Defense Management: Information on Selected Aspects of DOD's Jet Fuel
Program (Letter Report, 07/31/96, GAO/NSIAD-96-188).
Pursuant to a legislative requirement, GAO reviewed the Department of
Defense's (DOD) reimbursement pricing policies for the Defense Logistics
Agency's bulk and into-plane jet fuel programs, focusing on: (1) whether
the pricing policies, rules, and regulations for both fuel programs are
consistent with Defense Business Operations Fund (DBOF) policies; (2)
changes in bulk fuel usage and into-plane sales; and (3) how into-plane
jet fuel prices affect into-plane contractors' business.
GAO found that: (1) standard prices for bulk and into-plane jet fuel
programs generally comply with DBOF policies and procedures; (2) the
standard price for bulk jet fuel is designed to recover the direct costs
of supplying jet fuel; (3) DOD is unable to recover its total fuel cost
because DOD excludes the cost of fuel operations at military
installations; (4) the standard price for into-plane jet fuel is based
on product and operation costs; (5) serious weaknesses exist in DBOF
accounting and financial reporting systems; (6) although both bulk and
into-plane fuel sales have declined due to military downsizing and
realignment actions, worldwide bulk and into-plane sales have remained
relatively stable; (7) DOD bulk fuel consumption declined over 30
percent between 1991 and 1995 primarily due to a reduction of the number
of military flying hours; (8) in-plane fuel sales remained constant at 7
percent between 1991 and 1995 despite a dramatic increase and subsequent
drop-off in sales in 1993 due to the Persian Gulf War; (9) many
into-plane contractors believe that the implementation of separate
standard prices for bulk and into-plane fuel in 1993 increased
into-plane fuel prices; (10) there was no evidence that higher
into-plane prices adversely affected domestic into-plane jet fuel sales;
and (11) concerns about military aircraft stopping at air facilities
without buying fuel or paying for services were not widespread or
systematic.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: NSIAD-96-188
TITLE: Defense Management: Information on Selected Aspects of
DOD's Jet Fuel Program
DATE: 07/31/96
SUBJECT: Defense cost control
Fuel prices
Energy costs
Fuel sales
Aviation fuels
Energy industry
Intragovernmental revolving funds
Defense economic analysis
Fuel supplies
IDENTIFIER: Defense Business Operations Fund
Desert Storm
Desert Shield
DLA Bulk Fuel Program
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Cover
================================================================ COVER
Report to the Chairman and Ranking Minority Member, Subcommittee on
National Security, Committee on Appropriations, House of
Representatives
July 1996
DEFENSE MANAGEMENT - INFORMATION
ON SELECTED ASPECTS OF DOD'S JET
FUEL PROGRAMS
GAO/NSIAD-96-188
Defense Management
(709169)
Abbreviations
=============================================================== ABBREV
AFB - Air Force Base
DBOF - Defense Business Operations Fund
DFAS - Defense Finance and Accounting Service
DFSC - Defense Fuel Supply Center
DOD - Department of Defense
NATA - National Air Transportation Association
Letter
=============================================================== LETTER
B-272293
July 31, 1996
The Honorable C.W. Bill Young
Chairman
The Honorable John P. Murtha
Ranking Minority Member
Subcommittee on National Security
Committee on Appropriations
House of Representatives
In response to House Report 104-208, we reviewed the Department of
Defense's (DOD) reimbursement pricing policies for the Defense
Logistics Agency's bulk and into-plane jet fuel programs. The bulk
fuel program refers to jet fuel that the agency's Defense Fuel Supply
Center (DFSC) purchases from major commercial suppliers and
transports directly (via trucks, pipelines, barges, and railroads) to
military installations for use by military and other authorized
aircraft. The into-plane program consists of individual contracts
between DFSC and fixed-base operators\1 who provide jet fuel to
authorized aircraft at contractually established prices. These
prices are generally less than commercial prices charged at civilian
airports. The policies and procedures of the Defense Business
Operations Fund (DBOF) \2 govern the setting of standard prices for
jet fuel.
