THE ANNUAL COST OF CORROSION FOR COAST GUARD AVIATION AND VESSELS

Transcription

1 THE ANNUAL COST OF CORROSION FOR COAST GUARD AVIATION AND VESSELS REPORT AKN31T3 Eric F. Herzberg Norman T. O Meara Rebecca F. Stroh MARCH 2015

2 NOTICE: THE VIEWS, OPINIONS, AND FINDINGS CON- TAINED IN THIS REPORT ARE THOSE OF LMI AND SHOULD NOT BE CONSTRUED AS AN OFFICIAL AGENCY POSITION, POLICY, OR DECISION, UNLESS SO DESIGNATED BY OTHER OFFICIAL DOCUMENTATION. LMI ALL RIGHTS RESERVED.

3 The Annual Cost of Corrosion for Coast Guard Aviation and Vessels AKN31T3/MARCH 2015 Executive Summary LMI was tasked by the Corrosion Prevention and Control Integrated Product Team (CPC IPT) to measure the effect corrosion has on the cost of all Coast Guard aviation systems and vessels. This report documents the cost effects of corrosion for using FY data as a measurement baseline. This is an update of an earlier FY2007 effort to document corrosion costs for the Coast Guard. We based our discussion and primary analysis on the most recent data (FY2013). We estimated the annual corrosion cost for Coast Guard aviation and vessels to be $344 million, which is 22.1 percent of the total Coast Guard maintenance spending on aviation assets and vessels. We used a combined top-down and bottom-up approach to arrive at this corrosion cost estimate. 1 The top-down portion used summary-level cost and budget documentation to establish spending ceilings for depot, intermediate, and organizational-level maintenance for both organic and commercial maintenance activities. This established a maximum cost of corrosion in each area of activity. The bottomup portion used detailed work order records to aggregate actual occurrences of corrosion maintenance and activity. This established a minimum level of corrosion costs in each activity area. When necessary, we used statistical methods to bridge any significant gaps between the top-down and bottom-up figures to derive a final estimate for the cost of corrosion in each area. This review is part of a multiple-year plan to measure the effect of corrosion on cost and availability for all DoD weapon systems, infrastructure, and facilities. The most recent past and future cost study areas are listed in Table ES 1. Even though the Coast Guard is not part of the Department of Defense, it faces similar corrosion issues and, therefore, was included as part of the CPC IPT costestimation plan. 1 The method we use to measure corrosion-related cost focuses on tangible direct material and labor costs. This method has been approved by the CPC IPT. iii

4 Table ES 1. Cost of Corrosion Studies Study year Data baseline Study segment Estimated cost FY Navy and Marine Corps aviation $2.9 billion FY Coast Guard aviation and vessels $0.3 billion FY Air Force $4.1 billion FY Army ground vehicles $2.0 billion FY Navy ships $2.1 billion FY2006 DoD other equipment $3.1 billion FY Marine Corps ground vehicles $0.3 billion FY DoD facilities and infrastructure $2.0 billion FY Army aviation and missiles $1.5 billion FY Air Force $5.3 billion FY Navy and Marine Corps aviation $2.5 billion FY Navy ships $3.3 billion FY Army ground vehicles $1.7 billion FY Marine Corps ground vehicles $0.3 billion FY DoD facilities and infrastructure $3.0 billion FY Army aviation and missiles $1.9 billion FY2009 DoD other equipment $3.6 billion FY Coast Guard aviation and vessels $0.3 billion FY Navy and Marine Corps aviation $3.7 billion FY Air Force $6.0 billion CORROSION COSTS The scope of our study included an inventory of 242 aircraft across 14 models of aviation equipment and 2,744 vessels across 162 classes of vessels. We used three schema groups to categorize corrosion costs associated with aviation and vessels: Group 1 Depot and intermediate maintenance (DIM) costs and organizational maintenance (OM) costs Group 2 Corrective versus preventive costs Group 3 Structure-related versus parts-related costs. In Figure ES 1, we show the study results segregated by schema. iv

5 Executive Summary Figure ES 1. Cost of Corrosion for Coast Guard Aviation and Vessels by Schema (FY2013) Aviation Type C130 Cost Percentage of total Vessel Class WMEC 270 Cost Percentage of total Aviation Type H60 Cost Percentage of total Schema Total cost (in millions) Percentage of total schema cost DIM corrosion costs DIM corrosion costs $186 54% OM corrosion costs OM corrosion costs $158 46% Corrective corrosion costs Corrective corrosion costs $106 32% Preventive corrosion costs Preventive corrosion costs $229 68% Structure corrosion costs Structure corrosion costs $100 31% Parts corrosion costs Parts corrosion costs $218 69% DIM accounted for more than half of the total corrosion cost for Coast Guard aviation and vessels ($186 million). Corrosion-related DIM costs were 25.2 percent of the total DIM costs for Coast Guard aviation and vessels ($737 million). This is significantly higher than the comparable percentage of corrosion-related OM costs, which was 19.3 percent (based on a total OM cost of $820 million). The Coast Guard spent more preventing corrosion on aviation and vessels ($229 million) than it did on correcting corrosion-related issues ($106 million). Although this was consistent for both aviation and vessel maintenance, the ratio of preventive to corrective costs was far higher for the aviation community than it was for the vessels community. CORROSION COST FOCUS AREAS When we stratified the corrosion costs of Coast Guard aviation by total cost and cost per item, we identified five aviation end items (see Table ES 2) that were the highest in both total corrosion cost and average corrosion cost per item. These end items are good candidates for further focus. The order in which they are listed in Table ES 2 suggests a priority for further examination. v

6 Table ES 2. Coast Guard Aviation Candidates for Further Examination FY2013 ($ in millions) Aviation type Description Corrosion cost per item (in millions) Per-item rank Total corrosion cost (in millions) Total cost rank Combined rank a C-130 HC-130, long-range surveillance $1.0 1 $ aircraft H-60 MH-60, medium-range recovery $1.0 2 $ helicopter H-65 HH-65, short-range recovery $0.6 4 $ helicopter C-144 HC-144, medium-range $0.9 3 $ surveillance aircraft HU-25 HU-25, medium-range surveillance aircraft $0.1 5 $ a Assumes total corrosion cost and corrosion cost per item are of equal importance. Based on a sensitivity analysis, the only change to the combined ranking is the HH-65, which increases in priority if total corrosion costs are weighted more heavily than the average corrosion cost per item. We conducted a similar analysis for Coast Guard vessels. The vessel classes listed in Table ES 3 are also candidates for further focus. Table ES 3. Coast Guard Vessels Candidates for Further Examination FY2013 Vessel class Class description Corrosion cost per item (in millions) Per-item rank Total corrosion cost (in millions) Total cost rank Combined rank a WMEC 270B Medium-endurance cutter $1.7 2 $ WHEC 378 High-endurance cutter $1.5 4 $ WMSL 418 National security cutter $2.6 1 $ WMEC 210B Medium-endurance cutter $1.3 5 $ WMEC 270A Medium-endurance cutter $1.5 3 $ WLB 225B Seagoing buoy tender $1.0 8 $ WMEC 210A Medium-endurance cutter $1.1 6 $ WLB 225A Seagoing buoy tender $1.0 7 $ WTGB 140 Icebreaking tug $0.5 9 $ WPB 110C Patrol boat $ $ WLM 175 Coastal buoy tender $ $ a Assumes total corrosion cost and corrosion cost per item are of equal importance. Based on a sensitivity analysis, the WMEC 270B stays as the highest corrosion contributor, no matter the weight of corrosion cost per item relative to total corrosion cost. vi

7 Contents Chapter 1 Background and Analysis Method STUDY OBJECTIVES COAST GUARD MAINTENANCE STRUCTURE Coast Guard Aviation Maintenance Specifics Coast Guard Vessel Maintenance Specifics COAST GUARD CORROSION ORGANIZATION AVIATION AND VESSEL EQUIPMENT LIST STUDY METHOD Summary of Cost Estimation Method Study Limitations SUSTAINMENT CORROSION COST TREE DATA STRUCTURE AND ANALYSIS CAPABILITIES HIGH-LEVEL AVIATION AND VESSEL CORROSION COST TREES REPORT STRUCTURE Chapter 2 Coast Guard Aviation Corrosion Cost COAST GUARD AVIATION DIM COST OF CORROSION (NODES A1, B1, AND A3 ) Aviation DIM Top-Down Analysis Aviation DIM Bottom-Up Analysis COAST GUARD AVIATION OM COST OF CORROSION (NODES C1 AND D1 ) Aviation OM Top-Down Analysis Aviation OM Bottom-Up Analysis FINAL COAST GUARD AVIATION CORROSION COST (NODES A THROUGH D ) Chapter 3 Coast Guard Vessel Corrosion Cost COAST GUARD VESSEL DIM COST OF CORROSION (NODES A2, B2, AND A4 ) Vessels DIM Top-Down Analysis Vessel DIM Bottom-Up Analysis COAST GUARD VESSEL OM COST OF CORROSION (NODES C2 AND D2 ) Vessel OM Top-Down Analysis Vessel Bottom-Up Analysis vii

8 FINAL COAST GUARD VESSEL CORROSION COST TREES (NODES A THROUGH D ) Chapter 4 Summary and Analysis of Coast Guard Aviation and Vessel Corrosion Costs CORROSION COSTS BY NODE Aviation Corrosion Costs by Node Vessel Corrosion Costs by Node CORROSION COSTS BY TYPE AND CLASS Aviation Corrosion Costs by Type and Class Vessel Corrosion Costs by Type and Class CORROSION COSTS BY WBS Aviation Work Breakdown Structure Expanded Ships Work Breakdown Structure CORROSION COSTS CORRECTIVE VERSUS PREVENTIVE COSTS CORROSION COSTS PARTS VERSUS STRUCTURE Appendix A Coast Guard Aviation Equipment Appendix B Coast Guard Vessels Appendix C Corrosion Cost Data Sources by Node Appendix D Key Corrosion Words Appendix E Coast Guard Maintenance-Related Object Class Codes Appendix F Coast Guard Vessel Corrosion Cost by Class Appendix G Aviation Work Breakdown Structure Coding Appendix H Abbreviations Figures Figure 1-1. Coast Guard Command Structure Figure 1-2. Coast Guard Maintenance Structure Figure 1-3. Coast Guard Corrosion Prevention and Control Organization Figure 1-4. Coast Guard Aviation Corrosion Inspection Mapping Figure 1-5. Preventive and Corrective Corrosion Cost Curves Figure 1-6. Sustainment Corrosion Cost Tree Figure 1-7. Corrosion Cost Data Structure viii

9 Contents Figure 1-8. Coast Guard Aviation and Vessel Corrosion Cost Tree (FY2013) Figure 2-1. Coast Guard Aviation DIM Cost Tree FY2013 ($ in millions) Figure 2-2. Coast Guard Aviation Labor and Materials Cost Tree FY2013 ($ in millions) Figure 2-3. Coast Guard Aviation Military and Civilian Pay and Allowances Cost Tree FY2013 ($ in millions) Figure 2-4. Coast Guard Aviation Labor and Materials Cost Tree FY2013 ($ in millions) Figure 2-5. Example of a Corrosion Keyword Search from Coast Guard Aviation Databases Figure 2-6. Coast Guard Aviation Military and Civilian Pay and Allowances Cost Tree FY2013 ($ in millions) Figure 2-7. Coast Guard OM Aviation Cost Tree FY2013 ($ in millions) Figure 2-8. Coast Guard Aviation Operating Funds and Unit-Level Maintenance Cost Tree FY2013 ($ in millions) Figure 2-9. Coast Guard Aviation Operational Labor Cost Tree FY2013 ($ in millions) Figure Completed Coast Guard Aviation DIM and OM Cost Tree FY Figure Final Coast Guard Aviation Corrosion Cost Tree FY Figure 3-1. Coast Guard Vessel DIM Cost Tree FY2013 ($ in millions) Figure 3-2. Coast Guard Vessel Labor and Materials Cost Tree FY2013 ($ in millions) Figure 3-3. Coast Guard Vessel Military and Civilian Pay and Allowances Cost Tree FY2013 ($ in millions) Figure 3-4. Coast Guard Vessel Labor and Materials Cost Tree FY2013 ($ in millions) Figure 3-5. Example of a Corrosion Keyword Search from FLS Database Figure 3-6. Coast Guard Vessel DIM Materials Costs Linked to DIM Maintenance Tasks Figure 3-7. Coast Guard Military and Civilian Pay and Allowances Cost Tree FY2013 ($ in millions) Figure 3-8. Coast Guard OM Vessel Cost Tree FY2013 ($ in millions) Figure 3-9. Coast Guard OM Vessel Labor Cost Tree FY2013 ($ in millions) Figure Matching Materials Purchases to Corresponding Labor Records Using OPFAC and Action ID Data Fields ix

10 Figure Completed Coast Guard Vessel DIM and OM Cost Tree FY2013 ($ in millions) Figure Final Coast Guard Vessel Corrosion Cost Tree FY Figure 4-1. Coast Guard HH-65 Short-Range Recovery Helicopter Figure 4-2. Coast Guard Vessel Class WMEC 270B Medium Endurance Cutter Tables Table 1-1. DoD Cost-of-Corrosion Studies to Date and Future Efforts Table 1-2. Characterization of Coast Guard Aviation Included in Cost-of-Corrosion Study Table 1-3. Characterization of Coast Guard Vessels Included in Cost-of-Corrosion Study Table 1-4. Coast Guard Corrosion Cost Nodes Table 2-1. FY2013 Coast Guard Aviation Corrosion Cost for DIM and OM Table 2-2. FY2013 Coast Guard Aviation DIM Corrosion Cost Table 2-3. Coast Guard Classification of DIM Spending by AFC FY Table 2-4. Estimation of Aviation DIM Materials Cost Table 2-5. Segregation of Coast Guard Personnel Into Maintenance and Non-Maintenance Cost Categories FY Table 2-6. Segregation of Coast Guard Personnel into Aviation, Vessel, and Non-Aviation/Non-Vessel Cost Categories (Node A3 ) FY Table 2-7. Coast Guard Organizations and Personnel Who Perform Table 2-8. Illustration of Allocation of Materials Costs to Labor Records Table 2-9. FY2013 Coast Guard Aviation OM Corrosion Cost Table Top-Down to Bottom-Up Gap in OM Labor Cost from Previous Cost-of-Corrosion Studies Table 3-1. FY2013 Coast Guard Vessel Corrosion Costs for DIM and OM Table 3-2. FY2013 Coast Guard Vessel DIM Corrosion Cost Table 3-3. Coast Guard Classification of DIM Spending by AFC FY Table 3-4. Estimation of Vessels DIM Materials Cost Table 3-5. Segregation of Coast Guard Personnel into Aviation, Vessels, and Non-Aviation/Non-Vessel Cost Categories (Node A4 ) FY Table 3-6. Coast Guard Organizations and Personnel Who Perform DIM Vessel Maintenance x

