Defense Headquarters: Improved Data Needed to Better Identify Streamlining and Cost Savings Opportunities by Function
Published: 2016-06-30T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Facing budget pressures, DOD is seeking to reduce its headquarters activities by identifying streamlining opportunities. DOD has multiple layers of headquarters activities with complex, overlapping relationships, such as OSD, the Joint Staff, the military service secretariats and staffs, and defense agencies.
Committee reports accompanying bills for the National Defense Authorization Act for Fiscal Year 2015 included provisions for GAO to identify DOD's headquarters reduction efforts to date and patterns in functional areas related to DOD's headquarters activities. This report (1) describes the status of DOD's initiatives since 2014 to improve the efficiency of headquarters organizations and identify related cost savings, and (2) assesses the extent to which DOD has reliable data to assess headquarters functions and their associated costs.
GAO assessed DOD-wide headquarters-related efficiency efforts, and a DOD-wide data set that identifies positions with headquarters functions.
section_title: What GAO Found
paragraphs: Since 2014, and in part to respond to congressional direction, the Department of Defense (DOD) has undertaken initiatives intended to improve the efficiency of headquarters organizations and identify related cost savings, but it is unclear to what extent these initiatives will help the department achieve the potential savings it has identified. In a 2015 review of its six business processes, DOD identified $62 billion to $84 billion in potential cumulative savings opportunities for fiscal years 2016 through 2020. According to DOD officials, the department is currently pursuing four headquarters-related initiatives, but these were not completed, or results were not available, in time for GAO to assess their effect. The table below provides a description of these initiatives.
Source: GAO analysis of DOD information. GAO-16-286
DOD has taken steps to improve some available data on headquarters organizations, but does not have reliable data for assessing headquarters functions and associated costs. Consistent with a GAO recommendation, DOD has established a framework for major DOD headquarters activities, is working to identify which organizations or portions of organizations meet a new definition of major DOD headquarters activities, and plans to update a key database to improve visibility of headquarters resources. However, the one department-wide data set that identifies military and civilian positions by specific DOD headquarters functions contains unreliable data because DOD has not aligned these data with its revised headquarters definition. Further, DOD does not have plans to collect information on costs associated with functions within headquarters organizations. This may hinder DOD's ability to conduct an in-depth review for purposes of consolidating and streamlining headquarters functions. Without alignment of headquarters function data with the revised headquarters definition and collection of reliable information on costs associated with headquarters functions, DOD may be unable to accurately assess specific functional areas or identify potential streamlining and cost savings opportunities.
section_title: What GAO Recommends
paragraphs: To further DOD's efforts to identify headquarters-related efficiency opportunities, GAO recommends that DOD align its data on positions that have headquarters-related DOD function codes with the revised definition of major DOD headquarters activities and collect information on costs associated with functions within headquarters organizations. DOD concurred with the recommendations.

section_title: Letter
paragraphs: Like the rest of the federal government, the Department of Defense  (DOD) is operating in a constrained budget environment and is facing  difficult decisions about how to allocate its resources to meet its broad  and varying mission requirements across the world. In 2010, the  Secretary of Defense announced a department-wide efficiency initiative to  reduce overhead costs and reinvest the savings in sustaining DOD’s  current force structure and modernizing its weapons portfolio. Since  then, the department has pursued reductions in the size of staff within  headquarters activities. DOD has multiple layers of headquarters  activities with complex, overlapping relationships among them. Such  layers include the Office of the Secretary of Defense (OSD), the Joint  Staff, and the military services’ secretariats and staffs. These  headquarters activities across the department have responsibilities that  include developing guidance, reviewing performance, allocating  resources, and conducting mid- to long-range budgeting as they oversee,  direct, and control subordinate organizations or units.
The congressional defense committees have recognized DOD’s efforts to  identify and implement headquarters-related efficiencies. In doing so, the  defense committees have also raised questions about whether the  department implements these efficiencies based on assessments of  functions, which they believe could result in identification of greater cost  savings, and about DOD’s poor visibility into resources being devoted  across organizations to similar functions and missions. The National  Defense Authorization Act for Fiscal Year 2016 directs the Secretary of  Defense to conduct a comprehensive review of DOD headquarters,  among other things, for purposes of consolidating and streamlining  headquarters functions. The department’s functional review is to address  the extent to which certain groupings of DOD headquarters  organizations—such as OSD, the military departments, the defense  agencies, and other organizations—have duplicative staff functions and  services and could therefore be consolidated, eliminated, or otherwise  streamlined. In addition, the act also directs the Secretary of Defense to  modify the headquarters reduction plan required by section 904 of the  National Defense Authorization Act for Fiscal Year 2014 to ensure it  achieves savings in the total funding available for major DOD  headquarters activities by fiscal year 2020 that are not less than 25  percent of the baseline amount. The act defines major DOD  headquarters activities, which include organizations such as OSD; the  Joint Staff; military service secretariats and staff; and headquarters  elements of the combatant commands, defense agencies, and DOD field  activities. Finally, the act allows documented savings achieved pursuant  to the 25 percent headquarters reduction to be counted toward another of  the act’s requirements, namely, that the Secretary of Defense implement  a plan to ensure the department achieves not less than $10 billion in cost  savings from the headquarters, administrative, and support activities of  the department by fiscal year 2019.
Accounting for the resources devoted to headquarters has been a long- standing challenge for DOD, as our body of work on these issues has  shown. In October 1997, as part of our review on the mid-1990s military  drawdown, we found that total personnel and costs of defense  headquarters were significantly higher than were being reported.  Specifically, we found that three-fourths of subordinate organizations  excluded from management headquarters accounting were actually  performing management or management support functions, and such  accounting masked the true size of DOD’s headquarters organizations.  We recommended that the Secretary of Defense revise DOD’s guiding  headquarters instruction—DOD Instruction 5100.73—to expand its  coverage to include personnel assigned to all noncombat organizations  that are subordinate to DOD management headquarters. DOD partially  concurred with this recommendation and revised its headquarters  instruction in 1999, 2007, and again in 2012. However, our more recent  work has found that DOD’s challenges in identifying and tracking  headquarters personnel and other resources devoted to headquarters  have continued. For example, in March 2012, we found that DOD’s  headquarters instruction does not identify all current major DOD  headquarters activity organizations or address the tracking of contractors  that perform headquarters functions. Accordingly, we recommended that  the department update DOD Instruction 5100.73. DOD partially concurred  with this recommendation. DOD stated that it has established a revised  definition of major DOD headquarters activities in an August 2015  memorandum from the Deputy Secretary of Defense. However, DOD has  not updated the instruction to include the organizations, or portions of  organizations, that should be included in its count of headquarters  activities in accordance with this definition. Further, DOD has not  specified how contractors performing headquarters functions will be  identified and included in headquarters reporting. Finally, in January  2015, we found that selected DOD headquarters organizations neither  determined their personnel requirements as part of a systematic  requirements-determination process, nor had procedures in place to  ensure periodic reassessments of these requirements to help them  proactively identify efficiencies and limit personnel growth. We therefore  recommended that DOD conduct a systematic determination of personnel  requirements for these organizations; submit these personnel  requirements, among other things, to Congress; and establish and  implement procedures to conduct periodic assessments of these  personnel requirements. DOD partially concurred with these  recommendations but has not yet implemented them. See appendix I for  a discussion of our prior work since 2012 on accounting for defense  headquarters resources and on our related recommendations and their  respective status.
House Report 113-446 and Senate Report 113-176 accompanying  proposed bills for the National Defense Authorization Act for Fiscal Year  2015 include provisions that we identify DOD’s headquarters reduction  efforts to date and any trends in personnel and other resources being  devoted to selected functional areas within and across related  headquarters organizations. This report (1) describes the status of DOD’s  initiatives since 2014 to improve the efficiency of headquarters  organizations and identify related cost savings, and (2) assesses the  extent to which DOD has reliable data to assess headquarters functions  and their associated costs.
