oversight

Defense Budget: Observations on Infrastructure Activities

Published by the Government Accountability Office on 1997-04-04.

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

                     United States General Accounting Office

GAO                  Briefing Report to the Chairman,
                     Committee on National Security
                     House of Representatives


April 1997
                     DEFENSE BUDGET
                     Observations on
                     Infrastructure
                     Activities




GAO/NSIAD-97-127BR
             United States
GAO          General Accounting Office
             Washington, D.C. 20548

             National Security and
             International Affairs Division

             B-276573

             April 4, 1997

             The Honorable Floyd D. Spence
             Chairman, Committee on National Security
             House of Representatives

             Dear Mr. Chairman:

             The Department of Defense (DOD) wants to reduce and streamline
             infrastructure to help pay for the billions of dollars that DOD projects it will
             need for modern weapon systems. On February 10, 1997, we briefed your
             staff on infrastructure activities within DOD and our budget and program
             reviews of those activities. Our briefing was based primarily on data
             included in DOD’s 1997 Future Years Defense Program (FYDP) because the
             1998 FYDP was not available for our analysis. The information we provided
             at that briefing is detailed in the sections following this letter.


             An objective of DOD’s 1993 Report on the Bottom-Up Review was to
Background   identify potential infrastructure savings and to launch a long-term process
             to reduce and streamline DOD’s infrastructure without harming readiness.
             The report stated that infrastructure activities accounted for $160 billion in
             fiscal year 1994, or about 60 percent of DOD’s total obligational authority.

             DOD  defines infrastructure as those activities that provide support services
             to mission programs, such as combat forces, and primarily operate from
             fixed locations. DOD accounts for its infrastructure activities in eight
             categories: installation support; central training; central medical; central
             logistics; force management; acquisition infrastructure; central personnel;
             and central command, control, and communications.

             Between fiscal year 1997 and 2001, DOD planned to increase its
             procurement budget from $38.9 billion to $60.1 billion, primarily to buy
             modern weapon systems and upgrades to existing systems. DOD planned to
             fund that increase with a combination of increased defense budgets,
             savings from acquisition reform, and a reallocation of funds from
             infrastructure activities to procurement.

             The FYDP is an authoritative record of current and projected force
             structure, costs, and personnel levels that have been approved by the
             Secretary of Defense. The 1997 FYDP supported the administration’s fiscal
             year 1997 budget and included budget estimates for fiscal years 1997-2001.




             Page 1                                         GAO/NSIAD-97-127BR Defense Budget
                   B-276573




                   The proportion of planned infrastructure funding in DOD’s 1997-2001
Results in Brief   budgets was projected to remain at about 60 percent, the same proportion
                   it was at the time of the Bottom-Up Review. Costs of infrastructure
                   activities were expected to increase by $9 billion, from $146 billion in
                   fiscal year 1997 to $155 billion in fiscal year 2001. About 50 percent of the
                   infrastructure is in two categories—central logistics and installation
                   support.

                   About 80 percent of infrastructure activities that can be clearly identified
                   in DOD’s FYDP are funded by a combination of the military personnel
                   (30 percent) and operation and maintenance (50 percent) appropriations.1
                   Therefore, if DOD is to reduce its infrastructure activities, it must look to
                   these appropriations for the reductions.

                   Although active military personnel were projected to decline by about
                   30 percent between fiscal year 1990 and 1997, the salaries and benefits for
                   active duty military personnel were projected to decline by only
                   13 percent. The budgets were not expected to decrease commensurate
                   with the force because the force that remains has progressively become
                   more expensive. Increases in basic pay and allowances have contributed
                   to the higher costs. Also, by 1999, each service is expected to have a higher
                   percentage of officers in its force than it had in 1990.

                   Congress has been concerned about whether the drawdown of military
                   personnel may have gone too far and imposed permanent end strength
                   levels in the National Defense Authorization Act for Fiscal Year 1996
                   (P.L. 104-106). But, our work has shown that smaller end strengths are
                   possible without reducing the number of military personnel assigned to
                   mission forces. Specifically, about 660,000, or 45 percent, of active military
                   personnel for fiscal year 1997 were to be assigned to infrastructure
                   activities. Each service is assessing ways to streamline its operations that
                   could lead to fewer active military personnel needs. DOD could achieve
                   savings in the military personnel accounts by replacing active duty military
                   personnel, who perform infrastructure functions, with less costly civilian
                   personnel.




                   1
                    In Defense Infrastructure: Budget Estimates for 1996-2001 Offer Little Savings for Modernization
                   (GAO/NSIAD-96-131, Apr. 4, 1996), we stated that there are parts of the total infrastructure funding
                   that cannot be clearly identified in the FYDP, according to DOD officials. These funds pay for goods
                   and services sold by service-specific revolving funds. The officials estimate that this is 20 to 25 percent
                   of DOD’s total infrastructure budget and is mostly logistics purchases that cannot be specifically
                   identified.



                   Page 2                                                         GAO/NSIAD-97-127BR Defense Budget
B-276573




Operation and maintenance accounts were projected to increase from
$88.3 billion in fiscal year 1990 to $95.9 billion in fiscal year 2001.
Operation and maintenance funds are often linked with the readiness of
U.S. forces; however, those funds also pay for numerous other DOD
activities and functions. Although DOD has improved operations and
reduced costs, it continues to waste billions of dollars annually on
unneeded facilities and inefficient activities. For example, DOD retains
billions of dollars of excess inventory for which it spends hundreds of
millions of dollars annually to store. Also, 40 percent of the capacity of
DOD’s 21 major depots was excess to its 1996 workload. We have reported
that, as a first step to reduce infrastructure activities, DOD needs to prepare
a plan to guide its efforts. This plan should establish time frames and
identify organizations and personnel responsible for accomplishing fiscal
and operational goals.

We did not obtain agency comments on a draft of this report because it
was based primarily on our prior work, which is noted throughout the
report.

We conducted our work between January and March 1997 in accordance
with generally accepted government auditing standards.


We are providing copies of this report to appropriate Senate and House
Committees; the Secretary of Defense; and the Director, Office of
Management and Budget. We will also provide copies to other interested
parties upon request.

Please contact me at (202) 512-3504 if you or your staff have any questions
concerning this briefing report.

