Military Personnel: DOD Could Make Greater Use of Existing Legislative Authority to Manage General and Flag Officer Careers
Published: 2004-09-23T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Congress has established a legislative framework that shapes the careers and the management of general and flag officers. The Department of Defense (DOD) has proposed eliminating or amending a number of legislative provisions, such as revising existing statutory retirement limits based on age and years of service, to provide greater flexibility in managing its senior officers in order to retain experienced leaders. GAO is issuing this report in response to a mandate in the National Defense Authorization Act for Fiscal Year 2003. GAO's objectives were to (1) develop a profile of general and flag officer careers and (2) assess DOD's justification for its general and flag officer legislative proposals.
section_title: What GAO Found
paragraphs: General and flag officers who have retired over the past several years typically retired at age 56 after having served an average of 33 years of active commissioned service and 3-1/2 years in their last pay grade. On average, retired general and flag officers were first promoted to general and flag officer at age 49, upon reaching 26 years of active commissioned service, and served 6 years as a general or flag officer before retiring. DOD did not present evidence that the legislative provisions it seeks to change hinder the management of general and flag officers or the agency's ability to perform its mission. DOD presented various rationales for its proposals and sponsored a study of general and flag officer management but did not provide data to support the need for these proposals. GAO found that DOD can achieve its goal of extending some general and flag officers' careers and assignments within the parameters of the current legislative framework since many general and flag officers retire several years before reaching the statutory retirement limits. More specifically, the career profile data show that more than three-fourths of general and flag officers who retired in grades O-9 and O-10 between fiscal years 1997 and 2002 could have served at least 3 more years before reaching the current statutory retirement limits. Existing legislative authority provides some flexibility in managing general and flag officers, but the Executive Branch has not made frequent use of this authority. In particular, the Executive Branch has rarely used its existing authority to defer the retirement of general and flag officers on a case-by-case basis beyond the statutory limits on age and years of service. Additionally, factors other than the statutory limits, such as personal considerations and military service culture, may account for early retirements of general and flag officers. GAO also found that the proposals (1) would reduce congressional oversight and provide broad latitude to the Executive Branch in managing general and flag officers, (2) could impede the upward flow of officers by limiting promotion opportunities due to the extension of general and flag officer careers, and (3) would likely increase federal retirement outlays for retirement compensation, based on a cost estimate developed by GAO.

section_title: Letter
paragraphs: General and flag officers are the senior uniformed leaders of the armed  forces. Since 1996, Congress annually has authorized the military services  a total of nearly 900 active duty general and flag officers. A legislative  framework that has evolved over time shapes the careers of general and  flag officers and the management of these officers. For example, Congress  has enacted legislative provisions limiting the tenure of general and flag  officers, the terms they can serve in specified senior leadership positions,  and the distribution of general and flag officers across pay grades. Such  provisions reflect congressional interest in maintaining oversight and  accountability of general and flag officers. For fiscal year 2005, the  Department of Defense (DOD) has proposed eliminating or amending a  number of general and flag officer provisions to provide greater flexibility  in managing its senior uniformed leaders. Among DOD’s stated goals of the  proposals are to extend the careers of general and flag officers and to  increase the length of individual assignments. The Secretary of Defense  has expressed interest in retaining experienced leaders beyond the current  statutory retirement limits. We initiated this review in response to a  mandate in the National Defense Authorization Act for Fiscal Year 2003.  As subsequently agreed with your offices, we developed information and  analysis to assist Congress as it considers DOD’s fiscal year 2005  legislative proposals. Our specific objectives were to (1) develop a profile  of general and flag officer careers and (2) assess DOD’s justification for its  general and flag officer legislative proposals.
This is the second report we have issued in response to the fiscal year 2003  mandate. The mandate required DOD to review the existing statutory  framework for the management of general and flag officers and submit any  recommendations for revising the framework. The mandate directed us to  evaluate DOD’s recommendations. Our first report reviewed DOD’s 2003  study of general and flag officer requirements and authorizations and  recommended actions that DOD could take to clarify its general and flag  officer requirements. For example, we recommended that DOD clarify the  magnitude and impact between DOD’s validated requirements for general  and flag officers and congressional authorizations, to include an analysis  of the impact caused by the workarounds DOD uses to fill the gap between  requirements and authorizations.
To conduct this study, we analyzed career data on retired general and flag  officers who retired between fiscal years 1997 and 2002. We also reviewed  DOD’s rationale and supporting evidence for the legislative proposals,  reviewed the legislative history of provisions affecting general and flag  officers, and obtained information from the military services on the  management of general and flag officers. We also obtained the perspective  of several senior retired general and flag officers and other knowledgeable  individuals with experience in general and flag officer policy and  management. We focused our analysis on the active duty population,  although some of the proposals would also apply to reserve general and  flag officers. We assessed the reliability of data used in this report and  determined that it was sufficiently reliable for our purposes. Additional  information on our scope and methodology is provided at the end of this  letter.
We conducted our work from April to August 2004 in accordance with  generally accepted government auditing standards.
subsections: section_title: Background
subsections: section_title: General and Flag Officer Ranks
paragraphs: Congress has established four military ranks above the rank of colonel (for  the Army, the Air Force, and the Marine Corps) and captain (for the Navy).  Table 1 displays the pay grade designation, title of rank, and insignia worn  by officers at general and flag officer ranks.
