oversight

1998 DOD Budget: Operation and Maintenance Program

Published by the Government Accountability Office on 1997-08-21.

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

      United States
GAO   General Accounting
      Washington,
                            Office
                    D.C. 20548

      National Security and
      International Affairs Division

      B-277784


      August     21,1997

      Congressional        Committees

      Subject:     1998 DOD Budget:     Oueration   and Maintenance      Proaram

      This report evaluates the military services”and the Department  of Defense’s
      (DOD) fiscal year 1998 operation and maintenance (O&M> budget requests,
      which total about $94 billion. Our objective was to determine whether the
      O&M accounts should be funded in the amounts requested.

      We reviewed selected O&M activities managed by the Army, the Navy, the Air
      Force, and DOD at the headquarters level. The activities were selected for
      review because (1) O&M funding levels are increasing, (2) ongoing and issued
      reports by us and DOD audit agencies disclosed programmatic       issues with O&M
      implications, or (3) congressional committees expressed interest.

      In March, April, and June 1997, we provided your staffs with the preliminary
      results of our work. This report summarizes and updates that information,
      but does not include any actions that may have been taken by the
      Committees      during their reviews of the services’ budget requests.    We have
      not acknowledged       these committee actions because in some cases House and
      Senate actions have varied and conference actions are still pending.
      Further, this report does not include issues such as bulk fuel that no longer
      warrant a potential reduction based on updated information.      The following
      sections briefly discuss each of the potential reductions.

      As shown in table 1, we identified potential budget reductions        of about $3.7
      billion to the fiscal year 1998 O&M budget requests.




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Table 1: Potential Reductions                                    to the Fiscal Year 1998 O&M Budget                     Requests
by Program Category

(Dollars          in millions)


  Inventory Management:

      Secondary inventory purchases           $301.3            $343.6              $ 962.9                 $1,607.8

      Inventory holding costs                   57.7             319.5                   4.5                   381.7

      Navy supplies

      hy       supply items                     15.0                                                            15.0

     Unobligated funds                         146.4             128.1                 145.1                   419.6

     Medical care delivery            I                 I                I

     Civilian personnel                        120.5               2.8                  28.1        17.7       169.1

     Training infrastructure                                      55.0       $2.9       98.5         12.0      168.4

     Pilot training requirements                 2.6              59.7                  56.3                   118.6

     Transportation                             38.1              10.7        3.2       20.8        27.3       100.1

     Environmental restoration                                                                                  73.0

     Operating Tempo                            72.5                                                            72.6

     Training aircraft                                                                  67.0                    67-Q

     Maintenance operations                     65.0                                                            66.0

     Aircraft storage                                                                   42.4                    42.4

     Aircraft engine repairs                                                            37.5                    37.5

     Depot maintenance                          27.0                                                            27s

     Combat ammunition system                                                           14.3                     14.4

     Air defense units                          11.7                                                             11.;
                                          I                 I
     Medium launch vehicles                                                              8.1                      8.1

     B-1B bomber                                                                               I

       Total                                  .$867.8           $943.4       $6.1   61,486.Sb      $436.0   83,727.g


“O&M savings would depend on whether DOD adopted any of the three B-1B options that GAO
proposed.

bFigure does not include potential                      budget reduction for B-1B bomber.




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INVENTORY       MANAGEMENT

The fiscal year 1998 budgets for spare parts for the Army, the Navy, and the
Air Force can be reduced by $2,028.5 billion for secondary inventory purchases,
inventory holding costs, Navy supplies, and Army supply items. These issues
are summarized below.

Secondarv Inventorv    Purchases

In our February 1997 report on defense logistics,’ we noted that $34 billion of
DOD’s $69.6 billion secondary inventory on hand as of September 30, 1995,
exceeded then-current   operating and war reserve requirements.  Although DOD
had reduced its inventory from $77.5 billion since September 30, 1993, about
half of the inventory continues to exceed current operating and war reserve
requirements.

Further analysis showed that inventory valued at $1.1 billion represented 100
or more years of supply. Officials cited changing requirements  as a contributing
factor for accumulating most of the inventory on hand that exceeds current
needs.

Our analyses of past DOD inventory reports show that the purchase of
inventory in excess of current requirements is a continuing problem. For
example, as of September 30, 1991, $3.6 billion, or 20.3 percent, of the $17.6
billion in inventory on contract or on purchase request exceeded then-current
operating and war reserve requirements.         As of September 30, 1995, $1.8
billion, or 21.4 percent, of the $8.6 billion in inventory on contract or on
purchase request exceeded then-current        operating and war reserve
requirements.     Our analysis of DOD’s inventory reports as of September 30,
1996, showed that at that time, the Army, the Navy, the Air Force, and the
Defense Logistics Agency had $8.6 billion of inventory either on contract or on
purchase request. These reports showed that $1.6 billion, or 18.8 percent, of
the $8.6 billion exceeded then-current      operating and war reserve requirements.

In commenting on a draft of this report, DOD officials stated that applying the
criteria used to buy new items to existing inventory is not appropriate.  They
reasoned that if decisions are made to dispose of items that are going to be


‘Defense Logistics:   Much of the Inventorv   Exceeds Current   Needs
(GAO/NSIAD-97-71,      Feb. 28, 1997).

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needed in the future, resource requirements   would actually increase
significantly. According to DOD officials, the budget request for fiscal year 1998
already includes inventory reductions during the year of $2.8 billion. Prices
have been reduced to reflect these savings. DOD officials stated that further
reductions cannot be absorbed within supply management cash and income
levels and must be passed to customers where it will drastically affect their
programs.

We recognize that DOD is cutting back its inventories due to downsizing and
other factors. However, as we indicated, even though DOD has made
reductions in inventory purchases to reflect this downsizing, over time it
continues to have items on contract that are beyond its needs. Further, DOD
officials could not provide documentation  to show that the fiscal year 1998
budget had been reduced by $2.8 billion to reflect inventory reductions they said
were taken during the year. We believe further reductions in this area are
possible. As we pointed out, DOD purchases that are excess to current needs
run at about 20 percent. We consistently reported that more modern inventory
practices such as the use of a prime vendor concept for consumable hardware
items would help to avoid this situation.   Therefore, DOD’s fiscal year 1998
O&M budget request could be reduced by $1.6 billion to minimize the amount of
inventory excess to current needs. The individual     reductions are $301.3 million
for the Army, $343.6 million for the Navy, and $962.9 million for the Air Force.

