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Strategic Objective: Ensure Military Capabilities and Readiness.

Issue: After a decade of decline in defense spending, DOD has seen a 
gradual increase in recent years. The fiscal year 2002 budget of about 
$331 billion represented the largest increase in defense spending in 
recent years and came amidst growing concerns over the readiness of 
U.S. forces. The budget included additional resources for operational 
maintenance, quality-of-life programs, pay raises, and improvements to 
crumbling facilities. The most recent Quadrennial Defense Review charts 
a new defense strategy emphasizing homeland security, military 
transformation, joint operations, and advanced capabilities related to 
information technology, intelligence, and space operations. Follow-on 
studies will more precisely define how existing defense programs and 
priorities will change. The new defense strategy also highlights the 
criticality of reforming the department's business practices, 
streamlining organizational structures, and eliminating excess 
infrastructure that unnecessarily diverts resources from other defense 
priorities.

Obviously, the nature and intensity of the expected defense debate 
changed on September 11. The terrorist attacks heightened the debate 
over types of military capabilities and tactics required to address 
this threat and ensure adequate homeland protection. The Congress 
appropriated $40 billion in supplemental funds to deal with the 
immediate consequences of the attacks, with a large portion 
subsequently designated for increased defense spending. Requests for 
significant additional increases in defense spending are planned for 
fiscal year 2003 and beyond. The debate about what capabilities DOD 
must maintain and develop, where they should exist, and to what extent 
additional defense spending is required will be significantly shaped by 
the debate over the military's role in homeland security and the 
augmentation of the civilian agencies' roles in the fight against 
terrorism. Nonetheless, the Quadrennial Defense Review is the linchpin 
tying many of these issues together (see fig. 2.1).

Figure 2.1: Key Topical Issues Framing the Defense Debate.

Graphic depicting current defense challenges which include:
Jointness and Interoperability,
Capabilities Based Strategy versus two Major-Theater Wars,
Force Transformation,
Human Capital Challenges,
Quality of Life and Facilities Infrastructure,
Weapon Systems Modernization,
Homeland Security,
Guard and Reserve Roles,
Nuclear Stockpile, and
Improved Business Practices.
[End of Figure]

Performance Goals: To support efforts by the Congress and the federal 
government to address these issues, GAO will:

* assess the ability of DOD to maintain adequate readiness levels while 
addressing the force structure changes needed in the 21st century;

* assess overall human capital management practices to ensure a high-
quality total force;

* identify ways to improve the economy, efficiency, and effectiveness of 
DOD's support infrastructure and business systems and processes;

* assess the National Nuclear Security Administration's efforts to 
maintain a safe and reliable nuclear weapons stockpile;

* analyze and support DOD's efforts to improve budget analyses and 
performance management;

* assess whether DOD and the services have developed integrated 
procedures and systems to operate effectively together on the 
battlefield; and

* assess the ability of weapon system acquisition programs and processes 
to achieve desired outcomes.

Military Capabilities and Readiness:
Assess the Ability of the Department of Defense to Maintain Adequate 
Readiness Levels While Addressing the Force Structure Changes Needed in 
the 21st Century.

Key Efforts:

* Assess the basis for key changes resulting from the Quadrennial Defense 
Review and other strategic reviews,

* Evaluate DOD's progress in developing and implementing its role in 
homeland security,

* Assess the services' training and readiness to accomplish their 
missions,

* Assess the basis for force structure requirements and evaluate 
alternatives for achieving national security goals,

* Assess service plans for transforming their forces to meet future 
challenges,

* Assess the ability to deploy and sustain U.S. forces overseas,

* Assess DOD's efforts to effectively integrate active, reserve, 
civilian, and contractor personnel.

