By Marina Malenic
Purchasing additional Boeing [BA] C-17 Globemasters may make sense in light of possible higher costs for C-5 Galaxy upgrades, congressional auditors concluded in a new report on the Defense Department’s future airlift needs.
“Additional investments in C-17 aircraft may become more attractive,” the Government Accountability Office writes in a Nov. 21 report.
According to current estimates, a new C-17 would cost about $276 million, while complete modernization of a C-5 is priced at $132 million. However, while each new C-17 adds cargo capacity toward meeting the department’s airlift requirement, available capacity does not increase with each C-5’s modernization because the older planes are already part of the operational force.
“Consequently, according to DoD data, the C-5 modernization programs only provide a marginal increase of 14 percent in capability over nonmodernized aircraft,” the GAO report states. “We, working in collaboration with DoD, calculated that DoD would need to fully modernize seven C-5s to attain the equivalent capability achieved from acquiring one additional C-17 and the costs would be over three times more.”
Further, the Air Force has cut the number of C-5s it plans to fully modernize by more than half because of substantial cost increases in the C-5 Reliability Enhancement and Reengining Program (RERP). The service’s current lift maintenance plan is to provide avionics upgrades to all of its 111 C-5s, limit RERP to 52 C-5s and expand its C-17 fleet to 205 aircraft.
The Air Force’s cost estimate for the C-5 improvements is $9.1 billion. According to GAO, however, that number may be unrealistically low.
“This estimate may be understated because DoD did not apply risk or uncertainty analyses to its RERP major cost drivers,” the report states. “Moreover, the current RERP is underfunded by almost $300 million and may be unachievable if the engine production schedule is not met.”
The auditors also called attention to a new C-5 upgrade program in the works for 2010, which the Air Force has not yet priced or budgeted. Lockheed Martin [LMT] is the prime contractor for the C-5.
The auditors also warned that careful planning is needed to ensure the C-17 production line is not shut down prematurely, because restarting it would come at a significant cost to the government. Manufacturer Boeing currently has enough U.S. and foreign orders in the pipeline to keep the line open until September 2010.
In addition, GAO highlighted a discrepancy between the Pentagon’s and Boeing’s estimates for the cost of shut-down.
“The manufacturer and Air Force shutdown estimates differ significantly–about $1 billion and $465 million, respectively–in large part because the manufacturer’s estimate included assumptions about demolishing facilities and environmental remediation, while the Air Force’s did not,” the report states.
Meanwhile, Boeing announced this week that the North Atlantic Treaty Organization has approved the purchase of two Boeing C-17 Globemaster III cargo planes. The aircraft will be shared by 10 NATO and two non-NATO European countries.
Under an agreement with the Defense Department, two of the airlifters would be purchased from Boeing, while a third would be provided by the U.S. Air Force. The aircraft would be assigned to Papa Air Base, Hungary, for use by all the partner nations.
The 12 nations participating in the effort are Bulgaria, Estonia, Finland, Hungary, Lithuania, the Netherlands, Norway, Poland, Romania, Slovenia, Sweden and the United States.
NATO does not currently own a heavy airlift capability and frequently contracts with the United States and Russia for assistance with its heavy lift needs.
Delivery of the first plane could come as early as this spring, according to a Boeing press statement. The company provides logistics support to the 194 operational C-17s worldwide –180 with the U.S. Air Force; six with the Royal Air Force (UK); four with the Royal Australian Air Force, and four with the Canadian Forces. Boeing received a contract in July to provide two C-17s to Qatar, with deliveries starting late next (Defense Daily, July 23).
The Air Force confirmed earlier this month that it plans to order 15 C-17s early next year. That purchase would bring the U.S. fleet up to 205 airplanes, which Boeing has said is enough keep the production line running until August 2010 (Defense Daily, Nov. 17).
Boeing executives have said that each aircraft extends the production line by three weeks.
Two pending airlift studies–one by the Institute for Defense Analyses due this winter, and another by the Office of the Secretary of Defense and U.S. Transportation Command expected next fall–will further the debate over the C-17 program’s future.