The report, dated Sept. 28, outlines the findings of the Naval Audit Service, which conducted a review of the H-1 program between May 18, 2005, and June 13, 2006.

The H-1 program is supposed to provide both light utility (UH-1) and attack (AH-1) helicopters to the Marine Corps. But the program has suffered delayed deliveries and increased costs. In May, Pentagon acquisition executive Kenneth Krieg decided to continue the program, but also directed officials to continue to examine potential alternatives to the program. He codified his decision in a memo signed June 22.

This internal audit is not a review of alternatives, but rather an assessment of the H-1 program.

Auditors determined that the program's schedule estimates had no documented baselines and, therefore, were not verifiable to ensure that schedule planning considered the impact of problems.

The report also notes that the Defense Contract Management Agency decided in March to revoke Bell's accreditation in earned value management, one of the main methods contractors and government program managers use to track the performance of contractors working on major acquisition programs.

“We found manufacturing and technical issues affecting the schedule planning of H-1 aircraft inductions,” the report states. Auditors also found the program office was unable to demonstrate the use of earned value management to track the accomplishment of contract work and related costs for completion of that work.

“As a result of these conditions, realistic schedules, work progress, and resource requirements were not verifiable,” the report states. “The management of schedule planning and tracking the expenditure of funds used for the remaining [engineering, manufacturing and development] work can be improved.”

Although the schedule estimates developed by the H-1 program office reflect input from various sources, the process, assumptions, and variables considered are not documented and verifiable, auditors concluded.

“Opportunities were missed to delay the induction of fleet aircraft during a period of unresolved manufacturing issues at the contractors' facility and increased requirements for fleet aircraft,” the report states. “There were no documented procedures for adjusting the induction schedule when necessary to ensure maximum availability of the aircraft to warfighters.”

Auditors called for improving the management of schedules by documenting the process to ensure that all assumptions, variables, and risks are clearly understood and consistently applied when considering schedule changes.

In addition, the use of earned value management to monitor the contractor's production schedule will reduce the risk of missing opportunities to maximize aircraft availability for fleet use, the report states.

Further, the report found the program office was unable to determine the cost of resolving identified technical issues that are reported as corrected. As a result, auditors concluded that program officials could not demonstrate that they were monitoring the expenditures of funds for technical issues. The report calls for improvement in this area.

Auditors recommended two corrective actions, both of which were agreed to by the Navy. The Navy's planned actions satisfy the intent of these recommendations, the report says.

The report says Navy acquisition executive Delores Etter should, at major decision points, assess the risks and potential effects when schedule estimates for the H-1 program cannot be substantiated.

The other recommendation calls for the program office to “document the methodology to adjust induction schedules, based on contractor's production scheduling, to ensure maximum availability of aircraft for fleet operational use.”

Some parts of the report were disputed by the H-1 program office, according to a July 17 Navy memo reproduced in the report.

The program office disagreed with the assertion that schedule estimates were not verifiable.

In addition, the program office only partially agreed with the finding that it did not document the methodology, facts and assumptions used to develop the initial schedule.

Further, program officials did not concur with the auditors' finding that the lack of verifiable schedule estimates and visible completion costs were internal control weaknesses.

John Milliman, a spokesman for the program, said program officials have no additional comment on the review beyond the responses that were submitted to Etter's office and included in the final report.