GAO

United States General Accounting Office

Report to the Chairman, Subcommittee

on Military Readiness, Committee on

Armed Services, House of

Representatives

July 2000 DEFENSE

MANAGEMENT

Actions Needed to

Sustain Reform

Initiatives and Achieve

Greater Results

GAO/NSIAD-00-72

Page 1 GAO/NSIAD-00-72 Defense Management

Contents

Letter 3

Appendixes Appendix I: Objectives, Scope, and Methodology 32

Appendix II: Assessment of DRI Elements 35

Appendix III: Comments From the Department of Defense 78

Appendix IV: GAO Contacts and Staff Acknowledgments 82

Related GAO Products 83

Tables Table 1: Status of Some Major Defense Reform Initiatives 5

Table 2: Adopting Best Business Practices Initiatives 36

Table 3: Quality of Life Initiatives 50

Table 4: DOD Reported Staff Reductions 55

Table 5: Infrastructure Reduction Initiatives 59

Table 6: Acquisition System and Workforce Initiatives 66

Table 7: Homeland Defense Initiatives 74

Figures Figure 1: Overview of the Defense Reform Initiative 9

Figure 2: Defense Management Council Membership 14

Abbreviations

DOD Department of Defense

DRI Defense Reform Initiative
Page 2 GAO/NSIAD-00-72 Defense Management
Page 3 GAO/NSIAD-00-72 Defense Management

United States General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-283282 Letr

July 25, 2000

The Honorable Herbert H. Bateman

Chairman, Subcommittee on Military Readiness

Committee on Armed Services

House of Representatives

Dear Mr. Chairman:

The Defense Reform Initiative, announced by the Secretary of Defense in

November 1997, represents an important set of actions aimed at improving

the effectiveness and efficiency of Department of Defense (DOD) business

operations, particularly in areas that have had long-standing problems—

weapon system acquisition, financial management, and logistics

management. The ultimate goals of the Reform Initiative are to improve

service to the war fighters, who depend on these operations for support,

and help reduce infrastructure1 costs so that savings in operations and

maintenance funding can be shifted to support weapons modernization.2

Last year we reported that the Secretary and Deputy Secretary of Defense

had given the Reform Initiative their strong personal support and

established a management oversight structure to bring sustained direction

and emphasis to the effort. However, it was too early for us to assess how

effective this management emphasis and oversight structure would be in

the long term. Nevertheless, we noted that the initiative’s potential for

success could be enhanced if the Department developed a more

comprehensive, integrated strategy and action plan for reforming its major

business processes and support activities, and an investment plan for

implementing them.3

1 DOD defines infrastructure as those activities that provide support services to mission

programs (such as combat forces) and primarily operate from fixed locations.

2 The Department’s goal is to increase weapons modernization from $42 billion in fiscal year

1998 to $60 billion in fiscal year 2001.

3 Defense Reform Initiative: Organization, Status, and Challenges (GAO/NSIAD-99-87,

Apr. 21, 1999) and Defense Infrastructure: Improved Performance Measures Would Enhance

Defense Reform Initiative (GAO/NSIAD-99-169, Aug. 4, 1999).
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Page 4 GAO/NSIAD-00-72 Defense Management

As you requested, this report provides updated information on the status of

the Defense Reform Initiative. Specifically, it addresses the following

questions:

• Has the Department’s management emphasis and oversight structure

been effective in providing sustained direction and emphasis to the

program?

• What is the status of individual reform initiatives and what barriers

could limit their success?

• To what extent has the Reform Initiative resulted in savings, enabling

DOD to shift operation and maintenance funds to support weapons

modernization?

The scope and methodology of our work is included in appendix I.

Results in Brief The support of the Secretary and Deputy Secretary of Defense and the

management oversight structure they created to help implement the

Reform Initiative have provided the impetus to get the initiative off to a

good start. Opportunities exist, however, to make the initiative more

effective. For example, an important element of DOD’s management

oversight structure has been the Defense Management Council. This

Council, which was created by the Secretary to be his Reform Initiative

board of directors, could be more effective in advising the Secretary and

helping sustain the emphasis on reform. The Council, for example, has not

always (1) worked collaboratively to foster Department-wide solutions to

major problems, (2) established reform priorities to focus attention and

resources on the Department’s most important problems, or (3) exerted

authority to make decisions on key reforms. In addition, the Council

received limited information on the status of individual reform initiatives

that affected its ability to identify, discuss, and take corrective action on

reforms that are not progressing as expected. Moreover, the Department

initially agreed with but subsequently did not take action to implement our

recommendations to develop an integrated strategy, investment plan, and

funding targets for reforming its major business processes. Consequently, it

does not have a clear road map to ensure that the interrelationships

between its major reform initiatives are understood and addressed and that

it is investing in its highest priority requirements. Such a road map would

be a valuable tool in helping the Department manage the Reform Initiative

and maintain programmatic continuity and momentum during the

upcoming transition to a new administration and department leadership.
B-283282

Page 5 GAO/NSIAD-00-72 Defense Management

DOD has made some progress in implementing the numerous initiatives

included in the Defense Reform Initiative. Table 1 identifies the status of

some of the major initiatives by degree of progress.

Table 1: Status of Some Major Defense Reform Initiatives

A number of barriers have kept the Department from meeting its specific

time frames and goals. The most notable barrier is the difficulty in

overcoming institutional resistance to change in an organization as large

and complex as DOD, particularly in such areas as acquisition, financial

management, and logistics, which transcend most of the Department’s

functional organizations and have been long-standing management

concerns. Other barriers include (1) programming, including interfaces to

older existing (legacy) and new systems, or other technical problems

associated with new computer systems that are being developed to support

areas like paperless contracting and travel reengineering and (2) employee

concerns about the potential loss of jobs associated with competitive

sourcing and the use of prime vendors to store, distribute, and manage

DOD’s inventory. Additionally, the Department will need to reach

agreement with the Congress for future authority to hold additional base

realignment and closure rounds and for additional authorities for housing

privatization and property leasing.

Initially, Defense officials expected that savings from the Reform Initiative

would help DOD increase funding for weapons modernization from

$42 billion in fiscal year 1998 to $60 billion in fiscal year 2001. However,

widespread savings have not been achieved, primarily because most

individual initiatives are long-term efforts that require significant up-front

Initiatives Completed or

Likely to Be Completed on

Schedule

Initiatives Making Some

Progress, but Behind

Schedule

Initiatives That Will Require

Many Years to Fully

Implement

• Organizational

streamlining

• Military pay increases

• Purchase cards

• Performance contracts

• Defense Information

System Agency center

consolidations

• Demolition and disposal of

excess facilities

• Competitive sourcing

• Paperless contracting

• Travel reengineering

• Electronic malls

• Household goods

transportation

• Acquisition reform

• Financial management

reform

• Logistics transformation
B-283282

Page 6 GAO/NSIAD-00-72 Defense Management

investments to implement. It could take a number of years before these

investments are offset and net savings begin to accrue. Accordingly, the

initiatives will not play as great a role initially in providing savings as

originally envisioned. However, various initiatives are likely to produce

significant savings once up-front costs are recovered. In the short term, the

Department still plans to increase its modernization budget to $60 billion in

fiscal year 2001. Department officials expect that the additional funds will

initially come from budget increases provided by the Congress and by

delaying other activities, such as real property maintenance at military

bases and installations. It expects that the initiatives will eventually result

in enough savings to sustain an increased modernization budget in the

future.

This report suggests that the Congress may want to consider requiring the

Department to implement our previous recommendations to develop

integrated reform and investment plans. It also recommends that the

Secretary of Defense build on the Department’s actions to implement the

Defense Reform Initiative by improving the effectiveness of the Defense

Management Council. In written comments on a draft of this report, DOD

generally concurred with our conclusions and recommendations, as well as

our matters for congressional consideration. It also provided additional

observations about actions it has underway or planned to put long-term

change mechanisms in place.

Background Over the past decade, the Department of Defense conducted several major

defense reviews to assess military force structure requirements in the

post-Cold War era.4 Each of these reviews noted that excessive

infrastructure limited DOD’s ability to fund readiness and modernization

requirements. During this time, the Department undertook a number of

legislative and administrative initiatives to downsize the organization and

improve the efficiency of its business operations. The most notable of these

were the four base realignment and closure rounds that the Congress

authorized between 1988 and 1995. Others include the

• President’s Blue Ribbon Commission on Defense Management (also

known as the Packard Commission), which resulted in 250 wide-ranging

decisions in 1989 to consolidate business functions, improve

4 The 1991 Base Force Review, the 1993 Bottom-Up Review, and the 1997 Quadrennial

Defense Review.
B-283282

Page 7 GAO/NSIAD-00-72 Defense Management

information systems, enhance management, and employ better business

practices and

• Corporate Information Management initiative, which was a

Department-wide effort in the early- to mid-1990s to improve

administrative operations and reduce costs by streamlining business

processes and consolidating, standardizing, and integrating information

systems.

While each of these efforts produced savings, we found that the lack of

reliable cost information made it difficult to precisely determine the

amount of savings.5 In addition, our recent review of DOD’s Future Years

Defense Program showed that the infrastructure portion of the budget has

not decreased as planned.6 In fiscal year 1999, for example, DOD estimated

that infrastructure expenditures accounted for about 57 percent of the

budget; about the same percentage as fiscal year 1994.

The Defense Reform Initiative (DRI) represents another major effort to

modernize the Department’s business processes and reduce its

infrastructure costs. When he announced the program in November 1997,

the Secretary of Defense said that his goal was to ignite a revolution in

business affairs, similar to the revolution that had taken place in the private

sector over the past several years. He also pointed out that the

Department’s fighting forces are more agile and responsive, but that its

business and support functions were mired in old, inefficient processes and

systems, many of which were based on 1950s and 1960s technology. By

adopting the best business practices of the private sector, reducing and

reorganizing headquarters elements, expanding the use of public-private

competitions (using the Office of Management and Budget’s A-76 process),7

and eliminating unneeded infrastructure, the Secretary anticipated that the

Department could save significant amounts of money, which would then be

used to fund readiness and modernization priorities.

5 Letter to the Chairman, Subcommittee on Readiness, Committee on Armed Services,

House of Representatives (GAO/NSIAD-94-17R, Oct. 7, 1993); Defense IRM: Poor

Implementation of Management Controls Has Put Migration Strategy at Risk

(GAO/AIMD-98-5, Oct. 20, 1997); and Military Bases: Status of Prior Base Realignment and

Closure Rounds (GAO/NSIAD-99-36, Dec. 11, 1998).

6 Future Years Defense Program: Substantial Risks Remain in DOD’s 1999-2003 Plan

(GAO/NSIAD-98-204, July 31, 1998).

7 Under A-76, agencies conduct public/private competitions to determine whether the public

or private sector will perform selected commercial activities and functions.
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For the most part, the reform initiatives that were first included in the DRI

were not new. A few were outgrowths of the Packard Commission and

Corporate Information Management programs and had been ongoing for

several years. Nor do they represent all of the Department’s ongoing reform

initiatives. In explaining why some ongoing initiatives were included and

others were not, a representative of the Defense Reform Task Force, which

was responsible for developing the DRI Report, said the Task Force

judgmentally selected initiatives where commercial practices might be

successfully applied across a range of DOD organizations, functions, and

activities. In March 1999, the Secretary expanded the DRI to include most

of the Department’s major reform initiatives, including acquisition,

financial management, and logistics reform. Figure 1 shows the current

makeup of the DRI and selected initiatives.
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Page 9 GAO/NSIAD-00-72 Defense Management

Figure 1: Overview of the Defense Reform Initiative

DRI ements

Reengineer

business and

support operations

by adopting

private sector

business practices

Reengineer

business and

support operations

by adopting

private sector

business practices

Element 1

Adopting best

business practices

Element 1

Adopting best

business practices

Increase job

support and

assistance for

DOD personnel

Increase job

support and

assistance for

DOD personnel

Element 2

Quality of life

Element 2

Quality of life

Reorganize and

reduce the size

of DOD

headquarters

elements to focus

on corporate-level

tasks

Reorganize and

reduce the size

of DOD

headquarters

elements to focus

on corporate-level

tasks

Element 3

Organizational

streamlining

Element 3

Organizational

streamlining

Expand the use

of competition

between the public

and private sector

to improve

performance and

reduce DOD

costs

Expand the use

of competition

between the public

and private sector

to improve

performance and

reduce DOD

costs

Element 4

Competitive

sourcing

Element 4

Competitive

sourcing

 e e te Initiatives

- Electronic commerce

- Paperless contracting

-Purchase cards

- Electronic malls

- Prime vendors

- Travel reengineering

- Performance contracts

- Working Capital Funds

- Financial management

reform

- Transportation

documentation and

financial processes

- Electronic commerce

- Paperless contracting

-Purchase cards

- Electronic malls

- Prime vendors

- Travel reengineering

- Performance contracts

- Working Capital Funds

- Financial management

reform

- Transportation

documentation and

financial processes

- Household goods

transportation

- Military pay and

retirement benefits

- Project Outlook

Career Assistance

Center

- Strengthening civilian

workforce

- Household goods

transportation

- Military pay and

retirement benefits

- Project Outlook

Career Assistance

Center

- Strengthening civilian

workforce

- Reduce headquarters

and other staff

department-wide

- Reshape support

activities

- Realign offices within

the Office of the

Secretary of Defense

- Reduce headquarters

and other staff

department-wide

- Reshape support

activities

- Realign offices within

the Office of the

Secretary of Defense

- Compete 203,000

positions by 2005

- Compete and contract

out depot workload

to full extent of the

law

- Compete 203,000

positions by 2005

- Compete and contract

out depot workload

to full extent of the

law

- Base realignments

and closures

- Defense Information

System Agency

consolidations

- Demolition and

disposal of excess

facilities

- Energy management

- Housing privatization

- Leasing

- Base realignments

and closures

- Defense Information

System Agency

consolidations

- Demolition and

disposal of excess

facilities

- Energy management

- Housing privatization

- Leasing

Eliminate facilities that

are no longer needed

and/or that drain

resources

Eliminate facilities that

are no longer needed

and/or that drain

resources

Element 5

Infrastructure

Element 5

Infrastructure
B-283282

Page 10 GAO/NSIAD-00-72 Defense Management

a

In a February 11, 2000, memo, the Deputy Secretary of Defense removed oversight of Homeland

Defense issues from the Defense Reform Initiative and placed it under the purview of other DOD

organizations.

Source: Defense Reform Initiative Update, March 1999.

As we reported last year, DOD has established a management oversight

structure to help sustain the direction and emphasis of the DRI effort. This

structure includes a (1) Defense Management Council (chaired by the

Deputy Secretary and consisting of key civilian and military leaders) to

oversee the DRI efforts and advise the Secretary on new reform efforts,

Reengineer the

ac uisition

process and

enhance education

and training

Reengineer the

ac uisition

process and

enhance education

and training

 rotect merican

interests at

home and

abroad

 rotect merican

interests at

home and

abroad

 dopt an

electronic wor ing

environment and

protect the

information

 dopt an

electronic wor ing

environment and

protect the

information

Reduce overall

logistics costs

and improve

customer service

Reduce overall

logistics costs

and improve

customer service

DRI Elements

 lement 

 c uisition system

and wor force

 lement 

 c uisition system

and wor force

 lement 

 ransforming

logistics

 lement 

 ransforming

logistics

 lement 

 yberspace

 lement 

 yberspace lement 9

Homeland

defensea

 lement 9

Homeland

defensea

 Streamline research,

development, test, and

evaluation

infrastructure

 Improve the

ac uisition process

 nhance the

ac uisition wor force,

education and training

 Streamline research,

development, test, and

evaluation

infrastructure

 Improve the

ac uisition process

 nhance the

ac uisition wor force,

education and training

 Reduce wholesale

supply order receipt

time

 chieve total asset

visibility

 Reengineer and

streamline logistics

processes

 Reduce wholesale

supply order receipt

time

 chieve total asset

visibility

 Reengineer and

streamline logistics

processes

 Department wide

electronic environment

 Defense wide

information assurance

program

 ublic ey

infrastructure

 Department wide

electronic environment

 Defense wide

information assurance

program

 ublic ey

infrastructure

 ational Missile

Defense rogram

 Improve domestic

response to terrorist

attac s

 Defense hreat

Reduction gency

 ational Missile

Defense rogram

 Improve domestic

response to terrorist

attac s

 Defense hreat

Reduction gency

Selected Initiatives
B-283282

Page 11 GAO/NSIAD-00-72 Defense Management

(2) Coordinating Group to support the Management Council, and (3)

Defense Reform Office to monitor progress and identify areas where

management’s attention is needed. The military services and Defense

agencies, which are ultimately responsible for implementing the initiatives,

also established small offices or points of contact to receive and collect

information about the DRI.

Opportunities Exist to

Improve the

Management Emphasis

and Oversight of the

Reform Initiative

The high-level management attention and oversight structure established

by the Department, particularly during the early stages of the program,

have had a positive effect on the implementation of the DRI. Strong support

and leadership from the Secretary and Deputy Secretary of Defense, for

example, has given the initiative a high priority within the Department. In

addition, periodic meetings of the Defense Management Council have

reinforced the importance of the initiative and increased its visibility within

the military services and Defense agencies. At the same time, however,

opportunities exist to build on this management oversight structure to

enhance the potential success of the program. The Defense Management

Council, for example, could become more effective in advising the

Secretary and helping sustain the emphasis on reform by working more

collaboratively on Defense-wide problems, establishing review priorities,

and asserting its authority in key reform strategies and decisions. In

addition, the Department has not implemented our recommendations to

develop an integrated reform strategy and action plan and identify

investment requirements and funding targets for the DRI program.

Consequently it lacks a clear road map to ensure that the interrelationships

between its major reform initiatives are understood and addressed and that

it is investing in its highest priority requirements.

Sustained Support From the

Secretary and Deputy

Secretary of Defense Is Key

Both the Secretary and Deputy Secretary of Defense have strongly

advocated the need to dramatically reengineer business and support

activities, and they have provided continuous, visible support for DRI goals

and objectives. As we have previously reported, most recently with respect

to the Department’s Y2K efforts,8 this type of senior leadership is essential

8 Department of Defense: Progress in Financial Management Reform

(GAO/T-AIMD/NSIAD-00-163, May 9, 2000).
B-283282

Page 12 GAO/NSIAD-00-72 Defense Management

to the success of any major reform effort.9 The Secretary and Deputy

Secretary have also adopted several proven management concepts to help

overcome some of the obstacles that we found had limited the success of

past DOD reform efforts.10 These include (1) establishing a Defense

Management Council of senior defense leaders to help oversee the DRI and

advise the Secretary of Defense on new reform efforts, (2) developing

directives to communicate specific goals and objectives, milestones, and

decisions for selected initiatives, (3) creating performance contracts to

hold selected Defense agencies and activities accountable for cost-cutting

and service improvement goals, (4) directing that services and Defense

agency strategic and implementation plans, as required by the Government

Performance and Results Act,11 address DRI objectives, and (5) using

budget guidance to ensure services and Defense agencies adequately fund

individual initiatives. As we reported last year, these actions have helped

create a Defense-wide focus on infrastructure reduction and provide a

forum where problems caused by cultural barriers and parochial interests

can be addressed.12

Historically, when administrations come to an end, many of the

Department’s top civilian leaders leave their positions. For example, the

Deputy Secretary, who many recognize as the leading advocate of defense

reform, left the Department on March 31, 2000. The degree to which the

emphasis on reform may diminish due to the departure of this senior

official or any others will depend largely on the commitment of new

9 Organizational Culture: Techniques Companies Use to Perpetuate or Change Beliefs and

Values (GAO/NSIAD-92-105, Feb. 27, 1992); Reengineering Organizations: Results of a GAO

Symposium (GAO/NSIAD-95-34, Dec. 13, 1994); and Executive Guide: Improving Mission

Performance Through Strategic Information Management and Technology

(GAO/AIMD-94-115, May 1994).

10 Defense Management: Challenges Facing DOD in Implementing Defense Reform

Initiatives (GAO/NSIAD/AIMD-98-122, Mar. 13, 1998).

