Army Budget: Potential Reductions in Tracked Combat Vehicle Programs

Published by the Government Accountability Office on 1990-11-07.

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


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                                     United States
GAO                                  General Account&g   Office
                                     Washington, D.C. 20648

                                     National Security and
                                     International Affairs Division


                                     November 7,lQQO

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

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

                                     As requested, we reviewed the Army’s fiscal year 1991 procurement
                                     budget for the Abrams Tank and the Bradley Fighting Vehicle programs,
                                     which are included in the Army’s Tracked Combat Vehicles budget, We
                                     also reviewed the Army’s implementation of the fiscal year 1990 appro-
                                     priations for these programs. Our objective was to identify opportunities
                                     for potential reductions. We briefed your staffs in July 1990 on the pre-
                                     liminary results of our review. This letter summarizes our review and
                                     appendix I discusses it in more detail.

                                     We identified potential rescissions and budget reductions of $645.9 mil-
                                     lion in the amounts requested or appropriated for these programs-
                                     $440.8 million in fiscal year 1991 and $106.1 million in fiscal year 1990.
                                     These rescissions and reductions may be possible due to (1) reduced
                                     requirements, (2) lower cost estimates, and (3) current funding that is
                                     not needed until after fiscal year 1991. Table 1 shows the potential
                                     rescissions and budget reductions by program.

Table 1: Potential Rescissions and
Budget Reductions to the Army’s      Dollars in millions
Tracked Combat Vehicles Programs                                                             Fiscal year
                                     Program                                                 1991        1990        Total
                                     Abrams Tank                                           $138.9         $80.3     $219.2
                                     Bradley Fighting Vehicle                                301.9         24.8       326.7
                                     Total                                                 $440.8       $105.1      $545.9

                                     As requested, we did not obtain written agency comments on this report.
                                     However, we discussed the contents of the report with officials from the
                                     Office of the Secretary of Defense and the Department of the Army and
                                     have incorporated their comments where appropriate. Our scope and
                                     methodology are described in appendix II.

                                     Page 1                           GAO/NSIADSl-37RR   Tracked   Combat Vehicle Programs
B-222086                                                                    a

We are sending copies of this report to the Secretaries of Defense and
the Army; the Director, Office of Management and Budget; and inter-
ested congressional committees. Copies will also be made available to
others upon request.

This report was prepared under the direction of Richard Davis, Director,
Army Issues who may be reached on (202) 275-4141 if you or your staff
have any questions. Other major contributors to this report are listed in
appendix III.

Frank C. Conahan
Assistant Comptroller General

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Page 3   GAO/NSLAD-91-37RR   Tracked   Combat Vehicle   Programs
Contents                                                                                              i

Appendix I                                                                                                 6
Potential Reductions
to the Army$ Tracked
                        Abrams Tank
                        Bradley Fighting Vehicle

Combat Vehicles
Appendix II                                                                                           10
Appendix III                                                                                          11
Major Contributors to
This Report
Table                   Table 1: Potential Rescissions and Budget Reductions to                            1
                            the Army’s Tracked Combat Vehicles Programs

                        Page 4                       GAO/NSIAD9137BB   Tracked   Combat Vehicle Programs

    Page 5   GAO/NSIAD91-37BR   Tracked   Combat Vehicle Programs
Appendix I                                                                                       4

Potential Reductions to the Army’s Tracked ’                                                             l

Combat Vehicles Procurement Programs

                       We identified potential reductions of $545,9 million from the Army’s
                       Abrams Tank and Bradley Fighting Vehicle procurement programs:
                       $440.8 million in the fiscal year 1991 budget request and $106.1 million
                       in appropriated funds for fiscal year 1990.

                       The MlAl Abrams Tank is currently in production at Army-owned,
Abram Tank             contractor-operated plants near Detroit, Michigan, and near Lima, Ohio.
                       The Army plans to award a production contract for 616 Abrams Tanks
                       in January 1991-523 for the Army and 93 for the Marine Corps and a
                       foreign country. The 523 MlAl tanks for the Army are scheduled for
                       delivery from October 1991 through March 1993. Funds appropriated in
                       fiscal year 1990 will be used to fund production of 298 of the tanks. The
                       remaining 226 tanks will be funded out of the fiscal year 1991 proposed
                       budget. The MlA2 Abrams Tank, an upgraded version of the MlAl
                       Abrams Tank, is scheduled for initial production in 1992 by shifting pro-
                       duction of 62 of the remaining 225 tanks to the MlA2 configuration.

