Believing DOD’s efforts to reduce its infrastructure, including the size of its headquarters activities, lagged behind cuts in operational forces, Congress directed DOD to reduce positions in OSD, including Washington Headquarters Services and other defense support activities, by 25 percent from fiscal year 1994 levels by the end of fiscal year 1999. Furthermore, Congress directed DOD to reduce the number of positions in all DOD headquarters activities by 25 percent from fiscal year 1997 levels by the end of fiscal year 2002. Noting that it had already reduced personnel in heardquarters activities starting in fiscal year 1992, DOD believed these cuts would create an unreasonable burden on personnel who perform essential headquarters functions. DOD asked Congress to repeal this provision in March 1998. However, Congress did not rescind it. DOD noted that the congressionally mandated 25-percent reduction, when combined with the Department’s previously programmed reductions, would reduce these components by over 40 percent for the fiscal year 1992-2000 time period. In October 1997, we reported that the number of management headquarters’ personnel and costs were significantly higher than reported by DOD. During fiscal years 1985-96, DOD reported steady decreases in its management headquarters and headquarters support personnel—a 31-percent decline from about 77,000 to 53,000. However, these data did not include personnel at most of DOD’s noncombat organizations that are subordinate to management headquarters. In our review of selected subordinate organizations, nearly three of every four of them were primarily performing management or headquarters support functions and should have been reported to Congress by DOD. We recommended that the Secretary of Defense revise the directive on management headquarters and headquarters support activities to expand its coverage and simplify its criteria. In the November 1997 Defense Reform Initiatives (DRI) report, the Secretary of Defense directed OSD to reduce the number of personnel. To achieve reductions, the Secretary directed that OSD eliminate redundancy and obsolete functions, consolidate related functions, and transfer operational and program management functions to other DOD organizations. In addition, the Secretary directed that OSD’s “hidden staff”—components that directly support OSD but were not included as part of OSD’s formal organizational structure or reported in its personnel strengths—be absorbed into OSD. Finally, the Secretary directed the military departments and their major commands, defense agencies, defense field activities, joint staff, and unified commands to reduce the number of headquarters positions. OSD’s Administrative Instruction 53, “Temporary Staff Augmentations,” states that temporary staff may be used for emergencies, for unforeseen temporary requirements or workload surges, or for jobs for which the skills are not otherwise available within the organization. Temporary staff are not to be used to perform continuing office functions. DOD plans to cut 1,373 positions in OSD and its support activities by the end of fiscal year 1999. These reductions would be 2 percentage points more than the 25-percent cut mandated in the National Defense Authorization Act for Fiscal Year 1997. Although the number of positions has been reduced, civilian salary costs (in constant dollars) have not decreased. In addition, some service and defense agency personnel assigned to OSD are not counted as part of OSD. DOD’s plan to achieve the cuts is shown in table 1. Appendix I shows the changes by office within OSD. As of the end of fiscal year 1998, DOD had cut 1,123 positions, or 82 percent of the planned reductions—858 positions in OSD and 265 positions in Washington Headquarters Services (see table 2). Our analysis indicates that OSD eliminated 402 positions primarily by abolishing vacant positions, reducing the number of overstrength positions, eliminating military positions after the incumbents rotated, and abolishing positions by using early-out incentives. Some positions were also eliminated through organizational changes. For example, the Office of the Under Secretary of Defense for Policy reorganized and eliminated one assistant secretary position as well as several support positions. OSD also reduced the size of its staff by transferring positions to other DOD organizations. For example, in fiscal year 1997, OSD transferred 278 positions from a defense support activity to a DOD field activity. Positions in DOD field activities are not counted as part of OSD. Furthermore, DRI directed that OSD transfer positions that were considered operational or involved in program management to other DOD organizations. In fiscal year 1998, OSD transferred approximately 240 positions to other organizations. The major transfers that occurred during fiscal year 1998 are the following: The Office of the Under Secretary of Defense for Personnel and Readiness transferred 48 positions for managing DOD’s TRICARE medical program to the TRICARE management activity, a DOD field activity. OSD transferred 47 positions supporting various boards and commissions to the Washington Headquarters