Title 10 of the U.S. Code establishes service-specific ceilings for active  duty general and flag officers that total 877. Title 10 also authorizes  12 general and flag officer positions to be allocated by the Chairman of the  Joint Chiefs of Staff to the services for joint duty positions. These  authorizations do not count against the service ceilings. Title 10  establishes maximum limits on the percentage of general and flag officers  that may serve in certain pay grades. Specifically, no more than 50 percent  of all general or flag officers in each service may serve in a pay grade  above O-7. Between 15.7 and 16.2 percent of a service’s general or flag  officers may serve in pay grades O-9 and O-10. Finally, of a service’s  general or flag officers in grade O-9 and O-10, a maximum of 25 percent  may be in grade O-10.
section_title: DOD’s Fiscal Year 2005 Legislative Proposals
paragraphs: The National Defense Authorization Act for Fiscal Year 2003 directed DOD  to review legislative limitations affecting the management of general and  flag officers and directed DOD to submit a report to Congress. DOD  submitted a report in March 2003. In its report, DOD stated that its review  pointed to the merit of additional general and flag officer management  flexibilities that would increase the department’s ability to respond to  ever-changing events. The report also recommended changes in legislation  to improve general and flag officer management. In April 2003, DOD  submitted a legislative package to Congress—the Defense Transformation  for the 21st Century Act of 2003—that included several proposals aimed at  enhancing the department’s flexibility in managing general and flag  officers. Congress did not enact these proposals. In March 2004, DOD  resubmitted many of the same proposals to Congress for consideration as  part of the National Defense Authorization Act for Fiscal Year 2005. DOD’s  fiscal year 2005 legislative proposals are aimed at eliminating or amending  statutory provisions that the department believes restrict its flexibility in  managing general and flag officers.
subsections: section_title: Career Length and Retirement Compensation
paragraphs: One group of the fiscal year 2005 legislative proposals would make  changes affecting general and flag officer career length as well as  retirement compensation.
A proposal to increase the maximum retirement age from 62 to 68.
Currently, commissioned officers generally must retire upon reaching  age 62. The President may defer the retirement of an officer serving in a  grade above O-8 to age 64. No more than 10 such deferments may be in  effect at any one time. DOD’s proposal would extend the maximum  retirement age to 68 for general and flag officers and would allow the  Secretary of Defense to defer retirement of a general and flag officer to  age 72. There would be no limit on the number of deferments to age 72.
A proposal to eliminate limits on the total allowable years of military  service and time in grade. Currently, general and flag officers must retire  upon reaching specified limits on the total years of active commissioned  service or time in grade. These limits vary by pay grade. DOD’s proposal  would set no limit on the total allowable years of active commissioned  service and time in grade.
A proposal to eliminate a requirement that general and flag officers spend  at least 3 years time in grade in order to retire in that grade. In addition to  the 3-year time-in-grade requirement, existing law mandates that a general  or flag officer in pay grade O-9 or O-10 may retire in that grade only after  the Secretary of Defense or his designee certifies to the President and  Congress that the officer served on active duty satisfactorily in that grade.  Under DOD’s proposal, a general or flag officer at any pay grade may retire  in their current grade as long as the officer has served satisfactorily. The  proposal also would eliminate the certification requirement for officers  retiring in grade O-9 and O-10 and instead would require the approval of  the military department concerned and concurrence by the Secretary of  Defense or his designee.
Proposals to remove limitations on retirement pay. Currently, basic pay— the pay used to calculate retirement pay—is capped at the rate of pay for  level III of the federal civilian Executive Schedule, and retirement pay is  capped at a maximum of 75 percent of base pay. Under one DOD  proposal, the basic pay cap would be removed for the purposes of  calculating retirement pay. The pay cap would remain in place while the  officer is serving on active duty. A second DOD proposal would allow  general and flag officers who stay in military service longer than 30 years  to receive retirement pay that exceeds the current limit of 75 percent of  base pay.
section_title: Term Limits and Lateral Reassignment
paragraphs: A second group of legislative proposals would change restrictions on the  term limits for officers holding specified senior positions and on the lateral  reassignment of officers.
A proposal to eliminate existing restrictions on the length of terms of the  service chiefs of staff. The service chiefs are appointed to a 4-year term by  the President, by and with the advice and consent of the Senate. They  serve at the pleasure of the President. In time of war or during a national  emergency declared by Congress, a service chief may be reappointed for a  term of not more than 4 years. Under DOD’s proposal, after the service  chief’s initial 4-year term, the President may extend the service chief’s  term as he determines necessary, without congressional involvement.
A proposal to eliminate statutory 4-year terms of office for officers holding  specified senior positions. These positions include the Army’s branch  chiefs, deputy and assistant branch chiefs, Judge Advocate General and  Assistant Judge Advocate General, Chief of Army Nurse Corps, and Chief  of the Army Medical Specialist Corps; the Navy’s Chief of the Bureau of  Medicine and Surgery, Chief of the Bureau of Naval Personnel, Chief of  Chaplains, Judge Advocate General, and Director of the Nurse Corps or  Director of the Medical Service Corps; and the Air Force’s Judge Advocate  General and Deputy Judge Advocate General.
A proposal to eliminate existing restrictions on the number of terms of the  Chairman and Vice Chairman of the Joint Chiefs of Staff. Currently, the  Chairman and Vice Chairman are appointed by the President, by and with  the advice and consent of the Senate. They serve at the pleasure of the  President for a 2-year term and may be reappointed in the same manner  for two additional terms, for a total of 6 years. In time of war, there is no  limit on the number of reappointments. An officer may not serve as  Chairman and Vice Chairman if the combined service exceeds 6 years,  except that the President may extend this period to 8 years if he  determines such action is in the national interest. This limitation also does  not apply in the time of war. Under DOD’s proposal, the President may  reappoint the Chairman and Vice Chairman for additional 2-year terms as  he determines necessary, without congressional involvement. The  provision limiting total combined service as Chairman and Vice Chairman  would be eliminated under DOD’s proposal.
A proposal to eliminate existing restrictions on the length of terms of the  two Assistants to the Chairman of the Joint Chiefs of Staff for National  Guard and Reserve Matters. Each Assistant serves at the pleasure of the  Chairman for a 2-year term and may be continued in that assignment in the  same manner for 1 additional term. In time of war there is no limit on the  number of terms. Under DOD’s proposal, no terms would be specified for  these two positions.
