Government versus private industry helicopter operating costs

It turns out that the Port Authority of New York and New Jersey has been operating two Sikorsky S-76 helicopters mostly for “security” at a cost to taxpayers of $4 million per year (nj.com story). Most of the 258 annual flights were weekday flyovers of airports to look for unusual activity (aero-news.net; the implication is that terrorists could do whatever they liked on weekends). If we assume that each flight was for one hour (more than enough time to visit all NY-area airports) and hug the docks), that’s a cost of $15,500 per flight hour.

The S-76 was designed for flights of 200 nautical miles through clouds, e.g., getting 12 oil rig crewmembers out across the North Sea. No private company would consider using a $10+ million S-76 for flying short trips in clear weather with just one or two passengers. Aside from the crushing capital and operating costs, the S-76 is notorious for poor visibility compared to simpler cheaper helicopters.

The operation is being shut down because it turns out that the flights have no value at all. So it is kind of an academic exercise to wonder how much it would have cost if they’d used a Robinson R44, which would have offered superior visibility and more than adequate performance to carry two observers (one on either side) plus a pilot. Nonetheless, let’s run the numbers. Various local flight schools would have been delighted to rent out an R44, with pilot, for $400 per hour (East Coast Aero Club charges $379/hour). So the mission could have been accomplished for approximately 2.4 percent of the cost that the government agency actually spent, resulting in saving approximately $4 million per year in operating costs and $12 million in capital expense.

This may be part of the problem with government stimulus. The government spends 40X more than it needs to in order to accomplish a task in an inferior manner (in this case using the wrong helicopter for the job).

9 Comments

  1. michael

    July 17, 2010 @ 4:58 pm

    1

    This is why all public sector accounting should be real-time, web-accessible, fully open to the public with APIs. We should be able to see who gets paid what as it gets posted.

  2. Greg

    July 18, 2010 @ 5:28 am

    2

    Even real-time, web accessible, API enabled public sector accounting wouldn’t solve boondoggles such as this.

    What needs to happen is the creation of an incentive structure for government operations to run efficiently. Renting out R44s to get the job done is something a startup on a shoestring would do – they would whittle down their ‘needs’ to the really necessary ones and work the problem from the ground up for the lowest cost solution possible. Buying S-76s is the natural inclination of an organization to whom money simply does not matter. It doesn’t enter (much) into the decision making equation because it does not need to.

    How we would create an incentive structure for government agencies to naturally keep their expenses down is way above my pay grade. If someone could pull that trick off however, we would be in a much healthier financial position as a nation.

  3. Tom

    July 18, 2010 @ 9:17 am

    3

    Perhaps some of the requirements included twin engines for safety over urban environments where a single engine requires a place to set it down. Another might be 24/7 availability where sharing it with a flight school would not work. Also special communications equipment is probably needed.
    A better idea would have used the available resources of the other public service organizations that already have a flight department (probably also under used).

  4. philg

    July 18, 2010 @ 10:03 am

    4

    Tom: The sightseeing operators in New York City fly single-engine helicopters around the same areas all day every day. Plenty of police departments nationwide use single-engine helicopters, including R44s (Robinson even makes a police version fully equipped from the factory). A twin-engine helicopter has plenty of single points of failure, including the rotor system and transmission (demonstrated by a $20 million almost-new Sikorsky S-92 crashing into the water off Newfoundland after a transmission failure).

    Special communications equipment would be required? The pilot would be busy talking to ATC in that airspace, so the only people with a communications requirement would be the observers and they could use $49 cellphones wired or Bluetoothed into aviation headsets for noise control.

    A flight school wouldn’t given them 24/7 availability? Speaking as a guy who runs a helicopter flight school, I can tell you that we would be delighted to guarantee availability to a customer who wanted to use a helicopter every day.

    There is a private economy equivalent to this… Metro Traffic. This company supplies traffic information and video to pools of radio and TV stations. In a typical big city, they fly a Robinson R44 newscopter with a TV camera in the nose. They contract with local flight schools to supply a Cessna 172 or similar and fly along the highways during every rush hour. They pay about $100 per hour for the airplane and pilot. They supply a special radio that the flight school installs into the Cessna.

