Opportunity To Reduce Costs And Improve Aircraft Through Prompt Processing Of Engineering Change Proposals 8-152600 Department of Defense BY THE COMPTROLLER GENERAL OF THE UNITED STATES COMPTROLLER GENERAL OF THE UNITED STATES WASHINGTON. DC. 20548 B-152600 To the President of the Senate and the ‘, Speaker of the House of Representatives This is our report on the opportunity to reduce costs and improve aircraft through prompt processing of engineer- ing change proposals by the Department of Defense. Our re- view was made pursuant to the Budget and Accounting Act, 1921 (31 U.S.C. 53); the Accounting and Auditing Act of 1950 (31 U.S.C. 67); and the authority of the Comptroller General to examine contractors! records, as set forth in contract clauses prescribed by the United States Code (10 U.S.C. 2313(b)). Copies of this report are being sent to the Director, Office of Management and Budget; the Secretary of Defense; and the Secretaries of the Army, Navy, and Air Force. Comptroller General of the United States , COMPTROLLERGENERAL'S OPPORTUNITYTO REDUCECOSTSANDIMPROVE REPORTTO THE CONGRESS AIRCRAFTTHROUGHPROMPTPROCESSINGOF ENGINEERINGCHANGEPROPOSALS Department of Defense B-152600 DIGEST _----- WHYTHE REVIEW WASMADE Although precise information is not available, the General Accounting Office (GAO) has estimated that the total cqst.,~f~~~j~~j~~~~g.~~~~?n~s i for the Department of Defense ran betweenwmillionand $410 m?llion ' ,- during fiscal years 1967 and 1968. In view of such sizable expenditures, GAOhas inquired into the efficiency and~-=-. economy =._ .eir.s._ of _l_ thei .practices .~r.,.l_. -.~^i_-‘;-" __~..and . procedures followed by the ~h$$eZm%~?$ary servlc~s.,~~n,,_p:~~~~~~~~~.~~~~~~~~gi- neerin$*ch%ig~ 'hropo-.als+. ,&-~~~&?&&i?% .','.I. -TsxzGF FINDINGS AND CONCLUSIONS Engineering changes are frequently made to military aircraft to improve their safety, performance reliability, or maintainability. The need for such changes is usually discovered as a result of experience with some of the models that are already in operation or under test. For example, statistics showed that the flight-crew escape mechanism for three types of Navy aircraft being used by the operating forces did not work well at low speed and zero altitude; therefore engineering change proposals were initiated to improve the performance. Such changes may be originated by either the Government or the contrac- tor; but in either case the plan for a change, in the form of an engi- neering change proposal, must be approved by the military service that is responsible for the aircraft before the contractor is authorized to make the change. (See p. 5.) Usually, some aircraft are in production while the proposed engineering change is being evaluated. Delays in processing the change proposal can increase the number of unchanged aircraft completed and delivered to the operating forces. Once those aircraft are delivered to the users, the change could be delayed for months or years or never be made at all. Moreover, making such changes after production is generally more expensive. (See p. 6.) GAOexamined 547 engineering change proposals implemented on 11 types of aircraft by the military services during fiscal years 1967 and 1968, to see whether extensive delays in processing the changes had occurred. In making its evaluation, GAO used a standard established by the Department Tear - -~--_--Sheet of Defense. That standard allows 45 days for evaluating routine change proposals. GAO found that the length of time for processing the 547 en- gineering changes avera ed 131 days, or nearly three times as long as the standard allowed. 4See P- 8.) From the 547 change proposals, GAO selected for further review 784 on which it appeared most likely that delays had served to increase costs. Partly because contractors' records were often incomplete or inaccurate9 GAO could not determine the significance of the delays for many of the 184 changes. GAOestimated, however, that in 42 cases additional costs caused by delays in processing the engineering change proposals could total as much as $3.7 million if all planned changes were made. (See p. 10.) Delays in processing change proposals can deny the advantages of the change to the aircraft users for substantial periods of time or, in some cases9 permanently because aircraft lacking the change may be 1 to 3 years away from their next overhaul (the most practical time to implement the change). Even then, the overhaul period is sometimes curtailed for reasons of urgency, leaving insufficient time to make the change. (See pp. 10 and 11.) Among the causes for delay were --ineffective monitoring by project offices of evaluations by review- ing staffs, --insufficient direction for contractors from the military services as to the kind and extent of data to be submitted, --the reliance on a single, overall time standard in lieu of time standards for each individual organization concerned in the evalua- tion, --the reviewing staffs' practices of processing change proposals sequentially rather than concurrently, --duplicate reviews of change proposals, and' *' --lengthy processing of change proposals by groups not under the con- trol of the group managing the project. (See pp. 13 to 22.) The advantages of reducing the time for processing engineering change proposals are important enough to warrant a concentrated management ef- fort. (See p. 23.) RECOMMENDATIONS OR SUGGESTIONS GAO suggested that the Secretary of Defense designate a group in the De- partment of Defense to establish procedures for effective control of the 2 I I processing of engineering change proposals and to monitor the implementa- I tion of these controls by the military services. GAOalso suggested II specific actions that it believed would reduce processing time. (See II P* 23.) ; AGENCY ACTIONSANDUNRESOLVED ISSUES The Department of Defense agreed that the advantages of reducing proc- essing time for change proposals warranted increased management effort. The Department stated that each of the military services had established procedures for providing effective controls over the timeliness of the processing of change proposals, or had such procedures in a late stage of development, and that an audit of current practices for controlling engineering change proposals was under way. The Department stated also that a group would be formed!, on an ad hoc basis, to review procedures, and that any deficiencies found would be corrected. (See p. 24.) 