Several Issues Underscore Importance of Energy to DOD

Several issues, such as rising fuel costs, worldwide energy demand, and  the high fuel burden during operations, underscore the importance of  energy to DOD. Fuel costs for DOD are substantial and the volatility of  world oil prices will likely continue to affect the department. For example,  in fiscal year 2007, DOD reported that it consumed almost 4.8 billion  gallons of mobility fuel and spent $9.5 billion. Although fuel costs  represent less than 3 percent of the total DOD budget, they have a  significant impact on the department’s operating costs. DOD has estimated  that for every $10 increase in the price of a barrel of oil, DOD’s operating  costs increase by approximately $1.3 billion. Furthermore, during a 2007  military energy security forum, DOD officials discussed the possibility of  oil prices rising to as much as $200 a barrel if a major disruption were to  occur. Rising fuel costs may require DOD to make difficult trade-offs, such  as redirecting funds from ongoing programs to pay for needed fuel. In  addition, both the Army and Marine Corps have plans to grow their forces  over the next several years, which will inevitably require larger amounts of  fuel to sustain these forces and their weapons systems.
Other energy issues that are likely to affect DOD in the future are the  increased U.S. dependence on foreign oil, projected increases in the  worldwide demand for oil, and uncertainties about world oil supplies. In  2007, about 67 percent of the oil consumed in the United States was  imported, and the increased energy dependence on other countries raises  concern about instability in the Middle East and elsewhere. In addition,  the Department of Energy projects that worldwide oil demand will  continue to grow, reaching 118 million barrels per day in 2030, up from 84  million barrels per day in 2005. Although countries such as China and India  will generate much of this increased demand, the United States will remain  the world’s largest oil consumer. Moreover, more than 60 percent of world  oil reserves are in countries where relatively unstable political conditions  could constrain oil exploration and production. Furthermore, worldwide  supplies of oil from conventional sources remain uncertain. U.S. oil  production peaked around 1970, and worldwide production could peak  and begin to decline. Although there is great uncertainty about when this  might happen, most studies estimate that oil production will peak  sometime between now and 2040. These issues, as well as the increasing  threat of climate change, may lead to global instabilities that could require  DOD to conduct operations in some of these regions and protect oil supply  routes and critical infrastructure—all of which would ultimately lead to  increased fuel requirements for the department.
In addition, DOD’s high fuel requirements on the battlefield can place a  significant logistics burden on military forces, limit the range and pace of  operations, and add to mission risks. For example, for current operations,  the fuel logistics infrastructure requires, among other things, long truck  convoys that move fuel to forward-deployed locations while being  exposed to potential enemy attacks. Combatant commanders may also  face additional risks related to fuel disruptions in operations. For instance,  according to a U.S. Central Command official, changes in customs  procedures, truck driver strikes, refinery maintenance, road construction,  and holiday periods may close border crossings for long periods of time,  possibly resulting in the interruption of fuel supplies to forward-deployed  locations. Moreover, a 2007 LMI report stated that the department’s  increasing fuel demand limits its ability to establish a more mobile and  agile force.

