The DOD C-I 7 versus the Boeing 777 The DOD .1 7 versus the Boeing 777 A Comparison of Acquisition and Development

by A. Lee Battershell

NATIONAL DEFENSE UNIVERSITY Washington, D.C. 1999 The Institute for National Strategic Studies (INSS) is a major component of the National Defense University (NDU), which operates under the supervision of the President of NDU. It conducts strategic studies for the Secretary of Defense, Chairman of the Joint Chiefs of Staff, and unified commanders in chief; supports national strategic components of N DU academic programs; and provides outreach to other governmental agencies and the broader national security community. The Publication Directorate of I NSS publishes books, monographs, reports, and occasional papers on national security strategy, defense policy, and national military strategy through NDU Press that reflect the output of NDU research and academic programs. In addition, it produces the INSS Strategic Assessment and other work approved by the President of NDU, as well as Joint Force Quarterly, a professional military journal published for the Chairman.

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Library of Congress Cataloging-in-Publication Data Battershell, A. Lee, 1940- The DOD C-17 versus the Boeing 777 : a comparison of acquisition and development / A. Lee Battershell. p. cm. Includes bibliographical references (p.). ISBN 1-57906-01 7-X 1. C-17 (Jet transport) 2. Boeing 777 (Jet transport) I. Title. UG1242. T7B38 1998 358.4'07'0973--dc21 98-44146 CIP First Printing, October 1999 To those whose help, support, and encouragement made this book possible: my family the Battershells, the Goodwins, and the Arringtons and my boss, Jackie Crawford Contents

Acknowledgments ...... Xtll Preface ...... XV

PART I

. INTRODUCTION ...... 3 Problem ...... 4 Impact ...... 5

. A CONTRAST IN BACKGROUNDS ..... : ...... 7 The Boeing Company ...... 7 History ...... 7 The 777 ...... • ..... 8 The Department of Defense ...... 8 Military Air Transport History ...... 8 DOD Acquisition Process ...... 10 The 017 ...... 11

. ORGANIZATION AND MANAGEMENT ...... 1 5 Organization Theory ...... 15 Constancy of Purpose ...... 1 6 Mobility of Management ...... 1 7 Communication ...... 17 Management Focus ...... 1 8 The Boeing Company ...... 1 9 Program Definition ...... 21 Cost Definition ...... 21 Production ...... 22 Summary ...... 23 The Department of Defense ...... 24 Program Managers ...... 30 The Air Force ...... 30 McDonnell Douglas ...... 31 Reorganization and Employee Turnover ...... 31 Program Reporting Chain ...... 31 Plant Representative ...... 32 The Contractor ...... 32 Low-Level Research and Development ...... 33 Engineering and Manufacturing Development ...... 34 Concurrent Production and Development ...... 34 Summary ...... 36

ZX Comparison ...... 36 Commitment ...... 37 Focus ...... 37 Flexibility ...... 37 Constancy of Purpose ...... 37

. MISSION ...... 41 The Boeing Company ...... 41 The777 ...... 41 Summary ...... 44 The Department of Defense ...... 44 The C-17 ...... 45 Summary ...... 46 Comparison ...... 47

. NEED ...... 49 The Boeing Company ...... 49 The 747 ...... 49 CA TIA ...... 50 Summary ...... 50 The Department of Defense ...... i .... 50 The AMST ...... 50 The 017 ...... 51 Summary ...... 54 Comparison ...... 54

PART II

6. PROGRAM MANAGEMENT ...... 57 The Boeing Company ...... $7 Phase 1 -- Program Definition ...... 57 Phase 2--Cost Definition (9 Milestones) ...... 58 Phase 3-- Production ...... 59 The 777 ...... 60 Summary ...... 60 The Department of Defense ...... 60 Phase l--Mission Need ...... 61 Phase 2--Concept Exploration and Definition ...... 61 Phase 3--Concept Demonstration and Validation ...... 61 Phase 4--Engineering and Manufacturing Development .... 62 Phase 5--Production ...... 62 The 017 ...... 62 Summary ...... 64 Comparison ...... 64

X . TECHNOLOGY REQUIREMENTS AND PROBLEMS ...... 67 The Boeing Company ...... 67 Technical Problems ...... 67 Computer and Aircraft Design ...... 69 Engines ...... 70 Summary ...... 70 The Department of Defense ...... 71 The AMST ...... 71 Changing Payload Requirements ...... 72 Technical Problems ...... 73 Summary ...... 74 Comparison ...... ; ...... 74

. FUNDING ...... 79 The Boeing Company ...... 79 The 777 ...... 80 Summary ...... 82 The Department of Defense ...... 82 The Congressional Process ...... 83 The Defense Acquisition Board ...... 83 Other Countries ...... 84 Impact on Contractors ...... 84 The 017 ...... 84 Paying the Contractor ...... 87 Paying with the Correct Funds ...... 88 Avoiding an Antideficiency Violation ...... 89 Summary ...... 90 Comparison ...... 90

PART III

. CRITIQUE ...... 93 Program Management ...... 93 Selecting Technology ...... 94 Organization ...... 94 Mission ...... 95 Needs Determination ...... 96 Funding ...... 96 Approval ...... 97 Commitment ...... 97 Focus ...... 97 Flexibility ...... 97 Conclusion ...... 97

Glossary ...... 99 About the Author ...... 1 03 Acknowledgments

I have many to thank for helping with this that affected the C-17 development. The ideas book. First and foremost, thanks go to Profes- of Blaise Durante (Deputy Assistant Secretary sors Rita Wells, George McAleer, and Joseph of the Air Forces, Management Policy and Goldberg of the Industrial College of the Program Integration) helped form this book. Armed Forces. Without their guidance, ques- General Ronald Fogleman, former chief of staff tioning, challenge, and unwavering support, of the Air Force, cared enough about what I this book would not be. Many others, too was doing to take time out of a busy schedule numerous to list, also helped and supported to add tremendous perspective from his top- me along the way--thank you all. I also want level defense position. Former Undersecretary to acknowledge those at Boeing, McDonnell of Defense (Acquisitions) Dr. Paul Kaminski Douglas, and the Department of Defense who supported my efforts at every turn and has provided added support. suggested a follow-on to this study--an in- Lois White, Philip Condit's secretary at depth review of his own initiatives to The Boeing Company, believed enough in determine if they will significantly help solve what I was doing to encourage Mr. Condit to the problems experienced during the C-17 see me. Philip Condit, then President and development. now CEO of The Boeing Company, not only My heartfelt thanks go out to three more agreed to see me and added so much to this people. Lieutenant Colonel Greg Lockhart, book, he also encouraged Alan Mulally and USAF, worked on the C-17 project as a young Dale Hougardy to explain to me both the captain up until I met him as a student at ICAF political and technical development that was in 1994; he spent countless hours of his part of the 777. And Jerry King, president of precious time going over the many versions of Boeing's Defense and Space Group, cared this manuscript, challenging, encouraging, enough about the deteriorating relationship and correcting me many times. John Wilson, between defense and industry that he asked to Deputy Program Manager on the C-17 talk to me. Bill Savery, retired chief of engi- program, added tremendous insight through neering operations, The Boeing Company, his many readings and critiques; his insight tirelessly read version after version of this and encouragement helped keep me going. book, providing his expert insights and cri- John Dodds, an attorney with Department of tiques, and encouraged me to talk to Jerry the Air Force, reviewed and added to this Zanatta and Ron Ostrowski, both major play- study, using his consummate knowledge of the ers in the development and testing of the 777. C-17 program. Larry McCracken, McDonnell Douglas Finally, I want to acknowledge the truly Company, provided insight about the politics outstanding job of my manuscript editors: and players involved in the C-1 7 development Walter Thomas and Peggy Miller, who process. Major General Robert Drewes, provided much needed polish and focus; and USAF, helped me better understand the Mary Sommerville, NDU Press editor, who ongoing political dynamics within government chided and challenged me and reorganized my whole book.

20~rI Preface

This study--a comparison of the Boeing and Program management for the C-17 did not Department of Defense approaches to enjoy the same dedicated focus. Vacillation developing and producing an airplane--was from the top in leadership and direction undertaken to find out why the DOD marred progress for the C-17 program, which approach results in development and began in theearly 1970s as the Advanced production programs that span 11 to 21 years, Medium Short-Range Take Off and Landing while Boeing develops and produces planes in (AMST) transport, a tactical plane primarily for 4 to 9 years. The O17 and 777 were chosen short flights. Toward the end of the 1970s, because both use similar technology levels. leaders decided they really wanted a tactical Why does it take DOD longer than private plane with strategic capabilities (one that industry to develop and produce a new plane? could travel longer distances), then decided While there is no one answer, differences in they wanted a strategic plane, then refocused commitment and focus are pervasive in each on a strategic plane with tactical capabilities organization's management methods, that could carry more payload. Because DOD technology philosophy, structure, mission, had already performed several tests on the needs determination, and funding. tactical AMST to prove short take-off and Boeing President Philip Condit empha- landing capabilities, top leaders did not sized in an interview with the author that believe more testing was necessary for the while Boeing's latest transport plane, the 777, strategic plane. Also, because top leaders is phenomenal, it does not represent a knew exactly what they wanted, there was no technology breakthrough: "Designing the reason for concept exploration, demon- airplane with no mock-up and doing it all on stration, and validation. computer was an order of magnitude change." While leaders in the 1980s agreed the The design process using CATIA--computer- United States needed more strategic aided, three-dimensional, interactive appli- capability, they believed adding updated cation-helped Boeing produce a better plane models of existing planes would provide the and reduce future costs. Boeing invested needed strategic airlift capability much sooner heavily in CATIA; completely reorganized its than the C-17. The U.S. Government management approach, adopting a system of purchased more C-5s from Lockheed and Continuous Quality Improvement (CQI); and awarded McDonnell Douglas a low-level used design-build teams composed of development contract, which essentially put designers, builders, suppliers, and customers. the O17 development on hold until 1985. CATIA allowed design-build teams to work After the government approved the C-17 for together and identify problems before full-scale development, seven reorganizations production; the teams could seehow parts fit within DOD and McDonnell Douglas, plus together and whether there was room to fit all three significant labor turnovers, adversely the parts. Once everyone agreed on the affected C-17 development and production. approach and the design, Boeing committed In addition, both DOD and Congress to producing the 777. continued to question whether the Air Force really needed the C-17.

XV As the reader will learn in the following chapters, the reasons it took DOD longer to produce the C-17 than it took Boeing to produce the 777 are many and complicated. The basic explanation is the difference in commitment and focus. The priorities of each presidential administration affected DOD commitment to the C-17. At lower levels, lack of policy direction and funding reflected a wavering commitment. Boeing viewed the 777 as important to its mission and remained committed throughout development. A stable management structure supported Boeing's constancy of purpose. Boeing made a concerted effort to determine what kind of airplane to build and researched the best methods to build it. Politics interfered with the DOD process to determine need and hindered its ability to stay focused on the C-17. In the end, strong leadership during the Clinton administration from General Ronald Fogleman, John Deutch, Under Secretary of Defense (Acquisitions), and Paul Kaminski brought the program to fruition.

2G,7 The DOD C-I 7 versus the Boeing 777 PART I

1. Introduction

In the time it has taken the A# Force to buy the C- 17, Boeing has designed, tested, and produced the 747-400, 757, and 767, and has recently rolled out the new 777. Senator Jeff Bingaman (D-NM) 1

In 1995, two significant aircraft made aviation from commercial airlines, asking them what history as they lifted off runways in different they wanted in a new aircraft. Once Boeing parts of the country. One, the Boeing 777, a determined the type of aircraft to build, the wide-bodied, two-engine passenger plane company set a timeline, initiated innovative created by private enterprise, made its first development procedures, and then followed a commercial transoceanic flight in June 1 995. set of guidelines to produce the aircraft. The other, the C-17, a military cargo plane The C-17 began in the early 1970s as the created by the Department of Defense (DOD), Advanced Medium Short Range Take Off and received initial operating certification in Landing (AMST)--a prototype for a tactical January 1995. Each aircraft exhibited cargo airlifter. At that time, the Air Force was innovative design and high-tech features, but looking for a carrier to help Upgrade its tactical neither boasted an unprecedented level of cargo fleet. However, just as prototype testing untried technology. They were similar in many reached completion, military leaders ways--both intended to ferry passengers or questioned the limited strategic aspects of the cargo with appropriate ease from one point to aircraft and began lobbying for an aircraft that another. Yet each of these aircraft had a included strategic capabilities. DOD created unique story of development--one a the C-17 in the AMST shadow--claiming straightforward narrative of almost 9 years, the short-takeoff-and-landing technology proved other a complex, convoluted yarn spanning 24 on the tactical AMST would work on the years. Even after Congress approved funding, strategic C-17. Preliminary steps leading to the C-17 time table was greater than the the C-1 7 program started in the late 1970s. Boeing 777 (figure 1). This study compares After heavy lobbying by President Carter and and contrasts the histories of these two aircraft Defense Secretary Brown, Congress approved to determine why a private-sector company funding in 1980. Throughout the 1980s and was able to develop and produce the 777 in early 1990s, the C-17 continued to experience significantly less time than the government erratic backing, technical problems, and took to develop and produce the C-17. contractual disagreements. Delays, cost The 777 originated in the late 1980s increases, and questions of unethical during market research by the Seattle-based management at DOD and McDonnell Douglas Boeing Company. To determine what the centering on the C-17 caused the public and market would bear, Boeing solicited input

3 4 The DOD C-17 Versus the Boein 777

FIGURE 1. Development Timeline for the Boeing 777 and the DOD C-17 from Point of Approval* to Initial Operating Capability

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 Year

*For the Boeing 777, approval was based on the date the Boeing board of directors approved the program. For the C-17, it was based on the date Congress voted funding.

Congress to question whether or not DOD more effectively .... The existing DOD could efficiently manage a major development acquisition system is based on outdated program. management philosophies and organization structures.... There are so many hand-offs of responsibility for any Problem one acquisition program that In the early 1990s, demands from the accountability is difficult, and the ability American public for more responsive of any one person or organization to government prompted Vice President AI Gore change the process is small. 3 to initiate a national review to "make the entire Federal Government both less expensive Many problems associated with the C-17 and more efficient, and to change the culture are directly or indirectly attributed to flaws in of our national bureaucracy away from the acquisition process. This study will trace complacencyand entitlement toward initiative development of the C-1 7 in comparison with and empowerment. "2 the Boeing 777 to discover differences in the In 1 993, Secretary of Defense Les Aspin process by: directed a review to identify savings and improve efficiency in DOD. In his final report • Summarizing the historical back- he said: ground of the Boeing company and DOD • Analyzing and comparing the different We must restructure our acquisition approaches of Boeing and DOD to system to compensate for the decline in program management available resources for defense investment • Examining the approach of Boeing and and to exploit technological advances in DOD to technology the commercial sector of our economy A. Lee Battershell 5

• Comparing the organizational structure of Boeing and DOD to determine if, as many argue, the DOD structure encourages duplication and inefficiency • Comparing the mission of the C-17 with that of the Boeing 777 • Investigating the ways DOD and Boeing determine need • Comparing the steps Boeing and DOD followed to secure approval and funding for their programs. Impact Studies of acquisition over the past 25 years reveal that the DOD way of conducting business resulted in programs that spanned 1 1 to 21 years 4 and that by the time weapons systems are finally delivered, the technology is outdated, s Also, the lengthy time to develop weapon systems is directly linked to a doubling of the planned costs, Given this history, the C-17 case is not that unusual. If DOD continues using the same methods, costs will continue to climb. DOD must learn to maintain the superiority of the American military at less cost with more efficient methods. Therefore, whatever lessons we can learn from a comparison of the O17 and the 777 can have a major impact.

Not~ 1. Congress, Senate, "S-1587," debate on Senate bill to reform the DOD acquisition process, 103 rd Cong., 1st sess., June 1994, $6515. 2. AI Gore, The Gore Report on Reinventing Government (New York: Time Books, Random House, September 1993), 1. 3. Les Aspin, Report on the Bottom-Up Review (Washington: Department of Defense, October 1993), 101. 4. A.J. DiMascio, The Project Cycle, Military Project Management Handbook (New York: McGraw-Hill, 1993), 10.31. 5. Jacques Gansler, Affording Defense (Cambridge, MA: MIT Press, 1989), 215-238. ( 2. A Contrast in Backgrounds )

[In] Desert Storm... we had an advantage in people, an advantage in readiness, and an advantage in technology.... We need to preserve that part of the industrial base which will give us technological advantage, but we have to do it at a reduced cost and increased efficiency in procurement. William J. Perry, former Secretary of Defense1

The air combat and transport superiority the In 1 928, Boeing bought Pacific AirTransport United States enjoys today is derived in part and took over routes along the Pacific coast. A from efforts of pioneers such as the Wright year later, William Boeing and Frederick brothers and from continuing joint ventures Renschler, president of Pratt and Whitney between private industry and the military. engine manufacturers, set up a holding Private industry giants such as Boeing, company called the United Aircraft and McDonnell Douglas, Lockheed-Martin, Transport Corporation. The holding company Northrop, and many more worked hand in bought Chance Vought, manufacturer of a hand with the military to develop technology Navy fighter-observation aircraft; Hamilton respected throughout the world. Aero Manufacturing Company and Standard The government influences Boeing's Steel, propeller manufacturers; Sikorsky, growth by its contracts with and the laws Northrop, and Stearman, aircraft builders; regulating the company and the contracting Stout Airlines; and other businesses. It also process. Government influence on established Boeing Aircraft of Canada, Ltd., commercial companies is important because and opened the Boeing School of Aeronautics DOD has no other way to build aircraft or any in Oakland, California. In the 1930s, stringent other defense system. Its strength as a national antitrust laws caused Boeing to divest its defense agency is derived in part from the airline and engine manufacturing subsidiaries health of its relationships with the commercial and concentrate on building airplanes. sector. From. the 1920s, when Boeing began carrying U.S. mail, until the 1980s, Boeing corporate development was strongly tied to its The Boeing Company success in bidding for, winning, and History successfully executing U.S. Government Incorporated under the name of Pacific Aero contracts (80 percent plus). In the 1980s, Products in 1916, Boeing changed its name to contracts with the government became less Boeing Airplane Company in 191 7, when it lucrative, and Boeing began to look for ways built its first airplane--the B&W trainer, to increase the commercial side of its business; designed in 1914 by William Boeing and his the 777 was a big step in that direction. In friend, Conrad Westervelt, who was in the 1994, Boeing's commercial business U.S. Navy. Ten years later, Boeing won the represented 80 percent of its work; contract to carry the U.S. mail under its newly government business represented just 20 formed company, Boeing Air Transport, Inc. percent.

7 8 The DOD C-17 Versus the Boeing.. 777

The 777 apparent to many military leaders nor On April 9, 1994, Boeing rolled out its 22nd initially feasible, because of the technical commercial airplane--the Boeing 777; two limitations of early flying machines. As a months later, on June 12, the aircraft flew its result, the development of the U.S. maiden flight. On May 30, 1995, the Federal military airlift system followed an Aviation Administration (FAA) certified Pratt evolutionary course.4 and Whitney engines for extended twin- engine operations, and on June 7, 1995, Military Air Transport History United Airlines flew the first 777 commercial As early as World War I, the Army Signal transcontinental flight. 2 That was approxi- Corps used airplanes to transport cargo and mately 5 years after the Boeing board of personnel. However, the military did not have directors approved development of the 777, a dedicated cargo plane until the late 1920s, and almost 9 years after Boeing approved when Douglas Airplane Company produced initial research for its new plane (figure 2). the first C-1. Before this, the Army used The 777 was the first completely bombers and whatever else it had available for computer-designed aircraft, going from cargo. In 1995, the U.S. Transportation drawing board to production with no mockup. Command had 300 tactical and 552 strategic Even though Boeing used a fly-by-wire control airlift assets that included but were not limited system; advanced liquid-crystal flat panel to the C-141 (226), the C-5 (118), and the C-17 (13). s displays; a two-way digital data bus; an aerodynamically efficient airfoil wing; two During World War II, airlift proved powerful thrust engines; and new composite essential to deploy air, land, and sea forces. materials in the 777, Boeing President Philip Units cut off by combat were either resupplied Condit did not consider these improvements or withdrawn by air within hours. Vitally breakthroughs: needed spares were moved in real time to restore combat capabilities. In the Normandy Fly-by-wire is interesting.... But if you landings, air transports carried paratroopers step back, our autopilots are fly-by-wire over enemy defense lines to assault rear areas, r and always have been. We've given it a In the closing days of the war, over 10,000 little bit more authority [in the 777]. The transport aircraft were in service. ~ Speaking to 737 right from the start had what we the 1 947 National War College class, Major called a stick steering mode in which you General Robert M. Webster, Commander of moved the control wheel to make inputs to the Air Transport Command, stressed the the auto pilot. [These are] not an order of importance of the transport service: magnitude change. Designing the airplane with no mockup and doing it all on I feel that we have come out of that war computer was an order of magnitude change. 3 with an additional type, the transport plane, and that we should think in terms of bomber-fighter-transport--since they are The Department of Defense all equally important--and they must be properly balanced to each other if we are Aerial transportation has revolutionized to be prepared to conduct successful war modern warfare. Through airlift, it has operations. 7 become possible to move troops and supplies directly and rapidly into the battle On July 26, 1947, Congress passed legislation zone. Nevertheless, the potential creating an independent Air Force. Executive advantages of airlift were neither readily A. Lee Battershell 9

FIGURE 2. Timeline for the Boeing 777, from Concept to Initial Operating Capability

Approval to Develop I L

i

i 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 Year order 9877, signed the same day, spelled out expense for commercial airlines. The military four missions for the new military department: agreed to assume additional costs to strategic bombardment, air support of land commercial airlines and inaugurated the Civil retained forces, air defense, and air transport. 8 Reserve Air Fleet (CRAF) in 1952. Financial The new service proved its capabilities, from arrangements for CRAF evolved until, in the June 1948 to May 1949, when U.S. and allied 1990s, rather than require the government to military air carriers bypassed a Soviet blockade pay for added costs, carriers committed aircraft to transport over 2 million tons 9 of milk, flour, to CRAF in exchange for contracts to carry medicine, and other high-priority cargo to cargo during peacetime. Berlin. The Berlin airlift took its toll, however, Beginning in 1963, congressional and by pushing carriers beyond the miles military leaders began to debate whether to recommended for safe flight. In June 1950, combine tactical and strategic resources. when the United States responded to the Those who were against consolidation argued North Korean invasion of South Korea, the if tactical resources were combined with Military Air Transport Service (MATS) had to strategic resources, the Air Force would rely on commercial contractors to fly more neglect tactical resources. 11 Nevertheless, on than 40 percent of the missions on the United August 29, 1974, Air Force Chief of Staff States- Japan shuttle. 1° General David C. Jones announced Both World War II and the Korean War consolidation of tactical and strategic military confirmed the United States could not airlift under the Military Airlift Command maintain enough airlift capability in its (MAC), "to achieve better integration of overall military to respond to wartime requirements. airlift, strategic and tactical airlift assets."12 In 1950, the chairman of the National Security In 1986, the Packard Commission Resources Board requested a study of wartime recommended a single unified command for airlift requirements. James H. Douglas, who all forms of transportation. The chaired the study, recommended the recommendations of the commission were government bear costs for commercial airlines incorporated into the Goldwater-Nichols to maintain 587 aircraft modified for military Reorganization Act, passed during the Reagan use. The modifications made the aircraft administration. In 1987, President Reagan heavier, thereby increasing the operating established the U.S. Transportation Command lO The DOD C-17 Versus the Boein 777 ...... ~ ......

(USTRANSCOM) to integrate global air, land, Lockheed-Martin, believe the acquisition and sea transportation. Each of the service program is in need of radical reform. 16 secretaries, however, had a high degree of Augustine attributes problems in the process to control. During Desert Shield and Desert too many controls and regulations: Storm, this control led to a breakdown in the unified command structure. As a result, in The goal becomes one of complying with February 1992, Defense Secretary Richard the regulations, not solving the problem.. Cheney designated the commander in chief of • . It is ironic that when a truly important the Transportation Command as the single new system comes along, it is invariably manager for defense transportation, thereby pulled from the clutches of the acquisition assigning all service transportation process and afforded special treatment. components to that command in war and in Examples range from Vietnam-era peace. ]3 gunships to the Trident submarine, [and] from the military space program to SDI On June 1, 1992, the Air Force deactivated and Stealth. 17 MAC and created the Air Mobility Command (AMC). The AMC acquired tankers for How did the acquisition process become refueling strategic aircraft in flight and so cumbersome that a transport such as the relinquished control of tactical assets. AMC C-17 takes 24 years to build? A general dissolved the 834th and the 322d Airlift perception of corruption was certainly a divisions at Hickam Air Force Base in Hawaii factor. It created a wary Congress and public and units at Ramstein Air Force Base in that cried for accountability. For example, in Germany and transferred all tactical C-130 September 1995, the Justice Department took fleets to PACAF and USAFE. Strategic assets McDonnell Douglas to court for defrauding such as the C-5 and C-17 remained with the United States by routinely mischarging AMC. The new command's charter predicted labor costs on a number of DOD airplane "integration of airlift with tankers will better contracts, including the C-17.18 Other abuses enable the Air Force to provide global have proven more onerous. After each bout of mobility and reach while enhancing rapid corruption, regulations, procedures, and more response and the ability to operate with other oversight were initiated as protection against services and nations. "~4 The new further fraud. Additional regulations and reorganization effectively separated tactical procedures invariably extend acquisition and strategic assets once again. timelines. Many waste and fraud reports accompanied defense spending in the 1980s. DOD Acquisition Process The press reported overruns of $1.5 billion for the Sea Wolf and $200 million for each B-1 Respondents think almost 50 percent of airplane. There were stories of $400 hammers, the annual defense budget is lost to waste $7,000 coffee pots, and criminal conduct by and abuse . . . [and that] aerospace some defense contractors 19 With each contractors are suspected of a proclivity towards fraud. ~S scandal, Congress held widely publicized hearings and imposed more rigid controls and The defense acquisition program provides more oversight over the acquisition process. DOD with the tools and supplies it needs to President Reagan referred to his inspector conduct day-to-day business, protect generals as "junkyard dogs" and encouraged resources, and invest in infrastructure. Many, them to root out fraud and abuse• Deputy including Norman R. Augustine, president of Defense Secretary Frank Carlucci announced A. Lee Battershell I1

32 initiatives for improving the acquisition and to improve the ability of small businesses process. Reforms made in the 1 980s included to compete for contracts. 23 the 1982 Prompt Payment Act, which required After months of negotiations that melded the government to pay interest on late provisions from S-1 587, sponsored by Senator payments; the 1984 Competition in John Glenn (D-OH), and HR-2238, sponsored Contracting Act, which reduced the number of by Representative John Conyers, Jr. (D-MI), the exceptions for noncompetitive procurement; Federal Acquisition Streamlining Act became and the 1986 Goldwater-Nichols Reorgani- law (PL-103-355)in October 1 994. The act set zation Act, which consolidated parts of the the stage for rewriting the federal acquisition military and initiated other changes to the requirements. Senator William F. Cohen acquisition process} ° • (R-ME) called attention to the need for such During Desert Shield~Desert Storm, DOD reform in his assessment of the acquisition tried with little success to raise the system. In A History of Government small-purchase threshold for contingency Contracting, 24 James Nagle reported: operations. Especially troublesome was DOD inability to purchase commercial items. 21 For If someone were asked to devise a example, Rear Admiral W. L. Vincent, in his contracting system for the federal government, it is inconceivable that one Report of the DOD Acquisition Law Advisory reasonable person or a committee of Panel, reported a company could not sell an reasonable people would come up with encryption radio to the government because it the current system. That system is the did not sell enough of the radios to the public result of thousands of decisions made by and could not afford to provide the cost data thousands of individuals, both in and out DOD required. The Army required of government. It reflects the collision and certification that the company was selling to collaboration of special interests, the the government at the lowest possible price. impact of innumerable scandals and The company could not make such a successes, and the tensions imposed by guarantee because its products were priced on conflicting ideologies and personalities.2s the open market. Because of the Army's inability to waive certification requirements, How did the complexities of the DOD Japan bought the radios for Americans to use acquisition system affect the procurement in Desert Storm. 22 Such absurdities helped problems of the C-1 7? convince an already wary public that the procurement system was ineffective, in the The C-17 words of Senator Carl M. Levin (D-MI), the On May 18, 1992, the C-17 made its first acquisition system is "an almost impossibly flight. On June 14, 1993, Charleston Air Force complex and unwieldy system for people who Base, South Carolina, received its first C-1 7. 26 want to do business with the Federal Eighteen months later, on January 1995, Govern ment." General Robert Rutherford, USAF, commander Levin introduced S-1587, a 300-page bill of the Air Mobility Command (AMC), to amend 200 separate procurement-related announced that the C-1 7 had achieved initial provisions of the U.S. Code for Acquisitions. operating capability. 27 That was more than 1 4 The bill's stated objective was to streamline years after Congress approved the C-X (1 980) the acquisition process by eliminating or project, which developed the Cq 7, and more revising 300 of 600 laws, to facilitate than 24 years after DOD began developing the government purchase of commercial products, AMST, the precursor of the C-1 7 (figure 3). 12 The DOD C-17 Versus the Boein 777

FIGURE 3. Timeline for the DOD C-17, from Concept to Initial Operating Capability

Approval to Develop

1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 Year

The C-1 7 was the first Air Force transport Notes to introduce a complete fly-by-wire system, an 1. Joseph G. Mercer and Richard O. Roop on-board inert gas generating system Models and Simulations (Fort Belvoir, VA: Defense (OBIGGS), and head-up displays. It is the Systems Management College Press, 1994), v. only DOD plane that combines into one plane 2. PollyLane, "777 Wins Approval for Ocean the ability to carry outsize cargo, to airdrop Flights," The Seattle Times, May 30, 1995, and cargo and personnel, to operate into and out "777 Goes to Work," The Seattle Times, June 7, of small austere airfields, and to provide 1995. significant maneuverability on the ground. 28 3. Philip M. Condit, President, The Boeing Company, interview by author, November 1994, The C-17 has: Seattle, WA. 4. BettyKennedy et al., An Illustrated History • The ability to back up on inclined of the Military Airlift Command (1941-199 I) (Scott surfaces, maneuver in close quarters, and Air Force Base, IL: Military Airlift Command, park in small areas undated), 1. • Built-in ramps for delivering cargo to 5. James Kitfield, "The Long Haul," airfields with no additional material- Government Executive, March 1995, 33. handling equipment 6. Airlift and U.S. National Security: The Case • Capability for extensive low-level for the 017, White Paper on the Air Force Perspective (Washington: U.S. Air Force Public operations to evade threats, and rapid- Affairs Office, Pentagon, 1991 ), 2. cargo offload capability for runways under 7. Kennedy,53. combat conditions 8. Joseph L. Morse, The Universal Standard • Operational flexibility to carry more Encyclopedia (New York: Unicorn Publishers, types of cargo to more places under more 1955), 102-103. threatening conditions than any other 9. The World Book Encyclopedia (Kansas City, cargo plane the Air Force has in its mili- MO: Field Enterprises Educational Corporation, tary or Civil Reserve Air Fleet (CRAF) 1964), 207. inventory. 29 10. Kennedy, 75. 11. Richard T. Devereaux, Theater Airlift Management and Control (Maxwell Air Force Base, AL: Air University Press, September 1994). A. Lee BattersheIl 13

