Defense Headquarters: Further Efforts to Examine Resource Needs and Improve Data Could Provide Additional Opportunities for Cost Savings
Published: 2012-03-21T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Department of Defenses (DOD) headquarters and support organizations have grown since 2001, including increases in spending, staff, and numbers of senior executives and the proliferation of management layers. In 2010, the Secretary of Defense directed DOD to undertake a departmentwide initiative to reduce excess overhead costs. In response to a mandate, GAO evaluated the extent to which DOD (1) examined its headquarters resources for efficiencies and (2) has complete and reliable headquarters information available for use in making efficiency decisions. For this review, GAO analyzed documents and interviewed officials regarding DODs headquarters resources and information.
section_title: What GAO Found
paragraphs: The Department of Defense (DOD) has taken some steps to examine its headquarters resources for efficiencies, but additional opportunities for cost savings may exist by further consolidating organizations and centralizing functions. For purposes of the Secretary of Defenses efficiency initiative, DOD components were asked to focus in particular on headquarters and administrative functions, support activities, and other overhead in their portfolios. DODs fiscal year 2012 budget request included several efficiencies related to headquarters organizations or personnel. GAO found that these efficiencies generally fell into two categories: (1) consolidating or eliminating organizations based on geographic proximity or span of control and (2) centralizing overlapping functions and services. The DOD efficiencies that GAO reviewed to reduce headquarters resources are expected by DOD to save about $2.9 billion through fiscal year 2016, less than 2 percent of the $178 billion in savings DOD projected departmentwide. GAOs work indicates that DOD may be able to find additional efficiencies by further examining opportunities to consolidate organizations or centralize functions at headquarters. DOD may not have identified all areas where reductions in headquarters personnel and operating costs could be achieved because the department was working quickly to identify savings in the fiscal year 2012 budget and used a top-down approach that identified several targets of opportunity to reduce costs, including headquarters organizations, but left limited time for a detailed data-driven analysis. In February 2012, DOD proposed $61 billion in additional savings over fiscal years 2013 to 2017, but provided limited information as to what portions of these savings were specific to headquarters. Without systematic efforts to reexamine its headquarters resources on a more comprehensive basis, DOD may miss opportunities to shift resources away from overhead.
An underlying challenge facing DOD is that it does not have complete and reliable headquarters information available for use in making efficiency assessments and decisions. According to GAOs internal control standards, an agency must have relevant, reliable, and timely information in order to run and control its operations. DOD Instruction 5100.73 guides the identification and reporting of headquarters information. However, GAO found that this instruction is outdated and does not identify all headquarters organizations, such as component command headquarters at U.S. Africa Command and certain Marine Corps headquarters. Also, although some of the services and functions performed by contractors could be considered as headquarters activities, the instruction does not address the tracking of contractors that perform these functions. DOD has delayed updating the instruction to allow time for components to adjust to the statutory changes enacted by Congress in 2009 that created new headquarters reporting requirements. According to DOD officials, ever-changing statutory reporting requirements have contributed to DODs failure to report to Congress about the numbers of headquarters personnel. As the department did not have reliable headquarters data, DOD compiled related information from other sources to inform its 2010 efficiency initiative. Because of the short timelines given to identify efficiencies and limitations on the sharing of information, this information was not validated before decisions were made. As a result, some of the information used to identify headquarters-related efficiencies was inaccurate and some adjustments in resource allocations will have to be made during implementation to achieve planned savings. Looking to the future, until DOD has updated its instruction to ensure that it has complete and reliable headquarters data, the department will not have the information it needs, which could affect its efforts to direct resources to its main priorities during future budget deliberations.
section_title: What GAO Recommends
paragraphs: GAO recommends that DOD continue to examine opportunities to consolidate organizations and centralize functions and services and revise DOD Instruction 5100.73 to include all headquarters organizations, specify how contractors performing headquarters functions will be identified and included in reporting, clarify how components are to compile information needed to respond to headquarters reporting requirements, and establish time frames for implementing these actions. DOD concurred with GAOs first recommendation and partially concurred with GAOs second recommendation.

section_title: Letter
paragraphs: In 2010, the Secretary of Defense expressed concerns about the  dramatic growth in the Department of Defense’s (DOD) 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. In 2010, the Secretary of Defense also directed  DOD to undertake a departmentwide 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.  This effort identified efficiency initiatives totaling about $178 billion in  projected savings across the military departments and other DOD  components from fiscal year 2012 through fiscal year 2016, about   $24.1 billion of which is estimated to be achieved in fiscal year 2012.  DOD’s efficiency initiatives included a broad range of efforts, such as  holding the civilian workforce at fiscal year 2010 levels; reducing the  numbers of senior leaders, both officer and civilian; and reducing reliance  on service support contractors. Some headquarters were planned to be  closed and their missions and functions absorbed in other organizations,  while others were reorganized. More recently, in January 2012, the  administration released strategic guidance to direct defense priorities and  spending over the coming decade. It lays out several principles to guide  the development of DOD’s force structure, such as reducing DOD’s cost  of doing business by finding further efficiencies in headquarters and other  overhead.
DOD has multiple layers of headquarters management with complex,  overlapping relationships. Such layers include, but are not limited to, the  Office of the Secretary of Defense, the Joint Staff, and portions of the  military departments, defense agencies, and DOD field activities. In DOD  Instruction 5100.73, Major DOD Headquarters Activities, DOD defines  those headquarters whose primary mission is to manage or command the  programs and operations of DOD and its components, and their major  military units, organizations, or agencies as major DOD headquarters  activities.directing, and controlling subordinate organizations or units; these  responsibilities include developing guidance, reviewing performance,  allocating resources, conducting mid-to long-range budgeting, and, in the  case of combatant headquarters, planning for the employment of U.S.  military forces. See figure 1 for examples of DOD’s multiple layers of  headquarters organizations.
subsections: section_title: Background
paragraphs: In September 2011, we reported on DOD’s approach to examining itself  for efficiencies, including the parameters used to guide the Secretary of  Defense’s efficiency initiative. The initiative targeted both shorter and  longer-term improvements in a wide range of areas across the  department, including its organizational structure, business practices, and  modernization programs, and instituted reductions to its personnel levels.  As part of its fiscal year 2012 budget request, DOD projected savings of  $178 billion to be realized over a 5-year period beginning in fiscal year  2012, as shown in table 1.