Sincerely yours,




Richard Davis
Director, National Security
  Analysis




Page 3                                        GAO/NSIAD-97-127BR Defense Budget
Contents



Letter                                                                                           1


Briefing Section I                                                                               6
                       DOD Wants to Reduce Infrastructure to Help Pay for Modern                 6
Background               Weapon Systems

Briefing Section II                                                                              8
                       Comparison of Total Planned Obligational Authority to Total               8
Infrastructure in        Planned Infrastructure Funding, Fiscal Years 1997 to 2001
DOD’s Budget           DOD’s Fiscal Years 1997 to 2001 Program                                  10
                       DOD’s Fiscal Years 1997 to 2001 Program by Infrastructure                12
                         Category
                       Direct Infrastructure Funding by Appropriation, Fiscal Years 1997        14
                         to 2001 Program

Briefing Section III                                                                            16
                       Trends in Military Personnel                                             16
Military Personnel     Military Personnel in Infrastructure and Mission Programs, Fiscal        18
Accounts                 Year 1997

Briefing Section IV                                                                             20
                       Military Personnel Staffing—Condition                                    20
Reforming Military     Military Personnel Staffing—Actions Needed                               22
Personnel Functions
Briefing Section V                                                                              24
                       Trends in Operation and Maintenance Accounts                             24
Operation and          Operation and Maintenance Component: Civilian Personnel in               26
Maintenance              Workforce, Fiscal Year 1997
                       Operation and Maintenance Component: Civilian Personnel in               28
Accounts                 Infrastructure and Mission Programs, Fiscal Year 1997

Briefing Section VI                                                                             30
                       Current Infrastructure Condition                                         30
Reforming Operation    Actions Needed to Reform Systems and Processes and Reduce                32
and Maintenance          Infrastructure
Functions




                       Page 4                                     GAO/NSIAD-97-127BR Defense Budget
                        Contents




Appendix I                                                                                      34

Categories of Defense
Infrastructure




                        Abbreviations

                        DOD        Department of Defense
                        FYDP       Future Years Defense Program


                        Page 5                                    GAO/NSIAD-97-127BR Defense Budget
Briefing Section I

Background




      GAO            DOD Wants to Reduce Infrastructure to Help Pay for
                     Modern Weapon Systems

                     Infrastructure accounted for 60 percent of budget
                     authority at time of Bottom-Up Review
                     DOD wants to increase procurement funding
                     Infrastructure activities support mission activities,
                     such as combat forces, and operate primarily from
                     fixed locations




                                 Page 6                      GAO/NSIAD-97-127BR Defense Budget
Briefing Section I
Background




An objective of the Department of Defense’s (DOD) 1993 Report on the
Bottom-Up Review was to identify potential infrastructure savings and to
launch a long-term process to reduce and streamline DOD’s infrastructure
without harming readiness. The report stated that infrastructure activities
accounted for $160 billion in fiscal year 1994, or about 60 percent of DOD’s
total obligational authority.

Between fiscal year 1997 and 2001, DOD planned to increase procurement
funding from $38.9 billion to $60.1 billion, primarily to buy modern
weapon systems and upgrades to existing systems. DOD planned to fund
that increase with a combination of increased defense budgets, savings
from acquisition reform, and a reallocation of funds from infrastructure
activities to procurement.

DOD’s Future Years Defense Program (FYDP) is the most comprehensive
source of continuous defense resource data. The FYDP displays the
allocation of resources by programs and activities known as program
elements. Using the FYDP, DOD has clearly identified program elements that
fund infrastructure activities and refer to these as “direct infrastructure.”
However, there are parts of the total infrastructure funding that cannot be
clearly identified in the FYDP. According to DOD officials, these parts
account for 20 to 25 percent of DOD’s total infrastructure funding. These
funds pay mostly for logistics purchases.

DOD, in conjunction with the Institute for Defense Analysis, categorized
each of the FYDP program elements as either mission programs or
infrastructure programs. Activities and programs that produce the outputs
expected of DOD or directly support missions by deploying with the combat
forces are classified as mission programs. Activities that provide support
services to mission programs, such as combat forces, and primarily
operate from fixed locations are classified as infrastructure programs. DOD
accounts for its infrastructure activities in eight categories: installation
support; central training; central medical; central logistics; force
management; acquisition infrastructure; central personnel; and central
command, control, and communications. DOD excludes many intelligence,
space, and command, control, and communications programs from its
infrastructure even though they appear to fit DOD’s infrastructure
definition. These programs account for about $25.9 billion, or 26 percent,
of mission programs in fiscal year 1997.




Page 7                                       GAO/NSIAD-97-127BR Defense Budget
Briefing Section II

Infrastructure in DOD’s Budget




       GAO Comparison of Total Planned Obligational Authority to
                       Total Planned Infrastructure Funding, Fiscal Years
                       1997 to 2001

     Dollars in billions
     $300
                                                                                           270
                                                                        263
                                                       255
                               249
            244
     $250


     $200

                                                                                           155
            146                                        148              150
                               145
     $150


     $100


      $50


       $0
            1997              1998                   1999               2000               2001
                                                  Fiscal year

                                          Total budget Infrastructure




                                     Page 8                                    GAO/NSIAD-97-127BR Defense Budget
Briefing Section II
Infrastructure in DOD’s Budget




The 1997 FYDP supported the administration’s fiscal year 1997 budget and
included budget estimates for fiscal years 1997-2001. In May 1996, we
reported that our analysis of the infrastructure portion of the 1997 FYDP
shows that infrastructure costs are projected to increase about $9 billion,
from $146 billion in fiscal year 1997 to $155 billion in fiscal year 2001.1
Although the infrastructure portion of DOD’s budget is projected to
decrease from about 60 percent in 1997 to about 57 percent in 2001, this is
primarily because DOD’s total budget is projected to increase at a faster
rate than the infrastructure part of that budget.




1
  Defense Infrastructure: Costs Projected to Increase Between 1997 and 2001 (GAO/NSIAD-96-174,
May 31, 1996).



Page 9                                                    GAO/NSIAD-97-127BR Defense Budget
                   Briefing Section II
                   Infrastructure in DOD’s Budget




GAO DOD's Fiscal Years 1997 to 2001 Program


                              Dollars in billions

              Infrastructure $744




                                              Mission $537




                   Page 10                                   GAO/NSIAD-97-127BR Defense Budget
Briefing Section II
Infrastructure in DOD’s Budget




The total projected DOD budget for the 5-year period (1997-2001) included
in the 1997 FYDP was about $1.3 trillion. Infrastructure activities account
for about $744 billion of the $1.3 trillion total and mission activities
account for the remaining $537 billion.




