Backup aircraft account for about 35 percent of the Air Force’s and Navy/Marine Corps’ fighter/attack aircraft inventory. Operations and maintenance funds appropriated to support these aircraft are allocated based on the number of combat-designated aircraft, and the test and evaluation, and training aircraft in the backup force. There is no additional allocation for maintenance and attrition aircraft in the backup force. Those backup aircraft are operated and maintained with the same funds. This affects the budget, because maintenance and attrition backup forces siphon off funds from the combat-designated force. DOD’s October 1993 Bottom-Up Review: Forces for a New Era required the services to reduce and reshape their forces. The Bottom-Up Review specified 20 Air Force wings, 11 Navy air wings, and 4 Marine Corps air wings. DOD’s goals for the services include reducing combat-designated fighter/attack aircraft forces to 2,230 aircraft by 1999, a reduction of 25 percent from 1993 levels. Since 1977, audits by us and DOD have recommended that DOD (1) develop supportable criteria to justify backup aircraft inventories and procurement, (2) reduce the number of these assets, and (3) improve the management and oversight of these aircraft. In 1993, the Chairman, Joint Chiefs of Staff, reported that each service continues to use its own methodology, terminology, and philosophy to determine backup fighter/attack aircraft requirements. The report recommended the services use standard terminology and inventory definitions and thereby help ensure that procurement and maintenance funds be spent only on necessary aircraft. The Federal Managers’ Financial Integrity Act (FMFIA) is a mechanism for reporting material management weaknesses, such as unsupported inventory criteria, to agency heads, Congress, and the President. FMFIA also requires a corrective action plan be devised and milestones established to correct identified problems. By fiscal year 1996, the services’ force structure plans show significant reductions in combat-designated fighter/attack aircraft. These reductions are summarized in table 1 and appendix I. If these reductions are achieved, the ratio of combat-designated aircraft to backup aircraft will not significantly change. The relative number of combat-designated aircraft will increase slightly compared with backup aircraft, from 64.5 percent of the total active force in fiscal year 1993 to 66.5 percent of the total force in fiscal year 1996. Appendix II shows reductions by type of aircraft. Over many years, there has been concern that the services’ criteria for backup fighter/attack aircraft overstate requirements and need to be validated. In most cases, DOD responded that the existing criteria were relevant or that DOD would study the matter. Subsequent studies by others and us have repeatedly found that little has been done to validate the criteria. In 1977, we examined inventories of F-15s and F-14s and found that backup requirements for training, maintenance, and attrition aircraft were overstated. We recommended that Congress require DOD to base its justification for backup aircraft on realistic and supportable data. DOD agreed and responded that a review was underway to validate the requirements.In 1983, we again questioned criteria used by the services to justify backup F-14, F-15, F-16, and F/A-18 training, maintenance, and attrition aircraft. Further, we reported DOD had not initiated a review to validate the criteria. In 1992, the Naval Audit Service reported that the Navy had overstated the need for F-14 training aircraft. In 1993, the Chairman, Joint Chiefs of Staff, reported that the services’ requirements for combat-designated and backup aircraft were inconsistent, outdated, and in need of revision. See appendix III for a list and discussion of our previous audits and DOD audits of backup aircraft inventories and criteria. Despite recommendations to validate backup aircraft criteria, the Air Force continues to use unvalidated criteria. The Navy/Marine Corps has made progress toward justifying the number of aircraft needed to support the combat-designated force. The Air Force and the Navy/Marine Corps used standard planning factors or percentages to determine the number of backup aircraft required to support the combat force. More recently, the Navy/Marine Corps has used student volume, flying hour requirements, and aircraft utilization rates to determine the need for training backup aircraft, and a Test and Evaluation Master Plan to determine the need for test and evaluation backup aircraft. Table 2 summarizes the Air Force’s and the Navy/Marine Corps’ planning factors used to determine the need for backup aircraft. The Air Force plans to spend over $72 billion to procure 442 F-22 fighter/attack aircraft (4 fighter wing equivalents): 288 combat-designated aircraft and 154 backup aircraft. Table 3 shows the breakout of backup F-22 aircraft given (1) backup aircraft required using current Air Force backup aircraft criteria and (2) the procurement plan. If the F-22 experiences the