This report examines several issues associated with the cost-per-flying-hour (CPFH) metric used in the Department of Defense (DoD), including its use to compare operating and support costs of different aircraft. The report recommends a definition of CPFH when comparing aircraft, several ways the cost and usage data should be normalized, and a cost-per-aircraft metric as an alternative metric for comparing the O&S costs of aircraft.
Metrics to Compare Aircraft Operating and Support Costs in the Department of Defense
Published Dec 22, 2015
- What are the most appropriate metrics that high-level Department of Defense (DoD) decisionmakers can use to compare the operating-and-support (O&S) costs of different aircraft?
- Should costs that are relatively fixed each year, such as personnel costs, be included in the metric?
- Should only clearly variable costs, such as those for fuel and consumable and reparable parts, be included?
- How should costs be normalized when comparing costs for aircraft at different stages in the O&S phase, or with vastly different usage rates, or with different capabilities?
This report examines several issues associated with the cost-per-flying-hour (CPFH) metric used in the Department of Defense (DoD). CPFH is calculated as the ratio of an aircraft fleet's operating-and-support (O&S) costs divided by its flying hours. Subsets of an aircraft fleet's total annual O&S cost are budgeted in DoD for the flying-hour program used to achieve and maintain flight-crew proficiency and used to calculate hourly rates when DoD aircraft are flown on a reimbursable basis. In addition, other aggregations of costs are used to calculate CPFH and compare O&S costs of different aircraft for various other reasons, including informing decisions on aircraft acquisition and force structure.
This report examines usages of CPFH in DoD, including its use to compare O&S costs of different aircraft. The report recommends a definition of CPFH to be used when comparing aircraft and recommends several ways the cost and usage data should be normalized. The report also recommends a cost-per-aircraft metric (where primary aircraft inventory [PAI] is used for the number of aircraft) as an alternative metric for comparing the O&S costs of aircraft.
Cost per Flying Hour (CPFH) Metric Is Multidimensional and Used by DoD in Different Ways
- CPFH is a metric widely used by the military services for different purposes, such as for flying-hour programs (FHP), for flying-hour reimbursable billing rates, and to compare O&S costs of different aircraft programs.
- The key difference between CPFH used for FHP and reimbursable billing and the CPFH used to compare O&S costs of different aircraft programs is that cross-system O&S comparisons intentionally include some categories that are fixed (i.e., do not vary with flying hours).
O&S Cost per Aircraft Is Alternative Affordability Metric to CPFH in Comparing O&S Costs of Different Aircraft
- The CPFH metric can behave counterintuitively: When flying hours are reduced, total program costs are reduced, but cost per flight hour can increase.
- Decisionmakers could use CPFH to compare O&S costs of different aircraft when the appropriate standardization steps mentioned in the report are taken.
- Comparisons of CPFH are most appropriate when the intention is to compare costs that vary closely with flying hours, such as fuel, depot-level reparables, or perhaps engine-related costs.
- O&S costs will include elements that are largely fixed or insensitive to changes in flying hours — such as unit-level personnel, sustaining support, or modifications.
- The operating-and-support (O&S) costs included in the comparison should be clearly defined.
- All the direct elements of the standard O&S cost-element structure should be included when comparing O&S costs.
- Indirect costs should be excluded because, as their name implies, these costs are only indirectly affected by the aircraft, and because they are not captured consistently by the services' official O&S cost databases.
- A consistent measure of the number of flying hours per aircraft should be used when comparing costs of different aircraft. Costs of fleets should be compared using stable annual flying-hour levels needed to achieve crew proficiency and exclude flying hours for contingency operations, because variations in flying hours per aircraft affect the calculations.
- Basic data-normalization steps will be needed when comparing O&S costs of different aircraft. Costs should be compared using constant dollars to normalize for the effects of inflation at different points in time.
- Account for differences in actual costs versus estimated costs.
- Primary aircraft inventory (PAI) should be used as the measure of the number of aircraft when an annual O&S cost-per-aircraft metric is used.