Defense Management
Observations on DOD's FY 2009 Budget Request for Corrosion Prevention and Control Gao ID: GAO-08-663R April 15, 2008This letter formally responds to section 371 of the National Defense Authorization Act for Fiscal Year 2008. The act requires GAO to provide an analysis of the Department of Defense's (DOD) budget submission for corrosion control and prevention and a DOD report that was to be submitted with defense budget materials to the congressional defense committees within 60 days after submission of the budget for a fiscal year. On April 3, 2008, we provided the briefing to staff of Congressional committees to satisfy the mandate and 60-day reporting requirement.
Section 371 of the National Defense Authorization Act for Fiscal Year 2008 requires the Secretary of Defense, for each budget for a fiscal year beginning with FY09, to submit, with defense budget materials, a report on: (1) funding requirements for DOD's long-term corrosion prevention and control strategy; (2) return on investment that would be achieved by implementing this strategy; (3) funds requested in the budget compared with funding requirements; and (4) an explanation if requirements are not fully funded in the budget. It also requires GAO to provide an analysis of DOD's budget submission for corrosion control and prevention and an analysis of the report described above to the congressional defense committees within 60 days after submission of the budget for a fiscal year. President's FY09 budget request includes about $14.1 million for the CPC PE. This amount excludes any funding that the military services may contribute. According to data provided by OSD, of the $14.1 million requested for FY09, about $10.7 million is expected to fund corrosion projects. The remaining $3.4 million is expected to fund corrosion activities. Activities may include such things as cost studies, development of a corrosion guidebook for acquisition programs, and training. In addition to the CPC PE funding provided by OSD, the military services provided an average of about $8.5 million for corrosion projects per year for FY06-08. Using DOD requirements data and overall ROI averages, we calculate that: (1) FY09 budget request, if approved, would result in a total ROI of $435 million; (2) If all FY09 validated requirements were funded, the total ROI would be $1.15 billion; and (3) Therefore, the total ROI for unfunded requirements--that is, projects and activities not included in the budget request--is $715 million ($1.15 billion minus $0.435 billion).
GAO-08-663R, Defense Management: Observations on DOD's FY 2009 Budget Request for Corrosion Prevention and Control
This is the accessible text file for GAO report number GAO-08-663R
entitled 'Defense Management: Observations on DOD's FY 2009 Budget
Request for Corrosion Prevention and Control' which was released on
April 15, 2008.
This text file was formatted by the U.S. Government Accountability
Office (GAO) to be accessible to users with visual impairments, as part
of a longer term project to improve GAO products' accessibility. Every
attempt has been made to maintain the structural and data integrity of
the original printed product. Accessibility features, such as text
descriptions of tables, consecutively numbered footnotes placed at the
end of the file, and the text of agency comment letters, are provided
but may not exactly duplicate the presentation or format of the printed
version. The portable document format (PDF) file is an exact electronic
replica of the printed version. We welcome your feedback. Please E-mail
your comments regarding the contents or accessibility features of this
document to Webmaster@gao.gov.
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed
in its entirety without further permission from GAO. Because this work
may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this
material separately.
GAO-08-663R:
United States Government Accountability Office:
Washington, DC 20548:
April 15, 2008:
Congressional Committees:
Subject: Defense Management: Observations on DOD's FY 2009 Budget
Request for Corrosion Prevention and Control:
This letter formally transmits the attached briefing in response to
section 371 of the National Defense Authorization Act for Fiscal Year
2008 (see enclosure 1). The act requires GAO to provide an analysis of
DOD's budget submission for corrosion control and prevention and a DOD
report that was to be submitted with defense budget materials to the
congressional defense committees within 60 days after submission of the
budget for a fiscal year. On April 3, 2008, we provided the briefing to
staff of your committees to satisfy the mandate and 60-day reporting
requirement.
We are sending copies of this letter to the appropriate congressional
committees. We are also sending copies to the Secretary of Defense; the
Deputy Secretary of Defense; the Under Secretary of Defense
(Comptroller); the Under Secretary of Defense (Acquisition, Technology,
and Logistics); the Secretaries of the Army, Navy, and Air Force; and
the Commandant of the Marine Corps. This letter will also be available
at no charge on our Web site at http://www.gao.gov. Should you or your
staff have any questions concerning this report, please contact me at
(202) 512-8365 or solisw@gao.gov. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last
page of this report. Key contributors to this report were Tom Gosling,
Assistant Director, and Allen Westheimer.
