European Reassurance Initiative: DOD Needs to Prioritize Posture Initiatives and Plan for and Report their Future Cost

In response to Russia's annexation of Crimea in March 2014, the President announced the ERI, to reassure allies in Europe of U.S. commitment to their security. This initiative has been funded using OCO appropriations, which Congress provides in addition to DOD's base budget appropriations.

The Joint Explanatory Statement accompanying the Continuing Appropriations and Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2017, included a provision for GAO to review matters related to ERI. In this report, we (1) describe changes in ERI's objectives, funding under ERI, and DOD's posture in Europe since 2014 and (2) evaluate the extent to which DOD's planning processes for posture initiatives funded under ERI prioritize those initiatives, estimate their long-term costs, and communicate their estimated costs to Congress. GAO analyzed DOD strategy documentation, budget and cost analysis guidance, budget justification materials, and cost and obligations data. GAO also interviewed knowledgeable officials within the Office of the Secretary of Defense, U.S. European Command, the military services, and the State Department.

Since 2014, the Department of Defense (DOD) has expanded the European Reassurance Initiative's (ERI) objectives, increased its funding, and planned enhancements to European posture. DOD expanded ERI's objectives from the short-term reassurance of allies and partners to include deterring Russian aggression in the long term and developing the capacity to field a credible combined force should deterrence fail. With respect to funding, DOD will have requested approximately $4.5 billion for ERI's posture enhancements through the end of fiscal year 2017 (about $3.2 billion for fiscal year 2017 alone), and in July 2016 EUCOM identified funding needs for future posture initiatives. The expansion of ERI's objectives has contributed to DOD's enhancing its posture in Europe. Specifically, DOD has increased the size and duration of Army combat unit deployments, planned to preposition Army equipment in Eastern Europe, added new enduring locations (e.g., locations that DOD expects to access and use to support U.S. security interests for the foreseeable future), improved infrastructure, and negotiated new agreements with European nations. As of April 2017, DOD was considering further force enhancements under ERI as part of the department's ERI budget request. DOD also was reviewing whether new enduring locations to support ERI were needed and was considering other improvements to existing infrastructure.

DOD's process for planning ERI has not established priorities among posture initiatives funded under ERI relative to those in its base budget, nor estimated long-term sustainment costs for some posture initiatives funded under ERI, nor communicated future costs to Congress. ERI is being planned using a separate process from DOD's established processes and is funded from DOD's overseas contingency operations (OCO) appropriations. GAO found several weaknesses:

Lack of prioritization : DOD establishes priorities among ERI posture initiatives but has not evaluated them against base budget initiatives using its posture management process. As a result, DOD lacks an understanding of the relative importance of ERI initiatives and may be investing in projects that it will not continue should OCO funding become unavailable.

Lack of sustainment costs : EUCOM and the military services have not fully estimated the long-term costs to sustain equipment and construction funded under ERI. Based on DOD's approach for calculating rough order sustainment costs, GAO determined that these costs could be substantial. DOD officials said that GAO correctly applied DOD's approach for estimating sustainment costs, but noted that actual costs may be lower, because the military services may not fully fund sustainment. In the absence of comprehensive estimates, DOD has been limited in its ability to assess affordability and plan for future costs.

Not communicating future costs : DOD limits Congress's visibility into the resources needed to implement ERI and achieve its objectives because it does not include future costs in its ERI budget request.

This is a public version of a classified report issued in August 2017. Information on specific posture planning, guidance, and budget estimates that DOD deemed to be classified have been omitted from this report.

GAO recommends that DOD prioritize ERI posture initiatives against initiatives in its base budget, develop cost estimates for sustaining initiatives, and communicate future costs to Congress. DOD partially concurred with GAO's recommendations. GAO continues to believe that these recommendations are warranted.

In response to Russia’s annexation of Crimea in March 2014, President  Obama announced the European Reassurance Initiative (ERI), an effort  intended to reassure allies and partners of U.S. commitment to their  security. From fiscal year 2015 through fiscal year 2017, the Department  of Defense (DOD) identified $5.2 billion in funding for ERI as part of its  overseas contingency operation (OCO) budget requests. Most of this  funding would be used to enhance posture—forces, footprint (locations  and infrastructure), and host nation agreements—in Europe by funding  increases in military presence, improving infrastructure, and  prepositioning equipment. In July 2016, U.S. European Command  (EUCOM) submitted to DOD a prioritized list of requirements and funding  estimates for additional posture initiatives, which DOD was considering  for its budget submission at the time of our review.

