United States Government Accountability Office

GAO Report to the Subcommittee on 

Readiness, Committee on Armed 

Services, U.S. House of Representatives

CONTRACT 

MANAGEMENT 

Service Contract 

Approach to Aircraft 

Simulator Training 

Has Room for 

Improvement 

September 2006 

 

GAO-06-830 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

September 2006

CONTRACT MANAGEMENT 

Service Contract Approach to Aircraft 

Simulator Training Has Room for 

Improvement 

Highlights of GAO-06-830, a report to the 

Subcommittee on Readiness, Committee 

on Armed Services, House of

Representatives 

The Air Force has turned to service 

contracts for the F-15C, F-16, 

Airborne Warning and Control 

System, and F-15E, and the Army 

has done the same for helicopter 

simulator training at its Flight 

School XXI. The contractors own, 

operate, and maintain the simulator 

hardware and software. The

military services rely on industry to 

capitalize the required up-front 

investment, with the understanding

that the contractors will amortize

this investment by selling training

services by the hour. 

GAO was asked to address (1) the 

factors that led the Air Force and

Army to acquire simulator training

as a service and whether the 

decision to use this approach was

adequately supported; (2) whether 

implementation of the approach 

has resulted in the planned number

of simulator training sites being 

activated; and (3) whether the Air

Force and Army are effectively 

tracking the return on their

expenditure of taxpayer dollars.

GAO makes recommendations to 

the Secretary of Defense intended

to improve management and

oversight of these service contracts

to help ensure that the best

approach is used to provide the

war-fighter with needed training. 

In written comments on a draft of 

this report, DOD concurred with all 

but one of the recommendations,

only partially concurring with one 

pertaining to the Army’s simulator 

utilization rates. GAO continues to 

believe that the Army needs to 

track the extent to which it is using

simulator availability.

The Air Force and Army turned to service contracts for simulator training 

primarily because efforts to modernize existing simulator hardware and 

software had lost out in the competition for procurement funds. As a result, 

the simulators were becoming increasingly obsolete. Buying training as a 

service meant that operation and maintenance (O&M) funds could be used 

instead of procurement funds. Shifting the responsibility for simulator 

ownership, operation, and maintenance from the government to the 

contractor was thought to more quickly enable simulator upgrades to match

the changing configurations of aircraft. However, the decision to take a 

service contract approach was not supported by a thorough analysis of the 

costs and benefits as compared to other alternatives, despite a Department 

of Defense directive that provided for such an analysis. 

While Air Force and Army officials told GAO the new simulators are

significant improvements over the previous ones, the expected number of 

Air Force training sites have not been activated. For the Air Force, O&M 

funds have not been allocated at the anticipated levels, leading to schedule 

slippages. The F-16 simulator contractor cited the funding problems and 

subsequent schedule slippages as the basis for notifying the Air Force that 

its situation under the contract was no longer financially viable. The Air 

Force is in the process of re-competing the F-16 training contract, which will 

likely result in a training gap for pilots—possibly over 2 years—and 

additional costs to the Air Force. The start date of the Army’s flight 

simulator training was rebaselined twice, but Army officials told us that 

adequate training was in place for the flight school participants. 

The return on expenditure of taxpayer dollars is not being effectively 

tracked in three key ways: 

• Air Force utilization of simulator training frequently falls well below the 

hours for which the government is paying. The Army is not collecting 

data on utilization rates at all.

• The government has little insight into what it is paying for during the 

development period before training is activated, which can take more 

than a year. While invoices for preparatory efforts reflect only discrete 

tasks such as training capabilities assessments, the wide range of invoice 

amounts and GAO’s discussions with contractor representatives suggest 

that the government is actually making milestone payments to the 

contractors for a portion of their up-front costs to acquire and develop 

the simulators. 

• Most of the contracts contain award-term provisions, where the 

contractors can earn an extension of the contract period for good 

performance. GAO found that the award-term evaluation factors do not 

always measure key acquisition outcomes such as simulator availability 

and concurrency with aircraft upgrades. 

www.gao.gov/cgi-bin/getrpt?GAO-06-830.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Lisa Shames at 

(202) 512-4841 or shamesl@gao.gov. 
Contents 

Letter 1

Results in Brief 2 

Background 4

Service Contract Approach Had Perceived Benefits but Was Not 

Adequately Supported 9 

While Training Has Improved, the Expected Number of Simulator 

Sites Has Not Been Activated 12 

Return on the Expenditure of Taxpayer Dollars Is Not Effectively 

Tracked 19

Conclusion 28

Recommendations for Executive Action 29 

Agency Comments and Our Evaluation 30 

Appendix I Scope and Methodology 32 

Appendix II Comments from the Department of Defense 34 

Appendix III Comparison of Contractor Requirements under

Commercial and Non-commercial Acquisition 

Procedures 38 

Appendix IV Potential Duration of Air Force and Army Simulation 

Contracts 43 

Appendix V GAO Contact and Staff Acknowledgments 44 

Tables 

Table 1: Air Force and Army Simulator Training Contracts 6 

Table 2: Operational Simulator Training Locations and Start Dates 

as of July 2006 13 

Page i GAO-06-830 Acquisition of Simulator Training
Table 3: Comparison of DMO Estimated Funding Requirement with 

the Fiscal Year 2002 Program Objective Memorandum 

Funding Levels 14 

Table 4: Key Events That Have Affected Funding for the DMO 

Program 15

Table 5: Comparison of Planned and Actual Site Activations for 

AWACS 15

Table 6: Comparison of Planned and Actual Site Activations for F15C 16 

Table 7: Comparison of Planned and Actual Site Activations for F16 16 

Table 8: Comparison of Monthly Utilization Rate Calculation 

Methods for DMO System Simulatorsa

21

Table 9: Comparison of Site Survey Costs at Selected DMO System 

Sites 24 

Table 10: Comparison of Training Capability Requirements 

Assessments and Training Capability Assessments for 

DMO Systems 24 

Table 11: Comparison of Award-term Areas of Evaluation and the 

Weight Given to Each Area by System 26 

Figures 

Figure 1: Flight School XXI Schedule Rebaselines 17 

Figure 2: Comparison of Monthly Utilization Rates for AWACS 20 

Figure 3: Original Rate Structure for F-15C Simulator Service

Contracts 23

Page ii GAO-06-830 Acquisition of Simulator Training
Abbreviations 

AAVS Advanced Aircraft Virtual Simulators

AB air base 

AFB Air Force base 

AWACS Airborne Warning and Control System 

DMO Distributed Mission Operations 

DOD Department of Defense 

FAR Federal Acquisition Regulation 

O&M operation and maintenance 

OMB Office of Management and Budget 

TH training helicopter 

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Page iii GAO-06-830 Acquisition of Simulator Training
United States Government Accountability Office

Washington, DC 20548 

 

September 22, 2006 

The Honorable Joel Hefley 

Chairman 

The Honorable Solomon P. Ortiz 

Ranking Minority Member 

Subcommittee on Readiness 

Committee on Armed Services 

House of Representatives 

The Honorable Joel Hefley 

Chairman 

The Honorable Solomon P. Ortiz 

Ranking Minority Member 

Subcommittee on Readiness 

Committee on Armed Services 

House of Representatives 

In the late 1990s, the Air Force embarked upon an innovative strategy for 

acquiring flight simulator training for several of its aircraft platforms. 

Faced with increasingly obsolete simulators and growing competition for 

procurement dollars, the Air Force decided to buy simulator services from 

contractors—using operation and maintenance (O&M) funds—rather than 

continue the practice of having the government own and operate the 

simulators. This strategy was the beginning of an approach to war-fighting, 

known as Distributed Mission Operations (DMO), in which high-fidelity 

simulators would be used for training across dispersed locations. The 

initial platforms included in the DMO program were the F-15C, F-16, 

Airborne Warning and Control System (AWACS), and F-15E. In 2003, the 

Army followed the Air Force lead and awarded a service contract to obtain 

simulator training for the helicopters in its Flight School XXI program. The 

estimated value of the Air Force and Army contracts is nearly $2 billion. A 

key aspect of the service contract approach is the increased reliance on

contractors to keep the simulators concurrent with aircraft upgrades and 

ensure they are available for use. 

In the late 1990s, the Air Force embarked upon an innovative strategy for 

acquiring flight simulator training for several of its aircraft platforms. 

Faced with increasingly obsolete simulators and growing competition for 

procurement dollars, the Air Force decided to buy simulator services from 

contractors—using operation and maintenance (O&M) funds—rather than 

continue the practice of having the government own and operate the 

simulators. This strategy was the beginning of an approach to war-fighting, 

known as Distributed Mission Operations (DMO), in which high-fidelity 

simulators would be used for training across dispersed locations. The 

initial platforms included in the DMO program were the F-15C, F-16, 

Airborne Warning and Control System (AWACS), and F-15E. In 2003, the 

Army followed the Air Force lead and awarded a service contract to obtain 

simulator training for the helicopters in its Flight School XXI program. The 

estimated value of the Air Force and Army contracts is nearly $2 billion. A 

key aspect of the service contract approach is the increased reliance on

contractors to keep the simulators concurrent with aircraft upgrades and 

ensure they are available for use. 

At your request, we addressed (1) the factors that led the Air Force and 

Army to acquire simulator training as a service and whether the decision 

to use this approach was adequately supported, (2) whether 

implementation of this approach has resulted in the planned number of 

simulator training sites being activated, and (3) whether the Air Force and 

Army are effectively tracking the return on their expenditure of taxpayer 

dollars. 

At your request, we addressed (1) the factors that led the Air Force and 

Army to acquire simulator training as a service and whether the decision 

to use this approach was adequately supported, (2) whether 

implementation of this approach has resulted in the planned number of 

simulator training sites being activated, and (3) whether the Air Force and 

Army are effectively tracking the return on their expenditure of taxpayer 

dollars. 

To address these objectives, we interviewed Air Force and Army officials, 

as well as contractor representatives; performed a detailed analysis of the 

Air Force and Army service contracts; reviewed contractor performance 

measurements, annual evaluations, and payment invoices; and analyzed

historical documents such as acquisition plans, briefings, and decision 

memorandums. We visited Langley Air Force Base (AFB), Virginia, to view 

To address these objectives, we interviewed Air Force and Army officials, 

as well as contractor representatives; performed a detailed analysis of the 

Air Force and Army service contracts; reviewed contractor performance 

measurements, annual evaluations, and payment invoices; and analyzed

historical documents such as acquisition plans, briefings, and decision 

memorandums. We visited Langley Air Force Base (AFB), Virginia, to view 

Page 1 GAO-06-830 Acquisition of Simulator Training
F-15C simulator training; Shaw AFB, South Carolina, to view F-16 training; 

and the U. S. Army Aviation Center, Fort Rucker, Alabama to view the use

of Flight School XXI training helicopters (TH), the TH-67 Virtual 

Simulators and the Blackhawk and Chinook simulators. At each of these 

installations, we met with military officials and the contractor officials 

responsible for the training simulators. See appendix I for additional 

details on our scope and methodology. We performed our review from 

September 2005 to July 2006 in accordance with generally accepted 

government auditing standards. 

