    State Department: State Has Initiated a More Systematic Approach
    for Managing Its Aviation Fleet (02-FEB-07, GAO-07-264).

    The Department of State's (State) Bureau of International
    Narcotics and Law Enforcement Affairs (INL) owns 357 helicopters
    and fixed-wing aircraft (valued at over $340 million) primarily
    to help carry out its counternarcotics efforts, such as aerial
    eradication of drug crops in Colombia. INL relies on contractor
    support to help maintain and operate its aircraft. In 2004, GAO
    analysis showed that INL lagged behind other agencies in
    implementing Office of Management and Budget (OMB) and General
    Services Administration (GSA) aviation fleet management
    principles. GAO was mandated to review INL's management and
    oversight of this fleet. GAO specifically examined (1) the extent
    INL has complied with OMB and GSA aviation fleet management
    guidance and (2) how INL has overseen its aviation support
    contracts. Since INL has undertaken initiatives to address the
    weaknesses GAO observed, GAO makes no recommendations. GAO will
    follow up to ensure that these initiatives are completed, as
    planned. In comments on this report, State highlighted reforms
    under way. State also indicated that INL conducted analyses to
    justify most aviation investments. GAO notes, however, that the
    documentation provided did not reflect the key analyses called
    for by OMB guidance.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-07-264
        ACCNO:   A65524
      TITLE:     State Department: State Has Initiated a More Systematic
    Approach for Managing Its Aviation Fleet
         DATE:   02/02/2007
      SUBJECT:   Aircraft
    	     Aviation
    	     Contract administration
    	     Contract oversight
    	     Cost effectiveness analysis
    	     Federal regulations
    	     Investment planning
    	     Narcotics
    	     Procurement
    	     Procurement planning
    	     Program management
    	     Requirements definition
    	     Strategic planning
    	     Government agency oversight
    	     Policies and procedures

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    GAO-07-264

         * [1]Results in Brief
         * [2]Background

              * [3]Federal Guidance for Aircraft Management

         * [4]State Did Not Employ a Systematic Process for Managing Its A

              * [5]Comprehensive Strategic Assessment of Long-term Fleet Requir
              * [6]Justification of Aviation Fleet Investments Decisions

                   * [7]Analyses of Alternatives Were Not Prepared Until Recently
                   * [8]INL Had Not Established Acquisition Policies and
                     Procedures

              * [9]Assessment of Fleet Composition and Performance

                   * [10]Aviation Fleet Composition
                   * [11]Aircraft Cost and Usage Data

         * [12]INL Has Met Contract Oversight and Evaluation Requirements

              * [13]DynCorp International
              * [14]Lockheed Martin
              * [15]ARINC
              * [16]INL Plans to Centralize Contractor Oversight

         * [17]Conclusions
         * [18]Agency Comments and Our Evaluation
         * [19]GAO Comments
         * [20]GAO Contact
         * [21]Staff Acknowledgments
         * [22]GAO's Mission
         * [23]Obtaining Copies of GAO Reports and Testimony

              * [24]Order by Mail or Phone

         * [25]To Report Fraud, Waste, and Abuse in Federal Programs
         * [26]Congressional Relations
         * [27]Public Affairs

    Report to Congressional Committees

    United States Government Accountability Office

    GAO

    February 2007

    STATE DEPARTMENT

    State Has Initiated a More Systematic Approach for Managing Its Aviation
    Fleet

    GAO-07-264

    Contents

    Letter 1

    Results in Brief 3
    Background 6
    State Did Not Employ a Systematic Process for Managing Its Aviation Fleet
    in Accordance with OMB and GSA Guidance, but Plans to Do So Are Under Way
    12
    INL Has Met Contract Oversight and Evaluation Requirements 20
    Conclusions 24
    Agency Comments and Our Evaluation 25
    Appendix I Scope and Methodology 27
    Appendix II Comments from the Department of State 30
    GAO Comments 34
    Appendix III GAO Contact and Staff Acknowledgments 36

    Table

    Table 1: Funds Allocated for Aviation Activity for Fiscal Years 2002-2006
    9

    Figures

    Figure 1: Worldwide Distribution of INL Aircraft as of September 1, 2006 6
    Figure 2: Examples of Aircraft Owned by INL 8
    Figure 3: Aviation Fleet Management Planning Process 11

    Abbreviations

    GSA General Services Administration
    INL Bureau of International Narcotics and Law Enforcement Affairs
    NAS Narcotics Affairs Section
    OMB Office of Management and Budget

    This is a work of the U.S. government and is not subject to copyright
    protection in the United States. It may be reproduced and distributed in
    its entirety without further permission from GAO. However, because this
    work may contain copyrighted images or other material, permission from the
    copyright holder may be necessary if you wish to reproduce this material
    separately.

    United States Government Accountability Office

    Washington, DC 20548

    February 2, 2007

    The Honorable Patrick J. Leahy
    Chairman
    The Honorable Judd Gregg
    Ranking Minority Member
    Subcommittee on State, Foreign Operations, and Related Programs
    Committee on Appropriations
    United States Senate

    The Honorable Nita M. Lowey
    Chairman
    The Honorable Frank R. Wolf
    Ranking Minority Member
    Subcommittee on State, Foreign Operations, and Related Programs
    Committee on Appropriations
    House of Representatives

    Since fiscal year 2001, Congress has appropriated about $5 billion to the
    Department of State's (State) Bureau of International Narcotics and Law
    Enforcement Affairs (INL) for counternarcotics, counterterrorism, and law
    enforcement programs. State owns an aviation fleet--primarily to help INL
    carry out its counternarcotics efforts--that, as of September 1, 2006,
    totaled 357 aircraft.^1 Valued by State at over $340 million, the fleet is
    the second largest among U.S. government civilian agencies and includes
    aircraft in the United States and seven other countries--Afghanistan,
    Bolivia, Colombia, Ecuador, Mexico, Pakistan, and Peru. INL has allocated
    about $2.2 billion for aviation activities during fiscal years 2002
    through 2006. The aircraft are property of the U.S. government, though
    some are provided to countries on a no-cost lease basis. INL uses
    contractor support to help operate and maintain the aircraft, which are
    used in a wide variety of counternarcotics operations, from spraying
    herbicides on coca and opium poppies in Colombia and transporting the
    Colombian Army in support of its operations^2 to helping to secure the
    border between Afghanistan and Pakistan. When called upon, INL aircraft
    may also be used to conduct medical evacuations, search and rescue
    missions, and other counternarcotics-related operations. INL acquired a
    significant portion of its fleet since 2000 to support the implementation
    of Plan Colombia, established by the Colombian government in 1999 to
    reduce the cultivation, processing, and distribution of illegal narcotics
    by 50 percent over 6 years, among other goals.

    ^1This figure includes 55 fixed-wing airplanes and 222 rotary-wing
    helicopters that were operational. Of these aircraft, 41 were operated and
    maintained fully by the host government where they were based. An
    additional 80 were nonoperational and were in storage.

    In recent years, funding for INL's aviation fleet has been provided
    primarily through the Andean Counterdrug Initiative and the International
    Narcotics Control and Law Enforcement appropriations. Most of the aircraft
    are managed by INL's Office of Aviation (also called the Air Wing)
    headquartered at Patrick Air Force Base in Florida. However, other
    aircraft are managed by INL offices (often called a Narcotics Affairs
    Section or NAS) in the U.S. embassy in the countries where the aircraft
    are stationed.

    In 2004, we reviewed the management of Air Wing's operations and found
    that the Air Wing had not implemented several key principles of fleet
    management planning, as outlined in Office of Management and Budget (OMB)
    and General Services Administration (GSA) guidance.^3 This guidance is
    intended to help agencies make sound decisions in acquiring aircraft and
    managing their aviation fleets. At that time, our analysis showed that INL
    lagged behind other federal programs we reviewed, particularly in terms of
    long-term planning and justifying acquisitions. Also, in its report on
    State's fiscal years 2004 and 2005 financial statements, State's external
    financial auditor noted that State had ineffective controls over its
    aviation fleet and cited this shortcoming as a material weakness.^4 More
    recently, State's Office of Inspector General reported that, due to
    ineffective controls in tracking and reporting on its fleet, State
    underreported the value of its aircraft and parts by $162 million.^5 In
    2005, the Senate Appropriations Committee commented that the lack of
    central program management and funding for INL aviation programs has
    resulted in contract cost growth, poor execution, and inadequate financial
    management. The committee directed the Comptroller General to review the
    management and oversight of State's aviation fleet.^6

    2INL's aviation fleet is primarily used for counternarcotics programs.
    However, in 2002 and subsequent years, the Congress provided expanded
    authority for the use of U.S. assistance to Colombia. This authority
    enables the government of Colombia to use U.S.-provided helicopters and
    other counternarcotics assistance to combat groups designated as terrorist
    organizations, as well as drug production and trafficking.