Specifically, this report discusses
-- pricing policies, rules, and regulations used to establish
standard prices for both fuel programs and whether the cost
factors used for each are consistent with applicable policies;
-- whether bulk fuel usage and into-plane sales have changed in
recent years and our assessment of the reasons for any changes;
and
-- the significance and validity of questions and complaints raised
by into-plane contractors and the National Air Transportation
Association about the effect on their businesses of DOD changes
in the pricing of into-plane jet fuel.
--------------------
\1 Organizations at civilian airports that provide fueling and other
support functions for private, corporate, and commercial aircraft.
\2 These policies and procedures are established by the DOD
Comptroller.
BACKGROUND
------------------------------------------------------------ Letter :1
In fiscal year 1995, bulk jet fuel usage by all military services
totaled about $2.7 billion and into-plane contract sales to
authorized aircraft (including the military services and other U.S.
government agencies) totaled about $152 million.\3
According to DFSC, as of May 1996, there were 305 into-plane
contractors covering about 500 airports or locations worldwide; 288
of them provided service at 340 locations in the United States. DOD
officials told us that, among the military services, the Air Force
was the major consumer of jet fuel, accounting for about 70 percent
of the total.
DOD policy stipulates that the first choice to refuel military
aircraft is bulk fuel at a military facility. When a bulk fuel
source is not available or feasible, the next preference is an
into-plane contractor. Purchasing fuel commercially without an
into-plane contract is the source of last resort. This policy dates
from the mid-1980s and was in effect prior to the establishment of
separate bulk and into-plane standard prices.
When a military aircraft refuels at a location other than its home
base, the pilot or aircrew presents a card identifying the aircraft
by tail number and home unit to the fuel supplier. When military
aircraft refuel at a military facility, the officer in charge of bulk
fuel at that facility is responsible for billing the aircraft's home
unit using the bulk fuel standard price in effect at the time. When
an aircraft uses an into-plane source to refuel, the contractor bills
and is paid by the Defense Finance and Accounting Service\4 (DFAS)
based on the per gallon price contained in his contract in effect at
the time of purchase. DFAS, in turn, bills the aircraft's home unit
for the fuel purchase using the current standard price for into-plane
fuel.
DFSC, using DBOF policies and procedures, establishes standard prices
for both the bulk and into-plane contract jet fuel programs based
primarily on costs that include purchases of product from contractors
and program administration. Standard prices represent a uniform
selling price for all services that facilitates budgeting for jet
fuel requirements and simplifies the process for billing units.
There are two commonly used military jet fuels--JP-8 and JP-5. The
Air Force and the Army primarily use JP-8 while the Navy primarily
uses JP-5 because its higher flash point is considered safer for use
aboard Navy ships. Unlike commercial jet fuels, both JP-8 and JP-5
include additives to satisfy certain military requirements.
Before DBOF was established in 1991, DFSC used one standard price to
charge the military services for jet fuel obtained from either bulk
or into-plane sources. In fiscal year 1993, however, DFSC
established separate standard prices for both fuel programs to comply
with directions from the DOD Comptroller to establish prices that
more accurately assign to DBOF customers DOD's costs of acquiring
goods and services. In addition, this action responded to
recommendations in a DOD Inspector General report\5 that all costs
incurred to obtain fuel at commercial airports be billed to
customers.
Separate standard prices, established and implemented in fiscal year
1993, resulted in a comparatively higher price for into-plane fuel.
The higher standard price for into-plane fuel generated complaints
from individual contractors as well as the National Air
Transportation Association (NATA), which represents many into-plane
contractors. The complaints were based on beliefs that (1) many
into-plane contractors were experiencing reduced sales after separate
standard prices were established and (2) many military aircraft were
landing at their airfields without buying fuel (or buying very
little) while expecting services, such as use of the facilities and
transportation support, without paying for them.
