GAO

United States General Accounting Office

Report to the Chairman and Ranking

Member, Subcommittee on Defense,

Committee on Appropriations, U.S.

Senate

June 2000 DEFENSE BUDGET

Fiscal Year 2000

Contingency

Operations Costs and

Funding

GAO/NSIAD-00-168

Page 1 GAO/NSIAD-00-168 Defense Budget

United States General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-285260 Leter

June 6, 2000

The Honorable Ted Stevens

Chairman

The Honorable Daniel K. Inouye

Ranking Member

Subcommittee on Defense

Committee on Appropriations

United States Senate

In a March 1999 report to Congress, the Department of Defense (DOD)

reported that since the end of the Persian Gulf War in February 1991, U.S.

military forces had conducted or participated in approximately 50 overseas

contingency operations involving the deployment of 500 or more military

personnel at any one time. These operations included noncombatant

evacuation operations, no-fly zone enforcement, humanitarian assistance,

and peace enforcement operations.

In fiscal year 2000, U.S. military forces have participated or are

participating in a number of contingency operations. The largest of these

are in the Balkans (Bosnia and Kosovo) and Southwest Asia, where

incremental costs have totaled about $21.3 billion since they began in 1991

through March 2000.1 In response to your request, we (1) identified DOD's

incremental contingency operations costs and funding for all ongoing fiscal

year 2000 contingency operations and (2) assessed how DOD components

identify incremental costs in support of contingency operations.2 We are

also providing information on the need for, and average cost of, mission

rehearsal exercises conducted by the Army in preparation for contingency

deployments.

1

As used in this report, “incremental costs” means those costs that would not have been

incurred if it were not for the operation. It should be recognized that DOD's financial

systems cannot reliably determine costs and that only the total obligations are captured by

the accounting systems. The services use various management information systems to

identify incremental obligations and to estimate costs. Although we use the term costs

throughout this report as a convenience, we are actually referring to DOD's obligation of

funds.

2

DOD components include the four military services and smaller defense components that

also have a supporting role in the contingency operations, such as the Defense Information

Systems Agency, the National Security Agency, and the Special Operations Command.
B-285260

Page 2 GAO/NSIAD-00-168 Defense Budget

Results in Brief DOD estimates all ongoing contingency operations in fiscal year 2000 will

cost $4.7 billion, with operations in the Balkans and Southwest Asia

accounting for over 99 percent of that total. To date, DOD has received

about $2.65 billion for fiscal year 2000 contingency operations. Congress

appropriated $396 million directly to the services' military personnel

accounts. The remaining $2.3 billion came from the Overseas Contingency

Operations Transfer Fund, which Congress created to provide funding to

DOD components for contingency costs. As of April 2000, all funding

available in the Overseas Contingency Operations Transfer Fund had been

transferred to DOD components. In February 2000, the President submitted

a request for an emergency supplemental appropriation of about

$2.05 billion for contingency operations in Kosovo and East Timor for fiscal

year 2000. The supplemental request is pending. The military services

reported in March that their original cost estimates were still valid;

however, as of May 2000 there were about 1,000 fewer troops in the

Balkans than planned, which could result in lower fiscal year 2000 costs.

Nevertheless, if the supplemental is not enacted, Army officials report that

they will have to reduce overall operation and maintenance spending in late

July to cover the shortfall in contingency operations costs. The other

services report similar situations.

We have two concerns regarding how the services identify incremental

costs in support of contingency operations. First, the Air Force and the

Navy's Atlantic and Pacific Fleets use different methodologies to calculate

their costs for flying hours in support of contingencies. The DOD regulation

on contingency operations costs permits different methodologies, but this

practice results in different rates of reimbursement for similar levels of

activity.3 Second, the Air Force is seeking $47.2 million in the supplemental

appropriation request to repair or restore infrastructure used during

contingency operations in Kosovo. No other service is seeking similar

reimbursement in the budget request. DOD's regulation does not provide

for whether maintenance of home station infrastructure can be an

allowable incremental cost. However, DOD officials believe that some

home station costs may be attributable to contingency operations and plan

to revise the regulation.

3

DOD Financial Management Regulation, vol. 12, chap. 23, Contingency Operations (Mar.

