The TLM program objectives were to save money by reducing maintenance staffing, equipment, and base level support without sacrificing force readiness. Under TLM, the number of maintenance levels was reduced from three (organizational, intermediate, and depot) to two (organizational and depot). Maintenance previously performed at the intermediate level would be performed at the depot level which, in turn, would allow the Air Force to significantly reduce the number of maintenance personnel and equipment at the base level. However, it also required that items sent to the depots be repaired and ready for issue in a timely manner to compensate for the longer repair pipeline between the customer and the depot. In implementing TLM, the Air Force decided that it would not increase inventories. Inherent in this decision was the realization that it would have to develop a responsive transportation system to quickly move items to and from the point of repair, make necessary changes at the depots to absorb intermediate maintenance work that was previously performed at the base level, achieve a balance between spare parts and mission capability rates (i.e., determine the acceptable level of risk), and expand maintenance capabilities at the unit level to perform fault diagnostics to avoid sending items to the depot repair facility for relatively minor repairs. The Air Force tested the program from July 1991 through September 30, 1993. The tests—Coronet Deuce, Coral Star, and Coral Thrust—involved F-16 avionics items as well as several engines such as the F100-220, TF33-103, and TF33-7A. Based on the test results, the Air Force decided to implement TLM Air Force-wide for selected avionics and engines. Implementation began in fiscal year 1994 and is expected to be fully implemented by fiscal year 1997. The Air Force’s initial TLM cost and savings analysis in November 1992 showed that from fiscal years 1994 through 1999, program implementation would cost about $1.043 billion and savings would be about $1.428 billion—a net savings of $385 million. The major element of cost was due to the increased workload at the depots (i.e., performing intermediate maintenance at the depots versus the base level), and the major element of cost savings was due to maintenance personnel reductions at the base level. The Air Force later revised its initial analysis in December 1993. The analysis showed that implementation costs had increased from $1.043 billion to $1.468 billion and that total savings had increased from $1.428 billion to $1.726 billion. The program costs increased more than savings. As a result, the net savings decreased from $385 million to $258 million. As shown in table 1, depot repair was the principal factor that accounted for the major cost increase. This increase occurred because the scope of depot intermediate maintenance work had increased. When an engine is inducted into the depot intermediate maintenance facility, it is inspected and all necessary repairs are performed. In addition, other maintenance is performed to extend the operating life of the engine if the engine components are within a certain threshold for overhaul. This increased maintenance is referred to as jet engine intermediate maintenance plus (JEIM +). The increased savings was in the area of on-condition maintenance. According to Air Force officials, as a result of JEIM +, the time interval between engine overhauls will be extended. Thus, the savings increased from $451 million to $821.8 million. Even though the 1993 analysis continued to show a net savings by implementing the program, it did not include all program costs. For example, a 1993 Air Force analysis showed that the value of the mobility readiness spares packages (MRSP) kits would increase about $543 million to reconfigure the kits from a three level maintenance configuration to a TLM configuration for five aircraft types. Table 2 shows the value of the reconfigured kits by aircraft type. Prior to TLM, the kits were configured with shop replaceable items that would be used by intermediate maintenance units to repair the line replaceable components. However, with TLM, there will not be any intermediate maintenance capability in the theater of operation. Consequently, there is no need for the shop replaceable items in the MRSP kits. To make the kits compatible to TLM, the kits had to be reconfigured with higher cost line replaceable components rather than the lower cost shop replaceable items. Air Force officials emphasized that the Air Force did not have to spend any additional funds to achieve the kit reconfiguration. They pointed out that the largest increase in MRSP kit value was for the B-52 aircraft, which did not have MRSP kits prior to TLM. Air Force officials told us that when the mission of the aircraft was changed from a nuclear to a conventional mission, this necessitated a MRSP kit, even if the avionics items were not designated as TLM items. The officials said that they were able to establish these kits by redistributing excess inventory that was in the supply system as a result of retiring the B-52G aircraft. Therefore, they did not consider