oversight

Air Force Budget: Potential Reductions to Aircraft Procurement Budgets

Published by the Government Accountability Office on 1990-11-30.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                  United   States   General   Accounting   Office   .

                  Briefing Report to Congressional
GAO               Requesters



November   1990
                  AIR FORCE BUDGET
                  Potential Reductions to
                  Aircraft Procurement
                  Budgets
      United States

GAO   General Accounting
      Washington, D.C. 20548
                         _~
                            Office


      National Security and
      International Affairs Division

      B-235884

      November 30.1990

      The Honorable Daniel K. Inouye
      Chairman, Subcommittee on Defense
      Committee on Appropriations
      IJnited States Senate

      The Honorable John P. Murtha
      Chairman, Subcommittee on Defense
      Committee on Appropriations
      House of Representatives

      As requested, we reviewed the Air Force’s fiscal year 1991 aircraft pro-
      curement budget request and prior year appropriations for the C-l 7,
      H-2, and F-16 aircraft procurement programs and the C/KC-135, B-52,
      and B- 113modification programs. Our objectives were to identify poten-
      tial reductions to the fiscal year 1991 budget request and potential
      rescissions to prior year appropriations. This report was prepared
      before House and Senate Conferees agreed to the terms of the fiscal year
       1991 Defense Appropriations     Act. On July 19, 1990, we briefed your
      staffs on the results of our work so that the potential reductions or
      rescissions could be considered in the debate on the fiscal year 199 1
      Defense Appropriations     Act. The House and Senate Conferees agreed to
      the terms of this act in late October 1990.

      WC identified $3,094.9 million in potential reductions: $2,864.3 million in
      the fiscal year 1991 budget request and $186.8 million, $19.5 million,
      and $24.3 million in potential rescissions of appropriated funds from
      fiscal years 1990, 1989, and 1988, respectively. As shown in table 1,
      these potential reductions were primarily the result of our suggestions
      not to acquire C-17 aircraft and initial spares for B-2 aircraft in fiscal
      year 1991.




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Appendix I
Potential Reductions    to the Air Force’s
Aircraft  Procurement    Budgets




made in developing the V-17 aircraft, the program continued to face sig-
nificant cost and schedule challenges. For example, the program’s total
cost estimate increased from $37.5 billion in 1988 to $41.8 billion in
1990, a delay of nearly 1 year in the program’s schedule was reported in
late 1989, the first flight of the C-17 development aircraft was delayed
from August 1990 until ,Junr 1991, and further delays in the program’s
schedule were expected because of continuing difficulties with aircraft
assembly and avionics development and testing.

Delays of nearly 1 year in achieving important contract milestones, such
as first flight, slowed the program, and, as a result, most of the funds
appropriated in fiscal year 1990 remained unobligated. For example,
because of slow progress, the production contract for aircraft author-
ized for fiscal year lQ90. originally scheduled to be awarded in January
 1990, had not been awarded as of July 1990. The Air Force believed the
contract would be awarded in December 1990, 11 months later t,han
originally planned.

The Air Force and the contractor anticipated similar delays in achieving
contract milestones required before the contract for aircraft requested
in fiscal year 1991 could be awarded. For example, first flight of the
first production aircraft, originally scheduled for October 1990, is now
expected to occur in September 1991. If the contractor accomplishes this
milestone in September 1991, the Air Force will not award the fiscal
year 1991 procurement contract until the end of fiscal year 1991.

 In our testimony we recommended that the Congress consider reducing
 both the proposed procurement of two aircraft in fiscal year 1991 and
 the request for advance procurement funds for six aircraft to be
 acquired in fiscal year 1992. We believed schedule delays of about
  1 year justified delaying the procurement funding requested in fiscal
 year 1991 until fiscal year 1992. Advance procurement funds appropri-
 ated in fiscal year 1990 could be used to acquire items with long lead
 times for fiscal year lQQ2. The acquisition of initial spares could be
 delayed until the aircraft are acquired.




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                       Appendix I
                       Potential Reductions   to the Air Force’s
                       Aircraft Procurement    Budgets




Advance Procurement    The Congress provided $424.8 million in fiscal year 1990 for advance
                       procurement of B-2 aircraft. These funds were intended, in part, to pro-
                       vide funding for items with long lead times for five aircraft, which were
                       to be requested by the Air Force in fiscal year 1991. We identified
                       approximately $82 million of these funds to be considered for rescission
                       because the number of aircraft in the fiscal year 1991 budget was
                       reduced from 5 to 2 by the Secretary of Defense. The program office
                       estimated that the $82 million was applicable to the aircraft that will no
                       longer be procured in fiscal year 1991. Air Force officials told us that if
                       the $82 million in fiscal year 1990 advance procurement funds were
                       rescinded, additional funding in fiscal year 1991 would be required.



