Addressing the Deficit: Budgetary Implications of Selected GAO Work for
Fiscal Year 1996 (Letter Report, 03/15/95, GAO/OCG-95-2).
GAO provided information on new options for spending reductions and
revenue gains that stemmed from key findings and issues developed in GAO
work, focusing on the: (1) analytical framework for considering
individual options; and (2) estimates of the budgetary savings or
revenue gains of each option, where available.
GAO found that: (1) although some spending options reflect GAO
recommendations, most options represent one way to address significant
problems identified in GAO evaluations of federal policies and programs;
(2) the analytical framework for considering individual options is
organized around reassessing program objectives, redefining
beneficiaries, and improving program efficiency; (3) the framework
provides one set of criteria to assess the goals, scope, and approaches
for delivering federal programs; (4) estimates of budgetary savings and
revenue gains were developed by the Congressional Budget Office and the
Joint Committee on Taxation, respectively; (5) under the Budget
Enforcement Act of 1990, the spending and revenue options could be used
either to reduce the deficit or to provide funds for other programs; and
(6) its proposed options are similar to other deficit reduction
proposals.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: OCG-95-2
TITLE: Addressing the Deficit: Budgetary Implications of Selected
GAO Work for Fiscal Year 1996
DATE: 03/15/95
SUBJECT: Budget deficit
Deficit reduction
Program evaluation
Cost effectiveness analysis
Fiscal policies
Budget cuts
Budget outlays
Budget administration
Spending legislation
Cost control
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Cover
================================================================ COVER
Report to the Congress
March 1995
ADDRESSING THE DEFICIT - BUDGETARY
IMPLICATIONS OF SELECTED GAO WORK
FOR FISCAL YEAR 1996
GAO/OCG-95-2
Addressing the Deficit
Abbreviations
=============================================================== ABBREV
ADCAP - advanced capability
AFDC - Aid to Families with Dependent Children
AIP - Airport Improvement Program
AOC - Administrative Office of the U.S. Courts
BBS - broad-based, sustainable
BEA - Budget Enforcement Act
BLM - Bureau of Land Management
BRAC - base realignment and closure
CBO - Congressional Budget Office
CERCLA - Comprehensive Environmental Response, Compensation and
Liability Act
CRP - Conservation Reserve Program
CSFP - Commodity Supplemental Food Program
CVP - Central Valley Project
DFAS - Defense Finance and Accounting Service
DGPS - differential global positioning system
DLA - Defense Logistics Agency
DOD - Department of Defense
DOE - Department of Energy
DOT - Department of Transportation
DUR - drug utilization review
EDWAA - economic dislocation and worker adjustment assistance
EM - Environmental Restoration and Waste Management
EPA - Environmental Protection Agency
FAA - Federal Aviation Administration
FAS - Foreign Agricultural Service
FDIC - Federal Deposit Insurance Corporation
FHWA - Federal Highway Administration
FmHA - Farmers Home Administration
FWS - Fish and Wildlife Services
FY - fiscal year
GAO - General Accounting Office
GSA - General Services Administration
HACCP - Hazard Analysis and Critical Point Control System
HCFA - Health Care Financing Administration
HHS - Department of Health and Human Services
HMO - health maintenance organization
HUD - Department of Housing and Urban Development
ICC - Interstate Commerce Commission
IDB - industrial development bond
IFAD - International Fund for Agricultural Development
INS - Immigration and Naturalization Service
IRS - Internal Revenue Service
JAST - Joint Advanced Strike Technology
JCT - Joint Committee on Taxation
JTPA - Job Training Partnership Act
MAP - Military Airport Program
MPP - Market Promotion Program
MWR - morale, welfare, and recreation
NASA - National Aeronautics and Space Administration
NDAA - non-development airlift aircraft
NOAA - National Oceanic and Atmospheric Administration
NORAD - North American Aerospace Defense Command
NPR-1 - Naval Petroleum Reserve-1
OCSE - Office of Child Support Enforcement
OMB - Office of Management and Budget
O&M - operation and maintenance
OPEC - Organization of Petroleum Exporting Countries
PAYGO - pay-as-you-go
PPS - Prospective Payment System
QMB - qualified mortgage bond
RFE/RL - Radio Free Europe/Radio Liberty
RHCDS - Rural Housing and Community Development Service
RTC - Resolution Trust Corporation
SINC - service industry noncompliance initiative
SKFB - soup kitchens/food banks
SPR - Strategic Petroleum Reserve
SSA - Social Security Administration
SSN - nuclear-powered attack submarine
TEFAP - The Emergency Food Assistance Program
TCMP - Taxpayer Compliance Management Program
TPU - Torpedo Propulsion Unit
USAO - U.S. Attorney Office
USDA - U.S. Department of Agriculture
USIA - United States Information Agency
USTRANSCOM - U.S. Transportation Command
UAV - unmanned aerial vehicle
VA - Department of Veterans Affairs
VOA - Voice of America
Letter
=============================================================== LETTER
B-259261
March 15, 1995
To the President of the Senate and
the Speaker of the House of Representatives
In previous reports,\1 we have stressed to the Congress and the
public the urgent need for deficit reduction. This report is part of
our continuing effort to help the Congress identify options that
could be used to reduce the deficit. This year's report follows work
we began last year in Addressing the Deficit: Budgetary Implications
of Selected GAO Work (GAO/OCG-94-3, March 11, 1994). This report,
like its predecessor, systematically identifies in a single document
the budgetary implications of selected policy changes and program
reforms discussed in our work but not yet implemented or enacted. Of
the 120 options presented in this report, 52 are updated and 68 are
new. Most, if not all, of the options have already been provided to
interested congressional staff.
Narrative descriptions are presented in appendix III of this report
organized by budget function and receipts. Some of these options
reflect our recommendations; most do not, but rather represent one
way to address, in a budgetary context, some of the significant
problems identified in our evaluations of federal policies and
programs. Inclusion of a specific option in this report does not
mean that we endorse it as the only or most feasible approach or that
other spending reductions or revenue increases are not also
appropriate for consideration by the Congress.
We have also provided the analytical framework that we developed last
year to provide a structure for congressional consideration of
individual options in this report. The framework, presented in
appendix II, is organized around three broad themes:
reassess objectives, that is, reconsider whether to terminate or
revise services and programs provided;
redefine beneficiaries, that is, reconsider a program's intended
audience; and
improve efficiency, that is, reconsider how a program or service is
provided.
This framework provides one set of criteria that may be used to
assess goals, scope, and approaches for delivering federal programs.
To determine budgetary effects, each spending option was discussed
with the Congressional Budget Office (CBO), and each revenue option
was discussed with the Joint Committee on Taxation (JCT). Where
possible, estimates of budgetary savings or revenue gains were
developed by CBO and JCT. Where estimates are not provided, a brief
explanation and discussion is included with the option. A further
discussion of the savings estimates is included in appendix I.
Under the Budget Enforcement Act (BEA), as amended, the spending and
revenue options included in this report could be used either to
reduce the deficit or to provide funds for other programs. Under the
pay-as-you-go (PAYGO) rules of BEA, savings from direct spending
programs (entitlement and mandatory programs) or revenue options
would reduce the deficit unless these savings were used to offset
either program expansions or tax cuts. For discretionary spending
programs, savings from changes would contribute to additional deficit
reduction only if BEA caps on discretionary spending were lowered;
otherwise, the savings would be available for use in other
discretionary programs.
Although we derived the options in this report from our existing body
of work, there are similarities, not surprisingly, with other deficit
reduction proposals. For example, some options contained in this
report were included in the President's February 1995 budget
submission, Budget of the United States Government, Fiscal Year 1996;
the February 1995 CBO report, Reducing the Deficit: Spending and
Revenue Options; and the March 1994 Republican Budget Initiative For
Fiscal Year 1995.
We are sending copies of this report to appropriate congressional
committees and other interested parties.
This report was prepared under the direction of Paul L. Posner,
Director for Budget Issues, who may be reached at (202) 512-9573.
Specific questions about individual options included in the
appendixes may be directed to the GAO Contact listed with each
option. Major contributors to this report are listed in appendix IV.
Charles A. Bowsher
Comptroller General
of the United States
--------------------
\1 Budget Policy: Prompt Action Necessary to Avert Long-term Damage
to the Economy (GAO/OCG-92-2, June 5, 1992) and The Budget Deficit:
Outlook, Implications, and Choices (GAO/OCG-90-5, September 12,
1990).
THE STRUCTURE AND CONTENT OF THIS
REPORT
=========================================================== Appendix I
The options included in this report cover a wide range of federal
policies and programs, reflecting the breadth of GAO's work
responsibilities. To aid in using this report, each option is
presented in a standard format in appendix III. The options are
presented by budget function; options covering multiple functions
appear separately, as do options involving receipts. Cognizant
congressional committees and subcommittees and the responsible
executive department or agency are indicated for each option. The
applicable theme from the framework is also identified. For spending
options, we also indicate the affected budget account and subfunction
and whether the spending is discretionary or direct.
Each option is described in a brief narrative. Although these
descriptions are intended to synopsize the key issues and problems
developed in our audits and evaluations, readers are encouraged to
refer to the related GAO products, listed at the end of each option,
for a complete discussion.
Lastly, as noted in our letter, to determine savings and revenue
estimates, each option was discussed with the CBO and JCT. If
specific estimates could not be provided, a brief discussion is
included with the option. Where estimates are provided, the
following conventions were followed.\1
For revenue estimates, the increase in collections reflects that
which would occur, over and above that due under current law, if the
option were enacted.
For direct spending programs, estimated savings show the difference
between what the program would cost under the CBO baseline, which
assumes continuation of current law, and what it would cost after the
suggested modification.
For nondefense discretionary spending programs, two estimates are
provided. One estimate is of savings compared to the actual fiscal
year 1995 appropriations increased for projected inflation. A second
estimate is of savings compared to fiscal year 1995 appropriations in
nominal terms (held constant for the next 4 years).
For defense discretionary spending programs, estimates are of savings
compared to the President's 1995 fiscal year Defense Plan that CBO
uses for its defense discretionary estimates. CBO uses this plan
because it provides the programmatic detail necessary to estimate the
effects of changes in force structures and weapons systems.
Subsequent savings and revenue estimates provided by CBO and JCT may
not match exactly those contained in this report. Differences in the
details of specific proposals, changes in assumptions which underlie
the analyses, and updated baselines can all lead to significant
differences in estimates. Also, a few of our options--involving
sales of real estate and other government-owned property--constitute
asset sales. Under BEA, proceeds from the sale of federal government
physical or financial assets cannot be counted as deficit reduction.
However, both the President and some Members of the Congress have
proposed asset sales to reduce the deficit. The President has
proposed changing the scoring rules for asset sales for those sales
that meet certain standards. Given this context, in order to provide
policymakers the fullest possible picture of the budgetary
implications of our work, we have included those options which
constitute asset sales. They are clearly identified as such.
Finally, some of the options could not be estimated by CBO or JCT
under current scorekeeping conventions. Several of these involve
management improvements that we believe can contribute to solving the
deficit problem, but where the effects are too indirect for
estimation purposes. A few options are not estimated because they
concern future choices about spending that is not currently in the
baseline. In other cases, savings are likely to come in years beyond
the 5-year estimation period that CBO uses.
--------------------
\1 For a complete discussion of the uses and caveats of the CBO
estimates, see CBO's February 1995 report, Reducing the Deficit:
Spending and Revenue Options.
