Quadrennial Defense Review: All Personnel Cuts and Associated Savings May
Not Be Achieved (Letter Report, 04/30/98, GAO/NSIAD-98-100).

Pursuant to a congressional request, GAO reviewed the 1997 Report of the
Quadrennial Defense Review (QDR), focusing on the: (1) basis for the
personnel cuts; (2) services' plans to implement personnel cuts; (3)
extent that the services believe cuts will impact their ability to
execute the national military strategy; and (4) Department of Defense's
(DOD) plans to monitor the services' progress in implementing the cuts.

GAO noted that: (1) DOD's decision to reduce personnel as part of the
QDR was driven largely by the objective of identifying dollar savings
that could be used to increase modernization funding; (2) DOD officials
concluded that a 10-percent force structure cut would result in
unacceptable risk in implementing the national military strategy and
determined that the review process had not identified sufficient
infrastructure savings to meet DOD's $60-billion modernization goal; (3)
thus, the Secretary of Defense directed the services to develop plans to
cut the equivalent of 150,000 active military personnel to save between
$4 billion and $6 billion in recurring savings by fiscal year (FY) 2003;
(4) the services proposed initiatives to eliminate about 175,000
personnel and save an estimated $3.7 billion; (5) although the services
relied on some ongoing studies to develop proposals to achieve the cuts,
some of the analyses were limited; (6) moreover, variations existed in
the services' plans; (7) considerable risk remains in some of the
services' plans to cut 175,000 personnel and save $3.7 billion annually
by FY 2003; (8) with the exception of the Air Force, the services have
plans that should enable them to achieve the majority of the active
military cuts by the end of FY 1999; (9) however, the FY 1999 future
years defense program, which is the first to incorporate the QDR
decisions, does not include all of the personnel cuts because the Office
of the Secretary of Defense determined that some of the Air Force's
active military cuts announced in May 1997 are not politically
executable at this time, according to service officials; (10) moreover,
plans for some cuts are still incomplete or based on optimistic
assumptions about the potential to achieve savings through outsourcing
and reengineering and may not be implemented by FY 2003 as originally
anticipated; (11) the Air Force made an assumption that all military
positions planned to be competed would be replaced by contractors rather
than relying on historical experience that the civilian workforce wins
40 percent of all competitions; (12) the Air Force military personnel
cuts will focus primarily on personnel assigned to infrastructure
activities rather than mission forces and will involve replacing
personnel with less costly civilians or contractors rather than
eliminating functions; and (13) because some aspects of DOD's plan to
reduce personnel will not occur or will be delayed, it is critical that
the Office of the Secretary of Defense monitor the services' progress in
achieving the personnel cuts and associated savings.

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

 REPORTNUM:  NSIAD-98-100
     TITLE:  Quadrennial Defense Review: All Personnel Cuts and 
             Associated Savings May Not Be Achieved
      DATE:  04/30/98
   SUBJECT:  Personnel management
             Military personnel
             Human resources utilization
             Military cost control
             Military downsizing
             Civilian employees
             Defense contingency planning
             Combat readiness
             Reductions in force
             Military reserve personnel
IDENTIFIER:  DOD Quadrennial Defense Review
             DOD Future Years Defense Program
             
******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO report.  Delineations within the text indicating chapter **
** titles, headings, and bullets are preserved.  Major          **
** divisions and subdivisions of the text, such as Chapters,    **
** Sections, and Appendixes, are identified by double and       **
** single lines.  The numbers on the right end of these lines   **
** indicate the position of each of the subsections in the      **
** document outline.  These numbers do NOT correspond with the  **
** page numbers of the printed product.                         **
**                                                              **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced.  Tables are included, but    **
** may not resemble those in the printed version.               **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
** A printed copy of this report may be obtained from the GAO   **
** Document Distribution Center.  For further details, please   **
** send an e-mail message to:                                   **
**                                                              **
**                                            **
**                                                              **
** with the message 'info' in the body.                         **
******************************************************************


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


Report to Congressional Requesters

April 1998

QUADRENNIAL DEFENSE REVIEW - SOME
PERSONNEL CUTS AND ASSOCIATED
SAVINGS MAY NOT BE ACHIEVED

GAO/NSIAD-98-100

Quadrennial Defense Review

(701116)


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

  DOD - Department of Defense
  FYDP - Future Years Defense Program
  QDR - Quadrennial Defense Review
  OSD - Office of the Secretary of Defense

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


B-278199

April 30, 1998

The Honorable Strom Thurmond
Chairman
The Honorable Carl Levin
Ranking Minority Member
Committee on Armed Services
United States Senate

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

As you requested, we reviewed the Department of Defense's (DOD) May
1997 Report of the Quadrennial Defense Review (QDR), which directed
the services to reduce the number of active, reserve, and civilian
personnel.  Specifically, our report discusses (1) the basis for the
personnel cuts, (2) the services' plans to implement personnel cuts
and achieve savings, (3) the extent that the services believe the
cuts will impact their ability to execute the national military
strategy, and (4) DOD's plans to monitor the services' progress in
implementing the cuts.  We did not review planned cuts to the defense
agencies.  We are reporting separately on other aspects of the QDR,
including DOD's process and methodology for assessing force structure
and modernization requirements and the implications of the QDR
decisions on DOD's Future Years Defense Program (FYDP). 


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

The National Defense Authorization Act for Fiscal Year 1997 directed
the Secretary of Defense, in consultation with the Chairman, Joint
Chiefs of Staff, to conduct a review of the defense program.  The
legislation required DOD to report on a number of topics, including
the defense strategy, the force structure best suited to meet the
strategy, and the appropriate ratio of combat to support forces. 
During the QDR process, DOD considered three alternatives for
implementing the national defense strategy to shape and respond to
current needs and prepare the force for the future within an expected
budget of about $250 billion annually (constant 1997 dollars).  One
alternative focused on current dangers and called for maintaining the
current force structure and investment levels.  Another alternative
focused on future dangers and allocated more resources to modernizing
for the future but significantly reduced the current force.  The
final alternative, selected by DOD, targeted infrastructure
activities, called for modest force structure cuts, and increased
modernization funding to $60 billion per year.  According to the QDR,
this option retains sufficient force structure to meet current
requirements and reallocates resources to invest in force
modernization. 

A principal objective of the QDR was to understand the financial risk
in DOD's program plans and devise ways to manage that risk.  The QDR
noted that past years' procurement funds were used for unplanned
operating expenses.  The QDR concluded that as much as $10 billion to
$12 billion per year in future procurement funding could be diverted
for unplanned operating expenses.  The QDR also noted that the
migration of procurement funding is caused by unprogrammed operating
expenses from underestimating day-to-day operating costs, unrealized
savings from initiatives such as outsourcing or business process
reengineering, and new program demands.  To address this financial
instability, the QDR directed cutting some force structure and
personnel, shedding additional excess facilities through more base
closures and realignments, streamlining infrastructure, and reducing
quantities of some new weapon systems. 

Congress establishes minimum active duty personnel levels for each
service as part of the annual national defense authorization process. 
Thus, congressional approval for the QDR active duty personnel
reductions will be needed because they would reduce the number of
personnel below the current approved levels.  The QDR directed the
services to cut 61,700 active, 54,000 reserve, and 60,800 civilian
personnel by fiscal year 2003, except for 7,700 of the civilian cuts
that DOD expected to achieve by fiscal year 2005.  DOD expected to
save about $3.7 billion annually by fiscal year 2003 as a result of
these cuts.  The QDR personnel cuts are in addition to those cuts the
services had planned in the fiscal year 1998 FYDP through fiscal
year 2003, which was prepared before the QDR.  Appendix I shows the
total projected personnel reductions by service through fiscal year
2003. 


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

DOD's decision to reduce personnel as part of the Quadrennial Defense
Review was driven largely by the objective of identifying dollar
savings that could be used to increase modernization funding.  DOD
officials concluded that a 10-percent force structure cut would
result in unacceptable risk in implementing the national military
strategy and determined that the review process had not identified
sufficient infrastructure savings to meet DOD's $60 billion
modernization goal.  Thus, the Secretary of Defense directed the
services to develop plans to cut the equivalent of 150,000 active
military personnel to save between $4 billion and $6 billion in
recurring savings by fiscal year 2003.  The services proposed
initiatives to eliminate about 175,000 personnel and save an
estimated $3.7 billion.  Although the services relied on some ongoing
studies to develop proposals to achieve the cuts, some of the
analyses were limited.  Moreover, variations existed in the services'
plans.  For example, the Navy relied extensively on planned force
structure cuts, whereas the Air Force cuts are primarily based on
outsourcing. 

Considerable risk remains in some of the services' plans to cut
175,000 personnel and save $3.7 billion annually by fiscal year 2003. 
With the exception of the Air Force, the services have plans that
should enable them to achieve the majority of the active military
cuts by the end of fiscal year 1999.  However, the fiscal year 1999
future years defense program, which is the first to incorporate the
Quadrennial Defense Review decisions, does not include all the
personnel cuts because the Office of the Secretary of Defense
determined that some of the Air Force's active military cuts
announced in May 1997 are not executable at this time, according to
service officials.  Moreover, plans for some cuts are still
incomplete or based on optimistic assumptions about the potential to
achieve savings through outsourcing and reengineering and may not be
implemented by fiscal year 2003 as originally anticipated.  For
example, there is no agreement within the Army on how 25,000 of the
45,000 reserve cuts will be allocated.  Moreover, the Air Force
assumed that all military positions planned to be competed would be
contracted out rather than relying on historical experience that
shows a civilian workforce wins 40 percent of all competitions.  This
and other assumptions could make it difficult to achieve as many as
6,900 of the Air Force civilian cuts included in the fiscal year 1999
future years defense program. 

Service officials believe that the majority of the planned personnel
cuts will not impact the services' ability to implement the national
military strategy.  The cuts are primarily focused on reducing
personnel associated with infrastructure activities or combat forces
that are not critical to meeting war-fighting requirements, according
to service officials.  The Air Force military personnel cuts will
focus primarily on personnel assigned to infrastructure activities
rather than mission forces and will involve replacing military
personnel with less costly civilians or contractors rather than
eliminating functions.  Navy officials stated that its plan to
achieve personnel savings by eliminating surface combatants will not
affect its ability to implement the strategy because more capable
ships have entered the Navy's inventory.  In February 1997, we
reported that a smaller active Army support force could increase the
Army's risk of carrying out current defense policy.  Although the
Army has reduced its active support forces as part of the Quadrennial
Defense Review cuts, it believes these cuts will not significantly
increase the risk associated with implementing the national military
strategy because the positions are being transferred to the reserve
component. 

