The Army allocated 8,530 of these reductions to AMC. Plan for Achieving the Personnel Reductions Is Evolving

The Army’s plan for achieving its AMC personnel reduction goals are still evolving. Most, about 80 percent, of the total reductions are expected to occur between fiscal year 2001 and 2004. Basis for the Reductions Has Changed

To achieve the QDR reductions, the Army assumed that about 35,000 of AMC’s civilian positions could be subjected to competitive sourcing studies. Savings Are Likely to Be Less Than Anticipated and Take Longer to Be Realized

The Army expected to achieve cumulative savings of an estimated $1.4 billion between fiscal year 1999 and 2004 and an estimated $589 million in annual recurring savings thereafter from QDR civilian reductions in AMC. While these reductions are expected to achieve savings, our work indicates that savings in both the short and long term are likely to be less than expected and take longer to be realized. The savings totals will be lower in the short term because not all of the investment costs required to achieve the reductions were considered. Also, some of the savings programmed for fiscal year 2000 will be delayed because competitive sourcing studies that are underway are taking longer to complete and implement than planned. The Army used higher than average civilian salary costs to compute the estimated savings. The estimated savings did not include all the investment costs required to implement some initiatives. The Army also did not fully calculate the personnel separation costs associated with the QDR reductions in AMC. Had the Army applied a 2-percent increase consistently through fiscal year 2005, we estimate that the total savings would be reduced by about $52 million. The remaining $103 million, or 17 percent, of the estimated recurring savings is based on eliminating AMC positions that are essentially funded by non-Army organizations through reimbursements for services provided. Impact of Reductions Has Been Limited

Since most of the QDR reductions will occur between fiscal year 2001 and 2004, the impact on workload and readiness of these future reductions is yet to be determined. AMC officials, while expressing concerns about challenges they face in meeting the QDR and ongoing reductions, could not point to any significant effects to date other than employee morale. AMC officials stated that the ongoing reductions continue to have only marginal impacts on operations, which they have dealt with so far through various reorganizations and reengineering actions. Similarly, the Tank-automotive and Armaments Command’s plan to eliminate about 300 positions is based on projected workload decreases in fiscal years 2003 and 2004. To obtain information on the impact of the reductions on workload and readiness, we interviewed AMC’s Chief of Staff and officials at the various commands visited who were responsible for implementing the initiatives.
Why GAO Did This Study

Pursuant to a legislative requirement, GAO provided information on the status of efforts to implement personnel reductions in the Army Materiel Command (AMC) that were directed by the Quadrennial Defense Review (QDR), focusing on: (1) AMC's plans and timeframe for achieving the reductions; (2) the projected cost savings from such reductions; and (3) the cited impacts the reductions will have on workload and readiness.

What GAO Found

GAO noted that: (1) AMC has identified various initiatives to eliminate 8,530 civilian positions by fiscal year (FY) 2004 as called for in the QDR; (2) the majority of the reductions are now based on planned organizational changes, operating efficiencies, and anticipated future workload decreases, with lesser emphasis on competitive sourcing studies than originally anticipated by the QDR; (3) about 20 percent of the reductions are expected to occur over the next 2 years, and actions are under way to achieve the majority of these reductions; (4) about 80 percent of the reductions are expected to occur in FY 2001 through FY 2004; (5) plans for some of these reductions are still being finalized and uncertainties exist about some of these plans; (6) the Army estimated that the personnel reductions in the Command would result in $1.4 billion in cumulative savings from FY 1999 through FY 2004 and $589 million in annual recurring savings thereafter; (7) GAO's analysis indicates that estimated savings will be less than anticipated both in the short and long term; (8) the Army did not account for all of the investment costs that would be required to achieve the savings; (9) the Tank-Automotive and Armament Command estimated that about $35 million in investment costs were not included in the Army's analysis of projected savings; (10) also, the Army did not estimate all the personnel separation costs likely to be associated with implementing the reductions; (11) about $21 million in savings estimated for FY 2000 could be delayed because competitive sourcing studies are taking longer to complete and implement than planned; (12) the savings are overstated by an estimated $52 million at least through FY 2005 because the Army used higher than average civilian salary costs to compute its savings; (13) the long-term annual recurring savings to the Army are likely to be as much as 17 percent lower than expected since some planned personnel reductions reflect positions funded by non-Army organizations for work done on a reimbursable basis; (14) because most of the QDR reductions will occur between 2001 and 2004, much of the impact on workload and readiness is yet to be determined; (15) AMC officials, while expressing concerns about challenges they face in meeting the reductions, could not point to any significant adverse effects to date other than on employee morale; and (16) command officials stated that the ongoing reductions continue to have only marginal impacts on its operations, which they have dealt with so far through various reorganizations and reengineering actions.