State Department: State Has Initiated a More Systematic Approach for Managing Its Aviation Fleet
Published: 2007-02-02T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Department of State's (State) Bureau of International Narcotics and Law Enforcement Affairs (INL) owns 357 helicopters and fixed-wing aircraft (valued at over $340 million) primarily to help carry out its counternarcotics efforts, such as aerial eradication of drug crops in Colombia. INL relies on contractor support to help maintain and operate its aircraft. In 2004, GAO analysis showed that INL lagged behind other agencies in implementing Office of Management and Budget (OMB) and General Services Administration (GSA) aviation fleet management principles. GAO was mandated to review INL's management and oversight of this fleet. GAO specifically examined (1) the extent INL has complied with OMB and GSA aviation fleet management guidance and (2) how INL has overseen its aviation support contracts. Since INL has undertaken initiatives to address the weaknesses GAO observed, GAO makes no recommendations. GAO will follow up to ensure that these initiatives are completed, as planned. In comments on this report, State highlighted reforms under way. State also indicated that INL conducted analyses to justify most aviation investments. GAO notes, however, that the documentation provided did not reflect the key analyses called for by OMB guidance.
section_title: What GAO Found
paragraphs: Despite some improvements since 2004, INL has not yet employed a systematic process for managing its aviation fleet that adheres to OMB and GSA guidance intended to help federal programs ensure that they acquire, manage, and modernize their aircraft in a cost-effective manner. However, in October 2006, INL began a number of initiatives to improve compliance with this guidance. The guidance entails three key principles: (1) assessing a program's long-term fleet requirements, (2) acquiring the most cost-effective fleet of aircraft to meet those requirements, and (3) assessing fleet performance. INL's initiatives are intended to address weaknesses in the following three areas: (1) Long-term planning. Since 2004, INL has prepared a strategic plan and a Critical Flight Safety Program to refurbish certain aircraft and replace others to meet projected mission needs. However, this effort did not address the long-term aircraft needs of all INL aviation programs. (2) Fleet investment justifications. INL has funded multimillion dollar aircraft investments, including the acquisition of new aircraft and major overhauls of older assets, without documenting cost-benefit and life cycle cost analyses of alternatives. (3) Fleet composition assessment. INL has not reviewed the composition of its entire fleet to demonstrate that its aircraft are the most appropriate and cost-effective to meet mission requirements. INL is hampered in assessing the performance of its fleet because it does not have complete and reliable aircraft cost and usage data. INL has undertaken a study to assess the aviation fleet's overall composition, identify investment needs, and assess alternative approaches for meeting those needs. INL expects completion of this and other initiatives in 2007. Regarding contract oversight, INL has met applicable federal, agency, and contract-specific requirements for managing its aviation support contracts. In addition to direct contractor oversight, State has used quantitative measures, primarily aircraft readiness rates, to monitor and assess contractor performance.

section_title: Letter
paragraphs: Since fiscal year 2001, Congress has appropriated about $5 billion to the  Department of State’s (State) Bureau of International Narcotics and Law  Enforcement Affairs (INL) for counternarcotics, counterterrorism, and law  enforcement programs. State owns an aviation fleet-–primarily to help INL  carry out its counternarcotics efforts—that, as of September 1, 2006,  totaled 357 aircraft. Valued by State at over $340 million, the fleet is the  second largest among U.S. government civilian agencies and includes  aircraft in the United States and seven other countries—Afghanistan,  Bolivia, Colombia, Ecuador, Mexico, Pakistan, and Peru. INL has allocated  about $2.2 billion for aviation activities during fiscal years 2002 through  2006. The aircraft are property of the U.S. government, though some are  provided to countries on a no-cost lease basis. INL uses contractor  support to help operate and maintain the aircraft, which are used in a wide  variety of counternarcotics operations, from spraying herbicides on coca  and opium poppies in Colombia and transporting the Colombian Army in  support of its operations to helping to secure the border between  Afghanistan and Pakistan. When called upon, INL aircraft may also be  used to conduct medical evacuations, search and rescue missions, and  other counternarcotics-related operations. INL acquired a significant  portion of its fleet since 2000 to support the implementation of Plan  Colombia, established by the Colombian government in 1999 to reduce the  cultivation, processing, and distribution of illegal narcotics by 50 percent  over 6 years, among other goals.
In recent years, funding for INL’s aviation fleet has been provided  primarily through the Andean Counterdrug Initiative and the International  Narcotics Control and Law Enforcement appropriations. Most of the  aircraft are managed by INL’s Office of Aviation (also called the Air Wing)  headquartered at Patrick Air Force Base in Florida. However, other  aircraft are managed by INL offices (often called a Narcotics Affairs  Section or NAS) in the U.S. embassy in the countries where the aircraft are  stationed.
In 2004, we reviewed the management of Air Wing’s operations and found  that the Air Wing had not implemented several key principles of fleet  management planning, as outlined in Office of Management and Budget  (OMB) and General Services Administration (GSA) guidance. This  guidance is intended to help agencies make sound decisions in acquiring  aircraft and managing their aviation fleets. At that time, our analysis  showed that INL lagged behind other federal programs we reviewed,  particularly in terms of long-term planning and justifying acquisitions.  Also, in its report on State’s fiscal years 2004 and 2005 financial  statements, State’s external financial auditor noted that State had  ineffective controls over its aviation fleet and cited this shortcoming as a  material weakness. More recently, State’s Office of Inspector General  reported that, due to ineffective controls in tracking and reporting on its  fleet, State underreported the value of its aircraft and parts by   $162 million. In 2005, the Senate Appropriations Committee commented  that the lack of central program management and funding for INL aviation  programs has resulted in contract cost growth, poor execution, and  inadequate financial management. The committee directed the  Comptroller General to review the management and oversight of State’s  aviation fleet.
In response to this mandate, we reviewed INL’s overall management of its  aviation programs. We specifically examined (1) the extent to which INL  has managed its aviation fleet in accordance with OMB and GSA guidance  and (2) how INL has overseen aviation support contracts and whether it  did so in accordance with applicable standards.
