Future Years Defense Program: Substantial Risks Remain in DOD's 1999-2003 Plan (Letter Report, 07/31/98, GAO/NSIAD-98-204)
Pursuant to a congressional request, GAO reviewed the Department of
Defense's (DOD) Future Years Defense Program (FYDP) for fiscal year
1999, focusing on: (1) DOD's plans to address the financial and
programmatic risk areas that the Quadrennial Defense Review (QDR) found
in DOD's program; (2) comparing DOD's 1999 FYDP with its 1998 FYDP to
identify major changes and adjustments to address these risks areas; and
(3) whether there were risk areas in DOD's 1999 program.
GAO noted that: (1) although DOD has reduced military and civilian
personnel, force structure, and facilities over several years, DOD has
been unable to shift funds from infrastructure to modernization; (2) in
1997, infrastructure spending was 59 percent of DOD's total budget, the
same percentage as in 1994; (3) DOD acknowledged in the QDR that it has
postponed procurement plans because funds were redirected to pay for
underestimated operating costs and new program demands, and projected
savings from outsourcing and other initiatives had not materialized; (4)
to address this diversion of funds, the QDR directed DOD to cut some
force structure and personnel, eliminate additional excess facilities
through more base closures and realignments, streamline infrastructure,
and reduce quantities of some new weapon systems; (5) DOD made
adjustments in the 1999 FYDP to decrease the risk that funds would
migrate from procurement to unplanned operating expenses; (6) DOD has
programmed additional funds for new programs and has moderated its
procurement plans; (7) as a result of these and other changes, DOD
believes that its 1999 program is on a sounder financial footing; (8)
although DOD made adjustments to the 1999 FYDP, GAO continues to see
risks that DOD's program may not be executable as planned; (9) for
example, DOD projects savings of $24.1 billion as a result of lower
projected inflation rates and fuel costs and favorable foreign currency
exchange rates; (10) if these rates and costs do not hold true to DOD's
assumptions, projected savings will not materialize, and DOD will have
to adjust future budgets by cutting programs and/or requesting
additional budget authority; (11) further indication of risk can be
found in DOD's procurement plans and additional proposed initiatives to
reduce facilities; (12) DOD's estimates for procurement spending, in
relation to DOD's total budget, run counter to DOD's experience over the
last 32 years; (13) DOD procurement spending rises and falls in nearly
direct proportion to movements in its total budget; (14) DOD projects
that procurement funding will rise in real terms during 1998-2003 by
approximately 29 percent while the total DOD budget will remain
relatively flat; (15) on some important proposed initiatives, DOD will
need congressional approval; and (16) as long as the funding levels
agreed to in the balanced budget agreement for national defense remain
unaltered, DOD must solve its funding issues within its current and
projected total budget.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: NSIAD-98-204
TITLE: Future Years Defense Program: Substantial Risks Remain in
DOD's 1999-2003 Plan
DATE: 07/31/98
SUBJECT: Military downsizing
Defense cost control
Defense budgets
Reductions in force
Financial management
Budget cuts
Defense procurement
Future budget projections
Defense economic analysis
IDENTIFIER: DOD Future Years Defense Program
Strategic Arms Reduction Treaty
DOD Quadrennial Defense Review
DOD National Missile Defense Program
FYDP
START
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Cover
================================================================ COVER
Report to Congressional Requesters
July 1998
FUTURE YEARS DEFENSE PROGRAM -
SUBSTANTIAL RISKS REMAIN IN DOD'S
1999-2003 PLAN
GAO/NSIAD-98-204
Future Years Defense Program
(701127)
Abbreviations
=============================================================== ABBREV
DOD - Department of Defense
FYDP - Future Years Defense Program
O&M - operation and maintenance
OSD - Office of the Secretary of Defense
PA&E - Office of Program Analysis and Evaluation
QDR - Quadrennial Defense Review
RDT&E - research, development, test, and evaluation
START - Strategic Arms Reduction Treaty
Letter
=============================================================== LETTER
B-278787
July 31, 1998
The Honorable John R. Kasich
Chairman, Committee on the Budget
House of Representatives
The Honorable Charles E. Grassley
United States Senate
Our earlier analysis of the Department of Defense's (DOD) Future
Years Defense Program (FYDP) for fiscal year 1998 found substantial
risk that the program would not be executed as planned.\1 According
to DOD, compared to the fiscal year 1998 FYDP, the Quadrennial
Defense Review (QDR) proposed a more balanced, modern, and capable
program that can be executed within currently proposed budgets. DOD
planned to incorporate many of the details of the QDR blueprint into
its fiscal year 1999 FYDP.\2
As you requested, we (1) identified the Department's plans to address
the financial and programmatic risk areas that the QDR found in DOD's
program, (2) compared DOD's 1999 FYDP with its 1998 FYDP to identify
major changes and adjustments to address these risks areas, and (3)
explored whether there were risk areas in DOD's 1999 program. Our
report does not reflect any adjustments that may have been taken by
the Committees on Authorizations and Appropriations during their
reviews of the 1999 defense budget request.
--------------------
\1 Future Years Defense Program: DOD's 1998 Plan Has Substantial
Risk in Execution (GAO/NSIAD-98-26, Oct. 23, 1997).
\2 Unless otherwise stated, the years and dollars shown in this
report are on a fiscal year basis.
BACKGROUND
------------------------------------------------------------ Letter :1
The QDR was required by the Military Force Structure Review Act,
which was included in the National Defense Authorization Act for
Fiscal
Year 1997 (P.L. 104-201). The act directed the Secretary of
Defense, in consultation with the Chairman, Joint Chiefs of Staff, to
conduct a review of the defense needs from 1997 to 2015.
Since its bottom-up review in 1993, DOD has repeatedly stated that it
must reduce its infrastructure to offset the cost of future modern
weapon systems.\3 Our analysis of DOD's FYDPs and infrastructure
activities over the past several years showed that the infrastructure
portion of DOD's budget had not decreased as DOD planned.\4 Further,
planned funding increases for modern weapon systems have repeatedly
been shifted further into the future with each succeeding FYDP.
In May 1997, under the balanced budget agreement, the President and
Congress set forth a budget blueprint for the national defense budget
function. As part of the agreement, national defense funding levels
were established for 1999-2002.
The FYDP is an authoritative record of current and projected force
structure, costs, and personnel levels that has been approved by the
Secretary of Defense. In addition, it is used extensively throughout
DOD for analytical purposes and for making programming and budgeting
decisions. The 1998 FYDP supported the President's 1998 budget and
included budget estimates for 1998-2003. The 1999 FYDP supports the
President's 1999 budget and includes budget estimates for 1999-2003.
--------------------
\3 Infrastructure comprises activities that provide support services
to mission programs and primarily operate from fixed locations.
\4 Future Years Defense Program: Lower Inflation Outlook Was Most
Significant Change From 1996 to 1997 Program (GAO/NSIAD-97-36, Dec.
12, 1996); Defense Infrastructure: Costs Projected to Increase
Between 1997 and 2001 (GAO/NSIAD-96-174, May 31, 1996); and Future
Years Defense Program: 1996 Program Is Considerably Different From
the 1995 Program (GAO/NSIAD-95-213, Sept. 15, 1995).
RESULTS IN BRIEF
------------------------------------------------------------ Letter :2
Although DOD has reduced military and civilian personnel, force
structure, and facilities over several years, DOD has been unable to
shift funds from infrastructure to modernization. In 1997,
infrastructure spending was 59 percent of DOD's total budget, the
same percentage as in 1994. DOD acknowledged in the QDR that it has
postponed procurement plans because funds were redirected to pay for
underestimated operating costs and new program demands, and projected
savings from outsourcing and other initiatives had not materialized.
To address this diversion of funds, the QDR directed DOD to cut some
force structure and personnel, eliminate additional excess facilities
through more base closures and realignments, streamline
infrastructure, and reduce quantities of some new weapon systems.
DOD made adjustments in the 1999 FYDP to decrease the risk that funds
would migrate from procurement to unplanned operating expenses. For
example, funding for operation and maintenance is projected to be
substantially higher and funding for military personnel and
procurement is projected to be considerably lower than anticipated 1
year ago. DOD has programmed additional funds in areas, such as
medical care, that have been previously underestimated or
underbudgeted. It also has programmed additional funds for new
programs such as the National Missile Defense System. Moreover, DOD
has moderated its procurement plans. As a result of these and other
changes, DOD believes that its 1999 program is on a sounder financial
footing.
Although DOD made adjustments in the 1999 FYDP, we continue to see
risks that DOD's program may not be executable as planned. For
example, DOD projects savings of $24.1 billion as a result of lower
projected inflation rates and fuel costs and favorable foreign
currency exchange rates. However, if these rates and costs do not
hold true to DOD's assumptions, projected savings will not
materialize, and DOD will have to adjust future budgets by cutting
programs and/or requesting additional budget authority. Also,
considerable risk remains in the services' plans to cut 175,000
military and civilian personnel and save $3.7 billion annually by
2003. For example, plans for some cuts are incomplete or are based
on optimistic assumptions about the potential to achieve savings
through outsourcing and reengineering and may not be implemented on
time. Furthermore, the adequacy of funding for the Defense Health
Program is contingent upon several assumptions, including that
Congress will authorize the reduction of 61,700 active military
personnel recommended in the QDR and that the reduction will be a mix
of retirements and other attrition. Without this reduction, costs
will be higher than planned. Also, new programs, such as the
deployment of the National Missile Defense System, may require
additional investment funding. According to several analyses, this
system has high technical risk that would likely cause increased
costs and program delays. Moreover, the 1999 FYDP does not include
funds to deploy and operate the system if a decision is made to do
so.
Further indication of risk can be found in DOD's procurement plans
and additional proposed initiatives to reduce facilities. DOD's
estimates for procurement spending, in relation to DOD's total
budget, run counter to DOD's experience over the last 32 years.
