United States General Accounting Office

GAO Report to Congressional Requesters

April 1996 DEFENSE

INFRASTRUCTURE

Budget Estimates for

1996-2001 Offer Little

Savings for

Modernization

G O A

years

1921 - 1996

GAO/NSIAD-96-131

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-271564 

April 4, 1996

The Honorable John R. Kasich

Chairman, Committee on the Budget

House of Representatives

The Honorable Charles E. Grassley

The Honorable William V. Roth, Jr.

United States Senate

The Department of Defense’s (DOD) procurement funding of new weapon

systems has been greatly reduced since 1985. The Secretary of Defense has

stated that DOD must begin to increase procurement funding if it is to have

a modern future force. The Secretary wants to reform the acquisition

process and reduce and streamline infrastructure to help pay for the

billions of dollars that DOD projects it will need to modernize the force. As

you requested, we analyzed DOD’s infrastructure activities and their

associated costs in DOD’s Future Years Defense Program (FYDP) to see if

DOD plans to spend less for infrastructure activities by fiscal year 2001 to

help pay to modernize the force as the Secretary plans. We also

summarized some of our audit work that identified opportunities for DOD

to reduce or streamline infrastructure activities and asked the

Congressional Budget Office (CBO) to estimate the potential budgetary

savings.1

Background An objective of DOD’s 1993 Report on the Bottom-Up Review was to

identify potential infrastructure savings and to launch a long-term process

to reduce and streamline DOD’s infrastructure without harming readiness.

The report stated that infrastructure activities accounted for $160 billion in

fiscal year 1994, or about 60 percent of DOD’s total obligational authority. It

defined infrastructure as all DOD activities other than those directly

associated with operational forces, intelligence, strategic defense, and

applied research and development and identified seven infrastructure

categories. The categories were logistics, medical, personnel, training,

acquisition management, installation support, and force management.

The FYDP is an authoritative record of current and projected force

structure, costs, and personnel levels that have been approved by the

Secretary of Defense. The FYDP displays the allocation of resources by

1

Savings or reductions in infrastructure funding could be used to reduce the deficit or provide funds

for other programs, under the Budget Enforcement Act, as amended.

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programs and activities known as program elements. There are about

2,600 program elements in DOD’s fiscal year 1996 FYDP, which covers fiscal

years 1996-2001.

In September 1995, we reported on the significant differences between the

fiscal year 1995 and 1996 FYDPs.2

 As part of that work, we requested that

DOD identify for us the infrastructure programs in the FYDP. DOD officials

stated that they were in the process of coordinating changes to some

infrastructure activities and categories, and therefore, would not identify

the FYDP infrastructure related programs at that time. Based on DOD’s

infrastructure definition and categories in the bottom-up review report, we

identified the program elements in the FYDP that we considered to be

associated with infrastructure activities. In our 1995 report, we concluded

that, based on our analysis of the 1996 FYDP using the program elements

that we considered to be associated with infrastructure activities, the

proportion of infrastructure funding in the total defense budget would

remain relatively constant through 2001. DOD officials concurred with this

conclusion. In November 1995, DOD provided us with a detailed breakdown

of the infrastructure related program elements in the FYDP.

Results in Brief There are no significant net infrastructure savings to DOD between fiscal

years 1996 and 2001, based on our analysis of the infrastructure related

program elements in the FYDP. The proportion of planned infrastructure

funding in DOD’s budgets will remain relatively constant at about

60 percent through 2001. We also found that the combination of operation

and maintenance and military personnel appropriations fund about

80 percent of infrastructure activities that can be clearly identified in the

FYDP. Thus, DOD must identify significant infrastructure savings from these

appropriations to modernize its force.

Although DOD defines infrastructure as those activities that provide

support services to mission programs, such as combat forces, and

primarily operate from fixed locations, it excludes most intelligence,

space, and command, control, and communications programs that meet

this criterion. These programs account for about $25.2 billion in fiscal year

1996. If DOD’s objective is to examine all possible infrastructure for

savings, it would appear that it would want to include such programs.

2

Future Years Defense Program: 1996 Program Is Considerably Different From the 1995 Program

(GAO/NSIAD-95-213, Sept. 15, 1995).

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There are parts of the total infrastructure funding that cannot be clearly

identified in the FYDP, according to DOD officials. These funds pay for goods

and services sold by the Defense Business Operations Fund (DBOF)

activities. The officials estimate that this is about 20 to 25 percent of DOD’s

total infrastructure and mostly represents logistics purchases which

cannot be specifically identified.

Our work over the years has identified numerous areas where

infrastructure activities can be consolidated, streamlined, and

reengineered to be made more efficient. We specifically identify 13 options

in appendix I that CBO estimates could result in savings of about

$11.8 billion from fiscal years 1997-2001.

DOD’s Efforts to

Identify and Measure

Infrastructure

According to DOD officials within the Office of Program Analysis and

Evaluation (PA&E), DOD’s efforts to identify and track infrastructure funding

have been underway for several years.3 PA&E officials told us DOD has a

better understanding of the elements that fund DOD infrastructure activities

than it had at the time of the bottom-up review. Using the FYDP, DOD has

clearly identified program elements that fund infrastructure activities and

refer to these as “direct infrastructure.” However, there are parts of the

total infrastructure funding that cannot be clearly identified in the FYDP.

According to PA&E officials, this is about 20 to 25 percent of DOD’s total

infrastructure funding and mostly represents logistics purchases which

cannot be specifically identified.

Since the FYDP is the most comprehensive source of continuous defense

resource data, PA&E, with assistance from the Institute for Defense

Analyses, sought to define infrastructure programs in terms of FYDP

program elements. In June 1995 the Institute issued a manual and a

mapping scheme that categorize each of the FYDP program elements as

either mission programs or infrastructure programs.4

 Activities and

programs that produce the outputs expected of DOD or directly support

missions by deploying with the combat forces are classified as mission

programs. Activities that provide support services to the mission programs

and primarily operate from fixed locations are classified as infrastructure

programs. PA&E assigned each infrastructure program element to one of

the following eight categories based on the program’s activities:

3

PA&E, within the Office of the Secretary of Defense, is responsible for identifying and tracking

infrastructure activities.

4

A Reference Manual for Defense Mission Categories, Infrastructure Categories, and Program

Elements, Institute for Defense Analyses, (IDA Paper P-3113, June 1995).

Page 3 GAO/NSIAD-96-131 Defense Infrastructure
B-271564 

acquisition infrastructure; installation support; central command, control,

and communications; force management; central logistics; central medical;

central personnel; and central training. These categories are described in

appendix II. Central command, control, and communications is a new

category since the bottom-up review. The program elements in this

category were previously included in the force management category.

PA&E officials told us that some infrastructure activities and programs

could not be clearly identified in the FYDP because their funding is derived

from the goods and services they provide to others. For example, the

Defense Logistics Agency receives most of its funds from the goods and

services it sells to other DOD activities. As a result, the costs of its

infrastructure activities are included in all of the other defense activities’

budgets that purchase their goods and services. This situation is common

for activities that are included in DBOF.

5

 According to the officials, PA&E has

estimated a range for the DBOF infrastructure costs funded by mission

programs based on data from various DOD financial systems. For the fiscal

year 1995 FYDP (1995-1999), PA&E estimated these annual costs to be

between $28 billion and $39 billion, or about 20 to 25 percent of the total

infrastructure funding. However, the officials consider these estimates to

be preliminary until more precise methods to calculate this portion of the

infrastructure are developed next year. We could not verify the source or

accuracy of these estimates.

DOD May Not Be

Accounting for All Its

Infrastructure

DOD defines infrastructure as activities that provide support services to the

mission programs and primarily operate from fixed locations. In our

analysis of DOD’s infrastructure and mission programs, we found that many

intelligence, space, and command, control, and communications programs

are excluded from the infrastructure, even though they appear to fit DOD’s

infrastructure definition. In fiscal year 1996, intelligence, space, and

command, control, and communications programs accounted for

$25.2 billion, or 20 percent of mission programs. These programs include

installations, facilities, and activities that would not deploy with combat

forces but would support those forces. For example, the command,

control, and communications mission program was projected to receive

$3.6 billion in fiscal year 1996. Over $1 billion was for long-haul

communications for the defense communications system and various

expenses within the World-Wide Military Command and Control Systems.

Although combat forces may link into these systems, the actual systems

5

DBOF is a revolving fund. Activities financed by DBOF respond to demands for goods and services,

such as depot maintenance, in exchange for reimbursement of total costs incurred in delivering the

goods or services.

Page 4 GAO/NSIAD-96-131 Defense Infrastructure
B-271564 

operate from fixed locations. We believe that by categorizing most

intelligence, space, and command, control, and communications programs

as mission activities, even though they appear to include infrastructure

activities, DOD’s accounting of infrastructure may not be complete.