Significance:

The conclusion of the Quadrennial Defense Review presents many 
opportunities for GAO to assist the Congress in analyzing the basis for 
and effect of changes to defense strategies and programs. The Congress 
will be especially interested in the Department of Defense's (DOD) 
strategy for homeland security and how it will affect DOD's ability to 
carry out more traditional missions. GAO's independent assessments will 
highlight potential risks associated with proposed changes and examine 
how such changes will affect DOD's ability to address readiness 
problems. New areas of emphasis in the defense strategy, such as 
homeland security, force transformation, space, and information 
warfare, will force tough trade-off decisions and closer examination of 
how to achieve defense goals in the most cost-effective manner. 
Accordingly, analyses of the cost-effectiveness of defense alternatives 
and options will be needed. Similarly, the Congress and DOD are likely 
to focus more attention on how DOD can best blend the diverse elements 
of its total force to achieve economies and increase effectiveness and 
how it can better contain costs related to overseas operations.

Potential Outcomes that Could Result when GAO's Work Is Used:

Greater congressional understanding of the basis for key change in 
defense programs,

DOD actions to speed progress toward an effective homeland security 
strategy,

Improved military readiness to accomplish the national military 
strategy and elimination of barriers to achieving expected levels of 
readiness,

More rigorous requirements determination processes, less duplication of 
forces, and better data for considering force structure alternatives,

DOD actions to address inconsistencies between transformation plans, 
programs, milestones, and resources in relation to future warfighting 
needs,

Improvements in strategic airlift capabilities and management, and 
better data on costs and implications of overseas training and 
operations,

More cost-effective integration of military and civilian personnel, 
contractors, allies, and host nations to meet defense requirements.

Military Capabilities and Readiness:
Assess Overall Human Capital Management Practices to Ensure a High-
Quality Total Force.

Key Efforts:

* Assess DOD's human capital management of its civilian workforce,

* Examine benefits structure for active duty and reserve components to 
determine whether benefits have kept pace with the changing 
demographics,

* Analyze data from surveys of reserve component personnel to provide 
information on perceptions of quality-of-life issues and their 
relationship to recruiting and retention of reserve personnel,

* Assess DOD's professional military education programs,

* Evaluate the U.S. Investigations Service's quality assurance procedures 
for personnel security investigations performed under contract with 
DOD.

Significance:

DOD faces a tremendous challenge in sustaining and managing its large 
and diverse workforce of more than 3 million people, including military 
personnel (both active duty and reserves), federal civilian personnel, 
and private sector contract personnel. The U.S. Commission on National 
Security/21ST Century noted in its February 2001 report that America's 
military is losing too many key personnel; some with unique and 
valuable skills. Moreover, the increased operations tempo has placed 
higher demands on both the active duty and reserve components, raising 
quality-of-life concerns that affect personnel recruitment and 
retention. In addition, DOD faces complex and difficult challenges in 
managing its civilian workforce, which has a significant imbalance in 
shape, skills, and experience because of extensive downsizing. To shape 
and sustain a total force able to meet 21ST century needs will require 
flexible, creative, and dynamic personnel and compensation systems. A 
February 2000 DOD Science Board report stated that more deliberate and 
integrated shaping of the civilian and military force is needed. It 
recommended that DOD address its human capital challenges by 
establishing a strategic management plan, encompassing all elements of 
the total force; military, civilian, and private sector personnel. 
DOD's human capital challenges represent an urgent concern for the 
Congress.

Potential Outcomes that Could Result when GAO's Work Is Used:

An integrated, more strategic approach to DOD human capital planning 
and overall management of civilian workforce,

Improved benefits structure that will better support today's forces and 
enhance recruitment and retention of personnel,

Better understanding of attitudes, experiences, and opinions of reserve 
component personnel and factors most related to intent to leave or 
remain in the reserves,

A more effective professional military education system that enhances 
total force management and jointness among the services, as envisioned 
by the Goldwater-Nichols Act,

A more accurate, complete, timely, and cost-effective personnel 
security investigations process.

Military Capabilities and Readiness:
Identify Ways to Improve the Economy, Efficiency, and Effectiveness of 
DOD's Support Infrastructure and Business Systems and Processes.

Key Efforts:

* Identify ways to improve the economy, efficiency, and effectiveness of 
existing logistics support activities (transportation, inventory 
management, maintenance, disposal, and so forth),

* Identify ways to help DOD reengineer its logistics systems to meet 
future needs,

* Identify ways to improve the economy, efficiency, and effectiveness of 
other DOD business processes and management plans and assess progress 
being made in identifying best practices and implementing reforms such 
as competitive sourcing, privatization, and partnership arrangements,

* Identify ways to reduce excess facilities infrastructure and costs, 
improve the maintenance and repair of facilities, and improve planning 
for long-term recapitalization of facilities,

* Assess DOD compliance with legislative mandates governing provision of 
logistical support.

