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GAO-11-490R: 

United States Government Accountability Office: 
Washington, DC 20548: 

April 13, 2011: 

Congressional Committees: 

Subject: Defense Management: The Department of Defense's Fiscal Year 
2012 Corrosion Prevention and Control Budget Request: 

In 2010, the Department of Defense (DOD) estimated that corrosion 
costs the DOD over $22.9 billion annually. Corrosion negatively 
affects all military assets, including both equipment and 
infrastructure, and is defined as the unintended destruction or 
deterioration of a material due to its interaction with the 
environment.[Footnote 1] Corrosion also affects military readiness, 
taking critical systems out of action and creating safety hazards. 

Congress has enacted several legislative requirements to address the 
high cost of corrosion on military equipment and infrastructure, 
including legislation that created the Office of Corrosion Policy and 
Oversight (Corrosion Office) within the Office of the Under Secretary 
of Defense for Acquisition, Technology and Logistics.[Footnote 2] The 
Corrosion Office is responsible for the prevention and mitigation of 
corrosion of military equipment and infrastructure and, according to 
officials, manages funding for DOD-wide corrosion prevention and 
control (CPC) activities and CPC projects proposed by the Military 
Departments. Section 2228(e) of Title 10 of the United States Code 
requires DOD to annually report on CPC funding to Congress.[Footnote 
3] Additionally, the Duncan Hunter National Defense Authorization Act 
for Fiscal Year 2009 required each Military Department's corrosion 
control and prevention executive to submit an annual report with 
recommendations pertaining to his or her Department's CPC program, 
including corrosion-related funding levels to carry out all of the 
duties of the executive.[Footnote 4] In fiscal year (FY) 2011, 
Congress expanded the requirement for DOD to report on its CPC efforts 
by adding to or revising existing elements.[Footnote 5] 

Section 2228(e), as recently amended, requires DOD to annually submit 
a report to Congress on corrosion funding as part of its annual budget 
submission.[Footnote 6] In the report, DOD is to address funding 
requirements for its long-term corrosion reduction strategy, the 
return on investment (ROI) that would be achieved by implementing the 
strategy, the current and previous fiscal year funds requested in the 
budget compared to funding requirements, an explanation if funding 
requirements are not fully funded in the budget, and the current and 
previous fiscal year amount of funds requested in the budget for each 
project or activity described in its long-term strategy compared to 
the funding requirements for the project or activity. DOD is also to 
include a copy of the annual corrosion report most recently submitted 
by the corrosion executive of each Military Department, in an annex to 
DOD's report. The law also requires us to analyze DOD's budget 
submission and report and provide an assessment to the congressional 
defense committees within 60 days after the submission of the budget 
for the fiscal year,[Footnote 7] which occurred on February 14, 2011. 

This letter and enclosure I provide our mandated analysis of DOD's CPC 
budget request and the Corrosion Office's accompanying report for FY 
2012. Accordingly, our objectives were to: (1) determine the extent to 
which DOD's corrosion report addressed the mandated requirements, (2) 
assess the extent to which the CPC budget request met total estimated 
CPC funding requirements for activities and preliminary project 
proposals as stated in the FY 2012 DOD corrosion report, and (3) 
calculate the potential cost avoidance for DOD's CPC budget request 
and reported budget shortfall identified in the FY 2012 DOD corrosion 
report. (See the related GAO products at the end of enclosure I for a 
list of corrosion-related reports.) 

Scope and Methodology: 

To conduct this work, we analyzed data on DOD's CPC budget request and 
DOD's corrosion strategy, Corrosion Office-estimated CPC activity 
requirements and preliminary and actual project proposals, and other 
pertinent documents. In addition, we interviewed Corrosion Office and 
Military Department officials to obtain information on DOD's process 
for developing the CPC budget request, the FY 2012 DOD corrosion 
report, and the estimated ROIs used to calculate potential cost 
avoidance for DOD's CPC budget request and reported budget shortfall. 
To determine the extent to which the DOD and Military Department 
reports addressed the mandated requirements, we assessed the DOD and 
Military Department reports against the mandated requirements using 
qualitative content analyses. Two analysts independently reviewed the 
reports, recorded their observations, and discussed and reconciled any 
differences. The final assessment reflected our consensus. In 
addition, we discussed our preliminary analyses with Corrosion Office 
and Military Department officials to seek additional information in 
those cases where we determined that a report did not meet the 
mandated requirements. We considered the element addressed when the 
report explicitly discussed all parts of the element and not addressed 
when the report did not explicitly address any part of the mandated 
element. To assess the extent to which the CPC budget request met 
total estimated CPC funding requirements for activities and 
preliminary project proposals, we compared the CPC budget request to 
the reported funding requirements for CPC activities and preliminary 
project proposals. To calculate the potential cost avoidance for DOD's 
CPC budget request and reported budget shortfall identified in the FY 
2012 DOD corrosion report, we multiplied the CPC budget request and 
reported budget shortfall by the relevant estimated ROIs for activity 
requirements and preliminary project proposals provided by the 
Corrosion Office. As in prior years, we did not independently validate 
the Corrosion Office's estimated CPC activity requirements, project 
proposals, or estimated ROIs. Instead, we relied on data provided by 
the Corrosion Office after assessing the general reliability of the 
data by cross-checking them with other data sets and interviewing the 
officials responsible for the data collection. We found the data to be 
sufficiently reliable for the purposes of (1) presenting budget 
requirements, funding requested, and shortfall data as stated in DOD's 
corrosion report and (2) calculating potential cost avoidance based on 
these data and estimated ROI information provided by Corrosion Office 
officials. 

We conducted this audit from January 2011 through April 2011 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

Summary: 

Of the six mandated elements, DOD's corrosion report addressed five 
elements and did not address one element. DOD's corrosion report 
addressed elements such as funding requirements for a long-term 
corrosion reduction strategy, ROI that would be achieved by 
implementing the strategy, the funds requested in the budget compared 
to funding requirements (for the current and previous fiscal year), 
and an explanation if funding requirements are not fully included in 
the budget request. DOD's corrosion report also included the Military 
Departments' annual corrosion reports in an annex. DOD's corrosion 
report did not the address the requirement to compare the amount of 
funds requested in the budget to funding requirements for each project 
or activity in the strategy. Corrosion Office officials stated that 
they did not have enough time to incorporate this newly-required 
information into the report. The Military Departments' reports 
included recommendations pertaining to the CPC program, but did not 
include the funding levels required to carry out all duties of the 
corrosion control and prevention executive. According to Military 
Department officials, this is because it is difficult for the Military 
Departments to develop a comprehensive estimate of its departmentwide 
corrosion costs. Without such an estimate, they are unable to 
recommend the funding levels needed to carry out the executive's 
duties. Without all of the required information, DOD senior leaders 
and Congress may face challenges in assessing the levels of funding 
needed to effectively and cost efficiently prevent and control 
corrosion. 

