low on work. The Pacific Airmotive Corp. facility at Chino with some 2 million square feet of ramp space and several hangars and shops was completely idle. Southern California Aircraft Corp. at Ontario had well over 1.5 million square feet of idle space. The Grand Central Aircraft Co., Fresno, Calif., was using only 150,000 square feet of its 315,000 square feet of building area, while about 60 percent of its 870,000 square feet of uncovered work area was idle. 3. Facilities, equipment and tooling Unlike aircraft manufacturers, the maintenance contractors are using land and buildings in which no Government funds are invested. Eight of the nine contractors interviewed reported a total investment of about $12,800,000 in plant, tools, and equipment. The total investment would be higher, were not the land and buildings, in many instances, leased. Much of the aircraft and engine maintenance requires special tooling and test equipment which normally is furnished by the Government to the contractor. At the time of the staff study, Governmentfurnished tools and equipment valued at $1,600,000 where in the hands of this group of maintenance contractors. At the completion of a contract, the tools and equipment are either returned to the depot or shipped to the next successful bidder at Government expense. 4. Contractor capability The specialized maintenance contractors included in the staff study have been providing contractual work to the military over a period of years. They are, therefore, as an industry, presumably competent to handle aircraft maintenance work. Some contractors are exclusively engaged in engine overhaul, either reciprocating or jet or both, while other are exclusively engaged in aircraft maintenance. A few are engaged in both. Three of the nine contractors have capabilities for overhauling reciprocating engines ranging from the O-type for light aircraft through the R-2800 used on the C-118 (Air Force), R6D (Navy), and the DC-6 (commercial). One contractor, who was using only 15 percent of his engine facility at the time of the staff's survey, possessed tooling for overhaul of the R-4360, an engine which the Air Force and Navy overhaul exclusively within their own depots. One of these contractors possessed the capability for jet engine overhaul. That was for J-33 (Air Force and Navy) and J-35 (Air Force) jet engines. This contractor plans to have the capability by the summer of 1959 for overhaul of JT-3 and JT-4 jet engines (commercial versions of the military J-57 and J-75) for commercial airlines. There are certain factors that limit a plant's capability to the maintenance and overhaul of certain types of aircraft and engines, such as length of runways, capacity of covered hangars, special tools, handling equipment, and special test gear. These limitations naturally influence the award of a contract. As to special tooling, handling equipment, and test equipment, contractors generally feel that it would be impractical for each contractor to invest in all equipment needed for all types of aircraft and engines. For that reason, the Government is expected to, and does, provide such equipment for use under contracts. The capability and work of maintenance contractors is not limited, of course, to the maintenance of complete aircraft, but also includes the overhaul, repair, and testing of many of the aircraft components, parts, and items of equipment that make up the maintenance work loads of the military services. The extent to which aircraft maintenance is subcontracted depends largely upon the individual capabilities of the holder of a contract. Information supplied to the staff indicates that a relatively small percentage of the aircraft maintenance work is subcontracted. That work which was subcontracted by the maintenance contractors interviewed generally consisted of items, such as major propeller repair, sealed units, specialized electronic instruments, castings, and special platings. Engine overhaul contractors reported subcontracting chrome plating and some cylinder head rework only. Contractors informed the staff that a very high percentage of their present employees are experienced in the field of aircraft and engine maintenance. This is not necessarily indicative of the situation that would prevail under peak or stable workload conditions. Most contractors have been operating with reduced workloads and have stated that it is general practice when reducing the number of employees to retain those with higher skills and greater experience. 5. Plans for diversification The Air Force has stated that the aircraft maintenance workload programed for the maintenance industry is on the decline because of the transition to more complex weapons systems, including missiles, and the phasing out of obsolete aircraft. The Air Force indicated that the industry has been made aware of this situation. That the workload has declined is amply supported by information supplied by five of the nine maintenance contractors included in the staff study, which shows that they had about 50 percent fewer employees engaged in maintenance work during calendar year 1958 than during 1957. Only three contractors commented on their plans for diversification, each of which centered on the missile field. One, whose maintenance capacity showed only 5 percent utilization, is already engaged in the manufacture of Fiberglas boats. IV. DEPARTMENTAL POLICIES ON DEPOT VERSUS CONTRACT MAINTENANCE The staff