FYDP Provides Congress with Mixed Visibility of Projected DOD Spending

The FYDP provides Congress visibility of broad DOD funding shifts and  priorities regarding thousands of programs that have been aggregated, or  grouped, by appropriation category. Finally, the costs of ongoing operations in Iraq and Afghanistan,  which have been funded through supplemental appropriations, are not  projected in the FYDP thereby limiting the visibility over these funds. However, some requirements it plans to fund with the  supplemental appropriation have already been identified. As a result, DOD has too many  programs for the available dollars, which often leads to program  instability, costly program stretch-outs, and program termination. Further,  although DOD is considering how to link resources to these initiatives, it  does not have specific plans to make these linkages in the FYDP. DOD Does Not Have Specific Plans to Link the FYDP to Important QDR Initiatives

According to officials, DOD does not have specific plans to link  capabilities and the risk management framework to the FYDP, in part,  because these concepts have not been fully developed. In the past, DOD focused on whom an adversary might be,  whereas the current approach focuses on how future adversaries might  fight. We recognize that defining those expected costs is  challenging and that supplemental appropriations are sometimes  necessary. Nonetheless, the consequences of not considering the expected  costs of ongoing operations as part of larger budget deliberations will  mean that neither the administration nor congressional decision makers  will have the opportunity to fully examine budget implications of the  global war on terrorism. Indeed, the FYDP could be a useful tool for  weighing the costs of defense priorities such as the global war on  terrorism and DOD’s transformation efforts. Furthermore, this linkage could provide a  crosswalk between capabilities and the risk management framework such  that assessments of capabilities could be made in terms of the risk  management framework, which balances dimensions of risk, such as near  term operational risk versus risks associated with mid- to long-term  military challenges. Recommendations for Executive Action

In the interest of providing Congress greater visibility over projected  defense spending, we recommend that the Secretary of Defense direct the  Undersecretary of Defense (Comptroller) to take the following two  actions:  (1) provide Congress data on known or likely costs for ongoing operations  that are expected to extend into fiscal year 2005 for consideration during  its deliberation over DOD’s fiscal year 2005 budget request and  accompanying FYDP and  (2) include known or likely projected costs of ongoing operations for the  fiscal year 2006 and subsequent budget requests and accompanying  FYDPs. To enhance the effectiveness of the FYDP as a tool for planning and  analysis in the current strategic environment, the Secretary of Defense  should direct the Office of Program Analysis and Evaluation to take the  following two actions:  (1) align the program elements in the FYDP to defense capabilities needed to  meet the defense strategy, as these capabilities are identified and  approved, and the dimensions of the risk management framework and  include this alignment with the FYDP provided to Congress, and  (2) report funding levels for defense capabilities and the dimensions of the  risk framework in its summary FYDP report to Congress. DOD objected to our observation that DOD has historically employed  overly optimistic planning assumptions in its budget formulations.
Why GAO Did This Study

Congress needs the best available data about DOD's resource tradeoffs between the dual priorities of transformation and fighting the global war on terrorism. To help shape its priorities, in 2001 DOD developed a capabilities-based approach focused on how future adversaries might fight, and a risk management framework to ensure that current defense needs are balanced against future requirements. Because the Future Years Defense Program (FYDP) is DOD's centralized report providing DOD and Congress data on current and planned resource allocations, GAO assessed the extent to which the FYDP provides Congress visibility over (1) projected defense spending and (2) implementation of DOD's capabilities-based defense strategy and risk management framework.

What GAO Found

The FYDP provides Congress with mixed visibility over DOD's projected spending for the current budget year and at least four succeeding years. On the one hand, it provides visibility over many programs that can be aggregated so decision makers can see DOD's broad funding priorities by showing shifts in appropriation categories. On the other hand, in some areas DOD likely understates the future costs of programs in the FYDP because it has historically employed overly optimistic planning assumptions in its budget formulations. As such, DOD has too many programs for the available dollars, which often leads to program instability, costly program stretchouts, and delayed program termination decisions. Also, the FYDP does not reflect costs of ongoing operations funded through supplemental appropriations. Since September 2001, DOD has received $158 billion in supplemental appropriations to support the global war on terrorism, and DOD expects to request another supplemental in January 2005 to cover operations in Iraq and Afghanistan. While DOD officials stated they are uncertain of the amount of the request, some requirements they intend to fund with the supplemental appropriation have already been identified, such as temporarily increasing the Army's force structure. Defining costs during ongoing operations is challenging and supplemental appropriations are sometimes necessary; however, not considering the known or likely costs of ongoing operations expected to continue into the new fiscal year as part of larger budget deliberations will preclude DOD and congressional decision makers from fully examining the budget implications of the global war on terrorism. The FYDP provides Congress limited visibility over important DOD initiatives. While DOD is considering how to link resources to defense capabilities and the risk management framework, it does not have specific plans to make these linkages in the FYDP, in part because the initiatives have not been fully defined or implemented. Because the FYDP lacks these linkages, decision makers cannot use it to determine how a proposed increase in capability would affect the risk management framework, which balances dimensions of risk, such as near term operational risk versus risks associated with mid- to long-term military challenges.