Differing Scope and Methodology in GAO and University of California Reports Account for Variations in Cost Estimates for Homosexual Conduct Policy
Gao ID: GAO-06-909R July 13, 2006
Congress requested information concerning differences in cost estimates for implementing the Department of Defense's (DOD) homosexual conduct policy reported by GAO and a University of California Blue Ribbon Commission (Commission). In February 2005, we estimated that the cost to recruit and train replacements for enlisted servicemembers separated under the policy from fiscal years 1994 through 2003 was about $190.5 million. A year later, the Commission estimated that the cost was at least $363.8 million over the same time period--91 percent more than our estimate. This report answers the following questions: (1) What factors contributed to the difference in estimated costs reported by GAO and the Commission? (2) What factors accounted for the difference in estimated enlistee training costs in our 1998 and 2005 reports?
Over 90 percent of the difference between the GAO and Commission cost estimates was in enlistee training costs. Our 2005 report estimated the cost to train replacements for servicemembers separated under the policy over the 10-year period at $95.1 million, while the Commission's estimate was $252.4 million. The differences in estimates are primarily attributable to two items. First, our estimate focused largely on the direct and incremental training costs associated with the specific occupations of servicemembers separated under the policy for the applicable years. The Commission based its estimate on average training costs for all occupations indexed for inflation. Secondly, the Commission's estimate included a significant overhead allocation for things like DOD's overall training infrastructure. As noted below, we do not believe that allocating such fixed costs is appropriate since they represent sunk costs. Additionally, the Commission's estimate included training costs for the Marines, individuals in medical occupations, officers, and out-processing costs for separation travel. As we stipulated in our 2005 report, we did not include costs for the Marines because they were not capable of providing costs by occupational specialty. Additionally, the services could not reasonably estimate training costs for medical personnel and officers, and we did not consider separation travel costs in our analysis. In view of all the above, we stand behind our estimate of $95.1 million. Although our 1998 and 2005 reports both dealt, in part, with enlistee training costs, the reports answered different questions, addressed different populations, covered different time frames, and used different parameters to compute training cost estimates. In 1998, we estimated the average cost of training an enlistee (basic and initial skills training) at $28,800, which the Commission converted to $33,372 in 2004 dollars in its analysis of the cost of DOD's homosexual conduct policy. The estimated per-member training cost for the occupations performed by servicemembers separated under the policy in our 2005 report was $18,000 for the Navy, $7,400 for the Air Force, and $6,400 for the Army. These estimated costs are significantly lower than the Commission's estimate because they are primarily based on direct and incremental training costs.
GAO-06-909R, Differing Scope and Methodology in GAO and University of California Reports Account for Variations in Cost Estimates for Homosexual Conduct Policy
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Homosexual Conduct Policy' which was released on July 13, 2006.
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July 13, 2006:
The Honorable Edward M. Kennedy:
United States Senate:
Subject: Differing Scope and Methodology in GAO and University of
California Reports Account for Variations in Cost Estimates for
Homosexual Conduct Policy:
Dear Senator Kennedy:
You requested information concerning differences in cost estimates for
implementing the Department of Defense's (DOD) homosexual conduct
policy reported by GAO and a University of California Blue Ribbon
Commission (Commission). In February 2005,[Footnote 1] we estimated
that the cost to recruit and train replacements for enlisted
servicemembers separated under the policy from fiscal years 1994
through 2003 was about $190.5 million. A year later,[Footnote 2] the
Commission estimated that the cost was at least $363.8 million over the
same time period--91 percent more than our estimate. This report
answers the following questions: (1) What factors contributed to the
difference in estimated costs reported by GAO and the Commission? (2)
What factors accounted for the difference in estimated enlistee
training costs in our 1998[Footnote 3] and 2005 reports?
Difference in GAO and Commission Cost Estimates:
Over 90 percent of the difference between the GAO and Commission cost
estimates was in enlistee training costs. Our 2005 report estimated the
cost to train replacements for servicemembers separated under the
policy over the 10-year period at $95.1 million, while the Commission's
estimate was $252.4 million. The differences in estimates are primarily
attributable to two items. First, our estimate focused largely on the
direct and incremental training costs associated with the specific
occupations of servicemembers separated under the policy for the
applicable years. The Commission based its estimate on average training
costs for all occupations indexed for inflation. Secondly, the
Commission's estimate included a significant overhead allocation for
things like DOD's overall training infrastructure. As noted below, we
do not believe that allocating such fixed costs is appropriate since
they represent sunk costs. Additionally, the Commission's estimate
included training costs for the Marines, individuals in medical
occupations, officers, and out-processing costs for separation travel.
As we stipulated in our 2005 report, we did not include costs for the
Marines because they were not capable of providing costs by
occupational specialty. Additionally, the services could not reasonably
estimate training costs for medical personnel and officers, and we did
not consider separation travel costs in our analysis. In view of all
the above, we stand behind our estimate of $95.1 million.
