GAO 

United States Government Accountability Office

Report to Congressional Committees

BUREAU OF 

PRISONS 

Methods for Cost 

Estimation Largely 

Reflect Best Practices, 

but Quantifying Risks 

Would Enhance 

Decision Making 

November 2009 

GAO-10-94 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

November 2009

BUREAU OF PRISONS

Methods for Cost Estimation Largely Reflect Best 

Practices, but Quantifying Risks Would Enhance 

Highlights of GAO-10-94, a report to Decision Making

congressional committees 

The Department of Justice’s (DOJ) 

Federal Bureau of Prisons (BOP) is 

responsible for the custody and 

care of about 209,000 federal 

inmates—a population which has 

grown by 44 percent over the last 

decade. In fiscal years 2008 and 

2009, the President requested 

additional funding for BOP because 

costs for key operations were at 

risk of exceeding appropriated 

funding levels. GAO was 

congressionally directed to 

examine (1) how BOP estimates 

costs when developing its annual 

budget request to DOJ; (2) the 

extent to which BOP’s methods for 

estimating costs follow established 

best practices; and (3) the extent to 

which BOP’s costs for key 

operations exceeded requested 

funding levels identified in the 

President’s budget in recent years, 

and how this has affected BOP’s 

ability to manage its growing 

inmate population. In conducting 

our work, GAO analyzed BOP 

budget documents, interviewed 

BOP and DOJ officials, and 

compared BOP’s cost estimation 

documentation to criteria in GAO’s 

Cost Estimating and Assessment 

Guide. 

What GAO Recommends

GAO recommends that BOP (1) 

conduct an uncertainty analysis 

quantifying the extent to which its 

operational costs could vary due to 

changes in key cost assumptions 

and submit the results, along with 

budget documentation, to DOJ; and 

(2) improve documentation of 

calculations used to estimate its 

costs. BOP agreed with GAO’s 

recommendations. 

BOP uses three general steps to estimate costs for its annual budget 

submission: (1) estimating cost increases to maintain service levels, such as 

inmate medical care and utilities; (2) projecting inmate population changes for 

the budget year and for several years into the future using a modeling program 

that incorporates data on the current inmate population and estimated 

incoming population and associated sentences; and (3) estimating costs to 

both provide additional capacity to house projected inmate population growth 

and implement new programs, such as activating new prisons. 

BOP’s methods for cost estimation largely reflect best practices outlined in 

GAO’s Cost Estimating and Assessment Guide. BOP followed a well-defined 

process for developing a mostly comprehensive, well documented, accurate, 

and credible cost estimate for fiscal year 2008. For example, BOP used 

relevant historical cost data and considered adjustments for general inflation 

when estimating costs for its budget request to DOJ. Moreover, BOP’s 

methods for projecting inmate population changes were accurate, on average, 

to within 1 percent of the actual inmate population growth from fiscal year 

1999 to August 2009. Still, BOP could strengthen its methods in two ways. 

First, BOP has not quantified the level of confidence associated with its cost 

estimate. While not required by the Office of Management and Budget or DOJ, 

conducting an uncertainty analysis of this kind is a best practice. By providing 

the results of such analysis to DOJ, BOP officials could share advance 

information on the probability and associated risks of operating expenses 

exceeding enacted funding levels. Second, during our review of 

documentation for BOP’s fiscal year 2008 cost estimate, in some cases we 

required the guidance of BOP budget analysts to identify backup support 

because the documentation was insufficient to allow someone unfamiliar with 

the budget to locate detailed corroborating data. By documenting all steps, 

BOP would be better positioned to recreate its budget cost estimates in the 

event of attrition among those who initially developed them. 

According to BOP, from fiscal years 2004 through 2008, costs for non-salary 

inmate medical care and utilities exceeded funding levels in the President’s 

budget request by about $131 million and $55 million, respectively. As a result, 

BOP has faced funding gaps in its operations account that has left it with 

limited flexibility to manage its continually growing inmate population. 

Federal Inmate Population, Fiscal Years 2000 to 2009 

120,000

150,000

180,000

210,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Inmate population

Source: GAO analysis of BOP data.

Fiscal year

View GAO-10-94 or key components.

For more information, contact David C. 

Maurer at (202) 512-9627 or 

maurerd@gao.gov. 
Page i GAO-10-94 

Contents 

Letter 1

BOP Estimates Costs for Its Annual Budget Using Three General 

Steps 3 

BOP’s Methods for Estimating Costs Largely Reflect Best Practices 6 

Costs for Key Operations Have Exceeded the Funding Levels 

Requested in the President’s Budget in Recent Years 7 

Conclusions 9 

Recommendations for Executive Action 10 

Agency Comments 10 

Appendix I Briefing Slides to Congressional Staff 12 

Appendix II Comments from the Department of Justice, Federal 

Bureau of Prisons 63 

Appendix III GAO Contact and Staff Acknowledgments 66 

Table 

Table 1: Comparison of BOP’s Average Annual Rate of Cost 

Growth Due to Inflation and Inmate Population Growth 

and Average Annual Funding in President’s Budget 

Request for BOP, Fiscal Years 2004 through 2008 8 

Figure 

Figure 1: Federal Inmate Population Growth, Fiscal Years 2000 

through 2009 5 

 Bureau of Prisons 
Abbreviations 

B&F Buildings and Facilities 

BOP Federal Bureau of Prisons 

DOJ Department of Justice 

M&R Maintenance and Repair 

OMB Office of Management and Budget 

S&E Salaries and Expenses 

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

United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

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necessary if you wish to reproduce this material separately. 

Page ii GAO-10-94 Bureau of Prisons
Page 1 GAO-10-94 

 

United States Government Accountability Office

Washington, DC 20548 

 

November 10, 2009 

The Honorable Barbara Mikulski 

Chairman 

The Honorable Richard Shelby 

Ranking Member 

Subcommittee on Commerce, Justice, 

 Science, and Related Agencies 

Committee on Appropriations 

United States Senate 

The Honorable Alan B. Mollohan 

Chairman 

The Honorable Frank R. Wolf 

Ranking Member 

Subcommittee on Commerce, Justice, 

 Science, and Related Agencies 

Committee on Appropriations 

House of Representatives 

The Department of Justice’s (DOJ) Federal Bureau of Prisons’ (BOP) 

mission is to protect society by confining offenders in the controlled 

environments of prisons and community-based facilities that are safe, 

humane, cost-efficient, and appropriately secure. As of October 1, 2009, 

BOP was responsible for overseeing a total federal inmate population of 

approximately 209,000—a population which has grown by 44 percent since 

fiscal year 2000.1

 In recent years, BOP has faced challenges in meeting its 

operational workload responsibilities to manage this growth. In fiscal year 

2008, DOJ reported to the Office of Management and Budget (OMB) that 

BOP would be unable to operate at the funding levels in its appropriation 

because costs for key operations were at risk of exceeding appropriated 

funding levels. BOP reported that it again anticipated a funding gap in 

fiscal year 2009, and in response, Congress provided appropriations above 

the amount requested in the President’s budget. 

1

Inmate population data as reported by BOP. Of the total inmate population, approximately 

172,500 federal inmates—83 percent—were housed in 115 BOP-operated facilities 

throughout the country. The remaining inmates were housed primarily in contract 

confinement (i.e., facilities and halfway houses, operated by private contractors or 

state/local governments). 

 Bureau of Prisons 
 

This report responds to congressional direction in the explanatory 

statement accompanying the Omnibus Appropriations Act, 2009.2

 In 

accordance with this explanatory statement, and in consultation with the 

House and Senate Appropriations Committee staff, we are reporting on 

BOP’s methods for cost estimation, including the pricing of utilities and 

inmate medical care costs. Specifically, we address issues pertaining to (1) 

how BOP estimates costs when developing its annual budget request to 

DOJ; (2) the extent to which BOP’s methods for estimating costs follow 

established best practices or guidelines; and (3) the extent to which BOP’s 

costs for key operations exceeded requested funding levels identified in 

the President’s budget in recent years, and how this has affected BOP’s 

ability to manage its growing inmate population. On September 10, 2009, 

we provided a briefing to staff of the House and Senate Appropriations 

Subcommittees on Commerce, Justice, Science, and Related Agencies. 

