DOD has addressed one additional statutory requirement of section 911 of the NDAA for Fiscal Year 2017 since our June 2018 report. However, DOD has still not addressed five other requirements, including (1) issuing its organizational strategy, (2) issuing guidance on cross-functional teams, (3) providing training on cross-functional teams for team members and their supervisors, (4) providing training for presidential appointees, and (5) taking actions to streamline the Office of the Secretary of Defense, as shown in table 1. DOD addressed one of the statutory requirements in section 911 by submitting a report to Congress on the establishment of cross-functional teams on June 21, 2018. The report described the number of cross- functional teams established to date and the design and function of those teams, consistent with the requirements in section 911. OCMO officials told us that DOD plans to address three of the five remaining requirements by March 2019. Specifically, the department plans to take the following actions. Issue DOD’s organizational strategy. DOD has drafted, but not issued, its organizational strategy, which section 911 required to be issued by September 1, 2017. In June 2018, we reported that OCMO officials had revised the draft strategy to address the recommendation from our February 2018 report, including identifying potential action steps for the department that align with our leading practices for mergers and organizational transformations. OCMO officials have again revised the draft organizational strategy, incorporating, among other things, the criteria that distinguish cross-functional teams established under section 911 from other cross-functional working groups, committees, integrated product teams, and task forces, as required by section 918 the NDAA for Fiscal Year 2019. The officials said they expect the Secretary of Defense to issue the strategy in March 2019—18 months later than required by section 911. Take actions to streamline the Office of the Secretary of Defense. OCMO officials have revised the draft organizational strategy to identify the actions the department has taken that it views as responsive to this requirement. For example, the draft strategy states that DOD has delegated authority to approve certain global force management actions to the Chairman of the Joint Chiefs of Staff and certain acquisition oversight functions to the military departments. Section 911 required DOD to take these actions by June 23, 2018. As noted above, however, the organizational strategy has not been finalized. We will assess these actions against the requirements of section 911 after the organizational strategy has been issued. Issue guidance on cross-functional teams. DOD has drafted, but not issued, guidance on cross-functional teams, which section 911 required to be issued by September 30, 2017. In June 2018, we reported that OCMO officials had revised the draft guidance to address the recommendation from our February 2018 report. OCMO officials stated that they have no other planned revisions and that they expect the Secretary of Defense to issue the guidance in March 2019—18 months later than required by section 911. Further, OCMO officials told us that DOD plans to finalize the draft curricula and provide training to fulfill two additional section 911 requirements after the organizational strategy is issued. Training for cross-functional team members and their supervisors. OCMO has not provided the required training to cross-functional team members and their supervisors. OCMO officials stated that they plan to send the draft training curriculum for cross-functional team members and their supervisors to the Secretary after they send the strategy. In February 2018, we reported that the draft training curriculum addressed the section 911 requirements; OCMO officials told us they plan no further revisions to the curriculum. After the Secretary approves the curriculum, the officials stated, they plan to offer the training to cross-functional team members. Some cross- functional team members we met with stated that receiving training on cross-functional teams earlier would have been helpful for them to understand how to operate in a cross-functional team environment, such as reporting to both the team leader and to their home organization. Training for presidential appointees. OCMO has not provided the required training to individuals filling presidentially-appointed, Senate- confirmed positions in the Office of the Secretary of Defense. Section 911 requires these individuals to complete the training within 3 months of their appointment, or for DOD to request waivers. However, as of January 2, 2019, 23 of 35 such officials had been in their positions for more than 3 months, and none had received the training or been granted a training waiver. In our February 2018 report, we found that the draft curriculum met only one of the four required elements in section 911. We recommended, and DOD concurred, that the CMO should either (1) provide training that includes all of the required elements in section 911 or (2) develop criteria for obtaining a waiver and have the Secretary of Defense request such a waiver from the President for these required elements. In October 2018, an OCMO official stated that OCMO had revised the draft training curriculum for presidential appointees to include all of the required elements in section 911. The official also stated that OCMO plans to send the draft training curriculum to the Secretary of Defense for review after OCMO sends the organizational strategy. Once the curriculum is approved, the official stated that OCMO