DOD has requested and used OCO-designated appropriations for ERI  initiatives. Congress provides OCO-designated appropriations to DOD in  addition to appropriations for DOD’s base budget, generally to fund  ongoing military operations. DOD officials said that DOD has requested  OCO funds for ERI out of concerns about funding efforts to respond to  Russian aggression without reallocating resources from other priorities in  its base budget.

Since 2007, we have reported on issues associated with funding from the  OCO budget, including the level of transparency, accuracy, and reliability  of DOD’s OCO budget requests and efforts to transition enduring costs  from the OCO budget to the base budget. In January 2017, we reported  that DOD had developed an initial estimate of costs being funded by the  OCO budget that are likely to endure beyond current operations, such as  ERI, but it had not finalized or reported its estimate outside of the  department. We recommended that DOD develop a complete and  reliable estimate of DOD’s enduring OCO costs—which would include  those for ERI—and report those costs in concert with the department’s  future budget requests. DOD generally concurred with our  recommendations but said that until there is relief from statutory  budgetary caps established in legislation, it will continue to need OCO  funding. As of May 2017, the department has not implemented our  recommendations.

Given the evolving security environment in Europe and the growth of the  funding request for ERI, the Joint Explanatory Statement accompanying  the Continuing Appropriations and Military Construction, Veterans Affairs,  and Related Agencies Appropriations Act, 2017, included a provision for  us to examine matters related to ERI. In this report, we (1) describe  changes in ERI’s objectives, funding under ERI, and DOD’s posture in  Europe since 2014 and (2) evaluate the extent to which DOD’s planning  processes for posture initiatives funded under ERI prioritize those  initiatives, estimate their long-term costs, and communicate their  projected costs to Congress. This is a public version of a classified report  that we issued in August 2017. DOD deemed some of the information in  our August 2017 report to be classified; classified information must be  protected from loss, compromise, or inadvertent disclosure. Therefore this  report omits classified information about specific posture planning,  guidance, and budget estimates. Although the information provided in this  report is more limited, the report addresses the same objectives as the  classified report and uses the same methodology.

For objective one, we analyzed White House, DOD, and EUCOM  documentation. To determine how ERI’s objectives changed from  calendar year 2014 through 2017 we reviewed White House and EUCOM  fact sheets, DOD budget submissions, and EUCOM documentation.  Additionally, we identified changes in DOD’s priorities in Europe by  reviewing the National Defense Strategy and guidance issued by the  Office of the Secretary of Defense as well as other documentation to  determine how ERI’s expanded objectives supported the U.S. strategy  toward Russia. We also reviewed DOD and EUCOM posture planning  documentation to determine how DOD plans to change European posture  in support of ERI’s objectives.

For objective two, we compared DOD’s planning process to criteria from  its posture planning guidance and budget development guidance as well  as relevant best practices pertaining to cost estimation, accounting  standards, and internal controls. We reviewed DOD’s ERI budget  justification materials for fiscal years 2015 through 2017, slides presented  to the Deputy’s Management Action Group in December 2015 and  October 2016, and other documentation to assess the extent to which  DOD prioritized its posture initiatives. We assessed whether DOD  estimated and planned for the sustainment of these initiatives by  reviewing EUCOM and military service documentation and cost data  related to ERI major military construction and prepositioned equipment.  We did not assess the military services’ cost estimation methodologies,  because our objective was to determine whether future costs had been  considered as part of DOD’s planning processes. We calculated the  potential sustainment costs for major military construction by using DOD’s  rough order-of-magnitude estimation approach for such costs. We  assessed whether DOD has communicated its resource requirements to  Congress for posture initiatives funded under ERI by reviewing DOD’s  budget justification submissions for fiscal years 2015 through 2017. We  also summarized the funding under ERI that has been programmed or  obligated for minor construction and repair projects by collecting cost data  for these projects in fiscal years 2015 through 2017 from U.S. Army  Europe and U.S. Air Force Europe.

In conducting our work, we spoke to officials from the Office of the  Secretary of Defense, the Joint Staff, Department of the Army,  Department of the Air Force, Department of the Navy, United States  Marine Corps, EUCOM and its service component commands, and the  State Department.

We conducted this performance audit from June 2016 through December  2017 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.

Global defense posture is an enabler of U.S. defense activities and  military operations overseas and is a central means of defining and  communicating U.S. strategic interests to allies, partners, and  adversaries. It is driven by a hierarchy of national-level and DOD-specific  guidance, which includes the National Defense Strategy and the National  Military Strategy. Under DOD Instruction 3000.12, global defense posture  includes three elements:

Forces: forward stationed or rotationally deployed forces, U.S.  military capabilities, equipment, and units (assigned or allocated).