To describe the status of DOD’s initiatives to improve the efficiency of  headquarters organizations and identify related cost savings, we  identified and reviewed DOD headquarters-related efficiency efforts  begun since 2014. We obtained documentary and testimonial evidence  from senior officials in the Office of the Deputy Chief Management Officer  to determine the scope and status of these headquarters-related  efficiency efforts and what actions, if any, DOD has taken as a result of  the efforts.
To assess the extent to which DOD has reliable data to assess  headquarters functions and their associated costs, we took two main  steps.
First, we identified and reviewed DOD-wide information sources that  would provide data on the department’s workforce in terms of whether  the workforce is performing headquarters work, and the specific  headquarters functions that the workforce is performing. We  discussed these sources with officials from the Office of the Deputy  Chief Management Officer, the Office of the Under Secretary of  Defense for Personnel and Readiness, and the Office of the Director  of Cost Analysis and Program Evaluation. For this report, we analyzed  data and information related to the Inherently Governmental /  Commercial Activities (IGCA) Inventory because it was the only  DOD-wide data set identified that allowed us to determine the military  and civilian workforce—in the form of authorized positions—by both  headquarters and function. Specifically, we obtained data from  each of the military services’ manpower databases used to populate  DOD’s IGCA Inventory for fiscal years 2010 through 2014, which  was the most recent 5-year period available during our review. We  then identified and analyzed these headquarters positions for each  service and for each fiscal year by number of military and civilian  positions, function, grade, and location. We discussed the data, and  the reasons for any patterns or changes we observed in them, with  military service representatives. DOD was unable to provide similar  data for organizations outside the military departments known as the  Fourth Estate in time for our review, so we collected data on the  Fourth Estate’s military and civilian positions directly from the IGCA  Inventory for fiscal years 2012 to 2014. We assessed the data we  received against federal standards for internal control, which call for  an agency to have relevant, reliable, and timely information in order to  run and control its operations.
Second, we attempted to calculate the approximate costs of the  headquarters positions and associated functions. Because the IGCA  Inventory does not contain estimated costs for positions, we used the  service databases’ pay grade and location information assigned to the  military and civilian positions in an attempt to determine the estimated  cost to DOD of filling headquarters positions. We were unable to do a  similar calculation for the Fourth Estate because Fourth Estate data  on positions came from the IGCA Inventory, which does not contain  pay grade and location information needed for a cost calculation. We  assessed our and DOD’s efforts to calculate headquarters-related  costs against federal standards for internal control regarding having  relevant, reliable, and timely information, and noted the importance of  a key step that we have previously identified for conducting  fragmentation, overlap, and duplication reviews.
We assessed the reliability of the IGCA-related data sets by reviewing  responses to data questionnaires sent to knowledgeable service and  Fourth Estate officials, discussing the data with these officials, and  conducting our own cross-checks of the data to assess their  reasonableness. We found the data to be insufficient for identifying trends  in the number and type of headquarters positions and for estimating costs  associated with headquarters positions, as discussed in this report.  However, we found the data to be sufficiently reliable for presenting 1  year’s worth of data for purposes of illustrating the types of analyses of  department-wide headquarters functions that could be conducted if DOD  improved the reliability of these data. Finally, we were unable to obtain  data on contracted services personnel, either their positions or associated  costs, because DOD does not identify contracted services personnel by  the type of headquarters function they perform. More details on our  objectives, scope, and methodology can be found in appendix III.
We conducted this performance audit from January 2015 to June 2016 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
paragraphs: DOD Instruction 5100.73, Major DOD Headquarters Activities, establishes  a system to identify and manage the number and size of major DOD  headquarters activities. The instruction also provides an approved list of  major DOD headquarters activities, including  the Offices of the Secretary of the Army and Army Staff;  the Office of the Secretary of the Navy and Office of the Chief of  Naval Operations;
Headquarters, Marine Corps; and  the Offices of the Secretary of the Air Force and Air Staff.
All personnel working within these headquarters organizations are  considered to be performing major headquarters activities functions.  According to the instruction, other headquarters organizations include  portions of the defense agencies, DOD field activities, and the  combatant commands, along with their subordinate unified commands  and respective service component commands. For example, according to  DOD Instruction 5100.73, only personnel performing major headquarters  activities functions in the Defense Information Systems Agency and Air  Combat Command’s Intelligence Squadron would be considered  headquarters, while personnel performing other functions would be  excluded.
Several DOD organizations have responsibilities related to major DOD  headquarters activities, including those summarized below.
The Office of the Deputy Chief Management Officer (ODCMO) is  responsible for ensuring that DOD components are accurately  identifying and accounting for major DOD headquarters activities,  according to criteria established in DOD Instruction 5100.73. In  addition, the Deputy Chief Management Officer has primary  responsibility set forth under department guidance related to  improving the efficiency and effectiveness of operations across DOD’s  business functions, and is authorized by the Chief Management  Officer to act as the Principal Staff Assistant to issue policy and  guidance regarding matters relating to the management and  improvement of DOD business operations. This has included  responsibilities related to identifying and monitoring implementation of  cost savings opportunities and efficiencies across DOD’s business  areas.
The Under Secretary of Defense for Personnel and Readiness,  according to DOD Instruction 5100.73, is responsible for reviewing  and issuing guidance over, and consolidating changes in, manpower  authorizations and personnel levels for major DOD headquarters  activities, among other things. In addition to these responsibilities, the  Under Secretary of Defense for Personnel and Readiness also  compiles the annual Defense Manpower Requirements Report, which  provides DOD’s manpower requirements, to include manpower  assigned to major headquarters activities, as reflected in the  President’s budget request for the current fiscal year. The Under  Secretary of Defense for Personnel and Readiness is also responsible  for developing an annual guide for DOD components to use when  compiling their IGCA Inventory submissions in response to statutory  and regulatory reporting requirements. In addition, the Under  Secretary of Defense for Personnel and Readiness shares  responsibility—with the Under Secretary of Defense for Acquisition,  Technology and Logistics and the Office of the Under Secretary of  Defense (Comptroller)—for issuing guidance for compiling and  reviewing the Inventory of Contracted Services. The Under  Secretary of Defense for Personnel and Readiness in particular  compiles the inventories prepared by the components.
The heads of DOD components, including the Secretaries of the  military departments, the Chairman of the Joint Chiefs of Staff, and  the heads of other DOD components have responsibility, according to  this instruction, for maintaining a management information system that  identifies the number of personnel and total operating costs of major  DOD headquarters activities, and reporting on these data to the Under  Secretary of Defense (Comptroller).
Since 2010, DOD has recognized that it must reduce the cost of doing  business, including reducing the rate of growth in personnel costs and  finding further efficiencies in overhead and headquarters, in its business  practices, and in other support activities. Therefore, the department has  pursued headquarters-related reduction efforts in recent years to realize  cost savings. See appendix IV for additional details on these efforts.
section_title: Department-Wide Efficiency Initiatives That Include Headquarters Are Under Way
paragraphs: Since 2014, and in part to respond to congressional direction, DOD has  undertaken initiatives intended to improve the efficiency of its business  processes, which include headquarters organizations, and identify related  cost savings, but it is unclear to what extent these initiatives will help the  department achieve the savings it has identified. In May 2015, DOD  concluded its Core Business Process Review, which was intended to  apply lessons learned and information technology approaches from the  commercial sector to the department’s six core business processes— management of human resources, healthcare, financial flow, acquisition  and procurement, logistics and supply, and real property—in order to  save money and resources while improving mission performance.  Through this review, ODCMO identified $62 billion to $84 billion in  potential cumulative savings opportunities across the six business  processes for fiscal years 2016 through 2020. The review identified that  these potential savings opportunities could be achieved through civilian  personnel attrition and retirements to occur without replacements over the  next 5 years, matching labor productivity in comparable industries or  sectors, and improving core processes such as rationalizing  organizational structures to reduce excessive layers, optimizing contracts,  and using information technology to eliminate or reduce manual  processes. According to ODCMO officials, DOD ultimately concluded  that these potential savings opportunities could not entirely be achieved  through these means.
