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
- 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.
Table of Contents
Applications of Cost per Flying Hour in DoD
Alternative Metrics for Aircraft Operating and Support Costs
An Example of How Cost per Flying Hour and Cost per Aircraft Change When Flying Hours Are Reduced
Statistical Analysis of the Relationship Between Aircraft Annual O&S Costs and Number of Aircraft and Flying Hours