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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: 

GAO Highlights: 

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

Why GAO Did This Study: 

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. 

What GAO Found: 

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: 

* 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. 
* 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.
* 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. 

Figure: Examples of INL Aircraft: 

[See PDF for Image] 

Source: INL. 

[End of Figure] 

[Hyperlink, http://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 FordJ@gao.gov. 

[End of Section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

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: 

INL Has Met Contract Oversight and Evaluation Requirements: 

Conclusions: 

Agency Comments and Our Evaluation: 

Appendix I: Scope and Methodology: 

Appendix II: Comments from the Department of State: 

GAO Comments: 

Appendix III: GAO Contact and Staff Acknowledgments: 

Table: 

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

Figures: 

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

Figure 2: Examples of Aircraft Owned by INL: 

Figure 3: Aviation Fleet Management Planning Process: 

Abbreviations: 

GSA: General Services Administration: 

INL: Bureau of International Narcotics and Law Enforcement Affairs: 

NAS: Narcotics Affairs Section: 

OMB: Office of Management and Budget: 

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.[Footnote 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[Footnote 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. 

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.[Footnote 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.[Footnote 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.[Footnote 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.[Footnote 6] 

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: 

* 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. 

* 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. 

* 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: 

[See PDF for image] 

Source: GAO based on INL (data); Map Resources (map). 

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

[End of figure] 

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: 

[See PDF for image] 

Source: INL. 

[End of figure] 

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): 

Fiscal year: 2002; 
International Narcotics Control and Law Enforcement: $67.6; 
Andean Counterdrug Initiative: $289.0; 
Total: $356.6. 

Fiscal year: 2003; 
International Narcotics Control and Law Enforcement: 76.1; 
Andean Counterdrug Initiative: 366.3; 
Total: 442.4. 

Fiscal year: 2004; 
International Narcotics Control and Law Enforcement: 125.3; 
Andean Counterdrug Initiative: 316.4; 
Total: 441.7. 

Fiscal year: 2005; 
International Narcotics Control and Law Enforcement: 175.6; 
Andean Counterdrug Initiative: 313.7; 
Total: 489.3. 

Fiscal year: 2006; 
International Narcotics Control and Law Enforcement: 168.4; 
Andean Counterdrug Initiative: 348.0; 
Total: 516.4. 

Total; 
International Narcotics Control and Law Enforcement: $613.0; 
Andean Counterdrug Initiative: $1,633.4; 
Total: $2,246.4. 

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

[End of table] 

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: 

* Circular No. A-126,[Footnote 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. 

* 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.[Footnote 8] 

* 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.[Footnote 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,"[Footnote 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,[Footnote 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: 

[See PDF for image] 

Sources: GAO analysis of OMB and GSA's fleet management principles. 
Aircraft images Art Explosion. 

[End of figure] 

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.[Footnote 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 Caño Limón-Coveñas pipeline.[Footnote 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,[Footnote 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,[Footnote 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.[Footnote 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.[Footnote 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.[Footnote 18] In 2004, 
we reported that State's fiscal year 2000 through 2002 aircraft program 
costs reported to GSA were significantly understated.[Footnote 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.[Footnote 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[Footnote 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.[Footnote 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[Footnote 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.[Footnote 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.[Footnote 
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.[Footnote 26] 
Since 2004, State regulations have specified a policy that all new 
service contracts be performance-based, with clearly defined 
deliverables and performance standards.[Footnote 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.[Footnote 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[Footnote 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 Bogotá 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 Bogotá 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[Footnote 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. 

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 [Hyperlink, 
http://www/gao.gov]. 

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

Jess T. Ford: 
Director, International Affairs and Trade:  

[End of section] 

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. 

* 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.[Footnote 31] 

* 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 
Bogotá, 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. 

* 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.[Footnote 32] 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. 

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 Bogotá. 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 
Bogotá. 

[End of section] 

Appendix II: Comments from the Department of State: 

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

United States Department of State: 
Assistant Secretary for Resource Management and Chief Financial 
Officer: 
Washington, D.C. 20520: 

Ms. Jacquelyn Williams-Bridgers: 
Managing Director: 
International Affairs and Trade: 
Government Accountability Office: 
441 G Street, N.W. 
Washington, D.C. 20548-0001: 

Dear Ms. Williams-Bridgers: 

We appreciate the opportunity to review your draft report, "State 
Department: State Has Initiated a More Systematic Approach for Managing 
its Aviation Fleet," GAO Job Code 320406. 

The enclosed Department of State comments are provided for 
incorporation with this letter as an appendix to the final report. 

If you have any questions concerning this response, please contact 
Patricia Yorkman, Procurement Specialist, Bureau of International 
Narcotics and Law Enforcement Affairs at (202) 776-8806. 

Sincerely, 

Signed by: 

Bradford R. Higgins: 

cc: 
GAO - Al Huntington: 
INL - Anne Patterson: 
State/OIG - Mark Duda: 

Department of State Comments on GAO Draft Report: 

State Department: State Has Initiated a More Systematic Approach for 
Managing its Aviation Fleet GAO-07-264/GAO Code 320406: 

Thank you for the opportunity to comment on the draft report State 
Department: State Has Initiated a More Systematic Approach for Managing 
its Aviation Fleet. 

We appreciate GAO's decision to not make any recommendations in this 
report in light of reforms underway. We would like to emphasize that 
INL undertook several actions to correct shortcomings in its aviation 
management, including an internal aviation management review that began 
in July 2006, and other efforts such as an outsourced review that began 
in March 2006, which evaluated INL's support activities, including 
those of the Office of Aviation Programs prior to the conduct of this 
GAO review. 