A FRAMEWORK FOR DEFICIT REDUCTION
========================================================== Appendix II
The history of deficit reduction efforts suggests that basing
decisions on explicit policy rationales, rather than considering
separate program-by-program assessments, may improve chances for
success. A consistent and systematic framework can be an effective
means to formulate and package broad-based deficit reduction
proposals. Additionally, this kind of approach can be used
regardless of any other budgetary control mechanism (for example,
discretionary spending limits or sequestration procedures) or any
given level of desired deficit reduction.
GAO's deficit reduction framework consists of three broad themes:
reassess objectives, redefine beneficiaries, and improve efficiency
and accuracy. These three fundamental strategies are based on an
implicit set of decision rules that encourage decisionmakers to think
systematically, within an ever-changing environment, about
what services the government provides or should continue to provide,
for whom these services are or should be provided, and
how services are or should be provided.
By using a policy-oriented framework such as this, choices can be
made more clearly and the results become more defensible.
REASSESS OBJECTIVES
The first theme within our deficit reduction framework focuses on the
objectives for federal programs or services. Our premise is that
periodically reconsidering a program's original purpose, the
conditions under which it continues to operate, and its
cost-effectiveness, is appropriate. Our work suggests three decision
rules which illustrate this strategy.
Programs can be considered for termination if they have succeeded in
accomplishing their intended objectives or if it is determined that
the programs have persistently failed to accomplish their objectives.
Programs can be considered for termination or revision when
underlying conditions change such that original objectives may no
longer be valid.
Programs can be reexamined when cost estimates increase significantly
above those associated with original objectives, when benefits fall
substantially below original expectations, or both.
For example, the Davis-Bacon Act requires that workers on federally
assisted construction projects be paid wages at or above levels
determined to be prevailing in the area. Weighing this objective
against opportunities to reduce federal construction costs and
increase work opportunities for less skilled workers, the Congress
could consider GAO's option to reduce the scope or repeal
Davis-Bacon.
Another example involves reassessing rice program objectives. If the
Congress wanted to reduce high government costs and increase the U.S.
share of the world rice market, it could consider GAO's option to
move rice producers towards greater market orientation.
REDEFINE BENEFICIARIES
The second theme within our deficit reduction framework focuses on
the intended beneficiaries for federal programs or services. The
Congress originally defines the intended audience for any program or
service based on some perception of eligibility and/or need. To
better reflect and target increasingly limited resources, these
definitions can be periodically reviewed and revised. Our body of
work suggests four decision rules which illustrate this strategy.
Formulas for a variety of grant programs to state and local
governments can be revised to better reflect the fiscal capacity of
the recipient jurisdiction. This strategy could reduce overall
funding demands while simultaneously redistributing available grant
funds so that the most needy receive the same or increased levels of
support.
Eligibility rules can be revised without altering the objectives of
the program or service.
Fees can be targeted at individuals, groups, or industries that
directly benefit from federal programs. Also, existing charges can
be increased so that a greater portion of a program's cost is shared
by the direct beneficiaries.
Tax preferences can be narrowed or eliminated by revising eligibility
criteria or limiting the maximum amount of preference allowable.
For example, at a time when federal domestic discretionary resources
are constrained, better targeting of grant formulas offers a strategy
to bring down federal outlays by concentrating reductions on
wealthier localities with fewer needs and greater capacity to absorb
cuts. Federal grant formulas could be redesigned to lower federal
costs by disproportionately reducing federal funds to states and
localities with the strongest tax bases and fewer needs as shown in
GAO's option on formula grants.
Another example is the Market Promotion Program (MPP), an export
promotion program that subsidizes overseas promotional activities for
U.S. agricultural products. Given the possibility that federal
funds may be replacing industry funds instead of supporting
additional promotional activities, GAO provides an option to reduce
spending and restrict remaining federal funds to small, generic,
new-to-export companies.
IMPROVE EFFICIENCY
The third theme within our deficit reduction framework addresses how
the program or service is delivered. This strategy suggests that
focusing on the approach or delivery method can significantly reduce
spending or increase collections. Our body of work suggests five
decision rules which illustrate this strategy.
Reorganizing programs or activities with similar objectives and
audiences can eliminate duplication and improve operational
efficiency.
Using reengineering, benchmarking, streamlining, and other process
change techniques can reduce the cost of delivering services and
programs.
Using performance measurement and generally improving the accuracy of
available program information can promote accountability and
effectiveness and reduce errors.
Improving collection methods and ensuring that all revenues and debts
owed are collected can increase federal revenues.
Establishing market-based prices can help the government recover the
cost of providing services while encouraging the best use of the
government's resources.
As an illustration of this theme, the Department of Energy (DOE) and
the Environmental Protection Agency (EPA) both procure commonly used
analyses of toxic and radioactive contaminants in conjunction with
their responsibilities for large environmental cleanup efforts. EPA
spends less on these activities because, unlike DOE, EPA uses a
centralized procurement system. GAO's option offers a way to reduce
future costs by adapting DOE procurement to EPA's more efficient
processes.
Also in keeping with the efficiency theme, GAO has identified a total
of 163 federal programs and funding streams providing employment and
training assistance. These programs are spread across 15 departments
and independent agencies with a total budget of about $20 billion.
Many of the programs have similar goals and provide the same services
to similar populations using separate, parallel delivery structures.
Consolidating these programs where it is appropriate can reduce
administrative costs. GAO's option illustrates how opportunities to
improve efficiency and flexibility in employment and training
programs can provide a basis for reducing program funding.
OPTIONS FOR DEFICIT REDUCTION
========================================================= Appendix III
Appendix III is divided into two sections. First, table III.1 is a
summary listing of the options organized by budget function and
receipts. Following the table, the presentation of individual
options begins. This is organized by function beginning with
050-national defense. For each option, when relevant, we provide
information about authorizing committee, appropriations subcommittee,
primary agency, budget account, spending type, budget subfunction,
and framework theme. We then provide a summary and description of
budgetary implications.
Table III.1
Summary of Options for Deficit Reduction
BEA Framework
Option title Budget function category theme Status
------------------------ -- ---------------- ---------- ---------- --------
Hunter joint tactical 050-National Discretion Reassess New
Unmanned Aerial Vehicle defense ary objectives
system
Reduce Army inventories 050-National Discretion Improve New
of spare and repair defense ary efficiency
parts at divisions
Improved material 050-National Discretion Improve New
management can reduce defense ary efficiency
shipyard costs
Reduce Army's unfilled 050-National Discretion Improve New
war reserve requirements defense ary efficiency
by using other inventory
items
Defense infrastructure 050-National Discretion Improve Updated
defense ary efficiency
Potential reductions to 050-National Discretion Improve New
the fiscal year 1996 defense ary efficiency
defense operation and
maintenance budget
Alter readiness status 050-National Discretion Reassess New
of some ready reserve defense ary objectives
force ships
Upgrades to Navy F-14 050-National Discretion Reassess New
fighter aircraft may not defense ary objectives
be needed
Options to acquire fewer 050-National Discretion Reassess New
attack submarines defense ary objectives
Continental air defense 050-National Discretion Improve New
defense ary efficiency
Carrier battle group 050-National Discretion Improve New
expansions and upgrades defense ary efficiency
Army's Comanche 050-National Discretion Reassess Updated
helicopter defense ary objectives
F-22 fighter 050-National Discretion Reassess Updated
defense ary objectives
C-17 aircraft 050-National Discretion Reassess Updated
defense ary objectives
MK-48 advanced 050-National Discretion Reassess Updated
capability torpedo defense ary objectives
propulsion system
Reassess defense 050-National Discretion Reassess New
conversion spending defense ary objectives
Improve controls over 050-National Discretion Improve New
payments to defense defense ary efficiency
contractors
Defense inventories 050-National Discretion Improve Updated
defense ary efficiency
Use prime vendors to 050-National Discretion Improve New
supply high-volume defense ary efficiency
clothing and textile
items
Restructure defense 050-National Discretion Improve New
transportation defense ary efficiency
Reduce excess capacity 050-National Discretion Improve New
and increase cost- defense ary efficiency
effectiveness of depot
maintenance program
Use of innovative 050-National Discretion Improve New
commercial practices to defense ary efficiency
supply electronics items
to maintenance and
repair facilities
Consolidate the separate 050-National Discretion Improve New
military exchange stores defense ary efficiency
Copayments for care in 050-National Discretion Redefine Updated
military hospitals defense ary beneficiar
ies
Administering defense 050-National Discretion Improve Updated
health care defense ary efficiency
Centralize Department of 050-National Discretion Improve New
Energy's procurement of defense ary efficiency
laboratory testing
services
Improve Department of 050-National Discretion Improve New
Energy's property defense ary efficiency
management controls
Restructure Department 050-National Discretion Reassess New
of Energy's national defense ary objectives
laboratories
Negotiate more realistic 050-National Discretion Reassess New
environmental agreements defense ary objectives
Improve Hanford site 050-National Discretion Improve New
management defense ary efficiency
Burdensharing in the 050-National Discretion Improve Updated
Republic of Korea defense ary efficiency
Food aid: reduce or 150- Discretion Reassess New
eliminate funding for International ary/ objectives
Public Law 480 Title I affairs direct
Program
U.S. contribution to the 150- Discretion Reassess New
International Fund for International ary objectives
Agricultural Development affairs
Shortwave radio 150- Discretion Reassess New
modernization program International ary objectives
affairs
TV Marti 150- Discretion Reassess Updated
International ary objectives
affairs
Sell high-value property 150- Discretion Reassess New
in Tokyo International ary objectives
affairs
Space Station 250-General Discretion Reassess Updated
science, space, ary objectives
and technology
Recover clean coal 270-Energy Discretion Reassess New
technology funds ary objectives
Delay procurement of 270-Energy Discretion Reassess New
nuclear waste containers ary objectives
Privatize uranium 270-Energy Direct Reassess New
enrichment program objectives
Enhance profitability of 270-Energy Discretion Improve New
Naval Petroleum Reserve- ary efficiency
1
Consolidate Strategic 270-Energy Discretion Improve New
Petroleum Reserve ary efficiency
Federal land policies 300-Natural Direct Improve Updated
resources and efficiency
environment
Collaborative federal 300-Natural Discretion Improve New
land management approach resources and ary efficiency
environment
Federal timber sales 300-Natural Discretion Improve Updated
resources and ary efficiency
environment
Conservation reserve 300-Natural Direct Improve Updated
program contracts resources and efficiency
environment
Charge fair market value 300-Natural Direct Improve New
for natural resources resources and efficiency
environment
Communication site fees 300-Natural Direct Improve New
resources and efficiency
environment
Recreation fees at 300-Natural Direct Improve Updated
federal sites resources and efficiency
environment
Hardrock mining 300-Natural Direct Improve Updated