No Significant Net

Infrastructure Savings

Are Projected

Through 2001

Our review of DOD’s fiscal year 1996 FYDP found no significant net

infrastructure savings between fiscal years 1996 and 2001 because the

proportion of infrastructure in the DOD budgets under current plans will

remain relatively constant through 2001. For example, although

infrastructure funding was projected to decline from 1996 to 1997, the DOD

budget was also projected to decline at about the same rate. Infrastructure

activities would have to be reduced more than DOD’s total budget to

achieve net savings in infrastructure. About 60 percent of DOD’s budget is

expected to fund infrastructure activities during the 1996-2001 period, the

same as was reported for fiscal year 1994 in the bottom-up review report.

Figure 1 shows the trends for DOD’s total planned budgets and

infrastructure activities—both direct and estimated DBOF infrastructure

funded by mission programs.

Page 5 GAO/NSIAD-96-131 Defense Infrastructure
B-271564 

Figure 1: Comparison of DOD’s Total Planned Obligational Authority to Total Planned Infrastructure Funding for Fiscal

Years 1996-2001 (Constant 1996 dollars in billions)

1996 1997 1998 1999 2000 2001

$0

$50

$100

$150

$200

$250

$300

Fiscal Year

Total DOD budget Infrastructure

237 237 236 239 241

152 143

247

138 139 139 141

We analyzed the eight infrastructure categories to see if their estimated

funding levels changed from 1996 through 2001. For this and subsequent

analyses, we used direct infrastructure funding since we had no basis to

allocate DBOF funds across these categories. Figure 2 shows the projected

funding for the infrastructure categories through 2001. As figure 2 shows,

DOD has programmed about 25 percent less for installation support in 2001

than in 1996. Most of the planned decline results from base closures and

realignments and reductions in base operation costs and military

construction costs. However, any savings resulting from the decline in

installation support costs between 1996 and 1998 are offset by the

projected reductions in DOD’s total budget. The decline in installation

Page 6 GAO/NSIAD-96-131 Defense Infrastructure
B-271564 

support costs from 1998 to 2001 is almost entirely absorbed by the

increases in the other infrastructure categories.

Figure 2: Projected Trends for Infrastructure Categories for Fiscal Years 1996-2001 (Constant 1996 dollars in billions)

1996 1997 1998 1999 2000 2001

$5

$10

$15

$20

$25

Fiscal Year

Acquisition infrastructure Installation support Force management Central logistics

Central medical Central training Central personnel Central command, control,

and communications

Page 7 GAO/NSIAD-96-131 Defense Infrastructure
B-271564 

The projected funding by fiscal year for the infrastructure categories is

shown in table 1.

Table 1: Projected Funding for Infrastructure Categories for Fiscal Years 1996-2001

Constant 1996 dollars in billions

Infrastructure categories FY 1996 FY 1997 FY 1998 FY 1999 FY 2000 FY 2001

Installation support $25.83 $23.27 $21.49 $20.16 $19.35 $19.30

Central training 19.41 18.74 18.41 18.59 18.70 18.88

Central medical 15.93 15.25 15.22 15.32 15.49 15.76

Central logistics 13.89 12.83 12.51 12.93 12.68 12.96

Force management 13.65 13.33 12.84 13.97 14.41 14.99

Acquisition infrastructure 11.90 11.57 11.61 11.57 11.66 12.15

Central personnel 10.37 10.01 9.58 9.53 9.56 9.57

Central command, control, and communications 6.27 5.96 5.84 5.90 5.86 5.84

Resource adjustmentsa –0.19 –1.19 –1.07 –0.81 –0.68 –0.60

Total direct infrastructure $117.06 $109.78 $106.44 $107.16 $107.04 $108.85

aThese include adjustments for foreign currency fluctuations and service and Defense Logistics

Agency managed stock fund cash requirements.

Table 1 shows that three categories, installation support, central training,

and central medical, comprise 50 percent of the total direct infrastructure

in fiscal years 1996 and 2001. The table also shows that only two

categories increase over the 1996-2001 period—force management and

acquisition infrastructure.

Although it is not possible to allocate the DBOF infrastructure in mission

programs by infrastructure categories, we believe that much of this

infrastructure would be included in the central logistics category because

many of the DBOF activities perform logistics functions.

Most Infrastructure

Activities Are Funded

by the Operation and

Maintenance and

Military Personnel

Appropriations

As shown in figure 3, most direct infrastructure activities are funded by

operation and maintenance and military personnel appropriations. These

appropriations have been closely associated with the readiness and

quality-of-life of the force, priority areas of the Secretary of Defense for

the last few years. Thus, DOD must identify significant infrastructure

savings from these appropriations to modernize its force.

Page 8 GAO/NSIAD-96-131 Defense Infrastructure
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Figure 3: Direct Infrastructure Funding by Appropriation for Fiscal Years 1996-2001 (Constant 1996 dollars in billions)

1996 1997 1998 1999 2000 2001

$0

$20

$40

$60

$80

$100

$120

$140

Fiscal Year

Research, development, test and evaluation Military personnel

Military construction Procurement

Family housing Operation and maintenance 

Page 9 GAO/NSIAD-96-131 Defense Infrastructure
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As shown in table 2, 90 percent of DOD’s planned direct infrastructure costs

are funded out of three appropriations—operation and maintenance

(about 50 percent), military personnel (about 30 percent), and research,

development, test, and evaluation (about 10 percent).

Table 2: Direct Infrastructure by Appropriation for Fiscal Years 1996-2001

Constant 1996 dollars in billions

Appropriation FY 1996 FY 1997 FY 1998 FY 1999 FY 2000 FY 2001

Operation and maintenance $58.50 $55.75 $53.95 $53.40 $53.37 $53.68

Military personnel 32.62 31.29 30.80 30.48 30.33 30.30

Research, development, test, and evaluation 11.37 11.11 11.12 11.13 11.32 11.78

Military construction 6.26 4.41 3.78 3.66 3.01 3.16

Family housing 4.29 4.34 3.84 4.04 4.02 3.97

Procurement 3.20 3.17 3.00 4.38 4.72 5.56

Revolving funds and other 0.81 –0.28 –0.07 0.07 0.27 0.40

Total direct infrastructure $117.06 $109.78 $106.44 $107.16 $107.04 $108.85

Table 2 also shows that infrastructure funded by four

appropriations—operation and maintenance, military personnel, military

construction, and family housing—decline. The largest percentage decline

(about 50 percent) is in the military construction appropriation. Most of

the decline in the operation and maintenance, military personnel, and

military construction appropriations is from fiscal years 1996 to 1998. The

infrastructure funded by the procurement appropriation increases by

about $2.4 billion, or by 73 percent, between fiscal years 1996 and 2001.

Table 3 shows the distribution of operation and maintenance funds by

infrastructure program categories. Almost 60 percent of the total operation

and maintenance funding for direct infrastructure in fiscal years 1996 and

2001 is for installation support, central logistics, and central medical costs.

Central medical is the only category that is projected to increase during

the 1996 to 2001 period. Installation support is projected to decline by over

20 percent, or by about $2.5 billion.

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Table 3: Operation and Maintenance Funds by Infrastructure Category for Fiscal Years 1996-2001

Constant 1996 dollars in billions

Infrastructure category FY 1996 FY 1997 FY 1998 FY 1999 FY 2000 FY 2001

Installation support $12.09 $11.22 $10.65 $9.60 $9.49 $9.53

Central logistics 11.50 10.50 10.21 10.42 10.25 10.25

Central medical 10.24 9.82 9.85 10.02 10.29 10.51

Force management 8.50 8.35 7.68 7.77 7.77 7.82

Central training 8.12 7.87 7.78 7.83 7.86 7.89

Central personnel 3.94 3.93 3.84 3.82 3.77 3.76

Central command, control, and communications 3.71 3.68 3.58 3.60 3.59 3.61

Acquisition infrastructure 0.39 0.38 0.36 0.35 0.34 0.32

Total direct infrastructure $58.50 $55.75 $53.95 $53.40 $53.37 $53.68

Table 4 shows the distribution of military personnel funds by

infrastructure category. Central training accounts for about 30 percent of

the infrastructure funded by military personnel appropriations in fiscal

years 1996 and 2001. As the table shows, all of the categories decline

slightly during the 6-year period.