--------------------
\3 Authorized users include all DOD components, including Reserve
Components; non-DOD departments and agencies of the U.S. government;
and agencies of the governments of Canada and Germany--at U.S.
locations. These contracts do not obligate the government to
purchase any fuel from the contractor.
\4 DFAS, established in January 1991, is responsible for identifying
and implementing finance and accounting requirements, systems, and
functions for appropriated and non-appropriated funds, as well as
working capital, revolving funds and trust fund activities.
\5 Into-Plane Refueling, Office of the Inspector General, DOD, Report
Number 93-029, December 9, 1992.
RESULTS IN BRIEF
------------------------------------------------------------ Letter :2
DBOF policies governed standard pricing for both the bulk and
into-plane jet fuel programs. The standard prices used in each
program were based on appropriate cost factors and complied with
current DBOF policies. However, while the current policies as
applied to the into-plane program meet DBOF's original objective that
standard prices recover the total costs of goods and services
provided to customers, they do not in the bulk fuel program. In that
program, the current standard price is based only on the direct costs
incurred by DFSC to supply jet fuel and, therefore, excludes the cost
of fuel operations at military installations. By statute, DBOF
excludes such costs for installations that perform mission critical
functions, such as bases with combat-related missions. Although most
installations with training missions do not qualify for the
exclusion, their number is small and inclusion of all their
operations costs in the bulk fuel standard price would not materially
affect the difference between bulk and into-plane fuel standard
prices. Inclusion of these costs would only have a substantial
impact on the price difference between bulk and into-plane fuel at
specific locations if the installations were not part of a standard
pricing system.
In recent years, DOD's consumption of jet fuel has declined
significantly. The reduction is consistent with force downsizing and
related reductions in the number of military flying hours. Between
fiscal years 1991 and 1995, worldwide bulk jet fuel usage decreased
by 33 percent and the total DOD flying hour program decreased by 30
percent. Domestic into-plane fuel usage, however, declined only 7
percent. Furthermore, the proportional consumption of bulk and
into-plane jet fuel during this period remained relatively stable at
approximately 96 percent to 4 percent, respectively.
The overall decline in jet fuel usage appears to account for much of
the into-plane contractors' concerns about the effect of DOD fuel
pricing policies on their businesses. The implementation of separate
standard prices for jet fuel in 1993 produced an into-plane price
that was higher than the bulk price. A number of into-plane
contractors expressed concerns about the effect of the higher jet
fuel prices on their businesses. However, although some military
commands and units increased efforts to use bulk fuel, domestic
into-plane jet fuel sales remained constant in fiscal years 1994 and
1995 following a drop from 1993. In addition, information developed
by the NATA and selected into-plane contractors suggested that
concerns expressed about military aircraft stopping at their
facilities and not buying fuel or paying for services provided were
neither widespread nor systemic.
STANDARD JET FUEL PRICES ARE
CONSISTENT WITH CURRENT DBOF
POLICIES AND PROCEDURES
------------------------------------------------------------ Letter :3
Standard prices for bulk and into-plane jet fuel were set in
compliance with current DBOF policies and procedures. DOD 7000.14-R,
Volume 11B, Reimbursable Operations, Policy and Procedures--Defense
Business Operations Fund, dated December 1994, requires components to
establish product prices at the lowest practical level in order to
promote cost visibility/management and to motivate cost-effective
customer/supplier behavior. Further, the regulation states that an
activity or function (such as DFSC) must recover all of the direct
costs it incurs to break even. However, the 1994 regulation does not
fully meet the original intent for DBOF because it does not require
the identification of other costs of operations that are incurred by
operational components such as Air Force fighter squadrons.
Accordingly, those fuel operations costs at military bases that are
funded through the military service budgets are not included in the
bulk fuel standard price. These costs, which are incurred directly
by the individual military services--not DFSC, include contract
labor, the salaries of military personnel, and military construction.
DOD officials cited several reasons for excluding these costs.
