DOD Force Mix Issues: Converting Some Support Officer Positions to
Civilian Status Could Save Money (Letter Report, 10/23/96,
GAO/NSIAD-97-15).

GAO reviewed certain military support officer positions as possible
candidates for conversion to civilian status, focusing on the: (1)
criteria the military services use to determine which officer positions
are military essential; (2) officer positions that could be filled with
civilians without harming operational capabilities; and (3) cost savings
achieved through the conversion of military positions to civilian
status.

GAO found that: (1) Department of Defense (DOD) Directive 1100.4
provides guidance for determining which positions are military
essential; (2) federal civilian personnel cost less than military
personnel of equal rank and grade; (3) DOD could achieve cost savings of
about $95 million by converting 9,500 military officer positions to
civilian status; (4) the cost savings achieved by the conversion of
these military positions could fund other military operations; and (5)
military leaders perceived preference for military personnel and the
civilian drawdown in DOD could be impediments to these military to
civilian conversions.

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

 REPORTNUM:  NSIAD-97-15
     TITLE:  DOD Force Mix Issues: Converting Some Support Officer 
             Positions to Civilian Status Could Save Money
      DATE:  10/23/96
   SUBJECT:  Military downsizing
             Military cost control
             Personnel management
             Military officers
             Personnel classification
             Civilian employees
             Human resources utilization
             Combat readiness
             Military operations
IDENTIFIER:  Medicare Program
             Federal Employees Retirement System
             Federal Employees Health Benefits Program
             Federal Thrift Savings Plan
             Federal Employees Group Life Insurance Program
             
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Cover
================================================================ COVER


Report to Congressional Committees

October 1996

DOD FORCE MIX ISSUES - CONVERTING
SOME SUPPORT OFFICER POSITIONS TO
CIVILIAN STATUS COULD SAVE MONEY

GAO/NSIAD-97-15

DOD Force Mix Issues

(703013)


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

  CONUS - Continental United States
  DOD - Department of Defense
  FICA - Federal Insurance Contribution Act
  OMB - Office of Management and Budget
  OSD - Office of the Secretary of Defense

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


B-274401

October 23, 1996

The Honorable Dirk Kempthorne
Chairman
The Honorable Robert C.  Byrd
Ranking Minority Member
Subcommittee on Personnel
Committee on Armed Services
United States Senate

The Honorable Robert K.  Dornan
Chairman
The Honorable Owen B.  Pickett
Ranking Minority Member
Subcommittee on Military Personnel
Committee on National Security
House of Representatives

In 1994, we recommended that the Secretary of Defense study
opportunities to convert certain support positions from military to
civilian status, since federal civilian personnel cost the military
less than military personnel of roughly equal grade/rank.\1 Our 1994
detailed analysis was focused primarily on enlisted positions. 
Although the Department of Defense (DOD) concurred with our
recommendation, it converted no positions based on this work.  It
also filed a congressionally mandated report on military to civilian
conversions\2 and explained that large-scale conversions of military
positions would not be undertaken until its civilian workforce
stabilized at the conclusion of the drawdown.  DOD had converted
3,219 positions by the end of fiscal year 1996 to comply with the
requirement in the Fiscal Year 1996 National Defense Authorization
Act to convert at least 3,000 positions. 

We have conducted a similar analysis of commissioned officer
positions using fiscal year 1996 end strength data and, in accordance
with our basic legislative responsibilities, are reporting our
results to you because they fall within your committees'
jurisdiction.  Our review is a first step in identifying officer
positions that perform certain support and administrative functions
as candidates for civilian conversion.  Our specific objectives were
to identify the

  -- criteria the services use to determine which officer positions
     are "military essential," positions that DOD believes must be
     filled by a military person;

  -- positions currently filled with officers that might be filled
     with civilians without harming operational capabilities; and

  -- savings from converting positions from military to civilian
     status.  To achieve the second objective, we developed criteria
     based on DOD directives and guidance before applying it to
     selected officer positions in support activities. 


--------------------
\1 DOD Force Mix Issues:  Greater Reliance on Civilians in Support
Roles Could Provide Significant Benefits (GAO/NSIAD-95-5, Oct.  19,
1994). 

\2 Department of Defense Report on the Civilian and Military Mix in
Support Occupations, Report to the House Committee on National
Security and Senate Committee on Armed Services, Office of the Under
Secretary of Defense (Personnel and Readiness), April 1995. 