A proposal to permit the President or the Secretary of Defense to laterally  reassign general and flag officers in grades O-9 and O-10 to positions at the  same grade without congressional approval. Currently, the President may  designate positions of importance to carry the grade of O-9 or O-10. An  officer assigned to any such position has the grade specified for that  position if he is appointed to that grade by the President, by and with the  advice and consent of the Senate. If the officer is subsequently reassigned  to a position at the same grade, that new assignment must be confirmed by  the Senate. Under DOD’s proposal, the President or the Secretary of  Defense may reassign such an officer to another position at the same  grade without the advice and consent of the Senate. DOD’s proposed  change would not apply to positions established by law; appointment of  officers to these positions would continue to require the advice and  consent of the Senate.
section_title: Distribution Among Pay Grades
paragraphs: One of DOD’s proposals addresses the distribution of officers among the  general and flag officer pay grades.
A proposal to eliminate a provision limiting the number of active officers  who may serve above the pay grade of O-7 to no more than 50 percent of  the total number of general and flag officers in a service. Under DOD’s  proposal, the military services could have a higher proportion of officers  in pay grade O-8 than allowed under existing law. The proposal does not  affect existing caps on the percentage of general and flag officers in grades  O-9 and O-10.
section_title: Legislative Framework for General and Flag Officer Management Has Evolved Over Time
paragraphs: DOD’s fiscal year 2005 legislative proposals represent the latest in a long  series of discussions between Congress and DOD concerning general and  flag officer management. These discussions, which reflect a history of  congressional interest in maintaining oversight and accountability of  general and flag officers, have addressed such issues as the appropriate  number of general and flag officers to lead the armed forces, their  education and qualifications, and their age and experience level.  A legislative framework has evolved that shapes the careers of general and  flag officers and the management of these officers. The Defense Officer  Personnel Management Act of 1980 established key aspects of the current  legislative framework. The act codified in Title 10 many of the legislative  provisions DOD is seeking to change. Some provisions have roots in  earlier legislation such as the Officer Personnel Act of 1947.
section_title: Career Patterns of General and Flag Officers
paragraphs: The career profile data we developed show that general and flag officers  who retired between fiscal years 1997 and 2002 typically retired at age 56,  ranging from an average age of 53 for officers in pay grade O-7 to 57 for  officers in pay grade O-10. These retired general and flag officers averaged  33 years of active commissioned service, ranging from 30 years for an O-7  to 35 years for an O-10. The retirees spent an average of 3-1/2 years in their  last pay grade. Table 2 summarizes this data by pay grade.
Compared with the retirees, general and flag officers who remained on  active duty during these years were typically younger and had fewer years  of active commissioned service. Table 3 summarizes this data by pay  grade.
General and flag officers who retired between fiscal years 1997 and 2002  were promoted to pay grade O-7, on average, at age 49. At this promotion  point, they averaged 26 years of active commissioned service. Individuals  who retired at the higher pay grades were generally younger and had  fewer years of service when promoted to pay grade O-7 compared with  those who retired at the lower pay grades. General and flag officers who  retired during this time period served an average of 6 years as a general or  flag officer, with individuals in higher pay grades serving longer. Table 4  summarizes this data by pay grade.
Promotion data for fiscal years 1998 to 2003 shows that of officers at the  rank of colonel and Navy captain (pay grade O-6) who were considered for  promotion to pay grade O-7, 2.5 percent were selected. Of officers in pay  grade O-7 who were considered for promotion to pay grade O-8, 43 percent  were selected. Table 5 provides promotion data by service.
Additional career data for general and flag officers is provided in  appendix I.
section_title: DOD Did Not Provide Evidence That the Current Legislative Framework Hinders General and Flag Officer Management or Agency Performance
paragraphs: Although DOD provided various rationales for its fiscal year 2005  legislative proposals and sponsored a study on issues related to general  and flag officer management, DOD did not provide evidence showing that  the current legislative framework has hindered DOD’s management of  general and flag officers or degraded the department’s performance. In  addition, the fiscal year 2005 legislative proposals (1) would reduce  congressional oversight and provide broad latitude to the Executive  Branch in managing general and flag officers, (2) could impede the upward  flow of officers, and (3) would likely increase federal retirement outlays.  Finally, the Executive Branch has not made frequent use of existing  legislative authority that provides some flexibility to extend the careers of  general and flag officers on a case-by-case basis beyond the statutory  limits.
subsections: section_title: DOD Did Not Provide Data to Support the Need for Its Legislative Proposals
paragraphs: DOD did not provide data to support the need for its fiscal year 2005  legislative proposals to eliminate or amend current provisions governing  general and flag officer management. Our prior work has shown that one  of the critical success factors for strategic human capital management is  the use of reliable data to make human capital decisions. A fact-based,  performance-oriented approach to human capital management is crucial  for maximizing the value of human capital as well as managing related  risks. DOD has asserted that the proposals would enhance its ability to  manage general and flag officers and has provided various rationales in  favor of the proposals. However, we did not find evidence that the existing  legislative framework has hindered DOD’s management of general and flag  officers or the agency’s ability to perform its mission.
As one example, DOD stated that its proposals to extend the statutory  retirement age from age 62 to 68 would allow officers to serve longer  careers and spend more time in assignments. DOD further stated that two  reasons for adopting this proposal are to improve organizational stability  and improve the execution of long-term initiatives under consistent  leadership. However, DOD did not provide data showing that there are  existing problems with organizational instability or inconsistent  leadership, that the current retirement limits are a cause of these  problems, or that the proposals would be effective in addressing these  problems. DOD also did not provide data to explain why the pros it  identified outweigh the cons. Regarding the retirement age proposal, for  example, DOD stated that two cons were a reduction in opportunities for  organizational change that naturally occur with new leadership and a  reduction in opportunities for promotion to general and flag officer.  Moreover, a data-driven analysis also would have given DOD an  opportunity to consider other options for achieving its goal of extending  general and flag officer careers. For instance, it could have analyzed  options for extending military service of more general and flag officers to  the current statutory retirement age, raising the retirement age by 1 or  2 years versus 6 years, raising the deferment age above age 64, or  increasing the number of authorized age deferments beyond the 10 that  are currently allowed.