Of the $178 billion in projected savings proposed by the department,  $100 billion identified by the military departments and Special Operations  Command was reinvested in high-priority needs and the remaining   $78 billion was reduced from DOD’s budget from fiscal years 2012  through 2016. This reflects a 2.6 percent reduction from DOD’s fiscal year  2011 budget submission over the same period. Some of these savings  and reductions were from headquarters-related resources, such as  personnel and operating costs.
DOD Instruction 5100.73 establishes a system to identify and manage the  number and size of major DOD headquarters activities. As previously  stated, the instruction defines major DOD headquarters activities as those  headquarters whose primary mission is to manage or command the  programs and operations of DOD and its components and their major  military units, organizations, or agencies. Since the mid-1980s, Congress  has enacted statutory limits on the number of major DOD headquarters  activity personnel, to include those in the Office of the Secretary of  Defense; the headquarters of the combatant commands; the Office of the  Secretary of the Army and the Army Staff; the Office of the Secretary of  the Air Force and the Air Staff; the Office of the Secretary of the Navy, the  Office of the Chief of Naval Operations, and the Headquarters, Marine  Corps; and the headquarters of the defense agencies and DOD field  activities. In addition, Congress has enacted various reporting  requirements related to major DOD headquarters activity personnel. As  previously stated, our prior work has shown that DOD has encountered  challenges both in identifying major DOD headquarters activity personnel  and in reporting this information to Congress.
section_title: DOD’s Efficiencies Include Headquarters- Related Reductions, but Additional Opportunities for Cost Savings May Exist
paragraphs: DOD has taken some steps to examine its headquarters resources for  efficiencies, but additional opportunities for cost savings may exist by  further consolidating organizations and centralizing functions. For the  purposes of the Secretary of Defense’s efficiency initiative, DOD  components, including the military departments, were asked to focus in  particular on headquarters and administrative functions, support activities,  and other overhead in their portfolios. DOD’s fiscal year 2012 budget  request, describing its planned efficiency initiatives for fiscal years 2012  to 2016, included several initiatives related to headquarters organizations  or personnel. Two organizations, Joint Forces Command and the  Business Transformation Agency, were disestablished and some of their  functions were absorbed in other organizations. DOD estimated that  closing these two organizations would save approximately $2.2 billion  through fiscal year 2016. Table 2 provides other examples of  headquarters-related efficiency initiatives DOD is implementing in the  military departments and in other DOD components that we reviewed.  See appendix II for a further description of these headquarters-related  efficiency initiatives.
In compiling and comparing the headquarters-related efficiency initiatives  from across the department, we found that the approach that was taken  and level of detail differed markedly across the various DOD components.  For instance, some DOD components focused on specific organizations  and provided detail about planned actions, while others promised  significant reductions but provided only broad descriptions of what is  planned to achieve them. For example, the Navy provided detailed  information on the number of positions that will be eliminated and  estimated cost savings for the Navy’s merger of U.S. Fleet Forces  Command and U.S. 2nd Fleet staff. In contrast, the Army planned more  than $1 billion in savings by streamlining its installation management  services and programs but did not specify how this will be achieved.
In reviewing these headquarters-related efficiency initiatives, however, we  found that they generally fell into two categories: (1) consolidating or  eliminating organizations based on geographic proximity or span of  control, and (2) centralizing overlapping functions and services (see figs.  2 and 3).
The DOD efficiencies that GAO reviewed to reduce headquarters  resources are expected by DOD to save about $2.9 billion through fiscal  year 2016, less than 2 percent of the $178 billion in savings DOD  projected departmentwide. Our work indicates that DOD may be able to  find additional efficiencies by further examining opportunities to  consolidate organizations or centralize functions at headquarters. In its  January 2012 strategic guidance, DOD recognized that it would need to  find further efficiencies in headquarters and other overhead in order to  meet the demands of the new strategy. To achieve these efficiencies,  DOD could consider a number of different options, including reducing  organizational layers, consolidating administrative offices, and simplifying  management processes. However, the department does not have a  definition of what constitutes overhead or standards for assessing  headquarters resources. Given the size and complexity of the  department, setting common standards would be difficult. Nonetheless,  DOD officials we spoke with recognized that additional efficiencies could  be achieved by further examination of headquarters resources. The  following are examples of areas that officials said DOD was considering  for potential efficiencies.
According to Navy officials, the Deputy Under Secretary of the Navy is  having ongoing discussions with Navy components and conducting  analysis to identify potential future efficiencies, such as consolidating  or streamlining facilities management services and functions provided  at various Navy installations. Officials commented that these issues  are complicated and that as of December 2011, the estimates of the  savings had not been determined.
The Army is, among other things, implementing and integrating  previous efforts approved by the Secretary of Army, such as planning  to optimize materiel development and sustainment by eliminating  overlapping or redundant responsibilities between the Army’s program  executive offices and the Army Materiel Command. The Army expects  this effort to include reductions in personnel for an estimated annual  savings of $3 billion by the end of fiscal year 2015.
The Air Force is currently examining opportunities to provide better  command and control over air and space operations centers. As of  December 2011, Air Force officials could not provide further details  regarding this effort because decisions were still pending.
Defense Finance and Accounting Service officials are examining  travel and supplies, postage and printing, and other areas to identify  additional savings, which it estimates at $63 million by fiscal year  2017.
