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Passenger and Cargo Capability in Its Replacement Refueling Aircraft 
Was Made without Required Analyses' which was released on March 6, 
2007. 

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March 6, 2007: 

Congressional Committees: 

Subject: Defense Acquisitions: Air Force Decision to Include a 
Passenger and Cargo Capability in Its Replacement Refueling Aircraft 
Was Made without Required Analyses: 

The United States Air Force has described aerial refueling as a key 
capability supporting the National Security Strategy and military 
warfighters on a daily basis. Currently, the Air Force uses two 
aircraft for aerial refueling: the KC-135 and the KC-10. While the KC- 
10 fleet has an average age greater than 20 years, the KC-135 fleet 
averages more than 46 years and is the oldest combat weapon system in 
the Air Force inventory. Consequently, the Air Force intends to replace 
or recapitalize the KC-135 first. The Air Force began its KC-135 
recapitalization efforts in fiscal year 2004, and officials presented a 
KC-135 recapitalization program to joint military decision makers in 
November 2006. This program proposed the inclusion of a passenger and 
cargo capability, which exists to some extent in the current aircraft, 
in the replacement air refueling aircraft. The Air Force proposal is 
part of the Joint Capabilities Integration and Development 
System[Footnote 1] process, which uses analyses to identify and assess 
such a proposal so as to inform decision makers who must allocate 
scarce resources. According to Air Force officials, the 
recapitalization process may cost between $72 billion and $120 billion 
and will span decades.[Footnote 2] This recapitalization takes place at 
a time when the Air Force faces fiscal constraints over the next few 
years, forcing officials to reconfigure the service's short-and long- 
term priorities in its fiscal year 2008 budget plan. The Air Force has 
begun this process by announcing the intention to reduce personnel 
levels by 40,000 members. 

Because of broad congressional interest, we are currently reviewing, 
under the Comptroller General's authority to conduct evaluations on his 
own initiative, the Analysis of Alternatives for the recapitalization 
of the KC-135 aircraft.[Footnote 3] To fully understand the Analysis of 
Alternatives for the KC-135 Recapitalization, we reviewed the 
requirements determination process, of which an analysis of 
alternatives is a part. The purpose of this report is to bring to your 
attention issues concerning the adequacy of Department of Defense (DOD) 
analyses used to determine the requirements for a refueling aircraft 
with passenger and cargo capabilities, for which a contract is to be 
awarded late in fiscal year 2007. Specifically, we reviewed (1) to what 
extent policy and implementing guidance were followed in identifying 
the passenger and cargo capability and in assessing the associated risk 
of not including that capability in the replacement refueling aircraft 
proposal and (2) to what extent decision makers, who validated and 
approved the capability as a requirement, relied on analyses as 
specified in policy and implementing guidance and the extent to which 
this reliance may affect initiation of the acquisition 
program.[Footnote 4] 

On December 15, 2006, we briefed congressional staff on our preliminary 
observations. This letter expands on the information discussed in that 
briefing and includes recommendations to the Secretary of Defense. We 
plan to complete our review of the Analysis of Alternatives and report 
the results in early summer 2007. 

To conduct our evaluation, we reviewed documents containing analyses 
supporting decision making in the DOD requirements process. This 
involved a review of joint and service policies and implementing 
guidance that form a framework for DOD's capability-based planning 
processes. We also reviewed DOD's Mobility Capabilities Study and 
service concepts of operations concerning air mobility and aerial 
refueling as well as the RAND Analysis of Alternatives for KC-135 
Recapitalization and the corresponding DOD reviews of the Analysis of 
Alternatives. To assess the DOD recapitalization proposal, we reviewed 
DOD and Air Force key documents and analyses. Furthermore, we 
interviewed officials from the Office of the Under Secretary of Defense 
for Acquisition, Technology and Logistics, the Joint Staff, 
Headquarters Air Force, U.S. Transportation Command, Air Mobility 
Command, Air Force Office of Aerospace Studies, and RAND Corporation. 
We also interviewed officials directly involved with presentations made 
to the Air Force Requirements for Operational Capabilities Council and 
to the Joint Requirements Oversight Council. We performed our work 
between May and December 2006 in accordance with generally accepted 
government auditing standards. 

The passenger and cargo capability proposed for the replacement 
refueling aircraft is one of a number of proposed capabilities and this 
review was limited to this single capability. 

Results in Brief: 

Mandatory Air Force policy requires Air Force organizations to use a 
formal capabilities-based approach to identify, evaluate, develop, 
field, and sustain capabilities that compete for limited resources. 
Contrary to mandatory Air Force implementing guidance, however, the Air 
Force proposal for a replacement refueling aircraft included a 
passenger and cargo capability without analyses identifying an 
associated gap, shortfall, or redundant capability. According to 
mandatory Air Force implementing guidance, analyses supporting the 
decision-making process should assess a capability based on the effects 
it seeks to generate and the associated operational risk of not having 
it. In this case, the supporting analyses determined neither need nor 
risk with regard to a passenger and cargo capability. Air Force 
officials could not provide supporting information sufficient to 
explain this discrepancy between the analyses and their proposal. 
Without sound analyses, the Air Force may be at risk of spending 
several billion dollars unnecessarily for a capability that may not be 
needed to meet a gap or shortfall. 