To address these objectives, we reviewed OMB and GSA guidance and  related federal regulations for managing aircraft and other capital asset  programs, as well as applicable federal financial and contract management  regulations and guidance. We reviewed policy, program, budget, and  financial documentation and interviewed cognizant officials at INL in  Washington, D.C. We also examined applicable documentation and  interviewed INL and contract officials about fleet operations, financial  management, and contract oversight at the Air Wing’s main operating base  at Patrick Air Force Base, Florida, and at various sites in Colombia. We  chose Colombia because about two-thirds of INL’s active aviation fleet is  in that country and three contractors carry out aviation programs there.  See appendix I for a more detailed description of our scope and  methodology. We conducted our review from February 2006 through  January 2007 in accordance with generally accepted government auditing  standards.
subsections: section_title: Background
paragraphs: INL manages its aviation fleet in a decentralized manner. The Air Wing  manages about two-thirds of INL’s 357 aircraft, while the NAS at four  embassies manages the remainder. Figure 1 shows the distribution of INL  supported aircraft worldwide.
The Air Wing is responsible for assisting host nations eradicate illicit drug  crops and detect, monitor, and interdict drug production and trafficking  operations. In Colombia, it also assists the Colombian Army with  counterterrorism operations. To accomplish these missions, through its  contract with DynCorp International, the Air Wing uses an active fleet of  179 aircraft, including helicopters and fixed-wing airplanes, to undertake  aerial eradication in Colombia; support manual eradication of drug crops  in Afghanistan, Bolivia, and Peru; and enhance border security between  Afghanistan and Pakistan. Operations often take place in hostile  environments, which can place aircraft and personnel under small arms  fire. These programs are managed by the Air Wing headquarters office at  Patrick Air Force Base in Florida. As the aircraft program’s contractor,  DynCorp performs major maintenance and initial pilot training at Patrick  Air Force Base and flies and maintains U.S. aircraft and trains foreign  personnel at various locations in Afghanistan, Bolivia, Colombia, Peru and  Pakistan. Training for some of the spray aircraft is also conducted at  Kirtland Air Force Base in New Mexico, a location that helps simulate the  mountainous environment of Colombia.
In addition, the NAS offices within the U.S. embassies in Colombia,  Ecuador, Mexico, and Peru manage a total of 98 aircraft to support a  variety of host government counternarcotics efforts, with the involvement  and oversight of the INL Office of Latin American Programs. For example,  through contracts with ARINC and Lockheed Martin, the NAS in Colombia  provides aircraft to assist the (1) Colombian Air Force in interdicting  suspicious aircraft and (2) Colombian National Police in conducting aerial  eradication and interdiction operations, humanitarian missions, and other  activities. The NAS in Mexico provides both new and older model U.S.  government-owned helicopters to Mexico’s Office of Attorney General for  use in counternarcotics operations, including aerial surveillance, border  security, and training. INL also funds ARINC to assist the Government of  Mexico in maintaining these aircraft.
INL supports a wide variety of rotary and fixed-wing aircraft. Some are  excess defense aircraft that have been refurbished, while others were  purchased for use in INL programs. Figure 2 depicts examples of types of  aircraft owned and supported by INL.
Most of the funds used to support INL’s aviation fleet come from two  annual appropriations—the International Narcotics Control and Law  Enforcement and Andean Counterdrug Initiative—and supplemental  appropriations in some years. During fiscal year 2002 through 2006, INL  records indicate that it allocated about $2.2 billion for its aviation  activities. Table 1 shows a breakdown of the total amount allocated for  aviation activities by fiscal year and appropriation.
INL allocates its aircraft funds to a NAS for some country programs and to  the Air Wing. INL aircraft funding is also embedded in various program  budgets, such as the Air Bridge Denial Program in Colombia. These  program funds are primarily used to pay for three aviation support  contractors that repair and maintain the aircraft, train aircraft crews and  mechanics and, in some instances, fly the aircraft.
subsections: section_title: Federal Guidance for Aircraft Management
paragraphs: OMB provides the following guidance for State and other agencies to  follow in managing capital acquisitions, including aviation programs:    Circular No. A-126, which is intended to minimize cost and improve the  management and use of governmental aviation resources, prescribes  policies for acquiring, managing, using, accounting for the costs of, and  disposing of aircraft. According to the circular, agencies should not have  more aircraft than they need to fulfill their mission, and they should  periodically review the cost effectiveness of their entire fleet of owned  aircraft.
Circular No. A-76 establishes policy for the competition and contracting  out of commercial activities, including the use of aircraft, and provides  guidance for conducting cost comparisons to determine if the private  sector could provide aviation services at a lower cost.
Circular No. A-11, Part 7, establishes policy for planning, budgeting,  acquisition, and management of federal capital assets, including aircraft,  and requires agencies to submit a capital asset plan and business case  summary (an “Exhibit 300”) for all major capital investments, including  aircraft acquisitions and overhauls. The exhibit should demonstrate that  the agency analyzed three alternatives and calculated the life cycle costs  for each. OMB provides procedural and analytic guidance, including its  “Capital Programming Guide,” for implementing specific aspects of this  policy.
OMB Circular No. A-126 also sets out responsibilities for GSA regarding  aircraft management. In implementing this circular, GSA establishes  governmentwide policy on various aspects of aircraft management,  including procurement, operation, safety, and disposal, and publishes its  regulatory policies in the Code of Federal Regulations. GSA, through the  Interagency Committee for Aviation Policy, also published a number of  other guides and manuals to help agencies manage aircraft acquisitions,  use, and disposal. Its “Fleet Modernization Planning Guide,” in particular,  aids programs in developing cost-effective fleet replacement plans.