royalties resources and efficiency
environment
Natural resources 300-Natural Discretion Improve Updated
revenue sharing resources and ary efficiency
environment
Changing how federal 300-Natural Direct Reassess New
needs for helium are met resources and objectives
environment
Federal water policies 300-Natural Direct Improve Updated
resources and efficiency
environment
Water transfers 300-Natural Direct Improve New
resources and efficiency
environment
Pollution fees and taxes 300-Natural Direct Improve Updated
resources and efficiency
environment
Hazardous waste cleanup 300-Natural Discretion Improve Updated
cost recovery resources and ary efficiency
environment
Nuclear waste disposal 300-Natural Direct Improve Updated
fees resources and efficiency
environment
U.S. Department of 350-Agriculture Direct Reassess Updated
Agriculture dairy price objectives
support program
Milk marketing orders 350-Agriculture Direct Reassess Updated
objectives
U.S. Department of 350-Agriculture Direct Redefine Updated
Agriculture crop price beneficiar
supports ies
Farm lands eligible for 350-Agriculture Direct Improve Updated
deficiency payments efficiency
Rice program 350-Agriculture Direct Reassess New
objectives
Peanut program 350-Agriculture Direct Reassess New
objectives
Reduce or eliminate 350-Agriculture Direct Redefine New
funding for the Market beneficiar
Promotion Program ies
Reduce funding for the 350-Agriculture Direct Reassess New
Export Credit Guarantee objectives
Programs
National Oceanic 370-Commerce and Discretion Improve New
Atmospheric housing credit ary efficiency
Administration research
fleet modernization
Centralize servicing for 370-Commerce and Discretion Improve New
Rural Housing and housing credit ary efficiency
Community Development
Service's single-family
housing loans
Opportunities to reduce 370-Commerce and Discretion Improve Updated
the cost of the 2000 housing credit ary efficiency
decennial census
Eliminate or transfer 400- Discretion Reassess New
Interstate Commerce Transportation ary objectives
Commission functions
Cargo preference laws: 400- Discretion Reassess New
their costs and effects Transportation ary objectives
Increase federal fees 400- Direct Redefine New
paid by foreign-flagged Transportation beneficiar
cruise ships ies
Increase state share of 400- Discretion Redefine New
state-supported Transportation ary beneficiar
intercity rail passenger ies
service
Reduce or eliminate 400- Discretion Reassess New
Amtrak subsidies Transportation ary objectives
Targeting military 400- Discretion Improve New
airport program funds Transportation ary/ efficiency
within the national direct
airport system
Enhance Department of 400- Discretion Improve New
Transportation's Transportation ary efficiency
oversight of its
university research
Reappraise rural 450-Community Discretion Improve New
development programs and regional ary efficiency
development
Employment and training 500-Education, Discretion Improve Updated
programs training, ary/ efficiency
employment, and direct
social services
Overall strategy to 550-Health Direct Improve New
address prescription efficiency
drug fraud and Medicaid
fraud
Medicaid: States use 550-Health Direct Reassess New
illusory approaches to objectives
shift program costs to
the federal government
Medicaid formula: 550-Health Direct Reassess New
fairness could be objectives
improved
Adopt automated drug 550-Health Direct Improve New
utilization reviews efficiency
Teaching hospitals' 570-Medicare Direct Improve Updated
Medicare payments efficiency
Medicare payment 570-Medicare Discretion Improve Updated
safeguards ary/ efficiency
direct
Medicare payments for 570-Medicare Direct Improve Updated
high technology efficiency
procedures
Change the health 570-Medicare Discretion Improve New
maintenance organization ary/ efficiency
rate-setting method for direct
Medicare
Fees for non-Aid to 600-Income Direct Redefine Updated
Families with Dependent security beneficiar
Children child support ies
enforcement services
Automated child support 600-Income Direct Improve New
enforcement systems security efficiency
Funding for state 600-Income Discretion Improve New
automated welfare security ary/ efficiency
systems direct
Unified risk-based food 600-Income Discretion Improve New
safety system security ary efficiency
Consolidation of U.S. 600-Income Direct Improve New
Department of security efficiency
Agriculture food
assistance programs
Social Security 650-Social Discretion Improve Updated
continuing disability security ary/ efficiency
reviews direct
Cost sharing for 700-Veterans Discretion Redefine Updated
veterans' long-term care benefits and ary beneficiar
services ies
Construction of 700-Veterans Discretion Reassess Updated
veterans' medical care benefits and ary objectives
facilities services
Veterans' disability 700-Veterans Direct Redefine Updated
compensation for non- benefits and beneficiar
service connected services ies
diseases
Justice's use of private 750- Discretion Improve New
counsel to collect civil Administration ary efficiency
debt of justice
General Services 800-General Direct Improve Updated
Administration supply government efficiency
depot system
The 1-dollar coin 800-General Direct Improve Updated
government efficiency
Judiciary's long-range 800-General Direct Improve Updated
space planning system government efficiency
Premium payments to Multiple Discretion Improve New
employees while on leave ary efficiency
Global positioning Multiple Discretion Improve New
system technology ary efficiency
Reform or repeal the Multiple Discretion Reassess New
Davis-Bacon Act ary objectives
Better manage Department Multiple Discretion Improve New
of Energy overtime costs ary efficiency
Eliminate prefinancing Multiple Discretion Improve New
funds for Department of ary efficiency
Energy contractors
Use uncosted obligations Multiple Discretion Improve New
to offset future budget ary efficiency
needs
Federal agency credit Multiple Discretion Improve Updated
management programs ary/ efficiency
direct
Formula-based grant Multiple Discretion Redefine Updated
programs ary/ beneficiar
direct ies
Tax treatment of health Receipts Direct Redefine Updated
insurance premiums beneficiar
ies
Information reporting on Receipts Direct Improve Updated
forgiven debts efficiency
Administration of the Receipts Direct Improve Updated
tax deduction for real efficiency
estate taxes
Corporate tax document Receipts Direct Improve Updated
matching efficiency
Tax treatment of Receipts Direct Reassess Updated
interest earned on life objectives
insurance policies and
deferred annuities
Federal agency reporting Receipts Direct Improve Updated
to the Internal Revenue efficiency
Service
Independent contractor Receipts Direct Improve Updated
tax compliance efficiency
Deductibility of home Receipts Direct Reassess Updated
equity loan interest objectives
Internal Revenue Service Receipts Direct Improve Updated
staff utilization efficiency
Collecting gasoline Receipts Direct Improve Updated
excise taxes efficiency
Computing excise tax Receipts Direct Improve Updated
bases efficiency
Small-issue industrial Receipts Direct Reassess Updated
development bonds and objectives
qualified mortgage bonds
Improving compliance of Receipts Direct Improve New
sole proprietors efficiency
Increase highway user Receipts Direct Redefine New
fees on heavy trucks beneficiar
ies
--------------------------------------------------------------------------------
050 NATIONAL DEFENSE
------------------------------------------------------- Appendix III:1
Hunter joint tactical Unmanned Aerial Vehicle system
Reduce Army inventories of spare and repair parts at divisions
Improved material management can reduce shipyard costs
Reduce Army's unfilled war reserve requirements by using other
inventory items
Defense infrastructure
Potential reductions to the fiscal year 1996 defense operation and
maintenance budget
Alter readiness status of some ready reserve force ships
Upgrades to Navy F-14 fighter aircraft may not be needed
Options to acquire fewer attack submarines
Continental air defense
Carrier battle group expansions and upgrades
Army's Comanche helicopter
F-22 fighter
C-17 aircraft
MK-48 advanced capability torpedo propulsion system
Reassess defense conversion spending
Improve controls over payments to defense contractors
Defense inventories
Use prime vendors to supply high-volume clothing and textile items
Restructure defense transportation
Reduce excess capacity and increase cost-effectiveness of depot
maintenance program
Use of innovative commercial practices to supply electronics items to
maintenance and repair facilities
Consolidate the separate military exchange stores
Copayments for care in military hospitals
Administering defense health care
Centralize Department of Energy's procurement of laboratory testing
services
Improve Department of Energy's property management controls
Restructure Department of Energy's national laboratories
Negotiate more realistic environmental agreements
Improve Hanford site management
Burdensharing in the Republic of Korea
OPTION:
HUNTER JOINT TACTICAL UNMANNED
AERIAL VEHICLE SYSTEMHUNTER
JOINT TACTICAL UNMANNED AERIAL
VEHICLE SYSTEM
------------------------------------------------------- Appendix III:2
------------------------ ----------------------------------
Authorizing committees Armed Services (Senate)
National Security (House)
Appropriations Defense (Senate)
subcommittees National Security (House)
Primary agency Department of Defense
Accounts Multiple
Spending type Discretionary
Budget subfunction Department of Defense--Military
Framework theme Reassess objectives
------------------------------------------------------------
Beginning with first fielding in 1995, the Hunter Unmanned Aerial
Vehicle (UAV) System is to provide Army Corps, Marine Divisions, and
eventually Navy Amphibious Assault Ships with an intelligence
gathering capability. Hunter is intended to replace the Pioneer UAV
system that was used during Operation Desert Shield/Desert Storm, but
which had frequent failures. Hunter is a $4 billion program with
unit costs projected to be about $24 million per system.
Although Pioneer demonstrated the military utility of UAV systems in
combat, it is not clear that Hunter will ever be capable of meeting
the military requirements of the Army, Navy, and Marine Corps. GAO
has reported that to date, the Hunter UAV system has shown itself to
be logistically insupportable and tests have identified serious
performance problems that adversely affect the system's
effectiveness. Based on its performance to date, the system may
prove unsuitable for use by operational forces and, contrary to DOD
plans, could require costly contractor maintenance and support to
keep it operating. Furthermore, after several crashes during
testing, the Hunter UAV system was ordered grounded by DOD and has
remained grounded.
DOD has recently restructured the Hunter program in an effort to
address the system's problems. However, the restructured program
would further delay and curtail critical testing while allowing for
additional procurement of systems whose performance is so far
unproven and possibly defective. Even so, in October 1994, the
Commanding General of the Army's Operational Test and Evaluation
Command expressed his belief that it is unlikely Hunter will be ready
for Initial Operational Test and Evaluation by July 1995, as called
for in the restructuring plan.
Given the problems with the Hunter system, and the fact that DOD is
developing a number of other UAV systems including a close-range, or
maneuver, system and several endurance systems, the Congress may wish
to reconsider the need to purchase Hunter. Terminating the program
could produce the following savings.
Five-year Savings
(Dollars in millions)
FY96 FY97 FY98 FY99 FY00
-------------------- ------ ------ ------ ------ ------
Savings from the 1995 Defense Plan
------------------------------------------------------------
Budget authority 230 220 200 180 170
Outlays 50 110 170 180 180
------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCTS
----------------------------------------------------- Appendix III:2.1
Unmanned Aerial Vehicles: No More Hunter Systems Should Be Bought
Until Problems Are Fixed (GAO/NSIAD-95-52, March 1, 1995).
Unmanned Aerial Vehicles: Performance of Short-Range System Still in
Question (GAO/NSIAD-94-65, December 15, 1993).
GAO CONTACT
----------------------------------------------------- Appendix III:2.2
Louis J. Rodrigues, (202) 512-4841
OPTION:
REDUCE ARMY INVENTORIES OF
SPARE AND REPAIR PARTS AT
DIVISIONSREDUCE ARMY
INVENTORIES OF SPARE AND REPAIR
PARTS AT DIVISIONS
------------------------------------------------------- Appendix III:3
------------------------ ----------------------------------
Authorizing committees Armed Services (Senate)
National Security (House)
Appropriations Defense (Senate)
subcommittees National Security (House)
Primary agency Department of Defense
Account Operation and Maintenance, Army
(21-2020)
Spending type Discretionary
Budget subfunction Department of Defense--Military
Framework theme Improve efficiency
------------------------------------------------------------
The five Army divisions are authorized to stock more than 26,000
items such as parts for wheel and track vehicles and other support
equipment for their retail level inventories valued at more than $230
million.