    ^3GAO, Federal Aircraft: Inaccurate Cost Data and Weaknesses in Fleet
    Management Planning Hamper Cost Effective Operations, [28]GAO-04-645
    (Washington, D.C.: June 18, 2004).

    ^4Audit of the U.S. Department of State 2005 and 2004 Principal Financial
    Statements (AUD/FM-06-12A, December 2005).

    In response to this mandate, we reviewed INL's overall management of its
    aviation programs. We specifically examined (1) the extent to which INL
    has managed its aviation fleet in accordance with OMB and GSA guidance and
    (2) how INL has overseen aviation support contracts and whether it did so
    in accordance with applicable standards.

    To address these objectives, we reviewed OMB and GSA guidance and related
    federal regulations for managing aircraft and other capital asset
    programs, as well as applicable federal financial and contract management
    regulations and guidance. We reviewed policy, program, budget, and
    financial documentation and interviewed cognizant officials at INL in
    Washington, D.C. We also examined applicable documentation and interviewed
    INL and contract officials about fleet operations, financial management,
    and contract oversight at the Air Wing's main operating base at Patrick
    Air Force Base, Florida, and at various sites in Colombia. We chose
    Colombia because about two-thirds of INL's active aviation fleet is in
    that country and three contractors carry out aviation programs there. See
    appendix I for a more detailed description of our scope and methodology.
    We conducted our review from February 2006 through January 2007 in
    accordance with generally accepted government auditing standards.

    Results in Brief

    INL has not employed a systematic process for managing its aviation fleet
    that adheres to OMB and GSA guidance. This guidance entails three key
    principles: (1) assessing a program's long-term fleet requirements, (2)
    acquiring the most cost-effective fleet of aircraft to meet those
    requirements, and (3) assessing fleet performance. Since INL offices have
    acquired and deployed hundreds of aircraft in response to the emerging
    needs of U.S. counternarcotics foreign assistance programs without fully
    adhering to federal aviation fleet guidance, INL has limited assurance
    that its aircraft investment decisions have been cost-effective for the
    government. In October 2006, INL began to take initiatives to centralize
    key aspects of aviation fleet management and address the following three
    key areas of noncompliance with OMB and GSA guidance we identified:

    ^5See Audit of the Department's Reporting of Aircraft and Aircraft Parts
    (AUD/IP-06-35, September 2006).

    ^6S. Rept. 109-96 (Senate Committee on Appropriations, Report on
    Department of State, Foreign Operations, and Related Programs
    Appropriations Bill, 2006, p. 62).

               o Strategic planning for aviation-related activities was not
               comprehensive. According to OMB and GSA guidance, a strategic
               assessment of long-term fleet requirements is the basis of sound
               fleet management. Beginning in 2004, Air Wing prepared a strategic
               plan for its Air Wing operations and developed a Critical Flight
               Safety Program to rebuild certain aircraft and replace others to
               meet projected aerial eradication needs. This planning effort,
               however, did not address the long-term aircraft needs of other
               types of counternarcotics and counterterrorism activities not
               managed by the Air Wing, such as providing aircraft to support
               certain programs with the Colombian National Police and the
               Colombian Air Force. INL plans to complete an aviation fleet study
               in fiscal year 2007, which is intended to analyze the bureau's
               overall aircraft needs and form the basis for a long-term plan.
               o Aviation fleet investments were not systematically justified.
               INL has funded major, multimillion dollar aircraft investments,
               including the acquisition of aircraft and major overhauls of older
               assets, without conducting formal analyses to justify them.
               According to OMB guidance, agencies should justify major
               investments in their aviation fleet with a capital asset plan and
               business case, which, among other things, analyzes three viable
               alternatives and calculates their life cycle costs. According to
               OMB and GSA officials we consulted, without such analyses, State
               cannot demonstrate that the investments included in the
               department's budgets are the most appropriate and economical for
               its missions. According to INL officials, however, adherence to
               federal guidance was not always practical for INL during the years
               after Plan Colombia implementation began in 2000, as program
               managers needed to respond rapidly to political exigencies by
               acquiring readily available surplus aircraft and procuring new
               aircraft specifically mandated by legislation. According to INL
               officials, INL has tasked a consulting firm to conduct the formal
               analyses of alternative approaches needed to justify future
               aircraft investments in accordance with OMB guidance. The analyses
               are planned to be completed in 2007. Also, INL plans to issue an
               aviation program policy guide in 2007 to establish policies and
               directives on aircraft investments.
               o Aviation fleet cost and performance were not routinely assessed.
               INL was not routinely reviewing the composition of its entire
               fleet, as called for under OMB guidance, to demonstrate that its
               aircraft are the most appropriate and cost-effective to meet
               mission requirements. Furthermore, INL is hampered in assessing
               the performance of its fleet by a lack of comprehensive and
               reliable aircraft cost and usage data. INL's planned aviation
               fleet study is expected to include an assessment of the soundness
               of the composition of INL's aviation fleet and identification of
               appropriate performance measures to be included in an annual
               performance plan. In 2007, INL also plans to make improvements in
               the compilation of cost and usage data for its aircraft.

               In managing its aviation support contracts, INL has met both
               State's overall requirements and contract-specific oversight and
               management requirements. Air Wing and NAS officials interacted
               frequently with contract managers, made regular site visits, and
               reviewed regular progress reports. Furthermore, INL has
               established performance metrics and used them to ensure that
               contractors are meeting the terms of their contracts. For example,
               in 2005, State and DynCorp International entered into a new
               contract, whereby INL and DynCorp assess performance using an
               extensive set of indicators. Implementation of this performance
               measurement system has been challenging for both INL and the
               contractor. Metrics have not yet been developed for all aspects of
               contractor performance, and reliable data are not yet available
               for some indicators. Nonetheless, INL has used other key metrics,
               particularly aircraft operational readiness rates, to hold its
               contractors accountable for contract performance requirements. To
               ensure greater consistency in the implementation of aviation
               support contracts, INL plans to assign Air Wing the primary
               responsibility for managing and overseeing all aviation support
               contracts.

               Since INL has undertaken a number of initiatives to address the
               management weaknesses we observed, we are not making any
               recommendations in this report. However, we will follow up with
               INL to ensure that these initiatives have been completed in 2007,
               as planned.

               In commenting on a draft of this report, State highlighted the
               management initiatives under way at INL to improve the
               effectiveness and efficiency of aviation fleet operations, as well
               as to adhere to OMB and GSA guidance. State also indicated that,
               contrary to the observations in our report, INL conducted analyses
               to justify most aviation investments. However, the documentation
               that INL provided to us did not reflect the analyses called for by
               OMB guidance.

    			  Background

               INL manages its aviation fleet in a decentralized manner. The Air
               Wing manages about two-thirds of INL's 357 aircraft, while the NAS
               at four embassies manages the remainder. Figure 1 shows the
               distribution of INL supported aircraft worldwide.

    Figure 1: Worldwide Distribution of INL Aircraft as of September 1, 2006

    Note: The principal locations of the aircraft are indicated; aircraft may
    be relocated on a temporary basis as necessary.

    The Air Wing is responsible for assisting host nations eradicate illicit
    drug crops and detect, monitor, and interdict drug production and
    trafficking operations. In Colombia, it also assists the Colombian Army
    with counterterrorism operations. To accomplish these missions, through
    its contract with DynCorp International, the Air Wing uses an active fleet
    of 179 aircraft, including helicopters and fixed-wing airplanes, to
    undertake aerial eradication in Colombia; support manual eradication of
    drug crops in Afghanistan, Bolivia, and Peru; and enhance border security
    between Afghanistan and Pakistan. Operations often take place in hostile
    environments, which can place aircraft and personnel under small arms
    fire. These programs are managed by the Air Wing headquarters office at
    Patrick Air Force Base in Florida. As the aircraft program's contractor,
    DynCorp performs major maintenance and initial pilot training at Patrick
    Air Force Base and flies and maintains U.S. aircraft and trains foreign
    personnel at various locations in Afghanistan, Bolivia, Colombia, Peru and
    Pakistan. Training for some of the spray aircraft is also conducted at
    Kirtland Air Force Base in New Mexico, a location that helps simulate the
    mountainous environment of Colombia.

