High-Risk Series: Defense Infrastructure (Letter Report, 02/01/97,
GAO/HR-97-7).

GAO reviewed the difficult process of reducing the Department of
Defense's (DOD) infrastructure, focusing on: (1) the need for
infrastructure reductions and obstacles that have hindered DOD's ability
to achieve significant cost savings in this area; (2) DOD's future years
funding plan for infrastructure; and (3) areas in which GAO has
identified opportunities for reductions.

GAO found that: (1) despite DOD's actions over the last 7 to 10 years to
reduce operations and support costs, billions of dollars are wasted
annually on inefficient and unneeded activities; (2) DOD has in recent
years substantially downsized its force structure, however, it has not
achieved commensurate reductions in operations and support costs; (3)
for fiscal year 1997, DOD estimates that about $146 billion, or almost
two thirds of its budget, will be for operations and support activities;
(4) these activities, which DOD generally refers to as its support
infrastructure, include maintaining installation facilities, providing
nonunit training to the force, providing health care to military
personnel and their families, repairing equipment, and buying and
managing spare part inventories; (5) reducing the cost of excess
infrastructure activities is critical to maintaining high levels of
military capabilities; (6) DOD has found that infrastructure reductions
are a difficult and painful process because achieving significant cost
savings requires up-front investments, the closure of installations, and
the elimination of military and civilian jobs; (7) DOD has also
recognized that opportunities to streamline and reengineer its business
practices could result in substantial savings, but it has made limited
progress in accomplishing this; (8) DOD has programmed reductions in
installation support funding due to base closures and realignments,
however, overall infrastructure funding is projected to remain
relatively constant through 2001; (9) breaking down cultural resistance
to change, overcoming service parochialism, and setting forth a clear
framework for a reduced defense infrastructure are key to avoiding waste
and inefficiency; (10) to do this, the Secretary of Defense and the
service Secretaries need to give greater structure to their efforts by
developing an overall strategic plan; (11) the plan needs to establish
time frames and identify organizations and personnel responsible for
accomplishing fiscal and operational goals; (12) in developing the plan,
DOD should consider using a variety of means to achieve reductions,
including such things as consolidations, privatization, outsourcing,
reengineering, and interservicing agreements; (13) DOD should also
consider the need and timing for future base realignment and closure
rounds, as suggested by the 1995 Base Realignment and Closure Commissio*

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  HR-97-7
     TITLE:  High-Risk Series: Defense Infrastructure
      DATE:  02/01/97
   SUBJECT:  Defense cost control
             Military downsizing
             Logistics
             Defense procurement
             Base closures
             Base realignments
             Military training
             Strategic planning
             Future budget projections
             Risk management
IDENTIFIER:  DOD Base Force Plan
             DOD Bottom-Up Review
             DOD Future Years Defense Program
             Defense Business Operations Fund
             DOD Roles and Missions Report
             Sacramento (CA)
             San Antonio (TX)
             Louisville (KY)
             Charleston (SC)
             Colorado Springs (CO)
             Washington
             North Carolina
             Armed Forces Health Professions Scholarship Program
             High Risk Series 1997
             
******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO report.  Delineations within the text indicating chapter **
** titles, headings, and bullets are preserved.  Major          **
** divisions and subdivisions of the text, such as Chapters,    **
** Sections, and Appendixes, are identified by double and       **
** single lines.  The numbers on the right end of these lines   **
** indicate the position of each of the subsections in the      **
** document outline.  These numbers do NOT correspond with the  **
** page numbers of the printed product.                         **
**                                                              **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced.  Tables are included, but    **
** may not resemble those in the printed version.               **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
** A printed copy of this report may be obtained from the GAO   **
** Document Distribution Center.  For further details, please   **
** send an e-mail message to:                                   **
**                                                              **
**                                            **
**                                                              **
** with the message 'info' in the body.                         **
******************************************************************


Cover
================================================================ COVER


High-Risk Series

February 1997

DEFENSE INFRASTRUCTURE

GAO/HR-97-7

Defense Infrastructure


Abbreviations
=============================================================== ABBREV

  BRAC - base realignment and closure
  DBOF - Defense Business Operations Fund
  DFAS - Defense Finance and Accounting Service
  DOD - Department of Defense

Letter
=============================================================== LETTER



February 1997

The President of the Senate
The Speaker of the House of Representatives

In 1990, the General Accounting Office began a special effort to
review and report on the federal program areas its work identified as
high risk because of vulnerabilities to waste, fraud, abuse, and
mismanagement.  This effort, which was supported by the Senate
Committee on Governmental Affairs and the House Committee on
Government Reform and Oversight, brought a much-needed focus on
problems that were costing the government billions of dollars. 