Because some aspects of DOD's plan to reduce personnel will not occur
or will be delayed, it is critical that the Office of the Secretary
of Defense monitor the services' progress in achieving the personnel
cuts and associated savings.  The Office plans to review the
services' progress in achieving the personnel cuts during its annual
review of the services' budgets.  According to Office of the
Secretary of Defense officials, the Defense Management Council, which
was established in November 1997 by the Secretary of Defense to
oversee progress in achieving defense reform initiatives, will
oversee the services' outsourcing plans. 


   PERSONNEL CUTS ARE BASED ON
   DOD'S GOAL TO INCREASE
   MODERNIZATION FUNDING
------------------------------------------------------------ Letter :3

The level of personnel cuts called for in the QDR was based on DOD's
plan to achieve dollar savings that would (1) reduce the possibility
that procurement funds would be used for unplanned expenses and (2)
enable DOD to increase and maintain procurement funding at $60
billion annually.\1 In March and April 1997, DOD officials concluded
that a 10-percent force structure cut would result in an unacceptable
risk in implementing the national military strategy and that the
potential savings from infrastructure initiatives identified during
the QDR process would not be sufficient to ensure that procurement
funding would not be used for unplanned expenses.  As a result,
senior civilian officials and the service chiefs agreed that the
services needed to eliminate the equivalent of about 150,000 active
military personnel, which Office of the Secretary of Defense (OSD)
officials estimated would save between $4 billion and $6 billion
annually by fiscal year 2003.  The Secretary of Defense directed the
service chiefs to develop initiatives to achieve personnel cuts and
assess how to allocate the cuts among active, reserve, and civilian
personnel. 

In May 1997, the Secretary of Defense approved the services'
proposals to eliminate about 175,000 active, reserve, and civilian
personnel and save an estimated $3.7 billion by 2003, as shown in
table 1.  The savings estimates vary among the services because of
the different levels of active, reserve, and civilian personnel cuts
and the extent of outsourcing included in the services' plans.  For
example, the Navy and the Air Force plan to cut about 30,000 and
46,000 active, reserve, and civilian personnel, respectively. 
Despite the larger personnel cut, the Air Force's estimated savings
are significantly lower than the Navy's because most of the Air Force
cuts will occur primarily from replacing military and civilian
personnel with contractors, which saves only a portion of current
salaries.  In contrast, the Navy plans to eliminate personnel
primarily by reducing force structure, such as surface combatants,
which will save all of the current and future salaries. 



                                Table 1
                
                QDR Personnel Cuts and Estimated Savings
                 by Fiscal Year 2003 (fiscal year 1997
                     constant dollars in millions)

                                         Number of personnel
                                        ----------------------
                                                                Estima
                                                                   ted
                                                Reserv  Civili  saving
Service                                 Active       e      an       s
--------------------------------------  ------  ------  ------  ------
Army                                    15,000  45,000  33,700  $1,540
Navy                                    18,000   4,100   8,400   1,210
Air Force                               26,900     700  18,300     790
Marine Corps                             1,800   4,200     400     170
======================================================================
Total                                   61,700  54,000  60,800  $3,710
----------------------------------------------------------------------
Note:  The QDR also directed that 18,000 civilian employees assigned
to defense agencies be cut, which OSD estimated would save $1.5
billion. 

Source:  Report of the Quadrennial Defense Review and OSD. 

The Army plan was based on the assumption that it had to eliminate
the equivalent of 45,000 active personnel.  The Army decided to cut
its active, reserve, and civilian personnel each by the equivalent of
15,000 active personnel.  The active cuts were based primarily on
transferring some active combat service and combat service support
missions to the reserves and allocating percentage cuts to most of
the major command institutional forces.\2 The Army decided to cut the
reserves by 45,000, which it believed to be the equivalent of 15,000
active positions, based on the assumption that three reserve
component positions equaled the cost of one active position.  In
allocating the cuts between the reserve components, the Army
considered an analysis of forces that indicated about 6,300 Army
Reserve and 62,000 Army National Guard forces were not included in
current war plans.  After considering this analysis and other
factors, the Army decided to cut the Army Reserve by 7,000 personnel
and the Army National Guard by 38,000 personnel.  After the release
of the QDR, Army National Guard officials stated that they were not
included in the process used to determine the scope of the cuts and
that they have yet to reach agreement with Army headquarters on all
the personnel cuts.  The Army reserve components have agreed to cut
20,000 reserve personnel by fiscal
year 2000 and defer allocation of the remaining 25,000 cuts.  The
Army civilian cuts were based primarily on a plan to compete 48,000
civilian positions, with the assumption that private contractors
would win one-half of the competitions.  However, the Army's plan was
not based on a study of missions and functions by location.  The Army
assumed that all eligible positions in commercial activities would be
competed and that it could reclassify some positions that cannot
currently be competed.\3 The remainder of the civilian cuts were
based on efforts to reengineer the Army Materiel Command and reduce
the number of military technicians in the reserve component.\4

The Navy proposed reducing its active, reserve, and civilian
personnel by about 4.5 percent each.  The majority of the active
military cuts were based on planned force structure cuts, such as
reducing the number of surface combatants and attack submarines, and
transferring some active support ships to the Military Sealift
Command.  The Navy Reserve cuts were based primarily on plans to
decommission frigates, deactivate some aircraft and helicopters, and
eliminate positions that had been funded but had not been filled. 
The Navy expects to reduce civilian personnel primarily by workload
reductions and reengineering; however, it had not initiated any
studies, as of May 1997, to achieve these cuts.  Unlike the Army and
the Air Force plans, the Navy plan assumes very few reductions from
outsourcing because the Navy, in its fiscal year 1998 budget, had
programmed savings of $2.5 billion from outsourcing by fiscal year
2003. 

The Air Force planned to achieve the majority of its personnel cuts
from outsourcing and the remainder through consolidating fighter and
bomber squadrons and streamlining headquarters.  The Air Force relied
on an ongoing study, known as Jump Start, to determine the potential
for reducing active military and civilian positions by outsourcing. 
This study examined the potential for outsourcing at wing level
rather than relying exclusively on a broad, headquarters-only
assessment of all personnel that could potentially be outsourced. 
After the QDR, the Air Force identified some problems with the data
used to determine the potential number of cuts; therefore, it
programmed a smaller personnel reduction than that identified in the
QDR report. 

The Marine Corps plan to reduce active personnel was based primarily
on reducing and reorganizing the Marine Corps Security Battalion,
which provides security for Navy installations.  The Marine Corps
also proposed to cut some administrative support in headquarters
activities, but it had not identified any specific actions as of May
1997.  The Marine Corps had also not developed specific plans to
reduce reserve and civilian personnel. 


--------------------
\1 The fiscal year 1999 FYDP shows that $45.1 billion was funded for
procurement in fiscal year 1998 and that $48.7 billion was budgeted
for fiscal year 1999. 

\2 Institutional forces, called the Table of Distribution and
Allowances, generally provide nondeployable support to the Army
infrastructure, which includes training, doctrine development, and
base operations. 

\3 Title 10 U.S.C.  2465 prohibits DOD from outsourcing civilian
firefighters or security guards at military installations.  Chapter
146 of title 10 contains various provisions that restrict DOD's
outsourcing of depot maintenance and base support activities. 

\4 Military technicians are full-time civilian employees who are also
members of the reserve component. 


   SOME ASPECTS OF THE SERVICES'
   PLANS ARE INCOMPLETE AND BASED
   ON OPTIMISTIC ASSUMPTIONS
------------------------------------------------------------ Letter :4

Not all of the QDR personnel cuts were included in the fiscal year
1999 FYDP.  In addition, there is considerable risk that some of the
cuts included in the FYDP may not be achieved because (1) the Army
has not agreed on the allocation of 25,000 of the 45,000 reserve
component cuts, (2) significant reductions in the Air Force and the
Army are based on implementing aggressive outsourcing plans, and (3)
some of the Army and the Navy civilian reductions are contingent on
the outcome of reengineering studies.  On the other hand, all of the
services, except the Air Force, have plans to achieve the majority of
their active military cuts by the end of fiscal year 1999.  For
example, the Navy plans to achieve about 14,200, or 79 percent, of
its active military cuts in fiscal year 1999 through force structure
reductions, such as decommissioning surface combatants.  Moreover,
the Navy has plans to achieve its reserve cuts, and the Army has
specific plans to achieve 20,000 reserve component cuts.  Also, the
Marine Corps has plans to achieve the majority of its active and
reserve cuts.  Although outsourcing is only a small part of the
Navy's QDR cuts, the Navy has an aggressive outsourcing program that
involves risk because the Navy has not identified the majority of the
specific functions that will be studied to achieve the expected
savings.  Details of the services' plans are included in appendixes
II through V. 


      NOT ALL OF THE QDR PERSONNEL
      REDUCTIONS HAVE BEEN
      INCLUDED IN THE FISCAL YEAR
      1999 FYDP
---------------------------------------------------------- Letter :4.1

The Air Force did not program about 5,600, or 20 percent, of its
active military and 2,300, or 13 percent, of its civilian QDR
reductions in the fiscal year 1999 FYDP.  The Air Force double
counted some potential outsourcing savings, and OSD deferred most of
the Air Force's plans to restructure fighter squadrons and
consolidate bomber squadrons because it determined that the plans
were not executable at this time.  According to an OSD official, OSD
was concerned that the restructuring plan could be construed by
Congress as violating its guidance to refrain from any planning for
future base closures.  Likewise, the Air Force reserves will not be
reduced by 700 personnel because, after the QDR was released, the Air
Force decided to increase the reserve end strength to cover an
existing wartime shortage, according to Air Force officials.  These
actions will reduce the Air Force's planned recurring savings to
about $600 million compared with the $790 million it had planned to
achieve by fiscal year 2003. 