The career profile data we developed show that large numbers of general  and flag officers are retiring several years before the statutory retirement  limits on age and years of active commissioned service. Of the 172 general  and flag officers who retired in pay grades O-9 and O-10 between  fiscal years 1997 and 2002, 151 (88 percent) retired at least 3 years before  age 62. Of these 151 officers, 133 (88 percent) also had 3 years remaining  before reaching their statutory retirement limit on years of active  commissioned service. Altogether, these 133 officers represent 77 percent  of the 172 general and flag officers who retired in these pay grades. The  data suggests that large numbers of senior officers could serve at least one  more assignment prior to retirement under the existing legislative  framework. Factors other than the statutory retirement limits may affect  the career length of general and flag officers. Some of the retired general  and flag officers we interviewed noted that many general and flag officers  in their 50s explore their employment options outside the military to  increase stability for their family and earn higher salaries. Some noted a  “burnout” factor associated with their work as a general and flag officer.  Another factor is a military culture, as expressed in service policies and  practices, that encourages general and flag officers to move aside and  make way for others coming up through the ranks. These policies and  practices are discussed further elsewhere in this letter.
DOD sponsored a study by the RAND Corporation that addressed general  and flag officer management issues. DOD officials said this study served  as the primary analytical support for its fiscal year 2005 legislative  proposals. The RAND study, using the private sector as a model, identified  strategies for managing general and flag officers that would increase the  time they spend in assignments, the time spent in grade, and total career  length. RAND recommended that the services categorize their general and  flag officer positions as either “developing” or “using” positions and  determine the desired tenure for each, with a general goal of 2 years for  developing positions and 4 years for using positions. However, RAND  was not specifically tasked in its study to include an analysis of the  legislative proposals, and such an analysis was not included. RAND  concluded that the management changes it suggested could be  implemented largely within DOD’s current legislative authority. Title 10  authority permitting 40-year careers for officers in pay grade O-10 and  38 years for O-9s coupled with a statutory retirement age of 62 generally is  sufficient, the RAND study stated. RAND added that changes in law could  give the services more flexibility to implement its recommended  management changes. For example, allowing officers to retire with less  than 3 years time in grade would allow them to leave as needed. Also,  RAND saw no reason the military retirement age should not increase from  age 62. Finally, RAND supported retirement compensation changes similar  to those proposed by DOD.
section_title: Proposals Would Reduce Congressional Oversight and Provide the Executive Branch Broad Latitude in Managing General and Flag Officers
paragraphs: Some of DOD’s legislative proposals would reduce congressional oversight  of senior officer appointments. Specifically, the President could extend  indefinitely the terms of sitting service chiefs, with no fixed term length,  after they have completed their initial 4-year appointment. The President  also could extend indefinitely the number of 2-year terms served by the  Chairman and Vice Chairman of the Joint Chiefs of Staff, after their initial  2-year appointment. In none of these cases would Senate confirmation be  required. In addition, senior officers appointed to O-9 and O-10 positions  could be reassigned to other O-9 and O-10 positions (except for those  positions established by law) without going through the confirmation  process.
DOD’s proposals to permit reappointment of officers to senior positions  and make lateral appointments without going through the Senate  confirmation process would remove a check and balance in the current  system. The current legislative framework establishes congressional  oversight of officer management through several provisions of Title 10 that  require the President to seek the advice and consent of the Senate in order  to promote or appoint military officers. For example, Title 10 states that  appointments made to grades above O-3 by the President require the  advice and consent of the Senate. Prior to such codifications in Title 10,  the Officer Personnel Act of 1947 contained Senate confirmation  requirements, stating that officers were entitled to the rank, title, pay, and  allowances of a general or lieutenant general only when appointed in such  positions by the President, by and with the advice and consent of the  Senate. The confirmation process also is designed to disclose any  important adverse information about the nominated officer and provides  an opportunity for discussion between nominees and Members of  Congress. By placing a hold on individual nominations, Senators may also  use the confirmation process as leverage on military issues.
The proposed new authorities for managing general and flag officers  would give DOD broad latitude in determining how extensively they are  applied and for what purposes. DOD officials have stated that the  proposals, if approved, would be used sparingly in cases where their use is  deemed appropriate. For instance, DOD could use its proposed new  authorities to extend the career of an officer who holds a key  policy-making, operational, or acquisition position if maintaining  continuity in that position is deemed to be in DOD’s best interests.  However, DOD did not present a plan showing how it would institute the  proposed new authorities if approved. The proposed new authorities could  be applied extensively and for purposes other than those currently  intended by DOD. For example, although DOD has stated that one of its  goals is to increase the length of assignments, DOD could use the  authorities to extend the careers of senior officers while continuing to  shift them from assignment to assignment with the same frequency as  today. DOD could also choose to lengthen the time it takes for an officer  to be promoted to general and flag officer rank with the knowledge that  extra time could be gained at the end of the officer’s career. In addition,  the proposed new authorities would not preclude DOD from extending the  careers of numerous general and flag officers rather than a selected few as  DOD has stated is its intent. Currently, the maximum number of age  deferments authorized at any one time is 10 officers above pay grade O-8;  DOD has proposed eliminating this limit. In addition, DOD has proposed  eliminating existing provisions that require most general and flag officers  to serve at least 3 years time in grade in order to retire in that grade. Under  its proposed new authorities, DOD could retire numerous general and flag  officers in their current pay grade after they have served satisfactorily for  a few months, weeks, or even days.
