United States General Accounting Office

GAO Report to the Chairman, Subcommittee

on Military Forces and Personnel,

Committee on Armed Services, House of

Representatives

October 1994 AVIATION

CONTINUATION PAY

Some Bonuses Are

Inappropriate Because

of Prior Service

Obligations

GAO/NSIAD-95-30

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-257335 

October 14, 1994

The Honorable Ike Skelton

Chairman, Subcommittee on Military Forces and Personnel

Committee on Armed Services

House of Representatives

Dear Mr. Chairman:

In 1989, when extending the existing authority for the aviation retention

bonuses known as Aviation Continuation Pay (ACP), the House Armed

Services Committee expressed concern about the large number of pilots

who had testified at hearings that they had accepted the bonus because

the obligation they incurred ran concurrently with already existing service

commitments.1

 As part of a broader review of the Department of Defense’s

(DOD) special and incentive pays, we assessed how well the services were

complying with the House Armed Services Committee’s direction that

aviator retention bonuses were not to be given to service members for

time that they were already committed to serve. Specifically, our

objectives were to determine the (1) extent and amount of overlapping

commitments and (2) reasons for preexisting commitments.

Results in Brief DOD is paying ACP bonuses for time that service members already have

commitments despite direction from the House Armed Services

Committee to avoid such payments. In fiscal years 1992 and 1993, 

58 percent and 69 percent, respectively, of the new ACP contracts went to

aviators with preexisting commitments. These overlapping commitments

stemmed from commitments incurred mainly in connection with receipt of

additional training or permanent change of station moves. Overlapping

commitments averaged 15 months and cost DOD approximately $15 million

in fiscal year 1992 and $11 million in fiscal year 1993. Paying bonuses to

entice aviators to commit to serve for periods of time for which they are

already committed is not only inconsistent with the House Armed Services

Committee direction, but is not a prudent use of taxpayer funds.

Background In the late 1970s, DOD and the Congress found significant problems with

aviator retention. In 1980, the Congress initially authorized aviator

bonuses under 37 U.S.C. 301b. The bonuses were intended to be used to

improve retention and reduce shortages of flight personnel. The bonus

1

H. Rept. 121, 101st Congress, 1st Session 278 (1989).

Page 1 GAO/NSIAD-95-30 Aviation Continuation Pay
B-257335 

program, referred to as Aviation Officers Continuation Pay, was

reauthorized in some form from fiscal years 1981-82 and again in 1984-88.2

For fiscal year 1989, the Congress authorized a new aviation bonus

program as a provisional retention program to replace the Aviation

Officers Continuation Pay program. The National Defense Authorization

Act for fiscal years 1990 and 1991 (P.L. 101-189) authorized the present ACP

program.

Under the ACP program, the services are authorized to pay bonuses of up

to $12,000 for each year of additional commitment to aviators who have

completed at least 6 years but less than 13 years of active duty service.3

The commitment period cannot extend beyond their 14th year. Each of the

services, with the exception of the Army,4

 is using the ACP program to pay

retention bonuses to aviators.

ACP Paid to Aviators

With Preexisting

Commitments

Using data provided by the services, we determined that ACP was being

paid for periods of time for which aviators had preexisting commitments

for military service. In fiscal years 1992 and 1993, DOD committed to pay

$94.6 million and $75.6 million, respectively, in ACP. Of those totals,

approximately $15 million (16 percent) in fiscal year 1992 and $11 million

(15 percent) in fiscal year 1993 were for periods of time that the aviators

were already committed to serve. Of the 2,278 new ACP contracts in fiscal

year 1992 and the 1,104 contracts in fiscal year 1993, about 58 percent and

69 percent, respectively, went to service members with preexisting

commitments. Table 1 provides more detailed information on ACP

payments for periods of preexisting commitments during fiscal years 1992

and 1993.

2

The program ended on September 30, 1982, in accordance with the sunset provision in the Uniformed

Services Pay Act of 1981 (P.L. 97-60, 113, 95 Stat. 989, 995 (1981)). The Senate Armed Services

Committee found that the bonus was “an inappropriate solution to long-term retention problems” with

military aviators (S. Rept. 97-146 (Committee on Armed Services), p. 10, accompanying S.1181, 97th

Congress, 1st Session, 1981). The hiatus in the program ended with the passage of the DOD

Authorization Act of 1984 (P.L. No. 98-94, 904(a), 97 Stat. 614, 635-636 (1983)).

