Tuesday, August 26, 2008

RAND: Why Has the Cost of Fixed-Wing Aircraft Risen?

Why Has the Cost of Fixed-Wing Aircraft Risen?: A Macroscopic Examination of the Trends in U.S. Military Aircraft Costs over the Past Several Decades

By: Mark V. Arena, Obaid Younossi, Kevin Brancato, Irv Blickstein, Clifford A. Grammich

This report explores why, in recent decades, military fixed-wing aircraft costs have escalated beyond the rates of commonly used inflation indices, examining both economy-driven factors that the Services cannot control and customer-driven ones that they can. The authors found that this trend of cost increases is true for all types of aircraft — patrol, cargo, trainer, bomber, attack, fighter, and electronic warfare. Economy-driven variables examined include costs for labor, equipment, and material. Customer-driven ones include the costs of providing the performance characteristics that the Services want in their aircraft. The study found several reasons for cost escalation: the increased demand for greater aircraft stealth, the requirement for reduced aircraft weight, and government regulations designed to protect American industry and technology, the environment, and occupational health. Several options to reduce cost escalation are examined, including encouraging international competition for aircraft manufacture, stabilizing procurement rates, and incorporating “lessons learned” from prior development programs. Until this cost trend is curbed, the government will be able to afford fewer, increasingly expensive aircraft, especially if long-term defense investment spending remains relatively constant.

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