In preparation for the initiation of Operation Iraqi Freedom (OIF), the United States deployed four Army divisions and their supporting reserve component units, a Marine Expeditionary Force, and a significant portion of the Navy’s and Air Force’s combat power to southwest Asia. The Army’s Third Infantry Division (mechanized) and its supporting reserve component units were primarily equipped with Army-prepositioned assets—consisting of over 17,000 pieces of rolling stock and almost 6,000 standard 20-foot shipping containers of supplies—drawn from prepositioned equipment sites located in southwest Asia and offloaded from Army prepositioned ships. The 1st Marine Expeditionary Force was also primarily equipped with prepositioned assets offloaded from Marine Corps prepositioned ships. By the height of the combat portion of OIF, the United States had deployed a significant portion of its combat power to southwest Asia. For example, during fiscal year 2003, the Army deployed four divisions and numerous supporting active, reserve, and national guard units which participated in the combat phase of OIF. As a result, the Army estimated that these units, with assistance from other Army maintenance activities, would have to reconstitute over 53,000 pieces of rolling stock when the units redeployed to their home stations. In Iraq and Afghanistan, the U.S. military—especially the Army and Marine Corps—are operating at a pace well in excess of their normal peacetime level, which is driven by units’ training requirements. This not only greatly increases the day-to-day operational maintenance requirements, including spare parts demands, of deployed Army and Marine Corps units, but also generates a large post-operational maintenance requirement that must be addressed when the units redeploy to their home station. Upon redeployment, the units need to bring their equipment at least back up to fully mission-capable status in order for the units to be able to train on their equipment and achieve their readiness levels and be prepared for future deployments. In addition, before leaving Iraq, redeploying units turned in a large amount of prepositioned equipment that must undergo maintenance and repair before the equipment can be reissued to units deploying to or already in southwest Asia in support of OIF, or returned to prepositioned equipment stock for future use. Figure 1 shows some prepositioned equipment stored in Kuwait awaiting repair. Army and Marine Corps units returning from deployments related to the global war on terrorism have equipment that has been heavily used and is in various degrees of disrepair. Upon returning to home station, the units’ equipment is inspected to determine what maintenance is needed to bring the equipment back to the condition needed to allow the unit to conduct mission-essential training and be prepared for future deployments. The services use myriad repair and maintenance sources to assist units in reconstituting their equipment. At military installations, various maintenance personnel—including military personnel within units, installation personnel (including contractors) who support day-to-day maintenance operations, contractors who have been hired to augment the units’ and installations’ day-to-day workforces, and contractors who have been hired to increase an installation’s maintenance capacity—are all working in concert to reconstitute the units’ equipment in a timely manner so that the units will be ready to again deploy. In addition, military depots and contractors are using their vast maintenance and repair capabilities to help in the equipment reconstitution effort. To fund the global war on terrorism in fiscal year 2003, Congress provided DOD with $62 billion in the fiscal year supplemental appropriation, primarily funding operations in Iraq. While most of this funding was used to cover the costs of combat operations, the DFAS monthly terrorist report indicate that about $3.8 billion in funds were obligated for equipment reconstitution in fiscal year 2003. The fiscal year 2004 global war-on-terrorism supplemental budget included a significantly larger amount for equipment reconstitution than the previous supplemental budget. DOD requested $65.6 billion for executing the global war on terrorism in its fiscal year 2004 global war on terrorism supplemental budget request, which Congress funded at $64.3 billion. In the budget-building process that was used for developing its fiscal year 2004 global war-on-terrorism supplemental budget request, the department included $5.9 billion for equipment reconstitution. (See table 1.) For the fiscal year 2004 supplemental budget process, table 1 shows the requirements the services developed and what OSD ultimately included in its supplemental budget submission to Congress. The requirements are broken down between unit-level and depot-level requirements. Unit-level maintenance, which consists of organizational- and intermediate-level maintenance, includes maintenance performed by military units in motor pools and maintenance support units, and by DOD civilians and contractor personnel at installation maintenance organizations. Depot-level maintenance includes maintenance performed by DOD civilian employees and DOD contractors at military depots or private facilities. The fiscal year 2004 supplemental defense appropriation does not delineate the amounts appropriated for unit- and depot-level equipment reconstitution. The two-phased process DOD used to develop its fiscal year 2004 supplemental