F-l 6 Fighter

Brief Description of   The F-16 fighter aircraft is a single-engine, lightweight, high-perform-
Program                ante aircraft that is capable of delivering both air-to-air and air-to-sur-
                       face weapons. The first aircraft was delivered in September 1978. The
                       F-16 is used by the air forces of 17 nations. The Air Force plans to
                       acquire 150 F-16s per year for fiscal years 1990 through 1993 under a
                       multiyear contract that is being negotiated. Program officials expect this
                       contract to be finalized in ,June 199 1.


Results of Analysis    We did     not identify any potential reductions to the fiscal year 1991
                       budget     request. However, we identified potential rescissions of $865
                       million    in appropriated funds: $43.9 million from fiscal year 1990, $18.3
                       million    from fiscal year 1989, and $24.3 million from fiscal year 1988, as
                       shown     in table 1.2.




                        Page 9                                     GAO/NSIAD.Sl-17BR   Aircraft   Procurement   Budgets
                                   Appendix I
                                   Potential Reductions    to the Air Force’s
                                   Aircraft  Procurement    Budgets




                                   Also, the Air Force expected higher engine costs due to the increased
                                   price of nickel and, as a result, allocated funds to cover increases in the
                                   engine prices. However, a recent analysis showed cost increases were
                                   $35.3 million less than expected. Thus, we identified $14.1 million, $14.9
                                   million, and $6.3 million in fiscal year 1990, 1989, and 1988 appropri-
                                   ated funds, respectively, to be considered for rescission.

Final Contract Price Adjustment    The Air Force and General Dynamics both agreed to decrease the final
                                   contract price for the F-16’s Fl 10 engine support equipment in fiscal
                                   year 1988. The Air Force modified the Fl 10 engine contract in
                                   November 1989 to deobligate $2.1 million for fiscal year 1988. These
                                   funds were only available for obligation through September 30, 1990.

                             __-                                   -..~__
                                   After reviewing the results of our evaluation, officials from Air Force
                                   Headquarters and the program office emphasized that although the orig-
                                   inal purposes for which these funds were budgeted may have changed,
                                   the funds are not excess. They are needed to compensate for unantici-
                                   pated increases in procurement costs and transfers of program funds for
                                   high-priority requirements. The program manager told us that signifi-
                                   cant increases over budgeted amounts were expected in the contractor’s
                                   costs for manufacturing labor and overhead. Additionally, program
                                   office officials said $142.1 million from the fiscal year 1990 budget had
                                   been transferred for other purposes including military pay and Central
                                   American relief. Accordingly, the program manager advised us that all
                                   available funds appropriated for the F-16 program are needed to acquire
                                   aircraft and support equipment.



C/KC-135
Modifications

Brief Description of               Over 800 C/KC-135 aircraft were produced in the 1950s and 1960s for
Program                            aerial refueling and other purposes. Modifications have been made to
                                   C/KC-135 aircraft to improve their performance, reliability, and main-
                                   tainability. The fiscal year 1991 budget includes $631.9 million for 11
                                   different modification programs.




                                    Page 1 I                                    GAO/NSIADSI-17BR   Aircraft   Procurement   Budgets
                          Appendix I
                          Potential Reductions   to the Air Forcr’s
                          Aircraft Procurement    Budgets




                          These three modifications were originally scheduled to be procured in
                          fiscal year 1990, but the procurement was postponed until fiscal year
                          1991 because of delays in determining the requirements for the inte-
                          grated system. Therefore, we identified $22.8 million in fiscal year 1990
                          appropriated funds-$5.6 million for the Global Positioning System,
                          $7.2 million for the Ground Collision Avoidance System, and $10 million
                          for the Fuel Savings Advisory System-to be considered for rescission.
                          ‘I’hc C/KC-l 35 System Manager agreed with our conclusion.

Engine Replacement        The Air Force is replacing the engines in the C/KC-135 aircraft to reduce
                          fuel consumption, comply with engine noise standards, and increase the
                          amount of fuel the aerial tankers can carry by l-1/2 times. The
                          Air Force received $743.6 million for this modification in fiscal year
                          1989, but only $742.4 million was needed to meet cont,ract commitments
                          and other program costs. Accordingly, we identified %1.2 million in fiscal
                          year 1989 appropriated funds to be considered for rescission. The
                          system manager agreed with our conclusion.

