United States Government Accountability Office

GAO Report to Congressional Committees

DEFENSE BUSINESS 

TRANSFORMATION 

Achieving Success 

Requires a Chief 

Management Officer 

to Provide Focus and 

Sustained Leadership 

September 2007 

 

GAO-07-1072 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

September 2007

DEFENSE BUSINESS TRANSFORMATION

Achieving Success Requires a Chief 

Management Officer to Provide Focus 

and Sustained Leadership 

Highlights of GAO-07-1072, a report to 

congressional committees 

In 2005, GAO added the

Department of Defense’s (DOD)

approach to business 

transformation to its high-risk list 

because (1) DOD’s improvement 

efforts were fragmented, (2) DOD

lacked an integrated and 

enterprisewide business

transformation plan, and (3) DOD 

had not designated a senior official 

at the right level with the right 

authority to be responsible for 

overall business transformation 

efforts. This report assesses (1) the 

progress DOD has made in setting 

up a management framework for

overall business transformation 

efforts and (2) the challenges DOD 

faces in maintaining and ensuring 

the success of those efforts. GAO 

conducted this work under the

Comptroller General’s authority to 

conduct evaluations under his own

initiative. In conducting its work,

GAO compared DOD’s actions to 

key practices of successful

transformations. 

Although DOD has made progress toward establishing a management 

framework for overall business transformation, the framework currently 

focuses on business systems modernization and does not fully address 

broader business transformation efforts. In 2005, DOD set up the Defense 

Business Systems Management Committee to review and approve the 

business enterprise architecture—a transformation blueprint—and new 

business systems modernization investments. It also established the 

Business Transformation Agency, which currently reports to the Vice Chair 

of the Defense Business Systems Management Committee, to coordinate and 

lead business transformation across the department. Despite these steps, 

DOD has not clearly defined or institutionalized interrelationships, roles and 

responsibilities, or accountability for establishing a management framework 

for overall business transformation. For example, differences of opinion 

exist within DOD about the roles of various senior leadership committees. 

Until DOD’s business transformation management framework is 

institutionalized and encompasses broad responsibilities for all aspects of 

business transformation, it will be challenging for DOD to integrate related 

initiatives into a sustainable, enterprisewide approach to successfully 

resolve weaknesses in business operations that GAO has shown are at high 

risk of waste, fraud, and abuse. 

DOD also must overcome two critical challenges, among several others, if it 

is to maintain and ensure success. Specifically, DOD does not have (1) a 

comprehensive, integrated, and enterprisewide plan or set of linked plans, 

supported by a planning process that sets a strategic direction for overall 

business transformation efforts, prioritizes initiatives and resources, and 

monitors progress, and (2) a full-time leadership position at the right level 

dedicated solely to the planning, integration, and execution of overall 

business transformation efforts. A broad-based consensus exists among 

GAO and others, including the Institute for Defense Analyses and the 

Defense Business Board, that the status quo is unacceptable and that DOD 

needs a CMO to provide leadership over business transformation efforts. In a 

May 2007 letter to Congress, however, DOD stated its view that a separate 

position is not needed as the Deputy Secretary of Defense can fulfill the 

CMO role. Although the Deputy Secretary may be at the right level with 

appropriate authority to transform business operations, the demands placed 

on this position make it difficult for the Deputy Secretary to focus solely on 

business transformation—nor does the position have the necessary term of 

appointment to sustain progress across administrations. Further, DOD plans 

to leave the assignment of the CMO role to the discretion of the Secretary of 

Defense. In GAO’s view, codifying the CMO position in statute as a separate, 

full-time position at the right level with an extended term is necessary to 

provide sustained leadership, further DOD’s progress, and address 

challenges the department continues to face in its business transformation 

efforts. 

What GAO Recommends

GAO recommends that DOD 

(1) institutionalize an expanded 

management framework and 

(2) develop a planning process that 

results in an integrated and

enterprisewide plan or set of plans.

Congress should consider enacting

legislation to establish a chief 

management officer (CMO) at

DOD. DOD generally agreed with

GAO’s recommendations, but did 

not agree with the matter for 

Congress. GAO continues to

believe that DOD needs a CMO,

established in statute, to provide 

focus and sustained leadership. 

www.gao.gov/cgi-bin/getrpt?GAO-07-1072.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Sharon Pickup 

at (202) 512-9619 or pickups@gao.gov. 
Contents 

Letter 1

Results in Brief 3

Background 6

DOD Has Made Progress in Establishing a Management 

Framework upon Which to Develop Overall Business 

Transformation, but the Framework Focuses on Business 

Systems Modernization 8 

Two Critical Challenges Affect DOD’s Success in Maintaining and 

Furthering Its Progress in Overall Business Transformation 13 

Conclusions 18

Recommendations for Executive Action 19 

Matter for Congressional Consideration 19 

Agency Comments and Our Evaluation 19 

Appendix I Scope and Methodology 27 

Appendix II Comments from the Department of Defense 29 

Appendix III GAO Contact and Staff Acknowledgments 34 

Related GAO Products 35 

Table 

Table 1: Years When Specific DOD Areas on GAO’s 2007 High-Risk 

List Were First Designated as High Risk 7 

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Page i GAO-07-1072 Defense Business Transformation
United States Government Accountability Office

Washington, DC 20548 

September 5, 2007 

Congressional Committees 

The Department of Defense (DOD) spends billions of dollars to maintain 

key business operations intended to support the warfighter, including 

systems and processes related to the management of contracts, finances, 

the supply chain, support infrastructure, and weapons systems acquisition. 

However, we have reported for years that weaknesses in these business 

operations result in billions of dollars being wasted, reduced efficiencies, 

ineffective performance, inadequate accountability, and lack of 

transparency.

1

 Currently, DOD bears responsibility, in whole or in part, for 

15 of the federal government’s 27 programs or activities that we have 

identified as being at high risk of waste, fraud, abuse, and 

mismanagement. Specifically, in 2005, we identified DOD’s approach to 

overall business transformation as a high-risk area because (1) DOD’s 

improvement efforts and control over resources are fragmented, (2) DOD 

lacks an integrated and enterprisewide business transformation plan, and 

(3) DOD has not designated a senior official at the right level with the right 

authority to be responsible and accountable for business transformation. 

Accordingly, DOD’s business area weaknesses result in inadequate 

accountability to Congress and the American people, wasting billions of 

dollars each year at a time when DOD is competing for resources in an 

increasingly fiscally constrained environment. Our nation is not only 

threatened by external security threats but also from within by growing 

fiscal imbalances primarily due to our aging population and rising health

care costs. As a result, it is important that DOD get the most from every 

dollar it invests. 

 1

See for example, GAO, High-Risk Series: An Update, GAO-07-310 (Washington, D.C.: 

January 2007); Defense Business Transformation: A Comprehensive Plan, Integrated

Efforts, and Sustained Leadership Are Needed to Assure Success, GAO-07-229T 

(Washington, D.C.: Nov. 16, 2006); Department of Defense: Sustained Leadership Is

Critical to Effective Financial and Business Management Transformation, 

GAO-06-1006T (Washington, D.C.: Aug. 3, 2006); DOD’s High-Risk Areas: Successful 

Business Transformation Requires Sound Strategic Planning and Sustained Leadership, 

GAO-05-520T (Washington, D.C.: Apr. 13, 2005); and DOD Financial Management: 

Integrated Approach, Accountability, Transparency, and Incentives Are Keys to Effective

Reform, GAO-02-497T (Washington, D.C.: Mar. 6, 2002). 

Page 1 GAO-07-1072 Defense Business Transformation
We have long advocated the need for a chief management officer (CMO) at 

DOD with significant authority and experience and a term of office that 

would focus the necessary attention on enterprisewide business 

transformation and sustain progress across administrations. Within DOD,

business transformation is broad, encompassing people, planning, 

management, structures, technology, and processes in several key 

business areas. Our previous work has shown that two key practices—a 

comprehensive, integrated, and enterprisewide plan and focused and 

sustained leadership—are at the center of successful organizational 

transformation.2

 These practices can serve as a basis for federal agencies 

such as DOD, which seek to transform their cultures and business 

operations, to become more results-oriented, customer-focused, and 

collaborative in nature. The Deputy Secretary of Defense establishes the 

overall strategic direction and priorities for business transformation, 

according to a DOD directive. Recent initiatives started under the Deputy 

Secretary’s leadership hold potential to improve DOD’s business 

operations; however, concerns remain about DOD’s ability to sustain and 

ensure the success of overall business transformation efforts and related 

management reform initiatives across administrations in the absence of a

CMO who is focused full time and over the long term on defense business 

transformation efforts. 

