Report to Congressional Committees

United States General Accounting Office 

GAO

May 2004 FUTURE YEARS 

DEFENSE PROGRAM

Actions Needed to 

Improve Transparency 

of DOD’s Projected 

Resource Needs 

GAO-04-514 
www.gao.gov/cgi-bin/getrpt?GAO-04-514.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Sharon Pickup 

at (202) 512-9619 or pickups@gao.gov. 

Highlights of GAO-04-514, a report to 

Congressional Committees 

May 2004

FUTURE YEARS DEFENSE PROGRAM

Actions Needed to Improve Transparency 

of DOD's Projected Resource Needs 

The FYDP provides Congress with mixed visibility over DOD’s projected 

spending for the current budget year and at least four succeeding years. On 

the one hand, it provides visibility over many programs that can be 

aggregated so decision makers can see DOD’s broad funding priorities by 

showing shifts in appropriation categories. On the other hand, in some areas 

DOD likely understates the future costs of programs in the FYDP because it 

has historically employed overly optimistic planning assumptions in its 

budget formulations. As such, DOD has too many programs for the available 

dollars, which often leads to program instability, costly program stretchouts, and delayed program termination decisions. Also, the FYDP does not 

reflect costs of ongoing operations funded through supplemental 

appropriations. Since September 2001, DOD has received $158 billion in 

supplemental appropriations to support the global war on terrorism, and 

DOD expects to request another supplemental in January 2005 to cover 

operations in Iraq and Afghanistan. While DOD officials stated they are 

uncertain of the amount of the request, some requirements they intend to 

fund with the supplemental appropriation have already been identified, such 

as temporarily increasing the Army’s force structure. Defining costs during 

ongoing operations is challenging and supplemental appropriations are 

sometimes necessary; however, not considering the known or likely costs of 

ongoing operations expected to continue into the new fiscal year as part of 

larger budget deliberations will preclude DOD and congressional decision 

makers from fully examining the budget implications of the global war on 

terrorism. 

DOD’s Emergency Supplemental Appropriations for 2004 

The FYDP provides Congress limited visibility over important DOD 

initiatives. While DOD is considering how to link resources to defense 

capabilities and the risk management framework, it does not have specific 

plans to make these linkages in the FYDP, in part because the initiatives 

have not been fully defined or implemented. Because the FYDP lacks these 

linkages, decision makers cannot use it to determine how a proposed 

increase in capability would affect the risk management framework, which 

balances dimensions of risk, such as near term operational risk versus risks 

associated with mid- to long-term military challenges. 

Congress needs the best available 

data about DOD’s resource tradeoffs between the dual priorities of 

transformation and fighting the 

global war on terrorism. To help 

shape its priorities, in 2001 DOD 

developed a capabilities-based 

approach focused on how future 

adversaries might fight, and a risk 

management framework to ensure 

that current defense needs are 

balanced against future 

requirements. Because the Future 

Years Defense Program (FYDP) is 

DOD’s centralized report providing 

DOD and Congress data on current 

and planned resource allocations, 

GAO assessed the extent to which 

the FYDP provides Congress 

visibility over (1) projected defense 

spending and (2) implementation of

DOD’s capabilities-based defense 

strategy and risk management 

framework. 

GAO makes recommendations to 

provide Congress more data in 

fiscal year 2005 and beyond on 

known or likely costs of 

operations, and to enhance the 

FYDP as a tool in the new strategic 

environment. In comments on a 

draft report, DOD stated it already 

provides reliable information on 

known costs of ongoing operations 

to Congress as soon as it is 

available, and did not concur with 

the proposal to enhance the FYDP. 

GAO believes its recommendations 

offer practical solutions that would 

provide better information for 

congressional decision-makers to 

use during budget deliberations. 
Page i GAO-04-514 DOD's Future Years Defense Program 

Letter 1

Results in Brief 2

Background 4

FYDP Provides Congress with Mixed Visibility of Projected DOD 

Spending 6

The FYDP Has Not Been Linked to Important QDR Initiatives, 

Thereby Limiting Congressional Visibility 14

Conclusions 17

Recommendations for Executive Action 18

Agency Comments and Our Evaluation 18

Appendix I Scope and Methodology 23 

Appendix II Comparison of DOD’s 2003 and 2004 FYDPs by 

Primary Appropriation Category 25 

Appendix III Comments from the Department of Defense 27 

Appendix IV GAO Contact and Staff Acknowledgments 34 

Table 

Table 1: Emergency Supplemental Appropriations for DOD since 

September 11, 2001 13

Figure 

Figure 1: Total Dollar Changes in Appropriation Categories 

between the 2003 and 2004 FYDPs for Fiscal Years 2004-

2007 8

Contents 
Page ii GAO-04-514 DOD's Future Years Defense Program 

Abbreviations 

CBO Congressional Budget Office 

DOD Department of Defense 

FYDP Future Years Defense Program 

O&M operation and maintenance 

QDR Quadrennial Defense Review 

RDT&E research, development, test and evaluation 

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. It may be reproduced and distributed in its entirety without further 

permission from GAO. However, because this work may contain copyrighted images or 

other material, permission from the copyright holder may be necessary if you wish to 

reproduce this material separately. 
Page 1 GAO-04-514 DOD's Future Years Defense Program 

May 7, 2004 

Congressional Committees 

In light of the Department of Defense’s (DOD) challenge of transforming 

its forces for the future while simultaneously fighting the global war on 

terrorism, decision makers need to have the best data available about 

resources1

 to make trade-offs among these priorities. The Future Years 

Defense Program (FYDP), a DOD centralized report consisting of 

thousands of program elements, provides information on DOD’s current 

and planned outyear budget requests and is one of the principal tools 

available to help inform DOD and Congress about resource data relating to 

these challenging trade-offs. In 2001, to help shape its priorities, DOD 

developed a new capabilities-based defense strategy focused on “how” 

future adversaries might fight, rather than specifically on “whom” they 

might be. Realizing that it could not achieve the goals of the new strategy 

without a new approach to managing different kinds of defense risks, such 

as near term operational risk, DOD identified an associated risk 

management framework to ensure that current defense needs are 

balanced against future requirements. These two concepts—the 

capabilities-based approach and the risk management framework—are 

key tenets in DOD’s 2001 Quadrennial Defense Review (QDR).2

Furthermore, DOD has emphasized the need to link resources to 

capabilities and the risk management framework. 

We believe this report on the FYDP will be useful for your committees’ 

oversight of DOD’s future resource allocations between the dual priorities 

of transformation and fighting the global war on terrorism. We examined 

the utility of the FYDP as one of the principal tools providing DOD and 

Congress data on current and planned resource allocations. Specifically 

we assessed the extent to which the FYDP provides Congress visibility 

over (1) projected defense spending and (2) the implementation of DOD’s 

 1

 Throughout this report, the term “resources” refers to forces, manpower, and funding. 

2

 Every 4 years, as directed by 10 U.S.C. §118 (2004), DOD conducts a comprehensive 

examination of the national defense strategy, force structure, force modernization plans, 

infrastructure budget plan, and other elements of the defense program and establishes a 

defense program for the next 20 years. 

United States General Accounting Office 

Washington, DC 20548 
Page 2 GAO-04-514 DOD's Future Years Defense Program 

capabilities-based approach and risk management framework outlined in 

the 2001 QDR. 

In conducting our review, we determined that the automated FYDP data 

were sufficiently reliable for meeting our objectives. To assess 

congressional visibility of projected defense spending, we compared DOD 

reports and related 2003 and 2004 budget submissions, analyzed 2003 and 

2004 FYDP resource data, examined related reports, reviewed documents 

and officials’ statements related to supplemental appropriations, and 

interviewed appropriate DOD program and budget officials. To assess 

DOD’s implementation of its capabilities-based approach and risk 

management framework, we interviewed appropriate DOD officials, and 

officials from the Institute for Defense Analyses -– the organization 

currently under contract to make improvements to the FYDP; examined 

various DOD planning and budget documents; and analyzed the FYDP 

structure for the feasibility of including links to defense capabilities and 

the risk management framework. We conducted our work between June 

2003 and February 2004 in accordance with generally accepted 

government auditing standards. See appendix I for a more complete 

description of our scope and methodology. 

