    C-17 Aircraft: Cost and Performance Issues (Chapter Report, 01/26/95,
    GAO/NSIAD-95-26).

    The widebodied C-17 cargo plane was intended to carry out a variety of
    unique missions, such as delivering cargo and troops to battlefront
    airfields; landing in small, austere airfields during conflicts;
    airlifting outsize cargo, such as tanks; and performing air drops. GAO
    assessed the C-17's original justification and the effect of technical
    problems and cost increases on the aircraft's ability to achieve
    original program requirements. Changes in the intended role of the C-17,
    soaring program costs, and the results of the Defense Department's own
    analysis lead GAO to conclude that a fleet of 120 C-17 aircraft is not
    the most effective way to meet the Air Force's airlift needs. A fleet of
    40 C-17s and 64 commercial freighters could meet the Defense
    Department's airlift requirements, as expressed in the Mobility
    Requirements Study, at a cost savings of upwards of $10 billion when
    compared to a fleet of 120 C-17s.

    --------------------------- Indexing Terms -----------------------------

     REPORTNUM:  NSIAD-95-26
         TITLE:  C-17 Aircraft: Cost and Performance Issues
          DATE:  01/26/95
       SUBJECT:  Military aircraft
                 Combat readiness
                 Defense contingency planning
                 Cost effectiveness analysis
                 Military airlift operations
                 Military systems analysis
                 Defense cost control
                 Short takeoff/landing aircraft
                 Air Force procurement
                 Operations analysis
    IDENTIFIER:  C-17 Aircraft
                 C-5B Aircraft
                 KC-10 Aircraft
                 DOD Major Aircraft Review
                 C-5 Aircraft
                 C-141 Aircraft
                 Desert Shield
                 Desert Storm
                 Saudi Arabia
                 DOD Mobility Requirements Study
                 C-130 Aircraft
                 DOD Bottom-Up Review
                 Bradley Fighting Vehicle
                 High Mobility Multipurpose Wheeled Vehicle
                 HMMWV

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    Cover
    ================================================================ COVER

    Report to Congressional Committees

    January 1995

    C-17 AIRCRAFT - COST AND
    PERFORMANCE ISSUES

    GAO/NSIAD-95-26

    C-17 Aircraft

    Abbreviations
    =============================================================== ABBREV

      AMC - Air Mobility Command
      COEA - cost and operational effectiveness analysis
      DOD - Department of Defense
      IDA - Institute for Defense Analysis
      LAPES - low-altitude parachute extraction system
      MRS - Mobility Requirements Study
      MTM/D - million ton-miles per day

    Letter
    =============================================================== LETTER

    B-258210

    January 26, 1995

    The Honorable Strom Thurmond
    Chairman
    The Honorable Sam Nunn
    Ranking Minority Member
    Committee on Armed Services
    United States Senate

    The Honorable Floyd Spence
    Chairman
    The Honorable Ronald V.  Dellums
    Ranking Minority Member
    Committee on National Security
    House of Representatives

    The fiscal year 1994 conference report on the Department of Defense's
    authorization act contains a provision calling for us to assess the
    C-17's original justification and the effect of technical problems
    and cost increases on the aircraft's ability to achieve original
    program requirements.  This report responds to that provision and
    also discusses some of the assumptions underlying the conclusions in
    the recent C-17 cost and operational effectiveness analysis.

    This report was prepared under the direction of Louis J.  Rodrigues,
    Director of Systems Development and Production Issues, who may be
    reached on (202) 512-4841 if you or your staff have any questions.
    Major contributors are listed in appendix II.

    Henry L.  Hinton, Jr.
    Assistant Comptroller General

    EXECUTIVE SUMMARY
    ============================================================ Chapter 0

       PURPOSE
    ---------------------------------------------------------- Chapter 0:1

    In recent years, there has been congressional concern about whether
    the C-17 is the most cost-effective aircraft to meet the Air Force's
    airlift requirement.  The Fiscal Year 1994 National Defense
    Authorization Act conference report contains a provision calling for
    GAO to assess the C-17's original justification and the effect of
    technical problems and cost increases on the aircraft's ability to
    achieve original program requirements.  This report responds to that
    provision.  It also discusses the nature of the performance problems,
    the extent of the cost growth, and the results of the Department of
    Defense's (DOD) recent C-17 cost and operational effectiveness
    analysis.

       BACKGROUND
    ---------------------------------------------------------- Chapter 0:2

    In 1981, DOD identified a need for additional long-range airlift and
    established a fiscally constrained airlift goal of 66 million
    ton-miles per day.  At that time, long-range airlift capacity was
    about 29 million ton-miles per day.  To reach the goal, the Air Force
    procured 50 C-5Bs and 44 KC-10 aircraft and began developing a new
    airlifter, the C-17.

    The Air Force originally planned to acquire 210 C-17 aircraft.
    However, in April 1990, as part of DOD's Major Aircraft Review, the
    Secretary of Defense reduced the program to 120 aircraft--a
    sufficient number to maintain an airlift capacity of 52 million
    ton-miles per day, which was judged to be sufficient in the post-
    Cold War era.  Through fiscal year 1995, Congress has appropriated
    almost $18 billion for the C-17 program.  Due to cost, schedule, and
    performance concerns, the Deputy Secretary of Defense recently
    reduced the program to 40 aircraft, pending a Defense Acquisition
    Board review currently scheduled to occur in November 1995.  The Air
    Force, however, is still planning for a 120-aircraft program.  This
    report is intended to be used in congressional oversight of the
    pending decision.  The provisional 40-aircraft program is estimated
    to cost $22.5 billion, an additional $4.5 billion over the amount
    appropriated through fiscal year 1995.

       RESULTS IN BRIEF
    ---------------------------------------------------------- Chapter 0:3

    The C-17 was intended to perform several unique military missions,
    such as delivering cargo and troops directly to forward airfields,
    potentially near the battle zone; operating routinely into small,
    austere airfields in an intratheater role; airlifting outsize
    cargo--the largest items in the Army's inventory, for example,
    tanks--and performing airdrop missions.  However, these capabilities,
    on which the aircraft was originally justified, are not likely to be
    used as originally intended.  Meanwhile, the program's cost continues
    to increase.  DOD's recent C-17 cost and operational effectiveness
    analysis, while concluding that the C-17 is the preferred airlifter,
    showed that a fleet comprised of 40 C-17s and 64 commercial
    freighters could meet DOD's airlift requirements as expressed in the
    Mobility Requirements Study.  This alternative fleet can be procured
    at cost savings of $10.7 billion or more (in constant fiscal year
    1993 dollars) when compared to a fleet of 120 C-17s.

    Changes in the C-17's intended role, the results of DOD's C-17 cost
    and operational effectiveness analysis, and continued program cost
    growth lead us to conclude that a 120-aircraft C-17 program is not
    the most cost-effective way to meet airlift requirements.

       PRINCIPAL FINDINGS
    ---------------------------------------------------------- Chapter 0:4

          C-17'S ORIGINAL ROLE HAS
          CHANGED
    -------------------------------------------------------- Chapter 0:4.1

    The C-17 will not be used as initially envisioned because:

    The Air Force no longer plans to routinely operate the C-17 in an
    intratheater shuttle role, largely as a result of DOD's decision to
    reduce the quantity of aircraft from 210 to 120.

    The Army has not incorporated direct delivery\1 into its deployment
    doctrine or mobility planning exercises and would have to
    fundamentally change its deployment doctrine to use direct delivery
    routinely.  Even if the Army implemented a direct delivery concept,
    the C-17 would only rarely be used to deliver cargo to forward
    airfields near the battle front, in contrast to the original C-17
    concept of operations.

