Report to the Ranking Minority

Member, Committee on Governmental

Affairs, U.S. Senate

United States General Accounting Office

GAO

June 2001 DEPARTMENT OF

DEFENSE

Status of Achieving

Outcomes and

Addressing Major

Management

Challenges

GAO-01-783
Page 1 GAO-01-783 DOD’s Status of Achieving Outcomes

June 25, 2001

The Honorable Fred Thompson

Ranking Minority Member

Committee on Governmental Affairs

United States Senate

Dear Senator Thompson:

As you requested, we reviewed the Department of Defense’s (DOD) fiscal

year 2000 performance report required by the Government Performance

and Results Act of 1993 (GPRA) to assess the Department’s progress in

achieving selected outcomes that you identified as important mission

areas for DOD.1

 We did not review DOD’s fiscal year 2002 performance

plan because it had not been issued. DOD is uncertain if the plan will be

issued in this fiscal year because the Department is undergoing a major

review of its national defense strategies and business operations, which

may result in changes to the way DOD reports performance information.

Thus, we are unable, at this time, to discuss DOD’s fiscal year 2002 goals

and strategies to achieve the selected outcomes. Also, we could not

compare DOD’s fiscal year 2002 performance plan with its fiscal year 2001

performance plan for the selected outcomes. These are the same

outcomes we addressed in our June 2000 review of DOD’s fiscal year 1999

performance report and fiscal year 2001 performance plan to provide a

baseline by which to measure DOD’s performance from year to year.2

These selected outcomes are:

• The U.S. maintains technological superiority in key war-fighting

capabilities.

• U.S. military forces are adequate in number, well qualified, and highly

motivated.

• Combat readiness is maintained at desired levels.

• Infrastructure and operating procedures are more efficient and costeffective.

• Reduced availability and/or use of illegal drugs.

 1

This report is one of a series of reports on the 24 Chief Financial Officers (CFO) Act

agencies’ FY 2000 performance reports and FY 2002 performance plans.

2 Observations on the Department of Defense’s Fiscal Year 1999 Performance Report and

Fiscal Year 2001 Performance Plan (GAO/NSIAD-00-188R, June 30, 2000).

United States General Accounting Office

Washington, DC 20548
Page 2 GAO-01-783 DOD’s Status of Achieving Outcomes

• Fewer erroneous payments to contractors.

As agreed, using the selected outcomes for DOD as a framework, we (1)

assessed the progress DOD has made in achieving these outcomes and the

strategies DOD has in place to achieve unmet performance goals and (2)

compared DOD’s fiscal year 2000 performance report with the

Department’s prior year performance report for these outcomes to identify

improvements made. Additionally, we agreed to analyze how DOD

addressed its major management challenges, including the

governmentwide high-risk areas of strategic human capital management

and information security that we and the DOD Inspector General had

identified. Appendix I provides detailed information on how DOD

addressed these challenges. Appendix II contains DOD’s comments on a

draft of our report.

DOD’s progress in achieving the selected outcomes is unclear. One of the

reasons for the lack of clarity is that most of the selected program

outcomes DOD is striving to achieve are complex and interrelated and

may require a number of years to accomplish. Another, as we reported last

year, is that DOD did not provide a full assessment of its performance. We

also identified weaknesses in DOD’s strategies for achieving unmet

performance goals in the future. 3

• Planned outcome: The U.S. maintains technological superiority in key

warfighting capabilities

The extent to which the Department has made progress toward the

outcome of maintaining U.S. technological superiority in key warfighting capabilities is unclear. As we reported last year, some of the

performance goal’s underlying measures—such as procurement

spending and defense technology objectives—do not provide a direct

link toward meeting the goal, thus making it difficult to assess

progress. DOD’s performance report does not reflect concerns raised

within the Department about the adequacy of its strategy and the

timely introduction of new technologies to operational forces.

 3

 Annual performance goals establish a measurable path to incremental achievement of

larger strategic goals and outcomes. Performance goals are supported and evaluated by

quantifiable and/or qualitative output, which is assessed using performance measures or

indicators.

Results in Brief
Page 3 GAO-01-783 DOD’s Status of Achieving Outcomes

• Planned outcome: U.S. forces are adequate in number, well qualified,

and highly motivated

DOD’s performance measures do not adequately indicate its progress

toward achieving the outcome of ensuring that U.S. military forces are

adequate in number, well qualified, and highly motivated. DOD’s

performance measures still do not fully measure how well DOD has

progressed in developing military personnel or the extent to which U.S.

military forces are highly motivated. With the exception of the enlisted

recruiting area, DOD does not identify specific planned actions that it

or the services will take to assist them in meeting unmet performance

targets in the future. Also, DOD’s performance report discusses

generally the difficulties of the current retention environment, but the

report contains little clear articulation of specific actions or strategies

being taken to improve future retention.

• Planned outcome: Combat readiness is maintained at desired levels

The level of progress that DOD has made toward the outcome of

maintaining combat readiness at desired levels is unclear. Although

DOD met some performance measure targets, others had been

lowered, were incomplete, or were not met, thus making an accurate

assessment of progress difficult. Because DOD reported that it had met

its force-level targets, it plans no significant changes or strategies in

force structure for fiscal year 2001. However, we believe that forcelevel performance measures could be more complete and meaningful if

they included measures for associated support forces with the

measures for existing combat unit force levels.

• Planned outcome: Infrastructure and operating procedures are more

efficient and cost-effective

The extent to which DOD has made progress toward the outcome of

ensuring that infrastructure and operating procedures are more

efficient and cost-effective is still unclear. DOD reported that it met

many of its performance targets, such as disposing of property,

reducing logistics response time, and streamlining the acquisition

workforce. However, as we reported last year, the targets do not

always hold up to scrutiny; and some targets that DOD reported as met

had been lowered or were not met. For those measures that were not

met, or that were lowered, DOD’s performance report does not provide

clear strategies for achieving them in the future.
Page 4 GAO-01-783 DOD’s Status of Achieving Outcomes

• Planned outcome: Reduced availability and/or use of illegal drugs

DOD’s fiscal year 2000 performance report did not include

performance goals or measures related to the outcome of reducing the

availability and/or use of illegal drugs. Therefore, we had no basis to

assess DOD’s progress in achieving this outcome. DOD does, however,

support U.S. and foreign law enforcement agencies in their efforts to

reduce the availability and use of illegal drugs. It has lead responsibility

for aerial and maritime detection and monitoring of illegal drug

shipments to the United States. It also provides assistance and training

to foreign governments to combat drug-trafficking activities. DOD’s

fiscal year 2000 performance report recognized counternarcotics as a

crosscutting function and outlined DOD’s responsibilities in this area.

DOD has developed a set of performance results to determine the

effectiveness of its counterdrug operations and make better use of

limited resources.

• Planned outcome: Fewer erroneous payments to contractors

We had no basis to assess DOD’s progress toward achieving this

outcome because DOD had no performance goals directly related to

achieving the outcome. However, this issue represents a significant

problem for DOD. Under its broader goal of improving the efficiency of

its acquisition processes, DOD has developed performance measures

related to initiatives that may reduce the number of erroneous

payments made to contractors. For example, DOD’s performance

report contains goals and measures for increasing the use of paperless

transactions. While these measures reflect quantifiable assessments of

the levels of usage for the contracting methods, they may not directly

address whether the number of erroneous payments has been reduced.

On a related issue, we reported in February of this year that

overpayments continue to be a problem. We recommended actions

DOD could take to reduce the overpayment problem and assure more

timely repayment when overpayments do occur.4

In comparing DOD’s fiscal year 2000 and 1999 performance reports, we

noted that DOD has made several improvements. For example, it added

more discussion on the importance of human resources in achieving

 4 Contract Management: Excess Payments and Underpayments Continue to Be a Problem

at DOD (GAO-01-309, Feb. 22, 2001).
Page 5 GAO-01-783 DOD’s Status of Achieving Outcomes

DOD’s performance objectives and summarized how DOD’s performance

metrics responded to each of the eight major management challenges.