The Air Force and Army turned to service contracts for simulator training

primarily because efforts to modernize existing simulator hardware and 

software had lost out in the competition for available procurement funds. 

Buying simulator training as a service meant that O&M funds could be 

used to fund the requirement. Shifting the responsibility for simulator 

ownership, operation, and maintenance from the government to the 

contractor was thought to provide quicker state-of-the-art pilot and 

aircrew training capabilities and allow for automatic simulator upgrades to 

match the changing configurations of aircraft. However, the decision to 

use service contracts was not supported by a thorough analysis of the 

costs and benefits of this approach versus alternative approaches, despite 

a Department of Defense (DOD) directive on training that provides for an 

evaluation of the benefits and trade-offs of potential alternative training

solutions. While the Air Force and Army provided us with briefings that 

showed the decision-making process, the information does not provide 

adequate rationale for why certain alternatives were eliminated from 

consideration. A more in-depth analysis could have proactively addressed

and possibly mitigated the risks associated with this approach, where if a 

contractor fails to perform, the government is left without simulator 

hardware, software, or the anticipated level of training services. 

Results in Brief 

While Air Force and Army officials told us the new simulators are 

significant improvements over what they had previously, the expected 

number of Air Force simulator training sites has not been activated. For 

the Air Force, O&M funds have not been allocated to the contracts at the 

anticipated levels, leading to schedule slippages and fewer simulator sites 

in place than planned. Efforts to add funds, for example by shifting flying 

hour funds into the DMO program in 2003, have not been sufficient to 

regain the schedule and activate the number of sites anticipated. Further, 

the F-16 simulator training contractor, citing the funding problems and 

subsequent schedule slips, notified the Air Force in March 2004 that its 

situation was no longer financially viable under the contract and that it 

Page 2 GAO-06-830 Acquisition of Simulator Training
could not continue to provide simulator training as originally agreed. The 

Air Force will allow the contract to expire in June 2007. It is re-competing 

the F-16 training contract, which will likely result in a training gap for 

pilots—possibly over 2 years—and additional costs to the Air Force. Two 

aspects of the original contract, awarding it as a commercial acquisition 

and including an award-term provision,1

 will not be included in the new 

contract. 

The return on expenditure of taxpayer dollars is not being effectively 

tracked in three key ways: 

• Air Force utilization of simulator training frequently falls well below the 

hours for which the government is paying. In addition, utilization rates at 

different sites are reported based on very different criteria, leading to 

decisions to activate new training sites based on noncomparable 

information. The Army is not collecting data on utilization rates at all. 

• The government has little insight into what it is paying for during the 

development period before training is activated, which can take more than 

a year. Our analysis of invoices and discussions with contractor officials 

suggest that the government is, in effect, funding the private sector for a 

portion of its up-front costs to acquire and develop the simulators, 

although the invoices merely reflect discrete tasks such as site surveys. 

• Award-term evaluations are being used to measure performance, but the 

evaluation factors do not always measure key acquisition outcomes such 

as simulator availability and concurrency. In addition, the ability to “roll 

over” positive points on Air Force contracts can result in the contractor 

being awarded an additional year for only satisfactory performance—a 

scenario that is highly unlikely under the Army’s award-term plan. Air 

Force, Army, and some contractor officials indicated that award-term 

provisions may not be an effective incentive for improved performance. 

We make recommendations in this report to DOD on actions that can be 

taken to help ensure that the best approach is used to provide the warfighter with needed training, that the incentives motivate contractor 

performance toward achieving desired training outcomes, and that 

available simulator training is used in the most effective and efficient 

 1

 Award-term incentives are similar to award-fee incentives, but the contractor is rewarded 

for excellent performance with an extension of the contract period instead of additional 

fee. 

Page 3 GAO-06-830 Acquisition of Simulator Training
manner. In written comments on a draft of this report, DOD concurred 

with all but one of our recommendations. DOD partially concurred with 

our recommendation that the Army track and record monthly utilization 

rates on simulators at Flight School XXI. Nevertheless, DOD stated that 

the contractor is required to submit utilization data and that the data are 

available. Our recommendation was intended to encourage DOD to fully 

understand its student training requirements and to collect the information 

to decide whether it needs to adjust those requirements or contract 

provisions regarding simulator availability. Whether the utilization rates 

pertain to individual simulators or the student training load as a whole, we 

believe that the Army needs to know the extent to which it is using the 

simulator availability it is buying. DOD also offered two corrections to 

information in our draft report; we made changes as appropriate. DOD’s 

comments are included in their entirety in appendix II. 

Air Force and Army cite the increasingly complex training requirements 

needed to prepare for the ever more lethal battlefield environment as a 

factor that has led to greater reliance on flight simulators. A flight 

simulator is a system that tries to realistically replicate, or simulate, the

experience of flying an aircraft. Flight simulators range from video games 

to full-sized cockpit replicas mounted on hydraulic (or electromechanical) 

actuators and controlled by state-of-the-art computer technology. 

According to Air Force and Army officials, aircraft simulators are a costeffective way of helping to develop and refine operational flight skills. 

Simulators can facilitate training that might be impractical or unsafe if 

done with actual systems and allow for concentrated pilot practice in 

selected normal and emergency actions. Simulators also can train 

operators and maintainers to diagnose and address possible equipment 

faults, and enhance proficiency despite shortages of equipment, space, 

ranges, or time. 

In the late 1990s, the Air Force and Army were faced with increasingly 

obsolete simulators and the need to quickly acquire up-to-date pilot and 

aircrew training. In 1997, the then-Commander of the Air Force’s Air 

Combat Command proposed an innovative approach of buying training as 

a service, under which the contractors would own, operate, and maintain 

the simulator hardware and software. The simulator service contracts are 

one component of a much broader effort, now known as the DMO 

program. The DMO goal is to provide state-of-the-art simulator training ondemand at the location of the trainee, with the ultimate vision of 

networking different sites together to create more realistic flying 

scenarios. Plans call for each fighter unit eventually to be equipped with 

high-fidelity simulators. As of the fiscal year 2002 budget, the DMO 

Background 

Page 4 GAO-06-830 Acquisition of Simulator Training
program was formalized in the Air Force budget with the assignment of a 

program element line item that combined previous program elements for 

the various simulator systems. For fiscal year 2006, over $200 million was 

budgeted for the program. 

In the early 2000s, Army use of rotary-wing aviation simulation training 

was limited because the simulators being used were grossly obsolete and 

based on late 1970s’ technology. To revamp its helicopter training, the 

Army in late 2001 began the Flight School XXI program. Following the Air 

Force’s lead, the Army decided to acquire up-to-date simulator training 

using a service contract.

Congress and the Office of Management and Budget (OMB) have recently 

addressed the growing level of procurement of services. For example, 

Congress included provisions in Section 801 of the National Defense 

Authorization Act for Fiscal Year 20022

 designed to improve management 

and oversight of procurement of services. To ensure that DOD acquires 

services by means that are in its best interest and managed in compliance 

with applicable statutes, regulations, directives, and other requirements, 

the Act required DOD to establish a service acquisition management 

structure, comparable to the management structure that applies to the 

procurement of products.

3

 In September 2003, we reported that DOD and 

the military services had a management structure in place for reviewing 

individual services acquisitions valued at $500 million or more, but that 

approach did not provide a departmentwide assessment of how spending 

for services could be more effective.4

 Also, OMB Circular A-11’s Appendix 

B, “Budgetary Treatment of Lease-Purchases and Leases of Capital 

Assets,” was amended in 2005 to require agencies to submit to OMB for 

review any service contracts that require the contractor to acquire or 

construct assets valued over $50 million. While these provisions do not 

apply to the previously-awarded simulator training contracts, future 

replacement contracts will be covered. 

 2

 Pub. L. No. 107-107 (2001) codified at 10 U.S.C. 2330. 

3

 Implemented by Defense Federal Acquisition Regulation Supplement 237.170. 

4

 GAO, Contract Management: High-Level Attention Needed to Transform DOD Services 

Acquisition, GAO-03-935 (Washington, D.C.: Sept. 10, 2003).

Page 5 GAO-06-830 Acquisition of Simulator Training
All of the Air Force and Army simulator service contracts are funded with 

O&M funds. O&M funds are typically used for such things as military force 

operations, training and education, and depot maintenance. The contracts

are requirements contracts, meaning that the government, within available 

funds, shall order from the contractor all the training services specified for 

each of the aircraft platforms that are required during the effective

performance periods. Additionally, each contract contains language

limiting the government’s liability in the event the contract is terminated. 

For example, the Air Force F-15C contract states that the government 

reserves the right to terminate the contract for its sole convenience and 

that such termination prior to the issuance of a funded task order shall 

result in no payment to the contractor of any amount for any work 

performed or costs incurred. Table 1 provides additional descriptive 

information for each contract. 

Table 1: Air Force and Army Simulator Training Contracts 

Contract Information 

Dollars in millions 

System

Contract 

award date Prime contractor Contract valuea

AWACS Feb. 1999 Plexsys Interface Products, 

Inc. $101.0

F-15C Nov. 1997 Boeing Companyb277.0

F-15EcAug. 2003 Boeing Company 287.0

F-16 June 1999 Lockheed Martin Integrated

Systems, Inc. 178.0

Flight School XXI Sept. 2003 Computer Sciences 

Corporation - Defense 1108.0

Source: Air Force and Army contracts. 

a

Estimated costs for contract base years and all potential award-term or option years. 

b

The F-15C and F-15E contracts were originally awarded to McDonnell Douglas Corporation, which 

became a wholly-owned subsidiary of the Boeing Company. 

c

Training services for the F-15E are ordered under a much larger umbrella contract, Training Systems 

Acquisition II. 

