O&M appropriations support the training, supply, and equipment maintenance of military units as well as the administrative and facilities infrastructure of military bases. Along with military personnel costs, which are funded with separate military personnel appropriations, O&M funding is considered one of the major components of DOD’s funding for readiness. O&M funds provide for a diverse range of programs and activities that include the salaries and benefits for most DOD civilian employees; depot maintenance activities; fuel purchases; flying hours; base operations; consumable supplies; health care for active duty service personnel and other eligible beneficiaries; reserve component operations; and DOD-wide support functions including several combat support agencies, four intelligence agencies, and other agencies that provide common information services, contract administration, contract audit, logistics, and administrative support to the military departments. The Congress provides O&M appropriations to 11 service-oriented O&M accounts—the Army, Navy, Marine Corps, Air Force, Army Reserve, Navy Reserve, Marine Corps Reserve, Air Force Reserve, Army National Guard, Air National Guard, and defensewide—and to program accounts, such as the defense health program. In addition to the regular annual O&M appropriations, the Congress can make supplemental O&M appropriations to finance the incremental costs above the peacetime budget that are associated with contingencies, such as the GWOT. Since late 1995, DOD has encouraged the services and the defense agencies to conduct cost comparison studies as provided for in the Office of Management and Budget’s Circular A-76. Under the A-76 process, otherwise known as competitive sourcing, the military services and other defense components conduct a public/private competition for a commercial activity currently performed by government personnel to determine whether it would be cost-effective to contract with the private sector for that activity’s performance. On the other hand, a public/private competition is not required for private sector performance of a new requirement, private sector performance of a segregable expansion of an existing commercial activity performed by government personnel, or continued private sector performance of a commercial activity. However, before government personnel may perform a new requirement, an expansion to an existing commercial activity, or an activity performed by the private sector, a public/private competition is required to determine whether government personnel should perform the commercial activity. The DOD Commercial Activities Management Information System is DOD’s database of record established to meet reporting requirements on the conduct of A-76 competitions and the results from implementing A-76 decisions, whether the decisions are to continue using government employees to perform the work or to outsource the work. For contracts awarded to the private sector, the database includes the estimated cost to perform the work using government employees, the contract award amount, the actual contract cost for each contract performance period, and brief reasons for any cost growth over the performance periods. A contract performance period is normally for 12 months, although the first performance period may cover a shorter transition period when the work is initially conveyed to the contractor. Contract information is to be maintained through the end of the last performance period included in the competition. Installation officials are responsible for reporting information on the A-76 program for input into the DOD database. Driven primarily by increased operations associated with GWOT and other contingencies, DOD’s O&M costs increased substantially between fiscal years 1995 and 2005, with the most growth occurring since fiscal year 2001. DOD’s reliance on contractors for support services also increased substantially during this period in order to meet increased military requirements without an increase in active duty and civilian personnel and because federal government policy is to rely on the private sector for needed commercial services that are not inherently governmental in nature, which includes many of the requirements generated from the GWOT in areas such as logistics and base operations support. Although DOD’s O&M costs increased significantly between fiscal years 1995 and 2005, there was a distinct difference in the rate of growth between the early and latter years of this 10-year period. Specifically, as shown in figure 1, DOD’s annual O&M costs were practically constant until 2001, when the costs began to increase. Figure 2 shows that during the first half of the 10-year period from fiscal year 1995 to fiscal year 2000, DOD’s O&M costs increased about 1 percent. In comparison, costs in DOD’s other major budget categories during this period changed as follows: military personnel costs declined about 13 percent; procurement costs increased about 21 percent; research and development costs increased about 4 percent; and other costs increased about 1 percent. DOD total costs were almost constant between fiscal year 1995 and fiscal year 2000. Figure 3 shows that a significant change in cost growth occurred during the subsequent 5-year period from fiscal year 2000 to fiscal year 2005, when DOD’s O&M costs increased about 57 percent. In the other major budget