budget equipment reconstitution requirements contained weaknesses that produced errors that may result in misstatements of future-year budget estimates if not corrected. We observed two problems with the COST model associated with the first phase of DOD’s process that have generated unreliable estimates. First, the COST model can overstate reconstitution costs related to aircraft and ship costs because these costs are covered in both the operations and reconstitution sections of the model. Second, there is uncertainty in DOD over the maintenance requirements covered by the model. We also noted problems with the second phase of DOD’s process. In one instance, the Army did not consider funding in its baseline peacetime operation and maintenance budget that would be available for equipment reconstitution. The Army also significantly overestimated the organizational- and intermediate-level maintenance costs to reconstitute individual equipment items. In another instance, the services included requirements in their reconstitution estimates that appear to be inconsistent with equipment reconstitution activities established by OSD’s supplemental budget preparation guidance. Also, OSD guidance only allowed the services to request funding to replace known battle losses—excluding projected battle losses and other expected losses—in preparing their fiscal year 2004 supplemental budget submissions. The model that OSD and the services used in the first phase of the process to calculate reconstitution requirements for fiscal year 2004 resulted in an overstatement of about $1.2 billion. This is because the COST model contains an error that can result in a duplication of reconstitution cost requirements. The equipment reconstitution section of the COST model provides funding for aircraft and ship reconstitution that is already funded through the operations section of the model. All services support their aircraft through a flying-hour program that covers costs associated with operating aircraft, such as petroleum, oil and lubricants, consumables (supplies), and spare parts. As a result, all organizational- and intermediate-level maintenance and repair requirements are met through the flying-hour program. Since the operations section of the COST model already includes flying-hour program funding, the inclusion of an equation for aircraft reconstitution in the equipment reconstitution section of the model is redundant. Air Force officials told us that due to their flying-hour program, additional funding specifically addressing organizational- and intermediate-level reconstitution of aircraft was not needed. However, the Air Force’s fiscal year 2004 supplemental budget request included about $1.2 billion in the equipment reconstitution section for aircraft maintenance that was also covered by the operations section of the COST model. According to Air Force officials, they were unaware that the equipment reconstitution section duplicated the aircraft maintenance costs that are covered in the operations section of the COST model. In contrast, the Navy removed funding that the COST model’s equipment reconstitution section provided for aircraft organizational- and intermediate-level maintenance. The equipment reconstitution section of the COST model also duplicates organizational-level ship reconstitution that is already covered in the operations section of the model. However, the Navy treated this potential duplication in the same manner as it treated the flying-hour program duplication. Recognizing that this maintenance was already covered in the COST model’s operations section, the Navy only included intermediate- level ship maintenance, and aircraft and ship depot-level maintenance in the equipment reconstitution section of its requirements calculation. The different ways that the Air Force and Navy treated aircraft reconstitution demonstrate how this potential redundancy is a weakness in the structure of OSD’s COST model. In discussing these redundancies in the model with OSD comptroller officials, they told us that OSD and IDA officials were unaware of this potential duplication. This lack of awareness was demonstrated when OSD comptroller officials did not identify and correct the Air Force’s duplication described previously. Air Force finance officials told us that they have taken steps when preparing their fiscal year 2005 supplemental budget to prevent this duplication from occurring again. We observed that the fiscal year 2005 supplemental budget did not repeat this duplication. There was uncertainty within the department regarding which maintenance requirements were covered in the COST model. OSD and the services developed their equipment reconstitution requirements with the understanding that the COST model calculated organizational- and intermediate-level maintenance only, and they thus calculated their depot- level maintenance requirements outside of the model during the second phase of the process. However, we later learned that the model may have calculated some depot-level maintenance requirements, which could have resulted in the model duplicating the depot-level maintenance requirements calculated outside the model. We held a series of discussions with officials from OSD—the owners of the model—and IDA—the developers of the model—to determine what types of maintenance requirements are included in the equipment reconstitution section of the model. Both OSD and IDA officials provided us with different descriptions of what was included in the model.