Army Reserve Components: Cost, Readiness, and Personnel Implications of
Restructuring Agreement (Letter Report, 03/07/95, GAO/NSIAD-95-76).

Pursuant to a congressional request, GAO reviewed the Offsite Agreement,
a major restructuring of the Army National Guard and Army Reserve,
focusing on the agreement's: (1) implementation costs; (2) impact on
readiness; (3) efforts to absorb displaced personnel; (4) effect on the
implementation of the Goldwater-Nichols Department of Defense
Reorganization Act of 1986; and (5) impact on the Special Operations
Command's training of special Guard forces.

GAO found that: (1) the Offsite Agreement provides for the allocation of
367,000 positions to the Army National Guard and 208,000 positions to
the Army Reserve and for a realignment of functions between the Guard
and Reserve; (2) to achieve the agreement, the Guard and Reserve will
exchange about 10,000 authorized positions, the Reserve will transfer
about 4,300 positions to the Guard, and the Guard will reallocate about
7,700 positions; (3) the Army's $85-million estimate for implementing
the agreement is understated by about $100 million because it excludes
related training costs and includes savings that are not a result of the
agreement; (4) it is too early to determine how the agreement will
affect readiness; (5) the Reserve is helping inactivated soldiers find
new positions in other Reserve units, but it is not helping them switch
to the Guard; (6) some Reserve personnel will have difficulty finding
new Guard units because the Guard already has personnel in many
positions and is training its own personnel to fill available positions;
(7) the Guard is recruiting inactivating Reserve special forces
personnel and will add them to existing units or special temporary
detachments; (8) the Reserve plans to recruit deactivating Guard
personnel; and (9) there is no evidence that the Guard's status will
hinder the Special Operations Command's training responsibilities under
the Reorganization Act.

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

 REPORTNUM:  NSIAD-95-76
     TITLE:  Army Reserve Components: Cost, Readiness, and Personnel 
             Implications of Restructuring Agreement
      DATE:  03/07/95
   SUBJECT:  Defense contingency planning
             Federal agency reorganization
             Combat readiness
             Armed forces reserves
             National Guard
             Army personnel
             Human resources utilization
             Armed forces reserve training
             Military operations
             Personnel recruiting
IDENTIFIER:  DOD Bottom-Up Review
             Black Hawk Helicopter
             Offsite Agreement
             Army Aviation Restructure Initiative
             
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Cover
================================================================ COVER


Report to Congressional Requesters

March 1995

ARMY RESERVE COMPONENTS - COST,
READINESS, AND PERSONNEL
IMPLICATIONS OF RESTRUCTURING
AGREEMENT

GAO/NSIAD-95-76

Army Reserve Components


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


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


B-259379

March 7, 1995

Congressional Requesters

On December 10, 1993, the Secretary of Defense announced a major
restructuring of the Army National Guard and Army Reserve (we refer
to these collectively as reserve components).  Specifically, he laid
out the terms of the Offsite Agreement, which specified how personnel
reductions would be distributed between the reserve components. 

In response to your concerns about the effects of the agreement, we
evaluated (1) its cost of implementation, (2) its impact on the
reserve components' readiness, and (3) reserve components' efforts to
absorb displaced personnel.  Because the agreement is in the initial
stages of implementation, we can only estimate its impact on these
areas. 

Finally, as you requested, we assessed the agreement's impact on the
implementation of the Goldwater-Nichols Department of Defense
Reorganization Act of 1986.\1

Specifically, we determined whether the agreement decreases the
Special Operations Command's control over training of special forces
in the Guard. 


--------------------
\1 Public Law 99-433, October 1, 1986, 10 U.S.C.  161-166. 


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

The Department of Defense's bottom-up review concluded that the
Army's reserve components should be reduced to 575,000 positions by
1999--a 201,000 decrease since fiscal year 1989.  A group of senior
officers of the Army, its reserve components, and organizations that
represent Army component issues was tasked with providing a
recommendation to the Secretary of the Army on the allocation of the
575,000 positions between the Guard and Reserve.\2 The group, through
the Offsite Agreement, allocated the positions as follows:  367,000
positions to the Army National Guard and 208,000 to the Army Reserve. 