1 GAO recommends that the Secretary of Defense monitor actions planned I for improvement of the processing of change proposals, to ensure that I the actions are carried out effectively and are achieving the desired ,I objectives. (See p. 25.) I GAO plans to inquire into the effectiveness of the new controls. I :I MATTER FORCONSIDERATION BY THECONGRESS I I GAO is bringing this matter to the attention of the Congress because of its expressed interest in matters affecting the cost, timeliness, and II effectiveness of military weapons systems. ’ Tear - Sheet I t 3 , I Contents Page DIGEST 1 CHAPTER , 1 INTRODUCTION 4 2 DEPARTMENTOF DEFENSE POLICY PROVIDES FOR TIMELY PROCESSINGOF ENGINEERING CHANGE PROPOSALS 6 3 EXTENSIVE DELAYS IN PROCESSINGENGINEERING CHANGEPROPOSALS 8 4' EFFECTS OF DELAYS IN PROCESSING ENGINEERING CHANGEPROPOSALS 10 Processing delays can result in added cost 10 Operational forces denied benefits be- cause of delays in processing changes 11 5 IMPROVED PROCEDURESNEEDED TO REDUCE TIME REQUIRED TO PROCESSENGINEERING CHANGE PROPOSALS 13 Actual performance not sufficiently monitored 14 Contractors not adequately instructed on the kind of data needed for evalu- ation of proposals 16 Time limits not broken down into seg- ments 18 Concurrent processing of change pro- posals would reduce processing time 19 Elimination of duplicate reviews 20 Delays caused by reviews by units from outside project management group 21 6 GAO PROPOSALSAND AGENCY COMMENTS 23 GAO proposals 23 Agency comments 24 Page CHAPTER 7 CONCLUSION AND RECOMI'GNDATION 25 8 SCOPE OF REVIEW 26 APPENDIX I Delayed change proposals resulting in addi- tional cost 29 II Letter of June 30, 1970, from the Deputy As- sistant Secretary of Defense (Installations and Logistics) 30 III Principal officials of the Department of De- fense and the Departments of the Army, Navy, and Air Force responsible for the administration of activities discussed in this report 31 COMPTROLLER GENERAL'S OPPORTUNITYTO REDIJCECOSTSAND IMPROVE REPORT TO THECONGRESS AIRCRAFT THROUGHPROMPTPROCESSINGOF ENGINEERINGCHANGEPROPOSALS Department of Defense B-752600 DIGEST ------ WHYTHEREVIEWWASMADE Although precise information is not available, the General Accounting Office (GAO) has estimated that the total cost of engineering changes for the Department of Defense ran between $390 million and $410 million during fiscal years 1967 and 1968. In view of such sizable expenditures, GAO has inquired into the efficiency and economy of the practices and procedures followed by the three military services in processing engi- neering change proposals. FINDINGSANDCONCLUSIONS Engineering changes are frequently made to military aircraft to improve their safety, performance reliability, or maintainability. The need for such changes is usually discovered as a result of experience with some of the models that are already in operation or under test. For example, statistics showed that the flight-crew escape mechanism for three types of Navy aircraft being used by the operating forces did not work well at low speed and zero altitude; therefore engineering change proposals were initiated to improve the performance. Such changes may be originated by either the Government or the contrac- tor; but in either case the plan for a change, in the form of an engi- neering change proposal, must be approved by the military service that is responsible for the aircraft before the contractor is authorized to make the change. (See p. 5.) Usually, some aircraft are in production while the proposed engineering change is being evaluated. Delays in processing the change proposal can increase the number of unchanged aircraft completed and delivered to the operating forces. Once those aircraft are delivered to the users, the change could be delayed for months or years or never be made at all. Moreover, making such changes after production is generally more expensive. (See p. 6.) GAO examined 547 engineering change proposals implemented on 11 types of aircraft by the military services during fiscal years 1967 and 1968, to see whether extensive delays in processing the changes had occurred. In making its evaluation, GAO used a standard established by the Department of Defense. That standard allows 45 days for evaluating routine change proposals. GAO found that the length of time for processing the 547 en- gineering changes avera ed 131 days, or nearly three times as long as the standard allowed. 4See P* 8.) From the 547 change proposals, GAO selected for further review 184 on which it appeared most likely that delays had served to increase costs. Partly because contractors' records were often incomplete or inaccurate, GAO could not determine the significance of the delays for many of the 184 changes. GAOestimated, however, that in 42 cases additional costs caused by delays in processing the engineering change proposals could total as much as $3.7 million if all planned changes were made. (See p. 10.) Delays in processing change proposals can deny the advantages of the change to the aircraft users for substantial periods of time or, in some cases, permanently because aircraft lacking the change may be 1 to 3 years away from their next overhaul (the most practical time to implement the change). Even then, the overhaul period is sometimes curtailed for reasons of urgency, leaving insufficient time to make the change. (See pp. 10 and 11.) Among the causes for delay were --ineffective monitoring by project offices of evaluations by review- ing staffs, --insufficient direction for contractors from the military services as to the kind and extent of data to be submitted, --the reliance on a single, overall time standard in lieu of time standards for each individual organization concerned in the evalua- tion, --the reviewing staffs' practices of processing change proposals sequentially rather than concurrently, --duplicate reviews of change proposals, and --lengthy processing of change proposals by groups not under the con- trol of the group managing the project. (See pp. 13 to 22.) The advantages of reducing the time for processing engineering change proposals are important enough to warrant a concentrated management ef- fort. (See p. 23.) RECOMMENDATIONS OR SUGGESTIONS GAO suggested that the Secretary of Defense designate a group in the De- partment of Defense to establish procedures for effective control of the processing of engineering change proposals and to monitor the implementa- tion of these controls by the military services. GAO also suggested specific actions that it believed would reduce processing time. (See Ps 23.) AGENCY ACTIONSANDUNRESOLVED ISSUES The Department of Defense agreed that the advantages of reducing proc- essing time for change proposals warranted increased management effort. The Department stated that each of the military services had established procedures for providing effective controls over the timeliness of the processing of change proposals, or had such procedures in a late stage of development, and that an audit of current practices for controlling engineering change proposals was under way. The Department stated also that a group would be formed, on an ad hoc basis, to review procedures, and that any deficiencies found would be corrected. (See p. 24.) GAO recommends that the Secretary of Defense monitor actions planned for improvement of the processing of change proposals, to ensure that the actions are carried out effectively and are achieving the desired objectives. (See p. 25.) GAO plans to inquire into the effectiveness of the new controls. MATTER FORCONSIDERATION BY THECONGRESS GAO is bringing this matter to the attention of the Congress because of its expressed interest in matters affecting the cost, timeliness, and effectiveness of military weapons systems. 