Defense Acquisition Organizations: Status of Workforce Reductions
Released: 1998-06-29T00:00:00

Letter

Background

DOD has some 20 acquisition organizations as well as a diverse, multilayered workforce. In recent years, Congress has enacted legislation that requires DOD to reduce its acquisition workforce significantly and to identify opportunities to streamline and consolidate acquisition organizations and functions. These legislative efforts, aimed primarily at reducing the acquisition workforce consistent with decreasing budgets and acquisition reform initiatives, allow the Secretary of Defense wide latitude in implementing the reductions. DOD has long sought to focus on infrastructure reductions in an effort to fund weapons modernization.

Section 906(a) of the National Defense Authorization Act for Fiscal Year 1996 (P. L. 104-106) required a plan that, if implemented, would reduce the acquisition workforce by 25 percent over the 5-year period beginning October 1, 1995. Section 906(d) further required a reduction of 15,000 persons in fiscal year 1996. Appendix I contains a complete list of these acquisition organizations. Section 277 of the same act required DOD to develop a 5-year plan to consolidate and restructure its laboratories and test and evaluation centers.

Section 902 of the National Defense Authorization Act for Fiscal Year 1997 (P. L. 104-201) amended section 906 to require a total reduction of 30,000 personnel in fiscal years 1996 and 1997 combined.

Section 912 of the National Defense Authorization Act for Fiscal Year 1998 (P. L. 105-85) required a reduction of 25,000 personnel in fiscal year 1998. The act gave the Secretary of Defense the authority to reduce that number to as few as 10,000 if he determined and certified to Congress that further reductions would be inconsistent with the cost-effective management of defense acquisition systems and would adversely affect military readiness. On June 1, 1998, the Secretary notified Congress that the reductions in fiscal year 1998 would be 20,096. Section 912(b) required DOD to report on recent reductions, define the term defense acquisition workforce, and apply the term uniformly throughout DOD. Section 912 (c) required DOD to submit an implementation plan, by April 1, 1998, designed to streamline and consolidate acquisition organizations. DOD has submitted its plan.

DOD’s Acquisition Workforce Is Smaller, but Potential Savings Are Difficult to Track and May Be Offset

Our analysis of data obtained from the Defense Manpower Data Center (DMDC) indicates that DOD is still on schedule to achieve acquisition workforce reductions of 25 percent by the end of fiscal year 2000. DOD reduced its acquisition workforce 15.8 percent (or 59,974) during fiscal years 1996 and 1997. This reduction is nearly two-thirds of the reduction of 95,153 personnel that DOD must achieve to meet its 25 percent, 5-year target. Despite these reductions, potential savings cannot be directly tracked in DOD budget accounts. In addition, some of the potential savings DOD anticipates it will achieve through these reductions may be offset by other costs.

DOD Is Still on Schedule to Achieve Planned Reductions

Our analysis of data obtained from DMDC indicates that during fiscal years 1996 and 1997, DOD reduced its acquisition workforce at a significantly higher rate than it reduced its overall workforce. At the end of fiscal year 1995, DOD employed 380,615 persons in its acquisition organizations. At the end of fiscal year 1997, the total number of personnel employed dropped to 320,641—a reduction of 59,974 (or 15.8 percent). Since the 25-percent planned reduction by the end of fiscal year 2000 is 95,153, DOD achieved nearly two-thirds of the target during the 2-year period. Table 1 provides an analysis of workforce reductions that have already taken place in each of the acquisition organizations.

By contrast, at the end of fiscal years 1995 and 1997, respectively, DOD employed 2,319,401 and 2,158,927 persons overall. This overall reduction of 160,474 (or 6.9 percent) during the same period was less than one-half of that achieved in DOD’s acquisition workforce.

While most of the reductions in the acquisition workforce have been achieved directly through personnel reductions, a significant portion was also attained by disestablishing the Army Information Systems Command and distributing the majority of its personnel into a nonacquisition organization (i.e., an organization outside the purview of DOD Instruction 5000.58).

Potential Savings From Personnel Reductions Cannot Be Precisely Tracked in DOD’s Budget

DOD’s civilian acquisition workforce comprises nearly 40 percent of DOD’s overall civilian workforce and is paid primarily through operations and maintenance (O&M) and RDT&E funding. The Congressional Budget Office estimates that the average annual salary and benefits of an acquisition worker is about $53,000. Using this average, the personnel reduction in acquisition organizations during fiscal years 1996 and 1997 represents a potential savings of approximately $3.2 billion.

However, DOD’s accounting systems are unable to directly track workforce reductions in acquisition organizations to DOD budget accounts. For example, although, since 1995, the civilian payroll portion of DOD’s O&M budget has been reduced by approximately $3.6 billion (roughly 9 percent), it is unclear how much of that decline is accounted for by acquisition workforce reductions.

