Statement of

Donald B. Marron

Acting Director

Issues in Estimating the Cost of Operations in Iraq 

and the War on Terrorism

before the

Subcommittee on National Security, Emerging Threats, 

and International Relations 

Committee on Government Reform

U.S. House of Representatives

July 18, 2006

This document is embargoed until it is delivered at

2:00 p.m. (EDT), Tuesday, July 18, 2006. The

contents may not be published, transmitted, or

otherwise communicated by any print, broadcast, or

electronic media before that time. 

1. Congressional Budget Office, Letter to the Honorable John M. Spratt Jr. on the Estimated Costs of

U.S. Operations in Iraq Under Two Specified Scenarios (July 13, 2006).

2. The $393 billion in appropriations for the Department of Defense includes about $12 billion in

funding for indigenous Iraqi and Afghan security forces. That funding was shown separately in

CBO’s July 13 report for Congressman Spratt.

3. The most recent reports provided by DoD cover obligations through April 2006. 

4. The $40 billion amount includes about $5 billion in funding for indigenous Iraqi and Afghan

security forces, which was shown separately in CBO’s July 13 report for Congressman Spratt.

Mr. Chairman, Congressman Kucinich, and Members of the Subcommittee, I

appreciate the invitation to appear before you today to discuss the accuracy and

reliability of cost estimates for operations in Iraq and the war on terrorism. My

statement is based on the Congressional Budget Office’s (CBO’s) analyses of and

research on this issue over the past few years. CBO has been asked, on a number

of occasions, to determine how much has been spent and how much might be

spent in the future for those activities. Most recently, CBO estimated the future

costs of military operations in Iraq under two different scenarios at the request of

Congressman Spratt, the Ranking Member of the House Committee on the

Budget.1

This testimony will briefly discuss appropriations and obligations to date for

operations in Iraq and the war on terrorism. It will also offer an overview of

budgeting and reporting issues.

Appropriations and Obligations to Date

Since September 2001, the Congress has appropriated $432 billion for military

operations and other activities related to Iraq and the war on terrorism (see Table

1). About $393 billion of that sum was allocated to the Department of Defense

(DoD).2

 Because some of those funds are designated for classified purposes, about

which little information is publicly available, CBO cannot provide a precise

estimate of the amounts obligated to date. However, CBO concludes that DoD has

obligated almost all of those funds, with the exception of the roughly $66 billion

appropriated in the most recent supplemental (Public Law 109-234, Emergency

Supplemental Appropriations Act for Defense, the Global War on Terror, and

Hurricane Recovery, 2006). That judgment is based on an analysis of obligation

reports provided by DoD.3

In addition to appropriations for military operations, the Congress has

appropriated about $40 billion for diplomatic operations in and aid to Iraq,

Afghanistan, and other countries assisting the United States in Iraq and in the war

on terrorism.4 About half of that amount ($21 billion) has been appropriated for

the Iraq Relief and Reconstruction Fund, of which just over 90 percent has been 
5. According to 10 U.S.C. 101(a)(13), a “contingency operation” means a military operation in which

members of the armed forces are or may become involved in military actions, operations, or

hostilities against an enemy of the United States. It can also mean an operation in which reservecomponent members are called to active status or any other national emergency declared by the

President or the Congress.

2

Table 1.

Estimated Budget Authority for Operation Iraqi

Freedom and the War on Terrorism, Through Fiscal

Year 2006 

(Billions of dollars, by fiscal year)

2001 2002 2003 2004 2005 2006 Total

Department of Defense 14 17 80 88 77 116 393

Foreign Aid and

Diplomatic Operations * 1 8 22 3 4 40

 Total 14 19 88 111 81 120 432

Source: Congressional Budget Office.

Notes: * = Less than $500 million.

Numbers may not add up to totals because of rounding.

Estimates are based on analyses of appropriation acts and the Department of Defense’s budget

documentation.

obligated to date. On the basis of information from the Department of State, CBO

estimates that most of the remaining $19 billion has been obligated. 

Estimating the Cost of War

DoD estimates future war costs using a combination of cost models, surveys of

damaged and destroyed equipment, and analyses of actual costs incurred to date.

DoD’s principal model for estimating war costs is the Contingency Operations

Support Tool (COST), which was developed by the Institute for Defense

Analyses. That model uses cost factors derived from actual expenditures for prior

contingency operations to estimate operation and support costs for deploying

units.5

 However, the model is not used to estimate the full cost of repairing or

replacing damaged or destroyed equipment or expenses necessary to restore units

and materiel to predeployment conditions; such costs are estimated separately by

each of the military services. Those estimates, together with the operation and
6. Operation Enduring Freedom includes military operations in and around Afghanistan and other

overseas counterterrorism activities. Operation Noble Eagle refers to homeland security missions,

such as combat air patrols over major metropolitan areas, undertaken by DoD in response to the

terrorist attacks of September 11, 2001.

7. Among many other things, operation and maintenance includes funding for such things as

contractor support, fuel, spare parts, depot maintenance, base operations, and transportation.

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support estimates produced by the COST model, provide a basis for DoD’s

estimates of necessary funding.

The actual obligations incurred for military operations in Iraq and the war on

terrorism are tracked by the Defense Finance and Accounting Service, which

issues monthly reports on financial obligations for each of the major ongoing

operations (Iraqi Freedom, Enduring Freedom, and Noble Eagle).6 The reports

also show obligations by the year in which the funds were appropriated, as well as

by military service.

