HUMAN CAPITAL

Opportunities Exist to 

Further Improve 

DOD's Methodology 

for Estimating the 

Costs of Its 

Workforces

Report to Congressional Committees

September 2013

GAO-13-792

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-13-792, a report to 

congressional committees

September 2013

HUMAN CAPITAL

Opportunities Exist to Further Improve DOD’s 

Methodology for Estimating the Costs of Its 

Workforces

Why GAO Did This Study

DOD must make cost-effective 

decisions in the use of its military, 

civilian, and contractor workforces, and 

CAPE issued guidance that provides a 

methodology for cost estimates and 

comparisons among workforces. The 

conference report accompanying the 

National Defense Authorization Act for 

Fiscal Year 2013 mandated that GAO 

review the cost methodology in

Directive-Type Memorandum (DTM)

09-007 or its successor guidance to 

determine whether they reflect the 

actual, relevant, and quantifiable costs 

to taxpayers for work performed by

these workforces. This report 

evaluates the extent to which (1) 

DOD’s methodology reflects the full 

cost to the taxpayer, and (2) DOD's 

components incorporated the business 

rules in the memorandum and 

successor instruction into workforce 

mix decisions. GAO compared DOD’s 

cost methodology to guidance from 

other government entities and 

interviewed officials from components

applying the methodology, as well as 

other appropriate DOD officials.

What GAO Recommends

GAO is recommending that DOD 

develop further guidance on certain 

cost elements, such as training;

develop business rules for estimating 

Reserve and National Guard costs;

evaluate inclusion or non-inclusion of 

cost elements related to retirement;

assess cost models being used across 

the department; and reassess sources 

for contractor data. DOD concurred 

with two and partially concurred with 

three of GAO’s recommendations. 

GAO continues to believe it is 

important for DOD to fully address the 

recommendations in order to achieve 

desired results. 

What GAO Found

The Department of Defense (DOD) has improved its methodology for estimating 

and comparing the full cost to the taxpayer of work performed by military and 

civilian personnel and contractor support, but the methodology continues to have 

certain limitations. Best practices state that cost estimating rules should include a 

common set of standards that minimize conflicts in definitions, but DOD’s 

methodology does not provide guidance for certain costs. For instance, its 

estimate of service training costs divides total training funding by the number of 

servicemembers. Using this method yields an average training cost of $6,490 per 

servicemember in the Army for fiscal year 2012. However, Army data show that 

training for a general aviation officer can be as high as $93,600 a year, while the

training for an enlisted infantryman can be as low as about $4,600 a year. DOD’s 

Cost Assessment and Program Evaluation (CAPE) office has not provided more 

specific direction on training costs, although some officials have requested it. 

Additionally, CAPE officials told GAO they did not include Reserve and National 

Guard personnel in the methodology because usually these personnel are used 

on a short-term basis. However, a portion of these personnel do serve in a fulltime capacity. The Federal Accounting Standards Advisory Board has noted that 

a cost methodology should include any resources directly or indirectly used to 

perform work, and DOD relies on Reserve and National Guard personnel, for 

example, to provide airlift capabilities in support of military operations. Further, 

CAPE has not yet evaluated certain retirement-related cost elements. A portion 

of these cost elements may not be appropriate to include because they are not 

attributable to current military and civilian personnel. Without more specific 

direction in these areas, it will be more difficult for DOD to have reasonable 

assurance that its cost estimates and comparisons reflect the full and most 

accurate cost to the taxpayer of work performed by its various workforces.

DOD components GAO examined generally have incorporated business rules

contained in the memorandum and successor instruction into their workforce mix 

decisions, although DOD officials said opportunities to use the rules have been 

limited due to budgetary factors and few new or expanded missions. Moreover, 

implementation challenges exist. Some officials raised questions about the extent 

to which other officials throughout DOD are aware of a requirement to use the 

methodology for decisions other than in-sourcing. Further, CAPE recently 

completed a DOD-wide software tool for implementing its instruction, but at the 

time of GAO’s review, some DOD components had developed their own tools. 

CAPE officials told GAO that the components’ use of its DOD-wide tool will not 

be required, enforced, or monitored, and that CAPE has not reviewed the 

components’ tools. Best practices state that to be reliable, cost estimates should 

be derived using a process that produces results that are accurate and can be 

traced, replicated, and updated. Assessing these tools would enable CAPE to 

identify the advantages and disadvantages of allowing multiple tools and provide 

reasonable assurance that cost estimates are reliable. Further, the instruction 

directs users to a General Services Administration (GSA) website for determining 

contractor support costs. GAO has reported on limitations of GSA’s website such 

as its reporting of data that do not reflect post-competition prices. Without reliable 

data sources, DOD components may not be using the most suitable data needed 

to produce credible cost estimates.

View GAO-13-792. For more information, 

contact Brenda S. Farrell at (202) 512-3604 or 

farrellb@gao.gov
Page i GAO-13-792 DOD’s Personnel Cost Methodology

Letter 1

Background 4

DOD’s Methodology for Estimating and Comparing the Full Cost to 

the Taxpayer of Work Performed by Its Workforces is Limited in 

Certain Aspects 9

DOD’s Components Report that They Have Incorporated Business 

Rules into Their Workforce Mix Decisions, but Implementation 

Challenges Exist 19

Conclusions 25

Recommendations for Executive Action 26

Agency Comments and Our Evaluation 27

Appendix I Scope and Methodology 31

Appendix II Comments from the Department of Defense 37

Appendix III GAO Contact and Staff Acknowledgments 40

Related GAO Products 41

Tables

Table 1: Uses of the Business Rules Established in DTM 09-007 and 

DOD Instruction 7041.04 to Estimate and Compare 

Personnel Costs and to Support Workforce Mix Decisions 5

Table 2: Description of the Full Cost of Performance by Military 

and Civilian Personnel, and Contractor Support 7

Table 3: Retirement, Health, and Veteran Benefit Cost Elements 

Included in DOD Instruction 7041.04 17

Table 4: Number of Instances Selected Military Departments 

Commands and Offices, and Defense Agencies Reported 

Using DTM-09-007 to Support Various Types of Workforce 

Mix Decisions from January 2010 through June 2013 21

Table 5: Select Commands, Offices, and Defense Agencies 

Contacted About Implementing DTM 09-007 34

Contents
Page ii GAO-13-792 DOD’s Personnel Cost Methodology

Table 6: DOD Organizations Contacted for Information on 

Implementation of DTM 09-007 35

Abbreviations

CAPE Cost Assessment and Program Evaluation

DOD Department of Defense

DTM Directive Type-Memorandum 

GSA General Services Administration 

OSD Office of the Secretary of Defense 

USD (P&R) Under Secretary of Defense (Personnel and Readiness) 

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Page 1 GAO-13-792 DOD’s Personnel Cost Methodology

441 G St. N.W.

Washington, DC 20548

September 25, 2013

Congressional Committees

To meet its wide array of mission requirements, the Department of 

Defense (DOD) maintained a military workforce of over 1.4 million active 

duty servicemembers, nearly 850,000 reserve members,1 and about 

800,000 civilian full-time equivalents2 in fiscal year 2012. Augmenting that 

workforce, the department relies on about 710,000 contractor full-time 

equivalent personnel.3 As the federal government confronts growing fiscal 

challenges, DOD will compete for resources and face critical workforce 

decisions to meet budgetary constraints. Given these constraints, it is 

important that the department have an analytically rigorous and balanced 

process to estimate the total cost of its military, civilian, and contractor 

workforces to inform workforce decisions and make the necessary 

program decisions to meet its mission requirements. As reflected in 

DOD’s Directive-Type Memorandum (DTM) 09-0074

 1

The reserve component of DOD’s military personnel is comprised of the Army, the Navy, 

the Marine Corps, and the Air Force Reserves and the Army and the Air National Guards

of the United States.

and more recently in 

2

The number of civilian full-time equivalents includes all civilian employees, including both 

direct-hire and indirect-hire foreign nationals. A full-time equivalent is a standard measure 

of labor that equates to 1 year of full-time work (labor hours as defined by the Office of 

Management and Budget Circular A-11, Preparation, Submission, and Execution of the 

Budget (July, 2013)).

3

DOD is required to compile annually an inventory of contracted services, pursuant to 10 

U.S.C § 2330a, to include, among other data, the functions performed, the number of 

contractor full-time equivalents performing the function, and the total dollar amount of the 

services purchased. In its inventory of contracted services, the department reported 

spending about $145 billion for contracted services in fiscal year 2011, provided by an 

estimated 710,000 contractor full-time equivalents. We have previously found, however, 

that obligations reported for contracted services in budget justification materials and 

obligations reported in the inventory of contracted services differ. We have also previously 

found that a number of factors limit the accuracy and completeness of the inventory data. 

See, for example, GAO, Defense Acquisitions: Continued Management Attention Needed 

to Enhance Use and Review of DOD’s Inventory of Contracted Services, GAO-13-491

(Washington, D.C.: May 23, 2013). 

4

Department of Defense Directive-Type Memorandum 09-007, Estimating and Comparing 

the Full Costs of Civilian and Military Manpower and Contractor Support (Apr. 3, 2013). 

The DTM was first issued on January 29, 2010 and was extended five times. A DTM is a 

memorandum issued for time-sensitive actions that affect current issuances or will 

become DOD issuances (e.g., instructions or directives), and only when time constraints 

prevent publishing a new issuance. DTMs are typically only effective for 6 months.
Page 2 GAO-13-792 DOD’s Personnel Cost Methodology

DOD’s Instruction 7041.04, issued on July 3, 2013,5

The conference report accompanying the National Defense Authorization 

Act for Fiscal Year 2013

defense officials are 

to be aware of the full cost of personnel and have a thorough 

understanding of the implications of those costs to DOD and the federal 

government when developing national security policies and making 

program commitments.