Specifically, DOD procurement spending rises and falls in nearly
direct proportion to movements in its total budget. However, DOD
projects that procurement funding will rise in real terms during
1998-2003 by approximately 29 percent while the total DOD budget will
remain relatively flat. Also, on some important proposed
initiatives, such as base closures and military personnel reductions,
DOD will need congressional approval. Moreover, as long as the
funding levels agreed to in the balanced budget agreement for
national defense remain unaltered, DOD must solve its funding issues
within its current and projected total budget.
DOD'S PLANS TO ADDRESS RISK
------------------------------------------------------------ Letter :3
A principal objective of the QDR was to understand and devise ways to
manage the financial risk in DOD's program. In the QDR, the
Department acknowledges that it has a historic, serious problem--the
postponement of procurement modernization plans to pay for current
operating and support costs. DOD refers to this as migration of
funds. According to DOD, the chronic erosion of procurement funding
has three general sources: underestimated day-to-day operating
costs, unrealized savings from initiatives such as outsourcing or
business process reengineering, and new program demands. The QDR
concluded that as much as $10 billion to $12 billion per year in
future procurement funding could be redirected as a result of these
three general sources. The QDR also identifies other areas of
significant future cost risks.
To address this financial instability, the QDR directed DOD to cut
some force structure and personnel, eliminate additional excess
facilities through more base closures and realignments, streamline
infrastructure, and reduce quantities of some new weapon systems. By
taking these actions, the Secretary of Defense intended that the 1999
budget and FYDP would be fiscally executable, modernization targets
would be met, the overall defense program would be rebalanced, and
the program would become more stable.
During the QDR, DOD identified initiatives to reduce infrastructure
costs and personnel. However, even as the QDR report was released,
the Department acknowledged that more could be done. The
Department's November 1997 Defense Reform Initiative Report provided
a second set of initiatives to streamline and improve DOD's
infrastructure and support activities. Money saved by these
initiatives is to help fund weapons modernization. The Defense
Management Council, chaired by the Deputy Secretary of Defense,\5 was
charged by the Secretary to ensure implementation of the reform
decisions. The Council also was directed to examine similar reforms
for each of the services and to negotiate an annual performance
contract with the director of each defense agency.
--------------------
\5 Other members of the Council are the Vice Chairman of the Joint
Chiefs of Staff, the four Under Secretaries of Defense, the three
service Under Secretaries, and the four service Vice Chiefs.
THE 1999 FYDP REFLECTS
SIGNIFICANT RESOURCE
ADJUSTMENTS
------------------------------------------------------------ Letter :4
The 1999 FYDP reflects the budget blueprint outlined in the balanced
budget agreement, and therefore, its total budget does not vary
greatly from that in the 1998 FYDP. The common 5-year period of both
FYDPs (1999-2003) shows that the 1998 FYDP totaled $1,355 billion and
the 1999 FYDP totaled $1,356 billion. Table 1 compares the two
plans, by primary appropriation account.
Table 1
DOD's 1998 and 1999 FYDPs, by Primary
Appropriation Account
(Dollars in billions)
Fiscal year
------------------------------------------------
1999 2000 2001 2002 2003 Total
Account FYDP -------- -------- -------- -------- -------- ========
Military 1998 $70.1 $71.4 $73.3 $75.3 $77.5 $367.5
personnel
1999 70.8 70.7 71.6 73.0 74.9 361.0
Change 0.7 -0.7 -1.6 -2.2 -2.6 -6.4
Operation 1998 91.4 92.0 93.8 91.8 95.2 464.3
and
maintenan
ce
1999 94.6 95.7 97.7 99.5 101.7 489.2
Change 3.3 3.6 3.9 7.6 6.5 24.9
Procuremen 1998 50.7 57.0 60.7 68.3 68.0 304.7
t
1999 48.7 54.1 61.3 60.7 63.5 288.3
Change -2.0 -2.9 0.6 -7.7 -4.5 -16.4
Research, 1998 35.0 33.4 32.9 34.2 35.8 171.4
developmen 1999 36.1 33.9 33.0 33.5 34.3 170.9
t, test,
and Change 1.0 0.5 0.1 -0.7 -1.5 -0.5
evaluation
Military 1998 4.3 4.3 4.2 3.4 3.4 19.6
construct
ion
1999 4.3 4.9 4.4 3.7 4.0 21.3
Change 0.0 0.6 0.2 0.3 0.6 1.7
Family 1998 4.0 3.9 4.0 3.9 4.0 19.8
housing
1999 3.6 3.9 3.9 3.9 4.2 19.4
Change -0.4 0.0 -0.1 0.0 0.2 -0.4
Revolving 1998 1.7 1.3 1.3 1.4 1.4 7.0
and
management 1999 0.6 0.8 0.4 0.4 1.1 3.2
funds Change -1.1 -0.5 -1.0 -1.0 -0.3 -3.9
Defense- 1998 0.1 0.1 0.1 -0.1 0.1 0.2
wide
contingen
cies
1999 0.0 0.0 0.0 0.8 1.4 2.3
Change -0.1 -0.1 -0.1 0.9 1.4 2.1
================================================================================
Total 1998 $257.2 $263.5 $270.3 $278.2 $285.3 $1,354.5
1999 $258.6 $264.0 $272.3 $275.5 $285.1 $1,355.5
Change $1.4 $0.5 $2.0 $-2.7 $-0.2 $1.0
--------------------------------------------------------------------------------
Note: Program estimates in the FYDP are expressed in total
obligational authority, which is the sum of the new budget authority
provided for a given fiscal year and any other amounts authorized to
be credited to a specific fund or account during that year, including
transfers between funds or accounts. Total obligational authority
may not reflect the precise budget authority adjustments made in the
President's budget. Totals may not add due to rounding.
Source: 1998 and 1999 FYDPs.
APPROPRIATION CHANGES TO
REBALANCE THE DEFENSE PROGRAM
------------------------------------------------------------ Letter :5
As shown in table 1, DOD adjusted its three largest appropriations
substantially in the 1999 FYDP. Specifically, DOD added $24.9
billion to operation and maintenance (O&M) accounts and decreased the
procurement and military personnel accounts by $16.4 billion and $6.4
billion, respectively. (App. I shows the differences between
accounts in the 1998 and 1999 FYDPs for each appropriation.)
MILITARY PERSONNEL
-------------------------------------------------------- Letter :5.0.1
In comparing the two FYDPs, we found that planned active duty
military personnel and the comparable military personnel accounts
have net decreases of 56,500 personnel and $6.4 billion,
respectively. All services contribute to these planned decreases.
For example, the Air Force has the largest programmed decreases--a
reduction of 21,200 personnel and a 2.9-percent decrease in funding.
Figure 1 shows the total active military personnel levels for the
1998 and 1999 FYDPs.
Figure 1: DOD Total Active
Military Personnel for the 1998
and 1999 FYDPs
(See figure in printed
edition.)
Source: 1998 and 1999 FYDPs.
In the 1999 FYDP, active military personnel decrease 2.2 percent, and
the corresponding appropriation accounts decrease in real terms at
5.4 percent. The Air Force contributes the largest planned decreases
in personnel (7.2 percent) and funding in real terms (9 percent).
OPERATION AND MAINTENANCE
-------------------------------------------------------- Letter :5.0.2
Planned O&M funding from 1999 to 2003 increases by $24.9 billion
(5.4 percent) from the 1998 FYDP to the 1999 FYDP. Contributing to
the increase is the elimination of a previously projected $7.8
billion savings due to management initiatives. Those savings,
programmed in the 1998 FYDP for 2001 to 2003, are not programmed in
the 1999 FYDP. We reported that the 1998 FYDP savings were
programmed by the Office of the Secretary of Defense (OSD), although
there were no details about how the savings would be achieved.\6
According to DOD, over $8 billion of the $24.9 billion increase went
into the readiness-related accounts of depot maintenance, real
property maintenance, and spare parts. At the service level in the
1999 FYDP, O&M funding increases for every active duty component:
Air Force, $5.4 billion (5.3 percent); Navy, $4.3 billion (4.1
percent); Army, $1.9 billion (2.2 percent); and Marine Corps, $450
million (3.6 percent). Also, O&M, defense-wide planned funding
increases $294 million.
Civilian personnel salaries and benefits account for about 40 percent
of annual O&M appropriations.\7 Overall, civilian personnel levels
decrease more than double the rate in the 1999 FYDP than in the 1998
FYDP. In the 1998 FYDP, the total number of civilian personnel was
projected to decline 4.6 percent, and in the 1999 FYDP the decline is
projected to be 9.9 percent. In the 1999 FYDP, the Air Force
projects the largest decline of civilian levels (12.3 percent), and
OSD and defense-wide organizations project the second largest decline
(10.1 percent).
Figure 2 shows the total civilian personnel levels for the 1998 and
1999 FYDPs.
Figure 2: DOD Total Civilian
Personnel for the 1998 and 1999
FYDPs
(See figure in printed
edition.)
Source: 1998 and 1999 FYDPs.
--------------------
\6 Future Years Defense Program: DOD's 1998 Plan Has Substantial
Risk in Execution.
\7 Approximately 88 percent of DOD civilian payroll costs are paid
from O&M appropriations. The remainder is funded from the research,
development, test, and evaluation; military construction; and family
housing appropriation accounts.
PROCUREMENT
-------------------------------------------------------- Letter :5.0.3
Procurement funding from 1999 to 2003 is projected to decline by a
total of $16.4 billion (5.4 percent) from the 1998 to the 1999 FYDP.
The largest decline is in 2002--$7.7 billion, from $68.3 billion to
$60.7 billion.\8 This is the fifth straight budget year since 1995
that DOD has deferred procurement goals established in previous
FYDPs. For example, the 1995 FYDP, developed after DOD's bottom-up
review, projected funding of $57.1 billion in 1998. However, DOD is
executing a fiscal year 1998 procurement budget of $42.6 billion, a
difference of $14.5 billion.
