[Analytical Perspectives, Budget of the United States Government,
Fiscal Year 1998][Page 99-141]
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SPECIAL ANALYSES AND PRESENTATIONS
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6. FEDERAL INVESTMENT SPENDING AND CAPITAL BUDGETING
Investment spending is spending that yields long-term benefits. Its
purpose may be to improve the efficiency of internal Federal agency
operations or to increase the Nation's overall stock of capital for
economic growth. The spending can be direct Federal spending or grants
to State and local governments. It can be for physical capital, which
yields a stream of services over a period of years, or for research and
development or education and training, which are intangible but also
increase income in the future or provide other long-term benefits.
Most presentations in the Federal budget combine investment spending
with spending for current use. This chapter focuses solely on Federal
and federally financed investment. These investments are discussed in
the following sections:
<bullet> description of the size and composition of Federal
investment spending;
<bullet> a discussion of capital assets used to provide Federal
services and efforts to improve planning and budgeting for
these assets. An Appendix to Part II presents the ``Principles
of Budgeting for Capital Asset Acquisitions,'' which are being
used to guide the analysis of agency requests for spending for
capital assets. These principles include a proposed new Budget
Enforcement Act scorekeeping rule to enforce full funding of
capital projects;
<bullet> a presentation of trends in the stock of federally financed
physical capital, research and development, and education;
<bullet> alternative capital budget and capital expenditure
presentations; and
<bullet> projections of Federal physical capital outlays and recent
assessments of public civilian capital needs, as required by
the Federal Capital Investment Program Information Act of
1984.
Part I: DESCRIPTION OF FEDERAL INVESTMENT
For more than forty years, a chapter in the budget has shown Federal
investment outlays--defined as those outlays that yield long-term
benefits--separately from outlays for current use. This year, for the
third consecutive year, the discussion of the composition of investment
includes estimates of budget authority as well as outlays. For the first
time, these estimates extend four years beyond the budget year to 2002.
The classification of spending into investment and current outlays is
a matter of judgment. The budget has historically employed a relatively
broad classification, including physical investment, research,
development, education, and training. But presentations for particular
purposes could adopt different definitions of investment:
<bullet> To suit the purposes of a traditional balance sheet,
investment might include only those physical assets owned by
the Federal Government, excluding capital financed through
grants and intangible assets such as research, education, and
training.
<bullet> Focusing on the role of investment in improving national
productivity and enhancing economic growth would exclude items
such as national defense assets, the benefits of which are
enhanced national security rather than economic growth.
<bullet> Concern with the efficiency of Federal operations would lead
to a focus solely on investments to reduce costs or improve
the effectiveness of internal Federal agency operations, such
as computer systems.
<bullet> A ``social investment'' perspective might broaden the
coverage of investment beyond what is included in this chapter
to encompass programs such as childhood immunization, maternal
health, certain nutrition programs, and substance abuse
treatment, which are designed in part to prevent more costly
health problems in future years.
The relatively broad definition of investment used in this section
provides consistency over time: historical figures on investment outlays
back to 1940 can be found in the separate Historical Tables volume. The
detailed tables at the end of this section allow disaggregation of the
data to focus on those investment outlays that best suit a particular
purpose.
In addition to this basic issue of definition, there are two technical
problems in the classification of investment data, involving the
treatment of grants to State and local governments and the
classification of spending that could be shown in more than one
category.
First, for some grants to State and local governments it is the
recipient jurisdiction, not the Federal Government, that ultimately
determines whether the money is used to finance investment or current
purposes. This analysis classifies all of the outlays in the category
where the recipient jurisdictions are expected to spend most of the
money. Hence, the community development block grant is classified as
physical investment, although some may be spent for current purposes.
General purpose fiscal assistance is classified as current spending,
although some may be spent by recipient jurisdictions on physical
investment.
Second, some spending could be classified in more than one category of
investment. For example, grants
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for construction of research facilities
finance the acquisition of physical assets, but they also contribute to
research and development. To avoid double counting, the outlays are
classified in the category that is most commonly recognized as
investment. Consequently outlays for the conduct of research and
development do not include outlays for research facilities, because
these outlays are included in the category for physical investment.
Similarly, physical investment and research and development related to
education and training are included in the categories of physical assets
and the conduct of research and development.
When direct loans and loan guarantees are used to fund investment, the
subsidy value is included as investment. The subsidies are classified
according to their program purpose, such as construction, education and
training, or non-investment outlays. For more information about the
treatment of Federal credit programs,, refer to Chapter 8,
``Underwriting Federal Credit and Insurance.''
This section presents spending for gross investment, without adjusting
for depreciation. A subsequent section discusses depreciation and shows
investment and capital stocks both gross and net of depreciation.
Composition of Federal Investment Outlays
Major Federal Investment
The composition of major Federal investment outlays is summarized in
Table 6-1. They include major public physical investment, the conduct of
research and development, and the conduct of education and training.
Defense and nondefense investment outlays were $227.9 billion in 1996.
Because of reductions in defense spending they are estimated to decline
to $225.7 billion in 1997 and to $218.7 billion in 1998. Major Federal
investment will comprise an estimated 13.0 percent of total Federal
outlays in 1998 and 2.7 percent of the Nation's gross domestic product
(GDP). Greater detail on Federal investment is available in tables 6-2
and 6-3 at the end of this section. Those tables include both budget
authority and outlays.
Physical investment.--Outlays for major public physical capital
investment (hereafter referred to as physical investment outlays) are
estimated to be $102.8 billion in 1998. Physical investment outlays are
for construction and rehabilitation, the purchase of major equipment,
and the purchase or sale of land and structures. Slightly more than
three-fifths of these outlays are for direct physical investment by the
Federal Government, with the remaining being grants to State and local
governments for physical investment.
Direct physical investment outlays by the Federal Government are
primarily for national defense. Defense outlays for physical investment
were $55.0 billion in 1996 and are estimated to decline to $47.8 billion
in 1998. Almost all of these outlays, or $43.2 billion, are for the
procurement of weapons and other military equipment, and the remainder
is primarily for construction of military bases, family housing for
military personnel, and Department of Energy defense facilities.
Table 6-1. COMPOSITION OF FEDERAL INVESTMENT OUTLAYS
(In billions of dollars)
------------------------------------------------------------------------
Estimate
1996 -------------------
actual 1997 1998
------------------------------------------------------------------------
Major Federal Investment Outlays
Major public physical capital investment:
Direct Federal:
National defense...................... 55.0 50.6 47.8
Nondefense............................ 20.6 21.2 15.1
-----------------------------
Subtotal, direct major public
physical capital investment........ 75.5 71.8 62.9
Grants to State and local governments... 40.4 41.1 39.9
-----------------------------
Subtotal, major public physical
capital investment................. 115.9 113.0 102.8
Conduct of research and development:
National defense........................ 39.4 38.9 37.4
Nondefense.............................. 29.0 31.4 32.8
-----------------------------
Subtotal, conduct of research and
development.......................... 68.4 70.3 70.2
Conduct of education and training:
Grants to State and local governments... 24.7 26.1 27.1
Direct Federal.......................... 18.9 16.3 18.5
-----------------------------
Subtotal, conduct of education and
training............................. 43.6 42.5 45.6
-----------------------------
Total, major Federal investment outlays... 227.9 225.7 218.7
MEMORANDUM
Major Federal investment outlays:
National defense........................ 94.4 89.6 85.3
Nondefense.............................. 133.4 136.1 133.4
-----------------------------
Total, major Federal investment
outlays.............................. 227.9 225.7 218.7
Miscellaneous physical investments:
Commodity inventories................... -1.0 -0.7 -0.8
Other physical investment (direct)...... 4.1 3.9 3.7
-----------------------------
Total, miscellaneous physical
investment........................... 3.1 3.1 2.9
-----------------------------
Total, Federal investment outlays,
including miscellaneous physical
investment............................... 230.9 228.9 221.5
------------------------------------------------------------------------
Outlays for direct physical investment for nondefense purposes are
estimated to be $15.1 billion in 1998. These outlays include $12.2
billion for construction and rehabilitation. This amount funds water,
power, and natural resources projects of the Army Corps of Engineers,
the Bureau of Reclamation within the Department of the Interior, the
Tennessee Valley Authority, and the power administrations in the
Department of Energy; construction and rehabilitation of veterans
hospitals and Postal Service facilities; and facilities for space and
science programs. Outlays for the acquisition of major equipment are
estimated to be $6.8 billion in 1998. The largest amounts are for the
air traffic control system and the Postal Service. For the purchase or
sale of land and structures, collections are expected to exceed
disbursements by $3.9 billion in 1998, largely due to the planned sale
of the United States Enrichment Corporation and the privatization of Elk
Hills. These sales explain most of the decline in outlays from 1996 to
1998.