Footprint: networks of U.S. foreign and overseas locations,  infrastructure, facilities, land, and prepositioned equipment.

Agreements: treaties and access, transit, support, and status- protection agreements and arrangements with allies and partners that  set the terms regarding the U.S. military’s presence within the territory  of the host country.

EUCOM is one of six geographic combatant commands and is  responsible for missions in all of Europe, large portions of Asia, parts of  the Middle East, and the Arctic and Atlantic Oceans (see figure 1).  EUCOM evaluates the adequacy of posture in Europe to support relevant  plans and achieve military objectives. EUCOM shares responsibility with  the Chairman of the Joint Chiefs of Staff and the Office of the Secretary of  Defense for U.S. military relations with allies and partners in Europe and  the North Atlantic Treaty Organization (NATO).

The number of U.S. military sites located in EUCOM’s area of  responsibility and the number of military personnel assigned to Europe  have decreased substantially since the end of the Cold War, and two  heavy combat brigades had been deactivated by the end of fiscal year  2014. As of May 2016, EUCOM supported one airborne infantry brigade  and one Stryker brigade, as well as approximately 62,000 military  personnel across approximately 250 sites.

Since 2009, we have reported on issues related to DOD’s efforts to  estimate and report on the total cost of its global defense posture. In  2009, we identified weaknesses in DOD’s approach for adjusting its  global defense posture and recommended, among other things, that DOD  issue guidance for estimating total costs for global defense posture and  modify its annual report to Congress to include the total cost to complete  each planned posture initiative. In February 2011, we reported that  EUCOM lacked comprehensive cost data in a key posture planning  document and that therefore decision makers lacked critical information  that they needed to make fully informed posture decisions. We  recommended that the Chairman of the Joint Chiefs of Staff revise the  Joint Staff’s posture planning guidance to include direction on how the  combatant commands should analyze costs and benefits when  considering changes to posture and to require that posture plans include  comprehensive cost estimates. DOD agreed with the recommendations in  both reports and subsequently took steps to implement them.

In June 2012, we reported that DOD did not fully understand the cost  implications of two posture initiatives in Europe—including its decision to  return two heavy brigades from Europe to the United States—and that  key posture planning documents did not completely and consistently  include cost data. We recommended that DOD fully estimate the cost  implications of these two initiatives, clarify components’ roles and  responsibilities for estimating costs, and develop a standard reporting  format for cost data. DOD generally agreed with our recommendations  and has taken steps to implement two of them.

Following the President’s June 2014 announcement of ERI, EUCOM  identified five lines of effort that it would pursue under ERI, as described  in table 1.

Three of ERI’s lines of effort are expected to enhance DOD’s posture in  Europe. For example, DOD is using ERI to increase the forces present in  Europe by rotating an armored brigade combat team and elements of a  combat aviation brigade to Europe every nine months. DOD also plans  to enhance its footprint in Europe by using ERI funding to make  infrastructure improvements and establish locations for prepositioned  equipment. Finally, in order to implement ERI’s lines of effort and support  U.S. activities, DOD is partnering with the State Department to negotiate  host nation agreements that, among other things, establish protections for  U.S. military personnel and provide DOD the authority to improve host  nation installations and infrastructure. DOD is also supporting additional  exercises and training to improve interoperability with partner countries  while providing them with the capability and capacity to defend  themselves, but these efforts are not expected to affect DOD’s long-term  posture in Europe.

DOD Has Expanded ERI’s Objectives and Funding, Contributing to Enhancements in Its Posture in Europe

Since 2014, DOD has expanded ERI’s objectives, increased its funding,  and planned enhancements to posture in Europe. In fiscal years 2015  and 2016, ERI’s objective was to provide short-term reassurance to allies,  and the initiative had little funding for long-term enhancements to posture.  DOD focused its efforts on bolstering the security and capacity of NATO  allies and partners by funding training, conducting exercises, and  temporarily rotating Army and Air Force units to Eastern Europe. In fiscal  year 2017, DOD expanded ERI’s objectives to include deterring Russian  aggression in the long term and developing the capacity to field a credible  combined force should deterrence fail.

Recognizing that ERI’s expanded objectives would require DOD to alter  its posture in Europe, DOD has requested increased ERI funding. DOD  will have requested approximately $4.5 billion in ERI funding for posture  enhancements through the end of fiscal year 2017; about $3.2 billion of  this was requested for use in fiscal years 2017. During the time of our  review, EUCOM had identified a need for additional funding over the next  several years for additional posture enhancements in Europe. Specific  details about EUCOM’s future posture plans and funding requirements  were omitted because they are classified.

