This is the accessible text file for GAO report number GAO-14-595 
entitled 'Bulk Fuel Pricing: DOD Needs to Reevaluate Its Approach to 
Better Manage the Effect of Market Fluctuations' which was released on 
July 8, 2014. 

This text file was formatted by the U.S. Government Accountability 
Office (GAO) to be accessible to users with visual impairments, as 
part of a longer term project to improve GAO products' accessibility. 
Every attempt has been made to maintain the structural and data 
integrity of the original printed product. Accessibility features, 
such as text descriptions of tables, consecutively numbered footnotes 
placed at the end of the file, and the text of agency comment letters, 
are provided but may not exactly duplicate the presentation or format 
of the printed version. The portable document format (PDF) file is an 
exact electronic replica of the printed version. We welcome your 
feedback. Please E-mail your comments regarding the contents or 
accessibility features of this document to Webmaster@gao.gov. 

This is a work of the U.S. government and is not subject to copyright 
protection in the United States. It may be reproduced and distributed 
in its entirety without further permission from GAO. Because this work 
may contain copyrighted images or other material, permission from the 
copyright holder may be necessary if you wish to reproduce this 
material separately. 

United States Government Accountability Office: 
GAO: 

Report to Congressional Committees: 

July 2014: 

Bulk Fuel Pricing: 

DOD Needs to Reevaluate Its Approach to Better Manage the Effect of 
Market Fluctuations: 

GAO-14-595: 

GAO Highlights: 

Highlights of GAO-14-595, a report to congressional committees. 

Why GAO Did This Study: 

DOD purchases bulk fuel and sells it to customers, including the 
military services. Each fiscal year, DOD sets a standard price for 
budgeting purposes, endeavoring to closely approximate the price it 
will pay when it buys the fuel almost a year later. If this price is 
different than the standard price, DOD may need to take actions to 
manage its working capital funds—-funds used to purchase fuel and 
other commodities that are reimbursed through sales. 

Senate Report 113-44, accompanying a bill for the National Defense 
Authorization Act for FY 2014, mandated GAO to review DOD's approach 
for establishing its bulk fuel pricing. This report discusses, among 
other things, (1) how estimated bulk fuel costs have compared to 
actual costs since FY 2009 and the factors that have contributed to 
any differences; and (2) the extent to which DOD has considered 
options for adjusting its approach to estimating bulk fuel costs and 
managing working capital funds in light of any differences between 
estimated and actual fuel costs. GAO compared estimated and actual 
fuel costs for FY 2009 through 2013 and analyzed DOD actions to manage 
working capital funds. 

What GAO Found: 

During fiscal years 2009 through 2013, the Department of Defense's 
(DOD) actual costs for bulk fuel differed considerably from its budget 
estimates, largely because of fluctuations in fuel price in the open 
market. During this period, DOD underestimated its costs for 3 years 
and overestimated them for 2 years as shown below. GAO identified two 
factors that contributed to the differences between estimated and 
actual costs—(1) fuel price fluctuations and (2) differences between 
the military services' estimated fuel requirements and their actual 
fuel consumption. GAO's analysis showed that the differences between 
the price DOD paid for fuel and the price it charged its fuel 
customers—the standard price—accounted for, on average, 74 percent of 
the difference between estimated and actual costs. Specifically, of 
the three components of the standard price that DOD sets each fiscal 
year—crude oil, refinement markup, and nonproduct costs, such as 
transportation and facilities maintenance costs—differences in the 
price of crude oil accounted for most of the difference between 
estimated and actual fuel costs in fiscal years 2009 and 2010. In 
fiscal years 2011 through 2013, the refinement markup accounted for 
most of the difference. Differences between the services' estimated 
fuel requirements and actual fuel consumption accounted for an average 
of 26 percent of the difference between estimated and actual fuel 
costs. 

Figure: Estimated vs. Actual Fuel Costs, Fiscal Years (FY) 2009 
through 2013: 

[Refer to PDF for image: vertical bar ad line graph] 

Fiscal year: 2009; 
Actual costs: $10.5 million; 
Estimated costs: $13.5 million; 
Overestimated by $3.0 million. 

Fiscal year: 2010; 
Actual costs: $12.8 million; 
Estimated costs: $9.9 million; 
Underestimated by $2.9 million. 

Fiscal year: 2011; 
Actual costs: $17.5 million; 
Estimated costs: $14.1 million; 
Underestimated by $3.4 million. 

Fiscal year: 2012; 
Actual costs: $18 million; 
Estimated costs: $14.8 million; 
Underestimated by $3.2 million. 

Fiscal year: 2013; 
Actual costs: $15.5 million; 
Estimated costs: $17.5 million; 
Overestimated by $2.0 million. 

Source: GAO analysis of DOD data. GAO-14-595. 

[End of figure] 

Since 2004, DOD has conducted reviews of aspects of its bulk fuel 
program to determine whether adjustments should be made, including 
managing acquisition strategies, managing working capital funds, and 
budgeting for cost fluctuations. However, it has not updated its 
approach to reflect current market conditions or documented its 
rationale for the assumptions it uses in estimating the standard 
price. GAO's Cost Estimating and Assessment Guide and Office of 
Management and Budget guidance state that a cost estimate should be 
updated regularly to reflect changes to assumptions and actual costs, 
so that it always reflects current conditions. Furthermore, cost 
estimates should be supported by detailed documentation that describes 
how they were derived. Reevaluating its approach for estimating the 
standard price would allow DOD to develop more informed estimates and 
better position it to minimize risks and uncertainty resulting from 
changing market conditions. Further, documenting the rationale for its 
assumptions would provide greater transparency and clarify for fuel 
customers and decision makers the process DOD uses to set the standard 
price. 

What GAO Recommends: 

GAO recommends that DOD reevaluate its approach for estimating the 
components of the standard price and document the rationale for its 
assumptions. DOD agreed with the first recommendation and partially 
agreed with the second stating there is a closely-monitored, formal 
process. GAO continues to believe the recommendation remains valid as 
discussed in the report. 

View [hyperlink, http://www.gao.gov/products/GAO-14-595]. For more 
information, contact Cary Russell at (202) 512-5431 or 
russellc@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

DOD's Actual Costs Differed Considerably from Budget Estimates since 
Fiscal Year 2009, Due Largely to Fluctuations in Fuel Price: 

DOD Has Taken Various Actions to Manage the Effect of Differences 
between Estimated and Actual Fuel Costs: 

DOD Has Conducted Studies on Its Management of Working Capital Funds, 
but Has Not Reevaluated Its Approach or Documented Its Assumptions for 
Estimating Fuel Costs: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Scope and Methodology: 

Appendix II: Studies on Department of Defense Bulk Fuel Pricing and 
Management of the Defense-Wide Working Capital Fund: 

Appendix III: Comments from the Department of Defense: 

Appendix IV: GAO Contacts and Staff Acknowledgments: 

Tables: 

Table 1: DOD Estimated vs. Actual Fuel Costs, Fiscal Years 2009 
through 2013: 

Table 2: Analysis of Standard Price Components' Contributions to 
Difference between Estimated and Actual Price, Fiscal Years 2009 
through 2013: 

Table 3: Studies on DOD Bulk Fuel Pricing and Management of the 
Defense-Wide Working Capital Fund: 

Figures: 

Figure 1: Components of Fiscal Year 2013 Standard Annual Fuel Price of 
$156.66 Per Barrel: 

Figure 2: Budget Process for DOD Bulk Fuel Program: 

Figure 3: Actual Cost per Barrel vs. Standard Price, Fiscal Years 2009 
through 2013: 

Figure 4: Military Services' Estimated vs. Actual Fuel Consumption, 
Fiscal Years 2009 through 2013: 

Figure 5: Cash Balance in the Defense-Wide Working Capital Fund and 
Net Outlays for Fuel, Fiscal Years 2009 through 2013: 

Figure 6: Defense-Wide Working Capital Fund Balance, Transfers, and 
Standard Prices: 

Figure 7: Differences between Brent and West Texas Intermediate Crude 
Oil Prices, Fiscal Years 2009 through 2013: 

Abbreviations: 

BBEDCA: Balanced Budget and Emergency Deficit Control Act: 

DLA: Defense Logistics Agency: 

DLA Energy: Defense Logistics Agency Energy Management Activity Group: 

DOD: Department of Defense: 

DWWCF: Defense-wide Working Capital Fund: 

FY: Fiscal Year: 

OMB: Office of Management and Budget: 

OUSD(C): Office of the Under Secretary of Defense (Comptroller): 

WTI: West Texas Intermediate: 

[End of section] 

United States Government Accountability Office: 
GAO:
441 G St. N.W. 
Washington, DC 20548: 

July 8, 2014: 

Congressional Committees: 

For each fiscal year, the Department of Defense (DOD) sets a standard 
price per barrel that it will charge the military services and other 
customers for fuel. In setting this standard price, DOD endeavors to 
closely approximate the actual price it will pay for the fuel during 
the year of budget execution. However, due to the timing of DOD's 
budget process, the department estimates this price almost a year in 
advance of when it will actually purchase the fuel at the current 
market rate. Because of the volatility of world petroleum prices, the 
standard price DOD establishes for a barrel of fuel may be lower or 
higher than the price it will have to pay on the world market. For 
example, in fiscal year 2013, the price DOD paid for fuel ranged from 
around $140 to $164 per barrel--a difference of $24 per barrel. If the 
actual market price of fuel is higher than the price DOD is charging 
its customers, DOD will have to pay more for fuel than it is being 
reimbursed. If the actual price is lower than the standard price, DOD 
will have more cash than it anticipated. Since fiscal year 2009, the 
military services have purchased an average of approximately 110 
million barrels per year from DOD. Therefore, a standard price 
increase of even $1 per barrel would result in a $110 million 
difference from their budget requests. 

To manage these price fluctuations, DOD uses the Defense-wide Working 
Capital Fund (the fund), which covers DOD's costs for purchasing 
various commodities, including bulk fuel, and is reimbursed through 
DOD's sale of these commodities to the military services and other 
customers, such as other federal agencies and foreign military sales. 
The fund is intended to insulate the military services and DOD's other 
fuel customers from the volatility of the market by allowing DOD to 
charge them a consistent standard price. In some instances, DOD may 
need to respond to fluctuations in world fuel prices by increasing or 
decreasing its standard price or by transferring funds from other 
accounts into its Defense-wide Working Capital Fund in order to 
maintain a sufficient cash balance in the fund. 

The Senate report accompanying a bill for the fiscal year 2014 
National Defense Authorization Act mandated that we review DOD's 
approach for establishing its bulk fuel pricing.[Footnote 1] This 
report discusses (1) how estimated bulk fuel costs have compared with 
actual costs since fiscal year 2009 and the factors that have 
contributed to any differences; (2) the extent to which DOD has taken 
actions to manage the effect of any differences between estimated and 
actual fuel costs; and (3) the extent to which DOD has considered 
options for adjusting its approach to estimating bulk fuel costs and 
managing working capital funds in the light of any differences in 
recent years between estimated and actual fuel costs. 

To address these objectives we focused our analysis on fiscal years 
2009 through 2013. We focused on these years because this period 
covered the most recent complete year of fuel sales and provided 5 
years of cost data to analyze any trends. To determine the reliability 
of the data provided to us by DOD, we obtained information on how the 
data were collected, managed, and used through interviews with and 
questionnaires to relevant officials and determined that the data 
presented in our findings were sufficiently reliable for the purposes 
of this report. 

To determine how estimated bulk fuel costs have compared with actual 
costs since fiscal year 2009 and the factors that contributed to any 
differences, we compared the estimated costs for fuel against actual 
costs in the budget year of execution to identify any differences. For 
these differences, we determined the percentage of the difference 
explained by either fuel price fluctuations or differences in fuel 
consumption compared with budgeted consumption levels. We then 
compared each of the three components of the standard price (crude oil 
price, refinement markup, and nonproduct costs--such as transportation 
and facilities maintenance costs) against the actual costs for each 
component to determine which contributed most to the difference. 

To determine the extent to which DOD has taken actions to manage the 
effect of any differences between estimated and actual fuel costs, we 
reviewed monthly cash balances in the Defense-wide Working Capital 
Fund for fiscal years 2009 through 2013 to examine the effect that 
bulk fuel purchases and sales had on those balances. We also obtained 
information on the number and amount of approved transfer actions 
related to fuel into and out of the Defense-wide Working Capital Fund 
during this period. In addition, we identified all changes to the 
standard price DOD charged to customers and identified any fuel-
related supplemental appropriations received into the fund since 
fiscal year 2009. 