	DOD and the Military Services Have Made Efforts to Reduce Mobility Energy Demand

DOD and the military services have made efforts to reduce mobility energy  demand for their forces and in their weapons systems. At the department  level, OSD created the DOD Energy Security Task Force in 2006— consisting of an integrated product team, several working groups, and a  senior steering group—to address long-term energy security concerns.  Among other activities, the task force is monitoring the progress of  selected military service-led research and development projects (see table  1) that have the potential for reducing mobility energy demand.
In addition to focusing on research and development initiatives, DOD has  recognized a need to factor energy efficiency considerations into its  acquisition process. In 2007, the Deputy Secretary of Defense included  energy in DOD’s list of the top 25 transformational priorities for the  department as part of its initiative to pursue targeted acquisition reforms.  Also in 2007, the Office of the Under Secretary of Defense for Acquisition,  Technology, and Logistics established a DOD policy to include the fully  burdened cost of fuel—that is, the total ownership cost of buying, moving,  and protecting fuel in systems during combat—for the acquisition of all  tactical systems that create a demand for energy. To incorporate the fully  burdened cost of energy into acquisition decisions, OSD initiated a pilot  program that includes three systems: the Army and Marine Corps’ Joint  Light Tactical Vehicle, the Navy’s new CG(X) cruiser, and the Air Force’s  Next-Generation Long-Range Strike aircraft.
In another initiative, the Joint Staff added language to its guidance in May  2007 requiring that an energy efficiency key performance parameter be  selectively considered in the development of capability needs for new  systems. The guidance defines a key performance parameter as an  attribute or characteristic of a system that is considered critical or  essential to the development of an effective military capability.
In addition, each of the military services has its own initiatives under way  to reduce mobility energy demand. The following highlights several key  efforts and is not intended to be a comprehensive listing of all fuel  reduction efforts.
Army. The Army is addressing fuel consumption at forward-deployed  locations by developing foam-insulated tents and temporary dome  structures that are more efficient to heat and cool and therefore could  reduce the demand for fuel-powered generators at these locations.  Another initiative is the development of a transportable hybrid electric  power station, which uses wind, solar energy, a diesel generator, and  storage batteries to provide reliable power with fewer fuel requirements.
Navy. The Navy has established an energy conservation program aimed at  encouraging ships to reduce energy consumption. The energy  conservation program provides training materials, such as a shipboard  energy conservation manual and a pocket guide to assist commanders  with energy-saving activities. The program also gives quarterly awards to  ships that use less than the Navy’s established baseline amount of fuel.  The Navy has also made ship design alterations to reduce fuel demand.
Air Force. The Air Force has identified and begun to implement  initiatives aimed at reducing mobility energy demand and increasing fuel  efficiency, aligning these initiatives with its energy strategy. These  initiatives include determining fuel-efficient flight routes, reducing the  weight on aircraft, optimizing air refueling, and improving the efficiency of  ground operations. In addition, it is testing synthetic fuels in its aircraft  that could partly displace the use of petroleum-based fuel.
Marine Corps. The Marine Corps has initiated efforts to develop  alternative power sources and improve fuel management. For example, it  is testing the use of hybrid power—by combining solar panel, generator,  and battery energy sources—at remote sites to lessen its fuel  transportation demands to forward-deployed locations. In addition, the  Office of Naval Research is leading efforts for the Marine Corps to develop  decision support tools that process and analyze data and improve fuel  management in combat.

	DOD Has Not Established an Overarching Organizational Framework to Guide and Oversee Mobility Energy Reduction Efforts

While DOD and the military services have several efforts under way to  reduce mobility energy demand, DOD has not established an overarching  organizational framework to guide and oversee these efforts. In the  absence of a framework for mobility energy, we also found that DOD has  made limited progress in incorporating fuel efficiency considerations into  its key business processes and in implementing recommendations from  department-sponsored studies on fuel reduction. In the report that we  issued today, we made recommendations that DOD establish an  overarching organizational framework for mobility energy. Without such a  framework, DOD cannot be assured that its current mobility energy  reduction efforts will be fully implemented and will significantly reduce its  reliance on petroleum-based fuel.

		DOD Lacks Key Elements of an Overarching Organizational Framework

Our prior work has shown that an overarching organizational framework  is critical to successful transformation in both public and private  organizations. The key elements of such a framework include (1) top-level  leadership and an implementation team with dedicated resources and  funding; (2) a comprehensive strategic plan, including goals and  objectives, methods and timelines for evaluating progress, and outcome- oriented performance metrics; and (3) a communication strategy that  involves creating shared expectations and reporting related progress. We  found that DOD’s current approach to mobility energy lacks these  elements.

