**GAO-03-98**                      Published: Jan 01, 2003. Publicly Released: Jan 01, 2003.                  

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## Highlights

In its 2001 performance and accountability report on the Department of Defense (DOD), GAO identified systemic and specific problems with management processes related to strategic planning, human capital, support infrastructure, financial and information management, acquisition reform, contracting processes, and logistics reengineering. The information GAO presents in this report is intended to help to sustain congressional attention; facilitate a departmental focus on continuing to make progress in addressing these challenges' and others that have arisen since 2001; and ultimately overcome them. This report is part of a special series of reports on governmentwide and agency-specific issues.

DOD is transforming its business operations, and its current leadership places high priority and great attention on transformation. However, significant management problems continue to impact the economy, effectiveness, and efficiency of DOD's business processes. This places mission capabilities at risk by unnecessarily spending funds that could be directed to higher priorities such as modernization and readiness. Strengthen strategic planning and budgeting: DOD developed a new strategic plan and management framework, but shortcomings in strategic planning and budgeting processes provide little assurance that DOD manages and operates programs effectively or ensures adequate program accountability. Hire, support, and retain military and civilian personnel: DOD has instituted benefits, but junior officer shortages, retention problems, and civilian workforce reductions and imbalances create a workforce not balanced by age or experience and that puts at risk the orderly transfer of institutional knowledge. Overcome support infrastructure inefficiencies: DOD emphasizes reform but lacks an overarching business transformation strategy; infrastructure costs continue to consume nearly 44 percent of its budget, detracting from DOD's ability to spend funds on more critical needs such as weapon system modernization and readiness. Confront and transform pervasive, decades-old financial management problems: DOD has adopted business transformation initiatives, but long-standing financial management problems adversely affect its ability to control costs, ensure basic accountability, anticipate future costs and claims on the budget, measure performance, maintain funds control, prevent fraud, and address pressing management issues. Effectively manage information technology investments: DOD is investing heavily in modernizing its information technology, but management weaknesses have limited success. At the same time, information security weaknesses limit DOD's ability to ensure that current and future systems are not compromised. Improve DOD's weapons acquisition process: DOD has undertaken acquisition reforms, but cost increases, schedule delays, and performance shortfalls pervade the acquisition process; reforms have not produced consistent improvements in program outcomes. Improve processes and controls to reduce contract risk: DOD is trying to reduce contract risk, but problems in service contracting, techniques and approaches, payments, health contract management, and human capital undermine DOD's ability to effectively acquire goods and services. Improve quality of logistics support: DOD has 400 improvement initiatives ongoing, but longstanding problems in logistics processes, systems, and operations result in decreases in the quality and timeliness of logistics support. This is particularly the case for its high-risk inventory area.

Below are the reports in this series:

High-Risk Series: An Update GAO-03-119, Jan 1, 2003

High-Risk Series: Strategic Human Capital Management GAO-03-120, Jan 1, 2003

High-Risk Series: Protecting Information Systems Supporting the Federal Government and the Nation's Critical Infrastructures GAO-03-121, Jan 1, 2003

High-Risk Series: Federal Real Property GAO-03-122, Jan 1, 2003

Added later:

Pension Benefit Guaranty Corporation Single-Employer Insurance Program: Long-Term Vulnerabilities Warrant 'High Risk' Designation GAO-03-1050SP, Jul 23, 2003

**Performance and Accountability Series:**

Major Management Challenges and Program Risks: A Governmentwide Perspective GAO-03-95, Jan 1, 2003

Major Management Challenges and Program Risks: Department of Agriculture GAO-03-96, Jan 1, 2003

Major Management Challenges and Program Risks: Department of Commerce GAO-03-97, Jan 1, 2003

Major Management Challenges and Program Risks: Department of Defense GAO-03-98, Jan 1, 2003

Major Management Challenges and Program Risks: Department of Education GAO-03-99, Jan 1, 2003

Major Management Challenges and Program Risks: Department of Energy GAO-03-100, Jan 1, 2003

Major Management Challenges and Program Risks: Department of Health and Human Services GAO-03-101, Jan 1, 2003

Major Management Challenges and Program Risks: Department of Homeland Security GAO-03-102, Jan 1, 2003

Major Management Challenges and Program Risks: Department of Housing and Urban Development GAO-03-103, Jan 1, 2003

Major Management Challenges and Program Risks: Department of the Interior GAO-03-104, Jan 1, 2003

Major Management Challenges and Program Risks: Department of Justice GAO-03-105, Jan 1, 2003

Major Management Challenges and Program Risks: Department of Labor GAO-03-106, Jan 1, 2003

Major Management Challenges and Program Risks: Department of State GAO-03-107, Jan 1, 2003

Major Management Challenges and Program Risks: Department of Transportation GAO-03-108, Jan 1, 2003

Major Management Challenges and Program Risks: Department of the Treasury GAO-03-109, Jan 1, 2003

Major Management Challenges and Program Risks: Department of Veterans Affairs GAO-03-110, Jan 1, 2003

Major Management Challenges and Program Risks: U.S. Agency for International Development GAO-03-111, Jan 1, 2003

Major Management Challenges and Program Risks: Environmental Protection Agency GAO-03-112, Jan 1, 2003

Major Management Challenges and Program Risks: Federal Emergency Management Agency GAO-03-113, Jan 1, 2003

Major Management Challenges and Program Risks: National Aeronautics and Space Administration GAO-03-114, Jan 1, 2003

Major Management Challenges and Program Risks: Office of Personnel Management GAO-03-115, Jan 1, 2003

Major Management Challenges and Program Risks: Small Business Administration GAO-03-116, Jan 1, 2003

Major Management Challenges and Program Risks: Social Security Administration GAO-03-117, Jan 1, 2003

Major Management Challenges and Program Risks: U.S. Postal Service GAO-03-118, Jan 1, 2003

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## Topics

Government Operations

Civilian employeesContract oversightDefense cost controlMilitary personnel retentionDefense procurementFinancial managementInformation managementInformation securityInformation technologyInstitutional knowledgeInternal controlsLabor forceMilitary personnelPersonnel managementStrategic planningWeapons systems