requested the Departments of Defense, Army, Navy, and Air Force to furnish statements of their respective policies on the two questions presented by the committee directive, together with their views on relative merits of the alternative methods suggested therein for accomplishing aircraft maintenance. There are summarized below those portions of the replies that represent the statements of policy of the four departments. A. DEPARTMENT OF DEFENSE DOD has no published policy on the subject of contract maintenance of aircraft. Aircraft contract maintenance is accomplished under the respective policies of the Army, the Navy, and the Air Force. DOD states that it is currently developing an overall policy on the subject of depot maintenance which will assist the Government in fostering free competitive enterprise in this regard. Guidance will be offered on contract maintenance, maintenance cross-servicing agreements and utilization of "in-house" maintenance capability. DOD states that it does not envision prescribing mandatory annual amounts or percentages of maintenance to be accomplished by contractual means. This policy, according to DOD, would be impracticable in view of the wide variations that occur annually in military aircraft equipment requiring maintenance. B. DEPARTMENT OF THE ARMY The accomplishment of depot-level overhaul and repair of aircraft within the Army is performed in accordance with policies outlined in a memorandum from the Assistant Secretary of the Army, October 26, 1955. This memorandum stipulates that all aircraft depot maintenance be performed under contract with private industry or by cross-servicing agreements with the Air Force or the Navy. C. DEPARTMENT OF THE NAVY In response to the staff's request for a statement of Navy policy on the two questions presented by the committee directive, the Navy referred to the hearings before the House Subcommittee on Department of Defense Appropriations for 1959 (p. 335), wherein the Navy stated its policy in the following language: When considering sources for meeting aircraft overhaul and repair requirements, the prime consideration must be to insure that naval aviation forces receive the highest possible degree of aircraft availability, readiness, operational efficiency, mobility, and safety consistent with assigned operational missions. Specifically, the Navy maintenance workload policy, equally applicable to both Navy and commercial activities, is (1) to obtain the maximum possible peacetime naval aviation readiness with available money, facilities, and manpower and (2) to retain a mobilization level of plant and manpower capability for emergency expansion. It must be borne in mind that Navy-owned overhaul facilities are fully integrated with operational programs and that this integrated combination of line maintenance support and overhaul accommodates fluctuating fleet operational requirements. Division of a large segment of our workload into a number of sources destroys this integration which is vital in support of fleet operations. The policy and aim for selection of commercial work sources is (1) to rework commercial aircraft types for which industrial capacity is available, (2) to overhaul older combat models as they decline in absolute numbers, (3) to perform component overhaul by the manufacturer or his licensee for newly introduced components until Navy facility capacity can be established or where there is no economic justification for establishing Navy capability, and (4) to perform peak emergency overhaul demands beyond Navy capacity where classified military equipment would not be compromised. This maintenance workload policy is reviewed at least annually to determine sources (Government or industry) that can best provide the required fleet support. In this day of rapid technological progress, integrated facilities with the requisite skills are not always readily available. Most Navy aircraft maintenance overhaul and repair facilities are at coastal locations and are tied directly to support of fleet operations. This type of work, being directly related to our fleet operation, creates a sporadic and fluctuating workload whereas a successful and economical contract program with private industry requires a fairly large amount of work at a reasonably steady flow. In addition, the Navy's overhaul operations afford an otherwise unavailable means of training for military field maintenance assignments and for line maintenance functions in combat areas and make possible quick adjustment to combat needs. Prime manufacturers are used for the overhaul of new complex components being introduced into the inventory. The introduction of new items into the inventory is often accompanied by such problems as design and production deficiencies, validation of spare parts' requirements, revision of technical data and the development of effective maintenance methods. By contracting with the prime manufacturer for the initial overhaul, the gap between the introduction of the new item and development of the support capability is materially reduced. At the same time there is provided a means whereby the prime manufacturer can gain firsthand knowledge as to the maintainability of his product. Further, much valuable time is saved in reaching the desired end of having any necessary improvements incorporated in the product at the earliest possible date. D. DEPARTMENT OF THE AIR FORCE In response to the staff's request for a statement