Significance:

Although the United States significantly reduced its defense force 
structure and military spending in the decade following the end of the 
cold war, similar reductions did not occur in the defense support 
infrastructure, which has historically consumed about 60 percent of 
DOD's budget. (This represents mission support funding for various 
program elements, such as central logistics and installation support.) 
Operating efficiencies and reductions have resulted from efforts such 
as base realignment and closure, consolidations, organizational and 
business process reengineering, privatization, and competitive 
sourcing. However, DOD is faced with the need to address substantial 
inefficiencies in support operations; aging equipment and facilities; 
and continuing problems in the areas of spare parts, maintenance, and 
repair. DOD officials recognize that they must achieve greater 
efficiencies to more effectively manage their support operations, 
contain costs, and provide increased funding for weapon system 
modernization and other priority needs. Such pressures are likely to 
continue despite recent growth in the defense budget and pressures for 
significant additional increases are likely in future years.

Potential Outcomes that Could Result when GAO's Work Is Used:

Costs avoided and opportunities identified to reprogram funding for 
other priority needs while strengthening efficiency and effectiveness 
of existing support systems,

Improved logistics support that will enhance the readiness and 
sustainability of U.S. military forces,

Reduced costs and improved program efficiency and effectiveness,

Reduced facilities infrastructure, improved facilities maintenance and 
planning for facility needs and recapitalization costs, and improved 
overall cost-effectiveness of facilities management,

Increased compliance with legislative requirements.

Military Capabilities and Readiness:
Assess the National Nuclear Security Administration's Efforts to 
Maintain a Safe and Reliable Nuclear Weapons Stockpile.

Key Efforts:

* Assess NNSA's efforts at establishing effective personnel, procurement, 
and planning systems to address the workforce and infrastructure 
challenges it faces,

* Assess NNSA's capabilities to build and maintain the necessary 
experimental and production facilities to support a safe and reliable 
stockpile,

* Assess the extent to which DOE and NNSA have developed an effective and 
efficient security program to protect nuclear weapons material and 
information.

Significance:

In response to repeated management and security problems, the Congress 
passed legislation in October 1999 that established the National 
Nuclear Security Administration (NNSA). NNSA, a semiautonomous agency 
within the Department of Energy (DOE), is responsible for nuclear 
weapons production, prevention of the proliferation of weapons of mass 
destruction, and the production of naval reactors. Since its 
establishment in March 2000, NNSA has begun to develop approaches for 
addressing issues associated with planning, organization, procurement, 
personnel, and security. NNSA is still ramping up its organization, but 
concern has been expressed in the Congress about the slow pace of 
NNSA's organization and how effective its new structure will be. New 
management approaches are vital if NNSA is to effectively address the 
programmatic challenges before it. Because it is assumed that the 
United States will continue its policy of no testing, NNSA must develop 
first-of-a-kind experimental facilities and advanced supercomputing 
technology to ensure that the nation's nuclear weapons stockpile is 
safe and reliable without underground testing. It must ensure that 
there is a modern and efficient infrastructure to maintain and 
refurbish the stockpile as it ages. It must find effective human 
capital strategies to respond to an aging contractor and federal 
workforce. It must continue to improve its project management and 
contract administration to ensure results since it relies on nonprofit 
organizations and for-profit businesses to carry out its missions. 
Finally, it must improve security operations at all its facilities to 
ensure that classified information, nuclear materials, and weapons are 
adequately protected. Complicating this approximately $7.5 billion per 
year effort is the fact that the ongoing defense review may 
fundamentally change how the United States uses its nuclear deterrent.

