Personnel Cuts Are Based on DOD’s Goal to Increase Modernization Funding

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.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. 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. In developing their plans, the services made different assumptions about the personnel cuts that could be achieved through these competitions. 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. 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. 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. 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. Therefore, it is critical that DOD monitor the services’ progress in achieving the personnel cuts and savings. 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. The Office of the Secretary of Defense (OSD) estimated these cuts would save $1.5 billion by fiscal year 2003. 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. Air Force Has Not Programmed All Active Military QDR Cuts

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.
Why GAO Did This Study

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.

What GAO Found

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.