Military Airlift
DOD Should Take Steps to Strengthen Management of the Civil Reserve Air Fleet Program Gao ID: GAO-09-625 September 30, 2009To move passengers and cargo, the Department of Defense (DOD) must supplement its military aircraft with cargo and passenger aircraft from commercial carriers participating in the Civil Reserve Air Fleet (CRAF) program. Carriers participating in CRAF commit their aircraft to DOD to support a range of military operations. In the Fiscal Year 2008 National Defense Authorization Act, Congress required DOD to sponsor an assessment of CRAF and required GAO to review that assessment. GAO briefed congressional staff on its observations. As discussed with the staff, GAO further analyzed some of the issues identified in its review. This report assesses (1) the extent to which DOD has assessed potential risks to the CRAF program, and (2) the extent to which DOD's management of CRAF supports program objectives. For this engagement, GAO reviewed DOD-sponsored CRAF study reports and interviewed study leadership. GAO also interviewed over 20 of 35 CRAF participating carriers that responded to a request for a meeting, DOD officials, and industry officials.
DOD needs to establish the level of risk associated with declining charter passenger capabilities and DOD's increased need to move very large cargo. Although DOD depends on CRAF charter passenger aircraft to move more than 90 percent of its peacetime needs, there has been nearly a 55 percent decline in this CRAF capacity since 2003. In addition, since 2003, DOD's large cargo movement needs have increased with the acquisition of over 15,000 Mine Resistant Ambush Protected vehicles. Since there are no U.S. commercial cargo aircraft capable of moving cargo this size into Iraq and Afghanistan, DOD is using foreign-owned carriers to assist its military aircraft in such movements. However, there are scenarios where foreign-owned carriers may be unwilling or not allowed to fly. As a result, the lack of a commercial U.S. outsized cargo capability might restrict DOD's ability to meet its large cargo airlift needs in a timely manner. DOD has not quantified the risks these challenges pose to the CRAF program's ability to meet DOD's future transportation requirements because DOD has not completed risk assessments as described in the 2008 National Defense Strategy. Until risk assessments are conducted, DOD will not be sufficiently informed about potential risks in the CRAF charter passenger segment and in very large cargo airlift capability that could prevent DOD from managing its future airlift needs and the CRAF program effectively. DOD's management of CRAF has not provided CRAF participants with a clear understanding, which could strengthen the program's ability to support its objectives, in some critical areas of the program. Although internal controls such as policies can help meet program objectives, CRAF business partners do not have a clear understanding of DOD's expectations concerning four CRAF objectives--an enhanced mobilization base, modernization, increased air carrier participation, and communication--because DOD has not developed policies in these four areas. First, DOD has not developed policies regarding the enforcement of its business rules, such as the 60/40 rule that states that participants should fly only 40 percent of their total business for DOD. DOD does not consistently enforce this rule and this may decrease the mobilization base since it is difficult for carriers to size their fleets to meet DOD demands. Second, DOD has not developed policies or economic incentives that promote CRAF modernization and this may hinder CRAF carriers from modernizing their aircraft. Third, DOD has not developed policies regarding oversight of the distribution of its peacetime airlift business, the primary incentive to carriers for participating in CRAF. DOD has no involvement in this distribution, and the perceptions of some carriers that this process is unfair could ultimately reduce carrier participation in CRAF. Fourth, DOD has not developed policy concerning communication with the carriers on CRAF studies or proposed changes to the CRAF program. DOD has not always communicated with carriers prior to implementing changes or completing studies. Until DOD develops policies that provide carriers with a clear understanding of CRAF, DOD cannot provide reasonable assurance that CRAF will meet its primary objective of providing critical airlift.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-09-625, Military Airlift: DOD Should Take Steps to Strengthen Management of the Civil Reserve Air Fleet Program
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Report to Congressional Committees:
United States Government Accountability Office:
GAO:
September 2009:
Military Airlift:
DOD Should Take Steps to Strengthen Management of the Civil Reserve Air
Fleet Program:
GAO-09-625:
GAO Highlights:
Highlights of GAO-09-625, a report to congressional committees.
Why GAO Did This Study:
To move passengers and cargo, the Department of Defense (DOD) must
supplement its military aircraft with cargo and passenger aircraft from
commercial carriers participating in the Civil Reserve Air Fleet (CRAF)
program. Carriers participating in CRAF commit their aircraft to DOD to
support a range of military operations. In the Fiscal Year 2008
National Defense Authorization Act, Congress required DOD to sponsor an
assessment of CRAF and required GAO to review that assessment. GAO
briefed congressional staff on its observations. As discussed with the
staff, GAO further analyzed some of the issues identified in its
review. This report assesses (1) the extent to which DOD has assessed
potential risks to the CRAF program, and (2) the extent to which DOD‘s
management of CRAF supports program objectives.
For this engagement, GAO reviewed DOD-sponsored CRAF study reports and
interviewed study leadership. GAO also interviewed over 20 of 35 CRAF
participating carriers that responded to a request for a meeting, DOD
officials, and industry officials.
What GAO Found:
DOD needs to establish the level of risk associated with declining
charter passenger capabilities and DOD‘s increased need to move very
large cargo. Although DOD depends on CRAF charter passenger aircraft to
move more than 90 percent of its peacetime needs, there has been nearly
a 55 percent decline in this CRAF capacity since 2003. In addition,
since 2003, DOD‘s large cargo movement needs have increased with the
acquisition of over 15,000 Mine Resistant Ambush Protected vehicles.
Since there are no U.S. commercial cargo aircraft capable of moving
cargo this size into Iraq and Afghanistan, DOD is using foreign-owned
carriers to assist its military aircraft in such movements. However,
there are scenarios where foreign-owned carriers may be unwilling or
not allowed to fly. As a result, the lack of a commercial U.S. outsized
cargo capability might restrict DOD‘s ability to meet its large cargo
airlift needs in a timely manner. DOD has not quantified the risks
these challenges pose to the CRAF program‘s ability to meet DOD‘s
future transportation requirements because DOD has not completed risk
assessments as described in the 2008 National Defense Strategy. Until
risk assessments are conducted, DOD will not be sufficiently informed
about potential risks in the CRAF charter passenger segment and in very
large cargo airlift capability that could prevent DOD from managing its
future airlift needs and the CRAF program effectively.
DOD‘s management of CRAF has not provided CRAF participants with a
clear understanding, which could strengthen the program‘s ability to
support its objectives, in some critical areas of the program. Although
internal controls such as policies can help meet program objectives,
CRAF business partners do not have a clear understanding of DOD‘s
expectations concerning four CRAF objectives”an enhanced mobilization
base, modernization, increased air carrier participation, and
communication”because DOD has not developed policies in these four
areas. First, DOD has not developed policies regarding the enforcement
of its business rules, such as the 60/40 rule that states that
participants should fly only 40 percent of their total business for
DOD. DOD does not consistently enforce this rule and this may decrease
the mobilization base since it is difficult for carriers to size their
fleets to meet DOD demands. Second, DOD has not developed policies or
economic incentives that promote CRAF modernization and this may hinder
CRAF carriers from modernizing their aircraft. Third, DOD has not
developed policies regarding oversight of the distribution of its
peacetime airlift business, the primary incentive to carriers for
participating in CRAF. DOD has no involvement in this distribution, and
the perceptions of some carriers that this process is unfair could
ultimately reduce carrier participation in CRAF. Fourth, DOD has not
developed policy concerning communication with the carriers on CRAF
studies or proposed changes to the CRAF program. DOD has not always
communicated with carriers prior to implementing changes or completing
studies. Until DOD develops policies that provide carriers with a clear
understanding of CRAF, DOD cannot provide reasonable assurance that
CRAF will meet its primary objective of providing critical airlift.