11 The Results Act requires agencies to develop periodic strategic and annual performance

plans. DOD’s most recent strategic plan is the May 1997 Report of the Quadrennial Defense

Review, and its most recent performance plan is included as appendix I in the February 2000

edition of the Secretary’s annual report to the Congress. Among other things, the

performance plans provide agencies with a vehicle to identify their long-term goals and

objectives for all major functions and operations, the measures they will use to gauge

performance, and the strategies and resources they will use to achieve their performance

goals.

12 Defense Reform Initiative (GAO/NSIAD-99-87, Apr. 21, 1999).
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Page 13 GAO/NSIAD-00-72 Defense Management

leadership to reform and the extent to which processes for achieving

reform have been institutionalized.

The Defense Management

Council’s Effectiveness

Could Be Improved

While the Defense Management Council played an effective role in getting

the DRI started, opportunities exist to build on its success if Council

members are able to (1) work in a more collaborative fashion on major

Department-wide issues, (2) establish priorities among the numerous

reform initiatives, (3) enhance the Council’s decision-making role and

authority, and (4) obtain better information on the initiatives’ status. Such

steps can provide greater assurances that the DRI will continue to be

emphasized during any transition in DOD leadership.

The Defense Management Council is an important element of the

Department’s overall management strategy for implementing the DRI

program. Established by the Secretary of Defense to be his “board of

directors” for defense reform, the Council is chaired by the Deputy

Secretary of Defense and includes other senior executives in the Office of

the Secretary of Defense and the military services. According to the Deputy

Secretary, these executives are at a high enough level to speak for their

organizations and impact how the DRI is implemented either within their

home organizations or across the Department (see fig. 2).
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Figure 2: Defense Management Council Membership

Source: DRI Report.

In creating the Council in 1997, the Secretary said that he expected it to

(1) ensure the initiatives are faithfully and expeditiously carried out,

(2) maintain the momentum for change by identifying additional ways to

improve business practices and consolidate activities, and (3) provide

stronger departmental oversight of Defense agencies that would encourage

them to adopt more efficient ways of accomplishing their missions. If

properly constituted and managed, we believe that the Council could also

help the Department break down organizational stovepipes and overcome

the strong cultural resistance to change that has limited the success of past

reform programs.

Defense Management

 Council

Deputy Secretary of Defense

(Chairman)

Under Secretary of Defense

(Acquisition, Technology & Logistics)

Under Secretary of Defense

(Policy)

Under Secretary of Defense

(Personnel & Readiness)

Under Secretary of Defense

(Comptroller)

General Counsel

Assistant Secretary of Defense

(Command, Control, Communications & Intelligence)

Vice Chairman of Joint Chiefs of Staff

Air Force Vice Chief of Staff

 Army Vice Chief of Staff

Vice Chief of Naval Operations

Assistant Commandant of Marine Corps

Under Secretary of Air Force

Under Secretary of Army

Under Secretary of Navy Director of Defense Reform Office

Military service representatives

Office of the Secretary of Defense representative

Director Administration and Management
B-283282

Page 15 GAO/NSIAD-00-72 Defense Management

Last year we reported that the Council helped get the Reform Initiative off

to a good start.13 During the first 18 months of implementation, for

example, it met frequently; helped establish goals, objectives, and time

frames for completing many of the reform initiatives; and supported the

need for reform throughout the Department. The Council also seemed to

have a positive impact in terms of ensuring that staff at all levels of the

Department understood the significance and purpose of the DRI and were

supporting the Secretary’s goals. In particular, we found that Defense

organizations had begun to include goals and objectives in their annual

budgets and strategic plans and to establish offices to track

implementation status and problems.

Over the last year of implementation, however, the Defense Management

Council was not as active or fully engaged in the reform process. Among

other things, there were considerably fewer meetings as higher priority

national security events took place. For example, no meetings were held

for 4 months in mid-1999, at the height of the Kosovo conflict. To gain a

better understanding of how the Council is currently functioning, we met

with 9 of its 17 members, including the Deputy Secretary who chairs the

Council.14 While their opinions on the Council’s role and effectiveness

varied, most agreed in concept with the need for such an oversight body. It

was also pointed out that if the Council did not exist, its current members

would still have to be brought together from time to time to address reform

or infrastructure-related issues. Others thought it was valuable because it

brought both civilian and military leaders together to discuss

business-related issues of common interest to the Department. Most,

however, thought the Council’s greatest contribution was that it increased

overall awareness of the need for reform and helped communicate DRI

goals and objectives throughout the Department. They thought this was

valuable in getting the initiatives started in the right direction and

maintaining their momentum.

13 Defense Reform Initiative (GAO/NSIAD-99-87, Apr. 21, 1999).

14 We also met with 11 members of the DRI Coordinating Group to obtain their views on

Council operations. This Group, which was created by the Defense Management Council at

its first meeting, provides advice and assistance to the Council, drafts policy statements for

the Council’s review, and provides a forum for the military services and Defense agencies to

discuss concerns with DRI policy statements. It is headed by the Director for Program

Analysis and Evaluation in the Office of the Secretary and is comprised of senior level

representatives from the military services and Office of the Secretary.
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Nevertheless, most of the members believe the Council could be more

effective in serving as the Secretary’s “board of directors.” Among other

things, we were told that:

• Council members have not been able to completely put aside their

individual service and agency interests and focus on Department-wide

approaches to long-standing infrastructure and administrative

problems. Most Council members also participate in other high-level

management groups such as the Defense Resources Board, where they

meet regularly to discuss budget issues and compete for resources.

Consequently, it has been more difficult than expected to work in a

unified, collaborative fashion.

• The Council has not prioritized the importance of the various initiatives

based on the potential for savings and improved business processes.

The DRI initially included over 70 initiatives, which were treated equally

even though some were clearly more important. For example, efforts to

determine the number of personnel positions that could be competed

with the private sector (using the Office of Management and Budget’s

A-76 process) were treated the same as reducing the number of

committees that meet within the Department. This approach tended to

dilute or marginalize the Council’s effectiveness. The situation was

exacerbated when the Secretary expanded the DRI to include major

Department-wide efforts such as acquisition, financial management, and

logistics reform. These initiatives had not been discussed at Council

meetings, even though the Department considers their successful

implementation a high priority.

• The Council has largely not been a decision-making body, which

affected members’ approach to and participation in meetings. For

example, meetings generally evolved into little more than informational

updates on selected initiatives and the information was often not

sufficiently organized or detailed to reach conclusions or make

suggestions for change. Over time, this lack of authority and focus

reduced the “intellectual energy” members brought to the meetings and

raised questions, among members and others, about the contribution

the Council was making to the reform effort.
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We also found that the Council did not have good information to monitor

the status of the initiatives. The Defense Reform Office periodically

collected status information, but it contained few details on actual results,

costs incurred, or issues needing resolution. In addition, this information

was not current for many initiatives. Consequently, the Council lacked

sufficient information to identify initiatives that were not progressing as

expected and to make needed midcourse corrections. Based on a

recommendation we made last year,15 the Defense Reform Office has

recently developed additional output- and outcome-oriented performance

measures16 for many of its major DRI initiatives such as purchase cards,

travel reengineering, prime vendors, and financial management reform.

Defense Reform Office officials believe the measures will provide Council

members with adequate information to gauge the success of these

initiatives. Although we have not reviewed these measures to determine

their validity or accuracy, the Department’s actions seem to be a step in the

right direction.

Because of problems noted above, the Council is not playing as strong a

role as needed to break down organizational stovepipes and ensure that

DOD is arriving at common, Department-wide solutions to its major

problems. Rather, major reforms in areas such as acquisition, financial

management, and logistics are being managed as they have always been—

in functional or organizational “stovepipes”—increasing the risk that

solutions will serve the functional area but not the Department as a whole.

In discussing our work with the Deputy Secretary and Director of the

Defense Reform Office, they pointed out, however, that in recent months

Council meetings had begun to focus on some of the larger

Department-wide initiatives. The Director said, for example, that the

Council had recently received briefings on both financial management and

logistics reform efforts. Because of concerns about the focus and

directions of logistics reforms, the Council was instrumental in preparing a

new Defense Reform Initiative Directive that requires the military services,

Defense Logistics Agency, and Transportation Command to rethink their

approaches and report back to the Council with a new logistics reform plan

by July 1, 2000 (see app. II for more details).

15 Defense Infrastructure (GAO/NSIAD-99-169, Aug. 4, 1999).

16 Output measures focus largely on implementation progress or status. Outcome measures

show results or outcomes related to an initiative or program in terms of its effectiveness,

efficiency, and/or impact.
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An Integrated Strategy and

Action Plan Would Provide a

Road Map for Reform and

Help Sustain Momentum

Our April 1999 report recommended that the Secretary of Defense use the

framework provided by the Government Performance and Results Act to

establish a comprehensive, integrated strategy and action plan for

reforming the Department’s major business operations and support

activities. While DOD initially said it would review its ongoing reform

efforts and include them in its performance plans as appropriate, officials

subsequently said that they believed the Department’s current DRI and

Results Act plans were sufficient to guide the reform program and ensure

that the major reform initiatives were adequately integrated.

In updating our past work, it is clear that DOD’s current reform strategy is

still missing some key elements to facilitate management oversight and

maximize the potential that its key reform efforts (e.g., acquisition,

financial management, and logistics reform) will be fully integrated. These

include (1) identifying where interdependencies exist between the key

reform efforts and functional areas, (2) specifying the specific strategies

that will be used to address the interdependencies as reforms are

implemented, (3) assigning management responsibility and accountability

for carrying out reforms in a coordinated or matrixed manner,

(4) establishing appropriate performance measures and tracking progress

toward developing integrated systems and processes, and (5) providing

periodic management oversight by the Defense Management Council or

other appropriate body to gauge the level of progress being made and

ensure that individual managers are not attempting to unilaterally redesign

or reform their functional areas.17

An integrated strategy and action plan could also help DOD maintain

program momentum and continuity during any transition in Department

leadership. Without a well-documented strategy and plan, future leaders

could lose valuable time as they attempt to understand the rationale for

past decisions and the importance of dealing with the Department’s major

reforms in an integrated fashion.

17 According to the Department of Defense, very high level interdependencies of information

are now being denoted in DOD’s End-to-End Procurement Process Model which include

basic finance, contracting, logistics, and industry interrelationships in the

procurement/acquisition process.
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Identifying Investment

Costs Would Help Establish

Funding Priorities and

Overall DRI Affordability

Last year we also recommended that DOD identify investment

requirements for the major reform initiatives, establish Department-wide

funding targets for the entire program, and communicate the results to the

Congress during the annual budget process. In response, Defense officials

initially stated that they were reviewing DRI funding and considered it a

high priority. However, in discussions this year, officials stated that the

Department’s current budgetary process was sufficient to establish funding

priorities for the military services and Defense agencies and to

communicate DRI funding requirements to the Congress. Therefore, they

did not see a strong need to adopt our recommendations.

In establishing the DRI program, DOD did not select potential projects in a

systematic manner. Rather, it attempted to increase attention to the need

for reform by selecting a sample of ongoing or planned initiatives across

the Department. It later expanded the program to include most major

ongoing initiatives in the Department. While this approach has been useful

in mobilizing the Department toward reform, it has put senior leadership in

a position of supporting every reform initiative without regard to its

potential cost or return on investment. In addition, we found that DOD’s

leadership was requiring the military services and Defense agencies to fund

the DRI initiatives out of their existing budgets without a clear

understanding of overall investment requirements.

In contrast, the private sector commonly uses a technique known as

portfolio management to select, control, and evaluate major reform

projects or other types of investment options.18 Generally, portfolio

management involves (1) creating a complete portfolio of potential

investment projects, (2) analyzing each project to determine the cost of

maintaining the current process versus investing in new ones,

(3) comparatively ranking the projects based on expected net returns, and

(4) selecting projects for investment based on their expected contribution

to the most pressing organizational needs. When coupled with other

management controls and evaluation techniques, portfolio management

often helps organizations ensure that they are undertaking the most

important, cost-effective projects. It also gives them information to make

budgetary tradeoffs and determine where they can best invest their

resources and management attention to meet organizational priorities.

18 Portfolio management is also a technique the Department plans to use to enhance agency

management of information technology projects as required by the Clinger-Cohen Act of

1996 (P.L. 104-106, Division E).
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During our work this year, we did not find any substantial change in DOD’s

approach to analyzing investment requirements. For example, the military

services and Defense agencies are still required to fund DRI investment

costs out of their existing budgets, and senior leadership still lacked

adequate information on the investment costs of individual initiatives and

the overall DRI program. Consequently, senior leadership was not fully

aware of either the affordability of the DRI program or the impact the

program was having on the ability of the military services and Defense

agencies to fund other priority programs. Moreover, the ability of the

Congress to understand the total investment costs or relative funding

priorities for specific initiatives is impeded as well.

Implementation

Progress Is Mixed and

Barriers Remain

The Department of Defense has made some progress in implementing the

various reform initiatives. A few of the reform initiatives, such as

organizational changes in the Office of the Secretary of Defense, have been

completed. While most of the remaining initiatives are progressing at

various rates, a number of barriers could keep them from meeting specific

time frames and/or goals. The most notable barrier, which we have

reported on several times in the past, is the difficulty in overcoming

institutional resistance to any type of major reform in an organization as

large and complex as the Department of Defense. Other barriers include

(1) programming, including interfaces to legacy and new systems, or other

technical problems associated with new computer systems that are being

developed to support areas such as paperless contracting and travel

reengineering and (2) employee concerns about the potential loss of jobs

associated with competitive sourcing and the use vendors to store,

distribute, and manage the Department’s inventory. Additionally, the

Department will require new congressional authority to hold additional

base realignment and closure rounds and expand other initiatives such as

housing privatization and property leasing.

The following information, based on our analysis, summarizes the status of

some of the major initiatives by degree of progress. See appendix II for

more complete summaries of these and other initiatives.
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Initiatives Completed or

Likely to Be Completed on

Schedule

Organizational streamlining includes over 50 initiatives to reorganize and

reduce staff within the Office of the Secretary of Defense, Defense agencies

and field activities, and military service headquarters.19 They are aimed

primarily at creating flatter, more streamlined headquarters offices by

eliminating overlap, complexity, and redundancy. Some examples of

initiatives reported as complete include (1) transferring overseas military

banking operations from the Office of the Secretary of Defense to the

Defense Finance and Accounting Service, (2) reducing the number of

boards and committees in the Office of the Secretary of Defense, and

(3) reducing Office of the Secretary of Defense staff by 33 percent (about

1,000 people). These streamlining initiatives received a great deal of senior

management attention and priority during the first months following the

Secretary’s announcement of the DRI.

The Department proposed and the Congress enacted annual pay increases

for military personnel. As a result, a 4.8-percent pay raise for military

personnel began January 1, 2000. DOD also reports that it is using

government purchase cards20 to pay for almost 92 percent of purchases

costing $2,500 or less—exceeding its goal by almost 2 percent.

Performance contracts have also been developed for eight Defense

agencies/activities to improve the Department’s oversight of them and

outline goals for cost reductions and service improvements.

Although the DRI did not establish specific completion time frames, the

Defense Information System Agency expects to reduce the number of

19 We have a separate review underway addressing DOD’s progress in making headquarters

personnel reductions in line with congressional direction; that report will be completed

later this year.

20 A purchase card is essentially a credit card issued to authorized individuals throughout

DOD. Its use reduces the need for purchase orders and receiving reports, significantly

reducing the time and cost required to purchase relatively low-cost items.

• Organizational streamlining

• Military pay increases

• Purchase cards

• Performance contracts

• Defense Information System Agency center consolidations

• Demolition and disposal of excess facilities
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computer megacenters from 16 to 6 by the end of fiscal year 2000. In

addition, the initiative to demolish 80 million square feet of excess or

unused buildings at defense installations around the world has resulted in

the demolition of a reported 30 million square feet through fiscal year 1999,

a pace that was ahead of the demolition schedule.

Initiatives Making Some

Progress, but Behind

Schedule

Under the competitive sourcing element, DOD plans to use the Office of

Management and Budget A-76 process to compete over 200,000 positions

with the private sector between fiscal years 1997 and 2005. The Department

expects to realize $9.2 billion in savings during this period and $2.8 billion

in annual savings thereafter.21 In anticipation of savings from this effort, the

services are already shifting these funds from their future year operations

and maintenance accounts to meet other needs. However, undertaking

such a massive competitive sourcing effort has proved to be more difficult

and costly than expected. For example, the Navy was unable to meet its

fiscal year 1998 competitive sourcing goals because it lacked the personnel

and resources needed to effectively conduct the competitive sourcing

studies. For these and other reasons, the Navy proposed, and was given

approval, to use alternative approaches (e.g., reengineering,

reorganizations, and privatizations) along with the A-76 process to meet its

savings targets.22 Other services are also considering these other

approaches.

The paperless contracting initiative was expected to make all aspects of the

major weapons systems contracting process paperless by January 1, 2000,

primarily through increased use of computer technology. While substantial

21 An additional 42,000 positions are expected to be reviewed under a business process

reengineering emphasis referred to as strategic sourcing. This is expected to help the

Department achieve a total of $11.7 billion in savings by 2005 and increase the annual

recurring savings to $3.5 billion annually thereafter.

22 We currently have a separate review underway examining the Department’s progress in

implementing its competitive sourcing program and how the services also expect to make

use of the alternative approaches; that report will be completed this summer.

• Competitive sourcing • Electronic malls

• Paperless contracting • Household goods transportation

• Travel reengineering
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progress has been made in this area, a new standard procurement system

that is needed to fully implement this initiative will not be fielded to all

contracting offices until 2003. In addition, key technical issues (such as

developing electronic signature capability) have yet to be resolved. Efforts

to develop electronic signature interoperability and signature archiving

criteria continue between the Department of Defense, federal agencies, and

industry. Technical problems have also affected progress on the initiative to

reengineer the travel management system. This initiative, which is to

significantly improve the process for requesting, approving, and paying for

employee travel, may not be fully deployed in 2001 as expected. One of the

problems the Department must correct is that the travel system will pay a

traveler without first having funds obligated to cover the cost of the travel.

DOD personnel are beginning to use electronic malls—virtual one-stop

shops where customers have access to electronic vendor catalogs as well

as government contracts—to buy parts and supplies over the Internet.

However, mall sales are lower than expected due in part to the small

number of commercial catalogs currently on the system.23 Progress is also

being made toward implementing a new system to move the personal

property of military personnel and their families. However, delays in getting

one of the Department-wide pilot programs underway have caused officials

to now estimate that a new system will not be in place until the summer of

2002, about 2 years later than originally expected.

Initiatives That Will Require

Many Years to Fully

Implement

Over the past several years, acquisition, financial management, and

logistics reforms have received significant attention within DOD.24 Yet the

23 See Defense Management: Electronic Commerce Implementation Strategy Can Be

Improved (GAO/NSIAD-00-108, July 18, 2000) for the status of the Department’s electronic

mall efforts, as well as the implementation status of other electronic commerce initiatives.

24 We have previously identified the areas of Defense acquisition, inventory, and financial

management as high risk because of their vulnerabilities to waste, fraud, abuse, and

mismanagement. See Major Management Challenges and Risks: An Executive Summary

(GAO/OCG-99-ES, Feb. 1999).