12. Kennedy, 164. 13. Ronald R. Fogleman, Defense Transportation System 2010 Action Plan (Washington: Department of Defense, undated), 1-1. 14. Devereaux,37. 15. Donald E. Fink, "The Spares Morass," Aviation Week & Space Technology, July 7, 1986, 11. 16. Kenneth L. Adelman and Norman R. Augustine, The Defense Revolution (San Francisco, CA: Institute for Contemporary Studies, 1990), 176. 17. Ibid. 18. "Fighter Facing Huge Cost Overruns," Auburn Journal, September, 1995, A12. 19. Adelman and Augustine, 124. 20. C. M. Culver, Federal Government Procurement--An Uncharted Course Through Turbulent Waters (McLean, VA: National Contract Management Association, 1984), 34, 35. 21. Rita Wells, "Contracting Readiness: Timely Support for Military Operations," Acquisition Review Quarterly (Winter 1995): 47-48. 22. W.L. Vincent, Defense Acquisition Laws, Executive Summary: Report of the DOD Acquisition Law Advisory Panel (Fort Belvoir, VA: Defense Systems Management College Press, March 1993), 4. 23. Congress, Senate, Debate on Senate bill to reform the DOD acquisition process, 103 rd Cong., 1st sess., $6489. 24. Lisa Corbin, "Procurement Reform Overview," Government Executive, January 1995, A-3, 12A. 25. JamesF. Nagle, A History of Government Contracting (Washington: The George Washington University Press, 1992), 519. 26. 017 Globemaster III, Technical Description and Planning Guide (Long Beach, CA: McDonnell Douglas, 1993), iii. 27. "C-17 Update," Aerospace Newsletter, January/February, 1995. 2 8. FinalOperational Requirements Document (ORD), AMC 002-91, C-17, ACAT Level I, Report issued by the Air Mobility Command (Scott Air Force Base, IL: September 1993), 8. 29. Ibid., 5, 8. 3. Organization and Management

We trained hard . . . but every time we were beginning to form up into teams, we would be reorganized. I was to learn later in life that we tend to meet new situations by reorganizing.., and a wonderful method it can be for creating the illusion of progress while producing confusion, inefficiency, and demoralization. Attributed to Petronius Arbiter, A.D. 65

Although scholars have questioned whether pioneer in defining and establishing parame- Petronius, a first-century Roman satirist, is the ters for organizations at the beginning of the source of this description of organization, it is industrial revolution. For example, Smith often cited as a classic statement of the draw- advocated labor specialization (production backs of change for the sake of change. These lines) and competition--specialization to words could easily be applied to the DOD speed production and competition to achieve C-1 7 program. However, if change or reorga- balance and lower costs. From 1890 to 1930, nization is initiated to accommodate dynamic the classical school--described by writer forces in the environment or to achieve clearly Frederick Taylor--added structure and span of defined objectives--as it was at Boe- control as essential elements to organization. ing-positive growth occurs. In 1930, the behavioral school looked at Growth, as defined by B. J. Hodge and motivation, communications, leadership, William P. Anthony, is part of the organiza- group dynamics, and human relations. In the tional cycle that includes birth, growth, matu- 1960s, the systems and contingency schools, rity, deterioration, and death. Organizations respectively, added environment and techno- can avoid deterioration and death by aptly logical change (table 1).] Contingency theo- managing change--deflecting threatening rist Joan Woodward writes: environmental changes and seizing opportuni- ties that enhance objectives. 1 One of the keys Different technologies imposed different to successful management is in identifying and kinds of demands on individuals and orga- defining what to change: nizations, and these demands had to be met through an appropriate structure. Commercially successful firms seemed to Every company has two organizational be those in which function and form were structures: the formal one is written on the complementary. 4 charts; the other is the living relationship of the men and women in the organization. 2 Today, many organizations--including Boeing and DOD--are reorganizing under the W. Edwards Deming model, the so-called Organization Theory "Japanese style of management and organiza- Throughout time, historians or analysts at- tion." Because Deming is a statistical mathe- tempted to identify and define factors leading matician, one might suppose that science and to organizational success. Adam Smith was a math would form the theoretical foundations

15 16 The DOD C-17 Versus the Boein 777 ...... ~ ......

TABLE 1. Evolutionof Organization Theory School Major Concepts Theoretical Foundations Primary Theorists Classical Division of labor, span Engineering economics Taylor, Mooney, (1890-1930) of control Weber, Gantt, Gilbreth Behavioral (1930-1960) Motivation, Psychology, sociology, Fol lett, Maslow, communication, social psychology Herzberg leadership, group dynamic, human relationships Systems (1960-1990) Quantitative Mathematics, Boulding, Kast, techniques, macro engineering, computer Forrester perspective, science functionalism Contingency (1965- Open systems, Sociology, industrial Woodward, Galbraith, 1990) prescriptive approach, engineering, Lorsch dynamic relationships benchmarking Quality (1990-present) Quantitative Statistics, industrial Deming techniques, motivation, engineering, sociology communication, group dynamics, customer/quality orientation Source: B. J. Hodge and William P. Anthony, Organization Theory: A StrategicApproach (Boston, MA: Allyn and Bacon~ 1991 ), with additions.

of his theory. However, Hodge and Anthony transforming western management (table 2). classify Deming as a behaviorist because "the He also outlines seven deadly diseases and ten essence of this approach is that people will obstacles (tables 3 and 4) that deter the trans- work harder and with more of a sense of formation process. 6 Several of these impacted commitment if they have job security.., and the C-17 and the 777 especially lack of feel they have a significant part to play in constancy of purpose, mobility of manage- decision making and group activity. "s ment, and insufficient or improper communi- Deming believes in replacing middle cation. management with team leaders. Deming's teams are intended to encompass diverse skil Is Constancy of Purpose to accomplish complex objectives. A Constancy of purpose places the product and plane-building team might include designers, service of a company in a long-term perspec- manufacturers, analysts, marketers, and ac- tive. 7 Because DOD objectives change to countants. Under the Deming model, top meet world circumstances faster than DOD management must communicate effectively can develop a system, it is difficult for DOD to with workers, and the entire team must focus consider its product and service in a long-term on the customer. Deming lists 14 points for perspective. Boeing, on the other hand, is able A. Lee Battershell 17

TABLE 2. Fourteen Points for Transformation of American Industry

1. Create constancy of purpose. 2. Adopt the new philosophy. 3. End dependence on inspection to achieve quality. 4. Stop awarding business on the basis of price tag. 5. Improve constancy. 6. Institute training on the job. 7. Institute leadership. 8. Drive out fear. 9. Break down barriers between departments. 10. Eliminate slogans, exhortations, and targets. 11. Eliminate quotas, management by objective, management by numbers, numerical goals; substitute leadership. 12. Remove barriers that rob management engineers and workers of pride of workmanship. 13. Institute a vigorous education and self-improvement. 14. Involve everyone in the transformation.

Source: W. Edwards Deming, Out of Crisis (Cambridge, MA: MI]- Press, 1986). to develop a corporate policy to support opinions on the worth of the program. long-term objectives. The C-1 7 suffered many Although corporate officers changed at Boeing setbacks because of inconsistent, short-term during development of the 777, commitment perspectives. A good example is the tactical to the program remained solid. AMST that became a tactical plane with some strategic capabilities, then became a strategic Communication plane, then later became the C-17 strategic Bob Dryden, who ran the Wichita division of cargo airlifter with some tactical capabili- Boeing, said, "One of the things engineers ties-all because changing leaders had chang- don't learn in college is how to communicate. ing ideas. Conversely, the 777 benefitted from They know how to use slide rules and play a corporate commitment based on long-term with computers, but they don't talk to goals. anybody. "9 Frank Shrontz, chief executive officer (CEO) of Boeing, recognized the value Mobility of Management of improving management's ability to Typically, under a 4-year presidential system, communicate with the work force and the top-level government managers are not in value of communication among workers. His office long enough to embrace long-term program manager, Philip Condit, made goals. Noting that the average tenure of the communications a top priority when he secretary and the deputy secretary of the invited eight customer airlines to help set treasury is only 18 months, Deming asks, standards for the 777. To design and build the "How can anyone be committed to any policy plane, Condit used teams that included when his tenure is only a few years?"8 mechanics and pilots as well as other relevant Changes in leadership at the presidential level representatives. Each team member had to impacted support for the C-17 as different communicate frequently with other team defense secretaries expressed conflicting 18 The DOD C-17 Versusthe Boein 777

TABLE 3. Seven Deadly Diseases Western Culture Must Overcome to Achieve a Total Quality Organization

1. Lack of constancy of purpose 2. Emphasis on short-term profits 3. Evaluation of individual performance (merit rating or annual review) 4. Mobility of management; job hopping 5. Management by use of only visible figures 6. Excessive medical costs 7. Excessivecosts of liability

Source: W. Edwards Deming, Out of Crisis (Cambridge, MA: MIT Press, 1986).

TABLE 4. Ten Obstacles Western Civilization Must Overcome to Achieve a Total Quality Organization

1. Hope for instant pudding (take a long-term perspective) 2. The supposition that solving problems, automation, gadgets, and new machinery will transform industry 3. Search for examples (instead of looking for a recipe for success, ask why the company was successful or not more successful) 4. "Our problems are different" (principles of quality are universal) 5. Obsolescence in schools (best way for a student to learn a skill is to go to work in a good company under masters--interns) 6. Poorteaching of statistical methods in industry 7. The unmanned computer 8. The supposition that it is only necessary to meet specifications 9. Inadequate testing of prototypes 0. "Anyone who comes to try to help us must understand all about our business"

Source: w. Edwards Deming, Out of Crisis (Cambridge, MA: MIT Press, 1986).

players and to keep lines open with Once the Boeing board of directors agrees management. there is need for a product and approves program development, the CEO, the president, Management Focus top executives, and the program manager There are some fundamental differences in the remain sharply focused on developing and way Boeing and DOD approach a program. producing that product. If officers change, Boeing emphasizes customer, schedule, and even at top levels, the program still follows the cost; DOD stresses technology. Boeing focuses 3- to 5-year approved course. Within DOD, on developing and manufacturing planes. changing leadership, strategies, and policies DOD focuses on acquiring the tools it needs contribute to lack of focus and inconsistent to uphold the national security strategy--the management practices. Each new U.S. C-1 7 is one of many tools. president and DOD secretary bring a different A. Lee Battershell 19 view. In the years it takes to build a riveted the attention of managers and workers government plane, DOD may have several at the Boeing Company for the better part of 9 different security strategies combined with years while the plane was in concept, devel- differing views from the top on how to opment, and production. No such focus com- implement those strategies. Few managers at manded the attention of DOD officers and the program level last the full length of a DOD personnel during the more than 20 years the development project. C-17 was in concept and development. Boeing and DOD each utilize a standard set of procedures for major development The Boeing Company programs: If you look back on Boeing's history and • The Boeing program takes 3 to 9 years the six chief executives it has had, you'll and has three phases: find that in each case the right man was --Program definition chosen at the right time .... Frank Shrontz --Cost definition [was] inheritor of his predecessors' legends --Production. and legacies. Just at a time when both • The government program takes 11 to legend and legacy seem frayed, he recognized that improving the ways man- 21 years and, as of 1994, had five phases: agement motivates and communicates --Mission need with the work force, to achieve superior --Concept exploration and definition productivity, had become Boeing's top --Concept demonstration and priority. 11 validation --Engineering and manufacturing After becoming CEO in 1987, Frank development Shrontz realized management improvements --Production. were necessary if Boeing wanted to remain competitive in the market. Two improvements It is not unusual for Boeing to deviate from included better communications and eliminat- its standard practices when developing a ing nonvalue-added costs. Although Boeing plane. As Boeing President Philip Condit offered long:term employment, stability, and explained, "We can and do shortcut any of the numerous employee benefits, a 1989 strike phases when it is to our customers' advantage. proved the Boeing worker was looking for No two projects are exactly alike. "1° The other incentives. Boeing had grown so fast in military, likewise, will deviate from the norm the 1980s that management lost touch with its when engaging in a long-term project. In the workers. Employees sought respect and assur- case of the C-17, DOD made incorrect ance that good performance would lead to assumptions regarding the maturity of its career opportunity--for example, they asked technology and eliminated two stages for better training. Corporate officers saw in completely. Departures from standard these demands a way to improve manage- development practices do not, however, ment. Management consultant Gary Jusela always adversely affect development. In the observed, case of the 777, deviations enhanced the process. I found Boeing to be a company of para- A factor present in the Boeing manage- doxes. In some ways, it was the most ment process--and notably absent in loosely structured and informal system DOD--is a high degree of focus coupled with you'd ever want to see. But in other ways, constancy of purpose. Focus on the 777 it was very rigid, formalized and bureau- 20 The DOD C17 Versus the Boein 777

cratic .... One of the things that surprised but also throughout management. As Boeing me was that despite the senior officers prepared for these changes, Assistant General having been here a long time, they Manager Neil W. Standal explained, "Boeing showed an openness to looking for new ways .... They weren't blaming any of is concurrently designing the system by which Boeing's shortcomings on the work force, we are designing the aircraft. "is the union, or anyone else. They were Boeing chose the computer-aided asking what management processes . . . three-dimensional interactive application weren't useful anymore. 12 (CATIA) to design the 777 and implemented its version of total quality management-- In 1988, Bert Welliver, Senior Vice Presi- calling it Continuous Quality Improvement dent of Engineering and Technology, revealed (CQI).16 A French company, Dassault Aviation, during the previous year the company spent developed and used CATIA to design fighter $2.5 billion on nonvalue-added costs. Most planes. CATIA described the geometry of were design changes leading to costly produc- every part, tube, and component in electronic tion changes. If the company had not in- terms and projected parts in a three- curred the nonvalue-added costs, it could dimensional display. IBM and Boeing have claimed about $3 billion instead of $480 enhanced CATIA further, to detect parts that million profits for 1987.13 Officers at Boeing would not fit or function correctly, and recognized the company could not afford to created "CATIA man" to see how a person operate the same way on the 777. The goal would fit into different areas of the plane. As was simple: change organization practices to part of an initiation exercise, nearly 100 top send a flawless design to the manufacturing Boeing executives went to Japan to learn plant. Along with personnel changes sug- techniques in production and work-force gested by Jusela, Boeing would have to re- motivation. Boeing extended its traditional vamp its design and production processes. 48-month development timetable almost a The importance of a good production for year to accommodate the new design and world markets is becoming increasingly impor- multifunctional team processes. According to tant not only for Boeing but for America. As Philip Condit, directing the 777 program Peter Dressier of the Paradigm Design Studio turned into a people managing exercise: in Philadelphia said, You know, I've got an undergraduate We're busy developing new stuff that [the degree in mechanical engineering, a grad- Germans and the Japanese]... know how uate degree in aeronautical engineering, a to put into production .... If we had more graduate degree in business administra- good, solid manufacturing and production tion, and now I find myself being a prac- engineers who were happy to make an ticing psychologist because what I do elegant product that was serviceable, ninety percent of the time is deal with usable, manufacturable, and recyclable, people. we could knock everyone else's socks off. 14 CATIA enabled Boeing to use the teams that Deming recommended and to interact Boeing officers believed they could im- with its customers. The customers Boeing prove production by designing an airplane chose to contribute were: United Airlines, entirely on computer using a team approach, American Airlines, Delta Air Lines, British something no company had yet done. To do Airways, Japan Air Lines, All-Nippon Airways, so, Boeing had to undergo massive Qantas, and Cathay Pacific. It also allowed changes--not only in the engineering process, A Lee Battershell 21 ...... L ...... better communication among designers and lightweight plane of composites (already manufacturers. researched by Boeing) that would only carry Even though Boeing was undergoing the 150 passengers. The plane they wanted-- first real change since World War II in the way designed to carry 305 to 440 it built aircraft, in some ways it was returning passengers--would replace aging McDonnell to principles of earlier days. When the B-17 Douglas DC-10 and Lockheed L1011 was designed, for example, engineers sat airplanes. For reasons of economy and simple around a table and talked to each other. And maintenance, the airlines expressed a need for because the manufacturing plant was directly a "family" of planes built around one basic below the design area, they were able to talk model. 2° Boeing's innovative plan to to workers when they felt the need. As the produce the new aircraft included using the company grew, this high degree of integration computer design program, CATIA, combined and communication was lost. Yet, with with intensive customer, manufacturing, and CATIA, designers sat at computers-- production input. According to Boeing's plan, sometimes miles apart--and were able to view customers would help define the plane and each other's work in 3-D and talk to each work with design-build teams--which other. Parts labeled with the name and phone included manufacturing specialists--to number of the responsible engineer made identify and solve problems before aircraft tracing problems through the computer components reached the assembly line. network effortless. 18 There were only two levels between the Cost Definition Boeing president and the 777 program Building an entirely new airplane was costly manager (figure 4). Top ranking officers met and constituted a bold step for Boeing when daily to review status reports on every facet of most airlines were choosing to buy derivatives. the 777. When Boeing changed program For example, the popular new Airbus managers on the 777, focus remained steady A330/A340 was a derivative that combined a because there was continuous communication new wing with the A320 flight-control system and constancy of purpose. In Condit's words, and cockpit and the A300/A310 fuselage. 21 Nevertheless, Boeing was willing to face the We all knew what we wanted in the 777. costs of building a new plane to satisfy When I moved on from program manager potential customers and to ensure long-term to president [1992], Alan Mulally was the benefits for the company. Although Boeing next program manager for the 777. He was considered building a 767 derivative--the there with me when we conceived the 767X--the design-build teams initiated so 777--so was Dale Hougardy who many features that the idea of a derivative succeeded Alan [1994]. If, after I left, Alan decided to change the whole concept and became highly impractical. design of the 777, we would have had In order to assess costs of the program, problems. He didn't. 19 Boeing first had to determine what it would include on the new plane. Outside Program Definition representatives participated in the design Boeing's early research revealed the company process, adding features as they worked. needed a plane to fill a gap in the market Gordon McKenzie, from United Airlines, between the 767-200, which carried 218 emphasized mission capability--range and passengers, and the 747-400, which carried payload--and insisted on cabin features with 419 passengers. During early research, enough difference for passengers to notice. In customers told Condit they did not want a 22 The DOD C-17 Versus the Boeing.. 777 ......

FIGURE 4. The Management Hierarchy of the could change the bulb from inside the Boeing Company, 1995 aircraft. 24 Engine manufacturers designed powerful by-pass engines, allowing the plane to function with only two engines and thereby Chief ExecutiveOfficer The BoeingCompany cutting operating costs.2S In order to forestall F.A. Shrontz anticipated problems with 777 avionics, the Boeing board approved funding early in 1 990 A for an Integrated Aircraft System Lab (IASL) to test the new system.26 Boeing also built a new facility to produce composite materials at a President lower cost for use in the tail sections and The BoeingCompany P.M. Condit enlarged its manufacturing plant at Everett, Washington, to accommodate assembly of the new plane. As Boeing moved into the testing A phase and began to incur problems with ~r avionics technology, the board supported additional resources to solve problems threatening the delivery schedule.

Production The final configuration of the 777 reflected A input from four onsite customers and suggestions from 12 other customers that Y yielded more than 1,000 design innovations} 7 To make full use of CATIA, Condit organized the 777 teams in pyramids, with individual component designs at the bottom, subsystems in the middle, and the complete integrated 777 at the top. 28 Teams at the top incorporated all subteam efforts. There were addition, McKenzie "stressed . . . reliability approximately 238 design-build teams29 in the and maintainability of the airplane's design. "22 pyramid--more than twice the number first The teams chose flat panels for the main envisioned for the process.3° digital displays instead of cathode ray tubes Of course, there were initial growing because the panels were half as thick, did not pains. CATIA was not as user friendly as get hot, weighed less, and required fewer expected and required modifications before parts. 23 The fly-by-wire (FBW) technology becoming fully operative. And because all the performed stabilizing functions that permitted airplane parts were designed simultaneously, lighter wings and tail and called for fewer the parallel-processing system sometimes cables, pulleys, and brackets, making bogged down. 31 The complexity of construction easier. The empennage (tail communications among the many new sections), made with carbon-fiber reinforced design-build teams prompted Dale Hougardy, plastic weighed less than standard materials then vice president for operations, to remark: and cost less. Teams modified the electronics rack for better access and cooling and It requires an enormous commitment in relocated the rotating beacon so mechanics terms of orientation to change a business A. Lee Battershell 23

practice as substantial as this .... We had Administration (FAA) that it would use to renovate procedures and practices. We "red-label" (software and hardware considered spend lots of time communicating on a still in development) computers during its test regular basis, because . . . [the process] flights. There were recurring problems in the needs constant nourishment.32 Aeronautical Radio Inc. (ARINC) 629 database developed by Boeing engineer John Shaw, in Although program managers changed the primary flight computer (PFC) developed several times during development of the 777, by Avionics of London, and in the Aircraft changes did not affect overall procedures and Information Management System (AIMS). goals. In August 1 992, Alan Mulally replaced When Hougardy took over as program Philip Condit as the 777 program manager manager in 1994, the 777 was still and Condit went on to become president of experiencing software problems. However, in Boeing. At this point, drawings were 25 April 1995, the FAA certified the 777 for percent complete and major assembly was to extended twin-engine operations (ETOPS); on start in 5 months. Nevertheless, despite the June 7, United Airlines flew the first leadership shift at a critical Point, assembly commercial 777 from London to Washington. began as scheduled. Bill Savery, former Chief of Engineering The assembly process proved CATIA's Operations, praised Boeing's tenacity in worth almost immediately. Program Manager dealing with its avionics problems: Alan Mulally described the surprise and excitement at Boeing: It shows well the complexity and the problems we typically encounter in We knew the parts would be more development programs. But it also shows accurate, and fit together better. What has Boeing['s] determination and initiative in surprised us all is that design-build teams, developing work-arounds and recovery combined with digital design and plans.., to stick with the overall program customer airline knowledge, made the goals--particularly completion of certifi- aircraft so much easier to assemble. We cation and delivery. Tremendous things have learned much, and we're capable of can happen when you have dedicated, doing things that were only visions a few committed people who really want to years ago. Most importantly, we're make things happen.34 building on this success, keeping it going, and learning how to do it more efficiently Summary and faster.33 Although revitalization efforts were already underway at Boeing, a 1989 strike and Later, on June 12, 1994, tears filled extensive nonvalue-added costs presented a Mulally's eyes and cheers went up from the crisis at the company. Boeing committed to a crowd as the first 777 lifted off Everett's Paine new way of doing business, including a new Field. Shortly afterwards, Dale Hougardy, vice structure and greater emphasis on president of Operations, became the new 777 communication. program manager. Mulally was promoted to Boeing officials followed the overall senior vice president of Airplane format of the program management plan but Development. departed from previous development practices Even though Boeing's management in several ways. The company involved more transitions were smooth, the company customers, suppliers, and maintenance experienced serious problems with avionics personnel in concept and design; used integration. Technology problems caused computers for total design; and initiated Boeing to inform the Federal Aviation 24 The DOD C-17 Versu~ the Boein 777

integrated design-build teams. All three Right now we have a process where changes revolved around the use of CATIA. parochial interests of the services rather Recognizing all this would take time, Boeing than the joint mission are paramount. We purposely extended the period to build the need to shorten the distance between 777. Figure 5 compares time required to people at the top and bottom, we need to produce and test the 777 to time required for have a system that considers the joint other Boeing aircraft. mission, and we need to have program When Mulally and Hougardy became managers we know and trust. Right now we have all kinds of controls in place to program managers, they continued the process make sure the program manager doesn't Condit outlined at the beginning of the 777 get us in trouble. Usually a [program program. Cross-functional design-build teams manager] is selected for us. We don't allowed engineers to use their talents more know where he came from or how fully and reduced problems in production. capable he is. 38 Airline executives, mechanics, and pilots were made part of the design-build team early on Numerous studies show that DOD and continued to make valuable suggestions structure and rapidly changing top throughout the process. All worked toward a management contributed toward weapons that common goal. were over cost, behind schedule, and unable As Jeremy Main points out in Betting on to meet mission requirements. These studies the 21st Century Jet, changes at Boeing not sometimes led to change at DOD, but too only brought about a new commercial venture often changes were based on political but also symbolized the company's elements and not on factors that would willingness to adapt to change for the future. 3s improve the acquisition system. The Carnegie Shrontz commented on the changes he helped Commission on Science, Technology, and introduce: Government calculated that overhead alone constitutes 40 percent of the DOD acquisition I'm trying to change the culture, but not budget, compared to 5 to 15 percent in because I think this hasn't been a commercial enterprises. 39 people-oriented company. Past In the 1940s, each military department management was dealing with different was responsible for its own program research, eras and change is a slow process--you development, and acquisition. This just don't go from one approach to another overnight. 3° independence resulted in duplication and inter- and intraservice competition for labor, plants, and material. 4° Efforts to combine the The Department ofDefense three separate services for a more unified acquisition met with varying degrees of The current system is the result of a long accumulation of political weight on the success, and most merely added bureaucratic layers: side of complexity, redundancy, and oversight layers. It has become the vehicle for pursuing multiple political goals, often • In 1947, DOD created the Armed unrelated to those of procuring a weapon Services Procurement Act to standardize system, and these goals enjoy powerful purchasing methods constituencies. To rectify that bala nce will • In 1 958, President Eisenhower require the mobilization of an equal or attempted to develop a more unified greater weight on the side of change and military structure through the joint chiefs reform. 37 of staff. 41 A. Lee Bat~ershell 25

FIGURE 5. Development Time for Boeing Commercial Models

Years 0 1 2 3 4 5 6 7 8 9

'777 101 months

747-300 53 months

767-300 39 months

767 68 months r'lStart to Go Ahead 757 iGo Ahead to Finish 52 months

747 50 months

737 43 m onths

727 53 months

707

Source: William Savery, former chief, Engineering Operations, The Boeing Company.