MIISTAR UHF/EHF Command   This modification will allow the Air Force to use Navy fleet satellites to
Post Upgrade              disseminate command messages in a more jam-resistant mode. The Pres-
                          ident’s fiscal year 1991 budget request included $51.3 million for this
                          modification; however. Air Force estimates showed requirements for
                          only $38.5 million. Thus. WVidentified $12.8 million in the fiscal year
                          1991 request to be considered for reduction. Program officials explained
                          that the $12.8 million is needed to procure a prototype of the system.
                          The Air Force has yrt not documented and justified the need to acquire
                          a prototype.



B-52 Modifications

Brief Description of      B-.52 bombers were acquired in the late 1950s and early 1960s and are
Program                   used in both nuclear and conventional roles. The current inventory
                          includes B-52G and WY211models. Modifications have been made to
                          these aircraft to improve their performance, reliability, and maintain-
                          ability. The fiscal year 199 1 budget included nine different modification
                          projects for B-52 bombt~rs. totaling $109.6 million,




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                             -
                             Appendix I
                             Potential Reductions   tea the Air Force’s
                             Aircraft Procurement    Budgets




                                 origit& budget submission and has not identified sources for the addi-
                                 tional $73 million needed for this change, we identified $15.9 million
                                 from the fiscal year 199 1 budget request to be considered for reduction.

Global Positioning System        When fully deployed, the Global Positioning System is expected to pro-
                                 vide precise, worldwide positioning and navigation data for many mili-
                                 tary users. The fiscal year 1991 budget request included $5.1 million to
                                 acquire and install the system on 16 B-52G aircraft. However, because
                                 the Air Force now plans to retire these aircraft by 1995, the modifica-
                                 tions arc no longer needed. Thus, we identified $5.1 million in the fiscal
                                 year 1991 budget request to be considered for reduction.

                                 Even though the Air Force received $4 million to imtall this modifica-
                                 tion on some B-52 aircraft in fiscal year 1990. only $400,000 was
                                 needed. Therefore, we identified $3.6 million in fiscal year 1990 appro-
                                 priated funds to be considered for rescission.

                                 The Is-52 system manager agreed with the proposed rescission of $3.6
                                 million and that the Global Positioning System should not be installed on
                                 the 16 IMXG aircraft beginning in fiscal year 1991 if these aircraft are
                                 to be retired. However, the system manager planned to use the $5.1 mil-
                                 lion requested in fiscal year 1991 to begin the installation of this modifi-
                                 cation on B-52H aircraft. Since the modification of B-52H aircraft was
                                 not justified in the budget request and was not planned until fiscal year
                                 1993, we identified $5.1 million in the fiscal year 1991 budget request to
                                 be considered for rescission. The Air Force can justify the K52H modifi-
                                 cation as a separate modification.

Heads-Up Display and Night       This modification will acquire kits that provide lighting support for a
Vision Goggles                   heads-up display and night vision goggles. For fiscal year 1991, the Air
                                 Force requested $5.1 million to acquire 60 modification kits (component
                                 parts and materials). Howc>vrr, because all but 40 B-52G aircraft are
                                 planned to be retired by fiscal year 1995, and since 12 kits were
                                 acquired in fiscal year 1990. only 28 kits needed to be acquired in fiscal
                                 year 1991, We estimated that $3.1 million would be needed in fiscal year
                                 1991 to procure the 28 modification kits. Thus, we identified $2 million
                                 in the fiscal year 1991 budget request to be considered for reduction.
                                 Program officials disagreed with our conclusion. They maintained that
                                 anJ’ modification kits not installed on B-52G aircraft can be used on
                                 I~-5211aircraft. IIowevcr, this modification project for 1%52H bombers
                                 was not requested or justified in the budget request.




                                 Page 15                                  GAO/NSIAD-91.17BR   Aircraft   Procurement   Budgets
                      Appendix I
                      Potential Reductions    to thr Air Force’s
                      Aircraft  Procurement    Budgets




Results of Analysis   We did not identify any potential reductions to the fiscal year 1991
                      budget request. Howcvcr, we identified a potential rescission of $3 1.9
                      million from fiscal year 1990 appropriated funds because the Air Force
                      did not proceed as planned with a modification to add anti-icing heaters
                      to B-l H engine inlets.

