Defense Management
New Management Reform Program Still Evolving Gao ID: GAO-03-58 December 12, 2002The Secretary of Defense announced a new business transformation program in 2001 with the intent of improving the effectiveness and efficiency of Department of Defense business operations. Concerned that the previous administration's Defense Reform Initiatives (DRI) could not be successful without many years of sustained effort, the Senate Committee on Armed Services issued a September 2001 report directing GAO to assess which DRI initiatives have been carried forward. In completing this assessment, GAO also examined the management structure and types of initiatives contained in the new business transformation program. Also at the request of the Committee, more detailed information on the status of the logistics reform and electronic business/electronic commerce initiatives is provided in the GAO report. GAO interviewed officials involved with the former DRI initiatives, as well as officials operating at all levels of the new business transformation program. In commenting on a draft of this report, DOD concurred with GAO's findings.
Most former DRI initiatives are continuing, although not always under the direct oversight of the new business transformation structure. According to DOD, 5 initiatives have been completed and 35 are still ongoing in some form. In general, the ongoing initiatives are being managed under the applicable functional area of responsibility, without specific oversight and tracking by a central management reform office. Nonetheless, the new management structure--led by the Senior Executive Council and the Business Initiative Council--does oversee some former DRI initiatives, such as financial management reform and public-private competitions under the Office of Management and Budget's Circular A-76. While similar in some respects, DOD officials have stressed that the new business transformation management structure is not considered to be a replacement for the previous DRI management structure. Important differences exist between the management approaches of the former and current reform programs. For example, the new management structure has higher senior-level management involvement and focus on decision making, but less emphasis on specific savings targets. To date, most new reform program initiatives have been intentionally small in scope in order to produce benefits in fiscal year 2003. The new program has begun to consider some larger efforts, such as alternatives to A-76. GAO believes the new business transformation program has the potential to be an effective mechanism for reform given the high-level management membership and emphasis on interservice participation. However, DOD's efforts are still evolving, and it is too soon to tell how effective the new reforms will be. Moreover, like the DRI, the new management program does not yet have an overarching plan tying key reform efforts together in an integrated fashion.
GAO-03-58, Defense Management: New Management Reform Program Still Evolving
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Report to the Committee on Armed Services, U.S. Senate:
United States General Accounting Office:
GAO:
December 2002:
DEFENSE MANAGEMENT:
New Management Reform Program Still Evolving:
Highlights of GAO-03-58, a report to the Committee on Armed Services,
United States Senate
DEFENSE MANAGEMENT: New Management Reform Program Still Evolving
Why GAO Did This Study:
The Secretary of Defense announced a new business transformation
program
in 2001 with the intent of improving the effectiveness and
efficiency of
Department of Defense business operations. Concerned that the
previous
administration‘s Defense Reform Initiatives (DRI) could not be
successful
without many years of sustained effort, the Senate Committee on
Armed
Services issued a September 2001 report directing GAO to assess
which
DRI initiatives have been carried forward. In completing this
assessment,
GAO also examined the management structure and types of
initiatives
contained in the new business transformation program. Also at
the request
of the Committee, more detailed information on the status of
the
logistics reform and electronic business/electronic commerce
initiatives
is provided in the GAO report.
GAO interviewed officials involved with the former DRI initiatives,
as
well as officials operating at all levels of the new business
transformation
program. In commenting on a draft of this report, DOD concurred
with GAO‘s
findings.
What GAO Found:
Most former DRI initiatives are continuing, although not always
under the
direct oversight of the new business transformation structure.
According
to DOD, 5 initiatives have been completed and 35 are still
ongoing in some
form. In general, the ongoing initiatives are being managed
under the
applicable functional area of responsibility, without specific
oversight
and tracking by a central management reform office. Nonetheless,
the new
management structure”led by the Senior Executive Council and the
Business
Initiative Council”does oversee some former DRI initiatives,
such as
financial management reform and public-private competitions
under the
Office of Management and Budget‘s Circular A-76.
While similar in some respects, DOD officials have stressed
that the
new business transformation management structure is not
considered to
be a replacement for the previous DRI management structure.
Important
differences exist between the management approaches of the
former and
current reform programs. For example, the new management
structure has
higher senior-level management involvement and focus on
decision making,
but less emphasis on specific savings targets.
To date, most new reform program initiatives have been
intentionally
small in scope in order to produce benefits in fiscal
year 2003. The
new program has begun to consider some larger efforts,
such as
alternatives to A-76. GAO believes the new business
transformation
program has the potential to be an effective mechanism
for reform given
the high-level management membership and emphasis on
interservice
participation. However, DOD‘s efforts are still evolving,
and it is too
soon to tell how effective the new reforms will be. Moreover,
like the DRI,
the new management program does not yet have an overarching
plan tying
key reform efforts together in an integrated fashion.
[See PDF for image]
[End of figure]
http://www.gao.gov/cgi-bin/getrpt?GAO-03-58
To view the full report, including the scope
and methodology, click on the link above.
For more information, contact Barry W. Holman, Director,
Defense
Capabilities and Management, at (202) 512-8412 or
holmanb@gao.gov.
Defense Management:
GAO-03-58:
Contents:
Letter:
Results in Brief:
Background:
Scope and Methodology:
Agency Comments:
Briefing Section I: Status of Defense Reform Initiatives:
Briefing Section II: Management Structures:
Briefing Section III: Types of Initiatives:
Briefing Section IV: Conclusions:
Appendix I: Status of Defense Logistics Reform Efforts:
Appendix II: Status of Defense Electronic Business/Electronic Commerce
Reform Initiatives:
Appendix III: Summary Table of Defense Reform Initiatives:
Appendix IV: Status Report of the Defense Reform Initiatives:
Appendix V: Summary Table of Business Initiative Council
Initiatives:
Appendix VI: Defense Business Practice Implementation Board Members:
Appendix VII: Comments from the Department of Defense:
Appendix VIII: Staff Acknowledgments:
Related GAO Products:
Tables:
Table 1: Status of DRI Logistics Initiatives:
Table 2: Status of Future Logistics Enterprise Initiatives:
Table 3: Status of DRI Electronic Business Initiatives:
Abbreviations:
AT&L: Acquisition, Technology and Logistics:
BIC: Business Initiative Council:
DMC: Defense Management Council:
DOD: Department of Defense:
DRI: Defense Reform Initiative:
IT: information technology:
OSD: Office of the Secretary of Defense:
PKI: public key infrastructure:
QDR: Quadrennial Defense Review:
SEC: Senior Executive Council:
United States General Accounting Office:
Washington, DC 20548:
December 12, 2002:
The Honorable Carl Levin
Chairman
The Honorable John W. Warner
Ranking Minority Member
Committee on Armed Services
United States Senate:
The Defense Reform Initiative, announced by the Secretary of Defense in
November 1997, represented an important set of actions aimed at
improving the effectiveness and efficiency of Department of Defense
(DOD) business operations. The current Secretary of Defense announced
his own management reform program in 2001, referred to as the DOD
Business Transformation program, also with the intent of improving the
effectiveness and efficiency of the department‘s business operations.
The Senate Committee on Armed Services‘s September 12, 2001, report
accompanying the legislation to authorize the department‘s fiscal year
2002 appropriations expressed the view that reform of the department‘s
business practices will not be successful without many years of
sustained effort continuing through several administrations. The report
cited the desire to ensure that valuable initiatives had not been
dropped in the transition from one administration to the next, and it
sought to determine to what extent those initiatives were being
continued under the new management reform program. Accordingly, the
report tasked the department with making a determination concerning
which of the previous Defense Reform Initiatives should be continued
and incorporated into the new management reform program. The department
provided us with its February 28, 2002, status report of its
determination on the status of the former Defense Reform Initiatives.
The Senate report also directed us to review the department‘s
determinations and report on our findings. Accordingly, this report
discusses (1) what Defense Reform Initiative efforts have been carried
forward and how their progress is being tracked, (2) how the management
structure of the DOD Business Transformation program compares with that
of the Defense Reform Initiative, and (3) what types of initiatives are
contained in the DOD Business Transformation program. Additionally, at
the request of your offices, we provide more detailed information on
the status of the logistics reform and electronic business/electronic
commerce initiatives in appendixes I and II.
Results in Brief:
The Department of Defense indicates that most Defense Reform
Initiatives are being incorporated into the new management reform
program. In its February 2002 status report, the department indicated
that 5 initiatives had been completed and that 35 were still ongoing in
some form (see apps. III and IV). In general, the ongoing initiatives
are being managed under the applicable functional area of
responsibility, without specific oversight and tracking by a central
management reform office as was previously done. For example, logistics
reform efforts that were included in the Defense Reform Initiative
program have been subsumed into related initiatives under the Deputy
Under Secretary of Defense for Logistics and Materiel Readiness. DOD‘s
Business Transformation program‘s management structure is not
specifically tracking these initiatives. However, the new management
structure is overseeing some former Defense Reform Initiatives, such as
financial management reform and public-private competitions under the
Office of Management and Budget‘s Circular A-76.
Both the Defense Reform Initiative and DOD‘s Business Transformation
programs were created to improve the effectiveness and efficiency of
the department‘s business operations. In this regard, both programs
established management structures to implement and support their reform
efforts. While similar in some respects, department officials have
stressed that the new management structure is not considered to be a
replacement for the previous Defense Reform Initiative management
structure, including its Defense Management Council and the Defense
Reform Initiative program office. Important differences exist between
the management approaches of the former and current management reform
programs, such as the level of decision-making authority and emphasis
on savings. For example, the new program‘s Business Initiative Council
has the authority to approve Department of Defense-wide initiatives to
improve the department‘s business operations compared to the former
Defense Management Council, which acted primarily as an oversight body.
Also, the focus of the new business transformation program is on
effectiveness of actions, with the belief that efficiencies and savings
will ultimately result, whereas the former Defense Reform Initiative
sometimes established specific financial savings targets.
Additionally, thus far, most of the DOD Business Transformation
program‘s initiatives have been smaller in scope than those included
under Defense Reform Initiative efforts. (See app. V for a listing of
initiatives approved by the Business Initiative Council.) According to
department officials, many of the initial efforts were intentionally
small and selected to produce benefits in fiscal year 2003. However,
the new business transformation program has begun to consider some
larger efforts, such as alternatives to Circular A-76. Given the high-
level membership and significant amount of interservice participation,
we believe the new management program has the potential to be an
effective mechanism for reform. However, because the department‘s
efforts are still evolving, it is too soon to tell how effective this
approach will be in transforming the business operations of the
department. Moreover, like the Defense Reform Initiative, DOD‘s
Business Transformation program has not yet developed an overarching
plan tying key reform efforts together in an integrated fashion. This
could become more important as the department initiates broader,
interrelated efforts.
The department concurred with our findings in its written comments on a
draft of this report.
Background:
In November 1997, the then Secretary of Defense issued his Defense
Reform Initiative (DRI) report outlining a plan for reforming the
department‘s business operations. The report included a variety of
initiatives to reengineer business practices, consolidate
organization, eliminate unneeded infrastructure through additional
base closures, and conduct public-private competitive sourcing studies
for commercial activities. These initiatives were expected to help
achieve infrastructure reductions and business process improvements.
After the DRI was announced, the Department of Defense expanded the
scope of the DRI effort to include several additional initiatives such
as acquisition, financial management, and logistics reform.
DOD established a management oversight structure to help sustain the
direction and emphasis of the DRI effort. This structure included (1) a
Defense Management Council--chaired by the Deputy Secretary and
consisting of key civilian and military leaders--to oversee the DRI
efforts and advise the Secretary on new reform efforts, (2) a
Coordinating Group to provide assistance and advice to the Management
Council, and (3) a Defense Reform Office to track implementation of the
initiatives and identify areas where management‘s attention was needed.
The services and Defense agencies, which are ultimately responsible for
implementing the initiatives, also established small offices or points
of contact to receive and collect information about DRI. However, the
department did not develop an integrated reform strategy and action
plan to guide the program‘s implementation, a limitation we have found
in prior reform efforts.