Further, in terms of data verification, presentation, and content, DOD’s

fiscal year 2000 report has an effective format that is understandable to a

nondefense reader. However, the fiscal year 2000 report did not address

several weaknesses that we had identified in the fiscal year 1999 report.

For example, nine measures and indicators, which DOD reported to make

infrastructure and operating procedures more efficient and cost-effective,

are insufficient to assess whether DOD is making progress in streamlining

its infrastructure. Since DOD has not changed or supplemented these and

other measures, we continue to believe that DOD will have problems

determining the effectiveness of its infrastructure reduction efforts.

DOD’s fiscal year 2000 performance report also addresses major

management challenges we identified, including the governmentwide highrisk areas of strategic human capital management and information

security. Regarding strategic human capital management, the report

includes discussions of initiatives DOD has taken or planned to (1)

improve the quality of life for military members, such as improving and

refining selected bonus programs, and (2) shape its future civilian

workforce. Regarding information security, DOD’s performance report did

not provide any data showing measurable progress on this issue but did

cite several actions to improve security, such as a new web security

initiative to scrutinize information posted to DOD web sites. In addition,

DOD’s performance report discussed DOD’s progress in resolving all but

one of the other major management challenges that we had identified.

DOD did not discuss its progress in resolving the following challenge:

“Developing strategic plans that lead to desired mission outcomes.” As

noted in several other key challenges, sound plans linked to DOD’s overall

strategic goals are critical to achieving needed reforms. Inefficiencies in

the planning process have led to difficulties in assessing performance in

such areas as combat readiness and support infrastructure reduction. In

addition, some of these management challenges—such as financial

management—are crosscutting and may adversely affect DOD’s ability to

measure progress.

DOD is in the process of updating its strategic plan through the conduct of

its Quadrennial Defense Review, which sets forth its mission, vision, and

strategic goals. The review provides DOD another opportunity to include

qualitative and quantitative information that could contribute to providing

a clearer picture of DOD’s performance. On the basis of last year’s analysis

of DOD’s fiscal year 1999 performance report and fiscal year 2001

performance plan, we recommended that the Department include more
Page 6 GAO-01-783 DOD’s Status of Achieving Outcomes

qualitative and quantitative goals and measures in its annual performance

plan and report to gauge progress toward achieving mission outcomes.

DOD has not as yet fully implemented this recommendation. We continue

to believe that the Secretary of Defense should adopt this recommendation

as DOD updates its strategic plan through the review and prepares its next

annual performance plan. By doing so, DOD can ensure that it has

strategies that are tied to desired mission outcomes and are well thoughtout for resolving ongoing problems, achieving its goals and objectives, and

becoming more cost and results oriented.

In providing written comments on a draft of this report, DOD indicated

that its annual GPRA report provides the Congress and the public an

executive-level summary of key performance results over the past budget

year. DOD pointed out that future GPRA submissions will refine its

performance metrics to reflect priorities of the new defense strategy, but

stressed that, although it does not want to mask deficiencies in how DOD

manages performance, it does not want to emphasize shortfalls at the

expense of true achievements. DOD stated that it would be helpful if we

could provide a clearer definition of what standards of sufficiency will be

applied in evaluating future submissions. As we reported in last year’s

assessment, we agree that the answer is not to simply measure more

things in more detail. However, in many instances, for the outcomes

identified by the Committee, DOD’s report does not discuss strategies for

achieving unmet goals and does not fully assess its performance. We

believe that the best test of reasonableness or sufficiency to evaluate

DOD’s future progress resides in the requirements of GPRA itself, which

requires, among other things, agencies to explain and describe, in cases

where a performance goal has not been met, why the goal was not met.

The requirement to submit a fiscal year 2002 performance plan, which

DOD has yet to issue, also provides DOD with the opportunity to address

these shortfalls. In that regard, we have issued guidance that outlines

approaches agencies should use in developing performance plans.5

 These

actions would place DOD in a position of continuously striving for

improvement.

GPRA is intended to shift the focus of government decisionmaking,

management, and accountability from activities and processes to the

 5 The Results Act: An Evaluator’s Guide to Assessing Agency Annual Performance Plans

(GAO/GGD-10.1.20, Version 1, Apr. 1998); Executive Guide: Effectively Implementing the

Government Performance and Results Act (GAO/GGD-96-118, June 1996).

Background
Page 7 GAO-01-783 DOD’s Status of Achieving Outcomes

results and outcomes achieved by federal programs. New and valuable

information on the plans, goals, and strategies of federal agencies has been

provided since federal agencies began implementing GPRA. Under GPRA,

annual performance plans are to clearly inform the Congress and the

public of (1) the annual performance goals for agencies’ major programs

and activities, (2) the measures that will be used to gauge performance, (3)

the strategies and resources required to achieve the performance goals,

and (4) the procedures that will be used to verify and validate

performance information. These annual plans, issued soon after

transmittal of the President’s budget, provide a direct linkage between an

agency’s longer-term goals and mission and day-to-day activities.6

 Annual

performance reports are to subsequently report on the degree to which

performance goals were met. The issuance of the agencies’ performance

reports, due by March 31, represents a new and potentially more

substantive phase in the implementation of GPRA—the opportunity to

assess federal agencies’ actual performance for the prior fiscal year and to

consider what steps are needed to improve performance and reduce costs

in the future.7

The mission of the Department of Defense is to support and defend the

Constitution of the United States; provide for the common defense of the

nation, its citizens, and its allies; and protect and advance U.S. interests

around the world. Defense operations involve over $1 trillion in assets,

budget authority of about $310 billion annually, and about 3 million

military and civilian employees. Directing these operations represents one

of the largest management challenges within the federal government.

 6

The fiscal year 2002 performance plan is the fourth of these annual plans under GPRA.

7

The fiscal year 2000 performance report is the second of these annual reports under

GPRA.
Page 8 GAO-01-783 DOD’s Status of Achieving Outcomes

This section discusses our analysis of DOD’s progress in achieving

outcomes and the strategies that DOD has in place, particularly human

capital8

 and information technology, for accomplishing these outcomes. In

discussing these outcomes, we have also provided information drawn

from our prior work on the extent to which DOD provided assurance that

the performance information it is reporting is credible.

In general, the extent to which DOD has made progress in achieving the

six outcomes is unclear. In our opinion, one of the reasons for the lack of

clarity is that most of the selected program outcomes DOD is striving to

achieve are complex and interrelated and may require a number of years

to accomplish. This condition is similar to what we reported last year on

our analysis of DOD’s fiscal year 1999 performance report and fiscal year

2001 performance plan. Further, with the new administration, DOD is

undergoing a major review of its military strategy and business operations,

which may result in changes to the way DOD reports performance

information.

The extent to which the Department has made progress toward the

outcome of maintaining U.S. technological superiority in key war-fighting

capabilities is difficult to assess. DOD’s performance goal for this outcome

is to transform U.S. military forces for the future. As we reported last year,

some of the performance goal’s underlying measures—such as

procurement spending and defense technology objectives—do not provide

a direct link toward meeting the goal, thus making it difficult to assess

progress.

DOD’s performance report does not reflect concerns raised within the

Department about the adequacy of its strategy and institutional processes

for transforming forces. We noted in a prior report that a transformation

strategy is presented in the former Secretary of Defense’s 2001 Annual

Report to the President and the Congress.9

 However, the strategy does not

clearly identify priorities or include an implementation plan and outcomerelated metrics that can be used to effectively guide the transformation of

 8

Key elements of modern human capital management include strategic human capital

planning and organizational alignment; leadership continuity and succession planning;

acquiring and developing staffs whose size, skills, and deployment meet agency needs; and

creating results-oriented organizational cultures.

9 GAO/NSIAD-00-188R, June 30, 2000.

Assessment of the

Department of

Defense’s Progress

and Strategies in

Achieving Selected

Outcomes

Technological Superiority

in Key War-fighting

Capabilities
Page 9 GAO-01-783 DOD’s Status of Achieving Outcomes

U.S. forces and assess progress. This topic is currently being reviewed by

the new administration. As we reported, a 1999 Defense Science Board

study had recognized the need and called for such an explicit strategy, or

master plan; a roadmap; and outcome-related metrics to assess progress.

