outlook for performance-based logistics · ann arbor, michigan • amersham, u.k. aviation...
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Ann Arbor, Michigan • Amersham, U.K.www.AeroStrategy.com
Aviation Maintenance Professional SymposiumSan Diego, California1 & 2 October 2008
Outlook For PerformanceOutlook For Performance--Based LogisticsBased LogisticsAn Overview Of The Global Military Aircraft MRO MarketAn Overview Of The Global Military Aircraft MRO Market
Presented byPresented byKevin Michaels, PrincipalKevin Michaels, Principal
AeroStrategy LLCAeroStrategy LLC
2US Navy Maintenance Professionals SymposiumAeroStrategy © 2008 AeroStrategy
Current State Of PBL
AgendaAgenda
The Military MRO MarketThe Military MRO Market
Key Issues
3US Navy Maintenance Professionals SymposiumAeroStrategy © 2008 AeroStrategy
The Current Military Aircraft Fleet Is Around 39,000 AircraftThe Current Military Aircraft Fleet Is Around 39,000 Aircraft
2008 Active Military Aircraft FleetTotal = 39,113
Trainer / Trainer / Light Light
AttackAttack14%14%
Fighter / Fighter / Attack 23%Attack 23%
Transport Transport –– Lt/Med Lt/Med
8%8%
Rotary Wing Rotary Wing –– AttackAttack
4%4%
General General Aviation / Aviation / Utility 4%Utility 4%
Special Mission Special Mission 3%3% Tanker Tanker
2%2% Transport Transport ––Heavy 1%Heavy 1%
Source: AeroStrategy/OAGback
Rotary WingRotary WingTransport / UtilityTransport / Utility
37%37%
NewNew11%11%
MatureMature51%51%
OldOld38%38%
4US Navy Maintenance Professionals SymposiumAeroStrategy © 2008 AeroStrategy
The FThe F--16 Is The Largest Fleet Accounting For 8.4%16 Is The Largest Fleet Accounting For 8.4%Of The TotalOf The Total
Aircraft Type
# of Countries
2008 Fleet
% of Fleet Top Three Countries
F-16 24 3305 8.4% USA – 1332; Israel – 330; Turkey – 222
UH-60 13 1735 4.4% USA – 1492; S. Korea – 99; Japan – 97
UH-1 36 1721 4.4% USA – 384; Germany – 173; Japan – 165
C-130 66 1465 3.7% USA – 810; Saudi Arabia – 59; UK – 38
F-18 8 1419 3.6% USA – 1007; Canada – 115; Spain – 88
F-15 6 1218 3.1% USA – 699; Japan – 203; Saudi Arabia – 169
F-5 25 1148 2.9% S. Korea – 256; Taiwan – 168; S. Arabia – 99
AH-64 11 859 2.2% USA – 616; Israel – 51; Egypt – 34
CH-47 14 796 2.0% USA – 504; Japan – 71; S. Korea – 45
Gazelle 22 788 2.0% France – 304; Serbia – 139; Egypt – 89
Top Ten Military Aircraft Fleets - 2008
Source: AeroStrategy/OAGback
5US Navy Maintenance Professionals SymposiumAeroStrategy © 2008 AeroStrategy
The Military Fleet Continues Its Decline The Military Fleet Continues Its Decline –– Dropping Below Dropping Below 38,000 Aircraft By 201838,000 Aircraft By 2018
CumulativeDeliveries
2007Fleet Less
Retirements
Mili
tary
Airc
raft
Flee
t 37,95038,62639,133
2008 – 2018 Global Military Aircraft Fleet Forecast
Sources: AeroStrategy/OAGback
6US Navy Maintenance Professionals SymposiumAeroStrategy © 2008 AeroStrategy
AeroStrategyAeroStrategy’’s Analysis Covers Four Main Segments s Analysis Covers Four Main Segments Of Military Aircraft MROOf Military Aircraft MRO
Engine OverhaulMajor scheduled events (overhaul, hot section inspection)
