Air Support

n early March, the Air Force faced a readiness crisis. A routine maintenance check turned up faulty ejection seats on the service's F-15 fighter planes and forced the temporary grounding of the fleet of 700 aircraft, many of which are deployed in hot spots like the Balkans and the no-fly zone over southern Iraq. The Air Force needed a fix as fast as an F-15' s dogfight maneuvers.

And they got it. Within a week, Air Force engineers pinpointed the problem-cracks in a key piece of the seat's ejection system-and found the solution: a specially designed pair of brackets to strengthen the ejection seats. Within a few days, production lines at the service's Warner Robins Air Logistics Center in Georgia were churning out the new parts. By April, all the aircraft were repaired, the ground order was lifted and the tactical fighter planes were back in the sky.

"There's no way a civilian company could have done what we did," says Maj. Doug Fingles, deputy chief of Warner Robins' industrial product division. He says the depot pulled six tooling machines off other projects to crank out the brackets in a few days without any upfront money from the Air Force.

Few contractors would be willing to stand up a new production line in few days-with no upfront funding-to produce a few brackets. There is little money in low production of such items as ejection seat parts, and there are big costs in rearranging production lines and schedules on a few days' notice.

The manufacturing of the F-15 ejection seat brackets illustrates the continuing struggle facing the Air Force's three depots-the in-house manufacturing, repair and overhaul centers for aircraft, avionics and other weapon systems. In an era when the Air Force has been forced to consolidate its depot operations, depot managers are being asked to repair more advanced weapons systems at the same rate as a decade ago, with a smaller and older workforce. At the same time, they're being asked to find new ways to become more efficient and responsive. Moreover, managers must walk the political tightrope: saving dollars by outsourcing jobs and forming partnerships with defense contractors without raising the ire of labor unions or lawmakers seeking to protect jobs.

Closure and Controversy

Each of the military services has in-house depots that repair and produce spare parts for weapons ranging from fighter planes to tanks to aircraft carriers. Taken together, the Defense Department's 19 depots are among its largest and most costly operations, employing 64,500 civilian workers and spending $15.8 billion annually. The Air Force depots are the most expensive, accounting for about two-thirds of all depot spending ($10.4 billion annually) and employing about 36,000 workers.

Not surprisingly, the depots have been caught in the cross hairs of the base-closure and outsourcing process for the past decade. Since 1987, the Defense Department has gone from 38 depots to 19 today and cut its depot payroll from 156,000 workers to a workforce less than half of that size today. At the same time, the depot work performed by contractors has risen from $4 billion in 1987 to $7.6 billion today, while the workload done in-house has remained relatively stable at about $8 billion annually.

"Today, DoD has a smaller public sector depot structure, with less modern facilities and equipment and fewer maintenance personnel. Also, the department has increased reliance on the private sector to perform depot maintenance activities," said David Warren, director of defense capabilities and management for the General Accounting Office, at a March 23 House Armed Services military readiness subcommittee hearing.

The Air Force has had the biggest challenge of any of the services, having been forced in the base closure process to go from five depots to three by July. In 1995, the Base Realignment and Closure Commission selected Kelly Air Logistics Center in San Antonio and Sacramento Air Logistics Center at McClellan Air Force Base, Calif., for closure, leaving the Air Force with depots at Warner Robins; Hill Air Force Base, Utah; and Tinker Air Force Base, Okla. Unlike the other military services, however, the Air Force did not simply divide the work at the closing depots among the remaining sites or outsource it to private firms. Instead, the Air Force-heeding the wishes of the Clinton White House-crafted a "privatization in place" plan that called for contractors to take over the work using the shuttered depots and displaced workers in Sacramento and San Antonio.

Congressional critics accused the Clinton administration of currying favor with voters in California and Texas by making an end run around the base closure process. Ultimately, the Air Force allowed the three remaining depots and the contractors who were selected to operate out of the former Kelly and McClellan depots to compete for most of the service's maintenance work in three large public-private competitions.

The result was a public-private division of labor. Warner Robins won $455 million in C-5 cargo plane repair work over seven years. A government-industry team made up of the Ogden Air Logistics Center at Hill Air Force Base and a Boeing unit operating at Kelly won $1.7 billion in aircraft, hydraulic and avionics repair work over eight years. Another government-industry team consisting of the Oklahoma Air Logistics Center at Tinker Air Force Base and Lockheed Martin, also based at Kelly, won $10.1 billion in engine repair work over 15 years.