The most significant change in procurement is found in the
defense-wide accounts--a net decrease of $13.8 billion. Contributing
to this decrease was the liquidation of the projected $19.8 billion
modernization reserve. We reported that DOD had programmed the
modernization reserve funds in anticipation that savings would be
achieved from reduced operating costs and that the savings would
become available for procurement.\9 Among the services, the Army and
the Marine Corps project increases of $1.3 billion,\10 or 2.7
percent, and $342 million, or 7.7 percent, respectively. The Navy
and the Air Force project decreases of $2.9 billion, or 2.6 percent,
and $1.4 billion, or 1.4 percent, respectively.
--------------------
\8 The difference does not add due to rounding.
\9 Future Years Defense Program: DOD's 1998 Plan Has Substantial
Risk in Execution.
\10 Although total Army procurement increases in the 1999 FYDP, there
is a $3.2 billion, or 31-percent decrease in the Army missile
procurement account. A significant portion of the decrease was due
to the move of funding for the Patriot System and Theater Ballistic
Missile Defense Program from the Army to the Procurement,
defense-wide account.
PROGRAM ADDITIONS AND CUTS
TO REDUCE RISK IDENTIFIED IN
QDR
---------------------------------------------------------- Letter :5.1
DOD made other adjustments in the 1999 FYDP to (1) meet unplanned
operating expenses, such as medical care, or new program demands,
such as the National Missile Defense System and (2) avoid disrupting
or displacing other investment plans.
In the 1999 FYDP, the Defense Health Program, which accounts for
about
11 percent of annual O&M spending, is projected to receive higher
funding in every year (1999-2003) when compared with the 1998 FYDP.
The cumulative projected increase from the 1998 FYDP is $1.6 billion.
According to a Defense Health Affairs official, the projected
increase would adequately fund the core medical mission, which is
comprised of 2 parts, direct care and managed care contracts.
However, significant cost-saving initiatives will be necessary in the
non-patient care areas of the program.\11
The 1999 FYDP includes an acquisition program stability reserve to
address unforeseeable cost growth that can result from technical risk
and uncertainty associated with developing advanced technology for
weapons systems, for example, unexpected engineering problems.
Currently, cost growth in one program requires offsets from other
programs, which in turn can disrupt the overall modernization
program. DOD's plan is to distribute the reserve among programs for
the budget year before a President's budget is submitted to Congress.
The service acquisition executives centrally will manage the
reserves, and the Under Secretary of Defense for Acquisition and
Technology will provide oversight. These reserve funds total $2.4
billion for 2000-2003. Between 2000 and 2003, approximately $2.3
billion, or 97 percent, of the funding is programmed in procurement
accounts for the Army, Air Force, Navy, and Marine Corps. The
remaining 3 percent is programmed in the defense-wide research,
development, test, and evaluation account. Table 2 shows the
allocation of these funds, by year.
Table 2
Proposed Acquisition Program Stability
Reserve
(Dollars in millions)
Fiscal year
--------------------------------------
2000 2001 2002 2003 Total
-------------------- -------- -------- -------- -------- ========
Reserve $244 $485 $725 $966 $2,420
----------------------------------------------------------------------
Source: 1999 FYDP.
As stated in a recent report on weapon acquisitions,\12 we have not
evaluated the program stability reserve or the way DOD plans to
implement it. Nonetheless, DOD's use of the reserve has the
potential for communicating to program managers which practices will
be encouraged and which ones will not. For example, if the reserve
funds are used primarily to pay for problems that are revealed in
late product development or early production, the fund could
reinforce existing incentives for not dealing with problems until
they occur. Conversely, if the fund is used to resolve and preclude
problems, the fund could encourage problems to be revealed earlier in
programs.
The 1999 FYDP increased National Missile Defense System research,
development, test, and evaluation funding by $1.4 billion, or 75
percent ($1.8 billion to $3.2 billion), from the 1998 FYDP. The
program is to provide protection against a limited ballistic missile
attack. DOD's approach, commonly referred to as "3+3," is to
develop, within 3 years, elements of an initial system that can be
deployed within 3 years of a deployment decision. The initial
deployment decision review is scheduled for 2000. According to DOD,
if a sufficient missile threat to the United States has not
materialized at that time, development will continue, and the program
will maintain a capability to deploy within 3 years.
The QDR directed that some planned procurement be cut, in part to
address overall affordability concerns. In the 1999 FYDP, DOD
reduced quantities of some weapon systems from the 1998 FYDP. For
example, DOD reduced the planned purchase of Joint Surveillance
Target Attack Radar Systems' aircraft from 8 to 2, F-22 fighters from
70 to 58, and F/A-18E/F fighters from 228 to 204.
--------------------
\11 In fiscal year 1997, DOD significantly underbudgeted the 1997 O&M
Defense Health Program, but Congress appropriated additional funds.
Unrealistically low estimates continued in the 1998 FYDP in fiscal
years 1998 and 1999, as documented by DOD in the 1998 President's
budget submission.
\12 Best Practices: Successful Application to Weapon Acquisitions
Requires Changes in DOD's Environment (GAO/NSIAD-98-56, Feb. 24,
1998).
SOME FUNDING ADDITIONS IN
ANTICIPATION OF FUTURE
EXPENSES
---------------------------------------------------------- Letter :5.2
When comparing the 1999 FYDP with the 1998 FYDP, substantial planned
funding appears in the 1999 FYDP outyears. OSD has programmed funds
in two appropriation accounts without distributing the amounts to a
DOD organization. Within the revolving and management funds, DOD
working capital funds are anticipated to receive $450 million in 2000
to reduce advance billings. Moreover, in 2003, $700 million is
programmed for potential purchases of war reserve materials.
According to an Army official, the Army and an outside study group
have verified requirement shortages in Army war reserve materials.
If future DOD programming and budgeting cycles reveal that the
programmed funds are needed, then the amounts would be requested in
the applicable President's budget. Accordingly, trade-offs within
other DOD programs would not have to be made.
Estimated costs associated with DOD's request for the base closure
and realignment round in 2001 appear in the defense-wide
contingencies account. Net costs of $832 million and $1.45 billion
are programmed in fiscal years 2002 and 2003, respectively. The
costs represent a net amount, since DOD anticipates savings from the
avoidance of military construction and the cessation of some O&M
activities. If Congress does not give DOD new base closure
authority, DOD could budget these funds for other activities.
INFRASTRUCTURE REDUCTIONS
ARE CRITICAL TO ACHIEVING
DOD'S MODERNIZATION PLANS
---------------------------------------------------------- Letter :5.3
In 1997, infrastructure spending was 59 percent of DOD's total
budget, the same percentage that was reported in DOD's bottom-up
review report for 1994. Both the 1998 and the 1999 FYDPs projected
that infrastructure spending would decline to 54 percent of DOD's
budget in 2003.
To modernize the force, DOD plans to increase procurement funding to
$60 billion per year. If DOD is to achieve a $60 billion budget
goal, it must reduce funding for its infrastructure activities from
the military personnel and O&M accounts. As explained in our
previous reports and reflected in the 1999 FYDP, about 80 percent of
DOD's infrastructure activities are funded from these appropriation
accounts. However, as discussed in the next section, our review of
the 1999 FYDP found substantial risks that DOD's plans may not occur,
thereby jeopardizing DOD's attempts at fixing the migration of funds
problem and adhering to procurement plans.
DOD'S PROGRAM CONTINUES TO HAVE
SUBSTANTIAL RISK
------------------------------------------------------------ Letter :6
Although DOD made adjustments in the 1999 FYDP to decrease the risk
that funds would migrate from procurement to unplanned operating
expenses, we continue to see risks that DOD's program may not be
executable as planned. These risks involve unrealized savings and
other program needs.
PROJECTED SAVINGS FROM
FAVORABLE INFLATION AND
FOREIGN CURRENCY EXCHANGE
RATES USED FOR ADDITIONAL
PROGRAMS
---------------------------------------------------------- Letter :6.1
We reported in May 1998 that as a result of lower projected inflation
rates by the executive branch, DOD calculated that its goods and
services over the 1999-2003 period would cost about $21.3 billion
less than projected
1 year ago.\13 In addition, DOD projected savings of about $2.8
billion as a result of lower projected fuel costs and favorable
foreign currency exchange rates. DOD said that with these assumed
savings, it can fund additional procurement items and civilian and
military pay raises, which account for $15 billion of the $24.1
billion.
The executive branch's projection of DOD's inflation rate for 1999 is
1.5 percent, which is a historically low rate of inflation.\14 If the
projected savings from lower inflation, lower fuel costs, and
favorable foreign currency exchange rates materialize, DOD can fund
the additional programs. However, if those savings do not
materialize, DOD will have to adjust its future budgets by cutting
programs and/or requesting additional budget authority from the
President and Congress.
--------------------
\13 Defense Budget: Projected Inflation Savings (GAO/NSIAD-98-177R,
May 11, 1998).
\14 Projected inflation rates are 1.6 percent for 2000 and 1.7
percent for 2001-2003.
SOME PERSONNEL CUTS AND
ASSOCIATED SAVINGS MAY NOT
BE ACHIEVED
---------------------------------------------------------- Letter :6.2
DOD's decision to reduce personnel as part of the QDR was driven
largely by the objective of identifying dollar savings that could be
used to increase modernization funding. We reported in April 1998
that considerable risk remains in some of the services' plans to cut
175,000 personnel and save $3.7 billion annually by 2003.\15 The
projected cuts and savings are as a result of the QDR and are in
addition to those previously planned.
The 1999 FYDP does not include all the personnel cuts directed by the
QDR. With the exception of the Air Force, the services have plans
that should enable them to achieve the majority of their active
military cuts by the end of 1999. OSD determined that some of the
Air Force's active military cuts announced in May 1997 to restructure
fighter squadrons and consolidate bomber squadrons should not be
included in the 1999 FYDP because the plans were not executable at
this time.