The FYDP provides Congress with mixed visibility over DOD’s projected 

spending. On the one hand, it provides visibility over many programs that 

can be aggregated so that decision makers can see DOD’s broad funding 

priorities by showing shifts between and within appropriation categories. 

On the other hand, the FYDP provides less visibility over some important 

funding categories and may understate some costs. For example, the 

FYDP does not provide visibility over costs for some high priority items—

such as civilian personnel, spare parts, and information technology—

because, by design, these items are embedded in individual programs. 

Furthermore, as prior GAO reports have shown, DOD limits visibility in 

some areas because it likely understates future costs by employing overly 

optimistic planning assumptions in its budget formulations for programs, 

such as the long-term costs for weapon systems. Overly optimistic 

planning assumptions for programs not only limit visibility; they may have 

adverse implications, such as program termination, for the programs 

beyond the FYDP years. 

In addition, DOD does not include the costs of ongoing operations funded 

through supplemental appropriations, such as the global war on terrorism. 

Since September 11, 2001, DOD has received $158 billion in supplemental 

appropriations—an amount that exceeds the $99 billion DOD received in 

Results in Brief 
Page 3 GAO-04-514 DOD's Future Years Defense Program 

supplemental appropriations throughout all of the 1990s and is more than 

DOD’s fiscal year 2004 request for its entire Operation and Maintenance 

account.3

 Further, the administration expects to request another 

supplemental in January 2005 to cover costs of operations in Iraq and 

Afghanistan. While DOD officials have stated their uncertainty about how 

much will be requested, some requirements they intend to fund with the 

supplemental appropriation have already been identified, such as the cost 

of increased Army force structure. We recognize that defining costs during 

ongoing operations is challenging and supplemental appropriations are 

sometimes necessary to cover these costs. Nonetheless, not considering 

the expected costs of ongoing operations as part of larger budget 

deliberations will mean that neither the administration nor congressional 

decision makers will have the opportunity to fully examine the budget 

implications of the global war on terrorism. Therefore, we are 

recommending that DOD provide information on known or likely costs for 

ongoing operations to Congress for consideration during its fiscal year 

2005 and future budget deliberations. 

The FYDP’s current usefulness is limited in providing Congress visibility 

over the implementation of the capabilities-based defense strategy and 

associated risk management framework, important QDR initiatives. The 

Major Force Programs, initially developed as the fundamental framework 

of the FYDP, remain virtually unchanged and are not representative of 

DOD’s capabilities-based approach. Because the FYDP has a flexible 

structure, DOD has modified it over time to capture the resources 

associated with special areas of interest, such as space activities. 

However, DOD has not established a link in the FYDP to either defense 

capabilities, the basis of its new approach to the defense strategy, or the 

risk management framework, developed to ensure that current defense 

needs are balanced against future requirements. Moreover, while DOD is 

considering how to link resources to these initiatives, it does not have 

specific plans to make these linkages in the FYDP, in part because the 

initiatives have not been fully developed. DOD is currently undergoing the 

complex process of fully defining the capabilities it needs to meet the 

defense strategy. Although the risk management framework is better 

defined, DOD has not completed its process of linking it to resources, and 

this process does not include creating a link in the FYDP. Therefore, 

although DOD makes funding decisions that affect defense capabilities 

 3

 Unless otherwise stated, the years and dollars shown in this report are on a fiscal year 

basis and in constant fiscal year 2004 dollars. 
Page 4 GAO-04-514 DOD's Future Years Defense Program 

and the risk management framework, the effects on capabilities and risk 

are not clearly identifiable in the FYDP. If they were, both DOD and 

congressional decision makers would have greater ability to assess how a 

proposed increase or decrease in capability would relate to the funds and 

other resources needed and how it would affect the risk management 

framework. Therefore, we are recommending that DOD align the program 

elements in the FYDP to defense capabilities and the risk management 

framework and include this alignment with the FYDP provided to 

Congress. 

In written comments on a draft of this report, DOD stated that it already 

provides reliable information on the known costs of ongoing operations to 

Congress as soon as it is available and does not concur with our proposals 

to enhance the FYDP as a tool in the new strategic environment. We 

maintain our view that our recommendations offer practical solutions that 

would provide better information for congressional decision makers to use 

during budget deliberations and for improving congressional visibility over 

DOD’s allocation of resources. 

In 1962, DOD instituted the Planning, Programming, and Budgeting System 

to establish near-term projections in defense spending. This system was 

intended to provide the necessary data to assist defense decision makers 

in making trade-offs among potential alternatives, thereby resulting in the 

best possible mix of forces, equipment, and support to accomplish DOD’s 

mission. The military services and other DOD components developed the 

detailed data projections for the budget year in which funds were being 

requested and at least the 4 succeeding years and provided them to the 

Office of the Secretary of Defense. The resulting projections were 

compiled and recorded in a 5-year plan. In 1987, Congress directed the 

Secretary of Defense to submit the five-year defense program (currently 

referred to as the future years defense program, or FYDP) used by the 

Secretary in formulating the estimated expenditures and proposed 

appropriations included in the President’s annual budget to support DOD 

Background 
Page 5 GAO-04-514 DOD's Future Years Defense Program 

programs, projects and activities.4 The FYDP, which is submitted annually 

to Congress, is considered the official report that fulfills this legislative 

requirement. 

The Office of Program Analysis and Evaluation has responsibility for the 

assembly and distribution of the FYDP. The Office of the Under Secretary 

of Defense (Comptroller) has responsibility for the annual budget 

justification material that is presented to Congress. These offices work 

collaboratively to ensure that the data presented in the budget justification 

material and the FYDP are equivalent at the appropriation account level. 

The FYDP provides DOD and Congress a tool for looking at future funding 

needs beyond immediate budget priorities and can be considered a longterm capital plan. As GAO has previously reported, leading practices in 

capital decision making include developing a long-term capital plan to 

guide implementation of organizational goals and objectives and help 

decision makers establish priorities over the long term.5

 In 2002, Congress 

directed the Department of Homeland Security to begin developing a 

future budget plan modeled after DOD’s FYDP.6

In the 2001 QDR Report, DOD established a new defense strategy and 

shifted the basis of defense planning from a “threat-based” model to a 

“capabilities-based” model. According to the QDR report, the capabilitiesbased model is intended to focus more on how an adversary might fight 

rather than specifically on whom the adversary might be or where a war 

might occur. The report further states that in adopting a capabilities-based 

approach, the United States must identify the capabilities required to deter 

 4

 National Defense Authorization Act for Fiscal Years 1988 and 1989 (Pub. L. No. 100-180, 

Sec. 1203; Dec. 4, 1987). The FYDP reporting requirement is currently codified at 10 U.S.C. 

§ 221 (2004) and it states that any such future-years defense program shall cover the fiscal 

year with respect to which the budget is submitted and at least the 4 succeeding fiscal 

years. The FYDP must also include the estimated expenditures and the proposed 

appropriations, for each fiscal year of the period covered by that program, for the 

procurement of equipment and for military construction for each of the reserve 

components of the armed forces. 10 U.S.C. § 10543 (2004). 

5

 U.S. General Accounting Office, Executive Guide: Leading Practices in Capital 

Decision-Making, GAO/AIMD-99-32 (Washington, D.C.: Dec. 1998). GAO reported that 

leading organizations it studied prepare long-term capital plans to document specific 

planned projects, plan for resource use over the long term, and establish priorities for 

implementation. These capital plans usually cover a 5-, 6-, or 10-year period and are 

updated either annually or biennially. 

6

 Homeland Security Act of 2002 (Pub. L. No. 107-296, Sec.874, Nov. 25, 2002). 
Page 6 GAO-04-514 DOD's Future Years Defense Program 

and defeat adversaries, maintain its military advantage, and transform its 

forces and institutions. 