Over the next decade and a half, the Air Force expects to save about $2.6 billion through the consolidation of its depot work. Kelly and McClellan will formally shut down as military operations in July, but the controversy over how the work is split is likely to last at least a few more years. "As fast as we were disengaging from Kelly, contractors were moving in right behind us," says Air Force Maj. Gen. Paul Bielowicz, director of logistics for the Air Force Materiel Command (AFMC) at Wright-Patterson Air Force Base, Ohio. AFMC oversees all three depots.

Splitting the Difference

A federal law requires that federal employees at Defense depots perform at least half of all maintenance work on weapons systems. The 50-50 law, as it's known, has been a challenge for the Air Force as it has consolidated its depot operations.

Bielowicz says the Air Force contracted out more than 50 percent of its depot work last year and likely will again this year, because it has "bridge contracts" with commercial companies to perform temporary repair and maintenance work as equipment and personnel are consolidated at the three depots. Also, he says, awarding work once done solely by federal workers at Kelly and McClellan to public-private teams has increased the share of work performed by contractors. GAO has concluded that the Air Force is in danger of breaching the 50-50 threshold through 2004, because it has proposed spending hundreds of millions of additional dollars on contractor maintenance.

Congress granted the Air Force a waiver from the 50-50 requirement on national security grounds last year and is expected to do so again this year. But key members of Congress have made it clear they expect the waivers to end once the consolidation is complete. "Poor management on behalf of the Air Force does not justify yearly living under a national security waiver," says Bill Johnson, legislative director for Rep. James Hansen, R-Utah, who heads a caucus of House members with an interest in depot issues.

Hansen and other legislators argue that the Air Force needs to maintain a sizeable depot maintenance workforce to ensure it can respond quickly when problems such as the F-15 ejector seat issue arise. But a retired senior military officer, who asked not to be identified, says lawmakers have little interest in good management at depots and simply are trying to protect jobs in their states and districts through measures such as the 50-50 law. "Congress has created a middle-class job corps at the depots," says the officer, who argues there is no reason that all work done by service depots could not be privatized.

Air Force leaders would prefer that Congress give them the flexibility to decide whether it's more cost-effective and efficient to contract out maintenance work or have it done at the depots. "What 50-50 does do at times is give us a constraint that affects management decisions that aren't always in the best interests of good government," says Lt. Gen. Michael Zettler, the Air Force's deputy chief of staff for installations and logistics.

In addition to the 50-50 requirement, federal law also requires that the military services retain a core capability at their depots to perform repair and maintenance work on key weapon systems. The law is designed to ensure readiness requirements are met, promote competition with industry and guarantee a repair source of last resort.

In anticipation of the completion of depot consolidation in July, the Air Force is crafting a strategy, known as "core plus," emphasizing that all depots must maintain a core capability for repairing key systems. But, the plan also calls for the depots to seek additional work because core work alone will not allow for full and cost-effective use of depot facilities and equipment. "Our goal is to make sure down the road we have three viable depots from both a technology standpoint and an economy and efficiency standpoint," says Tom Batterman, deputy director of depot maintenance at AFMC.

The Air Force does not, however, expect the depots to go it alone in attracting additional business. In fact, the service is encouraging the depots to form partnerships with contractors. Already, the depots are experimenting with different versions of public-private partnerships, ranging from long-term, multibillion-dollar deals like those at Ogden and Oklahoma City, to agreements for less than $1 million at Warner Robins that allow a contractor to lease extra space or specialized tooling equipment.

"When we do partnerships intelligently, it allows us to get the benefits of what both the public and private sector have to offer in a way that is not an adversarial relationship," says Batterman.

Model Partnerships

The partnership between Warner Robins and defense contractor Northrop Grumman to maintain the Air Force's Joint Surveillance and Target Attack Radar System (JSTARS) aircraft often is cited as a model for the partnerships the service will seek in the future.

Under a 22-year contract potentially worth $7 billion, Northrop Grumman is responsible for the maintenance of the surveillance aircraft. But the deal requires that the contractor pay the depot to perform certain core upkeep and repair tasks on JSTARS. Additionally, Northrop Grumman will provide engineering services and other services needed to ensure the core work is done efficiently. For non-core work on JSTARS, Northrop is free to use private vendors or form additional partnerships at the depot.

"This partnership gives us the advantages of a competitive environment without the disadvantages, because now it is in interest of Northrop Grumman and the depot to work together," says George Falldine, director of plans and programs at Warner Robins.

Both sides stand to benefit if the partnership succeeds. Northrop Grumman will receive a higher fee if it exceeds performance requirements, while the depot will receive contractor support and could win additional work if it proves it can do a better job than commercial vendors, Falldine says.

