Quadrennial Defense Review

Status of Efforts to Implement Personnel Reductions in the Army Materiel Command Gao ID: NSIAD-99-123 March 31, 1999

The Report of the Quadrennial Defense Review, issued in May 1997, directed the Army to reduce personnel to help free up funds for forces modernization. The Army expected that its Materiel Command could significantly reduce the number of its civilian personnel by relying more on the private sector. Congress, however, has raised concerns about the extent of reductions in the Army Materiel Command over the years. This report discusses (1) the Army Materiel Command's plans and time frame for achieving the reductions, (2) the projected cost savings from such reductions, and (3) the cited impacts the reductions will have on workload and readiness.

GAO noted that: (1) AMC has identified various initiatives to eliminate 8,530 civilian positions by fiscal year (FY) 2004 as called for in the QDR; (2) the majority of the reductions are now based on planned organizational changes, operating efficiencies, and anticipated future workload decreases, with lesser emphasis on competitive sourcing studies than originally anticipated by the QDR; (3) about 20 percent of the reductions are expected to occur over the next 2 years, and actions are under way to achieve the majority of these reductions; (4) about 80 percent of the reductions are expected to occur in FY 2001 through FY 2004; (5) plans for some of these reductions are still being finalized and uncertainties exist about some of these plans; (6) the Army estimated that the personnel reductions in the Command would result in $1.4 billion in cumulative savings from FY 1999 through FY 2004 and $589 million in annual recurring savings thereafter; (7) GAO's analysis indicates that estimated savings will be less than anticipated both in the short and long term; (8) the Army did not account for all of the investment costs that would be required to achieve the savings; (9) the Tank-Automotive and Armament Command estimated that about $35 million in investment costs were not included in the Army's analysis of projected savings; (10) also, the Army did not estimate all the personnel separation costs likely to be associated with implementing the reductions; (11) about $21 million in savings estimated for FY 2000 could be delayed because competitive sourcing studies are taking longer to complete and implement than planned; (12) the savings are overstated by an estimated $52 million at least through FY 2005 because the Army used higher than average civilian salary costs to compute its savings; (13) the long-term annual recurring savings to the Army are likely to be as much as 17 percent lower than expected since some planned personnel reductions reflect positions funded by non-Army organizations for work done on a reimbursable basis; (14) because most of the QDR reductions will occur between 2001 and 2004, much of the impact on workload and readiness is yet to be determined; (15) AMC officials, while expressing concerns about challenges they face in meeting the reductions, could not point to any significant adverse effects to date other than on employee morale; and (16) command officials stated that the ongoing reductions continue to have only marginal impacts on its operations, which they have dealt with so far through various reorganizations and reengineering actions.

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