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

DOD planned to end fiscal year 1996 with about 234,000 active duty
officers.  Officers serve in warfighting positions as infantry
commanders and fighter pilots and support positions as civil
engineering officers, personnel officers, and veterinarians.  About
108,000 officers (approximately 46 percent) are assigned to support
positions.  As shown in table 1, the number of officers the services
planned to assign to such support positions in fiscal year 1996
ranged from about 6,800 officers (Marine Corps) to about 37,900
officers (Army). 



                                Table 1
                
                   Officer Positions by Major Defense
                 Mission Category (fiscal year 1996) In
                         Thousands of Positions

                                                           Marin
                                                      Air      e  Tota
                                        Army  Navy  Force  Corps     l
--------------------------------------  ----  ----  -----  -----  ====
Warfighting missions                    38.2  26.2   30.5   10.5  105.
                                                                     4
Defense-wide missions                    5.2   4.0   10.3    0.7  20.2
Support missions                        37.9  28.6   35.1    6.8  108.
                                                                     4
======================================================================
Total                                   81.3  58.8   75.9   18.0  234.
                                                                     0
----------------------------------------------------------------------
Source:  DOD. 

The services' downsizing efforts continued at the time of our review
and DOD planned to reduce officer positions by about 11,100 to
achieve an end strength of about 222,900 officers between fiscal
years 1996 and 1999.  Civilian pay and benefits generally cost less
than military pay and benefits (excluding special classes of
employees, such as air traffic controllers and law enforcement
personnel).  As a result, the greater the number of positions
converted, the greater the savings. 


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

Since 1954, DOD Directive 1100.4 has required the services to staff
positions with civilian personnel unless the services deem a position
military essential for one or more reasons, including combat
readiness, legal requirements, training, security, rotation, and
discipline.  However, the DOD directive and service implementing
guidance provide local commanders with wide latitude in justifying
the use of military personnel in their staffing requests. 

The Army, the Navy, and the Air Force are currently staffing officers
in about 9,500 administrative and support positions that civilians
may be able to fill at lower cost and with greater productivity due
to the civilians' much less frequent rotations.  Examples of career
fields that contain positions that might be converted are information
and financial management. 

DOD could save as much as $95 million annually by converting the
roughly 9,500 positions we identified.  Savings achieved through
military to civilian conversions can be used to pay for needed
priorities such as weapon systems modernization. 

Final cost savings and the elapsed time before all of the savings
were realized would depend on how many positions DOD converted and
how the conversions were carried out.  On the other hand, we
recognize that a number of impediments exist to military to civilian
conversions, such as the ongoing civilian drawdown in DOD and a
perceived preference by local commanders for military rather than
civilian personnel in certain positions.  These impediments are not
insurmountable, but they will be difficult to overcome without
direction and support from senior leaders at DOD, such as from the
Office of the Secretary of Defense (OSD), and sustained attention to
overcoming the impediments and developing and executing the
conversion plan. 


   A 1954 DIRECTIVE SPECIFIES
   MILITARY ESSENTIAL CRITERIA
------------------------------------------------------------ Letter :3

In 1954, DOD issued Directive 1100.4, which requires defense
activities to program the minimum number of personnel needed to meet
national security objectives and to use civilians whenever possible. 
The guidance directs the use of military personnel for any one or
more of the following reasons: 

  -- Required training is only available in the military. 

  -- The position is needed to maintain combat readiness. 

  -- The position requires a general military background for
     successful execution. 

  -- The law requires that the position be staffed by military
     personnel. 

  -- The position must be military in order to maintain good order
     and discipline or exercise authority under the Uniform Code of
     Military Justice. 

  -- The position is needed to ensure adequate opportunities to
     rotate personnel from overseas locations or sea duty to tours of
     duty in the Continental United States (CONUS). 

  -- The position must be military for security reasons in which the
     incumbent may be involved in combat, expected to use deadly
     force, or expected to exhibit an unquestioned response to
     orders. 

  -- The position requires unusual duty hours that are not normally
     compatible with civilian employment. 