• Acquisition reform

• Financial management reform

• Logistics transformation
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Department is still many years away from resolving its major problems in

these areas. For example, DOD has undertaken numerous initiatives to

improve its acquisition process. The DRI program highlights some of these

acquisition initiatives, including (1) reducing research, development, test,

and evaluation infrastructure; (2) reducing total ownership costs of

weapon systems;25 and (3) better training and management of its

acquisition workforce. While some progress is being made in these areas,

each is many years away from being completed. DOD, for example, is

planning to use a variety of methods, including competitive sourcing, to

reduce its research, development, test, and evaluation infrastructure. Even

though our work has shown that large-scale consolidations of this

infrastructure are possible, they are not likely to take place outside of base

closure rounds. Likewise, efforts to improve the acquisition process by

reducing total ownership costs for weapon systems are progressing, but

will not be fully realized until systems and processes are established to

develop reliable data on actual costs incurred and factors are changed that

drive program managers to underestimate costs, rely on immature

technologies, and underestimate the risk of cost, schedule, and

performance problems.26

Weaknesses in the financial management area continue to undermine the

Department’s ability to manage its $260 billion budget and an estimated

$1 trillion in assets. The DRI program highlights DOD’s intent to reduce the

number of finance and accounting systems from 324 in 1991 to 32 or fewer

by 2005 and produce auditable financial reports. While progress has been

made in reducing the number of finance and accounting systems, no major

part of the Department has been able to pass the test of an independent

audit. While DOD has made genuine progress in such areas as increased

accountability over property, plant, and equipment and recognition of

cleanup and disposal costs, major problems remain. These problems

hamper financial reporting; impair DOD’s ability to safeguard assets from

physical deterioration, theft, or loss; and result in the purchase of assets

already on hand in sufficient quantities. Also, inaccuracies in DOD’s

logistical, acquisition, budgetary, and other program feeder systems

prevent its managers from receiving the key financial information they

need to make informed decisions. Although the Department has recently

25 Costs associated with the development, production, operations, support, and disposal of

weapon systems.

26 Best Practices: DOD Training Can Do More to Help Weapon System Programs Implement

Best Practices (GAO/NSIAD-99-206, Aug. 16, 1999).
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issued its second Financial Management Improvement Plan, we have

reported that DOD still faces major challenges and that a sustained

commitment from the highest levels of DOD leadership will be necessary

for DOD to achieve its financial management improvement goals.27

Finally, there are hundreds of individual efforts underway to reform

logistics practices, and the Department in recent years has developed a

logistics strategic plan to guide programmatic improvements in this area.

While some progress has been made in reducing wholesale supply stocks

and adopting best management practices for certain types of inventory

items, the Department still faces major challenges in providing adequate

control and visibility over its inventory assets. Consequently, it is still many

years away from successfully completing its major reforms.

The Program Will

Provide Few

Short-term Cost

Savings, but Future

Savings Could Be

Substantial

Generally, DRI-related savings will likely be limited in the short term.

However, future savings for a number of the initiatives, while not easily

quantified, could be substantial if the initiatives are successfully completed

and result in the reduction of personnel. In the meantime, the Department

plans to achieve its $60 billion modernization goal primarily through

increased congressional funding and by delaying other budget priorities.

Initially, Defense officials expected that the DRI program would reduce

operating costs and help it increase funding for weapons modernization

from $42 billion in fiscal year 1998 to $60 billion in fiscal year 2001. For

several reasons, however, the program will not make a major contribution

toward achieving this goal.

• First, many of the initiatives require substantial up-front investments.

However, as discussed in a previous section, the full extent of these

investment costs is not known nor have priorities been established to

ensure that the Department funds projects that offer the greatest

potential net return. As a result, for several years the program will likely

consume more funds than it saves as the initiatives are implemented.

• Second, the Department has been overly optimistic in estimating the

savings to be realized from its A-76 competitions. Because of delays in

initiating and completing these competitions and the need to offset

associated investment costs, it is uncertain to what extent the

27 Department o f Defense: Progress in Financial Management Reform

(GAO/T-AIMD/NSIAD-00-163, May 9, 2000).
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Department will realize the $9.2 billion in savings it expected between

fiscal years 1997 and 2005.28 Because Defense components have already

adjusted their current and future years’ budgets to reflect these

expected savings, they will likely experience funding shortfalls in their

operations and maintenance or modernization accounts, unless other

adjustments are made or additional funds are provided.

• Third, because of concerns associated with the administration’s

handling of closure decisions for two maintenance depots in the 1995

base closure round, the Congress did not approve the Department’s

request to conduct two additional base realignment and closure rounds

in 2001 and 2005. Defense officials expected that these additional

rounds would generate net savings of $3.4 billion annually, once the cost

of implementing the closures had been recovered. While the timing of

the additional base closures would not contribute directly to the fiscal

year 2001 goal, DOD was relying on the savings to help sustain a

$60 billion modernization budget in future years. As part of its fiscal year

2001 budget request, the Department is asking for base realignment and

closure authority in fiscal years 2003 and 2005.

Notwithstanding the uncertainty of actual cost savings, DOD budget

documents show it will reach its $60 billion modernization goal in fiscal

year 2001. Our analysis of these documents shows that the majority of the

increase is expected to come from additional congressional funding for

specific weapon systems.29 In addition, the Department is reducing or

delaying funding for specific programs that could eventually have a

negative impact on readiness. For example, we recently reported30 that the

Air Force identified $355 million it needed for real property maintenance

projects in fiscal year 1998 that had been rated critical.31 In addition, its

budget plans do not provide any funding for these types of critical-rated

projects between fiscal years 1998 and 2003. According to the Air Force

Installations and Logistics office, repair projects were zeroed out of the

28 DOD Competitive Sourcing: Questions About Goals, Pace, and Risks of Key Reform

Initiative (GAO/NSIAD-99-46, Feb. 22, 1999).

29 Future Years Defense Program: Funding Increase and Planned Savings in Fiscal Year 2000

Program Are at Risk (GAO/NSIAD-00-11, Nov. 22, 1999).

30 Military Infrastructure: Real Property Management Needs Improvement

(GAO/NSIAD-99-100, Sept. 7, 1999).

31A critical rating indicates a significant loss of installation mission capability and frequent

mission interruptions; continuous work-arounds are needed.
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budget until fiscal year 2003 to fund weapon modernization programs. As a

result, Air Force officials have noted that its total funding backlog for

critical or degraded repair projects is growing.32

If the DRI can be sustained, however, there are a number of initiatives that

have the potential to not only improve the Department’s business and

support operations but also to save significant amounts of money in the

long term. DOD, for example, is showing a commitment to adopting more

efficient commercial standards and best practices in its acquisition,

financial management, and logistics programs, which are some of its most

inefficient and long-standing problem areas. It is also aggressively pursuing

several electronic commerce initiatives that have the potential to make its

buying and bill paying operations much more efficient and effective.

Conclusions The DRI program has provided a much-needed emphasis on improving the

Department’s business processes and reducing infrastructure costs. While

some progress is being made, the program is at risk of not achieving the

quantum change in process efficiency envisioned by the Secretary. To keep

the program on track, we believe DOD needs an overall integrated plan to

guide its implementation and an approach for assessing and making key

investment decisions. The Department has considered our prior

recommendations on these matters but plans no action. Without such

action, DOD cannot ensure, nor can the Congress evaluate, that initiatives

that have the potential for yielding the greatest results are emphasized and

that limited resources are directed to initiatives that promise the greatest

benefits.

Additionally, opportunities exist to strengthen the role of the Defense

Management Council and ensure that it takes a more active role in

providing direction and oversight to key reform initiatives, particularly for

Department-wide initiatives which hold promise of achieving the greatest

benefits if addressed in an integrated fashion, such as in the areas of

acquisition, financial management, and logistics reform. Ensuring that the

Council has timely information on the status of key initiatives is also

important to sustaining and maintaining momentum to the initiatives

during the upcoming change in administrations. The absence of these

actions also places initiative progress and success at risk.

32A degraded rating indicates a significant loss of installation mission capability; work

arounds to prevent mission disruption and degradation are often required.
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Matters for

Congressional

Consideration

Because the Department decided not to implement our prior

recommendations to (1) undertake a comprehensive approach in reforming

its major business and support activities and (2) develop an investment

plan to better ensure that it is undertaking the most cost-effective and

important reform, and because of the importance of sustaining the

initiatives into future administrations, the Congress may want to consider

requiring the Department to

• follow the framework provided by the Results Act to establish a more

comprehensive, integrated strategy and action plan for reforming the

Department’s major business processes and support activities,

particularly in the areas of acquisition, financial management, and

logistics reform and

• more fully identify investment funding requirements for the major

reform initiatives and Department-wide funding requirements for the

DRI and communicate them to the Congress during the annual budget

process.

Recommendations To build on the effectiveness of the current DRI management framework

and to help achieve desired results, we recommend that the Secretary of

Defense strengthen the role and effectiveness of the Defense Management

Council. These actions should include efforts to

• focus the Council’s attention on the key reform initiatives that, if

addressed in an integrated fashion could produce the greatest results;

• strengthen the Council’s decision-making role, authority, and

accountability, particularly with respect to the key Department-wide

acquisition, financial management, and logistics reforms; and

• provide the Council with current and accurate information on the status

of key reform initiatives so it can better gauge progress and identify and

address implementation problems.

Agency Comments and

Our Evaluation

In commenting on a draft of this report, DOD generally concurred with our

conclusions and recommendations, as well as our matters for

congressional consideration, and provided additional information about

actions underway or planned. However, it also expressed concern that the

report had not adequately acknowledged the Department’s extensive

efforts to put in place long-term change mechanisms and disagreed with

our conclusion that the DRI program was at risk of not achieving the
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quantum change in business process efficiency originally envisioned. In

addition, the Department provided more detailed technical comments,

including information about several electronic commerce initiatives and

performance measures it has created to assess its reform initiatives. We

incorporated the additional information and technical comments into the

report where appropriate. The Department’s comments concerning our

recommendations and matters for consideration are reprinted in

appendix III.

Concerning our recommendation to strengthen the role of the Defense

Management Council, DOD concurred without specifying the actions that it

would take. It noted, however, that recent Council meetings have, even

when no specific decisions were required, been increasingly lively, open,

and robust. At the time we were concluding our review, we also noted that

the Council appeared to be taking on a more active role than it had during

the preceding year. As we state in our recommendations, however, we

believe the Department can build on this increased activity by

strengthening the Council’s role and effectiveness. This would involve

actions to focus the Council’s attention on the Department’s most

important reform initiatives while ensuring the Council has accurate and

current information on the status of key reforms, and give the Council

greater decision-making responsibility and authority, while holding it

accountable for results.

Concerning our matters for congressional consideration, DOD concurred

with the need for a more integrated strategy and action plan and to more

fully identify investment funding requirements for the major reform

initiatives; however it did not specify what actions it would take. It

disagreed, however, that the Department has not fully identified funding

requirements for the major reform initiatives. DOD noted that while the

funding requirements are not centralized, the services and Defense

agencies have appropriate lines in the Planning, Programming, and

Budgeting System to cover the cost of individual reform initiatives. The fact

that the services and Defense agencies have included some funding for the

initiatives in their budgets does not mean that the Department has a full

grasp of the total cost of the DRI program. As stated in our report, DOD’s

leadership has required the military services and Defense agencies to fund

the reform initiatives out of their existing budgets without a clear

understanding of the overall investment requirements or the impact on

other service and agency programs. By developing an integrated strategy

and action plan for selecting, controlling, and evaluating major reform

projects or investment options, we believe DOD would have a better
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understanding of the program’s full costs and gain additional assurance

that it is undertaking the most important, cost-effective projects.

Finally, DOD expressed concern that the report had not adequately

acknowledged its extensive efforts to put in place long-term change

mechanisms and disagreed with our conclusion that the DRI program is at

risk of not achieving the quantum change originally envisioned. It noted

that significant reform initiatives have already been completed and that

numerous performance measures have recently been developed in keeping

with tenets of the Results Act to gauge the program’s effectiveness. Last

year, we reported that most of the performance measures used to gauge the

progress of individual initiatives were output-oriented.33 In April 2000, the

Department provided us about 40 performance measures, which included

both output- and outcome-oriented measures it is currently using to gauge

progress. We are encouraged by the Department’s increased emphasis on

performance measures and believe the measures could provide the

Defense Management Council with valuable information when determining

progress or making decisions on individual initiatives. To be useful,

however, the Department must ensure its status information is accurate

and kept current. We have previously noted limitations in this area. At the

same time, we believe that DOD’s ability to sustain the program is at risk

because it lacks a comprehensive, integrated strategy and action plan for

managing the program and addressing the most significant issues, and an

investment strategy for ensuring that it is making best use of its limited

resources.

We are sending copies of this report to the Honorable William S. Cohen,

Secretary of Defense; the Honorable F. W. Peters, Secretary of the Air

Force; the Honorable Louis Caldera, Secretary of the Army; the Honorable

Richard Danzig, Secretary of the Navy; Lt. Gen. Henry T. Glisson, Director,

Defense Logistics Agency; the Honorable Jacob J. Lew, Director, Office of

Management and Budget; and interested congressional committees and

members. We will also make copies available to others upon request.

33Defense Infrastructure: Improved Performance Measures Would Enhance Defense Reform

Initiative (GAO/NSIAD-99-169, Aug. 4, 1999).
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GAO points of contact concerning this report and other key contributors

are listed in appendix IV.

Sincerely yours,

Henry L. Hinton, Jr.

Assistant Comptroller General
Page 32 GAO/NSIAD-00-72 Defense Management

Appendix I

Objectives, Scope, and Methodology ApApenednxidexiIs

The Chairman, Subcommittee on Military Readiness, House Committee on

Armed Services, asked us to continue our oversight of the Defense Reform

Initiative (DRI) and provide an update on the status of Department of

Defense’s (DOD) efforts to implement the various initiatives. Specifically,

we addressed the following questions:

• Has the Department’s management emphasis and oversight structure

been effective in providing sustained direction and emphasis to the DRI?

• What is the status of individual reform initiatives and what barriers

could limit their success?

• To what extent has the DRI resulted in savings, enabling DOD to shift

operations and maintenance funds to support weapons modernization?

To assess the effectiveness of the Department’s oversight structure, we

relied primarily on testimonial evidence provided by the following 9 of

17 Defense Management Council members:

• Deputy Secretary of Defense;

• Under Secretary of Defense (Acquisition, Technology & Logistics);

• Assistant Secretary of Defense (Command, Control, Communications &

Intelligence);

• Under Secretary of Defense (Personnel & Readiness);

• Vice Chairman of Joint Chiefs of Staff;

• Air Force Vice Chief of Staff;

• Army Vice Chief of Staff;

• Under Secretary of Navy; and

• Director of Defense Reform Office.

We used a common set of questions during our discussions with senior

managers to ensure that we were consistent in the topics we addressed.

Among other things, we asked Council members to discuss the

Department’s position on previous recommendations we made related to

the DRI, the adequacy of current performance measures to gauge success,

the frequency of Council meetings, whether a Council is needed to guide

reform, and the impact of bringing additional initiatives such as financial

management reform under the DRI. In addition to answering questions

related to the topics listed above, the members also gave their impressions

of the success of the Council and areas where it could be improved.

We also addressed similar questions to 11 members of DOD’s Coordinating

Group and to representatives of the Defense Reform Office. The

Coordinating Group was established at the first Defense Management
Appendix I

Objectives, Scope, and Methodology

Page 33 GAO/NSIAD-00-72 Defense Management

Council meeting to help it consider DRI-related issues and provide

additional support to the Council as needed. It consists of senior-level

defense managers and has met regularly since the DRI program was

established. The Defense Reform Office is a small office established by the

Secretary of Defense to help track the implementation of the initiatives and

advises him when reform efforts were not progressing as expected.

Discussions with Coordinating Groups members and Defense Reform

Office staff gave us a better understanding of the type of information

presented and discussed at Council meetings, initiatives that have received

the most attention, and problems that have to be overcome to make the

Council and Coordinating Group structure more effective.

To assess the status of individual reform initiatives and barriers that could

limit their success, we held general discussions with officials responsible

for overseeing overall military service efforts at the following organizations

at the Pentagon in Arlington, Virginia:

• Air Force Management Reform Office;

• Army Program Analysis and Evaluation Directorate;

• Assistant Secretary for the Navy, Research, Development and

Acquisition; and

• Marine Corps Deputy Director for Programs and Resource Division.

We discussed the implementation of specific initiatives, including barriers

encountered, with appropriate officials within the following offices and

organizations:

• Under Secretary of Defense (Acquisition, Technology, and Logistics),

Arlington, Virginia;

• Deputy Under Secretary of Defense (Acquisition Reform), Acquisition

Process and Policies, Arlington, Virginia;

• Deputy Under Secretary of Defense (Installations), Arlington, Virginia;

• Deputy Under Secretary of Defense (Logistics), Logistics Reinvention

Office, Arlington, Virginia;

• Under Secretary of Defense (Personnel and Readiness), Arlington,

Virginia;

• Under Secretary of Defense (Comptroller), Arlington, Virginia;

• Directorate for Administration and Management (Organizational and

Management Planning), Arlington, Virginia;

• Joint Chiefs of Staff , Arlington, Virginia;

• Defense Contract Audit Agency, Fort Belvoir, Virginia;

• Defense Finance and Accounting Service, Arlington, Virginia;
Appendix I

Objectives, Scope, and Methodology

Page 34 GAO/NSIAD-00-72 Defense Management

• Defense Information Systems Agency, Arlington, Virginia;

• Defense Logistics Agency, Fort Belvoir, Virginia;

• Air Force Material Command, Wright Patterson Air Force Base, Ohio;

and

• 88th Squadron, Wright Patterson Air Force Base, Ohio.

We also relied on past and current work performed by our office to obtain

information on the status of initiatives and on potential implementation

barriers for specific initiatives.

While we did not conduct an in-depth review on every major DRI initiative,

we discussed and obtained supporting documentation related to the status

of implementation, barriers encountered, and efforts to overcome these

barriers.

To determine the extent to which savings have and are likely to be

achieved, we focused our attention on the status of DOD’s two primary cost

savings initiatives—base realignment and closures and A-76 competitions.

We relied on other GAO reports and ongoing work for information on the

status of A-76 efforts and the extent to which DOD believes it will achieve

savings. We also attempted to obtain information on implementation costs

and expected benefits for other DRI initiatives. However, because DOD

does not have good financial data, officials were not able to provide us with

precise information on the savings the initiatives have or will achieve.

Nevertheless, we discussed the status and likelihood of achieving savings

with the responsible officials. We also consulted with another GAO team

that reviewed DOD’s Future Years Defense Plan to determine if it reflects

an $18 billion increase in modernization spending as called for by the

Quadrennial Defense Review and, if so, how DOD achieved this increase.

Because many DRI initiatives require significant up-front investment to

implement, we also discussed costs and potential savings with responsible

officials.

We performed our work from July 1999 through May 2000 in accordance

with generally accepted government auditing standards.
Page 35 GAO/NSIAD-00-72 Defense Management

Appendix II

Assessment of DRI Elements ApendxiI

Each of the nine DRI elements includes a variety of initiatives, many of

which were underway before they were brought under the DRI umbrella.

DOD has identified formal savings goals for only two initiatives:

competitive sourcing (included in element four) and base realignment and

closure rounds (included in element five). Each reform initiative varies in

its progress toward meeting its objectives and milestones, and many of the

initiatives still face a variety of obstacles that could affect their ultimate

success. Last year we reported that most of the initiatives have output

performance measures, which largely focus on implementation progress or

status, rather than results or outcome measures.1 The following is an

overview of the reported progress on major initiatives within each element.

Element 1: Adopting

Best Business

Practices

The goal for this DRI element is to reengineer Defense business and

support operations primarily by adopting and applying new, world-class

business and management practices used by the private sector. DOD

believes these initiatives, which range from increased use of electronic

commerce to streamlining and redesigning Department-wide financial

processes, will not only improve efficiency and save money, but also better

position Defense activities to respond to war-fighters’ requirements in

today’s and tomorrow’s dynamic defense environment. Based on DOD

reports and our own analysis, we found that progress varies among the

10 individual initiatives. Table 2 provides an overview of the goals, status,

and issues related to each initiative.

1 Defense Infrastructure: Improved Performance Measures Would Enhance Defense Reform

Initiative (GAO/NSIAD-99-169, Aug. 4, 1999).
Appendix II

Assessment of DRI Elements

Page 36 GAO/NSIAD-00-72 Defense Management

Table 2: Adopting Best Business Practices Initiatives

Initiative Goal/milestone Status Issues

Electronic commerce Revolutionize the way the

Department does business.