In addition, plans for some cuts included in the 1999 FYDP are still
incomplete or based on optimistic assumptions. For example, there is
no agreement within the Army on how 25,000 of the 45,000 reserve cuts
will be allocated. This decision on how to allocate the reserve cuts
will not be made before the next force structure review. Moreover,
plans to achieve savings through outsourcing and reengineering may
not be implemented by 2003 as originally anticipated.\16 For example,
the Army plans to compete 48,000 positions to achieve the majority of
its civilian reductions. However, according to an Army official,
those reductions cannot be completed by 2003. Although it announced
studies covering about 14,000 positions, it has not identified the
specific functions or location of the remaining positions to be
studied. In addition, the Army's plan to eliminate about 5,300
civilian personnel in the Army Materiel Command through reengineering
efforts involves risk because the Command does not have specific
plans to achieve these reductions.\17 Although outsourcing is only a
small part of the Navy's QDR cuts, the Navy has an aggressive
outsourcing program that involves risk. Specifically, the Navy has
programmed savings of $2.5 billion in the 1999 FYDP based on plans to
study 80,500 positions--10,000 military and 70,500 civilian--by 2003.
Moreover, the Navy has not identified the majority of the specific
functions that will be studied to achieve the expected savings.
According to a Navy acquisition official, the Navy's ambitious
projected outsourcing savings may not materialize, thereby
jeopardizing its long-term O&M and procurement plans.
OSD recognizes that personnel cuts and the planned savings from those
cuts have not always been achieved, which contribute to the migration
of procurement funding. Therefore, OSD has established two principal
mechanisms for monitoring the services' progress in reducing
personnel positions. First, it expects to review the services' plans
for reducing personnel positions during annual reviews of the
services' budgets. Second, the Defense Management Council will
monitor the services' progress in meeting outsourcing goals.
DOD's plans are based on the assumption that Congress will modify the
permanent statutory minimum end-strength levels. These personnel
levels, or floors, require the services to collectively employ at
least 1,414,590 active duty military personnel.\18 This assumption
risks the execution of DOD plans. If Congress does not lower the
floors, costs for military personnel will be substantially higher.
Currently, DOD plans to have 1,396,000 active duty military personnel
in 1999, but if the services must retain about 19,000 personnel to
meet the floors, they would need about $1.1 billion more in 1999
military personnel funds. Furthermore, costs to meet the floors in
2000-2003 would be higher because DOD projects lower end-strength
levels than currently permitted by law. Notably, in 2003, DOD
projects 1,366,000 personnel--about 49,000 below current statutory
floors. If DOD is precluded from implementing its planned personnel
reductions, it would have to make other compensating adjustments to
its overall program.
--------------------
\15 Quadrennial Defense Review: All Personnel Cuts and Associated
Savings May Not Be Achieved (GAO/NSIAD-98-100, Apr. 30, 1998).
\16 The decision to outsource is based on the result of conducting
private-public competitions. This process determines whether
functions could be done more economically by contractors or by
in-house civilian employees.
\17 The Army now plans to eliminate 7,410 personnel.
\18 The National Defense Authorization Act for Fiscal Year 1998
identifies permanent end-strength floors--the lowest number of
military end strength for each of the services. The services have a
1-percent flexibility (the Army has 1.5 percent) in meeting the
permanent end-strength levels.
UNPROGRAMMED BILLS COULD
LEAD TO HIGHER O&M COSTS
---------------------------------------------------------- Letter :6.3
The QDR reported that unprogrammed expenses arise that displace
funding previously planned for procurement. The most predictable of
these expenses are underestimated costs in day-to-day operations,
especially for depot maintenance, real property maintenance, and
medical care. The least predictable are unplanned deployments and
smaller-scale contingencies.
The services and defense agencies plan to obligate $73 billion for
depot maintenance between 1999 and 2003. This estimate, despite its
magnitude, does not allow the defense agencies and services to
achieve OSD's goal of funding 85 percent of their maintenance
requirements during 1999-2003. According to DOD, the potential
liability of unfunded depot maintenance in the 1999 FYDP is $300
million per year. For example, the Army--which added $362 million
between 1999 and 2003--is projected to meet only 68 percent of its
depot maintenance requirements in 1999 and 79 percent by 2003.
Despite four base realignment and closure rounds, DOD still has
excess, aging facilities and has not programmed sufficient funds for
maintenance, repair, and upgrades. Each service has risk embedded in
its real property maintenance program to the extent that validated
real property needs are not met. For example, in the 1999
President's budget submission, the Air Force plans to fund real
property maintenance at the preventive or preservation maintenance
level in 1999, which allows only for day-to-day recurring
maintenance. This results in risk because the physical plant is
degraded and the backlog of maintenance and repair requirements
increases. Also, while the Marine Corps added funds during
1999-2003, the Commandant of the Marine Corps determined that the
planned funding would merely minimize deterioration of its
facilities. Further, although the Army added approximately $1
billion for real property maintenance in the 1999 FYDP, it was not
projected to meet its funding goal until 2002.
According to a Defense Health Affairs official, the cumulative O&M
funding increase of $1.6 billion over the 1998 FYDP adequately funds
the core medical mission, which is comprised of 2 parts, direct care
and managed care contracts. However, the 1999 FYDP funding is
contingent on several assumptions that contain risk. First, the
Defense Health Program assumes program-related personnel reductions
due to outsourcing and privatization initiatives. Estimated savings
for these efforts grow to $131 million by 2003. Second, the program
assumes a 1-percent savings from utilization management, such as
reducing the length of hospital stays from 4 days to 3 days. Third,
population adjustments due to force structure reductions play a
pivotal role. The projected program assumes that Congress will
authorize QDR recommended reductions of 61,700 active military
personnel and the reductions will be a mix of retirements and
nonretirement attrition. If end-strength reductions are not
authorized or a higher percentage of the reduction stems from
retirements than originally planned, the program will experience
higher costs than estimated. Without the authority to reduce active
duty end strengths, the beneficiary population of service personnel
and their dependents will not decrease. In addition, retirements do
not reduce costs because retirees and their dependents remain part of
the beneficiary population. According to a Defense Health Affairs
official, the funded program does not include an allowance for the
impact of advances in medical technology and the intensity of
treatment that was identified in a previous GAO report as a risk
factor.\19
Our recent work raises questions about whether cost savings and
efficiencies in defense health care will materialize. In August
1997,\20 we reported that a key cost-saving initiative of TRICARE,
DOD's new managed health care system, was returning substantially
less savings than anticipated and the situation was not likely to
improve. In our February 1998 testimony to Congress,\21 we stated
that implementation of TRICARE was proving complicated and difficult
and that delays had occurred and may continue.
Notwithstanding the historical costs of several, often overlapping
contingency operations, the 1999 FYDP provides funds only for the
projected "steady state" costs of Southwest Asia operations--$800
million in 1999. According to OSD officials, by design the FYDP does
not include funds for (1) the sustainment of increased operations in
the Persian Gulf to counter Iraq's intransigence on United Nations
inspections,\22 (2) the President's extension of the mission in
Bosnia, or (3) unknown contingency operations. DOD's position is
that costs for the mission in Bosnia should be financed separately
from planned DOD funding for 1999-2003.\23 Further, the QDR concluded
that contingency operations will likely occur frequently over the
next 15 to 20 years and may require significant forces, given the
national security strategy of engagement and the probable future
international environment. Thus, it is likely that DOD will continue
to have unplanned expenses to meet contingency operations.
--------------------
\19 Defense Health Program: Future Costs Are Likely to Be Greater
Than Estimated (GAO/NSIAD-97-83BR, Feb. 21, 1997).
\20 Defense Health Care: TRICARE Resource Sharing Program Failing to
Achieve Expected Savings (GAO/HEHS-97-130, Aug. 22, 1997).
\21 Defense Health Care: Operational Difficulties and System
Uncertainties Pose Continuing Challenges to TRICARE
(GAO/T-HEHS-98-100, Feb. 26, 1998).
\22 DOD programmed $150 million per year in 2000-2003 for additional
military personnel costs that could result from increased Southwest
Asia operations. OSD programmed the 2000-2003 funds in the O&M
Overseas Contingency Operations Transfer Fund, rather than
distributing this money to each service's military personnel account.
\23 In December 1997, the President extended DOD's Bosnia operations
past June 1998. To cover 1999 Bosnia costs, in March 1998, the
administration submitted a nonoffset emergency budget amendment of
$1.9 billion. Moreover, the President's 1999 budget request contains
an allowance for undistributed funds to cover contingencies such as
Bosnia and natural disasters. The President considers Bosnia funding
to have first claim on this allowance and has accordingly informed
the relevant congressional committees.
BASE CLOSURE SAVINGS HAVE
BEEN DIFFICULT TO ESTIMATE
PRECISELY
---------------------------------------------------------- Letter :6.4
In reporting on lessons learned from prior base closure rounds, we
noted that savings, though not well documented, are expected to be
substantial.\24 However, the precise amount and timing of net
recurring savings realized from base closure actions is uncertain.\25
For example, when compared with the 1998 FYDP, the Air Force has
revised its 1999 FYDP O&M savings for the fourth round of base
closures. In the 1998 FYDP, the Air Force estimated net savings at
$253 million, whereas in the 1999 FYDP it projects net savings at $85
million--a difference of $167 million.\26 This is the second
consecutive FYDP that the Air Force has lowered its expectations of
near-term savings.
In our comparison of the 1997 and 1998 FYDPs, we reported that the
Navy's savings estimates for the fourth round of base closures were
incorrect in that the savings were for outsourcing and competition
initiatives. In the 1999 FYDP, the Navy continues to report
estimated outsourcing savings incorrectly as base closure savings.
According to a Chief of Naval Operations official, the Navy will work
with appropriate budget and programming offices to correct the
reported FYDP information.