• In the 1960s, Defense Secretary Robert Jacques Gansler noted, "The institutional McNamara introduced the planning, resistance of the various services prevented programming, and budgeting system to many of the proposed changes from taking control allocation of resources.42 place. "46 For example, Defense Secretary • In 1976, the Office of Management Caspar Weinberger's resistance to the Packard and Budget established acquisition Commission lessened the impact of the guidelines for all government agencies. 43 commission's recommendations. In 1989, • In 1986, the Packard Commission Defense Secretary Richard Cheney authorized made recommendations based on six the study, Defense Management: Report to the underlying features that typified the most President, which described how best to successful commercial programs: clear implement the commission's command channels; stability; limited recommendations. Thomas McNaugher reporting requirements; small, high-quality described the recommendations in Defense staffs; communications with users; and Management Reform: For Better or for Worse? prototyping and testing. 44 as falling under the rubric "centralize, • In 1986, the Goldwater-Nichols Act simplify, and stabilize. "47 codified most of the Packard Commission DOD fashioned its current organization report and established the position of and acquisition system after recommendations Under Secretary of Defense (Acquisition & contained in the Packard Commission, the Technology) under the Office of the Goldwater-Nichols Act, and the Defense Secretary of Defense. 4S Management Review--all of which attempted to eliminate several layers of authority. That Almost all studies on military procurement objective is exemplified in DOD Directive recommend greater centralization, but, as 5000.1 : 26 The DOD C17 Versus the Boein 777

Each DOD component with acquisition acquisition. In addition, reforms added the management responsibilities shall positions of the Under Secretary of Defense maintain a streamlined chain of authority and accountability for managing major (Acquisition & Technology), the service defense acquisition programs.... This acquisition executives, and the Program chain of authority and accountability shall Executive Officer. Reforms also included as extend from a DOD Component players within the acquisition hierarchy the Acquisition Executive through Program Joint Chiefs o f Staff (JCS) and, through them, Executive Officers to individual Program the unified and specified commands. Managers.48 A comparison of the DOD organization chart with Boeing (table 5) reveals that DOD DOD organization charts reveal that has many more layers of management: reform eliminated two layers of authority between the Secretary of Defense and the [For the C-1 7] every major decision was program manger for the C-1 7. However, five viewed and reviewed by several levels. layers remained and the chain of command This contributed to the perceived lack of was not always straightforward (figures 6 and constancy and sense of confusion 7). Lieutenant Colonel Robert Saxer, USAF, throughout. Decisions were probably pointed out serious problems in the DOD much quicker at Boeing and very seldom reversed by the next layer.... [You] can't organizational structure in Buying the C-17: A say that about DOD. s° Case Study: Vacillation in leadership and direction [although the program manager had a new marred C-17 program progress. Numerous boss] he was still dependent upon both ASC [Aeronautical Systems Center] and managers headed the effort, many with AFSC [Air Force Systems Command] for differing views and some who openly manning, administration, and functional disagreed on program principles and goals. staff support.... By eliminating the Air Also, DOD eliminated two phases of its Force's senior acquisition general officer standard development program, combined from the normal program reporting chain, two other phases, and invented one phase to a huge leadership void and a great deal of cover the indecisive beginnings of the C-1 7. uncertainty were created. With a new President Jimmy Carter and Defense organizational structure now in place, the Secretary Harold Brown were convinced that issue of who would ultimately be held DOD needed a strategic airlifter capable of responsible and accountable for all AFAE [Air Force Acquisition Executive] and DAE carrying outsize equipment with short-take-off- [Defense Acquisition Executive] and-landing (STOL) capability. They ignored programmatic and policy decisions made congressional directives to build a tactical throughout the life of a development STOL aircraft and instead concentrated on program was now in question.49 promoting a strategic STOL aircraft. In 1979, Major General Emil Block, Jr., Under the new system, service secretaries USAF, Chief of Staff, HQ MAC, formed a team were excluded from the program chain of to define a strategic mission need statement, command. However, each secretary reported develop a preliminary operational concept, to Congress when a system was in jeopardy. and establish program management direction. Even though the services were restricted to Block completed the documents within 2 supporting and advising, they were de facto months and issued a statement of operational responsible for program implementation. requirements January 23, 1980. Normally it Thus, they retained a vested interest in takes DOD up to 2 years in the concept and A. Lee Bartershell 27

FIGURE 6. The Management Hierarchy of DOD, Before Reorganization, 1990

Secretary Department of Defense Richard Cheney

,A, Y

Under Secretary of Defense Department of Defense John Betti

Y

A Y

~k Y

Y

Source: Lieutenant Colonel Joseph D. Rouge, USAF, C-17 Case Study: Major Players in Defense Acquisition (Washington: Industrial College of the Armed Forces, National Defense University, December 30, 1995), 4. 28 The DOD C-17 Versus the Boein 777 ...... ~ ...... FIGURE 7. Management Hierarchy of DOD After Reorganization, 1990

Secretary Department of Defense Richard Cheney

Y 7_ Under Secretary of Defense | (Acquisitions and Technology) Department of Defense John Betti I A

A Y

Y

Source: Lieutenant Colonel Joseph D. Rouge, USAF, C-17 Case Study: Major Players in Defense Acquisition (Washington: Industrial College of the Armed Forces, National Defense University, December 30, 1995), 4. A. Lee Batl;ershell 29

TABLE 5. Organization Hierarchy for Boeing and DOD from Concept Through Development

CHAIRMAN, BOARD OF DIRECTORS/CEO Years U.S. PRESIDENT Years THORNTON Y. WILSON (72-87) RICHARD NIXON (69-74 FRANK A. SHRONTZ (87-97) GERALD FORD (74-77) PHILIP M. CONDIT (97-present) JIMMY CARTER (77-81) RONALD REAGAN (81-89) GEORGE BUSH (89-93) BILL CLINTON (93-present) PRESIDENT, BOEING SECRETARY OF DEFENSE FRANK A. SHRONTZ (87-92) MELVIN R. LAIRD (69-73) PHILIP M. CONDIT (92-97) ELIOT L. RICHARDSON (73-73) HARRY C. STONECIPHER (97-present) JAMES R. SCHLESINGER (73-75) DONALD H. RUMSFELD (75-77) HAROLD BROWN (77-81) CASPAR W. WEINBERGER (81-87) FRANK C. CARLUCCI (87-89) RICHARD CHENEY (89-93) LES ASPIN (93-94) WILLIAM J. PERRY (94-97) WILLIAM S. COHEN (97-present) PRESIDENT, COMMERCIAL AIRLINES UNDER SECRETARY OF DEF (ACQ) DEAN THORNTON (85-93) DONALD A. HICKS (86-86) B. WOODARD (93-98) RICHARD P. GODWIN (86-87) ALAN MULALLY (98-present) ROBERT B. COSTELLO (87-89) JOHN A. BETTI (89-90) DONALD J. YOCKEY (91-93) JOHN DEUTCH (93-94) PAUL KAMINSKI (94-97) NOEL LONGUEMARE (Acting) (97-97) JACQUES S. GANSLER (97-present) ASST SECRETARY OF AIR FORCE (ACQ)* (SERVICE ACQ EXEC (SAE) DANIEL S. RAK (Acting) (1986) JOHN J. WELCH, JR (87-90) G. KIM WINCUP (90-92) DARLEEN A. DRUYUN (Acting) (93-94) CLARK G. FIESTER (94-95) DARLEEN A. DRUYUN (95-present) AIR FORCE PROGRAM EXECUTIVE OFFICER (PEO) TACTICAL & AIRLIFT PROGRAM MAJ GEN EDWARD BARRY (90-91) MAJ GEN ED FRANKLIN (91-93) BRIG GEN JIM CHILDRESS (93-present) SYSTEM PROGRAM DIRECTOR (MANAGER) C-17 *~ MAJ GEN HARBOUR (80-86) COL THOMAS A. STOVER (86-87) COL V. STONE (87-87) BRIG GEN MICHAEL BUTCHKO (87-91) BRIG GEN KEN MILLER (91-93) BRIG GEN RON KADISH (93-96) BRIG GEN CHUCK JOHNSON (96-present) VICE-PRESIDENT PROGRAM MANAGER 777 MCDONNELL DOUGLAS O17 PROGRAM MANAGER PHILIP M. CONDIT (86-92) MARVIN MARKS (80-82) ALAN MULALLY (92-94) J. D VAN DYKE, (82-86) DALE HOUGARDY (94-96) ROBERT (BOB) CLEPPER (86-90) RON OSTROWSKI (96-present) JOHN CAPELLUPO (90-90) DAVE SWAIN (90-94) DONALD KOZSLOWSKI (94-present) *Prior to 1990 the hierarchy included the Secretary of the Air Force. **Prior to 1990 the hierarchy included the Commander Air Force Systems Command and Commander Aeronautical Systems Center. 30 The DOD C-17 Versus the Boein 777 development phase to develop documentation 17 received initial operating capability for a major weapons system, but Block's team, certification January 1995. s7 following Brown's direction, did not perform a standard or thorough investigation to identify Program Managers need. Convinced that research and The DOD management system provides for development on the AMST proved STOL two concurrent program managers or technology adequately, Brown asked DOD to directors--one appointed by the military and skip the demonstration and validation phase, sl one appointed by the contractor. The military Later, Defense Secretary Caspar Wein- manager ensures the contractor meets berger did not embrace Brown's plan for the requirements, costs, and schedule; the O17. Even though a congressional study contractor manager supervises subcontractors identified a strategic airlift shortfall, and builds and delivers the product. Both Weinberger saw other options to improve the managers exercise tight control over technical nation's airlift capacity. In 1981 Lockheed decisions and matters affecting design, cost, submitted an unsolicited proposal to Dr. and schedule. Richard DeLauer, Under Secretary for Defense When DOD awarded the truncated (Research and Engineering), offering to build contract to McDonnell Douglas, Major 44 C-Ss for $4.2 billion. Boeing also General Elbert E. Harbour, USAF, was program proposed to sell its 747 to the Air Force for manager for Air Force and J. D. Van Dyke was $52 million each. Early in 1982, DOD program manager for McDonnell Douglas. announced Lockheed would build 50 C-5Bs Over the life of the project, Air Force and to meet current needs for strategic airlift. Six McDonnell Douglas each assigned at least six months after the purchase, President Reagan different managers to the C-17 program. announced an intent to preserve the C-17 Command changes were often combined with program for procurement in the late 1980s to restructuring. Unlike the Boeing team, new replace the C-130 and the C-141.s2 program managers were not always well In July 1982, Secretary of the Air Force acquainted with the C-17. And, unlike the Verne Orr authorized a truncated research and Boeing team, which was focused and worked development program for the C-17, and the toward a common goal, the DOD and Air Force drew on fiscal year 1981 funds to McDonnell Douglas teams often competed award McDonnell Douglas a modest $31.6 and worked at cross purposes. million contract. The contract contained a clause allowing the government to restructure The Air Force the contract if DOD decided to fully fund the Harbour became C-X program manager in program, s3 A development option provided for 1980, an office under the Aeronautical flight test articles with first flight in FY 1987; Systems Division. A year later, reorganizations preparation for concurrent production; and to the division gave Harbour the responsibility completion of development beginning in FY as Deputy for Airlift and Trainers 58 in addition 1988. s4 DOD and McDonnell Douglas to those he exercised as program manager for decided not to use computer technology for the C-X. When Harbour left in 1986, two design in order to avoid expenses such a officers took his place, covering a period of technology would entail. The schedule would about 13 months---Colonel Thomas A. Stover, change many times in the ensuing years. USAF, July 1986 to June 1987, and Colonel V. McDonnell Douglas began concurrent Stone, USAF, July to August 1987. $9 In August development and production in 1988, 55 first 1987, the Air Force designated the C-17 flight Occurred September 1 991 ,$6 and the C- program as a separate office (ASC/YC) and A. Lee Battershell 3I appointed Colonel Michael J. Butchko (later for the C-1 7, this time to establish the C-17 Brigadier General) as System Program Officer program as a separate directorate: (SPO).6° Brigadier General Kenneth Miller, USAF, replaced Butchko in 1991, 61 and The basis of the concept [1984 Brigadier General Ron Kadish, USAF, replaced reorganization] is the segregation of the Miller in 1993. 62 total R&D and production/deployment effort into discrete areas or management When Butchko took command, he centers. Each management center will be restructured the contract from schedule based responsible for designated hardware/ to event based, pinning all future contract software items, the associated support funding decisions on milestone events. For tasks (logistics, technical data, training, example, Lot 2, low-rate initial production R&M etc.) and appropriate schedule, cost option, could not begin until after successful and performance parameters.~9 completion of the December 1988 Mission Computer Critical Design Review. Butchko David Ward, who served as deputy director also rescheduled first flight from 1987 to for the AMST program, ensured some 1 990. ~3 continuity by remaining as deputy director for the C-17 program. However, when the C-17 McDonnell Douglas went to full-scale development, many new Marvin Mark was C-X corporate manager from people with no previous experience in the 1980 to 1981.64 Van Dyke became general program were added to the Air Force office, manager for the C-17 in May 1981, about 1 including program managers. year before the Air Force awarded the When Stover and Clepper became low-level development contract to McDonnell program managers in 1986, McDonnell Douglas. 6s Van Dyke remained manager until Douglas was just completing detailed 1986. Robert Clepper succeeded Van Dyke engineering drawings in preparation for and served until 1990. McDonnell Douglas production. Although Boeing changed Vice President John Capellupo held the program managers at about this stage, position only a few months in 1990, until Boeing's overall management procedures were David Swain's appointment in that same designed to keep the 777 on track. Changes in year.66 In 1 993, Donald Kozlowski succeeded the DOD command structure, combined with Swai n.67 numerous changeovers, eroded the overall effectiveness of the program. By the time Reorganization and Employee Turnover Butchko took over in 1987, McDonnell From 1981 to 1995, there were seven Douglas was experiencing major problems reorganizations involving DOD that affected with its assembly schedule, which, by terms of C-17 development. McDonnell Douglas also the contract, threatened production funding. underwent several reorganizations and three Within a year, two DOD-mandated reorgani- significant labor turnovers from 1981 to 199,5. zations influenced management of the C-17 Air Force combined the position of C-X program--the realignment of the program program manager with that of deputy for airlift reporting chain and a reordering of the plant and trainers in 1980, allowing several representative hierarchy. 7° programs to share resources for functions such as contracting, engineering, and manufac- Program Reporting Chain turing. 68 In 1984, the Air Force reorganized Changes to the DOD acquisition process again in preparation for a milestone review resulting from the Goldwater-Nichols Act and and in anticipation of full-scale engineering the Defense Management Review affected the 32 The DOD C-17 Versus the Boein 777

reporting process for the program manager. the time of the reorganization, Plant When the Goldwater-Nichols Act required Representative Colonel Kenneth Tollefson, DOD to streamline the acquisition process, USAF, was experiencing serious problems DOD added service acquisition executives with McDonnell Douglas and the military responsible to the Under Secretary of Defense program manager. The problems worried (A&T). However, because then Defense Tollefson, but because he was not as well Secretary Caspar Weinberger did not favor the acquainted with the new command's law, DOD did not seriously implement it. hierarchy and support staff, he did not feel When Defense Secretary Cheney took office, comfortable discussing his concerns. he commissioned the Defense Management Review (DMR) to find out how best to The Contractor implement the Goldwater-Nichols Act. When McDonnell Douglas won the C-X As a result of the DMR, in 1990 the competition in 1981, it anticipated a reporting hierarchy changed dramatically. streamlined, commercial-like development Butchko, the C-17 program manager, was effort and designated its commercial division responsible to the program executive officer (a to develop and build the C-X. However, time new position), Major General Edward Barry, and changing players brought about a USAF, instead of to the Aeronautical Systems traditional government-contractor arrangement Center and the Air Force Systems Command. characterized by tight controls and In addition, a merger of two Air Force government oversight. 72 commands (Air Force Logistics Command and In 1987, labor disputes and parts shortages Air Force Systems Command) into the Air began occurring at McDonnell Douglas. At Force Materiel Command changed the source the same time McDonnell Douglas began and direction of the program manager's considering a Total Quality Management manning and staff support. In the new chain of (TQM) system that, among other changes, command, the program manager was called for reductions in middle management. responsible to the program executive officer From 1988 to 1989, McDonnell Douglas but was dependent on the Aeronautical eliminated a full management layer at its Systems Center and the Air Force Materiel headquarters 73 and all middle management at Command for manning, administration, and its production subsidiary, Douglas Aircraft. functional staff support. As Saxer points out, Although McDonnell Douglas intended "With a new organizational structure in place, these changes to improve organization, the issue of who would ultimately be held methods the company used to bring them responsible and accountable for all about created chaos in the C-1 7 program. For programmatic and policy decisions made example, just as production began on the throughout the life of a development program C-17 wing, Douglas Aircraft called 5,000 was now in question. "7~ middle-management employees together on a Friday, fired them, then told them to reapply Plant Representative for a reduced number of management In the 1950s, the government established plant positions the following Monday. 74 The process representatives to provide onsite inspections of defining and filling new management and administrative support for contract positions took almost 6 months. People were programs. Plant representatives historically often hired for inappropriate jobs, and reported to whichever service managed their workmanship on the C-1 7 reflected chaos in program. In a 1990 reorganization, all the plant. During production of the first 13 representatives began reporting to DOD. At sets of wings for the C-17, there were 14 A. Lee Battershell 33 different wing-dock business managers. Over C-17. At this point, the Pentagon told 90 percent of the nearly 900 structural McDonnell Douglas to resolve chronic mechanics were relatively inexperienced in problems or risk cancellation of the C-17 aerospace. Repair and rework on the factory program. In December 1993, Secretary of floor amounted to 40 percent of the Defense Les &spin placed McDonnell Douglas man-hours on the first two C-17s and added on a 2-year probation to fix technical and about 4 percent to the aircraft cost. 7s Plant financial problems. DOD delayed its Representative Tollefson described the commitment to buy more than 40 C-1 7s until program management as "corporate suicide.. it evaluated the company's performance in •. We would have to get a whole room full of November 1 995. 79 people together to find out who was in charge In yet another reorganization, the of various operations. "7~ company consolidated six defense and In June 1991, 1 month after the C-17 aerospace subsidiaries into two groups and missed its scheduled maiden flight, Program moved the C-17 program from the Douglas Manager Miller pressured McDon nell Douglas Aircraft Commercial Office to the Aerospace to reorganize under a Process Variability Group. Vice Presidents John P. Capellupo and Reduction (PVR) protocol Air Force devel- Kenneth A. Francis became responsible for oped. PVR separated the assembly process running the two groups. Executive Vice into subtasks and identified the areas President Herbert Lanese shared operational associated with most problems. The PVR team responsibility for the groups along with two included T. David Braunstein, Director of other executive officers, John McDonnell and Process Integration at McDonnell Douglas; Jim Gerald A. Johnston. A newly formed Office of Arnold, manufacturing system engineer, Air the Chairman served as senior management Force; and Jerry Guardado, Office of the Plant council and policy-making body for the Representative. 77 In January 1 992, McDonnell McDonnell Douglas government aerospace Douglas began restructuring to improve its business. According to Anthony Velocci, "The production process. The program office company want[ed] to further lower the cost of identified critical problems, developed a producing its military and commercial strategic plan, and created working teams-- products and improve quality across the adjustments similar to those incorporated at board• "8° Boeing. David Braunstein, Di rector of Process Integration, described attempts to identify Low-Level Research and Development problems at McDonnell Douglas as "one of Traditionally, DOD does not have a low-level the biggest detective stories I've ever seen. We research and development phase• This "phase" had to scour the whole process to learn how was simply invented to keep the C-1 7 program everything fit together and where the problem alive until DOD decided if it wanted to areas lay. "Ta Careful analysis of the assembly produce the aircraft. During this period, process paid off with measurable signs of McDonnell Douglas performed wind-tunnel product improvement. testing, developed the thrust reverse, During 1993, labor disputes and rifts developed integrated avionics and flight caused production slowdowns and over- control systems, and analyzed structural loads shadowed improvements in the McDonnell and sizing for primary structures. Douglas organizational structure. McDonnell Even though the low-level development Douglas moved workers from its ailing phase lasted longer than the 15 months commercial sector onto the C-17 project, allocated for it, Congress allowed the program replacing workers with experience on the to continue. In fiscal year 1983, Congress 34 The DOD C-17 Versus the Boein 777 ...... ~ ...... approved the $26.8 million that DOD Concurrent Production and Development requested but demanded a study to justify the The high degree of concurrency with many C-17 in light of recent C-5 and KC-10 changes in design proved more trouble than purchases. In 1985, Congress appropriated the program could overcome. In October the $123.3 million needed for an Engineering 1989, the Defense Acquisition Board reported and Manufacturing Development (E&MD) production risks throughout the C-17 program. contract, but the Defense Acquisition Board McDonnell Douglas had not resolved stalled the process by demanding a bottom-up problems in airframe assembly, the mission analysis of the C-17 program requirements, computer, and the electronic flight control scope, and content. Finally, on February 15, system. The Air Force responded by again 1 985, Defense Secretary Weinberger approved changing the date of the first flight and moving full-scale engineering development for the certification for initial operating capability C-17. forward. Development costs had grown from $3.4 to $5.4 billion, ~3 and by 1991, the Engineering and Manufacturing Pentagon's Cost Analysis Improvement Group Development estimated the C-17 program could exceed its $6.6 billion ceiling price by more than $2 The E&MD tasks in the military and billion. At this point, arguments began commercial sector are very similar. [They] between McDonnell Douglas and DOD over include the detailed design engineering who should pay. and development of manufacturing processes necessary to build an aircraft.8~ In December 1990, McDonnell Douglas submitted its request for test aircraft (T-l) Significant changes in the C-17 design completion certification--thereby asserting complicated the early engineering and eligibility for much-wanted production manufacturing development (or full-scale contracts. However, Plant Representative development) phase. The Air Force added Tollefson and Program Manager Butchko built-in pallets and OBIGGS, raising the empty disagreed on whether McDonnell Douglas weight of the aircraft by 5,000 pounds. In had really satisfied the milestone order to accommodate the additional weight, requirements. The relationship between the the government renegotiated with McDonnell two disagreeing military officers greatly Douglas, agreeing to adjust the payload and affected the C-17 program: "By the end of range and change the landing gear. The Air 1990, the relationship between Butchko and Force then began a series of annual reviews to Tollefson was deteriorating rapidly. Each had certify the company's ability to move from an extremely strong personality, each was full-scale development to production. In convinced they had the right answer for September 1986, the Air Force certified continuing problems. "84 McDonnell Douglas ready for production and Other problems with the C-17 included rated the company highly as a manufacturer. ~2 unrealistic requirements and standards set too However, significant baseline changes and high from the beginning. According to Major development caused production problems. General Frank E. Willis, USAF, MAC Deputy Chief for Requirements, "We in fact did find things that we would have been accused of gold-plating if we had paid money to develop them." An example was a 5-minute launch capability requiring complex avionics. A. Lee Battershell 35

Another example was unrealistic payload [certifying for] initial operating capability, requirements. When the Air Force finally then I wanted all 12 of those airplanes, if possible, to have the same configuration, conceded unrealistic payload requirements and if not I didn't want more than two and lowered them, Congress demanded to different configurations.~9 know why and Defense Secretary Cheney ordered an explanation. 8s Senior DOD Numerous changes and concurrent production officials and members of the House Armed resulted in several versions of the same Services Committee began asking if the C-1 7 aircraft. Before agreeing to certify the C-17, was another A-12, ~6 the Navy airplane Fogleman demanded they be made identical. Secretary Cheney canceled for being over When Kadish became program manager in cost, over schedule, and unable to fulfill its 1993, the Air Force and McDonnell Douglas mission. During testing in 1 991, fuel leaks began serious discussions on the pace of C-1 7 started to appear near the wing of the C-17. flight testing. McDonnell Douglas preferred to Some officials at McDonnell Douglas conduct a 1-year fast-paced program similar to attributed this and other problems to lack of those followed in the commercial sector. The production discipline and out-of-position Air Force demanded a slower paced, 3-year work. New command chains and work-team program, such as it used at Edwards Air Force pyramids reduced the number of problems Base in California. Under the latter standards, coming off the assembly line and cut overtime testing would continue through 1 994 or 1 995. costs. McDonnell Douglas cut production Throughout 1993, the media reported time 31 percent, reduced out-of-position work problems and excesses of the C-17 program. to less than 5 percent, and improved rework DOD disciplined top officials for impro- and repair cost 60 percent. 87 In October prieties. Decreasing payload requirements and 1992, a failed wing-strength test revealed an apparent lack of baseline configuration McDonnell Douglas had erred in the wing caught the attention of Congress. A Defense design• Corrections increased the aircraft Science Board evaluation revealed outdated weight, thus decreasing the payload it could design methods and numerous changes had carry. Finally, after improvements in the contributed to production delays. Also, rumors assembly process and wing design, surfaced that McDonnell Douglas planned to McDonnell Douglas was able to deliver the file a $1.35 billion claim against the Air Force first C-1 7 to the Military Airlift Command at for rescoping the project. 9° The C-1 7 program Charleston Air Force Base, South Carolina. It suffered yet another setback when the Air was the sixth O1 7 off the assembly line. This Force established a Nondevelopmental aircraft, the first equipped with dual hydraulic Airlifter Alternative (NDAA) Program Office to actuators to retract the nose-wheel landing determine the capabilities and costs of gear, was almost a year late and required a commercial aircraft alternatives to the C-1 7. 91 waiver from the original delivery Congress combined fiscal year 1994 requirements. ~8 Fogleman, who received the funding for the C-17 with sealift programs and C-17s and who was responsible for certifying called for a bottom-up review of DOD airlift them, then faced another kind of problem. requirements before releasing fiscal year 1 995 funds. 92 As Donald Kozslowski assumed the I was looking at the potential of... six job of program manager for McDonnell different kinds of airplanes in my first squadron . . . the fact that the first five Douglas in early 1994, Under Secretary of airplanes that came off the production line Defense (A&T) John M. Deutch brokered an •.. all had slightly different configurations agreement with McDonnell Douglas. DOD I could live with that until we started... agreed to relax design specifications, provide 36 The DOD C-17 Versus the Boein 777 ...... ~ ......

money for computer assisted design/computer purpose. Beginning in the Nixon admini- assisted manufacturing system, and purchase stration and continuing through the Reagan another 12 C-1 7s for a total of 40. McDonnell administration, the presidents' points of view Douglas agreed to drop its legal claims, invest and their defense secretaries greatly influenced more money in the program, and improve its the C-17. Officials in the Nixon and Ford managementY The government made it clear administrations supported the tactical AMST. that additional orders of the C-17 were Top brass under Jimmy Carter put a lid on the • dependent upon program performance and an program and lobbied hard for the C-1 7. Under NDAA analysis in November 1 995. 94 Reagan, leaders first supported purchasing alternate aircraft (C-5B), and only later Summary supported the C-1 7. Lobby power probably DOD deviated from its management model by did more to hinder or speed the C-] 7 process skipping phases 2 and 3 (concept exploration than any other single influence. Without and demonstration and validation) and support, the program floundered. With it, it combining phases 4 and 5 (full-scale flourished. The C-17 program began to turn development and production). DOD around in 1994 only after DOD established eliminated steps 2 and 3 because officials more realistic standards and high-level believed the AMST prototype proved officials at DOD and at McDonnell Douglas technology for the C-17. DOD invented the began supporting the program more actively. low-level development phase to preserve the contract and funds Congress had already Comparison approved. Combining the last two phases led • Boeing's organizational focus was to to concurrent production, which resulted in enhance development and manufacturing several different versions of the same aircraft. of the 777. Reorganizations at Boeing did Once the C-17 program got underway, not detract from the 777 development and several reorganizations, both at DOD and at production. DOD focus was to improve McDonnell Douglas, disrupted command its organizational effectiveness. Reorgani- lines and adversely affected the program. The zations-both at DOD and at McDonnell decision not to use computer-assisted design Douglas--disrupted command lines and methods hindered development processes. adversely affected the program. McDonnell Douglas contributed to delays • Boeing's organization and consistent when it produced a defective wing design and focus allowed officers to view the 777 allowed gross inefficiencies in production. from a long-term perspective. DOD When development costs began to soar, the organization and changing leadership government and McDonnell Douglas argued caused DOD officers to view the C-1 7 over who should pay. Technical difficulties, from a 4-year perspective. uncertain funding, and management problems • Boeing'scross-functional design-build created a volatile atmosphere between the teams, built around CATIA, allowed military and its contractor as well as among engineers to use their talents more fully principals in each sector. and reduced problems in production. The Even though the DOD structure produced defective McDonnell Douglas wing numerous inefficiencies, the greatest delays in design, gross production inefficiencies, the C-17 program can be traced to changing and the DOD decision not to use views in the White House. The influence of computer-assisted design methods the DOD highly mobile top governors is not hindered development processes. conducive to what Deming calls constancy of A. Lee Battershell 37

• Boeing's management remained technicians to other projects. Fogleman committed to the 777 throughout its 9- described problems in C-1 7 management: year program. Presidents and defense secretaries differed on their commitment to I think the fundamental problem started • . . in the beginning. We allowed the the C-17 and its precursor, the AMST, over aircraft to be overspec'd unnecessarily.... the 24-year program. In the very beginning, McDonnell Douglas did not have a first team on the C-17... Commitment Then, just about the time we had the go After board go-ahead on the 777, Boeing ahead to start producing, then McDonnell began finalizing design, preparing detailed Douglas commercial business started to engineering drawings, and gearing for drop off. So they rolled this commercial production. When unexpected problems work force into the C-17 factory and occurred with design, avionics, and the flight displaced the people they had trained in the C-17. And that cost us in terms of control system, Boeing directed appropriate quality. That was an institutional disaster.95 resources to solve the problems. When DOD received approval and funding for the C-17 As the program progressed, the from Congress, it placed orders for a different government and McDonnell Douglas became type of plane (the C-5B) and put the C-17 on embroiled in funding arguments. Neither hold 4 years. When problems with design, DOD nor McDonnell Douglas was able to avionics, and flight controls caused costs to maintain the kind of focus Boeing directed on exceed the ceiling price, McDonnell Douglas the 777 development. and DOD argued over who was responsible for the costs. Once the Cq 7 program began, Congress supported the program with yearly Flexibility Boeing developed and used a computer- appropriations. However, when the program design program that allowed flexibility in its could not overcome its development design and manufacturing processes. DOD problems, Congress began withholding and McDonnell Douglas chose not to use a procurement funds. computer program, an action which they believed would cut development costs. When FOCUS Boeing experienced technical problems on the Once Boeing received approval to build the 777, it was able to apply resources, which 777, program managers remained focused on included people and money. Conversely, what they needed to produce it. The four 777 funding constraints imposed by DOD or program managers worked for the 777 Congress restricted effective management of program before their promotion to program manager. Conversely, the Air Force set the C-1 7. unrealistic goals for its program and managers often came to the program with major Constancy of Purpose Although too many management layers and a responsibilities in other areas or with no C-1 7 cumbersome structure retarded C-1 7 develop- experience. After DOD received approval to ment, nonsupportive attitudes passed on by enter the engineering and manufacturing leadership caused the most delays. The highly development phase, the program missed major mobile leadership places DOD at a milestone dates. McDonnell Douglas used disadvantage when compared with the more less experienced technicians on the C-17 stable private sector. Because corporations are program, assigning the more experienced better able to control personnel movement at 38 The DOD C-17 Versus the Boein 777

the top, they are able to remain focused on 22. James P. Woolsey, "777" Air Transport goals--and maintain Deming's constancy of World, 1994, 27. purpose. The 777 program moved forward 23. James P. Woolsey, "Maintenance," Air even though some top managers changed Transport World, 1994, July 1993, 80. because Boeing followed a board-approved 24. Paul Proctor, "Boeing 777 Design Targets course of action. The DOD course, though Gate Mechanic," Aviation Week & Space approved by Congress, was set aside in favor Technology, April 11, 1994, 60. of purchasing alternative aircraft and later 25. Paul Proctor, "Boeing Rolls out 777 to Tentative Market," Aviation Week & Space altered to include added enhancements such Technology, November 22, 1993, 60. as OBIGGS and palletized ramps. 26. "BoeingCenter Serves As Proving Ground," Aviation Week & Space Technology, November 22, No t~ 1993, 64. 1. B.J. Hodge and William P. Anthony, 27. O'Lone, 36. Organization Theory, A Strategic Approach 28. JanetFiderio, "Electronic Teamwork Keeps (Boston, MA: Allyn and Bacon, 1991), 612. Boeing Growing," Computerworld, September 30, 2. LewisD. Eigen and Jonathan P. Siegel, The 1991,24. Manager's Book of Quotations (New York: 29. Allan F. Benson, "Boeing Launches 777 AMACOM, 1989), 303. From PCs" Assembly, December 1994, 15. 3. Hodgeand Anthony, 29. 30. O'Lone, 36. 4. Joan Woodward, Industrial Organization: 31. J.P. Donlan, "Boeing's Big Bet," Assembly, Theory and Practice (London: Oxford University November/December 1994, 42. Press, 1965), vi. 32. O'Lone, 36. 5. Hodgeand Anthony, 24. 33. Benson,16. 6. W. Edwards Deming, Out of Crisis 34. William Savery, retired Boeing chief of (Cambridge, MA: MIT Press, 1986), 2-309. engineering operations, interview by author, 7. Ibid., 23, 26. February 1995, Seattle, WA. 8. Ibid., 119. 35. Main, 102-114. 9. RobertJ. Serling, Legend and Legacy, The 36. Serling,464. Story of Boeing and Its People (New York: St. 37. BrendaForman, "Wanted: A Constituency Martin's Press, 1992), 445. for Acquisition Reform," Acquisition Review 10. Philip M. Condit, President, The Boeing Quarterly 1 (Spring 1994): 98. Company, interview by author, November 1994, 38. Ric Sylvester, Director, Program Acquisition Seattle, WA. Strategies Improvement, Office of the Under 11. Serling, 443. Secretary of Defense (A&T), interview with author, 12. Ibid., 443. February 8, 1994, Washington. 13. Ibid., 455. 39. "Acquisition Reform: A Mandate for 14. James Braham, "Winners By Design," Change," Defense Issues 9, no. 10. Machine Design, July 9, 1993, 25. 40. JamesF. Nagle, A History of Government 15. Richard G. O'Lone, "777 Revolutionizes Contracting (Washington: The George Washington Boeing Aircraft Development Process," Aviation University Press, 1992). Week & Space Technology, June 3, 1991, 34. 41. Jacques Gansler, Affording Defense 16. Ibid. (Cambridge, MA: MIT Press, 1989). 17. Serling,452. 42. Ibid., 14. 18. JeremyMain, "Betting on the 21"t Century 43. Culver, 30. Jet," Fortune, April 20, 1992, 102-114. 44. David Packard, A Quest for Excellence, 19. Condit, interview by author. Final Report to the President by the President's Blue 20. Main, 108. Ribbon Commission on Defense Management 21. J.A. Donoghue, "Last Century's Rollout," (Washington: Government Printing Office, 1986). Air Transport World, April 1994, 25. 45. ThomasMcNaugher, Defense Mangement Reform: For Better or for Worse? (Washington: A. Lee Battershell 39

