Defense Management

The Pentagon, which is attempting to reform its business processes by using "best practices" from the private sector, must further streamline operations and eliminate duplication of effort if it is to realize the cost savings that it is counting on to pay for weapon systems modernization. The Defense Department (DOD) is proposing to reengineer its business processes, consolidate and reorganize headquarters elements and defense agencies, increase the use of the Office of Management and Budget A-76 process to compete its commercial activities, and conduct two more rounds of base closures. Members of Congress have raised concerns, however, about the military's record in achieving infrastructure savings and the potential impact on readiness accounts if current reform initiatives falter. This testimony discusses the (1) risks associated with reducing budgets before savings are achieved, (2) challenges associated with implementing DOD's business process reengineering efforts, (3) opportunities to capitalize on consolidation and regionalization opportunities, and (4) underlying management problems that need to be corrected before implementing these reforms.

GAO noted that: (1) DOD's plans to reduce outyear budgets before the magnitude of savings is clearly known are not without risks; (2) this risk is that operating units and field commanders will not have sufficient funds to meet their readiness needs; (3) past reform initiatives, like the Defense Management Review of the early 1990s, started with much the same hope and promise of the Defense Reform Initiative (DRI); (4) however, for a number of reasons, they were not able to sustain themselves and fully achieve hoped for results; (5) in many cases, DOD reduced its operations and maintenance budgets up front, in anticipation that the savings would be realized; (6) when these savings did not materialize as quickly or to the extent expected, two things happened; (7) either money was deferred from other parts of the defense budget to pay for shortfalls in operations and maintenance accounts or support functions were unfunded; (8) GAO sees the same type of risk with the DRI; (9) many of the DRI business process reengineering initiatives must overcome significant challenges if they are to be implemented in a timely, efficient, and effective manner; (10) while DOD expects these initiatives to save an unspecified amount of money, it is also counting on them to bring world-class business processes to DOD and improve the quality of service provided to defense customers; (11) GAO's overall impression is that the initiatives have the potential to save significant amounts of money and improve the quality of service they provide; (12) however, in some cases, DOD either faces significant implementation challenges or is not thinking broadly enough in implementing the reform; (13) significant opportunities exist to achieve savings from consolidating, restructuring, and regionalizing initiatives; (14) however, GAO's past work on these initiatives shows that DOD has not been able to fully capitalize on the potential offered by such consolidations; and (15) achieving success in the DRIs requires DOD to address the underlying causes of its systemic management problems.