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United States Government Accountability Office

GAO

Report to Congressional Committees

November 2009

BUREAU OF
PRISONS
Methods for Cost
Estimation Largely
Reflect Best Practices,
but Quantifying Risks
Would Enhance
Decision Making

GAO-10-94

November 2009

BUREAU OF PRISONS
Accountability Integrity Reliability

Highlights
Highlights of GAO-10-94, a report to
congressional committees

Methods for Cost Estimation Largely Reflect Best
Practices, but Quantifying Risks Would Enhance
Decision Making

Why GAO Did This Study

What GAO Found

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. 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.

What GAO Recommends
GAO recommends that BOP (1)
conduct an uncertainty analysis
quantifying the extent to which its
operational costs could vary due to
changes in key cost assumptions
and submit the results, along with
budget documentation, to DOJ; and
(2) improve documentation of
calculations used to estimate its
costs. BOP agreed with GAO’s
recommendations.

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.
Federal Inmate Population, Fiscal Years 2000 to 2009
Inmate population
210,000
180,000
150,000
120,000

View GAO-10-94 or key components.
For more information, contact David C.
Maurer at (202) 512-9627 or
maurerd@gao.gov.

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Fiscal year
Source: GAO analysis of BOP data.

United States Government Accountability Office

Contents

Letter

1
BOP Estimates Costs for Its Annual Budget Using Three General
Steps
BOP’s Methods for Estimating Costs Largely Reflect Best Practices
Costs for Key Operations Have Exceeded the Funding Levels
Requested in the President’s Budget in Recent Years
Conclusions
Recommendations for Executive Action
Agency Comments

7
9
10
10

Appendix I

Briefing Slides to Congressional Staff

12

Appendix II

Comments from the Department of Justice, Federal
Bureau of Prisons

63

GAO Contact and Staff Acknowledgments

66

Appendix III

3
6

Table
Table 1: Comparison of BOP’s Average Annual Rate of Cost
Growth Due to Inflation and Inmate Population Growth
and Average Annual Funding in President’s Budget
Request for BOP, Fiscal Years 2004 through 2008

8

Figure 1: Federal Inmate Population Growth, Fiscal Years 2000
through 2009

5

Figure

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Abbreviations
B&F
BOP
DOJ
M&R
OMB
S&E

Buildings and Facilities
Federal Bureau of Prisons
Department of Justice
Maintenance and Repair
Office of Management and Budget
Salaries and Expenses

This is a work of the U.S. government and is not subject to copyright protection in the
United States. The published product may be reproduced and distributed in its entirety
without further permission from GAO. However, because this work may contain
copyrighted images or other material, permission from the copyright holder may be
necessary if you wish to reproduce this material separately.

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GAO-10-94 Bureau of Prisons

United States Government Accountability Office
Washington, DC 20548

November 10, 2009
The Honorable Barbara Mikulski
Chairman
The Honorable Richard Shelby
Ranking Member
Subcommittee on Commerce, Justice,
Science, and Related Agencies
Committee on Appropriations
United States Senate
The Honorable Alan B. Mollohan
Chairman
The Honorable Frank R. Wolf
Ranking Member
Subcommittee on Commerce, Justice,
Science, and Related Agencies
Committee on Appropriations
House of Representatives
The Department of Justice’s (DOJ) Federal Bureau of Prisons’ (BOP)
mission is to protect society by confining offenders in the controlled
environments of prisons and community-based facilities that are safe,
humane, cost-efficient, and appropriately secure. As of October 1, 2009,
BOP was responsible for overseeing a total federal inmate population of
approximately 209,000—a population which has grown by 44 percent since
fiscal year 2000. 1 In recent years, BOP has faced challenges in meeting its
operational workload responsibilities to manage this growth. In fiscal year
2008, DOJ reported to the Office of Management and Budget (OMB) that
BOP would be unable to operate at the funding levels in its appropriation
because costs for key operations were at risk of exceeding appropriated
funding levels. BOP reported that it again anticipated a funding gap in
fiscal year 2009, and in response, Congress provided appropriations above
the amount requested in the President’s budget.

1

Inmate population data as reported by BOP. Of the total inmate population, approximately
172,500 federal inmates—83 percent—were housed in 115 BOP-operated facilities
throughout the country. The remaining inmates were housed primarily in contract
confinement (i.e., facilities and halfway houses, operated by private contractors or
state/local governments).

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This report responds to congressional direction in the explanatory
statement accompanying the Omnibus Appropriations Act, 2009. 2 In
accordance with this explanatory statement, and in consultation with the
House and Senate Appropriations Committee staff, we are reporting on
BOP’s methods for cost estimation, including the pricing of utilities and
inmate medical care costs. Specifically, we address issues pertaining to (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 or guidelines; 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. On September 10, 2009,
we provided a briefing to staff of the House and Senate Appropriations
Subcommittees on Commerce, Justice, Science, and Related Agencies.
Prior to this briefing, we provided a draft of the briefing to responsible
DOJ and BOP officials, who generally agreed with our findings. This report
(1) provides a summary of our briefing and (2) transmits
recommendations that we are making to the Attorney General of the
United States. The full briefing, including our scope and methodology, is
reprinted as appendix I. Written comments from DOJ are reprinted as
appendix II.
To address these objectives, we analyzed BOP documentation to obtain
information on the guidelines and processes BOP used to estimate costs in
its annual budget submission, including annual DOJ and BOP budget
development guidelines and memorandum and OMB’s Circular A-11. 3 We
also analyzed available documentation, such as the formulas BOP used to
compute its fiscal year 2008 budget cost estimate, and compared the
documentation BOP used to develop its fiscal year 2008 budget cost
estimate to criteria for cost estimating best practices identified in GAO’s
Cost Estimating and Assessment Guide: Best Practices for Developing
and Managing Capital Program Costs. 4 Additionally, we reviewed BOP
documentation of operations costs for inmate medical care and utilities

2

H. Comm. on Appropriations, 111th Cong., Committee Print on H.R. 1105 / Public Law
Number 111-8 at 274 (2009), accompanying the Omnibus Appropriations Act, 2009 (Pub. L.
No. 111-8, 123 Stat. 524 (2009)).

3

Office of Management and Budget, Preparation, Submission, and Execution of the
Budget, Circular No. A-11 (Washington, D.C.: Executive Office of the President, June 2008).
4

GAO, GAO Cost Estimating and Assessment Guide: Best Practices for Developing and
Managing Capital Program Costs, GAO-09-3SP (Washington, D.C.: March 2009).

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and compared these costs to the amount of funding requested in the
President’s annual budget submission to Congress for BOP (known as the
President’s budget). Finally, we interviewed cognizant BOP and DOJ
budget development officials to obtain information about BOP’s budget
cost estimating methods and the factors contributing to BOP’s operational
costs exceeding funding levels, and how this has affected BOP’s ability to
manage its growing inmate population. Through document reviews and
interviews with agency officials knowledgeable about controls in place to
maintain the integrity of BOP cost and inmate population data that BOP
reported using to estimate costs for its annual budget submission to DOJ,
we determined that the data were sufficiently reliable for the purposes of
this report.
We conducted this performance audit from May 2009 to November 2009 in
accordance with generally accepted government auditing standards. Those
standards require that we plan and perform the work to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings and
conclusions based on our objectives. We believe that the evidence
obtained provides a reasonable basis for our findings and conclusions
based on our objectives.