    In addition, the NAS offices within the U.S. embassies in Colombia,
    Ecuador, Mexico, and Peru manage a total of 98 aircraft to support a
    variety of host government counternarcotics efforts, with the involvement
    and oversight of the INL Office of Latin American Programs. For example,
    through contracts with ARINC and Lockheed Martin, the NAS in Colombia
    provides aircraft to assist the (1) Colombian Air Force in interdicting
    suspicious aircraft and (2) Colombian National Police in conducting aerial
    eradication and interdiction operations, humanitarian missions, and other
    activities. The NAS in Mexico provides both new and older model U.S.
    government-owned helicopters to Mexico's Office of Attorney General for
    use in counternarcotics operations, including aerial surveillance, border
    security, and training. INL also funds ARINC to assist the Government of
    Mexico in maintaining these aircraft.

    INL supports a wide variety of rotary and fixed-wing aircraft. Some are
    excess defense aircraft that have been refurbished, while others were
    purchased for use in INL programs. Figure 2 depicts examples of types of
    aircraft owned and supported by INL.

    Figure 2: Examples of Aircraft Owned by INL

    Most of the funds used to support INL's aviation fleet come from two
    annual appropriations--the International Narcotics Control and Law
    Enforcement and Andean Counterdrug Initiative--and supplemental
    appropriations in some years. During fiscal year 2002 through 2006, INL
    records indicate that it allocated about $2.2 billion for its aviation
    activities. Table 1 shows a breakdown of the total amount allocated for
    aviation activities by fiscal year and appropriation.

    Table 1: Funds Allocated for Aviation Activity for Fiscal Years 2002-2006

    Dollars in millions
                      International Narcotics Control Andean Counterdrug
    Fiscal year                and Law Enforcement         Initiative    Total
    2002                                     $67.6             $289.0   $356.6
    2003                                      76.1              366.3    442.4
    2004                                     125.3              316.4    441.7
    2005                                     175.6              313.7    489.3
    2006                                     168.4              348.0    516.4
    Total                                   $613.0           $1,633.4 $2,246.4

    Source: INL "Congressional Notifications" and "Congressional Budget
    Justifications."

    INL allocates its aircraft funds to a NAS for some country programs and to
    the Air Wing. INL aircraft funding is also embedded in various program
    budgets, such as the Air Bridge Denial Program in Colombia. These program
    funds are primarily used to pay for three aviation support contractors
    that repair and maintain the aircraft, train aircraft crews and mechanics
    and, in some instances, fly the aircraft.

    Federal Guidance for Aircraft Management

    OMB provides the following guidance for State and other agencies to follow
    in managing capital acquisitions, including aviation programs:

               o Circular No. A-126,^7 which is intended to minimize cost and
               improve the management and use of governmental aviation resources,
               prescribes policies for acquiring, managing, using, accounting for
               the costs of, and disposing of aircraft. According to the
               circular, agencies should not have more aircraft than they need to
               fulfill their mission, and they should periodically review the
               cost effectiveness of their entire fleet of owned aircraft.
               o Circular No. A-76 establishes policy for the competition and
               contracting out of commercial activities, including the use of
               aircraft, and provides guidance for conducting cost comparisons to
               determine if the private sector could provide aviation services at
               a lower cost.^8
               o Circular No. A-11, Part 7, establishes policy for planning,
               budgeting, acquisition, and management of federal capital assets,
               including aircraft, and requires agencies to submit a capital
               asset plan and business case summary (an "Exhibit 300") for all
               major capital investments, including aircraft acquisitions and
               overhauls.^9 The exhibit should demonstrate that the agency
               analyzed three alternatives and calculated the life cycle costs
               for each. OMB provides procedural and analytic guidance, including
               its "Capital Programming Guide,"^10 for implementing specific
               aspects of this policy.

               OMB Circular No. A-126 also sets out responsibilities for GSA
               regarding aircraft management. In implementing this circular, GSA
               establishes governmentwide policy on various aspects of aircraft
               management, including procurement, operation, safety, and
               disposal, and publishes its regulatory policies in the Code of
               Federal Regulations. GSA, through the Interagency Committee for
               Aviation Policy,^11 also published a number of other guides and
               manuals to help agencies manage aircraft acquisitions, use, and
               disposal. Its "Fleet Modernization Planning Guide," in particular,
               aids programs in developing cost-effective fleet replacement
               plans.

               A comprehensive aviation fleet management planning process
               detailed in guidance that OMB and GSA have issued can help federal
               aircraft programs ensure that they acquire, manage, and modernize
               their aircraft in a cost-effective manner. Sound fleet management
               decisions should be based on a comprehensive process that relies
               on three key principles: (1) assessing a program's long-term fleet
               requirements, (2) acquiring the most cost-effective fleet of
               aircraft to meet those requirements, and (3) assessing fleet
               performance to determine if the needs are being effectively met.
               Figure 3 illustrates the fleet management planning process,
               showing that it is a continuous cycle of planning and analyses.

               Figure 3: Aviation Fleet Management Planning Process

    			  State Did Not Employ a Systematic Process for Managing Its Aviation
    			  Fleet in Accordance with OMB and GSA Guidance, but Plans to Do So
    			  Are Under Way

               Although INL has made limited progress since we first assessed the
               Air Wing's aviation fleet management in 2004 in adhering to OMB
               and GSA guidance, the bureau plans to undertake a more systematic
               management approach beginning in 2007.^12 The bureau has not (1)
               conducted a strategic assessment of all long-term fleet
               requirements, (2) justified new aircraft investments in a
               systematic way that considers the range of alternatives and life
               cycle costs, or (3) routinely reviewed the performance of the
               fleet to ensure that its composition is the most appropriate and
               cost-effective to achieve the bureau's missions. In August 2006,
               we shared our observations with INL officials about INL not
               adhering to OMB guidance, particularly in justifying new aircraft
               investments and analyzing the composition of the aviation fleet.
               In September 2006, after completing its own review of aviation
               program operations, INL officials told us that in October 2006
               they would be initiating a number of steps to resolve weaknesses
               we observed.

    			  Comprehensive Strategic Assessment of Long-term Fleet Requirements

               According to GSA's guidance and the OMB "Capital Programming
               Guide," a strategic assessment of the long-term fleet requirements
               is the foundation of fleet management because it identifies future
               workload requirements that serve as the basis for aircraft needs.
               The assessment process includes specific analyses, such as an
               assessment of the number of flight hours needed to meet mission
               requirements over a multiyear period and the capability of
               existing aircraft to meet those requirements cost effectively. The
               guidance recommends that, if shortfalls in the current mix of
               aircraft are identified, managers should determine the optimal mix
               of aircraft to meet anticipated flight hour and mission
               requirements and develop a proposed fleet acquisition or
               replacement plan to achieve the desired mix of aircraft. This plan
               could include an anticipated schedule of time frames for disposing
               of inadequate aircraft and procuring replacements.

               In 2004, we reported that Air Wing had not engaged in long-term
               planning to estimate the future, long-term mission requirements
               and what mix of aircraft was best suited for these requirements.
               Fleet planning was primarily short-term in nature and focused on
               identifying aircraft to meet current and the next year mission
               requirements.

               Since 2004, INL has prepared a strategic plan and a Critical
               Flight Safety Program for Air Wing operations. The Air Wing's
               strategic plan addresses the goals and long-term needs of its
               program in terms of operations, maintenance, logistics, safety,
               administrative/contract support, and information technology and
               communication. While the strategic plan does not analyze the
               flight hours needed to meet mission requirements, it does specify
               other operational requirements, including the total area of
               illicit crops to be sprayed and eradicated over a number of years.
               The strategic plan, completed in April 2004, also indicates the
               mix of aircraft assets and personnel necessary to meet these
               goals. The Air Wing's Critical Flight Safety Program specifies how
               the Air Wing plans to achieve the goals in its strategic plan with
               the aircraft available--primarily through a combination of
               aircraft overhauls and aircraft acquisitions.

               However, the Air Wing strategic plan and accompanying Critical
               Flight Safety Program did not address the aircraft needs of
               several INL aviation-related activities. For example, the
               strategic plan did not estimate the operational requirements or
               flight hours needed to continue supporting the Colombian Army's
               operations, including protection of the Cano Limon-Covenas
               pipeline.^13 Further, the Critical Flight Safety Program did not
               address the long-term aircraft needs of other INL aviation-related
               programs, such as assistance to the Colombian National Police or
               the Colombian Air Force's Air Bridge Denial Program,^14 or
               assistance to Mexico's Office of Attorney General. These other
               programs represent over a third of INL's active aviation fleet
               and, in some cases, aircraft are closely related to Air Wing
               operations, such as the aircraft that NAS Colombia provided to the
               Colombian National Police to support aerial eradication.