The Fiscal Year 2006 National Defense Authorization Act directed DOD to 

commission one or two studies on the feasibility and advisability of 

establishing a Deputy Secretary of Defense for Management to serve as a 

CMO at DOD, and required the results of each study to be reported to 

Congress.3

 The studies were to examine the effects of establishing a CMO, 

the appropriate relationship between the CMO and other defense officials,

and the appropriate term of service. The Institute for Defense Analyses 

and the Defense Business Board conducted CMO studies at the behest of 

DOD and concluded that a CMO in some form was needed at the 

department to focus on integration and enterprisewide business 

transformation. In a May 11, 2007, letter to Congress, however, DOD 

recommended that the Deputy Secretary of Defense serve as the CMO for 

the department and further stated that DOD would formalize the Deputy 

Secretary’s CMO role and transformation duties in a DOD directive. As of 

July 2007, both the House and Senate Armed Services Committees had 

introduced legislation that would require DOD to provide increased 

 2

See for example, GAO-07-310, GAO-07-229T, GAO-06-1006T, and GAO-05-520T. 

3

National Defense Authorization Act for Fiscal Year 2006, Pub. L. No. 109-163, § 907 (2006). 

Page 2 GAO-07-1072 Defense Business Transformation
leadership and direction over its business transformation efforts. While 

each committee has taken a different approach, both committees agree

that the status quo at DOD is unacceptable. 

We performed this review under the authority of the Comptroller General 

to conduct evaluations on his own initiative to contribute to the ongoing

discussion on the need for overall business transformation and a CMO at 

DOD. Specifically, our two objectives were to assess (1) the progress DOD 

has made in establishing a management framework for overall business 

transformation and (2) the challenges DOD faces in maintaining and 

ensuring the success of those efforts. 

To assess the progress DOD has made in its business transformation 

efforts, we reviewed and analyzed relevant documents and plans, 

interviewed key DOD senior leaders and defense experts, and reviewed 

current literature about the department’s business transformation efforts. 

These included DOD’s 2006 Quadrennial Defense Review, updates to 

DOD’s enterprise transition plan, DOD’s annual reports on business 

transformation to Congress, and meeting minutes and briefing documents 

from various DOD boards and committees. To assess the challenges DOD 

faces in maintaining and building upon this progress, we reviewed 

documentation and interviewed DOD officials involved in DOD’s business 

transformation efforts. We also compared DOD progress against key 

practices we have found to be at the center of successful organizational 

mergers and transformations.4

 See appendix I of this report for a more 

detailed discussion of our scope and methodology. We conducted our 

work from September 2006 through July 2007 in accordance with generally 

accepted government auditing standards. 

Although DOD has made progress toward establishing a management 

framework upon which to develop overall business transformation, the 

framework currently focuses on business systems modernization and does 

not fully address broader business transformation efforts. As part of its 

progress, the department has established new entities and developed 

various tools and plans for these entities to use in managing its business 

systems modernization efforts. For example, DOD established the Defense 

Business Systems Management Committee to review and approve the 

Results in Brief 

 4

GAO, Results-Oriented Cultures: Implementation Steps to Assist Mergers and

Organizational Transformations, GAO-03-669 (Washington, D.C.: July 2, 2003). 

Page 3 GAO-07-1072 Defense Business Transformation
defense business enterprise architecture—a transformation blueprint—

and the obligation of funds for defense systems modernization. Further, 

DOD established the Business Transformation Agency to support the 

committee by, for example, coordinating and leading business 

transformation across the department. Despite these steps, DOD has not 

clearly defined or institutionalized interrelationships, roles and 

responsibilities, or accountability for establishing a management 

framework for overall business transformation. For example, differences 

of opinion within DOD exist regarding which of the various senior 

leadership committees within the department will function as the primary 

body responsible for overall business transformation. Until DOD’s 

business transformation management framework is institutionalized and 

encompasses broad responsibilities for all aspects of business 

transformation, it will be challenging for DOD to integrate related 

initiatives into a sustainable, enterprisewide approach and to successfully 

resolve weaknesses in business operations that we have shown are at high 

risk of waste, fraud, and abuse. 

DOD must overcome two critical challenges if it is to maintain and build 

upon the progress it has made toward achieving overall business 

transformation. First, DOD does not have a comprehensive, integrated, 

and departmentwide plan or set of linked plans supported by a planning

process that sets a strategic direction for overall business transformation. 

This plan or set of plans should cover all key business functions and 

contain results-oriented goals, measures, and expectations that link 

organizational, unit, and individual performance goals, and also clearly 

link to DOD’s overall investment plans. Second, DOD lacks a full-time 

leadership position at the right level dedicated solely to the planning, 

integration, and execution of business transformation efforts. Without this

dedicated leadership, DOD’s progress on business transformation is at risk 

of not being able to sustain and ensure the success of overall business 

transformation efforts across administrations. A broad-based consensus 

exists among GAO and others, including the Institute for Defense Analyses

and the Defense Business Board, that the status quo is unacceptable and

that DOD needs a CMO to provide leadership over business transformation 

efforts, although there are different views concerning the characteristics 

of a CMO, such as whether the position should be codified in statute, 

established as a separate position from the Deputy Secretary of Defense,

designated as Executive Level II or Level III, subject to a term 

appointment, or supported by a deputy CMO. In a May 2007 letter to 

Congress, however, DOD outlined its position that the Deputy Secretary of 

Defense be designated as the CMO and plans to formalize this in a DOD 

directive. The department’s letter also stated that codifying the CMO 

Page 4 GAO-07-1072 Defense Business Transformation
duties would restrict the flexibility of future Presidents and Secretaries of 

Defense to build an integrated management team. Although the Deputy 

Secretary may be at the right level with appropriate authority to transform 

business operations, the demands placed on this position make it difficult

for the Deputy to focus solely on business transformation—and the 

position does not have the necessary term in office to sustain progress 

across administrations. 

We recommend that DOD institutionalize in directives the roles, 

responsibilities, and relationships among various business-related entities 

and committees and expand its management framework to capture overall 

business transformation efforts, rather than just business systems. In 

official comments on a draft of this report, DOD agreed with this 

recommendation and stated that the department is a strong advocate for 

institutionalizing in directives the functions, responsibilities, authorities, 

and relationships of its principal officials and the management processes 

they oversee. We also recommend that DOD develop a comprehensive, 

strategic planning process for business transformation that results in a 

comprehensive, integrated, and enterprisewide plan or set of plans. DOD 

partially concurred with this recommendation, stating that the department

has already begun to expand the scope of the enterprise transition plan to 

become a more robust enterprisewide planning document and to evolve 

this plan into the centerpiece strategic document for transformation. 

DOD did not agree with the matter for congressional consideration 

regarding the creation of a separate CMO position at DOD, stating that the 

Deputy Secretary of Defense is to be designated as the CMO, and that an

internal directive is being revised to that effect. Among other things, DOD 

stated that the Deputy Secretary has sufficient officials available to help 

manage the department and the authority necessary to refine DOD’s 

management structure to continue business management reform and 

integrate transformation activities. Further, DOD stated that establishing 

an additional official at the under secretary level to lead business 

transformation would generate dysfunctional competition among the five

other Under Secretaries by creating confusion and redundancy in their 

roles and responsibilities. We recognize that the Deputy Secretary has 

officials and institutional structures available to support the 

transformation process; however, transformation cannot be achieved 

through a committee approach. Ultimately, a person at the right level, with 

the right type of experience, in a full-time position with a term 

appointment, and with the proper amount of responsibility, authority, and 

accountability, is needed to lead the effort. Further, contrary to DOD’s 

view, we believe the establishment of a separate CMO position would 

Page 5 GAO-07-1072 Defense Business Transformation
bring leadership, accountability, focus and direction to the department’s 

efforts rather than creating competition and causing confusion. The CMO 

would not assume the responsibilities of the Under Secretaries of Defense 

or any other officials. Rather, the CMO would be responsible and 

accountable for planning, integrating, and executing the department’s 

overall business transformation effort, and would be able to give full-time 

attention to business transformation. We believe DOD’s position 

essentially represents the status quo and will, in fact, not adequately 

address the long-standing management weaknesses in DOD’s business 

operations. In the interest of the department and American taxpayers, 

DOD needs a CMO to help transform its key business operations and avoid 

billions of dollars in waste each year. We, therefore, continue to believe 

that Congress should consider enacting legislation to establish a CMO to 

provide full-time focus and sustained leadership attention to DOD’s 

business transformation efforts, and have retained the matter in our 

report. DOD’s comments and our evaluation are discussed in detail in a 

later section of this report, and the department’s comments are reprinted 

in appendix II. 

