Summary

The Defense Department (DOD) participated in contingency operations in several places during fiscal year 1995, including Haiti, Southwest Asia, and the former Yugoslavia. To help cover the incremental costs of these operations, Congress provided DOD with a supplemental appropriation. This report provides information on (1) the extent to which the supplemental appropriation fully covered DOD's incremental costs and the impact that funding shortages or overages may have had on the services and (2) the accuracy of the methods used to estimate incremental costs compared with actual costs and ways to improve the method of estimating costs.

GAO found that: (1) DOD and the services reported about $2.223 billion in contingency operations costs for FY 1995, primarily for operations in southwest Asia, Haiti, Cuba, and the former Yugoslavia; (2) the reported costs were $12 million less than the amount Congress provided through an emergency supplemental appropriation of $2.235 billion; (3) the Army and the Navy had to absorb their respective $75-million and $34-million shortfalls between what Congress provided and their actual costs by making reductions in other areas; (4) other DOD agencies collectively reported a shortfall of about $3 million; (5) the Marine Corps and the Air Force spent their respective $15 million and $110 million in excess funding on facility repairs, maintenance, and improvements; (6) reported costs of contingency operations surged in September 1995 to about four times more than the previous month's costs; (7) estimating costs of contingency operations is difficult because it involves making assumptions about such factors as force requirements, operation duration, logistical operations, and costs; and (8) although DOD and the services can make some improvements to their models for developing costs of potential force structure changes to aid them in estimating the costs of contingency operations, such estimations will continue to be inexact and require adjustments.