1999).
B-285260

Page 3 GAO/NSIAD-00-168 Defense Budget

Army mission rehearsal exercises are conducted to prepare units for

conditions they are likely to encounter during contingencies. Because the

skills taught are specific to the deployment and differ from ordinary

training tasks, the Army considers the exercise cost an incremental cost of

the contingency. Exercise costs—which average about $9-$15 million—are

offset against the costs that would have been incurred for other exercises

or training that the units had scheduled before the deployment was tasked

but which were canceled or modified due to the deployment.

This report contains recommendations that would improve DOD's

identification of incremental contingency operation costs to ensure costs

are identified, estimated, and reported consistently. DOD officials provided

oral comments on a draft of this report and generally agreed with the

information presented and with our recommendations. We incorporated

their comments where appropriate.

Background In fiscal year 2000, U.S. military forces are participating or have

participated in a number of contingency operations, and DOD is seeking

reimbursement for costs incurred in operations in the Balkans, Southwest

Asia, and East Timor. The largest ongoing contingency operations are in the

Balkans and Southwest Asia. From the beginning of U.S. military

involvement in the Balkans in 1992 through March 2000, DOD has reported

$13.82 billion in incremental costs. From 1991 through March 2000, DOD

has reported $7.44 billion in incremental costs for Southwest Asia

operations.

U.S. involvement in the Balkans began in July 1992 as part of humanitarian

relief efforts in Bosnia, Herzegovina, and Croatia and expanded in April

1993, when the United States began to participate in North Atlantic Treaty

Organization (NATO) enforcement of a no-fly zone over Bosnia and

Herzegovina. In December 1995, U.S. troops deployed as part of a

multilateral coalition under NATO command in and around Bosnia to assist

in implementing the General Framework Agreement (also known as the

Dayton Agreement). The number of U.S. military personnel in Bosnia as

part of the NATO force has steadily declined, from about 18,000 in February

1996, to about 6,900 in October 1998, to about 4,300 in April 2000. In

addition to U.S. military personnel in Bosnia, there are also about 600 U.S.

military personnel stationed in the nearby countries of Hungary, Croatia,

and Italy in support of Bosnia operations.
B-285260

Page 4 GAO/NSIAD-00-168 Defense Budget

In June 1999, the United States began providing troops to the NATO-led

Kosovo Force, whose mission is peace enforcement in Kosovo. The United

States is currently providing about 5,500 troops as part of the NATO force.

In addition, the United States has about 670 troops in Macedonia to operate

a staging base for U.S. troops entering and departing Kosovo.

U.S. forces have been involved in enforcing a no-fly zone in Southwest Asia

since the end of the Persian Gulf War. The size of the U.S. force varies

substantially depending on the level of tension with Iraq. According to DOD

budget documents, there are about 30,000 personnel in the area, many of

them Navy and Marine Corps personnel deployed on ships. Since the fall of

1999, about 500 U.S. troops have also been participating in some small

humanitarian and civic assistance activities in East Timor.

DOD budgets for the cost of ongoing contingency operations, and Congress

has appropriated funds for these operations to the services' military

personnel accounts and the Overseas Contingency Operations Transfer

Fund, which Congress created to provide funding to DOD components for

contingency costs. DOD transfers funds out of the Overseas Contingency

Operations Transfer Fund to the DOD components' appropriation accounts

as operations unfold during the year. Any monies remaining in the Fund at

the end of a fiscal year can be carried over to the next fiscal year. In the

case of new, expanded, or otherwise unfunded operations, such as the

operations involving Kosovo and East Timor, costs are not budgeted in

advance. DOD components borrow funds from other budgeted activities

that are planned for later in the fiscal year. If these funds are not

replenished through supplemental appropriations or reprogramming of

previously appropriated funds, then the components have to absorb the

costs within their regular appropriations.

DOD's Fiscal Year 2000

Contingency

Operations Costs and

Funding May Create

Challenges

DOD estimates that it will need $4.7 billion to fund contingency operations

in fiscal year 2000. It has received funding for Bosnia and Southwest Asia,

and the President has submitted an emergency supplemental appropriation

request to fund operations in Kosovo and East Timor. This request is

pending and, if not passed, could cause the DOD components to curtail

other planned activities in order to fund contingency operations. The

military services reported in March that their original cost estimates were

still valid. However, there are currently fewer troops than originally

planned in Bosnia and Kosovo, which could result in lower fiscal year 2000

costs.
B-285260

Page 5 GAO/NSIAD-00-168 Defense Budget

Estimated Incremental

Costs Are Primarily for

Operation and Maintenance

Activities

According to DOD's fiscal year 2000 budget submission, ongoing

contingency operations in fiscal year 2000 are estimated to cost $4.7 billion

(see table 1). On an operational basis, about $3.63 billion (77 percent) is for

Balkans operations. Most of the remainder is for Southwest Asia, with

$25 million planned for operations in East Timor.