Page 11                                      GAO/NSIAD-97-127BR Defense Budget
                                         Briefing Section II
                                         Infrastructure in DOD’s Budget




GAO          DOD's Fiscal Years 1997 to 2001 Program by
             Infrastructure Category


                              Central logistics   32%




                                                                                                   Installation support   16%




                               AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA
                               AAAA
                               AAAAAAAA
                                    AAAAAAAA
                                        AAAAAAAA
                                             AAAAAAAA
                                                 AAAA AAAA
                                                      AAAA AAAA
                                                           AAAA AAA
                                                                AAA
                               AAAA
                               AAAA AAAA
                                    AAAAAAAA
                                        AAAA
                                               AAAA
                                             AAAA
                                               AAAA
                                             AAAA
                                                    AAAA
                                                 AAAA
                                                    AAAA
                                                 AAAA
                                                         AAAA
                                                      AAAA
                                                         AAAA
                                                      AAAA
                                                              AAAA
                                                           AAAA
                                                              AAAA
                                                           AAAA
                                                                  AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA
                                                                AAA
                                                                AAA
                                                                  AAAA
                               AAAAAAAAAAAAAAAAAAAA
                                                 AAAA
                                                    AAAA
                                                      AAAA
                                                         AAAA
                                                           AAAA
                                                              AAAAAAAAAAAA
                                                                AAA    AAAAAAAA
                                                                            AAAAAAAA
                                                                                 AAAAAAAA
                                                                                      AAAAAAAA
                                                                                           AAAAAAAA
                                                                                                AAAAAAA
                                                                                                     AAA
                               AAAA
 Acquistion infrastructure 7% AAAA  AAAAAAAA AAAA
                                               AAAA
                                    AAAAAAAAAAAA AAAA
                                               AAAA AAAA
                                                 AAAA AAAA
                                                    AAAA AAAA
                                                      AAAA AAAA
                                                         AAAA AAAA
                                                           AAAA AAA
                                                              AAAAAAAA
                                                                AAA
                                                                  AAAA AAAA AAAA AAAA AAAA AAAA AAAAAAA
                               AAAA AAAAAAAA   AAAA
                                             AAAA   AAAA
                                                 AAAA    AAAA
                                                      AAAA    AAAA
                                                           AAAA   AAAAAAAAAAAAAAAAAAAAAAAAAAAA
                                                                AAA
                                                                       AAAA AAAA AAAA AAAA AAAA AAAAAAA
                                                                                                     AAA
                               AAAAAAAAAAAAAAAAAAAA
                                                 AAAA
                                                    AAAA
                                                      AAAA
                                                         AAAA
                                                           AAAA
                                                              AAAA
                                                                AAA
                                                                  AAAA
                                                                  AAAAAAAA
                                                                       AAAAAAAA
                                                                            AAAAAAAA
                                                                                 AAAAAAAA
                                                                                      AAAAAAAA
                                                                                           AAAAAAAA
                                                                                                AAAAAAA
                               AAAA
                               AAAAAAAA
                                    AAAAAAAA
                                               AAAA
                                        AAAAAAAA
                                             AAAA
                                               AAAA
                                                    AAAA
                                                 AAAA
                                                 AAAA
                                                    AAAA
                                                         AAAA
                                                      AAAA
                                                      AAAA
                                                         AAAA
                                                              AAAA
                                                           AAAA
                                                           AAAA AAA
                                                              AAAA
                                                                AAA
                                                                  AAAA
                                                                                                     AAA Central personnel
                                                                  AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA
                                                                       AAAA AAAA AAAA AAAA AAAA AAAA                         7%
                               AAAA
                               AAAAAAAA
                                    AAAAAAAA
                                               AAAA
                                        AAAAAAAA
                                             AAAA
                                               AAAA
                                                    AAAA
                                                 AAAA
                                                 AAAA
                                                    AAAA
                                                         AAAA
                                                      AAAA
                                                      AAAA
                                                         AAAA
                                                              AAAA
                                                           AAAA
                                                           AAAA AAA
                                                              AAAA
                                                                AAA
                                                                  AAAA AAAA
                                                                                                     AAA
                                               AAAA
                                               AAAAAAAA
                                                    AAAAAAAA
                                                         AAAAAAAA
                                                              AAAAAAAA AAAAAAAAAAAAAAAAAAAAAAAAAAA
                                                                            AAAA AAAA AAAA AAAA AAAA AAA
                                               AAAAAAAA
                                                    AAAAAAAA
                                                         AAAAAAAA AAAA
                                                              AAAAAAAA AAAA AAAA AAAA AAAA AAAA AAAA AAA
                                               AAAA               AAAAAAAA
                                                                       AAAAAAAA
                                                                            AAAAAAAA
                                                                                 AAAAAAAA
                                                                                      AAAAAAAA
                                                                                           AAAAAAAA
                                                                                                AAAAAAA
                                               AAAA AAAA AAAA AAAAAAAA AAAA AAAA AAAA AAAA
                                               AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA AAAA
                                               AAAA
                                               AAAA AAAAAAAA  AAAAAAAA AAAAAAAA  AAAAAAAA  AAAAAAAA
                                               AAAAAAAA
                                                    AAAAAAAA
                                                         AAAAAAAA
                                                              AAAAAAAA
                                                                  AAAAAAAA
                                                                       AAAAAAAA
                                                                            AAAAAAAA
                                                                                 AAAAAAAA
                                                                                      AAAAAAAA
                                                                                           AAAAAAAA
                                                                                                AAAA
                                               AAAA
                                               AAAA AAAA
                                                    AAAA AAAA
                                                         AAAA AAAA
                                                              AAAAAAAA
                                                                  AAAA AAAA
                                                                       AAAA AAAA
                                                                            AAAA AAAA
                                                                                 AAAA AAAA
                                                                                      AAAA AAAA
                                                                                           AAAAAAAA
                                                                                                AAAA
                 Central medical 11%           AAAA
                                               AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA
                                                    AAAA AAAA AAAAAAAA AAAA AAAA AAAA AAAA AAAA AAAA
                                               AAAA
                                               AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA
                                                    AAAA AAAA AAAAAAAA AAAA AAAA AAAA AAAA AAAA AAAA
                                               AAAA
                                               AAAA AAAA
                                                    AAAA AAAA
                                                         AAAA AAAA
                                                              AAAAAAAA
                                                                  AAAA AAAA
                                                                       AAAA AAAA
                                                                            AAAA AAAA
                                                                                 AAAA AAAA
                                                                                      AAAA AAAA
                                                                                           AAAA AAAA
                                                                                            Central
                                                                                                AAAA training
                                                                                                              14%
                                               AAAA
                                               AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA
                                                    AAAA AAAA AAAAAAAA AAAA AAAA AAAA AAAA AAAA
                                                                                                AAAA
       Command, control, and communications 4%
                                     Force management             9%




                                         Page 12                                                       GAO/NSIAD-97-127BR Defense Budget
Briefing Section II
Infrastructure in DOD’s Budget




The $744 billion of infrastructure included in the 1997 FYDP can be
subdivided into the eight infrastructure categories, which DOD has defined.
These categories are described in appendix I. Since most of the
infrastructure that cannot be clearly identified in the FYDP relates to
logistics purchases, we included this portion of the infrastructure in the
central logistics category.