As we disclosed in our 2005 report, for privacy reasons, we did not
review separated servicemembers' personnel records, including their
training histories. Instead, we used military specialty codes[Footnote
4] to match separated servicemembers to specific occupations. Relevant
factors regarding this population--such as occupation, rank, length of
service, and skill level--contributed to enlistee training cost
averages for this finite group of individuals that were much lower than
DOD-wide training cost averages for all enlistees. For example, over
one-half of separated servicemembers had the rank of E2 or below and
about one-third served in the military for 6 months or less, thereby
limiting the amount of training completed. Additionally, about 30
percent of servicemembers separated over the 10-year period were in the
occupational category "Not Occupationally Qualified, General,"
indicating that they had not completed occupational training, been
assigned to an occupation, or allowed to perform in an occupation on
their own. We relied on the expertise and knowledge of the training
commands in each service for case-by-case estimates of per-member
training costs for separated servicemembers. For example,
servicemembers classified by DOD as "Not Occupationally Qualified,
General" were given credit for completing basic training in our
analysis. Also, the training costs for each occupation were weighted by
the number of servicemembers discharged in each occupation. As a
result, occupations that had more servicemembers received more weight.
The Commission used in its analysis a DOD-wide training cost estimate
from our 1998 report for the average cost of basic plus initial skills
training for all enlistees in all occupations. Because this estimate
includes costs for the entire training infrastructure, its use results
in a much higher estimate. Infrastructure costs remain constant
regardless of the number of individuals trained and represent sunk
costs that exist whether enlistees complete their contract terms or
not. The Commission also computed the value lost to the military by
calculating a monthly return on the military's investment in training
for service after training and before discharge. The Commission
reported enlisted training costs of $331.9 million, which were offset
by their estimated return on investment of $79.5 million; therefore,
the cost to the military was $252.4 million.
Difference in Training Cost Estimates in Our 1998 and 2005 Reports:
Although our 1998 and 2005 reports both dealt, in part, with enlistee
training costs, the reports answered different questions, addressed
different populations, covered different time frames, and used
different parameters to compute training cost estimates. In 1998, we
estimated the average cost of training an enlistee (basic and initial
skills training) at $28,800, which the Commission converted to $33,372
in 2004 dollars in its analysis of the cost of DOD's homosexual conduct
policy. The estimated per-member training cost for the occupations
performed by servicemembers separated under the policy in our 2005
report was $18,000 for the Navy, $7,400 for the Air Force, and $6,400
for the Army. These estimated costs are significantly lower than the
Commission's estimate because they are primarily based on direct and
incremental training costs.
Our 1998 estimate was designed to determine the extent of DOD's
investment in recruiting and training first-term enlistees. The
estimate includes total infrastructure costs for all services combined
and was intended to demonstrate the magnitude of the cost of training
all recruits (hundreds of thousands each year) and the potential loss
when attrition rates are high. Average enlistee training costs were
computed as a straight average by dividing the total costs of training
by the total number of new enlistees. Including total infrastructure
costs was not appropriate for our 2005 estimate since individuals
separated for homosexual conduct represent such a small proportion of
the active force (about 950 per year over the 10-year period). Our 2005
estimates were designed to identify costs over a 10-year period for
training replacements by occupational specialty for those separated
under the policy.
We are sending copies of this report to the Secretary of Defense and
other interested parties. We will provide copies to others upon
request. In addition, the report is available at no charge on the GAO
Web site at [Hyperlink, http://www.gao.gov].
If you or your staff have any questions about this report, please
contact Derek Stewart at (202) 512-5559 or stewartd@gao.gov. Contact
points for our Offices of Congressional Relations and Public Affairs
may be found on the last page of this report.
Sincerely yours,
Signed by:
David M. Walker:
Comptroller General of the United States:
(350839):
FOOTNOTES
[1] GAO, Military Personnel: Financial Costs and Loss of Critical
Skills Due to DOD's Homosexual Conduct Policy Cannot Be Completely
Estimated, GAO-05-299 (Washington, D.C.: Feb. 23, 2005).
[2] University of California Blue Ribbon Commission, "Financial
Analysis of 'Don't Ask, Don't Tell': How much does the gay ban cost?"
(Santa Barbara, Calif.: Feb. 14, 2006).
[3] GAO, Military Attrition: Better Data, Coupled With Policy Changes,
Could Help the Services Reduce Early Separations, GAO/NSIAD-98-213
(Washington, D.C.: Sept. 15, 1998).
[4] Military specialty codes are elements of the enlisted
classification structure that identify an individual position or group
of closely related positions by service on the basis of the duties
involved. The term used to designate a military specialty differs
according to the military service concerned, such as "military
occupational specialty," used by the Army and Marine Corps; "Air Force
specialty," used by the Air Force; and "Navy enlisted classification,"
used by the Navy.
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