Despite recent reductions in authorized inventories for these
activities, the divisions continue to stock inventory that
contributes little toward meeting the needs of their customers. GAO
found that among the five divisions about $47 million was invested in
inventory items that had two or fewer demands during the previous 12
months. Of this, $37 million had no requests. Additionally, $61
million was invested in inventory that accounted for only 11 percent
of the items issued to the divisions' customers.
Stocking items at the retail level that receive few demands
represents an inventory investment that could be avoided. The Army's
own studies have shown similar results and have recommended that the
infrequently demanded items be removed from the list of items that
the divisions are authorized to stock. These studies have also
recommended that the criteria for determining what items should be
stocked need to be reevaluated. While DOD agrees that the criterion
for determining what inventory items should be stocked at the
divisions needs to be reevaluated, DOD did not fully agree that all
infrequently requested items should be removed from stock.
Savings under this option could be achieved by reducing Army
inventories of spare and repair parts. For example, if the Congress
chooses to reduce future investment in these items by $108 million to
reflect GAO's estimate, the following savings could result.
Five-year Savings
(Dollars in millions)
FY96 FY97 FY98 FY99 FY00
-------------------- ------ ------ ------ ------ ------
Savings from the 1995 Defense Plan
------------------------------------------------------------
Budget authority 108 0 0 0 0
Outlays 70 30 8 0 0
------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCTS
----------------------------------------------------- Appendix III:3.1
Army Inventory: Opportunities Exist for Additional Reductions to
Retail Level Inventories (GAO/NSIAD-94-129, June 6, 1994).
Army Inventory: Divisions' Authorized Levels of Demand-Based Items
Can Be Reduced (GAO/NSIAD-93-09, October 20, 1992).
Army Inventory: Fewer Items Should Be Stocked at the Division Level
(GAO/NSIAD-91-218, July 24, 1991).
GAO CONTACT
----------------------------------------------------- Appendix III:3.2
Mark E. Gebicke, (202) 512-5140
OPTION:
IMPROVED MATERIAL MANAGEMENT
CAN REDUCE SHIPYARD
COSTSIMPROVED MATERIAL
MANAGEMENT CAN REDUCE SHIPYARD
COSTS
------------------------------------------------------- Appendix III:4
------------------------ ----------------------------------
Authorizing committees Armed Services (Senate)
National Security (House)
Appropriations Defense (Senate)
subcommittees National Security (House)
Primary agency Department of Defense
Account Operation and Maintenance, Navy
(17-1804)
Spending type Discretionary
Budget subfunction Department of Defense--Military
Framework theme Improve efficiency
------------------------------------------------------------
The Navy's public shipyards support peacetime fleet maintenance needs
and provide a base for responding to wartime requirements. Although
the eventual size of the public shipyard industrial base is uncertain
because of fleet downsizing, each shipyard should operate as
efficiently as possible.
Despite recent improvements in shipyard material management, the
shipyards' material requirements determination process still is not
working as intended. Since shipyards order more material than needed
to accomplish ship repairs, they have unused material after repairs
are completed. GAO found that in fiscal years 1991 through 1993, the
shipyards wrote off $88 million in losses for unused material,
including $56 million in material sent to disposal. At the end of
fiscal year 1993, the shipyards had $34.7 million of material on hand
that had not been used on completed repairs and $11.8 million of
material on order for repairs that were already completed.
GAO also found that shipyards maintain inventories of material that
are not recorded on official records, issue more shop store material
than needed for some ship repairs, and do not ensure compliance with
policies to eliminate excess shop store inventories and protect
material assets from loss. As a result, inventory records were not
accurate and material funds were wasted. DOD agreed with GAO's
findings and conclusions.
The Congress could reduce appropriations by $46.5 million for the
Navy's shipyard repair material investment to account for excess
inventories.
Five-year Savings
(Dollars in millions)
FY96 FY97 FY98 FY99 FY00
-------------------- ------ ------ ------ ------ ------
Savings from the 1995 Defense Plan
------------------------------------------------------------
Budget authority 50 0 0 0 0
Outlays 40 10 0 0 0
------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCT
----------------------------------------------------- Appendix III:4.1
Navy Supply: Improved Material Management Can Reduce Shipyard Costs
(GAO/NSIAD-94-181, July 27, 1994).
GAO CONTACT
----------------------------------------------------- Appendix III:4.2
Mark E. Gebicke, (202) 512-5140
OPTION:
REDUCE ARMY'S UNFILLED WAR
RESERVE REQUIREMENTS BY USING
OTHER INVENTORY ITEMSREDUCE
ARMY'S UNFILLED WAR RESERVE
REQUIREMENTS BY USING OTHER
INVENTORY ITEMS
------------------------------------------------------- Appendix III:5
------------------------ ----------------------------------
Authorizing committees Armed Services (Senate)
National Security (House)
Appropriations Defense (Senate)
subcommittees National Security (House)
Primary agency Department of Defense
Account Operation and Maintenance, Army
(21-2020)
Spending type Discretionary
Budget subfunction Department of Defense--Military
Framework theme Improve efficiency
------------------------------------------------------------
Between 1992 and 1994, Department of Defense (DOD) policies
restricted the services with regard to filling war reserve
requirements with assets procured with funds other than those
specifically appropriated for that purpose. In February 1994, the
DOD Comptroller changed the policy and advised the Army that it could
use inventory items not needed for peacetime operations for these
purposes as long as the total amount of protected war reserve
inventory did not exceed $2.9 billion--the cumulative amount the
Congress had previously appropriated for buying war reserve
inventory.
GAO analysis shows that the Army could fill $497 million of its
unfilled war reserve requirements for spare and repair parts by
transferring items not needed for peacetime operating purposes to the
war reserve account. DOD agreed with GAO's analysis but is reluctant
to reclassify items not needed for peacetime operating purposes to
war reserves unless the Congress eliminates or modifies section 8007
of Public Law 103-139, the Department of Defense Appropriations Act
for 1994. This particular section provides that except in the
amounts equal to the amounts appropriated for war reserves, no
obligations may be made to procure or increase the value of war
reserve material inventory unless the Secretary of Defense had
notified the Congress prior to such obligations.
For fiscal year 1995, the administration did not request funding for
the Army's unfilled war reserve requirements nor does DOD have plans
to fund the requirements in the 1995 Defense Plan. If a future
administration budget proposal were made for unfilled war reserve
requirements, the Congress may wish to encourage DOD to shift
peacetime inventory by using funding already in the baseline
(operation and maintenance, Army account) to fill the new
requirements.
RELATED GAO PRODUCT
----------------------------------------------------- Appendix III:5.1
Army Inventory: Unfilled War Reserve Requirements Could Be Met With
Items From Other Inventory (GAO/NSIAD-94-207, August 25, 1994).
GAO CONTACT
----------------------------------------------------- Appendix III:5.2
Mark E. Gebicke, (202) 512-5140
OPTION:
DEFENSE INFRASTRUCTUREDEFENSE
INFRASTRUCTURE
------------------------------------------------------- Appendix III:6
------------------------ ----------------------------------
Authorizing committees Armed Services (Senate)
National Security (House)
Appropriations Defense (Senate)
subcommittees National Security (House)
Primary agency Department of Defense
Accounts Multiple
Spending type Discretionary
Budget subfunction Department of Defense--Military
Framework theme Improve efficiency
------------------------------------------------------------
As DOD realigns and downsizes, GAO has reported that it needs to
ensure that the remaining infrastructure is downsized commensurate
with the remaining forces. As pointed out in DOD's self-initiated
Bottom Up Review, there are numerous opportunities to reduce the
defense infrastructure without affecting readiness. In fact,
reducing the infrastructure could enhance readiness in that moneys
now being spent to maintain unneeded infrastructure could be applied
to readiness enhancement measures. Significant budget reductions
could be achieved by streamlining the command structure of the
remaining forces; sharing medical facilities and services;
consolidating depots and shipyards; reforming acquisition processes;
consolidating and eliminating research, development, and training
facilities; using simulators for training and exercises; and reducing
dependence on government-owned housing.
Savings for this option cannot be estimated until a comprehensive
consolidation and downsizing plan is specified. According to the
Bottom Up Review, infrastructure areas and processes accounted for
$160 billion of the $254 billion fiscal year 1994 Defense budget.
RELATED GAO PRODUCTS
----------------------------------------------------- Appendix III:6.1
1994 DOD Budget: Potential Reductions to the Operation and
Maintenance Budget (GAO/NSIAD-93-295BR, September 16, 1993).
Depot Maintenance: Issues in Management and Restructuring to Support
a Downsized Military (GAO/T-NSIAD-93-13, May 6, 1993).
Depot Maintenance: Issues in Allocating Workload Between the Public
and Private Sectors (GAO-T-NSIAD-94-161, April 12, 1994).
Military Bases: Analysis of DOD's Recommendations and Selection
Process for Closures and Realignments (GAO/NSIAD-93-173, April 15,
1993).
GAO CONTACT
----------------------------------------------------- Appendix III:6.2
Donna M. Heivilin, (202) 512-8412
OPTION:
POTENTIAL REDUCTIONS TO THE
FISCAL YEAR 1996 DEFENSE
OPERATION AND MAINTENANCE
BUDGETPOTENTIAL REDUCTIONS TO
THE FISCAL YEAR 1996 DEFENSE
OPERATION AND MAINTENANCE
BUDGET
------------------------------------------------------- Appendix III:7
------------------------ ----------------------------------
Authorizing committees Armed Services (Senate)
National Security (House)
Appropriations Defense (Senate)
subcommittees National Security (House)
Primary agency Department of Defense
Accounts Multiple
Spending type Discretionary
Budget subfunction Department of Defense--Military
Framework theme Improve efficiency
------------------------------------------------------------
The military services' operation and maintenance (O&M) accounts are
used to fund a wide range of military activities from training and
purchasing of spare and repair parts to civilian personnel.
GAO analysis of selected O&M requests for fiscal year 1995 showed
that the budget for that year could have been reduced by $4.5 billion
without damaging defense operations and capabilities. The largest
potential reductions, each for over $500 million, were associated
with better management of spare and repair parts inventories, funds
requested for ground operating tempo that are not used for training
purposes, overstated civilian personnel requirements, and excessive
unobligated balances from prior years' appropriations. Another
potential reduction of about $470 million was associated with
improved maintenance practices that the services could adopt.
The Congress may wish to consider the potential opportunity for
savings when formulating fiscal year 1996 appropriations for
operation and maintenance accounts.
Based on GAO's analysis regarding potential savings in the fiscal
year 1995 O&M budget, the Congress may wish to consider reductions of
a similar magnitude, $4.5 billion, when formulating fiscal year 1996
appropriations for O&M accounts. It is important for the Congress to
be aware that savings for this option include savings for other
options involving the individual services' O&M accounts since the
problems GAO identified persist. CBO noted that budget authority
savings could be larger due to savings from recurring costs.
However, CBO is unable to identify the particular years in which
these savings would be achieved or the amounts.
Five-year Savings
(Dollars in millions)
FY96 FY97 FY98 FY99 FY00
-------------------- ------ ------ ------ ------ ------
Savings from the 1995 Defense Plan
------------------------------------------------------------
Budget authority 4,500 0 0 0 0
Outlays 3,400 850 150 50 20
------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCT
----------------------------------------------------- Appendix III:7.1
1995 Budget: Potential Reductions to the Operation and Maintenance
Programs (GAO/NSIAD-94-246BR, September 6, 1994).