3

Pilot training commitments were changed to 7 years in 1987 and 8 years in 1988. Aviators are not

eligible for ACP until their undergraduate training commitment has been completed.

4

Army officials stated that they have been able to retain sufficient numbers of aviators without the ACP

program and do not want to single out one segment of officers for treatment that is different from that

provided its other officers.

Page 2 GAO/NSIAD-95-30 Aviation Continuation Pay
B-257335 

Table 1: ACP Costs and Overlaps for

Fiscal Years 1992 and 1993 Dollars in millions

Navya

Marine

Corpsa Air Forceb DOD total

New fiscal year 1992

ACP contracts

Total number 621 680 977 2,278

Total cost $11.8 $8.0 $74.8 $94.6

Contracts with overlap 232 (37%) 334 (49%) 755 (77%) 1,321 (58%)

Average overlap

(months) 13 16 14 14

Longest overlap

(months) 67 24 59 67

Cost of overlap $1.9 (16%) $2.7 (34%) $10.5 (14%) $15.1 (16%)

New fiscal year 1993

ACP contracts

Total number 137 168 799 1,104

Total cost $10.1 $2.0 $63.5 $75.6

Contracts with overlap 75 (55%) 77 (46%) 612 (77%) 764 (69%)

Average overlap

(months) 14 16 16 16

Longest overlap

(months) 60 24 60 60

Cost of overlap $1.0 (10%) $0.6 (30%) $9.6 (15%) $11.2 (15%)

aFigures on overlapping commitments do not include commitments that are the result of tuition

assistance (service payments for voluntary education programs). The Navy and the Marine Corps

did not provide this data because it would have required an extensive manual review of records.

Consequently, the data shown in the table understates the extent of overlapping commitments for

those services. In the Air Force, tuition assistance accounted for 4 percent of overlapping

commitments in fiscal year 1992 and 7 percent in fiscal year 1993.

bFigures on overlapping commitments do not include commitments occurring shortly before the

ACP contract dates due to limitations in Air Force data archives. Consequently, the data shown in

the table understates the extent of overlapping commitments. A study conducted by a War

College student using the same methodology as this one found that 90 percent of the pilots who

accepted ACP in fiscal year 1989 already had commitments to extend their service. (See

Mestemaker, Michael J., “The Aviation Career Improvement Act and Its Impact on Retention,”

Carlisle Barracks, Pennsylvania: U.S. Army War College, 1991.)

Reasons for

Preexisting and

Overlapping

Commitments

Aviators contracting for ACP may have preexisting commitments resulting

from a variety of circumstances, including flight training and permanent

change of station moves. Activities such as these sometimes bring with

them requirements for the continued service of the individual for a

specified period of time.

Page 3 GAO/NSIAD-95-30 Aviation Continuation Pay
B-257335 

The following composite illustrations show some of the main reasons for

preexisting commitments and the degree of overlap.

• Case 1: In January 1992, an Air Force strategic airlift pilot completed the

advanced flight courses required to become a C-5 crew commander. In

return for this training, the pilot incurred a 2-year service obligation. In

October 1992, the pilot signed a 6-year ACP contract for $72,000, which

overlapped with the 15 months remaining on the pilot’s flight training

commitment. Thus, the pilot was paid $15,000 for a 15-month period of

service (from October 1992 through December 1993) already owed to the

Air Force.

• Case 2: In January 1992, following a tour of duty aboard an aircraft carrier,

a Navy aviator accepted an assignment that involved a permanent change

of duty station to a shore-based training squadron. By making this move,

the aviator became obligated for 2 additional years in the Navy. In

November 1992, 10 months later, the aviator signed a 7-year ACP contract

for a bonus of $84,000. The aviator was therefore paid $14,000 for the

14-month period for which he was already obligated to serve because of

the move.

• Case 3: A Marine Corps aviator had been flying A-6 aircraft for a number of

years. However, because that aircraft was being phased out, the aviator

volunteered to be retrained as a Harrier (AV-8B) pilot. The retraining

obligated the aviator to 3 years of additional service. A year later, the

aviator signed a 2-year ACP contract for $12,000. As a result, he was paid

$12,000 to commit for a 24-month period for which he was already

committed.

Data provided by the services shows that the primary reason for

preexisting commitments in fiscal years 1992 and 1993 was flight training

in the Air Force and permanent change of station moves in the Navy and

the Marine Corps. Table 2 shows the reasons for preexisting commitments

for each of the services in those fiscal years.

