by Ben R Rich
During the 1980s an incredible $2 trillion was spent on military acquisitions alone, with new aircraft receiving the largest share of the defense budget, about 43 percent, followed in distant second place by missiles and electronics. The development costs of fighters have increased by a factor of 100 since the 1950s, and unit procurement costs have risen 11 percent every year since 1963! Small wonder, then, that there were only seven new airplanes introduced in the 1980s, compared to forty-nine in the 1950s. Only three new airplanes have been produced so far in this decade. Correspondingly, the aerospace industry has lost more than a quarter of its workforce since 1987.
New technology cannot be put on a shelf. It must be used. And the desperate need is to try to find ways to drastically reduce costs that would allow new generations of aircraft to evolve within the parameters of extremely modest defense expenditures. That will be the great challenge facing the Pentagon and the defense industry in the years to come.
I would like to share a few cost-saving ideas, but with the following caveat: in some ways I really do think that aerospace has gotten a bum rap from its critics. For example, General Motors spent $3.6 billion giving birth to the Saturn automobile, and it doesn’t even go supersonic. We spent $2.6 billion creating the stealth fighter and were able to keep costs down by incorporating the flight controls of the General Dynamics F-16 fighter and using the engine from the McDonnell Douglas F-18. We didn’t start from scratch but adapted off-the-shelf avionics developed by others. Avionics is the killer expense, costing about $7,000 a pound in a new airplane. A case in point is our own F-22 Advanced Tactical Fighter, which we designed at the Skunk Works in 1988, to replace the F-15, which has been the primary tactical fighter for the blue-suiters since 1972. In answer to the question, do we really need the F-22, comes another question: do we really want our combat pilots putting their lives on the line in a fighter now more than twenty-two years old?
The F-22 is a performing miracle. It can fly supersonic without afterburners, and using a revolutionary Thrust Vector Control System, can fly at extreme angles of attack while changing directions at high speeds, thereby outperforming any other airplane in the world—all this with the stealth invisibility achieved by the F-117A. To perform its incredible feats, the F-22’s avionics is as powerful as seven Cray computers! When we bid on this airplane we did so with the understanding that we would build seven hundred of them. That number would justify the enormous development costs that we shared with the government. Uncle Sam gave us $690 million and we put up a similar amount. The development phase was so expensive that we partnered with General Dynamics and Boeing. Northrop, our competitor, also put up $690 million in partnership with McDonnell Douglas. We won the competition, but all five companies involved in the F-22 contest have lost. We, the winners, will never make back our original investment because in the current budget crunch the government has cut back sharply on the number of F-22s it now plans to purchase. Currently, the Air Force has budgeted for four hundred new F-22s, but that number could decrease even further. The fewer the new airplanes produced, the more expensive the unit cost. The F-22 currently costs around $60 million each—the most expensive fighter ever. Meanwhile we and our partners are carrying huge production overheads in tooling and personnel. The sad truth is that our stockholders would have done better financially if they had invested that $690 million in CDs.
New advanced-technology airplanes are budget breakers. The B-2 bomber, at more than $2 billion a copy, proves that point. But we need stealthy long-range bombers like B-2s, which can fly anywhere in the world in twelve hours and drop a payload of forty conventional bombs. Still, unless we manage to get wildly inflated production costs down, aeronautics could well become an arcane art practiced by one or two manufacturers who somehow manage to survive. (Grumman, the Navy’s principal supplier of fighters for nearly sixty years, recently abandoned the sluggish fighter business entirely, while several other big manufacturers are also rumored to be planning to quit increasingly high-risk and unprofitable military aircraft production.)
So an urgent question to pose is how can an airplane as revolutionary and advanced as the F-22 be made for considerably less money? One way, which I have been promoting in vain for several years, would be to make it even more revolutionary than it already is. That is, much of the horrendously expensive avionics on board allows the F-22 to perform incredible aerodynamic maneuvers, from climbing straight up to pulling enormous g-loaded turns. But what if we invent onboard weapons systems that perform all the maneuvering while the airplane itself flies straight and level? In other words, missiles that could electronically lock onto a dogfighting target and swivel and turn at twelve gs while the airplane flies at only two gs. Such a reversal would drastically reduce the huge avionics costs.
Like true Skunk Workers, the aerospace industry as a whole must start thinking in new directions. Why build each new airplane with the care and precision of a Rolls-Royce? In the early 1970s, Kelly Johnson and I had dinner in Los Angeles with the great Soviet aerodynamicist Alexander Tupolev, designer of their backfire Bear bomber. “You Americans build airplanes like a Rolex watch,” he told us. “Knock it off the night table and it stops ticking. We build airplanes like a cheap alarm clock. But knock it off the table and still it wakes you up.” He was absolutely right. The Soviets, he explained, built brute-force machines that could withstand awful weather and primitive landing fields. Everything was ruthlessly sacrificed to cut costs, including pilot safety.