--------------------
\24 Military Bases: Lessons Learned From Prior Base Closure Rounds
(GAO/NSIAD-97-151, July 25, 1997).
\25 Savings can begin to accrue even as costs are being incurred to
implement a base closure decision. One-time implementation costs may
increase or decrease from initial estimates during the implementation
period. Such increases or decreases can affect the point at which
savings exceed implementation costs and net savings begin to accrue
on an annual recurring basis.
\26 The difference may not add due to rounding.
RISK IN MEETING PROCUREMENT
GOALS
---------------------------------------------------------- Letter :6.5
We reported that, since 1965, O&M spending has increased consistently
with increases in procurement spending.\27 However, in its 1998 FYDP,
DOD was optimistic in projecting increases in procurement together
with decreases in O&M. In the 1999 FYDP, DOD takes a more moderate
position, projecting that O&M spending in real terms will remain
relatively flat while procurement increases at a moderate rate.
Figure 3 shows the historical relationship between O&M and
procurement spending and compares the projections of the 1998 and the
1999 FYDPs.
Figure 3: Historical and
Projected Relationship Between
Procurement and O&M Spending in
Constant 1999 Dollars
(See figure in printed
edition.)
Source: DOD.
We reported that DOD's plans for procurement spending also run
counter to another historical trend.\28 Specifically, DOD procurement
spending rises and falls in nearly direct proportion to movements in
its total budget; however, in the 1998 FYDP, DOD projected an
increase in procurement of about 43 percent but a relatively flat
total DOD budget. The 1999 FYDP procurement projections continue to
run counter to the historical trend, although DOD has moderated its
position. Specifically, DOD projects that procurement funding will
rise in real terms during 1998-2003 by approximately 29 percent while
the total DOD budget will remain relatively flat. Figure 4 shows the
historical relationship between the total DOD budget and procurement
spending and DOD's 1999 FYDP projections.
Figure 4: Historical and
Projected Relationship Between
Procurement Spending and DOD's
Total Budget in Constant 1999
Dollars
(See figure in printed
edition.)
Source: DOD.
--------------------
\27 Future Years Defense Program: DOD's 1998 Plan Has Substantial
Risk in Execution.
\28 Future Years Defense Program: DOD's 1998 Plan Has Substantial
Risk in Execution.
RECENT PROCUREMENT TRENDS
IMPACT LONGER-TERM
AFFORDABILITY
---------------------------------------------------------- Letter :6.6
Over the 1995-98 FYDPs, DOD did not meet its plans to increase
procurement. For example, since 1995, DOD has lowered the estimated
funding for 1998 procurement from about $57 billion in the 1995 FYDP
to about $43 billion in the 1998 FYDP. The 1999 FYDP continues this
trend, as table 3 shows.
Table 3
Comparison of DOD's Procurement Plans
(Dollars in billions)
Planned procurement funding
----------------------------------------------------------------------------------
FY Averag
DP 1995 1996 1997 1998 1999 2000 2001 2002 2003 e
-- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
19 $43.3 $48.4 $49.8 $57.1 $60.1
95
19 39.4 43.5 51.4 54.2 $62.3 $67.3
96
19 38.9 45.5 50.5 57.7 60.1
97
19 42.6 50.7 57.0 60.7 $68.3 $68.0
98
19 48.7 54.1 61.3 60.7 63.5
99
Un -$9.0 - - - -$8.2 -$6.0 -$7.6 -$4.5 -$9.0
r $10.9 $14.5 $11.4
e
a
l
i
z
e
d
p
r
o
c
u
r
e
m
e
n
t
----------------------------------------------------------------------------------
Source: 1995, 1996, 1997, 1998, and 1999 FYDPs.
In its QDR report, DOD recognized that these trends have longer- term
implications. Specifically, "some of these reductions have
accumulated into long-term projections, creating a so-called 'bow
wave' of demand for procurement funding in the middle of the next
decade." The QDR report concludes that "this bow wave would tend to
disrupt planned modernization programs unless additional investment
resources are made available in future years."
The bow wave is particularly evident when considering DOD's aircraft
modernization plans. In September 1997, we reported that DOD's
aircraft investment strategy involved the purchase or significant
modification of at least 8,499 aircraft in 17 aircraft programs at a
total procurement cost of $334.8 billion (in 1997 dollars) through
the aircrafts' planned completions.\29 DOD's planned funding for the
17 aircraft programs exceeds, in all but
1 year between fiscal year 2000 and 2015, the long-term historical
average percentage of the budget devoted to aircraft purchases.
Compounding these funding difficulties is the fact that these
projections are very conservative. The projections do not allow for
real program cost growth, which historically has averaged at least 20
percent, nor do the projections allow for the procurement of
additional systems. However, as a result of the QDR, the 1999 FYDP
service aircraft procurement accounts have been moderated. Compared
with the 1998 FYDP, the 1999 FYDP reduces projected funding by $3.9
billion, or 4 percent.
--------------------
\29 Aircraft Acquisition: Affordability of DOD's Investment Strategy
(GAO/NSIAD-97-88, Sept. 8, 1997).
PROGRAM DEMANDS AND COST
GROWTH
---------------------------------------------------------- Letter :6.7
The QDR report cited cost growth of complex, technologically advanced
programs and new program demands as two areas contributing to the
migration of funds from procurement. For years, we have reported on
the impact of cost growth in weapon systems and other programs such
as environmental restoration. Specifically, we reported in 1994 that
program cost increases of 20 to 40 percent have been common for major
weapon programs and that numerous programs experienced increases much
greater than that.\30 We continue to find programs with optimistic
cost projections. For example, we reported in June 1997 that we were
skeptical the Air Force could achieve planned production cost
reductions of $13 billion in its F-22 fighter aircraft program.\31
Other DOD programs have also experienced cost growth. For example,
DOD estimated in December 1997 that the projected life-cycle cost of
the Chemical Demilitarization Program had increased by 27 percent
over the previous year's estimate.\32 As stated earlier, DOD has
established a reserve fund that can be used to help alleviate
disruptions caused by cost growth in weapon systems and other
programs due to technological problems. However, it remains to be
seen whether the need will exceed available reserve funds.
Policy decisions and new program demands can also cause perturbations
in DOD's funding plans, according to the QDR report. DOD has
programmed $1.4 billion more for the National Missile Defense System
in the 1999 FYDP than the 1998 FYDP. Despite the increase,
considerable risk remains with the program's funding. For example,
technical and schedule risks are very high, according to the QDR, our
analysis,\33 and an independent panel.\34 The panel noted that based
on its experience, high technical risk is likely to cause increased
costs and program delays and could cause program failure. In
addition to the technical and schedule risks, the 1999 FYDP does not
include funds to procure the missile system. If the decision is made
in 2000 to deploy an initial missile system by 2003, billions of
dollars of procurement funds would be required to augment the
currently programmed research and development funds.
As another example, the 1999 FYDP was predicated on the U.S.
shifting to a Strategic Arms Reduction Treaty (START) II nuclear
force posture. START II calls for further reductions in aggregate
force levels, the elimination of multiple-warhead intercontinental
ballistic missile launchers, the elimination of heavy
intercontinental ballistic missiles, and a limit on the number of
submarine-launched ballistic missile warheads. START II was approved
by the U.S. Senate in January 1996 but is pending enforcement until
ratification by Russia's parliament. In the absence of START II
enforcement, the United States may decide to sustain the option of
continuing START I force levels. According to the Secretary of
Defense's 1998 Annual Report to the President and the Congress, the
1999 budget request includes an additional $57 million beyond what
otherwise would have been requested to sustain the START I level.
However, maintaining this force beyond 1999 will result in additional
unplanned costs.
--------------------
\30 Future Years Defense Program: Optimistic Estimates Lead to
Billions in Overprogramming (GAO/NSIAD-94-210, July 29, 1994).
\31 Tactical Aircraft: Restructuring of the Air Force F-22 Fighter
Program (GAO/NSIAD-97-156, June 4, 1997).
\32 The program was established by the National Defense Authorization
Act of 1986 (P.L. 99-145, as amended). DOD is required to destroy
the complete chemical stockpile by April 29, 2007.
\33 National Missile Defense: Schedule and Technical Risks Represent
Significant Development Challenges (GAO/NSIAD-98-28, Dec. 12, 1997).
\34 Report of the Panel on Reducing Risk in Ballistic Missile Defense
Flight Test Programs, February 27, 1998.
CONCLUSIONS
------------------------------------------------------------ Letter :7
Recently, DOD has found itself in a counterproductive cycle. Past
attempts at streamlining infrastructure and/or reengineering business
practices have not produced the anticipated savings programmed in
recent FYDPs. Money saved from these initiatives was to help fund
modernization. For the past 5 years, projected procurement funding
has slipped with each succeeding FYDP. Moreover, unanticipated
contingency costs, higher day-to-day operating expenses, and new
program demands also have caused the migration of funds from
procurement to operating and support costs. In the QDR, DOD
specified this problem, identified its causes, and directed measures
to make the program more stable. In the 1999 FYDP, DOD has taken a
step toward abating this chronic migration of funds. However, even
with a rebalanced program, DOD faces substantial risk in its
execution of this first, post-QDR plan. We found that several of
DOD's projections are questionable and/or contain risk. Furthermore,
as long as the national defense funding levels agreed to in the
balanced budget agreement remain unaltered, solutions to DOD's
funding issues must be found within its current and projected budget.
Therefore, it is critical that DOD continues to strive for realistic
assumptions and plans in its future budget cycles.
AGENCY COMMENTS AND OUR
EVALUATION
------------------------------------------------------------ Letter :8
In commenting on a draft of this report, DOD took issue with some of
our characterizations. DOD stated that the 1999 FYDP represents
considerable progress toward the objectives of funding
readiness-related O&M requirements, implementing plans to streamline
and reduce infrastructure, and reducing the risk of migrating funds.