To determine the extent to which DOD has considered options for 
adjusting its approach for estimating bulk fuel costs and managing 
working capital funds, we reviewed documentation, including budget 
justification materials and DOD reports, that describes DOD's current 
process for estimating bulk fuel costs and compared it with cost-
estimating practices[Footnote 2] and Office of Management and Budget 
(OMB)[Footnote 3] and DOD guidance.[Footnote 4] We also performed 
analysis on the relationship of the West Texas Intermediate (WTI) 
crude oil benchmark with other crude oil pricing benchmarks to 
determine whether DOD's approach to setting its standard price 
reflects current market conditions. We reviewed related studies and 
recommendations that we identified through interviews with DOD 
officials and literature searches that discuss options available to 
DOD to adjust its approach to managing bulk fuel costs and working 
capital funds. For this review we focused on relevant studies that 
have been conducted since 2004. We also interviewed DOD officials 
responsible for managing DOD's bulk fuel program, economic policy and 
budget officials from OMB, and officials from the Department of 
Energy's Energy Information Administration, which is the federal 
government's primary authority on energy statistics and analysis. 
Appendix I provides a more detailed discussion of our scope and 
methodology. 

We conducted this performance audit from November 2013 to July 2014 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

Background: 

In each fiscal year, DOD establishes a standard price per barrel to be 
charged to its fuel customers. The Office of the Under Secretary of 
Defense (Comptroller), in coordination with the Defense Logistics 
Agency (DLA), estimates and sets a standard price for its fuel and 
other fuel-related commodities that endeavors to closely approximate 
the actual per barrel price during budget execution, which occurs 
almost a year later. The Office of the Under Secretary of Defense 
(Comptroller) sets the standard price annually based on three 
components. 

* Crude Oil--The baseline for setting the standard price is the 
forecasted price for crude oil, which is provided to DOD by OMB. To 
estimate the cost of crude oil, the Council of Economic Advisors, the 
Department of the Treasury, and OMB--referred to as the Troika--
jointly prepare a set of economic assumptions for agencies to use in 
preparing their overall budgets. In developing the crude oil price 
projections, the Troika uses oil price projections coming from the 
prices in the futures market for both West Texas Intermediate (WTI) 
and Brent crude oil prices.[Footnote 5] DOD uses the WTI projection as 
its baseline. According to OMB Circular A-11, all baseline estimates 
used in the budget must be consistent with the economic assumptions 
provided by OMB.[Footnote 6] 

* Refinement Markup--DOD adds a markup for the cost of refining the 
crude oil. Because DOD and its customers use refined oil products--
such as jet fuel and diesel fuel--DOD has to include the additional 
cost of refining the fuel in its standard price.[Footnote 7] This 
refinement markup is estimated based on the historical price 
relationship between WTI crude oil and refined product prices. 

* Nonproduct Costs--DOD adds an estimate for nonproduct costs 
associated with DLA's overhead, including facilities sustainment, 
restoration, and modernization; transportation; and storage costs. 
Other nonproduct costs include an estimate of product losses and may 
include cost recovery adjustments for prior year fund losses to the 
Defense-wide Working Capital Fund, legal judgments, and rounding. 

Figure 1 identifies each of the price components as a percentage of 
the total standard price for fiscal year 2013. 

Figure 1: Components of Fiscal Year 2013 Standard Annual Fuel Price of 
$156.66 Per Barrel: 

[Refer to PDF for image: pie-chart] 

Crude oil estimate: $93.28; 60%; 
Refinement markup: $46.64; 30%; 
Nonproduct costs: $16.74; 10%; 
Total: $156.66 per barrel. 

Source: GAO analysis of DOD data. GAO-14-595. 

Notes: Percentages may not add to 100 percent due to rounding. 
According to DOD officials, the refinement markup is determined based 
on a percentage of the forecasted crude oil price. This markup has 
historically ranged from 30 percent to 50 percent of the price of 
crude oil. Nonproduct costs include facilities sustainment, 
restoration, and modernization; transportation; and storage costs. 

[End of figure] 

In developing their annual Operation and Maintenance budget requests, 
the military services use the standard price and their estimated fuel 
requirements based on activity levels (such as flying hours, steaming 
days, tank miles, and base operations). For example, the Air Force as 
the largest DOD customer for fuel, purchased approximately 49 million 
barrels in fiscal year 2013, representing 53 percent of all sales to 
the military services. In determining its Operation and Maintenance 
funding needs, the Air Force provided an estimate for fuel in its 
budget request based on an analysis of each aircraft's fuel usage and 
future programmed flying hours. Figure 2 below generally illustrates 
the process and the main organizations involved in budgeting for fuel. 

Figure 2: Budget Process for DOD Bulk Fuel Program: 

[Refer to PDF for image: process illustration] 

OMB provides crude oil cost estimates; 
DLA Energy computes costs to refine; 
DLA Energy and OUSD(C) compute nonproduct costs; 
OUSD(C) makes adjustments based on other factors, such as cash 
balances in the DWWCF: 
Standard price. 

Army estimates requirements; 
Navy/Marine Corps estimates requirements; 
Air Force estimates requirements. 

Standard price times: 
requirements equals: 
services' operation and maintenance request. 

DOD's budget request. 

Congress approves with or without adjustments. 

OMB: Office of Management and Budget; 
DLA Energy: Defense Logistics Agency Energy Management Activity Group; 
OUSD(C): Office of the Under Secretary of Defense (Comptroller); 
DWWCF: Defense-wide Working Capital Fund. 

Source: GAO analysis of DOD information. GAO-14-595. 

[End of figure] 

DOD utilizes its Defense-wide Working Capital Fund to purchase bulk 
fuel for customers. According to DOD's Financial Management 
Regulation, working capital funds were established to satisfy 
recurring DOD requirements using a businesslike buyer-and-seller 
approach. The Defense-wide Working Capital Fund is the Working Capital 
Fund managed by the defense agencies. The fund consists of six 
activity groups. Three of these activity groups are operated by DLA, 
two by the Defense Information Systems Agency, and one by the Defense 
Finance and Accounting Service. The activity group related to DOD's 
bulk fuel program is the DLA Energy Management group, which provides 
worldwide energy support including bulk fuel purchasing, 
transportation, and storage for the military services and other 
customers. 

The fund covers DLA's costs for purchasing bulk fuel and is reimbursed 
through its sale of fuel to the military services and other customers 
at a standard price. The standard price is intended to remain 
unchanged until the next budget year. This helps to shield the 
military services from market price volatility by allowing the cash 
balance in the fund to absorb minor fuel price fluctuations.[Footnote 
8] According to DOD's Financial Management Regulation, the goal of the 
fund is to remain revenue-neutral, allowing the fund to break even 
over time--that is, to neither make a gain nor incur a loss. During 
the year the budget is executed, the actual price for a barrel of fuel 
on the world market may be higher or lower than DOD's standard price. 
If the actual price is higher, the cash balance in the Defense-wide 
Working Capital Fund will go down. If the actual price is lower, the 
cash balance in the fund will go up. These fluctuations in the cash 
balance are known as a net outlay. To correct for these fluctuations, 
DOD may adjust the standard price for the following year. For example, 
DOD may increase the standard price to make up for losses in the 
previous year and bolster the cash balance in the fund. Alternatively, 
DOD may decrease the standard price to reimburse the services, which 
had paid a higher price the previous year. DOD can also cover fund 
losses during the execution year by obtaining an appropriation from 
Congress, transferring funds from another DOD account into the fund, 
or adjusting the standard price out of cycle.[Footnote 9] 

DOD's Actual Costs Differed Considerably from Budget Estimates since 
Fiscal Year 2009, Due Largely to Fluctuations in Fuel Price: 

During fiscal years 2009 through 2013, DOD's actual costs for bulk 
fuel differed considerably from its budget estimates, due largely to 
fluctuations in fuel price. During those years, DOD either under-or 
overestimated what it would have to pay for bulk fuel. The differences 
between estimated and actual fuel costs were accounted for primarily 
by fluctuations in the market price for fuel. 

DOD's Actual Fuel Costs Differed from Its Budget Estimates: 

In each of fiscal years 2010, 2011, and 2012, DOD underestimated its 
bulk fuel costs by about $3 billion. In 2009, DOD overestimated these 
costs by about $3 billion and in 2013 by about $2 billion. Table 1 
shows the total difference between DOD's estimated and actual fuel 
costs for fiscal years 2009 through 2013. 

Table 1: DOD Estimated vs. Actual Fuel Costs, Fiscal Years 2009 
through 2013: 

Fiscal year: 2009; 
Estimated costs[A]: $13.5 billion; 
Actual costs[B]: $10.5 billion; 
Over-or: (under) estimate: $3.0 billion. 

Fiscal year: 2010; 
Estimated costs[A]: $9.9 billion; 
Actual costs[B]: $12.8 billion; 
Over-or: (under) estimate: ($2.9 billion). 

Fiscal year: 2011; 
Estimated costs[A]: $14.1 billion; 
Actual costs[B]: $17.5 billion; 
Over-or: (under) estimate: ($3.4 billion). 

Fiscal year: 2012; 
Estimated costs[A]: $14.8 billion; 
Actual costs[B]: $18.0 billion; 
Over-or: (under) estimate: ($3.2 billion). 

Fiscal year: 2013; 
Estimated costs[A]: $17.5 billion; 
Actual costs[B]: $15.5 billion; 
Over-or: (under) estimate: $2.0 billion. 

Source: GAO analysis of DOD data. GAO-14-595. 

[A] For the purposes of our analysis, we calculated DOD's estimated 
costs by multiplying the standard price per barrel by the estimated 
number of barrels that the military services would consume. 

[B] For the purposes of our analysis, we calculated DOD's actual costs 
by multiplying the actual purchase price per barrel times the actual 
number of barrels sold to the military services. 

[End of table] 

Differences between Estimated and Actual Fuel Costs Were Largely Due 
to Fuel Price Fluctuations: 

We identified two primary factors that accounted for the difference 
between estimated and actual costs--(1) fluctuations in the market 
price of fuel and (2) differences between the services' estimated and 
actual fuel consumption. Our analysis showed that from fiscal years 
2009 through 2013, the differences between the price DOD paid for fuel 
and the price it charged its fuel customers--the standard price--
accounted for, on average, 74 percent of the difference between 
estimated and actual costs. In fiscal year 2012, for example, DOD 
estimated a standard price of $131.04 per barrel. DOD's actual costs 
during that year averaged $167.33 per barrel--an underestimate of 
$36.29 per barrel--which represented 85 percent of the underestimate 
for fiscal year 2012. 

Figure 3 compares the actual price DLA paid for fuel with the standard 
price DOD used to calculate its budget estimates. 

Figure 3: Actual Cost per Barrel vs. Standard Price, Fiscal Years 2009 
through 2013: 

[Refer to PDF for image: multiple line graph] 

Fiscal year 2009: 

October 2008; 
Cost per barrel: $125.82; 
Standard price: $115.5. 

November 2008; 
Cost per barrel: $112.71; 
Standard price: $115.5. 

December 2008; 
Cost per barrel: $85.68; 
Standard price: $115.5. 

January 2009; 
Cost per barrel: $79.26; 
Standard price: $115.5. 

February 2009; 
Cost per barrel: $72.73; 
Standard price: $115.5. 

March 2009; 
Cost per barrel: $70.42; 
Standard price: $115.5. 

April 2009; 
Cost per barrel: $73.09; 
Standard price: $115.5. 

May 2009; 
Cost per barrel: $86.41; 
Standard price: $115.5. 

June 2009; 
Cost per barrel: $89.02; 
Standard price: $115.5. 

July 2009; 
Cost per barrel: $98.6; 
Standard price: $115.5. 

August 2009; 
Cost per barrel: $101.18; 
Standard price: $115.5. 

September 2009; 
Cost per barrel: $90.61; 
Standard price: $115.5. 

Fiscal year 2010: 

October 2009; 
Cost per barrel: $99.67; 
Standard price: $89.46. 

November 2009; 
Cost per barrel: $109.73; 
Standard price: $89.46. 

December 2009; 
Cost per barrel: $105.49; 
Standard price: $89.46. 

January 2010; 
Cost per barrel: $104.93; 
Standard price: $89.46. 

February 2010; 
Cost per barrel: $116.64; 
Standard price: $89.46. 

March 2010; 
Cost per barrel: $106.68; 
Standard price: $89.46. 

April 2010; 
Cost per barrel: $115.43; 
Standard price: $89.46. 

May 2010; 
Cost per barrel: $112.34; 
Standard price: $89.46. 

June 2010; 
Cost per barrel: $113.12; 
Standard price: $89.46. 

July 2010; 
Cost per barrel: $110.14; 
Standard price: $89.46. 