What GAO Recommends:
GAO is recommending that DOD (1) conduct risk assessments on two CRAF
passenger and cargo issues and (2) develop policies to strengthen its
management of the CRAF program. In comments on a draft of this report,
DOD disagreed with the first recommendation and agreed with the second.
View [hyperlink, http://www.gao.gov/products/GAO-09-625] or key
components. For more information, contact William Solis, (202) 512-
8365, solisw@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
DOD Has Not Assessed the Risks That Changes in Charter Passenger
Capabilities and DOD's Outsized Cargo Needs Might Have on the CRAF
Program:
DOD Has Not Issued Policies That Would Strengthen Management of the
CRAF Program:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Recent Department of Defense Studies:
Appendix II: Comments from the Department of Defense:
Appendix III: GAO Contact and Staff Acknowledgments:
Related GAO Products:
Figure:
Figure 1: Size of CRAF Charter Passenger Fleet and DOD Peacetime
Business (Fiscal Years 2001 through 2008):
Abbreviations:
AMC: Air Mobility Command:
CRAF: Civil Reserve Air Fleet:
DOD: Department of Defense:
IDA: Institute for Defense Analyses:
MRAP: Mine Resistant Ambush Protected:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
September 30, 2009:
Congressional Committees:
Since September 11, 2001, the U.S. Transportation Command's Air
Mobility Command (AMC) has successfully transported more than 6.8
million passengers and nearly 3 million tons of cargo by air. To move
these passengers and cargo, the Department of Defense (DOD) must
supplement its military aircraft with aircraft from commercial carriers
participating in the Civil Reserve Air Fleet (CRAF) program. Commercial
air carriers participating in CRAF contractually commit their aircraft
to DOD to be called upon, or activated, for use to support a range of
military operations. At the most demanding end of this range, DOD plans
for CRAF to move more than 90 percent of its passengers and almost 40
percent of its cargo requirements. As an incentive to encourage
participation in CRAF, DOD contracts exclusively with CRAF participants
to fly its daily peacetime passenger and cargo airlift business.
Currently, this daily peacetime business includes airlift for
operations in Iraq and Afghanistan, which is being handled without an
activation of CRAF. CRAF has been activated twice--once during
Operation Desert Shield/Storm and at the beginning of Operation Iraqi
Freedom. The Office of the Under Secretary of Defense for Acquisition,
Technology and Logistics (Transportation Policy) is responsible for
establishing policies for the CRAF program. The U.S. Transportation
Command is responsible for the daily management of the program and for
making recommendations concerning the capability, capacity and other
requirements for mobility assets needed to execute its mission.
The National Airlift Policy confirms the importance and the necessity
of CRAF by establishing that national objectives cannot be met without
using commercial air carriers.[Footnote 1] DOD has little capability to
meet its passenger airlift requirements in its military fleet;
therefore, DOD relies almost entirely on CRAF commercial carriers to
fulfill its requirements. Charter passenger carriers, operating on the
customers' schedules, provide nearly 90 percent of all daily, peacetime
passenger airlift for DOD, while the scheduled carriers, operating on
set routes and timetables, provide the remainder. In contrast, DOD's
military fleet has the capability to carry bulk, outsized, and
oversized cargo;[Footnote 2] however, DOD relies on commercial cargo
carriers to move bulk cargo in both peacetime and times of crisis or
war. Although CRAF cargo carriers can fly oversized cargo when needed,
they do not have the capability to move outsized cargo. CRAF carriers
are not capable of loading or moving strategic outsized equipment, such
as Mine Resistant Ambush Protected (MRAP) vehicles, tanks, and
helicopters.
Multiple DOD-sponsored studies have identified risks to the CRAF
program, with some risks due to a changing business environment and
challenges within the management of the CRAF program.[Footnote 3] For
example, as required by the Fiscal Year 2008 National Defense
Authorization Act, DOD sponsored an independent assessment of the
viability of the CRAF program. DOD submitted this assessment to
Congress in October 2008, and as required by that act, we subsequently
conducted a review of that assessment and briefed congressional staff
on our observations about the assessment and some issues we identified
about the CRAF program in general. As discussed with congressional
staff, we further analyzed some of the issues identified in that
review. This report assesses (1) the extent to which DOD has assessed
potential risks to the CRAF program and (2) the extent to which DOD's
management of CRAF supports program objectives.
To assess the extent to which DOD has assessed potential risks to the
CRAF program and the extent to which DOD's management of CRAF supports
program objectives, we reviewed several DOD-sponsored CRAF reports. We
interviewed study leadership from the DOD-sponsored studies to obtain
their perspectives and identify relevant issues relating to the CRAF
program from their respective studies. We also conducted structured
interviews with over 20 CRAF air carriers of the 35 participating in
the program as of October 2008 that responded to our request for a
meeting and interviewed airline industry officials and DOD officials at
the Office of Secretary of Defense, U.S. Transportation Command, and
Air Force Air Mobility Command to discuss the CRAF program. We analyzed
this information in the context of DOD's National Airlift Policy, 2008
National Defense Strategy, and airlift requirements to determine how
issues we identified might affect the CRAF program. We discussed the
management of the CRAF program with officials at the Office of
Secretary of Defense, U.S. Transportation Command, and Air Mobility
Command. We also reviewed the 2008 National Defense Strategy, GAO's
Standards for Internal Control in Federal Government,[Footnote 4] DOD's
Manager's Internal Controls, and U.S. Transportation Command's
Manager's Internal Controls (guidance to implement DOD's internal
controls program) to determine how programs should be managed to
minimize the risk of program failure and to identify elements of
effectively managed programs to determine if these elements are part of
the CRAF program.
We conducted this performance audit from January 2009 to July 2009 in
accordance with generally accepted government auditing standards. Those
standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
Results in Brief:
DOD has not assessed the level of risk that declining charter passenger
capabilities and DOD's increased need to move outsized cargo might have
on future airlift requirements and the CRAF program. Although DOD
depends on CRAF charter passenger aircraft to move more than 90 percent
of its peacetime and contingency airlift needs, there has been nearly a
55 percent decline in this capability since 2003. In 2003, DOD relied
on a charter air carrier capability comprised of more than 60 aircraft;
however, although DOD passenger needs have increased significantly
since 2003, the CRAF charter passenger air carrier capability has
decreased, declining to as few as 19 aircraft in April 2008 before
stabilizing at 29 aircraft in May 2008. The decline to 19 aircraft
delayed the return home of Maine National Guard troops in Iraq by about
a week and caused DOD to quickly find additional airlift. Because
scheduled carriers have historically been unwilling and/or unable to
fly the CRAF missions completed by charter carriers, this decline
suggests that, at some point in the future, charter passenger carriers
or aircraft participating in the CRAF program may not be able to meet
DOD's airlift needs on a daily basis and in contingency operations. In
addition, since 2003, DOD's need to move outsized cargo has increased
with the acquisition of over 15,000 MRAP vehicles. As there are no U.S.
commercial cargo aircraft capable of moving outsized cargo such as
these high priority vehicles into Iraq and Afghanistan, DOD is using
foreign-owned carriers to support such movements. According to DOD
officials, using foreign-owned carriers relieves some of the stress on
military aircraft--there are sufficient military aircraft to accomplish
the missions--and is less expensive than military airlift. As the need
to move outsized cargo has increased, use of foreign-owned carriers to
move these assets has increased; however, in some scenarios foreign-
owned carriers may be unwilling to fly, and in other scenarios, like a
CRAF activation, foreign-owned carriers would only be used in
exceptional circumstances. As a result, the lack of a U.S. outsized
cargo capability might affect DOD's ability to meet its outsized cargo
airlift needs in a timely manner. DOD has not established whether it
will need to continue to use these foreign-owned aircraft or whether
there is a need for a U.S. commercial capability to help relieve stress
on the military aircraft, and has not completed risk assessments, as
set out in the 2008 National Defense Strategy. The 2008 National
Defense Strategy describes the need to assess, mitigate, and respond to
risk in the execution of defense programs critical to national
security. Until specific risk assessments are conducted and actions are
taken to mitigate any risks that may exist in the CRAF charter
passenger segment and in outsized cargo capability that could prevent
DOD from managing its future airlift needs and the CRAF program
effectively, DOD and congressional decision makers will not be fully
informed about unmitigated risks--specifically, gaps, shortfalls, or
redundancies.