DOD has requested increased funding to support planned enhancements  to all three posture elements—forces, footprint, and agreements—in  Europe:

Force deployments to Eastern Europe: In fiscal years 2015 and  2016, the Army deployed armored brigade combat teams to Eastern  Europe to provide short-term reassurance to allies and partners,  which DOD officials said included Estonia, Latvia, Lithuania, and  Poland, among other countries. These short-duration deployments  were intermittent and focused on demonstrating U.S. commitment to  allies and partners. Additionally, the Air Force deployed air units on 4- month rotations to help protect allies’ and partners’ air space. In the  fiscal year 2017 budget justification materials provided to Congress,  as ERI’s objectives expanded, DOD requested funding to retain Air  Force fighter units in Europe. It also began deploying a rotational  armored brigade combat team so that one such brigade would be  present in Europe at all times (see figure 2). The first deployment, in  January 2017, included approximately 4,000 personnel, 90 Abrams  tanks, 90 Bradley Infantry fighting vehicles, and 112 supporting  vehicles. Additionally, DOD began procuring and prepositioning  equipment for two planned armored brigades in Europe, one of which  will include modernized tanks, as an additional deterrent. According to  Army officials, these force enhancements in Europe give the Army the  ability to quickly deploy a substantial ground force in the event of a  conflict. As of April 2017, DOD was still evaluating force  enhancements in Europe as part of its fiscal year 2018 budget  submission. Specific details were omitted because they are classified.

New locations and improvements to infrastructure: Since ERI was  announced in 2014, DOD has established new enduring locations in  Europe. An enduring location is designated by DOD and is a  geographic site that DOD expects to access and use to support U.S.  security interests for the foreseeable future. During our review, DOD  had not yet determined whether additional enduring locations would  be needed to support ERI.

In addition to establishing new enduring locations, DOD plans to improve  installations and infrastructure. From fiscal years 2015 through 2017,  DOD requested funding in its budget justification submissions to  Congress for major military construction projects in nine European  countries and to improve support infrastructure—such as roads,  railheads, and airbasing—at these locations. Major military construction  projects are those projects specified in National Defense Authorization  Acts. During the time of our review, DOD was considering addition  improvements to existing infrastructure, specific details of which are  classified. According to DOD and State Department officials, DOD is also  working with U.S. allies and partners to determine what infrastructure  improvements to roads, railroads, and bridges need to occur outside  enduring locations to allow rapid response to a conflict.

New host nation agreements: Since ERI was announced, DOD and  the State Department have completed host nation agreements with  six European nations in support of ERI efforts:

Romania, Bulgaria, and Poland, implementing previous  agreements, in order to facilitate U.S. construction on installations  and areas in the host country (June and July 2015 and June  2016).

Estonia, Latvia, and Lithuania, providing an overarching  framework for protections for U.S. personnel and U.S. access to  installations in host nations (January 2017).

DOD Does Not Prioritize Posture Initiatives Funded Under ERI against Those in Its Base Budget, Estimate Their Sustainment Costs, or Communicate Future Costs to Congress

DOD is using a separate process instead of its established posture  planning process to plan for ERI’s posture initiatives because of the  emergent nature of ERI requirements and their having been funded  through the OCO budget. DOD has established global defense posture  management and base budget development processes that plan for  posture initiatives and collectively support the department’s efforts to  establish priorities, evaluate resource requirements, and develop strategy  and policy. As a result of its not using its established processes, DOD is  not prioritizing posture initiatives funded under ERI against posture  initiatives funded through its base budget, estimating these initiatives’  long-term sustainment costs, or communicating their future costs to  Congress.

DOD is Not Using Its Established Processes to Plan for and Fund ERI Posture Initiatives

DOD is planning ERI posture initiatives outside of its established  processes and is funding these enduring initiatives—including rotational  deployments and infrastructure projects—out of its OCO budget. We have  previously identified risks associated with DOD’s practice of completing  construction projects outside of its established processes. For example, in  September 2016 we reported that DOD had not issued implementing  guidance to establish a formal process for reevaluating ongoing  contingency construction projects when missions change and that as a  result DOD risked completing unnecessary construction projects. We  also found that DOD lacked visibility into the amount of funding it was  spending on operations and maintenance-funded construction projects in  U.S. Central Command and that this increased financial risk and  duplication risk for the department.