DOD is perhaps the largest and most complex organization in the world 

and spends billions of dollars each year to maintain key business 

operations intended to support the warfighter, including systems and 

processes related to the management of contracts, finances, the supply 

chain, support infrastructure, and weapons systems acquisition. We have 

reported for years that inefficiencies in these business operations result in 

reduced efficiencies, ineffective performance, inadequate accountability,

and lack of transparency. Despite various reform initiatives, DOD 

continues to face weaknesses in business operations that not only 

adversely affect the reliability of reported financial data, but also the 

economy, efficiency, and effectiveness of DOD’s operations. 

Background 

To address long-standing management problems, we began our “high-risk” 

program in 1990 to identify and help resolve serious weaknesses in areas 

that involve substantial resources and provide critical services to the 

public. Historically, high-risk areas have been designated because of 

traditional vulnerabilities related to their greater susceptibility to fraud, 

waste, abuse, and mismanagement. As our high-risk program has evolved, 

we have increasingly used the high-risk designation to draw attention to 

areas associated with broad-based transformation needed to achieve

greater economy, efficiency, effectiveness, accountability, and 

sustainability of selected key government programs and operations. For 

example, we first added DOD’s overall approach to business 

Page 6 GAO-07-1072 Defense Business Transformation
transformation to our high-risk list in 2005 because DOD had not taken the 

necessary steps to achieve and sustain business reform on a broad, 

strategic, departmentwide, and integrated basis. Furthermore, DOD 

continues to dominate the high-risk list. Specifically, DOD currently bears 

responsibility, in whole or in part, for 15 of our 27 high-risk areas. Of the 

15 high-risk areas, the 8 DOD-specific high-risk areas cut across all of 

DOD’s major business areas. Table 1 lists the 8 DOD-specific high-risk 

areas. Also, as shown in table 1, many of these management challenges 

have been on the high-risk list for a decade or more. In addition, DOD 

shares responsibility for 7 governmentwide high-risk areas.5

 Collectively, 

these high-risk areas relate to most of DOD’s major business operations 

that directly support the warfighter, including how servicemembers get 

paid, the benefits provided to their families, and the availability and 

condition of the equipment they use both on and off the battlefield. 

Table 1: Years When Specific DOD Areas on GAO’s 2007 High-Risk List Were First 

Designated as High Risk

Area Year designated as high risk

DOD approach to business transformation 2005

DOD personnel security clearance program 2005

DOD support infrastructure management 1997

DOD business systems modernization 1995

DOD financial management 1995

DOD contract management 1992

DOD supply chain management 1990

DOD weapons systems acquisition 1990

Source: GAO.

Congress passed legislation that codified many of our prior 

recommendations related to DOD business systems modernization; this 

includes the establishment of various bodies and plans. Also as required 

by Congress, DOD commissioned studies examining the feasibility and 

 5

The seven governmentwide high-risk areas that DOD shares responsibility for are 

(1) strategic human capital management, (2) managing federal real property, (3) protecting

the federal government’s information systems and the nation’s critical infrastructures, 

(4) ensuring the effective protection of technologies critical to U.S. national security 

interests, (5) management of interagency contracting, (6) establishing appropriate and 

effective information-sharing mechanisms to improve homeland security, and 

(7) modernizing federal disability programs. 

Page 7 GAO-07-1072 Defense Business Transformation
advisability of establishing a CMO to oversee the department’s business 

transformation process. As part of this effort, the Defense Business Board, 

an advisory panel, examined various options and, in May 2006, endorsed 

the CMO concept. In December 2006, the Institute for Defense Analyses 

also endorsed the need for a CMO position at DOD. In May 2007, DOD 

submitted a letter to Congress outlining its position regarding a CMO at 

DOD, stating that the Deputy Secretary of Defense should assume the 

CMO responsibilities. 

Although DOD has made progress in establishing a management 

framework upon which to develop overall business transformation efforts, 

this framework currently focuses on business systems modernization 

rather than broader business transformation efforts. Congress included 

provisions in the National Defense Authorization Acts for Fiscal Years 

2005 and 20066

 to assist DOD in addressing financial management and 

business systems modernization challenges—two of our high-risk areas—

and DOD’s leadership has taken steps to comply with these provisions. For 

example, to improve financial management, DOD issued the initial 

Financial Improvement and Audit Readiness Plan in December 2005,

which was last updated in June 2007, to guide financial improvement and 

financial audit efforts within the department. Also, to address its business 

systems modernization challenges, DOD has established the following: 

• Defense Business Systems Management Committee: The Ronald W. 

Reagan National Defense Authorization Act for Fiscal Year 2005 required

DOD to set up a committee to review and approve major updates of the 

defense business enterprise architecture—or transformation blueprint—

and the obligation of funds for defense systems modernization. Prior to the 

enactment of this legislation, we reported that DOD had not established a 

governance structure and the process controls needed to ensure 

ownership and accountability of business systems investments.7

Subsequently, Congress directed DOD to establish the Defense Business 

Systems Management Committee to oversee DOD business 

transformation. In February 2005, the Deputy Secretary of Defense 

DOD Has Made 

Progress in 

Establishing a 

Management 

Framework upon 

Which to Develop 

Overall Business 

Transformation, but 

the Framework 

Focuses on Business 

Systems

Modernization 

 6

Ronald W. Reagan National Defense Authorization Act for Fiscal Year 2005, Pub. L. 

No. 108-375, § 332 (2004) (codified in part at 10 U.S.C. §§ 186 and 2222), and National 

Defense Authorization Act for Fiscal Year 2006, Pub. L. No. 109-163, § 376 (2006). 

7

GAO, DOD Business Systems Modernization: Improvements to Enterprise Architecture

Development and Implementation Efforts Needed, GAO-03-458 (Washington, D.C.: Feb. 28, 

2003).

Page 8 GAO-07-1072 Defense Business Transformation
chartered the Defense Business Systems Management Committee, which 

consists of senior defense military and civilian leaders. The Deputy 

Secretary of Defense serves as the chair of this committee and the Under 

Secretary of Defense for Acquisition, Technology, and Logistics serves as 

the vice chair of the committee. The committee is intended to establish 

strategic direction and plans for DOD’s business mission, oversee 

implementation of systemic performance in DOD’s business operations, 

approve business transformation plans and initiatives, ensure that funds 

are obligated for defense business systems modernization in accordance 

with the law, and recommend policies and procedures to the Secretary of 

Defense that enable efficient business operations throughout DOD. 

• Investment review boards: The Ronald W. Reagan National Defense 

Authorization Act also required DOD to set up investment review boards 

to evaluate systems’ consistency with the business enterprise architecture 

and to provide oversight of the investment review process for business 

systems. Prior to the establishment of investment review boards, we had 

reported that billions of dollars were being spent on business systems 

investments with little oversight.8

 DOD established the investment review 

boards in 2005 to serve as the oversight and investment decision-making 

bodies for business system investments in their respective areas of 

responsibility. These boards assess modernization investments over 

$1 million and determine how the investments will improve processes and 

support the warfighter. 

• Business Transformation Agency: DOD established the Business 

Transformation Agency in October 2005 with the intent for it to support 

the Defense Business Systems Management Committee and coordinate 

business transformation by ensuring adoption of DOD-wide information 

and process standards as defined in the business enterprise architecture. 

The Business Transformation Agency reports to the Under Secretary of 

Defense for Acquisition, Technology, and Logistics in his capacity as the 

vice chair of the Defense Business Systems Management Committee. The 

Business Transformation Agency’s charter includes responsibilities such 

as identifying urgent warfighter needs that can be addressed by business 

solutions, articulating the strategic vision for business transformation, 

exercising executive oversight for DOD-wide programs, and implementing 

plans and tools needed to achieve DOD business transformation. 