The current Secretary of Defense, in 2001, announced his management
reform program, referred to as the DOD Business Transformation program.
This resulted in the creation of two top-level committees, the Senior
Executive Council and the Business Initiative Council, to help improve
business practices and transform the military and to oversee the
implementation of the new reform program. The Secretary also created an
advisory group of outside experts known as the Defense Business
Practice Implementation Board.
The Senior Executive Council was established to help guide efforts
across the department to improve business practices. It is chaired by
the Secretary of Defense and is comprised of the Deputy Secretary of
Defense, the service secretaries, and the Under Secretary of Defense
for Acquisition, Technology and Logistics. The Senior Executive Council
was established to function as a board of directors for the department.
The Business Initiative Council, headed by the Under Secretary of
Defense for Acquisition, Technology and Logistics, includes among its
membership the service secretaries and the Vice Chairman of the Joint
Chiefs of Staff. Recently, membership was expanded to include the Under
Secretary of Defense (Comptroller) and the Under Secretary of Defense
for Personnel and Readiness. The Business Initiative Council was
established to encourage the military services to explore new money-
saving business practices to help offset funding requirements for
transformation and other high priority efforts.
The Defense Business Practice Implementation Board consists of business
leaders from the private sector to help advise the department on its
efforts to improve business practices. A list of these business leaders
is provided in appendix VI.[Footnote 1]
Scope and Methodology:
To determine the status of the DRI initiatives, we reviewed and
analyzed DOD‘s February 2002 status report, using it as our basis for
determining the current status of the former DRI initiatives. While we
did not conduct an in-depth review of each initiative, we did confirm
the accuracy of a number of the initiatives contained in DOD‘s report.
We also met with representatives from the Offices of Logistics and
Materiel Readiness and the Chief Information Officer to discuss the
logistics and electronic business/electronic commerce reform efforts.
To compare the new business transformation program management structure
with the DRI management structure, we relied heavily on our prior work
in this area (see Related GAO Products at the end of this report). We
also met with officials responsible for the new business transformation
program to discuss the management structure and obtain relevant
documentation. We reviewed documents applicable to the intent, purpose,
and structure of the DOD Business Transformation program.
During our work, we interviewed officials who had been heavily involved
in the former DRI, as well as officials operating at all levels of the
new business transformation program. These included the former director
of the DRI Office, the points of contact for several former DRI
initiatives, the Executive Secretary of the Senior Executive Council,
the current and past leaders of the Business Initiative Council
Executive Steering Committee, leaders for several of the Process/
Functional Boards, and champions for a few of the current business
transformation initiatives.
We conducted our review from February 2002 through September 2002 in
accordance with generally accepted government standards.
Agency Comments:
The Director of the Office of the Under Secretary of Defense‘s Defense
Procurement and Acquisition Policy provided written comments on a draft
of this report, which are reprinted in their entirety in appendix VII.
In its comments, DOD concurred with our findings in the draft report.
We are providing copies of this report to the Chairmen and Ranking
Minority Members of the Committee on Armed Services, House
of Representatives; Subcommittee on Defense, Committee on
Appropriations, U.S. Senate; Subcommittee on Defense, Committee
on Appropriations, House of Representatives; Subcommittee on Oversight
of Government Management, Restructuring, and the District of Columbia,
Committee on Governmental Affairs, U.S. Senate; and Subcommittee on
National Security, Veterans‘ Affairs and International Relations,
Committee on Government Reform, House of Representatives. We are also
sending copies of this report to the Secretary of Defense; the
Secretaries of the Army, Navy, and Air Force; the Commandant of the
Marine Corps; and the Director, Office of Management and Budget.
We will make copies available to others upon request. In addition, the
report will be available at no charge on the GAO Web site at http://
www.gao.gov.
If you or your staff have questions regarding this report, please
contact me on (202) 512-8412 or holmanb@gao.gov. Other major
contributors to this report are listed in appendix VIII.
Barry W. Holman
Director, Defense Capabilities and Management
[Signed by Barry W. Holman
[End of section]
Status of Defense Reform Initiatives:
The Department of Defense (DOD) indicates that most Defense Reform
Initiative (DRI) efforts are being carried forward--that is,
incorporated into the new management reform program. According to a DOD
official in the Office of the Under Secretary of Defense for
Acquisition, Technology and Logistics, those initiatives not included
in the department‘s February 2002 report were generally no longer
ongoing or no longer being tracked by the former DRI Office at the time
of the transition to the new administration. Of the 40 initiatives
identified in its February report, 5 were categorized as completed and
35 were categorized as ongoing in some form. (See app. III for a
summary table of Defense Reform Initiatives. App. IV contains DOD‘s
February 2002 status report in its entirety.):
Our analysis shows that most of the ongoing initiatives are not managed
with specific oversight and tracking under the umbrella of a central
management reform program/office. Rather, they continue to be managed
under the applicable functional area of responsibility. For example,
some of the logistics reform efforts included in the DRI program have
been subsumed into related initiatives under the Deputy Under Secretary
of Defense for Logistics and Materiel Readiness, but their progress is
not being specifically tracked by the new business transformation
program. However, there are some initiatives that are being monitored
under the new management structure. Two key examples are financial
management reform and public-private competitions under the Office of
Management and Budget Circular A-76. Responsibility and accountability
for financial management reform are vested with the DOD Comptroller,
but the effort is being overseen by the Senior Executive Council (SEC)
and, as such, is receiving high-level visibility under the DOD Business
Transformation program. The department‘s A-76 program has been subsumed
into a larger effort, which is seeking to identify a range of
alternatives to A-76 centered on noncore functions that DOD and the
services do not necessarily need to perform in-house. Both SEC and the
Business Initiative Council (BIC) are involved in this effort to
identify noncore functions.
Our analysis also shows that the DRI initiatives are continuing to
exhibit varying degrees of change under the new business transformation
program. For example, while the objectives of the DRI logistics
initiatives generally continue under the new business transformation
program, the framework for achieving these objectives has changed
completely. Conversely, the framework that was put in place under DRI
to achieve the goals of the electronic business/electronic commerce
program remains relatively unchanged.
DRI identified three broad logistics initiatives aimed at improving the
effectiveness and efficiency of business operations, reducing overall
logistics costs, and improving customer service. These initiatives
directed the department to develop a logistics strategic plan,
implement the logistics strategic plan using component transformation
plans, and improve the logistics value to the warfighter.
The department developed several versions of a logistics plan, and each
of the service and agency components produced implementation plans.
While we identified weaknesses in these efforts, we recognized they
were a positive and necessary step toward achieving the goals set by
the DRI program.
In September 2001, the current DOD leadership announced a new logistics
initiative program, designated the Future Logistics Enterprise, which
refocused top-level logistics reform on six issues. They are (1) pursue
depot maintenance public-private partnership, (2) use condition based
maintenance, (3) adopt total life-cycle system management, (4) pursue
end-to-end distribution, (5) establish new executive agents, and
(6) enhance enterprise integration.
Many of the objectives identified in the DRI program are continued in
varying degrees under the current Future Logistics Enterprise, though
not specifically under the auspices of SEC or BIC. A key difference
under the new business transformation program is the departure from
previous efforts to develop a comprehensive, integrated logistics
strategic plan, with the military components developing complementary
implementation plans. Nonetheless, several of the objectives of the
strategic planning initiative, such as minimizing logistics costs and
modernizing logistics processes, do continue, even though the approach
may have changed. DOD has carried forward the DRI goal of
implementing customer wait time as a departmentwide logistics metric,
and it now uses customer wait time as the sole measure of logistics
performance. However, the capability to capture and report customer
wait time is still under development. The DOD definition of customer
wait time--the elapsed time from order to receipt when a customer
orders an item--is broader than what the department is currently able
to measure.
See appendix I for more detail on the logistics reform efforts.
The department identified and began implementing a number of specific
electronic business/electronic commerce initiatives that it believed
would help modernize selected business practices. These include an
architecture, a strategic plan, an implementation plan, an electronic
mall to provide personnel with one-stop shopping via the Internet, and
methods for safeguarding electronic data.
However, in July 2000, we reported that DOD had made little progress in
the area of electronic commerce.[Footnote 2] Specifically, we found
that although a strategic plan was in place, other key implementation
issues had not been addressed. Efforts to develop a departmentwide
implementation plan had ceased, and work on an electronic commerce
systems architecture was lagging. While the electronic mall was
available to DOD shoppers, it was incomplete with several pieces under
development. Although DOD launched many initiatives to improve security
over its information, the public key infrastructure program was seen as
crucial to providing the necessary safeguards and was not expected to
be implemented for several years.[Footnote 3]
Currently, these electronic business efforts are not formal initiatives
under the new management structure, but they are receiving high-level
attention within the department under the direction of the Chief
Information Officer. The electronic business architecture is under
development, but the future direction is uncertain pending development
of a financial management enterprise architecture. The strategic plan
is being updated, and a new version is expected sometime in fiscal year
2003. There is currently no effort underway for a departmentwide
implementation plan, but the services continue to operate their
separate programs with oversight provided by the DOD Electronic
Business Board of Directors. Additionally, in February 2002, the BIC
approved an effort to implement a virtual information technology
marketplace for hardware, software, and selected services, which
complements the DRI electronic mall initiative. Moreover, the
electronic business area is receiving attention as one of the five
governmentwide initiatives in the President‘s Management Agenda for
fiscal year 2002. The initiative, referred to as Expanded Electronic
Government, specifically includes a public key infrastructure element
as part of an effort to safeguard data.
See appendix II for more detail on the electronic business/electronic
commerce reform efforts.
[End of section]
Management Structures:
The DRI program was established with an organizational framework to
give structure and guidance to the reform effort. The framework
consisted of the Defense Management Council (DMC), a coordinating group
to support DMC, and a DRI Office to track implementation and identify
issues that needed management attention. Points of contact called focal
points were established in the services and Defense agencies.
DMC was expected to act as an internal board of directors. Membership
included the Deputy Secretary of Defense (chair), the four Under
Secretaries of Defense, the Vice Chairman of the Joint Chiefs of Staff,
three military service Under Secretaries, four military service Vice
Chiefs, the General Counsel, and the Director of the DRI Office.
A coordinating group, comprised of senior level representatives from
the military services and the Office of the Secretary of Defense, was
established to support DMC. The Director for Program Analysis and
Evaluation, located in the Office of the Secretary of Defense, acted as
executive director and served as the primary interface with DMC,
helping to decide which issues to bring to it. The coordinating group
met weekly to provide advice and assistance to DMC, draft policy
statements, and provide a forum for the services and Defense agencies
to discuss concerns, deal with ongoing DRI activities, and resolve
problems.
The DRI Office was created to monitor progress and identify areas
where management attention was needed. Intentionally kept small--up
to eight people--it was tasked to track implementation of initiatives,
obtain information on progress and potential problems, develop status
reports, and look beyond DRI to identify other reform opportunities and
marshal support.
Focal points were either small offices or points of contact established
by the services and Defense agencies to receive and collect information
about the DRI initiatives. The focal points did not manage initiatives,
but they had a role in expediting actions and seeing that specific
initiatives were addressed in their organizations.
The high-level management attention and oversight structure established
by the department, particularly during the early stages of the program,
had a positive effect on the implementation of DRI. Strong support and
leadership from the then Secretary and Deputy Secretary of Defense, for
example, gave the DRI a high priority within the department. Through
its organizational framework, DOD tried to institutionalize and provide
a centralized, sustained emphasis on the former DRI. The Defense
Management Council and the DRI Office were established to provide the
type of management attention and oversight necessary for successful
reform by effectively communicating the reason for the change, setting
the overall scope and agenda, and establishing policy. One of the
direct communication tools DOD developed was the Defense Reform
Initiative Directive. These directives, reviewed by DMC and issued by
the Deputy Secretary of Defense, communicated specific goals and
objectives, milestones, and decisions for selected initiatives. A total
of 54 Defense Reform Initiative Directives were issued between November
1997 and March 2000.[Footnote 4]
DOD also developed performance contracts to improve oversight of
Defense agencies that provide numerous products and services to the
military services and to other Defense agencies. These performance
contracts were formal agreements delineating improvement goals related
to cost, productivity, quality, and responsiveness to customers.