Military decision makers approved the passenger and cargo capability as 
a requirement although supporting analyses identified no need or 
associated risk. Mandatory Air Force implementing guidance states that 
senior leaders must use the documented results of analyses to confirm 
the identified capability requirement. The Air Force Requirements for 
Operational Capabilities Council validated, and the Chairman of the 
Joint Chiefs of Staff's Joint Requirements Oversight Council validated 
and approved, the replacement refueling aircraft proposal with a 
passenger and cargo capability. Following this approval of the 
oversight councils, DOD plans to solicit proposals and award a contract 
for the replacement of the refueling aircraft late in fiscal year 2007. 
However, including a passenger and cargo capability without analyses 
identifying an associated gap or shortfall could preclude the 
certification of the program by the Under Secretary of Defense, 
Acquisition, Technology and Logistics to Congress. Without this 
certification, the acquisition program for the replacement refueling 
aircraft cannot begin. 

Accordingly, we are recommending that the Secretary of Defense direct 
the Secretary of the Air Force to accomplish the required analyses that 
evaluate the proposed passenger and cargo capability so as to determine 
if there is a gap, shortfall, or redundancy, assess the associated 
risk, and then submit such documentation to the Joint Requirements 
Oversight Council for validation. Once these analyses are completed, we 
also recommend that the Secretary of Defense direct the Chairman, Joint 
Chiefs of Staff, to formally notify the Under Secretary of Defense for 
Acquisition, Technology and Logistics that such analyses have been 
completed as required prior to certification of the program to 
Congress. 

In written comments on a draft of this report, DOD disagreed with our 
recommendation to accomplish the required analyses to establish if 
there is a gap, shortfall, or redundancy and assess associated risks 
concerning the proposed passenger and cargo capability in the 
replacement refueling aircraft. DOD stated that through the Joint 
Capabilities Integration and Development System process, the Air Force 
presented analysis and rationale for the passenger and cargo 
capability. DOD further stated that its Joint Requirements Oversight 
Council and the Air Force concluded that the analysis was sufficient 
justification for the capability and the Joint Requirements Oversight 
Council validated the requirement. However, as our report points out, 
DOD did not perform the required analyses and failed to identify a gap, 
shortfall, or redundancy for the passenger and cargo capability. DOD 
agreed with our recommendation to formally notify the Under Secretary 
of Defense for Acquisition, Technology and Logistics once the required 
analyses have been completed. DOD stated that the Under Secretary of 
Defense for Acquisition, Technology and Logistics will consider whether 
the Joint Requirements Oversight Council has accomplished its duties 
with respect to the program, including an analysis of the operational 
requirements of the program. DOD also stated that the Department would 
again review the justification for a passenger and cargo capability 
prior to making a decision to initiate the acquisition program. 
However, DOD did not offer assurance that, as we recommended, the Air 
Force would accomplish the required analyses to determine if there is a 
gap, shortfall, or redundancy, assess the associated risk, and then 
submit such documentation to the Joint Requirements Oversight Council 
for validation. We continue to believe that our recommendations have 
merit and that the analyses required by mandatory guidance are 
necessary to inform the decision that begins the acquisition program. 

In light of the DOD comments, we have added a matter for congressional 
consideration to this report that suggests the Congress require that: 

* in addition to the certification described by section 2366a of title 
10, United States Code, the Under Secretary of Defense for 
Acquisitions, Technology and Logistics make a specific certification 
that the Air Force employed a sound, traceable, and repeatable process 
producing analyses that determined if there is a gap, shortfall, or 
redundancy and assessed the associated risk with regard to passenger 
and cargo capability for the KC-135 Recapitalization, and: 

* consistent with service policy, these analyses are made available to 
the Joint Requirements Oversight Council prior to the Under Secretary's 
certification of the program pursuant to section 2366a of title 10, 
United States Code. 

DOD's comments are reprinted in enclosure I and our evaluation of the 
comments begins on page 12 of this letter. 

Background: 

With the use of its capabilities-based assessment system, DOD compares 
what the military has with what the military needs as it considers what 
it will buy. The military identifies and prioritizes these needs and 
proposes solutions or capabilities that address a capability gap or 
shortfall. A capability gap or shortfall is the military inability to 
achieve a desired effect by performing a set of tasks under specified 
standards and conditions. The gap may be the result of having no 
existing capability or lack of proficiency or sufficiency in an 
existing capability. When capabilities are validated and approved, they 
become requirements in the defense acquisition system. The KC-135 
recapitalization, seeking a replacement refueling aircraft for the Air 
Force, has proceeded under this capabilities-based approach.[Footnote 
5] 

In a capabilities-based approach, establishing the requirements for the 
replacement refueling aircraft involves consideration of capabilities 
beyond those of the current aircraft fleet. As described by DOD, the 
capabilities-based approach replaces the process of building plans, 
operations, and doctrine around an individual military weapon system as 
often occurred in the past.[Footnote 6] Instead, the capabilities-based 
approach requires that officials explicitly link the acquisition to 
appropriate and needed capabilities. For example, although the current 
KC-135 and the KC-10 refueling aircraft have a cargo and passenger 
capability, a replacement refueling aircraft proposal may or may not 
have such a capability, depending on needs of the warfighter and the 
supporting analyses. Air Force officials told us that based on this 
existing capability, they foresaw a need for the inclusion of a similar 
capability and included the passenger and cargo capability. However, in 
a capabilities-based approach, needs must be supported by analyses. 
Therefore, the inclusion of a passenger and cargo capability in the 
current proposal should not depend on what occurred in the past but 
what will be needed in the future. 