The military services are relying on industry to capitalize the required upfront investment needed to acquire simulator hardware and software, with 

the understanding that the contractors will amortize this investment by 

selling training services by the hour. Each contract establishes operating 

hours and the hourly payment rates for the life of the contracts, with rates 

structured to provide the contractor with higher income in the initial years 

of service. In calendar year 2004, for example, if the F-16 contractor 

provided Shaw AFB with simulator availability that met 95 percent of the 

Page 6 GAO-06-830 Acquisition of Simulator Training
required system elements,5

 the hourly rate would be $5,225, whereas in 

calendar year 2006, it would drop to $709 per hour. 

We have previously identified the need to examine the appropriate role for 

contractors to be among the challenges in meeting the nation’s defense 

needs in the 21st century.

6

 We recently reported that the government’s 

increasing reliance on contractors for missions previously performed by 

government employees highlights the need for sound planning and 

contract execution.7

The structure of the simulator service contracts was heavily influenced by

mid-1990s’ acquisition reform initiatives such as the Federal Acquisition 

Streamlining Act of 19948

 and the Clinger-Cohen Act of 1996.9 These Acts 

encouraged agencies to use commercial acquisition procedures as a way 

to streamline the acquisition process. Differences under commercial 

versus non-commercial procedures pertain, for example, to the 

contracting officer’s determination of price reasonableness, the 

government’s right to inspect and test, and government rights to acquire 

technical data. Appendix III outlines these and other key differences. The 

Air Force contracts for simulator training are structured as commercial 

acquisitions, but the Army’s is not. Army officials told us they could not 

justify calling the requirement “commercial” because the simulators would

be configured to reflect combat helicopters, which do not exist in the 

commercial market. In August 2005, a DOD Inspector General review of 

the procurement procedures for the F-16 contract concluded that the 

simulator service did not meet the definition or intent of a commercial 

Acquisition Reforms 

Shaped Contract 

Structures 

 5

 Required system elements include instructor stations, pilot cockpits, manned combat 

stations, local and long haul networks, and observation rooms. 

6

 GAO, 21st Century Challenges: Reexamining the Base of the Federal Government, 

GAO-05-325SP (Washington, D.C.: February 2005). 

7

 GAO, Contract Security Guards: Army’s Guard Program Requires Greater Oversight 

and Reassessment of Acquisition Approach, GAO-06-284 (Washington, D.C.: Apr. 3, 2006);

and Hurricane Katrina: Improving Federal Contracting Practices in Disaster Recovery

Operations, GAO-06-714T (Washington, D.C.: May 4, 2006). 

8

 Pub. L. No. 103-355, Title VIII (1994). 

9

 Pub. L. No. 104-106, Div. D (1996), formerly Federal Acquisition Reform Act of 1996 and

renamed in Treasury, Postal Service and General Government Appropriations Act, 1997, 

Pub. L. No. 104-208, Sec. 808 (1996) (contained in Omnibus Consolidation Appropriations 

Act, 1997, Pub. L. No. 104-208, (1996)). 

Page 7 GAO-06-830 Acquisition of Simulator Training
service and recommended that the Air Force not use commercial 

procedures for the re-competed F-16 contract. The Air Force is using noncommercial procedures for the new contract. 

To allow for contractor recoupment of up-front investment, the strategy to

acquire simulator services envisioned longer duration contracts. This 

coincided with practices in commercial industry, where long-term 

relationships between buyer and seller were becoming common. The Air 

Force and Army adopted this approach by including award-term incentives 

in the contracts. This incentive can best be described as a variant of an 

award-fee incentive, where the contractor is rewarded for excellent 

performance with an extension of the contract period instead of additional 

fee. Under the award-term concept, an assessment of the contractor’s 

performance is presented to the term determining official, who unilaterally 

determines whether to award an extension or a reduction to the contract 

ordering period. The potential total years of contract performance under 

the simulator contracts range from 13 to 19.5 years. Appendix IV contains 

the details of each contract. Award-term incentives are relatively new in 

government contracting and are not addressed in the Federal Acquisition 

Regulation (FAR). 

Several key players are involved with acquisition and use of simulator 

training. 

For the Air Force: 

Key Players 

• Air Combat Command: The requiring entity—the user of simulator 

training services—is located at Langley AFB, Virginia. The command 

trains, equips and maintains combat-ready forces for rapid deployment 

and employment. 

• Aeronautical Systems Center: This organization is the acquisition 

agency for the simulator contracts. Located at Wright-Patterson AFB, 

Ohio, it manages development, acquisition, modification, and in some 

cases, sustainment for a wide variety of aircraft and related equipment 

programs. The center develops attack, bomber, cargo, fighter, trainer, and

reconnaissance aircraft for the Air Force. 

• Air Force fighter units: These are the users of the simulator training, 

which currently is taking place in 10 fighter units. 

Page 8 GAO-06-830 Acquisition of Simulator Training
For the Army: 

• Fort Rucker, Alabama: Fort Rucker is the requiring entity for the Army’s 

helicopter flight simulator services. It is the home of all Army aviation 

flight training and the location of the initial training for new aviators, 

known as Flight School XXI. The types of helicopters used in Flight School 

XXI training are the TH-67 basic training helicopter, Chinook, Blackhawk,

Apache, and the Attack Reconnaissance Helicopter. Unlike the Air Force’s 

multiple sites, the helicopter simulators provided under the service 

contract are located at only this one training site, not at each operational 

unit. 

• Army Program Executive Office for Simulation, Training and 

Instrumentation: This office’s mission is to provide training, testing, and

simulation solutions for soldier readiness. The office is co-located in 

Orlando, Florida, with the Naval Air Systems Command, which awarded 

the contract on behalf of the Army. 

Both the Air Force and Army were faced with obsolete simulators due to

decisions to not devote sufficient procurement funds to upgrade existing 

simulator hardware and software. The decision to buy simulator training 

as a service allowed use of O&M funds, which would alleviate the need to

compete for procurement funds. Further, it was envisioned that service 

contracts would allow for automatic simulator upgrades to match the 

changing aircraft configurations, because industry would be responsible 

for acquiring, operating, and maintaining the simulators and keeping them

concurrent. However, the decision to embark on a services approach was 

not supported by a thorough analysis of the costs and benefits, despite a 

DOD directive providing that the acquisition of simulators is to be based 

on an evaluation of the benefits and trade-offs of potential alternative 

training solutions. 

The difficulty associated with competition for limited procurement dollars 

was a key factor in the decision to turn to service contracts for warfighting training. Frequently, simulators have lost out in this competition 

and ended up under-funded. In 1997, the Air Force identified simulators 

for four aircraft—the F-15C, F-16, F-15E, and AWACS—as “obsolete or 

grossly non-concurrent” due to age, technological obsolescence, and lack

of concurrency with operational aircraft. By early 2002, the Army was also 

faced with non-concurrent helicopter simulators, and field unit 

commanders were reporting decreased unit readiness. For example, while 

the goal of the training at Fort Rucker is to produce aviators trained at a 

Service Contract 

Approach Had 

Perceived Benefits 

but Was Not 

Adequately Supported 

Simulators Had Lost Out in 

Competition for 

Procurement Funds 

Page 9 GAO-06-830 Acquisition of Simulator Training
proficiency level of two (with level one being the highest), Army officials 

reported that most of the aviators were leaving school with only a 

proficiency level of three.

These degraded situations existed despite a DOD directive that provides

for the military services to ensure that all development, procurement, 

operation, and support costs for the acquisition of training simulators 

were programmed and funded. Recognizing the need to keep simulators 

current with aircraft configurations, particularly as the use of simulators 

to substitute for live flying hours was rising, the Air Force issued specific 

guidance on training devices. For example, Air Force Instruction 36-2248, 

Operation and Maintenance of Aircrew Training Devices, provides that 

funding be established for simulator modifications concurrently with 

modifications to the weapon system. Also, Air Force Instruction 36-2251, 

Management of Air Force Training Systems, provides that the training 

system receive the same precedence rating as the prime mission system it 

supports and the same visibility, funding, and documentation. 

Nevertheless, Air Force funding decisions had not kept flight training 

simulators for the four aircraft systems concurrent with aircraft 

configurations. 

Also in the late 1990s, the Air Combat Command had unexpended O&M 

flying hour funds available due to flight crew deployments and obstacles in

scheduling training. Use of these funds for service contracts would 

alleviate the need to compete for procurement funds in an increasingly 

tight arena. The competition for procurement dollars was also a factor for 

the Army, which noted that the funds necessary to maintain and upgrade

its helicopter training simulators had “not competed effectively against 

other Army operational and logistics requirements.” 

Air Force acquisition officials conducted market research to determine 

how civilian airlines acquired flight training. They found “turnkey” training

services contracts10 in place in the commercial airline industry. These 

officials envisioned that services contracts would provide quicker state-ofthe-art pilot and aircrew training and keep up with the rapid pace of 

technology development by shifting the responsibilities for simulator 

Service Contracts Intended 

to Yield More Concurrent 

Simulators 

 10 Turnkey contracts are those under which the contractor provides all needed supplies,

services, equipment, facilities, etc., to produce the desired product or service, so that the 

customer has only to “turn the key” to avail himself of the result. 

Page 10 GAO-06-830 Acquisition of Simulator Training
ownership, operation, and maintenance from the government to the 

contractor. Further, with the contractor responsible for any development, 

production, and testing necessary to ready the simulators for use, the Air 

Force saw that it would be relieved of these multiple acquisition efforts, an 

important factor given the recently downsized acquisition offices. In 

addition, a stated benefit of the service contracting approach for simulator 

training as initially implemented was the streamlining or reduction in 

government oversight. Since commercial acquisition procedures were 

used to buy these services, fewer government system reviews were 

required. 

When it decided to take a new approach to solve its helicopter simulator 

concurrency problems, the Army conducted its own market research, 

solicited business solutions from industry, and conferred with Air Force 

DMO officials. 

Neither the Air Force nor the Army thoroughly analyzed the costs and 

benefits of alternative approaches before pursuing this new approach. 

DOD’s August 1986, Directive 1430.13, Training Simulators and Devices, 

provides that the acquisition of simulators be based on an analysis of the 

training need, the potential use of existing devices to satisfy that need, and 

an evaluation of the benefits and trade-offs of potential alternative training 

solutions.11 A 1999 report to the Air Force on the DMO program also noted 

the importance of identifying key business factors before embarking on a 

major acquisition. As a result of the failure to conduct a thorough review 

of the various alternatives to solving the problem of non-concurrent 

simulators, decision makers lacked information on the potential cost and

benefit estimates that would be encountered should facts, circumstances, 

and assumptions change.