August 2010; 
Cost per barrel: $112.32; 
Standard price: $89.46. 

September 2010; 
Cost per barrel: $116.24; 
Standard price: $89.46. 

Fiscal year 2011: 

October 2010; 
Cost per barrel: $122.13; 
Standard price: $127.26. 

November 2010; 
Cost per barrel: $131.7; 
Standard price: $127.26. 

December 2010; 
Cost per barrel: $127.65; 
Standard price: $127.26. 

January 2011; 
Cost per barrel: $143.88; 
Standard price: $127.26. 

February 2011; 
Cost per barrel: $147.07; 
Standard price: $127.26. 

March 2011; 
Cost per barrel: $154.87; 
Standard price: $127.26. 

April 2011; 
Cost per barrel: $162.5; 
Standard price: $127.26. 

May 2011; 
Cost per barrel: $161.45; 
Standard price: $127.26. 

June 2011; 
Cost per barrel: $167.06; 
Standard price: $127.26. 

July 2011; 
Cost per barrel: $158.38; 
Standard price: $127.26. 

August 2011; 
Cost per barrel: $155.94; 
Standard price: $127.26. 

September 2011; 
Cost per barrel: $157.77; 
Standard price: $127.26. 

Fiscal year 2012: 

October 2011; 
Cost per barrel: $154.84; 
Standard price: $131.04. 

November 2011; 
Cost per barrel: $162.12; 
Standard price: $131.04. 

December 2011; 
Cost per barrel: $153.17; 
Standard price: $131.04. 

January 2012; 
Cost per barrel: $160.84; 
Standard price: $131.04. 

February 2012; 
Cost per barrel: $172.17; 
Standard price: $131.04. 

March 2012; 
Cost per barrel: $176.9; 
Standard price: $131.04. 

April 2012; 
Cost per barrel: $174.07; 
Standard price: $131.04. 

May 2012; 
Cost per barrel: $167.78; 
Standard price: $131.04. 

June 2012; 
Cost per barrel: $165.35; 
Standard price: $131.04. 

July 2012; 
Cost per barrel: $167.98; 
Standard price: $131.04. 

August 2012; 
Cost per barrel: $170.24; 
Standard price: $131.04. 

September 2012; 
Cost per barrel: $182.47; 
Standard price: $131.04. 

Fiscal year 2013: 

October 2012; 
Cost per barrel: $167.55; 
Standard price: $156.66. 

November 2012; 
Cost per barrel: $162.91; 
Standard price: $156.66. 

December 2012; 
Cost per barrel: $171.85; 
Standard price: $156.66. 

January 2013; 
Cost per barrel: $161.74; 
Standard price: $156.66. 

February 2013; 
Cost per barrel: $178.3; 
Standard price: $156.66. 

March 2013; 
Cost per barrel: $165.97; 
Standard price: $156.66. 

April 2013; 
Cost per barrel: $172.04; 
Standard price: $156.66. 

May 2013; 
Cost per barrel: $158.62; 
Standard price: $156.66. 

June 2013; 
Cost per barrel: $171.29; 
Standard price: $156.66. 

July 2013; 
Cost per barrel: $151.5; 
Standard price: $156.66. 

August 2013; 
Cost per barrel: $166.46; 
Standard price: $156.66. 

September 2013; 
Cost per barrel: $174.93; 
Standard price: $156.66. 

Source: GAO analysis of DOD data. GAO-14-595. 

[End of figure] 

Of the three components that constitute the standard price, crude oil 
prices and refinement markup costs accounted for most of the 
difference between the estimated standard price and actual fuel costs 
during fiscal years 2009 through 2013. In fiscal years 2009 and 2010, 
differences in the price of crude oil accounted for most of the 
difference between the estimated and actual prices--in 2009 for 95 
percent of the difference and in 2010 for 72 percent. However, during 
fiscal years 2011 through 2013, the refinement markup became the main 
driver of the difference, accounting for between 65 and 79 percent of 
the difference, as shown in table 2. 

Table 2: Analysis of Standard Price Components' Contributions to 
Difference between Estimated and Actual Price, Fiscal Years 2009 
through 2013: 

Percentage of Price Difference Accounted for by Component by Fiscal 
Year: 

Standard price component: Crude oil; 
2009: 95; 
2010: 72; 
2011: 25; 
2012: 17; 
2013: 17. 

Standard price component: Refinement markup; 
2009: 4; 
2010: 22; 
2011: 65; 
2012: 79; 
2013: 70. 

Standard price component: Nonproduct costs; 
2009: 1; 
2010: 6; 
2011: 10; 
2012: 4; 
2013: 12. 

Source: GAO analysis of DOD and Energy Information Administration 
data. GAO-14-595. 

Note: Percentages may not add to 100 due to rounding. 

[End of table] 

For fiscal years 2009 through 2012, DOD added a markup of 30 percent 
over the price of WTI to account for refinement costs in setting the 
standard price. According to DOD officials, the 30 percent markup over 
the WTI crude oil price had been a generally accurate predictive 
indicator for the price of DOD's actual refined fuel costs. However, 
in fiscal year 2011, actual fuel costs exceeded the price of WTI by an 
average of 49 percent and in 2012 by an average of 60 percent. 
Therefore, DOD set the refinement markup too low in those years. 
According to DOD officials, to account for these differences, DOD 
increased the markup for refinement costs from 30 percent to 50 
percent of the WTI price when developing the standard price for fiscal 
year 2013. 

Although fluctuations in fuel prices were, on average, the primary 
driver of the differences between estimated and actual fuel costs in 
fiscal years 2009 through 2013, differences between the services' 
estimated and actual fuel consumption levels also contributed to the 
overall difference. These differences accounted for, on average, 26 
percent of the difference between DOD's estimated and actual fuel 
costs. In fiscal years 2009 through 2012, the military services' 
estimated fuel requirements were within 5 percent of their actual 
consumption, as shown in figure 4. However, in fiscal year 2013, we 
found that differences between estimated and actual fuel consumption 
levels became the main driver of the total difference between 
estimated and actual fuel costs. In that year, DOD underestimated the 
cost of fuel but overestimated its consumption by approximately 19 
million barrels, or 17 percent. According to DOD officials, actual 
consumption was much lower as a result of actions DOD took to address 
sequestration.[Footnote 10] In November 2013, we reported that for 
fiscal year 2013, DOD's Operation and Maintenance accounts were 
reduced by approximately $20 billion, or 7.2 percent, due to 
sequestration reductions. We identified several actions DOD took to 
address these budgetary reductions. For example, in fiscal year 2013, 
the Air Force initially ceased flight operations from April through 
June for about one-third of active-duty combat Air Force units. Also, 
the Army curtailed training for all units except those deployed, 
preparing to deploy, or stationed overseas, and the Navy limited 
flight training for nondeploying units.[Footnote 11] 

Figure 4: Military Services' Estimated vs. Actual Fuel Consumption, 
Fiscal Years 2009 through 2013: 

[Refer to PDF for image: vertical bar and line graph] 

Millions of barrels of fuel: 

Fiscal year: 2009; 
Actual consumption: 115.74; 
Estimated DOD consumption: 1% under actual. 

Fiscal year: 2010; 
Actual consumption: 116.32; 
Estimated DOD consumption: 5% over actual. 

Fiscal year: 2011; 
Actual consumption: 116.97; 
Estimated DOD consumption: 5% over actual. 

Fiscal year: 2012; 
Actual consumption: 107.59; 
Estimated DOD consumption: 5% under actual. 

Fiscal year: 2013; 
Actual consumption: 93; 
Estimated DOD consumption: 17% under actual. 

Source: GAO analysis of DOD data. GAO-14-595. 

[End of figure] 

DOD Has Taken Various Actions to Manage the Effect of Differences 
between Estimated and Actual Fuel Costs: 

DOD has taken actions to manage fluctuations in the cash balance of 
the Defense-wide Working Capital Fund caused by differences between 
its estimated and actual fuel costs. These actions included 
transferring funds into the Defense-wide Working Capital Fund from 
other accounts and adjusting the standard price DOD charged to its 
fuel customers. 

Cash Balances in the Defense-Wide Working Capital Fund Fluctuate Due 
to Changing Fuel Prices: 

The Defense-wide Working Capital Fund provides the cash balance that 
is used to fund the day-to-day operations for six defense-wide 
activity groups, including DLA Energy, which provides, among other 
things, worldwide energy support to the military services and other 
authorized customers for bulk fuel purchasing, transportation, and 
storage. According to a DOD report, the volatility of fuel prices has 
historically posed a challenge to managing the cash balance of the 
fund.[Footnote 12] When DLA pays more or less for fuel than the 
standard price it charges its customers, the cash balance in the 
Defense-wide Working Capital Fund will go down or up. For instance, if 
fuel market prices rise significantly relative to the standard price, 
the cash balance in the fund will go down. On the other hand, if fuel 
market prices decrease relative to the standard price, the fund will 
generate excess cash and the balance will go up. In fiscal years 2009 
through 2013, the fluctuations in the cash balance of the Defense-wide 
Working Capital Fund were partially driven by these net outlays for 
fuel, as shown in figure 5. 

Figure 5: Cash Balance in the Defense-Wide Working Capital Fund and 
Net Outlays for Fuel, Fiscal Years 2009 through 2013: 

[Refer to PDF for image: vertical bar and line graph] 

Fiscal year 2009: 

Oct 2008; 
Actual cash balance: $0.702; 
Net energy outlay: $1.159 billion. 

November 2008; 
Actual cash balance: $1.371 billion; 
Net energy outlay: $0.608 billion. 

December 2008; 
Actual cash balance: $1.252 billion; 
Net energy outlay: $0.076 billion. 

January 2009; 
Actual cash balance: $1.425 billion; 
Net energy outlay: $0.249 billion. 

February 2009; 
Actual cash balance: $1.56 billion; 
Net energy outlay: $0.14 billion. 

March 2009; 
Actual cash balance: $1.707 billion; 
Net energy outlay: $0.104 billion. 

April 2009; 
Actual cash balance: $1.504 billion; 
Net energy outlay: -$0.216 billion. 

May 2009; 
Actual cash balance: $1.644 billion; 
Net energy outlay: -$0.034 billion. 

June 2009; 
Actual cash balance: $1.998 billion; 
Net energy outlay: -$0.11 billion. 

July 2009; 
Actual cash balance: $1.279 billion; 
Net energy outlay: -$0.394 billion. 

August 2009; 
Actual cash balance: $1.215 billion; 
Net energy outlay: -$0.312 billion. 

September 2009; 
Actual cash balance: $1.457 billion; 
Net energy outlay: -$0.075 billion. 

Fiscal year 2010: 

Oct 2009; 
Actual cash balance: $1.074 billion; 
Net energy outlay: -$0.079 billion. 

November 2009; 
Actual cash balance: $1.126 billion; 
Net energy outlay: $0.303 billion. 

December 2009; 
Actual cash balance: $0.901 billion; 
Net energy outlay: -$0.061 billion. 

January 2010; 
Actual cash balance: $1.634 billion; 
Net energy outlay: $0.103 billion. 

February 2010; 
Actual cash balance: $1.921 billion; 
Net energy outlay: $0.161 billion. 

March 2010; 
Actual cash balance: $2.093 billion; 
Net energy outlay: $0.316 billion. 

April 2010; 
Actual cash balance: $2.274 billion; 
Net energy outlay: $0.106 billion. 

May 2010; 
Actual cash balance: $2.854 billion; 
Net energy outlay: $0.293 billion. 

June 2010; 
Actual cash balance: $2.928 billion; 
Net energy outlay: -$0.043 billion. 

July 2010; 
Actual cash balance: $2.716 billion; 
Net energy outlay: -$0.149 billion. 

August 2010; 
Actual cash balance: $3.214 billion; 
Net energy outlay: -$0.062 billion. 

September 2010; 
Actual cash balance: $3.018 billion; 
Net energy outlay: -$0.164 billion. 

Fiscal year 2011: 

Oct 2010; 
Actual cash balance: $2.992 billion; 
Net energy outlay: -$0.845 billion. 

November 2010; 
Actual cash balance: $3.242 billion; 
Net energy outlay: $0.215 billion. 

December 2010; 
Actual cash balance: $3.107 billion; 
Net energy outlay: -$0.026 billion. 

January 2011; 
Actual cash balance: $3.24 billion; 
Net energy outlay: -$0.027 billion. 

February 2011; 
Actual cash balance: $3.412 billion; 
Net energy outlay: $0.05 billion. 

March 2011; 
Actual cash balance: $3.209 billion; 
Net energy outlay: $0.033 billion. 

April 2011; 
Actual cash balance: $3.56 billion; 
Net energy outlay: $0.015 billion. 