Nevertheless, ODCMO officials noted that DOD is already engaging in  initiatives that, in effect, address the opportunities highlighted by the Core  Business Process Review. The four department-led initiatives we  reviewed that include headquarters organizations are concurrent and  have varied scopes. Two of the initiatives are focused on OSD and its  related organizations—one of these initiatives consists of a series of  business process and systems reviews and the other initiative is a review  focused on reducing the number of layers in OSD. A third initiative is  focused specifically on contracted services requirements for DOD  organizations outside the military departments known as the Fourth  Estate. Finally, the fourth initiative—the review of the organization and  responsibilities of DOD—is focused on updating or adjusting  organizational relationships and authorities across the entire department,  with a final report to possibly be issued later in 2016. The four initiatives  were not completed, or their results were not available, in time for us to  assess their effect, and therefore it is unclear to what extent they will  contribute toward the savings identified by the Core Business Process  Review. The initiatives are described in more detail below.
subsections: section_title: Business Process and Systems Reviews
paragraphs: In August 2014, DOD announced Business Process and Systems  Reviews (BPSR), which, according to BPSR implementation guidance,  are intended to review business processes and the supporting information  technology systems within selected organizations in OSD and associated  defense agencies and DOD field activities. The purpose of these BPSRs  is to provide senior officials with information to clarify whether their  organizations are aimed at departmental outcomes, to identify resources  allocated to outcomes and any obstacles to achieving those outcomes,  and to identify activities that might be improved or eliminated. As of April  2016, DOD had completed BPSRs for five of nine organizations. In  some cases, organizations have taken steps to implement potential  improvement and savings opportunities identified by the BPSRs. For  example, as a result of a review of the ODCMO, the Deputy Secretary of  Defense approved the implementation of a single service provider for the  Pentagon’s information technology operations in May 2015. In other  cases, it is unclear whether organizations have begun taking steps to  implement the opportunities identified by the BPSR reviews. For example,  the Office of the Assistant Secretary of Defense for Energy, Installations,  and Environment identified a potential opportunity to reduce military  construction costs by up to 3 percent through revisions to antiterrorism  standards for DOD-owned buildings, but noted that this potential  opportunity must first be subject to thorough analysis to fully appreciate  its validity and return on investment. The department is currently working  to complete BPSR reviews for four other organizations. According to  ODCMO officials, DOD may conduct more BPSRs in the future but  currently has no specific plans to do so once these four are completed.
section_title: OSD Organizational Delayering Initiative
paragraphs: In July 2015, DOD announced an effort to reduce layers of management  and staff—known as delayering—in the management structure of OSD  and associated defense agencies and DOD field activities. According to  OSD officials and DOD’s fiscal year 2017 budget request, the department  intends to use this review to help respond to certain provisions in the  National Defense Authorization Act for Fiscal Year 2016, namely, the 25  percent reduction to the headquarters baseline amount by fiscal year  2020 and the $10 billion in cost savings from headquarters,  administrative, and support activities by fiscal year 2019. For this effort  to reduce OSD organizational layers, the ODCMO has directed these  organizations, with the support of an ODCMO team, to rationalize  organizational layers and supervisory spans of control, as well as to  identify redundant and obsolete workload and capture potential cost  savings. ODCMO’s guidance to the organizations conducting the  delayering reviews recommends, among other things, that the number of  organizational layers in OSD should not be more than five, and that the  capabilities and functional areas that have been historically assigned to  an OSD organization will remain within the same organization, unless a  functional assessment allows an opportunity for cross-organizational  partnership and shared work activities. According to officials from  ODCMO and the Office of the Under Secretary of Defense for Personnel  and Readiness, the organizations have identified the civilian positions  they intend to eliminate or restructure as part of the initiative. However,  the results of the initiative are not yet publicly available. The Deputy Chief  Management Officer stated that the department would issue a report, at  an unspecified time, that will include the cost savings identified by this  OSD Organizational Delayering initiative. According to the department’s  budget request for fiscal year 2017, the objective of this OSD delayering  review is to achieve $1.5 billion in cost savings from fiscal year 2018  through fiscal year 2021.
section_title: Services Requirements Review Board Initiative
paragraphs: Also in July 2015, DOD announced that it would seek to improve the  outcomes of contracted services through standardized processes and  governance structures. This initiative is intended, according to OSD  officials, to help the department achieve the 25 percent headquarters  reduction and the $10 billion in headquarters-related cost savings, which  were directed by the National Defense Authorization Act for Fiscal Year  2016. In December 2015, the Deputy Chief Management Officer  directed Fourth Estate organizations to convene internal review boards  known as Services Requirements Review Boards to review their  requirements for contracted services. These boards, which DOD has  implemented for OSD, the defense agencies, and DOD field activities, are  intended to assess every service contract within these organizations that  is worth $10 million or more to determine whether a valid requirement for  that contract remains or whether the funds could be better employed  elsewhere within the same organization. The results of these reviews are  then considered by DOD leadership using a senior review panel,  comprising the Deputy Chief Management Officer, the Principal Deputy  Under Secretary of Defense for Acquisition, Technology and Logistics,  and the Principal Staff Assistant for the organization being reviewed. In  March 2016, the Deputy Chief Management Officer reported that the  objective of this effort would be to achieve savings of at least 5 percent in  spending on such contracts, but did not specify the baseline from which  the 5 percent would be measured. According to the department’s budget  request for fiscal year 2017, DOD expects to realize savings through this  initiative of $1.9 billion in direct appropriations by 2021 within OSD, the  defense agencies, and DOD field activities, and additional savings in  working capital-funded entities. The Deputy Chief Management Officer  also stated that the department would issue a single report that will  include the cost savings identified by the Services Requirements Review  Board, as well as the OSD Organizational Delayering initiative, but did not  specify a time frame for doing so.
section_title: Review of the Organization and Responsibilities of DOD
paragraphs: In January 2016, the Deputy Secretary of Defense noted that the  Secretary of Defense, as part of his institutional reform agenda, directed  the Deputy Chief Management Officer and the Director for Joint Force  Development (J7) to lead a review of organizations and responsibilities of  the DOD. The objective of this review is to make recommendations for  updates or adjustments to organizational relationships and authorities,  based on the department’s experiences operating under the Goldwater- Nichols Department of Defense Reorganization Act of 1986. The  department intends to use this review, according to ODCMO officials, to  address the provision in the National Defense Authorization Act for Fiscal  Year 2016 that requires DOD to conduct a comprehensive review of  headquarters and administrative and support activities for purposes of  consolidating and streamlining headquarters functions. To conduct the  review, ODCMO officials stated that the department has developed five  working groups, led jointly by OSD and Joint Staff officials, with each  working group addressing a different topic: optimization of command and  control relationships to meet current and future security challenges;  improved coordination and elimination of overlaps between OSD and the  Joint Staff; the possible establishment of U.S. Cyber Command as a  unified combatant command; potential improvements to the requirements  and acquisition decision-making processes; and increased flexibility in  law and policy governing joint duty qualifications. In addition, as part of  this review of DOD’s organization and responsibilities, the military  departments have established their own working groups to assess the  structures of their respective secretariats and staffs to identify potential  improvements. According to ODCMO officials, most of the working groups  planned to complete their reviews and brief the Secretary of Defense by  March 2016. The results of these reviews were not available at the time of  our review. However, in a speech in April 2016, the Secretary of Defense  provided an overview of some preliminary recommendations that may  result from this review, such as clarification to the role of the Chairman of  the Joint Chiefs of Staff, changes to joint personnel management, and  adapting combatant commands to new functions. According to ODCMO  officials, the department may issue a report with findings and  recommendations on the overall review later in 2016.
