Civilian and Contractor Workforces: Complete Information Needed to Assess DOD's Progress for Reductions and Associated Savings
Published: 2015-12-23T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: With long-term fiscal challenges likely to continue, DOD must operate strategically and efficiently, including through cost-effective management of its human capital. Section 955 of the NDAA for Fiscal Year 2013 required DOD to, among other things, develop and implement a plan to achieve savings in the total funding for civilian and contractor workforces from fiscal years 2012 through 2017.
Section 955 also includes a provision that GAO review each of the Section 955 reports DOD submits to Congress to determine whether the required savings are being achieved and whether the plan is being implemented consistently with workforce-management laws.
This report addresses the extent to which (1) DOD, as shown in its September 2014 and February 2015 reports, is meeting the requirements specified in section 955 and (2) has achieved the cost savings required under section 955 and identified the savings in these reports. GAO reviewed the two reports DOD has submitted to Congress and supporting documents and interviewed cognizant officials.
section_title: What GAO Found
paragraphs: The Department of Defense's (DOD) September 2014 and February 2015 reports did not fully address most statutory requirements identified in section 955 of the National Defense Authorization Act (NDAA) for fiscal year 2013. Specifically, DOD partially addressed three statutory requirements and did not address three statutory requirements. For example, DOD's September 2014 report to Congress partially addressed the requirement to develop and implement a plan for achieving savings by outlining reductions in its civilian and contractor workforces, but DOD does not describe a process for implementing the planned reductions. Also, DOD did not address savings the department intends to achieve through reductions in the number of military, civilian, and contractor personnel. Instead the report outlined reductions in full-time equivalent (FTE) positions, which may not equate to savings, and did not outline savings in funding for the contractor workforce beyond fiscal year 2015. Without this information, Congress has limited assurance on how the department will achieve required savings and whether the savings will be achieved in a manner that is consistent with workforce-management laws.
Moreover, according to its reports, DOD has made civilian personnel reductions; however, GAO's analysis indicates that the reductions may not achieve the savings required by section 955, and DOD has not provided an explanation of the reasons for the projected shortfall in achieved savings in the contractor workforce. Section 955 requires DOD to achieve savings in the cost of the civilian and contractor workforces between fiscal year 2012 and fiscal year 2017 at least as large in percentage terms as the savings in military basic pay resulting from reductions in military end strength over the same period. In its section 955 reports, DOD reports on reductions to civilian FTEs, but does not report the civilian personnel savings associated with the reductions. Civilian FTEs by themselves, however, may not be reliable measures of the cost of the civilian workforce. For instance, GAO's analysis shows that from fiscal years 2012 through 2016, civilian FTEs declined by 3.3 percent, but civilian personnel costs declined by only 0.9 percent adjusted for inflation. Because DOD's focus has been on making and reporting on FTE reductions, DOD and Congress lack information on the extent to which the reductions will achieve savings, and DOD may risk falling short of the statutory requirement for cost savings in the civilian workforce. In addition, in its fiscal year 2016 budget, DOD shows a planned increase in spending on the contractor workforce that, if carried out, will mean that about half the reduction to contractor workforce spending that DOD has identified as its goal through fiscal 2017 remains to be achieved. Further, GAO's analysis shows that DOD would need to reduce its spending on the contractor workforce by about $4.1 billion from fiscal year 2012 through fiscal year 2017 in order to match the approximately 7.0 percent reduction in military average strength over the same period. DOD has not provided an explanation of the reasons for the shortfall as required by section 955, in part because complying with other statutory requirements has been a main focus of DOD's efforts to limit spending on the contractor workforce. Without this information, it is uncertain whether DOD will achieve the required section 955 savings in contractor spending, which hinders Congress's insight into what additional actions are required to achieve this goal.
section_title: What GAO Recommends
paragraphs: GAO recommends that the Secretary of Defense fully address ongoing section 955 requirements in its next two status reports to Congress. DOD generally concurred with the recommendation.