Prior to this briefing, we provided a draft of the briefing to responsible 

DOJ and BOP officials, who generally agreed with our findings. This report 

(1) provides a summary of our briefing and (2) transmits 

recommendations that we are making to the Attorney General of the 

United States. The full briefing, including our scope and methodology, is 

reprinted as appendix I. Written comments from DOJ are reprinted as 

appendix II. 

To address these objectives, we analyzed BOP documentation to obtain 

information on the guidelines and processes BOP used to estimate costs in 

its annual budget submission, including annual DOJ and BOP budget 

development guidelines and memorandum and OMB’s Circular A-11.3

 We 

also analyzed available documentation, such as the formulas BOP used to 

compute its fiscal year 2008 budget cost estimate, and compared the 

documentation BOP used to develop its fiscal year 2008 budget cost 

estimate to criteria for cost estimating best practices identified in GAO’s 

Cost Estimating and Assessment Guide: Best Practices for Developing 

and Managing Capital Program Costs.

4

 Additionally, we reviewed BOP 

documentation of operations costs for inmate medical care and utilities 

 

2

H. Comm. on Appropriations, 111th Cong., Committee Print on H.R. 1105 / Public Law 

Number 111-8 at 274 (2009), accompanying the Omnibus Appropriations Act, 2009 (Pub. L. 

No. 111-8, 123 Stat. 524 (2009)). 

3

Office of Management and Budget, Preparation, Submission, and Execution of the 

Budget, Circular No. A-11 (Washington, D.C.: Executive Office of the President, June 2008). 

4

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

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

Page 2 GAO-10-94 Bureau of Prisons
 

and compared these costs to the amount of funding requested in the 

President’s annual budget submission to Congress for BOP (known as the 

President’s budget). Finally, we interviewed cognizant BOP and DOJ 

budget development officials to obtain information about BOP’s budget 

cost estimating methods and the factors contributing to BOP’s operational 

costs exceeding funding levels, and how this has affected BOP’s ability to 

manage its growing inmate population. Through document reviews and 

interviews with agency officials knowledgeable about controls in place to 

maintain the integrity of BOP cost and inmate population data that BOP 

reported using to estimate costs for its annual budget submission to DOJ, 

we determined that the data were sufficiently reliable for the purposes of 

this report. 

We conducted this performance audit from May 2009 to November 2009 in 

accordance with generally accepted government auditing standards. Those 

standards require that we plan and perform the work to obtain sufficient, 

appropriate evidence to provide a reasonable basis for our findings and 

conclusions based on our objectives. We believe that the evidence 

obtained provides a reasonable basis for our findings and conclusions 

based on our objectives. 

When developing its annual budget submission, BOP uses three general 

steps to estimate costs for its two budget accounts—the Salaries and 

Expenses account (known as its operational budget) and its Buildings and 

Facilities account.5

 First, BOP estimates cost increases for maintaining the 

current level of services for operations as provided in the prior year’s 

enacted budget.6

 These include costs to address mandatory staff pay raises 

and benefit increases, inmate medical care, and utilities. BOP primarily 

analyzes historical obligations from the past five years to identify average 

annual operating cost increases. BOP also considers economic indicator 

information to estimate general inflationary cost increases, using data 

BOP Estimates Costs 

for Its Annual Budget 

Using Three General 

Steps 

 

5

The Salaries and Expenses account includes sub-accounts covering costs for staffing, 

inmate medical care, food, and utilities. From fiscal years 1999 through 2008, these 

expenses comprised about 90 percent of BOP’s budget—in fiscal year 2009, staffing costs 

for employee salaries accounted for about 60 percent of the Salaries and Expenses 

account. The Buildings and Facilities account has sub-accounts covering costs for design 

and construction of new facilities and modernization and repair of existing facilities. 

6

BOP officials reported that during years in which a continuing resolution is in effect, they 

must use the prior year’s budget request submission to DOJ as the baseline because of 

delays in the enactment of the budget. 

Page 3 GAO-10-94 Bureau of Prisons
 

from the Bureau of Labor Statistics Consumer Price Index, among other 

sources. 

Second, BOP projects inmate population changes for the budget year and 

for several years into the future. BOP uses a modeling program that 

identifies each inmate as a unique record tied to variables such as 

conviction year, sentence term, and conviction type, with data obtained 

from a variety of sources, including the Administrative Office of the U.S. 

Courts, the U.S. Sentencing Commission, and the Executive Office for U.S. 

Attorneys. The model identifies the number of inmates currently in BOP’s 

system and the length of those inmates’ sentences, as well as the number 

of inmates estimated to enter the BOP system and the length of their 

sentences. For example, for the fiscal year 2010 annual budget submission, 

BOP projected a net growth in its inmate population of 4,500 inmates. 

Third, BOP estimates costs to both house the projected number of new 

inmates, including building and facility requirements, and fund any new 

initiatives. According to BOP, a rising inmate population is the primary 

driver of new service costs (see figure 1 for graph showing federal inmate 

population growth from fiscal years 2000 through 2009). Thus, for any 

budget year, BOP uses inmate population projections to determine the 

necessary bedspace to house additional inmates. BOP estimates these 

associated incarceration costs by (1) determining how to distribute the 

incoming prisoners across newly activated facilities, existing facilities, or 

contract facilities; and (2) calculating staffing and other operational costs 

to manage the additional inmates at its facilities. BOP also identifies and 

estimates costs for new initiatives, such as the activation of a new BOP 

facility, by reviewing the proposals submitted by its divisions and regional 

offices, as well as historical data on costs for implementing such 

initiatives. 

Page 4 GAO-10-94 Bureau of Prisons
 

Figure 1: Federal Inmate Population Growth, Fiscal Years 2000 through 2009 

Inmate population

120,000

150,000

180,000

210,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Inmate population

Source: GAO analysis of BOP data.

Fiscal year

For its Buildings and Facilities account, BOP identifies new program costs 

associated with new construction and maintenance and repair of existing 

facilities. Using its long-term inmate population projections, BOP 

considers new construction proposals based on need, funding, and the 

anticipated speed of construction. BOP estimates construction costs 

largely by using analogous building costs for similar security level 

facilities, as well as considering assumptions, such as the rate of inflation 

and when potential construction would begin. BOP ranks maintenance 

and repair proposals by assigning safety the highest priority and estimates 

costs based on information it obtains from a construction cost estimation 

company. 

Page 5 GAO-10-94 Bureau of Prisons
 

BOP’s methods for estimating costs in its annual budget requests to DOJ 

largely reflect the best practices outlined in GAO’s Cost Estimating and 

Assessment Guide. Specifically, BOP followed a well-defined process for 

developing a mostly comprehensive, well documented, accurate, and 

credible cost estimate for fiscal year 2008.7

 For example, BOP used 

relevant historical cost data and considered adjustments for general 

inflation when estimating costs for its budget request to DOJ. Moreover, 

BOP’s methods for projecting inmate population changes have been 

largely accurate. For example, we found BOP’s projections were accurate, 

on average, to within 1 percent of the actual inmate population growth 

from fiscal year 1999 through August 20, 2009. 

BOP’s Methods for 

Estimating Costs 

Largely Reflect Best 

Practices 

We identified two areas where BOP could strengthen its methods for 

estimating costs in its annual budget submission. First, according to best 

practices described in GAO’s Cost Estimating and Assessment Guide, it 

is better for decision makers to know the range of potential costs that 

surround an estimate and the reasons behind what drives that range rather 

than just having a point estimate from which to make their decision. An 

uncertainty analysis provides a range of costs that span a best and worst 

case spread. While not required by OMB or DOJ in annual budget 

development guidance, conducting an uncertainty analysis of this kind is a 

best practice. BOP has not conducted an uncertainty analysis, and 

therefore has not quantified the level of confidence associated with its 

cost estimate. By providing the results of such analysis to DOJ, BOP 

officials could share advance information on the probability and 

associated risks of operating expenses exceeding enacted funding levels—

a situation BOP faced in fiscal year 2008. 

