Scrutinizing Outsourced Maintenance

Scrutinizing Outsourced Maintenance
By Jerome Greer Chandler

Overhaul & Maintenance

November, 2003

As airlines outsource more maintenance, accredited quality systems and vigilant oversight become bigger issues.

As the commercial aviation industry hurtles headlong toward outsourcing more maintenance, is the MRO landscape full of fissures, waiting to swallow airplanes whole? There are those who think so. One of them is John Gogila.

''Things are falling through the cracks,'' said the National Transportation Safety Board (NTSB) member. ''Repair stations are not getting the amount of oversight they need.''

These are strong assertions, stronger certainly than the conclusions reached by the Department of Transportation's Office of the Inspector General (OIG), which concluded in its July 8, 2003, ''Review of Air Carriers' Use of Aircraft Repair Stations'' that the way the current system is constructed, ''could lead to an erosion of safety.''

The OIG says the problem is conditional. Goglia believes it already has arrived. ''Disconnects occur more frequently now with third-party providers,'' he said.

As of December 2002, the OIG report said majors were using repair stations for 47% of their total aircraft maintenance costs. And, ''this year, without question, we have passed the 50% mark,'' said Bruce Strand, president of Strand Associates, a Denver-based consultancy.

How high can the figure go? Teo Ozdener, vice president of technical and engineering for Arlington, Va.-based Morten Beyer & Agnew, contends that within 10 years, Part 121 carriers in the U.S. will outsource 80% of their work.

Increased Oversight? As outsourcing soars, FAA inspection of third parties just isn't keeping pace, according to OIG. ''FAA has continued to focus its surveillance on air carriers' in-house facilities,'' said the report, ''with no comparable shift toward increasing oversight of work performed at repair stations.''

Specifically, the report found Flight Standard District Office inspectors sometimes ''limit their surveillance time at repair stations and do not monitor all phases of repair station operations during their inspections.'' So stretched are FAAs' ranks that in one instance the OIG discovered a single FAA inspector was assigned oversight responsibility for 21 repair stations, 21 agricultural operations, 12 service-for-hire operators, three general aviation operators, two helicopter operators and one maintenance school.

When the OIG visited 12 domestic and nine foreign repair stations, it uncovered a litany of mistakes. At 18 of the 21 third-party providers it visited, mechanics employed incorrect aircraft parts and outdated maintenance manuals, and failed to properly calibrate tools.

When OIG personnel toured foreign repair stations, the number of discrepancies they uncovered was similarly unsettling. It is important to note that, although they are widely used by U.S. air carriers, some FAA-certified repair stations are not directly monitored by FAA inspectors at all. That, said the report, is ''because other civil aviation authorities review these facilities on FAA's behalf.''

The problem OIG found is that those foreign inspectors ''do not provide FAA with sufficient information to determine what was inspected, what problems were found and how they were corrected.'' In 12 of the 16 files that OIG personnel reviewed, inspection documentation provided to FAA was ''incomplete or incomprehensible.''

When FAA did a sample inspection of a repair station that a foreign inspector already had inspected, FAA personnel found 45 deficiencies, many of them related directly to FAA requirements.

As a result of these and other findings, the Inspector General's audit report calls on FAA to correct what it sees as systemic, not isolated, problems by developing a more comprehensive approach to repair station inspections.

But Goglia believes the OIG's analysis missed a critically important point: Ultimately, it is the air carriers, not the FAA, that are responsible for aircraft maintenance.

Who Is Ultimately Responsible? ''The FAA is secondary in oversight,'' said Goglia. ''The primary role is the carrier's.'' He said FAA's job is to monitor what the air carriers do, that ''[FAA is] not the one that goes in there and does the primary inspection.''

Some carriers do oversight right. Others come up short. Goglia believes FedEx does it right, that it invests the time and talent to thoroughly monitor its 14 to 17 airframe, modification and maintenance vendors worldwide.

Goglia had an opportunity to view the FedEx approach in a visit to Aeronavali in Italy, where the giant cargo carrier has contracts for modifications and heavy maintenance of DC-10s and MD-11s.

What's different about FedEx's oversight? ''First off,'' said Goglia, ''they have reps on both sides of the house'' -- maintenance and quality assurance. ''They are on the floor,'' he said, ''not up two buildings away. They're right down on the hangar floor, walking around everyday, getting to know the inspectors first hand, getting to know what they're finding.''

''With quality assurance, engineering and management, we have 12 to 15 people'' at Aeronavali, said Tom Bodamer, FedEx's managing director for air fleet conversions. ''We establish a comprehensive on-site management team. I think that's where we may separate ourselves a little bit from the rest of the other operators.''

This intensive hands-on approach to outsourcing has definitely resulted in fewer squawks and re-work orders, said Bodamer.

The way Goglia sees it, everyone benefits from more intensive oversight -- the carriers as well as the third-party vendors. ''One of the things that seems to surface from people who use their own quality people,'' he said, ''is that they may actually pay for themselves. The product is better. There is less re-work. It also helps you identify costs within the system.