Vendors can now register to do

business with DOD over the Internet

and the Department established a

World Wide Web home page to serve

as a single entry point for industry to

shop for business opportunities.

The Department has not

developed a detailed plan to

implement its strategic vision

or electronic commerce

architecture. It also has not

determined how to best

manage the electronic

commerce program or fully

implemented key security

measures that are needed for

electronic commerce.

Paperless contracting Make all aspects of the major

weapon systems contracting process

paperless by January 1, 2000.

The Department is making progress,

but did not meet the DRI goal. As of

January 2000, the Department met the

goal for three of six components of the

contracting process.

Partially implemented new

systems and technology

problems have kept the

Department from meeting its

goals.

Purchase cards By fiscal year 2000, use the

purchase card for 90 percent of

purchases costing $2,500 or less

(micropurchases).

Goal has been exceeded. The

Department reports that it used the

credit card for almost 92 percent of

these purchases in fiscal year 1999.

Emphasis is now on using the

card to pay for purchases over

$2,500 where a contract has

already been established.

Electronic mall Expand the use of the electronic

shopping mall by (1) allowing for

on-line payment with purchase cards

by July 1998, (2) using purchase

cards for all mall purchases by

January 1, 2000, and (3) reaching

$25.5 million in sales in 1999.

Some progress is being made. The

electronic mall is now capable of

receiving on-line payments via the

purchase card. However, sales for

fiscal year 1999 amounted to

$2 million.

Computer software is not

user-friendly, services have

different philosophies on

when the mall should be

used, and most of the items

offered through the mall can

be purchased through other

mechanisms.

Prime vendors Increase the use of prime vendors for

Defense Logistics Agency-managed

items. For one category of hardware

items—facility maintenance

supplies—make prime vendor

contracts available for all installations

in the United States by January 1,

1999, with sales of $56 million and

$112 million in fiscal years 2000 and

2001, respectively.

Overall prime vendor sales have

increased from 18 to 27 percent of

Defense Logistics Agency sales

between fiscal years 1997 and 1999.

Contracts for facility maintenance

supplies are in place and the services

are now pilot testing the initiative. The

Department exceeded its sales goal by

purchasing $59.2 million of these items

from prime vendors in fiscal year 1999.

Several obstacles repeatedly

surface in DOD’s attempt to

implement or expand prime

vendor programs. These

obstacles include employee

fears of job loss and

customers’ lack of confidence

in a new process.

Travel system

reengineering

Privatize Washington, D.C., travel

office functions by October 1, 1998,

and implement a new system for

official Department-wide travel by

October 2000.

DOD privatized Washington, D.C.,

travel office functions, but will not fully

deploy a new travel system before

2003.

The travel system

encountered significant

testing problems that have not

been resolved.
Appendix II

Assessment of DRI Elements

Page 37 GAO/NSIAD-00-72 Defense Management

Note: The original DRI Report included two additional initiatives under the adopting best business

practices element—total asset visibility and household goods transportation. Total asset visibility now

falls under the transforming logistics element and the household goods transportation initiative is now

included in the quality of life element.

Source: Our analysis based on information in the DRI reports, Department officials, and program

documents.

Electronic Commerce In May 1998, the Department of Defense established its Joint Electronic

Commerce Program to increase the use of electronic business practices

that are common in private sector companies, practices such as using the

Performance contracts Develop eight performance contracts

for fiscal year 2000 to allow for

stronger departmental oversight and

increased accountability of selected

Defense agencies and activities.

All eight contracts are in place for fiscal

year 2000. Contracts will be reviewed

annually to modify goals and

performance measures.

Military services play a key

role in organizations meeting

some of their contract goals.

Working capital funds Establish a task force to make

recommendations on improving the

buyer-seller relationship and on

emphasizing incentives that will

reduce logistics costs, improve

customer satisfaction, and ultimately,

enhance weapon systems

supportability.

The task force developed 11 issue

papers that addressed issues such as

the prices charged to customers and

the need for a more flexible workforce.

The Deputy Secretary approved the

proposed changes.

The changes will require the

Department to educate

managers on new concept of

operations and address

employee concerns related to

benefits and job protection.

Financial management

reform

Redesign financial processes and

streamline organizations for optimum

effectiveness. Specific goals are to

(1) reduce the number of finance and

accounting systems from 109 in

1998 to 32 or fewer by 2005 and

(2) produce auditable financial

statements.

Some progress is being made, but

there are major obstacles to overcome.

While the number of finance and

accounting systems are being reduced,

the Department cannot account for

billions of dollars of inventory and

equipment.

Data accuracy problems have

not been resolved, which limit

the Department’s ability to

support day-to-day

decisionmaking, including

reliable program cost

information.

Transportation

documentation and

financial processes

Replace government unique

transportation documents with

commercial documents that are

electronically generated and test the

use of a third-party logistics provider.

The Department is using a

commercial-off-the-shelf software

package called PowerTrack to replace

government-unique documents and to

process transportation bills and

payments at about 150 sites. Also,

plans are in place to select a third-party

logistics provider in May 2000.

Questions remain about

PowerTrack’s capabilities.

Interfaces with accounting

systems also need to be

developed.

(Continued From Previous Page)

Initiative Goal/milestone Status Issues
Appendix II

Assessment of DRI Elements

Page 38 GAO/NSIAD-00-72 Defense Management

Internet and commercially available computer software to conduct

business.2 Through this program, the Department expects that all of its

business functions—from acquisitions to health care—will be able to

reduce operating costs and streamline business processes. It established

the Joint Electronic Commerce Program Office to facilitate the

implementation and acceleration of electronic commerce. During 1999, the

Department unveiled its first electronic business/electronic commerce

strategic plan. At its core, the plan expresses a vision in which technologies

are used not to simply automate existing processes but to also help

fundamentally change the way the Department does business. While DOD’s

electronic commerce program will encompass all of the Department’s

business operations, this element of the DRI focuses on the following two

electronic commerce initiatives

• streamlining the process vendors use to do business with DOD through

a one-time registration process and

• providing industry one-stop shopping for procurement opportunities

within the Department over the Internet.

DOD is making progress in implementing these two electronic commerce

initiatives. For example, as of March 2000, the Department reports that

163,000 vendors have been registered through its Internet-based central

registry known as the Central Contractor Registration. In addition, it

developed a World Wide Web site, referred to as “DODBusOpps.com,” to

provide vendors with information about the goods and services that DOD

organizations want to buy. According to the project office, as of January

2000, the site was posting 15,000 to 30,000 solicitations a month from 267

buying locations worldwide, reflecting 85 percent of DOD’s total

solicitation volume. It was also experiencing an average of 860,000

inquiries or “hits” a month from prospective vendors or contractors, with

the average user inquiry lasting about 8 minutes.

Although the benefits have not been quantified, both the central registry

and business opportunities web page are expected to help reduce the

administrative and clerical burdens that have always accompanied the

paper-bound solicitation and bidding processes. In addition to process

2 This section on electronic commerce was added in response to DOD’s comments on a draft

of this report. We had not initially included this information because we recently issued a

report that addressed the Department’s electronic commerce initiatives in more depth. (See

Defense Management: Electronic Commerce Implementation Strategy Can Be Improved

(GAO/NSIAD-00-108, July 18, 2000).
Appendix II

Assessment of DRI Elements

Page 39 GAO/NSIAD-00-72 Defense Management

improvements, the Department believes the business opportunities web

site can help stimulate competition by making solicitations more accessible

to the general public. However, our recent report on the Department’s

electronic commerce program pointed out that the Department faces

several implementation issues that, if not resolved, could adversely effect

the success of the program. Specifically, the Department has not yet

(1) completed a detailed plan to implement its strategic vision,

(2) developed an electronic commerce architecture,3 (3) determined how

to best manage the electronic commerce program, and (4) fully

implemented key security measures that are needed for electronic

commerce.

Paperless Contracting The DRI established a goal of making all aspects of the contracting process

paperless for major weapon systems by January 1, 2000. For many years,

each military service and Defense agency has used a different process (e.g.,

computer systems, data formats, and operating procedures) to administer

its respective contracts. This condition resulted in numerous nonstandard

processes that were largely manual, paper intensive, and characterized by

redundant, time-consuming actions. Moreover, this condition resulted in

pervasive inefficiencies in contract administration, not the least of which

were inaccurate payments and accounting records.

The Department is making progress, but did not meet the goal for this

initiative. According to statistics provided by the paperless contracting

program office, about 78 percent of the Department’s contracting

transactions were being accomplished electronically by the end of 1999.

DOD efforts to date have been focused on the following six components of

the contracting process. The three components that met the 90 percent

goal are asterisked:

• contract requirements*

• solicitations*

• awards/modifications*

• receipts/acceptance

3 Architecture development is a primary means of integrating business areas or processes

across an organization in a cost-effective manner. Architectures align information system

requirements with the business areas and processes that they support and promote systems

that readily exchange and share information. A system architecture defines the critical

attributes of an agency’s collection of information systems in both business/functional and

technical/physical terms.
Appendix II

Assessment of DRI Elements

Page 40 GAO/NSIAD-00-72 Defense Management

• invoice/payments

• contract closeout

Partially implemented new systems and technology problems have kept

DOD from meeting its paperless contracting goals. For example, the

Standard Procurement System has been partially implemented, but it is not

expected to be available to support major weapon system procurement

actions until sometime in 2002. Likewise, according to DOD, the Wide Area

Work Flow system, which processes receipts and invoices, had positive

results during the pilot phase, but has had minimal implementation to date.

The Defense Procurement Payment System, the bill-paying system, will not

be implemented until August 2003. In addition, key technological issues

(such as developing electronic signatures to prevent unauthorized access

and use) are yet to be resolved. Until these systems and processes are fully

deployed, DOD will continue to rely on numerous existing systems to

support paperless contracting processes.

Additionally, even after DOD meets its goal for these six components, the

contracting process will not be entirely paperless. While some initiatives

not included in these six components are also being transformed to an

electronic process (such as initial requirements definitions), other efforts

(such as maintenance of the official contract file) must still be

accomplished in paper until the technical aspects of long-term records

keeping and electronic signature archiving are resolved.

Purchase Cards The DRI set a goal for Defense components to use purchase cards to pay

for 90 percent of purchases that cost $2,500 or less (referred to as

micro-purchases) by fiscal year 2000. Purchase cards are commercial

credit cards that are issued to authorized DOD military and civilian users to

acquire and pay for low-cost supplies and services. The Department

implemented the card program to help streamline the acquisition process.

The Department has exceeded its purchase card goals. As of the end of

fiscal year 1999, almost 92 percent of all micro-purchases—about

9 million—were made using the purchase card, representing $4.6 billion in

sales. Although DOD officials do not know how much this program will

save the Department, they believe savings will accrue because the

purchase card eliminates much of the administrative and documentation

requirements of traditional procurement methods. The purchase card also

reduces the number of contracting documents and associated invoices that

the Defense Finance and Accounting Service must process for payment.
Appendix II

Assessment of DRI Elements

Page 41 GAO/NSIAD-00-72 Defense Management

Together, these improvements reduce process time and personnel

requirements, thereby producing savings.

At one time, the Department sought congressional support for legislation

that would increase the micro-purchase threshold to $10,000. That increase

would further reduce the volume of purchase transactions using traditional

procurement methods. The Congress, however, did not take action on this

proposal. According to the program manager, the current emphasis is on

expanding use of the card as a payment vehicle for larger procurements

where an underlying contract is in place. Also, deployed forces overseas

have the authority to use the card for purchases up to $25,000.

DOD Electronic Mall The DRI supported expanded use of electronic tools such as Internet-based

catalogs and shopping malls to enable DOD customers to shop for the best

buy from the convenience of their desktop computers. In addition, to make

the buying process as paperless as possible, the DRI required that, by

January 1, 2000, all such purchases would be made with the government

purchase card. Shortly after the DRI report was issued, however, the

Congress directed that the Department construct a central gateway to the

individual catalogs that Defense organizations had established. This

gateway was to provide a single view, access, and ordering capability.

DOD’s strategy has been to integrate the various catalogs into its

Department-wide mall, which features items from internal stocks as well as

from a number of commercial catalogs.

The Department has not made as much progress as it expected on this

initiative. While the mall can accept purchase cards for on-line payment,

customers often do not use them because they dislike the cards’ monthly

reconciliation process. Department statistics show that only 53 percent of

the mall’s transactions were made using the purchase card during February

2000. In addition, it has not yet been able to integrate all of the various

electronic catalogs into the mall. Several service-established catalogs still

remain separate. Finally, mall sales continue to be low. For fiscal year 1999,

sales totaled only $2 million.4

4 The Department has at times listed electronic mall sales for fiscal year 1999 at $51 million.

This figure is somewhat misleading, however, because it includes sales of clothing and

textiles through the Defense Logistics Agency’s Automated System for Cataloging and

Ordering Textiles. Although personnel can access this system through the mall, the vast

majority of purchases are made outside of it; the mall portion of this system’s sales are

included in the mall’s $2 million sales figure.
Appendix II

Assessment of DRI Elements

Page 42 GAO/NSIAD-00-72 Defense Management

Officials offered a variety of reasons for the low sales volume. First, most

of the 2.3 million items featured through the mall are Defense Logistics

Agency items; Defense organizations, however, generally have other

mechanisms for ordering these items, so personnel generally do not need

to go to the mall for them. Although the Department is working to increase

the number of commercial offerings to alleviate this problem, progress has

been slow. Second, some military service policies have effectively

discouraged mall use. For example, one organization said the mall could be

used only for purchasing commercial items, while another instructed

personnel not to use the purchase card over the Internet. Finally, some

believe the mall simply is not user friendly enough and turns off would-be

users.

Prime Vendor The DRI highlighted the need to increase the use of prime vendors5 to

manage parts, reduce government inventories, and improve delivery times

for all types of commodities managed by the Defense Logistics Agency.

Specifically, the DRI tasks the Defense Logistics Agency with establishing

regional prime vendor contracts for one category of hardware items—

facilities maintenance supplies—and the military services have been

directed to work with the Agency to identify sites for implementation and

opportunities for expansion. Examples of these types of supplies include

electrical, plumbing, heating and air conditioning supplies, lumber, paint,

small tools, assorted hardware, and building materials.

The Department is making progress in implementing various prime vendor

programs, but has a long way to go. The Defense Logistics Agency reports

that prime vendor sales for all categories of secondary items6 have

increased from about 18 percent to an estimated 27 percent between fiscal

years 1997 and 1999. In terms of facilities maintenance supplies, the

Defense Logistics Agency met the DRI goal of establishing regional

contracts. As of October 1999, DOD reports that 110 of 278 potential

customers were participating in this prime vendor program, and fiscal

year 1999 sales reached over $59.2 million. While the military services

exceeded the prime vendor sales goal for 1999, substantial opportunities

5 Prime vendors are contractors that buy inventory from a variety of suppliers, store it in

commercial warehouses, and ship it to customers when ordered.

6 Secondary inventory includes reparable components, subsystems, and assemblies;

consumable repair parts; bulk items and material; food; and expendable end items,

including clothing and other personal gear.
Appendix II

Assessment of DRI Elements

Page 43 GAO/NSIAD-00-72 Defense Management

exist to expand the program. According to Defense Logistics Agency

estimates, fiscal year 1999 prime vendor sales represent less than 10

percent of the $670 million the military services spend for facility

maintenance supplies.

We recently reported that in its efforts to adopt best practices, including

prime vendor programs, the Agency and the military departments have

faced a variety of implementation issues.7 Many issues are related to

concerns over whether the new practices can adequately meet military

supply needs and how the new practices will affect employees’ jobs.

Though these obstacles were overcome in some cases, they are significant

because they can slow or stop implementation efforts, or they can deter the

military department’s full participation in the initiatives.

We have ongoing work focused on the facilities maintenance supplies

prime vendor program, and we expect to issue a report later this year that

will discuss DOD’s efforts to implement this program as well as

opportunities to improve the effectiveness of program implementation.

Travel System

Reengineering

The DRI highlighted DOD’s efforts to institute a new travel system and set a

goal to privatize travel office functions in the Washington, D.C., office by

October 1, 1998, and to implement a reengineered travel process

throughout DOD by October 2000. The Department began reengineering its

travel management system for temporary duty travel in 1994 after

recognizing that the process used to request, approve, and pay for official

travel by its personnel required substantially more administrative costs and

took much more time than best management practices in the private sector.

Once implemented, the Department expects that the new paperless system

will allow travel requests and vouchers to be submitted and approved

electronically through digital signatures. The Department also expects that

the new system will be able to interface with departmental accounting and

disbursing systems. The Department estimates the new system will save

$4.4 billion between fiscal years 1999 and 2011 largely by reducing the time

and amount of paperwork needed to process transactions.

Although the Department privatized its Washington, D.C., office travel

functions, it is having significant problems implementing the newly

7 Defense Inventory: Opportunities Exist to Expand the Use of Defense Logistics Agency

Best Practices (GAO/NSIAD-00-30, Jan. 26, 2000).
Appendix II

Assessment of DRI Elements

Page 44 GAO/NSIAD-00-72 Defense Management

redesigned travel system and is still pretesting the program. DOD awarded

a contract for automated travel services in 1 of 19 regions of the United

States in May 1998. The Department plans to implement the new system in

this region first and then fully implement the new system in all remaining

regions over the course of 3 years.

Due to problems encountered during the testing phase, the Department has

not yet been able to fully implement the new system in the first region. For

example, the travel system will pay a traveler without first having funds

obligated to cover the cost of the travel. Another problem is that, in some

instances, the system does not correctly process a travel order amendment

and, as a result, the system will not pay the traveler. It is unknown at this

time how long it will take for contractors to resolve these problems.

However, it is unlikely that full implementation will occur before 2003.

Performance Contracts The DRI Report called for the establishment of performance contracts for

selected Defense agencies and activities that provide numerous products

and services (finance and accounting, telecommunications, computers,

supplies and parts, etc.) to the military services and other Defense

agencies. The contracts are a formal agreement between the principal staff

assistant in the Office of the Secretary of Defense, the Deputy Secretary,

and the Defense agency or activity, and they are intended to improve DOD’s

oversight of these agencies. Contracts are to include improvement goals for

organizations in terms of cost, productivity, quality, and responsiveness to

customers. The contracts are to also include specific performance

measures and annual reporting requirements. According to Defense agency

officials, the leadership of these agencies will be held accountable, through

annual performance appraisals, for meeting assigned goals.

Four organizations began using performance contracts in fiscal year 1999

and four additional organizations began using the contracts in fiscal year

2000. The Defense agencies and activities that have contracts include the

• Defense Finance and Accounting Service*

• Defense Logistics Agency*

• Defense Contract Audit Agency*

• Defense Health Program*

• Defense Education Agency

• Defense Information Systems Agency

• Defense Security Cooperation Agency

• Defense Security Service
Appendix II

Assessment of DRI Elements

Page 45 GAO/NSIAD-00-72 Defense Management

Defense officials generally stated their belief that performance contracts

are useful. After 2 years of experience, officials from the four Defense

organizations who were first to implement the contracts (identified with an

asterisk) said the contracts are the first formal agreements between the

agencies and the Office of the Secretary of Defense that measure

performance against defined objectives and cost targets. While officials

within the Office of the Secretary of Defense and Defense agencies are also

encouraged by the increased emphasis on performance brought about by

the contracts, some agency officials told us that many of the contract goals

cannot be achieved without a concerted effort by the military services to

help the organization reach the goals. For example, to reduce the number

of in-transit disbursements8 and problem disbursements,9 the Defense

Finance and Accounting Service is relying on the Defense components to

provide accurate and complete commitments, obligations, payment

demands, travel settlements, and accounting adjustments electronically

and in a mutually agreed upon standard format.

Working Capital Funds This initiative was added to the DRI as part of the March 1999 update and is

intended to address problems associated with working capital fund10

operations. Working capital funds provide essential goods and services

needed for maintaining military readiness, including the (1) overhaul of

ships, tanks, and aircraft and (2) sale of over 5 million types of vital

inventory items such as landing gears for aircraft.11 The primary goal of this

program is to focus the attention of all levels of management on the total

costs of carrying out certain critical DOD business operations to encourage

support organizations, such as maintenance facilities, to provide quality

8 An in-transit disbursement occurs when a payment is made by a Defense Accounting

Office or operating location or other disbursing office that does not have control of, or the

ability to input payment data into, the accounting system that holds the original obligation

information.

