Pursuant to a legislative requirement, GAO provided information on the Department of Defense's (DOD) Future Years Defense Program (FYDP), focusing on: (1) whether savings in DOD's fiscal year (FY) 1999-2003 FYDP were the result of DOD's Defense Reform Initiatives (DRI); (2) the extent to which savings and personnel reductions from competitive sourcing in the 1999-2003 FYDP were based on ongoing or planned studies of functions specifically identified under the Office of Management and Budget Circular A-76, and what percentage of the current costs of performing those functions were included from the projected savings from these studies; and (3) whether DOD components outsourced activities that included inherently governmental functions, without allowing civilian employees to compete under Circular A-76 procedures, or without following the study and notification requirements of 10 U.S.C. 2461.

GAO noted that: (1) DOD expects savings from individual DRIs, but has not incorporated specific savings in the 1999-2003 FYDP from these initiatives, except in the areas of competitive sourcing and estimates relating to future base realignment and closure (BRAC) decisions; (2) DOD's 1999-2003 FYDP incorporated $6.2 billion of estimated savings from competitive sourcing between FY 1997 and 2003, but these estimated savings do not fully account for up-front investment costs, which could reduce the amount of actual savings in the short term; (3) the FYDP does provide a fuller estimate of the impact of investment costs associated with BRACs; (4) while DOD has requested additional BRAC rounds, Congress has not authorized them; (5) the Office of the Secretary of Defense expects DRIs to reduce personnel requirements but has not required the services to link specific reductions with individual initiatives; (6) savings from competitive sourcing reflected in the 1999 FYDP were not linked to specific functions under study or targeted for future studies; (7) in addition, DOD does not yet have the systems in place that can provide reliable cost information needed to precisely identify savings; (8) consequently, it is not feasible to accurately identify the current costs of functions to be studied or the potential savings as a percentage of these costs; (9) according to DOD, savings estimates incorporated in the FYDP represented broad projections based on the numbers of positions expected to be studied and historic savings data; (10) GAO's work has shown that historic savings estimates may have important limitations and may not accurately indicate likely current and future savings; (11) study plans of most DOD components have evolved over time, but in many cases they have not linked positions to be studied to specific functions and locations; (12) firm savings estimates probably will not be possible until individual studies are completed; (13) even then, these estimates would be subject to change; (14) procurement and commercial activities data systems do not identify the extent to which DOD components may be outsourcing functions without complying with Circular A-76 procedures or 10 U.S.C. 2461 congressional reporting requirements; and (15) such cases can be identified only when they are specifically raised by affected parties.