6

To evaluate the extent to which DOD’s methodology for estimating and 

comparing the cost of work performed by military, civilian, and contractor 

workforces reflects the full cost to the taxpayer, we reviewed each of the 

cost elements contained in the most recent version of DTM 09-007 and 

DOD Instruction 7041.04 and compared them to best practices in GAO’s 

Cost Estimating and Assessment Guide,

mandated that GAO review the cost 

methodologies identified in DOD’s DTM 09-007 or its successor 

guidance. Specifically, GAO is mandated to review whether the 

methodology reflects the actual, relevant, and quantifiable costs to 

taxpayers for work performed by military, civilian and contractor 

workforces. This report evaluates the extent to which (1) DOD’s 

methodology for estimating and comparing the cost of work performed by 

military, civilian and contractor workforces reflects the full cost to the 

taxpayer and (2) DOD’s components have incorporated the business 

rules identified in the memorandum and instruction into their workforce 

mix decisions.

7 guidance in the Federal 

Accounting Standards Advisory Board Handbook,8 and the Office of 

Management and Budget guidelines for Performance of Commercial 

Activities.9

 5

DOD Instruction 7041.04, Estimating and Comparing the Full Costs of Civilian and Active 

Duty Military Manpower and Contract Support (July 3, 2013). 

In addition, we reviewed pertinent DOD and service-specific 

policies and guidance and interviewed knowledgeable officials within the 

6

H.R. Rep. 112-705, at 725 (Dec. 18, 2012).

7

GAO, GAO Cost Estimating and Assessment Guide: Best Practices for Developing and 

Managing Capital Program Costs, GAO-09-3SP (Washington, D.C.: March 2009).

8

Federal Accounting Standards Advisory Board, FASAB Handbook of Accounting 

Standards and Other Pronouncements, as Amended (Washington, D.C.: June 30, 2012).

9

Office of Management and Budget, Circular No. A-76, Performance of Commercial 

Activities, (May 29, 2003).
Page 3 GAO-13-792 DOD’s Personnel Cost Methodology

offices of the Under Secretary of Defense (Personnel and Readiness) 

(USD(P&R)), the Director of Cost Assessment and Program Evaluation 

(CAPE), and DOD’s Office of the Actuary. We also met with the Office of 

Management and Budget and other experts and interested parties we 

selected based on their work on issues related to the DTM.10

We conducted this performance audit from December 2012 to September 

2013 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

Specifically, 

we met with the Center for Strategic and International Studies, the Center 

for Strategic and Budgetary Assessments, the American Federation of 

Government Employees, and the Professional Services Council to 

discuss their perspectives on the preceding DTM and DOD Instruction. 

We also obtained the perspectives of the National Guard and Reserve 

community by meeting with the Office of the Secretary of Defense 

(Reserve Affairs) and the Reserve Forces Policy Board. To evaluate the 

extent to which DOD’s components have incorporated the business rules 

identified in the memorandum and instruction into their workforce mix 

decisions, we met with knowledgeable officials from 3 to 4 commands 

and offices we selected from each of the military departments, and 3 

defense agencies, for a total of 13 DOD entities. The results of these 

interviews cannot be generalized to all entities across DOD but provided 

insights about incorporation of business rules into workforce mix 

decisions. We used a non-probability sample, based on size of civilian 

workforce as of the end of fiscal year 2012, to make our selections. We 

obtained data from each entity on the number of instances they used the 

business rules identified in the DTM to inform workforce decisions from 

January 2010 through June 2013. In addition, we met with officials in 22

other DOD entities that are involved in guiding the implementation of the 

methodology. Although the Marine Corps was not part of our nonprobability sample, we met with several Marine Corps commands and 

offices to discuss their implementation of the methodology. We also 

obtained and evaluated the different software tools developed and 

employed by each of the components, defense agencies, and CAPE to 

apply the methodology in DTM 09-007 that was finalized in DOD 

Instruction 7041.04.

 10The Office of Management and Budget did not provide input on the development or 

conduct an analysis of DTM 09-007 or DOD Instruction 7041.04. However, OMB stated 

that it is reviewing the guidance and working with DOD as it considers government-wide 

management guidance on cost comparisons.
Page 4 GAO-13-792 DOD’s Personnel Cost Methodology

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives. Further details on our 

objectives, scope, and methodology can be found in appendix I.

DOD’s DTM 09-007 established business rules, or standard procedures, 

to estimate and compare the full cost of military and DOD civilian 

personnel and contractor support. These rules were incorporated with 

amendments into DOD Instruction 7041.04, which supersedes the DTM. 

According to the DTM and the instruction, when developing national 

security policies and making program commitments, DOD officials must 

be aware of the full costs of personnel and have a thorough 

understanding of the implications of those costs to DOD and, on a 

broader scale, the federal government. To facilitate this awareness, the 

DTM provided and the instruction provides business rules for DOD 

officials to estimate the full costs of the defense workforce and contracted 

support for tasks supporting planning, defense acquisition, and force 

structure. According to the instruction, the Office of the Secretary of 

Defense (OSD) and all DOD components are required to use these 

business rules when performing an economic analysis to support 

workforce decisions, such as determining the workforce mix of new or 

expanding mission requirements that are not inherently governmental11 or 

exempt from private-sector performance,12 and in-sourcing.13

 11The Federal Activities Inventory Reform (FAIR) Act of 1998, Pub. L. No 105-270, § 5 

(1998) (appended as a note below 31 U.S.C. § 501) defines inherently governmental 

functions as functions that are so intimately related to the public interest as to require 

performance by federal government employees. There is currently an open Federal 

Acquisition Regulation case (2012-001) under consideration to implement a September 

2011 Office of Federal Procurement Policy Letter that, among other things, clarified the 

definition of “inherently governmental function” (consistent with the FAIR Act definition). 

Office of Federal Procurement Policy, Policy Letter 11-01, Performance of Inherently 

Governmental and Critical Functions (Sept. 12, 2011). 

Table 1 

12 DOD Instruction 1100.22 provides criteria for identifying certain positions as exempt 

from performance by the private sector, such as activities necessary to provide for the 

readiness and workforce management needs of DOD or mitigate operational risk. Some, 

but not all, functions identified as closely associated with inherently governmental 

functions will meet the criteria necessary to be deemed exempt functions by DOD.

Background
Page 5 GAO-13-792 DOD’s Personnel Cost Methodology

shows how the DOD components can generally use the business rules 

established in DTM 09-007 and in DOD Instruction 7041.04 to estimate 

and compare personnel costs and to support workforce mix decisions.

Table 1: Uses of the Business Rules Established in DTM 09-007 and DOD Instruction 7041.04 to Estimate and Compare 

Personnel Costs and to Support Workforce Mix Decisions

Description 

Manpower costs The costs of manpower for a specific unit, organization, function, mission, or defense acquisition 

program; analysts should report the full costs of both military and civilian DOD manpower. 

Workforce mix decisionsa New or expanded missions: Conduct a cost comparison to determine whether civilian personnel or 

a contractor would perform the function(s) at a lower cost.

In-sourcing: When a function is currently being performed under contract, conduct a cost 

comparison to determine whether civilian personnel or a private-sector contractor would perform the 

function at a lower cost.

Manpower conversions between military and civilian personnel: Estimate the cost impact of 

converting a function from military to civilian or from civilian to military performance. 

Outsourcing: DOD components are required to conduct a public-private competition in accordance 

with OMB Circular A-76, and applicable law, to determine whether to convert a commercial activity 

currently performed by civilian personnel to private-sector performance.

Source: GAO analysis of DTM 09-007 and DODI 7041.04.

b

a A cost comparison using the business rules described in DTM 09-007 and now in DOD Instruction 

7041.04 is not required to support new or expanded mission and in-sourcing workforce mix decisions 

if the workforce requirement has been determined to be inherently governmental or exempt from 

private-sector performance.

b In the National Defense Authorization Act for Fiscal Year 2010, Congress imposed a temporary 

moratorium on new competitions involving functions currently performed by DOD civilian employees 

until, among other things, DOD reviewed and reported on various aspects of its public-private 

competition policies.

DOD Instruction 7041.04 does not require DOD’s components to make 

workforce decisions based on cost alone,14

 13DOD defines in-sourcing as the conversion of any currently contracted service or 

function to DOD civilian or military performance. See Deputy Secretary of Defense 

Memorandum, In-sourcing Contracted Services—Implementation Guidance (May 28, 

2009).

but it does require the 

components to consider cost in the decision making process when the 

function in question is not required by law, regulation, or policy to be 

performed by a certain workforce (e.g., inherently governmental or 

14Section 129a of Title 10 of the United States Code requires DOD policies and 

procedures to prioritize the achievement of a workforce sufficiently sized and of the 

appropriate mix to carry out DOD’s mission over cost.
Page 6 GAO-13-792 DOD’s Personnel Cost Methodology

military essential functions) and other workforce factors are equal.15 In 

other cases, the cost of using personnel to perform work may not be part 

of the decision making process. For example, a June 2013 memorandum 

from the Assistant Secretary of Defense states that during civilian 

furloughs the use of either military personnel or contractors to 

compensate for workload resulting from the civilian furloughs is 

prohibited.16

DOD Instruction 7041.04 states that the full costs of personnel include 

labor costs, current and deferred compensation costs paid in cash and inkind,17 as well as direct and indirect non-labor costs. For contractor 

support, the full cost is the sum of the service contract, the cost of goods, 

services and benefits provided in-kind to contractors or reimbursed by 

DOD, and the costs to DOD in support of the contract and contract 

administration. See table 2 for a description of the full cost of performance 

by military and civilian personnel, and contractor support, as defined in 

DOD Instruction 7041.04.

 15See DOD Instruction 1100.22, Policy and Procedures for Determining Workforce Mix

(Apr. 12, 2010) and DOD Instruction 1100.4, Guidance for Manpower Management (Feb. 

12, 2005).

16Assistant Secretary of Defense for Readiness and Force Management, Memorandum, 

Civilian Furloughs and Total Workforce Management (June 28, 2013).

17In-kind compensation refers to noncash benefits provided to employees. Deferred 

benefits impact the current cost of compensation because money must be set aside today 

to provide these benefits in the future.
Page 7 GAO-13-792 DOD’s Personnel Cost Methodology

Table 2: Description of the Full Cost of Performance by Military and Civilian Personnel, and Contractor Support

Cost Military and Civilian Personnel Contractor Support

Labor Costs

Current Cash and in-kind compensation incurred at the time of 

performance.

