New Limits vs. Service Limits
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Overhauls (excluding for the moment factory remans) can be done to "new limits" or "service limits". Each engine design has a published table of allowable dimensions, or "limits" for the critical parts. The parts are allowed to be within a certain size tolerance when new, or "new limits". As parts wear during service then those tolerances may no longer be met, "service limit" published which define the tolerances for a part in service. If a part cannot meet the service limits then it must be repaired or discarded.

An overhaul is defined as parts being cleaned and inspected to meet service limits. It is completely legal to take a part that does not meet new limits but does meet service limits and put that part into an overhauled engine. As the owner you must decide what is acceptable,and what is cant use again.

Given the expense and disruption of an overhaul it is almost always the right choice to insist that all parts put into the overhauled engine meet new limits. This is known as a "new limits" overhaul, and it will give you a known baseline of wear that is equivalent to a new engine. In some special cases service limits may be acceptable, for example the part in question is hugely expensive to replace or repair and the limits are not far out of new.

Limits are usually defined in terms of a minimum and maximum size measured in thousands of an inch. Dimensional limits are measured with micrometers, bore gauges, calipers, and other precision measuring tools. Limits are sometimes defined as the direct measurement of a part, and sometimes as the clearance or fit between two parts.

You should consider accessory overhauls when doing your engine overhaul. Engine overhaul is probably the best time to do accessories since they're easy to get to and your airplane is offline anyway. Further the overhaul clock gets consistently reset for all of the parts in your engine compartment. A reason not to overhaul an accessory with the engine is low time in service on the accessory, perhaps due to a recent one-off accessory overhaul performed for other reasons.

Accessory overhaul is usually not included in quoted overhaul prices but can be added as an option. You can also manage the accessory overhaul yourself using accessory shops. Typically you'll need to overhaul the following
Carburetor or fuel injection system

Fuel pump
Hydraulic pump
Vacuum pump
Oil cooler
Alternator or generator
Starter
Propeller governor
Magnetos

You might need to overhaul these items as well:

Propeller
Turbos
Exhaust manifolds

For some of these items it can be more cost-effective to just buy a new unit, especially for starters due to the new "lightweight" starter that are on the market now. Another example is replacing older Bendix magnetos which have been subject to too many ADs with a set of new Slick magnetos. Engine overhaul is also a good time to do any upgrades that you've been wanting to do, such as upgrade your old generator to an alternator.

If you have a constant speed propeller you should always overhaul the governor with an engine overhaul. The governor is a high pressure oil pump and it can accumulate dirt and junk that will be pumped right back into your freshly overhauled engine if you slap your governor back on without a cleaning and overhaul.

New vs. Overhauled Engine Parts

Engine overhaul instructions usually specify a set of parts as 100% replacement parts. This includes pistons, rings, bushings, seals, gaskets, etc. For non-factory overhauls this list isn't mandatory but it is a good idea and is accepted practice. Certain parts are hard or impossible to reuse even if you wanted to, such as gaskets and O-rings.

There are also a set of parts that you reuse. These include "steel" parts such as the crankshaft, connecting rods, rocker arms, pushrods, gears and driveshafts. Overhauls also reuse the engine case, accessory case parts, and any accessory drive mounting pads.

All reused parts will be dimensionally inspected and sometimes tested with non-destructive methods for cracks or defects using techniques like Magnaflux (for steel parts) or dye-penetrant tests. Any parts that fail to meet either in-service dimensional limits or new limits if you specify a new limits overhaul will be rejected and replaced no matter what your preferences are. Unfortunately some parts come in matched sets, such as connecting rods, so replacement of one may mean replacement of all which can get to be very very expensive. Fortunately the "steel" parts rarely need replacement.

I had ECI clean, inspect, and overhaul (rebushing, polishing, plating, and installing crankshaft counterweights) all of my steel parts, the case, and accessory pads. ECI also pre-assembles complex parts such as Continental starter adapters. I did get a new camshaft and lifters because my old camshaft had some corrosion and was starting to spall off bits of metal.