The QDR report also outlined a new risk management framework to use in 

considering trade-offs among defense objectives and resource constraints. 

This framework consists of four dimensions of risk: 

• Force management–the ability to recruit, retain, train, and equip 

sufficient numbers of quality personnel and sustain the readiness of the 

force while accomplishing its many operational tasks; 

• Operational–the ability to achieve military objectives in a near-term 

conflict or other contingency; 

• Future challenges–the ability to invest in new capabilities and develop 

new operational concepts needed to dissuade or defeat mid- to long-term 

military challenges; and 

• Institutional–the ability to develop management practices and controls 

that use resources efficiently and promote the effective operation of the 

Defense establishment. 

These risk areas will form the basis for DOD’s annual performance goals 

and for tracking associated performance results. Moreover, the QDR states 

that an assessment of the capabilities needed to counter both current and 

future threats must be included in DOD’s approach to assessing and 

mitigating risk. 

The FYDP provides Congress visibility of broad DOD funding shifts and 

priorities regarding thousands of programs that have been aggregated, or 

grouped, by appropriation category. For example, we noted that DOD 

increases its Research, Development, Test and Evaluation (RDT&E) 

account category and decreases other account categories in the 2004 

FYDP. Other funding shifts/priorities are less visible because the FYDP 

report, organized by program, cannot display some specific costs that are 

important to decision makers, such as funding for DOD’s civilian 

workforce. Moreover, the FYDP is a reflection of the limitations of DOD’s 

budget preparation process. For example, as we have reported in the past, 

the FYDP reflects DOD’s overly optimistic estimations of future program 

costs that often lead to costs being understated. Such understatements 

may have implications for many programs beyond the years covered by 

the FYDP. Finally, the costs of ongoing operations in Iraq and Afghanistan, 

which have been funded through supplemental appropriations, are not 

projected in the FYDP thereby limiting the visibility over these funds. The 

administration is expected to request additional supplemental funds in 

FYDP Provides 

Congress with Mixed 

Visibility of Projected 

DOD Spending 
Page 7 GAO-04-514 DOD's Future Years Defense Program 

calendar year 2005 according to DOD officials. Although some costs are 

difficult to predict, DOD expects costs to become more predictable later 

this year. However, some requirements it plans to fund with the 

supplemental appropriation have already been identified. 

The FYDP was designed to provide resource information at the program 

level that could be aggregated a variety of ways including up to the 

appropriation category level. For individual programs, this means that 

decision makers have visibility over planned funding for 4 or 5 years 

beyond the current budget year. Similarly, the programs can be aggregated 

in a variety of ways to analyze future funding trends. For example, our 

comparison of the 2003 FYDP to the 2004 FYDP provides visibility of 

funding shifts that DOD made at the appropriation category level, 

specifically showing that over the common years of both FYDPs, DOD 

plans to increase funding in its RDT&E appropriation category, while in 

most years decreasing funds to Procurement, Military Construction, 

Military Personnel, and Operation and Maintenance. According to DOD 

officials, this shift toward RDT&E reflects DOD’s emphasis on 

transforming military forces. Since the FYDP does not clearly identify 

those programs DOD considers transformational, we could not validate 

this claim. Figure 1 shows the changes made between the 2003 and 2004 

FYDPs to the department’s appropriation categories for the common 

4-year period, 2004–2007. Appendix II provides a more detailed table. 

Some Funding 

Shifts/Priorities Are Visible 

at the Appropriation 

Category Level in the 

FYDP; Others Are Less 

Visible 
Page 8 GAO-04-514 DOD's Future Years Defense Program 

Figure 1: Total Dollar Changes in Appropriation Categories between the 2003 and 2004 FYDPs for Fiscal Years 2004-2007 

a

RDT&E = research, development, test and evaluation 

b O&M = operation and maintenance 

c The “Other DOD accounts” category includes funding for the Other DOD Programs appropriation 

category (chemical agents and munitions destruction, the defense health program, drug interdiction 

and counter-drug activities, and the Office of the Inspector General), as well as for the two 

appropriation categories Revolving Management Funds and Undistributed Contingencies. 

Compared to the 2003 FYDP, funding in the Operation and Maintenance 

appropriation category in the 2004 FYDP was reduced by at least $9 billion 

per year from 2004 through 2007 for a total of $42 billion over that period. 

About $41 billion of that decrease is accounted for by the elimination of 

the Defense Emergency Response Fund, which had projected over 

$10 billion in funding each year for 2004 through 2007 in the 2003 FYDP, 

but had no funding in the 2004 FYDP for those years. Over those same 

years, the “Other DOD accounts” category increased by a total of 

$19 billion. The increase in these categories was mainly fueled by a 
Page 9 GAO-04-514 DOD's Future Years Defense Program 

$22 billion increase in the Defense Health Program, which was offset 

somewhat by a decrease in Revolving Management Funds.7

Although DOD’s policy priorities can be discerned at the appropriation 

level, some important funding categories cannot be identified because 

program elements, the most basic components of the report, are intended 

to capture the total cost of the program, as opposed to individual costs 

that comprise the program. For example, funding for spare parts, civilian 

personnel, and information technology are included in funding for 

individual programs and cannot be readily extracted from them. Congress 

has expressed interest in all of these funding categories. We note that DOD 

officials stated that these funding categories are delineated in other 

reports to Congress. 

Program elements that encompass multiple systems, such as the Army’s 

Future Combat Systems and DOD’s Ballistic Missile Defense System, could 

also limit visibility over funding trends and trade-offs in the FYDP. For 

example, in its 2004 budget justification material, the administration 

requested funding for the Army’s Future Combat Systems—often referred 

to as a “system of systems”—under a single program element.8

 In the 

National Defense Authorization Act for Fiscal Year 2004, Congress 

rejected the single program element and instead required the Secretary of 

Defense to break Future Combat Systems into three program elements.9

 In 

the conference report accompanying the bill, the conferees noted that “the 

high cost and high risk [of the Future Combat System] require 

congressional oversight which can be better accomplished through the 

application of separate and distinct program elements for the [Future 

Combat System].”10 In another example, DOD had proposed that Congress 

repeal its requirement for specifying Ballistic Missile Defense System 

program elements. According to DOD’s legislative proposal, this would 

coincide with the Secretary of Defense’s goal to establish a single program 

 7

 Revolving Management Funds include accounts such as DOD’s Working Capital Funds 

and National Defense Sealift Fund. These funds are used to conduct continuing cycles of 

business-like activity, in which the fund charges for the sale of products or services and 

uses the proceeds to finance its spending. 

8

 The Army plans to develop a family of 18 systems under the Future Combat Systems 

program. 

9

 Section 214(b), Pub.L. No.108-136 (Nov. 24, 2003). 

10 Conference Report (H.R. Conf. Rep. No. 108-354, at 611 (2003)), accompanying H.R. 1588 

(Pub.L. No. 108-136). 
Page 10 GAO-04-514 DOD's Future Years Defense Program 

that allows allocating and re-allocating of funds among competing 

priorities within the program. While Congress provided the administration 

flexibility for specifying program elements related to Ballistic Missile 

Defense, it nonetheless noted that budget reporting for Ballistic Missile 

Defense under one program element would be inappropriate.11

Since the mid-1980s, we have reported a limitation in DOD’s budget 

formulation—the use of overly optimistic planning assumptions. Such 

overly optimistic assumptions limit the visibility of costs projected 

throughout the FYDP period and beyond. As a result, DOD has too many 

programs for the available dollars, which often leads to program 

instability, costly program stretch-outs, and program termination. For 

example, in January 2003, we reported that the estimated cost of 

developing eight major weapon systems had increased from about 

$47 billion in fiscal year 1998 to about $72 billion by fiscal year 2003.12 We 

currently expect DOD’s funding needs in some areas to be higher than the 

estimates in the FYDP. The following are some examples of anticipated 

cost increases based on recent reports where we made recommendations 

to improve the management and costs estimates of these programs. 

