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1997 Defense Budget: Potential Reductions and Rescissions to DOD's Procurement and RDT&E Programs (Briefing Report, 09/04/96, GAO/NSIAD-96-193BR).

GAO examined the Department of Defense's (DOD) fiscal year (FY) 1997
budget request and prior years' appropriations for selected procurement
and research, development, test, and evaluation (RDT&E) programs.

GAO found that: (1) DOD has the opportunity to reduce its FY 1997
procurement and RDT&E requests by $3.2 billion and to rescind its prior
years' procurement and RDT&E appropriations by $454.9 million; (2) these
reductions are possible due to changes in DOD schedules and
requirements, and the issues affecting program funding; (3) the
potential rescissions include about $35.6 million in excess prior years'
appropriations for which obligational authority expires on September 30,
1996; and (4) DOD has requested congressional approval to reprogram some
of its excess funds in its FY 1996 omnibus reprogramming request to pay
for Bosnia operations.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  NSIAD-96-193BR
     TITLE:  1997 Defense Budget: Potential Reductions and Rescissions 
             to DOD's Procurement and RDT&E Programs
      DATE:  09/04/96
   SUBJECT:  Defense procurement
             Defense cost control
             Defense appropriations
             Defense budgets
             Budget cuts
             Budget authority rescission
             Reprogramming of appropriated funds
             Research programs
             Future budget projections
             Research and development costs
IDENTIFIER:  Bosnia
             
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Cover
================================================================ COVER


Briefing Report to Congressional Committees

September 1996

1997 DEFENSE BUDGET - POTENTIAL
REDUCTIONS AND RESCISSIONS TO
DOD'S PROCUREMENT AND RDT&E
PROGRAMS

GAO/NSIAD-96-193BR

1997 Defense Budget

(707136)


Abbreviations
=============================================================== ABBREV

  DOD - Department of Defense
  RDT&E - research, development, test, and evaluation

Letter
=============================================================== LETTER


B-272395

September 4, 1996

Congressional Committees

We examined the Department of Defense's (DOD) fiscal year 1997 budget
request and prior years' appropriations for selected procurement and
research, development, test, and evaluation (RDT&E) programs.  Our
objectives were to identify potential reductions in the fiscal year
1997 budget request and potential rescissions to prior years'
appropriations.  This report summarizes information provided to your
staffs from April through June 1996. 

We identified opportunities to reduce fiscal year 1997 procurement
and RDT&E requests by $3.2 billion and to rescind prior years'
procurement and RDT&E appropriations by about $454.9 million.  These
reductions and/or rescissions can be made because schedules slipped,
requirements changed, and issues affecting program funding emerged
since the budget request was developed.  The potential rescissions
include about $35.6 million in excess prior years' appropriations for
which obligational authority expires on September 30, 1996.  DOD has
requested congressional approval to reprogram some of these excess
funds in its fiscal year 1996 omnibus reprogramming request and has
identified some of these excess funds for possible use to pay for
Bosnia operations. 


   PROCUREMENT APPROPRIATIONS
------------------------------------------------------------ Letter :1

As shown in table 1, we identified about $3 billion in potential
reductions to DOD's fiscal year 1997 procurement budget requests and
$451.1 million in potential rescissions from DOD's prior years'
procurement appropriations. 



                                Table 1
                
                Potential Reductions and Rescissions to
                          Procurement Programs

                         (Dollars in millions)

                                             Potential
                                                fiscal       Potential
                                             year 1997      prior year
                                            reductions     rescissions
------------------------------------------  ----------  --------------
Army                                          $207.469        $159.485
Navy                                         2,302.955         256.330
Air Force                                      460.106          35.300
Defense-wide                                    15.200               0
======================================================================
Total                                       $2,985.730        $451.115
----------------------------------------------------------------------
The potential rescissions from prior years' procurement
appropriations include $416.9 million in excess fiscal year 1996
funds, about $2.4 million in excess fiscal year 1995 funds, and $31.8
million in expiring excess fiscal year 1994 funds. 

Details regarding the potential reductions and rescissions for
procurement programs are provided in appendix I. 


   RDT&E APPROPRIATIONS
------------------------------------------------------------ Letter :2

As shown in table 2, we identified $224.2 million in potential
reductions to DOD's fiscal year 1997 RDT&E budget requests and about
$3.8 million in potential rescissions from DOD's prior years' RDT&E
appropriations. 



                                Table 2
                
                Potential Reductions and Rescissions to
                             RDT&E Programs

                         (Dollars in millions)

                                             Potential
                                                fiscal       Potential
                                             year 1997      prior year
                                            reductions     rescissions
------------------------------------------  ----------  --------------
Army                                            $3.892          $0.142
Navy                                            19.698               0
Air Force                                       26.908           2.800
Defense-wide                                   173.724           0.821
======================================================================
Total                                         $224.222          $3.763
----------------------------------------------------------------------
All of the $3,763,000 in potential rescissions from prior years'
RDT&E appropriations is from expiring excess fiscal year 1995 funds. 

Details regarding the potential reductions and rescissions to RDT&E
programs are provided in appendix II. 


   AGENCY COMMENTS
------------------------------------------------------------ Letter :3

Commenting orally on a draft of this report, DOD disagreed with
virtually all of the potential funding reductions and rescissions. 
In many instances, DOD believed that the funds could be used for
other requirements.  We have incorporated DOD's comments on specific
programs throughout the report where appropriate. 


   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :4

To identify potential reductions and rescissions, we focused on
unobligated funds and funds on withhold in addition to program cost,
schedule, and performance issues.  We examined expenditure documents
to determine whether requests were adequately justified and whether
unobligated funds from prior appropriations should be retained. 
Appendix III provides more information regarding our scope and
methodology. 


---------------------------------------------------------- Letter :4.1

We are sending copies of this report to the Secretaries of Defense,
the Army, the Navy, and the Air Force and the Director, Office of
Management and Budget.  We will also make copies available to others
upon request. 

This report was prepared under the direction of Louis J.  Rodrigues,
Director, Defense Acquisitions Issues, who may be reached on (202)
512-4841 if you or your staffs have any questions.  Other major
contributors are listed in appendix V. 

Henry L.  Hinton, Jr.
Assistant Comptroller General

List of Congressional Committees

The Honorable Strom Thurmond
Chairman
The Honorable Sam Nunn
Ranking Minority Member
Committee on Armed Services
United States Senate

The Honorable Ted Stevens
Chairman
The Honorable Daniel K.  Inouye
Ranking Minority Member
Subcommittee on Defense
Committee on Appropriations
United States Senate

The Honorable Floyd D.  Spence
Chairman
The Honorable Ronald V.  Dellums
Ranking Minority Member
Committee on National Security
House of Representatives

The Honorable C.  W.  Bill Young
Chairman
The Honorable John P.  Murtha
Ranking Minority Member
Subcommittee on National Security
Committee on Appropriations
House of Representatives


POTENTIAL REDUCTIONS AND
RESCISSIONS TO PROCUREMENT
PROGRAMS
=========================================================== Appendix I

The Department of Defense (DOD) requested $38.9 billion in
procurement funding for fiscal year 1997.  As shown in table I.1, our
review of selected budget line items in the request and prior years'
appropriations identified potential reductions of about $3 billion to
fiscal year 1997 requests; potential rescissions of about $416.9
million and $2.4 million from fiscal year 1996 and 1995
appropriations, respectively; and $31.8 million in potential
rescissions from expiring fiscal year 1994 appropriations. 



                                    Table I.1
                     
                     Potential Reductions and Rescissions to
                               Procurement Programs

                              (Dollars in millions)


                                   Potential      Fiscal      Fiscal      Fiscal
                       Request\a   reduction   year 1996   year 1995   year 1994
--------------------  ----------  ----------  ----------  ----------  ----------
Army                  $1,124.292    $207.469    $152.000      $2.385      $5.100
Navy                   2,907.970   2,302.955     256.330           0           0
Air Force              2,486.223     460.106       8.600           0      26.700
Defense-wide              86.677      15.200           0           0           0
================================================================================
Total                 $6,605.162  $2,985.730    $416.930      $2.385     $31.800
--------------------------------------------------------------------------------
\a This is the amount requested for budget line items for which we
have identified a potential reduction and/or rescission. 


   ARMY PROCUREMENT PROGRAMS
--------------------------------------------------------- Appendix I:1

The Army requested $6.3 billion for procurement programs in fiscal
year 1997.  As shown in table I.2, we identified potential reductions
of about $207.5 million to the fiscal year 1997 request and potential
rescissions of $152 million, about $2.4 million, and $5.1 million
from fiscal year 1996, 1995, and 1994 appropriations, respectively. 



                                    Table I.2
                     
                     Potential Reductions and Rescissions to
                            Army Procurement Programs

                              (Dollars in millions)


Procurement                        Potential      Fiscal      Fiscal      Fiscal
appropriation          Request\a   reduction   year 1996   year 1995   year 1994
--------------------  ----------  ----------  ----------  ----------  ----------
Aircraft                $617.947     $46.031      $2.600      $2.385      $5.100
Missile                  186.547      39.786           0           0           0
Weapons and Tracked            0           0     142.800           0           0
 Combat Vehicles
Ammunition                     0           0       6.600           0           0
Other                    319.798     121.652           0           0           0
================================================================================
Total                 $1,124.292    $207.469    $152.000      $2.385      $5.100
--------------------------------------------------------------------------------
\a This is the amount requested for budget line items for which we
have identified a potential reduction and/or rescission. 


      AIRCRAFT PROCUREMENT, ARMY
------------------------------------------------------- Appendix I:1.1

The Army requested $970.8 million for aircraft procurement programs
in fiscal year 1997.  As shown in table I.3, we identified potential
reductions of $46 million to the fiscal year 1997 request and
potential rescissions of $2.6 million, about $2.4 million, and $5.1
million from fiscal year 1996, 1995, and 1994 appropriations,
respectively. 



                                    Table I.3
                     
                     Potential Reductions and Rescissions to
                        Army Aircraft Procurement Programs

                              (Dollars in millions)


Li                                     Potentia
ne                                            l
no                             Reques  reductio     Fiscal     Fiscal     Fiscal
.   Line item description           t         n  year 1996  year 1995  year 1994
--  -------------------------  ------  --------  ---------  ---------  ---------
6   UH-60 Blackhawk            $161.2    $0.824          0          0          0
     (Multiyear Procurement)       79
11  AH-64 Modifications        43.287     6.241          0          0          0
14  OH-58 Modifications         1.147     0.374          0          0          0
16  Longbow                    356.95    10.731          0          0          0
                                    7
20  Kiowa Warrior               9.115     9.115     $2.600     $2.385          0
21  EH-60 Quickfix             13.912    13.912          0          0          0
     Modifications
29  Training Devices            7.339     0.934          0          0          0
30  Common Ground Equipment    24.911     3.900          0          0          0
    UH-1 Huey Service Life          0         0          0          0     $5.100
     Extension Program
================================================================================
    Total                      $617.9   $46.031     $2.600     $2.385     $5.100
                                   47
--------------------------------------------------------------------------------

      UH-60 BLACKHAWK (MULTIYEAR
      PROCUREMENT) (LINE 6)
------------------------------------------------------- Appendix I:1.2

The Army's fiscal year 1997 request of $161.3 million for UH-60
Blackhawk helicopters can be reduced by $824,000 because an
equivalent amount of excess fiscal year 1995 funds are available to
meet fiscal year 1997 requirements.  At the beginning of fiscal year
1996, the Army had $15.3 million in unobligated fiscal year 1995
UH-60 Blackhawk procurement funds.  Through April 30, 1996, the Army
had obligated $645,000, or 4 percent of the amount, leaving an
unobligated balance of $14.7 million.  We asked Army program
management officials to provide us specific information on when and
how these funds would be used, but they did not provide us the
requested information.  Because the Army had not provided adequate
justification for retaining these funds, we initially concluded that
the unobligated $14.7 million could be used to offset the fiscal year
1997 request. 

DOD commented that all but $50,000 of the fiscal year 1995 funds had
been obligated; however, the Army's latest financial report dated
August 1, 1996, shows that the Army has not obligated $824,000.  We
believe, therefore, that these funds can be used to offset the fiscal
year 1997 request. 


         AH-64 MODIFICATIONS (LINE
         11)
----------------------------------------------------- Appendix I:1.2.1

The Army's fiscal year 1997 request of $43.3 million for AH-64
modifications can be reduced by $6.2 million because an equivalent
amount of excess fiscal year 1996 funds is available to meet program
requirements.  DOD is withholding these funds pending reprogramming
action.  Program officials said that the program was disrupted by DOD
withholding the fiscal year 1996 funds. 

DOD commented that our proposed reduction would adversely affect
planned procurements and upgrades and that it had already requested
approval to reprogram $5 million of the $6.2 million.  Nevertheless,
since these funds will not be used for AH-64 modifications in fiscal
year 1996, any funds not already approved for reprogramming can
instead be used to offset fiscal year 1997 requirements. 


         OH-58 MODIFICATIONS (LINE
         14)
----------------------------------------------------- Appendix I:1.2.2

The Army's fiscal year 1997 request of $1.1 million for OH-58
modifications can be reduced by $374,000 because an equivalent amount
of unobligated excess fiscal year 1996 funds is available to meet
these requirements.  The Army submitted budgets containing $400,000
in fiscal year 1995 and $1.4 million in fiscal year 1996 for OH-58
safety and sustainment modifications, even though it did not have
requirements for such modifications. 

A program official said that these funds were requested to allow for
contingencies.  He added that DOD encouraged such budgeting to keep
the line open and that he did not believe that program funding should
be reduced or rescinded because the funds could be used for other
purposes.  Nevertheless, the Army requested the funds for OH-58
safety and sustainment modifications in fiscal years 1995 and 1996
and they are not needed for that purpose.  Therefore, we believe the
unobligated amount can be used to offset the fiscal year 1997
request. 

DOD commented that most of the funds from the prior years had been
obligated.  However, according to the Army's latest financial report
dated August 1, 1996, the Army had not obligated $374,000.  We
believe, therefore, that amount can be used to offset the fiscal year
1997 request. 


         LONGBOW (LINE 16)
----------------------------------------------------- Appendix I:1.2.3

The Army's fiscal year 1997 request of $357 million for Longbow can
be reduced by $10.7 million because an equivalent amount of excess
fiscal year 1996 funds is available to meet program requirements if
they are not reprogrammed for Bosnia.  This amount is excess because
DOD withheld the $10.7 million from the fiscal year 1996
appropriation to pay for Bosnia operations. 

Program officials said that the fiscal year 1996 withholds are
contributing to difficulties in procuring the quantities planned for
the year.  However, since DOD does not plan to release these funds
for Longbow production in fiscal year 1996, they can be used to
offset fiscal year 1997 requirements.  DOD did not agree with the
reduction because the funds have been identified for possible use for
Bosnia. 


         KIOWA WARRIOR (LINE 20)
----------------------------------------------------- Appendix I:1.2.4

The Army's fiscal year 1997 request of $9.1 million can be denied
because prior years' funds are available to meet fiscal year 1997
requirements, and $2.4 million and $2.6 million can be rescinded from
fiscal year 1996 and 1995 appropriations, respectively.  Fiscal year
1995 and 1996 funds are excess to program requirements because
contract costs are less than amounts budgeted by the program office. 

The Army has about $11.5 million in excess fiscal year 1995 funds and
$2.6 million in excess fiscal year 1996 funds.  The fiscal year 1995
funds are excess because (1) definitized lot 12 contract costs for
the remanufacture of the mast mounted sight were $7.2 million less
than the program office had budgeted for the follow-on lot 12
remanufacturing effort, (2) the definitized contract for the lot 12
remanufactured airframes was $3.1 million less than what was
budgeted, and (3) the definitized lot 4 contract cost for the
retrofit program was $1.2 million less than budgeted.  The $2.6
million in excess fiscal year 1996 funds can be rescinded because the
amount budgeted for the lot 5 retrofit program was greater than the
not-to-exceed lot 5 contract amount.  DOD did not agree with the
reduction or rescissions but did not provide new information or
further rationale for its position. 


         EH-60 QUICKFIX
         MODIFICATIONS (LINE 21)
----------------------------------------------------- Appendix I:1.2.5

The Army's fiscal year 1997 request of $13.9 million to upgrade one
EH-60 Quickfix helicopter into the Intelligence Electronic Warfare
Common Sensor Advanced Quickfix configuration can be denied.  The
Army justified this request as a low-rate initial production unit for
the initial operational test and evaluation scheduled in September
1997.  According to the Army's justification, the upgraded system
will also support an approved Operational Requirements Document for
contingency forces. 

According to the current delivery schedule, the upgraded system, to
be procured in fiscal year 1997, would not be available for scheduled
operational testing.  Further, although procurement of an upgraded
system may also support an operational requirement, this is not a
justification for the purchase of additional systems prior to
operational testing. 