      NO AGREEMENT ON ALL OF THE
      ARMY RESERVE COMPONENT CUTS
---------------------------------------------------------- Letter :4.2

The QDR directed that the Army reduce its reserve components by
45,000 personnel.  In June 1997, at a meeting convened to reach
agreement on how the reductions should be allocated, the reserve
component agreed to reduce end strength by 20,000 by fiscal year
2000--17,000 in the Army National Guard and 3,000 in the Army
Reserve.  However, officials within the Army do not agree on how the
remaining 25,000 personnel will be cut.  For budgeting purposes, the
Army allocated 21,000 personnel to the National Guard and 4,000 to
the Army Reserve in the fiscal year 1999 FYDP.  However, National
Guard officials stated that they did not agree to the additional
cuts. 


      SIGNIFICANT REDUCTIONS ARE
      CONTINGENT ON IMPLEMENTING
      AGGRESSIVE OUTSOURCING PLANS
---------------------------------------------------------- Letter :4.3

A significant portion of the active military and civilian cuts in the
Air Force, and the civilian cuts in the Army, are based on plans to
conduct private-public competitions to determine whether functions
could be done more economically by contractors or an in-house
workforce consisting of civilian employees.\5 In developing their
plans, the services made different assumptions about the personnel
cuts that could be achieved through these competitions.  The Air
Force identified the specific functions that will be studied by base;
however, it made some assumptions that could overstate the number of
civilian cuts.  On the other hand, the Army had not identified the
majority of the specific functions by location to be competed, and
its plan assumes that all eligible civilian positions in commercial
activities can be competed. 

Although the fiscal year 1999 FYDP reflects a lower number of
reductions through outsourcing than the Air Force's May 1997 plan,
the Air Force made some assumptions that could make it difficult to
achieve about 6,900 civilian cuts.  According to Air Force officials,
the fiscal year 1999 FYDP reflects that about 22,000 military and
16,000 civilians will be eliminated through outsourcing by fiscal
year 2003.  To estimate the potential personnel cuts from
outsourcing, the Air Force assumed that all of the military positions
included in its Jump Start study, and all of the military and
civilian positions included in a separate outsourcing study of
targeted functions at four bases, would be contracted out.  This
assumption differs from past Air Force experience, which shows that a
civilian workforce wins 40 percent of all competitions and that 60
percent of the work is contracted out.  Air Force officials noted
that a standard 12-percent overhead factor must now be included in
the government cost estimate, which they believe will result in more
functions being contracted out.  Our recent review of the 12-percent
overhead rate suggests the potential, though not the certainty, for
more competitions to be won by the private sector.\6 If more
functions are contracted out, then more civilian positions will be
eliminated.  However, the Air Force commercial activities manager
stated that the Air Force has not had sufficient experience with the
12-percent overhead factor to determine if it will change the mix of
functions that remain in house or are contracted out.  If the A-76
change does not result in contractors winning more competitions and
the results are similar to past results, we estimate that the Air
Force may not be able to eliminate as many as 6,900 civilian
positions. 

The Army plans to compete 48,000 positions to achieve the majority of
its civilian reductions; however, the Army made some assumptions that
could make it difficult to achieve all of the planned cuts.  For
example, the Army assumed that it could compete all 34,000 civilian
positions in commercial activities except those exempted by
legislation, such as firefighters and security guards.  However,
unlike the Air Force, the Army has not done a study to determine if
all positions can be competed.  The Air Force found that it is not
practical to compete many positions in commercial activities because
the positions are spread across many units and locations.\7 The Army
announced studies covering about 14,000 of the 34,000 positions;
however, it has not identified the specific functions or location of
the remaining positions to be studied.  Army officials stated the
major commands would identify the functions to be studied as part of
their future annual budgets.  Finally, the study universe also
included some positions that involved performance of inherently
governmental functions and therefore cannot be competed.  Army
officials stated that, as part of the Defense Reform Initiative, a
study is underway to determine if all positions are consistently and
properly classified throughout DOD.  Army officials believe this
review will reclassify about 14,000 positions to commercial
activities, which will then enable the positions to be competed. 
However, the Army does not have analysis to support this figure. 

The Navy planned to achieve about 1,300, or 7 percent, of its active
military and about 1,200, or 14 percent, of its civilian QDR
personnel reductions through outsourcing.  However, the Navy now
plans to achieve about 660 of its active military QDR personnel cuts
through outsourcing because its initial plan did not adequately
consider the impact that outsourcing would have on sea-to-shore
rotation.\8 In addition to the QDR reductions, the Navy has
programmed savings of $2.5 billion in its fiscal year 1999 budget
based on plans to study 80,500 positions--10,000 military and 70,500
civilian--by fiscal year 2003.  OSD has identified Navy outsourcing
as an area in which planned savings may not be fully achieved. 
However, the Navy has not identified the majority of the specific
functions that will be studied to achieve the projected savings and
has not adjusted its personnel levels to reflect the effects of this
outsourcing initiative.  Navy officials stated that each year the
major commands will identify the functions to study as part of their
annual budgets. 


--------------------
\5 Office of Management and Budget Circular A-76 and its supplemental
handbook set forth procedures for agencies to conduct public-private
competitions. 

\6 Defense Outsourcing:  Better Data Needed to Support Overhead Rate
for A-76 Studies (GAO/NSIAD-98-62, Feb 27, 1998). 

\7 The Air Force had originally planned to compete about 21,000
positions in the communications and information management function,
but reduced its plan by about 5,400 positions, or 26 percent.  Air
Force officials noted that these positions were at many units and
locations, which made it difficult to identify more economical ways
of accomplishing the mission. 

\8 The Navy policy for sea-to-shore rotation is that enlisted
personnel in grades E-5 through E-9 spend no more than 4 years at sea
for every 3 years on shore in the aggregate. 


      SOME REDUCTIONS ARE
      CONTINGENT ON THE OUTCOME OF
      REENGINEERING STUDIES
---------------------------------------------------------- Letter :4.4

The Army's plan to eliminate about 5,300 civilian personnel in the
Army Materiel Command through reengineering efforts involves risk
because the Command does not have specific plans to achieve these
reductions.  The Army plans to use the results of reengineering
studies to identify ways to cut these positions; however, the studies
are not scheduled to start until after fiscal year 2000.  Moreover,
in February 1998, we reported that Army efforts to reengineer the
institutional forces have not been successful.  For example, the Army
initially identified 4,000 active military institutional positions
that it planned to transfer to operational forces.\9 However, our
work showed that the underlying basis for most of these personnel
savings are questionable. 

The Navy plan assumes that it will be able to eliminate about 1,100
civilian personnel through reengineering and reducing the workload at
the Navy Facilities Engineering Command field structure.  The Navy
started a study in January 1998 and plans to complete it by July
1998.  To achieve the savings target, Navy officials stated the study
must identify ways to reduce the workforce by 30 percent. 


--------------------
\9 Force Structure:  Army Efforts to Improve Efficiency of
Institutional Forces Have Produced Few Results (GAO/NSIAD-98-45, Feb. 
26, 1998). 


   SERVICES EXPECT FEW ADVERSE
   IMPACTS FROM PERSONNEL CUTS
------------------------------------------------------------ Letter :5

Service officials believe the majority of the planned personnel cuts
will not affect their ability to implement the national military
strategy because they will reduce infrastructure or, to the extent
that the cuts involve combat forces, implement missions more
cost-effectively without any significant loss in capability. 

Almost one-half of the active military cuts will involve replacing
military personnel with reserve forces, civilian employees, or
contractors rather than eliminating functions outright.  For example,
the Air Force plans to eliminate about 22,000 active military
personnel through outsourcing.  Air Force officials noted that these
personnel are not military essential because they do not deploy, are
not required to support overseas rotation needs, and primarily
involve infrastructure functions such as logistics and base operating
support.  Moreover, on the basis of past experience, the Air Force
expects that 75 percent of these personnel will be replaced by either
civilian employees or contractors.  The other 25 percent will be
eliminated because A-76 studies should result in more efficient
organizations requiring fewer personnel. 

The Navy plans to eliminate about 5,400 active military personnel by
reducing the number of surface combatants from the current level of
128 to 116 and decommissioning 2 attack submarines.  According to
Navy officials, the surface combatant reductions are possible because
the newer ships entering the fleet provide greater combat capability. 
Similarly, the Marine Corps plans to eliminate 1,200 active military
positions by restructuring its security battalion, which provides
support to the Navy.  Navy officials agreed with the Marines Corps'
proposed restructuring, which will eliminate personnel associated
with missions that are no longer valid and reorganize personnel to
provide the same level of support more efficiently. 

The Army believes that the plan to reduce active personnel can be
accomplished without significantly increasing the risk associated
with implementing the national military strategy.  The Army plans to
achieve almost one-half of its QDR-directed active cut by
transferring 7,100 active military combat support and combat service
support positions to the reserve component.  Army officials believe
that this plan will enable it to execute the national military
strategy with an acceptable level of risk, assuming adequate
resourcing for active and reserve components, availability of
increased sea- and airlift, funding for equipment modernization, and
improvements to existing intelligence and communication systems. 
However, the Army had not finalized its plan on which combat support
and combat service support missions would be transferred to the
reserve component.  Our February 1997 report on Army support forces
highlighted shortages in active support forces.  We reported that a
smaller active Army support force did not appear feasible because it
could increase the Army's risk of carrying out current defense
policy.\10 Specifically, our report stated that about 79,000 support
forces needed in the first 30 days of the first major theater war
would arrive late because the Army lacks sufficient numbers of active
support forces and must rely on reserve forces, which generally
require more than 30 days to mobilize and deploy. 


--------------------
\10 Force Structure:  Army Support Forces Can Meet Two-Conflict
Strategy With Some Risks (GAO/NSIAD-97-66, Feb.  28, 1997). 


   OVERSIGHT OF THE SERVICES'
   PLANS WILL BE CRITICAL TO
   ACHIEVING QDR GOALS
------------------------------------------------------------ Letter :6

The May 1997 QDR report recognizes that one of the primary sources of
instability in DOD's current plans is the possibility that planned
procurement funding may need to be used for other activities and that
unrealized savings is one of the key components of this problem.  The
report discusses several factors that contribute to funding
migration, stating that "migration also occurs when the savings
planned to accrue from initiatives like competitive outsourcing or
business process reengineering fail to achieve their expectations
fully."