Second, during our review of documentation for BOP’s fiscal year 2008 

cost estimate, we sometimes required the guidance of BOP budget 

analysts to identify backup support. This was because the documentation 

BOP provided was insufficient to allow someone unfamiliar with the 

budget to locate detailed corroborating data. For example, in reviewing 

BOP’s fiscal year 2008 cost estimate for a health service initiative related 

to expanding kidney dialysis treatment for inmates, we required a budget 

official’s assistance in locating supporting formulas used to calculate the 

 

7

GAO’s Cost Estimating and Assessment Guide identifies 12 practices that are the basis 

for effective cost estimation. We associate these practices with four characteristics: 

accurate, well documented, credible, and comprehensive. If followed correctly, these 

practices should result in reliable and valid cost estimates that (a) can be easily and clearly 

traced, replicated, and updated; and (b) enable managers to make informed decisions. 

Page 6 GAO-10-94 Bureau of Prisons
 

estimate. Best practices for cost estimation include providing enough 

detail so that the documentation serves as an audit trail that allows for 

clear tracking of cost estimates over time. By documenting all steps for 

developing its budget cost estimate, BOP would be better positioned to 

recreate its estimates in the event of attrition within its budget office 

among those who developed initial budget cost estimates. 

In providing feedback on our initial findings, BOP budget officials 

indicated that taking these steps would strengthen their methods for 

estimating costs in their annual budget submission to DOJ. 

BOP’s costs for key operations to maintain basic services, such as those 

for inmate medical care and utilities, exceeded the funding levels 

requested in the President’s budget from fiscal years 2004 through 2008, 

limiting BOP’s ability to manage its growing inmate population. During this 

period, BOP’s annual non-salary inmate medical care and utilities costs 

exceeded funding levels in the President’s budget request by a total of 

about $131 million and $55 million, respectively, largely due to inflation 

and inmate population growth.8

• According to BOP, from fiscal years 2004 through 2008, BOP’s annual 

non-salary inmate medical care costs increased by a total of about 

$146.5 million. In contrast, during this period, the President’s budget 

requested funding increases for non-salary inmate medical care 

totaling approximately $15.4 million. 

Costs for Key 

Operations Have 

Exceeded the 

Funding Levels 

Requested in the 

President’s Budget in 

Recent Years 

• According to BOP, from fiscal years 2004 through 2008, BOP’s annual 

utilities costs increased by a total of $87 million. In contrast, during 

this period, the President’s budget requested funding increases for 

utilities totaling approximately $31.6 million. 

Table 1 compares BOP’s rates of annual cost growth due to inflation and 

inmate population growth with the President’s budget requests for funding 

for non-salary inmate medical care and utilities from fiscal years 2004 

through 2008. 

 

8

Non-salary inmate medical care costs refer to the amount BOP spends on 

pharmaceuticals, medical supplies, and outside medical care--community hospital services 

and a portion of guard escort service and a portion of salaries (overtime). In fiscal year 

2008, non-salary inmate medical care and utilities costs were $430.5 million and $234 

million, respectively. 

Page 7 GAO-10-94 Bureau of Prisons
 

Table 1: Comparison of BOP’s Average Annual Rate of Cost Growth Due to Inflation 

and Inmate Population Growth and Average Annual Funding in President’s Budget 

Request for BOP, Fiscal Years 2004 through 2008

Average annual rate of 

cost growth incurred 

by BOP, fiscal years 

2004 through 2008

Average annual rate of 

funding growth in 

President’s budget 

request, fiscal years

2004 through 2008

Inmate medical care 

(non-salary) 8.7% 0.9%

Utilities 9.8% 3.2%

Source: GAO analysis of BOP data. 

When BOP has not received funding to cover the operational cost 

increases it has incurred, in some years it has used Salaries and Expenses 

funding planned for other areas to cover these costs. For example, one of 

BOP’s highest priorities is to increase staffing levels of corrections 

officers. However, BOP officials reported using Salaries and Expenses 

account funds initially planned for hiring additional corrections officers in 

fiscal years 2008 and 2009 to instead cover base operations cost increases 

related to inmate medical care, utilities, and personnel salary and benefit 

adjustments that were unfunded in the President’s budget requests. 

As with any other DOJ component, BOP’s budget requests are governed by 

DOJ and OMB budget development guidance. For example, DOJ budget 

development guidance for fiscal years 2008 and 2009 required components 

to limit cost growth for current services to no more than 4 percent greater 

than prior year levels. DOJ reported that this guidance was a general 

instruction given to all components, but recognized that BOP is different 

because its costs are less discretionary since BOP does not control the 

number of inmates for which it must care. In this way, DOJ reported that it 

did not automatically reject budget submissions from BOP that exceeded 

the cap, but instead required BOP to submit substantive information to 

justify need. 

DOJ also reported that OMB does not automatically provide funds for 

inflationary cost increases. DOJ cited OMB policy stating that inflationary 

adjustments for discretionary costs (such as utilities) can include some, 

all, or no allowance for inflation. DOJ officials reported that OMB typically 

does not include general inflationary adjustments that DOJ submits on 

behalf of BOP. 

Page 8 GAO-10-94 Bureau of Prisons
 

Nonetheless, DOJ has reported to OMB that other DOJ components could 

reduce operations, implement across-the-board hiring freezes, and 

implement policy changes that would reduce costs if faced with funding 

shortfalls similar to what BOP has faced in its operations budget. 

However, DOJ reported that BOP has already implemented significant 

reductions to programs and streamlined and centralized administrative 

functions to eliminate 2,300 positions. DOJ also reported that BOP has 

limited flexibility because almost all of BOP’s operational costs are 

devoted to staff salaries and provision of services. According to BOP data, 

in fiscal years 2007 and 2008, 99.5 percent of BOP’s Salaries and Expenses 

budget was fixed for its operations for paying staff salaries and providing 

services to house and care for the inmate population. 

In each of the last 2 fiscal years, BOP has needed additional funding to 

meet its operating costs for managing its growing inmate population. 

However, we found that BOP’s cost estimation methods largely reflect 

GAO’s cost estimating best practices. Furthermore, BOP officials reported, 

and DOJ officials acknowledged, that BOP has already implemented 

significant reductions in operations costs, such as by eliminating positions 

and centralizing administrative functions. Given BOP’s unique 

responsibility for managing this population, and its limited discretion 

when costs for key operations exceed funding levels, it is especially 

important for BOP to develop accurate cost estimates and clearly convey 

to decision makers the potential risk of costs exceeding funding levels. 

Conclusions 

In light of these circumstances, BOP’s budget cost estimation practices 

could be strengthened in two ways. First, although BOP is not required to 

report in its annual budget submission the extent to which actual costs 

may be expected to vary from cost estimates, we have identified the 

provision of an uncertainty analysis as a best practice. If BOP identified its 

level of cost estimation confidence and provided this information to DOJ, 

DOJ could more fully understand the range of potential costs—and the 

potential need for more funding—if estimating assumptions for key cost 

drivers, such as inmate population growth, do not hold true. 

Page 9 GAO-10-94 Bureau of Prisons
 

Second, by improving documentation of all steps for developing its cost 

estimate, BOP would be better positioned to re-create its estimates in the 

event of attrition within its budget office among those who developed 

initial cost estimates. 