DOD commented that the subsystems for the system will be available in
time for the operational testing.  However, Army test plans did not
indicate any need for additional subsystems for the operational
tests.  Moreover, the Army requested funding to procure a complete
system for the operational tests and the complete system will not be
available in time for the operational tests.  Therefore, we continue
to believe that the fiscal year 1997 request can be denied. 


         TRAINING DEVICES (LINE
         29)
----------------------------------------------------- Appendix I:1.2.6

The Army's fiscal year 1997 request of $7.3 million for training
devices can be reduced by $934,000 because an equivalent amount of
fiscal year 1996 funds is available to meet program requirements. 
DOD is withholding these funds and plans to reprogram them for Bosnia
operations.  Project officials are concerned that the fiscal year
1997 budget request might be reduced without the fiscal year 1996
withholds being restored to the program.  However, since these funds
will not be used for training devices in fiscal year 1996, we believe
they can be used to offset the fiscal year 1997 request if they are
not reprogrammed for Bosnia.  DOD did not agree with the reduction
because the funds have been identified for possible use for Bosnia. 


         COMMON GROUND EQUIPMENT
         (LINE 30)
----------------------------------------------------- Appendix I:1.2.7

The Army's fiscal year 1997 request of $24.9 million for common
ground equipment can be reduced by $3.9 million because an equivalent
amount of excess fiscal year 1996 funds is available to meet program
requirements.  The program office has identified these funds as
excess to its fiscal year 1996 airfield support equipment needs due
to program delays. 

Program officials attempted to return these funds to DOD for
inclusion in the fiscal year 1996 omnibus reprogramming request, but
they were not included.  Currently, they are attempting to have these
funds reprogrammed to the Air Traffic Navigation, Integration and
Coordination System.  These funds, according to a program official,
are necessary for further development of this system in fiscal year
1997.  However, since these funds will not be used for air traffic
control in fiscal year 1996, we believe they can be used to offset
the fiscal year 1997 budget request. 


         UH-1 HUEY SERVICE LIFE
         EXTENSION PROGRAM
----------------------------------------------------- Appendix I:1.2.8

The Army's fiscal year 1994 appropriation of $5.1 million for the
UH-1 Huey service life extension program can be rescinded because the
Army does not plan to modify the Huey.  In fiscal year 1994, Congress
provided $15 million for this effort.  The Army conducted a study of
the viability of extending the UH-1's service life and concluded that
there was no need for such a program.  The Army reprogrammed $9.9
million of the $15-million appropriation to the Kiowa aircraft
program and planned to reprogram the remaining $5.1 million for the
Javelin missile.  However, the $5.1-million reprogramming action was
not approved and DOD has withheld the funding.  The $5.1 million in
excess fiscal year 1994 funds will expire if not obligated by
September 30, 1996, and, therefore, is available for reprogramming or
rescission during the remainder of fiscal year 1996. 


      MISSILE PROCUREMENT, ARMY
------------------------------------------------------- Appendix I:1.3

The Army requested $766.3 million for missile procurement programs in
fiscal year 1997.  As shown in table I.4, we identified potential
reductions of about $39.8 million to the fiscal year 1997 request. 
We did not identify any potential rescissions from prior years'
appropriations. 



                               Table I.4
                
                Potential Reductions to the Army Missile
                          Procurement Programs

                         (Dollars in millions)


Li                                                              Potent
ne                                                                 ial
no                                                      Reques  reduct
.   Line item description                                    t     ion
--  --------------------------------------------------  ------  ------
5   Javelin                                             $162.1  $20.00
                                                            04       0
7   Multiple Launch Rocket System                       24.443  19.786
======================================================================
    Total                                               $186.5  $39.78
                                                            47       6
----------------------------------------------------------------------

         JAVELIN SYSTEM (LINE 5)
----------------------------------------------------- Appendix I:1.3.1

The Army's fiscal year 1997 request of $162.1 million for Javelin can
be reduced by $20 million if the Army modifies its third low-rate
initial production contract to purchase fewer command launch units
and missiles in fiscal year 1996 and uses the fiscal year 1996
funding allocated for these command launch units and missiles to
offset the 1997 request.  In addition, Congress may want to consider
restricting the Javelin 1997 appropriation until the Army conducts
additional operational tests that prove the redesigned Javelin is
operationally suitable. 

The Army is redesigning the command launch unit to reduce production
and logistics costs and plans to begin replacing all 277 low-rate
initial production units within 3 years after the first unit is
equipped.  To minimize replacement costs, the Army could reduce the
number of command launch units to be purchased in the third low-rate
initial production contract from 125 to 36 units and still sustain
the production line.  Program office officials said reducing the
number of launch units to 36 would decrease the cost of the contract
by $18.5 million.  Additionally, because of problems with the missile
rounds, the Army could reduce the number of missile rounds to be
purchased in the third low-rate initial production contract from
1,010 to 960, and still produce the rounds at the contractor's
minimum sustaining rate of 80 rounds per month.  According to the
Chief of Javelin's Cost Branch, reducing the number of rounds to be
purchased to 960 would decrease the contract cost by about $1.5
million.  In addition, the reduction should help ensure that problems
are identified and corrected before procuring additional rounds. 

The Army does not agree that the number of command launch units to be
purchased should be reduced to the contractor's minimum sustaining
level of production.  Army officials said that purchasing fewer
launch units will increase the per unit cost of the remaining units
because the contractor has already purchased materials and incurred
costs in anticipation of production.  They said, however, that the
contractor could use the materials that are common to the redesigned
unit in those units once their production begins, which would reduce
the costs of those future units.  Another reason given by the Army
officials for not reducing the purchase quantity was that it will
impact system fielding.  But, the Army has already decided to
postpone the purchase of 17 command launch units and a project office
official said the purchase of another 12 units may be postponed. 
According to the Army officials, even if production is reduced, the
minimum sustaining level of production that will allow the command
launch unit contractor to proceed to full-rate production in fiscal
year 1997, as currently planned, is 72 launch units.  But, in our
opinion, the Javelin is not ready for full-rate production because
the Army is redesigning many system components and has not adequately
tested the redesigned system to determine if it is suitable for
combat.  Operational testing is needed to ensure that the system's
reliability and performance in an operational environment will meet
the user's requirements. 

DOD did not agree with the reduction but did not provide new
information or further rationale for its position. 


         MULTIPLE LAUNCH ROCKET
         SYSTEM (LINE 7)
----------------------------------------------------- Appendix I:1.3.2

The Army's fiscal year 1997 request of $24.4 million for the Multiple
Launch Rocket System can be reduced by $19.8 million (the amount
requested to procure hardware for a second low-rate production of
852 extended range rockets) because recent testing revealed the
rocket's grenade submunition does not meet performance requirements. 
Additionally, the Army may want to consider postponing the planned
August 1996 low-rate initial production contract award for 1,326
extended range rockets until the grenade submunition meets
performance requirements. 

The grenade submunition has not consistently met its requirement of
less than 1 percent hazardous duds.\1 During preproduction
qualification testing from January to April 1996 on over 1,500
submunitions, the submunition demonstrated a hazardous dud rate of
2.63 percent.  Design verification testing of planned corrections to
the submunition will not occur until April through June 1997. 
Program office officials maintain that award of a low-rate production
contract for extended range rockets is necessary in fiscal year 1996
to avoid a production break during the transition from basic rockets
to extended range rockets. 

DOD did not agree with the reduction and our suggestion to postpone
award of the low-rate initial production contract stating that (1)
the causes of the submunition problem have been identified and
benchmarks have been incorporated in the planned verification testing
and (2) a delay of the August 1996 low-rate initial production award
would shut down the rocket production line and result in $67 million
in additional costs.  However, production schedules indicate that,
even if the low-rate production contract is awarded in fiscal year
1996, there will be no rocket deliveries in October and November
1997.  Moreover, any costs associated with a production break or a
decision to enter low-rate initial production should be balanced
against the costs of procuring an unproven weapon system.  Therefore,
we continue to believe the reduction is warranted. 


--------------------
\1 A hazardous dud is one that does not explode or disarm itself
within 3 minutes of impact. 


      PROCUREMENT OF WEAPONS AND
      TRACKED COMBAT VEHICLES,
      ARMY
------------------------------------------------------- Appendix I:1.4

The Army requested $1.1 billion for weapons and tracked combat
vehicles procurement programs in fiscal year 1997.  We did not
identify any potential reductions to the fiscal year 1997 request. 
However, as shown in table I.5, we identified a potential rescission
of $142.8 million from the fiscal year 1996 appropriation for one
item. 



                               Table I.5
                
                Potential Rescission to Army Procurement
                 of Weapons and Tracked Combat Vehicles
                                Programs

                         (Dollars in millions)

Li                                                           Potential
ne                                                          rescission
no                                                        (fiscal year
.   Line item description                                        1996)
--  --------------------------------------------------  --------------
8   Armored Gun System\a                                      $142.800
======================================================================
    Total                                                     $142.800
----------------------------------------------------------------------
\a The Army did not request fiscal year 1997 funding for this item. 


         ARMORED GUN SYSTEM (LINE
         8)
----------------------------------------------------- Appendix I:1.4.1

Unless Congress approves DOD's reprogramming requests, the Army's
fiscal year 1996 appropriation of $142.8 million for the Armored Gun
System can be rescinded because the program is being terminated.  The
Army had planned to procure 26 low-rate initial production vehicles
with this funding but with the program's termination, the funds will
no longer be required for this purpose.  Termination liability will
be funded from research and development appropriations because the
program is currently under an engineering and manufacturing
development contract.  Army project management officials agreed that
the procurement funds are no longer needed for the gun.  DOD did not
agree with the rescission because it indicated that it included $105
million of the excess fiscal year 1996 funds in its fiscal year 1996
omnibus reprogramming request and the remaining $37.8 million in the
Task Force XXI reprogramming request. 


      PROCUREMENT OF AMMUNITION,
      ARMY
------------------------------------------------------- Appendix I:1.5

The Army requested $853.4 million for ammunition procurement programs
in fiscal year 1997.  We did not identify any potential reductions to
the fiscal year 1997 request.  However, as shown in table I.6, we
identified a potential rescission of $6.6 million from the fiscal
year 1996 appropriation for one item. 



                               Table I.6
                
                Potential Rescission to Army Procurement
                      of Ammunition Appropriation

                         (Dollars in millions)

Li                                                           Potential
ne                                                          rescission
no                                                        (fiscal year
.   Line item description                                        1996)
--  --------------------------------------------------  --------------
11  81-mm Practice 1/10 Range M880 Mortar Cartridge\a           $6.600
======================================================================
    Total                                                       $6.600
----------------------------------------------------------------------
\a The Army did not request fiscal year 1997 funding for this item. 


         81-MM PRACTICE 1/10 RANGE
         M880 MORTAR CARTRIDGE
         (LINE 11)
----------------------------------------------------- Appendix I:1.5.1

The Army's fiscal year 1996 appropriation of $6.6 million for 81-mm
M880 practice mortar cartridges can be rescinded because the Army
does not plan to purchase the cartridges.  The Office of the
Secretary of Defense is withholding the funds because the Army does
not have a requirement for the cartridges.  Army officials agreed
that the $6.6 million is excess to fiscal year 1996 requirements and
can be rescinded. 


      OTHER PROCUREMENT, ARMY
------------------------------------------------------- Appendix I:1.6

The Army requested $2.6 billion for other procurement programs in
fiscal year 1997.  As shown in table I.7, we identified potential
reductions of about $121.7 million to the fiscal year 1997 request. 
We did not identify any potential rescissions from prior years'
appropriations. 



                               Table I.7
                
                   Potential Reductions to Army Other
                          Procurement Programs

                         (Dollars in millions)


Li                                                              Potent
ne                                                                 ial
no                                                      Reques  reduct
.   Line item description                                    t     ion
--  --------------------------------------------------  ------  ------
6   Family of Heavy Tactical Vehicles                   $163.3  $2.141
                                                            43
7   Armored Security Vehicles (Combat Support)           9.240   0.285
55  Intelligence Electronic Warfare -Ground Based       47.091  47.091
     Common Sensors (TIARA)
57  Joint STARS (TIARA)                                 85.428  69.135
14  Modification of In-Service Equipment                14.696   3.000
 7
======================================================================
    Total                                               $319.7  $121.6
                                                            98      52
----------------------------------------------------------------------

         FAMILY OF HEAVY TACTICAL
         VEHICLES (LINE 6)
----------------------------------------------------- Appendix I:1.6.1

The Army's fiscal year 1997 request of $163.3 million for the Family
of Heavy Tactical Vehicles can be reduced by $2.1 million because
fiscal year 1997 requirements are overstated by $522,000 and $1.6
million in excess fiscal year 1996 funds is available to meet fiscal
year 1997 program requirements. 

The Army's fiscal year 1997 request for the Heavy Equipment
Transporter System included $1.7 million for government testing,
engineering support, and documentation.  However, the Army overstated
testing and engineering support requirements by $24,000 and $114,000,
respectively, and could not support its $384,000 estimate for
documentation.  Therefore, the fiscal year 1997 budget request for
the Family of Heavy Tactical Vehicles can be reduced by $522,000. 

The Army's fiscal year 1996 budget request for the Palletized Load
System--trucks, trailers, and flat racks--included $43.7 million to
buy
179 trucks; however, the Army bought only 173 trucks for $1.5 million
less than budgeted.  Similarly, the Army's fiscal year 1996 budget
request for the Heavy Equipment Transporter System included $667,000
for engineering support; however, this requirement was overstated by
$119,000.  The $1.6 million in excess fiscal year 1996 funds can be
used to offset the fiscal year 1997 request for the Family of Heavy
Tactical Vehicles. 


         ARMORED SECURITY VEHICLES
         (COMBAT SUPPORT) (LINE 7)
----------------------------------------------------- Appendix I:1.6.2

The Army's fiscal year 1997 request of $9.2 million for Armored
Security Vehicles can be reduced by $285,000 because the Army
overestimated fiscal year 1997 program requirements.  The Army
incorrectly applied inflation adjustments and, as a result,
overestimated fiscal year 1997 program requirements by $285,000. 
Therefore, the fiscal year 1997 budget request can be reduced by
$285,000. 


         INTELLIGENCE ELECTRONIC
         WARFARE-GROUND BASED
         COMMON SENSORS (TIARA)
         (LINE 55)
----------------------------------------------------- Appendix I:1.6.3

The Army's fiscal year 1997 request of $47.1 million for full-rate
production of six Ground Based Common Sensors can be denied because
the system has not successfully completed initial operational test
and evaluation.  Two preliminary operational tests of this
system--called customer tests--conducted by the Army in July 1994 and
September 1995 for a low-rate initial production decision revealed
that the system was effective.  However, these tests also revealed
that the system would work only occasionally, in the right
conditions.  According to the project manager, planned initial
operational test and evaluation and not the customer tests will be
used to support a full-rate production decision.  Committing a system
to production without successful completion of initial operational
testing can result, as we have previously reported, in the system
later having significant problems with operational effectiveness
and/or suitability, often requiring major design changes and costly
retrofits and sometimes resulting in deployment of substandard
systems to combat forces.  Therefore, we believe the fiscal year 1997
request can be denied until the system successfully completes initial
operational test and evaluation. 

DOD commented that the Army will not commit to full-rate production
before completion of initial operational test and evaluation,
scheduled for September 1996.  However, the Army has not established
key performance parameters for the minimum acceptable performance
levels, and DOD believes that the Army should establish such
parameters before conducting the final initial operational test and
evaluation.  Therefore, we continue to believe the reduction is
warranted for the reasons stated above. 


         JOINT STARS (TIARA)
         (LINE 57)
----------------------------------------------------- Appendix I:1.6.4

The Army's fiscal year 1997 request of $85.4 million for Joint STARS
can be reduced by $69.1 million if the Army commits to only 1 system
now and if it does not acquire the remaining 15 systems until
operational testing is completed.  The Army plans to start
operational test and evaluation on the Common Ground Stations systems
in fiscal year 1998.  It has already contracted for more systems than
are needed to conduct those tests without acquiring an additional 15
systems in fiscal year 1997. 

DOD believes that because the Common Ground System has the same
functional baseline as the Ground Station Module and, therefore, is
not an immature system, operational tests should pose few problems. 
Our concern with DOD's approach is that the Ground Station Module
passed only 1 of 12 performance related criteria during developmental
tests in 1994 and 1995.  Moreover, the Common Ground Station
operational testing is not scheduled to occur until fiscal year 1998. 
The risks of systems starting production before operational tests are
conducted include reliability that is significantly less than
expectations and systems that (1) cannot meet current specifications
and/or (2) require significant and expensive post fielding repairs
for faults identified during operational testing.  Furthermore, by
delaying procurement of the 15 systems until fiscal years 1998 and
1999, contract costs could be reduced by over $5 million because unit
prices of these systems will be lower in the future. 