According to a DOD official, emphasis on performance contracts
continues; however, they have evolved into customer support agreements,
which means customers will now be more involved in developing the goals
and metrics for the Defense agencies.
DOD developed a departmentwide strategic plan, the Quadrennial Defense
Review (QDR), which set DOD‘s general direction for 4 years. Then, in
1998, the Secretary directed organizations at all levels of the
department to review their strategic plans and mission objectives to
ensure they were linked to the QDR and DRI goals and objectives.
In an effort to overcome typical budget shortfalls for management
reform initiatives, DOD directed the services and Defense agencies to
construct budgets and programs consistent with the corporate-level
goals in the QDR. Budget guidance included DOD‘s mission statement and
strategic goals, including the goal to ’fundamentally reengineer the
department.“:
The DRI included a variety of reform or reengineering initiatives, many
of which were already ongoing before they were brought under the DRI
umbrella. These included a series of 17 Management Reform Memoranda,
which had been issued in early 1997 by the Deputy Secretary of Defense.
To varying degrees, DRI gave each of those initiatives increased
visibility and top-level support within the department and, in many
instances, imposed new goals and milestones for accomplishing their
objectives.
The Defense Management Council played an effective role in getting DRI
started. For example, it helped establish goals, objectives, and time
frames for completing many of the initiatives; supported the need for
reform throughout the department; and helped ensure that staff at all
levels understood the significance and purpose of DRI.
As we previously reported, DMC might have been more effective in
serving as the Secretary‘s Board of Directors had the DMC members been
able to (1) work in a more collaborative fashion on major
departmentwide issues, (2) establish priorities among the numerous
reform initiatives, (3) enhance the DMC‘s decision-making role and
authority, and (4) obtain better information on the initiatives‘
status. In April 1999, we recommended that the Secretary of Defense
establish a comprehensive, integrated strategy and action plan for
reforming the department‘s major business operations and support
activities.[Footnote 5] Then again in a July 2000 report, we reiterated
that recommendation, stating that an integrated strategy and action
plan could help DOD maintain program momentum and continuity during any
transition in department leadership.[Footnote 6]
DOD Directive 5105.66 created the SEC on July 10, 2001. The SEC mission
is to advise the Secretary of Defense in the application of sound
business practices in the military departments, Defense agencies, and
other DOD components. SEC is intended to be the principal mechanism to
evaluate such practices and develop and implement proposals for
improvement. Such proposals, or special efforts, may initially be
developed under the purview of SEC and then referred to either BIC or
the applicable functional area for implementation.
The Defense Business Practice Implementation Board (the Board) reports
to SEC. Its mission is to make recommendations to SEC on strategies
for implementing best business practices of interest to DOD in matters
relating to management, acquisition, production, logistics, personnel
leadership, and the defense industrial base. The Board is to consist of
20 members and ad hoc consultants as necessary (see app. VI) and is
subject to renewal every 2 years.
The stated mission of BIC is to improve efficiency of DOD business
operations by identifying and implementing business reform actions that
allow savings to be reallocated to higher priority efforts. Membership
is similar to SEC.
The Steering Committee is responsible for developing project
guidelines, plans, and direction and ensuring that individual reforms
are integrated. It is composed of designated service three-star flag
and general officers, selected executives from the Office of the
Secretary of Defense, and a Joint Chief of Staff warfighter liaison.
The Joint Integration and Support Team (the Team) provides the
necessary analysis, coordination, facilitation, and support needed for
a project. The Team is comprised of BIC Executive Directors from the
Office of the Secretary of Defense, Joint Staff, the services, and
their supporting staff.
Seven multiservice/department process/functional boards conduct the
actual reform work efforts within the framework of the guidelines,
assessment methodologies, and information requirements of the Steering
Committee. Among other things, these boards develop action plans that
identify resource requirements, integration efforts with other reforms,
policies, directives, and training, where applicable.
The BIC, the Steering Committee, and the functional boards are
replicated at the individual service level.
The SEC assists the Secretary of Defense in determining broad policy
and implementing initiatives relating to the efficient organization and
management of the department. It identifies opportunities to achieve
improved efficiency and effectiveness in DOD operations, such as
improved business practices and consolidation of managerial functions
and activities. A senior Defense official acknowledges, however, that
given the high level of membership, the lines between ongoing
management responsibility and the management reform agenda may
sometimes appear blurred. Formal SEC meetings are held monthly.
The directive that created SEC required it to ’consult with members of
the business and the academic communities to seek innovative methods
to resolve management problems, reengineer business practices, and
streamline operations.“ To fulfill this requirement, a formal advisory
board, the Defense Business Practice Implementation Board, was created
and met for the first time on March 15, 2002. It plans to meet
quarterly, and has met three times to date and covered a variety of
issues, such as human capital transformation and financial performance
metrics.
The SEC and BIC memberships overlap considerably. Four of the six
members of the SEC also sit on the seven-member BIC. Such a
considerable overlap in membership provides a direct line of
communication between the two councils and ensures consistency between
the intent and implementation of business transformation initiatives.
In addition, the Executive Secretary of the SEC also attends BIC
meetings and acts as a liaison.
According to its charter, the BIC ’will establish the overall DOD
business reformation objectives and strategic direction, champion the
implementation of this initiative across DOD, and hold the
participating organizations responsible and accountable for positive
results and stated outcomes.“ The BIC approves the business reform
initiatives.
The BIC charter provides for a phased approach, with the initial focus
aimed at near-term reform actions. The four phases are:
1. Scoping of the Business Initiative (July 2001-September 2001):
recommend and implement near term ’quick hits“ that were expected to
result in some budgetary savings in fiscal year 2003 and recommend
longer-term initiatives.
2. Exploration of Long-Term Initiatives (October 2001-March 2002):
begin to implement longer-term initiatives and define metrics to be
used to measure effectiveness of reforms, including feedback from the
warfighter and achievement of projected savings.
3. Implementation of Long-Term Opportunities (April 2002-September,
2002): commence execution phase for long-term reform and provide
reports and results regarding progress and outcomes of reform actions.
4. Continuation of Reform Implementation (October 2002-March 2003):
follow-on work to the previous phase and document and present final
report of BIC efforts to the Under Secretary of Defense for
Acquisition, Technology and Logistics.
Lead responsibility for each phase of the effort rotates among the
military departments, with the Navy leading the first phase, followed
by the Air Force and the Army for subsequent phases. The lead military
department is primarily responsible for maintaining the forward-motion
of the BIC efforts. The intent is to ensure that all participating
military departments share in leading the BIC efforts and provide a
climate for the exchange of good ideas. The leadership role lasts
approximately 6 months.
The BIC establishes the overall DOD business reformation objectives
and strategic direction, champions the implementation of this
initiative across DOD, and holds the participating organizations
responsible and accountable for positive results and stated outcomes.
The Business Initiative Executive Steering Committee, the Joint
Integration and Support Team, and the Process/Function Boards support
the BIC work.
The SEC has a higher-level membership than the former Defense
Management Council and a much smaller membership as well--6 members
instead of 17. Unlike the DMC, the SEC does not have any military
members--all are currently civilians. According to DOD officials, one
lesson learned from the DMC was that in order for members to be
effective, they had to be willing to focus on departmentwide solutions,
putting aside their individual service and agency interests as
necessary. According to a high-ranking DOD official, the service
secretaries understood that they would be expected to work for the
Secretary of Defense as well as their own service organizations.
There appears to be less emphasis on a formal program construct than
with the DRI structure, which relied heavily on a central management
office (DRI Office) and formal Defense Reform Initiative Directives and
Management Reform Memoranda. In contrast, a senior Defense official
told us that much of the coordination and cooperation within the DOD
Business Transformation program seems to be based on relationships and
personality rather than on formal program structure. Additionally,
there is a higher level of personal accountability. Each level in the
management structure is accountable to the next level, up to the
service secretaries and, ultimately, to the Secretary of Defense.
To date, the business transformation program has focused on the
effectiveness of reforms with the belief that efficiencies and savings
will ultimately result rather than on initially focusing on specific
savings targets. Under DRI, projected savings from the Base Realignment
and Closure and A-76 initiatives were taken from the budget and put
toward higher priority efforts. Department officials told us that the
business transformation program has not programmed projected savings
into future budget plans from its new initiatives and remains undecided
whether to focus on savings being retained in the implementing office
or shifted elsewhere, such as to support force transformation.
Furthermore, DOD officials acknowledge that savings from some
initiatives, while expected, may be difficult to quantify.
Additionally, a senior Defense official told us that not all
initiatives require budgetary savings to be an objective--they can be
approved on the basis of good business practice. However, we believe
this could change as the initiatives move from being ’quick hits“ to
longer term, which require more investment dollars.
The DOD Business Transformation program structure includes a formal
advisory board to make recommendations to SEC on implementing best
business practices of interest to the department. This is quite
different than the DRI program. While DRI had working groups that
included some individuals from the private sector, it did not provide
for a private sector board to advise and help formulate the reform
program as a whole.
The new program is still evolving--SEC and BIC were established in July
2001 and the events of September 11, 2001, changed the focus of both
councils, at least for a time. Like the DRI program before, the current
program may also change focus. At this point, it is difficult to
determine where the change in focus might occur.
[End of section]
Types of Initiatives:
Briefing Section IV: Conclusions:
DOD issues press releases to announce business reform initiatives
approved by BIC. The first press release, issued October 15, 2001,
announced the initial round of approved initiatives. The press release
announcing the sixth round of approved initiatives approved on
September 4, 2002, was issued on October 15, 2002. Early initiatives
were dubbed ’quick hits“ by DOD and defined as ’those that have
positive influence/benefit in FY03.“ They were smaller in scope than
the DRI efforts, owing in part to the short time frame to accomplish
the initiatives by fiscal year 2003 and because DOD already had the
authority and ability to implement the initiatives. A list of
initiatives approved in each round is shown in appendix V.
BIC initiatives may come from a variety of sources, such as the
services, their major commands, the functional boards, BIC itself, and
even SEC, although DOD officials stated most are generated from the
bottom-up. Initiatives originating at the lower levels of the
management structure were identified in different ways. For example,
the Air Force sent out a general servicewide request for initiatives,
while the Navy reviewed Defense Science Advisory Board reports for
potential initiative candidates. The functional boards included
brainstorming sessions as part of their periodic meetings and also
formed integrated product teams to help identify initiatives.
The SEC is responsible for the oversight of broader initiatives and
recently directed each military service and Defense agency to
participate in the development of a core-competency based approach for
determining the source of services required. Such sources could include
current DOD employees, other federal agencies, and private-sector
contracts and/or partnerships. The premise behind this approach is for
DOD to focus its energies and talents on core functions and transition
the noncore competencies to alternative sources, initially through
pilot programs. These pilot programs, referred to as pioneer projects,
were approved in the May 31, 2002, round of BIC initiatives. This was
in keeping with the phased approach of the BIC, which started with
near-term initiatives and is progressing toward long-term
opportunities. DOD is still in the early stages of initiating this
effort.
In an effort to reform DOD‘s business processes, the Secretary of
Defense established two top-level councils, empowering both to
make decisions that have the potential to transform DOD. The councils‘
structures include senior level management from the various services
with decision-making authority. The joint membership and leadership
efforts of the councils are intended to ensure that all the services
and Defense agencies are engaged in changing the way DOD does business.
The Secretary also established a private sector advisory council in the
form of the Defense Business Practice Implementation Board to tap
management reform innovations and ideas from outside the
federal government.
The department‘s efforts are still evolving, and consequently, it is
too soon to tell how effective this approach will be in transforming
DOD‘s business operations. We believe this new management program has
the potential to be an effective mechanism for reform, given the high-
level membership and significant amount of interservice participation.