Grants to State and local governments for physical investment are
estimated to be $39.9 billion in 1998. More than three fifths of these
outlays, or $24.5 billion, are to assist States and localities with
transportation infrastructure. Other major grants for physical
investment fund sewage treatment plants, community development, and
public housing.
Conduct of research and development.--Outlays for the conduct of
research and development are estimated to be $70.2 billion in 1998.
These outlays are devoted to increasing basic scientific knowledge and
promoting related research and development. They increase the Nation's
security, improve the productivity of capital and labor for both public
and private purposes, and enhance the quality of life. Slightly more
than half of these outlays, an estimated $37.4 billion in 1998, are for
national defense. Physical investment for research and development
facilities and equipment is included in the physical investment
category.
Nondefense outlays for the conduct of research and development are
estimated to be $32.8 billion in 1998. This is almost entirely direct
spending by the Federal Government, and is largely for the space
programs, the National Science Foundation, the National Institutes of
Health, and research for nuclear and non-nuclear energy programs.
Conduct of education and training.--Outlays for the conduct of
education and training are estimated to be $45.6 billion in 1998. These
outlays add to the stock of human capital by developing a more skilled
and productive labor force. Grants to State and local governments for
this category are estimated to be $27.1 billion in 1998, more than half
of the total. They include education programs for the disadvantaged and
the handicapped, vocational and adult education programs, training
programs in the Department of Labor, and Head Start. Direct education
and training outlays by the Federal Government are estimated to be $18.5
billion in 1998. Programs in this category are primarily aid for higher
education through student financial assistance,
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loan subsidies, the veterans GI bill, and health training programs.
This category does not include outlays for education and training of
Federal civilian and military employees. Outlays for education and
training that are for physical investment and for research and
development are in the categories for physical investment and the
conduct of research and development.
Miscellaneous Investment Outlays
In addition to the categories of major Federal investment, several
miscellaneous categories of investment outlays are shown at the bottom
of Table 6-1. These items, all for physical investment, are generally
unrelated to improving Government operations or enhancing economic
activity. Outlays for commodity inventories are for the purchase or sale
of agricultural products pursuant to farm price support programs and the
purchase and sale of other commodities such as oil and gas. Sales are
estimated to exceed purchases by $0.8 billion in 1998.
Outlays for other miscellaneous physical investment are estimated to
be $3.7 billion in 1998. This category includes primarily conservation
programs. These outlays are entirely for direct Federal spending.
Detailed Tables on Investment Spending
This section provides data on budget authority as well as outlays for
major Federal investment. For the first time these estimates extend four
years beyond the budget year to 2002. Table 6-2 displays budget
authority (BA) and outlays (O) by major programs according to defense
and nondefense categories. The greatest level of detail appears in Table
6-3, which shows budget authority and outlays divided according to
grants to State and local governments and direct Federal spending.
Miscellaneous investment is not included in these tables because it is
generally unrelated to improving Government operations or enhancing
economic activity.
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Table 6-2. FEDERAL INVESTMENT BUDGET AUTHORITY AND OUTLAYS: DEFENSE AND NONDEFENSE PROGRAMS
(In millions of dollars)
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Estimate
Description 1996 -----------------------------------------------------------------------
Actual 1997 1998 1999 2000 2001 2002
--------------------------------------------------------------------------------------------------------------------------------------------------------
NATIONAL DEFENSE
Major public physical investment:
Construction and rehabilitation......... BA 4,670 5,008 5,555 4,516 3,767 3,540 3,155
O 5,409 4,816 4,526 4,613 3,617 3,223 2,804
Acquisition of major equipment.......... BA 42,975 44,435 42,923 50,833 57,219 60,871 68,552
O 49,645 45,924 43,408 44,841 47,877 51,932 55,688
Purchase or sale of land and structures. BA -77 -86 -87 -54 -26 -26 -26
O -77 -86 -87 -54 -26 -26 -26
-----------------------------------------------------------------------------------
Subtotal, major public physical BA 47,568 49,357 48,391 55,295 60,960 64,385 71,681
investment.
O 54,977 50,654 47,847 49,400 51,468 55,129 58,466
-----------------------------------------------------------------------------------
Conduct of research and development....... BA 37,810 39,491 38,744 37,872 35,834 35,328 36,640
O 39,428 38,916 37,416 37,917 36,326 35,492 35,882
Conduct of education and training BA 8 5 2 8 15 15 15
(civilian).
O 9 6 3 6 12 15 15
-----------------------------------------------------------------------------------
Subtotal, national defense investment... BA 85,386 88,853 87,137 93,175 96,809 99,728 108,336
O 94,414 89,576 85,266 87,323 87,806 90,636 94,363
NONDEFENSE
Major public physical investment:
Construction and rehabilitation:
Highways.............................. BA 17,884 21,973 22,304 22,168 22,072 22,043 22,034
O 19,653 19,645 19,653 19,392 19,191 18,915 18,763
Mass transportation................... BA 3,517 4,828 4,971 4,971 4,971 4,971 4,971
O 3,698 3,900 3,568 3,717 3,922 4,101 4,255
Rail transportation................... BA 119 244 434 434 434 434 434
O 282 211 379 511 435 437 436
Air transportation.................... BA 1,606 2,284 2,395 1,049 1,050 1,051 1,052
O 1,675 1,575 1,446 1,235 1,123 1,076 1,068
Water transportation.................. BA 129 137 120 121 122 122 122
O 125 117 116 120 115 119 121
Community development block grants.... BA 4,650 4,600 4,600 4,600 4,100 4,100 4,100
O 4,545 4,837 4,641 4,845 4,633 4,438 4,216
Other community and regional BA 1,351 1,379 1,408 1,338 1,156 1,171 1,165
development.
O 1,530 1,805 1,495 1,325 1,339 1,259 1,219
Pollution control and abatement....... BA 3,637 3,797 4,564 4,556 3,885 3,853 3,872
O 3,668 3,499 3,752 4,044 4,133 4,098 3,938
Water resources....................... BA 1,878 2,068 2,312 2,012 2,045 1,927 1,943
O 2,318 2,334 1,869 1,991 2,087 1,958 1,904
Housing assistance.................... BA 5,664 4,655 5,052 4,827 4,726 4,761 4,797
O 6,757 7,216 6,963 6,915 6,652 6,149 5,880
Energy................................ BA 1,827 1,292 1,183 1,112 1,130 1,119 1,133
O 1,918 1,378 1,147 1,141 1,163 1,150 1,160
Veterans hospitals and other health... BA 1,113 1,230 1,358 1,341 1,357 1,373 1,388
O 1,404 1,316 1,465 1,429 1,395 1,375 1,375
Postal Service........................ BA 1,132 1,870 1,376 964 721 783 1,996
O 1,138 1,063 1,251 1,195 986 870 2,205
GSA real property activities.......... BA .......... .......... .......... .......... .......... .......... ..........
O 1,478 1,418 1,175 1,028 965 916 941
Other programs........................ BA 1,776 1,785 1,640 1,418 1,311 1,312 1,312
O 2,293 2,179 1,971 2,152 1,937 1,711 1,590
-----------------------------------------------------------------------------------
Subtotal, construction and BA 46,283 52,142 53,717 50,911 49,080 49,020 50,319
rehabilitation.
O 52,482 52,493 50,891 51,040 50,076 48,572 49,071
-----------------------------------------------------------------------------------
Acquisition of major equipment:
Air transportation.................... BA 1,903 1,969 1,924 2,073 2,029 2,090 2,152
O 2,490 1,948 1,903 1,905 1,927 1,956 2,078
Postal Service........................ BA 1,890 3,545 1,075 586 180 221 665
O 987 2,478 1,378 1,793 236 210 505
Other................................. BA 3,915 3,131 3,465 3,494 2,851 2,782 2,707
O 3,835 3,965 3,545 4,307 4,177 3,530 3,480
-----------------------------------------------------------------------------------
Subtotal, acquisition of major BA 7,708 8,645 6,464 6,153 5,060 5,093 5,524
equipment.