Table 1: Fiscal Year 2000 Estimated Incremental Costs for DOD Contingency

Operations

Source: DOD's supporting documentation to the President's fiscal year 2000 budget submission.

On an appropriation account basis, operation and maintenance continues

to represent the bulk of contingency costs—about $4.16 billion

(88 percent) of the total $4.7 billion in estimated contingency operations

costs. Operation and maintenance funds are used for a variety of purposes,

including transportation of personnel, goods, and equipment; unit

operating support costs; and intelligence, communications, and logistics

support. The remaining $544 million (12 percent) is for military personnel

accounts, which fund the pay and allowances of mobilized reservists and

special payments or allowances for all qualifying military personnel, such

as Imminent Danger Pay ($150 per month) and Family Separation

Allowance ($75 per month).

Actual Costs May Be Less

Than Initially Estimated

Based on Decline in Troop

Levels in the Balkans

DOD tracks the incremental costs of contingency operations and prepares

monthly contingency operations cost reports. The most recent report

details costs incurred through March 2000. Reported costs through March

total over $2.3 billion in incremental costs for all contingency operations in

which U.S. military forces have been involved in fiscal year 2000 and

represent about 49 percent of DOD's full-year estimate. The Army has

Dollars in millions

Military personnel

Operation and

maintenance Total

Bosnia $214.3 $1,388.7 $1,603.0

Kosovo 191.8 1,833.6 2,025.4

Total Balkans $406.1 $3,222.3 $3,628.4

Southwest Asia 138.0 913.3 1,051.3

East Timor 0 25.0 25.0

Total $544.1 $4,160.6 $4,704.7
B-285260

Page 6 GAO/NSIAD-00-168 Defense Budget

incurred the majority of the costs—about 66 percent—with the Air Force

having the next highest costs—about 20 percent (see fig. 1). DOD

components have incurred costs of about $1.7 billion in the Balkans and

about $542 million in Southwest Asia. The remaining costs are attributable

to other small operations such as East Timor and disaster relief efforts in

Mozambique and Venezuela.

Figure 1: DOD Contingency Operations Costs by Component for Fiscal Year 2000 as

of March 31, 2000

Source: DOD Contingency Operations Cost Report for March 2000.

DOD separates the almost $2.326 billion in reported incremental costs into

five categories: military personnel, civilian personnel, personnel support,

operating support, and transportation. The last four categories are funded

from the operation and maintenance appropriation. The operating support

category, which accounts for costs relating to operation tempo, base

support, and reconstitution, has the highest costs—over $1 billion, or about

71 percent of the costs through March 2000. The next highest category is

military personnel, which total about 11 percent. Transportation, about 9

percent, and personnel support, about 9 percent, are the next highest
B-285260

Page 7 GAO/NSIAD-00-168 Defense Budget

categories. Civilian personnel costs account for less than 1 percent of the

total.4

As of March 2000, DOD was reporting that its original fiscal year 2000 cost

estimate was still valid, although cost reports through March 2000 suggest

costs could be higher. At the same time, as of May 2000, there were about

1,000 fewer U.S. troops in the Balkans than originally assumed, which

suggests that costs could be lower than originally estimated. Our analysis

of fiscal year 2000 costs for all DOD components through March 2000, the

latest data available, suggests that as of the middle of the fiscal year costs

were exceeding estimates by about $140 million. The Army's costs

exceeded estimates by about $117 million and the Navy's costs exceeded

estimates by about $21 million, while the Air Force's costs were about

$67 million below estimates. In discussing our analysis with DOD officials,

they said that while the cost reports are a useful tool, they have limitations

at this point in the fiscal year. For example, they said that some services

have contracts where annual costs are obligated at the beginning of the

fiscal year, although they will be incurred throughout the year. Therefore,

in a March 2000 report to the Senior Readiness Oversight Council, the

services indicated that their initial estimates were still valid. However,

there are about 700 fewer troops in Kosovo than originally planned and 300

fewer in Bosnia, most of whom were support troops whose tasks have now

been taken on by contractors. Army officials expect that current troop

levels will remain unchanged for the balance of the fiscal year. Therefore,

unless contractors incur sufficiently higher costs to offset the savings

generated by lower troop levels as they take on tasks now performed by

troops, we believe that full fiscal year 2000 costs at the end of the fiscal

year could be less than originally estimated.