To improve transparency in BOP’s cost estimation process, as well as 

DOJ’s annual budget formulation and justification process, and to provide 

DOJ with more detailed information to consider when deliberating its 

budget proposal for BOP, we recommend that the Attorney General take 

the following two actions: 

Recommendations for 

Executive Action 

• instruct the BOP Director to require the BOP budget staff to conduct 

an uncertainty analysis quantifying the extent to which operations 

costs could vary due to changes in key cost assumptions and submit 

the results along with budget documentation to DOJ so that DOJ could 

be aware of the range of likely costs and BOP’s associated confidence 

levels; and 

• instruct the BOP Director to require the BOP budget staff to improve 

documentation of calculations used to estimate its costs. 

We provided a draft of this report to DOJ for its review and comment. The 

BOP Director provided written comments on this draft and concurred with 

our findings and recommendations. BOP stated that including the results 

of an uncertainty analysis in the budget document would provide DOJ, 

OMB, and Congress better context for decision making and stated that it 

would include such analysis in preparation of its 2012 budget submission. 

BOP also stated that if time permits, it would work with DOJ and OMB to 

incorporate an uncertainty analysis into the President’s 2011 budget. 

BOP’s comments are reproduced in appendix II. 

Agency Comments 

Page 10 GAO-10-94 Bureau of Prisons
 

We are sending copies of this report to the Attorney General and 

interested congressional committees. In addition, this report will be 

available at no charge on the GAO Web site at http://www.gao.gov. 

Should you or your staff have any questions concerning this report, please 

contact me at (202) 512-9627 or by e-mail at maurerd@gao.gov. Contact 

points for our Offices of Congressional Relations and Public Affairs may 

be found on the last page of this report. Key contributors to this report are 

David C. Maurer 

listed in appendix III. 

Director, Homeland Security and Justice Issues 

Page 11 GAO-10-94 Bureau of Prisons
A

Staff 

ppendix I: Briefing Slides to Congressional

Page 12 GAO-10-94 

Appendix I: Briefing Slides to Congressional 

Staff 

1

Briefing on 

Federal Bureau of Prisons 

Methods for Estimating Costs

Prepared for the 

Senate and House Appropriations Committees

Subcommittees on 

Commerce, Justice, Science, 

and Related Agencies 

 Bureau of Prisons 
Appendix I: Briefing Slides to Congressional 

Staff 

2

Briefing Overview

• Introduction

• Objectives, Scope, and Methodology

• Results in Brief

• Background

• Findings

• Conclusions

• Recommendations

• Agency Comments

• Appendix I

Page 13 GAO-10-94 Bureau of Prisons
Appendix I: Briefing Slides to Congressional 

Staff 

3

Introduction 

In recent years, the Department of Justice’s (DOJ) Federal Bureau of Prisons (BOP) 

has faced challenges in meeting its operational workload responsibilities for overseeing 

the federal inmate population. In fiscal year 2008, DOJ reported to the Office of 

Management and Budget (OMB) that BOP would be unable to operate at the funding 

levels in its appropriation because costs for key operations were at risk of exceeding 

appropriated funding levels. BOP reported that it again anticipated a funding gap in 

fiscal year 2009, and in response Congress provided appropriations above the amount 

in the President’s budget request. 

• Fiscal year 2008: BOP received a total of $296.3 million in funding after its 

initial appropriation was enacted, including $109.2 million transferred from other 

DOJ accounts, $178 million from the Supplemental Appropriations Act, 2008 

and $9.1 million relating to the Global War on Terrorism in the Supplemental 

Appropriations Act, 2008.1

• Fiscal year 2009: BOP received a total of $160 million in funding above the 

President’s request through the Omnibus Appropriations Act, 20092 and $5 

million through the Supplemental Appropriations Act, 2009.3

1 Pub. L. No. 110-252, 122 Stat. 2323 (2008). 2 Pub. L. No. 111-8, 123 Stat. 524 (2009).

3 Pub. L. No. 111-32, 123 Stat. 1859 (2009).

Page 14 GAO-10-94 Bureau of Prisons
Appendix I: Briefing Slides to Congressional 

Staff 

4

Objectives, Scope, and Methodology

Objectives

The explanatory statement accompanying the Omnibus Appropriations Act, 2009 

directed GAO to review BOP’s methods for determining resource requirements.4

We designed our reporting objectives to answer the following three questions:

1. How does BOP estimate costs when developing its annual budget request to DOJ?

2. To what extent do BOP’s methods for estimating costs follow established best 

practices or guidelines?

3. To what extent have BOP’s costs for key operations exceeded requested funding 

levels identified in the President’s budget in the last five fiscal years, and how has 

this affected BOP’s ability to manage its growing inmate population?

4 H. Comm. on Appropriations, 111th Cong., Committee Print on H.R. 1105 / Public Law Number 111-8 at 274 

(2009) accompanying Pub. L. No. 111-8, 123 Stat. 524 (2009).

Page 15 GAO-10-94 Bureau of Prisons
Appendix I: Briefing Slides to Congressional 

Staff 

5

Objectives, Scope, and Methodology

Scope and Methodology: Objective 1

To determine how BOP estimates costs when developing its annual budget request to 

DOJ, we

• analyzed BOP documentation, including budget development guidelines, planning 

documents, and memorandum to obtain information on the steps BOP uses to 

estimate costs and the information BOP considers when doing so;

• reviewed OMB and DOJ budget development guidance, including OMB’s Circular A11 and DOJ annual budget development guidelines, to obtain information on federal 

budget formulation standards and requirements BOP must follow in preparing its 

annual budget request to DOJ,5 and 

• interviewed cognizant program officials from BOP’s Administration Division, including 

senior officials from BOP’s Budget Development Office and Capacity Planning 

Branch, to learn about BOPs methods for estimating costs. We also interviewed 

cognizant program officials from BOP’s Office of Research and Evaluation to obtain 

information on BOP’s methods for estimating inmate population increases.

5Office of Management and Budget, Preparation, Submission, and Execution of the Budget, Circular No. A-11 

(Washington, D.C.: Executive Office of the President, June 2008).

Page 16 GAO-10-94 Bureau of Prisons
Appendix I: Briefing Slides to Congressional 

Staff 

6

Objectives, Scope, and Methodology

Scope and Methodology: Objective 2

To determine the extent to which BOP’s methods for estimating costs follow established 

best practices or guidelines, we

• analyzed available documentation, including BOP's fiscal year 2008 budget cost 

estimate and other relevant agency documentation, such as the formulas BOP used 

to compute its fiscal year 2008 budget cost estimate; 

• interviewed cognizant program officials from BOP’s Administration Division, including 

the Budget Development Chief, to understand how BOP developed its budget cost 

estimates and to identify supporting budget development documentation; and

• compared the documentation BOP used to develop its fiscal year 2008 budget cost 

estimate with criteria for cost estimating best practices identified in GAO’s Cost 

Estimating and Assessment Guide: Best Practices for Developing and Managing 

Capital Program Costs.

6

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

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

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Objectives, Scope, and Methodology

Scope and Methodology: Objective 3

To determine the extent to which BOP’s costs for key operations exceeded 

funding levels requested in the President’s budget over the past five fiscal 

years and how this has affected BOP’s ability to manage its growing 

inmate population, we

• reviewed BOP documentation, including reported obligations costs for 

maintaining key operations, and compared these costs to requests for 

funding in the President’s annual budget submission to Congress for BOP;

• interviewed BOP budget development officials, as well as budget 

development officials from the DOJ Justice Management Division, to obtain information on the factors officials reported contributing to BOP’s 

operational costs exceeding funding levels.

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Objectives, Scope, and Methodology

Scope and Methodology

• To assess the reliability of the information we obtained about BOP's 

methods for estimating costs for its annual budget submission, we 

compared the documents BOP provided supporting its budget estimates for 

fiscal years 2004 to 2008 with information contained in the President's 

budget request for BOP for those years to determine the consistency of the 

information. 