GAO CONTACT
----------------------------------------------------- Appendix III:7.2
Mark E. Gebicke, (202) 512-5140
OPTION:
ALTER READINESS STATUS OF SOME
READY RESERVE FORCE SHIPSALTER
READINESS STATUS OF SOME READY
RESERVE FORCE SHIPS
------------------------------------------------------- Appendix III:8
------------------------ ----------------------------------
Authorizing committees Armed Services (Senate)
National Security (House)
Appropriations Defense (Senate)
subcommittees National Security (House)
Primary agency Department of Defense
Account National Defense Sealift Fund (17-
4557)
Spending type Discretionary
Budget subfunction Department of Defense--Military
Framework theme Reassess objectives
------------------------------------------------------------
Ready Reserve Force ships are used by the military services to
transport cargo to where it is needed. A 1990 DOD Mobility
Requirements Study recommended maintaining 63 ships at a high
readiness level (such as able to be activated in 4 or 5 days) with
operation and maintenance costing hundreds of millions of dollars.
Consistent with this study, the Army has a long-term plan to increase
its capability to reach seaports more quickly.
However, GAO has expressed a concern that the Army's current ability
to move cargo from key installations to seaports is constrained by
deteriorated rail facilities. GAO found that although the Army plans
to increase its capability to reach seaports more quickly, most
transportation infrastructure renovation and repair projects will not
be completed as anticipated in DOD's Mobility Requirements Study.
Further, GAO found that DOD's analysis did not support maintaining 63
ships in a high state of readiness. For example, the study's model
assumed only 14 ships would need to be ready to load cargo by the 5th
day.
Because the various components of the U.S. mobility forces must work
together to synchronize the delivery of equipment and supplies, GAO
believes that it is possible to keep some Ready Reserve Force ships
at a lower readiness level. Under similar logic, the Maritime
Administration's fiscal year 1994 Ready Reserve Force budget request
for maintenance and operations was $136 million, or approximately
$221 million less than the $357 million identified in the Mobility
Study. The administration concluded that reduced funding in fiscal
year 1994 would not result in a great degradation of readiness.
Appropriations could be reduced by keeping more Ready Reserve Force
Ships in a lower readiness level than planned until transportation
renovations and/or repairs are complete. For example, based on GAO's
audit work, if the Congress chose this alternative and 20 ships were
kept in a lower readiness status, the following savings could be
achieved.
Five-year Savings
(Dollars in millions)
FY96 FY97 FY98 FY99 FY00
-------------------- ------ ------ ------ ------ ------
Savings from the 1995 Defense Plan
------------------------------------------------------------
Budget authority 20 20 20 20 20
Outlays 15 18 20 20 20
------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCTS
----------------------------------------------------- Appendix III:8.1
Ready Reserve Force: Ship Readiness Has Improved, but Other Concerns
Remain (GAO/NSIAD-95-24, November 8, 1994).
Strategic Mobility: Serious Problems Remain in U.S. Deployment
Capabilities (GAO/T-NSIAD-94-165, April 26, 1994).
DOD's Mobility Requirements: Alternative Assumptions Could Affect
Recommended Acquisition Plan (GAO/NSIAD-93-103, April 22, 1993).
GAO CONTACT
----------------------------------------------------- Appendix III:8.2
Mark E. Gebicke, (202) 512-5140
OPTION:
UPGRADES TO NAVY F-14 FIGHTER
AIRCRAFT MAY NOT BE
NEEDEDUPGRADES TO NAVY F-14
FIGHTER AIRCRAFT MAY NOT BE
NEEDED
------------------------------------------------------- Appendix III:9
------------------------ ----------------------------------
Authorizing committees Armed Services (Senate)
National Security (House)
Appropriations Defense (Senate)
subcommittees National Security (House)
Primary agency Department of Defense
Account Aircraft Procurement, Navy (17-
1506)
Spending type Discretionary
Budget subfunction Department of Defense--Military
Framework theme Reassess objectives
------------------------------------------------------------
Until recently, the Navy planned to spend over $2.5 billion from
fiscal years 1994-2003 on structural, survivability, and capability
upgrades for many F-14 fighter aircraft. About $1.6 billion was
planned for a very limited ground attack upgrade to 210 aircraft, and
another $970 million was planned for structural and survivability
improvements to 198 older F-14A and B model aircraft (157 of which
would then receive the ground attack upgrade along with 53 F-14D
models).
A GAO analysis concluded that the first upgrade did not provide
enough additional capability and would not be fielded soon enough to
warrant the expenditure of $1.6 billion and the program was
terminated when the Congress did not appropriate these funds. Fiscal
year 1995 funds were appropriated for F-14A/B structural and
survivability improvements, and that program is likely to continue
for several years. Navy officials continue to believe a ground
attack upgrade is necessary. A final decision on the extent of the
upgrade depends on the results of a cost-effectiveness and
operational assessment and an acquisition milestone decision
scheduled for the first quarter of fiscal year 1995.
We question the need for F-14 structural/survivability upgrades. The
Navy has stated that F-14s are using up their service life and that
structural upgrades are needed to keep F-14s operating until they are
retired and replaced by F/A-18E/F aircraft beginning in fiscal year
2000. The Navy plans to retire and store about 150 F-14s over the
next 2 to 3 years as it reduces its force structure. In lieu of
structural modifications, some of these aircraft with service life
remaining, could possibly be brought back out of storage in future
years, and operated until F-14s are gradually retired and replaced by
F/A-18E/F aircraft. If the Congress chose to cancel the F-14
structural/survivability modification program, the following savings
could be achieved.
Five-year Savings
(Dollars in millions)
FY96 FY97 FY98 FY99 FY00
-------------------- ------ ------ ------ ------ ------
Savings from the 1995 Defense Plan
------------------------------------------------------------
Budget authority 130 120 120 110 110
Outlays 20 60 100 110 110
------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCT
----------------------------------------------------- Appendix III:9.1
Naval Aviation: F-14 Upgrades Are Not Adequately Justified
(GAO/NSIAD-95-12, October 19, 1994).
GAO CONTACT
----------------------------------------------------- Appendix III:9.2
Richard A. Davis, (202) 512-3504
OPTION:
OPTIONS TO ACQUIRE FEWER ATTACK
SUBMARINESOPTIONS TO ACQUIRE
FEWER ATTACK SUBMARINES
------------------------------------------------------ Appendix III:10
------------------------ ----------------------------------
Authorizing committees Armed Services (Senate)
National Security (House)
Appropriations Defense (Senate)
subcommittees National Security (House)
Primary agency Department of Defense
Account Shipbuilding and Conversion, Navy
(17-1611)
Spending type Discretionary
Budget subfunction Department of Defense--Military
Framework theme Reassess objectives
------------------------------------------------------------
Nuclear-powered attack submarines (SSN) are the Navy's prime
antisubmarine warfare asset. Today, faced with a changed world
threat, a new defense posture, and constrained defense budgets, the
Navy is reducing the size of its SSN fleet. The DOD's Bottom-Up
Review determined that the Navy needed to maintain a force of 45 to
55 SSNs after fiscal year 1999 to meet the requirements of the
defense strategy, including both regional conflicts and peacetime
presence operations.
One option the Congress may consider is to cancel plans to buy the
third Seawolf submarine and defer acquisition of a new generation
submarine until 2003, while continuing some research and development
efforts through 2000. The estimated savings reflected in the table
include the costs associated with consolidating submarine production
at one of the two facilities and maintaining that facility over the
next 5 years. However, due to the delayed acquisition of the new
generation submarine, beginning in 2003, the Navy would have to
increase its annual shipbuilding budgets more than currently planned.
Five-year Savings
(Dollars in millions)
FY96 FY97 FY98 FY99 FY00
-------------------- ------ ------ ------ ------ ------
Savings from the 1995 Defense Plan
------------------------------------------------------------
Budget authority 2,130 920 3,410 670 1,470
Outlays -20 750 1,320 1,550 1,210
------------------------------------------------------------
Source: Congressional Budget Office.
Note: Higher outlays from increased shutdown and maintenance costs,
as well as research and development costs, completely offset outlay
savings in 1996.
RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:10.1
Attack Submarines: Alternatives for a More Affordable SSN Force
Structure (GAO/NSIAD-95-16, October 13, 1994).
GAO CONTACT
---------------------------------------------------- Appendix III:10.2
Richard A. Davis, (202) 512-3504
OPTION:
CONTINENTAL AIR
DEFENSECONTINENTAL AIR DEFENSE
------------------------------------------------------ Appendix III:11
------------------------ ----------------------------------
Authorizing committees Armed Services (Senate)
National Security (House)
Appropriations Defense (Senate)
subcommittees National Security (House)
Primary agency Department of Defense
Accounts Operation and Maintenance, Air
National Guard (57-3840)
Operation and Maintenance, Air
Force
(57-3400)
National Guard Personnel, Air
Force
(57-3850)
Military Personnel, Air Force (57-
3500)
Procurement-funded Replenishment
Spares
Replacement Support Equipment and
Modifications
Spending type Discretionary
Budget subfunction Department of Defense--Military
Framework theme Improve efficiency
------------------------------------------------------------
The continental air defense mission evolved during the Cold War to
detect and intercept Soviet bombers attacking North America via the
North Pole. The force that carries out that mission is within the
North American Aerospace Defense Command (NORAD), which is a joint
U.S. and Canadian command. As of May 1994, the force consisted of
150 primary aircraft comprised of Air National Guard F-15A/B and
F-16A/B aircraft in 10 dedicated units, as well as 2 F-15 dual-tasked
general-purpose units which stand alert for NORAD. At that time the
Air Force budgeted about $370 million annually to operate and support
the continental air defense force.
The former Soviet Union no longer poses a significant threat of a
bomber attack on the continental United States. Further, internal
problems within Russia and other former Soviet Union countries have
extended the time it would take them to return to previous levels of
military readiness and capabilities. Reflecting these changing
realities, the Chairman of the Joint Chiefs of Staff determined in
1993 that the United States no longer needed a large, dedicated air
defense force and that the dedicated force could be significantly
reduced or eliminated.
Since the threat of a Soviet-style air attack against the United
States has largely disappeared, the air defense force now focuses its
activities on air sovereignty missions. These missions provide
surveillance and control of territorial airspace, including
activities such as assisting aircraft in distress or intercepting
aircraft as part of anti-drug smuggling efforts. However, active and
reserve general-purpose and training forces could perform this
mission because they (1) have comparable or better aircraft, (2) are
located at or near existing air defense bases, and (3) have pilots
who possess similar skills or could acquire the necessary skills used
by air defense and air sovereignty pilots.
Based on our audit work, GAO has concluded that significant savings
could be achieved by dual-tasking the active, reserve, and training
forces. Savings could also be achieved if the dedicated continental
air defense force and mission were eliminated. If the Congress chose
to eliminate the dedicated force the following savings could be
achieved.
Five-year Savings
(Dollars in millions)
-------- -------- -------- -------- -------- ----------
Savings from the 1995 Defense Plan
------------------------------------------------------------
Budget 210 430 450 470 480
authori
ty
Outlays 160 370 420 450 470
------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:11.1
Continental Air Defense: A Dedicated Force Is No Longer Needed
(GAO/NSIAD-94-76, May 3, 1994).