Central logistics and installation support, the two largest categories,
together comprise almost 50 percent of infrastructure costs. As we stated
in our May 1996 report on defense infrastructure, funding for all of the
categories, except installation support, is projected to increase during the
1997-2001 period. The decline in installation support is absorbed by the
increases in the other infrastructure categories.




Page 13                                      GAO/NSIAD-97-127BR Defense Budget
                                             Briefing Section II
                                             Infrastructure in DOD’s Budget




GAO              Direct Infrastructure Funding by Appropriation, Fiscal
                 Years 1997 to 2001 Program

Dollars in billions
$140



$120
     AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA
     AAAA
     AAAAAAAA
         AAAAAAAA
             AAAAAAAA
                  AAAAAAAA
                       AAAAAAAA
                           AAAAAAAA
                                AAAAAAAA
                                     AAAAAAAA
                                         AAAAAAAA
                                             AAAAAAAA
                                                  AAAAAAAA
                                                       AAAAAAAA
                                                            AAAAAAAA
                                                                 AAAAAAAA
                                                                      AAAAAAAA
                                                                           AAAAAAAA
                                                                                AAAAAAAA
                                                                                     AAAAAAAA
                                                                                          AAAAAAAA
                                                                                               AAAAAAAA
                                                                                                    AAAAAAAA
                                                                                                         AAAAAAAA
                                                                                                              AAAAAAAA
                                                                                                                   AAAAAAAA
                                                                                                                        AAAAAAAA
                                                                                                                             AAAAAAAA
                                                                                                                                  AAAAAAAA
                                                                                                                                       AAAA
     AAAA
     AAAAAAAA
         AAAAAAAA
             AAAAAAAA
                  AAAAAAAA
                       AAAAAAAA
                           AAAAAAAA
                                AAAAAAAA
                                     AAAAAAAA
                                         AAAAAAAA
                                             AAAAAAAA
                                                  AAAAAAAA
                                                       AAAAAAAA
                                                            AAAAAAAA
                                                                 AAAAAAAA
                                                                      AAAAAAAA
                                                                           AAAAAAAA
                                                                                AAAAAAAA
                                                                                     AAAAAAAA
                                                                                          AAAAAAAA
                                                                                               AAAAAAAA
                                                                                                    AAAAAAAA
                                                                                                         AAAAAAAA
                                                                                                              AAAAAAAA
                                                                                                                   AAAAAAAA
                                                                                                                        AAAAAAAA
                                                                                                                             AAAAAAAA
                                                                                                                                  AAAAAAAA
                                                                                                                                       AAAA
$100 AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA
     AAAAAAAAAAAA AAAA AAAAAAAA AAAA AAAAAAAAAAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA
     AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA
     AAAAAAAA
     AAAAAAAAAAAA
             AAAAAAAA
                  AAAAAAAA
                       AAAAAAAA
                           AAAAAAAA
                                AAAAAAAA
                                     AAAAAAAA
                                         AAAAAAAA
                                             AAAAAAAA
                                                  AAAAAAAA
                                                       AAAAAAAA
                                                            AAAAAAAA
                                                                 AAAAAAAA
                                                                      AAAAAAAA
                                                                           AAAAAAAA
                                                                                AAAAAAAA
                                                                                     AAAAAAAA
                                                                                          AAAAAAAA
                                                                                               AAAAAAAA
                                                                                                    AAAAAAAA
                                                                                                         AAAAAAAA
                                                                                                              AAAAAAAA
                                                                                                                   AAAAAAAA
                                                                                                                        AAAAAAAA
                                                                                                                             AAAAAAAA
                                                                                                                                  AAAAAAAA
                                                                                                                                       AAAA
     AAAA
     AAAAAAAA
         AAAAAAAA
             AAAAAAAA
                  AAAAAAAA
                       AAAAAAAA
                           AAAAAAAA
                                AAAAAAAA
                                     AAAAAAAA
                                         AAAAAAAA
                                             AAAAAAAA
                                                  AAAAAAAA
                                                       AAAAAAAA
                                                            AAAAAAAA
                                                                 AAAAAAAA
                                                                      AAAAAAAA
                                                                           AAAAAAAA
                                                                                AAAAAAAA
                                                                                     AAAAAAAA
                                                                                          AAAAAAAA
                                                                                               AAAAAAAA
                                                                                                    AAAAAAAA
                                                                                                         AAAAAAAA
                                                                                                              AAAAAAAA
                                                                                                                   AAAAAAAA
                                                                                                                        AAAAAAAA
                                                                                                                             AAAAAAAA
                                                                                                                                  AAAAAAAA
                                                                                                                                       AAAA
 $80 AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA
     AAAAAAAAAAAA AAAA AAAAAAAA AAAA AAAAAAAAAAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA
     AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA                  AAAA
     AAAA
     AAAAAAAA
         AAAAAAAA
             AAAAAAAA
                  AAAAAAAA
                       AAAAAAAA
                           AAAAAAAA
                                AAAAAAAA
                                     AAAAAAAA
                                         AAAAAAAA
                                             AAAAAAAA
                                                  AAAAAAAA
                                                       AAAAAAAA
                                                            AAAAAAAA
                                                                 AAAAAAAA
                                                                      AAAAAAAA
                                                                           AAAAAAAA
                                                                                AAAAAAAA
                                                                                     AAAAAAAA
                                                                                          AAAAAAAA
                                                                                               AAAAAAAA
                                                                                                    AAAAAAAA
                                                                                                         AAAAAAAA
                                                                                                              AAAAAAAA
                                                                                                                   AAAAAAAA
                                                                                                                        AAAAAAAA
                                                                                                                             AAAAAAAA
                                                                                                                                  AAAAAAAA
                                                                                                                                       AAAA
     AAAA
     AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA
         AAAAAAAA AAAA AAAAAAAA AAAA AAAAAAAAAAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA
     AAAAAAAA
         AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA
             AAAA AAAA AAAAAAAA AAAA AAAAAAAAAAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA
 $60 AAAA
     AAAA
                                                                                                                                       AAAA
     AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA
         AAAAAAAA AAAA AAAAAAAA AAAA AAAAAAAAAAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA
     AAAA
     AAAAAAAAAAAA AAAA AAAAAAAA AAAA AAAAAAAAAAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA
     AAAAAAAA
         AAAAAAAA
             AAAAAAAA
                  AAAAAAAA
                       AAAAAAAA
                           AAAAAAAA
                                AAAAAAAA
                                     AAAAAAAA
                                         AAAAAAAA
                                             AAAAAAAA
                                                  AAAAAAAA
                                                       AAAAAAAA
                                                            AAAAAAAA
                                                                 AAAAAAAA
                                                                      AAAAAAAA
                                                                           AAAAAAAA
                                                                                AAAAAAAA
                                                                                     AAAAAAAA
                                                                                          AAAAAAAA
                                                                                               AAAAAAAA
                                                                                                    AAAAAAAA
                                                                                                         AAAAAAAA
                                                                                                              AAAAAAAA
                                                                                                                   AAAAAAAA
                                                                                                                        AAAAAAAA
                                                                                                                             AAAAAAAA
                                                                                                                                  AAAAAAAA
                                                                                                                                       AAAA
     AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA
     AAAAAAAAAAAA AAAA AAAAAAAA AAAA AAAAAAAAAAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA
 $40 AAAA
     AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA
         AAAAAAAA AAAA AAAAAAAA AAAA AAAAAAAAAAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA
     AAAA
     AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA
         AAAAAAAA AAAA AAAAAAAA AAAA AAAAAAAAAAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA
     AAAA
     AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA
         AAAAAAAA AAAA AAAAAAAA AAAA AAAAAAAAAAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA
     AAAA
     AAAAAAAA
         AAAAAAAA AAAA AAAAAAAA AAAA AAAAAAAAAAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA
 $20 AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA
             AAAA AAAA AAAAAAAA AAAA AAAAAAAAAAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA
     AAAA
     AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA
         AAAAAAAA AAAA AAAAAAAA AAAA AAAAAAAAAAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA
     AAAA
     AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA
         AAAAAAAA AAAA AAAAAAAA AAAA AAAAAAAAAAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA
     AAAA
     AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA
         AAAAAAAA AAAA AAAAAAAA AAAA AAAAAAAAAAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA
     AAAAAAAAAAAA AAAA AAAAAAAA AAAA AAAAAAAAAAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAA
  $0 AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA
   1997                           1998                             1999                              2000                               2001
                                                               Fiscal year
              Operation and                             Research,
         AAA maintenance      AA                        development,        AA Military construction AAA
         AAA                  AA Military personnel     test, and evalution AA                       AAAFamily housing   Procurement