DOD commented that (1) the Ground Station Module passed all critical
operational issues during a multiservice operational test and (2)
limiting the low-rate initial production quantities to those needed
for testing would cause a break in production, thereby offsetting any
savings we identified.  We determined, however, that (1) ground
targeting, one of four critical operational issues, was not tested
during the multiservice operational test; (2) DOD's Office of the
Director of Operational Test and Evaluation has not yet made a final
determination on the efficacy of the Ground Station Module; and (3)
the Army has not evaluated the effects of our proposal on production. 
Therefore, we continue to believe the reduction is warranted. 


         MODIFICATION OF
         IN-SERVICE EQUIPMENT
         (LINE 147)
----------------------------------------------------- Appendix I:1.6.5

The Army's fiscal year 1995 request of $14.7 million for modification
of in-service equipment can be reduced by $3 million because excess
fiscal year 1995 funds are available to meet fiscal year 1997 program
needs.  The Department of the Army is withholding these funds because
of a problem with the Logistics Support Vehicle.  The Army plans to
reprogram these funds for some other purpose, but a program official
said that, as of May 8, 1996, these funds remained unobligated and
would not be available for the vehicle.  Since the Army does not plan
to use these funds for the Logistics Support Vehicle in fiscal year
1996, they can be used to offset fiscal year 1997 program needs. 
Program officials said that as of June 7, 1996, the requirement for
the vehicle was still valid and will have to be funded in the future. 


   NAVY PROCUREMENT PROGRAMS
--------------------------------------------------------- Appendix I:2

The Navy requested $15.4 billion for procurement programs for itself
and the Marine Corps in fiscal year 1997.  As shown in table I.8, we
identified potential reductions of $2.3 billion to the fiscal year
1997 request and potential rescissions of $256.3 million from fiscal
year 1996 appropriations. 



                               Table I.8
                
                Potential Reductions and Rescissions to
                       Navy Procurement Programs

                         (Dollars in millions)


                                                Potent       Potential
                                                   ial      rescission
                                        Reques  reduct    (fiscal year
Procurement appropriation                  t\a     ion           1996)
--------------------------------------  ------  ------  --------------
Aircraft                                $2,487  $2,174        $229.715
                                          .862    .249
Weapons                                 37.852   5.568           3.500
Shipbuilding and Conversion             151.65  74.000          16.400
                                             5
Other                                   224.54  46.538           6.715
                                             9
Marine Corps                             6.052   2.600               0
======================================================================
Total                                   $2,907  $2,302        $256.330
                                          .970    .955
----------------------------------------------------------------------
\a This is the amount requested for budget line items for which we
have identified a potential reduction and/or rescission. 


      AIRCRAFT PROCUREMENT, NAVY
------------------------------------------------------- Appendix I:2.1

The Navy requested $5.9 billion for aircraft procurement programs in
fiscal year 1997.  As shown in table I.9, we identified potential
reductions of about $2.2 billion to the fiscal year 1997 request and
potential rescissions of $229.7 million from fiscal year 1996
appropriations. 



                               Table I.9
                
                 Potential Reductions and Rescission to
                   Navy Aircraft Procurement Programs

                         (Dollars in millions)


Li                                              Potent       Potential
ne                                                 ial      rescission
no                                      Reques  reduct    (fiscal year
.   Line item description                    t     ion           1996)
--  ----------------------------------  ------  ------  --------------
5   F/A-18E/F (Fighter) Hornet          $1,859  $1,859               0
                                          .856    .856
6   F/A-18E/F (Fighter) Hornet Advance  294.86  294.86        $229.715
     Procurement                             7       7
45  Common Electronic Countermeasures   20.069  12.026               0
     Equipment
48  Common Ground Equipment             313.07   7.500               0
                                             0
======================================================================
    Total                               $2,487  $2,174        $229.715
                                          .862    .249
----------------------------------------------------------------------

         F/A-18E/F (FIGHTER)
         HORNET (LINE 5)
----------------------------------------------------- Appendix I:2.1.1

The Navy's fiscal year 1997 request of $1.9 billion for the F/A-18E/F
aircraft can be denied if, as we have suggested, Congress does not
authorize the production of the aircraft.  The Navy justified the
need for the F/A-18E/F in three key areas where the F/A-18C/D
aircraft was expected to be deficient:  range, carrier recovery
payload, and survivability.  However, operational deficiencies in the
F/A-18C/Ds either have not materialized as projected or can be
corrected with nonstructural changes to the F/A-18C/D.  Furthermore,
F/A-18E/F operational capabilities will only be marginally improved
over the F/A-18C/D.  While the F/A-18E/F will have increased range
over the F/A-18C/D due to the F/A-18E/F's larger fuel capacity, the
F/A-18C/D's range in the high altitude mission profile that the F-18s
are expected to fly will exceed the range required by the F/A-18E/F's
system specifications.  Also, the F/A-18E/F's range increase is
achieved at the expense of its combat performance--it will have less
combat capability in its sustained turn rate, maneuvering, and
acceleration than F/A-18C/Ds with its enhanced performance engines. 
Although improvements are planned to increase the F/A-18E/F's
survivability in combat, the need for the aircraft was not justified
on the basis to counter threats that could not be met with existing
or improved F/A-18C/Ds; also, the effectiveness of the stealth
improvements planned for the F/A-18E/F is questionable.  Further, the
Navy's $44 million (fiscal year 1996 dollars) unit recurring flyaway
cost estimate for the F/A-18E/F is understated.  We have, therefore,
concluded that procuring the new F/A-18E/F aircraft is not the most
cost-effective approach to modernizing the Navy's tactical aircraft
fleet.\2

DOD commented that it had determined that the F/A-18E/F offered
better capability than the earlier F/A-18C/D in many areas.  However,
DOD did not provide new information or further rationale for its
position.  Therefore, we have not changed our position. 


--------------------
\2 Navy Aviation:  F/A-18E/F Will Provide Marginal Operational
Improvement at High Cost (GAO/NSIAD-96-98, June 18, 1996). 


         F/A-18E/F (FIGHTER)
         HORNET ADVANCE
         PROCUREMENT (LINE 6)
----------------------------------------------------- Appendix I:2.1.2

The Navy's fiscal year 1997 request of $294.9 million for F/A-18E/F
advance procurement can be denied and the $229.7 million fiscal year
1996 appropriation can be rescinded if Congress does not authorize
F/A-18E/F production.  We have advised the congressional defense
committees that we have concluded that procuring the new F/A-18E/F
aircraft is not the most cost-effective approach to modernizing the
Navy's tactical aircraft fleet.  Given the cost and marginal
improvements in operational capabilities that the F/A-18E/F would
provide, we have recommended that the Secretary of Defense reconsider
the decision to produce the F/A-18E/F aircraft and, instead, consider
procuring additional F/A-18C/Ds.  DOD disagreed with these proposed
reductions and rescissions for the same reasons as indicated in the
above section on the F/A-18E/F (line 5) and our rejoinder to DOD's
comment is the same. 


         COMMON ELECTRONIC
         COUNTERMEASURES EQUIPMENT
         (LINE 45)
----------------------------------------------------- Appendix I:2.1.3

The Navy's fiscal year 1997 request of $20.1 million for common
electronic countermeasures equipment can be reduced by $12 million. 
These funds, requested for the AIR-67(V)3 radar warning receiver, are
not needed because fiscal year 1996 funds are available to initiate
low-rate production, if DOD certifies the AIR-67(V)3 to be
potentially operationally effective and suitable as required by
Congress.  In fiscal year 1996, funds to initiate the procurement of
the radar warning receiver were included in the F/A-18C/D program. 
However, due to continued schedule slippage, operational testing is
not scheduled to be completed until the second quarter of fiscal year
1997. 

DOD commented that the funds will be needed to complete development
and testing prior to the low-rate initial production decision in
fiscal year 1998.  We continue to believe the reduction is warranted
because the Navy no longer needs the funds to initiate low-rate
initial production in fiscal year 1996. 


         COMMON GROUND EQUIPMENT
         (LINE 48)
----------------------------------------------------- Appendix I:2.1.4

The Navy's fiscal year 1997 request of $313.1 million for common
ground equipment can be reduced by $7.5 million because the Navy
Comptroller is withholding $7.5 million in excess fiscal year 1996
funds that can be used to offset fiscal year 1997 program
requirements.  According to the Navy Comptroller's office, the excess
funds are required in fiscal year 1997 and the President's budget
reflected use of these funds to support fiscal year 1997
requirements.  However, we could not verify the accuracy of the
Navy's position because the Navy did not provide data to support its
position.  Therefore, unless the Navy can demonstrate that it offset
its fiscal year 1997 budget requirements by the $7.5 million in
excess fiscal year 1996 funds, the Navy's fiscal year 1997 request
should be reduced by that amount. 

DOD did not agree with the reduction and provided documentation that
the funds could be used in fiscal year 1996 if they are released by
the Navy.  Pending release of the funds, we continue to believe the
funds can be used to offset fiscal year 1997 requirements. 


      WEAPONS PROCUREMENT, NAVY
------------------------------------------------------- Appendix I:2.2

The Navy requested $1.4 billion for weapons procurement programs in
fiscal year 1997.  As shown in table I.10, we identified potential
reductions of about $5.6 million to the fiscal year 1997 request and
a potential rescission of $3.5 million from the fiscal year 1996
appropriation. 



                               Table I.10
                
                 Potential Reductions and Rescission to
                   Navy Weapons Procurement Programs

                         (Dollars in millions)


Li                                              Potent       Potential
ne                                                 ial      rescission
no                                      Reques  reduct    (fiscal year
.   Line item description                    t     ion           1996)
--  ----------------------------------  ------  ------  --------------
6   Advanced Medium Range Air-to-Air    $36.09  $3.807               0
     Missile                                 1
24  MK-46 Torpedo Modifications          1.761   1.761          $3.500
======================================================================
    Total                               $37.85  $5.568          $3.500
                                             2
----------------------------------------------------------------------

         ADVANCED MEDIUM RANGE
         AIR-TO-AIR MISSILE (LINE
         6)
----------------------------------------------------- Appendix I:2.2.1

The Navy's fiscal year 1997 request of $36.1 million for the Advanced
Medium Range Air-to-Air Missile can be reduced by $3.8 million
because excess fiscal year 1996 funds are available to meet fiscal
year 1997 program requirements.  Excess funds are available because
the fiscal year 1996 contract was negotiated at $3.8 million less
than expected.  A Navy official said that the Navy Comptroller did
not release fiscal year 1996 appropriated funds identified as savings
from the fiscal year 1996 contract award.  According to the official,
the funds are being held to offset fiscal year 1997 requirements. 
However, our analysis of the budget did not reveal unfunded
requirements or shortfalls.  DOD did not agree with the reduction but
provided no new information or further rationale to support its
position. 


         MK-46 TORPEDO
         MODIFICATIONS (LINE 24)
----------------------------------------------------- Appendix I:2.2.2

The Navy's fiscal year 1997 request of $1.8 million for MK-46 torpedo
modifications can be denied, and $3.5 million in the fiscal year 1996
appropriation can be rescinded if this program is terminated.  Of the
$3.5 million, about $2 million is currently unobligated, and the
remaining $1.5 million has been deferred by the Navy Comptroller. 
The Navy's upgrade programs should be terminated because (1) they
will only marginally improve existing torpedoes' performance and (2)
the Navy is developing a new Hybrid lightweight torpedo that is
supposed to accomplish the same littoral warfare objectives as the
upgrade effort. 

Our recent classified report on Navy torpedo programs points out that
the Navy is upgrading its existing lightweight torpedoes--the MK-46
and the MK-50 Block II--to improve their performance against diesel
submarines in shallow, littoral waters.  Operational performance
tests have not yet been done for either upgraded torpedo.  Without
such tests, the Navy will not know whether the upgrades will improve
the torpedoes' effectiveness.  However, the Navy's simulation
analyses show that the upgrades would only marginally improve
effectiveness.  Additionally, the Navy is developing a new Hybrid
lightweight torpedo to improve its capability against diesel
submarines in shallow, littoral waters. 

DOD did not agree that the program should be terminated and stated
that the MK-46 upgrade provides a cost-effective means to achieve an
interim capability for shallow-water antisubmarine warfare prior to
the introduction of the Hybrid lightweight torpedo.  We continue to
believe the reduction is warranted given (1) the lack of operational
test data and (2) the expected capability of the new Hybrid
lightweight torpedo. 


      SHIPBUILDING AND CONVERSION,
      NAVY
------------------------------------------------------- Appendix I:2.3

The Navy requested $4.9 billion for shipbuilding and conversion
programs in fiscal year 1997.  As shown in table I.11, we identified
potential reductions of $74 million to the fiscal year 1997 request
and a potential rescission of $16.4 million from the fiscal year 1996
appropriation. 



                               Table I.11
                
                 Potential Reductions and Rescission to
                    Navy Shipbuilding and Conversion
                                Programs

                         (Dollars in millions)


Li                                              Potent       Potential
ne                                                 ial      rescission
no                                      Reques  reduct    (fiscal year
.   Line item description                    t     ion           1996)
--  ----------------------------------  ------  ------  --------------
13  AE(C)                               $59.66  $30.00               0
                                             5       0
15  Service Craft                            0       0         $16.400
16  Outfitting                          91.990  44.000               0
======================================================================
    Total                               $151.6  $74.00         $16.400
                                            55       0
----------------------------------------------------------------------

         AE(C) (LINE 13)
----------------------------------------------------- Appendix I:2.3.1

The Navy's fiscal year 1997 request of $59.7 million for conversion
of Kilauea Class/Suribachi Class ships can be reduced by $30 million
because an equivalent amount of excess fiscal year 1996 funds are
available to meet these requirements.  These funds are available
because contracts were to have been awarded in March and April 1996
for the conversion of two of seven ships that have to be converted by
the end of fiscal year 1998.  However, as of May 1996, the Navy
Comptroller was withholding these funds from this program for
potential reprogramming for Bosnia; therefore, it does not appear
likely that the contracts will be awarded.  Concomitantly, the Navy
has requested $59.7 million for this conversion program for fiscal
year 1997. 

DOD did not agree with the reduction stating that the funds will now
be used for fiscal year 1996 conversion efforts.  However, it did not
provide documentation to support the spending plans.  Unless the Navy
can demonstrate a fiscal year 1996 need for these funds, we believe
the funds can be used to offset the fiscal year 1997 request. 


         SERVICE CRAFT (LINE 15)
----------------------------------------------------- Appendix I:2.3.2

If Congress does not approve DOD's reprogramming request, the Navy's
fiscal year 1996 appropriation of $16.4 million for service craft can
be rescinded because the funds are no longer needed for the purpose
for which they were provided.  The Navy Comptroller has placed the
$16.4 million on hold pending reprogramming action.  Since the Navy
does not plan to use the $16.4 million for service craft in fiscal
year 1996 and did not request fiscal year 1997 funding for this item,
the excess fiscal year 1996 funds can be rescinded.  DOD included the
$16.4 million in its fiscal year 1996 omnibus reprogramming request. 


         OUTFITTING (LINE 16)
----------------------------------------------------- Appendix I:2.3.3

The Navy's fiscal year 1997 request of $92 million for outfitting can
be reduced by $44 million because the Navy Comptroller is withholding
$44 million in excess fiscal year 1996 funds that can be used to meet
fiscal year 1997 program requirements.  According to the Navy
Comptroller's office, these excess funds are required in fiscal year
1997 and the President's budget reflected use of these funds to
support fiscal year 1997 requirements.  However, we could not verify
the accuracy of the Navy's position because the Navy did not provide
data to support its position.  Therefore, unless the Navy can
demonstrate that it offset its fiscal year 1997 budget requirements
by the $44 million in excess fiscal year 1996 funds, the Navy's
fiscal year 1997 request should be reduced by that amount.  DOD did
not agree with the reduction but did not provide new information or
further rationale for its position. 


      OTHER PROCUREMENT, NAVY
------------------------------------------------------- Appendix I:2.4

The Navy requested $2.7 billion for other procurement programs in
fiscal year 1997.  As shown in table I.12, we identified potential
reductions of $46.5 million to the fiscal year 1997 request and
potential rescissions of $6.7 million from fiscal year 1996
appropriations. 