section_title: Letter
paragraphs: The Department of Defense (DOD) is the nation’s largest employer, with  a total workforce consisting of nearly 2.1 million active-duty and reserve  military personnel, 756,000 full-time equivalent (FTE) civilian personnel,  and 641,000 FTE service contractor personnel. DOD’s civilian and  contractor personnel perform a wide variety of duties and responsibilities,  including mission-essential combat support functions such as logistics  support and maintenance. With long-term fiscal challenges likely to  continue, DOD must operate strategically and efficiently, including  through cost-effective management of its human capital.
Our prior work has emphasized the importance of DOD strategically  determining, as part of its workforce planning, the appropriate workforce  mix to perform the missions of the department, along with assessing  personnel costs and effects on readiness. In May 2013, we found that  DOD had not taken a holistic approach to managing its workforce  requirements to achieve the appropriate balance using all three  components—military, civilian, and contractor—of its total workforce, and  to prioritize the achievement of a workforce sufficiently sized and of the  appropriate mix to carry out DOD’s mission. We recommended that DOD  revise its workforce policies and procedures to address the determination  of the appropriate workforce mix. DOD partially concurred, stating that it  was in the process of issuing guidance to its military, civilian, and  contractor manpower management, and did not believe additional  direction was necessary at the time of the report. As of October 2015,  DOD has not taken action to fully implement the recommendation.
In the context of DOD balancing its civilian and contractor personnel with  declines in military end strength, section 955 of the National Defense  Authorization Act (NDAA) for Fiscal Year 2013 required the Secretary of  Defense to, among other things, develop and implement an efficiencies  plan to achieve savings in the total funding for civilian and contractor  workforces that are not less, as a percentage, than savings in funding for  basic military personnel pay resulting from reductions in military end  strengths from fiscal years 2012 through 2017. Section 955 also required  the Secretary of Defense to issue a series of reports on DOD’s  implementation of that plan, and includes a provision that we review each  of the reports DOD submits to Congress to determine whether the  required savings in the civilian and contractor workforces are being  achieved and whether the plan is being implemented in a manner  consistent with sourcing and workforce-management laws. This report  addresses the extent to which (1) DOD, as indicated in its initial  September 2014 report and February 2015 status report accompanying  the fiscal year 2016 budget request, is meeting the requirements  specified in section 955, and (2) has achieved the cost savings specified  by section 955 and has identified the savings in these reports.
To determine the extent to which DOD, as indicated in its reports, is  meeting the requirements specified in section 955, we analyzed DOD’s  September 2014 and February 2015 reports as well as related  documentation, and compared them to the requirements in section 955.  As of December 2015, these were the only two reports DOD had  submitted. To conduct this assessment, two analysts independently  reviewed DOD’s September 2014 report using a scorecard methodology  and assigned a score as to whether the document (1) addresses, (2)  partially addresses, or (3) does not address the statutory requirements.  The analysts then met to resolve any differences in their respective  independent analyses, and the final assessment was reviewed by both  our Office of General Counsel and team methodologist. In addition, we  reviewed the September 2014 report and related documentation using the  same methodology to assess the extent to which they contain information  regarding compliance with the workforce management laws specified in  the act. We also interviewed DOD and military service officials to  determine the organizations, information, and assumptions involved in  preparing the section 955 reports, and what guidance was provided to  DOD and the military services to implement the savings consistent with  the workforce-management laws specified in the act.
To determine the extent to which DOD has achieved the cost savings  required under section 955 and identified the savings in the reports it has  submitted to Congress, we reviewed and analyzed the civilian and  contractor workforce reductions identified in these reports and associated  budget documents. To assess DOD’s progress towards its goal for civilian  FTE reduction, we calculated, based on DOD’s February 2015 report, (1)  the FTE reduction that occurred from fiscal year 2012 through fiscal year  2014, the most recent year for which actual levels are available, and (2)  the additional reduction that DOD has planned through fiscal year 2017.  We then compared the percentage reduction in civilian FTEs from fiscal  year 2012 to fiscal year 2017 to the percent reduction in military average  strength over the same period.