Heath, Lexington, Brooks, 1990), 175. 61. Selected Acquisition Report (RCS: DD- 46. Gansler. COMP (Q&A)823) Program 017, annual reports 47. McNaugher, 172. issued by the C-17 program office (Wright- 48. DODD 5000.1, Defense Acquisition, Part Patterson Air Force Base, OH, December 31, D1, "Organizing for Efficiency and Effectiveness 1991), 1. (Washington: Department of Defense, February 23, 62. Ibid. 1991),1-7. 63. Saxer, 16, 17. 49. RobertJ. Saxer, "Buying the C-17 A Case 64. 1981 Annual Report (Long Beach, CA: Study," (thesis, Industrial College of the Armed McDonnell Douglas, December 31, 1981), 32. Forces, National Defense University, Washington 65. 1982 Annual Report (Long Beach, CA: DC, 1995). McDonnell Douglas, December 31, 1982), 33. 50. Greg Lockhart, comments on draft paper. 66. Larry McCracken, Director, Government February 1996. Lieutenant Colonel Lockhart was Communications, McDonnell Douglas Aerospace, associated with the C-17 program for nearly 8 telephone interview by author, September 1995. years, from 1986 to 1994. He served first as a C-17 67. SelectedAcquisition Reports 4. action officer at the Air Force Plant Representative 68. Johnson,44. Office at McDonnell Douglas, then as the C-17 69. Ibid., 339. System Officer (SYSTO) at Air Force Systems 70. Saxer,20, 21. Command Headquarters, and finally as the C-17 71. Ibid, 339. Program Element Monitor (PEM) at the Pentagon. 72. Bruce A. Smith, "Management Miscues, He provided expert guidance and input to this Delays Snarl C-17 Program," Aviation Week & book). Space Technology, April 12, 1993, 29. 51. CharlesL. Johnson, Acquisition of the C-17 73. 1988 Annual Report (Long Beach, CA: Aircraft--An Historical Account, Air University McDonnell Douglas, December 31, 1988), 3-45. Report Number 86-1270 (thesis, Air Command and 74. Saxer,20, 21. Staff College, Maxwell Air Force Base, AL, May 75. Smith, "Management Miscues," 31. 1996,), 255. 76. Saxer,20,21. 52. Ibid, 255. 77. JohnMcCIoud, "McDonnel Douglas Saves 53. Ibid., 267. Over $1,000,000 Per Plane With Reeingineering 54. David G. Ward, Deputy Director C-17, Effort," Industrial Engineering, October 1993, 28. Wright-Patterson Air Force Base, OH, Suggested 78. McCIoud, 29. Restructuring of C-17 R&D Program, memorandum 79. Barbara Westgate, "Weapon System to AFSC/SDNI (Major Converse) and AF/RDQL Jeopardy[ The Answer is: The C-17" (thesis, (LtCol Hamby), February 1, 1982, 1. Industrial College of the Armed Forces, National 55. Merle G. Cart, Historical Report January- Defense University, Washington, 1995), 15, 16, 18, June 1988, report prepared by the Air Force C-17 19. Program Office (ASD/YC), August 30, 80. Anthony L. Velocci, Jr., "Repeat of 1993 56. Bruce A. Smith, "First C-17 Flight Marks Performance A Must for McDonnell Douglas," Key Program Milestone," Aviation Week & Space Aviation Week & Space Technology, March 7, Technology, September 23, 1991, 18. 1994, 54-55. 57. "First C-17 Squadron Achieves IOC," 81. Michael S. Mutty, "A Comparison of Defense Daily, January 1 8, 1995, 70. Military and Commercial Aircraft Development," 58. James F. Aldridge, historian, Aeronautical (thesis, Industrial College of the Armed Forces, Systems Center, Wright-Patterson Air Force Base, Washington, 1993), 21. OH, "C-17 Program Directors," memorandum to 82. Saxer, 15. author August 24, 1995. 83. Ibid., 22. 59. C- 17 Historical Report January-June 1987 84. Ibid., 47. (Wright-Patterson Air Force Base, OH: Air Force C- 85. John D. Morrocco, "MAC Satisfied C-17 17 Program Office, 1987). Meets Requirements, But Fears Further Production 60. Aldridge. Delays," Aviation Week & Space Technology, September 9, 1991, 52-53. 40 The DOD C-17 Versus the Boein 777

86. Saxer,49. 87. BruceA. Smith, "Flight Test Pace for C-I 7 Under Review," Aviation Week & Space Technology, April 26, 1993, 21. 88. John D. Morrocco, "USAF Considers C-5 Upgrades," Aviation Week & Space Technology, June 21, 1993, 79. 89. Ronald R. Fogleman, interview by author, February 1995, Washington. 90. JohnD. Morrocco, "Congressional Support Eroding for C-17 Program," Aviation Week & Space Technology, March 15, 1993, 30. 91. John D. Morrocco, "Deutch Raps House Plan to Buy C-17 Alternatives," Aviation Week & Space Technology, May 23, 1994, 20. 92. "Defense Bills Corral C-17," Aviation Week and Space Technology, August 2, 1993. 93. DavidJ. Lynch, "Airlift's Year of Decision," Air Force, November 1994, 24-30. 94. David A. Fulghum, "Lawmakers Criticize USAF Budget Priorities," Aviation Week & Space Technology, March 7, 1994. 95. Fogleman, interview by author. ( 4. Mission )

Every organization decides what it expects to that would replace aging wide-body aircraft accomplish--its desired end, its mission. All already on the market. Boeing brought assets of the organization must then be potential customers into the initial marketing directed toward the specified goal. This process and later recruited airline chapter identifies the missions of Boeing and representatives to help engineers design the DOD and examines the functions of the 777 new airplane. Gordon McKenzie of United and the O17 to determine if or how each Airlines said, "Boeing started with a blank product helped fulfill overall mission sheet of paper and said, 'Tell us what you requirements. It also looks at mission to want'. "3 By September 1 990, Boeing knew determine what effect it had on development the answer: ti me. • A large twin-engine jet airplane carrying between 305 and 440 passengers The Boeing Company • A transport with a fly-by-wire control system, flat-panel liquid-crystal displays, To be the number one aerospace company graphite composite floor beams, six-wheel in the world and number one among the premier industrial concerns in terms of landing gears, and optional folding wing quality, profitability and growth. 1 tips • An airplane with a self-diagnostic Boeing was successful in its mission to maintenance system become the "number one aerospace company • A family of 777s to share parts and in the world" because Boeing made an effort standard features to understand its customers, was flexible in • An airplane that would cost less to adapting to their needs, and was willing to maintain. commit to a product that would help customers retain their competitive edge. After the boardapproved the 777, Boeing Referring to its customers, Boeing President established a program office to develop, Condit said, configure, design, validate, and provide definition to the product. We cannot expect to be profitable unless we design and build the kind of equipment The 777 that gives them the competitive edge they need to grow and prosper.... In short, our The mission of the 777 is to provide safe efforts will continue to be customer- and timely worldwide airlift of passengers driven, not technology-driven. 2 and cargo in a cost effective manner. It must be comfortable and aesthetically To fill a perceived commercial need, Boeing pleasing for passengers. It must operate sought to build a new medium-sized airplane routinely on a fast-paced schedule with

4/ 42 The DOD C-17 Versus the Boeing 777 ......

high mechanical reliability and minimum absolutely critical. The airplane that could down-time. It must operate efficiently and fly nonstop from New York to Paris had a effectively both in the air and into and out real advantage in the marketplace over the of crowded airfields. And it must have airplane that needed to stop in Shannon, extended-range twin-engine operations Ireland .... To be able to go from New (FOPS) capability upon delivery to the York to Tokyo nonstop rather than customer.4 stopping in Anchorage, Alaska, was a competitive advantage. Distance, Timeliness, and Safety. Boeing's However, the world is only so big. ability to deliver a twin-engine plane that Once you go halfway around, added range could fly 305 to 440 passengers from 3,960 to has no value.8 7,380 nautical miles (nm) resulted from the The 777 costs about $25.25 per mile to company's efforts to find the right design, operate--including insurance, administration, materials, and propulsion. Thick, aerodynamic and financing. The amount is similar for the wings allowed the plane to fly higher and MD-11 and Airbus A340-300X, 9 but on a faster, and engines developed by Pratt and per-seat basis, the 777 costs less to operate Whitney, General Electric, and Rolls Royce than these aircraft. provided greater lift and distance at less cost. CATIA and design-build teams allowed The combination of a large plane with only Boeing to develop an early manufacturing two engines constituted operating savings up plan and to identify numerous problems to 40 percent over comparable four-engine before the aircraft reached the production line. models, s Boeing flew thousands of miles Factory rework was cut up to 80 percent; the before delivering the first 777 to United body and wings of the 777 fit together without Airlines to prove its plane could safely any rework. Dale Hougardy, the 777 program transport passengers around the world. During manager, described the difference in testing, the wings were stressed to the manufacturing planning that CATIA equivalent of more than 2.5Gs--as if the introduced: aircraft were pulled abruptly out of a steep dive. In every trial the 777 performed beyond In the past, manufacturing was at the end expectations. 6 of the pipeline. With [the 777] . .. from Cost. According to Condit, "More and day one we started the manufacturing plan. The plan was developed as more, our airline customers describe their engineering matured. This is concurrent needs in terms of economics. The past two engineering in action. 1° years, in particular, have convinced them that they can flourish only by becoming more CATIA also allowed Boeing to transmit exact efficient and flexible under pressure from an designs to subcontractors, who in turn were increasingly lean and competitive business able to produce parts that came together environment. "z perfectly on the factory floor. 1~ Engine makers For both the airlines and the manufacturer, were able to design tubes, brackets, and cost was a leading concern. Airlines wanted troublesome externals so that different systems the best performing aircraft for the least cost; did not compete for the same space. In March Boeing wanted the best manufacturing value 1 994, CEO Frank Shrontz acknowledged the for the least cost. Reflecting on his customers, effect of streamlined assembly on costs: Condit said, Cost-cutting has arrived. One When jet airplanes first started operating important indicator is that although our across the North Atlantic, range was total sales are down, our margins are A. Lee Bat~ershell 43

improving, if you set aside development see where improvements were needed--such costs of the 777.12 as adding a latch to keep a door propped open or relocating a light for better visibility. 17 As a Comfort and Aesthetics. United Airlines result of feedback from mechanics, designers specified in detail how it wanted the interior lowered the height of the fuel panel for better of the new aircraft to look. For example, accessibility and increased the size of push United insisted on overhead storage bins that buttons so crews could open exterior panels followed a straight path, opening up the without removing gloves. Boeing also wrote passenger cabin, rather than tapering to follow software for an on-board maintenance system the fuselage contour. 13 The result is a spacious that tells gate mechanics exactly what they architecture that welcomes passengers with an will need to repair the aircraft before it lands. 18 open, airy cabin featuring high ceilings and Not wanting to repeat service problems graceful contours. Large windows and encountered on the 747-400, Boeing tested comfortable side walls provide clear views the 777 by flying it thousands of miles. During and more shoulder room. The 777 has the testing, Boeing engineers changed software to widest cabin in its class. Airlines can configure minimize false fire warnings that led to the 777 for high-comfort intercontinental or in-flight shutdowns and took similar steps with high-traffic regional markets with equal ease. erroneous oil system indicators, which were Boeing received the Industrial Design Award responsible for about 1 9 percent of in-flight for the interior of the 777 in 1992.14 Digital shutdowns. They also added electrical and entertainment and communication features hydraulic redundancy. Dedicated flight-test allow airlines to offer a wide range of personal aircraft were flown through 1,000 cycles of services, including telephones, digital sound simulated airline operations using the Pratt and video systems, satellite movies, interactive and Whitney PW 4084 engine--the video, and computer outlets. equivalent of about 3 years of service. 19 In the Mechanical Reliability. The media reacted end, Boeing delivered a plane with high with enthusiasm, reporting quotes from United mechanical reliability. Airlines and Boeing representatives: Extended-Range Twin-Engine Operations (ETOPS). The key consideration in any new On virtually every design point, we told technology is adding value for customers. In Boeing to design in reliability and the case of the 777, service readiness and maintainability. The 777 has so much airline reliability input, we shouldn't see ETOPS certification at time of delivery were any in-service surprises,is added values. 2° Traditionally, the Federal Aviation Administration (FAA)does not allow There's a tremendous amount of expertise a twin-engine plane to fly more than 1 hour and methodology for cockpits, but not for from an airport in its first year. Boeing wanted maintenance . . . at the gate, in the pre-delivery certification from FAA to fly the hangar, [or] at the shop. 16 777 up to 3 hours from the nearest airport--a In an effort to reduce mechanical key distance for lucrative flights over water, problems, Chief Mechanic Jack Hessburg such as from the mainland to Hawaii or from asked gate mechanics to troubleshoot by Japan to Singapore. 21 To secure early ETOPS performing repairs on mock-ups in the certification, beginning in 1 994 Boeing flew presence of designers. The designers were able five 777s with Pratt and Whitney engines on to observe the way mechanics operated and to thousands of test flights. 22 Because of early certification, Boeing's first customer, United 44 The DOD C-I7 Versus the Boein 777

Airlines, was able to schedule a transoceanic flight as its first official in-service flight. 23 The Department ofDefense Corporate Quality, Profitability, and Provide the military forces needed to deter Growth. At the per-unit price of $116 to $140 war and protect the security of our million (depending on options), it will take country. 24 Boeing some time to recoup the almost $7 billion estimated for development on the 777. How DOD fulfills that mission is spelled out However, because Boeing expects to produce in U.S. strategic policy. For 1995, the a family of 777s for the next 30 to 50 years, President's National Security Strategy read, in initial development costs were considered as part, an investment in long-term growth. At the end of 1995, Boeing had 166 orders for 777s, We must be able to credibly deter and including 22 for the Saudi Arabian state defeat aggression by projecting and airline, Saudia--an order for which Boeing sustaining U.S. power in more than one competed successfully against McDonnell region if necessary.... To do this, we Douglas. In 1994 and 1995, Boeing captured must have forces that can deploy quickly most commercial airline orders, with the 777 and supplement U.S. forward-based and forward-deployed forces as we leading the way. If the 777 meets Boeing's demonstrated by our rapid response in expectations over the long term, income from October 1994 when Iraq threatened it could exceed that of the lucrative 747. aggression against Kuwait. 2s Boeing is already using CATIA and design-build teams on other planes--namely During the course of its development, the the F-22 and the B-2. C-1 7 was redefined many times. It began as a tactical aircraft with a relatively short range Summary and limited capacity and ended as an aircraft Did the 777 contribute to Boeing's mission "to capable of carrying outsized equipment over be the number one aerospace company in the long distances. Along the way, as it changed world and number one among the premier to meet changing military requirements, it had industrial concerns in terms of quality, to compete for funds with any number of other profitability, and growth?" Indeed, at the end weapons systems, including some with high o.f 1995, Boeing was the number one profiles and appeal. commercial airplane manufacturer in the Nevertheless, in October 1 994, the C-1 7 world, with the 777 leading the way. The 777 proved its worth to DOD when it flew the 7th proved aesthetically pleasing to customers and Transportation Corp and its outsized cargo fit a market need. The computer design into Saudi Arabia on its first operational system, coupled with design-build teams, mission. General Ronald R. Fogleman used the helped produce a trouble-free airplane. C-1 7 in two sorties of 14-hour direct flights Building the 777 brought Boeing not only an before General Robert Rutherford certified the entirely new product but innovative design plane for initial operational capability. methods and a fresh corporate culture. General Fogleman based his decision to use the C-1 7 on faith in the new aircraft as well as A. Lee Battershell 45 concerns about the reliability of the C-5. In In addition to performing radical Fogleman's words, "It means giving the maneuvers in a tactical environment, the C-1 7 commander the assurance that when he uses had to: that piece of equipment, it will get the job done on time. That's why we did it. "26 • Transport large payloads over intercontinental distances without The C-17 refueling; provide strategic and theater airlift via airland, airdrop, or the Worldwide airlift of U.S. combat forces, low-altitude parachute extraction system; equipment, and supplies. [and] and augment aeromedical evacuation, adequate aerial delivery and airlift to nuclear weapon transport, and special execute the army's airland battle doctrine, capabilities missions. the Marine Corps' air-ground task force • Easily make transitions between operational doctrine, and the unified delivery modes by allowing in-flight commands' joint operations concepts.27 reconfigu ration. To complete its mission, the C-17 had to The major contributions of the C-17 to the perform several functions not normally present airlift system were long-range direct required of commercial aircraft: airdropping delivery and a design allowing delivery of cargo and personnel, air refueling, operating outsize combat cargo and equipment (with in and out of austere airfields and providing operators) directly onto semipaved runways defensive actions; and operating routinely in 3,000-feet long and 90-feet wide. 29 (The C-1 7 low-threat environments, occasionally in was not designed to land on unprepared medium-threat environments, and rarely in runways, as was the C-130). Payload, range, high-threat environment. The definitions for STOL capability, airdrop, maneuverability, low, medium, and high threat are: survivability, and versatility were major factors for C-17 customers. • Low threat: Small arms/automatic Payload and Range. The 1 980 request for weapons, plus light and heavy optically proposal asked for a plane that could carry aimed antiaircraft machine guns up to 130,000 pounds and fly 2,400 nautical miles 12.7-mm equivalent weaponry. without refueling. However, as already noted, • Medium threat: Low-threat weapons, DOD changed specifications of the C-17 plus optically aimed antiaircraft artillery several times, often in response to mission. heavier than 12.7 mm, and man-portable, The state of the world changed over time shoulder-fired, surface-to-air missiles. A while the C-17 was in development, as well as medium-threat area may include more the perceived needs of the military. Changes sophisticated weapons employed in a to the aircraft often brought a chain of dispersion pattern that makes avoidance technical and production changes that were possible with proper tactics and/or both costly and time consuming to DOD and defensive equipment. its contractors. • High threat: Low- and medium-threat Maneuverability. The C-17 ground weapons, plus a dispersion pattern that maneuverability is much greater than that of denies avoidance and requires pene- the C-141 or the C-5. Many pilots say the tration. Without suitable defensive C-17 handles like the much smaller C-130. countermeasures, tactics, and force The C-1 7 backs up and turns 180 degrees in protection, this penetration involves a high fewer than 90 feet. This maneuverability is probability of detection and attrition. 28 46 The DOD C-17 Versus the Boein 777

helpful for offloading material and is increased capacity and versatility more than especially important at congested airports. compensate for the added weight. Survivability. In 1 985, when the Air Force Impact of Changes. Costs rose for the re-negotiated its C-17 contract, it added C-17 in part because of numerous OBIGGS to provide a nitrogen generation modifications requiring major changes to the system that keeps oxygen vapors in the fuel wing and propulsion system. Some of these tank area below 9 percent. The lower oxygen changes included the fly-by-wire system, vapors allows the plane to avoid ignition OBIGGS, a built-in four-pallet ramp, and a when small arms fire hit the fuel lines. The defensive system. Fogleman expressed his addition of OBIGGS also meant the C-17 did concerns over the number of engineering not have to rely on liquid nitrogen supplies. changes on the C-1 7: OBIGGS could supply 50 pounds of nitrogen-enriched air to keep the fuel system We should somehow put a premium in inert for at least 48 hours. Adding OBIGGS every ECP [engineering change proposal] allowed the C-17 to use more austere that goes on. If you are successful in airstrips. 3° shortening the development process, STO[. STOL capability is especially you're not going to have that many important for cargo transports because it technology changes. You ought to take what you have, and maybe some enables pilots to deliver supplies close to an reasonable threshold and you baseline it area of need. Adding short-takeoff-and-landing with that. And then you go build the requirements on the C-17 required the baseline without a bunch of engineering addition of a fly-by-wire system and other change proposals.... We ought to build high-tech features. a block knowing that sometime down the Airdrop. Customers wanted the C-1 7 to road you're going to bring that whole airdrop heavy equipment, cargo, and group of airplanes back for an upgrade.31 personnel--all on the same mission. Personnel airdrops normally involve free-fall and McDonnell Douglas also complained about static-line drops through paratroop doors or changes. The contractor alleged the Air Force over the ramp, whereas equipment airdrops had redefined the project and filed for $450 use a towplate with a drague/extraction million in losses. 32 parachute. To airdrop personnel and In addition to added monetary costs, the equipment together, the O1 7 required special changes caused delays in production. DOD outfitting. missed numerous deadlines. The changes, Versatility. Customers also wanted a their implied costs, and the delays caused transport capable of carrying large vehicles, military and congressional leaders to question rolling stock, palletized and nonpalletized the O1 7 program. The government ordered at cargo, outsized items, and aeromedical litters. least five studies that questioned the DOD When crews reconfigure a C-141 to carry mission and asked if the C-17 fulfilled that palletized cargo, they must perform the mission. change on the ground. At least two planes are needed~ one to carry pallets for reconfiguring Summary and one to carry the cargo. With the C-17, a The C-17 fits the DOD mission to provide single Ioadmaster can flip a reversible floor military forces and fulfills President Clinton's while it is in flight to reconfigure the aircraft. 1995 National Security Strategy "to have While the pallets increase aircraft weight, the forces that can deploy quickly and supplement U.S. forward-based and forward-deployed A. Lee Battershell 47 forces.., as we demonstrated by our rapid approved its program, DOD vacillated over response in October 1994 when Iraq whether the C-1 7 was the right aircraft to meet threatened aggression against Kuwait." its mission. At least five studies were ordered However, the way DOD achieved its mission to determine whether or not the C-17 was was different in the early 1970s, and the appropriate. After DOD began developing the mission of its developmental aircraft, the C-1 7, it modified the design--creating chain AMST, was tactical. By the late 1 970s, DOD reactions involving weight and aerodynamics changed the mission of its development that proved costly to DOD and its contractor. aircraft to strategic. Once it settled on the C-1 7, DOD continued to add features such as OBIGGS, palletized ramps, and a defensive I. Beverly Cauffman, Boeing 777 Program system. McDonnell Douglas complained the Office, Boeing mission statement, telephone changes caused delays and increased costs interview by author, January 16, 1995. 2. Philip M. Condit, "Focusing on the beyond contracted parameters. Customer: How Boeing Does It, " Research Technical Management, January-February 1994, Comparison 35-37. The 777 contributes to Boeing's mission "to be 3. "Boeing Knocks Down the Wall Between the number one aerospace company in the the Dreamers and the Doers," Business Week, world and number one among the premier October 28, 199 I, 12 I. industrial concerns in terms of quality, 4. Cauffman. 5. Tim Smart et al., "Clash of the Flying profitability and growth." The C-17 fits the Titans," Business Week, November 22, 1993, 64. DOD mission to provide military forces to 6. EdwardH. Phillips, "777 Wing Stressed to deter war and protect the security of our Equivalent of 2.5G," Aviation Week & Space country, and it fulfills the 1995 National Technology, April 1 I, 1994, 49. Security Strategy to have forces that can 7. Condit, 34. deploy quickly around the world. 8. Ibid., 37 The difference between Boeing and DOD 9. Paul Proctor, "Twin Claims Huge Market is that at the time the Boeing board of Share," Aviation Week & Space Technology, April directors approved the 777, Boeing's 11, 1994, 49. 10. RichardG. O'Lone, "Final Assembly of 777 corporate leaders believed the 777 was key to Nears," Aviation Week & Space Technology, remaining number one in the aerospace October 12, 1992, 48. industry. At DOD, the O17 was one tool 11. "The Mind's Eye," Economist, March 5, among many to help support and defend the 1994, 8. United States. From 1 981 to 1 995, the C-1 7 12. "Banking on the Big Bird," Economist, competed for resources with many other March 12, 1994, 74. weapon systems in the DOD arsenal. 13. Richard G. O'Lone, "777 Revolutionizes Conversely, the 777 retained its number one Boeing Aircraft Development Process," Aviation focus during development at Boeing and faced Week & Space Technology, June 3, 1991, 36. little competition from other major 14. "Boeing777 flight deck," Machine Design, development programs. July 9, 1993, 26. 15. GordonMcKensie, United Airlines, quotes Of course, differing ideas on what DOD in Alan Benson, "Boeing Launches 777 From Pcs," needed to support its mission affected the Assembly, December 1994, 16. design of the C-17. For example, DOD 16. JessHesburg, The Boeing Company, quoted focused on producing a tactical transport from in Lester Reingold, "Of Men and Machines," Air 1 971 to 1979. In 1979, it changed its focus to Transport World, September 1992, 84. a strategic transport. Even after Congress 17. Ibid., 84-85. 48 The DOD C-17 Versus the Boein 777

18. Paul Proctor, "Boeing 777 Targets Gate Mechanic," Aviation Week & Space Technology, November 1993, 60. 19. Smartet al., 66. 20. Polly Lane, "777 Wins Approval for Ocean Flights," The Seattle Times, May 30, 1995, A1. 21. Smartet al., 66. 22. Polly Lane, "777 Goes to Work," The Seattle Times, June 7, 1995, A1. 23. Ida Hawkings, "777 ETOPS Biggest Success Story Ever," Boeing News, June 30, 1995, 5. 24. Defense Link Web Page, http:// www. defenselink.mil, July 27, 1998. 25. A National Security Strategy of Engagement and Enlargement (Washington: The White House, February 1995), 8,9. 26. Ronald R. Fogleman, "Air Force Direc- tion," Defense 95 1 (1995): 27. 27. FinalOperational Requirements Document 2, 12 (ORD), AMC 002-91, 017, ACAT Level I (Scott Air Force Base, IL: Air Mobility Command, September 15, 1993), attachment 1. 28. 017 Employment Concept of Operations (Scott Air Force Base, IL: Air Mobility Command, February 4, 1993), 6. 29. FinalOperational Requirements Document. 30. C-17Globemaster III Technical Description and Planning Guide (Long Beach, CA: McDonnell Douglas Aerospace, July 1993), 111-8. 31. RonaldR. Fogleman, interview by author, February 27, 1995, Washington. General Fogleman was Chief of Staff, USAF. 32. JohnA. Dodds, comments to author, 1996. Dodds was the Department of Air Force attorney and provided legal counsel on many issues associated with the C-17. ( 5. Need )

Need: a condition in which there is a deficiency of something... . an urgent requirement of something essential or desirable that is lacking. Webster's New World Dictionary 1

Boeing performs extensive market and and fill a growing medium-sized market technology research to identify customer between the 767 and 747.3 needs and to evaluate the company's ability to supply those needs. DOD determines its needs The airlines wanted to fine tune their fleets based on the President's national security with a plane bigger than the 767 stretched, but objectives. Once the President defines the smaller than a 747. They also wanted an national security objectives, the Joint Chiefs of entire family of planes built around one basic Staff 0CS) determine military objectives to model to allow cost sharing on maintenance, support the president. The commanders in parts, and training. By 1 990, Boeing decided chief of the major military commands on the all-new 777. Looking back on the determine what personnel and equipment are process, United Airlines Vice President of needed to support JCS objectives. If the Operations James Guyette noted, "Boeing military departments do not have sufficient listened and responded to our needs." Guyette resources for the mission, the deficiency called the process concurrent design--a first in the commercial industry. 4 becomes a "need." Prior to 1 986, the service departments directed their requests for weapons systems to The 747 the Office of the Secretary of Defense (OSD). Although Boeing accurately defined customer OSD considered and prioritized needs based need in a timely manner for the 777, it did not on each department's ability to argue its need always do so. For example, Boeing allowed a within the context of the overall DOD preoccupation with technology to influence mission. As the Defense Science Board stated 747 product development, and untimely need in its Report of the Acquisition Cycle Task identification caused 747-400 production Force, programs must have strong advocates to delays. CEO Bill Allen recalled the attitude at survive. With strong advocates, bad programs the time, "If the Boeing Company says we will survive; without strong advocates, good build this airplane, we will build it even if it programs can go by the wayside. 2 takes the resources of the entire company. "s When the Boeing board approved develop- ment of the 747, Pan American World Airlines The Boeing Company was the only U.S. airline interested in purchasing the aircraft. British Airways, Japan [Boeing needs] an airplane that can Air Lines, and others placed orders solely replace the aging McDonnell Douglas DC-10 and Lockheed L-1011 wide-bodies, because they feared Pan American would gain

49 50 The DOD C-17 Versus the Boein 777

an advantage in the world market. According Boeing that was not easy to implement. to TransWorld Airline chief executive Charles Gordon A. McKenzie, the United Airlines Tillinghast, representative, claims he spotted rolling eyes when Boeing engineers learned that United We were reluctant participants in the 747. and All Nipon Airways were "snooping But we couldn't afford to sit it out. Had we around. -1° known that the DC-10 and L-1011 were coming along, we might have sat it out. We feared that it would go ahead and we Summary didn't have the courage to stand aside.6 By October 1990, Boeing had completed its market analysis, selected the 777 Boeing's marketing prowess and the configuration, and identified costs. Philip worldwide need to "keep up with the Joneses" Condit presented his plan to the Boeing board helped sell the high-tech 747, but not until of directors for permission to solicit orders after Boeing nearly went bankrupt/ from the airlines. As he described the process, According to Frank Kolk of American Airlines, the real need in the 1960s was for a What you would love to have is United, twin-engine, wide-body, double-aisle aircraft British, American, JAL, on the same day all capable of carrying 250 passengers 2,100 raise their hand simultaneously and say we all want it. Then you know you've got a miles--a product that was 25 years in the slam dunk .... The board says, if you can future. 8 Boeing also had problems when it find three great big airlines who all want developed the follow-on to the 747--the to buy 100 airplanes, you don't even have 747-400 to come back.... United said, we'll go. Late in the process Boeing learned that We [went] back to the board, [and] said, customers wanted more high-tech elements 'We think there's broad enough market than anticipated. Customer demands for new interest .... Can we have approval to features necessitated a succession of changes proceed?' The answer was yes, thank throughout the 747-400--resulting in goodness.1 overwhelming integration problems. 9 By soliciting customer ideas and defining the From lessons learned on the 747, Boeing work statement of the 777 early, Boeing realized the importance of identifying successfully avoided unexpected customer customer need before the production process. demands. Customers told Boeing they wanted a family of aircraft to save money on interchangeable CATIA parts, maintenance, and training. CATIA and CATIA helped Boeing determine exactly what innovative design teams helped customers customers wanted and needed. Because define and express their needs to Boeing. engineers could design on the screen before going to production, customers could see The Department ofDe, rise early on what they did and did not like. However, using a computer design system and The bottom line is clear. America needs a inviting customers, mechanics, and engineers new core airlifter to meet the requirements to participate required a cultural change at of America's national security strategy.12

