Response to a Posthearing Question Related to GAO's November 16, 
2006 Testimony on the Defense Travel System (19-DEC-06, 	 
GAO-07-287R).							 
                                                                 
On November 16, 2006, GAO testified before the Permanent	 
Subcommittee on Investigations, Committee on Homeland Security	 
and Governmental Affairs, on the results of our audit on the	 
Defense Travel System (DTS). This letter responds to a question  
from Senator Coburn that we were asked to answer for the record. 
The question and our response follow.				 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-07-287R					        
    ACCNO:   A64306						        
  TITLE:     Response to a Posthearing Question Related to GAO's      
November 16, 2006 Testimony on the Defense Travel System	 
     DATE:   12/19/2006 
  SUBJECT:   Cost analysis					 
	     Cost effectiveness analysis			 
	     Data integrity					 
	     Defense cost control				 
	     Defense economic analysis				 
	     Financial management systems			 
	     Internal controls					 
	     Program evaluation 				 
	     Program management 				 
	     Travel						 
	     Travel costs					 
	     Program implementation				 
	     Defense Travel System				 

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GAO-07-287R

   

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December 19, 2006

The Honorable Norm Coleman

Chairman, Permanent Subcommittee on Investigations

Committee on Homeland Security and Governmental Affairs

United States Senate

Subject: Response to a Posthearing Question Related to GAO's November 16,
2006 Testimony on the Defense Travel System

Dear Mr. Chairman:

On November 16, 2006, I testified before your Subcommittee on the results
of our audit on the Defense Travel System (DTS).^1 This letter responds to
a question from Senator Coburn that you asked us to answer for the record.
The question and our response follow.

Q. Mr. Williams, GAO's September 2006 study looked at DOD's Program
Management Office-DTS (PMO-DTS) projected DTS annual savings estimates.
GAO found that PMO-DTS' $56.4 million of anticipated personnel savings are
unrealistic. PMO-DTS projected that the Army and Navy would have $24.2
million of personnel savings as a result of using DTS. However, GAO found
that the Army and Navy have not had and are not anticipating any savings
through decreased personnel from the implementation of DTS. DOD has
refuted GAO's findings by claiming that the savings created by DTS are not
necessarily achieved through decreased personnel, but through increasing
personnel productivity and reducing inefficiencies. Were PMO-DTS'
projected personnel savings based solely on personnel reduction, and if
not, is it possible to quantitatively measure cost savings through
increased personnel productivity and reducing inefficiencies?

As discussed in our September 2006 report^2 and reiterated in our November
2006 testimony^3 before your Subcommittee, the $24.2 million of personnel
savings estimated by the Department of Defense (DOD) relates to the Air
Force and the Navy.

^1 GAO, Defense Travel System: Estimated Savings Are Questionable and
Improvements Are Needed to Ensure Functionality and Increase Utilization,
GAO-07-208T (Washington, D.C.: Nov. 16, 2006).

^2 GAO, Defense Travel System: Reported Savings Questionable and
Implementation Challenges Remain, GAO-06-980 (Washington, D.C.: Sept. 26,
2006).

^3 GAO-07-208T.

More specifically, the September 2003 economic analysis noted that
personnel savings of $12.9 million and $11.3 million would be realized by
the Navy and Air Force, respectively. The assumption behind the personnel
savings computation was that there would be less manual intervention in
the processing of travel vouchers for payment, and therefore fewer staff
would be needed. However, based on our discussions with Air Force and Navy
DTS program officials, it is questionable as to how the estimated savings
will be achieved. Air Force and Navy DTS program officials stated that
they did not anticipate a reduction in the number of personnel with the
full implementation of DTS, but rather the shifting of staff to other
functions. Furthermore, according to DOD officials responsible for
reviewing economic analyses, while shifting personnel to other functions
is considered a benefit, it should be considered an intangible benefit
rather than tangible dollar savings since the shifting of personnel does
not result in a reduction of DOD expenditures. Also, as part of the Navy's
overall evaluation of the economic analysis, program officials stated that
"the Navy has not identified, and conceivably will not recommend, any
personnel billets for reduction." Finally, the Naval Cost Analysis
Division (NCAD) October 2003 report on the economic analysis noted that it
could not validate approximately 40 percent of the Navy's total costs,
including personnel costs, in the DTS life-cycle cost estimates because
credible supporting documentation was lacking. The report also noted that
the PMO-DTS used unsound methodologies in preparing the DTS economic
analysis.

The extent of personnel savings for the Army and defense agencies, which
DOD estimated to be $16 million and $6.3 million respectively, is also
unclear. The Army and many defense agencies use the Defense Finance and
Accounting Service (DFAS) to process their travel vouchers, so the
personnel savings for the Army and the defense agencies were primarily
related to reductions in DFAS's costs. In discussions with DFAS officials,
they were unable to estimate the actual personnel savings that would
result since they did not know (1) the number of personnel, like those at
the Air Force and Navy, that would simply be transferred to other DFAS
functions or

(2) the number of personnel that could be used to avoid additional hiring.
For example, DFAS expects that some of the individuals assigned to support
the travel function could be moved to support its ePayroll program. Since
these positions would need to be filled regardless of whether the travel
function is reduced, transferring personnel from travel to ePayroll would
reduce DOD's overall costs since DFAS would not have to hire additional
individuals.

As pointed out in your question and as discussed in our report and
testimony, DOD strongly objected to our finding that the personnel savings
are unrealistic. In its written comments, the department stated that it is
facing an enormous challenge and continues to identify efficiencies and
eliminate redundancies to help leverage available funds. We fully
recognize the challenge the department faces in attempting to improve the
efficiency and effectiveness of its business operations. The fact remains,
however, that the results of an economic analysis are intended to help
management decide if future investments in a given endeavor are
worthwhile. In order to provide management the most realistic information
possible to support decision-making in this area, it is imperative that an
economic analysis be supported by valid assumptions. However, we found
that the underlying assumptions were not valid, particularly in regard to
the estimated amounts for the Navy and Air Force.

Moreover, the department did not provide any new data or related
documentation in its comments that were counter to our finding. As a
result of these factors, we continue to believe that the estimated annual
personnel savings of $54.1 million are unrealistic.

If you or your staff have questions about our response to this question,
please contact me at (202) 512-9095, or [email protected] .

Sincerely yours,

McCoy Williams
Director, Financial Management and Assurance

(195107)

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