In our previous reporting concerning acquisition outcomes and best 
practices, we have noted the importance of matching warfighter 
requirements with available resources, a responsibility shared by the 
acquisition and requirements communities in DOD. As described in Air 
Force implementing guidance, there is within DOD a distinct separation 
between the requirements authority and acquisition authority.[Footnote 
7] Under this guidance, this separation requires early and continued 
collaboration between both communities in order for the Joint 
Capabilities Integration and Development System process and acquisition 
process to work effectively. Mandatory Air Force implementing guidance 
describes the process of analyzing and prioritizing capabilities as 
establishing a common understanding of how a capability will be used, 
who will use it, when it is needed, and why it is needed. The guidance 
further describes that each capability, such as the passenger and cargo 
capability of the replacement refueling aircraft, is to be assessed 
based on the effects it seeks to generate and the associated 
operational risk of not having it. To avoid the risk of unnecessary 
spending on an unneeded capability, service guidance envisions fielding 
affordable and sustainable operational capability needed by the 
warfighter. 

Mandatory Air Force policy and guidance implement the Joint 
Capabilities and Integration and Development System, which includes 
analyses performed by the military service and oversight by both 
service and joint oversight councils. The Air Force, as sponsor of the 
KC-135 recapitalization, participates in the Joint Capabilities 
Integration and Development System process, which is intended to 
identify, assess, and prioritize needed joint military capabilities and 
associated risks. Mandatory Air Force guidance states that Air Force 
capabilities-based planning employs an analytically sound, repeatable, 
and traceable process to identify capability needs.[Footnote 8] The Air 
Force Requirements for Operational Capabilities Council, an instrument 
of the Air Force Chief of Staff and Secretary of the Air Force, 
reviews, validates, and recommends approval of all Air Force 
capabilities based requirements.[Footnote 9] After Air Force 
validation, the Chairman's Joint Requirements Oversight Council, 
responsible for reviewing military acquisitions, approves and validates 
warfighting capabilities.[Footnote 10] From a requirements standpoint, 
final approval of a proposal rests at the level of the Chairman of the 
Joint Chiefs of Staff. 

Following Air Force validation and joint approval, the Under Secretary 
of Defense for Acquisition, Technology and Logistics, who supervises 
DOD acquisition,[Footnote 11] must certify, as Milestone Decision 
Authority for the proposed refueling recapitalization, that the 
requirements community has accomplished its statutory duties and that 
the proposed program is in compliance with DOD policies and 
regulations.[Footnote 12] Absent this certification, the acquisition 
program for the replacement refueling aircraft cannot begin.[Footnote 
13] 

In our prior reviews, we produced a number of products concerning 
aerial refueling requirements and related capabilities such as 
passenger and cargo capacity. In our August 1996 report, U.S. Combat 
Air Power: Aging Refueling Aircraft Are Costly to Maintain and Operate, 
we recommended consideration of a dual-use aircraft that could conduct 
both aerial refueling and airlift operations as a replacement for the 
KC-135.[Footnote 14] We recommended that the Secretary of Defense 
require that future studies and analyses of replacement airlift and 
tanker aircraft consider accomplishing the missions with a dual-use 
aircraft. DOD only partially concurred with this recommendation, 
expressing concern at that time about how a dual-use aircraft would be 
used and whether one mission area might be degraded to accomplish the 
second mission. In our June 2004 report, Military Aircraft: DOD Needs 
to Determine Its Aerial Refueling Aircraft Requirements, we recommended 
conducting a study to establish air refueling requirements and we also 
recommended that a comprehensive analysis of alternatives be conducted 
in support of the recapitalization of the KC-135.[Footnote 15] DOD 
concurred with this recommendation. The current proposal for 
recapitalization of the KC-135 considers a multirole aircraft, 
establishes air refueling requirements, and includes an analysis of 
alternatives. 

Air Force Analyses Did Not Identify a Need for Passenger and Cargo 
Capability as Required by Policy: 

Mandatory Air Force policy requires Air Force organizations to use a 
formal capabilities-based approach to identify, evaluate, develop, 
field, and sustain capabilities that compete for limited 
resources.[Footnote 16] According to DOD officials, the KC-135 
recapitalization has proceeded under a capabilities-based approach. 
Contrary to Air Force implementing guidance, however, the Air Force's 
proposal for a replacement refueling aircraft included a passenger and 
cargo capability without analyses identifying an associated gap, 
shortfall, or a redundant capability. According to mandatory Air Force 
implementing guidance, analyses supporting the decision-making process 
should assess a capability based on the effect it seeks to generate and 
the associated operational risk of not having it.[Footnote 17] However, 
in this case, the supporting analyses determined neither need nor risk. 
Air Force officials could not provide information explaining this 
discrepancy between the analyses and their proposal. The four analyses 
that might have established the passenger and cargo requirement are the 
Capabilities Review and Risk Assessment, the Functional Area Analysis, 
the Functional Needs Analysis, and the DOD Mobility Capabilities Study. 