3 CHAPTER1 INTRODUCTION The General Accounting Office has reviewed the prac- tices and procedures followed by the Departments of the Army y Navy 9 and Air Force in processing engineering change proposals for aircraft being produced for the Department of Defense (DOD). The scope of our review is presented on page 26. Generally, the military departments procure a specific type or model of aircraft over a period of several years, purchasing a portion of the total quantity each year. As experience is accumulated on aircraft in operational use, it is common practice to make changes to both completed aircraft and those in production to improve their safety, performance, reliability, or maintainability. Another rea- son for such changes is to provide the capability to perform missions not originally contemplated for the aircraft. Al- though precise information showing the total cost of making these changes was not available from the agency's records, we estimated that between $390 million and $410 million was spent by the DOD in fiscal years 1967 and 1968 to make changes in aircraft in production. This amount does not in- clude the cost of incorporating changes on aircraft already in service, The changes necessary to modify aircraft are called en- gineering changes. Under existing policy, engineering changes should not be made unless they offer significant benefit to the Government. More specifically, engineering changes are limited to those which (1) correct design defi- ciencies, (2) significantly improve operational effective- ness, (3) significantly reduce costs, or (4) prevent slip- pages in an approved production schedule. Falling within these criteria are changes which either eliminate safety hazards or improve the reliability, performance, or main- tainability of equipment. Following are examples of such changes: 4 The design of the Navy's A-6A aircraft was modified while it was in production to provide for the installa- tion of a 20 mm. gun pod on each of four wing stations on the aircraft. The change was made to improve the aircraft's attack capability, Engineering changes were to be made to various configu- rations of three Navy aircraft (A-6, F-4, and F-8) to provide a better flight-crew escape mechanism after sta- tistics revealed that the original mechanism did not work well for ejections at low speed and zero altitude. When the CR-53A cargo helicopter was first sent to Southeast Asia, it was found that the fine-grained, ex- ceptionally hard sand in the area was wearing out the teflon bearings in the helicopter engines very rapidly. To extend the life of the bearings, an engineering change was made that involved installation of devices designed to remove the particles of sand from the air taken into the engine air intake ducts. Engineering changes may originate with either the Gov- ernment or the manufacturer, Before the contractor may be- gin implementation of the change, however, the change must be evaluated, approved, and funded by the Government. Re- quests for approval of changes, which are called engineering change proposals, are prepared by the manufacturer and sub- mitted to the appropriate offices of the military services for approval. Cur review dealt with the processing of these proposals by those Government organizations having the re- sponsibility for evaluating and approving them. Because of the importance of timeliness in evaluating and processing engineering change proposals, we were primarily concerned with the effectiveness of management in achieving timely performance of this function. A list of principal officials responsible for activ- ities discussed in the report is included as appendix III. CHAPTER 2 DEPARTmNT OF DEFENSE POLICY PROVIDES FOR TIMELY PROCESSINGOF ENGINEERING CHANGEPROPOSALS To maintain control over the design of an aircraft they are purchasing, the military services require that all pro- posals for changes to aircraft under production be approved by officials of the appropriate military service before the change is made. Since the aircraft are in production, de- lays in processing the change proposals can result in some of the aircraft being produced without the changes. This is costly because it generally is more expensive to make the change after the aircraft have been completed and delivered to the operating forces. Moreover, making such changes af- ter production tends to overload the already overworked re- pair and overhaul organizations of the military services. The problem of delays in processing engineering change proposals can be particularly significant for aircraft be- cause most aircraft manufacturers produce aircraft in pro- duction "blocks." Usually, all aircraft produced in a block are identical. Changes are implemented in production on a block basis since breaking into an ongoing production block involves additional cost. Therefore, a few days' delay in processing a change proposal may result in missing an entire production block, which in turn could result in having to implement the change after production on a sizable number of aircraft, often over 100. Recognizing the importance of timely processing of en- gineering change proposals, DOD has established specific time standards and priorities to minimize the processing time for engineering change proposals. The directive issued by DOD concerning time standards for processing engineering changes provides that the chazges be categorized by priority as either "emergency ," "urgent," or "routine." The direc- tive provides further that an emergency proposal be pro- cessed within 24 hoq..rs, an urgent proposal within 15 days, and a routine proposal within 45 days, following receipt. Although these processing time standards were not issued un- til after the change proposals covered in our review had 6 been processed, the standards were essentially a codifica- tion of previously issued instructions of the individual military services. These instructions were more stringent than the time standards issued by DOD. For consistency, we have used the more lenient DOD-wide standards for comparing actual and standard processing times in this report, Our review did not include an evaluation of the reasonableness of the time standards provided in the DOD directive. CHAPTER --- .- 3 EXTENSIVE-DELAYS IN PROCESSING ENGINEERING CHANGE PROPOSALS We found that extensive delays had occurred in proc- essing engineering change proposals. We determined the processing time for all the 547 engineering change proposals approved during fiscal years 1967 and 1968 for the 11 air- craft listed below. Navy: F-4 fighter aircraft A-6 attack aircraft CH-53 heavy cargo helicopter A-7 attack aircraft CH-46 cargo helicopter Army: UH-1 utility helicopter CH-47 cargo helicopter CH-54 heavy lift helicopter Air Force: T-38 trainer A-37 attack aircraft C-141 transport aircraft These 547 engineering change proposals included 292 pro- cessed by the Naval Air Systems Command, 180 by the Army Aviation Systems Command, and 7.5 by the Air Force Aeronau- tical Systems Division. The average processing time for these 547 changes was 131 days, or 86 days in excess of the standard DOD established for routine changes. Processing time varied considerably among the three services. For example, change proposals processed at the Naval Air Systems Command averaged 158 days; at the Army Aviation Systems Command, 103 days; and at the Air Force Aeronautical Systems Division, 92 days. At these locations, we found that about 19 percent of the change proposals were processed within the 45-day time limit established by DOD for a routine change. Moreover, about 57 percent of the change proposals took 91 days or more to process. An analysis of processing time at these organizations is as follows: - Percent of engineering change proposals process&d in - 45 days 46 to -91 to 181 to Over or -- less 90 days 180 days 360 days 360 days Naval Air Systems Command 9 21 39 26 5 Army Aviation Systems Command 27 24 34 15 0 Air Force Aeronautical Systems Division 37 32 19 9 3 Overall 19 24 34 20 3 Within each service separate project offices had been established for monitoring the procurement of each individual aircraft. In more detailed comparisons of change proposal processing times, we found that there were also wide varia- tions in processing time among the aircraft project offices within a particular service. In a review of selected cases at the aircraft project offices, we found that the varia- tions in the processing time of engineering change proposals were basically attributable to varying degrees of managerial control and to the processing methods being applied. F'ur- ther comments on these controls and methods and the improve- ments we consider necessary are presented in subsequent chapters. 