Inventor-v   Holding   Costs

In January 1997,2 we reported that most of the services’ inventory items stored
at nonmajor locations were in small quantities.      In fact, over 53 percent of the
items were in quantities of three or fewer, while only 25 percent were in
quantities of 11 or more. The inventory at the nonmajor locations was valued
at over $8.3 billion. Of the $8.3 billion of inventory at the nonmajor locations,
$2.7 billion of it was not needed to meet the services’ then-current     operating
and war reserve requirements.     Our analysis also showed that many of the
Army items3 were infrequently    issued over the 2-year period ending August


2Defense Inventor-v:     Snare and Repair Parts Inventorv   Costs Can Be Reduced
(GAO/NSLAD-97-47,        Jan. 17, 1997).

31nformation was not readily available from the Air Force and the Navy to
determine the number of inventory issues on an item-by-item   basis at each
storage location.

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1996. Over 53 percent of the items at nonmajor storage locations had no issues,
and an additional 33 percent of the items had fewer than five issues during the
same time period.

On the basis of our analysis of the holding costs assigned to each inventory
item, we determined the services could reduce their annual inventory holding
costs by about $382 million by eliminating    inventory at nonmajor locations that
is not needed to meet current operating and war reserve requirements.       Our
analysis indicated that the Army was paying holding costs for 4,735 line items
of inventory that were excess to then-current    operating and war reserve
requirements;    the Navy was paying holding costs for 95,989 of such excess line
items; and the Air Force was paying holding costs for 822 of these excess line
items.    We calculated the holding costs for these excess line items using the
services’ variable holding costs per item.

The services’ fiscal year 1998 O&M budget requests could be reduced by about
$382 million to eliminate inventory excess to current requirements at the
nonmajor storage locations by attrition,   consolidation, or disposal. The Army’s,
the Navy’s, and the Air Force’s requests could be reduced by $57.7 million,
$319.5 million, and $4.5 million, respectively.

Naw   Supplies

We reported in August 1996,4 that the Navy’s item managers did not have
adequate visibility over the $5.7 billion in operating materials and supplies on
board ships and at its 17 redistribution     sites. We found that, because of this
lack of visibility,  materials and supplies valued at $883 million, or 15 percent,
were excess to then-current     operating allowances or needs. Lacking adequate
visibility, item managers incurred unnecessary costs of about $27 million in the
first half of fiscal year 1995 as a result of ordering or purchasing items that
were on hand at operating locations and classified as excess. Our review of
item managers’ forecasted spending plans for the second half of fiscal year 1995
and fiscal years 1996 and 1997 found planned purchases of items considered
excess at the operating level that could result in the Navy’s incurring about $38
million in unnecessary costs. This means that over a S-year period, the Navy
purchased or planned to purchase $65 million in items that were excess to


4Naw Financial Manaaement:       Imnroved Management of Operating Materials
and Sunnlies Could Yield Sianificant Savings (GAO/A.IMD-96-94,  Aug. 16,
1996).

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then-current   needs. Assuming that future planned purchases follow this
pattern, we estimate that for fiscal year 1998, the Navy will purchase items in
excess of current requirements costing over $21 million.

In this same report, we also recommended that the Navy close its 17
redistribution  sites, which are consumer-level storage facilities located in the
same general geographical areas as the wholesale supply activities.       According
to Congressional Budget Office (CBO) estimates, eliminating       the 17 sites would
reduce associated operating costs by $3 million in fiscal year 1998.

In June 1997, the Navy told us it was implementing       automated initiatives     to
improve the visibility of assets on ships and at redistribution    sites. It also said
that it had incorporated these anticipated improvements into its fiscal year
 1998 budget request. However, the Navy did not provide us with sufficient data
to verify its reductions to the fiscal year 1998 request or the cost savings
anticipated as a result of its planned improvements.      Therefore, we continue to
believe that the Navy’s fiscal year 1998 O&M budget request could be reduced
by $24 million ($21 million for operating materials and supplies in excess of
current requirements     and $3 million for its redundant redistribution    sites) to
improve its visibility over operating materials and supplies and eliminate the
redundancy in distributing    these supplies.

Armv   Sunnlv Items

A March 1997 U.S. Army Audit Agency report found that the acquisition data
in the Army’s Total Asset Visibility capability were inaccurate or incomplete.5
For example, at the U.S. Army Aviation and Troop Command and the U.S.
Army Communications-Electronics         Command, acquisition data for about $7.7
billion in assets ordered by project and product managers were not in the Total
Asset Visibility   capability.   The U.S. Army Audit Agency also found that project
and product manager personnel generally were not using the Total Asset
Visibility capability to make buy, repair, or redistribution     decisions. For
 example, at two commodity commands, the U.S. Army Audit Agency used the
 Total Asset Visibility   capability to identify about $13.3 million in excess assets
 on hand at retail and wholesale activities that the two commands could have
 used to reduce planned acquisitions or fill back-ordered requisitions.     Also,
 materiel managers at the commodity commands did not consider excess assets


 5Total Asset Visibilitv   Acauisition   Data, U.S. Army Audit   Agency (AA 97-135,
 Mar. 3, 1997).

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stored at a redistribution    center operated by U.S. Army Forces Command before
they made buy or distribution       decisions. The U.S. Army Audit Agency used the
Total Asset Visibility    capability to identify about $1.7 million in excess assets
stored at the distribution    center that the commodity commands could have used
to reduce planned acquisitions or fill back orders.

In June 1997, the Army reported that it was working to resolve issues discussed
in the U.S. Army Audit Agency report and to validate its data. The Army said
that it believed that making reductions in fiscal year 1998 would be premature.
However, we continue to believe that the Army’s fiscal year 1998 O&M budget
request could be reduced by $15 million ($13.3 million for excess assets on hand
at retail and wholesale activities and $1.7 million for excess assets stored at the
distribution  center operated by Forces Command).

UNOBLIGATED        FUNDS

Unobligated balances of expired prior years’ O&M appropriations         are generally
not available for new obligations but may be used for upward adjustments          to
existing obligations for the specific fiscal year of the appropriation.    These
expired unobligated balances may be used to fund upward adjustments for 5
fiscal years after the year of appropriation.   At the end of 5 years, the
remaining balances are canceled.

As of September 30, 1996, the Army, the Navy, and the Air Force had
unobligated balances from prior year appropriations     totaling $1.9 billion
($713.20 million for the Army, $563.52 million for the Navy, and $626.22
million for the Air Force). Service officials have stated that unobligated
balances are needed to satisfy upward adjustments to obligations that have not
yet been liquidated.   Our analysis shows that unobligated balances have been
increasing rather than decreasing and that the average annual increase for each
service over the last 4 years has been $146.36 million for the Army, $128.05
million for the Navy, and $145.06 for the Air Force. The reason for the
increasing balances is that the amount of the liquidations      is generally less than
the amount initially obligated.