The agreement also included a realignment of functions between the
Guard and Reserve.  This is to be accomplished through three separate
approaches--swap, migration, and reallocation. 

The swap involves about 10,000 authorized positions in each reserve
component.  The Guard agreed to inactivate 128 combat support and
combat service support units such as medical, military police, and
transportation units and transfer about 10,000 authorized positions
associated with these units to the Reserve.  The Reserve agreed to
inactivate 28 units, including most of its remaining combat units and
its last remaining special forces units, and transfer about 10,000
positions associated with these units to the Guard.  According to the
Army, the swap will more clearly concentrate combat support and
combat service support functions in the Reserve and combat functions
in the Guard. 

The migration involves the transfer of about 4,300 authorized
positions and over 250 helicopters from the Reserve to the Guard. 
The Reserve agreed to nearly deplete its helicopter resources by
inactivating 11 utility helicopter aviation and aviation maintenance
units and 15 medical air ambulance units.  According to Guard
officials, the migration and other initiatives will provide enough
helicopters for the Guard to cover the needs of each state.  Without
the migration, this objective would have been jeopardized because the
Guard is scheduled to lose helicopters as part of the Army's general
downsizing. 

The reallocation allows the Guard to keep about 7,700 authorized
positions for engineer and military police units that otherwise would
have been inactivated.  According to a Guard official, this will
enable the Guard to better support its state missions.  Other units
were eliminated so the positions could be reallocated within the
Guard.  The reallocation does not affect the Reserve, nor does it
affect the personnel end strength of the Guard. 


--------------------
\2 The group (called the Offsite group) was established in 1991 to
advise the Army leadership on key issues affecting the reserve
components and to circumvent potential disputes between them.  Its
deliberations are outside normal Department of Defense channels.  The
organizations were the National Guard Association of the United
States, Adjutant General Association, Senior Army Reserve Commanders
Association, Reserve Officers Association, and Association of the
U.S.  Army. 


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

Implementation of the Offsite Agreement could cost over $180 million. 
The Army's latest cost estimate is about $85 million.  However, we
believe that the Army's estimate excludes training costs that the
Guard will likely incur and includes savings in operating costs that
would have resulted regardless of the agreement. 

It is too early to tell how the agreement will affect readiness for
most units.  The Guard did not identify specific units that will
assume the missions of 20 inactivating Reserve units; another 107
Reserve units are new and have 1 year to establish their readiness
ratings.  We estimated the readiness impact for some units.  Thirteen
units will be replaced by units with lower readiness ratings, while
18 units will be replaced by units having the same or higher
readiness ratings. 

The Guard and Reserve have primarily left it up to the reserve
component commands and individual units to help affected persons find
new units.  In three areas already affected by the agreement--the
157th Separate Infantry Brigade, aviation units, and special
operations units--some of the commands' and units' initiatives appear
to be working well.  Others, however, appear to discourage the
transfer of personnel, even if a transfer would result in a more
effective use of their skills.  Senior and experienced officers and
enlisted persons in inactivating units appear to have the most
difficulty obtaining positions in other units in the Reserve and the
Guard.  Reserve helicopter pilots and technicians are also
experiencing difficulties. 

We found no evidence indicating that the Special Operations Command
will have problems exercising control over the training of Guard
special operations forces. 