                      The B-l B anti-icing modification is required to permit low-level flights
                      during icing conditions. 1‘rider certain conditions, ice can build up on
                      ISIB engine inlets, break off, and damage the engine. A proposed solu-
                      tion was to install heating elements on each engine inlet.

                      The Air Force requested and received $31.9 million in fiscal year 1990
                      to procure anti-icing modification kits. However, procurement was not
                      initiated because no funds were available to complete full-scale develop-
                      ment of the modification. Accordingly, we identified $31.9 million in
                      fiscal year 1990 appropriated funds to be considered for rescission.

                      Even though the $3 1.9 million is not needed for the anti-icing modifica-
                      tion, the Air Force wants 1o apply these funds to a new modification
                      program to install fire detection and suppression equipment in a section
                      of the II-113 wing in which f’ircs have occurred and destroyed two air-
                      craft. Program officials told us this modification is a high priority and
                      involves the safety of f’liglit crews. The Air Force requested $33.4 mil-
                      lion in its fiscal year I!~91 budget, for this modification program but
                      wants to begin the program in fiscal year 1990 using the funds appropri-
                      ated initially for the anti-icing modification. Since the Air Force has not
                      formally .justified the nwtl for additional funds in the first year of the
                      fire detect ion and suppression modification program, we identified the
                      63 1.9 million to bc consldercd for rescission.




                       Page 17                                     GAO/NSIAD-91.1’7BR   Aircraft   Procurement   Budgets
Appendix II1                                  ~-

Major Contributors to This Report


                        Norman Rabkin, Associate Director
National Security and   Carl Rogar, Assistant Director
International Affairs
Division, Washington,
D.C.
                        ~__
                        Robert D. Murphy, Ass&ant Dirt&or
Cincinnati Regional     Matthew Mongin, Evaluator-in-Charge
Office                  #JohnSeidl. Senior J3valuator
                        .Jamcs Kahmann, Senior Evaluator
                        Robert Rcpasky, Senior Evaluator
                        Donald Allgyer, Senior F:valuator



                        Roger Tomlinson, Senior Evaluator
Kansas City Regional    Stephen Boyles, Senior Evaluat.or
Office
                                                                                 .-
                        Theophilus Yu, Senior Evaluator
Los Angeles Regional
Office




 (392543)                Page 19                          GAO/NSIADPl-17BR   Aircraft   Procurement   Budgets
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Appendix II

Objectives, Scope,and Methodology


               This review is one of a series that examines defense budget issues. Our
               objectives were to review the Air Force’s fiscal year 199 1 aircraft pro-
               curement budget request and prior year appropriations and identify
               potential reductions and/or rescissions. We examined the C-17, B-2,
               F-15, and F-16 aircraft procurement programs and the C/KC-135,
               B-52, and B-1B modification programs. We identified potential reduc-
               tions and/or rescissions to the budgets for all of the programs except the
               F-15.

               We interviewed budget and program officials and reviewed pertinent
               program documents, audit reports, and budget support data at the
               Air Force Logistics Command and Aeronautical Systems Division,
               Air Force Systems Command, Wright-Patterson Air Force Base, Ohio;
               Oklahoma City Air Logistics Center, Tinker Air Force Base, Oklahoma;
               and Douglas Aircraft Company, Long Beach, California. We performed
               our work from March to .July 1990 in accordance with generally
               accepted government auditing standards.




               Page 18                          GAO/NSIADSl-l7BR   Aircraft   Procurement   Budgets
                               Appendix I
                               Potential Reductions    to thr Air Force’s
                               Aircraft  Procurement    Budgets




                               The Air Force also received $6 million for 24 modification kits in fiscal
                               year 1990. In June 1990 program officials estimated a requirement for
                               $3.4 million because the procurement of 12 modification kits was
                               delayed until fiscal year 1991. Thus, we identified $2.6 million in fiscal
                               year 1990 appropriated funds to be considered for rescission. The pro-
                               gram manager agreed with our conclusion.

Weapon System Trainer Update   The weapon system trainer update modification will replace the current
                               computer system with a state-of-the-art computer that has the capacity
                               and spare memory required to accommodate extensive modifications to
                               B-52 training devices. The Strategic Air Command has not revalidated
                               the requirement for this modification, since B-52 force structure has
                               changed and the program manager is uncertain whether this modifica-
                               tion will be required in fiscal year 199 1. Accordingly, we identified
                               $10.8 million in t,hc fiscal year 199 1 budget request to be considered for
                               reduction. Air Force Logistics Command officials that manage the modi-
                               fication program did not agree with our conclusion, since they were not
                               certain whether the Strategic Air Command would revalidate the
                               requirement for this modification.