Like U.S. Central Command, EUCOM is using DOD’s OCO budget to  fund construction projects and is planning those projects outside of its  established processes. Based on our analysis, DOD plans to spend  approximately $503 million from fiscal year 2015 through the end of fiscal  year 2017 on ERI-related construction projects—about $279 million for  major military construction projects and $224 million for minor military  construction and facilities maintenance and repair projects (hereafter,  minor construction and repair), as shown in table 2.

DOD has established global defense posture management and base  budget development processes that plan for posture initiatives and  collectively support the department’s efforts to establish priorities,  evaluate resource requirements, and develop strategy and policy.  According to DOD Instruction 3000.12, DOD’s global defense posture  processes apply to DOD forces, footprint, and agreements that support  joint and combined global operations and plans in foreign countries.  According to the instruction, DOD’s components use these processes to  address planning for global defense posture, resource requirements, and  policy development, among other things. Further, it states that these  processes are overseen by an executive council that provides   recommendations, inputs, and expertise on global defense posture to key  national strategy products. DOD’s Planning, Programming, Budgeting,  and Execution Process serves as the annual resource allocation process  for DOD and is intended to enable DOD to align resources to prioritized  capabilities; balance necessary warfighting capabilities with risk,  affordability, and effectiveness; and provide mechanisms for making and  implementing fiscally sound decisions in support of the national security  strategy and the national defense strategy.

DOD is using a separate and evolving process to plan ERI’s posture  initiatives—rather than following its established processes—because ERI  is being funded through DOD’s OCO budget. According to officials from  the Office of the Secretary of Defense, Cost Assessment and Program  Evaluation, the department has recognized that the short-term planning  process used to develop DOD’s OCO budget can create problems when  it is used to plan for enduring initiatives. As a result, DOD has developed  a separate process to plan for ERI.

As part of the fiscal year 2018 planning process, EUCOM provided a  prioritized list of potential requirements and an estimate of its annual  costs by appropriation account to the Director for Cost Assessment and  Program Evaluation. According to officials from the Office of the Secretary  of Defense, Cost Assessment and Program Evaluation, DOD completed  its review and provided recommendations to DOD’s senior leaders for  approval in October 2016 and final decisions were made within DOD in  April 2017. The specific criteria by which DOD assessed EUCOM’s  potential requirements are classified.

DOD is requesting funds for ERI’s posture initiatives as part of its OCO  budget, which is generally intended to be short-term funding for ongoing  contingency operations. In February 2009, the Office of Management and  Budget, in collaboration with DOD, issued criteria to assist in determining  whether funding properly belonged in DOD’s base budget or in its OCO  budget. These criteria were updated in September 2010 and currently  indicate that funding requests should be for specific geographic areas  where combat or direct combat support operations occur (such as Iraq  and Afghanistan). Further, budget items must meet other criteria. For  example, OCO funding requests may be for constructing facilities and  infrastructure in the theater of operations in direct support of combat  operations. In these cases, the level of construction should be the  minimum needed to meet operational requirements, and construction  completed at enduring locations must be tied to surge operations or major  changes in operational requirements.

In January 2017, we reported that DOD did not apply the OCO criteria to  ERI prior to deciding to budget for its requirements using its OCO budget.  We recommended that DOD, in consultation with the Office of  Management and Budget, reevaluate and revise the criteria for  determining what can be included in OCO budget requests. DOD  concurred with our recommendation and noted that it plans to propose  revised OCO criteria. As of May 2017, the department has not  implemented our recommendation.

DOD Does Not Prioritize ERI Initiatives against Those in Its Base Budget, Estimate Long-Term Sustainment Costs, or Communicate Future Costs to Congress

DOD’s planning for ERI’s posture initiatives does not establish priorities  for ERI initiatives relative to those in the base budget, estimate long-term  sustainment costs for some posture initiatives funded under ERI, or  communicate future ERI costs to Congress.

DOD Does Not Review and Prioritize Posture Initiatives Funded Under ERI Relative to Those in Its Base Budget

When planning ERI’s posture initiatives, DOD establishes priorities  among ERI’s initiatives but does not review posture initiatives funded  under ERI relative to those funded in the military services’ base budgets.  DOD’s posture management process is intended to establish priorities  among global posture elements and is overseen by a Global Posture  Executive Council. According to DOD Instruction 3000.12, the Executive  Council is responsible for reviewing, prioritizing, and endorsing across the  combatant commands key posture elements such as military construction  projects and international agreements. The Executive Council’s  endorsements inform the military services’ budget deliberations.