DOD may not have identified all areas where reductions in headquarters  personnel and operating costs could be achieved because, according to  DOD officials, the department was working quickly to identify savings in  the fiscal year 2012 budget. To accomplish this quickly, DOD used a top- down approach that identified several targets of opportunity to reduce  costs, including headquarters organizations, but left limited time for a  detailed data-driven analysis. In February 2012, in DOD’s fiscal year 2013  budget request, the department proposed an additional $61 billion in  savings from fiscal years 2013 to 2017 through reductions in overhead  and support requirements, and improved business practices. However, it  provided limited information as to what portions of these savings were  specific to headquarters and how they would be achieved. Without  systematic efforts to reexamine its headquarters resources on a more  comprehensive basis, DOD may miss opportunities to shift resources  away from overhead.
section_title: Lack of Complete and Reliable Headquarters Information Hinders Efforts to Identify and Implement Efficiencies
paragraphs: DOD does not have complete and reliable major DOD headquarters  activity data available for use in making efficiency assessments and  decisions because the department continues to have challenges in  identifying and tracking personnel and other resources devoted to  headquarters. According to our internal control standards, an agency  must have relevant, reliable, and timely information in order to run and  control its operations. In reviewing DOD’s guiding instruction we found  that it does not identify all current major DOD headquarters activity  organizations or address the tracking of contractors that perform  headquarters functions. DOD officials stated that they have delayed  updating the instruction to allow time for components to adjust to the  statutory changes enacted by Congress in 2009 that created new  reporting requirements for major DOD headquarters activity personnel.  According to DOD officials, the ever-changing statutory reporting  requirements have contributed to DOD’s failure to report to Congress  about the numbers of headquarters personnel. As the department did not  have reliable major DOD headquarters activity data, DOD gathered  information from multiple sources to compile headquarters-related  information for the Secretary of Defense’s 2010 efficiency initiative. Some  of the information DOD compiled to identify headquarters-related  efficiency initiatives was inaccurate, and as a result, some adjustments  will need to be made during implementation to achieve planned savings.  Without a proper accounting of headquarters personnel and operating  costs, to include contractors, DOD will not have complete and reliable  information on the universe of headquarters resources. Complete and  reliable headquarters information will be even more important in  supporting an examination of DOD resources in light of changes in DOD’s  strategic priorities for the next decade.
subsections: section_title: The DOD Instruction Does Not Include All Major DOD Headquarters Activity Organizations or Address Tracking of Contractors
paragraphs: According to our internal control standards, an agency must have  relevant, reliable, and timely information in order to run and control its  operations. This information is required to develop external reporting and  to make operating decisions, monitor performance, and allocate  resources. Moreover, we have reported that accurate, timely, and useful  financial management information is essential for sound management  analysis, decision making, and reporting within DOD.
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 Director of Administration and Management,  within the Office of the Secretary of Defense, is responsible for issuing  guidance, as required, and maintaining the list of major DOD  headquarters activity organizations. However, significant revisions to the  instruction have not been made since 2007 and the instruction does not  identify all current major DOD headquarters activity organizations. For  example, Navy officials noted several Marine Corps components, which  are parallel to Navy components in the major DOD headquarters activity  functions they perform, are not included in the instruction. Also, the  instruction does not reflect the component command headquarters of the  Departments of Navy and Air Force at U.S. Africa Command, which were  established in October 2008 and October 2009, respectively, and would  likely be considered major DOD headquarters activities.
Additionally, the instruction does not explicitly address how and to what  extent the thousands of contractors who work at headquarters around  DOD should be included as part of its major DOD headquarters activity  data. DOD has increasingly relied on contractors to provide a range of  services at headquarters, such as management and administrative  support, information technology, and base operations support. Some of  the services and functions performed by contractors could be considered  part of major DOD headquarters activities. Our work over the past decade  on DOD’s contracting activities has noted the need for DOD to obtain  better data on its contracted services and personnel to enable it to make  more informed management decisions, ensure departmentwide goals and  objectives are achieved, and have the resources to achieve desired  outcomes, which could include reducing overhead. In January 2011, we  reported that further action was needed by DOD to better implement its  requirements for conducting an inventory of its service contractor  activities and made two recommendations, including that DOD develop a  plan of action to collect manpower data from contractors. In response to  GAO’s report, DOD has outlined its approach for collecting these data,  but does not anticipate complete reporting until 2016.
National Defense Authorization Act for Fiscal Year 2010, Pub. L. No. 111-84, §1109  (2009), codified at 10 U.S.C. §115a. The Defense Manpower Requirements Report is an  annual report to Congress that provides DOD’s manpower requirements, to include those  for military personnel and civilians, as reflected in the President’s budget request for the  current fiscal year. must report the amount of any adjustment in personnel limits made by the  Secretary of Defense or the secretary of a military department and, for  each adjustment made pursuant to section 1111(b)(2) of the fiscal year  2009 National Defense Authorization Act, the purpose of the  adjustment. DOD officials are aware of the reporting requirements and  expect to report some major DOD headquarters activity data to Congress  in the fiscal year 2012 Defense Manpower Requirements Report;  however, it is unclear what information will be included in the report.
section_title: Some Information DOD Used to Identify Headquarters-Related Efficiency Initiatives Was Inaccurate and Some Resource Adjustments Will Be Made during Implementation
paragraphs: As the department did not have reliable major DOD headquarters activity  data, DOD gathered information from multiple sources to compile  headquarters-related information for the Secretary of Defense’s 2010  efficiency initiative. The military departments used existing budget review  processes to identify potential efficiency initiatives for fiscal years 2012 to  2016, while the Secretary of Defense established a temporary task force,  chaired by his Chief of Staff, to identify specific areas in which immediate  action could be taken departmentwide, such as holding the civilian  workforce at fiscal year 2010 levels. Because of the short timelines given  to identify efficiencies and limitations on the sharing of information  imposed on personnel by DOD to prevent disclosure of the decisions, this  information was not validated with the DOD officials responsible for  implementing the decisions to ensure that it was accurate. As a result,  some information used to identify headquarters-related efficiency  initiatives was inaccurate and some adjustments in resource allocations  will have to be made during implementation to achieve planned savings.