BOP Estimates Costs
for Its Annual Budget
Using Three General
Steps

When developing its annual budget submission, BOP uses three general
steps to estimate costs for its two budget accounts—the Salaries and
Expenses account (known as its operational budget) and its Buildings and
Facilities account. 5 First, BOP estimates cost increases for maintaining the
current level of services for operations as provided in the prior year’s
enacted budget. 6 These include costs to address mandatory staff pay raises
and benefit increases, inmate medical care, and utilities. BOP primarily
analyzes historical obligations from the past five years to identify average
annual operating cost increases. BOP also considers economic indicator
information to estimate general inflationary cost increases, using data

5

The Salaries and Expenses account includes sub-accounts covering costs for staffing,
inmate medical care, food, and utilities. From fiscal years 1999 through 2008, these
expenses comprised about 90 percent of BOP’s budget—in fiscal year 2009, staffing costs
for employee salaries accounted for about 60 percent of the Salaries and Expenses
account. The Buildings and Facilities account has sub-accounts covering costs for design
and construction of new facilities and modernization and repair of existing facilities.

6

BOP officials reported that during years in which a continuing resolution is in effect, they
must use the prior year’s budget request submission to DOJ as the baseline because of
delays in the enactment of the budget.

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from the Bureau of Labor Statistics Consumer Price Index, among other
sources.
Second, BOP projects inmate population changes for the budget year and
for several years into the future. BOP uses a modeling program that
identifies each inmate as a unique record tied to variables such as
conviction year, sentence term, and conviction type, with data obtained
from a variety of sources, including the Administrative Office of the U.S.
Courts, the U.S. Sentencing Commission, and the Executive Office for U.S.
Attorneys. The model identifies the number of inmates currently in BOP’s
system and the length of those inmates’ sentences, as well as the number
of inmates estimated to enter the BOP system and the length of their
sentences. For example, for the fiscal year 2010 annual budget submission,
BOP projected a net growth in its inmate population of 4,500 inmates.
Third, BOP estimates costs to both house the projected number of new
inmates, including building and facility requirements, and fund any new
initiatives. According to BOP, a rising inmate population is the primary
driver of new service costs (see figure 1 for graph showing federal inmate
population growth from fiscal years 2000 through 2009). Thus, for any
budget year, BOP uses inmate population projections to determine the
necessary bedspace to house additional inmates. BOP estimates these
associated incarceration costs by (1) determining how to distribute the
incoming prisoners across newly activated facilities, existing facilities, or
contract facilities; and (2) calculating staffing and other operational costs
to manage the additional inmates at its facilities. BOP also identifies and
estimates costs for new initiatives, such as the activation of a new BOP
facility, by reviewing the proposals submitted by its divisions and regional
offices, as well as historical data on costs for implementing such
initiatives.

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Figure 1: Federal Inmate Population Growth, Fiscal Years 2000 through 2009
Inmate population
210,000

180,000

150,000

120,000
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Fiscal year
Inmate population
Source: GAO analysis of BOP data.

For its Buildings and Facilities account, BOP identifies new program costs
associated with new construction and maintenance and repair of existing
facilities. Using its long-term inmate population projections, BOP
considers new construction proposals based on need, funding, and the
anticipated speed of construction. BOP estimates construction costs
largely by using analogous building costs for similar security level
facilities, as well as considering assumptions, such as the rate of inflation
and when potential construction would begin. BOP ranks maintenance
and repair proposals by assigning safety the highest priority and estimates
costs based on information it obtains from a construction cost estimation
company.

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BOP’s Methods for
Estimating Costs
Largely Reflect Best
Practices

BOP’s methods for estimating costs in its annual budget requests to DOJ
largely reflect the best practices outlined in GAO’s Cost Estimating and
Assessment Guide. Specifically, BOP followed a well-defined process for
developing a mostly comprehensive, well documented, accurate, and
credible cost estimate for fiscal year 2008. 7 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 have been
largely accurate. For example, we found BOP’s projections were accurate,
on average, to within 1 percent of the actual inmate population growth
from fiscal year 1999 through August 20, 2009.
We identified two areas where BOP could strengthen its methods for
estimating costs in its annual budget submission. First, according to best
practices described in GAO’s Cost Estimating and Assessment Guide, it
is better for decision makers to know the range of potential costs that
surround an estimate and the reasons behind what drives that range rather
than just having a point estimate from which to make their decision. An
uncertainty analysis provides a range of costs that span a best and worst
case spread. While not required by OMB or DOJ in annual budget
development guidance, conducting an uncertainty analysis of this kind is a
best practice. BOP has not conducted an uncertainty analysis, and
therefore has not quantified the level of confidence associated with its
cost estimate. 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—
a situation BOP faced in fiscal year 2008.
Second, during our review of documentation for BOP’s fiscal year 2008
cost estimate, we sometimes required the guidance of BOP budget
analysts to identify backup support. This was because the documentation
BOP provided was insufficient to allow someone unfamiliar with the
budget to locate detailed corroborating data. For example, in reviewing
BOP’s fiscal year 2008 cost estimate for a health service initiative related
to expanding kidney dialysis treatment for inmates, we required a budget
official’s assistance in locating supporting formulas used to calculate the

7
GAO’s Cost Estimating and Assessment Guide identifies 12 practices that are the basis
for effective cost estimation. We associate these practices with four characteristics:
accurate, well documented, credible, and comprehensive. If followed correctly, these
practices should result in reliable and valid cost estimates that (a) can be easily and clearly
traced, replicated, and updated; and (b) enable managers to make informed decisions.

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GAO-10-94 Bureau of Prisons

estimate. Best practices for cost estimation include providing enough
detail so that the documentation serves as an audit trail that allows for
clear tracking of cost estimates over time. By documenting all steps for
developing its budget cost estimate, BOP would be better positioned to
recreate its estimates in the event of attrition within its budget office
among those who developed initial budget cost estimates.
In providing feedback on our initial findings, BOP budget officials
indicated that taking these steps would strengthen their methods for
estimating costs in their annual budget submission to DOJ.

Costs for Key
Operations Have
Exceeded the
Funding Levels
Requested in the
President’s Budget in
Recent Years

BOP’s costs for key operations to maintain basic services, such as those
for inmate medical care and utilities, exceeded the funding levels
requested in the President’s budget from fiscal years 2004 through 2008,
limiting BOP’s ability to manage its growing inmate population. During this
period, BOP’s annual non-salary inmate medical care and utilities costs
exceeded funding levels in the President’s budget request by a total of
about $131 million and $55 million, respectively, largely due to inflation
and inmate population growth. 8
•

According to BOP, from fiscal years 2004 through 2008, BOP’s annual
non-salary inmate medical care costs increased by a total of about
$146.5 million. In contrast, during this period, the President’s budget
requested funding increases for non-salary inmate medical care
totaling approximately $15.4 million.

•

According to BOP, from fiscal years 2004 through 2008, BOP’s annual
utilities costs increased by a total of $87 million. In contrast, during
this period, the President’s budget requested funding increases for
utilities totaling approximately $31.6 million.

Table 1 compares BOP’s rates of annual cost growth due to inflation and
inmate population growth with the President’s budget requests for funding
for non-salary inmate medical care and utilities from fiscal years 2004
through 2008.

8
Non-salary inmate medical care costs refer to the amount BOP spends on
pharmaceuticals, medical supplies, and outside medical care--community hospital services
and a portion of guard escort service and a portion of salaries (overtime). In fiscal year
2008, non-salary inmate medical care and utilities costs were $430.5 million and $234
million, respectively.

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Table 1: Comparison of BOP’s Average Annual Rate of Cost Growth Due to Inflation
and Inmate Population Growth and Average Annual Funding in President’s Budget
Request for BOP, Fiscal Years 2004 through 2008
Average annual rate of
cost growth incurred
by BOP, fiscal years
2004 through 2008

Average annual rate of
funding growth in
President’s budget
request, fiscal years
2004 through 2008

Inmate medical care
(non-salary)

8.7%

0.9%

Utilities

9.8%

3.2%

Source: GAO analysis of BOP data.