   ARMY AND RESERVE COMPONENTS
   UNDERSTATED THE COST OF
   IMPLEMENTING THE AGREEMENT
------------------------------------------------------------ Letter :3

The Army and its reserve components considered several factors in
calculating the cost to implement the agreement.  The factors include
the percentage of personnel who would separate from military service
and receive benefits, the number of facilities that would have to
close, and the amount of goods and equipment that would have to be
moved.  In March 1994, the Assistant Secretary of Defense for Reserve
Affairs and the Vice Chief of Staff of the Army testified that the
short-term cost to implement the agreement was less than $100
million.  According to Army officials, this was a rough estimate
because the Army could not be certain how many military persons would
transfer or leave.  Also, the Army could not determine the actual
cost of closing facilities and transporting goods until the reserve
components identified which units would be affected.  However, when
we began our audit work in June 1994, the Army estimated the total
cost of implementing the agreement at about $38 million from fiscal
year 1995 to fiscal year 1999. 

In response to our audit questions, the Army revised some of its
estimates and, on the basis of these revisions, increased it to about
$85 million.  For example, Army officials projected that transition
benefits for Reservists whose units will deactivate would probably be
greater than originally estimated.\3 It also estimated that the
Reserve will need more funds for training and construction of
facilities and that the operations costs for units involved in the
swap would be more than anticipated. 

However, we believe that this revised estimate is understated by
about $100 million because it excludes training costs that are
related to the agreement and includes savings that are not a result
of the agreement.  In table 1, we compare our estimate with the
Army's initial and revised estimates. 



                           Table 1
           
              Cost Estimates of Implementing the
                      Offsite Agreement

                          Army's        Army's
                         initial       revised
Cost category           estimate      estimate  Our estimate
------------------  ------------  ------------  ------------
Transition                 $92.5        $109.0        $109.0
 benefits
Training                    15.7          24.5          38.5
Operations               (107.8)        (96.2)        (13.7)
Transportation               5.9           5.9           5.9
Facilities                  31.7          41.7          41.7
============================================================
Total                      $38.0         $84.9        $181.4
------------------------------------------------------------
We accepted the Army's revised estimates for transition benefits,
transportation of equipment, and costs of facilities because we had
no basis to question their reasonableness.  However, we found that
the revised estimate excluded training costs that the Guard will
likely incur and included savings in aircraft operating costs that
resulted from another initiative. 

The Guard will receive the missions of five Reserve assault
helicopter battalions that were being modernized with Blackhawk
helicopters.  The Reserve had trained the equivalent of 3-1/2
battalions for the Blackhawk systems.  The Guard did not include in
its estimates the cost to train a like amount of personnel.  We
estimate this training cost to be about $14 million because the Guard
units that will take over the Blackhawk missions have only a few
Blackhawk trained personnel.  Also, most Blackhawk qualified Reserve
personnel may not join the Guard.  The Guard will also have to train
the remaining 1-1/2 battalions, but we do not consider this a cost of
the agreement because it is an expense that the Reserve would have
had if it were not for the agreement. 

The Army estimated that the Guard will avoid about $82.5 million in
operating expenses by turning in excess nonmodern aircraft once the
Blackhawks arrive.  We believe the savings should not be attributed
to the agreement because these aircraft have been programmed for
disposal for several years.  Consequently, we deleted the $82.5
million savings from the operations cost category, leaving an
anticipated savings of $13.7 million.  According to Guard officials,
the $13.7 million savings to the federal government is that part of
the Guard's operating costs that is paid by state funds. 


--------------------
\3 Pay and benefits for reserve component members who are
involuntarily or voluntarily separated from military service due to
downsizing or unit inactivation. 


   AGREEMENT'S IMPACT ON READINESS
   CANNOT BE ESTIMATED YET FOR
   MOST UNITS
------------------------------------------------------------ Letter :4

The Department's current system for reporting readiness to the Joint
Chiefs of Staff is the Status of Resources and Training System.\4
This system measures the extent to which individual service units
possess the required resources and training to undertake their
wartime missions.  The system compares the current status of specific
elements considered essential to unit readiness--personnel and
equipment on hand, equipment condition, and the training of operating
forces--with those needed to undertake wartime missions. 

We compared the readiness levels (as of April 1994) of the
inactivating units with the readiness levels of the units assuming
the missions of the inactivating units.  Table 2 shows the results of
that comparison. 