section_title: DOD Does Not Have Reliable Data on Headquarters Functions and Costs, Which Hinders Assessment
paragraphs: DOD has taken steps to improve some available data on headquarters  organizations, but does not have reliable data for assessing headquarters  functions and associated costs. Consistent with a past GAO  recommendation, DOD published a new framework describing major  headquarters organizations and stated that it has established a new  definition of major DOD headquarters activities (although the department  has not yet updated its headquarters instruction to reflect this definition).  In addition, DOD is working to identify which organizations or portions of  organizations meet a new definition of major DOD headquarters activities  that was included in the National Defense Authorization Act for Fiscal  Year 2016, and intends to revise its headquarters instruction upon  completion of this effort. Finally, the department plans to update a key  resource database, the Future Years Defense Program (FYDP), to  improve visibility of headquarters resources. However, the one  department-wide data set that identifies specific DOD headquarters  functions contains unreliable data because the department has not  aligned these data with its definition of major headquarters activities, nor  does it have plans to collect information on the costs associated with  functions within headquarters organizations.
subsections: section_title: DOD Is Taking Steps to Improve Some Headquarters-Related Data
paragraphs: In 2015, the department began an effort to improve some available  headquarters data, which addresses a fundamental problem that our prior  reports have cited and DOD has acknowledged as a longstanding  challenge. Specifically, in August 2015, DOD published a framework  describing the major headquarters activities and stated that it has  established a new definition for its major DOD headquarters, although the  department has not yet updated its guiding instruction on headquarters to  reflect this new definition. The National Defense Authorization Act for  Fiscal Year 2016 was enacted in November 2015 and included a revised  definition of major DOD headquarters activities. Since that time,  according to ODCMO officials, DOD has been working to determine  which organizations or portions of organizations meet the new definition  in the act in order to establish a more accurate headquarters baseline. In  March 2016, the Deputy Chief Management Officer reported that the  department plans to complete this effort by June 2016, thereby  institutionalizing an authoritative headquarters baseline for purposes of  reporting and tracking. At this time, the department also plans to update  its guiding instruction on headquarters with the new definition. According  to ODCMO officials, tracking would include revising the headquarters- related coding of program elements in its key resource database—the  FYDP—to ensure they are appropriately designated as headquarters  according to the new definition, and, where necessary, to break down  these program element codes into headquarters and nonheadquarters  components to better reflect allocation of headquarters resources.  According to DOD officials, they have begun updating the resource  coding in the FYDP and plan to complete this effort by late 2016.
The re-baselining effort took on increased urgency when, in August 2015,  the Deputy Secretary of Defense announced a new 25 percent cost- reduction target for major DOD headquarters activities (the military  departments, OSD staff, the Joint Staff, defense agencies, DOD field  activities, and combatant commands) in anticipation of a congressional  mandate for additional reductions. In addition, the National Defense  Authorization Act for Fiscal Year 2016 allows documented savings  achieved pursuant to this 25 percent headquarters reduction to be  counted toward another of the act’s requirements, namely, that the  Secretary of Defense implement a plan to ensure the department  achieves not less than $10 billion in cost savings from the headquarters,  administrative, and support activities of the department by fiscal year  2019. According to ODCMO officials, DOD plans to meet this $10 billion  savings requirement by identifying existing efficiency initiatives whose  savings will be applied toward the savings total. For example, ODCMO  officials stated that the ODCMO will apply the savings that were identified  through an information technology consolidation initiative, through its  OSD Organizational Delayering initiative, as well as through its efforts to  streamline contracted services by means of the Services Requirements  Review Board. In March 2016, the DCMO provided an interim response  to Congress identifying that the fiscal year 2017 President’s Budget  included $7.8 billion in new efficiencies over the next 5 years, but did not  provide more specific information on when and from where in the budget  these efficiencies would be realized or how the department would apply  them to the $10 billion savings required by Congress. ODCMO’s interim  response stated that the department will issue a report that provides a  breakdown of the $10 billion cost savings by year, but did not provide a  time frame for doing so.
section_title: DOD Does Not Have Reliable Data on Headquarters Functions or a Plan to Collect Costs Associated with Headquarters Functions
paragraphs: Part of the reason that DOD must undertake concurrent reviews and  studies to achieve efficiencies is that the department does not have  reliable data in two main areas. First, available DOD-wide data sources  on headquarters functions are not aligned with the department-wide  definition of headquarters. We attempted to conduct an independent  review to assess headquarters functions, and we considered several  department-wide data sources but found limitations in each. Second,  DOD’s data on headquarters functions do not include information on  costs associated with functions within headquarters organizations, nor,  according to OSD officials, does the department have plans to collect  such information. According to federal standards for internal control, an  agency must have relevant, reliable, and timely information to run and  control its operations. This information is required to make operating  decisions, monitor performance, and allocate resources, among other  things. The lack of reliable data may hinder DOD’s ability to conduct a  comprehensive review for purposes of consolidating and streamlining  headquarters functions, among other things, as DOD was directed to do  in the National Defense Authorization Act for Fiscal Year 2016.
subsections: section_title: DOD-Wide Data Sources Are Not Aligned with Headquarters Definition
paragraphs: According to OSD officials, although DOD has several sources to  organize and categorize its workforce, only one department-wide data  set, known as the Inherently Governmental / Commercial Activities  (IGCA) Inventory, identifies specific DOD headquarters functions in the  form of authorized military and civilian positions. In the IGCA Inventory,  each DOD position is assigned a function based on the type of work  performed, and 38 of these 306 functions are headquarters-related.  Examples of such headquarters-related functions include Operation  Planning and Control, Military Education and Training, and Systems  Acquisition. Navy guidance specifically notes that the IGCA Inventory  may be used as a total force shaping tool and a starting point for future  manpower reviews or initiatives. For an example of the type of  information that reliable data on headquarters functions could produce,  see appendix V, which provides our analysis of the headquarters  functions with the highest number of positions for each military service  and Fourth Estate component in fiscal year 2014.
However, we found that because the data in this data set were not  aligned with headquarters definitions, they were not sufficiently reliable to  assess these functions. IGCA Inventory guidance calls for components  to assign headquarters-related DOD function codes to positions based on  a headquarters definition that, while derived from DOD Instruction  5100.73, does not include all elements of the definition in that instruction.  As a result, we found that the data on the number and functions of DOD’s  military and civilian headquarters positions have varying levels of  accuracy. For example, in fiscal year 2014, only 79 percent of authorized  positions in OSD were considered headquarters within the IGCA  Inventory, even though OSD is considered a headquarters organization in  its entirety under both the definition provided in DOD Instruction 5100.73  and the new definition. Officials from all four military services informed us  that, from fiscal year 2010 through fiscal year 2014, they discovered  some positions that had been incorrectly coded as headquarters and  undertook varying efforts to correct them. As a result, we have more  confidence in data presented in the later years of the 2010 to 2014 period  we reviewed, but data limitations in the earlier years covered by our  review precluded us from assessing trends of these functions over time.