50 A. Lee Battershell 5I

The AMST Chairman of the Joint Chiefs of Staff, General Unfortunately, America's security needs were George S. Brown, asked, "Is it practical to not always so clear. In 1971, DOD have an AMST with a slightly higher box pick up much of the C-5 outsized load for commissioned Boeing and McDonnell Douglas to develop the AMST (Advanced Europe--with air refueling as necessary?"~4 Medium Short Take Off and Landing), a After much vacillation and a change in tactical cargo plane that could carry outsize administration, the Air Force scrapped the equipment and take off and land on short AMST and initiated the C-X program. Major runways. This plane grew into a much larger Charles L. Johnson reported on the prevailing plane with greater capabilities, including some views in Acquisition of the C-17 Aircraft--An strategic features. Historical Accoun t: The need for the AMST originated with the A senior administration official (under Tactical Air Command, which needed to Carter)... pointing at what he termed the replace the C-130 with a plane that could almost unanimous opinion among carry outsize equipment directly to a battle pertinent government agencies [suggested] zone. Although the Air Force had many that the C-X program should be started C-130s in its inventory, the relatively small now. He said it would be a mistake to cargo-carrying capability of the C-130 limited prolong the agony of Boeing and its effectiveness. The C-5 could carry outsize McDonnell Douglas by giving the equipment, but it could not fly close to battle impression that the AMST (YC-14 and zones. YC-15) intratheater STOL program is still In November 1972, the Air Force alive under the guise of C-X. The White House's view of the requirement . . . contracted with Boeing and McDonnell- centers on a highly fuel-efficient follow-on Douglas to build prototypes for the AMST. The to the C-5 and the O141. Further, aircraft was to have a wide-body fuselage and advocates of the C-X optimized for the ability to carry a 27,000-pound payload long-range strategic (intertheater) airlift on a 400-nm radius mission into and out of a have the "political clout" in the executive 2,000-foot unimproved landing zone. The branch and in Congress, and the cargo compartment of the AMST was 68 supporters of i ntratheater. ~s percent greater than the C-130H, could deliver a 95 percent larger payload, and required General Block led the joint task force of about half the field length during landing and Air Force, Army, and Marine Corps take-off. ]3 representatives to define a new airplane that could perform both intertheater and The C-17 intratheater airlift roles. 16 According to Block's After consolidation of the tactical and strategic planners, the new aircraft should: military airlift commands in the mid-1970s, military leaders began asking if the Air Force • Carry outsize cargo could rework the tactical STOL aircraft into a • Provide direct delivery to combat areas strategic STOL aircraft. The Army still with a short field takeoff and landing contended it needed a tactical aircraft with the req u i rements ability to carry oversized and outsized • Refuel in flight. 17 equipment to forward points. However, the Air Force wanted strategic capability. The

51 52 The DOD C-17 Versus the Boein 777

Justifying the new aircraft, Block pointed Short field takeoff and landing ability will out deficiencies in the military's ability to enable [the C-5A] to operate into short carry outsize and oversized cargo: The C-5 semiprepared airstrips. This would allow it could deliver battle tanks and other outsized to deploy combat forces directly from the cargo into only large, rear-area airfields, and U.S. and rear area marshaling points into the C-130 cargo-carrying abilities were objective areas using airdrop or airland limited. 18 The proposed aircraft, through techniques at semiprepared airstrips as far forward as the tactical situation requires. 2~ aerial refueling, would have extended range and would help reduce ramp saturation at It became clear the Air Force had inflated enroute bases and reduce overflight rights problems) 9 C-5 performance standards to justify its purchase in light of recent C-1 41 purchases in In March 1980, General Block testified the 1960s. Despite Lockheed's claims that before Congress that his task force investigated wing modifications enabled it to operate in a number of ways to meet the airlift short semiprepared airstrips, the C-5 could not requirements, including using more civilian operate as stated. Yet, further studies to prove airliners, buying more C-Ss, and purchasing limitations of the C-5 did not convince Boeing 747s for Air Force use. The task force Congress that DOD needed the C-1 7. Holding concluded that these airplanes could not the Air Force accountable for past satisfy outsized cargo and other intratheater req u i rements: exaggerations, the House Research and Development Subcommittee voted 8 to 3 Based on operational experience, the Air against funding the C-X for fiscal year 1981. Force believes that the C-5 does not have After the hearing, Ichord wrote, the capability to operate into small austere airfields .... The C-5 requires a runway The subcommittee did not believe that the width of 148 feet to turn 180 degrees [and] C-X--a future system--was justified in the •.. taxiways 60 feet wide; it cannot back absence of relevant data or that this system up and does not have adequate clearances should be supported in the absence of for the obstacles normally associated with funds for the procurement of available sea smaller, austere airfields. The Boeing 747 and airlift assets that are needed to satisfy also has limitations because of its physical today's requirements. Beyond the matter size and would require a considerable or priority, the case for the C-X per se was development effort to adapt it for outsized not made to our satisfaction; and the DOD cargo. The cockpit must be raised, the representatives who appeared before the nose door enlarged, the cargo floor full committee fell short of making the strengthened and the landing gear made to case for this aircraft. 22 kneel to facilitate loading. Even with kneeling, the cargo floor would be about When Congress finally established funding 9 feet above the ground, and the aircraft for the C-X through a joint resolution in 1 980, would still have loading restrictions. 2° it also mandated the Secretary of Defense conduct a comprehensive study to determine Lockheed wanted to sell the C-5. At overall U.S. military mobility requirements Lockheed's prompting during committee before initiating development of the aircraft. 23 hearings, Congressman Richard Ichord Meanwhile, DOD selected McDonnell confronted General Block with the 1967 Douglas as the contractor for the C-X program mission statement for the C-5: in August 1981, causing William Gregory,

52 A. Lee Battershell 53 editor-in-chief, Aviaton Week & Space MTM/D, based on the threat of Soviet invasion Technology, to comment: and a NATO/Warsaw Pact conflict. At least one-half of the additional 20 MTM/D was for Last year the Air Force completed a outsized cargo such as armored vehicles, competitive source selection and chose self-propelled artillery, large helicopters, and Douglas to build its entry as the C-17... other combat support vehicles requiring a C-5 What the winning contractor had won was or C-1 7. 26 the right to build an unfunded airplane. 24 After the Berlin Wall fell in 1989, people began to question the need for a large military Throughout the hearing process, Congress arsenal. In 1990, the Major Airlift Review learned that although DOD might need (MAR) lowered airlift requirements to 48 additional cargo planes, it didn't know how MTM/D, and Defense Secretary Richard many it needed or what type. The Army did Cheney recommended reducing the number of not consider the size implications of major C-17 purchases from 210 to 120. equipment, nor how many items it needed to However, Desert Storm in late 1990 and deploy with combat units. The Army also did other regional conflicts caused the Mobility not know how many airlift assets were already Requirements Study (MRS) to raise suggested committed to the deployment of tactical payload requirements to 57 MTM/D. 27 LtCol fighters and airlift squadrons. 2S Lockhart explained that the previously low 48 Newly elected President Reagan and his MTM/D requirement was really based on defense secretary were not convinced DOD available funds and that the 57 MTM/D was needed another strategic airlifter--especially not really meant as a standard: since it already had the C-5. In 1982, DOD ordered 50 C-5Bs but allowed McDonnell In the MAR decision, they didn't start with Douglas to enter into a low-rate research and a requirement of 48 MTM/D. The development contract while the new perception was that they started with administration decided whether or not it really available dollars and found how many needed a C-17. In addition to the aircraft they could buy and backed into Congressionally Mandated Mobility Study the 48 MTM/D. Further, the 57 MTM/D was never meant as a requirement in the completed in 1983, there were six additional MRS.28 studies and plans: Airlift Master Plan (1983), the DSARC Bottom-up Review (1 985), Major Another study by RAND, Finding the Right Airlift Review (1990), Mobility Requirements Mix of Mifitary and Civil Airfift, Issues and Study (1992), AMC Alternatives to Strategic Implications, found that if DOD used a Airlift (1995), and Optimum Mix of C- t 7s and mixture of aircraft to include the Boeing Non-Developmen tal Airlift Alternatives (1995). 747-400, the KC-10, and the Lockheed C-5, Either Congress or DOD commissioned DOD could save between $5 billion and $24 each study to determine if DOD needed the billion. In one approach, RAND estimated the C-17 or--if it did--how many. The Congres- total need for C-17s at 40. The RAND sionally Mandated Mobility Study (CMMS) conclusion was based on the use of the C-17 recommended more airlift, sealift, and for transporting outsize equipment and pre-positioning equipment--both ashore and personnel and using other types of aircraft for afloat. The study also recommended less than outsized equipment (oversized and increasing the airlift objective, by 20 million other). 29 ton miles a day (MTM/D) for a total of 66

53 54 The DOE) C-17 Versus the Boeing 777 ......

Both the MRS and the MAR study based DOD decided to buy 120 C-17s because of their conclusions on the C-17 ability to carry the aircraft's versatility. 160,000 pounds 2,400 nm without refueling. Today, the requirement is for a 110,000- pound payload at a range of 3,200 nm. The Comparison AMC report states the Air Force needs at least • Boeing took 4 years to decide what 120 C-17 aircraft (or equivalents) to meet the kind of airplane it needed to build. DOD DOD goal of handling two nearly took 10 years, from 1971 to 1981, to simultaneous major regional conflicts. 3° decide what kind of airlift it needed to The C-17 is easier to handle, requires build. fewer crew members, and costs less to • Boeing brought customers into the maintain than the C-Ss and C-141s. The C-17 design process early and performed an has less dependence on ground-handling intensive marketing study to determine equipment because of an in-flight recon- what its customers needed. DOD did not figuration feature. It is capable of performing perform a comparable market study until airdrop missions for both cargo and personnel. after Congress tied funding to a mission- On the other hand, the C-5 and the Boeing need study. 747 carry more than the C-17 and travel • Boeing used early customer input to further without refueling. help eliminate late engineering changes, In November 1995, the Non-Develop- which can result in costly production mental Aircraft Alternative (N DAA) study cited problems. DOD and McDonnell Douglas findings similar to those of the earlier RAND made numerous changes to compensate study: DOD could save at least $9 billion if it for faulty wing design, payload, pallets, used a mix of C-17 and 747 aircraft. The Joint and landing gear, which caused costly Chiefs of Staff expressed willingness to production problems. purchase a mix of C-17s and 747-400s. However, DOD decided to purchase the full • Boeing listened to its customers and complement of 120 C-17s because, as Under developed an overall plan for its Secretary Paul J. Kaminski argued, even next-generation aircraft. When Boeing's though a mix of 100 C-17 and 18 C-33 customers said they didn't want a 767X, (Boeing 747) aircraft would cost less in life Boeing built the 777. Conflicting priorities cycle costs, "It brought far less flexibility with of different presidents and their defense it.,,31 secretaries influenced DOD internal priori- ties; DOD needs changed with changing Summary administrations. Politics at all levels affected DOD ability to • Once Boeing defined customer need, determine need for the C-17. Although the outlined its plan, and gaine d board ap- C-17 is now part of the DOD fleet, arguments proval, support for the 777 program re- continue on how many C-17s DOD needs to mained steady. DOD began with a need fulfill its mission. A November 1995 study for a tactical airplane--as determined by concluded that the most cost-effective pur- the Tactical Air Command--and ended chase would include a mix of C-17s and 747s. with a need for a strategic airlift as deter- mined by the President. Congressional support vacillated.

54 A. Lee Battershell 55

19. Hooten, 14-20. No tes 1. David B. Guralink, Webster's New World 20. McAlear, 8. 21. Ibid., 12 Dictionary (Cleveland: Will iam Collins Publishers, 22. Ibid., 13. 1980), 951. 23. Congressional Track Sheets (synopsis of 2. Richard D. DeLauer et al., Report of the congressional authorization and appropriation Acquisition Cycle Task Force (Washington: history prepared by the Office of the Secretary of Department of Defense, Office of the Under the Air Force for Acquisitions for FY81, HAC, 323- Secretary of Defense for Research and Engineering, 324, SAC 8203, Appro. Con. P35 (Washington: March 15, 1978), 45-46. 3. Robert J. Serling, Legend and Legacy, The Department of Defense, 1981). Story of Boeing and its People (New York: St. 24. Johnson,249. 25. McAlear, 7. Martin's Press, 1991), 452. 4. JamesP. Woolsey, "777: A Program of New 26. Ibid., 9. 27. Robert J. Lieberman, "Cost-Effectiveness Concepts," Airframe, April 1991. Analyses of the Air Force C-17 Program," Inspector 5. Serling,285 General Report 92-089 (Washington: Department 6. John Newhouse, The Sporty Game (New of Defense, May 12, 1992), 7. York: Alfred A. Knopf, 1982), 122. 28. Gary Lockhart, interview by author, March 7. Serling,332. 1995, Washington. 8. Newhouse, 122. 29. Jean R. Gebman, Lois J. Batchelder, and 9. Serling,457. Katherin M. Poehlmann, Finding the Right Mix of 10. Dori Jones Yang, "Boeing Knocks Down the Military and Civil Airlift: Issues and Implications, Wall Between the Dreamers and the Doers," vol. 1 (Santa Monica, CA: 1994), 51, 58. Business Week, October 1991,121. 30. David A. Fulghum, "Pentagon Plans 11. Philip M. Condit, President, Boeing Aggressive C-17 Buy," Air Force Magazine, Company, interview by author, November 1994, November 13, 1995, 21. Seattle, WA. 31. John Mintz, "Pentagon Picks C-17 Cargo 12. RonaldR. Fogleman, "The State of Defense Plane," The Washington Post, November 4, 1995, Transportation Preparedness," Defense Transpor- 1,20. tation Journal, August 1994, 45. 13. BettyKennedy et al., An Illustrated History of the Military Airlift Command (I 941-199/)(Scott Air Force Base, IL: Military Airlift Command, undated), 163. 14. David P. Lemaster, "AMST Strategic Derivative Study," memorandum to Chief of the JCS, September 7, 1976. Lemaster was an AMST Performance Engineer at Dayton, Ohio. 15. CharlesL. Johnson II, "Acquisition of the C- 17Aircraft--An Historical Account," Report Number 86-1270 (thesis, Air Command and Staff College, Maxwell Air Force Base, AL, 1986), 28. 16. Johnson,31. 17. Byron R. Hooten, "The C-17: We Need It Yesterday" (thesis, U.S. Army War Col lege, Carlisle Barracks, PA, 1985), 6, 7. 18. Kenneth E. McAlear, "The C-17 and Congress" (thesis, National War College, National Defense University, Washington, 1985), 28.

55 PART II

6. Program Management )

A... [program] can be generally characterized as a set of interdependent activities or tasks, which are integrated to accomplish a specific set of goals and objectives within a specified time period. A. J. DiMascio, The Project Cycle~

For Boeing, the approval process for the other grants approval to begin building. development begins before the company Other milestones require the approval of identifies customer needs; for DOD, the certain corporate officers. In the case of DOD, process begins after DOD identifies customer four milestones require Defense Acquisition needs. Boeing customers include airlines and Board approval. They are concept studies, major airplane leasing companies around the concept demonstration, development, and world; DOD customers include the nine production. In addition, DOD must obtain commanders in chief (CINCs) and aircraft congressional funding approval for its operators. programs each year. Approval for both Boeing and DOD revolves around development phases. As The Boeing Company identified in chapter 3, the development Philip Condit is quick to point out the phases for Boeing are program definition, cost company's written standards are only definition, and production (figure 8). Phase guidelines. Based on needs of its customer names for DOD changed over the life of the and/or lessons learned, Boeing may deviate C-17 project, but as of 1996 they were from its standard corporate guidelines. It is designated as mission need, concept important, however, to understand the basic exploration and definition, demonstration and format of Boeing's process in order to compare validation, engineering and manufacturing differences between approval for the 777 and development, and production and deploy- the C-17. ment. Although officially DOD does not count mission need, identifies concept exploration Phase l wProgram Definition and definition as phase 0, and identifies During phase 1, Boeing studies the market and production as phase IV, this study numbers the identifies a spectrum of designs, while phases I through 5 to compare them more focusing on customer mission requirements. easily with the Boeing phases (figure 9). After soliciting and analyzing input from key Within each phase, there are milestones airlines, the company investigates technology, that require board or management approval. costs, and scheduling considerations to arrive Two milestones in Boeing's cost-definition at a configuration and preliminary design. The phase require board approval--one grants company then determines what personnel approval to offer the product to customers and

57 58 The DOD C-17 Versus the Boeing 777

FIGURE 8. The Boeing 777: Approval Milestones within Each Phase

777

D ,,,,,,,,,,,,,,,,,,,, I D ,,,,,,,,,, D

MILESTONES

skills and facilities it will need to develop the Phase 2--Cost Definition (9 Milestones) proposed aircraft. In this phase, Boeing bases approval on cost of The CEO and one other corporate officer resources and of time (figure 10). A team may begin the definition phase, which determines market potential by studying identifies the need for a product. Officers customer need, production requirements, and representing different Boeing departments then availability of resources. The Vice President, participate at well-defined milestones along Customer Support, communicates with poten- the way. For example, 10 officers must tial customers. Engineers and accountants approve the first milestone to begin program analyze problems with technology and plot definition. They base their approval on written profit potential. They review the configuration evaluations in five areas: market, strategy, to look for component compatibility and other product, innovation, and planning. Only three potential problems. Boeing identifies the officers need to approve the second milestone, engines and suppliers; approves the which evaluates the market and analyzes key price~market~cost relationships; approves mission requirements. At the end of phase 1, authorization to offer; and approves Boeing approves a baseline configuration for engineering design go-ahead. A technology development and eval uation.2 review determines if proposed technology is mature and how its use will affect scheduling. A Lee Battershell 59

FIGURE 9. The DOD C-17: Approval Milestones within Each Phase

C-17 @

Determination ----TConcept l Demonstration Engineering and Production Of Mission Explorationand and Manufacturing and Need Definition Validation Development Deployment @MILESTONES

At milestone 4, when Boeing selects the After the board agrees to offer the plane, airplane configuration, 12 departments officers contact customers for purchase. If participate in the process to approve customers support the plane with orders and a technology and program development. deposit, the board approves go-ahead and the Milestone 7, authorization to offer, requires plane enters production. 3 approval from almost all departments before seeking board approval. At milestone 8, five Phase 3--Production officers study updated evaluations to During early stages of the production phase, determine if customer interest and orders are engineers establish the final airplane enough to continue. If the officers and the configuration and complete detailed designs. board approve the program, the board When the design drawings are 90 percent simultaneously authorizes funds and other complete, Boeing begins manufacturing. The corporate resources. Seven officers approve production phase is distinguished both by milestone 9, to begin a detailed engineering manufacturing and extensive ongoing testing. design. At this point, Boeing produces a Boeing's standard test areas include air schedule, budget requirements, engine conditioning, avionics, landing gears, engines, contracts, configuration, design criteria, and flight controls, special instrumentation, and reso u rce req u i rements. auxiliary power unit. 4 60 The DOD C-I7 Versus the Boeing 777

FIGURE 10. Boeing Model for the Cost-Definition Phase (9 Milestones)

The 777 out product that would sell, and their feedback inspired the board's decisiveness. In any earlier project, most of my time The board trusted its corporate officers. would have been spent solving technical When Condit asked for almost a year longer and contracting problems. Now, I spend than normal to prepare for production on the 70 percent to 80 percent of my time on 777, it readily granted his request. people issues. It is phenomenally important to tell everyone what is going on, and I use every device I can get my Summary hands on. These include orientation Boeing followed its standard course of sessions, question-and-answer sessions, approval for the 777, but with some important information sheets, and just a lot of variations. Customers were consulted early to meetings with everyone from customers to develop a product which had great market production workers,s appeal. Boeing was able to make use of customer input through the use of computers Boeing followed the standard development and an effective design-build hierarchy, which course for the 777 with some important kept management and the board informed of variations. The company involved customers continuing customer interest as well as in the early stages, used CATIA, and used development progress. design-build teams to implement customer feedback and improve communication within Boeing. The Department ofDefense The approval process was highly DOD does not have a Board of Directors that integrated because approving officers were provides approval, oversight, and funding incorporated into the design-build hierarchy. functions. Instead, DOD has the Defense The hierarchy established direct communi- Acquisition Board (DAB) and Congress. DAB cation lines between customers and engineers provides oversight and approves major and between engineers and corporate officers. acquisition development programs. An Corporate officers kept the board informed. independent body, Congress, provides This knowledge flow enhanced the approval, oversight, and funding. approval process in all ways. For example, DAB members include the Under although the board indicated it would grant Secretary and Deputy Under Secretary of automatic go ahead only after receiving 100 Defense (Acquisitions); the Chairman and Vice orders for the 777, when Philip Condit Chairman of the Joint Chiefs of Staff; the appeared before it with a purchase order for Director of Defense Research and Engineering 34 planes, the board granted immediate (DR&E); the Component Acquisition Execu- approval for development. Potential airline tives (CAE) of the Army, Navy, and Air Force; customers believed Boeing had a well-thought the Comptroller of DOD; the Assistant A. Lee Battershell 61

Secretary of Defense for Program Analysis and the military already performed in phase 1. Evaluation; the Director of Operational Test Even though the JROC evaluated several and Evaluation; and the Director and alternative solutions during the need Chairman of the cognizant DAB Committee. assessment, the contractor again explores DAB must approve a weapon system's alternatives, determines costs, and establishes progress before it can enter or exit a phase. 6 preliminary schedules. Because the functions of Congress and A recent study, Reengineering the DAB are independent, phase approval may Acquisition Oversight and Review Process, not include funding. For example, DAB may recommended that DOD transfer the concept approve a phase before Congress approves exploration and definition phase to the funds for that phase/ Conversely, large commanders in chief so end users can projects sometimes span several years between participate more actively in the creative phases and DAB approval, while Congress process] ° Since concept evaluation often approves funds yearly. As a result, Congress duplicates work performed during phase 1, often has more influence over the another solution would be to drop phase 2 development process than the DAB. entirely.

Phase 1--Mission Need Phase 3mConcept Demonstration and The request to validate a need, phase I (figure Validation 9), can originate from many sources, including The DOD demonstration and validation phase the commanders in chief, the Joint Chiefs of usually lasts 2 to 3 years, unless a prototype is Staff, a service component, a separate included. With a prototype, the phase can last operating agency, the OSD technology 5 years or longer. In phase 3, the contractor community, or a contractor. Usually the tests technical concepts identified in phase 2. originator will define alternative solutions for The system program office (SPO) and mission need. Today, before a need leads to contractor review system software and check concept exploration, the Joint Requirements materials for availability or limitations. Oversight Counci.l (JROC) must validate need. Contractors may fabricate some hardware. JROC members include the Vice Chairman of Also, in this phase the SPO and contractors the Joint Chiefs of Staff, the Vice Chiefs of Staff perform a comprehensive review of the project for the Air Force and Army, the Vice Chief of life-cycle, which includes reliability, Naval Operations, and the Assistant availability, and maintainability: 1~ Commandant of the Marine Corps. 8 The differences between the commercial Phase 2mConcept Exploration and and government sector are most distinct during the DOD demonstration and Definition validation phase. Differences occur not in Phase 2 is the "idea" phase and lasts I to 2 tasks and expenses but in timing and use years. 9 Generally, the services award a of technology. The theme underlying the contract for concept exploration to an outside systemic differences is once again source. By definition, a contractor's concept technological maturity. By the time the exploration is narrowly focused. For example, launch customer is secured in the if the contractor is an aircraft manufacturer, an commercial sector, D&V [demonstration aircraft-related solution is likely. In this phase, and validation] for the initial configuration often the contractor re-investigates security of that generation of aircraft is done. In the threats to the country, duplicating efforts military sector, it has just begun. 12 62 The DOD C-17 Versus the Boein 777

The SPO prepares an updated and rations. Even though the C-17 entered into a expanded operational requirements document new phase from 1982 to 1985 called limited and a minimum set of alternatives, identifies development, the major modifications for funding sources, and reevaluates cost, OBIGGS, palletized ramps, and new landing budgeting, scheduling, and contracting. In gear and problems with flight control systems, 1 979 the Air Force prepared a truncated study wing design, and avionics integration made for the C-17 because the President and the concurrent development and production more Secretary of Defense felt that prior research on challenging.. the AMST was justification enough for the The C-1 7 program skipped the first three program. phases--mission need, concept exploration and definition, and demonstration validation. Phase 4BEngineering and Manufacturing DOD argued need was already established. Development Indeed, numerous follow-on studies pointed In phase 4, the SPO evaluates project systems to an airlift deficiency for the U.S. military. economy, efficiency, and effectiveness to Also, many ranking officers in the military felt determine if it is ready for production. The the AMST sufficiently proved technology for SPO also reevaluates need, checks mission the proposed C-X program. Documentation critical computer resources, and reviews the Air Force would normally prepare in these contractor capabilities. This phase ends with early phases was hastily patched together and a plan that includes a manufacture-ready presented to Congress as justification for the design, a comprehensive production plan, and C-X program. logistic arrangements, such as details involving suppliers and equipment. Depending on the The C-17 contract and design maturity, even though DOD cannot legally require it, some It doesn't matter what the military strategy contractors commit their own resources, for is. Sometimes what counts is expediency, reasons that include maintaining a project's compromise, and getting it over with. To momentum, retaining its workforce, and field any new major weapon system in beginning production work. McDonnell today's environment requires sophisticated political skill, thorough analysis, Douglas committed resources at this stage of and--perhaps most of all--tenacity .... In the C-17 development because problems Washington, the battle is never over. 15 during development caused it to exceed the contract ceiling costs.13 Numerous advocates and detractors greatly influenced the C-17 development Phase 5--Production course. Even though Congress had approved The DOD production phase 5 is similar to the AMST program, President Jimmy Carter Boeingls phase 3--managing the production removed funding for it from his fiscal year line and delivery to customers. 14 It is in this 1979 budget--an action that killed the phase the program faces costly rework if program and paved the way for the C-X excessive changes were ordered or the design program, which Carter believed in strongly. was improperly executed. In the military, if General Block began forming his team for the significant rework occurs, the system reverts to C-X program in 1979. the development phase or undergoes a process The C-X program was not universally known as production concurrency. The latter supported. A 1980 letter from Assistant occurred in the case of the C-1 7, causing the Secretary of Defense for Program Analysis and first six aircraft to have different configu- Evaluation Russell Murray to Secretary of the A. Lee Battershell 63

Air Force Hans Mark questioned the capability with the C-17. Furthermore, support of the C-X versus the C-5 and challenged vacillated. In November 1 981, the Army and figures the Air Force used. Murray wrote, "1 Air Force Chiefs of Staff and the Marine Corps hasten to add that I am not an advocate of the Commandant sent a strongly worded letter to C-5 (yet), but merely its temporary public Congress endorsing the C-17. Two months defender for lack of anyone else to play that later, Richard DeLauer, Defense Under role. -16 Secretary for Research and Engineering, and Because many military leaders believed Frank Carlucci, Deputy Secretary of Defense, the AMST had proved technology for the C-X, expressed doubts about the C-1 7. Following they attempted to push the program through the recommendations of a special committee Congress without the normal preparation assigned to determine the nation's airlift required for such a program. According to needs, DOD purchased 50 C-5s to redress the Barbara Westgate, "USAF leadership i mmed late strategic airlift shortfall. attempt[ed] to define a program on extremely The Air Force decision to buy the C-5s vague guidance yet survive the scrutiny of angered Army officers who felt they were cut Congress who wanted . . . a [mission need out of the decisionmaking process on a statement] and funding profiles providing great program affecting their mission. Secretary of program detail. "~z the Army James R. Ambrose expressed his The inadequate documentation, coupled anger in a letter to the Air Force Secretary in with conflicting testimony on military needs, February 1 982: led Congress to reject the proposal. After the House Armed Services Research and It is one more illustration of the likely and Development Subcommittee voted against the unreasonable fate of adequate airlift in the C-X, Defense Secretary Brown requested a full hands of an Air Force [that] has its hands full with the MX, B-l, ATM, satellites, etc. committee hearing. This effort to bypass the I continue to believe, and, indeed, with subcommittee's authority angered several increasing strength, that the deployment members of Congress. When the full situation for ground forces will not be committee met, Brown failed to appear, straightened out until control of its destiny sending instead a lower ranking delegation of is given to the using service. To abdicate it civilian and uniformed personnel. Offended in this way to such obvious and long by this slight, the committee questioned the enduring prioritization at the bottom of the witnesses on technical matters beyond their list is perpetuating a scandalous capabilities and then voted against funding. ~° situation. 19 After intensive lobbying by both President Carter and Defense Secretary Brown, the joint On July 16, 1982, President Reagan sent a committee finally approved $35 million to letter to Representative Trent Lott, Minority begin research and development if DOD Whip of the House: adequately demonstrated it needed a new cargo plane. Our proposed airlift program currently before the Congress includes four related With the January 1 981 departure of Carter components. First, we intend to buy 50 and Brown, the C-17 lost its greatest additional C-5 aircraft to quickly reduce advocates. Although Reagan's mandate to the critical shortfall in outsize capacity. rebuild the nation's defenses increased Second, we will increase our air available funds, numerous other glamorous refueling/cargo capability by procurement and politically visible weapon systems, such of 44 KC-10 aircraft. Third, we will as the B-l, M-X, F-15, and F-16, competed expand the civil reserve air fleet ...... enhancement program, under which Summary domestically owned carriers can be used Kenneth E. McAlear captured the essence of in time of need. Finally, we plan to use available fiscal year 1981 funds in the C-X difficulties the Air Force encountered in selling program to continue research and the C-1 7 within both DOD and Congress: development on the C-17, thereby preserving the option of developing the The Air Force and the Military Airlift C-17 for procurement in the late 1980s to Command have simply not done an provide outsize capability and be a adequate job on Capitol Hill and within potential replacement for C-130 and the Department of Defense in the last 10 C-141 aircraft. We believe this years trying to justify a new airlift airplane. combination of actions is required to Shortcomings in solid airlift doctrine, develop the airlift capability we urgently analysis, political sophistication, articulate require. 2° spokesmen, and bureaucratic infighting have all contributed to the failure. 22 In July, 1 982, Air Force Secretary Verne Orr authorized award of a contract to In the late 1970s, two high-powered McDonnell Douglas for a modestly paced advocates, President Carter and Defense research and development program. This Secretary Brown, overcame opposition for the $31.6 million development contract for work C-17. However, President Reagan and through September 30, 1983, preserved the Defense Secretary Weinberger had different original source selection contract for views of how DOD should solve its airlift McDonnell Douglas. 21 shortfall. Weinberger allowed the C-17 After 2 years of low-level development, contract to proceed on low-level development the C-17 was ready for full-scale development. in late 1982 but did not approve full-scale However, because DOD had just purchased development until 1 985. several new cargo planes, Congress expressed reluctance to fund full-scale development for Comparison the C-17, The Senate requested a study to • Boeing performed an extensive cost- prove need. Only after the report satisfied definition phase to compare customer Congress did it approve the $123 million wants with technology maturity, cost, and requested in the 1 984 presidential budget. the price its customers were willing to pay. In the meantime, a milestone review for DOD did not initially fully evaluate full-scale development presented to the alternatives for cost savings. Defense Systems Acquisition Review Council • Boeing's board of directors provides (predecessor of DAB) in November 1984 approval, oversight, and funding. After caused Chairman Richard DeLauer to request board approval, Boeing remained a bottom-up analysis of the C-1 7 program, to committed to the 777 throughout include requirements, scope, and content. development. DOD provides approval Defense Secretary Weinberger approved full- and oversight and Congress provides scale development February 1985. Nearly a approval, oversight, and funding. After year later, on December 31, 1985, the Air DOD and Congress approved the C-17, Force finally approved a restructured full-scale both continued to vacillate on approval development contract with McDonnell and funding. Douglas. A. Lee Battershell 65