Some additional work also will flow to the Air Force's depots as they take on subcontracting jobs for repair of major weapon systems. Congress recently passed legislation that allows for expanded partnerships, including allowing depots to work as subcontractors. The Warner Robins depot is the first to take advantage of the law. Boeing hired the depot as a subcontractor to perform inspections on Air Force C-17 cargo aircraft the contractor is overhauling. The deal is worth an estimated $1 million annually.

Subcontracting will not be the norm at the depots. "We are not here to compete for subcontracting work," Falldine says. But he notes that in certain cases, such as aircraft inspections-where the depot is widely recognized as an expert in the field-it benefits the contractor and military readiness to use Warner Robins.

The Air Force's core-plus strategy is drawing mixed reviews. Jacques Gansler, undersecretary of Defense for acquisition, technology and logistics in the Clinton administration, says that increasing core work at depots will not make them more efficient or effective.

"Monopolies are never efficient. What needs to be done for depots to operate efficiently is to hold competitions," says Gansler, who now heads the Center for Public Policy and Private Enterprise at the University of Maryland. Studies show that regardless of whether a contractor or the government wins a competition, just going through the process leads to improved performance and an average savings of about 30 percent, he says. Gansler calls the 50-50 rule "arbitrary" and said the services should hold competitions between depots and contractors for all work done at depots. Jim Davis, secretary and treasurer of the American Federation of Government Employees, which represents thousands of workers at Air Force depots, is wary of any proposal that gives contractors a greater role, saying the Air Force is overly reliant on contractors and cannot prove they are cheaper than using federal employees.

"They have downsized too far, too fast and now they are in a position where they cannot keep the contractors honest," Davis says.

Paul Taibl, a policy analyst for Business Executives for National Security in Washington, says partnerships such as the C-17 overhaul pact are an ideal way of turning over management of logistics operations to the private sector without losing the expertise and skills of the military depots.

The real test of the Air Force's depot strategy will occur over the next two decades as new systems such as the F-22 fighter plane, the C-17 and the proposed Joint Strike Fighter are fielded and need repairs. The Defense Department and the Air Force say they would like private firms to take a lead role in not only building but maintaining the systems. The challenge for the Air Force will be doing so while maintaining core capacity and keeping 50 percent of the work in house.

"We are in the process of figuring out what is the best way to support those [future] systems," says Bielowicz.

Getting Lean

While expanded partnerships are the wave of the future, the Air Force depots still must find more efficient ways to maintain and repair the avionics and aircraft that have been making regular pit stops at the depots for decades. "The only way we are going to make quantum improvements in our depots is by making changes in our thought process," says Maj. Gen. Dennis Haines, Warner Robins' depot commander.

All the depots are pursuing an initiative, popularized in the commercial world by companies like Toyota, known as "lean manufacturing." The approach involves dissecting every step of a manufacturing process, pinpointing inefficiencies and keeping only those steps necessary for efficient production.

The lean manufacturing initiative at the depots seeks to fundamentally change the Air Force's maintenance philosophy from a Cold War mind-set that called for manufacturing and stockpiling huge parts inventories and scheduling weapons for repair quarterly. Today, depots are adopting a repair-on-demand approach that calls for manufacturing parts and making repairs as they are needed. "We want the field to drive the repair work done at the depots," says Haines. Already, applying lean manufacturing to a handful of maintenance operations at Warner Robins has saved about $8 million.

Depot managers say the increased use of partnerships and efforts to transform depot operations will cut costs and improve efficiency. But they readily acknowledge they never will reach the efficiency levels of their private-sector counterparts. They say the depots always will need extra space and workers to handle a war-fighting surge, fix an obsolete avionics system, or rearrange production lines to make emergency modifications like those for the F-15 ejector seats.

"The world's become an awfully competitive place," says Zettler. "We ought to be out there playing in the competition and setting benchmarks on how to do it, but we must never lose sight that while we can do a lot of things in the business format, we must be able to execute the national military strategy."

Depots at a Glance

Warner Robins Air Logistics Center, Ga.
Employees: 11,600
Specialties: Cargo aircraft, some fighter
aircraft, avionics
Annual budget: $3.1 billion

Oklahoma City Air Logistics Center
Employees: 13,400
Specialties: Bombers, tankers, aircraft
engines
Annual budget: $3.4 billion

Ogden Air Logistics Center, Utah
Employees: 9,900
Specialties: Fighter planes, hydraulic systems
Annual budget: $3.8 billion

Source: Air Force Materiel Command