    The Air Force has reported that the C-17's capability to land on
    short airfields would enable it to land on 6,400 more airfields in
    the free world (less the United States) than the C-5.  However, when
    wartime landing requirements, including minimum runway strength, are
    considered, the C-17's wartime airfield advantage decreases from
    6,400 to about 1,400 airfields.

    Outsize cargo requirements have declined in the post-Cold War world,
    and DOD's analysis shows that fewer than 120 C-17s are needed to meet
    current outsize airlift requirements.

    The Army no longer plans to use the C-17's unique low-altitude
    parachute extraction capability to deliver platforms weighing up to
    60,000 pounds, and, due to airflow problems on the aircraft, the C-17
    airdrop requirement will be reduced.

    --------------------
    \1 Direct delivery involves bypassing a main operating base to land
    directly at another base in the theater of operations.  This base may
    or may not be a small, austere airfield.

          PROGRAM COST INCREASES
          CONTINUE
    -------------------------------------------------------- Chapter 0:4.2

    DOD's original plan was to buy 210 aircraft for a total cost of $41.8
    billion.  In December 1992, total program costs for 120 aircraft were
    estimated to be $39.5 billion at a maximum production rate of 16
    aircraft per year.  In January 1994, estimated program costs
    increased to $43 billion, in part because the projected maximum
    procurement rate was reduced to
    12 aircraft per year.

    In May 1994, DOD estimated that program costs would further increase
    to $45.4 billion at a maximum production rate of 12 aircraft per
    year, due to higher production and support costs.  DOD also indicated
    that, if the maximum production rate were restricted to eight
    aircraft per year, program costs could increase to about $48 billion.
    In recent years, because of its concern with ongoing development and
    production problems, Congress has reduced funding to slow the C-17's
    procurement rate and to reduce the level of concurrency in the
    program.

          COST-EFFECTIVE ALTERNATIVES
          TO THE C-17
    -------------------------------------------------------- Chapter 0:4.3

    A recent C-17 cost and operational effectiveness analysis, conducted
    for DOD by the Institute for Defense Analyses, compared the delivery
    capability of the C-17 to alternative fleets, including a mixed fleet
    of 40 C-17s and 64 modified commercial freighters.  That analysis
    concluded that the C-17 is the preferred airlifter.  However, this
    conclusion was based on questionable assumptions about airfield
    availability, aircraft utilization rates, and the C-17's intratheater
    capability.  If alternative-- and, we believe, more
    realistic--assumptions are made, the C-17/commercial fleet could meet
    airlift requirements at cost savings of about $10.7 billion.

       MATTER FOR CONGRESSIONAL
       CONSIDERATION
    ---------------------------------------------------------- Chapter 0:5

    In light of changes in the C-17's intended role, the results of DOD's
    cost and operational effectiveness analysis, and continued program
    cost growth, Congress should not support the C-17 program beyond the
    minimum number needed to fulfill unique military requirements.  That
    number has not yet been determined, but is the subject of several
    ongoing studies.

       AGENCY COMMENTS AND GAO'S
       EVALUATION
    ---------------------------------------------------------- Chapter 0:6

    In commenting on a draft of this report, DOD agreed that it would be
    premature to commit to buying 120 C-17s at this time.  However, DOD
    stated that (1) the role of the C-17 has not changed, (2) the C-17
    can and will perform routine direct delivery and intratheater
    missions, (3) the airfield accessibility advantage of the C-17 over
    the C-5 is significant, and (4) crediting a 120-C-17 fleet with cost
    savings to reflect a reduced C-130 role was appropriate and did not
    result in understating the potential savings associated with mixed
    fleet alternatives.

    GAO's comparison of the C-17's originally envisioned role (as
    discussed in the 1986 C-17 System Operational Concept and the 1983
    Airlift Master Plan) with how the Air Force currently plans to
    operate it clearly shows that a change in the C-17's role has
    occurred.  The C-17 was originally intended to routinely deliver
    cargo directly to areas near the battle front, but now the Air Force
    concept of operation says it will only rarely be used in a direct
    delivery role into forward areas.

    The Air Mobility Command has informed GAO that, given the reduction
    in the number of C-17s from 210 to 120, it no longer intends to use
    the C-17 extensively for intratheater shuttle missions.

    Of the 1,400 airfields that comprise the C-17's advantage over the
    C-5, DOD's 1992 Mobility Requirements Study identified only 3 that
    would likely be used in a major regional contingency.

    The number of C-130s in the inventory has not been reduced as a
    result of the introduction of the C-17 nor are there plans to do so.
    Therefore, the C-17 should not be credited with any degree of
    additional cost savings to reflect an intratheater shuttle role and a
    reduction in the use of the C-130.  The inclusion of cost savings in
    the cost and operational effectiveness analysis increased the cost of
    the alternative fleets relative to the C-17.

    INTRODUCTION
    ============================================================ Chapter 1

    In the event of a conflict or crisis overseas, the United States must
    be able to deliver the troops, equipment, and supplies necessary to
    meet the threat.  The Department of Defense (DOD) relies on airlift,
    sealift, and prepositioned assets to accomplish this mission.
    Airlift, the vital component that provides rapid mobility to combat
    forces, delivers Army light forces, equipment, initial resupply and
    bulk ammunition, and nearly all precision munitions and time-critical
    items.  Airlift can also rapidly transport troops and supplies to
    link up with prepositioned equipment, thus speeding the deployment of
    heavier units early in a conflict.

       C-17 EXPECTED TO MODERNIZE
       AIRLIFT FLEET
    ---------------------------------------------------------- Chapter 1:1

    Airlift is classified as either intertheater (from one theater of
    operation to another) or intratheater (operations within a theater).
    Intertheater airlift services are provided by the Air Force's Air
    Mobility Command (AMC), which has a fleet of C-5, C-141, and KC-10
    aircraft to carry out that mission.  AMC also relies on the Civil
    Reserve Air Fleet to supplement its military airlift capacity during
    contingencies.  The Air Combat Command is responsible for operating
    C-130 aircraft, which provide intratheater airlift.

    In July 1982, the Air Force contracted with McDonnell Douglas
    Corporation to develop and produce the C-17, which is an air
    refuelable, four-engine jet transport, designed to operate in both
    the intertheater and intratheater roles (see fig.  1.1).  The C-17 is
    currently contracted to carry a maximum payload of 160,000 pounds
    2,400 nautical miles unrefueled and perform the full range of airlift
    missions, including unique military missions such as direct delivery
    to forward airfields, potentially near the battle zone; routine
    operations into small, austere airfields in an intratheater role;
    airlift of outsize cargo such as tanks; and airdrop.

    Figure 1.1:  C-17 Aircraft

    Source:  McDonnell Douglas Corporation.

    The Air Force originally planned to acquire 210 C-17 aircraft.
    However, in April 1990, as a result of DOD's Major Aircraft Review,
    the Secretary of Defense reduced the program to 120 aircraft.  The
    C-17 is still undergoing test and evaluation, with the flight test
    program scheduled to be completed in June 1995.  DOD plans to have a
    fleet of 120 C-17s delivered by 2004.

       PROVISIONAL 40-AIRCRAFT PROGRAM
       IMPLEMENTED
    ---------------------------------------------------------- Chapter 1:2

    In recent years, Congress has expressed concern with the C-17's
    growing cost and continuing technical problems.  The Fiscal Year 1993
    Defense Authorization Act required DOD to conduct a special Defense
    Acquisition Board review of the program.  In December 1993, as a
    result of the review, the Secretary of Defense announced that the
    program would be stopped at 40 aircraft unless McDonnell Douglas
    could demonstrate that program cost, schedule, and performance
    warranted completing the 120 aircraft program.  As we recently
    testified,\1 DOD has proposed lowering the C-17's payload/range
    specifications.  DOD has also proposed relaxing the aircraft's
    contracted short field landing specifications to levels that the C-17
    can probably achieve.  DOD plans to assess the contractor's
    improvements in November 1995, at the scheduled full-rate production
    decision milestone.