same attrition rate as the F-15, the Air Force will be able to sustain four fighter wing equivalents for 12.5 years with a force of 36 attrition aircraft. Conversely, if the F-22 experiences one-half the attrition rate of the F-15, the Air Force will be able to sustain four fighter wing equivalents for 25 years with a force of 36 attrition aircraft. DOD plans to spend $89 billion to procure 1,000 F/A-18E/F aircraft. The Navy’s planned inventory distribution for the F/A-18E/F would continue to increase the relative number of fighter/attack aircraft used for combat versus backup categories. For example in fiscal year 1993, 65 percent of the Navy/Marine Corps fighter/attack aircraft were categorized for combat. In fiscal year 1996 that is planned to increase to 68 percent. The distribution of the planned F/A-18E/F aircraft procurement would increase the fighter/attack combat aircraft proportion to 70 percent. FMFIA requires ongoing evaluations of internal agency management controls and accounting systems and annual reports to the President and Congress on the condition of those systems. FMFIA is not limited to accounting or administrative matters. Rather, it is intended to address the entire range of policies and procedures that management employs to perform its mission efficiently and effectively. In February 1994, the Secretary of Defense directed all Assistant Secretaries of Defense to improve implementation of the FMFIA. Numerous audits by DOD and us, reports, and congressional testimony have shown that the Air Force and the Navy need to validate their backup aircraft criteria. In our view, the lack of valid criteria is a material weakness reportable under the FMFIA. In addition, to the extent that other program analyses rely on backup aircraft criteria, those analyses would share the same weakness. The Navy acknowledged this when it reported aircraft acquisition requirements processes (which used current backup aircraft criteria) as a material management weakness in its fiscal year 1993 and 1994 FMFIA reports. Attrition aircraft are used to replace combat-designated training, and test and evaluation aircraft lost in peacetime mishaps. In 1994, the Air Force Materiel Command developed a concept that could be used to support the services’ aircraft needs. Although the report on which that recommendation was based offered no specific cost savings, a 1992 Air Force-sponsored study compared 8 years of storage costs plus reconstitution costs to 8 years of operating costs for selected aircraft, including the F-15 and the F-16. The study concluded that storage and reconstitution costs were only 1.9 percent of the operating and maintenance costs for an F-15 and 2.1 percent of operating and maintenance costs for an F-16. Neither the Air Force nor the Navy/Marine Corps had exercised this option as of 1994. The services’ fiscal year 1996 plans show 218 attrition aircraft. Past attrition rates, however, show that some of these aircraft will not be needed for over 7 years. For example, over the past 5 years, the Air Force lost an average of about 17 F-16 aircraft per year to peacetime mishaps. On the basis of this rate, some of those F-16s will not be needed until the year 2002. However, the Air Force operates and maintains those aircraft in the same manner as combat-designated aircraft. That is, attrition aircraft are assigned to active and reserve units and the Air Force uses operation and maintenance funds that are appropriated for combat-designated, training, and test and evaluation aircraft to support attrition aircraft. In essence, funds that are expected to be used to operate and support combat-designated aircraft are being siphoned off to support attrition aircraft. Attrition aircraft operating and maintenance costs are difficult to determine. However, in 1994 the Air Force Logistics Management Agency estimated the annual incremental cost of one attrition F-16 in operating units to be $13,366. In fiscal year 1994, the Air Force provided Air National Guard units about $75,000 for each additional attrition aircraft in excess of the first three aircraft supported by the units. However, individual Guard units estimate annual operation and maintenance costs range from about $120,000 to $400,000 for each aircraft. According to Air National Guard and Air Force officials, as the number of authorized combat-designated aircraft assigned to each unit decreases, supporting attrition aircraft becomes more difficult. One unit has already reported a potential degradation of its combat-designated aircraft operation as a result of attrition aircraft that have been assigned to that unit. We recommend that the Secretary of Defense direct the Secretary of the Air Force to (1) develop and use supportable and consistent criteria to justify backup aircraft inventories and future procurement of backup aircraft as the Navy is doing and (2) report the lack of valid backup fighter/attack aircraft requirements criteria as a material management weakness, in compliance with FMFIA, until these criteria are developed and put in use.