DOD reported that the FY 2012 total estimated CPC funding requirement 
for all CPC activities and preliminary project proposals is $43.2 
million. Of this total, DOD requested $11.1 million in its FY 2012 
budget. Therefore, DOD's reported budget shortfall is about $32.1 
million. However, the actual shortfall is somewhat less than the 
reported budget shortfall because the Corrosion Office develops its 
estimated CPC funding requirement based on the Military Departments' 
preliminary project proposals, which have historically exceeded the 
number of actual project proposals submitted for funding consideration. 

Using DOD's estimated ROIs, we calculated that if the amount requested 
in DOD's FY 2012 budget request is funded, the potential cost 
avoidance could be about $291.8 million. By applying DOD's estimated 
ROIs to the reported budget shortfall identified in its corrosion 
report, DOD may be missing an opportunity for additional cost 
avoidance totaling around $721.4 million by not funding all of its 
estimated CPC activity requirements and preliminary project proposals. 
The accuracy of these calculations is contingent on the accuracy of 
the estimated ROIs that have not been validated. Moreover, due to 
historical differences between the number of preliminary project 
proposals and actual project proposals, the actual shortfall--and 
therefore the potential cost avoidance--could be somewhat less. 

For additional information on the results of our work, see enclosure I. 

Recommendations for Executive Action: 

We are making recommendations to the Secretary of Defense to help 
ensure that the Corrosion Office and Military Department annual 
reports provide information on all of the mandated elements. 
Specifically, to ensure that Congress has all of the information it 
needs to exercise its oversight responsibilities, we recommend that 
the Secretary of Defense take the following two actions: 

* Direct the Under Secretary of Defense for Acquisition, Technology 
and Logistics to include all required elements in DOD's future 
corrosion reports. 

* Direct the Secretary of each Military Department to provide the 
required information on funding levels necessary to carry out all 
duties of the corrosion control and prevention executive. As the 
Military Departments develop the elements needed to provide the full 
funding levels, they should include the information on these elements 
in their annual reports. 

Agency Comments and Our Evaluation: 

In commenting on a draft of this report, DOD concurred with both 
recommendations. DOD's written comments are reprinted in enclosure II. 

DOD concurred that it should include all required elements in its 
future corrosion reports. DOD stated that the report, as submitted, 
provides Congress with all the information it needs to exercise its 
oversight responsibilities. DOD also commented that budgets for both 
activities and projects were provided and that activities are being 
executed in accordance with the DOD Corrosion Prevention and 
Mitigation Strategic Plan. However, as we stated earlier, DOD's 
corrosion report did not include, for the current and previous fiscal 
year, the amount of funds requested in the budget compared to the 
funding requirements for each project or activity in the strategy. 
Therefore, DOD should include this information in its FY 2013 report. 

DOD concurred that it should provide the required information on 
funding levels necessary to carry out all duties of the corrosion 
control and prevention executives and that as the Military Departments 
develop the elements needed to provide the full funding levels, they 
should include the information on these elements in their annual 
reports. DOD commented that it will, in future reports, provide the 
required information on funding levels necessary to carry out all 
duties of the corrosion control and prevention executive, as described 
in DOD guidance. 

We continue to believe that DOD leaders and Congress need all of the 
required information to exercise their oversight responsibilities. 
Because neither DOD's nor the Military Departments' reports provided 
all of the required information, DOD leaders and Congress may not be 
able to determine the size of the Corrosion Office's budget needed to 
cost-effectively prevent and mitigate corrosion's negative effects. 

We are sending copies of this report to the appropriate congressional 
committees. We are also sending copies to Secretary of Defense; the 
Deputy Secretary of Defense; the Under Secretary of Defense for 
Acquisition, Technology and Logistics; the Secretaries of the Army, 
Navy, and Air Force; and the Commandant of the Marine Corps. The 
report also is available at no charge on the GAO Web site at 
[hyperlink, http://www.gao.gov]. 

Should you or your staff have questions concerning this report, please 
contact me on (202) 512-8246 or edwardsj@gao.gov. Contact points for 
our Offices of Congressional Relations and Public Affairs may be found 
on the last page of this report. GAO staff who made key contributions 
to this report are list in enclosure III. 

Signed by: 

Jack E. Edwards: 
Director, Defense Capabilities and Management: 

Enclosures - 3: 

List of Committees: 

The Honorable Carl Levin:
Chairman:
The Honorable John McCain:
Ranking Member:
Committee on Armed Services:
United States Senate: 

The Honorable Daniel K. Inouye:
Chairman:
The Honorable Thad Cochran:
Ranking Member:
Subcommittee on Defense:
Committee on Appropriations:
United States Senate: 

The Honorable Howard P. "Buck" McKeon:
Chairman:
The Honorable Adam Smith:
Ranking Member:
Committee on Armed Services:
House of Representatives: 

The Honorable C.W. Bill Young:
Chairman:
The Honorable Norman D. Dicks:
Ranking Member:
Subcommittee on Defense:
Committee on Appropriations:
House of Representatives: 

[End of section] 

Enclosure I: Briefing Slides: 

The Department of Defense's Fiscal Year 2012 Corrosion Prevention
and Control Budget Request: 

Background: 

To mitigate corrosion's negative effects, Congress established the 
Corrosion Office: 

Congress has enacted several legislative requirements to address the 
high cost of corrosion and its negative effects, including legislation 
that created the Office of Corrosion Policy and Oversight (Corrosion 
Office) within the Office of the Under Secretary of Defense for 
Acquisition, Technology and Logistics (AT&L). The Corrosion Office is 
responsible for the prevention and mitigation of corrosion of military 
equipment and infrastructure.[Footnote 8] 

Corrosion can have negative effects on military equipment and 
infrastructure in terms of cost, readiness, and safety. 

