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Part of a larger RAND Project Air Force study on capability-based programming, this report introduces a revealed preference methodology to estimate the value to the United States Air Force of expediting F-15 fighter jet programmed depot maintenance (PDM). Such a valuation estimate would be useful in depot-level cost-benefit analysis. The authors rely on the fact that the Air Force has chosen to pay for intermittent PDM on F-15s to assert that F-15s must have enough value after PDM visits to justify PDM costs. Air Force expenditure data suggest that a typical fiscal year 2005 PDM visit cost about $3.2 million. Using the aircraft valuation curves consistent with PDM being worthwhile, the authors find that expediting an F-15's last PDM visit by a month must be worth at least $60,000. However, using a plausible annual aircraft valuation decline rate, they find that expediting an old F-15's last PDM visit by a month would be worth around $75,000, while expediting a new F-15's first PDM visit by a month would be worth more than $180,000. This report also explores various robustness enhancements. Consideration of aging aircraft issues, for instance, tends to increase the estimated value of expedited PDM.
This report is one of a series from a RAND Project AIR FORCE project, "The Cost of Future Military Aircraft: Historical Cost Estimating Relationships and Cost Reduction Initiatives." The report complements another document from this project, "Impossible Certainty: Cost Risk Analysis for Air Force Systems," and includes a literature review of cost growth studies and a more extensive analysis of the historical cost growth in acquisition programs than appears in the companion report. Overall, most of the studies reviewed reported that actual costs were greater than estimates of baseline costs. The most common metric used to measure cost growth is the cost growth factor (CGF), which is defined as the ratio of the actual cost to the estimated costs. A CGF of less than 1.0 indicates that the estimate was higher than the actual cost -- an underrun. When the CGF exceeds 1.0, the actual costs were higher than the estimate -- an overrun. Studies of weapon system cost growth have mainly relied on data from Selected Acquisition Reports (SARs). These reports are prepared annually by all major defense acquisition program (MDAP) offices within the military services to provide the U.S. Congress with cost, schedule, and performance status. The comparison baseline (estimate) typically corresponds to a major acquisition decision milestone. Prior studies have reported Milestone (MS) II CGFs for development costs ranging from 1.16 to 2.26; estimates of procurement CGFs ranging from 1.16 to 1.65; and total program CGFs ranging from 1.20 to 1.54. Regarding the differences among cost growth due to service, weapon, and time period, prior studies tended to find the following: Army weapon systems had higher cost growth than did weapon systems for the Air Force or Navy; cost growth differs by equipment type; and cost growth has declined from the 1960s and 1970s, after it was recognized as an important problem.
Describes a series of parametric equations for use in estimating the depot maintenance cost of new Air Force aircraft, particularly for the five major maintenance categories: airframe rework, engine overhaul, airframe component repair, engine component and accessory repair, and avionics component repair. The equations are intended to provide cost estimates for Defense Systems Acquisition Review Council Milestone II, at which point some design details of major aircraft subsystems (airframe, engine, avionics) are available. The report presents a single set of equations that are the most representative and applicable to the widest range of estimating situations, but presents alternative equations and supporting data and analyses for use by the interested reader.