For the fiscal year 2017 ERI budget, EUCOM requested funding for  several posture initiatives, including the continuous, rotational deployment  of an armored brigade combat team and the establishment of  prepositioned equipment in Europe. Officials representing the Under  Secretary of Defense for Policy and the Director, Cost Assessment and  Program Evaluation said that as part of its planning process for ERI the  Deputy’s Management Action Group evaluated and prioritized posture  initiatives funded under ERI. However, DOD could not provide  documentation that it had established priorities relative to posture  initiatives funded through the base budget. Further, the Global Posture  Executive Council did not review or prioritize posture initiatives funded   under ERI relative to posture initiatives funded through DOD’s base  budget. Similarly, as DOD prepared the fiscal year 2018 ERI budget  request, the Global Posture Executive Council did not prioritize EUCOM’s  proposed ERI posture initiatives relative to initiatives funded through  DOD’s base budget. More detailed information about these proposals,  and their potential funding requirements, are classified.

According to officials from the Office of the Under Secretary of Defense  for Policy and the Joint Staff, DOD did not prioritize posture initiatives  funded under ERI against base-budget funded posture initiatives,  because ERI is funded through DOD’s OCO budget—which does not  directly affect the services’ base budgets. However, because it does not  prioritize ERI initiatives against other initiatives funded through the base  budget, DOD lacks an understanding of the relative importance of  initiatives funded under ERI and may begin investing in projects that it  would not support in the absence of funding from DOD’s OCO budget.  For example, Army officials noted that if funding were to become  unavailable in DOD’s OCO budget, the Army is unsure how initiatives  funded under ERI would rank in importance relative to other posture  initiatives funded in its base budget. Consequently, the Army would be  forced to make critical—and potentially costly—decisions quickly and  without a clear idea of which posture initiatives were most important to the  department.

DOD Does Not Estimate Long- Term Sustainment Costs for Some Posture Initiatives Funded Under ERI

In planning for posture initiatives funded under ERI, EUCOM and the  military services have not fully estimated the long-term sustainment costs  of ERI’s posture initiatives to establish prepositioned equipment and  construct new facilities. DOD’s global defense posture guidance indicates  that, when evaluating potential changes to posture, the combatant  commands should work with the military services to estimate the full cost  of planned posture initiatives, including sustainment costs. DOD’s  guidance on economic analysis also notes the importance of  understanding both the size and timing of costs. Finally, our prior work  has demonstrated that comprehensive cost estimates of current and  future resource requirements are critical to making funding decisions and  assessing program affordability.

DOD leadership emphasized throughout the fiscal year 2018 budget  review process that the services would need to fund ERI posture   sustainment costs through their respective base budgets, but DOD did  not direct the services and EUCOM to estimate these costs as they would  have under their established processes. Officials from the Office of the  Secretary of Defense, Cost Assessment and Program Evaluation said  that DOD leadership emphasized that the military services would need to  fund all future sustainment costs for ERI projects from their base budgets.

Based on DOD’s approach for calculating rough order sustainment costs,  we determined that ERI sustainment costs for prepositioned equipment  and construction could be substantial. Army and Air Force officials said  that they were working to identify and incorporate these costs into future  base budget submissions. DOD officials said that we correctly applied  DOD’s approach for estimating sustainment costs, but noted that actual  costs may be lower than the estimated costs, because the military services may not fully fund sustainment. Additionally, officials said that  EUCOM is trying to negotiate burden sharing agreements with host  nations; however, it is unclear whether these negotiations will be  successful or how any resulting agreements would affect DOD’s future  costs.

Without comprehensive estimates of the sustainment costs for the  prepositioned equipment and major military construction projects in  Europe, DOD decision makers have been limited in their ability to  evaluate the affordability of these initiatives. Further, in the absence of  these estimates, the services have been limited in their ability to plan for  costs in future budgets, because they have an incomplete understanding  of the magnitude of those costs and of when they are likely to be incurred.

DOD Does Not Communicate to Congress the Future Costs of Enduring ERI Activities Funded through OCO

The funding plan that DOD submits to Congress for ERI does not contain  information about ERI’s future costs. This is in contrast to the way DOD  submits its funding plan for its base budget, where DOD provides  Congress with cost projections over a 5-year period, by appropriation,  leaving Congress with a better understanding of how and when to  allocate resources. In reviewing the fiscal year 2018 ERI request, the  Director for Cost Assessment and Program Evaluation assessed future  costs associated with posture initiatives funded under ERI. We previously  reported that DOD was not developing enduring requirements funded  through its OCO budget as part of its budget and programming process.  Officials from the Office of the Under Secretary of Defense (Comptroller)  and the Office of the Secretary of Defense, Cost Assessment and  Program Evaluation told us that DOD has not been required to provide  estimates for future OCO costs for ERI to Congress previously. An official  from the Office of the Under Secretary of Defense (Comptroller) told us  that DOD does not plan to provide these future costs to Congress along  with its fiscal year 2018 ERI budget submission.