* The Department of Defense (DOD), in its Annual Corrosion Report for 
2010, estimated that corrosion costs DOD $22.9 billion a year. 

* GAO has previously reported that corrosion negatively affects 
military readiness by taking critical systems out of action, and has 
also impacted safety resulting in fatal accidents due to the 
degradation of equipment.[Footnote 9] 

Corrosion affects all military assets and is defined as the unintended 
destruction or deterioration of material due to interaction with the 
environment. It includes such varied forms as rusting; pitting; 
galvanic reaction; calcium or other mineral buildup; degradation due 
to ultraviolet light exposure; and mold, mildew, or other organic 
decay. 

Corrosion Office funds DOD-wide CPC activities and projects: 

DOD began targeting funding toward corrosion prevention and control 
(CPC) in fiscal year (FY) 2006 when DOD established a separate program 
funding element for Research, Development, Test and Evaluation and a 
separate corrosion line item within an existing program element for 
Operation and Maintenance. 

The budget request, requirements, and shortfalls contained in the FY 
2012 DOD corrosion report reflect this program funding element and 
line item. According to Corrosion Office officials, the budget 
request, requirements, and shortfalls contained in the FY 2012 DOD 
corrosion report represent only a portion of DOD's total CPC 
requirements and requested funding for CPC efforts. 

The Corrosion Office manages the CPC program element and line item. 
The funding goes toward DOD-wide CPC activities and projects proposed 
by the Military Departments. The Corrosion Office defines activities 
and projects as follows: 

* Activities are essential to the success and institutionalization of 
the corrosion program within DOD. The Corrosion Office identifies 
these as "required activities." Examples include: 
- conducting cost-of-corrosion studies and, 
- identifying and updating corrosion-related specifications and 
standards. 

* Projects are Military Department technology demonstration projects 
for both weapon systems and infrastructure that the Corrosion Office 
identifies as acceptable for funding, if funding is available. For 
most accepted project proposals, the Military Departments supplement 
the Corrosion Office's funding, which is generally up to $500,000 per 
project. Examples include: 
- dehumidfication of PATRIOT missile equipment and, 
- corrosion protection for bulk fuel storage tank bottoms. 

Corrosion Office develops its CPC budget request: 

As we reported in 2010, the Corrosion Office uses a multistep process 
to develop its CPC budget request.[Footnote 10] The Corrosion Office: 

* Asks the Military Departments, in the fall, to submit preliminary 
project proposals for the future fiscal year. These preliminary 
project proposals only specify the title and estimated cost for each 
proposal. 

* Reduces the total estimated cost of preliminary project proposals by 
37 percent, to reflect the percentage of actual project proposals the 
Corrosion Office has determined historically to be acceptable for 
funding based on established project selection criteria. 

* Estimates funding needed for activities and adds this to the 
adjusted total estimated cost of preliminary project proposals to 
identify total estimated CPC funding requirements for activities and 
preliminary project proposals. 

* Reduces the total estimated CPC funding requirements for activities 
and preliminary project proposals to reflect the estimated costs of 
funding only the highest priority activities and projects. Corrosion 
Office officials explained that they make this adjustment because the 
Director of the Corrosion Office has determined that based on past 
experience, a request for the total estimated CPC activity 
requirements and preliminary project proposals is unlikely to be 
approved. For example, historically, AT&L has not approved the full 
request citing global commitments, constrained budgets, and
competing requirements. 

* Submits the CPC budget request to AT&L. 

DOD's corrosion report to Congress was mandated to contain four types 
of information in prior years: 

Since FY 2009, the Secretary of Defense has been mandated to annually 
submit, with defense budget materials, a corrosion funding report with 
information on these elements:[Footnote 11] 

* Funding requirements for the long-term strategy to reduce corrosion 
and its effects. 

* The return on investment (ROI) that would be achieved by 
implementing the strategy. 

* The funds requested in the budget compared to the funding 
requirements. 

* An explanation if the funding requirements are not fully funded in 
the budget. 

DOD's corrosion report to Congress is now mandated to contain three 
additional or revised types of information: 

The Ike Skelton National Defense Authorization Act for Fiscal Year 
2011 increased the information mandated in the DOD corrosion report. 
[Footnote 12] The new and expanded elements are: 

* For the fiscal year covered by the report and the preceding fiscal 
year, the funds requested in the budget compared to the funding 
requirements.[Footnote 13] 

* For the fiscal year covered by the report and the preceding fiscal 
year, the amount of funds requested in the budget for each project or 
activity in the long-term strategy compared to the funding 
requirements for the project or activity. 

* In an annex, a copy of the most recent annual report submitted by 
the corrosion control and prevention executive of each Military 
Department to the Secretary of Defense.[Footnote 14] Each Military 
Department report is required to include[Footnote 15] recommendations 
pertaining to the Military Department's CPC program, including 
corrosion-related funding levels required to carry out all of the 
duties of the corrosion control and prevention executive. 

[End of Background section] 

Objectives: 

As mandated,[Footnote 16] we analyzed DOD's CPC budget request and 
its accompanying corrosion report for FY 2012. Our objectives were to: 
	
1. determine the extent to which DOD's corrosion report addressed the 
mandated requirements; 

2. assess the extent to which the CPC budget request met total 
estimated CPC funding requirements for activities and preliminary 
project proposals as stated in the FY 2012 DOD corrosion report, and; 

3. calculate the potential cost avoidance for DOD's CPC budget request 
and reported budget shortfall identified in the FY 2012 DOD corrosion 
report. 

[End of Objectives section] 

Scope and Methodology: 

To conduct this work, we analyzed data on DOD's CPC budget request and 
DOD's corrosion strategy; Corrosion Office-estimated CPC activity 
requirements and preliminary and actual project proposals; and other 
pertinent documents. In addition, we interviewed Corrosion Office and 
Military Department officials to obtain information on DOD's process 
for developing the CPC budget request, the FY 2012 DOD corrosion 
report, and the estimated ROIs used to calculate potential cost 
avoidance for DOD's CPC budget request and reported budget shortfall. 