May 2011; 
Actual cash balance: $3.309 billion; 
Net energy outlay: -$0.366 billion. 

June 2011; 
Actual cash balance: $3.406 billion; 
Net energy outlay: -$0.205 billion. 

July 2011; 
Actual cash balance: $2.21 billion; 
Net energy outlay: -$0.057 billion. 

August 2011; 
Actual cash balance: $2.645 billion; 
Net energy outlay: $0.121 billion. 

September 2011; 
Actual cash balance: $3.096 billion; 
Net energy outlay: $0.243 billion. 

Fiscal year 2012: 

Oct 2011; 
Actual cash balance: $2.889 billion; 
Net energy outlay: -$0.245 billion. 

November 2011; 
Actual cash balance: $3.04 billion; 
Net energy outlay: $0.16 billion. 

December 2011; 
Actual cash balance: $2.742 billion; 
Net energy outlay: -$0.065 

January 2012; 
Actual cash balance: $3.013 billion; 
Net energy outlay: -$0.109 billion. 

February 2012; 
Actual cash balance: $3.526 billion; 
Net energy outlay: $0.199 billion. 

March 2012; 
Actual cash balance: $3.494 billion; 
Net energy outlay: $0.158 billion. 

April 2012; 
Actual cash balance: $3.579 billion; 
Net energy outlay: -$0.179 billion. 

May 2012; 
Actual cash balance: $3.373 billion; 
Net energy outlay: -$0.027 billion. 

June 2012; 
Actual cash balance: $4.261 billion; 
Net energy outlay: -$0.26 billion. 

July 2012; 
Actual cash balance: $2.823 billion; 
Net energy outlay: -$0.793 billion. 

August 2012; 
Actual cash balance: $2.098 billion; 
Net energy outlay: -$0.642 billion. 

September 2012; 
Actual cash balance: $2.209 billion; 
Net energy outlay: -$0.215 billion. 

Fiscal year 2013: 

Oct 2012; 
Actual cash balance: $1.67 billion; 
Net energy outlay: $1.785 billion. 

November 2012; 
Actual cash balance: $1.301 billion; 
Net energy outlay: -$0.149 billion. 

December 2012; 
Actual cash balance: $1.578 billion; 
Net energy outlay: $0.053 billion. 

January 2013; 
Actual cash balance: $0.928 billion; 
Net energy outlay: -$0.1 billion. 

February 2013; 
Actual cash balance: $1.24 billion; 
Net energy outlay: $0.031 billion. 

March 2013; 
Actual cash balance: $1.543 billion; 
Net energy outlay: $0.189 billion. 

April 2013; 
Actual cash balance: $1.623 billion; 
Net energy outlay: $0.147 billion. 

May 2013; 
Actual cash balance: $1.727 billion; 
Net energy outlay: $0.223 billion. 

June 2013; 
Actual cash balance: $2.785 billion; 
Net energy outlay: -$0.014 billion. 

July 2013; 
Actual cash balance: $2.222 billion; 
Net energy outlay: -$0.502 billion. 

August 2013; 
Actual cash balance: $2.216 billion; 
Net energy outlay: $0.007 billion. 

September 2013; 
Actual cash balance: $2.683 billion; 
Net energy outlay: -$0.009 billion. 

Source: GAO analysis of DOD data. GAO-14-595. 

Note: The Defense-wide Working Capital Fund cash balance is used to 
fund fuel and other commodities and services. Net outlays for these 
other commodities and services can also affect the cash balance in the 
fund. 

[End of figure] 

DOD Used Fund Transfers and Adjustments to Its Standard Price to 
Manage Working Capital Fund Balances: 

The Defense-wide Working Capital Fund is intended to provide DOD with 
the flexibility to absorb some fluctuation in fuel prices. However, in 
some instances, DOD has sought to manage the fluctuations in the 
fund's cash balance by transferring money into or out of the fund or 
by adjusting its standard price.[Footnote 13] For example, in fiscal 
years 2012 and 2013, DOD transferred funds into the Defense-wide 
Working Capital Fund. In 2012, DOD transferred $1 billion into the 
fund from the Afghanistan Security Forces Fund and in 2013 another 
$1.4 billion from various accounts, including the Foreign Currency 
Fluctuations account, to mitigate the cash shortfall caused by an 
increase in fuel costs over the standard price. DOD also transferred 
cash out of the fund during the period of our review. Specifically, in 
fiscal year 2011, Congress reduced funding for several DOD Operation 
and Maintenance accounts by about $2 billion to reflect excess cash 
balances in the Defense-wide Working Capital Fund.[Footnote 14] In 
response, DOD transferred almost $1.3 billion out of the Defense-wide 
Working Capital Fund to fund the reduced Operation and Maintenance 
accounts. We found that these transfers into or out of the fund can 
affect adjustments to the standard price. For example, according to 
DOD officials, the fiscal year 2013 transfer allowed DOD to maintain 
the same standard price throughout that year even though actual fuel 
costs exceeded the standard price. A DOD study noted that the fiscal 
year 2011 transfer out of the fund required DOD to increase its 
standard price by almost $40 per barrel because the cash balance in 
the Defense-wide Working Capital Fund was no longer sufficient to 
mitigate the increased costs of fuel in that year.[Footnote 15] 

DOD also used changes to the standard price to manage the cash balance 
in the Defense-wide Working Capital Fund. From the beginning of fiscal 
year 2009 through end of fiscal year 2013, DOD adjusted its standard 
price 13 times--increasing it 6 times and decreasing it 7 times. 
According to DOD, these price changes were due to changing product 
costs, approved transfers, and the availability of cash balances in 
the fund. For example, the fiscal year 2012 President's Budget 
estimated a standard price of $131.04. However, in October 2011, DOD 
raised the standard price to $165.90. It then lowered the price to 
$160.44 in January 2012, to $151.20 in June 2012 and finally to $97.02 
in July 2012, where the price remained for the rest of the fiscal 
year. Figure 6 shows the transfers and standard prices during fiscal 
years 2009 through 2013 and the cash balances in the Defense-wide 
Working Capital Fund. 

Figure 6: Defense-Wide Working Capital Fund Balance, Transfers, and 
Standard Prices: 

[Refer to PDF for image: combined line and plotted point graph] 

Fiscal year 2009: 

October 2008; 
Actual cash balance: $0.702 billion; 
Standard price per barrel: $170.94. 

November 2008; 
Actual cash balance: $1.371 billion; 

December 2008; 
Actual cash balance: $1.252 billion; 
Standard price per barrel: $104.58. 

January 2009; 
Actual cash balance: $1.425 billion; 

February 2009; 
Actual cash balance: $1.56 billion; 
Standard price per barrel: $69.72. 

March 2009; 
Actual cash balance: $1.707 billion; 

April 2009; 
Actual cash balance: $1.504 billion; 
Standard price per barrel: $60.48. 

May 2009; 
Actual cash balance: $1.644 billion; 

June 2009; 
Actual cash balance: $1.998 billion; 

July 2009; 
Actual cash balance: $1.279 billion; 

August 2009; 
Actual cash balance: $1.215 billion; 

September 2009; 
Actual cash balance: $1.457 billion; 
Standard price per barrel: $89.46. 

Fiscal year 2010: 

October 2009; 
Actual cash balance: $1.074 billion; 
Standard price per barrel: $116.76.  

November 2009; 
Actual cash balance: $1.126 billion. 

December 2009; 
Actual cash balance: $0.901 billion; 

January 2010; 
Actual cash balance: $1.634 billion; 
Standard price per barrel: $118.44. 

February 2010; 
Actual cash balance: $1.921 billion; 

March 2010; 
Actual cash balance: $2.093 billion; 

April 2010; 
Actual cash balance: $2.274 billion; 

May 2010; 
Actual cash balance: $2.854 billion; 

June 2010; 
Actual cash balance: $2.928 billion; 

July 2010; 
Actual cash balance: $2.716 billion; 
Standard price per barrel: $98.28.  

August 2010; 
Actual cash balance: $3.214 billion; 

September 2010; 
Actual cash balance: $3.018 billion; 

Fiscal year 2011: 

October 2010; 
Actual cash balance: $2.992 billion; 
Standard price per barrel: $127.26. 

November 2010; 
Actual cash balance: $3.242 billion; 

December 2010; 
Actual cash balance: $3.107 billion; 

January 2011; 
Actual cash balance: $3.24 billion; 

February 2011; 
Actual cash balance: $3.412 billion; 

March 2011; 
Actual cash balance: $3.209 billion; 

April 2011; 
Actual cash balance: $3.56 billion; 

May 2011; 
Actual cash balance: $3.309 billion; 

June 2011; 
Actual cash balance: $3.406 billion; 
Standard price per barrel: $165.90. 

July 2011; 
Actual cash balance: $2.21 billion; 
$1.283 billion transferred out of the fund. 

August 2011; 
Actual cash balance: $2.645 billion; 

September 2011; 
Actual cash balance: $3.096 billion; 

Fiscal year 2012: 

October 2011; 
Actual cash balance: $2.889 billion; 

November 2011; 
Actual cash balance: $3.04 billion; 

December 2011; 
Actual cash balance: $2.742 billion. 

January 2012; 
Actual cash balance: $3.013 billion; 
Standard price per barrel: $160.44. 

February 2012; 
Actual cash balance: $3.526 billion; 

March 2012; 
Actual cash balance: $3.494 billion; 

April 2012; 
Actual cash balance: $3.579 billion; 

May 2012; 
Actual cash balance: $3.373 billion; 

June 2012; 
Actual cash balance: $4.261 billion; 
Standard price per barrel: $151.20. 

July 2012; 
Actual cash balance: $2.823 billion; 
Standard price per barrel: $97.02; 
$1.00 billion transferred out of the fund. 

August 2012; 
Actual cash balance: $2.098 billion; 

September 2012; 
Actual cash balance: $2.209 billion; 

Fiscal year 2013: 

October 2012; 
Actual cash balance: $1.67 billion; 
Standard price per barrel: $156.66.  

November 2012; 
Actual cash balance: $1.301 billion; 

December 2012; 
Actual cash balance: $1.578 billion; 

January 2013; 
Actual cash balance: $0.928 billion; 

February 2013; 
Actual cash balance: $1.24 billion; 

March 2013; 
Actual cash balance: $1.543 billion; 

April 2013; 
Actual cash balance: $1.623 billion; 

May 2013; 
Actual cash balance: $1.727 billion; 

June 2013; 
Actual cash balance: $2.785 billion; 
$0.969 billion transferred out of the fund. 

July 2013; 
Actual cash balance: $2.222 billion; 

August 2013; 
Actual cash balance: $2.216 billion; 

September 2013; 
Actual cash balance: $2.683 billion; 
$0.5=425 billion transferred out of the fund. 

Source: GAO analysis of DOD data. GAO-14-595. 

[End of figure] 

Standard price adjustments affect the military services. According to 
DOD officials, an adjustment to the standard price is not their 
preferred option for managing the fund's cash balances because of the 
potential strain it places on the services' budgets. For example, a 
Navy official told us that when the standard price is increased, the 
Navy must either reduce consumption by curtailing training or request 
additional funding. Fiscal year 2013 was the first year since 2004 
during which DOD maintained its standard price for the entire year. 

DOD Has Conducted Studies on Its Management of Working Capital Funds, 
but Has Not Reevaluated Its Approach or Documented Its Assumptions for 
Estimating Fuel Costs: 

DOD has studied various aspects of its bulk fuel program since 2004, 
but it has not updated its current approach for setting the standard 
price to reflect current market conditions or documented its rationale 
for the assumptions it uses in estimating the standard price--even 
though the differences between its estimated and actual costs have 
been considerable since that time. 

DOD Has Conducted Various Studies on Its Bulk Fuel Program, Including 
Management of Working Capital Funds: 

Since 2004, DOD has completed a number of studies reviewing various 
aspects of its bulk fuel program, including studies of its management 
of working capital funds. We identified six studies related to DOD 
bulk fuel pricing and management of the Defense-wide Working Capital 
Fund. See appendix II for a description of the purpose of the studies 
and any identified findings, including the status on any proposed 
recommendations. 

