1998 Speeches
Jim Albaugh

Jim Albaugh

President

Space and Communications

"Partnerships in Space"

AFA National Symposium

November 13, 1998

Panel Members:

Partnerships in Space is a good topic for today. Just the fact that all of us are here, industry and the Air Force working as partners, is a big change from where we were five or ten years ago. If we were to be doing this ten years ago, all the watchdogs would have gotten very twitchy and I'm sure we'd have 60 Minutes come barreling through the doors.

Partnership is all about trust and trusting each other. One of the key roles of leadership is to create that trust and have a strong belief in one another.

In recent years, there has been a massive increase in rules and procedures, across all levels of government and industry, that are designed to protect us from ourselves and from waste, fraud and abuse. Just last week, I got a policy across my desk. It was a 13-page policy on how to conduct bake sales in the workplace!

The effect of all these rules has been a spiraling cycle of distrust and disempowerment. Fortunately, since Dr. Perry's initial thrust on acquisition reform back in 1994, we are seeing a tearing down of those rules and procedures and a build-up in trust and relationships. Companies like Boeing and Lockheed Martin have embraced these new reforms. In fact, just as DoD and the services are changing, the industry is changing as well.

It used to be that DoD would announce a specific need and we would go to the Pentagon and say, give us your money. Today, we ask you to invest your confidence in us. Now, don't get me wrong. We still want your money. But we are prepared to help achieve your goal of better, less expensive hardware developed in less time and we recognize that can happen only through partnering.

Let me tell you how that is happening in The Boeing Company. Just last Tuesday, I was in St. Louis, attending the fifth meeting of the Boeing Leadership Council. This council meets quarterly and includes representatives from the service acquisition executives, NASA Headquarters, the operating group, on-sight customer leaders and the operating group presidents in The Boeing Company. It was attended by Alan Mulally, who heads up our Boeing Commercial Airplane Group; Mike Sears, who is in charge of our Military Aircraft and Missiles Systems Group; and myself. Mike, Alan and I spent the entire day working together with our government customers to bring about change. Why did we do that? Because we think working together within Boeing and with our customer really provides us a competitive advantage.

I'd like to discuss the Boeing model for how the joint Leadership Council works. The customer comes to the table with their objectives for modernization and a list of ways to pay for that modernization. We bring to the table what we think are the core competencies of The Boeing Company, detailed customer focus, large scale, complex systems integration, and lean and efficient design and production systems. Together, we address how to make money for The Boeing Company, how to save the customer money and how to improve reliability, operability and capability.

Here are some of the issues we talked about on Tuesday. We went through how well our processes were working at The Boeing Company. We talked about what some of the new process thrusts should be. And we talked about candidate projects for civil-military integration, such as the complete conversion of our C-17 facility to commercial practices. We also talked about how we could share paperless data, a subject that was discussed early this morning. One of the concerns that we had was that all we would do is digitize what we have already. We have to be very careful we don't fall into that trap.

In the afternoon, Alan and Mike and I talked about how we can help achieve commercial defense integration throughout The Boeing Company. In that area, I think Boeing does have a real advantage in that we are 58-percent commercial and we are 42-percent government. At Boeing, we believe the best way to get that integration is to move people back-and-forth between the different organizations. Certainly Alan Mulally and Mike Sears are two good examples of people who have moved back-and-forth between military and commercial. In fact, many of you probably know that Alan recently left our defense business and has gone over to the commercial airplane group. As a result, Alan is now introducing our commercial people to a concept we all know and love... something called "earned value."

We also spent several hours discussing common technology needs across all of the businesses. Airplanes don't know if they are commercial or if they are military. We talked about technologies like composites, ceramics, propulsion, avionics, design codes and design tools. George Muellner is helping us very much in trying to sort out some of those technology needs.

The point I am trying to make is that, within Boeing, we feel that working together is a real strength for us and our customers.