Cost of the contract to the government.

Deferred Cash and in-kind compensation costs that will be 

incurred in the future.

Non-labor Costs

Direct The costs of goods, services and benefits that are 

used exclusively by an organization. 

The costs of goods, services, and benefits provided in-kind 

to contractors or reimbursed to contractors by DOD. In 

addition, the cost of services performed by DOD in support 

of the contract and contract administration. Indirect The costs of goods, services, and benefits that are not 

directly related to the production of a specific good or 

services, but instead are associated with the 

production of a variety of goods or services. These 

costs are also known as general and administrative 

and overhead costs.

Source: GAO analysis of DOD Instruction 7041.04.

Further, the Federal Accounting Standards Advisory Board Handbook 

defines full cost as the total amount of resources used to produce the 

output. More specifically, the full cost of an output is the sum of (1) the 

costs of resources consumed directly or indirectly that contribute to the 

output, and (2) the costs of identifiable supporting services provided by 

units within the reporting entity and by other reporting entities.18

The Director of CAPE is the principal advisor to the Secretary of Defense 

and other senior officials in DOD for independent cost assessment, 

program evaluation, and analysis. DOD Instruction 7041.04 states that 

CAPE, in collaboration with USD(P&R), and the Under Secretary of 

Defense (Comptroller), is responsible for developing a cost model for 

DOD-wide application to implement the business rules identified in the 

instruction. The instruction also states that CAPE, USD(P&R), the Under 

Secretary of Defense (Comptroller), and the heads of the DOD 

 18Federal Accounting Standards Advisory Board, FASAB Handbook of Accounting 

Standards and Other Pronouncements, as Amended (Washington, D.C.: June 30, 2012).

Roles and Responsibilities
Page 8 GAO-13-792 DOD’s Personnel Cost Methodology

components (such as the heads of the military departments)19 and OSD

components,20

The DOD Office of the Actuary provides actuarial expertise on all matters 

relating to military compensation and benefits, including performing 

annual valuations of the military retirement system, education benefits 

under the Montgomery G. I. Bill, and health care for the military retired 

population.

are responsible for using the business rules identified in 

the instruction. This includes using the business rules to estimate the full 

costs of the defense workforce in support of planning, defense 

acquisition, force structure decisions, and when performing an economic 

analysis in support of workforce mix decisions.

We have previously made recommendations to DOD to develop a 

methodology to estimate the full cost of military and civilian personnel. In 

our May 2006 report, we found that from fiscal years 2005 through 2007, 

the Air Force, the Army, and the Navy collectively converted or planned to 

convert a total of 5,507 military health care positions to civilian positions.21

 19In this context, DOD components include OSD, the military departments, the Office of 

the Chairman of the Joint Chiefs of Staff and the Joint Staff, the combatant commands, 

the Office of the Inspector General of the Department of Defense, the defense agencies, 

the DOD field activities, and all other organizational entities within the DOD.

We found at that time that it was unknown whether these conversions 

would increase or decrease costs to DOD, primarily because the 

methodology each of the departments considered using did not include 

the full cost of military personnel. Accordingly, we recommended, and 

DOD generally agreed, that the Secretaries of the Air Force, the Army, 

and the Navy coordinate with CAPE to develop the full cost for military 

personnel and for federal civilian or contract replacement personnel in 

assessing whether anticipated costs to hire civilian replacement 

personnel will increase costs to DOD for defense health care. In response 

to this recommendation, DOD issued DTM 09-007 in January 2010, which 

provided a full cost methodology for assessing military, civilian, or 

20The OSD component heads include the Under Secretaries and Assistant Secretaries of 

Defense.

21GAO, Military Personnel: Military Departments Need to Ensure That Full Costs of 

Converting Military Health Care Positions to Civilian Positions Are Reported to Congress, 

GAO-06-642 (Washington, D.C.: May 1, 2006).

Previous GAO Work on 

Estimating the Full Cost

of Personnel
Page 9 GAO-13-792 DOD’s Personnel Cost Methodology

contractor support personnel costs to inform workforce mix decisions, 

including military to civilian conversions.

In our February 2008 report on DOD’s efforts to address legislative 

requirements to use a full cost methodology to certify and report on 

planned conversions of military medical and dental positions to civilian 

medical and dental positions, we found that the Navy’s methodology was 

the only one that addressed the specific factors identified by the John 

Warner National Defense Authorization Act for Fiscal Year 2007 for 

positions planned for conversion for fiscal years 2007 and 2008.22 The Air 

Force and the Army relied on composite military rates, instead of using a 

full cost methodology. These composite rates did not include all of the 

required cost factors, such as training and recruiting costs. Accordingly, 

we recommended that DOD, among other things, develop operating 

guidance for the military departments to use when justifying future 

conversions of military medical and dental positions to civilian positions. 

In our recommendation we stated that this guidance should stipulate 

requirements to use a consistent full cost methodology for comparing the 

cost of military and civilian personnel. Officials in CAPE attributed the 

development of DTM 09-007, in part, to these recommendations.

DOD Instruction 7041.04 reflects improvements to DOD’s methodology 

for estimating and comparing the full cost to the taxpayer of work 

performed by military and civilian personnel and contractor support since 

the initial issuance of DTM 09-007, but the instruction is still limited in 

certain areas. For example, DOD’s instruction provides limited guidance 

on estimating overhead costs and adjusting advertising and recruiting, 

and training costs. In addition, CAPE has not established business rules 

for estimating the cost of a part of DOD’s total workforce—Reserve and 

National Guard personnel. Further, CAPE has not yet evaluated certain 

retirement and retiree health benefit cost elements that it is using to 

reflect the full cost of currently employed military and civilian personnel.

 22GAO, Military Personnel: Guidance Needed for Any Further Conversions of Military 

Medical Positions to Civilian Positions, GAO-08-370R (Washington, D.C.: Feb. 8, 2008).

DOD’s Methodology 

for Estimating and 

Comparing the Full 

Cost to the Taxpayer 

of Work Performed

by Its Workforces is 

Limited in Certain 

Aspects
Page 10 GAO-13-792 DOD’s Personnel Cost Methodology

DOD Instruction 7041.04 reflects a number of improvements in estimating 

certain cost elements in comparison to DTM 09-007, addressing some of 

the limitations users of the DTM and the interested parties we met with 

identified. While the DTM did not identify a responsible office for 

preparing clarifying guidance to assist users in applying the methodology, 

the instruction establishes that CAPE, among its other responsibilities, will 

be responsible for issuing such guidance. Also, CAPE has expanded the 

methodology to address specific elements that users of the DTM 

previously identified as missing, such as the cost of foregone taxes,23 lost 

productivity during periods of transition,24 and some other non-common 

costs associated with converting from contract to government 

performance.25

DOD’s instruction provides limited direction on estimating general and 

administrative and overhead costs, and adjusting advertising and 

Lastly, CAPE has been developing, refining, and testing a 

DOD-wide software tool—the Full Cost of Manpower—that employs the 

business rules established in the instruction, and the instruction provides 

a link to this tool. However, while CAPE has addressed several of the 

limitations users of the preceding DTM and other interested parties 

identified, certain limitations still exist.

 23Foregone taxes refer to corporate income tax revenue that is generated by hiring a 

contractor to complete work for DOD that could partially offset costs of the contract to the 

federal government, but not to DOD.

24Lost productivity during periods of transition refers to the loss of workforce productivity 

resulting from workforce decisions that result in a transition from public-to-private 

performance, private-to-public performance, or private-to-private performance.

25Non-common costs associated with converting from contract to government 

performance refer to costs that may increase when an activity is converted from contractor 

performance to government performance, such as the cost of rights to proprietary 

software or data rights.

DOD’s Instruction Includes 

Improvements, but Does 

Not Provide Guidance on 

Estimating and Adjusting 

Certain Cost Elements 

Related to Overhead, 

Advertising and Recruiting, 

and Training Costs

Improvements to 

DOD’s Methodology

General and Administrative 

and Overhead Costs
Page 11 GAO-13-792 DOD’s Personnel Cost Methodology

recruiting, and training costs. DOD Instruction 7041.04 states that the 

cost elements contained in the instruction can be modified or augmented 

in each specific case as necessary, but that the DOD components should 

be prepared to support each decision with sufficient justification. Best 

practices as reflected in GAO’s Cost Estimating and Assessment Guide 

state, however, that establishing ground rules for cost estimating provides 

a common set of agreed on estimating standards that provide guidance 

and minimize conflicts in definitions.26

The instruction directs users to include general and administrative and 

overhead costs in cost estimates. These costs include the goods, 

services, and benefits that support more than one organization. More 

specifically, these costs include a share of supplies and facilities and 

professional support services, and a fair share of the recurring costs of 

higher-level management and professional support services for 

organizations that produce or provide more than one product or service. 

The instruction provides a list of direct27 and indirect28

Further, if the user is unable to calculate the cost of overhead when 

considering converting work performed by contractors to performance by 

government employees, the instruction directs them to apply a standard 

overhead rate of 12 percent. The application of a standard 12 percent 

overhead rate is consistent with the rate federal agencies apply when 

considering the conversion of work performed by government employees 

costs that could be 

included for military and civilian personnel, but does not provide data 

sources or guidance on how to estimate them. Instead, CAPE identified 

subject-matter experts in each of the military departments to serve as 

points of contact to address these types of questions and provide 

assistance in the future.

 26GAO-09-3SP.

27DODI 7041.04 defines direct costs as costs that are related directly to the production of 

a specific good or the performance of a specific service. Typical direct costs are the 

compensation of employees for performance of work, fringe benefit costs, and the costs of 

materials consumed or expended in the performance of the work.