The historical documents we reviewed demonstrate that within the Air 

Force there was uncertainty about the cost-effectiveness of the service 

contract approach to simulator training. Although the potential for 

reduced costs through outsourcing certain responsibilities and eliminating 

government logistics support were cited in some decision documents, 

other documents indicated that the service contract approach would not 

cost significantly more or less than the traditional ownership strategy. Air 

Force officials told us that a comprehensive study of various options for 

Decision to Use Service 

Approach Not Supported 

with Thorough Analysis of 

Costs and Benefits of 

Alternatives 

 11 This directive was cancelled in 2005. 

Page 11 GAO-06-830 Acquisition of Simulator Training
providing simulator training had been commissioned. However, they have 

been unable to locate it. 

In preparing to re-compete the F-16 simulator contract, the DMO program 

office completed a formal business case analysis in November 2005, in 

response to a July 2005 congressional request. Air Force officials 

acknowledged that, if not for the request, the formal business case 

analysis would not have been completed. 

The Army completed two business case analyses prior to contracting for 

simulator services under the Flight School XXI program, but the analyses 

lacked sufficient detail to provide a thorough examination of the pros and

cons of the new approach. The scope of the analyses was limited to 

determining (1) what length of service contract would be appropriate to 

justify the large up-front investment required of the contractor and 

(2) whether projected funding was sufficient to meet program costs in the 

event the Army was required to follow the traditional acquisition 

approach. The Army provided us with decision briefings that set forth 

various options for simulator training, but the documents ruled out all but

the service contract approach without providing supporting analyses of 

the costs and benefits associated with each alternative. Further, the 

traditional method, where the government bought the simulators, was 

eliminated as an option due its perceived inability to meet the Flight 

School XXI 15-month start-up time frame. This schedule eventually slipped 

more than 10 months with, according to Army officials, no detrimental 

effect on student training schedules. The briefings do not address the 

possibility that the 15-month time frame was flexible. 

Air Force and Army officials told us the new simulators are big 

improvements over what they had previously. However, the Air Force has 

faced funding uncertainties using O&M funds for the contracts, and 

subsequent schedule slippages have resulted in fewer simulator sites 

activated than planned. In particular, the F-16 simulator training 

contractor, citing the reduced activations, notified the Air Force as early

as May 2001, that it was unable to provide simulator services as originally 

agreed and wished to restructure the contract. Later, the company cited

Air Force funding problems and schedule slips as the basis for claims 

against the Air Force and notified the Air Force that its financial situation 

under the contract was no longer viable. The Air Force will let the current

F-16 simulator training contract expire in June 2007 and is in the process 

of re-competing the contract, which will likely result in a training gap for 

pilots and additional costs to the Air Force. 

While Training Has 

Improved, the 

Expected Number of 

Simulator Sites Has 

Not Been Activated 

Page 12 GAO-06-830 Acquisition of Simulator Training
Some Air Force and Army 

Sites Are Operating and 

Officials Cite Improved 

Training Results 

At the locations we visited, officials told us they were pleased with the 

quality of the simulator training, particularly when compared with the 

level of training they had in the past. Pilots are routinely surveyed about 

the training they receive, and officials told us that, generally, the results 

have been very positive. For example, the Director of Operations for the 

F-16 mission training center at Shaw AFB told us that the simulation 

hardware and software are outstanding and that the training received by

young pilots is great. Initial training began under the Army’s Flight School 

XXI contract in November 2005. While all planned simulators have not yet 

been activated, according to Flight School XXI officials the school is now 

meeting its training goal and producing aviators with a proficiency level of

two, an improvement over the old regime. 

As of July 2006, the Air Force had 16 training simulator sites operational, 

as shown in table 2. 

Table 2: Operational Simulator Training Locations and Start Dates as of July 2006 

System Location Start date

F-15C Eglin AFB, Florida May 1999 

Langley AFB, Virginia May 2000 

Elmendorf AFB, Alaska July 2003 

Kadena air base (AB), Okinawa Apr. 2005 

Lakenheath AB, United Kingdom Jan. 2006 

AWACS Tinker AFB, OklahomaaDec. 2001

Elmendorf AFB, Alaska Sept. 2003 

Tinker AFB, Oklahoma Dec. 2003 

Kadena AB, Okinawa May 2005 

Tinker AFB, Oklahoma Sept. 2005 

F-16 Shaw AFB, South Carolina May 2002 

Shaw AFB, South Carolina Jan. 2003 

Mountain Home AFB, Idaho Sept. 2002 

Mountain Home AFB, Idaho Feb. 2004 

Spangdahlem AB, Germany Apr. 2004 

Misawa AB, Japan June 2005 

Source: GAO analysis of Air Force data. 

a

Some locations have multiple mission training centers. 

Page 13 GAO-06-830 Acquisition of Simulator Training
Air Force Funding 

Uncertainties Have 

Resulted in Schedule 

Slippages

The use of O&M funds under the service contract approach was intended 

to overcome the situation the military services had faced in the past, when 

internal decisions on funding priorities had resulted in inadequate 

procurement funds being made available for simulators. However, almost 

from the start of the DMO program, funding has been less than projected. 

As a result, schedule slippages have occurred for many sites compared 

with original Air Force requirements set forth in acquisition plans. Army 

officials told us that, to date, O&M funding for the Flight School XXI 

program has not been reduced. Army officials committed at the outset to 

fully fund the contract in accordance with the originally projected funding 

profile and, to date, the funding level has remained stable. 

As early as the 2002 budget planning process, Air Force budget requests 

did not fully fund planned activations, with a total difference between 

estimated requirements and funding of $524 million over the future year 

defense plan, as shown in table 3. 

Table 3: Comparison of DMO Estimated Funding Requirement with the Fiscal Year 2002 Program Objective Memorandum 

Funding Levels 

Dollars in millions

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 Total

DMO estimated funding 

requirement $97 $169 148 157 133 86 790

Fiscal year 2002 funding 

approved in the program 

objective memorandum 46 49 43 42 43 43 266

Funding difference -51 -120 -105 -115 -90 -43 -524

Source: GAO analysis of Air Force documents. 

An October 2000 Air Force “roadmap” report stated that this funding 

scenario would “severely impact the executability of the current 

contracted efforts, as well as the entire [DMO] vision.” Further, other Air 

Force decisions, in reaction to fiscal constraints and programs viewed as 

higher priority, have led to additional funding differences. The Air Combat 

Command sought to mitigate the impact of these funding differences by 

shifting flying hour funds into the DMO program in 2003. Table 4 depicts 

some key events pertaining to the program’s funding impacts and the 

command’s attempts to secure additional O&M funds. 

Page 14 GAO-06-830 Acquisition of Simulator Training
Table 4: Key Events That Have Affected Funding for the DMO Program 

Event Impact

1999: Unexpended flying hour funds 

centralized at Air Force headquarters 

Air Combat Command no longer had flexibility to use its unexpended flying hour funds for 

DMO; it now had to request, justify, and compete for funding. 

2001: Budget decision results for fiscal 

years 2002 – 2007 

Decisions made by the Air Force to fund other, higher-priority programs resulted in a 

difference of $524 million over the 6-year period, compared to the DMO plan. 

2004: Decision to accelerate F/A-22 DMO

compliance 

Office of the Secretary of Defense mandated that the schedule for linking the F/A-22 into

the DMO network be accelerated. The $57 million required to do this was unexpectedly 

taken from the DMO budget for fiscal years 2006-08, instead of from the F/A-22 

program’s budget. 

2004: Budget decision results for fiscal 

year 2006 

Decision was made by Air Force not to fund $250 million to facilitate access to the DMO

network by other aircraft (B-1, B-2, B-52, A-10), although flying hour funds had already 

been shifted out of these programs to support the DMO program. 

2004: Budget decision results for fiscal 

years 2006-2011 

Differences ranging from over $225 million in fiscal year 2006 to over $50 million in fiscal 

year 2011 as compared to the DMO plan could not be alleviated, even with a 

5-percent transfer of flying hour funds from other programs. 

2005: Decision to end 

F-16 simulator training contract 

The Air Force decision to end the F-16 simulator contract in 2007 will result in additional 

costs for re-competition efforts and upgrades of old training devices. 

Source: GAO analysis of Air Force documents. 

Largely as a result of these funding uncertainties, many Air Force mission

training centers have been activated significantly behind the planned 

schedule contained in acquisition management plans. These schedule 

slippages for AWACs, F-15C, and F-16 are shown in tables 5, 6, and 7,

respectively.

Table 5: Comparison of Planned and Actual Site Activations for AWACS 

Location 

Scheduled

activation date 

Actual activation

date

Quarters behind

scheduled

activation date

Tinker AFB (#1) 1QFY01 1QFY02 4

Tinker AFB (#2) 1QFY03 2QFY03 1

Tinker AFB (#3) No date set 4QFY05 Cannot be 

determined

Elmendorf AFB 4QFY02 4QFY03 4

Kadena AB 4QFY02 3QFY05 11

Source: GAO analysis of Air Force data. 

Page 15 GAO-06-830 Acquisition of Simulator Training
Table 6: Comparison of Planned and Actual Site Activations for F-15C 

Location 

Scheduled

activation date 

Actual activation

date

Quarters behind

scheduled

activation date

Eglin AFB 2QFY99 2QFY99 0

Langley AFB 3QFY99 3QFY99 0

Kadena AB 1QFY02 3QFY05 14

Lakenheath AB 1QFY02 2QFY06 17

Elmendorf AFB 1QFY03 4QFY03 3

Source: GAO analysis of Air Force data. 

Table 7: Comparison of Planned and Actual Site Activations for F-16

Location 

Scheduled

activation date 

Actual activation

date

Quarters behind

scheduled

activation date

Shaw AFB (#1) 1QFY02 3QFY02 2

Shaw AFB (#2) 3QFY02 2QFY03 3

Mt. Home AFB (#1) 3QFY02 4QFY02 1

Mt. Home AFB (#2) 4QFY03 2QFY04 2

Misawa AB 2QFY03 3QFY05 9

Spangdahlem AB 3QFY03 3QFY04 4

Source: GAO analysis of Air Force data. 

Air Force officials told us that since most of the original dates were 

“notional,” meaning that they were not firm requirements, but rather were 

intended to provide contractors with information about potential mission 

training center sites, the timely achievement of the schedules was not 

required. However, contractor representatives told us that their proposals 

relied upon the planned site activation schedules contained in the 

contracts, and delays could directly affect their profitability. 

Army’s Simulator 

Activation Schedule Was 

Also Delayed 

The Army has twice rebaselined the activation schedules for the Flight 

School XXI simulators—the TH-67 and the advanced aircraft virtual 

simulators (AAVS)—as shown in figure 1. 