• We also interviewed agency officials knowledgeable about controls in place 

to maintain the integrity of (1) inmate population and sentenced offender

data BOP used to populate its inmate population projection model for fiscal 

years 1999 to 2009 and (2) data on annual operations costs BOP reported 

between 2004 and 2008, including inmate medical care and utilities. As a 

result, we determined that the data were sufficiently reliable for the 

purposes of this report. 

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Objectives, Scope, and Methodology

Scope and Methodology

We conducted this performance audit from May 2009 to 

September 2009 in accordance with generally accepted 

government auditing standards. Those standards require that 

we plan and perform the work to obtain sufficient, appropriate 

evidence to provide a reasonable basis for our findings and 

conclusions based on our objectives. We believe that the 

evidence obtained provides a reasonable basis for our findings 

and conclusions based on our objectives.

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Results in Brief

• BOP develops its annual budget request to DOJ using three general steps: 

(1) estimating cost increases needed to maintain current service levels; (2) 

projecting inmate population changes; and (3) estimating costs to provide 

additional capacity to house inmate population growth and implement new 

programs.

• BOP’s methods for cost estimation largely reflect best practices outlined in 

GAO’s Cost Estimating and Assessment Guide. BOP followed a well 

defined process for developing a mostly comprehensive, well-documented, 

accurate, and credible cost estimate for fiscal year 2008; however, BOP 

has not quantified the level of confidence associated with its cost estimate. 

While not required by OMB or DOJ, conducting uncertainty analyses of this 

kind is a best practice. By providing the results of such analyses to DOJ, 

BOP officials could share advance information on the probability and 

associated risks of operating expenses exceeding enacted funding levels—

a situation BOP faced in fiscal year 2008. 

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Results in Brief

• BOP’s costs for key operations to maintain basic services, such as 

those for inmate medical care and utilities, have exceeded the 

funding levels requested in the President’s budget over the last 5 

fiscal years, and this has limited BOP’s ability to manage its 

growing inmate population. According to BOP, between fiscal years 

2004 and 2008, costs for non-salary inmate medical care and 

utilities exceeded funding levels in the President’s budget request 

by about $131 million and $55 million, respectively. 

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Results in Brief

To improve transparency in BOP’s cost estimation process, as well as DOJ’s 

annual budget formulation and justification process, we plan to make two 

recommendations to the Attorney General

1. instruct the BOP Director to require BOP budget staff to conduct an 

uncertainty analysis quantifying the extent to which operational costs 

could vary due to changes in key cost assumptions—and submit the 

results, along with budget documentation, to DOJ so that DOJ can be 

aware of the range of possible costs and BOP's confidence levels

associated with each point along the range;

2. instruct the BOP Director to require the budget staff to improve

documentation of calculations used to estimate its costs.

DOJ and BOP generally agreed with our findings and provided technical 

comments, which we integrated into our findings as appropriate.

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Background – BOP’s Mission

BOP’s mission is to protect society by confining offenders in the 

controlled environments of prisons and community-based facilities that 

are safe, humane, cost-efficient, and appropriately secure.

• As of October 1, 2009, BOP was responsible for overseeing a total 

federal inmate population of approximately 209,000.

• Approximately 172,500 federal inmates—83 percent—were 

housed in 115 BOP-operated facilities throughout the country. 

The remaining inmates were housed primarily in contract 

confinement (private facilities and halfway houses, operated by 

contractors or state/local governments).

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Background – Federal Budget 

Formulation Process

Through the multi-phase federal budget formulation process, BOP is required

to identify resource requirements and estimate costs for its annual budget

request to DOJ. This process is guided by OMB, which makes decisions on

executive agencies’ budgets and submits them as the “President’s Request”

to Congress. Key steps in this process involve:

• OMB issuing Circular A-11 to federal agencies, providing detailed 

instructions for submitting budget data and materials, as well as 

criteria for developing budget submissions;

• DOJ issuing to all components its annual budget development 

guidelines;

• BOP submitting its budget request to DOJ’s Justice Management 

Division about a year and a half prior to the budget year in question;

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Background – Federal Budget 

Formulation Process 

• The Attorney General analyzing all DOJ components’ budget requests 

in light of department-wide priorities and compiling and submitting the 

DOJ annual budget submission to OMB; and

• OMB making final decisions on all agencies’ budgets and submitting 

the President’s Request to Congress, which aggregates submissions 

for all of DOJ’s components, including BOP. 

• Figure 1 provides a high-level overview of this process.

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Background – Federal Budget Formulation 

Process and OMB, DOJ, and BOP Roles

Figure 1

Source: GAO analysis of BOP information.

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Background – BOP’s Budget 

Composition

BOP’s appropriated budget is comprised of the Salaries and Expenses (S&E) and 

Buildings and Facilities (B&F) accounts.

• The S&E account—known as BOP’s operations budget—includes sub-accounts 

covering costs for staffing; medical care; food; and utilities, such as water and 

gas. In fiscal year 2009, staffing costs for employee salaries comprised about 

60 percent of this account.

• The B&F account has sub-accounts covering costs for design and construction 

of new facilities and modernization and repair (M&R) of existing facilities.

• S&E expenses have accounted for the vast majority of BOP’s annual enacted 

budget from fiscal years 1999 through 2008—averaging about 90 percent. 

• The President’s fiscal year 2010 budget request for BOP’s S&E and B&F accounts 

totals $6.1 billion, which is 23 percent of DOJ’s $26.7 billion budget. 

• Figure 2 compares the President’s request for BOP to its enacted funding levels from 

fiscal year 1999 through 2009, and figure 3 shows the composition of the President’s 

request (S&E versus B&F) for BOP over the same period.

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Background – President’s Budget Request vs. 

Enacted Budget for BOP, Fiscal Years 1999 

through 2009

Source: GAO analysis of BOP data.

Figure 2

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Background – President’s Budget Requests 

for BOP: S&E and B&F Accounts, Fiscal Years 

1999 to 2009

Figure 3

Source: GAO analysis of BOP data.

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Background – BOP’s Challenges

• From fiscal years 2000 through 2009, BOP’s total inmate population level increased 

by 44 percent—from 145,125 to 209,027. BOP estimates that the total inmate 

population will continue to rise by about 4,500 inmates per year over the next decade. 

• During this period, BOP reports that crowding levels (the percentage of inmates 

housed in facilities above the rated capacity for safe and secure incarceration) have 

grown.7 BOP currently reports a system-wide crowding rate of 37 percent—more than 

double the rate (15 percent) that BOP has determined to be its long-term target for 

reducing overcrowding.

• According to BOP, as inmate population and crowding have increased, BOP’s overall 

inmate to staff ratio increased by nearly 18 percent from fiscal year 2000 to 2008, from 

4.13 to 1 to 4.86 to 1. BOP reports that this has caused a significant reduction in its 

ability to effectively supervise inmates in its facilities. 

7 According to BOP, rated capacity is intended to reflect the number of inmates that the facility was meant to house 

safely and securely and with adequate access to services providing necessities for daily living and programs 

designed to support inmates’ crime-free return to the community. 

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Background – BOP’s Challenges

• A 2005 BOP study found that an increase in crowding levels or inmate to 

staff ratios leads to an increase in serious violence among inmates.8

• As of August 1, 2009, BOP reported being staffed at 34,829—about 88 

percent of its authorized Full Time Equivalent (FTE) staffing level of 

39,692. About half of its authorized positions are for corrections officers. 

• Figure 4 compares BOP S&E staffing levels to its inmate population 

beginning in fiscal year 2000.

8 Department of Justice, Federal Bureau of Prisons, The Effects of Crowding and Staffing Levels in Federal Prisons 

on Inmate Violence Rates (Washington, D.C., 2005). 

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Background – BOP’s Inmate and Staffing 

Levels, Fiscal Years 2000 to 2009

Figure 4

Note: Fiscal year 2009 data based on projections provided by BOP on August 20, 2009.

Source: GAO analysis of BOP data. 

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Objective 1 – How does BOP estimate costs 

when developing its annual budget 

submission?