To determine the extent to which the DOD and Military Department 
reports addressed the mandated requirements, we: 

* assessed the DOD and Military Department reports against the 
mandated requirements using qualitative content analyses; 

* independently reviewed the reports using two analysts, compared and 
reconciled their observations, and recorded the analysts consensus 
observations; and; 

* discussed our preliminary analyses with Corrosion Office and 
Military Department officials to seek additional information in those 
cases where we determined that a report did not meet the mandated 
requirements. 

* We considered the element addressed when the report explicitly 
discussed all parts of the element and not addressed when the report 
did not explicitly address any part of the mandated element. 

To assess the extent to which the CPC budget request met total 
estimated CPC funding requirements for activities and preliminary 
project proposals, we compared the CPC budget request to the reported 
CPC activity requirements and preliminary project proposals. 

To calculate the potential cost avoidance for DOD's CPC budget request 
and reported budget shortfall identified in the FY 2012 DOD corrosion 
report, we multiplied the CPC budget request and reported budget 
shortfall by the relevant estimated ROIs for activity requirements and 
project proposals provided by the Corrosion Office. 

As in prior years, we did not independently validate the Corrosion 
Office's estimated CPC activity requirements, project proposals, or 
estimated ROIs. Instead, we relied on data provided by the Corrosion 
Office after assessing the general reliability of the data by cross-
checking the with other data sets and interviewing the officials 
responsible for the data collection. We found the data to be 
sufficiently reliable for the purposes of (1) presenting budget 
requirements, funding requested, and shortfall data as stated in DOD's 
FY 2012 corrosion report and (2) calculating potential cost avoidance 
based on these data and estimated ROI information provided by 
Corrosion Office officials. 

We conducted this audit from January 2011 through April 2011 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for
our findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

[End of Scope and Methodology section] 

Summary: 

Objective 1: 

Objective 1: Of the six mandated elements, DOD's corrosion report 
addressed five elements and did not address one element. 

* DOD's corrosion report addressed elements such as ROI and the 
mandate to include the Military Departments' annual corrosion reports 
in an annex. DOD's corrosion report also addressed funding 
requirements for a long-term strategy, for the current and previous 
fiscal year; the funds requested in the budget compared to the funding 
requirements; and an explanation of the difference. 

* DOD's corrosion report did not include, for the current and previous 
fiscal year, the amount of funds requested in the budget compared to 
the funding requirements for each project or activity in the strategy. 
Corrosion Office officials stated that they did not have enough time 
to incorporate this newly required information into the report. 

* The Military Departments' reports included recommendations 
pertaining to the CPC program, but did not include the funding levels 
required to carry out all duties of the corrosion control and 
prevention executives. According to Military Department officials, 
this is because it is difficult for the Military Departments to 
develop comprehensive estimates of their departmentwide corrosion 
costs. Without such estimates, they are unable to recommend the 
funding levels needed to carry out the executives' duties. 

* Without all of the required information, DOD senior leaders and 
Congress may face challenges in assessing the levels of funding needed 
to effectively and cost efficiently prevent and control corrosion. 

Objectives 2 and 3 and Recommendations: 

Objective 2: DOD reported that the FY 2012 total estimated CPC funding 
requirement for all CPC activities and preliminary project proposals 
is $43.2 million. Of this total, DOD requested $11.1 million in its FY 
2012 budget. Therefore, DOD's reported budget shortfall is about $32.1 
million. However, the actual shortfall is less than the reported 
budget shortfall because the Corrosion Office develops its estimated 
CPC funding requirement based on the Military Departments' preliminary 
project proposals, which have historically exceeded the number of 
actual project proposals later submitted for funding. 

Objective 3: Using DOD's estimated ROIs, if the amount requested in 
the FY 2012 budget is funded, the potential cost avoidance could be 
about $291.8 million. By applying DOD's estimated ROIs to the reported 
budget shortfall identified in its corrosion report, DOD may be 
missing an opportunity for additional cost avoidance totaling around 
$721.4 million by not funding all of its estimated CPC activity 
requirements and preliminary project proposals. The accuracy of these 
calculations is contingent on the accuracy of the estimated ROIs which 
have not been validated. Moreover, due to historical differences 
between the number of preliminary project proposals and actual project 
proposals, the actual shortfall-—and therefore the potential cost 
avoidance-—could be less. 

Recommendations for Executive Action: We are making recommendations to 
help ensure that DOD and Military Department reports provide needed 
information. DOD concurred with our recommendations. 

[End of Summary section] 

Objective 1: Extent report addressed elements: 
	
DOD's corrosion report addressed five of six mandated elements:	 

DOD's corrosion report addressed five of the six mandated elements:	 

* Funding requirements for long-term strategy-—Addressed: Provided in 
the report. 

* ROIs from implementing strategy-—Addressed: Provided ROI estimates 
in the report. As we reported in December 2010, actual ROIs for funded 
projects will not be available until around 5 years after a project is 
started.[Footnote 17] 

* Current and previous fiscal year funds requested compared to funding 
requirements-—Addressed: Provided in the report. 

* Explanation if funding requirements not fully included in the budget 
request—-Addressed: Provided in the report. 

* An annex with the Military Departments' reports—-Addressed: Provided 
in the report. 

DOD's corrosion report did not address one mandated element:	 

* Current and previous fiscal year amount of funds requested in the 
budget compared to the funding requirements for each project or 
activity-—Did not address: The report contains the CPC budget request 
for the current and previous fiscal year and identifies the total 
estimated CPC funding requirements for activities and preliminary 
project proposals for the long-term strategy, but the report does not 
list the funding amounts for each activity and project in the strategy. 

Military Departments' reports addressed one of two requirements: 
		
In the annex to DOD's corrosion report, each Military Department 
report addressed one of two requirements:	 

* Recommendations pertaining to the CPC program, including corrosion 
related funding levels required to carry out all of the duties of the 
corrosion control and prevention executive—-Addressed one of two 
requirements: Each Military Department report contains recommendations 
pertaining to the CPC program. Although each Military Department 
report provides an overview of its CPC efforts and discusses funding 
for some of the efforts, none of the Military Department reports 
recommended the level of funding needed to carry out the duties of the 
corrosion control and prevention executive. For example:	 

- The Army report identified the total amount of its FY 2010 
departmentwide CPC expenditures, but the report did not specify how 
much was needed to carry out the Army corrosion control and prevention 
executive's duties, which are distinct from individual projects.	 