Our analysis showed that the average annual increase in the unobligated
balances was $419.6 million.   In view of this overall trend in inaccurately
establishing either requested amounts or obligations for specific projects, the
services’ fiscal year 1998 O&M budget requests could be reduced by this amount
to more accurately reflect what is actually needed. The individual     reductions


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are $146.4 million   for the Army,   $128.1 million   for the Navy, and $145.1 million
for the Air Force.

MEDICAL     CARE DELIVERY

DOD’s managed care system--TRICARE--is         intended to make health care
benefits uniform regardless of venue, but some cost sharing is still based on
where patients receive their care. Under TRICARE, beneficiaries pay the same
enrollment fees whether they are enrolled with a military or civilian primary
care manager. However, subsequent cost sharing--in the form of copayments for
visits--is not required for care provided in military clinics but is required for
care from civilian providers.   We have testified and issued several reports6
about problems controlling costs as well as the inequities in the military health
service system.

According to CBO estimates, DOD could save $305 million in its Defense Health
Program in fiscal year 1998 by establishing beneficiary cost-sharing
requirements for care received in military hospitals that are similar to the cost
sharing for care that beneficiaries receive from civilian providers. Therefore,
Congress could direct DOD to effect this change and correspondingly    reduce
DOD’s fiscal year 1998 request for its Defense Health Program by $305 million
or use this amount to offset any shortfall in that program.

CMLIAN      PERSONNEL

The services’ and DOD’s fiscal year 1998 budget requests for civilian         personnel
could be reduced by $169.1 million7 because (1) the projected civilian        personnel


‘Defense Health Care: New Managed Care Plan Progressing. but Cost and
Performance Issues Remain (GAO/HEHS-96-128,       June 14, 1996); Defense
Health Care: Despite TRICARE Procurement Imnrovements.        Problems Remain
(GAO/HEHS-95-142,    Aug. 3, 1995); Defense Health Care: DOD’s Managed Care
Proaram Continues to Face Challenges (GAO/T-HEHS-95-117,       Mar. 28, 1995);
Defense Health Care: Issues and Challenges Confronting Militarv Medicine
(GAO/HEHS-95-104,    Mar. 22, 1995); Defense Health Care: Lessons Learned
From DOD’s Managed Health Care Initiatives    (GAO/T-HRD-93-21,     May 10,
 1993).

7While the majority of the reductions apply to the O&M appropriation,           there are
reductions that apply to other direct appropriations.

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levels at the beginning of fiscal year 1998 will be less than those the services
used to determine their 1998 budget requests and (2) the amount requested in
the budget requests differs from the amount shown in the budget justification
documents.

Based on the number of Army, Navy, Air Force, and DOD civilian personnel on-
board as of June 30, 1997, we estimate that the end strength at the end of fiscal
year 1997--the beginning figure for fiscal year 1998--will be 11,091 personnel
less than the figure used by the services to determine their fiscal year 1998
budget requests. Because the services estimated that more personnel will be on
board at the beginning of fiscal year 1998, the requested work years are
overstated by about 5,547 work years.

Additionally,  we found that the total amount shown in the President’s budget
for civilian personnel was $8 million less than the amount shown in justification
documents, for a net overstatement of $169.1 million (see table 2).




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Table 2: Civilian     Personnel     Overstatement       for Fiscal Year 1998

(Dollars in millions)




“Actual end strength far fiscal year 1997 as of June 1997 is projected based on historical   staffing
patterns that account for end-of-month reporting of temporary hires and retirements.

bEquivalent work years multiplied by the applicable average annual compensation rates; these rates
differ by service and the appropriation used to fund civilian positions, such as Army Military
Construction ($41,832) and Army Research, Development, Test and Evaluation ($61,016).

‘Selected DOD agencies (Defense Logistics Agency, Defense Investigative Service, DOD Inspector
General, Defense Information Systems Agency, Defense Contract Audit Agency, and Defense
Dependents Education). Some DOD agencies are presented in the President’s budget in total under
Defensewide appropriations and cannot be broken out separately for this analysis.

Because of the overstated personnel requirements,   the services’ fiscal year 1998
civilian personnel budget requests could be reduced by $169.1 million.     The
individual reductions are $120.5 million for the Army, $2.8 million for the Navy,
$28.1 million for the Air Force, and $17.7 million for other DOD agencies.

TRAINING       INFRASTRUCTURE

In our March 1996 report,8 we reported that the cost of providing formal
military training and education to individuals     increased significantly from fiscal
years 1987 through 1995. During that period, the training cost per student
increased by over $19,000--from about $53,194 to $72,546. (After considering
the effect of inflation, the cost per student increased by about $4,200 a year.)
This cost differential when multiplied    by the fiscal year 1995 training workload



‘DOD Training:  Onportunities Exist to Reduce the Training                      Infrastructure
(GAOLNSIAD-96-93, Mar. 29, 1996).

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shows that training costs since fiscal year 1987 have increased about $745
million more than normal inflation, even though the training workload has
decreased.

DOD and the services have completed several actions to reduce the training
infrastructure,   and even more actions will be implemented over the next several
years. The actions are intended to (1) reduce the number of locations where a
particular course is taught, (2) increase interservice training, and (3) increase
the use of private sector instructors  and facilities. Additionally, the Base
Realignment and Closure Commission’s actions to close and realign bases where
training is conducted are also expected to reduce the training infrastructure.
However, an overall plan to guide and measure the progress of reducing the
training infrastructure   is lacking.

The lack of a management information       system with reliable cost data within the
various training categories makes it difficult for DOD to evaluate the overall
effectiveness of alternate methods of providing training and to assess whether
actions taken to reduce costs are achieving the expected results. The need for
reliable data and a system for evaluating it has become even more critical
because excess training infrastructure   identified in the future will be difficult to
eliminate in the absence of a BRAGlike      process.

Congress could ensure that DOD addresses these problems by capping the
funding level for formal education and training at the fiscal year 1997
appropriation  level. Therefore, the services’ and DOD’s fiscal year 1998 O&M
budget requests could be reduced as shown in table 3.