First, in accordance with the regulation governing DBOF reimbursement
policies, DFSC computes the bulk standard price using only those
direct costs--fuel product, transportation, services, and
operations--incurred by DFSC in supplying the jet fuel. Second,
statutory provisions require the exclusion of mission critical
functions from DBOF charges. At installations with combat-related
missions, functions that are performed to maintain readiness, support
military mobilization requirements, and, in the case of the Navy,
allow for rotation of essential personnel between sea and shore duty
are considered mission critical. Third, at installations with
training-related missions, DOD also excludes fuel service costs
because they are not direct DFSC costs and because they are
associated with base fuel facilities and operations considered
integral to the functioning of the installations. Further, DOD
officials believe it would not be cost-effective to capture these
costs because the financial systems are not set up to identify and
report such costs and their inclusion would not materially affect the
standard bulk price of jet fuel. While we agree with this view, we
believe that, ideally, all costs should be captured under the DBOF
concept to help develop a standard price that could be compared to
prices offered by alternate jet fuel providers such as into-plane
contractors. However, we recognize that this may not be possible in
the near-term, given the state of existing defense accounting and
financial reporting systems that are not currently set up to capture
installation-level support costs with any precision. This problem is
not new. We recently reported that, since DBOF was established in
1991, DOD has not achieved DBOF's objectives because of serious
weaknesses in the accounting and financial reporting systems and
other difficulties in implementation.\6
--------------------
\6 See Defense Business Operations Fund: Management Issues Challenge
Fund Implementation (GAO/AIMD-95-79, Mar. 1, 1995).
COST FACTORS INCLUDED AND
EXCLUDED FROM BULK JET FUEL
STANDARD PRICE
---------------------------------------------------------- Letter :3.1
The initial standard price for into-plane fuel was established in
fiscal
year 1993 and for JP-8 was about $0.19 per gallon higher than the
bulk price. In 1994, the difference for JP-8 was $0.41 per gallon.
However, the difference is now less. For example, in fiscal year
1996, the standard price for JP-8 bulk fuel was $0.76 per gallon
compared to $0.98 per gallon for into-plane contract fuel--a
difference of $0.22 per gallon.
The standard price for bulk jet fuel is intended to recover the costs
that are directly incurred by DFSC in supplying jet fuel. The total
of these costs are divided by the quantity of fuel estimated to be
sold in that year to calculate an average cost per barrel, or
standard price. Jet fuel standard price computations start 18 months
and are finalized 9 months in advance of the fiscal year affected.
The standard price is not changed during the year without the
approval of the DOD Comptroller. According to DFSC data, the fiscal
year 1996 standard price of $0.76 per gallon for JP-8 jet fuel was
based on:
-- The cost of product ($0.60) makes up 79 percent of the standard
price.
-- The cost of transportation ($0.07) represents 9 percent of the
standard price.
-- The cost of services ($0.07) makes up 9 percent of the standard
price. Services include costs of minor construction,
maintenance, repairs, environmental compliance, and leasing of
commercial storage.
-- The cost of operations ($0.02) is 3 percent of the standard
price. The operations category covers DFSC staff (including the
salaries of military personnel assigned to DFSC) and overhead
costs.
The costs for on-base jet fuel distribution and refueling operations
are funded directly from the military services' budgets, not by DFSC
and, therefore, are not included in the standard price of jet fuel.
DOD officials stated that it is appropriate to exclude these costs
because most are mission related and essential to maintaining
military training and readiness. In this regard, 10 U.S.C. 2216
(d)(2)(C) provides that DBOF charges for goods and services may not
include amounts necessary to recover the costs of functions
designated as mission critical. This would include contract and
labor costs for fueler personnel, fueling equipment, and construction
of storage tanks. Funds for these items are largely provided in the
service appropriations for operations and maintenance, military
personnel, and military construction. According to DOD officials,
the largest excluded costs at combat or training facilities were
personnel-related--the salaries of military personnel or
contract/civilian labor costs.