O 7,312 8,391 6,826 8,005 6,340 5,696 6,063
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Purchase or sale of land and structures. BA 183 194 -4,040 229 241 243 -295
O 410 441 -3,875 432 435 428 -126
Other physical assets (grants).......... BA 926 911 1,063 1,120 1,118 1,127 1,066
O 692 994 1,137 1,068 1,110 1,111 1,085
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Subtotal, major public physical BA 55,100 61,892 57,204 58,413 55,499 55,483 56,614
investment.
O 60,896 62,319 54,979 60,545 57,961 55,807 56,093
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Conduct of research and development:
General science, space, and technology.. BA 10,719 10,779 11,115 11,205 11,202 11,317 11,354
O 9,745 10,424 10,707 10,872 10,838 10,854 10,960
Energy.................................. BA 2,548 2,312 2,542 2,650 2,464 2,396 2,354
O 2,938 2,577 2,796 2,771 2,753 2,658 2,552
Transportation.......................... BA 1,794 1,960 2,005 1,910 1,893 1,919 1,938
O 1,654 1,810 2,135 2,090 2,132 2,153 2,180
Health.................................. BA 11,820 12,647 12,951 12,984 13,026 13,068 13,112
O 10,267 12,059 12,655 12,925 12,998 13,023 13,060
Natural resources and environment....... BA 1,781 1,841 1,901 1,865 1,891 1,906 1,939
O 1,593 1,620 1,673 1,652 1,668 1,668 1,698
All other research and development...... BA 2,693 2,687 2,840 3,046 3,097 3,171 3,256
O 2,797 2,879 2,824 3,015 3,062 3,117 3,183
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Subtotal, conduct of research and BA 31,355 32,226 33,354 33,660 33,573 33,777 33,953
development.
O 28,994 31,369 32,790 33,325 33,451 33,473 33,633
-----------------------------------------------------------------------------------
Conduct of education and training:
Education, training, employment and
social services:
Elementary, secondary, and vocational BA 13,660 16,899 18,241 18,703 19,129 19,451 19,628
education.
O 14,739 16,111 16,387 18,451 18,722 19,072 19,400
Higher education...................... BA 12,713 9,452 13,212 14,578 14,700 14,998 14,418
O 12,172 9,141 11,348 13,390 13,678 13,825 13,179
Research and general education aids... BA 1,762 1,993 2,000 1,834 1,940 1,977 1,994
O 1,906 1,914 2,035 1,817 1,926 1,959 1,994
Training and employment............... BA 5,068 5,675 5,987 6,286 6,594 5,417 5,549
O 5,175 4,910 5,402 6,044 6,252 5,742 5,444
Social services....................... BA 6,072 6,539 6,942 7,202 7,467 7,757 8,059
O 5,940 6,447 6,637 6,820 7,029 7,285 7,569
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Subtotal, education, training, and BA 39,275 40,558 46,382 48,603 49,830 49,600 49,648
social services.
O 39,932 38,523 41,809 46,522 47,607 47,883 47,586
-----------------------------------------------------------------------------------
Veterans education, training, and BA 1,274 1,526 1,503 1,598 1,603 1,653 1,671
rehabilitation.
O 1,373 1,558 1,580 1,617 1,619 1,661 1,679
Health.................................. BA 793 882 728 720 718 715 712
O 760 864 804 728 719 708 704
Other education and training............ BA 1,519 1,510 1,453 1,461 1,485 1,458 1,481
O 1,485 1,505 1,434 1,466 1,476 1,460 1,470
-----------------------------------------------------------------------------------
Subtotal, conduct of education and BA 42,861 44,476 50,066 52,382 53,636 53,426 53,512
training.
O 43,550 42,450 45,627 50,333 51,421 51,712 51,439
-----------------------------------------------------------------------------------
Subtotal, nondefense investment......... BA 129,316 138,594 140,624 144,455 142,708 142,686 144,079
O 133,440 136,138 133,396 144,203 142,833 140,992 141,165
===================================================================================
Total, major Federal investment........... BA 214,702 227,447 227,761 237,630 239,517 242,414 252,415
O 227,854 225,714 218,662 231,526 230,639 231,628 235,528
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Table 6-3. FEDERAL INVESTMENT BUDGET AUTHORITY AND OUTLAYS: GRANT AND DIRECT FEDERAL PROGRAMS
(in millions of dollars)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Estimate
Description 1996 -----------------------------------------------------------------------
Actual 1997 1998 1999 2000 2001 2002
--------------------------------------------------------------------------------------------------------------------------------------------------------
GRANTS TO STATE AND LOCAL GOVERNMENTS
Major public physical investments:
Construction and rehabilitation:
Highways.............................. BA 17,879 21,972 22,302 22,166 22,070 22,041 22,032
O 19,644 19,588 19,475 19,333 19,172 18,902 18,751
Mass transportation................... BA 3,517 4,828 4,971 4,971 4,971 4,971 4,971
O 3,698 3,900 3,568 3,717 3,922 4,101 4,255
Rail transportation................... BA 1 69 10 10 10 10 10
O 16 33 48 36 10 10 10
Air transportation.................... BA 1,550 2,230 2,347 1,000 1,000 1,000 1,000
O 1,655 1,519 1,395 1,185 1,075 1,028 1,018
Pollution control and abatement....... BA 2,314 2,417 2,474 2,211 2,190 2,207 2,225
O 2,368 2,127 2,119 2,032 2,155 2,279 2,188
Other natural resources and BA 174 161 44 44 44 44 44
environment.
O 255 283 75 48 43 43 43
Community development block grants.... BA 4,650 4,600 4,600 4,600 4,100 4,100 4,100
O 4,545 4,837 4,641 4,845 4,633 4,438 4,216
Other community and regional BA 1,106 1,013 1,152 1,110 926 938 929
development.
O 1,172 1,227 1,170 1,137 1,121 1,032 987
Housing assistance.................... BA 4,554 4,622 4,567 4,342 4,241 4,276 4,312
O 6,007 6,335 5,999 5,845 5,508 5,022 4,767
National defense...................... BA .......... .......... .......... .......... .......... .......... ..........
O 16 9 4 1 .......... .......... ..........
Other construction.................... BA 134 130 119 115 116 116 116
O 222 212 179 159 126 119 118
-----------------------------------------------------------------------------------
Subtotal, construction and BA 35,879 42,042 42,586 40,569 39,668 39,703 39,739
rehabilitation.
O 39,598 40,070 38,673 38,338 37,765 36,974 36,353
-----------------------------------------------------------------------------------
Other physical assets................... BA 978 962 1,120 1,177 1,178 1,187 1,128
O 757 1,075 1,208 1,130 1,169 1,170 1,145
-----------------------------------------------------------------------------------
Subtotal, major public physical BA 36,857 43,004 43,706 41,746 40,846 40,890 40,867
capital.
O 40,355 41,145 39,881 39,468 38,934 38,144 37,498
-----------------------------------------------------------------------------------
Conduct of research and development:
Agriculture............................. BA 223 223 223 223 223 223 223
O 224 234 223 221 215 193 207
Other................................... BA 89 258 126 127 127 129 130
O 79 94 238 180 162 158 159
-----------------------------------------------------------------------------------
Subtotal, conduct of research and BA 312 481 349 350 350 352 353
development.
O 303 328 461 401 377 351 366
-----------------------------------------------------------------------------------
Conduct of education and training:
Elementary, secondary, and vocational BA 12,881 16,111 17,342 17,797 18,212 18,527 18,694
education.
O 13,930 15,288 15,574 17,573 17,828 18,168 18,486
Higher education........................ BA 63 83 39 40 41 42 44
O 108 77 74 38 40 41 42
Research and general education aids..... BA 243 439 311 317 348 356 361
O 288 286 377 334 346 349 356
Training and employment................. BA 3,998 4,513 4,500 4,764 5,035 3,824 3,920
O 4,162 3,783 4,208 4,666 4,751 4,184 3,839
Social services......................... BA 5,828 6,299 6,693 6,945 7,201 7,482 7,775
O 5,702 6,185 6,391 6,573 6,774 7,022 7,297
National defense (civilian)............. BA .......... .......... .......... .......... .......... .......... ..........