 8

GAO-03-458. 

Page 9 GAO-07-1072 Defense Business Transformation
In addition, the department has developed various tools and plans to 

enable these entities to manage its business systems modernization 

efforts. The tools and plans the Defense Business Systems Management 

Committee approves, the Business Transformation Agency implements, 

and the investment review boards use to assess compliance include the

following: 

• Business enterprise architecture: DOD’s business enterprise 

architecture is a tool or a blueprint to guide and constrain investments in 

DOD organizations and systems as they relate to business operations. The 

business enterprise architecture provides the thin layer of corporate 

policies, capabilities, standards, and rules and focuses on providing 

tangible outcomes for a limited set of enterprise-level (DOD-wide) 

priorities, and the components are responsible under the department’s 

tiered accountability approach for defining their respective componentlevel architectures that are aligned with the corporate business enterprise 

architecture. According to DOD, subsequent releases of the business 

enterprise architecture will continue to reflect this federated approach and 

will define enforceable interfaces to ensure interoperability and 

information flow to support decision making at the appropriate levels. 

• Enterprise transition plan: DOD guidance states that the enterprise 

transition plan is intended to lay out a road map for achieving DOD’s 

business transformation by implementing changes to technology, 

processes, and governance consistent with DOD’s business enterprise 

architecture. According to DOD, the enterprise transition plan is intended 

to summarize all levels of transition planning information (milestones, 

metrics, resource needs, and system migrations) as an integrated product 

for communicating and monitoring progress—resulting in a consistent 

framework for setting priorities and evaluating plans, programs, and 

investments. The enterprise transition plan contains time-phased 

milestones, performance metrics, and a statement of resource needs for 

new and existing systems that are part of the business enterprise 

architecture. Business Transformation Agency officials said that they see 

the enterprise transition plan as the highest level plan for DOD business 

transformation. DOD released its first enterprise transition plan in 

September 2005. DOD updates the enterprise transition plan twice a year, 

once in March as part of DOD’s annual report to Congress and once in 

September. 

While our prior work has acknowledged this progress, we also have 

reported on limitations. For example, while the latest version of the 

business enterprise architecture focuses on DOD-wide corporate policies, 

capabilities, rules, and standards, which are essential elements to meeting 

Page 10 GAO-07-1072 Defense Business Transformation
legislative requirements, this version has yet to be augmented by the DOD 

component organizations’ subsidiary architectures that are also essential 

to meeting these requirements and the department’s goal of having a 

federated family of architectures. While the latest version of the enterprise 

transition plan provides performance measures for the enterprise and 

component programs, including key milestones (such as initial operating 

capability), it does not include other important information needed to 

understand the sequencing of these business investments and does not 

address DOD’s complete portfolio of business system investments. While 

the department has established and begun implementing the investment 

review structures and processes that are consistent with legislation, it has

yet to fully define the related portfolio-based information technology 

investment management practices.9

Furthermore, DOD’s efforts have been mainly focused on business 

systems modernization. During our review, we examined key documents, 

such as DOD’s enterprise transition plan, business transformation 

guidance, and minutes from the meetings of the Defense Business Systems 

Management Committee, and our analysis found that DOD has not yet 

expanded the focus beyond business systems. In addition, DOD officials 

stated that the Defense Business Systems Management Committee has 

mainly focused on providing oversight for business systems investments, 

rather than overall business transformation efforts, because this is what 

legislation has required it to do. Similarly, DOD officials stated that the 

enterprise transition plan also is focused on business systems and does 

not provide enough detail about overall business transformation. DOD 

officials added that the Business Transformation Agency is also limited to 

focusing mainly on business systems because its role is to support the 

Defense Business Systems Management Committee, which primarily 

provides oversight for business systems initiatives as specified in the 

Ronald W. Reagan National Defense Authorization Act. 

Additionally, DOD has not clearly defined or institutionalized 

interrelationships, roles and responsibilities, or accountability for 

 9

See for example, GAO, DOD Business Transformation: Lack of an Integrated Strategy 

Puts the Army’s Asset Visibility System Investments at Risk, GAO-07-860 (Washington,

D.C.: July 27, 2007); DOD Business Systems Modernization: Progress Continues to Be

Made in Establishing Corporate Management Controls, but Further Steps Are Needed, 

GAO-07-733 (Washington, D.C.: May 14, 2007); Business Systems Modernization: Strategy

for Evolving DOD’s Business Enterprise Architecture Offers a Conceptual Approach, but

Execution Details Are Needed, GAO-07-451 (Washington, D.C.: Apr. 16, 2007); and 

GAO-07-310. 

Page 11 GAO-07-1072 Defense Business Transformation
establishing a management framework for overall business 

transformation. For example, the Deputy Secretary of Defense chairs an 

advisory board called the Deputy’s Advisory Working Group, which DOD 

officials have stated has a role in overall business transformation. The 

Deputy’s Advisory Working Group started in 2006 as an ad hoc committee, 

co-chaired by the Deputy Secretary of Defense and Vice Chairman of the 

Joint Staff, to manage the planning process for DOD’s strategic plan, the 

Quadrennial Defense Review.10 According to DOD officials, this working 

group is to provide departmentwide strategic direction on various issues 

that it chooses. Many of the same individuals who sit on the Defense 

Business Systems Management Committee also serve on the Deputy’s 

Advisory Working Group. However, opinions differ within DOD as to 

whether the committee or the working group will function as the primary 

body responsible for overall business transformation, and the relationship 

between these two entities has not been formalized. In addition, opinions

differ between the two entities regarding the definition of DOD’s key 

business areas, with the Defense Business Systems Management 

Committee and the Business Transformation Agency using a broader 

definition of business processes than the Deputy’s Advisory Working 

Group and its supporting organizations. These differences hinder DOD’s 

ability to leverage the business systems modernization management 

framework to fully address broader business transformation efforts. Until 

the department institutionalizes a management framework that 

encompasses all aspects of business transformation, including establishing

overall responsibility for and defining what is included in business 

transformation, DOD will be unable to integrate related initiatives into a 

sustainable, enterprisewide approach and to resolve weaknesses in 

business operations that we have shown are at high risk of waste, fraud, 

and abuse. 

 10Congress mandated that DOD conduct a review every 4 years to examine the national

defense strategy, force structure, force modernization, infrastructure, budget plan, and 

other elements of the defense program and policies of the United States with a view toward

determining and expressing the defense strategy of the United States. 

Page 12 GAO-07-1072 Defense Business Transformation
DOD faces two critical challenges to achieving successful business 

transformation. First, DOD does not have a comprehensive, integrated, 

and enterprisewide plan or set of linked plans supported by a planning 

process that sets a strategic direction for overall business transformation

efforts and monitors progress. Second, DOD lacks a full-time leadership 

position dedicated solely to the planning, integration, and execution of 

business transformation efforts. Until the department establishes a 

comprehensive, integrated planning process and establishes full-time 

sustained leadership, DOD will be challenged to integrate related 

initiatives into a sustainable, enterprisewide approach and to resolve 

weaknesses in business operations that we have shown are at high risk of 

waste, fraud, and abuse.

DOD continues to be challenged in its business transformation efforts 

because it has not developed a comprehensive, integrated, and 

enterprisewide action plan or set of linked plans for business 

transformation that is supported by a comprehensive planning process. 

Such a plan or set of plans would help set strategic direction for overall 

business transformation efforts, prioritize initiatives and resources, and 

monitor progress through the establishment of performance goals, 

objectives, and rewards. Our prior work has shown that this type of plan 

should cover all of DOD’s key business functions; contain results-oriented 

goals, measures, and expectations that link institutional, unit, and 

individual performance goals and expectations to promote accountability; 

and establish an effective process and related tools for implementation 

and oversight.11 Furthermore, such an integrated business transformation 

plan would be instrumental in establishing investment priorities and 

guiding the department’s key resource decisions. 