Signed by:
William M. Solis:
Director, Defense Capabilities and Management:
List of Congressional Committees:
The Honorable Carl Levin:
Chairman:
The Honorable John McCain:
Ranking Member:
Committee on Armed Services:
United States Senate:
The Honorable Daniel Inouye:
Chairman:
The Honorable Ted Stevens:
Ranking Member:
Subcommittee on Defense:
Committee on Appropriations:
United States Senate:
The Honorable Ike Skelton:
Chairman:
The Honorable Duncan L. Hunter:
Ranking Member:
Committee on Armed Services:
House of Representatives:
The Honorable John P. Murtha:
Chairman:
The Honorable C.W. Bill Young:
Ranking Member:
Subcommittee on Defense:
Committee on Appropriations:
House of Representatives:
[End of section]
Enclosure:
Observations on DOD‘s FY 2009 Budget Request for Corrosion Prevention
and Control:
Briefing for Congressional Defense Committees:
April 3, 2008:
Section 371 of the National Defense Authorization Act for Fiscal Year
2008[A]:
* Requires the Secretary of Defense, for each budget for a fiscal year
beginning with FY09, to submit, with defense budget materials, a report
on:
- Funding requirements for DOD‘s long-term corrosion prevention and
control strategy.
- Return on investment that would be achieved by implementing this
strategy.
- Funds requested in the budget compared with funding requirements.•An
explanation if requirements are not fully funded in the budget.
* Requires GAO to provide an analysis of DOD‘s budget submission for
corrosion control and prevention and an analysis of the report
described above to the congressional defense committees within 60 days
after submission of the budget for a fiscal year.
[A] Pub. L. No. 110-181, §371 (2008) amended 10 U.S.C. §2228 to
include, among other things, the reporting requirements for the
Secretary of Defense and the Comptroller General.
Engagement Objectives:
In response to the mandate, GAO:
1. Analyzed DOD‘s fiscal year 2009 budget request for OSD‘s Corrosion
Prevention and Control Program Element (CPC PE).
2. Compared the budget request with requirements and analyzed the
projected return on investment (ROI) for funded and unfunded
requirements.
3. Obtained information on DOD‘s process for developing its CPC PE
budget submission.This briefing is intended to satisfy the mandate to
review DOD‘s FY09 budget request for corrosion prevention and control.
Scope and Methodology:
* Scope: DOD's fiscal year 2009 budget submission and requirements for
the CPC PE.
* Methodology: Analyzed DOD budget and requirements data, as well as
corrosion strategy documents. We calculated the potential ROI for DOD‘s
funded and unfunded FY09 requirements based on DOD validated
requirements data and overall ROI averages. Interviewed officials at
the Under Secretary of Defense (Comptroller) and the Corrosion Policy
and Oversight Office, within the Under Secretary of Defense for
Acquisition, Technology, and Logistics (USD/ATL).
* Limitations/data reliability: DOD had not yet submitted its required
corrosion report. Also, we did not independently validate DOD‘s CPC
requirements or projected ROI.
Generally Accepted Government Auditing Standards (GAGAS) Statement:
We conducted this performance audit from February 2008 to April 2008 in
accordance with generally accepted government auditing standards. Those
standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
Objective 1: DOD‘s FY09 Budget Request for CPC PE:
President‘s FY09 budget request includes about $14.1 million for the
CPC PE. This amount excludes any funding that the military services may
contribute.
Table: CPC PE Funding (FY 2006-2009), Dollars in millions:
O&M:
FY06 (estimated): $8.136;
FY07 (estimated): $7,346;
FY08 (estimated): $7.869;
FY09 (requested): $8.962.
RDT&E:
FY06 (estimated): $7.402;
FY07 (estimated): $7.124;
FY08 (estimated): $18,917;
FY09 (requested): $5.102.
Total:
FY06 (estimated): $15.538;
FY07 (estimated): %14.460;
FY08 (estimated): $26.786;
FY09 (requested): $14.064.
[End of table]
According to data provided by OSD,of the $14.1 million requested for
FY09, about $10.7 million is expected to fund corrosion projects. The
remaining $3.4 million is expected to fund corrosion activities.
While DOD will not make final selections of CPC projects until summer
2008, examples of potential projects include:
* Air Force temporary corrosion barrier coatings;
* Army primer and topcoat powder coatings;
* Navy ultra high solids shipboard coatings;
* Army non-metallic cooling towers.
Activities may include such things as cost studies, development of a
corrosion guidebook for acquisition programs, and training.
In addition to the CPC PE funding provided by OSD, the military
services provided an average of about $8.5 million for corrosion
projects per year for FY06-08.
Table: Military Service Contributions for CPC PE Projects (FY06-08),
Dollars in millions:
Army:
FY06: $5.4;
FY07: $5.0;
FY08: $4.9;
3-year average: $5.1.
Navy:
FY06: $2.4;
FY07: $2.3;
FY08: $2.7;
3-year average: $2.5.