On the other hand, he should not remain indefinitely as the head of that service. Each  service requires, and indeed, is entitled, to a new service chief every 4 years so that new  ideas can be tested; but after 4 years he should step aside for a new appointee.
section_title: Proposals Could Impede Upward Flow of General and Flag Officers
paragraphs: DOD’s proposals, by enhancing its flexibility to extend the careers of  general and flag officers, could impede the upward flow of general and flag  officers. Because DOD is authorized a fixed number of general and flag  officers, vacancies must open up in the general and flag officer pay grades  in order to allow for promotions of lower-grade officers. Therefore,  upward flow could be impeded if some general and flag officers are  retained longer on active duty.
Promotion of a steady and predictable upward flow of officers from junior  to more senior positions is a long-standing precept of military officer  management that is grounded in the legislative framework. The “up-or-out”  promotion system, created by the Officer Personnel Act of 1947, requires  most commissioned officers at or below pay grade O-4 who have twice  been passed over for promotion to leave military service. The up-or-out  system, among other things, creates promotion opportunities for lower  level officers, limits stagnation, and maintains youth and vigor in the  officer corps. As instituted under the Defense Officer Personnel  Management Act of 1980, expectations are built into the officer  management system concerning the points in an officer’s career when  promotions should occur from one pay grade to the next higher level. In  hearings preceding adoption of the Defense Officer Personnel  Management Act, DOD affirmed the value of the up-and-out system in  fostering a combat ready military. A DOD official also stated that the  up-or-out system eliminated the turbulence and errors associated with  replacing an aged senior leadership and provided a regularized way of  replacing people that maintains a proper age and experience balance.
Service policies on general and flag officer management also promote  upward flow by encouraging general and flag officers to retire prior to the  statutory limits.
According to a 2002 Navy policy issued by the Chief of Naval Operations,  a steady process of both promotions and retirements goes hand-in-hand in  the flag community. Since the Navy operates with fixed authorizations,  flag officers promote to vacancies and vacancies come from retirements.  The policy states that to maintain upward flow, there will come a time  when all flag officers must acknowledge the need to step aside and make  room for the youth, vigor, and vitality of those more junior flag officers.  The Navy policy establishes specific retirement expectations for flag  officers in grades O-7 and O-8 and reinforces the Navy’s practice of not  relying on statutory retirements.  In 2004, the Marine Corps reiterated its general and flag officer retirement  policy to support the service’s goal of maintaining a steady promotion  flow. The policy states that general officers in pay grade O-7 who twice  have been passed over for promotion should voluntarily retire after  30 years of service and general officers in pay grade O-8 who have not  been nominated for appointment to a higher position should plan to  voluntarily retire after 3 years time in grade. The same policy applies to  general officers in pay grade O-9 who have not been nominated for  another O-9 or O-10 position.
An Army policy, which was rescinded in 2004, stated that general officers  in pay grades O-7 and O-8 who had not reached their maximum limit  for years of service were expected to request voluntary retirement at age  59. According to an Army official, the Army rescinded this policy because  Title 10 restrictions were deemed to be sufficient.
Air Force officials told us they did not currently have a written policy on  the timing of general officer retirements. A former senior official we  interviewed who was familiar with Air Force policy told us that while the  Air Force did not have a written policy, general officers were orally briefed  that they were expected to retire after 3 years in grade if they were not  selected for promotion.
The potential effects of impeding the upward flow of general and flag  officers are reduced promotion opportunities, stagnation, and aging of the  general and flag officer population. However, the impact would depend on  the extent that DOD uses its proposed authority to extend general and flag  officer careers. Some of the former senior officials we interviewed thought  that youth and vigor should be maintained and that aging the general and  flag officer population would therefore be a mistake. Concern was also  expressed about the creation of promotion bottlenecks and the possibility  that older general and flag officers may become out of touch with current  technology, training, and other aspects of the military. Others were not  concerned about aging this population, stating that individuals are  different and their vigor should not be judged based solely on age. Life  expectancy in the United States increased by about 10 years (16 percent)  since the Officer Personnel Act of 1947 and about 3 years (5 percent) since  the Defense Officer Personnel Management Act of 1980.
Upward flow could be retained under DOD’s proposal to eliminate the  statutory requirement that an officer must serve 3 years time in grade in  order to retire in that grade. Currently, other statutory provisions allow for  a small number of individuals to retire with less than 3 years time in  grade. Eliminating the time-in-grade requirement would theoretically  enable the services to balance the extensions of some general and flag  officer careers with the earlier retirement of other officers in order to  continue the upward flow of officers. The 3-year rule was instituted under  the Defense Officer Personnel Management Act. The former senior  officials we interviewed generally favored some time-in-grade requirement  rather than eliminating the requirement altogether. They stated that at  least a year or two is needed for newly promoted individuals to learn their  new job, make an impact on the organization, and recover from any early  mistakes. A time-in-grade requirement also gives the service time to assess  the performance and future potential of these officers.
Another DOD proposal that could affect the upward flow of general and  flag officers is the elimination of the statutory limit requiring that no more  than 50 percent of a service’s general or flag officers serve in a pay grade  above O-7. Eliminating this limit could result in an increase in the number  of positions at pay grade O-8 and a decrease in the number of positions at  pay grade O-7. Consequently, the services may have to be less selective in  promoting general and flag officers from pay grade O-7 to O-8. For  instance, the Marine Corps already promotes, on average, 71 percent of its  general and flag officers from pay grade O-7 to O-8. If its pool of O-8  positions increases relative to the O-7 pool, the Marine Corps would have  to promote an even larger percentage of officers from pay grade O-7,  thereby decreasing selectivity. Service officials said that the job structure  for their general and flag officers is based on the current 50-percent  distribution limit. DOD reviewed its general and flag officer positions in  2003 and validated requirements for 1,039 active duty general and flag  officer positions, including 524 (50 percent) at the O-7 pay grade. Some of  the former senior officials we interviewed expressed concerns about  removing the distribution limit. The current limit creates a pyramid-shaped  general and flag officer corps, with a large pool of O-7s at the base and  fewer numbers at each higher rank. This pyramid shape enables the  services to manage their general and flag officers in a way that allows for  predictability and selectivity.
section_title: Proposed Compensation Changes Would Increase Federal Retirement Outlays
paragraphs: Our analysis of DOD’s retirement compensation proposals to remove the  basic pay cap and the 75-percent cap shows that, if implemented, they  would likely result in an increase in federal retirement outlays. Based on a  cost estimate we developed, federal retirement outlays would increase by  a total of approximately $55 million in fiscal year 2004 dollars over a  10-year period. Outlays over the longer term would continue to grow as  more general and flag officers retire under the revised formulas and  continue to receive higher retirement pay over their lifetime. Information  on how we calculated this cost estimate, including the limitations of our  methodology, is provided in the scope and methodology section at the end  of this letter. We did not calculate the annual amount that would have to  be appropriated for the military retirement fund if the proposals were  implemented.