               According to INL officials, INL plans to conduct an aviation fleet
               study in fiscal year 2007. The study is expected to take 9 months
               to complete and include a needs analysis of INL's current aviation
               fleet. The resulting report is expected to specify aircraft
               requirements in terms of a number of variables, including payload,
               range, speed, endurance, availability, and maintainability, among
               other factors. This study is intended to form the basis of a
               long-term plan for all aviation-related programs in 2007.

    			  Justification of Aviation Fleet Investments Decisions

               Until recently, INL had not taken actions to prepare the analyses
               prescribed by OMB and GSA to help justify aviation fleet
               investment decisions. Nor had INL established a set of policies
               and procedures for aviation acquisitions.

    			  Analyses of Alternatives Were Not Prepared Until Recently

               According to GSA guidance, after identifying potential aircraft
               and developing a proposed fleet replacement plan, aviation
               managers should develop a series of analyses to identify and
               acquire the most cost-effective aircraft to meet mission needs.
               These analyses should include preparing a study, as described in
               OMB Circular No. A-76, to determine whether the aviation
               operations should be performed by the government or contracted to
               the private sector. Also, for all major investments, agencies
               should prepare a capital asset plan and business case summary as
               described in OMB Circular No. A-11, Part 7, Exhibit 300, which
               should include the results of an analysis of three alternatives,
               in addition to the current arrangement, to help ensure that the
               most cost-effective investment is selected. For this comparison of
               alternatives, a life cycle cost analysis is needed to provide
               managers with important information concerning the total cost of
               operating and maintaining an aircraft over its useful life. Such
               documents should be prepared to support acquisition of new
               aircraft, as well as modernization or enhancements of aircraft
               already in operation. Once these analyses are completed, aviation
               managers should obtain senior management approval and then acquire
               needed aircraft or commercial aviation services.

               In 2004, we reported that INL used no set criteria for Air Wing
               aircraft acquisitions and could not provide any A-76 cost
               comparison studies or cost-benefit analyses supporting its
               aircraft acquisitions. According to INL officials, the exigent
               circumstances of its programs precluded preparation of
               cost-benefit and other detailed analyses. INL acquired a large
               number of aircraft since 2000 to support Plan Colombia and other
               counternarcotics and counterterrorism efforts in Colombia,
               including 33 UH-1N, 25 UH-II, and 14 UH-60 Black Hawk helicopters.
               Some of the aircraft acquired were surplus aircraft that were made
               available under a relatively short time frame; other aircraft
               acquisitions were congressionally directed.

               Since 2004, INL has continued to make multimillion dollar
               investments in its aviation fleet, both by acquiring new aircraft
               or refurbishing older aircraft it had previously acquired, without
               conducting the analyses prescribed by OMB. According to officials
               we spoke to at OMB, the Air Wing, NAS Colombia, and the Office of
               Latin America Programs, the bureau has never prepared OMB-required
               justifications, as laid out in Circulars Nos. A-76 and A-11, for
               any of its aircraft investments. For example, in fiscal year 2006,
               the Air Wing began implementing its Critical Flight Safety
               Program, expected to cost a total of $356 million over 6 years, to
               upgrade and overhaul the aviation fleet used for Air Wing
               operations. This investment includes refurbishing several Vietnam
               era OV-10 observation airplanes and UH-1N helicopters to extend
               their useful life and make them more commercially supportable and
               procuring new UH-60 and UH-II helicopters. However, the
               documentation Air Wing provided us did not include cost-benefit
               analyses of alternatives or a calculation of life cycle costs for
               each element of the program. Similarly, in 2004, INL began
               acquiring 12 new Schweizer SAC 333 helicopters to support Mexico's
               Office of Attorney General's antinarcotics efforts, at a cost of
               about $15 million, without conducting the analyses called for in
               OMB Circular Nos. A-76 and A-11 to justify the acquisitions.

               According to OMB and GSA officials we consulted, without the
               analyses called for in OMB guidance, State cannot be reasonably
               certain whether the aircraft procurements and refurbishments
               reflected in their budgets are the most appropriate and economical
               alternatives. In particular, we found little evidence that
               important cost and operational considerations were formally taken
               into account when INL decided to refurbish OV-10 spray aircraft. A
               NAS Colombia official indicated that this was not an appropriate
               investment for Colombia because, among other reasons, the
               Colombian government does not have the capacity to maintain these
               aircraft after U.S. support for the aerial eradication program
               ends. The NAS, therefore, decided to purchase new and commercially
               available AT-802 crop dusting aircraft to conduct aerial
               eradication in Colombia. Representatives of DynCorp International,
               the contractor responsible for maintaining both aircraft, argued
               that the AT-802 was more practical and cost-effective to maintain
               than the OV-10. Air Wing officials considered the OV-10
               refurbishment to be more appropriate because it kept in service an
               aircraft with important safety characteristics, including a dual
               engine configuration and ejection seats. A formal analysis of
               alternatives, including a calculation of life cycle costs, could
               have weighed these considerations on a more objective basis.

               INL has recently taken steps to justify its aircraft investment
               decisions better. As directed by an appropriations conference
               committee,^15 INL prepared an analysis of alternatives for the
               procurement of new spray aircraft to support its aerial
               eradication program in Colombia. In August 2006, we shared our
               observations with INL about the lack of supporting analysis for it
               aircraft investments. In October 2006, INL tasked a private
               consulting firm with conducting analyses in accordance with OMB
               Circulars Nos. A-11 and A-76 to justify an aircraft acquisition
               intended to replace leased transport aircraft to support
               counternarcotics activities in Afghanistan. In addition, as part
               of its 2007 fleet study, INL has tasked the same consulting firm
               to prepare a capital asset plan and business case, in accordance
               with OMB Circular No. A-11, that would identify and analyze
               alternatives for filling INL's aircraft needs.

    			  INL Had Not Established Acquisition Policies and Procedures

               OMB Circular No. A-126 requires agencies to issue internal
               directives and policies for acquiring and managing aircraft.
               Responsibility for implementing these policies should be assigned
               to a senior management official who has the agencywide authority
               and resources to implement them. INL has not established
               bureauwide directives and policies relating to aviation
               acquisition that incorporate OMB guidance. Program managers we
               spoke to at INL and NAS Colombia were unaware of key OMB
               acquisition guidance and were unsure about the roles and
               responsibilities of the various INL offices in preparing the
               justification OMB circulars call for.

               INL plans to issue an "Aviation Program Policy Guide" that will
               set forth policies, procedures, and responsibilities for managing
               the bureau's aviation fleet and serve as a vehicle for planning,
               coordination, and dispute resolution. While INL has designated the
               director of the Air Wing as the senior aviation management
               official for its aviation fleet, this official's authority, roles,
               and responsibilities will be defined in the policy guide,
               according to an INL official. INL expects that the policy guide
               will be completed in 2007 and reflect OMB guidance about
               justifying aviation fleet investments.

    			  Assessment of Fleet Composition and Performance

               According to OMB Circular No. A-126, agencies are required to
               review periodically the continuing need for all of their aircraft
               and the cost-effectiveness of their aircraft operations, and then
               should report any excess aircraft and release all aircraft that
               are not fully justified by this review. A copy of each agency
               review should be submitted to GSA and to OMB with the agency's
               next budget submissions. Federal regulations call for such studies
               every 5 years.^16 Finally, managers should incorporate the results
               of their periodic Circular No. A-126 reviews into their long-term
               fleet planning process and make adjustments to their fleets as
               needed. We found that INL has neither assessed the composition of
               its aviation fleet, nor fully tracked cost and usage of its
               aircraft.

    			  Aviation Fleet Composition

               In 2004, we reported that INL had not followed OMB Circular No.
               A-126 for reviewing the composition of its entire fleet to ensure
               its cost-effectiveness.^17 According to INL officials we spoke
               with, the bureau has still not conducted the type of fleet review
               that is called for under OMB Circular No. A-126. Without such a
               review, INL cannot demonstrate that the composition of its fleet
               and planned additions to it are appropriate and cost-effective.

               INL has included in the scope of its fleet study an assessment of
               the soundness of the fleet composition and possible alternative
               aircraft or approaches to consider. Also, as part of the fleet
               study, the bureau plans to identify cost-effective performance
               measures that can be used in an annual performance plan.