O 2 .......... .......... .......... .......... .......... ..........
Agriculture............................. BA 428 426 418 418 418 418 418
O 403 419 420 418 418 418 418
Other................................... BA 94 78 81 72 73 73 74
O 100 82 84 81 76 72 72
-----------------------------------------------------------------------------------
Subtotal, conduct of education and BA 23,535 27,949 29,384 30,353 31,328 30,722 31,286
training.
O 24,695 26,120 27,128 29,683 30,233 30,254 30,510
-----------------------------------------------------------------------------------
Subtotal, grants for investment......... BA 60,704 71,434 73,439 72,449 72,524 71,964 72,506
O 65,353 67,593 67,470 69,552 69,544 68,749 68,374
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DIRECT FEDERAL PROGRAMS
Major public physical investment:
Construction and rehabilitation:
National defense:
Military construction............... BA 2,815 3,220 2,519 2,537 2,565 2,491 1,633
O 3,382 3,102 2,934 2,793 2,132 1,855 1,432
Family housing...................... BA 1,016 1,017 679 722 436 441 433
O 1,078 1,007 916 788 372 376 372
Atomic energy defense activities and BA 839 771 2,357 1,257 766 608 1,089
other.
O 933 698 672 1,031 1,113 992 1,000
-----------------------------------------------------------------------------------
Subtotal, national defense........ BA 4,670 5,008 5,555 4,516 3,767 3,540 3,155
O 5,393 4,807 4,522 4,612 3,617 3,223 2,804
-----------------------------------------------------------------------------------
International affairs................. BA 157 218 200 200 200 200 200
O 279 265 230 219 213 215 215
General science, space, and technology BA 423 349 338 259 252 254 260
O 611 487 423 406 333 327 321
Water resources projects.............. BA 1,728 1,935 2,272 1,972 2,005 1,887 1,903
O 2,090 2,082 1,799 1,946 2,047 1,918 1,864
Other natural resources and BA 1,644 1,637 2,350 2,631 1,967 1,913 1,908
environment.
O 1,672 1,684 1,900 2,279 2,252 2,089 2,016
Energy................................ BA 1,827 1,292 1,183 1,112 1,130 1,119 1,133
O 1,918 1,378 1,147 1,141 1,163 1,150 1,160
Postal Service........................ BA 1,132 1,870 1,376 964 721 783 1,996
O 1,138 1,063 1,251 1,195 986 870 2,205
Transportation........................ BA 307 366 593 595 597 598 599
O 419 407 675 703 606 606 608
Housing assistance.................... BA 1,110 33 485 485 485 485 485
O 750 881 964 1,070 1,144 1,127 1,113
Veterans hospitals and other health BA 1,066 1,183 1,317 1,304 1,320 1,336 1,351
facilities.
O 1,347 1,272 1,418 1,384 1,351 1,336 1,338
Federal Prison System................. BA 245 310 149 97 .......... .......... ..........
O 486 309 393 527 410 253 181
GSA real property activities.......... BA 1 157 .......... .......... .......... .......... ..........
O 1,579 1,757 1,262 1,028 965 916 941
Other construction.................... BA 764 750 868 723 735 742 745
O 611 847 760 805 841 791 756
-----------------------------------------------------------------------------------
Subtotal, construction and BA 15,074 15,108 16,686 14,858 13,179 12,857 13,735
rehabilitation.
O 18,293 17,239 16,744 17,315 15,928 14,821 15,522
-----------------------------------------------------------------------------------
Acquisition of major equipment:
National defense:
Department of Defense--Military BA 42,641 44,179 42,664 50,583 56,969 60,624 68,310
(Procurement).
O 49,252 45,668 43,164 44,601 47,641 51,698 55,457
Atomic energy defense activities.... BA 334 256 259 250 250 247 242
O 393 256 244 240 236 234 231
-----------------------------------------------------------------------------------
Subtotal, national defense........ BA 42,975 44,435 42,923 50,833 57,219 60,871 68,552
O 49,645 45,924 43,408 44,841 47,877 51,932 55,688
-----------------------------------------------------------------------------------
General science and basic research.... BA 252 239 244 250 251 251 251
O 199 262 271 271 263 256 246
Space flight, research, and supporting BA 763 744 575 574 558 540 526
activities.
O 545 698 638 610 595 575 564
Energy................................ BA 218 183 170 194 203 202 215
O 221 195 193 222 231 231 243
Postal Service........................ BA 1,890 3,545 1,075 586 180 221 665
O 987 2,478 1,378 1,793 236 210 505
Air transportation.................... BA 1,903 1,969 1,924 2,073 2,029 2,090 2,152
O 2,490 1,948 1,903 1,905 1,927 1,956 2,078
Water transportation (Coast Guard).... BA 228 245 242 242 242 242 242
O 240 179 196 216 226 239 245
Other transportation (railroads)...... BA 330 362 .......... .......... .......... .......... ..........
O 322 262 159 104 .......... .......... ..........
Social security....................... BA 257 86 63 68 73 78 84
[[Page 108]]
O 164 103 153 164 176 189 203
Hospital and medical care for veterans BA 767 513 483 483 483 483 483
O 614 564 483 489 490 490 490
Department of Justice................. BA 377 444 480 288 296 304 314
O 294 378 293 348 216 146 151
Department of the Treasury............ BA 643 230 628 619 119 119 119
O 616 541 106 551 599 148 98
General supply fund................... BA .......... .......... .......... .......... .......... .......... ..........
O 497 556 673 703 748 655 694
Other................................. BA 28 34 523 719 566 503 411
O 58 146 309 567 574 542 486
-----------------------------------------------------------------------------------
Subtotal, acquisition of major BA 50,631 53,029 49,330 56,929 62,219 65,904 74,014
equipment.
O 56,892 54,234 50,163 52,784 54,158 57,569 61,691
-----------------------------------------------------------------------------------
Purchase or sale of land and structures:
National defense...................... BA -77 -86 -87 -54 -26 -26 -26
O -77 -86 -87 -54 -26 -26 -26
International affairs................. BA 10 10 10 10 10 10 10
O 11 11 10 10 9 9 9
Sale of the United States Enrichment BA .......... .......... -1,800 .......... .......... .......... ..........
Corporation.
O .......... .......... -1,800 .......... .......... .......... ..........
Privatization of Elk Hills............ BA .......... .......... -2,415 .......... .......... .......... ..........
O .......... .......... -2,415 .......... .......... .......... ..........
Other................................. BA 173 184 165 219 231 233 -305
O 399 430 330 422 426 419 -135
-----------------------------------------------------------------------------------
Subtotal, purchase or sale of land BA 106 108 -4,127 175 215 217 -321
and structures.
O 333 355 -3,962 378 409 402 -152
-----------------------------------------------------------------------------------
Subtotal, major public physical BA 65,811 68,245 61,889 71,962 75,613 78,978 87,428
investment.
O 75,518 71,828 62,945 70,477 70,495 72,792 77,061
-----------------------------------------------------------------------------------
Conduct of research and development:
National defense:
Defense military...................... BA 35,402 37,060 36,371 35,544 33,541 33,054 34,403
O 36,936 36,485 35,067 35,626 34,077 33,264 33,682
Atomic energy and other............... BA 2,408 2,431 2,373 2,328 2,293 2,274 2,237
O 2,492 2,431 2,349 2,291 2,249 2,228 2,200
-----------------------------------------------------------------------------------
Subtotal, national defense.......... BA 37,810 39,491 38,744 37,872 35,834 35,328 36,640
O 39,428 38,916 37,416 37,917 36,326 35,492 35,882
-----------------------------------------------------------------------------------
International affairs................... BA 253 191 247 253 257 265 270
O 419 379 339 317 320 327 332
General science, space, and technology:
NASA.................................. BA 7,844 7,797 8,009 8,034 8,025 8,133 8,164
O 6,963 7,524 7,767 7,841 7,734 7,738 7,802
National Science Foundation........... BA 2,204 2,277 2,367 2,373 2,379 2,386 2,392
O 2,077 2,195 2,201 2,272 2,332 2,344 2,386
Other general science................. BA 671 705 739 798 798 798 798
O 705 705 739 759 772 772 772
-----------------------------------------------------------------------------------
Subtotal, general science, space, BA 10,972 10,970 11,362 11,458 11,459 11,582 11,624
and technology.