- The Navy report discussed the total amount it anticipated could be 
spent by the Navy and Corrosion Office for CPC projects in FY 2011, 
but the report did not identify a level of funding needed to carry out 
the Navy corrosion control and prevention executive's duties, which 
are distinct from individual projects.	 

- The Air Force report identified the FY 2012 funding requested from 
the Corrosion Office for CPC projects, but the report did not identify 
a level of funding needed to carry out the Air Force corrosion control 
and prevention executive's duties, which are distinct from individual 
projects.	 

Reasons reports did not address certain elements: 

According to Corrosion Office and Military Department officials, there 
are a variety of reasons that the reports do not contain all of the 
required information. 

* Corrosion Office officials explained that the requirement for new 
information came into effect in January 2011, and that they did not 
have enough time to incorporate all of the newly required information 
into DOD's corrosion report. Corrosion Office officials said that they 
plan to include the additional element in future reports. 

* Military Department officials explained that they were unable to 
include funding levels required to carry out all duties of the 
corrosion control and prevention executives because the Military 
Departments lacked comprehensive estimates for the cost of their own 
departmentwide CPC efforts. According to Military Department 
officials, they are in the process of developing comprehensive 
estimates for their CPC efforts. 

Because neither DOD's nor the Military Departments' reports provided 
all of the required information, DOD senior leaders and Congress may 
not have all of the information needed to exercise their oversight 
responsibilities, such as determining the funding needed to cost 
effectively prevent and mitigate corrosion's negative effects. 

[End of Objective 1 section] 

Objective 2: Extent request meets reported needs: 

DOD reports budget shortfall of $32.1 million: 

DOD's corrosion report showed that the total estimated CPC funding 
requirements for activities and preliminary project proposals for FY 
2012 is about $43.2 million, but the FY 2012 CPC budget request was 
about $11.1 million. Therefore, DOD's reported budget shortfall is 
about $32.1 million ($4.7 million for required activities and $27.4 
million for preliminary project proposals). Table 1 shows these data 
and corresponding data for 3 prior years. 

Table 1: DOD's Reported CPC Funding Requirements for Activities and 
Preliminary Project Proposals, Budget Requests, and Budget Shortfalls, 
Fiscal Years 2009 to 2012: 

Fiscal year: 2009; 
Activities: $3.4 million; 
Preliminary project proposals: $28.5 million; 
Sum of activities and	preliminary project proposals: $32.0 million; 
CPC budget request: $14.2 million; 
Reported budget	shortfall[A]: $17.8 million. 

Fiscal year: 2010; 
Activities: $6.2 million; 
Preliminary project proposals: $21.5 million; 
Sum of activities and	preliminary project proposals: $27.7 million; 
CPC budget request: $13.1 million; 
Reported budget	shortfall[A]: $14.5 million. 

Fiscal year: 2011; 
Activities: $6.5 million; 
Preliminary project proposals: $40.6 million; 
Sum of activities and	preliminary project proposals: $47.0 million; 
CPC budget request: $12.0 million; 
Reported budget	shortfall[A]: $35.1 million. 

Fiscal year: 2012; 
Activities: $8.3 million; 
Preliminary project proposals: $34.9 million; 
Sum of activities and	preliminary project proposals: $43.2 million; 
CPC budget request: $11.1 million; 
Reported budget	shortfall[A]: $32.1 million. 

Source: GAO analysis of DOD data. 

[A] The reported budget shortfall is the total estimated CPC funding 
requirements for activities and preliminary project proposals minus 
the CPC budget request. Totals for a fiscal year may not add due to 
rounding. 

[End of table] 

Actual shortfall is likely to be less than the reported shortfall: 

The actual shortfall is likely to be less than the reported budget 
shortfall shown in table 1. Historically, the Military Departments 
have submitted fewer actual project proposals than preliminary project 
proposals. Therefore, even if the estimated project cost for every 
actual project proposal is the same as the estimate contained in the 
earlier preliminary project proposal, the total "required" funding 
would decrease between the fall and spring submissions because the 
Military Departments have dropped some of their proposed projects. For 
example: 

* In the fall of 2009, the Military Departments submitted 173 
preliminary project proposals to the Corrosion Office. 

* The Corrosion Office used the estimated costs from the 173 proposals 
to develop the total estimated cost of preliminary project proposals 
as reported in DOD's corrosion report. 

* In the spring of 2010, the Military Departments submitted 81 actual 
project proposals (a reduction of 92 proposals) to the Corrosion 
Office. Actual project proposals are detailed proposals that consider 
factors such as the availability of matching funding from the Military 
Departments and testing assets. 

* For each of the past 3 years, the number of preliminary project 
proposals and the total budget needed to fund all of the preliminary 
project proposals have exceeded the number of actual project proposals 
and the total budget needed to fund the actual project proposals later 
submitted by the Military Departments (see table 2). 

As a result, the funding required for actual project proposals and 
the budget shortfall are likely to be somewhat less than the amounts 
reported to Congress. 
			
Number of Military Department projects higher in fall than in spring: 

From FY 2009 to FY 2011, the number of Military Department preliminary 
project proposals submitted to the Corrosion Office in the fall were 
about twice the number of actual project proposals submitted to the 
Corrosion Office in the spring (see table 2). 

Table 2: Difference between the Number of Preliminary and Actual 
Project Proposals Submitted by the Military Departments to the 
Corrosion Office, Fiscal Years 2009 to 2012: 
							
Fiscal year: 2009; 
Number of preliminary project proposals: 116; 
Budget needed to fund	preliminary project proposals: $47.6 million; 
Number of actual project proposals: 60; 
Budget needed to fund actual project proposals:	$19.7 million; 
Decrease in proposals: number: 56; 
Decrease in proposals: percent:	48%; 
Decrease in budget: amount: $27.9 million. 

Fiscal year: 2010; 
Number of preliminary project proposals: 119; 
Budget needed to fund	preliminary project proposals: $35.8 million; 
Number of actual project proposals: 66; 
Budget needed to fund actual project proposals:	$20.8 million; 
Decrease in proposals: number: 53; 
Decrease in proposals: percent:	45%; 
Decrease in budget: amount: $15.0 million. 

