Ketra Schmitt is a professor in the Centre for Engineering in Society and the director of Concordia’s Independent Program.
“We can generally attribute this increase to escalating prices,” says Schmitt, a member of Concordia’s Centre for Engineering and Society. “On average, changes in fuel expenditures account for 80 per cent of the variance between budget estimates and actual spending.”
The amount of petrol consumed is also an important factor. Using more than was budgeted for accounted for approximately 20 per cent of the over-spending, with variance greatest during the early stages of the wars in Afghanistan and Iraq — times at which activities such as flying hours, days at sea and tank miles inevitably increased.
Underestimating resource requirements at the beginning of an unexpected, large military operation may be unavoidable. However, the DOD failed to accurately budget for the more predictable fuel (as well as other) costs of ongoing wartime operations — paying for them instead with emergency funds.
“The failure to accurately forecast the cost and properly budget for fuel requirements during periods of long-term conflict expose the DOD to excessive price risks and budget shortfalls,” says Schmitt. “As fuel expenses rise on the order of billions of dollars, governments inevitably make tough trade-offs, sometimes taking away resources from other programs in order to ensure military operations are adequately fueled.”
What’s the solution? Schmitt's research explores several proposed approaches for better forecasting fuel prices and managing consumption. For example, it suggests the DOD could engage in fixed price contracts to increase budget stability.
“It’s kind of like getting a fixed rather than variable interest rate for your mortgage. Depending on the market you may be better or worse off, but at least you know what the price will be,” Schmitt says.
This research shows that, ultimately, the government needs to stop its policy of paying for ongoing wartime operations with emergency funds, which are exempt from spending caps.
“Whether it’s justified as a wartime necessity or because of unpredictable prices, reliance on emergency funds impairs the ability of the government and the public to adequately evaluate the costs of different choices,” says Shannon Lloyd, who led the study.
Partners in research: This study was led by Shannon Lloyd (independent researcher) and included collaboration by Nicholas M. Rotteveel (Booz Allen Hamilton), Timothy Schwartz and Cameron Stanley (Concurrent Technologies Corporation).