Table 4: Military Personnel Funds by Infrastructure Category for Fiscal Years 1996-2001

Constant 1996 dollars in billions

Infrastructure categories FY 1996 FY 1997 FY 1998 FY 1999 FY 2000 FY 2001

Central training $10.17 $9.83 $9.61 $9.46 $9.44 $9.46

Central personnel 6.10 5.87 5.68 5.65 5.70 5.74

Central medical 5.35 5.19 5.13 5.05 5.00 4.98

Force management 4.20 4.05 4.26 4.20 4.15 4.13

Installation support 4.07 3.78 3.67 3.62 3.59 3.61

Central command, control, and communications 1.19 1.09 1.08 1.06 1.05 1.04

Acquisition infrastructure 0.96 0.86 0.82 0.81 0.79 0.79

Central logistics 0.84 0.78 0.76 0.75 0.74 0.74

Resource adjustments –0.26 –0.17 –0.22 –0.12 –0.14 0.19

Total direct infrastructure $32.62 $31.29 $30.80 $30.48 $30.33 $30.30

Page 11 GAO/NSIAD-96-131 Defense Infrastructure
B-271564 

Table 5 shows the distribution of research, development, test, and

evaluation funds by infrastructure categories. As the table shows, about

90 percent of the funds are in the acquisition infrastructure category. The

table also shows that the total direct infrastructure funding for research,

development, test, and evaluation remains relatively constant during the

6-year period.

Table 5: Research, Development, Test, and Evaluation Funds by Infrastructure Category for Fiscal Years 1996-2001

Constant 1996 dollars in billions

Infrastructure category FY 1996 FY 1997 FY 1998 FY 1999 FY 2000 FY 2001

Acquisition infrastructure $10.50 $10.30 $10.38 $10.24 $10.44 $10.95

Central command, control, and communications 0.42 0.39 0.35 0.37 0.35 0.34

Installation support 0.22 0.19 0.14 0.13 0.13 0.11

Force management 0.21 0.21 0.24 0.36 0.38 0.35

Central logistics 0.02 0.02 0.02 0.02 0.02 0.02

Central personnel 0.01 0.01 0.01 0.01 0.01 0.01

Total direct infrastructure $11.37 $11.11 $11.12 $11.13 $11.32 $11.78

Our Work Identifies

Ways to Reduce

DOD’s Infrastructure

Funding

Our ongoing work and prior reports have identified numerous

opportunities to reduce, consolidate, and streamline operations in areas

such as industrial facilities, inventory management, and training activities.

We believe that changes would yield savings in DOD’s infrastructure over

the longer term and need to be aggressively pursued. This is critical, since

the savings derived from reducing infrastructure can be used for other

purposes, such as to modernize weapon systems or reduce the deficit.

Moreover, savings could also help address long-standing financial

management problems in DOD. Historically, DOD has encountered problems

in putting effective financial management systems in place. Our work has

shown that DOD continues to have serious problems in many areas,

including accounting for billions of dollars in annual disbursements, failing

to identify and disclose potential future government liabilities, failing to

protect its assets from fraud, waste, and abuse and being unable to reliably

report on the costs of its operations.6

 In order to address these problems,

DOD may need to make investments to consolidate and improve the quality

and reliability of its financial and accounting systems as well as to upgrade

6

Financial Management: Challenges Facing DOD in Meeting the Goals of the Chief Financial Officers

Act (GAO/T-AIMD-96-1, Nov. 14, 1995); High Risk Series: Defense Contract Management

(GAO/HR-95-3, Feb. 1995); and High Risk Series: Defense Inventory Management (GAO/HR-95-5,

Feb. 1995).

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B-271564 

the agency’s financial management personnel. Below, we discuss several

examples of our work.

• Our work highlights several actions that could be taken to improve the

cost-effectiveness of the DOD depot maintenance program. These actions

include using more cross-servicing and public-private competitions and

reducing costly excess capacity that exists at intermediate level

maintenance units.

• Our work suggests that DOD could reduce costs by adopting commercial

inventory management practices for hardware items. For example, DOD

inventories of hardware items existing in 1992 are expected to decrease

only 20 percent by 1997. Even then, projected inventory for construction,

electronics, general, and industrial hardware items could last for between

2 to 4 years, compared to private sector levels of about 90 days.

• Our work on DOD’s training infrastructure found that an overall plan to

guide and measure the progress of reducing the training infrastructure is

lacking. Moreover, the lack of a management information system with

reliable cost data within the various training categories makes it difficult

for DOD to evaluate the overall effectiveness of alternate methods of

providing training and assess whether actions taken to reduce costs are

achieving the expected results.

• Reengineering and modern technology offer opportunities to reduce costs

and improve the quality of service. DOD has invested heavily in costly

information systems that have failed to produce dramatic service

improvements, increase productivity, or reduce costs. As a result, DOD may

lock itself into automated ways of doing business that do not serve its

goals for the future and cannot provide promised benefits and savings.

Specific Options for

Reducing DOD’s

Infrastructure

We present 13 options in appendix I where estimates of budgetary savings

were developed by CBO. We discuss a few of these options below. Some of

the options reflect our recommendations; others do not, but rather

represent one way to address, in a budgetary context, some of the

significant problems identified in our evaluation of DOD programs.

Inclusion of a specific option in this report does not mean that we endorse

it as the only or most feasible approach or that other spending reductions

are not also appropriate for consideration by Congress.

Our option with the highest dollar value savings addresses DOD’s

acquisition workforce. In November 1995, we reported that DOD acquisition

organizations had a combined acquisition workforce of about

464,000—398,000 civilian and 66,000 military in 1994. Even with declines in

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B-271564 

both the defense procurement budget and the civilian acquisition

workforce since 1990, the number of acquisition organizations remains

relatively constant. Subsequent to our report, the National Defense

Authorization Act for Fiscal Year 1996 required DOD to provide a plan to

reduce the number of military and civilian personnel in acquisition

organizations by 25 percent over 5 years and eliminate duplicative

functions among existing acquisition organizations. CBO estimates the

5-year savings (fiscal years 1997-2001) associated with the civilian

personnel reductions alone would be approximately $5.5 billion.

Another option addresses savings for the central logistics infrastructure

category. In February 1996, we reported that DOD’s transportation costs are

higher than necessary. DOD customers frequently pay prices for

transportation services that are double or triple the cost of the basic

transportation. Driving these higher costs are the U.S. Transportation

Command’s fragmented management processes and its inefficient

organizational structure, which includes not only the command

headquarters but the Army Military Traffic Management Command, the

Navy Military Sealift Command, and the Air Force Air Mobility Command.

Salaries and wages alone for the U.S. Transportation Command in fiscal

year 1994 were more than $1 billion. Our option illustrates one way to

improve the U.S. Transportation Command’s operations by combining

functions and eliminating some personnel at the Military Traffic

Management Command and Military Sealift Command. Civilian personnel

savings associated with this reorganization effort could be $450 million for

fiscal years 1997-2001.

An option for the central medical infrastructure category establishes

copayments for care received in military hospitals. Health care received by

military beneficiaries in military hospitals and clinics is free. However,

military beneficiaries share in the costs of care they obtain from civilian

providers. Research has shown that free care leads to greater and

unnecessary utilization and, therefore, greater costs. By establishing

cost-sharing requirements for care received in military hospitals similar to

civilian cost-sharing requirements, 5-year savings for fiscal years 1997-2001

of approximately $1 billion could be achieved.

Table 6 summarizes our options organized by infrastructure category. The

cumulative 5-year total (fiscal years 1997-2001) of budgetary savings

estimated by CBO is $11.8 billion.

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Table 6: Summary of GAO Options for Potential Savings in DOD Infrastructure

Budget authority in millions of dollars for fiscal years 1997-2001

Infrastructure category Option title

Five-year

savings

Acquisition infrastructure Reduce DOD’s acquisition workforce and provide more efficient operations $5,540

Reassess defense conversion spending 1,067

Installation support Consolidate Air Force fighter squadrons 718

End U.S. presence at Soto Cano Air Force Base, Honduras 150

Eliminate funds for the Legacy Resource Management Program 50

Force management Reduce the size of DOD’s finance and accounting infrastructure 1,390

Cap funding for the Civil Air Patrol 30

Central logistics Reduce the size of DOD’s transportation infrastructure 450

Central medical Close DOD’s Uniformed Services University of the Health Sciences 299

Establish copayments for care in military hospitals 1,018

Central personnel Collocate and close recruiting facilities 104

Discontinue or phase out the Junior Reserve Officers’ Training Corps Program 912

Central training Discontinue National Guard youth programs 71

Total budget authority $11,799

Sources: GAO options for which CBO provided savings estimates.

Agency Comments In oral comments, DOD agreed with this report’s findings and conclusions.

The comments dealt primarily with technical accuracy and clarification.

We have changed the report, as appropriate, to respond to these

comments.