When BOP has not received funding to cover the operational cost
increases it has incurred, in some years it has used Salaries and Expenses
funding planned for other areas to cover these costs. For example, one of
BOP’s highest priorities is to increase staffing levels of corrections
officers. However, BOP officials reported using Salaries and Expenses
account funds initially planned for hiring additional corrections officers in
fiscal years 2008 and 2009 to instead cover base operations cost increases
related to inmate medical care, utilities, and personnel salary and benefit
adjustments that were unfunded in the President’s budget requests.
As with any other DOJ component, BOP’s budget requests are governed by
DOJ and OMB budget development guidance. For example, DOJ budget
development guidance for fiscal years 2008 and 2009 required components
to limit cost growth for current services to no more than 4 percent greater
than prior year levels. DOJ reported that this guidance was a general
instruction given to all components, but recognized that BOP is different
because its costs are less discretionary since BOP does not control the
number of inmates for which it must care. In this way, DOJ reported that it
did not automatically reject budget submissions from BOP that exceeded
the cap, but instead required BOP to submit substantive information to
justify need.
DOJ also reported that OMB does not automatically provide funds for
inflationary cost increases. DOJ cited OMB policy stating that inflationary
adjustments for discretionary costs (such as utilities) can include some,
all, or no allowance for inflation. DOJ officials reported that OMB typically
does not include general inflationary adjustments that DOJ submits on
behalf of BOP.

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Nonetheless, DOJ has reported to OMB that other DOJ components could
reduce operations, implement across-the-board hiring freezes, and
implement policy changes that would reduce costs if faced with funding
shortfalls similar to what BOP has faced in its operations budget.
However, DOJ reported that BOP has already implemented significant
reductions to programs and streamlined and centralized administrative
functions to eliminate 2,300 positions. DOJ also reported that BOP has
limited flexibility because almost all of BOP’s operational costs are
devoted to staff salaries and provision of services. According to BOP data,
in fiscal years 2007 and 2008, 99.5 percent of BOP’s Salaries and Expenses
budget was fixed for its operations for paying staff salaries and providing
services to house and care for the inmate population.

Conclusions

In each of the last 2 fiscal years, BOP has needed additional funding to
meet its operating costs for managing its growing inmate population.
However, we found that BOP’s cost estimation methods largely reflect
GAO’s cost estimating best practices. Furthermore, BOP officials reported,
and DOJ officials acknowledged, that BOP has already implemented
significant reductions in operations costs, such as by eliminating positions
and centralizing administrative functions. Given BOP’s unique
responsibility for managing this population, and its limited discretion
when costs for key operations exceed funding levels, it is especially
important for BOP to develop accurate cost estimates and clearly convey
to decision makers the potential risk of costs exceeding funding levels.
In light of these circumstances, BOP’s budget cost estimation practices
could be strengthened in two ways. First, although BOP is not required to
report in its annual budget submission the extent to which actual costs
may be expected to vary from cost estimates, we have identified the
provision of an uncertainty analysis as a best practice. If BOP identified its
level of cost estimation confidence and provided this information to DOJ,
DOJ could more fully understand the range of potential costs—and the
potential need for more funding—if estimating assumptions for key cost
drivers, such as inmate population growth, do not hold true.

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GAO-10-94 Bureau of Prisons

Second, by improving documentation of all steps for developing its cost
estimate, BOP would be better positioned to re-create its estimates in the
event of attrition within its budget office among those who developed
initial cost estimates.

Recommendations for
Executive Action

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, we recommend that the Attorney General take
the following two actions:
•

•

Agency Comments

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; and
instruct the BOP Director to require the BOP budget staff to improve
documentation of calculations used to estimate its costs.

We provided a draft of this report to DOJ for its review and comment. The
BOP Director provided written comments on this draft and concurred with
our findings and recommendations. BOP stated that including the results
of an uncertainty analysis in the budget document would provide DOJ,
OMB, and Congress better context for decision making and stated that it
would include such analysis in preparation of its 2012 budget submission.
BOP also stated that if time permits, it would work with DOJ and OMB to
incorporate an uncertainty analysis into the President’s 2011 budget.
BOP’s comments are reproduced in appendix II.

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GAO-10-94 Bureau of Prisons

We are sending copies of this report to the Attorney General and
interested congressional committees. In addition, this report will be
available at no charge on the GAO Web site at http://www.gao.gov.
Should you or your staff have any questions concerning this report, please
contact me at (202) 512-9627 or by e-mail at maurerd@gao.gov. Contact
points for our Offices of Congressional Relations and Public Affairs may
be found on the last page of this report. Key contributors to this report are
listed in appendix III.

David C. Maurer
Director, Homeland Security and Justice Issues

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Appendix I: Briefing Slides to Congressional
Staff

Appendix I: Briefing Slides to Congressional
Staff

!
Iiff::.

GAO
Acoountablilly' Integrity. Reliability

Briefing on
Federal Bureau of Prisons
Methods for Estimating Costs
Prepared for the
Senate and House Appropriations Committees
Subcommittees on
Commerce, Justice, Science,
and Related Agencies

1

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GAO-10-94 Bureau of Prisons

Appendix I: Briefing Slides to Congressional
Staff

e!

GAO
Accountablilly 'Intejlrlty • Reliability

Briefing Overview
•
•
•
•
•
•
•
•
•

Introduction
Objectives, Scope, and Methodology
Results in Brief
Background
Findings
Conclusions
Recommendations
Agency Comments
Appendix I

2

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Appendix I: Briefing Slides to Congressional
Staff

e!

GAO
Accountablilly 'Intejlrlty • Reliability

Introduction
In recent years, the Department of Justice’s (DOJ) Federal Bureau of Prisons (BOP)
has faced challenges in meeting its operational workload responsibilities for overseeing
the federal inmate population. In fiscal year 2008, DOJ reported to the Office of
Management and Budget (OMB) that BOP would be unable to operate at the funding
levels in its appropriation because costs for key operations were at risk of exceeding
appropriated funding levels. BOP reported that it again anticipated a funding gap in
fiscal year 2009, and in response Congress provided appropriations above the amount
in the President’s budget request.

1
2
3

•

Fiscal year 2008: BOP received a total of $296.3 million in funding after its
initial appropriation was enacted, including $109.2 million transferred from other
DOJ accounts, $178 million from the Supplemental Appropriations Act, 2008
and $9.1 million relating to the Global War on Terrorism in the Supplemental
Appropriations Act, 2008.1

•

Fiscal year 2009: BOP received a total of $160 million in funding above the
President’s request through the Omnibus Appropriations Act, 20092 and $5
million through the Supplemental Appropriations Act, 2009.3

Pub. L. No. 110-252, 122 Stat. 2323 (2008).
Pub. L. No. 111-8, 123 Stat. 524 (2009).
Pub. L. No. 111-32, 123 Stat. 1859 (2009).

Page 14

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Appendix I: Briefing Slides to Congressional
Staff

e!

GAO
Accountablilly 'Intejlrlty • Reliability

Objectives, Scope, and Methodology
Objectives
The explanatory statement accompanying the Omnibus Appropriations Act, 2009
directed GAO to review BOP’s methods for determining resource requirements.4
We designed our reporting objectives to answer the following three questions:
1.

How does BOP estimate costs when developing its annual budget request to DOJ?

2.

To what extent do BOP’s methods for estimating costs follow established best
practices or guidelines?

3.

To what extent have BOP’s costs for key operations exceeded requested funding
levels identified in the President’s budget in the last five fiscal years, and how has
this affected BOP’s ability to manage its growing inmate population?

4

H. Comm. on Appropriations, 111th Cong., Committee Print on H.R. 1105 / Public Law Number 111-8 at 274
(2009) accompanying Pub. L. No. 111-8, 123 Stat. 524 (2009).

Page 15

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GAO-10-94 Bureau of Prisons

Appendix I: Briefing Slides to Congressional
Staff

e!