plans to recommend to the Secretary of Defense that all presidential appointees in the Office of the Secretary of Defense receive the training and does not plan to request waivers. As described above, we have previously recommended that DOD take actions to improve its implementation of the section 911 requirements related to the organizational strategy, guidance, and training. As we have reported before, addressing our recommendations and fully implementing the remaining requirements would better position DOD to effectively implement its cross-functional teams and advance a collaborative culture, as required by the NDAA. We will continue to monitor DOD’s progress in addressing these statutory requirements and our related recommendations. DOD is establishing a new cross-functional team to address growing challenges in the electronic warfare mission area. Section 918 of the NDAA for Fiscal Year 2019 requires DOD to establish this cross- functional team by November 11, 2018, to identify gaps in electronic warfare and joint electromagnetic spectrum operations, capabilities, and capacities within the department across personnel, procedural, and equipment areas. In January 2019, an OCMO official stated that the Office of the Under Secretary of Defense for Acquisition and Sustainment had drafted the team's charter and that it had been sent to the Secretary of Defense for review and approval. In addition, DOD plans to disestablish the first cross-functional team established in response to section 911 to address challenges with personnel vetting and background investigations. This team was responsible for managing the transfer of background investigations for certain DOD personnel from the Office of Personnel Management to DOD. However, Office of the Under Secretary of Defense for Intelligence officials stated that DOD plans to subsume the roles and responsibilities of the team into a new Personnel Vetting Transformation Office. According to the officials, the new office will be responsible for managing the administration’s proposed transfer of background investigations for all executive branch personnel from the Office of Personnel Management to DOD. As a result, the cross-functional team’s roles and responsibilities would overlap with those of the Personnel Vetting Transformation Office, the officials stated. The officials expect to formally disestablish the cross-functional team in the first quarter of fiscal year 2019 after DOD issues the charter for the Personnel Vetting Transformation Office. Last, DOD continues to implement its nine cross-functional teams dedicated to reforming and improving business operations, but plans to no longer consider these teams as responsive to section 911. The National Defense Business Operations Plan for Fiscal Years 2018-2022, issued in May 2018, stated that these teams were established pursuant to section 911. As of October 2018, however, DOD’s draft organizational strategy states that these teams were not established in response to section 911. Instead, it describes them as a second layer of cross- functional coordination that will aid in ensuring broader implementation of collaborative and team-oriented practices in the department. We describe these teams’ efforts to improve DOD’s enterprise business operations below and in appendix III. The National Defense Business Operations Plan for Fiscal Years 2018- 2022 highlights nine cross-functional teams as key mechanisms for implementing the plan’s strategic objective to improve and strengthen business operations through a move to enterprise or shared services. From October 2017 through January 2018, the Deputy Secretary of Defense, at the direction of the Secretary, established these nine teams to implement initiatives intended to improve the quality and productivity of the department’s business operations, including moving toward more use of enterprise services. According to memoranda appointing the team leaders, the teams support the Secretary of Defense’s focus on creating a more lethal and effective force by allowing the department to reallocate resources from business operations to readiness and to recapitalization of the combat force. These nine teams—hereafter referred to as business reform teams and whose leaders report to the CMO—address community services management, financial management, health care management, human resources, information technology and business systems, real property management, service contracts and category management, supply chain and logistics, and testing and evaluation. They are described in more detail in appendix III. The Fiscal Year 2019 DOD Annual Performance Plan identifies performance goals and measures to achieve the strategic goals and objectives described in the National Defense Business Operations Plan, including the goal of reforming the department’s business practices. It designates several business reform team leaders as responsible for meeting the performance goals and associated performance measures. For example, the leader of the information technology and business systems reform team is responsible for the performance goal to transform how the department delivers secure, stable, and resilient information technology infrastructure in support of warfighter lethality. This goal is consistent with the team’s overarching objective to plan and execute the transformation of all business systems affecting support areas within the department. The Annual Performance Plan’s objectives and timeframes related to the business reform teams, however, do not fully align with some of the initiatives that the teams are pursuing. For example, according to the