11 Contents Table 3-7. Coast Guard Vessel OM Corrosion Cost FY Table 4-1. Coast Guard Aviation Corrosion Cost by Node and Sub-Node FY Table 4-2. Coast Guard Vessel Corrosion Cost by Node and Sub-Node FY Table 4-3. Coast Guard Vessel Maintenance and Corrosion Cost Comparison for Labor and Materials FY Table 4-4. Coast Guard Aviation Equipment Ranked by Highest Contribution to Total Corrosion Cost FY Table 4-5. Top Contributors to Coast Guard Aviation DIM and OM Average Corrosion Cost per Item FY Table 4-6. Coast Guard Aviation Equipment with the Highest Combined Ranks of Average Corrosion Cost per Item and Total Corrosion Cost FY Table 4-7. Top 20 Contributors to Coast Guard Vessel Total Corrosion Cost FY Table 4-8. Highest 20 Contributors to Coast Guard Vessel DIM and OM Average Corrosion Cost per Item FY Table 4-9. Coast Guard Vessels with the Highest Combined Ranks of Average Corrosion Cost per Item and Total Corrosion Cost FY Table AWBS Maintenance Activity Codes Table AWBS System Codes Table Example of AWBS Subsystem Codes and Descriptions in System 31 Fire Control System and Target Acquisition Table Top 10 Coast Guard Aviation DIM and OM Corrosion Cost Ranking by AWBS System FY Table Top 10 Coast Guard Vessel DIM and OM Corrosion Cost Ranking by ESWBS FY Table Aviation DIM and OM Corrective and Preventive Corrosion Cost FY Table Top 10 Aviation Preventive Corrosion Costs by Type of Maintenance Action FY Table Coast Guard Vessel DIM and OM Corrective and Preventive Corrosion Cost FY Table Coast Guard Aviation DIM and OM Corrosion Cost by Parts Versus Structure FY Table Coast Guard Vessel DIM and OM Corrosion Cost by Parts Versus Structure FY xi

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13 Chapter 1 Background and Analysis Method In December 2002, Congress, concerned with the high cost of corrosion, enacted legislation that endowed the Under Secretary of Defense for Acquisition, Technology and Logistics (USD[AT&L]) with the overall responsibility for preventing and mitigating the effects of corrosion on military equipment and infrastructure. 1,2 To carry out the responsibilities for corrosion prevention and mitigation, fulfill congressional requirements, and respond to Government Accountability Office (GAO) recommendations, the USD(AT&L) established the Corrosion Prevention and Control Integrated Product Team (CPC IPT), a cross-functional team of personnel from the military services and private industry. In response to a GAO recommendation to develop standardized methodologies for collecting and analyzing corrosion cost, readiness, and safety data, 3 the CPC IPT created standard methods to measure the effect of corrosion on both the cost and availability for DoD s military equipment and infrastructure. 4,5 In April 2006, the CPC IPT published the results of its first corrosion cost study using the standard corrosion cost estimation method. Table 1-1 present the results of that first study, other past studies, and the timeline for future corrosion studies. More recently ( ), LMI was tasked by the CPC IPT with estimating the effect of corrosion on cost and availability for Air Force, Navy, and Marine Corps aviation assets as well as the corrosion-related cost for Coast Guard aviation and vessels. Although the Coast Guard is not part of the DoD, it faces similar corrosion issues and, therefore, is included as part of the CPC IPT plan. We published the corrosion impact results for the Air Force and Navy and Marine Corps aviation assets in separate reports. The Coast Guard aviation and vessel portion of the corrosion cost study are presented in this report. We used data from FY2009 through FY2013 as a baseline for this study. 1 The Bob Stump National Defense Authorization Act for Fiscal Year 2003, Public Law , 2 December 2002, p Public Law was enhanced by Public Law , The National Defense Authorization Act for Fiscal Year 2008, Section 371, 28 January GAO, Opportunities to Reduce Corrosion Costs and Increase Readiness, GAO , July 2003, p DoD CPC IPT, Proposed Method and Structure for Determining the Cost of Corrosion for the Department of Defense, August DoD CPC IPT, The Impact of Corrosion on the Availability of DoD Weapon Systems and Infrastructure, October

14 Table 1-1. DoD Cost-of-Corrosion Studies to Date and Future Efforts Study year a Data baseline Study segment Annual cost of corrosion FY2004 Army ground vehicles $0.8 million FY2004 Navy ships $3.1 billion FY2005 DoD facilities and infrastructure $1.4 billion FY2005 Army aviation and missiles $1.6 billion FY2005 Marine Corps ground vehicles $0.4 billion FY Navy and Marine Corps aviation $2.9 billion FY Coast Guard aviation and vessels $0.3 billion FY Air Force $4.1 billion FY Army ground vehicles $2.0 billion FY Navy ships $2.1 billion FY2006 DoD other equipment $3.1 billion FY Marine Corps ground vehicles $0.3 billion FY DoD facilities and infrastructure $2.0 billion FY Army aviation and missiles $1.5 billion FY Air Force $5.3 billion FY Navy and Marine Corps aviation $2.5 billion FY Navy ships $3.3 billion FY Army ground vehicles $1.7 billion FY Marine Corps ground vehicles $0.3 billion FY DoD facilities and infrastructure $3.0 billion FY Army aviation and missiles $1.9 billion FY2009 DoD other equipment $3.6 billion FY Coast Guard aviation and vessels $0.3 billion FY Navy and Marine Corps aviation $3.7 billion FY Air Force $6.0 billion a Study period is 1 calendar year. We estimate the current annual cost of corrosion for DoD is $23.5 billion, which represents 20.3 percent of total maintenance expenditures. We derived this total cost figure by aggregating the most recent cost of each study segment (but excluding the totals from the Coast Guard aviation and vessels study). 6 Future cost and availability corrosion studies will continue to update these results to help the services and the Coast Guard identify trends over time. 6 We disregarded the Coast Guard aviation and vessels total of $0.3 billion because the Coast Guard is part of the Department of Homeland Security. 1-2

15 Background and Analysis Method STUDY OBJECTIVES We had two specific objectives for this study: 1. Estimate the most recent annual corrosion-related sustainment costs for Coast Guard aviation and vessel assets. 2. Identify corrosion cost reduction opportunities for Coast Guard aviation and vessel assets. COAST GUARD MAINTENANCE STRUCTURE Coast Guard operations are configured into two commands: the Atlantic Area Command (LANTAREA) and the Pacific Area Command (PACAREA). As we show in Figure 1-1, the two commands are organized into nine Coast Guard districts and then into smaller operating units, either air stations or sectors. Figure 1-1. Coast Guard Command Structure Commandant, USCG Atlantic Area Commander (LANTAREA) Pacific Area Commander (PACAREA) Boston, MA Alameda, CA Cleveland, OH Miami, FL District Aviation air station Vessel sector/station Cutters (65 to 175 in length) Honolulu, HI Juneau, AK Cutters (greater than 175 in length) New Orleans, LA Seattle, WA Portsmouth, VA 1-3

16 For aviation assets, 24 air stations are assigned to 1 of 9 districts. For vessels, there are 35 sectors and 170 stations. 7 In addition, vessels from 65 feet to 175 feet in length are considered separate operating units and are assigned to the one of the nine districts. Vessels greater than 175 feet in length are assigned directly to either LANTAREA or PACAREA. The Office of Aeronautical Engineering and the Office of Naval Engineering in the Engineering and Logistics Directorate (ELD) of Coast Guard Headquarters provides top-level policy, resource management, and oversight of Coast Guard aircraft and vessel maintenance. We show the Coast Guard maintenance structure and the organizations that perform each level of maintenance in Figure 1-2. Organizations that are responsible for maintenance are highlighted in blue. Figure 1-2. Coast Guard Maintenance Structure COMMANDANT VICE COMMANDANT RESOURCES INTELLIGENCE AND CRIMINAL INVESTIGATIONS Atlantic Area Commander DEPUTY COMMANDANT FOR OPERATIONS DEPUTY COMMANDANT FOR MISSION SUPPORT Pacific Area Commander DEPLOYABLE OPERATIONS GROUP District Mission Execution Units MARINE SAFETY, SECURITY AND STEWARDSHIP CAPABILITY HUMAN RESOURCES COMMAND, CONTROL, COMMUNICATIONS AND INFORMATION TECHNOLOGY Districts Mission Execution Units FORCE READINESS COMMAND OPERATIONAL LOGISTICS DIRECTOR Engineering and Logistics Directorate ACQUISITIONS AND HEAD CONTRACTING AUTHORITY Air Logistics Center Surface Forces Logistics Center Shore Infrastructure Logistics Center From a funding standpoint, the Coast Guard combines depot and intermediate maintenance (DIM) activities. It sources and collects data on these two levels of maintenance as though they were integrated activities. DIM is performed by the ELD activities (the Air Logistics Center [ALC] and the Surface Forces Logistics Center [SFLC]) as well as the maintenance and logistics commands assigned to LANTAREA and PACAREA districts and mission execution units. Commercial companies also perform Coast Guard DIM. 7 Wikipedia, last viewed on 22 September

17 Background and Analysis Method Coast Guard Aviation Maintenance Specifics Aircraft logistics support is highly centralized at the ALC in Elizabeth City, North Carolina. As the manager of Coast Guard aircraft maintenance, the ALC funds aircraft DIM, provides engineering support, and performs most aircraft depot maintenance. Operational maintenance, or OM (such as inspections and minor repairs, shop maintenance that requires portable and bench-mounted tools, and component repair not overhaul), is performed primarily by station crews at the 24 air stations and their subsidiary units. Major components and repair parts are provided to these operating units without charge to their operating funds. Coast Guard Vessel Maintenance Specifics From a maintenance standpoint, all Coast Guard vessels are categorized as either cutters or boats. Cutters are vessels 65 feet or greater in length; boats are smaller than 65 feet. For cutters, SFLC provides vessel maintenance management oversight and centrally manages most funds for DIM. OM of boats is funded from district or unit operating accounts. Commercial providers perform the majority of depot maintenance tasks, although the Coast Guard Yard in Curtis Bay, Maryland, performs a significant amount of depot maintenance, as well. DIM is also performed at industrial centers in the integrated support commands that are field activities of SFLC. The Engineering Logistics Center (ELC) Curtis Bay, Maryland, provides lifecycle engineering and logistics support to Coast Guard vessels, associated electronics systems, and weapons systems. It also manages some depot maintenance funds. COAST GUARD CORROSION ORGANIZATION No single executive at Coast Guard Headquarters is dedicated to addressing corrosion-related issues, and the management of corrosion issues is different for aircraft and vessels. We depict the Coast Guard corrosion organization in Figure

18 Figure 1-3. Coast Guard Corrosion Prevention and Control Organization Commandant, USCG Engineering and Logistics Directorate Office of Aeronautical Engineering Environmental and Naval Engineering Program Divisions ALC Corrosion Control Program Manager In the case of aircraft, corrosion has long been recognized as a major maintenance issue, and a program manager overseas the strong corrosion control program at ALC in Elizabeth City. For example, when a comprehensive corrosion inspection is conducted, corrosion problems on the airframe are graphically mapped as the aircraft is inducted for depot overhaul. We show an example of this in Figure 1-4. Figure 1-4. Coast Guard Aviation Corrosion Inspection Mapping Items (A) through (K) denote corrosion discrepancies found There is no centralized corrosion control program or organization for vessels. Resolution of general corrosion issues at the headquarters level is an additional duty for the environmental and naval engineering divisions. Specific corrosion problems on vessels are addressed by program managers or engineers at SFLC. 1-6

19 Background and Analysis Method AVIATION AND VESSEL EQUIPMENT LIST The scope of this study included all Coast Guard aviation end items and vessels. The source of the aviation equipment list was the equipment table of the Aviation Computerized Maintenance System (ACMS), the Coast Guard s primary database for recording aviation maintenance. The source of the vessel list was the platform table of the Fleet Logistics System (FLS), the Coast Guard s primary database for recording DIM for vessels. For Coast Guard aviation assets, we provide data and analysis at the type/model/series (TMS) level of detail. We included in the study 14 models of aviation equipment and an inventory of 242 aircraft. Table 1-2 presents a characterization of a Coast Guard aviation asset. We provide a complete listing of all Coast Guard aviation equipment included in this study in Appendix A. Table 1-2. Characterization of Coast Guard Aviation Included in Cost-of-Corrosion Study Type/model/series Description Total number of aircraft HC-130H Long range surveillance aircraft 27 For Coast Guard vessels, we provide data and analysis at the class level. We included in this study 162 classes and 2,744 total vessels. Table 1-3 presents a characterization of a Coast Guard vessel. We provide a complete listing of all Coast Guard vessels included in this study in Appendix B. Table 1-3. Characterization of Coast Guard Vessels Included in Cost-of-Corrosion Study Class Description Total number of vessels WLB 225B 225 Foot Buoy Tender 11 STUDY METHOD The study methods we applied to Coast Guard aviation and vessels assets were the same as those described in the original cost-of-corrosion reports. For the sake of brevity, we only provide a brief description of those methods here. Readers who want more information on the cost of corrosion study methodology may refer the original report. 8 8 LMI, The Annual Cost of Corrosion for Coast Guard Aviation and Vessels, Report MEC70T2, Eric F. Herzberg et al., May