To assess DOD’s progress toward its goal for the contractor workforces,  we calculated (1) the reduction that would be required for DOD to achieve  its goal of matching the reduction in contractor workforce spending to the  reduction in military average strength from fiscal year 2012 through fiscal  year 2017 that DOD included in its February 2015 report; (2) the  reduction that has occurred from fiscal year 2012 through fiscal year  2014, the most recent year for which actual levels are available; (3) the  increase that DOD has planned through fiscal year 2016, the latest year  for which DOD provides contractor workforce spending levels; and (4) any  shortfall between the required reductions and DOD’s actual and planned  reductions through fiscal year 2017. We also interviewed DOD and  military service officials to obtain an understanding of why they selected  the savings and reductions goals identified in the reports and the  information upon which the goals are based. In addition, to assess the  extent to which reductions in civilian FTEs may result in the required  savings to the civilian workforce, as well as the extent to which reductions  in military average strength result in a similar reduction to military basic  pay, we reviewed DOD budget data on each data series for fiscal years  2012 through 2016 and calculated (1) the annual percentage change from  year to year, and (2) the overall percentage change during this period,  and reviewed these relationships.
We determined that the data contained in DOD’s reports and related  budget materials were sufficiently reliable for the purpose of reporting on  and analyzing reductions to the civilian workforces in the context of data  as presented by DOD. Specifically, we reviewed our previous reports that  used workforce data, reviewed DOD instructions on the preparation and  entering of these data, compared military and civilian personnel and  funding to other data published by DOD, and discussed the reliability of  the data with Office of the Under Secretary of Defense (Comptroller)  (OUSD Comptroller) officials. For more information on our scope and  methodology, see appendix I.
We conducted this performance audit from February 2015 to December  2015 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
subsections: section_title: Background
subsections: section_title: Section 955 Statutory Requirements
paragraphs: In January 2013, Congress enacted the NDAA for Fiscal Year 2013.  Section 955 of the act (section 955) outlines statutory requirements for  the Secretary of Defense to develop a plan to achieve savings in the  civilian personnel and service contractor workforces of DOD. The act  required the Secretary of Defense to develop and implement a plan to achieve savings in the total funding  for civilian and contractor workforces that are not less, as a  percentage, than savings in funding for basic military personnel pay  resulting from reductions in military end strengths from fiscal years  2012 through 2017; ensure that the plan is consistent with policies and procedures  required by 10 U.S.C. § 129a, and to ensure that the savings are not  achieved through unjustified transfers of functions between or among  the military, civilian, and service contractor personnel workforces of  DOD, consistent with authorities available to the department under  sections 129a, 2330a, 2461, and 2463 of title 10 of the United States  Code; provide an initial report including a comprehensive description of the  plan to achieve savings no later than 120 days after enactment of the  NDAA; provide status reports describing the implementation of the plan in the  prior year as part of the budget submitted by the President to  Congress for each of fiscal years 2015 through 2018; in each status report, provide a summary of savings achieved through  personnel reductions and the number of military, civilian, and  contractor personnel reduced; and  in each status report include an explanation where any savings fall  short of the annual target.
section_title: DOD’s Reports and Roles and Responsibilities
paragraphs: DOD has submitted two reports to Congress in response to section 955.  In September 2014, DOD issued its first report in response to section  955. DOD refers to the September 2014 report as its initial report. In  February 2015, DOD provided a status report in budget justification  materials that accompanied the President’s budget request for fiscal year  2016. Both reports were developed by the Office of the Under Secretary  of Defense (Comptroller) (OUSD Comptroller), which is the department’s  principal advisor on budgetary and financial matters and has  responsibilities for developing and executing DOD’s annual budget.  Section 955 also requires that DOD’s plan be consistent with policies and  procedures required under section 129a of title 10 of the United States  Code. According to 10 U.S.C. § 129a, the Under Secretary of Defense for  Personnel and Readiness (USD P&R) has overall responsibility for the  development of guidance on the implementation of policies and  procedures for determining the most appropriate and cost-efficient mix of  military, civilian, and contractor personnel to perform the mission of DOD.  In addition, USD P&R is, among other things, to provide oversight policy,  assess the size and shaping of the civilian workforce, and develop  policies, plans, and programs to ensure the readiness of the total force.