While service officials told us they had taken steps to improve  consistency of the headquarters-related DOD function codes in the IGCA  Inventory, DOD does not have plans to update the data set to ensure that  the headquarters-related DOD function codes in the IGCA Inventory are  also consistent with the new headquarters definition. According to OSD  officials, they have no plans to do so because the IGCA Inventory is not  the department’s authoritative source for headquarters data. However,  DOD and service officials have noted that, over time, officials have  inconsistently interpreted what should be counted as headquarters  according to the instruction, resulting in varying counts of headquarters  positions depending on the source of the data. For example, in its Fiscal  Year 2015 Defense Manpower Requirements Report, DOD included an  estimate for fiscal year 2014 of 108,073 headquarters positions across  the department, that is, OSD, the military services, the Joint Staff and  combatant command headquarters, and the defense agencies and DOD  field activities. In contrast, for these same organizations, DOD reported a  total of 74,221 headquarters positions in its IGCA Inventory for fiscal year  2014 and a total of 61,046 headquarters positions in a May 2015  headquarters-related report, known as the Section 904 report. We  believe that alignment of data sets containing headquarters-related  codes, such as the IGCA Inventory, with the department-wide  headquarters definition will provide senior DOD officials with the relevant,  reliable, and timely information they need to make operating decisions,  monitor performance, and allocate resources. Without alignment of data  on department-wide military and civilian positions that have headquarters- related DOD function codes with the authoritative, revised definition of  major DOD headquarters activities, the department will not have reliable  data to enable senior officials to accurately assess headquarters  functions, target specific functional areas for further analysis, or identify  potential streamlining opportunities.
section_title: DOD Does Not Plan to Collect Information on Functions with Headquarters Organizations
paragraphs: ODCMO officials stated that, once they have finalized the headquarters  definition, they plan to complete an effort to improve the accuracy of the  resource levels attached to headquarters organizations by ensuring that  organizations are appropriately designated as headquarters in the FYDP  and, as needed, breaking these organizations down into smaller  headquarters and nonheadquarters program element codes. However,  these actions will not provide reliable information on the costs associated  with the various functions within those headquarters organizations.  According to ODCMO officials, the department does not have plans to  collect such information because it believes that improving the accuracy  of the resources associated with headquarters organizations will be  sufficient to support any future DOD assessments of headquarters. We  believe, however, that, detailed information that provides visibility into the  costs associated with functions within headquarters organizations would  better facilitate identification of opportunities for consolidation or  elimination across organizational boundaries.
Moreover, the defense committees have previously noted that, to achieve  significant savings, the department must focus on consolidating and  eliminating organizations and personnel that perform similar functions and  missions. Army officials have also noted that being able to track the  Army’s manpower by function could be useful to understand cost drivers  in the budget, and could provide a starting point to help them determine  the best application of structure and manpower. In addition, the National  Defense Authorization Act for Fiscal Year 2016 directs the Secretary of  Defense to conduct a comprehensive review of DOD headquarters,  among other things, for purposes of consolidating and streamlining  headquarters functions. This functional review is to address the extent to  which certain groupings of DOD headquarters organizations—such as  OSD, the military departments, the defense agencies, and other  organizations—have duplicative staff functions and services and could  therefore be consolidated, eliminated, or otherwise streamlined. We have  previously identified key steps to help analysts and policymakers conduct  reviews to identify and evaluate instances of duplication, fragmentation,  and overlap. One step in conducting such a review is to identify the  potential positive and negative effects of any duplication, fragmentation,  or overlap by assessing program implementation, outcomes and impact,  and cost-effectiveness. In particular, we found that assessing and  comparing the performance and cost-effectiveness of programs can help  analysts determine which programs, or aspects of programs, to  recommend for actions such as consolidation or elimination.
In the absence of reliable data on the costs of functions with headquarters  organizations, we obtained data from each of the military services’  manpower databases on all military and civilian headquarters positions  for fiscal years 2010 through 2014. However, we could not reliably  calculate the estimated costs to DOD of filling those positions due to  inconsistencies and incomplete information in the pay grade data we  collected from the Army and the Air Force. For example, the Army could  not provide data to distinguish whether the 15 percent of its headquarters  positions allocated to its reserve components in 2014 were full- or part- time—a factor needed to estimate costs. In the Air Force, we were unable  to match civilian pay scales to 16 percent of Air Force civilian  headquarters positions in 2014. For the Fourth Estate headquarters  positions, DOD was unable to provide pay grade and location information  from its Fourth Estate data system in time for our review due to other  ongoing, headquarters-related initiatives. However, according to our  analysis of data-reliability questionnaires sent to Fourth Estate  organizations, 25 of the 38 Fourth Estate organizations, or 66 percent,  reported that their data in the Fourth Estate data system for the period  from fiscal year 2010 through fiscal year 2014 were incomplete or  inaccurate.
Once the definition of major DOD headquarters activities is published in  DOD guidance, without reliable information on the costs associated with  functions within headquarters organizations—through revisions to the  IGCA Inventory or another method—the department will not be able to  accurately estimate resources associated with specific headquarters  functions, which in turn could help senior officials identify streamlining  opportunities, make decisions, monitor performance, and allocate  resources.
section_title: Conclusions
paragraphs: As it faces a potentially extended period of fiscal constraints, DOD has  concluded that reducing the resources it devotes to headquarters is an  area where cost savings can be achieved. The defense committees  agree, but have expressed concern about DOD’s ability to identify  significant cost savings given the department’s poor visibility into the total  resources being devoted across organizations to similar functions and  missions. Further, Congress has recently directed the Secretary of  Defense to ensure that the department achieves savings in the total  funding available for major DOD headquarters activities by fiscal year  2020 that are not less than 25 percent of the baseline amount, and to  implement a plan to ensure the department achieves not less than $10  billion in cost savings from its headquarters, administrative, and support  activities by fiscal year 2019. Since 2014, DOD has undertaken  concurrent initiatives of varying scope that include improving the  efficiency of headquarters organizations and identifying related cost  savings, but, because they are not yet completed, it is unclear to what  extent these initiatives will help the department to achieve the $62 billion  to $84 billion in cost savings opportunities that it has identified. DOD’s  limited information on which positions perform which headquarters  functions and their associated costs hinders its ability to identify potential  cost savings associated with opportunities to consolidate and streamline  these headquarters functions. While the department has taken steps to  respond to a new headquarters definition and has begun to align its key  resource database—the FYDP—to better reflect the new definition, these  efforts are not yet completed and the department does not have plans to  align these efforts with the existing data on department-wide military and  civilian positions that have headquarters-related DOD function codes or to  collect information on the costs associated with functions within  headquarters organizations. Without such alignment and such  information, the department will not be well-positioned to reliably conduct  an assessment of its headquarters workforce by function to identify  opportunities for streamlining and related cost savings. Conducting such  functional analysis could allow DOD officials to raise questions about the  number and types of positions with particular headquarters functions and  to better understand cost drivers and identify efficiency-related  opportunities within the department.
section_title: Recommendations for Executive Action
paragraphs: To further DOD’s efforts to identify opportunities for more efficient use of  headquarters-related resources, we recommend that the Secretary of  Defense direct the Deputy Chief Management Officer, in coordination with  the Under Secretary of Defense for Personnel and Readiness, the  Chairman of the Joint Chiefs of Staff, the Secretaries of the military  departments, and the heads of the defense agencies and DOD field  activities, to take the following two actions: align DOD’s data on department-wide military and civilian positions  that have headquarters-related DOD function codes with the revised  definition of major DOD headquarters activities in order to provide the  department with reliable data to accurately assess headquarters  functions and identify opportunities for streamlining or further analysis;  and once this definition is published in DOD guidance, collect reliable  information on the costs associated with functions within headquarters  organizations—through revisions to the IGCA Inventory or another  method—in order to provide the department with detailed information  for use in estimating resources associated with specific headquarters  functions, and in making decisions, monitoring performance, and  allocating resources.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to DOD for review and comment. In  written comments on a draft of this report, DOD concurred with our two  recommendations. DOD’s comments are summarized below and  reprinted in their entirety in appendix VI.
DOD concurred with our recommendations to (1) align DOD’s data on  department-wide military and civilian positions that have headquarters- related DOD function codes with the revised definition of major DOD  headquarters activities, and (2) once this definition is published in DOD  guidance, collect reliable information on the costs associated with  functions within headquarters organizations—through revisions to the  IGCA Inventory or another method.