9 CHAPTER4 EFFECTS OF DELAYS IN PROCESSING ENGINEERING CHANGE PROPOSALS By reviewing a selected number of engineering change proposals, we estimated that processing delays could result in additional costs of as much as $3.7 million if all changes were made and found that operational units had been denied the benefits of the changes for substantial periods of time, We selected, from the 547 proposals mentioned previ- ously, 184 in which it appeared most likely that the delays might have resulted in additional costs or other adverse ef- fects. Because contractors' records were often incomplete or inaccurate, we could not determine the effect of many of the delays. In 42 cases, however, we were able to determine from the contractors' records that six or more aircraft had not received the change because of the delay, and we were able to calculate the cost of installing the change later than had been planned by the contractor. Several of these cases involved over 100 aircraft. Moreover, since the con- tractors often anticipate delays in estimating which produc- tion aircraft will receive the change, it is possible that prompt processing of these change proposals could have en- abled the contractors to make the changes to an even greater number of aircraft during production. PROCESSING DELAYS CAN RESULT IN ADDED COST In evaluating the effects of engineering change pro- posal processing delays, we calculated that additional costs of as much as $3.7 million would be incurred by the Govern- ment if all planned changes were made. This cost would be attributable to the fact that the contractors were not able to make the 42 changes as they had originally planned. A description of these change proposals, the number of air- craft missing the change during production, and the related increased cost is presented in appendix I. 10 On an individual-change basis, the estimated additional cost resulting from processing delays varied widely. We estimated that, at one extreme, an additional cost of about $250 would be incurred to install switches on seven helicop- ters as a result of engineering change proposal processing delays. At the other extreme, additional costs of about $1 million would be incurred for installing attitude indi- cators and remote-control gyroscopes in 231 helicopters that could have received the change during production if the change proposal had received timely processing. We esti- mated that additional costs would exceed $50,000 on 17 of the 42 delayed changes and would exceed $100,000 on nine of the 42. OPERATIONAL FORCES DENIED BENEFITS BECAUSEOF DELAYS IN PROCESSINGCHANGES Where changes are not made to aircraft during produc- tion, the changes may not be incorporated on "missed" air- craft for a long period of time and, in some instances, may never be made. Under these circumstances, delays in proc- essing can have a significant impact on operational use of the aircraft. DOD officials informed us that, for several reasons, aircraft leaving the contractor's plant without the change may remain without the change for substantial periods of time. In the first place, changes are normally made during the aircraft's scheduled overhaul or rework which, in the case of the Navy, is performed on the basis of cycles which vary from 12 to 37 months. The changes cannot ordinarily be made until this overhaul or rework period is reached. Secondly, we were informed by one DOD official that sometimes, for reasons of urgency, changes which were plan- ned for certain aircraft during overhaul were not made be- cause the overhaul period was too short. Many Navy opera- tional aircraft have an active service life of only 6 or 7 years; therefore a combination of processing delays and insufficient overhaul time could result in an aircraft's not having the benefit of an improvement for the greater part of its useful life. 11 Furthermore, the change may never be made. Changes made after production are funded from a different source than changes made during production. Therefore, a change that has been approved during production but not made be- cause of processing delays must compete with other changes for funds, and funds are often limited. Also, because of the extent of work required, it is not practical to make a change after production. We were informed of one delayed change proposal which required extensive rewiring of the aircraft. Although this change could have been carried out during production, it was not practical to make it after the aircraft was completed. Consequently, the operational users will never have the benefit of the change on a number of aircraft. 12 CHAPTER5 IMPROVED PROCEDURESNEEDED TO REDUCE TIME REQUIRED TO PROCESSENGINEERING CHANGE PROPOSALS Although each of the military services had standards for what was considered timely processing of engineering change proposals, none of the services had established the procedural steps necessary to effect adherence to these stan- dards. On pages 8 and 9 we cited statistics which showed that the length of time the services took to effect an engi- neering change proposal, of the 547 we reviewed, averaged three times that allowed by the DOD-wide standards adopted after our review. These standards were more lenient than those which the services had in effect at the time these changes were processed. In view of the services' failure to secure adherence to processing time standards, we inquired into the actual procedures followed by the three services, to ascertain what might be done to expedite the processing of engineering change proposals. Our review showed the following areas in which improvement appears possible. DOD-wide: Monitoring of actual performance to ensure compli- ance with time standards. Instructions for contractors on the kind of data needed for evaluation of proposals. Air Force and all but one Navy project: Breakdown of overall processing time standards into segments to guide groups in processing engineer- ing change proposals. Navy: Processing of change proposals on a sequential or concurrent basis. Duplicate reviews. Air Force: Delays because of reviews by units outside the project management group. 