During the same period, the RDT&E account actually increased approximately $826 million (more than 2 percent). It is also unclear how much of that increase is accounted for by acquisition workforce changes because DOD’s RDT&E account does not break out civilian payroll.

Potential Savings From Personnel Reductions May Be Offset

In addition to DOD’s inability to accurately track savings from personnel reductions in acquisition organizations, such savings have not been and may not be fully realized due to other offsetting costs. For example, potential savings from acquisition workforce reductions may be offset in part by contracting with private entities for some services previously performed by government personnel (i.e., substituting one workforce for another). According to a DOD official, other mission-specific costs that may offset savings from workforce reductions include (1) investment costs, such as early buyouts and (2) undocumented costs, such as overtime and workforce inefficiencies introduced by personnel shortages or inexperienced workers.

Our analysis shows that while DOD’s acquisition workforce has declined, defensewide contract awards for support services have increased over the past 5 years. As shown in figure 1, DOD’s spending on support services, as a percentage of overall DOD spending on contracts, is increasing. For example, the dollar value of DOD’s support service contracts in fiscal year 1997 was $47.8 billion (roughly 40 percent), compared to $45.5 billion (about 33 percent) in fiscal year 1993. Although we cannot directly correlate the increase in support service contracting to specific reductions in the acquisition workforce, we found that support service contracts generally increased for certain occupational fields that experienced the largest personnel reductions, including management analyst, contracting, administrative, and computer specialist. DOD officials stated that they have not studied the direct correlation of outsourced activities as they relate to mandated reductions. DOD is in the process of trying to determine cost savings associated with outsourcing activities.

Acquisition Workforce Redefinition Has Potential to Enhance Personnel Management

Numerous definitions have been applied to DOD’s acquisition workforce. These definitions can greatly affect how this workforce is counted and thus the number of personnel included. In response to congressional direction, DOD has developed a new way to define its acquisition workforce that it believes (1) more accurately reflects the numbers of personnel performing acquisition functions throughout the agency and (2) has the potential to directly link the management of acquisition personnel to DOD’s overall manpower and budgeting systems and processes.

Acquisition Workforce Definitions

While DOD’s acquisition workforce has been defined in numerous ways over the years, generally one of three approaches has been used. The first is to identify organizations with missions that fit the concept of acquisition and to include all the people in those organizations as the acquisition workforce. Under this approach, various segments of that workforce have been exempted. The first three examples in table 2 (1 through 1.b) show the number of acquisition workforce personnel as defined by this approach.

A second approach has been to focus on the senior professional members of the acquisition workforce having to meet the certification requirements of DAWIA. The act, (10 U.S.C. 1701 et seq.) enacted November 5, 1990, aims to professionalize DOD’s acquisition workforce. It requires the Secretary of Defense to establish an acquisition workforce with specific experience, education, and training qualifications. Specific provisions of the act require the Secretary of Defense to (1) establish a management structure along with policies and regulations for implementing the act’s provisions, (2) establish qualification requirements, (3) provide training and education to meet these requirements, and (4) enhance civilian opportunities to progress to senior acquisition positions.

A third approach provides the basis for DOD’s new definition; that is, to identify acquisition functions and related occupations and then identify the people performing those functions regardless of their assigned organization. DOD officials contend that the first approach overstates the number of personnel involved in acquisition and excludes others performing acquisition functions in other DOD organizations. For example, if all individuals that are employed in the organizations included in DOD Instruction 5000.58 (see app. I for a complete list) are identified as acquisition personnel, such occupations as doctors and security guards would be included. Conversely, the Defense Information Systems Agency, which, according to a DOD official, is the primary purchasing agent for DOD’s information systems technology, is not listed in 5000.58 as an acquisition organization and would not be included as part of the acquisition workforce.

Status of DOD’s Redefinition of Its Acquisition Workforce

In response to the requirement contained in section 912(b) of the National Defense Authorization Act for Fiscal Year 1998, the Secretary of Defense informed Congress that beginning October 1, 1998, members of the acquisition workforce will be uniformly identified using an updated version of an approach developed by the 1986 Packard Commission. This method, developed by DOD’s Acquisition Workforce Identification Working Group in cooperation with an outside consultant, identifies the workforce by considering occupations across DOD and occupations in certain organizations. The workforce will be a combination of (1) certain occupations regardless of the organizational designation, (2) certain occupations only if employed in certain organizations, and (3) other selected functions throughout DOD. These three categories, for the first time, create a DOD-wide framework around which each of the military services and defense agencies can seek consensus. The Working Group has subsequently engaged the services and agencies in identifying the personnel that would constitute a newly defined acquisition workforce.