Fiscal year: 2011; 
Number of preliminary project proposals: 173; 
Budget needed to fund	preliminary project proposals: $64.4 million; 
Number of actual project proposals: 81; 
Budget needed to fund actual project proposals:	$23.5 million; 
Decrease in proposals: number: 92; 
Decrease in proposals: percent:	53%; 
Decrease in budget: amount: $40.9 million. 

Fiscal year: 2012; 
Number of preliminary project proposals: 157; 
Budget needed to fund	preliminary project proposals: $55.4 million; 
Numberof actual project proposals: Not available[A]; 
Budget needed to fund actual project proposals:	Not available; 
Decrease in proposals: number: Not available; 
Decrease in proposals: percent:	Not available; 
Decrease in budget: amount: Not available. 

Source: GAO analysis of DOD data. 

[A] Information on FY 2012 actual project proposals is not yet 
available because the Military Departments will submit their actual 
project proposals in spring 2011.	 

[End of table] 

Reasons Military Departments submit fewer actual project proposals: 

The reason the number of actual project proposals submitted in the 
spring is smaller than the number of preliminary project proposals 
submitted in the fall is that the Military Departments are sometimes 
unable to plan for changing project variables (e.g., the availability 
of Military Departments' funding or testing assets). 

Corrosion Office officials provided examples of how changes in key 
variables can result in the Military Departments submitting a 
preliminary project proposal in the fall but not submitting that 
proposal as an actual project proposal in the spring. For example: 

* If the Military Department plans to provide funding in the fall, but 
is unable to provide funding in the spring, staff may be shifted to 
other funded projects. 

* Many projects require technology demonstrations to be performed on 
testing assets, such as a weapon system. However, due to deployments, 
a weapons system's availability may change between the fall and 
spring, and the weapon system may no longer be available when the 
project is planned to begin. 

* Some preliminary project proposals are not developed into actual 
project proposals because interim discussions between the Military 
Departments and the Corrosion Office identify factors that suggest the 
proposal is unlikely to receive Corrosion Office matching funds. 

[End of Objective 2 section] 

Objective 3: Potential cost avoidance: 

Military Departments required to estimate ROIs: 

As part of the project selection process, the Corrosion Office 
requires that an estimated ROI cost-benefit analysis be submitted for 
each actual project proposal. 

The estimated ROI is the ratio of the present value of benefits to the 
present value of the actual project proposal's total cost. The total 
cost for each project is based on both the funding requested from the 
Corrosion Office and the funding provided by the Military Department. 

* Corrosion Office guidance uses a 7 percent annual discount rate to 
estimate the present value of benefits and costs. According to 
Corrosion Office officials, this is a conservative estimate to avoid 
overstating the project's eventual ROI. 

* Estimated ROI analyses and estimated savings vary for each actual 
project proposal submitted by the Military Departments. As we reported 
in 2010, ROI validations are not available until around 5 years after 
a project is started.[Footnote 18] 

Corrosion Office officials informed us that a Military Department 
point of contact estimates the ROI that is included in the actual 
project proposal. 

* In the Army and Navy, the corrosion control and prevention executive 
reviews the actual project proposal—-including the estimated ROI-—
before the materials are submitted to the Corrosion Office. 

* Air Force officials explained that currently the corrosion control 
and prevention executive does not review the actual project proposals 
before submission, but will take on a more significant oversight role 
in the future. 

FY 2012 request could result in cost avoidance of about $291.8 million: 

Corrosion Office officials provided us estimated ROIs of 38:1 for all 
accepted projects, 26:1 for all other projects, and 2:1 for all 
activities, based on cumulative 7-year averages. 

* The 6-year average for accepted projects that the Corrosion Office 
provided to us in 2010 was an estimated 47:1.[Footnote 19] This means 
that the current average of 38:1 is $9 less for each $1 invested by 
the Corrosion Office and the Military Departments. 

* The 6-year and 7-year average estimated ROIs for CPC activities were 
both 2:1. 

If the Military Departments' 7-year average estimated ROIs are 
accurate, 

* the $11.1 million identified in the FY 2012 CPC budget request ($3.6 
million for activities and $7.5 million for preliminary project 
proposals), could—if approved—result in a potential cost avoidance of 
about $291.8 million, and; 

* if the CPC activity requirements and preliminary project proposals 
identified in the $32.1 million reported budget shortfall ($4.7 
million for all other activities and $27.4 million for all other 
preliminary project proposals) were funded, the potential total cost 
avoidance could be about $721.4 million. 

The accuracy of these calculations is contingent on the accuracy of 
the estimated ROIs, which have not been validated. Moreover, as we 
explained earlier, DOD's reported funding requirements for preliminary 
project proposals may exceed the funding required for actual project 
proposals. Therefore, the cost avoidance that could result from 
funding the reported budget shortfall could be less than $721.4 
million. 

Military Departments' ROI validations incomplete: 

The DOD Corrosion Prevention and Mitigation Strategic Plan notes that 
follow-on reviews of completed projects are required and are to focus 
on validating the completed project's ROI. 

As we reported in December 2010,[Footnote 20] the Military Departments 
have completed about one-third of their required ROI validations for 
projects funded in FY 2005, but completion of the remaining projects' 
validations for that year is behind schedule. 

* We reported that the Military Departments had completed the ROI 
validation for 10 of the 28 implemented projects funded in FY 2005. 
[Footnote 21] 

* As of March 2011, the Military Departments had completed one 
additional ROI validation. 

According to Military Department officials, ROI validations are not 
completed because CPC funding is awarded for the 2-year project 
implementation period only, and the Military Departments typically do 
not have funds remaining for validating ROIs after the projects are 
completed. 

If the ROI validations of finished projects are not completed, the 
Corrosion Office will not have needed data to determine how to best 
invest limited CPC funds. 

We recommended in December 2010 that the Corrosion Office coordinate 
with the Military Departments' corrosion control and prevention 
executives to complete their ROI validations. DOD concurred with this 
recommendation. In March 2011, Corrosion Office officials outlined the 
steps they plan to take to implement this recommendation, which 
include assisting the Military Departments in documenting and 
estimating the ROIs and, when needed, providing funds to complete ROI 
validations. 

