In a March 1999 white paper detailing modernization plans for the bomber fleet, the Air Force advised Congress that it needed 93 B-1Bs, including 70 combat-coded aircraft by the end of fiscal year 2004, to meet DOD’s strategy of being prepared to win two nearly simultaneous major theater wars. In June 2001, the Air Force proposed reducing the fleet from 93 to 60 aircraft and reducing the number of combat-coded aircraft to 36. Table 1 compares the force structure before and after OSD’s June 2001 decision to reduce and consolidate the B-1B fleet. Partly in response to concerns expressed by Members of Congress about OSD’s June 2001 decision to eliminate the B-1B mission at Mountain Home, McConnell, and Robins Air Force Bases, the Air Force identified and announced new missions for these locations in September 2001. Planning for the new missions is well underway, and the units are expected to transition to their new missions in the fourth quarter of fiscal year 2002. Mountain Home’s current F-15E squadron will be increased from 18 to 24 aircraft, and its 7 KC-135 tankers will be relocated to the Air National Guard unit at McConnell Air Force Base. The Air National Guard unit at McConnell will be redesignated as the 184th Air Refueling Wing and will have 10 KC-135R tankers. The Guard unit at Robins Air Force Base will transition to the 116th Air Control Wing and have 19 Joint Surveillance Target Attack Radar System aircraft. As you know, we have issued numerous reports on the B-1B bomber in response to a variety of congressional concerns. In February 1998, for example, we reported that the Air Force could save millions of dollars without reducing mission capability by assigning more B-1Bs to the reserve component. A list of related GAO products can be found at the end of this report. The decision to reduce the B-1B force was not based on a formal analysis of how a smaller B-1B force would impact DOD’s ability to meet wartime requirements. Air Force officials explained that their decision to reduce the fleet from 93 to 60 was made in response to an OSD suggestion to eliminate the entire B-1B fleet and to address significant funding shortages in the B-1B modification program. Furthermore, the decision was not vetted through established DOD budget processes that normally involve a wider range of participants and generally allow more time for analysis of proposed changes. Senior Air Force officials believe, based on their military judgment, that the decision will not adversely affect DOD’s ability to implement the national security strategy. With regard to the Air Force’s analysis of basing alternatives, a lack of Air Force guidance led Air Force officials in the Office of the Deputy Chief of Staff for Plans and Programs to develop their own methodology to determine where to base the reduced B-1B fleet. These officials did not document their methodology at the time the decision was made and could not replicate the calculations used to make the basing decision. However, our review of documents prepared (at our request) after the decision was made suggests the Air Force used an inconsistent methodology and incomplete costs when estimating the savings generated from the consolidation. As a result, it is not clear whether they chose the most cost-effective alternative. In May 2001, as it considered changes to the fiscal year 2002 DOD budget previously submitted to Congress by the prior administration, senior OSD officials suggested eliminating the entire B-1B fleet that had experienced long-standing survivability and reliability problems. OSD officials in offices such as the Program Analysis and Evaluation did not undertake any analysis of the impact of the proposed B-1B retirements on the Air Force’s ability to meet war-fighting requirements. At that time, the OSD Comptroller estimated that eliminating the B-1B would save approximately $4.5 billion in fiscal years 2002 through 2007. The savings would be achieved by eliminating the B-1Bs from both the active and Guard fleets and canceling the B-1B modernization program, according to an official in the Comptroller’s office. Acknowledging that it lacked sufficient funding to complete planned upgrades to all 93 aircraft, but at the same time believing that some B-1Bs should be retained, the Air Force proposed reducing the size of the fleet from 93 to 60 and reinvesting the savings in upgrades to the remaining 60 aircraft. According to the Secretary of the Air Force and the Chief of Staff of the Air Force, the proposal was budget-driven. The Chief of Staff told us that if the Air Force reduced the number of aircraft to 60, it would have sufficient funds to upgrade the remaining aircraft to make them more usable in combat. The Air Force did no formal analysis of the impact of a smaller B-1B fleet on its ability to meet current and future war-fighting requirements when it proposed this reduction. Senior Air Force leaders told us that they are comfortable with the proposed reduction because they believe that 60 upgraded aircraft will provide significantly more capability in terms of effectiveness, survivability, and maintainability than is