Our analysis shows that DOD does not have an integrated plan in place 

and has not fully developed a comprehensive planning process. For 

example, we analyzed the enterprise transition plan and determined that 

the goals and objectives in the enterprise transition plan were not clearly

linked to the goals and objectives in the Quadrennial Defense Review, 

DOD’s highest level strategic plan. In addition, the enterprise transition 

plan is not based on a strategic planning process. For example, it does not 

provide a complete assessment of DOD’s progress in overall business 

Two Critical 

Challenges Affect 

DOD’s Success in 

Maintaining and 

Furthering Its 

Progress in Overall 

Business 

Transformation 

DOD Has Not Developed a 

Comprehensive, 

Integrated, and 

Enterprisewide Plan or Set 

of Plans Supported by a 

Planning Process for 

Business Transformation 

Efforts 

 11See for example, GAO-07-310, GAO-07-229T, GAO-06-1006T, GAO-05-520T, and 

GAO-02-497T. 

Page 13 GAO-07-1072 Defense Business Transformation
transformation efforts aside from business systems modernization. 

Furthermore, while the enterprise transition plan contains goals and 

milestones related to business systems, the plan does not contain resultsoriented goals and measures that assess overall business transformation. 

Finally, we determined that DOD’s business transformation efforts are 

currently guided by multiple plans that are developed and maintained by

various offices within DOD. 

DOD officials acknowledged our analysis that DOD does not have an 

integrated plan in place. Business Transformation Agency officials see the 

enterprise transition plan as the highest level plan for business 

transformation but acknowledge that it does not currently provide an

assessment of the department’s overall approach to business 

transformation. Business Transformation Agency officials also

acknowledged that they are challenged to work across various offices to 

develop an integrated planning process and results-oriented measures to 

assess overall business transformation. These officials added that DOD is 

starting to develop a family of linked plans to guide and monitor business 

transformation. Specifically, DOD’s March 2007 update to the enterprise 

transition plan includes an approach that is intended to align other 

business plans with the enterprise transition plan,12 establish working 

relationships among plan owners across DOD’s major business areas, and 

identify interdependencies among their products. However, according to 

Business Transformation Agency officials and others within DOD, the 

alignment currently involves only ensuring data consistency across DOD’s 

major business plans and does not yet encompass the full integration they

envision. In addition, it is not clear from discussions with these officials 

which committee or office within DOD will be responsible for developing

a family of linked plans and a supporting comprehensive planning process.

 12The plans that DOD is looking to align with the enterprise transition plan are the 

(1) Quadrennial Defense Review, DOD’s strategic plan; (2) Performance and Accountability 

Report that provides an overview of DOD’s financial condition and includes an assessment 

of annual program performance; (3) Financial Improvement and Audit Readiness Plan that 

addresses DOD’s financial management high-risk area; (4) Defense Acquisition 

Transformation Report to Congress that summarizes how implementation plans are used to 

reform DOD’s acquisition system; (5) Supply Chain Management Improvement Plan that

addresses DOD’s supply chain high-risk area; (6) Focused Logistics Joint Functional 

Concept and the Focused Logistics Campaign Plan that address DOD’s logistics strategy; 

(7) Human Capital Strategy that addresses changes to DOD’s personnel system; and 

(8) Defense Installations Strategic Plan that addresses the evolution of the strategic 

planning process for DOD real property and installations’ lifecycle assets.

Page 14 GAO-07-1072 Defense Business Transformation
The Defense Science Board,13 the Defense Business Board,14 and the 

Institute for Defense Analyses15 agree with our analysis. These 

organizations have issued reports supporting DOD’s need for an integrated 

planning process for business transformation. In a February 2006 report 

on military transformation,16 the Defense Science Board concluded that 

DOD needed, but did not have, a multiyear business plan capable of 

relating resources to mission purposes. In addition, the report said that 

confusion existed over roles in identifying needs, proposing and choosing 

solutions, executing programs, and overseeing performance. The Defense

Science Board concluded that an effective business plan would give 

decision makers a clear understanding of the impact of resource decisions. 

The Defense Business Board arrived at a similar conclusion. In a May 2006

report on governance at DOD,17 the Defense Business Board reported that 

a challenge facing DOD’s business activities was the move from a 

hierarchical, functional approach to an enterprisewide, cross-functional, 

horizontal approach. The Defense Business Board recommended that 

DOD develop a strategic plan that contains clear goals and supporting 

objectives, including outcome-based metrics. In a December 2006 report 

about the need for a CMO at DOD,18 the Institute for Defense Analyses 

recommended that DOD adopt a planning structure that would ensure that 

the strategic-level directions and priorities drive day-to-day planning and 

execution. The Institute for Defense Analyses said that the planning 

 13The Defense Science Board, composed of members designated from civilian life by the 

Under Secretary of Defense for Acquisition, Technology, and Logistics, advises the 

Secretary of Defense; the Deputy Secretary of Defense; the Under Secretary of Defense for 

Acquisition, Technology, and Logistics; and the Chairman of the Joint Chiefs of Staff on

scientific, technical, manufacturing, acquisition process, and other matters of special 

interest to DOD. 

14The Defense Business Board provides the Secretary of Defense, through the Deputy 

Secretary of Defense, independent advice and recommendations on effective strategies for 

the implementation of best business practices of interest to DOD. 

15The Institute for Defense Analyses is a nonprofit corporation that administers three

federally funded research and development centers to provide objective analyses of 

national security issues, particularly those requiring scientific and technical expertise, and 

conduct related research on other national challenges. 

16Defense Science Board, Defense Science Board Summer Study On Transformation: A 

Progress Assessment Volume I (Washington, D.C.: February 2006). 

17Defense Business Board, Governance-Alignment and Configuration of Business

Activities Task Group Report (Washington, D.C.: May 31, 2006). 

18Institute for Defense Analyses, Does DOD Need a Chief Management Officer? 

(Alexandria, Va.: December 2006). 

Page 15 GAO-07-1072 Defense Business Transformation
structure should contain top-level goals, approaches, and resources and 

link these goals to the required resources within the executing activities. 

DOD continues to lack sustained leadership focused solely on business 

transformation. We have reported that as DOD and other agencies embark 

on large-scale organizational change initiatives, similar to defense business 

transformation, there is a compelling need to, among other things, 

(1) elevate attention on management issues and transformational change 

efforts, (2) integrate various key management and transformation efforts 

into a coherent and enterprisewide approach, and (3) institutionalize 

accountability for addressing transformation needs and leading change. 

Without such leadership, DOD is at risk of not being able to sustain and 

ensure the success of its overall business transformation efforts, and its 

progress is at risk of being another in a long line of unsuccessful 

management reform initiatives.19

The Deputy Secretary of Defense has elevated the attention paid to 

business transformation efforts, and he and other senior leaders have 

clearly shown a commitment to business transformation and to addressing 

deficiencies in the department’s business operations. For example, the 

Deputy Secretary has been actively engaged in monthly meetings of both 

the Defense Business Systems Management Committee and the Deputy’s 

Advisory Working Group, and directed the creation of the Business 

Transformation Agency to support the Defense Business Systems 

Management Committee. However, these organizations do not provide the

sustained leadership needed to successfully achieve overall business 

transformation. The Defense Business Systems Management Committee’s 

representatives consist of political appointees whose terms expire when 

administrations change and the roles of the Deputy’s Advisory Working 

Group have not been institutionalized in DOD directives or charters. 

Without this, the committee’s very existence and role could change within

or between administrations. 

A broad-based consensus exists among GAO and others that the status quo 

is unacceptable and that DOD needs a CMO to provide leadership over 

DOD Has Not Established 

a Full-time Leadership 

Position at the Right Level 

Dedicated Solely to 

Business Transformation 

Efforts 

 19For a discussion of DOD’s prior management initiatives, see GAO, Defense Management: 

Additional Actions Needed to Enhance DOD’s Risk-Based Approach for Making Resource 

Decisions, GAO-06-13 (Washington, D.C.: Nov. 15, 2005), and Highlights of a GAO 

Roundtable: The Chief Operating Officer Concept: A Potential Strategy to Address 

Federal Governance Challenges, GAO-03-192SP (Washington, D.C.: Oct. 4, 2002). 