In its response, DOD stated that it is currently updating civilian and  military manpower and total obligation authority baselines for major DOD  headquarters activities to align with the new headquarters-related  definition and framework. The department stated that this effort includes  updating data architecture for coding major DOD headquarters activities,  by program element code, in the Future Years Defense Program, and  noted that this data architecture will serve as the authoritative  methodology to account for headquarters manpower and resources in the  future. Further, DOD stated that, once those efforts are complete and the  new framework is codified in an update to DOD Instruction 5100.73, the  department will determine how best to align the function code taxonomy,  which is the source of data for the IGCA Inventory, with the revised  framework and definitions. We agree that determining how to align the  data set from the IGCA Inventory with the revised framework and  definitions is an important first step and, if implemented, would address  the intent of our first recommendation.
Finally, DOD stated in its comments that the updated data architecture  will enable the department to collect consistent, comprehensive, and  authoritative information on the costs associated with major DOD  headquarters activities. We also agree that updating the data architecture  for coding major DOD headquarters activities will help improve the  department’s visibility of headquarters-related resources. As the  department works to complete this effort, we believe that it should  develop a means of collecting reliable information on the costs associated  with functions within headquarters organizations. Doing so would provide  the department with detailed information for use in estimating resources  associated with specific headquarters functions, and, if implemented,  would address the intent of our second recommendation.
We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, the Under Secretary of Defense  for Personnel and Readiness, the Deputy Chief Management Officer, the  Chairman of the Joint Chiefs of Staff, the Secretaries of the military  departments, and the heads of the defense agencies and DOD field  activities. 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) 512-3489 or pendletonj@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 VII.
section_title: Appendix I: Prior GAO Work on Accounting for Resources Devoted to Department of Defense Headquarters
paragraphs: We have issued several reports since 2012 on defense headquarters and  on the Department of Defense’s (DOD) challenges in accounting for the  resources devoted to headquarters.
In March 2012, we found that while DOD has taken some steps to  examine its headquarters resources for efficiencies, additional  opportunities for savings may exist by further consolidating organizations  and centralizing functions. We also found that DOD’s data on its  headquarters personnel lacked the completeness and reliability  necessary for use in making efficiency assessments and decisions.
Recommendations: We recommended that the Secretary of Defense  direct the Secretaries of the military departments and the heads of the  DOD components to continue to examine opportunities to consolidate  commands and to centralize administrative and command support  services, functions, or programs. Additionally, we recommended that  the Secretary of Defense revise DOD Instruction 5100.73, Major DOD  Headquarters Activities, to include all headquarters organizations;  specify how contractors performing headquarters functions will be  identified and included in headquarters reporting; clarify how  components are to compile the information needed for headquarters- reporting requirements; and establish time frames for implementing  actions to improve tracking and reporting of headquarters resources.  DOD concurred with the first recommendation and partially concurred  with the second recommendation in this report.
Status: DOD officials have stated that, since 2012, several efforts  have been made to consolidate or eliminate commands and to  centralize administrative and command support services, functions, or  programs. For example, Office of the Secretary of Defense (OSD)  officials said that DOD has begun efforts to assess which  headquarters organizations are not currently included in its guiding  instruction on headquarters, and will update the instruction. However,  as of June 2016, DOD has not completed its update of the instruction  to include all major headquarters activity organizations. OSD officials  stated that they would begin updating this instruction upon completion  of the effort to assess headquarters organizations. In addition, DOD  has not specified how contractors will be identified and included in  headquarters reporting, and has not identified a time frame for action.
In May 2013, we found that authorized military and civilian positions at the  geographic combatant commands—excluding U.S. Central Command— had increased by about 50 percent from fiscal year 2001 through fiscal  year 2012, primarily due to the addition of new organizations, such as the  establishment of U.S. Northern Command and U.S. Africa Command, and  increased mission requirements for the theater special operations  commands. We also found that DOD’s process for sizing its combatant  commands had several weaknesses, including the absence of a  comprehensive, periodic review of the existing size and structure of these  commands and inconsistent use of personnel-management systems to  identify and track assigned personnel.
Recommendations: We recommended that the Secretary of Defense  direct the Chairman of the Joint Chiefs of Staff to revise its guiding  instruction on managing joint personnel requirements—Chairman of  the Joint Chiefs of Staff Instruction 1001.01A, Joint Manpower and  Personnel Program—to require a comprehensive and periodic  evaluation of whether the size and structure of the combatant  commands meet assigned missions. DOD did not concur with this  recommendation, but we continue to believe that institutionalizing a  periodic evaluation of all authorized positions would help to  systematically align manpower with missions and add rigor to the  requirements process. The department concurred with the remaining  three recommendations, namely, that the Secretary of Defense: (1)  direct the Chairman of the Joint Chiefs of Staff to revise Chairman of  the Joint Chiefs of Staff Instruction 1001.01A to require the combatant  commands to identify, manage, and track all personnel and to identify  specific guidelines and time frames for the combatant commands to  consistently input and review personnel data in the system; (2) direct  the Chairman of the Joint Chiefs of Staff, in coordination with the  combatant commanders and Secretaries of the military departments,  to develop and implement a formal process to gather information on  authorized manpower and assigned personnel at the service  component commands; and (3) direct the Under Secretary of Defense  (Comptroller) to revise volume 2, chapter 1, of DOD’s Financial  Management Regulation 7000.14R to require the military  departments, in their annual budget documents for operation and  maintenance, to identify the authorized military positions and civilian  and contractor full-time equivalents at each combatant command and  provide detailed information on funding required by each command for  mission and headquarters-support, such as civilian pay, contract  services, travel, and supplies.
Status: With regard to the recommendation to revise the instruction to  require the commands to improve visibility over all combatant  command personnel, DOD has established a new manpower tracking  system, the Fourth Estate Manpower Tracking System, that is to track  all personnel data, including temporary personnel, and identify  specific guidelines and timelines to input/review personnel data. With  regard to the recommendation to develop and implement a formal  process to gather information on authorized manpower and assigned  personnel at the service component commands, as of August 2015,  the process outlined by DOD to gather information on authorized and  assigned personnel at the service component commands is the same  as the one identified during our prior work. With regard to the  recommendation to revise DOD’s Financial Management Regulation,  in December 2014 DOD indicated that the Office of the Under  Secretary of Defense (Comptroller) had reinstituted an existing  budgetary document, the President’s Budget 58, Combatant  Command Direct Funding, and directed the military services to use  this budget exhibit in its guidance on submission of the fiscal years  2016 through 2020 program and budget. The President’s Budget 58  provides the department’s justification and visibility for changes in the  level of resources required for each combatant command. While the  President’s Budget 58 does not provide detailed information on the  number of authorized military or civilian positions and contractor full- time equivalents at each combatant command, it does identify the  funding required by each combatant command for mission and  headquarters support, which, in general, satisfies the intent of our  recommendation.
In June 2014, we found that DOD’s functional combatant commands  have shown substantial increases in authorized positions and costs to  support headquarters operations since fiscal year 2004, primarily to  support recent and emerging missions, including military operations to  combat terrorism and the emergence of cyberspace as a warfighting  domain. Further, we found that DOD did not have a reliable way to  determine the resources devoted to management headquarters as a  starting point for DOD’s planned 20 percent reduction to headquarters  budgets, and thus we concluded that actual savings would be difficult to  track. We recommended that DOD reevaluate the decision to focus  reductions on management headquarters to ensure meaningful savings  and set a clearly defined and consistently applied baseline starting point  for the reductions. Further, we recommended that DOD track the  reductions against the baselines in order to provide reliable accounting of  savings and reporting to Congress.