                           Table 2
           
             Readiness Comparison of Units as of
                          April 1994

                                              Cannot
                            No                    be
                      degradat  Degradatio  estimate
                           ion           n         d   Total
--------------------  --------  ----------  --------  ======
Swap
Guard to Reserve             9          11       108     128
Reserve to Guard             8           -        20      28
Migration
Utility helicopter           -           2         9      11
Air ambulance                -           -        15      15
============================================================
Total                       17          13       152     182
------------------------------------------------------------
We could not estimate the agreement's impact on readiness for 152 of
the 182 units affected by the swap and migration.  However, we
estimated the readiness impact for some units.  Thirteen units will
be replaced by units with lower readiness ratings, while 17 units
will be replaced by units having the same or higher readiness
ratings. 

We do not have estimates for the agreement's readiness impact on
152 units because new units are being created or individual units
have not been designated to replace inactivating units.  For example,
we cannot identify the readiness impact for 20 of the 28 Reserve to
Guard transfers involved in the swap because the Guard did not
designate specific units that will assume the missions of the 20
Reserve units.  In all but one of the 108 Guard to Reserve transfers,
we could not estimate the readiness impact because they involved the
establishment of new Reserve units. 

The 107 new Reserve units have up to 1 year to organize and build up
their readiness ratings before the Guard units are inactivated. 
During this year, the Reserve units' readiness ratings can be
expected to improve as the units obtain personnel and equipment and
train their personnel, while the Guard units' ratings can be expected
to decrease as these units lose personnel and equipment.  Hence, the
impact on readiness could vary over time.  For some units, this time
could be very short.  For example,
37 Reserve units are being established within 50 miles of existing
inactivating Guard units to utilize Guard personnel, equipment, and
facilities.  We were told that in some of these cases, Guard units
will convert to Reserve units. 

In 13 instances, some degradation in readiness may occur.  For
example, two Guard units that will take on the missions of Reserve
Blackhawk helicopter units do not have enough Blackhawk helicopters
or trained personnel to satisfy unit requirements.  Reserve unit
personnel told us that it may take 3 to 5 years before these Guard
units reach the readiness level of the Reserve units that are
deactivating.  According to Army officials, the Army plans to convert
these units within a 3-year period, and they anticipate, on the basis
of National Guard historical data, that unit readiness will not be
degraded longer than 1 year during the conversion.  In the other 11
instances, Guard units had higher overall readiness ratings than
existing Reserve units taking on their missions. 

In 17 instances, we noted either little impact on readiness or an
improvement in readiness.  For example, nine inactivating Guard units
had the same or higher overall readiness ratings as existing Reserve
units taking on their missions.  Similarly, six of the eight Guard
field artillery and armor units taking on the missions of Reserve
units had higher overall readiness ratings than the inactivating
Reserve units. 


--------------------
\4 We reported in Military Readiness:  DOD Needs to Develop a More
Comprehensive Measurement System (GAO/NSIAD-95-29, Oct.  27, 1994)
that this system provides valuable information on readiness but that
the information is limited and cannot signal an impending change in
readiness. 


      CONTINGENCY FORCE POOL UNITS
---------------------------------------------------------- Letter :4.1

Contingency force pool units support a crisis response force, serve
as follow-on forces, or serve as forces in a separate contingency. 
It is important for these units to maintain a high state of readiness
because these units often deploy to military conflicts
early--sometimes even before some active units.  Fifty-eight
inactivating Guard units in the swap and seven inactivating Reserve
units in the aviation migration portion of the agreement had
contingency force pool designations.  These designations did not
always transfer to the units that assumed the missions of the
inactivating units.  We found that the agreement's impact on
readiness varied on a unit-by-unit basis. 

Most of the Guard's contingency force pool designations transferred
to the Reserve as of November 22, 1994.  For 44 of the 58 units,
existing Reserve units assumed the contingency force pool assignments
previously assigned to the Guard, while for 14 units, new Reserve
units will take on the assignment.  We found that 29 of the 44 Guard
units had higher overall readiness ratings than the Reserve units
taking on the contingency force pool assignment.  For the remaining
15 units, the overall readiness ratings for the Reserve units are
equal to or higher than those of the Guard units.  We could not
ascertain the impact on readiness for the 14 new Reserve units. 

