COMMENT ON DIFFERENCES TO THE LIFE CYCLE COSTS QUESTION: Regardless of the numbers of 747-type aircraft to equate to the 50 C-5Bs, what is the life-cycle cost difference for the two fleets? General Burke, I believe your testimony before the Armed Services Committee last month was that the life-cycle cost difference would be less than $1 billion. I am told that other Air Force witnesses have testified before the House Appropriations Defense Subcommittee, that a 20-year life-cycle cost difference between buying 48 747-type aircraft and 50 C-5Bs is on an order of magnitude of around $4 billion. Would you comment on this disparity? ANSWER: The Boeing Company offered to replace 50 C-5Bs with 48 new B747s. The acquisition cost for the two programs in constant FY 1981 dollars is $5.9B for the C-5B and $3.5B for the B747s. These estimates were accomplished by the Air Force and the OSD Cost Analysis Improvement Group on a rigorously comparable basis. They include funds for initial spares, peculiar support equipment, technical data, future engineering changes, and program management costs. The portion of these funding requirements covered by the respective unsolicited proposals is $4.9B for the C-5B proposal and $3.0B for the B747 proposal. The ratio of contractor price to total acquisition cost is 83% for Lockheed and 86% for Boeing. Boeing has proposed a contractor logistic support concept for the B747. The Air Force is not convinced this concept would be acceptable for a world wide committed airlift system. In addition, when making operating and support cost comparisons, it is important that candidate aircraft be charged for the same costs and tasks. For these reasons, the Air Force believes that a proper cost comparison should use the same support concept for both proposals. The operating and support costs for the C-5B and B747 have been estimated by the Air Force and OSD CAIG. These estimates differ from Boeing in two key areas: (1) Boeing estimates the average peacetime fuel consumption to be 25% less than the Air Force estimate, and (2) Boeing estimates lower spares and depot maintenance costs associated with a contractor logistic support concept rather than an organic support concept, such as the one presently used on the MAC C-5, C-141, and C-130 force. These 0&S cost estimates are: When these costs are added to the acquisition costs stated earlier, the life cycle cost estimates are: Therefore, the Air Force and OSD CAIG estimate of the life cycle cost differential between the B747 and the preferred best C-5B program is $2.6B (FY 81 dollars) lower for the B747. Finally, the Air Force does not agree that 48 is the number of B747s required to replace the 50 C-58 to be added to the USAF organic airlift force under the DoD airlift program. Even when using Boeing's assumptions (with which the Air Force does not fully agree) about the helicopter disassembly, acceptable loading clearances, and C-5 allowable cabin loads the Air Force estimates that 55 B7478 (48 PAA) are required to provide the same force closure capability as 50 C-5Bs (44 PAA). Based on these numbers, the life cycle cost comparison becomes: AP FY 81 $ billions AF 50/C-5B $14.7B This estimate is $.9B lower for the B-747, rather than the nearly $6.0B differential claimed by Boeing. The far greater military capability and utility of the C-5B clearly justifies this additional cost. GREATEST MILITARY UTILITY QUESTION: In your opinion, regardless of the life-cycle cost which do you believe has the greatest military difference utility? ANSWER: There is no doubt that the C-5B, which was designed as a military airlifter, has far greater military utility than the B747. AMENDMENT OF SENATOR JACKSON Senator STEVENS. This battle, I understand, is going to be fought on the floor on Tuesday in terms of an amendment of Senator Jackson dealing with a 1-year concept of purchasing the surplus 10's and 747's with 1983 money and looking to 1984 to start something, C-17's or C-5B's. I would like to have your analysis of that option. Have you analyzed that option, Senator Jackson's option? General ALLEN. I am not familiar with this option, Mr. Chairman. With regard to this DC-10 question, however, in our request for proposals for the conversion of wide bodies from passenger carrying to passenger to cargo we got in 53 bids on DC-10s. Forty-nine of those were the 10's and only four of them were the longer-range 30's. Senator STEVENS. I would be interested in your analysis of this option. I think it is going to be, as I understand it, a Tuesday vote now. We just received word the DOD bill has been continued until Tuesday. As I understand the proposal, the 1983 moneys could be used to purchase oversized equipment available on the market. The 1984 moneys would be committed to either starting the C-5B or starting the C-17. [The information follows:] PURCHASE SURPLUS 10'S AND 747's WITH 1983 FUNDS The Air Force has not evaluated a proposal to buy surplus aircraft on a single year procurement. We have evaluated the purchase of a fleet of such aircraft over several years and have rejected it because the aircraft available do not meet our requirement for additional outsize capability. General ALLEN. Well, inasmuch as the lack of outsize capability is our most critical shortfall, if there were some combination of that nature, as the Commander in Chief of the Military Airlift Command I would prefer to start and get the additional outsize capabilities represented by the C-5 and give the second priority to 747's. FUNDING TO START C-17 Senator STEVENS. Well, what