    			  Aircraft Cost and Usage Data

               Detailed cost and usage data are critical for assessing the
               cost-effectiveness of aircraft, and Circular No. A-126 and related
               federal regulations require agencies to collect this data in a
               standardized format for their entire aviation fleet. One of the
               most common measures used to evaluate the cost-effectiveness of
               various aspects of an aircraft program is expressed as the cost
               per flying hour for certain types of aircraft costs. Other
               measures include, but are not limited to, maintenance costs per
               flying hour; fuel and other fluids costs per flying hour; and
               accident repair costs per flying hour (or per aircraft). Federal
               regulation 41 C.F.R. 102.33-425 requires federal agencies to
               accumulate and report to GSA aircraft usage data and the cost of
               operating each aircraft based on the standard aircraft program
               cost elements defined in OMB Circular No. A-126.^18 In 2004, we
               reported that State's fiscal year 2000 through 2002 aircraft
               program costs reported to GSA were significantly understated.^19

               However, State's information systems do not capture the data
               necessary for INL to fully adhere to OMB guidance and related
               federal regulation regarding compiling and reporting data on the
               cost and usage of its aviation fleet and individual aircraft. In a
               September 2006 audit of State's aircraft, the State Office of
               Inspector General determined that State did not have a
               comprehensive and effective cost management system to record,
               maintain, and report timely, reliable data on its aircraft.^20 To
               provide GSA the required information on aircraft cost and usage,
               the Air Wing developed an information system called the Air Wing
               Information System that compiles cost and usage data such as
               flight hours per aircraft and other related information. However,
               although the system captured cost and usage data for the 179
               aircraft managed by the Air Wing, it did not do so for the 98
               aircraft managed by the Office of Latin American Programs and the
               NAS offices in Colombia, Ecuador, Peru, and Mexico.

               Additionally, due to financial management system deficiencies and
               weaknesses in key internal controls, INL could not provide us
               sufficiently reliable^21 data on the status of the funds allocated
               for its aviation fleet. We requested from INL the amounts
               obligated, expended, and available from fiscal year 2001 through
               2005 appropriations used to acquire, operate, and maintain its
               aviation fleet. INL could not provide the necessary data because
               its financial management systems do not readily identify
               aviation-related costs, even though State has taken steps to
               improve data completeness and additional improvement efforts are
               under way. Further, the systems do not accumulate data on the cost
               of operating individual aircraft based on the standard cost
               elements prescribed by OMB, such as costs related to crew,
               maintenance, engine overhaul, and fuel. INL officials told us that
               it would have to conduct a manual review of thousands of
               transaction documents to identify all aircraft costs. We also
               noted weaknesses in key internal controls over the recording of
               financial transactions and management of funds.^22 Specifically,
               INL had limited bureauwide written procedures addressing (1) how
               its staff should reconcile the financial records that overseas
               posts independently maintain with State's Regional Financial
               Management System^23 or (2) an effective method of reviewing
               outstanding obligations for identifying excess funds. These
               controls are critical to ensuring accurate and complete data on
               the status of funds allocated for INL aviation fleet.

               Although State is implementing two new financial management
               systems, neither is designed to generate the detailed data INL
               needs to analyze the cost-effectiveness of its aviation fleet. INL
               is spending about $1 million to implement a new bureauwide
               financial management system, called the Local Financial Management
               System, to standardize how each NAS records financial activity to
               provide more visibility over NAS financial activity to INL
               headquarters. State's Bureau of Resource Management is also
               implementing a new departmentwide financial management system
               called the Global Financial Management System.^24 However, like
               the existing systems, neither the new INL nor the departmentwide
               systems incorporate the standard program cost elements outlined in
               OMB Circular No. A-126 and the related federal regulation.
               Officials in State's Bureau of Resource Management informed us
               that they were not familiar with INL's cost data requirements when
               designing the Global Financial Management System. Without the
               ability to accumulate and summarize aircraft costs by standard
               program elements, INL will be limited in determining whether its
               aviation fleet is managed in a cost-effective manner.

               State has taken steps to improve its ability to compile and report
               aircraft cost data, such as establishing appropriate codes in its
               accounting system. Further, INL plans to assign responsibility for
               reporting cost and usage data for all INL aircraft to the Air
               Wing, regardless of which office manages the aircraft. According
               to an Air Wing official, the Air Wing plans to modify the Air Wing
               Information System to capture fleetwide cost and usage data. The
               Air Wing, according to the same official, expects the modification
               to help INL meet GSA reporting requirements and greatly improve
               its ability to capture selected aircraft cost elements.
               Furthermore, INL plans to use OMB Circular No. A-126 standard
               aircraft program cost elements to prepare a template to
               standardize budget line items used for all aviation-related
               programs. Finally, State officials responsible for implementing
               the Global Financial Management System told us that they plan to
               address INL's cost data requirements after the system is
               implemented in fiscal year 2007 but were not sure whether the new
               system can provide the cost data capabilities needed by INL.^25

    			  INL Has Met Contract Oversight and Evaluation Requirements

               Federal regulations require federal agencies to develop and
               perform contract quality assurance procedures to verify that
               services and supplies provided conform to contract requirements
               and to maintain suitable records enumerating quality assurance
               actions.^26 Since 2004, State regulations have specified a policy
               that all new service contracts be performance-based, with clearly
               defined deliverables and performance standards.^27 The aviation
               support contracts with DynCorp International, Lockheed Martin, and
               ARINC comply with these regulations and use performance-based
               metrics to assess contractor performance; however, the Lockheed
               Martin and ARINC contracts make less intensive use of such
               metrics.^28 Currently the responsibility for contractor oversight
               for Lockheed and ARINC is divided among NAS officials in Colombia,
               the government task leaders in Washington, D.C., and the
               contractors located in Colombia. INL plans to centralize
               contractor oversight by assigning Air Wing staff the
               responsibility for managing all aviation support contractors.

    			  DynCorp International

               In 2005, State and DynCorp International entered into a new
               performance-based contract^29 whereby State and DynCorp assess
               contractor performance using an extensive set of indicators. The
               contract establishes standards for several functional areas across
               which performance is measured, including maintenance, logistics,
               operations, safety, and training. Within these areas, State and
               DynCorp track 84 specific performance metrics (such as hectares of
               illicit crop eradicated, percentage of total aviation fleet
               available, and host nation training hours performed) to help
               assess DynCorp's performance.

               In order to manage the oversight of these performance categories,
               State and DynCorp use an online tracking system and database;
               however, this system has limitations. The performance categories
               in this system, called SeeSOR, correspond to the 84 metrics
               specified in the contract. The SeeSOR system provides a quality
               assurance checklist for each activity and an inspection schedule,
               regularly prompting State and DynCorp managers to enter
               performance information. In the case of poor ratings, the system
               automatically produces corrective action reports, and DynCorp
               managers track these corrective actions by time and inspector.
               Each corrective action issue requires a response within a
               specified time frame. However, INL and DynCorp officials in
               Colombia told us that SeeSOR is not a comprehensive quality
               assurance or contract management tool because it does not include
               certain activities that DynCorp performs. For example, force
               protection, which DynCorp does in Colombia, is not incorporated
               into the system. Also, computer network difficulties make regular
               data entry from remote locations in the field problematic. Between
               November 2005 and September 2006, DynCorp conducted over 400
               audits of information in the system and found 104 issues requiring
               corrective action. State and DynCorp are still fine tuning the
               system to improve its ability to measure contractor performance in
               an environment such as Colombia.

               Consequently, State and DynCorp use means other than the SeeSOR
               system, such as personal contact, to help oversee contractor
               performance. According to INL officials in Colombia, personal
               contact between INL and DynCorp is the most valuable monitoring
               tool. INL and DynCorp personnel talk and exchange e-mails
               throughout the day to identify issues that need attention. In
               addition, State program managers conduct daily "walk through"
               inspections of facilities in Bogota and make unannounced site
               visits to forward operating locations. The DynCorp manager in
               Colombia also relies on daily oral communication with contractor
               staff outside of Bogota to stay aware of issues in the field.
               Further, DynCorp provides a detailed briefing to INL every week,
               which addresses performance across all functional areas of the
               contract. All advisers and managers are expected to attend, and
               minutes are kept of these meetings. Also, State conducts monthly
               reviews of aircraft and eradication reports and formally evaluates
               DynCorp's performance every 4 months.

