24-Year, GBP 1.5B contract to Maintain UK’s Hercules Fleet
In mid-2006 the UK MoD added another platform to the expanding list of long-term, performance-based, public-private, “contracting for availability” maintenance solutions for Britain’s key military platforms, by awarding Marshall Aerospace a GBP 1.52 billion contract ($2.86 billion conversion back then) to begin supporting its fleet of C-130 Hercules transport aircraft until 2030.
The deal has several segments, with mechanisms for price adjustments upward and downward as the contract continues. Britain’s SDSR plans may also cut the deal off early, if the entire C-130 fleet retires by 2022 as planned. As prime contractor, Marshall Aerospace is working in partnership with the Defence Logistics Organisation (DLO), the Royal Air Force, Lockheed Martin and Rolls-Royce to deliver the Hercules Integrated Operational Support (HIOS) programme. The HIOS programme will provide guaranteed levels of aircraft availability to a fleet that includes both older C3/C1 models (C-130K stretched and normal) and C4/C5 models (C-130J-30 and C-130J).
Contracts & Key Events
The HIOS contract covers all aspects of Hercules support for 19 C-130K and 24 C-130J aircraft, each of which has 4 engines. Depth maintenance will be provided by Marshall Aerospace at Cambridge. The Royal Air Force will continue to provide front line forward maintenance. All parties will be supported by the Lockheed Martin-led supply chain, and by engine support from Rolls Royce.
Valuing Rolls Royce’s HIOS extension is difficult, because it’s presented as GBP 100 million for 2 extensions. One is for HIOS until 2015, and the other covers the RAF’s VC10 tanker fleet and their Rolls Royce Conway Mk. 301 turbofan jet engines until 2013. Lockheed Martin didn’t announce the value of its portion. UK MoD | Marshall Aerospace | Lockheed Martin | Rolls Royce.
Feb 17/11: Rolls-Royce announces a 1-year contract extension from HIOS prime Marshall Aerospace, valued at over $43 million.
Jan 28/11: NATO deal. HIOS was good advertising. Outside of HIOS, Marshall Aerospace annouces a contract renewal from the NATO Maintenance & Supply Agency (NAMSA), who outsources Unscheduled and Periodic Depot Level Maintenance services for NATO C-130s. NAMSA is NATO’s principal logistics support management agency, and it provides a wide range of logistics support services to NATO armed forces and commands including supply, maintenance, procurement, contract management, and engineering and technical support.
The contract encompasses a full range of C-130 maintenance activities (from ‘drop-in’ repairs to full PDMs, and including Isochronal checks) in support of the USAF over the next 3 years. Overall, Under this contract, Marshall Aerospace is expecting to see up to 10 aircraft a year, from C-130 B-H/K fleets operated by any of the 28 NATO member states, including the RAF C-130K fleet. The first aircraft is expected to arrive at Marshall’s UK facility in Cambridge during the Q1 2011.
Oct 2010: SDSR ends HIOS early? The new government’s Strategic Defence and Security Review [PDF] may shorten HIOS by 8 years, to 2022. One of its elements is to:
“withdraw the C-130J Hercules tactical transport aircraft from service by 2022, a decade earlier than planned, as we transition to the larger and more capable A400M aircraft”
The SDSR also cuts Britain’s planned A400M buy to 22, from 25.
Aug 19/08: Wing replacement. L-3 SPAR announces an $18 million contract under the Royal Air Force’s Hercules Outer Wing Replacement Plan, in order to keep 3 C-130Ks (C1/C3) in service until their planed retirement. This contract is not part of HOIS, as it is brought on by increased wear that stems from use beyond the contract’s scope. The situation is so dire that it’s forcing a number of British C-130s to retire early. Read “L-3 SPAR Wins Life-Extension Contracts for RAF C-130Ks” for more, including the relevant NAO report.
Oct 1/07: The HIOS contract moves from the ‘transition’ to incentivised ‘availability’ phase 2 months early, which will result in additional aircraft available to support operations. The Transition period was originally planned from June 1/06 to Dec 1/07, but the 4 HIOS partners (UK MoD, Marshall Aerospace, Lockheed Martin and Rolls-Royce) decided to accelerate the completion of this period to Oct 1/07.
April 1/07: The UK DLO is merged with the UK Defence Procurement Agency to form Defence Equipment & Support, which will manage HIOS going forward.
Jan 23/07: Smiths Aerospace has been awarded a 5-year contract by Lockheed Martin, with options up to an additional 5 years, worth a potential value of $52 million. The contract includes performance-based logistics (PBL) support for the Hercules Integrated Operation Support (HIOS) Program for C-130J/K aircraft operated by the Royal Air Force (RAF). The work is taking place at Smiths’ facilities in Michigan, Florida, Ohio, New York and Illinois in the United States and in Cheltenham and Gloucester in the United Kingdom. Smiths release.
June 13/06: Rolls-Royce announces business worth GBP 110 million to ensure engine availability over the next 5 years for the UK Ministry of Defence’s fleet of Rolls-Royce powered C-130 Hercules transport aircraft, covering 244 engines. The initial 5-year contract from Marshall Aerospace is part of a longer agreement, for which the firm value to Rolls-Royce has not yet been defined.
Under the terms of the contract, Rolls-Royce will provide all off-wing support for the engines in the fleet until the out-of-service date of 2030 for the C-130J version. Lockheed Martin is the third member of the HIOS team and together, the 3 companies have developed a program to improve overall availability and reduce support costs for the fleet of C-130Ks powered by the T56 (130 engines) and C-130Js powered by the AE 2100 (114 engines).
This new arrangement is incremental to the GBP 48 million contract signed in July 2005 for the support of the AE 2100 engines on the C-130J aircraft. Rolls Royce claims that in the 11 months since signature, Rolls-Royce has consistently delivered engine availability above the contracted level. RR release.
June 2/06: The initial HIOS contract partnership is announced. It covers maintenance and logistics of 19 C-130K and 24 C-130J aircraft with a value of GBP 1.5bn up to March 31/30.
The contract will see up to 60 new jobs created in Cambridge and will help secure work for the future for around 500 staff at Marshall Aerospace who are currently employed in the support of the Hercules fleet. Lord Drayson, Britain’s Minister for Defence Procurement, said that the contract is expected to save taxpayers in excess of GBP 171 million ($322 million at current conversion) over the next 24 years. See MoD release | Marshall Aerospace release | The Manufacturer coverage.