The Working Group is also seeking ways to incorporate the acquisition workforce into DOD’s manpower management and budgeting systems. One of the Group’s primary objectives is to tie DOD-wide acquisition functions directly to corresponding budgetary program element codes, thus linking the acquisition workforce to DOD’s budget process for the first time. This approach, according to the Working Group, would allow DOD to address some specific shortfalls in its traditional approach. For example, it could (1) improve significantly, DOD’s ability to effectively manage the acquisition workforce in budgeting and planning for training and (2) allow DOD to more directly identify and track the impacts of changes in the acquisition workforce, such as reductions and potential savings.

Air Force Laboratory Streamlining and Consolidation Effort Has Limited Impact on Size of Infrastructure

Significant cuts in DOD’s acquisition workforce might be expected to result in reductions in associated infrastructure. In a review of a major Air Force laboratory reorganization, however, we found that DOD’s efforts focused more on management efficiencies than actual infrastructure reductions. We believe the results of DOD’s laboratory consolidation efforts are instructive in attempting to understand the lack of change in the infrastructure related to the acquisition workforce.

In 1996, Congress required DOD to develop a 5-year plan for restructuring and consolidating its laboratories and test and evaluation centers. DOD’s response was Vision 21, a plan based on the reduction, restructuring, and revitalization of its RDT&E infrastructure.

In our report on best practices associated with restructuring the federal RDT&E infrastructure, we pointed out that a variety of critical elements need to be in place to ensure that any restructuring effort is successful, and we concluded that DOD’s Vision 21 plan incorporated many of these elements. These elements include (1) a crisis or catalyst that served to spark action; (2) an independent authority to overcome parochialism and political pressure that impede decision-making; (3) core missions focused to support the organization’s overall goals and strategies; (4) clear definitions that fully delineate the existing infrastructure; and (5) accurate, reliable, and comparable data that capture total infrastructure costs and utilization rates for each affected activity.

To position itself for DOD’s implementation of the Vision 21 plan, the Air Force restructured its research laboratories. The Air Force Research Laboratory, created in October 1997, was a consolidation of four independent laboratories and is responsible for research and technology development in support of the Air Force’s future and existing aircraft and weapon systems. The specific objectives of creating a single laboratory were to (1) streamline the laboratory organizational structure, with emphasis on reducing the cost of operating the infrastructure; (2) consolidate full resource ownership and accountability (dollars and people) under a single commander; (3) reduce fragmentation of similar technologies currently distributed among multiple technology directorates; and (4) create a more robust, focused laboratory enterprise postured for the future.

Under this consolidation, the independent laboratories were all functionally consolidated as a single organization. The number of directorates was reduced from 22 to 9, and the number of planning staffs was reduced from 5 to 1. Laboratory officials told us that they are now in the process of identifying and collecting actual total operating costs, such as civilian and military labor, base operating support, depreciation, contract support, and equipment. These officials expect to eventually reduce the laboratory’s management overhead by 450 positions. Although 78 percent of the Laboratory’s budget is outsourced to industry and academia, Laboratory officials estimate that its support costs are 24 cents per dollar of revenue, or about $591 million. The goal is to maintain the laboratory’s support cost at 24 cents per dollar for the period 2000-2005, a move that would save an estimated $50 million a year.

Laboratory officials told us that there were two basic reasons the closure of major facilities was not considered as part of their consolidation efforts. First, they believed that Congress would be unwilling to approve any unilateral restructuring of its research facilities unless a base realignment and closure (BRAC) process is undertaken. Second, they did not want to preempt any action that might take place under Vision 21, which calls for a comprehensive review of all DOD laboratories and test centers. But Vision 21 was subsequently subsumed by the Quadrennial Defense Review, which called for two additional BRAC rounds for fiscal years 1999 and 2001. DOD decided not to submit its legislative package for Vision 21 and instead opted to include its RDT&E infrastructure in any future BRAC rounds. Congress has rejected the recommendation for additional BRAC rounds.

In response to section 912(c) of the National Defense Authorization Act for Fiscal Year 1998, the Secretary of Defense called for further study of DOD’s RDT&E base.

Conclusions

DOD has reduced its acquisition workforce and associated costs. Further, DOD is on schedule to meets its 25-percent personnel reduction target. However, the potential savings from these reductions cannot be precisely tracked in DOD’s O&M and RDT&E budget accounts. In any case, these anticipated savings may be offset by other costs. Furthermore, DOD has not reduced its acquisition infrastructure to the extent that it reduced its acquisition personnel. Further attention may be needed to achieve cuts in the infrastructure associated with the personnel reductions.