BOP estimates costs using three general steps:

Step 1: BOP estimates the costs necessary to maintain operations for 

existing workload requirements (current services) by using the prior 

year’s request or enacted budget as a baseline.9

Step 2: BOP projects inmate population changes for the budget year.

Step 3: BOP estimates costs to accommodate projected inmate 

population growth, including the provision of new programs, such as 

activation of a new BOP prison facility, for the budget year.

9 BOP officials reported that during years in which a continuing resolution is in effect, they must use the prior 

years’ budget request submission to DOJ as the baseline because of delays in the enactment of the budget. 

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Objective 1 – Estimating Costs to 

Maintain Current Services (S&E Account)

First, BOP estimates cost increases for maintaining the level of services—

operational costs—provided in the prior year’s enacted budget for the S&E 

account. 

• These costs include adjustments to address mandatory staff pay 

raises and benefit increases, inmate medical care, and utilities across 

BOP’s 115 facilities. 

• BOP primarily analyzes historical obligations from the last 5 years to identify 

average annual operating cost increases.

• BOP also considers economic indicator information to estimate general inflationary cost increases, using data from the Bureau of Labor Statistics 

Consumer Price Index and other sources. 

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Objective 1 – Projecting Population 

Changes

Second, BOP projects inmate population changes for the budget year, and for 9 years 

into the future. 

• BOP uses a modeling program that identifies each inmate as a unique record tied to 

variables such as conviction year, sentence term, and conviction type. 

• BOP’s model uses data and information from a variety of sources, including the 

Administrative Office of the U.S. Courts, the U.S. Sentencing Commission, and the 

Executive Office for U.S. Attorneys to identify

• Number of inmates currently in prison and the length of their sentences, and

• Number of inmates estimated to enter prison and the length of their sentences.

• For the fiscal year 2010 annual budget submission, BOP projected a net growth of 

4,500 inmates.

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Objective 1 – Estimating Costs to 

Provide Additional Capacity

Third, BOP estimates costs to both house the projected number of new inmates,

including building and facility requirements, and fund any new initiatives. 

• According to BOP, a rising inmate population is the primary driver of new service costs. 

• For the budget year, BOP uses inmate projections to determine necessary bedspace to house additional inmates. 

• For future years, BOP uses inmate projections to plan for long term capacity needs, including new construction and arrangements for contract confinement. 

• BOP estimates the associated incarceration costs by (1) determining how to distribute incoming prisoners across newly activated facilities, existing facilities, or privately operated facilities, and (2) calculating staff and other operational costs at each facility type. 

• BOP identifies and estimates costs for new initiatives/program increases, such as activation of a new BOP prison facility, by reviewing the proposals submitted by its divisions and regional offices, and historical data. 

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Objective 1 – Estimating Costs to Provide 

Additional Capacity (B&F Account)

BOP also identifies new program costs associated with its B&F account, including new

construction and M&R.

• Using its long term population projections, BOP considers new construction 

proposals based on need, funding, and the anticipated speed of construction. 

• BOP estimates construction costs (for new prisons or expansions to existing 

facilities) largely by using analogous building costs for similar security level 

facilities. Cost estimates are also based on assumptions, including the rate of 

inflation and when construction will begin.

• M&R project proposals are ranked by assigning safety the highest priority, with 

lesser importance given to improving accessibility and updating facilities more 

than 50 years old. BOP estimates costs for replacement values through 

information it obtains from a construction cost estimation company. 

• Since fiscal year 2005, OMB has placed a moratorium on new BOP prison 

construction because OMB has focused on contracting with private prisons to 

address bedspace needs. However, BOP has identified new construction plans 

and included proposals for new construction as part of its capacity plan.10

10 According to BOP, the only new construction funding requested by the administration since fiscal year 2005 has 

been for completion of an ongoing prison project in Mendota, California.

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Objective 2 – To what extent do BOP’s 

methods for estimating costs follow 

established best practices or guidelines?

BOP’s methods for estimating costs in its annual budget requests to DOJ

largely reflect the four best practices outlined in GAO’s Cost Estimating and

Assessment Guide.

• GAO’s Cost Estimating and Assessment Guide has identified 12 practices 

that are the basis for effective cost estimation.11 We associate these 

practices with four characteristics: accurate, well documented, credible, and 

comprehensive. OMB endorsed this guidance as being sufficient for meeting 

most cost estimating requirements, including for budget formulation.

• If followed correctly, these practices should result in reliable and valid cost 

estimates that (a) can be easily and clearly traced, replicated, and updated; 

and (b) enable managers to make informed decisions.

11 See appendix I for a description of these cost estimating practices.

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Objective 2 – Extent To Which BOP’s Cost Estimation 

Methods Reflect GAO’s Cost Estimation Best Practices

As table 1 illustrates, we found that BOP’s methods for estimating costs met 

one and substantially met three of these four practices. The following 

explains the definitions we used in assessing BOP’s methods for 

estimating costs in its annual budget submission to DOJ:

Met – BOP provided complete evidence that satisfies the entire criterion;

Substantially Met – BOP provided evidence that satisfies a large portion of 

the criterion; 

Partially Met – BOP provided evidence that satisfies about half of the 

criterion; 

Minimally Met – BOP provided evidence that satisfies a small portion of the 

criterion; 

Not Met – BOP provided no evidence that satisfies any of the criterion.

• DOJ officials reported being satisfied with BOP’s cost estimation methods, 

noting that they could not identify any area needing improvement.

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Objective 2 – BOP’s Methods for Estimating Costs in 

its Annual Budget Requests to DOJ Largely Reflect 

GAO Best Practices

Table 1: Extent to Which BOP’s Cost Estimating Methods Reflect GAO Best Practices

Source: GAO analysis.

Met The cost estimates should provide for results that are unbiased and 

should not be overly conservative or optimistic. In addition, the 

estimates should be updated regularly to reflect material changes in 

the program, and steps should be taken to minimize mathematical 

mistakes and their significance. Among other things, the estimate 

should be grounded in a historical record of cost estimating and

actual experiences on comparable programs.

Accurate

The cost estimates should have clearly defined purposes and be Substantially met supported by documented descriptions of key program or system 

characteristics. Additionally, they should capture in writing such 

things as the source data used and their significance, the 

calculations performed and their results, and the rationale for 

choosing a particular estimating method. Moreover, this information 

should be captured in such a way that the data used to derive the 

estimate can be traced back to, and verified against, their sources. 

The final cost estimate should be reviewed and accepted by 

management.

Well 

documented

Best practice Explanation Satisfied?

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Objective 2 – BOP’s Methods for Estimating Costs in 

its Annual Budget Requests to DOJ Largely Reflect 

GAO Best Practices

Table 1 (continued)

Source: GAO analysis.

The cost estimates should discuss any limitations in the Substantially met analysis performed due to uncertainty surrounding data or 

assumptions. Further, the estimates’ derivation should 

provide for varying any major assumptions and recalculating 

outcomes based on sensitivity analyses, and their associated 

risks/uncertainty should be disclosed. Also, the estimates 

should be verified based on cross-checks using other 

estimating methods and by comparing the results with 

independent cost estimates.

Credible

The cost estimates should include both government and Substantially met contractor costs over the program’s full life cycle, from the 

inception of the program through design, development, 

deployment, and operation and maintenance to retirement. 

They should also provide an appropriate level of detail to 

ensure that cost elements are neither omitted nor double 

counted and include documentation of all cost-influencing 

ground rules and assumptions.

Comprehensive

Best practice Explanation Satisfied?

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Objective 2 – BOP’s Cost Estimating Methods 

Met Characteristics for Accuracy

Consistent with best practices, BOP used relevant historical cost data

and considered adjustments for general inflation when estimating

costs for its fiscal year 2008 budget request to DOJ, and its methods

for projecting inmate population have been largely accurate.