Some of the implementation challenges that resulted from inaccurate  information were significant, involving hundreds of millions of dollars. The  most prominent example we found was an Air Force efficiency initiative to  consolidate installation support services, such as environmental quality  and civil engineering services, real property programs and services,  vehicle and fuel management, operational contracting, security forces,  and some family services, at field operating agencies and Air Force  headquarters. When initially developed in July 2010 as part of its  preparations for the fiscal year 2012 budget, the initiative was estimated  to save $685 million by eliminating 1,371 positions by fiscal year 2016.  However, according to an Air Force official, the initial savings estimate  was developed at senior levels on an extremely short time line and  proved overly optimistic. According to Air Force officials, in December  2010, after further analysis by the Air Force staff was completed, the  estimate was revised to a savings of $148.1 million by eliminating 354  positions by fiscal year 2016. Air Force officials told us that they now have  to reduce operating costs or personnel from other functional areas to  make up the $537 million difference in savings and the 1,017 difference in  personnel reductions estimated as part of DOD’s fiscal year 2012 budget.  In other examples, we found DOD components had overestimated the  number of personnel or incorrectly identified the amount of contractor- related resources at affected organizations, potentially affecting estimated  savings.
section_title: Conclusions
paragraphs: With the long-term fiscal challenges facing the nation, additional efforts to  find cost savings at DOD will likely be necessary. As DOD considers its  future resources and the key military capabilities it will need to meet its  new strategic priorities, the department will need to consider further  efficiencies in overhead, such as personnel and operating costs at DOD  headquarters. While DOD has taken some steps to trim its headquarters,  these initial efforts were uneven across the department and modest in  contrast to the defense budget. The savings DOD projected over 5 years  from the headquarters reductions taken to date represent a small fraction  of the defense budget over the same period. Additional headquarters- related efficiencies may be identified by further examining opportunities to  consolidate organizations or centralize functions. To ensure that  appropriate levels of resources are applied to overhead, it is critical for  DOD to have complete and reliable information to use to inform its  decision-making and prioritize its resources. Without updating its guiding  instruction to ensure that it has complete and reliable data on  headquarters personnel and operating costs, DOD will not have the  information it needs, which could affect its efforts to direct resources  toward its main priorities.
section_title: Recommendations for Executive Action
paragraphs: We recommend that the Secretary of Defense take the following two  actions.
To further DOD’s efforts to reduce overhead-related costs in light of the  recent changes in DOD’s strategic priorities, we recommend 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 or eliminate military commands that are  geographically close or have similar missions, and to seek further  opportunities to centralize administrative and command support services,  functions, or programs.
To improve DOD’s ability to identify how many headquarters personnel it  has, including military, civilian and contractor personnel, and improve the  information Congress and DOD need to ensure that headquarters  organizations are appropriately sized and overhead positions are reduced  to the extent possible, we recommend that the Secretary of Defense  direct the Director of Administration and Management, in consultation with  the Under Secretary of Defense for Personnel and Readiness, to revise  DOD Instruction 5100.73, Major DOD Headquarters Activities, to  include all major DOD headquarters activity organizations,  specify how contractors performing major DOD headquarters activity  functions will be identified and included in headquarters reporting,  clarify how components are to compile the major DOD headquarters  activities information needed to respond to the reporting requirements  in section 1109 of the fiscal year 2010 National Defense Authorization  Act, and establish time frames for implementing the actions above to improve  tracking and reporting headquarters resources.
section_title: Agency Comments and Our Evaluation
paragraphs: In written comments on a draft of this report, DOD concurred with our first  recommendation and partially concurred with our second  recommendation. DOD’s comments are reprinted in their entirety in  appendix IV. DOD also provided technical comments, which we  incorporated into the report as appropriate.
DOD fully concurred with our recommendation 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 or eliminate military commands that are geographically close  or have similar missions, and to seek further opportunities to centralize  administrative and command support services, functions, or programs. In  its comments, DOD stated that it would continue to assess its  organizational structure and personnel to optimize output and eliminate  inefficiencies.
DOD partially agreed with our second recommendation that the Secretary  of Defense direct the Director of Administration and Management, in  consultation with the Under Secretary of Defense for Personnel and  Readiness, to revise DOD Instruction 5100.73, Major DOD Headquarters  Activities, to (1) include all major DOD headquarters activity  organizations, (2) specify how contractors performing major DOD  headquarters activity functions will be identified and included in  headquarters reporting, (3) clarify how components are to compile the  major DOD headquarters activities information needed to respond to the  reporting requirements in section 1109 of the fiscal year 2010 National  Defense Authorization Act, and (4) establish time frames for implementing  the actions above to improve tracking and reporting of headquarters  resources. In its written comments, DOD stated that it concurs with the  intent of this recommendation and supports the refinement and update of  DOD Instruction 5100.73, Major DOD Headquarters Activities. It then  separately addressed three elements of our recommendation—including  all major DOD headquarters activity organizations, reporting on  contractors performing major DOD headquarters activities, and clarifying  how components are to compile these data to respond to reporting  requirements.