A tough choice these days is whether to overhaul existing cylinders or buy new cylinders. New cylinders are relatively cheap, but they're still more expensive than overhauling your existing cylinders. If you have low wear on your existing cylinders, for example they're a first-run set that was previously installed new and has never been overhauled, then there's a good chance they can be overhauled and reinstalled. You may have to go "oversize" on the cylinder bores if they were worn beyond normal limits, but that's ok. Oversize means that the bores are machined out an extra 0.010" bigger than a new cylinders, and correspondingly bigger rings and pistons are installed. The extra material removed from the cylinder bore to get to the oversized dimension is insignificant and you get reset to a known dimension. An overhauled cylinder still gets all the important stuff replaced or freshened up, including valve guides, valve seats, cylinder barrel choke and cylinder barrel honed finish.

Of course if your engine is out of production and you cannot find new parts then you're going to be overhauling by definition. In some cases this may mean resorting to chroming cylinders and reusing parts that would normally be considered throwaways, such as pistons. Unless you're in this situation with an out of production engine, I would recommend staying away from chrome cylinders because they are somewhat unpredictable and the cost isn't justified with new cylinders being relatively cheap.

Personally for a full overhaul would always go with new cylinders. They're roughly double the price of an overhaul of your existing cylinder, but you get a completely new set of cylinders, valves, and valve hardware. For many engines you have a choice of cylinder manufacturer, ranging from factory cylinders, cylinders with through hardened or nitrided barrels, Superior all-steel cylinders with investment cast heads, ECI cylinders with steel barrels, or ECI cylinders with CermiNil barrels. Each manufacturer has their spiel and gimmicks, recommend Superior cylinders because the fit and finish is high, the steel cylinder is a time-proven configuration, and Superior parts appear to have good service life and warranty service. Continental cylinders have been subject to several recalls in recent years, and it would be incredibly annoying to have to pull apart your newly rebuilt engine to send bad cylinders back to the factory due to manufacturing defects.

Engine Installation

When your engine is off the airplane it is a good time to consider whether the engine mounting and connections are in good shape. Most of the time these items are very hard to get to, and they rarely see maintenance as a result. The only real downside of doing them during an overhaul can be the increased time and cost of replacement.

The most important item to consider is flexible hose connections for fuel, oil, vacuum, and hydraulics. Aircraft hoses have a service life limitation and they get brittle with age. The high temperature conditions which exist in engine compartments will age a host faster than if it is located in a cooler environment such as a wing. A brittle hose can break in flight without warning which can have severe consequences.

A five year service life is considered normal. Hoses can last much longer than 5 years in service, so they're not automatic throwaways, but in my book anything older than 10 years or so is suspect. Hoses are usually marked with the date of manufacture either printed on the hose itself or on metal tag attached to the hose. Since you're probably removing at least one end of all the hoses attached to the engine, it is a good time to inspect the hose dates and to flex the hoses. If the hose is hardened it is time to replace it. You'll probably be surprised how old your hoses are. I've pulled out hoses that were original to the airplane (some dating back to the 40s) and when they were flexed the rubber would literally snap in half.

If you have a set of hose mandrels you can make your own hoses for Aeroquip 303/Stratoflex 111 medium-pressure hose. This is a laborious and messy task, but it can save money. If you don't have the mandrels the chances of correct assembly are almost nil, so don't try it. If you don't have the mandrels or the patience you should send your old hoses to a hose shop for replacement. A real hose shop guarantees the hose and pressure tests the replacements. A good shop is Sacramento Sky Ranch.

Besides high-pressure hoses, the air intake hoses on most airplanes are made of "SCAT" or "SCEET" tubing which chafes and wears. If your intake hoses have holes, replace them. Each hole is potentially a place where air is bypassing the air filter or carburetor heat, which can have bad engine life or flight safety consequences respectively.

Consider whether the rubber engine mount vibration isolators are in need of replacement. Often these are replaced during engine overhaul as a matter of course. The rubber becomes cracked and hardened with age. If the rubber is hardened then it won't be a good vibration isolator.

When you go to the expense of overhauling your engine, also spend the time to make sure your air-cooling baffles are tight and are in good condition. Baffles take lots of abuse from chafing and corrosion and often need replacement or repair during engine overhauls. Don't cheap out on the few bucks it will take to replace broken or worn baffles because bad cooling will ruin the best overhaul. Even if your baffles are in good shape, always replace the baffle seals with silicon rubber seals that are cut to the proper length to make a good seal with your airplane's cowling.

Also don't forget to budget for removal and reinstallation of the engine. This can be a time consuming task, and depending on the aircraft you should consider 10 to 20 hours as a minimum.