Also, a joint military service working group identified a need for a

comprehensive strategy as an issue that the 2001 Quadrennial Defense

Review must address. Further, the Defense Science Board, Joint Staff and

unified command officials, joint military service working group, and others

raised concerns about the ability of DOD’s current institutional processes

to turn the results of transformation initiatives into fielded capabilities in a

timely manner. These processes—which include DOD’s planning,

programming, and budgeting system and weapons acquisition system—

focus on near- or mid-term requirements and do not foster the timely

introduction of new technologies to operational forces.

For each of the supporting performance measures, DOD’s report describes

data collection and verification measures. However, our work in this area

has not addressed the reliability of DOD’s data. Thus, we are unable to

comment on the extent to which the reported performance information is

accurate.

DOD’s performance measures do not adequately indicate its progress

toward achieving the outcome of ensuring that U.S. military forces are

adequate in number, well qualified, and highly motivated. Therefore, we

cannot judge the level of progress DOD has made in this area. DOD’s

performance goal for this outcome is to recruit, retain, and develop

personnel to maintain a highly skilled and motivated force capable of

meeting tomorrow’s challenges. DOD’s performance measures still do not

fully measure how well DOD has progressed in developing military

personnel or the extent to which U.S. military forces are highly motivated.

Although DOD’s report identifies specific goals for recruiting and

retention, the Department does not include human capital goals and

measures aimed specifically at tracking the motivation or development of

its personnel.

The level of progress toward meeting specific targets in the areas of

enlisted recruiting and retention is mixed. The Air Force failed to meet its

targets for first- or second-term retention, and the Navy did not meet its

target for first-term retention. While most reserve components met or

came in under their targets for enlisted attrition, the Army Reserve did not

stay within its attrition target. On the positive side, the services met or

exceeded their targets for enlisted recruiting and recruit quality. However,

Developing and Motivating

U.S. Military Forces
Page 10 GAO-01-783 DOD’s Status of Achieving Outcomes

DOD’s report showed that the target for active enlisted recruiting was

revised downward, enabling DOD to meet a goal it might otherwise have

been unable to achieve. If such adjustments become commonplace, the

same kind of force shaping problems that resulted from the intentional

restriction of new accessions during the 1990s drawdown could result.

Still other targets, such as for enlisted retention, are set at such aggregate

levels that they could mask variations in retention by occupational area

and skill levels, which would limit achieving the outcome of ensuring that

U.S. military forces are adequate in number, well qualified, and highly

motivated. As such, the enlisted retention goal provides only a partial

measure of the military’s ability to retain adequate numbers of personnel.

DOD’s performance report realistically identified the likelihood of

continued challenges in recruiting for the military services and in retention

for the Navy and the Air Force. But it did not devote significant attention

to identifying specific reasons why DOD missed certain targets. Likewise,

with the exception of the enlisted recruiting area, the report did not

identify specific planned actions that DOD or the services will take to

assist them in meeting future performance targets. For enlisted recruiting,

however, the services identified several actions to help them cope with

this challenge. For example, the Army and the Navy have increased

funding for recruiting and plan to offer enlistment bonuses of up to

$20,000. They also plan to continue allowing recruits to choose a

combination of college fund and enlistment bonuses. The Army plans to

experiment with innovative ways to expand the market for new recruits

through programs like College First and GED Plus. And, the Air Force has

instituted a college loan repayment program, increased enlistment

bonuses to $12,000, and added more recruiters.

With regard to retention, the Department’s performance report discusses

generally the difficulties of the current retention environment and the

fiscal year 2000 enlisted retention challenges. However, the report

contains little clear articulation of specific actions or strategies being

taken to improve future retention. For example, the report noted that the

Navy has established a Center for Career Development that is chartered to

focus on retention, providing the fleet the necessary tools to retain Navy

personnel. However, the performance report does not elaborate on what

those tools are or how they are being enhanced. Similarly, the Air Force

indicated that it held two retention summits in fiscal year 2000 and that

initiatives resulting from those summits will facilitate achievement of

fiscal year 2001 retention targets. However, the report does not cite

specific initiatives that would be taken or when they would be put into

place. DOD expects that fiscal year 2001 will continue to present retention
Page 11 GAO-01-783 DOD’s Status of Achieving Outcomes

challenges for the services’ reserve components. The report, however, did

not identify any specific actions or initiatives that would be taken to help

address the challenge.

Finally, for each of its performance measures, DOD’s report describes the

data flow used to produce DOD’s assessment. The procedures used to

collect, verify, and validate the data cited in the report provide reasonable

assurance that the information is accurate and reliable.

The level of progress that DOD has made toward the outcome of

maintaining combat readiness at desired levels is unclear. DOD’s

performance goals for this outcome are to maintain trained and ready

forces and have strategic mobility.10 Although DOD has met some

performance measure targets for both goals, other targets are incomplete,

have been lowered, or have not been met, thus making an accurate

assessment of progress difficult. For example, DOD reported meeting its

force-level targets for the performance goal of maintaining trained and

ready forces. However, the targets do not provide a complete picture of

the forces needed to respond to a full spectrum of crises, to include

fighting and winning two major theater wars nearly simultaneously.11

DOD’s metric includes only combat forces for each service, and not the

necessary support forces. In the Army’s case, this means that DOD’s

metric captures only 239,000 of the 725,000 forces the Army projects it

would deploy to two wars. The targets also do not capture other important

attributes beyond the size of the force, such as the extent to which DOD

has made the best possible use of its available resources. For example,

DOD’s plan does not set results-oriented goals for integrating the

capabilities of the active, National Guard, and Reserve forces—even

though each of these components is essential for mission effectiveness. 12

As another example, DOD still has not been able to achieve its tank-mile

training target of 800 miles of training per tank, conducted at various home

stations, in Kuwait, and in Bosnia. Although DOD came closer to meeting

the target in fiscal year 2000 than it did in fiscal year 1999—101 (17

 10 The Strategic Mobility performance goal is supported by three metrics: airlift capacity,

sealift capacity, and equipment prepositioning. Our work enables us to comment on only

airlift capacity.

11 This assumption may change with the Secretary’s defense review.

12 Force Structure: Army Is Integrating Active and Reserve Combat Forces, but Challenges

Remain (GAO/NSIAD-00-162, July 18, 2000).

Maintaining Combat

Readiness
Page 12 GAO-01-783 DOD’s Status of Achieving Outcomes

percent) more tank miles—it still fell short by nearly 100 training miles per

tank. DOD reported that it failed to meet the targets because units were

not available for training, units used training simulators instead of actual

training, and resources were diverted from field exercises to other high

priority needs such as upgrades and maintenance of key training ranges.

While our recent work shows this to be true, we reported that the

movement of training funds for other purposes had not resulted in the

delay or cancellation of planned training events in recent years.13

Further, data are not as reliable as they could be. DOD and the Army

define the 800 tank-mile measure differently. DOD’s definition includes

tank-training miles conducted in Kuwait and Bosnia, while the Army’s

home station training measure excludes those miles.14 Using the Army’s

home station training measure, it conducted 655 miles of training in fiscal

year 2000, which is 145 miles or 18 percent short of its budgeted home

station training goal. Figure 1 compares budgeted and actual Army home

station tank training miles from fiscal year 1997 to fiscal year 2000.

 13 Defense Budget: Need to Better Inform Congress on Funding for Army Division Training

(GAO-01-902), expected to be released in summer 2001.

14 The Army includes Bosnia miles in home station training, but the amount is minor—4

miles in fiscal year 2000.
Page 13 GAO-01-783 DOD’s Status of Achieving Outcomes

Figure 1: Average Number of Home Station Tank Training Miles Budgeted and

Achieved, Fiscal Years 1997-2000

Source: GAO.

