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Life Cycle Cost Savings by Improving Reliability

Dr. Charles E. McQueary

Director, Operational Test and Evaluation

January 15, 2009

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0

20

40

60

80

100

120

140

160

0 20 40 60 80 100 120 140 160Cumulative Count of BLRIP Reports

Number Effective

and Suitabile

Number Effective

And Suitable

Cumulative Number of BLRIP Reports

Ideal

Effective

SuitableFY08

Total: 28% of Systems Not Suitable2007: 4 of 8 (50%) Not Suitable2008: 2 of 6 (33%) Not Suitable

Why DOT&E is Interested in Reliability

Cumulative IOT&E Results Through FY 2008

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Sustainment Costs, Which are Largely Driven by Reliability, Represent the Largest Fraction of Life Cycle Costs

RDT&E Procurement O&S

Surface Ships

1%

39%

60%

Fighter Aircraft

4%

25%

71%

Rotary Wing Aircraft

3%

24%

73%

Ground Combat Systems

4%

28%

68%

OSD CAIG

4

1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040

94 yrsB-52 67 yrs2.5 Ton Truck 93 yrsC-130

UH-1 69 yrsM-113 59 yrs

72 yrsAIM-9

56 yrsSSN 688

36 yrsF-14

71 yrsCH-47

44 yrsHEMTT

51 yrsF-15

86 yrsKC-135

SOURCE: John F. Phillips DUSD (L)

Sustainment Costs Become More ImportantAs Systems’ Service Lives Increase

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Investment Can Improve Reliability The Cost Estimating Relationship (CER)

Investment = Reliability Improvement Ratio

0.3659

2.119X APUC

10.8

0.60.50.40.3

0.2

108654

3

2

10.80.6 108765432 100806050403020 1000700500400300200 2000

Investment/ APUC

Linear regression of In (Improvement Ratio) on In (Investment/APUC) gives:y = .4718681 Log (Investment/APUC) – 1.005395 Percent Confidence IntervalR2 = .82

Impr

ovem

ent R

atio

6

0

500

1000

1500

2000

2500

3000

0 20 40 60 80 100Investment in Reliability Improvement, $M

20-Y

ear C

ost,

$M

Investment in Reliability, $ M

20-y

ear C

ost,

$ M

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Small Reliability Investments Can Significantly Reduce LCCNotional Example - Effect of Reliability Investment on System Cost (UAV)

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HH-60H MH-60S$6.6M Spent on Reliability

What Changed

Components (APUC in $ thousand)MFBHR = Mean Flying Hours Between Removal

APUC = Average Production Unit Cost

Reliability Change(50 Percent Improvement)

2.4 Hrs. MFHBR 3.6 Hrs. MFHBR

Estimated 20-year LCC $M FY03(LCC reduced by approximately 83 percent)

Program Example: Small Investment in Reliability Produced Dramatic Reduction in Life Cycle Cost

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Key: Start Programs Rightat the Beginning of the Acquisition Cycle

Defense Science Board Taskforce (May 2008)

“ . . . the single most important step necessary to correct high suitability failure rates is to ensure programs are formulated to execute a viable systems engineering strategy from the beginning, including a robust reliability, availability, and maintainability (RAM) program, as an integral part of design and development. No amount of testing will compensate for deficiencies in RAM program formulation.”

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Num

ber o

f Fai

lure

s in

the

Fiel

d

Ow

ners

hip

Cos

t

Efforts Underway to Improve Reliability, Maintainability, and Availability

Reliability, Availability, Maintainability and Cost Manual (RAM-C Manual)DOT&E on JCIDS Functional Control Boards

GEIA Standard 009, RFP and Contract Language, Investment Model

Reliability Growth in design phase

RAM growth monitoring for incentives, Young/Bolton memos

RAM program Evaluation and Standards, testing KPP

RAM field data collection, feedback

Right Requirements

Right Contract

and Incentives

Right Design

and Redesign

Right Development

Right Validation

Right Next Increment

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• Development and Procurement are important cost drivers; however, Operations & Sustainment is where the majority of life cycle costs reside.

• There is great potential for savings if O&S costs are significantly decreased.

• The single greatest driver of O&S costs is reliability. The more reliable the system, the less it costs to operate and sustain in the field. Improved reliability can mean substantial cost savings, and even a small investment in reliability, can significantly decrease O&S costs.

• Widespread consensus on the need to improve reliability has led to the creation of effective policy – but strong leadership and continued emphasis is needed to implement policy and realize significant life cycle cost reductions.

• In its formal recommendations to the incoming administration for improving the DoD acquisition process, the DBB should recommend increased focus on reliability during the acquisition process.

Summary

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Back-up Slides

• Initiatives to Improve Reliability

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Initiatives to Improve Reliability, Maintainability, and Availability

• McQueary-Finley Memo on Reliability Improvement WG(15 Feb 2008)

– Ensure programs are formulated to execute a viable systems engineering strategy, including a RAM growth program.

– Ensure government organizations reconstitute a cadre of experienced T&E and RAM personnel.

– Implement mandated integrated DT and OT, including the sharing and access to all appropriate contractor and government data and the use of operationally representative environments in early testing.

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Initiatives to Improve Reliability, Maintainability, and Availability

• Reliability Improvement Working Group Recommendations

– Mandatory policy reliability policy; Service RAM “champions”– Program guidance for early reliability planning– Language for RFPs and contracts (based on ANSI/GEIA-STD-0009-

2008 “Reliability Program Standard for Systems Design, Development, and Manufacturing”)

– Scorecard to evaluate bidder’s proposals– Standard evaluation criteria for credible assessments of program

progress– Cadre of experts in each Service; workforce training

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Initiatives to Improve Reliability, Maintainability, and Availability

• Young Memo on RAM Policy (July 2008)

– The Service Secretaries are directed to establish Service policy to do the following:

• Effective collaboration between the requirements and acquisition communities

• Development contracts and acquisition plans must evaluate RAM during system design.

• Evaluate the maturation of RAM through each phase of the acquisition life cycle.

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• Service Progress Implementing OSD Policy for Reliability Improvement

– Army• Army RAM policy & guidance• Designated responsible Executive; PM accountability• Established center of excellence• Aggressive work force training & guidance• Specific programs affected

– Navy

• “Reinvigorating existing RAM-focused procedures”• “Implementing key reforms”

– Air Force

• “Review and revise policy and guidance as needed”

Initiatives to Improve Reliability, Maintainability, and Availability

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• DoDI 5000.02 (Dec. 2008)

– "PMs for all programs shall formulate a viable Reliability, Availability, and Maintainability (RAM) strategy that includes a reliability growth program as an integral part of design and development."

Initiatives to Improve Reliability, Maintainability, and Availability