DOD did not develop a cost estimate for its general and flag officer  proposals. DOD officials, however, stated that the costs of its proposals  taken together would be minimal because a smaller number of officers  would serve longer in senior positions than is currently the case.  A Congressional Budget Office analysis of legislative provisions to allow  certain senior officers to remain on active duty longer and others to retire  with less time in grade would have an insignificant impact on direct  spending. According to the Congressional Budget Office analysis, the  costs and benefits of these adjustments would offset each other. The  Congressional Budget Office analysis did not include the retirement  compensation proposals.
DOD stated that its proposals to improve retirement pay would provide  greater incentive for general and flag officers to remain on active duty and  would provide more appropriate compensation for general and flag  officers who serve longer careers. Our interviews with retired general and  flag officers indicated that retirement pay was not a driving factor in their  decision about when to retire. Some expressed the opinion that retirement  pay was adequate, while others stated that retirement pay should be  improved to recognize and reward longer military service.
Retirement pay for general and flag officers, as well as other  servicemembers, is based on a servicemember’s basic pay while on active  duty times a multiplier. The multiplier is equal to 2.5 percent times  their years of service. At this rate, retirement pay rises from 50 percent of  basic pay with 20 years of service until reaching 75 percent of basic pay  with 30 years of service. At that point, retirement pay is capped at  75 percent of basic pay. Based on basic pay rates effective January 1, 2004,  the maximum basic pay for a general or flag officer (for an officer in pay  grade O-10 with more than 26 years of service) is $13,304 per month, or  $159,654 per year. However, a legislative cap on basic pay limits basic pay  to the rate of pay for level III of the Executive Schedule, which for 2004  equals the rate of $12,050 per month, or $144,600 per year.
Our analysis of DOD’s retirement compensation proposals shows that  DOD’s proposal to eliminate the basic pay cap would increase retirement  pay for officers in pay grade O-10, although general and flag officers at  lower pay grades could be affected in later years if basic pay increases at a  faster rate than the cap. DOD’s proposal to eliminate the 75-percent  retirement pay cap would increase retirement pay for general and flag  officers at any pay grade who retire with more than 30 years of service.  Table 6 shows the estimated impact of eliminating one or both of these  caps on a general or flag officer’s retirement pay. The table provides  notional examples for an officer in each of the four general and flag  officers pay grades retiring at either 30 or 37 years of service. The  estimates are based on basic pay rates effective as of January 1, 2004.
section_title: Executive Branch Has Not Made Frequent Use of Existing Legislative Authority to Extend General and Flag Officer Careers
paragraphs: The Executive Branch currently has legislative authority to extend the  careers of general and flag officers on a case-by-case basis without  congressional approval. Title 10 grants the President authority to extend  the careers of as many as 10 general and flag officers to age 64, or 2 years  beyond the standard retirement age. In addition, service Secretaries may  defer the retirement of officers in the health professions and the chaplain  corps until age 68 if such a deferral is deemed to be in the best interest of  the military service. Title 10 also authorizes a service Secretary, based on  the needs of the service, to defer the retirement of officers in the grades  of O-7 and O-8 for up to 5 years beyond their years of service limit.  Deferment for any officer in a grade above O-8 requires Presidential  approval.
The Executive Branch has not made frequent use of its existing authority  to extend the careers of general and flag officers. Although DOD does not  track the extent that this authority is used, DOD officials told us it has  been used rarely. For instance, they stated that just one age deferment was  currently in effect. Our analysis showed that few general and flag officers  have exceeded the statutory retirement limits. Only three general and flag  officers who retired between fiscal years 1997 and 2002 exceeded the age  62 limit, and eight general and flag officers exceeded the years of service  limits. According to an official in the Office of the Under Secretary of  Defense (Personnel and Readiness), Officer and Enlisted Personnel  Management, the existing authority to extend general and flag officer  careers is seldom used because DOD prefers not to sanction routine  exceptions to the normal retirement limits. The official also characterized  the department’s process for gaining approval of these exceptions as  onerous and time-consuming. DOD’s procedures call for six individuals to  approve a deferment—the service chief, the service secretary, the  Chairman of the Joint Chiefs of Staff, the Under Secretary of Defense  (Personnel and Readiness), the Secretary of Defense, and the President.  Some deferments, however, do not have a statutory requirement for  approval beyond the service secretary. In addition, deferments have been  included as part of the Presidential nomination process rather than treated  as separate actions. In such cases, the nomination package from the  Secretary of Defense to the President requesting appointment of an officer  to a general and flag officer position simultaneously requests Presidential  approval of a retirement deferment if a deferment is determined to be  required for the officer to serve in the position.