For strategic mobility, DOD reported that it met targets for two of three

underlying measures: airlift capacity, and land- and sea-based

prepositioning. However, in the area of airlift capacity, DOD revised the

performance targets downward from those that had been set in prior

performance plans and last year’s performance report. DOD reported that

it revised the new targets to reflect updates to the planning factors for C-5

aircraft wartime performance. While it is appropriate for DOD to revise

targets, as necessary, we reported that the new targets are significantly

less than goals established in a 1995 Mobility Requirements Study BottomUp Review Update and even lower than a newly established total airlift

capacity requirement of 54.5 million-ton miles per day established in

DOD’s Mobility Requirements Study 2005, issued in January 2001. 15 DOD’s

performance report contains targets of a total airlift capacity of 45.4

million-ton miles per day for military aircraft and the Civil Reserve Air

 15 Military Readiness: Air Transport Capability Falls Short of Requirements

(GAO/NSIAD-00-135, June 22, 2000).
Page 14 GAO-01-783 DOD’s Status of Achieving Outcomes

Fleet, with 24.9 million-ton miles per day coming from military aircraft. By

comparison, DOD’s airlift capacity requirements are about 50 million-ton

miles per day for total airlift capacity, with nearly 30 million-ton miles per

day coming from the military. DOD’s performance report does not explain

how these new targets were set or how they differed from prior years’

targets. It is also unclear whether or how DOD intends to meet the higher

requirement of 54.5 million-ton miles per day.

Because DOD reported that it had met its force-level targets, it plans no

significant changes or strategies in force structure for fiscal year 2001.

However, we believe that force-level targets could be more complete and

meaningful if they included associated support forces with existing

combat unit force levels. For example, the lack of any target setting for

Army support forces masks the Army’s historic problem in fully resourcing

its support force requirements, as well as more recent steps the Army has

taken to reduce its shortfall level.

With respect to tank training strategies, in response to our recent

recommendation, DOD agreed to develop consistent tank training

performance targets and reports to provide the Congress with a clearer

understanding of tank training.16 Also, DOD has initiated a strategy to more

clearly portray the number of tank training miles driven, and the

Department is moving toward becoming more consistent with the Army’s

800-tank mile measure. However, as stated above, DOD continues to

include tank-training miles conducted in Kuwait in its definition of the

measure, while the Army excludes those miles. DOD reports that the

problems encountered in meeting fiscal year 2000 tank training objectives

are not, for the most part, expected to recur in fiscal year 2001. However,

the problems DOD describes are not unique to fiscal year 2000. Army units

are now in their sixth year of deployments to the Balkans, which, as DOD

stated, affects its training availability. Further, in at least 6 of the past 8

fiscal years (1993 through 2000), DOD has moved funds from division

training for other purposes. For the most recent of those years—the 4-year

period from fiscal years 1997 through 2000—DOD moved a total of almost

$1 billion of the funds the Congress had provided for training. DOD reports

that an Army management initiative implemented in fiscal year 2001 will

limit the reallocation of funds. However, at the time of our work, it was

too early in the fiscal year to assess the initiative’s success.

 16 GAO-01-902, expected to be released summer 2001.
Page 15 GAO-01-783 DOD’s Status of Achieving Outcomes

Further, DOD has identified strategies for strategic airlift improvement,

such as including a C-17 aircraft procurement program to provide

additional airlift capacity and upgrading of C-5 aircraft components. We

recently reported that the C-5 upgrades, however, were fiscal year 2000

proposals that are waiting to be funded in the 2001-2012 timeframe. 17

Thus, in the near term, this strategy would not likely result in significant

increases in capacity.

For each of its performance measures, DOD’s fiscal year 2000

performance report discussed the source and review process for the

performance information. With one exception involving DOD’s En Route

System of 13 overseas airfields, DOD’s data appear to be reasonably

accurate. The En Route System is a critical part of DOD’s ability to quickly

move the large amounts of personnel and equipment needed to win two

nearly simultaneous major theater wars, as required by the National

Military Strategy. However, DOD’s performance report excludes data on

En Route System limitations from the measures it uses to assess

performance in strategic mobility, resulting in an incomplete picture of its

capabilities. Rapid mobilization of U.S. forces for major theater wars

requires a global system of integrated airlift and sealift resources, as well

as equipment already stored overseas. The airlift resources include

contracted civilian and military cargo aircraft and the 13 En Route System

airfields in Europe and the Pacific where these aircraft can land and be

serviced on their way to or while in the expected war zones in the Middle

East and Korea. We learned during a recent review of the En Route System

that DOD includes measures of its performance in meeting goals for

aircraft, sealift, and prepositioned equipment capacities in its measures of

strategic mobility capability.18 However, it does not include data on

shortfalls in En Route System capacity, which are a major limiting factor

on airlift capacity and overall performance in strategic mobility.

Officials from the Office of the Secretary of Defense told us that they do

not include data on En Route System shortfalls because airfield capacity

has not been considered a primary criterion for measuring performance in

strategic mobility. However, DOD has reported that the chief limiting

factor on deployment operations is not usually the number of available

 17 Military Readiness: Air Transport Capability Falls Short of Requirements

(GAO/NSIAD-00-135, June 22, 2000).

18 Military Readiness: More Management Forces Needed on Airfields for Overseas

Deployments (GAO-01-566, June 22, 2001).
Page 16 GAO-01-783 DOD’s Status of Achieving Outcomes

aircraft but the capability of en-route or destination infrastructure to

handle the ground operations needed by the aircraft. In a recently issued

report, we recommended that DOD begin to include information on En

Route System limitations and their effects on strategic mobility in its

performance reports.19

DOD’s progress toward achieving the outcome of ensuring that

infrastructure and operating procedures are more efficient and costeffective remains unclear. The performance goals for this outcome are to

streamline infrastructure through business practice reform and improve

the acquisition process. DOD reported that it met many of its performance

targets, such as disposing of property, reducing logistics response time

and streamlining the acquisition workforce. However, as we reported last

year, the targets did not always hold up to scrutiny; and some targets that

DOD reported as met had been lowered or were not met.

For example, while DOD has reported meeting its targets for publicprivate competitions, we have found that delays have been encountered in

initiating and completing planned studies that have the potential for

reducing savings expected to be realized in the near-term. Additionally,

changes have been made in overall study goals, creating some

uncertainties about future program direction. For example, the

Department recently reduced its plan to study 203,000 positions under

Office of Management and Budget (OMB) Circular A-76 to about 160,000

positions while supplementing it with a plan to study 120,000 positions

under a broader approach known as strategic sourcing.20 Similarly, DOD

reported that it had met its 99-month target cycle time for average major

defense acquisition programs. However, compared to fiscal year 1999

results, the average cycle time actually increased by 2 months. We have

reported numerous examples of questionable defense program schedules,

such as with Army Comanche helicopter program delays. In this regard,

our work has shown that DOD could benefit from the application of

commercial best practices to ensure that (1) key technologies are mature

before they are included in weapon system development programs, (2)

 19 GAO-01-566, June 22, 2001.

20 Strategic sourcing, as we use the term, involves functional or organizational assessments

regarding the potential for consolidation, restructuring, reengineering, privatization, etc., of

functions, activities, and services, but initially does not involve competition between the

public and private sectors.

Streamlining Infrastructure

and Operating Procedures
Page 17 GAO-01-783 DOD’s Status of Achieving Outcomes

limits are set for program development cycle times, and (3) decisions are

made using a knowledge-based approach.21

As another example, DOD reported that it did not meet its cost growth

measure. On average, reported costs rose in major defense acquisition

programs by 2.9 percent during fiscal year 2000 compared to the goal of

1.0 percent. DOD explains the causes for the excessive cost growth but not

the strategies to solve the problem. We have reported pervasive problems

regarding, among other things, unrealistic cost, schedule, and performance

estimates; unreliable data on actual costs; and questionable program

affordability. Also, we have recommended that DOD leadership improve

the acquisition of weapon systems by using more realistic assumptions in

developing system cost, schedule, and performance requirements and

approving only those programs that can be fully executed within

reasonable expectations of future funding.22

DOD’s fiscal year 2000 performance report sufficiently explains why a

number of performance measures were not met but does not provide clear

plans, actions, and time frames for achieving them. For example, DOD

reported that no systemic problems would hinder it from meeting working

capital fund and defense transportation documentation targets in the

future. However, DOD believes it may have difficulty meeting supply

inventory goals due to continuing concerns about the impact of inventory

reductions on readiness. In the report, DOD acknowledges that it may

have problems meeting some targets because it must balance its

infrastructure reduction initiatives with efforts to enhance quality of life,

improve recruiting and retention, and transform the military to meet the

challenges of the 21st century.

