An Examination of the Relationship Between Usage and Operating and Support Costs for Air Force Aircraft

by Eric J. Unger

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This research examines the relationship between operating and support (O&S) costs and usage of Air Force aircraft, in order to improve resource allocation. Currently the Air Force uses an average cost metric to forecast costs related to flying hours. Problems arise with the accuracy of the cost per flying hour (CPFH) factors when the relationship between cost and usage is either nonlinear or includes nontrivial fixed costs. Although it may seem reasonable that if the Air Force flies an aircraft twice as many hours, O&S costs should double, empirical evidence shows that the doubling of flying hours actually increases non-fuel O&S costs by less than that amount. Fuel cost is the only category with clear statistical evidence to support the use of flying hours over aircraft inventory in predictive models. The Air Force can improve its allocation of O&S resources by altering the current proportional CPFH metrics to better accommodate fixed costs.

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This document was submitted as a dissertation in September 2007 in partial fulfillment of the requirements of the doctoral degree in public policy analysis at the Pardee RAND Graduate School. The faculty committee that supervised and approved the dissertation consisted of Edward Keating (Chair), Bart Bennett, and Lara Schmidt.

This report is part of the RAND Corporation Dissertation series. Pardee RAND dissertations are produced by graduate fellows of the Pardee RAND Graduate School, the world's leading producer of Ph.D.'s in policy analysis. The dissertations are supervised, reviewed, and approved by a Pardee RAND faculty committee overseeing each dissertation.

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