DOD's management of the CRAF program has not provided CRAF air carrier
participants with a clear understanding of some critical areas of the
program. Management internal controls help provide reasonable assurance
that programs are focused on and can achieve their objectives by
requiring clearly articulated policies. The National Airlift Policy
states that federal policies governing the CRAF program should enhance
the mobilization base,[Footnote 5] promote aircraft modernization,
increase air carrier participation, and provide a framework for
dialogue and cooperation with commercial air carriers; however, we
found that CRAF business partners do not have a clear understanding of
DOD's expectations concerning these objectives because DOD lacks
formal, written policies in four critical areas of the program, which
could strengthen the program's ability to support its objectives.
* First, DOD's lack of policy regarding the enforcement of its business
rules may negatively affect the CRAF mobilization base. DOD does not
routinely enforce a basic CRAF business rule, outlined in the CRAF
solicitation, allowing that no more than 40 percent of a CRAF carrier's
revenues should come from the government. DOD has no formal policy
describing this rule or when it will be enforced, thus leaving CRAF
participants and those interested in becoming participants potentially
unaware of DOD's intent. Also, CRAF carriers have stated that the
inconsistent enforcement of this rule makes it difficult since leasing
or buying aircraft to meet DOD needs requires long-term planning.
* Second, DOD has not developed CRAF policies that promote
modernization, although modernization of the CRAF fleet is an objective
of the National Airlift Policy and has been acknowledged as a goal by
senior Air Force officials. Despite repeated congressional testimony
from DOD officials stressing the importance of modernization, DOD does
not provide CRAF participants any guidelines, objectives, or economic
incentives that would encourage modernization. Some charter passenger
air carriers, which help fly the majority of peacetime missions for
DOD, fly aircraft in the Federal Aviation Administration's National
Aging Aircraft Research Program. In the absence of specific
modernization objectives, CRAF business partners will remain unaware of
DOD's expectations toward modernization, and might not take steps
needed to modernize their aircraft.
* Third, DOD's lack of policy regarding the distribution of DOD's
peacetime airlift business may negatively affect CRAF air carrier
participation. According to DOD officials, the process and procedures
for distributing DOD's peacetime airlift business among carriers have
not been defined by and are not overseen by DOD. While DOD defines how
participants earn entitlements to peacetime airlift business, DOD
actually distributes the entitlements to three teams of CRAF
participants. The teams then distribute the business based on
arrangements made by each team's members. In our discussions with
carriers, some carriers expressed concerns that the distribution of
DOD's peacetime business was unfair, because carriers were not getting
the distribution they expected based on their contributions to CRAF,
and lacked transparency. Because the distribution of this business is
intended to incentivize CRAF participation, this perception could
ultimately reduce carrier participation in CRAF.
* Fourth, DOD has not developed policy that establishes a framework for
dialogue and cooperation with commercial air carriers, which could
involve CRAF participants in decision-making and facilitate sharing
information with them. According to airline officials, DOD has not
routinely involved CRAF carriers in proposed changes to the CRAF
program in advance and it has not shared CRAF study results with the
carriers until recently. As a result, CRAF participants told us that
they have been unable to adjust their business plans to better address
DOD needs and easily absorb some of the program changes that have been
announced. DOD has told us that there are many ways in which they
communicate with the carriers.
By developing policies that provide commercial air carriers with a
clear understanding of critical aspects of the CRAF program, DOD can
strengthen its management of the CRAF program and have reasonable
assurance that the CRAF program will meet its primary objective of
providing critical airlift to support DOD's potential future needs.
To provide additional assurance the CRAF program can continue to meet
DOD airlift needs and to assist DOD in more effectively managing the
program, we are making two recommendations. First, to help DOD identify
and analyze risks that could assist DOD in meeting its future airlift
requirements, we recommend that DOD conduct risk assessments that
evaluate the declining U.S. charter passenger capability and the lack
of a U.S. commercial outsized cargo capability and develop appropriate
policies and procedures for mitigating any identified risks. Second, to
facilitate effective management of the critical partnership between DOD
and the U.S. commercial air carrier industry and to help ensure that
CRAF can meet its program objectives, we recommend that DOD develop
formal, written policy that establishes: enforcement guidelines for the
basic CRAF business rules; objectives and measures of effectiveness
required to achieve modernization of the CRAF fleets; oversight over
how peacetime airlift business is distributed; and mechanisms by which
DOD seeks input from CRAF participants in program issues and concerns
and information sharing.
In commenting on a draft of this report, DOD did not agree with our
recommendation to conduct risk assessments that evaluate the declining
U.S. charter passenger capability and the lack of a U.S. commercial
outsized capability. DOD commented that the 2008 CRAF viability study
conducted by the Institute for Defense Analyses (IDA) evaluated the
risk of the charter passenger industry, and based on that study, they
are examining potential mitigation strategies for the declining
passenger charter fleet. However, during our review, we found no
evidence that U.S. Transportation Command has conducted an up-to-date
risk assessment or is developing policies and procedures to mitigate
any risks associated with declining charter passenger capability. As we
reported, the 2008 IDA study data ended in 2007. Also, the study did
not establish a level of acceptable risk for the CRAF program.
Additionally, DOD commented that there was no need to develop any
mitigation strategies for an outsized cargo capability because CRAF is
not intended to provide an outsized cargo capability. Given DOD's
recent addition of over 15,000 MRAPs, we continue to believe that risk
assessments, as outlined in the National Security Strategy, of both the
charter passenger and outsized cargo issue would give DOD specific
information that would help them shape their future strategic
transportation requirements. DOD concurred with our recommendation to
develop formal, written policy that establishes: enforcement guidelines
for the basic CRAF business rules; objectives and measures of
effectiveness required to achieve modernization of the CRAF fleets;
oversight over how peacetime airlift business is distributed; and
mechanisms by which DOD seeks input from CRAF participants in program
issues and concerns and information sharing. A more detailed discussion
of DOD's comments and our response to these comments follow the
Recommendations for Executive Action section of this report.
Background:
The CRAF program was created in 1951 and its importance was reaffirmed
by the National Airlift Policy in 1987. The National Airlift Policy
states that the military will rely on the commercial air carrier
industry to provide the airlift capability required beyond that
available in the military airlift fleet. Additionally, the policy
includes nine guidelines to meet airlift requirements in peacetime and
wartime. These guidelines direct that policies be designed to:
* increase participation in CRAF;
* enhance the mobilization base of the U.S. commercial air carrier
industry;[Footnote 6]
* provide a framework for dialogue and cooperation with commercial air
carriers; and:
* promote the development of technologically advanced transport
aircraft and related equipment. According to DOD officials, these
guidelines serve as the objectives of the CRAF program.
CRAF commitments are divided into three levels or stages--Stages I, II,
and III--depending on the size of the operations or contingency in
which DOD is involved. As defined in the CRAF contract between DOD and
its commercial partners, Stage I activation supports expanded
operations beyond DOD's routine daily operations and provides the
equivalent of 30 passenger and 30 cargo aircraft; Stage II activation
is used in the event of a major regional contingency and supporting
mobilization and provides the equivalent of 87 passenger aircraft and
75 cargo aircraft; and Stage III activation supports two major regional
contingencies and provides the equivalent of 136 passenger aircraft and
120 cargo aircraft. When CRAF is activated, carriers have a specified
time frame in which to provide aircraft, with pilots and crews, to DOD.