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Table 3: Potential Reductions                to DOD’s and the Services’ Fiscal Year 1998
O&M Request for Training

(Dollars   in millions)

                           Fiscal year 1997                Fiscal year         Potential
                           O&M funding level               1998 request        reduction
  Navy                                       $639.2              $694.2             $55.0
  Marine    Corps                              41.1                 44.0               2.9
IIAir   Force          I                      636.8 1             735.3 I             98.5
IIDefense-wide”        I                      152.2 1              164.2 1            12.0
  Totalb                                $1,469.3       1       $1,637.7    1       $168.4

“Defense-wide   figures include recruiting    costs.

‘Totals exclude the k-my because the Army’s fiscal year 1998 request of $592 million has been
reduced from the fiscal year 1997 appropriated level of $614.4 million. Thus, we have not
recommended a reduction.

PILOT      TRAINING         REQUIREMENTS

Our February 1997 report’ showed that for fiscal year 1996, the Army, the
Navy, the Marine Corps, and the Air Force had designated 11,336 positions, or
about 25 percent of all aviator positions, as nonflying positions to be filled by
aviators. In determining   their aviator training requirements,  the services
consider both flying and nonflying positions. Including nonflying positions
increases the total aviator requirements and results in the services’ projecting
aviator shortages in the upcoming fiscal years. To compensate for this
perceived shortage, the services plan to increase the number of pilots it trains
between fiscal year 1997 and 2001, as shown in table 4.




‘DOD Aviator Positions: Training Reauirements                         and Incentive          Pav Could Be
Reduced (GAO/NSIAD-97-60,    Feb. 19, 1997).

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Table 4: Number    of Pilots to Be Trained


 Fiscal year 1 Army     Navy      Marine   Corps
                          569 1              307 I
                          633 1              322 1          900 II
     1999    I    570     645 1              322 1        1.025 11
                          645 1              322 1        1,025 II
                          645 1              322 1        1,050 II
 Total       1 2,722    3,137 I            1,595 I        4,654   11

As shown in table 5, there are more than enough aviators          available   to satisfy all
flying position requirements through fiscal year 2001.




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Table 5: Flying         Requirements   Versus Available    Pilots




  2001            Air    Force          13,074                      11,168    1,906

                  Navy                    7,912                      5,788    2,124

                  Marine Corps            3,240                      2,618      622

                  Army                    9,583                      9,162      421




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To the extent that the number of nonflying pilot positions could be filled by
nonaviators, the pilot training requirements  could be reduced. About $5 million
in cost savings could be achieved over several years for each Navy, Marine
Corps, and Air Force pilot candidate and about $366,000 for each Army
helicopter pilot candidate not trained.

The services have not reviewed their nonflying positions to determine which
ones could be filled by nonaviators.    However, even if only 5 percent of the
positions could be converted to nonaviator positions, the savings in pilot
training costs would be significant.    For example, assuming that the number of
pilots the services plan to train in fiscal year 1998 were reduced by 5 percent--
about 122 pilot candidates--and    the average training cost is $5 million for the
Navy, the Marine Corps, and the Air Force and $366,000 for the Army, the total
reduction in pilot training costs would be about $474.3 million.      According to
service officials, it takes about 4 years to fully train a pilot. Therefore, on
average, the $474.3 million in reduced training costs equates to about $118.6
million a year.

The services’ fiscal year 1998 O&M budget requests could be reduced by $118.6
million based on a 5-percent reduction of pilots to be trained and the services’
average training cost per pilot. The individual amounts are $2.6 million for the
Army, $59.7 million for the Navy, and $56.3 million for the Air F0rce.l’

U.S. TRANSPORTATION         COMMAND

The U.S. Transportation   Command (USTRANSCOM)          is responsible for
providing air, land, and sea transportation services to the military forces.
These services are provided through USTRANSCOM’s          three component
commands: the Military Traffic Management Command, the Air Mobility
Command, and the Military Sealift Command. USTRANSCOM                operates under
the Air Force Working Capital Fund, formerly the Defense Business Operations


“For example, the Army plans to train 576 pilots in fiscal year     1998. The total
pilot reduction for fiscal year 1998 would be 28.8, or 5 percent,   of 576 pilots.
Total training costs would be $10.5 million (28.8 pilot reduction    multiplied    by
the $366,000 average training cost). The average training cost      per year would
be $2.6 million ($10.5 million divided by the 4 years it takes to   fully train a
pilot). The Navy receives the training funds and pays the pilot     training costs
for the Marine Corps. Therefore, the Navy’s potential reduction       of $59.7 million
includes $20.1 million for the Marine Corps.

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Fund system of financial management.     Under this arrangement, DOD
customers request transportation services from USTKANSCOM’s        component
commands, which contract for the services and bill the customers for those
services. DOD guidance requires that USTKANSCOM         recover its total cost
from its customers. Customers generally pay for the transportation     services
with O&M funds.

In February 1996,11 we reported that DOD customers pay USTRANSCOM
substantially  more--from 24 percent to 201 percent--than      it costs
USTKANSCOM        to provide the transportation     services. For example, customers
may pay the Military Traffic Management Command and the Military Sealift
Command $3,800 to arrange for shipment of a container load from California to
Korea. However, the commercial carrier may charge USTKANSCOM                 only
$1,250 for providing the transportation     service. The increased transportation
costs are due to factors such as (1) fragmented transportation       processes, (2)
multiple organizational    elements to implement these processes, and (3)
component commands’ organizational        structures that require duplicative
administrative   and support activities.

The Fiscal Year 1996 Defense Appropriation      and Authorization    Conference
Reports requested that DOD report on measures being taken to improve the
efficiency of the transportation organizations  and infrastructure   under
USTRANSCOM’s         control. DOD reported that USTFLANSCOM, the Joint Staff,
the services, the Office of the Secretary of Defense, and worldwide customers
had aggressively implemented a wide range of organizational        and process
efforts to reduce overhead, improve efficiency, and ensure a defense
transportation   system capable of meeting the challenges of the twenty-first
century. DOD stated that for fiscal years 1993 through 1999, these efforts will
result in savings in excess of $500 million.

If USTRANSCOM       makes the needed organizational      changes and realizes
anticipated savings, the services will need fewer O&M funds to pay for the more
efficient and less costly USTRANSCOM      transportation    services. In our
September 1996 report on DOD’s fiscal year 1997 O&M budget, we suggested
that Congress might wish to reduce USTRANSCOM’s            Defense Business
Operating Fund budget by $250 million, or 5 percent, to encourage



 ‘IDefense Transnortation: Streamlining  of the U.S. Transnortation     Command        Is
 Needed (GAOLNSIAD-96-60,    Feb. 22, 1996).