• BOP officials reported estimating costs for medical care and utilities 

for the budget year in question based on historical obligations over 

the prior three to five years. For example, BOP provided 

documentation that officials reported using to develop BOP’s fiscal 

year 2009 inmate medical care cost estimate showing BOP’s 

annual non-salary inmate medical care costs had increased an 

average of about 10 percent annually between fiscal years 2003 

and 2005.12

12 Non-salary inmate medical care costs refer to the amount BOP spent on pharmaceuticals, medical supplies, 

and outside medical care (community hospital services and a portion of guard escort service and a portion of 

salaries (overtime). 

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Objective 2 – BOP’s Cost Estimating Methods 

Met Characteristics for Accuracy

• BOP’s total inmate population projections were accurate, on 

average, to within 1 percent of the actual inmate growth from fiscal 

year 1999 to August 20, 2009. 

• BOP overestimated the inmate population for 8 of the 11 fiscal 

years reviewed.

• Figure 5 compares BOP’s projected population levels as reflected

in the President’s request compared to the actual inmate 

populations at the end of each fiscal year, 1999 to 2009 (projected). 

• Table 2 presents the difference between the projected and actual

population increases. 

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Objective 2 – BOP’s Population 

Projections Have Been Largely Accurate

Note: Actual inmate population for fiscal year 2009 as of August 20, 2009.

Source: GAO analysis of BOP data.

Figure 5

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Objective 2 – BOP’s Population 

Projections Have Been Largely Accurate

Note: Actual inmate population for fiscal year 2009 as of August 20, 2009.

Source: GAO analysis of BOP data.

Table 2

2009 206,165 207,872 -1707

2008 202,584 201,668 916

2007 203,880 200,020 3,860

2006 195,972 192,584 3,388

2005 190,004 187,394 2,610

2004 180,279 179,895 384

2003 175,126 172,499 2,627

2002 169,217 163,436 5,781

2001 160,919 156,572 4,347

2000 141,282 145,125 -3,843

1999 127,902 133,689 -5,787

Fiscal year Projected Actual Difference

Inmate population level

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Objective 2 – BOP’s Cost Estimating Methods 

Substantially Met Characteristics for Being Well 

Documented

Consistent with best practices, BOP clearly defined the purpose of its cost estimates,

and its calculations and results substantially met characteristics for being well

documented. 

• We reviewed BOP’s fiscal year 2008 budget request to DOJ and supporting documentation and found budget officials had documented the formulas they used to calculate cost elements for new initiatives, such as activation-related costs for a new prison facility planned to open in the budget year.

• In some cases, however, we required the guidance of BOP budget analysts to 

identify backup support because the documentation was insufficient to allow 

someone unfamiliar with the budget to locate detailed corroborating data. For 

example, in reviewing BOP’s fiscal year 2008 cost estimate for a health service 

initiative related to expanding kidney dialysis, we required a budget official’s 

assistance in locating supporting formulas used to calculate the estimate. Best 

practices include providing enough detail so that the documentation serves as an 

audit trail to allow for clear tracking of cost estimates over time.

• Documenting all steps for developing its cost estimate would better position BOP to 

recreate its estimates in the event of attrition within its budget office among those 

who have developed initial cost estimates.

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Objective 2 – BOP’s Cost Estimating Methods 

Substantially Met Characteristics for 

Credibility

Consistent with best practices, BOP performed independent government cost estimates

related to constructing new prisons and used historical data to estimate key operational

costs, including utilities and inmate medical care, and its calculations and results

substantially met characteristics for credibility.

• BOP performed cross-checks by benchmarking new estimates against historical 

data, such as by estimating medical care costs based on cost obligations in recent 

years and developed numerous risk analyses and impact scenarios of funding cuts.

• Although not required to do so by OMB or DOJ annual budget development 

guidelines, BOP did not perform an uncertainty analysis consistent with best 

practices to quantify the risk associated with changes to various assumptions that 

drive its cost estimates.13 Major assumptions include the inmate population 

projection; inflation indices for medical care and utilities; and annual salary 

increases. 

• Such an analysis would help provide DOJ, Congress, and other stakeholders with 

information to determine the probability that costs for key operations, such as inmate 

medical care and utilities, may exceed funding levels requested in the President’s 

budget. 

13 An uncertainty analysis provides a range of costs that span a best and worst case spread. According to best 

practices, it is better for decision makers to know the range of potential costs that surround an estimate and the 

reasons behind what drives that range rather than just having a point estimate from which to make their decision.

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Objective 2 – BOP’s Cost Estimating Methods 

Substantially Met Characteristics for Being 

Comprehensive

Consistent with best practices, BOP detailed pertinent costs related to its S&E

and B&F accounts across sub-accounts. This level of detail helped ensure

that no cost elements were omitted or double counted in its budget request

submission to DOJ, and that BOP’s calculations and results substantially met

characteristics for comprehensiveness. 

• BOP relied on ground rules and assumptions, such as using inmate

population projections to drive cost estimates for capacity needs and using 

historical obligation trends to estimate growth for utilities and inmate 

medical care costs.

• However, as noted earlier, BOP did not determine risk distributions for all 

assumptions, which would enable it to perform an uncertainty analysis for 

key cost elements. 

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Objective 3 – To what extent have BOP’s costs for key operations 

exceeded requested funding levels in the President’s 

budget in the last five fiscal years, and how has this affected 

BOP’s ability to manage its growing inmate population?

Costs for key operations to maintain basic services, such as those for inmate 

medical care and utilities, have exceeded the funding levels requested in 

the President’s budget over the past five fiscal years, and this has limited 

BOP’s ability to manage its growing inmate population. 

• From fiscal years 2004 through 2008, the funding levels requested in the 

President’s budget for BOP have been insufficient to cover annual cost 

growth for maintaining existing services, including inmate medical care and 

utilities. Moreover, population adjustment funding—necessary to cover 

expenses associated with housing a growing inmate population in BOPoperated facilities—has not consistently been included in the President’s 

budget, with BOP receiving no funding adjustments in some years.

• As a result, BOP has faced funding gaps in its operations account that has 

left it with limited flexibility to manage its continually growing inmate 

population.

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Objective 3 – Costs to Maintain Key Operations and 

Accommodate a Growing Inmate Population Have Exceeded 

Funding Levels Requested in the President’s Budget

BOP’s annual cost growth to maintain key operations exceeded annual funding 

adjustments requested in the President’s budget from fiscal years 2004 through 

2008. For example, during this time, costs for non-salary inmate medical care 

and utilities exceeded funding levels by about $131 million and $55 million, 

respectively. BOP attributed the cost growth to inflation and inmate population 

growth.14

Medical care costs: From fiscal year 2004 through 2008, BOP’s annual 

non-salary inmate medical care costs increased by about $146.5 million. In 

contrast, during this period, the President’s budget requested funding cost 

adjustments for non-salary inmate medical care totaling about $15.4 

million. 

13 In fiscal year 2008, non-salary inmate medical care and utilities costs were $430.5 million and $234 million, 

respectively.

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Objective 3 – Costs to Maintain Key Operations and 

Accommodate a Growing Inmate Population Have Exceeded 

Funding Levels Requested in President’s Request

Utilities costs: From fiscal year 2004 through 2008, BOP’s annual utilities 

costs increased by a total of $87 million. In contrast, during this period, the 

President’s budget requested funding cost adjustments for utilities costs 

totaling about $31.6 million. 

• Table 3 compares the rates of BOP’s average annual cost growth for nonsalary inmate medical care and utilities to average rates of annual funding 

adjustments requested in the President’s budget, from fiscal year 2004 

through 2008.

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Objective 3: Historical Cost Growth Has 

Exceeded Funding Adjustments in the 

President’s Request

Table 3

Source: GAO analysis of BOP data.