The services, the joint activities, and the defense agencies were all
created and maintained to accomplish specific missions.  These
activities established staffing requirements at the time their
missions were tasked to include determining which positions were
military essential.  Since the activities were established, staffing
requirements may have changed as missions or doctrine changed,
technological innovations were introduced, funding priorities
changed, or major reorganizations were implemented.  To respond to
changes requiring additional personnel, commanders determined new
staffing requirements and requested authorization from their major
commands to fill the positions with DOD Directive 1100.4 available as
guidance in determining which positions are military essential. 
However, there are no DOD or service systems in place to ensure the
continued validity of previous decisions regarding the military
essentiality of established positions in organizations not
experiencing such change.  Since the establishment of officer
positions can be subjective and judgmental and the services generally
prefer using military rather than civilian staffing, once the
positions are established, neither the services nor local commanders
have much incentive to revalidate the positions and these positions
often remain categorized as military essential because they already
are military. 


   THOUSANDS OF OFFICER POSITIONS
   ARE CANDIDATES FOR CONVERSION
------------------------------------------------------------ Letter :4

Our review of 32,155 positions (or about 14 percent of all active
duty officer positions) indicated that about 9,500 were candidates
for military to civilian conversion.  We used criteria based on DOD
and service implementing guidance to evaluate such positions as
research and development officer and systems automation officer in
the Army, comptroller and oceanographer in the Navy, and acquisition
management officer and civil engineer in the Air Force. 


      CRITERIA BASED ON DOD AND
      SERVICE IMPLEMENTING
      GUIDANCE TO IDENTIFY
      CONVERSION CANDIDATES
---------------------------------------------------------- Letter :4.1

To identify candidates for conversion, we developed criteria based on
the DOD directive and service implementing guidance.  Our criteria
consisted of four questions that reflect the substance of the DOD
criteria and considered each position to be a conversion candidate
when the answer was "no" to all four.  The questions were as follows: 

(1)Is the primary skill or knowledge required in the position
uniquely available in the military? 

(2)Does the position have a mission to deploy to a theater of
operations in wartime or during a contingency? 

(3)Does any law require that the position be staffed by a military
person? 

(4)Is the position needed to support the normal rotation of
servicemembers deployed overseas or afloat to assignments in CONUS? 

As shown in table 2, our criteria generally agreed with DOD's. 



                                Table 2
                
                  Comparison of DOD's and Our Military
                           Essential Criteria

DOD Directive 1100.4    Our criteria
----------------------  ----------------------------------------------
Training                Is the primary skill or knowledge required in
                        the position uniquely available in the
                        military?\a

Combat readiness        Is the primary skill or knowledge required in
                        the position uniquely available in the
                        military?

Military background     Is the primary skill or knowledge required in
                        the position uniquely available in the
                        military?

Law                     Does any law require that the position be
                        staffed by active duty personnel?

Discipline              Does any law require that the position be
                        staffed by active duty personnel?\b

Rotation                Is the position needed to support the normal
                        rotation of servicemembers deployed overseas
                        or afloat to assignments in CONUS?

Security                Does the position have a mission to deploy to
                        a theater of operations in wartime or during a
                        contingency?\c

Unusual duty hours      None\d
----------------------------------------------------------------------
\a We considered positions military essential if the primary skill or
knowledge required was not unique to the military but the incumbent
had to have other substantive knowledge or experience that was unique
to the military. 

\b One aspect of the DOD criteria is that incumbents must be able to
exercise Uniform Code of Military Justice authority in certain
positions. 

\c The DOD criteria refer to the likelihood that incumbents will be
involved in combat, while ours recognizes only those that deploy to a
theater of operations, which is where combat would occur.  The DOD
criteria also refer to the need to staff positions with military
personnel because the incumbent may need to use deadly force. 
However, we did not consider that in our analysis because the need
for deadly force while nondeployed was unlikely in nearly all of the
career fields that we reviewed. 

\d We did not develop a corresponding question because civilians
sometimes work unusual duty hours. 

Source:  DOD Directive 1100.4, "Guidance for Manpower Programs" (Aug. 
20, 1954).  For purposes of our analysis, we accepted positions as
military essential even if the only "yes" was to the question on
deployability to a theater of operations or the duty station is in a
location other than in CONUS.  However, DOD deployed over 14,000
civilian federal employees and contractors to the theater of
operations during the Persian Gulf War, and non-CONUS locations
include duty stations in Hawaii, Alaska, and other locations where
combat is unlikely.  Thus, deployability alone may not be sufficient
justification for maintaining positions as military. 

Outside experts reviewed our criteria.  The experts suggested
modifications to the criteria, which we adopted.  These officials
believed that our criteria, as modified, adequately identified
military to civilian conversion candidates. 

