The Department of Defense's bottom-up review concluded that the Army's reserve components should be reduced to 575,000 positions by 1999--a 201,000 decrease since fiscal year 1989. A group of senior officers of the Army, its reserve components, and organizations that represent Army component issues was tasked with providing a recommendation to the Secretary of the Army on the allocation of the 575,000 positions between the Guard and Reserve. The group, through the Offsite Agreement, allocated the positions as follows: 367,000 positions to the Army National Guard and 208,000 to the Army Reserve. The agreement also included a realignment of functions between the Guard and Reserve. This is to be accomplished through three separate approaches--swap, migration, and reallocation. The swap involves about 10,000 authorized positions in each reserve component. The Guard agreed to inactivate 128 combat support and combat service support units such as medical, military police, and transportation units and transfer about 10,000 authorized positions associated with these units to the Reserve. The Reserve agreed to inactivate 28 units, including most of its remaining combat units and its last remaining special forces units, and transfer about 10,000 positions associated with these units to the Guard. According to the Army, the swap will more clearly concentrate combat support and combat service support functions in the Reserve and combat functions in the Guard. The migration involves the transfer of about 4,300 authorized positions and over 250 helicopters from the Reserve to the Guard. The Reserve agreed to nearly deplete its helicopter resources by inactivating 11 utility helicopter aviation and aviation maintenance units and 15 medical air ambulance units. According to Guard officials, the migration and other initiatives will provide enough helicopters for the Guard to cover the needs of each state. Without the migration, this objective would have been jeopardized because the Guard is scheduled to lose helicopters as part of the Army's general downsizing. The reallocation allows the Guard to keep about 7,700 authorized positions for engineer and military police units that otherwise would have been inactivated. According to a Guard official, this will enable the Guard to better support its state missions. Other units were eliminated so the positions could be reallocated within the Guard. The reallocation does not affect the Reserve, nor does it affect the personnel end strength of the Guard. The Army and its reserve components considered several factors in calculating the cost to implement the agreement. The factors include the percentage of personnel who would separate from military service and receive benefits, the number of facilities that would have to close, and the amount of goods and equipment that would have to be moved. In March 1994, the Assistant Secretary of Defense for Reserve Affairs and the Vice Chief of Staff of the Army testified that the short-term cost to implement the agreement was less than $100 million. According to Army officials, this was a rough estimate because the Army could not be certain how many military persons would transfer or leave. Also, the Army could not determine the actual cost of closing facilities and transporting goods until the reserve components identified which units would be affected. However, when we began our audit work in June 1994, the Army estimated the total cost of implementing the agreement at about $38 million from fiscal year 1995 to fiscal year 1999. In response to our audit questions, the Army revised some of its estimates and, on the basis of these revisions, increased it to about $85 million. For example, Army officials projected that transition benefits for Reservists whose units will deactivate would probably be greater than originally estimated. It also estimated that the Reserve will need more funds for training and construction of facilities and that the operations costs for units involved in the swap would be more than anticipated. However, we believe that this revised estimate is understated by about $100 million because it excludes training costs that are related to the agreement and includes savings that are not a result of the agreement. In table 1, we compare our estimate with the Army's initial and revised estimates. We accepted the Army's revised estimates for transition benefits, transportation of equipment, and costs of facilities because we had no basis to question their reasonableness. However, we found that the revised estimate excluded training costs that the Guard will likely incur and included savings in aircraft operating costs that resulted from another initiative. The Guard will receive the missions of five Reserve assault helicopter battalions that were being modernized with Blackhawk helicopters. The Reserve had trained the equivalent of 3-1/2 battalions for the Blackhawk systems. The Guard did not include in its estimates the cost to train a like amount of personnel. We estimate this training cost to be about $14 million because the Guard units that will take over the Blackhawk missions have only a few Blackhawk trained personnel. Also, most Blackhawk qualified Reserve personnel may not join the Guard. The Guard will also have to train the remaining 1-1/2 battalions, but we do not consider this a cost of the agreement because it is an expense that the Reserve would have had if it were not for the agreement. The Army estimated that the Guard will avoid about $82.5 million in operating expenses by turning in excess nonmodern aircraft once the Blackhawks arrive. We believe the savings should not be attributed to the agreement because these aircraft have been programmed for disposal for several years. Consequently, we deleted the $82.5 million savings from the operations cost category, leaving an anticipated savings of $13.7 million. According to Guard officials, the $13.7 million savings to the federal government is that part of the Guard's operating