20 To ensure consistency, we used the definition of corrosion that Congress developed: The deterioration of a material or its properties due to a reaction of that material with its chemical environment. 9 We have applied this definition of corrosion to each study. Following our estimation method, we segregated maintenance activities by their source and nature, using the following three schemas: 1. Level of maintenance a. Costs incurred at both depot and intermediate levels of maintenance. At the depot level, maintenance involves the major overhaul or a complete rebuilding of parts, assemblies, subassemblies, and end items, including the manufacture of parts, modifications, testing, and reclamations. 10 At the intermediate level, maintenance is the responsibility of (and performed by) designated maintenance activities for direct support of using organizations. Intermediate-level maintenance normally involves three phases a) calibration, repair, or replacement of damaged or unserviceable parts, components, or assemblies; b) the emergency manufacture of non-available parts; and c) technical assistance provided to using organizations. 11 b. Costs incurred because of materiel maintenance at the operational or unit level. Operational maintenance in the Coast Guard is equivalent to organizational maintenance within the DoD, which defines organizational maintenance as The responsibility of and performed by a using organization on its assigned equipment. Its phases normally consist of inspecting, servicing, lubricating, and adjusting, as well as the replacing of parts, minor assemblies, and subassemblies Op. cit., Public Law , p Joint Publication 1-02, Department of Defense Dictionary of Military and Associated Terms, 12 April 2001 (as amended through 9 November 2006). 11 Ibid, JP Ibid, JP

21 Background and Analysis Method 2. Nature of work classified as either preventive or corrective maintenance a. Corrective maintenance costs are incurred while addressing an existing corrosion problem. 13 b. Preventive maintenance costs are incurred while addressing a potential future corrosion issue. 3. System of the end item being worked on classified as either a structure or a part a. Structure-related costs are direct corrosion costs incurred by the body frame of a system or end item. b. Parts-related costs are direct corrosion costs incurred by a removable part of a system or end item. Summary of Cost Estimation Method The method we used to estimate costs focused on tangible direct material and labor costs. To estimate the cost of corrosion, we used a combined top-down and bottom-up approach. For the top-down portion, we used summary-level cost and budget documents to establish spending ceilings for DIM and OM for both organic and commercial maintenance activities. This established a maximum cost of corrosion in each maintenance area. For the bottom-up portion, we used detailed work order records to aggregate actual occurrences of corrosion maintenance and activity. This established a minimum level of corrosion costs in each activity area. Where necessary, we used statistical methods to bridge any significant gaps between the top-down and bottom-up figures and to derive a final estimate for the cost of corrosion in each area of maintenance. From a management standpoint, we determined the ratio between corrective costs and preventive costs. Over time, it is usually more expensive to fix a problem than it is to prevent the problem. But it is also possible to overspend on preventive measures. As shown in Figure 1-5, classifying the cost elements into categories helps decision makers find the proper balance between preventive and corrective expenses to minimize the overall cost of corrosion. To identify the value of classifying costs into preventive and corrective categories, we established the ratio between these costs and determined if an optimum ratio between the two categories would result in the lowest total cost. 13 According to International Organization for Standardization 9000:2000, preventive costs involve steps taken to remove the causes of potential nonconformities or defects. Preventive actions address future problems. Corrective costs are incurred when removing an existing nonconformity or defect. Corrective actions address actual problems. 1-9

22 Figure 1-5. Preventive and Corrective Corrosion Cost Curves Cost of corrosion Total cost of corrosion curve Minimum overall cost of corrosion Preventive cost curve Corrective cost curve High Study Limitations Ratio of preventive to corrective cost Low DATA CODING DATA GAPS Although a useful and comprehensive estimating technique, the combined topdown and bottom-up approach has several limitations, as we summarize in the following subsections. The technique relies partially on a subjective interpretation of malfunction and maintenance action codes within the data records to assign corrosion as a cause of the maintenance action. If the codes are entered incorrectly or do not capture the true cause of the action, the methodology cannot completely compensate. Text searches of the corrective-action descriptions can correct some inaccurate coding, but not all. Although we made every effort to accumulate as many bottom-up records as possible, gaps between the top-down reporting and bottom-up totals still exist. Scaling the bottom-up totals to account for the gap between top-down and bottom-up totals assumes the gap is represented by the bottom-up data. In other words, the gap is randomly represented by existing data. 1-10

23 Background and Analysis Method DEFERRED MAINTENANCE Identified, but unresolved maintenance issues that cannot be corrected because of a lack of funding, scheduling conflicts, or operational requirements, are known as deferred maintenance. Although the reporting of deferred maintenance per Federal Accounting Standards Advisory Board guidance is an annual requirement and could include potential future Coast Guard aircraft and vessel equipment corrosion costs, we elected to exclude deferred maintenance from the study. From an accounting standpoint, deferred maintenance is not a current-year cost, but a potential future expense. The maintenance identified as deferred may never be performed. SUSTAINMENT CORROSION COST TREE We developed a sustainment corrosion cost tree to depict the details of our cost measurement approach. Figure 1-6 is an example of the cost tree; we discuss the actual cost figures in detail in the next two chapters of this report. Figure 1-6. Sustainment Corrosion Cost Tree $v million Coast Guard operating expenses $a million Coast Guard aviation maintenance $s million Coast Guard non-maintenance $x million Coast Guard vessel maintenance $b million Aviation DIM $a b million Aviation OM $y million Vessel DIM $x y million Vessel OM Laborrelated cost of corrosion Materials and services related cost of corrosion Laborrelated cost of corrosion Materials and services related cost of corrosion A B C D Laborrelated cost of corrosion Materials and services related cost of corrosion Laborrelated cost of corrosion Materials and services related cost of corrosion A B C D From Figure 1-6, we see the relationship between the main cost categories. We started with all Coast Guard operating expenses and separated costs into aviation and vessels expenditures. We further separated the sustainment costs into the two levels of maintenance: DIM and OM. We then identified cost groupings within the cost categories and labeled them as cost nodes. For example, node A represents the DIM labor cost of corrosion; node D refers to the OM materials and services related cost of corrosion. We determined the total maintenance-related sustainment cost of corrosion for Coast Guard aviation and vessels by combining the costs found at all nodes in all segments of the DIM and OM cost tree in Figure

24 DATA STRUCTURE AND ANALYSIS CAPABILITIES To accommodate the anticipated variety of decision makers and data users, we designed a corrosion cost data structure that maximizes analysis flexibility. Figure 1-7 illustrates the data structure and different methods of analysis. Figure 1-7. Corrosion Cost Data Structure Vessel Type xxx (Age z years) Cost Percentage of total Engine Type 100 (Age 5 years) Cost Percentage of total Aircraft Type 001 (Age 12 years) Cost Percentage of total Labor Materials WBS DIM corrosion costs OM corrosion costs Corrective corrosion costs Preventive corrosion costs Structure corrosion costs Parts corrosion costs Using this data structure, we were able to analyze all available data against the following: Equipment type Age of equipment type Corrective versus preventive costs DIM or OM costs Structure versus parts costs 1-12

25 Background and Analysis Method Material costs Labor costs Work breakdown structure (WBS). 14 HIGH-LEVEL AVIATION AND VESSEL CORROSION COST TREES We developed the cost tree illustrated in Figure 1-8 to help visually identify the cost of corrosion for Coast Guard aviation and vessels. Figure 1-8. Coast Guard Aviation and Vessel Corrosion Cost Tree (FY2013) $10.3 billion Coast Guard spending $7.7 billion Non-maintenance spending $1.0 billion Non-aviation and non-vessel Maintenance spending $0.7 billion Coast Guard aviation and vessel DIM $0.9 billion Coast Guard aviation and vessel OM Labor-related cost of corrosion A Materials and services related cost of corrosion B Labor-related cost of corrosion C Materials and services related cost of corrosion D $139 million $47 million $119 million $39 million $344 million in annual Coast Guard aviation and vessels corrosion cost At the top of the cost tree is $10.3 billion, which is the entire Coast Guard spending for FY By eliminating non-maintenance costs and maintenance costs for non-aviation and non-vessel equipment, we were left with the maintenance costs for aviation and vessels. We further segregated the cost tree into the two maintenance levels: DIM and OM costs. 14 The WBS determines the weapon subsystem on which work is being performed. For vessels, we use the Expanded Ships Work Breakdown Structure (ESWBS) coding for surface ships established in the CMPLus Classifications and Naming Conventions Reference Guide, Coast Guard Office of Logistics Systems, Version 3.0, January For aviation, we use the Component End Item (CEI) convention established in the Coast Guard s Aviation Computerized Maintenance System (ACMS) as a basis, but converted to the LMI aviation work breakdown structure or AWBS a standardized work breakdown structure for all aircraft used by all services within the DoD. 15 Financial information received from Coast Guard Office of Budget Execution (CG-83). 1-13

26 Cost nodes A D depict the main segments of corrosion cost. Using separate cost trees for DIM and OM, we determined the overall corrosion costs by combining the costs at each node. Table 1-4 describes the information provided at each sub-node. We provide the documentation of data sources for the cost figures in each node in Appendix C. Table 1-4. Coast Guard Corrosion Cost Nodes Node Description DIM nodes A1 DIM labor aviation (AFC-41) A2 DIM labor vessels (AFC-45) A3 DIM labor aviation (AFC-01 and -08) A4 DIM labor vessels (AFC-01 and -08) B1 DIM materials and services aviation (AFC-41) B2 DIM materials and services vessels (AFC-45) OM nodes C1 OM labor aviation C2 OM labor vessels D1 OM materials and services aviation D2 OM materials and services vessels REPORT STRUCTURE Chapter 2 explicitly details the corrosion-related costs for Coast Guard aviation equipment, and Chapter 3 details the corrosion-related costs for Coast Guard vessels. Chapter 4 presents our analysis of those costs, and opportunities for focus to mitigate these costs. The appendixes provide supporting data and analysis. Although this study included data from FY2009 through FY2013, we present cost information throughout Chapters 2 and 4 using FY2013 data only to illustrate how we determined the cost for each equipment grouping. This is also the most recent data, and therefore, most relevant. We present the data from previous years in the analysis section of Chapter

27 Chapter 2 Coast Guard Aviation Corrosion Cost Corrosion accounts for 22.2 percent of the total Coast Guard aviation maintenance cost, which was $761 million in FY2013. We show the costs of the two maintenance levels (depot and intermediate levels of maintenance and operational maintenance) in Table 2-1. Table 2-1. FY2013 Coast Guard Aviation Corrosion Cost for DIM and OM Cost segment Maintenance cost (in millions) Corrosion cost (in millions) Corrosion costs as a percentage of maintenance costs DIM $394 $ % OM $367 $ % Total $761 $ % At $115 million, OM represents the largest corrosion cost for aviation. DIM corrosion costs as a percentage of maintenance costs are less than half the corresponding corrosion percentage for OM. Corrosion cost as a percentage of DIM is 13.7 percent compared to 31.3 percent for OM. We discuss this and other observations in more detail in the next chapter. We present an in-depth discussion of how we determined the cost of corrosion for each cost node in the following sections. We start with the DIM cost of corrosion. COAST GUARD AVIATION DIM COST OF CORROSION (NODES A1, B1, AND A3 ) Coast Guard aviation DIM corrosion costs are surprisingly low as a percentage of maintenance for both labor and materials. We identified a total aviation DIM corrosion cost of $54 million. This represents 13.7 percent of total Coast Guard aviation DIM costs of $394 million. We show the two segments of DIM cost in Table

28 Table 2-2. FY2013 Coast Guard Aviation DIM Corrosion Cost Cost segment Maintenance cost (in millions) Corrosion cost (in millions) Corrosion costs as a percentage of maintenance costs DIM labor $191 $ % DIM materials $203 $ % Total $394 $ % Aviation DIM Top-Down Analysis We started to examine DIM costs by presenting the detailed DIM corrosion tree in Figure 2-1. In this cost tree, we started with the total for Coast Guard spending ($10.3 billion) and conducted our top-down analysis until we reached the level of the tree just above the corrosion cost nodes ( A1, B1, and A3 in Figure 2-1). From that point, we examined the bottom-up data to extract the corrosion costs at each node. Figure 2-1. Coast Guard Aviation DIM Cost Tree FY2013 ($ in millions) $10,308 Total Coast Guard Spending $M (FY2013) $1,465 Acquisition, Construction, Improvements and Bridges $131 Reserve Training $12 Environmental $202 Health Fund $6,809 Operating Expenses $20 Research, Development, Test and Evaluation $1,669 Mandatory (Retired Pay, Boating Safety, Oil Spill Liability) $1,003 Depot and Intermediate Level Maintenance $4,295 Military and Civilian Pay and Allowances (AFC-01 and AFC-08) $1,185 Operating Funds and Unit Level Maintenance (AFC-30) $326 Other non-maintenance OE Funding $3,006 Non-maintenance $1,289 Maintenance $901 $284 Non-maintenance Maintenance $330 Aviation (AFC-41) $377 Non-aviation and non-vessels $296 Vessels (AFC-45) $365 Aviation labor $534 Non-aviation and non-vessels labor $390 Vessels labor $66 Aviation materials $108 Non-aviation and non-vessels materials $110 Vessels materials $127 Labor $203 Materials $251 Labor $45 Materials $64 $301 Depot/ Operational intermediate $47 $343 Depot/ Operational intermediate Note: FY2013 figures include overseas contingency operations (OCO) and Hurricane SANDY supplemental funds, as well as funding-related effects from FY2013 sequestration. 2-2

29 Coast Guard Aviation Corrosion Cost We started our analysis with a top-down cost of $ billion for total Coast Guard expenditures. The source of this cost, 1 the Coast Guard Office of Budget Execution, details the separation of the total Coast Guard cost into seven appropriation categories. This is the second level of the cost tree in Figure 2-1. We analyzed the Operating Expenses appropriation, because it is where we find DIM costs and eventually DIM-related corrosion costs. The total operating expenses in FY2013 were $6.809 billion. We further segregated the aviation operating expenses into five subcategories based on the Coast Guard s Allotment Fund Control (AFC) convention. Coast Guard aviation DIM costs are found in AFC-41 (aeronautical engineering), AFC-01 (military pay), and AFC-08 (civilian pay). AFC-41 is contained within the DIM branch on the left side of our cost tree in Figure 2-1. AFC-01 and AFC-08 fall within the military and civilian pay and allowances branch in the middle of the tree. Both of these branches are reflected in the third level of the tree in Figure 2-1. TOP-DOWN ANALYSIS AVIATION DIM (NODES A1 AND B1 ) We focused on the left side of the cost tree in Figure 2-1, namely the AFC-41 allotment funding category, and reproduced the aviation labor and materials cost tree segment in Figure 2-2. Figure 2-2. Coast Guard Aviation Labor and Materials Cost Tree FY2013 ($ in millions) $1,003 Depot and Intermediate Level Maintenance $330 Aviation (AFC-41) $377 Non-aviation and non-vessels $296 Vessels (AFC-45) $127 Labor $203 Materials $251 Labor $45 Materials $111 Noncorrosion $16 Corrosion A1 $173 Noncorrosion $30 Corrosion B1 1 Financial information received from Coast Guard Office of Budget Execution (CG-83). 2-3