Page 4 GAO/NSIAD-95-30 Aviation Continuation Pay
B-257335 

Table 2: Reasons for Preexisting

Commitments in Fiscal Years 1992 and

1993

Figures in percentages

Fiscal year

Reason for preexisting

obligation Navy

Marine

Corps

Air

Force

1992 Flight training 1 18 57

Permanent change of station 93 62 33

Other 6 20 10

1993 Flight training 0 31 51

Permanent change of station 97 64 29

Other 3 5 20

Recommendation The payment of ACP bonuses without reductions for periods of service for

which aviators have preexisting commitments is inconsistent with

congressional committee expectations and is not a prudent use of

resources. We recommend that the Secretary of Defense establish internal

controls to ensure that the services do not pay aviators for periods of

preexisting service obligations.

Agency Comments

and Our Evaluation

DOD partially agreed with our findings but did not agree with our

recommendation. DOD recognized that offering retention bonuses to

aviators who have an existing service obligation may appear, when taken

in isolation, imprudent. However, DOD stated that this practice needs to be

considered in relation to the underlying objectives of the program. DOD’s

comments are included in their entirety in appendix I.

DOD stated that permanent changes of station and advanced training

primarily benefit the service and the resulting commitments are imposed

for different purposes than the ACP commitments. DOD noted that

personnel are moved to different duty stations to fulfill validated service

needs and the resulting service obligation is imposed as a means of

reducing the turbulence and cost that result from moves that occur too

frequently. The service commitment attached to advanced training is

intended to ensure that the service is able to recoup its additional

investment. The intent of the ACP commitment requirement, on the other

hand, is to ensure that experienced aviators will remain in the service

between the end of their initial training commitments (6 to 8 years) and

the point (about 14 years) at which the lure of retirement benefits exerts

greater influence on retention.

Page 5 GAO/NSIAD-95-30 Aviation Continuation Pay
B-257335 

While we recognize that the various types of service commitments may

have been imposed for different reasons, the effects of such commitments

are the same—the aviator is obligated to remain in the service for a certain

period of time. Paying a retention bonus to an aviator when that aviator

was already committed to remain in the service is not a prudent use of

scarce resources. For example, we found that some Marine Corps aviators

who had a preexisting service commitment requiring them to remain in the

service for 24 months were given ACP to remain in the service for those

same 24 months. In effect, ACP did nothing to increase the retention of

those aviators who were already obligated to stay for the entire period.

DOD also raised a concern that small differences in timing could have large

dollar consequences for individual aviators. That is, receipt of permanent

change of duty orders immediately before ACP bonus eligibility would

cause the aviator to lose a substantial amount of money. This, however, is

true of any program that has specific eligibility periods. If perceived

inequity resulting from the timing of ACP eligibility becomes a problem, it

could be addressed by suspending the unexpired portion of a preexisting

service commitment and reimposing it at the end of the ACP commitment

period. That is, if an aviator had 16 months of service commitment

remaining from either a permanent change of station or some advanced

training, the aviator could receive ACP and the 16 months could be

reinstated at the expiration of the commitment imposed under the ACP

program.

DOD stated that if it required preexisting commitments to be completed

before an aviator could accept a retention bonus, resulting attrition would

cost more money than enforcing those commitments would save. DOD’s

rationale was that some aviators would refuse to accept a relocation if it

cost them some bonus money and then would have to be separated from

the service. DOD said that since the average training cost for an

experienced aviator is about $5 million, the loss of only a couple of

aviators would more than offset the projected savings.

We believe this is a spurious argument. If it were valid, it would make

sense to pay nearly $5 million in order to retain each aviator and avoid

incurring a $5-million replacement cost. In reality, the services do not

replace such losses by recruiting and training a replacement, but rather

they cover retention shortfalls with rated personnel drawn from other year

groups or aviators assigned to nonflying positions.

Page 6 GAO/NSIAD-95-30 Aviation Continuation Pay
B-257335 

Scope and

Methodology

We examined the legislative history of ACP, reviewed DOD’s annual reports

to the Congress on the program, and reviewed pertinent DOD and service

regulations for the program. We also interviewed DOD and service

representatives to determine their policies on paying ACP for periods of

previously existing commitments and to develop typical examples of such

preexisting commitments to illustrate overlaps.