We don’t need to be ruthless to save costs, but why build the luxury model when the Chevy would do just as well? Build it right the first time, but don’t build it to last forever. Why must every aircraft be constructed to fly for twenty thousand hours and survive the stresses and strains of a thousand landings and takeoffs? Why not lower the endurance requirements for the majority of airframes? Wars are now planned to last ninety days because after that time ammunition reserves run out. In battle, most airplanes will be deployed for a few hundred hours at most. It would be cheaper to dispose of them once they’ve seen combat than to stockpile vast quantities of replacement parts and engines. We could make a small number of aircraft to last for years in training flights. But produce the majority—the ones destined for a relatively short spurt of combat flying—with less expensive materials. This same sort of Skunk Works’ cost-reduction thinking could extend to airplane tires arid other parts. Why, for example, must tires last for one thousand landings? If we mass-produced them at somewhat lower standards, we could throw away airplane tires after ten landings and still save money.
We cannot enjoy total product perfection and really don’t need it. The only areas where the final result must be 100 percent are safety, quality, and security. That final 10 percent striving toward maximum perfection costs 40 percent of the total expenditure on most projects.
General Electric’s jet engine plant at Evendale, Ohio, sells its engines to the commercial airlines for 20 percent less than to the Air Force. Price gouging? No. But the Air Force insists on having three hundred inspectors working the production line for its engines. The commercial airlines have no outside inspectors slowing down production and escalating costs. Instead, the airline industry relies entirely on GE’s engine warranty, a guarantee that the engine will function properly or GE will be required to pay a penalty as well as all costs for replacement, repairs, and time lost. Why can’t the Air Force operate with similar guarantees and save 20 to 30 percent on engine costs and eliminate three hundred unnecessary jobs to boot?
One of the biggest cost items in defense is logistics management and maintenance. We should reevaluate the design of many components and make them throwaway or limited-shelf-life items. Batteries, brakes, servos, modular avionics, should all be replaced on a definite schedule, not wait for them to wear down. This would reduce the accumulation of large spare part inventories in city-size warehouses, cut down repairs and maintenance, and lower supply pipeline costs. Savings could run in the hundreds of millions.
Currently, two U-2s are stationed in Cyprus with twelve Lockheed maintenance persons, while two other U-2s stationed at Taif, in Saudi Arabia, in support of the UN mission in Iraq, have more than two hundred Air Force personnel. And when the U-2s at Taif need periodic overhauls, they are flown to Cyprus, where our crews do the job.
Another relatively easy cost-reduction scheme would be to rethink aircraft design so that all parts are “no-handed.” That is, there would be no left and right hinges or wing flaps or other control surfaces. The cockpit controls would likewise be no-handed. Production learning curves in manufacturing these items would be twice improved by not having to devote half to left and half to right and would reduce significantly spares and storage parts requirements.
Even at the Skunk Works I’ve seen my share of money wasted, at times in the most ridiculous ways imaginable. One that particularly sticks in my craw occurred when President Johnson first announced in 1964 the existence of the RS-71, the Air Force two-seater Blackbird. That’s right, RS-71 was its official designation, but Johnson accidentally turned it around and called it the “SR-71.” Instead of putting out a brief correction, the Air Force decided not to call attention to a very minor mistake by the commander in chief and ordered us to change about twenty-nine thousand blueprints and drawings at a cost of thousands of dollars so that they would read “SR-71” and not “RS-71.” Another frustrating example was the stubborn insistence of the Air Force to have its insignia painted on the wings and fuselage of the SR-71 Blackbird, even though no one would ever see it at eighty-five thousand feet; finding a way to keep the enamel from burning off under the enormous surface temperatures and maintain its true red, white, and blue colors took our chief chemist, Mel George, weeks of experimentation and cost the government thousands of unnecessary dollars. After we succeeded, the Air Force decided that the white on the emblem against the all-black fuselage was too easy to spot from the ground, so we repainted it pink. Air Force regulations also forced us to certify that the Blackbird could pass the Arizona road-dust test! Years earlier low-flying fighters training over Arizona’s desert wastes suffered engine damage from sand and grit. We had to demonstrate that our engine was specially coated to escape grit damage—this for an airplane that would overfly Arizona at sixteen miles high.
Such bureaucratic madness, I am certain, will never entirely disappear no matter how tight things get, but affordability nowadays is even more important than technology, and a genuine attempt to control costs is the highest priority among all branches of the military. The Skunk Works concept as a vibrant force in the American defense industry can come into its own only if and when the government reverses some of its counterproductive practices. And the most obvious place to start in achieving greater efficiency is to ferociously attack unnecessary bureaucratic red tape and paperwork.