9 Problem disbursements are specific disbursements that have not been matched with

corresponding obligations.

10 Working capital funds, a type of revolving fund, rely on sales revenue, rather than direct

appropriations, to fund their operations. Working capital funds are expected to (1) generate

sufficient revenue to cover the full costs of their operations and (2) operate on a break-even

basis over time—that is, not make a profit nor incur a loss.

11 In December 1996, DOD established four working capital funds by reorganizing activities

included in the Defense Business Operations Fund, which had already consolidated nine

industrial and stock funds operated by the military services and other DOD entities in 1991.
Appendix II

Assessment of DRI Elements

Page 46 GAO/NSIAD-00-72 Defense Management

goods and services at the lowest cost. While the Department seeks to

furnish customers and providers with incentives that will lead to the

required level of readiness at the least cost to the military, it acknowledges

that the current system is out of balance. For example, customers often

perceive the price charged by a Defense Working Capital Fund provider as

too high, due in part to the inclusion of the total costs, including overhead

costs, in its prices. We previously found that some activities seek to have

maintenance work performed at non-depot maintenance facilities to avoid

perceived higher costs and surcharges associated with depot activities

operating through the working capital fund.12 Thus, while these customers

are making the most cost-effective decision for themselves, these decisions

may not be the most cost-effective from DOD’s overall standpoint.

To address the problems with the Working Capital Fund operations, a task

force drafted a series of 11 papers detailing various problems and making

recommendations for improvement. The Deputy Secretary of Defense

subsequently reviewed and approved the recommendations in early 2000.

Examples of approved changes include

• making quarterly adjustments to the rates charged by the information

services business activity if the activity experiences significant

unbudgeted losses that would result in year end net operating results

varying from the budget by more than $10 million;

• creating a more flexible workforce to respond to workload fluctuations

and ultimately to decrease labor costs; and

• improving training to managers on operational effectiveness to ensure

they understand the costs associated with providing products and

services.

Implementing the changes may be difficult. The Department will have to

educate its managers on the new way of doing business and address

concerns of the Office of Personnel Management and several employee

organizations regarding employee benefits and protection.

Financial Management Financial management reform was added to the DRI in March 1999. In

adding financial management to the DRI, the Department set out its

intention that comprehensive financial management reforms are intended

12 Depot Maintenance: Army Report Provides Incomplete Assessment of Depot-type

Capabilities (GAO/NSIAD-00-20, Oct. 15, 1999).
Appendix II

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to streamline and redesign financial processes for optimum effectiveness—

reduce costs and improve service quality. Specifically, the DRI goals are to

reduce the number of finance and accounting systems used from 324 in

1991 to 32 or fewer by 2005 and produce auditable financial statements.

To date, no major part of the Department has been able to pass the test of

an independent financial audit. Auditors have consistently issued

disclaimers of opinion because of pervasive weaknesses in the

Department’s financial management systems, operations, and controls.

Such problems led us in 1995 to put Defense financial management on our

list of high-risk areas vulnerable to waste, fraud, abuse, and

mismanagement, a designation that continued in last year’s update.13 While

DOD has made genuine progress in the financial management arena in

areas such as increased accountability over property, plant, and equipment

and recognition of cleanup and disposal costs, as discussed in our recent

testimony,14 major problems remain—problems that are pervasive, deeply

rooted, and complex in nature. The Department’s most difficult financial

management challenges include an inability to account for billions of

dollars of inventory and property, plant, and equipment, and accurately

report the net cost of its operations and produce accurate budget data.

The Department has acknowledged that it is impossible to reverse

decades-old problems overnight, and some reforms will require several

more years to implement. For example, DOD reported as of March 2000,

that it had reduced the number of finance and accounting systems it uses to

96 and expects to reduce that number to 32 or fewer by 2005. The

Department has hundreds of initiatives underway intended to address its

financial management shortcomings. Many of these initiatives are included

in DOD’s second Financial Management Improvement Plan that was issued

in 1999, and are designed to help achieve a “clean” financial audit opinion.15

While such opinions represent an important milestone, the final goal of the

13 High-Risk Series: An Overview (GAO/HR-95-1, Feb. 1995); High-Risk Series: Defense

Financial Management (GAO/HR-97-3, Feb. 1997); and Major Management Challenges and

Program Risks: A Governmentwide Perspective (GAO/OCG-99-1, Jan. 1999).

14 Department of Defense: Progress in Financial Management Reform

(GAO/T-AIMD/NSIAD-00-163, May 9, 2000).

15 DOD was directed to submit this plan by the National Defense Authorization Act for Fiscal

Year 1998. The plan is to address all aspects of financial management within DOD, including

the finance systems, accounting systems, and data feeder systems that support financial

operations.
Appendix II

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Department’s financial management improvement efforts must be

correcting serious systems and control weaknesses that impair both asset

accountability and the production of timely and reliable financial and

performance information DOD needs to manage its operations on a

day-to-day basis. Lessons learned from DOD’s Year 2000 experience,

including a business process focus and top leadership involvement, and

adopting a strategic approach to improving the Department’s financial

management human capital will be invaluable to achieving this final goal.

Transportation

Documentation and

Financial Processes

The DRI also calls for changing the Department’s transportation

documentation and financial (i.e., billing, collection, and payment)

processes to reduce infrastructure costs, eliminate government-unique

documentation and processes, and employ commercial practices. In March

1998, the Deputy Secretary of Defense approved four prototype tests in

different modes of transportation—airlift, sealift, surface, and express

deliveries—to test the use of commercial documentation and credit cards

to pay transportation bills. As a result of the prototype tests, in February

1999, the Deputy Secretary directed DOD to (1) eliminate

government-unique documentation, (2) use PowerTrack software—a

commercial product—to track transportation transactions and pay

transportation bills, and (3) develop a 1-year regional prototype to test the

use of a third-party logistics provider for domestic freight transportation

and its associated financial management functions. These initiatives were

then included as part of the March 1999 update of the DRI.

The Department is making progress in implementing these initiatives. We

recently reported that the military services and Defense agencies have

begun to use commercial documentation instead of government-unique

documents, which officials estimate will result in the elimination of

1.6 million government-unique documents.16 In addition, as of April 2000,

PowerTrack has been implemented at 153 of 204 sites and officials expect

to have it fully implemented by December 2000. Finally, the Department

plans to award a contract sometime after July 2000 to test the use of a thirdparty logistics provider for domestic freight transportation and associated

financial management functions. Total investment costs for implementing

these initiatives are estimated at $41.4 million for fiscal years 1997 through

2000. DOD officials believe eliminating government unique documentation

16 Defense Transportation: Process Reengineering Could Be Enhanced by Performance

Measures (GAO/NSIAD-00-7, Dec. 20, 1999).
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and using PowerTrack software will save about $11.2 million annually, once

fully implemented.

Before these savings can be realized, we reported that the Department

must overcome several implementation problems related to the

PowerTrack initiative. For example, DOD must modify its electronic

payment system to accommodate the existing unique interagency billing

process, which is plagued with data accuracy and reliability problems. In

addition, some bases and installations are unable to access PowerTrack

through the Internet because they do not have the technical infrastructure

or equipment necessary to access the Internet. In addition, the Department

does not have sufficient system security to protect it against hackers.

Element 2: Quality of

Life

DOD added this element to the DRI in March 1999 to highlight the

Department’s goal of increasing the level of job support and assistance it

provides to both military and civilian employees. As table 3 shows, DOD

has made significant progress in implementing its quality of life initiatives.

All the initiatives were added to the DRI when it was updated in March 1999

with the exception of household goods transportation, which was included

in the adopting best business practices element of the original DRI.
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Table 3: Quality of Life Initiatives

Source: Our analysis based on information in the DRI reports, Department officials, and program

documents.

Household Goods

Transportation

The movement of servicemembers’ household goods is viewed as an

important quality of life issue. According to the March 1999 DRI Report, the

Department moves approximately 650,000 military and civilian families

every year—more than any U.S. corporation—at a cost of nearly

$1.2 billion. Yet, its system provides personnel some of the worst service in

the nation, with damage claims resulting from 25 percent of all moves,

compared to 10 percent in the private sector. While no implementation time

frames were established, the DRI Report highlighted several initiatives to

reengineer the personal property shipping process, including

Initiative Goal/milestone Status Issues

Household goods transportation Reengineer processes for

moving Defense personnel and

their families.

The services plan to pilot test

improved approaches to moving

household goods, but they are

experiencing difficulties getting

the projects started. As a result,

DOD does not expect to have a

new process in place until the

summer of 2002.

The Department is still

determining how it will measure

performance in terms of both

customer satisfaction and cost.

Military pay and retirement

benefits

Improve pay and benefits by

(1) increasing pay 4.4 percent

beginning January 1, 2000, and

3.9 percent annually in fiscal

years 2001-2005 and

(2) reforming the retirement

package for members.

Congress approved several pay

changes, including a 4.8 percent

pay increase for calendar year

2000 and additional pay

increases through calendar year

2005. Changes were also made

in retirement benefits for

members that entered service

after July 31, 1986.

Legislation is pending that would

authorize implementation of

service members’ participation

in the Thrift Savings Plan.

Project Outlook Career

Assistance Center

Provide counseling and job

assistance to personnel affected

by downsizing efforts in the

Office of the Secretary of

Defense.

The Center provided assistance

to almost 670 DOD personnel

and dependents. The Center

was closed in January 2000,

following the completion of Office

of the Secretary of Defense

downsizing efforts.

None.

Strengthen civilian workforce Establish a Chancellor for

Education and Professional

Development to raise the quality

of civilian training and

professional development to

world-class standards by

January 1, 2000.

Progress is being made, but

some delays have occurred. A

Chancellor for Education has

been appointed, an office is

staffed and running, and a task

force was formed to develop

DOD education standards.

Performance measures and

standards for a wide range of

academic programs are being

developed.
Appendix II

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• selecting vendors based on “best value” rather than lowest cost;

• contracting for the management of the entire household goods shipment

process to a commercial relocation company;

• increasing the monetary allowance for personnel who move their own

belongings from 80 to 90 percent of what the government would have

paid; and

• using purchase cards to ensure prompt and easy payment.

DOD has one Department-wide pilot program underway and another

planned that incorporate some, but not all, of the initiatives listed above.

The Navy is also pilot testing a new approach on its own. DOD plans to

complete its evaluation of all pilots by April 30, 2002, and could pick one

pilot or elements of each pilot and the current process to revise the

household goods transportation program. Officials expect a new process to

be in place by summer 2002—2 years later than officials originally

expected.

Last year we testified before the Subcommittee on Military Readiness,

Committee on Armed Services, House of Representatives, that improving

DOD’s personal property program has been a slow, complex process and

that before any type of conclusion about these efforts can be reached, DOD

must have accurate and credible data to determine the type and extent of

changes that should be made.17 To its credit, DOD is developing an

evaluation plan with the assistance of a private company to measure the

performance of the pilots in relation to each other and against the current

program. However, there have been some delays in developing an

evaluation plan. Officials are still trying to resolve issues related to the

questions to be included in customer satisfaction surveys and how best to

capture cost information. In addition, potential bid protests involving the

second pilot mentioned above could further delay the start of the testing

period.

We are continuing to monitor the Department’s efforts in this area and plan

to issue a report later this year related to DOD’s evaluation plan and

on-going pilot test results.

17 Defense Transportation: Efforts to Improve DOD’s Personal Property Program

(GAO/T-NSIAD-99-106, Mar. 18, 1999).
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Military Pay and Retirement

Benefits

The DRI report calls for improving pay and retirement benefits to

adequately compensate its military personnel. DOD also hopes this

initiative will help it meet recruitment goals and compete with the effects

of a strong civilian economy. In 1999, top DOD and service officials testified

that dissatisfaction with pay and retirement played a significant role in the

decision of many servicemembers to leave the military. In order to address

retirement and compensation concerns, the DRI called for (1) pay

increases of 4.4 percent for all military personnel beginning January 1,

2000, and of 3.9 percent annually in fiscal years 2001−2005 and (2) changes

in the retirement package offered to personnel joining the service after

1986.

The Congress approved pay raises even higher than DOD’s request. The

January 1, 2000, pay raise was set at 4.8 percent, representing a four-tenths

percentage point increase over what was requested in the Fiscal Year 2000

President’s Budget. The Congress also approved pay raises of one-half

percentage point above the employment cost index for fiscal years

2001−2006. Pay changes for this past year also included a variable pay raise

resulting from a restructuring of the military pay table, which the

Department believes will provide a greater reward for personnel getting

promoted rather than years of service. In addition, the Fiscal Year 2000

National Defense Authorization Act now gives members that entered the

service after July 31, 1986, and retire with less than 30 years of creditable

service, the option to either retire under the pre-1986 military retirement

plan, or to accept a one-time $30,000 lump sum bonus and remain under the

current retirement plan at its reduced rate of retired pay. As a result, the

Department believes these enhancements will give servicemembers a

retirement plan that is just as attractive as the plan given to

servicemembers who entered service in the early 1980s.

The Fiscal Year 2000 National Defense Authorization Act also authorized

servicemembers to participate in the Federal Thrift Savings Plan to build

tax-deferred retirement savings. Under that legislation, DOD participation

is contingent upon the President proposing, and the Congress enacting,

additional legislation that would offset (under the budget rules) the loss of

tax revenue resulting from members’ participation in the plan. Although no

such offsetting legislation has been proposed, both the House and Senate

versions of the fiscal year 2001 defense authorization bill being considered

by the Congress would authorize the implementation of the military’s

participation in the Thrift Savings Plan. The proposed legislation would

eliminate the requirement for the President to identify mandatory spending

offsets that are currently provided in the fiscal year 2001 budget resolution.
Appendix II

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Project Outlook Career

Assistance Center

Another DRI initiative called for the establishment of the Project Outlook

Career Assistance Center, which would provide transition assistance to

DOD personnel in the Office of the Secretary of Defense and their

dependents affected by downsizing, A-76 competitions, and other DRI

changes. The Department’s intention was to bring in the human resources

community early to reduce employee fears that they would be involuntarily

separated from their jobs.

Since 1998, the Career Assistance Center has helped 666 DOD personnel

and their dependents with counseling and employment assistance.

Specifically, it helped 93 persons find employment within DOD, other

government agencies, or the private sector. Besides giving employment

support, the Center helped to educate and counsel affected personnel by

offering seminars and workshops on topics such as preparing electronic

resumes, improving communication skills, and determining career options

and strategies. Individual counseling was also offered to assist personnel in

assessing their skills, networking, preparing resumes and cover letters,

interviewing, and negotiating techniques.

The Center was closed in January 2000, following the completion of the

Office of the Secretary of Defense downsizing efforts. A Center official said

advanced planning and early placement services were most likely the

primary reasons why DOD was able to achieve the DRI reductions without

having to involuntarily separate people.

Strengthening Civilian

Workforce

In 1997 the DRI established a goal of providing a world-class education

system for all DOD civilians by January 1, 2000. The DRI report cited the

education of DOD civilians as an area that needs improvement and that

DOD has been rendering second-rate education, training, and professional

development to its civilian employees. To achieve its goal, the DRI calls for

(1) the appointment of a Chancellor for Education and Professional

Development, (2) every DOD educational institution to be accredited, and

(3) all courses to be certified by a recognized accreditation authority.

Although some progress has been made within the last year, it may be a

year or more past the original 2000 deadline before this initiative is fully

implemented. On October 2, 1998, DOD’s first Chancellor for Education

and Professional Development was sworn in to head this effort. The

Chancellor’s mandate is to improve the quality of DOD’s professional

education, eliminate duplicative or unnecessary programs and curriculum

development efforts, and ensure that DOD education and training responds
Appendix II

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Page 54 GAO/NSIAD-00-72 Defense Management

to valid needs, competency requirements, and career development

patterns.

The Chancellor’s Office is now focused on the two remaining DRI

initiatives related to accreditation. To assist in these efforts, DOD

established a special task force led by the Chancellor to develop

accreditation-like standards that can be applied to and adopted by the

diverse range of DOD civilian education institutions and programs. For

example, DOD provides classes for all types of positions, including

administrative staff, computer programmers, and engineers. The

Department expects the development of prototype standards to be

completed by the end of fiscal year 2000 and DOD-wide implementation of

approved standards to be completed by the end of fiscal year 2001.

Element 3:

Organizational

Streamlining

Under this element, the DRI called for a series of reductions,

reorganizations, and other organizational adjustments within the Office of

the Secretary of Defense, Defense agencies and activities, and the military

services. The goal is to have a flatter, more streamlined headquarters

throughout DOD to (1) ensure that the headquarters focuses on core,

corporate-level tasks rather than program management and day-to-day

management of subordinate activities; (2) strengthen headquarters’ focus

on long-term strategic, program, and financial planning; and (3) weed out

unnecessary overlap, complexity, and redundancy in tasks. To accomplish

these ends, DOD initiated over 50 separate efforts. These efforts include

• consolidating existing offices,

• moving responsibilities from the Office of the Secretary of Defense to

other DOD components,

• reducing the total number of committees and boards that exist in DOD

by 25 percent, and

• reducing personnel throughout the Department.

Although the DRI stated that these changes could result in savings, the

expected savings were not quantified and were secondary to the primary

goal of fashioning a more responsive, less bureaucratic organization.

The Department reports that significant progress is being made in meeting

the various organizational streamlining goals. For example, it has

completed action on over two-thirds of the reorganizations and

consolidations. It has also reduced the number of boards and commissions

by 40 percent—from 550 to 338. Finally, personnel reductions are starting
Appendix II

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to occur. Table 4 shows the progress DOD reports it has made as of January

1, 2000. While the Office of the Secretary of Defense and field activities

reductions were to be completed by fiscal year 2000, the remaining

reductions are not expected to be complete until 2003.

Table 4: DOD Reported Staff Reductions

a Information provided by the Navy and Marine Corps represent Headquarters personnel reduced as of

January 1999. Therefore, military headquarters personnel reductions are likely to be higher than

stated in the chart.

Source: Under Secretary of Defense (Comptroller) and Director, Administration and Management.

As shown, the Office of the Secretary of Defense, field activities, Defense

agencies, and military headquarters organizations have reduced almost

26,000 positions, and these organizations appear to be on track for meeting

their DRI goals. Currently, the Office of the Secretary of Defense is the only

organization that has achieved its DRI goal.

Downsizing efforts take time and can be difficult to achieve. For example,

reductions at the Office of the Secretary of Defense level are a combination

of one-third transfers to other DOD organizations and two-thirds

elimination of job positions. According to DOD officials, these reductions

were difficult to implement, and DOD probably would not have met its

downsizing goal without the direct involvement of the Deputy Secretary of

Defense. For 2 years, the Deputy Secretary was provided quarterly reports

on downsizing efforts. While organizations provided compelling arguments

not to complete some of the specific organizational downsizing goals (i.e.,

changes in organizational responsibilities require more, not fewer staff, and

the same workload would be spread to fewer staff), the Deputy Secretary

continued to push for the reductions.

Organization

Reduction goals

(percent)

Total personnel to

be reduced

Actual personnel

reduced (as of 1/00)

Reductions achieved

as of 1/00 (percent)

Office of the Secretary of

Defense

33 986 989 100

DOD field activities 36 3,221 2,817 87

Defense agencies 21 27,095 19,249 71

All other headquarter

elements, including the

headquarters of the

military departments and

their major commandsa

10 3,490 2,871 81

Total 34,792 25,926 75
Appendix II

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Element 4: Competitive

Sourcing

Under this DRI element, DOD plans to subject commercial-type activities

now conducted by the government to the competitive forces of the

marketplace. DOD believes this will sharpen performance and lead to

better value. It also believes competition, regardless of whether the public

or private sector wins, can achieve significant savings. DOD is making

progress in meeting its goals for both initiatives under this element—A-76

competitions and outsourcing depot maintenance workloads—but it will

have to address a variety of problems to fully implement them.

