Following on widespread adoption of performance-based logistics in military maintenance, AgustaWestland is pushing contractor support closer to the front lines.
AgustaWestland and its competitors are working to convince operators of military helicopters that their best bet for keeping those aircraft flying on increasingly tight budgets is to turn over responsibility for their support to private industry.
The manufacturers' campaigns are part of a larger move toward "performance-based logistics," which integrates companies more deeply in military intermediate and depot level--that is, "heavy" or "depth"--maintenance. Performance-based logistics is taking root to varying degrees in U.S. military rotorcraft support, with the U.S. Navy and Coast Guard among its pioneers.
Such initiatives are taking on greater importance as military services endeavor to do a better job of managing the life-cycle costs of their aircraft and other capital equipment. The U.S. Army, for instance, is establishing Life-Cycle Management Commands to make clear that priority. Over the last year, the Army has merged its Aviation and Missile Command and the program executive offices for aviation, tactical missiles and space and missiles into the Aviation and Missile Life-Cycle Management Command. Maj. Gen. James Pillsbury heads that command.
AgustaWestland aims to take that trend further by assuming support all the way up to the doorsteps of front-line squadrons. Its efforts took a major step forward last April, when the U.K. Defence Ministry's Defence Logistics Organisation awarded a team led by its Westland Helicopters, Ltd. unit a five-year, ï¿½300-million ($530 million) contract to support the U.K. military fleet of Sea King helicopters. As we went to press, the U.K. Treasury was weighing final approval of a contract to provide even more comprehensive support of Merlin helicopters. Westland expected that approval before the start of this month.
AgustaWestland hopes to follow those contracts with awards to provide similar support for the U.K.'s Apache fleet in 2007 and for its next generation of Lynx helicopters after that. The company has dubbed these initiatives Integrated Operational Support.
The move to performance-based logistics and beyond is private industry's response to the realities of military aircraft procurement and operations. Generally, fewer new aircraft are being acquired, which requires existing ones to operate much longer than expected when they were designed and first purchased. Even when new aircraft enter the fleet, they must be operated on ever tighter budgets and under greater and greater scrutiny of their direct operating costs. This makes it harder for manufacturers at every level to profit by manufacturing new aircraft, components and parts.
A Way to Preserve Profits
"The motivation for us is to grow the business," said Nick Smith, Westland's head of customer support strategy. "The number of platforms is dwindling."
Greater involvement in more comprehensive support of aircraft, new and old, is considered the most feasible option for maintaining revenue and profits.
"In the old paradigm, we made money selling parts," said David Adler, senior vice president of world customer support at Sikorsky Aircraft, which has its own performance-based logistics arrangements with the U.S. Navy, Coast Guard and Army. "In the new paradigm, we're going to make money by not selling parts," that is, by helping customers find ways to minimize failures, unscheduled maintenance and operating costs.
Sikorsky is signed on as the logistics contractor for EADS' Eurocopter EC145-based entry in the U.S. Army's current Light Utility Helicopter competition, which has called for bids that include "the ultimate in performance-based logistics," Adler said. For the regular Army's portion of that planned 320-aircraft acquisition, contractors are to cover all material and maintenance to keep those aircraft flying. (National Guard aircraft acquired under the program would require less extensive contractor support.)
Moves in the United Kingdom are part of a larger transformation of military rotary-wing support. The three U.K. military services--the Army, Royal Navy and Royal Air Force--operate about 700 helicopters from more than 20 air stations.
Changes to support for those helicopters were spurred in 2003 by a study of logistics in the air and land environments. Dubbed the End-to-End study, it found that significant benefits could be realized by rationalizing current rotary-wing logistics support into "Forward elements, mainly those parts configured for deployment, and Depth, covering the `deep' repair, maintenance and upgrade elements of support," according to the U.K. Defence Logistics Transformation Programme.
In parallel with that study, military rotary-wing integrated product teams began developing new support agreements with industry to improve effectiveness and reduce life-cycle and direct operating costs for each helicopter type in the U.K. military fleet.
