Secretary of Defense certifies F-22 multi-year contract savings to the taxpayer doubles over previous estimate

WASHINGTON (June 29, 2007) - U.S. Senator Saxby Chambliss, R-Ga., a member of the Senate Armed Services Committee, today announced that the Secretary of Defense has certified that the F-22 multi-year contract authorized in the fiscal year 2007 National Defense Authorization Act meets all requirements of the law and will result in a savings to American taxpayers of $411M.

The updated cost estimate was conducted by the RAND Corporation, a federally-funded research and development corporation, and delivered to Congress today. The previous cost estimate, conducted by the Institute for Defense Analyses, concluded that the F-22 multi-year would only save $225M. RAND concluded that the per airplane savings under the F-22 multi-year contract would be $6.85M, significantly higher than the per plane savings under the previously approved F-18 multi-year contract which was $3.8M.

"This is a huge victory for the Department of Defense, the Air Force, and for the American taxpayers," said Chambliss. "Some people were skeptical about the amount of savings that could be achieved through a multi-year contract for the F-22, and the RAND study proves that the savings are in fact substantial and are significantly higher than previously expected. I commend the Department of Defense, the Air Force, and RAND for the hard work they have done over the past nine months on this effort."

"The F-22 meets all requirements for a multi-year contract and will clearly result in substantial savings for the government. Almost every time I´m in an Armed Services Committee hearing, someone makes the point that we need to think of ways to do things better, cheaper, and with better acquisition processes in order to use the taxpayers´ resources more wisely. That is exactly what the F-22 multi-year contract will do by securing $411M in savings and allowing the Defense Department and the contractor to conduct business better, faster, and cheaper -- and that is good government," Chambliss added.

Background

Last year Congress approved a 3-year multi-year contract for 60 F-22´s conditional upon the Secretary of Defense certifying to Congress that the aircraft met the requirements for a multi-year contract, including certification that the contract would result in "substantial savings." Additionally, the Secretary of Defense was required to provide an updated cost estimate for a 3-year multi-year contract compared to an annual procurement contract.

The 3-year multi-year contract for 60 F-22´s was authorized by a floor amendment by Senator Chambliss during Senate deliberations on the FY07 National Defense Authorization Act in June 2006. The amendment passed 70-28 and secured inclusion of the multi-year contract in the final bill.

The F-22 is a first-of-a-kind multi-mission fighter aircraft that combines stealth, supercruise, advanced maneuverability and integrated avionics to make it the world's most capable combat aircraft. The U.S. Air Force considers the F-22 Raptor its top priority for air dominance, operational access, homeland and cruise missile defense.

Source: http://www.theweekly.com/news/2007/June/29/F-22.html

Savings cited on F-22

Study notes cost cut of $410M; HAFB would service jets

By Suzanne Struglinski
Deseret Morning News

WASHINGTON — A three-year contract to buy 60 new F-22A Raptors, which would be serviced at Hill Air Force Base, will save up to $410 million, according to a study released Friday.

Utah Sens. Orrin Hatch and Bob Bennett, both Republicans, voted for an amendment in last year's defense authorization bill that allowed the government to enter into a multiyear contract for the planes, versus the traditional annual procurements.

This was initially thought to save $335 million in taxpayer money, but a study by completed by the Rand Corp. found that the single three-year contract to buy 60 F-22A fighter jets along with engines and spare parts could save $270 million to $640 million, with the most likely savings figure being about $410 million.

Rand said improved competition among parts suppliers, better manufacturing scheduling and eliminating the need to prepare new proposals for future one-year contracts are just some ideas that would lead to the savings.

"A multiyear agreement to purchase F-22A's offers the potential of savings because it allows manufacturers to optimize the purchase of parts as well as the production schedule and avoid the need for proposals for future lots," said Obaid Younossi, the report's lead author and a management scientist at Rand.

The Air Force developed the F-22 to replace the F-15s.

"In a time when America is waging a war against terrorism that is truly global in scope, the demand on our nation's resources is considerable," Hatch said. "We need to find innovative ways to stay on the frontier of military technology while being good stewards over the taxpayers' money. I'm gratified that the multiyear contract for the F-22A will save even more than we originally expected."

Source: http://deseretnews.com/dn/view/0,1249,680195642,00.html

News Release

FOR RELEASE
Friday
June 29, 2007

OFFICE OF MEDIA RELATIONS
703-413-1100 x5117
and 310-451-6913
media@rand.org

RAND STUDY ESTIMATES MULTIYEAR PURCHASE OF F-22A FIGHTERS
WOULD SAVE AIR FORCE HUNDREDS OF MILLIONS OF DOLLARS

Using a single three-year contract to buy 60 F-22A fighter jets along with engines and spare parts – rather than using three separate annual contracts – would save the U.S. Air Force hundreds of millions of dollars, according to a RAND Corporation study issued today.

The study estimates the savings to the Air Force would range from $270 million to $640 million, with the most likely savings figure being about $410 million.

The savings would be realized through efficiencies such as improving competition among parts suppliers, better manufacturing scheduling, and eliminating the need to prepare new proposals for future one-year contracts, according to researchers for RAND, a nonprofit research organization.

The RAND study was a congressionally mandated review of an Air Force request to purchase a final group of F-22A fighters and spare engines with a multiyear agreement rather than three single-year contracts like those used to buy the fighters previously.

The multiyear agreement was approved by Congress in the Fiscal Year 2007 National Defense Authorization Act and the Fiscal Year 2007 Appropriations Act. The RAND study was sponsored of the Office of the Secretary of Defense to satisfy requirements of the National Defense Authorization Act prior to Secretary of Defense certification of the multiyear procurement.

Based on the $410 million savings figure, RAND researchers estimate the multiyear agreement would result in a 4.5 percent savings on the cost of acquiring 60 airplanes, 133 engines and spare parts scheduled to be purchased over the next three years.

"A multiyear agreement to purchase F-22A's offers the potential of savings because it allows manufacturers to optimize the purchase of parts as well as the production schedule and avoid the need for proposals for future lots," said Obaid Younossi, the report's lead author and a management scientist at RAND.

Also known as the Raptor, the F-22A is a two-engine fighter jet with both air-to-air and air-to-ground tactical systems. The first 123 F-22A fighters purchased by the Air Force were acquired during the past six years using one-year contracts that require annual approval of the Congress.

The Air Force expects to spend about $10 billion to purchase an additional 60 of the airplanes and related equipment over the next three years.

In order to understand the types of savings possible under multiyear contracts, RAND researchers visited the main contractors building the F-22A – Lockheed Martin, Boeing, and Pratt and Whitney – and their major suppliers to gather details about potential cost savings. This included reviewing documents such as subcontractor purchase agreements and other detailed information.

RAND researchers found that about 70 percent of the estimated savings could be substantiated by initiatives already identified by contractors. The rest of the savings are expected to come from efficiencies not yet identified.

The study, titled "F-22A Multi-Year Procurement Program: An Assessment of Cost Savings," is available at www.rand.org.

In addition to Younossi, other authors of the study are Mark V. Arena, Kevin Brancato, John C. Graser, Benjamin W. Goldsmith, Mark Lorell, Fred Timson and Jerry Sollinger.

The RAND National Defense Research Institute conducted the study. It is a federally funded research and development center sponsored by the Office of the Secretary of Defense, the Joint Staff, the Unified Combatant Commands, the Department of the Navy, the Marine Corps, the defense agencies and the defense Intelligence Community.

Source: http://www.rand.org/news/press.07/06.29.html