• As we reported in April 2003, cost increases have been a factor in the Air 

Force substantially decreasing the number of F/A-22 Raptors to be 

purchased—from 648 to 276.13 Moreover, current budget estimates, which 

exceed mandated cost limitations, are dependent on billions of dollars of 

cost offset initiatives which, if not achieved as planned, will further 

increase program costs. In addition, GAO considers continued acquisition 

of this aircraft at increasing annual rates before adequate testing is 

completed to be a high-risk strategy that could further increase production 

costs. 

• DOD has not required the services to set aside funds to support the 

procurement and maintenance of elements of the Ballistic Missile Defense 

System. Management of this “system of systems” was shifted from the 

services to the Department’s Missile Defense Agency in January 2002, but 

 11 Conference Report (H.R. Conf. Rep. No. 108-354, at 613 (2003)), accompanying H.R. 1588 

(Pub.L. No. 108-136). 

12 U.S. General Accounting Office, Major Management Challenges and Program Risks: 

Department of Defense, GAO-03-98 (Washington, D.C.: Jan. 2003). These amounts are in 

constant fiscal year 2003 dollars. 

13 U.S. General Accounting Office, Tactical Aircraft: Status of the F/A-22 Program, 

GAO-03-603T, (Washington, D.C.: Apr. 2, 2003). 

FYDP Limits Visibility of 

Some Future Costs 

through Overly Optimistic 

Planning Assumptions 
Page 11 GAO-04-514 DOD's Future Years Defense Program 

procurement and maintenance costs will be borne by the services as 

elements of the system demonstrate sufficient maturity to enter into fullrate production. In April 2003, we concluded that because DOD had not 

yet set aside funds to cover its long-term costs, the department could find 

that it cannot afford to procure and maintain that system unless it reduces 

or eliminates its investment in other important weapons systems.14 We 

recommended that the Secretary of Defense explore the option of 

requiring the services to set aside funds for this purpose in the FYDP. DOD 

concurred with this recommendation, noting that doing so would not only 

promote the stability of the overall defense budget but would also 

significantly improve the likelihood that an element or component would 

actually be fielded. 

• Since its inception in fiscal year 1986, DOD’s $24 billion chemical 

demilitarization program (a 2001 estimate) has been plagued by frequent 

schedule delays, cost overruns, and continuing management problems. In 

October 2003, we testified that program officials had raised preliminary 

total program cost estimates by $1.4 billion and that other factors, yet to 

be considered, could raise these estimates even more.15 

In written comments on a draft of this report, DOD strongly objected to 

our conclusion that DOD has historically employed overly optimistic 

assumptions and noted that these statements do not reflect recent efforts 

to correct this problem. In August 2001, DOD established guidance that all 

major acquisition programs should be funded to the Cost Analysis 

Improvement Group estimates, which, according to DOD, have historically 

been far more accurate than Service estimates. However, as DOD 

acknowledges in its written comments, there is currently no auditable data 

available to document the effects of this guidance; therefore, we could not 

analyze this claim. Further, GAO reports issued after a draft of this report 

was sent to DOD – such as our March 2004 report on the Air Force’s F/A22 program and our April 2004 testimony on DOD’s Chemical 

Demilitarization program – continue to raise questions about DOD’s 

planning assumptions.16 For example, in our F/A-22 report, we continued 

 14 U.S. General Accounting Office, Missile Defense: Knowledge-Based Practices Are Being 

Adopted, but Risks Remain, GAO-03-441 (Washington, D.C.: Apr. 30, 2003). 

15 U.S. General Accounting Office, Chemical Weapons: Better Management Tools Needed to 

Guide DOD’s Stockpile Destruction Program, GAO-04-221T (Washington, D.C.: Oct. 30, 

2003). These amounts are in then-year dollars. 

16 U. S. General Accounting Office, Tactical Aircraft: Changing Conditions Drive Need for 

New F/A-22 Business Case, GAO-04-391 (Washington, D.C.: Mar. 15, 2004) and Chemical 

Weapons: Destruction Schedule Delays and Cost Growth Continue to Challenge Program 

Management, GAO-04-634T (Washington, D.C.: Apr. 1, 2004). 
Page 12 GAO-04-514 DOD's Future Years Defense Program 

to observe that additional increases in development costs for the F/A-22 

are likely and in our report on DOD’s Chemical Demilitarization Program, 

we observed that the program continues to fall behind schedule 

milestones. 

Some of the examples listed above will have budgetary impacts beyond 

the 2009 end date of the 2004 FYDP. As the Congressional Budget Office 

(CBO) reported in January 2003, “programs to develop weapon systems 

often run for a decade or more before those systems are fielded, and other 

policy decisions have long-term implications; thus, decisions made today 

can influence the size and composition of the nation’s armed forces for 

many years to come.”17 In its February 2004 update to that report, CBO 

projected that if the programs represented in the 2004 FYDP were carried 

out as currently envisioned by DOD, demand for resources would grow 

from the current projection in 2009 of $439 billion to an average demand 

for resources of $458 billion a year between 2010 and 2022.18 When CBO 

assumed that costs for weapons programs and certain other activities 

would continue to grow as they have historically rather than as DOD 

currently projects, CBO’s projections increased to an average of $473 

billion a year through 2009 and an average of $533 billion between 2010 

and 2022. 

The FYDP does not include future costs for ongoing operations when 

these operations are funded through supplemental appropriations. Since 

the attacks of September 11, 2001, DOD has received supplemental 

appropriations totaling $158 billion in constant 2004 dollars to support 

operations in Iraq, Afghanistan, and elsewhere, as well as to initially 

recover and respond to the terrorist attacks. This amount exceeds the 

$99 billion DOD received in supplemental appropriations throughout all of 

the 1990s and is more than what DOD requested for its entire Operation 

and Maintenance account for fiscal year 2004. Table 1 summarizes these 

supplemental appropriations. 

 17 Congressional Budget Office, The Long-Term Implications of Current Defense Plans, 

(www.cbo.gov, January 2003). 

18 Congressional Budget Office, The Long-Term Implications of Current Defense Plans: 

Detailed Update for Fiscal Year 2004, (www.cbo.gov, February 2004). 

FYDP Does Not Provide 

Visibility Over Future 

Costs of Operations 

Funded through 

Supplemental 

Appropriations 
Page 13 GAO-04-514 DOD's Future Years Defense Program 

Table 1: Emergency Supplemental Appropriations for DOD since September 11, 

2001 

2004 dollars in billions 

Fiscal 

year Public law 

Supplemental 

amount 

appropriated to 

DOD

2004 Pub. L. No. 108-106 (Nov. 6, 2003). Emergency 

Supplemental Appropriations Act for Defense and for the 

Reconstruction of Iraq and Afghanistan, 2004 

$65.2

2003 Pub. L. No. 108-87 (Sep. 30, 2003). Department of 

Defense Appropriations Act, 2004: (Rescinded funds 

appropriated in Pub. L. No. 108-11 (Apr. 16, 2003)) 

-3.6

2003 Pub. L. No. 108-11 (Apr. 16, 2003). Emergency Wartime 

Supplemental Appropriations Act, April 2003 

64.0

2002 Pub. L. No. 107-206 (Aug. 2, 2002). 2002 Supplemental 

Appropriations Act for Further Recovery From Response 

to Terrorist Attacks on the United States 

14.0

2001/ 

2002 

Pub. L. No. 107-38 (Sep. 18, 2001). 2001 Emergency 

Supplemental Appropriation For Recovery From And 

Response to Terrorist Attacks on the United States and 

Pub. L. No. 107-117 (Jan. 10, 2002). Department of 

Defense and Emergency Supplemental Appropriations for 

Recovery from Response to Terrorist Attacks on the 

United States Act, 2002 

18.3

Total $158.0

Source: GAO analysis of supplemental appropriations. 

Note: Numbers do not add due to rounding. 