The installations we visited that had combat-related missions used
military personnel to perform most of the fueling operations. Most
of the personnel had mobility ratings that required them to deploy
during contingencies or mobilization. For example,
-- Cannon Air Force Base (AFB), Clovis, New Mexico, which is under
the Air Force's Air Combat Command, used military personnel for
its fuel functions. About 76 percent of the 86 authorized
aircraft fuelers were assigned to the fighter wing stationed at
Cannon and were earmarked for mobilization.
-- Oceana Naval Air Station, Virginia Beach, Virginia, used about
50 military personnel assigned to the base to refuel aircraft
stationed there. The shore duty at Oceana enables the Navy to
provide personnel a shore rotational billet for about 24 to 36
months. These military personnel refuel aircraft aboard
deployed aircraft carriers when assigned to sea duty.
Three installations we visited had training related missions. One of
them, Luke AFB, used military personnel for base fueling operations
because its command, the Air Education and Training Command, intends
to maintain a capability to provide military fuel personnel for
deployment and mobilization missions. The other two installations,
Randolph AFB in San Antonio, Texas, and the Army's Fort Rucker,
Alabama, used civilian contractors to perform fueling functions.
Although cost information on these contracts was available at these
bases--about $5 million--it was not captured in the standard bulk
fuel price.
DOD officials cited different reasons for not including contractor
costs in its bulk fuel prices. Installation officials stated that
mission-criticality was not a factor for the contractors providing
fuel services because they had no deployment or mobilization
missions. Nevertheless, they believed these costs should be
considered "sunk" because the government's investments in its
facilities associated with aircraft fueling such as fuel equipment,
fuel storage tanks, runways, and hangars were integral to the
functioning of the base.
DOD officials also stated it would not be cost-effective to capture
these costs considering the effort that would be required to collect
accurate data or to establish a new standard pricing system for just
training bases. This is especially true given the relatively small
amount of fuel pumped at training bases when compared to combat
bases. To illustrate, a DFSC official stated that even if most
training base contract costs (mostly at facilities in the Navy and
the Air Force) were added to the bulk fuel standard price, the impact
would be approximately $0.01 per gallon. While the different reasons
for not including installation-level fueling costs in the bulk fuel
standard price appear reasonable, inclusion of these costs only would
have a substantial impact on the price difference between bulk and
into-plane fuel at specific locations if the installations were not
part of a standard pricing system.
COST FACTORS INCLUDED IN THE
STANDARD PRICE FOR
INTO-PLANE CONTRACT JET FUEL
---------------------------------------------------------- Letter :3.2
The standard price for into-plane contract jet fuel is based on two
factors: the cost of product and DFSC operations costs. DOD
officials told us in fiscal year 1996, this amounted to 98 percent
and 2 percent of the standard price, respectively.
Into-plane contractors bid on DFSC contracts based on their cost of
the jet fuel product, per-gallon fees, and their into-plane fee,
which includes the contractors' pumping costs and profit. Cost of
product is normally based on the invoices or certifications made by
the contractor's jet fuel supplier or established by the weekly
posted price in the Oil Price Information Service, a private weekly
publication that shows commercial jet fuel market prices for specific
geographic areas throughout the United States. Per-gallon fees are
those imposed by governmental or airport authorities on a per-gallon
basis, such as environmental and airport assessments, that must be
paid by the contractor. Into-plane fees are negotiated by the
contractors with DFSC and include the contractors' costs for items
such as storage, record keeping, and fuel testing. It also includes
the contractors' profit. The into-plane fees for all into-plane
contracts ranged from $0.03 to $0.57 per gallon; the fees at the
eight contractors we visited were between $0.04 to $0.49.\7
Contractors can, and some do, charge military aircraft various
handling fees such as landing and overnight parking fees when they do
not buy fuel. For example, two of the nine into-plane locations we
visited charged handling fees if the pilot did not buy fuel.