DOD's budget for operations in East Timor was limited to $25 million by

the Office of Management and Budget. However, DOD's cost reports

through March 2000 show total costs for this operation at almost $54

million. Therefore, if the $25 million included in the emergency

supplemental for East Timor is appropriated, the services will have to

absorb the costs incurred above the $25-million limit within their regular

appropriations. For example, the Marine Corps will have to absorb about

$6.9 million in operation and maintenance costs for this operation.

4

Numbers do not add due to rounding.
B-285260

Page 8 GAO/NSIAD-00-168 Defense Budget

If Supplemental Funding is

Not Received, Fiscal Year

2000 Contingency Funding

May Prove Challenging for

DOD

DOD had received about $2.65 billion in fiscal year 2000 funding for

contingency operations in Bosnia and Southwest Asia as of May 2000.

Funding came from several sources (see table 2).

Table 2: Fiscal Year 2000 Funding for DOD Contingency Operations

a

Includes military personnel funding for Bosnia and Southwest Asia only.

b

This amount remained in the Overseas Contingency Operations Transfer Fund at the end of fiscal

year 1999.

As of April 2000, the full $2.258 billion in the Transfer Fund had been

transferred to DOD components to pay for contingency operations costs to

date. The Army received $1.434 billion; the Air Force, $620.9 million; the

Navy, $70.5 million; the Marine Corps, $1.6 million; and other DOD

components, $130.8 million.

Congress did not include funds for ongoing Kosovo operations in the fiscal

year 2000 DOD Appropriations Act, and operations in East Timor began

after the act was passed. Therefore, the President submitted an emergency

supplemental appropriation request to Congress in February 2000 for these

two operations. This request, if enacted as submitted, would provide about

$2.05 billion—$25 million for operations in East Timor and the remainder

for operations in Kosovo. These operations have been ongoing since the

beginning of the fiscal year, and DOD components will have to use their

regular appropriated funds to pay for costs incurred for these operations

after funds from the Transfer Fund are exhausted. If the emergency

supplemental request is not passed, DOD components will have to absorb

any funding shortfalls within their regular appropriations by canceling or

deferring other planned spending. Such actions could involve canceling

training exercises, deferring depot maintenance, and canceling or deferring

spare parts purchases.

Dollars in millions

Appropriated to Military Personnel Account $ 396a

Overseas Contingency Operations Transfer Fund

Fiscal year 2000 beginning balance $ 544b

Fiscal year 2000 appropriation 1,714

Total available in fiscal year 2000 $2,258

Total available to DOD $2,654

Emergency supplemental (pending) $2,050
B-285260

Page 9 GAO/NSIAD-00-168 Defense Budget

The Army, which estimated that it would need about $2.7 billion in funding

from the Overseas Contingency Operations Transfer Fund for fiscal year

2000, will be affected more than the other services if the supplemental

request is not enacted. 5 It has received $1.434 billion from the Transfer

Fund, leaving a shortfall of about $1.3 billion for the fiscal year.6 U.S. Army,

Europe, which bears the bulk of the costs for the Balkans operations,

estimates that absorbing the shortfall within its operation and maintenance

account will deplete that account by early July 2000. If the shortfall is

spread across the entire Army operation and maintenance account, the

Army projects that it will run out of funds by late July. Decisions to cancel

training exercises, most of which cannot be rescheduled, will have to be

made in mid-June because of transportation scheduling deadlines.

According to Army officials, canceling training could affect readiness.

The other services will have to similarly absorb some contingency costs.

The Air Force estimated that it would need $856.1 million but has received

only $620.9 million from the Transfer Fund, leaving a shortfall of

$235.2 million. If it absorbs the shortfall, the Air Force projects that it will

run out of funds for its flying hour program in mid-August, which could

stop the Air Force from conducting training. The Navy's total requirement

is about $273.1 million, and it has received about $70.5 million from the

Transfer Fund, for a shortfall of $202.6 million. The Navy plans to delay the

overhaul of a submarine that is scheduled to begin in June and to make

other decisions to curtail planned activities as the year progresses. The

Marine Corps' total requirement is about $12.2 million, and it has received

$1.6 million from the Transfer Fund and $170,000 from other sources, for a

shortfall of $10.4 million.