would be the funding to start the C-17 in 1983? General ALLEN. I would defer to General Burke on that. General BURKE. I would think we would start around the $200 million level. The staff says we could get going with that, assuming that we spend the $32 million that we now have. Senator STEVENS. How much do you have in here for the C-5B? General BURKE. $800 million. Senator STEVENS. Thank you, gentlemen. We appreciate your help. SUBCOMMITTEE RECESS The subcommittee will stand in recess until Wednesday, May 12 at 10 a.m. when we will receive testimony on RDJTF/Readiness. [Whereupon, at 12:15 p.m., Thursday, May 6, the subcommittee was recessed, to reconvene at 10 a.m., Wednesday, May 12, 1982.] DEPARTMENT OF DEFENSE APPROPRIATIONS FOR FISCAL YEAR 1983 THURSDAY, JUNE 24, 1982 U.S. SENATE, SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS, Washington, D.C. The subcommittee met at 8 a.m., in room 1114, Everett McKinley Dirksen Senate Office Building, Hon. Ted Stevens (chairman) presiding. Present: Senators Stevens, Garn, Rudman, and Eagleton; also present: Senator Mattingly. AIRLIFT ENHANCEMENT PROGRAM NONDEPARTMENTAL WITNESSES OPENING STATEMENT OF SENATOR STEVENS Senator STEVENS. Good morning, gentlemen. This is the time scheduled to hear non-Government witnesses interested in the military airlift enhancement issue. This issue, obviously, has become a major controversy. In its action on the 1983 Defense authorization, the Senate rejected the Defense Department's request to begin acquiring 50 C-5B aircraft in favor of commercial wide-bodied transports adaptable for military use. We do not know yet what the House decision on this issue will be. Meanwhile, there is revived interest in the C-X program under which the Air Force wants to develop and acquire a new generation transport suitable for intratheater and limited airport operations as well as outsize cargo. Regardless of what happens with the authorization bill, this committee will have to make far-reaching decisions with respect to airlift enhancement, not only for the type of aircraft to procure and maintain in reserve, but the overall scope of the proposed expansion. Related issues include the acquisition of KC-10 aircraft, and the upgrading of C-130's, C-141's and others. We have already conducted a lengthy hearing with witnesses from the Defense Department, notably from the Air Force. It was at this hearing that the Air Force supported its request for new C5B procurement, but stressed a continuing need in the future for a new aircraft such as the C-17 selected under the C-X program. Today's hearing is to help gather more factual information from those directly involved in aircraft development and production. It would be in the committee's own interest to keep this hearing impartial, but to encourage a free exchange so that as much information can be gathered as possible. We also have a witness representing interests not directly tied to the military or defense contracting industry. We are going to proceed first with representatives from major contractors who were specifically invited to attend. We will hear first from Boeing, then from Lockheed and then from McDonnellDouglas in that order. We welcome you all to the committee. In each instance we will see that your complete prepared statement is printed in the record. We ask you to highlight your major points in your statement and be available for questions from the committee. We also ask that you identify those who are with you at the witness table for the record, before you proceed. VALIDITY OF LOBBYING EFFORT I have one comment to make about the problems to date. That pertains to our reaction-not only mine, but I think other members of the committee-to the document that indicates that there has been not only a coordinated intense lobbying effort, but also a computerized lobbying effort as far as this issue is concerned. We have been asked to look into the question as to whether or not this lobbying effort violates existing law. I will have a meeting of the committee and we will take that up at a later time. But I will say that the lobbying on this issue is geting more intense than any issue I have seen this year so far in the defense area, and my advice to you is to cool it, because everyone is going to lose in terms of this effort to improve the airlift if the sides are drawn so firmly that no one is willing to look at what is in the best interest of the country as a whole. I am going to stop having appointments with any member of any firm that has any interest in this issue. If we want additional information we will ask for it. That is what the law says at the present time. That includes the Air Force. There has just been too much lobbying as far as I am concerned, and if you will take my advice you will stay away from the other members of this committee, too. The first witness is Mr. Clyde Skeen, senior vice president of the Boeing Co. Pardon me, my good friend from Missouri, Senator Eagleton. OPENING REMARKS OF SENATOR EAGLETON Senator EAGLETON. I have a brief statement. I join with you and the other members of this subcommittee in welcoming this morning's hearing and the witnesses to testify. I commend them for their attendance at this early hour and I look forward to receiving their testimony. Also, I would like to commend you, Mr. Chairman, for convening this hearing. As we all know, airlift has become the subject of considerable controversy, you have highlighted that by your concluding remarks. Congressional approval to proceed with the program to cor |