OSD has established two principal mechanisms for monitoring the
services' progress in achieving personnel cuts, according to OSD
officials.  First, it expects to review the services' plans for
achieving personnel cuts during annual reviews of the services'
budgets.  Second, the Defense Management Council, which was
established in November 1997 by the Secretary of Defense to oversee
progress in achieving defense reform initiatives, will monitor the
services' progress in meeting outsourcing goals.  The Council is
chaired by the Deputy Secretary of Defense and includes
representatives from OSD, the Joint Staff, and the services. 

In preparing their fiscal year 1999 budgets, the services used
different methods to reflect the personnel and dollar savings
associated with outsourcing, which could make it more difficult for
DOD officials to understand the services' assumptions and plans for
outsourcing and monitor their progress.  For example, the Navy's
projected personnel levels included in its budget for fiscal years
1999 through 2003 reflect the force structure cuts planned to meet
QDR-mandated personnel levels but do not reflect further cuts that
could result from outsourcing.  The Navy plans to compete 10,000
military and 70,500 civilian positions by fiscal year 2003, and its
budget assumes that these competitions will achieve $2.5 billion in
savings through fiscal year 2003.  However, because the Navy does not
know how many civilians and military positions will be reduced as a
result of these competitions, it did not adjust the personnel figures
in its budget to reflect the projected effects of outsourcing.  In
contrast, the Air Force's projected personnel levels in the fiscal
year 1999 budget reflect large cuts in military and civilian
personnel from outsourcing.  In preparing their budgets, each service
assumed a different rate of savings as a result of public-private
competitions.  For example, the Army assumed it would save 20
percent, the Air Force 25 percent, and the Navy 30 percent of its
current personnel expenses. 

OSD officials stated that they are aware that the services used
different methods for reflecting the personnel and dollar impacts of
outsourcing and that the fiscal year 1999 FYDP reflects these
different approaches.  The Acting Director of OSD's Program Analysis
and Evaluation Office has established a task force to ensure that
consistent and comparable approaches are used for personnel and
dollar savings. 


   CONCLUSIONS
------------------------------------------------------------ Letter :7

The personnel cuts directed by the QDR were driven primarily by the
need to identify dollar savings that could be used to increase
modernization funding.  However, DOD may not achieve all the
personnel cuts and associated savings.  With the exception of the Air
Force, the services have plans that should enable them to achieve the
majority of the active military cuts by the end of fiscal year 1999. 
However, these cuts depend on Congress reducing the current minimum
active duty personnel levels.  There is considerable risk that the
active military cuts in the Air Force, the reserve component cuts in
the Army, and the civilian cuts in all the services may not be
achieved by fiscal year 2003 because the services' plans are not
complete and depend on outsourcing and reengineering initiatives that
are based on optimistic assumptions or largely undefined to date. 
OSD recognizes that the planned savings from these initiatives have
not always been achieved, which contributes to the migration of
procurement funding.  Therefore, it is critical that DOD monitor the
services' progress in achieving the personnel cuts and savings. 


   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :8

DOD provided written comments on a draft of this report, which are
reprinted in appendix VI.  In its comments, DOD wanted to clarify
several key issues to avoid over emphasizing negative aspects of the
QDR personnel reductions.  For example, DOD noted that the QDR
process began by developing an overarching defense strategy followed
by assessments of the force structure, readiness, and modernization
to implement the strategy.  It believed the report's emphasis on
dollar savings ignores the Department's strategy assessment and noted
that the resulting balanced program recommended by the QDR is based
on modest reductions and restructuring of U.S.  military forces to
meet present threats.  DOD also noted that the QDR was a blueprint to
revolutionize business affairs and promote more efficient
infrastructure, with many of the details to be fully developed
through the programming and budget cycles.  Moreover, DOD stated that
our report is apparently based on information available as of May
1997 and does not reflect the implementation details that were
developed during the fiscal year 1999 budget cycle.  Finally, DOD
noted that we were critical of QDR decisions to downsize the Army's
active, reserve, and civilian components.  It stated these decisions
were based on a careful analysis of the risks, the potential impact
on readiness, and the ability to execute the cuts. 

Our report specifically recognizes that the QDR included more than
personnel reductions and notes that we will be reporting separately
on other aspects of the QDR, such as the process for determining the
force structure and modernization requirements.  We believe that the
risk associated with the services' plans to implement the personnel
cuts and achieve the expected savings is an important linkage. 
Specifically, the personnel cuts account for the majority of the
savings DOD expects from the QDR to increase modernization funding. 
Although this report reflects our analysis of the services' initial
plans when the QDR was released in May 1997, it also assesses OSD and
service actions to implement the QDR personnel reductions as of
February 1998.  For example, the report reflects OSD's decision in
December 1997 to defer much of the Air Force tactical fighter and
bomber consolidation plans and the Marine Corps' decision, made after
the fiscal year 1999 budget was finalized, to reduce fewer reserve
personnel than directed in the QDR.  The report also includes our
analysis of the services' outsourcing and reengineering plans as of
February 1998.  With regard to the Army, we found that some details
of the Army's plan to reduce personnel, such as the number of active
support forces to be cut, had not been finalized as of May 1997. 
Moreover, our report shows that the Army faces certain risks to
execute some of the reserve and civilian cuts, such as the lack of
agreement within the Army on how the majority of the reserve
component cuts will be allocated.  Likewise, the majority of the
Army's civilian cuts are based on outsourcing and reengineering
efforts.  However, the Army, unlike the Air Force, has not identified
the majority of the specific functions by location to be studied but
plans to rely on the major commands to identify functions over the
next several years.  In addition, the Army is also counting on some
functions being reclassified so they can be competed. 

DOD also provided technical comments, which were incorporated as
appropriate. 


   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :9

To determine the basis for DOD's decision to reduce personnel, we
interviewed senior DOD civilian and military officials to obtain
information on the decision-making process that led to the personnel
cuts and obtained documentation on the services' proposals to cut
active, reserve, and civilian personnel.  To obtain information on
how the services plan to achieve the cuts and how these cuts will
impact the services' ability to execute the national military
strategy, we interviewed officials who were involved in developing
and refining the individual service plans and reviewed service
studies and analyses that supported the proposed cuts.  We also
obtained documentation from the services on data included in the
fiscal year 1999 FYDP and compared this data with the services' May
1997 plans.  Finally, we interviewed the Acting Director, OSD Program
Analysis and Evaluation Office, regarding DOD's plans to monitor the
services' progress in implementing the cuts and obtained and analyzed
information concerning the services' methods for reflecting in their
budgets the potential impact of outsourcing. 

We conducted our work from May 1997 to February 1998 in accordance
with generally accepted government auditing standards. 


---------------------------------------------------------- Letter :9.1

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

Please call me on (202) 512-3504 if you or your staff have any
questions concerning this report.  Major contributors to this report
are listed in appendix VII. 

Richard Davis
Director, National Security
 Analysis


PROJECTED PERSONNEL CUTS BY
SERVICE THROUGH FISCAL YEAR 2003
=========================================================== Appendix I

Table I.1 shows the projected active military, reserve, and civilian
end strength for fiscal year 2003 if all personnel cuts programmed in
the fiscal year 1998 Future Years Defense Program (FYDP) and directed
in the Quadrennial Defense Review (QDR) are implemented. 



                               Table I.1
                
                Projected Active Military, Reserve, and
                   Civilian Personnel Cuts by Service
                        Through Fiscal Year 2003

Component         Army          Navy       Air Force     Marine Corps
------------  ------------  ------------  ------------  --------------
Active
Fiscal year     495,000       402,000       381,100        174,000
 1997 end
 strength
Cuts               0           14,500        15,500           0
 programmed
 in the
 fiscal
 year 1998
 FYDP
Cuts             15,000        18,000        26,900         1,800
 directed in
 the QDR
Projected       480,000       369,500       338,700        172,200
 fiscal year
 2003 end
 strength if
 all cuts
 are
 achieved
Reserve
Fiscal year     582,000        95,900       182,500         42,000
 1997 end
 strength
Cuts             7,500         2,400         2,900            0
 programmed
 in the
 fiscal year
 1998 FYDP
Cuts             45,000        4,100          700           4,200
 directed in
 the QDR
Projected       529,500        89,400       178,900         37,800
 fiscal year
 2003 end
 strength if
 all cuts
 are
 achieved
Civilian
Fiscal year     256,200       206,600       181,200         18,300
 1997 end
 strength
Cuts             22,800        23,700        17,400          500
 programmed
 in the
 fiscal year
 1998 FYDP
Cuts             33,700        8,400         18,300          400
 directed in
 the QDR
Projected       199,700       174,500       145,500         17,400
 fiscal year
 2003 end
 strength if
 all cuts
 are
 achieved
----------------------------------------------------------------------
Source:  Fiscal Year 1998 FYDP and Report on the Quadrennial Defense
Review, May 1997. 


ARMY PLAN TO ACHIEVE QDR PERSONNEL
CUTS
========================================================== Appendix II

The QDR directed that the Army cut 15,000 active military, 45,000
reserve component, and 33,700 civilian personnel.  These cuts
represent a reduction of 3 percent for the active military, 5 percent
for the reserve component, and 15 percent for the civilian personnel
end strengths projected for fiscal year 2003 before the QDR.  The
Office of the Secretary of Defense (OSD) estimated these cuts would
save $1.5 billion by fiscal
year 2003.  The Army has refined its plan since May 1997, but some
elements still remain undefined.  For example, the Army has allocated
all of the active military cuts among the major commands, but the
commands have not identified some of the specific functions to cut. 
Likewise, over one-half of the reserve component cuts have not been
specifically identified, and the majority of the civilian cuts are
based on aggressive outsourcing efforts that are largely undefined. 


   SOME ACTIVE MILITARY CUTS HAVE
   NOT BEEN IDENTIFIED
-------------------------------------------------------- Appendix II:1

Army plans to implement various initiatives to achieve the QDR cut. 
These initiatives are shown in table II.1. 



