DOD Counterdrug Activities: Reported Costs Do Not Reflect Extent of DOD's
Support (Letter Report, 09/23/1998, GAO/NSIAD-98-231).

The Defense Department (DOD) provides personnel, equipment, and
facilities to support U.S. drug interdiction and other counterdrug
activities. The Office of National Drug Control Policy reported that
DOD's fiscal year 1999 budget request for these activities totaled
$882.8 million. Members of Congress have questioned whether the reported
funds reflect the full extent of DOD's support. This report determines,
for fiscal years 1994 through 1998, (1) the total operating and support
costs associated with counterdrug activities and (2) the share of the
original procurement costs of those weapon systems most often used by
the active component in counterdrug activities. GAO also determines, for
the same period, the amount of assistance that DOD provided under the
Foreign Assistance Act to foreign countries to support counterdrug
efforts.

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

 REPORTNUM:  NSIAD-98-231
     TITLE:  DOD Counterdrug Activities: Reported Costs Do Not Reflect
	     Extent of DOD's Support
      DATE:  09/23/1998
   SUBJECT:  Military budgets
	     Military operations
	     Military aircraft
	     Smuggling
	     Drug trafficking
	     Helicopters
	     Military vessels
	     Law enforcement
	     Cost accounting
	     International cooperation
IDENTIFIER:  E-3 Aircraft
	     UH-60 Helicopter
	     P-3 Aircraft
	     Oliver Hazard Perry Class Frigate
	     Sentry Aircraft
	     AWACS
	     Black Hawk Helicopter
	     Orion Aircraft
	     FFG-7 Class Frigate
	     DOD Visibility and Management of Operating and Support
	     Costs Database

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GAO/NSIAD-98-231

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

Report to Congressional Requesters

September 1998

DOD COUNTERDRUG ACTIVITIES -
REPORTED COSTS DO NOT REFLECT
EXTENT OF DOD'S SUPPORT

GAO/NSIAD-98-231

Counterdrug Activities

(701131)

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

  DOD - Department of Defense
  O&S - operating and support
  OPTEMPO - Central Transfer Account and the military services'
     operations
  VAMOSC - Visibility and Management of Operating and Support Costs

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

B-279766

September 23, 1998

The Honorable James M.  Inhofe
Chairman
The Honorable Charles S.  Robb
Ranking Minority Member
Subcommittee on Military Readiness
Committee on Armed Services
United States Senate

The Department of Defense (DOD) provides personnel, equipment, and
facilities in support of U.S.  drug interdiction and other
counterdrug activities.  The Office of National Drug Control Policy
reported that DOD's fiscal year 1999 budget request for these
activities is $882.8 million.  Because you believe the reported funds
do not reflect the full extent of DOD's support, you asked us to
determine, for fiscal years 1994 through 1998 (1) the total operating
and support (O&S) costs that can be associated with counterdrug
activities and (2) the share of the original procurement costs of
those weapon systems most often used by the active component in
counterdrug activities.\1 Under the Foreign Assistance Act, DOD also
provides assistance to foreign countries in support of counterdrug
activities.  You asked us to determine, for fiscal years 1994 through
1998, the amount of assistance DOD provided under section
506(a)(2)(A)(i)(I) of the act, hereafter referred to as 506(a)(2).

--------------------
\1 O&S costs are those resources required to operate and support a
system, a subsystem, or a major component during its useful life in
the operational inventory.

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

The U.S.  response to drug abuse and drug trafficking is to integrate
domestic and international efforts to reduce the demand and supply of
drugs.  The Office of National Drug Control Policy was established by
the Anti-Drug Abuse Act of 1988.  It is responsible for establishing
policies, priorities, and objectives for the nation's drug control
program.  The Office has established five long-range goals as a basis
to reduce drug abuse, trafficking, and their consequences.  DOD
supports each of these goals, as shown in table 1.

                                Table 1

                National Drug Control Strategy Goals and
                             DOD's Support

Goal  Description                      Examples of DOD's efforts
----  -------------------------------  -------------------------------
1     Educate and enable America's     National Guard and service
      youth to reject illegal drugs    outreach programs (primarily
      as well as alcohol and tobacco   for youths) that assist
                                       community groups.

2     Increase the safety of           DOD components provide direct
      America's citizens by            support to drug law enforcement
      substantially reducing drug-     agencies in the form of
      related crime and violence       equipment and support services.

3     Reduce health and social costs   DOD provides demand reduction,
      to the public of illegal drug    drug testing, education, and
      use                              awareness programs for
                                       uniformed and civilian
                                       employees.

