AMRAAM

Acquisition

Excellence

Col James S. Knox, Jr.Acting Program DirectorAir-to-Air JSPO

Air-to-Air Joint Systems Program Office

I n t e g r i t y - S e r v i c e - E x c e l l e n c e

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Overview

Background: Developed Vision 2000 in 1997

Vision and Implementation

Results

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Background

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Background

In 1997, AMRAAM Program Faced:

Extended Production Run Small Annual US Procurements

Costly Infrastructure At Low Quantities, Only 50% of Dollars Bought Missiles

Significant Mandated Manpower Reductions by FY00 No Plan in Place

Loss of Competition From AMRAAM Producers Raytheon Petitioned Government to Purchase Hughes Aircraft

Company

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Air Force AMRAAM Total Procurement Cost Breakout

0.0

100.0

200.0

300.0

400.0

500.0

600.0

700.0

800.0

Lot 3 Lot 4 Lot 5 Lot 6 Lot 7 Lot 8 Lot 9 Lot 10 Lot 11

Missile Hardware Wrty, Spares, Data, GFE RepairsVE INC/INV/INCORP Test EquipmentTest Support A&ASGWEF/Simulation P3I ImplementSafety, Env, WRTTM, AMAT Tech Services to PrimeProg Mgmt Admin ICSPSE/Sustainment DepotTraining Eq

$ M

illio

ns

FY 89 90 91 92 93 94 95 96 97

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“Net Sales Booked”

BusinessPlan

Net Sales Plummeted

PRODUCTION PLUMMETED

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Program Response

In 1998, AMRAAM Program:

Supported Raytheon/Hughes Merger Attained $50K Reduction in Hardware Price as a Condition

Teamed with Raytheon to Implement Commercial Business Practices Saved 28% ($590M) of Procurement Funds Reduced AF Manpower by 30% 2 Years Early Over 75% of Dollars Now Buy Missiles

Established 10-Year Cost Control Strategy Long-term Production Price Commitments From Raytheon

Dependent on Stable FY Quantities and Approval of Planned Upgrade Program

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Vision 2000

VISION 20001997

200 Person SPO

Competitive Producers

~ $700K AUPC

50% of 3020 to Contractor

Complex Specs - Govt Control

Govt Configuration Control/Mgmt

Govt Tests/Analyses/Cross-Check

70 - 100 Person SPO

Single Producer with TSPR

~ $500K AUPC

> 80% to Contractor

System Performance Spec - Only Govt Control

Contractor Config Control/Mgmt

Contractor Responsible for Product - “Combat Ready System”

Enablers: Single Producer Through Merger;Long Term Pricing Agreement (LTPA)

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LEADING CHANGEBy John Trotter

8 STAGE PROCESS

1. Establish Sense of Urgency

2. Create Guiding Coalition

3. Develop Vision and Strategy

4. Communicate Vision

5. Empower Broad-Based Action

6. Generate Short-Term Wins

7. Consolidate Gains and Produce More Change

8. Anchor New Approaches in the Culture

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Vision and Implementation

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VISION 2000: THE CORNERSTONES

Procurement:

Sustainment:

Workforce/Teaming:

Development:

1

2

3

4Product Performance:SOLID FOUNDATION

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Total System Performance Responsibility (TSPR) Philosophy

The Contractor shall perform the tasks that he

deems necessary and sufficient to develop,

deliver, warrant, and support affordable combat

capable and readily available weapons systems.

The Government defines and communicates

performance requirements, provides requisite

resources, supports a Long Term Pricing

Strategy, and enables Contractor activities.

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CORNERSTONE #1:PROCUREMENT

Raytheon Manages/Verifies Product

Government Controls System Performance Specification

$400K Average Unit Procurement Cost (AUPC)

> 75% of Budget Buys Product

70 Person Program Office - Enablers “Live” With Raytheon

Raytheon Responsible for “Combat Ready System”

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Task Destination - Contractor, Government, Boneyard

DECISIONS

DIRECTORS’ GROUP

Ms. Judy Stokley, USAF SPD

Mark Stenger, USN PD

Chuck Anderson, Hughes

Jim Wilson, Raytheon

RECOMMENDATIONS

TRI-PARTY PANEL

USAF/USN/Hughes/Raytheon

Deputy Directors

Chief Engineers

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Task Destination Process

AMRAAM SPOAMRAAM SPO

AdvancedTechnology

AdvancedTechnology

UserAF/Navy

UserAF/Navy

GovernmentOversight

GovernmentOversight

AircraftAircraft

SEEK EAGLESafety

SEEK EAGLESafety

ContractorContractor

TestTest

SupportSustainment

SupportSustainment

IntelIntel

AllocateFunctions

AssignTasks

Vision2000

Functions

SPO Tasks

Evaluate PerGround Rules

Define &Organize

78 Functions44 to Contractor, 3 to Boneyard, 31 Core Government

5 Transition Plans

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Cornerstone #2:Workforce/Teaming

Fully Team With Raytheon - Ensure TSPR Success!! Stand-Up Mirror Organizations 1 Jun 98 Kick-Off Facilitated Training - Mid-Jun 98