			Top-Level Leadership and Implementation Team

While DOD has begun to increase management attention and has identified  energy as a transformational priority, it has not designated a single  executive-level OSD official whose primary focus is on mobility energy  and who is accountable for these matters across the department. Our prior  work has stated that leadership must set the direction, pace, and tone and  provide a clear, consistent rationale that brings everyone together behind  a single mission. Currently, DOD’s approach to mobility energy is  decentralized, with fuel oversight and management responsibilities  diffused among several OSD and military service offices as well as  working groups. DOD directives designate the Under Secretary of Defense  for Acquisition, Technology, and Logistics as the department’s senior  energy official, with responsibility for establishing policies, granting  waivers, and approving changes in the management of energy  commodities, including petroleum. However, it is unclear the extent to  which the Under Secretary or any official from this office provides  comprehensive guidance and oversight and sets a direction for mobility  energy reduction efforts across the department. In addition, the Under  Secretary has a broad range of other responsibilities that include, among  other things, matters relating to the DOD acquisition system, research and  development, systems engineering, logistics, installation management, and  business management modernization. Therefore, the Under Secretary’s  primary focus has not been on the management of mobility energy.
In addition, DOD’s Energy Security Task Force was formed to address  long-term energy security concerns, such as DOD’s reliance on fossil fuels,  but we found that the task force has been unable to develop policy or  provide guidance and oversight of mobility energy issues across the  department. As indicated in its charter, the task force is required to  develop a comprehensive DOD energy strategy and an implementation  plan. Among other deliverables, the charter also requires it to define  DOD’s energy challenge, create a compendium of energy-related works,  and perform a strategic assessment of energy. While the task force has  taken steps to identify and monitor the progress of selected mobility  energy reduction projects across the department, it has not yet completed  an energy strategy or implementation plan, as well as other  responsibilities. Furthermore, OSD officials told us that while the task  force has briefed the Deputy Secretary of Defense’s advisory group on its  recommended projects, it does not have a “seat at the table” in  departmental discussions at the Deputy Secretary of Defense level or at  other executive levels, such as the Joint Requirements Oversight Council,  the Defense Acquisition Boards, or the 3-Star Group within DOD’s  Planning, Programming, Budgeting, and Execution process, as an advocate  for reducing mobility energy demand.
DOD also does not have an implementation team in place, with dedicated  resources and funding, to address mobility energy issues. For example, the  officials who lead DOD’s Energy Security Task Force’s integrated product  team do so as an extra responsibility outside of their normal work duties.  Other DOD officials said that the task force provides a good forum for  sharing energy ideas across the department but lacks adequate staff to  carry out specific actions. Furthermore, a task force participant told us  that it can be difficult to find time to attend meetings while balancing  other duties. The task force also does not receive any dedicated funding to  pursue department-level energy priorities. Without a long-term funding  mechanism, DOD may not be able to ensure that mobility energy reduction  efforts receive sustained funding over a period of years.
Moreover, DOD may not be well positioned to serve as a focal point on  mobility energy within the department, with Congress, and with the  Department of Energy or other interagency partners. During a military  energy security forum held at the National Defense University in  November 2007, representatives from various DOD offices presented  energy as an area that is significant to a breadth of issues ranging from  force protection to global stability to the security of DOD’s critical  infrastructure. They also noted that DOD has the potential to play multiple  roles with respect to energy, including consumer, market leader,  educator/motivator, oil infrastructure protector, and warfighter supporter.  These concerns, coupled with an increased national and congressional  interest in reducing fossil fuel dependence and exploring alternative  energies, will likely necessitate an increased leadership focus on long-term  energy issues, both within DOD and in its role as a stakeholder in  interagency and national dialogues.

			Comprehensive Strategic Plan

DOD has not yet developed a comprehensive strategic plan for mobility  energy, although it has taken some steps to lay the foundation for mobility  energy strategic planning. According to OSD officials, DOD has begun to  incorporate mobility energy issues into its Guidance on the Development  of the Force, a department-level strategic planning document. In addition,  the Office of the Deputy Assistant Secretary of Defense for Policy  Planning, within the Office of the Under Secretary of Defense for Policy, is  analyzing future energy concerns for the United States and the  international security environment and highlighting their implications for  the department. DOD officials said that the analysis is expected to provide  information for consideration in the development of future strategic  planning documents. We also observed that the DOD Energy Security Task  Force has begun efforts to define goals that eventually may be  incorporated into a DOD energy security strategic plan. OSD officials told  us that the task force’s intent is to complete this strategic plan by May  2008. However, current DOD strategic planning documents, such as the  National Military Strategy and the most recent Quadrennial Defense  Review, do not address mobility energy reduction. Furthermore, until  DOD fully develops and implements a comprehensive strategic plan for  mobility energy, it cannot be certain that mobility energy reduction efforts  align with the department’s energy mission or strategic goals, ensure that  they are appropriately prioritized, or know whether critical gaps or  duplication of efforts exist.

			Communication Strategy

DOD does not have an effective mechanism to facilitate communication  and coordination of mobility energy reduction efforts among OSD and the  military services. In addition, we found a lack of cross-service  coordination concerning mobility energy reduction initiatives. While  DOD’s Energy Security Task Force aims to identify key players within the  energy field, its current structure does not ensure departmentwide  communication of fuel reduction efforts, particularly among the military  services, which are responsible for most of these efforts. More specifically,  during our observation of a task force monthly meeting, we found that  although this venue provides for some sharing of information, the  generally less than 2 hours allotted for each monthly meeting does not  allow for effective coverage of the spectrum of DOD’s mobility energy  issues. Moreover, we noted in our report that although the task force’s  senior steering group includes, among others, the service under  secretaries and assistant secretaries; the Director, Defense Research and  Engineering; and several principal deputy under secretaries of defense, it  only meets two to three times a year. Additionally, with the exception of  the Air Force, none of the other military service members on the senior  steering group have primary responsibility for mobility energy efforts  within their services. Without executive-level focal points, the military  services may not be well positioned to effectively coordinate on mobility  energy efforts across the department or provide leadership or  accountability for efforts within their services. Furthermore, DOD cannot  be assured that energy reduction efforts are consistent with DOD’s energy  priorities and goals.