28DODI 7041.04 defines indirect costs as costs that are not directly related to the 

production of a specific good or service, but instead are associated with the production of 

a variety of goods and services. For example, the cost of the administration of a large 

company is an indirect cost that must be spread over the products or services that are 

produced by the company.
Page 12 GAO-13-792 DOD’s Personnel Cost Methodology

to contractors through a public-private competition29 using OMB Circular 

A-76.30 However, both the DOD Inspector General and we have found 

that the standard rate of 12 percent of labor costs does not have a sound 

analytical basis, which leaves some uncertainty about whether the rate 

may be understated or overstated.31 Our past work acknowledged the 

difficulty of obtaining reliable cost data that could provide a sound basis 

for an overhead rate, but we concluded that until actual overhead costs 

are used to develop a more meaningful standard overhead rate, the 

magnitude of savings expected from public-private competitions will be 

imprecise and competition decisions could continue to be controversial.32

In the case of advertising and recruiting, and training costs, the instruction 

directs the components to estimate an average rate, but does not provide 

guidance to adjust these average rates when appropriate. For example, 

the instruction provides a total budget figure for advertising and recruiting, 

and training costs by military service. These budget figures are divided by 

service end strength33

Several users of the methodology within the military departments told us 

they would like additional guidance or have requested additional guidance 

on these costs. These users said they were not sure what was included in 

to create the average cost per servicemember 

within each service.

 29Conducting competitions between public and private sources to identify the most costeffective provider of services is one tool DOD can legally use to achieve efficiencies. 

However, in the National Defense Authorization Act for Fiscal Year 2010, Congress 

imposed a temporary moratorium on new A-76 competitions involving functions currently 

performed by DOD civilian employees until, among other things, DOD reviewed and 

reported on various aspects of its public-private competition policies.

30OMB Circular A-76, Performance of Commercial Activities, (May 29, 2003) establishes 

federal policy for the competition of commercial activities.

31DOD Office of the Inspector General, Infrastructure and Environment: Public/Private 

Competition for the Defense Finance and Accounting Service Military Retired and 

Annuitant Pay Functions, D-2003-056 (Arlington, VA: Mar. 21, 2003); GAO, DOD Met 

Statutory Reporting Requirements on Public-Private Competitions, GAO-11-923R

(Washington, D.C.: Sept. 26, 2011); and GAO, Defense Outsourcing: Better Data Needed 

to Support Overhead Rates for A-76 Studies, GAO/NSIAD-98-62 (Washington, D.C.: Feb. 

27, 1998).

32GAO-11-923R.

33End strength represents the actual number of personnel on board at the end of a fiscal 

year.

Advertising and Recruiting, 

and Training Costs
Page 13 GAO-13-792 DOD’s Personnel Cost Methodology

advertising and recruiting costs and added that some functions or 

specialties would cost more to recruit and train. Specifically, the users told 

us that, for some specialties, the average training rates are too low, while 

for other specialties, the rates are too high. The users also said these 

costs vary depending on the rank or grade of the personnel, and 

depending on whether the specialty requires training or certifications. For 

example, the average rate for training in the Army for fiscal year 2012 

was $6,490 per servicemember. However, according to Army data, the 

amortized cost of training for an officer with a general aviation area of 

concentration can range from about $6,500 to $93,600 a year, depending 

on rank.34

Due to the lack of explanatory guidance on these cost elements, users of 

the preceding DTM told us they have developed their own methods for 

estimating and adjusting these costs, or have not included the costs in 

their estimates. Some officials have requested more developed guidance 

on these cost elements, but CAPE did not provide more specific direction 

in its recently issued instruction. Rather, as previously mentioned, CAPE 

identified subject-matter experts in each of the military departments to 

serve as points of contact to address these types of questions. However, 

without more developed guidance that establishes a clear set of ground 

rules or standards, subject-matter experts in the military departments and 

cost estimators must make their own assumptions, which can lead to 

inconsistent estimates, as well as hinder DOD’s and congressional 

decision makers’ visibility over the costs of accomplishing work by the 

different workforces.

In contrast, the amortized cost of training an enlisted member 

with an infantryman area of concentration can range from about $4,600 to 

$8,000 a year depending on pay grade.

 34Amortization is the gradual extinguishment of any amount over a period of time through 

a systematic allocation of the amount over a number of consecutive accounting periods. 

The Army Military-Civilian Cost System’s total amortized average cost of training factor is 

derived from the average cost of basic training, average cost of initial skill training, 

average cost of career training, or average cost of One Station Unit training.
Page 14 GAO-13-792 DOD’s Personnel Cost Methodology

Although Reserve and National Guard personnel are a significant part of 

the military workforce, comprising about 38 percent of the military 

workforce end strength in fiscal year 2012, CAPE did not establish 

business rules for developing cost estimates for these personnel in its 

instruction.35

Military service officials told us that they currently use or are considering 

using Reserve and National Guard personnel to perform work, and that in 

the absence of business rules for estimating the cost of these personnel, 

some officials said they have generated cost estimates for these 

workforces using their own methods. For example, one of the Air Force 

commands we interviewed conducted a business case analysis to 

evaluate the pros and cons associated with alternative workforce 

structures to help them meet their requirements. This analysis included 

the consideration of three courses of action: (1) adding additional 

contractor support, (2) adding additional civilian and active duty military 

personnel or (3) using reservists to provide quick surge capacity. The 

command officials said they used the methodology in the preceding DTM 

to conduct part of the analysis, and used Air Force guidance for the 

reserve component.

The Federal Accounting Standards Advisory Board 

Handbook states that a cost methodology that captures full costs should 

include any resources directly or indirectly used to perform work. 

Furthermore, the instruction states that the DOD components should use 

the business rules to account for the full cost of personnel when 

developing independent cost estimates and pricing units in the force 

structure.

DOD’s military workforce consists of both active military and Reserve and 

National Guard personnel, and we have previously reported the 

importance of DOD employing a strategic approach to managing its total 

workforce to achieve its missions.36

 35H. R. Rep. No. 113-102 (June 7, 2013), accompanying a proposed bill for National 

Defense Authorization Act for Fiscal Year 2014, contains language directing the Secretary 

of Defense to include factors for determining the full cost of Reserve Components into 

CAPE’s cost model.

In addition, in January 2013, a 

Reserve Forces Policy Board report to the Secretary of Defense 

recommended that CAPE establish DOD policy or guidance for 

calculating the full cost of the reserve components. The report concluded 

36GAO, Human Capital: Additional Steps Needed to Help Determine the Right Size and 

Composition of DOD’s Total Workforce, GAO-13-470 (Washington, D.C.: May 29, 2013). 

CAPE Has Not Established 

Business Rules for 

Estimating Reserve and 

National Guard Costs
Page 15 GAO-13-792 DOD’s Personnel Cost Methodology

that without such a policy, senior leaders within DOD will not have 

complete or uniform data on the total costs associated with active and 

reserve personnel to make informed workforce decisions.37

Although officials within DOD’s components told us they have estimated, 

or said they may need to estimate, the cost of Reserve and National 

Guard personnel for cost comparisons, and while CAPE officials 

acknowledged there may be a place for developing guidance and tool 

sets for assessing the costs of these personnel, they were not convinced 

that there is a need to incorporate them into the recently issued 

instruction.

According to 

officials in CAPE, determining the best person–civilian or military–to fill a 

full-time position is a far different question than determining the best mix 

of active and reserve personnel, and that they will work to develop 

additional guidance and tools as needed. CAPE added that the Board’s 

singular focus on cost obscured the fact that many other factors such as 

peacetime and wartime demands, deployment frequency and duration, 

and unit readiness are of equal or greater importance. An official in the 

Office of the Assistant Secretary of Defense for Reserve Affairs, however, 

stated that the reserve components should be included in the instruction 

in order for DOD to make effective workforce decisions for its total 

workforce.

38 CAPE officials stated that those personnel perform work on 

a short-term temporary basis and the effort required to develop the 

associated costs would be time consuming and resource intensive. 

However, a portion of Reserve and National Guard personnel serve in a 

full-time capacity, and both part-time and full-time reservists perform 

functions in support of DOD’s various missions.39

 37Reserve Forces Policy Board, Eliminating Major Gaps in DOD Data on the FullyBurdened and Life-Cycle Cost of Military Personnel: Cost Elements Should be Mandated 

by Policy, RFPB Report FY13-02 (Jan. 7, 2013). 

For example, DOD 

relies on Reserve and National Guard personnel to provide airlift 

capabilities in support of military operations and in domestic missions and 

38Accordingly, CAPE added “active duty” to the title of instruction 7041.04 to be clear that 

the instruction did not include discussion of Reserve and National Guard personnel costs.

39About 9 percent of the Reserve and National Guard serve as full-time reservists. These 

full-time reservists perform duties associated with organizing, administering, recruiting, 

instructing, or training the various reserve components. See GAO-13-470 and GAO, 

Military Personnel: DOD Needs to Establish a Strategy and Improve Transparency over 

Reserve and National Guard Compensation to Manage Significant Growth in Cost,

GAO-07-828 (Washington, D.C.: June 20, 2007).
Page 16 GAO-13-792 DOD’s Personnel Cost Methodology

to provide engineer units to assist local and state agencies in, among 

other things, construction of roads, bridges, and emergency housing. 

Without establishing business rules for estimating the cost of Reserve 

and National Guard personnel, however, whether as part of the 

instruction or in some other venue, DOD cannot create estimates and 

comparisons to inform workforce mix and force structure decisions for its 

total workforce.

The instruction directs users to include payments the government makes 

into funds to support the retirement and health benefits that current 

military and civilian personnel who become eligible for retirement will 

receive upon retirement; however, a portion of these payments may not 

be relevant to current personnel. Retirement and health benefits are 

deferred benefits that current employees will receive in the future. These 

deferred benefits, regardless of when the employee receives them, are 

attributable to current service by an employee and are to be included in 

considering the full costs of a workforce. According to the Federal 

Accounting Standards Advisory Board Handbook, however, costs that are 

attributable to services rendered in prior years that are attributable to 

services previously rendered by current retirees and to past service of 

current active civilian and military personnel are sunk costs that should 

not be included in determining current costs.40

Accordingly, the instruction appropriately includes several cost elements 

that capture the actuarial “normal cost” to DOD of future retirement and 

health benefits for military and civilian personnel—that is, the costs of 

such future benefits that are attributable to a current employee’s work in a 

given year.41

 40Federal Accounting Standards Advisory Board, FASAB Handbook of Accounting 

Standards and Other Pronouncements, as Amended (Washington, D.C.: June 30, 2012).