                                             Page 14                                                          GAO/NSIAD-97-127BR Defense Budget
Briefing Section II
Infrastructure in DOD’s Budget




Although each appropriation funds some direct infrastructure activities,
about 80 percent of direct infrastructure costs are funded by military
personnel and operation and maintenance accounts, about 30 percent and
50 percent, respectively. Thus, if DOD is to achieve significant
infrastructure reductions to fund future force modernization, those
reductions must come from these appropriations. However, these
appropriations have been closely associated with the readiness and
quality-of-life of the force, the Secretary of Defense’s priority areas for the
last few years.




Page 15                                       GAO/NSIAD-97-127BR Defense Budget
Briefing Section III

Military Personnel Accounts




      GAO                Trends in Military Personnel


                                                     Active Military Only
         Dollars in billions                                                                       Personnel in millions

                                                                                                                   2.2
         80
                                                                                                                   2

         60                                                                                                        1.8

                                                                                                                   1.6
         40
                                                                                                                   1.4
         20
                                                                                                                   1.2

          0                                                                                                        1
              1990       1991   1992   1993   1994     1995        1996      1997   1998   1999   2000      2001
                                                          Fiscal year

                                                         Personnel Dollars




                                          Page 16                                           GAO/NSIAD-97-127BR Defense Budget
Briefing Section III
Military Personnel Accounts




Between 1990 and 1997, the number of active military personnel was
projected to decrease from 2.07 million to 1.46 million, or about
30 percent. During the same period, DOD’s annual budgets for active
military personnel were projected to decrease by only about 13 percent,
from $70 billion to about $61 billion. The budgets were not expected to
decrease commensurate with the force because the force that remains has
progressively become more expensive. Increases in basic pay and
allowances have contributed to the higher costs.1 Also, force reductions
left DOD with a more senior and, thus, a more expensive force. For
example, our ongoing work shows that by 1999, each service is expected
to have a higher percentage of officers in the total forces than was the case
in 1990. The projected budgets for active military personnel in the 1997
FYDP reflect DOD’s plans for a relatively stable force and pay and benefit
increases through 2001.

DOD  can reduce costs in the military personnel accounts by (1) reducing
the force, (2) changing the compensation package for military personnel,
and/or (3) changing the composition of the force. Any of these actions
would be difficult and controversial and would require collaboration
between Congress and the administration.




1
 In Defense Budget: Trends in Active Military Personnel Compensation Accounts for 1990-97
(GAO/NSIAD-96-183, July 9, 1996), we present comprehensive data on various pay categories included
in the military personnel compensation accounts and trends in those pay categories.



Page 17                                                   GAO/NSIAD-97-127BR Defense Budget
                                   Briefing Section III
                                   Military Personnel Accounts




GAO        Military Personnel in Infrastructure and Mission
           Programs, Fiscal Year 1997

                                                            Army infrastructure   170,313

           Navy infrastructure   178,134


                                                                                  Air Force
                                                                                  infrastructure 241,155
 USMC infrastructure 70,100




                                    Mission   797,298




                                   Page 18                                              GAO/NSIAD-97-127BR Defense Budget
Briefing Section III
Military Personnel Accounts




Congress has been concerned about whether the drawdown of military
personnel may have gone too far and imposed permanent end strength
levels in the National Defense Authorization Act for Fiscal Year 1996
(P.L. 104-106). But, our work has shown that smaller end strengths are
possible without reducing the number of military personnel assigned to
mission forces. In fiscal year 1997, about 797,000, or 55 percent, of all
active duty military personnel are assigned to positions DOD classified as
directly related to mission programs. The remaining 660,000, or 45 percent,
of active military personnel are assigned to positions that support
infrastructure functions. Of the military personnel that support
infrastructure functions, 36 percent are in the Air Force, 26 percent are in
the Army, 27 percent are in the Navy, and 11 percent are in the Marine
Corps. Each service is assessing ways to streamline its operations that
could lead to fewer active military personnel needs.