The Reserve aviation units' contingency force pool designations
transferred to the Guard as of November 22, 1994.  In six of the
seven cases, the Guard units had the same or higher overall readiness
ratings as the Reserve units they are replacing.  In the remaining
case, the Guard unit had a lower readiness rating. 


   INITIATIVES TO REASSIGN
   DISPLACED PERSONNEL HAVE MIXED
   RESULTS
------------------------------------------------------------ Letter :5

Most of the Reserve troops facing inactivation will be released
during fiscal year 1995, while most of the affected Guard troops will
not be inactivated until subsequent years.  Table 3 shows the number
of units and authorized positions that will be affected in fiscal
years 1994-95 and 1996-97. 



                           Table 3
           
           Comparison of Units Inactivated in 1994-
           95 and Units to Be Inactivated in 1996-
                              97


                                    Authoriz        Authoriz
                                          ed              ed
                              Unit  personne  Unit  personne
                                 s         l     s         l
----------------------------  ----  --------  ----  --------
Guard                           16     2,265   112     8,682
Reserve                         24     7,352    30     6,705
============================================================
Total                           40     9,617   142    15,387
------------------------------------------------------------
Because we cannot anticipate what future actions the reserve
components will take to accommodate displaced personnel, we focused
our attention in three primary areas affected in fiscal years 1994
and 1995 by the agreement--the 157th Separate Infantry Brigade,
aviation units, and special operations units.  These account for 23
of the 40 units and about 6,900 of 9,600 authorized personnel. 


      157TH SEPARATE INFANTRY
      BRIGADE
---------------------------------------------------------- Letter :5.1

We found that the Army Reserve Command is helping inactivated
soldiers find new positions in other Reserve units but is not helping
them switch to the Guard even though the available Guard positions
are more consistent with their occupational skills and offer greater
longevity.  For example, the Reserve Command in eastern Pennsylvania
has offered assignments to nearly all the troops in the 157th
Separate Infantry Brigade.  These positions generally are in other
Reserve units within a 50-mile range of the soldiers' homes.  These
include several new units in eastern Pennsylvania established to
accommodate troops from the 157th.  But many of the offers will be
for overstrength positions that can only be held for 1 year, and few
will be for assignments in the soldiers' current occupational skills. 
According to reserve officials, they expect few permanent positions
to become available to senior officers and enlisted personnel. 

Reserve and Guard officials told us that many soldiers in the 157th
would rather switch from the Reserve to the Guard because they are
combat soldiers and the Guard is the only reserve component with
combat units.  We were also told that the Reserve will release some
troops to the Guard but is doing several things that will make
switching unattractive.  For example, soldiers transferring to
Reserve positions and requiring new occupational skills will
immediately begin training for the new positions, while soldiers who
elect to join the Guard will be used to close out the Brigade and
will not be released until the inactivation date for the 157th, which
is scheduled for September 1995. 

Pennsylvania Army National Guard officials told us that, except for
senior officers and enlisted persons, they would welcome the transfer
of troops from the 157th.  To make the transfer to the Guard more
attractive, the Guard recently announced that it would honor most
Reserve bonus contracts and student loan repayment plans. 


      AVIATION UNITS
---------------------------------------------------------- Letter :5.2

Most Reserve helicopter pilots, technicians, and civilians associated
with aviation units will have difficulty finding new units in the
Guard.  The Guard already has personnel for most of these positions,
except for the Blackhawk units where the Guard has few qualified
Blackhawk personnel.  However, even for these units, we do not
anticipate that many Reserve aviators will transfer to the Guard
because the Guard is training its own personnel to fill available
positions.  For example, in Illinois, the Guard has assigned the
Blackhawk mission to a unit some distance away from the inactivating
Reserve unit and is training Guard personnel to become Blackhawk
qualified. 