Page 16 GAO-07-1072 Defense Business Transformation
business transformation efforts, although there are different views 

concerning the characteristics of a CMO, such as whether the position 

should be codified in statute, established as a separate position from the 

Deputy Secretary of Defense, designated as Executive Level II or Level III, 

subject to a term appointment, or supported by a deputy CMO. As required 

by Congress, DOD commissioned studies of the feasibility and advisability 

of establishing a deputy secretary of defense for management to oversee 

the department’s business transformation process. As part of this effort, 

the Defense Business Board, an advisory panel, examined various options 

and, in May 2006, endorsed the CMO concept. Furthermore, in December 

2006, the Institute for Defense Analyses issued a study that reported on 

various options for the creation of a CMO position and recommended that

a CMO is needed at DOD. In response to the Institute for Defense Analyses 

report, DOD submitted a letter to Congress in May 2007 outlining the 

department’s position on a CMO at DOD. However, this position does not 

adequately address the key leadership challenge that we discuss in this 

report—that is, the lack of a senior leader, at the right level, with 

appropriate authority, to focus full time on overall business 

transformation. In summary, DOD is proposing to Congress that the role of 

a CMO be assigned to the Deputy Secretary of Defense. While the Deputy

Secretary may be at the right level, with the appropriate authority and 

responsibility to transform business operations, we have testified that the 

demands placed on him and other senior leaders make it difficult for them

to maintain the oversight, focus, and momentum needed to resolve 

business operational weaknesses, including the high-risk areas. Finally, 

DOD does not agree with codifying the CMO role in legislation, stating that 

doing so would restrict the flexibility of future Presidents and Secretaries 

of Defense to build an integrated management team. DOD would rather 

leave the assignment of the CMO role to the discretion of the Secretary of 

Defense, and DOD plans to formalize the Deputy Secretary’s CMO and 

business transformation duties in a DOD directive. 

Because of the complexity and long-term nature of business 

transformation, we have long advocated the establishment of a CMO 

position at DOD with significant authority and experience and a term that 

would provide sustained leadership and the time to integrate the 

department’s overall business transformation efforts. Major 

transformation initiatives often take at least 5 to 7 years in large private 

and public sector organizations. Codifying a separate, full-time CMO 

position in statute would ensure continuity and help to create 

unambiguous expectations and underscore congressional desire to follow 

a professional, nonpartisan, sustainable, and institutional approach to this

position. Without formally designating responsibility and accountability 

Page 17 GAO-07-1072 Defense Business Transformation
for results, reconciling competing priorities among various organizations 

and prioritizing investments will be difficult and could impede the 

department’s progress in addressing deficiencies in key business areas. A 

full-time and separate CMO position could devote the necessary time and 

effort to further and sustain DOD’s progress and would be accountable for 

planning, integrating, and executing the department’s overall business 

transformation efforts. Further, we believe that the CMO should be at 

Executive Level II and report directly to the Secretary of Defense so that 

the position has the stature needed to successfully address integration 

challenges, address DOD’s high-risk areas with a strategic and systematic 

approach, and prioritize investments across the department. By subsuming 

the CMO duties within the Deputy Secretary of Defense position as DOD 

advocates, the CMO would be at level II, but not subject to a term or able 

to focus full-time attention on business transformation. Finally, we 

advocate an extended term appointment for the CMO of at least 5 to 7 

years so that the position could span administrations to sustain business 

transformation when key personnel changes occur. 

DOD’s efforts at business transformation consist of various entities whose 

interrelationships are not clearly articulated and numerous plans that are 

not integrated across the department. Currently, there is no single 

individual, office, or integrated plan within DOD to provide a complete and 

focused assessment of the department’s business transformation efforts. 

DOD continues to face formidable challenges, both externally with its 

ongoing military operations and internally with the long-standing problems 

of fraud, waste, and abuse. Pervasive, decades-old management problems 

related to its business operations affect all of DOD’s major business areas. 

While DOD has taken positive steps to address these problems, our 

previous work has shown a persistent pattern of limited scope of focus 

and a lack of integrated planning and sustained leadership. In this time of 

growing fiscal constraints, every dollar that DOD can save through 

improved economy and efficiency of its operations is important to the 

well-being of our nation and the legitimate needs of the warfighter. DOD 

can no longer afford to address business transformation as it has in the 

past. Unless DOD elevates and integrates its efforts, billions of dollars will 

continue to be wasted every year. Furthermore, without strong and 

sustained leadership, both within and across administrations, DOD will 

likely continue to have difficulties in maintaining the oversight, focus, and

momentum needed to implement and sustain the needed reforms to its 

business operations. In this regard, we continue to believe that a CMO 

whose sole focus is to integrate and oversee the overall transformation of 

the department’s business operations remains key to DOD’s success. 

Conclusions 

Page 18 GAO-07-1072 Defense Business Transformation
To ensure successful and sustained business transformation at DOD, we 

recommend that the Secretary of Defense take the following two actions: 

• Institutionalize in directives the roles, responsibilities, and relationships 

among various business-related entities and committees, such as the 

Defense Business Systems Management Committee, investment review 

boards, the Business Transformation Agency, and the Deputy’s Advisory 

Working Group, and expand the management framework to capture 

overall business transformation efforts, rather than limit efforts to 

modernizing business systems. 

• Develop a comprehensive strategic planning process for business 

transformation that results in a comprehensive, integrated, and 

enterprisewide plan or set of interconnected functional plans that covers

all key business areas and provides a clear strategic direction, prioritizes 

initiatives, and monitors progress across the department. 

Given DOD’s view that the Deputy Secretary of Defense should be 

assigned CMO duties, Congress should consider enacting legislation to 

establish a separate, full-time position at DOD with the significant 

authority and experience and a sufficient term to provide focused and 

sustained leadership and momentum over business transformation efforts. 

In written comments on a draft of this report, DOD generally concurred 

with our recommendations that the department institutionalize a 

management framework and develop a comprehensive strategic planning

process for business transformation, and disagreed with our matter for 

congressional consideration that Congress enact legislation to establish a 

separate, full-time CMO position. The department’s comments are 

reprinted in appendix II. In its overall comments, DOD expressed concern 

about what it characterized as GAO’s belief that the department placed 

improper emphasis on business systems modernization to the detriment of 

overall business transformation efforts. In particular, DOD stated that 

business systems modernization is a critical step in achieving overall 

business transformation, and that lessons learned and governance 

structures developed for modernizing business systems acquisition 

processes are being evaluated for implementation beyond the business 

side. It further stated that the Deputy’s Advisory Working Group and the 

Defense Business Systems Modernization Committee both focus more 

broadly on defense business transformation. DOD also believed we had 

overstated the nature of “broad-based consensus” between GAO, the 

Institute for Defense Analyses, and the Defense Business Board about the 

Recommendations for 

Executive Action 

Matter for 

Congressional 

Consideration 

Agency Comments 

and Our Evaluation 

Page 19 GAO-07-1072 Defense Business Transformation
need for a CMO in DOD, noting that the Institute for Defense Analyses had 

examined four alternate methods for institutionalizing the roles of the 

CMO and ultimately supported the department’s position that those duties 

be vested in the Deputy Secretary of Defense. 

We disagree with DOD’s characterization of our report with respect to the 

emphasis of the department’s efforts and the nature of the broad-based 

consensus on the need for a CMO. The report specifically gives DOD credit 

for progress to date on setting up an overall framework for broader 

business transformation, and in no way suggests that any specific steps 

taken regarding modernizing business systems are detrimental to this 

progress. Rather, we note that the framework, as currently structured and 

implemented, focuses on business systems, is a foundation to build upon, 

and needs to be expanded to more fully address broader transformation 

issues. The report also recognizes the establishment of the Deputy’s 

Advisory Working Group and the Defense Business Systems 

Modernization Committee. While DOD suggests these two groups focus 

more broadly on business transformation, our work shows that DOD has 

not clearly defined or institutionalized interrelationships, roles and 

responsibilities, or accountability for broader business transformation 

among these entities. Also, differences of opinion exist within DOD about 

the roles and scope of the various entities. Further, contrary to DOD’s 

view, we did not overstate the nature of the “broad-based consensus” 

regarding the need for a CMO. In fact, the Defense Business Board, 

Institute for Defense Analyses, and the department are on record in their 

support for establishing a CMO at DOD. Specifically, the board endorsed 

the CMO concept in a study completed in May 2006, the Institute for 

Defense Analyses identified the need for a CMO in its study completed in 

December 2006, and DOD, in a May 2007 letter, informed Congress of its 

view that the Deputy Secretary of Defense should assume CMO 

responsibilities. The Institute for Defense Analyses also recommended 

that Congress establish a new deputy CMO position with an Executive 

Level III term appointment of 7 years to provide full-time support to the 

Deputy Secretary in connection with business transformation issues. We 

believe these actions demonstrate a broad-based consensus regarding the

need for a CMO and, therefore, that the status quo is unacceptable. 

