the practicalities of outsourced maintenance r2

1Aircraft, Engines & Components' Consultation Services 1

“The practicalities of monitoring outsourced maintenance”.Engr. Zafar I. JamiPartner / CEOAircraft, Engines & Components’ Consultation Services (AECCS)Website: www.aeccs.com

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Aircraft Operator’s Maintenance organization

E& M Organization

E& M Organization

On WingMaintenance

On WingMaintenance

EngineeringEngineeringOff Wing

MaintenanceOff Wing

Maintenance

In HouseIn House Out SourcedOut SourcedPeriodicPeriodicRectifications

& RepairsRectifications

& Repairs

Time & MaterialTime & Material

P.B.C.P.B.C.

A Division Of Airline

A Division Of Airline

IndependentEstablishmentIndependent

Establishment

Engines and APU.Engines and APU.Component Exchange.

Component Exchange.

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Types of Outsourced Maintenance (Off Wing)

•Performance Based–Power By The Hour.

•Your own Engine /APU comes back after repairs/ restorations.

–Component Exchange.•Mostly for Components but often for APU and small Engines.

–Nose to Tail Programs.•Can also include Heavy Checks.

•Time and Material

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Performance Based Contracts (PBC)

Some of the popular contracts are:On Point Solutions GEAEFHA –Fleet Hour Agreement RRFMP –Fleet Mgmt. Program PWA Component Care Programs VariousGold Care / Component Exch. Boeing

OEMs are usually in a better spot to win such contracts on new fleets, but independent MROs and Third Party Service Providers are also active in this area.

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Salient Features of Performance Based Contracts

It’s a Long Term Commitment Preferably do it for the whole expected period of

operation in one Go. Operations should be within assumptions’

range. Provides Risk Mitigation (not elimination). Foreseeable Basic Costs (not total cost).

Prediction accuracy ~70to 80%

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Some Myths and Facts about PBC

Word of warningFollowing are based on generic concept of a PBC/

Exchange Program. However, as these contracts are a result of negotiations between the parties and keep changing with experiences gained from other contracts, all of the points mentioned may not be applicable to a particular contract.

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Some Myths and Facts about PBC

Myth Fact I need not indulge in their

work-scoping issues-as it is in the interest of the Service Provider to produce Best (Gold Plated) Engines / Components, that would last longer.

After paying their rates plus insurance, the operator is fully covered for all Engine / Component related costs.

This is somewhat true in the early period, but in the later years, work-scopes can be toned down to the extent that AD/Alert SBs too are not incorporated if the compliance dates fall beyond the contract. It may be sensible to get some of them incorporated at cost.

There can be a number of ‘hanging’ costs, that ultimately are Operator’s responsibility. Sometime they can run in millions.

Some Myths and Facts about PBC II

Myth

•After entering into PBC, we do not have to pay the Maintenance Reserves (M.R) to the Lessors, or worry about meeting their Return Conditions.

•There is no need to monitor the Engines going to the Shop under PBC, as the Service Provider is responsible for everything.

Fact•Unless there is a tripartite agreement to this effect, MR Payments / Return Conditions are applicable . M.R Payments are adjusted at restoration shop visits.

•Monitoring always pays. Specially as there is a chance that, if not contested, the removal may be declared beyond the scope of PBC, hence chargeable to the customer .

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Component Exchange Programs (CEP):

•Things to Understand and Watch.

•Things to Monitor and Control.

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C E P: Things to Comprehend and Watch

It is easier to include items in the program than to take them out. Start from a minimum list of components about which you are certain

that they have to be in it for a very long period. Give a realistic timeframe for delivery of the components, as after

that the clock for late delivery will continue till their receipt at the Vendor. With a loose control this may easily reach up to 20% of price paid to include the item.

If the removal is unjustified, you not pay only for Test Charges but may also have to pay for a good portion of shop visit cost.

As you always get a different unit, your system should be capable of handling it. Take care that you get Full Documents, including Back to Birth

history and AD / Mod status and promptly enter them in your system.

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C E P: Things to Monitor & Control

Shipments: Optimize & Monitor Shipment cycle through out. Discuss with all agencies involved before committing to the timeframe.

Get confirmations at each stage as there are many a slips.

Removal Planning: Try to plan removals on days that align with shipment schedules. Ensure availability of components as well as the aircraft concurrently. If cases of late shipments or AOG are high for a peculiar component, plan

for a standby unit/s (rent or purchase).

Analyze & Control Removals: Ensure proper trouble shooting sequences are followed. Monitor & Control Unjustified Removals. But understand that this cannot

be brought to zero. NFF limits typically range between 5% (majors) to 20%( minors).


Time & MaterialTime & Material Type Type Outsourced Maintenance.Outsourced Maintenance.

Salient Features.Salient Features.

Practicalities of Monitoring.Practicalities of Monitoring.