However, like the former DRI program, the DOD Business Transformation
program has not yet developed an overarching plan tying all the
individual reform efforts together. Although the Business Initiative
Council Charter suggests one was anticipated, it states,
’The BIC efforts will be conducted within a total systems approach,
with individual reforms identified, reviewed, and executed within the
context of an integrated business model for DOD. This approach will
also allow for an assessment of the overall extent of the proposed
changes to ensure that DOD has the capacity and resilience to
effectively integrate the cumulative impact of the various functionally
oriented changes.“:
As the new program takes on broader initiatives, the development of an
overarching integrated plan could take on increased importance,
particularly where initiatives become more interrelated and up-front
investments are required.
We have previously recommended that the department establish a
comprehensive, integrated strategy and action plan for reforming its
major business processes and support activities.[Footnote 7] We believe
that recommendation is in line with the plan cited in the BIC Charter.
[End of section]
Appendix I: Status of Defense Logistics Reform Efforts:
The Defense Reform Initiative (DRI) program had three broad logistics
initiatives, two of which dealt with aspects of strategic planning.
Subsequently, the Department of Defense (DOD) restructured its
logistics improvement initiatives, discontinuing the framework for
reform begun under the DRI process. Many of the objectives identified
in the DRI are continued in varying degrees under current departmental
improvement initiatives--though not specifically under the oversight of
the new Senior Executive Council (SEC) or Business Initiative Council
(BIC). A key difference under the DOD Business Transformation program
is the departure from previous efforts to develop a comprehensive,
integrated logistics strategic plan, with the military components
developing complementary implementation plans. At the same time, many
other previously initiated service-led logistics reform efforts
continue. Providing logistics support that is economical and responsive
has been identified by us as a major management challenge facing the
department, as reported in our periodic Performance and Accountability
reports covering 21 federal agencies.
DRI Logistics Reform Initiatives:
The DRI, begun in 1997, was aimed at improving the effectiveness and
efficiency of DOD business operations. This effort included three broad
logistics improvement initiatives:
* development and implementation of a logistics strategic plan to
provide a vision and set of objectives for improving logistics support
to the warfighter;
* submission of annual logistics transformation plans by DOD components
to document how these organizations were to reach the goals and
objectives laid out in the logistics strategic plan; and:
* improvement of the value of logistics to the warfighter by reducing
logistics response time, increasing total asset visibility,[Footnote 8]
and reducing supply inventories.
DOD identified 11 associated objectives that represent the specific
actions it would undertake to implement the three DRI logistics
improvement initiatives. Table 1 provides the objectives of each DRI
logistics initiative, along with its associated metrics and milestones.
This table also characterizes the extent to which the initiatives are
continued under current logistics improvement initiatives.
Table 1: Status of DRI Logistics Initiatives:
Initiative objective: I-Develop Logistics Strategic Plan; Metrics: See
below; Milestones: See below; Extent to which prior efforts continued
under current logistics improvement initiatives: DOD-wide strategic
plan is no longer directed, although several planning efforts
continue.
Initiative objective: Optimize support to the warfighter by baselining
existing mission-capable rates, and then establishing and moving toward
achieving higher target rates; Metrics: Mission-capable rates;
Milestones: Establish baseline and target rates by 2001, and achieve
improvement through the end of fiscal year 2006 with components
reporting progress annually; Extent to which prior efforts continued
under current logistics improvement initiatives: The Office of the
Secretary of Defense (OSD) no longer tracks mission-capable rate
metrics but continues to focus on support to the warfighter by using
weapon system performance metrics such as weapon system availability.
The services continue to track mission capable rate goals and status.
Initiative objective: Improve strategic mobility to meet warfighter
requirements by increasing cargo airlift, sealift surge, and afloat
preposition capacity to meet current DOD guidance; Metrics: Ton-miles/
square footage/containers; Milestones: Eliminate all shortfalls by
end of fiscal year 2006; Extent to which prior efforts continued under
current logistics improvement initiatives: This specific objective is
not carried over into new OSD logistics initiatives. However, the U.S.
Transportation Command has a strategic plan that includes metrics and
milestones for resolving projected shortfalls and that no longer calls
for eliminating all shortfalls by the end of fiscal year 2006. It
currently estimates being able to meet the sealift shortfall by fiscal
year 2003 and the airlift shortfall by 2018.
Initiative objective: Improve strategic mobility to meet warfighter
requirements by developing a measurement approach and appropriate
targets for mobility infrastructure and mobility process improvements;
Metrics: Not developed; Milestones: Develop an improvement plan by the
end of 2001 and achieve improvement goals by the end of fiscal year
2006; Extent to which prior efforts continued under current logistics
improvement initiatives: This specific objective is not carried over
into new OSD logistics initiatives. However, the U.S. Transportation
Command has a strategic plan that includes metrics and milestones for
improving the mobility infrastructure and processes by the end of
2006.
Initiative objective: Refine the definition of customer wait time,
develop appropriate measures, and implement as the departmentwide
logistics metric; Metrics: Number of days from customer order to
delivery (for total supply chain); Milestones: Develop definition and
measurement by end of fiscal year 2001 and fully implement measurement
for all selected segments by the end of fiscal year 2006; Extent to
which prior efforts continued under current logistics improvement
initiatives: This objective, and its associated metric and 2006
milestone, continues under the current OSD logistics improvement
initiatives.
Initiative objective: Fully implement total asset visibility across DOD
to allow users to view information on the identity and status of
Defense materiel and assets and to complete business transactions using
this information; Metrics: Visibility into the location of assets;
Milestones: Determine methods, asset information requirements, and
associated measures by the end of fiscal year 2000 and implement 100
percent of requirements by the end of fiscal year 2006; Extent to
which prior efforts continued under current logistics improvement
initiatives: This objective is no longer continued under current OSD
logistics initiatives.
Initiative objective: Reengineer and modernize applicable logistics
processes and systems by developing modernization plans by the end of
fiscal year 2001 and by increasing the proportion of modernized
logistics business systems according to those plans; Metrics:
Percentage of systems modernized; Milestones: Develop modernization
plans by the end of 2001 and increase the proportion of modernized
logistics business systems according to those plans by the end of
fiscal year 2006, with components reporting annually against targets;
Extent to which prior efforts continued under current logistics
improvement initiatives: While this objective continues under the new
OSD logistics initiative, the approach has changed. Milestones have
been established for initial and midterm tasks--such as reviewing
ongoing information system development efforts--but new metrics and
milestones for full program implementation have not yet been
developed.
Initiative objective: Minimize logistics costs while meeting
warfighter requirements by reducing the overall costs of logistics
support for selected weapon systems; Metrics: Logistics costs;
Milestones: Reduce the overall costs of logistics support for selected
fielded weapon systems by 7 percent by fiscal year 2000, by 10 percent
by fiscal year 2001, and by 20 percent by the end of fiscal year 2005;
Extent to which prior efforts continued under current logistics
improvement initiatives: This objective, and its associated metrics and
milestones, continues under the current OSD logistics initiatives.
Initiative objective: II-Implement Logistics Strategic Plan using
Component Transformation Plans; Metrics: See below; Milestones: See
below; Extent to which prior efforts continued under current logistics
improvement initiatives: Logistics transformation plans have been
discontinued.
Initiative objective: Each DOD component submits a logistics
transformation plan that documents how the component plans to reach
the goals and objectives laid out in the DOD Logistics Strategic Plan;
Metrics: Not fully developed; Milestones: Submit plans annually to OSD
beginning in fiscal year 2000; Extent to which prior efforts continued
under current logistics improvement initiatives: This objective is not
being continued, and the components are not preparing transformation
plans to support a coordinated DOD-wide logistics transformation
strategy.
Initiative objective: III-Improve Logistics Value to the Warfighter;
Metrics: See below; Milestones: See below; Extent to which prior
efforts continued under current logistics improvement initiatives:
Initiative as structured in the DRI has†significantly changed or been
discontinued, but the general goal of improving support to the
warfighter continues under current OSD initiatives.
Initiative objective: Reduce logistics response time; Metrics: Number
of days from customer order to delivery (for wholesale portion of
supply chain); Milestones: Obtain orders from the wholesale system in
24 days in fiscal year 1999, and 18 days in fiscal year 2000; Extent
to which prior efforts continued under current logistics improvement
initiatives: This objective continues under the current OSD logistics
initiatives; however, OSD is now using as a metric the number of days
from customer order to delivery for the total supply chain. Current
measurements are limited to spare and repair parts and do not include
other classes of supply.
Initiative objective: Increase total asset visibility; Metrics:
Percentage of inventories that are visible to all integrated material
managers; Milestones: Achieve 80 percent visibility of asset
inventories in fiscal year 1999 and 90 percent in fiscal year 2000;
Extent to which prior efforts continued under current logistics
improvement initiatives: This objective does not continue under the
current OSD logistics initiatives.
Initiative objective: Reduce supply inventories; Metrics: Adjusted
acquisition value of DOD‘s secondary item inventories; Milestones:
Reduce secondary item inventories to an adjusted value of $56 billion
by fiscal year 2000; Extent to which prior efforts continued under
current logistics improvement initiatives: This objective does not
continue under the current OSD logistics initiatives.
Source: GAO analysis of DOD data.
[End of table]
Under DRI, the department had recognized two broad approaches
for addressing critical logistics shortfalls--strategic planning and
implementation and optimizing support to the warfighter. As a result of
its DRI improvement initiatives, the department then developed several
versions of a logistics strategic plan and each of the components
produced plans intended to support the implementation of goals and
objectives in the DOD plan. We have recommended improvements to DOD‘s
strategic planning process, including the development and
implementation of a logistics strategic plan in several reports since
the mid-1990‘s.[Footnote 9] While we identified weakness in these
efforts, we recognized that they were a positive step since the
implementation of effective strategic planning is essential to the
comprehensive transformation of logistics structures, processes, and
supporting information systems to improve customer service and reduce
support costs. Further, regarding the need to improve support to the
warfighter, DOD recognized three significant problems impacting
successful, timely, and economical support--logistics response time,
total asset visibility, and inventory reduction.
Various DOD organizations and activities were involved in pursuing
aspects of the DRI logistics improvement efforts. The department
produced several reports on its progress in implementing the logistics
improvement initiatives, with the last report completed in 2001.
Concluding that logistics strategic planning was on track, the report
stated, ’although logistics reform is relatively new compared with
acquisition reform, progress has been achieved within the past 18
months, and the Department has developed an overarching logistics
strategic plan in August 1999 that provides vision and a set of
objectives for meeting the logistics challenges of the 21st century.“
However, the report acknowledged that the components‘ transformation
plans showed programs that were ’underfunded, not cohesive, lacked
specific performance metrics and milestones, and had no clear
relationship to DOD strategic objectives.“ Also, regarding the effort
to improve logistics value to the warfighter, the report indicated that
the services had achieved the three metrics established for this
initiative.
New Reform Focus:
With the change in administration in 2001, DOD‘s new leadership began
formulating a new approach for dealing with problems within the
department. Regarding logistics issues, in September 2001, the current
Deputy Under Secretary of Defense for Logistics and Materiel Readiness
announced a management improvement program, which discontinued the
three DRI initiatives and refocused the department‘s top-level
logistics improvement efforts. DOD officials stated that these new
logistics initiatives, designated the Future Logistics Enterprise,
would be the focus of the department‘s logistics support improvement
efforts during the current administration. However, the officials
stated that the tenets of the DRI logistics initiatives have been
incorporated into the department‘s Future Logistics Enterprise or into
other logistics improvement efforts within DOD.
The Future Logistics Enterprise is comprised of six new objectives.
Table 2 summarizes the objectives with the associated metrics and
milestones. The table also describes the extent to which current
efforts are a continuation of prior DRI improvement initiatives.