In December 1992, GAO issued a series of reports on the fundamental
causes of problems in high-risk areas, and in a second series in
February 1995, it reported on the status of efforts to improve those
areas.  This, GAO's third series of reports, provides the current
status of designated high-risk areas. 

This report addresses one of the five newly designated high-risk
areas--the difficult process of reducing the Department of Defense's
(DOD) infrastructure.  It focuses on the need for infrastructure
reductions and obstacles that have hindered DOD's ability to achieve
significant cost savings in this area.  It describes DOD's future
years funding plan for infrastructure and discusses areas in which we
have identified opportunities for reductions.  It also discusses the
need for DOD to give greater structure to its reduction efforts by
developing a strategic plan and involving the Congress. 

Copies of this report series are being sent to the President, the
congressional leadership, all other Members of the Congress, the
Director of the Office of Management and Budget, and the heads of
major departments and agencies. 

James F.  Hinchman
Acting Comptroller General
of the United States


OVERVIEW
============================================================ Chapter 0

Despite the Department of Defense's (DOD) actions over the last 7 to
10 years to reduce operations and support costs, billions of dollars
are wasted annually on inefficient and unneeded activities.  DOD has
in recent years substantially downsized its force structure. 
However, it has not achieved commensurate reductions in operations
and support costs.  For fiscal year 1997, DOD estimates that about
$146 billion, or almost two thirds of its budget, will be for
operations and support activities.  These activities, which DOD
generally refers to as its support infrastructure, include
maintaining installation facilities, providing nonunit training to
the force, providing health care to military personnel and their
families, repairing equipment, and buying and managing spare part
inventories. 


   THE PROBLEM
---------------------------------------------------------- Chapter 0:1

DOD is faced with transforming its Cold War operating and support
structure in much the same way it has been working to transform its
military force structure.  Making this transition is a complex,
difficult challenge that will affect hundreds of thousands of
civilian and military personnel at activities in many states across
the nation.  If DOD does not address this challenge now, however,
pressing needs will go unmet, while scarce defense resources will be
wasted or used inefficiently.  For example: 

  -- We previously identified 13 options for reducing DOD's
     infrastructure that could result in savings of $11.8 billion. 

  -- DOD's laboratory infrastructure is estimated to have an excess
     capacity of 35 percent. 

  -- DOD's capacity for rotary-wing aircraft training is double what
     is needed by all of the military services. 

  -- The cost to educate a physician in DOD's Uniform Services
     University of Health Sciences is more than twice as much as the
     cost of providing scholarships to students in civilian medical
     schools. 

  -- DOD's efforts to shift workloads to the private sector without
     downsizing overall depot infrastructure will exacerbate existing
     excess capacity problems. 

  -- DOD's overhead costs for transportation services are frequently
     two to three times the basic cost of transportation. 

  -- Funds are being spent to operate and maintain aging and
     underutilized buildings, roads, and other infrastructure that
     will likely be declared excess by DOD in the near future. 

Reducing the cost of excess infrastructure activities is critical to
maintaining high levels of military capabilities.  Expenditures on
wasteful or inefficient activities divert limited defense funds from
pressing defense needs such as the modernization of weapon systems. 
DOD has identified net infrastructure savings as a funding source for
modernization but has not, thus far, achieved anticipated savings. 
As a result, DOD has been unable to shift funds to modernization as
planned. 


   THE CAUSES
---------------------------------------------------------- Chapter 0:2

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 that infrastructure reductions are a difficult
and painful process because achieving significant cost savings
requires 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 effects on local communities and economies as well as the
impartiality of the decisions have historically hindered DOD's
ability to close or realign bases.  DOD has also recognized that
opportunities to streamline and reengineer its business practices
could result in substantial savings, but it has made limited progress
in accomplishing this. 

By DOD's count, base realignment and closure (BRAC) rounds in 1988,
1991, and 1993 produced decisions to fully or partially close 70
major domestic bases and resulted in a 15-percent reduction in plant
replacement value.  DOD's goal during the 1995 BRAC round was to
reduce the overall domestic base structure by a minimum of another 15
percent, for a total reduction of 30 percent in DOD-wide plant
replacement value.  DOD's 1995 closures and realignments will
increase the total reduction to 21 percent, or 9 percent short of its
goal. 

