USE OF LIGHTWEIGHT MATERIALS FOR ARMY TRUCKS
commercial technology and components.5 Additional strategies to control and minimize the costs associated with low-volume manufacturing include
minimizing fixed costs and buying flexible fixed assets.
One method of increasing the Army’s purchasing power is to partner with other NATO nations in contracting for basic truck structural architectures and standard commercial components. More sensitive systems, such as
electronics unique to the U.S. Army, could be added later as “black box”
components. Although this approach seems feasible from a business perspective, it may be difficult politically. Changes proposed for DOD business practices, however, may make such an approach possible in the future.6
Enabling New Technology Insertion
aggressive fuel-consumption requirements rather than simply requirements with respect to vehicle range.
Life-Cycle Assessment
As noted earlier, procurement and operating budgets, and therefore decision making regarding these two issues, are currently decoupled within the military. The incorporation of life-cycle assessment as a required element of the procurement process would promote the consideration of operating, maintenance, and disposal costs during initial acquisition. Life-cycle
assessment would promote the use of new materials and the replacement of older trucks in the fleet.
Military vehicles have long service lives, often on the order of 20 years.
As a result, actual total life-cycle costs include substantial operations and support (O&S) costs that may approach or exceed the initial acquisition cost.
When personnel costs are included in O&S costs, TACOM found the total O&S costs for the medium tactical truck to be 66 percent of the total life-cycle cost.7 The O&S costs for a recapitalized truck could be as high as 72.5 percent. The total life-cycle cost of a tactical truck with an initial cost of
$150,000 could be $441,000, and that of a recapitalized truck as high as
$546,000.
In some cases, the O&S costs are increased owing to corrosion problems. One study estimated that corrosion damage to cargo trucks cost the Army between $850 and $1,000 per truck per year, not to mention the cost of the downtime of the trucks.8 Other data indicate that the cost may be as high as $1,200 per year per truck when the cost of labor is included.
Corrosion also impairs the readiness of trucks for duty. It was recently reported that 17 percent of the cargo trucks in Hawaii were so corroded their mission capability is seriously impaired.9
The use of lightweight, corrosion-resistant structural materials in truck designs would be promoted if real fuel costs and O&S costs were given more prominence in acquisition requirements. Life-cycle costing should be
7R.S. Bazzy. TACOM. Cost and Systems Analysis Information. Presentation to the committee, May 9, 2002.
8Army Materiel Command. 1998. Army Corrosion Prevention and Control. Program, Army Regulation 750–59. Available at <http://www.army.mil/usapa/epubs/pdf/
r750_59.pdf>. Accessed March 2003.
9J.M. Argento. U.S. Army. Industrial Ecology Center Initiatives. Presentation to the committee, May 9, 2002.
USE OF LIGHTWEIGHT MATERIALS FOR ARMY TRUCKS
institutionalized in future truck procurements in order to evaluate the impact of new vehicle designs, material changes, and technology alternatives by quantifying the cost of ownership of current vehicles and using these data to project fuel efficiency, up front production costs, O&S costs, maintenance and repair costs, and obsolescence and refurbishment costs. The Army should develop a standard life-cycle model that could be used in the acquisition process by both proposers and evaluators. Before a truck is purchased by the Army, the contractor should have in place a government- approved system of cost accounting to justify the selling price of these future systems. This change would require the implementation of new procurement practices, and on Source Selection Boards for Army vehicles there would need to be trained personnel who were capable of taking a holistic approach.
Best-Value Procurement
The "value" of a product is a function of procurement price and operational costs and performance, measured over useful life. An
inexpensive product that has high maintenance and operating costs, or that is unreliable, is not a "best value". With Army trucks, it is difficult to harness competitive market forces because of the small market and consequent narrow supplier base. Traditionally, the suppliers of light trucks have been domestic automakers, such as Ford and Dodge. The suppliers for medium and heavy trucks have been specialty vehicle manufacturers and defense contractors with dedicated manufacturing and assembly lines. Stewart and Stevenson is the primary source of the Family of Medium Tactical Vehicles (FMTV), and Oshkosh Truck Corporation is the primary source of heavy tactical vehicles. The remanufacturing program for 2.5- and 5-ton trucks is undertaken by AM General and Oshkosh Truck Corporation. High unit costs and small production runs of items built to military specifications are typical of the defense-unique industrial base for trucks.
An alternative type of procurement process could provide suppliers with incentives to produce products that maximize the Army’s value. The Army could develop an understanding of the utility function10 governing the use of trucks, and then compete its supply contracts in such a way as to reward suppliers whose product maximizes the Army’s utility function. For example, it would be useful to understand how much of a reduction in price offsets a 10
10The utility of a truck is a complex function of characteristics such as its price, durability, logistical footprint, and reliability.
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Enabling New Technology Insertion
percent reduction in reliability, or how much more should be paid for a truck with extremely high reliability. At least one study has addressed the principles of measuring utility.11 The Army would benefit from an investigation of utility analysis and its applicability to the truck procurement process. A utility function could provide the Army with a single, quantitative equation that could be shared with suppliers and used to award procurement contracts.
Utility analysis, or a similar method that places a quantitative measure on the value of performance, can be the basis for achieving best-value procurement.
The Army’s existing procurement system could be adapted to this approach.