Report: DoD overestimates savings from cutbacks

The Defense Department may be assuming too much when calculating savings from base closures and outsourcing efforts, the General Accounting Office concludes in a new report.

As a result, projected savings from the two major components of the Defense Reform Initiative may not be reliable, GAO said in its report, "Future Years Defense Program: How Savings From Reform Initiatives Affect DoD's 1999-2003 Program" (NSIAD-99-66).

DoD's fiscal year 1999-2003 Future Years Defense Program, which estimates future expenditures and appropriations requirements, estimated the department would save $6.2 billion by putting up more than 200,000 jobs for competition between 1997 and 2003 under Office of Management and Budget Circular A-76.

But according to GAO's report, these savings will take longer to achieve and will be less than DoD anticipated because up-front investment costs were not included in the savings equation. Such costs include studies that assess the feasibility of outsourcing DoD jobs.

Only the Navy deducted some initial investment costs when calculating its savings from A-76 competitions, GAO said. DoD also based its projected savings on historical data, including average personnel costs per position and savings from prior competitions. Such broad estimates are subject to change, GAO warned.

DoD's methods for estimating savings from base closures are similarly flawed, the report said. Savings estimates in 1999's Future Years Defense Program are based on the results of the 1993 and 1995 rounds of closures, but those rounds included the least expensive military bases. DoD should not assume that future rounds will be as inexpensive, the report said-or that Congress will even approve more closures.

In response to the report, DoD officials said future studies will allow for more refined savings projections. Currently, DoD has not completed enough studies to establish a baseline for savings estimates, officials said.