Once activated, air carriers continue to operate and maintain the
aircraft with their resources; however, AMC controls the aircraft
missions.
The majority of DOD passenger flights require carrier flexibility, as
many DOD missions are not routine in their locations or timing. Charter
passenger carriers fly the majority of DOD peacetime, contingency, and
Stage I business because charter passenger carriers' businesses are
designed with the flexibility to provide airlift based on the
customer's (DOD's) schedule. Scheduled passenger carriers operate
commercial flights on regular routes and can ill afford unplanned
disruptions to their airline networks. However, because of their large
fleet sizes, the scheduled carriers are a critical component of the
CRAF fleet.
As an incentive to encourage participation in CRAF, DOD contracts
exclusively with CRAF participants to fly its daily, peacetime
passenger and cargo airlift business and any surge for contingencies.
As articulated in an August 2008 DOD-sponsored CRAF study, carriers
earn the entitlement to DOD's peacetime business through points awarded
based on their aircraft commitments to each CRAF stage.[Footnote 7]
According to the study, the greater the commitment by the carrier, the
greater the amount of peacetime business to which a CRAF participant is
entitled. These points become the basis of a carrier's entitlement to
compete for the procurement of peacetime passenger and cargo airlift
business.
To maximize the value of these entitlements, CRAF participants have
formed into three teaming arrangements, which are created and managed
by the participants themselves. These teams comprise of a mix of
passenger and cargo carriers that join together to pool their
entitlements to DOD business; that is, the entitlement directly
associated with a carrier's individual commitment is combined with the
entitlements earned by other carriers on their team. DOD assigns
peacetime business to the team based on the team's total entitlement
and availability, not to the individual carrier. Once that business is
assigned to the team, the team leader, or administrator, is responsible
for accepting and distributing the business to the carriers at their
discretion.
DOD's 2008 National Defense Strategy requires the military to assess,
mitigate, and respond to risk that could potentially damage national
security.[Footnote 8] Identifying and managing risk is also an
important goal of all successful internal control programs. Internal
controls include the organization, policies, and procedures used by
agencies to reasonably ensure that, among other things, critical
programs like CRAF achieve their intended results effectively and
efficiently. Internal control standards require that management should
provide for an assessment of the risks the agency faces from both
external and internal sources. These standards also require that there
be control activities--that is, the policies, procedures, techniques,
and mechanisms that enforce management's directives--in place to help
insure that actions are taken to address risk.
DOD Has Not Assessed the Risks That Changes in Charter Passenger
Capabilities and DOD's Outsized Cargo Needs Might Have on the CRAF
Program:
Charter Passenger Capability Has Declined:
Although DOD depends heavily on CRAF charter passenger capability, this
capability has declined substantially over the past 5 years and DOD has
not established the risk that this decline may have for the CRAF
program. DOD depends on the charter passenger industry to move more
than 90 percent of its peacetime requirements, as well as all
contingency surges. While the charter passenger capability has,
historically, satisfied DOD's requirements, there has been a 60 percent
decline in this capability since 2003 due mainly to a declining demand
for charter airlines in the commercial sector. Figure I shows this
decline in CRAF participants' charter passenger aircraft from a high of
66 aircraft in 2004 to 29 in 2008. Additionally, the figure shows that,
even as commercial passenger carriers' revenues from DOD peacetime
business increased to historic levels after 2001, and the amount of
business available to charter passenger carriers was higher than it had
ever been, the charter aircraft capacity continued to decline.
Figure 1: Size of CRAF Charter Passenger Fleet and DOD Peacetime
Business (Fiscal Years 2001 through 2008):
[Refer to PDF for image: line graph]
Year: 2001;
Total CRAF passenger business revenue per year: $500 million;
Combined CRAF charter passenger carrier fleet size per year: 47.
Year: 2002;
Total CRAF passenger business revenue per year: $1,250 million;
Combined CRAF charter passenger carrier fleet size per year: 56.
Year: 2003;
Total CRAF passenger business revenue per year: $2,300 million;
Combined CRAF charter passenger carrier fleet size per year: 65.
Year: 2004;
Total CRAF passenger business revenue per year: $2,000 million;
Combined CRAF charter passenger carrier fleet size per year: 66.
Year: 2005;
Total CRAF passenger business revenue per year: $2,500 million;
Combined CRAF charter passenger carrier fleet size per year: 51.
Year: 2006;
Total CRAF passenger business revenue per year: $2,700 million;
Combined CRAF charter passenger carrier fleet size per year: 46.
Year: 2007;
Total CRAF passenger business revenue per year: $2,600 million;
Combined CRAF charter passenger carrier fleet size per year: 44.
Year: 2008;
Total CRAF passenger business revenue per year: $3,400 million;
Combined CRAF charter passenger carrier fleet size per year: 29.
Source: GAO analysis of CRAF data.
[End of figure]
This decline in charter passenger capability led to a finding in the
August 2008 DOD-sponsored CRAF viability study that this capability may
become marginal for unexpected peacetime and contingency requirements.
However, the study did not reflect that, in April 2008, CRAF's largest
charter passenger carrier ceased operations due to bankruptcy. The
sudden loss of 16 charter passenger airplanes from the CRAF program
left DOD with only 3 charter passenger carriers and 19 total charter
passenger aircraft until May 2008, when another passenger carrier
dropped its scheduled services and committed 20 charter aircraft to
CRAF. However, according to industry officials and confirmed by DOD,
the sudden reduction in charter aircraft after the April 2008
bankruptcy led to a situation in which the return home of some
redeploying Maine National Guard troops in Iraq was delayed by about a
week. Because of a limited charter aircraft capability, the Commander,
U.S. Transportation Command, personally called CRAF scheduled carriers
and asked them to free up aircraft to transport these troops back to
the United States.[Footnote 9] The bankruptcy of DOD's largest charter
passenger carrier without notice demonstrates the volatility of the
charter passenger industry and raises questions about the industry's
ability to continue to meet DOD requirements without a CRAF activation
involving the larger, scheduled carriers to satisfy the requirements
the charter passenger industry was filling.
There is little or no excess capacity among scheduled carriers. The
five scheduled passenger carriers we spoke with told us that, due to
market conditions and shrinking fleets that have been tailored to meet
their commercial demands more efficiently, scheduled carriers are
reluctant to commit aircraft to peacetime operations, contingencies,
and CRAF Stage I beyond a small, required contribution.[Footnote 10]
According to airline and industry officials, pulling a single aircraft
out of a scheduled passenger carrier's daily planned service can cause
major disruptions to its routes; therefore, to support any stage of
CRAF activation, scheduled air carriers depend on a decrease in their
commercial demands, similar to the reductions seen after September 11,
2001, that would make aircraft available. If the charter passenger
industry business continues to decline, DOD will likely be forced to
turn to scheduled air carriers to fulfill daily and Stage I
requirements currently met by the charter carriers. However, given the
scheduled carriers' smaller fleets, DOD has not quantified the number
of charter passenger aircraft it may need on a daily basis and in
contingencies and Stage I, or the risk of having a smaller charter
passenger capability to handle these requirements. DOD officials have
told us that they have no concerns that sufficient CRAF participants
will respond to a call for airlift, whether during peacetime or in an
activation.
DOD's Need to Move Outsized Cargo Has Increased:
Since 2005, DOD's need to move outsized cargo to support peacetime and
contingency operations has increased with the acquisition of more than
15,000 MRAP vehicles. Because there are no U.S. commercial cargo
aircraft capable of moving outsized cargo such as MRAP vehicles into
Iraq and Afghanistan, DOD is using foreign-owned carriers to support
such movements to supplement its military airlift capability. As of
April 2009, DOD had moved a total of 3,890 MRAPs by air, of which
almost 80 percent were moved using foreign-owned carriers flying large
Antonov-124 aircraft. We found and DOD confirmed that in the 2005
Mobility Capabilities Study, DOD planned for U.S. commercial cargo
carriers participating in the CRAF program to move only bulk cargo, and
did not identify a need for these carriers to move outsized cargo;
however, without some supplemental capability--such as the use of
foreign-owned carriers--the need for DOD to move outsized cargo into
areas of crisis, and have that cargo arrive in a timely manner, could
limit DOD's ability to meet future airlift requirements. According to
DOD analysts involved in the ongoing Mobility Capabilities and
Requirements Study--2016, DOD will again plan for CRAF cargo
participants to carry only bulk cargo.
