Options for Reducing Costs in the United Kingdom’s Future Aircraft Carrier (CVF) Programme
May 6, 2005
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The United Kingdom's Ministry of Defence is designing its next class of aircraft carriers. At the ministry's request, RAND presented several cost-saving tools and measures, including cost analysis tools (e.g., a whole-life cost model), ways to reduce construction costs (e.g., advanced outfitting), methods to save on support costs (e.g., variations of contractor logistics support), and guidelines for reducing personnel costs, as well as numerous specific ways of doing so.
The United Kingdom's Ministry of Defence (MOD) recognises that its Future Aircraft Carrier (CVF) acquisition project provides opportunities to save substantial sums of money over the life of the ships. To help realise the project's whole-life savings potential, the MOD called for an independent, objective analysis of new technologies and alternative manufacturing options. The RAND Corporation was asked to perform that analysis and, in particular, to identify and evaluate options for reducing support costs and other whole-life costs, and for reducing manpower.
The precision of the RAND analysis was limited by the fact that, at the time of the study, the design of the CVF was still evolving; therefore, detailed design and manning data were unavailable. However, RAND presented approaches to quantifying and realising cost reductions, along with some specific measures to reduce costs in various areas.
The evaluation of initiatives to reduce CVF whole-life cost (WLC) requires a set of analytical tools to understand the trade-offs among various cost elements. RAND presented four such analytic paradigms:
Although the focus of their efforts was on support costs and manpower, the researchers also identified several options that might lead to lower CVF construction costs:
Designing some systems to commercial standards might reduce support costs in addition to acquisition costs. RAND inferred from studies for the US Navy that the use of certain habitation-related commercial systems (water, trash, etc.) in the CVF might save as much as a net £400 million in WLC across both ships.
Paint is also a major maintenance expense. If higher-quality paint were used, one of the planned dry-dockings might be eliminated, which could yield substantial savings.
In planning from the outset to save whole-life support costs, we naturally turn to contractor logistics support (CLS), in which the design contractor is paid a price to guarantee the availability of the ship. Such an arrangement motivates the contractor to make efficient trade-offs between acquisition and support costs and efficient repair-or-replace decisions.
Unfortunately, it does not appear that the MOD could have a CLS arrangement in which the contractor is responsible for every aspect of making a carrier available and is paid solely for available vessel days. The ship would be too costly and complicated for a contractor to assume full financial risk if the ship does not operate.
Instead, CLS on the CVF could be a modified version in which considerable responsibilities are left to the MOD's Defence Logistics Organisation or to the weapon system manufacturers. However, such modified CLS might be prone to areas of unclear responsibility, in which different participants blame one another for why the ship does not operate correctly.
RAND began its personnel cost analysis by reviewing the approaches taken by the Royal Navy and its contractors to establishing complement size. Researchers suggested that, as further complementing work was done, the following points be kept in mind:
Next, RAND drew from case studies of complement-reduction initiatives on other naval platforms to identify and evaluate a number of complement-reducing measures and suggest directions for the future. Researchers identified 57 feasible complement-reduction options of potential relevance to the CVF. Of those, 12 were judged to have appreciable potential for complement reduction and to be advantageous in other respects. Six of these twelve emerged as particularly promising:
RAND observed that initial complement targets have historically proved optimistic, and progress towards the complement goal could be complicated by remaining challenges. For example, many complement- reducing options are not technological but procedural, and efforts to implement such changes can encounter institutional resistance.
RAND concluded by offering some general guidelines towards better defining complement-reduction options and pushing them closer to realisation:
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