                               Table II.1
                
                   Planned Active Army QDR Reductions

Initiative                                  Positions reduced
----------------------------------  ----------------------------------
Transfer combat service support                   7,100
 and combat support to reserve
 components
Reduce major command headquarters                 2,900
Reduce active support to the                      1,400
 reserves
Reduce Army Materiel Command                      1,300
Reduce and relocate some forces in                1,000
 Panama
Restructure military intelligence                 1,000
Reduce Army Medical Command                        800
Other                                              500
======================================================================
Total                                            16,000\a
----------------------------------------------------------------------
\a The Army plans to eliminate an additional 1,000 positions to
offset a shortage in its "trainees, transients, holdees, and
students" force. 

Source:  Department of the Army. 

The Army plans to transfer some combat support and combat service
support missions to the reserve component, which will eliminate about
7,000 active military positions.  The reserve component has already
taken over about one-half of these missions.  According to Army
officials, these transfers were based on an Army study that concluded
that about 3,400 late-deploying combat support and combat service
support activities could be transferred to the reserves.  The
remaining 3,600 positions were to be identified in the Total Army
Analysis, expected to be released in March 1998.\1

The major commands have not specifically identified about one-half of
the 2,900 cuts to their institutional forces.  The Army allocated
percentage cuts to most of the major commands based on the judgment
of senior Army leaders.  For example, commands that were considered
low priority received a higher percentage cut than commands that were
considered a higher priority.  In February 1997, we reported that
allocating positions based on available budgets, without defining
workload requirements, leads to across-the-board cuts that reduce
funds available to all commands regardless of relative need.\2

The Army has identified all of the cuts associated with active
training support to the reserve component.  These cuts were based on
an Army study that concluded, among other things, that three existing
active headquarters components that support reserve training could be
merged into one.  According to National Guard officials, the Guard
supports the concept of centralized training support to the reserve
component but is concerned that these reductions could result in less
training support for some units.  These cuts comply with section 414
(a) of Public Law 102-190, as amended,which requires the Army to
provide a minimum of 5,000 active personnel to provide training
support to the reserve component. 

The Army Materiel Command has identified all of its active military
cuts.  The Command was reduced by 1,900 active military personnel,
but only 1,300 of these cuts will be used to meet the QDR reduction. 
The remaining 600 cuts will be used to offset other force structure
adjustments within the Army.  In developing its plans to reach the
QDR cut, the Command first identified positions that it wanted to
remain with the military, such as commanders and chaplains, and then
decided to cut about 1,000 positions by ceasing to perform some
missions.  For example, the Command eliminated the new equipment
training and developmental equipment testing missions.  According to
Command officials, project managers for new weapon systems will have
to fund any new equipment training in the future.  On the other hand,
the Army National Guard may assume some of the developmental testing
mission.  The Command allocated the remaining cuts across its
subordinate commands. 

The Army plans to cut 1,000 positions as part of a plan to reduce and
relocate some of the positions that are currently in Panama.  For
example, the Army plans to eliminate about 400 positions in an
infantry battalion that is no longer needed. 

The Army plans to cut its Medical Command by about 3 percent, or 800
positions, which is proportionate with the overall reduction to the
active Army.  According to Office of the Surgeon General officials,
these cuts are based on changes in workload and populations served. 
Although the Medical Command has tentatively identified about 400 of
its cuts, these cuts will not be finalized until the Total Army
Analysis is complete.  At the time that we completed our work, the
Command had not identified how to allocate the remaining cuts. 

The Army has identified about 300 of the cuts associated with its
plans to restructure military intelligence.  According to Army
officials, an ongoing study, expected to be completed in May 1998,
will identify the remaining intelligence positions to be cut. 
Finally, the Army plans to cut 300 positions from the joint staff and
defense agencies and 200 positions from the 82nd Airborne Division. 
Army officials noted that the Joint Staff and defense agencies
positions were identified as part of the Secretary of Defense's
recommendation, in the November 1997 Defense Reform Initiative, to
reduce headquarters.  The Army plans to cut 200 positions that are no
longer required in the 82nd Airborne Division. 


--------------------
\1 The Army uses the process known as Total Army Analysis to
determine the number and types of support units needed to support the
Army's combat forces and to allocate personnel authorizations to
required units. 

\2 Force Structure:  Army Support Forces Can Meet Two-Conflict
Strategy With Some Risks (GAO/NSIAD-97-66, Feb.  28, 1997). 


   AGREEMENT HAS NOT BEEN REACHED
   ON THE MAJORITY OF RESERVE
   COMPONENT CUTS
-------------------------------------------------------- Appendix II:2

The QDR directed that the Army reserve components be reduced by
45,000 personnel.  At a meeting convened in June 1997 to reach
agreement on how the reductions should be allocated, the reserve
components agreed to reduce end strength by 20,000 (17,000 in the
National Guard and 3,000 in the Reserve) by fiscal year 2001. 
Officials have not agreed on how the remaining 25,000 personnel
reduction would be allocated.  For budgeting purposes, the Army
allocated 21,000 of the remaining cuts to the Army National Guard and
4,000 to the Army Reserve. 

The Army National Guard plans to achieve the initial 17,000
reduction--5,000 in fiscal year 1998, 5,000 in fiscal year 1999, and
7,000 in fiscal year 2000--through attrition.  It does not plan to
reduce force structure along with the personnel cuts.  The Army
National Guard plans to distribute the reductions among the states,
based on their historical ability to recruit and maintain Guard
members, and reallocate personnel as necessary to ensure that units
with priority missions maintain readiness.  An Army National Guard
readiness official stated that the reductions will probably result in
understaffing some institutional force units and the combat
divisions.  As we reported in March 1996,\3 DOD and Army studies
noted that many Army National Guard combat units are not needed to
meet the national security strategy.  Although the Army has
programmed a reduction of an additional 21,000 personnel between
fiscal years 2001 and 2003, the National Guard opposes these cuts and
therefore has no specific plans to implement them. 

To achieve its cuts, the Army Reserve plans to eliminate 3,000
individual mobilization augmentees in fiscal year 2000.\4 Army
officials stated that, about 1,500 personnel are in medical positions
that, according to a recently completed medical reengineering
initiative, are excess to requirements.  The remaining 1,500 cuts
will be based on ongoing reviews of all Army Reserve Individual
Mobilization Augmentee positions.  The Army has programmed an
additional reduction of 4,000 personnel between fiscal years 2001 and
2003; however, the Army Reserve is waiting for the Total Army
Analysis results to determine how these cuts will be made. 


--------------------
\3 Army National Guard:  Validate Requirements for Combat Forces and
Size Those Forces Accordingly (GAO/NSIAD-96-63, Mar.  14, 1996). 

\4 Individual mobilization augmentees are members of the selected
reserve who augment active component commands that have wartime
requirements above their peacetime strength authorizations. 


   PLANS FOR CIVILIAN CUTS ARE
   LARGELY UNDEFINED
-------------------------------------------------------- Appendix II:3

Although the QDR directed that the Army cut 33,700 civilian
personnel, the Army's plans are not completely defined and based on
assumptions that could make it difficult to achieve all of the cuts. 
For example, the Army plans to achieve the majority of these cuts
through outsourcing; however, a significant portion of the plan has
not been clearly defined.  Moreover, the Army assumed it could cut
about 5,300 positions by reengineering the Army Materiel Command, but
it does not have specific plans to achieve the majority of these
cuts.  The Army also assumed that it could cut 2,400 military
technicians, but these cuts may be delayed because they are directly
tied to force structure reductions that are not currently programmed. 
In fact, the Army Reserve plans to reduce 200 military technicians
and 200 civilians instead of 400 military technicians. 

The Army's outsourcing plan may be difficult to achieve because it
assumes that all eligible positions in commercial activities can be
competed and that the Army can increase the study population by
reclassifying some positions that cannot currently be competed.  To
achieve the QDR cuts, the Army plans to compete 48,000 civilian
positions--34,000 positions currently in commercial activities and
14,000 positions that must be reclassified before they can be
competed.  The Army assumes that it can compete all of the 34,000
civilian positions in commercial activities.  However, unlike the Air
Force, the Army has not done any study to determine if all positions
can be competed.  The Air Force found that it is not practical to
compete many positions in commercial activities because they are
spread across many units and functions. 

The Army has initiated studies covering about 15,000 of the 34,000
positions in commercial activities.  However, some of these positions
are being used to satisfy personnel cuts that were identified before
the QDR.  For example, a Test and Evaluation Command official noted
that almost all the positions eliminated through the ongoing studies
will be used to satisfy personnel reduction targets that existed
before the QDR and not to meet QDR cuts.  Moreover, the Army has not
identified the specific functions by command or installation for the
remaining 19,000 positions to be studied.  Army officials stated that
the major commands would identify the specific functions to be
studied as part of each year's budget. 

The Army's potential study universe includes 14,000 positions that
are currently considered inherently governmental and therefore cannot
be competed.  According to Army officials, OSD is currently examining
whether relevant civilian positions are consistently and properly
classified as either a commercial activity or an inherently
government function.  The Army expects that this effort will result
in 14,000 positions being reclassified as commercial activities and
therefore becoming eligible to be competed.  However, there is
currently no data available to support this assumption. 

The majority of the civilian cuts allocated to the Army Materiel
Command have not been specifically identified.  The Command has
identified specific plans for about 3,200 of its 8,500 civilian cuts. 
For example, the Command plans to eliminate the School of Engineering
and Logistics at Red River Army Depot, Texas, and reduce staff
oversight of installation management commandwide.  The Command does
not presently have specific plans for the remaining 5,300 reductions. 
According to Command officials, the remaining reductions are not
scheduled to occur until after fiscal
year 2000, which should allow the Command time to develop plans to
achieve these cuts. 

As part of the civilian cuts, the Army plans to cut 2,200 military
technicians--2,000 in the National Guard and 200 in the Army Reserve. 
However, the cuts in the Army National Guard may not occur.  Congress
sets annual end strengths for dual-status military technicians, which
would have to be reduced from current levels to accommodate the
planned cuts.  Alternatively, 10 U.S.C.  10216 states that DOD must
document reductions in force structure if it budgets for a lower
number of dual-status military technicians than the authorized level. 
Army National Guard officials stated that they do not plan to reduce
force structure as part of the QDR, so they do not intend to reduce
the number of military technicians.  The Army is currently working to
resolve this issue.  On the other hand, the Army Reserve plans to
reduce force structure to eliminate its military technicians. 