    Through fiscal year 1995, Congress has appropriated almost $18
    billion for the C-17 program, including (1) $5.8 billion for
    research, development, test, and evaluation; (2) $12 billion for
    procurement; and (3) $163 million for military construction.
    Congress has also authorized the procurement of 32 C-17 aircraft and
    advance procurement funds for another 8 aircraft.  As of December
    1994, 17 production C-17s had been delivered to the Air Force.

    --------------------
    \1 Military Airlift:  The C-17 Proposed Settlement and Program Update
    (GAO/T-NSIAD-94-172,
    Apr.  28, 1994).

       OBJECTIVE, SCOPE, AND
       METHODOLOGY
    ---------------------------------------------------------- Chapter 1:3

    The Fiscal Year 1994 Defense Authorization Act conference report
    contains a provision calling for us to assess whether (1) the
    original C-17 justification remains valid and (2) the C-17 can still
    achieve its original program requirements, given cost increases and
    technical problems.  This report responds to that provision.  It also
    discusses the nature of the performance problems, the extent of the
    cost growth, and the results of DOD's recent C-17 cost and
    operational effectiveness analysis (COEA), which was conducted by the
    Institute for Defense Analyses (IDA).

    To determine if the C-17's original justification has changed, we
    reviewed program documents, including past and current system
    specifications, operational requirements documents, concepts of
    operation, and Army field manuals and doctrine.  We also used our
    past work on the Major Aircraft Review, Operation Desert
    Shield/Storm, the Mobility Requirements Study (MRS), and the C-17
    program.  We interviewed officials from the Office of the Secretary
    of Defense, the Joint Chiefs of Staff, Air Force Headquarters, AMC,
    Army Headquarters, and the Army's Training and Doctrine Command.

    We used information from our continuing work to monitor cost,
    schedule, and performance issues related to the program at the
    McDonnell Douglas plant, Long Beach, California, and C-17
    developmental and operational testing by the Air Force at Edwards Air
    Force Base, California.  We also reviewed a recent Defense Science
    Board report on the C-17 and spoke with members of the Board's
    working groups regarding the C-17's payload/range performance and
    other aspects of the program.

    To determine whether cost-effective alternatives to the full C-17
    program exist, we reviewed the COEA.  We also interviewed officials
    from IDA, the Office of the Secretary of Defense, AMC, McDonnell
    Douglas Corporation, Boeing Corporation, and Lockheed Corporation.

    We conducted our review between April 1993 and December 1994 in
    accordance with generally accepted government auditing standards.  We
    obtained DOD comments on a draft of this report, which are discussed
    at the end of each of the following chapters and are presented in
    their entirety in appendix I along with our detailed evaluation of
    them.

    C-17'S PLANNED ROLE HAS CHANGED
    ============================================================ Chapter 2

    The Air Force justified the C-17 in the early 1980s on the aircraft's
    planned capabilities to operate routinely in an intratheater shuttle
    role; perform direct delivery missions to forward airfields,
    potentially in hostile areas; and airlift substantial amounts of
    outsize cargo such as tanks and helicopters.  The C-17 was also
    intended to provide the capability to conduct low-level parachute
    extractions of the Army's heavy equipment and to airdrop troops and
    equipment.  However, the C-17's envisioned role has changed, and
    these capabilities will not be used as originally intended.

       JUSTIFICATION FOR THE C-17
    ---------------------------------------------------------- Chapter 2:1

    DOD's 1981 Congressionally Mandated Mobility Study addressed the U.S.
    policy objective of concurrently supporting a major North Atlantic
    Treaty Organization-Warsaw Pact conflict and a lesser contingency
    involving a Soviet-backed threat in the Persian Gulf region.  DOD
    recommended increasing U.S.  airlift capacity by about 20 million
    ton-miles per day (MTM/D) to 66 MTM/D--the capacity to lift the
    required amount of cargo and troops to Europe and Southwest Asia to
    counter an imminent threat.  The 1981 mobility study highlighted the
    need for a new airlifter that could land on small, austere airfields;
    perform both intertheater and intratheater airlift missions; and
    carry outsize cargo--the largest items in the Army's inventory.
    Outsize cargo includes, for example, M1 tanks, Patriot battery radar,
    and Apache helicopters.

    The Air Force's 1983 Airlift Master Plan concluded that, in addition
    to new C-5B and KC-10 aircraft, procuring 210 C-17s was the most
    cost-effective way to reach the goal of 66 MTM/D while providing
    necessary military utility.  Military utility included the ability to
    operate from austere airfields in an intratheater airlift role,
    perform direct delivery missions to forward operating locations,
    carry all types of combat equipment, and airdrop combat equipment and
    troops.  Figure 2.1 depicts the C-17's concept of operations.

       Figure 2.1:  C-17 Concept of
       Operations

       (See figure in printed
       edition.)

    Source:  Air Force.

       C-17'S INTENDED ROLE HAS
       CHANGED
    ---------------------------------------------------------- Chapter 2:2

    The C-17's role has been modified from that envisioned in the 1983
    Airlift Master Plan.  The C-17 will not routinely conduct
    intratheater shuttle missions, will not routinely perform direct
    delivery missions, and will rarely land near the battle front.
    Furthermore, the dissolution of the Soviet threat has resulted in a
    reduced requirement for outsize cargo.  In addition, the number of
    airfields open to the C-17 but not the C-5 is much less than the Air
    Force has previously stated.\1 Finally, the C-17's unique
    60,000 pound low-altitude parachute extraction system (LAPES)
    capability is not needed, and the aircraft cannot meet original
    airdrop requirements.

    --------------------
    \1 Military Airlift:  Comparison of C-5 and C-17 Airfield
    Availability (GAO/NSIAD-94-225, July 11, 1994).

          C-17 WILL NOT PERFORM
          INTRATHEATER SHUTTLE
          MISSIONS ROUTINELY
    -------------------------------------------------------- Chapter 2:2.1

    The C-17's planned intratheater capability was key to its anticipated
    cost-effectiveness.  Intratheater missions are needed when sealifted
    cargo arrives in the theater or when deployed forces need to be
    repositioned quickly.  These missions are typically carried out by
    C-130s or ground transportation.  Because the C-17 would perform the
    workload of the C-130s, the Air Force's 1983 Airlift Master Plan
    stated that 198 C-130s would be retired and not replaced, a key
    factor in establishing the C-17's cost-effectiveness.  Current Air
    Force policy, however, reflects a substantially diminished
    intratheater role for the C-17.  For example, AMC's 1993 Air Mobility
    Master Plan does not discuss using the C-17 in an intratheater role
    or retiring a significant number of C-130s.

    The Air Force initially anticipated that the C-17 would routinely
    perform intratheater missions during contingencies.  However, as a
    result of the 1990 Major Aircraft Review, the Secretary of Defense
    reduced the number of C-17s from 210 to 120, citing the changing
    strategic environment and diminished Soviet threat.  Under the
    current 120-aircraft program, the intertheater airlift flow would be
    adversely affected if C-17s were diverted to perform intratheater
    missions on a routine basis.  AMC officials acknowledge that while
    C-17s will provide theater commanders additional flexibility when
    needed, the aircraft will not routinely perform intratheater missions
    as originally planned.

