Table 1 describes the 17 aircraft programs and their estimated procurement funding requirements and appendix I provides details on these programs. Funding Needed for Aircraft Procurement Programs Will Exceed Historical Norms

DOD asserts that its aircraft modernization programs are affordable as planned. Funding for DOD’s aircraft purchases was at its highest point, both in dollar terms and as a percentage of the overall DOD budget, during the early to mid-1980s. Therefore, a long-term average would be more appropriate than early 1980’s historical norms as a benchmark for an analysis of funding patterns, and its use would even out the high aircraft procurement funding of the early 1980s and the lower funding of the post-Vietnam and post-Cold War eras. If DOD’s aircraft investment strategy is implemented as planned and the defense budget stabilizes at DOD’s currently projected fiscal year 2003 level (about $247 billion in constant fiscal year 1997 dollars), DOD’s projected funding for aircraft purchases will exceed the historical average percentage of the defense budget for aircraft purchases in all but 1 year between fiscal year 2000 and 2015. To increase procurement funding while keeping overall defense spending at current levels, DOD anticipates major savings will be generated from infrastructure reductions and acquisition reform initiatives, as well as increased purchasing power through significantly lower inflation projections. We found, however, that there are unlikely to be sufficient savings available to offset DOD’s projected procurement increases. DOD’s traditional approach to managing affordability problems is to reduce procurement quantities and extend production schedules without eliminating programs. Our work showed that DOD develops weapon system acquisition strategies that are based on optimistic projections of funding that are rarely achieved. If DOD’s assumptions regarding future spending for its aircraft programs do not materialize, DOD may need to (1) reduce funding for some or all of the aircraft programs; (2) reduce funding for other procurement programs; (3) implement changes in infrastructure, operations, or other areas; or (4) increase overall defense funding. DOD needs to reorient its aircraft investment strategy to recognize the reality of a constrained overall defense budget for the foreseeable future. Therefore, we recommend that the Secretary of Defense, in close consultation with the defense and budget committees of the Congress, define realistic, long-term projections of overall defense funding and, within those amounts, the portion of the annual procurement funding that can be expected to be made available to purchase new or significantly improved aircraft. Our recent reviews of DOD’s previous initiatives to reduce the costs of defense infrastructure and reengineer business practices indicate that the amount and availability of savings from such initiatives may be substantially less than DOD has estimated. Descriptions of Planned Aircraft Acquisitions

Marine Corps aircraft. At this time, the availability of savings from planned initiatives is not clearly evident. 2. The Quadrennial Defense Review does not provide sufficiently detailed projections to judge the affordability of DOD’s new aircraft procurement plans by comparing the long-term funding expected to be available with the funding needed to fully implement those plans. 3. 5.
Why GAO Did This Study

GAO reviewed the Department of Defense's (DOD) aircraft acquisition investment strategy, focusing on: (1) DOD's and the Congressional Budget Office's estimates of the annual funding needed for aircraft programs, as a percentage of the overall DOD budget, and a comparison of that percentage to a long-term historical average percentage of the defense budget; (2) the potential long-term availability of funding for DOD's planned aircraft procurements; and (3) DOD's traditional approach to resolving funding shortfalls.

What GAO Found

GAO noted that: (1) to meet its future aircraft inventory and modernization needs, DOD's current aircraft investment strategy involves the purchase or significant modification of at least 8,499 aircraft in 17 aircraft programs, at a total procurement cost of $334.8 billion (fiscal year 1997 dollars) through their planned completions; (2) DOD has maintained that its investment plans for aircraft modernization are affordable within expected future defense budgets; (3) DOD had stated earlier that sufficient funds would be available for its aircraft programs based on its assumptions that: (a) overall defense funding would begin to increase in real terms after fiscal year (FY) 2002; and (b) large savings would be generated from initiatives to downsize defense infrastructure and reform the acquisition process; (4) DOD's aircraft investment strategy may be unrealistic in view of current and projected budget constraints; (5) recent statements by DOD officials, as well as congressional projections, suggest that overall defense funding will be stable, at best, for the foreseeable future; (6) DOD's planned funding for the 17 aircraft programs in all but one year between FY 2000 and 2015 exceeds the long-term historical average percentage of the budget devoted to aircraft purchases and, for several of those years, approaches the percentages of the defense budget reached during the peak Cold War spending era of the early-to-mid-1980s; (7) the amount and availability of savings from infrastructure reductions and acquisition reform, two main claimed sources for increasing procurement funding, are not clearly evident today; (8) GAO's recent reviews of these initiatives indicate there are unlikely to be sufficient savings available to offset projected procurement increases; (9) to deal with a potential imbalance between procurement funding requirements and the available resources, DOD may need to: (a) reduce planned aircraft funding and procurement rates; (b) reduce funding for other procurement programs; (c) implement changes in force structure, operations, or other areas; or (d) increase total defense funding; (10) DOD has historically made long-term commitments to acquire weapon systems based on optimistic procurement profiles and then significantly altered those profiles because of insufficient funding; and (11) to avoid or minimize affordability problems, DOD needs to bring its aircraft investment strategy into line with more realistic, long-term projections of overall defense funding, as well as the amount of procurement funding expected to be available for aircraft purchases.