ComponentsMaintenance expenditure for major aircraft system/component categories
Organizational and intermediate-level maintenance support
Field Maintenance
Airframe HeavyScheduled “depot-level” and airframe heavy maintenance at offsite government or contractor depots
Note: Excludes major modification programs
7US Navy Maintenance Professionals SymposiumAeroStrategy © 2008 AeroStrategy
2008 Global Military Aircraft MRO Spending 2008 Global Military Aircraft MRO Spending Over $60 BillionOver $60 Billion
2008 Military MRO MarketTotal = $60.7 B
Figures are for western aircraft only
US Reconstitution / ResetUS Reconstitution / Reset~$2.5 ~$2.5
Field MaintenanceField Maintenance$28.8 $28.8
Airframe HeavyAirframe Heavy$11.7 $11.7
Component Component OverhaulOverhaul
$9.6 $9.6
Engine OverhaulEngine Overhaul$8.1 $8.1
Source: AeroStrategy/OAGback
8US Navy Maintenance Professionals SymposiumAeroStrategy © 2008 AeroStrategy
US Military Aircraft MRO Expenditures Are More Than US Military Aircraft MRO Expenditures Are More Than Twice That Of The Next Largest RegionTwice That Of The Next Largest Region
2008 Military MRO MarketTotal = $60.7 B
Reset
Figures are for western aircraft onlySource: AeroStrategy/OAGback
9US Navy Maintenance Professionals SymposiumAeroStrategy © 2008 AeroStrategy
Airframe Depot Maintenance Spending Approaches Airframe Depot Maintenance Spending Approaches $12 Billion in 2008$12 Billion in 2008
2008 Military Airframe MRO MarketTotal = $11.7 B
Rotary Wing Rotary Wing AttackAttack$273M$273MTanker, $617MTanker, $617M General Aviation / UtilityGeneral Aviation / Utility
$87M $87M
Trainer / Light Trainer / Light Attack, $705MAttack, $705M
Transport Transport -- Lt/MedLt/Med$804M $804M
Transport Transport -- HeavyHeavy$911M $911M
Special MissionSpecial Mission$1,088M$1,088M
Rotary Wing Rotary Wing --Transport/UtilityTransport/Utility
$1,732M $1,732M
Fighter / AttackFighter / Attack$5,507M $5,507M
Figures are for western aircraft onlySource: AeroStrategy/OAGback
10US Navy Maintenance Professionals SymposiumAeroStrategy © 2008 AeroStrategy
Flight Deck Avionics Are The Single Largest Flight Deck Avionics Are The Single Largest Component MRO CategoryComponent MRO Category
2008 Military Component MRO MarketTotal = $9.6 B
OtherOther$1,453 M$1,453 M
Flight Flight Deck Deck
AvionicsAvionics$2,372 M$2,372 M
Dynamic Dynamic CompComp
$1,145 M$1,145 M
Landing Landing GearGear
$967 M$967 M
HydraulicHydraulic$898 M$898 M
Mission Mission AvionicsAvionics$753 M$753 M
W&BW&B$578 M$578 M
ElectricalElectrical$419 M$419 M
FuelFuel$388 M$388 M
APUAPU$331 M$331 M
PneumaticsPneumatics$284 M$284 M
Figures are for western aircraft onlySource: AeroStrategy/OAGback
11US Navy Maintenance Professionals SymposiumAeroStrategy © 2008 AeroStrategy
Engine MRO Spending Exceeds $8.0B; GE Engines Engine MRO Spending Exceeds $8.0B; GE Engines Account For More Than OneAccount For More Than One--Third Of The DemandThird Of The Demand
2008 Military Engine MRO MarketTotal = $8.1 B
General ElectricGeneral Electric41%41%
Pratt & WhitneyPratt & Whitney29%29%
TurbounionTurbounion4%4%
HoneywellHoneywell3%3%