''It boils down to money,'' asserted Goglia. ''Warranty costs go down because claims go down,'' he said.

At maintenance review meetings involving FedEx and its third-party providers, the quality assurance team dissects a slew of metrics: quality, cleanliness, turntimes, the number of non-routine items. ''All of that is exchanged and shared with our suppliers,'' said Bodamer, ''so they know exactly what our expectations are and where we're still having difficulties.'' He considers the information exchange key to rendering oversight truly effective.

FedEx isn't in the businesses of giving business to a vendor based solely on price. ''It's a factor,'' he said. ''But it's way down the list.'' Why? ''If the quality is there,'' said Bodamer, ''the costs will come into line.''

When quality is absent, things can get very problematic very quickly. Goglia has observed just how sticky. When a major carrier audited work done by a third-party provider to whom it had contracted heavy maintenance recently, the results were illuminating.

The airline audited its aircraft after heavy checks had been performed, but before they had left the facility. ''They audited 2,700 job cards,'' said Goglia, who said the repair station improperly completed 462 of them, or 18%.

In a more telling example, Goglia cites an instance where a bolt on a flight control system had an impaired nut and a missing cotter pin. An inspector had signed off the work. What makes the incident so unnerving is that it occurred after the Emery crash. ''Word was out in the industry that this was happening,'' he said. The fact that it happened again, this time absent a crash, is ''an indication that we're not paying attention.''

What does it take to make people pay attention? Teo Ozdener believes a mandated quality management system is a good place to begin.

Sarah MacLeod, executive director of the Aeronautical Repair Station Association, believes the market in essence already regulates quality on its own and that federally mandated quality systems are unnecessary. She also believes that if companies are not employing quality operations, they will not succeed. Does empirical evidence exists which supports that quality assurance systems actually improve quality, MacLeod asked? ''That's the ultimate test in a safety-related environment,'' she said.

FAA actually attempted to mandate quality systems in its new Part 145 rule, but in the final Part 145.201, it withdrew the requirement of establishing and maintaining a quality assurance system. Ozdener said FAA withdrew the requirement because of cost to repair stations, but it might try to revive the quality system issue in a subsequent NPRM in the future.

For those who want to implement a quality system now, ISO 9000 is a popular avenue. ISO 9000 is the International Organization for Standardization's standards requirements for quality management systems. Timco, one of the nation's largest third party providers, has begun subscribing to the universally accepted standard.

''This is a relatively small industry,'' said Timco President Gil West. ''Your reputation proceeds you.'' And nothing so burnishes, or tarnishes, reputation as the attention a company pays to quality. Timco just received AS-9100 certification, effectively the aviation equivalent of ISO 9000, at its Lake City, Fla., facility. That's where Timco works on C-130s. ''We're in the process of getting AS-9100 certification for our other facilities as well,'' said West.

In one part of the western world, quality assurance is mandated. That's the function of the European's JAR-OPS 1.035, which requires that operators establish a quality system to monitor compliance. While the JAA requirement doesn't specify that the quality system the operator establishes conform precisely to the standards or precepts laid out in ISO 9000, Ozdener said that ''JAR-OPS draws heavily on the ISO principles.''

There is no similar mandate under the FARs. ''Although the European authorities require that operators establish a quality system,'' said Ozdener, ''FAA Advisory Circular (AC) 120-59 (''Air Carrier Internal Evaluation Programs'') merely promotes a voluntary program/system.'' The objective of that program is establishment of an IEP, an Internal Evaluation Program, a program, according to the AC, ''based on the premise that certificate holders are primarily responsible for continuously monitoring and ensuring that their operations are safe and in compliance with the FAR.''

Ozdener believes the best way for carriers and third parties to ensure quality is to establish IEPs. ''Outsourcing is good,'' he said. ''But the control is not there.'' IEPs would calibrate that control, offering air carriers and vendors alike a common touchstone, one predicated on improving the system.

The Morten Beyer & Agnew executive contends carriers looking to outsource fall into two categories. ''One entity will go after cheap labor,'' he said. ''They will not go with reputation.'' He contends carriers in financial difficulty with older fleets make up this tier.

The second group, inclusive of carriers such as JetBlue, ''have newer generation aircraft and they want top-of-the-line maintenance.''

''Having someone else do your heavy maintenance should not involve any sacrifice in quality or safety,'' said Tom Anderson, JetBlue's senior vice president of technical operations.

When looking for a third-party provider, Anderson believes a fundamental question is, ''Are they prepared to treat you like a customer. That's first and foremost.'' He said, ''There are lots of bargains out there. But finding a place with good economics and superior quality is more of a challenge these days.'' The issue for him is, ''can these people do the job with the same level of passion and expertise that JetBlue demands?''

Talk to virtually anyone in this business and they'll tell you something to the effect that their mission is to provide, or facilitate, ''safe, efficient and cost effective transport.'' Well and good. The people who utter those words mean them. But the trick is effectuating them, making them jump from two-dimensional corporate mission statements to work cards on the floor, to the mindsets of the people turning wrenches.
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