Additionally, in preparing its posture requirements, EUCOM did not  identify assumptions regarding host nation and NATO burden sharing.  For example, officials from the Office of the Under Secretary of Defense  for Policy said that DOD has submitted a request to the NATO Security  Investment Programmé for $200 million in funding to build a facility in  Poland to store Army equipment. Officials told us that, as a result, this  construction project was identified as a lesser priority in EUCOM’s fiscal  year 2018 request for funding. A senior Army officer told us that  completion of a facility in Poland was critical to its plans in Europe.  Officials from the U.S. Mission to NATO told us that as of July 2016  NATO had approved funding to complete preliminary architectural and  engineering design for this project. Officials expect additional funding will  be made available in July 2017 to complete final design and site  preparation and the full cost of the project will be approved in early 2019.  However, these officials noted that additional funding beyond what has  been approved by NATO may be required to meet U.S.-specific  requirements. Similarly, EUCOM officials said that they are working to  identify opportunities to defray future costs through host nation   contributions, but it is unclear how much funding—if any—host nations  will provide moving forward.

Congress has expressed interest in knowing the future costs of enduring  activities being funded through DOD’s OCO budget. The Senate  Appropriations Committee’s report accompanying a bill for DOD’s fiscal  year 2015 appropriations stated that the committee does not have an  understanding of enduring activities funded by the OCO budget. The  committee further noted that there is a potential for risk in continuing to  fund non-contingency-related activities through the OCO budget. Both  GAO’s and other federal standards emphasize that agencies should  provide complete and reliable information on the costs of programs  externally, so that decision makers can make informed decisions when  allocating resources.

DOD has not provided Congress projections of future costs for posture  initiatives funded under ERI because it is reviewing those requirements  outside of its budget and programming processes, and DOD officials said  that the department is not required to provide this information. As a result,  DOD is limiting congressional visibility into the resources needed to  achieve ERI’s objectives. If DOD does not provide Congress with  projections of the future costs of posture initiatives funded under ERI and  information on its assumptions pertaining to host nation support and  burden sharing, it will continue to impede congressional visibility into the  resources that are needed to fully implement these initiatives.

Russia’s annexation of Crimea and the subsequent threat of further  aggression led DOD to establish and later expand ERI’s objectives and  enhance posture in Europe to support a new U.S. strategy toward Russia.  DOD has requested funding for these enhancements using its OCO  budget; however, the processes DOD uses to develop its OCO budget  were not designed to plan for and fund long-term, enduring initiatives  such as ERI. By following a separate planning process when funding ERI  with OCO, DOD is taking on risk by not reviewing and prioritizing ERI  posture plans against other posture initiatives, estimating the costs for  sustaining ERI initiatives, and providing Congress with estimates of ERI’s  future costs. DOD risks making decisions that lack a strategic vision in  comparison to other DOD priorities and may fund initiatives that cannot  be sustained over the long term. Furthermore, Congress is likely to face  challenges in assessing DOD’s estimated costs for ERI and the  affordability of initiatives funded under ERI over the long term.

To better ensure that DOD can target resources to its most critical  initiatives and establish priorities across its base budget and overseas  contingency operations budget, we recommend that the Secretary of  Defense prioritize posture initiatives under ERI relative to those funded in  its base budget as part of its established posture-planning processes.  (Recommendation 1)

To better enable decision makers to evaluate the full long-term costs of  posture initiatives under ERI, we recommend that the Secretary of  Defense direct EUCOM and the military services to develop estimates for  the sustainment costs of prepositioned equipment and other infrastructure  projects under ERI and ensure that the services plan for these long-term  costs in future budgets. (Recommendation 2)

To support congressional decision making, we recommend that the  Secretary of Defense provide to Congress, along with the department’s  annual budget submission, estimates of the future costs for posture  initiatives funded under ERI and other enduring costs that include  assumptions such as those pertaining to the level of host nation support  and burden sharing. (Recommendation 3)

We provided a draft of the classified report to DOD for review and  comment. DOD partially concurred with all three of our recommendations,  and we have reproduced DOD’s comments on the classified report in  appendix II. DOD also provided technical comments, which we  incorporated as appropriate.