The A-76 Program DOD is using Office of Management and Budget Circular A-76 to conduct

competitions between the public and private sector. These competitions,

known as competitive sourcing, determine whether the public or private

sector could best perform selected commercial activities and functions.

DOD is in its fourth year of a program to evaluate activities that involve

approximately 203,000 positions for potential competitive sourcing, which

is expected to result in estimated savings of $9.2 billion by 2005, and

$2.8 billion in annual recurring savings thereafter.

Between fiscal years 1997 and 1999, DOD announced 97,211 positions for

study (about 48 percent of its current A-76 study goal), completing full

competitions on about 8,500 of these positions. The services have made

varying degrees of progress in initiating planned studies but are finding

they are taking longer than expected to complete. We previously reported

on delays in completing these studies as well as how the Department’s

savings will likely be smaller than expected in the short term because it had

not fully calculated either the investment costs associated with

undertaking these competitions or the personnel separation costs likely to

be associated with implementing them.

The services have expressed concern about the reductions in their future

operating budgets that have already been planned in anticipation of A-76

savings. For example, the Navy was having difficulty identifying positions

for A-76 competitions. In response, the Navy proposed a broader, systems

engineering approach to be used in concert with competitive sourcing. This

strategy, referred to as strategic sourcing, relies on a broad range of

manpower management techniques—such as reengineering,

reorganization, and privatization—to achieve savings rather than relying

solely on A-76 competitions. According to DOD officials, strategic sourcing

provides DOD with an opportunity to achieve efficiencies in areas that may

not be subject the A-76 competitive processes.
Appendix II

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While the Navy is the furthest along in its strategic sourcing plan (it plans to

review functions that would involve almost 42,000 positions),18 the Air

Force and the Army say they too are considering strategic sourcing

initiatives. The services insist they are not abandoning their A-76 goals;

rather, they are adjusting those goals to include this form of sourcing. The

Office of the Secretary of Defense has issued interim guidance on the

strategic sourcing program, which emphasizes that commercial activities

included in strategic sourcing remain available for competition in the

future.

We have several ongoing jobs in this area and plan to issue reports on the

status of DOD’s A-76 program studies and savings later this year.

Depot Maintenance

Workload

Another DRI goal is to pursue public-private competitions for depot

maintenance work to the full extent of the law to lower maintenance costs

and improve services. Currently, several statutes in title 10 of the U.S. Code

govern depot maintenance competitions and allocations of workload

between the public and private sectors. One key provision is in section

2466, which places a 50-percent ceiling on the amount of depot

maintenance funds that can be used for contracted work.

We recently reported19 that each department is moving closer to the

50-percent ceiling, continuing the trend of recent years and consistent with

DOD policies and plans to increase reliance on the private sector for depot

work. The Air Force held three major competitions for workload

performed at two Air Force depots slated for closure as a result of base

realignment and closure decisions. A DOD depot won the first competition

(for C-5 aircraft workload), with projected savings of $190 million over

7 years. Defense depots, each in partnership with a contractor, won the

other two competitions. The Air Force projects savings of $1.8 billion over

15 years from the competition for engine workloads and $638 million over

9 years for the other competed workloads. In total, the three competitions

18 Strategic sourcing studies involving these 42,000 positions are expected to produce

additional savings of $2.4 billion by 2005 and $.7 billion in annual recurring savings

thereafter. Collectively, A-76 and Navy strategic sourcing are expected to yield about

$11.7 billion in savings by 2005 and $3.5 billion annually thereafter.

19 Depot Maintenance: Future Year Estimates of Public and Private Workloads Are Likely to

Change (GAO/NSIAD-00-69, Mar. 1, 2000).
Appendix II

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are expected to save about 16 percent compared to the estimated baseline

costs.

The Air Force, however, is having difficulties in managing the workload

within the 50-percent limitation. Our March 2000 testimony20 discussed the

reasons behind the Air Force’s difficulties and the Secretary’s decision to

waive the section 2466 requirement for fiscal year 2000 and, potentially, for

2001. We cited Air Force decisions to contract for more depot work and the

results of the three public-private competitions as the primary reasons why

the Air Force has little flexibility in the near term to stay within the ceiling

and will continue to face significant challenges in the coming years. Air

Force officials, however, have indicated plans to identify workloads that

might be brought back in-house to permit them to stay within the

50 percent limitation.

Element 5: Infrastructure The DRI Report supports shrinking the size of DOD’s physical

infrastructure by eliminating excess infrastructure, consolidating or

restructuring operations and support activities, and demolishing unneeded

buildings. Collectively about the size of the state of Virginia (40,000 square

miles), DOD has the world’s largest infrastructure. The Secretary of

Defense and other officials have expressed concern that the Department

continues to retain more infrastructure than needed despite four base

closure rounds between 1988 and 1995. At the same time, DOD continues to

report a significant backlog in funding requirements for maintenance and

repair of its facilities. Maintenance of unneeded facilities drains resources

that might otherwise be used on facilities and installations needed for the

future or to support modernization and readiness priorities. Table 5 shows

the progress DOD has made on its six infrastructure initiatives. With the

exception of building demolitions and Defense Information Systems

Agency consolidations, the other reform initiatives have proven to be very

difficult to implement.

20 Depot Maintenance: Air Force Faces Challenges in Managing to 50-50 Ceiling

(GAO/NSIAD-00-112, Mar. 3, 2000).
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Table 5: Infrastructure Reduction Initiatives

a The Defense Information Systems Agency consolidation initiative was in the original DRI Report but

was not mentioned in the March 1999 update. According to a Defense Reform Office official, this

initiative is still considered to be part of the DRI.

Note: The original DRI Report included an initiative to consolidate research and development, test and

evaluation facilities. This initiative is now included in the 21st century acquisition system and workforce

element.

Source: Our analysis based on information in the DRI reports, Department officials, and program

documents.

Initiative Goal/milestone Status Issues

Base realignment and closure Hold additional rounds in 2001

and 2005.

The Congress did not approve

the request for more rounds.

Congressional approval is

needed for future base closure

rounds.

Defense Information Systems

Agency consolidationsa

Reduce the number of centers

from 16 to 6.

As of February 2000, the

number of centers has been

reduced to seven. Officials

expect to meet the goal by the

end of fiscal year 2000.

The agency is having problems

hiring qualified staff at the

centers gaining new workload.

Demolition and disposal of

excess facilities

Demolish over 80 million square

feet of buildings by fiscal year

2003.

30.6 million square feet were

demolished through fiscal year

1999.

None.

Energy management Reduce energy consumption

and privatize all utility systems

by September 30, 2003.

New ways to reduce energy

costs have been tested, but

significant problems are being

encountered in privatizing utility

systems and the Department is

unlikely to meet its goals. As of

December 31, 1999, DOD has

privatized only 13 of the

approximately 1,700 systems it

is considering for privatization.

This effort is complex,

time-consuming, and expensive.

It requires analyzing state and

local laws governing utilities and

evaluating offers received from

interested utility companies.

Military housing privatization Privatize: 1,000 units in fiscal

year 1998; 13,000 units in fiscal

year 1999; and 30,000 by fiscal

year 2000.

The goals have not been met. As

of January 1, 2000, DOD had

issued contracts to privatize

3,083 units in two housing

projects.

In general, structuring

privatization deals is complex

and time consuming. The

Congress and we have also

expressed concern over

privatization deals.

Leasing Market unused and underutilized

property to the private sector

and seek legislation to expand

the types of in-kind

consideration, such as the

construction of new facilities, the

Department can receive.

DOD proposed new legislation in

January 2000.

Congressional approval is

needed.
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Base Realignment and

Closure

The DRI Report called for additional base realignment and closure rounds

in 2001 and 2005. More recently, the President’s fiscal year 2001 budget

request calls for rounds in 2003 and 2005. Despite four rounds between

1988 and 1995, Defense officials believe excess facilities remain and are a

burden on the budget in a resource-constrained environment. Both the

Quadrennial Defense Review and DRI reports support this view. Defense

officials now project that two additional rounds would generate new

savings of $3.4 billion a year once realignment and closure actions were

completed and the costs of implementing these actions were offset by

savings. The Department’s future years budget plans reflect the impact of

these savings. Because of concerns about issues such as cost and savings

from prior rounds, their economic impact, and executive branch handling

of two closure and realignment decisions in the 1995 round, the Congress

has been reluctant to authorize additional rounds.

Our work has shown that, despite limitations in precision, past base

realignment and closure recommendations will result in substantial savings

once implementation costs have been offset and net savings begin to

accrue.21 Further, our December 1998 report also found that the majority of

communities surrounding closed bases are faring well economically in

relation to the national average. Our analysis of lessons learned found that,

despite the difficulties of base realignment and closure decision-making,

the processes that evolved over the past four rounds are regarded by many

as a good starting point for future legislation and decision-making

processes. We noted that the processes used between 1988 and 1995 had

several checks and balances to keep political influences to a minimum. At

the same time, we also noted that the success of the processes requires the

cooperation of all participants.

Defense Information System

Agency Consolidations

The original DRI called for reducing the number of computer megacenters

from 16 to 6. Operated by the Defense Information Systems Agency, these

megacenters were established by consolidating the workload and

equipment of 194 computer centers. Today, the Agency provides various

computer and telecommunications services and command and control

support throughout the Department. Despite the earlier consolidations, the

Department believes its information-processing infrastructure needs

21 See Military Bases (GAO/NSIAD-99-17, Nov. 13, 1998) and Military Bases

(GAO/NSIAD-99-36, Dec. 11, 1998).
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further reduction. Agency officials project that, once completed, the new

structure will result in operating and personnel cost reductions that will

help the Agency achieve $1.5 billion in savings over a 10-year period ending

in fiscal year 2007. The DRI did not establish any deadlines for completing

the consolidations, but the emphasis on this initiative is reflected in a

performance contract that was developed in direct response to the DRI.

The consolidation goals that have been incorporated into the contract

reflect the Defense Information Systems Agency’s plans to have the revised

structure in place by the end of fiscal year 2000.

Consolidation efforts are nearly complete. As of February 2000, the

Defense Information Systems Agency had reduced the number of

megacenters to seven—an achievement considered noteworthy by Agency

officials considering DOD and the entire information technology industry

were focused on preparations for the Y2K millennium change. Officials

expect the final mainframe workload migration to be completed by the end

of this fiscal year, once Y2K testing has been completed. Further, the

staffing reductions that were to accompany the megacenter reductions

were ahead of schedule. Agency plans call for total reductions of 893

personnel between fiscal year 1997 and the end of fiscal year 2000. As of

March 2000, 1,104 civilian positions had been eliminated, over 200 more

than planned. As a result of its efforts, the Agency estimates that it has

realized savings of $71 million for fiscal years 1998 and 1999 and will realize

another $120 million of savings in fiscal year 2000.

According to Agency officials, the continuing nationwide shortage of

skilled information technology professionals has made it difficult to hire

qualified civilian personnel at megacenter sites gaining new workload. This

hiring shortfall has been covered on a temporary basis by using contractor

support.

Demolition and Disposal of

Excess Facilities

The DRI calls for the military services to demolish and dispose of 80 million

square feet of obsolete and excess facilities by fiscal year 2003. This

initiative is intended to save operations and maintenance dollars and

improve safety through the removal of excess facilities. According to

program officials at Wright Patterson Air Force Base, the DRI has made the

funding of demolitions a priority. Prior to the DRI, these officials were

required to develop and maintain a list of buildings they wanted to

demolish, but funding intended for demolitions went to higher priorities,

such as critical repairs and maintenance of occupied buildings and
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facilities. Now, a portion of these funds is dedicated for the sole purpose of

demolitions.

Through the end of fiscal year 1999, DOD had already reached about

40 percent of its building demolition goal by demolishing 30.6 million

square feet of space. Officials estimate the Department has avoided

spending $32 million in fiscal year 1999 due to fiscal year 1998 demolitions

and will avoid approximately $61 million in fiscal year 2000 and each year

thereafter due to demolitions in both fiscal years 1998 and 1999. These

figures do not represent savings per se. Rather they are costs DOD will

avoid spending on these buildings that can be used for other priorities.

Energy Management The energy management initiative is designed to help the Department

better manage its energy costs, primarily by privatizing utility systems and

identifying new ways to procure energy.22 As part of this initiative, the

Department plans to use private sector capital and expertise to maintain

and upgrade about 1,700 electric, water, wastewater and gas systems

supporting DOD’s installations by September 30, 2003.23 The DRI also

expanded the Defense Logistics Agency’s Defense Energy Support Center’s

responsibilities to include finding ways to maximize energy savings

through a series of demonstration projects.

DOD has experienced mixed success with its energy management

initiatives. While the Defense Energy Support Center has been successful

in its attempts to conduct several demonstration projects that identified

money saving techniques for purchasing energy, the military services are

unlikely to meet the 2003 time frame for privatizing its utility systems.

Since the DRI was announced, the military services have privatized only

13 utility systems since the DRI, of which the Army privatized 11 and the

Navy 2.

22 In the March 1999 update to the DRI, DOD consolidated two initiatives from the original

DRI Report—utility system privatization and regional energy demonstrations—and now

refers to these as the energy management initiative.

23 As of December 31, 1999, DOD estimated that it was using a total of 2,742 electric, water,

waste water, and gas utility systems. However, in determining the number of systems it

could consider for privatization, it found 122 of these were privatized prior to the DRI and

another 886 are not owned by DOD.
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According to DOD officials, privatization efforts are very complex, time

consuming, and costly. For example, privatization includes describing the

current condition of about 1,700 utility systems, analyzing myriad state and

local laws governing utilities, and determining the best value offer received

from interested utility companies. In December 1998, DOD issued a

program budget decision directing the services to set aside $243.6 million

to complete privatizations between fiscal years 1999 and 2004. The

program budget decision estimated that utility system privatization might

begin to provide about $327 million in annual savings after privatizations

are completed in 2003. However, these early budget estimates of the costs

and savings are now viewed as unrealistic. In addition to paying for

privatization studies, military service officials are also concerned that

utility bills will increase without a corresponding increase in operations

and maintenance funds.24 Compounding the complexity of this effort is the

fact that utility system privatization is occurring simultaneously with other,

closely-related energy management initiatives. Despite the

interrelationship of these initiatives, however, the services have not as yet

developed an overall energy management strategy, which would integrate

the efforts.

Military Housing

Privatization

According to the 2000 Annual Defense Report to the President and the

Congress, two-thirds of the Department’s 282,000 existing housing units are

in need of extensive repair. The Deputy Under Secretary of Defense for

Installation Support said the average age of on-base housing units is more

than 35 years, and these units are approaching the end of their useful life.

Efforts to privatize military family housing are aimed at using private

capital to upgrade housing faster than DOD could on its own. At the

Department’s request, the Congress enacted legislation in fiscal year 1996

containing a series of authorities, termed the Military Housing Privatization

Initiative, that was to test over a 5-year period the use of various incentives

and arrangements to encourage private sector investment in military

housing. Housing privatization was subsequently made part of the DRI,

with a current goal to privatize 1,000 units by fiscal year 1998; 13,000 units

by fiscal year 1999; and 30,000 units by fiscal year 2000.

The Department has not met the DRI goals. As of January 1, 2000, it has

awarded only two contracts to build or renovate 3,083 military family

24 We have a separate review underway examining the service’s privatization efforts that

should be completed later this year.
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housing units.25 Two other Navy projects, involving 589 units, were

approved under a prior legislative authority.26

Defense officials attributed the slow progress to the many legal, financial,

contractual, and budgetary issues involved. We recently reported, for

example, the services had to decide how to structure privatization deals

and how the various federal laws and regulations applied to the proposed

deals.27 Also, congressional concerns about the execution of the program

resulted in the Department curtailing its housing privatization plans. A July

1998 Conference Report on Appropriations for Military Construction cites

that privatization was not intended to become a substitute for the

traditional housing construction program. In 1999, the services scaled back

their privatization plans from 87,000 units at 49 installations to 22 projects

to build or renovate 30,994 units.

Until experience is gained in the actual operation of several projects, key

questions about the cost effectiveness of privatization will remain

unanswered. These questions include whether developers will operate and

maintain privatized housing in accordance with the contracts and whether

the military will need the housing over the long terms of most projects

(typically 50 years). For example, the Department’s January 2000

announcement of a new $3 billion initiative to significantly increase

housing allowances over the next 5 years raises questions about housing

privatization and how DOD balances its housing options. The intent of the

new initiative is to eliminate the out-of-pocket expenses military members

normally pay to live off base. Higher housing allowances could mean that

more military members would be able to live off base, decreasing the need

for on-base housing, including privatized housing.

Leasing The DRI calls for the Department to propose legislation allowing the

military services to enter into lengthier leasing deals that would make

leasing of real property to the private sector more attractive, and clarify the

types of in-kind consideration the services could receive in exchange for

25 Housing privatization has occurred at Lackland Air Force Base, Texas; and Fort Carson,

Colorado.

26 Section 2803 of the National Defense Authorization Act for Fiscal Year 1995 (P.L. 103-337).

27 Military Housing: Continued Concerns in Implementing the Privatization Initiative

(GAO/NSIAD-00-71, Mar. 30, 2000).
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the use of space at military bases. For the past 5 years, DOD has used

authority granted by the Congress to lease some of its non-excess, but not

fully utilized property. In return for permitting nonfederal entities to

temporarily put Defense property to productive use, the Department has

received in-kind services such as maintenance, repair, and environmental

restoration of facilities. However, Defense officials believe current leasing

laws limit the kind of compensation the Department can receive from

leasing and how it can spend the money. For example, the Department

would like in-kind consideration to be applied at any military installation

for things such as the construction of new facilities and base operating

support services.

DOD submitted its proposed new legislation to the Congress with its fiscal

year 2001 budget submission. However, there are many uncertainties that

make its successful implementation questionable. For example, a program

official is uncertain if the Congress will enact the proposed legislation

giving the Department more latitude in conveying land at military

installations to private developers for up to 35 years. In addition, DOD does

not have a lot of experience with this type of leasing and may have to hire

consultants to help structure these deals.

Although the Department is still awaiting congressional passage of its

leasing proposal, the Congress has approved separate legislation that

would enable the Navy and the Air Force to pursue enhanced leasing

initiatives in partnership with the private sector and local communities.

The legislation would allow the Navy to manage the development of a

planned community consisting of housing, operational facilities, and

recreational opportunities on Ford Island, a part of the Pearl Harbor Naval

Complex on the island of Oahu, Hawaii. The Air Force legislation provides

a number of specific leasing authorities that allow the Air Force to test and

demonstrate new ways to manage installations at Brooks Air Force Base,

Texas.

Element 6: A Vision for

the 21st Century

Acquisition System and

Workforce

To build a military capable of meeting 21st century missions, DOD has

acknowledged it must equip its forces with the latest technologies and

tools. This, in turn, requires an acquisition system that provides the highest

quality goods in the most affordable and efficient fashion possible. Over the

last several years, DOD has undertaken numerous initiatives to improve its

acquisition processes. This DRI element, which was added in March 1999,

highlights some of the many on-going efforts, including (1) streamlining

DOD’s research, development, test, and evaluation infrastructure;
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(2) improving the acquisition process through reducing total ownership

costs and barriers to accessing commercial technology and products; and

(3) training and managing its acquisition workforce better. As shown in

table 6, progress varies among the three initiatives.

Table 6: Acquisition System and Workforce Initiatives

Source: Our analysis based on information in the DRI reports and Department officials.

Streamlining Research,

Development, Test, and

Evaluation Infrastructure

Over the last 10 years, the Department has spent an average of $36 billion a

year on Research, Development, Test and Evaluation programs covering a

wide range of activities, from basic research in science and engineering to

Initiative Goal/milestone Status Issues

Streamlining research,

development, test and evaluation

infrastructure

No goals or deadlines given. DOD completed a plan to

restructure its laboratories and

test centers in accordance with

congressional direction.