this to be a TLM program cost since they did not have to buy the inventory needed for kit reconfiguration. In our opinion, although no additional funds were spent to achieve the kit reconfiguration, the $449 million of added value of the MRSP kits should be considered a TLM program related cost because the added value was necessitated by the kit reconfiguration to a TLM orientation. A second example of excluded costs involved the assumption about how many avionics items would be sent to depots for repair. The 1992 analysis assumed that all TLM avionics items would be returned to depots for repair. The 1993 analysis, however, reflected that about 67 percent of the items would be repaired at the depot. Our review showed, however, that the revised assumption was not occurring. As of September 1995, only 47 percent of the TLM avionics items removed from the aircraft for repair were being sent to the depots. Because the avionics repair workload at depots has not materialized to the extent it was anticipated, the amount of depot repair costs shown in the second analysis category is overstated. Air Force officials said that having less items being sent to the depots for repair than expected did not mean that more items were being repaired at the base level. They said that better screening processes at the base level to identify those items that do not need to be sent to the depot for repair and better fault diagnostic capability could account for the reduced workload at the depots. A third example was the cost for facilities’ renovations and minor construction ($8 million) at the San Antonio and Oklahoma City depots. Renovations and construction were required so that the depots could handle the anticipated increased TLM workload. The decision as to whether a TLM-designated item is repaired on base or sent to a depot depends on the extent of maintenance required. The Air Force criterion is that if avionics items and engines cannot be repaired at the base level, they must be sent to a depot within 48 and 72 hours, respectively. This criterion reflects the recognition that, under TLM, there is a need to reduce the amount of time from when an item is removed from the aircraft until it is repaired and ready for reissue. In this regard, the Air Force has emphasized the use of express transportation to move items from a base to a depot repair facility and to expedite the depot repair process. The Air Force was concerned that without expedited transportation and repair, operating bases might have to increase their inventory levels. The Air Force has established repair turn around time standards for TLM items. Our analysis showed that, for the month of October 1995, the reported repair turn around times for avionics items averaged about 10.9 days as compared to the Air Force standard of 8 days. Officials said that a large percentage of the avionics items are being repaired at bases rather than at depots as evidenced by the fact that, as of September 1995, only 47 percent of the items are being sent to depots for repair. At one depot, an official told us that this low workload has resulted in about 40 people being transferred from the avionics repair shop to other depot repair activities. The official said that in a contingency situation, the higher generation of unserviceable items due to high operating tempo coupled with reduced ability of field units to repair the items could cause the depot workload to double or triple. In turn, this level of increase could overwhelm the depots’ repair capabilities and result in increased repair turn around times for avionics items. With regard to engines, the reported repair turn around times show that the standards generally are not being met. However, some officials said that a better measurement of the depots’ response to TLM would be to compare the actual repair turn around times to the average of the depot and base level repair time prior to TLM implementation. Other Air Force officials said that the pre-TLM averages are not realistic because they were derived from a 1992 baseline when the Air Force was experiencing long maintenance delays due to a shortage of repair parts. The officials said that it should be noted that after the Gulf War, the returning aircraft underwent extensive maintenance and that it was this period that was used to compute the averages. Consequently, they said the averages are inflated. The results of our comparison of actual repair turn around times to the Air Force standard and pre-TLM average are shown in table 3. Air Force officials told us that the primary reason that the repair turn around time for engines exceeds the Air Force standard is that there is a ready supply of engines. When there is a ready supply of serviceable engines available for issue, there is no real requirement to rapidly turn around the unserviceable engines. Therefore, when an unserviceable engine or engine component is shipped to the repair facility, it could be stored until there is a need to repair the item. Our analysis of Air Force-wide engine requirements and available inventory as of October 1995 confirms that, in most cases, there are sufficient