To apply our criteria, we judgmentally selected 37 career fields in
the Army, the Navy, and the Air Force and, using our criteria,
evaluated officer positions in those activities planned to be on the
service personnel rolls at the end of fiscal year 1996.  We applied
our criteria by comparing military position classifications contained
in relevant service manuals to position classifications contained in
the Department of Labor's Dictionary of Occupational Titles.  Where
we found corresponding positions in each, we proceeded to our second
question.  To answer our second question, the services provided us
with the information specifying the number of positions in each
career field scheduled to deploy to a theater of operations in a
contingency.  We also considered all positions assigned to naval
vessels or installations outside CONUS to be deployable and thus
military essential.  Next, we interviewed service officials to
determine whether any laws required positions in our selected career
fields to be staffed by active duty personnel.  Finally, we used
service rotation policy factors or related information to determine
how many positions must be reserved as military to maintain sea to
shore or overseas to CONUS rotation opportunities.  The number of
positions left after asking these four questions and excluding
positions from further consideration became the number of positions
that we believe are candidates for conversion. 

We did not validate the need for any of the positions evaluated.  For
purposes of our analysis, we accepted all positions shown on
personnel rolls for fiscal year 1996 as needed.  We also did not
attempt to determine whether converted positions should be staffed by
federal civilian employees or contractors. 


      THE ARMY COULD CONSIDER
      CONVERTING ABOUT 1,000
      POSITIONS
---------------------------------------------------------- Letter :4.2

Our review of 7,184 positions in 16 career fields in the Army
indicate that about 1,000 are candidates for conversion to civilian
status, as shown in table 3. 



                                Table 3
                
                    Military to Civilian Conversion
                         Candidates in the Army

                                                            Conversion
                                                 Positions  candidates
Career field                                      analyzed  identified
----------------------------------------------  ----------  ----------
Adjutant General                                       596         182
Comptroller                                            170          76
Contracting and industrial management                  370         157
Foreign area officer                                   570           0
Logistics                                              588          28
Nuclear research and operations                         90           0
Operations, plans, and training                        841           0
Operations research/systems analysis                   212          76
Ordnance                                               200           1
Personnel programs management                          236          11
Psychological operations and civil affairs              51           0
Public affairs                                         133          17
Quartermaster                                          129           0
Research development and acquisition                   955         134
Systems automation officer                             641         323
======================================================================
Total                                                5,782       1,006
----------------------------------------------------------------------
Note:  We analyzed 1,402 positions known as "Branch Immaterial,"
which consists of positions whose job description does not correlate
directly with a specific career field.  The positions we analyzed are
not included in table 3, but we found 1 position that we identified
as a conversion candidate. 

Source:  Our analysis is based on position data supplied by the Army
Force Integration Support Agency. 

As part of an initial effort in 1995 to assign military essential
codes to Army positions, the Army identified about 6,100 officer and
enlisted positions that it coded as available for conversion to
civilian status.  However, Army officials were reluctant to provide
us with additional details until the analysis has been validated. 
Army officials also told us that no conversions are planned until the
Army is sure that it will be able to hire civilian personnel (despite
the ongoing civilian drawdown) to execute the missions of the
converted positions. 


      THE AIR FORCE COULD CONSIDER
      CONVERTING OVER 6,800
      POSITIONS
---------------------------------------------------------- Letter :4.3

Of the 18,713 commissioned officer positions we reviewed in the Air
Force, about 6,800 are candidates for military to civilian
conversion, as shown in table 4. 



                                Table 4
                
                    Military to Civilian Conversion
                      Candidates in the Air Force

                                                            Conversion
                                                 Positions  candidates
Career field                                      analyzed  identified
----------------------------------------------  ----------  ----------
Acquisition management                               2,545       2,058
Civil engineer                                       1,571         285
Communications                                       4,655       2,173
Financial officer                                    1,066         582
Information management                               1,465         211
Logistics plans                                        647         170
Manpower                                               261          91
Morale, welfare, and recreation                        333          25
Operations support                                   1,109           0
Personnel                                            1,131         662
Public affairs                                         375          61
Security police                                      1,013         206
Special duty                                         1,366         194
Transportation                                         467           0
Weather                                                709         123
======================================================================
Total                                               18,713       6,841
----------------------------------------------------------------------
Sources:  Our analysis is based on position data supplied by the Air
Force. 