DOD has programmed reductions in installation support funding due to
base closures and realignments; however, as shown in table 1, overall
infrastructure funding is projected to remain relatively constant
through 2001. 



                                Table 1
                
                 DOD's Projected Funding Through Fiscal
                               Year 2001

                  (Dollars in billions (constant 1997
                               dollars))

                                                              Percenta
                                                                 ge of
                                                      Infra-    budget
                                                    structur   that is
                                             Total    e part    infra-
                                          projecte        of  structur
Fiscal year                               d budget    budget         e
----------------------------------------  --------  --------  --------
1997                                          $244      $146        60
1998                                           243       142        58
1999                                           243       141        58
2000                                           244       140        57
2001                                           246       141        57
----------------------------------------------------------------------

   WHAT NEEDS TO BE DONE
---------------------------------------------------------- Chapter 0:3

To its credit, DOD has programs to identify potential infrastructure
reductions in many areas.  However, breaking down cultural resistance
to change, overcoming service parochialism, and setting forth a clear
framework for a reduced defense infrastructure are key to avoiding
waste and inefficiency.  To do this, the Secretary of Defense and the
service Secretaries need to give greater structure to their efforts
by developing an overall strategic plan.  The plan needs to establish
time frames and identify organizations and personnel responsible for
accomplishing fiscal and operational goals.  This plan needs to be
presented to the Congress in much the same way that DOD presented its
plan for force structure reductions in the Base Force Plan and the
Bottom-Up Review.  This will provide a basis for the Congress to
oversee DOD's plan for infrastructure reductions and allow the
affected parties to see what is going to happen and when.  In
developing the plan, the Department should consider using a variety
of means to achieve reductions, including such things as
consolidations, privatization, outsourcing, reengineering, and
interservicing agreements.  It should also consider the need and
timing for future BRAC rounds, as suggested by the 1995 BRAC
Commission and other groups.  In the interim, we believe significant
reductions can be made in a number of areas. 


SUBSTANTIAL OPPORTUNITIES FOR
REDUCTIONS EXIST
============================================================ Chapter 1

While we have not completed an in-depth analysis of all the
categories of infrastructure, our work to date has identified
numerous areas where infrastructure activities can be eliminated,
streamlined, or reengineered to be made more efficient.  For example,
we previously identified 13 options that the Congressional Budget
Office estimates could result in savings of about $11.8 billion
during fiscal years 1997-2001. 

The following sections discuss key infrastructure categories in which
we have identified opportunities for savings.  DOD defined the
categories and allocated infrastructure programs to those categories
in its Future Years Defense Program.  However, DOD could not allocate
about 20 to 25 percent of its total infrastructure that is associated
with the Defense Business Operations Fund.\1 DOD officials believe
the unallocated portion of the infrastructure is mostly for logistics
purchases. 


--------------------
\1 The 1997 Defense Authorization Act required DOD to conduct a
comprehensive study of the Defense Business Operations Fund (DBOF)
and to present an improvement plan to Congress for approval.  Pending
the results of this study, the Defense Comptroller, on December 11,
1996, dissolved DBOF and created four working capital funds:  Army,
Navy, Air Force, and Defense-wide.  The four funds will continue to
operate under the revolving fund concept--using the same policies,
procedures, and systems as they did under DBOF--and charge customers
the full costs of providing goods and services to them. 


   ACQUISITION INFRASTRUCTURE
---------------------------------------------------------- Chapter 1:1

The acquisition infrastructure includes activities and personnel that
support the research, production, and procurement of weapon systems
and other critical defense items.  During fiscal year 1997,
acquisition infrastructure will account for about $10.2 billion, or
about 7 percent, of projected infrastructure expenditures. 

In a 1993 roles and missions report, the Joint Chiefs of Staff stated
that each service had approached training and tests and evaluation
from its unique perspective and had developed its own
infrastructures, leading to DOD-wide overlap and redundancy.  In our
analysis of this report, we noted problems in achieving
consolidations in the training and evaluation areas and stated that
DOD should consider consolidations in two areas--Air Force and Navy
electronic warfare threat testing capabilities and high performance
fixed-wing aircraft testing capabilities. 