Notwithstanding these positions, we also recognize, as stated in the report,

that there are different views concerning the characteristics of a CMO, 

such as whether the position should be codified in statute, established as a 

separate position from the Deputy Secretary, designated as Executive

Level II or Level III, or subject to a term appointment. As stated in this 

report and numerous testimonies, we believe the CMO position should be 

Page 20 GAO-07-1072 Defense Business Transformation
codified in statute as a separate and full-time position, designated as 

Executive Level II, and subject to an extended term appointment. 

In addition to its overall comments, DOD provided detailed comments on

our two recommendations. Specifically, DOD concurred with our first 

recommendation that the department institutionalize in directives the 

roles, responsibilities, and relationships among various business-related 

entities and committees and expand the management framework beyond 

business systems modernization to capture overall business 

transformation efforts. In fact, DOD stated explicitly in its comments that 

the department is a strong advocate for institutionalizing, in its DOD 

Directives System, the functions, responsibilities, authorities, and 

relationships of its principal officials and the management processes they

oversee. DOD added that the Deputy Secretary of Defense has issued a 

directive-type memorandum on the management of the Deputy’s Advisory 

Working Group and that a draft DOD directive has been prepared to define 

the functions of the Defense Business Systems Management Committee 

and elaborate its relationships with the Defense Business Transformation 

Agency and other key business-related entities in the department. We 

recognize that directives and memorandums, in some cases, do exist, and 

that DOD plans to finalize additional directives, particularly for the 

Defense Business Systems Management Committee. As noted in our 

report, during the course of our review, we found that DOD has not clearly

defined or institutionalized interrelationships, roles and responsibilities, or 

accountability for establishing a management framework for overall 

business transformation, and that differences of opinion exist within the 

department regarding which of the various senior leadership committees 

will function as the primary body responsible for overall business 

transformation. Therefore, we encourage DOD to ensure that its efforts to 

institutionalize its management framework for business transformation in 

directives specifically address these matters, and once directives are 

finalized, to take steps to clearly communicate the framework and 

reinforce its implementation throughout the department. 

Further, DOD partially concurred with our second recommendation that 

the Secretary of Defense develop a comprehensive strategic planning 

process for business transformation that results in a comprehensive, 

integrated, and enterprisewide plan or set of plans. Specifically, DOD 

stated that it has already begun to expand the scope of the enterprise 

transition plan to become a more robust enterprisewide planning 

document and to evolve this plan into the centerpiece strategic document

for transformation. DOD added that as the enterprise transition plan 

evolves, it will continue to improve in aligning strategy with outcomes, 

Page 21 GAO-07-1072 Defense Business Transformation
identifying business capability gaps, prioritizing future needs, and 

developing metrics to measure achievement. DOD also stated that it will 

continue to evolve its family of plans to address our recommendation. 

While DOD’s proposed actions to address both of our recommendations 

appear to be positive steps, the key to their success will be in the details of 

their implementation. Moreover, we continue to believe that these efforts 

alone will not be sufficient to bring about the desired transformation. 

More specifically, efforts to institutionalize and broaden the scope of a 

management framework and develop a comprehensive strategic planning

process for business transformation will not be successful without a CMO 

to guide and sustain these efforts. 

However, DOD disagreed with our matter for congressional consideration 

that Congress consider enacting legislation to establish a separate, fulltime CMO position at DOD to provide focused and sustained leadership 

and momentum over business transformation efforts, stating that no 

official below the Secretary of Defense, except the Deputy Secretary, has 

the rank and perspective to provide the strategic leadership and 

authoritative decision making necessary to ensure implementation of 

departmentwide business activities. DOD stated that the Deputy Secretary 

of Defense is to be designated as the CMO and that an internal directive is 

being revised to that effect. DOD also stated its belief that the continuity of 

business transformation is best ensured by institutionalized processes and 

organizations, the knowledge and perspective of DOD’s career workforce, 

clear and mutually agreed to economy and efficiency goals, and the due 

diligence of future administrations and Members of Congress to nominate 

and confirm highly qualified executives to serve at DOD. Further, DOD 

stated that the establishment of an additional official at the under 

secretary level to lead business transformation would generate 

dysfunctional competition among the five other Under Secretaries by 

creating confusion and redundancy in their roles and responsibilities. DOD 

added that the Deputy Secretary of Defense as the CMO has sufficient 

officials available to assist in managing the department and the authority 

necessary to refine the department’s management structure to continue 

business management reform and integrate business transformation 

activities with the operational work of the department. 

Because of the complexity and long-term nature of business 

transformation, we have consistently reported and testified that DOD 

needs a CMO with significant authority and experience, a term that would 

provide sustained leadership, and the time to integrate overall business 

transformation efforts. In our view, DOD’s plan to subsume the CMO 

duties within the Deputy Secretary of Defense position and to establish 

Page 22 GAO-07-1072 Defense Business Transformation
this action by directive would place the responsibilities at the appropriate

level—Executive Level II—but would result in a position not subject to a 

term or able to focus full-time attention on business transformation. 

Transformation is a long-term process, especially for large and complex 

organizations such as DOD. Therefore, a term of at least 5 to 7 years is 

recommended to provide sustained leadership and accountability. To 

ensure continuity, it should become a permanent position, with the 

specific duties authorized in statute. As stated in our report, we believe

codifying a separate, full-time CMO position in statute would also help to 

create unambiguous expectations and underscore congressional desire to

follow a professional, nonpartisan, sustainable, and institutional approach 

to this position. 

We recognize that the Deputy Secretary of Defense has officials and 

institutional structures available to support the transformation process; 

however, transformation cannot be achieved through a committee 

approach. Ultimately, a person at the right level, with the right type of 

experience, in a full-time position with a term appointment, and with the 

proper amount of responsibility, authority, and accountability is needed to

lead the effort. Contrary to DOD’s view, we believe the establishment of a 

separate CMO position would bring leadership, accountability, focus, and 

direction to the department’s efforts rather than creating dysfunctional 

competition and causing confusion. The CMO would not assume the 

responsibilities of the Under Secretaries of Defense or any other officials.

Rather, the CMO would be responsible and accountable for planning, 

integrating, and executing the department’s overall business 

transformation effort, and would be able to give full-time attention to 

business transformation. As such, the CMO would be a key ally to other 

officials in the department in dealing with the business transformation 

process. Without formally designating responsibility and accountability for 

results, reconciling competing priorities among various organizations and 

prioritizing investments will be difficult and could impede progress in 

addressing deficiencies in key business areas. We believe DOD’s position 

essentially represents the status quo, and that in the interest of the 

department and American taxpayers, the department needs a CMO to help 

transform its key business operations and avoid billions of dollars in waste 

each year. 

We are encouraged that this matter is now before Congress as it prepares 

to deliberate on pending legislation that calls for statutorily establishing a 

CMO for DOD. In particular, we believe any resulting legislation should 

include some important characteristics for the CMO position. Specifically, 

a CMO at DOD should be codified in statute as a separate and full-time 

Page 23 GAO-07-1072 Defense Business Transformation
Defense Business Transformation

position that is designated as an Executive Level II appointment and 

reports directly to the Secretary of Defense so that the individual in this 

position has the stature needed to successfully address integration 

challenges, adjudicate disputes, and monitor progress on overall business 

transformation across defense organizations. In addition, the position 

should be subject to an extended term appointment such that the CMO 

would span administrations to sustain transformation efforts when key 

personnel changes occur. Transformation is a long-term process, 

especially for large and complex organizations such as DOD. Therefore, a 

term of at least 5 to 7 years is recommended to provide sustained 

leadership and accountability. In addition, we would recommend a 

requirement for advance notification should the Secretary decide to 

remove an individual from the CMO position. 

We are sending copies of this report to interested congressional 

committees and the Secretary of Defense. We will also make copies 

available to others upon request. This report is also available at no charge 

on GAO’s Web site at http://www.gao.gov. 