As DOD moves additional troops and equipment into land-locked
Afghanistan and in similar scenarios in the future, the need to airlift
MRAPs and other large equipment, like helicopters, may continue to need
the use of commercial carriers to assist military airlift. However, it
is not clear whether foreign-owned carriers would be able or willing to
fly in certain scenarios. For example, DOD officials acknowledged that
foreign-owned carriers, for security reasons, would not likely be used
during a CRAF activation.[Footnote 11] Moreover, we believe the use of
foreign-owned companies in support of U.S. military operations could be
problematic if or when foreign-owned carriers find supporting a U.S.
contingency to be inconsistent with their national interests. For
example, in 2008, when the U.S. Transportation Command was using
Russian-based carriers to fly outsized cargo to Iraq, Afghanistan, and
other locations, U.S. military aircraft ferried Georgian troops from
Iraq back to Georgia in anticipation of a potential confrontation with
Russian troops. We believe that risk may be increased in such scenarios
in the future. Without further analysis of DOD's options for meeting
its outsized cargo needs, including the potential role of commercial
carriers, the inability of DOD to meet its needs to move outsized cargo
into areas of crisis and have that cargo arrive in a timely manner
could increase risk for DOD operations. However, DOD officials told us
that DOD is using the foreign-owned aircraft only to ease the high
stress on military aircraft and because such use is less expensive than
military aircraft, not because there is an insufficient number of
military aircraft available to fly this outsized cargo.
DOD Is Not Fully Aware of How Changes in Its Charter Passenger Airlift
Capabilities and DOD's Outsized Cargo Needs Affected CRAF Because It
Has Not Conducted Risk Assessments:
DOD is not fully aware of the extent to which these changes may have
affected the CRAF program's ability to meet DOD's future transportation
requirements because DOD has not conducted risk assessments as
described in the 2008 National Defense Strategy. In this strategy, DOD
defines risk to the national defense in terms of the potential for
damage to national security combined with the probability of occurrence
and a measurement of the consequences should the underlying risk remain
unaddressed. This strategy also states that DOD must account for future
challenges and their associated risks[Footnote 12] to meet the
objective of winning our nation's wars and describes the need to
assess, mitigate, and respond to risk in the execution of defense
programs critical to national security. In the case of the CRAF
program, risk assessments can be used to determine if there are any
gaps, shortfalls, or redundancies in the charter passenger or outsized
cargo segments that could prevent DOD from meeting future airlift
requirements.
The most recent DOD sponsored CRAF study, issued in August 2008,
predicted that passenger charter capability may become marginal, but
the capabilities reviewed in the study did not include the further
declines in this capability that occurred in 2008. The study also did
not quantify the risk associated with the passenger charter capability
decline that has already occurred. In accordance with both GAO and DOD
management internal controls,[Footnote 13] a risk assessment could
inform program managers by establishing the maximum and minimum
acceptable risk for the CRAF program. For example, it could identify
the numbers of charter passenger aircraft necessary to meet DOD
requirements. Without a risk assessment, DOD will continue to be
uncertain what the levels of required CRAF charter participation is
necessary to fulfill requirements, and DOD and industry decisions
makers will not be able to begin to take steps to address the risks.
Furthermore, according to DOD officials, DOD has not conducted a risk
assessment that examines outsized cargo movement, including the use of
commercial air carriers to supplement its military fleet, and
identifies any consequences of relying on foreign owned carriers to
meet peacetime and contingency needs. As previously stated, DOD is
using foreign-owned carriers to move MRAPs and other outsized equipment
to Afghanistan and Iraq. However, the 2005 Mobility Capabilities
Study[Footnote 14] predates the acquisition of more than 15,000
outsized MRAPs. Additionally, the August 2008 CRAF study did not assess
any CRAF outsized cargo movement. A risk assessment could determine
whether a gap, shortfall, or redundancy exists in relation to the U.S.
commercial and military outsized cargo capability. In addition, a risk
assessment could provide information to decision makers regarding the
possibility of potential damage to national security from the reliance
on foreign-owned carriers and the probability of such damage in future
contingencies. Without such a risk assessment, DOD may not know the
most effective method for transporting outsized cargo, and if any
methods present potential risk to national security.
DOD Has Not Issued Policies That Would Strengthen Management of the
CRAF Program:
DOD's management of the CRAF program has not provided CRAF air carrier
participants with a clear understanding of some critical areas of the
program, which could strengthen the program's effectiveness and the
ability to support its objectives. Although management internal
controls such as clearly articulated policies can help meet program
objectives, DOD has not developed policies related to four of the CRAF
program objectives as outlined in the National Airlift Policy. These
four objectives include: enhancing the mobilization base,[Footnote 15]
promoting aircraft modernization, increasing air carrier participation,
and providing a framework for dialogue and cooperation with commercial
air carriers. As outlined by both GAO and DOD, management internal
controls help provide reasonable assurance that, through effective
management, programs can achieve their objectives. According to these
management internal controls, one way to help assure that a program's
objectives are met is to establish clearly articulated policies.
Policies, a form of management control, are, according to U.S.
Transportation Command, intended to provide guidance and procedures to
carry out operations or achieve objectives. However, we found that CRAF
business partners do not have a clear understanding of important
aspects of the CRAF program because DOD lacks policies in critical
areas of the CRAF program that could help DOD meet its program's
objectives. U.S. Transportation Command officials have stated that the
CRAF contract with the carriers serves as policy. However, the contract
does not contain some elemental items of policy including objectives,
goals, and measures of effectiveness as outlined in GAO and DOD
management internal controls.
DOD Has Not Developed Policies Related to Four CRAF Program Objectives:
DOD Has Not Developed Policy Concerning 60/40 Rule Enforcement:
DOD has not developed policy regarding the enforcement of its business
rules, such as the 60/40 rule, that would help strengthen the CRAF
mobilization base. More than 40 years ago, DOD established measures to
ensure that CRAF air carriers had both commercial and DOD revenue
streams. These measures evolved into what is now known as the 60/40
rule, a rule defined in the CRAF solicitation allowing that no CRAF
carrier should collect more than 40 percent of its revenues from DOD
business. Carriers that earn more than 40 percent of their revenue from
DOD may be penalized by reductions in their entitlement to DOD
business. The original goals of the rule were to ensure that CRAF
carriers maintained a strong business base, efficient operations, and
modern fleets, all of which would prevent carriers from going out of
business when DOD demands were low. The rule would also provide DOD
with a surge capability to draw on if demand grew suddenly. Although
DOD created the 60/40 rule with these intended goals, several CRAF
carriers told us that they are unaware of the intent of the rule today
because they are not sure if they have to follow the rule, or if it is
even being enforced.
Some CRAF carriers have broken the 60/40 rule by depending in large
part on DOD for their revenue. However, because there is no written DOD
policy describing the rule and its enforcement, no carrier could tell
us when, or under what conditions, the rule is actually enforced.
