Summary: Department of Defense (DOD) managers make important and complex investment decisions about proposed military construction projects. Since resources are becoming scarcer and more costly, it is essential that proposed projects be evaluated on a consistent and systematic basis before decisions are made. DOD generally requires an economic analysis for military construction proposals which involve a choice between two or more alternatives, and projects justified on the basis of military necessity are not exempt from the requirement to perform an economic analysis.
Less than 12 percent of the Army, Navy, and Air Force projects proposed to Congress in fiscal years (FY) 1976 and 1977 were evaluated by economic analyses. In FY 1976, the 31 projects evaluated by economic analysis represented only $89 million of the $2.5 billion Army, Navy, and Air Force construction program. In FY 1977, the 37 projects accounted for only $138 million of the $2 billion Army, Navy and Air Force construction projects. Although it is conceivable that certain projects may not have been susceptible to such analysis or that the cost of the analysis may have been greater than the potential benefits, it is believed that more than 12 percent of the construction projects should have been evaluated by economic analysis. In a wide variety of proposed projects, DOD managers did not use economic analysis to evaluate potentially feasible alternatives. Of the 116 project files examined that did not contain economic analysis, 39 made no reference to economic analysis, and 50 indicated that economic analysis was not applicable without disclosing specific reasons.