plan, the leader of the community services management team is responsible for developing a strategic plan for armed forces retirement home reform by the second quarter of 2018. However, according to a list of the team’s current initiatives as of September 2018, the team was not pursuing this initiative. In October 2018, OCMO officials stated that Washington Headquarters Service is currently leading the armed forces retirement home reform effort. When we asked these officials how they view the relationship between performance measures in the plan and those of the business reform teams’ initiatives, they acknowledged that the teams’ initiatives have evolved since the plan’s development and that the teams have identified additional initiatives that may not be reflected in the plan. They also noted that OCMO drafted the content for the Fiscal Year 2019 DOD Annual Performance Plan before most of the teams were fully staffed and operational. As of October 2018, the officials stated that OCMO was coordinating with the team leaders to review the Fiscal Year 2019 DOD Annual Performance Plan and, as appropriate, to modify or develop new performance measures and targets for the Fiscal Year 2020 DOD Annual Performance Plan. Given DOD’s efforts to address this issue, we are not making a recommendation at this time, but will continue to monitor their efforts as part of our ongoing work on the high-risk nature of DOD’s business transformation efforts. DOD has made some progress establishing and organizing the business reform teams, but implementation of the teams’ initiatives has been uneven. We found that implementation of the business reform teams has demonstrated some key characteristics of leading practices for implementing effective cross-functional teams that we have identified in our prior work. For example, across all the teams we spoke with, members were responsible for leading the development of their team’s initiatives and communicating with their home organizations to obtain input, demonstrating a well-defined team structure. In addition, the business reform teams are structured to facilitate open and regular communication, another leading practice. For example, the teams are generally co-located with each other, which enables direct communication among team members and between teams, members stated. Further, members from most of the teams we spoke with were supportive of their team leaders and viewed them as effective in their roles, demonstrating an inclusive team environment. Team leaders across all teams also stated that they regularly interact with senior management, such as through weekly one-on-one meetings with the CMO or Deputy CMO. This engagement reflects a key characteristic that states team leaders should regularly interact with senior management. However, we found that the business reform teams’ efforts have not proceeded according to early plans outlined by the department. DOD’s August 2017 report to Congress on restructuring the CMO organization stated that the teams were intended to help modify processes to move toward enterprise service delivery. According to the report, the department would transition to DOD enterprise services by the end of fiscal year 2018. In July 2018, OCMO officials acknowledged that they were behind schedule, but told us they expected to catch up to this deadline by the end of fiscal year 2018, as originally planned. That deadline was not realized. According to OCMO officials, the teams are identifying new milestones for implementing initiatives, some of which will contribute to a move toward enterprise services. In addition, the business reform teams vary in the number of initiatives they are pursuing. As of September 2018, OCMO reported that the teams were pursuing a total of 135 initiatives and that the number of initiatives per team ranged from 2 to 38. For example, the community services management team was developing 2 initiatives—1 to examine the feasibility of merging DOD’s three military exchange services and the Defense Commissary Agency into a single resale enterprise, and the other to streamline the inventory of DOD lodging. In contrast, the supply chain and logistics team was developing 21 short- and long-term initiatives, such as reducing the footprint of underutilized warehouses and developing better data interoperability throughout the supply chain and logistics enterprise. Further, the teams’ progress in advancing their initiatives to the implementation and monitoring phase has varied. The Reform Management Group oversees the business reform teams. The Deputy Secretary of Defense chairs the Reform Management Group, and the CMO facilitates regular meetings of the group. The Reform Management Group authorizes the business reform teams to proceed with their initiatives through five gates—0 through 4. These gates trace initiatives from conception to implementation and monitoring. Before proceeding from one gate to the next, the teams must submit certain deliverables to the Reform Management Group for review and approval. For example, before an initiative can proceed to gate 1, OCMO requires the teams to submit a charter for the initiative, which can identify, among other things, the problem or opportunity statement, the project scope, expected outcomes and risk analysis, and preliminary performance measures. Figure 1 provides an overview of the five gates and the status of initiatives by gate, as of September 2018. As shown in figure 1, while some teams have successfully advanced several initiatives to gate 4, others have not yet progressed initiatives past gate 2. Specifically, as of September 2018, DOD reported that 