Scope and

Methodology

To define and evaluate DOD’s infrastructure activities, we interviewed

officials in DOD’s Office of PA&E and analyzed data contained in the fiscal

year 1996 FYDP. The fiscal year 1997 FYDP was not available. In addition, we

reviewed DOD’s Reference Manual For Defense Mission Categories,

Infrastructure Categories, and Program Elements prepared by the Institute

for Defense Analyses; the President’s fiscal year 1996 budget submission;

the fiscal year 1996 Authorization Report; our prior reports; and pertinent

reports by the CBO, the Congressional Research Service, and others.

The direct infrastructure was derived using DOD’s mapping scheme. The

DBOF infrastructure funded by mission programs was projected using

PA&E’s data. For the fiscal year 1995 FYDP, which included data for fiscal

Page 15 GAO/NSIAD-96-131 Defense Infrastructure
B-271564 

years 1995-1999, PA&E estimated the DBOF portion of the infrastructure

funded by mission programs as 20 to 25 percent of the total infrastructure.

DOD did not calculate an annual value of DBOF infrastructure funded by

mission programs for the years included in the 1996 FYDP. Therefore, we

based our fiscal years 1996-2001 estimates of DBOF infrastructure funded

by mission programs on the same proportions DOD had estimated for the

1995 FYDP. For example, we took the direct infrastructure, which we could

measure using the 1996 FYDP, to equal 75 to 80 percent of the total value of

infrastructure. We then extracted the additional 20 to 25 percent of

infrastructure from the total value of mission programs as DBOF

infrastructure funded by mission programs to obtain our estimated values

for total infrastructure.

Infrastructure options were drawn from our prior and ongoing work. CBO

determined the budgetary effects of these options.

Our work was conducted from October 1995 to March 1996 in accordance

with generally accepted government auditing standards.

We are providing copies of this report to appropriate congressional House

and Senate committees; the Secretaries of Defense, the Air Force, the

Army, and the Navy; and the Director, Office of Management and Budget.

We will also provide copies to other interested parties upon request.

If you have any questions concerning this report, please call me on

(202) 512-3504. Major contributors to this report were Robert Pelletier,

William Crocker, Deborah Colantonio, Edna Thea Falk, and Scott

Hornung.

Richard Davis

Director, National Security

 Analysis

Page 16 GAO/NSIAD-96-131 Defense Infrastructure
Page 17 GAO/NSIAD-96-131 Defense Infrastructure
Contents

Letter 1

Appendix I 

Infrastructure Options

20

Reduce DOD’s Acquisition Workforce and Provide More Efficient

Operations

21

Reassess Defense Conversion Spending 23

Consolidate Air Force Fighter Squadrons 25

End U.S. Presence at Soto Cano Air Force Base, Honduras 27

Eliminate Funds for the Legacy Resource Management Program 28

Reduce the Size of DOD’s Finance and Accounting Infrastructure 29

Cap Funding for the Civil Air Patrol 32

Reduce the Size of DOD’s Transportation Infrastructure 34

Close DOD’s Uniformed Services University of the Health

Sciences

38

Establish Copayments for Care in Military Hospitals 40

Collocate and Close Recruiting Facilities 42

Discontinue or Phase Out the Junior Reserve Officers’ Training

Corps Program

44

Discontinue National Guard Youth Programs 46

Appendix II 

Categories of Defense

Infrastructure

47

Tables Table 1: Projected Funding for Infrastructure Categories for

Fiscal Years 1996-2001

8

Table 2: Direct Infrastructure by Appropriation for Fiscal Years

1996-2001

10

Table 3: Operation and Maintenance Funds by Infrastructure

Category for Fiscal Years 1996-2001

11

Table 4: Military Personnel Funds by Infrastructure Category for

Fiscal Years 1996-2001

11

Table 5: Research, Development, Test, and Evaluation Funds by

Infrastructure Category for Fiscal Years 1996-2001

12

Table 6: Summary of GAO Options For Potential Savings In DOD

Infrastructure

15

Figures

Page 18 GAO/NSIAD-96-131 Defense Infrastructure
Contents

Figure 1: Comparison of DOD’s Total Planned Obligational

Authority to Total Planned Infrastructure Funding for Fiscal

Years 1996-2001

6

Figure 2: Projected Trends for Infrastructure Categories for

Fiscal Years 1996-2001

7

Figure 3: Direct Infrastructure Funding by Appropriation for

Fiscal Years 1996-2001

9

Abbreviations

AMC Air Mobility Command

CBO Congressional Budget Office

DBOF Defense Business Operations Fund

DOD Department of Defense

DFAS Defense Finance and Accounting Service

FYDP Future Years Defense Program

JROTC Junior Reserve Officers’ Training Corps

MSC Military Sealift Command

MTMC Military Traffic Management Command

PA&E Office of Program Analysis and Evaluation

ROTC Reserve Officers’ Training Corps

USTRANSCOM U.S. Transportation Command

Page 19 GAO/NSIAD-96-131 Defense Infrastructure
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Infrastructure Options

This appendix provides GAO’s infrastructure options organized by

infrastructure category. In addition to the infrastructure category, GAO

provides information about the budget account, GAO’s framework theme,1

and a summary and description of budgetary implications. Although the

descriptions are intended to synopsize the key issues and problems

developed in GAO’s audits and evaluations, readers are encouraged to refer

to the related GAO products, listed at the end of each option, for a complete

discussion.

Acquisition Infrastructure

 Reduce DOD’s acquisition workforce and provide more efficient

 operations

 Reassess defense conversion spending

Installation Support

 Consolidate Air Force fighter squadrons

 End U.S. presence at Soto Cano Air Force Base, Honduras

 Eliminate funds for the Legacy Resource Management Program

Force Management

 Reduce the size of DOD’s finance and accounting infrastructure

 Cap funding for the Civil Air Patrol

Central Logistics

 Reduce the size of DOD’s transportation infrastructure

Central Medical

 Close DOD’s Uniformed Services University of the Health Sciences

 Establish copayments for care in military hospitals

Central Personnel

 Collocate and close recruiting facilities

 Discontinue or phase out the Junior Reserve Officers’ Training Corps

 Program

Central Training

 Discontinue National Guard youth programs

1

For a complete discussion of GAO’s deficit reduction framework, see Addressing the Deficit:

Budgetary Implications of Selected GAO Work for Fiscal Year 1996 (GAO/OCG-95-2, Mar. 15, 1995).

Page 20 GAO/NSIAD-96-131 Defense Infrastructure
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Infrastructure Options

Option:

Reduce DOD’s

Acquisition Workforce

and Provide More

Efficient Operations

Intrastructure category Acquisition infrastructure

Budget accounts Multiple

GAO framework theme Improve efficiency

In November 1995, GAO reported that DOD had a combined acquisition

workforce of about 464,000—398,000 civilians and 66,000 military

personnel in fiscal year 1994. The DOD acquisition infrastructure consumes

enormous resources that could otherwise be used to meet modernization

needs. In 1994, DOD’s civilian acquisition workforce was 12 percent lower

than in 1980; however, these personnel reductions have not resulted in a

commensurate decline in civilian payroll costs. This is due in part to the

significant decline in blue collar workers. In addition, DOD officials stated

that civilian payroll costs increased because of other factors, such as the

advent of locality pay and changes in grade structure.

Despite declines in both the defense procurement budget and the civilian

workforce since 1990, the number of acquisition organizations remains

relatively constant. Each acquisition organization maintains similar

occupational fields in common areas, such as personnel, budgeting,

computer specialists, and contracting, and many of the duties performed

in these occupations are not unique to an acquisition organization’s

mission. As a result, there are significant opportunities to improve

efficiencies in these areas.

The National Defense Authorization Act for Fiscal Year 1996 contains a

provision (title IX, section 906) that requires DOD to provide a plan to

reduce the number of personnel (both military and civilian) assigned to

defense organizations by 25 percent over a 5-year period. The provision

also requires an actual reduction of 15,000 personnel during fiscal year

1996. The total civilian personnel reductions would be about 90,000.

Further, the provision requires eliminating duplicative functions among

the acquisition organizations.

Successful implementation of a 25-percent reduction in DOD’s acquisition

workforce and consolidation of functions would result in substantial

future savings. The savings from civilian personnel salaries alone are

estimated in the following table.

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Infrastructure Options

Five-year Savings

Dollars in millions

FY 1997 FY 1998 FY 1999 FY 2000 FY 2001

Budget authority $80 $450 $1,040 $1,880 $2,090

Outlays 80 440 1,020 1,850 2,090

Source: CBO.

Related GAO Product Defense Acquisition Organizations: Changes in Cost and Size of Civilian

Workforce (GAO/NSIAD-96-46, Nov. 13, 1995).

