Defense Management

The Department of Defense (DOD) has made progress in implementing the many initiatives included in the Defense Reform Initiative announced in November 1997. Initiatives completed or likely to be completed on schedule include organizational streamlining, military pay increases, purchase cards, performance contracts, Defense Information System Agency center consolidations, and the demolition and disposal of excess facilities. Areas in which initiatives have made some progress but are behind schedule include competitive sourcing, paperless contracting, travel reengineering, electronic malls, and household goods transportation. Initiatives that will require many years to fully implement include acquisition reform, financial management reform, and logistics transformation. DOD officials had hoped initially that savings from the Reform Initiative would help yield significant amounts for weapons modernization in fiscal year 2001. Because most initiatives are long-term efforts that require significant up-front investments to implement, however, it could take years before the investments are offset and net savings begin to accrue. The Reform Initiative could be more effective if the Defense Management Council would work collaboratively to foster Department-wide solutions, establish reform priorities, and exert authority to make key decisions. At present, DOD has not implemented GAO's recommendations concerning an integrated strategy, investment plan, and funding targets.

GAO noted that: (1) the support of the Secretary and Deputy Secretary of Defense and the management oversight structure they created to help implement the Reform Initiative have provided the impetus to get the initiative off to a good start; (2) however, opportunities exist to make the Reform Initiative more effective; (3) for example, an important element of DOD's management oversight structure has been the Defense Management Council; (4) this council, which was created by the Secretary to be his Reform Initiative board of directors, could be more effective in advising the Secretary and helping sustain the emphasis on reform; (5) the Department initially agreed with but subsequently did not take action to implement GAO's recommendations to develop an integrated strategy, investment plan, and funding targets for reforming its major business processes; (6) consequently, it does not have a clear road map to ensure that the interrelationships between its major reform initiatives are understood and addressed and that it is investing in its highest priority requirements; (7) a number of barriers have kept the Department from meeting its specific timeframes and goals; (8) the most notable barrier is the difficulty in overcoming institutional resistance to change in an organization as large and complex as DOD, particularly in such areas as acquisition, financial management, and logistic, which transcend most of the Department's functional organizations and have been long-standing management concerns; (9) initially, Defense officials expected that savings from the Reform Initiative would help DOD increase funding for weapons modernization from $42 billion in fiscal year 1998 to $60 billion in fiscal year 2001; (10) however, widespread savings have not been achieved, primarily because most individual initiatives are long-term efforts that require significant up-front investments to implement; (11) it could take a number of years before these investments are offset and net savings begin to accrue; (12) however, various initiatives are likely to produce signigicant savings once up-front costs are recovered; and (13) the Department expects that the initiatives will eventually result in enough savings to sustain an increased modernization budget in the future.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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