O 10,164 10,803 11,046 11,189 11,158 11,181 11,292
-----------------------------------------------------------------------------------
Energy.................................. BA 2,548 2,312 2,542 2,650 2,464 2,396 2,354
O 2,938 2,577 2,796 2,771 2,753 2,658 2,552
Transportation:
Department of Transportation.......... BA 508 531 651 629 634 641 647
O 479 489 730 702 699 699 682
NASA.................................. BA 1,222 1,198 1,273 1,200 1,178 1,197 1,210
O 1,120 1,261 1,194 1,234 1,296 1,321 1,366
-----------------------------------------------------------------------------------
Subtotal, transportation............ BA 4,278 4,041 4,466 4,479 4,276 4,234 4,211
O 4,537 4,327 4,720 4,707 4,748 4,678 4,600
-----------------------------------------------------------------------------------
[[Page 109]]
Health:
National Institutes of Health......... BA 11,263 11,996 12,333 12,378 12,428 12,479 12,530
O 9,642 11,469 12,060 12,326 12,414 12,448 12,492
All other health...................... BA 548 642 613 601 593 584 577
O 616 581 590 594 579 570 563
-----------------------------------------------------------------------------------
Subtotal, health.................... BA 11,811 12,638 12,946 12,979 13,021 13,063 13,107
O 10,258 12,050 12,650 12,920 12,993 13,018 13,055
-----------------------------------------------------------------------------------
Agriculture............................. BA 953 963 975 980 991 1,002 1,013
O 944 948 962 974 982 1,027 1,026
Natural resources and environment....... BA 1,778 1,838 1,898 1,862 1,888 1,903 1,936
O 1,587 1,619 1,671 1,650 1,666 1,666 1,696
National Institute of Standards and BA 416 429 480 506 518 564 620
Technology.
O 374 428 440 463 491 514 543
Hospital and medical care for veterans.. BA 256 263 235 235 235 235 235
O 231 261 241 234 233 233 233
All other research and development...... BA 579 603 643 811 835 842 854
O 596 605 599 787 803 805 822
-----------------------------------------------------------------------------------
Subtotal, conduct of research and BA 68,853 71,236 71,749 71,182 69,057 68,753 70,240
development.
O 68,119 69,957 69,745 70,841 69,400 68,614 69,149
-----------------------------------------------------------------------------------
Conduct of education and training:
Elementary, secondary, and vocational BA 779 788 899 906 917 924 934
education.
O 809 823 813 878 894 904 914
Higher education........................ BA 12,650 9,369 13,173 14,538 14,659 14,956 14,374
O 12,064 9,064 11,274 13,352 13,638 13,784 13,137
Research and general education aids..... BA 1,519 1,554 1,689 1,517 1,592 1,621 1,633
O 1,618 1,628 1,658 1,483 1,580 1,610 1,638
Training and employment................. BA 1,070 1,162 1,487 1,522 1,559 1,593 1,629
O 1,013 1,127 1,194 1,378 1,501 1,558 1,605
Health.................................. BA 793 882 728 720 718 715 712
O 760 864 804 728 719 708 704
Veterans education, training, and BA 1,274 1,526 1,503 1,598 1,603 1,653 1,671
rehabilitation.
O 1,373 1,558 1,580 1,617 1,619 1,661 1,679
General science and basic reserach...... BA 502 523 519 518 518 518 518
O 469 502 484 518 516 530 518
National defense........................ BA 8 5 2 8 15 15 15
O 7 6 3 6 12 15 15
International affairs................... BA 236 218 199 199 199 199 199
O 279 233 210 201 199 199 199
Other................................... BA 503 505 485 511 543 525 556
O 472 531 482 495 522 504 535
-----------------------------------------------------------------------------------
Subtotal, conduct of education and BA 19,334 16,532 20,684 22,037 22,323 22,719 22,241
training.
O 18,864 16,336 18,502 20,656 21,200 21,473 20,944
-----------------------------------------------------------------------------------
Subtotal, direct Federal investment..... BA 153,998 156,013 154,322 165,181 166,993 170,450 179,909
O 162,501 158,121 151,192 161,974 161,095 162,879 167,154
===================================================================================
Total, major Federal investment........... BA 214,702 227,447 227,761 237,630 239,517 242,414 252,415
O 227,854 225,714 218,662 231,526 230,639 231,628 235,528
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 110]]
Part II: PLANNING, BUDGETING, AND ACQUISITION OF CAPITAL ASSETS
The previous section discussed Federal investment broadly defined. The
focus of this section is much narrower--the review of planning and
budgeting for capital assets during the past year and the resultant
budget proposals for capital assets owned by the Federal Government and
used to deliver Federal services. Capital assets consist of Federal
buildings, information technology, and other facilities and major
equipment, including weapons systems, federally owned infrastructure,
and space satellites.\1\ With proposed major agency restructuring,
organizational streamlining, and other reforms, good planning may
suggest reduced spending for some assets, such as office buildings, and
increased spending for others, such as information technology, to
increase the productivity of a smaller workforce.
---------------------------------------------------------------------------
\1\ This is almost the same as the definition in Part I of this
chapter for spending for direct Federal construction and rehabilitation,
major equipment, and purchase of land, except that capital assets
excludes grants to private groups for these purposes (e.g., grants for
equipment for research and grants to AMTRAK). A more complete definition
can be found in the glossary to the ``Principles of Budgeting for
Capital Asset Acquisitions,'' which is at the end of this Part.
---------------------------------------------------------------------------
In recent years the Office of Management and Budget (OMB) and the
Congress have reviewed the Federal Government's performance in planning,
budgeting, risk management, and the acquisition of capital assets. The
reviews indicate that the performance is uneven across the Government.
The problems have many causes and as a result, there is no single
solution. Agencies that are strong in this area may be able to provide
best practices that could assist agencies that need improvement. In
meeting the objective of improving the Government's performance, it is
essential that the caliber of government planning and budgeting for
capital assets be improved.
Improving Planning, Budgeting, and Acquisition of Capital Assets
Risk Management.--Recent OMB reviews have found a recurring theme in
many capital asset acquisitions--that risk management should become more
central to the planning, budgeting, and acquisition process. Failure to
analyze and manage the inherent risk in all capital asset acquisitions
may have contributed to cost overruns, schedule shortfalls, and
acquisitions that fail to perform as expected. Failure to adopt capital
asset requirements that are within the capabilities of the market and
budget limitations may also have contributed to these problems. For each
major project a risk analysis that includes how risks will be isolated,
minimized, monitored, and controlled may help prevent these problems.
The proposals in this budget, together with recent legislation enacted
by Congress, are designed to help the Government manage better its
portfolio of capital assets.
Long-Term Planning and Analysis.--Planning and managing capital
assets, especially better management of risk, has historically been a
low priority for some agencies. Attention focuses on coming-year
appropriations, and justifications are often limited to lists of desired
projects. The increased use of long-range planning linked to performance
goals required by the Government Performance and Results Act would
provide a better basis for justifications. It would increase foresight
and improve the odds for cost-effective investments.
A need for better risk management, integrated life-cycle planning, and
operation of capital assets at many agencies was evident in the OMB
reviews. Research equipment was acquired with inadequate funding for its
operation. New medical facilities sometimes were built without funds for
maintenance and operation. New information technology sometimes was
acquired without planning for associated changes in agency operations.
Congressional concern.--Congress has expressed its concern about
planning for capital assets with legislation and other actions that
complement Administration efforts to ensure better performance:
<bullet> The Government Performance and Results Act of 1993 (GPRA) is
designed to help ensure that program objectives are more
clearly defined and resources are focused on meeting these
objectives.
<bullet> The Federal Acquisition Streamlining Act of 1994 (FASA),
Title V, requires agencies to improve the management of large
acquisitions. Title V requires agencies to institute a
performance-based planning, budgeting, and management approach
to the acquisition of capital assets. As a result of improved
planning efforts, agencies are required to establish cost,
schedule, and performance goals that have a high probability
of successful achievement. For projects that are not achieving
90 percent of original goals, agencies are required to discuss
corrective actions taken or planned to bring the project
within goals. If they cannot be brought within goals, agencies
should identify how and why the goals should be revised,
whether the project is still cost beneficial and justified for
continued funding, or whether the project should be canceled.