categories during this period, military personnel costs increased about 36 percent, procurement costs increased by about 62 percent, research and development increased by about 62 percent, and other costs increased about 13 percent. DOD total costs increased about 51 percent between fiscal year 2000 and fiscal year 2005. Trends in O&M costs at the military service level generally reflect the overall DOD trend. As shown in figure 4, between fiscal years 1995 and 2000, little change occurred in each service’s O&M costs. However, considerable cost growth occurred between fiscal years 2000 and 2005. Among the services, the Army had the largest percentage of growth in O&M costs between fiscal years 2000 and 2005. During this period, the Army’s O&M costs increased by about 137 percent, while the Navy and Marine Corps’ and the Air Force’s O&M costs increased by about 30 percent and 29 percent, respectively. According to DOD and service officials, the primary cause for increased O&M costs since fiscal year 2001 is the increase in military operations associated with GWOT and other contingencies, including hurricane relief. However, the officials also stated that other factors have contributed to the growth in O&M costs, such as the aging of military infrastructure and equipment; increased costs for installation security, antiterrorism force protection, communications, information technology, transportation, and utilities; and certain changes in acquisition approaches. The fight against terrorism has resulted in operations and deployments around the globe that are in addition to the usual peacetime operations. According to DOD, the related costs have included not only the personnel costs associated with mobilizing National Guard and reserve forces but also the costs of supporting these forces and the increased pace of operations. O&M-funded costs include a wide range of activities and services supporting operations including costs related to (1) predeployment and forward-deployed training of units and personnel; (2) personnel support costs including travel, subsistence, reserve component personnel activation and deactivation costs, and unit-level morale, welfare, and recreation; (3) establishment, maintenance, and operation of housing and dining facilities and camps in the theaters of operation; (4) petroleum, oils and lubricants, spare parts, consumable end items, and other items necessary to support the deployment of air, ground, and naval units; (5) establishment, maintenance, and operation of facilities including funds for roads, water, supply, fire protection, hazardous waste disposal, force protection bunkers and barricades; (6) command, control, communications, computers and intelligence within the contingency areas of operations; (7) organization-level maintenance including repairs to equipment and vehicles; (8) intermediate- and depot-level maintenance of weapons and weapon system platforms requiring service after the wear and tear of combat operations; and (9) contracts for services for logistics and infrastructure support to deployed forces. The additional military costs associated with GWOT and other contingencies have been primarily funded through supplemental appropriations. Figure 5 shows the annual amount of supplemental O&M funds appropriated each year from fiscal year 2000 through fiscal year 2005. During this period, supplemental O&M appropriations totaled about $210 billion and, according to the services, additional amounts were transferred or reprogrammed from other accounts to the O&M accounts of the military services. Although costs associated with the GWOT and other contingencies have been the primary reason for increased O&M costs between fiscal years 2000 and 2005, other factors also contributed to the O&M cost growth in the military services. To illustrate, if the services’ annual O&M total obligation authority is adjusted by removing annual supplemental O&M appropriations and net transfers and reprogrammings into the O&M account, the result shows that O&M costs still grew during this time period, as illustrated in figure 6. Specifically, between fiscal years 2000 and 2005, O&M costs after the adjustment grew by about 44 percent in the Army, 17 percent in the Navy and Marine Corps, and 2 percent in the Air Force. According to service officials, baseline O&M costs have increased between fiscal years 2000 and 2005 because of many factors, such as aging of military infrastructure and equipment, and increased costs for installation security, antiterrorism force protection, communications, information technology, transportation, and utilities. Navy officials particularly cited the implementation of DOD’s utility privatization program as a factor contributing to increased O&M costs. In a September 2006 report, we noted that DOD’s utility costs could potentially increase by another $954 million to pay costs associated with remaining utility systems that might be privatized. Increased O&M costs are also attributable to certain changes in DOD’s acquisition approaches. For example, the Air Force historically bought space launch vehicles, such as the Delta and Titan rockets, as products paid for with procurement appropriations. Now, under the Evolved Expendable Launch Vehicle program, the Air Force uses O&M appropriations to purchase launch services using contractor- owned launch vehicles. The projected cost of this program is $28 billion.