Cost Estimates Developed to Date Are Notional
NSIAD-97-209, Aug 18, 1997
Pursuant to a congressional request, GAO reviewed the executive branch's estimate of the cost of expanding the North Atlantic Treaty Organization (NATO), focusing on: (1) the reasonableness of the study's key assumptions; (2) verifying the pricing of individual cost elements and identifying the basis for the pricing; (3) whether the estimate's major cost categories and elements should be ascribed to NATO enlargement; (4) factors that were not included in the study's cost estimate that could affect enlargement costs; and (5) comparing the executive branch's cost estimate with the Congressional Budget Office (CBO) and Rand Corporation estimates. GAO did not independently estimate the cost of enlarging NATO.
GAO noted that: (1) its analysis of the Department of Defense's (DOD) cost estimate to enlarge NATO indicates that its key assumptions were generally reasonable and were largely consistent with the views of U.S., NATO, and foreign government officials; (2) however, DOD's lack of supporting cost documentation and its decision to include cost elements that were not directly related to enlargement call into question its overall estimate; (3) because of the uncertainties associated with enlargement and DOD's estimating procedures, the actual cost of NATO enlargement could be substantially higher or lower than DOD's estimated cost of about $27 billion to $35 billion; (4) GAO's comparison of DOD's estimate with the RAND and CBO estimates does not indicate that the RAND and CBO costs estimates are more reliable than DOD's; (5) GAO could not verify DOD's pricing of many individual cost elements because DOD officials did not develop sufficient supporting documentation; (6) DOD included two major cost categories that cannot be directly attributed to NATO's enlargement; (7) GAO found no direct link between the cost of remedying current shortfalls in NATO's reinforcement capabilities and enlargement of the alliance; (8) GAO questions whether all of DOD's new member modernization and restructuring costs are attributable to NATO enlargement; (9) DOD's third cost category, direct enlargement, contains elements appropriately attributed to NATO enlargement, based on GAO's analysis; (10) NATO enlargement could entail additional costs beyond those included in the DOD estimate; (11) these costs could include assistance, such as enhanced Partnership for Peace or other bilateral assistance provided as a consolation to countries not invited to join NATO in July 1997; (12) there will also be additional costs associated with subsequent decisions to invite additional countries to join NATO; (13) in addition, the United States may provide assistance to help new members restructure and modernize their forces, which DOD acknowledged but did not include in its estimate of the U.S. cost share; (14) CBO and RAND developed a range of cost estimates for NATO enlargement, including estimates that employ a defense strategy similar to DOD's; and (15) several factors account for the differences between DOD's estimate and the CBO and RAND estimates, including those estimates that employed defense strategies similar to DOD's.