In similar emergency situations, and when immediate action is necessary,

DOD has relied upon the so-called “Feed and Forage” Act (41 U.S.C. 11),

enacted in its original form in 1861 during the Civil War to incur obligations

on behalf of the United States for such items as “clothing, subsistence,

forage, fuel, quarters, transportation, or medical and hospital supplies” that

exceed available appropriations but which may not exceed the necessities

of the current year. The Secretary of Defense is required to advise Congress

immediately of the exercise of this authority and to report quarterly on

5

These amounts do not include the funds appropriated directly to the services' military

personnel accounts for Bosnia and Southwest Asia.

6

This includes $220 million originally transferred from the Fund to the Air Force and the

Navy but later reallocated to the Army to cover its Kosovo operation costs.
B-285260

Page 10 GAO/NSIAD-00-168 Defense Budget

estimated obligations incurred under this authority. This authority is

unfunded and requires a subsequent appropriation to liquidate any

obligations that are incurred. DOD last used this authority in 1994 during an

operation in Haiti.

Services Differ in How

They Determine Some

Incremental

Contingency Costs

The DOD regulation on contingency operations provides guidelines for

determining incremental costs and cost categories for those components

participating in contingency operations. Our assessment of how the

services determine their contingency operations costs raised two issues.

First, the Air Force and the Navy's Atlantic and Pacific Fleets differ in how

they identify their incremental flying hour costs for contingencies and are

reimbursed at different rates for similar levels of activity. Second, the Air

Force is requesting $47.2 million in infrastructure reconstitution costs in

the supplemental request for Kosovo. The regulation on reconstitution

does not provide for costs generated by infrastructure wear and tear at

home stations as an allowable incremental cost.

Methods Used to Calculate

Incremental Flying Hour

Costs Can Lead to Different

Reimbursements

The DOD regulation on contingency operations directs the services to

report only those incremental operation tempo costs they incur as a direct

result of a contingency. The regulation recognizes that flying hours in

support of contingency operations overlap to some degree with each

service's flying hour program, which is funded through its annual operation

and maintenance account. However, the regulation authorizes each specific

command that is involved in the operation to develop its own methodology

for separating funded flying hours from contingency flying hours to

determine the additional incremental costs attributable to the contingency.

As a result, the Air Force and the Navy's Atlantic and Pacific Fleets

calculate their incremental flying hours differently and are reimbursed at

different rates for similar levels of flying activity.

The Air Force incurs incremental costs providing flight support to

contingencies with its active, National Guard, and Reserve forces. In fiscal

year 2000, the Air Force has decided to absorb the cost of this contingencyrelated flight support within its base flying hour budget for active forces.

The Air Force will need to reprogram funds or ask for additional funding

for any incremental contingency-related flying hours if its base flying hour

budget for active forces is fully used. This decision was made because the

Air Force had under executed its active forces' base flying hour budget

each year from fiscal year 1994 through 1998, yet sought and received

additional funding for its incremental contingency flying hour costs. Air
B-285260

Page 11 GAO/NSIAD-00-168 Defense Budget

Force officials said that service leadership became concerned that this

historic under execution could lead to a future reduction in the total flying

hour program. The Air Force will still seek reimbursement, however, for all

incremental contingency operations flying hour costs incurred by its

National Guard and Reserve units. These units tend to fly all the hours in

their base flying hour budget and participate in contingencies on an “as

needed” basis.

The Navy's Atlantic and Pacific Fleet aircraft have been involved in

contingency operations, and each fleet has developed its own methodology

for calculating incremental flying hour costs in support of these operations.

The Atlantic Fleet's methodology determines how much its deployed

aircraft would have flown for training each month of the deployment had

there been no contingency. This scheduled flying hour requirement is

already funded through the Navy's annual operation and maintenance

appropriation. When the deployed units' monthly flying hour costs exceed

this base funded budget, the fleet counts the excess as an incremental cost

of the contingency.

The Pacific Fleet's methodology for determining contingency flying hour

costs considers the training value of each flight. It considers all flying hours

flown in the contingency area as being in support of the contingency but

recognizes some training value in 40 percent of the hours flown. The

remaining 60 percent of hours flown are considered to have little or no

training value and are claimed as an incremental contingency cost.

Depending on the number of hours flown, this methodology could result in

a higher rate of reimbursement than the Atlantic Fleet's methodology.