In addition, the instruction includes several cost elements 

that represent costs to other federal agencies for deferred benefits. For 

contractor support, the cost of retirement and health care are included in 

the cost of the contract. See table 3 for a list of cost elements in the 

instruction related to retirement, health, and veteran benefits for military 

and civilian personnel.

41The “normal cost” is the actuarially determined cost of future benefits attributable to 

employee service during the fiscal year.

Portions of Certain 

Retirement-Related 

Cost Elements May 

Not Be Relevant
Page 17 GAO-13-792 DOD’s Personnel Cost Methodology

Table 3: Retirement, Health, and Veteran Benefit Cost Elements Included in DOD Instruction 7041.04

Military Civilian

Costs to DOD Military Retirement Fund Retirement Accrual

Medicare-Eligible Retiree Health Care Fund Federal Retirement Thrift Investment Savings Plan

Pre-Medicare-Eligible Health Care Federal Employee Health Benefits Program

Health Benefits for Active Duty and Dependents Social Security

Social Security Medicare

Medicare

Costs to other 

Federal Agencies

Department of Treasury: Contribution for 

Concurrent Receipts

Department of Treasury: Contribution for Unfunded 

Civilian Retirement 

Department of Treasury: Contribution to the Military 

Retirement Fund

Office of Personnel Management: Post Retirement 

Health Benefits

Department of Treasury: Contribution to the 

Medicare-Eligible Retiree Health Care Fund

Department of Veteran Affairs: Veterans’ Benefits 

Department of Labor: Veterans’ Employment and 

Training 

Source: GAO analysis of DOD guidance.

In addition to normal costs, however, our analysis found that the 

instruction also directs the inclusion of several cost elements that may not 

be appropriate to consider. These include payments for part of unfunded 

liabilities—any previously identified shortfalls in federal retirement 

assets—for pension and retiree health benefits for which trust funds have 

been established and prefunding payments made for services performed 

previously. A portion of these payments toward an unfunded liability may 

not be relevant to estimating the full cost of performance by current 

military and civilian personnel because they capture sunk costs that were 

incurred at some point in the past and are not being incurred currently. In 

other words, a portion of these payments are not attributable to the 

current employee’s performance of a service. For example, the 

Department of Treasury currently makes payments into the Military 

Retirement Fund and the Medicare-Eligible Retiree Health Benefit Fund,42

 42Part of the Department of Treasury’s payment to the fund is to cover a portion of the 

normal cost that is not paid by DOD. This amount is appropriately included.

portions of which may not be appropriate to consider for current workforce 

cost comparisons because these payments cover a part of the unfunded 
Page 18 GAO-13-792 DOD’s Personnel Cost Methodology

accrued liability for all the retirees and current members who had earned 

benefits before the two accrual funding systems were established.43

Actuaries in the Office of the DOD Actuary indicated that CAPE did not 

coordinate or request their input when developing the DTM or the 

instruction. These actuaries did not believe the instruction should include 

costs that contribute toward unfunded benefits earned through prior 

service. Further, the actuaries identified other costs that may not be 

appropriate to include in a measure of current costs. These include 

certain retirement and post-service benefits, such as retiree health 

benefits paid by DOD for non-Medicare-eligible retirees and post-service 

benefits paid by the Department of Veterans Affairs. While these costs 

are not prefunded by contributions into a trust fund, the benefits paid in 

any particular year for these programs are also sunk costs that were 

earned by prior service. DOD actuaries said that other cost elements, 

such as for civilian retirement benefits and veterans’ benefits may also 

need to be reevaluated.44

DOD actuaries said that CAPE did not provide them a copy of the 

instruction that replaced the DTM for comment. In addition, actuaries said 

that for CAPE to fully evaluate the inclusion of pension, retiree health 

care, and other relevant costs, that office would have to consult with 

DOD’s Office of the Actuary as well as other appropriate actuarial offices. 

However, CAPE has not yet done so. To the extent the instruction 

includes cost elements that it should not, DOD components and offices 

following the instruction would be overestimating the cost of using certain 

workforces.

 43For example, the Military Retirement Fund was established in 1985. The 2012 payment 

to the Military Retirement Fund includes funds for the amortization of the unfunded liability 

for all retirement benefits earned by military personnel for service prior to 1985. Included 

in the unfunded liability are the consolidated requirements of the military departments to 

cover retired officers and enlisted personnel of the Army, Navy, Marine Corps, and Air 

Force; retainer pay of enlisted personnel of the Fleet Reserve of the Navy and Marine 

Corps; and survivors’ benefits. 

44Payments that are sunk costs may need to be removed from any tally of current costs. 

However, for some of these payments that are not prefunded by contributions into a trust 

fund, an actuarial normal cost may have to be included instead. Present measures of 

current costs might be overstated to the extent that current payments for sunk costs 

exceed the normal cost attributable to current service.
Page 19 GAO-13-792 DOD’s Personnel Cost Methodology

The DOD components we examined, for the most part, including 

commands, offices, and defense agencies, reported to us that they have 

incorporated the business rules identified in the DTM and instruction into 

their workforce mix decisions. Still, implementation challenges exist. 

Some of the DOD components we examined used the business rules for 

estimating and comparing the full cost of DOD personnel and contract 

support to inform workforce mix decisions, while others reported they 

have had limited opportunities to use the business rules. However, some 

military service officials said they did not know the extent to which officials 

at more local levels were aware of the DTM or used it, and therefore their 

reported instances of using the business rules may underestimate the 

actual number of instances. In addition, at the time when we met with 

these organizations, CAPE had not completed development of a DODwide software tool for implementing the instruction and, in the meantime, 

the components we examined had developed their own cost tools to 

apply the business rules and develop cost estimates. Further, the 

instruction that replaced DTM 09-007 directs users to data that may not 

contain the most accurate information for determining contractor support 

costs.

While the DOD components we examined generally reported to us that 

they have incorporated the business rules identified in the preceding DTM 

and current instruction to create cost estimates in support of workforce 

mix decisions, their opportunities to use the business rules have been 

limited. Among the 13 DOD components we included in our scope, 8 

reported that they used the preceding DTM and provided documentation 

showing that cost was a factor in their decision making from January 

2010 through June 2013, 4 told us that they had not had the opportunity 

to use the DTM but were aware of it, and 1, while it also had not had the 

opportunity to use the DTM, reported that it was not aware of it.45

 45None of the components with whom we met had had the opportunity to use the business 

rules since the release of the Instruction replacing the DTM.

According to the DTM and instruction, the policies and procedures 

established within it are applicable to all DOD components. Specifically, 

the DTM stated and the instruction states that, when developing national 

security policies and making program commitments, DOD officials must 

be aware of the full costs of personnel and have a thorough 

DOD’s Components 

Report that They 

Have Incorporated 

Business Rules into 

Their Workforce Mix 

Decisions, but 

Implementation 

Challenges Exist

DOD Components 

Reported Incorporating 

the Business Rules into 

Their Workforce Mix 

Decisions, but 

Opportunities for Use 

Have Been Limited
Page 20 GAO-13-792 DOD’s Personnel Cost Methodology

understanding of the implications of those costs to DOD and, on a 

broader scale, to the federal government.

All eight of the DOD components we examined that reported that they 

had used the DTM to inform workforce mix decisions were commands 

within the military services, and a majority of their cost estimates 

supported in-sourcing decisions—moving work performed by contractors 

to performance by DOD employees. For example, of the 649 instances in 

which the commands we examined reported using the DTM from January 

2010 through June 2013, 639 or 98 percent were to inform in-sourcing 

decisions. Of those 639, the Air Force Materiel Command accounted for 

approximately 525 or 82 percent.46 These commands provided us with 

documentation such as decision memoranda, completed cost benefit 

analysis spread sheets, and briefing slides given to senior leadership 

showing that cost was a factor in their decision-making. Further, with the 

exception of one instance in the Naval Supply Systems Command, 

officials from DOD components we met told us that, since January 2010, 

they have converted neither military to civilian positions nor civilian to 

military positions. The Army Installation Management Command and the 

Air Force Materiel Command reported a few instances of new or 

expanding missions that required the use of the DTM. Table 4 shows the 

number of times the commands we examined used the DTM and for what 

reason.

 46Not all the instances a component reported using the DTM to support an in-sourcing 

decision resulted in a decision to in-source. 
Page 21 GAO-13-792 DOD’s Personnel Cost Methodology

Table 4: Number of Instances Selected Military Departments Commands and Offices, and Defense Agencies Reported Using 

DTM-09-007 to Support Various Types of Workforce Mix Decisions from January 2010 through June 2013

Workforce Mix Decisions

Component

Command, Office 

or Agency

Insourcing

Conversion 

From Civilian 

to Military 

Position

Conversion 

From Military 

to Civilian 

Position 

New or 

Expanding 

Missions Total

Army Installation

Management 

Command

15 0 0 7 22

Army Sustainment 

Command

0 a 0 0 0 0

U.S. Army Security 

Assistance Command

1 0 0 0 1

Navy Commander, Navy 

Installations Command 

b 11 0 0 0 11

Commander, U.S. 

Pacific Fleet

28 0 0 0 28

Naval Supply Systems 

Command 

31 0 1 0 32

Strategic Systems 

Programs Office

0 0 0 0 0

Air Force Air Force Materiel 

Command

525 0 c 0 2 527

Air Force Special 

Operations Command

28 0 0 0 28

Air Force Office of 

Special Investigations 

0 0 0 0 0

Defense Agencies Defense Logistics 

Agency

0 0 0 0 0

Office of the Secretary 

of Defense 

0 0 0 0 0

Defense Media Activity 0 0 0 0 0

Total 639 0 1 9 649

Source: GAO analysis of DOD data.:

a

Officials with the Army Sustainment Command told us that they had used the DTM to facilitate 

workforce mix decisions but did not track the usage; therefore, the command was unable to provide 

us with the number of times it used the DTM to inform workforce mix decisions.

b

We did not select commands or offices within the Marine Corps in our non-probability sample 

because we could not determine the number of civilian personnel within the commands and offices, 

and therefore we did not request Marine Corps data on the number of instances they used the DTM 

to inform workforce mix decisions. See Appendix 1 for more information.

c Air Force Material Command, while stating that their data was approximated, also noted that their 

insourcing total was a minimum of 525 instances.
Page 22 GAO-13-792 DOD’s Personnel Cost Methodology

Some DOD officials said they were not clear on uses of the DTM beyond 

in-sourcing, and others said their reported instances of using the business 

rules may underestimate the actual number of reported instances. 