    			  Lockheed Martin

               State and Lockheed Martin began a 4-year contract in July 2006
               that implements a performance-based method for assessing
               contractor performance. In the contract, Lockheed Martin and its
               subcontractor^30 work closely with the Colombian National Police
               to support its illicit drug eradication and interdiction and
               humanitarian missions, with responsibility for aircraft
               maintenance, logistics, police training, and multiple construction
               projects at bases across Colombia. Under the contract, the
               government task leader must hold regular status meetings, and
               Lockheed Martin is required to submit monthly performance reports
               containing, among other things, accomplishments and issues that
               arose during the reporting period, projected future activities,
               and subcontractor performance relative to agreed upon metrics.
               Lockheed Martin also must implement and maintain a quality
               assurance system to ensure that product and service integrity meet
               or exceed contract requirements. In addition, the contract
               specifies specific performance standards in program management,
               quality control, safety, aircraft maintenance, logistics, support
               maintenance, training, and information technology. For example,
               one maintenance standard specifies that the contractor sustain a
               75 percent aircraft operational readiness rate.

    ^7OMB Circular No. A-126, Improving the Management and Use of Government
    Aircraft, May 1992.

    ^8OMB Circular No. A-76, Performance of Commercial Activities, May 2003.

    ^9OMB Circular No. A-11, Part 7, Planning, Budgeting, Acquisition, and
    Management of Capital Assets, revised June 2006.

    ^10Capital Programming Guide v 2.0, Supplement to Office of Management and
    Budget Circular No. A-11, Part 7: Planning, Budgeting, and Acquisition of
    Capital Assets, June 2006.

    ^11This committee is under the aegis of GSA. It formulates aviation
    polices for the various civilian federal departments and agencies that
    maintain aircraft. The committee also helps to ensure that agency aviation
    fleets are maintained properly and are operationally safe through on-site
    reviews.

    ^12The 2004 review did not include other INL programs managed by INL's
    Office of Latin American Programs and the NAS offices.

    ^13For more information about this program, see GAO, Efforts to Secure
    Colombia's Cano Limon-Covenas Oil Pipeline Have Reduced Attacks, but
    Challenges Remain, [36]GAO-05-971 (Washington, D.C.: Sept. 6, 2005).

    ^14For more information about this program, see GAO, Air Bridge Denial
    Program in Colombia Has Implemented New Safeguards, but Its Effect on Drug
    Trafficking Is Not Clear, [37]GAO-05-970 (Washington, D.C.: Sept. 6,
    2005).

    ^15H. Rept. 109-265 requires that, prior to the obligation of funds for
    the procurement of aircraft, State shall provide the Committees on
    Appropriations with an analysis of alternatives.

    ^1641 C.F.R. S102-33.200.

    ^17In 2004, we found that of the seven aviation programs we examined, only
    one program (the Department of Interior's Fish and Wildlife Service) had
    completed an A-126 review.

    ^18GSA maintains the Federal Aviation Interactive Reporting System to
    track aircraft cost and usage data reported by federal agencies.

    ^19 [38]GAO-04-645 .

    ^20AUD/IP-06-35 (September 2006).

    ^21We planned to review a statistical sample of INL aircraft financial
    transactions. However, due to data incompleteness and inconsistencies, we
    determined that INL aircraft financial data files were not sufficiently
    reliable for our planned statistical sampling. See appendix I for
    additional information.

    ^22The Comptroller General's Standards for Internal Control in the Federal
    Government, [39]GAO/AIMD-00-21 .3.1 (Washington, D.C.: November 1999)
    require that federal agencies document internal control procedures in
    their management directives, policies, and manuals and that such
    documentation, as well as evidence the control procedures are actually
    performed be readily available for review. Furthermore, transactions and
    events are to be completely and accurately recorded.

    ^23The Regional Financial Management System processes foreign posts'
    financial activity and provides information to the Central Financial
    Management System--State's primary financial management system.

    ^24This system will replace the Central Financial Management System.

    INL Has Met Contract Oversight and Evaluation Requirements

    ^25We note that one of the key causes of financial management system
    projects not meeting their cost, schedule, and performance goals across
    the federal government is agencies not following a disciplined process for
    defining and managing system requirements. See GAO, Financial Management
    Systems: Additional Efforts Needed to Address Key Causes of Modernization
    Failures, [40]GAO-06-184 (Washington, D.C.: Mar. 15, 2006).

    ^2648 C.F.R. S 46.104.

    ^2748 C.F.R. S 637.6.

    ^28The Lockheed and ARINC contracts are not directly between State and the
    companies but are task orders under indefinite quantity, indefinite
    delivery contracts between Lockheed and ARINC, respectively, and the U.S.
    Army Communications and Electronics Command in Fort Monmouth, New Jersey.
    A task order is a contract for services that does not procure or specify a
    firm quantity of services (other than minimum and maximum quantities) and
    that provides for the issuance of orders for the performance of tasks
    during the contract period. For convenience, we refer to these task orders
    as contracts throughout this report.

    ^29The contract is primarily a fixed-price contract with an award fee,
    incentive fee, and award term, which allows for up to a 10-year
    performance period.

    ^30Lockheed Martin's subcontractor, Contracting, Consulting, Engineering
    LLC, performs most of this work.

               In Colombia, we observed that State maintained regular contact
               with the contractor and the Colombian National Police to assess
               compliance with contract requirements. State's oversight measures
               included monitoring performance in functional areas, such as
               maintenance, logistics, training, and safety. While the program
               manager stated that the principal performance metric was aircraft
               readiness rates, State received and reviewed daily and monthly
               status reports, memos, and trip reports, and participated in a
               quarterly program management review covering the functional areas
               above. State attends weekly maintenance meetings between Lockheed
               and the Colombian Police. In addition, the contractor also
               performed random site visits and fuel inspections, reporting the
               findings to the NAS program manager. The NAS uses standards from
               the U.S. Army Aviation Management System to produce and issue
               standard operating procedures in most functional areas.

               However, the planned nationalization of this program and its heavy
               involvement with and dependence on the Colombian National Police
               has presented challenges to implementing an effective
               performance-based contract. Personnel problems within the police
               force have adversely affected the contractor's ability to meet
               nationalization or its aircraft readiness rate goals. For
               instance, the contractor reported absentee rates among police
               trainees in the logistics branch as high as 25 percent. Further,
               over half of Colombian helicopter mechanics were not sufficiently
               skilled to perform more than routine maintenance tasks and,
               therefore, required more contractor supervision than planned. The
               contractor also has little influence over personnel decisions
               within the police force. The Colombian police frequently rotate
               their trainees to different positions, which hampers the
               development of specialized skills and the ability of the
               contractor to pass on responsibility and nationalize the program.
               For example, the contractor logistics office reported working with
               seven different Colombian officers in 4 years. In another case, a
               police trainee attended a specialized and lengthy course for
               engine oil analysis in the United States, only to be transferred
               out of maintenance shortly after returning to Colombia. Program
               managers have corrected some of these training issues and now
               track the training Colombian police personnel receive to help
               ensure that only committed and appropriately skilled trainees
               receive detailed instruction.

    			  ARINC

               Under the ARINC contract, which began in June 2004 and could
               extend to 4 years, State has established a performance-based
               system to monitor contractor performance. Our review focused on
               State's assessment of ARINC's contract performance in support of
               the Air Bridge Denial Program. The objective of this program is to
               suppress the illicit aerial trafficking of narcotics in Colombian
               airspace by tracking and forcing down suspected traffickers. ARINC
               is responsible for, among other things, maintaining seven aircraft
               and training Colombians to maintain these aircraft. Reporting
               requirements include monthly performance reports containing, among
               other things, accomplishments and issues that arose during the
               reporting period, projected future activities, and performance
               relative to the agreed upon metrics. In addition, the contract
               specifies performance standards in operations, logistics,
               training, and project management, among others.

               We found that State was in compliance with contractor oversight
               requirements and that, in many cases, ARINC exceeded its reporting
               requirements in the contract. State is in daily personal contact
               with the Air Bridge Denial Program manager. Although the program
               manager told us that he did not have the quality assurance plan
               required by the contract, we found that ARINC's reporting to State
               included many of the quality assurance plan requirements, such as
               training standards and reviews. The NAS program manager also
               received and reviewed flight activity reports on a daily, weekly,
               and monthly basis. In addition, the program manager participated
               in regular meetings to discuss the status of aircraft, training,
               and operations, and conducted a semiannual review, as well as an
               annual program certification. The program manager made monthly
               visits to Air Bridge Denial locations and shared trip reports with
               cognizant State officials.

