Cost Estimating Has Improved but Operational Changes Will Affect Current Estimates

NSIAD-97-183: Published: Jul 28, 1997. Publicly Released: Jul 28, 1997.

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GAO reviewed the: (1) Department of Defense's (DOD) process for estimating the costs of contingency operations in Bosnia and Herzegovina to determine whether the process has been improved since GAO's prior reviews; and (2) basis for the fiscal years 1997-1998 cost estimates and the impact operational changes could have on these estimates.

GAO noted that: (1) DOD has improved its process for estimating costs of contingency operations by requiring that cost estimates be a part of the decision-making process in undertaking any new operation or changing an ongoing one; (2) it also created a high-level committee to review cost estimates; (3) quarterly reviews of estimates for ongoing operations allow DOD to react to changes in costs; (4) DOD based its cost estimates for Bosnia operations for fiscal years 1997 and 1998 on its fiscal year (FY) 1996 experience and operational decisions known at the time; (5) DOD appears to have used a logical process to develop these estimates; (6) however, operational changes have had and continue to have significant impacts on the costs; (7) the North Atlantic Treaty Organization's decision to extend the operation beyond December 1996 increased the FY 1997 cost estimate by over $1.8 billion; (8) recent operational decisions will increase the cost estimate for FY 1998; and (9) other decisions, such as changes in the size and composition of the force and the timing of withdrawal, could further increase the cost estimate for FY 1998.

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