For each of its performance measures, DOD’s report discusses the source

and review process for the performance information. The data appear to

be credible, with some exceptions. For example, we previously reported

that unreliable cost and budget information related to DOD’s measure for

the percentage of the budget spent on infrastructure negatively affects the

Department’s ability to effectively measure performance and reduce

costs.23 We also reported that significant problems exist with the

 21 Major Management Challenges and Program Risks: Department of Defense (GAO-01-244,

Jan. 2001).

22 High Risk Series: An Update (GAO-01-263, Jan. 2001).

23 GAO/NSIAD-00-188R, June 30, 2000.
Page 18 GAO-01-783 DOD’s Status of Achieving Outcomes

timeliness and accuracy of the underlying data for the measure related to

inventory visibility and accessibility.

We could not assess DOD’s progress in achieving performance goals or

measures because DOD’s fiscal year 2000 performance report did not

include performance goals or measures for this outcome. DOD does,

however, assist U.S. and foreign law enforcement agencies in their efforts

to reduce the availability and use of illegal drugs. It has lead responsibility

for aerial and maritime detection and monitoring of illegal drug shipments

to the United States. It also provides assistance and training to foreign

governments to combat drug-trafficking activities. DOD’s 2000

performance report recognized counternarcotics as a crosscutting

function and outlined DOD’s responsibilities in this area.

In a December 1999 report on DOD’s drug control program, we

recommended that DOD develop performance measures to determine the

effectiveness of its counterdrug activities and make better use of limited

resources.24 In response to our recommendation, DOD developed a set of

“performance results” that are compiled on a quarterly basis. These

performance results are intended to (1) provide a useful picture of the

performance results of individual projects, (2) facilitate the identification

of projects that are not demonstrating adequate results, (3) allow an

overall assessment of DOD’s counterdrug program’s results, and (4)

describe those DOD accomplishments that directly support the

performance goals delineated in the National Drug Control Strategy’s

Performance Measures of Effectiveness Plan. DOD is currently refining the

performance results in an effort to improve its ability to measure the

success or failure of counterdrug activities.

We had no basis to assess DOD’s progress in achieving the outcome of

making fewer erroneous payments to contractors because DOD had no

performance goals directly related to the outcome. However, this issue

represents a significant problem for DOD. Under its broader goal of

improving the efficiency of its acquisition processes, DOD has developed

performance measures that address related contracting issues.

Specifically, the 2000 performance report contains goals and measures for

increasing the use of paperless transactions. However, these measures do

not directly address the outcome of fewer erroneous payments. While they

 24 Drug Control: Assets DOD Contributes to Reducing the Illegal Drug Supply Have

Declined (GAO/NSIAD-00-9, Dec. 21, 1999).

Reduced Availability

and/or Use of Illegal Drugs

Fewer Erroneous

Payments to Contractors
Page 19 GAO-01-783 DOD’s Status of Achieving Outcomes

do reflect quantifiable measures of the levels of usage for these

contracting processes, they may not directly address whether the number

of erroneous payments has been reduced.

On a related issue, we have reported over the last several years that DOD

annually overpaid its contractors by hundreds of millions of dollars,

constituting a significant problem. In February of this year, we reported

that DOD contractors repaid $901 million in overpayments in fiscal year

2000 to a major DOD contract payment center.25 This represents a

substantial amount of cash in the hands of contractors beyond what is

intended to finance and pay for the goods and services DOD bought. For

example, contractors returned $351 million in overpayments in fiscal year

1999 to this DOD payment center. Contractor data indicate that 77 percent

of that amount resulted from contract administration actions (see fig. 2).

 25 GAO-01-309, Feb. 22, 2001.
Page 20 GAO-01-783 DOD’s Status of Achieving Outcomes

Figure 2: Sources of Excess Payments

Percent of dollar value for excess payment repaid in FY 1999

Source: GAO.

However, DOD does not review available data on why this major category

of overpayments occurs. Such a review is necessary if excess payments

are to be reduced. Therefore, in our February 2001 report, we

recommended that DOD routinely analyze data on the reasons for excess

payments, investigate problem areas, and implement necessary actions to

reduce excess payments. In responding to our recommendation, DOD

stated that it would conduct an initial review of excess payment data and

determine whether routine receipt and analysis of this data would be

meaningful.
Page 21 GAO-01-783 DOD’s Status of Achieving Outcomes

In comparing DOD’s fiscal year 2000 performance report with its prior

year report, we noted that DOD has made several improvements. For

example, it added more discussion on the importance of human resources

in achieving its performance objectives; summarized how its performance

metrics responded to each of eight major management challenges it faces;

and included a more in-depth explanation of each cross-cutting activity it

is involved with, rather than just a listing of the responsible agencies. The

eight major management challenges facing the Department are:

• Developing strategic plans that lead to desired mission outcomes.

• Hiring, supporting, and retaining military and civilian personnel with

the skills to meet mission needs.

• Establishing financial management operations that provide reliable

information and foster accountability.

• Effectively managing information technology investments.

• Reforming acquisition processes while meeting military needs.

• Improving processes and controls to reduce contract risk.

• Creating an efficient and responsive support infrastructure.

• Providing logistics support that is economical and responsive.

In terms of data verification, presentation, and content, DOD’s fiscal year

2000 performance report has an effective format that is understandable to

a nondefense reader. DOD also clarified some of its terminology. For

example, it changed the term “performance goal” to “performance target”

to remove confusion about what the annual performance goals are.

The fiscal year 2000 report, however, did not address several weaknesses

that we identified in the fiscal year 1999 report. For example, DOD

reported nine measures and indicators to make infrastructure and

operating procedures more efficient and cost-effective. We believe that

these measures are insufficient to assess whether DOD is actually making

progress toward streamlining its infrastructure. Some measures, such as

the number of positions subject to OMB Circular A-76 or strategic sourcing

reviews, generally reflect status information rather than the impact that

programs are having on the efficiency and cost-effectiveness of operations.

Since DOD has not changed or supplemented these measures, we continue

to believe that DOD will have problems determining how effective its

infrastructure reduction efforts have been. Also, we have testified that

DOD has undergone a significant downsizing of its civilian workforce. In

part due to the staffing reductions already made, imbalances appear to be

Comparison of DOD’s

Fiscal Year 2000

Performance Report

With the Prior Year

Report for Selected

Outcomes
Page 22 GAO-01-783 DOD’s Status of Achieving Outcomes

developing in the age distribution of DOD civilian staff.26 The average age

of this staff has been increasing, while the proportion of younger staff,

who are the pipeline of future agency talent and leadership, has been

dropping.

As another example, DOD’s performance report has no outcome-oriented

measures for working capital fund activities. The idea behind working

capital funds is for activities to break even over time. Thus, if an activity

has a positive net operating result one year, it will budget for a negative

net operating result the next year. The measure DOD currently uses to

assess its working capital fund operations is net operating results. This

particular measure, however, is of little value for determining the outputs

achieved for goals and services provided through the working capital fund

activities. We believe that additional measures are needed to help

determine operational effectiveness, particularly because these activities

report about $75 billion in annual revenues associated with their

operations. For example, a good measure to determine the effectiveness of

the supply management activity group could be the percentage of aircraft

that are not mission capable due to supply problems.

GAO has identified two governmentwide high-risk areas: strategic human

capital management and information security. Regarding strategic human

capital management, we found that DOD’s performance report did not

explain DOD’s progress in resolving human capital challenges. However,

the report included a description on the importance of human resources,

such as the importance of total force integration and quality of life and

personnel. With respect to information security, we found that DOD’s

performance report did not explain its progress in resolving its

information security challenges. However, it states that specific goals,

objectives, and strategies for improving DOD’s management of

information can be found in the Information Management Strategic Plan

(http://www.c3i.osd.mil) discussed in appendix J of DOD’s 2001 Annual

Report to the President and the Congress.