The John Warner National Defense Authorization Act for Fiscal Year 
2007 required the Secretary of Defense to submit a report on fuel rate 
and the cost projections used in the DOD budget presentation.[Footnote 
16] In response, DOD completed a study in February 2007 that compared 
the crude oil forecast provided by OMB with crude oil forecasts 
developed by the Department of Energy and 38 private forecasting 
companies.[Footnote 17] Based on its analysis, DOD elected to maintain 
its current approach--using OMB's WTI forecast as its preferred 
baseline--because the study concluded that OMB's forecasts were 
comparable to or better at estimating the actual crude oil price than 
the alternative forecasts it evaluated.[Footnote 18] 

More recently, in January 2012, in response to the Ike Skelton 
National Defense Authorization Act for Fiscal Year 2011,[Footnote 19] 
the Office of the Under Secretary of Defense (Comptroller) reviewed 
alternatives for managing the balances of the Defense-wide Working 
Capital Fund. The study found that fuel cost volatility poses a major 
threat to the fund's solvency.[Footnote 20] As a result, the study 
concluded that DOD may need to request funding transfers that could 
disrupt investment programs or threaten readiness. The study 
recommended two alternatives for managing working capital funds. The 
first would allow DOD to transfer expiring unobligated balances from 
other appropriation accounts into the fund to build a cash reserve. 
The study noted that this alternative is similar to authorities 
provided to other federal agencies' working capital funds, but that it 
would require statutory authorization. The second alternative would 
allow the fund to accumulate and reserve funds in times of positive 
cash flow--up to $12.5 billion, or two times the largest cash 
shortfall on record. The Office of the Under Secretary of Defense 
(Comptroller) identified several concerns with this alternative. For 
example, according to the study, DOD would need congressional 
authorization to accumulate positive operating results. Additionally, 
the study noted that maintaining a large cash balance in the fund to 
mitigate potential price risk is not a productive use of resources. 
According to DOD officials, DOD's Financial Management Regulation is 
currently being updated with an estimated issuance of summer 2014 to 
allow for greater flexibility in developing cash balance targets for 
the Defense-wide Working Capital Fund. 

The 2012 study also listed other alternatives for managing working 
capital fund balances, which it did not recommend due to certain 
limitations, risks, and costs. These included some alternatives that 
had previously been studied and recommended by the Defense Business 
Board.[Footnote 21] For example, the Defense Business Board had 
previously studied the feasibility of hedging fuel on the open market, 
which includes purchasing financial instruments to minimize risk in 
future prices.[Footnote 22] However, according to the study, DOD has 
elected not to pursue hedging for a number of reasons including that 
it is outside of DOD's current authority, would incur management fees 
that would increase total costs, and poses additional political and 
economic risk. The 2012 study also rejected the Defense Business 
Board's recommendations to implement firm-fixed-price fuel contracts 
and to partner with the Department of the Interior to access 
additional funds when fuel costs increase. The study noted that firm-
fixed-price contracts would shift pricing risk to the supplier, which 
would be likely to result in DOD paying a premium for the contracts. 

DOD Has Not Reevaluated Its Approach or Documented its Assumptions for 
Setting the Standard Price: 

According to GAO's Cost Estimating and Assessment Guide, a cost 
estimate should be updated regularly to reflect significant changes--
such as changes to assumptions--and actual costs, so that it always 
reflects current conditions.[Footnote 23] Also, according to the 
guide, major assumptions should be assessed to determine how sensitive 
they are to changes, and risk and uncertainty analysis should be 
performed to determine the level of risk associated with the estimate. 
Further, OMB guidance states that agencies should consider the effect 
that demographic, economic, or other changes can have on assumptions 
for program levels beyond the budget year.[Footnote 24] However, the 
assumptions that DOD uses for setting the crude oil component of the 
standard price do not reflect current market conditions. Specifically, 
DOD's assumptions do not consider (1) differences between crude oil 
benchmarks, (2) differences between domestic and international crude 
oil prices, and (3) the decreasing relationship between crude oil and 
refined prices. 

DOD's approach for establishing the standard price has not accounted 
for changes in market conditions for crude oil. As discussed earlier 
in this report, DOD's process of adding a refinement markup to the 
price of WTI in setting the standard price has resulted in estimated 
fuel costs that have been considerably lower than actual fuel costs. 
We found that, from fiscal years 2010 through 2013, the price for WTI 
diverged from other crude oil pricing benchmarks. According to a 
report from the Energy Information Administration, WTI was selling 
during this period for less than other crude oil pricing benchmarks, 
such as Brent--a commonly used crude oil benchmark.[Footnote 25] The 
price spread between WTI and Brent reached a high of $27 per barrel in 
September 2011, as shown in figure 7. Energy Information 
Administration officials also told us that, although the price spread 
between Brent and WTI has narrowed recently, they believe that the 
relationship between the pricing of Brent and WTI may remain volatile 
and that a price spread between the two benchmarks will likely 
continue. In its April 2014 Short-Term Energy Outlook, the Energy 
Information Administration estimates that in calendar year 2015 the 
price of WTI will be about $11 per barrel less than the price of Brent. 

Figure 7: Differences between Brent and West Texas Intermediate Crude 
Oil Prices, Fiscal Years 2009 through 2013: 

[Refer to PDF for image: multiple line graph] 

Dollars per barrel: 

Fiscal year 2009: 

Oct 2008; 
Brent Spot Average: $76.61; 
West Texas Intermediate (WTI): $71.58. 

November 2008; 
Brent Spot Average: $57.31; 
West Texas Intermediate (WTI): $52.45. 

December 2008; 
Brent Spot Average: $41.12; 
West Texas Intermediate (WTI): $39.95. 

January 2009; 
Brent Spot Average: $41.68; 
West Texas Intermediate (WTI): $43.44. 

February 2009; 
Brent Spot Average: $39.09; 
West Texas Intermediate (WTI): $43.32. 

March 2009; 
Brent Spot Average: $47.94; 
West Texas Intermediate (WTI): $46.54. 

April 2009; 
Brent Spot Average: $49.66; 
West Texas Intermediate (WTI): $50.18. 

May 2009; 
Brent Spot Average: $59.05; 
West Texas Intermediate (WTI): $57.3. 

June 2009; 
Brent Spot Average: $69.64; 
West Texas Intermediate (WTI): $68.61. 

July 2009; 
Brent Spot Average: $64.15; 
West Texas Intermediate (WTI): $64.44. 

August 2009; 
Brent Spot Average: $71.04; 
West Texas Intermediate (WTI): $72.51. 

September 2009; 
Brent Spot Average: $69.41; 
West Texas Intermediate (WTI): $67.65. 

Fiscal year 2010: 

Oct 2009; 
Brent Spot Average: $75.72; 
West Texas Intermediate (WTI): $72.77. 

November 2009; 
Brent Spot Average: $77.99; 
West Texas Intermediate (WTI): $76.66. 

December 2009; 
Brent Spot Average: $74.47; 
West Texas Intermediate (WTI): $74.46. 

January 2010; 
Brent Spot Average: $78.33; 
West Texas Intermediate (WTI): $76.17. 

February 2010; 
Brent Spot Average: $76.39; 
West Texas Intermediate (WTI): $73.75. 

March 2010; 
Brent Spot Average: $81.2; 
West Texas Intermediate (WTI): $78.83. 

April 2010; 
Brent Spot Average: $84.29; 
West Texas Intermediate (WTI): $84.82. 

May 2010; 
Brent Spot Average: $73.74; 
West Texas Intermediate (WTI): $75.95. 

June 2010; 
Brent Spot Average: $75.34; 
West Texas Intermediate (WTI): $74.76. 

July 2010; 
Brent Spot Average: $76.32; 
West Texas Intermediate (WTI): $75.58. 

August 2010; 
Brent Spot Average: $76.6; 
West Texas Intermediate (WTI): $77.04. 

September 2010; 
Brent Spot Average: $75.24; 
West Texas Intermediate (WTI): $77.84. 

Fiscal year 2011: 

Oct 2010; 
Brent Spot Average: $81.89; 
West Texas Intermediate (WTI): $82.67. 

November 2010; 
Brent Spot Average: $84.25; 
West Texas Intermediate (WTI): $85.28. 

December 2010; 
Brent Spot Average: $89.15; 
West Texas Intermediate (WTI): $91.45. 

January 2011; 
Brent Spot Average: $89.17; 
West Texas Intermediate (WTI): $96.52. 

February 2011; 
Brent Spot Average: $88.58; 
West Texas Intermediate (WTI): $103.72. 

March 2011; 
Brent Spot Average: $102.76; 
West Texas Intermediate (WTI): $114.64. 

April 2011; 
Brent Spot Average: $109.53; 
West Texas Intermediate (WTI): $123.26. 

May 2011; 
Brent Spot Average: $100.9; 
West Texas Intermediate (WTI): $114.99. 

June 2011; 
Brent Spot Average: $96.24; 
West Texas Intermediate (WTI): $113.83. 

July 2011; 
Brent Spot Average: $97.3; 
West Texas Intermediate (WTI): $116.97. 

August 2011; 
Brent Spot Average: $86.33; 
West Texas Intermediate (WTI): $110.22. 

September 2011; 
Brent Spot Average: $85.52; 
West Texas Intermediate (WTI): $112.83; 
Greatest difference: $27.31 per barrel. 

Fiscal year 2012: 

Oct 2011; 
Brent Spot Average: $86.32; 
West Texas Intermediate (WTI): $109.55. 

November 2011; 
Brent Spot Average: $97.13; 
West Texas Intermediate (WTI): $110.77. 

December 2011; 
Brent Spot Average: $98.53; 
West Texas Intermediate (WTI): $107.87. 

January 2012; 
Brent Spot Average: $100.27; 
West Texas Intermediate (WTI): $110.69. 

February 2012; 
Brent Spot Average: $102.2; 
West Texas Intermediate (WTI): $119.33. 

March 2012; 
Brent Spot Average: $106.16; 
West Texas Intermediate (WTI): $125.45. 

April 2012; 
Brent Spot Average: $103.32; 
West Texas Intermediate (WTI): $119.75. 

May 2012; 
Brent Spot Average: $94.65; 
West Texas Intermediate (WTI): $110.34. 

June 2012; 
Brent Spot Average: $82.3; 
West Texas Intermediate (WTI): $95.16. 

July 2012; 
Brent Spot Average: $87.9; 
West Texas Intermediate (WTI): $102.62. 

August 2012; 
Brent Spot Average: $94.3; 
West Texas Intermediate (WTI): $113.36. 

September 2012; 
Brent Spot Average: $94.51; 
West Texas Intermediate (WTI): $112.86. 

Fiscal year 2013: 

Oct 2012; 
Brent Spot Average: $89.49; 
West Texas Intermediate (WTI): $111.71. 

November 2012; 
Brent Spot Average: $86.53; 
West Texas Intermediate (WTI): $109.06. 

December 2012; 
Brent Spot Average: $87.86; 
West Texas Intermediate (WTI): $109.49. 

January 2013; 
Brent Spot Average: $94.76; 
West Texas Intermediate (WTI): $112.96. 

February 2013; 
Brent Spot Average: $95.31; 
West Texas Intermediate (WTI): $116.05. 

March 2013; 
Brent Spot Average: $92.94; 
West Texas Intermediate (WTI): $108.47. 

April 2013; 
Brent Spot Average: $92.02; 
West Texas Intermediate (WTI): $102.25. 

May 2013; 
Brent Spot Average: $94.51; 
West Texas Intermediate (WTI): $102.56. 

June 2013; 
Brent Spot Average: $95.77; 
West Texas Intermediate (WTI): $102.92. 

July 2013; 
Brent Spot Average: $104.67; 
West Texas Intermediate (WTI): $107.93. 

August 2013; 
Brent Spot Average: $106.57; 
West Texas Intermediate (WTI): $111.28. 

September 2013; 
Brent Spot Average: $106.29; 
West Texas Intermediate (WTI): $111.6. 

Source: GAO Analysis of Energy Information Administration data. GAO-14-
595. 

Note: WTI is a crude oil produced in Texas and southern Oklahoma that 
serves as a reference or "marker" for pricing a number of other crudes 
and that is traded in the domestic spot market at Cushing, Oklahoma. 
Brent is a blended crude oil produced in the North Sea region that 
serves as a reference or "marker" for pricing a number of other crudes. 

[End of figure] 

Recognizing this market change, other federal agencies have adjusted 
their crude oil benchmarks for estimating energy prices because of 
this price spread. For example, in its 2013 Annual Energy Outlook, the 
Energy Information Administration shifted from WTI to Brent for 
estimating energy prices. According to officials from the Energy 
Information Administration, Brent crude oil prices have become the 
primary international crude oil benchmark. Furthermore, these 
officials noted that worldwide petroleum product prices--including in 
the United States--are typically based on Brent prices. This is 
consistent with DLA's analysis, which found that domestic refined fuel 
products are more closely related with Brent than with WTI prices. 