DOD’s redefinition of its acquisition workforce appears to be based on a solid analytical framework of identifying and linking acquisition personnel and acquisition functions. Tying the acquisition workforce to the budget process, if successful, could increase the quality and timeliness of information critical to decisionmakers.

Agency Comments

We provided DOD officials with a draft of this report. DOD provided oral comments and concurred fully with the information contained in it.

Scope and Methodology

To determine the extent of reductions in DOD’s overall workforce and in its acquisition workforce, we obtained employment levels, as measured by end strength, through the end of fiscal year 1997 from DMDC located in Monterey, California (West Division), and Washington, D.C. (East Division). We performed analyses on various aspects of the data, stratifying it by organization, occupational/job series, and so forth. We also interviewed and obtained defense manpower data from officials in the Office of the Under Secretary of Defense (Personnel and Readiness), the Office of the Under Secretary of Defense (Acquisition & Technology), and other selected DOD components.

To examine trends in DOD O&M budget accounts, we obtained the Future Years Defense Program’s Total Obligational Authority figures for fiscal years 1996-99. We stratified the budget data by pay for civilian personnel versus all other obligational authority.

To examine trends in contract awards for services, supplies, and equipment, we retrieved contract data from DOD’s Individual Contract Action Report for fiscal years 1993-97, stratified by year. We converted budget, payroll, and contract data to constant 1998 dollars.

In reviewing the Air Force Research Laboratory consolidation, we interviewed cognizant Air Force officials, to obtain their justifications and rationale for initiating the restructuring effort. To ascertain the Laboratory’s pre- and post-consolidation parameters, we obtained specific data regarding the size and composition of the workforce, the number of laboratories and sites, overlap of primary areas of research, and so forth.

We discussed various consolidation and restructuring cases with officials in the Office of the Under Secretary of Defense and other DOD components. In determining appropriate case studies for this report, we also applied an analytical framework developed in earlier work.

We did not independently review the reliability of DOD’s management information systems or databases. However, we interviewed DMDC officials regarding their quality control procedures for minimizing sources and chances for error. Further, we independently obtained the data and compared the results of our analyses to those of other users of the same database. Checking and matching of this independently derived information gave us assurance that the data were consistent. Lastly, we ascertained the extent to which DOD assessed the reliability of the Data Center’s products.

We performed our work from January through May 1998 in accordance with generally accepted government auditing standards.

We are sending copies of this report to the Ranking Minority Member of the House National Security Committee, the Secretary of Defense, and the Director of the Office of Management and Budget. We will make copies available to others upon request.

If you have any questions concerning this report, please contact me at (202) 512-4841. Major contributors to this report are listed in appendix II.

Defense Acquisition Organizations

The Department of Defense (DOD) Instruction 5000.58 states that the mission of an acquisition organization, with its subordinate elements, includes planning, managing, and/or executing acquisition programs that are governed by DOD Directive 5000.1 (reference (n)), DOD Instruction 5000.2 (reference (o)), and related issuances. Specifically, these organizations (and any successor organization of these commands) are as follows:

Office of the Under Secretary of Defense (Acquisition and Technology)

Army Information Systems Command

Army Materiel Command

Army Strategic Defense Command (now the Army Space and Strategic Defense Command)

Army Acquisition Executive

Office of the Assistant Secretary of the Navy (Research, Development, and Acquisition)

Naval Sea Systems Command

Naval Air Systems Command

Naval Supply Systems Command

Naval Facilities Engineering Command

Office of the Chief of Naval Research

Space and Naval Warfare Systems Command

Navy Strategic Systems Program Office

Navy Program Executive Officers/Direct Reporting Program Manager

Marine Corps Systems Command

Office of the Assistant Secretary of the Air Force (Acquisition)

Air Force Systems/Air Force Logistics Commands (now the Air Force Material Command)

Air Force Program Executive Organization

Strategic Defense Initiative Organization (now the Ballistic Missile Defense Organization)

Defense Logistics Agency

Special Operations Command (now the Special Operations Command Acquisition Center)

Major Contributors to This Report

National Security and International Affairs Division, Washington, D.C.

Chicago Field Office

Related GAO Products

Best Practices: Elements Critical to Successfully Reducing Unneeded RDT&E Infrastructure (GAO/NSIAD/RCED-98-23, Jan. 8, 1998).

Defense Acquisition Organizations: Reductions in Civilian and Military Workforce (GAO/NSIAD-98-36R, Oct. 23, 1997).

Defense Acquisition Organizations: Changes in Cost and Size of Civilian Workforce (GAO/NSIAD-96-46, Nov. 13, 1995).

Defense Acquisition Infrastructure: Changes in RDT&E Laboratories and Centers (GAO/NSIAD-96-221BR, Sept. 13, 1996).

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