DOD noted that our report does not acknowledge that the risks in
achieving these objectives have been substantially reduced in the
1999 FYDP and the Department's program is on a sounder financial
footing. Moreover, DOD acknowledges that all risks have not been
eliminated and intends to pursue future initiatives to address the
remaining risks. We agree, as stated in our report, that DOD made
adjustments from the 1998 FYDP to the 1999 FYDP to increase O&M and
decrease the risk that funds would migrate from procurement to
operating expenses. Moreover, it has plans to reduce infrastructure.
However, as explained in this report, we continue to see risks that
DOD's program may not be executable as planned in part because the
services' plans to reduce military and civilian personnel are
incomplete or based on optimistic assumptions.
DOD said that it has been able to reduce the proportion of resources
devoted to infrastructure activities from 47 percent in 1994 to 45
percent in 1997, as a percent of total obligation authority.
Moreover, DOD states that we are inaccurate in reporting that
infrastructure in 1997 remains at 59 percent of DOD's total budget,
the same percentage as in 1994. Our method of calculating the
infrastructure in DOD's budget is based on the methodology prescribed
by OSD's Office of Program Analysis and Evaluation (PA&E) in late
1995. We have consistently used this methodology since then to
report on DOD's progress in reducing its infrastructure and DOD has
agreed with our prior reports, findings, and analysis. The
methodology includes both direct infrastructure (that which can be
clearly identified in the FYDP) and a percentage of the defense
working capital funds that represents the infrastructure portion of
these funds.
In discussing DOD's comments with PA&E officials, they stated that
for a number of reasons, including the difficulty of estimating the
infrastructure portion of defense working capital funds, PA&E is
evaluating different methodologies to estimate infrastructure in its
budget. One such measure, which DOD used to derive the percentages
discussed in its letter, is to estimate only the direct
infrastructure. However, there are important limitations in this
methodology. While it is a simpler methodology, it excludes a
significant part of the infrastructure, which PA&E previously
considered important to capture. Moreover, DOD established an
important baseline in its October 1993 bottom-up review report when
it said that infrastructure activities in 1994 would account for
approximately 59 percent of DOD's total obligational authority
(including revolving funds) and that it needed to reduce that
infrastructure. We strongly believe that it is important to maintain
a consistent baseline to measure changes in infrastructure over time.
DOD believes that its assumptions of the savings rates for
outsourcing personnel are conservative. According to DOD, the
estimated savings reflected in the 1999 FYDP assume that the
Department successfully executes the currently projected schedule of
competitions. Moreover, DOD emphasizes that it needs to closely
monitor implementation of projected competition schedules through the
programming and budgeting cycles. We believe DOD has taken a step in
the right direction to monitor implementation of the outsourcing
process. However, considerable risk remains in the services' plans
to cut planned personnel by 2003 because the plans are still
incomplete or based on optimistic assumptions. DOD suggested several
technical changes for clarification and accuracy, which we
incorporated in the report where appropriate. DOD's comments are
reprinted in their entirety in appendix II.
SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :9
To determine the major program adjustments in DOD's fiscal year 1999
FYDP, we interviewed officials in the Office of Under Secretary of
Defense (Comptroller); the Office of Program Analysis and Evaluation;
the Army, Navy, and Air Force program and budget offices; and Office
of the Assistant Secretary of Defense (Health Affairs). We examined
a variety of DOD planning and budget documents, including the 1998
and 1999 FYDPs and the QDR report. We also reviewed the President's
fiscal year 1999 budget submission; our prior reports; and pertinent
reports by the Congressional Budget Office, the Congressional
Research Service, and others.
To determine the implications of program changes and underlying
planning assumptions, we discussed the changes with DOD officials.
We compared DOD's automated data with published documents provided by
DOD. Specifically, we compared total budget estimates, appropriation
totals, military and civilian force levels, force structure levels,
and some specific program information. Based on our comparisons, we
were satisfied that DOD's automated FYDP data and published data were
in agreement. We did not test DOD's management controls of the FYDP
data.
Our review was conducted from November 1997 through June 1998 in
accordance with generally accepted government auditing standards.
---------------------------------------------------------- Letter :9.1
We are sending copies of this report to other appropriate Senate and
House Committees; the Secretaries of Defense, the Air Force, the
Army, and the Navy; and the Director, Office of Management and
Budget. We will also provide copies to others upon request.
If you have any questions concerning this report, please call me on
(202) 512-3504. Major contributors to this report are listed in
appendix III.
Richard Davis
Director, National Security
Analysis
DEPARTMENT OF DEFENSE'S 1998 AND
1999 FUTURE YEARS DEFENSE
PROGRAMS, BY ACCOUNTS
=========================================================== Appendix I
The following tables show the differences between accounts in the
1998 and 1999 Future Years Defense Programs (FYDP) for each
appropriation. Totals may not add due to rounding.
Table I.1
Military Personnel Appropriation
Accounts, 1998 and 1999 FYDPs
(Dollars in millions)
Fiscal year
--------------------------------------
Percent
change
1999-
1999 2000 2001 2002 2003 Total 2003
FYDP ------ ------ ------ ------ ------ ====== --------
Military 1998 $20,96 $21,30 $21,81 $22,48 $23,18 $109,7
personnel, 3 4 6 1 8 52
Army
1999 21,002 20,807 21,300 21,939 22,629 107,67
8
Change 39 -497 -516 -542 -559 - -1.9
2,074
Military 1998 16,388 16,749 17,284 17,729 18,235 86,386
personnel,
Navy
1999 16,613 16,487 16,720 17,156 17,653 84,630
Change 225 -262 -564 -573 -582 - -2.0
1,756
Military 1998 6,330 6,525 6,702 6,892 7,087 33,536
personnel,
Marine Corps 1999 6,272 6,442 6,611 6,776 6,949 33,049
Change -58 -83 -91 -116 -138 -487 -1.5
Military 1998 17,184 17,454 17,842 18,293 18,779 89,553
personnel,
Air Force 1999 17,312 17,374 17,305 17,357 17,623 86,970
Change 127 -80 -537 -936 - - -2.9
1,156 2,583
Reserve 1998 2,064 2,094 2,158 2,202 2,280 10,799
personnel,
Army 1999 2,152 2,169 2,204 2,196 2,265 10,985
Change 88 74 46 -6 -16 186 1.7
Reserve 1998 1,398 1,429 1,459 1,497 1,541 7,325
personnel,
Navy 1999 1,387 1,385 1,404 1,428 1,463 7,067
Change -11 -44 -56 -69 -78 -258 -3.5
Reserve 1998 391 403 414 422 432 2,062
personnel,
Marine Corps 1999 402 404 401 399 403 2,008
Change 11 1 -13 -24 -29 -54 -2.6
Reserve 1998 852 877 900 923 948 4,500
personnel,
Air Force 1999 856 893 916 940 965 4,570
Change 4 16 16 17 17 70 1.6
National Guard 1998 3,184 3,207 3,281 3,375 3,473 16,520
personnel,
Army 1999 3,405 3,352 3,342 3,354 3,410 16,863
Change 220 145 61 -21 -63 342 2.1
National Guard 1998 1,344 1,368 1,399 1,442 1,486 7,040
personnel,
Air Force 1999 1,376 1,403 1,437 1,480 1,525 7,220
Change 32 35 38 38 38 180 2.6
================================================================================
Total 1998 $70,09 $71,41 $73,25 $75,25 $77,45 $367,4
9 0 6 7 0 72
1999 $70,77 $70,71 $71,63 $73,02 $74,88 $361,0
7 5 9 4 4 39
Change $678 -$695 - - - - -1.8
$1,617 $2,232 $2,566 $6,432
--------------------------------------------------------------------------------
Table I.2
Operation and Maintenance Appropriation
Accounts, 1998 and 1999 FYDPs
(Dollars in millions)
Fiscal year
--------------------------------------
Percent
change
1999-
1999 2000 2001 2002 2003 Total 2003
FYDP ------ ------ ------ ------ ------ ====== --------
Operation and 1998 $16,89 $17,15 $17,34 $17,89 $18,29 $87,57
1 7 0 0 7 5
maintenance 1999 17,273 17,533 17,833 18,337 18,541 89,517
(O&M),
Army Change 382 376 493 447 243 1,941 2.2
O&M, Navy 1998 21,518 20,199 20,763 21,137 21,252 104,86
9
1999 21,927 21,706 21,527 21,771 22,284 109,21
6
Change 409 1,507 764 634 1,032 4,346 4.1
O&M, Marine 1998 2,404 2,482 2,511 2,567 2,621 12,585
Corps
1999 2,524 2,568 2,566 2,638 2,739 13,035
Change 120 86 56 71 118 450 3.6
O&M, Air Force 1998 18,628 19,456 20,506 20,414 21,311 100,31
6
1999 19,177 20,426 21,584 21,878 22,607 105,67
2
Change 549 969 1,079 1,464 1,295 5,356 5.3