GAO CONTACT
---------------------------------------------------- Appendix III:11.2
Richard A. Davis, (202) 512-3504
OPTION:
CARRIER BATTLE GROUP EXPANSIONS
AND UPGRADESCARRIER BATTLE
GROUP EXPANSIONS AND UPGRADES
------------------------------------------------------ Appendix III:12
----------------------------- -----------------------------
Authorizing committees Armed Services (Senate)
National Security (House)
Appropriations subcommittees Defense (Senate)
National Security (House)
Primary agency Department of Defense
Accounts Operation and Maintenance,
Navy
(17-1804)
Military Personnel, Navy (17-
1453)
Procurement-funded
Replenishment Spares
Replacement Support Equipment
and Modifications
Spending type Discretionary
Budget subfunction Department of Defense--
Military
Framework theme Improve efficiency
------------------------------------------------------------
Aircraft carrier battle groups are the centerpiece of the Navy's
surface force and significantly influence the size, composition, and
cost of the fleet. The annualized cost to acquire, operate, and
support a single Navy carrier battle group is about $1.7 billion (in
fiscal year 1995 dollars) and will continue to increase. The Navy is
embarking on several costly carrier-related programs--procuring
another carrier, refueling existing carriers, and replacing/upgrading
combat aircraft.
GAO's analysis indicates that there are opportunities for using less
costly options to satisfy many of the carrier battle groups'
traditional roles without unreasonably increasing the risk that U.S.
national security would be threatened. For example, one less costly
option would be to rely more on increasingly capable surface
combatants, such as cruisers, destroyers, or frigates, for overseas
presence and crises response. If the Congress chose to retire one
aircraft carrier and one active air wing in 1996, the following
savings could be achieved.
Five-year Savings
(Dollars in millions)
FY96 FY97 FY98 FY99
------------- ------ ------ ------ ------ -------------
Savings from the 1995 Defense Plan
------------------------------------------------------------
Budget 290 600 630 650 670
authority
Outlays 210 480 560 610 640
------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:12.1
Navy Carrier Battle Groups: The Structure and Affordability of the
Future Force (GAO/NSIAD-93-74, February 25, 1993).
GAO CONTACT
---------------------------------------------------- Appendix III:12.2
Richard A. Davis, (202) 512-3504
OPTION:
ARMY'S COMANCHE
HELICOPTERARMY'S COMANCHE
HELICOPTER
------------------------------------------------------ Appendix III:13
------------------------ ----------------------------------
Authorizing committees Armed Services (Senate)
National Security (House)
Appropriations Defense (Senate)
subcommittees National Security (House)
Primary agency Department of Defense
Account Research, Development, Test and
Evaluation, Army (21-2040)
Spending type Discretionary
Budget subfunction Department of Defense--Military
Framework theme Reassess objectives
------------------------------------------------------------
When fielded in 2003, the Comanche helicopter is to replace the
Vietnam-era scout and attack helicopters that the Army considers
incapable of meeting existing or future requirements. The Comanche's
overall program cost has grown to approximately $45 billion, with an
estimated program unit cost of about $35 million. Anticipated cost
increases and other unresolved technical risks indicate that future
cost growth is likely. Moreover, the Army's Comanche helicopter
program currently faces a $540 million funding shortfall for fiscal
years 1995-2004. In order to cope with anticipated funding
shortfalls, the Army is proposing to streamline the program. This
entails merging the demonstration, validation, engineering, and
manufacturing development phases into one developmental phase. In
December 1994, the Secretary of Defense decided to restructure the
Comanche program as a prototype/technology base program, resulting in
a program cost reduction from $4.2 billion to about $2 billion for
fiscal years 1996 through 2001.
Although light attack missions are part of the Army's plan for the
Comanche, its lethality is now expected to rival or surpass that of
the Apache--the Army's premiere attack helicopter. In addition, as
the Army reduces its total helicopter fleet, it plans to modify many
of those that will remain to increase combat capabilities. For
example, the Army is arming the Kiowa and plans to improve the basic
model Apaches, including adding Longbow modifications to 227 Apaches.
These actions, collectively, tend to blur the distinction in roles
among the Army's helicopter fleet.
Given real and probable development cost increases, uncertain
operating and support cost savings, questions about the role of the
Comanche compared to other more affordable Army helicopters, and
declining defense budgets, the Congress may wish to rethink the need
to purchase the Comanche. Terminating the program would produce the
following savings.
Five-year Savings
(Dollars in millions)
FY96 FY97 FY98 FY99 FY00
-------------------- ------ ------ ------ ------ ------
Savings from the 1995 Defense Plan
------------------------------------------------------------
Budget authority 370 500 520 520 500
Outlays 210 410 490 500 500
------------------------------------------------------------
Source: Congressional Budget Office.
Note: The Comanche Helicopter program has been restructured to a
prototype program only in the administration's 1996 budget request.
Therefore, under the President's 1996 Defense Plan, savings from
terminating the program would be considerably lower than the estimate
above.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:13.1
Army Aviation: Modernization Strategy Needs to Be Reassessed
(GAO/NSIAD-95-9, November 21, 1994).
Comanche Helicopter: Program Needs Reassessment Due to Increased
Unit Cost and Other Factors (GAO/NSIAD-92-204, May 27, 1992).
GAO CONTACT
---------------------------------------------------- Appendix III:13.2
Louis J. Rodrigues, (202) 512-4841
OPTION:
F-22 FIGHTERF-22 FIGHTER
------------------------------------------------------ Appendix III:14
------------------------ ----------------------------------
Authorizing committees Armed Services (Senate)
National Security (House)
Appropriations Defense (Senate)
subcommittees National Security (House)
Primary agency Department of Defense
Account Aircraft Procurement, Air Force
(57-3010)
Spending type Discretionary
Budget subfunction Department of Defense--Military
Framework theme Reassess objectives
------------------------------------------------------------
In recent years, GAO has issued numerous reports on the Air Force's
F-22 program leading to the following findings and conclusions.
The Air Force's F-22 program was initiated in 1981 to meet the
evolving threat projected for the mid-1990s. Since the F-22 program
entered full-scale development in 1991, the severity of the projected
military threat in terms of quantities and capabilities had declined.
Instead of confronting thousands of modern Soviet fighters, U.S. air
forces are now expected to confront potential adversary air forces
that include few fighters that have the capability to challenge the
F-15--the U.S. front line fighter. GAO's analysis shows that the
F-15 exceeds the most advanced fighter threat system expected to
exist for many years. Further, our analysis indicated that the
current inventory of F-15s can be economically maintained in a
structurally sound condition until 2015 or later.
DOD is currently planning to procure significant units before
completing operational tests and evaluations, thereby increasing the
cost, schedule, and performance risks within the system. Initial
operational tests and evaluations that determine the system's
operational utility and appropriateness for production are not
scheduled to be completed until after the Air Force will have
committed to procure 80 aircraft involving an investment of $12.4
billion. Air Force plans call for procurement of 4 aircraft a year,
increasing to 36 a year (a 900 percent increase) before initial
operational tests and their evaluation are scheduled to be completed.
Many aircraft systems entering production before starting operational
testing have required major modification later which is often costly.
Using DOD guidelines, F-22 program concurrency is high because the
F-22 program is scheduled to proceed into low rate initial production
well before any operational testing starts. Furthermore, the F-22
program contemplates a higher commitment as a percent of total
production prior to completion of initial operational testing than
most modern fighter programs.
Because the need for the F-22 is not urgent and the concurrency
between development and production is high, the Congress could choose
to restrict production of F-22s to six aircraft in 1999 and eight
aircraft in 2000 until initial operational tests and evaluations are
completed in February 2002. One Air Force official stated that one
set of production tooling can produce six to eight production
aircraft a year. If the Congress decides to restrict production in
this way, the following savings could be achieved.
Five-year Savings
(Dollars in millions)
FY96 FY97 FY98 FY99 FY00
-------------------- ------ ------ ------ ------ ------
Savings from the 1995 Defense Plan
------------------------------------------------------------
Budget authority 0 0 0 740 1,740
Outlays 0 0 0 50 290
------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:14.1
Weapons Acquisition: Low-Rate Initial Production Used to Buy Weapon
Systems Prematurely (GAO/NSIAD-95-18, November 21, 1994).
Tactical Aircraft: F-15 Replacement is Premature as Currently
Planned (GAO/NSIAD-94-118, March 25, 1994).
Tactical Aircraft: Planned F-15 Replacement Is Premature
(GAO/C-NSIAD-94-11, December 8, 1993).
F-22 Fighter: Concurrency in Development and Production
(GAO/NSIAD-95-59, report in progress).
GAO CONTACT
---------------------------------------------------- Appendix III:14.2
Louis J. Rodrigues, (202) 512-4841
OPTION:
C-17 AIRCRAFTC-17 AIRCRAFT
------------------------------------------------------ Appendix III:15
----------------------------- -----------------------------
Authorizing committees Armed Services (Senate)
National Security (House)
Appropriations subcommittees Defense (Senate)
National Security (House)
Primary agency Department of Defense
Account Aircraft Procurement, Air
Force (57-3010)
Spending type Discretionary
Budget subfunction Department of Defense--
Military
Framework theme Reassess objectives
------------------------------------------------------------
Many GAO reports and testimonies issued over the past decade have
produced the following findings and conclusions regarding the Air
Force C-17.
The C-17 has been a troubled program almost since its inception and
has fallen far short of original cost, schedule, and performance
objectives. As a result of the program's problems, the Department of
Defense (DOD) sponsored a cost and operational effectiveness analysis
to explore alternatives to the C-17 for meeting planned airlift
capacity requirements, including acquiring additional commercial
wide-body derivative aircraft. Although the analysis shows that
there are cost effective wide-body alternatives, DOD has not made a
final decision on substituting commercial wide-body aircraft for the
C-17.
The Congress may wish to purchase commercial wide-body aircraft over
the period 1996 to 2000 instead of purchasing more than 40 C-17
aircraft. Estimated funding identified for strategic airlift
purposes in the 1995 Defense Plan could be used.\2 The following
savings could be achieved if 34 commercial wide-body aircraft were
purchased instead of buying additional C-17s.
Five-year Savings
(Dollars in millions)
FY96 FY97 FY98 FY99 FY00
-------------------- ------ ------ ------ ------ ------
Savings from the 1995 Defense Plan
------------------------------------------------------------
Budget authority 210 1,660 1,480 2,370 2,380
Outlays 10 150 560 1,090 1,570
------------------------------------------------------------
Source: Congressional Budget Office.
--------------------
\2 The 1995 plan for strategic airlift, according to DOD, could buy
more C-17s or non-development airlift aircraft (NDAA) or a
combination of NDAA and C-17s. The specifics of how DOD would use
this money are not available now and may not be available until the
fall of 1995 when DOD is scheduled to decide whether or not to
purchase more C-17s. Moreover, the 1995 plan for strategic airlift
did not include any money in the year 2000. CBO assumed that the
administration would need roughly $4.3 billion in 2000 (about the
same amount in 1999) to continue procurement.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:15.1
Military Airlift: Comparison of C-5 and C-17 Airfield Availability
(GAO/NSIAD-94-225, July 11, 1994).
Military Airlift: The C-17 Proposed Settlement and Program Update
(GAO/T-NSIAD-94-172, April 28, 1994).
Military Airlift: The C-17 Program Update and Proposed Settlement
(GAO/T-NSIAD-94-166, April 19, 1994).
Military Airlift: C-17 Settlement Is Not a Good Deal
(GAO/NSIAD-94-141, April 15, 1994).
Military Airlift: The C-17 Program Status and Proposed Settlement
(GAO/T-NSIAD-94-115, February 10, 1994).
Military Airlift: Status of the C-17 Development Program
(GAO/T-NSIAD-93-6, March 10, 1993) and (GAO/T-NSIAD-93-8, March 18,
1993).