Potential Outcomes that Could Result when GAO's Work Is Used:

A better understanding of the stockpile stewardship program to help the 
Congress ensure that the annual investment of more than $4.5 billion is 
spent efficiently and supports specific program outcomes,

Improved DOE process for the safe production and storage of nuclear 
materials and components at the nuclear weapons complex,

Improved DOE program for ensuring the safety of international nuclear 
facilities,

Better information to help decision makers gauge the ability of NNSA's 
stockpile stewardship program to ensure the safety and reliability of 
existing nuclear weapons.

Military Capabilities and Readiness:
Analyze and Support DOD's Efforts to Improve Budget Analyses and 
Performance Management.

Key Efforts:

* Track DOD's obligations of its annual appropriations and examine how 
various elements of the defense budget are being spent, including 
special supplemental appropriations,

* Analyze the extent to which key aspects of the DOD budget submission 
are reasonable and justified,

* Assess the DOD future years' plans for their long-term realism and 
affordability,

* Assess DOD's implementation of GPRA principles and whether they address 
DOD's major management challenges and high-risk areas,

* Assess the effectiveness of DOD's efforts to improve its overall 
operations and to address major performance and accountability 
challenges and areas identified as high risk.

Significance:

By law, DOD is required to undertake a comprehensive review of its 
defense programs every 4 years. This Quadrennial Defense Review is 
expected to provide a blueprint for changes to plans, programs, 
budgets, goals, and objectives and has been dually designated as DOD's 
strategic plan for purposes of meeting the requirements of the 
Government Performance and Results Act of 1993 (GPRA). Thus, the 
Quadrennial Defense Review provides a view of future management 
directions and serves as a strategic framework for assessing results.

DOD operations currently involve over $1 trillion in assets, a budget 
authority of approximately $330 billion in 2002, and about 3 million 
military and civilian employees. Planning and budgeting for DOD 
represent one of the largest management challenges within the federal 
government. While DOD has the most effective warfighting organization 
in the world, the same level of excellence is not evident in many of 
its business processes that are critical to the achievement of DOD's 
mission in a reasonably economical, efficient, and effective manner. 
GAO's work has identified a number of DOD operations and programs as 
"high risk" because of their vulnerabilities to waste, fraud, abuse, 
and mismanagement. DOD has prided itself in its recent efforts in 
strategic planning and its decades-old planning, programming, and 
budgeting system, but many of the management and budgeting processes 
are not linked in a coherent, results-oriented manner. As a result, DOD 
cannot ensure that its budgets and its annual and future years' plans 
are reasonable or affordable and will achieve the results necessary to 
ensure national security. To provide such assurances, DOD faces 
challenges to 1. improve its budgeting activities by focusing on 
performance and results, 2. align its organizational structures with 
its new strategic plan, 3. effectively employ management initiatives 
and incentives, and 4. focus on results-oriented performance 
information for its outcomes.

Potential Outcomes that Could Result when GAO's Work Is Used:

Increased accountability of the military services and defense agencies 
for executing their budgets to achieve their objectives,

Improved accountability by providing information to defense-related 
appropriations and authorization committees in their deliberations of 
DOD's budgets,

Improved budget and program planning to realistically address changing 
national security needs with limited resources,

Improved performance of DOD programs through a greater focus on results 
and high-risk areas.

Military Capabilities and Readiness:
Assess Whether DOD and the Services Have Developed Integrated 
Procedures and Systems to Operate Effectively Together on the 
Battlefield.

Key Efforts:

* Evaluate how DOD is equipping its forces to achieve joint capabilities,

* Evaluate DOD's efforts to field integrated command, control, 
communications, computers, intelligence, surveillance, and 
reconnaissance (C4ISR) and weapons systems,

* Assess extent to which DOD's development and acquisition of C4ISR 
systems will lead to information superiority and greater battlefield 
awareness,

* Assess DOD's efforts to experiment with future joint warfighting 
concepts and capabilities,

* Assess DOD's activities to prepare its forces for joint operations,

* Evaluate DOD's plans for conducting integrated military operations with 
the North Atlantic Treaty Organization and other international 
partners.