Competitive sourcing is one of

the tools DOD plans to use to

reduce infrastructure costs.

No large-scale infrastructure

reductions are likely to take

place outside of base-closure

rounds.

Improving the acquisition

process

Maximize use of commercial

items, replace

government-unique processes

with commercial equivalents,

and reduce total costs of

acquiring, operating,

maintaining, and disposing of

weapon systems.

Progress is being made, but

DOD is years away from full

implementation. Business and

manufacturing operations at over

325 facilities have been

converted to commercial

standards. Pilot programs have

been started to test costreduction techniques.

The Department believes

acquisition costs are still too

high. Opportunities exist for

DOD to adopt techniques used

by private industry to reduce

costs such as keeping

technology development

separate from product

development.

Enhancing the acquisition

workforce, education and

training

(1) Deliver 25 percent of

acquisition courses through

technologies, such as the

Internet, by the end of fiscal year

1999 and for all courses by

2003; (2) provide 40 hours of

continuing education classes to

80,000 personnel in 1999 and all

acquisition professionals by the

year 2000; and (3) implement a

demonstration project to allow

greater managerial control over

personnel processes—such as

the implementation of a new

payment and reward system.

DOD is making progress, but is

still years away from meeting its

goals. (1) About 10 percent of its

acquisition courses (8 of 81

courses) are now available on

the Internet. (2) The DOD

components are developing

programs for employees to

obtain 40 hours of continuing

education, but do not have

systems in place to track

progress towards achieving the

goal. (3) Finally, DOD started a

5-year demonstration project in

1999 to change certain

personnel processes.

We previously reported on

several problems with DOD’s

acquisition workforce training,

including that training either did

not reach the right people when

it was needed or did not reach

them at all.
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the full-scale development of specific weapon systems, such as the F-22

fighter aircraft and the Comanche helicopter. Reducing the number of

laboratories and centers has been an on-going effort, and despite closing

62 sites as part of previous base realignment and closure rounds, the

Department and the Congress believe DOD continues to have excess

capacity. Although the DRI did not set specific goals or deadlines for this

initiative, the Department has developed a new plan for streamlining the

laboratories and test centers in accordance with the Strom Thurmond

National Defense Authorization Act for Fiscal Year 1999.

Most of the streamlining for laboratories and test centers occurred prior to

the DRI through the base realignment and closure process. For example,

the Defense Manpower Data Center reports that staffing levels in the

laboratories and centers have declined about 29 percent (from 131,000 in

fiscal year 1990 to 93,000 in fiscal year 1997) after four closure rounds. The

Department estimates these reductions have resulted in annual manpower

savings of about $2.4 billion and a $3.9 billion reduction in operating costs

since 1990. Since the Congress has approved no additional closure rounds,

the Department plans to use other methods, including competitive

sourcing, to maintain its technical superiority while further reducing its

infrastructure costs. No large-scale consolidations, however, are likely to

take place outside of the base closure process.

Improving the Acquisition

Process

In March 1999, DOD highlighted three initiatives that will help the

Department access commercial technology and adopt business practices

characteristic of world class suppliers, while also reducing the total cost of

acquiring and operating weapon systems purchased. The three initiatives

are

• maximizing the use of commercial items, operations, and practices

(referred to as civil military integration);

• assisting contractors in replacing government-unique business and

manufacturing processes with commercial equivalents, modifying

existing contracts to comply with reform initiative goals, and reducing

or eliminating many of the barriers that inhibit government and industry

collaborative business efforts (referred to as the single process

initiative); and

• reducing total ownership costs of weapon systems (i.e., development,

production, operations, support, and disposal), to help ensure DOD is

making the most cost-effective procurement decisions now and in the
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future. A key component of this is to make performance and schedule a

function of available resources.

DOD is making progress in each of these areas but is years away from full

implementation. For example, as of February 10, 2000, the Department

reported that it had achieved some success by converting the business and

manufacturing operations of over 325 facilities from military to commercial

standards in areas of quality control, calibration, soldering, and parts

management practices. The Department has targeted 11 activities for

review during fiscal year 2000, including product support, delivery, pricing,

and payment and financial management. In addition, the Department

reports it has saved $30.6 million in negotiated changes to existing

contracts and estimates cost avoidance savings of $523.8 million on future

contracts as a result of replacing government unique processes with

commercial equivalents. Finally, the services are in the process of

implementing a series of pilot programs that focus on reducing total

ownership costs for major acquisition programs. For example, the Navy

has set a goal of using commercial computers and application software on

the Aegis Cruiser thereby eliminating the need for military specifications

and standards. The Navy is reporting a savings of about $4.0 million per

ship. Because many of the pilot programs are still being implemented, we

did not attempt to determine the overall status.

Despite these attempts to streamline acquisition processes and reduce

costs, in January 1999, the Defense Systems Affordability Council

acknowledged that total ownership costs of weapon systems are too high

and can be reduced significantly if DOD would better emulate and apply

best practices of the public and private sectors. The Council set targets for

reducing logistics costs for fielded weapons systems by 7 percent in fiscal

year 2000, 10 percent by fiscal year 2001, and 20 percent by fiscal year 2005.

In March 1999, we testified that the best practices of leading commercial

firms could be used to improve the development of technology and weapon

systems in the Department.28 In particular, knowledge standards29 that are

28 Defense Acquisition: Best Commercial Practices Can Improve Program Outcome

(GAO/T-NSIAD-99-116, Mar. 17, 1999).

29 This means that decisionmakers must have virtual certainty about critical facets of the

product under development when needed. This knowledge can be broken down into three

junctures: when a match is made between the customer’s requirements and the available

technology, when the product’s design is determined to be capable of meeting performance

requirements, and when the product is determined to be producible within cost, schedule,

and quality targets.
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rigorously applied, coupled with the practice of keeping technology

development separate from product development, could put managers in

the best position to succeed in developing better products in less time and

producing them within estimated costs. We also believe that lasting

improvements in program outcomes will not be realized until the

Department changes the incentives that drive program managers to

underestimate costs; rely on immature technologies; and underestimate the

risk of cost, schedule, and performance problems.

Enhancing the Acquisition

Workforce, Education and

Training

For the last decade, the importance of an educated professional acquisition

workforce has been a major focus of the Department. For example, the

Congress passed the Defense Acquisition Workforce Improvement Act in

1990 directing DOD to establish education, training, and experience

requirements for its acquisition workforce to enhance the defense

acquisition process. In 1992, the Department established the Defense

Acquisition University, a consortium of 13 schools, to develop and provide

training for the acquisition workforce. Since its inception, the University

has trained about 35,000 acquisition personnel per year using an extensive

curriculum of 81 courses, including courses on the Department’s

acquisition reform initiatives. The March 1999 DRI update included the

following five broad training and education initiatives;

• enhancing basic skills training;

• institutionalizing continuous learning;

• teaching the concepts of the commercial business environment;

• recruiting, developing, and retaining technology leaders; and

• managing the acquisition workforce.

Specific goals are to (1) deliver 25 percent of acquisition courses through

distributed learning technologies, like the Internet, by the end of fiscal year

1999 and for all courses by 2003; (2) provide 40 hours of continuing

education classes to 80,000 personnel in 1999 and all acquisition

professionals (about 163,000) by the year 2000; and (3) implement a

demonstration project to evaluate, among other things, new systems of

payment and reward.

DOD is making progress toward achieving its goals, but it is several years

away from full implementation. At the time of our review, the University

offered 8 of its 81 courses, about 10 percent, on the Internet. According to

the program manager, all University classes are being evaluated to

determine which classes or portions of classes can be offered on-line.
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Some courses, particularly those involving senior-level managers, will

continue to require in-class training. DOD also believes it is progressing in

its efforts to provide 40 hours of continuing education hours to its

employees, but officials said they will not know the exact number of

employees completing training until tracking systems are put in place by

the military services and Defense agencies. According to DOD officials,

about 26,500 personnel participated in University courses and an estimated

78,000 personnel participated in distance learning classes such as

videoconferences in fiscal year 1999. Finally, DOD launched a 5-year

Civilian Acquisition Workforce Demonstration Project in 1999 to determine

if DOD’s acquisition effectiveness can be enhanced by allowing greater

managerial control over personnel processes and functions such as hiring

and equitably compensating personnel. In addition, the Project expands the

opportunities available to employees through a more responsive and

flexible personnel system. As envisioned, the project will cover

approximately 8,000 to 18,000 civilian acquisition employees and related

support personnel at some 60-200 sites throughout DOD.

Despite the Department’s efforts, enhancements can still be made to its

approach for acquisition training. For example, a June 1999 Department

study recommended that training organizations become change agents and

be modeled after their corporate counterparts. In addition, in August 1999

we found that standard training offered by the Defense Acquisition

University did not make a major contribution to the leading program

offices’ ability to implement best practices.30 Training either did not reach

the right people when it was needed or did not reach them at all. Further,

best practice training did not contain the depth or practical insights

program officials need to implement these practices.

Element 7:

Transforming Logistics

for the 21st Century

This element of the DRI, which was added as part of the March 1999

update, focuses on the steps DOD is taking to improve the efficiency and

effectiveness of its logistics business practices and processes. DOD’s

overall vision is to achieve a highly efficient and integrated logistics system

for buying, storing, and distributing supplies as well as maintaining and

repairing weapon systems by 2006. To achieve this vision, the DRI lays out

the following broad initiatives:

30 Best Practices: DOD Training Can Do More to Help Weapon System Programs Implement

Best Practices (GAO/NSIAD-99-206, Aug. 16, 1999).
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• educe wholesale supply order-receipt time;

• achieve total asset visibility and accessibility for 90 percent of DOD

inventory by fiscal year 2000; and

• reengineer and streamline logistics processes.

DOD is making some progress in implementing its logistics initiatives. The

Department reports that is has met the goals for reducing the time it takes

for wholesalers to deliver supplies and achieving total asset visibility.

However, it is just starting other initiatives to reengineer and streamline

logistics processes. For example, the services plan to conduct 30 pilot

projects to reengineer product support activities by 2002 and implement

new techniques by 2005. In addition, as stated earlier in our prime vendor

discussion in element 1, the Department is attempting to expand its use of

prime vendor contracts to hardware items.

Transforming DOD’s logistics processes is a very complex undertaking. For

example, although the Department reports that it has met its total asset

visibility goal, we and the DOD Inspector General found significant

problems with the timeliness and accuracy of data used in the total asset

visibility system. We recently reported that user groups had concerns about

the quality of data in the system, and these problems do not appear to be

resolved.31 In addition, the military services and the Defense Logistics

Agency have over 400 major actions underway to streamline logistics

processes. While these major actions may support DOD’s overall vision,

Defense officials acknowledged that the Department has had an

incomplete roadmap or investment strategy to manage and coordinate its

wide range of initiatives in achieving the desired logistics transformation.

DOD has recognized the need to develop transition plans and a defense

reform initiative directive was recently signed by the Deputy Secretary of

Defense directing the military services, Defense Logistics Agency, and

Transportation Command to submit transition plans for review by the

Defense Management Council by July 1, 2000. Specifically, the plans are to

include four intermediate objectives:

• developing performance measures for customer wait time in fiscal year

2001;

• adopting a simplified delivery priority system driven by war-fighter

requirements by fiscal year 2002;

31 Defense Inventory: DOD Could Improve Total Asset Visibility Initiative With Results Act

Framework (GAO/NSIAD-99-40, April 12, 1999).
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• achieving accurate total asset visibility and accessibility by fiscal year

2004; and

• fielding a web-based logistics information system that provides early

deploying forces real-time information by fiscal year 2004 and to the

remainder of the force by fiscal year 2006.

To assist in establishing and reviewing the plans, the Under Secretary of

Defense (Acquisition, Technology, and Logistics) is to conduct an annual

review of the plans. However, the directive does not stipulate how these

individual plans will be used to formulate an integrated strategy. Beginning

in calendar year 2001, annual plans and the related strategic plan

performance measurement data will be submitted with the Program

Objective Memorandum to facilitate DOD’s program and budget reviews.

Element 8: Cyberspace This element of the DRI, which was added as part of the DRI’s March 1999

update, focuses primarily on the security issues surrounding DOD’s

business and warfighting operations. DOD believes such a shift toward

electronically based operations will help reduce costs and improve

performance, but it also recognizes that such a shift carries significant

security risks. DOD already relies heavily on computers, and its systems

and networks are becoming increasingly interconnected. As a result, it is at

increased risk of having data stolen or of being hobbled by attack or natural

disaster.

The Department has undertaken dozens of initiatives and activities to

improve security over its systems and networks. These initiatives and

activities, which are grouped under the general heading of “Information

Assurance,” range from large, centrally managed programs to more

narrowly focused technical changes to specific systems. These efforts

include

• establishing a program to improve DOD-wide planning, coordination,

and oversight of information assurance activities;

• ensuring through training and other vehicles that DOD personnel

understand the possible threats to DOD systems and how to mitigate

those threats;

• building up the Department’s technological tools for safeguarding its

systems (e.g., intrusion detection devices and user authentication tools);

• improving DOD’s ability to identify and correct vulnerabilities (e.g.,

using procedures for disseminating information on weaknesses and

ensuring that those weaknesses are addressed);
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• establishing a new organization for detecting attacks and intrusions and

marshalling the forces to repel them; and

• developing tactics for reacting to and defending against attacks.

DOD information assurance officials readily acknowledge that DOD

systems and networks continue to be more vulnerable than the Department

would like, despite progress in improving security. One official noted that

there is a “huge population” of unclassified networks in need of additional

safeguards. Moreover, DOD officials did not dispute the findings of an

August 1999 GAO report, which said serious weaknesses in DOD

information security continue to provide hackers as well as hundreds of

thousands of authorized users the opportunity to modify, steal,

inappropriately disclose, and destroy sensitive DOD data.32

The DRI points out that no single approach will take care of security

concerns, as evidenced by the variety of initiatives now underway.

Information assurance officials also said, however, that the public key

infrastructure now being developed will go a long way toward providing

important safeguards. This infrastructure revolves around the use of

algorithms, or mathematical “keys,” that DOD personnel can use to digitally

sign and encrypt documents and data. These capabilities are expected to

help DOD ensure that (1) the data in its systems has not been tampered

with; (2) system users can confirm who is on the other end of an electronic

transaction; (3) the parties involved in a transaction cannot later deny they

participated in the transaction; and (4) data cannot be accessed without

proper authorization. These safeguards are considered so important that

the Deputy Secretary of Defense said in a May 1999 memo that DOD “must

take an aggressive approach” in developing its ability to achieve them.

Given all that is involved in the effort, however, DOD timetables indicate it

may take 2 years or more for the Department to fully achieve its goals.

Element 9: Homeland

Defense in the Next

Century

This element of the DRI focuses on the challenges facing DOD to counter

the proliferation of weapons of mass destruction (nuclear, biological, and

chemical and their means of delivery) and the increased threat of domestic

terrorism. DOD believes countering these threats will become DOD’s most

important and complex challenge over the next 10 to 20 years. Table 7

provides an overview of the three initiatives included in this element.

32 DOD Information Security: Serious Weaknesses Continue to Place Defense Operations at

Risk (GAO/AIMD-99-107, Aug. 26, 1999).
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Table 7: Homeland Defense Initiatives

Source: Our analysis based on information in the DRI reports and Department officials.

National Missile Defense The National Missile Defense program is a major defense acquisition

program being managed by the Ballistic Missile Defense Organization at an

estimated life-cycle cost of $36.2 billion. Its primary mission is to defend

the United States against limited ballistic missile attacks. DOD believes,

once the national missile defense system is operational, it will provide a

reliable defense against ballistic missile attacks targeted at America’s

homeland.

In October 1996, the Department began system development with the

intent to support a deployment readiness review in fiscal year 2000. Since

then, the program has encountered numerous developmental problems,

cost overruns, and schedule delays. In December 1997, GAO reported that

Initiative Goal/milestone Status Issues

National Missile Defense Build and deploy a system to

protect the U.S. from long range,

ballistic missile attacks by 2005.

DOD has designated this to be a

high-risk development program.

System deployment is now

expected to be completed in

2007.

Deployment will require

modification of the 1972

Anti-Ballistic Missile Treaty.

Improving domestic response Improve domestic response to

weapons of mass destruction

incidents by (1) fielding 10

regional-based teams comprised

of National Guard personnel and

(2) responding to incidents within

4-hours of being notified.

Ten teams are expected to be

fully operational during the first

half of this year. DOD plans to

establish 17 additional teams

between March and July 2000.

The Congress has raised

concerns about the need for

these teams in light of numerous

local, state, and federal

organizations that provide similar

functions. In addition, local,

state, and federal officials

believe a shorter response time

of 1 to 2 hours is critical for the

teams to perform their mission

effectively.

Defense Threat Reduction

Agency

Create a single DOD

organization to carry out

programs designed to address

proliferation of and counter

threats posed by weapons of

mass destruction by

(1) establishing a headquarters

office at Herndon, Virginia, by

October 1, 1998, and

(2) housing all activities at or

near Herndon, Virginia, by

December 31, 2000.

The new agency became

operational in October 1998.

During fiscal year 2000,

headquarters staff will be

housed primarily at Ft. Belvoir,

Virginia instead of Herndon,

Virginia. Most of the other

activities will be housed at Ft.

Belvoir during fiscal year 2004,

upon the completion of a new

building.

The Congress must approve

military construction funding for

the new building.
Appendix II

Assessment of DRI Elements

Page 75 GAO/NSIAD-00-72 Defense Management

DOD faces significant challenges in the program because of high schedule

and technical risks.33 To minimize program risks, the Department has

subsequently restructured the program and is now following a phased

development approach. While it still plans to hold a deployment readiness

review in July 2000, it does not expect to begin system deployment until

2005, nearly 2 years later than originally planned. Deployment is to be

completed in 2007.

The Department reports that deploying the system will require the United

States to modify the 1972 Anti-Ballistic Missile Treaty, which many consider

the bedrock of arms control. The current administration is working on this

issue and does not expect to make a decision until later this year.

Improving Domestic

Response

This DRI effort calls for using specially trained National Guard civil support

teams that can quickly deploy and help civilian authorities to respond to

terrorist attacks involving weapons of mass destruction. Specifically, the

plan was for teams to be fully staffed, trained, certified, and validated fully

mission capable by January 5, 2000, and to deploy to an accident site within

4 hours of notice.

As of February 2000, only three teams were fully staffed. The Department’s

original plan suggested that there eventually should be a team in each state,

territory, and the District of Columbia for a total of 54 teams. DOD

subsequently funded only 10 regionally based teams,34 which officials

expected to be fully mission-capable by April 1, 2000. According to the DRI

Office, the teams are state assets controlled by their respective governors,

but they are trained and equipped by DOD. Each team is to be staffed with

22 full-time Army or Air National Guard members organized into six

functions: command, operations, administration and logistics,

communication, medical, and survey.

The Congress has questioned the need for civil support teams given local,

state, and other federal initiatives. To clarify how the Department plans to

33 National Missile Defense: Schedule and Technical Risks Represent Significant

Development Challenges (GAO/NSIAD-98-28, Dec.12, 1997).

34 The teams are located in California, Colorado, Georgia, Illinois, Massachusetts, Missouri,

New York, Pennsylvania, Texas, and Washington. They were selected based on state

demographics, proximity to Air National Guard units that could provide airlift, presence of

other federal/military assets, transportation networks, and other criteria.
Appendix II

Assessment of DRI Elements

Page 76 GAO/NSIAD-00-72 Defense Management

use these teams, the Congress directed the Secretary of Defense (per

section 1036, National Defense Authorization Act for Fiscal Year 2000) to

provide a status report on Civil Support teams by January 2000. This report

was to include, among other things, information on how the teams’

capabilities compared with other first responders, their plans for

conducting realistic exercises, how the teams will be used across state

borders, and measures for recruiting and retaining proficient team

members. The report was issued on February 24, 2000. Meanwhile, on

January 13, 2000, the Secretary of Defense announced plans to add 17

additional teams at an estimated cost of $107 million in fiscal year 2000,

bringing the total nationwide to 27. The Department expected these teams

would be established between March and July 2000. According to the DRI

Office, DOD has no plans to add any more teams beyond the current 27.

