How CBO Projects the Long-Term Costs of the Department of Defense’s Future Years Defense Program
Report
Since 2003, CBO has projected the Department of Defense’s costs for the 10 to 15 years beyond those covered in the Future Years Defense Program’s five-year plan. This report describes some of the methods CBO uses to make those projections.
In most years, the Department of Defense (DoD) produces a five-year plan, called the Future Years Defense Program (FYDP), that is associated with the budget it submits to the Congress. Because decisions made in the near term can affect the defense budget in the longer term, the Congressional Budget Office has projected DoD’s costs for the 10 to 15 years beyond the FYDP period for each of DoD’s FYDPs since 2003. CBO regularly reports those projections in its Long-Term Implications of the Future Years Defense Program. In this report, CBO describes some of the methods it currently uses to make those projections.
CBO’s projections of DoD’s costs can generally be separated into analysis focusing on two types of activities.
Activities whose funding is driven primarily by the size of the force and by economic cost factors. These activities are funded by appropriations for military personnel and for operation and maintenance (O&M), which CBO combines into an operation and support (O&S) category, and the appropriations for military construction and family housing, which CBO combines into an infrastructure category.
Activities that can have a higher degree of flexibility in their program content and therefore exhibit greater annual variability. These activities are funded by appropriations for research, development, test, and evaluation (RDT&E) and procurement, which CBO combines into an acquisition category.
CBO’s Long-Term Implications of the Future Years Defense Program reports include two projections of DoD’s long-term costs.
FYDP case. For this case, CBO uses DoD’s estimates of costs over the FYDP period and then bases its projection for the next 10 years on the economic and cost assumptions reflected in DoD’s FYDP.
Alternative-cost case. Because the assumptions that underlie DoD’s FYDPs have often underestimated future costs, CBO also prepares a projection that includes the same program content as the FYDP case (for example, the same number of military personnel and the same schedules and quantities for weapons purchases), but its costs during the FYDP and beyond are based on CBO’s projections of economic factors (for the O&S and infrastructure categories) and on DoD’s record of cost growth in weapons programs (for the acquisition category).