Officials within OSD and headquarters elements said they did not know 

the extent to which officials throughout the department are aware of the 

instruction and the requirement to use the associated business rules. For 

example, it was not clear to some Army officials in one office that the 

business rules were to be used for costing out decisions beyond insourcing. Other officials noted, however, that the business rules identified 

in the DTM or references to the DTM have been incorporated into some 

service-level policies and procedures to support decisions other than insourcing. For example, the Army’s approval form for new service 

contracts includes a question asking if the cost of labor for new services 

contracts was determined using the business rules.

47

Officials within the agencies and offices that were aware of the DTM but 

had not used it told us of several reasons why they did not conduct these 

types of workforce cost estimates since the initial issuance of the DTM. 

For example, officials said they had not used it, in part, due to issues 

related to the current fiscal environment, such as concerns about 

anticipated reductions in funds available for contractor support and 

limitations on the number of civilian full-time equivalents. Officials also 

said they did not use the DTM because their offices do not have direct 

access to military personnel and have had no new or expanded missions.

Some military 

service officials said they did not know the extent to which the reported 

data represented the full degree to which organizations were, in fact, 

using the business rules, and therefore their reported instances of using 

the business rules may underestimate the actual number of instances. 

For example, one official acknowledged to us that it is difficult for his 

organization to identify the degree to which the business rules were being 

applied at the local levels.

 47H.R. Rep No. 113-102 (June 7, 2013), accompanying a proposed bill for the National 

Defense Authorization Act for Fiscal Year 2014, contains language directing the Under 

Secretary of Defense for Acquisition, Technology, and Logistics, in coordination and 

consultation with the Under Secretary of Defense for Personnel and Readiness, to issue 

policies for implementing a standard checklist for services contract approval, and to the 

extent practicable, to model the policies and checklist on those already used by the Army.
Page 23 GAO-13-792 DOD’s Personnel Cost Methodology

CAPE recently completed development of a DOD-wide software tool for 

implementing DOD Instruction 7041.04. During the time we met with 

component organizations, however, the DOD-wide tool was not available, 

and in the absence of the tool the components we examined had 

developed their own tools to apply the business rules in the DTM to 

develop workforce cost estimates. When initially released on January 29, 

2010, DTM 09-007 called for CAPE, within one year of its publication, to 

develop a cost model for DOD-wide application that employs the business 

rules set forth in the DTM. In addition, best practices in GAO’s Cost 

Estimating and Assessment Guide state that in order to be reliable, cost 

estimates should be derived using an overall process that produces highquality cost estimates that are comprehensive and accurate and that can 

be easily and clearly traced, replicated, and updated.

According to officials in CAPE, they contracted out the development of a 

software tool for the required cost model to implement the business rules 

and, when DOD issued Instruction 7041.04 on July 3, 2013, CAPE also 

released its DOD-wide tool for use across the department. Officials in 

CAPE told us that the components’ use of the DOD-wide tool will not be 

required, enforced, or monitored. DTM 09-007 stated that CAPE would 

oversee compliance with both the DTM and the use of the DOD-wide tool. 

When DOD Instruction 7041.04 was issued, however, the requirement for 

CAPE to oversee use of its tool was removed.

In the absence of CAPE’s DOD-wide tool, the Air Force modified an 

existing software tool originally used to inform public-private competition 

decisions, and the Army, the Marine Corps, and the Navy developed tools 

using an existing off-the-shelf software program. While the services 

developed and use different tools, those tools generally incorporate the 

cost elements identified in the DTM and current instruction. The defense 

agencies we met with said they had not created tools to implement the 

business rules, and officials from these agencies said they would use the 

DOD-wide tool when it was made available to them.

According to the instruction, the business rules provide a consistent 

approach for all DOD components to estimate the cost of personnel. 

Accordingly, the instruction provides a list of potential cost factors 

associated with personnel that should be considered in the decisionmaking process even when personnel costs are not the only factor. 

Officials in CAPE stated, however, that they have not reviewed the 

services’ tools to ensure they are in compliance with the business rules 

and do not plan to review them. An assessment of these various tools 

would enable CAPE to identify the advantages and disadvantages of 

DOD Components Use 

Different Tools to 

Implement the DTM
Page 24 GAO-13-792 DOD’s Personnel Cost Methodology

allowing multiple cost estimation tools. DOD decision makers who then 

use these various economic analyses or cost estimates would have 

greater assurance that they are using reliable results to make workforce 

mix decisions.

When estimating contractor support costs for a new or expanding 

mission, Instruction 7041.04 provides several options for users to 

consider, although these options may not be the most accurate data 

sources. For example, the instruction directs the user to begin with the 

negotiated price of an existing contract, which DOD and military 

department officials told us is their preferred option. If an existing contract 

is not available, those officials attempt to find another contract that is 

similar to the contactor support for which costs are being estimated. To 

facilitate this, most of the services, agencies, and offices we met with 

maintain their own database of historical contractor data.

If an existing contract is not available, the instruction directs the user to 

either a General Services Administration (GSA) website48 or the Army’s 

online database for contract management and reporting to obtain 

contractor support costs for services. We have previously highlighted 

limitations with GSA’s data, however, such as the fact that contractors’

published rates on the website do not reflect post-competition prices.49

 48GSA describes its Advantage! Website as an online shopping system for interagency 

contracts for federal agencies across the government. 

The GSA website allows users to search for services, and then identifies 

a list of contractors that provide the service along with their rates. The 

listed rates, however, may be negotiated with the contractor. Further, 

DOD officials we spoke to during this review said that GSA’s website 

does not provide targeted data, such as actual contractor rates by 

function or geographic location. For example, officials with one command 

we spoke to noted their use of a contractor who possesses unique 

specialized nuclear weapons related knowledge. According to those 

officials, GSA’s website does not contain available data for unique 

positions like these. In addition, officials said that GSA’s website provides 

too large a range of rates for them to develop realistic estimates. Best 

practices from GAO’s Cost Estimating and Assessment Guide state that a 

49GAO, Contracting Strategies: Data and Oversight Problems Hamper Opportunities to 

Leverage Value of Interagency and Enterprisewide Contracts, GAO-10-367 (Washington, 

D.C.: Apr. 2010). 

DOD Components May Be 

Relying on Data Sources 

That Do Not Contain the 

Most Accurate Data for 

Determining Contractor 

Costs
Page 25 GAO-13-792 DOD’s Personnel Cost Methodology

basic characteristic of credible cost estimates is having multiple sources 

of suitable, relevant, and available data.

In July 2013, when the DOD Instruction replacing DTM 09-007 was 

issued, the Army’s Contractor Manpower Reporting Application was 

added as an additional source for contractor data. The Contractor 

Manpower Reporting Application is an online database that automates 

the Army’s contract management and reporting process for contract 

management personnel by allowing users to view contract information, 

track contract data, and view various reports based on contract data in 

the application. The Contractor Manpower Reporting Application business 

process captures information on funding source, contracting vehicle, 

organization supported, mission and function performed, labor hours, and 

labor costs for contracted efforts, among other things.

50 Currently the 

application collects data for the Army, the Air Force, and the Navy on the 

number of contractor employees by using direct labor hours and 

associated cost data. However, DOD is still developing its departmentwide Contractor Manpower Reporting Application system and we 

previously found that a number of factors limit the accuracy and 

completeness of inventory data.51 Officials within CAPE told us they were 

unaware of some of the limitations with the contractor support data 

sources provided in the instruction. In the absence of data sources that 

are consistent with established practices for developing cost estimates, 

DOD components may be using data that do not lead to credible 

contractor cost estimates.

With a total workforce of about 3 million individuals, as well as an 

estimated 710,000 contractor full time equivalents, DOD’s investment in 

personnel to accomplish its missions constitutes a substantial financial 

commitment. In those cases where the department can choose what 

workforce it wants to utilize to accomplish tasks, it is crucial that it have 

an accurate method for comparing the costs of its civilian, military, and 

contractor personnel. DOD has taken important steps to achieve this goal 

since our 2008 report on military to civilian conversions for health care 

 50Contractor Manpower Reporting Application Version 3.6 Full User Guide (no date).

51GAO-13-491 and GAO, Defense Acquisitions: Further Actions Needed to Improve 

Accountability for DOD's Inventory of Contracted Services, GAO-12-357 (Washington, 

D.C.: Apr. 6, 2012).

Conclusions
Page 26 GAO-13-792 DOD’s Personnel Cost Methodology

personnel, including the development of DTM 09-007 and its successor 

Instruction 7041.04. The department’s current direction for estimating and 

comparing the cost of its available workforces, however, could be 

improved. For instance, users currently find it difficult to develop 

estimates of particular costs such as overhead, advertising and recruiting, 

and training, and the services have not received guidance on developing 

estimates for Reserve and National Guard personnel. Further, as we

have noted, there is some disagreement within the department about the 

inclusion of certain retirement costs in current workforce cost estimates. 

More comprehensive guidance in these areas could improve the 

components’ ability to make accurate cost comparisons between 

workforces.

Similarly, the department currently lacks assurance that workforce cost 

estimates and comparisons are consistent across the department, but by 

evaluating the different cost estimation tools currently being used by the 

components, it could decide on the best course to ensure consistency 

and accuracy. Also, current and accurate data on contractor support 

costs is critical for the department in making workforce decisions, but due 

to limitations in some of the data DOD has identified for making contractor 

support cost estimates, components may be relying on data sources that 

do not produce intended results. While federal agencies always must 

make consistent and cost-effective choices in managing their resources, 

this is especially true given the ongoing fiscal challenges that have 

imposed budgetary constraints across the federal government and are 

likely to continue for some time.

To improve DOD’s estimates and comparisons of the full cost of its 

military, civilian, and contractor workforces, we are making the following 

five recommendations to the Secretary of Defense.