                               Table I.12
                
                Potential Reductions and Rescissions to
                    Navy Other Procurement Programs

                         (Dollars in millions)


Li                                              Potent       Potential
ne                                                 ial      rescission
no                                      Reques  reduct    (fiscal year
.   Line item description                    t     ion           1996)
--  ----------------------------------  ------  ------  --------------
2   Allison 501K Gas Turbine            $3.445  $3.033               0
4   Other Propulsion Equipment           7.922   6.080               0
5   Other Generators                     0.588   0.588          $0.912
25  Hull, Mechanical, and Electrical    35.545   5.141               0
     Items Under $2 Million
34  Standard Boats                       4.576   4.576           1.337
44  MK-23 Target Acquisition System      1.347   1.347           1.551
49  SSN Acoustics                       44.134  12.463               0
54  Surface Ship Torpedo Defense         5.701   5.101               0
60  AN/SLQ-32                            6.358   1.000               0
77  Enhanced Modular Signal Processor        0       0           1.060
     Multiyear Procurement
94  TADIX-B                              4.243   2.365               0
10  Submarine Communication Equipment   29.430   1.200               0
 9
14  Harpoon Support Equipment            0.097   0.097           1.855
 5
15  Rolling Airframe Missile Guided     50.765   2.124               0
 1   Missile Launch System
15  Aegis Support Equipment             30.398   1.423               0
 3
======================================================================
    Total                               $224.5  $46.53          $6.715
                                            49       8
----------------------------------------------------------------------

         ALLISON 501K GAS TURBINE
         (LINE 2)
----------------------------------------------------- Appendix I:2.4.1

The Navy's fiscal year 1997 request of $3.4 million for the Allison
501K gas turbine program can be reduced by $3 million because an
equivalent amount of excess fiscal year 1996 funds are available to
meet program requirements.  According to Navy Comptroller officials,
$3 million in fiscal year 1996 funds was not needed for the program
and was placed on hold pending the award of fiscal year 1997
contracts.  Since these funds will not be used for the Allison 501K
gas turbine program in fiscal year 1996, they can be used to offset
the fiscal year 1997 budget request.  DOD did not agree with this
proposed reduction stating that the President's budget reflected a $3
million reduction for slow program execution.  However, we were
unable to independently corroborate or verify that the $3 million
reduction was reflected in the President's budget because DOD did not
provide documentation or further rationale to support its position. 
Therefore, we continue to believe the reduction is warranted. 


         OTHER PROPULSION
         EQUIPMENT (LINE 4)
----------------------------------------------------- Appendix I:2.4.2

The Navy's fiscal year 1997 request of $7.9 million for other
propulsion equipment can be reduced by $6.1 million because an
equivalent amount of excess fiscal year 1996 funds is available to
meet program requirements.  Fiscal year 1997 budget documents show
that the fiscal year 1996 program needs $6.1 million less than the
amount provided.  According to officials in the Navy Comptroller
office, the excess funds are planned to be reprogrammed for the
Isotta Fraschini Diesel Improvement Program in support of the
Near-term Mine Warfare and Plan of Action and Milestones projects
initiated by the Chief of Naval Operations.  However, since these
funds will not be used for other propulsion equipment in fiscal year
1996, they can be used to offset the fiscal year 1997 budget request. 
DOD did not agree with the reduction but did not provide new
information or further rationale for its position. 


         OTHER GENERATORS (LINE 5)
----------------------------------------------------- Appendix I:2.4.3

If Congress does not approve DOD's reprogramming request, the Navy's
fiscal year 1997 request of $588,000 for other generators can be
denied because an equivalent amount of excess fiscal year 1996 funds
is available to meet program requirements, and $912,000 of the fiscal
year 1996 appropriation can be rescinded. 

The Navy Comptroller placed $1.7 million in fiscal year 1996 funds on
hold.  Comptroller officials told us that $202,000 is required for a
contract award, and that the remaining $1.5 million is available for
reprogramming.  DOD included the $1.5 million in its fiscal year 1996
omnibus reprogramming request.  However, since the $1.5 million is
excess to fiscal year 1996 program requirements, $588,000 can be used
to offset the fiscal 1997 request and the remaining $912,000 can be
rescinded. 


         HULL, MECHANICAL, AND
         ELECTRICAL ITEMS UNDER $2
         MILLION
         (LINE 25)
----------------------------------------------------- Appendix I:2.4.4

The Navy's fiscal year 1997 request of $35.5 million for hull,
mechanical, and electrical items under $2 million each can be reduced
by $5.1 million because an equivalent amount of excess fiscal year
1996 funds is available to meet program requirements.  Fiscal year
1997 budget documents show that the Navy needs $5.1 million less than
the amount provided for these items in fiscal year 1996.  Navy
Comptroller officials told us that Congress reduced this program by
$4.3 million in fiscal year 1996 and that the remaining $800,000 will
be used to support fiscal year 1997 requirements.  According to the
officials, the President's budget reflected use of these funds to
support fiscal year 1997 requirements.  However, we could not verify
the Navy's position because the Navy did not provide data to support
its position.  Therefore, unless the Navy can demonstrate that
Congress reduced the fiscal year 1996 appropriation by $4.3 million
and that the Navy offset its fiscal year 1997 budget requirements by
the $800,000 in excess fiscal year 1996 funds, the Navy's fiscal year
1997 request should be reduced by $5.1 million.  DOD did not agree
with the reduction but did not provide new information or further
rationale for its position. 


         STANDARD BOATS (LINE 34)
----------------------------------------------------- Appendix I:2.4.5

If Congress does not approve DOD's reprogramming request, the Navy's
fiscal year 1997 request of $4.6 million for standard boats can be
denied because an equivalent amount of excess fiscal year 1996 funds
is available to meet program requirements, and $1.3 million of the
fiscal year 1996 appropriation can be rescinded. 

The Navy Comptroller placed $5.9 million in fiscal year 1996 funds on
hold.  Officials in the Comptroller's office told us that $5.7
million of the withhold amount was available for reprogramming.  DOD
subsequently included the $5.7 million in its fiscal year 1996
omnibus reprogramming request.  According to the officials in the
Navy Comptroller's office, the remaining $200,000 will be used to
support fiscal year 1997 requirements and the President's budget
reflected use of the $200,000 to support fiscal year 1997
requirements.  However, we could not verify the Navy's position
because the Navy did not provide data to support its position.  Since
$5.7 million will not be used for standard boats in fiscal year 1996
and we could not verify that the Navy offset its fiscal year 1997
budget requirements by the $200,000 in excess fiscal year 1996 funds,
the Navy's fiscal year 1997 request should be reduced by $4.6 million
and the remaining $1.3 million can be rescinded. 


         MK-23 TARGET ACQUISITION
         SYSTEM (LINE 44)
----------------------------------------------------- Appendix I:2.4.6

The Navy's fiscal year 1997 request of $1.3 million for the MK-23
Target Acquisition System program can be denied because an equivalent
amount of excess fiscal year 1996 funds is available to meet program
requirements.  In addition, $1.6 million in excess fiscal year 1996
funds can be rescinded. 

The Navy Comptroller placed $2.9 million in fiscal year 1996 funds on
hold.  According to the Navy Comptroller's office, these excess funds
are required in fiscal year 1997 and the President's budget reflected
use of these funds to support fiscal year 1997 requirements. 
However, we could not verify the accuracy of the Navy's position
because the Navy did not provide data to support its position. 
Therefore, unless the Navy can demonstrate that it offset its fiscal
year 1997 budget requirements by the $2.9 million in excess fiscal
year 1996 funds, the Navy's fiscal year 1997 request can be reduced
by $1.3 million and the remaining $1.6 million can be rescinded.  DOD
did not agree with the proposed reduction but did not provide new
information or further rationale for its position. 


         SSN ACOUSTICS (LINE 49)
----------------------------------------------------- Appendix I:2.4.7

If Congress does not approve DOD's reprogramming request, the Navy's
fiscal year 1997 request of $44.1 million for the SSN acoustics
program can be reduced by about $12.5 million because an equivalent
amount of excess fiscal year 1996 funds is available to meet program
requirements.  Fiscal year 1997 budget documents show that the
program needs $40.9 million for fiscal year 1996, or about $1 million
less than the adjusted amount provided for the program.  Also, the
Navy Comptroller is withholding $11.4 million in fiscal year 1996
funds and plans to reprogram these funds to higher priority programs. 
DOD included about $10.3 million of the excess fiscal year 1996 funds
in its fiscal year 1996 omnibus reprogramming request.  However,
since these funds are not needed for the SSN acoustics program in
fiscal year 1996, they can be used to offset the Navy's fiscal year
1997 budget request. 


         SURFACE SHIP TORPEDO
         DEFENSE (LINE 54)
----------------------------------------------------- Appendix I:2.4.8

If Congress does not approve DOD's reprogramming request, the Navy's
fiscal year 1997 request of $5.7 million for the Surface Ship Torpedo
Defense program can be reduced by $5.1 million because an equivalent
amount of excess fiscal year 1996 funds is available to meet program
requirements.  The Navy Comptroller placed $5.1 million in fiscal
year 1996 funds on hold.  According to the Navy Comptroller's office,
these excess funds are required in fiscal year 1997 and the
President's budget reflected use of these funds to support fiscal
year 1997 requirements.  However, we could not verify the accuracy of
the Navy's position because the Navy did not provide data to support
its position.  Therefore, unless the Navy can demonstrate that it
offset its fiscal year 1997 budget requirements by the $5.1 million
in excess fiscal year 1996 funds, the Navy's fiscal year 1997 request
should be reduced by that amount. 

DOD commented that the President's budget reflected a $4.2 million
reduction for slow program execution and provided documentation that
$900,000 in excess fiscal year 1996 funds were included in the fiscal
year 1996 omnibus reprogramming request.  Because DOD did not provide
new information or further rationale for its position on the $4.2
million reduction, we believe the Navy's fiscal year 1997 request can
be reduced by $5.1 million if the $900,000 is not reprogrammed. 


         AN/SLQ-32 (LINE 60)
----------------------------------------------------- Appendix I:2.4.9

The Navy's fiscal year 1997 request of $6.4 million for the AN/SLQ-32
program can be reduced by $1 million because an equivalent amount of
excess fiscal year 1996 funds is available to meet program
requirements.  The Navy Comptroller placed $1 million in fiscal year
1996 funds on hold.  According to the Navy Comptroller's office,
these excess funds are required in fiscal year 1997 and the
President's budget reflected use of these funds to support fiscal
year 1997 requirements.  However, we could not verify the accuracy of
the Navy's position because the Navy did not provide data to support
its position.  Therefore, unless the Navy can demonstrate that it
offset its fiscal year 1997 budget requirements by the $1 million in
excess fiscal year 1996 funds, the Navy's fiscal year 1997 request
should be reduced by that amount.  DOD did not agree with the
reduction but did not provide new information or further rationale
for its position. 


         ENHANCED MODULAR SIGNAL
         PROCESSOR MULTIYEAR
         PROCUREMENT (LINE 77)
---------------------------------------------------- Appendix I:2.4.10

Of the Navy's fiscal year 1996 appropriation for the Enhanced Modular
Signal Processor multiyear procurement program, $1.1 million can be
rescinded because these funds are excess to program requirements. 
Fiscal year 1997 budget documents show that the program needs only
$25.3 million for fiscal year 1996, or $1.1 million less than the
amount provided.  Since the Navy does not plan to buy additional
processors in fiscal year 1997, the $1.1 million in excess fiscal
year 1996 funds can be rescinded.  DOD did not agree with the
reduction stating the fiscal year 1996 program was reduced by $1.1
million to reflect undistributed congressional reductions, but this
does not indicate excess funds based on reduced requirements.  No
documentation or further rationale was provided to support its
position. 


         TADIX-B (LINE 94)
---------------------------------------------------- Appendix I:2.4.11

If Congress does not approve DOD's reprogramming request, the Navy's
fiscal year 1997 request of $4.2 million for the TADIX-B program can
be reduced by $2.4 million because an equivalent amount of excess
fiscal year 1996 funds is available to meet program requirements. 
Navy Comptroller officials told us that $2.4 million in unobligated
fiscal year 1996 funds is on hold pending the fiscal year 1996
omnibus reprogramming request for higher priority items.  DOD
subsequently included $2 million of the excess fiscal year 1996 funds
in its fiscal year 1996 omnibus reprogramming request.  However,
officials from the Navy Comptroller's office said the requirement for
TADIX-B terminals will continue.  Because the $2.4 million will not
be used for the TADIX-B program in fiscal year 1996, it can be used
to offset the fiscal year 1997 budget request if the reprogramming
request is not approved.  If it is approved, $400,000 could be still
used to offset the budget request. 


         SUBMARINE COMMUNICATION
         EQUIPMENT (LINE 109)
---------------------------------------------------- Appendix I:2.4.12

If Congress does not approve DOD's reprogramming request, the Navy's
fiscal year 1997 request of $29.4 million for submarine
communications equipment can be reduced by $1.2 million because an
equivalent amount of excess fiscal year 1996 funds is available to
meet program requirements.  Navy Comptroller officials told us that
$1.2 million in unobligated fiscal year 1996 funds is on hold pending
the fiscal year 1996 omnibus reprogramming request for higher
priority programs.  DOD subsequently included this amount in its
fiscal year 1996 omnibus reprogramming request.  However, Navy
Comptroller officials said the requirement for which the funds were
originally provided is still valid.  Since the Navy does not plan to
use these funds for submarine communications equipment in fiscal year
1996, they can be used to offset the fiscal year 1997 budget request. 


         HARPOON SUPPORT EQUIPMENT
         (LINE 145)
---------------------------------------------------- Appendix I:2.4.13

The Navy's fiscal year 1997 request of $97,000 for the Harpoon
support equipment can be denied because an equivalent amount of
excess fiscal year 1996 funds is available to meet program
requirements, and $1.9 million of the $2.9 million fiscal year 1996
appropriation can be rescinded. 

The Navy Comptroller placed $2 million in unobligated fiscal year
1996 funds on hold.  According to the Navy Comptroller's office,
these excess funds are required in fiscal year 1997 and the
President's budget reflected use of these funds to support fiscal
year 1997 requirements.  However, we could not verify the accuracy of
the Navy's position because the Navy did not provide data to support
its position.  Therefore, unless the Navy can demonstrate that it
offset its fiscal year 1997 budget requirements by the $2 million in
excess fiscal year 1996 funds, the Navy's fiscal year 1997 request
should be denied and the remaining $1.9 million can be rescinded. 
DOD did not agree with the reduction but did not provide new
information or further rationale for its position. 


         ROLLING AIRFRAME MISSILE
         GUIDED MISSILE LAUNCH
         SYSTEM
         (LINE 151)
---------------------------------------------------- Appendix I:2.4.14

The Navy's fiscal year 1997 request of $50.8 million for the Rolling
Airframe Missile Guided Missile Launch System program can be reduced
by $2.1 million because an equivalent amount of excess fiscal year
1996 funds is available to meet program requirements.  The Navy
Comptroller placed $2.1 million in fiscal year 1996 funds on hold. 
According to the Navy Comptroller's office, these excess funds are
required in fiscal year 1997 and the President's budget reflected use
of these funds to support fiscal year 1997 requirements.  However, we
could not verify the accuracy of the Navy's position because the Navy
did not provide data to support its position.  Therefore, unless the
Navy can demonstrate that it offset its fiscal year 1997 budget
requirements by the $2.1 million in excess fiscal year 1996 funds,
the Navy's fiscal year 1997 request should be reduced by that amount. 
DOD did not agree with the reduction but did not provide new
information or further rationale for its position. 


         AEGIS SUPPORT EQUIPMENT
         (LINE 153)
---------------------------------------------------- Appendix I:2.4.15

The Navy's fiscal year 1997 request of $30.4 million for the Aegis
Support Equipment program can be reduced by $1.4 million because an
equivalent amount of excess fiscal year 1996 funds is available to
meet program requirements.  Fiscal year 1997 budget documents show
that the program needs $1.4 million less than the amount provided for
fiscal year 1996.  The Navy Comptroller placed $953,000 of the fiscal
year 1996 funds on hold.  According to the Navy Comptroller's office,
these excess funds are required in fiscal year 1997 and the
President's budget reflected use of these funds to support fiscal
year 1997 requirements.  However, we could not verify the accuracy of
the Navy's position because the Navy did not provide data to support
its position.  Therefore, unless the Navy can demonstrate that it
offset its fiscal year 1997 budget requirements by the $1.4 million
in excess fiscal year 1996 funds, the Navy's fiscal year 1997 request
should be reduced by that amount.  DOD did not agree with the
reduction but did not provide new information or further rationale
for its position. 


      PROCUREMENT, MARINE CORPS
------------------------------------------------------- Appendix I:2.5

The Marine Corps requested $555.5 million for procurement programs in
fiscal year 1997.  As shown in table I.13, we identified a potential
reduction of $2.6 million to the fiscal year 1997 request for one
item.  We did not identify any potential rescissions to prior years
appropriations. 



                               Table I.13
                
                Potential Reduction to the Marine Corps
                          Procurement Programs

                         (Dollars in millions)


Li                                                              Potent
ne                                                                 ial
no                                                      Reques  reduct
.   Line item description                                    t     ion
--  --------------------------------------------------  ------  ------
3   .50 Caliber                                         $6.052  $2.600
======================================================================
    Total                                               $6.052  $2.600
----------------------------------------------------------------------

         .50 CALIBER (LINE 3)
----------------------------------------------------- Appendix I:2.5.1

The Marine Corps' fiscal year 1997 request of $6.1 million for .50
caliber ammunition can be reduced by $2.6 million because an
equivalent amount of excess fiscal year 1996 funds in the Procurement
of Ammunition, Navy and Marine Corps appropriation is available to
meet program needs. 