Recommendations: We recommended that the Secretary of Defense  reevaluate the decision to focus reductions on management  headquarters to ensure the department’s efforts ultimately result in  meaningful savings. DOD partially concurred, questioning, in part, the  recommendation’s scope. We agreed that the recommendation has  implications beyond the functional combatant commands, which was  the scope of our review, but the issue we identified is not limited to  these commands. We also recommended that the Secretary of  Defense (1) set a clearly defined and consistently applied starting  point as a baseline for reductions; and (2) track reductions against the  baselines in order to provide reliable accounting of savings and  reporting to Congress. DOD concurred with these two  recommendations.
Status: To address the two recommendations with which it concurred,  DOD said that it planned to use the Future Years Defense Program  data to set the baseline going forward. DOD stated that it was  enhancing data elements within a DOD resource database to better  identify management headquarters resources to facilitate tracking and  reporting across the department. A December 2014 Resource  Management Decision directed DOD components to identify and  correct inconsistencies in major headquarters activities in authoritative  DOD systems and reflect those changes in the fiscal year 2017  program objective memorandums or submit them into the manpower  management system, but this effort has not yet been completed.
In January 2015, we found that, over the previous decade, authorized  military and civilian positions have increased within the DOD  headquarters organizations we reviewed—OSD, the Joint Staff, and the  Army, Navy, Marine Corps, and Air Force secretariats and staffs—but the  size of these organizations has recently leveled off or begun to decline.  In addition, we found that the DOD headquarters organizations we  reviewed do not determine their personnel requirements as part of a  systematic requirements-determination process, nor do they have  procedures in place to ensure that they periodically reassess these  requirements as outlined in DOD and other guidance. Current personnel  levels for these headquarters organizations are traceable to statutory  limits enacted in the 1980s and 1990s to force efficiencies and reduce  duplication. However, we found that these limits have been waived since  fiscal year 2002 and have little practical utility because of statutory  exceptions for certain categories of personnel, and because the limits  exclude personnel in supporting organizations that perform headquarters- related functions.
Recommendations: We recommended that the Secretary of Defense  direct the following three actions: (1) conduct a systematic  determination of personnel requirements for OSD, the Joint Staff, and  the military services’ secretariats and staff, which should include  analysis of mission, functions, and tasks, and the minimum personnel  needed to accomplish those missions, functions, and tasks; (2) submit  these personnel requirements, including information on the number of  personnel within OSD and the military services’ secretariats and staffs  that count against the statutory limits, along with any applicable  adjustments to the statutory limits, to Congress, along with any  recommendations needed to modify the existing statutory limits; and  (3) establish and implement procedures to conduct periodic  reassessments of personnel requirements within OSD and the military  services’ secretariats and staffs. DOD partially concurred with all of  these recommendations. In addition, we raised a matter for  congressional consideration, namely, that Congress should consider  using the results of DOD’s review of headquarters personnel  requirements to reexamine the statutory limits. Such an examination  could consider whether supporting organizations that perform  headquarters functions should be included in statutory limits and  whether the statutes on personnel limitations within the military  services’ secretariats and staffs should be amended to include a  prohibition on reassigning headquarters-related functions elsewhere.
Status: With regard to the recommendation that DOD conduct a  systematic determination of personnel requirements for OSD, the  Joint Staff, and the military services’ secretariats and staff, the  department stated that it will continue to use the processes and  prioritization that are part of the Planning, Programming, Budgeting,  and Execution process, and will also investigate other methods for  aligning personnel to missions and priorities. However, DOD did not  specify whether any of these actions would include a workforce  analysis. With regard to the recommendation related to conducting  periodic reassessments of personnel requirements within OSD and  the military service secretariats and staffs. DOD said that it supports  the intent of the recommendation but that such periodic  reassessments require additional resources and personnel, which  would drive an increase in the number of personnel performing major  DOD headquarters activities. Specifically, DOD stated it intends to  examine the establishment of requirements determination processes  across the department, to include the contractor workforce, but this  will require a phased approach across a longer timeframe. In  December 2014, the Secretary of Defense directed the Deputy Chief  Management Officer to develop and implement a manpower  requirements validation process for OSD, the defense agencies, and  DOD field activities for military and civilian manpower, but, as of June  2016, this effort has not yet been completed. With regard to the  recommendation related to the submission of the personnel  requirements to Congress, along with any applicable adjustments and  recommended modifications. DOD stated that it has ongoing efforts to  refine and improve its reporting capabilities associated with these  requirements, noting that the department has to update DOD  Instruction 5100.73, Major DOD Headquarters Activities, before it can  determine personnel requirements that count against the statutory  limits. We previously recommended that the department update this  instruction, and, according to DOD officials, they intend to begin  updating the instruction in June 2016. In addition, we noted that DOD  did not indicate whether the department would submit personnel  requirements that count against the statutory limits in the Defense  Manpower Requirements Report, as we recommend, once the  instruction is finalized. We continue to believe that submitting these  personnel requirements to Congress in this DOD report would provide  Congress with key information to determine whether the existing  statutory limits on military and civilian personnel are effective in  limiting headquarters personnel growth. With regard to the matter for  congressional consideration, the Senate Armed Services Committee  markup of the National Defense Authorization Act for Fiscal Year  2017 includes a provision that would allow the OSD and the military  departments to increase their number of military and civilian personnel  by 15 percent in times of national emergency.
section_title: Appendix II: Descriptions of Headquarters- Related Department of Defense Function Codes
paragraphs: In the Inherently Governmental / Commercial Activities (IGCA) Inventory  for fiscal years 2010 through 2014, there are 38 functions, each  designated by a specific DOD function code, that have a headquarters  designation; of these, 35 are labeled “Management Headquarters,” while  3 are labeled “Combatant Headquarters.” For the purposes of this report,  we use the term “headquarters,” rather than “management headquarters”  or “combatant headquarters,” when referring to the titles of these 38  functions in the body of the report. Table 1 lists the 38 headquarters  functions with accompanying descriptions.
section_title: Appendix III: Objectives, Scope, and Methodology
paragraphs: House Report 113-446 and Senate Report 113-176 included provisions  that we, among other things, identify the Department of Defense’s (DOD)  headquarters reduction efforts to date and any trends in personnel and  other resources being devoted to selected functional areas within and  across related organizations. This report (1) describes the status of  DOD’s initiatives since 2014 to improve the efficiency of headquarters  organizations and identify related cost savings; and (2) assesses the  extent to which DOD has reliable data to assess headquarters functions  and their associated costs.
To describe the status of DOD’s initiatives to improve the efficiency of  headquarters organizations and identify related cost savings, we  identified and reviewed DOD headquarters-related efficiency efforts  begun since 2014. We obtained documentary and testimonial evidence  from senior officials in the Office of the Deputy Chief Management Officer  to determine the scope and status of these headquarters-related  efficiency efforts and what actions, if any, DOD has taken as a result of  the efforts.
To assess the extent to which DOD has reliable data to assess  headquarters functions and their associated costs, we took two main  steps.
First, we identified and reviewed DOD-wide sources of information  that would provide data on the department’s workforce in terms of  whether the workforce is performing headquarters work and the  specific headquarters functions that workforce is performing. We  discussed with officials from the Office of the Deputy Chief  Management Officer, the Office of the Under Secretary of Defense for  Personnel and Readiness, and the Cost Analysis and Program  Evaluation office, and reviewed data from, several department-wide  sources, specifically, the Future Years Defense Program, the  Defense Manpower Data Center, the Inherently Governmental /  Commercial Activities (IGCA) Inventory, and the Inventory of  Contracted Services. For this report, we analyzed data and  information related to the IGCA Inventory because it was the only  DOD-wide data set identified that allowed us to determine the military  and civilian workforce—in the form of authorized positions—by both  headquarters and function. However, we found that the data in the  IGCA Inventory were submitted by the various DOD organizations at  different points in a given fiscal year. To ensure that the data would be  as close to the end of each fiscal year as possible, we obtained data  from each of the military services’ manpower databases used to  populate DOD’s IGCA Inventory for fiscal years 2010 through 2014,  which was the most recent 5-year period available during our review.  For each service database, we identified the subset of military and  civilian positions considered headquarters according to IGCA  guidance. We then analyzed these headquarters positions for each  organization and for each fiscal year by number of military and civilian  positions, function, grade, and location. We discussed the data, and  the reasons for any patterns or changes we observed in them, with  military service representatives. DOD was unable to provide similar  data for organizations outside the military departments known as the  Fourth Estate in time for our review, so we collected data on the  Fourth Estate’s military and civilian positions directly from the IGCA  Inventory for fiscal years 2012 to 2014. We assessed the data we  received against federal standards for internal control, which call for  an agency to have relevant, reliable, and timely information in order to  run and control its operations.