Handling fees could be charged for needed items such as landing fees,
parking fees, oxygen, or oil. We were told by base officials and
pilots at bases that they do not permit into-plane contractors to
work on their aircraft other than for minor maintenance.
--------------------
\7 The into-plane fee range is dictated by competitive market forces,
other economic conditions, negotiations, and geographic location.
For example, if the amount of fuel pumped at a location is expected
to be great and several companies bid for the DFSC contract, the
into-plane fee would likely be lower than if the projected volume
were small and there was no competition.
STATUS OF DOD'S FINANCIAL
AND ACCOUNTING SYSTEMS
---------------------------------------------------------- Letter :3.3
DBOF consolidated numerous industrial and stock funds\8 operated by
the military services and DOD in 1991. Its overriding goal is to
focus the attention of all levels of management on the total cost of
carrying out and managing a number of critical DOD business
operations, including the acquisition and distribution of jet fuel to
the military services. A basic DBOF principle is to establish prices
that recover the total costs of providing goods and services to its
customers. DBOF policies and procedures, which are established by
the DOD Comptroller, govern the pricing for jet fuel provided to
government aircraft.
We have reported serious weaknesses in the accounting and financial
reporting systems and other difficulties in DBOF's implementation and
previously concluded that additional functions and activities should
not be added to DBOF until these problems are resolved. For example,
under current systems, there is no way to (1) segregate the amount of
work military personnel do for DFSC versus the amount of work they
perform for the military service they are assigned to with any degree
of precision or (2) accurately extract fuel related costs from large
multifunction base level operations contracts. Such capabilities are
essential to establishing standard prices consistent with the intent
of DBOF. DBOF's problems are symptomatic of the weaknesses in DOD's
overall financial management environment. We, congressional
committees, and the DOD Inspector General have continually
highlighted pervasive problems in DOD's financial operations, which
we have designated as a high-risk area.\9
--------------------
\8 These are types of revolving funds that are modeled after
business-like operations except they operate on a break-even basis by
recovering the costs incurred in providing goods and services to
customers.
\9 High Risk Series: An Overview (GAO/HR-95-1, Feb. 1995).
FORCE DOWNSIZING ACTIONS
REDUCED DOD'S JET FUEL USAGE
------------------------------------------------------------ Letter :4
Both bulk and into-plane fuel sales have declined in recent years due
to the downsizing and realignment actions that have been occurring in
the wake of the end of the Cold War. However, the proportion between
worldwide bulk and into-plane fuel sales remained relatively stable
at approximately 96 percent to 4 percent, respectively.
Between fiscal years 1991 and 1995, according to service data, total
DOD flying hours dropped from about 7.2 million to just over 5
million--a decrease of 30 percent. For the same period, bulk fuel
sales reported by DFSC to the military services declined 33 percent
worldwide. Worldwide sales of into-plane fuel for the same period
dropped 48 percent. However, according to DOD officials, the size of
this drop was exaggerated by the unusually high sales in 1991
resulting from Operations Desert Shield and Desert Storm. Reported
into-plane sales--domestic and foreign--for 1991 totaled 7.5 million
barrels\10 compared to an average of about 4 million for the 4
following years. Reported domestic into-plane jet fuel sales
decreased just 7 percent over this period, however, and remained
steady in the last 2 fiscal years--1994 and 1995.
Appendixes II and III provide details and summarizes trends on the
indicators previously discussed as well as others related to DOD fuel
usage and force downsizing during fiscal years 1991-95.
--------------------
\10 One barrel equals 42 gallons.
CONTRACTOR CONCERNS DO NOT
APPEAR TO BE WIDESPREAD
PROBLEMS
------------------------------------------------------------ Letter :5
NATA officials and some of its into-plane contractor members believed
that many contractors were experiencing significant drops in their
jet fuel sales following the establishment of separate standard
prices for bulk and into-plane fuel. They also believed that many
aircraft were landing at their airfields and not buying any or buying
very little fuel while expecting the same level of service provided
by the into-plane contractor to aircraft that bought fuel. They
believed the above conditions to be widespread and systemic.