AIR FORCE PLAN TO ACHIEVE QDR
PERSONNEL CUTS
========================================================= Appendix III

The QDR directed that the Air Force cut 26,900 active, 700 reserve,
and 18,300 civilian personnel.  These cuts represent a reduction of 7
percent for the active military, 0.4 percent for the reserves, and 11
percent for the civilian personnel end strengths projected for fiscal
year 2003 before the QDR.  OSD estimated that these cuts would reduce
personnel costs by about $790 million by fiscal year 2003.  However,
the Air Force did not program all of the QDR cuts in the fiscal year
1999 FYDP because (1) it decreased its estimate of the number of
military and civilian positions that can be eliminated through
outsourcing, (2) OSD deferred most of the Air Force's plan to
restructure its combat forces because it was not executable by fiscal
year 2003, and (3) the Air Force decided not to cut reserve
personnel.  Therefore, the Air Force's fiscal year 1999-2003 budget
only accounts for about $600 million, or 76 percent, of the savings
it planned to achieve through the personnel cuts.  Furthermore, the
actual personnel cuts could be significantly lower than the amount
programmed because of optimistic assumptions that the Air Force made
regarding the potential for outsourcing. 


   AIR FORCE HAS NOT PROGRAMMED
   ALL ACTIVE MILITARY QDR CUTS
------------------------------------------------------- Appendix III:1

The Air Force has not included about 5,600 of the 26,900 active
military cuts directed by the QDR in the fiscal year 1999 FYDP
because (1) it found problems with the outsourcing estimates it had
used in May 1997 as input for the QDR cuts and (2) OSD deferred the
majority of Air Force plans to restructure some fighter and bomber
squadrons.  These actions lowered the planned savings by about $156
million.  Table III.1 shows the specific initiatives the Air Force
plans to implement the QDR cuts, the differences between the May 1997
QDR plan and the fiscal year 1999 FYDP, and the estimated impact of
the differences on savings. 



                              Table III.1
                
                Air Force May 1997 and Fiscal Year 1999
                FYDP Plans for Reducing Active Military
                               Personnel

                         (Dollars in millions)

                                   Cuts
                               based on
               Cuts based on     fiscal                   Estimated
               May 1997 QDR   year 1999                   impact on
Initiative         plan            FYDP     Change        savings\a
-------------  -------------  ---------  -------------  --------------
Outsourcing       25,400         22,100     (3,300)         ($41)
Restructuring      4,800          1,400     (3,400)         (170)
 combat
 forces
Streamlining        800               0      (800)           (40)
 headquarters
Implementing         0            2,300      2,300           115
 other OSD
 changes to
 active
 personnel
Reinvesting\b     (4,100)       (4,500)       400            (20)
======================================================================
Total             26,900         21,300     (5,600)         ($156)
----------------------------------------------------------------------
\a Estimates are based on an average active military salary of
$50,000 per year and a 25-percent savings from outsourcing, which
were used by OSD to estimate savings from personnel cuts. 

\b The Air Force plans to increase the number of personnel assigned
to some missions to eliminate existing shortfalls and respond to new
missions. 

Source:  Our analysis of Air Force data. 

Before the QDR, the Air Force began a study, known as Jump Start, to
examine the potential to outsource military and civilian positions in
commercial activities.  In March 1997, we reported that this
initiative should enable the Air Force to reduce the size of the
active force.\1 Although Jump Start was not complete in May 1997 when
the QDR report was issued, the Air Force had developed preliminary
estimates of the number of active and civilian personnel that could
be reduced through outsourcing and used these estimates, along with
other ongoing Air Force outsourcing initiatives, to develop its QDR
proposal to reduce active personnel.  The Air Force's Jump Start
analysis was fairly detailed.  Specifically, the Air Force analyzed
its commercial activities by major function and units and obtained
input from both functional specialists and major commands that would
be affected.  However, after the QDR was released, the Air Force
found that it had double counted--or overstated the potential to
reduce--about 3,300 military positions in Jump Start.  The Air Force
corrected this error in its fiscal year 1999 budget.  As a result,
the fiscal year 1999 FYDP assumes that 3,300 fewer active military
positions will be eliminated through outsourcing by 2003 than the
amount assumed in the Air Force's May 1997 QDR plan. 

The Air Force's May 1997 QDR plan also included several initiatives
to restructure some combat forces that would have eliminated about
4,800 active military positions.  In May 1996, we reported that the
Air Force could consolidate its fighter squadrons and maintain the
same number of aircraft but carry out its missions with fewer active
duty personnel.\2 We developed options that could eliminate between
two and seven squadrons.  However, the fiscal year 1999 FYDP assumes
that only about 1,400 of these positions will be eliminated.  During
the QDR, the Air Force developed a plan to increase the size of some
active fighter squadrons from 18 to 24 aircraft and transfer 1 active
fighter wing to the reserves.  The Air Force also proposed to
increase the size of some bomber squadrons from 12 to 18 aircraft. 
However, OSD deferred much of the fighter restructuring and the
entire bomber consolidation plans because it determined they were not
executable by fiscal year 2003.  OSD was concerned that the
restructuring plan could be construed by Congress as violating its
guidance to refrain from any planning for future base closures.  In
preparing the fiscal year 1999 budget, OSD cut the active force by
about 2,300 through other initiatives, which offset some of the
planned force structure reductions. 


--------------------
\1 Force Structure:  Potential Exists to Further Reduce Active Air
Force Personnel (GAO/NSIAD-97-78, Mar.  28, 1997). 

\2 Air Force Aircraft:  Consolidating Fighter Squadrons Could Reduce
Costs (GAO/NSIAD-96-82, May 6, 1996). 


   AIR FORCE NO LONGER PLANS TO
   CUT RESERVES
------------------------------------------------------- Appendix III:2

The QDR report stated the Air Force reserve component would be
reduced by 700 personnel.  This decision was based on an Air Force
plan to cut 700 civil engineering positions in the reserves. 
According to Air Force officials, these positions will be eliminated
because they have no wartime mission.  However, the Air Force has
subsequently decided to increase the reserve end strength to cover an
existing shortage in security police units.  Thus, the Air Force will
not realize an estimated $5 million in savings.\3


--------------------
\3 This estimate was based on an average reserve salary of $7,000 per
year, which was used by OSD to estimate savings from personnel cuts. 


   FISCAL YEAR 1999 FYDP WILL NOT
   INCLUDE ALL QDR CIVILIAN CUTS
------------------------------------------------------- Appendix III:3

The Air Force planned to achieve all but 100 of its 18,300 civilian
cuts through outsourcing.  However, the fiscal year 1999 FYDP does
not include 2,300 of the civilian cuts mandated by the QDR because
the Air Force has revised its estimate of the number of civilians
that can be outsourced.  After the QDR was released, the Air Force
found that it had double counted--or overstated the potential to
reduce--about 2,300 civilian positions in Jump Start.  Thus, the Air
Force's planned savings was reduced by an estimated $29 million.\4


--------------------
\4 This estimate was based on an average civilian salary of $50,000
per year and a 25-percent savings from outsourcing, which were used
by OSD to estimate savings from personnel cuts. 


   AIR FORCE COULD HAVE DIFFICULTY
   ACHIEVING CUTS INCLUDED IN THE
   FYDP
------------------------------------------------------- Appendix III:4

The Air Force's difficulty in implementing QDR cuts may be compounded
because of optimistic assumptions it made in calculating the active
military and civilian outsourcing cuts included in the fiscal year
1999 FYDP.  Our analysis of the Air Force's outsourcing estimates
shows that the Air Force may have a difficult time achieving as many
as 3,000 military and 8,600 civilian cuts included in the FYDP. 
Examples of the problems we identified are as follows: 

  -- The Air Force found an additional 700 Jump Start positions that
     are included in the fiscal year 1999 FYDP but had already been
     included in the fiscal year 1998 FYDP, and therefore, cannot be
     used to meet QDR cuts. 

  -- The fiscal year 1999 FYDP includes 1,200 administrative
     positions from the Jump Start study that Air Force leaders
     determined are not good candidates for outsourcing because they
     are split between many different units and locations, thereby
     making it difficult to identify more economical ways of
     accomplishing the mission. 

  -- The Air Force may have overstated 5,700 civilian cuts in Jump
     Start because it assumed that all the military positions being
     eliminated would be contracted out.  However, Air Force
     historical experience with public-private competitions under the
     A-76 process shows that 40 percent of these positions would
     remain in house with civilian employees. 

  -- An Air Force outsourcing initiative that was separate from Jump
     Start but was included in the fiscal year 1999 FYDP overstated
     civilian cuts by about 1,200 positions.  Specifically, the Air
     Force has targeted selected functions at 4 bases with about
     3,000 positions--2,000 military and 1,000 civilians--to
     outsource.  However, the Air Force did not base its personnel
     cuts on its historical experience but assumed that all of these
     positions would be replaced by contractor personnel.  On the
     basis of the Air Force's past experience with cost comparison
     studies, we estimate that about 1,200 of these positions would
     remain in house with civilian employees. 

Air Force officials agree that these errors and assumptions will make
it more challenging to achieve outsourcing estimates included in the
fiscal year 1999 FYDP.  The officials stated that they are continuing
to work closely with the major commands to refine their estimates. 


NAVY PLAN TO ACHIEVE QDR PERSONNEL
CUTS
========================================================== Appendix IV

The QDR report recommends that the Navy reduce 18,000 active
military, 4,100 reserves, and 8,400 civilian personnel.  This
reduction represents about a 4.5-percent cut of the active, reserve,
and civilian personnel end strengths projected for fiscal year 2003
before the QDR.  The majority of the active and reserve cuts result
from force structure reductions.  The Navy plans to achieve the
majority of the active military cuts in fiscal year 1999.  The
civilian cuts depend primarily on the results of reengineering
studies and projected decreases in workload.  The QDR cuts do not
represent all the potential personnel reductions in the Navy by
fiscal year 2003 because the Navy's fiscal year 1999 budget projects
savings of $2.7 billion by fiscal
year 2003 from competing 10,000 military and 75,500 civilian
positions.  The Navy's plan for achieving the QDR personnel cuts is
summarized in
table IV.1. 