Page 16 GAO-06-830 Acquisition of Simulator Training
Figure 1: Flight School XXI Schedule Rebaselines

0

5

10

15

20

25

30

35

40

Months to activate

after contract award

rebaseline 2

Months to activate

after contract award

rebaseline 1

Months to activate

after contract award

Months after award

Source: GAO analysis of Army data.

AAVS

TH-67

In the original contract, the TH-67 basic training helicopter simulators 

were scheduled to begin operation in December 2004, 15 months after 

contract award. The Flight School XXI project manager could not provide 

documentation to support this time frame and, in fact, told us that the 

flight school could not have been ready for students at that time. The Army 

subsequently rebaselined the schedule to allow for an 8-month delay. 

Similarly, the Army revised the AAVS activation schedule—originally set at

18 months after contract award—to allow a 7-month delay. According to 

the project manager, these delays resulted from a protest of the contract 

award by a competitor and the contractor’s renegotiation with its 

subcontractors. The schedule was rebaselined a second time, as shown 

above, because the contractor was not able to meet the adjusted schedule.

The Army agreed to the further slippages in exchange for the contractor’s 

providing two extra terrain databases as consideration. Despite these 

schedule changes, the necessary simulators and facilities were ready for 

the first flight school class in November 2005, in accordance with the final 

revisions to the contract schedule. 

Page 17 GAO-06-830 Acquisition of Simulator Training
F-16 Simulator Training 

Gap Anticipated 

The risk the government faces if a contractor fails to perform as expected

under the service contracts is heightened because the government does 

not own anything—the hardware, software, and data rights are owned by 

the contractor. In the traditional approach, the government would own the 

hardware and any software or data it had acquired rights to. While there 

would be no guarantees as to the condition of these items if the contractor

had failed to perform, the government would at least be able to provide 

them to the replacement contractor, who could potentially make use of 

them under a new contract. The situation the Air Force has faced with the 

F-16 simulator contract is illustrative of the potential for not only a 

degradation in training, but also increased costs to the government when 

contract performance does not occur as planned.

From the outset, the Air Force believed that the F-16 simulator 

contractor’s cost estimate was low, as it was about $70 million less than 

the government’s estimate. According to Air Force and contractor 

officials, the reason for the low cost estimate was that the contractor 

amortized its development costs over all the sites that were planned to be

activated rather than the minimum number that were contractually 

required. When schedule delays occurred and the expected sites were not 

activated, the contractor reported that it lacked the financial viability to 

continue work under the contract. In April 2003, the contractor stopped 

work toward making the simulators concurrent with the aircraft, stating 

that it considered the tasks beyond the contract scope. Subsequently, it 

told the Air Force it was not in its best interest to activate additional 

training sites.12

The Air Force will allow the F-16 simulator training contract to expire in 

June 2007 because, according to DOD, the contractor failed to earn 

enough award-term points to extend the period of performance. The Air 

Force plans to re-compete the contract. Two aspects of the original 

contract, awarding it as a commercial acquisition and including an awardterm provision, will not be included in the new contract. 

 12 The contractor claimed that it had incurred $73.3 million in non-recurring costs and that 

it had only recovered $31.7 million of these costs through payment for preparatory

services. According to a March 2006 DOD Inspector General report, an improper contract

restructure directed by the Air Force Principal Deputy Assistant Secretary for Acquisition 

and Management committed the Air Force to pay the remaining $41.6 million in claimed 

non-recurring costs even though the government received minimal value. 

Page 18 GAO-06-830 Acquisition of Simulator Training
Because of the time needed to re-compete the contract and for the 

winning contractor to provide initial training capabilities, the Air Force 

faces a potential training gap of over 2 years, during which even the 

current degraded level of F-16 simulator training services will not be 

available to pilots. In an effort to ensure some level of continued training 

during that period, the Air Force plans to award a contract for interim 

service capability at three air bases. This interim capability will be 

available for block 50 aircraft only.13 For the block 40 aircraft, the Air 

Combat Command plans to spend approximately $20 million to refurbish 

old F-16 unit training devices. These devices are limited in training 

potential compared to the current level of simulation. 

The Air Force and the Army are not effectively tracking the return on their 

expenditure of taxpayer dollars to acquire simulator training services. The 

extent to which the simulators are being used is either not measured or is 

measured inconsistently. The government is paying for activities 

conducted during the simulator development period but lacks insight into 

what it is actually paying for. Finally, award-term evaluations that were 

established to encourage excellent contractor performance do not always 

measure key acquisition outcomes such as simulator availability and 

concurrency, and can result in additional contract years being awarded for 

only “satisfactory” performance. 

Return on the 

Expenditure of 

Taxpayer Dollars Is 

Not Effectively 

Tracked 

Information on Utilization 

Rates Is Lacking 

The utilization rate is the percentage of available hours the simulators are 

actually used. The Army is not tracking the extent to which aviators are 

using the contracted service for Flight School XXI simulators, even though 

for simulators the Army owns, utilization rates are tracked. Program 

officials told us that, because the Army is contracting for simulator 

training to be available, there was no need to track the extent to which the

government is using this availability. Without data on utilization rates, the 

Army has no basis for determining the extent to which it is using the 

services it is buying. 

We found that Air Force installations are collecting information on 

monthly utilization rates, as provided for in a May 1998 Air Force 

 13 The primary mission of F-16 block 50 aircraft is the destruction and suppression of 

enemy air defenses. Block 40 aircraft have the primary mission of filling the air-to surface

attack role. 

Page 19 GAO-06-830 Acquisition of Simulator Training
instruction.14 However, rates at the locations we examined were often far 

less than the hours the government purchased. For the three AWACS 

mission training centers at Tinker AFB, for example, we found that, during 

the 2-year period ending December 2005, monthly utilization rates were 

frequently reported at less than 50 percent, as shown in figure 2. 

Figure 2: Comparison of Monthly Utilization Rates for AWACS 

0

20

40

60

80

100

120

S

Oct.

Nov.

Dec.

ept.

Aug.

Feb.

Mar.

Apr.

May

June

July

Jan. 05

S

Oct.

Nov.

Dec.

ept.

Aug.

Feb.

Mar.

Apr.

May

June

July

Jan. 04

Nov.

Dec.

Oct. 03

Percent

Source: GAO analysis of Air Force data.

Months Tinker 1

Tinker 2

Tinker 3

Full capability

The Air Force Audit Agency has reported that installations had acquired

excess simulator capacity and unnecessarily consumed O&M funds that 

could have been applied to other mission requirements. At Shaw AFB, for 

example, the agency found that the Air Force had paid to use the simulator 

10 hours a day, but only used it about 6 hours per day over a 4-month 

period.15 The underutilization was attributed to missions being either not 

 14 Air Force Instruction 36-2248, Operation and Management of Aircrew Training 

Devices, provides that training units calculate the utilization rate. 

15 Air Force Audit Agency, Flight Simulator Utilization, 20th Fighter Wing, Shaw AFB, 

SC; F2004-0051-FDM0000 (Mid-Atlantic Area Audit Office, May 5, 2004). 

Page 20 GAO-06-830 Acquisition of Simulator Training
scheduled or cancelled. Deployment requirements and range training were 

identified as contributing factors. At Spangdahlem AB, the audit agency 

reported that the Air Force had contracted for excess hours of simulator 

availability to provide the maximum flexibility for pilot schedules.16 As a 

result, the Air Force paid for enough simulator availability to hold 3,952 

training events in fiscal year 2005, even though it needed only 1,982 

training events to meet training requirements. 

Our analysis also found that monthly utilization rate calculations are 

inconsistent among DMO system sites, even though an Air Force 

instruction provides guidance on how to calculate and report utilization 

data. We asked six installation quality assurance representatives how they 

calculated utilization rates. Four of the six representatives were unaware 

of the instruction, telling us that they had not received any guidance for 

calculating simulator use. Several different calculation methods are being 

used, as described in table 8. 

Table 8: Comparison of Monthly Utilization Rate Calculation Methods for DMO 

System Simulatorsa

Simulator Calculation method

AWACS Number of hours where some training was given divided by the 

number of available training hours. 

F-15C Number of training periods in which one or more simulators was 

in use divided by the number of training periods available. 

F-16 (Shaw AFB) Number of system elements used that were effective divided by 

the number of possible system elements. 

F-16 (Mountain

Home AFB) 

Number of simulators used divided by the number of available 

simulators. 

Source: Air Force quality assurance representatives. 

a

F-15E service not yet available. 

Air Combat Command officials told us the reported utilization rates are 

used to determine whether or when to activate another training center at a

site. They also said they are using utilization rate information to determine 

how many additional “live” flying hours can be moved to the simulators, in 

particular to alleviate the burden of high fuel costs for aircraft. Because of 

 16 Air Force Audit Agency, Distributed Mission Operations, 52d Fighter Wing, 

Spangdahlem AB, Germany; F2006-0018-FDE000 (European Area Audit Office, Jan. 25,

2006). 

Page 21 GAO-06-830 Acquisition of Simulator Training
the very different methods being used to calculate the rates, however, 

decisions are being made based on non-comparable information. 

In addition, we found that the Air Force’s instruction for calculating 

monthly simulator utilization rates could result in overstating the rates, 

thus overstating the return on the expenditures made. The instruction 

directs that utilization be reported when any or all devices at a given 

location are used. Thus, the Air Force can pay to have four simulators 

available at a site, use only one of the four during a training period, and 

still report that simulator utilization was 100 percent as opposed to 25 

percent of the paid availability. 

Payments for Tasks during 

Development Period Are 

Not Transparent 

Under the services approach, contractors commit to major investment at 

the front end, with the return on their investment to come from hourly fees 

received for providing simulator service. As an additional way to help the

contractor recoup its costs earlier, the government added “preparatory” 

tasks during the development period prior to the start of service. These

tasks are defined in the contracts as discrete events, such as site surveys 

and training capability assessments, that are ordered and paid for prior to 

the start of service. Payments for these tasks provide the contractor cash 

flow between contract award and the planned service start dates and give 

the government a contractual avenue for contract oversight prior to 

receiving services. We found that the Air Force and Army have little 

insight into what they are paying for under the preparatory tasks. Although 

the invoices reflect only the discrete tasks, such as training capabilities 

assessments, the wide range of invoice amounts—from $91,000 to more 

than $6.5 million for similar tasks—and our discussions with contractor 

officials suggest that the government is actually making milestone 

payments to the contractors for a portion of their up-front costs to acquire

and develop the simulators. 