Reforming INL's aviation management is an initiative begun by Assistant 
Secretary Patterson upon her arrival to the Bureau as a result of 
management concerns raised internally, as well as by GAO, OIG, and 
Congress. The Assistant Secretary commissioned a comprehensive internal 
review of aviation management in July 2006. 

In addition to complying with GSA and OMB aviation fleet guidance, the 
INL internal review sought ways to improve the Bureau's overall 
aviation management and identify opportunities for efficiency and 
effectiveness in our aviation business models. The INL review team 
debriefed GAO on the comprehensive review and its interim 
recommendations in late September 2006. 

INL began implementing major aviation management reforms in October 
2006 when it took steps toward hiring an aviation consulting firm to 
conduct an analysis in compliance with OMB and GSA guidance concerning 
a proposed acquisition of a small number of new aircraft to replace 
airplanes currently leased in Afghanistan. That analysis is due to be 
completed in late January 2007. The same consulting firm is conducting 
a study that will assess INL's entire fleet for compliance with GSA and 
OMB planning and acquisition guidance and will include the preparation 
of an OMB Exhibit 300. While not yet formally required for submission, 
the Exhibit 300 will allow INL to establish a capital asset plan and 
improve its long-term strategic planning capability and justification 
for fleet investments. 

INL disagrees with the GAO assessment that we neglected to provide 
fleet investment justifications using cost-benefit and life-cycle 
analyses of alternatives prior to these recent initiatives. Although it 
was not fully documented in the OMB format, considerable analysis was 
done to evaluate economically sound alternatives in most previous 
aircraft investments. 

INL would like to point out that GSA and OMB guidance is designed for 
civilian fleets rather than foreign assistance aviation programs. For 
example, INL's aircraft fleet was acquired often as a result of 
immediate exigencies, frequently relying on excess DoD aircraft because 
funding was not available to purchase ideal, expensive equipment. 
Aircraft for which funding was actually available has normally come by 
way of legislation that specified the types of aircraft to be purchased 
(e.g. Sikorsky Blackhawk and Bell Huey-II helicopters, as well as K-MAX 
helicopters never requested by the Administration). These factors 
obviated the benefit of conducting formal analyses. Furthermore, INL's 
aircraft operate overseas, often in a collaborative effort with foreign 
government organizations that share responsibilities and supporting 
costs. Finally, INL aircraft often operate under paramilitary 
conditions, even though it is considered a civilian fleet by GSA and 
OMB standards. Even with these extenuating challenges, INL is fully 
committed to bringing its program into compliance in the coming months. 

INL would also like to point out that it is bridging the difference 
between the GSA cost accounting reporting requirements and the 
Department's financial system structure. INL launched a Local Financial 
Management System in 2006 that will improve its ability to link 
budgetary obligation data to aviation funding for foreign affairs 
programs. In addition, INL has determined that the most appropriate 
platform to capture GSA cost accounting reporting requirements is 
through the Air Wing Inventory System (AWIS). This will improve INL's 
ability to track aviation costs and improve our funding transparency in 
response to previous program criticisms. In addition, INL has been 
heavily involved in working with the Resource Management Bureau to 
define requirements for and to implement a flexible Global Financial 
Management System data warehouse that will also improve INL's ability 
to track and report on INL worldwide costs. 

INL has implemented several other aviation reforms, including working 
with the Deputy Chief Financial Officer to ensure appropriate 
accounting for aviation assets in the Department's inventory control 
system and financial statements. While awaiting the results of the 
fleet study which will take nine months, INL is taking other specific 
measures for compliance with GSA and OMB guidance, including the 
consolidation of INL's aviation fleet under one Senior Aviation 
Management Official and the reporting of all INL aircraft for FAIRS. 
INL expects to make its first complete FAIRS reporting by June 2007. 

Beyond the scope of GSA and OMB compliance, INL is moving forward with 
other efforts to improve the efficiency and effectiveness of its 
aviation management such as consolidating aviation contract 
administration and oversight and improving transparency in aviation 
budgeting. internal review team found that several management 
inefficiencies were attributable to INL's fragmented nature in managing 
aviation information and business processes, some of which contributed 
to deficiencies in compliance with GSA and OMB guidance. 

In a unification session in early November 2006, INL Air Wing and NAS 
officials identified methods for implementing review team 
recommendations for consolidating business processes, including ways 
for (1) improving our aviation strategic planning, (2) consolidating 
contract administration and oversight, (3) consolidating and 
standardizing cost data collection and reporting methods, and (4) 
improving budget communication tools. 

INL appreciates GAO's assistance in confirming areas needing continued 
improvement and acknowledging INL efforts underway. 

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

GAO Comments: 

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. 

[End of section] 

Appendix III: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

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

Staff Acknowledgments:  

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

[End of section] 

(320406): 

FOOTNOTES 

[1] This 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. 

[2] INL'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. 

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

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

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

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

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

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

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

[10] Capital 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. 

[11] This 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. 

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

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

[14] For 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, GAO-05-970 (Washington, D.C.: 
Sept. 6, 2005). 

[15] H. 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. 

[16] 41 C.F.R. §102-33.200. 

[17] In 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. 

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

[19] GAO-04-645. 

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

[21] We 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. 

[22] The Comptroller General's Standards for Internal Control in the 
Federal Government, 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. 

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

[24] This system will replace the Central Financial Management System. 

[25] We 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, GAO-06-184 (Washington, D.C.: Mar. 15, 2006). 

[26] 48 C.F.R. § 46.104. 

[27] 48 C.F.R. § 637.6. 

[28] 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. 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. 

[29] The 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. 

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

[31] GAO-04-645. 

[32] GAO, Standards for Internal Control in the Federal Government, 
GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999). 

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