Defense Industry: Status of the C-17 Program and Related Issues
Affecting the McDonnell Douglas Corporation (GAO/T-NSIAD-92-4,
November 14, 1992).
Military Aircraft: C-17 Wing Flap Requires Additional Testing
(GAO/NSIAD-92-160, July 8, 1992).
Military Airlift: Selected Events in the Development of the C-17
(GAO/NSIAD-92-181FS, May 4, 1992).
Military Airlift: Cost and Complexity of the C-17 Aircraft Research
and Development Program (GAO/NSIAD-91-5, March 19, 1991).
Status of the Air Force's C-17 Aircraft Program (GAO/T-NSIAD-90-48,
June 19, 1990).
Military Airlift: C-17 Faces Schedule, Cost, and Performance
Challenges (GAO/NSIAD-89-195, August 18, 1989).
GAO CONTACT
---------------------------------------------------- Appendix III:15.2
Louis J. Rodrigues, (202) 512-4841
OPTION:
MK-48 ADVANCED CAPABILITY
TORPEDO PROPULSION SYSTEMMK-48
ADVANCED CAPABILITY TORPEDO
PROPULSION SYSTEM
------------------------------------------------------ Appendix III:16
------------------------ ----------------------------------
Authorizing committees Armed Services (Senate)
National Security (House)
Appropriations Defense (Senate)
subcommittees National Security (House)
Primary agency Department of Defense
Account Weapons Procurement, Navy (17-
1507)
Spending type Discretionary
Budget subfunction Department of Defense--Military
Framework theme Reassess objectives
------------------------------------------------------------
In 1986, the Navy established a requirement to upgrade the propulsion
system on its MK-48 Advanced Capability (ADCAP) torpedo. The upgrade
was intended to reduce noise levels when the torpedo was fired from
the SSN-21 Seawolf submarine. In January 1992, the Navy stated that
the Seawolf's requirements could be met by the current ADCAP, without
the upgrade. The Navy now plans to combine the Torpedo Propulsion
Unit (TPU) with a new guidance and control unit. Together these
improvements, referred to as the ADCAP Modification Program, are
estimated to cost about $711 million. According to a Navy official,
the Navy plans to upgrade about 1,386 ADCAP torpedoes starting about
January 1997.
Although operational test and evaluation of the ADCAP Modification
Program will not be complete until late 1995, the Navy plans to seek
approval for low-rate initial production in February 1995. In 1992,
GAO questioned the need for the TPU and recommended that the TPU be
terminated. Although the Navy now justifies the TPU in part on the
basis of improving ADCAP shallow water performance, latest Navy
testing has shown that the current ADCAP torpedo can effectively
operate in shallow water. If the Congress chose to terminate the
upgrade program, the following savings could be achieved.
Five-year Savings
(Dollars in millions)
FY96 FY97 FY98 FY99 FY00
-------------------- ------ ------ ------ ------ ------
Savings from the 1995 Defense Plan
------------------------------------------------------------
Budget authority 20 20 20 20 0
Outlays 10 10 20 20 10
------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:16.1
Navy Torpedo Program: MK-48 ADCAP Propulsion System Upgrade Not
Needed (GAO/NSIAD-92-191, September 10, 1992).
GAO CONTACT
---------------------------------------------------- Appendix III:16.2
Richard A. Davis, (202) 512-3504
OPTION:
REASSESS DEFENSE CONVERSION
SPENDINGREASSESS DEFENSE
CONVERSION SPENDING
------------------------------------------------------ Appendix III:17
------------------------ ----------------------------------
Authorizing committees Armed Services (Senate)
National Security (House)
Appropriations Defense (Senate)
subcommittees National Security (House)
Primary agency Department of Defense
Accounts Multiple
Spending type Discretionary
Budget subfunction Department of Defense--Military
Framework theme Reassess objectives
------------------------------------------------------------
Estimates of DOD's portion of the total federal funds to be spent on
defense conversion for fiscal years 1993 through 1997 are increasing.
However, we found no evidence that (1) the level of spending is
appropriate in light of other government programs that support
similar purposes and (2) the private economy has not already
responded to the need for which these funds were authorized and
appropriated. Consequently, the Congress may wish to slow DOD's
spending in this area.
The President's defense conversion initiative, announced on March 11,
1993, totaled $19.6 billion over 5 years; DOD's portion was 42
percent. The administration's February 1994 estimate of the cost of
the initiative was $21.6 billion; DOD's portion has increased to 59
percent. A study for DOD's 1993 Defense Conversion Commission
identified 116 other federal or state programs, not classified as
defense conversion, that could help ease the impact of defense
downsizing. These programs cost about $24 billion in fiscal year
1993. Other related programs include federal activities to develop
advanced industrial technology with costs of about $10 billion in
fiscal year 1994.
The United States is now in the tenth year of defense downsizing and
many firms, individuals, and communities who were adversely affected
may have already responded. GAO reports show that overall, savings
from slowing defense conversion spending would depend on the programs
and activities affected. As an illustrative example, the
Congressional Budget Office estimates that if the Technology
Reinvestment Program, one component of defense conversion spending,
was eliminated beginning in fiscal year 1996, the following savings
could be achieved.
Five-year Savings
(Dollars in millions)
FY96 FY97 FY98 FY99 FY00
-------------------- ------ ------ ------ ------ ------
Savings from the 1995 Defense Plan
------------------------------------------------------------
Budget authority 650 680 700 730 750
Outlays 280 560 650 690 720
------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:17.1
Defense Conversion: Capital Conditions Have Improved for Small- and
Medium-Sized Firms (GAO/NSIAD-94-224, July 21, 1994).
Defense Conversion: Status of Funding and Spending
(GAO/NSIAD-94-218BR, June 30, 1994).
Defense Conversion: Slow Start Limits Spending (GAO/NSIAD-94-72,
January 25, 1994).
GAO CONTACT
---------------------------------------------------- Appendix III:17.2
David E. Cooper, (202) 512-4587
OPTION:
IMPROVE CONTROLS OVER PAYMENTS
TO DEFENSE CONTRACTORSIMPROVE
CONTROLS OVER PAYMENTS TO
DEFENSE CONTRACTORS
------------------------------------------------------ Appendix III:18
------------------------ ----------------------------------
Authorizing committees Armed Services (Senate)
National Security (House)
Appropriations Defense (Senate)
subcommittees National Security (House)
Primary agency Department of Defense
Accounts Multiple
Spending type Discretionary
Budget subfunction Department of Defense--Military
Framework theme Improve efficiency
------------------------------------------------------------
Weak financial controls have resulted in millions of dollars of
incorrect payments being made by the Defense Finance and Accounting
Service (DFAS), the principal contract-paying activity of the
Department of Defense. During a 6-month period, DFAS processed $751
million in checks from defense contractors. GAO researched checks
totaling $392 million and found that $305 million, 78 percent,
represented overpayments by the government. Overpayments resulted
from DFAS making duplicate payments and paying invoices without
considering previous progress payments.
Contractors, rather than DFAS' controls, detected most overpayments.
GAO work shows that this increases the risk that losses will result
from undetected or unreturned payments. Overpayments cost the
government thousands of dollars of interest each day; underpayments
are also costly as Defense is required to pay interest on valid
invoices that are paid late.
Defense is working to strengthen its existing internal control
procedures to prevent overpayments and detect them more rapidly when
they do occur. Initiatives are also underway to reform and
streamline the complex regulatory policies and procedures that affect
contract payments. GAO believes, however, that the large dollar
amounts at risk warrant DOD's viewing the need for corrective actions
with an increased sense of urgency.
CBO agrees that stronger internal controls can reduce costs from
over- and underpayments to contractors. However, savings depend on
the specific changes in control systems that would be required and
their likely effects.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:18.1
DOD Procurement: Overpayments and Underpayments at Selected
Contractors Show Major Problem (GAO/NSIAD-94-245, August 5, 1994).
DOD Procurement: Millions in Overpayments Returned by DOD
Contractors (GAO/NSIAD-94-106, March 14, 1994).
GAO CONTACT
---------------------------------------------------- Appendix III:18.2
David E. Cooper, (202) 512-4587
OPTION:
DEFENSE INVENTORIESDEFENSE
INVENTORIES
------------------------------------------------------ Appendix III:19
------------------------ ----------------------------------
Authorizing committees Armed Services (Senate)
National Security (House)
Appropriations Defense (Senate)
subcommittees National Security (House)
Primary agency Department of Defense
Accounts Multiple
Spending type Discretionary
Budget subfunction Department of Defense--Military
Framework theme Improve efficiency
------------------------------------------------------------
Over 100 GAO reports have pointed out DOD inventory management
problems and have shown that DOD has continually bought and stored
items that greatly exceeded its operational and war reserve needs.
Systemic problems in determining requirements and inadequate
financial accountability and control have contributed to poor
inventory management practices. Further, DOD's culture has
traditionally emphasized overbuying and placed little value on
economy and efficiency, causing unneeded items to pile up in
warehouses. Force reductions and base closures will only compound
the situation and result in additional unneeded inventory.
DOD has been slow to implement private sector practices that could
reduce inventory costs. In this regard, the Defense Logistics Agency
has recently begun conducting pilot programs to demonstrate the
applicability of commercial practices and to tailor changes required
in each of its facilities so that the successful results of the
programs could be applied in supply and distribution.
Systemic reforms--such as improving the way inventory requirements
are determined, using commercial inventory management practices, and
changing financial management policies and practices--are needed to
achieve further reductions in DOD's budget requirements. GAO
estimates that, as of September 1993, only about half of DOD's $77.5
billion in inventory was needed to be on hand to support current
operations and war reserves. GAO presents several specific options
relating to DOD inventories. See options "Use Prime Vendors to
Supply High-Volume Clothing and Textile Items," "Use of Innovative
Commercial Practices to Supply Electronics Items," "Reduce Army
Inventories of Spare and Repair Parts at Divisions," and "Improved
Material Management Can Reduce Shipyard Costs."
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:19.1
Commercial Practices: DOD Could Reduce Electronics Inventories by
Using Private Sector Techniques (GAO/NSIAD-94-110, June 29, 1994).
Commercial Practices: Leading-Edge Practices Can Help DOD Better
Manage Clothing and Textile Stocks (GAO/NSIAD-94-64, April 13, 1994).
Commercial Practices: DOD Could Save Millions by Reducing
Maintenance and Repair Inventories (GAO/NSIAD-93-155, June 7, 1993).
DOD Food Inventory: Using Private Sector Practices Can Reduce Costs
and Eliminate Problems (GAO/NSIAD-93-110, June 4, 1993).
Defense Transportation: Commercial Practices Offer Improvement
Opportunities (GAO/NSIAD-94-26, November 26, 1993).
Defense Inventory: Top Management Attention Is Crucial
(GAO/NSIAD-90-145, March 26, 1990).
GAO CONTACT
---------------------------------------------------- Appendix III:19.2
OPTION:
USE PRIME VENDORS TO SUPPLY
HIGH-VOLUME CLOTHING AND
TEXTILE ITEMS USE PRIME VENDORS
TO SUPPLY HIGH-VOLUME CLOTHING
AND TEXTILE ITEMS
------------------------------------------------------ Appendix III:20
------------------------ ----------------------------------
Authorizing committees Armed Services (Senate)
National Security (House)
Appropriations Defense (Senate)
subcommittees National Security (House)
Primary agency Department of Defense
Accounts Multiple
Spending type Discretionary
Budget subfunction Department of Defense--Military
Framework theme Improve efficiency
------------------------------------------------------------
The Department of Defense (DOD) spends over a billion dollars for
clothing and textile items sold to military service customers,
primarily the services' 14 recruit induction centers and over 300
military exchange stores.