GAO
Accountablilly 'Intejlrlty • Reliability

Objectives, Scope, and Methodology
Scope and Methodology: Objective 1
To determine how BOP estimates costs when developing its annual budget request to
DOJ, we
•
•

•

analyzed BOP documentation, including budget development guidelines, planning
documents, and memorandum to obtain information on the steps BOP uses to
estimate costs and the information BOP considers when doing so;
reviewed OMB and DOJ budget development guidance, including OMB’s Circular A11 and DOJ annual budget development guidelines, to obtain information on federal
budget formulation standards and requirements BOP must follow in preparing its
annual budget request to DOJ,5 and
interviewed cognizant program officials from BOP’s Administration Division, including
senior officials from BOP’s Budget Development Office and Capacity Planning
Branch, to learn about BOPs methods for estimating costs. We also interviewed
cognizant program officials from BOP’s Office of Research and Evaluation to obtain
information on BOP’s methods for estimating inmate population increases.
5Office

of Management and Budget, Preparation, Submission, and Execution of the Budget, Circular No. A-11
(Washington, D.C.: Executive Office of the President, June 2008).

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Objectives, Scope, and Methodology
Scope and Methodology: Objective 2
To determine the extent to which BOP’s methods for estimating costs follow established
best practices or guidelines, we
•
•
•

analyzed available documentation, including BOP's fiscal year 2008 budget cost
estimate and other relevant agency documentation, such as the formulas BOP used
to compute its fiscal year 2008 budget cost estimate;
interviewed cognizant program officials from BOP’s Administration Division, including
the Budget Development Chief, to understand how BOP developed its budget cost
estimates and to identify supporting budget development documentation; and
compared the documentation BOP used to develop its fiscal year 2008 budget cost
estimate with criteria for cost estimating best practices identified in GAO’s Cost
Estimating and Assessment Guide: Best Practices for Developing and Managing
Capital Program Costs.6

6 GAO, GAO Cost Estimating and Assessment Guide: Best Practices for Developing and Managing Capital
Program Costs, GAO-09-3SP (Washington, D.C.: March 2009).

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Accountablilly 'Intejlrlty • Reliability

Objectives, Scope, and Methodology
Scope and Methodology: Objective 3
To determine the extent to which BOP’s costs for key operations exceeded
funding levels requested in the President’s budget over the past five fiscal
years and how this has affected BOP’s ability to manage its growing
inmate population, we
•

reviewed BOP documentation, including reported obligations costs for
maintaining key operations, and compared these costs to requests for
funding in the President’s annual budget submission to Congress for BOP;

•

interviewed BOP budget development officials, as well as budget
development officials from the DOJ Justice Management Division, to
obtain information on the factors officials reported contributing to BOP’s
operational costs exceeding funding levels.
7

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Objectives, Scope, and Methodology
Scope and Methodology
• To assess the reliability of the information we obtained about BOP's
methods for estimating costs for its annual budget submission, we
compared the documents BOP provided supporting its budget estimates for
fiscal years 2004 to 2008 with information contained in the President's
budget request for BOP for those years to determine the consistency of the
information.
• We also interviewed agency officials knowledgeable about controls in place
to maintain the integrity of (1) inmate population and sentenced offender
data BOP used to populate its inmate population projection model for fiscal
years 1999 to 2009 and (2) data on annual operations costs BOP reported
between 2004 and 2008, including inmate medical care and utilities. As a
result, we determined that the data were sufficiently reliable for the
purposes of this report.
8

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Accountablilly 'Intejlrlty • Reliability

Objectives, Scope, and Methodology
Scope and Methodology
We conducted this performance audit from May 2009 to
September 2009 in accordance with generally accepted
government auditing standards. Those standards require that
we plan and perform the work to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and
conclusions based on our objectives. We believe that the
evidence obtained provides a reasonable basis for our findings
and conclusions based on our objectives.

9

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Results in Brief
• BOP develops its annual budget request to DOJ using three general steps:
(1) estimating cost increases needed to maintain current service levels; (2)
projecting inmate population changes; and (3) estimating costs to provide
additional capacity to house inmate population growth and implement new
programs.
• 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; however, BOP
has not quantified the level of confidence associated with its cost estimate.
While not required by OMB or DOJ, conducting uncertainty analyses of this
kind is a best practice. By providing the results of such analyses to DOJ,
BOP officials could share advance information on the probability and
associated risks of operating expenses exceeding enacted funding levels—
a situation BOP faced in fiscal year 2008.
10

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Accountablilly 'Intejlrlty • Reliability

Results in Brief
• BOP’s costs for key operations to maintain basic services, such as
those for inmate medical care and utilities, have exceeded the
funding levels requested in the President’s budget over the last 5
fiscal years, and this has limited BOP’s ability to manage its
growing inmate population. According to BOP, between fiscal years
2004 and 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.

11

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Results in Brief
To improve transparency in BOP’s cost estimation process, as well as DOJ’s
annual budget formulation and justification process, we plan to make two
recommendations to the Attorney General
1.

instruct the BOP Director to require 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 so that DOJ can be
aware of the range of possible costs and BOP's confidence levels
associated with each point along the range;

2.

instruct the BOP Director to require the budget staff to improve
documentation of calculations used to estimate its costs.

DOJ and BOP generally agreed with our findings and provided technical
comments, which we integrated into our findings as appropriate.
12

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Accountablilly 'Intejlrlty • Reliability

Background – BOP’s Mission
BOP’s mission is to protect society by confining offenders in the
controlled environments of prisons and community-based facilities that
are safe, humane, cost-efficient, and appropriately secure.
• As of October 1, 2009, BOP was responsible for overseeing a total
federal inmate population of approximately 209,000.
• Approximately 172,500 federal inmates—83 percent—were
housed in 115 BOP-operated facilities throughout the country.
The remaining inmates were housed primarily in contract
confinement (private facilities and halfway houses, operated by
contractors or state/local governments).

13

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Accountablilly 'Intejlrlty • Reliability

Background – Federal Budget
Formulation Process
Through the multi-phase federal budget formulation process, BOP is required
to identify resource requirements and estimate costs for its annual budget
request to DOJ. This process is guided by OMB, which makes decisions on
executive agencies’ budgets and submits them as the “President’s Request”
to Congress. Key steps in this process involve:
• OMB issuing Circular A-11 to federal agencies, providing detailed
instructions for submitting budget data and materials, as well as
criteria for developing budget submissions;
• DOJ issuing to all components its annual budget development
guidelines;
• BOP submitting its budget request to DOJ’s Justice Management
Division about a year and a half prior to the budget year in question;

14

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GAO
Accountablilly 'Intejlrlty • Reliability

Background – Federal Budget
Formulation Process
• The Attorney General analyzing all DOJ components’ budget requests
in light of department-wide priorities and compiling and submitting the
DOJ annual budget submission to OMB; and
• OMB making final decisions on all agencies’ budgets and submitting
the President’s Request to Congress, which aggregates submissions
for all of DOJ’s components, including BOP.
• Figure 1 provides a high-level overview of this process.

15

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Accountablilly 'Integrity· Reliability

Background – Federal Budget Formulation
Process and OMB, DOJ, and BOP Roles
Figure 1

CD

February.May

DOJ component agencies

begin the procesJs ot
planning and fOl'"mulatlng
budget requests using
OMB and DOJ budget
development guidelines.
Tho budget will bo In offect
In two years.

fIt

@

June-August

OOJ budget staff reviews,
analyzes and rolls up the
budget request and the
component agencies

appeal recommendations,

@

December

Federal Budget Formulation Process

OOJ appeals to OMS for
more funding and enters
Into negotiations; final
budget request decisions

August

The Attorney Gener,l
makes11nal decision on
budget after discussion
with component agencies.

ar'e made.

CD

<D

Late November

OMB glv•• cabinet
agencies their' spending
levels and pr'Ogram
guidance for the budget·
or "passback".

Source: GAO analysis of BOP information.

Page 27

(§)

Seplember-November

September

DOJ .ubmlts budget
100MB.

OMB revIews spending
request, spending caps.
and administrative
priorities.