Mandatory Air Force policy directs the use of a Capabilities Review and 
Risk Assessment as a capabilities-based planning process that is 
traceable, repeatable, and defensible to identify Air Force-wide 
capability shortfalls, gaps, and areas for further study.[Footnote 18] 
According to mandatory Air Force implementing guidance, senior leaders 
use these findings to make comprehensive decisions that will yield the 
best results for the Air Force and joint warfighter.[Footnote 19] The 
Air Force conducted a Capabilities Review and Risk Assessment examining 
the Air Force concepts of operations to determine if a capability gap 
or shortfall existed and the assessment did not report a passenger and 
cargo capability gap to be addressed by an air refueling 
aircraft.[Footnote 20] 

The Functional Area Analysis and the Functional Needs Analysis are 
related assessments and both are a part of the Joint Capabilities 
Integration and Development System. According to mandatory Air Force 
implementing guidance, the Functional Area Analysis documents the 
military tasks needed to achieve military objectives.[Footnote 21] The 
Functional Area Analysis for the replacement refueling aircraft does 
not identify movement of passengers and cargo as a required task of the 
proposed refueling replacement aircraft. Mandatory Air Force 
implementing guidance also describes follow-on analysis, the Functional 
Needs Analysis, which compares the capability needs to the capabilities 
provided by existing or planned systems and identifies the gaps/ 
shortfalls or redundancies.[Footnote 22] Additional mandatory Air Force 
implementing guidance states that if the Functional Needs Analysis 
identifies a shortfall, Air Force planners must determine the 
consequence to the Air Force of having a specific amount of capability 
and the likelihood that the shortfall will have an adverse effect on 
the Air Force's ability to achieve desired effects for a given time 
period.[Footnote 23] The Functional Needs Analysis for the replacement 
tanker aircraft does not document a passenger and cargo capability gap 
or shortfall and made no mention of the consequence to the Air Force of 
having or not having this capability or the likelihood that a shortfall 
will have an adverse effect on the Air Force. 

In 2004, the Department of Defense identified the Mobility Capabilities 
Study as an effort to determine, among other things, refueling 
requirements and recapitalization needs.[Footnote 24] The Mobility 
Capabilities Study executive summary stated the analysis conducted by 
the study addressed five objectives including identifying mobility 
capability gaps, overlaps, or excesses and providing associated risk 
assessments.[Footnote 25] However, when the report of the Mobility 
Capabilities Study was released in 2005, it did not identify a 
passenger and cargo gap or shortfall, concluding instead that combined 
U.S. and host nation transportation assets were adequate to meet U.S. 
objectives with acceptable risk. The study did note that a passenger- 
and cargo-capable refueling aircraft could be used in a secondary 
mission role when not being used in its primary mission. However, the 
Mobility Capabilities Study also identified a refueling aircraft 
shortfall in all refueling-required scenarios but one and concluded 
that the number of aircraft needed to satisfy refueling needs ranges 
from 520 to 640 total aircraft, a range that exceeds the current Air 
Force inventory of 590 refueling aircraft.[Footnote 26] A possible 
shortage of refueling aircraft under some circumstances raises 
questions about the ability to employ a refueling aircraft in a 
passenger and cargo role and underscores the importance of analyses to 
guide decision-makers concerning a refueling replacement aircraft. 
Additionally, DOD previously expressed concern that a tanker with a 
passenger and cargo capability could inappropriately degrade the air 
refueling mission of the aircraft and concluded that such an option 
could only be accepted if supported by analyses.[Footnote 27] 

Mandatory Air Force implementing guidance governing the capabilities- 
based planning analyses discussed above states that capabilities-based 
planning employs an analysis process that identifies, assesses, and 
prioritizes needed military capabilities.[Footnote 28] These four 
analyses did not identify a passenger and cargo capability gap, did not 
establish that such a capability would represent a redundancy, and did 
not assess the risk of not acquiring such a capability. Without sound 
analyses, the Air Force may be at risk of spending several billion 
dollars unnecessarily for a capability that may not be needed to meet a 
gap or shortfall. 

Military Decision Makers Approved the Capability with Neither an 
Identified Need nor Risk Assessment: 

Military decision makers approved the passenger and cargo capability as 
a requirement although supporting analyses identified neither need nor 
risk. According to mandatory Air Force implementing guidance, the 
validation phase of the requirements determination process is the 
formal review process of a capabilities-based requirements document by 
the Air Force Requirements for Operational Capabilities Council or 
Chairman's Joint Requirements Oversight Council to confirm the 
capability need and operational requirement.[Footnote 29] The Air Force 
Requirements for Operational Capabilities Council validated and the 
Chairman's Joint Requirements Oversight Council validated and approved 
the replacement refueling aircraft proposal with a passenger and cargo 
capability. 

The Air Force Requirements for Operational Capabilities Council is the 
oversight body established to validate and recommend approval or 
disapproval of Air Force-sponsored proposals and requirements 
documents. This instrument of the Air Force Chief of Staff and 
Secretary of the Air Force first reviewed and then validated the 
proposal for a passenger and cargo capability in the replacement 
refueling aircraft. According to mandatory Air Force implementing 
guidance, the Air Force Requirements for Operational Capabilities 
Council ensures Air Force capabilities-based requirements documentation 
is prepared in accordance with Air Force and joint guidance, complies 
with established standards, and accurately articulates valid Air Force 
capabilities-based requirements.[Footnote 30] Although there was 
neither an identified need nor a risk assessment that supported 
inclusion of the passenger and cargo capability in the replacement 
refueling aircraft, the Air Force Requirements for Operational 
Capabilities Council validated the proposal in July 2006 and forwarded 
it for Joint Requirements Oversight Council consideration. 

