Each year, GAO’s work contributes to many legislative and executive branch actions that result in significant financial savings and other improvements in government operations. Some, but not all, are identified through GAO’s system for periodically following up to determine the status of actions taken on the recommendations made in its audit and evaluation reports. About 70 percent of the recommendations made over the past 5 years have been implemented. This report includes summaries highlighting the impact of GAO’s work and associated key open recommendations—those recommendations which have not been fully implemented. It also includes a set of computer diskettes with details of all open recommendations. This information should help congressional and agency leaders prepare for upcoming appropriations and oversight activities and stimulate further actions to achieve the desired improvements in government operations. 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Although the national defense budget has declined significantly over the past decade, the Department of Defense (DOD) still spends almost $80 billion annually to research, develop, and acquire weapon systems. DOD’s leadership has emphasized its commitment to streamlining and improving the acquisition process to reduce acquisition costs while ensuring technological leadership and a strong, competitive industrial and technology base. The National Aeronautics and Space Administration (NASA) has similar efforts underway. During fiscal year 1997, we reviewed (1) the justifications for new and modified systems to determine whether they are reasonable and support the national military strategy, (2) system development programs to determine whether systems are being acquired in an effective and efficient manner, and (3) acquisition strategies to determine whether DOD and NASA have selected the lowest risk and least costly acquisition strategies consistent with the need for the planned system or modification. Our reviews included systems such as the B-2, F/A-18E/F, F-22, C-17, and F-14 aircraft and unmanned aerial vehicles. We also continued our work on DOD’s development of space systems, including the Defense Satellite Communications System and Expandable Launch Vehicle Program. To determine whether DOD and NASA are streamlining and improving their acquisition processes, practices, and infrastructure, we evaluated the implementation of governmentwide acquisition reform legislation and reviewed new proposals. We also assessed DOD’s efforts to utilize opportunities for international cooperation in the development and production of weapon systems. In addition, we assisted the Senate and House Appropriations Committees, the Senate Armed Services Committee, and the House National Security Committee, by examining DOD’s fiscal year 1998 budget and prior years’ appropriations and identifying opportunities to reduce DOD’s procurement and RDT&E funding by about $1.38 billion. We provided Congress with information to assist in its oversight responsibility on many occasions. For example, we reported that DOD needs to reorient its aircraft investment strategy to recognize the reality of a constrained overall defense budget for the future. Otherwise, a significant imbalance is likely to result between the funding requirements, particularly the major commitments for the initial procurement of all the planned aircraft programs (such as the F/A-18E/F and F-22) over the next several years, and available funding. Our work on the use of major weapon systems warranties resulted in Congress repealing 10 U.S.C. 2403 and reducing DOD’s procurement budget by $75 million for fiscal year 1998 to account for potential savings. We reported that Theater High Altitude Area Defense project had not achieved a successful intercept during the four tests conducted in the engineering, manufacturing, and development phase of RDT&E. Subsequently, Congress denied DOD’s program request for $262 million for fiscal year 1998. Our work regarding defense industry restructuring showed that DOD did not include data on grants provided by the Department of Labor in its annual restructuring reports to Congress. As a result, DOD agreed to include such information in future reports in order to provide Congress more complete information about federal funding used to assist workers affected by restructuring. We also found that tracing savings into contract prices was extremely difficult given other factors that affect a contractor’s operations and costs. Subsequently, Congress requested that we determine whether defense contract prices are lower than they would have been had restructuring not occurred and to evaluate the impact of defense industry consolidation on competition. Our work on the Federal Acquisition Computer Network (FACNET) showed that agencies had good business and technical reasons for not using FACNET and recommended that the government needs a coherent strategy and flexibility to implement alternative electronic commerce technologies and purchasing methods that make good business sense and are aligned with commercial applications. As a result, the fiscal year 1998 Defense Authorization Act repealed the mandated use of FACNET. In addition, the President’s Management Council tasked a high-level management committee to review electronic commerce implementation government wide and develop a more integrated federal strategy. Our work on whether DOD provides Congress accurate information on contracts for advisory and assistance services showed that DOD may be significantly underreporting those costs. In the President’s budget submission, DOD reported fiscal year obligations of about $3 billion on advisory and assistance service contracts. Our analysis of DOD’s contract data indicated fiscal year 1996 obligations of almost $12 billion for services involving advising or assisting DOD management. As a result, the Congress reduced DOD’s budget by $300 million and attributed this reduction to our work. Subsequently, the Senate Appropriations Committee requested a review to more fully examine the reasons for the underreporting on contracts for advisory and assistance services. Defense Acquisitions is the point of contact for three areas that have been designated as high-risk—Defense Weapon Systems Acquisition, Defense Contract Management, and NASA Contract Management. In fiscal year 1997, we reported that despite DOD’s past and current efforts to reform its acquisition system, wasteful practices still add billions of dollars to defense acquisition costs. Many new weapon systems cost more and do less than anticipated, and schedules are often delayed. Moreover, the need for some of these costly weapons is questionable, particularly since the collapse of the Soviet Union. DOD’s goal is to become the world’s smartest buyer, continuously reinventing and improving the acquisition process while taking maximum advantage of emerging technologies that enable business process reengineering. DOD is pursuing a number of positive initiatives that could, over time, improve the cost-effectiveness of its acquisition processes and is reporting some success in terms of cost savings or avoidance and other benefits. The ultimate effectiveness of these initiatives cannot be fully assessed because many are in various stages of implementation. Therefore, it may be several years before tangible results can be documented and sustained. Further, as with many other elements of defense, contract administration and audit resources have been reduced, and further reductions are planned. At the same time, DOD continues to look to additional outsourcing opportunities, and it plans to significantly increase its procurement budgets in the coming years. Both these actions may increase contracting actions and the need for effective contract administration and audit. To maintain appropriate controls over contract expenditures with reduced resources, DOD will need to improve the efficiency of its contract management. Over the past several years, NASA has improved its contract management by changing its policies and practices to better influence its contractors’ performance and improve oversight of its procurement activities. Since NASA spends about $13 billion annually, it is likely to have problems periodically. The key is early identification to prevent the problems from becoming systemic. We are concerned about the systems and processes NASA uses to oversee its procurement activities and the ability of these systems and processes to routinely produce accurate and reliable management information. NASA has told us that it has made improvements in these areas. Our work in contract management concluded that unless DOD achieves cost-effective control over its payment process, it will continue to risk hundreds of millions of dollars in potential overpayments and other financial management and accounting control problems. Further, improving the efficiency of the payment process could save additional millions of dollars annually in reduced processing costs. We recommended that DOD (1) thoroughly evaluate the information requirements of the user, procurement, and accounting communities in terms of their impact on the payment process’ ability to produce useful information; (2) evaluate whether the structure that the Columbus Center uses to charge its customers for accounting services needs to better reflect the cost of servicing contracts; (3) establish a DOD-wide policy for closing out existing contracts that cannot be reconciled because accurate and complete data are lacking; and (4) explore increased opportunities for using best practices. (GAO/NSIAD-97-37, GAO/HR-97-4) In May 1995, we reported that the unclear lines of jurisdiction over stealth-related items may lead to the inappropriate export of military sensitive materials and technology. We recommended that the State Department clarify the licensing jurisdiction between the Commerce Control List and U.S. Munitions List for all stealth-related commodities and technologies with a view towards ensuring adequate controls under the Arms Export Control Act for all sensitive stealth-related items.