• Boeing used a sophisticated computer Notes design program to help facilitate commu- 1. A.J. DiMascio, The Project Cycle, Military nication among its integrated teams of Project Management Handbook (New York: engineers, customers, marketers, and McGraw-Hill, 1993), 10.5. 2. BCAC Planning and Commitment Policy, production specialist. Early customer Boeing internal guidelines for program involvement helped eliminate last minute management (Seattle, WA: Boeing, undated), PM engineering changes that create costly 58 3003. production problems. DOD decided not 3. Ibid. to use a computer design program and 4. Ibid. made engineering changes that created 5. Philip Condit, quoted in Jeremy Main, costly production problems. Excessive "Betting on the 21 st Century Jet," Fortune, April 20, changes caused the C-17 to undergo 1992, 117. significant development problems even 6. JosephH. Schmoll, Introduction to Defense Acquisition Managment (Ft. Belvoir, VA: Defense when it entered production. Systems Management College Press, 1993), 13. • Boeing added almost a year to its 7. Ibid, 32. development program because it needed 8. Ibid., 22. more time to accommodate problems 9. Ibid., 27. inherent in a new computer design 10. John S. Caldwell, Reengineering the program, highly computerized avionics, Acquisition Oversight and Review Process and a new organization approach. DOD (Washington: Department of Defense, 1994), 24- used a highly success-oriented schedule 26. because it believed the C-1 7 technology 11. Schmoll, 27. was mature and would not result in many 12. Michael S. Mutty, "A Comparison of Military and Commercial Aircraft Development" problems. (thesis, Industrial College of the Armed Forces, • Boeing followed its standard Washington, 1993), 21. development structure with some 13. Schmoll, 27. enhancements that brought customers into 14. Ibid. the design process and improved internal 15. Kenneth E. McAlear, "The C-17 and communications. The assurance that Congress" (thesis, National War College, National Boeing could sell the 777 gave the board Defense University, Washington, 1985), 33. confidence to add almost a year to its 16. Charles L. Johnson, "Acquisition of the C- normal production process. 17 Aircraft--An Historical Account," (thesis, Air DOD did not follow its standard Command and Staff College, Maxwell Air Force development structure for approval. It Base, AL, May 1986), 100. 17. Barbara Westgate, "Weapon System skipped phases I through 3. Support for Jeopardy! The Answer is: The C-17" (thesis, the project vacillated under different Industrial College of the Armed Forces, National presidents and funding was further Defense University, Washington, 1995), 9. threatened when Congress learned of 18. McAlear, 12. problems with the program. There was no 19. Ibid. forethought given to extending time lines 20. Johnson,265. before the program began because military 21. Ibid., 267. leaders believed technology would not 22. McAlear, 33. present problems. ( 7. TechnologyRequirements and Problems )

Technology must earn its way on to a Boeing plane .... In short, our efforts will continue to be customer driven, not technology driven. Philip M. Condit1

Studies of DOD acquisition over the past 25 In the 1 970s and 1980s, Boeing chose not to years reveal that DOD methods resulted in include the fly-by-wire system, flat-panel development programs spanning 11 to 21 video displays, and advanced propulsion years, and by the time the weapon systems systems on its planes, s Even though the were delivered, the technology was out of technology existed for these features, Boeing date. Not surprisingly, the length of time to did not consider it mature enough for use in its develop systems was also linked to a doubling commercial planes. Before going into of costs. production on any high-tech system, Boeing Jacques Gansler warns against govern ment imposes Gansler's design-to-cost constraints. preoccupation with technology without regard Evaluations of technology often include to cost. He believes that until DOD trade-offs of performance, technology, and introduces affordability into its requirements manufacturing investments. In 1990, new and shifts from a design-to-performance features on the proposed 777 included: approach to a design-to-cost approach, it will procure fewer and fewer weapon systems each • The fly-by-wire system year. Eventually, Gansler speculates, the • Advanced liquid-crystal fiat-panel United States will not have enough modern displays systems to present a credible defense posture. 2 • A two-way digital databus patented by According to Gansler, technology has Boeing (Aeronautical Radio Inc., ARINC generally introduced improved performance, 629) but "in the defense world, costs have risen • Aerodynamically efficient wings along with performance." Comparatively, • Powerful thrust engines "commercial computers, televisions, and other • Composite materials in the airframe items that use similar technology have • An advanced composite empennage. improved dramatically in performance and gone down dramatically in price. 'n Technical Problems Although Boeing did not consider new features on the 777 as technical break- The Boeing Company throughs, design methods the company chose were on the leading edge of technology. Philip The 777 causes me to sit bolt upright in bed periodically. It's a hell of a gamble. Condit referred to Boeing's computer design There's a big risk in doing things totally technology, which eliminated the mockup, as differently.4 an "order of magnitude change." Of course,

67 68 The DOD C17 Versus the Boein 777 ...... ~.~......

there were some startup difficulties associated ARINC 629. The electronic highway with innovative design technology as well as along which the 777 computers exchange with some of the new technology features on data, the ARINC 629 is an updated version of the 777--particularly with avionics. the ARINC 429 found on the C-17. ARINC Avionics Integration. Avionics cover a 629 features one wire running the length of multitude of high-tech electronic devices the aircraft to which every other computer is found on modern aircraft; ~ on the 777 they connected. Because all computers communi- include: cate with each other and with the central processing units along this system, ARINC had • The fly-by-wire system with ARINC to be operational before Boeing could test its 629 other systems. Early versions of the powerful, • The Aircraft Information Management integrated ARINC circuit chips overheated and System (AIMS) would not transmit data. 9 • The Flight Management System (FMS) Aircraft Information Management System • The Primary Flight Computer(PFC) (ALMS). Honeywell developed AIMS, the • Actuator Control Electronics (ACE). system that manages data exchange among most 150 processors on the 777. Departing The Fly-by-Wire System. This uses from the fail-safe architecture of separate electrical signals rather than mechanical links computer functions, Honeywell consolidated to move airplane control surfaces such as the most of the 777 digital processing into two rudder and ailerons. It performs stabilizing central computers. To keep a bug in one functions that permit use of lighter tail and processing unit from corrupting other units, wings and reduces the need for cables, Honeywell partitioned the software, which pulleys, brackets, and actuators. Because the required 18 preprogrammed application- system has fewer moving parts than standard specific integrated circuit (ASIC) chips. systems, mechanical malfunctions are fewer. Developing these chips required a year longer The system provides protection against than anticipated. Don Morrow of Honeywell inadvertent maneuvers and is easier to handle admitted that the company "really because of automatic compensation for gear, underestimated what it would take to develop flap, and thrust changes. 7 However, because [AIMS] .... As a result, we went downstream of the complex interactions between hardware a little farther than we wanted. "~° and software, fly-by-wire is extremely difficult Ada Software Language. DOD originally to build and test. developed Ada, a single-standard software Although Boeing considered fly-by-wire language, to cut costs for supporting more technology mature, it could not assemble and than 300 existing program languages and to integrate the fly-by-wire system until it solved provide greater portability for use in planes problems with other components--the ARINC and other weapon systems. Ada prevents databus, AIMS, and the software coding. isolated faults from shutting down the entire Problems with avionics began early on and system, protects against real-time bugs, has continued throughout testing. For example, high host-target portability, and does not allow the rudder shut down because engineers had programmers to take shortcuts, which not anticipated how much the tail flexed when sometimes cause errors.1~ However, pro- the rudder moved. To solve the problem grammers for the 777 complained that early Boeing had to rewrite computer codes to versions of the code were problematic and better control the ailerons, slats, and rudders. 8 caused delays when developing the primary A. Lee Battershell 69 flight computer. 12 Boeing was the first wanted to avoid similar embarrassing and company to use Ada in a commercial aircraft. costly problems on the 777; the company's Primary Flight Computer (PFC). Three goal was to deliver a fault-free aircraft on time. primary flight computers calculate precise Startup problems with CATIA threatened adjustments in response to the autopilot and Boeing's delivery schedule. According to to the flight management computer that Ronald A. Ostrowski, director of engineering, controls destination, course, and altitude. the challenge was to "convert people's Boeing's contractors had problems writing thinking from 2-D to 3-D, [which] took more software codes for the three computers and time than we thought. I came from a paper integrating codes with the ARINC databus. 13 world, and now I am managing a digital Solving problems in the avionics system took program. "16 Instead of allowing the schedule over a year longer than Boeing anticipated. In to slip because of CATIA, Boeing increased order to maintain its schedule, Boeing flew human resources and spent the money test flights with uncertified computers; the FAA necessary to overcome problems. Boeing certified the 777 as safe only 1 month before probably spent $7 billion for research and delivery of the first plane to United Airlines. development, although Boeing has not confirmed these estimates. Alan Mulally, Computer and Aircraft Design Senior Vice President for Airplane Development, defended Boeing's upfront If Boeing's new approach to design works, expenditures: the 777 will be an efficient, economic plane with a lot fewer bugs than new In our business, it's very rare that you can planes usually have. As a result, Boeing move the end point. When you make a could save the millions it usually spends commitment like we made, fixing design problems during production [customers] lay out.., plans for a whole and after the plane has been delivered to fleet of airplanes.... They will have plans the airlines. 14 to retire old airplanes .... It just seemed best to keep the end date the same and Boeing's decision to change design and add some more resources.17 production practices emerged as a means of cutting costs after analysis revealed primary Boeing's decision to press forward with the cost drivers at the company were downstream new design technology proved worthwhile. changes (those made after development) and CATIA-designed parts made in factories all over the world fit together with almost no rework on the factory floor. In the past, Boeing engineers were still need for rework. The wing assembly tool that designing when manufacturing began. They Giddings & Lewis in Janesville, Wisconsin, put often made changes as problems came to light together and the world's largest C-frame on the factory floor, on the flight line, or even riveting system wing assembly tool from Brotje after delivering the plane to the customer. For Automation of Germany both ran with CATIA. example, when Boeing delivered the 747-400 In Kansas, Boeing's Wichita Division built the to United in 1990, it assigned 300 engineers lower lobe (belly) of the 777 nose section; the to eliminate bugs undetected earlier, is United skins of the airframe came from Japan. 18 officials were dissatisfied with the late delivery Charlie Houser, product line manager at of the 747 and with the costs sustained in Wichita, described the process: rescheduling flights and compensating CATIA and digital preassembly let us find passengers for maintenance delays. Boeing areas of potential interference before we 70 The DOD C-17 Versus the Boeing 777

started production. The individual costs and operating costs unnecessarily. "22 assemblies fit together extremely well, Ultimately, if Boeing had not delivered the especially the passenger floor .... It went together smoother than any floor grid of twin-engine 777, another company would any size that we've ever built in Wichita. 19 have done so. Airbus now has a twin-engine plane (A330) that competes favorably with the Engines 777. 23 For the 777, Pratt and Whitney and Boeing chose three companies to supply Rolls Royce built derivative engines by scaling engines for the 777: Pratt and Whitney, up older designs. GE designed a completely General Electric (GE), and Rolls Royce. The new engine. engines were described as: When the 777 lifted off on its first test flight in 1993, two balls of flame and smoke the largest and most powerful ever built, belched from Pratt and Whitney engines. The with the girth of a 737% fuselage and a differences in the rates of thermal expansion thrust, or propulsive power, of between between the interior components of the engine 71,000 and 85,000 pounds compared with and the compressor case caused the casing to about 57,000 pounds of the latest 747 expand faster than the actively cooled interior engine. Key factors in this performance are engine components. To equalize the new, larger-diameter fans with wide-chord temperatures, Pratt and Whitney engineers fan blade designs and bypass ratios changed the software commands directing the ranging from 64o-1 to as high as 9-to-1. blade angle of the first four compressor stages. The typical by-pass ratio for today's wide-body jet engines is 5-to-1. Pratt and The engine worked perfectly on the second flight. 24 Whitney is furnishing the PW4000 series of engines, General Electric is offering the Boeing also grounded a plane in May GE90 series and Rolls-Royce is offering the 1995, after a GE engine backfired in a Trent 800 series of engines.2° spectacular display of flame and smoke. Improper airflow caused the backfire, which Boeing's success in finding manufacturers GE solved with methods similar to those used willing to invest in new engine technology by Pratt and Whitney. 2~ GE and its French represented a significant shift in attitude collaborator, SNECMA, chose composite toward technology development. Many materials for the new engines because of their American companies were unwilling to take lighter weight and ability to withstand the leading steps in technology unless the extreme heat of high-compression engines-- government picked up the tab. For example, in even though Rolls Royce had tried and failed the 1960s, GE would not take risks to develop to use composites in the 1980s. 26 In 1995, at a high-bypass jet engine for the 747. Yet, GE the SNECMA engine test sight in Villaroche, participated in a military program, the C-5A, France, bird-strike tests on the engine knocked where the government absorbed the costs to out three blades. To solve the problem, GE develop that same high-bypass technology. 21 made 40,000 computer calculations for stress Boeing pushed propulsion technology on on the blade. Within a few months, engineers the twin-jet 777 because all airlines had redesigned a part which enabled the engine to expressed interest in reducing operating withstand bird-strike tests. 27 expenses. As Jerry Zanatta, director of flight test engineering pointed out, "Flying with two Summary engines allows redundancy that a pilot wants Boeing committed to an airplane that would in order to ensure safety of flight. Flying with serve its customers and ensure the company a more than two engines only increases fuel place in the market for 50 years. The company A. Lee Battershell 71 was also committed to changing its design and flight crew of only two pilots and one Ioadmaster. 32 manufacturing process. Given these commitments, Boeing's board and manage- The technologies for the C-17 were not ment focused on what they had to do to make new, but the way technologies were applied it happen. When Boeing encountered was. The C-17 depended on a complex, problems in the design-build system and with integrated avionics system to reduce the crew avionics, it absorbed the costs and pushed to two pilots and a Ioadmaster. By forward to meet its delivery schedule. comparison, the C-1 41 and the C-5 required as many as seven people to perform similar The Department ofDefense functions. 33 Introducing STOL to an aircraft designed to carry 5 times as much weight as Technology on the C-17 was not as well the AMST involved major modifications to the defined as some would have us believe. 28 "already proved" technology, including a new wing: "There is more technology in the wing I was shocked in the fall of 1992 tO than in any other part of an airframe .... discover that this airplane was being produced from paper, that they did not Production schedules are keyed to wings. "34 have a CAD/CAM system, that they had never had a CAD/CAM system.29 The AMST In 1 971, the Air Force contracted with both Secretary of Defense Harold Brown Boeing and McDonnell Douglas to build an justified using a fixed-price contract to AMST prototype that could fly a 400-nautical produce the C-17 because military leaders mile-radius mission, carry 27,000 pounds, and believed the technology for the C-17 was land on short runways using short takeoff and mature. AMST prototypes demonstrated landing technology. Such an aircraft, in the short-field take-off-and-landing capability, and words of General Paul K. Carlton, would be "a by the late 1 970s, the hardware and software miniature C-5. "35 In 1975, the McDonnell were considered off the shelf. 3° The Air Force's Douglas YC-15 prototype successfully request for proposal stated, "Undue com- demonstrated powered-lift technology that met plexity or technical risk will be regarded as mission requirements. poor design. "3~ After McDonnell Douglas won In 1 976, Air Force Chief of Staff General the contract, it wrote this low-risk technology David C. Jones asked if a single derivative theme into the C-1 7 technical planning guide: model of the AMST could be used in both a strategic and tactical airlift capacity. 36 Gordon The C-17 systems are straightforward in Taylor and Gordon Quinn from the design, are highly reliable, and represent Aeronautical Systems Division at Wright- current technology. For example, a version Patterson Air Force Base, Ohio, investigated of the C-17 engine has been proven in the ability of the AMST to carry the M-60 commercial airline service since 1985. Main Battle tank, weighing 110,000 to New-technology systems, like the on-board inert gas generating system 117,000 pounds, with ranges of 2,000, 3,000, (OBIGGS), are used only where they offer and 4,000 nautical miles. Taylor and Quinn significant advantages over previous concluded that using a derivative aircraft in methods, computer-controlled routine strategic airlift would significantly multifunction displays and head-up increase both the weight and cost of the displays enable the aircraft to be flown AMST. To restructure the AMST from a tactical and all its missions accomplished with a to a strategic aircraft would require full-scale 72 The DOD C-17 Versus the Boein 777

development (a larger wing, heavier structure, He reasoned that the kinds of equipment MAC and different aerodynamics). Even in a needed to haul over essential routes--from non-STOL capacity, the wing, a major airframe West Coast bases to Hickam Air Force Base, component, would have to undergo Hawaii, and East Coast bases to Lajes Airfield considerable change. 37 In 1976, Brigadier in the Azores--did not require a plane with a General Phillip Larsen, USAF, Deputy Chief of 167,000-pound capacity. Johnson claimed the Staff, Systems, Air Force Systems Command, Air Force inflated the weight requirements wrote, "It would not be cost effective to during contract negotiations because incorporate a STOL capability in a strategic McDonnell Douglas asserted it could build an airlift derivative aircraft. It would be aircraft that would carry 1 72,000 pounds for necessary to increase... [the] YC-15 wing 2,400 nautical miles. He claimed reducing the area 69 percent and gross weight 115 payload to 160,000 pounds would better meet percent. "38 the needs of MAC: On December 10, 1979, Program Management Directive R-Q 6131 (3) formally This was not a reassessment of canceled the AMST program. On that same requirements as much as it was a day, Directive R-C 0020 (1) provided formal refinement of the original requirements.. direction and guidance for full-scale • . McDonnell Douglas, in competing for engineering development of the C-X. This the contract, offered more than what MAC directive ordered that the C-X skip standard needed .... All of us, being eager to do steps in the program process, most more, said sure, we'll write the specs at the higher level. 43 significantly, the phase for demonstration and validation, because "the new aircraft will use existing technology.., since the Air Force When the C-1 7 was in the early stages of had demonstrated and proved advanced development, its payload requirement was technology concepts and operational utility in 160,000 pounds. At this requirement and the AMST program. "39 This "phase omission" exercising STOL capability, the aircraft needed proved to be an error in the C-17 program more powerful engines. Pratt and Whitney and process. Rolls Royce were capable of producing such engines, but John M. Deutch, Under Secretary Changing Payload Requirements of Defense (A&T) considered the change too costly. Deutch preferred to reduce payload The payload requirements for the C-17 specifications rather than change engines-- changed at least five times over the course of especially since most agreed the C-1 7 payload its development. The 1981 request for requirements were set too high at the proposal ordered a STOL plane that could beginning. 44 General Fogleman asserted, "We carry a maximum payload of 130,000 didn't need a plane to carry a 1 72,200 pound pounds. 4° By the time the Air Force awarded payload then and we don't need a plane to the contract in 1 982, it had raised the key carry 1 60,000 pounds now. payload requirement to 1 72,200 pounds for a 2,400-nm range. 41 In 1988, DOD decreased The original requirement set in the early the payload to 1 67,000 to compensate for a 1980s was for a 130,000 pound payload, palletized ramp and OBIGGS system that the weight of an M-1 tank. This increased the weight of the aircraft by 5,000 specification . . . was linked to the Cold pounds. In 1991, MAC commander General War goal of transporting 10 Army divisions Hansford Johnson, USAF, reduced the payload to Europe in 10 days, rather than dealing requirement once again, to 1 60,000 pounds. 42 with the types of regional contingencies the Pentagon now is focusing on .... An A. Lee Bat~ershell 73

absolute critical leg for us in this new fly-by-wire became necessary when initial world we are living in is how much can wind tunnel testing revealed pilots using a this airplane carry 3,200 miles.... So we manual system could not prevent the aircraft established a 110,000-pound payload from going into an unrecoverable stall during threshold at the 3,200-mile range which short-field landings at a slow, high-angle did not exist before.4s approach, s° Introduction of the fly-by-wire system brought with it complex problems of The C-17 program did not begin to computer integration similar to those overcome its technology problems until top experienced at Boeing. military leaders such as Deutch and Fogleman Flight Control System. Shortly after focused realistically on O17 requirements McDonnell Douglas directed the Sperry compared with customer needs. By January Corporation to use the fly-by-wire system, 1995, in a concerted effort to establish Honeywell purchased Sperry. Honeywell realistic requirements, DOD, Congress, and reset the date for flight-qualified software to McDonnell Douglas agreed to decrease the April 25, 1 991, thereby extending delivery 4 payload and increase the range requirements. years from the date McDonnell Douglas first ordered the system in 1987. Not satisfied with Technical Problems the extended delay, the Air Force Program From the beginning, key players in the C-17 Office convinced McDonnell Douglas that GE program underestimated the technical could deliver the fly-by-wire system. challenges of the project. Roger A. Panton, McDonnell Douglas ended Honeywell's chief of engineering for the O1 7, said, "Our contract in July 1989. s~ GE delivered its primary technical problem with the C-1 7 was system for integrated testing October 1 990. s2 integration. We grabbed too much off the shelf Mission Computers. The core of the C-1 7 and tried to put it together. "4~ Off-the-shelf avionics integration is the mission computers. technology included a fly-by-wire system, Three computers receive information over the advanced materials, engines, software, and a databus from on-board systems. The powered lift that the McDonnell Douglas computers compare information, analyze data, YC-1 5 prototype demonstrated in 1 975. perform calculations, and display information In a 1993 report, the Defense Science to the pilot and copilot. The displayed Board also Cited lack of computer-aided information includes functions a flight design as a contributor to program engineer normally performs, such as difficultiesS Deutch added to this assessment determining position and velocity, some of the program's other weaknesses: determining weight, calculating airdrop requirements, and gauging small airfield • Technical risks involved in flight test conditions, s3 software and avionics integration McDonnell Douglas awarded a fixed-price • Structural deficiencies in the wings, contract to Delco in July 1 986 to develop the flaps, and slats mission computer, s4 In August 1988, an • Uncertainty of flight-test program independent review team--which included requirements. 48 personnel from McDonnell Douglas, Hughes Electronics, and the Air Force--concluded Avionics Integration. Problems occurred Delco had not completed engineering when DOD changed from a manual flight requirements and McDonnell Douglas had not system with electronic control to a adequately defined those requirements. In July quadruple-redundant electronic flight control 1 989, McDonnell Douglas terminated Delco's system (fly-by-wire).49 The change to the 74 The DOD C-17 Versus the Boeing 777

contract and assumed responsibility for and modifications to correct them added 700 managing the software. pounds to the weight of the aircraft. 6° A Because McDonnell Douglas failed to CAD/CAM system similar to Boeing's CATIA spell out language requirements to its software might have prevented both problems. subcontractors, the C-17 evolved with software in almost every computer language Summary known at the time. ss GAO described the C-1 7 DOD and its contractor underestimated the as "the most computerized, software-intensive scope of technological changes and their costs aircraft ever built, relying on 19 different when they changed the mission of their embedded computers incorporating more than aircraft from tactical to strategic. To meet 80 microprocessors and about 1.3 million changing weight requirements, McDonnell lines of code." As late as 1995, Deputy Douglas had to add computerized flight Program Manager John Wilson said problems controls. Lack of experience and mis- with the software were ongoing: management of software contracts caused This is a tough area. The C-17 System delays and increased costs to the project. A Program Office recognizes that additional math error caused major problems in the throughput could be beneficial. Although wing, and sloppy work created fuel leaks. the computer performs the basic mission, it is slow and does not have the Comparison throughput and user friendliness we would • Boeing evaluated technology carefully like. We are working the area.$6 and took care not to push it further than the market required. DOD goldplated its Wings. In September 1 991, persistent fuel payload requirements and pushed leaks around the wings held up delivery for technology beyond the needs of its nearly a month while technicians located the customers. leaks and determined cause. Jim Berry, • Boeing required its subcontractors to Vice-President and General Manager at use Ada to enforce discipline on its McDonnell Douglas, attributed the fuel leaks computer system. DOD allowed its to sloppy workmanship caused by lack of contractors to use a number of production discipline and unscheduled works noncompatible computer languages. • Boeing used a computer to design its In October 1992, the C-17 failed a aircraft and built a new lab to integrate wing-strength test. Even though the Air Force and test avionics. McDonnell Douglas had reduced the maximum payload designed the C-1 7 on paper. requirements from 167,000 pounds to • When Boeing encountered technical 160,000 pounds, the wings were still not problems in CATIA and the fly-by-wire strong enough to handle a full payload at the system, the company took immediate steps required 150 percent safety factor, s8 Causes of to correct them; Boeing remained the failure were attributed to a computational committed to its delivery date and error in the initial wing design and improper allocated resources to solve its problems. methods of determining compression stress. When DOD learned that McDonnell McDonnell Douglas repeated the error Douglas would miss its deadline, it throughout the wing structure, further curtailed funding and extended the complicating correction procedures, s9 delivery date. The failed wing-strength test and fuel leaks cost McDonnell Douglas more than $1 billion, A. Lee Battershell 75

DOD often takes so long to overcome McDonnell Douglas C-17 support team, technology problems that, by the time a credits integrated teams for helping change the weapon is complete, the technology is C-1 7 program from a failure to a success. He outdated. In Affording Defense, Jacques said that with integrated product teams, Gansler summarizes DOD methods: "The "Problems bubble up faster and they are unreasonably long acquisition cycle leads to resolved faster. "63 The F-22, the B-2, and the unnecessary development costs, to increased V-22 Osprey are all benefiting from CATIA 'gold plating,' and to the fielding of obsolete and the strides Boeing made in composite technology. "61 Even though the C-17 is the manufacturing. However, the military has not most versatile cargo plane the United States adopted the design-to-cost approach found in has, DOD was not able to produce it until it commercial industry. For example, the F-22 solved major technology problems. Although faces more than one-half billion dollars in cost Boeing began development of its plane several overruns in the design phase alone. 64 years after DOD began development of the C- When Dr. Kaminski became Under 17, it completed the 777 at about the same Secretary of Defense for Acquisition and time as the C-1 7, Boeing used the same level Technology in 1994, he emphasized several of technology, and in some cases--as with initiatives to overcome problems enumerated computer design, flat-panel displays, increased in the C-17. One is using cost as an propulsion, and advanced manufacturing independent variable (CAIV). The CAIV process--it used higher technology. initiative encourages program managers to Jacques Gansler illustrates the difference work with users and decide, based on the between the defense world and the mission, if program requirements are worth the commercial world by observing the practices cost. While he admits DOD has not of new engineers in each setting: completely adopted CAW, he points to Army success with the SMART-T program, a program A typical American engineering student to develop a tactical communication terminal. (graduate or undergraduate) is taught how Following the CAIV initiative, the Army to design the "best system." Using program manager worked with users to change computers, sophisticated mathematics, requirements and reduce costs from $790 and all their engineering skills, these million to $250 million. 6s In addition to students set out to design systems that will CAIV, Dr. Kaminski also helped rewrite achieve the maximum performance. If regulations to reduce acquisition cycle time they enter the commercial world, they are taught that their designs should be and encouraged program managers to use modified to reduce the likely costs of modeling and simulation to better manage production and operation. However, if system engineering and integration risks. they enter the defense world, they continue to use the design practices they Notes learned in school, and cost-cutting 1. Philip M. Condit, "Focusing on the becomes an exercise for the Customer: How Boeing Does It," Research manufacturer.62 Technical Management, January-February, 1994, 35-37. The military has learned some lessons from 2. Jacques Gansler, Affording Defense commercial developers. The F-22 and now the (Cambridge, MA: MIT Press, 1989), 231. C-17 acquisition programs are using the 3. Ibid. integrated product team concept Boeing 4. Dean Thornton, quoted in Jeremy Main, "Betting on the 21 st Century Jet," Fortune, April 20, developed in its design-build process. Jay 1992, 102. Kappmeier, general manager for the 76 The DOD C-17 Versus the Boein 777

5. Michael S. Mutty, "A Comparison of 30. Charles L. Johnson II, "Acquisition of the C- Military and Commercial Aircraft Development" 17 Aircraft" (thesis, Air Command and Staff (thesis, Industrial College of the Armed Forces, College, Maxwell Air Force Base, AL, 1986), National Defense University, Washington, 29, 30. 1993), 8. 31. Ibid. 6. John Newhouse, The Sporty Game (New 32. C-17Globemaster III, Technical Description York: Alfred A. Knopf, 1982), 158. and Planning Guide (Long Beach, CA: McDonnell 7. Arthur Reed, "New A330/340, 777 Douglas, 1993), II1-1, IV-1. Systems," Air Transport World, March 1994, 33. RustyMoen and Pete Lossi, C-141 pilots, 63-68. interview by author, February 1995, Washington. 8. ByronAcohido, "Computer With Wings," 34. Newhouse, 193. The Seattle Times, June 5, i995, A-9. 35. BettyKennedy An Illustrated History of the 9. Ibid,A-8. Military Airlift Command (1941-1991) (Scott Air 10. Ibid. Force Base, IL: Military Airlift Command, undated), 11. Martin C. Libicki, Standards: The Rough 163. Road to the Common Byte (Washington: National 36. David C. Jones, "Use of AMST Derivative Defense University Press, May 1995), 28-30. in a Strategic Airlift Primary Mission Role," 12. Acohido, A-8. message to Andrews Air Force Base, MD, March 13. Ibid. 10, 1976. 14. Main, 104. 37. Gordon Taylor and Gordon Quinn, 15. Ibid., 108. "Conceptual Design Analysis of AMST's with 16. James P. Woolsey, "777," Air Transport Strategic Airlift Derivative Capability" (Wright World, April 1994, 23. Patterson Air Force Base, OH: Aeronautical 17. Alan Mulally, Senior Vice President, Systems Division, April 1976), Summary, C. Airplane Development and Definition, The Boeing 38. Phillip Larsen, Deputy Chief of Staff, Air Company, interview by author, November 1994, Force Systems Command, "Use of A/vlST Derivative Seattle, WA. in a Strategic Airlift Primary Mission Role (message 18. Allan F. Benson, "Boeing Builds 777 On 090014Z Mar 76)," letter to USAF/RD Line," Assembly, January 1995, 35-36. headquarters, May 11,1976. 19. Ibid., 38. 39. Johnson,30. 20. Main, 104. 40. JohnD. Morrocco, "Easing C-17 Specs No 21. Newhouse, 118. Threat to AMC," Aviation Week & Space 22. Jerry Zanatta, Director, Flight Test Technology, January 3, 1994, 26. Engineering, The Boeing Company, interview by 41. Johnson, 182. author, November 1994, Seattle, WA. 42. Robert J. Lieberman, Cost~Effectiveness 23. PaulDuff),, "More Making Do With Two," Analysis for the Air Force C-17 Program, Inspector Air Transport World, June 1994, 199. General Report No. 92-089 (Washington: 24. Stanley W. Kandebo, "PW4084 Surge Department of Defense, May 12, 1992), 7. Problem Resolved, Flight Test Nears Completion," 43. John D. Morrocco, "MAC Satisfied C-17 Aviation Week & Space Technology, November 29, Meets Requirements, But Fears Further Production 1993, 32. Delays," Aviation Week & Space Technology, 25. William M. Carley, "Engine Troubles Put September 9, 1991, 52-53. GE Behind in Race to Power New 777s," The Wall 44. Morrocco, "Easing C~17 Specs," 26. Street Journal, July 12, 1995, A-l, A-9. 45. Ibid. 26. Newhouse, 173, 174. 46. RogerA. Panton, Chief of Engineering, 27. Carley,A-1. C-17 Program Office, interview by author, 28. Ron Kadish, briefing at the C-17 Program November 1994, Wright-Patterson Air Force Office, Wright-Patterson Air Force Base, OH, Base, OH. November 7, 1994. 47. JamesA. Fain, Jr., and Robert A. Fuhrman, 29. Ronald R. Fogleman, interview by author, Report of the Defense Science Board Task Force on February 27, 1995, Washington. C-17 Review (Washington: Defense Science Board, A. Lee Battershell 77 ......