Table 2: Status of Future Logistics Enterprise Initiatives:
Objective: Pursue depot maintenance public-private partnerships to
achieve greater facility utilization, reduce cost, and realize greater
investment in organic depots by empowering DOD depots to develop
partnerships with the commercial sector; Metrics: Metrics are under
development. Potential metrics include the value of private-sector
investment in DOD depots and increased workload at DOD depots resulting
from public-private partnerships. Officials said it will be sometime in
early 2003 before the metrics will be finalized; Milestones: Not yet
developed; Extent to which current logistics improvement initiatives
continue prior DRI efforts: This was not an objective addressed by
DRI.
Objective: Use more accurate condition-based maintenance data to
predict failures and maintenance requirements, reduce unnecessary
maintenance, and increase operational availability and readiness;
Metrics: Not yet developed; Milestones: Not yet developed; Extent to
which current logistics improvement initiatives continue prior DRI
efforts: This was not an objective addressed by DRI.
Objective: Adopt a total life-cycle approach to weapon system
management to achieve effective performance and optimum readiness while
reducing operations and support costs, in order to meet warfighter
weapon systems performance requirements; Metrics: Not yet developed
for measuring collective success of this objective. DOD plans to
develop metrics by February 2004; Milestones: Near-term milestones
were established for six areas: (1) establish the framework and
structure for the effort, including DOD policy and guidance by December
2002; (2) change the business processes within the current logistics
environment and revise financial mechanisms by December 2005;
(3) marshal resources to support the initiative, including the public
and private supplier bases, new workforce, and investment funds by
October 2003; (4) synchronize this effort with other initiatives by
November 2002; (5) enhance existing and implement new oversight
mechanisms for weapon system sustainment by December 2003; and
(6) institutionalize this new acquisition and support concept
throughout DOD by December 2003; Extent to which current logistics
improvement initiatives continue prior DRI efforts: This objective
continues the general DRI objective to optimize logistics support to
the warfighter by requiring the use of performance measurements such as
weapon systems availability and reliability.
Objective: Pursue end-to-end distribution to streamline supply support
to the warfighter by providing materiel, including retrograde, from the
source of supply or point of origin to the point of use or disposal, as
defined by the combatant commander.[A]; Metrics: Customer wait times:
number of days from customer order to delivery (for total supply
chain); Milestones: Reduce the time for spare and repair parts from 18
days in 2001 to 17 days in 2002, and to 16 days in 2003. Unclear
whether milestones will be established for other commodities; Extent
to which current logistics improvement initiatives continue prior DRI
efforts: This objective continues the DRI objective to reduce customer
wait time.
Objective: Establish new executive agents determination process to
assign responsibility to a service or Defense agency for providing
common services (i.e., bulk fuel or area decontamination) and to
improve planning to ensure that the needed resources are available;
Metrics: Not yet developed; Milestones: Not yet developed; Extent to
which current logistics improvement initiatives continue prior DRI
efforts: This was not an objective addressed by DRI.
Objective: Enhance enterprise integration by building on service and
Defense Logistics Agency software integration efforts and reduce
information system support costs by streamlining and changing current
DOD business processes and practices so that they are supported by
commercially available software; Metrics: Not yet developed;
Milestones: Not yet developed. Near-term milestones are in
development; Extent to which current logistics improvement initiatives
continue prior DRI efforts: This objective continues the DRI objective
to reengineer and modernize logistics systems, but takes a different
approach.[B].
[A] This effort is also supposed to ensure a smooth transition from
peacetime to wartime distribution processes and to resolve conflicting
demands for airlift and sealift that currently exist between deploying
forces and sustainment distribution requirements.
[B] DOD reviewed six ongoing systems‘ software modernization efforts--
four in the Navy and one each in the Army and the Air Force--resulting
in seventeen general findings and fourteen follow-on actions to guide
and expand the enterprise integration effort. Based on the findings and
recommended actions, DOD is developing a detailed logistics
architecture for the services to follow in reengineering their
information management systems.
Source: GAO analysis of DOD data.
[End of table]
While the Future Logistics Enterprise initiatives were originally
adopted in 2001, many details have yet to be worked out regarding DOD‘s
approach for implementing these initiatives. In some cases, policy is
still being formulated. For five of the six objectives, the metrics to
monitor and evaluate the success of the initiatives and milestones for
achieving improved states are not yet developed or are not fully
developed. Officials said that, in general, these initiatives are in
their infancy. DOD has focused on initiating the efforts, setting
policy for the new initiatives, and exploring potential approaches for
evaluating progress toward achieving the objectives.
Many Logistics Objectives Continue:
Many of the logistics improvement objectives under the former DRI
are continuing to varying degrees today. The following discussion
highlights the metrics and milestones of the DRI objectives shown in
table 1 and provides an assessment of the extent to which each is
continued in the current Office of the Secretary of Defense logistics
improvement initiatives.
* Optimize support to the warfighter: The Office of the Secretary of
Defense is modifying its approach for evaluating logistics support to
the warfighter, based on the adoption of its performance-based
logistics support concept. The new measure should indicate the
effectiveness of logistics support for specific weapon systems, but it
does not provide as broad an indicator of the effectiveness of the
total logistics support system as the mission-capable rates measure
adopted under DRI to assess the effectiveness of logistics support to
the warfighter. To optimize improvements in warfighter logistics
support, DRI provided that each military component identify existing
mission-capable rates for its various systems. Using these rates as a
baseline, the services were to establish a goal of higher mission-
capable rates and move toward achieving these higher rates by fiscal
year 2006. While operational units will continue to use mission-capable
rates, according to DOD officials, the adoption of performance-based
logistics has resulted in the need for measures that will evaluate the
performance of logistics providers in supporting weapon systems based
on factors within their control. The process calls for program offices,
in conjunction with the warfighter, to establish weapon systems-level
performance metrics--such as system availability and mission
reliability--based on existing constraints, including available
funding levels, physical space for maintenance, and information about
the quality of the weapon system. For example, the F-117 aircraft
program is evaluated primarily on an aircraft availability measure of
99 percent for the aircraft system, excluding the engine. While DOD
officials stated that improved system availability and reliability
should equate to improved mission-capable rates, the mission-capable
rates measure is a broader indicator of the health of a system and
therefore a better indicator of the performance of the logistics system
in supporting the warfighter.
* Increase strategic mobility capacity: The Future Logistics Enterprise
includes a general goal to improve strategic mobility capability as
envisioned by DRI, but the new initiative does not specifically address
the DRI strategic mobility goals. Nonetheless, other improvement
initiatives continue to track the strategic mobility shortfall and
develop approaches for improving mobility infrastructure and processes.
Strategic airlift shortfalls have been a long-standing defense problem
affecting the capability of the military services to transport required
forces and support to the theater of operations in a timely manner. For
example, when completed in 2001, the Mobility Requirements Study 2005
identified a strategic airlift carrying capacity requirement of 54.5
million ton miles. The DRI set a goal of achieving the required
airlift, sealift, and afloat preposition capacity identified by the
Mobility Requirements Study by 2006. The department currently estimates
that it should be able to satisfy this requirement by the end of 2018
with the acquisition of 180 C-17 aircraft and modernization of 100 C-5
aircraft.
* Improve strategic mobility processes and infrastructure: While DOD is
not focusing on strategic mobility shortfalls in its Future Logistics
Enterprise initiatives, its other logistics improvement efforts
continue to address these issues. For example, DRI called for
developing a measurement plan and goals for mobility infrastructure and
process improvements. The Transportation Command strategic plan
identifies goals and measures for improving mobility infrastructure and
processes. The Transportation Command also tracks DOD‘s progress toward
resolving the defense strategic mobility shortfall, although officials
noted that the requirement is currently being reassessed. It is
appropriate for the Transportation Command to follow mobility shortfall
issues. However, it also appears appropriate that (1) the ability of
DOD to marshal its assets to the required theater of operations in a
timely manner be identified as a critical logistics goal and (2) such a
logistics improvement initiative be managed and measured within the
Office of the Secretary of Defense, which has responsibility for
setting transportation policy within DOD.
* Reduce customer wait time: DOD has carried forward the DRI goal of
implementing customer wait time as a departmentwide logistics metric,
and it uses customer wait time as the sole measure of logistics
performance reported under the Government Performance and Results
Act.[Footnote 10] The DRI required the development of a definition and
measurement of customer wait time and full implementation of the
selected measurement by the end of fiscal year 2006. The department has
defined and developed measures for customer wait time, and it is
pursuing full implementation as part of its Future Logistics Enterprise
initiative to pursue end-to-end distribution. However, the capability
to capture and report customer wait time is still under development.
The DOD definition of customer wait time--the elapsed time from order
to receipt when a customer orders an item--is broader than what the
department is currently able to measure. While the long-range goal is
to use the customer wait-time measure to encompass all wholesale and
retail transactions associated with customer orders, DOD‘s current
capability is limited to measuring spare and repair parts ordered by
organizational-level maintenance activities. DOD officials said they
intend to meet the 2006 goal for full implementation of the broader
customer wait time definition.
* Increase total asset visibility: Under the new business
transformation program, DOD shifted its focus from total asset
visibility to customer wait time. The DRI required the determination of
appropriate asset visibility measures and the implementation of total
asset visibility requirements by the end of fiscal year 2006. Office of
the Secretary of Defense officials said that while they believe total
asset visibility is a capability that in some instances should enable
reductions in customer wait time, DOD is not pursuing total asset
visibility as a part of its Future Logistics Enterprise. However, we
found that total asset visibility continues to have importance to the
combat commander by providing the ability to (1) see the flow of
logistics into the theatre and make lateral transfers as needed, (2)
reduce the potential for multiple/duplicative requisitions when assets
do not show up on time, and (3) allow a commander to perform support-
gap analyses on proposed operational plans. We have reported the need
for gaining total asset visibility as an important tool in managing the
procurement, distribution, and disposal of defense assets and have
identified shortfalls in this capability as a factor in making supply
management a high-risk area in DOD. According to joint staff officials,
asset visibility is a critical capability that merits continued focus
and resources to ensure the accomplishment of needed improvement.
Consequently, a working group--comprised of Office of the Secretary of
Defense, service, Defense agency, and selected Combatant Command
membership--has formed to begin crafting a long-term total asset
visibility strategy. We have previously recommended that DOD develop a
total asset visibility system.
* Reengineer and modernize logistics processes and systems: The goal of
updating or replacing logistics systems with modern systems has been
carried forward under the Future Logistics Enterprise initiative to
enhance enterprise integration, but the specific measures contained in
the DRI are not part of the current initiative. The DRI required DOD to
develop information system modernization plans with annual
implementation targets and then to implement improvements according to
those plans by fiscal year 2006, with each military component reporting
annually on its progress toward modernization. Instead of continuing to
pursue DRI information system improvement goals, DOD began the
initiative to enhance enterprise integration in November 2001 with a
different information systems approach. The new logistics information
system‘s objective is to achieve a common operating environment built
on ongoing service and Defense Logistics Agency software integration
efforts and reduce system support costs. The department began by
reviewing six ongoing Enterprise Resource Program efforts within the
services to identify best business practices to be considered for
adoption agencywide. Based on the results of the review, DOD is
developing a detailed logistics architecture for the services to follow
in reengineering their information management systems. Whether the
initiative to enhance enterprise integration will result in the same
changes anticipated by DRI is not yet known because specific measures
are only now being developed to support the desired enterprise
integration end-state in 2015.
* Minimize logistics costs while meeting warfighter requirements: The
goal to reduce logistics support costs for selected weapon systems has
continued under the Under Secretary of Defense for Acquisition,
Technology and Logistics functional area of responsibility within the
department. DRI required the reduction of logistics support costs from
a 1997 baseline for selected weapon systems by 7 percent by fiscal year
2000, by 10 percent by fiscal year 2001, and with a stretch goal of
20 percent by the end of 2005. To comply with the requirement, DOD used
an ongoing effort to address the rising cost of sustaining weapon
systems. This effort, called Reduction of Total Ownership Costs, tested
approaches for reducing the weapons systems logistics sustainment costs
in 10 weapons system pilot programs from each military department. This
effort set goals to reduce the overall costs of logistics support for
selected systems by fiscal year 2006. The ownership cost reduction
effort is not specifically part of the Future Logistics Enterprise;
however, according to program officials, the pilot programs have
achieved some ownership cost reduction results, and the lessons learned
are available to weapon system program offices in their ongoing efforts
to reduce ownership costs.