Air Force manpower officials told us they believe that officers in
OSD or joint duty assignments should not be considered to be
conversion candidates because the Air Force does not control those
positions.  Our analysis included OSD and joint duty positions, but
we considered them military essential based on our work with
officials of the Air Force manpower office.\3 However, some of these
positions may also be candidates for conversion because lack of
control over a position is not a military essential criterion and the
Air Force would regain control over officers assigned to joint duty
positions that were converted. 

Air Force manpower officials also told us that opportunities may
exist for military to civilian conversions in certain of the
service's 38 field operating agencies.  The Air Force assigned about
20,000 officers and enlisted personnel in May 1995 (excluding Air
National Guard and Air Force Reserve personnel) to such field
operating agencies as the Air Intelligence Agency, the Air Weather
Service, and the Military Personnel Center. 

In 1996, the Air Force completed a draft study called the "Minimum
Military Essential Threshold" study and concluded that between 7,118
and 12,473 officer positions were candidates for conversion
(depending on the methodology used) in the same career fields that we
reviewed.  The Air Force's study looked at a greater number of career
fields and positions than we did and overall identified a range from
15,176 to 25,412 positions as potential candidates for conversion,
depending on the methodology used. 


--------------------
\3 The Air Force had 2,199 officers assigned to OSD and joint duty
positions at the time of our review. 


      THE NAVY COULD CONSIDER
      CONVERTING ABOUT 1,600
      POSITIONS
---------------------------------------------------------- Letter :4.4

We reviewed 6,258 Navy officer positions and concluded that about
1,600 were candidates for military to civilian conversion, as shown
in table 5.




                                Table 5
                
                    Military to Civilian Conversion
                         Candidates in the Navy

                                                            Conversion
                                                 Positions  candidates
Career field                                      analyzed  identified
----------------------------------------------  ----------  ----------
Aerospace engineering aviation maintenance             542          74
Civil engineering                                    1,174         431
Engineering                                            825         238
Oceanography                                           322         159
Public affairs                                         184          90
Supply                                               3,211         647
======================================================================
Total                                                6,258       1,639
----------------------------------------------------------------------
Source:  Our analysis is based on data supplied by the Bureau of
Naval Personnel. 

We were not aware of any large-scale military to civilian conversion
analysis underway or completed by the Navy at the time of our review. 
However, we identified one study completed in December 1995 by the
Naval Manpower Analysis Center that concluded that of 848 Judge
Advocate General positions (in November 1995), 24 could be
eliminated, 27 could be converted to other occupations, and 59 could
be eliminated with their responsibilities transferred to contractors. 


      DOD COULD SAVE ABOUT $95
      MILLION ANNUALLY BY
      CONVERTING ABOUT 9,500
      POSITIONS
---------------------------------------------------------- Letter :4.5

If DOD converted all of the positions that we identified and
maintained the existing grade structure, DOD could achieve annual
cost savings of about $95 million in the converted positions. 
Assuming DOD converted about 9,500 positions and maintained the grade
structure that existed prior to conversion, the Army could save as
much as $10 million, the Navy as much as $16 million, and the Air
Force as much as $69 million.  Savings could be much higher if the
services or DOD reviewed the approximately
76,000 support positions (staffed by officers) that we did not review
and identified additional conversion candidates. 

We determined the average cost of military and federal civilian
salary and benefits in pay grades O-1 to O-6 and general schedule
grades GS-7 to GS-15 to estimate cost savings obtainable by
converting positions from military to their roughly equivalent
civilian pay grade.  As shown in table 6, cost savings vary depending
on the pay grade of the converted position. 



                                Table 6
                
                   Average Cost Comparison of Annual
                 Military Compensation by Pay Grade in
                                 CONUS

                              Military             Civilian   Civilian
                            compensati          compensatio       cost
Rank                              on\a   Grade          n\b  advantage
--------------------------  ----------  ------  -----------  ---------
O-6                           $119,378   GS-15     $108,334    $11,044
O-5                            100,502   GS-14       93,097      7,405
O-4                             83,125   GS-12       67,394     15,731
O-3                             67,469   GS-11       56,686     10,783
O-2                             54,198    GS-9       47,333      6,865
O-1                             40,458    GS-7       39,197      1,261
----------------------------------------------------------------------
Note:  All costs shown are costs to the government only. 