DOD’s September 2014 report outlined reductions achieved in civilian  personnel for fiscal years 2012 and 2013 and planned reductions for  fiscal years 2014 through 2019. The reductions in civilian personnel are  further grouped by military component and civilian hiring status of direct,  reimbursable, or foreign. The report also outlines reductions achieved in  military personnel using military average strength by active, reserve, and  National Guard status for fiscal years 2012 and 2013 and planned  reductions for these personnel for fiscal years 2014 through 2019.  Additionally, the report outlines reductions achieved in funding for  contracted services for fiscal years 2012 and 2013 and planned  reductions for contracted services for fiscal year 2014 and 2015.
Section 955 gave DOD authority to exempt certain civilian and contractor  functions from reductions. Most of the September 2014 report provides  details on these exclusions—for fiscal years 2012 through 2017. As a  result, about 70 percent of the civilian workforce was excluded from the  savings goals over the period. The exclusions are categorized by  personnel functions such as depots, medical, and shipyards as well as by  military component and the department’s defense-wide agencies such as  the Defense Commissary Agency and Defense Contract Audit Agency.  Similar to the September 2014 report, the February 2015 report that was  included in budget justification materials accompanying the President’s  budget for fiscal year 2016 outlines achieved and proposed civilian  personnel reductions for fiscal years 2014 through 2020 and reductions to  contractor personnel spending through fiscal year 2016. In addition, the  proposed reductions in civilian personnel are further categorized by hiring  status, as in the initial report provided in September 2014. Further the  February 2015 report details exclusions taken by the department based  on the categories identified in the initial report—personnel functions,  military components, and DOD’s defense-wide agencies. See table 1 for  an overall summary of the reductions reported by DOD for each  workforce.
section_title: DOD’s Reports Did Not Fully Address Most of the Statutory Requirements
paragraphs: DOD’s September 2014 and February 2015 reports did not fully address  most statutory requirements related to the civilian and contractor  workforces. Specifically, of the six statutory requirements, DOD partially  addressed three statutory requirements and did not address three  statutory requirements. Table 1 summarizes the statutory requirements  and our assessment of the extent to which DOD’s reports addressed  these requirements.
During our discussions with OUSD Comptroller officials, they  acknowledged that both reports did not fully address the requirements of  section 955. Specifically, these officials stated that the reports did not  include a comprehensive description of the implementation plan for the  reductions, that they did not include savings achieved in total funding for  civilian and contractor personnel, and that no specific actions were taken  to ensure implementation would be consistent with workforce  management laws. These officials explained that they did not fully  address all of the requirements because they had to balance meeting the  section 955 requirements with other competing priorities including  completing the President’s budget requests for fiscal year 2015 and 2016.
While DOD developed a plan for reductions in the civilian workforce, it did  not provide details to understand how these reductions would be  achieved or any information demonstrating that the goals were being  achieved. As a result, one of the deadlines for the requirements— providing an initial report, including a comprehensive description of the  plan, no later than 120 days after enactment of Act—has passed, and  Congress does not have information on how the department will achieve  required savings, and whether the savings will be achieved in a manner  that is consistent with workforce-management laws.
section_title: Achieving Required Cost Savings in Civilian Workforce Is Uncertain Due to Incomplete Reporting by DOD, and Planned Increases in Contract Workforce Spending Pose a Challenge to Achieving Required Savings DOD Has Made Civilian Personnel Reductions, but the Reductions May Not Achieve Required Savings
paragraphs: According to its section 955 reports, DOD has made civilian personnel  reductions; however, our analysis shows that the reductions may not  achieve the savings required by section 955. Section 955 requires DOD  to achieve savings in the cost of the civilian and contractor workforces  between fiscal year 2012 and fiscal year 2017 not less than the savings in  military basic pay, in percentage terms, resulting from reductions in  military end strength over the same period, and also requires DOD to  report on the savings achieved in each of its annual status reports. In its  reports, however, DOD provides information on reductions to civilian full- time equivalents (FTE), but does not report the civilian personnel costs  associated with the reductions, and as a result it is not clear whether its  reductions will achieve the savings required under section 955.