December 1993), 6. 65. J. Ronald Fox, "Paul Kaminski on 48. John D. Morrocco, "C-17 Put on Final Acquisition Reform," PrOgram Manager, January- Notice as Pentagon Mull s Options," Aviation Week February 1997, 10. & Space Technology, May 17, 1993, 62-63. 49. 017 Historical Report, January-June 1987 (Wright-Patterson Air Force Base, OH: Air Force C- 17 Program Office, undated), 3. 50. J.R. Hopkins and Curtis R. De Keyrel, "An Analysis of the Root Causes of Delays and Deficiencies in the Development of Embedded Software for Air Force Weapons Systems" (thesis, Air Force Institute of Technology, Wright-Patterson Air Force Base, OH, December 1993); and Robert J. Lieberman et al., Selected Acquisitions Actions on the C- 17 Aircraft, Inspector General Report 91-007 (Washington: Department of Defense, November 2, 1990), 20. 51. Ibid., 19, and Hopkins, 36. 52. Richard C. Thompson, 017 (ASD/YC) Historical Report I July-31 December 1990 (Wright-Patterson AFB, OH: Aeronautical Systems Division, February 1991). 53. C-17Globemaster III, Technical Description and Planning Guide (Long Beach, CA: McDonnell Douglas, 1993). 54. Lieberman. 55. Hopkins, 36, and "C-17 Program Faces Problems in Manufacturing, Software, Aviation Week and Space Technology, May 18, 1992, 31. 56. John Wilson, O17 Deputy Program Manager, USAF, Wright-Patterson Air Force Base, written comments to author to clarify status of O17 software, February 19, 1995. 57. Bruce A. Smith, "Douglas Improves C-17 Costs and Quality, Adds Fuel Leak Fixes to Initial Transports," Aviation Week & Space Technology, July 20, 1992, 56. 58. John D. Morrocco, "Panel to Scrutinize C- 17 Wing Loads Test," Aviation Week & Space Technology, September 20, 1993, 30. 59. Bruce A. Smith, "Management Miscues, Delays Snarl C-17 Program," Aviation Week & Space Technology, September 20, 1993, 30. 60. Ibid., 30. 61. Gansler. 62. Ibid., 227. 63. Katherine Mclntire Peters, "It Flies," Government Executive, June 1996, 17. 64. "Fighter Facing Huge Cost Overruns," Auburn Journal, September 1995, A-12. 8. Funding )

Budget instability, as Pentagon officials refer to it, is hardly unique to the Defense Department. Few businesses can predict sales in advance .... All employ approaches to budgeting [and funding] that leave options open for handling uncertainty. Thomas L. McNaugher 1

Both the government and private sectors must business must properly account for how each plan when funding large development spends development funds. Congress allocates programs, such as the C-17 and the 777, and funds for development based on DOD both must consider fundamental fiduciary requirements in the yearly presidential budget. responsibilities to constituents. DOD has a In business, corporate officers request fiduciary responsibility to provide the best development funds, which the board approves defense for American citizens at the least cost and allocates in the corporate budget. If to the taxpayer. The Boeing Company has a government or a business spends money for fiduciary responsibility to its stockholders and development that was not allocated--by must remain competitive in the market. Congress or the governing body of the According to Boeing President Philip corporation--they are breaching a fiduciary Condit, not all decisions to improve trust. Government officials may incur an anti- competitiveness improve the bottom line in deficiency violation (the government version the short term: of a misappropriation of funds); business officers may incur a fraud violation for I sometimes make decisions that cost misappropriation of funds. money rather than make money. In other words, if it costs to provide something to a client that will protect our market share The Boeing Company and help provide future income for the Boeing funds research and development of shareholders, I will spend that money. Not commercial aircraft with resources that every decision is for the immediate bottom include investments, income from operations line someare for future bottom lines.2 (airplane sales), or outside financing. Although Boeing customarily receives a deposit of 20 to Likewise, not all procurement decisions 30 percent from customers when building a improve DOD ability to defend American new airplane, such deposits do not cover citizens in the short term. Historically, DOD development costs. When Boeing undertakes weapon-acquisition decisions determine a major development program, financing it defense capabilities 20 to 30 years in the becomes one of the biggest challenges) future. To determine how to allocate assets, Although Boeing sets aside money for government and corporate officials must large research and development projects, the weigh current needs against future ones. company is not always able to predict In addition to planning and budgeting for research and development costs accurately. large development programs, government and

79 c:!£ ?£[ ......

For example, switching to a wider fuselage company's business was 80 percent with and incorporating improvements for stability private industry and only 20 percent with the caused the 707 to go far over budget in the government.~2 1950s. Likewise, costs soared on the Dash-80--which exceeded original estimates The 777 by $20 million. In the early 1970s, Boeing almost went bankrupt when the development This has all cost a bundle, but it's our costs on the 747 exceeded expectations. 4 investment in the future.~3 Boeing's experience in the early 1970s with the 747 caused George Weyerhaeuser, a The development costs of the 777 probably member of the board, to warn Boeing, "You're equaled those of the C-1 7. Joseph Ozimek, never going to start a new airplane program marketing chief for Boeing's commercial with my approval unless you have a plan that aircraft, described the 777 as "the world's shows you're going to get a decent return on most expensive privately funded commercial investment. "s Yet, by the late 1970s, the venture. The pyramids and the Manhattan board was confident enough to authorize Project were government funded. "14 more than the net worth of the company on Boeing will not divulge exactly what it two new airplanes--the 767 and 757. 6 spent on development for the 777. However, Up until the 1980s, much of Boeing's by backing into financial information business was government related. However, published by Boeing, experts estimated the during the 1980s, military contracts became costs at about $7 billion. Analyst Joseph E. less profitable and Boeing began to give more Campbell (Lehman Brothers, Inc.) estimated thought to expanding its commercial business. Boeing spent $6.3 billion. Boeing's Japanese In 1986, a blue ribbon commission suggested partners also spent money for research and government regulations were becoming development. The total probably equals the increasingly onerous and little profit potential $7 billion plus spent on the C-1 7. is However, existed in government contracts. 7 In keeping if the value of time is factored into the DOD with the commission's findings, from 1988 to program, the C-1 7 cost more. 1990, Boeing lost $95 million, $559 million, When board members approved the 777, and $418 million in successive years on they set a course that would determine contracts with the Federal Government. 8 Boeing's primary revenues for the next 30 to Shronz recognized the need for change at 50 years. They anticipated high development Boeing. In January 1990, he combined six costs and knew necessary management and divisions dealing with defense and space production changes would be costly. John activities into one defense and space division Mintz captured the spirit of Boeing's long-term under JerryKing. 9 The new Defense and objectives in Betting It All On 777: Space Group ended 1991 with a small profit, 1° and later, from 1992 to 1994, when fewer The making of the 777 is a tale of a commercial sales and high R&D costs created $22-billion company reinventing itself for a slump at Boeing, the group helped fund the the 21st century. Building the 375-seat 777 with its improved earnings. 11 Boeing also jet--the world's largest twin-engine plane~required a revolution inside trimmed its work force as part of an overall Boeing. The company had to change how effort to keep the company healthy and to it finances new airplanes, how its meet its deadline for the 777. engineers design them, how its test pilots Because of changes initiated by Shrontz, check them out, how its marketers sell Boeing's commercial side grew. In 1 992, the them. ~6 A. Lee Bat~ershell 81

Financing. In an effort to spread financial The company invested $370 million in a new risks and lessen development costs, Boeing Integrated Aircraft Systems Laboratory adjacent entered into a risk-sharing arrangement with to its headquarters, equipping it with full-sized Mitsubishi Heavy Industries, Ltd., Fuji Heavy 777 wing and tail assemblies and the Industries, Ltd., and Kawasaki Heavy airplane's entire computer system. Here, Industries, Ltd.17 Risk sharing was new to engineers tested individual parts, sub- Boeing. In the 1970s, Boeing secured loans assemblies, and integrated aircraft systems on from three major subcontractors--United the static bench and under simulated flight Technologies, Northrop, and Rohr--but these conditions. 23 Boeing also flew 777 test models loans were repayable under normal terms and the equivalent of 3 years of operation hours. conditions. 18 When technology problems threatened Unlike traditional loan agreements, certification, Boeing added more resources to risk-sharing agreements are not repayable. In overcome these problems. Boeing considered exchange for agreeing to subcontract work, the high cost of early certification necessary to the Japanese consortium contributed 20 meet customer needs. percent of the airframe. 19 Although no one Marketing. Four decades ago Boeing confirmed how much the Japanese decided to seek specific customers, contributed, Japanese development costs were aggressively support its products after sale, and estimated at anywhere from millions to look into the future for profits. Boeing billions. 2° introduced the 707, 727, 737, 747, 757, and Boeing could not form a risk-sharing 767 based on this strategy and in each case partnership in the United States because waited out profits, even though unforeseen stringent antitrust laws prevent domestic events often caused some to doubt its teaming. Such laws complicated Boeing's efficacy. 24 For example, events resulting from ability to finance new airplane development, the Persian Gulf War caused Dean Thornton, especially because Boeing's chief competitor, president of the Boeing Commercial Airplane Airbus, formed a multicountry team to share Group, to question the success of the 777. development costs. The existing Airbus The Gulf War and a worldwide recession partnership, the anticipated high costs for the in the early 1 990s caused air traffic to drop 3 777, and antitrust laws caused Boeing to look to 4 percent. The traffic decline coupled with to Japan for partners. Japanese contractors overbuying in the late 1980s caused airlines to provided about 20 percent of the 777 order fewer planes. In 1992, the uncertain airframe, most of the fuselage body sections, economy prompted Thornton to remark, " in-spar ribs, and wing-to-body fairings. In [The 777 is] not going to fail, but the degree of return for these contracts, Japan's airlines success is uncertain. It depends on the promised to buy 777s. ~ market. "2s Design. To overcome traditional problems Nevertheless, as United Airlines represen- between design and production, Boeing tative Gordon McKenzi observed, "Even introduced design-build teams and CATIA. unprofitable airlines need to position Although these design innovations were costly themselves for recovery. You just can't wait in the short term, Boeing believed they would until times are good [before ordering new prove cost effective in the long term on later planes] because of 4- to 5-year lead times [for 777 models, n airplane production].'26 Testing. Boeing bypassed the normal Boeing experts believed noise control rules 2-year qualifying process for extended range and aging aircraft would cause many aircraft twin-engine operations by extensive testing. retirements in the 1990s--about 300 per 82 The DOD C-17 Versus the Boeing 777

year--compared to about half that number Boeing committed corporate resources, found expected from 2001-2010. 27 innovative, risk-sharing financing, and made Boeing began lowering prices so airlines necessary cuts at home. In keeping with its would find it cheaper to buy new planes than long-term marketing goals, Boeing committed to maintain their old ones. Condit plans to to funding upfront costs and waiting out the shave 25 to 30 percent from 777 prices by the first nonprofitable years of the 777. year 2000. One way of lowering prices is to decrease production costs. By 1998, for example, The Department ofDefense Boeing plans to reduce production time on It is a telling fact of life in the defense narrow-body jets from 13 months to 6. 2o (£O business that firms and program managers Frank Shrontz also hopes to exceed a make multimillion dollar investment production rate of 300. This rate takes decisions with only a vague sense of future advantage of economies of scale for ordering funding levels. Private firms may not plan tools and supplies and contributes to a lower perfectly, of course, but they surely realize break-even target. If Boeing can produce more that they undermine the wisdom of their planes, the economies of scale improve. own R&D investments if they fail to Regarding his goals, Shrontz observed, provide funding stability to major projects. Meanwhile, other countries--France and I don't think we're in any danger of not Japan in particular--seem able to allocate achieving a break-even quantity for the even billions of dollars over periods of program. We believe we will sell many several years. In the United States, by more than 300 or 400, but giving you a contrast, the pursuit of the world's most time frame is difficult. For example, we sophisticated military technologies creeps almost canceled the 737 program early on, forward to the tune of a ponderous annual because we were only selling about one a budget cycle that leaves everyone guessing month. Ironically, the 737 turned out to be about next year's budget. 3~ our most successful program to date. We have the capability to build seven 777s a In an effort to control spending, Congress month. 29 allocates yearly funding for large projects such as the C-17. Thomas L. McNaugher of the As of August 1997, Boeing had 325 orders Brookings Institution believes that this yearly for the 777. 3o If the 777 continues to enjoy funding raises costs of large projects and that, record-breaking sales, Boeing will recoup among other benefits, multiyear funding investments much faster than the 7-year time would help reduce staffs at the Defense frame set by the 707 for showing a profit. Department and in Congress. 33 Jacques S. Gansler suggests that a multiyear budget A good part of our future success on the would encourage more realistic cost estimates. commercial side of the business depends Under the current system, program managers on [the 777]. We invested heavily in it project increases into future budgets when with both dollars and talent. I think we funding is threatened in current years. 34 In picked a winner. 31 Affording Defense, Gansler cites numerous Summary studies that hold budget instability and changing requirements responsible for cost Boeing changed its management structure and overruns of $15 billion a year at DOD. 3s built the commercial side of its business when Both McNaugher and Gansler believe that government contracts no longer made sense. full funding of approved government programs To meet the funding challenges of the 777, would produce plans that are more realistic A. Lee Battershell 83 and save money as well as time. As Alan financing, for example. DOD has only one Mulally, Senior Vice-President, Boeing, said, source of support--Congress. DOD must "If I had to compete for funding each year, it argue the benefits of a program and identify would add at least a year and a half to my costs while it is still in the very early stages of program management time. 'n~ planning; it does not have a phase devoted solely to cost definition. George McAleer, The Congressional Process acquisition professor at the Industrial College Congress passes two yearly bills critical for of the Armed Forces, captures the essence of funding: the authorization bill approves a the problem: DOD program, and the appropriation bill grants the money for it. Congressional You [come] up with the estimate.., in the idea phase.... You say . . . $200 approval does not always mean funding. For million dollars [to complete the program]. example, in 1 978, President Carter removed Then you get into [engineering and funding for the AMST from the 1979 manufacturing development] several years appropriation bill--an action that killed the later, and the $200 million has grown to program even though Congress had authorized $450 million. And there you are on (approved) it. Capitol Hill and you're saying, "Mr. Not only does Congress appropriate Congressman the program has grown." large-project funds annually, but it establishes And the Congressman says, "Colonel, you limits on how long the funds are available for mean to tell me you don't know how to the project. For example, DOD must obligate estimate within a 100 percent rough?" That's what the folks on the Hill will look appropriated research and development funds at--the stupidity of major weapons (3600 funds) within 2 years. If DOD needs to acquisition from DOD. 37 purchase items that require a long lead-time, it must request procurement funds (3010 The Defense Acquisition Board funds). Congress can require DOD to obligate The Defense Acquisition Board (DAB) must procurement funds within a year. approve any program such as the C-1 7. The Because DOD writes budget plans several program then enters the Planning, years before Congress acts on them, it may not Programming, and Budgeting System (PPBS). make sense to purchase long-lead items within As the name implies, the PPBS has three the period set by Congress. For example, phases: actual development time often lags behind planned progress. Yet, if a program officer • Planning. The 9-month planning phase decides not to purchase long-lead items within is the responsibility of the Under Secretary congressional parameters, the money must be of Defense for Policy. returned and the allocation request repeated. • Programming. The programming phase Program managers are often inclined to make falls under the Assistant Secretary of unwise purchases rather than risk their Defense for Program Analysis and allocations. Evaluation. This office releases its Defense Both DOD and Boeing are experienced Planning Guidance in August of each players in the research and development odd-numbered calendar year. The services business. The difference between the two is and defense agencies submit their program that Boeing usually devotes a full phase to cost objective memoranda (POM) in April of definition and decides, in advance, the each even-numbered calendar year. benefits of a program and how it will cover • Budgeting. The budgeting phase is the cost overruns--from sales or from outside responsibility of the Comptroller, who 84 The DOD C-17 Versus the Boein 777 ...... ~ ......

combines information from USD(P), the The C-17 POMs, and OSD. The Comptroller submits During fiscal years 1981-95, developing the the final request to the Office of C-17 cost U.S. taxpayers $5.6 billion. Management and Budget for submission to McDonnell Douglas funded an additional Congress as part of the President's Budget $1.7 billion--bringing the total C-17 Request. 38 development cost to $7.3 billion. 4° Congress specifies the amount DOD must A full PPBS cycle takes 24 months. allocate for research and development and for Planners must factor this into any long-term production. It is illegal for DOD to spend government program along with the 8 months money appropriated for production on it normally takes Congress to pass funding research and development. Figure 16 shows legislation. Thus, budgeting and funding for how much the President requested and how DOD programs are both time consuming and much Congress funded for the C-17 during costly. Many, including Jerry King, president fiscal years 1 981-95. Congress came closer to of Boeing's Defense and Space Group, meeting DOD requests for development than consider the funding process to be the it did for production. number-one problem for DOD. 39 DevelopmentFunding (3600). Support for DOD requests vacillated, but in the end, Other Countries Congress funded most of the amount France and Japan both set aside funds for an requested for development. In 1980, after the entire program once they decide on a major House initially rejected the C-1 7, Congress weapon system. The companies contracting appropriated $35 million for fiscal year 1981 with these governments enjoy more stable C-17 development--S46.3 million less than financing. In the United States, when a requested. In fiscal year 1983, Congress company like McDonnell Douglas contracts appropriated $60 million for the C-17, even for a major development program such as the though DOD did not ask for it because C-17, it must contend with unstable Congress believed the C-1 7 program needed congressional financing. There are times when funds in order to have a meaningful program. even incremental funding may not cover costs. In fiscal year 1984, Congress met the DOD request exactly. In 1985, in addition to almost Impact on Contractors meeting the DOD budget request, Congress DOD usually retains significant control over designated the C-17 a special interest program the development and production processes so DOD could not transfer money from the through progress payments to its contractors. C-17 program without congressional approval. Normally, progress payments cover most For 1987, DOD moved the delivery date development costs. However, in fixed-price forward 3 years and reduced its requests for contracts, the contractor accepts risk for part money. Congress appropriated more. In of the development costs. Contractors are January 1988 and 1989, because of budgetary usually willing to accept fixed-price restrictions, Congress deducted $100 million development contracts only if they (1) expect and $20 million from the C-1 7 program, but to make up losses in the production phase, (2) invited DOD to request reprogramming. 41 want to invest in new technology and allow DOD chose not to do so. the government to pay part of the costs, or (3) Procurement Funding (3010). Funding expect to make up costs through change did not go as well for procurement as it did for orders. For the C-17, McDonnell Douglas research and development. Congress hoped to make up losses in production. A. Lee Banershell 85

TABLE 6. Funding Schedule for Development--RDT&E (3600 Funds) (dollars in thousands) Fiscal Year PBR* CA** Difference 1981 $81.3 $35.0 $46.3 1982 0 0 0 1983 0 60.0 60.0 1984 26.8 26.8 0 1985 129.3 123.3 6.0 1986 453.7 383.7 70.0 1987 612.3 650.0 37.7 1988 1,219.9 1,119.9 100.0 1989 961.7 941.1 20.6 I 1990 915.2 885.2 30.0 I 1991 541 .I 541 .I 0 1992 377.4 376.4 1.0 1993 210.3 180.8 29.5 1994 179.8 179.8 0 1995 221.5 190.2 31.3 TOTAL $5,930.3 $5,693.3 $237.0

*PBR: President's budget request. **CA: Congressional appropriation Source: "CongressionalTrack Sheets," synopses of congressional authorization and appropriation history prepared by the Secretary of the Air Force (Acquisitions) for FY81-95 [Washington: Secretary of the Air Force (Acquisitions), undated]. appropriated $I 6.7 billion of the $21.7 billion Accounting Office (GAO) was performing an DOD requested to produce the C-17 from audit to determine if DOD really needed the fiscal years 1987-95--$5 billion less than C-17; (2) Congress wanted DOD to open DOD requested. The Senate Armed Services competition for wing production rather than Committee expressed concern over Air Force allow McDonnell to manufacture it; and (3) requests for long-lead items suggesting that, Congress wanted assurance from McDonnell "the Air Force may be planning for an Douglas it would assume upfront costs for unrealistic aircraft production rate. "42 production tooling. 43 In 1 987, three factors caused Congress to By 1 989, when Congress began debating cut the C-17 budget: (I) the General procurement funds for fiscal year 1990, the C-17 was in trouble. Members of Congress 86 The DOD C-17 Versus the Boeing 777 ......

TABLE 7. Funding Schedule for Procurement (3010 Funds) (dollars in thousands) Fiscal Year PBR* CA** Difference I 1 987 $182.3 $15.0 $167.3 I 1987 ADVPt 35.0 35.0 0 I 1988 6,179.0 5,890.0 289.0 I I 1988 ADVP 663.0 663.0 0 I I 1989 904.1 900.1 4.0 I I 1989 ADVP 998.7 1,000.0 1.3 I I I 1990 1,524.0 1,110.1 413.9 I 1991 1,704.5 400.0 1,304.5 ! ! I 1991 ADVP 204.3 60.0 144.3 I I I 1992 MODH- 1,618.0 0 1,618.0 ! ! 1993 2,513.9 1,810.6 703.3 I ! I ! 1993 ADVP 205.6 250.9 45.3 ! ! I 1994 2,072.8 1,935.8 137.0 ! ! I 1994 ADVP 245.5 245.5 0 I ! I 1994 MOD 16.5 2.1 14.4 ! ! I 1995 2,472.9 2,168.6 i 304.3 ! ! 1995 AVDP 189.9 189.9 0 I ! TOTAl $21,730 $16,676.6 I $5,053.4

*PBR: President's budget request. **CA: Congressional appropriation. +ADVP: advance procurement for long-lead items. ++MOD: modification Source: "Congressional Track Sheets," synopses of congressional authorization and appropriation history prepared by the Secretary of the Air Force (Acquisitions) for FY81-95 (Washington: Secretary of the Air Force (Acquisitions), undated). voiced deep concerns about costs of systems, [the] first flight wouldn't occur production and shifting schedules: before December 1990. In June, the makerof the flight control system advised The first flight of the C-17 is officially the prime contractor that it was continuing scheduled for August 1990. Air Force to have problems and could not support testimony in March indicated that due to the December 1990 date. The most problems with electronic flight control ambitious schedule now puts first flight in A. Lee Battershell 87

the March-April 1991 time frame. The until the Secretary of Defense provides a design of the flight control system is only report to the Congressional Defense 70 percent complete and additional Committees, which designates a pro- problems are a possibility .... Under the duction representative aircraft that Air Force's current plan, funds for 22 incorporates fixes to the wing, flaps, slats, aircraft, or 10 percent of the total fleet, and landing gear. In addition, the report would be appropriated before the first will identify the cost of retrofitting the first flight. This situation is unacceptable to the ten production aircraft with these Committee. 44 deficiency corrections. 46

Continuing changes in the schedule, The conferees also directed that the C-17 technical problems, and inconsistencies in Lot VII engine advance procurement contract procurement needs all affected congressional not be awarded until the Secretary of Defense appropriations. Defense Secretary Richard provides the Congressional Defense Com- Cheney reported a reduced need for C-1 7s just mittees with a report on the consideration to as the Air Force appeared to contradict be received by the government for any engines Cheney with directives to accelerate in Lots IV through Vl which do not meet the procurement. For fiscal year 1991, Congress specific fuel consumption requirements in the deducted $1.3 billion from the C-17 engine specifications found in the original production budget, and, for fiscal year 1 992, co nt facts.47 Congress deleted $1.6 billion requested for modifications. The Appropriations Committee Paying the Contractor reported, In January 1 993, the DOD Inspector General reported a potential antideficiency violation The first test aircraft has not flown yet, because the government used production much less the first production aircraft, funds to pay for research and development. which is still in final assembly.... The Inspector General Derek Vander Schaaf committee sees no need to begin this recommended "address[ing] the direct modification program when the first production aircraft has not been responsibility of the three senior Air Force delivered. 4s officials present at the September 29, 1 990, meeting for the improper payment through In 1992, the DOD Inspector General their intimidation of the [administrative issued reports alleging that the government contracting officer]." Inspector General Derek improperly paid McDonnell Douglas. In the Vander Schaaf reported the officers improperly same year, the C-17 failed a wing-strength test provided $349 million in financial assistance because of math errors by McDonnell to McDonnell Douglas, improperly accepted Douglas. During congressional deliberation the first test airplane as "assembly complete," for FY 1993, Congress deducted $703.3 and used their positions to bully others into million and reduced the procurement from submission. 48 eight to six airplanes. It made similar The C-17 contract between DOD and reductions in fiscal years 1994 and 1995. In McDonnell-Douglas was a fixed-price addition, Congress imposed the following incentive-fee contract. As of July 1991, the conditions: $6.6 billion contract ceiling price covered contract line items funded with both The conferees directed that not more than development and procurement appropriations. $100,000,000 of fiscal year 1994 advance DOD needed to take extra care so it would procurement funding may be obligated not cause an antideficiency violation by 88 The DOD C-17 Versus the Boein 777