With regard to including all major DOD headquarters activity  organizations in the instruction, DOD stated that the department uses the  designation of major DOD headquarters activities in DOD Instruction  5100.73 to identify and manage the size of organizations in order to  comply with statutory limitations, not as a tool to manage the  organizational efficiency of the department or its components. It further  stated that shortcomings in the instruction have limited impact on the  management of the department. As we noted in our report, the purpose of  the instruction is to establish a system to identify and manage the number  and size of major DOD headquarters activities, and the guidance does  address statutory limitations. However, the instruction certainly has  implications for the management of the department that extend beyond  the need to comply with relevant statutory limits. For example, the  instruction directs the department to take certain steps, including  maintaining an approved list of major DOD headquarters activities, in  order to provide a framework for implementing the DOD policy that major  DOD headquarters activities shall be organized and staffed in a manner  that permits the effective accomplishment of assigned responsibilities with  a minimum number of personnel. Additionally, the department expressed  concerns about revising the definition of major DOD headquarters  activities in DOD Instruction 5100.73 because there are references to that  definition in statute. However, we did not recommend that the department  revise the definition. As noted by the department, section 194 of Title 10  of the United States Code sets out limitations on military and civilian  personnel involved in management headquarters activities or  management headquarters support activities of the defense agencies and  the DOD field activities. The statute specifies that the terms “management  headquarters activities” and “management headquarters support  activities” are to be defined as those terms were defined in the January 7,  1985, version of DOD Directive 5100.73. Our recommendation is not  aimed at revisions to the definition; rather, as explained in our report, the  recommendation is based on the fact that the list of major DOD  headquarters activities found in enclosure 4 of the instruction is outdated.  As such, we disagree with the assertion that updating the guidance  consistent with our recommendations would in any way threaten the  “foundational basis” prescribed by Title 10 or require statutory relief.  Furthermore, we note that in addition to the administrative change from  directive to instruction in 2009 mentioned by the department, other  revisions have been made to the guidance since 1985, including changes  made in 1999 revising the way the definitions of management  headquarters activities, management headquarters support activities, and  other terminology are presented.
With regard to specifying how contractors performing major DOD  headquarters activity functions will be identified and included in  headquarters reporting, DOD stated that it submitted a plan to the  congressional defense committees in November 2011 for its Inventory of  Contracts for Services that established both near-term and long-term  actions needed to improve overall visibility and accountability of all  contracted services, including those performed in support of major DOD  headquarters activities. This plan and subsequent guidance issued in  December 2011 describe the steps being taken to account for the level of  effort of contracted support, based on the activity requiring the service.  DOD also noted that aligning contract support with the requiring activity,  as opposed to contracting activity, will ensure that the department can  reflect contractor full-time equivalents, based on direct labor hours  collected from contractors, supporting major DOD headquarters activities.  While we support DOD efforts to improve visibility and accountability of  contracted services, particularly those supporting major DOD  headquarters activities, as noted in our report, DOD does not anticipate  complete reporting on contractor manpower data until 2016. We continue  to believe that DOD should make it a priority to obtain better data on its  contracted services and personnel to enable it to make more informed  management decisions, ensure departmentwide goals and objectives are  achieved, and have the resources to achieve desired outcomes, which  could include reducing overhead.
With regard to clarifying how components are to compile information  needed to respond to the reporting requirements for major DOD  headquarters activity of Section 1109 of the fiscal year 2010 National  Defense Authorization Act, DOD stated that it has incorporated this  requirement into the Defense Manpower Requirements Report. The  department stated that the DOD components reported aggregate civilian  and military data for inclusion in the fiscal year 2012 Defense Manpower  Requirements Report that will be included in the fiscal year 2013 report  as well. The department also stated that a more accurate reflection of  major DOD headquarters activity data is being incorporated into the  annual Inherently Governmental and Commercial Activities Inventory. It  further noted that the inventory guidance issued in October 2011 included  the major DOD headquarters activity requirement and the fiscal year 2012  inventory will include these data. In its written comments, DOD stated that  this revision will provide greater analytic capability for DOD function  codes, manpower mix criteria, location of services, and specific  unit/organization of billets designated as major DOD headquarters  activities. Again, we support DOD’s efforts to include major DOD  headquarters activity data in the Inherently Governmental and  Commercial Activities Inventory, but note that DOD did not provide a time  frame for when the fiscal year 2012 inventory would be issued. Further,  while DOD noted that it will include aggregate civilian and military data in  the fiscal year 2012 and fiscal year 2013 Defense Manpower  Requirements Report, neither of these reports has been issued, and we  are therefore unable to determine whether the data were included.
Despite DOD’s concerns, we continue to believe that it is important for  DOD to take actions to revise the instruction to include all major DOD  headquarters activity organizations, specify how contractors will be  identified and included in headquarters reporting, and clarify how  components are to report this information as well as establish time frames  for implementing these actions to improve tracking and reporting of  headquarters resources.
We are sending copies of this report to interested congressional  committees, the Secretary of Defense, the Under Secretary of Defense  for Personnel and Readiness, the Director of Administration and  Management, the Deputy Chief Management Officer, and the secretaries  of the military departments. In addition, this 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 (404) 679-1816 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 V.
section_title: Appendix I: Scope and Methodology
paragraphs: We conducted this work in response to a statutory mandate that directed  us to conduct routine investigations to identify federal programs,  agencies, offices, and initiatives with duplicative goals and activities within  departments and governmentwide. This report evaluated the extent to  which the Department of Defense (DOD) (1) examined its headquarters  resources for efficiencies and (2) has complete and reliable headquarters  information available for use in making efficiency decisions.
To conduct this work, we selected and assessed DOD efficiency  initiatives related to headquarters based on our analysis of information  included with DOD’s fiscal year 2012 budget request and the Secretary of  Defense’s Track Four Efficiency Initiatives Decisions memo. We used the  Department of Defense Efficiency Initiatives Fiscal Year 2012 Budget  Estimates justification book to select two efficiency initiatives affecting  each of the military departments based on their relevancy to  headquarters. Using this sample of headquarters-related efficiency  initiatives, we chose to interview components responsible for  implementing the selected efficiency initiatives based on the amount of  savings they are responsible for achieving. We used the Secretary of  Defense’s Track Four Efficiency Initiatives Decisions memo to select two  combatant commands and one organization from each of the following:  the Office of Secretary of Defense, the defense agencies, and the DOD  field activities. We selected organizations rather than specific efficiency  initiatives because their estimated personnel and cost savings reflected  several DOD efficiency initiatives, including the defense agency, Office of  Secretary of Defense, and combatant command baseline review and the  service support contracts reduction. We selected the organizations based  on the amount of estimated personnel cuts and savings they were  responsible for achieving. The efficiency initiatives and organizations we  selected are further discussed in appendix II.