* Develop component logistics transformation plans: DOD discontinued
the DRI objective that required the components to prepare annual plans
to serve as the primary vehicle for aligning the military component
initiatives, attaining resources, and documenting the approach for
achieving the goals and objectives as identified by the logistics
strategic plan. In requiring the components to develop logistics
transformation plans based on strategies and objectives established in
a DOD-wide plan, the department recognized the need to implement a more
coordinated approach to logistics support planning. While we identified
disconnects in the transformation plans, the strategic planning process
was designed to identify disconnects so that they might be resolved.
Further, our review of the services‘ transformation plans found other
weaknesses, but we recognized that the plans were a step in the right
direction. As we have previously recommended, we believe DOD needs a
logistics strategic plan that is linked to service specific logistics
plans.[Footnote 11]
* Reducing logistics response time: DOD discontinued the metrics
and milestones associated with this objective and instead adopted
customer wait time to measure the effectiveness of logistics support to
the warfighter. According to DOD officials, customer wait time is a
broader measure for assessing logistics value to the warfighter. As
discussed previously, the department is pursuing full implementation of
measures for customer wait time as part of the Future Logistics
Enterprise initiative to pursue end-to-end distribution. DOD officials
said they intend to meet the 2006 goal for full implementation of the
broader customer wait time definition.
* Reducing inventory levels: The department has discontinued the
metrics and milestones associated with this objective and has adopted
customer wait time as a broader measure for assessing logistics value
to the warfighter. Officials stated that the drive to reach reduced
inventory levels has resulted in the unintended consequence of parts
shortages. Officials said DOD is pursuing better inventory practices
that optimize inventory levels to provide for needed parts with minimum
holding costs. While we recognize the need to maintain needed
inventories, we have identified inventory management as a high-risk
area since 1990.[Footnote 12] We have reported that there are still
opportunities to improve inventory processes, systems, and practices to
prevent overbuying based on imprecise or inaccurate inventory
management data.
[End of section]
Appendix II: Status of Defense Electronic Business/Electronic Commerce
Reform Initiatives:
In 1997, the Defense Reform Initiative (DRI) called for DOD to
revolutionize its business operations by adopting best business
practices, particularly those that promote electronic business
operations. To accomplish this, the department identified and began
implementing a number of specific, electronic business initiatives that
it believed would help modernize selected business practices. The
electronic business program and the related initiatives that began
under the DRI rubric are, for the most part, continuing; however,
management oversight generally has occurred under the responsible
functional areas rather than under the Senior Executive Council (SEC)
and the Business Initiative Council (BIC).[Footnote 13] Nonetheless,
the electronic business area is receiving significant departmental
attention by the Chief Information Officer since it is one of the five
governmentwide initiatives--Expanded Electronic Government--of the
President‘s Management Agenda for fiscal year 2002.
DRI Electronic Business Initiatives:
As an outgrowth of DRI, DOD established a Joint Electronic Commerce
Program in May 1998 to increase the use of electronic business
practices and associated information technologies that are common in
private-sector companies, such as using the Internet and commercially
available computer software to conduct business. In March 1999, DOD
issued policy guidance for the program. The policy guidance identified
three essential elements that DOD believed was needed to achieve its
electronic business goals, including (1) an overarching electronic
commerce architecture, (2) a strategic plan, and (3) an overarching
implementation plan.
In June 2000, the department issued DOD Directive 8190.2 establishing
policy and responsibilities for DOD‘s electronic business/electronic
commerce program. This directive replaced Department of Defense Reform
Initiative Directive #43--Defensewide Electronic Commerce--as well as
the March 1999 policy guidance. Directive 8190.2 instructed DOD
components to plan, develop, and implement electronic business from a
DOD-wide perspective; describe and adhere to an architecture; and
implement electronic business security solutions, among other things.
The Chief Information Officer was designated the primary Principal
Staff Assistant responsible for the program‘s overall policy direction,
oversight, planning, development, architectures, security, technical
integration, and implementation of approved DOD-wide initiatives.
In July 2000, we reported on the status of DOD‘s electronic commerce
program.[Footnote 14] At that time, we found that DOD had not yet (1)
completed a detailed plan to implement its strategic vision, (2)
developed an electronic commerce architecture, (3) determined how to
best manage the electronic commerce program, and (4) fully implemented
key security measures needed for electronic commerce.
Also in July 2000, DOD chartered its Electronic Business Board of
Directors to recommend improvements to the electronic business vision,
goals, and direction as well as coordinate implementation of activities
and monitor metrics. The Board was established to focus primarily on
cross-functions and cross-component programs, such as departmental
priorities, departmental performance measures, and architecture/
infrastructure. This board continues to place emphasis on electronic
business issues, policies, and concerns.
In addition, the Electronic Business Steering Group was recently
established within the Office of the Under Secretary of Defense
Acquisition, Technology and Logistics (AT&L) to oversee DOD-wide
initiatives that fall under AT&L‘s purview. It is chaired by the
Principal Deputy Under Secretary of Defense (AT&L) with membership from
the AT&L staff and representatives from the Offices of the Chief
Information Officer and Chief Financial Officer. There is an overlap in
membership between DOD‘s Electronic Business Board of Directors and
AT&L‘s Electronic Business Steering Group.
The Defense Reform Initiative Transition Report 2001 indicated that
most electronic business initiatives were continuing on-track, but that
some efforts were identified as needing a reevaluation. In addition,
DOD‘s February 28, 2002, DRI status report (see app. IV) identified
successes and challenges related to electronic commerce or electronic
business. Key among these initiatives are an electronic business
architecture, an electronic business strategic plan, an electronic
business implementation plan establishing electronic malls, and the
safeguarding of electronic data.
Current Electronic Business Reform Efforts:
Under the new business transformation program, DOD‘s Chief Information
Officer has responsibility for the Electronic Business/Electronic
Commerce Program‘s overall policy direction, oversight, planning,
development, architectures, security, technical integrations, and
implementation of approved DOD-wide electronic business initiatives.
The Chief Information Officer also provides direction and oversight to
the Joint Electronic Commerce Program Office, which, among other
things, ensures the coordination and integration of business processes
throughout the department, much like it did under the DRI management
structure.
DRI provided for a number of specific electronic commerce initiatives
covering aspects of several DOD business processes, such as
acquisition, logistics, and financial management. However, for this
report, we focused our review on five key efforts, including the
development of (1) an architecture, (2) a strategic plan, (3) an
implementation plan, (4) an electronic mall, and (5) a public key
infrastructure.[Footnote 15] The first three efforts were developed as
a result of policy guidance and were viewed by DOD as necessary
underpinnings for the program‘s success. The other two efforts were
specific Defense Reform Initiatives with associated goals
and performance measures. Table 3 provides information on each of
these efforts.
Table 3: Status of DRI Electronic Business Initiatives:
Objective: Electronic Business Architecture: Integrate business
processes and information systems across the military services and
Defense agencies; Metrics: Not developed; Milestones: Initial
architecture development in 3-5 years. Changing requirements, new
technologies, and improved business practices will cause the initial
architecture to continually evolve; Extent to which prior efforts
continued under current program: Work continues on the electronic
business architecture, overseen by the Defense Information Systems
Agency and the Defense Logistics Agency. The financial management
enterprise architecture, overseen by the Comptroller, currently
overlaps some electronic business architecture efforts.
Objective: Electronic Business Strategic Plan: Identify goals,
objectives, and strategies DOD will pursue over the next 10 years to
achieve an electronic business operations environment; Metrics: Plan
included 3 overall goals supported by 10 objectives that were supported
by 41 strategies; Milestones: Strategic plan issued May 1999; Extent
to which prior efforts continued under current program: Plan is being
updated by the Chief Information Officer as Principal Staff Assistant,
with expected completion in 2003.
Objective: Electronic Business Implementation Plan: Guide the military
services and Defense agencies to develop their individual electronic
commerce programs in a manner consistent with the goals and objectives
of the strategic plan; Metrics: Not developed; Milestones: Not
established; Extent to which prior efforts continued under current
program: In February 2000, DOD decided to abandon efforts to develop a
DOD-wide plan.
Objective: DOD Electronic Mall: Create a primary source for DOD users
to acquire commercially available items on-line; Metrics: Total sales,
items available, catalogs available, and total registered users;
Milestones: Use purchase cards for all mall purchases by January 1,
2000; Extent to which prior efforts continued under current program:
Efforts continue under the oversight of Defense Logistics Agency as the
Executive Agent. Additionally, the BIC has initiated two efforts that
expand capabilities of information technology (IT)purchases.
Objective: Safeguarding Electronic Data/Public Key Infrastructure:
Improve DOD‘s ability to safeguard the integrity of data and verify the
authenticity of transactions; Metrics: Not finalized but officials
considering distribution of cards and reduction in paperwork;
Milestones: Begin implementation of a DOD-wide ’smart card“ program in
fiscal year 2001; Extent to which prior efforts continued under
current program: Work continues, managed by the Assistant Secretary of
Defense for Command, Control, Communications, and Intelligence as the
DOD Chief Information Officer.
Source: DOD and GAO reports.
[End of table]
The extent to which elements of the DRI objectives continue under
current reform efforts is discussed more fully in the following
sections.
Electronic Business Architecture:
The department believes that an architecture is necessary to integrate
business processes and information systems across the military services
and Defense agencies. Without such an architecture, DOD runs the risk
of having the services and Defense agencies develop and implement
initiatives that are redundant, do not readily share information, and
do not maximize the department‘s investments in information technology.
In July 2000, we reported that although DOD was making efforts to
develop an electronic commerce architecture, little progress had been
made. Currently, the Defense Information Systems Agency and the Defense
Logistics Agency are continuing to work to jointly develop an
electronic business architecture. An upgrade--version 4.0--is now being
used by these agencies and may be released DOD-wide later this fiscal
year. However, further development of this architecture is currently
uncertain, pending the future direction of a financial management
enterprise architecture.
In July 2001, the Secretary of Defense directed the development of a
Defense-wide enterprise architecture, also referred to as the financial
management enterprise architecture. According to senior DOD officials,
the scope of this architecture includes all of DOD except the
warfighter and is intended to seamlessly link the department‘s
reengineered business practices and its financial and management
information. In April 2002, DOD awarded a $100 million contract to IBM
to develop this financial management enterprise architecture. Defense-
wide implementation is expected to begin by 2005 and take several years
to fully implement. The Office of the Comptroller is overseeing this
effort.
DOD officials acknowledge that there are overlapping efforts between
the financial management architecture and the electronic business
architecture. The offices responsible for the development of the two
architectures have recently begun discussing their separate efforts,
but it is unclear how the current electronic business architecture may
be incorporated into this broader enterprise architecture. However, the
Office of the Chief Information Officer recognizes the need for such
integration.
Electronic Business Strategic Plan:
In May 1999, DOD released its Electronic Business Strategic Plan, which
identified the goals, objectives, and strategies that DOD planned to
pursue over the next 10 years to achieve an electronic business
operations environment. The strategic plan broadened the scope of
electronic commerce to include all DOD business processes, not just the
buying and selling activities traditionally associated with electronic
commerce. The plan included 41 strategies aimed at achieving broad
goals, such as improving productivity and promoting cultural changes in
the department.[Footnote 16] The goals were to be achieved through
actions such as establishing training programs, partnering with
industry, and basing new electronic commerce applications on commercial
standards and practices.
According to DOD officials, the strategic plan is being updated to
reflect the numerous changes that have occurred in the electronic
business area since the plan was first issued in 1999. DOD expects the
update will be completed sometime in fiscal year 2003.