30 This section of the cost tree contains DIM labor and material costs. Potential aviation corrosion costs are contained in both of these categories. Our top-down analysis was fairly straightforward. We segregated the $1,003 million in DIM costs into three categories: aviation, vessels, and non-aviation/non-vessels. 2 The Coast Guard uses AFCs to segregate spending on DIM in much the same way. We show this categorization in Table 2-3. Table 2-3. Coast Guard Classification of DIM Spending by AFC FY2013 AFC Description Top-down classification Total expenditure (in millions) AFC-41 Aeronautical Aviation $330 AFC-42 Electronic Non-aviation/non-vessel $191 AFC-43 Civil/ocean engineering Non-aviation/non-vessel $186 and shore facilities AFC-45 Naval engineering Vessels $296 Total $1,003 For our top-down DIM aviation cost, we used the $330 million from AFC-41. This established a ceiling for DIM spending on aviation for commercial labor and materials, as well as government-purchased materials. We took our aviation analysis one step further to understand how the $330 million total was partitioned into labor and materials. We knew the entire $330 million comprises three segments: commercial labor, commercial materials, and Coast Guard procured materials. But we did not know the relative size of each segment. Based on other similar corrosion aviation studies, we concluded the ratio of materials to labor for depot-level work is 1.06 to 1. 3 From our analysis (in the next section) on military pay and civilian pay and allowances, we determined the DIM Coast Guard labor total to be $64 million. We used this information to determine the relative size of Coast Guard procured DIM materials, as well as the commercial DIM labor and materials total. We show this calculation in Table 2-4. Table 2-4. Estimation of Aviation DIM Materials Cost DIM segment Labor cost Materials-to-labor ratio Estimated Coast Guard DIM materials cost Coast Guard $64.0 million 1.06 to 1 $67.7 million Commercial $127.4 million 1.06 to 1 $134.9 million 2 Examples of non-aviation/non-vessel maintenance include facilities, communications, and vehicles. 3 LMI, The Annual Cost of Corrosion for Navy and Marine Corps Aviation, David Forman et al., MEC70T1, to be published in

31 Coast Guard Aviation Corrosion Cost Using the $64.0 million in Coast Guard DIM labor cost and applying the 1.06 to 1 materials-to-labor ratio resulted in $67.7 million of Coast Guard DIM materials cost. When we subtracted this amount from the $330 million total, we were left with $262.3 million. Using our materials-to-labor ratio of 1.06 to 1 allowed us to split this remaining amount into $127.4 million of commercial DIM labor and $134.9 million of commercial DIM materials. The final labor and materials totals then became $127.4 million for commercial labor and $202.6 million for commercial materials and Coast Guard procured materials combined ($67.7 million + $134.9 million). These are the labor and materials totals reflected in the third level of the cost tree in Figure 2-2. TOP-DOWN ANALYSIS AVIATION DIM MILITARY AND CIVILIAN PAY AND ALLOWANCES (NODE A3 ) We next focused on the middle of the cost tree military and civilian pay and allowances. This is the segment that contains the AFC-01 and AFC-08 allotment funding categories. We reproduce this segment of the cost tree in Figure 2-3 for ease of discussion. Figure 2-3. Coast Guard Aviation Military and Civilian Pay and Allowances Cost Tree FY2013 ($ in millions) $4,295 Military and Civilian Pay and Allowances (AFC-01 and AFC-08) $3,006 Non-maintenance $1,289 Maintenance $365 Aviation labor $534 Non-aviation and non-vessels labor $390 Vessels labor $64 $301 Depot/ Operational intermediate $47 $343 Depot/ Operational intermediate $56 Noncorrosion $8 Corrosion A3 We started with a top-down pay total from the cost tree of $4.295 billion. 4 To separate the pay of maintenance personnel from non-maintenance personnel, we 4 Coast Guard Office of Budget Execution (CG-83). 2-5

32 identified the workforce with maintenance rates, specialties, or occupational series for all Coast Guard personnel. 5 We then determined the staffing levels for each rate, specialty, or occupational series. For civilians, we used the authorized levels as identified in the Personnel Allowance List (PAL). For active duty and reserve components, we used the actual staffing levels as identified in the Defense Manpower Data Center (DMDC) FY2013 extracts. Using an average annual salary, we determined the maintenance and nonmaintenance pay totals. We show these calculations in Table 2-5. Table 2-5. Segregation of Coast Guard Personnel Into Maintenance and Non-Maintenance Cost Categories FY2013 Category Status Number of authorized or actual personnel Average annual salary a Total cost (in millions) Maintenance Active duty 12,407 $90,246 $1,120 Non-maintenance Active duty 25,080 $90,246 $2,263 Maintenance Reserve 1,747 $27,048 $47 Non-maintenance Reserve 5,301 $27,048 $143 Maintenance Civilian 1,263 $96,506 $122 Non-maintenance Civilian 6,213 $96,506 $600 Total maintenance 15,417 $83,597 $1,289 Total non-maintenance 36,594 $82,154 $3,006 Total 52,011 $82,582 $4,295 a We determined the average annual salary from FY2013 DMDC data for DoD personnel. From Table 2-5, we applied the maintenance ($1,289 million) and non-maintenance ($3,006 million) cost totals to our cost tree. These are the figures in the second level of the cost tree in Figure 2-3. Our task was to then isolate the aviation portion of the $1,289 million total maintenance pay. We again sorted the authorized maintenance rates, specialties, and occupational series positions into three categories: aviation, vessels, and non-aviation/nonvessels. We also classified all unit types to which Coast Guard personnel are assigned according to the same three categories. In most instances this was fairly simple because the air stations and larger cutters are clearly identified in the personnel data. Based on the combination of rates, specialties, occupational series, and unit type classification, we determined the number of maintenance personnel that support aviation, vessels, and non-aviation/non-vessels by their actual unit assignments. We used salary averages to convert these personnel numbers into pay figures. The third level of the cost tree in Figure 2-3 contains these pay totals. We show this calculation below in Table The Personnel Allowance List (PAL) for the Coast Guard. 2-6

33 Coast Guard Aviation Corrosion Cost Table 2-6. Segregation of Coast Guard Personnel into Aviation, Vessel, and Non-Aviation/Non-Vessel Cost Categories (Node A3 ) FY2013 Maintenance category Number of personnel Average annual salary Total cost (in millions) Aviation 4,016 $90,774 $365 Non-aviation/non-vessels 6,951 $76,809 $534 Vessels 4,450 $87,727 $390 Total 15,417 $83,597 $1,289 Our final task in the top-down analysis of Coast Guard military and civilian pay was to allocate the aviation maintenance total of $365 million into the DIM and OM levels of maintenance. We used our unit type and location data from the PAL to accomplish this. Since DIM aviation maintenance is performed by Coast Guard employees at only one location, the analysis was fairly simple. We show the result in Table 2-7. Table 2-7. Coast Guard Organizations and Personnel Who Perform DIM aviation maintenance organization Number of personnel Component Average annual salary Total cost (in millions) ALC Elizabeth City, NC 227 Active duty $90,246 $ Civilian $96,506 $43.4 Total 677 $94,407 $63.9 From the analysis, we concluded there were $63.9 million in labor costs for Coast Guard maintenance personnel who provide depot- and intermediate-level aviation maintenance. Operational maintenance accounted for the remaining $301.1 million of aviation labor maintenance. Aviation DIM Bottom-Up Analysis Having established a cost ceiling of $330 million for the commercial labor and materials and government-purchased materials categories for aviation DIM as well as a ceiling of $63.9 million for military and civilian DIM aviation labor, the challenge was to identify the corrosion costs within these totals using a bottom-up approach. We first analyzed the $330 million commercial labor and materials and government materials aviation DIM total. 2-7

34 BOTTOM-UP ANALYSIS AVIATION DIM COST OF CORROSION (NODES A1 AND B1 ) We extracted the cost of corrosion from the total aviation DIM costs for labor ($127 million) and materials ($203 million). We show the corrosion costs for DIM labor in node A1 ($16 million) and for DIM materials in node B1 ($30 million). We repeat the DIM cost tree in Figure 2-4 for ease of discussion. Figure 2-4. Coast Guard Aviation Labor and Materials Cost Tree FY2013 ($ in millions) $1,003 Depot and Intermediate Level Maintenance $330 Aviation (AFC-41) $377 Non-aviation and non-vessels $296 Vessels (AFC-45) $127 Labor $203 Materials $251 Labor $45 Materials $111 Noncorrosion $16 Corrosion A1 $173 Noncorrosion $30 Corrosion B1 Bottom-Up Analysis Aviation DIM Commercial Labor Cost of Corrosion (Node A1 ) We analyzed data from the three primary aviation DIM maintenance and supply recording applications used by the Coast Guard under an umbrella system called the Asset Logistics Management Information System (ALMIS): Aviation Computerized Maintenance System Electronic Aircraft Log (EAL) System Aviation Maintenance Management Information System (AMMIS). These three systems record DIM operations performed on aviation assets and provide the associated commercial labor hours for the operation. They were the source of our bottom-up data. 2-8

35 Coast Guard Aviation Corrosion Cost We searched the data records text fields, which describe the work being performed for corrosion keywords (such as rust, paint, and preserve ) to identify activities related to corrosion. We provide a complete list of these key corrosion words in Appendix D. We attributed the cost for labor hours for records flagged with corrosion keywords at a certain corrosion percentage. The specific percentage was determined with the help of subject matter experts in the aviation community within DoD. As an example, for most inspections, we attributed only part of the activity cost to corrosion. Corrosion is typically one of several reasons for performing this type of task. Inspections, tests, and certain repairs fit this category. The simplified example in Figure 2-5 illustrates how we apply the corrosion keyword search. Figure 2-5. Example of a Corrosion Keyword Search from Coast Guard Aviation Databases Control Number Item description Operation Description Work Center Work Center Description Quantity Hours BLADE,MAIN ROTOR 0040 REMOVE MOISTURE 2101/587E0 MAIN ROTOR BRANCH COLD SECTION MODULE 0010 MFG BURR TAGS 2101/543A0 ENGINE CLEANING BRAN COLD SECTION MODULE 0070 APPLY COATING CASE DIFF 2101/552E0 METAL SPRAY BRANCH COLD SECTION MODULE 0480 FINISH MACHINE SURFACE F 2101/553B0 MACHINE BRANCH # COLD SECTION MODULE 0540 FINISH MACHINE DIM X & Y 2101/553B0 MACHINE BRANCH # ENGINE,AIRCRAFT,TUR 0010 MFG. BURR TAGS 2101/543A0 ENGINE CLEANING BRAN ENGINE,AIRCRAFT,TUR 0050 CK/TS LUBE SCAVENGE PUMP 2101/543H0 PNEUDRAULIC ACCESSOR The grey highlighted records (the first and third records from the top) were flagged as corrosion-related because they matched our key corrosion words. We compared the comments section of these records with our key word list. The non-highlighted records from Figure 2-5 (the second and fourth through seventh records from the top) do not match either search criteria and, therefore, were not flagged or considered in our analysis. We assessed each maintenance record in this manner and aggregated the labor hours associated with corrosion tasks. We then converted the hours into a corrosion labor cost by multiplying the labor hours by a standard rate of $54.34 per hour. 6 Our total DIM corrosion labor cost at this point was $6.3 million. When we totaled the commercial DIM labor costs from our Coast Guard bottomup data sources, we obtained a figure of $49.8 million. We compared this total to the top-down commercial labor cost total of $127 million from Figure 2-4. Realizing we had a gap between our top-down and bottom-up figures, we applied a scaling factor to each labor record so our bottom-up total matched our top-down figure. This factor was , or Applying this factor to the initial DIM 6 This is the average annual salary for a maintenance civilian from Table 2-5, $96,506, divided by 1,776 hours. OMB Circular A-76 (March 2003) states a civilian full-time equivalent (FTE) is 1,776 hours. Therefore, we use the average annual salary divided by 1,776 hours to calculate the equivalent hourly rate. 2-9

36 bottom-up labor corrosion total of $6.3 million yielded a final DIM labor corrosion costs for node A1, $16.1 million. It is not unusual to have a gap between top-down and bottom-up commercial maintenance cost information. Commercial maintenance contracts can be numerous and rarely are controlled centrally. Data reporting requirements within these contracts also vary greatly. Another common practice for commercial providers is to include the labor costs for repair of a component into the sale price of that component back to the government. This would result in labor costs that appear underestimated and materials costs that appear overestimated. We next assessed the DIM materials cost of corrosion node B1. Bottom-Up Analysis Aviation DIM Materials Cost of Corrosion (Node B1 ) Although we could link each material purchase to an aircraft tail number a unique identifier for that aircraft we could not link the materials purchases to a particular labor task for that aircraft. Therefore, we could only estimate the material costs of corrosion in a roundabout way. To determine corrosion-related materials costs, we calculated the materials costs by aircraft tail number and allocated these costs to each labor record with the same tail number and model of aircraft. We show an example of this in Table 2-8. Table 2-8. Illustration of Allocation of Materials Costs to Labor Records Tail number Maintenance operation Labor cost Allocated materials cost Record flagged for corrosion? a Corrosion percentage Corrosion labor cost Corrosion materials cost 6032 Repair flight control $3,000 $5,000 No 0% $0 $0 circuit card 6032 Replace seal $7,500 $5,000 Yes 50% $3,750 $2, Inspect housing $1,000 $5,000 Yes 40% $400 $2, Chemical clean bell $2,000 $5,000 Yes 100% $2,000 $5,000 housing 6608 Replace pilot seat $5,000 $2,000 No 0% $0 $ Prepare housing for $500 $2,000 Yes 100% $500 $2,000 painting 6608 Paint housing $1,000 $2,000 Yes 100% $1,000 $2, Inspect turret $4,000 $2,000 Yes 50% $2,000 $1,000 Note: Materials costs were spread evenly to each maintenance record within the same tail number. For example, the aircraft with a tail number of 6032 had $20,000 in materials costs spread evenly to each of the three maintenance operations ($5,000 each). The aircraft with tail number 6608 has $8,000 of total materials cost similarly allocated $2,000 to each of four maintenance records. a Each record was flagged for corrosion based on the corrosion keyword search discussed earlier. 2-10