		DOD Has Made Limited Progress in Incorporating Fuel Efficiency into Key Business Processes and in Implementing Recommendations from Department-Sponsored Studies

In the absence of an overarching organizational framework, DOD has  made limited progress in incorporating fuel efficiency as a consideration  in key business processes—which include developing requirements for  and acquiring new weapons systems—and in implementing  recommendations made in department-sponsored studies on fuel  reduction.

			DOD Has Not Yet Fully Incorporated Fuel Efficiency Considerations into Its Key Business Processes

While DOD has recently begun to take some steps to integrate fuel  considerations into its key departmental business processes, such as its  requirements development and acquisition processes for new weapons  platforms and other mobile defense systems, these considerations are not  factored in a systematic manner and cannot be fully applied. For example,  DOD’s requirements development process does not systematically include  energy efficiency considerations, and the capability gap assessments  associated with the process do not include fuel-related logistics, thus  leaving these types of issues to be resolved after systems are fielded. In  May 2007, the Joint Staff established an energy efficiency key performance  parameter that would require fuel considerations during capabilities  development. However, because DOD has not developed a methodology to  determine how best to employ the energy efficiency key performance  parameter, its implementation remains uncertain.
DOD has also taken steps to inform its acquisition process with its pilot  program to determine the fully burdened cost of fuel for three mobile  defense systems. While the pilot program represents a step toward  providing visibility over the total logistics costs associated with delivered  fuel and DOD has set a fall 2008 deadline to issue guidance for applying  the fully burdened cost of fuel in acquisition programs, DOD has not yet  developed an approach for determining how it would incorporate this  information into its acquisition decision-making process. Until the pilot  program is completed and the results are assessed, DOD is not in a  position to apply a fully burdened cost analysis to its acquisition process.  Thus, the department is unable to promote greater visibility over its  acquisition decisions or more fully consider the operational and cost  consequences of the fuel burden on the logistics infrastructure.
Other key DOD business processes, such as those that address repair,  recapitalization, and replacement of mobile defense systems, also present  opportunities to incorporate fuel efficiency measures during system  upgrades. However, OSD officials told us that the department generally  makes decisions about system upgrades without regard to fuel efficiency,  including the fully burdened cost of fuel, in part because such decisions  require greater up-front costs. Although DOD recognizes that by reducing  energy demand it can provide its forces greater flexibility and reduce their  dependency on the logistics infrastructure, some OSD officials told us that  DOD’s budget process promotes a short-term outlook and does not  encourage the purchase of fuel-efficient systems or upgrades that may  initially cost more but could reduce life cycle and logistics costs over the  long term. Moreover, the 2008 Defense Science Board report noted that  DOD’s lack of tools to assess the operational and economic benefits of fuel  efficiency technologies is a major reason why DOD underinvests in the  development and deployment of these technologies.

			DOD Has Been Slow to Implement Recommendations from Department-Sponsored Studies on Fuel Reduction

In the absence of an overarching organizational framework, DOD has  made limited progress in implementing recommendations from  department-sponsored studies by organizations such as the Defense  Science Board, The JASONs, and LMI that have urged an expansion of  efforts to reduce dependency on petroleum-based fuel. These studies  confirmed that for many reasons, continued heavy reliance on petroleum- based fuel poses a significant problem for DOD. For example, LMI  reported that DOD’s increasing fuel demand furthers the nation’s reliance  on foreign energy sources and, as we mentioned previously, limits the  department’s ability to establish a more mobile and agile force. The studies  found a need to focus more DOD management attention on mobility  energy matters and recommended actions aimed at, among other things,  improving the fuel efficiency of weapons platforms, eliminating  institutional barriers that bear upon the department’s decisions regarding  fuel efficiency, and developing a long-term mobility energy strategy that  would lead to reduced consumption of petroleum-based fuel.
DOD has not taken a formal position on these recommendations, and  implementation, in some cases, would require significant changes  throughout the department that could generate institutional resistance.  One study, for example, called for creating a unified energy governance  structure in order to alter DOD’s “energy culture.” During our review, we  found that DOD had taken some steps toward implementing some of the  recommendations, such as initiating a pilot program for determining the  fully burdened cost of delivered fuel and adding a requirement for a fuel  efficiency key performance parameter in its Joint Staff policy manual.  However, other recommendations, such as establishing a governance  structure for mobility energy, have not been implemented. Furthermore,  the 2008 Defense Science Board report noted that the recommendations  made by the 2001 Defense Science Board report are still open and remain  viable. Our report, which was issued today, presented the  recommendations from these department-sponsored studies and actions  DOD has taken in more detail. We also concluded that an overarching  organizational framework could better position DOD to address these and  other fuel reduction recommendations in a more timely and effective  manner.