4     Shield America's air, land, and  DOD provides personnel and
      sea frontiers from the drug      equipment to detect and monitor
      threat                           drug trafficking to the United
                                       States.

5     Break foreign and domestic drug  DOD supports intelligence,
      sources of supply                detection, monitoring, and
                                       interdiction efforts in foreign
                                       countries.
----------------------------------------------------------------------
Source:  The National Drug Control Strategy, 1998:  Budget Summary
and Ten-Year Plan.

DOD's counterdrug budget, as reported by the Office, is comprised of
two major categories:  the Central Transfer Account and the military
departments' operations (OPTEMPO).  The Office defines the Central
Transfer Account as a single budget line that accounts for all
associated DOD counterdrug resources, with the exception of active
component military personnel costs and military OPTEMPO.
Specifically, the account funds such items as special supply and
equipment purchases, reserve component military personnel costs, and
travel costs for individuals supporting counterdrug activities.  The
military departments' OPTEMPO costs, currently funded in the
services' operation and maintenance accounts, are for fuel, spare
parts, and depot-level repairables for weapon systems used in
counterdrug activities.  Table 2 shows DOD's reported counterdrug
spending for fiscal years 1994-98.

                                Table 2

                DOD's Reported Counterdrug Spending for
                          Fiscal Years 1994-98

                         (Dollars in millions)

                                       Fiscal year
                            ----------------------------------
                                                         1998\
Category                      1994   1995   1996   1997      a   Total
--------------------------  ------  -----  -----  -----  -----  ======
Central Transfer Account    $671.3  $721.  $678.  $806.  $712.  $3,590
                                        3      4      2      9      .1
Military OPTEMPO             143.6  118.9  143.6  133.8  134.9   674.8
======================================================================
Total                       $814.9  $840.  $822.  $940.  $847.  $4,264
                                        2      1      1      7      .9
----------------------------------------------------------------------
Note:  Totals do not add due to rounding.

\a Enacted budget authority for fiscal year 1998.

Source:  Office of National Drug Control Policy's budget summaries
for 1995-98.

DOD provides assistance to foreign countries that support counterdrug
activities.  An authority to transfer defense equipment and services
to support international narcotics control efforts is section
506(a)(2) of the Foreign Assistance Act.

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

There are significant operating and support costs for counterdrug
activities that are not reflected in DOD's counterdrug reported costs
and funding requests.  These include costs associated with military
services' weapon systems and costs for deployed personnel who are not
assigned to specific weapon systems.  The costs associated with
weapon systems, if allocated to counterdrug activities, would total
in excess of $2 billion for fiscal years 1994 through 1996.\2 The
number of military personnel deployed in the United States who were
not assigned to specific weapon systems totaled about 14,000.  These
individuals were assigned for various time periods between fiscal
year 1994 and 1996.  Although we did not estimate the support costs
for these personnel, they would be in addition to the costs reported
by DOD and the $2 billion we estimated.  According to DOD officials,
these operating and support costs are not included in DOD's
counterdrug budgets because they pertain to the existing force
structure that supports the national defense mission and would be
incurred regardless of the type of operations conducted.  This
practice is consistent with the way DOD reports incremental costs for
contingency operations.

The military services use numerous weapon systems for counterdrug
activities that were purchased to support the national military
strategy.  The weapon systems most often used for counterdrug
activities were the Air Force's E-3 aircraft, the Army's UH-60
helicopter, and the Navy's P-3 aircraft and Perry class frigate.
With the assistance of service officials, we developed a methodology
to allocate to counterdrug activities a share of the original
procurement costs of these systems.  Using this methodology, we
calculated that about $150 million of the procurement costs for these
four systems could be allocated to counterdrug activities for fiscal
years 1994-97.\3

In fiscal years 1994 and 1995, there were no transfers of articles
and services to foreign countries under section 506(a)(2).  In fiscal
years 1996 and 1997,\4 a total of $131 million in articles and
services were transferred from DOD under this authority.

--------------------
\2 Cost data were not yet available for fiscal years 1997 and 1998.

\3 Data were not yet available to estimate these costs for fiscal
year 1998.

\4 As of August 14, 1998, there had been no approved transfers of
equipment and services under this section for fiscal year 1998.

   ADDITIONAL O&S COSTS ASSOCIATED
   WITH DOD'S COUNTERDRUG
   ACTIVITIES
------------------------------------------------------------ Letter :3

There are significant O&S costs associated with the military
services' weapon systems used for counterdrug activities that are not
reflected in DOD's counterdrug reported costs and funding requests.
These include intermediate and depot-level maintenance costs, active
military personnel salaries and benefits, and base operating support
costs.  To identify these additional costs, we primarily used the
services' Visibility and Management of Operating and Support Costs
(VAMOSC) database,\5 which allocates O&S costs by weapon system.  We
determined that there were O&S costs for major weapon systems (ships
and aircraft) used in counterdrug activities in excess of $2 billion
over the $406.2 million in OPTEMPO costs reported by DOD for fiscal
years 1994 through 1996.\6 Figure 1 compares these additional costs
to DOD's reported costs by fiscal year.