costs that is paid by state funds. The Department's current system for reporting readiness to the Joint Chiefs of Staff is the Status of Resources and Training System. This system measures the extent to which individual service units possess the required resources and training to undertake their wartime missions. The system compares the current status of specific elements considered essential to unit readiness--personnel and equipment on hand, equipment condition, and the training of operating forces--with those needed to undertake wartime missions. We compared the readiness levels (as of April 1994) of the inactivating units with the readiness levels of the units assuming the missions of the inactivating units. Table 2 shows the results of that comparison. We could not estimate the agreement's impact on readiness for 152 of the 182 units affected by the swap and migration. However, we estimated the readiness impact for some units. Thirteen units will be replaced by units with lower readiness ratings, while 17 units will be replaced by units having the same or higher readiness ratings. We do not have estimates for the agreement's readiness impact on 152 units because new units are being created or individual units have not been designated to replace inactivating units. For example, we cannot identify the readiness impact for 20 of the 28 Reserve to Guard transfers involved in the swap because the Guard did not designate specific units that will assume the missions of the 20 Reserve units. In all but one of the 108 Guard to Reserve transfers, we could not estimate the readiness impact because they involved the establishment of new Reserve units. The 107 new Reserve units have up to 1 year to organize and build up their readiness ratings before the Guard units are inactivated. During this year, the Reserve units' readiness ratings can be expected to improve as the units obtain personnel and equipment and train their personnel, while the Guard units' ratings can be expected to decrease as these units lose personnel and equipment. Hence, the impact on readiness could vary over time. For some units, this time could be very short. For example, 37 Reserve units are being established within 50 miles of existing inactivating Guard units to utilize Guard personnel, equipment, and facilities. We were told that in some of these cases, Guard units will convert to Reserve units. In 13 instances, some degradation in readiness may occur. For example, two Guard units that will take on the missions of Reserve Blackhawk helicopter units do not have enough Blackhawk helicopters or trained personnel to satisfy unit requirements. Reserve unit personnel told us that it may take 3 to 5 years before these Guard units reach the readiness level of the Reserve units that are deactivating. According to Army officials, the Army plans to convert these units within a 3-year period, and they anticipate, on the basis of National Guard historical data, that unit readiness will not be degraded longer than 1 year during the conversion. In the other 11 instances, Guard units had higher overall readiness ratings than existing Reserve units taking on their missions. In 17 instances, we noted either little impact on readiness or an improvement in readiness. For example, nine inactivating Guard units had the same or higher overall readiness ratings as existing Reserve units taking on their missions. Similarly, six of the eight Guard field artillery and armor units taking on the missions of Reserve units had higher overall readiness ratings than the inactivating Reserve units. Contingency force pool units support a crisis response force, serve as follow-on forces, or serve as forces in a separate contingency. It is important for these units to maintain a high state of readiness because these units often deploy to military conflicts early--sometimes even before some active units. Fifty-eight inactivating Guard units in the swap and seven inactivating Reserve units in the aviation migration portion of the agreement had contingency force pool designations. These designations did not always transfer to the units that assumed the missions of the inactivating units. We found that the agreement's impact on readiness varied on a unit-by-unit basis. Most of the Guard's contingency force pool designations transferred to the Reserve as of November 22, 1994. For 44 of the 58 units, existing Reserve units assumed the contingency force pool assignments previously assigned to the Guard, while for 14 units, new Reserve units will take on the assignment. We found that 29 of the 44 Guard units had higher overall readiness ratings than the Reserve units taking on the contingency force pool assignment. For the remaining 15 units, the overall readiness ratings for the Reserve units are equal to or higher than those of the Guard units. We could not ascertain the impact on readiness for the 14 new Reserve units. The Reserve aviation units' contingency force pool designations transferred to the Guard as of November 22, 1994. In six of the seven cases, the Guard units had the same or higher overall readiness ratings as the Reserve units they are replacing. In the remaining case, the Guard unit had a lower readiness rating. Most of the Reserve troops facing inactivation will be released during fiscal year 1995, while most of the affected Guard troops will not be inactivated until subsequent years. Table 3 shows the number of units and authorized positions that will be affected in fiscal years 1994-95 and 1996-97. Because we cannot anticipate what future actions the reserve components will take to accommodate displaced personnel, we focused our attention in three primary areas affected in fiscal years 1994 and 1995 by the agreement--the 157th Separate Infantry Brigade, aviation units, and special operations units. These account for 23 of the 40 units and about 6,900 of 9,600 authorized personnel. We found that the Army Reserve Command is helping inactivated soldiers find new positions in other