Information provided to us by NATA and individual into-plane
contractors we visited did not substantiate these concerns as being
either widespread or systemic. NATA volunteered to survey its 800
members who sell fuel (including about 250 into-plane contractors) to
document the nature and extent of their concerns. Only 53 of the 800
members responded and
21 responses were illegible or unresponsive. Of the 32 usable
responses,
-- 12 (37 percent) showed a pattern of declining sales over 2 or
more years,
-- 7 (22 percent) reported an increase in sales for at least 2
years, and
-- 13 (41 percent) indicated no clear pattern of increase or
decrease.
Further, in a follow-up survey, only 4 of the 53 who responded to the
first survey expressed any concern about government aircraft stopping
and using their facilities without buying fuel.
We found similar results at the eight into-plane contractors (at nine
sites) we visited--six of which were NATA members. DFSC domestic jet
fuel sales data for 1991 to 1995 showed six contractors experienced
stable--less than 1 percent change--or increased government sales;
three experienced sales declines in excess of 10 percent. Three
expressed concerns about military aircraft using their facilities
without purchasing fuel. Two of the three contractors charged fees
for such services.
AGENCY COMMENTS
------------------------------------------------------------ Letter :6
DOD generally agreed with the information contained in this report.
Where appropriate, we have incorporated DOD's comments and other
points of clarification throughout the report.
---------------------------------------------------------- Letter :6.1
Appendix I explains the scope of our work and the methodology used in
conducting the study. Appendix II is a summary of indicators
reflecting trends in jet fuel usage and aircraft inventory for fiscal
years 1991 through 1995. The aircraft inventory charts in appendix
II display totals for attack/fighter aircraft and bombers used by
active and reserve forces. Appendix III shows the percentage of
yearly changes in DOD indicators. Appendix IV contains a
reproduction of DOD's comments.
We are sending copies of this report to interested congressional
committees and Members of Congress; the Secretary of Defense; the
Director, Defense Logistics Agency; the Commander, Defense Fuel
Supply Center; and the Director, Office of Management and Budget. We
will also make copies available to others on request.
Please contact me at (202) 512-8412 if you or your staff have any
questions concerning this report. Major contributors to this report
are listed in appendix V.
David R. Warren, Director
Defense Management Issues
SCOPE AND METHODOLOGY
=========================================================== Appendix I
Our study of the Department of Defense's (DOD) jet fuel reimbursement
pricing policies was performed DOD-wide and included briefings and
discussions with Office of the Under Secretary of Defense
(Comptroller) and (Logistics) officials and with jet fuel managers at
the Defense Logistics Agency, the Air Force, the Army, and the Navy
headquarters.
At DOD, the military services, and the Defense Fuel Supply Center (a
component of the Defense Logistics Agency), we identified and
obtained overall information on the policies and procedures for
buying and pricing bulk and into-plane contract fuel. We also
obtained overall data on the quantities and value of jet fuel
purchased by the military services for fiscal years 1991 through 1995
to determine recent trends in sales from the Defense Fuel Supply
Center. Information provided by the Defense Fuel Supply Center is
the best available government data. We did not validate the accuracy
of the databases from which this information was obtained.
We visited seven military bases to observe the aircraft refueling
process; identify the costs associated with receipt, storage, and
distribution of jet fuel; and determine general mobilization or
contingency missions. The military installations were Andrews Air
Force Base (AFB), Maryland; Cannon AFB, Clovis, New Mexico; Randolph
AFB, San Antonio, Texas; Luke AFB, Glendale, Arizona; Fort Rucker,
Enterprise, Alabama; Fort Bliss,
El Paso, Texas; and Oceana Naval Air Station, Virginia Beach,
Virginia.