   Figure 1:  Additional O&S Costs
   and DOD's Reported OPTEMPO
   Costs for Counterdrug
   Activities

   (See figure in printed
   edition.)

Note:  Totals do not add due to rounding.

Source:  Developed by GAO using DOD and service data.

Our estimate incorporated all O&S costs for these systems reported in
the VAMOSC database.  However, each service reports O&S data
differently.  To the extent possible, we obtained additional data
from other service sources to develop comparable costs across the
services and added the additional costs to the VAMOSC data.  For
example, because Navy installation support costs are not captured in
its VAMOSC database, we calculated these costs based on average cost
factors and personnel data provided by the Navy.  We were unable to
obtain the same categories of data for the services in all cases.

In addition to O&S costs associated with weapon systems, there were
support costs associated with personnel deployed for counterdrug
activities who were not assigned to specific weapon systems, such as
personnel in intelligence units.  For example, about 14,000 military
personnel were assigned to counterdrug activities in the United
States between fiscal year 1994 and 1996 who were not associated with
specific weapon systems.  During those years, these personnel were
assigned to missions for varying lengths of time on a rotational
basis.  The pay, benefits, and support costs associated with these
personnel were in addition to the counterdrug costs reported by DOD
and the $2 billion we estimated.\7

DOD officials indicated that these additional O&S costs are not
included in DOD's counterdrug budget because they pertain to the
existing force structure that supports the national defense mission
and, therefore, they would be incurred regardless of the type of
operations conducted.  This practice is consistent with the way DOD
reports incremental costs for contingency operations.

--------------------
\5 An information system for reporting historical weapon system O&S
costs derived from a wide range of service data sources.

\6 VAMOSC data were not yet available for fiscal years 1997 and 1998.

\7 We did not estimate a cost value for these personnel because their
length of deployment and military rank data were not readily
available.

   PRO RATA SHARE OF PROCUREMENT
   COSTS FOR MOST USED WEAPON
   SYSTEMS
------------------------------------------------------------ Letter :4

To estimate the pro rata share of the original procurement costs of
weapon systems used most often by the active component in counterdrug
activities, we used the total flying hours or steaming days these
systems were used for counterdrug activities.  We identified three
types of aircraft and one type of ship for this analysis--the Air
Force E-3 aircraft, Army UH-60 helicopter, and Navy P-3 aircraft and
Perry class frigate.  For the four systems, we obtained their
original procurement costs and their original expected lives (in
flying hours or steaming days).  Using these factors, we computed a
cost per hour/day that could be applied to the time flown/steamed for
counterdrug activities.  Using the methodology we developed, we
calculated that about $150 million of the procurement costs for the
four systems could be allocated to counterdrug activities for fiscal
years 1994-97.\8 As shown in table 3, most of these costs were for
the Perry class frigate due to the number of days steamed in support
of counterdrug activities.

                                Table 3

                Pro Rata Share of Procurement Costs for
                        Most Used Weapon Systems

                         (Dollars in millions)

                                         Fiscal year
                                ------------------------------
System                            1994    1995    1996    1997   Total
------------------------------  ------  ------  ------  ------  ======
E-3                               $3.1    $1.2    $1.6    $1.5    $7.4
UH-60                              1.8     2.1     3.2     5.4    12.5
P-3                                3.2     4.4     5.4     4.4    17.4
FFG (Perry Class Frigate)         37.7    33.8    23.2    19.0   113.7
======================================================================
Total                            $45.8   $41.5   $33.4   $30.3  $151.0
----------------------------------------------------------------------
Source:  Developed by GAO using DOD and service data.

The $151 million does not include the cost of research and
development and modifications.  Service officials advised us that
this methodology reflects neither life-cycle nor depreciation costs.

--------------------
\8 We estimated the pro rata share of procurement costs through
fiscal year 1997 because actual flying hour and steaming day data
were not yet available for fiscal year 1998.