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GAO
Accountablilly 'Intejlrlty • Reliability

Background – BOP’s Budget
Composition
BOP’s appropriated budget is comprised of the Salaries and Expenses (S&E) and
Buildings and Facilities (B&F) accounts.
• The S&E account—known as BOP’s operations budget—includes sub-accounts
covering costs for staffing; medical care; food; and utilities, such as water and
gas. In fiscal year 2009, staffing costs for employee salaries comprised about
60 percent of this account.
• The B&F account has sub-accounts covering costs for design and construction
of new facilities and modernization and repair (M&R) of existing facilities.
• S&E expenses have accounted for the vast majority of BOP’s annual enacted
budget from fiscal years 1999 through 2008—averaging about 90 percent.
• The President’s fiscal year 2010 budget request for BOP’s S&E and B&F accounts
totals $6.1 billion, which is 23 percent of DOJ’s $26.7 billion budget.
• Figure 2 compares the President’s request for BOP to its enacted funding levels from
fiscal year 1999 through 2009, and figure 3 shows the composition of the President’s
request (S&E versus B&F) for BOP over the same period.

17

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!
~

GAO
AccounUlblllly· Integrity· Reliability

Background – President’s Budget Request vs.
Enacted Budget for BOP, Fiscal Years 1999
through 2009
Figure 2
eoU811I (in bJm....")
7

6

s
4

2

o
1999

2000

2001

2002

20M

2004

2005

2007

2008:

2009

Fi"cal yo"...
Piresident's Budget
_

Enacted (pllilS supplemental BJild trBJllafers)

Source: GAO analysis of BOP data.

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GAO
Accountablilly 'Intejlrlty • Reliability

Background – President’s Budget Requests
for BOP: S&E and B&F Accounts, Fiscal Years
1999 to 2009
Figure 3
Dollllno(ln 101 k:ms)

II'
8:

7
6,

!i,

43

2
1
U

19119
FilI1C:

2.000

2.001

veil..

_

8uildings anal Facilities 18&1F)

_

Salamas anal Eiq!>enBaB IS&E~

Source: GAO analysis of BOP data.

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Accountablilly 'Intejlrlty • Reliability

Background – BOP’s Challenges
• From fiscal years 2000 through 2009, BOP’s total inmate population level increased
by 44 percent—from 145,125 to 209,027. BOP estimates that the total inmate
population will continue to rise by about 4,500 inmates per year over the next decade.
• During this period, BOP reports that crowding levels (the percentage of inmates
housed in facilities above the rated capacity for safe and secure incarceration) have
grown.7 BOP currently reports a system-wide crowding rate of 37 percent—more than
double the rate (15 percent) that BOP has determined to be its long-term target for
reducing overcrowding.
• According to BOP, as inmate population and crowding have increased, BOP’s overall
inmate to staff ratio increased by nearly 18 percent from fiscal year 2000 to 2008, from
4.13 to 1 to 4.86 to 1. BOP reports that this has caused a significant reduction in its
ability to effectively supervise inmates in its facilities.

7 According

to BOP, rated capacity is intended to reflect the number of inmates that the facility was meant to house
20
safely and securely and with adequate access to services providing necessities for daily living and programs
designed to support inmates’ crime-free return to the community.

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Accountablilly 'Intejlrlty • Reliability

Background – BOP’s Challenges
• A 2005 BOP study found that an increase in crowding levels or inmate to
staff ratios leads to an increase in serious violence among inmates.8
• As of August 1, 2009, BOP reported being staffed at 34,829—about 88
percent of its authorized Full Time Equivalent (FTE) staffing level of
39,692. About half of its authorized positions are for corrections officers.
• Figure 4 compares BOP S&E staffing levels to its inmate population
beginning in fiscal year 2000.

8 Department

of Justice, Federal Bureau of Prisons, The Effects of Crowding and Staffing Levels in Federal Prisons
21
on Inmate Violence Rates (Washington, D.C., 2005).

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Accountablilly 'Intejlrlty • Reliability

Background – BOP’s Inmate and Staffing
Levels, Fiscal Years 2000 to 2009
Figure 4
BOP S1"ft ."nd Inm"te pClpullatllo_
220,000
200,000
180,000
1&0,000
1 0,000
120,000
100,000
80,000
&0,000
0,000
20,000

o
2.000

2001

2.O1l2

201l1J

2.004

20115

2006

2007

2008:

2009

Fisc8.' y.esr-

ToIaJ 6&JE staff on-boBTd
ToI·aJ 80 P i"""Ble popu ..tion ~ ioolu<lee colillract

confinemelill~

Note: Fiscal year 2009 data based on projections provided by BOP on August 20, 2009.
Source: GAO analysis of BOP data.

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GAO
Accountablilly 'Intejlrlty • Reliability

Objective 1 – How does BOP estimate costs
when developing its annual budget
submission?
BOP estimates costs using three general steps:
Step 1: BOP estimates the costs necessary to maintain operations for
existing workload requirements (current services) by using the prior
year’s request or enacted budget as a baseline.9
Step 2: BOP projects inmate population changes for the budget year.
Step 3: BOP estimates costs to accommodate projected inmate
population growth, including the provision of new programs, such as
activation of a new BOP prison facility, for the budget year.

9

BOP officials reported that during years in which a continuing resolution is in effect, they must use the prior
years’ budget request submission to DOJ as the baseline because of delays in the enactment of the budget.

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Accountablilly 'Intejlrlty • Reliability

Objective 1 – Estimating Costs to
Maintain Current Services (S&E Account)
First, BOP estimates cost increases for maintaining the level of services—
operational costs—provided in the prior year’s enacted budget for the S&E
account.
• These costs include adjustments to address mandatory staff pay
raises and benefit increases, inmate medical care, and utilities across
BOP’s 115 facilities.
• BOP primarily analyzes historical obligations from the last 5 years to identify
average annual operating cost increases.
• BOP also considers economic indicator information to estimate general
inflationary cost increases, using data from the Bureau of Labor Statistics
Consumer Price Index and other sources.

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Accountablilly 'Intejlrlty • Reliability

Objective 1 – Projecting Population
Changes
Second, BOP projects inmate population changes for the budget year, and for 9 years
into the future.
• BOP uses a modeling program that identifies each inmate as a unique record tied to
variables such as conviction year, sentence term, and conviction type.
• BOP’s model uses data and information from a variety of sources, including the
Administrative Office of the U.S. Courts, the U.S. Sentencing Commission, and the
Executive Office for U.S. Attorneys to identify
•
•

Number of inmates currently in prison and the length of their sentences, and
Number of inmates estimated to enter prison and the length of their sentences.

• For the fiscal year 2010 annual budget submission, BOP projected a net growth of
4,500 inmates.

25

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GAO

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Accountablilly 'Intejlrlty • Reliability

Objective 1 – Estimating Costs to
Provide Additional Capacity
Third, BOP estimates costs to both house the projected number of new inmates,
including building and facility requirements, and fund any new initiatives.
•

According to BOP, a rising inmate population is the primary driver of new
service costs.
• For the budget year, BOP uses inmate projections to determine necessary
bedspace to house additional inmates.
• For future years, BOP uses inmate projections to plan for long term
capacity needs, including new construction and arrangements for contract
confinement.

•

BOP estimates the associated incarceration costs by (1) determining how to
distribute incoming prisoners across newly activated facilities, existing facilities,
or privately operated facilities, and (2) calculating staff and other operational
costs at each facility type.
BOP identifies and estimates costs for new initiatives/program increases, such
as activation of a new BOP prison facility, by reviewing the proposals submitted
by its divisions and regional offices, and historical data.