Page 22 GAO/NSIAD-96-131 Defense Infrastructure
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Infrastructure Options

Option:

Reassess Defense

Conversion Spending

Infrastructure category Acquisition infrastructure

Budget account Research, Development, Test, and

Evaluation, Defense-wide (97-0400)

GAO framework theme Reassess objectives

Estimates of DOD’s portion of the total federal funds to be spent on defense

conversion for fiscal years 1993 through 1997 increased in the early years

of the current administration. However, GAO found no evidence that (1) the

level of spending is appropriate in light of other government programs that

support similar purposes and (2) the private economy has not responded

to the need for which these funds were authorized and appropriated.

Consequently, Congress may wish to slow DOD’s spending in this area.

The President’s defense conversion initiative, announced on March 11,

1993, totaled $19.6 billion over 5 years; DOD’s portion was 42 percent. The

administration’s February 1994 estimate of the initiative’s cost was

$21.6 billion; DOD’s portion had increased to 59 percent. A study for DOD’s

1993 Defense Conversion Commission identified 116 federal or state

programs, not classified as defense conversion, that could help ease the

impact of defense downsizing. These programs cost about $24 billion in

fiscal year 1993. Other related programs include federal activities to

develop advanced industrial technology with costs of about $10 billion in

fiscal year 1994.

The United States is now in the 11th year of defense downsizing, and many

firms, individuals, and communities that were adversely affected may have

already responded. Overall, savings from slowing defense conversion

spending would depend on the programs and activities affected. As an

illustrative example, CBO estimates that if the Technology Reinvestment

Program, one component of defense conversion spending, is eliminated

beginning in fiscal year 1997, the following savings could be achieved.2

2

The National Defense Authorization Act for Fiscal Year 1996 reduced the administration’s request of

$500 million for the Technology Reinvestment Program to $195 million.

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Infrastructure Options

Five-year Savings

Dollars in millions

FY 1997 FY 1998 FY 1999 FY 2000 FY 2001

Budget authority $201 $207 $213 $220 $226

Outlays 87 170 200 209 218

Source: CBO.

Related GAO Products Technology Reinvestment Project: Recent Changes Place More Emphasis

on Military Needs (GAO/T-NSIAD-95-167, May 17, 1995).

Defense Conversion: Capital Conditions Have Improved for Small- and

Medium-Sized Firms (GAO/NSIAD-94-224, July 21, 1994).

Defense Conversion: Status of Funding and Spending

(GAO/NSIAD-94-218BR, June 30, 1994).

Defense Conversion: Slow Start Limits Spending

(GAO/NSIAD-94-72, Jan. 25, 1994).

Page 24 GAO/NSIAD-96-131 Defense Infrastructure
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Infrastructure Options

Option:

Consolidate Air Force

Fighter Squadrons

Infrastructure category Installation support

Budget account Operation and Maintenance, Air Force

(57-3400)

GAO framework theme Improve efficiency

The Air Force accounts for its fighter force structure in wing equivalents

that represent 72 aircraft. At the end of the Air Force’s planned drawdown,

the Air Force’s active component F-15 and F-16 communities will make up

about 10 fighter wing equivalents. The Air Force plans to station these

aircraft in 37 squadrons at 17 bases in the United States and overseas.

Until recently, Air Force fighter wings were predominantly organized in 3

squadrons of 24 aircraft. However, the Air Force has decided to reduce its

squadron size to 18, which also reduced its wing size to 54. This change in

unit size increased the number of wings and squadrons to more than

would have been needed had the squadron size stayed at 24.

The Air Force has not demonstrated that it needs additional squadrons. Air

Force officials maintain that more squadrons are needed to provide the Air

Force with additional flexibility to respond to numerous potential conflicts

across the globe. Although the Air Force considers smaller fighter

squadrons beneficial, it had not performed any analysis to justify its

decision. Further, according to Air Force officials, Commanders in Chiefs,

who are responsible for conducting these operations, developed plans

based on the number of aircraft that are needed to execute

missions—regardless of squadron size.

Keeping more squadrons than are needed increases operating costs and

may result in more base infrastructure than the Air Force needs. GAO

developed several notional basing plans that the Air Force could use in

considering how to consolidate its fighter force into fewer squadrons.

Implementing these plans could eliminate not only between two and seven

squadrons, but also a wing and/or fighter base. CBO identified operating

and support cost savings ranging between $37 million and $145 million

annually (in 1996 dollars).3

 Recurring savings resulting from a base closure

are estimated at an additional $40 million annually (in 1996 dollars).

However, these savings would not begin to accrue until 3 to 4 years after

the base closure decision. If Congress chose to consolidate the Air Force’s

3

The CBO savings estimate is based on GAO’s manpower reduction estimates. Based on these

reductions, GAO’s work shows that operating costs savings could range between $25 million and

$115 million annually. Differences between CBO and GAO estimates are attributable to the larger

infrastructure cost savings estimated by CBO and not included in GAO’s estimates.

Page 25 GAO/NSIAD-96-131 Defense Infrastructure
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Infrastructure Options

fighter force into fewer squadrons by eliminating seven of them, the

following operating savings could be achieved.

Five-year Savings

Dollars in millions

FY 1997 FY 1998 FY 1999 FY 2000 FY 2001

Budget authority $75 $154 $158 $163 $168

Outlays 71 149 157 162 167

Source: CBO.

Note: Savings estimates do not include funds associated with the base closure. The savings

could be significant depending on the base selected for closure.

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Infrastructure Options

Option:

End U.S. Presence at

Soto Cano Air Force

Base, Honduras

Infrastructure category Installation support

Budget accounts Operation and Maintenance, Army

(21-2020); Air Force (57-3400)

GAO framework theme Reassess objectives

In 1983, the U.S. established a military presence at Soto Cano Air Force

Base, Honduras, to support U.S. military and political interests in Central

America, which were threatened by communist expansion in the area.

Since the end of the Cold War, the major mission of U.S. personnel at Soto

Cano has been to support military training exercises. In February 1995,

GAO reported that a continuing U.S. presence at Soto Cano was not critical

to U.S. government activities in Central America. Although current data on

the cost of the U.S. presence were not available, fiscal year 1994 operation

and maintenance costs were about $30 million. Since that time, activities

at Soto Cano have not changed substantially. Congress may wish to

eliminate the Army and Air Force presence at Soto Cano, which could

result in the following savings.

Five-year Savings

Dollars in millions

FY 1997 FY 1998 FY 1999 FY 2000 FY 2001

Budget authority $30 $30 $30 $30 $30

Outlays 25 30 30 30 30

Source: CBO.

Related GAO Products 1996 DOD Budget: Potential Reductions to Operation and Maintenance

Program (GAO/NSIAD-95-200BR, Sept. 26, 1995).

Honduras: Continuing U.S. Presence at Soto Cano Base Is Not Critical

(GAO/NSIAD-95-39, Feb. 8, 1995).

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Infrastructure Options

Option:

Eliminate Funds for

the Legacy Resource

Management Program

Infrastructure category Installation support

Budget account Operation and Maintenance, Defense-wide

(97-0100)

GAO framework theme Improve efficiency

In fiscal year 1995, DOD requested $10 million for the Legacy Resource

Management Program, which was created in 1990 to protect and preserve

the natural and cultural resources on DOD-owned land. Congress

appropriated $50 million, but the DOD Comptroller has only released

$30 million for use by this program. Examples of activities funded during

fiscal year 1995 by the program included preservation of historic

documents related to the Air Force band, a study of Peregrine falcon

migration, research on German prisoners of war murals, restoration and

rehabilitation of a historic adobe structure, and salmon rearing.

For fiscal year 1996, DOD has requested $10 million for the program. While

the program may be worthwhile, the question is whether funding this

program represents the best use of DOD funds. By eliminating funds for this

program, Congress could reduce DOD’s infrastructure funding by

$10 million annually.

Five-year Savings

Dollars in millions

FY 1997 FY 1998 FY 1999 FY 2000 FY 2001

Budget authority $10 $10 $10 $10 $10

Outlays 8 9 10 10 10

Source: CBO.

Related GAO Product 1996 DOD Budget: Potential Reductions to Operation and Maintenance

Program (GAO/NSIAD-95-200BR, Sept. 26, 1995).

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Option:

Reduce the Size of

DOD’s Finance and

Accounting

Infrastructure

Infrastructure category Force management

Budget accounts Multiple

GAO framework theme Improve efficiency

After several false starts, in May 1994 DOD announced it would begin

consolidating and reducing the size of its finance and accounting

infrastructure during fiscal year 1995. It plans to reduce the number of

sites where finance and accounting activities are conducted from over 300

to 26 which will result in a major reduction in staff years. The 26 sites are

composed of 5 large existing finance centers and 21 new sites that are

called operating locations. To date, 16 operating locations have been

opened.