<bullet> The Information Technology Management Reform Act of 1996
(ITMRA) is designed to ensure that information technology
acquisitions support agency missions developed pursuant to
GPRA. ITMRA also requires a performance-based planning,
budgeting, and management approach to the acquisition of
capital assets.
<bullet> The General Accounting Office recently released a study,
Budget Issues: Budgeting for Federal Capital (November 1996),
written in response to a congressional request, which
recommended that OMB continue its focus on fixed assets.
OMB concern.--Since 1994, OMB has devoted particular attention to
improving the process of planning, budgeting, and acquiring capital
assets.
[[Page 111]]
<bullet> Separate OMB reviews that focused on capital assets have
occurred for the last three budgets.
<bullet> After seeking out and analyzing the problems, which differed
from agency to agency, OMB issued guidance on this issue in
1994. This guidance was repeated in 1995 and reissued in 1996
as OMB Circular A-11: Part 3: ``Planning, Budgeting, and
Acquisition of Fixed Assets'' (July 1996) (hereafter referred
to as Part 3). Part 3 identified other OMB guidance on this
issue.\2\
---------------------------------------------------------------------------
\2\ Other OMB guidance includes: (1) OMB Circular No. A-109, Major
System Acquisitions, which establishes policies for planning major
systems that are generally applicable to fixed asset acquisitions. (2)
OMB Circular No. A-94, Guidelines and Discount Rates for Benefit-Cost
Analysis of Federal Programs, which provides guidance on benefit-cost,
cost-effectiveness, and lease-purchase analysis to be used by agencies
in evaluating Federal activities including fixed asset acquisition. It
includes guidelines on the discount rate to use in evaluating future
benefits and costs, the measurement of benefits and costs, the treatment
of uncertainty, and other issues. This guidance must be followed in all
analyses submitted to OMB in support of legislative and budget programs.
(3) Executive Order No. 12893, ``Principles for Federal Infrastructure
Investments,'' which provides principles for the systematic economic
analysis of infrastructure investments and their management. (4) OMB
Bulletin No. 94-16, Guidance on Executive Order No. 12893, ``Principles
for Federal Infrastructure Investments,'' which provides guidance for
implementing this order and appends the order itself. (5) the revision
of OMB Circular A-130, Management of Federal Information Resources
(February 20, 1996), which provides principles for internal management
and planning practices for information systems and technology (published
in the Federal Register, February 20, 1996, pp. 6433-6434).
---------------------------------------------------------------------------
Agencies were requested to approach planning for capital
assets in the context of strategic plans to carry out their
missions, and to consider alternative methods of meeting their
goals. Systematic analysis of the full life-cycle expected
costs and benefits was required, along with risk analysis and
assessment of alternative means of acquiring assets. The
Administration proposes to make agencies responsible for the
capital assets they use, and to work throughout the coming
year to improve agency risk management, planning, budgeting,
acquisition, and operation of these assets.
<bullet> In the FY 1997 Budget a year ago, the Administration
proposed a separate allowance of $1.4 billion for full funding
of selected capital assets in the Department of Energy, NASA,
and the Department of the Interior. Congress responded
favorably by enacting a portion of this allowance for the
Department of Energy.
<bullet> OMB memorandum 97-02, Funding Information Systems
Investments (October 25, 1996) was issued to establish clear
and concise decision criteria regarding investments in major
information technology investments.
<bullet> As part of this Budget, OMB is:
--requesting full funding in regular or advance appropriations for
new capital projects and for many capital projects formerly
funded incrementally. These requests are shown in Table 6-5 and
discussed in the accompanying text.
--issuing the ``Principles of Budgeting for Capital Asset
Acquisitions,'' which appear at the end of this Part and are
also available as a separate publication. These principles
offer guidelines to agencies to help carry out better planning,
analysis, risk management, and budgeting for capital asset
acquisitions. The principles include a proposed new Budget
Enforcement Act scorekeeping rule to enforce full funding of
capital projects.
--Later this year OMB plans to publish a ``Capital Programming
Guide.'' This Guide is being developed by an interagency task
force that includes participation from the General Accounting
Office. A draft of the Guide is currently in circulation for
comment. Its purpose is to provide professionals in the Federal
Government a basic reference on capital assets management
principles to assist them in planning, budgeting, acquiring,
and managing the asset once in use. The draft Guide emphasizes
risk management and the importance of analyzing capital assets
as a portfolio.
From Planning to Budgeting.--Long-range agency plans should channel
fully justified budget-year and out-year capital acquisition proposals
into the budget process. Agencies were asked to submit projections of
both budget authority and outlays for high-priority capital asset
proposals not only for the budget year but for the four subsequent years
through 2002 as well. In addition, OMB held a separate review on capital
assets again as part of the 1998 budget review process. This provided an
overview of requests, flagged issues, and considered cross-cutting
recommendations. Agency-specific capital asset issues were highlighted
in the agency reviews.
Attention was given to whether the ``lumpiness'' of some capital
assets--large one-year temporary increases in funding--disadvantaged
them in the budget review process. In some cases, agencies aggregate
capital asset acquisitions into budget accounts containing only such
acquisitions; such accounts tend to smooth out year-to-year changes in
budget authority and outlays and avoid crowding other expenditures. In
other cases, agencies or program managers do not hesitate to request
``spikes'' in spending for asset acquisitions, and the review process
accommodates them. But some agencies go out of their way to avoid such
spikes, and some agencies have trouble accommodating them. Part 3
encouraged agencies to accommodate justified spikes in their own
internal reviews, and the OMB review in some cases made special
allowance for these one-time increases.
Full Funding of Capital Assets.--Good budgeting requires that
appropriations for the full costs of asset acquisition be provided up
front to help ensure that all costs and benefits are fully taken into
account when decisions are made about providing resources. Full funding
was endorsed by the General Accounting Office in its recent report,
Budgeting for Federal Capital (November 1996). This rule is followed for
most Department of Defense procurement and construction programs and for
General Services Administration buildings. In other areas too often it
is not. When it is not followed and capital assets are funded in
increments, without certainty if or when future funding will be
available, it can and occasionally does result in poor risk management,
weak planning, acquisition of assets
[[Page 112]]
not fully justified, higher acquisition costs, cancellation of major projects, the loss of sunk costs, and inadequate funding to maintain and operate the assets. Full funding is also an important element in managing large acquisitions effectively and holding management responsible for achieving goals.
This budget requests full funding with regular or advance
appropriations for new capital projects and for many capital projects
funded incrementally in the past. Projects that might have been funded
in increments in past years and are fully funded in this budget are
identified below in Table 6-5 and discussed in the accompanying text.
Next year additional effort will be made to include full funding for all
new capital projects, or at least economically and programmatically
viable segments (or modules) of new projects.
Other Budgeting Issues.--Other budgeting decisions can also aid in
acquiring capital assets. Availability of funds for one year often may
not be enough time to complete the acquisition process. Most agencies
request that funds be available for more than one year to complete
acquisitions efficiently, and Part 3 encouraged this. As noted, many
agencies aggregate asset acquisition in budget accounts to avoid
lumpiness. In some cases, these are revolving funds that ``rent'' the
assets to the agency's programs.
To promote better program performance, agencies are also being
encouraged by OMB to examine their budget account structures to align
them better with program outputs and outcomes and to charge the
appropriate account with significant costs used to achieve these
results. The asset acquisition rental accounts, mentioned above, would
contribute to this. Budgeting this way would provide information and
incentives for better resource allocation among programs and a continual
search for better ways to deliver services. It would also provide
incentives for efficient capital asset acquisition and management.
Acquisition of Capital Assets.--Improved planning, budgeting, and
acquisition strategies are necessary to increase the ability of agencies
to acquire capital assets within, or close to, the original estimates of
cost, schedule, and performance used to justify project budgets and to
maintain budget discipline. The OMB initiative along with enactment of
FASA (Title V) and ITMRA require agencies to institute a performance-
based planning, budgeting, and management approach to the acquisition of
capital assets.
OMB, working with the agencies over the last year, began separate but
related efforts to develop an integrated management approach that
employs performance based acquisition management as part of a
disciplined capital programming process. OMB also wants the capital
asset acquisition goals incorporated into the annual performance plan
called for by GPRA so that a unified picture of agency management
activities is presented and acquisition performance goals are linked to
the achievement of program and policy goals. This integrated approach
will not only eliminate duplication in reporting agency actions but,
most importantly, will foster more effective implementation of
performance-base acquisition management.