Results of Analysis    We identified potential budget reductions of $138.9 million for fiscal
                       year 1991 and $80.3 million in potential rescissions for fiscal year 1990
                       to the Army’s Abrams Tank program. The reductions are attributable to
                       (1) reduced requirements, (2) a lower cost estimate based on information
                       available after the Army submitted its budget, and (3) eliminating funds
                       not authorized to be obligated until after fiscal year 1991.

Reduced Requirements   The Army’s fiscal year 1990 budget request called for closing the
                       Detroit tank plant-one of its two tank production plants-in Sep-
                       tember 1991. However, the Congress appropriated an additional $94.4
                       million in fiscal year 1990 to buy 33 more tanks. These extra tanks were
                       to be used to keep new tank production in both Army plants at minimum
                       sustaining rates through April 1992. These 33 tanks are part of the 523
                       tanks scheduled for contract award in January 1991,

                       The additional tanks are no longer required because the Army will now
                       only maintain assembly operations at the Lima plant from October 1991
                       through April 1992. After September 1991, the Detroit plant will remain
                       open only for manufacturing parts. Based on adjusted funding require-
                       ments provided by the Abrams Tank System Project Office, eliminating
                       these 33 tanks would result in a potential rescission of $73.7 million to
                       the fiscal year 1990 appropriation.

                       Page 6                        GAO/NSIAD-91-37BR   Tracked   Combat Vehicle Programs
                                 Appendix I
                                 Potential Reducti0n.s to the Army’8 Tracked
                                 Combat Vehicles Procurement Program13

Cost ProposalsLower Than         The Abrams Tank Project Office received lower contractor unit cost pro-
Expected                         posals for the next production lots of the basic vehicle and fire control
                                 components. These lower unit costs were obtained after the fiscal year
                                 1991 budget was submitted. As a result, there is $25.3 million in the
                                 fiscal 1991 budget request that is available for reduction, in addition to
                                 the reduction cited above, if the Congress cuts tank production by our
                                 recommended 33 unneeded tanks. The potential reduction would be
                                 $28 million if the 33 tanks remain in the program.

Funding Not Required in          The Army plans to begin production of its new MlA2 tank in 1992
ProposedBudget and Current       through the use of an engineering change order. The change order will
Appropriation                    amend a contract award, scheduled for January 1991, for 523 MlAl
                                 tanks to make 62 of them into the MlA2 tank. The Army’s fiscal years
                                 1990 appropriation and 1991 budget include $120.2 million ($113.6 mil-
                                 lion in fiscal year 1991 and $6.6 million in fiscal year 1990) for transi-
                                 tion to the MlA2 tank that the project office is not authorized to
                                 obligate until fiscal year 1992 when a production decision is scheduled.
                                 The Army will decide in January 1992 based on test results if they are
                                 going to produce the MlA2. The $120.2 million available for rescission
                                 and budget reductions includes

                             . $67.9 million       for required changes to build the MlA2 tank,
                             l $19.4 million       to test pilot and initial production tanks, and
                             l $42.9 million       for contractor technical support to complete the technical
                               data package         and prepare user manuals.

                                 Project officials agree that they are not currently authorized to obligate
                                 this funding until fiscal year 1992. However, program officials said they
                                 anticipate requesting a waiver from the Department of the Army giving
                                 them authority to obligate some portion of these funds before the pro-
                                 duction decision milestone. However, they had not determined the
                                 timing of the waiver request and the amount of funds to be involved.

                                 Through fiscal year 1989, the Army contracted for the production of
Bradley Fighting                 6,624 Bradley Fighting Vehicles. The Army’s fiscal year 1991 proposed
Vehicle                          budget, released in January 1990, was based on a plan to purchase an
                                 additional 3,000 vehicles using a 5-year, multiyear contract to produce
                                 600 vehicles each year. The multiyear procurement of the 3,000
                                 Bradleys reflected an Army procurement objective of 8,811 vehicles. As
               Y                 a result of force structure changes, the Army reduced its requirement in
                                 April 1990 to 6,724 vehicles. The Army now plans to buy an additional
                                 1,200 Bradleys to meet its needs.

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                                                                                                                -.        -
                      Appe*     1
                      Potential ReducUone to the Army’s Tracked                                                               &
                      combat Vehicle8 Procurement Progr8ma

Results of Analysis   The Army now plans to award a contract for delivery of Bradleys over
                      42 months but obligating all funds in the first 2 years. An alternate
                      strategy could achieve the Army’s objectives and offer a potential
                      rescission and budget reduction of $326.7 million from the fiscal years
                      1990 appropriation and 1991 budget.