Despite these consolidation efforts, additional opportunities exist to

reduce the infrastructure and improve the efficiency of finance and

accounting operations. In September 1995, we reported that the process

DOD used to identify the appropriate size and location of its consolidated

operations was flawed. Not only would the planned infrastructure be

larger than necessary, but it would also perpetuate the continued use of

older, inefficient, and duplicative systems. With fewer people available to

support the same operations and systems at fewer locations, the

consolidation could degrade, rather than improve, customer service.

Moreover, DOD’s plan does not reflect leading-edge business practices and,

therefore, may require additional consolidations if business process

reengineering techniques are used to identify more productive business

practices for DOD finance and accounting operations.

Because DOD’s decision to open 21 new operating locations was not based

on current or future operating requirements, customer needs, or

leading-edge business practices, other consolidation alternatives could

produce substantial infrastructure savings. The Defense Finance and

Accounting Service (DFAS) Consolidation Task Force showed that savings

could occur by retaining the 5 large centers plus 6, 10, or 15 operating

locations. The Task Force concluded, however, that 6 new operating

locations was the best alternative because it would save more money and

allow an optimum consolidation of finance and accounting functions.

Based on this and other factors, we recommended that DOD reassess the

number of operating locations needed to efficiently perform finance and

accounting operations.

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Infrastructure Options

DOD’s subsequent reassessment concluded that 16 rather than 21 operating

locations are needed to support its finance and accounting operations.

Because of its interpretation of congressional intent, however, DOD

continues to support the opening of all 21 locations. We are currently in

the process of analyzing DOD’s reassessment of its operating location

requirements but have preliminarily concluded that DOD has

misinterpreted congressional intent and at a minimum, should not be

opening the 5 facilities that it no longer believes are needed. We have not

yet done enough work to determine how many, if any, additional operating

locations are excess to DOD’s needs. In presenting this option, therefore,

we relied on the analysis performed by the DFAS Consolidation Task Force

which identified 6 as the optimum number of operating locations.

Recognizing the costs DOD has incurred to open 16 centers, reducing the

number of operating locations from 16 to 6 could achieve savings in

several different ways. First, a reduction in the infrastructure would

require fewer support and management personnel and related items to

operate the locations. Second, military construction funding for sites that

would require extensive renovations would not be necessary. Third, in

anticipation of the efficiencies and service improvements that would be

achieved under DOD’s reengineering and privatization efforts, annual

funding could be reduced 10 to 15 percent. If Congress was to direct the

Secretary of Defense to reduce the existing 16 locations to 6, as

recommended by the DFAS Consolidation Task Force, the following savings

could be achieved in civilian personnel and military construction. This

represents the optimum consolidation of locations according to the DFAS

Consolidation Task Force. The savings estimate assumes that by reducing

the number of sites to six, 6,500 civilian personnel positions would be

eliminated. This magnitude of personnel reductions can only be attained if

DOD achieves the productivity gains it expects from reengineering and

privitization/outsourcing initiatives. However, Congress and DOD will need

to reach an agreement on the exact number of operating locations and

reductions in personnel. Moreover, as we pointed out in our letter, DOD

may need to make investments in this area to improve its financial

management systems.

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Infrastructure Options

Five-year Savings

Dollars in millions

FY 1997 FY 1998 FY 1999 FY 2000 FY 2001

Budget authority $90 $210 $340 $370 $380

Outlays 60 190 320 400 400

Source: CBO.

Related GAO Product DOD Infrastructure: DOD’s Planned Finance and Accounting Structure Is Not

Well Justified (GAO/NSIAD-95-127, Sept. 18, 1995).

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Infrastructure Options

Option:

Cap Funding for the

Civil Air Patrol

Infrastructure category Force management

Budget account Operation and Maintenance, Defense-wide

(97-0100)

GAO framework theme Improve efficiency

The Civil Air Patrol is a nonprofit corporation that is comprised of private

citizens who assist in national and local emergencies, such as inland

search and rescue missions, emergency air transport, counter drug

surveillance, and humanitarian airlift missions. The Air Force has been

providing financial support and some management personnel to the patrol

for a number of years.

In response to congressional concerns about patrol funding, in

January 1995, the Air Force began a reorganization to reduce (1) the

number of active duty military and Air Force civilian employees who

provide support to the patrol and (2) the need for funding by $3 million a

year. The reorganization has resulted in a need for more, not less,

operation and maintenance funding. The reason for this is that the number

of employees (about 250 before the reorganization) was not significantly

reduced and state liaisons, who were once paid from the military pay

appropriation, are now paid from operation and maintenance funds.

After the reorganization is complete, there will be 75 Air Force military

and civilian employees supporting the patrol. In addition, there will be 162

patrol employees who will be paid with appropriated funds. This total

includes 90 military retirees who will serve as wing liaisons in each of the

50 states, the District of Columbia, and Puerto Rico. These individuals will

be compensated with operation and maintenance funds at a rate equal to

the difference between what their retirement pay is and what their active

duty pay would be if they were still on active duty.

For fiscal year 1996, the Air Force received $17 million of operation and

maintenance funds to provide support to the patrol. This amount

represents an increase of $6 million over the fiscal year 1995 funding level.

Because the reorganization has not achieved the intended savings,

Congress could cap the program at the fiscal year 1995 level. The resultant

estimated savings are shown in the following table.

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Infrastructure Options

Five-year Savings

Dollars in millions

FY 1997 FY 1998 FY 1999 FY 2000 FY 2001

Budget authority $6 $6 $6 $6 $6

Outlays 4 6 6 6 6

Source: CBO.

Related GAO Product 1996 DOD Budget: Potential Reductions to Operation and Maintenance

Program (GAO/NSIAD-95-200BR, Sept. 26, 1995).

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Option:

Reduce the Size of

DOD’s Transportation

Infrastructure

Infrastructure category Central logistics

Budget accounts Operation and Maintenance, Navy

(17-1804); Army (21-2020); Air Force

(57-3400); Marine Corps (17-1106)

GAO framework theme Improve efficiency

Various studies, commissions, and task forces dating as far back as 1949

have recommended changes in the defense transportation system

organizational structure. Transportation processes were found to be

fragmented, inefficient, and costly. Traffic management processes and

automated systems were developed independently for each mode of

transportation. The entire defense transportation system was built along

service and modal lines. Furthermore, no one DOD transportation agency

was responsible for handling or managing all facets of cargo movement.

In 1987, after the Goldwater-Nichols Act of 1986 urged that actions be

taken to unify transportation management, the Secretary of Defense

established the U.S. Transportation Command (USTRANSCOM). USTRANSCOM

was created as a unified combatant command for transportation missions;

combining the missions, responsibilities, and forces of the defense

transportation single managers. The managers were the Army’s Military

Traffic Management Command (MTMC), which is responsible for managing

land transportation, military traffic, and water port operations; the Navy’s

Military Sealift Command (MSC), which is responsible for sealift; and the

Air Force’s Air Mobility Command (AMC), which is responsible for airlift.

At first, mission responsibility was restricted to times of war or conflicts.

But in 1992, USTRANSCOM’s mission was expanded to cover both wartime

and peacetime, and MTMC, MSC, and AMC, though they remained major

commands of their respective services, became component commands of

USTRANSCOM. In addition, USTRANSCOM was given control of all

transportation assets, except for those that are service-unique or

theater-assigned.

A recent study by USTRANSCOM concluded that transportation process

fragmentation remains. GAO’s recent report concludes that traffic

management processes perpetuate fragmentation, typically along service

and transportation modal lines, much as they were before USTRANSCOM was

created. The report also indicates that even with the establishment of

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Infrastructure Options

USTRANSCOM, recommendations to change the organizational structure have

not been implemented.

This extensive infrastructure is costly. Transportation services that the

military component commands have traditionally provided, such as port

handling and intermodal transfers, are being handled primarily by

commercial carriers. Component field offices are part of an antiquated

system that moves cargo by separate modes and requires on-site personnel

at modal transfer points. For example, a military customer is charged

$2,624 for a shipment from New Jersey to Rotterdam, Netherlands; yet a

commercial carrier charges $1,553 for the shipment. The added cost to the

customer of $1,071 (which is 69 percent of the carrier’s $1,553 charge)

represents the overhead amount charged to the customer.

Opportunities exist to reduce the defense transportation infrastructure

and improve the efficiency of cargo traffic management operations.

Combining common-user transportation functions and positions under the

direct command and control of a single manager, USTRANSCOM, would

eliminate unnecessary overhead, duplication of functions, and overlapping

responsibilities. Ultimately, streamlining the command structure would

reduce the costs of operations being passed to customers. Under such a

realignment, service-unique functions would remain with the services.

