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