In presentations related to the 2005 President’s budget submitted to 

Congress in early February 2004, DOD officials reported that the budget 

does not include funding for ongoing operations in Iraq and Afghanistan, 

and they expect another supplemental will be needed in January 2005 to 

finance incremental costs for these operations. Senior DOD officials 

indicated that operations in Iraq and Afghanistan will continue into fiscal 

year 2005, but the requirements and costs of these continued operations 

are difficult to estimate because of uncertainties surrounding the political 

situations in these regions. However, they noted that funding estimates 

will likely become clearer over the course of the year. For example, the 

Under Secretary of Defense (Comptroller) stated that by July 2004, the 

operations in Iraq and Afghanistan may be better defined and that having 

time to analyze expenditures will help in making more realistic 

projections. In addition, Service and DOD officials have already identified 

some requirements that have associated costs. For example, the Army has 
Page 14 GAO-04-514 DOD's Future Years Defense Program 

been authorized to temporarily increase its end strength by 30,000 soldiers. 

In briefings on the 2005 budget request, DOD and Army officials stated 

that they intended to partially fund this additional end strength with the 

supplemental appropriation anticipated for 2005. 

DOD, with congressional approval, has used different approaches in the 

past to fund operations. For example, in the former Yugoslavia, DOD 

funded operations begun in fiscal year 1996 through a combination of 

transfers between DOD accounts, absorbing costs within accounts, and 

supplemental appropriations. However, in 1997, Congress established the 

Overseas Contingency Operations Transfer Fund, which provided funding 

to DOD rather than directly to the individual military services, and allowed 

DOD to manage the funding of contingency operations among the military 

services more effectively and with some flexibility.19 In 2002, DOD 

determined that funding for operations in the former Yugoslavia were 

sufficiently stable to be included directly in appropriation account 

requests. GAO observed in a 1994 report that if an operation continued 

into a new fiscal year, it would seem appropriate that DOD would build 

the expected costs of that operation into its budget and allow Congress to 

expressly authorize and appropriate funds for its continuation.20 We 

continue to hold this view. 

The FYDP, as currently structured, does not contain a link to defense 

capabilities or the dimensions of the risk management framework, both 

important QDR initiatives, limiting the FYDP’s usefulness and 

congressional visibility of the initiatives’ implementation. Further, 

although DOD is considering how to link resources to these initiatives, it 

does not have specific plans to make these linkages in the FYDP. The 

Major Force Programs, initially developed as the fundamental framework 

of the FYDP, remain virtually unchanged and are not representative of 

DOD’s capabilities-based approach. Furthermore, additional program 

aggregations that DOD created in the FYDP’s structure do not capture 

 19 U.S. General Accounting Office, Bosnia: Cost Estimating Has Improved, but 

Operational Changes Will Affect Current Estimates, GAO/NSIAD-97-183 (Washington, 

D.C.: July 28, 1997) and Omnibus Consolidated Appropriations Act, 1997 (Pub. L. 

No. 104-208, Sept. 3, 1999). 

20 U.S. General Accounting Office, DOD Budget: Analysis of Options for Funding 

Contingency Operations, GAO/NSIAD-94-152BR, (Washington, D.C.: Apr. 26, 1994). 

The FYDP Has Not 

Been Linked to 

Important QDR 

Initiatives, Thereby 

Limiting 

Congressional 

Visibility 
Page 15 GAO-04-514 DOD's Future Years Defense Program 

information related to capabilities-based analysis or the risk management 

framework in part because these concepts have not been fully developed. 

DOD has modified the FYDP over time to create new categories of 

program elements; however, it currently does not include categorizations 

that are intended to relate to the QDR’s initiatives regarding defense 

capabilities and the risk management framework. Major Force Programs, 

originally established to organize the FYDP into the major DOD missions, 

have remained virtually the same in the five decades since their 

introduction, do not reflect how DOD combat forces and their missions 

have changed over time, and do not organize the FYDP by major defense 

capabilities. For example, the Major Force Program of General Purpose 

Forces includes large numbers of programs with varied capabilities that 

would complicate comparisons needed for understanding defense 

capabilities and associated trade-off decisions inherent in risk 

management. General Purpose Forces include virtually all conventional 

forces within DOD and slightly over one-third of DOD funding is allocated 

to this broad category. Ground combat units, tactical air forces, and 

combatant ships are among the wide array of forces considered General 

Purpose Forces. Including forces with such diverse capabilities in the 

same category diminishes the Major Force Program’s usefulness to DOD 

and Congress for identifying trade-offs among programs. Additionally, all 

available resources with comparable capabilities are not categorized in the 

same Major Force Program. For example, the Major Force Program 

structure identifies Guard and Reserve forces separately despite the fact 

that today Guard and Reserve forces are integrated into their respective 

Service’s force structure, deploy and fight with the general forces, and 

have some of the same capabilities. 

Over time, as decision makers needed information not captured in the 

Major Force Programs, DOD created new aggregations of program 

elements and added attributes to the FYDP’s structure. The most recent 

aggregation categorized the data by force and infrastructure categories, 

which were developed to relate every dollar, person, and piece of 

equipment in the FYDP to either forces or infrastructure.21 This model 

groups forces, the warfighting tools of the Combatant Commanders, into 

 21 Institute for Defense Analyses, DOD Force & Infrastructure Categories: A FYDP-Based 

Conceptual Model of Department of Defense Programs and Resources, IDA Paper P-3660, 

(Alexandria, Va.: September 2002). 

FYDP Structure Does Not 

Reflect QDR Initiatives 
Page 16 GAO-04-514 DOD's Future Years Defense Program 

broad operational categories according to their intended use (such as 

homeland defense or intelligence operations), and groups infrastructure, 

the set of activities needed to create and sustain forces, based upon the 

type of support activity it performs (such as force installations or central 

logistics). DOD has also added attribute fields to the program elements for 

such activities as space and management headquarters in order to capture 

the resources associated with specific areas of interest. However, these 

new aggregations and attributes were not intended to relate the FYDP’s 

resources to defense capabilities or the risk management framework. 

According to officials, DOD does not have specific plans to link 

capabilities and the risk management framework to the FYDP, in part, 

because these concepts have not been fully developed. For example, 

capability-based analysis is still under development. DOD officials 

describe this as a complex process—representing a fundamental shift in 

the basis of defense planning and requiring the participation of all DOD 

components. In the past, DOD focused on whom an adversary might be, 

whereas the current approach focuses on how future adversaries might 

fight. DOD’s April 2003 Transformation Planning Guidance states that joint 

operating concepts will provide the construct for a new capabilities-based 

resource allocation process. To date, these joint operating concepts have 

not been formalized. According to DOD officials, while some concepts 

may be completed near-term, the overall initiative is expected to take 4 to 

5 years to complete. 

Furthermore, although the risk management framework has been better 

defined than the capabilities have, it also has not been fully implemented 

because it has not been fully linked to resources. In December 2002, DOD 

instructed its components to begin displaying the linkage of plans, 

outputs, and resources in future budget justification material based upon 

the four dimensions of its risk management framework. According to DOD 

officials, in the fiscal year 2005 budget submission, DOD provided this 

linkage for 40 percent of its resources. DOD plans to complete this process 

by fiscal year 2007, but does not currently have plans to link the risk 

management framework to the FYDP as part of this process. DOD’s 2003 

Annual Report provided an example of how the FYDP could be linked to 

the risk management framework using the Force and Infrastructure 

categories. However, according to DOD officials, this example was 

intended to be a rough aggregation for a specific performance metric and 

is not officially recognized as the most appropriate way to show how 

DOD’s resources link to the risk management framework. Therefore, this 

linkage has not been integrated into the FYDP’s structure. 