available today. The Under Secretary of Defense (Comptroller) included the reduction in the amended 2002 DOD budget request after discussions with the Secretary of Defense and the Deputy Secretary of Defense. The decision to reduce the number of B-1Bs was not fully vetted through the DOD Planning, Programming, and Budgeting System. Under established DOD procedures, the service sends its budget to the Office of the Under Secretary of Defense (Comptroller) where issue area experts review it. Potential changes in the form of draft program budget decisions are circulated to the services, the Joint Staff, the Director of Program Analysis and Evaluation, and various assistant secretaries of defense who are in a position to evaluate the impact of the potential budget decisions on the national military strategy and the objectives of the Secretary of Defense. Their comments are provided to the Comptroller who considers them, finalizes the program budget decision, and forwards it to the Deputy Secretary of Defense for signature. According to an official in the Comptroller’s office, in this instance, the Comptroller approved the program budget decision that reduced and consolidated the B-1B fleet after discussions with the Secretary of Defense and the Deputy Secretary of Defense. A draft program budget decision was not circulated to the Office of the Director, Program Analysis and Evaluation, the Joint Staff, or the Air Force according to representatives of these offices. Air Force officials told us they were surprised when senior OSD officials decided to implement the B-1B fleet reduction in June 2001. While Air Force officials recommended reducing the fleet, they did not know that the recommendation was to be included in the fiscal year 2002 amended budget until just a few days before OSD officials transmitted the budget to Congress and made it public. These same officials told us that they were also surprised that the consolidation was to be implemented by October 1, 2001. They believed that they needed about 1 year to implement the decision. As a result of the short time frame between the OSD decision to implement the Air Force’s proposal to reduce and consolidate the B-1Bs and the release of the amended fiscal year 2002 budget, Air Force officials told us the Air Force did not have time to determine if the Guard units would get new missions and identify those meet with Members of Congress from the affected states to explain the decision. The decision to reduce the fleet and complete the consolidation by October 1, 2001, concerned Members of Congress. As a result, Congress delayed implementation until the Air Force completed a review of bomber force structure and provided information on alternative missions and basing plans. According to the legislation, the Air Force could begin implementing the fleet reduction and consolidation 15 days after providing the required report to Congress. The report was delivered to Congress in February 2002. Among other things, the report provided a summary of the (1) Air Force’s reasons for reducing the B-1B fleet, (2) follow-on missions for the affected units, and (3) details of the B-1B modernization program. The Air Force began relocating and retiring B-1Bs in July 2002. Air Force officers in the Office of the Deputy Chief of Staff for Plans and Programs said they considered a number of basing options before recommending that the remaining aircraft be consolidated at two active duty bases. However, they did not document the options considered at the time the decision was made and could not provide a comprehensive list of options considered. In early 2002, at our request, they prepared a paper that outlined some of the options they believed were considered. According to the paper, the Air Force considered options that would have consolidated the aircraft at two active bases and one Guard base, one Guard base and one active base, or two active duty bases. The option selected continues to house B-1Bs at two active duty bases—26 at Ellsworth Air Force Base and 32 at Dyess Air Force Base.According to Air Force officials, they selected this option because they believed it was the most cost-effective option available. Specifically, they believed they would achieve significant economies of scale by consolidating the aircraft at the two largest B-1B bases, which were located in the active component. Air Force headquarters staff told us they had no written guidance or directives to assist them when they completed the cost analysis for assessing where to locate the aircraft, and the officers at Air Force headquarters responsible for evaluating basing options said they received no guidance from their senior leaders. Consequently, they developed their own approach for determining where the B-1Bs should be retained. The Air Force did not document its methodology at the time the consolidation decision was made but attempted to reconstruct it in early 2002 at our request. At that time, however, Air Force officials were unable to replicate the savings estimates they had developed or provide a complete explanation of the methodology used to make the basing decision.