The proportion of active duty military personnel that support
infrastructure functions varies by service. For fiscal year 1997, 63 percent
of Air Force personnel, 34 percent of Army personnel, 44 percent of Navy
personnel, and 40 percent of Marine Corps personnel are assigned to
infrastructure functions.




Page 19                                      GAO/NSIAD-97-127BR Defense Budget
Briefing Section IV

Reforming Military Personnel Functions




      GAO             Military Personnel Staffing--Condition



                       Requirements for many noncombat positions are
                       not based on sound strategy
                       Thousands of positions staffed by military
                       personnel could be staffed by less costly civilians




                                  Our work has shown that DOD requirements for many noncombat positions
                                  are not based on sound strategy and that thousands of positions staffed by
                                  military personnel could be staffed by less costly civilians. We reported in
                                  1997 that the Army’s efforts to make its institutional force (which provides
                                  generally nondeployable support, including training, doctrine
                                  development, base operations, supply, and maintenance) more efficient
                                  and potentially smaller are hampered by long-standing weaknesses in its




                                  Page 20                                     GAO/NSIAD-97-127BR Defense Budget
Briefing Section IV
Reforming Military Personnel Functions




process to determine institutional force requirements.1 Specifically, many
of the Army’s institutional requirements are not determined through an
analysis of workload that includes analyzing what work needs to be done
based on mission and assessing how processes can be improved. Such an
analysis, when combined with the Army’s efforts to reengineer its overall
organization through functional assessments, would help the Army
determine how big its force needs to be and allocate resources efficiently
toward its highest priority institutional needs. In ongoing work, we found
that the Navy does not have an effective program for determining
personnel requirements for its shore establishment and, therefore, has
little assurance that these resources are being used efficiently and that its
shore establishment is appropriately sized.

We reported in 1994 that, although DOD policy is to use civilians wherever
possible, large numbers of military personnel perform technical,
management, administrative, and other functions that civilians typically
perform.2 DOD’s and the services’ policies allow service managers wide
latitude in filling positions with military personnel. No single directive
explains how DOD’s policy should be implemented or the specific criteria
to use in determining the appropriate mix of personnel. Therefore,
because of the broad nature of the guidance, tradition, and cultural
preferences for military incumbency, DOD and the services often merely
maintain the status quo on military incumbency. We identified
opportunities for the services to achieve operational efficiencies and
budget savings through greater use of civilian personnel in support
positions. We reported that, on average, each civilian support employee in
the United States costs about $15,000 less per year than a comparable
graded military person.

In 1996, we reported that about 9,500 military officers were staffed to
administrative and support positions in the Army, the Navy, and the Air
Force that civilians might be able to fill at lower costs and with greater
productivity due to the civilians’ much less frequent rotations.3




1
 Force Structure: Army Support Forces Can Meet Two-Conflict Strategy With Some Risks
(GAO/NSIAD-97-66, Feb. 28, 1997).
2
DOD Force Mix Issues: Greater Reliance on Civilians in Support Roles Could Provide Significant
Benefits (GAO/NSIAD-95-5, Oct. 19, 1994).
3
DOD Force Mix Issues: Converting Some Support Officer Positions to Civilian Status Could Save
Money (GAO/NSIAD-97-15, Oct. 23, 1996).



Page 21                                                   GAO/NSIAD-97-127BR Defense Budget
                 Briefing Section IV
                 Reforming Military Personnel Functions




GAO   Military Personnel Staffing--Actions Needed




           Improve processes for determining number
           and composition of noncombat positions

           Fill positions with military personnel only when
           essential




                 Page 22                                  GAO/NSIAD-97-127BR Defense Budget
Briefing Section IV
Reforming Military Personnel Functions




DOD  needs to improve its processes for determining the number and
composition of noncombat positions and to fill positions with military
personnel only when essential. In our 1997 report on the Army’s force
structure, we recommended that the Secretary of the Army improve the
management and allocation of personnel resources to the institutional
Army. Specifically, we recommended that the Secretary of the Army report
to the Secretary of Defense the Army’s long-standing problems with
implementing a workload-based analysis as a material weakness under the
Federal Managers’ Financial Integrity Act to maintain visibility of the
issue. DOD concurred with our recommendation and stated that the Army
will look at relationships and potential of new workload-based
management tools in the Quadrennial Defense Review.

In our 1994 report on DOD’s force mix, we recommended that the Secretary
of Defense establish a joint review board and provide it with a mandate to
work with the services to ensure a thorough and consistent review of
military support positions that may have potential for conversion to
civilian positions. We also recommended that the Secretary of Defense
direct the services to identify military positions that should be replaced
with civilians and eliminate, to the extent possible, impediments to using
civilians when they would be less costly. Although DOD concurred with our
recommendations, it converted no positions based on this work. In a
congressionally mandated report,4 DOD explained that large-scale
conversions of military positions would not be undertaken until its civilian
workforce stabilized at the conclusion of the drawdown.

In our October 1996 report, we recommended that the Secretary of
Defense overcome the impediments to conversion, develop a plan to
convert officer positions in support activities that are not military
essential, and require that the services implement the plan and report back
to the Secretary on the progress in implementing the plan. We also
recommended that the Secretary develop a process to ensure that the need
for military staffing in support positions is reassessed when major changes
or reorganizations occur. DOD generally concurred with our report and
acknowledged that support positions could be converted by the services
and that cost savings and other advantages can be obtained through such
conversions. DOD indicated that it would convene a series of meetings to
develop approaches to facilitate conversions.



4
 Department of Defense Report on the Civilian and Military Mix in Support Occupations, Report to the
House Committee on National Security and Senate Committee on Armed Services, Office of the Under
Secretary of Defense (Personnel and Readiness), April 1995.