According to airline officials, this lack of guidance affects carriers'
business plans because they are not sure whether to account for 60/40
rule compliance when determining the size their fleets. Unclear
enforcement parameters also make it difficult to plan lease or purchase
of planes or how many to acquire. Three DOD-sponsored CRAF studies
completed in the last 3 years have all given differing recommendations
regarding the 60/40 rule, adding to the ambiguity as to whether or not
the rule is or will be in effect. Additionally, it is unclear whether
or not CRAF objectives of participation and meeting DOD surge demands
are being met. Without policy that clearly states the guidelines and
objectives of the 60/40 rule, CRAF carriers may not be able to properly
size their fleets to meet DOD demands, and have the capacity for DOD to
draw on to meet demands, which may decrease the mobilization base of
the CRAF program.
DOD Has Not Developed Policy Concerning CRAF Fleet Modernization:
DOD has not developed policies that promote CRAF fleet modernization,
although DOD officials have recognized the need for a more modern CRAF
fleet. The National Airlift Policy directs that policies be created to
promote the development of technologically advanced transport aircraft
in order to ensure a commercial airlift capability. In addition, a
December 2007 DOD-sponsored CRAF study acknowledged the importance of
modernization and recommended that DOD develop policies to encourage
CRAF carriers to modernize their existing fleets. Moreover, DOD
officials have recognized the necessity of a modernized commercial air
fleet by repeatedly testifying before Congress about its importance for
the continued viability of the program.
However, DOD has not provided CRAF participants with policies that
include guidelines, objectives, or economic incentives that would
encourage modernization. Because the charter passenger industry plays
such a large role in moving DOD passengers, we believe it is in DOD's
interest to ensure the commercial airlines have guidelines and
incentives, such as a rate structure that would pay more for carriers
to fly newer airplanes, to assist in modernizing their fleets. Two of
DOD's largest remaining charter passenger carriers are flying large
numbers of aircraft listed on the Federal Aviation Administration's
Aging Aircraft List. As the December 2007 DOD-sponsored CRAF study
warned, these planes will soon be retired as the costs of inspections,
maintenance, and life-extension work becomes prohibitive. Since these
aircraft are being used to fly DOD business almost exclusively, charter
passenger carriers told us that they look to DOD to provide guidance
and incentives to modernize. DOD officials told us that they cannot
influence modernization or force the carriers to modernize. However,
without DOD policy that provides specific modernization guidelines,
CRAF carriers may not see a reason or have a business case to take
steps needed to modernize their aircraft.
DOD Has Not Developed Policy Concerning Oversight of Distribution of
Peacetime Business:
DOD has not developed policies regarding the oversight of distribution
of its peacetime airlift business, which may negatively affect CRAF air
carrier participation and may affect DOD's ability to manage the CRAF
program effectively. DOD's incentive system of contracting with CRAF
participants to fly its daily peacetime business is intended to meet
the program objective of increasing air carrier participation in CRAF
by providing each CRAF participant with a reasonable share of peacetime
business. DOD policy that includes guidance, instructions, regulations,
procedures, or rules that clarify the CRAF incentive system and some
oversight of the distribution of peacetime business would give CRAF
carriers a clearer understanding of this important process.
According to DOD officials, the process and procedures for distributing
DOD's peacetime airlift business have not been described in policy and
are not overseen by DOD. As discussed earlier, DOD awards individual
carriers points based on the number and type of aircraft they commit to
CRAF. These points become the basis of a carrier's entitlement to
compete for the procurement of peacetime passenger and cargo airlift
business. To maximize these points, the carriers have formed themselves
into three teams that have their own agreements on how the business
will be distributed among the team members. U.S. Transportation Command
officials confirmed that they distribute peacetime business to the
teams and have no further involvement in how the teams distribute
peacetime business among the members. The officials also said that they
consider the existing system to be adequate in meeting program
objectives. In the absence of DOD oversight and control, some of the
CRAF carriers have expressed concerns that peacetime business
distribution is not transparent and can be inequitable. Some CRAF
participants have told us that teams distribute DOD peacetime contracts
disproportionate to an individual air carrier's CRAF commitment. These
carriers also told us that the result is that some CRAF participants
receive less DOD business than their entitlement reflects. Some CRAF
carriers told us that the execution of the incentive system discourages
participation and, in some instances, could cause carriers to go out of
business. We understand that U.S. Transportation Command and Air
Mobility Command have no involvement with the formation of the teams or
the agreements teams have reached with their members. However, without
DOD policies and oversight over the final distribution of the peacetime
business that flows from the incentive system established by DOD, DOD
cannot be sure that this system is accomplishing its goal of enhancing
carrier participation in CRAF.
DOD Has Not Developed Policy Concerning DOD and CRAF Carrier
Communication:
DOD has not developed policy that establishes a framework for dialogue
and cooperation with commercial air carriers that would invite CRAF
participants to comment on pending program decisions and facilitate
sharing information with them. Although facilitating an effective
partnership between DOD and commercial carriers is a stated objective
of the CRAF program, airline officials stated that DOD has not involved
CRAF participants in some important program decisions that have had
significant impact on the participants' business plans. For example,
DOD announced a policy change that decreased the amount of money
carriers were reimbursed for fuel, which is allowed under the CRAF
contract. Carriers told us that they factor in fuel reimbursements in
their yearly business plans, and are not prepared to adjust to a
significant pricing change during the middle of a year, especially when
they had no knowledge of the change ahead of its implementation and
thus could not plan in advance for the effects. In addition, until
recently, DOD had not shared information from DOD-sponsored studies on
the CRAF program with CRAF carriers. For example, of the four DOD-
sponsored CRAF studies completed in the past 6 years, most carriers we
talked to told us they had neither seen nor heard of the studies until
late 2008. Of the CRAF carriers we interviewed, only one carrier
reported receiving a copy of any DOD-sponsored CRAF study.
DOD officials have said that mechanisms are in place for effective CRAF
communication between DOD and CRAF carriers, such as using trade
associations to perform what DOD officials describe as an "industrial
reality check" and holding industry days and conferences. However,
according to some carriers, communication through trade associations is
not sufficient because some carriers are not allowed a voice in
meetings, and some carriers are not members of the associations at all.
Several carriers stated that DOD has little communication with them
beyond using trade associations and annual meetings. With a clearly
described policy that establishes a framework for an effective
partnership fostering communication, DOD could strengthen its
management of the CRAF program and enhance its relationship with the
carriers, thus ensuring continued participation in CRAF.
Conclusions:
Given the importance of CRAF in moving passengers and cargo for DOD to
support peacetime and contingency operations and major operations
requiring CRAF activation, it is critical for the CRAF program to be
able to meet DOD's future needs. By policy, statute, and contract, DOD
depends on CRAF business partners that increasingly find themselves in
a challenging business environment. If the charter passenger industry
continues to decline, DOD could increasingly turn to scheduled air
carriers to fulfill the daily and Stage I requirements that are
currently being met by the charter carriers; however, the scheduled
carriers may not be willing or able to fly these missions and meet
DOD's airlift needs. Additionally, the potential absence of sufficient
outsized cargo capability could potentially jeopardize national
security by preventing DOD from accomplishing its missions due to an
inability to move outsized cargo into areas of crisis within the time
frames the commanders need it to arrive. Until risk assessments are
conducted and actions are taken to mitigate any risks that are
identified, DOD and industry decision makers will not be fully informed
about risks in the CRAF charter passenger segment and in outsized cargo
capability that could prevent CRAF from meeting DOD's airlift
requirements. Moreover, the lack of appropriate policies that address
critical areas of the CRAF program hinders DOD's ability to meet the
objectives of the program. Until DOD develops policies that provide
commercial air carriers with a clear understanding of critical aspects
of the CRAF program, such as enforcement of business rules (such as the
60/40 rule), specific modernization guidelines, distribution of
peacetime business, and a framework for communication, thus
strengthening its management of the program, DOD cannot provide
reasonable assurance that the CRAF program will meet its primary
objective of providing critical airlift to support DOD operations.
Recommendations for Executive Action:
To assist DOD with management of the CRAF program, we are making the
following two recommendations for executive action.