The original service contract concept for the F-15C, the first simulator 

contract awarded, had no provision for the contractor to recoup any costs 

during the development period, which usually lasts more than a year. 

Figure 3 shows the development period before the start of simulator 

services and the original hourly rate structure under the F-15C contract. 

Page 22 GAO-06-830 Acquisition of Simulator Training
Figure 3: Original Rate Structure for F-15C Simulator Service Contracts 

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Rate

Source: Air Force data.

Fiscal year

Contract

award

Planned 

service

start

Initial rate

Steady-state rate includes

inflation growth

This original approach, according to Air Force and contractor officials, 

contributed to schedule and certification delays with the F-15C. Air Force 

officials told us that they had no contractual avenue to obtain insight into 

the contractor’s performance during the development period and thus 

were not aware that the contractor had encountered delays in obtaining 

information from other programs and in determining the complexity of 

some simulation elements. As a result, full service was not implemented 

on schedule and certification of simulation service was delayed until after 

the start of initial service. Further, according to the contractor, it suffered 

an unrecoverable loss of income during the high-rate, initial service 

period. Subsequently, based on feedback received from industry, the Air 

Force changed its approach and incorporated preparatory services into 

the F-15C contract and all subsequent DMO system contracts to obtain 

more visibility into contractor activities during the development period. 

The Army also paid for preparatory services during the development 

period of the Flight School XXI contract. 

Our analysis of the Air Force’s payments for preparatory services found 

significantly disparate costs for site surveys and training assessments, as 

reflected in tables 9 and 10, respectively. 

Page 23 GAO-06-830 Acquisition of Simulator Training
Table 9: Comparison of Site Survey Costs at Selected DMO System Sites 

Dollars in thousands 

Systems 

Sites AWACS F-15C F-15E F-16

Tinker AFB (#1) $130 

Tinker AFB ( #2) 216 

Elmendorf AFB 322 $55 $90

Kadena AB 330 67 

Lakenheath AB 56 100

Shaw AFB (#1) $625

Shaw AFB (#2) 1,000

Shaw AFB (#3) 1,100

Source: GAO analysis of contractor invoices.

Table 10: Comparison of Training Capability Requirements Assessments and 

Training Capability Assessments for DMO Systems 

Dollars in thousands 

Systems 

Task AWACS F-15CcF-15E F-16

Training capability requirements assessmentsa

Number 1 $122 $2,000 $2,850 

Number 2 2,600 4,850 

Number 3 200 1,800 

Number 4 100 

Training capability assessmentsb

Number 1 356 $91 1,644 

Number 2 454 722 6,575 

Number 3 261 565 3,161 

Number 4 289 1,000 

Number 5 115 

Number 6 150 

Source: GAO analysis of contractor invoices.

a

Training capability requirements assessments trace the capabilities of the simulator to the training 

task list, which provides descriptions of training for various mission profiles. 

b

Training capability assessments include reviews of system performance evaluations and verification 

and validation tests to authorize shipment of simulator service to designated destinations. 

c

The F-15C contractor was not paid for training capability requirements assessments as preparatory

services. 

Page 24 GAO-06-830 Acquisition of Simulator Training
We asked Air Force and Army officials what was specifically included in 

these preparatory services and how they determined what they received in

return for payments made. They told us that the contractors determine 

what is included and needed for each service at each site. 

Three of the four contractors we spoke with agreed that funding for 

preparatory tasks helped defray their development costs. They said that, in

effect, they bill for these tasks as milestone payments rather than for the 

discrete tasks themselves. Thus, they are able to begin defraying hardware 

and software development costs before the start of services. Officials from 

the fourth contractor stated that site survey tasks are standard but that 

there is some leeway in what is to be done for training capability 

assessments and training capability requirements assessments. 

With the upcoming re-competition of the F-16 simulator training contract,

the Air Force may pay again for the preparatory service tasks in the new 

contract’s development period, having already spent nearly $42 million on 

these tasks in the initial contract. Air Force officials told us they cannot 

assume that potential offerors would make use of the preparatory work 

the original contractor has performed. 

Award-term Evaluations 

Do Not Measure Key 

Acquisition Outcomes 

In an effort to measure performance and encourage the contractors to 

perform in an efficient and effective manner, both the Air Force and Army 

employ award-term incentives. However, while the award-term evaluation

areas include pilot and crew satisfaction, they do not always measure the 

key acquisition outcomes of system availability and concurrency with 

aircraft upgrades. 

While the Air Force does include system availability as an evaluation area, 

it is assigned only 25 to 30 percent of the total score. Concurrency is not 

included as a separate evaluation area. The Army’s evaluation areas, on 

the other hand, include concurrency but not system availability. While the 

Army requires the tabulation and submission of such data as operational 

availability and training service completion rate, these data are not 

included in the award-term evaluations.17 In addition, several of the 

evaluation areas include assessments of such things as responsiveness to 

 17 Operational availability is the total time of effective training service divided by the total 

time of scheduled simulation services. The training service completion rate is the number 

of completed training periods divided by the number of required training periods. 

Page 25 GAO-06-830 Acquisition of Simulator Training
government requests for cost and pricing data for proposed work not in 

the initial contract. We recently recommended that DOD move toward 

more outcome-based award-fee criteria that would promote accountability 

for acquisition outcomes, rather than include criteria such as

responsiveness to government customers or the quality of proposals 

submitted.18

Table 11 compares the award-term evaluation areas and the weight given 

to each area. 

Table 11: Comparison of Award-term Areas of Evaluation and the Weight Given to 

Each Area by System

Weight of evaluation area (percent of total) 

Evaluation area AWACS F-15C F-16 

Flight 

School XXI 

Pilot/crew 

satisfaction 

50 50 50 40

System availability 30 25 20

Technical insertion 10 15 10 10

Proposal quality 

(also called 

affordability) 

10 5 15 5

Small business

participation 

5 5

Concurrency 20

Management 

(includes small

business 

participation) 

25

Total 100 100 100 100

Source: Air Force and Army award-term plans. 

Note: F-15E does not include an award-term incentive. 

The Air Force and Army both assign the largest weight to “pilot/crew 

satisfaction.” However, this measure has limitations, particularly when it is 

heavily relied on to inform award-term decisions. Air Force officials told 

us that it is in the pilots’ best interests to assign a high rating to this factor;

otherwise, they could be viewed as not having received adequate training

 18 GAO, Defense Acquisitions: DOD Has Paid Billions in Award and Incentive Fees 

Regardless of Acquisition Outcomes, GAO-06-66 (Washington, D.C.: Dec. 19, 2005).

Page 26 GAO-06-830 Acquisition of Simulator Training
and could be asked to retake it. Additionally, pilots are frequently hurried 

in completing their surveys and dash off check marks without much 

consideration. Also, the distinction between the levels of satisfaction can 

be blurry. For the Army, for example, if training and support are adversely 

impacted for an “extended period,” user satisfaction is to be rated as 

unsatisfactory. However, if the adverse impact occurs “infrequently or 

temporarily,” it is considered marginal. Because the terms are not defined,

the Army cannot be certain that pilots are providing consistent ratings. 

We also found that, under the Air Force’s award-term plan, contractors 

can earn an additional award-term year for only satisfactory performance 

because awarded points are rolled over to the next evaluation period. A 

contractor with only satisfactory performance in each of five rating areas

can receive up to 51 points each year; thus, within 2 years, it can 

accumulate the 100 points needed for a 1-year contract extension. The 

F-16 simulator training contractor, for example, which recently notified 

the government that it could not continue to perform under the contract,

received overall award-term evaluations of “very good” for the first two 

rating periods (May 2002 through July 2003) and “satisfactory” in the third 

and fourth periods (July 2003 through January 2005) and earned one 

contract year extension. The Army has taken a different approach; under 

its award-term plan it is very unlikely that the contractor can be awarded 

contract extensions for “satisfactory” performance because rollover is 

allowed only when more than 100 points are earned. Thus, the contractor

with only satisfactory performance cannot accumulate enough points for 

an additional contract year. 

While service is not yet available, the F-15E simulator training contract, 

awarded in August 2003, does not include an award-term incentive 

because, according to the contracting officer, “it doesn’t work.” Contractor 

officials told us that the subjective nature of the criteria and the manner in

which they are applied negate the award term as a performance incentive.

Both the Air Force and Army indicated that they are moving away from 

using award-term incentives on future contracts. The Air Force will not 

include such an incentive in its re-competition for the F-16 simulator 

training contract because, according to the DMO director, it has not been 

found to be a significant motivator to the contractor; experience has 

shown that withholding payment for poor service is a much more effective 

tool to induce improved performance. In addition, since a recent statutory 

provision limits future total contract periods of performance to 10 years, 

Page 27 GAO-06-830 Acquisition of Simulator Training
an award-term provision can no longer be used to implement long-term 

arrangements such as those in place for the existing simulator training 

contracts.19

We recently reported that DOD has little evidence to support its belief that 

award fees improve contractor performance and acquisition outcomes 

and, in fact, frequently pays out most of the available award fee to 

contractors regardless of their performance outcomes.20 We also found 

that DOD contracts frequently included rollover provisions, where 

unearned award fee from one evaluation period was shifted to a 

subsequent evaluation period or periods, thus providing the contractor an

additional opportunity to earn previously unearned fee. We recommended 

that DOD issue guidance on when rollover of award fee is appropriate. A 

March 2006 guidance on award fee contracts states, among other things, 

that use of rollover provisions should be the exception rather than the rule 

and that the decision to use rollover provisions should be addressed in the 

acquisition strategy, including a rationale as to why a rollover provision is 

appropriate.

Because simulator training had lost out in the internal competition for 

procurement funds, the Air Force and Army turned to service contracts, 

expecting that O&M funds would be made available to meet requirements. 

In the case of the Air Force, this expectation has not materialized and 

planned site activations have been slowed. In addition, although the Air 

Force and Army plan to continue with the service contract approach for 

simulator training, neither supported the decision with a thorough analysis 

of the costs and benefits of alternative approaches to delivering the 

training. Finally, the heightened risks associated with increased reliance 

on contractors to deliver simulator training calls for careful attention to 

contract management and oversight. Effective and well-managed 

incentives for motivating performance are especially important. Better 

government visibility into the contractors’ activities, such as preparatory 

tasks, during the development period is critical so that the government can 

understand the basis for what are essentially milestone payments during 

Conclusion 

 19 Ronald W. Reagan National Defense Authorization Act for Fiscal Year 2005, Pub. L. 

No.108-375, Sec. 813 (2004) limits the total contract period for multiyear task and delivery

order contracts, as extended pursuant to options, to 10 years unless the head of the agency

determines in writing that exceptional circumstances necessitate a longer contract period. 