According to its September 2014 report, DOD does not project either  military pay or civilian personnel costs beyond the budget year. As a  result, DOD did not provide the information required by section 955.  According to OUSD Comptroller officials, DOD does develop 5-year plans  for civilian FTEs as a part of the process for both the annual budget and  Future Years Defense Program (FYDP). In addition, according to these  officials, FTEs are typically the primary measure they use in managing  and reporting on DOD’s civilian workforce. For example, Office of  Management and Budget Circular A-11, which provides guidance on the  preparation of the President’s budget, uses FTEs as the main measure  for the size of an agency’s civilian workforce in certain contexts. As a  result, OUSD Comptroller chose to use civilian FTEs and military average  strength—which is the closest approximation to FTEs for military  personnel—for the purpose of assessing compliance with section 955’s  savings requirement, rather than reporting savings in the cost of the  civilian workforce compared to savings in military basic pay resulting from  reductions in military end strength over the same period, as section 955  requires.
According to DOD’s reports, it set a goal for achieving compliance with  section 955 of reducing civilian FTEs less exclusions from fiscal year  2012 through fiscal year 2017 by the same amount, in percentage terms,  as military average strength over the same period. As of DOD’s February  2015 report, this goal amounts to approximately a 7.0 percent reduction in  the civilian workforce from fiscal years 2012 through 2017. As discussed  above, under section 955, DOD is permitted to exclude spending on  certain portions of the civilian and contractor workforces from the required  reductions. In its February 2015 report, DOD reported that of its  approximately 776,000 civilian FTEs in fiscal year 2012, approximately  538,000 civilian FTEs, or about 69 percent, are covered by an exclusion.  The approximately 7.0 percent reduction needed to match the reduction  in military average strength applies to the remaining 238,000 civilian  FTEs. In its February 2015 report, DOD reported that it had reduced  civilian FTEs by 15,448 through fiscal year 2014, and has planned for an  additional reduction of about 789 FTEs through fiscal year 2017.  Together, these actual and planned FTE reductions represent a reduction  of 6.8 percent from fiscal year 2012 to fiscal year 2017, compared to the  7.0 percent reduction in military average strength over the same period  DOD set as its goal for achieving compliance with section 955.
Civilian FTEs and military average strength by themselves, however, may  not be reliable measures of the cost of the civilian personnel workforce  and military personnel basic pay, which section 955 requires DOD to use  in measuring the savings it is to achieve. As shown in table 3, from fiscal  year 2012 through fiscal year 2016, DOD’s total civilian personnel costs  increased by 2.9 percent in current year (non-inflation-adjusted) terms  even as total civilian FTEs decreased. In constant (inflation-adjusted)  terms, total civilian personnel costs decreased, though not as much as  civilian FTEs. As a result, reductions to civilian FTEs may not achieve  commensurate savings, and larger FTE reductions may be required in  order for DOD to achieve the savings required by section 955.  Additionally, reductions in spending on military basic pay may have been  more or less than reductions in military average strength over this period,  depending on whether inflation-adjusted figures are used. As a result,  using reductions in spending on military basic pay resulting from  reductions in military end strength as its benchmark for savings, as  section 955 requires, could mean that, depending on the treatment of  inflation, either a smaller or larger reduction could be required for DOD to  achieve the savings required by section 955 than if DOD were to continue  to use reductions in military average strength as its benchmark. The  effect of this difference over the period from fiscal years 2012 through  2016 is shown in table 3.
OUSD Comptroller and military service officials told us that they do not  normally project civilian or military personnel costs beyond the budget  year, and therefore this information is not typically available. However,  they also noted that it may be possible to estimate costs for the purpose  of section 955 compliance. For example, some military service officials  said they were able to estimate the cost associated with positions  excluded under section 955, which, if subtracted from the total funding for  the civilian workforce, could be used to help estimate the amount of  savings under section 955. In addition, an OUSD Comptroller official  indicated military basic pay spending could be estimated based on budget  year basic pay rates and projected strength levels.
Standards for Internal Control for the Federal Government note that  agencies need operational and financial data to determine whether an  agency is achieving its compliance requirements under various laws and  regulations, monitor performance, and allocate resources. Because  DOD’s focus has been on making and reporting FTE reductions, not cost  savings as required by 955, DOD and Congress do not have information  on the extent to which the reductions will achieve savings, and DOD may  risk falling short of the statutory requirement for cost savings in the civilian  workforce.
subsections: section_title: DOD Had Made the Majority of Required Reductions to Contractor Workforce Spending, but a Planned Increase in Fiscal Year 2016 Poses a Challenge to Achieving Required Savings
paragraphs: Its September 2014 report indicated that DOD was on track to complete a  majority of the reduction in spending on the contractor workforce required  to meet its stated goal by fiscal year 2017. However, in its fiscal year  2016 budget, DOD shows a planned increase in such spending for fiscal  year 2016, which would leave about half of the reduction required through  fiscal year 2017 still to be achieved. DOD has not provided an  explanation of the reasons for the shortfall as required by section 955.