The first effort was the issuance of OMB Circular A-11, Part 3,
Planning, Budgeting and Acquisition of Fixed Assets, in July 1996. Part
3 presents unified guidance to agencies on planning, budgeting, and
acquisition management of fixed assets. It also presents unified
guidance designed to coordinate the collection of agency information for
OMB reports to the Congress required by FASA Title V and ITMRA. Part 3
for this budget limited reporting to high-priority acquisitions with
expansion to all acquisitions planned for the 1999 Budget. Part 3
required agencies to provide information to OMB on the extent of
planning and risk mitigation efforts accomplished for new projects to
ensure a high probability that the cost, schedule and performance goals
established will be successfully achieved. For ongoing projects agencies
are to provide information on the achievement of, or deviation from,
goals. For projects that are not achieving 90 percent of original goals,
agencies are required to discuss corrective actions taken, or
contemplated, to bring the project within goals or, if not, how and why
the goals should be revised and whether the project is still cost
beneficial and justified for continued funding or should be canceled.
Acquisition goals submitted with the 1998 Budget, if approved by OMB,
are the baseline goals for all future monitoring of project progress for
both management purposes and reporting to Congress as required by FASA
Title V and ITMRA.
As the second effort, on October 25, 1996, OMB memorandum 97-02,
Funding Information Systems Investments, was issued to establish clear
and concise decision criteria regarding investments in major information
technology investments. As a general presumption, OMB will recommend new
or continued funding only for those major system investments that
satisfy these criteria and expands coverage to all capital investments.
At the Appendix to this Part are the Principles of Budgeting for
Capital Asset Acquisitions, which incorporate the above criteria and
expand coverage to all capital investments. OMB recognizes that many
agencies are in the middle of ongoing projects initiated prior to
enactment of ITMRA and FASA Title V, and may not be able to satisfy the
criteria immediately. For those systems that do not satisfy the
criteria, OMB considered requests to use 1997 and 1998 funds to support
reevaluation and replanning of the project as necessary to achieve
compliance with the criteria or to determine that the project would not
meet the criteria and should be canceled.
As a result of these two initiatives, capital asset acquisitions are
to have baseline cost, schedule, and performance goals for future
tracking purposes or they are to be either reevaluated and changed or
canceled if no longer cost beneficial.
Outlook.--The effort to improve planning and budgeting for capital
assets will continue in 1997.
[[Page 113]]
<bullet> The Administration will work with the Congress to increase
the number of projects that are fully funded with regular or
advance appropriations.
<bullet> OMB will be working with congressional committees, the
President's Management Council, the Chief Financial Officers
Council, and the Chief Information Officers Council to help
agencies with their responsibility for capital assets through
the alignment of budgetary resources with program results. OMB
will also work with these groups to implement the ``Principles
of Budgeting for Capital Asset Acquisitions,'' which are shown
as an Appendix to this Part.
<bullet> In the OMB review process, proposals for the acquisition of
capital assets and related issues of lumpiness or ``spikes''
will continue to receive special attention. Agencies will be
encouraged to give the same special attention to future asset
acquisition proposals.
<bullet> To ensure that the full costs and benefits of all budget
proposals are fully taken into account in allocating
resources, agencies will be required to propose full funding
for acquisitions in their budget requests.
<bullet> OMB will finalize the guidance to implement the requirements
of FASA Title V within the civilian agencies and develop
materials for OMB use in reviewing agency planning for new
acquisitions and performance information on acquisitions in
process.
<bullet> As noted earlier, OMB plans to issue a ``Capital Programming
Guide'' that will assist professionals in the Federal
Government in risk management, planning, budgeting, acquiring,
and operating efficiently capital asset acquisitions.
Major Acquisition Proposals
For the definition of major capital assets described above this budget
requests $61.8 billion of budget authority for 1998. This includes $45.8
billion for the Department of Defense and $16.0 billion for other
agencies. The major requests are shown in the accompanying Table 6-4:
``Capital Asset Acquisitions,'' which distributes the funds generally
according to the categories for buildings, information technology, and
other acquisitions.
Buildings
This category includes both general purpose office buildings and
special purpose buildings, such as hospitals, prisons, and courthouses.
This budget includes $10.9 billion of budget authority for 1998 for the
major building acquisitions.
Department of Defense.--The budget includes $3.7 billion for 1998 for
general construction on military bases and family housing. This funding
will be used to:
<bullet> support the fielding of new systems;
<bullet> enhance operational readiness, including deployment and
support of military forces;
<bullet> provide housing for military personnel and their families;
<bullet> implement base closure and realignment actions; and
<bullet> correct safety deficiencies and environmental problems.
General Services Administration.--The 1998 budget requests $1.7
billion in obligations for GSA for the construction or renovation of
buildings. These funds will allow for new construction for U.S. Courts
and the acquisition of general purpose office space in locations where
long-term needs show that ownership is preferable to leasing.
Department of Energy.--This budget requests $1.5 billion for 1998 for
assets in this category. The largest item is a request for $0.9 billion
for the National Ignition Facility, which will be used to perform
experiments, including inertial confinement fusion experiments, at high
pressures and temperatures. These investments are also discussed in the
text that accompanies Table 6-5.
Department of Veterans Affairs.--The 1998 budget requests $0.5 billion
in budget authority for new construction and rehabilitation of veterans
hospitals, clinics, nursing homes, and other health care facilities; for
construction of a new national cemetery and expansion of two existing
national cemeteries; and for improvements to regional benefits offices.
Department of Health and Human Services.--This budget requests $0.5
billion for the Department of Health and Human Services for buildings.
This includes capital projects for the National Institutes of Health
Clinical Research Center and improved facilities for the Indian Health
Service. Both are discussed with Table 6-5 and the request for advance
appropriations.
Other agencies.--The largest item in this category is for the Postal
Service ($1.4 billion in 1998). Other building acquisitions include the
Research Triangle Park consolidated facility in North Carolina for the
Environmental Protection Agency; the Department of State for buildings
abroad; the Department of Justice for new prison construction and
related capital projects, and a National Laboratory Center and fire
research facility for the Bureau of Alcohol, Tobacco, and Firearms.
Funds are also requested in the Commerce Department for new construction
of a fisheries laboratory in Santa Cruz, California, to support NOAA's
environmental stewardship mission and a new facility at the Goddard
Space Flight Center in Maryland.
Information Technology
This category covers capital purchases for information technology and
includes computer hardware, major software, and renovations required for
this equipment. This budget includes $3.3 billion in budget authority
for 1998 for major information technology.
[[Page 114]]
Table 6-4. CAPITAL ASSET ACQUISITIONS
(Budget authority in billions of dollars)
------------------------------------------------------------------------
1996 1997 1998
actual proposed proposed
------------------------------------------------------------------------
MAJOR ACQUISITIONS
Buildings:
Department of Defense.................... 4.6 4.9 3.7
General Services Administration \1\...... 1.3 1.5 1.7
Department of Energy..................... 0.2 0.2 1.5
Department of Veterans Affairs........... 0.5 0.6 0.5
Department of Health and Human Services.. 0.4 0.5 0.5
Other agencies........................... 2.3 3.0 3.0
----------------------------
Subtotal, buildings...................... 9.3 10.7 10.9
Information technology:
Department of Defense.................... 1.3 1.5 1.4
Internal Revenue Service................. 0.6 0.2 0.6
Other agencies........................... 1.1 0.9 1.3
----------------------------
Subtotal, information technology......... 3.0 2.6 3.3
Other acquisitions:
Department of Defense.................... 40.5 42.0 40.7
Department of Transportation............. 2.2 2.3 2.2
Department of Energy..................... 1.9 1.8 2.0
Army Corps of Engineers.................. 1.2 1.5 1.8
Other agencies........................... 5.9 6.8 4.5
----------------------------
Subtotal, other acquisitions............. 51.7 54.4 51.2
============================
Total, major acquisitions \2\.............. 64.1 67.7 65.5
Sale of major assets....................... ....... ........ -4.2
Acquisitions in smaller accounts........... 0.7 0.7 0.5
----------------------------
Total, capital asset acquisitions \3\...... 64.7 68.4 61.8
------------------------------------------------------------------------
* indicates $50 million or less.
