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
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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 [email protected]. 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, [email protected]
			  
			  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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(320406)

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

To view the full product, including the scope
and methodology, click on the link above.

For more information, contact Jess T. Ford at (202) 512-4268 or
[email protected].

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
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