Specifically, the  estimate should be well documented, comprehensive, accurate, and  credible. Cost factors and management factors are key types of data that  the tool uses to develop estimates. The Army Relies More on COST to Develop Personnel and Operations Estimates, but the Other Services Rely on Their Own Estimates

The Army uses COST as intended by relying on the tool to generate an  estimate for many personnel and operations costs for GWOT budget  requests. DOD officials and IDA representatives stated that COST is  better suited for Army ground forces; therefore, the Army relies on the  final estimate developed by COST and submits this information to the  DOD Comptroller as part of its GWOT budget request. The Air Force, Marine Corps, and Navy all fulfill the requirement to  develop an estimate for their respective service’s personnel and operations  funding requirements for GWOT using COST; however, these services  significantly alter the COST results to match estimates they have  developed outside COST, using historical obligation data and other  information. As a result, most  of the changes they make to COST results, based on historical obligation  data, are decreases in the amount estimated by COST. Several service officials stated that,  because of the limitations to COST, the required process of using COST to  develop a cost estimate was duplicative of their preferred method of using  historical obligation data and other information better suited to their  specific service to develop a GWOT budget request. However, officials stated the tool does not perform as well for estimating  costs for the lengthy deployment and sustainment phases associated with  a large campaign such as GWOT. Military Services Use Other Methods to Determine Cost Estimates for Procurement, Most Equipment Maintenance, and Some Contract Costs

Because COST does not have the capability to estimate costs such as  procurement, reset-related equipment maintenance, and contracted needs  and services, service budget officials report using historical obligation  data, other models and formulas, and other information, such as  deployment information, to estimate these costs. COST Is Frequently Updated and Refined, but Could Benefit from a Review of Adherence to Best Practices

DOD has taken steps to improve the performance and reliability of COST;  however, COST could benefit from a review of the tool’s adherence to best  practices for high-quality cost estimation as outlined in our Cost  Assessment Guide. While we did not  undertake a full assessment of COST against best practices, during the  course of our review we identified features of COST’s estimation process  that meet best practices and other features that would benefit from further  review. For example, COST adheres to several best practices for a  comprehensive and accurate cost estimate, such as frequent updates to  the structure of COST and the data that COST uses to generate estimates. COST Could be Assessed for Adherence to Cost Estimation Best Practices

While DOD has taken steps to revise and update COST to improve  effectiveness, COST has not been assessed according to best practices for  cost estimation that define reliable, high-quality cost estimates. DOD Comptroller  officials stated they are confident in the tool’s ability to provide reasonable  estimates because COST is frequently updated. While the tool and underlying data  have been refined and updated, COST’s overall effectiveness for estimating  GWOT costs has not been assessed. DOD agreed with our recommendation that the DOD Comptroller arrange  for an independent review of the Contingency Operations Support Tool  (COST) against best practices for cost estimation. Furthermore,  the AFSAA review was not a thorough review against best practices for  cost estimation, which requires cost estimates to be well documented,  comprehensive, accurate, and credible. To better understand how the Department of Defense (DOD) develops a  Global War on Terrorism (GWOT) budget request and the use of the  Contingency Operations Support Tool (COST) and other methods of  developing an estimate, we asked DOD to demonstrate how the services  used COST and other methods to develop the $6.3 billion budget estimate  for military operations that was included as part of DOD’s October 2007  $42.3 billion amendment to the fiscal year 2008 GWOT supplemental  request for emergency funding.
Why GAO Did This Study

Since the September 2001 terrorist attacks, Congress has provided about $800 billion as of July 2008 to the Department of Defense (DOD) for military operations in support of the Global War on Terrorism (GWOT). GWOT budget requests have grown in scope and the amount requested has increased every year. DOD uses various processes and the Contingency Operations Support Tool (COST) to estimate costs for these operations and to develop budget requests. GAO assessed (1) how DOD uses COST and other processes to develop GWOT budget requests and (2) what actions DOD has taken to ensure COST adheres to best practices for cost estimation. GAO interviewed DOD officials and others to determine how the services develop GWOT budget requests using COST and other processes. GAO also used its Cost Assessment Guide as criteria for best practices for cost estimation.

What GAO Found

The services use COST as part of their process to develop a GWOT budget request. While the Army relies more on the estimate resulting from COST, the other services adjust the results of COST to reflect estimates they generate outside of COST, based on historical obligation data and other information. DOD's financial management regulation and other guidance require components to use COST to develop an estimate for the deployment and sustainment of military personnel and equipment for ongoing operations in support of GWOT. While all services use COST to develop an initial estimate, Air Force, Marine Corps, and Navy budget officials alter the results of the tool to match information provided by lower level commands and historical obligation data that they believe are more accurate than the COST-generated estimate. These officials stated that the tool routinely overestimates some costs and therefore most changes made are decreases in the amount estimated by COST. These officials believe that the requirement to use COST to develop a GWOT budget request is a duplicative process to their preferred method of using historical obligation data and other information better suited to their specific service. For example, they stated that COST better represents the needs of Army ground forces and the tool has not been refined to be as effective for estimating needs for their service's mission. These officials also mentioned that COST is better suited for developing estimates for smaller-scale contingency operations than for the lengthy deployments and sustainment phases associated with a large campaign such as GWOT. To develop estimates for items that are outside the scope of COST, such as procurement and certain contracts, the military services rely primarily on needs assessments developed by commanders and historical obligation data. DOD has taken steps to improve the performance and reliability of COST; however, COST could benefit from an independent review of the tool's adherence to best practices for high-quality cost estimation as described in GAO's Cost Assessment Guide. COST has been refined many times and cost factors are routinely updated in an effort to use the most current information available to develop an estimate. DOD officials stated they are confident in the tool's ability to provide reasonable estimates because COST is frequently updated. However, COST has not been assessed against best practices for cost estimation to determine whether COST can provide high-quality estimates that are well documented, comprehensive, accurate, and credible. While GAO did not undertake a full assessment of COST against best practices, it determined that some features of the tool meet best practices while other features would benefit from further review. For example, the tool adheres to several best practices for a comprehensive and accurate cost estimate, such as frequent updates to the structure of COST and the data the tool uses to generate estimates. However, COST relies on GWOT obligation data that GAO has identified as being of questionable reliability. A thorough, independent review of COST against best practices could provide decision makers with information about whether the tool creates cost estimates for GWOT expenses that are well documented, comprehensive, accurate, and credible.