Control of PMA parts / DER Control of PMA parts / DER repairs.repairs.

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Salient Features of a Time & Material Type Contract.

PLUS: Can be One Off. Flexibility in Operation You are in full control of the work scope Its easier to switch vendors and source spares.

Can take advantage of Market improvements

MINUS You assume all Risks beyond Warranties /Insurance Not easy to predict Costs.

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Practicalities of Monitoring through Rep

A Rep at the MRO is the most useful tool for monitoring the outsourced work. But make sure the following when planning to do so: Keep a provision to station the Rep (permanent or

visiting) in the Contract for on-site monitoring, and define his functions. Without this the Shop may refuse to let him monitor the work.

The Rep should work in a manner that will not interfere in Shop’s / Hangar’s functioning.

Timely query and decision making is very vital otherwise the delays & costs will be on operator’s account.

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Practicalities of Monitoring ..II

The Rep must know how long the Aircraft have to be in the fleet, and give advice accordingly in LLP selections and SB incorporation.

Preparation for an aircraft’s or engine's disposal / Lease return must start at least one Shop / Hangar Visit in advance.

Last, but not the least, it may be better to do without a Rep than to assign someone who lacks training, competence or aptitude.

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Monitoring Use of PMA Parts and DER Repairs:

As these are getting into more expensive areas, their use can now save $$$ Millions even on a small fleet, but take care of the following: Your own evaluation should justify its usage. FAA’s acceptability does not imply acceptability by the

Regulatory Authority of country of registration. Ensure it does not affect Contractual obligations with

the OEM or the Lessor. This can give rise to Warrantees and Lease Return issues.

Always keep a track of their usage and monitor their performance / reliability and pricing.

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Outsourcing and IT Process

While Outsourcing reduces Complexity of Engineering & Maintenance setups, it increases the need to Monitor more actively, which has a bearing on its IT System and reinforces its role in several areas.

Outsourcing and IT

•Changing Perspectives.–What should be the Strategies ?

•How a good System can help?

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Airworthiness & Invoice / Work related Records

Reliability &Decision Support

Shipment &Receipt

ENGG. / IT

Outsourcing and IT System - Areas needing Enhancement

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Changing IT Perspectives -Time and Material Contracts

Issues–Too many Shipping and Receipt Destinations to follow-up.

–Varying Data Formats from each vendor.– Differing Invoicing and payment methods.

–Divergent Contractual requirements

Strategy to deal with–Design an IT module for Ship / Receive and Follow-up. Use tools- Lean/ 6Sigma - to Optimize.–Try for directly up-loadable data formats.–Good IT System with Scrutiny and Checks can help a lot. –Give your own basic contract. Add an IT module to warn of approaching deadlines on either sides.

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Changing IT Perspectives PBC-(PBTH/ C E P)..I

•Too many Parts and Serial Numbers to deal with.

–Shipment and receipts have penalty clauses.–Old parts may appear again or their data may be required by a regulatory / investigating authority.

•How to evaluate and monitor Vendors’ performance.

•IT System be designed to ensure to

―Have more check points than under T&M .–Keep removed parts on system but with a Dormant status.

–Update new data before making them Active again.

•Have a Decision Support System

•Define & Compare CTQs to evaluate Vendors.•Define and Measure vendors’ KPIs and feed it to DSS.

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Changing IT Perspectives (PBTH/ C E P)..II

•Work scope control. –Changes often not reflected in operator’s documents.

•No Fault Found Removals need to be probed in greater details as these cost much more than in case of In-house Maintenance.

•Make it a contractual requirement for vendor to inform of any change and update system ASAP. •Enhance Capabilities of Reliability Reporting System

•System should bring to light NFF data (and costs) retrospectively for mandatory reviews.

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How AECCS can help.

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AECCS can help in … Maintenance Agreements:

- Between Customers and MRO Shops– Agreements with Service Providers – Component Exchange Programs – Lease and Purchase.

Leasing and Purchase -Physical Inspection and Assessments

-Maintenance Reserves Management-Optimally meeting Lease Return Conditions

MRO / Engineering IT System Help in Evaluation and SelectionHelp in Resolution of Implementation and

Change Management issues.

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AECCS can help in …-Shop Visit Services

Maintenance Program Development MRO / Service Provider Evaluation and Selection. Work scoping of Engine /APU and Components Representation at or Liaison with MRO during Engine

and APU Shop Visits Scrutiny and Technical Review of Shop Visit invoices Review & Disposition of Scrap and left-over material

after Shop Visits Review / Management of Maintenance Reserves after

Shop Visits Help in resolving issues with Warrantees and

Insurance.

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the practicalities of outsourced maintenance r2

Documents

componentcomponent engines

notplated engines

components butoften

availability of components

minimum list of components

peculiar component

control removals

component related costs