    			  INL Plans to Centralize Contractor Oversight

               INL plans to centralize contractor oversight by assigning Air Wing
               staff the responsibility for managing all aviation support
               contractors. Under this arrangement, INL plans to compile
               information on aircraft performance in one central location. This
               will enable INL managers to assess performance of the entire fleet
               more consistently, and more readily collect the data that INL
               needs to assess the overall composition and cost-effectiveness of
               the aviation fleet.

    			  Conclusions

               INL's aviation fleet has grown at a rapid pace to meet emerging,
               global counternarcotics and counterterrorism priorities. However,
               INL did not systematically employ federal management principles
               and guidelines in acquiring this fleet. As a result, key analyses
               were not done to help ensure that INL program managers made
               cost-effective decisions, particularly with regard to major
               investments in the fleet. In October 2006, INL officials began
               initiating significant changes to the oversight of aviation fleet
               operations, placing particular emphasis on conducting key analyses
               of its fleet to help guide future investment decisions and adhere
               to OMB and GSA guidance. If INL follows through, these analyses
               should result in a long-term plan for aircraft investments and an
               assessment of the current composition of the fleet to help ensure
               that it is the most cost-effective to meet mission requirements.
               Current plans call for these to be completed in 2007. Since INL
               has undertaken a number of initiatives to address the management
               weaknesses we observed, we are not making any recommendations in
               this report. However, we will follow up with INL to ensure that
               these initiatives have been completed in 2007, as planned.

    			  Agency Comments and Our Evaluation

               State provided comments on a draft of this report (see app. II).
               In its comments, State acknowledged that our work, among others,
               was an impetus for a comprehensive internal review of aviation
               management and expressed appreciation to us for confirming areas
               needing continued improvement. State highlighted the management
               reforms INL has undertaken to enhance the efficiency and
               effectiveness of aviation fleet management, as well as to improve
               INL's adherence to OMB and GSA guidance. State also noted
               operational circumstances that make such adherence challenging.
               State disagreed with our observation that INL did not provide
               fleet investment justifications using cost-benefit and life-cycle
               analyses of alternatives. State indicated that considerable
               analysis was done to evaluate economically sound alternatives in
               most previous aircraft investments. However, the documentation INL
               provided did not include the analyses called for by OMB guidance.
               Without documentation of such analyses, we were not able to assess
               whether State's investment decisions were appropriately justified
               in accordance with this guidance. In addition to these comments,
               State provided us technical comments, which we have incorporated
               throughout the report, as appropriate.

               We are sending copies of this report to interested congressional
               committees and the Secretary of State. We also will make copies
               available to others upon request. In addition, this report will be
               available at no charge on the GAO Web site at
               http://www/gao.gov .

               If you or your staff have any questions concerning this report,
               please contact me at (202) 512-4268 or FordJ@gao.gov. Contact
               points for our Offices of Congressional Relations and Public
               Affairs may be found on the last page of this report. GAO staff
               who made major contributions to this report are listed in appendix
               III.

               Jess T. Ford
    			  Director, International Affairs and Trade

    			  Appendix I: Scope and Methodology

               To assess the extent to which the Bureau of International
               Narcotics and Law Enforcement Affairs (INL) has managed its
               aviation fleet in accordance with Office of Management and Budget
               (OMB) and General Services Administration (GSA) guidance, we
               reviewed the applicable guidance and discussed progress in
               adhering to this guidance with State and contractor officials at
               INL offices in Washington, D.C.; Melbourne, Florida; and Colombia,
               reviewing relevant documents, where appropriate. We chose to focus
               our review primarily on operations in Colombia because nearly
               two-thirds of INL's active aviation fleet is in that country, and
               three contractors carry out programs there. We obtained
               information on the number and distribution of aircraft from INL
               officials and determined that this information was sufficiently
               reliable for the purposes of this report.

               o To assess how INL conducted strategic planning to identify
               long-term aircraft needs, we obtained and reviewed planning
               documents prepared by the bureau, including Bureau Performance
               Plans, the Air Wing Strategic Planning Summary, and the
               documentation of the Critical Flight Safety Program. We reviewed
               the content of the planning documents and determined the extent to
               which it reflected information provided about INL fleet operations
               we obtained from INL officials. We based our assessment of the
               bureau's planning documents on federal guidance described in a
               prior report on federal aircraft.^1
               o To assess how INL justified investments in its aviation fleet,
               we reviewed documentation, where available, and discussed major
               ongoing and planned aircraft investments with relevant bureau
               officials. In particular, to assess the justification for the
               Critical Flight Safety Program, we discussed this program with Air
               Wing officials and DynCorp representatives in Melbourne, Florida,
               and with NAS officials in Bogota, Colombia. We discussed
               justification of aircraft acquisitions for counternarcotics
               programs in Mexico with officials from the INL Office of Latin
               America Programs. We based our assessment of justification
               documentation on federal guidance presented in OMB Circulars Nos.
               A-76, A-126, and A-11 Part 7, and OMB's "Capital Programming
               Guide." To obtain a better understanding of the applicability of
               this guidance, we spoke with officials from OMB and GSA's Aircraft
               Management Policy Division, and a representative from Conklin and
               DeDecker Company, a GSA contractor that assists federal agencies
               with developing cost-benefit analyses for their aviation programs.
               o To determine how INL assessed the cost and performance of its
               aircraft and ensured that the composition of the fleet was
               cost-effective, we reviewed documentation and interviewed bureau
               officials in Washington, D.C.; Air Wing officials in Florida; and
               Narcotics Affairs Section (NAS) officials in Colombia. To obtain
               an understanding of the systems and procedures INL used to track
               its aircraft funding and related obligations and expenditures, we
               gathered information from INL accounting and budget officials. We
               reviewed INL financial management handbooks as well as automated
               systems' documents. We identified and evaluated key internal
               controls INL uses to ensure the completeness and accuracy of
               recorded appropriated funds and the status of those funds. We
               assessed INL's reconciliation procedures with requirements found
               in the Comptroller General's Standards for Internal Control in the
               Federal Government.^2 To identify and report the amount of funds
               allocated to aviation activities, we obtained and reviewed
               Congressional Notifications and Congressional Budget
               Justifications for the Andean Counterdrug Initiative and
               International Narcotics Control and Law Enforcement
               appropriations. We identified aviation related activities and
               compiled funding data for these activities by appropriation and
               fiscal year. Based on our efforts to determine the reliability of
               the aviation activity allocations, we concluded that these data
               were sufficiently reliable for the purposes of this report.

               We also planned to review a statistical sample of INL aircraft
               financial transactions for fiscal years 2001 to 2005 to assess the
               reliability of recorded aircraft financial data. For each fiscal
               year, we requested the total appropriated funds used for aircraft
               acquisition, operation, and maintenance, along with the status of
               those funds--amounts obligated, expended, and available. For
               obligated and expended funds, we requested separate, detailed
               transaction-level data files that supported the obligation and
               expenditure levels reflected in the status of the fiscal year
               funds. State provided data files from NAS offices, its Office of
               Aviation, and its Central Financial Management System. We
               performed a data reliability analysis of the files provided to
               determine whether we could use the data files for the selection of
               our planned statistical sample. We noted that the data files were
               not complete; for example, NAS offices and the Office of Aviation
               data files did not include detail listings of expenditure
               transactions. We also noted inconsistencies in the data files
               State provided us. For example, the Central Financial Management
               System data files contained expenditure records for the Office of
               Aviation but no related obligation records. Due to the aircraft
               financial data files being incomplete and the inconsistencies we
               identified, we determined that the INL aircraft financial data
               files were not sufficiently reliable for our planned statistical
               sampling.

    ^1 [41]GAO-04-645 .

    ^2GAO, Standards for Internal Control in the Federal Government,
    [42]GAO/AIMD-00-21 .3.1 (Washington, D.C.: November 1999).