The Chairman of the Joint Chiefs uses the Joint Requirements Oversight 
Council to help fulfill his statutory responsibility to provide advice 
to the Secretary of Defense on requirements prioritization.[Footnote 
31] The Vice Chairman of the Joint Chiefs of Staff, on behalf of the 
Chairman, presides over the Joint Requirements Oversight Council and, 
in this role, assists the Chairman in identifying and assessing the 
priority of joint military requirements (including existing systems and 
equipment) to meet the national military and defense 
strategies.[Footnote 32] According to joint policy, Joint Capabilities 
Integration and Development System procedures support the Chairman and 
Joint Requirements Oversight Council in identifying, assessing, and 
prioritizing needed joint military capabilities and conducting risk 
assessments.[Footnote 33] In November of 2006, the Joint Requirements 
Oversight Council met, validated, and approved the passenger and cargo 
capability without the supporting analyses that identified a passenger 
and cargo need or an associated risk. Officials acknowledged that 
analyses that might have established the need and might have assessed 
the risk were not used in the Chairman's oversight council. Officials 
stated that decision makers used military judgment as the basis to 
include the passenger and cargo capability in the proposal for the 
replacement refueling aircraft. In our review of relevant DOD policy 
and guidance, we found mandatory Air Force guidance describing a 
capabilities-based process that incorporates subjective operational 
expertise in combination with objective analysis.[Footnote 34] However, 
we found decision makers did not use objective analysis in combination 
with their judgment as required.[Footnote 35] By including a passenger 
and cargo capability in the replacement refueling aircraft without 
supporting analyses that identify need and assess associated risk, the 
Air Force may be at risk of spending several billion dollars 
unnecessarily and DOD may not be able to certify the program as 
required by statute. 

The lack of analyses identifying and supporting the passenger and cargo 
capability affects the acquisition program directly. The Air Force 
intends to replace the fleet of more than 500 KC-135s, and the Mobility 
Capabilities Study of 2005 set the requirement for KC-135s at a range 
of between 520 to 640 aircraft. Replacement of this fleet is estimated 
to cost a minimum of $72 billion. Compared to a refueling aircraft 
without a passenger and cargo capability, the inclusion of the 
capability is estimated to increase costs by 6 percent. The Joint 
Requirements Oversight Council approval of the proposal of a 
replacement refueling aircraft with the passenger and cargo capability, 
without an established need supported by analyses and without an 
analysis of risk, could result in an unnecessary expenditure of at 
least $4.3 billion by our estimates. 

Lack of analyses may also affect initiation of the acquisition program. 
Pursuant to statute, the Under Secretary of Defense for Acquisition, 
Technology and Logistics must certify the program before initiation of 
an acquisition program.[Footnote 36] Among other items, this 
certification must include that (1) the Joint Requirements Oversight 
Council has accomplished its duties including an analysis of 
operational requirements and (2) the KC-135 refueling replacement 
aircraft program complies with DOD policies, regulations, and 
directives. Although responsible for reviewing and approving military 
needs, the Joint Requirements Oversight Council approved a capability 
that was not associated with a capability gap or shortfall, contrary to 
policy and implementing guidance. This could preclude certification of 
the program by the Under Secretary of Defense for Acquisition, 
Technology and Logistics. Without this certification, the acquisition 
program for the replacement refueling aircraft cannot begin.[Footnote 
37] 

Conclusions: 

DOD and the military services are facing significant budgetary 
pressures as they determine the necessary equipment and personnel to 
meet varied and demanding missions. As we noted earlier in our report, 
the Air Force is faced with fiscal constraints and is considering 
reducing its personnel by tens of thousands. While funding these 
budgetary and personnel issues, the Air Force has indicated that its 
top acquisition priority is replacement of the KC-135 aerial refueling 
aircraft.[Footnote 38] Additionally, the Air Force has decided that the 
replacement aircraft is to include a passenger and cargo capability. 
However, it has reached the decision to add this capability without the 
benefit of supporting analyses that identified need and assessed 
associated risk. 

Accomplishing required analyses informs decision making and it is 
consistent with current Air Force policy. Mandatory Air Force 
implementing guidance states each capability is to be assessed on the 
effects it seeks to generate and the associated operational risk of not 
having it. Additionally, the Air Force recognizes the importance of 
policies that accurately determine requirements in an environment of 
limited resources to achieve the greatest Air Force 
capability.[Footnote 39] Accomplishing the required analyses related to 
the passenger and cargo capability in the replacement refueling 
aircraft informs decision making, complies with mandatory Air Force 
policy and implementing guidance, and may avoid unnecessary 
expenditures for capability that may be unneeded. 

Recommendations for Executive Action: 

We recommend that the Secretary of Defense direct the Secretary of the 
Air Force to accomplish the required analyses that evaluate the 
proposed passenger and cargo capability so as to determine if there is 
a gap, shortfall, or redundancy, assess the associated risk, and then 
submit such documentation to the Joint Requirements Oversight Council 
for validation. Once these analyses are completed, we also recommend 
that the Secretary of Defense direct the Chairman, Joint Chiefs of 
Staff, to formally notify the Under Secretary of Defense for 
Acquisition, Technology and Logistics that such analyses have been 
completed as required prior to certification of the program to 
Congress. 