Page 23                                                    GAO/NSIAD-97-127BR Defense Budget
Briefing Section V

Operation and Maintenance Accounts




      GAO                  Trends in Operation and Maintenance Accounts


     Dollars in billions                                                                                 Personnel in millions
     150                                                                                                                 2.2


                                                                                                                         2


     100                                                                                                                 1.8


                                                                                                                         1.6


       50                                                                                                                1.4


                                                                                                                         1.2


        0                                                                                                                1
            1990       1991   1992   1993      1994     1995          1996         1997   1998   1999   2000      2001
                                                            Fiscal year

                                                      Dollars Military personnel




                                            Page 24                                              GAO/NSIAD-97-127BR Defense Budget
Briefing Section V
Operation and Maintenance Accounts




While the number of active military personnel were projected to decline by
about 30 percent between fiscal year 1990 and 1997, operation and
maintenance budgets were projected to stay relatively constant, except for
the increase in 1991 due to the Persian Gulf War. From fiscal year 1997 to
fiscal year 2001, the operation and maintenance budgets are projected to
increase by 8 percent while active military personnel remain relatively
unchanged. Although the operation and maintenance appropriations do
not fund military pay and allowances, the accounts support many
readiness activities and quality-of-life programs that are affected by the
number of military personnel.

Since fiscal year 1987, the operation and maintenance accounts have been
the largest appropriation group in DOD’s budget, and they are expected to
remain the largest through fiscal year 2001. When compared with the
federal budget, DOD’s fiscal year 1997 operation and maintenance budget
request represents about 18 percent of total federal discretionary spending
and is larger than most federal agencies’ fiscal year 1997 budget requests.1
This is larger than the combined budgets of the Departments of Education,
Energy, Housing and Urban Development, Interior, and State and the
Environmental Protection Agency. Operation and maintenance
appropriations fund a diverse range of programs and activities that include
salaries and benefits for most civilian DOD employees; depot maintenance
activities; base operations; consumable supplies; and health care for active
duty service personnel, dependents of active duty personnel, and retirees
and their dependents.




1
 Discretionary programs are funded through annual appropriations acts and include such programs as
national defense, education, and law enforcement.



Page 25                                                   GAO/NSIAD-97-127BR Defense Budget
                           Briefing Section V
                           Operation and Maintenance Accounts




GAO          Operation and Maintenance Component: Civilian
             Personnel in Workforce, Fiscal Year 1997


                                                                Army 32%




        Navy/Marines 28%




                                                                      Defense agencies 18%




                           Air Force 22%
Total: 798,300




                           Page 26                                         GAO/NSIAD-97-127BR Defense Budget
Briefing Section V
Operation and Maintenance Accounts




According to DOD, over 40 percent of annual operation and maintenance
appropriations fund civilian salaries and benefits. In fiscal year 1997, DOD
was projected to have 798,300 civilian personnel. Of these, about 252,000
were assigned to Army programs, 227,000 to Navy and Marine Corps
programs, 178,000 to Air Force programs, and 142,000 to defense agencies
and DOD-wide programs.




Page 27                                      GAO/NSIAD-97-127BR Defense Budget
                           Briefing Section V
                           Operation and Maintenance Accounts




GAO    Operation and Maintenance Component: Civilian
       Personnel in Infrastructure and Mission Programs,
       Fiscal Year 1997




                                                                Mission 19%




      Infrastructure 81%




                           Page 28                                  GAO/NSIAD-97-127BR Defense Budget
Briefing Section V
Operation and Maintenance Accounts




Civilian personnel have historically provided important support to military
combat forces in peacetime and in war. Civilian personnel maintain
military installations, repair and maintain weapon systems, and provide
communications and logistical support. In some instances, civilians fill
combat-essential functions and deploy with combat troops. For example,
during the Persian Gulf War, DOD employed over 14,000 civilian employees
and contractor personnel to support its military forces. Civilians served in
a wide variety of support positions, including transportation, maintenance
and repair, and weapon systems support roles.2 In fiscal year 1997, about
648,000 of DOD’s civilian employees (81 percent) were projected to fill
positions that relate to infrastructure programs, while 150,000 (19 percent)
were projected to fill positions related to mission programs.




2
DOD Force Mix Issues: Greater Reliance on Civilians in Support Roles Could Provide Significant
Benefits (GAO/NSIAD-95-5, Oct. 19, 1994).



Page 29                                                   GAO/NSIAD-97-127BR Defense Budget
Briefing Section VI

Reforming Operation and Maintenance
Functions



      GAO             Current Infrastructure Condition



                       Many unneeded facilities exist
                       Billions of dollars of excess inventory on hand
                       Billions of dollars wasted on inefficient operations




                                 Page 30                      GAO/NSIAD-97-127BR Defense Budget
Briefing Section VI
Reforming Operation and Maintenance
Functions




Although DOD has made progress in improving key operations and
reducing costs, it continues to waste billions of dollars annually on
unneeded facilities, excess inventory, and inefficient activities. DOD has
acknowledged that it has more infrastructure than needed for the
downsized force.

We have identified potential areas where DOD could achieve savings by
reducing unneeded facilities. For example, at the time of the 1995 Base
Realignment and Closure process, DOD’s overall depot system had
40 percent excess capacity (i.e., fiscal year 1996 program workload
compared to maximum potential capacity). DOD currently has 21 major
depots—7 depots have 50 percent or more excess capacity and 3 have
between 40 and 50 percent excess capacity. After all base closure actions
are completed, DOD’s research and development laboratory infrastructure
still will have about 35 percent excess capacity, according to DOD officials.
Further, DOD is spending $51 million in military construction funds on
accounting facilities that are unneeded.

We also pointed out that maintaining inventory that is not needed is
expensive and does not contribute to an effective, efficient, and
responsive supply system. In 1996, we found that $2.7 billion of DOD’s
$8.3 billion in inventory at nonmajor locations was not needed to meet the
services’ current operating and war reserve requirements. We estimated
the services could save about $382 million annually in inventory holding
costs by eliminating the excess inventory.1

We also found instances where more efficient operations could achieve
savings. For example, to cover excessively high overhead costs, DOD
frequently charges customers double or triple the cost of basic
transportation. The high overhead costs stem in part from an outdated and
inefficient organizational structure and separate billing systems that could
be streamlined. DOD estimates its processing costs for temporary duty
travel—about $3.5 billion in fiscal year 1993—are as much as 30 percent of
the direct travel cost. This percentage is well above the 10-percent average
reported for private companies and the 6-percent rate that industry
considers an efficient operation. Other examples can be found in our
March 14, 1997, report, Addressing the Deficit: Budgetary Implications of
Selected GAO Work for Fiscal Year 1998 (GAO/OGC-97-2).