To assess the extent to which DOD examined its headquarters resources  for efficiencies, we obtained and analyzed documentary and testimonial  evidence on selected headquarters-related efficiency initiatives  announced by DOD, including the analysis conducted to identify  headquarters-related resources and the approach taken to develop  headquarters-related efficiency initiatives. To assess the extent to which  DOD has complete and reliable headquarters information available for  use in making efficiency decisions, we obtained and analyzed  documentary and testimonial evidence from DOD components detailing  the policies and procedures, as well as roles and responsibilities, for  tracking and reporting headquarters personnel and operating costs, such  as DOD Instruction 5100.73, Major DOD Headquarters Activities. We  also obtained and analyzed documentary and testimonial evidence on the  processes and data DOD components used to identify their headquarters- related resources when developing selected headquarters-related  efficiencies.
In addition to conducting interviews with the components responsible for  executing selected efficiency initiatives, we collected documentary and  testimonial evidence from the military department’s deputy chief  management offices, financial management and budget offices, and other  DOD components that were involved in developing the efficiency  initiatives directed by the Secretary of Defense and included as part of  DOD’s fiscal year 2012 budget request. We interviewed officials, and  where appropriate obtained documentation, at the organizations listed  below:   Office of Secretary of Defense
Office of the Director of Cost Assessment and Program Evaluation
Office of the Under Secretary of Defense for Policy
Office of the Director of Administration and Management
Office of the Under Secretary of Defense for Personnel and
Office of the Under Secretary of Defense (Comptroller)
Manpower and Personnel Division
U.S. European Command  U.S. Northern Command
Defense Finance and Accounting Services  Department of the Air Force
Office of the Under Secretary of the Air Force, Deputy Chief
Office of the Deputy Chief of Staff for Logistics, Installations and
Office of the Deputy Chief of Staff for Manpower, Personnel and  Services, Directorate of Manpower, Organization and Resources
U.S. Air Forces in Europe
Air Combat Command
Air Education and Training Command
First Air Force (Air Forces North)
Third Air Force (Air Forces Europe)
Air Force Real Property Agency
Air Force Services Agency
Air Force Center for Engineering and the Environment
Office of Deputy Under Secretary of the Army
Office of the Assistant Secretary of the Army (Financial Management  and Comptroller), Office of the Director, Army Budget
Office of the Assistant Chief of Staff for Installation Management
U.S. Army Installation Management Command, Headquarters
U.S. Army Installation Management Command, Atlantic Region
Office of the Deputy Chief of Staff for Programs, Directorate of  Program, Analysis, and Evaluation
Office of the Deputy Chief of Staff for Personnel, Directorate of Plans
Office of the Assistant Secretary of the Army for Manpower and
U.S. Army Europe
U.S. Army North
Office of the Deputy Under Secretary of the Navy, Deputy Chief  Management Officer
Office of the Deputy Chief of Naval Operations (Manpower,  Personnel, Education and Training)
Office of the Deputy Chief of Naval Operations (Integration of  Capabilities and Resources)
Office of the Assistant Secretary of the Navy (Financial Management  and Comptroller), Office of Budget
Headquarters, Marine Corps
U.S. Marine Forces Europe
U.S. Naval Forces Europe
U.S. Fleet Forces Command
Naval Air Systems Command
Navy Reserve Force Command
U.S. Pacific Fleet  We conducted this performance audit from September 2010 to March  2012 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: Descriptions of Headquarters- Related Efficiency Initiatives
paragraphs: For this review, we selected and assessed headquarters-related  efficiency initiatives specific to the military departments as well as  organizations affected by DOD-wide efficiency initiatives, discussed in  detail below. The efficiency initiatives we reviewed did not include all the  headquarters-related efficiency initiatives DOD has announced. We  chose to review the efficiency initiatives based on the organizations  affected as well as the estimated number of personnel and the amount of  cost savings involved.
subsections: section_title: Military Departments’ Efficiency Initiatives
paragraphs: As part of the Secretary of Defense’s efficiency initiative, the military  departments and Special Operations Command were instructed to find at  least $100 billion in savings from fiscal years 2012 to 2016 that could be  reinvested in force structure and modernization efforts, starting with the  fiscal year 2012 budget. Some of these initiatives included reductions to  headquarters personnel and operating costs, as shown below.
subsections: section_title: Department of the Navy: Merging U.S. Fleet Forces Command and U.S. 2nd Fleet Staff
paragraphs: Under this Navy initiative, U.S. 2nd Fleet was disestablished and its staff  was merged into U.S. Fleet Forces Command. Prior to this merger, U.S.  2nd Fleet was responsible for training, certifying, and providing maritime  forces to respond to global contingencies while U.S. Fleet Forces  Command served to provide operational and planning support to the  combatant commanders and worked with U.S. Pacific Fleet to organize,  man, train, maintain, and equip Navy forces. The Navy found that the  missions of the two organizations had converged over time, and decided  that an integrated staff could better adapt to changing missions than two  separate staffs and the merger could eliminate redundant personnel. As a  result of the merger, U.S. Fleet Forces Command now assumes both its  previous responsibilities as well as U.S. 2nd Fleet’s former missions. The  efficiency initiative eliminated one Navy flag officer at the rank of vice  admiral, 160 active component positions, and 184 reserve component  positions. The consolidation resulted in estimated savings of $10.5 million  in fiscal year 2012, with expected cumulative savings of $100.8 million by  fiscal year 2016. The consolidation began in May 2011 and was  functionally completed on September 30, 2011.