A comprehensive aviation fleet management planning process detailed in  guidance that OMB and GSA have issued can help federal aircraft  programs ensure that they acquire, manage, and modernize their aircraft in  a cost-effective manner. Sound fleet management decisions should be  based on a comprehensive process that relies on three key principles: (1)  assessing a program’s long-term fleet requirements, (2) acquiring the most  cost-effective fleet of aircraft to meet those requirements, and (3)  assessing fleet performance to determine if the needs are being effectively  met. Figure 3 illustrates the fleet management planning process, showing  that it is a continuous cycle of planning and analyses.
section_title: State Did Not Employ a Systematic Process for Managing Its Aviation Fleet in Accordance with OMB and GSA Guidance, but Plans to Do So Are Under Way
paragraphs: Although INL has made limited progress since we first assessed the Air  Wing’s aviation fleet management in 2004 in adhering to OMB and GSA  guidance, the bureau plans to undertake a more systematic management  approach beginning in 2007. The bureau has not (1) conducted a strategic  assessment of all long-term fleet requirements, (2) justified new aircraft  investments in a systematic way that considers the range of alternatives  and life cycle costs, or (3) routinely reviewed the performance of the fleet  to ensure that its composition is the most appropriate and cost-effective to  achieve the bureau’s missions. In August 2006, we shared our observations  with INL officials about INL not adhering to OMB guidance, particularly in  justifying new aircraft investments and analyzing the composition of the  aviation fleet. In September 2006, after completing its own review of  aviation program operations, INL officials told us that in October 2006 they  would be initiating a number of steps to resolve weaknesses we observed.
subsections: section_title: Comprehensive Strategic Assessment of Long-term Fleet Requirements
paragraphs: According to GSA’s guidance and the OMB “Capital Programming Guide,”  a strategic assessment of the long-term fleet requirements is the  foundation of fleet management because it identifies future workload  requirements that serve as the basis for aircraft needs. The assessment  process includes specific analyses, such as an assessment of the number  of flight hours needed to meet mission requirements over a multiyear  period and the capability of existing aircraft to meet those requirements  cost effectively. The guidance recommends that, if shortfalls in the current  mix of aircraft are identified, managers should determine the optimal mix  of aircraft to meet anticipated flight hour and mission requirements and  develop a proposed fleet acquisition or replacement plan to achieve the  desired mix of aircraft. This plan could include an anticipated schedule of  time frames for disposing of inadequate aircraft and procuring  replacements.
In 2004, we reported that Air Wing had not engaged in long-term planning  to estimate the future, long-term mission requirements and what mix of  aircraft was best suited for these requirements. Fleet planning was  primarily short-term in nature and focused on identifying aircraft to meet  current and the next year mission requirements.
Since 2004, INL has prepared a strategic plan and a Critical Flight Safety  Program for Air Wing operations. The Air Wing’s strategic plan addresses  the goals and long-term needs of its program in terms of operations,  maintenance, logistics, safety, administrative/contract support, and  information technology and communication. While the strategic plan does  not analyze the flight hours needed to meet mission requirements, it does  specify other operational requirements, including the total area of illicit  crops to be sprayed and eradicated over a number of years. The strategic  plan, completed in April 2004, also indicates the mix of aircraft assets and  personnel necessary to meet these goals. The Air Wing’s Critical Flight  Safety Program specifies how the Air Wing plans to achieve the goals in its  strategic plan with the aircraft available—primarily through a combination  of aircraft overhauls and aircraft acquisitions.
However, the Air Wing strategic plan and accompanying Critical Flight  Safety Program did not address the aircraft needs of several INL aviation- related activities. For example, the strategic plan did not estimate the  operational requirements or flight hours needed to continue supporting  the Colombian Army’s operations, including protection of the Caño Limón- Coveñas pipeline. Further, the Critical Flight Safety Program did not  address the long-term aircraft needs of other INL aviation-related  programs, such as assistance to the Colombian National Police or the  Colombian Air Force’s Air Bridge Denial Program, or assistance to  Mexico’s Office of Attorney General. These other programs represent over  a third of INL’s active aviation fleet and, in some cases, aircraft are closely  related to Air Wing operations, such as the aircraft that NAS Colombia  provided to the Colombian National Police to support aerial eradication.
According to INL officials, INL plans to conduct an aviation fleet study in  fiscal year 2007. The study is expected to take 9 months to complete and  include a needs analysis of INL’s current aviation fleet. The resulting  report is expected to specify aircraft requirements in terms of a number of  variables, including payload, range, speed, endurance, availability, and  maintainability, among other factors. This study is intended to form the  basis of a long-term plan for all aviation-related programs in 2007.
section_title: Justification of Aviation Fleet Investments Decisions
paragraphs: Until recently, INL had not taken actions to prepare the analyses  prescribed by OMB and GSA to help justify aviation fleet investment  decisions. Nor had INL established a set of policies and procedures for  aviation acquisitions.
subsections: section_title: Analyses of Alternatives Were Not Prepared Until Recently
paragraphs: According to GSA guidance, after identifying potential aircraft and  developing a proposed fleet replacement plan, aviation managers should  develop a series of analyses to identify and acquire the most cost-effective  aircraft to meet mission needs. These analyses should include preparing a  study, as described in OMB Circular No. A-76, to determine whether the  aviation operations should be performed by the government or contracted  to the private sector. Also, for all major investments, agencies should  prepare a capital asset plan and business case summary as described in  OMB Circular No. A-11, Part 7, Exhibit 300, which should include the  results of an analysis of three alternatives, in addition to the current  arrangement, to help ensure that the most cost-effective investment is  selected. For this comparison of alternatives, a life cycle cost analysis is  needed to provide managers with important information concerning the  total cost of operating and maintaining an aircraft over its useful life. Such  documents should be prepared to support acquisition of new aircraft, as  well as modernization or enhancements of aircraft already in operation.  Once these analyses are completed, aviation managers should obtain  senior management approval and then acquire needed aircraft or  commercial aviation services.