Budgeting and Reporting Issues

CBO has been asked by the Congress on several occasions to estimate the future

costs of operations in Iraq and the war on terrorism. Estimating war costs is

always difficult because of uncertainty about the pace and scale of future military

operations. However, better estimates could be provided to the Congress if more

information was available on costs incurred to date. In particular, CBO has

identified four main concerns regarding the current process of budgeting and cost

reporting for operations in Iraq and the war on terrorism.

Supplemental Budget Requests and Obligation Reports 

DoD’s supplemental budget requests and the monthly obligation reports issued by

the Defense Finance and Accounting Service often do not provide enough detail

to determine how DoD develops its budget requests and how funds for operations

in Iraq and the war on terrorism have been obligated. The $440 billion requested

by DoD for its regular activities in fiscal year 2007 was supported by very detailed

justification documents. By contrast, DoD’s most recent supplemental request,

which totaled about $68 billion, was accompanied by relatively little backup

material. For instance, it included only five pages for operation and maintenance

costs, even though those costs constituted almost half (about $33 billion) of the

request.7

DoD recently delivered to the Congress justification material for $50 billion

requested by the Administration as part of its proposed 2007 budget to cover the

cost of operations related to Iraq and the war on terrorism for the first part of that

fiscal year. Because the documentation was only recently delivered and is in draft
8. The authority of the Feed and Forage Act is limited to obligations for items meant to sustain troops

in the field, such as clothing, subsistence, fuel, quarters, transportation, and medical supplies. It

cannot be used to purchase additional weapons or for support of military hardware.

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form, CBO cannot comment on the specifics of that material at this time.

However, upon initial inspection, it appears that the material is more detailed, at

least in some respects, than such documentation provided in the past.

The monthly obligation reports also provide limited information. According to

those reports, about $84 billion was obligated for military operations in Iraq and

the war on terrorism in fiscal year 2005. Of that amount, 25 percent ($21 billion)

was allocated for purposes described as “other.” Little information was provided

to suggest how the funds were obligated. Without a better understanding of those

expenditures, it is difficult to estimate whether such costs will be incurred in

future years. The reports also do not include obligations for classified activities.

On the basis of conference reports for various supplemental appropriation acts,

CBO estimates that those costs are at least $25 billion. In addition, the obligation

reports would be a more useful source of information if they contained some

information on the pace of operations—such as troop levels, flying hours, or

vehicle miles—in a given month. Such information would be useful in analyzing

monthly cost variations.

Timing of Budget Requests

Since fiscal year 2001, funding for activities in Iraq and the war on terrorism has

been provided through a combination of partial-year appropriations (sometimes

referred to as bridge appropriations), which are enacted near the beginning of the

fiscal year, and midyear supplemental appropriations. If the bridge appropriations

run out before enactment of the midyear appropriations, DoD can pay for warrelated expenses using funds meant for its regular activities besides war, which are

then reimbursed upon enactment of the midyear supplemental. In the event the

midyear appropriations are delayed and funds for DoD’s regular activities begin to

run out, DoD has some options. One option would be to use its authority to

transfer funds among various appropriation accounts (such as transferring funds

from procurement accounts to operation and maintenance accounts), although that

authority is limited. In addition, DoD could invoke the Feed and Forage Act (41

U.S.C. 11), which allows the President to obligate funds without an appropriation

for the purpose of sustaining troops in the field. That authority was invoked

immediately after the terrorist attacks on September 11, 2001, although ultimately

it was not used because the Congress quickly provided the necessary

appropriations.8

Some analysts have suggested that, to better assist in planning future defense

budgets, DoD should include the entire fiscal year’s cost of activities in Iraq and
9. Much of the agencies’ budget preparation occurs long before the February budget submission.

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the war on terrorism in its regular budget request. That approach would have both

positive and negative consequences. On the positive side, including war costs in

the regular request would give the Congress more time to debate and modify the

budget request for those activities. Also, fully funding those operations at the

beginning of the fiscal year would help DoD avoid any potential funding issues

that might arise from delayed enactment of midyear supplemental appropriations.

On the negative side, budgeting for activities in Iraq and the war on terrorism in

combination with the regular budget request could result in less clarity about

which funds would go to war-related activities and which were intended strictly

for peacetime operations. In addition, submitting the request at the beginning of

the fiscal year could lead to less accurate cost projections because the budget must

be submitted in February (eight months prior to the start of the fiscal year).9

Tracking Actual War-Related Obligations and Outlays 

Regardless of when the funds for Iraq and the war on terrorism are provided, they

are recorded in the same appropriation accounts that fund the regular nonwar

budget, making it difficult to sort out how much is ultimately spent on war-related

activities. For example, the Congress appropriated about $218 billion to DoD’s

operation and maintenance accounts for fiscal year 2006. Of that amount, about

$72 billion was appropriated for war-related activities and about $146 billion was

appropriated for DoD’s regular operating costs.

The standard budget execution reports submitted to the Office of Management

and Budget do not delineate between those war and nonwar expenditures, making

it difficult to determine how much has actually been spent for activities related to

Iraq and the war on terrorism. The Defense Finance and Accounting Service

issues monthly reports that track war-related obligations, but, as indicated earlier,

those reports do not include obligations for classified programs and do not provide

detail on the pace of operations.

Distribution of Data and Information

CBO frequently has difficulty obtaining monthly reports on war obligations and

other data. Often the agency receives that information months after the data are

officially approved for release. That problem could be addressed by establishing a

standard, more-comprehensive distribution list for the war obligation reports and

other data. It would also be helpful to have access to the COST model that DoD

uses to formulate its supplemental requests or to the data and methodology

underlying it.