13 Details of each of the areas in which we believe improve- ments are needed are presented below. ACTUAL PERFORMANCENOT SUFFICIENTLY MONITORED Our review showed that with one exception the project offices did not systematically keep track of the time re- quired by each organizational level for evaluating engineer- ing change proposal processing; thus, management had insuf- ficient means of monitoring to see that actual performance was commensurate with established standards. The status and historical records on engineering change proposals gen- erally showed the change number, the title, and the dates of various events such as receipt, approval, and change order release but, except for one instance, did not show essential information needed to evaluate processing delays. The one project office (Air Force's T-38 Project Office) which had maintained adequate information records had been doing so for about 6 months prior to our review. Because the chronology of processing individual change proposals was not available in most cases, we traced and documented, to the extent possible from existing records, the chronology of processing the changes included in our re- view. In doing this, we noted one instance where the mis- routing of a change proposal was not discovered for 70 days. A proper monitoring system should have led to the discovery of the misrouting much sooner, and the resultant delay would have been appreciably reduced. Furthermore, we believe that, to determine whether goals are being met, management needs reports on actual per- formance. Although each activity we reviewed has some type of reporting, none appears to provide the type of informa- tion that we believe is needed by management to sufficiently evaluate actual performance. We found that: --the monthly reports which the Army Aviation Systems Command prepared showed the number of engineering change proposals on hand at the beginning and end of the month but did not show how many proposals ex- ceeded processing time standards. 14 --the Air Force Aeronautical Systems Division report did show the number of proposals exceeding estab- lished time limits but did not show the extent of the delays or other data which would be necessary to ad- equately appraise performance in meeting time stan- dards, --at the Naval Air Systems Command, a report on engi- neering change activity had been prepared for fiscal year 1966. After that, however, there had been no reporting by the Command. The 1966 report showed the volume in numbers and in dollar value and catego- rized the change proposals by type and priority. The report, however, did not show information con- cerning processing delays. It is our view that, to be meaningful, these reports should show the volume of engineering change proposals in numbers and dollar value; the categorization by priority and type; the percentage and number of proposals exceeding established goals; the extent of processing delays based on established standards; the points where delays occur; and, most important, the reasons for the delays. Such informa- tion would be sufficient to alert management to significant deviations from established processing time standards and to permit appropriate corrective measures. It is our opinion that the ineffective reporting proce- dure has apparently resulted in management's not being alerted to the significance and extent of processing prob- lems. Moreover, there is insufficient information for man- agement to pinpoint problem areas and take corrective ac- tion. We believe that, if a meaningful reporting system had been in existence, the chronic processing problem might not have been allowed to persist as long as it did. 1.5 CONTRACTORS --- NOT ADEQUATELYINSTRUCTED ~- THE KIND OFDATA NEEDEDFOR 0~ EJALUATJON OF PROPOSALS Prior to our review, the military services had estab- lished military standards governing the development and preparation of engineering change proposals. It was the in- tent of the services that these standards would provide for uniform documentation; ensure that complete and accurate data were included in each change proposal; and, thereby, permit a complete evaluation, normally without the need for recourse to the contractor for additional data. The standards, although providing explicit guidelines for preparation of these proposals, did not define the depth of information to be provided. In recognizing that the mag- nitude of cost and the extent of technical complexity were factors which determined the amount of information to be provided, the military services generally left to systems commands and project offices the task of expanding upon the standards to ensure that information of appropriate range and depth for evaluation was provided. We found that the weapons systems commands and the project offices, in general, had not tailored these stan- dards to the peculiarities of their equipment nor their or- ganizational approach to the processing of change proposals. The extent of direction to the contractor usually amounted to no more than a contract clause stipulating that appropri- ate military standards be adhered to in preparing and sub- mitting change proposals. The depth of the information to be provided apparently was left to the judgment of the con- tractor. Furthermore, we found little evidence that spe- cific direction had been provided to contractors on an indi- vidual basis. At every activity we visited that was responsible for approving change proposals, we found that some delays had occurred because the proposals did not contain sufficient data for prompt evaluation and decisionmaking. Lack of rec- ordkeeping on the processing of changes precluded our deter- mining the full extent of the delays in each processing step and identifying all instances where lack of data was 16 a delay-causing factor. Responsible officials assured us, however, that the lack of sufficient data was a frequently recurring problem. We found that in several instances processing of change proposals had been delayed until further testing was com- pleted. It appeared that in each instance tests had not been requested until after the proposal was submitted. DOD standards provide only that sufficient testing be performed. The extent of tests required for prompt and complete evalua- tion in these cases apparently was to be decided by the re- viewers at the time of the evaluation. In several other instances, processing of change pro- posals was delayed until the contractor furnished detailed blueprint drawings although the standards did not specifi- cally require that detailed drawings accompany the proposed change. Configuration management officials--those having responsibility for control of the aircraft design--stated that detailed drawings were not needed in most cases but might be necessary on certain types of change proposals. We found further that processing of change proposals was delayed while contractors performed additional engineer- ing effort. In one case the Air Force wanted a change in a fuel shutoff valve but had not fully defined its criteria for the valves. Consequently, after the change proposal was submitted, the contractor was required to redesign the shut- off valve and resubmit the change proposal. In another case when the Air Force submitted a change proposal, it did not notify the contractor that corrosion preventative meas-ures were required as a part of the change. As a result, addi- tional information from the contractor was required. We be- lieve that these two cases illustrate instances in which specific direction could have been provided on an individual basis, preventing delay. We believe that substantial