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USTRANSCOM         to make the needed organizational changes.12 The Fiscal Year
1997 Appropriations    Act reduced the services’ O&M accounts by $100 million to
reflect anticipated USTRANSCOM       reengineering and streamlining savings.

Based on the fact that USTRANSCOM           anticipates savings in fiscal year 1998,
USTRANSCOM’s        fiscal year 1998 O&M budget request could be reduced by
$100 million.   This amount represents a level of savings roughly commensurate
with USTRANSCOM          savings estimates.13 The reduction should be allocated
among the services based on the percentage of total transportation        services that
each of the military services and other DOD activities obtains from
USTRANSCOM.         The individual reductions are $38.1 million for the Army,
$10.7 million for the Navy, $3.2 million for the Marine Corps, $20.8 million for
the Air Force, and $27.3 million for other DOD activities.

DOD officials commented on a draft of this report that the fiscal year 1998
budget reflects the cumulative fiscal years 1993-1997 savings in the fiscal year
1997 funding level and a final savings increment of $44.3 million in fiscal year
1998. DOD stated that the additional $100 million reduction will not result in
saving any more actual transportation       costs and will result in significant
underfunding    of the transportation   accounts. According to DOD officials,
insufficient transportation   funds will impact training and could curtail troop
rotations which will adversely affect morale and readiness.

We recognize DOD and USTRANSCOM               have taken steps intended to improve
defense transportation       processes and achieve savings. However, if DOD is
making reductions in USTRANSCOM’s            budget to reflect savings, we have no
evidence that savings of approximately       $500 million in transportation  costs
have resulted in lowered transportation       rates to O&M defense customers. Our
preliminary    analysis shows that transportation     rates have continued to increase
through fiscal year 1997. The rates for fiscal year 1998 are not available to us
at this time. The intent of our recommendation         is to encourage USTRANSCOM
to pass on the savings in transportation      costs to defense customers so more
transportation    capabilities can be procured with existing funds.


I21997 DOD Budget: Potential      Reductions to Oneration     and Maintenance
Program (GAO/NSIAD-96-220,        Sept. 18, 1996).

13Calculation of $100 million potential budget reduction      based on
USTRANSCOM’s       projected savings of over $500 million     divided by 6 years
(fiscal years 1993 through 1999).

17                                                 GAO/NSIAD-97-239R    1998 DOD Budget
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ENVIRONMENTAL         RESTORATION

In March 1996,l* we reported that the Army, in estimating its budget needs,
does not consider the funds contributed by the Shell Oil Company for its share
of the cleanup costs at the Rocky Mountain Arsenal. We also reported this
issue in our report on DOD’s fiscal year 1997 budget. According to Army
officials, the funds in the Shell account are used to supplement appropriated
funds transferred from the Defense Environmental      Restoration Account and are
generally not used to offset budget requirements.    The Army includes the Rocky
Mountain Arsenal’s requirements for appropriated funds into a consolidated
DOD budget request. Therefore, according to these officials, the Shell funds are
not visible in the budgeting process and do not influence funding decisions.
Army officials commented that it is not feasible to use the Shell funds to offset
budget requirements     in most instances because the funds do not represent a
 steady fixed flow and are not fiscal year specific. The Defense Environmental
 Restoration Program’s planned execution for fiscal year 1997 was about $73
 million, which is less than the fiscal year 1997 balance in the Shell account
 (about $92 million).

The amount of funds the Army transfers to O&M from the Defense
Environmental   Restoration Account in fiscal year 1998 could be reduced by $73
million and the remaining $19 million of the Shell account balance could be
considered by the Army when submitting its fiscal year 1999 O&M budget
request.

OPERATING     TEMPO

The Army uses the Training Resource Model to compute its operation tempo
(OPTEMPO) requirements.        OPTEMPO refers to the pace of operations and
training that units need in order to achieve a prescribed level of readiness. We
reported in 1995 that the training model contained outdated assumptions that
resulted in an overstatement    of training requirements.15 Although the Army is
in the process of implementing    corrective measures, the model remains outdated



14Environmental   Cleanup: Progress in Resolving Lone-standing    Issues at the
Rockv Mountain    Arsenal (GAO/NSIAD-96-32,    Mar. 29, 1996).

15Armv Training: One-Third of 1993 and 1994 Budgeted       Funds Were Used for
Other Purposes (GAO/NSIAD-95-71,   Apr. 7, 1995).

 18                                             GAO/MUD-97-239R    1998 DOD Budget
B-277784


and the Army continues     to overestimate    the amount   of OPTEMPO     funds it
needs.

For fiscal year 1998, the Army requested about $2.42 billion for ground
OPTEMPO based on a rate of 800 miles. However, we found that the Army
consistently underexecuted OPTEMPO miles for fiscal years 1994 to 1996. For
example, the Army executed only 642 miles in fiscal year 1996, the last full year
for which information   was available. In addition, the Army funded only 97
percent of the amount requested in the fiscal year 1997 President’s budget.

Because the training model has not been updated to more accurately reflect
actual training requirements and the Army has consistently underexecuted the
stated OPTEMPO requirement     of 800 miles, we estimate the Army’s fiscal year
1998 request could be reduced about $72.5 million ($2.42 billion multiplied by 3
percent).

TRAINING    AIRCRAFT

A 1996 Air Force Audit Agency report stated that the Air Force could reduce its
cost for aircraft parts by better managing its training aircrafk and their related
parts.16 The Agency reported that two Air Education and Training Command
training wings maintained      23 permanently  grounded training aircraft that were
underused.     The 23 aircraft contained parts and engines valued at over $135.2
million that the Air Force could use for current buy requirements totaling $36.8
million.

The Agency also reported that two Air Education and Training Command
training wings did not complete reclamation screening for about 74 permanently
grounded training aircraft that were needed for training. These aircraft
contained $279.3 million of parts, components, and engines. The Air Force
Audit Agency stated that some of these items could be used to fill part of the
current $96.4 million in buy requirements.

Air Force Audit recommendations      directed the Air Education and Training
Command to (1) review and adjust the size of the fleet of permanently     grounded
training aircraft to the level needed to support student training requirements
and (2) direct the training wings to screen, identify, remove, and turn in all



16Permanentlv   Grounded   TraininP   Aircraft,   Project 95051027 (Aug. 9, 1996).

19                                                  GAO/MUD-97-239R     1998 DOD Budget
B-277784


aircraft parts that are not needed in training programs   and that do not
disfigure the exterior appearance of the aircraft.