While DOD expressed misgivings about using its existing legislative  authority to exceed statutory retirement limits, DOD could make greater  use of this authority in order to extend the careers of general and flag  officers on a case-by-case basis. DOD has used existing authority to allow  a small number of general and flag officers to retire in their current pay  grade with less than 3 years time in grade. A policy decision to make  greater use of its existing authority to extend general and flag officer  careers could also provide an incentive for DOD to achieve greater  efficiency in the deferment process.
section_title: Conclusions
paragraphs: DOD has not presented a sound business case to support the need for  changing existing legislative provisions to better manage general and flag  officers. DOD, for example, has not provided data showing that the  existing legislative provisions have hindered general and flag officer  management or led to agency performance problems such as  organizational instability. Furthermore, some of the proposed changes  would reduce congressional oversight of general and flag officers and  could impede the upward flow of general and flag officers. DOD may have  options for extending the careers and assignments of general and flag  officers without raising the statutory retirement age or the limit on  total years of active commissioned service. Efforts to extend general and  flag officer careers, however, would have to account for factors other than  the statutory limits that have a role in the timing of general and flag officer  retirements—factors including personal considerations and a military  culture that encourages senior leaders to step aside and make way for  others to move up. DOD also has the authority, on a case-by-case basis, to  extend general and flag officer careers beyond the statutory retirement  limits. We see no reason for DOD not to use this authority to the fullest  extent allowable under the law. If DOD makes full use of its existing  legislative authority but finds that it is inadequate to achieve its goal of  retaining experienced leaders, then it may be in a better position to argue  for changes to this authority. Finally, DOD has not determined the long- term cost implications of its proposals pertaining to retirement  compensation.
section_title: Recommendation for Executive Action
paragraphs: To help achieve DOD’s goal of retaining experienced leaders, we  recommend that the Secretary of Defense direct the Under Secretary of  Defense (Personnel and Readiness) to evaluate options for extending  general and flag officer careers within the existing legislative framework.  This evaluation should include an assessment of (1) factors that contribute  to the retirement of senior general and flag officers prior to the statutory  retirement limits, (2) the need for changes in DOD policy or procedure to  make greater use of existing authority to extend general and flag officers  careers on a case-by-case basis beyond the statutory retirement limits, and  (3) the long-term cost implications of proposals to change retirement  compensation.
section_title: Agency Comments and Our Evaluation
paragraphs: DOD provided written comments on a draft of this report. In its comments,  DOD did not concur with our recommendation and stated that it opposed  the premise that the desired flexibility can be achieved within the current  statutory framework. We recognize that the national security mission,  including the Global War on Terrorism and transformation of the force,  presents increasing complexities for military leaders, and we do not take  issue with the department’s position that it needs experienced and agile  senior leaders. The question is whether the current legislative framework  has hindered DOD’s ability to manage general and flag officers effectively  or the agency’s performance. We continue to believe that DOD has not  presented a sound business case to support the need for changing the  existing legislative framework. This is not to say that changes are not  needed for the future, but that DOD has not provided data to make a  determination either way. Unless and until a business case for change is  made, we believe our recommendation will help DOD maximize the use of  its current legislative authorities in order to retain experienced leaders. In  addition, DOD already has the authority to extend the careers of some  general and flag officers beyond the statutory retirement limits but has  rarely used this authority. For example, as noted in our report, just one  age deferment was in effect at the time of our review.
DOD stated that options for extending general and flag officer careers  within the existing legislative framework were considered by the RAND  study and found wanting. However, the statement of work for the study  established a broad objective to assess the management and policy  implications of potential changes in military officer management and  policy. The statement of work did not address specifically DOD’s  legislative proposals for general and flag officer management. The main  thrust of the RAND study was to assess options for varying the length and  number of general and flag officer assignments rather than a review of the  existing legislative framework. RAND advocated that the military services  establish goals on the desired length of assignments based on the nature of  the positions. RAND concluded that the changes it suggested to improve  the management of general and flag officer careers could be implemented  largely within DOD’s current legislative framework, although changes in  law (such as extending the statutory retirement age) could give the  services more flexibility to implement RAND’s recommendations.
In its comments, DOD stated that it should not have to justify its legislative  proposals by identifying failures in the current general and flag officer  management system. Our report does not imply that this is the standard  for seeking management improvements. However, DOD did not provide  data to support its assertions that there were existing problems with the  current system—such as organizational instability and inconsistent  leadership—that the current statutory framework was a cause of these  problems, or that the proposals would be effective in addressing these  problems. In the absence of data, it is difficult to judge DOD’s assertions  that the proposed authorities are needed. Moreover, a data-driven analysis  may have identified other options for achieving DOD’s goal of extending  general and flag officer careers. Our report provides examples of such  options.
DOD, in its comments, further stated that retaining senior, experienced  leaders requires a systemic change to the management of general and flag  officers. Making greater use of its existing authorities to extend general  and flag officer careers on a case-by-case basis would, according to DOD,  provide only marginal opportunities for improvement and would be less  preferable than a set of statutes designed to encourage retention of  experienced officers. The issue of whether DOD should make more  extensive use of existing authorities in lieu of the systemic changes it  seeks depends in part on DOD’s intentions for extending the careers of  general and flag officers. During our review, we were told the legislative  proposals, if approved, would be used sparingly in cases where their use is  deemed appropriate. If that is still the case, then making greater use of the  existing authorities could be sufficient for achieving this goal. If DOD  makes greater use of these authorities and ultimately finds them to be  inadequate, then the department may be in a better position to argue for  changes to the existing statutes. As we noted in our report, however, DOD  had not presented an implementation plan, and the proposed new  authorities could be applied more extensively or for purposes other than  those currently intended by DOD.