It is now 1997, BRAC 1995 is history, and despite efforts to focus on
test and evaluation infrastructure during that process, no major
consolidations or reductions in the test and evaluation
infrastructure have occurred.  Further, there is little to indicate
that the services will voluntarily agree to consolidation across
service lines, where the greatest savings are apt to be achieved.  In
fact, there are indications that some of the services are trying to
add to their testing capabilities to protect their infrastructure. 
For example, the Navy intends to construct a large anechoic chamber
at Patuxent River, Maryland, and the Air Force plans to add to its
anechoic capacity at Edwards Air Force Base, California, but the
existing chamber at Edwards is underused. 

Although studies of DOD's laboratories and centers have shown excess
capacity, they have generally recommended management efficiencies
rather than infrastructure reductions.  Despite four BRAC rounds,
reductions in laboratory infrastructure have not kept pace with
reductions in funding, personnel, and force structure levels. 
According to DOD officials, after all current BRAC actions have been
completed, DOD's laboratory infrastructure will still have an excess
capacity of approximately 35 percent.  DOD lost opportunities during
the BRAC 1995 process to reduce laboratory infrastructure because it
split the analysis of research and development laboratories and test
and evaluation centers and because each service tried to protect its
own facilities instead of adopting cross-service efficiencies. 


   CENTRAL LOGISTICS
---------------------------------------------------------- Chapter 1:2

Central logistics includes maintenance activities, the management of
materials, operation of supply systems, communications, and minor
construction.  Central logistics activities will consume at least $13
billion, or about 9 percent, of projected fiscal year 1997
infrastructure expenditures. 

Currently, DOD has 21 major depot maintenance facilities--2 of which
are scheduled to close.  Each of the service's depot maintenance
systems have excess capacity.  In fact, at the time of the 1995 BRAC
process, the overall DOD depot system had 40 percent excess capacity. 
While each of the services had actions underway, those actions will
neither reduce excess capacity nor achieve the expected cost savings. 

The BRAC Commission's July 1995 report to the President noted that
the decision to close two of the Air Force's five air logistics
centers--at Sacramento, California and San Antonio, Texas--was
difficult to make but necessary, given the Air Force's significant
excess depot capacity and limited defense resources.  The report
concluded that these actions should save about $151.3 million over
the 6-year implementation period and $3.5 billion over 20 years. 
When the President forwarded the Commission's recommendations to the
Congress, however, he stated that his intent was to privatize the
work in place at these two locations.  Further, he decided to delay
the centers' closures until 2001. 

Our analysis indicates that delaying the centers' closures until 2001
could increase net costs during the 6-year implementation period by
hundreds of millions of dollars, primarily because it would limit the
Air Force's ability to achieve recurring savings to offset expected
closure costs.  Privatizing defense depot activities in place could
yield savings if other public and private activities were more fully
utilizing their maintenance repair capacity.  However, because both
the public and private sectors have substantial excess capacity,
privatizing the Sacramento and San Antonio workloads in place would
result in missed opportunities to consolidate workloads at the
remaining centers.  Consolidating workloads would allow the Air Force
to achieve annual savings of over $200 million and reduce excess
capacity from 45 percent to about 8 percent.  If, on the other hand,
the remaining centers do not receive the additional workload, they
will continue to operate with significant excess capacity, becoming
more inefficient and expensive as their workloads dwindle. 

Our analysis of the Army depot system showed that the Army is not
effectively downsizing its remaining depot maintenance infrastructure
to reduce costly excess capacity.  Further, plans to privatize
workloads in place at closing facilities rather than transfer the
workloads to remaining underutilized Army facilities would increase
excess capacity in Army depots from 42 percent to 46 percent and
increase Army maintenance depot costs.  Specifically, our work showed
that

  -- transferring ground communications and electronic equipment from
     the Sacramento Air Logistics Center to the Tobyhanna Army Depot
     could reduce Tobyhanna's operating costs and result in annual
     savings of $24 million, and

  -- consolidating the tactical missile workload at the Tobyhanna
     depot could significantly improve the utilization of the depot's
     capacity and decrease costs by as much as $27 million annually. 