TurbomecaTurbomeca3%3%
SnecmaSnecma6%6%
Rolls RoyceRolls Royce11%11%
OtherOther 2%2% Rolls Royce / TurbomecaRolls Royce / Turbomeca1%1%
Figures are for western aircraft onlySource: AeroStrategy/OAGback
12US Navy Maintenance Professionals SymposiumAeroStrategy © 2008 AeroStrategy
Fighters And Rotary Wing Aircraft Drive 70% Of Field Fighters And Rotary Wing Aircraft Drive 70% Of Field Maintenance SpendingMaintenance Spending
2008 Military Field Maintenance MarketTotal = $28.8 B
Fighter / Fighter / AttackAttack44%44%
Rotary Wing Rotary Wing ––Transport / Transport /
UtilityUtility20%20%
Transport Transport ––Lt / MedLt / Med
14%14%
Special Special MissionMission
8%8%
Rotary Wing Rotary Wing ––AttackAttack
6%6%
Trainer / Light AttackTrainer / Light Attack3%3%
GA / GA / Utility Utility
1%1%
Transport Transport ––HeavyHeavy
2%2%TankerTanker
2%2%
Figures are for western aircraft onlySource: AeroStrategy/OAGback
13US Navy Maintenance Professionals SymposiumAeroStrategy © 2008 AeroStrategy
Despite A Declining Fleet And Declining Reset Dollars, MRO Despite A Declining Fleet And Declining Reset Dollars, MRO Expenditures Still Grow To Almost $65 BillionExpenditures Still Grow To Almost $65 Billion
Global Military Maintenance Market Forecast2008 – 2018
• The decline in Reset causes overall growth to be less than 1%• 2% increase due to ageing offsets the fleet decline
Figures are in constant 2006 dollars
Engine Overhaul
Component Overhaul
Airframe Heavy
Field Maintenance
60.7 64.8US Reset
Source: AeroStrategy/OAGback
14US Navy Maintenance Professionals SymposiumAeroStrategy © 2008 AeroStrategy
Current State Of PBLCurrent State Of PBL
AgendaAgenda
The Military MRO Market
Key Issues
15US Navy Maintenance Professionals SymposiumAeroStrategy © 2008 AeroStrategy
PBL Has Evolved Significantly Since Its PBL Has Evolved Significantly Since Its ConceptionConception
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
1998 NDAA 1998 NDAA Mandates DoD To Mandates DoD To
Report To Congress Report To Congress on on ““Product Support Product Support
ReengineeringReengineering””
First PBLs: FFirst PBLs: F--117 & 117 & APUsAPUs
DoD Issues DoD Issues Report and Report and 30 RTOC 30 RTOC
Pilot Pilot Programs Programs
are launchedare launched
2001 QDR 2001 QDR Mandates Mandates
““PBLPBL””
PBL PM PBL PM Guidebook Guidebook PublishedPublished
DoD Acquisition DoD Acquisition Policy identifies PBL Policy identifies PBL
as the Preferred as the Preferred Support StrategySupport Strategy
ACAT 1 & 2 Systems ACAT 1 & 2 Systems to use PBL or justify to use PBL or justify
alternativealternative Source: Supply Chain Visions, AeroStrategy
OSD PBL OSD PBL Policy Policy
Memos: Memos: Business Business
Case Case Analyses used Analyses used
to evaluateto evaluate
Over 200 Over 200 current or current or
planned US planned US DoD PBL DoD PBL ProgramsPrograms
Focus on Focus on Performance Performance
Driven Driven OutcomesOutcomes
Key issues today:Key issues today:•• New versus Legacy?New versus Legacy?•• Which missions?Which missions?•• Platform versus Platform versus
system?system?•• PFI?PFI?