TLM engines available for issue to meet requirements. Our analysis showed that for 8 of the 10 TLM engines there were enough ready-for-issue engines to meet at least 90 percent of the requirements and for 7 of the 10 engines, the number of ready-for-issue engines met or exceeded the requirements (see table 4). Another indication that the Air Force has a sufficient supply of TLM engines is the fact that it has retired 114 of the TLM engines valued at $41.1 million during fiscal years 1993 through 1995, as shown in table 5. Although not meeting repair turn around times and relying on the current supply of engines to meet customer needs may not cause a problem in the short term, it could become a problem over the long term as more items are designated as TLM items and as the ready available supply of engines is decreased. Air Force officials said that when the program is fully implemented in fiscal year 1997, the Air Force will analyze the engine supply situation, and some engines may be eliminated from the inventory. If this occurs, the number of engines to be repaired will be reduced and the maintenance focus will shift to meeting the repair turn around time or the Air Force will have to buy additional stocks for the base level. In the interim, the program has not been fully tested in the type of restrictive environment that it may be required to operate. When Air Force units deploy overseas, they will not take intermediate maintenance capability with them for the TLM avionics items and engines. Instead, the units will have to rely on airlift to transport their unserviceable TLM assets to the depot for repair. Likewise, they will have to rely on airlift for replenishment stocks. According to Air Force officials, not deploying the intermediate maintenance capability will reduce airlift requirements by the equivalent of 175 C-141 aircraft during the first 30 days of a two major regional contingency scenario. Before TLM, the plan was to airlift the intermediate maintenance capability to the theater sometime after the initiation of mobilization. TLM, however, will require airlift much earlier in the contingency for returning and replenishing spare parts inventories. Because airlift is not dedicated for these purposes, retrograde and resupply will have to compete with other airlift users. Airlift priorities and assignments are controlled by the theater commander. In the early stages of a conflict, the commander could decide that airlift priorities should be devoted to moving more combat power into the theater rather than spare parts. If this occurs at the same time that the Air Force units are seeking replenishment avionics and engines, sustainability problems could arise. U.S. Central Command officials told us that airlift has not been specifically dedicated for returning unserviceable items from the theater of operation to the United States and for resupplying units in the theater with needed spare parts. Command officials, however, believed that there should be sufficient airlift available for these purposes. Other Air Force officials told us that they are not convinced that there will be sufficient airlift available to meet TLM needs early in a contingency. In view of the unresolved TLM issues and the fact that the program has not fully achieved its intended objectives and has not been fully implemented, we recommend that the Secretary of Defense direct the Secretary of the Air Force to continue to periodically reassess the cost efficiency and effectiveness of items already in the program as well as those planned for the program to determine whether the avionics items and engines are the most appropriate TLM candidates. To facilitate the reassessment, the Secretary of the Air Force should develop a revised cost and savings analysis that reflects (1) the facilities and minor construction costs incurred to ready depots for TLM and (2) the fact that the anticipated workload at the depots has not materialized; an assessment of the depots’ ability to meet the repair turn around times prescribed by the Air Force standard when the current inventory of engines is reduced and TLM is fully implemented; and an action plan, in concert with wartime theater commanders, that assesses the availability of airlift in the early stages of a conflict to fully support the added airlift requirements of TLM. The Department of Defense concurred with our findings and recommendations. Officials agreed that there should be a continuing reassessment of TLM candidates to ensure that the right ones are in the program and that further assessments of capability and inventory should be conducted. These assessments have been programmed through the TLM end-to-end analysis and engine supply reassessment. The officials further stated that the Air Force will continue to work with the Joint Staff and Supported Commanders-in-Chief to determine effective use of airlift allocation to meet service requirements. The full text of the Department’s comments are included as appendix I. To determine how the TLM program costs and anticipated savings were computed, we reviewed Air Force studies and budget documents and held