[End of Objective 3 section] 

Conclusions: 

The DOD corrosion report accompanying its FY 2012 CPC budget request 
for activities and projects again provided Congress with the types of 
mandated information that it has used in prior years to address prior 
mandated requirements for information. However, DOD's corrosion report 
did not provide all of the additional information mandated in recently
enacted legislation. 

The Military Departments' reports also provided some mandated 
information but did not fully address all requirements for information 
first mandated in fiscal year 2009. 

With a full year to gather and prepare the information for next year's 
annual report on proposed DOD-wide CPC projects and activities, DOD 
and the Military Departments should be better positioned to address 
all the information needs of Congress, as well as the needs of senior 
DOD officials. 

Providing all of the required information and working with the 
Military Departments to validate the ROIs would give DOD leaders and 
Congress needed information to better determine the size of the 
Corrosion Office's budget. 

[End of Conclusions section] 

Recommendations for Executive Action: 

To ensure that Congress has all of the information it needs to 
exercise its oversight responsibilities, we recommend that the 
Secretary of Defense take the following two actions: 

* Direct the Under Secretary of Defense for Acquisition, Technology 
and Logistics to include all required elements in DOD's future 
corrosion reports. 

* Direct the Secretary of each Military Department to provide the 
required information on funding levels necessary to carry out all 
duties of the corrosion control and prevention executive. As the 
Military Departments develop the elements needed to provide the full 
funding levels, they should include the information on these elements 
in their annual reports. 

[End of Recommendations for Executive Action section] 

Agency Comments and Our Evaluation: 

In its written comments, DOD concurred with both recommendations. 

* DOD concurred that it should include all required elements in DOD's 
future corrosion reports. DOD stated that the report, as submitted, 
provides Congress with all the information it needs to exercise its 
oversight responsibilities. DOD also commented that budgets for both 
activities and projects were provided and that activities are being 
executed in accordance with the DOD Corrosion Prevention and
Mitigation Strategic Plan. However, as we stated earlier, DOD's 
corrosion report did not include, for the current and previous fiscal 
year, the amount of funds requested in the budget compared to the 
funding requirements for each project or activity in the strategy. 
Therefore, DOD should include this information in its FY 2013 report. 

* DOD concurred that it should provide the required information on 
funding levels necessary to carry out all duties of the corrosion 
control and prevention executive and that as the Military Departments 
develop the elements needed to provide the full funding levels, they 
should include the information on these elements in their annual 
reports. DOD commented that it will, in future reports, provide the 
required information on funding levels necessary to carry out all 
duties of the corrosion control and prevention executive, as described 
in DOD guidance. DOD stated that these funding levels will not include 
the entire Military Departments' CPC funding requirements because 
neither the Corrosion Office nor the Military Department corrosion 
control and prevention executives have oversight or control of the 
entire CPC budgets. 

We continue to believe that DOD leaders and Congress need all of the 
required information to exercise their oversight responsibilities. 
Because neither DOD's nor the Military Departments' reports provided 
all of the required information, DOD leaders and Congress may not be 
able to determine the size of the Corrosion Office's budget needed to 
cost effectively prevent and mitigate corrosion's negative effects. 

[End of Agency Comments and Our Evaluation section] 

Related GAO Products: 

Opportunities to Reduce Potential Duplication in Government Programs, 
Save Tax Dollars, and Enhance Revenue. [hyperlink, 
http://www.gao.gov/products/GAO-11-318SP]. Washington, D.C.: March 1, 
2011. 

Defense Management DOD Needs to Monitor and Assess Corrective Actions 
Resulting from Its Corrosion Study of the F-35 Joint Strike Fighter. 
[hyperlink, http://www.gao.gov/products/GAO-11-171R]. Washington, 
D.C.: December 16, 2010. 

Defense Management: DOD Has a Rigorous Process to Select Corrosion 
Prevention Projects, but Would Benefit from Clearer Guidance and 
Validation of Returns on Investment. [hyperlink, 
http://www.gao.gov/products/GAO-11-84]. Washington, D.C.: December 8, 
2010. 

Defense Management: Observations on the Department of Defense's Fiscal 
Year 2011 Budget Request for Corrosion Prevention and Control. 
[hyperlink, http://www.gao.gov/products/GAO-10-607R]. Washington, 
D.C.: April 15, 2010. 

Defense Management: Observations on Department of Defense and Military 
Service Fiscal Year 2011 Requirements for Corrosion Prevention and 
Control. [hyperlink, http://www.gao.gov/products/GAO-10-608R]. 
Washington, D.C.: April 15, 2010. 

Defense Management: Observations on DOD's Fiscal Year 2010 Budget 
Request for Corrosion Prevention and Control. [hyperlink, 
http://www.gao.gov/products/GAO-09-732R]. Washington, D.C.: June 1, 
2009. 

Defense Management: Observations on DOD's Analysis of Options for 
Improving Corrosion Prevention and Control through Earlier Planning in 
the Requirements and Acquisition Processes. [hyperlink, 
http://www.gao.gov/products/GAO-09-694R]. Washington, D.C.: May 29. 
2009. 

Defense Management: Observations on DOD's FY 2009 Budget Request for 
Corrosion Prevention and Control. [hyperlink, 
http://www.gao.gov/products/GAO-08-663R]. Washington, D.C.: April 15, 
2008. 

Defense Management: High-Level Leadership Commitment and Actions Are 
Needed to Address Corrosion Issues. [hyperlink, 
http://www.gao.gov/products/GA0-07-618]. Washington, D.C.: April 30, 
2007. 

Defense Management: Additional Measures to Reduce Corrosion of 
Prepositioned Military Assets Could Achieve Cost Savings. [hyperlink, 
http://www.gao.gov/products/GAO-06-709]. Washington, D.C.: June 14, 
2006. 

Defense Management: Opportunities Exist to Improve Implementation of 
DOD's Long-Term Corrosion Strategy. [hyperlink, 
http://www.gao.gov/products/GAO-04-640]. Washington, D.C.: June 23, 
2004. 

Defense Management: Opportunities to Reduce Corrosion Costs and 
Increase Readiness. [hyperlink, 
http://www.gao.gov/products/GAO-03-753]. Washington, D.C.: July 7, 
2003. 

Defense Infrastructure: Changes in Funding Priorities and Strategic 
Planning Needed to Improve the Condition of Military Facilities. 
[hyperlink, http://www.gao.gov/products/GAO-03-274]. Washington, D.C.: 
February 19, 2003. 