Second, we attempted to calculate the approximate costs of the headquarters positions and associated functions. Because the IGCA Inventory does not contain estimated costs for positions, we used the service databases’ pay grade and location information assigned to the military and civilian positions in an attempt to determine the estimated cost to DOD of filling headquarters positions. Specifically, we applied DOD’s military composite standard pay rates and civilian fringe benefits rates to the pay grades we had collected for each position identified in the service databases. We were unable to do a similar calculation for the Fourth Estate because Fourth Estate data on positions came from the IGCA Inventory, which does not contain pay grade and location information needed for a cost calculation. We assessed our and DOD’s efforts to calculate headquarters-related costs against federal standards for internal control on having relevant, reliable, and timely information, and noted the importance of a key step that we have previously identified for conducting fragmentation, overlap, and duplication reviews. Specifically, one of the steps in conducting such a review is to identify the positive and negative effects of any fragmentation, overlap, and duplication by assessing  program implementation, outcomes and impact, and cost- effectiveness.
We assessed the reliability of the IGCA-related data sets by reviewing  responses to data questionnaires sent to knowledgeable service and  Fourth Estate officials, discussing the data with these officials, and  conducting our own cross-checks of the data to assess their  reasonableness. We found the data to be insufficient for identifying trends  in the number and type of headquarters positions and for estimating costs  associated with headquarters positions. However, we found the data to  be sufficiently reliable for presenting 1 year’s worth of data for purposes  of illustrating the types of analyses of department-wide headquarters  functions that could be conducted if DOD improved the reliability of these  data. Finally, we were unable to obtain data on contracted services  personnel, either their positions or associated costs, because DOD does  not identify contracted services personnel by the type of headquarters  function they perform.
We interviewed officials or, where appropriate, obtained documentation  from the organizations listed below.
Office of the Secretary of Defense
Office of the Deputy Chief Management Officer
Office of Cost Assessment and Program Evaluation
Office of the Under Secretary of Defense (Comptroller)
Office of the Under Secretary of Defense for Personnel and  Readiness
Office of the Under Secretary of Defense for Acquisition,  J1, Manpower and Personnel Directorate
Department of the Army
Office of the Assistant Secretary of the Army for Manpower and
G1, Office of the Deputy Chief of Staff for Personnel
G3/5/7, Operations and Plans
Department of the Navy
Office of the Assistant Secretary of the Navy for Manpower
N1, Office of the Deputy Chief of Naval Operations, Manpower
Deputy Commandant for Combat Development and Integration,
Department of the Air Force
A1, Office of the Deputy Chief of Staff for Personnel
U.S. Special Operations Command
Defense Agencies / DOD Field Activities
Defense Acquisition University
Defense Advanced Research Projects Agency
Defense Contract Audit Agency
Defense Contract Management Agency
Defense Finance and Accounting Service
Defense Human Resource Activity
Defense Information Systems Agency
Defense Legal Services Agency
Defense POW/MIA Accounting Agency
Defense Security Cooperation Agency
Defense Technical Information Center
Defense Technology Security Administration
Defense Threat Reduction Agency
Department of Defense Education Activity
Department of Defense Inspector General
Office of Economic Adjustment
Pentagon Force Protection Agency
Test Resource Management Center  We conducted this performance audit from January 2015 to June 2016 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 IV: Department of Defense Headquarters-Related Reduction Efforts to Realize Cost Savings Since 2010
paragraphs: Department of Defense (DOD) officials identified the following efforts  initiated between 2010 and 2014 to realize cost savings related to  headquarters.
In a May 2010 speech, the Secretary of Defense expressed concerns  about the dramatic growth in DOD’s headquarters and support  organizations that had occurred since 2001, including increases in  spending, staff, and numbers of senior executives and the  proliferation of management layers. The Secretary of Defense then  directed that DOD was to undertake a department-wide initiative to  assess how the department is staffed, organized, and operated, with  the goal of reducing excess overhead costs and reinvesting these  savings toward sustainment of DOD’s current force structure and  modernizing its weapons portfolio.
In March 2012, DOD identified additional efficiency initiatives, referred  to as More Disciplined Use of Resources initiatives, in its fiscal year  2013 budget request. DOD identified additional More Disciplined Use  of Resources initiatives for the fiscal year 2014 budget in April 2013.  According to information accompanying its fiscal years 2013 and 2014  budget requests, DOD identified these initiatives by conducting a  review of bureaucratic structures, business practices, modernization  programs, civilian and military personnel levels, and associated  overhead costs.
In March 2013, the Secretary of Defense directed the completion of a  Strategic Choices Management Review to examine the potential  effect of additional, anticipated budget reductions on the department  and to develop options for performing DOD missions. According to the  Secretary, a tenet of the review was the need to maximize savings  from reducing DOD’s overhead, administrative costs, and other  institutional expenses.
In July 2013, the Secretary of Defense set a target for reducing DOD  components’ total management headquarters budgets by 20 percent  for fiscal years 2014 through 2019, including costs for civilian  personnel and contracted services, while striving for a goal of 20  percent reductions to authorized military and civilian personnel. This  effort was designed to streamline DOD’s management of its  headquarters through efficiencies and elimination of spending on  lower-priority activities.
In August 2013, the Secretary and Deputy Secretary of Defense  directed an organizational review of the Office of the Secretary of  Defense, consistent with the Strategic Choices and Management  Review, that was intended to assess and recommend specific  adjustments to OSD’s organizational structure. The review resulted in  several organizational alignments, such as realigning another office to  the Office of the Deputy Chief Management Officer structure, and  contributed to the 20 percent headquarters reductions that were  captured in DOD’s fiscal year 2015 budget request.
section_title: Appendix V: Percentages of Department of Defense Headquarters Functions for Fiscal Year 2014
paragraphs: This appendix provides our analysis showing the five headquarters  functions, in each military service and Fourth Estate component, with the  highest number of headquarters positions for fiscal year 2014. Based on  our review of the data and discussions with service officials, fiscal year  2014 data is the most reliable data available during the period of our  review.
subsections: section_title: Military Services
paragraphs: The military services are the Army; the Navy; the Marine Corps; and the  Air Force. To help meet their respective missions, each military service  has both operational and nonoperational headquarters organizations. See  table 2 for the percentage of the military services’ headquarters positions  by headquarters function for fiscal year 2014.
section_title: Fourth Estate
paragraphs: The Fourth Estate is made up of the Department of Defense (DOD)  organizations that are separate from the military services. Our review  focused on four organizational components that make up the Fourth  Estate: (1) the Office of the Secretary of Defense; (2) the Joint Staff,  including the North Atlantic Treaty Organization; (3) the combatant  commands; and (4) defense agencies and DOD field activities. See table  3 for the percentage of Fourth Estate headquarters positions by  headquarters function for fiscal year 2014.
section_title: Appendix VI: Comments from the Department of Defense
section_title: Appendix VII: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Margaret A. Best (Assistant  Director), Tracy Barnes, Timothy Carr, Gabrielle A. Carrington, Cynthia  Grant, Mae Jones, Bethann E. Ritter Snyder, Benjamin Sclafani, Michael  Silver, Amie Lesser, and Melissa Wohlgemuth made key contributions to  this report.