20 GAO-06-66. 

Page 28 GAO-06-830 Acquisition of Simulator Training
that phase. In addition, unless utilization rates are tracked in a consistent 

manner, the government will not know whether it is making the best use 

of what it is buying. 

To help ensure that the best approach is used to provide the war-fighter 

with needed training, we recommend that the Secretary of Defense direct 

the Secretaries of the Air Force and Army to conduct a thorough analysis 

of the costs and benefits of using service contracts for simulator training 

to determine if it is indeed the best approach. The analysis should 

proactively address potential risks associated with the service contract 

approach and identify the level of simulator training needed to meet 

requirements. 

Recommendations for 

Executive Action 

To help ensure that the required training is provided to pilots, we 

recommend that the Secretary of the Air Force reconcile the funding level 

needed for simulator training with the requirements identified in the 

evaluation of costs and benefits of the service contract approach and take

steps to allocate funds accordingly. 

To help ensure that the incentives motivate contractor performance 

toward achieving desired training outcomes, we recommend that the 

Secretary of Defense direct the Secretaries of the Air Force and Army to 

take the following two actions: 

• Determine whether it is in the government’s best interest to retain the 

award-term incentive under these service contracts. 

• If the award-term incentive is retained, take appropriate steps to improve 

the approach by reassessing the areas to be rated and the definitions of 

performance levels for the various grade categories. For the Air Force, 

improvements to the approach should include a determination as to 

whether to continue allowing rollover of award-term points. 

To help ensure greater transparency into what the government is paying 

for preparatory tasks during the development phase, we recommend that 

the Secretary of Defense direct the Secretaries of the Air Force and Army 

to take the following two actions: 

• Reassess the pricing of any up-front payments made to the contractors 

during the development period on future replacement or restructured 

contracts. 

Page 29 GAO-06-830 Acquisition of Simulator Training
• If retained, take appropriate measures to (1) create an appropriate and 

transparent contract payment mechanism, separate from the preparatory 

tasks, if development costs are to be reimbursed; and (2) increase visibility 

into the percentage of upfront development costs contractors are 

recouping from these preparatory tasks and development payments. 

To help ensure that available simulator training for the warfighter is used 

in the most effective and efficient manner, we recommend that the 

Secretary of Defense take the following four actions: 

• Direct the Secretaries of the Air Force and Army to determine whether and 

how simulator utilization can be increased in order to maximize use of 

taxpayer dollars. 

• Direct the Secretary of the Army to track and record monthly utilization 

rates on Flight School XXI contracted simulator training in order to have 

the data necessary to adjust training requirements and contract provisions, 

as necessary. 

• Direct the Secretary of the Air Force to revise Air Force Instruction 

36-2248, Operation and Management of Aircrew Training Devices, to 

ensure that, for the purposes of reporting utilization rates, the usage of

individual training simulators is calculated. 

• Direct the Secretary of the Air Force to ensure that all sites consistently 

track and report simulator utilization. 

In written comments on a draft of this report, DOD concurred with all but 

one of our recommendations. DOD partially concurred with our 

recommendation that the Army track and record monthly utilization rates 

on simulators at Flight School XXI. DOD stated that the service contract 

approach requires only that the vendor meet the programmed student 

training load. Nevertheless, DOD stated that the contractor is required to 

submit utilization data and that the data are available for use in future 

adjustments to the contracting strategy, requirements, or provisions. Our 

recommendation was intended to encourage DOD to fully understand its 

student training requirements and to collect the information to decide

whether it needs to adjust requirements or contract provisions regarding

simulator availability. Whether the utilization rates pertain to individual 

simulators or the student training load as a whole, we believe that the 

Army needs to know the extent to which it is actually using the simulator 

availability it is buying. DOD also offered two corrections to information 

Agency Comments 

and Our Evaluation 

Page 30 GAO-06-830 Acquisition of Simulator Training
in the draft, and we made changes as appropriate. DOD’s comments are 

included in their entirety in appendix II. 

We will send copies of this report to the Secretaries of Defense, the Air 

Force, and the Army; appropriate congressional committees; and other 

interested parties. We make copies available to others upon request. In 

addition, the report will be available at no charge on the GAO Web site at 

http://www.gao.gov. 

If you or your staff has questions concerning this report, please contact me 

at (202) 512-4841 or by e-mail at shamesl@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on the 

last page of this report. 

Lisa Shames, Acting Director 

Acquisition and Sourcing Management 

Page 31 GAO-06-830 Acquisition of Simulator Training
Appendix I: Scope and Methodology Appendix I: Scope and Methodology 

To determine which factors led the Air Force and Army to acquire 

simulator training as a service contract using operation and maintenance 

funds, we analyzed historical documents such as acquisition plans, 

briefings, and decision memorandums. For the Air Force, we interviewed 

Air Force management, including officials at the Office of the Assistant 

Secretary of the Air Force, Acquisition; Aeronautical Systems Center 

(responsible for contracting the simulator training services) and the Air 

Combat Command (funds and uses the simulator training). For the Army, 

we interviewed officials at the Office of the Assistant Secretary of the 

Army for Acquisition, Logistics, and Technology; and Army officials 

responsible for managing the Army’s Flight School XXI initiative, including

officials of the Program Executive Office for Simulation, Training and 

Instrumentation. We visited Langley Air Force Base, Virginia, to observe 

F-15C simulator training; Shaw Air Force Base, South Carolina, to observe 

F-16 simulator training; and Fort Rucker, Alabama, to observe the Flight

School XXI helicopter simulator training. Additionally, to evaluate whether 

the military services adequately justified the new service contract 

approach, we reviewed the Office of Management and Budget’s Circular 

A-11, Appendix B, “Budgetary Treatment of Lease-Purchases and Leases of 

Capital Assets,” and Air Force and Army regulations and guidance 

regarding business case analyses. We also drew from our prior reviews of 

Department of Defense systems, in particular our recent review of the 

Army’s Future Combat System.1

To assess whether the new approach has resulted in the planned number 

of simulator training sites being activated, we evaluated contract 

documents and information provided by the Air Combat Command and 

Aeronautical Systems Center to compare planned to actual schedule 

activations. We gathered and analyzed budget data related to program 

schedules and interviewed program officials. We analyzed contract 

documents and other program documents from Flight School XXI and 

discussed the schedule rebaselining with Army officials. We analyzed the 

Air Force’s request for proposals for the F-16 simulator training contract 

re-competition to determine whether key differences in the acquisition 

approach were incorporated. 

To determine if the Air Force and Army are effectively tracking the return

on their expenditure of taxpayer dollars, we analyzed simulator utilization 

 1

 GAO, Defense Acquisitions: Improved Business Case Is Needed for Future Combat 

System’s Successful Outcome, GAO-06-367 (Washington, D.C.: Mar. 14, 2006). 

Page 32 GAO-06-830 Acquisition of Simulator Training
Appendix I: Scope and Methodology 

data and military service guidance on utilization rates; analyzed contractor

performance measurements, annual evaluations, and award-term plans for 

the simulator training contracts; and compared preparatory service costs 

charged to the government under each of the four Air Force contracts and

the Army contract. We also interviewed contractor representatives and 

government officials. 

Page 33 GAO-06-830 Acquisition of Simulator Training
Appendix II: Comments from the Department Appendix II: Comments from the Department of Defense 

of Defense 

Page 34 GAO-06-830 Acquisition of Simulator Training
Appendix II: Comments from the Department 

of Defense 

Page 35 GAO-06-830 Acquisition of Simulator Training
Appendix II: Comments from the Department 

of Defense 

Page 36 GAO-06-830 Acquisition of Simulator Training
Appendix II: Comments from the Department 

of Defense 

Page 37 GAO-06-830 Acquisition of Simulator Training
Appendix III: Comparison of Contractor 

Requirements under Commercial and Noncommercial Acquisition Procedures 

The following table shows differences, as set forth in the Federal 

Acquisition Regulation (FAR), for contractor requirements under 

commercial versus non-commercial acquisition procedures. 

Requirement Under noncommercial procedures Under commercial procedures 

Type of contract A wide selection of contract types is available in 

order to provide flexibility. (FAR 16.101(a)) 

Limited contract types are authorized. Agencies shall 

use firm-fixed-price contracts or fixed-price contracts 

with economic price adjustment. These contract 

types may be used in conjunction with an award fee 

and performance or delivery incentives when the 

award fee or incentive is based solely on factors 

other than cost. (FAR 12.207)

To implement the Services Acquisition Reform Act of 

2003 (contained in Section 1432 of the National 

Defense Authorization Act for Fiscal Year 2004, Pub. 

L. No. 108-136 (2003)), a proposed amendment to 

FAR would expressly authorize the use of time-andmaterials and labor-hour contracts for certain 

categories of commercial services under specified 

conditions. (FAR Case 2003-027, 70 Federal 

Register 56318, Sept. 26, 2005.)

Inspection and testing Government has right to inspect and test. (FAR 

46.102 & 46.202-3) 

Contracts for commercial items shall rely on

contractors’ existing quality assurance systems as a 

substitute for Government inspection and testing 

before tender for acceptance unless customary 

market practices for the commercial item being 

acquired include in-process inspection. Any inprocess inspection by the Government shall be 

conducted in a manner consistent with commercial 

practice. (FAR 12.208) 

Determination of price 

reasonableness 

Price must be determined fair and reasonable 

through various proposal analysis techniques. (FAR 

15.404-1) 

While price reasonableness must be established, the 

contracting officer should be aware of customary 

commercial terms and conditions when pricing 

commercial items. Commercial item prices are 

affected by factors that include, but are not limited to, 

speed of delivery, length and extent of warranty, 

limitations of seller’s liability, quantities ordered, 

length of the performance period, and specific

performance requirements. (FAR 12.209) 

Cost or pricing data 

(Requirements based 

on Truth in Negotiations 

Act, 10 U.S.C. 2306a; 

41 USC 254b)

Required for contract award and modifications unless 

applicable exception, such as adequate competition 

or prices agreed upon are based on prices set by law 

or regulation. Threshold for application is $550,000. 