DOD Does Not Have 

Specific Plans to Link the 

FYDP to Important QDR 

Initiatives 
Page 17 GAO-04-514 DOD's Future Years Defense Program 

It is important for DOD and congressional decision makers to have the 

most complete information possible on the costs of ongoing operations as 

they deliberate the budget. In a previous report, we observed that if an 

operation continues into a new fiscal year, it would seem appropriate that 

DOD would build the expected costs of that operation into its budget and 

allow Congress to expressly authorize and appropriate funds for its 

continuation. We recognize that defining those expected costs is 

challenging and that supplemental appropriations are sometimes 

necessary. Nonetheless, the consequences of not considering the expected 

costs of ongoing operations as part of larger budget deliberations will 

mean that neither the administration nor congressional decision makers 

will have the opportunity to fully examine budget implications of the 

global war on terrorism. Indeed, the FYDP could be a useful tool for 

weighing the costs of defense priorities such as the global war on 

terrorism and DOD’s transformation efforts. However, as a reflection of 

the budget, the FYDP is weakened in this regard because it does not 

include known or likely costs of ongoing operations funded through 

supplemental appropriations. Without a clear understanding of such costs, 

members of Congress cannot make informed decisions about 

appropriations between competing priorities. 

Additionally, the FYDP as it is currently structured does not provide either 

DOD or Congress with full visibility over how resources are allocated 

according to key tenets of the defense strategy outlined in the QDR. As a 

result, resource allocations may not reflect the priorities of the defense 

strategy, including its new capabilities-based approach and the risk 

management framework. Yet, the current strategic environment and 

growing demand for resources require that DOD and Congress allocate 

resources according to the highest defense priorities. Indeed, as the 

common report that captures all components’ future program and budget 

proposals, the FYDP provides DOD an option for linking resource plans to 

its risk management framework and capabilities assessment and providing 

that information to Congress. Furthermore, this linkage could provide a 

crosswalk between capabilities and the risk management framework such 

that assessments of capabilities could be made in terms of the risk 

management framework, which balances dimensions of risk, such as near 

term operational risk versus risks associated with mid- to long-term 

military challenges. 

Conclusions 
Page 18 GAO-04-514 DOD's Future Years Defense Program 

In the interest of providing Congress greater visibility over projected 

defense spending, we recommend that the Secretary of Defense direct the 

Undersecretary of Defense (Comptroller) to take the following two 

actions: 

(1) provide Congress data on known or likely costs for ongoing operations 

that are expected to extend into fiscal year 2005 for consideration during 

its deliberation over DOD’s fiscal year 2005 budget request and 

accompanying FYDP and 

(2) include known or likely projected costs of ongoing operations for the 

fiscal year 2006 and subsequent budget requests and accompanying 

FYDPs. 

To enhance the effectiveness of the FYDP as a tool for planning and 

analysis in the current strategic environment, the Secretary of Defense 

should direct the Office of Program Analysis and Evaluation to take the 

following two actions: 

(1) align the program elements in the FYDP to defense capabilities needed to 

meet the defense strategy, as these capabilities are identified and 

approved, and the dimensions of the risk management framework and 

include this alignment with the FYDP provided to Congress, and 

(2) report funding levels for defense capabilities and the dimensions of the 

risk framework in its summary FYDP report to Congress. 

In written comments on a draft of this report, DOD provided some general 

overarching comments concerning our characterization of the FYDP as a 

database, as well as other comments responding to our specific 

recommendations. 

First, DOD noted that it had redefined the FYDP as a report rather than a 

database, and stated that it maintains a variety of databases to support 

decision making that should not be confused with the FYDP itself. DOD 

stated that our characterization of the FYDP as a database resulted in a 

misinterpretation that pervades our draft report and results in incorrect 

assertions and conclusions. We have updated our report to refer to the 

FYDP as a report rather than a database in response to the definition 

change provided in DOD’s April 2004 guidance – issued after our draft 

report was sent to DOD for comment. However, we disagree with the 

DOD statement that characterizing the FYDP as a flexible database 

structure leads to incorrect assertions and conclusions. Whether the 

FYDP is referred to as a database or a report, it is an existing tool used to 

Recommendations for 

Executive Action 

Agency Comments 

and Our Evaluation 
Page 19 GAO-04-514 DOD's Future Years Defense Program 

inform analyses, as DOD acknowledged in its written comments, and it has 

been modified over time to capture resource information associated with 

special areas of interest. Although a variety of databases are maintained 

by DOD to support decision making, the FYDP is submitted annually to 

Congress, as required. Therefore, we believe that our recommendations 

that DOD provide Congress with greater information in fiscal year 2005 

and beyond on known or likely costs of operations, and enhance the FYDP 

as a tool in the new strategic environment provide practical solutions for 

improving congressional visibility of DOD’s allocation of resources, as 

discussed below. 

DOD neither concurred nor nonconcurred with the recommendations that 

the Undersecretary of Defense (Comptroller) provide Congress data on 

known or likely costs for ongoing operations that are expected to extend 

into fiscal year 2005 and beyond. DOD stated that it already provides this 

information to Congress as soon as it is sufficiently reliable and that, at 

this point in the war on terrorism, current operations are too fluid to 

permit an accurate determination of the amount of funding required a year 

in advance. In response to our statement that DOD does not include the 

costs of ongoing operations funded through supplemental appropriations, 

DOD further stated that items funded through supplemental 

appropriations are above and beyond resources budgeted and 

appropriated for peacetime operations and that funding requirements for 

wartime and contingency operations are driven by events and situations 

that DOD cannot anticipate. We are encouraged that DOD agrees with the 

principle of providing these data to Congress as soon as they are 

sufficiently reliable. As we reported, DOD indicated that operations in 

Iraq and Afghanistan will continue into fiscal year 2005; therefore, it is 

reasonable that DOD would anticipate some costs associated with these 

operations. However, DOD did not budget any funds for these operations 

in its fiscal year 2005 budget request or accompanying FYDP submitted to 

Congress. Based on statements by the Undersecretary of Defense 

(Comptroller) that cost data will become clearer as the year progresses, 

we expect that DOD will be able to provide such data to Congress for both 

the fiscal year 2005 and 2006 budget deliberations. In addition, some 

requirements that have associated costs, such as the Army’s temporary 

increase in endstrength, have already been identified. We acknowledge in 

our report the challenges associated with estimating costs for ongoing 

operations. Although DOD states that including these estimates would 

unnecessarily complicate resource discussions and decisions, we maintain 

that the challenges of estimating costs for ongoing operations must be 

weighed against Congress’s responsibility for balancing government-wide 
Page 20 GAO-04-514 DOD's Future Years Defense Program 

funding priorities using the best available data at the time of its budget 

deliberations. 

Lastly, DOD nonconcurred with our recommendations for the Office of 

Program Analysis and Evaluation to align the program elements in the 

FYDP with defense capabilities and the risk management framework and 

include this alignment with the FYDP provided to Congress. DOD stated 

that it does not use the FYDP as a tool to conduct analyses of capability or 

risk trade-offs between systems, as such a tool would be relatively 

uninformative and needlessly complex, though the FYDP does inform 

those analyses. DOD also said it does not intend to embed capabilities or 

the risk management framework in the FYDP, as these constructs are still 

being developed and may change significantly, but it is working to create 

decision-support tools that will link resource allocations to capability and 

performance metrics, and it may be able to report on those allocations as 

the tools and processes mature. We maintain our view that the FYDP is 

the ideal vehicle for providing information on these new concepts to 

Congress. First, since the FYDP already exists as a legally mandated 

reporting mechanism, it avoids the creation of any duplicative reporting. 

Second, because the FYDP cuts across all the services and agencies, it 

provides a macro picture of DOD resource allocations in terms of both 

missions and appropriations. Third, as we note in our report, because the 

FYDP is flexible, DOD has periodically built new categories of program 

elements into it to provide decision makers with resource information as 

needed. Currently, Congress cannot use the FYDP to identify the results 

of DOD’s resource analyses of capabilities or risk trade-offs between 

programs because these relationships are not aligned with the program 

elements in the FYDP. We recognize that the FYDP is not the only tool 

available for defense resource decision making; however, we note, as DOD 

has stated in its written comments, that the FYDP informs analyses and 

reflects the resource implications of decisions. While we recognize that 

DOD is still working to define these concepts, we maintain our view that, 

once defined, reporting these relationships with the FYDP provided to 

Congress would improve congressional visibility of DOD resource 

allocations. 

