Defense Logistics: Marine Corps and Army Reset Liability Estimates

What GAO Found

The Marine Corps and Army has each developed its own process for producing reset liability estimates, which are the amount of funding that may be required by a service to reset—i.e., repair, recapitalize, and replace—equipment returning from operations, thereby returning the equipment to combat ready condition. According to department officials, there is no Department of Defense (DOD) guidance for the services to use as they produce their reset liability estimates. Although there are similarities in the services’ processes for estimating reset liability amounts, there also are key differences. Specifically, the services use the same definition of reset in preparing their estimates, which is defined in a January 2007 DOD memorandum, in part, as actions taken to restore units to a desired level of combat capability commensurate with the units’ future mission. However, the services apply that definition to different categories of equipment and calculate reset liability over different time periods. For example, the Marine Corps’ reset liability estimate includes ground equipment, while the Army estimate includes both ground and aviation equipment. Also, the Marine Corps’ reset liability estimate covers all fiscal years until reset is complete while the Army estimate covers a 2-year period (current fiscal year and next fiscal year) even though reset may not be completed within those two fiscal years.

Further, when producing their estimates, the Marine Corps and Army use similar cost factors, such as parts and labor. However, the services make different assumptions about the condition—worst case or historical average—of the returning equipment that they will reset. In making differing assumptions about condition, each service can differ on the estimated unit repair cost for a piece of equipment common to each service scheduled for reset in the same year. For example, in fiscal year 2014, both services projected an amount needed to repair each 155 millimeter (MM) towed howitzer returning from combat and planned for reset. The Marine Corps estimated the unit repair cost to be $311,090, assuming the howitzer would return in worst case condition. The Army estimated the unit repair cost to be $246,778 by applying historical information to produce its average estimated unit repair cost for the howitzer. Service-unique differences can yield varying reset costs and reset estimates for an item common to both services. Such process differences result in reset liability estimates that are not comparable.

Since 2001, the Marine Corps and Army have spent billions of dollars to reset—repair, recapitalize, or replace—equipment, including equipment returning from operations in Iraq and Afghanistan. These services have identified a multibillion dollar reset liability as they seek to complete their reset efforts. Senate Committee Report 113–176, accompanying S.2410, a bill for the National Defense Authorization Act for Fiscal Year 2015, included a provision for GAO to provide the Senate Armed Services Committee with an assessment of the Marine Corps’ and Army’s reset liability estimates. This report describes the processes the Marine Corps and Army use in producing reset liability estimates, including the extent to which the services use a consistent definition of reset in producing reset liability estimates, and use similar cost factors and assumptions in producing reset liability estimates. To conduct this work, GAO reviewed Marine Corps and Army guidance. GAO also reviewed documentation of reset activities and budget documentation from the Office of the Under Secretary of Defense (Comptroller), and testimonies and statements of senior DOD officials before congressional committees concerning reset activities. To obtain information about the production of reset liability estimates, GAO interviewed officials from service headquarters and commands responsible for reset decisions as well as officials from the Office of the Secretary of Defense, Office of Cost Assessment and Program Evaluation. To illustrate similarities and differences between how the Marine Corps and Army produce their reset liability estimates, GAO selected an equipment item used in combat by the two services. Specifically, GAO selected the 155MM towed howitzer after considering major ground equipment items that are common to both services and that are being reset as they return from Afghanistan.