•

26

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Accountablilly 'Intejlrlty • Reliability

Objective 1 – Estimating Costs to Provide
Additional Capacity (B&F Account)
BOP also identifies new program costs associated with its B&F account, including new
construction and M&R.
•

Using its long term population projections, BOP considers new construction
proposals based on need, funding, and the anticipated speed of construction.
• BOP estimates construction costs (for new prisons or expansions to existing
facilities) largely by using analogous building costs for similar security level
facilities. Cost estimates are also based on assumptions, including the rate of
inflation and when construction will begin.
• M&R project proposals are ranked by assigning safety the highest priority, with
lesser importance given to improving accessibility and updating facilities more
than 50 years old. BOP estimates costs for replacement values through
information it obtains from a construction cost estimation company.
• Since fiscal year 2005, OMB has placed a moratorium on new BOP prison
construction because OMB has focused on contracting with private prisons to
address bedspace needs. However, BOP has identified new construction plans
and included proposals for new construction as part of its capacity plan.10

10 According to BOP, the only new construction funding requested by the administration since fiscal year 2005 has
been for completion of an ongoing prison project in Mendota, California.

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Accountablilly 'Intejlrlty • Reliability

Objective 2 – To what extent do BOP’s
methods for estimating costs follow
established best practices or guidelines?
BOP’s methods for estimating costs in its annual budget requests to DOJ
largely reflect the four best practices outlined in GAO’s Cost Estimating and
Assessment Guide.
• GAO’s Cost Estimating and Assessment Guide has identified 12 practices
that are the basis for effective cost estimation.11 We associate these
practices with four characteristics: accurate, well documented, credible, and
comprehensive. OMB endorsed this guidance as being sufficient for meeting
most cost estimating requirements, including for budget formulation.
• If followed correctly, these practices should result in reliable and valid cost
estimates that (a) can be easily and clearly traced, replicated, and updated;
and (b) enable managers to make informed decisions.
11

See appendix I for a description of these cost estimating practices.

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Objective 2 – Extent To Which BOP’s Cost Estimation
Methods Reflect GAO’s Cost Estimation Best Practices
As table 1 illustrates, we found that BOP’s methods for estimating costs met
one and substantially met three of these four practices. The following
explains the definitions we used in assessing BOP’s methods for
estimating costs in its annual budget submission to DOJ:
Met – BOP provided complete evidence that satisfies the entire criterion;
Substantially Met – BOP provided evidence that satisfies a large portion of
the criterion;
Partially Met – BOP provided evidence that satisfies about half of the
criterion;
Minimally Met – BOP provided evidence that satisfies a small portion of the
criterion;
Not Met – BOP provided no evidence that satisfies any of the criterion.
• DOJ officials reported being satisfied with BOP’s cost estimation methods,
noting that they could not identify any area needing improvement.
29

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Accountablilly 'Intejlrlty • Reliability

Objective 2 – BOP’s Methods for Estimating Costs in
its Annual Budget Requests to DOJ Largely Reflect
GAO Best Practices
Table 1: Extent to Which BOP’s Cost Estimating Methods Reflect GAO Best Practices
Best practice

Explanation

Satisfied?

Accurate

The cost estimates should provide for results that are unbiased and
should not be overly conservative or optimistic. In addition, the
estimates should be updated regularly to reflect material changes in
the program, and steps should be taken to minimize mathematical
mistakes and their significance. Among other things, the estimate
should be grounded in a historical record of cost estimating and
actual experiences on comparable programs.

Met

Well
documented

The cost estimates should have clearly defined purposes and be
supported by documented descriptions of key program or system
characteristics. Additionally, they should capture in writing such
things as the source data used and their significance, the
calculations performed and their results, and the rationale for
choosing a particular estimating method. Moreover, this information
should be captured in such a way that the data used to derive the
estimate can be traced back to, and verified against, their sources.
The final cost estimate should be reviewed and accepted by
management.

Substantially met

Source: GAO analysis.

30

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Objective 2 – BOP’s Methods for Estimating Costs in
its Annual Budget Requests to DOJ Largely Reflect
GAO Best Practices
Table 1 (continued)
Best practice

Explanation

Satisfied?

Credible

The cost estimates should discuss any limitations in the
analysis performed due to uncertainty surrounding data or
assumptions. Further, the estimates’ derivation should
provide for varying any major assumptions and recalculating
outcomes based on sensitivity analyses, and their associated
risks/uncertainty should be disclosed. Also, the estimates
should be verified based on cross-checks using other
estimating methods and by comparing the results with
independent cost estimates.

Substantially met

Comprehensive

The cost estimates should include both government and
contractor costs over the program’s full life cycle, from the
inception of the program through design, development,
deployment, and operation and maintenance to retirement.
They should also provide an appropriate level of detail to
ensure that cost elements are neither omitted nor double
counted and include documentation of all cost-influencing
ground rules and assumptions.

Substantially met

Source: GAO analysis.

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Objective 2 – BOP’s Cost Estimating Methods
Met Characteristics for Accuracy
Consistent with best practices, BOP used relevant historical cost data
and considered adjustments for general inflation when estimating
costs for its fiscal year 2008 budget request to DOJ, and its methods
for projecting inmate population have been largely accurate.
• BOP officials reported estimating costs for medical care and utilities
for the budget year in question based on historical obligations over
the prior three to five years. For example, BOP provided
documentation that officials reported using to develop BOP’s fiscal
year 2009 inmate medical care cost estimate showing BOP’s
annual non-salary inmate medical care costs had increased an
average of about 10 percent annually between fiscal years 2003
and 2005.12
12 Non-salary inmate medical care costs refer to the amount BOP spent on pharmaceuticals, medical supplies,
and outside medical care (community hospital services and a portion of guard escort service and a portion of
salaries (overtime).

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Accountablilly 'Intejlrlty • Reliability

Objective 2 – BOP’s Cost Estimating Methods
Met Characteristics for Accuracy
• BOP’s total inmate population projections were accurate, on
average, to within 1 percent of the actual inmate growth from fiscal
year 1999 to August 20, 2009.
• BOP overestimated the inmate population for 8 of the 11 fiscal
years reviewed.
• Figure 5 compares BOP’s projected population levels as reflected
in the President’s request compared to the actual inmate
populations at the end of each fiscal year, 1999 to 2009 (projected).
• Table 2 presents the difference between the projected and actual
population increases.

33

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GAO

e!

Accountablilly 'Intejlrlty • Reliability

Objective 2 – BOP’s Population
Projections Have Been Largely Accurate
Figure 5
BOP Inmate papulation
210,000
200,000
190,000
180,000

160,000

1 0,000
130,000
120,000
2000

2004

2005

2006

200\1'

2008

2001l

P,rojacted in P,raBidarrd'B Budget

"""'!uBI BI the 03",1 at fi""al Y"'"

Note: Actual inmate population for fiscal year 2009 as of August 20, 2009.
Source: GAO analysis of BOP data.

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GAO
Accountablilly 'Intejlrlty • Reliability

Objective 2 – BOP’s Population
Projections Have Been Largely Accurate
Table 2
Inmate population level
Fiscal year

Projected

Actual

Difference

1999

127,902

133,689

-5,787

2000

141,282

145,125

-3,843

2001

160,919

156,572

4,347

2002

169,217

163,436

5,781

2003

175,126

172,499

2,627

2004

180,279

179,895

384

2005

190,004

187,394

2,610

2006

195,972

192,584

3,388

2007

203,880

200,020

3,860

2008

202,584

201,668

916

2009

206,165

207,872

-1707

Note: Actual inmate population for fiscal year 2009 as of August 20, 2009.
Source: GAO analysis of BOP data.