In addition, GAO has identified eight major management challenges facing

DOD. Some of these challenges are crosscutting issues. For example,

improving DOD’s financial management operations so that it can produce

useful, reliable and timely cost information is essential if DOD is to

 26 Human Capital: Strategic Approach Should Guide DOD Civilian Workforce Management

(GAO/T-GGD/NSIAD-00-120, Mar. 9, 2000).

DOD’s Efforts to

Address Major

Management

Challenges Identified

by GAO
Page 23 GAO-01-783 DOD’s Status of Achieving Outcomes

effectively measure its progress toward achieving outcomes and goals

across virtually the entire spectrum of DOD’s business operations.

Although DOD’s performance report discussed the agency’s progress in

resolving many of its challenges, it did not discuss the agency’s progress in

resolving the following challenge: “Developing strategic plans that lead to

desired mission outcomes.” As we reported in March 2001, sound strategic

planning is needed to guide improvements to the Department’s

operations.27 Without it, decisionmakers and stakeholders may not have

the information they need to ensure that DOD has strategies that are well

thought-out to resolve ongoing problems, achieve its goals and objectives,

and become more results oriented. While DOD has improved its strategic

planning process, its current strategic plan is not tied to desired mission

outcomes. As noted in several of the other key challenges, sound plans

linked to DOD’s overall strategic goals are critical to achieving needed

reforms. Inefficiencies in the planning process have led to difficulties in

assessing performance in areas such as combat readiness; support

infrastructure reduction; force structure needs; and matching resources to

program spending plans. Appendix I provides detailed information on how

well DOD addressed these challenges and high-risk areas as identified by

both GAO and the DOD Inspector General.

Shortfalls in DOD’s current strategies and measures for several outcomes

have led to difficulties in assessing performance in areas such as combat

readiness, support infrastructure reduction, force structure needs, and the

matching of resources to program spending plans. DOD’s fiscal year 2002

performance plan, which has yet to be issued, provides DOD with the

opportunity to address these shortfalls. DOD is also in the process of

updating its strategic plan through the conduct of its Quadrennial Defense

Review, which sets forth its mission, vision, and strategic goals. The

review provides DOD with another opportunity to include qualitative and

quantitative information that could contribute to providing a clearer

picture of DOD’s performance.

On the basis of last year’s analysis of DOD’s fiscal year 1999 performance

report and fiscal year 2001 performance plan, we recommended that the

Department include more qualitative and quantitative goals and measures

in its annual performance plan and report to gauge progress toward

 27 Major Management Challenges and Program Risks: Departments of Defense, State, and

Veterans Affairs (GAO-01-492T, Mar. 7, 2001).

Conclusions
Page 24 GAO-01-783 DOD’s Status of Achieving Outcomes

achieving mission outcomes. DOD has not as yet fully implemented this

recommendation.

We continue to believe that the Secretary of Defense should adopt this

recommendation as it updates its strategic plan through the Quadrennial

Defense Review and prepares its next annual performance plan. By doing

so, DOD can ensure that it has strategies that are tied to desired mission

outcomes and are well thought-out for resolving ongoing problems,

achieving its goals and objectives, and becoming more cost and results

oriented.

As agreed, our evaluation was generally based on the requirements of

GPRA; the Reports Consolidation Act of 2000; guidance to agencies from

OMB for developing performance plans and reports (OMB Circular A-11,

Part 2); previous reports and evaluations by us and others; our knowledge

of DOD’s operations and programs; our identification of best practices

concerning performance planning and reporting; and our observations on

DOD’s other GPRA-related efforts. We also discussed our review with

agency officials in DOD’s Office of Program Analysis and Evaluation and

with the DOD Office of Inspector General. The agency outcomes that were

used as the basis for our review were identified by the Ranking Minority

Member, Senate Governmental Affairs Committee as important mission

areas for the agency and do not reflect the outcomes for all of DOD’s

programs or activities. Both GAO, in our January 2001 performance and

accountability series and high risk update, and DOD’s Inspector General in

December 2000 identified the major management challenges confronting

DOD, including the governmentwide high-risk areas of strategic human

capital management and information security. We did not independently

verify the information contained in the performance report, although we

did draw from other GAO work in assessing the validity, reliability, and

timeliness of DOD’s performance data. We conducted our review from

April 2001 through June 2001 in accordance with generally accepted

government auditing standards.

In a letter dated June 14, 2001, the DOD Director for Program Analysis and

Evaluation provided written comments on a draft of this report. DOD

indicated that its annual GPRA report provides the Congress and the

public an executive-level summary of key performance results over the

past budget year. DOD stated that, together, the metrics presented in its

report demonstrate how DOD’s existing management practices enable it to

recruit, train, equip, and field the most effective military force in the world.

DOD said that we overlooked this fact in our draft report. However, DOD

pointed out that future GPRA submissions will refine its performance

Scope and

Methodology

Agency Comments

and Our Evaluation
Page 25 GAO-01-783 DOD’s Status of Achieving Outcomes

metrics to reflect priorities of the new defense strategy, but it sees little

value in adding large amounts of new measures auditors and others have

proposed over the past 18 months. DOD reiterated that GPRA is not the

sole venue for reporting performance results—it submits more than 900

reports annually to the Congress alone, many of which address issues

highlighted in our draft report. DOD stressed that a key goal of the GPRA

legislation is to increase public confidence in government and, although it

does not want to mask deficiencies in how DOD manages performance, it

does not want to emphasize shortfalls at the expense of true

achievements. DOD stated that it would be helpful if we could provide a

clearer definition of what standards of sufficiency will be applied in

evaluating future submissions.

Notwithstanding DOD’s statement that the metrics DOD presented in its

performance report can enable it to have an effective military force, we

continue to believe, for the reasons cited in our report, that DOD’s

progress in achieving the selected outcomes is still unclear. As we have

recently recognized in our report on major performance and

accountability challenges facing DOD,28 our nation begins the new

millennium as the world’s sole superpower with military forces second to

none, as evidenced by experiences in the Persian Gulf, Bosnia, and

Kosovo. We also stated that the same level of excellence is not evident in

many of the business processes that are critical to achieving DOD’s

mission in a reasonably economical, efficient, and effective manner. A

major part of DOD’s performance report focuses on outcomes related to

these processes, the results of which are critical to DOD’s ability to

maintain its military capability.

As we reported in last year’s assessment, we agree that the answer is not

to simply measure more things in more detail. However, in many

instances, for the outcomes identified by the Committee, DOD’s report

does not discuss strategies for achieving unmet goals and does not fully

assess its performance. We believe that the best test of reasonableness or

sufficiency to evaluate DOD’s future progress resides in the requirements

of GPRA itself, which requires, among other things, agencies to explain

and describe, in cases where a performance goal has not been met, why

the goal was not met. The requirement to submit a fiscal year 2002

performance plan, which DOD has yet to issue, also provides DOD with

the opportunity to address these shortfalls. In that regard, we have issued

 28 GAO-01-244, Jan. 2001.
Page 26 GAO-01-783 DOD’s Status of Achieving Outcomes

guidance that outlines approaches agencies should use in developing

performance plans.29 These actions would place DOD in a position of

continuously striving for improvement. Appendix II contains DOD’s

comments.

As arranged with your office, unless you publicly announce its contents

earlier, we plan no further distribution of this report until 30 days after the

date of this letter. At that time, we will send copies to appropriate

congressional committees; the Secretary of Defense; and the Director,

Office of Management and Budget. Copies will also be made available to

others on request.

If you or your staff have any questions, please call me at (202) 512-4300.

Key contributors to this report were Charles I. Patton, Jr.; Kenneth R.

Knouse, Jr.; Elizabeth G. Mead; Cary B. Russell; and Brian G. Hackett.

Sincerely yours,

Henry L. Hinton, Jr., Managing Director

Defense Capabilities and Management

 29 GAO/GGD-10.1.20, Version 1, Apr. 1998; GAO/GGD-96-118, June 1996.
Appendix I: Observations on the Department

of Defense’s Efforts to Address Its Major

Management Challenges

Page 27 GAO-01-783 DOD’s Status of Achieving Outcomes

The following table identifies the major management challenges

confronting the Department of Defense (DOD), which include the

governmentwide high-risk areas of strategic human capital management

and information security. The first column of the table lists the

management challenges that we and/or DOD’s Inspector General (IG) have

identified. The second column discusses what progress, as discussed in its

fiscal year 2000 performance report, DOD made in resolving its challenges

along with our assessment. We found that DOD’s performance report

discussed the agency’s progress in resolving many of its challenges but

that it did not discuss the agency’s progress in resolving the following

challenges: Strategic Planning, Other Security Concerns, and Health Care.