                               Table IV.1
                
                  Navy Plan to Achieve QDR Reductions
                        (fiscal years 1999-2003)

Initiative             Active           Reserve           Civilian
----------------  ----------------  ----------------  ----------------
Reduce force           11,000            2,200               50
 structure
Reduce                 1,400              250               250
 intermediate
 maintenance
Outsource              1,300               50               400
Streamline              950                0                300
 headquarters
Reduce                  800                0                 0
 individuals
 account\a
Reengineer Naval         0                 0              3,600\b
 Facilities
 Engineering
 Command
Decrease in              0                 0               3,000
 working capital
 fund workload
Other                  2,550             1,600              800
======================================================================
Total                  18,000            4,100             8,400
----------------------------------------------------------------------
\a This account includes transients, patients, prisoners, and
students.  The reduction is directly related to a smaller active
military force. 

\b This amount includes about 800 positions to be cut through
outsourcing. 

Source:  Navy. 



   MOST ACTIVE MILITARY CUTS
   RESULT FROM REDUCING FORCE
   STRUCTURE
-------------------------------------------------------- Appendix IV:1

Approximately 11,000, or 61 percent, of the active cuts are
associated with force structure cuts called for in the QDR, as shown
in table IV.2. 



                               Table IV.2
                
                Active Navy Military Personnel Cuts from
                 QDR Force Structure Reductions (fiscal
                            years 1999-2003)

Force structure change                          Positions
----------------------------------  ----------------------------------
Deactivate 15 surface combatants                  5,100
Deactivate 5 auxiliary ships and                  2,000
 reduce the
 crew size on 7 other auxiliary
 ships
Deactivate 2 submarines and 1                     1,600
 tender
Deactivate 2 amphibious ships                      600
Deactivate 2 helicopter squadrons                  400
Reduce F-14 squadron size                          400
Other                                              900
======================================================================
Total                                             11,000
----------------------------------------------------------------------
Source:  Department of the Navy. 

The Navy plans to decrease the number of surface combatants from the
current level of 128 to 116 by the end of fiscal year 2003.  Navy
officials said that newer ships entering the fleet will be more
capable than those being deactivated.  This increased capability will
enable the Navy to provide forward presence and comply with other
aspects of the national military strategy using fewer ships. 

The Navy also plans to cut about 1,500 positions by deactivating five
auxiliary oiler ships staffed by active personnel and replacing them
with four ships that will be reactivated and staffed by civilian
personnel assigned to the Military Sealift Command.  According to
Navy officials, the four ships that will be reactivated will be more
economical primarily because they require smaller crews.  The
Military Sealift Command operates its ships with smaller crews
because it hires skilled mariners, whereas Navy ships often rely
heavily on recruits that must be trained to replace more skilled
sailors.  In addition, the Navy plans to cut about 500 positions by
reducing the crew size on eight multiproduct auxiliary ships.\1 We
had previously reported that the Navy could transfer these ships to
the Military Sealift Command and save about $122.5 million.\2 The
Navy determined that these ships should continue to be staffed with
smaller military crews because the ships can maintain battle group
speeds and operate within battle group formations. 

The Navy plans to eliminate about 300 positions by decommissioning
two attack submarines.  The QDR states that this force reduction was
based on changing post-Cold War requirements.  In addition, the Navy
plans to eliminate about 1,300 billets by decommissioning one
submarine tender.  According to a Navy official, this decision was
made because submarine tenders are more expensive to operate than
shore-based maintenance activities and the Navy is willing to service
its submarine fleet with two tenders--one each in the Atlantic and
Pacific Fleets. 

The Navy plans to deactivate two amphibious ships and cut about 600
positions.  According to Navy officials, this cut will leave the Navy
with the 36 amphibious ships required to satisfy the Navy's long-term
goal for 12 amphibious readiness groups.  According to the Navy, this
goal will allow it to meet wartime requirements and sustain peacetime
operations. 

The QDR assumes the Navy will cut about 400 positions by deactivating
two helicopter supply squadrons and relying on private contractors to
provide this service.  However, the Navy is reconsidering whether
this option is viable for the helicopter detachment based in Guam. 

The QDR concluded that the Navy would maintain 10 active
carrier-based airwings, but the Navy plans to reduce the size of F-14
squadrons from 14 to 10 aircraft, which will eliminate 40 aircraft
and about 400 positions.  A Navy official stated this action was
taken because F-14s are reaching their fatigue life expectancy and
are expensive to maintain.  The Navy plans to fund these squadrons as
if they had 12 aircraft each, which will allow the squadrons to
satisfy mission requirements as well as maintain qualified pilots to
transition to the F/A-18F.  However, the Navy does plan to return the
size of the fighter squadrons back to 14 aircraft when the F-14s are
replaced by F/A-18E/Fs during fiscal years 2001-08. 

The Navy also plans to cut about 6,500 active military positions in
infrastructure-related activities.  Some of the infrastructure cuts
are based on the projected force structure cuts.  For example, the
Navy plans to cut about 1,400 intermediate maintenance positions
because a smaller force will decrease workload.  The Navy also plans
to reduce Atlantic and Pacific Fleet headquarters by 20 percent, or
about 950 positions--490 in the Atlantic Fleet and 460 in the Pacific
Fleet.  The Navy has identified the specific positions within each
fleet to eliminate. 

Finally, the Navy planned to eliminate about 1,300 positions by
outsourcing selected functions in the Atlantic and Pacific Fleets. 
Fleet officials stated that they now plan to eliminate only about 660
military positions through outsourcing because the original plan
included positions that are still needed due to sea-to-shore rotation
requirements. 


--------------------
\1 A multiproduct auxiliary ship can transfer munitions, provisions,
freight, food, and other consumables to combatant ships while
steaming along side at a distance from 80 to 300 feet. 

\2 Navy Ships:  Turning Over Auxiliary Ship Operations to the
Military Sealift Command Could Save Millions (GAO/NSIAD-97-185, Aug. 
8, 1997). 


   NAVAL RESERVE CUTS ARE SPLIT
   BETWEEN FORCE STRUCTURE AND
   INFRASTRUCTURE ACTIVITIES
-------------------------------------------------------- Appendix IV:2

The Navy plans to achieve about 2,200, or 52 percent, of its 4,100
reserve cuts by reducing force structure.  It plans to achieve the
remaining 1,900 cuts by reducing positions in various reserve support
activities and eliminating funded positions it has been unable to
fill.  The Navy plans to eliminate nearly one-half of the positions
in 1999 and the remainder between 2000 and 2003. 

The largest reserve force structure reduction results from the Navy's
decision to reduce the number of reserve P-3 squadrons from eight to
seven and the number of aircraft per squadron from eight to six.\3
The Navy's plan will eliminate 22 aircraft and about 840 positions. 
According to a Navy official, it is difficult to meet overseas
deployment requirements with reserve personnel, so the Navy decided
it needed more active personnel to satisfy this requirement. 

The Navy also plans to eliminate about 240 positions by
decommissioning four Naval Reserve frigates, two in fiscal year 2002
and two in fiscal
year 2003.  An additional 460 positions will be eliminated by
deactivating the helicopter squadrons that support these frigates. 
However, a Navy official stated that the reserves may keep some of
these frigates for an increased role in drug interdiction missions,
which could reduce the number of positions originally scheduled to be
cut.  The Navy plans to revisit this decision during the fiscal year
2000 budget process. 

The Navy plans to reduce the size of helicopter minesweeper squadrons
from 12 to 8 aircraft, which will eliminate about 115 positions.  The
minesweeping squadrons comprise active and reserve personnel and
aircraft.  Navy officials stated that the Navy decided to reduce the
number of reserve aircraft because the reserve component could not
adequately staff and maintain the squadrons to satisfy the 72-hour
deployment requirement.  The Navy also plans to deactivate one
coastal minesweeper that supports the U.  S.  Southern Command, which
will eliminate about 115 positions. 

The final reserve force structure change involves a decision to
replace an F-14 squadron of 14 aircraft with an F-18A squadron of 12
aircraft.  Navy officials noted that the F-18As are less expensive to
operate and maintain than the F-14 aircraft and that the normal
reserve squadron size is 12 aircraft.  This action will cut about 115
positions. 

The Navy also plans to eliminate about 1,900 positions in various
reserve support activities.  Some of these cuts result from the force
structure changes.  For example, the Navy plans to cut about 250
maintenance positions because the reserves will have fewer aircraft
to maintain.  Another 185 positions will be eliminated based on the
Navy's decision to deactivate a submarine tender from the active
fleet.  Additional positions will be eliminated because the Navy has
not been able to fill them.  For example, the Seabees have not been
able to fill underwater construction positions with qualified
personnel primarily because they do not have the money to pay for the
6-month training course that is required for sailors to qualify for
the program.  The Seabees have also not been able to recruit sailors
coming off active duty who possess the required skills and training. 
In addition, although the battalions have a wartime role, the Navy
decided that it was not feasible to fund battalion positions that
were not being filled.  Together with reductions from Construction
Battalion headquarters, the Navy plans to cut about 600 battalion
positions.  Likewise, the Navy plans to cut about 250 medical and 190
intelligence positions because they remained unfilled. 


--------------------
\3 These aircraft conduct antisurface, antisubmarine, surveillance,
and mining operations for naval task groups at sea. 


   CIVILIAN CUTS ARE BASED ON
   REENGINEERING INITIATIVES AND
   PROJECTED DECREASES IN WORKLOAD
-------------------------------------------------------- Appendix IV:3

The Navy assumed that it could cut about 3,600 positions from the
Naval Facilities Engineering Command through various management
efficiencies.  The Navy plans to achieve one-third of the 2,500
Public Work Center cuts through productivity improvements, one-third
through workload reductions, and one-third through outsourcing.  The
Navy plans to privatize utilities and streamline internal processes,
such as acquisition reform, to achieve the productivity cuts.  For
the workload reductions, the Navy assumed that a 20-percent decline
in the military construction program (including base closures)
between fiscal year 1998 and 2003 would equate to a 20-percent
reduction in personnel.  Finally, the outsourcing cuts are based on
Navy plans to study about 4,200 positions.  The Navy has studies
underway for approximately 1,100 of these positions.  The Navy plans
to study the remaining 3,100 positions in fiscal years 1999 through
2001; however, it has not yet identified the specific functions to be
studied. 