In 2004, we reported that INL used no set criteria for Air Wing aircraft  acquisitions and could not provide any A-76 cost comparison studies or  cost-benefit analyses supporting its aircraft acquisitions. According to INL  officials, the exigent circumstances of its programs precluded preparation  of cost-benefit and other detailed analyses. INL acquired a large number of  aircraft since 2000 to support Plan Colombia and other counternarcotics  and counterterrorism efforts in Colombia, including 33 UH-1N, 25 UH-II,  and 14 UH-60 Black Hawk helicopters. Some of the aircraft acquired were  surplus aircraft that were made available under a relatively short time  frame; other aircraft acquisitions were congressionally directed.
Since 2004, INL has continued to make multimillion dollar investments in  its aviation fleet, both by acquiring new aircraft or refurbishing older  aircraft it had previously acquired, without conducting the analyses  prescribed by OMB. According to officials we spoke to at OMB, the Air  Wing, NAS Colombia, and the Office of Latin America Programs, the  bureau has never prepared OMB-required justifications, as laid out in  Circulars Nos. A-76 and A-11, for any of its aircraft investments. For  example, in fiscal year 2006, the Air Wing began implementing its Critical  Flight Safety Program, expected to cost a total of $356 million over 6  years, to upgrade and overhaul the aviation fleet used for Air Wing  operations. This investment includes refurbishing several Vietnam era OV- 10 observation airplanes and UH-1N helicopters to extend their useful life  and make them more commercially supportable and procuring new UH-60  and UH-II helicopters. However, the documentation Air Wing provided us  did not include cost-benefit analyses of alternatives or a calculation of life  cycle costs for each element of the program. Similarly, in 2004, INL began  acquiring 12 new Schweizer SAC 333 helicopters to support Mexico’s  Office of Attorney General’s antinarcotics efforts, at a cost of about   $15 million, without conducting the analyses called for in OMB Circular  Nos. A-76 and A-11 to justify the acquisitions.
According to OMB and GSA officials we consulted, without the analyses  called for in OMB guidance, State cannot be reasonably certain whether  the aircraft procurements and refurbishments reflected in their budgets  are the most appropriate and economical alternatives. In particular, we  found little evidence that important cost and operational considerations  were formally taken into account when INL decided to refurbish OV-10  spray aircraft. A NAS Colombia official indicated that this was not an  appropriate investment for Colombia because, among other reasons, the  Colombian government does not have the capacity to maintain these  aircraft after U.S. support for the aerial eradication program ends. The  NAS, therefore, decided to purchase new and commercially available AT- 802 crop dusting aircraft to conduct aerial eradication in Colombia.  Representatives of DynCorp International, the contractor responsible for  maintaining both aircraft, argued that the AT-802 was more practical and  cost-effective to maintain than the OV-10. Air Wing officials considered the  OV-10 refurbishment to be more appropriate because it kept in service an  aircraft with important safety characteristics, including a dual engine  configuration and ejection seats. A formal analysis of alternatives,  including a calculation of life cycle costs, could have weighed these  considerations on a more objective basis.
INL has recently taken steps to justify its aircraft investment decisions  better. As directed by an appropriations conference committee, INL  prepared an analysis of alternatives for the procurement of new spray  aircraft to support its aerial eradication program in Colombia. In August  2006, we shared our observations with INL about the lack of supporting  analysis for it aircraft investments. In October 2006, INL tasked a private  consulting firm with conducting analyses in accordance with OMB  Circulars Nos. A-11 and A-76 to justify an aircraft acquisition intended to  replace leased transport aircraft to support counternarcotics activities in  Afghanistan. In addition, as part of its 2007 fleet study, INL has tasked the  same consulting firm to prepare a capital asset plan and business case, in  accordance with OMB Circular No. A-11, that would identify and analyze  alternatives for filling INL’s aircraft needs.
section_title: INL Had Not Established Acquisition Policies and Procedures
paragraphs: OMB Circular No. A-126 requires agencies to issue internal directives and  policies for acquiring and managing aircraft. Responsibility for  implementing these policies should be assigned to a senior management  official who has the agencywide authority and resources to implement  them. INL has not established bureauwide directives and policies relating  to aviation acquisition that incorporate OMB guidance. Program managers  we spoke to at INL and NAS Colombia were unaware of key OMB  acquisition guidance and were unsure about the roles and responsibilities  of the various INL offices in preparing the justification OMB circulars call  for.
INL plans to issue an “Aviation Program Policy Guide” that will set forth  policies, procedures, and responsibilities for managing the bureau’s  aviation fleet and serve as a vehicle for planning, coordination, and dispute  resolution. While INL has designated the director of the Air Wing as the  senior aviation management official for its aviation fleet, this official’s  authority, roles, and responsibilities will be defined in the policy guide,  according to an INL official. INL expects that the policy guide will be  completed in 2007 and reflect OMB guidance about justifying aviation fleet  investments.
section_title: Assessment of Fleet Composition and Performance
paragraphs: According to OMB Circular No. A-126, agencies are required to review  periodically the continuing need for all of their aircraft and the cost- effectiveness of their aircraft operations, and then should report any  excess aircraft and release all aircraft that are not fully justified by this  review. A copy of each agency review should be submitted to GSA and to  OMB with the agency’s next budget submissions. Federal regulations call  for such studies every 5 years. Finally, managers should incorporate the  results of their periodic Circular No. A-126 reviews into their long-term  fleet planning process and make adjustments to their fleets as needed. We  found that INL has neither assessed the composition of its aviation fleet,  nor fully tracked cost and usage of its aircraft.
subsections: section_title: Aviation Fleet Composition
paragraphs: In 2004, we reported that INL had not followed OMB Circular No. A-126 for  reviewing the composition of its entire fleet to ensure its cost- effectiveness. According to INL officials we spoke with, the bureau has  still not conducted the type of fleet review that is called for under OMB  Circular No. A-126. Without such a review, INL cannot demonstrate that  the composition of its fleet and planned additions to it are appropriate and  cost-effective.