Partnership with our space customer has really paid off for us. Let me give you some examples. On airborne laser, as a result of acquisition reform initiatives that we have worked on over the last several years, we are going to be able to bring the airborne laser to fruition in six years. Our original concept had it being brought to completion in 12 years.

Another positive result is that, after working very closely with our customer, we recently got an award piece score of 100 percent. We have a customer who is happy with our performance and believe me, a customer who made our whole Boeing team happy with the score and recognition. Talk about a win-win!

In our global positioning satellite program, the customer went from giving us a statement of work to giving us a statement of objectives. They were able to help us reduce the Block 2A to Block 2F costs from $43-million per satellite down to $28-million per satellite. In doing so, we are also going to be able to increase the on-orbit satellite life from six years to 13 years. In addition, we believe there are some great applications for that satellite bus that we can leverage into the commercial area and I would guess that Mike Henshaw is going to talk about that a little later.

Relative to civil-military integration, the other thing we want to do with GPS is to work with our commercial airplane people. Our goal is to figure out how we can land an airplane using GPS alone.

Being a rocket guy, let me talk about what I think is a classic success story of military-civil partnering. It has already been discussed this morning, and that is the evolved expendable launch vehicle, or EELV.

Prior to acquisition reform between 1986 and 1994, there were no less than 18 launch-related studies. Each one attempted to develop a future space transportation program. With flexible acquisition reform, EELV will be flying by 2001. We are going to be able to develop the new Atlas and the new Delta in four years. Now, I was reading the other day that it took Burger King two years to develop their new french fry. If we can do rocket science in four years and it takes them two years to develop a french fry, I think we are on the right track!

On EELV, it was no easy challenge that we got from the Air Force. They set a reduction target of 25-percent for the cost of a payload to orbit and they set a goal of 50-percent. They also decided that, rather than having a winner-take-all procurement, they'd go with two suppliers. This provided a big opportunity for Boeing and Lockheed Martin to get into the commercial launch business without having to go to Baikonur in order to launch Protons or, in the case of Boeing, having to go to Christmas Island to launch Zenits.

To gain an appreciation of how this has worked, let me site an example that I am most familiar with. I was involved at Rocketdyne in the development of the R-68 engine. We decided on a lox-hydrogen solution to the EELV problem because we could get a 30-percent increase in thrust by going with liquid hydrogen rather than kerosene. We went back and looked at our models for developing a new engine and found it would cost $2 billion. We knew, at that cost, that would never meet the design-to-cost goals the Air Force gave us. We took a hard look at why it cost so much historically to develop lox-hydrogen engines and went back and looked at the Space Shuttle Main Engine. What we found was, about 75-percent of the cost and time associated with engine development was tied up in the test, fail and fix loop that we got into once we got the engine at the test stand. Then we peeled the onion some more and found the reason for the test failures was that we were operating in a pump turbine environment we hadn't operated in before and, in addition, we were introducing new technologies.

On the RS-68 engine, we decided to operate the turbine in an environment we knew a lot about from our experience on the Space Shuttle Main Engine. We also decided to introduce no new technologies. We focused on cost, and cost alone. What we were able to do is reduce the number of parts by 93 percent, the number of welds by 95 percent and the amount of labor by 95 percent. So, now we have an engine we are going to develop not in 10 years, but two-and-one-half years. We are going to have an engine with 50 percent more thrust than the Space Shuttle Main Engine and we are going to build it for a fraction of the cost - and I am not going to give that cost number away today.

We have also seen major cost reductions on the rest of the vehicle and on its operations. Secretary Peters talked about what that is going to be worth to the DoD - about $6 billion. We think that is a great investment of the $1 billion they are giving to Lockheed Martin and The Boeing Company. It is also going to allow both companies to go out and compete internationally in the commercial area.