		Overarching Organizational Framework Needed to Better Position DOD to Address Mobility Energy Challenges

In the report we issued today, we recommended that DOD establish an  overarching organizational framework for mobility energy to improve the  department’s ability to guide and oversee mobility energy reduction  efforts. To establish such a framework, DOD should designate an  executive-level OSD official who is accountable for mobility energy  matters; develop a comprehensive, departmentwide strategic plan; and  improve DOD’s business processes to incorporate energy efficiency  considerations. In addition, we recommended that the military services  designate executive-level focal points to establish effective  communication and coordination among OSD and the military services on  departmentwide mobility energy reduction efforts as well as to provide  leadership and accountability over their own efforts. With a mobility  energy overarching organizational framework in place, DOD would be  better positioned to reduce its significant reliance on petroleum-based fuel  and to address the energy challenges of the 21st century. In commenting  on a draft of our report, DOD partially concurred with our  recommendations.
Mr. Chairman and Members of the Subcommittee, this concludes my  prepared statement. I would be happy to answer any questions that you  may have at this time.

	Contact and Acknowledgments

For further information regarding this testimony, please contact William  Solis at (202) 512-8365 or solisw@gao.gov. In addition, contact points for  our Offices of Congressional Relations and Public Affairs may be found on  the last page of this statement. Individuals who made key contributions to  this testimony are Thomas Gosling, Assistant Director; Karyn Angulo;  Alissa Czyz; and Marie Mak.
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. However, 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.

Summary:
Why GAO Did This Study

The Department of Defense (DOD) is the single largest U.S. energy consumer. About three-fourths of its total consumption consists of mobility energy--the energy required for moving and sustaining its forces and weapons platforms for military operations. GAO was asked to discuss DOD's efforts to manage and reduce its mobility energy demand. This testimony addresses (1) energy issues that are likely to affect DOD in the future, (2) key departmental and military service efforts to reduce demand for mobility energy, and (3) DOD's management approach to guide and oversee these efforts. This testimony is based primarily on work conducted for a report that GAO issued today (GAO-08-426) on DOD's management of mobility energy.

What GAO Found

Several issues, such as rising fuel costs, worldwide energy demand, and the high fuel burden during operations, underscore the importance of energy to DOD. Fuel costs for DOD are substantial and the volatility of world oil prices will likely continue to affect the department--which may require DOD to make difficult trade-offs such as redirecting funds from ongoing programs to pay for needed fuel. Other energy issues that are likely to affect DOD in the future are the increased U.S. dependence on foreign oil, projected increases in the worldwide demand for oil, and uncertainties about world oil supplies. Furthermore, DOD's high fuel requirements on the battlefield can place a significant logistics burden on military forces, limit the range and pace of operations, and add to mission risks, including exposing supply convoys to attack. Given these issues, DOD must be well positioned to effectively manage energy demands for military operations. DOD has initiatives under way to reduce mobility energy demand. At the department level, OSD created a task force to address energy security concerns. In addition, the Deputy Secretary of Defense included energy in DOD's list of the top 25 transformational priorities for the department as part of its initiative to pursue targeted acquisition reforms. Each of the military services also has its own initiatives under way. The Army is addressing fuel consumption at forward-deployed locations by developing foam-insulated tents and temporary dome structures that are more efficient to heat and cool, reducing the demand for fuel-powered generators. The Navy has established an energy conservation program to encourage ships to reduce energy consumption. The Air Force has developed an energy strategy and undertaken initiatives to determine fuel-efficient flight routes, reduce the weight on aircraft, optimize air refueling, and improve the efficiency of ground operations. The Marine Corps has initiated research and development efforts to develop alternative power sources, such as hybrid power, and improve fuel management. While these and other mobility energy reduction efforts are under way, DOD lacks elements of an overarching organizational framework to guide and oversee these efforts. Specifically, GAO found that DOD's current approach to mobility energy lacks (1) a single executive-level OSD official who is accountable for mobility energy matters, (2) a comprehensive strategic plan for mobility energy, and (3) an effective mechanism to provide for communication and coordination of mobility energy efforts among OSD and the military services as well as leadership and accountability over each military service's efforts. GAO also found that DOD has made limited progress in incorporating fuel efficiency as a consideration in key business processes--which include developing requirements for and acquiring new weapons systems. With a mobility energy overarching organizational framework in place, DOD would be better positioned to reduce its significant reliance on petroleum-based fuel and to address the energy challenges of the 21st century.