US Military PBL Evolution
16US Navy Maintenance Professionals SymposiumAeroStrategy © 2008 AeroStrategy
PBL Implementation Continues To Expand In The USPBL Implementation Continues To Expand In The US
9/2006 DoD ACAT I / II Program Status
Total CurrentPBL
Scheduled PBL
TotalPBLs
Army 60 18 28 46 (77%)
Navy 85 35 23 58 (68%)
Air Force 70 33 17 50
(71%)
DoD 215 86 68 154 (72%)
Recent DevelopmentsRecent Developments•• US Army extending PBL to more US Army extending PBL to more
helicopters helicopters –– 8 April 20088 April 2008–– Began last year with AHBegan last year with AH--64 Apache64 Apache
–– $173M component level PBL$173M component level PBL–– 90% availability90% availability
–– Extending to CHExtending to CH--47 Chinook47 Chinook–– Boeing partnership with Corpus Boeing partnership with Corpus
Christi Army DepotChristi Army Depot–– Initially focused on rotor bladesInitially focused on rotor blades
•• Ogden ALC awards Honeywell $370M PBL Ogden ALC awards Honeywell $370M PBL contract to support Bcontract to support B--2 and C2 and C--130 APU 130 APU fleetsfleets
–– First PBL issued by OOFirst PBL issued by OO--ALCALC–– Could expand to FCould expand to F--15, C15, C--5, A5, A--10, B110, B1--B, B,
EE--3 and F3 and F--16s at Hill Air Force Base 16s at Hill Air Force Base •• USAF launches business case review of the USAF launches business case review of the
CC--17 GSP Program 17 GSP Program –– arguably the most arguably the most successful PBL programsuccessful PBL program
Source: secondary research, DAU
Number of ACAT I & II ProgramsSupported By PBL COntracts
17US Navy Maintenance Professionals SymposiumAeroStrategy © 2008 AeroStrategy
France Have Progressed Quite Far Toward PBL / PFI; France Have Progressed Quite Far Toward PBL / PFI; Israel Is Beginning That JourneyIsrael Is Beginning That Journey
•• $2.2 billion in MRO spend (3$2.2 billion in MRO spend (3rdrd overall)overall)•• Significant organic capabilitySignificant organic capability
–– AIA BordeauxAIA Bordeaux–– AIA ClermontAIA Clermont--FerrandFerrand–– AIA CuersAIA Cuers--PierrefeuPierrefeu
•• Outsourcing decisions political and jobsOutsourcing decisions political and jobs--relatedrelated
•• Outsourced concentrated with three Outsourced concentrated with three French suppliers:French suppliers:
–– EurocopterEurocopter–– DassaultDassault–– SnecmaSnecma
•• Advanced along the contracting spectrum Advanced along the contracting spectrum with several major contractswith several major contracts
–– €€50m EC145 ILS contract50m EC145 ILS contract–– €€319m Eurocopter helicopter support 319m Eurocopter helicopter support
contract (600+ helicopters with contract (600+ helicopters with availability guarantees)availability guarantees)
–– 22 year EC120 training PFI22 year EC120 training PFI
FRANCEFRANCE
ISRAELISRAEL
•• $2.0 billion in MRO spend (4$2.0 billion in MRO spend (4thth overall)overall)•• Typically relies upon several governmentTypically relies upon several government--
owned and private defense contractorsowned and private defense contractors–– IAI, governmentIAI, government--owned, but owned, but
increasingly independentincreasingly independent–– ElbitElbit–– Bet ShemeshBet Shemesh
•• Ability to outsource severely limitedAbility to outsource severely limited•• Moving into PBL and PFI contractsMoving into PBL and PFI contracts
–– PBH for Bell 206/209 training PBH for Bell 206/209 training helicopters with Cyclone (an Elbit helicopters with Cyclone (an Elbit subsidiary)subsidiary)
–– Grob 120 training PFIGrob 120 training PFI•• New programs / upgradesNew programs / upgrades
–– JSFJSF–– FF--16i16i–– Planned 707 tanker upgradesPlanned 707 tanker upgrades–– Planned CHPlanned CH--53 upgrades53 upgrades
•• Work closely with US Military and Work closely with US Military and extensively use FMS channelsextensively use FMS channels
Source: AeroStrategy,Secondary Research