We also met with representatives of the National Air Transportation
Association to discuss their concerns and review results of a survey
(volunteered by the organization) of their into-plane contractors to
identify and document the nature and extent of member concerns. We
also visited eight into-plane contractors (at nine geographic
locations) to discuss their contracts with the Defense Fuel Supply
Center and concerns about sales of jet fuel to military and other
authorized aircraft. The into-plane contractors visited were
Andalusia-Opp Airport Authority, Andalusia, Alabama; Pensacola
Aviation Center, Inc., Pensacola, Florida; Flight International
Aviation, Inc., Newport News, Virginia; Great Southwest Aviation,
Inc., Roswell, New Mexico; Oasis Aviation, El Paso, Texas--two
locations; GTA Aviation Services, Inc., Phoenix, Arizona; Hawthorne
Aviation, Chantilly, Virginia; and Raytheon Aircraft Services, Inc.,
San Antonio, Texas.
We conducted our review from October 1995 through July 1996 in
accordance with generally accepted government auditing standards.
SELECTED DOD INDICATORS, FISCAL
YEARS 1991-1995
========================================================== Appendix II
Figure II.1: Total DOD Flying
Hours
(See figure in printed
edition.)
Source: DOD.
(See figure in printed
edition.)
Figure II.2: Bulk Jet Fuel
Sales
(See figure in printed
edition.)
Source: DOD.
(See figure in printed
edition.)
Figure II.3: Worldwide,
Domestic Into-Plane Sales
(See figure in printed
edition.)
Source: DOD.
(See figure in printed
edition.)
Figure II.4: Percent of Bulk
and Into-Plane Sales
(See figure in printed
edition.)
Source: DOD.
(See figure in printed
edition.)
Figure II.5: Air Force
Attack/Fighter Aircraft
(See figure in printed
edition.)
Source: DOD.
(See figure in printed
edition.)
Figure II.6: Air Force Heavy
Bombers
(See figure in printed
edition.)
Source: DOD.
(See figure in printed
edition.)
Figure II.7: Navy
Attack/Fighter Aircraft
(See figure in printed
edition.)
Source: DOD.
(See figure in printed
edition.)
Figure II.8: Marine Corps
Attack/Fighter Aircraft
(See figure in printed
edition.)
Source: DOD.
(See figure in printed
edition.)
PERCENTAGE CHANGE FROM PRIOR
FISCAL YEAR FOR SELECTED DOD
INDICATORS
========================================================= Appendix III
Total
percent
decline
since
Item 1992 1993 1994 1995 1991
------------------------------------ ---- ---- ---- ---- --------
Air Force attack/fighter aircraft -10 -11 -18 -6 -38
Air Force heavy bombers -11 -9 -22 -7 -42
Navy attack/fighter aircraft +3 -9 -6 -17 -26
Marine Corps attack/fighter aircraft -8 -4 -3 +1 -13
Total DOD flying hours -14 -7 -10 -3 -30
Bulk jet fuel -18 -3 -10 -5 -33
Worldwide into-plane jet fuel -61 +66 -13 -7 -48
Domestic into-plane jet fuel +6 0 -11 0 -7
----------------------------------------------------------------------
Source: GAO calculations based on DOD data.
(See figure in printed edition.)Appendix IV
COMMENTS FROM THE DEPARTMENT OF
DEFENSE
========================================================= Appendix III
MAJOR CONTRIBUTORS TO THIS REPORT
=========================================================== Appendix V
NATIONAL SECURITY AND
INTERNATIONAL AFFAIRS DIVISION,
WASHINGTON, D.C.
Brad Hathaway, Associate Director
George A. Jahnigen, Project Director
Foy D. Wicker, Project Manager
David W. Rowan, Senior Evaluator
ACCOUNTING AND INFORMATION
MANAGEMENT DIVISION, WASHINGTON,
D.C.
Gregory E. Pugnetti, Assistant Director
OFFICE OF GENERAL COUNSEL
William T. Woods, Assistant General Counsel
NORFOLK FIELD OFFICE
J. Larry Peacock, Senior Evaluator
Willie J. Cheely, Jr., Evaluator
*** End of document. ***