Enhanced Ground Egress         Concern arose over the safety of B-52 ejection seat systems after a
                               repair technician pulled an ejection seat lever and was killed. The
                               Enhanced Ground Egress modification will allow the system to be
                               repaired safely. Since this modification had already been funded with
                               excess prior year fimds, fiscal year 1991 funds were not needed. Thus,
                               we identified $55 million requested for this modification in the fiscal
                               year 1991 budget to be considered for reduction.



B-l B Modifications

Brief Description of           B- 1B multirole bcjmbers were produced in the mid- 1980s to replace aging
Program                        B-52 bombers. Air Force plans call for the B-lB to replace the B-52 as a
                               penetrating bomber and provide the capability to penetrate Soviet
                               defenses until the 11-2,a more advanced bomber, is deployed in the mid-
                                1990s. The H-11<will eventually become a cruise missile carrier and
                               could be used as a conventional bomber. The B-l B will be modified
                               throughout its life span to correct deficiencies, improve reliability and
                               maintainability. and add or improve operational capability.




                                Page 16                                     GAO/NSIAD91-17BR   Aircraft   Procurement   Budgets
                                            Appendix I
                                            Potential Reductions           to the Air Force’s
                                            Aircraft  Procurement           Budgets




                                            In light of dramatic changes in eastern Europe and other factors, such as
                                            efforts to reduce the defense budget, the Air Force planned to restruc-
                                            ture the bomber force and retire some of the B-52G bombers. The cur-
                                            rent program objective memorandum for B-52 aircraft indicates the
                                            current B-52G inventory of 159 aircraft will be reduced to 40 by fiscal
                                            year 1995. Thus, fewer aircraft will have to be modified than previously
                                            planned.


Results of Analysis                         We identified potential reductions of $46.5 million: $40.3 million in the
                                            fiscal year 1991 budget request and $6.2 million in appropriated funds
                                            from fiscal year 1990, as shown in table 1.4.

Table 1.4: Potential Reductions   in B-52
Modification Funds                          Dollars    r mllllons
   .                                                                                                                      Fiscal year
                                            Program                                                                       1991        1990            Total
                                            Advanced       Cruise      M~sslle Integration                                 $1 0           $0 0         $1.0
                                            Al-Q-172     electronic       countermeasures       set                        159              00         15.9
                                            Global Posltlonlng          Systema                                              51             36          8.7
                                            Heads-up display           and mght vlsun        goggles                         20             26~         4.6
                                            Weapon      system        trainer   update                                      108             00         10.6
                                            Enhanced      Ground         Egress                                              55             00          5.5
                                            Total                                                                         $40.3           $6.2        $46.5
                                            %ee note a I” table I3


Advanced Cruise Missile                     This modification will enable the B-52H to carry heavier weapon loads.
Integration                                 The fiscal year 199 1 budget request included $11.7 million for this modi-
                                            fication; however, in -June 1990 the system manager determined that
                                            only $10.7 million would be needed, since contract proposals were lower
                                            than budgeted. Thus, WCidentified $1 million to be considered for reduc-
                                            tion from the fisc,al year 1991 budget request.

ALQ-172 Electronic                          This modification will update the B-52H’s primary defensive system.
Countermeasures Set                         The fiscal year 1991 budget request included $65.4 million for the pro-
                                            curement of support equipment. During our evaluation, program offi-
                                            cials documented an estimated cost for the support equipment of $49.5
                                            million and advised us that the remaining $15.9 million in the fiscal year
                                            1991 budget request would be used to partially fund an engineering
                                            change to the system. which is expected eventually to cost $89 million.
                                            Because the Air Force did not document or justify this requirement in its




                                            Page 14                                                    GAO/NSIADSl-17BR    Aircraft   Procurement   Budgets
                                       -
                                           Appcmlix I
                                           Potential Reductions to the Air Force’s
                                           Aircraft Procurement Rudgrts




Results of Analysis                        We identified potential reductions of $80 million: $56 million in the
                                           fiscal year 199 1 budget request and $22.8 million and $1.2 million in
                                           appropriated funds from fiscal years 1990 and 1989, respectively, as
                                           shown in table 1.3.

