Defense Infrastructure: Costs Projected to Increase Between 1997 and 2001
(Letter Report, 05/31/96, GAO/NSIAD-96-174).

Pursuant to a congressional request, GAO analyzed the infrastructure
portion of the Department of Defense's (DOD) 1997 Future Years Defense
Program (FYDP).

GAO found that: (1) the DOD budget is projected to increase by $26
billion by year 2001 and infrastructure funding is expected to increase
by $9 billion during that same period; (2) these increases will decrease
the proportion of planned infrastructure funding from 60 percent to 57
percent; (3) portions of DOD infrastructure funding cannot be clearly
identified in the FYDP; (4) these funds pay for goods and services sold
by Defense Business Operations Fund (DBOF) activities, represent 20 to
25 percent of the DOD infrastructure budget, and are mostly logistical
purchases that cannot be specifically identified; (5) installation
support is expected to decrease between 1997 and 2001, but all other
infrastructure categories are projected to increase during that period;
and (6) DOD must achieve significant infrastructure savings from
operation and maintenance and military personnel appropriations for
future force modernization.

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

 REPORTNUM:  NSIAD-96-174
     TITLE:  Defense Infrastructure: Costs Projected to Increase Between 
             1997 and 2001
      DATE:  05/31/96
   SUBJECT:  Defense budgets
             Defense cost control
             Future budget projections
             Defense economic analysis
             Defense procurement
             Federal agency reorganization
             Military training
             Funds management
             Defense appropriations
             Logistics
IDENTIFIER:  DOD Future Years Defense Program
             Defense Business Operations Fund
             
Defense Infrastructure: Costs Projected to Increase Between 1997 and 2001
(Letter Report, 05/31/96, GAO/NSIAD-96-174).

Pursuant to a congressional request, GAO analyzed the infrastructure
portion of the Department of Defense's (DOD) 1997 Future Years Defense
Program (FYDP).

GAO found that: (1) the DOD budget is projected to increase by $26
billion by year 2001 and infrastructure funding is expected to increase
by $9 billion during that same period; (2) these increases will decrease
the proportion of planned infrastructure funding from 60 percent to 57
percent; (3) portions of DOD infrastructure funding cannot be clearly
identified in the FYDP; (4) these funds pay for goods and services sold
by Defense Business Operations Fund (DBOF) activities, represent 20 to
25 percent of the DOD infrastructure budget, and are mostly logistical
purchases that cannot be specifically identified; (5) installation
support is expected to decrease between 1997 and 2001, but all other
infrastructure categories are projected to increase during that period;
and (6) DOD must achieve significant infrastructure savings from
operation and maintenance and military personnel appropriations for
future force modernization.

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

 REPORTNUM:  NSIAD-96-174
     TITLE:  Defense Infrastructure: Costs Projected to Increase Between 
             1997 and 2001
      DATE:  05/31/96
   SUBJECT:  Defense budgets
             Defense cost control
             Future budget projections
             Defense economic analysis
             Defense procurement
             Federal agency reorganization
             Military training
             Funds management
             Defense appropriations
             Logistics
IDENTIFIER:  DOD Future Years Defense Program
             Defense Business Operations Fund
             
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Cover
================================================================ COVER


Report to Congressional Requesters

May 1996

DEFENSE INFRASTRUCTURE - COSTS
PROJECTED TO INCREASE BETWEEN 1997
AND 2001

GAO/NSIAD-96-174

Defense Infrastructure

(701093)


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

  DOD - Department of Defense
  FYDP - Future Years Defense Program

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


B-272167

May 31, 1996

The Honorable Charles E.  Grassley
The Honorable William V.  Roth, Jr.
United States Senate

As you requested, we analyzed the infrastructure portion of the
Department of Defense's (DOD) 1997 Future Years Defense Program
(FYDP), which covers fiscal years 1997-2001.  Specifically, you asked
that we provide DOD's projected costs for each of its eight
infrastructure categories.\1


--------------------
\1 An analysis of the infrastructure portion of DOD's fiscal years
1996-2001 FYDP is included in Defense Infrastructure:  Budget
Estimates for 1996-2001 Offer Little Savings for Modernization
(GAO/NSIAD-96-131, Apr.  4, 1996).  Because of significant changes in
DOD's inflation assumptions and other adjustments to infrastructure
categories, the 1996 and 1997 FYDPs are not directly comparable.  Our
review of the differences in the two FYDPs is continuing, and we plan
to report the results of that review at a later date. 