37 Coast Guard Aviation Corrosion Cost By aggregating the materials corrosion costs associated with flagged corrosion records, we calculated an initial total of $24.8 million in organic corrosion-related DIM materials costs. When we added the bottom-up materials costs from the three ALMIS applications, we obtained a total of $168.1 million. We compared this total to the topdown materials cost total of $203 million from Figure 2-4, which is approximately 80 percent of our top-down total. Realizing our top-down total still exceeded our bottom-up total, we applied a scaling factor to each materials record so our bottom-up total matched our top-down figure. This factor was , or Applying this factor to the initial DIM bottom-up materials corrosion total of $24.8 million yielded a final DIM corrosion-related materials costs for node B1, $30.0 million. We next assessed the DIM Coast Guard labor cost of corrosion node A3. BOTTOM-UP ANALYSIS AVIATION DIM COAST GUARD LABOR COST OF CORROSION (NODE A3 ) Our next task was to extract the cost of corrosion from the DIM Coast Guard labor cost ($64 million). We show the aviation DIM Coast Guard labor corrosion cost ($8 million) as node A3 in Figure 2-1 and Figure 2-3. We repeat the Coast Guard military and civilian pay and allowances branch of the cost tree as Figure 2-6 for ease of discussion. Figure 2-6. Coast Guard Aviation Military and Civilian Pay and Allowances Cost Tree FY2013 ($ in millions) $4,295 Military and Civilian Pay and Allowances (AFC-01 and AFC-08) $3,006 Non-maintenance $1,289 Maintenance $365 Aviation labor $534 Non-aviation and non-vessels labor $390 Vessels labor $64 $301 Depot/ Operational intermediate $47 $343 Depot/ Operational intermediate $56 Noncorrosion $8 Corrosion A3 2-11

38 We performed this analysis for Coast Guard DIM labor in the same manner as commercial labor. The bottom-up maintenance records were recorded in the same three ALMIS applications ACMS, EAL, and AMMIS. Applying the same methodology yielded an initial Coast Guard DIM labor-related corrosion cost of $3.1 million. When we totaled the bottom-up Coast Guard DIM labor costs from the three ALMIS applications, we obtained a figure of $25.1 million. Realizing our topdown total still slightly exceeded our bottom-up total, we applied a scaling factor to each labor record so that our bottom-up total matched our top-down figure. This factor is , or Applying this factor to the initial DIM bottom-up labor corrosion total of $3.1 million yielded a final Coast Guard DIM labor corrosion cost for node A3, $7.9 million (which is rounded to $8 million in Figure 2-1 and Figure 2-7). COAST GUARD AVIATION OM COST OF CORROSION (NODES C1 AND D1 ) Coast Guard aviation OM corrosion costs represent a significant percentage of maintenance in terms of both labor and materials. We identified a total aviation OM corrosion cost of $115 million. This is 31.3 percent of total Coast Guard aviation OM costs of $367 million. We show the two segments of OM cost in Table 2-9. Table 2-9. FY2013 Coast Guard Aviation OM Corrosion Cost Cost segment Maintenance cost (in millions) Corrosion cost (in millions) Corrosion costs as a percentage of maintenance costs OM labor $301 $ % OM materials and services $66 $ % Total $367 $ % We started our analysis of the OM corrosion cost calculation from the top down. Aviation OM Top-Down Analysis The analysis for the top of the tree was the same as for the aviation DIM section. We do not repeat that analysis here; instead we jump to the OM-specific parts of the cost tree. 2-12

39 Coast Guard Aviation Corrosion Cost TOP-DOWN ANALYSIS AVIATION OM MILITARY AND CIVILIAN PAY AND ALLOWANCES ( C1 AND D1 ) We began our examination of OM costs by developing the detailed OM corrosion tree presented in Figure 2-7. To develop the OM cost tree, we began with the total Coast Guard spending and conducted our top-down analysis until we reached the level of the tree just above the corrosion cost nodes ( C1 and D1 ). From that point, we examined the bottom-up data to extract the corrosion costs at each of these two nodes. Figure 2-7. Coast Guard OM Aviation Cost Tree FY2013 ($ in millions) $10,308 Total Coast Guard Spending $M (FY2013) $1,465 Acquisition, Construction, Improvements and Bridges $131 Reserve Training $12 Environmental $202 Health Fund $6,809 Operating Expenses $20 Research, Development, Test and Evaluation $1,669 Mandatory (Retired Pay, Boating Safety, Oil Spill Liability) $4,295 Military and Civilian Pay and Allowances (AFC-01 and AFC-08) $1,185 Operating Funds and Unit Level Maintenance (AFC-30) $326 Other non-maintenance OE Funding $3,006 Non-maintenance $1,289 Maintenance $901 $284 Non-maintenance Maintenance $365 Aviation labor $534 Non-aviation and non-vessels labor $390 Vessels labor $66 Aviation materials $108 Non-aviation and non-vessels materials $110 Vessels materials $64 $301 Depot/ Operational intermediate $204 Noncorrosion $97 Corrosion C1 $47 $343 Depot/ Operational intermediate $48 Noncorrosion $18 Corrosion D1 We started our OM analysis by examining the middle of the cost tree military and civilian pay and allowances. This segment contains the AFC-01 and AFC-08 allotment funding categories. As discussed earlier, we identified $1,289 million of maintenance labor cost and $365 million of aviation maintenance cost (see Table 2-6). We then determined the DIM-to-OM split of the aviation maintenance cost by segregating costs associated with personnel who are assigned to units that perform DIM. We determined this amount to be $64 million of DIM. This meant the remaining $301 million was OM (from Table 2-7). 2-13

40 TOP-DOWN ANALYSIS AVIATION OM MATERIALS We next shifted our focus to the operating funds and unit-level maintenance segment of the cost tree. We reproduce this segment in Figure 2-8 for ease of discussion. This section of the cost tree contains OM Coast Guard material costs. Generally, commercial organizations are not involved in performing OM for Coast Guard aviation assets. Figure 2-8. Coast Guard Aviation Operating Funds and Unit-Level Maintenance Cost Tree FY2013 ($ in millions) $1,185 Operating Funds and Unit Level Maintenance (AFC-30) $901 $284 Non-maintenance Maintenance $66 Aviation materials $108 Non-aviation and non-vessels materials $110 Vessels materials $48 Noncorrosion $18 Corrosion D1 We started the top-down analysis for this section by identifying the expenditures associated with operating funds and unit-level maintenance. The Coast Guard segregates these costs into an allotment funding category: AFC-30. Within this AFC, funding is separated into smaller groupings called object class codes (OCCs). We classified the OCCs as maintenance or non-maintenance. We list the maintenance OCCs in Appendix E. We identified $284 million of expenditures associated with maintenance OCCs. We depict this total in the second level of the cost tree in Figure 2-8. We further segregated the maintenance OCCs into aviation, vessel, and nonaviation/non-vessel categories based on the OCC description. We identified a total of $66 million in aviation maintenance spending. We show this total in the third level of the cost tree in Figure 2-8. Aviation OM Bottom-Up Analysis Having established cost ceilings of $301 million for Coast Guard OM aviation labor and $66 million for OM aviation government-purchased materials, the challenge was to identify the corrosion costs within these totals. We first analyzed the $301 million for Coast Guard OM aviation labor. 2-14

41 Coast Guard Aviation Corrosion Cost BOTTOM-UP ANALYSIS AVIATION OM LABOR COST OF CORROSION (NODE C1 ) Our task was to extract the cost of corrosion (node C1, $97 million) from the total Coast Guard OM aviation labor cost ($301 million). We repeat the Coast Guard labor portion of the OM cost tree in Figure 2-9 for ease of discussion. Figure 2-9. Coast Guard Aviation Operational Labor Cost Tree FY2013 ($ in millions) $4,295 Military and Civilian Pay and Allowances (AFC-01 and AFC-08) $3,006 Non-maintenance $1,289 Maintenance $365 Aviation labor $534 Non-aviation and non-vessels labor $390 Vessels labor $64 $301 Depot/ Operational intermediate $204 Noncorrosion $97 Corrosion C1 $47 $343 Depot/ Operational intermediate We analyzed Coast Guard OM aviation labor in the same way we analyzed commercial and Coast Guard DIM aviation labor. The bottom-up OM data are recorded in the three ALMIS applications (ACMS, EAL, and AMMIS). We identified the OM costs within these systems by identifying the facility_type_id code within each record. We designated entries annotated with a 3 or 4 as OM. Applying the corrosion search method yielded an initial Coast Guard OM corrosion labor cost of $37.8 million. We aggregated our bottom-up labor totals from the ALMIS applications, and found $117.0 million of labor costs, which we compared to the top-down total of $301 million from Figure 2-9. The gap between the topdown OM aviation labor cost and the bottom-up total is typical of what we have seen in previous corrosion studies. In Table 2-10 we show the top-down to bottom-up gap for OM labor of these previous studies. 2-15

42 Table Top-Down to Bottom-Up Gap in OM Labor Cost from Previous Cost-of-Corrosion Studies Study segment Top-down total (in millions) Bottom-up total (in millions) Bottom-up percentage Army ground vehicles $10,023 $2, % Navy ships $8,225 $ % Army aviation and missiles $5,958 $2, % Marine corps ground vehicles $1,643 $ % Coast guard aviation $301 $ % Total $26,149 $6, % For Coast Guard OM aviation labor, we obtained 39.0 percent of our top-down total. This is slightly higher than the average of 26.1 percent for the most recent corrosion studies. We can account for some of this gap as follows: We determined the top-down cost figure of $301 million by multiplying a staffing level by a per capita yearly salary. We determined the bottom-up cost of $117.0 million by aggregating direct hands-on maintenance labor hours and multiplying by $50.81, which is the hourly equivalent of the average annual salary for active duty maintenance personnel. 7 The top-down cost is the total yearly cost of the 3,339 personnel (4,106 from Table 2-6 less the 677 personnel for DIM labor from Table 2-7) with aviation-related maintenance rates, specialties, or occupational series. We calculated the bottom-up cost by multiplying the hours recorded for hands-on maintenance by this number of personnel. Therefore, we know there will always be a gap between the top-down and bottom-up OM labor figures because a typical aviation maintainer spends only a small percentage of time performing direct hands-on maintenance. The remaining time is spent on leave, recovering from illness, in training, on travel, and attending to other administrative duties. Realizing that our bottom-up labor costs do not account for all top-down costs, we applied a scaling factor to each labor record so that our bottom-up total matches our top-down figure. This factor was , or Applying this factor to the initial OM bottom-up labor corrosion total of $37.8 million yields a final OM FY2013 aviation labor corrosion costs for node C1, $97.1 million. BOTTOM-UP ANALYSIS AVIATION OM GOVERNMENT MATERIALS COST OF CORROSION (NODE D1 ) Our bottom-up analysis for OM materials was the same as that for DIM materials. To determine corrosion-related materials costs, we calculated the materials costs by aircraft tail number and allocated these costs to each labor record with the same tail 7 This is the average annual salary, $90,246, divided by 1,776 hours. 2-16

43 Coast Guard Aviation Corrosion Cost number and model of aircraft. We aggregated the materials costs associated with the flagged corrosion records from the labor analysis. We assessed each maintenance record in this manner and aggregated the material-related corrosion costs, which at this point was $14.4 million. When we totaled the materials costs from the ALMIS applications, we obtained a figure of $53.0 million. We compared this total to the top-down materials cost total of $66 million from Figure 2-8. Realizing we had a small gap between our topdown and bottom-up materials costs, we applied a scaling factor to each materials record so our bottom-up total matched our top-down figure. This factor was , or Applying this factor to the initial OM bottom-up materials corrosion total of $14.4 million yielded a final OM aviation materials corrosion cost for node D1 of $17.9 million. FINAL COAST GUARD AVIATION CORROSION COST (NODES A THROUGH D ) We present the complete aviation DIM and OM cost tree with all corrosion nodes in Figure Figure Completed Coast Guard Aviation DIM and OM Cost Tree FY2013 $10,308 Total Coast Guard Spending $M (FY2013) $1,465 Acquisition, Construction, Improvements and Bridges $131 Reserve Training $12 Environmental $202 Health Fund $6,809 Operating Expenses $20 Research, Development, Test and Evaluation $1,669 Mandatory (Retired Pay, Boating Safety, Oil Spill Liability) $1,003 Depot and Intermediate Level Maintenance $4,295 Military and Civilian Pay and Allowances (AFC-01 and AFC-08) $1,185 Operating Funds and Unit Level Maintenance (AFC-30) $326 Other non-maintenance OE Funding $3,006 Non-maintenance $1,289 Maintenance $901 $284 Non-maintenance Maintenance $330 Aviation (AFC-41) $377 Non-aviation and non-vessels $296 Vessels (AFC-45) $365 Aviation labor $534 Non-aviation and non-vessels labor $390 Vessels labor $66 Aviation materials $108 Non-aviation and non-vessels materials $110 Vessels materials $127 Labor $203 Materials $251 Labor $45 Materials $64 DIM $301 Operational $47 DIM $343 Operational $111 Noncorrosion $16 Corrosion A1 $173 Noncorrosion $30 Corrosion B1 $56 Noncorrosion $8 Corrosion A3 $204 Noncorrosion $97 Corrosion C1 $48 Noncorrosion $18 Corrosion D1 2-17

44 We present the Coast Guard aviation corrosion cost trees with corrosion costs at each major node in Figure Figure Final Coast Guard Aviation Corrosion Cost Tree FY2013 $10.3 billion Coast Guard Spending $9.5 billion Non-maintenance or non-aviation-related maintenance $0.4 billion Coast Guard aviation DIM $0.4 billion Coast Guard aviation OM Laborrelated cost of corrosion Materials and services-related cost of corrosion Laborrelated cost of corrosion Materials and services-related cost of corrosion A B C D $24 million $30 million $97 million $18 million $169 million in annual Coast Guard aviation corrosion cost 2-18