Table 1.3: Potential Reductions   in
C/KC-135 Modification Funds                Dollars   II- millions
                                                                                                             Fiscal year
                                           Program                                                    1991          1990           1989          Total
                                           Global    Poshonlng      System’                          $190            $5 6           $0 0         $24.6
                                           Ground     Colhs~on Awdance             System               77             72            00           14.9
                                           Fuel Savings      AdvIsor)     System                       165            100            00           26.5
                                           Englne    replacement                                        00             00             12            l3
                                           MILSTAR UHF/EHF              Comnland     Post
                                             upgrade                                                   128             00            00           12.6
                                           Total                                                     $56.0          $22.6           $1.2         $60.0

                                           “We ldenllfied a total polenl~al reduction of $110 mullion to the fiscal year 1991 budget request for “se,
                                           equlpmenl for this system rhls potential reduction IS discussed I” Air Force Budget Potenh Reduce
                                           tions in Command, Control and Communlcatlons Funds (GAO/NSIAD-90.300BR. Sepl 28 1990)


Global Positioning, Ground                 The Air Force plans to integrate and install the Global Positioning, the
Collision Avoidance, and Fuel              Ground Collision Avoidance. and the Fuel Savings Advisory Systems on
Savings Advisory Systems                   C/KC-135 aircraft as one project. The Global Positioning System is to
                                           provide precise, worldwide, three-dimensional positioning and naviga-
                                           tion for various military aircraft, including the C/KC-135. The Ground
                                           Collision Avoidance System is to provide visual indications, alarm sig-
                                           nals, and verbal cxutions if the aircraft encounters hazardous flight con-
                                           ditions. The Fuel Savings Advisory System is to provide the flight crew
                                           optimum power sett mgs needed to meet mission requirements while get-
                                           ting the most cfflcictnt fuel use.

                                            The Air Force’s tixxl ycsar 1991 budget request includes $43.2 million
                                            for these modifications: $19 million for the Global Positioning System,
                                            $7.7 million for thr, Ground Collision Avoidance System, and $16.5 mil-
                                            lion for the Fuel Savings Advisory System. These modifications are to be
                                            installed in C/Kc’-l:l5 aircraft by one contractor. The contract award is
                                            scheduled for Scptcmbcr 1991, less than 1 month before the end of fiscal
                                            year 1991. To acc.omplish the planned contract award schedule, the
                                            Air Force would 1IaI.c’to compress several pre-contract award activities.
                                            Since the modifkations are to be accomplished in fiscal year 1992, the
                                            funds can be reqt~c~s~cdand justified for fiscal year 1992. Accordingly,
                                            we suggested tht,sct I‘untls be deleted from the fiscal year 1991 budget
                                            request.



                                            Page 12                                         GAO/NSIAD-91.17BR        Aircraft   Procurement    Budgets
                                            Appendix I
                                            Potential Reductions      to the Air Force’s
                                            Aircraft Procurement       Budgets




Table 1.2: Potential Reductions   in F-16
Fighter Procurement Funds                   Dollars   I” millions
                                                                                                                Fiscal year
                                                                                                        1990           1969         1966’         Total
                                            Advanced   ldentlflcatlon
                                              Friend or Foe System                                      $29.8          $0 0           $0 0       $29.8
                                            Economvz      price adlustments
                                               Alrframe                                                   00            34            159          19.3
                                               Engines                                                   14 1          149             63          35.3
                                            FInal contract     price adjustment                           00            00             21           2.1
                                            Total                                                      $43.9         $18.3          924.3        $86.5

                                            aThese funds were only wallable       for obligation through September 30, 1990


Advanced Identification Friend              The Air Force was developing an Advanced Identification                                 Friend or Foe
or Foe System                               System to help F- 16 pilots identify aircraft encountered during combat
                                            missions. The Air Force received $29.8 million in fiscal year 1990 and
                                            planned to request $.50.3 million in fiscal year 1991 to procure the
                                            system. In June 1989, however, the Air Force changed plans to buy and
                                            install this system in F-16s and reallocated the $50.3 million included in
                                            the fiscal year 199 1 budget request to pay for expected increases in
                                            manufacturing labor and overhead costs. Since the system is not going
                                            to be acquired for F-16s. we identified $29.8 million in fiscal year 1990
                                            appropriated funds to be considered for rescission.