The Navy plans to eliminate about 1,100 positions by reengineering
the Naval Facilities Engineering Command's field divisions.  The Navy
has started a study to determine how it can reduce the workforce by
30 percent through restructuring and streamlining operations and
improve services to Navy customers.  The study is scheduled to be
completed in July 1998, and the reductions are scheduled to be
implemented by fiscal year 2000. 

The Navy also assumes that it will be able to cut about 3,000
positions funded through the working capital fund based on projected
decreases in workload.  However, the Navy was not able to provide any
documentation to support these reductions. 


   OTHER OUTSOURCING STUDIES ARE
   PLANNED
-------------------------------------------------------- Appendix IV:4

The Navy's fiscal year 1999 budget projects savings of $2.5 billion
by fiscal year 2003 from competing 80,500 positions--10,000 military
and 70,500 civilian positions--over the next 5 years.  However, the
Navy did not program any potential military or civilian personnel
cuts based on its outsourcing program.  If the Navy studies all
80,500 positions, about 6,500 military and 35,000 civilian positions
could be cut.\4 Alternatively, if the Navy does not succeed in
outsourcing these positions, it will have to reduce the amount of its
planned savings in subsequent budgets.  To date, the Navy has
announced studies covering about 18,500 of these positions, but it
does not have the remaining 62,000 positions identified by function
or location. 


--------------------
\4 DOD policy is that all military positions being competed are
considered non-essential and will be replaced by either a civilian
employee or contractor.  The Navy assumes that 6,500 of the active
positions could be cut but that 3,500 will remain military to support
sea-to-shore rotation.  The civilian cuts are based on Navy
experience that indicates 50 percent of the functions studied are won
by contractors. 


MARINE CORPS PLAN TO ACHIEVE QDR
PERSONNEL CUTS
=========================================================== Appendix V

The QDR directed that the Marine Corps cut 1,800 active, 4,200
reserve, and 400 civilian personnel.  These cuts represent a
reduction of 1 percent for the active military, 10 percent for the
reserves, and 2 percent for the civilian personnel end strengths
projected for fiscal year 2003 before the QDR.  The Marine Corps did
not have a specific plan for making the cuts at the time the QDR was
announced.  However, during the summer and fall of 1997, the Marine
Corps reviewed its activities to identify ways to reduce personnel to
QDR-directed levels as well as shift more resources to its highest
priority war-fighting units.  The Marine Corps plans to eliminate
3,000 reserve positions, 1,200 less than directed in the QDR.  Marine
Corps officials stated the revised plan will achieve approximately
the same level of savings implied in the QDR-proposed reduction
because more positions for reservists on full-time active duty are
being eliminated. 


   MOST ACTIVE CUTS INVOLVE A
   REORGANIZATION OF SECURITY
   FORCES
--------------------------------------------------------- Appendix V:1

The Marine Corps plans to reduce the size of the Marine Security
Force Battalion and eliminate headquarters administrative and support
positions to achieve its active military cuts.  The Marine Security
Force Battalion has historically provided security for some Navy
installations and some deployed Navy ships.  These requirements have
been reduced because the number of nuclear weapons storage and
transfer sites are decreasing, nuclear weapons are no longer deployed
on ships, and most Navy bases are open to the public.  The Navy has
agreed that the Marine Corps could reduce the size of the security
battalion, eliminating about 1,200, or 40 percent, of its 3,000
positions.  About 70 percent of these positions were associated with
missions that were no longer valid.  The remaining 30 percent
involved proposals to meet the same level of support through more
efficient use of personnel.  The Marine Corps plans to satisfy the
Navy's security needs by increasing the number of special
anti-terrorist platoons from 6 to 11, providing anti-terrorist
training to the Navy personnel on Navy bases and stations as needed,
and continuing to provide security guards for selected Navy
activities.  The Marine Corps also plans to eliminate about 600
administrative positions by improving efficiency and using new
technology, although the positions have not been specifically
identified. 

The Marine Corps developed its plan to meet active duty cuts outlined
in the QDR as a part of a broader effort to shift resources to its
highest priority operational requirements.  In addition to developing
a plan to achieve its QDR cuts, the Marine Corps also identified
about 4,000 positions that could be eliminated and transferred to
operational units to achieve a 90-percent staffing level in these
units.  For example, the Marine Corps plans to eliminate or reduce
administrative and support positions, such as audio-visual and
disbursing.  The Marine Corps also plans to reduce or eliminate some
weapon systems.  For example, the Marine Corps plans to reduce about
850 positions related to cuts in certain infantry and missile
systems, including some anti-tank missile positions and all 383 HAWK
missile firing positions.  A senior Marine Corps official said that,
although these systems are valuable, they are not the most critical
and that the resources can be better used in other ways.  For
example, despite the capability of the HAWK system, its lift
requirements make movement into theater difficult.  The Marine Corps
plans to rely on Navy aircraft and Army Patriot missiles to replace
HAWK capabilities until a future anti-ballistic missile defense is
deployed. 


   RESERVE CUTS ARE FEWER THAN
   DIRECTED BY THE QDR
--------------------------------------------------------- Appendix V:2

The QDR directed that the Marine Corps reduce its reserve component
by 4,200.  According to Marine Corps officials, the Commandant, after
an extensive review of the reserve force structure, decided to cut
only 3,000 positions.  Marine Corps officials noted that, although
fewer positions are being cut than the QDR directed, approximately
the same level of savings will be achieved because the Marine Corps
original estimates were based on average costs for drilling
reservists who are generally paid for weekend duty, whereas the
Marine Corps' revised plan cuts more full-time reservists who have
higher salaries that are comparable to active duty personnel.\1 The
Commandant chartered a reserve force structure review group to make
recommendations on restructuring the Marine Corps Reserve, within QDR
guidelines, to complement the active component in meeting the
requirements of the war-fighting commanders in chief.  The group
focused on identifying forces not critical to meeting war-fighting
requirements and units at sites that are underutilized, not
cost-effective, or in poor condition and eliminating redundant or
unnecessary headquarters overhead.  An additional consideration was
to minimize the impact on individual personnel whose positions will
be eliminated.  This consideration meant closing units in areas where
there are other units within the geographical area so that personnel
displaced by closings can fill positions in other local units. 

On the basis of the work of the force structure review group, the
Commandant decided to eliminate 3,000 reserve positions:  1,434
positions from drilling units, 695 individual mobilization
augmentees, and 553 positions for reservists on active duty.  The
Marine Corps also plans to reduce the number of new recruits by 318
positions.  Full-time reserve personnel represent the highest cost
category.  By eliminating more of these positions than it originally
estimated, the Marine Corps expects to achieve approximately the same
level of savings and lose fewer personnel than directed in the QDR. 

To achieve the reductions in drilling units, the Marine Corps plans
to deactivate units and realign personnel and organizations at
various sites throughout the United States.  The Marine Corps plans
to deactivate one theater missile defense (HAWK) unit and reorganize
another, which will eliminate about 475 positions.  This action
corresponds to the Marine Corps' decision to eliminate HAWK units in
the active force.  The Marine Corps also plans to deactivate 10 other
units, which will eliminate about 740 positions.  Some of these units
had difficulty in recruiting and sustaining their occupational
specialties and were already understaffed, whereas others had no
wartime mission.  Finally, other cuts are based on plans to
restructure some units so that the Marine Corps can accomplish its
missions more efficiently without undermining operational
effectiveness.  For example, the Marine Corps plans to cut about 230
positions by deactivating one Marine Wing Support Squadron and
transferring some of its functions to other squadrons. 

The Marine Corps plans to reduce 695 individual mobilization
augmentee positions in fiscal years 1998 and 1999 through attrition. 
The individual mobilization augmentees currently serve in many
capacities, including headquarters and support activities.  The
Marine Corps allocated the cuts to each functional area, such as
communications and information.  However, it is currently conducting
a review to identify the specific positions within each area to
eliminate. 

Full-time reserve reductions will be taken by units spread throughout
the Marine Corps Reserve, including small cuts in some operating
units.  The largest number of reductions--175--will come from the
reserve air wing, which had 1,080 full-time reserve positions.  The
Marine Corps plans to achieve most of these reductions by reducing
air wing headquarters staff (77 positions) and eliminating HAWK units
(34 positions).  Headquarters and support units will be cut by higher
percentages than other units.  For example, Marine Corps headquarters
will eliminate 49, or 37 percent, of its 133 active reserve
positions, and the Marine Corps Combat Development Command will be
reduced by 15, or 75 percent, of its 20 active reserve positions.  In
addition, the Marine Corps plans to consolidate reserve
administrative activities in one location, which will eliminate about
155 active reserve positions. 


--------------------
\1 According to Marine Corps officials, OSD instructed the Marine
Corps to calculate savings by equating four reserve positions to one
active duty position.  However, full-time reservists, as opposed to
reservists who drill on weekends, are paid the same as active duty
personnel.  Thus, eliminating one full-time position would save as
much as eliminating four drilling unit positions. 


   CIVILIAN CUTS HAVE NOT BEEN
   IDENTIFIED
--------------------------------------------------------- Appendix V:3

To achieve the civilian cuts, the Marine Corps plans to eliminate 63
positions, or 10 percent, of the civilian staff at its headquarters
and other activities in the Washington, D.C., area.  The remaining
237 positions to be eliminated will be prorated among other
installations worldwide.  The Marine Corps has not identified the
actual positions to be cut.  Over the next 5 years, the Marine Corps
will provide funding for fewer positions, and the local commanders
will have to decide which positions to cut.  Because of the long lead
time, Marine Corps officials believe the cuts can be achieved through
normal attrition and targeted incentives and without reductions in
force. 




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



(See figure in printed edition.)


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================= Appendix VII

NATIONAL SECURITY AND
INTERNATIONAL AFFAIRS DIVISION,
WASHINGTON, D.C. 

Janet St.  Laurent
Mike Kennedy
Ron Leporati
Margaret Morgan
Lisa Quinn


*** End of document. ***