Bureau of Prisons:
Methods for Cost Estimation Largely Reflect Best Practices, but Quantifying Risks Would Enhance Decision Making
GAO-10-94, Nov 10, 2009
The Department of Justice's (DOJ) Federal Bureau of Prisons (BOP) is responsible for the custody and care of about 209,000 federal inmates--a population which has grown by 44 percent over the last decade. In fiscal years 2008 and 2009, the President requested additional funding for BOP because costs for key operations were at risk of exceeding appropriated funding levels. Government Accountability Office (GAO) was congressionally directed to examine (1) how BOP estimates costs when developing its annual budget request to DOJ; (2) the extent to which BOP's methods for estimating costs follow established best practices; and (3) the extent to which BOP's costs for key operations exceeded requested funding levels identified in the President's budget in recent years, and how this has affected BOP's ability to manage its growing inmate population. In conducting our work, GAO analyzed BOP budget documents, interviewed BOP and DOJ officials, and compared BOP's cost estimation documentation to criteria in GAO's Cost Estimating and Assessment Guide.
BOP uses three general steps to estimate costs for its annual budget submission: (1) estimating cost increases to maintain service levels, such as inmate medical care and utilities; (2) projecting inmate population changes for the budget year and for several years into the future using a modeling program that incorporates data on the current inmate population and estimated incoming population and associated sentences; and (3) estimating costs to both provide additional capacity to house projected inmate population growth and implement new programs, such as activating new prisons. BOP's methods for cost estimation largely reflect best practices outlined in GAO's Cost Estimating and Assessment Guide. BOP followed a well-defined process for developing a mostly comprehensive, well documented, accurate, and credible cost estimate for fiscal year 2008. For example, BOP used relevant historical cost data and considered adjustments for general inflation when estimating costs for its budget request to DOJ. Moreover, BOP's methods for projecting inmate population changes were accurate, on average, to within 1 percent of the actual inmate population growth from fiscal year 1999 to August 2009. Still, BOP could strengthen its methods in two ways. First, BOP has not quantified the level of confidence associated with its cost estimate. While not required by the Office of Management and Budget or DOJ, conducting an uncertainty analysis of this kind is a best practice. By providing the results of such analysis to DOJ, BOP officials could share advance information on the probability and associated risks of operating expenses exceeding enacted funding levels. Second, during our review of documentation for BOP's fiscal year 2008 cost estimate, in some cases we required the guidance of BOP budget analysts to identify backup support because the documentation was insufficient to allow someone unfamiliar with the budget to locate detailed corroborating data. By documenting all steps, BOP would be better positioned to recreate its budget cost estimates in the event of attrition among those who initially developed them. According to BOP, from fiscal years 2004 through 2008, costs for non-salary inmate medical care and utilities exceeded funding levels in the President's budget request by about $131 million and $55 million, respectively. As a result, BOP has faced funding gaps in its operations account that has left it with limited flexibility to manage its continually growing inmate population.
- Review Pending
- Closed - implemented
- Closed - not implemented
Recommendations for Executive Action
Recommendation: To improve transparency in BOP's cost estimation process, as well as DOJ's annual budget formulation and justification process, and to provide DOJ with more detailed information to consider when deliberating its budget proposal for BOP, the Attorney General should instruct the BOP Director to require the BOP budget staff to conduct an uncertainty analysis quantifying the extent to which operations costs could vary due to changes in key cost assumptions and submit the results along with budget documentation to DOJ so that DOJ could be aware of the range of likely costs and BOP's associated confidence levels.
Agency Affected: Department of Justice
Status: Closed - Implemented
Comments: We found that the Federal Bureau of Prisons (BOP) could strengthen its budget formulation process in two ways: first, by conducting analyses to quantify its level of confidence in the cost estimates it prepares to support annual budget submissions to the Department of Justice (DOJ), and second, by providing the results of these analyses to DOJ so that DOJ could be aware of the range of likely costs and BOP's associated confidence levels. In accordance with best practices contained in GAO's Cost Estimating and Assessment Guide, we recommended that the Attorney General instruct the BOP Director to require the BOP budget staff to conduct an uncertainty analysis quantifying the extent to which operational costs could vary due to changes in key cost assumptions and submit the results, along with budget documentation, to DOJ. In response, in July 2010, BOP procured services for a consulting firm to provide statistical analysis of key cost assumptions BOP uses in its budget formulation. The consulting firm conducted uncertainty analyses to quantify the likely range of BOP medical, utilities, and food costs and provided BOP with its results. In September 2011, March 2012 and July 2012, BOP transmitted the results of its statistical analysis to both DOJ and the Office of Management and Budget to support preparation of the fiscal year 2013 and 2014 budget submissions. BOP's actions for conducting uncertainty analyses of its cost estimates and transmitting the results to DOJ are consistent with the intent of our recommendation.
Recommendation: To improve transparency in BOP's cost estimation process, as well as DOJ's annual budget formulation and justification process, and to provide DOJ with more detailed information to consider when deliberating its budget proposal for BOP, the Attorney General should instruct the BOP Director to require the BOP budget staff to improve documentation of calculations used to estimate its costs.
Agency Affected: Department of Justice
Status: Closed - Implemented
Comments: We found that the Bureau of Prison's (BOP) fiscal year 2008 budget cost estimate did not contain sufficient documentation to allow someone unfamiliar with the budget to locate detailed corroborating data. In accordance with best practices contained in GAO's Cost Estimating and Assessment Guide, we recommended that the Attorney General instruct the BOP Director to require that BOP budget staff improve documentation of calculations used to estimate its costs. In response, BOP reported to us in May 2010, that it had taken corrective actions to improve the transparency of its budget cost estimation methods in its fiscal year 2011 budget submission. These actions included adding supporting documentation for pertinent inflation factors and historical spending information. In addition, in August 2010, we met with BOP budget officials to review their fiscal year 2011 budget submission documentation and found calculations and results to be well documented. For example, we reviewed selected cost items in BOP's Buildings and Facilities justification and Salaries and Expenses justifications and were able to trace these estimates to supporting documentation used to estimate the budget costs. As a result of improved documentation, BOP is now better positioned to re-create its cost estimates in the event of attrition within its budget office.