Future Years Defense Program

The House Armed Services Committee report on the National Defense Authorization Act for Fiscal Year 1999 noted that the military's earlier reform initiatives had not produced the expected savings and had created problems because of premature budget reductions. Accordingly, the report asked GAO to provide answered to several questions about the support for savings and personnel reductions found in the Defense Department's (DOD) fiscal year 1999 budget request and out-year budget plans. This report responds to the following questions: (1) What savings in DOD's fiscal year 1999-2003 Future Years Defense Program that were the results of DOD's Defense Reform Initiatives? (2) To what extent were the savings and personnel reductions from competitive sourcing in the 1999-2003 FYDP based on ongoing or planned studies of functions specifically identified under Office of Management and Budget Circular A-76, and what percentage of the current costs of performing those functions were included from the projected savings from these studies? (3) Did DOD components outsource activities that included inherently governmental functions, without allowing civilian employees to compete under Circular A-76 procedures, or without following the study and notification requirements of 10 U.S.C. 2461?

GAO noted that: (1) DOD expects savings from individual DRIs, but has not incorporated specific savings in the 1999-2003 FYDP from these initiatives, except in the areas of competitive sourcing and estimates relating to future base realignment and closure (BRAC) decisions; (2) DOD's 1999-2003 FYDP incorporated $6.2 billion of estimated savings from competitive sourcing between FY 1997 and 2003, but these estimated savings do not fully account for up-front investment costs, which could reduce the amount of actual savings in the short term; (3) the FYDP does provide a fuller estimate of the impact of investment costs associated with BRACs; (4) while DOD has requested additional BRAC rounds, Congress has not authorized them; (5) the Office of the Secretary of Defense expects DRIs to reduce personnel requirements but has not required the services to link specific reductions with individual initiatives; (6) savings from competitive sourcing reflected in the 1999 FYDP were not linked to specific functions under study or targeted for future studies; (7) in addition, DOD does not yet have the systems in place that can provide reliable cost information needed to precisely identify savings; (8) consequently, it is not feasible to accurately identify the current costs of functions to be studied or the potential savings as a percentage of these costs; (9) according to DOD, savings estimates incorporated in the FYDP represented broad projections based on the numbers of positions expected to be studied and historic savings data; (10) GAO's work has shown that historic savings estimates may have important limitations and may not accurately indicate likely current and future savings; (11) study plans of most DOD components have evolved over time, but in many cases they have not linked positions to be studied to specific functions and locations; (12) firm savings estimates probably will not be possible until individual studies are completed; (13) even then, these estimates would be subject to change; (14) procurement and commercial activities data systems do not identify the extent to which DOD components may be outsourcing functions without complying with Circular A-76 procedures or 10 U.S.C. 2461 congressional reporting requirements; and (15) such cases can be identified only when they are specifically raised by affected parties.