ACQUISITION EXCELLENCE SUCCESSFUL INTEGRATION OF COMMERCIAL SYSTEMS A Study of Commercial Derivative Systems Stockman, Ross, Bongiovii & Sparks i SUCCESSFUL INTEGRATION OF COMMERCIAL SYSTEMS A Study of Commercial Derivative Systems Dr. William Stockman, Lt. Colonel, USAF (Ret) Milt Ross, Lt. Colonel, USAF (Ret), SES DAF(Ret) Robert Bongiovi, Major General, USAF (Ret) Greg Sparks, Colonel, USAF (Ret) ii iii Preface Integrating Commercial Systems to meet DOD Missions The intent of this book is to provide a discussion of how commercial derivative aircraft (CDA) play a significant role in the past, present and future military force structures. At its simplest, a commercial derivative product is anything that was developed and produced for public use that might also have a military application. The basic theory is that the military might be able to save schedule and development cost by adapting this commercial product to meet a military requirement. This is an ancient concept that goes back to the early cavemen who would club their enemies with the same weapon they used to kill their food—dual use technology at its earliest! As military equipment and systems progressed and became more lethal, there still was normally little difference between the military and commercial version. It was only after the introduction of major military machines (combat ships, battering rams, catapults, etc.) that military engineering and development began to become a major business. Thus, military history is full of weaponry that is either dual purpose or developed from a civilian product. On the surface, this sounds like a good, relatively easy, and inexpensive approach. Yet, recent DOD history is full of examples where the CDA approach ended up in cancelled programs, cost overruns and expensive life cycle costs. The simple reason for these negative outcomes, as we will present in this book, is that the DOD often fails to either learn the basic rules of CDA acquisition and sustainment strategy or else fails to implement them in practice. For this book, we have limited our interest to aircraft procurement plus the sustainment and logistics benefits and mainly to those which have been previously developed for civilian use. Despite that limitation, most of our findings, lessons learned and conclusions apply just as effectively to other types of commercial derivative systems. This book was begun in parallel with the development of the USAF Commercial Derivative Aircraft (CDA) Acquisition Guide that was delivered to the USAF in 2009. Major funding to finish this book was provided by PESystems of Dayton Ohio. The guide provides a very succinct view of CDA acquisition and focuses on the differences compared to traditional, full-development DoD acquisition programs. One of the basic findings is that CDAs and traditional aircraft development/acquisition programs suffer many of the same problems and benefit from many of the same solutions. The guide provides straight forward advice on how to avoid the most common problems in developing and executing a CDA program throughout a lifecycle. This book supports the practitioner by providing an in-depth discussion of many of the key elements and problems of CDAs—something that the format of the guide did not allow. To research this book, the authors spent a great deal of time reviewing the extensive acquisition documentation, studies, academic research, and evaluations from senior level review groups. We also interviewed many of the current and past experts in iv this field to learn their thoughts and experiences in managing these programs. The result is a very interesting discussion of some recent CDA successes and failures along with an extensive list of lessons learned to pass on to current and future CDA program professionals. Lessons Learned While there is a long list of detailed lessons learned in the latter chapters, the basic lessons are quite simple—much like the rules for taking care of the Mogwai.1 Pick a civilian system that meets the military requirements. Understand that the civilian systems may have been built to operate in a totally different environment than that envisioned by the military operators. If there is a mismatch between the military requirements and the commercial capability, change the requirement. Understand at what point of the commercial product lifecycle the procurement will occur and what benefits or challenges will be encountered during product support Only minor changes should be allowed, since cost, risk and schedule delays increase exponentially with changes. As expected, all of the lessons learned for traditional DoD acquisition programs apply—funding stability, no requirements creep, and requiring high technology readiness levels. As a program manager, you know you have achieved success on a CDA program when you reach the three-way intersection on the knowledge highway2 where: 1. A match is made between the customer‘s requirements and the available technology 2. The product‘s design is determined to be capable of meeting performance requirements 3. The product is determined to be producible within cost, schedule, and quality targets 1 The Mogwai must be kept away from bright light, never made wet and never, ever be fed after midnight. Confused? Find a copy of 1984s ―Gremlins.