Based on our analysis of DOD’s section 955 reports and related  documents, DOD would need to reduce its spending on the contractor  workforce by about $4.1 billion between fiscal year 2012 and fiscal year  2017 in order to match the approximately 7.0 percent level of reduction in  military average strength over the same period. As of its September  2014 report, DOD’s planned reductions through fiscal year 2015 showed  that, if they were maintained though fiscal year 2017, DOD would have  been on track to achieve its stated goals for complying with section 955.  In its September 2014 report, DOD reported a budgeted level of spending  on its contractor workforce of about $53.1 billion for fiscal year 2015—a  reduction of about $4.7 billion compared to its fiscal year 2012 spending  of about $57.8 billion, which, if maintained through fiscal year 2017, would  exceed its required reduction of $4.1 billion from fiscal year 2012 though  fiscal year 2017.
In its fiscal year 2016 budget, however, DOD has planned an increase in  funding for the contractor workforce over fiscal year 2014 levels that could  lead to a gap between DOD’s stated goal for reductions and the  reductions it has planned. As shown in figure 2, DOD reported having  reduced contractor service spending between fiscal years 2012 and 2014  by about $3.2 billion, or about 80 percent of the required reduction  through fiscal year 2017. Between fiscal years 2014 and 2016, however,  DOD budgeted for an increase in contractor workforce spending of about  $1.2 billion. If carried out, this will mean that about half the reduction to  contractor workforce spending through fiscal year 2017 that DOD has  identified as its goal remains to be made.
An OUSD Comptroller official told us that the increase in spending on the  contractor workforce between fiscal years 2014 and 2016 was driven by a  number of different needs, including additional requirements for facilities  maintenance and contracted services to support readiness and training  needs. In addition, the official stated that complying with spending  limitations under section 808 of the NDAA for Fiscal Year 2012, rather  than section 955, has been a main focus of their efforts to limit spending  on the contractor workforce in recent years. This was in part because,  while section 955 requires that a certain level of savings be achieved by  fiscal year 2017, section 808 was a recurring requirement for fiscal years  2012 through 2015, and has been a main focus for those years. The  official also explained that the contracted services spending reported by  DOD is volatile in part because some categories of contract services,  such as maintenance of facilities and equipment, can be deferred based  on the department’s needs and available resources, including statutory  limitations on spending such as sections 808 and 955.
Section 955 requires DOD to report on the savings achieved in each of its  annual status reports and that, in any case in which savings fall short of  the annual targets, the report shall include an explanation of the reasons  for the shortfall. As discussed above, while DOD’s status report  acknowledges the shortfall, it does not provide an explanation of the  reasons for the shortfall as required by section 955, nor does it provide an  explanation of how it plans to address the shortfall by fiscal year 2017.  During our discussions, OUSD Comptroller officials acknowledged that  their reports did not fully address the requirements of section 955. These  officials explained that they did not fully address all of the requirements  because they had to balance meeting the 955 requirements with other  competing priorities including completing the President’s budget requests  for fiscal year 2015 and 2016. In addition, OUSD Comptroller officials  stated that they had assumed that the reports addressed all statutory  requirements because the officials had briefed the congressional defense  committees several times as they were preparing the reports and were  not aware of any concerns the committees expressed regarding the  reports. Without this information, however, it is uncertain whether DOD  will achieve the required section 955 savings in contractor spending or  whether Congress will have the information needed to have insight into  what additional actions are required to achieve this goal.