104 of the teams’ 135 initiatives had not yet reached gate 3, the implementation phase. According to the teams we interviewed, several factors may affect the progress of an initiative, such as its complexity or a team’s approach to developing initiatives. For example, the community services management team leader stated that the team is primarily focused on the consolidation of the defense commissaries and exchanges, an initiative that is relatively large in scope and complexity. According to the team leader, this initiative involves a number of internal stakeholders, including all of the military services, as well as outreach to external stakeholders, such as veterans’ organizations. In addition, the leader stated that the team would need legislative changes to fully implement the initiative. As a result of the large scope and complexity, the leader expects the initiative to take longer to implement than others. Some teams have pursued a proof-of-concept approach to developing their initiatives, which involves pilots to test initiatives to prove their value prior to department-wide implementation. For example, the health care management team is conducting a regional pilot to test the feasibility of consolidating the purchasing of services across the military health system. DOD has asserted that some of its initiatives have produced benefits through savings or efficiencies. For example, according to a September 2018 DOD report on the department’s investments in support of the National Defense Strategy, the department achieved $1.61 billion in benefits by implementing private-sector best practices in purchasing goods and service contracts in the Air Force and defense agencies. In addition, DOD reported that the department saved $297 million through commercial information technology solutions, department-wide network management, and optimized data centers. Further, according to the report, consolidating four health care enterprises improved patient care and medical readiness, with an estimated savings of more than $2.5 billion annually by 2023. OCMO officials stated that they are still in the process of working with the Office of the Under Secretary of Defense for Comptroller to document savings generated from the business reform teams’ initiatives. Given that OCMO officials stated they are taking steps to document savings generated from the teams’ initiatives, we are not making a recommendation at this time, but will continue to monitor their efforts as part of our ongoing work on the high-risk nature of DOD’s business transformation efforts. One senior DOD official involved in the reform effort acknowledged that the teams’ progress has been uneven. He cited a number of factors that can affect teams’ implementation, including the degree to which the teams have support from the highest levels of department leadership to operate independently and advance changes that may be unpopular with internal or external stakeholders, and the ability of teams to tackle longstanding systemic challenges, such as inaccurate cost data throughout the department. This official and several teams we met with cited the importance of the team leader’s commitment to driving team success. We found that uncertainty with funding for initiatives may be an additional factor inhibiting some teams’ progress. In some cases, the business reform teams need funding to further develop and implement their initiatives, such as the supply chain and logistics team’s requirement for $2.4 million to conduct a pilot project that included conducting three site visits for warehouse and labor assessments in support of one of its initiatives. According to OCMO officials, the business reform teams can request funding from OCMO to further develop their initiatives, or if funding is not available from OCMO, the teams can seek funding from functional organizations. However, even in the early stages of their implementation, some teams told us that they did not have access to sufficient funding to fully develop and implement some of their approved initiatives or that the process for obtaining the funding was uncertain. For example, in June 2018, one team leader told us that the team did not have sufficient funding to implement four initiatives. The leader also stated that the team was not alerted to the lack of funding until immediately prior to its planned implementation of these initiatives. Members from another team stated that the Reform Management Group wanted the team to implement its initiatives more quickly, which increased the amount of funding the team needed for implementation. When the team requested additional funding, however, OCMO did not have it available. Further, OCMO officials told us that the teams submitted nine requests for funding in fiscal year 2018, but OCMO did not have funding to support four of these requests as of the end of fiscal year 2018. As the teams continue to develop and implement their initiatives, the number of requests for funding may increase in the future. Our prior work on efficiency initiatives has found that up-front investments may often be required to realize long-term efficiencies and savings. In this regard, OCMO officials told us that, as of September 2018, the nine teams had planned investments of about $6.7 billion to implement their initiatives from fiscal years 2018 through 2024. OCMO officials stated that this amount is a projection from the teams, and DOD has not yet identified sources for this funding. In addition, officials stated that more investment could be needed as the teams continue to develop initiatives and more enter the implementation phase. However, according