The changes "will have an impact on every facet of helicopter support from end to end," Commodore Ian Tibbitt of the Royal Navy, the U.K. Defence Logistics Organisation's cluster leader for rotary-wing integrated product teams, has said.
AgustaWestland is in a unique position to take advantage of those changes. It was named a Defence Ministry "preferred supplier" last year, and the two now have a "partnering and business transformation" agreement. Under that pact, the Sea King Integrated Operational Support (SKIOS) Phase 1 contract was awarded under a single source, non-competitive procurement procedure. (Phase 2 of the contract, which calls for material support directly to front-line units, is to take effect Jan. 5.) After five years, the contract can be extended another five years.
The SKIOS initiative is intended to provide the Defence Ministry with guaranteed levels of availability of support, a more integrated support service based upon guaranteed availability of equipment and technical services. It replaces about 60 individual contracts with more than 30 different suppliers, which alone is projected to save the Defence Ministry ï¿½50 million ($88 million) over the next decade. AgustaWestland forecasts that Integrated Operational Support initiatives will lower the Defence Ministry's cost of operating the Sea Kings by 18.5 percent and the Merlins by 20 percent.
By saving on the cost of technical support and spares, the initiative is intended to make more funding in the limited defense budgets available for re-investment in new and improved equipment.
A big change, Westland's Smith said, is that the initiative shifts risk from the military services operating the aircraft to the contractors supporting them. The military essentially is contracting for capability, seeking a guarantee that when missions are planned and scheduled, aircraft are available to fly them.
"They do day-to-day maintenance. They task and schedule the aircraft," he said. "Every problem is our problem. Our motivation is to make the squadrons fly." The company's Integrated Merlin Operational Support proposal, for instance, calls for contractors to be paid by aircraft flight hour.
In that sense, Smith said, financial incentives under this scheme "are geared toward the right behaviors." The more reliable the contractor team can make the aircraft and its support, the more money it will make.
For instance, under "traditional" support arrangements, contractors wouldn't propose a modification or upgrade of the aircraft or components "unless the government came along with a check and said, `Right, we want a mod,'" Smith said.
Westland is prime contractor on the SKIOS team, which includes BAE Systems Avionics and Thales UK. They have set up an avionics alliance for all rotary-wing aircraft. Within the Sea King initiative, they are to provide Westland with a reliable "avionics arm" to deliver a total platform support capability.
Under the contract, Westland will assume responsibility for the provision of aircraft, transmission, mechanical and avionics support covering spares, repairs, publications and technical advice. The technical support will include a customer support service and the provision of on-site support teams at each Sea King main operating base.
The British Sea Kings have been in service for 30 years and are planned to remain so through 2018. As such, they will continue to play a key part in Britain's defense and search-and-rescue capabilities. The U.K. fleet includes seven different variants of the Sea King. They are used for a variety of tasks and are operated by all three front-line commands: Joint Helicopter Command Sea King Mk. 4s provide battlefield helicopter support to the Commando Force; Strike Command and Fleet Mk. 3/3a and Mk. 5 aircraft fly search and rescue, and Fleet Mk. 7s provide airborne early warning and surveillance for deployed operations.
The Integrated Merlin Operational Support initiative, which is intended to provide more responsive and cost-effective support at significantly lower overall cost to the Defence Ministry, takes AgustaWestland's efforts a step further. With it as prime contractor, the contractor team would take over management of both on- and off-aircraft deep maintenance at the Merlin's main support base at RNAS Culdrose from the Defence Logistics Organisation.
Data is the Key
The backbone of the Merlin initiative would be provided by the Integrated Operational Support management information system, which includes an enhanced health and usage diagnostic system.
This real-time electronic maintenance management system is designed to provide an automatic audit trail between aircraft health and usage monitoring system downloads, fault rectification, asset tracking, electronic technical publications and component history.
Sikorsky's Adler said that is a key challenge in such efforts. "You have to have the sophistication of knowledge and information to anticipate failure rates" and other elements that drive operating costs. Sikorsky has several labs set up to prioritize and mitigate cost factors to support such initiatives.