section_title: Conclusions
paragraphs: At a time when the entire federal government is facing fiscal challenges  that are likely to continue, DOD must plan strategically for reductions to  its civilian and contractor workforces to achieve savings. Fully meeting all  of the requirements of section 955 would be a step in the right direction in  this regard, and would provide Congress with assurance that the  department is making progress. However, DOD’s 2014 and 2015 reports  did not meet the statutory requirements, and DOD needs to act quickly to  ensure that its remaining two reports address these requirements and  provide the needed assurance. Without information on actual savings in  the civilian workforce rather than reductions in FTEs, Congress and DOD  will not be positioned to determine whether the reductions will support  section 955’s overall savings requirements. Furthermore, decision makers  in Congress will not be able to assess progress on meeting the savings  requirements for the civilian and contractor workforces within the statutory  time frame without information in the remaining status reports on any  shortfalls and actions DOD is taking to address these shortfalls.
section_title: Recommendations for Executive Action
paragraphs: To help ensure that Congress has the necessary information to provide  effective oversight over DOD’s workforces, we are recommending that the  Secretary of Defense direct the Office of the Under Secretary of Defense  (Comptroller) (OUSD Comptroller), in collaboration with the Under  Secretary of Defense for Personnel and Readiness (USD P&R), to  address ongoing requirements in section 955 and include this information  in status reports that accompany the President’s budget request for fiscal  years 2017 and 2018. The information to be included in future status  reports includes a comprehensive description of a plan to achieve savings for the  civilian workforce and contractor workforce for fiscal year 2012  through fiscal year 2017; a description demonstrating that the plan is consistent with policies  and procedures implementing workforce-management laws and steps  the department is taking to ensure that no unjustified transfers  between workforces take place as part of the implementing plan; status reports to be included in the President’s budget request for  fiscal years 2017 and 2018 describing the implementation of the plan  in the prior year; the cost of covered civilian personnel and military basic pay for fiscal  years 2012 through 2017, and an assessment of these costs in regard  to their compliance with the statutory requirements set forth in section  955; and an explanation for any shortfall in its reductions for the civilian and  contractor workforces, and a description of actions DOD is taking to  achieve the required savings.
section_title: Agency Comments
paragraphs: We provided a draft of this report to DOD for review and comment. In its  written comments DOD concurred with all five parts of our  recommendation and provided clarifying comments for three of the parts.  DOD’s comments are reprinted in their entirety in appendix II.
We are sending copies of this report to the appropriate congressional  committees; the Secretary of Defense, the Under Secretary of Defense  (Comptroller); and the Under Secretary of Defense (Personnel and  Readiness). In addition the report is available at no charge on the GAO  website at http://www.gao.gov.
If you or your staff have any questions about this report, please contact  me at (202) 512-3604 or farrellb@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix III.
section_title: Appendix I: Scope and Methodology
paragraphs: To determine the extent to which the Department of Defense’s (DOD)  September 2014 and February 2015 reports met the requirements  specified in section 955 of the National Defense Authorization Act (NDAA)  for fiscal year 2013, we reviewed DOD instructions and other related  documentation to identify DOD’s efforts to address the statutory  requirements of section 955. Specifically, we reviewed DOD instructions  governing the roles and responsibilities of the Office of the Under  Secretary of Defense (Comptroller) (OUSD Comptroller), Office of the  Under Secretary of Defense for Personnel and Readiness (USD P&R),  and the military services. We interviewed knowledgeable officials from the  OUSD Comptroller, USD P&R, and Department of the Army, Navy, and  Air Force offices with responsibility for section 955. We discussed roles,  responsibilities, information, and assumptions involved in preparing the  plan and DOD reports. Additionally, we had discussions with OUSD  Comptroller, USD P&R, and service officials to determine what guidance  was provided to DOD to implement the plan, as described in its  September 2014 report, consistent with workforce-management laws.  Also, we provided written questions to each of the services to obtain their  perspectives on the roles, responsibilities, information, and assumptions  involved in preparing their proposed reductions.
Further, we requested documentation on the assumptions and data used  to compile the September 2014 report and budget justification materials  accompanying the President’s budget request for fiscal year 2016. We  requested documentation on DOD guidance to address section 955  requirements, but DOD officials said there were not aware of any  documentation. We therefore relied on interviews with DOD and service  offices to obtain this information. To determine the extent to which DOD  met the requirements specified in section 955 of the NDAA for fiscal year  2013, we analyzed DOD’s September 2014 report and February 2015  report and compared them to the statutory requirements in section 955.  We conducted this assessment with two analysts independently reviewing  DOD’s September 2014 report using a scorecard methodology and  assigned a score to determine whether the document (1) addresses, (2)  partially addresses, or (3) does not address the statutory requirements.  The analysts then met to resolve any differences in their respective  independent analyses.