GAO has reported that while private sector companies are cutting
costs by minimizing inventories, DOD continues to store redundant
levels of clothing and textile inventories throughout its wholesale
and retail system. Much of this inventory is aged; for about 26
percent of the items, DOD had 10 years of supply on hand. To
maintain these stocks, DOD employs a large operations infrastructure
and thus incurs unnecessary inventory storage and handling costs.
Many private sector firms and some federal agencies with uniformed
employees are relying on prime vendors to manage their clothing
inventories. Prime vendors provide timely and direct delivery
between customers and suppliers, and order additional stock from
manufacturers on short notice, with quick turnaround, to minimize
inventory holding costs and improve customer service. DOD plans to
implement a prime vendor program at recruit induction centers
beginning in fiscal year 1995. GAO believes that substantial
opportunities exist to reduce DOD annual expenditures on clothing and
textile items by adopting best commercial practices on a wide-scale
basis, CBO cannot develop a 5-year savings estimate for this option
at this time.
RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:20.1
Commercial Practices: Leading-Edge Practices Can Help DOD Better
Manage Clothing and Textile Stocks (GAO/NSIAD-94-64, April 13, 1994).
GAO CONTACT
---------------------------------------------------- Appendix III:20.2
OPTION:
RESTRUCTURE DEFENSE
TRANSPORTATIONRESTRUCTURE
DEFENSE TRANSPORTATION
------------------------------------------------------ Appendix III:21
------------------------ ----------------------------------
Authorizing committees Armed Services (Senate)
National Security (House)
Appropriations Defense (Senate)
subcommittees National Security (House)
Primary agency Department of Defense
Accounts Multiple
Spending type Discretionary
Budget subfunction Department of Defense--Military
Framework theme Improve efficiency
------------------------------------------------------------
Numerous studies by DOD, presidential commissions, and others have
reported that the structure of the defense transportation system is
fragmented and inefficient. Traffic management processes were
developed independently for each mode of transportation, and each
supported with independently developed automated systems. GAO
believes that DOD needs to better integrate traffic management and to
provide more effective support, at lower cost, both in peace and in
war.
In 1992, DOD designated the U.S. Transportation Command (USTRANSCOM)
the single DOD manager for defense transportation in peace and war.
However, GAO work shows that the extensive field organization and
multiple component command responsibilities continue to exist.
USTRANSCOM and the services also continue to support multiple
independent automated transportation systems. Savings could be
achieved by restructuring the traffic management infrastructure,
including the implementation of a 1988 proposal by a DOD task force
to consolidate the individual headquarters commands. While CBO
agrees that savings would result from implementation of this option,
it cannot develop a 5-year savings estimate until numerous variables,
such as the extent of consolidation and the impact on command and
support structures, are determined.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:21.1
Defense Transportation: Commercial Practices Offer Improvement
Opportunities (NSIAD-94-26, November 26, 1993).
Defense Transportation: Ineffective Oversight Contributes to Freight
Losses (NSIAD-92-96, June 18, 1992).
Defense Reorganization: DOD's Efforts to Streamline the
Transportation Command (NSIAD-91-36BR, October 26, 1990).
GAO CONTACT
---------------------------------------------------- Appendix III:21.2
Donna M. Heivilin, (202) 512-8412
OPTION:
REDUCE EXCESS CAPACITY AND
INCREASE COST-EFFECTIVENESS OF
DEPOT MAINTENANCE PROGRAMREDUCE
EXCESS CAPACITY AND INCREASE
COST-EFFECTIVENESS OF DEPOT
MAINTENANCE PROGRAM
------------------------------------------------------ Appendix III:22
------------------------ ----------------------------------
Authorizing committees Armed Services (Senate)
National Security (House)
Appropriations Defense (Senate)
subcommittees National Security (House)
Primary agency Department of Defense
Accounts Multiple
Spending type Discretionary
Budget subfunction Department of Defense--Military
Framework theme Improve efficiency
------------------------------------------------------------
DOD's annual $15 billion depot maintenance program provides for major
overhaul of parts, rebuilding parts and end items, modifying systems
and equipment by applying new or improved components, and
manufacturing parts unavailable from the private sector. This work
is accomplished by thousands of commercial contractors as well as by
DOD employees in large industrial depots maintained by the military
departments. Factors such as threat changes, new war-fighting plans,
force structure reductions, and increased reliability and
maintainability of many military systems have significantly reduced
depot maintenance requirements over the past few years. The
department has been struggling to implement initiatives to (1)
identify what maintenance should be conducted at depots and what
should be conducted in operational units, (2) cost-effectively
allocate depot maintenance workload between the public and private
sectors, (3) downsize the military depot maintenance system\1 to
reduce excess capacity, and (4) implement a cost-effective approach
for managing DOD's depot management programs, systems, and
facilities. Changes in several areas could improve the
cost-effectiveness of the DOD depot maintenance program.
First, the current DOD depot management structure is not conducive to
making interservicing decisions that are essential to developing a
more efficient and effective depot maintenance system. Several prior
GAO studies have discussed this problem in detail. By consolidating
the management of the depot maintenance program in a single DOD
agency or command, the department would produce the greatest
opportunity for efficiency and matching depot capacity with future
requirements.
Second, legislation that prohibits the military departments from
contracting out more than 40 percent of their depot maintenance work
to the private sector may preclude the most cost-effective allocation
of workload. Furthermore, since statistics gathered regarding this
workload allocation are inconsistent among the services and between
the public and private sector, DOD's analysis of the so-called 60-40
split between the public and private sector is not meaningful. The
Congress may wish to consider legislation eliminating the 60-40
requirement and providing that DOD assign depot work to the public or
private sector based on merit-based criteria that includes industrial
base, readiness, and core requirements as well as cost.
CBO cannot develop a 5-year savings estimate at this time. The
magnitude of savings would depend on the resulting structure and size
of the depot maintenance system and workload split between the
private and public sectors.
--------------------
\1 With full implementation of currently approved base realignment
and closure (BRAC) decisions, the number of military depots will be
reduced to 24, and more closures are expected to be announced as a
part of the 1995 BRAC process.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:22.1
Navy Maintenance: Assessment of the Public and Private Shipyard
Competition Program (GAO/NSIAD-94-184, May 25, 1994).
Correspondence to the Chairman, Subcommittee on Readiness, Committee
on Armed Services, July 28, 1994 (follow-up to April 12, 1994, Depot
Maintenance Testimony).
Depot Maintenance: Issues in Allocating Workload Between the Public
and Private Sectors (GAO/T-NSIAD-94-161, April 12, 1994).
Depot Maintenance: Issues in Management and Restructuring to Support
a Downsized Military (GAO/T-NSIAD-93-13, May 6, 1993).
GAO CONTACT
---------------------------------------------------- Appendix III:22.2
Donna M. Heivilin, (202) 512-8412
OPTION:
USE OF INNOVATIVE COMMERCIAL
PRACTICES TO SUPPLY ELECTRONICS
ITEMS TO MAINTENANCE AND REPAIR
FACILITIESUSE OF INNOVATIVE
COMMERCIAL PRACTICES TO SUPPLY
ELECTRONICS ITEMS TO
MAINTENANCE AND REPAIR
FACILITIES
------------------------------------------------------ Appendix III:23
------------------------ ----------------------------------
Authorizing committees Armed Services (Senate)
National Security (House)
Appropriations Defense (Senate)
subcommittees National Security (House)
Primary agency Department of Defense
Accounts Multiple
Spending type Discretionary
Budget subfunction Department of Defense--Military
Framework theme Improve efficiency
------------------------------------------------------------
The Defense Logistics Agency (DLA) manages over 1 million electronics
items, such as resistors, fuses, and switches. It stores this
inventory, valued at over $2 billion, at 28 distribution depots and
other storage locations. This large level of inventory reflects
DLA's practice of buying and storing electronics supplies to ensure
they are available to customers--sometimes several years in advance
of when the supplies are actually needed. The turnover of DLA's
electronics inventory is slow. In fiscal year 1993, the wholesale
inventory of such items would turn over once every 4 years. In
comparison, private sector suppliers often turn their stock over 4
times a year.
Many private sector companies have adopted modern inventory
management practices, including long-term relationships with
suppliers, direct delivery programs, and direct communication
channels between suppliers and end users. With these practices,
companies do not store supplies at intermediate handling and storage
locations, as DOD does. Instead, they arrange for suppliers to
deliver inventory items directly to the end users facility close to
the time when the items are needed. The result is a reduction in
inventories and related holding costs as well as improved customer
service.
DLA has initiated several programs to adopt commercial practices for
electronics items, but overall progress is slow and projected results
are limited. However, DLA recently initiated a study to examine the
feasibility of using "supplier parks" at military industrial
facilities--a successful technique currently in use by progressive
private firms. Budgetary savings would result if DLA managed
electronics inventories in this manner.
GAO believes that substantial opportunities exist to reduce DOD
expenditures on electronics items by adopting best commercial
practices on a wide-scale basis. CBO cannot develop a 5-year savings
estimate for this option at this time.
RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:23.1
Commercial Practices: DOD Could Reduce Electronics Inventories by
Using Private Sector Techniques (GAO/NSIAD-94-110, June 29, 1994).
GAO CONTACT
---------------------------------------------------- Appendix III:23.2
Donna M. Heivilin, (202)512-8412
OPTION:
CONSOLIDATE THE SEPARATE
MILITARY EXCHANGE
STORESCONSOLIDATE THE SEPARATE
MILITARY EXCHANGE STORES
------------------------------------------------------ Appendix III:24
------------------------ ----------------------------------
Authorizing committees Armed Services (Senate)
National Security (House)
Appropriations Defense (Senate)
subcommittees National Security (House)
Primary agency Department of Defense
Accounts Multiple
Spending type Discretionary
Budget subfunction Department of Defense--Military
Framework theme Improve efficiency
------------------------------------------------------------
GAO reviewed the "morale, welfare, and recreation (MWR)" program--a
$12 billion dollar enterprise that provides service members, their
dependents, and eligible civilians with an affordable source of goods
and services like those available to civilians--and found that
revenue generated by the MWR activities is likely to decrease in the
1990's because of the downsizing of forces and increasing private
sector competition. Appropriated funds--which now constitute 10
percent of MWR funding--are also expected to decline as overall
budgets decline.
Exchange stores are the largest producer of MWR revenue. DOD's
decentralized approach to managing the MWR program will not work well
in this environment. Since 1968, studies by GAO, DOD, and others
have recommended the consolidation of exchanges into a single entity.
Each study predicted financial benefits could be achieved through
consolidation. While the Army and Air Force exchanges have been
consolidated, the Navy and Marine Corps retain independent exchanges.
Further consolidations could achieve additional savings. CBO cannot
develop a 5-year savings estimate until numerous variables, such as
the extent of consolidation, are determined.
RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:24.1
Morale, Welfare, and Recreation: Declining Funds Require DOD to Take
Action (GAO/NSIAD-94-120, February 28, 1994).
GAO CONTACT
---------------------------------------------------- Appendix III:24.2
Donna M. Heivilin, (202) 512-8412
OPTION:
COPAYMENTS FOR CARE IN MILITARY
HOSPITALS COPAYMENTS FOR CARE
IN MIL