Consistent and Uniform Treatment of Inflation Needed in Program Cost Estimates Provided to the Congress

Inflation is continually cited as a leading cause of tremendous cost growth in Government programs in recent years. The practices followed by selected Government agencies in providing for inflation in the cost estimates of long-term major programs were examined because the long-term programs proposed by the departments and agencies are not costed on a consistent and uniform basis, and it is impossible for the Congress to compare programs.

Office of Management and Budget (OMB) and agency procedures do not result in uniform treatment of expected inflation or price changes in the budget and cost estimates provided to Congress. The use of uniform inflation criteria would enable Congress to make comparisons of program budgets. OMB could achieve this by: limiting the number of inflation indexes used, issuing explicit guidelines for adjusting estimates to account for inflation during the budget processing cycle, requiring annually recosted long-term program estimates consistent with prevailing prices, and requiring agencies to identify separately the effect of inflation on future program costs. An alternative would be to permit all agencies to include inflation in their long-term program cost estimates as the Department of Defense does.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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