Assembling and Supporting the Joint Strike Fighter in the UK Cynthia R. Cook Mark V. Arena John C. Graser Hans Pung Issues and Costs Jerry Sollinger Obaid Younossi Prepared for the United Kingdom’s Ministry of Defence R Europe National Security Research Division The research described in this report was prepared for the United Kingdom’s Ministry of Defence. Library of Congress Cataloging-in-Publication Data Assembling and supporting the Joint Strike Fighter in the UK : issues and costs / Cynthia R. Cook ... [et al.]. p. cm. “MR-1771.” Includes bibliographical references. ISBN 0-8330-3463-4 (pbk.) 1. X–35 (Jet fighter plane) 2. Short take-off and landing aircraft. 3. Great Britain. Royal Air Force—Procurement. 4. Great Britain. Royal Navy— Procurement. 5. X–35 (Jet fighter plane)—Maintenance and repair. I. Cook, Cynthia R., 1965– UG1242.F5A72 2003 358.4'383'0941—dc21 2003014692 Cover photograph by Lockheed Martin RAND is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND® is a registered trademark. RAND’s publications do not necessarily reflect the opinions or policies of its research sponsors. Cover design by Stephen Bloodsworth © Copyright 2003 RAND All rights reserved. No part of this book may be reproduced in any for m by any electronic or mechanical means (including photocopying, recording, or information storage and retrieval) without permission in writing from RAND. Published 2003 by RAND 1700 Main Street, P.O. Box 2138, Santa Monica, CA 90407-2138 1200 South Hayes Street, Arlington, VA 22202-5050 201 North Craig Street, Suite 202, Pittsburgh, PA 15213-1516 RAND URL: http://www.rand.org/ To order RAND documents or to obtain additional information, contact Distribution Services: Telephone: (310) 451-7002; Fax: (310) 451-6915; Email: [email protected] PREFACE In October 2002, the United Kingdom’s Ministry of Defence (MOD) commissioned RAND to investigate certain issues relating to the pro­ curement of the Joint Strike Fighter (JSF). The MOD plans to procure up to 150 of the short-takeoff/vertical landing (STOVL) variant of the JSF to meet its Future Joint Combat Aircraft (FJCA) requirement. This research was intended to inform the MOD about the overlap between JSF final assembly and repair, to assess the suitability of four UK aerospace companies as potential sites for JSF final assembly, to determine the costs of moving JSF final assembly to the UK, and to look at certain potential technology transfer–related implications of such a move. This book should be of special interest not only to the Defence Pro­ curement Agency and to other parts of the MOD but also to service and defence agency managers and policymakers on both sides of the Atlantic. It should also be of interest to aerospace companies in the United Kingdom. This research was undertaken for the FJCA Inte­ grated Project Team jointly by RAND Europe and the International Security and Defense Policy Center of RAND’s National Security Research Division (NSRD), which conducts research for the U.S. Department of Defense, allied foreign governments, the intelligence community, and foundations. For more information on RAND’s International Security and Defense Policy Center, contact the Director, Jim Dobbins. He can be reached by e-mail at [email protected]; by phone at 703-413-1100, extension 5134; or by mail at RAND, 1200 South Hayes Street, Arling­ iii iv Assembling and Supporting the JSF in the United Kingdom ton, Virginia, 22202-5050. More information about RAND is available at www.rand.org. CONTENTS Preface ......................................... iii Figures ......................................... ix Tables.......................................... xi Summary ....................................... xiii Acknowledgements ................................ xix Acronyms ....................................... xxi Chapter One INTRODUCTION .............................. 1 History of the Joint Combat Aircraft Requirement ...... 1 History of the Joint Strike Fighter ................... 2 JSF Is an International Collaboration ................ 4 British Aspiration to Repair UK Aircraft .............. 7 Purpose of the Study ............................ 9 Assess Synergies Between a Repair and FACO Facility.............................. 9 Examine Potential UK Facilities for JSF FACO ........ 10 Cost Analysis of a UK FACO Facility ............... 10 Questions Regarding the Export of Technology ....... 11 Methodology ................................ 11 How This Report Is Organised ..................... 11 Chapter Two AIRFRAME FACO AND AIRFRAME MR&U ............ 13 Background on FACO Processes ................... 13 Background on Aircraft Maintenance ............... 19 v vi Assembling and Supporting the JSF in the United Kingdom Organisational Level .......................... 