Program office officials told us that the planned fiscal year 1996
buy of
.50 caliber ball linked ammunition would have caused the Marine Corps
to exceed the acquisition objective for this item.  The Navy
Comptroller placed the $2.6 million in excess fiscal year 1996 funds
on hold pending a review of program requirements.  The Navy plans to
reprogram the $2.6 million in fiscal year 1996 funds for a nonlethal
weapons program.  The Under Secretary of Defense for Acquisition and
Technology directed the services to implement the nonlethal weapons
program in March 1996.  Since these funds are no longer needed for
.50 caliber linked ammunition in fiscal year 1996, they can be used
to offset fiscal year 1997 requirements.  DOD did not agree with the
reduction but did not provide new information or further rationale
for its position. 


   AIR FORCE PROCUREMENT PROGRAMS
--------------------------------------------------------- Appendix I:3

The Air Force requested $14.5 billion for procurement programs in
fiscal year 1997.  As shown in table I.14, we identified potential
reductions of $460.1 million to the fiscal year 1997 request, a
potential rescission of $8.6 million from the fiscal year 1996
appropriation, and potential rescissions of $26.7 million from the
expiring fiscal year 1994 appropriation. 



                               Table I.14
                
                Potential Reductions and Rescissions to
                     Air Force Procurement Programs

                         (Dollars in millions)


                              Potent
                                 ial     Fiscal
Procurement           Reques  reduct       year       Fiscal year
appropriation            t\a     ion       1996          1994
--------------------  ------  ------  ---------  ---------------------
Aircraft              $1,262  $321.0     $8.600            0
                        .827      97
Missile               1,207.  139.00          0         $20.500
                         252       9
Other                 16.144       0          0          6.200
======================================================================
Total                 $2,486  $460.1     $8.600         $26.700
                        .223      06
----------------------------------------------------------------------
\a This is the amount requested for budget line items for which we
have identified a potential reduction and/or rescission. 


      AIRCRAFT PROCUREMENT, AIR
      FORCE
------------------------------------------------------- Appendix I:3.1

The Air Force requested $5.8 billion for aircraft procurement
programs in fiscal year 1997.  As shown in table I.15, we identified
potential reductions of about $321.1 million to the fiscal year 1997
request and a potential rescission of $8.6 million from the fiscal
year 1996 appropriation. 



                               Table I.15
                
                 Potential Reductions and Rescission to
                Air Force Aircraft Procurement Programs

                         (Dollars in millions)


Li                                              Potent       Potential
ne                                                 ial      rescission
no                                      Reques  reduct    (fiscal year
.   Line item description                    t     ion           1996)
--  ----------------------------------  ------  ------  --------------
12  C-130J                              $62.89  $62.89               0
                                             0       0
14  Joint Primary Aircraft Training     67.135  67.135          $8.600
     System
18  C-20A                               113.80  13.700               0
                                             5
28  F-15 Aircraft Modifications         179.31  22.300               0
                                             8
60  Aircraft Spares                     314.74  116.20               0
                                             5       0
61  Common Aerospace Ground Equipment   176.42  16.179               0
                                             2
63  F-16 Post Production Support        81.562  10.654               0
66  War Consumables                     56.296   4.039               0
67  Miscellaneous Production Charges    210.65   8.000               0
                                             4
======================================================================
    Total                               $1,262  $321.0          $8.600
                                          .827      97
----------------------------------------------------------------------

         C-130J (LINE 12)
----------------------------------------------------- Appendix I:3.1.1

The Air Force's fiscal year 1997 request of $62.9 million for a
C-130J aircraft can be denied if the Air Force postpones the C-130J
procurement to fiscal year 1998.  According to a program budget
document, the fiscal year 1998 cost includes a quantity discount that
starts with the procurement of two or more aircraft.  For example,
the average airframe unit cost is projected to decrease from $51.9
million for one aircraft in fiscal year 1997 to $43.6 million for two
aircraft in fiscal year 1998.  Because the C-130J is also produced
under foreign military sales contracts, postponing procurement until
fiscal year 1998 will not cause a break in production.  DOD did not
agree with the reduction stating that the fiscal year 1997 C-130J buy
will be more than one aircraft.  However, it only requested funding
for one aircraft and did not provide new information on its
procurement plans. 


         JOINT PRIMARY AIRCRAFT
         TRAINING SYSTEM (LINE 14)
----------------------------------------------------- Appendix I:3.1.2

The Air Force's fiscal year 1997 request of $67.1 million for the
Joint Primary Aircraft Training System can be denied because an
equivalent amount of prior year funds is available to meet fiscal
year 1997 program requirements. 

Program officials stated that the fiscal year 1995 and 1996 budget
requests and subsequent appropriations were set at levels to cover
the planned quantity and expected unit prices for several contractors
who submitted bids on the contract.  However, the Air Force
contracted for the approved quantity at a unit price lower than
anticipated.  The differences between the funds provided and those
needed are $40.5 million for fiscal year 1995 and $35.2 million for
fiscal year 1996.  The Air Force can use these excess funds to offset
the fiscal year 1997 request, and the $8.6 million balance can be
rescinded from either fiscal year 1995 or 1996.  DOD commented that
the excess funds have already been identified to Congress as a source
for other high priority needs and are not available to the Air Force. 
Nevertheless, the excess funds were provided for procuring the Joint
Primary Aircraft Training System and could be used to offset fiscal
year 1997 requirements. 


         C-20A (LINE 18)
----------------------------------------------------- Appendix I:3.1.3

The Air Force's fiscal year 1997 request of $113.8 million for the
C-20A aircraft, or Small VCX, can be reduced by $13.7 million because
the fiscal year 1997 requirement is overstated.  The operational
requirements document, which is being prepared, defines an Air Force
requirement for
2 small, commercial, 12-passenger business-type jets equipped with
commercial communications equipment.  The budget request, however,
includes $10 million for design and development of a more robust
communication suite.  A program official stated that the $10 million
was included as a contingency in case Headquarters, Air Force,
revised the requirements documents to include a more robust suite;
or, alternatively, a potential contractor submitted a proposal for a
larger commercial type aircraft.  Further, although this is to be a
commercial off-the-shelf type procurement, the request includes $3.7
million for engineering change proposals.  A program official stated
that engineering changes may be needed to incorporate commercial
service bulletins that could be issued while the aircraft is being
produced. 

DOD commented that the $13.7-million requirement was based on
industry estimates for mission configuration changes and known
communications modification needs.  However, program officials told
us they were not aware of these needs and could provide no
documentation to support DOD's position.  Therefore, we continue to
believe the reduction is warranted. 


         F-15 AIRCRAFT
         MODIFICATIONS (LINE 28)
----------------------------------------------------- Appendix I:3.1.4

The Air Force's fiscal year 1997 request of $33.7 million for the
Multifunctional Information Distribution System/fighter data link
program, included in this budget line, can be reduced by $22.3
million because fiscal year 1997 requirements are overstated.  The
remaining $11.4 million is needed to complete the qualification
efforts of prototype systems ($4 million) and for a simulator upgrade
($7.4 million). 

The Air Force planned to award the fiscal year 1997 modification
contract for this data link during the first quarter of fiscal year
1997.  However, because of a schedule slip, contract award has
slipped to November 1997, or the first quarter of fiscal year 1998. 
Therefore, not all of the fiscal year 1997 funding is needed.  DOD
agreed with the reduction. 


         AIRCRAFT SPARES (LINE 60)
----------------------------------------------------- Appendix I:3.1.5

The Air Force's fiscal year 1997 request of $314.7 million for
aircraft spares can be reduced by $116.2 million--$36 million for
C-17 spares, $44.9 million for B-2 spares, and $35.3 million for
other spares--because excess fiscal year 1994, 1995, and 1996 funds
are available to meet program requirements. 

The Air Force's fiscal year 1997 request of $61.4 million for C-17
aircraft spares can be reduced by $36 million because the Air Force
has excess prior year funds that Air Force officials informed us will
be used to offset fiscal year 1997 requirements.  Program officials
agreed that they do not need about $36 million for C-17 spares in
fiscal year 1997.  However, they disagreed with the reduction,
stating that they would like to use the excess funds for future
requirements and a reduction would require them to reduce other
critical needs in future years.  Nevertheless, the $36 million is not
needed in fiscal year 1997 and can be requested when needed in the
future. 

The Air Force's fiscal year 1997 request of $44.9 million for B-2
aircraft spares can be denied and other fiscal year 1997 aircraft
spares requests can be reduced by $35.3 million because the Air Force
overestimated the amount of funds required to reimburse the stock
fund by $80.2 million for fiscal years 1994 through 1997.  Program
officials agreed that the B-2 program will have $80.2 million in
excess spares funding if the fiscal year 1997 B-2 spares request is
approved. 

DOD disagreed with the proposed reduction and provided data on C-17
and B-2 spares requirements.  In analyzing this data, we determined
that our initial conclusion on the amount of excess funds for B-2
spares was understated; therefore, we have modified that portion of
the proposed reduction. 


         COMMON AEROSPACE GROUND
         EQUIPMENT (LINE 61)
----------------------------------------------------- Appendix I:3.1.6

The Air Force's fiscal year 1997 request of $176.4 million for common
aerospace ground equipment can be reduced by $16.2 million because
excess fiscal year 1996 funds are available to meet fiscal year 1997
program requirements.  The Air Force received $16.2 million in fiscal
year 1996 funding to purchase 231 self-generating nitrogen systems. 
The systems did not meet specifications and, as a result, the Air
Force will not procure them during fiscal year 1996 or 1997.  Air
Force officials disagreed that these funds are excess and stated that
they could be used for other requirements.  DOD did not agree with
the reduction but did not provide new information or further
rationale for its position. 


         F-16 POST PRODUCTION
         SUPPORT (LINE 63)
----------------------------------------------------- Appendix I:3.1.7

The Air Force's fiscal year 1997 request of $81.6 million for F-16
post production support can be reduced by $10.7 million because the
fiscal year 1997 request is overstated by $6.7 million and $4 million
in excess fiscal year 1996 funds are available to offset the request. 

The Air Force included $4 million for F-16 sustainment costs in both
the fiscal year 1996 F-16 Aircraft Procurement and F-16 Post
Production Support budget lines.  F-16 program officials agreed that
the same costs were counted twice.  Also, assuming no further F-16
procurement would be authorized, the Air Force's fiscal year 1997
request for post production support included termination costs for
the F-16 aircraft production contract.  However, the Air Force has
decided to continue F-16 production well into the year 2000;
therefore, fiscal year 1997 funding for termination costs is no
longer justified.  The program office agreed that the fiscal year
1997 request was overstated by $6.7 million. 

DOD commented that the excess funds are needed to support F-16
procurement; however, it did not provide new information or further
rationale for its position.  Therefore, we continue to believe the
reduction is warranted. 


         WAR CONSUMABLES (LINE 66)
----------------------------------------------------- Appendix I:3.1.8

The Air Force's fiscal year 1997 request of $56.3 million for war
consumables can be reduced by $4 million because fiscal year 1997
requirements are overstated.  The Air Force planned to purchase 158
inboard pylons as war reserves for F-15E aircraft at a unit price of
$130,532.  However, after submitting the fiscal year 1997 budget
request, the Air Force determined that existing pylons could be
retrofitted at an estimated cost of $93,700 per retrofit. 

According to the Air Force Material Command officials, the Air Force
has a requirement for 177 pylons rather than 158.  Therefore, they
recommended increasing the retrofit quantity to 177 to meet the total
requirement.  Retrofitting 177 pylons will cost $16.6 million, rather
than the $20.6 million requested and, therefore, the fiscal year 1997
request can be reduced by $4 million.  DOD agreed with the reduction. 


         MISCELLANEOUS PRODUCTION
         CHARGES (LINE 67)
----------------------------------------------------- Appendix I:3.1.9

The Air Force's fiscal year 1997 request of $40.2 million for the
NAVSTAR Global Positioning System, included in this budget line, can
be reduced by $8 million because an equivalent amount of excess
fiscal year 1995 funds is available to meet program needs. 

The Air Force overestimated the amount of funding required for
testing in fiscal year 1995 by $8 million.  A recent internal review
by the program office identified these funds as excess after
reviewing program requirements.  Although DOD commented that it
included these excess funds in the fiscal year 1996 omnibus
reprogramming request, the funds were not included.  Therefore, we
have not changed our position. 


      MISSILE PROCUREMENT, AIR
      FORCE
------------------------------------------------------- Appendix I:3.2

The Air Force requested $2.7 billion for missile procurement programs
in fiscal year 1997.  As shown in table I.16, we identified potential
reductions of $139 million to the fiscal year 1997 request and $20.5
million in potential rescissions from expiring fiscal year 1994
appropriations. 



                               Table I.16
                
                Potential Reductions and Rescissions to
                 Air Force Missile Procurement Programs

                         (Dollars in millions)


Li                                              Potent       Potential
ne                                                 ial      rescission
no                                      Reques  reduct    (fiscal year
.   Line item description                    t     ion           1994)
--  ----------------------------------  ------  ------  --------------
7   Advanced Medium Range Air-to-Air    $116.2  $8.400               0
     Missile                                99
20  Global Positioning (Multiyear       171.13       0          $5.000
     Procurement) Space                      5
23  Space Shuttle Operations Space      52.500  10.800               0
24  Space Boosters Space                489.60  40.800               0
                                             6
25  Medium Launch Vehicle Space         135.36   4.000           2.500
                                             1
26  Medium Launch Vehicle Space         40.238   9.050               0
     Advance Procurement
28  Defense Support Program (Multiyear  70.967  62.900          13.000
     Procurement) Space
48  Sensor Fuzed Weapon                 131.14   3.059               0
                                             6
======================================================================
    Total                               $1,207  $139.0         $20.500
                                          .252      09
----------------------------------------------------------------------

         ADVANCED MEDIUM RANGE
         AIR-TO-AIR MISSILE (LINE
         7)
----------------------------------------------------- Appendix I:3.2.1

The Air Force's fiscal year 1997 request of $116.3 million for the
Advanced Medium Range Air-to-Air Missile can be reduced by $8.4
million because fiscal year 1997 requirements are overstated by $5.4
million and, unless Congress approves DOD's reprogramming request, $3
million in excess fiscal year 1995 funds is available to meet fiscal
year 1997 program needs. 

The Air Force's fiscal year 1997 request can be reduced by $5.4
million because of schedule changes for beginning upgrades for depot
equipment and initial overestimates of engineering change orders. 
Funding for the depot upgrades to provide a capability to test
missiles with product improvements can be reduced by $2.3 million
because the Air Force does not plan to begin the upgrade until fiscal
year 1998.  Therefore, the Air Force can request the $2.3 million in
its fiscal year 1998 budget submission.  The program office agreed. 
Funding for engineering change orders can be reduced by $3.1 million
because in previous Advanced Medium Range Air-to-Air Missile budget
requests and in accordance with Air Force guidance, the program
office used recurring missile hardware cost to estimate the
engineering change orders.  However, for fiscal year 1997, the
program office based its estimate on total fly-away costs, which
include nonrecurring costs such as production test and support,
technical services, and value engineering, in addition to the
recurring hardware cost.  Using total fly-away costs overstated the
fiscal year 1997 funding requirement by $3.1 million.  Program office
officials stated this missile is a complex weapon system that
justifies increased funds for engineering change orders.  However,
the Air Force has purchased over 6,000 missiles and will award the
11th contract for missiles in fiscal year 1997.  In addition, other
Air Force programs use a lower percentage for estimating engineering
changes. 

If Congress does not approve DOD's reprogramming request, the Air
Force's fiscal year 1997 request can be reduced by an additional $3
million because an equivalent amount of excess fiscal year 1995 funds
is available to meet program requirements.  The missile's program
office identified $3 million in fiscal year 1995 funds as excess to
program requirements.  According to program officials, the funds were
requested for engineering changes but were not required for that
purpose.  DOD included the funds in its fiscal year 1996 omnibus
reprogramming request.  However, they could be used to offset fiscal
year 1997 requirements. 

DOD agreed that the fiscal year 1997 request is overstated by $2.3
million but did not agree with the $3.1-million reduction for
engineering change orders.  DOD stated that this would reduce funding
for these changes to an inadequate level.  However, our estimates are
based on the same factors provided by the program office and we
followed the same methodology used by the Air Force in prior years. 
Therefore, we continue to believe that the Air Force overstated its
funding needs


         GLOBAL POSITIONING
         (MULTIYEAR PROCUREMENT)
         SPACE (LINE 20)
----------------------------------------------------- Appendix I:3.2.2

If Congress does not approve DOD's reprogramming request, $5 million
can be rescinded from the Air Force's fiscal year 1994 appropriation
of $171.8 million for the NAVSTAR Global Positioning System because
the funds are no longer needed for the Block IIR program.  The $5
million in excess fiscal year 1994 funds will expire if not obligated
by September 30, 1996, and, therefore, is available for reprogramming
or rescission during the remainder of fiscal year 1996.  DOD included
these excess funds in its fiscal year 1996 omnibus reprogramming
request. 