discussions with Air Force headquarters officials responsible for program development and implementation. Also, we compared the costs and savings identified in the original cost/savings analysis to the revised cost and savings analysis developed for the fiscal year 1995 budget. We then held discussions with officials to ascertain the reasons for cost increases and net savings decreases. To determine whether the program has reduced repair turn around time, we reviewed Air Force reports summarizing repair turn around time and held discussions with depot officials who monitor and analyze the data. For engines, we compared post-TLM repair time data to pre-TLM repair time data and to repair standards developed by the Air Force. For avionics items, we compared actual TLM repair turn around times to Air Force repair standards. To assess the use of TLM to support deployed forces, we reviewed deployment plans, airlift requirements and held discussions with officials who plan and implement deployment plans during military operations. In addition, we obtained and analyzed cost data showing the effect of TLM on the configuration of the war reserve kits. Our review was performed at the U.S. Central Command, MacDill Air Force Base, Florida; U.S. Air Force Headquarters, Washington, D.C.; Air Force Logistics Management Agency, Maxwell Air Force Base, Air Force Materiel Command, Wright-Patterson Air Force Base, Ohio; Air Mobility Command, Scott Air Force Base, Illinois; Air Combat Command, Langley Air Force Base, Virginia; Oklahoma City Air Logistics Center, Tinker Air Force Base, Oklahoma; San Antonio Air Logistics Center, Kelly Air Force Base, Texas; and 1st Fighter Wing, Langley Air Force Base, Virginia. We performed our review from June 1995 to December 1995 in accordance with generally accepted government auditing standards. As you know, the head of a federal agency is required by 31 U.S.C. 720 to submit a written statement on actions taken on our recommendations to the House Committee on Government Reform and Oversight and the Senate Committee on Governmental Affairs not later than 60 days after the date of this report. A written statement must also be submitted to the House and Senate Committees on Appropriations with the agency’s first request for appropriations made more than 60 days after the date of the report. We are also sending copies of this report to the Chairmen and Ranking Minority Members, House and Senate Committees on Appropriations, House Committee on National Security, Senate Committee on Armed Services, Senate Committee on Governmental Affairs, House Committee on Government Reform and Oversight; and the Director of the Office of Management and Budget. If you or members of your staff have any questions or would like to discuss the matters in this report in further detail, please call me at (202) 512-5140. The major contributors to this report are shown in appendix II. Norman L. Jessup, Jr. Jeanett H. Reid The first copy of each GAO report and testimony is free. Additional copies are $2 each. 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Summary: GAO reviewed the Air Force's implementation of the Two Level Maintenance (TLM) program, which is its plan to facilitate downsizing by transferring some repairs from many individual bases to centralized depots, focusing on whether the program: (1) has achieved the expected results; (2) has reduced repair turnaround time; and (3) will be an effective maintenance program for supporting deployed forces. GAO found that; (1) the TLM program is not achieving the full extent of the intended benefits; (2) between the time of the Air Force's first cost and savings analysis in 1992 and the second analysis in 1993, the estimated costs to implement TLM had increased and the expected net savings had decreased--from $385 million to $258 million; (3) in addition, all program costs have not been included in the cost/savings analyses; (4) for avionics items, the repair turn around time under TLM generally met the Air Force's established repair turn around standard; (5) for engines, however, the repair turn around times are exceeding the standard by as many as 87 days; (6) for example, the repair turn around time standard for the TF30-111 engine, used on the F-111 aircraft, is 41 days, but as of August 1995, its average repair turn around time was 128 days; (7) the use of TLM to support deployed forces in times of conflict will add to the airlift burden; (8) because the deployed forces will not have in-country intermediate maintenance capability, the forces will be dependent on airlift for their spare and repair parts; (9) however, airlift priorities are controlled by the theater commander not the Air Force; (10) as a result, a theater commander could decide that the need for combat power in the early stages of the conflict has a higher priority than return of unserviceable items to depot repair facilities and movement of items from the depots to the theater of operation; and (11) the need for early sustainment airlift to support TLM is an issue that has not been fully resolved and is one that could affect sustainment of the deployed forces.