Matter for Congressional Consideration: 

The Congress should consider requiring that: 

* in addition to the certification described by section 2366a of title 
10, United States Code, the Under Secretary of Defense for 
Acquisitions, Technology and Logistics make a specific certification 
that the Air Force employed a sound, traceable, and repeatable process 
producing analyses that determined if there is a gap, shortfall, or 
redundancy and assessed the associated risk with regard to passenger 
and cargo capability for the KC-135 Recapitalization, and: 

* consistent with service policy, these analyses are made available to 
the Joint Requirements Oversight Council prior to the Under Secretary's 
certification of the program pursuant to section 2366a of title 10, 
United States Code. 

Agency Comments and Our Evaluation: 

In written comments on a draft of this report, DOD did not agree with 
one recommendation but agreed with a second recommendation. DOD's 
comments are included as enclosure I at the end of this report. 

DOD disagreed with our recommendation to accomplish the required 
analyses to establish if there is a gap, shortfall, or redundancy and 
assess associated risks concerning the proposed passenger and cargo 
capability in the replacement refueling aircraft. In its comments, DOD 
stated that through the Joint Capabilities Integration and Development 
System process, the Air Force presented analysis and rationale for the 
passenger and cargo capability. DOD further stated that its Joint 
Requirements Oversight Council and the Air Force concluded that the 
analysis was sufficient justification for the capability and the Joint 
Requirements Oversight Council validated the requirement. However, as 
our report points out, DOD did not perform the required analyses and 
failed to identify a gap, shortfall, or redundancy for the passenger 
and cargo capability. When interviewed, Joint Requirements Oversight 
Council officials told us that no analysis identifying a need for a 
passenger and cargo capability was presented to the council. Required 
analyses should establish an understanding of when and why a capability 
is needed and the risk of not having it. No such analysis was available 
to the Joint Requirements Oversight Council. Considering the 
requirement for analyses that separate needs from wants and the risk of 
unnecessary expenditures in this multi-year multi-billion dollar 
acquisition program, we continue to believe that our recommendation has 
merit and that the analyses required by mandatory guidance are 
necessary to inform the decision that begins the acquisition program. 

DOD agreed with our recommendation to formally notify the Under 
Secretary of Defense for Acquisition, Technology and Logistics once the 
required analyses have been completed. Acknowledging the responsibility 
established in section 2366a of title 10, United States Code, DOD 
stated that the Under Secretary of Defense for Acquisition, Technology 
and Logistics will consider whether the Joint Requirements Oversight 
Council has accomplished its duties with respect to the program, 
including an analysis of the operational requirements of the program. 
DOD also stated that the Department would again review the 
justification for a passenger and cargo capability prior to making a 
decision to initiate the acquisition program. However, DOD did not 
offer assurance that, as we recommended, the Air Force would accomplish 
the required analyses to determine if there is a gap, shortfall, or 
redundancy, assess the associated risk, and then submit such 
documentation to the Joint Requirements Oversight Council for 
validation. We believe that the time it could take to accomplish the 
required analyses and submit the analyses for revalidation by the Joint 
Requirements Oversight Council, could delay the Under Secretary's 
certification until just prior to the Milestone B decision, and may 
frustrate the congressional oversight that would otherwise be permitted 
under section 2366a.[Footnote 40] We believe that in a program 
committing $120 billion over several decades, the review confirming 
that needs are justified should occur as far in advance of program 
initiation as possible. 

We continue to believe that by including a passenger and cargo 
capability in the replacement refueling aircraft without required 
analyses that identify need and assess associated risk, the Air Force 
is at risk of spending several billion dollars unnecessarily. We also 
believe, as reported, that the absence of analyses identifying a 
capability gap, shortfall, or redundancy, and the Joint Requirements 
Oversight Council approval of the program without these analyses is 
contrary to policy and implementing guidance and could preclude 
certification of the program by the Under Secretary of Defense for 
Acquisition, Technology and Logistics. In light of the DOD comments on 
our report, we are proposing a matter for congressional consideration. 

We are sending copies of this report to other interested congressional 
committees; the Secretary of Defense; the Under Secretary of Defense, 
Acquisition, Technology and Logistics; the Secretary of the Air Force, 
and the Director, Office of Management and Budget. Copies of this 
report will also be made 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 have any questions regarding this report, please contact me at 
(202) 512-8365 or solisw@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 include Ann Borseth, Assistant Director; Grace Coleman; Oscar 
Mardis; Karen Thornton; and Steve Woods. 