‖ 2 ―Best Commercial Practices Can Improve Program Outcomes,‖ GAO Report GAO/T-NSAID-99-116, 17 March 1999. v The Architecture of this Book In this book, we have divided the chapters into five main sections: THE BEGINNING OF COMMERCIAL DERIVATIVE SYSTEMS 1. In the Beginning: This is an abbreviated discussion of the original United States CDA: The Wright Flyer. 2. Recent Department of Defense Experience and Direction: This chapter looks at the evolution of CDAs as DOD and the aerospace industry grew. THE THEORY OF COMMERCIAL DERIVATIVES FOR MILITARY AIRCRAFT 3. Economics 101 for Commercial Derivatives: This detailed discussion provides the framework for later chapters on how to successfully adopt commercial aircraft and major commercial technologies into military programs. 4. Are Commercial Derivative Aircraft As Easy as They Look? This chapter discusses the application of the theory and compares and contrasts commercial and military aircraft programs. This chapter focuses on three case studies of CDA programs to learn the pros and cons of actually executing a CDA program. 5. FAA Certification—We Paid For It, Why Throw It Away? This chapter discusses the certification issues of CDAs and why the military normally does let this lapse. 6. Logistics and Support. This chapter expands the discussion of logistics and support benefits from CDAs and why they are difficult to capture and retain. WHAT’S SO HARD ABOUT BUYING SOMETHING OFF THE SHELF 7. Why Can’t We Make Up Our Minds? This chapter looks at how requirements guide the source selection and how recent history is challenging how we choose CDAs. 8. Commercial Derivative Case Studies. This looks at the challenges of setting up, acquiring and operating CDA programs. 9. If It Already Works, Why Are We Testing It? This chapter addresses the challenge of determining if the CDA meets military needs and how much new testing in actually required. vi WHAT DO THE EXPERTS THINK? 10. Does Time Heal All Wounds? For this book, we interviewed over 50 experts on CDA programs to include engineers, program managers, senior DOD officials and system operators. This chapter gathers their significant expertise and insight on the correct way to use CDAs. 11. What Does Industry Think? This is a compilation of industry comments based on our interviews with industry leadership. DID WE PAY ATTENTION AND LEARN SOMETHING? 12. Lessons Learned: This is a compilation of numerous sources on CDA lessons learned from the experts and the literature. 13. What Does the Future Hold? Like many studies of this type, we found a long list of lessons learned, met many really smart people and researched multiple CDAs that worked well in the commercial world—so how did things get messed up and where do we go from here? The intended readership This book is written for present and future acquisition program managers and their functional staff for both aircraft producers and for government program offices. This book, along with the USAF Commercial Derivative Aircraft Acquisition Guide, provides a solid starting point for new programs attempting to acquire commercial aircraft to fill military roles. Many of the topics and lesson learned also apply to non- aircraft programs, so that anyone attempting to meet military requirements with an off- the-shelf system will benefit from its content. vii Acknowledgments This book would not have been possible without the support of the following: The Sponsors: Wesley King, President and CEO, PESystems Larry Bogemann, PESystems LTC Don Jackson, USAF (ret), PESystems Dayton Aerospace Support and Reviewers COL Darryl Holcomb, USAF (ret) Ms. JoAnn Swangim, GM-15 (ret) All the interviewees who preferred to remain anonymous. Copyright 2011 by PESystems, Inc. and Dayton Aerospace, Inc. All rights reserved. viii The Authors DR. WILLIAM K. STOCKMAN, LT. COL, USAF (RET) Dr. Bill Stockman is currently a Senior Associate at Dayton Aerospace, Inc. and a former Professor at the Air Force Institute of Technology (AFIT). He has 34 years experience in the areas of engineering, acquisition management and strategy, economics, cost estimating, graduate and undergraduate education, and acquisition research. Lt. Colonel Stockman retired from the USAF in 2002 as Graduate Cost Degree