are inherently heavy and require large amounts of electrical power. This has contributed to the high weight of vehicles, to the detriment

of performance and mobility. Individual soldiers carry ECM systems and, because of the need to carry several spare batteries, they are extremely heavy.

To get systems to Afghanistan as quickly as possible, some systems were

only partly ―codified‖ – the process whereby equipment stores are assigned serial numbers and allocated a NATO stock number. This has made the ordering of spares and tracking systems in-theatre difficult. They require

regular calibration and there is limited test equipment to do so.

Operation and Support

The impact of the additional weight of UORs on vehicle performance and difficulties in supporting ECM systems have already been addressed. The

Armed Forces recognise that UORs are performing well in Iraq and Afghanistan, but the focus on deploying equipment as early as possible has led to some support and training problems.

Some UORs were deployed without sufficient spares and availability has

suffered accordingly. The Mastiff vehicle was deployed with an initial $4 million spares package, based on US experience of operating the vehicle on roads. But in Afghanistan it was used regularly on cross-country routes,

resulting in a high level of usage of suspension components and exceeding the ability of the supply system to deliver. As with ECM equipment, the speed with which Mastiff was procured meant there was no codification of

spare parts and hence the ordering of spare parts was convoluted and slow.

UOR equipment was often not allocated for use in pre-deployment training and so service personnel were not as well prepared to operate and maintain it as they should have been.

Cost The NAO report states that by March 2009 the MOD had approved the

spend of £4.2 billion on UORs, covering modifications to helicopters, modifications to aircraft, upgrade of existing vehicles, new vehicles, early

warning systems for bases, ECM, UAVs, deployable accommodation, and surveillance. A statement to Parliament reported in Hansard stated that the spend per year was:

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Financial

Year

Spend (£

million)

2002-03 500

2003-04 180

2004-05 130

2005-06 260

2006-07 790

2007-08 1550

2008-09 800

Total 4210

Where the NAO has given cost information, it has been included within the text above, but this is limited to the cost of new land vehicles and the

upgrade to Lynx. The following estimates for the four UORs addressed above have been drawn from the MOD Web Site, Hansard and defence journals. The figures should be treated as indicative and are suitable for this exercise,

but should not be used for other purposes.

UOR Type Project Cost

Land

Vehicles

Upgrade 500

New 800

Helicopter Lynx 70

Sea King 140

Sand & Dust

Protection

50

ECM All 200

UAV Reaper 770

Hermes 450 510

Desert Hawk 250

Total 3290

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Questions

For each of the four categories of UOR, determine whether it

was primarily: a) a response to an unexpected threat; b) to enable operations in environmental conditions beyond the

original design requirements of the equipment; or c) to provide a valuable new capability.

Assess the effectiveness of each category of UOR in terms of time, cost and performance.

Consider the spend profile given in paragraph 3.20, indicating

why you think it is the shape it is and in an ideal world what shape you would like it to be.

Consider the likely effectiveness of alternative design

approaches outlined in paragraph 2.5. For each category of UOR, would they have resulted in greater effectiveness in terms of time cost and performance?

What could have been done to overcome the support problems

experienced with some of the UORs?

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At the beginning of this book, there is a dedication to the members of, and participants in, the IDEAA conferences that have taken place across the

world. Some of these cases have been utilised by those members and participants at IDEAA, at their own organisations or at some other premises. Some however, are new and have not been seen before, having been

specifically written for this collection. All have the potential to influence thinking; they can be utilised by individuals or groups; they can be considered on a one-off basis or as a part of a larger programme. All will aid

acquisition learning, especially on a comparative basis, where acquisition professionals in one country can analyse the approach taken by acquisition

professionals in another. The US cases identify, in differing contexts, cost-saving, time reduction and

the need for trade-offs to enable the right balance of time, cost and quality in defence acquisition. This has also been a factor when considering the role

of contractors as they undertake key tasks, such as sustainment and testing, with an impact upon cost, through just-in-time inventory strategies. Another key element is assessing the relationship between customers and

suppliers, albeit in operational scenarios and the subsequent distribution of essential equipment. Again, within in a specific context, there is assessment of the vital provision, nature and time constraints of the financial payments

to programmes. Taking this further, consideration is given to the possible cost savings available through the use of outsourcing, a means by which

risk can apparently be transferred to industry, but which cannot be analysed, as the concept of risk transfer is not straightforward (nor, arguably, can operational risk be transferred!). There is then consideration

through a case study of the role of prime vendor support, one that must be considered fundamental to logistics performance. Following this, the make-or-buy question is, at a very strategic level, analysed in a specific contextual

setting that has caused huge repercussions, not just in the USA but in Europe and around the globe, being highlighted in the AF Tanker case.

All of these require consideration and analysis; as a result, the reader will have gained insight into the issues and challenges underpinning not only

US defence acquisition, but also comparable acquisition scenarios in other countries.

Concluding Remarks

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The UK cases commence with a piece of equipment and capability that is now relatively old but includes a significant innovative support solution,

even though the requirement, in terms of capability response to any threat, is now much reduced. Following on from this, is a view on a piece of

equipment that has now been replaced by a more up-to-date capability. It highlights the importance of relationships and consistency in requirements setting. Echoing the theme of relationships is a case that considers the rifle

employed by the UK Armed Forces. Relationships, design issues and the use of production methods in line with cost estimates are to the fore.

Collaboration is a currently a major theme for the UK and this is raised in a case that involves a number of different participants and a number of

differing acquisition organisations. Subsequent cost overruns, delays and performance compromises are highlighted as stakeholders emphasise differing requirements. It should be noted that this case was written in

2007, before the situation as it now stands, had developed.

Contextual setting in the next case, allows innovative solutions to an acquisition package that arguably could only have been actioned because of geographical and political circumstances. Building from this, is the case of

Challenger II, which looks at competition and how it can impact upon the production of national capability. To accompany this, is a case that looks at an innovative solution to the provision of logistic support through a third-

party provider. Considering this on a wider collaborative dimension, is a case that looks at project management and the integration of differing

national design authorities, which ultimately ended in the cession of the project.

Coming right up to date with current conflicts, is a case that highlights the need to respond rapidly to changing and demanding requirements. In particular, it considers means by which the normally bureaucratic process

of defence acquisition can be streamlined. The next two cases look at the utilisation of logistic support in differing environments but argue that for

effective capability, Defence Lines of Development (DLoDs) have to be optimised and that this has an impact on a wide range of acquisition activity, not least of all in the supply and support chain. Finally, the

contemporary issue of the generation of Urgent Operational Requirements (UORs) is analysed in a generic sense to consider enhancing future

acquisition activities. At the commencement of this book and the indication of what IDEAA stood

for, the idea was put forward that by improving understanding of the acquisition processes, issues and challenges of other countries, the acquisition community as a whole would be more effective. It is becoming

increasingly difficult for any one country (even the USA) to undertake all the acquisition activity they have to, a situation which is exacerbated by the

recognition that most operations are now conducted on a multi-national basis. To be effective, acquisition should also be undertaken on an international, inclusive basis.

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At the heart of these case studies, are the issues and challenges that have

been encountered in the UK and USA. Frequently, they have a similar basis. Through an understanding that can come from looking at these case

studies, the acquisition community and the professionals operating within it, can better learn how to manage situations that may arise in their own acquisition environment.

These cases have been based upon real situations and although some of the personnel and their commentaries are not strictly factual, they provide

examples of the type of scenario that acquisition professionals will face. By understanding the issues, they will be able to make better judgements and

decisions in their acquisition environments.