INL has included in the scope of its fleet study an assessment of the  soundness of the fleet composition and possible alternative aircraft or  approaches to consider. Also, as part of the fleet study, the bureau plans to  identify cost-effective performance measures that can be used in an annual  performance plan.
section_title: Aircraft Cost and Usage Data
paragraphs: Detailed cost and usage data are critical for assessing the cost- effectiveness of aircraft, and Circular No. A-126 and related federal  regulations require agencies to collect this data in a standardized format  for their entire aviation fleet. One of the most common measures used to  evaluate the cost-effectiveness of various aspects of an aircraft program is  expressed as the cost per flying hour for certain types of aircraft costs.  Other measures include, but are not limited to, maintenance costs per  flying hour; fuel and other fluids costs per flying hour; and accident repair  costs per flying hour (or per aircraft). Federal regulation 41 C.F.R. 102.33- 425 requires federal agencies to accumulate and report to GSA aircraft  usage data and the cost of operating each aircraft based on the standard  aircraft program cost elements defined in OMB Circular No. A-126. In  2004, we reported that State’s fiscal year 2000 through 2002 aircraft  program costs reported to GSA were significantly understated.
However, State’s information systems do not capture the data necessary  for INL to fully adhere to OMB guidance and related federal regulation  regarding compiling and reporting data on the cost and usage of its  aviation fleet and individual aircraft. In a September 2006 audit of State’s  aircraft, the State Office of Inspector General determined that State did  not have a comprehensive and effective cost management system to  record, maintain, and report timely, reliable data on its aircraft. To  provide GSA the required information on aircraft cost and usage, the Air  Wing developed an information system called the Air Wing Information  System that compiles cost and usage data such as flight hours per aircraft  and other related information. However, although the system captured  cost and usage data for the 179 aircraft managed by the Air Wing, it did not  do so for the 98 aircraft managed by the Office of Latin American  Programs and the NAS offices in Colombia, Ecuador, Peru, and Mexico.
Additionally, due to financial management system deficiencies and  weaknesses in key internal controls, INL could not provide us sufficiently  reliable data on the status of the funds allocated for its aviation fleet. We  requested from INL the amounts obligated, expended, and available from  fiscal year 2001 through 2005 appropriations used to acquire, operate, and  maintain its aviation fleet. INL could not provide the necessary data  because its financial management systems do not readily identify aviation- related costs, even though State has taken steps to improve data  completeness and additional improvement efforts are under way. Further,  the systems do not accumulate data on the cost of operating individual  aircraft based on the standard cost elements prescribed by OMB, such as  costs related to crew, maintenance, engine overhaul, and fuel. INL officials  told us that it would have to conduct a manual review of thousands of  transaction documents to identify all aircraft costs. We also noted  weaknesses in key internal controls over the recording of financial  transactions and management of funds. Specifically, INL had limited  bureauwide written procedures addressing (1) how its staff should  reconcile the financial records that overseas posts independently maintain  with State’s Regional Financial Management System or (2) an effective  method of reviewing outstanding obligations for identifying excess funds.  These controls are critical to ensuring accurate and complete data on the  status of funds allocated for INL aviation fleet.
Although State is implementing two new financial management systems,  neither is designed to generate the detailed data INL needs to analyze the  cost-effectiveness of its aviation fleet. INL is spending about $1 million to  implement a new bureauwide financial management system, called the  Local Financial Management System, to standardize how each NAS  records financial activity to provide more visibility over NAS financial  activity to INL headquarters. State’s Bureau of Resource Management is  also implementing a new departmentwide financial management system  called the Global Financial Management System. However, like the  existing systems, neither the new INL nor the departmentwide systems  incorporate the standard program cost elements outlined in OMB Circular  No. A-126 and the related federal regulation. Officials in State’s Bureau of  Resource Management informed us that they were not familiar with INL’s  cost data requirements when designing the Global Financial Management  System. Without the ability to accumulate and summarize aircraft costs by  standard program elements, INL will be limited in determining whether its  aviation fleet is managed in a cost-effective manner.
State has taken steps to improve its ability to compile and report aircraft  cost data, such as establishing appropriate codes in its accounting system.  Further, INL plans to assign responsibility for reporting cost and usage  data for all INL aircraft to the Air Wing, regardless of which office  manages the aircraft. According to an Air Wing official, the Air Wing plans  to modify the Air Wing Information System to capture fleetwide cost and  usage data. The Air Wing, according to the same official, expects the  modification to help INL meet GSA reporting requirements and greatly  improve its ability to capture selected aircraft cost elements. Furthermore,  INL plans to use OMB Circular No. A-126 standard aircraft program cost  elements to prepare a template to standardize budget line items used for  all aviation-related programs. Finally, State officials responsible for  implementing the Global Financial Management System told us that they  plan to address INL’s cost data requirements after the system is  implemented in fiscal year 2007 but were not sure whether the new system  can provide the cost data capabilities needed by INL.
section_title: INL Has Met Contract Oversight and Evaluation Requirements
paragraphs: Federal regulations require federal agencies to develop and perform  contract quality assurance procedures to verify that services and supplies  provided conform to contract requirements and to maintain suitable  records enumerating quality assurance actions. Since 2004, State  regulations have specified a policy that all new service contracts be  performance-based, with clearly defined deliverables and performance  standards. The aviation support contracts with DynCorp International,  Lockheed Martin, and ARINC comply with these regulations and use  performance-based metrics to assess contractor performance; however,  the Lockheed Martin and ARINC contracts make less intensive use of such  metrics. Currently the responsibility for contractor oversight for  Lockheed and ARINC is divided among NAS officials in Colombia, the  government task leaders in Washington, D.C., and the contractors located  in Colombia. INL plans to centralize contractor oversight by assigning Air  Wing staff the responsibility for managing all aviation support contractors.
subsections: section_title: DynCorp International
paragraphs: In 2005, State and DynCorp International entered into a new performance- based contract whereby State and DynCorp assess contractor  performance using an extensive set of indicators. The contract establishes  standards for several functional areas across which performance is  measured, including maintenance, logistics, operations, safety, and  training. Within these areas, State and DynCorp track 84 specific  performance metrics (such as hectares of illicit crop eradicated,  percentage of total aviation fleet available, and host nation training hours  performed) to help assess DynCorp’s performance.