To improve DOD’s methodology for estimating and comparing the full 

cost of its various workforces, we recommend that the Secretary of 

Defense direct the Office of Cost Assessment and Program Evaluation 

office to take the following three actions:

• Further develop guidance for cost elements that users have identified 

as challenging to calculate, such as general and administrative, 

overhead, advertising and recruiting, and training;

• Develop business rules for estimating the full cost of National Guard 

and Reserve personnel; and

Recommendations for 

Executive Action
Page 27 GAO-13-792 DOD’s Personnel Cost Methodology

• In coordination with the department’s Office of the Actuary and 

appropriate federal actuarial offices, reevaluate the inclusion and 

quantification of pension, retiree health care costs, and other relevant 

costs of an actuarial nature and make revisions as appropriate.

To facilitate consistent workforce cost estimates and comparisons, we 

recommend that the Secretary of Defense direct the Office of Cost 

Assessment and Program Evaluation to assess the advantages and 

disadvantages of allowing the continued use of different cost estimation 

tools across the department or directing department-wide application of 

one tool, and revise its guidance in accordance with the findings of its 

analysis.

To improve DOD’s ability to estimate contractor support costs, we 

recommend that the Secretary of Defense direct the Office of Cost 

Assessment and Program Evaluation, consistent with established 

practices for developing credible cost estimates, to research the data 

sources it is currently using and reassess its contractor support data 

sources for use when determining contractor support costs.

In written comments on a draft of this report, DOD agreed with our 

findings that it must make cost-effective decisions in structuring and 

shaping its workforce of military personnel, government civilians, and 

contracted support. Specifically, DOD concurred with two of our 

recommendations and partially concurred with three. DOD’s comments 

are reprinted in appendix II. DOD also provided technical comments on 

the draft report, which we incorporated as appropriate.

DOD partially concurred with our recommendation to further develop 

guidance for the cost elements that users have identified as challenging 

to calculate, such as general and administrative, overhead, advertising 

and recruiting, and training. In commenting on our report, DOD stated that 

it will continue to review the methodology for calculating these cost 

elements and issue clarifying guidance where necessary or appropriate. 

DOD also stated that it is part of an inter-agency effort that is developing 

government-wide cost comparisons and that, if or when government-wide 

cost comparison guidance is published, DOD will adjust its own guidance 

accordingly. We continue to believe that fully addressing this 

recommendation would enhance the development of DOD’s methodology 

for estimating and comparing the cost of its workforces. 

Agency Comments 

and Our Evaluation
Page 28 GAO-13-792 DOD’s Personnel Cost Methodology

DOD also partially concurred with our recommendation to develop 

business rules for estimating the full cost of National Guard and Reserve 

personnel. In its comments, DOD stated that it is assessing the potential 

need for reserve manpower costing models, as well as the identification 

of questions that reserve costing policies and models would be used to 

address. Once it has gained a more thorough understanding of the 

questions to be addressed by reserve cost estimates, it will begin work on 

guidance as necessary, and development of reserve component costing 

models if appropriate. We continue to believe that fully addressing this 

recommendation would enhance the development of DOD’s methodology 

for estimating and comparing the cost of its workforces and DOD’s ability 

to make more informed workforce decisions.

DOD concurred with our recommendation to coordinate with the 

department’s Office of the Actuary and appropriate federal actuarial 

offices, reevaluate the inclusion and quantification of pension, retiree 

health care costs, and other relevant costs of an actuarial nature and 

make revisions as appropriate. In its response to our report, DOD stated 

that it will work with the Office of the Actuary, and others as necessary, to 

reevaluate the inclusion and quantification of these costs elements and, 

following evaluation, revisions will be made. We believe such actions, if 

implemented effectively, will fully address the intent of the 

recommendation.

DOD partially concurred with our recommendation to assess the 

advantages and disadvantages of allowing the continued use of different 

cost estimation tools across the department or directing department-wide 

application of one tool, and revise its guidance in accordance with the 

findings of its analysis. We acknowledge, as DOD stated in comments on 

our report, that the department is open to assessing the advantages and 

disadvantages of allowing the continued use of alternate cost estimation 

tools among the various components, and, if necessary, will revise its 

guidance based on this assessment. However, in order to satisfy the 

intent of this recommendation, DOD needs to take action to fully address 

this recommendation. Doing so will facilitate more consistent workforce 

cost estimates and comparisons when DOD’s components use the 

department’s methodology for estimating and comparing the cost of their 

workforces.

Finally, DOD concurred with our recommendation to research the data 

sources it is currently using and reassess its contractor support data 

sources for use when determining contractor support costs. In its 

comments, DOD stated that as the department increases its fidelity into 
Page 29 GAO-13-792 DOD’s Personnel Cost Methodology

contractor support costs through the collection of statutorily required 

information via the Enterprise-wide Contractor Manpower Reporting 

Application in support of the Inventory of Contracts for Services, the 

department will modify its guidance accordingly. We believe that this 

action, if implemented effectively, will address the intent of the 

recommendation.

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

Under Secretary of Defense for Personnel and Readiness, the Director of 

DOD’s Office of Cost Assessment and Program Evaluation, the Office of 

Management and Budget, and appropriate congressional committees. In 

addition, this report will also be available at no charge on the GAO Web 

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

If you or your staff have any questions regarding this report, please 

contact me at (202) 512-3604 or farrellb@gao.gov. Contact points for the 

Offices of Congressional Relations and Public Affairs may be found on 

the last page of this report. GAO staff who made major contributions to 

this report are listed in appendix III.

Brenda S. Farrell

Director

Defense Capabilities and Management
Page 30 GAO-13-792 DOD’s Personnel Cost Methodology

List of Committees

The Honorable Carl Levin

Chairman

The Honorable James Inhofe

Ranking Member

Committee on Armed Services

United States Senate

The Honorable Dick Durbin

Chairman

The Honorable Thad Cochran

Ranking Member

Subcommittee on Defense

Committee on Appropriations

United States Senate

The Honorable Howard P. McKeon

Chairman

The Honorable Adam Smith

Ranking Member

Committee on Armed Services

House of Representatives

The Honorable C.W. Bill Young

Chairman

The Honorable Pete Visclosky

Ranking Member

Subcommittee on Defense

Committee on Appropriations

House of Representatives
Appendix I: Scope and Methodology

Page 31 GAO-13-792 DOD’s Personnel Cost Methodology

To evaluate the extent to which the Department of Defense’s (DOD) 

methodology for estimating and comparing the cost of work performed by 

military, civilian, and contractors reflects the full cost to the taxpayer, we 

identified each of the cost elements contained in the most recent version 

of Directive Type-Memorandum (DTM) 09-0071 and DOD Instruction 

7041.042 and compared them to best practices in GAO’s Cost Estimating 

and Assessment Guide,3 guidance in the Federal Accounting Standards 

Advisory Board Handbook,4 and the Office of Management and Budget 

guidelines for Performance of Commercial Activities.5 We also reviewed 

pertinent DOD and service-specific policies and guidance related to 

workforce mix and economic analysis.6 In addition, we interviewed 

knowledgeable officials within the offices of the Under Secretary of 

Defense (Personnel and Readiness), the Director of Cost Assessment 

and Program Evaluation, DOD’s Office of the Actuary, and the military 

services. We also met with the Office of Management and Budget7

 1

Department of Defense Directive-Type Memorandum 09-007, Estimating and Comparing 

the Full Costs of Civilian and Military Manpower and Contractor Support (Apr. 3, 2013).

and 

other experts and other interested parties we selected based on their 

work on issues related to the DTM. Specifically, we met with the Center 

for Strategic and International Studies and the Center for Strategic and 

Budgetary Assessments, both of which are independent nonprofit policy 

research institutes. We also met with the American Federation of 

2

DOD Instruction 7041.04, Estimating and Comparing the Full Costs of Civilian and Active 

Duty Military Manpower and Contract Support (July 3, 2013).

3

GAO, GAO Cost Estimating and Assessment Guide: Best Practices for Developing and 

Managing Capital Program Costs, GAO-09-3SP (Washington, D.C.: March 2009).

4

Federal Accounting Standards Advisory Board, FASAB Handbook of Accounting 

Standards and Other Pronouncements, as Amended (Washington, D.C.: June 30, 2012).

5

Office of Management and Budget Circular A-76, Performance of Commercial Activities, 

(May 29, 2003).

6

For example, we reviewed Deputy Secretary of Defense Memorandum, In-sourcing 

Contracted Services—Implementation Guidance (May 28, 2009); U.S. Army Cost Benefit 

Analysis Guide, 3rd Edition, (Apr. 24, 2013); Air Force Instruction 65-501, Financial 

Management: Economic Analysis, (Aug. 29, 2011); and Naval Supply Systems Command 

Instruction 5310.10, Naval Supply Systems Command In-sourcing Policy (Sept. 14, 2012), 

among others.

7

The Office of Management and Budget did not provide input on the development or 

conduct an analysis of DTM 09-007 or DOD Instruction 7041.04. However, OMB stated 

that it is reviewing the guidance and working with DOD as it considers government-wide 

management guidance on cost-comparisons.

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

Page 32 GAO-13-792 DOD’s Personnel Cost Methodology

Government Employees, a federal government employee union, and the 

Professional Services Council, a trade association of the government 

professional and technical services industry. We obtained the perspective 

of the National Guard and Reserve community by meeting with the Office 

of the Secretary of Defense (Reserve Affairs) and the Reserve Forces 

Policy Board. We also reviewed published work by independent research 

institutes evaluating the business rules contained in the preceding DTM, 

such as those issued by the Center for Strategic and International 

Studies, the Project on Government Oversight, and the Reserve Forces 

Policy Board.8

To evaluate the extent to which DOD’s components have incorporated 

the business rules identified in DTM 09-007 and DOD Instruction 7041.04 

into their workforce mix decisions, we met with knowledgeable officials 

from the offices of the Under Secretary of Defense (Personnel and 

Readiness), the Director of Cost Assessment and Program Evaluation, 

the Secretariat of the Air Force for Manpower and Reserve Affairs, 

Assistant Secretary of the Army for Manpower and Reserve Affairs, the 

Assistant Secretary of the Navy for Manpower and Reserve Affairs and 

Headquarters Marine Corps, Deputy Commandant, Programs and 

Resources.9

 8

See Center for Strategic and International Studies, A Report of the CSIS DefenseIndustrial Group: DOD Workforce Cost Realism Assessment (Washington D.C.: May 

2011); Project on Government Oversight, Bad Business: Billions of Taxpayer Dollars 

Wasted on Hiring Contractors (Washington, D.C.: Sept. 13, 2011); and Reserve Forces 

Policy Board, Eliminating Major Gaps in DOD Data on the Fully-Burdened and Life-Cycle 

Cost of Military Personnel: Cost Elements Should be Mandated by Policy (Washington, 

D.C.: Jan. 7, 2013).