          DIRECT DELIVERY ROLE MAY NOT
          BE USED ROUTINELY
    -------------------------------------------------------- Chapter 2:2.2

    The C-17 was also intended to offer an extended direct delivery
    capability by landing at forward airfields near the battle front.
    However, the Air Force's current C-17 operational concept states that
    the aircraft will rarely land near the battle front.  Moreover,
    current Army doctrine calls into question the extent to which the
    C-17's direct delivery capability will be used.  The Army--the
    primary user of airlift--prefers to deploy to main operating bases
    rather than directly to final destination airfields.

             C-17 WILL RARELY DELIVER
             CARGO TO FORWARD AREAS
    ------------------------------------------------------ Chapter 2:2.2.1

    The C-17's operational concept has changed from one that emphasizes
    direct delivery to forward airfields at the brigade rear area to one
    that stresses more standard airlift operations at the corps support
    area.  The 1986 C-17 System Operational Concept stated that "the
    C-17's capability to deliver directly to small, austere airfields
    close to the battle area will reduce delivery times, reduce
    congestion at main operating bases, and enhance operational
    flexibility by increasing the number of airfields that can be used."
    This document also stated that the C-17's routine destination
    airfields would likely be located at the brigade rear area.  Figure
    2.2 provides an illustrative example of this concept.

       Figure 2.2:  Original C-17
       Delivery Concept

       (See figure in printed
       edition.)

    Source:  GAO representation of Army and Air Force information.

    Recently, the Air Force has downplayed the extent to which the C-17
    will fly into forward areas near the front.  The 1993 C-17 Employment
    Concept of Operations states that the C-17 will rarely deliver cargo
    to the brigade support area.  The brigade support area is typically
    near the boundary between the brigade rear area and the division rear
    area.  Figure 2.3 illustrates the current concept.

       Figure 2.3:  Current C-17
       Delivery Concept

       (See figure in printed
       edition.)

    Source:  GAO representation of Army and Air Force information.

    According to Air Force and Army officials, the C-17 would be very
    unlikely to use an airfield not protected by a corps.  However, AMC
    officials stated that the C-17 will provide theater commanders the
    flexibility to operate in forward areas if necessary.

             ARMY DOCTRINAL CHANGE
             REQUIRED TO USE DIRECT
             DELIVERY ROUTINELY
    ------------------------------------------------------ Chapter 2:2.2.2

    The Army's current method of deployment does not use direct delivery,
    even to well-developed airfields.  The Army trains and fights based
    on a "mass and maneuver" strategy, with forward movements planned
    from major bases in the theater of operations.  Desert Shield/Storm
    experience and the 1992 MRS indicate that the Army remains reluctant
    to use direct delivery.

    During Desert Shield/Storm, numerous well-developed airfields
    eventually became accessible to military airlifters in Saudi Arabia.
    However, the Army preferred to use the two main operating bases and
    was opposed to sending units directly to other airfields.  AMC had to
    convince some Army units to use direct delivery to bypass these bases
    and send troops and cargo directly to the final destination airfields
    on C-5s and C-141s.  For example, 3 months after the Desert Shield
    deployment began, the Army was still requesting that over 75 percent
    of its missions go to a main operating base.

    When preparing its deployment database for the MRS, which assumed a
    fleet of 80 C-17s would be available, the Army again did not make use
    of direct delivery.  For example, in the Southwest Asia scenario, the
    Army planned to send all troops and cargo to the two main operating
    bases that had been used in Desert Shield/Storm.  AMC persuaded the
    Joint Chiefs of Staff to add more locations to increase delivery
    capability.

    Army, Air Force, and other DOD officials agree that doctrinal changes
    will be needed if the Army is to deploy using the direct delivery
    concept on a routine basis.

          C-17 CAN LAND AT FEWER
          SMALL, AUSTERE AIRFIELDS
          THAN AIR FORCE HAS REPORTED
    -------------------------------------------------------- Chapter 2:2.3

    The Air Force has reported that the C-17's capability to land on
    short airfields would enable it to land at about 6,400 more airfields
    in the free world (less the United States) than the C-5.  However,
    the 6,400 figure is overstated because it did not take into account
    runway strength and included all types of airfields, ranging from
    concrete and asphalt to gravel, dirt, and grass, many of which are
    not suitable for either aircraft.  When wartime landing
    requirements,\2 including minimum runway strength, are considered,
    the C-17's wartime airfield advantage decreases from 6,400 to about
    1,400 airfields.  More importantly, DOD's 1992 MRS identified only
    three such airfields that would likely be used by the C-17 in the
    major regional contingency scenarios.  Two are located in Korea and
    one in Saudi Arabia.

    --------------------
    \2 The number of airfields on which the C-5 could land was based on a
    wartime runway length and width criteria of 5,000 feet by 131 feet
    since Air Force officials told us this is the narrowest runway that a
    C-5 has actually landed on during wartime.

          OUTSIZE CARGO REQUIREMENTS
          HAVE DECREASED
    -------------------------------------------------------- Chapter 2:2.4

    The 1983 Air Force decision to buy the C-17 was based largely on the
    aircraft's ability to carry outsize cargo.  In the North Atlantic
    Treaty Organization-Warsaw Pact scenario examined in DOD's 1981
    Congressionally Mandated Mobility Study, 27 percent of the airlifted
    equipment was outsize.  The post-Cold War scenarios examined in DOD's
    recent MRS, however, require a smaller percentage of outsize cargo
    than the Soviet-based scenarios.  In the most lift-intensive scenario
    in the 1992 MRS--simultaneous deployments to Southwest Asia and
    Korea--about 15 percent of the cargo was outsize.  Recent deployment
    experience also reflects a smaller outsize cargo requirement.  During
    Desert Shield/Storm, only 12 percent of the airlifted cargo was
    outsize.

    An Air Force and DOD analysis shows that fewer than 120 C-17s would
    be needed, in conjunction with the existing aircraft fleet, to meet
    the outsize airlift delivery requirement in the 1992 MRS.  The MRS
    moderate risk airlift requirement, judged acceptable by DOD, was
    accomplished with a fleet that included 80 C-17s.  DOD did not
    determine the minimum number of C-17s that would be needed to meet
    the moderate risk requirement.  DOD is currently preparing a new MRS,
    scheduled to be completed by the end of January 1995, that will
    reflect the recommendations in the Department's 1993 Bottom-up
    Review.  Preliminary AMC data indicate that the percentage of outsize
    cargo will not change significantly from the 15 percent assumed in
    the 1992 MRS.

          UNIQUE C-17 LAPES CAPABILITY
          NO LONGER REQUIRED
    -------------------------------------------------------- Chapter 2:2.5

    LAPES is a means of extracting equipment while an airlifter flies at
    low levels.  At present, the C-130 is the only aircraft capable of
    LAPES operations, and it is limited to extracting 42,000 pounds of
    equipment.  In 1981, the Army identified an "urgent need" to develop
    a LAPES capability up to 60,000 pounds.  According to Army officials,
    this capability was needed to extract armored artillery pieces,
    ammunition, and towing vehicles from the same LAPES platform, which
    would minimize dispersion over the drop zone.  The C-17 was intended
    to provide this unique capability.

    In March 1994, the Army acknowledged that "LAPES has been an
    expensive, unused, untrained capability and is potentially of limited
    battlefield use." The Army stated that the current C-130 42,000-pound
    LAPES capability "appears to more than adequately address foreseeable
    Army requirements." The Army intends neither to maintain the material
    systems and rigging required for the 60,000-pound LAPES platform nor
    to conduct C-17 LAPES training.  Thus, the C-17 will not be used for
    this mission.  However, AMC officials noted that testing of a
    42,000-pound C-17 LAPES capability is currently underway.