Fully Integrate US Navy and Air Logistics Centers Establish and Maintain Common Goals and Objectives Program Leadership and System Integration Groups Trained Enablers In Place

Team With Raytheon To Establish A VitalTeam With Raytheon To Establish A VitalOrganization And Workforce CommensurateOrganization And Workforce Commensurate

With Our Vision 2000With Our Vision 2000

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Win-Win Business Arrangement

CongressOSD

Service(s)

Affordable, Combat Ready Products to

Warfighters

Stockholders, Corporate Construct, Profits,

Marketing, Suppliers

ProfitsNew Business

Reputation

RequirementsResources

ReportsGovt PM Industry PM

Develop and Execute Win-Win Strategies In An Develop and Execute Win-Win Strategies In An Atmosphere of Teamwork and TrustAtmosphere of Teamwork and Trust

Develop and Execute Win-Win Strategies In An Develop and Execute Win-Win Strategies In An Atmosphere of Teamwork and TrustAtmosphere of Teamwork and Trust

Accountable Accountable

ACCOUNTABLE

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AMRAAM Directors’ Goals For 2001

Goal 1: Implement Next Generation Long-Term Pricing AgreementChampions: Len Iannuzzo (JSPO)/Frank Wyatt

(Raytheon)

Goal 2: Successful Cost/Schedule/Performance Execution of P3I Phase 3 Program

Champions: Lt. Col Ken Moran/Don Targoff

Goal 3: Support SIG Long-Term Portfolio Planning andInvestment Options

Champions: Aaron Brinson/Phil Gallagher

Goal 4: Meet or Exceed All Customer Production and SystemPerformance Requirements

Champions: Len Iannuzzo /Frank Wyatt Goal 5: Support National Security Assistance Policy and Secure

International Sales to Support the LTPAChampions: Carlton Taylor/Karen Crandall

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AMRAAM Directors’ Goals For 2001

Goal 6: Meet or Exceed All Customers’ System SustainmentRequirements

Champions: Maj Lisa Carney/Lt Col Schoeneman/Craig Lelicoff

Goal 7: Maximize AMRAAM Missile Production by SupportingSurface Launch Requirements With Domestic andInternational Customers

Champions: Len Iannuzzo/Port McKinster

Goal 8: Effectively Support our AMRAAM Users’ WarfightingRequirements an Capabilities Through Test andEvaluation (T&E)

Champions: Bob Guidry/Bill Laney

Goal 9: Document Aircraft Integration Issues and Migration PlansChampions: Aaron Brinson/Bill Laney

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Cornerstone #3:P3I Phase III EMD Characteristics

System Performance Specification Maps to ORD

Cost Plus Award Fee

AUPC Commitment Clause for Lots 16-21

Contractor/Government Joint Factory Pricing Model

Contractor Responsible and Accountable With Government As Enabler

Acquisition Program Baseline to Promote Program Stability

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Long Term Price Control Strategy

AU

PC

LOT 12 . . 15 16 . . . . 21 FY 98 . . 01 02 . . . . 07

P3I Phase III CAIVFor

AUPC Commitment

LTPALots 12-15

Joint Factory PricingModel (Deltas)

P3I Phase III EMD

99 03

Long Term Pricing Agreement

FFP Lots 12-15 (FY98-01)

Contractor Develops TSPR Mindset

AUPC Commitment

P3I Phase III EMD (FY99-03)

AUPC Commitment Lots 16-21

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Cornerstone #4: Sustainment

Raytheon Repairs Missiles, CFMREs, MBTS, CATMs, and Containers

Raytheon Monitors Performance of Fielded Systems and Feeds Corrective Actions into Development, Production, and Sustainment

Raytheon Honors 10 Year Bumper-to-Bumper Warranty and Manages Spares

Raytheon Executes Service Life Prediction Program (SLPP)

Raytheon, With Enablers, Closer to Warfighters

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Results

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0.00

50.00

100.00

150.00

200.00

250.00

FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07

TOTAL COST OF OWNERSHIP FY98 PB VERSUS FY00 POM

Procurement RDT&E O&M

FY98 PB FY00 POM

TY

Dol

lars

in M

illio

ns

18% Less TCO

28% Less Procurement

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Key Changes

New Way Program Leadership Group Business Control Board Govt: Missile Performance Spec Contractor Self-oversight Profit Posture Over Several Years Contractor Meets Spend Plan/

Expenditures - GREEN Service Life Prediction Program Contractor and Government Invest

in Improvements Contractor Owns Field

Performance Contractor Maintains Availability

for Warfighters Enablers, VTCs, and EDI Open Financial Books

Old Way Staff Budget Control Board Govt: 370+ Spec Government Quality Inspectors Head-to-Head Competition Government Chronically Behind in

Obligations/Expenditures Surveillance Government Only Invests in

Improvements Government Monitors and Directs

Contractor Government Mandates Repair

Turnaround Time Government Reviews and CDRLs Little/No Insight

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Problem Solving

We Will Have Problems Solve Them Together With Industry

Fundamental First Question What is the right thing to do? Once You Know That, It’s a Matter of Finding a Way to Do It

Work with Your Industry Counterpart to Establish Clear Understanding. . .Don’t Count on the Contract

“Lawyers are well aware that any contract, however well crafted, can be broken unless some smattering of ethics and goodwill remains on each side.”*

*Rushworth M. Kidder

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Contracting’s Role In This Journey

Partnered With Industry to Write Flexible Contracts That Accommodate the Team Approach Established Flexible Long Term Pricing Agreement (LTPA)

Models (Quantity, Configuration and Responsive to Late FMS Sales)

Review-Discuss-Concur (RDC) Performance Based Payment (PBP) on All FFP Contracts Government Controls Missile Performance Specifications

Only Developed Alternate Disputes Resolution (ADR) Clause . . .