\a Military compensation includes average basic pay; basic allowance
for quarters, including the variable housing allowance; basic
allowance for subsistence; the tax advantage accruing by virtue of
the nontaxability of the allowances; an employer's contribution for
the Federal Insurance Contribution Act (FICA) and Medicare; an
estimate of the cost of providing health care to servicemembers and
their families; and the value of benefit accruals under the military
retirement system.  All benefits are in fiscal year 1996 numbers,
except health care, which is in 1995 numbers. 

\b Civilian compensation includes salary paid at step 5 of the
general schedule; an average CONUS-based locality adjustment of 5.57
percent; government contributions to the Federal Employees Retirement
System, including matching contributions to the Thrift Savings Plan;
participation in the Federal Employees Health Benefit Program; the
Federal Employees Group Life Insurance Program; employer
contributions for FICA and Medicare; and miscellaneous fringe
benefits such as workers' compensation and awards or bonuses. 

Sources:  Our analysis is based on data supplied by OSD (Force
Management Policy, Directorate of Compensation); the Office of
Management and Budget (OMB); OMB Circular A-76, Performance of
Commercial Activities; and our 1994 report on military to civilian
conversions.  Grade equivalencies are based on comparisons
established for Geneva Convention purposes (DOD Instruction 1000.1,
Jan.  30, 1974). 

DOD and the services have been looking for ways to fund initiatives
such as weapon systems modernization by saving money in current
operations.  For example, as we reported in July 1996,\4

the military personnel accounts fund a sizable portion of DOD's
infrastructure, which DOD wants to decrease to help pay for modern
weapon systems.  Also, the Army has a number of streamlining
initiatives underway intended to save as much as $8 billion. 
Military to civilian conversions can offer additional opportunities
to help fund modernization. 

However, final cost savings and the elapsed time before the full
savings are realized will depend on the number of positions converted
and the way conversions are carried out.  DOD can convert positions
to civilian status, but it would have to cut the military force
structure to achieve savings.\5

On the other hand, DOD can maintain the existing force structure and
increase positions in career fields with identified shortages of
authorizations.  However, maintaining the force structure should only
be done with adequate justification because DOD would experience a
net increase in costs if it maintains the same size force structure
after conversion since no military positions would be eliminated and
civilian or contractor staffing would increase. 


--------------------
\4 Defense Budget:  Trends in Active Military Personnel Compensation
Accounts for 1990-97 (GAO/NSIAD-96-183, July 9, 1996). 

\5 Congressional approval may be required to cut the military force
structure. 


      IMPEDIMENTS LIMIT THE
      SERVICES' ABILITY TO CONVERT
      POSITIONS TO CIVILIAN STATUS
---------------------------------------------------------- Letter :4.6

Finally, as we reported in our 1994 report on military to civilian
conversions, a number of impediments exist to military to civilian
conversions.  First, given the latitude of the services' guidance and
instructions, local commanders are able to and may often prefer to
use servicemembers due to a perceived greater degree of control over
staff.  Second, local commanders may have little guarantee that
funding will be provided for converted positions.  Military pay is
provided through the service personnel accounts and funding will be
available to continue staffing the position.  But because civilian
pay is budgeted in a variety of operation and maintenance accounts
that also fund such other needs as the purchase of fuel, spare parts
for weapons and equipment, and training of military personnel, the
services may have different priorities than providing sufficient
civilian pay to support conversions.  Thus, a local commander who
chooses to convert a position risks losing the military position with
little assurance that adequate funding will be provided to hire a
civilian replacement.  Finally, DOD believes the ongoing civilian
personnel drawdown would make more difficult the task of converting
positions until the drawdown ends.  However, as we reported in April
1996,\6 DOD programmed a civilian drawdown of 26 percent from fiscal
years 1993 to 2001, more than double the 12-percent recommended by
the White House's National Performance Review.  As a result, DOD
could slow the rate of the civilian drawdown to provide civilian
staff to fill the approximately 9,500 conversion candidates that we
identified in this report.  These impediments are not insurmountable,
but will be difficult to overcome without direction and support from
DOD's senior leadership, such as from OSD, and sustained attention to
carrying out conversions by senior-level staff to overcome the
impediments and develop and execute the conversion plan. 


--------------------
\6 Civilian Downsizing:  Unit Readiness Not Adversely Affected, but
Future Reductions a Concern (GAO/NSIAD-96-143BR, Apr.  22, 1996). 


