Life Cycle Cost Savings by Improving Reliability Dr. Charles E. McQueary Director, Operational Test and Evaluation January 15, 2009

22 Number Effective And Suitable Cumulative Number of BLRIP Reports Ideal Effective Suitable FY08 Total: 28% of Systems Not Suitable 2007: 4 of 8 (50%) Not Suitable 2008: 2 of 6 (33%) Not Suitable Why DOT&E is Interested in Reliability Cumulative IOT&E Results Through FY 2008

33 Sustainment Costs, Which are Largely Driven by Reliability, Represent the Largest Fraction of Life Cycle Costs RDT&E Procurement O&S OSD CAIG

yrs B yrs 2.5 Ton Truck 93 yrs C-130 UH-1 69 yrs M yrs 72 yrs AIM-9 56 yrs SSN yrs F yrs CH yrs HEMTT 51 yrs F yrs KC-135 SOURCE: John F. Phillips DUSD (L) Sustainment Costs Become More Important As Systems’ Service Lives Increase

55 Investment Can Improve Reliability The Cost Estimating Relationship (CER) Investment = Reliability Improvement Ratio X APUC Investment/ APUC Linear regression of In (Improvement Ratio) on In (Investment/APUC) gives: y = Log (Investment/APUC) – Percent Confidence Interval R 2 =.82 Improvement Ratio

Investment in Reliability Improvement, $M 20-Year Cost, $M Investment in Reliability, $ M 20-year Cost, $ M 120 Small Reliability Investments Can Significantly Reduce LCC Notional Example - Effect of Reliability Investment on System Cost (UAV)

7 HH-60HMH-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. MFHBR3.6 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

88 Key: Start Programs Right at 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.”

Number of Failures in the Field Ownership Cost 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

10 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

11 Back-up Slides Initiatives to Improve Reliability

12 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.

13 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 “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

14 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.

15 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

16 DoDI (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