Likewise, unique transportation readiness requirements would be reported

separately and funded directly to the services.

Nearly 90 percent of defense cargo moves by domestic commercial motor

carriers during peacetime and noncontingency operations. Additional

opportunities for outsourcing include use of direct booking during

noncontingency operations whereby customers book directly with carriers

and substantially decrease the involvement of government traffic

management; use of commercial freight forwarders, not government traffic

managers; employment of third-party logistics firms to handle

documentation, billing, and payment; and use of existing commercial

system capabilities for in-transit and total asset visibility needs. By

increasing the use of outsourcing to satisfy peacetime requirements,

USTRANSCOM and its customers could achieve additional cost savings as

well as dedicate resources to the critical role of strategic planning.

Various options exist to achieve defense transportation infrastructure

savings. Fixing the organizational structure is a mandatory first step to

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Infrastructure Options

substantially reduce costs. A logical way, though not the only one, would

be to take the following steps.4

• First, place the 362 Defense Business Operations Fund Transportation MSC

staff worldwide together with MTMC. This move would create a single

MTMC/MSC headquarters staff—one set of personnel responsible for such

activities as public affairs, internal review, equal employment opportunity,

and other staff functions. MTMC’s Field Operating Activity and MSC’s Central

Technical Activity would be consolidated. One office would be responsible

for all contract negotiations and administration, comptroller/budget

activities, litigation/legal activities. And, all MSC field staff functions

currently at area commands would be merged with MTMC area command

staff. In fiscal year 1994, MSC’s Defense Business Operations Fund

Transportation staff costs were $54 million.

• Second, close MTMC continental United States area commands at Bayonne,

New Jersey, and at Oakland, California. These commands are not

justifiable because of budgetary pressures. Labor costs for these two

commands alone in fiscal year 1994 were $65 million,

• $29 million for Eastern Area-Bayonne (civilian and military),

• $12 million for Eastern Area-Bayonne (military garrison-Bayonne),

• $21 million for Western Area-Oakland (civilian and military), and

• $3 million for Western Area-Oakland (military garrison-Oakland)

• Third, eliminate MTMC overseas area commands. Overseas areas

commands in fiscal year 1994 were $29 million—$20 million for

MTMC-Europe, Rotterdam (civilian and military) and $9 million for

MTMC-Pacific, Wheeler Army Air Field, Hawaii (civilian and military).

• Fourth, eliminate MTMC port commands. MTMC operates 26 port and

terminal facilities around the world, with more than 1,200 staff, with a

support cost, based on fiscal year 1994 data, exceeding $70 million (not

including contract stevedore costs).

4

All cost data come from “Defense Business Operations Fund, Defense-wide, FY 1996/1997 Biennial

Budget Estimates, Operating and Capital Budgets, February 1995, Congressional Data,” and MTMC,

MSC, and AMC financial reports.

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Infrastructure Options

If Congress chose to consolidate the organizational structure as outlined

above, the following civilian personnel savings could be achieved.

Five-year Savings

Dollars in millions

FY 1997 FY 1998 FY 1999 FY 2000 FY 2001

Budget authority $20 $60 $105 $130 $135

Outlays 20 60 105 130 135

Source: CBO.

Note: Savings estimates do not include funds associated with operating costs or closing sites.

Related GAO Products Defense Transportation: Streamlining of the U.S. Transportation

Command Is Needed (GAO/NSIAD-96-60, Feb. 22, 1996).

Defense Transportation: Commercial Practices Offer Improvement

Opportunities (GAO/NSIAD-94-26, Nov. 26, 1993).

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Option:

Close DOD’s

Uniformed Services

University of the

Health Sciences

Infrastructure category Central medical

Budget account Defense Health Program (97-0130)

GAO framework theme Reassess objectives

In 1972, Congress created two complementary physician accession

sources: the Health Profession Scholarship Program and the Uniformed

Services University of the Health Sciences. Under the scholarship

program, DOD pays tuition and fees, plus a monthly stipend for students

enrolled in civilian medical schools. In return, the students incur an

obligation to serve a year of active duty service for each year of benefits

received, with a 2-year minimum obligation. In contrast, students at the

University enter active military service as medical students, receive the

pay and benefits of an officer at the O-1 level, and incur a 10-year service

obligation. In 1994, 155 medical students graduated from the University.

GAO’s analysis shows that the University provides a medical education that

compares well with that of other U.S. medical schools. Traditional

measures of quality place the University within the mid-range of medical

schools nationwide and its graduates at or above other military physicians.

In addition, the University provides education and training for other health

care and related professions and engages in research, consultation, and

archival activities. These activities, which do not directly contribute to the

education of military physicians, involve University faculty and staff. DOD

would likely continue to conduct these activities even if the University

were closed.

University graduates begin their military medical careers with more

readiness training than their peers, but the significance of the additional

training is unclear. Due to the absence of objective measures, no

conclusive evidence exists that University graduates are better prepared to

meet the needs of military medicine than their civilian-educated peers. The

services have not assessed the impact of readiness training, and a

thorough assessment is needed to determine the type and amount of such

training that military physicians need.

GAO’s analysis shows that on a per graduate basis, the University is the

most expensive source of military physicians when considering DOD costs

and total federal costs. With DOD education and retention costs of about

$3.3 million, the cost of a University graduate is more than 2 times greater

than the $1.5 million cost for a regular scholarship program graduate.

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Infrastructure Options

When costs are distributed over the expected years of military physicians’

service, the University remains more costly when only DOD costs are

considered, but it is nearly equal to the cost of the regular scholarship

program and lower than the cost of the deferred program when total

federal costs are considered. This difference occurs because University

graduates are expected to have much longer military careers and the

University receives much less non-DOD federal support than civilian

medical schools.

Given the changes in operational scenarios and DOD’s approach for

delivering peacetime health care, new assessments of the military’s

physician needs and the means to acquire and retain such physicians are

needed. For example, if DOD continues to need a cadre of experienced

career physicians, alternative strategies, such as an additional scholarship

option with a longer service obligation, could be considered as a

potentially less expensive way to increase the length of selected military

physicians’ careers. Additional readiness training could be provided

through a post graduate period specifically designed to enhance the

physician’s preparation for the special needs of military medicine. If

Congress chose to close the Uniformed Services University of the Health

Sciences and maintain a steady supply of physicians through other

sources, the following savings could be achieved.

Five-year Savings

Dollars in millions

FY 1997 FY 1998 FY 1999 FY 2000 FY 2001

Budget Authority $21 $35 $52 $94 $97

Outlays 17 31 47 84 93

Source: CBO.

Related GAO Product Military Physicians: DOD’s Medical School and Scholarship Program

(GAO/HEHS-95-244, Sept. 29, 1995).

Page 39 GAO/NSIAD-96-131 Defense Infrastructure
Appendix I 

Infrastructure Options

Option:

Establish Copayments

for Care in Military

Hospitals

Infrastructure category Central medical

Budget account Defense Health Program (97-0130)

GAO framework theme Redefine beneficiaries

Currently, care received by military beneficiaries in military hospitals and

clinics is free. However, when care must be obtained through civilian

providers, military beneficiaries share in the costs of the care they receive.

This uneven system has led to confusion, uncertainty, and inequity among

beneficiaries as to what their health care benefits are. Further, research

has shown that free care leads to greater (and unnecessary) use and,

therefore, greater costs.

Congress may wish to establish beneficiary cost-sharing requirements for

care received in military hospitals that are similar to the cost-sharing for

care that beneficiaries receive from civilian providers. Estimated savings

from doing so are shown in the following table.

Five-year Savings

Dollars in millions

FY 1997 FY 1998 FY 1999 FY 2000 FY 2001

Budget authority $202 $203 $204 $204 $205

Outlays 175 197 201 201 202

Source: CBO.

Related GAO Products Defense Health Care: DOD’s Managed Care Program Continues to Face

Challenges (GAO/T-HEHS-95-117, Mar. 28, 1995).

Defense Health Care: Issues and Challenges Confronting Military Medicine

(GAO/HEHS-95-104, Mar. 22, 1995).

Defense Health Care: Lessons Learned From DOD’s Managed Health Care

Initiatives (GAO/T-HRD-93-21, May 10, 1993).

Defense Health Care: Obstacles in Implementing Coordinated Care

(GAO/T-HRD-92-24, Apr. 7, 1992).

Page 40 GAO/NSIAD-96-131 Defense Infrastructure
Appendix I 

Infrastructure Options

Defense Health Care: Implementing Coordinated Care—A Status Report

(GAO/HRD-92-10, Oct. 3, 1991).

The Military Health Services System—Prospects for the Future

(GAO/T-HRD-91-11, Mar. 14, 1991).