OMB has also accounted for other crude oil benchmarks in its annual 
economic assumptions that are provided to federal agencies for 
budgeting purposes. According to officials from DOD and OMB, beginning 
with the fiscal year 2014 budget cycle, OMB began providing DOD and 
other federal agencies with forecasted Brent prices in addition to WTI 
prices. OMB officials told us that although OMB Circular A-11 requires 
that federal agencies' budget estimates be consistent with OMB's 
economic assumptions, DOD has discretion over which economic 
assumptions, such as an appropriate crude oil benchmark, to apply in 
developing its bulk fuel estimates. 

We identified other market conditions that DOD has not accounted for 
with its current approach to determining the crude oil component of 
the standard price. For example, DLA purchases about half of its fuel 
from overseas refiners. From fiscal years 2009 through 2013, DLA 
purchased, on average, 48 percent of its fuel from overseas sources. 
However, WTI is a pricing benchmark only for domestic crude oil. 
Because DOD uses WTI, its baseline for setting the standard price does 
not account for any potential price differences between domestic and 
overseas purchases. Furthermore, officials at DOD also expressed 
concerns that crude oil may no longer be a good indicator for refined 
product prices. According to an official from the Office of the Under 
Secretary of Defense (Comptroller), in recent years the relationship 
between crude oil prices and the price of DOD refined products has not 
been as closely related as it has in the past. This is consistent with 
our own analysis. Specifically, for fiscal years 2009 through 2013 we 
compared the actual price DLA paid for fuel with the actual price of 
other fuel products--including WTI crude oil, Brent crude oil, and 
commercial jet fuel--to determine the relationship among these prices. 
Based on our analysis of data from the Energy Information 
Administration, we found that in each year the prices DLA paid for 
fuel had a closer relationship with commercial jet fuel prices than 
with either WTI or Brent crude oil prices. 

To compensate for the limitations in its crude oil baseline, DOD has 
adjusted other components of its standard price. For example, as 
discussed earlier in this report, beginning in fiscal year 2013, DOD 
increased the refinement markup component of the standard price from 
30 percent to 50 percent to account for the divergence between WTI and 
other crude oil pricing benchmarks. DOD has continued to use the 50 
percent refinement markup in setting its standard price for fiscal 
years 2014 and 2015. This practice means that DOD is using the markup 
not only to account for refinement costs, but to cover the price 
spread between WTI and other crude oil pricing benchmarks. By using 
the increased refinement markup to compensate for the price spread, 
DOD is not addressing the underlying limitations with its crude oil 
baseline. Rather, DOD is adding further risk and uncertainty 
concerning its estimate, because the estimate must now account for 
additional price variables. 

Even though in recent years its methodology has been producing 
estimates that differ significantly from actual costs, DOD has not 
reevaluated its approach or documented the rationale behind the 
assumptions it uses for setting the standard price. DOD's 2007 study 
found that its forecasting methodology produced results as good as or 
better than the forecasting models the study compared it with. 
[Footnote 26] However, that study focused exclusively on the crude oil 
component of the standard price. It did not evaluate the accuracy of 
the standard price methodology as a whole against other potential 
approaches. Moreover, since that time, DOD has not reevaluated whether 
using WTI as its baseline assumption--with the corresponding 
refinement markup--is still appropriate given recent market changes. 
Further, DOD has not considered whether a crude oil baseline is still 
reasonable at all. Officials from the Office of the Under Secretary of 
Defense (Comptroller) told us that they have held internal discussions 
regarding changing the crude oil pricing baseline used in the standard 
price, but no final decision has been made. 

Furthermore, DOD has not fully documented its rationale and 
assumptions for establishing each component of the standard price. 
GAO's Cost Estimating and Assessment Guide states that a cost estimate 
should be supported by detailed documentation that describes how it 
was derived.[Footnote 27] According to the guide, the documentation 
should include, among other things, the estimating methodology used to 
derive the costs for each element of the cost estimate, and it should 
also discuss any limitations of the data or assumptions. Further, a 
well-documented methodology allows decision makers to understand and 
evaluate the budget request and make proper determinations. According 
to an official from the Office of the Under Secretary of Defense 
(Comptroller) responsible for overseeing DOD's bulk fuel program, 
DOD's Financial Management Regulation provides overarching guidance on 
establishing prices for working capital fund products, including fuel. 
Specifically, the Financial Management Regulation provides that all 
business areas of the fund are required to set their prices based upon 
full cost recovery, including general and administrative support 
provided by others. This official noted that DOD's process for setting 
the standard price is based on this full cost recovery, as described 
in specific guidance in the Financial Management Regulation. 
Additionally, federal guidance also governs aspects of the rate-
setting process. For example, OMB's A-11 Circular requires DOD's 
budget estimates for fuel to be consistent with OMB's economic 
assumptions. For this reason the official stated that the 
establishment of a more specific methodology could be potentially 
redundant to the existing process, and could add additional 
administrative hurdles that may not add value. 

However, while DOD's Financial Management Regulation provides overall 
principles for working capital funds, it does not require DOD to 
document its methodology for setting the standard price in a step-by-
step process. Therefore, DOD does not have detailed documentation that 
describes the rationale for the assumptions it uses. For example, DOD 
has not documented its rationale for continuing to select WTI as a 
crude oil benchmark in establishing the standard price although OMB 
now provides more than WTI crude oil forecasts in its economic 
assumptions. Also, according to the Office of the Under Secretary of 
Defense (Comptroller) official, DOD determines its refinement markup 
to account for the fact that DLA purchases refined product and does 
not buy crude oil and that this factor is developed based on current 
commodity market experience balanced against DOD priorities. However, 
DOD has not documented its rationale or assumptions for determining 
these trade-offs. Reevaluating its approach for estimating the 
components of the standard price would allow DOD to develop more 
informed estimates and better position DOD to minimize risks and 
uncertainty resulting from changing market conditions. Further, 
documenting the rationale for its assumptions would provide greater 
transparency and clarify for fuel customers and decision makers the 
process DOD uses to set the standard price. 

Conclusions: 

DOD has faced challenges in setting a standard price that closely 
approximates its actual fuel costs, and in recent years its estimated 
fuel prices have differed considerably from its actual costs. Actual 
prices have differed from DOD's estimates largely because changes in 
fuel market conditions have not been reflected in the standard price. 
Additionally, DOD has not documented its rationale for continuing to 
use the same assumptions. The Defense-wide Working Capital Fund, 
designed to absorb the effects of price fluctuations, has been 
insufficient to absorb the significant net outlays for fuel. This has 
led to large transfers into the fund from other DOD accounts and 
adjustments to the standard price DOD charges to customers--disrupting 
other DOD programs and straining the military services' budgets. 
Despite the recurring need for these transfers and price adjustments, 
DOD has not reevaluated its approach to setting the standard price 
since 2007. Until DOD has reevaluated its approach and documented its 
assumptions for setting the standard price, it may not be certain that 
its price reflects current conditions. 

Recommendations for Executive Action: 

To improve DOD's process for setting its standard fuel price, we 
recommend that the Secretary of Defense direct the Office of the Under 
Secretary of Defense (Comptroller), in coordination with the Defense 
Logistics Agency (DLA), to take the following two actions: 

* reevaluate the approach for estimating the components of the 
standard price and: 

* document its assumptions, including providing detailed rationale for 
how it estimates each of these components. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to DOD, OMB, and the Energy 
Information Administration for review and comment. DOD provided 
written comments, which are summarized below and reprinted in appendix 
III. In its comments, DOD concurred with the first recommendation and 
partially concurred with the second recommendation. OMB and the Energy 
Information Administration did not provide comments on the draft 
report. 

DOD concurred with the first recommendation that the Secretary of 
Defense direct the Under Secretary of Defense (Comptroller), in 
coordination with the Defense Logistics Agency, to reevaluate DOD's 
approach for estimating the components of the standard price. In its 
comments, DOD stated that this is an ongoing effort within the 
department and that the Office of the Under Secretary of Defense 
(Comptroller) and the Defense Logistics Agency are continually 
evaluating methods to better estimate the price of fuel. DOD stated 
that this is a challenge because the rate-setting process takes place 
a budget cycle in advance of execution. DOD noted that fuel-market 
volatility affects the Working Capital Fund's ability to budget for, 
and customers' ability to buy, fuel at a stabilized price. 
Additionally, in its comments, DOD stated that the department does not 
have the storage capacity to hold a year's worth of fuel in advance, 
so fuel is purchased in real time throughout the execution year and 
sold at a price set 18 months prior. We agree that the rate-setting 
process is challenging, given the timing of DOD's budget process and 
when the department actually purchases fuel. However, as stated in the 
report, DOD's current approach for establishing the standard price has 
not accounted for changes in market conditions for crude oil, such as 
the decreasing relationship between crude oil and refined prices, even 
though its methodology has been producing estimates that differ 
greatly from actual costs. Although DOD noted in its comments that it 
is continually evaluating methods to better estimate the price of 
fuel, it did not specify any specific initiatives to that end. 
Moreover, the report did not identify any studies that DOD has 
undertaken since 2004 that constitute a reevaluation of the 
department's approach for estimating the components of the standard 
price. Reevaluating its approach for estimating the components of the 
standard price would allow DOD to develop more-informed estimates and 
better position the department to minimize risks and uncertainty 
resulting from changing market conditions. 

DOD partially concurred with the second recommendation that the 
Secretary of Defense direct the Under Secretary of Defense 
(Comptroller), in coordination with the Defense Logistics Agency, to 
document its assumptions, including providing a detailed rationale for 
how it estimates each of the standard price components. In its 
comments, DOD stated that the department does not have a "documented" 
specific, step-by-step process to develop the fuel price. DOD further 
stated that it prices fuel by using a formal process that has been 
presented to the department's leadership, briefed to congressional 
staffers, discussed with the administration, and reproduced in various 
instructional and informational briefings and papers. In its comments, 
DOD stated that the process for setting the fuel price is similar to 
other Working Capital Fund products and follows the intent of DOD's 
Financial Management Regulation and congressional implementing 
language for full cost recovery. We stated in the report that DOD's 
Financial Management Regulation provides overall principles for 
working capital funds, but it does not require DOD to document its 
methodology for setting the standard price in a step-by-step process. 
Therefore, DOD does not have detailed documentation that describes the 
rationale for the assumptions it uses, such as its rationale for 
selecting one crude oil benchmark over another benchmark or the 
factors and other tradeoffs that it considers when establishing the 
refinement markup. GAO's Cost Estimating and Assessment Guide states 
that a cost estimate should be supported by detailed documentation 
that describes how it was derived.[Footnote 28] According to the 
guide, the documentation should include, among other things, the 
estimating methodology used to derive the costs for each element of 
the cost estimate, and it should also discuss any limitations of the 
data or assumptions. Documenting DOD's assumptions, including the 
rationale for each component of the standard price, would provide 
greater transparency and clarify for fuel customers and decision 
makers the process DOD uses to set the standard price. 

We are sending copies of this report to appropriate congressional 
committees and the Secretary of Defense; the Under Secretary of 
Defense (Comptroller); the Director of DLA; the Director of OMB; and 
the Administrator of the Energy Information Administration. In 
addition, this report is available at no charge on GAO's website at 
[hyperlink, http://www.gao.gov]. 

If you or your staff have questions about this report, please contact 
Cary Russell at (202) 512-5431 or russellc@gao.gov, or Asif A. Khan at 
(202) 512-9869 or khana@gao.gov. Contact points for our Offices of 
Congressional Relations and Public Affairs may be found on the last 
page of this report. GAO staff who made key contributors to this 
report are listed in appendix IV. 