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Objective 2 – BOP’s Cost Estimating Methods
Substantially Met Characteristics for Being Well
Documented
Consistent with best practices, BOP clearly defined the purpose of its cost estimates,
and its calculations and results substantially met characteristics for being well
documented.
•

•

•

We reviewed BOP’s fiscal year 2008 budget request to DOJ and supporting
documentation and found budget officials had documented the formulas they used to
calculate cost elements for new initiatives, such as activation-related costs for a new
prison facility planned to open in the budget year.
In some cases, however, 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. For
example, in reviewing BOP’s fiscal year 2008 cost estimate for a health service
initiative related to expanding kidney dialysis, we required a budget official’s
assistance in locating supporting formulas used to calculate the estimate. Best
practices include providing enough detail so that the documentation serves as an
audit trail to allow for clear tracking of cost estimates over time.
Documenting all steps for developing its cost estimate would better position BOP to
recreate its estimates in the event of attrition within its budget office among those
who have developed initial cost estimates.
36

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Objective 2 – BOP’s Cost Estimating Methods
Substantially Met Characteristics for
Credibility
Consistent with best practices, BOP performed independent government cost estimates
related to constructing new prisons and used historical data to estimate key operational
costs, including utilities and inmate medical care, and its calculations and results
substantially met characteristics for credibility.
•
•

•

BOP performed cross-checks by benchmarking new estimates against historical
data, such as by estimating medical care costs based on cost obligations in recent
years and developed numerous risk analyses and impact scenarios of funding cuts.
Although not required to do so by OMB or DOJ annual budget development
guidelines, BOP did not perform an uncertainty analysis consistent with best
practices to quantify the risk associated with changes to various assumptions that
drive its cost estimates.13 Major assumptions include the inmate population
projection; inflation indices for medical care and utilities; and annual salary
increases.
Such an analysis would help provide DOJ, Congress, and other stakeholders with
information to determine the probability that costs for key operations, such as inmate
medical care and utilities, may exceed funding levels requested in the President’s
budget.
13 An uncertainty analysis provides a range of costs that span a best and worst case spread. According to best
37
practices, it is better for decision makers to know the range of potential costs that surround an estimate and the
reasons behind what drives that range rather than just having a point estimate from which to make their decision.

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Objective 2 – BOP’s Cost Estimating Methods
Substantially Met Characteristics for Being
Comprehensive
Consistent with best practices, BOP detailed pertinent costs related to its S&E
and B&F accounts across sub-accounts. This level of detail helped ensure
that no cost elements were omitted or double counted in its budget request
submission to DOJ, and that BOP’s calculations and results substantially met
characteristics for comprehensiveness.
• BOP relied on ground rules and assumptions, such as using inmate
population projections to drive cost estimates for capacity needs and using
historical obligation trends to estimate growth for utilities and inmate
medical care costs.
• However, as noted earlier, BOP did not determine risk distributions for all
assumptions, which would enable it to perform an uncertainty analysis for
key cost elements.

38

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Objective 3 – To what extent have BOP’s costs for key operations
exceeded requested funding levels in the President’s
budget in the last five fiscal years, and how has this affected
BOP’s ability to manage its growing inmate population?
Costs for key operations to maintain basic services, such as those for inmate
medical care and utilities, have exceeded the funding levels requested in
the President’s budget over the past five fiscal years, and this has limited
BOP’s ability to manage its growing inmate population.
• From fiscal years 2004 through 2008, the funding levels requested in the
President’s budget for BOP have been insufficient to cover annual cost
growth for maintaining existing services, including inmate medical care and
utilities. Moreover, population adjustment funding—necessary to cover
expenses associated with housing a growing inmate population in BOPoperated facilities—has not consistently been included in the President’s
budget, with BOP receiving no funding adjustments in some years.
• 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.
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Objective 3 – Costs to Maintain Key Operations and
Accommodate a Growing Inmate Population Have Exceeded
Funding Levels Requested in the President’s Budget
BOP’s annual cost growth to maintain key operations exceeded annual funding
adjustments requested in the President’s budget from fiscal years 2004 through
2008. For example, during this time, costs for non-salary inmate medical care
and utilities exceeded funding levels by about $131 million and $55 million,
respectively. BOP attributed the cost growth to inflation and inmate population
growth.14
Medical care costs: From fiscal year 2004 through 2008, BOP’s annual
non-salary inmate medical care costs increased by about $146.5 million. In
contrast, during this period, the President’s budget requested funding cost
adjustments for non-salary inmate medical care totaling about $15.4
million.

13 In fiscal year 2008, non-salary inmate medical care and utilities costs were $430.5 million and $234 million,
respectively.

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Objective 3 – Costs to Maintain Key Operations and
Accommodate a Growing Inmate Population Have Exceeded
Funding Levels Requested in President’s Request
Utilities costs: From fiscal year 2004 through 2008, BOP’s annual utilities
costs increased by a total of $87 million. In contrast, during this period, the
President’s budget requested funding cost adjustments for utilities costs
totaling about $31.6 million.
• Table 3 compares the rates of BOP’s average annual cost growth for nonsalary inmate medical care and utilities to average rates of annual funding
adjustments requested in the President’s budget, from fiscal year 2004
through 2008.

41

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Objective 3: Historical Cost Growth Has
Exceeded Funding Adjustments in the
President’s Request
Table 3

Average
Average annual rate of cost annual rate of funding growth in
growth incurred by BOP,
President’s budget request,
fiscal years 2004 through 2008
fiscal years 2004 through 2008
Inmate medical
care
(non-salary)

8.7%

0.9%

Utilities

9.8%

3.2%

Source: GAO analysis of BOP data.

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Objective 3 – Costs to Accommodate a Growing Inmate
Population and Maintain Staffing Levels Have Exceeded Funding
Adjustments Requested in the President’s Budget, According to
BOP
In some years, the President’s request for BOP has included funding adjustments for
marginal costs associated with inmate population growth in existing BOP facilities.15
However, BOP budget officials reported that this cost adjustment has not included
necessary funding to hire additional correctional officers to maintain inmate to
corrections staff ratios and effectively manage the new population.
•
•
•

For example, the most recent institution population adjustment request, in fiscal year
2009, included $17.1 million to house a projected net increase of 1,807 inmates in
existing BOP facilities.16
In fiscal year 2009, BOP reported an inmate to corrections officer ratio of about 10 to
1 (the number of inmates supervised per corrections officer).
BOP budget officials reported that BOP would need to hire 180 additional
corrections officers to maintain this ratio for the 1,807 new inmates. However,
according to salary and benefits cost assumptions provided by BOP budget officials,
the staffing portion of the adjustment provided funding equivalent to staffing 46
additional corrections officers.

15Marginal costs include providing security, food, medical care, clothing, unit management, education, records, and
43
maintenance associated with additional inmates entering existing BOP facilities.
16BOP uses a standard DOJ marginal cost per inmate rate. In fiscal year 2009, this rate was $9,483.

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Objective 3 – Because BOP’s Operations Funding Has Not Kept
Pace with Annual Growth, BOP Continues to Face Challenges
Managing its Growing Inmate Population
When BOP has not received funding to cover operational cost increases it has
incurred, in some years BOP had used S&E funding planned for other
areas to cover these costs.
• Though one of BOP’s highest priorities is to increase staffing levels of
corrections officers, BOP officials report using S&E funds in fiscal years
2008 and 2009 initially planned for hiring additional officers to instead cover
base operations cost increases related to inmate medical care, utilities, and
personnel salary and benefit adjustments that have been unfunded in the
President’s budget requests.
• In the President’s fiscal year 2010 budget request, $70 million is included
as a line item for additional BOP staffing. However, BOP officials reported
that this funding, if received, is to be used, in part, to cover existing
employees’ mandatory pay and benefit increases, and other operations
cost increases.

44

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Objective 3 – BOP Has Limited Flexibility
in Managing Funding Gaps
As with any other DOJ component, BOP’s budget requests are governed by
standard DOJ and OMB budget development guidance.
• For example, DOJ budget development guidance for fiscal years 2008
and 2009 instructed components to limit cost growth for current
services to no more than 4 percent greater than prior year levels.
• DOJ reported that the 4 percent cap guidance is a general instruction
given to all components but recognizes that BOP is different because
its costs are less discretionary. Furthermore, DOJ reported that it did
not automatically reject budget submissions from components that
exceeded the cap, but instead required components to submit
substantive information to justify need.