18US Navy Maintenance Professionals SymposiumAeroStrategy © 2008 AeroStrategy
The UK Is The Leading Innovator In MilitaryThe UK Is The Leading Innovator In MilitarySupport; Turkey Has Limited PBL ExperienceSupport; Turkey Has Limited PBL Experience
•• $1.9 in MRO spend (5$1.9 in MRO spend (5thth Overall)Overall)•• Dramatic steps to restructure their Dramatic steps to restructure their
approach to aircraft supportapproach to aircraft support–– Creation of DE&S (DLO & DPA)Creation of DE&S (DLO & DPA)–– Sale of DARA Fleetlands (Helicopter Sale of DARA Fleetlands (Helicopter
support facilities) to Vectorsupport facilities) to Vector–– Defence Industrial Strategy (DIS)Defence Industrial Strategy (DIS)
•• Moving to Moving to ““ThroughThrough--LifeLife”” support. E.g. :support. E.g. :–– BAE / all fast jetsBAE / all fast jets–– AgustaWestland AgustaWestland –– most helicoptersmost helicopters
•• Most advanced along the Most advanced along the ““Transformation StaircaseTransformation Staircase”” with a with a number of number of ““integratedintegrated”” contractscontracts
–– Marshall Aerospace / CMarshall Aerospace / C--130 HIOS130 HIOS–– AgustaWestland AgustaWestland –– Sea King SKIOSSea King SKIOS–– BAE / Hawk IOSBAE / Hawk IOS–– AgustaWestland AgustaWestland –– Merlin IMOSMerlin IMOS–– UKMFTSUKMFTS–– FSTA PFIFSTA PFI
U.K.U.K. TURKEYTURKEY
•• $1.5 billion in MRO spend (7$1.5 billion in MRO spend (7thth overall)overall)
•• Most MRO provided via governmentMost MRO provided via government--owned Turkish Aerospace Industriesowned Turkish Aerospace Industries
•• TAI responsible for the utilization of the TAI responsible for the utilization of the capabilities of 5th Main Maintenance capabilities of 5th Main Maintenance Center (MMC) and Air Force Supply and Center (MMC) and Air Force Supply and Maintenance Centers (ASMC) of the Maintenance Centers (ASMC) of the Turkish Armed ForcesTurkish Armed Forces
•• Several key new programsSeveral key new programs–– FF--16i Block 5016i Block 50–– FF--35 (TAI to build under license and 35 (TAI to build under license and
provide MRO services)provide MRO services)–– A400M (10 ordered through OCCARA400M (10 ordered through OCCAR
•• Limited experience with PBL or PFILimited experience with PBL or PFI
Source: AeroStrategy,Secondary Research
19US Navy Maintenance Professionals SymposiumAeroStrategy © 2008 AeroStrategy
Germany Has Begun Pursuing PerformanceGermany Has Begun Pursuing Performance--Base Base Contracting; Italy Has Shown Little InterestContracting; Italy Has Shown Little Interest
•• $1.5 billion in MRO spend (8$1.5 billion in MRO spend (8thth overall)overall)•• Some organic capabilities, but fewer than Some organic capabilities, but fewer than
FranceFrance•• Germany has begun the trek moving Germany has begun the trek moving
towards PBL and PFI contractstowards PBL and PFI contracts•• Several Public Private Partnerships with Several Public Private Partnerships with
MTU for engine supportMTU for engine support–– RB199RB199–– EJ200EJ200
•• Recently entered GermanyRecently entered Germany’’s first PFIs first PFI–– NH90 trainingNH90 training–– €€488m, 14.5 year contract with 488m, 14.5 year contract with
Helicopter Flight Training services Helicopter Flight Training services (CAE, Eurocopter, Rheinmetall (CAE, Eurocopter, Rheinmetall Defense Electronics and Thales)Defense Electronics and Thales)
•• Severe O&M budget pressuresSevere O&M budget pressures–– Declining budgetsDeclining budgets–– Fleet recapitalization requirements Fleet recapitalization requirements
(Eurofighter, A400M, NH90)(Eurofighter, A400M, NH90)
GERMANYGERMANY
•• $1.1 billion MRO spend (10$1.1 billion MRO spend (10thth overall)overall)•• Limited organic capability focused on O&I Limited organic capability focused on O&I
level maintenancelevel maintenance•• Favored approach to MRO is partnership Favored approach to MRO is partnership