Signed by: 

Cary Russell: 
Director: 
Defense Capabilities and Management: 

Signed by: 

Asif A. Khan: 
Director: 
Financial Management and Assurance: 

List of Committees: 

The Honorable Carl Levin: 
Chairman: 
The Honorable James M. Inhofe: 
Ranking Member: 
Committee on Armed Services: 
United States Senate: 

The Honorable Richard Durbin: 
Chairman: 
The Honorable Thad Cochran: 
Ranking Member: 
Subcommittee on Defense: 
Committee on Appropriations: 
United States Senate: 

The Honorable Howard P. "Buck" McKeon: 
Chairman: 
The Honorable Adam Smith: 
Ranking Member: 
Committee on Armed Services: 
House of Representatives: 

The Honorable Rodney Frelinghuysen: 
Chairman: 
The Honorable Pete Visclosky: 
Ranking Member: 
Subcommittee on Defense: 
Committee on Appropriations: 
House of Representatives: 

[End of section] 

Appendix I: Scope and Methodology: 

To address our objectives, we focused our analysis on fiscal years 
2009 through 2013. We focused on these years because this period 
covered the most recent complete year of the Department of Defense's 
(DOD) fuel sales and provided 5 years of cost data to analyze any 
trends. To determine how estimated bulk fuel costs have compared with 
actual costs since fiscal year 2009 and identify the factors that 
contributed to any differences, we compared the estimated budget costs 
for fuel against actual costs in the budget year of execution and 
identified any differences. We calculated DOD's estimated fuel costs 
by multiplying the standard price per barrel by the number of barrels 
the military services estimated they would consume. To calculate DOD's 
actual fuel costs, we multiplied the actual purchase price per barrel 
by the number of barrels sold to the military services. We then 
determined which factors contributed to the overall differences. 
Specifically, we calculated the percentage of the overall difference 
explained by either fuel price fluctuations or differences between 
estimated fuel consumption and actual consumption. Next, we compared 
each of the three components of the standard price (crude oil price, 
refinement markup, and nonproduct costs--such as transportation and 
facilities maintenance) against the actual costs for each component to 
determine which one contributed most to the difference between the 
standard price and actual fuel costs. We also interviewed officials 
from the Office of the Under Secretary of Defense (Comptroller), the 
Defense Logistics Agency (DLA), the military services, and the 
Department of Energy's Energy Information Administration to discuss 
the factors that contributed to these differences.[Footnote 29] 

To determine the extent to which DOD has taken actions to manage the 
effect of any differences between estimated and actual fuel costs, we 
reviewed monthly cash balances in the Defense-wide Working Capital 
Fund for the period October 2008 through September 2013 and determined 
the effect of bulk fuel purchases and sales on those balances. In 
doing so, we determined net outlays from the Defense-wide Working 
Capital Fund and compared them with the cash balance in the fund. We 
analyzed DOD financial management documents for this same period to 
determine the number and amount of approved transfer actions related 
to fuel into and out of the Defense-wide Working Capital Fund and any 
fuel-related supplemental appropriations received into the fund. In 
addition, we analyzed DOD budget-justification materials and other 
documentation to identify all changes to DOD's standard price. We also 
interviewed officials from DOD and the military services to determine 
the effect on the services' budgets of transfers and changes to the 
standard price. 

To determine the extent to which DOD has considered options for 
adjusting its approach for estimating bulk fuel costs and managing 
working capital funds, we reviewed related studies and recommendations 
that we identified through interviews with DOD officials and 
literature searches that discuss options available to DOD to adjust 
its approach to managing bulk fuel costs and working capital funds. 
For this review we focused on relevant studies that have been 
conducted since 2004. We interviewed DOD officials to determine the 
status of any findings and recommendations from these studies related 
to DOD's bulk fuel pricing or management of the Defense-wide Working 
Capital Fund. We also reviewed documentation that describes DOD's 
current approach for estimating bulk fuel costs, including budget-
justification materials and DOD reports, and discussed the 
department's approach with officials from the Office of the Under 
Secretary of Defense (Comptroller), DLA, and the Office of Management 
and Budget. We compared this information with cost-estimating 
practices established in GAO's Cost Estimating and Assessment 
Guide[Footnote 30] and Office of Management and Budget[Footnote 31] 
and DOD guidance.[Footnote 32] We also interviewed officials from DOD, 
the Office of Management and Budget, and the Department of Energy to 
discuss current fuel market conditions and alternative approaches to 
estimating bulk fuel costs and reviewed Department of Energy reports 
describing current fuel market conditions. To better understand the 
fuel market conditions, we reviewed DLA fuel purchase data for fiscal 
years 2009 through 2013 and compared the amount of domestic fuel 
purchases with the amount of international fuel purchases. We also 
performed analysis on the relationship of the West Texas Intermediate 
(WTI) crude oil benchmark with other crude oil pricing benchmarks to 
determine whether DOD's approach to setting its standard price 
reflects current market conditions. Further, we conducted an analysis 
on the relationship of crude oil prices with refined product costs, 
including the cost of commercial jet fuel. 

To determine the reliability of the fuel cost data provided to us by 
DOD, we obtained information on how the data were collected, managed, 
and used through interviews with and questionnaires to relevant 
officials. We assessed the reliability of the data collected by 
analyzing questionnaire responses from Office of the Under Secretary 
of Defense (Comptroller) and DLA officials, which included information 
on their data system management, data quality-assurance processes, and 
potential sources of errors and mitigations of those errors. To 
determine the reliability of monthly cash balances in the Defense-wide 
Working Capital Fund, we (1) obtained and analyzed reports containing 
detailed data on transactions affecting the Working Capital Fund cash 
balance including collections, disbursements, direct appropriations to 
the fund, and funds transferred into and out of the fund; (2) 
reconciled year-end cash balances between DOD reports and Department 
of the Treasury records; and (3) obtained and analyzed documentation 
supporting the amount of funds transferred in and out of the Working 
Capital Fund. To determine the reliability of DLA fuel purchase data, 
we compared DLA domestic and international fuel purchases against fuel 
purchase data provided in DOD's budget-justification materials. To 
determine the reliability of the Energy Information Administration's 
data on Brent, WTI, and commercial jet fuel prices, we reviewed 
information on its methodology and data quality guidelines in 
accordance with GAO guidance on assessing data from federal 
statistical databases. Based on our review of the data, we determined 
that the data presented in our findings were sufficiently reliable for 
the purposes of this report. 

We interviewed officials, and where appropriate obtained 
documentation, at the following DOD locations: 

* Office of the Under Secretary of Defense (Comptroller); 

* Office of the Assistant Secretary of Defense for Operational Energy 
Plans and Programs; 

* Defense Logistics Agency, Energy Management Activity Group; 

* Air Force Petroleum Agency; 

* Office of the Secretary of the Air Force, Financial Management and 
Comptroller; 

* Army Petroleum Center; 

* Naval Supply Systems Command; and: 

* Headquarters, Marine Corps, Programs and Resources, Operations and 
Maintenance Budget Formulations Branch. 

We also interviewed other officials from the following federal 
agencies and other organizations: 

* Office of Management and Budget; 

* Department of Energy, Energy Information Administration; and: 

* Institute for Defense Analyses. 

We conducted this performance audit from November 2013 to July 2014, 
in accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe the 
evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives. 

[End of section] 

Appendix II: Studies on Department of Defense Bulk Fuel Pricing and 
Management of the Defense-Wide Working Capital Fund: 

This appendix contains a list of six studies conducted since 2004 on 
the Department of Defense's (DOD) bulk fuel pricing and management of 
the Defense-wide Working Capital Fund. Table 3 provides information on 
each study's name and purpose, as well as any findings and 
recommendations, and DOD's response to the recommendations or status 
of their implementation. Some of the studies listed below included 
information outside the scope of our review; however, we have only 
included findings and recommendations related to DOD's bulk fuel 
pricing or management of the Defense-wide Working Capital Fund. 

Table 3: Studies on DOD Bulk Fuel Pricing and Management of the 
Defense-Wide Working Capital Fund: 

Defense Business Board: Recommendations related to the practical use 
of fuel hedging for DOD, March 2004: 

Purpose: To examine potential ways to reduce DOD's exposure to fuel 
price volatility by hedging in commercial markets; 
Findings and recommendations: 
Finding; 
DOD could feasibly hedge its fuel purchases, which includes purchasing 
financial instruments to minimize risk in future prices; 
Recommendations; 
1. DOD should not engage in hedging in commercial markets; 
2. DOD should propose that the Office of Management and Budget (OMB) 
consider seeking legislative authority for DOD to engage in 
"nonmarket" hedging by entering into an agreement with the Department 
of the Interior to mutually offset dollar variances resulting from 
fuel price volatility; 
DOD response: DOD reported that OMB is not supportive of an agreement 
with the Department of the Interior because the current arrangement is 
neutral from a government-wide budget-scoring perspective--OMB's 
evaluation of the effect that changes in fiscal policy will have on 
the federal budget. 

Secretary of Defense: Report to Congressional Defense Committees--
Budgeting for Fuel Cost Fluctuations, February 2007: 

Purpose: To report on budgeting for fuel cost fluctuations; 
Findings and recommendations: 
Findings; 
* Current DOD fuel forecasting methodology produced results as good as 
or better than the majority of other fuel forecasters; 
* Changing forecasting sources or methods may not provide more 
realistic estimates; 
Recommendations; 
The study did not make any recommendations; 
DOD response: Not applicable. 

Defense Business Board: Re-examining Best Practices for DOD Fuel 
Acquisition, July 2011: 

Purpose: To identify private-sector best business practices for 
purchasing fuel in large volumes; 
Findings and recommendations: 
Finding; 
Current private-sector best practices for managing fuel price 
protection would reduce uncertainty and risk related to future fuel 
prices; 
Recommendations; 
1. Defense Logistics Agency (DLA) should request fuel price quotes 
from suppliers both with and without a "price adjustment" feature; 
2. DOD should solicit proposals for Fuel Price Risk Management 
services from private sector firms to advise on or manage fuel price 
exposure; 
3. DOD should revisit the possibility of an intragovernmental price 
stability agreement with the Department of the Interior--transferring 
funds between the Department of the Interior and DOD depending on 
which department benefits from unanticipated fuel price increases; 
DOD response: DOD reported that recommendation 1 would result in 
additional expenses to DOD and that suppliers have indicated that they 
do not currently sell fuel to large customers under long-term 
contracts at firm-fixed prices; 
DOD reported that the Assistant Secretary of Defense for Operational 
Energy Plans and Programs is considering recommendation 2, but that no 
decision had been made to pursue it as of April 2014; 
DOD reported that OMB is not supportive of an agreement with the 
Department of the Interior because the current arrangement is neutral 
from a government-wide budget-scoring perspective--OMB's evaluation of 
the effect that changes in fiscal policy will have on the federal 
budget. 

Department of Defense: Revolving Funds Operational Cash Balances, 
January 2012: 

Purpose: To determine a sufficient operational level of cash that each 
of DOD's revolving funds should maintain in order to sustain a single 
rate or price throughout the fiscal year; 
Findings and recommendations: 
Finding; 
Fuel cost volatility poses a major threat to the Defense-wide Working 
Capital Fund's solvency and can require funding reallocations that 
disrupt investment programs or threaten readiness; 
Recommendations; 
1. Authorize DOD to transfer expiring unobligated balances, with 
appropriate controls, from its appropriation accounts to the Working 
Capital Fund cash account to build a reserve for fuel cost increases; 
2. Allow the Working Capital Fund to accumulate positive operating 
results and develop a cash reserve to mitigate the effects of fuel 
market volatility; 
DOD response: DOD reported that OMB does not support recommendation 1 
because of budget scoring issues--OMB's evaluation of the effect that 
changes in fiscal policy will have on the federal budget; 
DOD reported that it is currently updating its Financial Management 
Regulation to allow for greater flexibility in developing cash balance 
targets for the Defense-wide Working Capital Fund (expected to 
complete in summer of 2014). 

Business Executives for National Security: Finding Efficiencies in the 
Business of Defense: Reducing Fuel Cost for the Defense Logistics 
Agency, February 2013: 

Purpose: To analyze a series of prior recommendations aimed at 
improving DLA's fuel procurement operations and highlight additional 
practices to improve DLA's fuel procurement and distribution system; 
Findings and recommendations: 
Findings; 
* Current budgeting practices have created considerable budgeting 
inefficiency. In recent years the standard price has created 
additional volatility for both DLA and its military services customers; 
* Standard price is the biggest challenge in the agency's businesslike 
buyer-and-seller approach to bulk fuel; 
Recommendation; 
Increase intradepartmental pressure to give DLA Energy added input 
into the standard price formulation process; 
DOD response: DOD reported that fuel pricing guidance is one of the 
responsibilities of the Office of the Under Secretary of Defense 
(Comptroller). DLA operates through the Defense-wide Working Capital 
Fund and is DOD's sole source fuel provider. In this role DLA is an 
integral part of DOD's price setting. During the price-setting 
process, DLA determines the nonproduct costs of the standard price, 
and its market research office provides independent product 
projections as input to the product costs, which are used in the 
development of the standard price. 

Institute for Defense Analyses: Fuel Price Effects on Activity and 
Readiness, September 2013: 

Purpose: To provide context for DOD to assess the significance of the 
fuel pricing changes while considering the magnitude of historical 
unbudgeted requirements; 
Findings and recommendations: 
Finding; 
There is no significant evidence from the military services that 
unbudgeted fuel price fluctuations have caused reductions in readiness 
over the long term or within a fiscal year; 
Recommendation; 
DOD should consider potential mitigating policies, including 
alternative budgeting strategies, and explore specific "what if" case 
studies on unbudgeted fuel requirements; 
DOD response: DOD reported that it continually evaluates policies and 
strategies to mitigate pricing increases. This study was completed too 
recently to be considered for any updated policies. 

Source: GAO analysis of DOD data. GAO-14-595. 