          C-17 CANNOT MEET ORIGINAL
          AIRDROP REQUIREMENTS
    -------------------------------------------------------- Chapter 2:2.6

    The ability to airdrop troops and equipment is one of DOD's most
    critical requirements.  Currently, only the C-141 and C-130 aircraft
    are capable of routinely performing airdrop missions.\3 The Joint
    Chiefs of Staff recently revalidated the requirement for a strategic
    airdrop of a brigade's worth of troops and equipment.  Because the
    C-130 cannot fly the long distances required for this mission and the
    C-141 fleet is being retired, the C-17 is expected to fulfill this
    requirement.  However, the C-17 has not been able to meet initial
    requirements because of airflow problems caused by its design.  As a
    result, the Army is lowering its airdrop requirements.

    The contracted specifications call for the C-17 to airdrop 102
    combat-equipped paratroopers using static line deployed parachutes,
    preceded by at least 8, 500-pound equipment bundles, within 55
    seconds.  The bundles are to be dropped out of the cargo ramp door
    while the paratroopers jump from the two troop doors on the
    aircraft's sides.  The Army considers combination drops critical to
    early entry lethality and survivability on the battlefield.  However,
    testing has shown that the C-17 has severe airflow problems when the
    side troop doors and the rear cargo door and ramp are open.

    In March 1994, the Army notified AMC that, due to the C-17's airflow
    problems, it had revised its airdrop requirement in terms of
    "desired" and "required" capabilities.  The Army's new desired
    objective for the combination airdrop is to drop 102 paratroopers and
    8 bundles in
    70 seconds.  The required capability is to drop 102 paratroopers and
    2 bundles in 55 seconds.  However, AMC officials told us that this is
    an unrealistic requirement because 102 paratroopers cannot exit the
    C-17 within this time frame.  Accordingly, AMC plans to reduce the
    C-17 airdrop requirement.

    Another specification requires airdropping 40 containerized delivery
    system bundles, weighing 2,350 pounds each.  However, the C-17 has
    been restricted to dropping only 30 bundles because of safety
    concerns.  The C-17 program office is making design changes to
    eliminate this safety hazard and enable the C-17 to drop 40 bundles.

    --------------------
    \3 While the C-5 is capable of airdropping equipment, the Air Force
    does not routinely use the aircraft in this role.

       CONCLUSION
    ---------------------------------------------------------- Chapter 2:3

    The C-17's anticipated role has changed and the aircraft will not be
    used as originally envisioned.  The C-17 was justified on the basis
    of its unique capability to routinely deliver the full range of Army
    combat equipment to locations inaccessible to other strategic
    airlifters.  The C-17 is not likely to conduct routine intratheater
    and direct delivery missions as planned, and it is no longer expected
    to operate into forward airfields near the battle front.
    Furthermore, the number of airfields in the free world open to the
    C-17, but not the C-5, is significantly less than the Air Force
    claimed in justifying the C-17.  While the C-17 is capable of
    carrying outsize cargo, a DOD analysis indicates that a fleet of 120
    C-17s may not be necessary to fulfill outsize delivery requirements.
    Finally, one of the aircraft's unique capabilities-- using LAPES to
    deliver a 60,000-pound platform--will not be used, and its airdrop
    capability does not meet the Army's original requirements.  The
    aircraft is likely to operate primarily in a routine intertheater
    airlift role.

       AGENCY COMMENTS AND OUR
       EVALUATION
    ---------------------------------------------------------- Chapter 2:4

    DOD's position in commenting on a draft of this report is that (1)
    the role of the C-17 has not changed, (2) the C-17 can and will
    perform routine direct delivery and intratheater shuttle missions,
    and (3) the airfield accessibility advantage of the C-17 over the C-5
    is significant.

    A comparison of the C-17's envisioned role as discussed in the 1986
    C-17 System Operational Concept, the 1983 Airlift Master Plan, the
    1993 C-17 Employment Concept of Operations, and the 1993 Air Mobility
    Master Plan shows that the role of the C-17 has clearly changed.  For
    example, the Air Force no longer plans to use the C-17 to routinely
    conduct intratheater shuttle missions.  Further, while direct
    delivery is still a part of the concept for the C-17, the C-17's
    operational concept has changed from one that emphasized direct
    delivery to forward airfields near the battle front to one that
    emphasizes more standard airlift operations at or near a main
    operating base.  The Army is changing its doctrine to incorporate the
    use of direct delivery, but these doctrinal changes do not call for
    routine direct delivery to forward airfields near the battle front.

    Although the C-17 can land on more airfields than the C-5, the C-17's
    airfield advantage is significantly less than the 6,400 airfields
    originally claimed, and the 1992 MRS identified only three small
    austere airfields that would likely be used by the C-17 in major
    regional contingencies.

    ALTERNATIVES TO THE C-17 CAN HELP
    MEET AIRLIFT REQUIREMENTS AT
    SIGNIFICANTLY LOWER COST
    ============================================================ Chapter 3

    DOD's COEA showed that the C-17 is the preferred military airlifter
    because, when considering delivery of outsize cargo, the C-17 retains
    its throughput ability better than the C-5 if (1) airfield
    constraints are encountered and (2) the C-17's planned utilization
    rate (higher than the C-5's experienced rate) is achieved.  However,
    the COEA also showed that alternative airlift fleets, such as a
    combination of 40 C-17s and 64 modified commercial freighters, can
    meet airlift requirements at a significantly lower cost if
    alternative--in our opinion, more reasonable--assumptions are made.
    In addition, C-17 program costs have continued to increase, and
    potential savings from adopting an alternative to the 120-aircraft
    fleet could approach $4 billion more than the $10.7 billion (in
    constant fiscal year 1993 dollars) we identified in our earlier
    report.\1

    --------------------
    \1 Airlift Requirements:  Commercial Freighters Can Help Meet
    Requirements at Greatly Reduced Cost (GAO/NSIAD-94-209, July 11,
    1994).

       C-17 COEA
    ---------------------------------------------------------- Chapter 3:1

    DOD's COEA examined alternatives to the full C-17 program, including
    (1) restarting the C-5 line, (2) extending the service life of the
    C-141, and (3) procuring new commercial freighter aircraft.  The
    capability of Boeing 747 freighters was assessed to determine how
    commercial aircraft would contribute to airlift missions.\2 The
    COEA's conclusion was that an airlift fleet with 120 C-17s was the
    preferred choice to meet the requirements set forth in the 1992 MRS,
    despite the fact that it was more expensive than a fleet comprised of
    C-17s and modified commercial freighters.  This conclusion was based
    on three major assumptions:

    Airfield availability for airlift use would be extremely constrained.

    The C-17 would achieve a 15.2-hour per day utilization rate while
    commercial freighters would achieve only a 12.5-hour per day rate.

    The C-17 would be used routinely in place of the C-130 to accomplish
    intratheater delivery, so C-130 operating and support costs should be
    added to non-C-17 alternatives.

    Our review indicated that alternative assumptions pertaining to
    airfield availability, utilization rates, and intratheater capability
    are more realistic.  Adjusting for these assumptions would result in
    the C-17 fleet being less capable and a mixed C-17/commercial fleet
    being more capable and more cost-effective than the COEA's
    conclusions indicate.

    --------------------
    \2 To accommodate the Army's new 2.5- and 5-ton trucks, commercial
    freighters' floors would need to be strengthened and the side doors
    would need to be widened or the trucks would have to be fitted with
    collapsible cab tops.  The COEA reflects the estimated cost and
    performance of these modifications.