   FOREIGN ASSISTANCE PROVIDED
   UNDER SECTION 506(A)(2)
------------------------------------------------------------ Letter :5

Under section 506(a)(2) of the Foreign Assistance Act, the President
is authorized to transfer up to $75 million in defense articles and
services each fiscal year.  In fiscal years 1994 and 1995, there were
no transfers under this authority.  In fiscal years 1996 and 1997,\9
a total of $131 million in articles and services were transferred
from DOD under this authority.  For example, in fiscal year 1996, DOD
transferred $75 million in articles and services, such as C-26
aircraft, patrol boats, and radio equipment, to support counterdrug
activities in Colombia, Peru, Venezuela, and eastern Caribbean
countries.  DOD also provides equipment and services to foreign
governments and U.S.  law enforcement agencies under a number of
other authorities.

--------------------
\9 As of August 14, 1998, there had been no approved transfers of
equipment and services under this act for fiscal year 1998.

   AGENCY COMMENTS
------------------------------------------------------------ Letter :6

DOD generally concurred with a draft of this report.  DOD stated that
it established the counterdrug program within the current force
structure and that it funds all costs that are incremental and unique
to the counterdrug mission in the Central Transfer Account.  It also
stated that the services continue to program, budget, and fund major
acquisition costs, depot level maintenance costs, and force structure
requirements, as part of fulfilling its overall mission.  It believes
that section 506(a)(2) costs should be included in the value of the
counterdrug program but did not believe that O&S and acquisition
costs should be included because these are service-specific costs
that are intrinsically incurred by each service.  DOD stated that we
did not estimate the cost of active duty military personnel salaries
or excess defense articles under 10 U.S.C.  2576(a).

We agree with DOD and specifically state in the report that DOD does
not include depot-level maintenance and other O&S costs in its
counterdrug budget because they pertain to existing force structure
and would be incurred regardless of the type of operations conducted.
We also agree and state that weapon systems used for counterdrug
activities were purchased to support the overall mission of DOD.  We
recognize, as DOD pointed out, that most O&S and weapon systems costs
would be incurred regardless of the counterdrug mission.  We included
active component military personnel costs associated with weapon
systems used for counterdrug activities, but did not include these
costs for personnel deployed to a counterdrug activity that were not
associated with a weapon system because data were not readily
available.  Although we do not specifically mention defense articles
under 10 U.S.C.  2576(a), we state in the report that DOD provides
equipment and services to foreign governments under other
authorities.  We believe, and DOD recognizes, that our cost estimates
can be used as a reference in estimating DOD's support for
counterdrug activities.

   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :7

To estimate the O&S costs not captured in the DOD counterdrug budget,
we first obtained data on the weapon systems, operating hours, and
costs directly associated with counterdrug activities.  These data
were reported by the services to the Office of the Secretary of
Defense for fiscal
years 1994-98.  In addition, we obtained total O&S costs, primarily
reported in the VAMOSC database, for these systems.  Although each
service reports VAMOSC data differently, we attempted to gather and
analyze the data in the same manner for all services.  To the extent
possible, where data were not available in VAMOSC, we worked with the
services to obtain information from other service sources.  For
example, we calculated Navy installation support costs based on
average cost factors and personnel data the Navy provided.  We also
calculated Army mission personnel costs for aviation systems by
obtaining average personnel costs and other personnel data from the
Army.  Once we obtained the O&S data, we estimated a total O&S cost
per hour and applied this cost rate to the number of hours flown/days
steamed in support of counterdrug activities.  We subtracted the
DOD-reported counterdrug costs from our computed cost to avoid double
counting.  We were unable to obtain some data, such as Army base
operating support costs.  We interviewed officials and obtained
documents at the Army Cost and Economic Analysis Center, the Navy
Center for Cost Analysis, the Air Force Cost Analysis Center, the
Office of the DOD Coordinator for Drug Enforcement Policy and
Support, and the Army, the Navy, and the Air Force counterdrug
offices.  We did not independently verify the data provided to us.

To estimate a pro rata share of the original procurement costs for
systems most often used in counterdrug activities, we developed a
methodology in consultation with the services.  We obtained
procurement costs and useful life data from the service program
offices for each of the systems in our analysis.  We did not
independently verify the data provided to us.

To obtain information on the value of section 506(a)(2) assistance
for counterdrug purposes, we interviewed officials and examined
documents at the Defense Security Assistance Agency, which develops,
implements, and monitors security assistance plans and programs.

We performed our review between March 1998 and August 1998 in
accordance with generally accepted government auditing standards.

---------------------------------------------------------- Letter :7.1

We are providing copies of this report to the Secretaries of Defense,
the Army, the Navy, and the Air Force.

This report will also be made available to others on request.  If you
or your staff have any questions about this report, please contact me
at (202) 512-3504.  Robert Pelletier, Lisa Quinn, and Joe Kirschbaum
prepared this report.

Richard Davis
Director, National Security
 Analysis

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

(See figure in printed edition.)
*** End of document ***