(FAR 15.403-1 and -4) 

Commercial items are exempt (FAR 15.403-1(b)(3) 

and (c)(3)) 

Appendix III: Comparison of Contractor 

Requirements under Commercial and Noncommercial Acquisition Procedures 

Page 38 GAO-06-830 Acquisition of Simulator Training
Appendix III: Comparison of Contractor 

Requirements under Commercial and Noncommercial Acquisition Procedures 

Requirement Under noncommercial procedures Under commercial procedures 

Contract financing The contracting officer must consider the following 

order of preference when a contractor requests 

contract financing., 

(a) Private financing without Government guarantee.

(b) Customary contract financing. 

(c) Loan guarantees. 

(d) Unusual contract financing. 

(e) advance payments. (FAR 32.106) 

For purchases of commercial items, financing of the 

contract is normally the contractor’s responsibility. 

(32.202-1) However, customary market practice for 

some commercial items may include buyer contract 

financing. In these circumstances, the contracting 

officer may offer Government financing in 

accordance with the policies and procedures in 

Part 32. (FAR 12.210) 

However, government financing provided only to 

extent actually needed for prompt and efficient 

performance, considering availability of private 

financing and probable impact on working capital of 

predelivery expenditures and productions lead-times. 

(FAR 32.104) 

Government financing of commercial purchases is 

expected to be different from that used for noncommercial purchases. While the contracting officer 

may adapt non-commercial techniques and 

procedures for use in implementing commercial 

contract financing arrangements, the contracting 

officer must have a full understanding of effects of 

the differing contract environments and of what is 

needed to protect the interests of the Government in 

commercial contract financing. (FAR 32.202-1(c)) 

Types of payments for commercial item purchases. 

(FAR 32.202-2)

1. Commercial advance payment: 

payment made before any performance of work 

(not to exceed 15 percent of contract price) 

2. Commercial interim payment: 

payment made after some, but not all, work has 

been performed

3. Delivery payment: 

payment made for accepted supplies or services, 

including partial deliveries (FAR 32.001) 

Technical data The Government may acquire technical data and 

rights in technical data for multiple purposes. 

Agencies shall strike a balance between the 

government’s need and the contractor’s legitimate 

proprietary interest. (FAR 27.4) 

Generally, the Government shall acquire only the 

technical data and the rights in that data customarily 

provided to the public with a commercial item or 

process. The contracting officer shall presume that 

data delivered under a contract for commercial items 

was developed exclusively at private expense. When 

a contract for commercial items requires delivery of 

technical data, the contracting officer shall include 

appropriate provisions and clauses delineating the 

rights in the technical data in the contract. (FAR 

12.211) 

Page 39 GAO-06-830 Acquisition of Simulator Training
Appendix III: Comparison of Contractor 

Requirements under Commercial and Noncommercial Acquisition Procedures 

Requirement Under noncommercial procedures Under commercial procedures 

Computer 

software/documentation 

The Government may acquire computer 

software/documentation for multiple purposes. 

Agencies shall strike a balance between the 

government’s need and the contractor’s legitimate 

proprietary interest. (FAR 27.402) 

Commercial computer software or commercial 

computer software documentation shall be acquired

under licenses customarily provided to the public to 

the extent such licenses are consistent with federal 

law and otherwise satisfy the government’s needs. 

Generally, offerors and contractors shall not be 

required to— 

1. Furnish technical information related to 

commercial computer software or commercial 

computer software documentation that is not 

customarily provided to the public; or 

2. Relinquish to, or otherwise provide, the 

Government rights to use, modify, reproduce, 

release, perform, display, or disclose commercial 

computer software or commercial computer 

software documentation except as mutually 

agreed to by the parties. 

(FAR 12.212(a)) 

Cost accounting 

standards 

41 U.S.C. 422

Compliance generally required for contractors in 

connection with negotiated contracts in excess of 

$500,000. 

Contractors must disclose and consistently follow 

their cost accounting practices. (FAR 30.101) 

Cost Accounting Standards do not apply to contracts 

for acquisition of commercial items when they are 

firm-fixed-price or fixed-price with economic price 

adjustment. (FAR 12.214) 

Preaward Survey In determining whether a potential awardee is a 

responsible contractor, per criteria in FAR 9.104-1, 

contracting officers may require a preaward survey 

when the information on hand or readily available is 

not sufficient to make such a determination. (FAR 

9.106-1) 

If the contemplated contract will involve the 

acquisition of commercial items, the contracting 

officer should not request a preaward survey unless 

circumstances justify its cost. (FAR 9.106-1(a)) 

Audit Rights When contracting by negotiation, the contracting 

officer shall insert the clause at FAR 52.215-2, Audit 

and Records—Negotiation in solicitations and

contracts which allows contracting officer 

examination of costs when cost or pricing data is 

required or for cost-reimbursement, incentive, timeand-materials, labor-hour, or price redeterminable 

contracts. (FAR 15.209(b) and 52.215-2) 

Commercial item contracts exempted. (FAR 

15.209(b)(1)(iii)) 

Applicability of certain 

laws: 

Walsh-Healy Public 

Contracts Act 

On contracts for supplies over $10,000, contractors 

must adhere to provisions pertaining to minimum 

wages, maximum hours, child labor, convict labor, 

safe/sanitary working conditions. (FAR 22.602) 

Not applicable. (FAR 12.503(a)) 

Page 40 GAO-06-830 Acquisition of Simulator Training
Appendix III: Comparison of Contractor 

Requirements under Commercial and Noncommercial Acquisition Procedures 

Requirement Under noncommercial procedures Under commercial procedures 

Contingent fees Contractor must warrant that it has not employed or 

retained anyone, on a contingent fee basis, to obtain 

this contract. 

(FAR 3.404, 52.203-5) 

Not applicable. (FAR 12.503(a)) 

Drug-Free Workplace 

Act of 1988 

Contractor must agree that it will provide a drug-free 

workplace (FAR 23.504(a)) 

Not applicable. (FAR 12.503(a)) 

Vietnam Era Veterans’ 

Readjustment 

Assistance Act of 1972 

Contractor must report on its affirmative actions to 

employ and advance covered veterans (FAR 

22.1302(a)) 

Law’s limitation on use of appropriated funds for 

contracts with entities not meeting veterans 

employment reporting requirements is not applicable. 

(FAR 12.503(a)) 

Trafficking Victims 

Protection 

Reauthorization Act of 

2003 

Contracts for services must prohibit contractor

activities regarding, and require contractor policies to 

combat, severe forms of trafficking in persons, the 

procurement of commercial sex acts, and use of 

forced labor. (FAR 22.1705) 

Not applicable. (FAR 12.503(a)) 

Contract Work Hours 

and Safety Standards 

Act 

Contract clause required providing that contractors 

employing laborers or mechanics are required to 

compensate them for overtime. (FAR 52.222-4) 

Requirements for a certificate and contract clause 

related to the Act are not applicable. (FAR 12.503(b))

Anti-Kickback Act of 

1986 

Contract clause requires prime contractors to (1) 

have in place and follow reasonable procedures 

designed to prevent and detect violations of the Act; 

and (2) cooperate fully with any Federal agency 

investigating a possible violation of the Act. (FAR 

3.502-2(i)) 

Requirements for a clause and certain other 

requirements related to the Act are not applicable. 

(FAR 12.503(b)) 

International Air 

Transportation Fair 

Competitive Practices 

Act of 1974 (Fly 

America Act) 

Contracts must include clause requiring use of U.SFlag Air Carriers by government contractors when 

available (FAR 47.405) 

Requirement for a clause related to the Act is not 

applicable. (FAR 12.503(b)) 

Prohibition on Limiting 

Subcontractor Direct 

Sales to the United 

States 

Contracts must include clause precluding contractors 

from restricting direct subcontractor sales to the 

Government. (FAR 3.503-2 and 52.203-6(a)) 

Contractors may restrict subcontractors’ sales to the 

Government, as long as the Government is treated 

no differently than other prospective purchaser. (FAR 

52.203-6, Alternate I) 

Selected contract 

administration 

provisions: 

Changes Generally, contracting officer permitted to make 

unilateral changes within the scope of the contract 

and to require continued contractor performance of 

the contract as changed. (FAR 43.201) 

Changes may be made only by written agreement of 

the parties (bilateral). (FAR 12.301(b)(3); 52.212-

4(c)) 

Page 41 GAO-06-830 Acquisition of Simulator Training
Appendix III: Comparison of Contractor 

Requirements under Commercial and Noncommercial Acquisition Procedures 

Requirement Under noncommercial procedures Under commercial procedures 

Termination for the 

convenience of the 

government 

Generally, termination costs for fixed-price contracts 

limited to total contract price less payments made or 

to be made under contract plus reasonable costs 

incurred in performance of work terminated, to 

include fair and reasonable profit, and reasonable 

settlement costs. Cost principles and procedures of 

FAR Part 31 apply to costs. (FAR 49.502(b); 52.249-

2) 

Termination costs limited to percentage of contract 

price reflecting percentage of work performed prior to 

termination plus reasonable charges resulting from 

termination. For payments thereunder, contractor not 

required to comply with cost accounting standards or 

contract cost principles in FAR Part 31. (FAR 

12.301(b)(3); 52.212-4(l)) 

Source: GAO analysis of Federal Acquisition Regulation requirements. 

Page 42 GAO-06-830 Acquisition of Simulator Training
Appendix IV: Potential Duration of Air Force Appendix IV and Army Simulation Contracts : Potential Duration of Air Force 

and Army Simulation Contracts 

System Base performance period

Additional years possible 

via award term

Potential total years 

of contract performance

Air Force: 

F-15C Nov. 1997 to Nov. 2005 (8 years) 7 years 15 years

AWACS Feb.1999 to Feb. 2006 (7 years) 8 years 15 years

F-16 June 1999 to June 2006 (7 years) 8 years 15 years

F-15E Aug. 2003 to July 2016 (13 years) N/A 13 years

Army:

Flight School XXI Sept. 2003 to Mar. 2015 (11.5 

years) 8 years 19.5 years

Source: GAO analysis of contract data. 

Page 43 GAO-06-830 Acquisition of Simulator Training
Appendix V: 

A

GAO Contact and Staff 

cknowledgments 

Page 44 GAO-06-830

Appendix V: GAO Contact and Staff 

Acknowledgments 

Lisa Shames (202) 512-4841 or shamesl@gao.gov

In addition to the individual named above, Michele Mackin, Assistant 

Director; Marie Ahearn; Christine Bonham; Gary Delaney; Carlos Diz; 

Benjamin Federlein; Victoria Klepacz; and Sanford Reigle made key 

contributions to this report. 

GAO contact 

Acknowledgments 

(120492) Acquisition of Simulator Training
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