As of December 1996, the Air Education and Training Command had reviewed
its need for training aircraft and declared four of its aircraft excess at two
training wings. However, it did not identify any resulting savings. As of
January 1997, the Air Education and Training Command had rewritten its
guidance to mandate that wings remove components, engines, and parts whose
removal will not cause training degradation or disfigure the exterior appearance
of the aircraft and turn them into base supply. Again, the Air Education and
Training Command did not calculate any possible savings as a result of
implementing     the revised guidance.

DOD officials commented that the Air Force budget reflects a $38 million
reduction in spare part buys associated with reclamation efforts. DOD officials
stated that the savings directly attributable to ‘the training aircraft we address
are relatively small. Many of the parts available from these specific aircraft
were not being purchased because sufficient inventories already existed or the
parts were obsolete. In addition, some of the parts that were actually needed
had already been removed from these aircraft.      According to DOD officials, the
savings from reclaiming additional parts were reflected in DOD’s budget
request.

While we recognize that DOD has made some reductions in spare part buys
associated with reclamation efforts, we continue to believe that further savings
through reclamation for these aircraft are possible. Based on the Air Force
Audit Agency followup as of January 1997, the Air Education and Training
Command did not identify any resulting savings from actions taken. Therefore,
the Air Force’s fiscal year 1998 O&M budget request could be reduced by about
$67 million (50 percent of $133.2 million--$36.8    million for the 23 underused
training aircraft’s parts and engines and $96.4 million for the parts that can be
used from the 74 aircraft still needed for training).

MAINTENANCE        OPERATIONS

A March 1997 U.S. Army Audit Agency report stated that the process Army
depots used to obtain, store, and issue repair parts for maintenance and
fabrication programs did not provide the most cost-effective support to




20                                               GAO/NSIAD-97-239R   1998 DOD Budget
B-277784


maintenance operations.17 The report stated that this process had three
separate levels of retail inventory that were not cost-effective:   (1) materiel in
installation  supply accounts, (2) materiel in automated storage and retrieval
systems (mechanized warehouses in maintenance facilities), and (3)
maintenance shop stocks. The report also concluded that the three levels of
inventory were not necessary and resulted in extra handling of materiel at the
depots. As repair parts flowed through the different inventory levels, depots
received, stored, and issued the same item several times before a maintenance
shop installed it in a piece of equipment.   The redundant handling of materiel
increased supply workload and the need for personnel. The Agency
recommended that the Army consolidate inventories maintained          by installation
supply and maintenance activities and store almost all the materiel in retrieval
systems and remove the need for Defense Logistics Agency’s support and
eliminate the redundant handling of materiel.      It estimated that the Army could
reduce on-hand inventory by at least $60 million if inventories were
consolidated and save at least $5 million annually by eliminating       the redundant
handling of materiel.

In June 1997, the Army stated that, on the basis of the audit report, three pilot
studies at three different depots will be conducted beginning on October 1, 1997,
to determine the feasibility of the Agency’s recommendations.    The Army said
that it believed that it would be premature to expect to realize any savings in
fiscal year 1998. We continue to believe, however, that the Army’s process of
supporting maintenance operations can be streamlined and therefore the Army’s
fiscal year 1998 O&M budget request can be reduced by $65 million ($5 million
for removing the need for Defense Logistics Agency support and eliminating    the
redundant handling of materiel and $60 million for reducing on-hand inventory
by consolidating inventories).

AIRCRAFT     STORAGE

In our September 1996 report we stated that the Air Force could reduce O&M
costs by storing 126 fighter and attack attrition aircraft.   However, attrition
aircraft also exist for other types of aircraft. In 1992, an Air Force-sponsored
study concluded that storage and reconstitution     costs for F-15 and F-16 aircraft
were 1.9 percent and 2.1 percent, respectively, of the aircraft’s O&M costs. In
addition, the Navy has found storage of excess aircraft for future use to be the


17Management of Repair Parts for Maintenance,       U.S. Army    Audit   Agency (A4
97-161, Mar. 17, 1997).

21                                                GAO/N&ID-97-239R       1998 DOD Budget
B-277784


most cost-effective means of managing these assets. It should be noted that
some of the Air Force’s attrition aircraft are not likely to be needed until after
2005 based on historical attrition rates. The Air Force could reduce its costs by
storing attrition aircraft in excess of short-term needs.

The Air Force’s fiscal year 1998 O&M budget request could be reduced by $42.4
million ($75,000 multiplied by 565 attrition aircraft). Our analyses of the
operating and maintenance costs is based on the funding the Air Force gave Air
National Guard units to operate and maintain additional attrition aircraft in
fiscal year 1994--about $75,000 per aircraft.

AIRCRAFT    ENGINE    REPAIRS

A 1996 Air Force Audit Agency report stated that program management
personnel at the Aeronautical Systems Center did not have an effective repair
support program and adequate related internal controls for the FllO General
Electric 129 and FlOO Pratt 8z Whitney 229 engines.18 Specifically, program
managers did not provide depot repair procedures in a timely and economical
manner and did not accurately compute engine repair requirements.     The
Agency found that program management personnel at the Aeronautical       Systems
Center did not develop depot repair procedures for new components or transfer
existing repair procedures for components used on older engines for 29 of the 60
(48 percent) engine components reviewed. As a result, the Air Force could incur
about $26.4 million in additional costs for spare item procurements and
contractor repairs.

The Agency also found that equipment specialist personnel at Oklahoma City
and San Antonio Air Logistics Centers had misstated estimated condemnation
rates for 28 of the 59 (47 percent) engine components reviewed. As a result,
buy and repair budget requirements were overstated by a net amount of $11.1
million ($14 million overstatement and $2.9 million understatement).

Audit recommendations    included (1) establishing or transferring depot-level
repair procedures, as necessary, for all FllO General Electric 129 and FlOO
Pratt & Whitney 229 engines and (2) ensuring that personnel comply with
requirements for reviewing, computing, and supporting estimated condemnation
rates. In commenting on the report, the Air Force concurred with both


1sF110-GE-129 and FlOO-PW-229      Ermine Programs,    Air Force Audit   Agency,
Project 95062007 (Oct. 7, 1996).

22                                               GAOLNSIAD-97-239R   1998 DOD Budget
B-277784


recommendations.    As of March 31, 1997, the Air Force had not reported any
resulting reductions in buy and repair requirements.    In June 1997, the Air
Force stated that a reduction in funds for these engines would result in
shortages. However, we could not verify whether shortages would occur based
on the data provided by the Air Force.