[End of table] 

[End of section] 

Appendix III: Comments from the Department of Defense: 

Office Of The Under Secretary Of Defense: 
Comptroller: 
1100 Defense Pentagon: 
Washington, DC 20301-1100: 

June 25, 2014: 

Mr. Asif A. Khan: 
Director: 
Financial Management and Assurance: 
U.S. Government Accountability Office: 
441 G Street, N.W. 
Washington, DC 20548: 

Dear Mr. Khan: 

Enclosed is the Department of Defense (000) response to the GAO draft
report (GAO-14-595), "Bulk Fuel Pricing: 000 Needs 10 Re-Evaluate its 
approach to Better Manage The Effect of Market Fluctuations", dated 
July 2014, (GAO Code 351876). 

Sincerely, 

Signed by: 

John P. Roth: 

Enclosure: As stated: 

GAO Draft Report Dated May 30, 2014: 
GAO-14-595 (GAO Code 351876): 

"Bulk Fuel Pricing: DOD Needs To Re-Evaluate Its Approach To Better 
Manage The Effect Of Market Fluctuations" 

Department Of Defense Comments To The GAO Recommendation: 

Recommendation 1: The GAO recommends that the Secretary of Defense 
direct the Office of the Under Secretary of Defense (Comptroller), in 
coordination with the Defense Logistics Agency, to re-evaluate the 
approach for estimating the components of the standard price. 

DoD Response: Concur with comment. This is an ongoing effort within 
the Department of Defense. The Office of the Under Secretary of 
Defense (Comptroller) and the Defense Logistics Agency are continually 
evaluating methods to better estimate the price of fuel. We lake the
responsibility of maintaining a stabilized price through the year of 
execution very seriously. The challenge remains that rate setting 
process takes place a budget cycle in advance of execution. Fuel 
market volatility is the wild card in the Working Capital Fund's 
ability to budget for, and customers' ability to buy, fuel at a 
stabilized price. The Department does not have storage capacity to
hold a year's worth of fuel purchased in advance, so fuel is purchased 
in real-time throughout the execution year and sold at a price set 18 
months prior. 

Recommendation 2: The GAO recommends that the Secretary of Defense 
direct the Office of the Under Secretary of Defense (Comptroller), in 
coordination with the Defense Logistics Agency, to document its 
assumptions, including providing detailed rationale for how it
estimates each of these components. 

DoD Response: Partially Concur. The Department does not have a 
"documented" specific step by step process to develop the fuel price. 
The OUSD(C) prices fuel by using a formal process that has been 
presented to the Department's leadership, briefed to congressional 
staffers, discussed with the Administration, and reproduced in various 
instructional and informational briefings and papers. The process for 
setting the price of fuel is a closely monitored (both inside and 
outside the Department) formal process that is similar to other 
Working Capital Fund products. The process follows the intent of the 
Financial Management Regulation and congressional implementing 
language for full cost recovery. 

[End of section] 

Appendix IV: GAO Contacts and Staff Acknowledgments: 

GAO Contacts: 

Cary Russell, (202) 512-5431 or russellc@gao.gov: 

Asif A. Khan, (202) 512-9869 or khana@gao.gov: 

Staff Acknowledgments: 

In addition to the contacts named above, Gregory Pugnetti, Assistant 
Director; Matthew Ullengren, Assistant Director; Pedro Almoguera; 
Russell Bryan; Virginia Chanley; Stephen Donahue; Adam Hatton; Joanne 
Landesman; Amie Steele; and Michael Willems made key contributions to 
this report. 

[End of section] 

Footnotes: 

[1] S. Rep. No. 113-44, at 210 (2013). 

[2] GAO, GAO Cost Estimating and Assessment Guide: Best Practices for 
Developing and Managing Capital Program Costs, [hyperlink, 
http://www.gao.gov/products/GAO-09-3SP] (Washington, D.C.: March 
2009). The methodology outlined in the Cost Estimating and Assessment 
Guide is a compilation of best practices that federal cost-estimating 
organizations and industry use to develop and maintain reliable cost 
estimates throughout the life of an acquisition program. 

[3] OMB Circular No. A-11, Preparation, Submission, and Execution of 
the Budget (July, 2013). 

[4] Department of Defense Financial Management Regulation 7000.14-R, 
Volume 2B (September, 2010). 

[5] WTI is a crude oil produced in Texas and southern Oklahoma that 
serves as a reference or "marker" for pricing a number of other crudes 
and that is traded in the domestic spot market at Cushing, Oklahoma. 
Brent is a blended crude oil produced in the North Sea region that 
serves as a reference or "marker" for pricing a number of other crudes. 

[6] OMB Circular No. A-11, Preparation, Submission, and Execution of 
the Budget (July, 2013). 

[7] The refinement markup also accounts for some transportation 
expenses incurred by the supplier and charged to DLA for transporting 
the purchased fuel to DLA. 

[8] According to DOD Financial Management Regulation 7000.14-R, Volume 
2b, Chapter 9, cash levels in the Defense-wide Working Capital Fund 
should be maintained at 7 to 10 days of operational cost and 6 months 
of capital disbursements calculated using a formula provided in the 
regulation. 

[9] DOD guidance requires that the department seek prior approval from 
the congressional defense committees for certain transfers between 
appropriations accounts and to reprogram funds within an appropriation 
above certain thresholds. 

[10] The absence of legislation to reduce the federal budget deficit 
by at least $1.2 trillion triggered the sequestration process in 
section 251A of the Balanced Budget and Emergency Deficit Control Act 
of 1985 (BBEDCA), Pub. L. No. 99-177 (1985), as amended. Pursuant to 
the BBEDCA, the President ordered sequestration of budgetary resources 
across nonexempt federal government accounts on March 1, 2013--5 
months into fiscal year 2013. 

[11] GAO, Sequestration: Observations on the Department of Defense's 
Approach in Fiscal Year 2013, [hyperlink, 
http://www.gao.gov/products/GAO-14-177R] (Washington D.C.: Nov. 7, 
2013). 

[12] Department of Defense, Defense Working Capital Fund: Revolving 
Funds Operational Cash Balances (Washington, D.C.: January 2012). 

[13] Another option available to DOD for managing cash balance 
fluctuations is to request supplemental appropriations into the 
Defense-wide Working Capital Fund. However, during fiscal years 2009 
through 2013, according to DOD budget-justification documents, DOD did 
not request supplemental appropriations into the Defense-wide Working 
Capital Fund to specifically address the effect of changing fuel 
prices. According to DOD budget materials, DOD did receive 
supplemental appropriations each year from fiscal years 2009 through 
2013, but these funds were primarily requested to address Overseas 
Contingency Operations transportation costs and costs associated with 
combat fuel losses. 

[14] Department of Defense and Full-Year Continuing Appropriation Act, 
2011, Pub. L. No. 112-10, Division A, § 8097 (2011). 

[15] Department of Defense, Defense Working Capital Fund: Revolving 
Funds Operational Cash Balances, (Washington, D.C.: January 2012). 

[16] Pub. L. No. 109-364, § 1006 (2006). 

[17] Secretary of Defense, Report to Congressional Defense Committees: 
Budgeting for Fuel Cost Fluctuations (February 2007). 

[18] The act further required us to review DOD's report, including the 
basis for the Secretary's conclusions for the preferred approach. We 
found that the analysis DOD was able to conduct did not provide a 
compelling reason for DOD to adjust its rate setting approach, but 
concluded that DOD would need to capture and maintain the necessary 
forecast data to conduct a more robust and extensive analysis in the 
future. See GAO, Defense Budget: Review of DOD's Report on Budgeting 
for Fuel Cost Fluctuations, [hyperlink, 
http://www.gao.gov/products/GAO-07-688R] (Washington, D.C.: Apr. 26, 
2007). 

[19] Pub. L. No. 111-383 § 1402 (2011). 

[20] Department of Defense, Defense Working Capital Fund: Revolving 
Funds Operational Cash Balances (Washington, D.C.: January 2012). 

[21] The Defense Business Board provides the Secretary and Deputy 
Secretary of Defense, as well as other senior leaders, an outside 
private-sector perspective on best business practices for 
consideration and potential application to DOD. 

[22] Defense Business Board, Report to the Senior Executive Council, 
Department of Defense: Fuel Hedging Task Group, Report FY03-08 (Mar. 
1, 2004). 

[23] [hyperlink, http://www.gao.gov/products/GAO-09-3SP]. 

[24] OMB Circular No. A-11, Preparation, Submission, and Execution of 
the Budget (July, 2013). 

[25] Congress created the Energy Information Administration within the 
Department of Energy in 1977. As a statistical agency, it provides 
policy-independent data, forecasts, and analyses to promote sound 
policy making, efficient markets, and public understanding regarding 
energy and its interaction with the economy and the environment. 
According to the Energy Information Administration, the depression in 
the price of WTI was a result of rapid growth in U.S. and Canadian oil 
production, which overwhelmed the transportation infrastructure needed 
to move crude oil from Cushing, Oklahoma, where WTI is quoted. See 
U.S. Energy Information Administration, Annual Energy Outlook 2013, 
DOE/EIA-0383(2013) (Washington, D.C.: April 2013). 

[26] Secretary of Defense, Report to Congressional Defense Committees: 
Budgeting for Fuel Cost Fluctuations. 

[27] [hyperlink, http://www.gao.gov/products/GAO-09-3SP]. 

[28] [hyperlink, http://www.gao.gov/products/GAO-09-3SP]. 

[29] Congress created the Energy Information Administration within the 
Department of Energy in 1977. As a statistical agency, it provides 
policy-independent data, forecasts, and analyses to promote sound 
policy making, efficient markets, and public understanding regarding 
energy and its interaction with the economy and the environment. 

[30] GAO, GAO Cost Estimating and Assessment Guide: Best Practices for 
Developing and Managing Capital Program Costs, [hyperlink, 
http://www.gao.gov/products/GAO-09-3SP] (Washington, D.C.: March 
2009). The methodology outlined in the Cost Estimating and Assessment 
Guide is a compilation of best practices that federal cost-estimating 
organizations and industry use to develop and maintain reliable cost 
estimates throughout the life of an acquisition program. 

[31] OMB Circular No. A-11, Preparation, Submission, and Execution of 
the Budget (July, 2013). 

[32] Department of Defense Financial Management Regulation 7000.14-R, 
Volume 2B (September, 2010). 

[End of section] 

GAO's Mission: 

The Government Accountability Office, the audit, evaluation, and 
investigative arm of Congress, exists to support Congress in meeting 
its constitutional responsibilities and to help improve the 
performance and accountability of the federal government for the 
American people. GAO examines the use of public funds; evaluates 
federal programs and policies; and provides analyses, recommendations, 
and other assistance to help Congress make informed oversight, policy, 
and funding decisions. GAO's commitment to good government is 
reflected in its core values of accountability, integrity, and 
reliability. 

Obtaining Copies of GAO Reports and Testimony: 

The fastest and easiest way to obtain copies of GAO documents at no 
cost is through GAO's website [hyperlink, http://www.gao.gov]. Each 
weekday afternoon, GAO posts on its website newly released reports, 
testimony, and correspondence. To have GAO e-mail you a list of newly 
posted products, go to [hyperlink, http://www.gao.gov] and select 
"E-mail Updates." 

Order by Phone: 

The price of each GAO publication reflects GAO's actual cost of 
production and distribution and depends on the number of pages in the 
publication and whether the publication is printed in color or black 
and white. Pricing and ordering information is posted on GAO's 
website, [hyperlink, http://www.gao.gov/ordering.htm]. 

Place orders by calling (202) 512-6000, toll free (866) 801-7077, or 
TDD (202) 512-2537. 

Orders may be paid for using American Express, Discover Card, 
MasterCard, Visa, check, or money order. Call for additional 
information. 

Connect with GAO: 

Connect with GAO on facebook, flickr, twitter, and YouTube.
Subscribe to our RSS Feeds or E mail Updates. Listen to our Podcasts.
Visit GAO on the web at [hyperlink, http://www.gao.gov]. 

To Report Fraud, Waste, and Abuse in Federal Programs: 

Contact: 
Website: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm]; 
E-mail: fraudnet@gao.gov; 
Automated answering system: (800) 424-5454 or (202) 512-7470. 

Congressional Relations: 

Katherine Siggerud, Managing Director, siggerudk@gao.gov: 
(202) 512-4400: 
U.S. Government Accountability Office: 
441 G Street NW, Room 7125: 
Washington, DC 20548. 

Public Affairs: 

Chuck Young, Managing Director, youngc1@gao.gov: 
(202) 512-4800: 
U.S. Government Accountability Office: 
441 G Street NW, Room 7149: 
Washington, DC 20548. 

[End of document]