The Navy is also attempting to privatize workloads in place rather
than transfer them to other facilities where excess capacity exists. 
During the 1995 BRAC process, one of DOD's recommendations was to
close the depot at Louisville, Kentucky.  The Commission, however,
recommended that the Navy privatize the workload in place rather than
transfer it to other Navy facilities.  We determined that the Navy's
plan for privatizing workloads in place would not reduce excess
capacity in the remaining public depots and might prove more costly
than transferring the workload.  Moreover, the private sector would
still have excess capacity, including facilities owned by the two
defense contractors selected to operate and manage the privatized
Louisville depot. 

We have also identified long-standing problems and opportunities to
reduce infrastructure costs in the key area of inventory management. 
While the Defense Logistics Agency has taken steps to reengineer its
logistics practices and reduce consumable inventories, it could do
more to achieve substantial savings.  Given the approximately $70
billion investment in defense secondary inventory items, we have
prepared a separate high-risk report that focuses on the need for DOD
to be more aggressive in changing its management culture and to take
advantage of new management practices so that inefficiencies can be
eliminated. 


   INSTALLATION SUPPORT
---------------------------------------------------------- Chapter 1:3

Installation support includes personnel and activities that fund,
equip, and maintain facilities from which defense forces operate. 
This support will consume about $25 billion, or about 17 percent, of
projected fiscal year 1997 infrastructure expenditures. 

Despite the recognized potential to reduce base operating support
costs through greater reliance on interservice-type arrangements, the
services have not taken sufficient advantage of available
opportunities.  Differing service traditions and cultures and concern
over losing direct control of support assets have often caused
commanders to resist interservicing. 

DOD has long been concerned about and has sought ways to reduce the
cost of military base support.  A downsized force and reduced defense
budgets in recent years are causing the services to take renewed
interest in trying to achieve greater economies, efficiencies, and
cost savings in base operations.  Their efforts include a more
vigorous examination of the potential for greater interservice and
intraservice arrangements involving base support as well as
partnership arrangements between military bases and local governments
and communities.  For example, service officials in Charleston, South
Carolina, reported a 1-year cost avoidance of over $1 million in
travel and per diem costs through the shared use of video
teleconferencing capabilities.  Also, service officials in Colorado
Springs, Colorado, reported that a consolidated regional natural gas
contract resulted in cost savings of $9.5 million over a 3-year
period. 

DOD believes that greater economies and savings could be achieved by
further consolidation and elimination of duplicate support services
where military bases are located close to one another or where
similar functions are performed at multiple locations.  For example,
both Fort Lewis and McChord Air Force Base in Washington maintain
separate airfield operations facilities.  Fort Lewis personnel
believe that both bases' airfield operations can be served by one
facility.  At Fort Bragg and Pope Air Force Base in North Carolina,
both services are maintaining separate contract administration,
supply and engineering, and other support services that may have the
potential for consolidation. 

The following list includes selected base support functions that
could be consolidated for use by all the services: 

  -- Airfield operations

  -- Biological assessments

  -- Bulk fuel storage

  -- Child care services

  -- Civilian personnel services

  -- Communication systems maintenance

  -- Contracting services

  -- Facility maintenance

  -- Housing services

  -- Legal assistance and claims

  -- Management and maintenance of family housing

  -- Public works management

  -- Roads and ground maintenance

  -- Small arms maintenance

  -- Support services

  -- Tactical vehicle maintenance

  -- Training services

  -- Vehicle transportation and maintenance


   CENTRAL TRAINING
---------------------------------------------------------- Chapter 1:4

The central training infrastructure includes basic training for new
personnel, aviation and flight training, military academies, officer
training corps, other college commissioning programs, and officer and
enlisted training schools.  During fiscal year 1997, central training
will account for about $19 billion, or about 13 percent, of projected
infrastructure expenditures. 

Since 1987, the BRAC Commission has recommended base closures and
mission realignments that, when fully implemented, will reduce the
number of locations where the services provide formal training for
military personnel.  Senior DOD officials recognize that even after
completion of the 1995 BRAC round, excess training infrastructure
will remain.  In testimony before the BRAC Commission, the Chairman
of the Joint Chiefs of Staff cited the need for future base closure
authority because of opportunities for further cross-servicing,
particularly in the area of joint-use bases and training facilities. 

During our examination of the 1995 BRAC recommendations, we
identified several Army training-related installations with
relatively low military value that were not proposed for closure
because of the up-front closure costs, despite projected long-term
savings.  The Navy's analysis indicated that its primary pilot and
advanced helicopter training requirements were 19 to 42 percent below
peak historic levels.  However, the BRAC process did little to change
this situation because only one Navy air training facility was slated
for realignment, and none was slated for closure.  Further, as a
result of the services' inability to consolidate rotary-wing training
at one location, they were left with capacity for rotary-wing
training that was more than twice the space needed. 