         SPACE SHUTTLE OPERATIONS
         SPACE (LINE 23)
----------------------------------------------------- Appendix I:3.2.3

The Air Force's fiscal year 1997 request of $52.5 million for the
Inertial Upper Stage Program can be reduced by $10.8 million because
excess fiscal year 1995 and 1996 funds are available to meet program
requirements.  Fiscal year 1995 funds are available because,
according to program officials, $6 million was budgeted for
unanticipated problems that did not occur because of a near perfect
fiscal year 1995 launch.  These funds can be used to offset fiscal
year 1997 requirements.  In addition, program officials plan to
obligate $35.7 million of $40.5 million provided in fiscal year 1996
for the integration and launch services production contract and use
the remaining $4.8 million for unanticipated problems.  However, the
program office has an additional $5.1 million in fiscal year 1996
management reserve funds for similar purposes.  Therefore, the excess
$4.8 million in fiscal year 1996 funds can also be used to reduce the
fiscal year 1997 budget request.  DOD did not agree with the
reduction but did not provide new information or further rationale
for its position. 


         SPACE BOOSTERS SPACE
         (LINE 24)
----------------------------------------------------- Appendix I:3.2.4

The Air Force's fiscal year 1997 budget request of $489.6 million for
Space Boosters Space can be reduced by $40.8 million because fiscal
year 1997 requirements are overstated by $20.8 million and, unless
Congress approves DOD's reprogramming request, $20 million in excess
fiscal year 1996 funds is available to meet fiscal year 1997 program
needs.  These reductions are possible because (1) funds associated
with nonrecurring costs for follow-on procurement are not needed at
this time, (2) funds for launch operations are to be augmented by a
classified user, (3) contract award for launch site support was
delayed, and (4) production contract costs were lower than expected. 

According to Air Force program officials, the $69.8 million requested
for the follow-on Titan IV procurement of two vehicles (numbers 42
and 43) included $28.4 million for nonrecurring costs associated with
five additional launch vehicles (numbers 42 through 46).  The Air
Force is re-evaluating its acquisition strategy for this follow-on
procurement and does not plan to have the results until April 1997. 
Funds for the last two vehicles (numbers 45 and 46) would not
normally be needed until fiscal years 1999 and 2000, respectively,
and there is no justification for accelerating this effort.  The
nonrecurring effort associated with these last two vehicles is
estimated at $11.4 million and, therefore, the fiscal year 1997
budget request can be reduced by this amount. 

The fiscal year 1997 request of $127.1 million for Titan IV launch
operations was based on plans to receive $83 million from a
classified user.  However, subsequent to the budget submission, the
Air Force revised the cost-sharing arrangement between the Air Force
and the classified user for launch operations, increasing the amount
of funds to be provided by the classified user by $9.4 million, or a
total of $92.4 million.  According to Air Force program officials,
launch operation requirements did not increase in connection with
this adjustment, nor did the Air Force reduce its launch operations
request by an equivalent amount.  The Air Force now plans to use this
additional $9.4 million for Titan IV follow-on production and
contract close-out costs and not for launch operations; therefore,
these funds can be used to reduce the fiscal year 1997 budget
request. 

Additionally, DOD included $20 million in excess fiscal year 1996
funds in its fiscal year 1996 omnibus reprogramming request.  These
funds are no longer needed because of a delay in the award of a
contract for launch site support ($17.3 million) and lower than
expected claims against the production contract ($2.7 million).  If
Congress does not approve DOD's reprogramming request, the funds can
be used to offset the fiscal year 1997 request. 

DOD commented that the fiscal year 1997 request did not include $11.4
million for nonrecurring costs for Titan IV and the additional $9.4
million was received to offset higher than expected negotiated values
for new production and launch operations contracts.  However, DOD did
not provide new documentation or further rationale for its position. 


         MEDIUM LAUNCH VEHICLE
         SPACE (LINE 25)
----------------------------------------------------- Appendix I:3.2.5

The Air Force's fiscal year 1997 request of $135.4 million for the
Medium Launch Vehicle Space can be reduced by $4 million because
excess fiscal year 1996 funds are available to meet program
requirements.  Program officials stated that the Air Force budgeted
an additional $4 million in fiscal year 1996 for launch pad repair
work that can be funded by expiring prior year funds.  These excess
fiscal year 1996 funds can be used to offset the fiscal year 1997
request. 

In addition, if Congress does not approve DOD's reprogramming
request, $2.5 million can be rescinded from the fiscal year 1994
appropriation of $109.5 million for the Medium Launch Vehicles
because the Delta II Medium Launch Vehicle program has $2.5 million
in fiscal year 1994 funds that are excess to program needs.  Program
officials stated that although $5.5 million was budgeted for launch
pad repair work, the current estimated cost of the work is only $3
million.  The resulting $2.5 million in excess fiscal year 1994 funds
will expire if not obligated by September 30, 1996, and, therefore,
is available for reprogramming or rescission during the remainder of
fiscal year 1996.  DOD included the $2.5 million in its fiscal year
1996 omnibus reprogramming request. 


         MEDIUM LAUNCH VEHICLE
         SPACE ADVANCE PROCUREMENT
         (LINE 26)
----------------------------------------------------- Appendix I:3.2.6

If Congress does not approve DOD's reprogramming requests, the Air
Force's fiscal year 1997 request of $40.2 million for the Delta II
Medium Launch Vehicle can be reduced by about $9.1 million because
excess fiscal year 1996 funds are available to meet program
requirements.  Program officials stated that the funds were for
advance procurement of long lead items for a Delta II launch vehicle
in fiscal year 1997, but this requirement was subsequently deleted
from the Air Force's fiscal year 1997 budget request.  Therefore, the
excess fiscal year 1996 funds can be used to offset the fiscal year
1997 budget request. 

DOD did not agree with the reduction stating that it included
$523,000 of these excess funds in its fiscal year 1996 omnibus
reprogramming request and has identified the remaining $8.527 million
for possible use to pay for Bosnia operations. 


         DEFENSE SUPPORT PROGRAM
         (MULTIYEAR PROCUREMENT)
         SPACE (LINE 28)
----------------------------------------------------- Appendix I:3.2.7

If Congress does not approve DOD's reprogramming request, the Air
Force's fiscal year 1997 request of $71 million for the Defense
Support Program multiyear procurement can be reduced by $62.9 million
because an equivalent amount of excess prior years' funds is
available to meet fiscal year 1997 program needs.  The excess funds,
$35 million and $27.9 million in fiscal years 1995 and 1996,
respectively, can be used to offset the fiscal year 1997 budget
request. 

Fiscal year 1995 funds are available due to restructuring of the
block 18 production contract, reduced launch service requirements,
and cancellation of laser cross links.  DOD included $31.9 million of
the excess fiscal year 1995 funds in the fiscal year 1996 omnibus
reprogramming request.  Fiscal year 1996 funds are available because
program requirements were reduced.  Program officials stated that
excess fiscal year 1996 funding is needed to meet unfunded fiscal
year 1997 program requirements. 

In addition, if Congress does not approve DOD's reprogramming
request, $13 million of the Air Force's $350.3 million fiscal year
1994 appropriation for the program can be rescinded because these
funds are excess to program requirements.  In fiscal year 1995, this
program received $54 million in reprogrammed fiscal year 1994 funds
for contractor claims.  In fiscal year 1996, these claims were
settled for $41 million--$13 million less than the amount needed. 
The $13 million in excess fiscal year 1994 funds will expire if not
obligated by September 30, 1996, and, therefore, is available for
reprogramming or rescission during the remainder of fiscal year 1996. 
DOD included the $13 million in its fiscal year 1996 omnibus
reprogramming request. 

DOD did not agree with the reduction but provided no new information
or further rationale to support its position. 


         SENSOR FUZED WEAPON (LINE
         48)
----------------------------------------------------- Appendix I:3.2.8

The Air Force's fiscal year 1997 request of $131.1 million for the
Sensor Fuzed Weapon can be reduced by $3.1 million because excess
fiscal year 1996 funds in the Procurement of Ammunition, Air Force,
appropriation are available to meet program needs.  A contracting
official said the fiscal year 1996 contract was awarded for about
$3.1 million less than budgeted.  Therefore, the excess funding can
be used to offset the fiscal year 1997 budget request. 

A program management official agreed that the funds were not required
for the contract; however, he would like to use the funds for
potential engineering changes that could result from a study to
extend the weapon's shelf life.  But, since the study has not begun,
he could not identify the specific changes required nor the cost.  He
also said if changes were not required, he would like to use the
funding to buy more weapons.  DOD did not agree with the reduction
but did not provide new information or further rationale for its
position. 


         OTHER PROCUREMENT, AIR
         FORCE
----------------------------------------------------- Appendix I:3.2.9

The Air Force requested $6 billion for other procurement programs in
fiscal year 1997.  We did not identify any potential reductions to
the fiscal year 1997 request.  However, as shown in table I.17, we
identified $6.2 million in potential rescissions from expiring fiscal
year 1994 appropriations. 



                               Table I.17
                
                Potential Rescissions to Air Force Other
                          Procurement Programs

                         (Dollars in millions)


Li                                              Potent       Potential
ne                                                 ial      rescission
no                                      Reques  reduct    (fiscal year
.   Line item description                    t     ion           1994)
--  ----------------------------------  ------  ------  --------------
63  Defense Support Program                  0       0          $5.000
68  Air Force Satellite Control         $16.14       0           1.200
     Network                                 4
======================================================================
    Total                               $16.14       0          $6.200
                                             4
----------------------------------------------------------------------

         DEFENSE SUPPORT PROGRAM
         (LINE 63)
---------------------------------------------------- Appendix I:3.2.10

Five million dollars of the Air Force's $28.4 million fiscal year
1994 appropriation for the Defense Support Program can be rescinded
because these funds were provided for engineering change orders and
management risk, but the program office has identified the funding as
excess to its needs.  The $5 million in excess fiscal year 1994 funds
will expire if not obligated by September 30, 1996, and, therefore,
is available for reprogramming or rescission during the remainder of
fiscal year 1996. 

DOD commented that it included $3.5 million in its fiscal year 1996
omnibus reprogramming request and the remaining $1.5 million has been
earmarked for upward obligation adjustments in the expired account. 
However, the $3.5 million was not included in the fiscal year 1996
omnibus reprogramming request, and DOD did not provide data to
support its position that the remaining $1.5 million was needed in
the expired account.  Therefore, we continue to believe the reduction
is warranted. 


         AIR FORCE SATELLITE
         CONTROL NETWORK (LINE 68)
---------------------------------------------------- Appendix I:3.2.11

Of the Air Force's fiscal year 1994 appropriation of $30.1 million
for the Satellite Control Network, $1.2 million can be rescinded
because the funds are excess to program needs.  Program officials
identified these funds as excess to program needs because contract
award costs were $1.2 million less than the amount budgeted.  These
funds will expire if not obligated by September 30, 1996; therefore,
they are available for reprogramming or rescission during the
remainder of fiscal year 1996.  DOD commented that the funds have
been committed as a contingent liability for a cost overrun on an
engineering change proposal.  However, it did not provide
documentation for its position. 


   DEFENSE-WIDE PROCUREMENT
   PROGRAMS
--------------------------------------------------------- Appendix I:4

DOD requested $1.8 billion for Defense-wide procurement programs in
fiscal year 1997.  As shown in table I.18, we identified a potential
reduction of $15.2 million to the fiscal year 1997 request for one
item.  We did not identify any potential rescissions from prior
years' appropriations. 



                               Table I.18
                
                  Potential Reduction to Defense-wide
                          Procurement Programs

                         (Dollars in millions)


Li                                                              Potent
ne                                                                 ial
no                                                      Reques  reduct
.   Line item description                                    t     ion
--  --------------------------------------------------  ------  ------
45  C-130 Modifications                                 $86.67  $15.20
                                                             7       0
======================================================================
    Total                                               $86.67  $15.20
                                                             7       0
----------------------------------------------------------------------

      C-130 MODIFICATIONS
      (LINE 45)
------------------------------------------------------- Appendix I:4.1

The Special Operations Command's fiscal year 1997 request of $86.7
million for C-130 aircraft modifications can be reduced by $15.2
million, the amount requested to procure seven directional infrared
radar countermeasures systems in fiscal year 1997, because the
system's operational effectiveness and suitability have not been
proven.  However, operational test and evaluation is not scheduled to
begin until August 1997 and will not end until after fiscal year
1997.  Additionally, during our review project office officials
expressed concern about limitations of a major component of the
system and said they were considering fielding the system without
this component.  Buying systems with known problems before they have
been proven through operational testing can result in the procurement
of unsatisfactory weapons requiring costly modifications to achieve
satisfactory performance and, in some cases, deployment of
substandard systems to combat forces.  We believe, therefore, that
the Command could postpone this procurement until the system has been
proven in operational tests. 

DOD commented that (1) development testing to date has demonstrated
that all components and system level performance meet or exceed
specified requirements; (2) reducing the fiscal year 1997 funding
will result in cost growth and schedule delay; and (3) before buying
the system, the system will complete environmental qualification,
specification compliance, and operational suitability testing. 
Although simulations and laboratory testing provides valuable
information about the system and its components, DOD has previously
taken the position that they are not adequate substitutes for
operational testing.  This is why operational testing is still a
requirement in DOD regulations.  Although testing on a C-130 test
aircraft is scheduled for May 1997 and the production option decision
is scheduled for June 1997, testing on operational C-130 Mission
Designator Series aircraft is not scheduled until after the
production decision.  Therefore, we have not changed our position. 


POTENTIAL REDUCTIONS AND
RESCISSIONS TO RESEARCH,
DEVELOPMENT, TEST, AND EVALUATION
PROGRAMS
========================================================== Appendix II

DOD requested $34.7 billion in research, development, test, and
evaluation (RDT&E) funding for fiscal year 1997.  As shown in table
II.1, our review of selected budget line items in the request and
prior years' appropriations identified potential reductions of $224.2
million to fiscal year 1997 requests and potential rescissions of
about $3.8 million from expiring fiscal year 1995 appropriations.  We
did not identify any potential rescissions from fiscal year 1996
appropriations. 



                               Table II.1
                
                Potential Reductions and Rescissions to
                             RDT&E Programs

                         (Dollars in millions)


                                                Potent       Potential
                                                   ial      rescission
                                        Reques  reduct    (fiscal year
                                           t\a     ion           1995)
--------------------------------------  ------  ------  --------------
Army                                    $41.47  $3.892          $0.142
                                             8
Navy                                    703.64  19.698               0
                                             4
Air Force                               309.18  26.908           2.800
                                             7
Defense-wide                            1,634.  173.72           0.821
                                           781       4
======================================================================
Total                                   $2,689  $224.2          $3.763
                                          .090      22
----------------------------------------------------------------------
\a This is the amount requested for the budget line items for which
we have identified a potential reduction and/or rescission. 


   ARMY RDT&E PROGRAMS
-------------------------------------------------------- Appendix II:1

The Army requested $4.3 billion for RDT&E programs in fiscal year
1997.  As shown in table II.2, we identified a potential reduction of
about $3.9 million to the fiscal year 1997 request for one item and a
potential rescission of $142,000 from expiring fiscal year 1995
appropriation for another item. 



                               Table II.2
                
                 Potential Reduction and Rescission to
                          Army RDT&E Programs

                         (Dollars in millions)


Li                                              Potent       Potential
ne                                                 ial      rescission
no                                      Reques  reduct    (fiscal year
.   Line item description                    t     ion           1995)
--  ----------------------------------  ------  ------  --------------
32  Aviation Advanced Technology        $41.47  $3.892               0
                                             8
89  Tri-Service Standoff Attack              0       0          $0.142
     Missile
======================================================================
    Total                               $41.47  $3.892          $0.142
                                             8
----------------------------------------------------------------------


      AVIATION ADVANCED TECHNOLOGY
      (LINE 32)
------------------------------------------------------ Appendix II:1.1

If DOD does not approve the Army's reprogramming request, the Army's
fiscal year 1997 request of $41.5 million for aviation advanced
technology can be reduced by $3.9 million because an equivalent
amount of excess fiscal year 1996 funds is available to meet program
requirements.  Congress added $4 million to the fiscal year 1996
request for Improved Cargo Helicopter Technology.  According to the
program office, about $100,000 has been used to pay bills, and DOD
has withheld the remaining funds pending an internal
reprogramming-related action.  A program official also said that the
program has received $2.3 million from the Aircraft
Modification/Product Improvement Program (line 167) for vibration
testing, thereby reducing the severity of the impact of not receiving
the withheld funds.  Since the $3.9 million in fiscal year 1996 funds
is not being used for the purpose for which the funds were provided,
the funds can be used to offset the fiscal year 1997 request. 