Appendix I: Observations on the Department

of Defense’s Efforts to Address Its Major

Management Challenges
Appendix I: Observations on the Department

of Defense’s Efforts to Address Its Major

Management Challenges

Page 28 GAO-01-783 DOD’s Status of Achieving Outcomes

Table 1: Major Management Challenges

Major management challenge

Progress in resolving major management challenge as

discussed in the fiscal year 2000 performance report

GAO-designated governmentwide high risk

Strategic Human Capital Management

GAO has designated strategic human capital management as

a high-risk area across the government.

In a series of reports and recent testimonies, we identified a

number of human capital challenges regarding DOD’s

workforce.a

 These include problems with recruiting and

retaining qualified military personnel and significant downsizing

of the civilian workforce without adequate workforce planning.

(In addition, DOD’s IG also cited several military and civilian

human capital issues that need to be addressed and has

recently included human capital as 1 of 10 significant

management challenges facing DOD.)

Progress toward resolving recruiting and retention challenges for

military personnel are discussed in the outcomes section of this

report. DOD’s 2000 performance report identifies several initiatives

that the services intend to implement to address recruiting

challenges. These initiatives include increasing funding for recruiting,

increasing enlistment bonuses, continuing to allow recruits to choose

a combination of college fund and enlistment bonuses, instituting a

college loan repayment program and other initiatives aimed at

attracting more of the college-bound population, and adding more

recruiters.

DOD did not have any performance measures/indicators regarding

its overall civilian workforce. It briefly addressed its civilian workforce

requirements as a “related issue” toward the end of its report, and

made reference to chapter 10 of the 2001 Annual Report to the

President and the Congress for details. In the annual report, DOD

cited a four-part strategy to deal with its civilian workforce

challenges: research into what is happening; planned recruitment

and accession management; development and retention; and careful

transition management.

Information Security

Our January 2001 high-risk update noted that the agencies’

and governmentwide efforts to strengthen information security

have gained momentum and expanded. Nevertheless, recent

audits continue to show federal computer systems are riddled

with weaknesses that make them highly vulnerable to

computer-based attacks and place a broad range of critical

operations and assets at risk of fraud, misuse, and disruption.

(The DOD IG has also identified this area as a significant

management challenge.)

DOD did not provide any data showing measurable progress for this

issue in fiscal year 2000. However, DOD’s report did provide

information indicating that DOD had taken actions to improve

information security such as (1) implementing a new web security

initiative to scrutinize information posted to DOD web sites; (2)

updating the DOD public key infrastructure policy; and (3)

undertaking several new initiatives to respond to cyber attacks.

A number of these actions are discussed in DOD’s 2001 Annual

Report to the President and the Congress. However, DOD

information security officials acknowledge that DOD systems and

networks are more vulnerable than DOD would like; and, as we have

reported,b

 the DOD information assurance program has made

progress, but problems have kept the program from meeting its

goals. For example, planning and coordination of security

management technologies and operations are not consistent

throughout DOD.
Appendix I: Observations on the Department

of Defense’s Efforts to Address Its Major

Management Challenges

Page 29 GAO-01-783 DOD’s Status of Achieving Outcomes

Major management challenge

Progress in resolving major management challenges as

discussed in the fiscal year 2000 performance report

GAO-designated major management challenge

Strategic Planning Shortfalls

While DOD has improved its strategic planning process, its

strategic plan is not tied to desired mission outcomes. Sound

plans linked to DOD’s overall strategic goals are critical to

achieving needed reforms. Inefficiencies in the planning

process have led to difficulties in assessing performance in

such areas as combat readiness, support infrastructure

reduction, force structure needs, and the matching of

resources to program spending plans.

This challenge is not addressed in the 2000 performance report.

GAO- and IG-designated major management challenges

Contract Management Reform

DOD spends over $130 billion a year contracting for goods and

services. We and the DOD IG (under its acquisition

management challenge) continue to identify risks in

contracting. DOD continues to experience significant

challenges relating to contract management, including (1)

maintaining a skilled acquisition workforce, (2) ensuring

competition in the acquisition of services, (3) preventing

erroneous and improper payments being made to its

contractors, (4) implementing commercial practices for contract

pricing, and (5) managing health care contracts.

DOD has attempted to measure selected changes to its contracting

processes by establishing key metrics, including (1) the percentage

of purchases made by purchase card, (2) the percentage of

paperless contracting and payment transactions, and (3) the

percentage of reduction in acquisition workforce personnel.

According to DOD officials, DOD plans to meet its contract

performance goals for 2001. However, these metrics do not measure

many of the significant challenges to improve processes and controls

for reducing contract risk. For example, the metric on personnel

reductions does not consider the impact of these reductions in

contract surveillance, assess the mix of skills maintained, or assess

the level and quality of training provided to DOD personnel.

More information concerning erroneous payments to contractors is

discussed in the outcomes section of this report.

Financial Operations Reforms

The results of DOD’s fiscal year 2000 financial audit

demonstrate that DOD continues to confront serious and

pervasive weaknesses in its financial management systems,

operations, and controls. These weaknesses, taken together,

continue to represent the largest single obstacle to achieving

an unqualified opinion on the U.S. government’s consolidated

financial statements. None of the military services or major

DOD components has yet passed the test of an independent

financial audit. Further, these long-standing weaknesses

hamper DOD’s ability to produce useful, reliable, and timely

information for day-to-day management and decisionmaking,

including its ability to effectively measure performance, reduce

costs, and maintain adequate funds control.

DOD’s Fiscal Year 2000 Performance Report reflects a revision to its

previous financial performance metrics related to the performance

goal, “Improve Financial and Information Management.” Specifically,

while retaining measures relating to compliant finance and

accounting systems and achieving unqualified financial audit

opinions, DOD’s FY 2000 report added a measure to track how

quickly noncompliant feeder systems are replaced with compliant

systems. Expanding DOD’s performance reporting focus to include

tracking feeder systems is an important and appropriate addition.

DOD reported meeting or exceeding its 2000 goals for the existing

performance measures on compliant finance and accounting

systems and achieving unqualified financial audit opinions. DOD did

not establish 2000 goals for the new performance measure on

compliant feeder systems. According to this year’s DOD Financial

Management Improvement Plan, this year was used to establish a

“baseline” for monitoring systems’ compliance with requirements.

While the current finance, accounting, and feeder system-by-system

compliance orientation may well result in improved financial
Appendix I: Observations on the Department

of Defense’s Efforts to Address Its Major

Management Challenges

Page 30 GAO-01-783 DOD’s Status of Achieving Outcomes

Major management challenge

Progress in resolving major management challenges as

discussed in the fiscal year 2000 performance report

management operations and systems, fundamental reform is unlikely

unless it is also undertaken as part of a broader reform goal. DOD’s

financial management improvement efforts should be measured

against an overall goal of effectively supporting DOD’s basic

business processes, including appropriately considering related

business process systems interrelationships. Successful

reengineering—a comprehensive, integrated reform of all DOD

business support operations (including its financial, acquisition,

logistics and other business support functions)—will be essential if

DOD is to effectively address a deep-rooted organizational emphasis

on maintaining “business as usual” across the Department.

In addition, we are also concerned that DOD’s fiscal year 2000

performance metric concerning obtaining unqualified audit opinions

may impede putting meaningful, sustainable improvements in place.

We have reported our concern that substantial efforts to work around

DOD’s serious system and control weaknesses to derive year-end

balances for the purpose of obtaining clean audit opinions will not

produce reliable and timely financial and performance information

needed to manage DOD’s everyday operations.c

Information Technology Challenges

Effective management of information technology is key to

implementing many of DOD’s planned management reforms.