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

Between fiscal years 1997 and 2001, DOD plans to increase procurement
funds from $38.9 billion to $60.1 billion primarily for new weapon
systems and upgrades to existing systems.  The Secretary of Defense
has stated that he expects to achieve this 54 percent increase within
the President's proposed budgets with savings from infrastructure
reductions, cost avoidance from acquisition reforms, and privatizing
services. 

DOD defines infrastructure as those activities that provide support
services to mission programs, such as combat forces, and primarily
operate from fixed locations.  DOD accounts for its infrastructure
activities in eight categories:  installation support, central
training, central medical, central logistics, force management,
acquisition infrastructure, central personnel, and central command,
control, and communications.  However, DOD excludes many
intelligence, space, and command, control, and communications
programs.  These programs account for about $25.9 billion in fiscal
year 1997. 


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

Our analysis of the infrastructure portion of the 1997 FYDP shows
that infrastructure costs are projected to increase about $9 billion
from $146 billion in 1997 to $155 billion in 2001.  Although the
infrastructure portion of DOD's budget is projected to decrease from
about 60 percent in 1997 to about 57 percent in 2001, this is
primarily because DOD's total budget is projected to increase at a
faster rate than the infrastructure part of that budget. 

Although the installation support portion of DOD's infrastructure
budget is projected to decline during the 1997 to 2001 period, all
other categories of infrastructure are projected to increase.  The
combination of operation and maintenance and military personnel
appropriations fund about 80 percent of infrastructure activities
that can be clearly identified in the FYDP.  Thus, DOD must look to
these two appropriations if it intends to spend less for
infrastructure activities. 


   DOD'S INFRASTRUCTURE BUDGET IS
   INCREASING
------------------------------------------------------------ Letter :3

DOD's budget is projected to increase by $26 billion between 1997 and
2001, whereas infrastructure funding is projected to increase by $9
billion during this same period, as shown in figure 1.  As a result,
the proportion of planned infrastructure funding in DOD's budget is
projected to decrease from about 60 percent to 57 percent. 

   Figure 1:  Comparison of DOD's
   Total Planned Obligational
   Authority to Total Planned
   Infrastructure Funding, Fiscal
   Years 1997-2001 (dollars in
   billions)

   (See figure in printed
   edition.)

   Source:  GAO analysis of DOD
   data.

   (See figure in printed
   edition.)

As we explained in our April report, there are parts of the total
infrastructure funding that cannot be clearly identified in the FYDP,
according to DOD officials.  These funds pay for goods and services
sold by the Defense Business Operations Fund activities.  The
officials estimate that this is about 20 to 25 percent of DOD's total
infrastructure budget and is mostly logistics purchases that cannot
be specifically identified.  For subsequent analyses, we used direct
infrastructure funding identified in the FYDP since we had no basis
to allocate Defense Business Operations Funds across the
infrastructure categories. 

Figure 2 and table 1 show that installation support decreases
slightly between 1997 and 2001 but all the other infrastructure
categories increase during the period.  Although it is not possible
to allocate the Defense Business Operations Fund infrastructure in
programs by infrastructure categories, we believe that much of this
infrastructure would be included in the central logistics category
because many of the fund's activities perform logistics functions. 

   Figure 2:  Projected Trends for
   Infrastructure Categories,
   Fiscal Years 1997-2001 (dollars
   in billions)

   (See figure in printed
   edition.)

   Source:  GAO analysis of DOD
   data.

   (See figure in printed
   edition.)