      TRI-SERVICE STANDOFF ATTACK
      MISSILE (LINE 89)
------------------------------------------------------ Appendix II:1.2

Of the Army's fiscal year 1995 appropriation of $1.2 million for the
Tri-Service Standoff Attack Missile, $142,000 can be rescinded
because the program has been terminated and the Army has identified
these funds as excess to program requirements.  The Army terminated
its participation in the program in fiscal year 1994, and DOD
terminated the entire program in fiscal year 1995 because of
significant development difficulties and growth in its expected unit
cost. 

DOD commented that the funds have been earmarked as part of the
Army's portion of the out-of-court settlement for terminating the
program.  However, documentation provided to us by the program
executive office for tactical missiles shows that the funds are
excess to program needs.  Therefore, we continue to believe that the
funds can be rescinded. 


   NAVY RDT&E PROGRAMS
-------------------------------------------------------- Appendix II:2

The Navy requested $7.3 billion for RDT&E programs in fiscal year
1997.  As shown in table II.3, we identified potential reductions of
about $19.7 million to the fiscal year 1997 requests for eight items. 
We did not identify any potential rescissions from prior years'
appropriations. 



                               Table II.3
                
                   Potential Reductions to Navy RDT&E
                                Programs

                         (Dollars in millions)


Li                                                              Potent
ne                                                                 ial
no                                                      Reques  reduct
.   Line item description                                    t     ion
--  --------------------------------------------------  ------  ------
48  Ship Concept Advanced Design                        $13.80  $3.400
                                                             7
55  Advanced Warhead Development (MK-50)                 1.329   1.329
56  Marine Corps Assault Vehicles                       40.106   1.486
75  Gun Weapon System Technology                        42.204   2.000
10  New Design SSN                                      394.00   4.700
 6                                                           0
11  Unguided Conventional Air-Launched Weapons          22.322   1.648
 2
15  Tomahawk and Tomahawk Mission Planning Center       136.36   3.700
 4                                                           4
16  Aviation Improvements                               53.512   1.435
 3
======================================================================
    Total                                               $703.6  $19.69
                                                            44       8
----------------------------------------------------------------------

      SHIP CONCEPT ADVANCED DESIGN
      (LINE 48)
------------------------------------------------------ Appendix II:2.1

If Congress does not approve DOD's reprogramming request, the Navy's
fiscal year 1997 request of $13.8 million for ship concept advanced
design can be reduced by $3.4 million because the Navy Comptroller is
withholding $3.4 million in excess fiscal year 1996 funds that can be
used to offset fiscal year 1997 program requirements.  According to
the Navy Comptroller's office, these excess funds are required in
fiscal year 1997 and the President's budget reflected use of these
funds to support fiscal year 1997 requirements.  However, DOD
included $3.4 million in its fiscal year 1996 omnibus reprogramming
request and we could not verify the accuracy of the Navy's position
because the Navy did not provide data to support its position. 
Therefore, unless the Navy can demonstrate that it offset its fiscal
year 1997 budget requirements by the $3.4 million in excess fiscal
year 1996 funds, the Navy's fiscal year 1997 request should be
reduced by that amount. 


      ADVANCED WARHEAD DEVELOPMENT
      (MK-50) (LINE 55)
------------------------------------------------------ Appendix II:2.2

The Navy's fiscal year 1997 request of $1.3 million for MK-50
advanced warhead development can be denied.  Funds for the Navy's
upgrade of its lightweight torpedo are provided from this account. 
These funds are not needed, and the upgrade efforts can be terminated
because (1) they will only marginally improve the torpedoes'
performance and (2) the Navy is developing a new Hybrid lightweight
torpedo that is expected to accomplish the same littoral warfare
objectives as the upgrade effort. 

In our classified report on Navy torpedo programs issued earlier this
year, we pointed out that the Navy is upgrading its existing
lightweight torpedoes--the MK-46 and the MK-50 Block II--to improve
their performance against diesel submarines in shallow, littoral
waters.  Operational performance tests have not been done for either
upgrade program.  Without such tests, the Navy will not know whether
the upgrade will improve the torpedoes' effectiveness.  Additionally,
the Navy's new Hybrid lightweight torpedo being developed is intended
to improve the Navy's capability against diesel submarines in
shallow, littoral waters.  DOD did not agree that the program should
be terminated and stated that the MK-50 upgrade provides a
cost-effective means to achieve an interim capability for
shallow-water antisubmarine warfare prior to the introduction of the
Hybrid lightweight torpedo. 


      MARINE CORPS ASSAULT
      VEHICLES (LINE 56)
------------------------------------------------------ Appendix II:2.3

The Navy's fiscal year 1997 request of $40.1 million for Marine Corps
assault vehicles can be reduced by $510,000 because an equivalent
amount of excess fiscal year 1996 funds is available to meet fiscal
year 1997 requirements.  The Marine Corps is developing the Advanced
Amphibious Assault Vehicle as its primary combat vehicle during both
ship-to-shore maneuvers and combat operations ashore.  The Marine
Corps planned to award a demonstration/validation phase contract in
March 1996 requiring estimated fiscal year 1996 contract payments of
$21.3 million.  However, a delay in the competitive bid process
caused the contract award to slip to June 1996.  As a result, fiscal
year 1996 contract payments are now estimated to total about $20.8
million, or $510,000 less than the amount originally estimated. 

According to the program manager, the winning contractor may be able
to accelerate work to regain the 2 months already lost.  Given that
(1) the winning contractor would first need to determine an
appropriate work breakdown schedule to accommodate this additional
workload and (2) less than 4 months remained in the fiscal year when
the contract was awarded, we have concerns that the contractor can
accomplish 6 months of work in just 4 months.  As a result, we
believe $510,000 in excess fiscal year 1996 funds could be used to
offset the fiscal year 1997 budget request. 

Marine Corps program officials disagreed with the fiscal year 1997
reduction noting that it would place their already accelerated
program at risk and would affect the selected contractor's ability to
correct government identified deficiencies in its contract proposal. 
Given the additional workload cited by program officials, we still
believe the $510,000 will be excess to fiscal year 1996 needs and can
be applied toward fiscal year 1997 requirements.  DOD agreed with the
Marine Corps officials and noted that the fiscal year 1996 funding
profile is $510,000 less than originally planned. 


      GUN WEAPON SYSTEM TECHNOLOGY
      (LINE 75)
------------------------------------------------------ Appendix II:2.4

The Navy's fiscal year 1997 request of $42.2 million for gun weapon
system technology can be reduced by $2 million because fiscal year
1997 requirements are overstated.  In December 1994, the Chief of
Naval Operations approved a revised naval surface fire support plan
that required the Naval Sea Systems Command to (1) initiate upgrades
to the Navy's 5-inch, MK 45 gun mount to deliver precision-guided
munitions and (2) develop a 5-inch precision-guided munition with an
initial operational capability before fiscal year 2001.  The Navy
planned to award an engineering and development contract to modify
its existing 5-inch/MK 45 gun mount in November 1995; however, the
contract award slipped to February 1996 because of the complexities
of incorporating all the required modifications into the gun mount
contract.  As a result, fiscal year 1996 actual contract payments
will total $10 million instead of $12 million as budgeted by the
program office.  According to a Navy program official, the $2 million
in available fiscal year 1996 funds was used to accelerate (1)
ongoing gun mount fire control development efforts and (2) mission,
tracking, and targeting software changes to a shipboard computer
system to accommodate a precision-guided munition capability, planned
fiscal year 1997 efforts.  As a result, we believe that the fiscal
year 1997 request is overstated by $2 million and, therefore, can be
reduced by that amount. 

Navy program officials disagreed with the reduction noting that it
would introduce unnecessary risk into an ambitious program and would
likely affect their ability to meet the program's required initial
operational capability date.  DOD agreed with the facts but not the
reduction.  DOD did not provide new information or further rationale
for its position. 


      NEW DESIGN SSN
      (LINE 106)
------------------------------------------------------ Appendix II:2.5

The Navy's fiscal year 1997 request of $394 million for New Design
SSN development can be reduced by $4.7 million because fiscal year
1997 requirements are overstated.  The Navy planned to award an
engineering and development contract to integrate sonar and combat
control architecture with related subsystems.  However, a delay in
the competitive bid process caused the contract award to slip from
January to April 1996.  In addition, critical item testing
demonstrated that state-of-the-art commercial off-the-shelf equipment
could work effectively within the anticipated system design,
resulting in lower than expected fiscal year 1996 contract costs.  As
a result, the program office will obligate $12.8 million less in
fiscal year 1996 than was planned as of February 1995.  The Navy and
DOD reprogrammed $5.5 million, and the program manager used $2.6
million to make essential adjustments to other fiscal year 1996
developmental efforts and $4.7 million to purchase materials for a
related new SSN design subsystem development effort in fiscal year
1997.  Because the Navy no longer needs to purchase these materials
in fiscal year 1997, we believe the fiscal year 1997 request is
overstated and, therefore, can be reduced. 

Navy program officials disagreed with the fiscal year 1997 reduction,
noting that the program manager must retain flexibility to execute
trade-offs in this highly complex developmental system as long as
they are within the overall scope and plan for the program.  DOD
commented that the President's budget reflected a $4.5-million
reduction for program-related changes.  However, it did not provide
documentation or further rationale to support its position. 
Therefore, we were unable to verify DOD's position and continue to
believe the reduction is warranted. 


      UNGUIDED CONVENTIONAL
      AIR-LAUNCHED WEAPONS (LINE
      112)
------------------------------------------------------ Appendix II:2.6

The Navy's fiscal year 1997 request of $22.3 million for the unguided
conventional air-launched weapons can be reduced by $1.6 million
because the Navy Comptroller is withholding $1.6 million in excess
fiscal year 1996 funds that can be used to offset fiscal year 1997
program requirements.  According to the Navy Comptroller's office,
these excess funds are required in fiscal year 1997 and the
President's budget reflected use of these funds to support fiscal
year 1997 requirements.  However, we could not verify the accuracy of
the Navy's position because the Navy did not provide data to support
its position.  Therefore, unless the Navy can demonstrate that it
offset its fiscal year 1997 budget requirements by the $1.6 million
in excess fiscal year 1996 funds, the Navy's fiscal year 1997 request
should be reduced by that amount.  DOD did not agree with the
proposed reduction but did not provide new information or further
rationale for its position. 


      TOMAHAWK AND TOMAHAWK
      MISSION PLANNING CENTER
      (LINE 154)
------------------------------------------------------ Appendix II:2.7

The Navy's fiscal year 1997 request of $136.4 million for the
Tomahawk and Tomahawk mission planning center can be reduced by $3.7
million because the Navy Comptroller is withholding $3.7 million in
excess fiscal year 1996 funds that can be used to offset fiscal year
1997 program requirements.  According to the Navy Comptroller's
office, these excess funds are required in fiscal year 1997 and the
President's budget reflected use of these funds to support fiscal
year 1997 requirements.  However, we could not verify the accuracy of
the Navy's position because the Navy did not provide data to support
its position.  Therefore, unless the Navy can demonstrate that it
offset its fiscal year 1997 budget requirements by the $3.7 million
in excess fiscal year 1996 funds, the Navy's fiscal year 1997 request
should be reduced by that amount.  DOD did not agree with the
proposed reduction but did not provide new information or further
rationale for its position. 


      AVIATION IMPROVEMENTS (LINE
      163)
------------------------------------------------------ Appendix II:2.8

The Navy's fiscal year 1997 request of $53.5 million for aviation
improvements can be reduced by $1.4 million because excess fiscal
year 1996 funds are available to meet fiscal year 1997 program
requirements.  Fiscal year 1997 budget documents show that the
program needs about $64.8 million for fiscal year 1996, or about $2.1
million less than the amount provided.  According to the Navy
Comptroller's office, these excess funds are required in fiscal year
1997 and the President's budget reflected use of these funds to
support fiscal year 1997 requirements.  Program office officials told
us they plan to obligate these funds in fiscal year 1997 for
electro-optic requirements that were rephased after submission of the
fiscal year 1996 President's budget and prior to the submission of
the fiscal year 1997 budget.  However, Navy documents supporting the
fiscal year 1997 budget request show that the Navy reduced its fiscal
year 1997 requirements by $621,000.  Therefore, unless the Navy can
demonstrate that it offset its fiscal year 1997 budget requirements
by another $1.4 million in excess fiscal year 1996 funds, the Navy's
fiscal year 1997 request for this item should be reduced by that
amount.  DOD did not agree with the proposed reduction but did not
provide new information or further rationale for its position. 


   AIR FORCE RDT&E PROGRAMS
-------------------------------------------------------- Appendix II:3

The Air Force requested $14.4 billion for RDT&E programs in fiscal
year 1997.  As shown in table II.4, we identified potential
reductions of $26.9 million to the fiscal year 1997 requests for four
items and a potential rescission of $2.8 million from the expiring
fiscal year 1995 appropriation for another item. 



                                    Table II.4
                     
                      Potential Reductions and Rescission to
                             Air Force RDT&E Programs

                              (Dollars in millions)


Li                                                        Potent       Potential
ne                                                           ial      rescission
no                                                Reques  reduct    (fiscal year
.   Line item description                              t     ion           1995)
--  --------------------------------------------  ------  ------  --------------
46  Advanced Military Satellite Communications    $31.64  $15.10               0
                                                       3       0
78  Munitions Dispenser Development               56.229   3.808               0
13  Advanced Medium Range Air-to-Air Missile      25.883   5.000               0
 7
17  Satellite Control Network                     89.960       0          $2.800
 4
18  Titan Space Launch Vehicles                   105.47   3.000               0
 2                                                     2
================================================================================
    Total                                         $309.1  $26.90          $2.800
                                                      87       8
--------------------------------------------------------------------------------

      ADVANCED MILITARY SATELLITE
      COMMUNICATIONS (LINE 46)
------------------------------------------------------ Appendix II:3.1

The Air Force's fiscal year 1997 request of $31.6 million for
advanced military satellite communications can be reduced by $15.1
million because fiscal year 1997 requirements are overstated.  Air
Force officials told us that $15.1 million was requested for the
Processing Subsystem Engineering Model effort.  They stated that this
effort has been delayed until at least fiscal year 1998.  DOD
commented that the funds could be used for other critical research
and development efforts.  However, we believe they can also be used
to offset fiscal year 1997 requirements. 


      MUNITIONS DISPENSER
      DEVELOPMENT (LINE 78)
------------------------------------------------------ Appendix II:3.2

The Air Force's fiscal year 1997 request of $56.2 million for
developing the Wind Corrected Munitions Dispenser can be reduced by
$3.8 million because the request is overstated by $300,000 and $3.5
million in excess fiscal 1996 funds is available to meet fiscal year
1997 requirements.  Since submitting the fiscal year 1997 budget
request, the program office has restructured the planned use of the
requested funding for several cost elements.  This revised plan
includes $16 million for aircraft integration efforts.  However,
program documentation indicates that only $15.7 million is required. 
Therefore, the request can be reduced by $300,000. 

In addition, $3.5 million in excess fiscal year 1996 funds can be
used to offset the fiscal year 1997 request.  Program officials were
planning to use $16.2 million for aircraft integration during fiscal
year 1996, but, because of delays in a related program, they now plan
to obligate only $12.7 million during fiscal year 1996.  Program
officials said that they plan to carry over the excess $3.5 million
to fund aircraft integration in fiscal year 1997.  Program officials
agreed with our analysis but expressed concern that the unobligated
fiscal year 1996 funds might be reprogrammed, which would create a
shortfall in fiscal year 1997.  DOD agreed with the reduction. 


      ADVANCED MEDIUM RANGE
      AIR-TO-AIR MISSILE
      (LINE 137)
------------------------------------------------------ Appendix II:3.3

The Air Force's fiscal year 1997 request of $25.9 million for the
Advanced Medium Range Air-to-Air Missile can be reduced by $5 million
because an equivalent amount of excess fiscal year 1996 funds, if
released, is available to meet fiscal year 1997 program needs.  DOD
has not released the $5 million to the Air Force because, according
to program officials, the missile's preplanned product improvement
program does not have a requirement for these funds.  Program
officials said the fiscal year 1996 funds already released to the
program are sufficient for fiscal year 1996.  DOD commented that the
funds were needed to provide additional testing for the phase 3
product improvement risk reduction effort.  However, since program
officials believe program requirements are adequately funded, we
continue to believe the reduction is warranted. 


      SATELLITE CONTROL NETWORK
      (LINE 174)
------------------------------------------------------ Appendix II:3.4

Of the Air Force's fiscal year 1995 appropriation of $90 million for
the Satellite Control Network, $2.8 million can be rescinded because
program officials identified this amount as excess to program
requirements.  The fiscal year 1995 funds are available because
contract award costs were $2.8 million less than the amount budgeted. 
These fiscal year 1995 funds will expire if not obligated by
September 30, 1996, and, therefore, are available for reprogramming
or rescission during the remainder of fiscal year 1996.  Air Force
officials stated that they planned to include these funds in the
fiscal year 1996 omnibus reprogramming request, but the funds were
not included.  DOD agreed with the reduction. 


      TITAN SPACE LAUNCH VEHICLES
      (LINE 182)
------------------------------------------------------ Appendix II:3.5

The Air Force's fiscal year 1997 request of $105.5 million for Titan
Space Launch Vehicles can be reduced by $3 million because excess
fiscal year 1996 funds are available to meet program needs.  Program
officials stated that because of a delay in awarding a contract for a
new guidance system, only $3.4 million of $6.4 million budgeted for
the guidance system could be obligated.  The remaining $3 million in
excess fiscal year 1996 funds can be used to offset the fiscal year
1997 budget request.  DOD commented that the funds had already been
deleted from the program.  However, we could not verify the accuracy
of DOD's position because neither DOD nor Air Force program officials
provided documentation to support the position that the funds had
been deleted from the program.  Therefore, we continue to believe
that the reduction is warranted. 


   DEFENSE-WIDE RDT&E PROGRAMS
-------------------------------------------------------- Appendix II:4

DOD requested $8.4 billion for Defense-wide RDT&E programs in fiscal
year 1997.  As shown in table II.5, we identified potential
reductions of $173.7 million to the fiscal year 1997 request for six
items and a potential rescission of $821,000 from expiring fiscal
year 1995 appropriation for one item. 



                                    Table II.5
                     
                      Potential Reductions and Rescission to
                           Defense-wide RDT&E Programs

                              (Dollars in millions)


Li                                                        Potent       Potential
ne                                                           ial      rescission
no                                                Reques  reduct    (fiscal year
.   Description of item                                t     ion           1995)
--  --------------------------------------------  ------  ------  --------------
16  Defense Nuclear Agency                        $195.1  $15.50               0
                                                      31       0
64  Theater High Altitude Area Defense-Theater    269.00  129.30               0
     Missile Defense                                   0       0
70  Corps Surface-to-Air Missile -Theater         56.232  10.790               0
     Missile Defense-Demonstration/Validation
73  Other Theater Missile Defense/Follow-on       520.11   0.489          $0.821
     Theater Missile Defense                           1
78  Theater High-Altitude Area Defense System-    212.79  15.000               0
     Theater Missile Defense                           8
80  Patriot PAC-3 Theater Missile Defense         381.50   2.645               0
     Acquisition                                       9
================================================================================
    Total                                         $1,634  $173.7          $0.821
                                                    .781      24
--------------------------------------------------------------------------------

      DEFENSE NUCLEAR AGENCY (LINE
      16)
------------------------------------------------------ Appendix II:4.1

The Defense Nuclear Agency's fiscal year 1997 request of $195.1
million can be reduced by $15.5 million because fiscal year 1997
requirements are overstated by $7 million and $8.5 million in excess
fiscal year 1996 funds is available to meet fiscal year 1997 program
needs.  The Agency received $8.5 million in fiscal year 1996 and
requested $7 million in fiscal year 1997 for the Thermionic
Experiment with Conversion in Active Zone program.  On February 15,
1996, the Agency terminated the program's hardware purchase contract. 
Therefore, the $7 million requested for fiscal year 1997 is no longer
needed, and the $8.5 million in excess fiscal year 1996 funds can be
used to offset fiscal year 1997 requirements. 


      THEATER HIGH-ALTITUDE AREA
      DEFENSE -THEATER MISSILE
      DEFENSE (LINE 64)
------------------------------------------------------ Appendix II:4.2

The Ballistic Missile Defense Organization's fiscal year 1997 request
of $269 million for the Theater High-Altitude Area Defense program
can be reduced by $129.3 million because (1) the Army plans to commit
$128 million for production of missile interceptors well before
testing provides some assurance of their operational capabilities and
(2) $1.3 million is excess to program requirements. 

The fiscal year 1996 appropriation included $65 million to begin
producing 40 User Operational Evaluation System interceptors; an
additional $63 million is requested for fiscal year 1997 to continue
production.  In August 1996, the Army plans to exercise a contract
option to acquire the interceptors; however, sufficient data for a
limited assessment of their operational capabilities will not be
available until limited user tests are completed in early 1998.  Over
the years, we have reported on the production of systems prior to
conducting adequate operational testing.  The consequences have
included the acquisition of unsatisfactory weapons requiring costly
modifications and/or the deployment of substandard systems to combat
forces.  Delaying the contract until user tests are completed would
delay final delivery of the interceptors to late 2000.  This is about
1-1/2 years later than currently planned but before the system's
initial fielding scheduled for the 2006 timeframe. 

The program's fiscal year 1996 appropriation included $1.5 million to
modify a classified target for use in the demonstration and
validation phase's flight test program.  However, the Ballistic
Missile Defense Organization subsequently determined that the
classified target only required $200,000 for maintenance rather than
modifications.  Ballistic Missile Defense Organization officials
acknowledged that the remaining $1.3 million was not needed for the
classified target but stated that they would like to retain the funds
for mission support at the flight range.  However, these funds are
not needed for this purpose because range support for the program's
demonstration and validation phase flight test is already fully
funded. 

DOD commented that (1) Congress wants this capability by fiscal year
1998 and our suggested reduction would adversely affect that
objective, (2) the contract option for the interceptors will not be
exercised until after a successful target intercept, and (3) the need
to fund the classified target caused an unplanned reduction to other
efforts and the $1.3 million not needed for the target was returned
to the original efforts.  We continue to believe that it is premature
to procure the interceptors.  As stated in our recent report, we are
concerned with the risks inherent in the Army's accelerated approach
of contracting for interceptors to be deployed before testing
provides assurance of the interceptor's effectiveness and recommended
that the Secretary of Defense seek legislative relief from the
requirements of the 1996 National Defense Authorization Act in
regards to acquiring the capability by fiscal year 1998.\3 Regarding
the classified target funding, we determined that the target was
funded from a separate account that funds demonstration and
validation targets and that the funds are no longer needed for that
purpose.  Therefore, we have not changed our position. 


--------------------
\3 Ballistic Missile Defense:  Issues Concerning Acquisition of THAAD
Prototype System (GAO/NSIAD-96-136, July 9, 1996). 


      CORPS SURFACE-TO-AIR
      MISSILE-THEATER MISSILE
      DEFENSE-DEMONSTRATION/VALIDATION
      (LINE 70)
------------------------------------------------------ Appendix II:4.3

The Ballistic Missile Defense Organization's fiscal year 1997 request
of $56.2 million for the Corps Surface-to-Air Missile program can be
reduced by $10.8 million--$8.2 million because of slippage in the
award of fiscal year 1996 contracts and $2.6 million because the
contract slippage reduces fiscal year 1997 funding requirements. 

On May 1, 1996, the Army awarded international teaming contracts to
two U.S.  contractors to define development work to be done by two
international prime contractor teams during the follow-on project
definition-validation phase.  According to an Army official, because
the period of performance for the teaming contracts is 120 days and
other actions need to be taken before the contracts are awarded, the
follow-on project definition-validation phase contracts cannot be
awarded until the end of fiscal year 1996 or early fiscal year 1997. 
Thus, we believe it is highly unlikely that the prime contracts can
be awarded before fiscal year 1997 and, therefore, the $8.2 million
provided for the contracts in fiscal year 1996 can be used to offset
fiscal 1997 requirements. 

Assuming the project definition-validation phase prime contracts are
awarded in July 1996, the project office estimated the U.S.  share of
the fiscal year costs for the two prime contracts would be $46.7
million.  However, because of the delays in awarding the
international teaming contracts, the prime contracts will probably
not be awarded until the end of fiscal year 1996, or more likely, the
first quarter of fiscal year 1997.  This delay reduces the
contractors' anticipated effort in fiscal year 1997 and will result
in a $2.6-million decrease in the estimate of work to be done. 

DOD commented that (1) even though award of the project
definition-validation phase contracts has slipped to September 1996,
the planned contract completion date of December 1998 agreed to in
the multinational memorandum of understanding has not slipped; (2)
the proposed reduction could result in delaying the project
definition-validation phase completion date and breaking the existing
agreement; and (3) the fiscal year 1997 request was based on industry
proposals for the U.S.  share of the effort only and subsequent
agreements to relocate European efforts to the United States will
require additional up-front funding in fiscal year 1997. 

The memorandum of understanding states that the project
definition-validation phase is planned for completion in calendar
year 1998 and will remain in force until the phase is completed or
for 5 years, whichever occurs first.  Therefore, our proposed
reduction should not effect the agreement.  Additionally, the budget
estimate of the U.S.  share of the prime contractor's project
definition-validation effort exceeded the contractors' estimates by
$14.7 million, of which about $6.5 million was budgeted for fiscal
year 1997.  Considering the 6-month schedule slippage and the
$14.7-million overestimate, the program should have sufficient funds
to maintain stability.  Therefore, we continue to believe the
reduction is warranted. 


      OTHER THEATER MISSILE
      DEFENSE/FOLLOW-ON THEATER
      MISSILE DEFENSE (LINE 73)
------------------------------------------------------ Appendix II:4.4

The Ballistic Missile Defense Organization's fiscal year 1997 request
of $37.2 million for the Arrow missile can be reduced by $489,000
because excess fiscal year 1996 funds are available to meet fiscal
year 1997 requirements, and $821,000 can be rescinded from the fiscal
year 1995 appropriation. 

In February 1996, the project office received an additional $1.3
million in fiscal year 1995 funds to support the Arrow Deployability
Project.  Of this amount, $489,000 was used to fund fiscal year 1996
requirements and the remaining $821,000 was unobligated as of April
29, 1996.  Therefore, we believe $489,000 in fiscal year 1996
funds--the amount no longer needed because requirements were met with
fiscal year 1995 funds--is available to offset fiscal year 1997
requirements, and the remaining $821,000 can be rescinded.  The
excess fiscal year 1995 funds will expire if not obligated by
September 30, 1996, and, therefore, are available for reprogramming
or rescission during the remainder of fiscal year 1996.  The project
office agreed that the $1.3 million is excess to program needs. 
However, DOD did not agree with the $821,000 rescission stating that
the funds will be obligated by September 30, 1996.  Because DOD did
not provide documentation for its obligation plans, we continue to
believe the funds are available for reduction or rescission. 


      THEATER HIGH-ALTITUDE AREA
      DEFENSE SYSTEM-THEATER
      MISSILE DEFENSE (LINE 78)
------------------------------------------------------ Appendix II:4.5

The Ballistic Missile Defense Organization's fiscal year 1997 request
of $212.8 million for the Theater High-Altitude Area Defense system
can be reduced by $15 million because the fiscal year 1997
requirement is overstated.  The requirement is overstated because the
current demonstration and validation phase program for this system
includes funding to procure 20 interceptors for flight tests;
however, only 15 flight tests are scheduled.  Because they use the
same components, the remaining interceptors could be used to fulfill
a fiscal year 1997 requirement for five partial interceptors for the
early engineering and manufacturing phase safety and hazard
assessment tests. 

The project office agreed that the five demonstration and validation
interceptors could be used in the early engineering and manufacturing
development tests.  Army and Ballistic Missile Defense Organization
officials said that they would prefer using the interceptors for
canceled tests or other requirements that may surface.  However, the
interceptors can only be used if the cancelled tests are reinstated,
and to reinstate them would require significant additional funding,
which is not currently available.  DOD did not agree with the
reduction but did not provide new information or further rationale
for its position. 


      PATRIOT PAC-3 THEATER
      MISSILE DEFENSE ACQUISITION
      (LINE 80)
------------------------------------------------------ Appendix II:4.6

The Ballistic Missile Defense Organization's fiscal year 1997 request
of $381.5 million can be reduced by $2.6 million because fiscal year
1997 requirements are overstated by $1.3 million and $1.3 million in
excess fiscal year 1996 funds is available to meet program needs. 

According to the project office, program restructuring reduced the
fiscal year 1997 engineering and manufacturing development phase
contract requirements by $1.3 million.  An extension of Patriot's
engineering and manufacturing development phase, according to the
product manager for theater targets, also reduced fiscal year 1996
target requirements by $1.3 million.  These excess funds can be used
to offset the fiscal year 1997 budget request. 

DOD commented that the funds were still needed for engineering and
manufacturing development phase contractual requirements and that the
proposed reduction for targets is inappropriate because the target
procurement process for the first flight test has already begun. 
However, Patriot program officials agreed that the $1.3 million for
engineering and manufacturing development was excess to fiscal year
1997 requirements and the theater missile defense's target office
agreed that the $1.3 million was excess to Patriot's target
requirements in fiscal year 1997.  Because DOD did not provide new
information or further rationale for its position, we continue to
believe the reduction is warranted. 


SCOPE AND METHODOLOGY
========================================================= Appendix III

We reviewed DOD's procurement and RDT&E programs that we identified
from our ongoing assignments and the initial phase of this assignment
as having cost, schedule, performance, or programmatic concerns.  To
achieve our objectives of identifying potential reductions to the
fiscal year 1997 requests and potential rescissions of prior years'
appropriations, we interviewed program officials and reviewed program
documentation such as budget requests and justifications, monthly
program status reports, correspondence, briefing reports, and
accounting and financial reports. 

We performed our work at numerous DOD and military service
organizations.  Some of the organizations we visited were

  -- Office of the Secretary of Defense and Army, Navy, Air Force,
     and Marine Corps headquarters, Washington, D.C.;

  -- Army Materiel Command, Alexandria, Virginia;

  -- Army Aviation and Troop Command, St.  Louis, Missouri;

  -- Army Communications-Electronics Command, Fort Monmouth, New
     Jersey;

  -- Army Tank-Automotive and Armaments Command, Warren, Michigan;

  -- Army Missile Command and Ballistic Missile Defense Organization,
     Huntsville, Alabama;

  -- Army Space and Strategic Defense Command, Huntsville, Alabama;

  -- Program Executive Office, Theater Missile Defense, Huntsville,
     Alabama;

  -- Naval Air and Sea Systems Commands, Arlington, Virginia;

  -- Naval Undersea Warfare Center Division, Newport, Rhode Island;

  -- Air Force Materiel Command, Space and Missile System Center, Los
     Angeles, California;

  -- Air Force Materiel Command, Aeronautical Systems Center,
     Wright-Patterson Air Force Base, Ohio; and

  -- Air Force Materiel Center, Electronic Systems Division, Hanscom
     Air Force Base, Massachusetts. 

We conducted our review from October 1995 to June 1996 in accordance
with generally accepted government auditing standards. 


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix IV

NATIONAL SECURITY AND
INTERNATIONAL AFFAIRS DIVISION,
WASHINGTON, D.C. 

Raymond Dunham, Project Director
Robert J.  Stolba, Project Manager
Raymond W.  Allen
Jerry W.  Clark
Samuel N.  Cox
James A.  Elgas
Daniel M.  Fleming
Lawrence D.  Gaston, Jr.
John D.  Heere
Daniel C.  Hoagland
Rosa M.  Johnson
Steven F.  Kuhta
Howard R.  Manning
Robert D.  Outerbridge
Richard J.  Price
Wanda M.  Slagle
Bruce H.  Thomas
Homer H.  Thomson
Charles A.  Ward

ATLANTA FIELD OFFICE

Tana M.  Davis
Lee A.  Edwards
Leon S.  Gill
T.  Wayne Gilliam
Thomas L.  Gordon
Bobby D.  Hall
Barbara H.  Haynes
William S.  Lipscomb
Carol T.  Mebane
Danny G.  Owens
John W.  Randall, Jr.
Angel D.  Sharma
Wendy P.  Smythe
Dana S.  Solomon
John S.  Warren, Jr. 

BOSTON FIELD OFFICE

Raffaele Roffo
Ralph L.  Tavares
Paul G.  Williams

CHICAGO/DAYTON FIELD OFFICE

Edward R.  Browning
Johnetta C.  Gatlinbrown
Daniel J.  Hauser
Robert D.  Murphy
Richard L.  Strittmatter
Myra A.  Watts

KANSAS CITY/ST.  LOUIS FIELD
OFFICE

Gary L.  Billen
Charles O.  Burgess
Richard E.  Burrell
Lawrence A.  Dandridge
William H.  Gansler
Lauri A.  Kay
Lillian I.  Slodkowski
Robert D.  Spence

LOS ANGELES FIELD OFFICE

Samuel L.  Hinojosa
Thaddeus S.  Rytel, Jr.
Lorene S.  Sarne
Allen D.  Westheimer

NORFOLK FIELD OFFICE

Henry Arzadon
Paul A.  Latta


*** End of document. ***