45 Chapter 3 Coast Guard Vessel Corrosion Cost Corrosion accounts for 22.0 percent of the total Coast Guard vessels maintenance cost, which was $796 million. We show the costs of the two maintenance levels (depot and intermediate levels of maintenance and operational maintenance) in Table 3-1. At $132 million, DIM represents both the highest corrosion cost and the largest percentage of corrosion-to-maintenance cost (38.5 percent) for Coast Guard vessels. Table 3-1. FY2013 Coast Guard Vessel Corrosion Costs for DIM and OM Cost segment Maintenance cost (in millions) Corrosion cost (in millions) Corrosion costs as a percentage of maintenance costs DIM $343 $ % OM $453 $43 9.5% Total $796 $ % Although maintenance at the depot and intermediate level is less maintenance than at the operational level (43 percent), corrosion-related DIM represents more than 75 percent of corrosion costs for Coast Guard vessels. We discuss this and other observations in more detail in the next chapter. In this chapter, we present an in-depth discussion of how we determined the vessel-related cost of corrosion for each cost node. We start with the DIM cost of corrosion. COAST GUARD VESSEL DIM COST OF CORROSION (NODES A2, B2, AND A4 ) Coast Guard vessels DIM corrosion costs are significant as a percentage of maintenance for both labor and materials. We identified a total vessels DIM corrosion cost of $132 million. This was 38.4 percent of total Coast Guard vessels DIM costs, which was $343 million. We show the two segments of DIM costs labor and materials in Table 3-2. Both labor and materials cost have approximately the same corrosion-tomaintenance cost percentages. 3-1

46 Table 3-2. FY2013 Coast Guard Vessel DIM Corrosion Cost Cost segment Maintenance cost (in millions) Corrosion cost (in millions) Corrosion costs as a percentage of maintenance costs DIM labor $298 $ % DIM materials $45 $ % Total $343 $ % Vessels DIM Top-Down Analysis We examined vessels DIM costs in much the same way we investigated aviation costs. We started with the top-down portion of the analysis until we reached the level of the tree just above the corrosion cost nodes ( A2, B2, and A4 in Figure 3-1). From that point, we examined the bottom-up data to extract the corrosion costs at each node. Figure 3-1. Coast Guard Vessel DIM Cost Tree FY2013 ($ in millions) $10,308 Total Coast Guard Spending $M (FY2013) $1,465 Acquisition, Construction, Improvements and Bridges $131 Reserve Training $12 Environmental $202 Health Fund $6,809 Operating Expenses $20 Research, Development, Test and Evaluation $1,669 Mandatory (Retired Pay, Boating Safety, Oil Spill Liability) $1,003 Depot and Intermediate Level Maintenance $4,295 Military and Civilian Pay and Allowances (AFC-01 and AFC-08) $1,185 Operating Funds and Unit Level Maintenance (AFC-30) $326 Other non-maintenance OE Funding $3,006 Non-maintenance $1,289 Maintenance $901 $284 Non-maintenance Maintenance $330 Aviation (AFC-41) $377 Non-aviation and non-vessels $296 Vessels (AFC-45) $365 Aviation labor $534 Non-aviation and non-vessels labor $390 Vessels labor $66 Aviation materials $108 Non-aviation and non-vessels materials $110 Vessels materials $127 Labor $203 Materials $251 Labor $45 Materials $64 DIM $301 Operational $47 DIM $343 Operational $154 Noncorrosion $97 Corrosion A2 $28 Noncorrosion $17 Corrosion B2 $29 Noncorrosion $18 Corrosion A4 3-2

47 Coast Guard Vessel Corrosion Cost Similar to the aviation analysis, we began with a top-down cost of $ billion for Coast Guard expenditures. The next step (the second level of the cost tree in Figure 3-1) was exactly the same as we described earlier in the Coast Guard aviation section, so we do not repeat it here. We conducted a further analysis on the Operating Expenses appropriation because this was where we found vessels DIM costs and, eventually, corrosion costs. The total operating expenses in FY2013 were $6.809 billion (from the second level in the cost tree in Figure 3-1). We further segregated the operating expenses into five subcategories based on the Coast Guard s AFC convention. Coast Guard vessels DIM costs are found in AFC-45 (naval engineering), AFC-01 (military pay) and AFC-08 (civilian pay). In Figure 3-1, AFC-45 falls within the depot and intermediate level maintenance branch, on the left side of the tree. AFC-01 and AFC-08 are in the military and civilian pay and allowances branch, in the middle of the tree. Both branches are represented in the third level of the tree in Figure 3-1. TOP-DOWN ANALYSIS VESSEL DIM (NODES A2 AND B2 ) We focused on the AFC-45 allotment funding category (the left side of the cost tree from Figure 3-1) for DIM labor and materials costs. We reproduce this segment of the cost tree in Figure 3-2 for ease of discussion. Figure 3-2. Coast Guard Vessel Labor and Materials Cost Tree FY2013 ($ in millions) $1,003 Depot and Intermediate Level Maintenance $330 Aviation (AFC-41) $377 Non-aviation and non-vessels $296 Vessels (AFC-45) $251 Labor $45 Materials $154 Noncorrosion $97 Corrosion A2 $28 Noncorrosion $17 Corrosion B2 This section of the cost tree contains commercial DIM labor and materials costs as well as Coast Guard DIM materials costs. Potential vessels corrosion costs are contained in each of these categories. Our top-down analysis was fairly straightforward. As explained in Chapter 2, we segregated the $711 million in DIM costs into three categories: aviation, vessels, 3-3

48 and non-aviation and non-vessels. The Coast Guard uses AFC codes to segregate spending on DIM in much the same way. We repeat Table 2-3 here (as Table 3-3) for ease of analysis. Table 3-3. Coast Guard Classification of DIM Spending by AFC FY2013 AFC Description Top-down classification Total expenditure (in millions) AFC-41 Aeronautical Aviation $330 AFC-42 Electronic Non-aviation/non-vessels $191 AFC-43 Civil/ocean engineering and Non-aviation/non-vessels $186 shore facilities AFC-45 Naval engineering Vessels $296 Total $1,003 For our top-down DIM vessels cost, we used the $296 million figure from AFC- 45. This established a ceiling for DIM spending on vessels for commercial labor and materials, as well as government-purchased materials. We took our analysis one step further to understand how the $296 million is partitioned into labor and materials. We knew the entire $296 million comprises three segments: commercial labor, commercial materials, and Coast Guard procured materials. But we did not know the relative size of each segment. When analyzing the main Coast Guard DIM database 1 from a historical spending standpoint in FY2013 as well as the spending ratio for depot maintenance on Navy surface vessels, we found that 85.0 percent (a ratio of 6.7 to 1) of the total expenditure for DIM on vessels is related to labor. From our analysis (in the next section) on military pay and civilian pay and allowances, we determined the DIM Coast Guard vessels labor total to be $47 million. We used this information to determine the relative size of Coast Guard procured DIM vessel materials, as well as the commercial DIM vessel labor and materials total. We show this calculation in Table 3-4. Table 3-4. Estimation of Vessels DIM Materials Cost DIM labor segment Labor cost Materials-to-labor ratio Estimated vessels DIM materials cost Coast Guard $47.0 million 1 to 6.7 $7.0 million Commercial $251.4 million 1 to 6.7 $37.6 million 1 We used the FLS database. 3-4

49 Coast Guard Vessel Corrosion Cost Using the $47.0 million in Coast Guard DIM labor cost and applying the 1 to 6.7 materials-to-labor ratio resulted in $7.0 million of Coast Guard DIM materials cost. When we subtracted this amount from the $296 million total, we are left with $289 million. Using our materials-to-labor ratio of 1 to 6.7 allowed us to split this remaining amount into $251.4 million of commercial DIM labor and $37.6 million of commercial DIM materials. The final labor and materials totals then became $251.4 million for commercial labor and $44.6 million for commercial materials and Coast Guard procured materials combined ($37.6 million + $7.0 million). These are the labor and materials totals reflected in the third level of the cost tree in Figure 3-1. TOP-DOWN ANALYSIS VESSEL DIM MILITARY AND CIVILIAN PAY AND ALLOWANCES (NODES A4 ) We next focused on the middle of the cost tree military and civilian pay and allowances. This is the segment that contains the AFC-01 and AFC-08 allotment funding categories. We reproduce this segment of the cost tree in Figure 3-3 for ease of discussion. Figure 3-3. Coast Guard Vessel Military and Civilian Pay and Allowances Cost Tree FY2013 ($ in millions) $4,295 Military and Civilian Pay and Allowances (AFC-01 and AFC-08) $3,006 Non-maintenance $1,289 Maintenance $365 Aviation labor $534 Non-aviation and non-vessels labor $390 Vessels labor $47 DIM $343 Operational $29 Noncorrosion $18 Corrosion A4 We started with a top-down pay total of $4.295 billion. 2 In Chapter 2, we determined the maintenance and non-maintenance pay totals for the Coast Guard. This yielded a maintenance pay total of $1,289 million (from Figure 3-3). The 2 The source of this figure is the Coast Guard Office of Budget Execution (CG-83). 3-5

50 non-maintenance pay was $3,006 million. These are the figures in the second level of the cost tree in Figure 3-3. Our task was to separate the vessels portion of the $1,289 million total maintenance pay. We accomplished this by sorting the authorized maintenance rates, specialties, and occupational series positions into three categories: aviation, vessels, and nonaviation/non-vessels. We also classified the unit types to which Coast Guard personnel are assigned into the same three categories. In some instances this was fairly simple, because the larger cutters are identified as units by their hull number in the personnel data. Based on the combination of rates, specialties, occupational series, and unit type classification, we determined the number of maintenance personnel that support aviation, vessels, and non-aviation/non-vessels by their actual unit assignments. We used salary averages to convert these personnel numbers into pay figures. The third level of the cost tree in Figure 3-3 contains these pay totals. We show this calculation in Table 3-5. Table 3-5. Segregation of Coast Guard Personnel into Aviation, Vessels, and Non-Aviation/Non-Vessel Cost Categories (Node A4 ) FY2013 Maintenance category Number of personnel Average annual salary Total cost (in millions) Aviation 4,016 $90,774 $365 Non-aviation/non-vessels 6,951 $76,809 $534 Vessels 4,450 $87,727 $390 Total 15,417 $83,597 $1,289 Our final task in the top-down analysis of Coast Guard military and civilian pay was to allocate the vessels maintenance total of $390 million into the DIM and OM maintenance using the unit type and location data. We identified Coast Guard locations and organizations that perform DIM vessels maintenance. DIM vessels maintenance is performed at naval engineering support units (NESUs), industrial production facilities (IPFs), maintenance augmentation teams (MAT) and the Surface Fleet Logistics Center in Baltimore (SFLC, also known as the Coast Guard Yard). We list the maintenance personnel within these organizations and their labor rates in Table 3-6. From the analysis, we concluded there were $47 million in labor costs for Coast Guard maintenance personnel who provide depot- and intermediate-level aviation maintenance. The remaining $343 million of vessels labor maintenance therefore is to provide OM for vessels. 3-6

51 Coast Guard Vessel Corrosion Cost Table 3-6. Coast Guard Organizations and Personnel Who Perform DIM Vessel Maintenance Organization Number of personnel Average annual salary Total cost (in millions) NESUs, IPFs, and MATs 313 $90,246 $28.2 SFLC 202 $93,561 $18.9 Total 515 $91,546 $47.1 Vessel DIM Bottom-Up Analysis Having established a cost ceiling of $296 million for the commercial labor and materials and government-purchased materials categories for vessels DIM, as well as a ceiling of $47 million for military and civilian DIM vessels labor, the challenge was to identify the corrosion costs within these totals, using a bottom-up analysis. We first analyzed the $296 million commercial labor and materials and government vessel materials DIM total. BOTTOM-UP ANALYSIS VESSEL DIM COST OF CORROSION (NODES A2 AND B2 ) We extracted the cost of corrosion from the total vessels DIM costs for labor ($251 million) and materials ($45 million). We show the DIM costs for labor in node A2 ($97 million) and materials in node B2 ($17 million). We repeat the vessels DIM cost tree in Figure 3-4 for ease of discussion. Figure 3-4. Coast Guard Vessel Labor and Materials Cost Tree FY2013 ($ in millions) $1,003 Depot and Intermediate Level Maintenance $330 Aviation (AFC-41) $377 Non-aviation and non-vessels $296 Vessels (AFC-45) $251 Labor $45 Materials $154 Noncorrosion $97 Corrosion A2 $28 Noncorrosion $17 Corrosion B2 3-7

52 Bottom-Up Analysis Vessel DIM Commercial Labor Cost of Corrosion (Node A2 ) We analyzed data from Fleet Logistics System, the primary vessels DIM maintenance recording system used by the Coast Guard. FLS lists every DIM operation performed on every vessel and provided the associated commercially performed labor hours for the operation. Using a list of keywords (such as rust, paint, and preserve ) we searched the data records to identify activities related to corrosion. We provide a complete list of these key corrosion words in Appendix D. The simplified sample FLS report in Figure 3-5 illustrates how we isolated the corrosion activities from the non-corrosion activities. Figure 3-5. Example of a Corrosion Keyword Search from FLS Database Vessel identifier Description of maintenance task Task Cost 127 PROVIDE THE TEMPORARY SERVICES, DOCKSIDE $ 8, SEAL THE DECK COVERINGS (INTERIOR WET) $ 45, COMPARE THE PRESSURE GAUGES & THERMOMETERS (NON-CRITICAL) $ 1, CALIBRATE THE ELECTRIC METERS (CRITICAL) $ GENERAL MAINTENANCE THE FATHOMETER TRANSDUCERS $ 1, PRESERVE, 100% THE RUDDERS $ 3,609 8 PRESERVE, PARTIAL THE HULL PLATING, U/W BODY $ 13, PRESERVE, 100% THE HULL PLATING, U/W BODY $ 99, PRESERVE, INTERNAL THE APPENDAGES (U/W) $ COMMERCIAL CLEANING THE SEWAGE VACUUM COLLECTION TANKS $ 4, OVERHAUL THE OILY WATER SEPERATOR (GEN) $ 1, CALIBRATE THE OIL CONTENT MONITOR $ LEVEL 2 INSPECT & REPAIR THE SINGLE POINT DAVIT (GEN) $ 15,597 The blue and green highlighted records in Figure 3-5 contain key information concerning corrosion maintenance activities. The blue highlighted records are flagged because 100 percent of their costs can be attributed to corrosion. Typically, the purpose of these activities is to prevent or correct corrosion. In comparison, we could only attribute part of the cost for the record highlighted green in Figure 3-5 to corrosion. Corrosion is one of several reasons for performing this task. Inspections, tests, and certain repairs fit this category. We, therefore, estimated corrosion costs for these types of records at 33 percent of the total labor cost. 3 We assessed each maintenance record in the same manner and aggregated the corrosion costs. Our total DIM corrosion labor cost at this point was $173.4 million. 3 We derived the 33 percent from discussions with Coast Guard subject matter experts and from a previous vessel-related corrosion study (The Annual Cost of Corrosion for Army Ground Vehicles and Navy Ships, Eric F. Herzberg et al., LMI Report SKT50T2, May 2006). 3-8