Signed by: 

William M. Solis, Director: 
Defense Capabilities and Management: 

List of Addressees: 

The Honorable Carl Levin: 
Chairman: 
The Honorable John McCain: 
Ranking Minority Member: 
Committee on Armed Services: 
United States Senate: 

The Honorable Daniel K. Inouye: 
Chairman: 
The Honorable Ted Stevens: 
Ranking Minority Member: 
Subcommittee on Defense: 
Committee on Appropriations: 
United States Senate: 

The Honorable Ike Skelton: 
Chairman: 
The Honorable Duncan L. Hunter: 
Ranking Minority Member: 
Committee on Armed Services: 
House of Representatives: 

The Honorable John P. Murtha: 
Chairman: 
The Honorable C.W. Bill Young: 
Ranking Minority Member: 
Subcommittee on Defense: 
Committee on Appropriations: 
House of Representatives: 

Enclosure !: Comments from the Department of Defense: 

Office Of The Under Secretary Of Defense: 
3000 Defense Pentagon: 
Washington, DC 20301-3000:
Acquisition, Technology, And Logistics:

Feb 20 2007:

Mr. William M. Solis:
Director, Defense Capabilities and Management: 
U.S. Government Accountability Office:
441 G Street, N.W. 
Washington, DC 20548:

Dear Mr. Solis:

This is the Department of Defense (DoD) response to the GAO Draft 
Report, 07-367R, "Air Force Decision to include a Passenger and Cargo 
Capability in Its Replacement Refueling Aircraft Was Made Without 
Required Analyses," dated January 23, 2007 (GAO Code 350973/GAO-07- 
367R). The Department of Defense non-concurs with Recommendation 1 and 
concurs with Recommendation 2 in the draft report. Details of our 
responses are contained in the enclosure.

The Department appreciates the opportunity to comment on the draft 
report.

Sincerely,

Signed by: 

Diane M. Wright: 
Acting Director: 
Portfolio Systems Acquisition:

Enclosure: 
As stated:

GAO Draft Report - Dated January 23, 2007 GAO Code 350973/GAO-07-367R:

"Air Force Decision to Include a Passenger and Cargo Capability in Its 
Replacement Refueling Aircraft Was Made Without Required Analyses":

Department Of Defense Comments To The Recommendations:

Recommendation 1: The GAO recommended that the Secretary of Defense 
direct the Secretary of the Air Force to accomplish the required 
analyses that evaluate the proposed passenger and cargo capability so 
as to determine if there is a gap, shortfall, or redundancy, assess the 
associated risk, and then submit such documentation to the Joint 
Requirements Oversight Council for validation.

DOD Response: Non-concur. Through the Joint Capabilities Integration 
and Development System (JCIDS) process, the Air Force presented 
analysis and rationale for the passenger and cargo capability. The 
Joint Requirements Oversight Council (JROC) and the Air Force concluded 
that the analysis was sufficient justification for the capability, and 
the JROC validated the passenger and cargo requirement. The Department 
will review the JROC justification and associated analysis prior to the 
Milestone B decision, as required by section 2366a of title 10, United 
States Code.

Recommendation 2: The GAO recommended that the Secretary of Defense 
direct the Chairman, Joint Chiefs of Staff, once these analyses are 
completed, to formally notify the Under Secretary of Defense for 
Acquisition, Technology and Logistics that such analyses have been 
completed as required prior to certification of the program to Congress.

DOD Response: Concur. In accordance with section 2366a of title 10, 
United States Code, the Under Secretary of Defense for Acquisition, 
Technology and Logistics will consider whether the Joint Requirements 
Oversight Council has accomplished its duties with respect to the 
program, including an analysis of the operational requirements for the 
program. 

[End of section] 

(350973): 

FOOTNOTES 

[1] The procedures established in the Joint Capabilities Integration 
and Development System (JCIDS) support the Chairman of the Joint Chiefs 
of Staff and the Joint Requirements Oversight Council in identifying, 
assessing, and prioritizing joint military capability needs as 
specified in Title 10 of the United States Code, sections 153, 163, 
167, and 181. Chairman of the Joint Chiefs of Staff Instruction 
3170.01E, Joint Capabilities Integration and Development System,  1 
(May 11, 2005), hereinafter referred to as CJCSI 3170.01E (May 11, 
2005). 

[2] This cost estimate is based on information provided by Air Force 
officials in congressional testimony. The cost represents the estimated 
total cost of procuring 520 replacement refueling aircraft over a 38- 
year period. This is based on an estimated range of current prices per 
plane based on costs cited in Air Force testimony, February, 2006. 

[3] According to Air Force implementing guidance, this is an analysis 
that helps decision makers select the most cost-effective alternative 
to satisfy an operational capabilities-based requirement. An Analysis 
of Alternatives is also an analysis of operational effectiveness and 
estimated life-cycle costs for alternative materiel systems. Air Force 
Instruction 10-601, Capabilities-Based Requirements Development,  
4.4.1 (July 31, 2006), hereinafter cited as AFI 10-601 (May 31, 2006). 

[4] In policy and implementing guidance concerning capabilities-based 
assessments, the words needs and requirements are used interchangeably. 
For purposes of this report, we use the term capability to mean the 
military ability to achieve a desired effect by performing a set of 
tasks under specified standards and conditions. Also for purposes of 
this report, the term requirement means a system capability or 
characteristic required to accomplish approved mission needs. 

[5] In an interview regarding the Air Force briefing to the Joint 
Requirements Oversight Council, a senior DOD official told us the 
refueling recapitalization program is proceeding under a capabilities- 
based approach. 

[6] Prior to this new capabilities-based approach, DOD used a threat- 
and risk-based process to determine requirements. While threat is no 
longer the driving factor in determining requirements, risk management 
is still part of DOD acquisition strategy. 

[7] AFI 10-601, Capabilities-Based Requirements Development,  1.2 
(July 31, 2006). 

[8] Air Force Instruction 10-604, Capabilities-Based Planning,  1.1.1 
(May 10, 2006), hereinafter cited as AFI 10-604 (May 10, 2006). 