O&M, defense- 1998 10,543 10,622 10,876 11,122 11,399 54,562
wide
1999 10,751 10,672 10,890 11,138 11,405 54,856
Change 208 50 14 16 6 294 0.5
O&M, Army 1998 1,210 1,241 1,262 1,286 1,317 6,316
Reserve
1999 1,203 1,244 1,234 1,285 1,309 6,275
Change -7 3 -28 0 -8 -41 -0.6
O&M, Navy 1998 858 885 857 952 859 4,412
Reserve
1999 929 941 904 1,052 899 4,725
Change 71 56 47 100 40 313 7.1
O&M, Marine 1998 115 116 116 119 122 588
Corps
Reserve 1999 115 114 107 108 110 553
Change -1 -2 -9 -12 -13 -36 -6.1
O&M, Air Force 1998 1,631 1,598 1,614 1,646 1,697 8,186
Reserve
1999 1,745 1,671 1,692 1,734 1,778 8,620
Change 113 73 79 88 81 434 5.3
O&M, Army 1998 2,367 2,478 2,533 2,598 2,735 12,711
National
Guard 1999 2,437 2,389 2,452 2,508 2,623 12,408
Change 70 -90 -81 -90 -112 -303 -2.4
O&M, Air 1998 2,982 2,970 2,991 3,054 3,125 15,122
National
Guard 1999 3,094 3,072 3,114 3,214 3,285 15,779
Change 112 102 123 160 160 657 4.3
Drug 1998 652 663 688 702 720 3,425
interdiction
and
counter-drug 1999 728 712 726 735 748 3,649
activities,
defense Change 75 49 38 32 28 223 6.5
Defense Health 1998 9,743 10,143 10,568 10,730 10,908 52,092
Program
1999 10,056 10,443 10,934 11,042 11,211 53,686
Change 313 300 366 312 303 1,594 3.1
Former Soviet 1998 345 504 237 0 0 1,085
Union
threat 1999 442 451 466 255 448 2,062
reduction
Change 98 -53 229 255 448 977 90.0
Overseas 1998 0 0 0 0 0 0
contingency
operations 1999 747 150 150 150 150 1,347
transfer fund
Change 747 150 150 150 150 1,347
Management 1998 0 0 -600 - - -
initiatives 4,200 3,000 7,800
1999 0 0 0 0 0 0
Change 0 0 600 4,200 3,000 7,800
Other O&M 1998 1,481 1,531 1,541 1,807 1,867 8,228
1999 1,477 1,597 1,494 1,612 1,583 7,762
Change -4 66 -47 -195 -285 -466 -5.7
================================================================================
Total 1998 $91,36 $92,04 $93,80 $91,82 $95,23 $464,2
9 5 2 6 2 74
1999 $94,62 $95,68 $97,67 $99,45 $101,7 $489,1
3 7 3 8 20 60
Change $3,254 $3,642 $3,871 $7,632 $6,487 $24,88 5.4
6
--------------------------------------------------------------------------------
Note: Service O&M budgets contain funds that were formerly
represented in defense-wide revolving funds under the heading
¹Military Commissary Revolving Funds.º
Table I.3
Procurement Appropriation Accounts by
Service, 1998 and 1999 FYDPs
(Dollars in millions)
Fiscal year
--------------------------------------
Percen
t
change
1999-
1999 2000 2001 2002 2003 Total 2003
FYDP ------ ------ ------ ------ ------ ======== ------
Army 1998 $8,373 $9,351 $10,11 $10,61 $11,05 $49,509
procurement 4 6 5
1999 8,173 9,128 10,022 11,239 12,260 50,822
Change -200 -223 -93 623 1,205 1,313 2.7
Navy/Marine 1998 20,447 23,384 23,975 25,920 24,364 118,090
Corps
procurement 1999 20,160 21,669 26,376 23,094 24,215 115,513
Change -287 - 2,400 - -149 -2,577 -2.2
1,715 2,826
Air Force 1998 18,183 19,609 21,335 22,216 21,543 102,886
procurement
1999 17,475 18,860 20,751 21,950 22,437 101,473
Change -708 -749 -584 -266 895 -1,413 -1.4
Defense-wide 1998 3,711 4,653 5,237 9,584 11,044 34,229
procurement
1999 2,897 4,466 4,119 4,378 4,610 20,471
Change -814 -187 - - - -13,758 -40.2
1,118 5,205 6,434
================================================================================
Total 1998 $50,71 $56,99 $60,66 $68,33 $68,00 $304,714
4 6 2 5 6
1999 $48,70 $54,12 $61,26 $60,66 $63,52 $288,279
5 2 7 1 3
Change - - $606 - - - -5.4
$2,009 $2,874 $7,674 $4,483 $16,435
--------------------------------------------------------------------------------
Table I.4
Army Procurement Appropriation Accounts,
1998 and 1999 FYDPs
(Dollars in millions)
Fiscal year
--------------------------------------
Percent
change
1999-
1999 2000 2001 2002 2003 Total 2003
FYDP ------ ------ ------ ------ ------ ====== --------
Aircraft 1998 $1,241 $1,219 $1,391 $1,672 $1,789 $7,311
procurement,
Army
1999 1,326 1,372 1,456 2,007 2,074 8,234
Change 85 153 65 335 285 923 12.6
Missile 1998 1,541 1,881 2,008 2,501 2,211 10,143
procurement,
Army
1999 1,206 1,432 1,514 1,488 1,285 6,924
Change -336 -449 -494 - -927 - -31.7
1,013 3,218
Procurement of 1998 1,475 1,621 1,688 1,517 1,912 8,213
weapons and
tracked combat 1999 1,434 1,566 1,615 1,794 1,911 8,319
vehicles,
Army Change -41 -55 -73 277 -1 106 1.3
Procurement of 1998 976 1,164 1,184 1,253 1,382 5,959
ammunition,
Army 1999 1,009 1,157 1,232 1,495 1,664 6,556
Change 33 -7 48 242 282 597 10.0
Other 1998 3,140 3,467 3,844 3,673 3,760 17,884
procurement,
Army
1999 3,199 3,602 4,204 4,456 5,327 20,788
Change 59 136 360 783 1,567 2,904 16.2
================================================================================
Total 1998 $8,373 $9,351 $10,11 $10,61 $11,05 $49,50
4 6 5 9
1999 $8,173 $9,128 $10,02 $11,23 $12,26 $50,82
2 9 0 2
Change -$200 -$223 -$93 $623 $1,205 $1,313 2.7
--------------------------------------------------------------------------------
Table I.5
Navy/Marine Corps Procurement
Appropriation Accounts, 1998 and 1999
FYDPs
(Dollars in millions)
Fiscal year
--------------------------------------
Percent
change
1999-
1999 2000 2001 2002 2003 Total 2003
FYDP ------ ------ ------ ------ ------ ====== --------
Aircraft 1998 $7,669 $9,164 $8,579 $8,404 $8,526 $42,34
procurement, 2
Navy
1999 7,467 8,128 7,777 8,055 7,990 39,418
Change -203 - -801 -349 -536 - -6.9
1,036 2,924
Weapons 1998 1,436 1,821 2,018 2,173 2,394 9,842
procurement,
Navy 1999 1,328 1,615 1,707 1,888 2,042 8,580
Change -108 -206 -311 -285 -352 - -12.8
1,262
Shipbuilding 1998 5,958 6,576 8,048 9,760 7,617 37,959
and
conversion,
Navy 1999 6,253 6,218 11,533 7,305 7,998 39,306
Change 295 -358 3,486 - 380 1,347 3.5
2,455
Procurement of 1998 503 561 499 524 579 2,666
ammunition,
Navy and 1999 430 489 475 500 577 2,470
Marine Corps
Change -73 -72 -24 -24 -2 -196 -7.3
Other 1998 4,185 4,297 3,880 4,128 4,327 20,817
procurement,
Navy
1999 3,938 4,241 3,841 4,321 4,594 20,934
Change -248 -56 -39 193 267 117 0.6
Procurement, 1998 696 965 953 930 921 4,464
Marine Corps
1999 746 978 1,042 1,025 1,015 4,806
Change 50 13 90 95 94 342 7.7
================================================================================
Total 1998 $20,44 $23,38 $23,97 $25,92 $24,36 $118,0
7 4 5 0 4 90
1999 $20,16 $21,66 $26,37 $23,09 $24,21 $115,5
0 9 6 4 5 13
Change -$287 - $2,400 - -$149 - -2.2
$1,715 $2,826 $2,577
--------------------------------------------------------------------------------
Table I.6
Air Force Procurement Appropriation
Accounts, 1998 and 1999 FYDPs
(Dollars in millions)
Fiscal year
--------------------------------------
Percent
change
1999-
1999 2000 2001 2002 2003 Total 2003
FYDP ------ ------ ------ ------ ------ ====== --------
Aircraft 1998 $8,080 $8,730 $10,10 $10,92 $10,08 $47,91
procurement, 3 0 4 6
Air Force 1999 7,756 8,215 9,485 10,388 10,157 46,001
Change -323 -514 -618 -532 73 - -4.0
1,915
Missile 1998 2,892 3,304 3,354 3,453 3,601 16,604
procurement,
Air Force 1999 2,360 2,799 3,185 3,342 3,596 15,282
Change -532 -505 -169 -112 -5 - -8.0
1,322
Procurement of 1998 457 619 788 813 943 3,620
ammunition,
Air Force 1999 384 547 722 693 813 3,159
Change -72 -72 -67 -120 -131 -462 -12.7
Other 1998 6,755 6,956 7,090 7,030 6,915 34,745
procurement,
Air Force 1999 6,974 7,298 7,360 7,528 7,872 37,032
Change 220 342 270 498 957 2,286 6.6
================================================================================
Total 1998 $18,18 $19,60 $21,33 $22,21 $21,54 $102,8
3 9 5 6 3 86
1999 $17,47 $18,86 $20,75 $21,95 $22,43 $101,4
5 0 1 0 7 73
Change -$708 -$749 -$584 -$266 $895 - -1.4
$1,413
--------------------------------------------------------------------------------
Table I.7
Defense-wide Procurement Appropriation
Accounts, 1998 and 1999 FYDPs
(Dollars in millions)
Fiscal year
--------------------------------------
Percent
change
1999-
1999 2000 2001 2002 2003 Total 2003
FYDP ------ ------ ------ ------ ------ ====== --------
Procurement, 1998 $2,616 $1,774 $1,858 $2,013 $2,061 $10,32
defense- 2
wide\a
1999 2,042 3,315 3,101 3,228 3,730 15,416
Change -575 1,541 1,243 1,215 1,669 5,094 49.3
National Guard 1998 0 0 0 0 0 0
and Reserve
equipment 1999 0 0 0 0 0 0
Change 0 0 0 0 0 0
Chemical 1998 1,094 1,096 924 931 980 5,026
agents and
munitions 1999 855 1,149 1,016 1,149 879 5,048
destruction,
defense Change -239 53 92 218 -101 23 0.5
Modernization 1998 0 1,783 2,454 6,640 8,003 18,881
reserve
1999 0 0 0 0 0 0
Change 0 - - - - -
1,783 2,454 6,640 8,003 18,881
Defense export 1998 1 0 0 0 0 1
loan
guarantees 1999 1 2 2 2 2 7
Change 0 2 2 2 2 6 1154.8
================================================================================
Total 1998 $3,711 $4,653 $5,237 $9,584 $11,04 $34,22
4 9
1999 $2,897 $4,466 $4,119 $4,378 $4,610 $20,47
1
Change -$814 -$187 - - - - -40.2
$1,118 $5,205 $6,434 $13,75
8
--------------------------------------------------------------------------------
\a In the 1998 FYDP for 1999, $965 million was programmed for the
modernization reserve.