paying more than $4.9 billion for program personnel carefully monitor development and $1.7 billion for the first six contract cost and schedule information, s3 operational aircraft. 49 To help finance work in progress, DOD Paying with the Correct Funds agreed to pay McDonnell-Douglas progress Congress appropriated research and payments equaling up to 99 percent of the development funds for the test aircraft (T-l) contract price, s° $4.45 billion for development and two nonflying test items--the "static" test [99 percent x $4.5 billion] and $1.68 billion vehicle and the "durability" test vehicle. for production (99 percent x $1.7 billion). Congress allocated production funds for the Once payments for development exceeded first four production aircraft, even though the $4.45 billion, DOD could not pay until Air Force planned to use them in the flight-test McDonnell Douglas delivered the contracted programY Neither the contract nor the item, such as the test airplane, in an legislation defined differences between acceptable condition. DOD paid monthly research and development and production for progress payments based on McDonnell items that were not readily linked to a Douglas' actual monthly costs and estimated particular aircraft. Costs for the efforts in costs to complete the contract. In July 1 991, question fell into the category of "sustaining the estimate-at-completion (EAC) for engineering." Sustaining engineering "en- development and Lots I and II was $7.3 sure[d] that the system design was correctly billion, sl and efficiently implemented during the If DOD were aware of the $7.3 billion system's production phase. "ss EAC, DOD would multiply the monthly By exercising procurement options in invoiced amount by a loss ratio factor then January 1988 (Lot I for 2 C-17s) and July 1989 further limit payments to 99 percent of the (Lot II for 4 C-17s), the Air Force fully contracted price, s2 For example, a $6.6 obligated its production funds. The contract billion contract ceiling price divided by a $7.3 (1) included a Limitation of Government billion EAC has a loss ratio of 90.4 percent. Obligations clause allowing the program Because the contractor was responsible for manager to obligate production (3010)funds any costs expected to exceed $6.6 billion, for the full target price, (2) included a plan DOD used this procedure to ensure its which set a minimum amount of RDT&E contractors had sufficient funds based on (3600) funding each fiscal year, (3) required contract progress, but did not receive the full McDonnell Douglas to continue performance amount until after acceptable product on R&D effort as long as the government delivery. However, the procedure is based on fulfilled its minimum funding requirements, the contractor providing correct estimates. As and (4) required the contractor to separate Ann McDermott points out in her report, production and R&D charges for billing "Implementing Public Law 101-510:" purposes, s6 In May 1990, McDonnell Douglas The longer contractors delay admitting submitted a bill for $231.6 million based on overruns will occur, the longer they an estimate-at-completion of $5.942 billion. receive payments at the initial rate. In The Administrative Contracting Officer (ACO) addition, the perception exists that the more sunk costs a program has, the less decided McDonnell Douglas understated its likely it is that the service or Congress will estimate-at-completion and refused payment cancel the program. Since it may not be in until McDonnell Douglas provided updated the contractor's best interest to identify estimates. On July 10, 1990, McDonnell cost overruns early, it is imperative that Douglas submitted a revised estimate- A. Lee Battershell 89 at-completion of $6.414 billion. The ACO properly defined. Butchko chose not to approved the payment but was able to pay exercise the option of requesting a ruling from only a portion of the bill because of GAO or asking the local oversight office to insufficient R&D funds, s7 perform a technical review. Instead he When the ACO was unable to pay the requested a Defense Contract Audit review. McDonnell Douglas revised bill, he reviewed The Defense Contract Auditor acquiesced to the accounting records to find out why there the program manager's desire to reclassify was a shortage of funds. When the audit funds even though the transactions were revealed DOD overpaid from R&D funds, improper. McDonnell Douglas insisted the Air Force split progress payments based on the ratio of Avoiding an Antideficiency Violation production and R&D funds to total contract Antideficiency violations are based on funding. The company stated, under the terms violations of "the color of money." The of the contract, if the Air Force refused to fund program manager must distinguish money further development, McDonnell Douglas was assigned for research and development (3600) not obligated to continue the project, s8 from that designated for procurement (3010). Program Manager Major General Michael Rather than mix appropriated funds, the Butchko directed McDonnell Douglas to responsible agency must ask Congress for review records and determine if any sustaining approval to reprogram or request additional engineering costs were erroneously charged to funds. Butchko planned to go to Congress research and development rather than to until he learned if he re-allocated sustaining production; McDonnell Douglas found it had engineering charges to production instead of repeatedly erroneously charged sustaining R&D, he could free money to pay R&D costs. engineering costs to R&D. The Air Force then The argument centered on whether the adjusted journal entries to redefine the engineering drawings for sustaining transition point for sustaining engineering engineering work were 90 percent complete. charges of $1 72 million--moving them from Colonel Kenneth Tollefson of the resident development to production accounts. In Defense Procurement Representative Office addition, improper acceptance of the test did not believe they were. Normally, the aircraft allowed McDonnell Douglas to resident representative (Tollefson) would liquidate $1.6 billion and receive an perform the technical review, but Butchko additional $16 million in production funds overruled Tollefson. 6° Butchko then ignored from the government. A Defense Contract an opportunity for review from the General Audit Agency (DCAA) audit approved the Accounting Office. Later reports cited "failure adjustments Butchko's office made even to take reasonable steps to ensure adequate though DCAA considered the audit unusual evaluation of the 1990 proposal" as basis for and noted the transactions violated cost- the violation. The 1990 proposal redefined accounting rules, which prohibit retroactive and reclassified sustaining engineering to cost-accounting changes. To justify the production rather than R&D. changes, the DCAA wrote, "The final price On April 29, 1993, Secretary of Defense paid is a cumulative redetermination of all Les Aspin dismissed Butchko and disciplined CLINs [contract line item numbers]; the two other generals--Lieutenant General accounting change does not appear to have Edward Barry (program executive officer) and any cost impact to the government. "s9 Brigadier General John Nauseef (principal Sustaining engineering costs proved assistant to the Deputy Chief of Staff)--and a difficult to allocate because they were never civilian, Albert Hixenbaugh (contracting 90 The DOD C-17 Versus the Boeing 777

officer). The defense secretary directed that Congress funded most of the requested none of the four "be assigned to work in the development costs and long-lead procurement acquisition management area" and stated, on an annual basis even though it questioned the wisdom of Air Force's purchasing long- The defense acquisition system operates lead items because "the Air Force may be on the principle of centralized policy- planning for an unrealistic aircraft production making and decentralized execution. At the heart of the system is the need for rate." And it often questioned whether DOD accountability at all levels. If the system is really needed the C-17. However, when to work, then those charged with McDonnell Douglas experienced problems responsibility for the management of with avionics and manufacturing, both DOD bill ion-dollar systems must perform to the and Congress withheld procurement funds and highest standard.61 DOD extended product delivery dates. Arguments arose between DOD and its DOD and McDonnell Douglas conducted contractor over who should pay for the C-1 7 more than six reviews to evaluate the development. Ensuing funding violations accounting procedures for the C-17 and to resulted in disciplinary actions against revisit actions of Butchko and others. Several program management officials. of these reviews produced contradictory Yearly funding competition, arguments conclusions. One report found while "certain between DOD and its contractor, and funding management decisions were questionable... violations det#acted focus from developing [they] are clearly within a range of acceptable and producing the C-1 7. management discretion. "~2 Another report stated Butchko knew or should have known Comparison precisely what actions to take and he • Boeing lined up resources to pay for recognized the impropriety of his actions. the 777 development--including some However, the same report found no criminal innovative risk-sharing arrangements with liability because there was no evidence he or Japanese manufacturers. DOD depended any other government official had knowingly on Congress to fund the C-1 7. or willfully violated the law. Investigators • Boeing committed funds to develop concluded their report with a disclaimer: the 777 upon board approval. The 777 While we understand and accept the need program manager did not have to fight for for the rules regarding the proper funds after board approval. Even after expenditure of appropriated funds, we DOD and congressional approvals, cannot help but wonder whether this the C-17 was subject to annual DOD and whole process has focused thousands of congressional funding reviews and highly man-hours of effort on a very small dependent upon program manager problem not warranting that type of interaction with the contractor and response. funding authorities. • When Boeing had problems with the Summary design process and the 777 avionics, it DOD depended primarily on Congress to fund committed resources that included funds development based on contracted costs for the to overcome the problems. When DOD C-17. Since actual costs exceeded the experienced problems with avionics, contracted amount, McDonnell Douglas DOD and Congress withheld funds and funded approximately $1.7 billion of the $7.3 extended delivery dates. billion. A. Lee Battershell 91

• Boeing and its risk-sharing partners Notes agreed on financing for the 777 1. ThomasL. McNaugher, New Weapons Old development and production. Arguments Politics (Washington: The Brookings Institution, between DOD and its contractor over who 1989), 141, 144. 2. Philip Condit, President, The Boeing should pay for the C-1 7 development and Company, interview with author, November 16, funding violations detracted focus from 1994, Seattle, WA. developing and producing the C-1 7. 3. Artemis March, "The Future of the Aircraft Inventory," Technology Review, January 1990, 30. In the 1980s, Boeing began to see the 4. RobertJ. Serling, Legend & Legacy (New disadvantages of relying on government York: St. Martin's Press, 1992), 159, 188, 333. contracts for profit and took steps to develop 5. Ibid., 385. its commercial side that included the 777. 6. John Newhouse, The Sporty Game (New The 777 was conceived within the guidelines York: Alfred A. Knopf, 1982), 208. 7. David Packard, A Quest for Excellence, of Boeing's marketing strategy, which final report to the President by the President's Blue encompassed long-term profitability. Boeing Ribbon Commission on Defense Management, June carefully lined up resources to pay for the 777 1986, 71. development--including some innovative risk- 8. Serling,460, 461. sharing arrangements with Japanese 9. BruceA. Smith, "Boeing to Rely on Proven man ufactu rers. Strategies While Facing Prospect of Lower DOD commitment to the C-1 7 was not so Earnings," Aviation Week & Space Technology, straightforward, and like many large programs, May 25, 1992, 66. it was subject to annual congressional funding 10. "Why Boeing Doesn't Have the All-Clear reviews. Many feel this yearly funding process Yet," Business Week, May 11, 1992, 78. 11. Boeing1992-94 financial statements. adds time and costs to DOD programs. 12. Smith, 65. Congressional funding for C-17 research 13. Ron Ostrowski, quoted in John Mintz, and development was initially fairly "Betting It All on 777," The Washington Post, consistent. However, in the mid-1 980s, when March 26, 1995, H7. troubles in the C-1 7 program became public, 14. Ibid., H1. Congress responded by cutting procurement 15. Ibid. funds and demanding studies to examine 16. Ibid. DOD needs. Boeing, on the other hand, met 17. JeremyMain, "Betting on the 21 st Century adversity with increased resources. Jet," Fortune, April 20, 1992, 116. Both Boeing and DOD must separate costs 18. Serling,333. 19. Michael Selwyn, "The Boeing 777," Asian for research and development from those for Business, June 1992, 31. production. Each organization has mecha- 20. Mintz, H1,H6. nisms to classify uncertain items--DOD can 21. Selwyn,24. request clarification from GAO and Boeing 22. Alan Mulally, Senior Vice President, can request clarification from the IRS. DOD Airplane Development and Definition, The Boeing methods violated the law, and the numerous Company, interview by author, November 16, studies to determine accountability in the 1994, Seattle, WA. wake of the anti-deficiency scandal detracted 23. PaulProctor, "New Boeing Test Lab Targets focus from the C-1 7 project. Higher Reliability," Aviation Week & Space Technology, April 11, 1994, 56. 24. BruceA. Smith, "Boeing to Rely on Proven Strategies While Facing Prospect of Lower Earnings," 63. 25. Main, 102. 92 The DOD C-17 Versus the Boein 777

26. Eric Nelson, "Boeing Gets Airlines on 1993), i-iii, 5, 7. Board," Business Marketing, May 1994, 44. 49. Robert J. Lieberman, Audit of Contractor 27. RichardG. O'Lone, "U.S. Airframe Outlook Accounting Practice Changes for C- 17 Engineering Bright Despite Gloomy 1991 Results," Aviation Costs, Inspector General Report Number 92-046 Week & Space Technology, March 16, 1992, 54. (Washington: Department of Defense, February 13, 28. "25 Executives to Watch--Phil Condit," 1992), 1. Business Week, 1993, 64. 50. VanderSchaaf, 13. 29. J.P. Donlan, "Boeing's Big Bet," Assembly, 51. Lieberman, 1. November/December 1994, 42. 52. Robert K. Saxer, Buyingthe 017, A Case 30. "Boeing Commercial Airplanes, Boeing Study (Industrial College of the Armed Forces, Home Page, August 1997, http://www.boeing.com/ National Defense University, Washington, 1995), commercial. 34. 31. FrankShrontz, quoted in Donlan. 53. Ann-Cecil M. McDermott, "Implementing 32. Thomas L. McNaugher, Defense PUblic Law 101-510" (Maxwell Air Force Base, AL: Management Reform: For Better or for Worse? Air University, undated), 3. (Washington: DC Heath Lexington Books, 1990), 54. VanderSchaaf, 2. 182. 55. Lieberman, 7. 33. Ibid., 183. 56. DavidL. Mastin, C-17 (Wright-Patterson Air 34. Jacques Gansler, Affording Defense Force Base, OH: Air Force Institute of Technology, (Cambridge, MA: MIT Press, 1989), 120. January 1994), B-5. 35. Ibid., 121. 57. VanderSchaaf, 17. 36. Mulally. 58. Ibid., 28, 77. 37. George McAleer, "The Acquisition 59. Lieberman., 13. Process," comments made during a briefing at the 60. Ibid., 8, 9, 10. Industrial College of the Armed Forces, National 61. Les Aspin, Secretary of Defense, "Air Force Defense University, Washington, 1995. Review of the DOD Inspector General Report on 38. JosephH. Schmoll, Introduction to Defense the C-17 Aircraft," memorandum to Acting Air Acquisition Management (Fort Belvoir, VA: Force Secretary, January 14, 1993. Defense Systems Management College Press, 62. Michael B. Donley, Acting Air Force 1993), 30. Secretary, "Air Force Review of DODIG Inquiry on 39. GeraldKing, President, Boeing Defense and C-17," memorandum to Defense Secretary Les Space Group, interview by author, November 16, Aspin, April 21, 1993. 1994, Seattle, WA. 40. Katherine Mclntire Peters, "It Flies," Government Executive, June 1996, 14. 41. "Congressional Track Sheets," synopses of congressional authorization and appropriation history prepared by the Secretary of the Air Force (Acquisitions) for FY81-95 (Washington: Secretary of the Air Force (Acquisitions), undated). 42. Ibid., FY89, I-1, I-15, IV-S0. 43. Ibid., FY87, 42, 43. 44. Ibid., FY90, 1-30. 45. Ibid., FY92, 1-17. 46. Ibid., FY94, 1-53. 47. Ibid. 48. Derek Vander Schaaf et al., Government Actions Concerning McDonnell Douglas Corporation Financial Condition during 1990, I nspector General Report, unnumbered (Washington: Department of Defense, January PART Iii

9. Critique )

Why did the C-17 take so much longer to acquisition process. Because DOD frequently develop than the 777? The answer--to some changed plans, setting goals became degree---is found in each organization's unrealistic. Weight requirements, for example, methods of management, selecting were changed several times--either to technology, organization, mission, needs accommodate add-ons or mission adjust- determination, and funding. Under stable ments. Technical difficulties accompanied the leadership and unwavering board support, changes, and not surprisingly, DOD failed to Boeing approached 777 development with meet deadlines. Congress responded commitment, focus, and flexibility. On the predictably by ordering studies, adjusting other hand, the C-17 fell under the influence funding, or demanding other forms of of the White House, and the DOD mobile accountability. internal leadership contributed differing views Because the C-1 7 cycle time was so long, of management as well as different levels of there was a loss of accountability and resolve competency. DOD support wavered, its as people came and went and organizations structure lacked flexibility, and its leadership changed. Personnel changes often brought failed to remain focused. significant shifts in program direction. Program managers' actions frequently reflected the unsettled relationship and disagreements Program Management between McDonnell Douglas and the Both the government and Boeing have government--straining relationships in all standard procedures for developing aircraft. directions. The government unnecessarily Boeing followed procedures fairly closely, complicated the contract by combining whereas DOD skipped several important steps development and procurement funds in the in its standard process. Boeing tracked the ceiling price and failing to define sustaining market in arriving at a comprehensive plan for engineering, which allowed managers to make development. DOD had no comparable plan improper payment decisions. Major changes and frequently questioned the efficacy of its in the DOD command structure blurred own program. command lines at critical times and interfered The C-17 began with mixed blessings with managers' ability to function. The during the Carter years--when support for an leadership of DOD, though highly competent airlifter with strategic capabilities overrode at times, was not consistent. backing for a tactical airlifter. C-17 advocates In contrast, Boeing followed its standard pushed the program through Congress without course for development but with several the equivalent of a comprehensive "market important modifications. The company study," and skipped other steps in the normal solicited more than usual customer input,

93 94 The DOD C-17 Versus the Boeing 777

initiated entirely new design procedures, and McDonnell Douglas' lax management of extended its timeline to accommodate software controls resulted in myriad computer innovations and reorganization. Boeing's plan languages, which made the system inefficient followed a carefully laid course and was not and testing unnecessarily complex. Because affected by personnel changes. Shifts in the cycle was so long, mature technology in management--including the position of the beginning of the program became obsolete program manager--went smoothly. Boeing technology by the end. kept lines of communication open and Problems with technology were encouraged a high degree of communication compounded by disagreements with its among designers and engineers. The new contractor. When DOD reduced the number CATIA design-build teams incorporated of aircraft it planned to purchase, it also customers, mechanics, and other end users reduced incentives for its primary contractor to into the design process. make up in production what it lost during development. McDonnell Douglas responded Selecting Technology by taking its most experienced technicians off Some people believe that a high level of the C-17 program--technicians whose skills technology may account for the long-term were needed to coordinate the complex nature of DOD programs; however, this was computer systems. not necessarily the case for the C-17. For Although Boeing prefers to stay on the example, the C-17 was not equipped with leading edge of technology to remain complex systems found in a fighter or a competitive, the company does not use bomber. In fact, the technology used on the untried technology on its commercial C-1 7 was tested and proved on the prototype airplanes. In the case of the 777, several of the C-17, the AMST. features were new, but technology for them The military, however, did not use the was mature. Boeing took several steps to tested technology exactly as it was used on the prevent technical problems from holding up AMST. For the C-17, the short-take-off-and- the program. The company used CATIA, a landing capability required developing a new technological troubleshooter, it imposed wing design and installing a fly-by-wire discipline on its software languages, and it system. DOD added OBIGGS, a new built high-tech labs for testing the wing and defensive system, and rotating cargo pallets. tail assemblies. When Boeing encountered Requirements changed as the international problems, namely in its design system and situation changed, allowing requirements to integration of its fly-by-wire system, it creep and, in some cases, such as increasing increased resources to resolve the problems in payload capability beyond needs, require- a timely manner. ments became gold plated. DOD and McDonnell Douglas chose not Organization to use a CAD/CAM system in order to cut Numerous studies have held the DOD upfront costs. While the CAD/CAM systems acquisition system responsible for were not as sophisticated during early C-1 7 inefficiencies. In keeping with efforts to development as when Boeing designed the reform, DOD has undergone several 777, such a system clearly would have helped reorganizations--some of these taking place C-17 development. With a CAD/CAM system, while the C-17 was in development. DOD designers could better manage design reorganizations, intended to streamline the modifications as requirements and technology acquisition system, disrupted lines of changed over the long development time. command for program managers and added A. Lee Battershell 95 layers of management to the C-17 program. Introducing integrated teams helped facilitate McDonnell Douglas also attempted recovery. reorganization, but the company's methods-- No doubt, extra layers of management and such as eliminating whole layers of midprogram restructuring slowed C-17 management and firing and rehiring workers development. However, the greatest detriment in inappropriate jobs--disrupted production to efficiency was a lack of constancy of and caused other serious problems on the purpose. The organizational structure of DOD C-17, such as fuel leaks. renders it subservient to the views of the Complicating development still further current administration and subject to a highly were parochial interests of the services and mobile leadership. These factors make commands causing one to ask who the C-17 focusing on a long-term program problematic, customer was--the Army, the Air Force, the if not impossible. commands, the commanders in chief? The Boeing's organizational structure is more letter from the Army Secretary to the Air Force stable and characterized by fewer layers than Secretary expressing dissatisfaction with the that of DOD. Also, Boeing thoroughly Air Force decision to buy the C-5 is one evaluated its structure before embarking on example. Another is the Mobility Air the 777 program. Cost-benefit studies and Command efforts to sell Congress the CX lessons learned from other programs suggested program while the Air Force Systems changes in methodology as well as changes in Command tried to push the AMST plane. management. Boeing hired an outside During C-17 development, first the consultant to direct changes in corporate Mobility Air Command then the Air Force management and devised a revolutionary Chief of Staff lobbied hard to reduce the C-17 design-build pyramidal system to improve troublesome, gold-plated payload require- design methods. A highly sophisticated ments. One could argue the C-17 is no computer system facilitated the process. different than the variety of customers Boeing faces. In both cases, there is a determination A/lission process that derives basic requirements for the The DOD mission is further defined in the aircraft from known customer needs. national strategic policy of the United States Problems with late customer add-ons and is thus subject to the interpretation of definitely impacted 747-400 timely each president. What is needed to fulfill the development. The difference for the 777 was DOD mission is characteristically debated in Boeing's concerted effort to use integrated the White House, on the Hill, and in the teams allowing designers to identify both Pentagon. The C-17 competed with numerous customers and customer needs earlier in the other weapons systems for its place in the process. Its cost-definition phase helped United States arsenal, and its mission evolved Boeing determine if cost and technology despite ever-changing policy. Most notable maturity would allow it to meet customer was the transition from tactical airlifter to one needs. Continued competition from airline of strategic capabilities. This mission differ- manufacturers helped motivate Boeing to ence necessitated significant modifications build a support organization and development and did much to prolong the program. processes to decrease costs and increase Boeing envisioned the 777 as an important quality. For the C-17, when realistic part of its mission to become number one in requirements and the threat of competition air and space in the world. Using direct were introduced, the program turned around. market research--asking potential customers-- 96 The DOD C-I7 Versus the Boein 777

Boeing determined a need for a cost efficient, Although DOD normally follows strict medium-sized plane to replace aging aircraft guidelines on expenditures allocated for in the market. Research also told Boeing that development versus production, the C-1 7 was airlines were interested in a family of airplanes in development and production at the same that would share parts and reduce time. This concurrence, in combination with maintenance training. Boeing was willing to improperly defined contract terms, blurred undergo heavy costs to build a trouble-free allocation lines. In 1992, the DOD Inspector aircraft; certify it for early, extended General found several officers guilty of twin-engine operations; and assure the aircraft inappropriate behavior and potential anti- met its promised delivery date. The company deficiency violations for misappropriation of regarded the aircraft and its family--as a funds. The incident lent an aspect of scandal long-term investment supporting the company to a program already plagued with problems. mission. Numerous investigations followed the citations, further detracting from the program. Needs Determination Because McDonnell Douglas was Congress and DOD ordered numerous studies operating under a fixed-price contract, the to help define DOD overall needs--these company expected to sustain certain losses in "market studies" often came in mid- the development stages of the C-1 7. It hoped development and helped to define, finally, the to make up the losses on lucrative production C-17 mission and configuration. During the contracts. However, as costs mounted, the 1980s, leaders did not embrace the C-17. company objected--claiming the Air Force Throughout the 1990s, military leaders had rescoped the contract with its many continued to argue over how many C-17s changes. McDonnell Douglas also felt the were needed and whether to purchase impact of smaller than anticipated orders for alternative aircraft such as the 747. the C-17. These factors in combination caused Lessons learned on the 747-400 taught McDonnell Douglas to threaten the Boeing the necessity of correctly assessing government with legal action and to take other need. With the 777, Boeing determined early measures that slowed C-1 7 production. Even on that customers wanted enough new though McDonnell Douglas ultimately features to justify building an entirely new absorbed most development cost overruns, aircraft. To forestall late add-ons, the company Congress took them into account when it used a highly sophisticated computer system, reduced procurement funding for the C-1 7. keeping customers in the design loop The Boeing system for funding is much throughout development. simpler. The board guarantees financing when it grants approval for a project. However, Funding when profit returns are several years down the A large, long-term development program-- road, financing a large development program such as the C-17--must be approved by is not easy--even for a large, healthy Congress. After initial approval, the program corporation like Boeing. Boeing financed the appears as a line item in the president's 777 from internal resources and from unique budget where it must survive the yearly risk-sharing agreements with Japanese Congressional scrutiny. When the C-1 7 began companies. When commercial sales were to miss deadlines and encountered other down, or Boeing felt financial pressures, the problems, Congress responded with demands company took whatever money-saving steps it for accountability and reduced funding. needed, including personnel cuts. A. Lee Battershell 97

Approval Commitment Even though DOD projects must undergo The priorities of each presidential initial approval by the Defense Acquisition administration affected the DOD commitment Board, Congress exercises powerful yearly to the C-17. At lower levels, lack of policy control when it considers annual direction and funding reflected a wavering appropriations for the program. commitment. Boeing viewed the 777 as In the case of the C-17, political factors important to its mission and remained intervened to influence approval for the DOD committed throughout development. Boeing's program. Congress first approved the AMST constancy of purpose was supported by a program to satisfy DOD needs for a tactical stable management structure. airlifter. However, President Carter removed the line item for the AMST from his ~OC~S presidential budget in order to pave the way Boeing made a concerted effort to determine for an airlifter with strategic capabilities. what kind of an airplane to build and Although Congress objected to the paucity of researched the best methods to build it. documentation supporting the C-17 program, Politics interfered with the DOD process to it eventually approved the program heavily determine need and hindered its ability to stay lobbied by President Carter and Secretary of focused on the C-17. In the end, strong Defense Brown. President Reagan vacillated leadership assigned during the Clinton over support of the C-17. First he supported administration brought the program to fruition. the purchase of alternative aircraft (to fill immediate needs) and then he supported the Flexibility C-17 as a replacement for aging aircraft in the Political influence, the annual funding U.S. fleet. However, as the C-17 neared process, and out-of-date design tools all full-scale development and the program fell limited DOD flexibility. Boeing's hierarchy of behind schedule, Congress began to question design-build teams kept Boeing informed of the Air Force's ability to manage its program, customer needs and corporate managers demanded studies to determine need, and informed of technical difficulties. When withheld funding. problems arose, Boeing responded quickly For the 777, Boeing followed its normal and decisively. approval process--with certain important modifications. In order to prepare for production and to establish a realistic Conclusion timetable, corporate officers asked the board Although actual costs for the C-17 and the for approval to extend the standard timetable Boeing 777 were similar, when time is by almost a year. Because Boeing had learned factored in, the C-17 cost more. As Bruce hard lessons from the late delivery of its 747- Smith, Aviation Week reporter, said, "The 400, the company placed a premium on a C-17 transport is a good example of what dependable schedule. The board's decision to happens when the challenges of a major grant the extra time and then, later, to uphold military aircraft program are underestimated the schedule when technical difficu Ities arose, and the development phase of the program demonstrated the company's commitment to drags on for too many years." the 777. Boeing's hierarchy of design-build Paul Kaminski, former Under Secretary for teams included approving officers and Acquisitions and Technology, recommends, facilitated a step-by-step process of among other things, more research before development. committing to production. He developed new 98 The DOD C-17 Versus the Boein 777 ...... ~ ...... initiatives to mitigate some of the problems encountered in the O17 program. Examples include initiatives to reduce acquisition cycle time, to use modeling and simulation so program managers can better manage system engineering and integration risk, and to view cost as an independent variable so program managers can work with users to decide if the requirement is worth the cost. If DOD were to truly centralize acquisition and development under the DOD structure and focus on its primary customers, the commanders in chief of the unified commands, it could simplify the acquisition process. If Congress joined with DOD in providing full funding for major acquisition projects, the programs might enjoy greater stability. Under such a system, DOD would be compelled to choose its needs more selectively. Future studies should assess how Dr. Kaminski's initiatives might have solved the problems identified in the C-17 program, and compare the C-17 with at least one program that encompasses the new initiatives. If new initiatives such as these prove to be successful, they should be considered for application throughout DOD,: as they might well prevent other programs from taking 24 years to produce workable weapons systems. Glossary )

A&T acquisition and technology ACO admi nistrative contracting officer AFAE Air Force acquisition executive AIMS aircraft information management systems. Manages data among the computer processors. AMC Air Mobility Command AMST advanced medium short take-off and landing ARINC Aeronautical Radio Incorporated. The ARINC 629 is an electronic highway along which computers exchange data. ASC aeronautical Systems center ASD aeronautical systems division ASD(PA&E) Assistant Secretary of Defense for Program Analysis and Evaluation ASIC chips application-specific integrated circuit chips CAD/CAM computer-aided design/computer-aided manufacturing system. An object is designed with the CAD component of the system, and the design is translated into manufacturing or assembly instructions for specialized mach i nery. CAE component acquisition executive CAIV cost as an independent variable CATIA computer-aided, three-dimensional, interactive application CEO chief executive officer CINC commander in chief CLIN contract line item number CMM Congressionally Mandated Mobility Study CONG AP congressional appropriation CQ~ continuous quality improvement CRAF Civil Reserve Air Fleet C-X cargo transport research D&V demonstration and validation DAB Defense Acquisition Board DAE defense acquisition executive DCAA Defense Contract Audit Agency DMR Defense management review

99 100 The DOD C-17 Versusthe Boein 777

DOD Department of Defense DODI Department of Defense Instruction DODIG Department of Defense Inspector General DDR&E Director of Defense Research and Engineering DSARC Defense Systems Acquisition Review Council ECP engineering change proposal empennage tail assembly of an airplane, consisting of vertical and horizontal stabilizers and including the fin, rudder, and elevators ETOPS extended twin-engine operations FAA Federal Aviation Administration fly-by-wire a system of electrical signals rather than mechanica ! linkages to move airplane control surfaces such as the rudder and ailerons FSED full-scale engineering development GAO General Accounting Office inertial upper the upper stage of a space ship that is self-contained and uses stage automatic instruments to guide along a preassigned course using the laws of accelerated motion and gravitation IRS Internal Revenue Service JCS Joint Chiefs of Staff JROC Joint Requirements Oversight Council LOGO limitation of government obligations MAC Military Airlift Command MAR major airlift review MATS Military Air Transport Service mockup a full-sized replica of a structure or apparatus used for experimental purposes MRS Mobility Requirements Study MTM/D million-ton miles a day NDAA non-developmental airlift alternatives OBIGGS onboard inert gas generating system. This nitrogen generation system keeps oxygen vapors in the fuel tank area below 9 percent. The lower oxygen vapors allow the plane to avoid ignition when small arms fire hits the fuel lines. OSD Office of the Secretary of Defense OT&E operational test and evaluation PA&E program analysis and evaluation PBR President's budget request PEO program executive officer PFC primary flight computer POM program objective memorandum PPBS Planning, Programming, and Budgeting System A. Lee Battershell 101

PVR process variability reduction. An Air Force developed system used to identify production problems associated with C-1 7 assembly. R&D research and development R&M repair and maintenance SAF(AQ) Secretary of the Air Force for Acquisitions SAM surface-to-air missile SDI Strategic Defense Initiative SPO system program office STOL short take-off and landing TAC Tactical Air Command TQM total quality management USD Under Secretary of Defense USD(P) Under Secretary of Defense for Policy USD(PA&E) Under Secretary of Defense for Program Analysis and Evaluation USTRANSCOM U.S. Transportation Command About the Author )

A. Lee Battershell is a Certified Acquisition Force, State, and Treasury. She authored Professional Program Manager and Acqui- several pamphlets and articles, including sition Professional Financial Management "Acquisition Alerts for Program Managers" and Comptroller. She is currently on the staff of "Technology Approach: DOD versus Boeing, Battershell and Company, Certified Public A Comparative Study." Accountants, in Kent, Washington. Prior to In addition to many performance awards, her current position she served on the board of Ms. Battershell received the Federal Woman of directors of the Association of the Industrial the Year Award and the Outstanding Civilian College of the Armed Forces, and the Industry Career Service Award. She holds a Master of Conference Board, Washington. Research for Science in National Resource Strategy from this book was conducted while the author the Industrial College of the Armed Forces, served as a Research Fellow at the Industrial National Defense University, a Bachelor of College of the Armed Forces. Science in business from California State Ms. Battershell retired in 1997 as Director, University, Sacramento, and a certificate from Policy, Oversight, and Systems, Air Force the Defense Acquisition University Senior Audit Agency. During her 31 years of Acquisition Program Course. At present she is government service she served in various completing her Master of Science in business positions for the Departments of Defense, Air from Central Michigan University.

103 The DOD C-I 7 versus the Boeing 777

Why did it take 'the Pentagon three times longer to develop the C-I 7 Globemaster III than it took the Boeing Company to produce the 777--planes with similar capabil- ities and technology? This striking comparison led the author of The DOD C-I 7 versus the Boeing 777 to conclude that: "Boeing made a concerted effort to determine what kind of airplane to build and researched the best methods

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 to build it. Politics interfered with the DOD process to determine need and hindered its ability to stay focused on the C-17." As this work by a talented acquisition profes- sional reveals, "differences in commitment and focus are pervasive in each organization's management methods, technology philosophy, structure, mission, needs determina- tion, and funding."

NSTITUTE FOR NATIONAL STRATEGIC STUDIES NATIONAL DEFENSE UNIVERSITY