If you or your staff have any questions regarding this report, please 

contact me at (202) 512-9619 or pickups@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on the 

last page of this report. Other staff members who made key contributions 

to this report are listed in appendix III. 

Sharon L. Pickup 

Director, Defense Capabilities and Management 

Page 24 GAO-07-1072
List of Committees 

The Honorable Daniel K. Inouye 

Chairman 

The Honorable Ted Stevens 

Ranking Member 

Subcommittee on Defense 

Committee on Appropriations 

United States Senate 

The Honorable Carl Levin 

Chairman 

The Honorable John S. McCain 

Ranking Member 

Committee on Armed Services 

United States Senate 

The Honorable Joseph I. Lieberman 

Chairman 

The Honorable Susan M. Collins 

Ranking Member 

Committee on Homeland Security and Governmental Affairs 

United States Senate 

The Honorable Daniel K. Akaka 

Chairman 

The Honorable George V. Voinovich

Ranking Member 

Subcommittee on Government Management, the Federal Workforce, 

 and the District of Columbia 

Committee on Homeland Security and Governmental Affairs 

United States Senate 

The Honorable John P. Murtha 

Chairman 

The Honorable C.W. Bill Young 

Ranking Member 

Subcommittee on Defense 

Committee on Appropriations 

House of Representatives 

Page 25 GAO-07-1072 Defense Business Transformation
The Honorable Ike Skelton 

Chairman 

The Honorable Duncan L. Hunter 

Ranking Member 

Committee on Armed Services 

House of Representatives 

Page 26 GAO-07-1072 Defense Business Transformation
Appendix I: Scope and Methodology Appendix I: Scope and Methodology 

To assess the progress the Department of Defense (DOD) has made in 

setting up a management framework for business transformation, we 

reviewed and analyzed relevant documents and current literature about 

the department’s business transformation and interviewed key DOD senior 

leaders and defense experts. Documents that we used for our review 

included, but were not limited to, (1) GAO reports related to DOD’s highrisk areas, including business systems modernization, development of the 

business enterprise architecture, and organizational transformation; 

(2) DOD products, including the 2006 Quadrennial Defense Review and 

updates to DOD’s enterprise transition plan; (3) DOD’s annual reports on 

business transformation to Congress (and biannual updates); (4) DOD 

testimony to Congress on the status of business transformation; and 

(5) meeting minutes and briefing documents, such as those from the 

Defense Business Systems Management Committee, the Deputy’s Advisory 

Working Group, and the Defense Business Board, related to DOD’s 

business transformation, governance, and management reforms. We 

obtained testimonial evidence from officials representing the Business 

Transformation Agency, offices within the Office of the Secretary of 

Defense (including the Program Analysis and Evaluation Directorate; 

Office of the Director, Administration and Management; and the Office of 

Business Transformation), the Joint Staff, the military departments, and 

defense experts. 

To assess the challenges DOD faces in maintaining and ensuring success 

in its overall business transformation efforts, we compared DOD’s efforts 

to key practices we found to be consistently at the center of successful 

organizational mergers and transformations, specifically, establishing a 

coherent mission and integrated strategic goals to guide the 

transformation and ensuring that top leadership drives the 

transformation.1

 We also reviewed relevant plans and related documents 

to assess integration among DOD’s various business-related plans. These 

plans included DOD’s Quadrennial Defense Review, Performance and 

Accountability Report, Financial Improvement and Audit Readiness Plan, 

Defense Acquisition Transformation Report to Congress, Supply Chain 

Management Improvement Plan, Focused Logistics Joint Functional 

Concept and the Focused Logistics Campaign Plan, Human Capital 

Strategy, and the Defense Installations Strategic Plan. In addition, we 

reviewed proposals for a chief management officer (CMO) at the 

 1

GAO, Results-Oriented Cultures: Implementation Steps to Assist Mergers and

Organizational Transformations, GAO-03-669 (Washington, D.C.: July 2, 2003). 

Page 27 GAO-07-1072 Defense Business Transformation
Appendix I: Scope and Methodology 

department and obtained testimonial evidence from key DOD officials and 

defense experts. As part of this effort, we considered comments raised by 

several public and private sector officials during a forum sponsored by the 

Comptroller General in April 2007. The purpose of this forum was to 

discuss the merits of a CMO or chief operating officer concept. We also 

analyzed congressionally mandated CMO reports prepared by the Defense 

Business Board and the Institute for Defense Analyses and reviewed 

DOD’s response to the study prepared by the Institute for Defense 

Analyses. 

We conducted our work from September 2006 through July 2007 in 

accordance with generally accepted government auditing standards. 

Page 28 GAO-07-1072 Defense Business Transformation
Appendix II: Comments from the Department Appendix II: Comments from the Department of Defense 

of Defense 

Page 29 GAO-07-1072 Defense Business Transformation
Appendix II: Comments from the Department 

of Defense 

Page 30 GAO-07-1072 Defense Business Transformation
Appendix II: Comments from the Department 

of Defense 

Page 31 GAO-07-1072 Defense Business Transformation
Appendix II: Comments from the Department 

of Defense 

Page 32 GAO-07-1072 Defense Business Transformation
Appendix II: Comments from the Department 

of Defense 

Page 33 GAO-07-1072 Defense Business Transformation
Appendix III: GAO

A

 Contact and Staff 

cknowledgments 

Page 34 GAO-07-1072

Appendix III: GAO Contact and Staff 

Acknowledgments 

GAO Contact Sharon Pickup, (202) 512-9619 or pickups@gao.gov

In addition to the contact named above, David Moser, Assistant Director; 

Thomas Beall; Renee Brown; Donna Byers; Grace Coleman; Gina Flacco;

Barbara Lancaster; Julia Matta; and Suzanne Perkins made key 

contributions to this report. 

Acknowledgments 

Defense Business Transformation
Related GAO Products Related GAO Products 

DOD Business Systems Modernization: Progress Continues to Be Made 

in Establishing Corporate Management Controls, but Further Steps Are 

Needed. GAO-07-733. Washington, D.C.: May 14, 2007. 

Business Systems Modernization: DOD Needs to Fully Define Policies 

and Procedures for Institutionally Managing Investments. GAO-07-538. 

Washington, D.C.: May 11, 2007. 

DOD Transformation Challenges and Opportunities. GAO-07-500CG. 

Washington, D.C.: February 12, 2007.

Business Systems Modernization: Strategy for Evolving DOD’s Business 

Enterprise Architecture Offers a Conceptual Approach, but Execution 

Details Are Needed. GAO-07-451. Washington, D.C.: April 16, 2007. 

High-Risk Series: An Update. GAO-07-310. Washington, D.C.: January 

2007. 

Defense Business Transformation: A Comprehensive Plan, Integrated 

Efforts, and Sustained Leadership Are Needed to Assure Success. 

GAO-07-229T. Washington, D.C.: November 16, 2006. 

Department of Defense: Sustained Leadership Is Critical to Effective 

Financial and Business Management Transformation. GAO-06-1006T. 

Washington, D.C.: August 3, 2006. 

Business Systems Modernization: DOD Continues to Improve 

Institutional Approach, but Further Steps Needed. GAO-06-658. 

Washington, D.C.: May 15, 2006. 

GAO’S High-Risk Program. GAO-06-497T. Washington, D.C.: March 15, 

2006. 

Defense Management: Additional Actions Needed to Enhance DOD’s 

Risk-Based Approach for Making Resource Decisions. GAO-06-13. 

Washington, D.C.: November 15, 2005. 

Defense Management: Foundational Steps Being Taken to Manage DOD 

Business Systems Modernization, but Much Remains to be Accomplished 

to Effect True Business Transformation. GAO-06-234T. Washington, D.C.: 

November 9, 2005. 

Page 35 GAO-07-1072 Defense Business Transformation
Related GAO Products 

21st Century Challenges: Transforming Government to Meet Current and 

Emerging Challenges. GAO-05-830T. Washington, D.C.: July 13, 2005. 

DOD Business Transformation: Sustained Leadership Needed to Address 

Long-standing Financial and Business Management Problems. 

GAO-05-723T. Washington, D.C.: June 8, 2005. 

Defense Management: Key Elements Needed to Successfully Transform 

DOD Business Operations. GAO-05-629T. Washington, D.C.: April 28, 

2005. 

(350902) Page 36 GAO-07-1072 Defense Business Transformation
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