Table I.8
Research, Development, Test, and
Evaluation Appropriation Accounts, 1998
and 1999 FYDPs
(Dollars in millions)
Fiscal year
--------------------------------------
Percent
change
1999-
1999 2000 2001 2002 2003 Total 2003
FYDP ------ ------ ------ ------ ------ ====== --------
Research, 1998 $4,497 $4,496 $4,674 $4,791 $4,675 $23,13
development, 2
test, and 1999 4,781 4,755 4,900 4,887 4,885 24,206
evaluation
(RDT&E), Army Change 284 259 225 96 210 1,074 4.6
RDT&E, Navy 1998 7,756 7,044 6,765 7,370 7,934 36,869
1999 8,109 7,605 7,231 7,671 8,269 38,885
Change 353 561 466 302 335 2,016 5.5
RDT&E, Air 1998 13,800 12,965 12,558 13,374 14,486 67,183
Force
1999 13,598 12,614 12,287 12,791 13,142 64,431
Change -202 -351 -271 -583 - - -4.1
1,345 2,751
RDT&E, 1998 8,689 8,586 8,580 8,397 8,383 42,636
defense-wide
1999 9,315 8,658 8,288 7,898 7,749 41,907
Change 625 72 -292 -500 -634 -729 -1.7
Developmental 1998 279 288 295 292 309 1,463
test and
evaluation, 1999 251 263 263 259 273 1,309
defense
Change -28 -25 -32 -33 -36 -154 -10.5
Operational 1998 23 24 25 25 26 124
test and
evaluation, 1999 25 26 25 26 26 128
defense
Change 2 1 0 0 0 4 3.2
================================================================================
Total 1998 $35,04 $33,40 $32,89 $34,24 $35,81 $171,4
5 3 7 9 4 07
1999 $36,07 $33,92 $32,99 $33,53 $34,34 $170,8
9 0 3 1 4 67
Change $1,034 $517 $96 -$718 - -$540 -0.3
$1,470
--------------------------------------------------------------------------------
Table I.9
Military Construction Appropriation
Accounts, 1998 and 1999 FYDPs
(Dollars in millions)
Fiscal year
--------------------------------------
Percent
change
1999-
1999 2000 2001 2002 2003 Total 2003
FYDP ------ ------ ------ ------ ------ ====== --------
Military 1998 $697 $606 $580 $736 $696 $3,315
construction,
Army 1999 791 948 877 972 769 4,357
Change 94 342 298 236 73 1,043 31.5
Military 1998 475 696 734 815 863 3,584
construction,
Navy 1999 468 709 752 815 945 3,690
Change -7 13 19 -0 82 106 3.0
Military 1998 465 522 539 647 680 2,854
construction,
Air Force 1999 455 452 518 624 649 2,698
Change -11 -70 -21 -23 -31 -156 -5.5
Military 1998 709 750 705 628 610 3,402
construction,
defense-wide 1999 492 811 535 524 862 3,224
Change -218 61 -170 -104 252 -178 -5.2
Military 1998 66 77 77 77 77 374
construction,
Army Reserve 1999 71 80 75 74 74 374
Change 5 3 -2 -3 -3 0 0.0
Military 1998 15 11 25 28 44 122
construction,
Naval Reserve 1999 15 21 21 24 37 119
Change -0 11 -3 -4 -7 -4 -2.9
Military 1998 34 45 31 34 37 181
construction,
Army National 1999 48 61 48 48 48 253
Guard
Change 14 16 17 14 11 72 39.7
Military 1998 32 111 127 58 61 389
construction,
Air National 1999 35 107 123 56 59 380
Guard
Change 3 -4 -4 -2 -2 -9 -2.4
Military 1998 12 29 31 35 37 145
construction,
Air Force 1999 11 26 30 33 35 135
Reserve
Change -2 -3 -1 -2 -2 -10 -6.8
North Atlantic 1998 200 200 200 200 200 1,000
Treaty
Organization 1999 185 293 341 388 386 1,593
Security
Investment Change -15 93 141 188 186 593 59.3
Program
Base 1998 1,551 1,240 1,183 131 116 4,221
realignment
and
closure 1999 1,731 1,380 1,072 159 118 4,459
account, II-
IV
Change 179 140 -111 28 2 239 5.7
================================================================================
Total 1998 $4,258 $4,287 $4,231 $3,390 $3,420 $19,58
6
1999 $4,301 $4,889 $4,393 $3,717 $3,982 $21,28
2
Change $43 $603 $162 $327 $562 $1,696 8.7
--------------------------------------------------------------------------------
Table I.10
Family Housing Appropriation Accounts,
1998 and 1999 FYDPs
(Dollars in millions)
Fiscal year
--------------------------------------
Percent
change
1999-
1999 2000 2001 2002 2003 Total 2003
FYDP ------ ------ ------ ------ ------ ====== --------
Family 1998 $1,256 $1,323 $1,324 $1,355 $1,376 $6,634
housing, Army
1999 1,208 1,245 1,235 1,263 1,319 6,271
Change -48 -77 -88 -92 -58 -363 -5.5
Family 1998 1,272 1,287 1,309 1,349 1,375 6,591
housing, Navy
and
Marine Corps 1999 1,196 1,204 1,211 1,243 1,259 6,112
Change -75 -83 -98 -106 -116 -480 -7.3
Family 1998 1,093 1,121 1,145 1,172 1,191 5,722
housing, Air
Force
1999 1,016 1,082 1,101 1,122 1,136 5,457
Change -77 -39 -44 -50 -55 -264 -4.6
Family 1998 35 35 36 36 37 179
housing,
defense-wide 1999 37 38 38 38 38 189
Change 2 3 2 1 1 10 5.7
Homeowners 1998 132 0 0 0 0 132
assistance
fund, defense 1999 110 0 0 0 0 110
Change -22 0 0 0 0 -22 -16.7
DOD family 1998 180 175 172 0 0 526
housing
improvement 1999 7 341 338 200 400 1,286
fund
Change -173 166 166 200 400 759 144.3
DOD military 1998 0 0 0 0 0 0
unaccompanied
housing 1999 0 0 0 0 0 0
improvement
fund Change 0 0 0 0 0 0
================================================================================
Total 1998 $3,966 $3,941 $3,985 $3,913 $3,979 $19,78
4
1999 $3,574 $3,910 $3,923 $3,866 $4,151 $19,42
4
Change -$392 -$31 -$62 -$47 $172 -$360 -1.8
--------------------------------------------------------------------------------
Table I.11
Revolving and Management Funds, 1998 and
1999 FYDPs
(Dollars in millions)
Fiscal year
--------------------------------------
Percent
change
1999-
1999 2000 2001 2002 2003 Total 2003
FYDP ------ ------ ------ ------ ------ ====== --------
DOD working 1998 $31 0 0 0 0 $31
capital
funds 1999 95 $450 0 0 $700 1,245
Change 64 450 0 0 700 1,214 3,940.6
National 1998 690 369 $404 $413 421 2,296
defense
sealift
fund 1999 418 337 369 374 381 1,878
Change -272 -32 -35 -39 -40 -418 -18.2
Reserve 1998 0 0 0 0 0 0
mobilization
income 1999 37 0 0 0 0 37
insurance
fund
Change 37 0 0 0 0 37
Military 1998 939 944 943 942 942 4,709
commissary
revolving 1999 0 0 0 0 0 0
fund\a
Change -939 -944 -943 -942 -942 -
4,709
================================================================================
Total 1998 $1,659 $1,313 $1,347 $1,355 $1,363 $7,036
1999 $550 $787 $369 $374 $1,081 $3,160
Change - -$526 -$978 -$981 -$282 - -55.1
$1,110 $3,876
--------------------------------------------------------------------------------
\a For the 1999 FYDP, commissary funds were transferred into each
service's O&M budget and thus are no longer captured as a DOD
revolving fund
Table I.12
Defense-wide Contingencies, 1998 and
1999 FYDPs
(Dollars in millions)
Fiscal year
--------------------------------------
Percent
change
1999-
FYDP 1999 2000 2001 2002 2003 Total 2003
------ ------ ------ ------ ------ ------ ====== --------
Undistributed 1998 $85 $85 $85 -$115 $85 $225
contingencies,
defense 1999 1 2 2 832 1,449 2,284
Change -84 -84 -84 947 1,364 2,059 915.3
--------------------------------------------------------------------------------
(See figure in printed edition.)Appendix II
COMMENTS FROM THE DEPARTMENT OF
DEFENSE
=========================================================== Appendix I
(See figure in printed edition.)
MAJOR CONTRIBUTORS TO THIS REPORT
========================================================= Appendix III
NATIONAL SECURITY AND
INTERNATIONAL AFFAIRS DIVISION,
WASHINGTON, D.C.
Robert Pelletier
Deborah Colantonio
William Crocker
Douglas Horner
Shawn Bates
Bob Kenyon
Robert Henke
*** End of document. ***
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