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Research Questions

  1. How can the relative costs of operating and supporting Air Force active- and reserve-component units be determined?
  2. Since cost considerations favor the active and reserve components differently for the purposes of meeting strategic and operational demands, what approach can be taken to determining a cost-minimizing active/reserve mix?
  3. What steps can the active and reserve components each take to achieve greater cost-efficiency?

The relative costs of operating and supporting Air Force active- and reserve-component units are an important consideration in programming the mix of forces for various missions. Unfortunately, there are no generally accepted or well-documented methodologies for compiling the costs and output measures to be included in these comparisons. This report describes the development of one such methodology and applies it to an exploration of force mix alternatives in several weapon systems. Using data from the Air Force Total Ownership Cost decision support system from fiscal years 2006 through 2010, the author estimates the cost of operating the C-130 tactical airlifter, KC-135 aerial refueler, and F-16 multirole fighter fleets in Air Force active and reserve components. The author highlights the ways in which cost considerations favor the active and reserve components differently and discusses how this can help determine a cost-minimizing active/reserve mix.

Key Findings

A Methodology for Comparing Active- and Reserve-Component Flying Units' Costs

  • Cost information with sufficient granularity is assembled and disseminated by the Air Force primarily in its Air Force Total Ownership Cost decision support system.
  • Appropriate comparisons can be made if unit costs are spread across outputs related to strategic demands, ongoing operational demands, and aircrew proficiency flying demands; total owned aircraft, total operational flying hours, and total flying hours, respectively, can be used as measures of these outputs.

Active and Reserve Units Have Asymmetrical Cost Advantages

  • For the purpose of meeting strategic demands, reserve-component units provide mission-ready aircraft with competent aircrew and maintenance workforces at lower cost per aircraft than active units.
  • In contrast, active units have often met operational demands at lower cost per flying hour.
  • For units operating at the same scale, in terms of number of hours flown, reserve units have a lower cost per flying hour than active units. However, many more reserve units operate on a scale that is too small to realize available economies of scale, and these small-scale units have high flying costs per hour.

Determining a Cost-Minimizing Active/Reserve Mix

  • The model suggests that reducing operational demands would tilt the cost-minimizing mix in the direction of the reserve components, while reducing planned strategic capacity (fleet size) would have the opposite effect.

Recommendations

  • Efficiency in the active component might be improved by examining the amount of flying required to maintain proficiency; for the reserve components, efficiency would be improved by increasing their scale of operations and their contribution to meeting operational demands.
  • In the near term, the Air Force faces budget-driven reductions in its fleet sizes but no immediate reduction in operational demands. This suggests that near-term fleet reductions should be taken in the reserve components.
  • If operational demands subsequently subside, the stage will then be set for tilting the mix back toward the reserve components.

Table of Contents

  • Chapter One

    Introduction

  • Chapter Two

    Costs and Outputs

  • Chapter Three

    Cost Structures and Alternative Mixes

  • Chapter Four

    Perspectives and Insights

  • Appendix A

    Organization Types

  • Appendix B

    Outputs and Costs per Output

  • Appendix C

    Optimization Exercises

Research conducted by

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