53 Coast Guard Vessel Corrosion Cost When we totaled the labor costs from FLS, we obtained a figure of $449.0 million. We compared this total to the top-down labor cost total of $251 million from Figure 3-4. Realizing we had captured more labor costs than our top-down figure, we applied a scaling factor to each labor record so our bottom-up total matched our top-down figure. This factor is , or Applying this factor to the initial DIM bottom-up labor-related corrosion total of $173.4 million yielded a final DIM labor corrosion costs for node A2 of $96.9 million (which is rounded to $97 million in Figure 3-4). It is somewhat unusual to capture more bottom-up costs than top-down costs. One possible cause is that we used average yearly salaries of government maintenance personnel to establish the top-down totals, but actual commercial labor rates to aggregate the bottom-up labor costs. It is reasonable to expect the commercial labor rates to be somewhat higher. We next assessed the DIM materials cost of corrosion node B2. Bottom-Up Analysis Coast Guard Vessel DIM Materials Cost of Corrosion (Node B2 ) The bottom-up analysis for DIM materials followed our analysis of DIM labor. If materials are used in the performance of a maintenance task, they are captured in the maintenance data record. We illustrate this in Figure 3-6. Figure 3-6. Coast Guard Vessel DIM Materials Costs Linked to DIM Maintenance Tasks Maintenance Task Material cost amount Unit price Quantity Part number Part name RUDDERS PRESERVE, 100 PERCENT $6,504 $3,252 2 H SEAL ASSEMBLY,RUDDER RUDDERS PRESERVE, 100 PERCENT $550 $275 2 H SEAL ASSEMBLY,RUDDER RUDDER STOCK SEAL,INSPECT AND REPAIR $7,178 $3,589 2 H SEAL ASSEMBLY,RUDDER RUDDER STOCK SEAL,INSPECT AND REPAIR $12,133 $6,067 2 H SEAL ASSEMBLY,RUDDER STARBOARD ENGINE $4,990 $1, SEAL STARBOARD ENGINE $4,990 $1, SEAL SHIP SERVICE DIESEL GENERATOR $10,000 $2, SEAL We pulled the corrosion costs for materials from records that we flagged for corrosion as a result of the keyword search. When the labor record was flagged for corrosion, so too were the corresponding materials. We assessed each maintenance record in this manner and aggregated the materials corrosion costs, giving us a total DIM corrosion materials cost of $13.2 million. 3-9

54 When we added the materials costs from FLS, we obtained a total figure of $35 million. We compared this total to the top-down materials cost total of $45 million (see Figure 3-4). Realizing we had not captured our total top-down material costs in our bottom-up data, we applied a scaling factor to each materials record so that our bottomup total matched our top-down figure. This factor was 45 35, or Applying this factor to the initial DIM bottom-up materials corrosion total of $13.2 million yielded a final DIM materials corrosion cost for node B2 of $17.0 million. We next assessed the Coast Guard vessels DIM labor cost of corrosion node A4. BOTTOM-UP ANALYSIS COAST GUARD VESSEL DIM LABOR COST OF CORROSION (NODE A4 ) Our task was to extract the cost of corrosion from the total DIM Coast Guard labor cost ($47 million). We show the vessels DIM corrosion-related labor cost ($18 million) as node A4 in Figure 3-1. We repeat the Coast Guard military and civilian pay and allowances cost tree as Figure 3-7 for ease of discussion. Figure 3-7. Coast Guard Military and Civilian Pay and Allowances Cost Tree FY2013 ($ in millions) $4,295 Military and Civilian Pay and Allowances (AFC-01 and AFC-08) $3,006 Non-maintenance $1,289 Maintenance $365 Aviation labor $534 Non-aviation and non-vessels labor $390 Vessels labor $47 DIM $343 Operational $29 Noncorrosion $18 Corrosion A4 We used the detailed bottom-up data from FLS to draw conclusions about the DIM labor costs for Coast Guard vessels. Again using a list of keywords, we identified activities related to corrosion. When we aggregated our bottom-up labor costs, we found that we had accounted for all of the top-down costs of $47 million in our bottom-up data. Therefore, the corrosion cost for node A4 is $18 million. 3-10

55 Coast Guard Vessel Corrosion Cost COAST GUARD VESSEL OM COST OF CORROSION (NODES C2 AND D2 ) Coast Guard vessels OM corrosion costs are not as significant as the vessels DIM corrosion costs from both a total cost and a percentage of maintenance standpoint. We identified a total vessels OM corrosion cost of $43 million, which is only 9.5 percent of total Coast Guard vessels OM costs of $383 million. We show the two segments of OM costs in Table 3-7. Table 3-7. Coast Guard Vessel OM Corrosion Cost FY2013 Cost segment Maintenance cost (in millions) Corrosion cost (in millions) Corrosion costs as a percentage of maintenance costs OM labor $343 $22 6.4% OM materials and services $110 $ % Total $453 $43 9.5% We started our analysis of the OM corrosion costs calculation from the top down. Vessel OM Top-Down Analysis The analysis for the top of the tree was the same as for the vessels DIM section discussed previously. We do not repeat that analysis here; instead we jump to the OM-specific parts of the cost tree. TOP-DOWN ANALYSIS VESSEL OM MILITARY AND CIVILIAN PAY AND ALLOWANCES (NODES C2 AND D2 ) We began to examine OM costs within the detailed OM corrosion tree (Figure 3-8). We started with the total Coast Guard spending and conducted our top-down analysis until we reached the level of the tree just above the corrosion cost nodes ( C2 and D2 ). From that point, we examined the bottom-up data to extract the corrosion costs at each node. 3-11

56 Figure 3-8. Coast Guard OM Vessel Cost Tree FY2013 ($ in millions) $10,308 Total Coast Guard Spending $M (FY2013) $1,465 Acquisition, Construction, Improvements and Bridges $131 Reserve Training $12 Environmental $202 Health Fund $6,809 Operating Expenses $20 Research, Development, Test and Evaluation $1,669 Mandatory (Retired Pay, Boating Safety, Oil Spill Liability) $4,295 Military and Civilian Pay and Allowances (AFC-01 and AFC-08) $1,185 Operating Funds and Unit Level Maintenance (AFC-30) $326 Other non-maintenance OE Funding $3,006 Non-maintenance $1,289 Maintenance $901 $284 Non-maintenance Maintenance $365 Aviation labor $534 Non-aviation and non-vessels labor $390 Vessels labor $66 Aviation materials $108 Non-aviation and non-vessels materials $110 Vessels materials $47 $343 Depot/ Operational intermediate $321 Noncorrosion $22 Corrosion C2 $89 Noncorrosion $21 Corrosion D2 We started our vessels OM analysis by examining the middle of the cost tree military and civilian pay and allowances. This segment contains the AFC-01 and AFC-08 allotment funding categories. As discussed earlier, we identified $1,289 million of maintenance labor cost and the $390 million of vessels maintenance cost. We determined the DIM-to-OM split of the vessels maintenance cost by segregating the costs for personnel who are assigned to units that perform DIM. We determined this amount to be $47 million. This meant the remaining $343 million was OM. TOP-DOWN ANALYSIS VESSEL OM We next shifted our focus to the operating funds and unit-level maintenance segment of the cost tree (node D2 from Figure 3-8). This section of the cost tree contains OM commercial labor and materials costs, as well as OM materials costs. Potential vessels corrosion costs are contained in each of these categories. 3-12

57 Coast Guard Vessel Corrosion Cost We started the top-down analysis for this section by identifying the expenditures associated with operating funds and unit-level maintenance. The Coast Guard segregates these costs into an allotment funding category: AFC-30. Within this AFC, funding is separated into smaller object class codes groupings. We classified the OCCs as either maintenance or non-maintenance. We list the maintenance OCCs in Appendix E. In this way we identified $284 million of expenditures associated with maintenance OCCs. We depict this total in the second level of the operating funds and unit-level maintenance segment of the cost tree in Figure 3-8. We further segregated the maintenance OCCs into aviation, vessel, and nonaviation/non-vessels categories based on the OCC description. We identified a total of $110 million in vessels maintenance spending. We reflect this total in the third level of the operating funds and unit-level maintenance segment of the cost tree in Figure 3-8. Vessel Bottom-Up Analysis Having established cost ceilings of $343 million for Coast Guard vessels OM labor and $110 million for OM commercial labor and materials and governmentpurchased materials, the challenge was to identify the corrosion costs within these totals. We first analyzed the $343 million for vessels OM labor. BOTTOM-UP ANALYSIS VESSEL OM LABOR COST OF CORROSION (NODE C2 ) Our task was to extract the cost of corrosion (node C2, $22 million) from the total Coast Guard vessels OM labor cost ($343 million). We repeat the Coast Guard labor portion of the OM cost tree in Figure 3-9 for ease of discussion. Figure 3-9. Coast Guard OM Vessel Labor Cost Tree FY2013 ($ in millions) $390 Vessels labor $47 $343 Depot/ Operational intermediate $321 Noncorrosion $22 Corrosion C2 We analyzed bottom-up data from two main sources: the Corrective Maintenance Action (CMA) table and the Maintenance Task Executables (MTE) table. Both tables are within a larger application Configuration Management Plus (CMPlus). 3-13

58 Corrective Maintenance Action (CMA) is the primary maintenance recording repository for corrective, unscheduled OM actions. MTE is the main recording repository for scheduled preventive OM tasks. These tables list each OM operation performed on each vessel and provide the associated labor hours for the operation. We aggregated our bottom-up labor from both the CMA and MTE tables (a total of $100.3 million) and compared the composite total to our top-down labor cost total of $343 million. We can account for some of this gap as follows: We determined the top-down cost figure of $343 million by multiplying a staffing level by a per capita yearly salary. We determined the bottomup cost of $100.3 million by aggregating direct hands-on maintenance labor hours and multiplying by $50.81, the hourly equivalent of the per capita rate. The top-down cost is the total yearly cost of the 3,935 personnel 4 with vessel-related maintenance rates, specialties, or occupational series. We calculated the bottom-up cost using only the hours recorded for hands-on maintenance by this number of personnel. We know there will always be a gap between the top-down and bottom-up OM labor figures because only a small percentage of a typical vessel maintainer s time is spent performing direct hands-on maintenance. The remaining time is spent on leave, recovering from illness, in training, on travel, and attending to other administrative duties. In addition, some hands-on maintenance tasks are not being recorded. We found from previous studies that the typical range of top-down labor costs that we can account for with the bottom-up labor data ranges from 15 percent to 40 percent. We assessed each maintenance record using the keyword search and aggregated the corrosion costs. Our total OM corrosion labor cost at this point was $6.4 million. Realizing that our bottom-up labor costs did not account for the top-down costs, we applied a scaling factor to each bottom-up labor record so our bottom-up total matched our top-down figure. This factor was , or Applying this factor to the initial OM bottom-up labor corrosion total of $6.4 million yielded a final OM FY2013 labor corrosion costs for node C2 of $22 million. BOTTOM-UP ANALYSIS VESSEL OM COMMERCIAL LABOR AND MATERIALS AND GOVERNMENT MATERIALS COST OF CORROSION (NODE D2 ) Our bottom-up analysis for OM materials was the same as that for OM labor. For each labor record involving a purchase of materials, we identified the materials for that labor record, even though the materials data is contained in a separate part of the database. 4 4,450 personnel from Table 2.16 minus the 515 personnel who work on vessel DIM as shown in Table

59 Coast Guard Vessel Corrosion Cost A Coast Guard established convention links the materials purchases to corresponding labor tasks by matching the records operating facility (OPFAC) and action identification (Action ID) data fields. We demonstrate this convention in Figure Figure Matching Materials Purchases to Corresponding Labor Records Using OPFAC and Action ID Data Fields OPFAC Action ID Corrective Action Labor Hours Materials purchased? Hull_Number Ship_Category Removed failed non-skid surface to bare metal, PPP and applied new nonskid surface 80 No WMEC 615 Cutter Install a roller for the foil in the paint locker hanging over table. 8 No WMEC 623 Cutter Replace explosion cover #1 Main Diesel Engine 8 Yes WMEC 626 Cutter Installed new engine exhaust hoses, alternator, starter, prop, throttle control, changed filters and fluids, completed all scheduled PMS. 9 No WMEC 626 Cutter Prep, prime and paint all bulkheads with soft white (27780) 8 Yes WMEC 167 Cutter Ladder base has a broken weld causing ladder to flex. Clean ladder base to clean bright metal and re-weld. 8 No WMEC 39 Cutter Replace Seal 2 Yes WLR Tenders and Tugs Renew lamp 0.5 Yes WLR Tenders and Tugs Troubleshot and found a wire pulled out of the start/ stop toggle switch. Renewed toggle switch 0.5 Yes WLR Tenders and Tugs Renew Lamp 0.25 Yes WLR Tenders and Tugs OPFAC Action ID Item Name Part Number Quanity Used NIIN Door, Safety Paint, Soft White Seal, Hydrualic Lamp, Searchlight Switch, Toggle Lamp, Incandescent 50-50T Materials or supply records The labor records with the arrows to the side required a materials purchase. The OPFAC and Action ID fields of these labor records are identical to the corresponding materials and supply records. This provided the mechanism by which the materials could be associated with the corresponding labor task. The corrosion costs for materials, therefore, were identified from labor records we flagged for corrosion as a result of the keyword search. When a labor record was flagged for corrosion and materials were purchased, the corresponding materials cost were considered corrosion costs as well. We assessed each maintenance record in this manner and aggregated the materials corrosion costs. Our total OM corrosion materials cost at this point was $3.6 million. When we totaled the materials costs from CMA and MTE, we obtained a figure of $19.0 million. We compared this total to the top-down materials cost total of $110 million (see Figure 3-8). Realizing we had a gap between our top-down and bottom-up materials costs, we applied a scaling factor to each materials record so 3-15