Air Force Facility

Reconstitution Decision

Could Increase Total

Contingency Operations

Costs

As part of the fiscal year 2000 supplemental request, the Air Force has

requested funds for what it described as the reconstitution of

infrastructure, such as buildings and runways, used during contingency

operations in Kosovo. The DOD regulation on contingency operations

permits the services to charge reconstitution costs for cleaning, inspecting,

maintaining, replacing, and restoring equipment owned by a participating

unit. Another section of DOD's regulation discusses facilities and base

support. This section allows incremental costs to be incurred for, among

other things, maintenance of billeting, camps, airfields, staging areas, and

other facilities, but only away from home station. DOD officials said that

while the regulation does not address infrastructure and facilities

reconstitution, it is meant to be a guide and is not all inclusive. These

officials believe that some home station costs may be attributable to
B-285260

Page 12 GAO/NSIAD-00-168 Defense Budget

contingency operations. They stated that the regulation needs to be

clarified to include guidance on the extent to which infrastructure

maintenance and repair costs at home stations incurred while supporting

contingencies should be considered an incremental cost.

Some projects for which the Air Force has requested funding are at home

station bases, such as Spangdahlem Air Force Base in Germany, and others

are at bases that are used only to support contingencies, such as Moron Air

Force Base in Spain. Some of these projects are related to the Kosovo

operation; however, some repairs result from years of use over several

contingency operations. For example, one project includes restoring

contingency operations dormitories at Moron Air Force Base at a cost of

$3.9 million. According to Air Force officials, this project is justified as a

reconstitution cost based on heavy use in Kosovo operations, as well as

being a refueling base for air traffic headed into Bosnia and Southwest Asia

over the years of those operations. Another project is for restoring airfield

pavements at Spangdahlem Air Force Base in Germany at a cost of

$2 million. According to Air Force documents, the base was used for

combat missions and transient heavy cargo aircraft during the Kosovo air

campaign. However, this base is also home to the 52nd Fighter Wing and is

used for regular operations.

The Air Force is the only DOD component to request contingency

operations funding for infrastructure maintenance and repair projects,

which are normally funded from operation and maintenance accounts.

Requests for funding for such projects from the Overseas Contingency

Operations Transfer Fund could increase if other DOD components follow

this practice.

Army Mission

Rehearsal Exercises

Prepare Troops for

Peacekeeping

Deployments

The Army trains primarily to fight major theater wars at a high level of

intensity. However, Army units deploy for other operations, such as

peacekeeping, that involve lower levels of intensity and unique or different

skills. The Army uses mission rehearsal exercises to prepare and rehearse

those skills the task forces deploying to Bosnia or Kosovo may need to

successfully conduct the operation. Costs for these exercises are included

as incremental contingency operations costs and are offset against the cost

of training that was planned for the unit, but canceled or modified because

of the deployment.
B-285260

Page 13 GAO/NSIAD-00-168 Defense Budget

Mission Rehearsal

Exercises Give Units an

Opportunity to Practice

Unique Skills

Mission rehearsal exercises have contributed to the success of contingency

operations in the Balkans, according to Army officials. These exercises

have provided the opportunity to develop the different skills, such as

controlling crowds and communicating with local nationals, needed for

contingency operations that are not covered in regularly scheduled training

and to practice these skills in a realistic training environment specifically

tailored to the operation. The officials also believe that integrating low

intensity conflict training into the scheduled training rotations could

shorten the days needed for the mission rehearsal exercise, but not

eliminate the need for the exercises.

The rehearsal exercises are tailored to the specific operation and last from

17 to 24 days, including the deployment to and from the training area. They

are scheduled after units are identified to deploy to support a specific

contingency operation. Four mission rehearsal exercises are scheduled for

fiscal year 2000, two to prepare for Bosnia deployments and two to prepare

for Kosovo deployments. The Bosnia rehearsal exercises are conducted at

the Joint Readiness Training Center, Fort Polk, Louisiana. Mission

rehearsal exercises for Kosovo are conducted at the Combat Maneuver

Training Center at Hohenfels, Germany.

In our prior work,7 we noted that ground combat commanders differed on

when to provide peace operations training. Some believed it should be

included in standard unit training and others believed it should be done

after the units have been notified of their participation. According to Army

officials responsible for training units in Europe, this low intensity conflict

training is now being integrated into regularly scheduled training rotations

at the Combat Maneuver Training Center. However, this training is not

tailored to any specific contingency as is the mission rehearsal exercise.