We worked with the services to develop methodologies for analyzing the

number, duration, and types of preexisting commitments. Using these

analyses, we determined the cost of payment for overlapping periods. We

did not perform a full reliability assessment of the service databases.

However, we compared the information provided to us to that contained

in service reports and discussed the information with service officials to

determine whether it provided a reasonable and accurate profile of

individuals receiving ACP. In determining the length of overlap, we rounded

the number of days to the closest month. Our review was conducted from

January 1994 to August 1994 in accordance with generally accepted

government auditing standards.

As arranged with your office, unless you publicly announce its contents

earlier, we plan no further distribution of this report until 10 days from its

issue date. At that time, we will send copies to other interested

congressional committees and Members of Congress; the Secretaries of

Defense, the Air Force, and the Navy; and the Commandant of the Marine

Corps. We will also make copies available to other interested parties on

request.

Please contact me on (202) 512-5140 if you or your staff have any

questions concerning this report. Major contributors to this report are

listed in appendix II.

Sincerely yours,

Mark E. Gebicke

Director, Military Operations

 and Capabilities Issues

Page 7 GAO/NSIAD-95-30 Aviation Continuation Pay
Appendix I 

Comments From the Department of Defense

Note: GAO comments

supplementing those in the

report text appear at the

end of this appendix.

Page 8 GAO/NSIAD-95-30 Aviation Continuation Pay
Appendix I 

Comments From the Department of Defense

Page 9 GAO/NSIAD-95-30 Aviation Continuation Pay
Appendix I 

Comments From the Department of Defense

Now on pp. 1-2.

Page 10 GAO/NSIAD-95-30 Aviation Continuation Pay
Appendix I 

Comments From the Department of Defense

Now on pp. 2-3.

See comment 1.

See comment 2.

Page 11 GAO/NSIAD-95-30 Aviation Continuation Pay
Appendix I 

Comments From the Department of Defense

See comment 3.

Now on pp. 3-5.

Page 12 GAO/NSIAD-95-30 Aviation Continuation Pay
Appendix I 

Comments From the Department of Defense

Now on p. 5.

Page 13 GAO/NSIAD-95-30 Aviation Continuation Pay
Appendix I 

Comments From the Department of Defense

Page 14 GAO/NSIAD-95-30 Aviation Continuation Pay
Appendix I 

Comments From the Department of Defense

See comment 4.

Page 15 GAO/NSIAD-95-30 Aviation Continuation Pay
Appendix I 

Comments From the Department of Defense

The following are GAO’s comments on the Department of Defense’s (DOD)

letter dated August 5, 1994.

GAO Comments 1. We calculated the average overlap by averaging the number of months

of overlap for only those aviators who had overlapping commitments. DOD

is suggesting that the approximately 30 percent of the aviators who had no

overlap also be included in the average. Calculating the average overlap in

that way would yield a misleadingly lower figure.

2. This argument is similar to the one previously mentioned. According to

data provided by the Air Force on the new ACP contracts for fiscal year

1993, there were 612 instances of preexisting commitments, 43 (7 percent)

of which were the result of tuition assistance. The 5.5-percent figure

suggested by DOD would be based on all Aviation Continuation Pay (ACP)

contracts rather than only those ACP contracts with overlaps.

3. The study conducted by the Army War College student shows that the

problem of overlapping commitments is not new and provides reasonable

assurance that the time periods we used for our review (fiscal years 1992

and 1993) were not periods of abnormally high overlaps. We did not

extrapolate any data from that study. Rather, we used data provided by the

services.

4. The statement that “every aviator lost with seven years experience will

require seven years to replace” is not an accurate portrayal. Retention

shortfalls are not filled by recruiting and training a replacement. Rather,

aviator shortfalls are filled by drawing from the already-trained aviator

pool in other year groups and from those in nonflying positions.

Page 16 GAO/NSIAD-95-30 Aviation Continuation Pay
Appendix II 

Major Contributors to This Report

National Security and

International Affairs

Division, Washington,

D.C.

Norman J. Rabkin, Associate Director

William E. Beusse, Assistant Director

Office of the General

Counsel

Michael D. Hipple, Attorney-Advisor

Norfolk Regional

Office

Dudley C. Roache, Jr., Regional Management Representative

Janet Keller, Evaluator-in-Charge

Sharon Reid, Evaluator

Robert Floren, Evaluator

(391216) Page 17 GAO/NSIAD-95-30 Aviation Continuation Pay
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