delays in processing change proposals would be avoided if contractors were provided with sufficient direction delineating the information required for effective evaluations. Subsequent to the period covered by our review, DOD is- sued a military specification setting forth information 17 requirements for change proposals for all types of equip- ment. This specification becomes a part of the contract for such equipment. The specification, which replaced standards previously adopted for a similar purpose by each of the ser- vices, is somewhat more specific as to information require- ments. Nonetheless, it is our opinion that the specifica- tion is still not sufficiently specific to ensure submission of necessary data. This is particularly true because the specification covers all types of equipment and does not ad- dress itself to the informational needs peculiar to specific types of equipment such as aircraft. TIME LIMITS NOT BROKEN DOWNINTO SEGMENTS To encourage prompt processing of change proposals, two of the three military services not only had established overall time standards for processing change proposals but, in addition, had provided that time standards be established for each group charged with evaluating change proposals. In view of the numerous separate evaluations on change propos- als, it seems that the most effective control would be achieved when time limits are established for each group having evaluation responsibilities. Configuration manage- ment officials haveagreed that time limits on engineering change evaluations serve as a standard for determining that delays exist and act as disciplines motivating personnel to minimize inactivity and indecision. Time limits can also serve as a basis for systematic follow-up by management on engineering change proposals in process to determine reasons for delays and to expedite completion of the evaluation. Although both the Army and the Navy had requirements for establishing time limits for each processing group, we found that only the Army Aviation Systems Command project off ices and one Naval Air Systems Command project office (A-6 Project Office) had established time-limit criteria for functional groups, such as engineering, logistics, and pro- duction, that participated in the review process. The groups in the remaining Naval Air Systems Command project offices and those of the Air Force Aeronautical Systems Di- vision (the Air Force had established no time limitations for functional groups) had only the overall processing goals set by the services to guide them. 18 We believe that the lack of time limits at the review level permitted inactivity and indecision which added to the engineering change proposal processing time. That this may be the case is illustrated by a test performed by one con- figuration manager. He stated that, for a number of change proposals,he convened a meeting of evaluating personnel within 10 days after having received each of the proposals. At these meetings all aspects of the change proposals were discussed and the proposals were acted upon immediately thereafter. The proposals, which experience showed might normally have taken more than 45 days to process, were ap- proved within 20 days. In view of his experience, the configuration manager concluded that much of the delay in processing proposals was attributable to inactivity or in- decision. Other configuration managers also said they felt that much of the delay in processing proposals was due to paper shuffling, routing practices, or inactivity. We believe that processing delays could be reduced if time limits were applied and enforced at the appropriate or- ganizational level. Where such time limits are not in ef- fect, we feel that there is no pressure, sense of urgency, or obligation put on the individual evaluations. We believe also that, because the overall time limit of 45 days for a routine change proposal is unrelated to the individual proc- essing steps to which a change proposal is exposed and be- cause the time limit is applicable to such a wide scope of evaluation, the individual evaluator has no comprehension of how he fits chronologically into the framework. We be- lieve that imposing time limits on all evaluating groups would accomplish this. DOD apparently was in general agreement with this view. The Department's time standards for processing change propos- als, issued subsequent to the period covered by our review, provided that specific time limits for individual groups in- volved in processing change proposals be established. CONCURRENTPROCESSING OF CHANGEPROPOSALS WOULDREDUCE PROCESSINGTIME‘ The processing of an engineering change proposal in- volves an evaluation of the proposal by different divisions of the appropriate DOD organization, with regard to their 19 specific areas of responsibility. When each of these eval- uations is performed concurrently, the total processing time is as long as the evaluation requiring the most time. When evaluations are performed in sequential order, the total processing time is the sum of the individual evaluation times. Since there are many evaluations of a change pro- posal, it follows that evaluation of a proposal in sequen- tial order will result in longer processing time. For example, in one case a change proposal was in proc- essing for 84 days before it was approved. Fifty-nine of these days were spent in the sequential processing cycle. The longest period that any group in this cycle had the pro- posal was 17 days. We believe that concurrent processing of evaluations could have saved 42 days. In comparing total processing times of the Naval Air Systems Command, where evaluations are sequentially pro- cessed, with those of the Air Force Aeronautical Systems Di- vision and the Army Aviation Systems Command, where they are processed concurrently; we found that, on the average, it took the Navy about 66 days more than the Air Force and 55 days more than the Army to process a change proposal. The proposals were reviewed from the same aspects at all three procurement activities, and the items undergoing re- view were generally comparable. We believe that, partly be- cause of the time consumed in the sequential routing and re- view procedures, processing at the Naval Air Systems Command is more lengthy. Although processing instructions followed by the Naval Air Systems Command require that change proposals be pro- cessed expeditiously, the instructions do not explicitly re- quire that the proposals be processed concurrently. We be- lieve that the instructions should require concurrent proc- essing of change proposals, when possible, as an aid toward minimizing processing time. ELIMINATION -- OF DUPLICATE F%VIEX?S We believe also that minimal processing time can result when each individual reviewer, as a normal practice, per- forms only one evaluation of the proposed change. Duplicate 20 processing not only lengthens the total processing time but also increases the workload of the reviewer. This in turn can cause delays in processing other proposed changes. The processing systems in existence at the Air Force Aeronautical Systems Division and the Army Aviation Systems Command do not appear to contain duplicate processing. Nor- mally, each reviewing element performs an evaluation of the proposed change and prepares formal comments. The comments are then submitted