The National Guard Bureau has requested that the state adjutant
generals establish assignment advisory boards for aviation personnel,
which would match available Reservists and Guard personnel with
available positions and select those who are best qualified.  As of
January 1995, most states affected by the agreement have scheduled
advisory boards. 


      SPECIAL FORCES UNITS
---------------------------------------------------------- Letter :5.3

The Army National Guard recruited inactivating Reserve special forces
personnel and added them to existing Guard units or to special
temporary detachments it created.  For example, the Guard created
three detachments with an authorized strength of 83 persons each to
accommodate personnel of the Reserve 12th special forces group.  This
arrangement places the Guard in an overstrength position with too
many units, a situation that Army officials stated will be remedied
in 18 months.  During this time, the Guard plans to assess all Guard
special forces units and retain those units having the highest
readiness ratings and sustainability at the end of the test period. 


      OTHER INITIATIVES
---------------------------------------------------------- Letter :5.4

We learned of other initiatives to accommodate displaced personnel. 
For example, the Reserve is establishing 37 new units within 50 miles
of inactivating Guard units.  It plans to recruit the deactivating
Guard personnel for these units.  Included in the 37 are 6 watercraft
units in Washington State, which are to assume the missions of
deactivating Guard units. 


      LEGISLATION REQUIRES ARMY
      REPORT ON DISPLACED
      PERSONNEL
---------------------------------------------------------- Letter :5.5

The Defense Appropriations Act for fiscal year 1995 directed the
Secretary of the Army to ensure that members of units inactivating as
a result of the agreement be reassigned to remaining units to the
maximum extent practicable.  It further directed the Secretary to
submit semi-annual reports to the congressional defense committees on
the number of members reassigned while the agreement is in effect. 


   SPECIAL OPERATIONS COMMAND CAN
   CONTROL TRAINING OF NATIONAL
   GUARD SPECIAL FORCES
------------------------------------------------------------ Letter :6

The Offsite Agreement places all reserve component special forces in
the Guard, which is generally state-controlled during peacetime.  We
found no evidence that the Guard's status would hinder the Special
Operations Command's training responsibilities under the
Goldwater-Nichols Department of Defense Reorganization Act of 1986. 

The Goldwater-Nichols Department of Defense Reorganization Act of
1986 authorizes combatant commands to exercise command and control
over their forces.  As a combatant command, the U.S.  Special
Operations Command is responsible for preparing active and reserve
component special operations forces to carry out assigned missions,
including the training of assigned forces. 

As we reported in March 1994,\5 special operations forces have become
an integral part of the combatant commanders' peacetime mission. 
Overseas training exercises are held frequently in support of this
mission, and according to Command officials, reserve component forces
are often called upon to participate in this training.  For example,
troops from the Mississippi, Maryland, and Alabama National Guards
conducted training programs for military personnel and provided
assistance to local citizens in Honduras in 1994.  Further, the
Guard's participation in overseas training exercises is ensured as a
result of a 1990 U.S.  Supreme Court decision.\6 This decision
affirmed a federal law restricting governors from withholding consent
for overseas training for Guard units put on active duty. 

The Department of Defense is formulating policy guidance that will
clarify the relationship between the Guard and the combatant commands
as established by law and will ensure the authority of Governors will
not be limited over their National Guard forces when these forces are
not in federal service.  An Army National Guard official told us that
the policy guidance should more clearly give combatant commands
authority over training and readiness of assigned reserve component
forces. 


--------------------
\5 Special Operations Forces:  Force Structure and Readiness Issues
(GAO/NSIAD-94-105, Mar.  24, 1994). 

\6 Perpich v.  Department of Defense, 496 U.S.  334 (1990). 


   AGENCY COMMENTS AND OUR
   EVALUATION. 
------------------------------------------------------------ Letter :7

In commenting on a draft of our report, the Department of Defense
agreed with all of our findings except for our cost estimate to
implement the Offsite Agreement.  Specifically, the Department said
that the $82.5 million in cost avoidance for the early inactivation
of aviation units is attributable to the agreement and should be
included in our estimate.  We continue to disagree with the
Department's position. 