section_title: Department of the Navy: Reducing Fleet Shore Command Personnel by 5 Percent at U.S. Pacific Fleet and U.S. Fleet Forces Command
paragraphs: Under this Navy initiative, shore military positions at both U.S. Pacific  Fleet and U.S. Fleet Forces Command were eliminated and personnel  associated with these positions were redirected to higher-priority  missions, including filling personnel shortages of operational ships at sea.  Navy officials stated that new capabilities and systems on operational  ships, such as ballistic missile defense, have led to increased manpower  requirements at sea. Additionally, more effective training has decreased  shore manpower needs, freeing up manpower for operational ships at  sea. The associated funding for the reduced shore military positions,  $88.3 million, has been removed from the budget for fiscal year 2012.  From fiscal years 2012 to 2016, the expected cumulative savings is  $858.1 million.
section_title: Department of the Air Force: Consolidating Installation Support Services at Field Operating Agencies and Air Force Headquarters
paragraphs: This is an Air Force initiative to consolidate installation support services at  Air Force headquarters and field operating agencies, which are Air Force  components that perform specialized activities in support of Air Force- wide missions. To achieve the estimated personnel and cost savings, the  Air Force is consolidating environmental quality and civil engineering  services, real property programs and services, vehicle and fuel  management, operational contracting, security forces, and some family  services by shifting positions from major command staffs that provide  these services to field operating agencies or Air Force headquarters and  eliminating others. Planning for the implementation of this initiative is still  underway and implementation will be phased from fiscal years 2012 to  2016. When initially developed in July 2010 as part of the Air Force’s  preparations for the fiscal year 2012 budget, the initiative was estimated  to save $685 million and eliminate 1,371 positions by fiscal year 2016.  However in December 2010, after further analysis was completed, the  estimate was revised to eliminate 354 positions by fiscal year 2016 along  with a savings of $2.4 million in fiscal year 2012 and $148.1 million by  fiscal year 2016. The Air Force may now have to reduce operating costs  or personnel from other functional areas to make up the $537 million  difference in savings estimated as part of DOD’s fiscal year 2012 budget.
section_title: Department of the Air Force: Consolidating Air and Space Operations Centers and Numbered Air Forces
paragraphs: This is an Air Force initiative to consolidate air and space operations  centers in Europe and in the continental U.S. and to inactivate numbered  air forces. Numbered air forces provide operational leadership to  subordinate units, such as wings, or are designated as component  numbered air forces that perform operational and warfighting missions for  U.S. combatant commanders. Air and space operations centers provide  command and control of Air Force operations and coordinate with other  components and military services. The Air Force consolidated the 617th  Air and Space Operations Center, which supports U.S. Africa Command,  with the 603rd Air and Space Operations Center, which supports U.S.  European Command, resulting in the elimination of 55 positions and one  headquarters organization, resulting in a savings of $4.2 million in fiscal  year 2012 and a cumulative savings of $37.8 million from fiscal years  2012 to 2016. The consolidation was completed on October 1, 2011. Air  Force officials stated that the transition has gone smoothly because  personnel in these organizations had practiced being integrated while  executing military operations in Libya as part of Operation Odyssey  Dawn. The merged organizations will now provide operational and  command and control support to both combatant commands. The Air  Force planned to consolidate the 601st and 612th Air and Space  Operations Centers, supporting U.S. Northern Command and U.S.  Southern Command, respectively; however, this was formally halted on  August 30, 2011, by Air Force officials in favor of developing an Air Force- wide solution to provide more effective operational command and control.  As of December 2011, Air Force officials could not provide further details  regarding this solution because decisions were still pending. The Third Air  Force (Air Forces Europe) and the 17th Air Force (Air Forces Africa) are  also being consolidated with the headquarters of U.S. Air Forces in  Europe, thereby eliminating one headquarters organization and 183  positions for a cumulative savings of $95.1 million from fiscal years 2012  to 2016. This effort is estimated to be completed by May 2012. The 19th  Air Force, which supports Air Education and Training Command, will be  consolidated with the command’s headquarters, thereby eliminating 18  positions and saving $0.6 million in fiscal year 2012 with cumulative  savings of $10.8 million by fiscal year 2016. This initiative is to be  completed by June 2012. Although Air Education and Training Command  has identified 18 positions to be eliminated, this effort was initially  designed to eliminate 40 positions. Air Education and Training Command  has informed Air Force leadership that some of these personnel were  performing safety- and compliance-related inspections and could not be  eliminated; therefore Air Force leadership is considering adjusting the  number of positions that may be removed.
section_title: Department of the Army: Streamlining Installation Management Services and Programs
paragraphs: This is an Army initiative to reduce, eliminate and re-scope services and  programs across the Army’s installations, with an estimated cumulative  savings of $1.1 billion ($456 million in fiscal year 2015 and $667 million in  fiscal year 2016). Services and programs to be reviewed include human  resources, information technology, logistics, public works, and security,  and other services provided on Army installations. On August 29, 2011,  the Army established the Installation Management Reform Task Force— which includes representatives of the Army commands and organizations,  such as the Army Installation Management Command—to assist in  streamlining installation management and reducing overhead costs,  among other things. Specifically, the representatives of the task force are  responsible for conducting a detailed analysis of the services provided on  Army installations. In September 2011, the Army began its holistic review  of installation services and infrastructure costs to evaluate opportunities  to develop efficiencies, among other things. Army commands, such as the  Installation Management Command, were directed to seek ways to  reduce shared contracted services or eliminate services and programs  perceived to be of little value to reduce costs. They are also looking at the  effects of reduced population (both military and civilians) on the demands  for installation services. According to officials at the Office of Assistant  Chief of Staff for Installation Management, the office leading this  efficiency initiative, they are in the early stages of identifying the services  and programs to be reduced, eliminated, or re-scoped, and the effort is  scheduled to be executed in fiscal year 2015 and fiscal year 2016.
