Acquisition Reform

Although it continues to support the Defense Department's (DOD) efforts to reform its acquisition processes, GAO raises concerns about the extent to which cost reductions from acquisition reform that the military has reported will be available to fund DOD's modernization program in the near term. Of the $29 billion in estimated cost reductions reported by the military, GAO found that only $7.2 billion, or 25 percent of the reductions, are expected to occur between 1995 and 2002. Most of the remaining $21.8 billion reported by the military are reductions that either occurred before 1995 or are expected to occur after fiscal year 2002. A large portion of the $7.2 billion has been used to meet needs within the program generating the reduction. GAO also found that acquisition reform savings may be offset by cost increases elsewhere in the programs. Consequently, few funds will be available for other DOD acquisition programs.

GAO noted that: (1) while GAO continues to support the Department of Defense's (DOD) effort to reform its acquisition processes, GAO's review raises concerns about the extent to which cost reductions from acquisition reform that the services have reported will be available to fund DOD's modernization program in the near term; (2) of the $29 billion in estimated cost reductions reported by the services, GAO's analysis shows that only $7.2 billion, or 25 percent of the reductions, are expected to occur between 1995 and 2002 from an approved budget; (3) most of the remaining $21.8 billion reported by the services are reductions that either occurred before 1995 or are anticipated to occur beyond fiscal year (FY) 2002; (4) a significant portion of the $7.2 billion had been used to meet needs within the program generating the reduction; (5) acquisition reform cost reductions may be offset by cost increases elsewhere in the programs; (6) GAO's analysis of 33 of the 63 programs reporting acquisition reform cost reductions shows that after taking into account these reductions and after adjusting for inflation and quantities of systems being bought, total acquisition costs for these programs increased an average of 2 percent; (7) this suggests that the estimated cost reductions from acquisition reform are being offset by cost increases elsewhere in the programs or reinvested within the programs; (8) consequently, few funds will be available for other DOD acquisition programs; and (9) GAO excluded classified programs and others that could not be fairly compared to the baseline from its analysis.