Never Had to Use It Exercise Options on Standalone Contracts Contractor Self Oversight (CSO)

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Contracting’s Role In This Journey (Concluded)

Partnered With Industry to Write Flexible Contracts That Accommodate the Team Approach (Continued) 10-year Bumper-to-Bumper Warranty Roll Forward Warranty Accountability Roll Forward GFP Accountability Electronic Data Sharing Multiple Production Lot Options Raytheon in Charge of All Simulation Modeling, Testing, Tooling,

Test Equipment, Spares and Parts Obsolescence Partnered With DCM/DCAA on CSO in the Plant and Developing and

Reviewing Early LTPA Models Partnered with JSPO Establishing Highly Successful Enabler Role

Facilitating Communication Not Directing the Contractor

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YA - The Cutting Edge

Trusting Partnership with Industry Heart and Soul TSPR - Need to Rename This! LTPA PBP PBA Green Execution Superior, Affordable Products That Get the Job Done

Do NotDo Not Underestimate the Impact Underestimate the Impact YourYourCreativity and Dedication Have!Creativity and Dedication Have!

Do NotDo Not Underestimate the Impact Underestimate the Impact YourYourCreativity and Dedication Have!Creativity and Dedication Have!

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Back Ups

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Incremental Changes To AMRAAM

91 93 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09908988FY LOTAWARDS 87 9492

Improved Warhead; Improved SoftwareImproved Warhead; Improved SoftwareP3I Phase 2

AIM-120C4

Major Upgrade to Guidance Section Hardware/SoftwareMajor Upgrade to Guidance Section Hardware/Software

P3I Phase 3

AIM-120C7

New Active Radar MissileNew Active Radar MissileAIM-120A

Major Hardware Upgrade to Guidance Section; Annex G Software Upgrade Exploited Hardware CapabilitiesMajor Hardware Upgrade to Guidance Section; Annex G Software Upgrade Exploited Hardware Capabilities

AIM-120B

Minor Hardware Upgrade to Guidance Section; Smaller Wings/Fins, Improved SoftwareMinor Hardware Upgrade to Guidance Section; Smaller Wings/Fins, Improved SoftwareP3I Phase 1

AIM-120C3

Upgrade to Control Section; Longer Rocket MotorUpgrade to Control Section; Longer Rocket Motor

P3I Phase 2

AIM-120C5

Changes to Target Detection Device, Improved SoftwareChanges to Target Detection Device, Improved Software

P3I Phase 2

AIM-120C6

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Contract Philosophy

“What”, Not “How”

Total System Perspective Missile, Support Infrastructure, Support Items Field Performance Development, Production, Sustainment Long Term Focus

Shared Risk

Program Objectives to Directly Support Warfighter

Prerequisite: Foundation of Performance, Mutual Trust

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Teaming

Insight, Not Oversight Contractor “Self-governance” In-plant Enablers

Assistance, Not “Watchers”Measured by Value Added

Program Leadership Group “Counterparts” Teamed Over Shared Goals Integrate Program, Manage Risk Win or Lose Together Greatly Increased Communication Shared Accountability for Success

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Mutual Trust

TSPR SOC (You Might Call it a SOO) 2 1/2 Pages of Short Statements Example: “The contractor shall perform quick-look review

of AMRAAM firings, and identify and resolve anomalies. The contractor shall prioritize efforts to ensure issues with the greatest program impact are resolved as rapidly as practical.”

Change Control Pre-TSPR: Govt Had Class I Change Control over 370

Specifications Now: ~50 Page Missile Performance Spec - All Else Under

Raytheon Control 10-Year Bumper-to-Bumper Warranty - 2 paragraphs

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Unity of Purpose

Government/Industry Focus on Common Goals to Meet Interdependent Requirements: Warfighters’ Needs, Company’s Financial Health, Program’s Report Cards

Examples Factory Testing Depot Repair Failure Analysis/Retrofit Software Upgrades

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Lessons Learned

Nurture a Government/Industry Team Common Vision and Goals Win-Win Strategies

Establish Consolidated, Integrated Contract Packages Avoid Fragmented Work Projects

Articulate Responsibilities and Accountabilities

Stand Firm Against Attackers Use Compelling Data and Comprehensive Strategies

Learn to Look Steely-Eyed Into the Barrel of a Six Gun “THIS IS THE WAY WE ARE GOING” and “NO” Are

Powerful Find Change Agents With Personal Courage