Utilities 9.8% 3.2% 

Inmate medical 8.7% 0.9% 

care

(non-salary)

Average 

annual rate of funding growth in 

President’s budget request, 

fiscal years 2004 through 2008

Average annual rate of cost 

growth incurred by BOP, 

fiscal years 2004 through 2008

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Objective 3 – Costs to Accommodate a Growing Inmate 

Population and Maintain Staffing Levels Have Exceeded Funding 

Adjustments Requested in the President’s Budget, According to 

BOP

In some years, the President’s request for BOP has included funding adjustments for

marginal costs associated with inmate population growth in existing BOP facilities.15

However, BOP budget officials reported that this cost adjustment has not included

necessary funding to hire additional correctional officers to maintain inmate to

corrections staff ratios and effectively manage the new population. 

• For example, the most recent institution population adjustment request, in fiscal year 

2009, included $17.1 million to house a projected net increase of 1,807 inmates in 

existing BOP facilities.16

• In fiscal year 2009, BOP reported an inmate to corrections officer ratio of about 10 to 

1 (the number of inmates supervised per corrections officer). 

• BOP budget officials reported that BOP would need to hire 180 additional 

corrections officers to maintain this ratio for the 1,807 new inmates. However, 

according to salary and benefits cost assumptions provided by BOP budget officials, 

the staffing portion of the adjustment provided funding equivalent to staffing 46 

additional corrections officers.

15Marginal costs include providing security, food, medical care, clothing, unit management, education, records, and 

maintenance associated with additional inmates entering existing BOP facilities.

16BOP uses a standard DOJ marginal cost per inmate rate. In fiscal year 2009, this rate was $9,483.

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Objective 3 – Because BOP’s Operations Funding Has Not Kept 

Pace with Annual Growth, BOP Continues to Face Challenges 

Managing its Growing Inmate Population

When BOP has not received funding to cover operational cost increases it has

incurred, in some years BOP had used S&E funding planned for other

areas to cover these costs.

• Though one of BOP’s highest priorities is to increase staffing levels of 

corrections officers, BOP officials report using S&E funds in fiscal years 

2008 and 2009 initially planned for hiring additional officers to instead cover 

base operations cost increases related to inmate medical care, utilities, and 

personnel salary and benefit adjustments that have been unfunded in the 

President’s budget requests. 

• In the President’s fiscal year 2010 budget request, $70 million is included 

as a line item for additional BOP staffing. However, BOP officials reported 

that this funding, if received, is to be used, in part, to cover existing 

employees’ mandatory pay and benefit increases, and other operations 

cost increases.

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Objective 3 – BOP Has Limited Flexibility 

in Managing Funding Gaps 

As with any other DOJ component, BOP’s budget requests are governed by

standard DOJ and OMB budget development guidance.

• For example, DOJ budget development guidance for fiscal years 2008 

and 2009 instructed components to limit cost growth for current 

services to no more than 4 percent greater than prior year levels.

• DOJ reported that the 4 percent cap guidance is a general instruction 

given to all components but recognizes that BOP is different because 

its costs are less discretionary. Furthermore, DOJ reported that it did 

not automatically reject budget submissions from components that

exceeded the cap, but instead required components to submit 

substantive information to justify need.

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Objective 3 – BOP Has Limited Flexibility 

in Managing Funding Gaps

• DOJ reported that OMB does not automatically provide funds for 

inflationary cost increases. DOJ cited OMB policy stating that inflationary 

adjustments for discretionary costs (such as utilities) can include some, all, 

or no allowance for inflation. DOJ officials reported that OMB typically does 

not include general inflationary adjustments that DOJ submits on behalf of 

BOP when it formulates the President’s request.

• However, DOJ has reported to OMB that, if faced with funding shortfalls 

similar to what BOP has faced in its operations budget, other DOJ 

components could reduce operations, implement across-the-board hiring 

freezes, and implement policy changes that would reduce costs. However, 

with almost all of its S&E costs fixed,17 DOJ reported that BOP has limited 

flexibility in these areas, and has already implemented significant 

reductions to programs, such as streamlining and centralizing 

administrative functions to eliminate 2,300 positions.

17 According to BOP data, in fiscal years 2007 and 2008, 99.5 percent of BOP’s S&E budget was fixed—that 

is, for paying staff salaries, and providing services to house and care for the inmate population.

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Conclusions

In each of the last 2 fiscal years, BOP has needed additional funding 

to meet its operating costs. 

• However, we found that BOP's cost estimation methods either met 

or substantially met GAO’s cost estimating best practices.

• Further, BOP officials report, and DOJ officials acknowledged, that 

BOP has already implemented significant reductions in programs 

by eliminating positions and centralizing administrative functions. 

• In addition, the current level of overcrowding within BOP facilities 

presents an already serious safety challenge. Given BOP’s unique

responsibility for managing this population, it has limited discretion 

when costs for key operations exceed funding levels. 

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Conclusions

In light of these circumstances, BOP's budget cost estimation practices could

be strengthened in two ways:

• First, although BOP, like other DOJ agencies, is not required to report the 

extent to which actual costs may be expected to vary from cost estimates, 

we have identified the provision of an uncertainty analysis as a best 

practice. If BOP identified its level of cost estimation confidence and 

provided this information to DOJ, DOJ could more fully understand the 

range of potential costs—and the potential need for more funding—if 

estimating assumptions for key cost drivers, such as inmate population 

growth, do not hold true.

• Second, by improving documentation of all steps for developing its cost estimate, BOP would be better positioned to recreate its estimates in the 

event of attrition within its budget office among those who have developed 

initial cost estimates. 

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Recommendations

To improve transparency in BOP’s cost estimation process, as well as DOJ’s

annual budget formulation and justification process, and to provide DOJ with

more detailed information to consider when deliberating its budget proposal

for BOP, we recommend that the Attorney General of the United States take

the following two actions:

• instruct the BOP Director to require the BOP budget staff to conduct 

an uncertainty analysis quantifying the extent to which operations 

costs could vary due to key cost assumptions changing and submit the 

results along with budget documentation to DOJ so that DOJ could be 

aware of the range of likely costs and associated confidence levels; 

and 

• instruct the BOP Director to require the BOP budget staff to improve 

documentation of calculations used to estimate its costs.

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Agency Comments

• We provided a draft of this report to DOJ and BOP for review and

comment. We also verbally described our findings and proposed 

recommendations to DOJ and BOP officials in a meeting on August 

31, 2009. Additionally, we received technical comments from DOJ 

and BOP, which we incorporated where appropriate.

• DOJ and BOP generally agreed with the findings. DOJ and BOP 

will formally review our recommendations when we submit our final 

product in fall 2009.

• We made several requests to meet with OMB, but we were unable 

to schedule a meeting during our review.

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Appendix I – GAO’s 12 Step Cost 

Estimating Practices

Source: GAO.

Page 62 GAO-10-94 Bureau of Prisons
Appendix II: Comments from the Department Appendix II: Comments from the Department of Justice, Federal Bureau of Prisons 

of Justice, Federal Bureau of Prisons 

Page 63 GAO-10-94 Bureau of Prisons
Appendix II: Comments from the Department 

of Justice, Federal Bureau of Prisons 

Page 64 GAO-10-94 Bureau of Prisons
Appendix II: Comments from the Department 

of Justice, Federal Bureau of Prisons 

Page 65 GAO-10-94 Bureau of Prisons
Appendix III: GAO

A

 Contact and Staff 

cknowledgments 

Page 66 GAO-10-94 

Appendix III: GAO Contact and Staff 

Acknowledgments 

David C. Maurer, (202) 512-9627 or maurerd@gao.gov 

In addition to the contact named above, Joy Gambino, Assistant Director, 

and Jay Berman, Analyst-in-Charge, managed this assignment. Pedro 

Almoguera, Tisha Derricotte, Geoffrey Hamilton, Marvin McGill, Karen 

Richey, Adam Vogt, and Melissa Wolf made key contributions to this 

report. 

 Bureau of Prisons 

GAO Contact 

Staff 

Acknowledgments 

(440797) 
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