The United States has a long history of military research and development. To help conduct and manage this research, DOD has a diverse network of 80 in-house laboratories and 26 test centers. Their missions range from basic scientific research to direct technical support to operational commands. The management, operations, and funding for these disparate laboratories and test centers also vary among the services. Over the past decade, several organizations, panels, and commissions have identified significant personnel and resource problems facing the laboratories and test centers. For example, several studies found that the laboratories needed more flexibility in personnel rules governing the scientific workforce in order to attract and retain staff. Similarly, several recent studies identified problems with declines in investment and infrastructure, resulting in outdated facilities and technical equipment. To help the laboratories and test centers with these problems, the Congress enacted legislation in fiscal years 1999 and 2000 establishing pilot programs for laboratories and test centers to propose innovative partnerships, business-like practices, and human capital initiatives. The 1999 pilot program focused on partnerships and business-like practices, while the 2000 program focused more on human capital initiatives. Together, the two pilot programs authorized the Secretary of Defense to provide one laboratory and one test center in each service the authority to explore innovative methods for partnering with universities and private sector entities to conduct defense research and development; attract a workforce balance between permanent and temporary personnel and with an appropriate skill and experience level; develop or expand innovative methods of operation that provide more defense research for the dollar; and waive any restrictions on these methods that are not required by law. A total of 10 laboratories and test centers from all 3 services participated in the pilot programs. They are listed in appendix I. Both programs were authorized for 3 years. The 1999 pilot expired in March 2002; the 2000 pilot, in March 2003. For both programs, DOD was required to submit preliminary and final reports to the Congress on program activities. The preliminary report for the 1999 program was submitted in July 1999. However, as of the date of this report, the three other reports have not been submitted. In fiscal year 2003, the Congress authorized another 3-year pilot program and extended the 1999 and 2000 pilot programs until 2005. Under the new 2003 pilot program, the Secretary of Defense is to provide one laboratory and one test center in each service the authority to use innovative personnel management methods to ensure that the participants can employ and retain an appropriately balanced workforce, and effectively shape the workforce to fulfill the organization mission; develop or expand innovative methods of using cooperative agreements with private sector and educational organizations to promote the technological industrial base for critical defense technologies and facilitate the training of a future scientific and technical workforce; and waive any restrictions not required by law. As of May 2003, DOD had not identified any participants for the 2003 pilot program. The 2003 legislation also requires DOD to issue three reports, including a January 2003 report on its experience with the 1999 and 2000 pilot programs, barriers to implementation of these programs, and proposed solutions to overcome these barriers. According to DOD officials, this report has been drafted, but as of May 2003, it had not been submitted to the Congress. Since the inception of the pilot programs in 1999, 178 initiatives have been proposed, but only 4—or 2 percent—have been implemented under the pilot programs. Participating laboratories and test centers proposed initiatives covering a variety of areas, including business-like practices, partnerships with industry and academia, and human capital innovations. We found that laboratories focused many of their proposals on human capital innovations, while test centers tended to concentrate on business-like practices and partnerships. Over the course of the 1999 and 2000 pilot programs, the laboratories and test centers proposed 178 human capital, business, and partnership initiatives. As shown in table 1, slightly over half of the initiatives dealt with human capital and the remainder dealt with business-like practices and partnerships. Overall, the laboratories proposed substantially more initiatives than did the test centers. Furthermore, the laboratories and test centers focused on different types of initiatives. The laboratories more often proposed human capital initiatives, while the test centers overwhelmingly focused on business and partnership initiatives. Laboratory officials told us that they are especially concerned about attracting top-quality scientists to replace a retiring workforce. Test center officials told us that they are focused on modernizing their infrastructure and developing new methods of sharing the cost of operations. Proposals for business-like practices included many initiatives to streamline or improve local operations. Some initiatives focused on expanding the use of innovative techniques such as other transactions or cooperative agreements. Several other proposals sought the authority to reinvest fees or revenues into facilities revitalization. For example, one Navy laboratory proposed imposing a surcharge for its services and using that revenue to fund capital investments, and an Air Force laboratory proposed using facility construction as a valid in-kind contribution under cooperative agreements. Partnership proposals included initiatives such as collaborative research agreements with Arnold Engineering Development Center and the University of Tennessee Space Institute to create a formal business bond to pursue