First, to help DOD identify and analyze risks associated with achieving
program objectives, we recommend that the Secretary of Defense direct
the Commander, U.S. Transportation Command to:
* Conduct risk assessments as outlined in DOD's National Defense
Strategy that:
- evaluate the declining U.S. charter passenger capability by
establishing the maximum and minimum acceptable risk for the CRAF
program expressed in terms of numbers of charter passenger aircraft
necessary to meet DOD requirements; and:
- evaluate the lack of an outsized cargo capability to supplement
military capability and the extent to which the reliance on foreign
owned carriers is appropriate;
* Develop appropriate policies and procedures for mitigating any
identified risks.
Second, to strengthen the effectiveness of the critical partnership
between DOD and the U.S. commercial air carrier industry and the
management of the CRAF program to achieve its objectives, we recommend
that the Secretary of Defense direct the Under Secretary of Defense for
Acquisition, Technology and Logistics (Transportation Policy) to
develop policy that:
* establishes enforcement guidelines for the basic CRAF business rules,
to include intent, objectives, and measures of effectiveness
mechanisms;
* establishes incentives, objectives and measures of effectiveness
required to ensure modernization of the CRAF fleets;
* establishes and describes oversight mechanisms by which DOD will
monitor how peacetime airlift business is distributed to ensure that
its CRAF incentive program is working as intended; and:
* establishes and describes the mechanisms by which DOD includes CRAF
participants to provide comments on pending program decisions and in
information sharing, and that includes objectives and measures of
effectiveness of these activities.
Agency Comments and Our Evaluation:
In written comments on a draft of this report, DOD did not agree with
our first recommendation to conduct risk assessments regarding the
declining charter passenger capability and the lack of an outsized
cargo capability as part of the Civil Reserve Air Fleet, but partially
agreed with that part of the recommendation to develop policies and
procedures to mitigate any identified risks. DOD agreed with our second
recommendation to develop policy for aspects of the CRAF program. DOD's
comments are reprinted in appendix II.
While DOD disagreed with our recommendation to conduct risk
assessments, DOD agreed with the value of conducting a risk assessment
on the declining U.S. charter passenger charter capability, stating
that this has already been evaluated by the CRAF viability study
conducted by IDA DOD also stated that, based on the recommendations of
the IDA study, DOD is already examining the declining passenger charter
fleet and potential mitigation strategies. However, as we stated in our
report, IDA's report included data that stopped at 2007 and did not
include data regarding the 2008 business termination of a carrier that
provided nearly 50 percent of the charter passenger capability
available to DOD. Also, while the IDA report stated that the charter
passenger industry may become marginal, data analysis that supported
this statement did not establish the maximum and minimum acceptable
risk for the CRAF program. Therefore, we continue to believe that our
recommendation to establish acceptable risk levels is still viable and
important.
DOD also disagreed with the second part of our recommendation
concerning the need to conduct a risk assessment on the lack of a CRAF
outsized cargo capability, stating that the CRAF program is not
intended to provide outsized cargo capability. In their comments, DOD
stated that its use of foreign carriers to transport outsized cargo is
a strategy to reduce costs, save military flying hours and flight crews
for higher priority missions, reduce military footprint, or provide
flexible contract length/timing. DOD also stated that it is not an
indication of a shortfall in the DOD outsize cargo capability or the
CRAF program. However, as we reported, DOD used foreign-owned carriers
flying AN-124 aircraft to move high priority outsized cargo (MRAPs)
into Iraq instead of the organic fleet of C-5s and C-17s. We did not
state that there was a shortfall in either the CRAF program or DOD
outsized capability. Rather, we point out that, if DOD is to know
whether there is a shortfall, gap, or redundancy in that capability,
particularly given the addition of over 15,000 MRAPs, they would need
to do a risk assessment. We continue to believe that a risk assessment
of this issue would give DOD specific information that would help it
shape future strategic transportation requirements.
DOD partially agreed with the third part of our recommendation
pertaining to the need to develop appropriate policies and procedures
for mitigating any identified risks regarding the decline of charter
passenger capability and lack of outsized cargo capability. DOD stated
that U.S. Transportation Command is examining potential mitigation
strategies for the declining U.S. passenger charter segment. However,
during our review, we found no evidence that U.S. Transportation
Command was developing policies and procedures to mitigate any risks
associated with declining charter passenger capability and outsized
cargo capability. DOD disagreed with the need to develop any mitigation
strategies for an outsized cargo capability since CRAF is not intended
to carry outsized cargo. As stated above, DOD's use of foreign-owned
carriers to move outsized MRAPs would lead us to believe that there
might be a future need for policies and procedures to mitigate any
shortfall or gap.
DOD agreed that there is a need for comprehensive policy governing all
of the CRAF program elements identified in our draft report. However,
DOD did not identify what, if any, specific actions it would take in
response to our recommendation. We encourage DOD to establish
enforcement guidelines for CRAF business rules; objectives and measures
of effectiveness for modernization; oversight mechanisms describing how
peacetime business should be distributed; and mechanisms for
information sharing.
We are sending copies of this report to interested congressional
committees; the Secretary of Defense; and the Under Secretary of
Defense (Acquisition, Technology and Logistics). In addition, this
report will be available at no charge on the GAO Web site at
[hyperlink, http://www.gao.gov].
If you or your staffs have any questions about this report, please
contact me at (202) 512-8365 or solisw@gao.gov. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this report. Key contributors to this report are
listed in appendix III.
Signed by:
William M. Solis:
Director, Defense Capabilities and Management:
List of Committees:
The Honorable Carl Levin:
Chairman:
The Honorable John McCain:
Ranking Member:
Committee on Armed Services:
United States Senate:
The Honorable Ike Skelton:
Chairman:
The Honorable Howard McKeon:
Ranking Member:
Committee on Armed Services:
House of Representatives:
[End of section]
Appendix I: Recent Department of Defense Studies:
Sustaining the Civil Reserve Air Fleet (CRAF) Program, Institute for
Defense Analyses, May 1, 2003.
Economic Review of the Civil Reserve Air Fleet (CRAF) Program,
Institute for Defense Analyses, December 15, 2007.
Civil Reserve Air Fleet (CRAF) Study Report, Council for Logistics
Research, July 13, 2008.
Civil Reserve Air Fleet: Economics and Strategy, Institute for Defense
Analyses, August 22, 2008.
[End of section]
Appendix II: Comments from the Department of Defense:
Deputy Under Secretary Of Defense For Logistics And Materiel Readiness:
3010 Defense Pentagon:
Washington, DC 20301-3010:
September 25, 2009:
Mr. William M. Solis:
Director, Defense Capabilities and Management:
U.S. Government Accountability Office:
441 G Street, N.W.
Washington, DC 20548:
Dear Mr. Solis:
This is the Department of Defense (DoD) response to the GAO draft
report, GAO-09-625 "Military Airlift: DoD Should Take Steps to
Strengthen Management of the Civil Reserve Air Fleet Program," dated
August 18, 2009 (GAO Code 351306). Detailed comments on the report
recommendations are enclosed.
The Department non-concurs with the first recommendation. The
Department does not agree that the lack of outsize capability in the
CRAF program needs to be addressed. The Department partially concurs
with the second recommendation, agreeing that USTRANSCOM should
continue to develop mitigating strategies for the declining passenger
charter capability. The Department concurs with the third
recommendation.
My point of contact is Lt Col Michael Holmes, OADUSD(TP), at (703) 601-
4461, extension 110.