[End of Related GAO Products section] 

[End of Enclosure I] 

Enclosure II: Comments from the Department of Defense: 

Office Of The Under Secretary Of Defense: 
Acquisition, Technology And Logistics: 
3000 Defense Pentagon: 
Washington, DC 20301-3000: 

April 8, 2011: 

Mr. Jack Edwards: 
Director, Defense Capabilities and Management: 
U.S. Government Accountability Office: 
441 G Street, N.W. 
Washington, DC 20548: 

Dear Mr. Edwards: 

This is the Department of Defense (DoD) response to the GAO Draft 
Report, GAO-11-490R, "The Department of Defense's Fiscal Year 2012 
Corrosion Prevention and Control Budget Request,” dated April 5, 2011 
(GAO Code 351587). Detailed comments on the report recommendations are 
enclosed. 

Sincerely, 

Signed by: 

Daniel J. Dunmire: 
Director: 
DoD Corrosion Policy and Oversight: 

Enclosure: As stated: 

[End of letter] 

GAO Draft Report Dated April 5, 2011: 
GAO-11-490R (GAO Code 351587): 

"The Department of Defense's Fiscal Year 2012 Corrosion Prevention and
Control Budget Request" 

Department Of Defense Comments To The GAO Recommendations: 

Recommendation 1: The GAO recommends that the Secretary of
Defense direct the Under Secretary of Defense for Acquisition, 
Technology and Logistics to include all required elements in DOD's 
future corrosion reports. 

DoD Response: Concur. However, the DoD believes that the report as 
submitted provides the Congress with all of the information it needs 
to exercise its oversight responsibilities. Budgets for both 
activities and projects were provided. Activities are being executed 
in accordance with the DoD Corrosion Prevention and Mitigation 
Strategic Plan, dated February 2011. Projects are being executed based 
on input from the Military Departments in accordance with an 
established process that has been characterized by the GAO as 
"rigorous" in report GAO-11-84 dated December 2010. 

Recommendation 2: The GAO recommends that the Secretary of Defense 
direct the Secretary of each Military Department to provide the 
required information on funding levels necessary to carry out all 
duties of the corrosion control and prevention executive. As the 
Military Departments develop the elements needed to provide the full 
funding levels, they should include the information on these elements 
in their annual reports. 

DoD Response: Concur. In future reports, DoD will provide funding 
levels necessary to execute the duties of the Military Department's 
corrosion control and prevention executives as described in DODI 
5000.67. These funding levels will not include the entire Military 
Departments' corrosion prevention and control funding requirements. 
Neither CPO nor the Military Department CCPE's have oversight or 
control of the entire corrosion prevention control budgets of DoD per
10 USC 133. 

[End of Enclosure II] 

Enclosure III: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Jack Edwards, (202) 512-8246 or edwardsj@gao.gov. 

Staff Acknowledgments: 

In addition to the contact named above, Suzanne Wren, Assistant 
Director; Amanda Harris; Charles Perdue; Steven Putansu; Michael 
Shaughnessy; Chris Turner; and Erik Wilkins-McKee made key 
contributions to this report. 

[End of Enclosure II] 

Footnotes: 

[1] Corrosion includes such varied forms as rusting; pitting; galvanic 
reaction; calcium or other mineral buildup; degradation due to 
ultraviolet light exposure; and mold, mildew, or other organic decay. 

[2] See 10 U.S.C. § 2228. 

[3] Section 2228(e) was recently amended by section 331 of the Ike 
Skelton National Defense Authorization Act for Fiscal Year 2011, Pub. 
L. No. 111-383 (2011). 

[4] See Pub. L. No. 110-417, § 903 (2008). 

[5] See Pub. L. No. 111-383, § 331 (2011) (amending § 2228(e)). 

[6] Section 2228(e), amended by Pub. L. No. 111-383, § 331. 

[7] Section 2228(e)(2), amended by Pub. L. No. 111-383, § 331(2). 

[8] 10 U.S.C. § 2228(a). 

[9] GAO, Defense Management: High-Level Leadership Commitment and 
Actions Are Needed to Address Corrosion Issues, [hyperlink, 
http://www.gao.gov/products/GAO-07-618] (Washington, D.C.: Apr. 30, 
2007). 

[10] GAO, Defense Management: Observations on the Department of 
Defense’s Fiscal Year 2011 Budget Request for Corrosion Prevention and 
Control, [hyperlink, http://www.gao.gov/products/GAO-10-607R] 
(Washington, D.C.: Apr. 15, 2010). 

[11] 10 U.S.C. 6 2228(e)(1). As indicated in the following slide. the 
third element was slightly modified in January 2011.	 

[12] See Pub. L. No. 111-383, § 331(1), (3) (2011) (amending § 
2228(e)). 

[13] This element previously existed in the mandate, as indicated on 
the previous slide, but was modified in the act. 

[14] Section 2228(e)(3), added by Pub. L. No. 111-383, § 331(3). The 
annual reports are submitted pursuant to section 903(b)(5) of the 
Duncan Hunter National Defense Authorization Act for Fiscal Year 2009, 
Pub. L. No. 110-417 (2008). 

[15] See Pub. L. No. 110-417, § 903(b)(5). 

[16] 10 U.S.C. § 2228(e)(2), amended by Pub. L. No. 111-383, § 331(2). 

[17] GAO, Defense Management: DOD Has a Rigorous Process to Select 
Corrosion Prevention Projects, but Would Benefit from Clearer Guidance 
and Validation of Returns on Investment, [hyperlink, 
http://www.gao.gov/products/GAO-11-84] (Washington, D.C.: Dec. 8, 
2010). 

[18] [hyperlink, http://www.gao.gov/products/GAO-11-84]. 

[19] [hyperlink, http://www.gao.gov/products/GAO-10-607R]. 

[20] [hyperlink, http://www.gao.gov/products/GA0-11-84]. 

[21] For these 10 projects, the average ROI ratio was validated as 
12:1, slightly higher than the average estimated ROI of 11:1 for these 
projects when they were originally proposed. While the agreement 
between the average estimated and validated ROIs is encouraging, the 
small number of projects—-overall and by type of project—-does not 
allow these findings to be generalized. 

[End of section] 

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