Electronic Business Implementation Plan:
After the strategic plan was issued in May 1999, the joint program
office prepared two draft implementation plans that the military
services and Defense agencies reviewed. The departmentwide Electronic
Business Implementation Plan was intended to support the strategic plan
and assure that the military services‘ and Defense agencies‘ individual
electronic commerce programs would be consistent with the goals and
objectives of the strategic plan. However, military service officials
and others were not satisfied with the draft implementation plans,
primarily because they believed the draft plans were too narrowly
focused. Further, officials contended the drafts did not describe how
the strategies outlined in the strategic plan would be implemented, and
consequently, accountability and milestones for accomplishing the
strategies were not established. In February 2000, DOD decided to
abandon efforts to develop an implementation plan primarily because the
Chief Information Officer and the Joint Electronic Commerce Program
Office were unable to reach agreement with the military services and
Defense agencies on the scope and content of an overarching
implementation plan. At this time, there are no efforts underway to
develop a departmentwide implementation plan in the near future.
While the services and the Joint Electronic Commerce Program Office
have continued with separate programs without a joint implementation
plan, some DOD officials told us they believe the risks associated with
this condition are mitigated by the oversight provided by the DOD
Electronic Business Board of Directors. This board has high-level
representation from the services and Defense agencies, and critical
issues and decisions related to electronic business within DOD receive
high-level visibility via this board.
DOD Electronic Mall:
The DOD electronic mall provides users with a simple means to order
commercially available items on-line from different catalogues through
a single location. Similar to a new retail business, the primary focus
of the electronic mall has been to establish itself in the marketplace.
Since its inception in 1998, electronic mall management has
concentrated on expanding the number of items offered, catalogs
available, and customers using the site.
In July 2000, we reported that although the electronic mall was
available to DOD shoppers, it was not a completed effort, with several
pieces still under development. DOD wanted to have four ’shopping
corridors“ on the mall that would group items under the categories of
commodities, information technology, services, and training. As of
March 2000, only the commodities and information technology corridors
had been established, with most items falling under the commodities
corridor. Further, commodity sales were lower than expected.
According to a Defense Logistics Agency official, the electronic mall
has made reasonable progress toward achieving the goals set out in the
legislation.[Footnote 17] The Army, Navy, and Defense Logistics Agency
have selected the DOD electronic mall as their electronic ordering
platform. Consistent with the goal of having the suppliers host the
catalogs (rather than having the government host catalog data), the DOD
electronic mall now provides access to many suppliers that have
electronic catalogs. In fiscal year 2002, 73 commercial catalogs with
approximately 10 million catalogue listings accounted for sales of
about $13.7 million. This is up from approximately $175,000 in fiscal
year 1998 and $2.8 million in fiscal year 2000.
The BIC has also initiated two efforts that affect the procurement of
IT goods and services. The first effort, ’Enterprise Software
Initiative,“ was approved in the BIC‘s first round of initiatives in
September 2001 and was intended to streamline the acquisition process
for commercial software products. To extend the Enterprise Software
Initiative to include IT hardware and selected services, BIC approved
an initiative titled ’Virtual IT Marketplace“ at its February 6, 2002,
meeting. This initiative addresses a concern that current Defense
customers have access to numerous stand-alone alternatives to shop for
IT products and services. This new DOD initiative would allow DOD
customers to access this IT corridor either directly through a General
Services Administration portal or through the DOD electronic mall. The
Assistant Secretary of Defense for Command, Control, Communications,
and Intelligence as the DOD Chief Information Officer is overseeing
this effort. The Virtual IT Marketplace will also provide a software
assessment management capability to support the Enterprise
Software Initiative.
Safeguarding Electronic Information/Public Key Infrastructure:
DOD‘s electronic commerce goals cannot be fully realized unless it
improves its ability to safeguard and verify the authenticity of
electronic data and transactions. DOD has launched many initiatives to
improve security over information. However, one effort--the public key
infrastructure (PKI)--is seen as critical because it will provide
important safeguards. The President‘s Management Agenda for fiscal year
2002 specifically directs federal agencies to undertake a PKI program
to promote digital signatures for transactions within the federal
government, between government and businesses, and between government
and citizens.
PKI is essential to improving security because it allows DOD to ensure
that (1) the data contained in electronic transactions and messages
have not been tampered with, (2) systems users can confirm who is on
the other end of an electronic transaction, (3) the parties involved in
a transaction cannot later deny that they participated in the
transaction, and (4) the transaction or message data cannot be accessed
and read without proper authorization. The program will achieve these
assurances by giving digital signature and data encryption capabilities
to DOD personnel.
In July 2000, we reported that the PKI program is not a simple
undertaking for DOD. The ’infrastructure“ in the program‘s title refers
to the policies, procedures, systems, facilities, and organizations
that need to be involved in issuing, managing, and revoking digital
certificates that vouch for a user‘s identity and contain the keys that
are used to digitally sign and encrypt documents and data. In short,
PKI is a system of hardware, software, policies, and people that, when
fully and properly implemented, can provide information security
assurances that are important to protecting sensitive communications
and transactions.
The DRI Transition Report 2001 reiterated that the PKI program was a
very difficult challenge for the department. The necessary technology
was not mature and technical issues, including interoperability and
ease of use, had not been fully resolved. Moreover, for the
infrastructure to work properly, DOD sources noted that the department
will have to:
* confirm the identity of each user;
* mass distribute programmable ’smart cards“ that will carry a
mathematical key and PKI certificate that will enable DOD personnel to
digitally sign documents and enable the encryption of data;
* ensure that individual computer workstations have the necessary
’middleware,“[Footnote 18] which allows the hardware to accept the
smart cards; and:
* enable appropriate DOD software applications to interface with the
smart cards.
According to department officials, the DOD PKI, based on commercial
industry standards, is being deployed in phases, introducing new
features and capabilities in an orderly fashion, consistent with
commercial technology progression. Each release adds new capabilities
while maintaining the core functionality that defines a successful PKI.
DOD is in the process of issuing smart cards; in fact, over a million
cards have been issued and more are being issued each day. DOD expects
to have over 3.5 million cards and certificates issued to all eligible
DOD personnel by October 2003. Middleware is being installed and made
operational at many DOD locations.
The DOD Office of the Inspector General issued a report in December
2001, which stated DOD had made progress in implementing the PKI
program. However, the report also identified several unfunded
requirements for the program. The unfunded requirements included
enabling applications to work with PKI, security support for the smart
card, and middleware development. This is consistent with comments from
DOD officials, who reported that DOD still needs to issue smart cards,
put middleware in place, and establish a PKI system of hardware,
software, and policies.
[End of section]
Appendix III: Summary Table of Defense Reform Initiatives:
[See PDF for image]
Source: DOD February 28, 2002, report.
[End of table]
According to DOD, the following definitions were used to categorize the
DRI initiatives:
* Completed: The initiative is considered to have been completed, i.e.,
met the goal(s) established.
* Ongoing (as is): The initiative remains active, without change, and
there are existing efforts to meet the established goal(s) or
objective(s).
* Ongoing With Revision: The initiative remains active, although the
target goal(s) or objective(s) has been changed.
* Subsumed: The initiative has been made part of another management
effort but remains viable.
[End of section]
Appendix IV: Status Report of the Defense Reform Initiatives:
[See PDF for image]
[End of section]
Appendix V: Summary Table of Business Initiative Council Initiatives:
BIC initiatives approved: One-Time Clearance of Priority Placement for
Scientific and Engineering Positions; Description of initiatives: To
eliminate unnecessary delays in hiring hard to fill scientific and
engineering positions by allowing for a one-time clearance of the
Priority Placement Program.
BIC initiatives approved: Modify 180-Day Waiting Period to Hire
Retired Military; Description of initiatives: To encourage highly
qualified retired military personnel to pursue civil service careers by
changing the DOD policy to allow service secretaries to delegate within
the components the 180-day waiver authority.
BIC initiatives approved: Management Mix Management Flexibility;
Description of initiatives: To allow the services to make the most
efficient use of civilian/contract personnel without predetermined
constraints/expectations.
BIC initiatives approved: Recovery Auditing; Description of
initiatives: To use contingency fee auditing services contract to
identify and recover overpayments in the Working Capital Funds to
providers of goods and services.
BIC initiatives approved: Raise Below Threshold Reprogramming (BTR)
Thresholds; Description of initiatives: To raise the thresholds for BTR
actions by providing program managers greater flexibility to execute
their programs by increasing the threshold for procurement accounts
from $10 million to $20 million and by increasing the threshold for
research and development from $4 million to $10 million.
BIC initiatives approved: Web-Based Invoice/Receipt Processing;
Description of initiatives: To reduce the incurrence of incorrectly
prepared or missing receiving reports and to move toward a paperless
process by using existing automated systems that will allow the Defense
Finance and Accounting System to pay vendors more quickly and
accurately.
BIC initiatives approved: Common Range Scheduling Tool; Description of
initiatives: To enhance coordination of testing schedules across
multiple sites and to avoid unnecessary scheduling delays by developing
and implementing a Web-based scheduling tool capable of real or near
real-time updates.
BIC initiatives approved: Local/Regional Cell Phone Pooling;
Description of initiatives: To overcome rising cost of cellular
telephone bills and inefficient phone purchases, negotiate new local or
regional cell phone contracts to consolidate cell phone users into
appropriate pools.
BIC initiatives approved: Enterprise Software Initiative (ESI);
Description of initiatives: To streamline the acquisition process by
providing best-priced, standards-compliant software products through
expanding the use of the ESI process as the benchmark acquisition
strategy by using the current structure of executive agents distributed
among military departments/Defense agencies, maintaining a flexible
process to be responsive to customer needs, and extending a software
asset management framework within DOD to enhance enterprise software-
life cycle management capability.
BIC initiatives approved: Common Flight Clearance Process; Description
of initiatives: To reduce clearance turnaround time, develop and
implement a ’common“ flight clearance process by incorporating the
latest information technology advancements.
BIC initiatives approved: BIC initiatives approved; December 3, 2001;
Description of initiatives: Description of initiatives.
BIC initiatives approved: Optimize Professional Continuing Education
(PCE); Description of initiatives: To streamline professional
continuing education by allowing the services to determine where PCE
will take place and which service is best suited to provide PCE.
BIC initiatives approved: Modify Joint Professional Military Education
(JPME) II Requirements; Description of initiatives: To modify JPME II
by allowing the course to be less than 12 weeks, removing the mandatory
sequencing requirements for Joint Specialty Officer designation, and by
allowing service staff and War Colleges to provide resident and
nonresident Joint Professional Military Education II.
BIC initiatives approved: Allow for Contracting of Security Guards;
Description of initiatives: To allow services to contract security
guards in the continental United States at small locations to provide
increased flexibility as DOD continues to enhance antiterrorism/force
protection measures.
BIC initiatives approved: Revise Davis-Bacon Act Thresholds;
Description of initiatives: To raise the Davis-Bacon Act threshold from
$2,000 to $100,000.
BIC initiatives approved: Improve Interservice Product Quality
Deficiency Reporting (PQDR) Business Process; Description of
initiatives: To develop and implement a methodology to seamlessly share
PQDR data across all services and agencies.
BIC initiatives approved: Establish Process for Property Conveyance for
Conservation Purposes; Description of initiatives: To allow DOD to
convey surplus property to a state or local government, or nonprofit
conservation organization for natural resource conservation purposes.
BIC initiatives approved: Establish Funding Flexibility within a
Program; Description of initiatives: To establish transfer flexibility
’between“ appropriations in the ’same program“ at $30 million or 10
percent, whichever is less.
BIC initiatives approved: Increase Flexibility of Expired Year Funds;
Description of initiatives: To avoid the need to request specific
program legislation when expired appropriations have been exhausted by
establishing the authority to reprogram expired dollars.
BIC initiatives approved: Increase Expense/Investment Threshold;
Description of initiatives: To provide field commanders greater
flexibility in their decision-making process and ability to fund
critical requirements by increasing the expense/investment threshold
from $100,000 to $500,000.