research in laser-induced surface improvement technology and university flight research. The Army’s Aberdeen Test Center proposed a limited liability company. Under this concept, industry, academia, and government would form a profit-making company to conduct research and testing at the installation. The test center proposed using its share of the profits to reinvest in the infrastructure at Aberdeen. Several human capital initiatives focused on recruiting and retention flexibilities as well as additional voluntary separation incentives. These proposals included initiatives to streamline hiring of experts and consultants; accelerate promotions for scientists and engineers; provide retention bonuses for key scientists; and hire students directly after graduation. Several participants submitted proposals for direct hire authority to allow faster hiring of scientists, and several submitted proposals for voluntary retirement incentives as a mechanism for reshaping the workforce. Almost none of the 178 proposed initiatives were approved and implemented using the pilot programs’ authorities. As figure 1 shows, only 2 percent—or 4 proposals—were implemented under the pilot programs. In contrast, 74 percent were blocked or dropped during the review process or remain on hold awaiting resolution. The four implemented initiatives were donating laboratory equipment directly to local schools, waiving top-level certification of certain service agreements with streamlining cooperative agreements to facilitate collaborative work agreements with outside activities, and granting temporary relief from some mandatory personnel placement reviews. Officials at the laboratories that proposed these initiatives told us that they were considered minor changes with little impact on the larger problems facing the laboratories. Twelve times as many initiatives—24 percent—were implemented using different authorities than the pilot programs. For example, several laboratories requested the authority to appoint retired military members to civilian positions without having to wait the required 180 days. This requirement was waived using a different authority than the pilot programs. Another human capital initiative—to appoint senior scientists from private industry—was authorized by subsequent legislation. In the business/partnership category, the 46th Test Group at Holloman Air Force Base used other authorities to negotiate a complex leasing arrangement with industry to install a radar test facility at White Sands Missile Range. This effort took several years and overcame many contractual and regulatory barriers. In addition, a Navy laboratory streamlined foreign license applications using another authority. The low level of implementation of the proposed initiatives occurred for two primary reasons. First, DOD did not develop an effective process for implementing the pilot programs. Second, DOD determined that proposed human capital initiatives—for example, requests for the authority to hire directly or offer voluntary retirement incentives—were in conflict with statutory provisions. DOD did not provide standardized guidance on proposal requirements or feedback for improving proposals; coordinate or prioritize proposals; or clarify decision-making authority for proposal review and approval. DOD also did not designate a strong focal point to coordinate the pilot programs, advocate process improvements, and provide assistance and advice to participants. The lack of a strong focal point exacerbated other process gaps. According to officials at DOD laboratories, test centers, and headquarters, DOD did not provide standardized guidance on proposal requirements or feedback for improving proposals (or, in many cases, information on the status of proposals submitted for approval). Proposals often lacked specificity and detail. Many were broadly conceptual or generic in nature and lacked a detailed business case that linked their contribution to overall objectives for the pilot programs. For example, a proposal to permit scientists to serve in a leadership role in professional societies failed to include details of the problems encountered, and the potential to improve operations. Similarly, several proposals for direct hire authority failed to include a business case to explain what specific needs this authority would address or how it would address them. Lack of specificity and business case detail led to the failure of many initiatives to win approval. DOD attorneys told us that many proposals were so vague that it was impossible to determine whether or not the proposed initiatives could meet legal requirements. At a department level, DOD also did not coordinate or prioritize proposals, thereby precluding decisions on how best to pursue common interests and issues such as direct hiring authority or forming partnerships with universities. Instead, each participant submitted proposals individually, and thus multiple independent proposals were often submitted for the same or similar issues. DOD attorneys pointed out that it would have been more effective to group proposals by common theme and prioritize them. They believed a unified approach and prioritized proposals with clearly written, specific plans for solving well-defined problems would have enabled them to more effectively assist participants with resolving legal issues. DOD did not clarify decision-making authority for proposal review and approval. Many organizations and individuals were stakeholders in proposal review and approval, and they often had differing management structures, concerns, and interests. Stakeholders included military and civilian leaders, attorneys, and human capital and personnel staff at several levels: the local installation where participating laboratories and test centers were housed; the individual service; and OSD. The roles and decision-making authority of the various stakeholders were never negotiated and clarified.