Page 41 GAO/NSIAD-96-131 Defense Infrastructure
Appendix I 

Infrastructure Options

Option:

Collocate and Close

Recruiting Facilities

Infrastructure category Central personnel

Budget account Operation and Maintenance, Army

(21-2020)

GAO framework theme Improve efficiency

The Army, as the executive agent for recruiting facilities, is responsible for

requesting funds for all recruiting offices. For fiscal year 1996, the Army’s

operation and maintenance budget request includes $102.6 million for

leasing costs associated with the recruiting facilities.

GAO estimates that leasing costs could be reduced about $5.1 million by

collocating the supervisory personnel with the recruiters rather than

maintaining separate facilities for the supervisors. According to DOD

officials, in fiscal year 1994, all of the Army’s and about one-half of the

Navy’s and Air Force’s supervisory personnel occupied separate office

space. In contrast, the Marine Corps locates its supervisory recruiting

personnel with its recruiters.

An additional $13.3 million of leasing costs could be saved if the least

productive recruiting offices were closed. GAO’s December 1994 report

noted that 518 counties, out of a total of 1,036 counties in which recruiting

offices were located, accounted for only 13.5 percent of the services’

accessions. Of this total, approximately 290 counties each produced only

one recruit during the first 5 months of 1994. On the other hand, 259

counties, or 25 percent of the total counties, produced 70 percent of all

service accessions.

If the services closed the recruiting offices in the least productive

50 percent of the 518 counties, about 2,800 recruiters could be reassigned

and $13.3 million dollars could be saved in annual leasing costs. Thus,

Congress may want to direct that supervisory recruiting personnel be

collocated with the recruiting personnel and that the least productive

recruiting offices be closed. Taking these actions could result in the

following savings.

Page 42 GAO/NSIAD-96-131 Defense Infrastructure
Appendix I 

Infrastructure Options

Five-year Savings

Dollars in millions

FY 1997 FY 1998 FY 1999 FY 2000 FY 2001

Budget authority $20 $20 $21 $21 $22

Outlays 15 19 20 21 22

Source: CBO.

Related GAO Products 1996 DOD Budget: Potential Reductions to Operation and Maintenance

Program (GAO/NSIAD-95-200BR, Sept. 26, 1995).

Military Recruiting: More Innovative Approaches Needed

(GAO/NSIAD-95-22, Dec. 22, 1994).

Page 43 GAO/NSIAD-96-131 Defense Infrastructure
Appendix I 

Infrastructure Options

Option:

Discontinue or Phase

Out the Junior

Reserve Officers’

Training Corps

Program

Infrastructure category Central training

Budget accounts Operation and Maintenance, Navy

(17-1804); Army (21-2020); Air Force

(57-3400)

GAO framework theme Reassess objectives

The National Defense Act of 1916 established the Junior Reserve Officers’

Training Corps (JROTC) program for high schools and private secondary

schools. The program’s primary purpose was to disseminate military

knowledge among the secondary school population of the United States.

The ROTC Vitalization Act of 1964 expanded the program and required the

Secretary of each military department to establish and maintain JROTC

units. In the wake of the August 1992 Los Angeles riots, the President and

the Chairman of the Joint Chiefs of Staff made plans to double the size of

the program within 5 years.

The services’ fiscal year 1996 operation and maintenance requests include

$124.3 million for the JROTC program, an increase of $16.8 million, which

will be used in part to add 78 schools to the program. According to service

officials, the current program is essentially a stay-in-school program and is

operated in about 2,300 high schools in the United States and overseas.

The program’s objectives are to teach military and citizenship subjects. In

addition, the Army operates a summer camp, and operation and

maintenance funds are used to help pay instructors’ salaries. Service

officials emphasized that the program is not viewed as a recruiting tool for

the services.

While the program may benefit the community and the public in general,

the question is whether DOD should be involved in funding this type

program or whether the program should be funded by a non-DOD

appropriation account. Congress may wish to discontinue or phase out the

JROTC program, which would save about $124 million annually. If the

program was eliminated the following savings could be achieved.

Five-year Savings

Dollars in millions

FY 1997 FY 1998 FY 1999 FY 2000 FY 2001

Budget authority $173 $177 $182 $187 $193

Outlays 164 177 182 187 193

Source: CBO.

Page 44 GAO/NSIAD-96-131 Defense Infrastructure
Appendix I 

Infrastructure Options

Related GAO Product 1996 DOD Budget: Potential Reductions to Operation and Maintenance

Program (GAO/NSIAD-95-200BR, Sept. 26, 1995).

Page 45 GAO/NSIAD-96-131 Defense Infrastructure
Appendix I 

Infrastructure Options

Option:

Discontinue National

Guard Youth Programs

Infrastructure category Central training

Budget account Operation and Maintenance, Defense-wide

(97-0100)

GAO framework theme Reassess objectives

In 1992, Congress authorized the National Guard to undertake a pilot

program in 10 states to determine if the life skills and employment

potential of high school dropouts could be improved through

military-based training. In fiscal year 1993, Congress provided the first

funds to conduct the Civilian Youth Opportunities pilot program. This

program, known as ChalleNGe, is a 5-month residential program with a

1-year post-residential mentoring segment aimed at high school dropouts.

Currently, the program operates in 15 states and has an enrollment of

about 3,716 youths. The DOD fiscal year 1996 operation and maintenance

budget request includes $56.65 million for this program.

A second program, called Starbase, is a 5-week course that focuses on

math, science, and technology for in-school youths in grades kindergarten

through 12. This program operates in 14 states at 17 locations. The fiscal

year 1996 budget request includes $4.75 million for this program.

While these programs may benefit the community and the public in

general, the question is whether DOD should be involved in funding this

type of program or whether the program should be funded by a non-DOD

appropriation account. Congress may wish to discontinue National Guard

youth programs, which would result in the following savings.

Five-year Savings

Dollars in millions

FY 1997 FY 1998 FY 1999 FY 2000 FY 2001

Budget authority $71 $0 $0 $0 $0

Outlays 67 4 0 0 0

Source: CBO.

Note: Authorization for this program expires after fiscal year 1997.

Related GAO Product 1996 DOD Budget: Potential Reductions to Operation and Maintenance

Program (GAO/NSIAD-95-200BR, Sept. 26, 1995).

Page 46 GAO/NSIAD-96-131 Defense Infrastructure
Appendix II 

Categories of Defense Infrastructure

Installation support consists of activities that furnish funding, equipment,

and personnel to provide facilities from which defense forces operate.

Activities include construction planning and design, real property

maintenance, base operating support, real estate management for active

and reserve bases, family housing and bachelor housing, supply

operations, base closure activities, and environmental programs.

Acquisition infrastructure consists of all program elements that support

program management, program offices, and production support, including

acquisition headquarters, science and technology, and test and evaluation

resources. This category includes earlier levels of research and

development, including basic research, exploratory development, and

advanced development.

Central logistics consists of programs that provide support to centrally

managed logistics organizations, including the management of material,

operation of supply systems, maintenance activities, material

transportation, base operations and support, communications, and minor

construction. This category also includes program elements that provide

resources for commissaries and military exchange operations.

Central training consists of program elements that provide resources for

virtually all non-unit training, including training for new personnel,

aviation and flight training, military academies, officer training corps,

other college commissioning programs, and officer and enlisted training

schools.

Central medical consists of programs that furnish funding, equipment, and

personnel that provide medical care to active military personnel,

dependents, and retirees. Activities provide for all patient care, except for

that provided by medical units that are part of direct support units.

Activities include medical training, management of the medical system,

and support of medical installations.

Central personnel consists of all programs that provide for the recruiting

of new personnel and the management and support of dependent schools,

community, youth, and family centers, and child development activities.

Other programs supporting personnel include permanent change of station

costs, personnel in transit, civilian disability compensation, veterans

education assistance, and other miscellaneous personnel support

activities. 

Page 47 GAO/NSIAD-96-131 Defense Infrastructure
Appendix II 

Categories of Defense Infrastructure

Command, control, and communications consists of programs that

manage all aspects of the command, control, and communications

infrastructure for DOD facilities, information support services, mapping and

charting products, and security support. This category includes program

elements that provide nontactical telephone services, the General Defense

Intelligence Program and cryptological activities, the Global Positioning

System, and support of air traffic control facilities.

Force management consists of all programs that provide funding,

equipment, and personnel for the management and operation of all the

major military command headquarters activities. Force management also

includes program elements that provide resources for defense-wide

departmental headquarters, management of international programs,

support to other defense organizations and federal government agencies,

security investigative services, public affairs activities, and criminal and

judicial activities.

(701077) Page 48 GAO/NSIAD-96-131 Defense Infrastructure
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