          AIRFIELD CONSTRAINTS AFFECT
          FLEET CAPABILITY
    -------------------------------------------------------- Chapter 3:1.1

    The COEA was based on the threat scenario portrayed in the 1992 MRS,
    which postulated that an aggressive enemy was moving directly into
    Saudi Arabia.  Based on this threat, several airfield assumptions
    were examined.  The COEA showed that the C-17 had a better delivery
    capability for outsize cargo than the mixed C-17/commercial aircraft
    fleet when airfield availability was extremely limited.  Under the
    assumption that airlift deliveries would be equivalent to the first
    45 days of Desert Shield, when only one major airlift airfield would
    be available, the C-17 fleet could meet the MRS delivery requirement,
    but the mixed fleet could not.  However, under the airfield
    assumptions used in the MRS Southwest Asia scenario, in which more
    airlift airfields were assumed to be available, the COEA showed that
    the mixed fleet of 40 C-17s and 64 747s could deliver the required
    amount of cargo.  This mixed fleet would cost about $6 billion less
    than the fleet of 120 C-17s.

    During the first 45 days of Desert Shield, airfield availability was
    limited to only one major airlift base, due primarily to the Saudi
    Arabian government's reluctance to allow U.S.  access to multiple
    airfields and the U.S.  Army's preference for deploying to only major
    operating bases.  In Desert Shield/Storm, Iraqi troops became
    entrenched shortly after the invasion of Kuwait and did not invade
    Saudi Arabia.  We believe that, given the threat scenario on which
    the COEA was based, the MRS assumption that the Saudi government
    would open additional airlift airfields is more realistic than the
    airfield assumption based on early Desert Shield experience.  Under
    the MRS airfield assumption, the mixed C-17/commercial fleet meets
    the airlift requirement.

          C-17'S COST-EFFECTIVENESS
          DEPENDS ON HIGH UTILIZATION
          RATE
    -------------------------------------------------------- Chapter 3:1.2

    The COEA indicated that the C-17 would perform better than mixed
    fleets if a 15.2-hour per day utilization rate were assumed for the
    C-17.  An aircraft's utilization rate is the planned average daily
    flying hours per aircraft for the entire fleet and is based on
    numerous elements, such as mission capable rate, number of aircrews
    per aircraft, and availability of spares.  The COEA showed that,
    based on a 15.2-hour utilization rate for the C-17 and a 12.5 rate
    for the 747, both alternatives would meet the stated airlift
    requirement.  The fleet of 120 C-17s could deliver more outsize cargo
    than the mixed fleet but would cost $6 billion more.  If the 747's
    utilization rate is increased to 15.2, a rate AMC officials
    acknowledge is feasible, the results show a significant increase in
    the mixed fleet's ability to deliver outsize and oversize cargo.\3

    The C-17's 15.2-hour utilization rate is undemonstrated.  To sustain
    this rate, the C-17 must demonstrate a mission capable rate of 90
    percent, and the Air Force must sufficiently fund C-17 spares and
    aircrews.  The level of war reserve spares for airlift aircraft has
    historically been less than required to sustain projected wartime
    utilization rates.\4 Air Force officials told us they believe that
    the spares level for the C-17 will be fully funded, in part, because
    spares funding has recently been made a higher priority.  The Air
    Force also plans to maintain a higher aircrew to aircraft ratio for
    the C-17 than for other strategic airlifters.  The relatively higher
    C-17 aircrew ratio contributes to its ability to maintain a higher
    utilization rate.

    --------------------
    \3 Oversize cargo includes trucks, Bradley vehicles, High Mobility
    Multi-purpose Wheeled Vehicles, and self-propelled howitzers.

    \4 Military Airlift:  Peacetime Use of War Reserve Spares Reduces
    Wartime Capabilities (GAO/NSIAD-90-186, June 25, 1990).

          COEA UNDERESTIMATES
          POTENTIAL SAVINGS ASSOCIATED
          WITH MIXED FLEET ALTERNATIVE
    -------------------------------------------------------- Chapter 3:1.3

    Because the C-17 was designed to deliver cargo to small, forward
    airfields typically used by the C-130, the COEA assumed that the
    alternative with only 40 C-17s would need 80 additional C-130s to
    provide about the same intratheater movement capability as the fleet
    of 120 C-17s.  Thus, the life-cycle cost of the mixed fleet
    alternative was increased by $4.7 billion over 25 years (in constant
    fiscal year 1993 dollars).  However, as discussed in chapter 2, the
    C-17's planned intratheater role has been largely limited and the Air
    Force does not plan to replace C-130s with C-17s for intratheater
    missions.  Therefore, it was inappropriate to assume the mixed fleet
    alternative should include this added $4.7 billion.  If this cost is
    subtracted from the mixed fleet, the cost of a fleet of 120 C-17s
    increases from about $6 billion to about $10.7 billion more than the
    mixed fleet alternative.

       C-17'S PROGRAM COST CONTINUES
       TO INCREASE
    ---------------------------------------------------------- Chapter 3:2

    In its May 1994 paper, "Department of Defense Airlift Acquisition
    Strategy," DOD included average cost figures that indicate that C-17
    program cost estimates continue to increase.  In December 1992, total
    program costs were estimated to be $39.5 billion (in then-year
    dollars)\5 at a maximum rate of 16 aircraft per year.  In January
    1994, the C-17 program director estimated that total program costs
    would increase to $43 billion because of a reduced procurement rate
    of 12 aircraft per year and increased estimates for production and
    support costs.

    DOD's paper indicated that, at a maximum production rate of 12
    aircraft per year, total program costs would be $45.4 billion.  This
    increase is attributable to increased production and support costs
    and the cost of a recently approved business settlement between DOD
    and McDonnell Douglas.\6 If the maximum procurement rate were reduced
    to eight aircraft per year, DOD's paper estimated that total program
    costs would increase another $2.6 billion, to about $48 billion.\7 In
    recent years, due to ongoing development and production problems,
    Congress has reduced funding to slow the C-17's production rate to
    reduce the level of concurrency in the program.  While the Air
    Force's desired procurement rate may eventually be achieved, the
    program has been significantly more stretched out than originally
    planned.

    The C-17 procurement cost estimates reported in DOD's paper are
    significantly higher than those in the C-17 COEA.  DOD's paper
    indicates that estimated procurement costs have increased by $2.8
    billion to $4 billion (in constant fiscal year 1993 dollars) since
    the C-17 COEA.  Consequently, the potential savings from adopting an
    alternative to the 120-aircraft fleet would be significantly greater
    than the $10.7 billion we previously reported.  While estimating the
    exact amount of savings would be very difficult because of the many
    variables involved, we believe the increase in savings could approach
    $4 billion.  However, this estimate does not take into account
    changes that may have occurred in the estimated costs of modified
    commercial aircraft.

    --------------------
    \5 Then-year dollars include estimates of future year inflation.

    \6 Military Airlift:  C-17 Settlement Is Not a Good Deal
    (GAO/NSIAD-94-141, Apr.  15, 1994).

    \7 These higher program cost estimates do not include a number of
    contractor cost reduction proposals that are now undergoing technical
    evaluation.

       MINIMUM NUMBER OF C-17S NEEDED
       TO FULFILL UNIQUE MILITARY
       REQUIREMENTS NOT YET DETERMINED
    ---------------------------------------------------------- Chapter 3:3

    Determining whether a mixed fleet is a viable alternative to a
    120-aircraft C-17 program depends on the fleet's capability to
    fulfill certain unique military requirements such as direct delivery
    to forward airfields, routine operations into small, austere
    airfields in an intratheater role, airlift of outsize cargo, and
    airdrop.  The COEA was not intended to address this issue in detail.
    DOD has several studies underway, scheduled to be completed before
    the November 1995 Defense Acquisition Board decision on C-17
    full-rate production, that will assess the capability of various
    fleet mixes and identify the minimum number of C-17s needed to
    fulfill unique military airlift requirements.  As currently planned,
    nondevelopmental airlift aircraft source selection and quantity will
    depend on the C-17 full-rate production decision.  The Defense
    Acquisition Board will consider several factors in deciding whether
    to continue the C-17 program, including C-17 flight test and
    reliability results, contractor performance, and the findings of the
    Air Force's airlift fleet mix study.