to DOD’s budget materials for fiscal year 2019, requested funding for OCMO—a source used to fund the development of some of the teams’ initiatives—will decrease from about $48 million in fiscal year 2018, to about $36 million in fiscal year 2019. Leading practices for implementing effective cross-functional teams highlight the importance of senior management providing teams with access to resources. These leading practices also state that teams should have well-defined team operations with established rules and procedures. Further, the findings from a study contracted by DOD in August 2017 to determine how best to implement effective cross- functional teams identified actions for DOD to consider for supporting the implementation of its cross-functional teams, including identifying funding mechanisms to fully support cross-functional teams. The study suggested that language outlining the preferred mechanisms and authorities for this purpose can be included in cross-functional team guidance. OCMO officials told us that the office maintains a list of funding requests from the teams and prioritizes which initiatives to fund based on several factors including estimated yield, feasibility, and available resources for implementation. However, OCMO did not have a process for identifying and prioritizing available funding for implementing the initiatives planned by the business reform teams for fiscal year 2018, and has not established one for fiscal year 2019. According to OCMO officials, the department initially planned to use available funding from OCMO or the savings generated by the initiatives to fund the development and implementation of other initiatives. However, OCMO officials have since recognized that funding is needed and they are in the early stages of developing an approach to do so. Specifically, OCMO officials said they are working with the Office of the Under Secretary of Defense for Comptroller to identify funding for initiatives in fiscal year 2020. While there will likely be initiatives that cannot be funded given limited resources, OCMO and the reform teams could benefit from a clear process for identifying and prioritizing available funding. Without such a process, OCMO and the reform teams may not be able to adequately plan for and execute their initiatives. Section 911 of the NDAA for Fiscal Year 2017 called for organizational and management reforms to assist DOD in addressing challenges that have hindered collaboration and integration across the department. While the department has taken some steps to implement the section 911 requirements, it has still not met statutory due dates for implementing key requirements intended to support its cross-functional teams and to advance a more collaborative culture within the department. We continue to believe it is important for senior leadership to demonstrate their commitment to fulfilling section 911 by addressing our prior related recommendations and by completing the remaining requirements. Further, section 921 of the NDAA for Fiscal Year 2019 requires DOD to reform its enterprise business operations to increase the effectiveness and efficiency of mission execution. DOD has highlighted its nine cross- functional teams dedicated to improving the department’s business operations as key to achieving enterprise business reform. However, this effort has been marked by a slow start and uneven progress, and teams face a number of challenges. One key challenge is the teams’ lack of resources to drive their initiatives forward. OCMO has not established a process for identifying and prioritizing available funding for the development and implementation of the teams’ initiatives, which has hampered the success of some of the enterprise reform efforts. The Secretary of Defense should ensure that the Chief Management Officer establishes a process for identifying and prioritizing available funding to develop and implement initiatives from the cross-functional reform teams. (Recommendation 1) We provided a draft of this report to DOD for review and comment. In its written comments, which are reproduced in Appendix V, DOD concurred with our recommendation and described ongoing and planned actions to address it. We are sending copies of this report to the appropriate congressional committees, the Acting Secretary of Defense, and DOD’s Acting Chief Management Officer. In addition, the report is available at no charge on our website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2775 or fielde1@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 VI. Section 911 of the NDAA for Fiscal Year 2017 included a provision for us—every 6 months after the date of enactment on December 23, 2016, through December 31, 2019—to submit to the defense committees a report. Each report is to set forth a comprehensive assessment of the actions that DOD has taken pursuant to section 911 during each 6-month period and cumulatively since the NDAA’s enactment. We issued our first report in June 2017, and did not make recommendations. We issued our second report in February 2018, and made four recommendations to improve DOD’s implementation of section 911. We issued our third report in June 2018, and did not make recommendations. Table 2 identifies our three prior reports on DOD’s implementation of section 911 and the status of the four recommendations from our February 2018 report. Section 911 of the National Defense Authorization Act for Fiscal Year 2017 requires the Secretary of Defense to take several actions. Table 3 summarizes these requirements, the due date, and the date completed, if applicable, as of December 2018. The Deputy Secretary