Future Years Defense Program: 1996 Program Is Considerably Different From
the 1995 Program (Letter Report, 09/15/95, GAO/NSIAD-95-213).

Pursuant to a congressional request, GAO compared the Department of
Defense's (DOD) fiscal year (FY) 1996 Future Years Defense Program
(FYDP) with its FY 1995 FYDP, focusing on: (1) what major program
adjustments DOD made from FY 1995 to FY 1996; (2) the implications of
these changes for the future; and (3) whether the FY 1996 FYDP complies
with statutory requirements.

GAO found that: (1) the FY 1996 FYDP differs considerably from the FY
1995 FYDP; (2) total FY 1996 program costs have increased by about $12
billion; (3) $27 billion in planned weapon system modernization programs
have been eliminated, reduced, or deferred to the year 2000 and beyond;
(4) the military personnel, operation and maintenance, and family
housing accounts have increased by over $21 billion and continue to
increase to support DOD emphasis on readiness and quality of life
programs; (5) DOD plans to compensate for near-term 1996 FYDP
procurement decreases by substantially increasing procurement in FY 2000
and FY 2001 by infrastructure savings, acquisition reforms, and real
budget growth; (6) the FY 1996 FYDP does not reflect reduced
infrastructure costs because of funding increases for base operations,
headquarters functions, and quality-of-life programs; (7) the FY 1996
budget resolution contains $24.2 billion more for DOD than the
President's FY 1996 through FY 2001 budget request, giving DOD an
opportunity to restore some reduced or deferred programs; (8) the
additional 1996 funding could mitigate the need for DOD to increase
out-year budgets; and (9) the FY 1996 FYDP complies with applicable
legislative requirements.

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

 REPORTNUM:  NSIAD-95-213
     TITLE:  Future Years Defense Program: 1996 Program Is Considerably 
             Different From the 1995 Program
      DATE:  09/15/95
   SUBJECT:  Defense procurement
             Future budget projections
             Advanced weapons systems
             Military housing
             Presidential budgets
             Defense economic analysis
             Defense cost control
             Research and development
             Compliance
             Defense appropriations
IDENTIFIER:  DOD Bottom-Up Review
             LPD-17 Ship
             F-22 Aircraft
             F/A-18C/D Aircraft
             Tomahawk Cruise Missile
             B-2 Aircraft
             DOD Future Years Defense Program
             
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Cover
================================================================ COVER


Report to Congressional Requesters

September 1995

FUTURE YEARS DEFENSE PROGRAM -
1996 PROGRAM IS CONSIDERABLY
DIFFERENT FROM THE 1995 PROGRAM

GAO/NSIAD-95-213

Future Years Defense Program

(701062)


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

  DOD - Department of Defense
  FYDP - Future Years Defense Program

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


B-265840

September 15, 1995

The Honorable William V.  Roth, Jr.
Chairman, Committee on Governmental Affairs
United States Senate

The Honorable John R.  Kasich
Chairman, Committee on the Budget
House of Representatives

The Honorable Charles E.  Grassley
United States Senate

At your request, we compared the Department of Defense's (DOD) fiscal
year 1996 Future Years Defense Program (FYDP) with the FYDP for
fiscal year 1995.  Specifically, you asked us to determine (1) what
major program adjustments were made from the 1995 FYDP to the 1996
FYDP, (2) what the implications of these changes are for the future,
and (3) whether the 1996 FYDP complies with statutory requirements. 


   BACKGROUND
------------------------------------------------------------ Letter :1

Dramatic changes that occurred in the world as a result of the end of
the Cold War and the dissolution of the Soviet Union have
fundamentally altered the United States' security needs.  In March
1993, DOD initiated a comprehensive review to define and redesign the
nation's defense strategy, force structure, modernization,
infrastructure, and budgets "from the bottom up." The report of the
Bottom-Up Review, issued in October 1993, concluded that DOD could
reduce its forces and infrastructure from a posture designed to meet
a global Soviet threat to one that focuses on potential regional
conflicts.\1

In our review of the 1995 FYDP,\2 the first FYDP to reflect the
implementation of the Bottom-Up Review strategy, we concluded that
DOD's major planning assumptions relied too heavily on optimistic
cost estimates and potential savings.  As a result, it had not gone
far enough to meet economic realities, thus leaving its new plan with
more programs than proposed budgets would support.  This included
approximately $20 billion in overprogramming, which DOD identified in
the 1995 FYDP as undistributed future adjustments. 


--------------------
\1 DOD defines infrastructure as all DOD activities other than those
directly associated with operational forces, intelligence, strategic
defense, and applied research and development. 

\2 Future Years Defense Program:  Optimistic Estimates Lead to
Billions in Overprogramming (GAO/NSIAD-94-210, July 29, 1994). 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :2

The fiscal year 1996 FYDP, which covers fiscal years 1996-2001, is
considerably different from the 1995 FYDP, which covers fiscal years
1995-99.  First, the total program increased by about $12.6 billion
in the
4 common years of both plans (fiscal years 1996-99).  Second,
approximately $27 billion in planned weapon system modernization
programs for these 4 years have been eliminated, reduced, or deferred
to the year 2000 and beyond.  Third, the military personnel,
operation and maintenance, and family housing accounts increased by
over $21 billion during the common period and continue to increase to
2001 to support Defense's emphasis on readiness and quality-of-life
programs.  The net effect is a more costly defense program, despite
substantial reductions in DOD's weapon modernization programs between
1996 and 1999. 

Defense plans to compensate for the decline in procurement during the
early years of the 1996 FYDP by substantially increasing procurement
funding in 2000 and 2001.  The Secretary of Defense plans to pay for
the increased future modernization with a combination of savings
achieved from infrastructure reductions and acquisition reforms and
from real budget growth. 

Our analysis shows that the 1996 FYDP does not reflect reduced
infrastructure costs, primarily because of funding increases for base
operation and management headquarters functions and quality-of-life
programs.  However, the Concurrent Resolution on the Budget for
Fiscal Year 1996 includes over $24 billion more for Defense than
requested in the President's budget for fiscal years 1996-2001.  The
additional budget amounts are expected, in part, to lessen the need
for Defense to reduce or defer weapon modernization programs to meet
other near-term readiness requirements.  Assuming the funds are
appropriated, Congress will specify how Defense is to spend some of
the added funds; however, DOD may have an opportunity to restore some
programs that were reduced or deferred to the year 2000 and beyond. 
Further, the additional near-term funding could mitigate the need for
DOD to increase out-year budgets. 

The fiscal year 1996 FYDP was submitted in compliance with applicable
legislative requirements. 


   1996 FYDP SHIFTS WEAPONS
   PROCUREMENT TO LATER YEARS TO
   FUND HIGHER PRIORITY PROGRAMS
------------------------------------------------------------ Letter :3

The 1995 FYDP, which totaled $1,240 billion, represented DOD's 5-year
program plan through fiscal year 1999.  The 1996 FYDP, which totals
$1,544 billion, covers the 6-year period from fiscal year 1996
through fiscal year 2001.  The 1996 plan overlaps the 1995 plan for
the years 1996-99.  Table 1 compares the two plans by primary
appropriation account.  The shaded area represents the common years
to both plans. 



                                     Table 1
                     
                     Comparison of DOD's 1995 and 1996 FYDPs
                         by Primary Appropriation Account

                              (Dollars in billlions)