               To assess how INL monitors its contract costs and performance, we
               gathered and analyzed contract documents and interviewed agency
               and contract officials to determine each contract's scope,
               activities covered, and oversight requirements. In addition, we
               interviewed contract office representatives from the three main
               contractors identified in our review: Lockheed Martin Systems
               Management, LLC; DynCorp International LLC; and ARINC Engineering,
               LLC, and analyzed contract documents and reports to determine
               performance issues. The Lockheed and ARINC contracts are not
               directly between State and the companies, but are task orders
               under indefinite quantity, indefinite delivery contracts between
               Lockheed and ARINC, respectively, and the U.S. Army Communications
               and Electronics Command in Fort Monmouth, New Jersey. In Colombia,
               we discussed aircraft operations and maintenance issues with NAS,
               Air Wing, and contract staff at various operational sites in the
               country. We met officials with primary responsibility for the
               Colombian Police's aerial eradication program and the Colombian
               Army's aviation program at the Office of Aviation headquarters at
               El Dorado Airport in Bogota. We also met with managers, pilots,
               and mechanics and observed flight operations and maintenance at
               two aerial eradication operating locations--Barrancabermeja and
               San Jose--and the Colombian Army Aviation Brigade headquarters at
               Tolemaida. In addition, we met with NAS and contractor staff
               overseeing Colombia's Air Bridge Denial Program at Apiay and the
               Colombian National Police's aviation program at the Colombian
               police main operating base at Guaymaral near Bogota.

    			  Appendix II: Comments from the Department of State

    			  Note: GAO comments supplementing those in the report text appear at the
    end of this appendix.

    See comment 1.

    See comment 5.

    See comment 4.

    See comment 3.

    See comment 2.

    See comment 6.

    GAO Comments

               The following are GAO's comments on the Department of State letter
               dated January 22, 2007.

                            1. We acknowledge INL's efforts to address the
                            shortcomings that GAO and others have identified in
                            its management of its aviation fleet throughout the
                            draft report and this final version. However, we note
                            that we began our review efforts with a formal
                            notification to the Secretary of State in January
                            2006 and met with INL and other State officials to
                            discuss our objectives in February 2006. At the time,
                            INL did not inform us of any ongoing or planned
                            efforts to evaluate its Office of Aviation Programs
                            or INL's overall aviation fleet. In August 2006, we
                            briefed INL on our preliminary findings that it had
                            not complied with OMB and GSA guidance in managing
                            its aviation fleet. The September briefing that INL
                            presented to us addressed the issues we had raised
                            and laid out the reforms it would begin in October.
                            As a result, we concluded that recommendations for
                            further actions were not necessary, but that we would
                            follow up at a later date to ensure that INL's
                            initiatives are completed, as planned.
                            2. We do not report that INL did not conduct any
                            analyses. Rather, we noted in the draft report and
                            this final version that documentation INL provided us
                            did not reflect the key analyses called for by OMB
                            guidance.
                            3. In the draft report and this final version, we
                            report that INL officials told us that the exigent
                            circumstances of INL's operations precluded them from
                            doing the detailed OMB analyses. We also noted that,
                            in some cases, Congress directed what aircraft to
                            procure. Nevertheless, once the aircraft are in the
                            inventory, OMB guidance requires agencies to review
                            periodically the need for and the cost-effectiveness
                            of the aircraft. INL has not done this, but we noted
                            in the draft report and this final version that it
                            has efforts under way to meet this requirement.
                            4. In the draft report, we noted that INL's aviation
                            operations in Colombia often take place in hostile
                            environments, which can place aircraft and personnel
                            under small arms fire. We have modified the final
                            report to note that aviation operations in other
                            foreign locations often take place in hostile
                            environments, too.
                            5. In the draft report and this final version, we
                            point out that INL's Local Financial Management
                            System does not provide the standard program cost
                            elements needed to meet OMB requirements. We also
                            note that State officials responsible for designing
                            the Global Financial Management System were not aware
                            of INL's cost data requirements and are not sure the
                            system can provide the data needed. Regarding the Air
                            Wing Inventory System referred to, we reported in
                            2004 that the data in this system were significantly
                            understated. We agree that, if the system's
                            shortcomings are corrected, it is an appropriate tool
                            to address GSA's reporting requirements.
                            6. We agree that consolidating INL's aviation fleet
                            under a senior aviation management official is one
                            way to address some of the shortcomings GAO, State's
                            Office of the Inspector General, and INL's internal
                            studies have identified. However, INL has not defined
                            the senior aviation management official's authority,
                            roles, and responsibilities. This is under
                            development and will be part of INL's aviation
                            program policy guide, which INL expects to complete
                            later this year.

    			  Appendix III: GAOA Contact and Staff Acknowledgments

    			  GAO Contact

               Jess Ford, (202) 512-4268, FordJ@gao.gov

    			  Staff Acknowledgments

               In addition to the individual named above, key contributors to
               this report were A.H. Huntington, III, Assistant Director; Felicia
               Brooks; Joseph Carney; Kay Daly; Mattias Fenton; James Michels;
               Sylvia Schatz; Ann Ulrich; and Leonard Zapata.

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    www.gao.gov/cgi-bin/getrpt?GAO-07-264 .

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    Highlights of [44]GAO-07-264 , a report to congressional committees

    February 2007

    STATE DEPARTMENT

    State Has Initiated a More Systematic Approach for Managing Its Aviation
    Fleet

    The Department of State's (State) Bureau of International Narcotics and
    Law Enforcement Affairs (INL) owns 357 helicopters and fixed-wing aircraft
    (valued at over $340 million) primarily to help carry out its
    counternarcotics efforts, such as aerial eradication of drug crops in
    Colombia. INL relies on contractor support to help maintain and operate
    its aircraft.

    In 2004, GAO analysis showed that INL lagged behind other agencies in
    implementing Office of Management and Budget (OMB) and General Services
    Administration (GSA) aviation fleet management principles. GAO was
    mandated to review INL's management and oversight of this fleet. GAO
    specifically examined (1) the extent INL has complied with OMB and GSA
    aviation fleet management guidance and (2) how INL has overseen its
    aviation support contracts.

    Since INL has undertaken initiatives to address the weaknesses GAO
    observed, GAO makes no recommendations. GAO will follow up to ensure that
    these initiatives are completed, as planned. In comments on this report,
    State highlighted reforms under way. State also indicated that INL
    conducted analyses to justify most aviation investments. GAO notes,
    however, that the documentation provided did not reflect the key analyses
    called for by OMB guidance.

    Despite some improvements since 2004, INL has not yet employed a
    systematic process for managing its aviation fleet that adheres to OMB and
    GSA guidance intended to help federal programs ensure that they acquire,
    manage, and modernize their aircraft in a cost-effective manner. However,
    in October 2006, INL began a number of initiatives to improve compliance
    with this guidance. The guidance entails three key principles: (1)
    assessing a program's long-term fleet requirements, (2) acquiring the most
    cost-effective fleet of aircraft to meet those requirements, and (3)
    assessing fleet performance. INL's initiatives are intended to address
    weaknesses in the following three areas:

               o Long-term planning. Since 2004, INL has prepared a strategic
               plan and a Critical Flight Safety Program to refurbish certain
               aircraft and replace others to meet projected mission needs.
               However, this effort did not address the long-term aircraft needs
               of all INL aviation programs.
               o Fleet investment justifications. INL has funded multimillion
               dollar aircraft investments, including the acquisition of new
               aircraft and major overhauls of older assets, without documenting
               cost-benefit and life cycle cost analyses of alternatives.
               o Fleet composition assessment.  INL has not reviewed the
               composition of its entire fleet to demonstrate that its aircraft
               are the most appropriate and cost-effective to meet mission
               requirements. INL is hampered in assessing the performance of its
               fleet because it does not have complete and reliable aircraft cost
               and usage data.

    INL has undertaken a study to assess the aviation fleet's overall
    composition, identify investment needs, and assess alternative approaches
    for meeting those needs. INL expects completion of this and other
    initiatives in 2007.

    Regarding contract oversight, INL has met applicable federal, agency, and
    contract-specific requirements for managing its aviation support
    contracts. In addition to direct contractor oversight, State has used
    quantitative measures, primarily aircraft readiness rates, to monitor and
    assess contractor performance.

    Examples of INL Aircraft

    References

    Visible links
      28. http://www.gao.gov/cgi-bin/getrpt?GAO-04-645
      36. http://www.gao.gov/cgi-bin/getrpt?GAO-05-971
      37. http://www.gao.gov/cgi-bin/getrpt?GAO-05-970
      38. http://www.gao.gov/cgi-bin/getrpt?GAO-04-645
      39. http://www.gao.gov/cgi-bin/getrpt?GAO/AIMD-00-21.3.1
      40. http://www.gao.gov/cgi-bin/getrpt?GAO-06-184
      41. http://www.gao.gov/cgi-bin/getrpt?GAO-04-645
      42. http://www.gao.gov/cgi-bin/getrpt?GAO/AIMD-00-21.3.1
      44. http://www.gao.gov/cgi-bin/getrpt?GAO-07-264
    *** End of document. ***