                                Table 1
                
                  Projected Funding for Infrastructure
                   Categories, Fiscal Years 1997-2001

                         (Dollars in billions)

                                    FY      FY      FY      FY      FY
Infrastructure categories         1997    1998    1999    2000    2001
------------------------------  ------  ------  ------  ------  ------
Installation support            $25.10  $23.64  $22.68  $22.53  $23.03
Central training                 19.35   19.40   20.08   20.71   21.46
Central medical                  15.47   15.82   16.13   16.64   17.38
Central logistics\               13.33   13.30   14.18   14.15   14.70
Force management                 12.91   12.38   13.05   13.12   13.35
Acquisition infrastructure       10.25   10.64   10.97   11.19   11.76
Central personnel                10.33   10.24   10.41   10.60   10.83
Central command, control, and
 communications                   5.78    5.84    6.05    6.05    6.20
Resource adjustments\a            0.05    0.53    0.50    0.62    0.58
======================================================================
Total direct infrastructure\b   $112.5  $111.8  $114.0  $115.6  $119.3
                                     8       0       5       1       0
----------------------------------------------------------------------
\a These include adjustments for foreign currency fluctuations and
service and Defense Logistics Agency managed stock fund cash
requirements. 

\b Totals may not add due to rounding. 

Source:  GAO analysis of DOD data. 

As shown in figure 3 and table 2, most direct infrastructure
activities are funded by operation and maintenance and military
personnel appropriations.  Thus, if DOD is to achieve significant
infrastructure savings for future force modernization, the savings
must come from these accounts.  However, these appropriations have
been closely associated with the readiness and quality-of-life of the
force, the Secretary of Defense's priority areas for the last few
years. 

   Figure 3:  Direct
   Infrastructure Funding by
   Appropriation, Fiscal Years
   1997-2001 (dollars in billions)

   (See figure in printed
   edition.)

   Source:  GAO analysis of DOD
   data.

   (See figure in printed
   edition.)



                                Table 2
                
                Direct Infrastructure by Appropriation,
                         Fiscal Years 1997-2001

                         (Dollars in billions)

                                    FY      FY      FY      FY      FY
Appropriation                     1997    1998    1999    2000    2001
------------------------------  ------  ------  ------  ------  ------
Operation and maintenance       $56.30  $56.17  $56.41  $57.57  $59.50
Military personnel               33.53   33.10   33.67   34.33   35.20
Research, development,
 test, and evaluation            10.47   10.89   11.20   11.43   11.89
Military construction             4.99    4.15    4.15    3.84    3.96
Family housing                    3.98    3.84    4.08    4.08    4.12
Procurement                       2.38    2.53    3.48    3.21    3.46
Revolving funds and other\a       0.93    1.11    1.06    1.13    1.17
======================================================================
Total direct infrastructure\b   $112.5  $111.8  $114.0  $115.6  $119.3
                                     8       0       5       1       0
----------------------------------------------------------------------
\a These include adjustments for foreign currency fluctuations and
service and Defense Logistics Agency managed stock fund cash
requirements. 

\b Totals may not add due to rounding. 

Source:  GAO analysis of DOD data. 


   AGENCY COMMENTS
------------------------------------------------------------ Letter :4

The data and analysis in this report were provided to DOD for review
and comment.  In oral comments, DOD stated the data were complete and
accurate and concurred with the analysis. 


   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :5

To define and evaluate DOD's infrastructure activities in the 1997
FYDP, we interviewed the acting Director, Force and Infrastructure
Analysis Division in the Office of the Secretary of Defense, Program
Analysis and Evaluation.  Our analyses are based on data contained in
the fiscal year 1997 FYDP.  In addition to the FYDP and associated
annexes, we reviewed DOD's Reference Manual for Defense Mission
Categories, Infrastructure Categories, and Program Elements, prepared
in conjunction with the Institute for Defense Analysis.  We also
reviewed the President's fiscal year 1997 budget submission and our
prior reports. 

Our work was conducted during the month of May 1996 in accordance
with generally accepted government auditing standards. 


---------------------------------------------------------- Letter :5.1

We are providing copies of this report to appropriate congressional
committees; the Secretaries of Defense, the Air Force, the Army, and
the Navy; and the Director, Office of Management and Budget.  We will
also provide copies to other interested parties upon request. 

If you have any questions concerning this report, please call me on
(202) 512-3504.  Major contributors to this report were Robert
Pelletier, William Crocker, Margaret Morgan, Edna Thea Falk, and
Scott Hornung. 

Richard Davis
Director, National Security
 Analysis


*** End of document. ***