60 our bottom-up total matched our top-down figure. This factor was , or Applying this factor to the initial OM bottom-up materials corrosion total of $3.6 million yielded a final OM materials corrosion cost for node D2 of $20.8 million. FINAL COAST GUARD VESSEL CORROSION COST TREES (NODES A THROUGH D ) We present the complete vessels DIM and OM cost tree with all corrosion nodes in Figure In Figure 3-12, we present the Coast Guard vessels corrosion cost tree with corrosion costs at each major node. Figure Completed Coast Guard Vessel DIM and OM Cost Tree FY2013 ($ in millions) $10,308 Total Coast Guard Spending $M (FY2013) $1,465 Acquisition, Construction, Improvements and Bridges $131 Reserve Training $12 Environmental $202 Health Fund $6,809 Operating Expenses $20 Research, Development, Test and Evaluation $1,669 Mandatory (Retired Pay, Boating Safety, Oil Spill Liability) $1,003 Depot and Intermediate Level Maintenance $4,295 Military and Civilian Pay and Allowances (AFC-01 and AFC-08) $1,185 Operating Funds and Unit Level Maintenance (AFC-30) $326 Other non-maintenance OE Funding $3,006 Non-maintenance $1,289 Maintenance $901 $284 Non-maintenance Maintenance $330 Aviation (AFC-41) $377 Non-aviation and non-vessels $296 Vessels (AFC-45) $365 Aviation labor $534 Non-aviation and non-vessels labor $390 Vessels labor $66 Aviation materials $108 Non-aviation and non-vessels materials $110 Vessels materials $127 Labor $203 Materials $251 Labor $45 Materials $64 DIM $301 Operational $47 DIM $343 Operational $154 Noncorrosion $97 Corrosion A2 $28 Noncorrosion $17 Corrosion B2 $29 Noncorrosion $18 Corrosion A4 $321 Noncorrosion $22 Corrosion C2 $89 Noncorrosion $21 Corrosion D2 3-16

61 Coast Guard Vessel Corrosion Cost Figure Final Coast Guard Vessel Corrosion Cost Tree FY2013 $10.3 billion Coast Guard Spending $9.5 billion Non-maintenance or non-vessel-related maintenance $0.3 billion Coast Guard vessel DIM $0.5 billion Coast Guard vessel OM Laborrelated cost of corrosion Materials and services-related cost of corrosion Laborrelated cost of corrosion Materials and services-related cost of corrosion A B C D $115 million $17 million $22 million $21 million $175 million in annual Coast Guard vessel corrosion cost 3-17

62

63 Chapter 4 Summary and Analysis of Coast Guard Aviation and Vessel Corrosion Costs Based on the analysis presented in Chapter 2 and Chapter 3, we estimated the total annual corrosion cost for Coast Guard aviation and vessels to be $344 million. 1 During the execution of this study, we created a data structure that allowed many different views of this estimate far too many to depict within the body of this report. In this chapter, we extract several of the more interesting summaries and discuss their significance. CORROSION COSTS BY NODE Aviation Corrosion Costs by Node We present the Coast Guard aviation and vessels corrosion costs by node and subnode starting with aviation (Table 4-1). Table 4-1. Coast Guard Aviation Corrosion Cost by Node and Sub-Node FY2013 Node Description of corrosion cost node Maintenance cost (in millions) Corrosion cost (in millions) Corrosion as a percentage of maintenance cost A1 DIM labor (AFC-41) $127 $ % A3 DIM labor (AFC-01 and -08) $64 $8 12.5% B1 DIM materials and services (AFC-41) $203 $ % DIM total $394 $ % C1 OM labor $301 $ % D1 OM materials and services $66 $ % OM total $367 $ % Total all costs $761 $ % In terms of aviation DIM and OM costs, OM labor is the largest contributor to aviation corrosion costs from both a cost and percentage of maintenance standpoint ($97 million, or 32.2 percent of total maintenance). The overall corrosion cost for aviation as a percentage of total maintenance cost is 22.2 percent. This means a significant portion of maintenance costs are the result of corrosion. 1 Although this study includes cost estimates for FY , we present cost information throughout using FY2013 data only to illustrate the analysis capabilities. This saves the reader from having to review the FY charts and graphics that illustrate the same capabilities. 4-1

64 Vessel Corrosion Costs by Node Node We present the Coast Guard vessels corrosion costs by node and sub-node in Table 4-2. Table 4-2. Coast Guard Vessel Corrosion Cost by Node and Sub-Node FY2013 Description of corrosion cost node Maintenance cost (in millions) Corrosion cost (in millions) Corrosion cost as a percentage of maintenance cost A2 DIM labor (AFC-45) $251 $ % A4 DIM labor (AFC-01 and -08) $47 $ % B2 DIM materials and services (AFC-45) $45 $ % DIM total $343 $ % C2 OM labor $343 $22 6.4% D2 OM materials and services $110 $ % OM total $453 $43 9.5% Total all costs $796 $ % Although the AFC-45 DIM Coast Guard vessel labor ($97 million) is the greatest contributor to vessel corrosion costs, nearly all DIM nodes in Table 4-2 show significant corrosion costs from a percentage-of-maintenance standpoint. Vessel DIM corrosion costs are 38.5 percent of maintenance, while vessel OM corrosion costs are only 9.5 percent of maintenance. As a percentage of maintenance, corrosion-related labor and materials and services costs for vessels are similar. We show this in Table 4-3. Table 4-3. Coast Guard Vessel Maintenance and Corrosion Cost Comparison for Labor and Materials FY2013 Type of cost Maintenance costs (in millions) Corrosion costs (in millions) Corrosion cost as a percentage of maintenance cost Labor $641 $ % Materials and services $155 $ % In terms of labor (nodes A2, A4, and C2 in Table 4-2), vessels have a total corrosion cost of $137 million and a maintenance cost of $641 million. This is a corrosion percentage of 21.4 percent. In terms of materials costs (nodes B2 and D2 in Table 4-2), vessels have a total materials corrosion cost of $38 million and a maintenance cost of $155 million. This is a corrosion percentage of 24.5 percent. It also appears that corrosion maintenance is being performed only infrequently within the organizational units, but corrosion maintenance comprises a heavy concentration of the maintenance work performed at the depot and intermediate facilities. 4-2

65 Summary and Analysis of Coast Guard Aviation and Vessel Corrosion Costs CORROSION COSTS BY TYPE AND CLASS We calculated the total corrosion cost as well as the corrosion cost as a percentage of total maintenance cost by type of equipment. Aviation Corrosion Costs by Type and Class In Table 4-4 we show the Coast Guard s aviation equipment ranked by total corrosion cost (from highest to lowest). We show only those aircraft with a fleet size larger than 10 to avoid portraying a skewed picture of the data. Table 4-4. Coast Guard Aviation Equipment Ranked by Highest Contribution to Total Corrosion Cost FY2013 Rank Aviation type General nomenclature Fleet size Maintenance cost (in millions) Corrosion cost (in millions) Corrosion cost as a percentage of maintenance 1 H-65 HH-65, Short-range recovery helicopter 103 $231 $ % 2 H-60 MH-60, Medium-range recovery helicopter 44 $264 $ % 3 C-130 HC-130, Long-range surveillance aircraft 33 $129 $ % 4 C-144 HC-144, Medium-range surveillance aircraft 14 $49 $ % 5 HU-25 HU-25, Medium-range surveillance aircraft 26 $13 $3 25.4% With more than $61 million in corrosion costs, the HH-65 short-range recovery helicopter (see Figure 4-1) is the greatest contributor to Coast Guard aviation corrosion costs. The HH-65 is also the highest contributor from a percentage of maintenance standpoint (at 26.5 percent) although not by a significant margin, as other aircraft are in that range as well. Fleet size seems to be the main reason the HH-65 is the greatest contributor by aircraft type to corrosion cost. Figure 4-1. Coast Guard HH-65 Short-Range Recovery Helicopter 4-3

66 Table 4-5 shows the Coast Guard aviation equipment by average corrosion cost per item. We calculated these costs by attributing the total corrosion costs by aircraft type to the number of items in the inventory for each type. Table 4-5. Top Contributors to Coast Guard Aviation DIM and OM Average Corrosion Cost per Item FY2013 Rank Aviation type Nomenclature Fleet size Corrosion cost (in millions) Average. corrosion cost per item (in millions) 1 C-130 HC-130, Long-range surveillance aircraft 33 $33.5 $ H-60 MH-60, Medium-range recovery helicopter 44 $42.7 $ C-144 HC-144, Medium-range surveillance aircraft 14 $12.4 $ H-65 HH-65, Short-range recovery helicopter 103 $61.2 $ HU-25 HU-25, Medium-range surveillance aircraft 26 $3.2 $0.12 Note: Average corrosion costs per item are rounded. The greatest contributor to the average Coast Guard aviation corrosion cost per item is the HC-130 long-range surveillance aircraft. At $0.97 million per aircraft, the MH-60 medium-range helicopter has an average corrosion cost that is almost as high as the HC-130. Although both total corrosion cost and average corrosion cost per item are useful measures, the most useful analysis may be to combine these two indicators. In Table 4-6, we show the combined ranking for Coast Guard aviation equipment in terms of both total corrosion cost and average corrosion cost per item. Table 4-6. Coast Guard Aviation Equipment with the Highest Combined Ranks of Average Corrosion Cost per Item and Total Corrosion Cost FY2013 Rank Aviation type Description Corrosion cost per item (in millions) Per-item rank Total corrosion cost (in millions) Total cost rank Combined rank a 1 C-130 HC-130, Long-range surveillance aircraft 2 H-60 MH-60, Medium-range recovery helicopter 2 H-65 HH-65, Short-range recovery helicopter 4 C-144 HC-144, Medium-range surveillance aircraft 5 HU-25 HU-25, Medium-range surveillance aircraft $ $ $ $ $ $ $ $ $ $ a Assumes total corrosion cost and corrosion cost per item are of equal importance. Based on a sensitivity analysis, the only change to the combined ranking is the HH-65, which increases in priority if total corrosion costs are weighted more heavily than the average corrosion cost per item. 4-4

67 Summary and Analysis of Coast Guard Aviation and Vessel Corrosion Costs The HC-130 long-range surveillance aircraft and the MH-60 medium-range recovery helicopter are the systems with the highest combined contribution of total corrosion cost and corrosion cost per item. The sequence systems are presented in Table 4-7 suggests a priority for investigating corrosion cost reduction opportunities for Coast Guard aviation equipment. Vessel Corrosion Costs by Type and Class We compared the top 20 contributors to corrosion cost by vessel class (Table 4-7). A complete list of corrosion costs by vessel class is provided in Appendix F. Table 4-7. Top 20 Contributors to Coast Guard Vessel Total Corrosion Cost FY2013 Rank Vessel class Class description Maintenance cost (in millions) Corrosion cost (in millions) Corrosion cost as a percentage of maintenance 1 WMEC 270B Medium endurance cutter $50.7 $ % 2 WHEC 378 High endurance cutter $47.0 $ % 3 WMEC 210B Medium endurance cutter $35.7 $ % 4 RBS 25 Response boat small $64.6 $ % 5 WLB 225B Seagoing buoy tender $34.9 $ % 6 WAGB 420 Icebreaker $28.9 $ % 7 WMSL 418 National security cutter $30.4 $ % 8 MLB 47 Motor life boat $33.5 $ % 9 WPB 87 Patrol boat $16.9 $ % 10 WMEC 270A Medium endurance cutter $20.3 $ % 11 WAGB 399 Polar class icebreaker $16.3 $ % 12 WMEC 210A Medium endurance cutter $17.4 $ % 13 WLB 225A Seagoing buoy tender $14.6 $ % 14 WLM 175 Coastal buoy tender $19.9 $ % 15 WPB 110C Patrol boat $10.8 $ % 16 WPB 110 MEP Patrol boat $12.8 $ % 17 WTGB 140 Icebreaking tug $12.4 $ % 18 RBM Response boat medium $22.0 $ % 19 WIX 295 Training barque $9.0 $ % 20 WMEC 282 Medium endurance cutter $7.9 $ % With almost $15 million in corrosion costs, vessel class WHEC 270B, the Coast Guards 270 foot medium endurance cutter (see Figure 4-2), is the greatest contributor to total vessel corrosion costs. The WHEC 270B is one of the largest vessels in the Coast Guard. It is 378 feet long and has a high amount of superstructure exposed to salt water. The WHEC 270B fleet is also relatively old, with the majority of vessels built in the 1960s and 1970s. 4-5

68 Figure 4-2. Coast Guard Vessel Class WMEC 270B Medium Endurance Cutter Table 4-8 shows the Coast Guard aviation equipment by average corrosion cost per item. We calculated these costs by attributing the total corrosion costs by vessel class to the number of items in the inventory for each class. We show only those vessel classes with an inventory of three or more to avoid depicting a skewed portrayal of the data. Table 4-8. Highest 20 Contributors to Coast Guard Vessel DIM and OM Average Corrosion Cost per Item FY2013 Rank Vessel class Class description Vessel class inventory Corrosion cost (in millions) Corrosion cost per vessel (in millions) 1 WMSL 418 National security cutter 4 $10.3 $2.6 2 WMEC 270B Medium endurance cutter 9 $14.9 $1.7 3 WMEC 270A Medium endurance cutter 4 $6.2 $1.5 4 WHEC 378 High endurance cutter 10 $14.7 $1.5 5 WMEC 210B Medium endurance cutter 9 $11.3 $1.3 6 WMEC 210A Medium endurance cutter 5 $5.5 $1.1 7 WLB 225A Seagoing buoy tender 5 $5.0 $1.0 8 WLB 225B Seagoing buoy tender 11 $10.9 $1.0 9 WTGB 140 Icebreaking tug 9 $4.3 $ WLR 75C River buoy tender 5 $2.1 $ WPB 110C Patrol boat 12 $4.3 $ WLM 175 Coastal buoy tender 14 $4.9 $ WLIC 75D Inland construction tender 3 $0.9 $ WLIC 160 Inland construction tender 4 $1.2 $ WLIC 75B Inland construction tender 3 $0.7 $ WPB 110 non-mep Patrol boat 6 $1.5 $ WPB 110 MEP Patrol boat 18 $4.3 $ WPB 110 OCO Patrol boat 6 $1.3 $ WLR 65A River buoy tender 6 $1.2 $ WYTL 65A Small harbor tug 3 $0.3 $