20 Intermediate Level............................ 20 Depot Level ................................. 21 Depot Maintenance Costs ........................ 24 MR&U Scenarios ............................... 30 FACO Processes Compared to Airframe Depot MR&U Processes................................. 32 Overlap of Tooling and Facilities ................... 35 Common and Unique Worker Skills and Learning Required ................................. 36 Potential Advantages of Collocating FACO and MR&U................................ 39 Potential Disadvantages of Collocating FACO with MR&U ............................... 41 Chapter Three POTENTIAL SITES FOR JSF FACO OR MR&U IN THE UNITED KINGDOM ............................ 43 The UK Aerospace Industry ....................... 43 BAE SYSTEMS ............................... 45 DARA ..................................... 47 Marshall Aerospace ........................... 49 Rolls-Royce ................................. 51 FACO Facility Requirements ...................... 52 Chapter Four COST ASSESSMENT ............................ 57 Methodology.................................. 57 Which Budget?............................... 57 Overview of the Cost Modelling Approach .......... 58 Model Structure ............................... 59 Overall Description ........................... 59 General Assumptions .......................... 62 Discussion and Treatment of Individual Cost Factors............................... 62 Direct Production Labour and Cost ............... 66 Chapter Five RESULTS OF COST ANALYSIS ..................... 85 Introduction .................................. 85 Calculating Cost Differences of UK Alternatives ........ 86 Cost Elements ................................. 88 Contents vii Baseline Assumptions ........................... 90 The Cost Difference Between Alternatives ............ 90 Sensitivity Analysis ............................. 94 Additional FACO Production .................... 94 Extent of MR&U Workload ...................... 97 Learning Transfer Percentage.................... 97 Royalty Charge/Licencing Fees .................. 98 Long-Term Exchange Rate ...................... 99 Monte Carlo Uncertainty Analysis ................ 100 Summary .................................... 102 Chapter Six JSF TECHNOLOGY-TRANSFER ISSUES .............. 105 Background and U.S. Policy on Military Technology Transfer.................................. 106 Arms Export Control Act of 1976 (AECA) ............ 107 ITAR ...................................... 108 National Disclosure Policy (NDP) ................. 108 Technology-Transfer Process .................... 111 JSF FACO and MR&U Technologies Affected by the NDP.................................. 112 An Overview of the JSF LO Requirements ........... 113 Manufacturing of JSF Airframe LO Features ......... 114 LO-Related Resources Required During JSF FACO .... 115 Technology-transfer Negotiations and the JSF Programme Production Schedule ........................ 115 UK Sites’ Experience with TAA Processing ............ 117 Summary .................................... 118 Chapter Seven CONCLUSIONS................................ 119 Overlap Between FACO and MR&U ................. 119 Suitability of UK Sites for FACO .................... 121 Costs for a UK FACO Facility ...................... 121 Technology-Transfer Issues ....................... 122 Appendix A. SITE QUESTIONNAIRE .......................... 123 B. PRODUCTION GAPS AND RESTARTS ............... 141 Bibliography ..................................... 147 FIGURES 2.1. Final Assembly and Checkout .................. 14 2.2. Percentage of Total Through-Life Costs Attributable to Variable Airframe Depot Maintenance .......... 25 2.3. F-15A Airframe Depot Labour Hours and Hours per Total Aircraft Inventory ....................... 27 2.4. F-16A Airframe Depot Labour Hours and Hours per Total Aircraft Inventory ....................... 28 2.5. F-18C/D Airframe Depot Labour Hours and Hours per Total Aircraft Inventory .................... 29 2.6. Notional Overlap of Facilities, Tooling, and Equipment Between FACO and MR&U ........... 37 3.1. Location of Selected Aerospace Firms ............ 45 4.1. Cost Model Influence Diagram ................. 61 5.1. Sensitivity of Net Cost Delta to Additional Production at UK FACO Site ............................ 95 5.2. Cost Element Deltas for FACO and MR&U in UK Versus Baseline as a Function of Additional FACO Production for Assumption B .................. 96 5.3. Learning Transfer Percentage Sensitivity Analysis ... 99 5.4. Total Cost Delta Sensitivity to Royalty Fee ......... 100 5.5. Long-Term Exchange Rate Sensitivity for Total Cost Delta....................................