I was in Boston recently and visited Old Ironsides at its berth, coincidentally at a time when the ship was being painted. I chatted with one of the supervisors and asked him about the length of the government specifications for this particular job. He said it numbered two hundred pages and laughed in embarrassment when I told him to take a look at the glass display case showing the original specification to build the ship in 1776, which was all of three pages.
Everyone in the defense industry knows that bureaucratic regulations, controls, and paperwork are at critical mass and, if unchecked, in danger of destroying the entire system. An Air Force general in procurement at the Pentagon once confided to me that his office handled thirty-three million pieces of paper every month—over one million per day. He admitted that there was no way his large office staff could begin to handle that kind of paper volume, much less read it. General Dynamics is forced by regulations to store ninety-two thousand boxes of data for their F-16 fighter program alone. They pay. rent on a fifty-thousand-square-foot warehouse, pay the salaries of employees to maintain, guard, and store these unread and useless boxes, and send the bill to the Air Force and you and me. That is just one fighter project. There are many other useless warehouses just like it. There is so much unnecessary red tape that by one estimate only 45 percent of a procurement budget actually is spent producing the hardware.
Oversight is vitally important, but we are being managed to death and constantly putting more funds and resources into the big end of the funnel to get an ever smaller trickle of useful output from the small end. Over the years in the Skunk Works, we supplied necessary paperwork when it was critically important and eliminated all the rest of it. A Skunk Works purchase order for vendor development of a system used in an advanced airplane took three pages. The vendor replied with a four-page letter proposal that included specifications for the system under development. And that was that. But at Lockheed’s main plant, or at any other manufacturer’s, that same transaction typically produced a 185-page purchase order, which led to a 1,200-page proposal, as well as three volumes on technical factors, costs, and management of the proposed project.
To put the paperwork blitz in perspective: there are currently operative throughout the Defense Department, acquisition regulations that reportedly could fill an entire shelf of 300-page books, in addition to 50,000 individual specifications, 12,000 contract clauses for specific components, 1,200 department directives, and 500 separate procurement regulations.
Paperwork should be limited to what the government most needs to keep tabs on. And I cannot deny that over the years the defense industry has had more than its share of cost overruns, bribery scandals, and other serious transgressions, which proves the need for intense scrutiny. In many ways, though, our sullied reputation was somewhat unearned because cost overruns in our industry were seldom more than 20 percent, while in other industries operating entirely by private financing, big-project overruns of 30 percent or even higher are not uncommon.
Nevertheless, excessive government regulation is the penalty we now pay for years of overpromising and lax management in aerospace. At the heart of the defense industry problem was a recognition that if we bid unrealistically low to get a project, the government would willingly make up the difference down the line by supplying additional funding to meet increasing production costs. And it would do so without penalties.
Now if there are serious cost overruns, whether caused by unexpected inflationary spirals or even “no fault” acts of God, the company is liable to pay for it all or fix any mistakes from its own pocket. The era of the fixed-price contract rules supreme. As for major cost overruns, it is impossible to really surprise the government by suddenly revealing out-of-control expenses because every production line is swarming with government bean counters and inspectors keeping close tabs every step of the way.
Back in 1958, we in the Skunk Works built the first Jetstar, a two-engine corporate jet that flew at .7 Mach and forty thousand feet. We did the job in eight months using fifty-five engineers. In the late 1960s the Navy came to us to design and build a carrier-based sub-hunter, the S-3, which would fly also at .7 Mach and forty thousand feet. Same flight requirements as the
Jetstar, but this project took us twenty-seven months to complete. One hint as to the reasons why: at the mock-up conference for the Jetstar—which is where the final full-scale model made of wood gets its last once-over before production—we had six people on hand. For the S-3 mock-up the Navy sent three hundred people. S-3 may have been a more complex airplane than Jetstar, but not thirty times so. But we were forced to do things the Navy Way.
In more recent years the government seemed determined to lower procurement costs through rigorous competition. One curious idea developed by Ronald Reagan’s secretary of the Navy, John Lehman, and adapted by the Air Force and other service branches as well, was something called leader-follower competition. The rule of this game was that the winner of a competitive bidding competition had to turn over his winning design to the loser. The loser would then learn how to build the winner’s product, and by the third year of production the loser would be allowed to bid on the project against the winner. For example, several years ago Hughes won the competition for an advanced medium-range attack missile against Raytheon, builder of the Patriot missile. The government bought four thousand of these missiles annually. The first year Hughes got the entire order. The second year, Raytheon, which had studied Hughes’s winning design, got an order to build one thousand while Hughes dropped to three thousand. By the third year, the government opened up the bidding to full competition and Raytheon won a majority of the buy. They were able to put in a lower bid because they had no initial research and development costs to factor into the price and they took over 60 percent of that missile’s production.