Services. The Office of the Under Secretary of Defense for Policy transferred 42 positions at the U.S. Mission to the North Atlantic Treaty Organization to the Department of the Army. The Office of the Assistant Secretary of Defense for Public Affairs transferred 28 positions that managed the freedom of information and security review programs to the Washington Headquarters Services. As of the end of fiscal year 1998, DOD had reduced Washington Headquarters Services by a net of 265 positions. Approximately 300 positions were cut by contracting out the Pentagon cleaning service, and another 130 were cut primarily by eliminating vacant positions and positions vacated through early-out incentives. However, these cuts were partly offset by an increase of 165 positions from functions transferred into Washington Headquarters Services, primarily from OSD. To complete the planned cuts, DOD plans to cut 250 positions (202 in OSD and 48 in Washington Headquarters Services) in fiscal year 1999. To achieve its cuts, OSD plans to eliminate 130 positions and transfer another 72 positions. As of November 1998, OSD had identified 32 of the positions to eliminate and told us it had completed 40 of the planned transfers. Washington Headquarters Services plans to cut 72 positions, which will be partly offset by an increase of 24 positions for new missions as well as the expansion of current missions. As of October 1998, Washington Headquarters Services had cut 19 positions by transferring positions in the executive motor pool and travel function to the Department of the Army. According to Washington Headquarters Services officials, the remaining positions will be eliminated by consolidating contracting offices and through early-out incentives. Although about 1,125 positions were eliminated in or transferred from OSD and Washington Headquarters Services between fiscal year 1994 and 1998, there was no proportional decrease in civilian salaries during this time frame. Our analysis indicates that OSD civilian salary costs increased by $7 million (4 percent), from $172 million in fiscal year 1994 to $179 million in fiscal year 1998 (constant 1998 dollars). Likewise, Washington Headquarters Services civilian salary costs increased by $2 million (2 percent) from $84 million to $86 million during this same period. Salary costs did not decline commensurate with the personnel reductions partly because many of the positions eliminated were vacant and annual civilian pay raises exceeded the inflation rate. In addition, OSD incurred some one-time costs associated with incentives to encourage personnel to leave early. For example, DOD paid $1.4 million in such incentives in fiscal year 1998. The military services and defense agencies temporarily assign personnel to OSD that are not counted as part of OSD. While DRI recommended that personnel in the defense support activities and overstrength positions be counted as part of OSD, it did not discuss personnel temporarily assigned to OSD. DOD does not have a central database that identifies such positions or people, known as detailees, but the number could be large. For example, an official from the Office of the Assistant Secretary of Defense for Command, Control, Communications and Intelligence (ASD/C3I) said that 115 people were temporarily assigned to ASD/C3I as of August 1998. The Office of the Under Secretary of Defense for Policy said it had about 26 detailees, and the Office of the Under Secretary of Defense for Acquisition and Technology said it had about 10 detailees. Our review of ASD/C3I information on the 115 detailees’ assignments showed that some of the detailees met the requirements of OSD’s administrative instruction on temporary staff. For example, an ASD/C3I official noted that his office could not recruit temporary staff with the required skills to deal with Year 2000 issues. ASD/C3I was using 20 military service and defense agency people to work on such issues. Another 36 ASD/C3I detailees were either liaisons with the various intelligence agencies or individuals from other agencies on developmental assignments. According to an ASD/C3I official, these positions are permanent within the organization, and personnel occupying these positions change every 2 to 3 years. The remaining 59 positions being filled by detailees appeared to be a permanent part of ASD/C3I. According to an ASD/C3I official, approximately 30 detailees had been assigned to work on specific projects but did not return to their home organizations when the projects ended. For example, the Defense Information Systems Agency sent 17 people to ASD/C3I to support the corporate information management initiative; however, they did not return when the project was terminated. ASD/C3I officials said they were developing a plan to incorporate the policy-related positions into OSD and return the other positions to their parent organizations by fiscal year 2000. The remainder of the detailees were in ASD/C3I’s Defense Airborne Reconnaissance Office. According to an ASD/C3I official, they plan to downsize the office from 27 to 18 and either transfer the function to one of the military departments or make it a permanent part of ASD/C3I.