Mission Rehearsal Exercise

Costs Are Considered

Incremental

The Army considers mission rehearsal exercise costs to be contingency

costs because they relate to specific deployments to contingency

operations. The average total cost for a mission rehearsal exercise to

prepare for a Bosnia rotation has been about $9 to $11 million. The average

cost for a mission rehearsal exercise for a Kosovo rotation has been about

$14 to $15 million. The costs are higher for the Kosovo rotations because of

7

Peace Operations: Effect of Training, Equipment, and Other Factors on Unit Capability

(GAO/NSIAD-96-14, Oct. 18, 1995).
B-285260

Page 14 GAO/NSIAD-00-168 Defense Budget

the larger number of personnel that participate in these mission rehearsal

exercises. The units that participate and the training center where they

take place both incur some of the costs, which include such things as

personnel travel, equipment transportation, operation tempo, and other

support costs.

For example, the Brigade Task Force from the 10th Mountain Division at

Fort Drum and associated and support units participated in a mission

rehearsal exercise in May 1999 for the deployment to Bosnia in August

1999. This mission rehearsal exercise cost $9.9 million and involved 6,405

personnel who deployed to the Joint Readiness Training Center. The cost

included $5.2 million for transportation and travel expenses for personnel

and transportation of equipment to and from the training center. The cost

also included $1.9 million for air and ground operating tempo during the

exercise and for the movement of the unit's aircraft to and from the

exercise. Other cost items included $2.8 million for role players and

linguists, construction of training facilities, support at the training center,

contractor support for developing the exercise, observers and controllers

for the exercise, and other miscellaneous items.

After these costs are submitted, the costs of the mission rehearsal

exercises are offset against the costs that would have been incurred for

other exercises and training that the units had scheduled before the

deployment was tasked but which were canceled or modified after the unit

was notified of the deployment. The Army considers any remaining costs

after the offset to be incremental to the contingency operation.

Conclusions The DOD regulation on contingency operations permits the services

considerable latitude in identifying their incremental contingency

operations costs. Whatever methodology each service chooses to use,

however, should result in similar levels of reimbursement for similar levels

of activity, particularly within the same service. Depending on the hours

flown in support of contingency operations, the different methodologies

the Navy uses will not result in similar reimbursements. The DOD

regulation does not provide for infrastructure wear and tear at home

stations as an allowable contingency cost. However, DOD officials believe

that some of this wear and tear is appropriately attributed to contingency

operations and plan to modify the regulation to address these costs. As part

of the emergency supplemental request for Kosovo operations, the Air

Force has requested millions of dollars in costs for wear and tear on home
B-285260

Page 15 GAO/NSIAD-00-168 Defense Budget

station infrastructure and related facilities used in contingency operations,

which the other services have not.

Recommendations To insure consistency in estimating and reporting incremental contingency

operations costs, we recommend that the Secretary of Defense determine

whether a common methodology for developing incremental flying hour

costs is feasible, and, if so, revise the regulation on contingency operations

to reflect that methodology. At a minimum, we recommend that the

Secretary of Defense direct the Secretary of the Navy to develop and apply

a single methodology for determining the incremental flying hours within

the Navy.

Because the regulation on contingency operations does not provide for

wear and tear on infrastructure and related facilities at home stations as a

contingency operation cost, we recommend that the Secretary of Defense

modify the regulation to specifically state circumstances under which

home station infrastructure wear and tear is allowable as a contingency

operation cost.

Agency Comments and

Our Evaluation

In oral comments on a draft of this report, the Associate Director, Active

Force Operations Team, and the budget analyst for contingency operations,

Office of the Under Secretary of Defense (Comptroller) and service budget

officials responsible for contingency operations costs generally concurred

with the information presented. In discussing a common methodology for

determining incremental contingency operation flying hours, while the

Navy's Atlantic and Pacific Fleets use different methodologies, DOD

officials noted that the Air Force and the Atlantic Fleet use similar methods

for determining incremental flying hours. The Navy representative stated

that although the Navy has not yet determined a methodology, a single

methodology for calculating incremental flying hours would be in place for

use in fiscal year 2001. If the Navy decides to adopt the Atlantic Fleet's

methodology, then the intent of our recommendation for a common

methodology would be met. If, however, the Navy decides to adopt the

Pacific Fleet's methodology, there would continue to be a disparity in

methodologies between the Air Force and the Navy and that methodology

could result in a higher reimbursement rate for incremental hours flown.