In order to manage the oversight of these performance categories, State  and DynCorp use an online tracking system and database; however, this  system has limitations. The performance categories in this system, called  SeeSOR, correspond to the 84 metrics specified in the contract. The  SeeSOR system provides a quality assurance checklist for each activity  and an inspection schedule, regularly prompting State and DynCorp  managers to enter performance information. In the case of poor ratings,  the system automatically produces corrective action reports, and DynCorp  managers track these corrective actions by time and inspector. Each  corrective action issue requires a response within a specified time frame.  However, INL and DynCorp officials in Colombia told us that SeeSOR is  not a comprehensive quality assurance or contract management tool  because it does not include certain activities that DynCorp performs. For  example, force protection, which DynCorp does in Colombia, is not  incorporated into the system. Also, computer network difficulties make  regular data entry from remote locations in the field problematic. Between  November 2005 and September 2006, DynCorp conducted over 400 audits  of information in the system and found 104 issues requiring corrective  action. State and DynCorp are still fine tuning the system to improve its  ability to measure contractor performance in an environment such as  Colombia.
Consequently, State and DynCorp use means other than the SeeSOR  system, such as personal contact, to help oversee contractor performance.  According to INL officials in Colombia, personal contact between INL and  DynCorp is the most valuable monitoring tool. INL and DynCorp personnel  talk and exchange e-mails throughout the day to identify issues that need  attention. In addition, State program managers conduct daily “walk  through” inspections of facilities in Bogotá and make unannounced site  visits to forward operating locations. The DynCorp manager in Colombia  also relies on daily oral communication with contractor staff outside of  Bogotá to stay aware of issues in the field. Further, DynCorp provides a  detailed briefing to INL every week, which addresses performance across  all functional areas of the contract. All advisers and managers are  expected to attend, and minutes are kept of these meetings. Also, State  conducts monthly reviews of aircraft and eradication reports and formally  evaluates DynCorp’s performance every 4 months.
section_title: Lockheed Martin
paragraphs: State and Lockheed Martin began a 4-year contract in July 2006 that  implements a performance-based method for assessing contractor  performance. In the contract, Lockheed Martin and its subcontractor  work closely with the Colombian National Police to support its illicit drug  eradication and interdiction and humanitarian missions, with  responsibility for aircraft maintenance, logistics, police training, and  multiple construction projects at bases across Colombia. Under the  contract, the government task leader must hold regular status meetings,  and Lockheed Martin is required to submit monthly performance reports  containing, among other things, accomplishments and issues that arose  during the reporting period, projected future activities, and subcontractor  performance relative to agreed upon metrics. Lockheed Martin also must  implement and maintain a quality assurance system to ensure that product  and service integrity meet or exceed contract requirements. In addition,  the contract specifies specific performance standards in program  management, quality control, safety, aircraft maintenance, logistics,  support maintenance, training, and information technology. For example,  one maintenance standard specifies that the contractor sustain a 75  percent aircraft operational readiness rate.
In Colombia, we observed that State maintained regular contact with the  contractor and the Colombian National Police to assess compliance with  contract requirements. State’s oversight measures included monitoring  performance in functional areas, such as maintenance, logistics, training,  and safety. While the program manager stated that the principal  performance metric was aircraft readiness rates, State received and  reviewed daily and monthly status reports, memos, and trip reports, and  participated in a quarterly program management review covering the  functional areas above. State attends weekly maintenance meetings  between Lockheed and the Colombian Police. In addition, the contractor  also performed random site visits and fuel inspections, reporting the  findings to the NAS program manager. The NAS uses standards from the  U.S. Army Aviation Management System to produce and issue standard  operating procedures in most functional areas.
However, the planned nationalization of this program and its heavy  involvement with and dependence on the Colombian National Police has  presented challenges to implementing an effective performance-based  contract. Personnel problems within the police force have adversely  affected the contractor’s ability to meet nationalization or its aircraft  readiness rate goals. For instance, the contractor reported absentee rates  among police trainees in the logistics branch as high as 25 percent.  Further, over half of Colombian helicopter mechanics were not  sufficiently skilled to perform more than routine maintenance tasks and,  therefore, required more contractor supervision than planned. The  contractor also has little influence over personnel decisions within the  police force. The Colombian police frequently rotate their trainees to  different positions, which hampers the development of specialized skills  and the ability of the contractor to pass on responsibility and nationalize  the program. For example, the contractor logistics office reported working  with seven different Colombian officers in 4 years. In another case, a  police trainee attended a specialized and lengthy course for engine oil  analysis in the United States, only to be transferred out of maintenance  shortly after returning to Colombia. Program managers have corrected  some of these training issues and now track the training Colombian police  personnel receive to help ensure that only committed and appropriately  skilled trainees receive detailed instruction.
Under the ARINC contract, which began in June 2004 and could extend to  4 years, State has established a performance-based system to monitor  contractor performance. Our review focused on State’s assessment of  ARINC’s contract performance in support of the Air Bridge Denial  Program. The objective of this program is to suppress the illicit aerial  trafficking of narcotics in Colombian airspace by tracking and forcing  down suspected traffickers. ARINC is responsible for, among other things,  maintaining seven aircraft and training Colombians to maintain these  aircraft. Reporting requirements include monthly performance reports  containing, among other things, accomplishments and issues that arose  during the reporting period, projected future activities, and performance  relative to the agreed upon metrics. In addition, the contract specifies  performance standards in operations, logistics, training, and project  management, among others.