DOD’s comments are included in their entirety in appendix III. Annotated 

evaluations of DOD’s comments are also included in appendix III. 

We are sending copies of this report to the Secretary of Defense; the 

Undersecretary of Defense (Comptroller); and the Director, Office of 

Management and Budget. We will also make copies available to others 
Page 21 GAO-04-514 DOD's Future Years Defense Program 

upon request. In addition, this report will be available at no charge on the 

GAO Web site at http://www.gao.gov. 

If you have any questions about this report, please contact me at 

(202) 512-9619. Major contributors to this report are listed in appendix IV. 

Sharon L. Pickup 

Director, Defense Capabilities and Management 
Page 22 GAO-04-514 DOD's Future Years Defense Program 

List of Committees 

The Honorable John Warner 

Chairman 

The Honorable Carl Levin 

Ranking Minority Member 

Committee on Armed Services 

United States Senate 

The Honorable Ted Stevens 

Chairman 

The Honorable Daniel Inouye 

Ranking Minority Member 

Subcommittee on Defense 

Committee on Appropriations 

United States Senate 

The Honorable Duncan Hunter 

Chairman 

The Honorable Ike Skelton 

Ranking Minority Member 

Committee on Armed Services 

House of Representatives 

The Honorable Jerry Lewis 

Chairman 

The Honorable John Murtha 

Ranking Minority Member 

Subcommittee on Defense 

Committee on Appropriations 

House of Representatives 
Appendix I: Scope and Methodology 

Page 23 GAO-04-514 DOD's Future Years Defense Program 

We determined that the automated FYDP data was sufficiently reliable for 

use in meeting this report’s objectives. DOD checks the FYDP data against 

its budget request sent to Congress at the appropriation category level. We 

also compared the FYDP data with published documents DOD provided to 

ensure that the automated data correctly represented DOD’s budget 

request. Specifically, we compared total budget estimates, appropriation 

totals, military and civilian personnel levels, force structure levels, and 

some specific program information. Based on our and DOD’s comparison, 

we were satisfied that the automated FYDP data and published data were 

in agreement. GAO has designated DOD’s financial management area as 

high risk due to long-standing deficiencies in DOD’s systems, processes, 

and internal controls.1

 Since some of these systems provide the data used 

in the budgeting process, there are limitations to the FYDP’s use. However, 

since we determined the FYDP accurately represents DOD’s budget 

request, it is sufficiently reliable as used for this report. 

To determine whether the FYDP provides visibility over DOD funding 

priorities we compared DOD reports and Secretary of Defense 

congressional testimonies that supported the 2003 and 2004 budget 

submissions against FYDP data. We also analyzed resource data from the 

2003 and 2004 FYDPs for fiscal years 2004 – 2007 to identify trends. We 

adjusted the current dollars to constant 2004 dollars using appropriate 

DOD Comptroller inflation indexes to eliminate the effects of inflation. To 

determine whether the FYDP provides visibility over likely future budget 

requests, we reviewed other related GAO, Congressional Research Service, 

and Congressional Budget Office reports and interviewed program and 

budget officials at the Office of the Secretary of Defense and service 

headquarters. In addition, we summarized documents related to 

supplemental appropriations and analyzed DOD officials’ statements 

regarding plans for supplemental appropriations in 2005. 

To determine whether the FYDP is useful for implementing DOD’s risk 

management framework and capabilities based planning, we interviewed 

appropriate officials at the Office of the Secretary of Defense, service 

headquarters, and the Institute for Defense Analyses— the organization 

currently under contract to make improvements to the FYDP, and 

examined various DOD planning and budget documents including the 2001 

Report of the Quadrennial Defense Review, DOD’s 2003 Annual Report to 

 1

 U.S. General Accounting Office, Major Management Challenges and Program Risks: 

Department of Defense, GAO-03-98 (Washington, D.C.: Jan. 2003). 

Appendix I: Scope and Methodology 
Appendix I: Scope and Methodology 

Page 24 GAO-04-514 DOD's Future Years Defense Program 

the President and the Congress, and DOD’s fiscal year 2003 and 2004 

budget submissions. We also examined the structure of the FYDP to 

determine if it currently included, or was possible to include, a link to the 

risk management framework or defense capabilities. 

Our review was conducted between June 2003 and February 2004 in 

accordance with generally accepted government auditing standards. 
Appendix II: Comparison of DOD’s 2003 and 

2004 FYDPs by Primary Appropriation 

Category 

Page 25 GAO-04-514 DOD's Future Years Defense Program 

Total obligation authority in millions of FY 2004 dollars 

 FYDP 2004 2005 2006 2007 Total

Research, Development, Test and 

Evaluation 2003 $56,891 $59,556 $56,823 $54,902 $228,172

 2004 61,827 66,001 62,182 61,304 251,314

 $ Change 4,936 6,445 5,359 6,402 23,142

 % Change 8.7% 10.8% 9.4% 11.7% 10.1%

Procurement 2003 73,297 76,470 82,638 92,698 325,103

 2004 72,747 75,949 81,594 89,985 320,275

 $ Change -550 -521 -1,044 -2,713 -4,828

 % Change -0.8% -0.7% -1.3% -2.9% -1.5%

Military Construction 2003 5,102 6,212 10,426 13,054 34,794

 2004 5,123 6,036 10,048 12,520 33,727

 $ Change 21 -176 -378 -534 -1,067

 % Change 0.4% -2.8% -3.6% -4.1% -3.1%

Military Personnel 2003 $103,966 $105,025 $107,327 $107,638 423,956

 2004 98,956 100,174 101,447 101,776 402,353

 $ Change -5,010 -4,851 -5,880 -5,862 -21,603

 % Change -4.8% -4.6% -5.5% -5.4% -5.1%

Operation and Maintenance 2003 128,052 130,367 131,653 130,407 520,479

 2004 116,959 119,002 120,675 121,356 477,992

 $ Change -11,093 -11,365 -10,978 -9,051 -42,487

 % Change -8.7% -8.7% -8.3% -6.9% -8.2%

Family Housing 2003 4,322 4,984 4,734 4,572 18,612

 2004 4,371 4,694 4,904 4,537 18,506

 $ Change 49 -290 170 -35 -106

 % Change 1.1% -5.8% 3.6% -0.8% -0.6%

Other DOD Programsa

2003 12,259 12,338 12,629 12,824 50,050

 2004 17,900 17,773 18,089 18,402 72,164

 $ Change 5,641 5,435 5,460 5,578 22,114

 % Change 46.0% 44.1% 43.2% 43.5% 44.2%

Revolving and Management Funds 2003 2,115 2,587 2,198 3,255 10,155

 2004 2,784 1,379 2,103 1,030 7,296

 $ Change 669 -1,208 -95 -2,225 -2,859

 % Change 31.6% -46.7% -4.3% -68.4% -28.2%

Appendix II: Comparison of DOD’s 2003 and 

2004 FYDPs by Primary Appropriation 

Category 
Appendix II: Comparison of DOD’s 2003 and 

2004 FYDPs by Primary Appropriation 

Category 

Page 26 GAO-04-514 DOD's Future Years Defense Program 

Total obligation authority in millions of FY 2004 dollars 

 FYDP 2004 2005 2006 2007 Total

Undistributed Contingencies 2003 0 0 0 0 0

2004 45 47 49 51 192

$ Change 45 47 49 51 192

% Change n/a n/a n/a n/a NA

 2003 $386,004 $397,539 $408,428 $419,350 $1,611,321

 2004 $380,712 $391,055 $401,091 $410,961 $1,583,819

 $Change -$5,292 -$6,484 -$7,337 -$8,389 -27,502

Total %Change -1.4% -1.6% -1.8% -2.0% -1.7%

Source: GAO analysis of DOD data. 