The Air     Force’s fiscal year 1998 O&M budget request could be reduced by $37.5
million    ($26.4 million for the procurement and repair of its FllO General
Electric    129 and FlOO Pratt & Whitney 229 engines and $11.1 million for the
engine     components whose condemnation rates had been misstated).

DEPOT MAINTENANCE

In our September 1996 report,lg we stated that opportunities           existed to reduce
Army depot maintenance costs by transferring,       rather than privatizing-in-place,
workloads from closing and downsizing depots. We estimated that consolidating
the tactical missile workload at the Tobyhanna depot and transferring            this
workload from the Letterkenny       depot could significantly     improve the use of the
Tobyhanna depot and decrease costs by as much as $27 million annually.                Army
officials stated that they are now studying and considering the possible transfer
of the Letterkenny    missile workload to Tobyhanna.        If the Army transfers the
Letterkenny    missile workload to Tobyhanna, the Army’s fiscal year 1998 O&M
budget request could be reduced by $27 million.

COMBAT       AMMUNITION       SYSTEM

A 1997 Air Force Audit Agency report found that the Air Force planned to
continue to upgrade the components of an information    system to track combat
ammunition.20   According to the report, planned or ongoing modifications and
upgrades to Air Force and command components of the systems did not comply




lgArmv Denot Maintenance:   Privatization Without Further Downsizing
Increases Costlv Excess Capacity (GAO/NSIAD-96-201,    Sept. 18, 1996).

20Combat Ammunition       System, Air Force Audit     Agency, Project 96054009 (Jan.
17, 1997).

23                                                   GAOLNSIAD-97-239R    1998 DOD Budget
B-277784


with Corporate Information      Management initiative21 requirements and DOD
guidance. This condition occurred because the Air Force developed the initial
modification     and upgrade plans before DOD classified the two components as
legacy systems. As a result, the Air Force was planning to spend over $38.7
million without obtaining a DOD waiver to the information management
initiative   requirements.

One of the Agency’s recommendations       was that the Air Force either terminate
or obtain waivers for the planned additional work not authorized under the
initiative. In June 1997, the Air Force stated that the fiscal year 1998 budget
request of $14.3 million is primarily   for sustainment costs, not software
enhancements.    However, in its official response to the Air Force Audit Agency
report, the Air Force acknowledged that these changes were modifications       and
upgrades, not sustainment.

The Air Force’s fiscal year 1998 O&M budget request could be reduced by $14.3
million and funding discontinued for automated systems that will soon be
replaced.

AIR DEFENSE      UNITS

A January 1997 U.S. Army Audit Agency report (Restructuring          Maintenance in
Air Defense Units, AA 97-105) stated that many maintenance activities in air
defense units had one layer of management that could be eliminated.          The
Agency estimated that by restructuring    maintenance activities, the Army would
reduce equipment requirements by about $11.7 million.         The consolidation of
maintenance would also improve the effectiveness of maintenance operations by
consolidating the workforce at a central location, increasing visibiliiy    over
repair parts, and enhancing opportunities   for cross-training   mechanics.

In June 1997, the Army stated that it was evaluating several of the
recommendations    made in the report and that it had not yet decided whether
the recommendations   were feasible. The Army said that it believed that
making cuts in fiscal year 1998 would be premature.    We continue to believe,


21This initiative requires DOD to select the best of the services’ existing
automated systems for like functions and migrate all users to the same systems.
In October 1993, DOD accelerated implementation       of a migration strategy,
selected systems, and required the military components to transition to the
systems by April 1997.

24                                                GAO/NSIAD-97-239R   1998 DOD Budget
B-277784


however, that the Army’s fiscal year 1998 O&M budget request could be
reduced by $11.7 million and the air defense units restructured to manage
resources more cost-effectively and reduce the cost of unnecessary equipment.

MEDIUM     LAUNCH      VEHICLES

The Air Force requested $27.8 million in O&M funds in the fiscal year 1998
budget for Air Force medium launch vehicle requirements.             The Air Force also
requested $19.6 million in O&M funds22 for Delta II launch vehicle recovery
efforts as part of the Omnibus Reprogramming           request for fiscal year 1997.23
However, we found that the Air Force has overstated requirements in the fiscal
year 1997 reprogramming        request by $8.1 million because of a decrease in
estimated costs and funding requirements.          According to Air Force officials, the
cost estimate for the recovery effort decreased by $3.5 million after submitting
their request as a result of contract negotiations and the reassessment of
requirements.     The Air Force identified $11.5 million for launch site recovery
costs; $3 million for investigation    costs incurred by the launch vehicle
contractor, McDonnell Douglas, located in Huntington           Beach, California; and
$1.6 million for investigation    costs incurred by Aerospace Corporation in El
Segundo, California, which is a Federally Funded Research and Development
Center. The Air Force expects the contractor to be responsible for costs
associated with the investigation      and has funded the Aerospace Corporation’s
investigation   costs with other available funds.

If Congress approves the fiscal year 1997 Omnibus Reprogramming         request of
$19.6 million for the Delta recovery effort, the Air Force’s fiscal year 1998 O&M
budget request could be reduced by $8.1 million ($3.5 million from contract


22The Air Force also requested $18.1 million in Missile       Procurement funds to
address launch vehicle production impacts for the Air       Force Materiel Command.
We will address this issue under a separate report on       the procurement and
Research, Development, Test and Evaluation budgets          (to be issued by August
30, 1997).

230n January 17, 1997, a Delta II launch vehicle carrying a Global Positioning
System satellite exploded shortly after liftoff at Cape Canaveral. The accident
destroyed the launch vehicle and payload and damaged parts of the launch pad
and surrounding area. U.S. Air Force Space Command estimated the cost to
repair the damage, restore launch capability, and investigate causes of the
failure totaled $19.6 million.

25                                                  GAO/NSIAD-97-239R    1998 DOD Budget
B-277784


negotiations and requirements    reassessments   plus $4.6 million    for costs covered
by other funds).

B-l BOMBER     OPTIONS

We recently reported% three options to reduce or restructure the bomber force
that would achieve cost savings and enable DOD to retain extensive aggregate
airpower capabilities.   The first two options--retiring all or a portion of the B-1B
fleet--would result in a smaller bomber force than DOD currently plans. The
third option--increasing  the number of B-1Bs in the Air National Guard--could
reduce the cost to maintain DOD’s bomber force while preserving the war-
fighting capability of DOD’s planned bomber force. Options two and three are
not mutually exclusive.