We found that State was in compliance with contractor oversight  requirements and that, in many cases, ARINC exceeded its reporting  requirements in the contract. State is in daily personal contact with the Air  Bridge Denial Program manager. Although the program manager told us  that he did not have the quality assurance plan required by the contract,  we found that ARINC’s reporting to State included many of the quality  assurance plan requirements, such as training standards and reviews. The  NAS program manager also received and reviewed flight activity reports  on a daily, weekly, and monthly basis. In addition, the program manager  participated in regular meetings to discuss the status of aircraft, training,  and operations, and conducted a semiannual review, as well as an annual  program certification. The program manager made monthly visits to Air  Bridge Denial locations and shared trip reports with cognizant State  officials.
section_title: INL Plans to Centralize Contractor Oversight
paragraphs: INL plans to centralize contractor oversight by assigning Air Wing staff the  responsibility for managing all aviation support contractors. Under this  arrangement, INL plans to compile information on aircraft performance in  one central location. This will enable INL managers to assess performance  of the entire fleet more consistently, and more readily collect the data that  INL needs to assess the overall composition and cost-effectiveness of the  aviation fleet.
section_title: Conclusions
paragraphs: INL’s aviation fleet has grown at a rapid pace to meet emerging, global  counternarcotics and counterterrorism priorities. However, INL did not  systematically employ federal management principles and guidelines in  acquiring this fleet. As a result, key analyses were not done to help ensure  that INL program managers made cost-effective decisions, particularly  with regard to major investments in the fleet. In October 2006, INL officials  began initiating significant changes to the oversight of aviation fleet  operations, placing particular emphasis on conducting key analyses of its  fleet to help guide future investment decisions and adhere to OMB and  GSA guidance. If INL follows through, these analyses should result in a  long-term plan for aircraft investments and an assessment of the current  composition of the fleet to help ensure that it is the most cost-effective to  meet mission requirements. Current plans call for these to be completed in  2007. Since INL has undertaken a number of initiatives to address the  management weaknesses we observed, we are not making any  recommendations in this report. However, we will follow up with INL to  ensure that these initiatives have been completed in 2007, as planned.
section_title: Agency Comments and Our Evaluation
paragraphs: State provided comments on a draft of this report (see app. II). In its  comments, State acknowledged that our work, among others, was an  impetus for a comprehensive internal review of aviation management and  expressed appreciation to us for confirming areas needing continued  improvement. State highlighted the management reforms INL has  undertaken to enhance the efficiency and effectiveness of aviation fleet  management, as well as to improve INL’s adherence to OMB and GSA  guidance. State also noted operational circumstances that make such  adherence challenging. State disagreed with our observation that INL did  not provide fleet investment justifications using cost-benefit and life-cycle  analyses of alternatives. State indicated that considerable analysis was  done to evaluate economically sound alternatives in most previous aircraft  investments. However, the documentation INL provided did not include  the analyses called for by OMB guidance. Without documentation of such  analyses, we were not able to assess whether State’s investment decisions  were appropriately justified in accordance with this guidance. In addition  to these comments, State provided us technical comments, which we have  incorporated throughout the report, as appropriate.
We are sending copies of this report to interested congressional  committees and the Secretary of State. We also will make copies available  to others upon request. In addition, this report will be available at no  charge on the GAO Web site at http://www/gao.gov.
If you or your staff have any questions concerning this report, please  contact me at (202) 512-4268 or FordJ@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on the  last page of this report. GAO staff who made major contributions to this  report are listed in appendix III.
section_title: Appendix I: Scope and Methodology
paragraphs: To assess the extent to which the Bureau of International Narcotics and  Law Enforcement Affairs (INL) has managed its aviation fleet in  accordance with Office of Management and Budget (OMB) and General  Services Administration (GSA) guidance, we reviewed the applicable  guidance and discussed progress in adhering to this guidance with State  and contractor officials at INL offices in Washington, D.C.; Melbourne,  Florida; and Colombia, reviewing relevant documents, where appropriate.  We chose to focus our review primarily on operations in Colombia  because nearly two-thirds of INL’s active aviation fleet is in that country,  and three contractors carry out programs there. We obtained information  on the number and distribution of aircraft from INL officials and  determined that this information was sufficiently reliable for the purposes  of this report.
To assess how INL conducted strategic planning to identify long-term  aircraft needs, we obtained and reviewed planning documents prepared by  the bureau, including Bureau Performance Plans, the Air Wing Strategic  Planning Summary, and the documentation of the Critical Flight Safety  Program. We reviewed the content of the planning documents and  determined the extent to which it reflected information provided about  INL fleet operations we obtained from INL officials. We based our  assessment of the bureau’s planning documents on federal guidance  described in a prior report on federal aircraft.
To assess how INL justified investments in its aviation fleet, we reviewed  documentation, where available, and discussed major ongoing and  planned aircraft investments with relevant bureau officials. In particular,  to assess the justification for the Critical Flight Safety Program, we  discussed this program with Air Wing officials and DynCorp  representatives in Melbourne, Florida, and with NAS officials in Bogotá,  Colombia. We discussed justification of aircraft acquisitions for  counternarcotics programs in Mexico with officials from the INL Office of  Latin America Programs. We based our assessment of justification  documentation on federal guidance presented in OMB Circulars Nos. A-76,  A-126, and A-11 Part 7, and OMB’s “Capital Programming Guide.” To  obtain a better understanding of the applicability of this guidance, we  spoke with officials from OMB and GSA’s Aircraft Management Policy  Division, and a representative from Conklin and DeDecker Company, a  GSA contractor that assists federal agencies with developing cost-benefit  analyses for their aviation programs.
To determine how INL assessed the cost and performance of its aircraft  and ensured that the composition of the fleet was cost-effective, we  reviewed documentation and interviewed bureau officials in Washington,  D.C.; Air Wing officials in Florida; and Narcotics Affairs Section (NAS)  officials in Colombia. To obtain an understanding of the systems and  procedures INL used to track its aircraft funding and related obligations  and expenditures, we gathered information from INL accounting and  budget officials. We reviewed INL financial management handbooks as  well as automated systems’ documents. We identified and evaluated key  internal controls INL uses to ensure the completeness and accuracy of  recorded appropriated funds and the status of those funds. We assessed  INL’s reconciliation procedures with requirements found in the  Comptroller General’s Standards for Internal Control in the Federal  Government. To identify and report the amount of funds allocated to  aviation activities, we obtained and reviewed Congressional Notifications  and Congressional Budget Justifications for the Andean Counterdrug  Initiative and International Narcotics Control and Law Enforcement  appropriations. We identified aviation related activities and compiled  funding data for these activities by appropriation and fiscal year. Based on  our efforts to determine the reliability of the aviation activity allocations,  we concluded that these data were sufficiently reliable for the purposes of  this report.