Reserve units but is not helping them switch to the Guard even though the available Guard positions are more consistent with their occupational skills and offer greater longevity. For example, the Reserve Command in eastern Pennsylvania has offered assignments to nearly all the troops in the 157th Separate Infantry Brigade. These positions generally are in other Reserve units within a 50-mile range of the soldiers' homes. These include several new units in eastern Pennsylvania established to accommodate troops from the 157th. But many of the offers will be for overstrength positions that can only be held for 1 year, and few will be for assignments in the soldiers' current occupational skills. According to reserve officials, they expect few permanent positions to become available to senior officers and enlisted personnel. Reserve and Guard officials told us that many soldiers in the 157th would rather switch from the Reserve to the Guard because they are combat soldiers and the Guard is the only reserve component with combat units. We were also told that the Reserve will release some troops to the Guard but is doing several things that will make switching unattractive. For example, soldiers transferring to Reserve positions and requiring new occupational skills will immediately begin training for the new positions, while soldiers who elect to join the Guard will be used to close out the Brigade and will not be released until the inactivation date for the 157th, which is scheduled for September 1995. Pennsylvania Army National Guard officials told us that, except for senior officers and enlisted persons, they would welcome the transfer of troops from the 157th. To make the transfer to the Guard more attractive, the Guard recently announced that it would honor most Reserve bonus contracts and student loan repayment plans. Most Reserve helicopter pilots, technicians, and civilians associated with aviation units will have difficulty finding new units in the Guard. The Guard already has personnel for most of these positions, except for the Blackhawk units where the Guard has few qualified Blackhawk personnel. However, even for these units, we do not anticipate that many Reserve aviators will transfer to the Guard because the Guard is training its own personnel to fill available positions. For example, in Illinois, the Guard has assigned the Blackhawk mission to a unit some distance away from the inactivating Reserve unit and is training Guard personnel to become Blackhawk qualified. The National Guard Bureau has requested that the state adjutant generals establish assignment advisory boards for aviation personnel, which would match available Reservists and Guard personnel with available positions and select those who are best qualified. As of January 1995, most states affected by the agreement have scheduled advisory boards. The Army National Guard recruited inactivating Reserve special forces personnel and added them to existing Guard units or to special temporary detachments it created. For example, the Guard created three detachments with an authorized strength of 83 persons each to accommodate personnel of the Reserve 12th special forces group. This arrangement places the Guard in an overstrength position with too many units, a situation that Army officials stated will be remedied in 18 months. During this time, the Guard plans to assess all Guard special forces units and retain those units having the highest readiness ratings and sustainability at the end of the test period. We learned of other initiatives to accommodate displaced personnel. For example, the Reserve is establishing 37 new units within 50 miles of inactivating Guard units. It plans to recruit the deactivating Guard personnel for these units. Included in the 37 are 6 watercraft units in Washington State, which are to assume the missions of deactivating Guard units. The Defense Appropriations Act for fiscal year 1995 directed the Secretary of the Army to ensure that members of units inactivating as a result of the agreement be reassigned to remaining units to the maximum extent practicable. It further directed the Secretary to submit semi-annual reports to the congressional defense committees on the number of members reassigned while the agreement is in effect. The Offsite Agreement places all reserve component special forces in the Guard, which is generally state-controlled during peacetime. We found no evidence that the Guard's status would hinder the Special Operations Command's training responsibilities under the Goldwater-Nichols Department of Defense Reorganization Act of 1986. The Goldwater-Nichols Department of Defense Reorganization Act of 1986 authorizes combatant commands to exercise command and control over their forces. As a combatant command, the U.S. Special Operations Command is responsible for preparing active and reserve component special operations forces to carry out assigned missions, including the training of assigned forces. As we reported in March 1994, special operations forces have become an integral part of the combatant commanders' peacetime mission. Overseas training exercises are held frequently in support of this mission, and according to Command officials, reserve component forces are often called upon to participate in this training. For example, troops from the Mississippi, Maryland, and Alabama National Guards conducted training programs for military personnel and provided assistance to local citizens in Honduras in 1994. Further, the Guard's participation in overseas training exercises is ensured as a result of a 1990 U.S. Supreme Court decision. This decision affirmed a federal law restricting governors from withholding consent for overseas training for Guard units put on active duty. The Department of Defense is formulating policy guidance that will clarify the relationship between the Guard and the combatant commands as established by law and will ensure the authority of Governors will not be limited over their National Guard