Economic Price Adjustments                  The provisions of F- 16 aircraft and engine production contracts allow
                                            periodic adjustments in price due to changes in inflation; the price of
                                            specific materials. such as industrial metals; or the labor cost index.
                                            tinder these provisions, General Dynamics, the F-16 prime contractor,
                                            and the Air Force agreed to reduce the price of the current production
                                            contract for fiscal years 1989 and 1988. The Air Force subsequently
                                            modified the F-16 multiyear contract in May 1990 to deobligate $38.5
                                            million and $33.1 million for fiscal years 1989 and 1988, respectively.
                                            The fiscal year 1988 funds were only available for obligation through
                                            September 30, 1990

                                             In anticipation of this modification, the Air Force committed $35.1 mil-
                                             lion and $17.2 million in fiscal year 1989 and 1988 appropriated funds,
                                             respectively, to other program costs. Since the amounts committed were
                                             less than the amounts deobligated, we identified $3.4 million and $15.9
                                             million in fiscal year 1989 and 1988 appropriated funds, respectively, to
                                             be considered for, rc,scission.




                                             Page 10                                           GAO/NSIAL%Sl-17BR       Aircraft   Procurement   Budgets
                                           Appendix I
                                           Potential Reductions      to the Air Force’s
                                           Aircraft Procurement       Budgets




B-2 Bomber

Brief Description of                       The B-2 is intended to be a long-range, multirole bomber capable of car-
                                           rying both nuclear and conventional munitions. The aircraft incorpo-
Program                                    rates low observable technologies, making it difficult to detect in flight.
                                           The Northrop Corporation began full-scale development of the B-2 in
                                           1981 and conducted the first flight test in 1989. tinder the development
                                           program, six aircraft are to be built and used for flight tests. Through
                                           fiscal year 1990, 10 production aircraft were authorized and funded.
                                           Advance procurement funding was approved in fiscal year 1990 for the
                                           Air Force to begin acquiring parts with long lead times for an additional
                                           five production aircraft.

                                           Due to the high cost of the B-2 program, funding restrictions, and a
                                           reduction in the Soviet threat, the Secretary of Defense, in April 1990,
                                           reduced the total mnnber of aircraft to be procured from 127 to 70 and
                                           the number to be procured in fiscal year 199 1 from 5 to 2.


Results of Analysis                        We identified potential reductions of $704 million: $622 million in the
                                           fiscal year 1991 budget request and $82 million in fiscal year 1990
                                           appropriated funds, as shown in table I. 1.

Table 1.1: Potential Reductions   in B-2
Bomber Procurement Funds                   Dollars   in mlhons
                                                                                                                Fiscal year
                                                                                                                1991         1990         Total
                                           lnltlal spares                                                     $622 0          $0 0       $622.0
                                           Advance     procurement                                                00          82 0         62.0
                                           Total                                                              $622.0        $62.0        $704.0


Initial Spares                             According to Air Force Logistics Command officials, the program
                                           changes proposed by the Secretary of Defense reduced the requirement
                                           for the procurement of initial spares in fiscal year 199 1. Air Force offi-
                                           cials said current unobligat.ed prior year appropriations were adequate
                                           to acquire the net’essary spares through fiscal year 1991. Thus, we iden-
                                           tified $622 million in the fiscal year 1991 budget request to be consid-
                                           ered for reduction.




                                           Page 8                                         GAO/NSIAD-91.17BR     Aircraft   Procurement   Budgets
Potential Reductions to the Air Force’s Aircraft
Procurement Budgets

                       We identified $3,094.9 million to be considered for reduction from the
                       Air Force’s fiscal year 1991 budget request and prior year appropria-
                       tions: $2864.3 million in the fiscal year 1991 budget request and $186.8
                       million, $19.5 million. and $24.3 million in appropriated funds from
                       fiscal years 1990. 1989, and 1988, respectively. These potential reduc-
                       tions are described below by program.



C-l 7 Airlifter

Brief Description of   The C-17 aircraft is being developed by Douglas Aircraft Company to
                       provide the Air Force with increased long-range airlift capability. The
Program                aircraft is to have four engines, a wide body, and a three-person crew. It
                       is being designed to transport a full range of military cargo directly into
                       small and austere airfields. Full-scale development of the C-17 began in
                       1985, at which time the Air Force planned to acquire a total of 210 air-
                       craft between fiscal years 1988 and 1998. The Air Force requested
                       $2,146 million for fiscal year 1991: $1,705 million for six aircraft, $204
                       million for advance procurement, and $237 million for initial spares.