We also planned to review a statistical sample of INL aircraft financial  transactions for fiscal years 2001 to 2005 to assess the reliability of  recorded aircraft financial data. For each fiscal year, we requested the  total appropriated funds used for aircraft acquisition, operation, and  maintenance, along with the status of those funds—amounts obligated,  expended, and available. For obligated and expended funds, we requested  separate, detailed transaction-level data files that supported the obligation  and expenditure levels reflected in the status of the fiscal year funds. State  provided data files from NAS offices, its Office of Aviation, and its Central  Financial Management System. We performed a data reliability analysis of  the files provided to determine whether we could use the data files for the  selection of our planned statistical sample. We noted that the data files  were not complete; for example, NAS offices and the Office of Aviation  data files did not include detail listings of expenditure transactions. We  also noted inconsistencies in the data files State provided us. For example,  the Central Financial Management System data files contained  expenditure records for the Office of Aviation but no related obligation  records. Due to the aircraft financial data files being incomplete and the  inconsistencies we identified, we determined that the INL aircraft financial  data files were not sufficiently reliable for our planned statistical sampling.
To assess how INL monitors its contract costs and performance, we  gathered and analyzed contract documents and interviewed agency and  contract officials to determine each contract’s scope, activities covered,  and oversight requirements. In addition, we interviewed contract office  representatives from the three main contractors identified in our review:  Lockheed Martin Systems Management, LLC; DynCorp International LLC;  and ARINC Engineering, LLC, and analyzed contract documents and  reports to determine performance issues. The Lockheed and ARINC  contracts are not directly between State and the companies, but are task  orders under indefinite quantity, indefinite delivery contracts between  Lockheed and ARINC, respectively, and the U.S. Army Communications  and Electronics Command in Fort Monmouth, New Jersey. In Colombia,  we discussed aircraft operations and maintenance issues with NAS, Air  Wing, and contract staff at various operational sites in the country. We met  officials with primary responsibility for the Colombian Police’s aerial  eradication program and the Colombian Army’s aviation program at the  Office of Aviation headquarters at El Dorado Airport in Bogotá. We also  met with managers, pilots, and mechanics and observed flight operations  and maintenance at two aerial eradication operating locations— Barrancabermeja and San Jose—and the Colombian Army Aviation  Brigade headquarters at Tolemaida. In addition, we met with NAS and  contractor staff overseeing Colombia’s Air Bridge Denial Program at Apiay  and the Colombian National Police’s aviation program at the Colombian  police main operating base at Guaymaral near Bogotá.
section_title: Appendix II: Comments from the Department of State
paragraphs: The following are GAO’s comments on the Department of State letter  dated January 22, 2007.
subsections: section_title: GAO Comments
paragraphs: 1.  We acknowledge INL’s efforts to address the shortcomings that GAO  and others have identified in its management of its aviation fleet  throughout the draft report and this final version. However, we note  that we began our review efforts with a formal notification to the  Secretary of State in January 2006 and met with INL and other State  officials to discuss our objectives in February 2006. At the time, INL  did not inform us of any ongoing or planned efforts to evaluate its  Office of Aviation Programs or INL’s overall aviation fleet. In August  2006, we briefed INL on our preliminary findings that it had not  complied with OMB and GSA guidance in managing its aviation fleet.  The September briefing that INL presented to us addressed the issues  we had raised and laid out the reforms it would begin in October. As a  result, we concluded that recommendations for further actions were  not necessary, but that we would follow up at a later date to ensure  that INL’s initiatives are completed, as planned.  2.  We do not report that INL did not conduct any analyses. Rather, we  noted in the draft report and this final version that documentation INL  provided us did not reflect the key analyses called for by OMB  guidance.  3.  In the draft report and this final version, we report that INL officials  told us that the exigent circumstances of INL’s operations precluded  them from doing the detailed OMB analyses. We also noted that, in  some cases, Congress directed what aircraft to procure. Nevertheless,  once the aircraft are in the inventory, OMB guidance requires agencies  to review periodically the need for and the cost-effectiveness of the  aircraft. INL has not done this, but we noted in the draft report and this  final version that it has efforts under way to meet this requirement.  4.  In the draft report, we noted that INL’s aviation operations in  Colombia often take place in hostile environments, which can place  aircraft and personnel under small arms fire. We have modified the  final report to note that aviation operations in other foreign locations  often take place in hostile environments, too.  5.  In the draft report and this final version, we point out that INL’s Local  Financial Management System does not provide the standard program  cost elements needed to meet OMB requirements. We also note that  State officials responsible for designing the Global Financial  Management System were not aware of INL’s cost data requirements  and are not sure the system can provide the data needed. Regarding  the Air Wing Inventory System referred to, we reported in 2004 that the  data in this system were significantly understated. We agree that, if the  system’s shortcomings are corrected, it is an appropriate tool to  address GSA’s reporting requirements.  6.  We agree that consolidating INL’s aviation fleet under a senior aviation  management official is one way to address some of the shortcomings  GAO, State’s Office of the Inspector General, and INL’s internal studies  have identified. However, INL has not defined the senior aviation  management official’s authority, roles, and responsibilities. This is  under development and will be part of INL’s aviation program policy  guide, which INL expects to complete later this year.
section_title: Appendix III: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the individual named above, key contributors to this report  were A.H. Huntington, III, Assistant Director; Felicia Brooks; Joseph  Carney; Kay Daly; Mattias Fenton; James Michels; Sylvia Schatz; Ann  Ulrich; and Leonard Zapata.