To determine the extent to which DOD has achieved the cost savings  required under section 955 and identified the savings in its September  2014 report and February 2015 report, we reviewed and analyzed the  civilian and contractor workforce reductions identified in these reports and  associated budget documents. To assess DOD’s progress towards its  goal for civilian full-time equivalent (FTE) reductions, we calculated,  based on DOD’s February 2015 report, (1) the FTE reduction that  occurred from fiscal year 2012 through fiscal year 2014, the most recent  year for which actual values are available, and (2) the additional reduction  that DOD has planned through fiscal year 2017. We then compared the  percentage reduction in civilian FTEs from fiscal year 2012 to fiscal year  2017 to the percentage reduction in military average strength over the  same period.
To assess the extent to which reductions in civilian FTEs may result in the  required savings to the civilian workforce, as well as the extent to which  reductions in military average strength result in a similar reduction to  military basic pay, we reviewed DOD budget data on each data series for  fiscal years 2012 through 2016 and calculated (1) the annual percentage  change from year to year, and (2) the overall percentage change during  this period. We then compared the relationships between (1) civilian FTEs  and personnel costs—both drawn from DOD’s annual Operations and  Maintenance overview submitted to Congress as part of its budget  justification, and (2) military average strength as reported in the section  955 report and military basic pay as reported in DOD and service budget  documents. In comparing these relationships, we used both current year  (non-inflation-adjusted) and fiscal year 2012 constant (inflation-adjusted)  dollars for civilian personnel costs and military basic pay. To produce the  inflation-adjusted figures, we used the following deflators, as published by  DOD in its National Defense Budget Estimates for Fiscal Year 2016: for  civilian compensation, the “Civilian Pay” deflator; for civilian benefits, the  “Total Excluding Pay, Fuel, and Medical” deflator; for military basic pay,  the “Military Pay” deflator.
To assess DOD’s progress towards its goal for the contractor workforce,  we calculated the planned percentage reduction to military average  strength from fiscal year 2012 through fiscal year 2017 that DOD included  in its status report accompanying the fiscal year 2016 budget. Using that  percentage reduction, we calculated the reduction that would be required  to achieve an equivalent percentage reduction in contractor workforce  spending. We then calculated, based on the data provided by DOD in its  report and related documentation, (1) the reduction that has occurred  from fiscal year 2012 through fiscal year 2014, the most recent year for  which actual values are available; (3) the additional increase that DOD  has planned through fiscal year 2016, the latest year for which DOD  provides contractor workforce spending data; and (4) any shortfall  between the required reductions and DOD’s actual and planned  reductions through fiscal year 2017. To the extent that our analysis  identified a shortfall, we interviewed OUSD Comptroller officials to  understand the reasons for the shortfall. We also interviewed OUSD  Comptroller officials about how and why they chose the goals and data  that were included in their reports, as well as alternative approaches to  collecting the data required by section 955.
According to OUSD Comptroller officials, the data on military, civilian, and  contractor workforces included in their 955 reports and budget materials  are based on data from the Comptroller Information System and Program  Resources Collection Process. We determined that these data were  sufficiently reliable for the purpose of reporting on and analyzing  reductions to the civilian workforces. Specifically, we reviewed previous  GAO reports that used workforce data, reviewed DOD instructions on the  preparation and entering of this data, compared military and civilian  personnel and funding to other data published by DOD, and discussed  the reliability of the data with OUSD Comptroller officials.
We conducted this performance audit from February 2015 to December  2015 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
section_title: Appendix II: Comments from the Department of Defense
section_title: Appendix III: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Vincent Balloon, Assistant  Director; Timothy Carr; Timothy DiNapoli; Beth Reed Fritts; Amie Lesser;  Daniel Ramsey; Terry Richardson; Ophelia Robinson; John Van Schaik;  Allen Westheimer; Erik Wilkins-McKee; and Michael Willems made key  contributions to this report.