   RECOMMENDATIONS
------------------------------------------------------------ Letter :5

We recommend that the Secretary of Defense overcome the impediments
to conversion, develop a plan to convert officer positions in support
activities that are not military essential, and require that the
services implement the plan and report back to the Secretary on
progress in implementing the conversion plan. 

To ensure that decisions identifying positions as military essential
remain valid, we recommend that the Secretary of Defense develop a
process to ensure that the need for military staffing in support
positions is reassessed when major changes or reorganizations occur. 


      AGENCY COMMENTS AND OUR
      EVALUATION
---------------------------------------------------------- Letter :5.1

DOD generally concurred with our report and acknowledged that support
positions exist that could be converted by the services and that cost
savings and other advantages can be obtained through such
conversions.  DOD indicated that it would convene a series of
meetings by the end of October 1996 involving OSD, the services, and
joint staff representatives to develop approaches to facilitate
conversions.  Because DOD converted no positions based on our 1994
review of enlisted position conversion opportunities, these meetings
should consider both officer and enlisted positions for conversion. 

DOD did not agree with our original recommendation to convene a joint
review board to facilitate conversions.  But because DOD's approach
involving high level support meets the intent of our first
recommendation to overcome the impediments and facilitate
conversions, we have revised our recommendation by deleting our
suggestion that a joint review board be convened. 

DOD also stated that it has resisted provisions forcing conversions
in the past and that impediments such as lack of consistent funding
to hire civilians, the civilian drawdown, and the congressionally
mandated minimum military strength remain its principle concerns. 
DOD further stated that our report does not offer adequate resolution
to the impediments to conversion.  Developing solutions to the
impediments was beyond the scope of our work, although the
impediments do not appear insurmountable.  First, DOD indicated that
it cannot be assured of consistent funding for civilian replacements
without congressional action.  While this may be true, DOD can submit
a proposed budget for congressional action in the next budget cycle
to reduce the military personnel accounts and increase the operations
and maintenance accounts to pay civilian replacements.  If DOD wants
to change personnel account and operations and maintenance fund
appropriations in this fiscal year, it will have to request
congressional action.  Once sufficient operations and maintenance
funds are appropriated, DOD would have to ensure that the services
use the funds to hire civilians and not for other purposes (for which
operations and maintenance funds are also available).  Second, DOD
stated that conversions run contrary to the ongoing civilian
drawdown.  We disagree.  Conversions do not necessarily have to
counteract plans to reduce the size of government.  For example, DOD
currently plans to reduce civilian end strength by 26 percent between
fiscal year 1993 and 2001.  If DOD reduced civilian end strength by
about 25 percent (rather than 26 percent), it would have enough
civilian authorizations to replace the 9,500 officers that we
identified in this report.  Third, DOD stated that the minimum
military strength mandated by Congress is an impediment to
conversion.  However, conversion of support positions from military
to civilian status would not affect military capability, but merely
lower the cost of getting support work done, freeing up funds that
could be used to enhance modernization.  As stated earlier,
achievement of savings depends on elimination of the military
authorizations freed up by conversion rather than reassigning to meet
other needs.  Therefore, DOD could request that Congress revise
minimum military strength in the next congressional session if
revisions are needed to facilitate conversions and achieve cost
savings. 

DOD stated that it could not comment on the positions we identified
for conversion due to a lack of specifics in the report.  In our
report, we identified the number of positions that we believe are
candidates for conversion.  Although we could have specified which
positions we recommended for conversion, we did not because we wanted
to avoid unnecessarily limiting DOD's discretion to select positions
for conversion.  DOD also stated that our review reflected a point in
time and did not take into account programmed reductions.  While it
is true that our review did reflect a point in time (the end of
fiscal year 1996), DOD can convert any positions still on personnel
rolls after fiscal year 1996 that are not military essential. 

Finally, DOD stated that it had concerns about the methodology that
we proposed for identifying positions for conversion.  Our
methodology is one of at least five that we are aware of that DOD
could use.  For example, in 1996, the Air Force applied three
different methodologies for identifying military essential (and
non-essential) positions and concluded that over 25,000 officer
positions could be converted using one approach.  When we compared
the results of the Air Force's most conservative analysis with our
own in the 15 career fields that we reviewed, we found that in 11 of
15 career fields, ours and the Air Force's analyses differed by less
than
100 positions per career field out of over 18,000 positions analyzed. 
In addition, the Army identified over 6,000 positions that it
concluded were not military essential.  DOD could select one or a
combination of any of the methodologies developed. 

