DOD defines infrastructure as activities that generally operate from fixed locations to support missions like those carried out by combat forces. Infrastructure includes installation support; central training; central medical; central logistics; force management; acquisition; infrastructure; central personnel; and central command, control, and communications. DOD recognizes that its support structure is inefficient and that its costs continue to absorb a large share of the defense budget and diverts funding that could be used for modernization. DOD has implemented various reform initiatives in the past to achieve efficiencies and reduce costs. The Defense Management Review (DMR), base realignment and closure (BRAC) process, National Performance Review, the bottom-up review, and other efforts proposed various actions intended to achieve these objectives. More recently, the Commission on Roles and Missions (CORM) and the Defense Science Board (DSB) have identified similar problems with DOD’s support structure and processes, but have made outsourcing and privatization the centerpiece of their reforms to reduce infrastructure and support costs. DOD defines outsourcing as the transfer of functions performed inhouse to outside providers and privatization as the transfer or sale of government assets to the private sector. Between fiscal year 1997 and 2002, DOD plans to increase procurement funding from $44.1 billion to $68.3 billion, primarily to buy new weapon systems and upgrade existing systems. DOD hopes that initiatives to reduce infrastructure costs will provide much of the increased procurement funding. Initiatives to achieve infrastructure and support savings include outsourcing and privatization, acquisition reforms, organizational streamlining and consolidation, management process reengineering, base and facility closures, personnel reductions, and inventory reductions. DOD’s quadrennial review is likely to identify additional plans and initiatives for reducing infrastructure costs. If savings from these initiatives are not achieved and the defense budget remains relatively constant, planned weapon systems procurements may have to be delayed, stretched out, or canceled; the force structure may have to be further reduced; and/or compromises may have to be made in military readiness. “Our infrastructure was reduced by less than 21 percent after four BRAC rounds, while the force structure fell by 40 percent. This disparity has introduced organizational inefficiencies that drive up O&M costs, making it more difficult for us to give the taxpayers best value for the dollars that we invest in national security . . . . Funding for military construction and real property maintenance by contract has been cut to the bone, and perhaps beyond. We are being pressed hard to find the resources to maintain our mission essential facilities.” Our work has shown that several factors have limited DOD’s success in implementing prior initiatives and achieving the expected savings. DOD officials have repeatedly recognized the importance of using resources for the highest priority operational and investment needs rather than maintaining unneeded property, facilities, and overhead. However, DOD has found infrastructure reductions to be difficult and painful because they require up-front investments, the closure of installations, and the elimination of military and civilian jobs. Service parochialism, a cultural resistance to change, and congressional and public concern about the economic effects on local communities, as well as the fairness of closure decisions, have historically hindered DOD’s ability to close or realign bases. DOD has also recognized that streamlining and reengineering its business practices could result in savings, but it has made limited progress in doing so. Many opportunities exist for consolidating and streamlining the services support functions and activities. Unfortunately, DOD has eliminated people and reduced funding without ensuring that the initiatives have achieved the intended efficiencies. In some cases people were reduced without redesigning the function or activity to reduce the staffing needs. While DOD gained some efficiencies through this approach it could have done better by thoroughly and thoughtfully analyzing what work had to be done and where and by whom the work could most cost-effectively be done. The 1989 DMR proposed a program of consolidations and management improvements estimated to save tens of billions of dollars in support and overhead programs and eliminate an estimated 42,900 civilian and military positions over fiscal years 1991-95. The review resulted in 250 decisions to implement consolidations, improve information systems, enhance management, and employ better business practices. The projected savings from each decision ranged from a few million dollars to over $10 billion. Early in the program, DOD made several adjustments that included reducing savings projections, extending the savings period for 2 years, and identifying additional savings associated with new initiatives. As a result, in April 1992, DOD projected DMR savings to be $71.1 billion for fiscal years 1991-97 (Air Force, $22.5 billion; Navy, $21.6 billion; Army, $20.9 billion; and DOD agencies, $6.1 