       CONCLUSION
    ---------------------------------------------------------- Chapter 3:4

    Serious concerns about the C-17's cost-effectiveness have prompted
    Congress to direct DOD to explore alternatives to the full C-17
    program.  The COEA identified less costly alternatives that could
    meet airlift requirements and save billions of dollars.  In addition,
    the C-17's program cost continues to increase.  Therefore, the
    savings associated with a mixed fleet of C-17s and commercial
    freighters could be significantly greater than the COEA reported.

       MATTER FOR CONGRESSIONAL
       CONSIDERATION
    ---------------------------------------------------------- Chapter 3:5

    In light of changes in the C-17's intended role, its less than
    anticipated performance, the results of DOD's COEA, and continued
    program cost growth, we continue to believe that Congress should not
    support the C-17 program beyond the minimum number needed to fulfill
    unique military requirements.  That number has not yet been
    determined but is the subject of several ongoing studies.

       AGENCY COMMENTS AND OUR
       EVALUATION
    ---------------------------------------------------------- Chapter 3:6

    In commenting on a draft of our report, DOD stated that (1) a direct
    invasion of Saudi Arabia would still likely result in extremely
    constrained theater airfield availability in contrast to that
    reflected in the 1992 MRS, (2) two C-17s flew missions to Kuwait and
    demonstrated higher utilization rates than required, and (3) its COEA
    estimate of potential savings associated with the mixed fleet
    alternatives was not understated.

    While the precise extent of airfield availability in any future
    contingency is unknown, the MRS threat suggests that more airfields
    will be available than was the case during Desert Shield, when allied
    forces had the advantage of a 5-month deployment period.  We believe
    that using the Desert Shield-type airfield situation juxtaposed
    against an MRS threat gives the C-17 an inappropriate advantage over
    alternative airlifters.  In our opinion, a more valid basis on which
    to compare the C-17 to alternative airlift fleets is the COEA's
    examination of the MRS airfield availability assumption.

    The recent missions to Kuwait are not an adequate basis for
    establishing the appropriate sustainable utilization rate because
    these missions were of extremely limited duration.  DOD has not yet
    determined how to extrapolate an inherent utilization rate from the
    results of the planned July 1995 reliability, maintainability, and
    availability evaluation.  Our position remains that the projected
    C-17 utilization rate of 15.2 is, as yet, undemonstrated and that
    comparing this rate to a 12.5-hour utilization rate for commercial
    airlifters that have demonstrated higher utilization rates
    inappropriately favored the C-17 in the COEA.

    DOD's position that the C-17's intratheater role is unchanged from
    that depicted in the 1983 Airlift Master Plan, despite an almost
    50-percent reduction in the number of aircraft, is untenable.  DOD's
    position also contradicts the comments of Office of the Secretary of
    Defense and AMC officials on our July 1994 report on the COEA, as
    well as the comments of AMC officials on this report.  These
    officials acknowledged that the C-17's intratheater shuttle role has
    been substantially diminished in the wake of the reduction from 210
    to 120 aircraft.  Moreover, they concurred with our finding that the
    COEA should not have assumed a cost saving to the C-17 to account for
    this intratheater role.

    (See figure in printed edition.)Appendix I
    COMMENTS FROM THE DEPARTMENT OF
    DEFENSE
    ============================================================ Chapter 3

     See comment 1.

    (See figure in printed edition.)

     Now on pp.  2-3 and 9-10.

    (See figure in printed edition.)

     Now on pp.  2-3 and 12-17.

     See comment 2.

     See comment 3.

    (See figure in printed edition.)

     See comment 4.

     See comment 5.

    (See figure in printed edition.)

     See comment 6.

     See comment 7.

     Now on pp.  3 and 14-17.

    (See figure in printed edition.)

     See comment 8.

    (See figure in printed edition.)

     See comment 9.

    (See figure in printed edition.)

     Now on pp.  3 and 17-18.

     See comment 10.

    (See figure in printed edition.)

     See comment 11.

    (See figure in printed edition.)

     See comment 12.

     Now on pp.  3 and 19-20.

     See comment 13.

    (See figure in printed edition.)

     See comment 14.

    (See figure in printed edition.)

     Now on pp.  4 and 22-23.

     See comment 15.

     See comment 16.

    (See figure in printed edition.)

     Now on pp.  22-23.

     See comment 17.

    (See figure in printed edition.)

     See comment 18.

     Now on p.  24.

     See comment 19.

    (See figure in printed edition.)

     See comment 20.

     Now on pp.  4, 22,
    and 24-25.

     See comment 21.

    (See figure in printed edition.)

     Now on pp.  4 and 25.

     Now on pp.  4 and 26.

    (See figure in printed edition.)

    GAO COMMENTS

    The following are GAO's comments on the Department of Defense's (DOD)
    letter dated November 18, 1994.

    1. Our response to each of these specific issues is set forth in the
    following notes, which are annotated to DOD's enclosure.

    2. A comparison of the C-17's envisioned role with how the Air Force
    currently plans to operate it clearly shows that it will not be used
    as originally intended--that is, the C-17 will not routinely conduct
    intratheater shuttle missions and will rarely land at the brigade
    rear area.  DOD's position is based on the belief that the difference
    between "routine" and "rarely" is insignificant.

    The basis for DOD's statement that more, not fewer, C-17s are needed,
    when DOD has yet to determine the minimum number of C-17s needed to
    meet military-unique airlift requirements, is unclear.

    3. Contrary to DOD's assertion, we do not state that DOD has deleted
    intratheater shuttle missions from the requirements for the C-17.
    Rather, we state that the C-17 will not routinely perform
    intratheater missions as originally planned.  In commenting on our
    1994 report (Airlift Requirements:  Commercial Freighters Can Help
    Meet Requirements At Greatly Reduced Cost), Office of the Secretary
    of Defense and Air Mobility Command (AMC) officials acknowledged that
    the C-17's intratheater airlift role had been substantially
    diminished.

    4. DOD suggests that it is planning to procure the C-17, in part, to
    carry out humanitarian missions.  This rationale needs to be
    re-examined in light of the growing cost of the aircraft.  Other
    airlifters can accomplish these missions at a substantially lower
    cost.

    5. Our report does not state or imply that outsize airlift
    requirements involve only percentages of overall cargo weight.  Our
    findings are based, in part, on AMC's analysis for the 1992 Mobility
    Requirements Study (MRS), which included all types of cargo and which
    was based on the MRS time-phased force deployment data.  This
    analysis showed that about
    80 C-17s, along with the other airlifters in the fleet, could meet
    DOD's delivery requirements.  A preliminary analysis by AMC indicates
    that the outsize cargo requirements in the MRS Bottom-Up Review
    Update will not substantially increase from those used in the 1992
    MRS.  Therefore, outsize cargo capabilities cannot be considered a
    basis on which to procure
    120 C-17s.

    6. The ability to carry outsize cargo was one of the original
    capabilities on which the C-17 was justified.  Our report does not
    present this capability as the sole justification for the aircraft.

    7. We asked for documentation to support this statement.  However,
    the documentation was not provided to us.  We subsequently contacted
    an official from the Institute for Defense Analyses who told us that,
    of two airlift models used for the cost and operational effectiveness
    analysis (COEA), one accounted for the inability of commercial
    aircraft to carry all oversize equipment, while the other model did
    not have the ability to adjust for item configuration.  Moreover, DOD
    has not provided us with evidence that the oversize cargo issue would
    have any significant effect on the COEA's outcome.

    8. While direct delivery has always been included as a part of the
    C-17's operational concept, we found that the Army had not
    incorporated direct delivery into its doctrine.  DOD's comments do
    not dispute this finding.