Significance:

As recent experience has shown in Desert Storm and Kosovo, success in 
military operations is highly dependent on the ability of military 
forces to work effectively in a joint environment. The ability to 
conduct joint and combined operations is a key enabler to maintaining a 
superior force in an era where the nature and extent of national 
security missions have become broader and more varied. Not only must 
the military integrate its own forces; it must also have the 
capabilities to operate with those of its allies and coalition 
partners. Implementing Joint Vision 2020 and its principal concepts of 
dominant maneuver, precision engagement, focused logistics, and full 
dimensional protection require that the U.S. military develop the 
doctrine, organization, training, systems, and leadership to function 
as a truly integrated joint force. Through integration, the military 
can become faster, more lethal, and more precise.

To make effective decisions, joint commanders must have a complete, 
accurate, and timely picture of the battlefield and must be confident 
that command, control, communications, computers, intelligence, 
surveillance, and reconnaissance systems can exchange information 
quickly and accurately. In addition, appropriate concepts and doctrine 
must be in place, and forces must be structured and trained to 
facilitate joint operations. In the past, DOD and the services have 
lacked coordinated or common procedures and interoperable systems to 
carry out joint military operations. This is largely because the 
services have traditionally developed separate approaches on how to 
fight and have built the forces and capabilities needed to execute 
their own individual approaches. One consequence of this has been the 
acquisition of costly overlapping and duplicative systems. These 
separate approaches worked in the past because the battle space was 
segmented and controlled by different services. Current and anticipated 
future missions will require more coordinated joint and combined 
operations that optimize and leverage all services' capabilities.

Potential Outcomes that Could Result when GAO's Work Is Used:

More cost-effective, integrated acquisition of weapons systems and 
materiel,

Improved interoperability of systems and exchange of information 
necessary for effective command, control, and communications,

Improved management of battlefield information and communications,

Improved coordination of service and joint warfighting experimentation 
efforts,

More effective joint exercises and training,

Enhanced ability of U.S. forces to operate with allies,

Military Capabilities and Readiness:
Assess the Ability of Weapon System Acquisition Programs and Processes 
to Achieve Desired Outcomes.

Key Efforts:

* Provide brief annual status and risk updates on a wide range of weapon 
systems, observing trends in acquisition performance and opportunities 
for budgetary actions,

* Target reviews of individual weapon systems to assess their ability to 
achieve outcomes early enough so that DOD can take action well ahead of 
major decisions,

* Assess barriers that prevent DOD from advancing technology while at the 
same time developing new weapons more quickly and predictably,

* Assess how the processes that provide key resources to acquisition 
programs help; or hinder; achieving desired outcomes,

Significance:

DOD invests $100 billion each year in a wide array of weapon systems to 
equip U.S. armed forces. These systems range from upgrades to tanks and 
fighter aircraft to sophisticated satellites and networks of systems, 
such as those used for national missile defense. It is not unusual for 
a single program to cost over $40 billion. These investments represent 
the largest discretionary portion of the U.S. budget.

DOD's acquisition process has produced the best weapons in the world. 
At the same time, the process routinely yields weapons that exceed cost 
and schedule estimates by significant amounts. The opportunity costs of 
such increases are significant; a mere 3-percent cost growth per year 
means that $3 billion of scarce discretionary funds are not available 
for new investments. Given the complexity of modern weapons, some 
problems can be expected. Many, however, can be predicted and avoided. 
It is not unusual for a new program to rely on fledgling technologies 
for high performance, only to report late in development that 
insufficient time and money had been estimated to mature the 
technologies and incorporate them into an overall design. As unplanned 
cost increases occur, activities such as testing are deferred, giving 
rise to the late discovery of problems. Ultimately, it takes more money 
to buy fewer of a new weapon, thereby limiting anticipated 
capabilities. DOD recognizes this pattern and has signaled its 
intention to improve acquisitions. Recently, DOD has begun to recognize 
the potential of using best practices adopted from world-class 
enterprises to field systems within predicted estimates and to reduce 
the time and cost of doing so.

Potential Outcomes that Could Result when GAO's Work Is Used:

More relevant knowledge base for congressional decision making,

Increased use of best practices to achieve desired outcomes,

Better transition of new technologies to weapon programs and reduced 
acquisition cycle times,

Efficient and effective allocation of resources, such as people, 
funding, and training, to acquisition programs.