section_title: Defense-wide Efficiency Initiatives
paragraphs: As part of DOD’s efficiency initiative, the Secretary of Defense directed a  series of initiatives designed to reduce duplication, overhead, and excess  across the department. For example, the Secretary directed components  of the Office of the Secretary of Defense, the Joint Staff, combatant  commands, the defense agencies, and DOD field activities to conduct  baseline reviews of how they use personnel and budgetary resources to  carry out their missions in order to rebalance resources. This and other  departmentwide efforts were projected to yield about $78 billion in  savings through fiscal year 2016. The efficiencies for the components  discussed below originate from both the baseline reviews and other  departmentwide efficiency initiatives.
subsections: section_title: Office of the Under Secretary of Defense for Policy
paragraphs: The Office of the Under Secretary of Defense for Policy is a component of  the Office of the Secretary of Defense that advises the Secretary of  Defense on the formulation of national security and defense policy. To  identify efficiencies, the Office of the Under Secretary of Defense for  Policy conducted a study that found its ratio of administrative support to  senior executives was 3 to 1, which was above the industry standard; it  therefore determined that it could make reductions in administrative  overhead. The Office of the Under Secretary of Defense for Policy cut 68  technical support contractors and 42 administrative support contractors  for an estimated savings of $14.6 million in fiscal year 2012, and  expected cumulative savings of $77.7 million from fiscal years 2012 to  2016. Officials with the Office of the Under Secretary of Defense for  Policy stated that the component is on target to meet all directed  initiatives.
section_title: Defense Finance and Accounting Service
paragraphs: The Defense Finance and Accounting Service is a defense agency that  provides finance and accounting services for the DOD civilians and  military members. It is enacting several efficiencies and plans to eliminate  227 contractor positions and six civilian positions. Additionally, it is  planning to eliminate paper leave and earning statements that it provides  to DOD personnel and reduce manual processing of transactions by  increasing electronic commerce to pay for contractor mission support.  The associated savings for these initiatives, $41.3 million, has been  removed from the budget for fiscal year 2012. From fiscal years 2012 to  2016, the expected cumulative savings is $206.5 million. Although the  associated funding of $41.3 million has been removed for fiscal year  2012, officials said that 100 percent elimination of paper leave and  earning statements and increase in e-commerce transactions depend on  the demands of the agency’s customers.
section_title: Washington Headquarters Services
paragraphs: The Washington Headquarters Services is a field activity organization that  supplies administrative support services across the department, such as  information technology, facilities management, and human resources.  According to Washington Headquarters Service officials, they identified  the efficiencies by focusing on critical services and devolving noncritical  and completed missions. The Washington Headquarters Services  reduced the number of organizational elements it has from 12 to 8 by  merging directorates that performed similar services and functions. It  combined its Information Technology Management and Office of the  Secretary of Defense Networks directorates to form the Enterprise  Information Technology Services directorate. The former directorates of  Defense Facilities and Pentagon Renovation were combined to form  Facilities Services, while three directorates that performed similar  administrative functions were consolidated to form the Enterprise  Management directorate. Through these efforts, Washington  Headquarters Services will eliminate a total of 52 civilian positions and  generate an estimated savings of $7.2 million for fiscal year 2012 and an  expected cumulative savings of $57 million from fiscal years 2012 to  2016. Officials said the associated funding has been removed for fiscal  year 2012 and, as of January 2012, 50 of the 52 civilian positions have  been removed.
section_title: U.S. Northern Command
paragraphs: U.S. Northern Command is a unified combatant command whose mission  is to conduct homeland defense, civil support, and security cooperation.  U.S. Northern Command is implementing several efficiencies, to include  eliminating lower-priority functions, consolidating U.S. Northern  Command’s and North American Aerospace Defense Command’s staff  functions, eliminating 13 additional support billets, and reducing reliance  on service support contractors. According to officials, these actions have  resulted in an estimated savings of $12.6 million for fiscal year 2012 and  expected cumulative savings of $87.8 million from fiscal years 2012 to  2016. To achieve the efficiencies, U.S. Northern Command reviewed low- priority tasks and eliminated manpower and other associated costs such  as supplies and computer support. Officials said civilian positions have  been eliminated and phased contract reductions will be complete by  September 2013.
section_title: U.S. European Command
paragraphs: U.S. European Command is a unified combatant command whose  mission is to conduct military operations, international military  engagement, and interagency partnering to enhance U.S. and  transatlantic security. U.S. European Command has implemented several  efficiencies to achieve savings. The command reorganized its  headquarters to promote interagency cooperation by realigning staff and  reduced headquarters manpower and expenditures by 10 percent by  realigning resources to higher-priority missions. These actions were  estimated to eliminate 86 military and civilian positions and save   $17 million in fiscal year 2012, with expected cumulative savings of   $84.8 million by fiscal year 2016. According to officials, U.S. European  Command has already completed the reorganization of its headquarters,  and the funding for the eliminated positions has been removed from the  fiscal year 2012 budget.
section_title: Appendix III: Examples of DOD’s Headquarters Organizations
paragraphs: Figures 4 through 9 contain the information on DOD headquarters  organizations presented in noninteractive format.
section_title: Appendix IV: Comments from the Department of Defense
section_title: Appendix V: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Patricia Lentini, Assistant  Director; Erin Behrmann; Pat Bohan; Grace Coleman; Richard Geiger;  Jeffrey Hubbard; Cynthia Saunders; John Van Schaik; Angela Watson; K.  Nicole Willems and Weifei Zheng made key contributions to this report.