    9. The C-17's operational concept has changed from one that
    emphasized direct delivery to forward airfields at the brigade rear
    area to one that stresses more standard airlift operations at the
    corps rear area.  This finding is supported by a comparison of
    original and current C-17 operational documents.  As DOD states, the
    1993 C-17 Concept of Operations asserts that the C-17 will rarely
    direct deliver supplies to the brigade support areas.  This is in
    direct contrast to the 1986 System Operational Concept, which states
    that the C-17 will routinely land at the brigade rear area, which is
    closer than the brigade support area to the forward edge of the
    battle area.  (Emphasis added.)

    10. DOD acknowledges that the C-17 can only land on approximately
    1,400 more runways than the C-5, not the 6,400 airfields it
    previously had asserted.  However, even this airfield advantage
    should be viewed in the context of major regional contingency
    scenarios and the fact that the 1992 MRS only identified three small
    austere airfields that would likely be used by the C-17.

    11. We have seen no evidence that the reduction in the number of C-5s
    from 109 to 104 will have a significant impact on the C-17's
    cargo-carrying requirements.  Furthermore, our report discusses
    several of the justifications for the C-17, not outsize cargo only.

    12. While the decreased Army emphasis on low-altitude parachute
    extraction system (LAPES) is not unique to the C-17, it eliminates
    one of the C-17-unique missions--the 60,000-pound LAPES capability.

    13. The ability to airdrop equipment bundles and personnel
    simultaneously is a key military requirement.  Joint Chiefs of Staff
    and Army officials repeatedly emphasized its importance to us during
    our review.  According to AMC officials, the Army's current
    requirement is not achievable and this C-17 requirement will be
    reduced.

    14. Containerized delivery system testing is still ongoing and no
    final conclusion can be made at this time.

    15. Desert Shield and Operation Vigilant Warrior were significantly
    different than the MRS major regional contingency scenario, which
    postulates that an aggressive enemy is attempting to invade Saudi
    Arabia.  In the 1992 MRS, DOD assumed that more airfields would be
    available for airlift operations than was the case during Desert
    Shield.  This assumption was based specifically on the nature of the
    MRS threat.  The COEA's conclusion that the C-17 is the preferred
    airlifter was based on an assumption that airfield availability in
    the MRS scenario would be extremely constrained--to the point where
    only one major airlift airfield was available--as was the case during
    the first 6 weeks of Desert Shield.  This assumption gave the C-17 an
    advantage over the other airlifters because of its projected ability
    to use available space more efficiently than a C-5 or a 747.

    In light of the imminent threat to Saudi Arabia assumed in the MRS
    scenario, we believe a more equitable assumption is the COEA's
    alternative case, which uses the MRS airfield availability
    assumption, rather than juxtaposing a Desert Shield-type airfield
    assumption onto an MRS threat.

    In our report on the 1992 MRS, we pointed out that DOD assumed that
    numerous airfields would be available without determining the effect
    of a range of airfield availability within the theater of operations.
    We did not assert that a Desert Shield-type situation was necessarily
    likely to occur.  DOD's response to our report was that, given the
    aggressive threat assumed in the MRS, more airfields were likely to
    be available for airlift operations than was the case during Desert
    Shield.  As the COEA shows, various degrees of airfield availability
    have a significant effect on airlift deliveries.  DOD, Air Force, and
    AMC officials agree that airfield availability for any future
    scenario is an unknown.  Therefore, choosing the Desert Shield
    airfield assumption as the likely case in an MRS major regional
    contingency is, in our opinion, not well grounded.

    16. Our statement regarding the COEA's conclusion on airfield
    availability was correct as stated.  The COEA defines "moderate"
    airfield constraints as the availability of the first 6 weeks of
    Desert Shield, which we consider extremely constrained.  We believe
    the word "moderate" in this instance is misleading.  The availability
    of only one major airlift airfield represents in our view an
    extremely constrained availability; to have anything less would be to
    have no major airlift airfield availability.

    17. The COEA's conclusion that the C-17 is the preferred airlifter
    was based, in part, on an assumption that the C-17 would attain a
    projected utilization rate that exceeds that of any other airlifter,
    while the other airlifters in the study were held to demonstrated or,
    in the case of commercial airlifters, lower than demonstrated rates.
    The performance of two C-17s on the recent Kuwait mission does not
    support the use of a sustained 15.2-hour utilization rate in a COEA
    because that mission was limited in scope.  In addition, even if the
    C-17 attains a high utilization rate during the July 1995
    reliability, maintainability, and availability evaluation, DOD has
    not yet determined how the evaluation results will be extrapolated
    analytically to justify the 15.2-hour rate for a sustained period of
    time.  Therefore, we continue to believe that, for purposes of a
    COEA, comparable utilization rates for the C-17 and the 747 would be
    a more legitimate basis for comparison.

    The COEA found that, even under airfield constraints reflecting the
    first
    6 weeks of Desert Shield, the C-17 fleet at a 12.5-hour utilization
    rate did not meet the MRS requirement.

    18. As DOD's comment indicates, a comparison of ground times between
    the C-17 and modified commercial aircraft has not yet been made.
    Once the comparison has been accomplished, DOD should know what
    impact loading and unloading of various aircraft will have on
    utilization rates.

    19. DOD's position contradicts comments provided by officials from
    the Office of the Secretary of Defense and AMC on our recent report,
    Airlift Requirements:  Commercial Freighters Can Help Meet
    Requirements at Greatly Reduced Cost, and AMC officials' comments on
    this report.  Those officials acknowledged that, due primarily to the
    reduction in the number of aircraft from 210 to 120, the C-17 is not
    likely to operate routinely in an intratheater shuttle role as
    originally envisioned.  DOD's position also contradicts AMC's
    explicit intention, as reflected in the 1993 Air Mobility Master
    Plan, not to use the C-17 for extensive intratheater shuttle
    missions.

    20. In its cover letter, DOD indicated that the COEA had not
    underestimated potential savings associated with mixed fleet
    alternatives, but here DOD indicates that the savings were
    underestimated by $2.8 billion, not by the $4.7 billion as we had
    estimated.  These two statements appear inconsistent.

    DOD concluded that C-130 operating and support costs must be borne
    while C-130s are substituted for C-17s until all 120 C-17s are
    procured.  This conclusion was based on the assumption that the C-17
    would perform routine intratheater missions in the place of C-130s.
    As discussed above, AMC no longer intends to use the C-17 extensively
    for intratheater shuttle missions.  The 1993 Air Mobility Master Plan
    makes no mention of the C-17's intratheater role.  The number of
    C-130s in the inventory has not been reduced as a result of the
    introduction of the C-17 nor are there plans to do so.  DOD officials
    have not provided any evidence that C-17s will replace C-130s for
    intratheater missions.  Therefore, the C-17 should not be credited
    with any degree of additional cost savings to reflect such a role.

    21. We have modified the report to acknowledge that nondevelopmental
    airlift aircraft costs used in the COEA were only estimates and may
    have changed since that time.

    MAJOR CONTRIBUTORS TO THIS REPORT
    ========================================================== Appendix II

       NATIONAL SECURITY AND
       INTERNATIONAL AFFAIRS DIVISION,
       WASHINGTON, D.C.
    -------------------------------------------------------- Appendix II:1

    Thomas J.  Denomme
    James A.  Elgas
    Michele Mackin
    Steve Martinez

       KANSAS CITY REGIONAL OFFICE
    -------------------------------------------------------- Appendix II:2

    Richard E.  Burrell
    Karen A.  Rieger

       LOS ANGELES REGIONAL OFFICE
    -------------------------------------------------------- Appendix II:3

    Noel J.  Lance
    Dorian R.  Dunbar
    Carlos M.  Garcia