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Objective 3 – BOP Has Limited Flexibility
in Managing Funding Gaps
• DOJ reported that OMB does not automatically provide funds for
inflationary cost increases. DOJ cited OMB policy stating that inflationary
adjustments for discretionary costs (such as utilities) can include some, all,
or no allowance for inflation. DOJ officials reported that OMB typically does
not include general inflationary adjustments that DOJ submits on behalf of
BOP when it formulates the President’s request.
• However, DOJ has reported to OMB that, if faced with funding shortfalls
similar to what BOP has faced in its operations budget, other DOJ
components could reduce operations, implement across-the-board hiring
freezes, and implement policy changes that would reduce costs. However,
with almost all of its S&E costs fixed,17 DOJ reported that BOP has limited
flexibility in these areas, and has already implemented significant
reductions to programs, such as streamlining and centralizing
administrative functions to eliminate 2,300 positions.
17 According to BOP data, in fiscal years 2007 and 2008, 99.5 percent of BOP’s S&E budget was fixed—that
is, for paying staff salaries, and providing services to house and care for the inmate population.

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Conclusions
In each of the last 2 fiscal years, BOP has needed additional funding
to meet its operating costs.
• However, we found that BOP's cost estimation methods either met
or substantially met GAO’s cost estimating best practices.
• Further, BOP officials report, and DOJ officials acknowledged, that
BOP has already implemented significant reductions in programs
by eliminating positions and centralizing administrative functions.
• In addition, the current level of overcrowding within BOP facilities
presents an already serious safety challenge. Given BOP’s unique
responsibility for managing this population, it has limited discretion
when costs for key operations exceed funding levels.

47

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Conclusions
In light of these circumstances, BOP's budget cost estimation practices could
be strengthened in two ways:
• First, although BOP, like other DOJ agencies, is not required to report the
extent to which actual costs may be expected to vary from cost estimates,
we have identified the provision of an uncertainty analysis as a best
practice. If BOP identified its level of cost estimation confidence and
provided this information to DOJ, DOJ could more fully understand the
range of potential costs—and the potential need for more funding—if
estimating assumptions for key cost drivers, such as inmate population
growth, do not hold true.
• Second, by improving documentation of all steps for developing its cost
estimate, BOP would be better positioned to recreate its estimates in the
event of attrition within its budget office among those who have developed
initial cost estimates.
48

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Recommendations
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, we recommend that the Attorney General of the United States take
the following two actions:
• 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 key cost assumptions changing and submit the
results along with budget documentation to DOJ so that DOJ could be
aware of the range of likely costs and associated confidence levels;
and
• instruct the BOP Director to require the BOP budget staff to improve
documentation of calculations used to estimate its costs.
49

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Agency Comments

• We provided a draft of this report to DOJ and BOP for review and
comment. We also verbally described our findings and proposed
recommendations to DOJ and BOP officials in a meeting on August
31, 2009. Additionally, we received technical comments from DOJ
and BOP, which we incorporated where appropriate.
• DOJ and BOP generally agreed with the findings. DOJ and BOP
will formally review our recommendations when we submit our final
product in fall 2009.
• We made several requests to meet with OMB, but we were unable
to schedule a meeting during our review.

50

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Appendix I: Briefing Slides to Congressional
Staff

GAO

e!

Accountablilly 'Intejlrlty • Reliability

Appendix I – GAO’s 12 Step Cost
Estimating Practices
Initiation and research
Your audience, what you
are estimating, and why
you are estimating it are
of the utmost importance

Assessment
Cost assessment steps are
iterative and can be
accomplished in varying order
or concurrently

Analysis
The confidence in the point or range
of the estimate is crucial to the
decision maker

Presentation
Documentation and
presentation make or
break a cost estimating
decision outcome

Analysis, presentation, and updating the estimate steps
can lead to repeating previous assessment steps

Define the
estimate's
purpose

F>

Develop the
estimating
plan

Define
the
program

F> ~::::
Obtain
the
data

Determine
the
estimating
structure

Identify
ground
rules and
assumptions

~====~====::::
Develop the point
estimate and compare
~ to an independent
cost estimate

Source: GAO.

•

Conduct
sensitivity
analysis

Conduct a
risk and
uncertainty
analysis

Document
the
estimate

Present
estimate to
management
for approval

Upclatethe
estimate to
reflect actual
costsIchanges

51

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Appendix II: Comments from the Department
of Justice, Federal Bureau of Prisons

Appendix II: Comments from the Department
of Justice, Federal Bureau of Prisons

U.S. Department of Justice

Federal Bureau of Prisons

Office of the Director

Washingtmz, DC 20j34

November 4, 2009

David C. Maurer, Director
Homeland Security & Justice Issues
U.S. Government Accountability Office
Seattle, WA 98104
Dear Mr. Maurer:
The Bureau of Prisons (BOP) appreciates the opportunity to
formally respond to the Government Accountability Office's draft
report entitled Bureau of Prisons: Methods for Cost Estimation
Largely Reflect Best Practices. but Ouantifying Risks Would
Enhance Decisionmaking. We have completed our review of the
information reflected in the report and offer the following
comments.
First, we concur with the GAO assessment and its findings that
the BOP process is "well defined", and that the data and
estimates are "well documented, accurate and credible".
Furthermore, we agree with GAO that funding gaps in the BOP
operations account have left the BOP " ... with limited
flexibility to manage its continually growing inmate population."
Finally, we concur with the two GAO recommendations as explained
below.
Recommendation 1:
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.
Response:
The BOP agrees with this recommendation.
To increase
transparency, BOP believes that including the results of
uncertainty analysis in the budget document will provide all
decisionmakers (DOJ, OMB, and the Congress) better context for
decisionmaking.
The BOP already provides in its Buildings and

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Appendix II: Comments from the Department
of Justice, Federal Bureau of Prisons

Facilities Budget a range of potential project costs, which
alerts the decisionmaker to potential cost fluctuations such as
those we have seen in the past few years.
The BOP looks forward
to working with the GAO and learning more about the analysis
program they recommend.
The BOP will accomplish this recommendation with its 2012 budget
cycle beginning in the Spring Call, and if time permits, the BOP
will work with the DOJ and OMB to incorporate it into the
President's 2011 Budget.
Recommendation 2:
Instruct the BOP Director to require the BOP
budget staff to improve documentation of calculations used to
estimate its costs.
Response:
The BOP agrees with this recommendation.
To increase
transparency, it is critical that the reader/evaluator of the
budget request be provided sufficient information to understand
how the mandatory costs (i.e., medical, utility, food expenses)
were derived and how capacity and staffing changes will need to
be adjusted accordingly.

The BOP's corrective action is to include its multi-year
population projection table (Budget year + 5) and corresponding
crowding table which demonstrate how the request supports the
projected population and how it tracks with the growth.
In
addition, pertinent annualization and inflation factors from BOP
supporting documentation will be included to make the budget
request more transparent and easier to understand.
Finally, consistent with the discussion in the GAO report, the
BOP proposes to add historical spending information graphics for
mandatory expenses such as pay increases, medical, utilities and
food costs. This would provide additional context and insight
for the reader.
If you have any questions regarding this response, please
contact VaNessa P. Adams, Assistant Director, Program Review
Division, at (202) 616-2099.
Sincerely,

jrH~
Director

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Appendix II: Comments from the Department
of Justice, Federal Bureau of Prisons

cc:

Richard Theis, Assistant Director
Audit Liaison Group, JMD

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Appendix III: GAO Contact and Staff
Acknowledgments

Appendix III: GAO Contact and Staff
Acknowledgments
GAO Contact

David C. Maurer, (202) 512-9627 or maurerd@gao.gov

Staff
Acknowledgments

In addition to the contact named above, Joy Gambino, Assistant Director,
and Jay Berman, Analyst-in-Charge, managed this assignment. Pedro
Almoguera, Tisha Derricotte, Geoffrey Hamilton, Marvin McGill, Karen
Richey, Adam Vogt, and Melissa Wolf made key contributions to this
report.

(440797)

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