1997 Defense Reform Bill

GAO strongly supports improving the Pentagon's business practices and further reducing its support infrastructure. The Defense Department needs to further streamline its operations, consolidate functions, eliminate duplicative efforts, and improve efficiency if it is to realize the savings needed to pay for weapon systems modernization and other spending priorities. This testimony discusses provisions in the Defense Reform Act of 1997 (H.R. 1778) that relate to defense personnel reforms, defense business practice reforms, and additional miscellaneous reforms.

GAO noted that: (1) GAO strongly supports the need to improve the Department of Defense's (DOD) business practices and further reduce its support infrastructure; (2) despite spending reductions that have occurred, GAO's review of DOD's future years funding plans through fiscal year (FY) 2001 indicates that overall support infrastructure funding as a percentage of the budget is projected to remain relatively constant in the range of 57-58 percent; (3) DOD needs to achieve significant savings in its support infrastructure to help increase funding for weapon system modernization and meet its aim of increasing procurement funding from $44.1 billion to $68.3 billion between FY 1997 and 2002; (4) opportunities to improve defense business practices are illustrated by GAO's February 1997 high-risk series of reports that include six areas (financial management, information technology, weapon systems acquisition, contract management, infrastructure, and inventory management) within DOD; (5) DOD's inability to effectively address weaknesses in high-risk areas has resulted in billions of dollars being wasted and places billions of dollars in future spending at similar risk; (6) in order to effectively address the underlying causes of the high-risk areas, GAO believes that senior-level defense managers need to develop a strategic plan; (7) legislative initiatives such as H.R. 1778, and the Government Performance and Results Act, are important to stimulating long-term changes needed in DOD; (8) there are opportunities to achieve savings by reducing personnel overhead in various DOD headquarters and support areas identified in the bill; (9) GAO's work shows that there are inefficiencies in various defense activities addressed in the bill such as the U.S. Transportation Command, and that there are significant opportunities to change business practices in defense agencies as suggested by this title; (10) the requirement to remove the Defense Automation and Printing Service's surcharge billed to its military customers would be inconsistent with working capital fund cost accounting principles; (11) GAO questions part of the provision creating a board to coordinate audits because it would authorize the Under Secretary of Defense (Comptroller/Chief Financial Officer) to participate in jurisdictional decisions among the service auditors and to resolve jurisdictional disputes; and (12) this role raises questions regarding the independence of service audit organizations.