Note: Totals may not add due to rounding. 

a Other DOD programs include chemical agent and munitions destruction, the defense health 

program, drug interdiction and counter-drug activities, and the Office of the Inspector General. 
Appendix III: Comments from the Department 

of Defense 

Page 27 GAO-04-514 DOD's Future Years Defense Program 

Appendix III: Comments from the 

Department of Defense 

Note: GAO comments 

supplementing those in 

the report text appear at 

the end of this appendix. 
Appendix III: Comments from the Department 

of Defense 

Page 28 GAO-04-514 DOD's Future Years Defense Program 

Now on p. 20. 

Now on pp. 19-20. 

Now on pp. 18-19. 
Appendix III: Comments from the Department 

of Defense 

Page 29 GAO-04-514 DOD's Future Years Defense Program 

See comment 2. 

Now on pp. 11-12 and 

see comment 1. 
Appendix III: Comments from the Department 

of Defense 

Page 30 GAO-04-514 DOD's Future Years Defense Program 

See comment 5. 

See comment 4. 

Now on pp. 19-20 and 

see comment 3. 
Appendix III: Comments from the Department 

of Defense 

Page 31 GAO-04-514 DOD's Future Years Defense Program 

See comment 6. 
Appendix III: Comments from the Department 

of Defense 

Page 32 GAO-04-514 DOD's Future Years Defense Program 

The following are GAO’s comments on the Department of Defense’s letter 

dated April 13, 2004. 

1. DOD objected to our observation that DOD has historically employed 

overly optimistic planning assumptions in its budget formulations. In 

response to its comments, we acknowledged DOD guidance to reduce 

future resource shortfalls on page 11 of this report and noted the lack 

of auditable data to document the effects of this guidance. We also 

provided additional examples of GAO reports that continue to raise 

questions about DOD’s planning assumptions. 

2. DOD provided a rationale for growth in civilian personnel costs. We 

intended civilian personnel to be an example of costs not visible in the 

FYDP, as opposed to an example of cost growth. Therefore, we have 

clarified the language on page 2 of this report to reflect this point. 

Further, we are not proposing that civilian personnel costs be 

disassociated from programs, as suggested by DOD’s comments. 

3. DOD reiterated that it already provides Congress reliable information 

on the known costs for ongoing operations as soon as it is available. As 

we stated in our evaluation of agency comments on page 19 of this 

report, we are encouraged that DOD agrees with the principle of 

providing these data to Congress as soon as they are sufficiently 

reliable. However, we note that cost data is expected to become 

clearer as the year progresses and some requirements that have 

associated costs have already been identified. Therefore, we expect 

that DOD will be able to provide such data to Congress for their fiscal 

year 2005 and 2006 budget deliberations. 

4. DOD noted that our report implied that the cost of increased Army 

force structure has been fully identified and asserted that, to the 

contrary, the work to define the particulars of this plan in sufficient 

detail to support budget development is still in progress. However, we 

note that in February 2004, the Undersecretary of Defense 

(Comptroller) outlined an Army force-restructuring plan that would be 

partially funded through the existing fiscal year 2004 supplemental 

appropriation. While DOD may not have fully defined the particulars of 

this plan, since it has identified a funding timeline, we believe that at 

least some of the cost of increased Army force structure can be 

estimated at this time. 

5. Based on comments from the Air Force, DOD asked that we clarify 

that the reduction in the number of F/A-22 aircraft being purchased 

GAO Comments 
Appendix III: Comments from the Department 

of Defense 

Page 33 GAO-04-514 DOD's Future Years Defense Program 

was not largely due to cost increases, and it referred to the role played 

by two Quadrennial Defense Reviews in the decision. Our report 

stated, however, that cost increases have been one factor in the Air 

Force’s substantially decreasing the number of F/A-22 Raptors to be 

purchased – from 648 to 276. Moreover, development costs have 

increased dramatically and in a report that was issued after this draft 

was sent to DOD for comment, GAO continued to observe that 

additional increases in development costs for the F/A-22 are likely.1

 We 

maintain our view that the F/A-22 program illustrates that DOD’s 

funding needs in some areas exceed the estimates used in the FYDP. 

6. Based on comments from the Air Force, DOD challenged our 

implication that the F/A-22 program will exceed mandated cost 

limitations if billions of dollars of cost offset initiatives are not 

achieved as planned. In February 2003, we reported that the Air Force 

has had some success in implementing cost reduction plans to offset 

cost growth.2

 However, production improvement programs, also 

designed to offset costs, have faced recent funding cutbacks and 

therefore are unlikely to offset cost growth as planned. The Air Force 

stated that it has no intention of violating mandated cost limitations, 

but that it does intend to seek relief from them as part of the fiscal year 

2006 President’s budget. To the extent that the Air Force requests 

additional funds for the F/A-22, our view that the FYDP understates 

costs is further confirmed.

 1

 U.S. General Accounting Office, Tactical Aircraft: Changing Conditions Drive Need for 

New F/A-22 Business Case, GAO-04-391 (Washington, D.C.: Mar. 15, 2004). 

2

 U.S. General Accounting Office, Tactical Aircraft: DOD Needs to Better Inform Congress 

about Implications of Continuing F/A-22 Cost Growth, GAO-03-280 (Washington, D.C.: 

Feb. 28, 2003). 
Appendix IV: GAO Contact and Staff 

Acknowledgments 

Page 34 GAO-04-514 DOD's Future Years Defense Program 

Gwendolyn R. Jaffe (202) 512-4691 

In addition to the person named above, Patricia Lentini, Margaret Best, 

Barbara Gannon, Christine Fossett, Tom Mahalek, Betsy Morris, Ricardo 

Marquez, Jane Hunt, and Michael Zola also made major contributions to 

this report. 

Appendix IV: GAO Contact and Staff 

Acknowledgments 

GAO Contact 

Acknowledgments 

(350395) 
The General Accounting Office, the audit, evaluation and investigative arm of 

Congress, exists to support Congress in meeting its constitutional responsibilities 

and to help improve the performance and accountability of the federal 

government for the American people. GAO examines the use of public funds; 

evaluates federal programs and policies; and provides analyses, 

recommendations, and other assistance to help Congress make informed 

oversight, policy, and funding decisions. GAO’s commitment to good government 

is reflected in its core values of accountability, integrity, and reliability. 

The fastest and easiest way to obtain copies of GAO documents at no cost is 

through the Internet. GAO’s Web site (www.gao.gov) contains abstracts and fulltext files of current reports and testimony and an expanding archive of older 

products. The Web site features a search engine to help you locate documents 

using key words and phrases. You can print these documents in their entirety, 

including charts and other graphics. 

Each day, GAO issues a list of newly released reports, testimony, and 

correspondence. GAO posts this list, known as “Today’s Reports,” on its Web site 

daily. The list contains links to the full-text document files. To have GAO e-mail 

this list to you every afternoon, go to www.gao.gov and select “Subscribe to e-mail 

alerts” under the “Order GAO Products” heading. 

The first copy of each printed report is free. Additional copies are $2 each. A 

check or money order should be made out to the Superintendent of Documents. 

GAO also accepts VISA and Mastercard. Orders for 100 or more copies mailed to a 

single address are discounted 25 percent. Orders should be sent to: 

U.S. General Accounting Office 

441 G Street NW, Room LM 

Washington, D.C. 20548 

To order by Phone: Voice: (202) 512-6000 

TDD: (202) 512-2537 

Fax: (202) 512-6061 

Contact: 

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

E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470 

Jeff Nelligan, Managing Director, NelliganJ@gao.gov (202) 512-4800 

U.S. General Accounting Office, 441 G Street NW, Room 7149 

Washington, D.C. 20548 

GAO’s Mission 

Obtaining Copies of 

GAO Reports and 

Testimony 

Order by Mail or Phone 

To Report Fraud, 

Waste, and Abuse in 

Federal Programs 

Public Affairs