Defense Reform Initiative

The Defense Reform Initiative report, issued in November 1997, outlined a series of initiatives that the Defense Department (DOD) hopes will make its current organization and business practices more agile, responsive, and efficient. GAO strongly endorses DOD's efforts to reform its business processes and reduce its support infrastructure costs. DOD hopes that the Defense Reform Initiative will eventually provide a major source of recurring savings that can be used to increase funding for weapons system modernization. This testimony (1) outlines steps that DOD has taken to provide program direction and give momentum to the Defense Reform Initiative, (2) discusses additional steps that could be taken to facilitate a more comprehensive reform effort, (3) discusses the impact of the current initiatives on DOD's budget process, (4) highlights progress generally being made in implementing the initiative, and (5) provides a more detailed discussion about the status of the competitive sourcing initiative.

GAO noted that: (1) the Secretary and the Deputy Secretary of Defense have shown strong support for the DRI program and established an organizational framework to give additional structure and guidance to the effort; (2) also, using special directives, performance contracts, and planning and budget guidance, DOD has sought to institutionalize and sustain the DRI; (3) DOD's inclusion of the DRI into its plans for implementing the Government Performance and Results Act, and its requirements for strategic goals and performance plans, represents an important step toward ensuring a long-term focus on the initiatives and on efforts to track their progress; (4) because the DRI framework had been in place for just over a year, it is too soon for GAO to assess how effective it will be in the long-term; (5) GAO did identify several areas where DOD could build on its initial efforts to give greater impetus to its desire to achieve a revolution in business affairs; (6) these include: (a) incorporating other major, ongoing reform efforts in the DRI so that DOD can develop a more comprehensive, integrated strategy for reforming defense business and support activities; (b) better delineating the funding requirements needed to achieve the major reforms; and (c) enhancing DOD's ability to measure DRI results, particularly through needed financial management and related reforms; (7) DOD has projected specific savings for only two of the initiatives, and these savings have already been factored into DOD's future budget plans; (8) however, a variety of factors suggests that significant short-term savings from these and other initiatives are uncertain; (9) Congress has not authorized additional base closure rounds because of concerns about prior rounds; (10) DOD components have not fully identified the resource requirements needed to conduct the planned competitive sourcing studies or the personnel separation costs likely to be associated with implementing the results; (11) the DRI program includes a variety of reform or reengineering initiatives, many of which were ongoing before they were brought under the DRI umbrella; (12) competitive sourcing is one of the major initiatives, and DOD's plan for this effort is ambitious; (13) short-term savings may not be realized as quickly as DOD has projected; and (14) there is also some uncertainty about the extent to which savings initially estimated from competitive sourcing studies can be sustained over time based on changes that have occurred after competitions were completed, and DOD's lack of a system for tracking savings.