Logistics: Metered Maintenance No Matter What


April 17, 2010:  Another major military weapons system is being maintained by the manufacturer with a "power by the hour" agreement. In this case, it's the two RB199 engines in each of Britain's Tornado jet fighters. The British government is paying Rolls Royce $1.1 billion to take care of several hundred of these engines for the next fifteen years. The deal is what the name implies. The user pays the supplier a variable amount for repairs and replacement of the engines, depending on how many hours the engine is used. This approach has become quite popular, and successful, for commercial, and now military, engines (and other equipment as well). This system gives the maintenance supplier (often the manufacturer) a financial incentive to build the gear to last, and to keep running without untimely failures. This works fine for equipment that is used in known conditions.

There are sometimes serious problems with such arrangements. Two years ago, the Rolls Royce AE1107C jet engines (that drive the propellers) in the U.S. Marine Corps new tilt rotor V-22 aircraft, were wearing out ahead of schedule. That was endangering the "power by the hour" maintenance program. Overall, V-22 engines were expected to last nearly 500 hours (and some have gone over 600 hours), but in Iraq, the average was not quite 400 hours. This was particularly bad news for Rolls Royce, which sold the Department of Defense a "power by the hour" maintenance deal. The peculiar sand and dust in Iraq, in addition to the high temperatures, proved to be so extreme, that they wore down the AE1107C engines faster than Rolls Royce had anticipated. The maintenance deal was renegotiated, but Rolls Royce had to eat a bunch of extra expenses.

"Power by the hour" deals have long been successful with commercial equipment, particularly the engines on airliners, and with major items of industrial equipment in general. The lawyers and engineers have learned to allow for some degree of the unexpected, without ruining the certainty that such agreements bring to owning and operating some very expensive equipment (that cost several million dollars each). Military equipment is another matter, as it often operates in the most extreme conditions and circumstances. But engineers have become much better at predicting when complex equipment will fail, making it possible to offer "power by the hour" maintenance and support contracts. These are much appreciated by military planners, who have to deal with so much uncertainty otherwise.



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