The DRI goal for teams to deploy to an incident site within 4 hours of

notice has and continues to be an item of controversy. In May 1999, for

example, we reported that local, state, and federal officials we spoke with

expressed concerns that this response time is too long.35 They believe the

teams need to be at the scene within 1 to 2 hours if those who are first to

respond are to benefit from the services they provide. The concerns about

arrival times surfaced because the Department had no plans to dedicate

ground crews, flight crews, or aircraft for on-call, immediate response to

support a Civil Support team deployment. In addition, our discussions with

local, state, and federal officials surfaced a number of additional concerns

that could impact the teams’ capabilities to meet their mission and

responsibilities. These concerns centered on recruiting and retention,

training, and operational issues.

Defense Threat Reduction

Agency

In the original DRI Report, the Secretary of Defense identified the

challenges posed by weapons of mass destruction as the greatest and most

complex threats facing DOD in the future. To address these challenges, the

DRI called for the Department to establish by October 1, 1998, the Defense

Threat Reduction Agency by consolidating activities from several

organizations, including the On-site Inspection Agency, the Defense Special

Weapons Agency, the Defense Technical Security Administration, and the

Office of the Assistant to the Secretary of Defense for Nuclear and

Chemical and Biological Defense Programs. In addition, all agency

35 Combating Terrorism: Use of National Guard Response Teams Is Unclear

(GAO/NSIAD-99-110, May 21, 1999).
Appendix II

Assessment of DRI Elements

Page 77 GAO/NSIAD-00-72 Defense Management

activities were to be housed at or near Herndon, Virginia, by December 31,

2000. The new agency has been established and it is responsible for a

diverse range of activities including on-site inspections, technology

security, special weapons technology, nuclear support, chemical-biological

defense, cooperative threat reduction, counterforce, and force protection.

The Defense Threat Reduction Agency is making progress in consolidating

some of its operations, but it has determined that the existing Herndon,

Virginia, facility is too small and the physical layout is inadequate to protect

its people from potential terrorist attacks. In May 1999, DOD informed the

Congress (as directed by the conference report accompanying the Strom

Thurmond National Defense Authorization Act for Fiscal Year 1999) that it

no longer plans to continue its consolidation efforts. After considering a

range of options to remedy its physical plant and security concerns, DOD

has decided to build a new facility at Fort Belvoir, Virginia, and it plans to

include this project proposal in its fiscal year 2002 military construction

budget submission. DOD believes this project will provide the earliest and

most cost-effective option for consolidation.

If approved and properly funded, DOD expects to occupy the new facility

in fiscal year 2004. In the meantime, according to a December 1999

Program Budget Decision Memorandum, the revised plan is to house

approximately 1,000 employees at Fort Belvoir, Virginia, and the remaining

personnel, about 700, at two other locations in Alexandria, Virginia.
Page 78 GAO/NSIAD-00-72 Defense Management

Appendix III

Comments From the Department of Defense ApendxiI
Appendix III

Comments From the Department of Defense

Page 79 GAO/NSIAD-00-72 Defense Management
Appendix III

Comments From the Department of Defense

Page 80 GAO/NSIAD-00-72 Defense Management
Appendix III

Comments From the Department of Defense

Page 81 GAO/NSIAD-00-72 Defense Management
Page 82 GAO/NSIAD-00-72 Defense Management

Appendix IV

GAO Contacts and Staff Acknowledgments ApendxiIV

GAO Contacts David R. Warren (202) 512-8412

Barry W. Holman (202) 512-8412

James E. Hatcher (937) 258-7959

Acknowledgments In addition to those named above, Cheryl Andrew, Leticia Bates, James

Fuquay, Johnetta Gatlin-Brown, Steve Hunter, Bob Preston, Jennifer

Thomas, and Jeanne Willke made key contributions to this report.
Page 83 GAO/NSIAD-00-72 Defense Management

Related GAO Products

Element 1: Adopting

Best Business

Practices

Defense Management: Electronic Commerce Implementation Strategy Can

Be Improved (GAO/NSIAD-00-108, July 18, 2000).

Department of Defense: Progress in Financial Management Reform

(GAO/T-AIMD/NSIAD-00-163, May 9, 2000).

Defense Transportation: Process Reengineering Could Be Enhanced by

Performance Measures (GAO/NSIAD-00-7, Dec. 20, 1999).

Air Force Depot Maintenance: Analysis of Its Financial Operations

(GAO/AIMD/NSIAD-00-38, Dec. 10, 1999).

Department of Defense: Status of Financial Management Weaknesses and

Actions Needed to Correct Continuing Challenges

(GAO/T-AIMD/NSIAD-99-171, May 4, 1999).

Air Force Supply: Management Actions Create Spare Parts Shortages and

Operational Problems (GAO/NSIAD/AIMD-99-77, Apr. 29, 1999).

DOD Financial Management: More Reliable Information Key to Assuring

Accountability and Managing Defense Operations More Efficiently

(GAO/T-AIMD/NSIAD-99-145, Apr. 14, 1999).

Financial Management: Analysis of DOD’s First Biennial Financial

Management Improvement Plan (GAO/AIMD-99-44, Jan. 29, 1999).

DOD Information Services: Improved Pricing and Financial Management

Practices Needed for Business Area (GAO/AIMD-98-182, Sept. 15, 1998).

Inventory Management: More Information Needed to Assess DLA’s Best

Practice Initiatives (GAO/NSIAD-98-218, Sept. 2, 1998).

Air Force Supply Management: Analysis of Activity Group’s Financial

Reports, Prices, and Cash Management (GAO/AIMD/NSIAD-98-118, June 8,

1998).

Inventory Management: DOD Can Build on Progress by Using Best

Practices for Reparable Parts (GAO/NSIAD-98-97, Feb. 27, 1998).

Financial Management: Seven DOD Initiatives That Affect the Contract

Payment Process (GAO/AIMD-98-40, Jan. 30, 1998).
Related GAO Products

Page 84 GAO/NSIAD-00-72 Defense Management

Defense Inventory Management: Expanding Use of Best Practices for

Hardware Items Can Reduce Logistics Costs (GAO/NSIAD-98-47, Jan. 20,

1998).

Element 2: Quality of

Life

Defense Transportation: The Army’s Hunter Pilot Project Is Inconclusive

but Provides Lessons Learned (GAO/NSIAD-99-129, June 23, 1999).

Defense Transportation: Plan Needed for Evaluating the Navy Personal

Property Pilot (GAO/NSIAD-99-138, June 23, 1999).

Defense Transportation: Progress of MTMC Pilot (GAO/NSIAD-99-130R,

Apr. 15, 1999).

Defense Transportation: DOD and GSA Personal Property Programs

(GAO/NSIAD-99-139R, Apr. 15, 1999).

Defense Transportation: Efforts to Improve DOD’s Personal Property

Program (GAO/T-NSIAD-99-106, Mar. 18, 1999).

Military Retirement: Proposed Changes Warrant Careful Analysis

(GAO/T-NSIAD-99-94, Feb. 25, 1999).

Financial Management: Training of DOD Financial Managers Could Be

Enhanced (GAO/AIMD-98-126, June 24, 1998).

Defense Transportation: The Army’s Hunter Pilot Project to Outsource

Relocation Services (GAO/NSIAD-98-149, June 10, 1998).

Element 3:

Organizational

Streamlining

Defense Headquarters: Status of Efforts to Reduce Headquarters Personnel

(GAO/NSIAD-99-45, Feb. 17, 1999).

Defense IRM: Alternatives Should Be Considered in Developing New

Civilian Personnel System (GAO/AIMD-99-20, Jan. 27, 1999).

Defense Headquarters: Total Personnel and Costs Are Significantly Higher

Than Reported to Congress (GAO/NSIAD-98-25, Oct. 30, 1997).

Defense Acquisition Organizations: Reductions in Civilian and Military

Workforce (GAO/NSIAD-98-36R, Oct. 23, 1997).
Related GAO Products

Page 85 GAO/NSIAD-00-72 Defense Management

Element 4: Competitive

Sourcing

Military Base Closures: Lack of Data Inhibits Cost-Effectiveness Analysis of

Privatization-in-Place Initiatives (GAO/NSIAD-00-23, Dec. 20, 1999).

Defense Logistics: Army Should Assess Cost and Benefits of the Workload

Performance System Expansion (GAO/NSIAD-00-16, Nov. 12, 1999).

Depot Maintenance: Army Report Provides Incomplete Assessment of

Depot-type Capabilities (GAO/NSIAD-00-20, Oct. 15, 1999).

Depot Maintenance: Status of the Navy’s Pearl Harbor Pilot Project

(GAO/NSIAD-99-199, Sept. 10, 1999).

DOD Competitive Sourcing: Lessons Learned System Could Enhance A-76

Study Process (GAO/NSIAD-99-152, July 21, 1999).

Air Force Logistics: C-17 Support Plan Does Not Adequately Address Key

Issues (GAO/NSIAD-99-147, July 8, 1999).

Air Force Depot Maintenance: Management Changes Would Improve

Implementation of Reform Initiatives (GAO/NSIAD-99-63, June 25, 1999).

Air Force Supply: Management Actions Create Spare Parts Shortages and

Operations Problems (GAO/NSIAD/AIMD-99-77, Apr. 29, 1999).

Force Structure: A-76 Not Applicable to Air Force 38th Engineering

Installation Wing Plan (GAO/NSIAD-99-73, Feb. 26, 1999).

DOD Competitive Sourcing: Results of Recent Competitions

(GAO/NSIAD-99-44, Feb. 23, 1999).

DOD Competitive Sourcing: Questions About Goals, Pace, and Risks of Key

Reform Initiative (GAO/NSIAD-99-46, Feb. 22, 1999).

Army Industrial Facilities: Workforce Requirements and Related Issues

Affecting Depots and Arsenals (GAO/NSIAD 99-31, Nov. 30, 1998).

Defense Depot Maintenance: Contracting Approaches Should Address

Workload Characteristics (GAO/NSIAD-98-130, June 15, 1998).

Defense Depot Maintenance: DOD Shifting More Workload for New

Weapon Systems to the Private Sector (GAO/NSIAD-98-8, Mar. 31, 1998).
Related GAO Products

Page 86 GAO/NSIAD-00-72 Defense Management

Base Operations: DOD’s Use of Single Contracts for Multiple Support

Services (GAO/NSIAD-98-82, Feb. 27, 1998).

Defense Outsourcing: Better Data Needed to Support Overhead Rates for

A-76 Studies (GAO/NSIAD-98-62, Feb. 27, 1998).

Element 5:

Infrastructure

Military Housing: Continued Concerns in Implementing the Privatization

Initiative (GAO/NSIAD-00-71, Mar. 20, 2000).

Military Infrastructure: Real Property Management Needs Improvement

(GAO/NSIAD-99-100, Sept. 7, 1999).

Military Base Closures: Potential to Offset Fiscal Year 2000 Budget Request

(GAO/NSIAD-99-149, July 23, 1999).

Military Bases: Status of Prior Base Realignment and Closure Rounds

(GAO/NSIAD-99-36, Dec. 11, 1998).

Military Bases: Review of DOD’s 1998 Report on Base Realignment and

Closure (GAO/NSIAD-99-17, Nov. 13, 1998).

DOD Information Services: Improved Pricing and Financial Management

Practices Needed for Business Area (GAO/AIMD-98-182, Sept. 15, 1998).

Financial Management: Accounting Implications of DOD’s Facilities

Demolition Programs (GAO/AIMD-98-194R, Aug. 28, 1998).

Military Housing: Privatization Off to a Slow Start and Continued

Management Attention Needed (GAO/NSIAD-98-178, July 17, 1998).

Federal Electricity: Retail Competition Could Create Savings for

Department of Defense (GAO/RCED-98-73R, Feb. 25, 1998).

Federal Electricity: Retail Competition Could Create Government Savings

(GAO/RCED-97-244, Sept. 30, 1997).

Defense Infrastructure: Demolition of Unneeded Buildings Can Help Avoid

Operating Costs (GAO/NSIAD-97-125, May 13, 1997).

DOD Infrastructure: DOD Is Opening Unneeded Finance and Accounting

Offices (GAO/NSIAD-96-113, Apr. 14, 1996).
Related GAO Products

Page 87 GAO/NSIAD-00-72 Defense Management

DOD Infrastructure: DOD’s Planned Finance and Accounting Structure Is

Not Well Justified (GAO/NSIAD-95-127, Sept. 18, 1995).

Element 6: 21st

Century Acquisition

System and Workforce

Best Practices: DOD Training Can Do More to Help Weapon System

Programs Implement Best Practices (GAO/NSIAD-99-206, Aug. 16, 1999).

Best Practices: Better Management of Technology Development Can

Improve Weapon System Outcomes (GAO/NSIAD-99-162, July 30, 1999).

Financial Management: Better Controls Essential to Improved Reliability of

DOD’s Depot Inventory Records (GAO/AIMD-99-132, June 28, 1999).

Department of Defense: Improving the DOD Payment Process, Using

Recovery Auditing and Changing the Prompt Payment Act

(GAO/T-NSIAD-99-193, June 16, 1999).

Acquisition Reform: Review of Selected Best-Value Contracts

(GAO/NSIAD-99-93R, Apr. 14, 1999).

Acquisition Reform: NASA’s Internet Service Improves Access to

Contracting Information (GAO/NSIAD-99-37, Feb. 9, 1999).

Acquisition Reform: Multiple-award Contracting at Six Federal

Organizations (GAO/NSIAD-98-215, Sept. 30, 1998).

Financial Management: Improvements Needed in Air Force Vendor

Payment Systems and Controls (GAO/AIMD-98-274, Sept. 28, 1998).

Defense Acquisition Organizations: Status of Workforce Reductions

(GAO/NSIAD-98-161, June 29, 1998).

Defense Acquisition Organizations: Linking Workforce Reductions With

Better Program Outcomes (GAO/T-NSIAD-97-140, Apr. 8, 1997).

Best Practices: DOD Can Help Suppliers Contribute More to Weapon

System Programs (GAO/NSIAD-98-87, Mar. 17, 1998).

Acquisition Reform: Implementation of Key Aspects of the Federal

Acquisition Streamlining Act of 1994 (GAO/NSIAD-98-81, Mar. 9, 1998).
Related GAO Products

Page 88 GAO/NSIAD-00-72 Defense Management

Best Practices: Successful Application to Weapon Acquisitions Requires

Changes in DOD’s Environment (GAO/NSIAD-98-56, Feb. 24, 1998).

Best Practices: Elements Critical to Successfully Reducing Unneeded

RDT&E Infrastructure (GAO/NSIAD/RCED-98-23, Jan. 8, 1998).

Element 7:

Transforming Logistics

for the 21st Century

Defense Inventory: Improved Management Framework Needed to Guide

Air Force Best Practice Initiatives (GAO/NSIAD-00-2, Nov. 18, 1999).

Defense Logistics: Army Should Assess Cost and Benefits of the Workload

Performance System Expansion (GAO/NSIAD-00-16, Nov. 12, 1999).

Defense Inventory: Improved Management Framework Needed to Guide

Navy Best Practice Initiatives (GAO/NSIAD-00-1, Oct. 21, 1999).

Defense Inventory: Improved Management Framework Needed to Guide

Army Best Practice Initiatives (GAO/NSIAD-99-217, Sept. 14, 1999).

Army Logistics: Status of Proposed Support Plan for Apache Helicopter

(GAO/NSIAD-99-140, July 1, 1999).

Air Force Depot Maintenance: Management Changes Would Improve

Implementation of Reform Initiatives (GAO/NSIAD-99-63, June 25, 1999).

Air Force Supply: Management Actions Create Spare Parts Shortages and

Operations Problems (GAO/NSIAD/AIMD-99-77, Apr. 29, 1999).

Defense Inventory: DOD Could Improve Total Asset Visibility Initiative

With Results Act Framework (GAO/NSIAD-99-40, Apr. 12, 1999).

Defense Inventory: Continuing Challenges in Managing Inventories and

Avoiding Adverse Operational Effects (GAO/T-NSIAD-99-83, Feb. 25, 1999).

Major Management Challenges and Program Risks: Department of Defense

(GAO/OCG-99-4, Jan. 1, 1999).

Defense Depot Maintenance: DOD Shifting More Workload for New

Weapon Systems to the Private Sector (GAO/NSIAD-98-8, Mar. 31, 1998).

Best Practices: DOD Can Help Suppliers Contribute More to Weapon

System Programs (GAO/NSIAD-98-87, Mar. 17, 1998).
Related GAO Products

Page 89 GAO/NSIAD-00-72 Defense Management

Element 8: Cyberspace

Security

DOD Information Security: Serious Weaknesses Continue to Place Defense

Operations at Risk (GAO/AIMD-99-107, Aug. 26, 1999).

Information Security: Serious Weaknesses Place Critical Federal

Operations and Assets at Risk (GAO/AIMD-98-92, Sept. 23, 1998).

Executive Guide: Information Security Management−Learning From

Leading Organizations (GAO/AIMD-98-68, May 1, 1998).

Element 9: Homeland

Defense

Combating Terrorism: Chemical and Biological Medical Supplies Are

Poorly Managed (GAO/HEHS/AIMD-00-36, Oct. 29, 1999).

Chemical and Biological Defense: Chemical Stockpile Emergency

Preparedness Program for Oregon and Washington (GAO/NSIAD-00-13,

Oct. 26, 1999).

Foreign Military Sales: Review Process for Controlled Missile Technology

Needs Improvement (GAO/NSIAD-99-231, Sept. 29, 1999).

Chemical and Biological Defense: Program Planning and Evaluation Should

Follow Results Act Framework (GAO/NSIAD-99-159, Aug. 16, 1999).

Combating Terrorism: Analysis of Federal Counterterrorist Exercises

(GAO/NSIAD-99-157BR, June 25, 1999).

Combating Terrorism: Use of National Guard Response Teams Is Unclear

(GAO/T-NSIAD-99-184, June 23, 1999).

Combating Terrorism: Observations on Growth in Federal Programs

(GAO/T-NSIAD-99-181, June 9, 1999).

Combating Terrorism: Analysis of Potential Emergency Response

Equipment and Sustainment Costs (GAO/NSIAD-99-151, June 9, 1999).

Combating Terrorism: Use of National Guard Response Teams Is Unclear

(GAO/NSIAD-99-110, May 21, 1999).

Ballistic Missile Defense: More Common Systems and Components Could

Result in Cost Savings (GAO/NSIAD-99-101, May 21, 1999).
Related GAO Products

Page 90 GAO/NSIAD-00-72 Defense Management

Combating Terrorism: Issues to Be Resolved to Improve Counterterrorism

Operations (GAO/NSIAD-99-135, May 13, 1999).

Combating Terrorism: Observations on Biological Terrorism and Public

Health Initiatives (GAO/T-NSIAD-99-112, Mar. 16, 1999).

Combating Terrorism: Observations on Federal Spending to Combat

Terrorism (GAO/T-NSIAD/GGD-99-107, Mar. 11, 1999).

Combating Terrorism: FBI’s Use of Federal Funds for CountertorrorismRelated Activities (Fiscal Years 1995-1998) (GAO/GGD-99-7, Nov. 20, 1998).

Combating Terrorism: Opportunities to Improve Domestic Preparedness

Program Focus and Efficiency (GAO/NSIAD-99-3, Nov. 12, 1998).

Combating Terrorism: Observations on the Nunn-Lugar-Domenici Domestic

Preparedness Program (GAO/T-NSIAD-99-16, Oct. 2, 1998).

National Missile Defense: Even With Increased Funding Technical and

Schedule Risks Are High (GAO/NSIAD-98-153, June 23, 1998).

Combating Terrorism: Threat and Risk Assessments Can Help Prioritize

and Target Program Investments (GAO/NSIAD-98-74, Apr. 9, 1998).

Cruise Missile Defense: Progress Made but Significant Challenges Remain

(GAO/NSIAD-99-68, Mar. 31, 1999).

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