1
 Defense Inventory: Spare and Repair Parts Inventory Costs Can Be Reduced (GAO/NSIAD-97-47,
Jan. 17, 1997).



Page 31                                                 GAO/NSIAD-97-127BR Defense Budget
                 Briefing Section VI
                 Reforming Operation and Maintenance
                 Functions




GAO   Actions Needed to Reform Systems and Processes
      and Reduce Infrastructure

       Prepare a strategic plan to reduce unneeded
       infrastructure
       Consolidate facilities to eliminate excess capacity
       Shift commercial-type activities to the private
       sector
       Reengineer functions based on best practices
       Improve inventory practices and dispose of excess
       inventory




                 Page 32                               GAO/NSIAD-97-127BR Defense Budget
Briefing Section VI
Reforming Operation and Maintenance
Functions




DOD  has substantial opportunities to reduce its infrastructure costs and
realize the significant savings it needs to support modernization. In
March 1997, we reported on opportunities to reform key DOD business
practices.2 We have previously reported that, to take best advantage of
these opportunities, DOD needs to develop an overall strategic plan to
guide efforts to reduce infrastructure activities. This plan should establish
time frames and identify organizations and personnel responsible for
accomplishing fiscal and operational goals. In developing this plan, DOD
should consider using a variety of means to achieve reductions, including
consolidations, closings, reengineering, and privatizing facilities and
operations. It should also consider the need and timing for future base
closure rounds, as suggested by the 1995 Base Realignment and Closure
Commission and others.

Numerous opportunities exist for DOD to eliminate excess capacity by
consolidating workloads and closing facilities, especially in the areas of
depot maintenance, training, research, and financial accounting. Greater
efficiency could also be achieved by consolidating and eliminating
duplicate support services where military bases are located close to one
another or where similar functions are performed at multiple locations.
DOD needs to apply private industry’s best practices to reengineer key
processes, such as transportation, travel, and pay, which currently cost
much more than industry standards.

DOD needs to reform its inventory management system by adapting best
business practices to ensure that its supply system is effective, efficient,
and responsive. For example, DOD should improve its requirements
determination system and storage practices.




2
  Defense Programs: Opportunities to Reform Key Business Practices (GAO/NSIAD-97-99R,
Mar. 5, 1997).



Page 33                                                 GAO/NSIAD-97-127BR Defense Budget
Appendix I

Categories of Defense Infrastructure


               Installation support consists of activities that furnish funding, equipment,
               and personnel to provide facilities from which defense forces operate.
               Activities include construction planning and design, real property
               maintenance, base operating support, real estate management for active
               and reserve bases, family and bachelor housing, supply operations, base
               closure activities, and environmental programs.

               Acquisition infrastructure consists of all program elements that support
               program management, program offices, and production support, including
               acquisition headquarters, science and technology, and test and evaluation
               resources. This category includes earlier levels of research and
               development, including basic research, exploratory development, and
               advanced development.

               Central logistics consists of programs that provide support to centrally
               managed logistics organizations, including the management of material,
               operation of supply systems, maintenance activities, material
               transportation, base operations and support, communications, and minor
               construction. This category also includes program elements that provide
               resources for commissaries and military exchange operations.

               Central training consists of program elements that provide resources for
               virtually all non-unit training, including training for new personnel,
               aviation and flight training, military academies, officer training corps,
               other college commissioning programs, and officer and enlisted training
               schools.

               Central medical consists of programs that furnish funding, equipment, and
               personnel that provide medical care to active military personnel,
               dependents, and retirees. Activities provide for all patient care, except for
               that provided by medical units that are part of direct support units.
               Activities include medical training, management of the medical system,
               and support of medical installations.

               Central personnel consists of all programs that provide for the recruiting
               of new personnel and the management and support of dependent schools,
               community, youth, and family centers, and child development activities.
               Other programs supporting personnel include permanent
               change-of-station costs, personnel in transit, civilian disability
               compensation, veterans education assistance, and other miscellaneous
               personnel support activities.




               Page 34                                      GAO/NSIAD-97-127BR Defense Budget
           Appendix I
           Categories of Defense Infrastructure




           Command, control, and communications consists of programs that
           manage all aspects of the command, control, and communications
           infrastructure for Department of Defense facilities; information support
           services; mapping and charting products; and security support. This
           category includes program elements that provide nontactical telephone
           services, the General Defense Intelligence Program and cryptological
           activities, the Global Positioning System, and support of air traffic control
           facilities.

           Force management consists of all programs that provide funding,
           equipment, and personnel for the management and operation of all the
           major military command headquarters activities. Force management also
           includes program elements that provide resources for Defense-wide
           departmental headquarters, management of international programs,
           support to other defense organizations and federal government agencies,
           security investigative services, public affairs activities, and criminal and
           judicial activities.




(701113)   Page 35                                      GAO/NSIAD-97-127BR Defense Budget
Ordering Information

The first copy of each GAO report and testimony is free.
Additional copies are $2 each. Orders should be sent to the
following address, accompanied by a check or money order
made out to the Superintendent of Documents, when
necessary. VISA and MasterCard credit cards are accepted, also.
Orders for 100 or more copies to be mailed to a single address
are discounted 25 percent.

Orders by mail:

U.S. General Accounting Office
P.O. Box 6015
Gaithersburg, MD 20884-6015

or visit:

Room 1100
700 4th St. NW (corner of 4th and G Sts. NW)
U.S. General Accounting Office
Washington, DC

Orders may also be placed by calling (202) 512-6000
or by using fax number (301) 258-4066, or TDD (301) 413-0006.

Each day, GAO issues a list of newly available reports and
testimony. To receive facsimile copies of the daily list or any
list from the past 30 days, please call (202) 512-6000 using a
touchtone phone. A recorded menu will provide information on
how to obtain these lists.

For information on how to access GAO reports on the INTERNET,
send an e-mail message with "info" in the body to:

info@www.gao.gov

or visit GAO’s World Wide Web Home Page at:

http://www.gao.gov




PRINTED ON    RECYCLED PAPER
United States                       Bulk Rate
General Accounting Office      Postage & Fees Paid
Washington, D.C. 20548-0001           GAO
                                 Permit No. G100
Official Business
Penalty for Private Use $300

Address Correction Requested