DOD's comments are reprinted in appendix I.  DOD also provided some
technical corrections that we have incorporated into the text of our
report as appropriate. 


   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :6

We reviewed DOD's 1995 report to Congress on military to civilian
conversions, DOD directives, service orders and guidance, manuals,
and military to civilian conversion analyses conducted by the
services.  We also interviewed officials and reviewed documents from
the Office of the Assistant Secretary of Defense (Force Management
Policy); the Army's Directorate of Manpower; the Bureau of Naval
Personnel and the Air Force's Directorate of Program and Evaluation
in Washington, D.C.; the Army's Force Integration Support Agency in
Virginia; the Naval Manpower Analysis Center in Tennessee; and the
Air Force Personnel Center in Texas.  We used information obtained
from some of these sources to develop our military essential
criteria.  We relied on our work in 1994 to identify impediments to
conversion and we found no evidence that any of the impediments had
changed. 

To estimate the potential cost savings to be obtained from
conversions, we compared the cost to the government of military pay,
benefits, and employer contributions such as that required under FICA
with similar costs likely to be incurred if the same positions were
staffed with civilians of comparable pay grades.  To determine
military costs, we multiplied the average cash and in-kind
compensation averages in officer grades from O-1 to O-6 provided by
the Assistant Secretary of Defense (Force Management Policy,
Directorate of Compensation) by the number of positions we identified
as military to civilian conversion candidates.  To account for
differences in the number of positions available for conversion at
the different grades (and consequently to recognize differences in
cost savings at each grade), we multiplied the applicable pay grade
average cost savings by the number of positions in the same pay grade
that we believe should be converted.  We also assumed that the
percentage of positions at each pay grade remained the same before
and after conversion. 

To estimate the cost to the government of staffing converted
positions, we used cost factors provided to us by OMB; OMB Circular
A-76, Performance of Commercial Activities, which includes
instructions to federal agencies on determining the cost of federal
pay and benefits; and information from the Office of Personnel
Management.  For purposes of our analysis, we assumed federal pay to
be that paid at step 5 of the general schedule for each applicable
pay grade (because that is approximately the average pay step within
the pay grades and we used average military pay in estimating the
cost of military personnel).  In accordance with instructions from
OMB, we multiplied annual salary (at step 5, including the average
CONUS-based locality adjustment of 5.57 percent) by specified cost
factors to determine the cost to the government of (1) the Federal
Employees Retirement System and government contributions to the
Thrift Savings Plan, (2) the employer's contribution for FICA, (3)
the Federal Employees Group Life Insurance Program, and (4) the
civilian retiree health care.  We used Office of Personnel Management
cost data to estimate the cost to the government of providing
civilian health insurance coverage for current employees under the
Federal Employees Health Benefit Program.  Finally, we used OMB
Circular A-76 to estimate the cost of miscellaneous fringe benefits
such as workers' compensation and bonuses or other awards.  As
recommended by an OMB official, we assumed that any converted
position would be staffed by a civilian employee covered under the
Federal Employees Retirement System.  We restricted our analysis to
those civilian occupations not considered special class employees,
such as air traffic controllers or law enforcement personnel.  If
converted positions are in special classes, cost savings may be
smaller or non-existent. 

We conducted our work from December 1995 to September 1996 in
accordance with generally accepted government auditing standards. 


---------------------------------------------------------- Letter :6.1

We will send copies of this report to other interested congressional
committees; the Secretaries of Defense, the Army, the Navy, and the
Air Force; and the Director, OMB.  Copies will be made available to
others upon request. 

The major contributors to this report are listed in appendix II.  If
you have any questions about this report, please contact me on (202)
512-5140. 

Mark E.  Gebicke
Director, Military Operations and
 Capabilities Issues




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



(See figure in printed edition.)


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix II


   NATIONAL SECURITY AND
   INTERNATIONAL AFFAIRS DIVISION,
   WASHINGTON, D.C. 
-------------------------------------------------------- Appendix II:1

Sharon A.  Cekala
William E.  Beusse
Brian J.  Lepore
William J.  Rigazio


   DALLAS FIELD OFFICE
-------------------------------------------------------- Appendix II:2

Roger L.  Tomlinson


   NORFOLK FIELD OFFICE
-------------------------------------------------------- Appendix II:3

Lawrence E.  Dixon
Paul A.  Gvoth, Jr. 


*** End of document. ***