with domestic OEMs or MROswith domestic OEMs or MROs–– AgustaWestlandAgustaWestland–– AleniaAlenia–– AvioAvio–– AeronavaliAeronavali
•• Little evidence of interest in or Little evidence of interest in or implementation of PBL of PFI programsimplementation of PBL of PFI programs
•• New programsNew programs–– EurofighterEurofighter–– FF--3535
•• Have worked closely with US Military in Have worked closely with US Military in the pastthe past
–– Pilot trainingPilot training–– Even leasing of 34 FEven leasing of 34 F--16s16s
ITALYITALY
Source: AeroStrategy,Secondary Research
20US Navy Maintenance Professionals SymposiumAeroStrategy © 2008 AeroStrategy
Current State Of PBL
AgendaAgenda
The Military MRO Market
Key IssuesKey Issues
21US Navy Maintenance Professionals SymposiumAeroStrategy © 2008 AeroStrategy
Motivation For Using PBL Contracts Varies With Motivation For Using PBL Contracts Varies With Mission And MaturityMission And Maturity
TacticalTacticalFightersFighters
StrategicStrategicTransportTransport
TrainersTrainersTankersTankers
OldOld NewNew
UK TornadoUK Tornado
UK CUK C--130B130B--HHHawkHawk
FF--2222JSFJSF
Eurofighter TLSEurofighter TLS
UK TankerUK TankerCC--1717
CC--130J HIOS130J HIOSNHNH--9090
TrainersTrainers
RiskRisk
LowLow
MediumMedium
HighHigh
•• Upper right Upper right –– new tactical new tactical aircraft and PBLs aircraft and PBLs -- high riskhigh risk
–– Operational risk Operational risk –– Uncertain performance Uncertain performance
characteristicscharacteristics–– Limited industrial baseLimited industrial base–– Avoiding infrastructure Avoiding infrastructure
development is a key development is a key motivation for customersmotivation for customers
–– Favor OEMsFavor OEMs•• Left half of the matrix are Left half of the matrix are
sunset aircraftsunset aircraft–– Known operational Known operational
performance and performance and component reliabilitycomponent reliability
–– Developed industrial baseDeveloped industrial base–– Desire to free up organic Desire to free up organic
capacitycapacity•• PBLs favorable for those in PBLs favorable for those in
the lower right of the medium the lower right of the medium risk bandrisk band
•• Limited examples of PBL in Limited examples of PBL in the upper left quadrantthe upper left quadrant
MaturityMaturity
Mis
sion
Mis
sion
The Overarching Motivation Is Alignment Of IncentivesThe Overarching Motivation Is Alignment Of Incentives
Source: AeroStrategy
222007 Military MRO Conference & ExhibitionAeroStrategy © 2007 AeroStrategy
The Level Of PBL Contracts The Level Of PBL Contracts –– Platform Versus System Or Platform Versus System Or Component Level Component Level –– Is The Source Of Much DebateIs The Source Of Much Debate
PBL Contract TypesPBL Contract Types
Component LevelComponent Level
Systems Level Systems Level (e.g. (e.g. –– Avionics, electrical Avionics, electrical
system, or propulsion system, or propulsion system)system)
Platform Level Platform Level (e.g. (e.g. –– CC--17, F17, F--22 or NH22 or NH--90)90)
2004 GAO Report noted limited use of Platform Level PBLs in private industry and recommended a focus on component or subsystem PBLs
Source: AeroStrategy
232007 Military MRO Conference & ExhibitionAeroStrategy © 2007 AeroStrategy
The Aircraft Life Cycle Provides One Framework To The Aircraft Life Cycle Provides One Framework To Consider The Appropriate PBL StructureConsider The Appropriate PBL Structure
FleetFleet
TimeTime
GrowthGrowth
•• Limited repair capability / Limited repair capability / capacitycapacity
•• Lack deep understanding of Lack deep understanding of operational performanceoperational performance
•• Generally favors platform Generally favors platform level PBLs level PBLs –– often with the often with the Prime / OEMPrime / OEM
MatureMature
•• Costs and risks are Costs and risks are well understoodwell understood
•• Repair capabilities Repair capabilities developeddeveloped