[9] AFI 10-601,  2.3.5.1 (July 31, 2006). 

[10] AFI 10-601,  2.3.5.2 (July 31, 2006). 

[11] 10 U.S.C. 133 (b)(1) (2006). 

[12] 10 U.S.C. 2366a  (a)(7) and (a)(10) (2006). 

[13] 10 U.S.C.  2366a (a) (2006) and Department of Defense Instruction 
5000.2, Operation of the Defense Acquisition System,  3.7.1.2 (May 12, 
2003), hereinafter cited as DODI 5000.2 (May 12, 2003). 

[14] GAO, U.S. Combat Air Power: Aging Refueling Aircraft Are Costly to 
Maintain and Operate, GAO/NSIAD-96-160 (Washington, D.C.: Aug. 8, 
1996). 

[15] GAO, Military Aircraft: DOD Needs to Determine Its Aerial 
Refueling Aircraft Requirements, GAO-04-349 (Washington, D.C.: June 4, 
2004). 

[16] Air Force Policy Directive 10-6, Capabilities-Based Planning and 
Requirements Development,  1 (May 31, 2006), hereinafter cited as AFPD 
10-6 (May 31, 2006). 

[17] AFI 10-601,  1.2 (July 31, 2006). 

[18] AFPD 10-6,  1.1 (May 31, 2006). 

[19] AFI 10-604,  3.1.4 (May 10, 2006). 

[20] The Global Mobility Concept of Operations describes the primary 
mission of air refueling as providing worldwide, day/night, adverse 
weather, probe/drogue, and boom air refueling on the same sortie to 
receiver-capable U.S., allied, and coalition military aircraft 
(including unmanned aircraft). Refueling aircraft are employed to 
support global attack, air bridge, deployment, redeployment, homeland 
defense, and theater support to joint, allied, and coalition air 
forces, and specialized national defense missions. They also are used 
to support special operations and U.S. nuclear forces. 

[21] AFI 10-604,  3.1.4.2 (May 10, 2006). 

[22] AFI 10-601,  2.2.1 (July 31, 2006). 

[23] AFI 10-604,  3.1.4.3 (May 10, 2006). 

[24] GAO-04-349, app. II, p. 34. 

[25] Department of Defense Mobility Capabilities Study, Executive 
Summary, Sec. II, p. 2 (December 2005). 

[26] The inventory of 590 air refueling aircraft comprises 114 KC- 
135Es, 417 KC-135Rs, and 59 KC-10 aircraft. 

[27] GAO/NSIAD-96-160, app. I, p. 41. 

[28] Capabilities-based analyses that identify, assess, and prioritize 
include the Functional Needs Analysis, Functional Area Analysis, and 
the Capabilities Review and Risk Analysis. AFI 10-604,  1.1.1 and 
3.1.4 (May 10, 2006). The Mobility Capabilities Analyses 2005 shared 
this objective of identifying mobility capability gaps, overlaps, or 
excesses and providing associated risk assessment. Department of 
Defense Mobility Capability Study, Executive Summary, section II, p. 2. 

[29] AFI 10-601,  2.3.5 (July 31, 2006). 

[30] AFI 10-601,  3.4 (July 31, 2006). 

[31] 10 U.S.C.  153 (a)(4)(A) and 10 U.S.C.  181 (b)(1) (2006) and 
Chairman of the Joint Chiefs of Staff Instruction 5123.01B, Charter of 
the Joint Requirements Oversight Council, Encl. A-1. 

[32] 10 U.S.C.  181 (b)(1) (2006). 

[33] CJCSI 3170.01E,  1 (May 11, 2005) and Chairman of the Joint 
Chiefs of Staff Instruction 5123.01B, Charter of the Joint Requirements 
Oversight Council, Encl. A  2e(15), p. A-6 (April 15, 2004). 

[34] AFI 10-601,  1.4.1 (July 31, 2006). 

[35] Air Force Instruction 10-601 (July 31, 2006) also describes, at  
1.4.3, the concept of Top-Down Direction, whereby higher authority, 
such as the Chief of Staff of the Air Force, may direct a sponsor to 
initiate the development and fielding of a new capability. Even if Top- 
Down Direction were used in this case, the sponsor would still be 
responsible for conducting appropriate analysis and producing the 
capabilities-based documents, pursuant to the mandatory guidance at AFI 
10-601,  1.4.3. 

[36] 10 U.S.C.  2366a (a) (2006). 

[37] 10 U.S.C.  2366a (2006) and DODI 5000.2  3.7.1.2 (May 12, 2003). 

[38] In October 2006, the Chief of Staff of the Air Force identified 
the service's top five procurement priorities as follows: (1) 
replacement refueling aircraft, (2) combat rescue helicopter, (3) space-
based early warning and communications satellites, (4) the F-35 
(Lightning II), and (5) the next-generation long-range strike bomber. 

[39] Air Force Policy Directive 16-5, Planning, Programming, and 
Budgeting System,  1 (29 July 1994).

[40] In respect to acquisition programs, milestones are established in 
DODI 5000.2 and are the points where a recommendation is made and 
approval is sought regarding starting or continuing a program into the 
next phase. In this instance, the decision at Milestone B is to enter 
into the system development and demonstration phase pursuant to 
guidance prescribed by the Secretary of Defense and to begin the 
acquisition program. 

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