\1\ Obligations.
\2\ Includes accounts with acquisitions of $50 million or more in one
year.
\3\ This total is derived from the direct Federal major public physical
investment budget authority on Table 6-3 ($61.9 billion for 1998).
Table 6-4 excludes an estimate of spending for assets not owned by the
Federal Government ($2.5 billion for 1998), and includes obligations
for the General Services Administration ($2.5 billion in 1998).
Department of Defense.--The budget requests $1.4 billion for 1998 for
the Department of Defense for information technology capital purchases.
These funds will be used to purchase hardware and software to support
worldwide communications to bases and deployed forces, improve
information security for critical computer systems, replace obsolete
equipment, and improve the information processing capabilities for the
department. Virtually every function within the Department, including
logistics, communications, command and control, intelligence,
acquisition management, finance, personnel, health, and environmental
security will be supported by these information technology investments.
Internal Revenue Service (IRS) Information Technology Investments.--
The budget requests $0.6 billion in budget authority for 1998 for
information technology investments in 1999. These efforts and proposed
advance appropriations for 1999 will ensure that future capital
investments by the IRS will improve customer service by providing
alternative means of filing returns and paying taxes, improve telephone
service for taxpayers; and give employees immediate access to complete
information and modern tools to do their jobs. These investments are
also discussed in the text that accompanies Table 6-5, which displays
advance appropriations for capital acquisitions.
Other agencies.--Other major information technology purchases include
funds to support science and space activities for NASA; to support law
enforcement activities in the Department of Justice; to support the
delivery of veterans health care services and improve the processing of
veterans benefits claims, and for the General Services Administration.
Also included are funds to support modernization of the National Weather
Service in the Department of Commerce. This is discussed in the text
accompanying Table 6-5.
Other Acquisitions
This category includes facilities and major equipment not included
above. The budget requests $51.2 billion for 1998 for the acquisitions
included in this capital assets category. Most of this is for defense
procurement of weapons.
Department of Defense.--The budget requests $40.7 billion for 1998 to
procure or modify weapons systems and related support equipment. This
includes tactical fighter aircraft, airlift aircraft, naval vessels,
tanks, helicopters, missiles, and vehicles.
Department of Transportation.--The budget requests $2.2 billion for
the Department of Transportation, which includes funds to modernize the
air traffic control system and funds for the Coast Guard to acquire
vessels and modernize shore facilities. Requests for advance
appropriations for the air traffic control system in the Federal
Aviation Administration are discussed with Table 6-5.
Department of Energy.--This budget includes $2.0 billion for major
facilities and equipment. These are largely for general science and
research activities, environmental restoration, weapons activities,
nuclear and non-nuclear energy activities, and the Bonneville Power
Administration. This budget requests full upfront funding for many of
these projects. These data are shown in Table 6-5 and described in the
accompanying text.
Army Corps of Engineers.--The budget requests $1.8 billion for 1998
for capital assets for the Army Corps of Engineers. These funds finance
construction, rehabilitation, and related activity for water resources
development projects that provide navigation, flood control, water
supply, hydroelectric, and other benefits. Table 6-5 identifies the
amounts of upfront funding and advance appropriations requested for
these programs and the accompanying text discusses these activities.
Other agencies.--The largest item in this category is equipment for
the Postal Service ($1.1 billion in 1998). Other major acquisitions in
this category are for the Tennessee Valley Authority for dams, locks,
and other facilities; the purchase of vehicles by the General Services
Administration, and medical equipment to support the delivery of
veterans health care.
Full Funding of Major Projects
This budget proposes full funding for new capital projects and for
many projects formerly funded incrementally.
[[Page 115]]
The importance of full funding was discussed earlier in this Part and
is also explained in the ``Principles of Budgeting for Capital Asset
Acquisitions,'' which appears as an Appendix to this Part. This budget
proposes to use this principle more consistently than in past years.
Table 6-5 shows spending for capital projects proposed for full funding
in this budget that might have been funded in increments in the past.
This budget requests $7.7 billion in budget authority for 1998 and $14.4
billion in advance appropriations for 1999-2003, for a total request of
$22.1 billion for these projects for these years.
Army Corps of Engineers
This budget requests $380 million in 1998 to fully fund upfront new
projects and $228 million for 1998 and $575 million for 1999-2002 to
fully fund ongoing projects that can be completed in 2002 or earlier.
These funds finance construction, rehabilitation, and related activity
for water resources development projects that provide navigation, flood
control, water supply, hydroelectric, and other benefits.
Department of Commerce
This budget requests $503 million for 1998 and $2,332 million in
advance appropriations for 1999-2003 for capital asset acquisitions in
the National Oceanic and Atmospheric Administration (NOAA). These
acquisitions support the largest modernization in the history of the
National Weather Service. The modernization is well underway and
demonstrating improvements in weather forecasts and warnings that lead
to lives and property saved. The budget supports this multi-year effort
to develop and deploy advanced technology, including advanced radar
equipment, other ground observing systems, and geostationary and polar-
orbiting satellites that will greatly improve the timeliness and
accuracy of severe weather and flood warnings while reducing staffing
requirements. The total request of $3,989 million in budget authority
for 1998-2010 will complete the systems acquisition related to the
modernization of the National Weather Service, procure the current and
follow-on geostationary satellite series, the current polar orbiting
satellite system, and several construction projects including
construction of a new fisheries laboratory and science center.
Table 6-5. PROPOSED SPENDING TO FULLY FUND SELECTED CAPITAL ASSET ACQUISITIONS
(Budget authority in millions of dollars)
----------------------------------------------------------------------------------------------------------------
Advance appropriations
Regular -----------------------------------------------------
appropriations Sum
1998 1999 2000 2001 2002 2003 1999-
2003
----------------------------------------------------------------------------------------------------------------
ARMY CORPS OF ENGINEERS
Construction:
Projects with full upfront funding \1\.. 380 ....... ....... ....... ....... ....... .......
Projects with advance appropriations \2\ 228 277 177 89 32 ....... 575
---------------------------------------------------------------------
Subtotal, Army Corps of Engineers....... 608 277 177 89 32 ....... 575
DEPARTMENT OF COMMERCE
National Oceanic and Atmospheric
Administration: Capital Assets
Acquisition: \3\
Projects with advance appropriations \2\ 503 724 551 480 375 202 2,332
DEPARTMENT OF ENERGY
National Defense Assets Acquisition:
Projects with full upfront funding \1\... 2,166 ....... ....... ....... ....... ....... .......
Science Assets Acquisition: Projects with
full upfront funding \1\................. 127 ....... ....... ....... ....... ....... .......
Energy Assets Acquisition: Projects with
full upfront funding \1\................. 42 ....... ....... ....... ....... ....... .......
---------------------------------------------------------------------
Subtotal, Department of Energy.......... 2,335 ....... ....... ....... ....... ....... .......
DEPARTMENT OF HEALTH AND HUMAN SERVICES
National Institutes of Health: Projects
with advance appropriations \2\.......... 90 90 40 ....... ....... ....... 130
Indian Health Service: Projects with
advance appropriations \2\............... 39 39 31 ....... ....... ....... 70
---------------------------------------------------------------------
Subtotal, Department of Health and Human
Services............................... 129 129 71 ....... ....... ....... 200
DEPARTMENT OF THE INTERIOR
Bureau of Reclamation: Water and Related
Resources:
Projects with full upfront funding \1\.. 17 ....... ....... ....... ....... ....... .......
Projects with advance appropriations \2\ 6 11 9 ....... 1 ....... 21
---------------------------------------------------------------------
Subtotal, Bureau of Reclamation....... 23 11 9 ....... 1 ....... 21
National Park Service: Projects with
advance appropriations: \2\
Construction............................ 52 48 35 20 31 26 160
Everglades Restoration Fund............. 100 100 100 100 ....... ....... 300
---------------------------------------------------------------------
Subtotal, National Park Service....... 152 148 135 120 31 26 460
---------------------------------------------------------------------
Subtotal, Department of the Interior.... 175 159 144 120 32 26 481
DEPARTMENT OF JUSTICE
Federal Bureau of Investigation: Salaries
and expenses: Projects with advance
appropriations \2\....................... 84 48 ....... ....... ....... ....... 48
DEPARTMENT OF TRANSPORTATION