•• Potentially Potentially opportunity to unopportunity to un--bundle for cost bundle for cost effectivenesseffectiveness
SunsetSunset
•• OEMs often losing interest OEMs often losing interest as fleet declinesas fleet declines
•• Two possible extremesTwo possible extremes–– Unbundle completelyUnbundle completely–– Or, rebundle for platform Or, rebundle for platform
level (e.g. UK HIOS and level (e.g. UK HIOS and Canadian CCanadian C--130 Support)130 Support)
Aircraft Life CycleAircraft Life Cycle
24US Navy Maintenance Professionals SymposiumAeroStrategy © 2008 AeroStrategy
The UK Transformation Staircase Illustrates The Step Beyond The UK Transformation Staircase Illustrates The Step Beyond PBL PBL –– Contracting For Capability, Typically Via PFIContracting For Capability, Typically Via PFI
TraditionalTraditional
SparesSparesInclusiveInclusive
ContractingContractingForFor
AvailabilityAvailability
ContractingContractingForFor
CapabilityCapability
Source: UK MoD
DE&SDE&S
ProviderProvider DeciderDecider
UK Support Transformation StaircaseSu
pplie
rSu
pplie
rIncreasedIncreased
InvolvementInvolvement
Contracting for availability:Contracting for availability:Supplier responsible for delivering platforms and equipment to agreed performance and output standards
Contracting for capability:Contracting for capability:Supplier responsible for providing a capability (e.g. Air to Air Refueling) and outputs to agreed performance standards
DE&S = Defense Equipment & Support, the UK organization responsible for managing acquisition and support
25AeroStrategy© 2007 AeroStrategy
The Pros And Cons Of PBL / PFI Are Still Being DebatedThe Pros And Cons Of PBL / PFI Are Still Being Debated
•• Predicable costPredicable cost
•• Increased Increased availabilityavailability
•• Aligned Aligned incentivesincentives
•• Reduced CAPEXReduced CAPEX
•• Lower MRO costsLower MRO costs
•• Reduced flexibilityReduced flexibility
•• Performance risk and associated Performance risk and associated costcost
•• Lack of familiarityLack of familiarity
•• Time to contractTime to contract
•• Misaligned objectives / Misaligned objectives / unintended resultsunintended results
PBL Tradeoffs – Pros Seem To Be Winning
Source: AeroStrategy
PROSCONS
26AeroStrategy© 2007 AeroStrategy
Key MessagesKey Messages•• Over 39,000 military aircraft generate Over 39,000 military aircraft generate
$60.7 billion in MRO activity in 2008$60.7 billion in MRO activity in 2008•• Reconstitution / Recap has a noticeable Reconstitution / Recap has a noticeable
impact on the marketimpact on the market•• Military MRO will grow to almost $65B by Military MRO will grow to almost $65B by
2018 despite a shrinking fleet2018 despite a shrinking fleet•• The countries examined resist simple The countries examined resist simple
generalization generalization →→ suggesting there is no suggesting there is no ““oneone--size fits allsize fits all”” solution. A complex solution. A complex set of factors govern a countryset of factors govern a country’’s s progress along the contracting progress along the contracting continuumcontinuum
•• Several issues must be considered when Several issues must be considered when evaluating a support strategyevaluating a support strategy
–– Platform maturityPlatform maturity–– MissionMission–– Level of contracting (Platform vs. System)Level of contracting (Platform vs. System)–– Pros and cons of contracting for Capability Pros and cons of contracting for Capability
/ PFI/ PFI
Source: AeroStrategy
27US Navy Maintenance Professionals SymposiumAeroStrategy © 2008 AeroStrategy
Thanks For Your Attention!
www.AeroStrategy.com
To learn more about AeroStrategy please contact:US OfficeKevin Michaels, Principal Hal Chrisman, PrincipalPh: +1 (734) 821-0220 Ph: +1 (734) 821-0227kmichaels@aerostrategy.com hchrisman@aerostrategy.com
UK OfficeDavid Stewart, PrincipalPh: +44 (1494) 431600dstewart@aerostrategy.com
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