GAO-09-160CG

Transforming DO

Business Operatio

Gene L. Dodaro

Defense Finance 2008

October 27, 2008
GAO-09-160CG 

Outline

• GAO Efforts to Assist Upcomin

Transition

• Fiscal Challenges Facing DOD• Opportunities to Improve DOD

Business Operations
GAO-09-160CG 

No Ordinary Transiti

Dynamics Shaping our Env

• A nation at war and facing first 

security change

• Near-term and long-term econo

challenges

• Financial Turmoil• Economic Slowdown• Long-term fiscal imbalance as bac

• Personnel and Performance Ch
GAO-09-160CG 

Near Term: 

GAO Role in Financial R

• Oversight role critically important 

Economic Stabilization Act

• Congress turned to GAO• Auditors of FDIC, FHFA and gove

wide statements

• Advice and analysis in reassessi

regulatory structure
GAO-09-160CG 

Long Term: 

GAO Simulations on Federal F

• Short term issues require respon• Long term unsustainable path wi

need attention

• Need to reexamine base, reform 

entitlements and review revenue 
GAO-09-160CG 

Composition of Fed

Spending

21%

10%

14%

27% 28%

2%

7%

14%

32%

45%

1967 1987 

Defense Social Security

Net interest

All other spending

Source: GAO analysis of data from the Office of Management and Budget.
GAO-09-160CG 

Social Security, Medicare, and 

Spending as a Percent of 

05

1015202530

2008 2020 2030 2040 2050 20

Percent of GDP

Social Secu

Medicai

Medicar

Source: GAO analysis of data from the Office of the Chief Actuary, Social Security Administration, Office Medicaid Services, and the Congressional Budget Office.Note: Social Security and Medicare projections based on the intermediate assumptions of the 2008 Trusbased on CBO’s January 2008 short-term Medicaid estimates and CBO’s December 2007 long-term Meexcess cost growth consistent with the 2008 Trustees intermediate assumptions.
GAO-09-160CG 

DOD Budget Authority FY 20

(Excluding Global War on T

$289.9

$331.1

$368.5 $376.6

$43

$400.9 $418.5

$0

$100$200$300$400$500$600

FY01 FY02 FY03 FY04 FY05 FY06 FY

Source: DOD.Note: amounts in nominal dollars.

Dollars in Billions
GAO-09-160CG 

Transition:

GAO Objectives

• Provide insight into pressing national i• Highlight the growing need for innovat

integrated approaches to solve nationachallenges

• Document targeted opportunities to co

resources that can be applied to new i

• Underscore critical capacity-building n

individual agencies that will affect implof whatever new priorities are pursued

• Help inform the management improve

agendas of Congress and the new adm

• Update High Risk list
GAO-09-160CG 

DOD Faces Growing Fiscal C

• DOD faces a number of near-term and 

fiscal pressures

• Extended operations have taken a toll on re

rebuilding will be complex and costly

• Rising personnel costs for pay, benefits, and • Significant cost growth in weapon systems p• At same time, DOD is pursuing broad-based 

• Reshape and grow the force • Modernize and transform capabilities
GAO-09-160CG 

Opportunities Exist to Improv

Business Operations

• Achieving affordable defense plan req

fiscal discipline

• Billions of dollars spent to sustain key 

business operations

• Since first attempt at financial stateme

major DOD component 20 years ago, reported weaknesses in DOD’s busine
GAO-09-160CG 

Opportunities Exist to Improv

Business Operations

DOD High Risk Areas

• Overall (Management) Approach t

Transformation

• Business System Modernization• Personnel Security Clearance Pro• Support Infrastructure Manageme• Financial Management• Supply Chain Management• Weapons Systems Acquisition• Contract Management
GAO-09-160CG 

Excess Secondary Inve

• DOD estimates investment in its s

is more than $150 billion a year

• Value of secondary inventory (spa

has grown by tens of billions of dosubstantial amounts are excess 

• Difficulties in estimating lead times 

inefficient use of funds, and potenshortages/excesses

• Need to strengthen accountability 

management of secondary invento
GAO-09-160CG 

Weapons System Cost 

Schedule Growth

•

Funding in DOD investment accou

nts 

(RDT&E and procurement) has significantly increased since 2000

•

Problems, such as cost 

growth and schedule delays, continue

•

More money did not make existing programs well and additional unexecutable

programs got started

•

Across-the-board 

improvements require fundamental changes to requirements, funding, and acquisition systems

(Fiscal year 2008 doll

Annual funding in investment accountsTotal commitmenfor Major Defense Acquisition Progr

Source: GAO analysis of 
GAO-09-160CG 

Contract Management Ch

• DOD is increasingly relying on contractors t

services to help meet critical missions and sacquisition functions

• DOD spent more than $315 billion acquiring 

services in fiscal year 2007, more than douspent 6 years earlier. 

• Weaknesses lead to poor outcomes

• Lack of well defined requirements• Use of ill suited business arrangements• Inadequate number of trained acquisition/oversig

• Need to strengthen workforce training/capa

reexamine mix, roles, and responsibilities ocivilian, and contractors
GAO-09-160CG

Transforming DO

Business Operatio

Gene L. Dodaro

Defense Finance 2008

October 27, 2008
GAO-09-160CG 

On the Web

Web site: www.gao.gov/cghome.htm

Contact

Chuck Young, Managing Director, Public AffairsYoungC1@gao.gov (202) 512-4800 

U.S. Government Accountability Office441 G Street NW, Room 7149Washington, D.C. 20548

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