Sincerely,
Signed by:
Alan F. Estevez:
Acting:
Enclosure: As stated:
[End of letter]
GAO Draft Report - Dated August 18, 2009:
GAO Code 351306/GAO-09-625:
"Military Airlift: DoD Should Take Steps to Strengthen Management of
the Civil Reserve Air Fleet Program"
Department Of Defense Comments To The Recommendations:
Recommendation 1: The GAO recommends that the Secretary of Defense
direct the Commander, U.S. Transportation Command to conduct risk
assessments as outlined in DoD's National Defense Strategy that:
* Evaluate the declining U.S. charter passenger capability by
establishing the maximum and minimum acceptable risk for the Civil
Reserve Air Fleet (CRAF) Program expressed in terms of numbers of
charter passenger aircraft necessary to meet DoD requirements; and;
* Evaluate the lack of an outsized cargo capability to supplement
military capability and the extent to which the reliance on foreign
owned carriers is appropriate.
DOD Response: Non-concur. DoD agrees with the value of conducting a
risk assessment on the declining U.S. charter passenger charter
capability. This has already been evaluated by the Congressionally-
mandated CRAP viability study conducted by the Institute for Defense
Analyses (IDA) for DoD. The IDA study established the likely numbers of
aircraft which would be left in the passenger charter segment in the
post-OIF/OEF business environment. It also clearly described the likely
impacts of a reduction in DoD business, including a greater potential
for more frequent CRAP activations during future contingencies unless
DoD devises new incentives for the scheduled passenger carriers to fill
the gap in capability. Based on the recommendations of the IDA study,
DoD is already examining the declining passenger charter fleet and
potential mitigation strategies.
DoD disagrees with the recommendation to have the Commander, USTRANSCOM
complete a risk assessment regarding the lack of outsize cargo
capability in the CRAP program. The CRAP program is not intended to
provide outsize cargo capability as DoD sizes its organic airlift fleet
of C-5 and C-17 aircraft to meet anticipated peak oversize and outsize
cargo requirements.
Foreign aircraft are contracted to carry outsize cargo as an
operational strategy to reduce costs, save military flying hours and
flight crews for higher priority missions, reduce military footprint,
or provide flexible contract length/timing. It is not an indication of
a shortfall in the DoD outsize cargo capability or the CRAP program.
Recommendation 2: The GAO recommends that the Secretary of Defense
direct the Commander, U.S. Transportation Command to develop
appropriate policies and procedures for mitigating any identified
risks.
DOD Response: Partially concur. USTRANSCOM is examining potential
mitigation strategies for the declining U.S. passenger charter segment.
DoD disagrees with the recommendation to develop procedures for
mitigating risks regarding the lack of outsize cargo capability in the
CRAF program, as CRAF is not intended to provide outsize cargo
capability, as described above.
Recommendation 3: The GAO recommends that the Secretary of Defense
direct the Under Secretary of Defense for Acquisition, Technology and
Logistics (Transportation Policy) to develop policy that:
* Establishes enforcement guidelines for the basic CRAF business rules,
to include intent, objectives, and measures of effectiveness
mechanisms;
* Establishes incentives, objectives and measures of effectiveness
required to ensure modernization of the CRAF fleets;
* Establishes and describes oversight mechanisms by which DoD will
monitor how peacetime airlift business is distributed to insure that
its CRAF incentive program is working as intended; and;
* Establishes and describes the mechanisms by which DoD includes CRAF
participants to provide comments on pending program decisions and
information sharing and includes objectives and measures of
effectiveness of these activities.
DOD Response: Concur. DoD agrees that there is a need for comprehensive
policy governing all of the program elements identified in the GAO
draft report.
[End of section]
Appendix III: GAO Contact and Staff Acknowledgments:
GAO Contact:
William M. Solis, (202) 512-8365 or solisw@gao.gov:
Staff Acknowledgments:
In addition to the contact named above, Ann Borseth, Assistant
Director; Renee Brown; Jeremy Hawk; Jeffrey R. Hubbard, analyst-in-
charge; Mae Jones; Karen Thornton; and Steve Woods made key
contributions to this report.
[End of section]
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http://www.gao.gov/products/GAO-08-884R]. Washington, D.C.: July 15,
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Airline Deregulation: Reregulating the Airline Industry Would Likely
Reverse Consumer Benefits and Not Save Airline Pension. [hyperlink,
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2006.
Commercial Aviation: Bankruptcy and Pension Problems Are Symptoms of
Underlying Structural Issues. [hyperlink,
http://www.gao.gov/products/GAO-05-945]. Washington, D.C.: September
30, 2005.
Commercial Aviation: Legacy Airlines Must Further Reduce Costs to
Restore Profitability. [hyperlink,
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2004.
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2003.
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2002.
[End of section]
Footnotes:
[1] National Security Decision Directive 280, June 24, 1987.
[2] There are three designations of cargo types: bulk, oversized, and
outsized. Bulk cargo is cargo that will fit on a 463L cargo system
pallet or standard commercial airline pallet/cargo container. Oversized
cargo is air cargo that exceeds the dimensions of a standard (463L)
pallet, but is air transportable on military and most civilian cargo
carriers. Outsized cargo exceeds the dimensions of oversized cargo and
requires the use of a military C-5 or C-17 aircraft or surface
transportation.
[3] See appendix I for a list of the studies.
[4] GAO, Standards for Internal Control in the Federal Government,
[hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1]
(Washington, D.C.: November 1999).
[5] DOD defines the mobilization base as the total of all resources
available, or that can be made available, to meet foreseeable wartime
needs. Such resources include the manpower and materiel resources and
services required for the support of essential military, civilian, and
survival activities, as well as the elements affecting their state of
readiness, such as planning with industry and modernization of
equipment.
[6] DOD defines the mobilization base as the total of all resources
available, or that can be made available, to meet foreseeable wartime
needs. Such resources include the manpower and materiel resources and
services required for the support of essential military, civilian, and
survival activities, as well as the elements affecting their state of
readiness, such as planning with industry and modernization of
equipment.
[7] Upon commitment and acceptance to the CRAF program, the CRAF
carrier's aircraft are assigned points based on range, payload, and
productive utilization rate, essentially determining the value of each
aircraft to the program.
[8] The National Defense Strategy defined risk in terms of the
potential for damage to national security combined with the probability
of the occurrence and the measurement of the consequences should the
underlying risk remain unaddressed.
[9] It should be noted that the teaming arrangements may provide DOD
with an additional means to enforce the contract. Under the terms and
conditions of some of these contracts the carriers are jointly and
severely liable and would be contractually bound to provide the
aircraft and services required under the terms and conditions of the
contract.
[10] All carriers must commit at least one aircraft to Stage I to be
eligible to commit to the later stages.
[11] While foreign-owned carriers cannot fly CRAF missions, foreign-
owned carriers can fly DOD (CRAF-like) chartered missions during
peacetime operations in compliance with the Fly CRAF Act. These DOD
chartered missions are contracted to CRAF participants, which
subcontract these missions to foreign-owned carriers.
[12] Future challenges risks are those associated with the department's
capacity to execute future missions successfully against an array of
prospective future challengers.
[13] GAO, Internal Control Management and Evaluation Tool, GAO-01-1008G
(Washington, D.C.: August 2001); GAO, Standards for Internal Control in
the Federal Government, [hyperlink,
http://www.gao.gov/products/GAO/AIMD-00-21.3.1] (Washington, D.C.:
November 1999); and Department of Defense Instruction 5010.40,
Managers' Internal Control Program Procedures (January 4, 2006).
[14] The Mobility Capabilities Study which began in May 2004,
reassessed DOD's mobility capabilities against the backdrop of a
revised National Military Strategy. The study results were intended to
support decisions on future strategic airlift needed to meet varying
military requirements of combat operations and smaller military
efforts. This study is the fourth in a series of major mobility studies
that DOD has conducted since the end of the Cold War.
[15] DOD defines the mobilization base as the total of all resources
available, or that can be made available, to meet foreseeable wartime
needs. Such resources include the manpower and materiel resources and
services required for the support of essential military, civilian, and
survival activities, as well as the elements affecting their state of
readiness, such as planning with industry and modernization of
equipment.
[End of section]
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