  5. David Wihl

    July 18, 2010 @ 7:20 pm

    5

    The Port Authority simply took The Onion literally.

  6. gene

    July 19, 2010 @ 12:04 pm

    6

    In my past (work) life we built buildings of various types and leased them to the US government. We found universally that we could build and operate the buildings for less than half of what the government was spending for nearly identical buildings. Stupid waste aside (usually caused by using government money to return political favors) we have far too much government in any case. 1st, scale back government at all levels to rational sizes and then make what is left operate as efficiently as possible.

  7. Timon

    July 19, 2010 @ 7:18 pm

    7

    Another example closer to ground: take the San Francisco Municipal Transit Authority. It spends, in operating costs alone, about $1.30 per passenger mile (source: http://www.ntdprogram.gov/ntdprogram/pubs/profiles/2008/agency_profiles/9015.pdf ) , compared with a national average for private cars including the vehicle, gas, etc., of $.50. (source: http://www.irs.gov/newsroom/article/0,,id=216048,00.html ). You could buy everyone who uses Muni a car and still have enough left over to buy them another car, and still have enough left over after that to buy them a motorcycle, for what we spend on their bus drivers. I recommend not going to the ntdprogram.gov website if you read this blog. By comparison you can take a nice chartered coach from the DC to NYC Chinatowns for about $.09 per passenger mile retail (source: https://www.nydcexpress.com/SearchBus.aspx?t=1&from=12&to=17 ). It is not clear exactly how you account for capital expenditures in a system like Muni; what do you call the $1.6 billion, 1.7 mile subway extension that is expected to serve 5,000 weekday additional trips? Suppose you have maintenance costs of one percent per year (conservative). That’s $16 million a year just treading water, plus say $30 in bond payments for the capital. That is about $105 a passenger mile, given its short length, the equivalent to 210 average cars per individual passenger. (check arithmetic here: http://www.sonic.net/~mly/Muni/Third-Street-EIR-Executive-Summary.html .) Maybe you just account for this as an infinite expense, given the pension promises to the people currently working on theses systems. Either way a 40x government wastage factor seems right at a minimum, across modes of transportation.

  8. eric a berg

    July 21, 2010 @ 2:09 am

    8

    My mother in law worked her whole life for the Navy, and I’ve worked my whole adult life at the biggest private company on planet Earth. The helicopter ride is just exactly what you get when you tell a huge company to fix the problem no matter what it costs.
    The problem is: terrorism. People want to feel safe. How do you make airports and skyscrapers safe from terrorism in a free society? Well, you can’t..
    Everyone is to blame so no-one is guilty.

  9. Michael

    July 26, 2010 @ 3:16 pm

    9

    Something about this post really made me smile because I see this kind of inefficiency/excess everyday in the government’s “Making Home Affordable” policy implementation.

    Philip talks in one of his books about the problem of each individual company keeping a database, but due to security concerns among others, each disparate information system can’t “talk” to one another.

    The government purchased one of the most expensive IS solutions on the market from LPS(Lender Processing Services) in order to track each mortgage servicer’s progress through this program. About 80% of the industry uses MSP(Mortgage Servicing Platform), the LPS flagship product.

    On top of everything else, neither solution interfaces with the other anyway. Even with the same company strangling mortgage servicing information technology like an octopus, even they could not offer a turn-key solution for servicers to participate in this government program. Instead most servicers are in the dark, submitting erroneous data, and largely just doing the minimum necessary to suck at the teat of the fatted calf.

    If all of this sounds really expensive, it is. It is the $4 million dollar helicopter solution when the $100k one would have done just as fine. Retirement, financial regulation, foreclosure, and now health care…pick anything the octopus has tried to dip its inky tentacles into and you will find the same track record of excess, waste, error, and ultimately hubris.

    Oh yeah, and in case you’re wondering, FNMA bought one that doesn’t even fly right.

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