forces when these forces are not in federal service. An Army National Guard official told us that the policy guidance should more clearly give combatant commands authority over training and readiness of assigned reserve component forces. In commenting on a draft of our report, the Department of Defense agreed with all of our findings except for our cost estimate to implement the Offsite Agreement. Specifically, the Department said that the $82.5 million in cost avoidance for the early inactivation of aviation units is attributable to the agreement and should be included in our estimate. We continue to disagree with the Department's position. In February 1993, 10 months prior to the Agreement, the Army's Aviation Restructuring Initiative directed the National Guard to inactivate over 600 helicopters because they were no longer needed to support National Guard missions. The Department said that the National Guard agreed to turn in helicopters earlier than required by the Initiative because of the agreement. The Department further said that the $82.5 million is attributable to savings in operations and maintenance due to the early turn-in schedule. The Department was not able to produce convincing evidence that the agreement had any impact on the National Guard's turn-in schedule. Since the Guard was already required to turn in these aircraft, we continue to believe that the savings should not be attributed to the agreement. The Department's comments are shown in appendix I. We reviewed the provisions of the agreement and the actions taken by the Army and reserve components to implement it. We spoke with Department of the Army, Army Reserve, and Army National Guard officials to obtain documents and other information pertaining to the cost and readiness implications of the agreement, the reserve components' efforts to absorb displaced personnel, and the agreement's impact on control of special forces in the reserve components. We also spoke with officials of the U.S. Special Operations Command to discuss the Command's control over Guard units. We visited National Guard and Army Reserve Command offices and units in Pennsylvania and Illinois and an Army Reserve Command office in Missouri to discuss actions planned or underway to assist displaced personnel in finding new units. We also met with Army Reserve Association officials to discuss their views on the agreement. The association is not represented in the Offsite group. Our review was conducted between May and December 1994 in accordance with generally accepted government auditing standards. We are sending copies of this report to the Secretary of Defense, the Secretary of the Army, appropriate congressional committees, and other interested parties. We will also make copies available to others on request. The major contributors to this report are Robert Pelletier, Donald Campbell, Mae Jones, Paul O'Brien, and Frances Scott. Please contact me at (202) 512-3504 if you or your staff have any questions concerning this report. The following is a GAO comment on the Department of Defense's letter dated February 10, 1995. 1. The $22.6 million for the early inactivation of overstructured aviation units is included in the $82.5 million we deleted from Army's savings estimates. The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. U.S. General Accounting Office P.O. Box 6015 Gaithersburg, MD 20884-6015 Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202) 512-6000 or by using fax number (301) 258-4066, or TDD (301) 413-0006. Each day, GAO issues a list of newly available reports and testimony. To receive facsimile copies of the daily list or any list from the past 30 days, please call (301) 258-4097 using a touchtone phone. A recorded menu will provide information on how to obtain these lists.

Summary:
Pursuant to a congressional request, GAO reviewed the Offsite Agreement, a major restructuring of the Army National Guard and Army Reserve, focusing on the agreement's: (1) implementation costs; (2) impact on readiness; (3) efforts to absorb displaced personnel; (4) effect on the implementation of the Goldwater-Nichols Department of Defense Reorganization Act of 1986; and (5) impact on the Special Operations Command's training of special Guard forces. GAO found that: (1) implementation of the Offsite Agreement could cost over $180 million; (2) the Army's latest cost estimate is about $85 million; (3) GAO believes that the Army's estimate excludes training costs that the Guard will likely incur and includes savings in operating costs that would have resulted regardless of the agreement; (4) it is too early to tell how the agreement will affect readiness for most units; (5) the Guard did not identify specific units that will assume the missions of 20 inactivating Reserve units; another 107 Reserve units are new and have 1 year to establish their readiness ratings; (6) GAO estimated the readiness impact for some units; 13 units will be replaced by units with lower readiness ratings, while 18 units will be replaced by units having the same or higher readiness ratings; (7) the Guard and Reserve have primarily left it up to the reserve component commands and individual units to help affected persons find new units; (8) in three areas already affected by the agreement (the 157th Separate Infantry Brigade, aviation units, and special operations units) some of the commands' and units' initiatives appear to be working well; (9) others, however, appear to discourage the transfer of personnel, even if a transfer would result in a more effective use of their skills; (10) senior and experienced officers and enlisted persons in inactivating units appear to have the most difficulty obtaining positions in other units in the Reserve and the Guard; (11) reserve helicopter pilots and technicians are also experiencing difficulties; and (12) GAO found no evidence indicating that the Special Operations Command will have problems exercising control over the training of Guard special operations forces.