DOD also stated that our report did not adequately address the  relationship between service policy and culture and the existing statutory  authorities. DOD stated that the services have had to adopt more stringent  criteria than the law allows to ensure an orderly transition of senior  officers as they approach their statutory age and tenure limits and to avoid  organizational turmoil and personal hardship. Our report states, however,  that a steady upward flow of officers is grounded in the legislative  framework and reinforced by service policies on general and flag officer  management. Because DOD is authorized a fixed number of general and  flag officers, vacancies must open up in the general and flag officer pay  grades in order to allow for promotions of lower-grade officers. The  service policies cited in our report appear to be aimed primarily at  ensuring that general and flag officers will retire when their services are  no longer needed rather than on avoiding problems with the current  statutory retirement limits. In addition, the Army’s decision to rescind its  policy is inconsistent with DOD’s comment that the services have needed  to adopt more stringent criteria than the law allows. As our report states,  many general and flag officers are retiring several years before reaching  their statutory limits on age and years of commissioned service. For  example, more than three-fourths of general and flag officers who retired  in grades O-9 and O-10 between fiscal years 1997 and 2002 could have  served 3 or more years before reaching the current statutory retirement  limits. Factors other than the statutory limits, such as personal  considerations and military service culture, may account for early  retirements of general and flag officers. As part of our recommendation,  we state that DOD should assess these factors as part of its evaluation of  options for extending general and flag officer careers within the current  legislative framework.
Finally, in its comments, DOD stated that the costs associated with the  retirement compensation proposals would be offset by a reduction in the  number of O-10 retirees and the fact that longer service means fewer years  of actual retirement per retiree. DOD added that a detailed discussion of  this point is provided in the RAND study. DOD, however, has not analyzed  the long-term cost implications of its retirement compensation proposals.  In addition, while the RAND study contains a discussion of retirement  compensation and recommends that DOD consider changes in this area, it  does not provide an analysis of long-term cost implications. RAND  officials told us that they developed some rough cost estimates but that a  cost analysis was not part of their study objectives. We continue to believe  that a full assessment of the retirement compensation proposals should  include a cost analysis. In addition, it should be noted that the proposal to  remove the 75-percent cap would increase retirement pay for general and  flag officers at any pay grade—not just O-10s—who retire with more than  30 years of service.
DOD’s comments are reprinted in appendix II of this letter.
section_title: Scope and Methodology
paragraphs: To develop a career profile of general and flag officers, we obtained data  from the Defense Manpower Data Center covering fiscal years 1997 to  2002. Of the 1,535 general and flag officers in the database, 635 had  retirement dates and 900 were still on active duty as of the end of fiscal  year 2002. We used the general and flag officer data to build an overall  general and flag officer career profile by analyzing salient characteristics  of that population. For example, we identified such things as the mean- averages of years in service, years in grade, and years of age at retirement.  We assessed the reliability of the data by (1) performing electronic testing  of required data elements, (2) reviewing existing information about the  data and the system that produced them, and (3) interviewing agency  officials knowledgeable about the data. As a further check on data  reliability, we independently obtained general and flag officer data from  each of the military services. We concluded from our review that the data  were sufficiently reliable for the purposes of this report. We also obtained  data from the military services concerning promotion opportunity for  officers selected for promotion to pay grades O-7 and O-8. This data  covered fiscal years 1998 to 2003.
To assess DOD’s justification for its fiscal year 2005 legislative proposals,  we reviewed DOD’s rationale and supporting evidence for the proposals,  including a section-by-section analysis of the legislative proposals  developed by the Office of the Secretary of Defense (OSD) and statements  made by senior DOD officials in congressional testimony. We reviewed the  2004 RAND study on general and flag officer management, met with the  principal authors of the study, and obtained related information, including  the statement of work and the database RAND developed of general and  flag officer assignments. We discussed with RAND officials the  methodology used to compile this database. We did not assess the models  RAND used in its analysis. We reviewed the legislative histories of existing  provisions that DOD seeks to change. We also met with OSD and service  officials to discuss the legislative proposals and the management of  general and flag officers under the current legislative framework. We  obtained DOD and service policies and other documents and data  regarding general and flag officer management.
We met with 11 retired senior general and flag officers and other officials  with experience in general and flag officer policies and management to  obtain their views on the legislative proposals. We identified these officials  through information obtained from DOD as well as referrals from the  individuals interviewed. In selecting the individuals, we sought to obtain a  variety of perspectives based on their previous experiences. As a group,  these individuals spanned the four military services and OSD and included  senior leadership in the military services, the Joint Staff, and operational  commands. Some of these individuals had worked extensively on military  personnel matters and general and flag officer issues within both DOD and  Congress. Since the individuals were selected judgmentally, their views  are not representative of a larger population.
For our analysis of DOD’s retirement pay proposals, we used the data from  the Defense Manpower Data Center to determine the pay grade and years  of service for general and flag officers who retired between fiscal years  1997 to 2002. We then calculated, based on the basic pay table effective as  of January 1, 2004, what their retirement pay would be under the existing  retirement pay formula and under the proposed changes. We calculated  the annual average federal government outlay in fiscal year 2004 dollars  for retirement pay and total outlays over a 10-year period. The  assumptions we used for our analysis have limitations. We did not  calculate annual increases either in basic pay or in retirement pay cost-of- living adjustments. We also assumed that all new beneficiaries would  continue to receive retirement pay over the 10-year period; we did not  include actuarial projections to account for expected life expectancy. Our  calculations were based on the final pay retirement formula, although  there will be future growth in the number of general and flag officers who  retire under the “high-3” formula. We assumed that future general and flag  officer retirees would have a similar profile in terms of number of retirees,  pay grade, and years of service to those who retired between fiscal years  1997 to 2002.
We are sending copies of this report to the Secretary of Defense and the  Director, Office of Management and Budget. In addition, the report will be  available at no charge on GAO’s Web site at http://www.gao.gov.
If you or your staff have any questions regarding this report, please  contact me at (202) 512-5559 (stewartd@gao.gov) or Brenda S. Farrell at  (202) 512-3604 (farrellb@gao.gov). Major contributors to this report were  James Driggins, Thomas W. Gosling, David Mayfield, J. Paul Newton,  Jennifer R. Popovic, and Bethann E. Ritter.
section_title: Appendix I: Career Profile Data for Retired General and Flag Officers
paragraphs: This appendix presents data showing the age and years of service  distributions for general and flag officers who retired between fiscal years  1997 and 2002.
section_title: Appendix II: Comments from the Department of Defense
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