However, significant management weaknesses in both

systems modernization and systems security place the ultimate

success of many reform initiatives at risk. Weaknesses in

information technology management could seriously jeopardize

operations and compromise the confidentiality, integrity, or

availability of sensitive information.

We have reported that fundamental management controls,

such as integrated enterprise architectures, disciplined

management practices, and mature system development

processes, are still not being implemented on a systemic basis

within the Department.a Also, DOD’s systems modernization

efforts remain on GAO’s high-risk list. In addition, the DOD IG

has reported that the Department’s five-year record in

implementing the Clinger-Cohen Act is “somewhat

disappointing” and has also reported information technology

(IT) management as a principal management challenge.

Although DOD’s fiscal year 2000 performance report does not

provide a quantitative measurement of progress towards addressing

this challenge, the report does indicate that the Department is taking

some action toward this objective. For example, in fiscal year 2001

DOD intends to issue a policy that delineates the roles and

responsibilities of DOD’s Chief Information Officer in implementing

information resource management reforms, and that defines the

relationship of these officers to other key DOD managers. The

performance report includes a qualitative measure of the DOD’s

progress in implementing Goal 3 of its information management

strategic plan: reform DOD IT management processes to increase

efficiency and mission contribution.d

 This goal is intended to improve

IT management. However, as currently specified, the performance

indicator is neither an outcome-oriented nor quantifiable metric that

allows DOD to establish targets and measure its success in meeting

these goals. Until DOD defines such a metric, measuring its progress

in improving IT management will be difficult.

Acquisition Reform

The weapons systems acquisition process continues to be a

high-risk area. Notwithstanding ongoing reform, the process is

still too slow and costly. Pervasive problems persist regarding

the process to acquire weapons; cost, schedule, and

performance estimates; program affordability; and the use of

high-risk acquisition strategies such as acquiring weapons

based on optimistic assumptions about the maturity and

availability of enabling technologies.

This challenge is discussed in the outcomes section of this report.
Appendix I: Observations on the Department

of Defense’s Efforts to Address Its Major

Management Challenges

Page 31 GAO-01-783 DOD’s Status of Achieving Outcomes

Major management challenge

Progress in resolving major management challenges as

discussed in the fiscal year 2000 performance report

In addition, the DOD IG considers the overall acquisition

process for goods and services to be a significant management

challenge given the fact that DOD has initiated an

unprecedented number of major improvement efforts, including

at least 40 significant acquisition reform initiatives. The IG

reported concerns related to the proper oversight and feedback

on new processes.

Support Infrastructure Inefficiencies

Since the Cold War, DOD has reduced its forces by 25 percent

and closed many bases to reduce its operations and support

infrastructure. While these efforts resulted in savings, the

percentage of DOD’s budget spent on its infrastructure has

remained relatively constant between fiscal year 1996 and

fiscal year 2001 at around 60 percent.

DOD has introduced a number of initiatives aimed at (1)

making its operations and support infrastructure smaller, more

efficient, and more responsive to warfighter needs and (2)

creating savings for other needs like weapons modernization.

However, because of continued inefficiencies in its support

infrastructure, this continues as a high-risk area for DOD.

This challenge is discussed in the outcomes section of this report.

Logistics Support Inefficiencies

While the current logistics system gets the job done, it is often

described as a brute force process that is uneconomical and

inefficient. Although DOD has progressed in improving logistics

support, especially through the application of best inventory

management practices, serious weaknesses persist throughout

its logistics activities; and it is unclear to what extent its

ongoing management improvement initiatives will overcome

these weaknesses. A key area of the logistics process that

remains high risk is inventory management. DOD continues to

spend more than is necessary to procure and manage

inventory, yet at the same time items are not available when

needed.

DOD used the following three measures in its fiscal year 2000

performance report to assess progress towards makings its logistics

support functions more efficient:

• logistics response time,

• visibility and accessibility of DOD material assets, and

• disposal of excess National Defense Stockpile

 inventory and reduction of supply inventory.

According to the report, DOD is currently developing a measure for

customer wait time.

DOD reports that it exceeded its goals in each of these areas, with

the exception of reducing its supply inventory. DOD expects to have

problems meeting goals for this measure in the future due to

concerns about the impact of inventory reductions on readiness.

We believe these measures are appropriate for gauging progress.

However, we are concerned with the overall management of the

logistics reform efforts. Currently, the services and defense agencies

have about 400 ongoing individual initiatives to improve logistics

support. Yet, DOD has not developed an overarching plan that

integrates individual service efforts into a single, DOD-wide

implementation strategy. According to DOD officials, DOD’s planned

new logistics architecture will provide this integration. If done

properly, we believe this architecture will help guide and control

DOD’s reform efforts.
Appendix I: Observations on the Department

of Defense’s Efforts to Address Its Major

Management Challenges

Page 32 GAO-01-783 DOD’s Status of Achieving Outcomes

Major management challenge

Progress in resolving major management challenges as

discussed in the fiscal year 2000 performance report

IG-designated major management challenges

Other Security Concerns

In addition to the threats posed by unauthorized intrusions into

DOD information systems, a wide range of other threats

confront DOD. These include terrorism against U.S. personnel

and facilities and the disclosure or theft of sensitive military

technology. Recent work by the DOD IG highlighted continuing

problems with DOD’s security clearance program and export

control policies. Additionally, the IG noted that more attention is

needed for other issues, including properly demilitarizing

equipment before disposal, ensuring computers being sold or

transferred outside of DOD contain no classified material, and

controlling the access of contractors and visitors to technical

information at military engineering organizations and

laboratories.

This challenge is not directly addressed in the 2000 performance

report. However, the report does describe the more general issue of

terrorism and weapons of mass destruction in domestic incidents as

a crosscutting activity and states that the Federal Emergency

Management Agency serves as the lead federal agency. According

to the performance report, during peacetime, DOD coordinates all of

its consequence management activities through the Assistant to the

Secretary of Defense for Civil Support, who plans and coordinates

with 26 other federal agencies and the Federal Emergency

Management Agency.

Health Care

The DOD health care system reportedly costs over $16 billion

annually and serves approximately 8.2 million eligible

beneficiaries through its health care delivery program,

TRICARE. The DOD IG reported three major challenges for

this area: cost containment, data integrity, and transitioning to

managed care. Cost containment is challenged by the

continued lack of good cost information combined with

significant levels of health care fraud. Data integrity in

management information systems has been a persistent

problem that affects health care program effectiveness and

efficiency. The transition to managed care is challenged by

incomplete, incorrect information being provided to Service

members and by older beneficiaries being without accessibility

to health care resources because of DOD downsizing.

This challenge is not addressed in the 2000 performance report.

Readiness

The DOD IG reported that there is fairly broad consensus that

readiness shortfalls exist, although the extent of impairment to

mission capability is unclear. Indicators of readiness problems

include spare parts shortages; significant backlogs for depot

maintenance and real property maintenance; concerns related

to recruiting, retention and morale; disproportionately

numerous deployments for some units; unanticipated high

operating tempos; and equipment availability problems.

This challenge is discussed in the outcomes section of the report.
Appendix I: Observations on the Department

of Defense’s Efforts to Address Its Major

Management Challenges

Page 33 GAO-01-783 DOD’s Status of Achieving Outcomes

a

Major Management Challenges and Program Risks: Department of Defense (GAO-01-244, Jan.

2001); Human Capital: Strategic Approach Should Guide DOD Civilian Workforce Management

(GAO/T-GGD/NSIAD-00-120, Mar. 9, 2000); Major Management Challenges and Program Risks:

Departments of Defense, State, and Veterans Affairs (GAO-01-492T, Mar. 7, 2001); and Human

Capital: Major Human Capital Challenges at the Departments of Defense and State (GAO-01-565T,

Mar. 29, 2001).

b

Information Security: Progress and Challenges to an Effective Defense-wide Information Assurance

Program (GAO-01-307, Mar. 30, 2001).

c

GAO-01-263, Jan. 2001.

d

The Department of Defense Information Management Strategic Plan, Oct. 19, 1999.
Appendix II: Comments From the Department

of Defense

Page 34 GAO-01-783 DOD’s Status of Achieving Outcomes

Appendix II: Comments From the

Department of Defense

(350063)
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