                       On April 26, 1990, the Secretary of Defense announced that, as a result
                       of his review of ma.jor aircraft programs, the total number of C-17s
                       would be reduced from 210 to 120 and the request for 6 aircraft in the
                       President’s fiscal year 1991 budget would be reduced to 2 aircraft.
                       These reductions were expected to allow more time for flight testing
                       before the production rate increases.


Results of Analysis    Because of continuing schedule delays under the existing contracts and
                       the significant amount of unobligated prior year appropriations,   we
                       identified $2,146 million of the fiscal year 1991 budget request to be
                       considered for reduction. However, Air Force officials told us that even
                       if nv aircraft arc approved for procurement in fiscal year 199 1, procure-
                       ment funds may be needed to keep critical subcontractors actively
                       working on C-l 5 subsystems and parts.

                       In June 1990 wc testified’ on the C-17 aircraft program before the Sub-
                       committee on Projection Forces and Regional Defense, Senate Committee
                       on Armed Services. We stated that although some progress had been

                       ‘Status of the Air For< e‘s (‘-17 Arcraft   Program (GAO,?NSIAD-90-48,       June 19, 1990).




                       Page 6                                           GAO/NSIALMl-17BR        Aircraft   Procurement   Budgets
contents


                                            -

Letter                                                                                                       1

Appendix I                                                                                                   6
Potential Reductions     C-17 Airlifter                                                                     6
                         B-2 Bomber                                                                         8
to the Air Force’s       F-16 Fighter                                                                       9
Aircraft Procurement     C/KC-135 Modifications                                                            11
                         B-52 Modifications                                                                13
                         B-1R Modifications                                                                16

Appendix II                                                                                                18
Objectives, Scope, and
Methodology
Appendix III                                                                                                19
Major Contributors to
This Report
Tables                   Table 1: Potential Reductions to the Air Force’s Aircraft                           2
                             Procurement Budgets
                         Table 1.1: Potential Reductions in B-2 Bomber                                       8
                             Procurement Funds
                         Table 1.2: Potential Reductions in F-16 Fighter                                    ICI
                             Procurement Funds
                         Table 1.3: Potential Reductions in C/KC-135 Modification                           12
                             Funds
                         Table 1.4: Potential Reductions in B-52 Modification                               14
                             Funds




                         Page 4                            GAO/NSIADSl-17BR   Aircraft   Procurement   Budgets
                                       -                                                                                                             -
                                           J&236884




Table 1: Potential Reductions to the
Air Force’s Aircraft Procurement           Dollars    in mkns
Budgets                                                                                               Fiscal year
                                           Program                                          1991          1990    1989        198a8           Total
                                           C 17 Alrllfler                               $2.146 0          $0 0       $00        $0 0      92,146.O
                                           8~2 Bomber                                      622 0          820          00        00          704.0
                                           F-16 Flghier                                       00          43 9       183        24 3           86.5
                                           C/KC-l35         Modifications’                   56 0         228          12        00            80.0
                                           B-52 Modlflcatlo&’                                40 3           62         00        00            46.5
                                           B~l B Modlflcations                                00           319         00        00            31.9
                                           Total                                       $2,864.3        $186.8      $19.5      $24.3       $3,094.9

                                           “These funds WE only ava~lahlv for obl!gat$on through September 30. 1990

                                           “Among the potential reduc t~ons for the C/KC-l35 and B 52 modkatlon   pragrams IS Global Posltlonlng
                                           System user equipment This potential reduct!on IS discussed in AIMForce Budget Potential Reductux
                                           in Command, Control and Communications Funds (GAO/NSIAD 90 300BK Sept 28, 1990)


                                           Additional information on our review is discussed in appendix I. Our
                                           object,ives, scope, nntl methodology are described in appendix II.

                                           We did not obtain written agency comments on this report. However, we
                                           discussed its contents with officials from the Office of the Secretary of
                                           Defense and the D~~pattmcnt of the Air Force and incorporated their
                                           comments where appropriate. We are sending copies of this report to
                                           appropriate congressional committees; the Secretaries of Defense and
                                           the Air Force; the I )irc~ctor, Offic*r of Management and Budget; and other
                                           interested parties.

                                           This report was prepared under the direction of Nancy R. Kingsbury,
                                           Director, Air Force Issues, who may be reached at (202) 275-4268 if you
                                           or your staff have any questions concerning this report. Other major
                                           caontribut,ors to this rclport are listed in appendix III.




                                            Frank C. Conahan
                                            Assistant Comptroller General




                                            Pagr 2                                        GAO/NSLAIb91-17BR      Aircraft   Procurement     Budgets