I know Mike [Henshaw] will be talking about communications and information so I won't say a lot about this area. But I would like to discuss the total demand for data by the military. As you can see from the chart, there is quite a short fall. Clearly, the implication is that the DoD is going to have to spend a lot of money or they are going to have to take advantage of the commercial constellations of the future. If you look at the commercial satellite communications business, from satellites to launch to services, it is about $40 billion a year right now. Within 10 years, it will be $160 billion. As a result, there is a great opportunity for the DoD to leverage off what is going on in the commercial satellite area... but they need to get involved early in the development phase.

One thing very clear from the chart is that the DoD can't afford to build up capacity for their peak surge demand. The possibility exists though, that they could use commercial resources to meet these demands in the event of a future threat. There is a good example of how this joint military-civil approach can work and it is called the Civil Reserve Air Fleet. Many of you are probably very aware of that. The DoD invests in strengthening, reinforcing and paying for the operation of commercial airplanes. In return, these aircraft are available for heavy lift duty in the event of a sudden need of the Armed Forces. That was used to quite an extent in the Persian Gulf War.

This same kind of partnering can work in the area of satellites but we need to ensure that, as we work the systems of systems solutions, we get the DoD and the military very involved in the up-front planning of new satellite constellations, like Iridium, Teledesic, Ellipso and others.

Before I close, General Lyles said I was supposed to throw out something controversial so we could have some lively discussion. I'd like to close by bringing up something that hopefully will help the discussion. It has been touched on already this morning. That is the national space policy. We all know the objective of the space policy, for the United States to be a leader in space launch. It also provides for the government to let industry use excess launch capacity on a non-interfering basis. When written, our U.S. launch manifest was about 75-percent government and about 25-percent commercial. In the future, that equation will flip-flop and we will be 75-commercial and 25-government. Commercial launches are now consuming all the excess capacity that is out there and are driving range costs. On Iridium, we got a task from Mike to get the Iridium satellite constellation up in a hurry.

At the range, we were working the government around the clock, seven days a week and they did a terrific job for us, but we drove up their cost structure.

As a result of the need for increased government support for commercial launches, there is a lot of talk about how to share costs more equitably. One approach that everybody talks about is to develop a spaceport after the airport model.

I initially thought that was the right answer. But my launch experts have convinced me that may not be the case.

If you look at an airport, it really has a captive market. If you are in Los Angeles and you want to fly to New York, you are going to go to LAX. You are not going to drive up to San Francisco or drive down to San Diego. Really, what we have with airports are captive markets.

For satellites, though, people like Don Cromer at Hughes are not going from LA to space. They are going from Earth-to-orbit. It is a different model. Other than the constraints of launch mechanics, we can launch satellites from any place in the world. We can launch them at Baikonur. We can launch them at Kourou [French Guiana]. We can launch them in China. These are all locations that are heavily subsidized by their governments.

Right now, our launch operations costs are about 10 percent and my guess is that Mike's are about 10 percent as well. But if we take on more cost sharing, where will that number go to? 15 percent? 20 percent? I don't know what that answer is. The point is, if they go too high we could damage the U.S. commercial launch business and all commercial launches, including those from Boeing and Lockheed Martin, could wind up overseas. Once again, the government could be stuck with all the range costs.

Again, I don't have the answer, but I think it is a bigger issue than Boeing or Lockheed Martin or the Air Force. It really is all about national space policy and we need to work together to come up with the right answer.

The Air Force is taking a leadership role in this. Colonel Jeff Norton is working on a range economic model and The Boeing Company will support him in the development of that model. We intend to take this issue back to Washington to work it on Capitol Hill and drive it towards a conclusion.

I would like to close by saying a little about acquisition reform. I hope this doesn't come across too much like a commercial, but it really is a commercial for what the Air Force has done.

We had a supplier conference in Seattle a couple of months ago. We had some 400 suppliers there and we talked about partnering between Boeing and our customers and between Boeing and our suppliers. We had an artist at the conference who took notes on our discussion of acquisition reform. The result is this mural [displayed on wall at presentation]. The mural takes us from Dr. Perry's message back in 1992 to where we are today and into the future. I hope you'll enjoy looking at it.

Thank you and I look forward to the discussion.