In February 1993, 10 months prior to the Agreement, the Army's
Aviation Restructuring Initiative directed the National Guard to
inactivate over
600 helicopters because they were no longer needed to support
National Guard missions.  The Department said that the National Guard
agreed to turn in helicopters earlier than required by the Initiative
because of the agreement.  The Department further said that the $82.5
million is attributable to savings in operations and maintenance due
to the early turn-in schedule.  The Department was not able to
produce convincing evidence that the agreement had any impact on the
National Guard's turn-in schedule.  Since the Guard was already
required to turn in these aircraft, we continue to believe that the
savings should not be attributed to the agreement.  The Department's
comments are shown in appendix I. 


   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :8

We reviewed the provisions of the agreement and the actions taken by
the Army and reserve components to implement it.  We spoke with
Department of the Army, Army Reserve, and Army National Guard
officials to obtain documents and other information pertaining to the
cost and readiness implications of the agreement, the reserve
components' efforts to absorb displaced personnel, and the
agreement's impact on control of special forces in the reserve
components.  We also spoke with officials of the U.S.  Special
Operations Command to discuss the Command's control over Guard units. 

We visited National Guard and Army Reserve Command offices and units
in Pennsylvania and Illinois and an Army Reserve Command office in
Missouri to discuss actions planned or underway to assist displaced
personnel in finding new units.  We also met with Army Reserve
Association officials to discuss their views on the agreement.  The
association is not represented in the Offsite group. 

Our review was conducted between May and December 1994 in accordance
with generally accepted government auditing standards. 


---------------------------------------------------------- Letter :8.1

We are sending copies of this report to the Secretary of Defense, the
Secretary of the Army, appropriate congressional committees, and
other interested parties. 

The major contributors to this report are Robert Pelletier,
Donald Campbell, Mae Jones, Paul O'Brien, and Frances Scott.  Please
contact me at (202) 512-3504 if you or your staff have any questions
concerning this report. 

Richard Davis
Director, National Security
 Analysis

List of Requesters

The Honorable Frank R.  Lautenberg
The Honorable Richard J.  Santorum
The Honorable Arlen Specter
United States Senate

The Honorable Robert E.  Andrews
The Honorable Robert A.  Borski
The Honorable Michael N.  Castle
The Honorable William F.  Clinger, Jr.
The Honorable Jerry F.  Costello
The Honorable Richard J.  Durbin
The Honorable Thomas M.  Foglietta
The Honorable Bob Franks
The Honorable George W.  Gekas
The Honorable Benjamin A.  Gilman
The Honorable William F.  Goodling
The Honorable James C.  Greenwood
The Honorable Henry J.  Hyde
The Honorable Ron Klink
The Honorable Paul McHale
The Honorable Martin T.  Meehan
The Honorable Bud Shuster
The Honorable Christopher H.  Smith
The Honorable Robert S.  Walker
The Honorable Curt Weldon
The Honorable Dick Zimmer
House of Representatives




(See figure in printed edition.)Appendix I
COMMENTS FROM THE DEPARTMENT OF
DEFENSE
============================================================== Letter 

See comment 1. 



(See figure in printed edition.)



(See figure in printed edition.)

Now on pp.  3-5. 

See comment 1. 



(See figure in printed edition.)

Now on pp.  5-6. 



(See figure in printed edition.)

Now on pp.  6-7. 



(See figure in printed edition.)

Now on pp.  7-9. 



(See figure in printed edition.)

Now on p.  10. 


The following is a GAO comment on the Department of Defense's letter
dated February 10, 1995. 


   GAO COMMENT
------------------------------------------------------------ Letter :9

1.  The $22.6 million for the early inactivation of overstructured
aviation units is included in the $82.5 million we deleted from
Army's savings estimates. 