   FORCE MANAGEMENT
---------------------------------------------------------- Chapter 1:5

Force management provides funding, equipment, and personnel for the
management and operation of all the major military command
headquarters activities.  During fiscal year 1997, force management
will account for about $13 billion, or about 9 percent, of projected
infrastructure expenditures. 

In the area of transportation, DOD customers frequently pay double or
triple the cost of basic transportation.  The Transportation Command
retains an outdated and inefficient, modally oriented organizational
structure with many collocated facilities.  Each separate component
command incurs operational and support costs.  Customers receive
bills from each component command for each mode of transportation,
rather than a single intermodal bill from only one component. 
Separate billing systems are inefficient, adding people and costs to
the process.  Wages and salaries alone for the commands in fiscal
year 1994 were more than $1 billion.  Further, DOD's guidance for
handling the cost of maintaining a mobilization capability does not
clearly state that these costs are not to be passed on to
transportation customers. 

DOD may not achieve the goals of its reengineering efforts to improve
the defense transportation system processes and reduce costs unless
it concurrently looks at how the organization should be restructured. 
Waiting to address organizational issues until process improvements
are made will likely impede achievement of the full benefits of DOD's
reengineering efforts. 

For temporary duty travel, DOD reported that it spent about $3.5
billion in fiscal year 1993 and estimated that its processing costs
were as much as 30 percent of the direct travel cost.  This cost is
well above the 10-percent average reported for private companies and
the 6-percent rate that industry considers an efficient operation. 
Leading companies have been able to improve service and reduce
processing costs dramatically by reengineering their travel
management and implementing best practices for keeping costs down. 

Having recognized that its costs were too high, DOD chartered a task
force in July 1994 to reengineer travel management.  The task force
recommended that DOD consider applying private industry best
practices as part of its reengineering effort, and the Deputy
Secretary of Defense concurred with the recommendation.  While a
transition team has been tasked with developing an implementation
mechanism, sustained commitment and oversight by top management will
be critical to ensure success. 

Another area in which we have done many evaluations in the past and
that is also being addressed in a separate high-risk report is
defense financial management.  Among other things, our work shows
that DOD is planning to spend $51 million in military construction
funds on Defense Financial Accounting Service (DFAS) facilities that
are not needed.  Further, while DFAS is considering reengineering its
financial management systems and processes to improve productivity,
more aggressive reengineering commensurate with private sector
companies could increase infrastructure savings.  Specifically, the
number of employees for civilian payroll functions could be reduced
by an additional 470 persons, operating costs could be reduced by $16
million, and the number of operating locations needed for civilian
pay functions could be further reduced. 


   CENTRAL MEDICAL
---------------------------------------------------------- Chapter 1:6

The central medical infrastructure includes personnel and funding for
medical care provided to military personnel, dependents, and
retirees.  Activities include medical training, management of the
military health care system, and support of medical installations. 
During fiscal year 1997, medical infrastructure will account for
about $16 billion, or about 11 percent, of projected infrastructure
expenditures. 

Each of the three military departments operates its own health care
system.  To a large extent, these systems have many of the same
administrative, management, and operational functions.  Since 1949,
over 22 studies have reviewed the feasibility of creating a health
care entity within DOD to centralize management and administration of
the three systems.  Most of these studies encouraged some form of
organizational consolidation.  Consolidating the three military
medical systems into one centrally managed system could eliminate
duplicate administrative, management, and operational functions.  An
estimate of savings cannot be developed until numerous variables,
such as the extent of consolidation and the impact on command and
support structures, are determined.  The Army, Navy, and Air Force
have resisted any efforts to consolidate health care operations,
primarily on the grounds that each has unique medical activities and
requirements. 

Also, since 1972, DOD has obtained physicians from two source
programs:  the Health Professional Scholarship Program and the
Uniformed Services University of Health Sciences.  Under the former,
DOD pays tuition, fees, and a monthly stipend for students enrolled
in civilian medical schools.  These students are obligated to serve a
year of active duty for each year of benefits received.  Under the
latter, medical students are on active duty military service,
receiving pay and benefits, while attending medical school; they
incur a 10-year service obligation. 