billion). In early 1993, DOD Comptroller officials estimated that changes to the future years defense program (FYDP), force reductions, and workload reductions could result in total savings of about $62.8 billion rather than $71.1 billion. The savings reductions, however, could not be tracked to specific DMR initiatives. In reviewing initial savings estimates, we found that the estimates were not always based on cost analyses supported by historical facts or empirical cost data. During our 1993 review of the DMR we found it difficult to validate and track savings to specific initiatives. Moreover, we could not easily determine the extent to which savings resulted from the initiatives or from other factors such as reduced workloads, changes in force structure, or defense downsizing. For example, one initiative claimed savings of $5.6 billion for the possible consolidation of supply depots, inventory control points, maintenance depots, automatic data processing design centers and operations, accounting operations and finance centers, and research and development laboratories and test facilities. However, most of these consolidations did not occur. Likewise, an initiative to develop standard and consolidated automated data processing systems throughout DOD was not accomplished. Finally, a DSB task force known as the Odeen panel evaluated the DMR savings projections and concluded there could be a $12.6-billion to $16.7-billion shortfall between the DOD’s 1992 budget projections for fiscal years 1994-97. The panel also projected additional potential budget shortfalls of $7.4 billion to $9.8 billion in fiscal years 1998 and 1999. Overall, it projected an estimated shortfall for the 1994-99 FYDP could be between $20 billion and $26.5 billion and that a shortfall existed in operation and maintenance (O&M) funding. We reported in 1994 that the panel’s estimated budget shortfall was generally low. Through the BRAC process initiated in 1988, DOD has closed or is closing 97 domestic bases. About 50 percent of the planned closures have been completed. DOD reported that last year, for the first time, the savings from closures exceeded the costs and savings from closures will continue to accumulate each year. DOD expected its base closures to reduce annual base support costs from $41 billion in 1988 to $29.5 billion in 1997. Our analysis of base support costs in the FYDP and at nine closing installations indicates that BRAC savings should be substantial. However, the total amount of actual savings is uncertain because DOD’s systems do not provide this information. If DOD BRAC savings are less than estimated, DOD’s ability to fund future programs at planned levels will be affected. DOD has submitted annual BRAC cost and savings estimates, but their usefulness is limited. For example, the Air Force’s savings were not based on budget-quality data, and the Army’s estimates excluded reduced military personnel costs that the Navy and the Air Force included in their estimates. Further, BRAC cost estimates excluded more than $781 million in economic assistance to local communities as well as other costs. Consequently, the Congress does not have a complete picture of projected BRAC savings. For the past three decades, federal agencies have been encouraged to expand their procurements of goods and services from the private sector. For years, DOD has been contracting out functions, activities, and services it formerly accomplished using DOD civilian or military personnel. OMB established procedures for determining whether commercial activities should be outsourced in Circular A-76. These procedures, which have been the primary vehicle used to make these outsourcing decisions, include a handbook for performing cost-effectiveness evaluations. However, these procedures and various provisions of legislation have, to some extent, limited DOD outsourcing and resulting savings. Using the A-76 process and procedures, DOD has conducted over 2,100 public-private competitions between 1978 and 1994. However, starting in 1988, the number of A-76 studies undertaken each year began to decline substantially. Several legislative provisions limited DOD’s outsourcing efforts. For example, the first provision, contained in the National Defense Authorization Act for fiscal years 1988-89 (P.L. 100-180), gave authority to installation commanders to determine whether to study activities for potential outsourcing. Because of disruptions to their workforce, the cost of conducting studies, and a desire for more direct control of their workforce, various officials told us that commanders often chose not to pursue outsourcing. This law, which was known as the “Nichols Amendment” and codified at 10 U.S.C. 2468, was effective through September 30, 1995. Another provision, contained in the DOD Appropriations Act for Fiscal Year 1991 (P.L. 101-511) and subsequent DOD appropriations acts, prohibited funding for lengthy A-76 studies. Finally, a provision contained in the Department of Defense Authorization Acts for Fiscal Years 1993 and 1994 prohibited DOD from entering into contracts resulting from cost studies done under OMB Circular A-76. In response, DOD imposed a moratorium on A-76 studies and canceled about three-quarters of the ongoing studies.