to a configuration manager, and the vari- ous reviewing elements do not participate in the processing again unless technical advice is solicited in the approval process. At the Naval Air Systems Command, the normal processing procedure requires each reviewing element to evaluate the proposed change at least twice. The reviewing elements per- form evaluations of the proposal submitted by the contractor and then informally submit comments to an equipment design engineer. At the completion of his evaluation, the engineer prepares a condensed version of the proposed change and routes it to each of the reviewing elements for a second evaluation. The condensed version normally contains the same data shown in the basic change proposal. Our review indicated that duplicate processing was add- ing to delays at the Naval Air Systems Command. In an anal- ysis of 40 proposed changes, we calculated that the average total processing time was increased by 33 days due to the second evaluation. We believe that elimination of duplicate processing could substantially decrease processing time. DELAYS CAUSED BY REVIEWS BY UNITS FROM OUTSIDE PROJECT MANAGEMENTGROUP In the Air Force the responsibilities for supply manage- ment and other functions are separated from the project man- agement group that approves change proposals. All supply aspects of a proposed change are thus evaluated and acted upon by the activity responsible for supply management. Also, unlike the other services, the Air Force requires op- erational commands to participate directly in the processing of the proposal. Air Force configuration management 21 directives provide that each of the commands evaluating change proposals establish and maintain a formal evaluation board. The board meets periodically to review and act upon the proposed changes. Our review of selected change proposals at the Air Force Aeronautical Systems Division indicated that delin- quent processing by activities other than the project man- agement group was a primary cause of delay. For example, we found that delays ranging from 36 to 221 days had occurred on selected change proposals at one Air Force Aeronautical Sys- tems Division project office, primarily because of delin- quent processing at a command having responsibility for other functions. One responsible project official stated that Air Force Aeronautical Systems Division project offices had no control over the processing by other activities. A repre- sentative of one of these other activities mentioned that generally a review was not begun until word was received from the Air Force Aeronautical Systems Division that the change proposal had been found technically acceptable. This amounted to sequential processing and substantially delayed completion of the review process. 22. CHAPTER 6 GAO PROPOSALSAND AGENCY COHHENTS GAO PROPOSALS In a draft of this report, we advised DOD that delays in the processing of change proposals appeared to be the rule rather than the exception. We advised DOD further that we believed management action to reduce processing time to the minimum and secure compliance with its standards was war- ranted because the advantages of reducing processing time-- reductions in expenditures and better equipped aircraft-- seemed so significant that it was well worth concentrated management effort to attain more timely processing. In the draft report, we also suggested steps to achieve more timely processing of engineering change proposals. We suggested that the Secretary of Defense designate a group in DOD to establish procedures for effective control of the processing of engineering change proposals and to monitor the implementation of these controls by the military ser- vices. We suggested further that matters to be considered should include the establishing of: 1. Time standards for processing change proposals, bro- ken down into segments, to guide individuals and groups functioning in the evaluating cycle. 2. A system of recording enough information on the ac- tual performance of evaluating groups to provide management a means of periodically evaluating how actual performance compares to established standards. 3. Reviews by project officials to determine, for each aircraft type, specific data to be furnished by con- tractors for evaluating change proposals applicable to the aircraft. 4. Standardized procedures that will provide for con- current reviews of engineering change proposals and eliminate duplicate processing. 23 AGENCY COMMENTS The DOD responded to our draft report in a letter from the Deputy Assistant Secretary of Defense (Installations and Logistics) dated June 30, 1970, a copy of which is in- cluded as appendix II. The Deputy Assistant Secretary agreed that the advantages of reducing the processing time for engineering change proposals warranted increased man- agement effort to ensure more timely processing. He stated that the military departments had devoted considerable man- agement attention this past year to all aspects of config- uration management, especially to the processing of engi- neering change proposals, and that each of the departments had established, or had procedures in a late stage of de- velopment to establish, effective controls over the timeli- ness of processing change proposals. The Deputy Assistant Secretary stated that a formal in- ternal audit, then underway, to evaluate the configuration management programs of the departments would include an au- dit of the then-current practices for controlling engineer- ing change proposals. He stated also that, in view of these actions, DOD did not plan to form a group, such as we had suggested, to establish additional DOD-wide procedures for controlling and monitoring engineering change proposals, He indicated, however, that a group would be formed, on an ad hoc basis, to review specific procedures developed by the military departments and that action would be taken to cor- rect any deficiencies found. 24 WAFTER --7 CONCLUSION AND RECCPPlENDATION We believe that the advantages of reducing the time for processing engineering change proposals are important enough to warrant a concentrated management effort to at- tain more timely processing. The action being taken by DOD of developing and imple- menting controls over processing time seems to be respon- sive to our suggestions and, if the controls are appropri- ate and are effectively carried out, it should significantly improve the timeliness of engineering change proposal proc- essing. We plan to inquire into the effectiveness of DOD's new controls after the actions, which it has taken and plans to take, have been completed. We recommend that the Secretary of Defense monitor ac- tions planned for improvement of the processing of engineer- ing change proposals, to ensure that the actions are carried out effectively and are achieving the desired objectives, 2.5 CHAPTFX8 SCOPE OF REViEW Our review included an examination of DOD policies, procedures, and practices for processing engineering change proposals. At aircraft procurement activities of the Army, Navy, and Air Force and at associated contractor locations, we analyzed pertinent-records and interviewed officials responsible for processing engineering changes. Our review was conducted between January 1968 and September 1969 at three procurement activities and nine aircraft contractor locations. We developed engineering change proposal chronologies of events; computed processing times; compared actual proc- essing times with established standards to determine de- lays; determined extent and significance of delays; ascer- tained reasons why delays occurred; evaluated the reasons in terms of authenticity; and determined what action man- agement was taking to preclude recurrences. We also mea- sured the impact of engineering change proposal processing delays in terms of the increased implementation costs and the user benefits denied when the delays prevented the in- corporation of engineering changes on aircraft during pro- duction. 