DOD officials agreed that infrastructure wear and tear at home station is

not provided for in the DOD regulation on contingency costs. However,
B-285260

Page 16 GAO/NSIAD-00-168 Defense Budget

they noted that some home station infrastructure wear and tear may be

attributable to contingency operations. They stated that they plan to

modify the regulation to include guidance on these types of costs.

In commenting on our analysis of costs through the end of the year, the

officials stated that at this point in the fiscal year the cost reports, taken on

their own, may not present an accurate picture of year end costs. Based on

our discussion with DOD officials and more current cost data, we revised

our cost analysis to focus on how lower troop levels in the Balkans may

lead to lower overall fiscal year 2000 costs, notwithstanding the fact that

this could also lead to higher contractor costs. We also revised the report to

reflect other technical comments as appropriate.

Scope and

Methodology

We limited our review to those contingencies for which DOD has sought or

is seeking funding from the Overseas Contingency Operations Transfer

Fund. To identify and assess the contingency cost information contained in

this report, we conducted work at the Office of the Secretary of Defense;

the Joint Staff; the Departments of the Army, the Navy, and the Air Force;

U.S. Army Forces Command; U.S. Army Europe; 10th Mountain Division,

Fort Drum, New York; 1st Infantry Division, Wurzburg, Germany; U.S. Navy

Atlantic Fleet; U.S. Navy Pacific Fleet; Naval Air Forces Pacific; U.S. Pacific

Command; U.S. Army Pacific; Marine Forces Pacific; Air Force Air Combat

Command; U.S. Special Operations Command; and the Defense

Information Systems Agency. At these locations, we reviewed contingency

operations cost reports; DOD budget documents for fiscal years 1999, 2000,

and 2001; training plans; Joint Staff training policy regulations; and

documents that supported contingency-related costs. We did not verify the

data used by the Defense Finance and Accounting Service to create the

contingency operations cost reports.

We performed our work between January and May 2000 in accordance with

generally accepted government auditing standards.

We are sending copies of this report to the Honorable Jerry Lewis,

Chairman, and the Honorable John P. Murtha, Ranking Minority Member,

Subcommittee on Defense, House Committee on Appropriations; the

Honorable William Cohen, Secretary of Defense; the Honorable William J.

Lynn, Under Secretary of Defense (Comptroller); and the Honorable Jacob

Lew, Director, Office of Management and Budget. Copies of this report will

also be made available to others upon request.
B-285260

Page 17 GAO/NSIAD-00-168 Defense Budget

If you have any questions on this report, please call me on (202) 512-5140 or

the contact listed in appendix I.

Carol R. Schuster

Associate Director

National Security Preparedness Issues
Page 18 GAO/NSIAD-00-168 Defense Budget

Appendix I

GAO Contact and Staff Acknowledgments ApendixI

GAO Contact Steve Sternlieb (202) 512-4534

Acknowledgments In addition to the name above, Ann Borseth, Alan Byroade, Glenn Furbish,

and Herbert Dunn made key contributions to this report.

(702044) Letr
Ordering Information The first copy of each GAO report is free. Additional copies of

reports are $2 each. A check or money order should be made out to

the Superintendent of Documents. VISA and MasterCard credit

cards are accepted, also.

Orders for 100 or more copies to be mailed to a single address are

discounted 25 percent.

Orders by mail:

U.S. General Accounting Office

P.O. Box 37050

Washington, DC 20013

Orders by visiting:

Room 1100

700 4th St. NW (corner of 4th and G Sts. NW)

U.S. General Accounting Office

Washington, DC

Orders by phone:

(202) 512-6000

fax: (202) 512-6061

TDD (202) 512-2537

Each day, GAO issues a list of newly available reports and

testimony. To receive facsimile copies of the daily list or any list

from the past 30 days, please call (202) 512-6000 using a touchtone

phone. A recorded menu will provide information on how to obtain

these lists.

Orders by Internet:

For information on how to access GAO reports on the Internet,

send an e-mail message with “info” in the body to:

info@www.gao.gov

or visit GAO’s World Wide Web home page at:

http://www.gao.gov

To Report Fraud,

Waste, or Abuse in

Federal Programs

Contact one:

• Web site: http://www.gao.gov/fraudnet/fraudnet.htm

• e-mail: fraudnet@gao.gov

• 1-800-424-5454 (automated answering system)

United States

General Accounting Office

Washington, D.C. 20548-0001

Official Business

Penalty for Private Use $300

Address Correction Requested

Bulk Rate

Postage & Fees Paid

GAO

Permit No. GI00