of Defense has established nine cross-functional teams since October 2017 to implement reform initiatives intended to improve the quality and productivity of the department’s business operations, including moving toward more use of enterprise services. According to the memoranda appointing the team leaders, these teams support the Secretary of Defense’s focus on creating a more lethal and effective force by allowing the department to reallocate resources from business operations to readiness and to recapitalization of the combat force. As of September 2018, these nine cross-functional teams varied in size, ranging from 5 to 31 members. According to OCMO officials, the size of the teams can vary based on the knowledge and expertise needed to implement the teams’ initiatives. The team leaders are either presidential appointees or members of the Senior Executive Service. In addition, the Deputy Secretary of Defense directed the military departments and functional organizations to appoint reform team members, and the teams include representatives from the military departments, functional organizations relevant to the reform topic, and external experts. At the time we met with the teams, most reported that they were the appropriate size and had the right skills and expertise represented on the team. Figure 2 provides additional details on the composition of these nine cross-functional teams, as of September 2018. In February 2018, we reported on eight leading practices for implementing effective cross-functional teams. Table 4 identifies these leading practices and their related key characteristics. In addition to the contact named above, Margaret Best (Assistant Director), Tracy Barnes, Arkelga Braxton, William Carpluk, Michael Holland, William Lamping, Chad Johnson, Matthew Kienzle, Amie Lesser, Ned Malone, Judy McCloskey, Sheila Miller, Sally Newman, Richard Powelson, Daniel Ramsey, Ron Schwenn, Jared Sippel, Susan Tindall, and Sarah Veale made key contributions to this report.

Summary: DOD continues to confront organizational challenges that hinder collaboration. To address these challenges, section 911 of the NDAA for FY 2017 directed the Secretary of Defense to issue an organizational strategy that identifies critical objectives that span multiple functional boundaries; establish cross-functional teams to support this strategy and provide related guidance and training; and take actions to streamline the Office of the Secretary of Defense. Further, section 921 of the NDAA for FY 2019 calls for the Secretary of Defense to reform the department's enterprise business operations. The NDAAs for FY 2017 and 2019 also included provisions for GAO to assess DOD's actions in response to sections 911 and 921, respectively. This report assesses the extent to which DOD has made progress in (1) addressing the requirements of section 911, and (2) reforming the department's enterprise business operations under section 921. GAO reviewed documentation on DOD's implementation of sections 911 and 921; interviewed cross-functional team leaders, members, and other DOD officials; and compared DOD's implementation of its cross-functional teams to GAO's key practices. The Department of Defense (DOD) has implemented four statutory requirements in section 911 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2017, but has not addressed five requirements intended to support cross-functional teams and promote department-wide collaboration (see table). For two of these requirements, DOD has missed the statutory deadline by more than a year. GAO previously recommended that DOD take actions to improve its implementation of section 911, and DOD reported it is doing so, such as revising its draft cross-functional team guidance to address statutory requirements. Fully implementing GAO's prior recommendations and the remaining statutory requirements would better position DOD to effectively implement its cross-functional teams and advance a collaborative culture, as required by the NDAA. Nine cross-functional teams are driving DOD's enterprise business reform efforts under section 921 of the FY 2019 NDAA, but the teams' progress has been uneven. As of September 2018, DOD reported that these nine teams were pursuing a total of 135 business reform initiatives. However, 104 of these initiatives have not reached the implementation phase. A key challenge facing the teams is that some lack resources to fully implement their approved initiatives. For example, DOD officials stated that the department did not fulfill four of nine funding requests from the teams in fiscal year 2018 to implement their initiatives. As of September 2018, DOD officials estimated that the teams need about $6.7 billion to implement their initiatives from FYs 2018 through 2024, but DOD has not identified sources for this funding. GAO's prior work on efficiency initiatives found that up-front investments may be required to realize long-term savings. In addition, GAO's prior work on leading practices for implementing effective cross-functional teams highlights the importance of providing teams with access to resources and having well-defined team operations with established rules and procedures. However, DOD has not established a process for identifying and prioritizing available funding for implementing the teams' initiatives. Without such a process, DOD and the teams may not be able to adequately plan for and execute their reform initiatives. GAO recommends that DOD establish a process to identify and prioritize funding for implementing its cross-functional teams' business reform initiatives. DOD concurred with this recommendation.