of Air Force policy on the two questions presented by the committee directive, the Air Force also referred to the hearings before the House Subcommittee on Department of Defense Appropriations for 1959 (p. 543), containing a statement of Air Force policy reading as follows: The maintenance and modernization of weapon systems and associated support equipment is done in both Air Force depots and contractor facilities. The Air Force policy for distribution of this workload has not changed in the last few years. Basically, the USAF depot maintenance work force are utilized to accomplish work projects which will contribute most to a full tactical capability in the event of an emergency and provide an in-being maintenance readiness capability to support the combat forces. Industry is utilized to the extent necessary in the accomplishment of depot maintenance requirements which exceed the USAF depot work force capability. Work projects which are not critical to the development of in-being readiness support within the USAF depot system are fully contracted to industry. In deciding whether to maintain contractually or to maintain in a depot, a number of factors are taken into consideration, such as impacts on combat effectiveness, economy, and security. Often, the inability to acquire or retain necessary skills requires the Air Force to contract workloads even though in-depot maintenance would be preferred for tactical reasons. Normally, the depot workload consists of first-line aircraft. We use the prime manufacturer for initial IRAN or modification contracts for new aircraft or engines being introduced into the Air Force inventory. The primary reason for this is that it is often necessary to accept production models of aircraft and equipment although we are aware that major modifications may be necessary and that "bugs" involving maintenance and overhaul have to be ironed out. The original manufacturer is often in the best position to provide these services. At the same time, the gap between the introduction of the new item and the development of a maintenance capability is materially reduced. It provides a means whereby the prime manufacturer can gain firsthand knowledge through practical experience as to the maintainability and deficiencies of his product. Further, much valuable time is saved getting these improvements into production line models. On our second line aircraft and certain aircraft engines and accessories, competitive bids are solicited from private maintenance contractors. V. DISTRIBUTION OF MAINTENANCE WORKLOAD A. DISTRIBUTION BETWEEN DEPOTS AND CONTRACTORS Figures which the military services have issued from time to time concerning the distribution of their maintenance dollars between depots and contractors are likely to be misleading if taken as a measure of the extent to which the services resort to contract maintenance as opposed to depot maintenance. Such figures are usually taken from fiscal and management reports which are stated in terms of established budgetary programs and projects. Along with funds for depot maintenance work, these budgetary programs and projects. in some cases include substantial amounts for items which are extraneous to the question of depot maintenance versus contract maintenance. This is especially true in the case of modification and modernization of in-service aircraft. The bulk of this work is funded out of no-year appropriations for the procurement of aircraft. It falls into two distinct categories: (1) the procurement of kits needed to accomplish the modifications, and (2) the installation of these kits. The first category involves what is essentially a manufacturing type of operation and normally would be accomplished through procurement action with commercial sources of supply regardless of what policy the service might be following with respect to depot versus contract maintenance. The second category involves what is essentially a labor type of operation which could be accomplished either by depot personnel or by contract. Logically, any statistical presentation which is intended to portray the policy of the service with regard to depot maintenance versus contract maintenance should exclude the manufacturing type work. Even those maintenance expenditures which are funded out of the operations and maintenance appropriations and are specifically classified as depot maintenance include items that are extraneous to the question of depot versus contract maintenance. For example, Air Force budget project No. 431, entitled "Depot maintenance," includes expenditures for aircraft storage, vehicle storage, and the procurement of spare parts. However, these items do not appear to alter the statistical picture sufficiently to warrant an attempt to isolate them. After due consideration of the foregoing factors, the following tabulations, based on program data for fiscal year 1959, are believed by the staff to constitute a reasonably valid portrayal of the manner in which the three Services apportion their depot-type maintenance work between Government depots and private contractors: Depot versus contract funds programed for fiscal year 1959 1 The amounts shown in this table for aircraft modernization and modification are exclusive of the amount programed for kits, engineering, technical data, and 1st destination transportation, since these items are not depot-type work. * Includes engines. Represents cross-servicing by Navy and Air Force. |