Air Force:
FY06: $1.6;
FY07: $1.2;
FY08: $0.1;
3-year average: $1.0.
Total:
FY06: $9.4;
FY07: $8.5;
FY08: $7.7;
3-year average: $8.5.
[End of table]
Objective 2: CPC Requirements and ROI:
* Corrosion office updates and validates requirements annually. The
office submitted FY09 requirements to USD/ATL in December 2007.
* DOD validated total CPC PE requirements of $33.8 million for FY09.
This amount includes $28.5 million for projects and $5.3 million for
activities.
* As part of the project selection process, DOD requires that an ’ROI“
cost-benefit analysis be submitted with project plans. Projects costs
are to consist of the up-front investment cost and annual operating and
support costs. Benefits are to consist of annual savings or cost
avoidance over the useful life of the project. As of June 2007,the ROI
calculations are required to use a net present value approach.
* ROI varies by individual project and activity and may span several
years. Based on historical averages for FY05-08, DOD calculates an
overall ROI of 40-1 for projects and 2-1 for activities.
Using DOD requirements data and overall ROI averages,[A] we calculate
that:
* FY09 budget request, if approved, would result in a total ROI of $435
million.
* If all FY09 validated requirements were funded, the total ROI would
be $1.15 billion.
* Therefore, the total ROI for unfunded requirements”that is, projects
and activities not included in the budget request”is $715 million
($1.15 billion minus $0.435 billion).
[A] We did not validate DOD‘s overall ROI averages. We noted that until
last year, DOD allowed the submission of project plans to include ROI
calculations that did not use a net present value approach in their ROI
calculations. Using this approach would inflate the ROI since the time-
value of costs and savings are not considered. However, DOD corrosion
officials told us that less than 5% of the projects did not use the net
present value ROI approach.
Objective 3: Process for Developing CPC PE Budget:
* According to USD/ATL, global commitments, constrained budgets, and
competing requirements preclude fully funding CPC requirements.
* 2006 Program Objective Memorandum (POM) cycle included about $14
million for the CPC PE in FY09. This funding level was set with the
expectation that the services would provide more CPC funding in their
budgets.
* Corrosion officials told us they submitted a $14.1 million budget
request in accordance with USD/ATL guidance capping FY09 funding
requests at POM levels.
* Comptroller officials told us that while program offices may consider
ROI benefits in developing budget submissions, requirements for systems
and services, rather than ROI, drive funding levels in DOD‘s annual
budget request.
Agency Views:
To obtain agency views, we discussed a draft of this briefing with
officials from the Corrosion Policy and Oversight Office. They
concurred with the facts presented. On the basis of their comments and
supporting documentation they provided, we modified the briefing
regarding their revised methodology for calculating ROI.
[End of enclosure]
GAO's Mission:
The Government Accountability Office, the audit, evaluation and
investigative arm of Congress, exists to support Congress in meeting
its constitutional responsibilities and to help improve the performance
and accountability of the federal government for the American people.
GAO examines the use of public funds; evaluates federal programs and
policies; and provides analyses, recommendations, and other assistance
to help Congress make informed oversight, policy, and funding
decisions. GAO's commitment to good government is reflected in its core
values of accountability, integrity, and reliability.
Obtaining Copies of GAO Reports and Testimony:
The fastest and easiest way to obtain copies of GAO documents at no
cost is through GAO's Web site [hyperlink, http://www.gao.gov]. Each
weekday, GAO posts newly released reports, testimony, and
correspondence on its Web site. To have GAO e-mail you a list of newly
posted products every afternoon, go to [hyperlink, http://www.gao.gov]
and select "E-mail Updates."
Order by Mail or Phone:
The first copy of each printed report is free. Additional copies are $2
each. A check or money order should be made out to the Superintendent
of Documents. GAO also accepts VISA and Mastercard. Orders for 100 or
more copies mailed to a single address are discounted 25 percent.
Orders should be sent to:
U.S. Government Accountability Office:
441 G Street NW, Room LM:
Washington, D.C. 20548:
To order by Phone:
Voice: (202) 512-6000:
TDD: (202) 512-2537:
Fax: (202) 512-6061:
To Report Fraud, Waste, and Abuse in Federal Programs:
Contact:
Web site: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm]:
E-mail: fraudnet@gao.gov:
Automated answering system: (800) 424-5454 or (202) 512-7470:
Congressional Relations:
Ralph Dawn, Managing Director, dawnr@gao.gov:
(202) 512-4400:
U.S. Government Accountability Office:
441 G Street NW, Room 7125:
Washington, D.C. 20548:
Public Affairs:
Chuck Young, Managing Director, youngc1@gao.gov:
(202) 512-4800:
U.S. Government Accountability Office:
441 G Street NW, Room 7149:
Washington, D.C. 20548:
