GAO: AMC overstated savings from job reductions

The outsourcing of the two software centers is part of the Army Materiel Command's larger effort to free up money for modernization. But faulty accounting may have led the Army to overstate by hundreds of millions of dollars the amount of savings likely to result from instituting best business practices and eliminating government jobs, according to a report the General Accounting Office released last month.

According to the report, "Status of Efforts to Implement Personnel Reductions in the Army Materiel Command," AMC's plan to eliminate 8,530 civilian positions throughout many of its depots and research and testing facilities by fiscal 2004, as well as its initiatives to re-engineer its business practices, will fall short of reaching the Army's goal of $1.4 billion in savings.

GAO's study determined that the Army relied on an erroneous increase in civilian salary costs for the average employee. For example, the Army assumed that average civilian pay would increase by 2 percent each year between 1999 and 2005, except during fiscal 2001, when pay would increase by 14 percent. According to GAO, "Had the Army applied a 2 percent increase consistently...we estimate that the total savings would be reduced by about $52 million."

GAO also found that AMC had counted $182.6 million in savings from eliminating positions funded through organizations other than AMC. "While this will reduce personnel levels in AMC, the dollar savings will accrue to other organizations," GAO said.

AMC undertook the personnel reduction plan as a result of the 1997 Quadrennial Defense Review, which directed the Army to reduce personnel servicewide to free up money for critical modernization programs. By fiscal 2004, the QDR will reduce the number of AMC personnel from 102,000 to about 48,000, according to GAO.