We also met with responsible officials in 3 to 4 commands 

and offices we selected from each of the military departments and 3 

defense agencies, for a total of 13 DOD components. We used a nonprobability sample, based on size, to make our selections. The results of 

these interviews cannot be generalized to all entities across DOD but 

provided insights about incorporation of business rules into workforce mix 

decisions. To choose our sample, we requested and obtained data from 

the Defense Manpower Data Center on the number of civilian personnel 

currently assigned to each of the military commands and defense 

agencies within DOD as of the end of fiscal year 2012. Due to the way the 

number of civilian personnel assigned to commands within the Marine 

9

DOD Instruction 7041.04 was issued on July 3, 2013. Therefore, for a majority of our 

review, DTM 09-007 was the most current guidance. 
Appendix I: Scope and Methodology

Page 33 GAO-13-792 DOD’s Personnel Cost Methodology

Corps is reported to the Defense Manpower Data Center, we were unable 

to align numbers of civilian personnel with specific Marine Corps 

commands or offices. Therefore, the Marine Corps was excluded from our 

selection criteria and we did not select any Marine Corps commands as 

part of our non-probability sample. Once the data for the other 

components was compiled, we rank ordered the commands within each 

of the military departments and the defense agencies from largest to 

smallest based on civilian personnel counts. For each of the military 

departments and defense agencies, we divided the rank ordered list of 

commands and agencies into three groups: large, medium, and small. We 

considered commands and agencies with 10,000 or more full-time civilian 

employees as large, commands and agencies with at least 1,000 but less 

than 10,000 full-time civilian employees as medium; and commands and 

agencies with less than 1,000 full-time civilian employees as small. We 

generated a selection number based on the total number of commands 

and agencies and counted down the rank ordered list of commands and 

agencies to identify those commands and agencies that we would meet 

with. This method resulted in one selected command, office, or agency 

from each of the categories of large, medium, and small.10 In addition to 

discussing with each of these entities their implementation of the 

business rules identified in DTM 09-007, we requested the number of 

times they used the business rules to inform workforce decisions (e.g., insourcing, workforce conversions, and new or expanded missions) from 

January 2010 when the DTM was issued to June 2013. We did not 

independently validate the number of uses of the business rules reported 

to us by each of the entities or the cost estimates used to inform the 

workforce decisions. Table 5 shows the commands and agencies we met 

with to determine the extent to which DOD incorporated the business 

rules contained in DTM 09-007.

 10We did not meet with a small command in the Navy. We determined that the two small 

commands within the Navy were not appropriate for our review. One of the commands 

was a Reserve Command and the other command had classified the total number of 

civilian personnel. As a result, we selected the smallest of the medium commands for the 

Navy. 
Appendix I: Scope and Methodology

Page 34 GAO-13-792 DOD’s Personnel Cost Methodology

Table 5: Select Commands, Offices, and Defense Agencies Contacted About Implementing DTM 09-007

Component Command, Office, or Defense Agency

Army Installation Management Command

Army Sustainment Command

U.S. Army Security Assistance Command

Navy Commander, Navy Installations Command

Commander, U.S. Pacific Fleet

Navy Supply Systems Command

Strategic Systems Program Office

Air Force Air Force Materiel Command

Air Force Special Operations Command

Air Force Office of Special Investigations

Defense Agencies Defense Logistics Agency

Office of the Secretary of Defense

Defense Media Activity

Source: GAO.

In addition, we met with officials in other DOD entities that are involved in 

guiding the implementation of the methodology. Although the Marine 

Corps was not part of our non-probability sample, we met with several 

Marine Corps commands and offices to discuss their implementation of 

the business rules identified in DTM 09-007. We also received a 

consolidated Marine Corps response to our questions on the 

implementation of the methodology. Table 6 shows the other DOD 

organizations we contacted to discuss the department’s efforts to 

implement the business rules contained in the preceding DTM.
Appendix I: Scope and Methodology

Page 35 GAO-13-792 DOD’s Personnel Cost Methodology

Table 6: DOD Organizations Contacted for Information on Implementation of DTM 09-007

Assistant Secretary of the Navy, Manpower and Reserve Affairs

Office of the Assistant Secretary of Defense for Reserve Affairs

Director of Cost Assessment and Program Evaluation

Department of Defense Office of the Actuary

Army, Office of Force Management Directorate 

Deputy Assistant Secretary of the Army for Cost and Economics

Naval Center for Cost Analysis

Office of the Chief of Naval Operations, Chief of Navy Personnel, Total Force Requirements Division, Manpower and Accounting 

Branch

Headquarters Marine Corps, Director of Marine Corps Staff

Headquarters Marine Corps, Deputy Commandant, Programs and Resources

Headquarters Marine Corps, Deputy Commandant Aviation

Headquarters, Marine Corps, Deputy Commandant Manpower and Reserve Affairs

Commander, Marine Corps Systems Command

Deputy Commandant, Combat Development and Integration, Total Force Structure Division 

Deputy Commandant, Plans, Policy, and Operations

Deputy Commandant, Installation and Logistics (Contracts)

Marine Corps Combat Development Command, Operations Analysis Division

Program Element Office, Land System

Headquarters Marine Corps Training and Education Command 

Headquarters Marine Corps, Director of Marine Corps Staff

Headquarters Marine Corps, Aviation

Headquarters Marine Corps, Manpower and Reserve Affairs

Marine Corps Systems Command

Secretariat of the Air Force, Deputy Assistant Secretary for Cost and Economics, Directorate of Economics and Business 

Management 

Air Force Cost Analysis Agency

Air Force Personnel Center

Source: GAO.

Further, we received a demonstration by the Office of Cost Assessment 

and Program Evaluation of its DOD-wide Full Cost of Manpower tool to 

gain an understanding of DOD’s application of the business rules 

contained in DTM 09-007. We also requested and obtained copies of the 

tools from each of the commands, offices, and defense agencies we met 

with to develop an understanding of the software tools they developed to 

apply the business rules in the DTM and in the instruction. For the Air 
Appendix I: Scope and Methodology

Page 36 GAO-13-792 DOD’s Personnel Cost Methodology

Force we obtained a copy of their software tool, DTM-COMPARE. For the 

Army, the Marine Corps, and Navy we obtained copies of the off-the-shelf 

software that was programmed to implement the business rules contained 

in the preceding DTM. In addition, we attended an Army Installation 

Management Command training on their Cost Analysis Workbook tool. 

Further, we obtained and reviewed sample documentation from the 

military commands that had applied the business rules identified in the 

preceding DTM to support workforce mix decisions.

We conducted this performance audit from December 2012 to September 

2013 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.
Appendix II: Comments from the

Department of Defense

Page 37 GAO-13-792 DOD’s Personnel Cost Methodology

Appendix II: Comments from the

Department of Defense
Appendix II: Comments from the

Department of Defense

Page 38 GAO-13-792 DOD’s Personnel Cost Methodology
Appendix II: Comments from the

Department of Defense

Page 39 GAO-13-792 DOD’s Personnel Cost Methodology
Appendix III: GAO Contact and Staff 

Acknowledgments

Page 40 GAO-13-792 DOD’s Personnel Cost Methodology

Brenda S. Farrell, (202) 512-3604 or Farrellb@gao.gov.

In addition to the contact named above, David Moser, Assistant Director; 

Timothy Carr, Brian Pegram, Erin Preston, Frank Todisco, Erik WilkinsMcKee, and Michael Willems made key contributions to this report.

Appendix III: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments
Related GAO Products

Page 41 GAO-13-792 DOD’s Personnel Cost Methodology

Defense Contractors: Information on the Impact of Reducing the Cap on 

Employee Compensation Costs. GAO-13-566. Washington, D.C.: June 

19, 2013.

Human Capital: Additional Steps Needed to Help Determine the Right 

Size and Composition of DOD’s Total Workforce. GAO-13-470. 

Washington, D.C.: May 29, 2013.

Defense Acquisitions: Continued Management Attention Needed to 

Enhance Use and Review of DOD’s Inventory of Contracted Services. 

GAO-13-491. Washington, D.C.: May 23, 2013.

Pension Costs on DOD Contracts: Additional Guidance Needed to 

Ensure Costs Are Consistent and Reasonable. GAO-13-158. 

Washington, D.C.: January 22, 2013.

Federal Workers: Results of Studies on Federal Pay Varied Due to 

Differing Methodologies. GAO-12-564. Washington, D.C.: June 22, 2012.

Defense Workforce: DOD Needs to Better Oversee In-sourcing Data and 

Align In-sourcing Efforts with Strategic Workforce Plans. GAO-12-319. 

Washington, D.C.: February 9, 2012.

DOD Met Statutory Reporting Requirements on Public-Private 

Competitions. GAO-11-923R. Washington, D.C.: September 26, 2011.

Military Personnel: Comparisons between Military and Civilian 

Compensation Can Be Useful, but Data Limitations Prevent Exact 

Comparison. GAO-10-666T. Washington, D.C.: April 28, 2010.

Military Personnel: Military and Civilian Pay Comparisons Present 

Challenges and Are One of Many Tools in Assessing Compensation. 

GAO-10-561R. Washington, D.C.: April 1, 2010.

Military Personnel: Guidance Needed for Any Future Conversions of 

Military Medical Positions to Civilian Positions. GAO-08-370R. 

Washington, D.C.: February 8, 2008.

Military Personnel: Military Departments Need to Ensure That Full Costs 

of Converting Military Health Care Positions to Civilian Positions Are 

Reported to Congress. GAO-06-642. Washington, D.C.: May 1, 2006.

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