26 APPENDIXES 27 APPENDIX I DELAYED CHANGEPROPOSALS RESULJING IN ADDITIONAL COST Engineering change Aircraft Estimated increased cost Aircraft proposal missing resulting from making project number Description of engineering change proposal change change after production DB-1 275 Add engine air induction screen and install par- ticle separator 4(! $ 62,200 BB-1 288 Improved swashplate assembly 288 10,190 DB-1 278 Provide a secondary source of hydraulic power to collective and cyclic boost cylinders 51 46,333 UH-1 279 Improve serviceability and reliability of the collective and rotating control system 51 133,722 U-I-1 285~ Install AR/ARC 54 FM communication equipment in lieu of AN/ARC 44 53 69,012 UH-1 349 Add additional roof access step 670 37,493 AK-1 363 Improved taillight 85 34,467 WI-1 and Improved method for connecting the engine fuel AH-l 310 inlet hose 155 7,170 DB-land An-l 371R2 Improved hydraulic air filter system 868 131,415 AH-1 378 Improved hydraulic system lockout valves 259 74,799 AH-1 390 Relocate UHF-VHF and FM antennas 24,193 AH-1 398 Improved S&i pylon compensation network ;i 37,431 AH-1 366 Improved attitude indicator and remote control gyroscope 231 1,052,205 AH-l 380 Improved capacity main rotary inverter 84 30,660 CB-47 404 Provide added drainage for fuselage 32 7,680 C&47 495 Deletion of VCR audio-padding from the inter- phone junction box 58 1,740 CR-47 526 Improved N-2 actuator 193,209 CB-47 533 Increase torquemeter indicator damping :: 28,305 T-38 135DR Motor operated fuel shutoff valve 87 43,061 T-38 187D Phase revision elimination primary AD1 sphere system 36 6,696 T-30 199D Canopy safe warning system improvements 12 12,986 T-30 203D Aileron control system improvement 76 20,501 T-30 204D CAM flap control detent modification 34 8,697 T-38 205D Nose wheel steering circuitry bearings 20 10,231 T-38 209D Installation of rudder servo input shaft duct seal 21 1,533 A-6A 276 Installation of two point oil quantity gauging systems 20 84,392 A-6A 470 Improvement of airborne moving target radar 85 290,428 A-6A 475 Provide TACAN-IFF separation 19 51,433 A-6A 486 Installation of beacon radar 101 142,107 A-6A 495 LABS IP LAY down bombing 74 111,311 A-7B 27 Modification of wing leading and trailing edge flap controls 57 296,373 A-7A and B 29-1 Canopy handle change and wingfold addition 57 10,597 A-7B 29-6 Addition of rain removal hot caution light 196 43,057 A-7A 29-14 Provision for AWW-2A fuel function control unit 57 19,495 A-7A 22 Installation of additional armor 57 88,610 A-7A 31 APQ-116 radar change 73 70,937 A-7A and B 33 Increase range turbine inlet temperature indica- tor 104 85,134 A-7B 44 Addition of communication equipment--Juliet 28 81 275,358 CB-46 370 Installation of lock on/lock off altitude hold switch automatic trim system control panel 7 249 CR-53 6046 Incorporation of the range extension configura- tion 24 1,%X? CH-53 6062E Incorporation of remote topping 18 3,912 CH-54 8057 Installation of improved control rod assembly and strut assembly 6 264 4,556 $3,662,300 29 APPENDIX II ASSISTANT SECRETARY OF DEFENSE WASHINGTON, 0.~. 20301 30 J'UN 1970 lNSTAM.AllONS AND LOGISTIC5 AR Mr. C. M. Bailey Director, Defense Division U. S. General Accounting Office Washington, D. C. 20548 Dear Mr. Bailey: This is in response to your letter of April 29, 1970, to the Secretary of Defense which forwarded copies of your draft report, “Opportunity to Reduce Costs through Prompt Processing of Engineering Change Proposals, ” (OSD Case #3112). We agree that the advantages associated with reducing the processing time for engineering change proposals warrant increased management effort to assure more timely processing. The Military Departments have devoted considerable management attention this past year to all aspects of configuration management, especially to the processing of engineering change proposals. Each of the Departments has now established, or has procedures in a late stage of development to establish, effective controls over the time- liness of processing change proposals. A formal internal audit now under way to evaluate the configuration management programs of the Departments will specifically include audit of current practices for controlling engineering change proposals. In view of these actions it is not planned to form a group to establish additional Defense-wide procedures for control and monitoring of engineering change proposals at this time. However, a group will be formed on an ad hoc basis to review specific procedures developed by the Military Departments. Action will be taken to correct any defi- ciencies found. 5incc. rely, 30 APPENDIX III Page 1 PRINCIPAL OFFICIALS OF THE DEPARTMENTOF DEFENSEAND THE DEPARTMENTSOF THE ARMY, NAVY, AND AIR FORCE RESPONSIBLE FOR THE ADMINISTRATION OF ACTIVITIES DISCUSSED IN THIS REPORT Tenure of office From -To DEPARTMENTOF DEFENSE SECRETARYOF DEFENSE: Melvin R. Laird Jan. 1969 Present Clark M. Clifford Mar. 1968 Jan. 1969 Robert S. McNamara Jan. 1961 Feb. 1968 DIRECTOR OF DEFENSERESEARCH AND ENGINEERING: John S. Foster, Jr. Oct. 1965 Present ASSISTANT SECRETARYOF DEFENSE (INSTALLATIONS AND LOGISTICS): Barry J. Shillito Feb. 1969 Present Thomas D. Morris Sept. 1967 Jan. 1969 Paul R. Ignatius Dec. 1964 Aug. 1967 DEPARTMENTOF THE ARMY SECRETARYOF THE ARMY: Stanley R. Resor July 1965 Present ASSISTANT SECRETARYOF THE ARMY (INSTALLATIONS AND LOGISTICS): J. Ronald Fox June 1969 Present Vincent P. Huggard (acting) Mar. 1969 June 1969 Dr. Robert A. Brooks Oct. 1965 Feb. 1969 31 APPENDIX III Page 2 PRINCIPAL OFFICIALS OF THE DEPARTMENTOF DEFENSEAND THE DEPARTMENTSOF THE ARMY, NAVY, AND AIR FORCE RESPONSIBLE FOR THE ADMINISTRATION OF ACTIVITIES DISCUSSED IN THIS REPORT (continued) Tenure of office From -To DEPARTMENTOFTHENAVY SECRETARYOF THE NAVY: John H. Chafee Jan. 1969 Present Paul R. Ignatius Aug. 1967 Jan. 1969 Charles F. Baird (acting) Aug. 1967 Aug. 1967 Robert H. B. Baldwin (acting) July 1967 July 1967 Paul H. Nitze Nov. 1963 June 1967 ASSISTANT SECRETARYOF THE NAVY (INSTALLATIONS AND LOGISTICS): Frank Sanders Feb. 1969 Present Barry J. Shillito Apr. 1968 Jan. 1969 Vacant Feb. 1968 Mar. 1968 Graeme C. Bannerman Feb. 1965 Feb. 1968 DEPARTMENTOF THE AIR FORCE SECRETARYOF THE AIR FORCE: Robert C. Seamans, Jr. Feb. 1969 Present Harold Brown Oct. 1965 Jan. 1969 ASSISTANT SECRETARYOF THE AIR FORCE (INSTALLATIONS AND LOGIS- TICS): Phillip Whittaker May 1969 Present Robert H. Charles Nov. 1963 May 1969 U.S. GAO Wash., D.C. 32
Opportunity To Reduce Costs and Improve Aircraft Through Prompt Processing of Engineering Change Proposals
Published by the Government Accountability Office on 1971-01-20.
Below is a raw (and likely hideous) rendition of the original report. (PDF)