Given the changes in operational scenarios and DOD's approach for
delivering peacetime health care, new assessments of needs for
physicians and the means to acquire and retain such physicians are
needed.  Our analysis shows that on a per-graduate basis, the
Uniformed Services University is the most expensive source of
military physicians.  With DOD education and retention costs of about
$3.3 million, the cost of a University graduate is more than two
times greater than the $1.5 million cost for a regular scholarship
program graduate.  CBO estimates that if the Uniformed Services
University of the Health Sciences were closed and a steady supply of
physicians were maintained through other sources, DOD could realize
savings of $272 million during fiscal years 1997-2001. 


WHAT NEEDS TO BE DONE
============================================================ Chapter 2

DOD has programs to identify potential infrastructure reductions in
many areas.  However, breaking down cultural resistance to change,
overcoming service parochialism, and setting forth a clear framework
for a reduced defense infrastructure are key to avoiding waste and
inefficiency.  To do this, the Secretary of Defense and the service
Secretaries need to give greater structure to their efforts by
developing an overall strategic plan.  The plan needs to establish
time frames and identify organizations and personnel responsible for
accomplishing fiscal and operational goals.  This plan needs to be
presented to the Congress in much the same way that DOD presented its
plan for force structure reductions in the Base Force Plan and the
Bottom-Up Review.  This will provide a basis for Congress to oversee
DOD's plan for infrastructure reductions and allow the affected
parties to see what is going to happen and when.  In developing the
plan, the Department should consider using a variety of means to
achieve reductions, including such things as consolidations,
privatization, outsourcing, reengineering, and interservicing
agreements.  It should also consider the need and timing for future
BRAC rounds, as suggested by the 1995 BRAC Commission and other
groups. 


RELATED GAO PRODUCTS
=========================================================== Appendix 3

Air Force Depot Maintenance:  Privatization-In-Place Plans Are Costly
While Excess Capacity Exists (GAO/NSIAD-97-13, Dec.  31, 1996). 

Army Depot Maintenance:  Privatization Without Further Downsizing
Increases Costly Excess Capacity (GAO/NSIAD-96-201, Sept.  18, 1996). 

Navy Depot Maintenance:  Cost and Savings Issues Related to
Privatizing-in-Place at the Louisville, Kentucky, Depot
(GAO/NSIAD-96-202, Sept.  18, 1996). 

Defense Acquisition Infrastructure:  Changes in RDT&E Laboratories
and Centers (GAO/NSIAD-96-221BR, Sept.  13, 1996). 

Defense Infrastructure:  Costs Projected to Increase Between 1997 and
2001 (GAO/NSIAD-96-174, May 31, 1996). 

Military Bases:  Opportunities for Savings in Installation Support
Costs Are Being Missed (GAO/NSIAD-96-108, Apr.  23, 1996). 

Military Bases:  Closure and Realignment Savings Are Significant, but
Not Easily Quantified (GAO/NSIAD-96-67, Apr.  8, 1996). 

Defense Infrastructure:  Budget Estimates for 1996-2001 Offer Little
Savings for Modernization (GAO/NSIAD-96-131, Apr.  4, 1996). 

Defense Transportation:  Streamlining of the U.S.  Transportation
Command Is Needed (GAO/NSIAD-96-60, Feb.  22, 1996). 

Military Bases:  Analysis of DOD's 1995 Process and Recommendations
for Closure and Realignment (GAO/NSIAD-95-133, Apr.  14, 1995). 


1997 HIGH-RISK SERIES
=========================================================== Appendix 4

An Overview (GAO/HR-97-1)

Quick Reference Guide (GAO/HR-97-2)

Defense Financial Management (GAO/HR-97-3)

Defense Contract Management (GAO/HR-97-4)

Defense Inventory Management (GAO/HR-97-5)

Defense Weapon Systems Acquisition (GAO/HR-97-6)

Defense Infrastructure (GAO/HR-97-7)

IRS Management (GAO/HR-97-8)

Information Management and Technology (GAO/HR-97-9)

Medicare (GAO/HR-97-10)

Student Financial Aid (GAO/HR-97-11)

Department of Housing and Urban Development (GAO/HR-97-12)

Department of Energy Contract Management (GAO/HR-97-13)

Superfund Program Management (GAO/HR-97-14)


























The entire series of 14 high-risk reports can be ordered using the
order number GAO/HR-97-20SET. 

*** End of document. ***