DOD partially concurred with our first recommendation to use its  established posture-planning processes to prioritize ERI’s posture  initiatives relative to those funded in DOD’s base budget. In its comments,  DOD stated that it will continue to prioritize the negotiation of international  agreements supporting ERI through the Global Posture Executive  Council, and that an on-going Strategic Review will inform ERI and guide  both EUCOM and the services in their program planning efforts. These  are positive steps. DOD also stated it will adjudicate its ERI-funded force  requirements through its global force management process, adding that it  will continue to resource OCO funds for ERI requirements until there is a  sufficient increase in DOD’s base budget to do so. However, we continue  to believe, as noted in our report, that DOD could improve its planning for  posture initiatives funded under ERI, whether or not they are funded  through OCO, by using DOD’s established posture planning processes.  Although DOD’s global force management process directly affects  overseas military posture in the near term, this process is not designed to  evaluate long-term posture priorities. If DOD does not prioritize the forces  and infrastructure projects funded under ERI against those funded using  the military services’ base budgets, it will continue to lack an  understanding of the relative importance of the posture initiatives funded  under ERI. Without such an understanding, DOD increases the risk that  the services will need to make critical and potentially costly decisions  without a clear idea of which posture initiatives are most critical to the  department.

DOD partially concurred with our second recommendation that EUCOM  and the military services develop estimates for future sustainment costs  and plan for these costs in future budgets. In its comments, DOD stated  that its components will continue to estimate the sustainment costs for  prepositioned stocks and other infrastructure projects during DOD’s  annual program and budget review process. DOD also commented that  without additional topline base budget funding, some portion of the  associated sustainment costs will need to be financed with OCO funds.  However, as we noted in our report, neither the Army nor the Air Force  has fully estimated these potentially significant future costs, nor had either  service incorporated them into their future budgets. Using OCO funds  would mark a departure from DOD leadership’s emphasis that the  services would need to fund ERI posture sustainment costs through their  respective base budgets. Additionally, not developing robust estimates for  sustaining these initiatives could increase long-term fiscal risk for the  department if DOD shifts more ERI-associated enduring costs into its  OCO budget. In the absence of robust cost estimates and deliberate  planning to address those costs in future budgets, DOD will continue to  be limited in its ability to evaluate the affordability of posture initiatives  funded under ERI, and the military services may not plan adequate  funding to sustain posture investments in Europe.

DOD partially concurred with our third recommendation, to provide  Congress with estimates of the future costs for posture initiatives funded  under ERI and information on any underlying assumptions, such as those  pertaining to the level of host nation support and burden sharing. In its  comments, DOD stated that it does not currently prepare a formal 5-year  Future Years Defense Program for OCO-related costs. Moreover, DOD  commented that it factors in host nation support and burden sharing when  preparing budget estimates for Congress. However, DOD does not state  whether it will begin to provide Congress future estimates and any  underlying assumptions with its budget submission. It is critical that DOD  increase congressional visibility into ERI’s future costs and its underlying  assumptions to facilitate congressional oversight and reasonably ensure  that initiatives can be sustained over the long-term.

We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, and the Commander, U.S.  European Command. In addition, the report is available at no charge on  the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact  me at (404) 679-1816 or pendletonj@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 major contributions to  this report are listed in Appendix III.

Appendix I: Unspecified Minor Military Construction and Facilities Maintenance and Repair Projects Funded under the European Reassurance Initiative in Fiscal Years 2015 through 2017

The Army and Air Force identified approximately $224 million in  unspecified minor military construction and facilities maintenance and  repair projects (hereafter, minor construction and repair) that were  programmed or obligated for the European Reassurance Initiative (ERI) in  fiscal years 2015 through 2017. This includes $157 million for minor  construction and repair projects identified by the Army and nearly $67  million for minor construction and repair projects identified by the Air  Force. According to U.S. European Command officials, Navy and Marine  Corps construction projects funded under ERI were either major military  construction or exercise-related construction projects. The tables below  do not include Navy and Marine Corps exercise-related construction  projects. Using the data provided by the military services, we compiled  the programmed and obligated funding for these minor construction and  repair projects by fiscal year, country, location, and project name in tables  3 and 4. The information in these tables was provided by U.S. Army  Europe and U.S. Air Force Europe in response to our request for a list of  minor military construction and repair projects. The data provided did not  identify the appropriations used for each project. Accordingly, we have  not conducted a review to examine whether funds were appropriately  used for a given project.

Appendix III: GAO Contact and Staff Acknowledgments

In addition to the contact named above, Kevin O’Neill, Assistant Director;  Alex Winograd, Analyst-in-Charge; Scott Bruckner, Adrianne Cline, Martin  De Alteriis, Joanne Landesman, Jennifer Leotta, Carol Petersen, Michael  Shaughnessy, and Jena Sinkfield all made key contributions to this  report.