                      The Army’s revised procurement plan, approved on July 6, 1990, calls
                      for obligating $622.8 million in available fiscal year 1990 funds’ and
                      $687.9 million requested in the fiscal year 1991 budget to award a
                      2-year, multiyear contract for 1,200 vehicles, Under this plan, the fiscal
                      year 1990 funds would be used to procure 610 vehicles and the fiscal
                      year 1991 requested funds would be used to procure the remaining 690.
                      The vehicles are scheduled to be produced over a 42-month period
                      starting in May 1991-400 to be produced in the 1st year, 300 in the
                      2nd and 3rd years, and 200 in the 4th year. Production is stretched out
                      over 42 months to maintain the production base until November 1994
                      when the production of derivative vehicles, such as the Multiple Launch
                      Rocket System, Line-of-Sight Anti-Tank vehicle, and sales to foreign
                      governments are expected to increase.

                      An alternate approach would allow the Army to keep the same
                      42-month production schedule, but not require the funding for the final
                      18 months of production (500 vehicles) to be budgeted until fiscal years
                      1992 and 1993. Under this approach, the 1st year requirements (400
                      vehicles) would be funded from the fiscal year 1990 approved program
                      and the 2nd year requirements (300 vehicles) would be funded from the
                      fiscal year 1991 planned budget. Funding for the remaining 500 vehicles
                      would not be required until fiscal years 1992-93. This funding stream
                      would follow the Army’s original S-year, multiyear contract plan
                      wherein the 1st production year was to be funded from the fiscal year
                      1990 budget; the 2nd year from the fiscal year 1991 budget; and the 3rd,
                      4th, and 5th years from the fiscal years 1992,1993, and 1994 budgets,
                      respectively. The 4-year, multiyear contract that we propose would
                      result in potential reductions in the fiscal year 1991 budget of

                      ‘There is $607.8 million in the fiscal year 1991 budget request for Bradley Fighting Vehicles. The
                      Office of the Secretary of Defense has requested congressional approval for reprogramming $86 mil-
                      lion, reducing available funds to $622.8 million.

                      Page 8                                  GAO/NSIAD9137RR        Tracked   Combat Vehicle Programa
.   Appendix I
    PotuntiaJ Reduction  to the Army’s Tracked
    Combat Vehicles Pracurement    Programa

    $301.9 million2 and potential rescissions of $24.8 million3 in the fiscal
    year 1990 appropriation.

    The Bradley Fighting Vehicle System Project Office provided us with the
    program cost estimates for the 4-year, multiyear contract strategy and
    agrees with the potential savings calculations. However, project officials
    believe the 2-year, multiyear strategy is their only available option
    because projected Army budgets after fiscal year 1991 do not currently
    contain planned funding for the procurement of Bradley Fighting Vehi-
    cles. We believe this is an administrative decision that can be revised
    and does not justify the Army’s proposed acquisition strategy.

    2The $301.9 million reduction from the fiscal year 1991 budget is the result of decreasing the vehicle
    procurement budget by $271.4 million and eliminating the advance procurement budget of $30.6

    3The $24.8 million reduction from the fiscal year 1990 budget is the result of increasing the vehicle
    procurement budget by $7.2 million and decreasing the advance procurement budget by $32 million.

    Page 9                                    GAO/NSIAD-9l-WBR       Tracked   Combat Vehicle    Progran~
Appendix II

Scopeand Methodology

              This review is one of a series that examines defense budget issues. We
              reviewed the Army’s fiscal year 1990 and 1991 funding requirements
              for the procurement of the Abrams Tank and Bradley Fighting Vehicle
              programs. These programs represented 82 percent of the Army’s pro-
              curement of Tracked Combat Vehicles fiscal year 1991 budget.

              In performing our review, we interviewed officials at the Abrams Tank
              System and Bradley Fighting Vehicle Systems Project Offices located at
              the Army Tank-Automotive Command, Warren, Michigan, and examined
              project office documents and budget support data. We also discussed our
              proposed budget reductions with Department of the Army and Office of
              the Secretary of Defense officials.

              Our review was performed from January to July 1990 in accordance
              with generally accepted government auditing standards.

              Page 10                      GAO/NSIAD91-37BR   Tracked   Combat Vehicle Programs
Appexqlix III

Mqjor Contributors to This Report

                          Henry Hinton, Associate Director
National Security and     F. James Shafer, Assistant Director
International Affairs
Division, Washington,

                          Robert W. Herman, Evaluator-in-Charge
Detroit Regional Office   Richard F. Seeburger, Site Senior
                          Gerald H. Springborn, Evaluator
                          Myron M. Stupsker, Evaluator
                          Donald A. Warda, Evaluator

(888988)                  Page 11                       GAO/NSIAD-9137RR   Tracked   Combat Vehicle Programe

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