The first option--retiring the entire B-1B force of 95 aircraft--would reduce
DOD’s conventional airpower capabilities somewhat but would yield significant
cost savings. In a May 1996 report,25 we suggested that rather than modify and
sustain the B-1B force, the Air Force could retire its B-1Bs as soon as possible,
based on the presumption that their targets could be hit by other available
interdiction  weapons. If DOD were to retire the B-1B force, CBO estimates it
would save about $6 billion in budget authority for fiscal years 1998 through
2002. Depending on how DOD phased in this option, the Air Force could save a
portion of the associated operation and maintenance costs in fiscal year 1998.
According to an Air Force official, the fiscal year 1998 O&M budget includes an
estimated $434 million for B-1B support.

The second option--retire  27 reconstitutior? reserve B-1Bs and keep 68 B-1Bs
in the force--would not result in as much loss in capability as retiring the entire
B-1B fleet. If 27 B-1Bs were retired, DOD would still have numerous other
combinations of platforms and weapons to destroy the types of targets that the


24Addressina the Deficit: Budgetarv Imnlications of Selected GAO Work for
Fiscal Year 1998 (GAO/OCG-97-2, Mar. 14, 1997).

25U.S. Combat Air Power: Reassessing Plans to Modernize Interdiction
Canabilities Could Save Billions (GAOLNSIAD-96-72, May 13, 1996).

26These a?craft are not funded for flying hours and they lack aircrews, but they
are based with B-1B units, flown on a regular basis, maintained like other B-
lBs, and modified with the rest of the fleet.

26                                                GAO/NSIAD-97-239R     1998 DOD Budget
B-277784


B-1Bs would otherwise attack. According to CBO estimates, retiring the 27 B-
1Bs would save about $750 million in budget authority for fiscal years 1998
through 2002.

The third option--placing  more B-1Bs in the Air National Guard--could reduce
the cost to operate DOD’s bomber force while preserving the war-fighting
capability of DOD’s planned bomber force. According to CBO estimates, placing
2427 more B-1Bs in the Air National Guard would save about $110 million in
budget authority for fiscal years 1998 through 2002.

Estimated cost savings for our options range from about $110 million to $6
billion in budget authority for fiscal years 1998 through 2002. While we could
not identify specific O&M costs associated with options two and three, we were
able to identify O&M costs in the Air Force fiscal year 1998 budget request for
B-1B support. We recognize that the decision to retire all or a portion of the B-
1B force represents a major policy decision. However, if the B-1B force were
retired at this time, the Air Force’s fiscal year 1998 O&M budget request could
be reduced by some portion of the $434 million now programmed to support the
B-1B.

SCOPE AND METHODOLOGY

To determine whether O&M accounts should be funded in the amounts
requested, we interviewed program and budget officials who managed the O&M
programs and/or prepared the budget requests. We also reviewed and analyzed
financial, budget support, and program documents related to the O&M issues
and analyzed prior-year funding levels and obligations to identify trends. In
addition, we reviewed our ongoing assignments and recently issued reports, as
well as recently issued reports of the DOD Inspector General and the service
audit agencies, to identify issues with O&M ramifications.  We conducted our
review at Army, Navy, Air Force, and DOD headquarters,     Washington,    D.C.,
from January to August 1997 in accordance with generally accepted government
auditing standards.




27We selected 24 because this would achieve a 50/50 active/reserve ratio when
attrition and backup aircraft are excluded and the Air Force has placed 50
percent or more of some refueling and air mobility assets in the reserve
component.

27                                             GAO/NSIAD-97-239R   1998 DOD Budget
B-277784


Representatives of the services and DOD commented orally on a draft of this
report. DOD officials generally agreed with the approach and methodology for
the findings presented in this report. They also noted that the GAO reports we
cite contain the Department’s positions on the findings in this report. DOD
noted exceptions to inventory management, U.S. Transportation      Command, and
training aircraft issues. Their comments were incorporated in the report where
appropriate.



We are sending copies of this report to the Chairmen and Ranking Minority
Members of the House and Senate Committees on Appropriations,      Senate
Committee on Armed Services, and House Committee on National Security;        the
Secretaries of Defense, the Army, the Navy, and the Air Force; the Director   of
the Office of Management and Budget; and other interested congressional
committees. Copies will be made available to others upon request.

This report was prepared under the direction of Mark E. Gebicke, Director,
Military Operations and Capabilities Issues, who may be reached on (202) 512-
5140 if you or your staff have any questions. Major contributors to this report
are listed in enclosure I.




Henry L. Hinton, Jr.
Assistant Comptroller   General




28                                             GAO/NSIAD-97-239R   1998 DOD Budget
B-277784


The Honorable John R. Kasich
Chairman
The Honorable John M. Spratt, Jr.
Ranking Minority Member
Committee on the Budget
House of Representatives

The Honorable C. W. Bill Young
Chairman
The Honorable John P. Murtha
Ranking Minority Member
Subcommittee on National Security
Committee on Appropriations
House of Representatives

The Honorable Ted Stevens
Chairman
The Honorable Daniel K. Inouye
Ranking Minority Member
Subcommittee on Defense
Committee on Appropriations
United States Senate

The Honorable Herbert H. Bateman
Chairman
The Honorable Norman Sisisky
Ranking Minority Member
Subcommittee on Military Readiness
Committee on National Security
House of Representatives

The Honorable James M. Inhofe
Chairman
The Honorable Charles S. Robb
Ranking Minority Member
Subcommittee on Readiness
Committee on Armed Services
United States Senate




29                                   GAOMXAD-97-239R   1998 DOD Budget
ENCLOSURE       I                                                      ENCLOSURE    I


                      MAJOR    CONTRIBUTORS     TO THIS REPORT

NATIONAL  SECURITY          AND INTERNATIONAL     AFFAIRS   DMSION,
WASHINGTON.  D-C.

Carol R. Schuster
Brenda Farrell
Donna M. Rogers
Beverly C. Schladt
Martin E. Scire

Uldis Adamsons
James R. Murphy
Nomi R. Taslitt
Ken J. Brubaker
Lou V. Modliszewski

ACCOUNTING          AND INFORMATION     MANAGEMENT     DIVISION,      WASHINGTON,
D.C.

West E. Coile

NORFOLK     FIELD     OFFICE

Raul S. Cajulis
Thomas R. Pantelides

LOS ANGELES         FIELD   OFFICE

Harold D. Reich
Allen D. Westheimer




(703191)




                                          30
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