BIC initiatives approved: Establish Operations and Maintenance (O&M)
Close-Out Flexibility; Description of initiatives: To pay for emerging
but not forecasted must-pay bills by allowing DOD to carryover up to 2
percent of O&M funding for 1 year.
BIC initiatives approved: Streamline Administrative Coordination
Process; Description of initiatives: To streamline and simplify the
procedures used to coordinate documents and actions within DOD.
BIC initiatives approved: Streamline Contract Close-Out Process;
Description of initiatives: To close out 400 plus completed cost
contracts that are under $1 million and that are at least 9 years old;
and by using lessons learned develop new business practices within the
contract close-out community.
BIC initiatives approved: Streamline Clinger-Cohen Implementation;
Description of initiatives: To develop a process for the appropriate
implementation of the Clinger-Cohen Act while avoiding the duplication
of existing acquisition processes and oversight.
BIC initiatives approved: Eliminate Excise Tax on DOD Tactical
Vehicles; Description of initiatives: To request exemption from the
Treasury department from paying the federal retail excise tax on
military and tactical-wheeled vehicles above 33,000 pounds gross
vehicle weight.
BIC initiatives approved: BIC initiatives approved; February 6, 2002;
Description of initiatives: Description of initiatives.
BIC initiatives approved: Commercialize Military-Developed Systems;
Description of initiatives: To have the private sector purchase up to
10 C-17 aircraft for its use with the agreement that the aircraft would
be available to DOD if required in a contingency.
BIC initiatives approved: Commercializing Acquisition: Raise the Truth
in Negotiations Act (TINA) Thresholds; Description of initiatives: To
raise the TINA dollar threshold to $7.5 million.
BIC initiatives approved: Virtual IT Marketplace; Description of
initiatives: To implement a virtual IT marketplace portal to extend the
DOD Enterprise Software Initiative to include IT hardware and selected
services using the General Services Administration.
BIC initiatives approved: Streamline the General Officer/Flag Officer
Nomination Process; Description of initiatives: To simplify the
nomination process and allow the services to make timely and flexible
moves of general/flag officers.
BIC initiatives approved: BIC initiatives approved; March 18, 2002;
Description of initiatives: Description of initiatives.
BIC initiatives approved: Cell Phone Subsidy; Description of
initiatives: To develop procedures to select and reimburse employees a
flat payment for official use of their personal cell phone.
BIC initiatives approved: Streamline Technology Readiness Assessments;
Description of initiatives: To modify the mandatory requirement for
Technology Readiness Assessments.
BIC initiatives approved: Elimination of Value Engineering Reporting;
Description of initiatives: To eliminate the annual value engineering
reporting requirements of the Office of Management and Budget Circular
A-131.
BIC initiatives approved: Streamline IT Equipment Disposal Process;
Description of initiatives: To eliminate duplicative IT equipment
disposal processes.
BIC initiatives approved: BIC initiatives approved; May 31, 2002;
Description of initiatives: Description of initiatives.
BIC initiatives approved: Pioneer Projects; Description of initiatives:
To use a variety of sourcing arrangements such as commercial cost
comparison; divestiture; reengineering; and/or further expansion of
privatization efforts in order to transition noncore competencies to
the private sector.
BIC initiatives approved: Buy to Budget; Description of initiatives: To
allow DOD to purchase increased amounts of major procurements without
obtaining prior congressional approval.
BIC initiatives approved: Simplify Physical Access Control at DOD
Installations and Facilities by Using the Common Access Card;
Description of initiatives: To eliminate the necessity for DOD to issue
and for personnel to carry additional physical access badges after the
Common Access Card is issued.
BIC initiatives approved: Eliminate Unnecessary Reports; Description of
initiatives: To implement a process to routinely evaluate potential
unnecessary, duplicative, or excessive reporting requirements.
BIC initiatives approved: Embedded Instrumentation; Description of
initiatives: To establish acquisition policy that requires all systems
to have an integrated set of embedded instrumentation for diagnostics,
prognostics, testing, and training if the business case analysis
considers it reasonable and practicable.
BIC initiatives approved: BIC initiatives approved; September 4, 2002;
Description of initiatives: Description of initiatives.
BIC initiatives approved: Improve Visibility of Contract Services;
Description of initiatives: To obtain better visibility of the
contractor work force by establishing the Army as the DOD pilot to test
the contractor manpower and cost reporting process.
BIC initiatives approved: Consolidate Defense Agency Overhead
Functions; Description of initiatives: To examine opportunities for
potential consolidation of the noncore functions performed by the
Defense agencies and field activities.
BIC initiatives approved: Reengineer Personnel Security Investigation;
Description of initiatives: To seek relief from the burdensome and slow
processes associated with granting personnel security investigations.
BIC initiatives approved: e-Content Enterprise Licensing; Description
of initiatives: To expand the enterprise agreement methodology in order
to further leverage the purchasing power of DOD.
BIC initiatives approved: International Electronic Information Release
policy; Description of initiatives: To determine the best method of
sharing information between U.S. government offices and foreign
government organizations for the purpose of conducting foreign military
sales business, military equipment loans, and cooperative programs for
the development and production of military equipment.
BIC initiatives approved: Managing for Results; Description of
initiatives: To link resources consumed by DOD installation activities
to performance outcomes (results), customer demands, and work outputs
by using activity-based costing and management tools, performance
measures, and benchmarks.
BIC initiatives approved: Guaranteed Fixed-Price Remediation (GFPR);
Description of initiatives: To use GFPR contracts, a new contracting
method that obligates contractors to guarantee achievement of DOD‘s
environmental cleanup objectives for a fixed price, and the contractors
use insurance to protect against cost overruns.
BIC initiatives approved: Reengineer Legislative Coordination Process;
Description of initiatives: To redesign DOD‘s procedures for
formulating, reviewing, and submitting legislative proposals to
Congress.
BIC initiatives approved: Cost-Effective Multiyear Contracting
Arrangements and/or Purchase of Military Sealift Command Ships;
Description of initiatives: To explore alternative approaches for
acquiring the required capability with the primary objective of
reducing rates charged to customers while still meeting mission
requirements.
BIC initiatives approved: Working Capital Fund-Business Practices;
Description of initiatives: To improve the business practices and
financial policies of the Defense Working Capital Fund across all
business areas.
BIC initiatives approved: Provide Adequate Fitness Facilities;
Description of initiatives: To establish a team with representatives
from the Office of the Secretary of Defense and the services to explore
various fitness facilities alternatives that each service could use as
appropriate for addressing its unique requirements.
BIC initiatives approved: Improve the Speed and Quality of the
Decision-Making Process within DOD; Description of initiatives: To
establish a cross-component team to study the reengineering of DOD‘s
decision-making process.
Source: DOD.
[End of table]
[End of section]
Appendix VI: Defense Business Practice Implementation Board Members:
Member: William (Gus) Pagonis (Chair); Affiliation: Executive Vice
President, Supply Chain, Sears, Roebuck and Company.
Member: Michael Bayer (Vice Chair); Affiliation: Private consultant
engaged in enterprise strategic planning and mergers and acquisitions.
Member: Neil Albert; Affiliation: Senior Vice President and Director of
MCR Federal, Inc.
Member: Brad Bends; Affiliation: Vice President, Financial Services,
KPMG.
Member: Denis Bovin; Affiliation: Vice Chairman, Bear Stearns and
Company, Inc.
Member: Frederic Cook; Affiliation: Frederic Cook & Company.
Member: Travis Engen; Affiliation: President and CEO, Alcan, Inc.
Member: Steve Friedman; Affiliation: Chairman, Board of Columbia
University.
Member: Robert Hale; Affiliation: Senior Fellow, Logistics Management
Institute.
Member: W.N. Johnson; Affiliation: Vice President, Dean of Students,
Boston University.
Member: James Kimsey; Affiliation: Founding CEO and Chairman Emeritus
of America Online.
Member: Dana Mead; Affiliation: Retired Chairman, Tenneco, Inc.
Member: Phil Merrill; Affiliation: Board of Capital-Gazette
Communications.
Member: Richard Perle; Affiliation: Chairman, Defense Policy Board, ex
officio.
Member: William Phillips; Affiliation: Partner,
PricewaterhouseCoopers, Washington.
Member: Arnold Punaro; Affiliation: Senior Vice President and Director,
Federal Business Development, Science Applications International
Corporation.
Member: William Schneider, Jr; Affiliation: Chairman, Defense Science
Board, ex officio.
Member: Andrew Siegel; Affiliation: Deutsche Bank.
Member: Frank Sullivan; Affiliation: Frank Sullivan Associates.
Member: Mortimer Zuckerman; Affiliation: Editor-in-Chief, U.S. News &
World Report.
Member: Observer; Affiliation: Affiliation.
Member: David Walker; Affiliation: Comptroller General of the United
States.
Member: Mark Everson; Affiliation: Controller, Office of Federal
Financial Management, Office of Management and Budget.
Source: DOD.
[End of table]
[End of section]
Appendix VII: Comments from the Department of Defense:
OFFICE OF THE UNDER SECRETARY OF DEFENSE:
3000 DEFENSE PENTAGON WASHINGTON, DC 20301-3000:
ACQUISITION, TECHNOLOGY AND LOGISTICS:
14 NOV 2002:
Mr. Barry W. Holman:
Director, Defense Capabilities and Management Team United States
General Accounting Office:
441 G Street, N.W. Washington, DC 20548:
Dear Mr. Holman:
This is the Department of Defense (DoD) response to the GAO draft
report, ’DEFENSE MANAGEMENT: New Management Reform Program Still
Evolving,“ dated October 11, 2002 (GAO Code 350233/GAO-03-58). While
the draft report did not contain specific recommendations for the
Department, I appreciate the opportunity to review the draft report.
The report is technically accurate and I have no comments to the report
as written.
If you have any questions, please contact my action officer for this
action, Mr. Frank Leaming (703-614-7529), email:
frank.leaming@osd.mil.
Sincerely,
Deidre A. Lee
Director, Defense Procurement and Acquisition Policy:
Signed by Deidre A. Lee
[End of section]
Appendix VIII: Staff Acknowledgments:
Acknowledgments:
Debra McKinney, Nancy Lively, Cheryl Andrew, Julia Denman,
James Fuquay, James Hatcher, Larry Junek, John Strong, and R.K. Wild
also made significant contributions to this report.
[End of section]
Related GAO Products:
Defense Reform Initiative: Organization, Status, and Challenges. GAO/
NSIAD-99-87. Washington, D.C.: April 21, 1999.
Defense Infrastructure: Improved Performance Measures Would
Enhance Defense Reform Initiative. GAO/NSIAD-99-169. Washington, D.C.:
August 4, 1999.
Defense Management: Electronic Commerce Implementation Strategy Can Be
Improved. GAO/NSIAD-00-108. Washington, D.C.: July 18, 2000.
Defense Management: Actions Needed to Sustain Reform Initiatives
and Achieve Greater Results. GAO/NSIAD-00-72. Washington, D.C.:
July 25, 2000.
Defense Headquarters: Status of Efforts to Redefine and
Reduce Headquarters Staff. GAO/NSIAD-00-224. Washington, D.C.:
September 6, 2000.
Defense Logistics: Strategic Planning Weaknesses Leave Economy,
Efficiency, and Effectiveness of Future Support Systems at Risk.
GAO-02-106. Washington, D.C.: October 11, 2001.
FOOTNOTES
[1] The Comptroller General of the United States, David M. Walker,
serves as an observer on this panel.
[2] U.S. General Accounting Office, Defense Management: Electronic
Commerce Implementation Strategy Can Be Improved, GAO/NSIAD-00-108
(Washington, D.C.: July 18, 2000).
[3] A public key infrastructure is a system of hardware, software,
policies, and people that, when fully and properly implemented, can
provide a suite of information security assurances that are important
in protecting sensitive communications and transactions.
[4] While Defense Reform Initiative Directives were used to communicate
specific goals, objectives, milestones, and decisions associated with
the Defense Reform Initiative program, not every directive resulted in
a separate initiative.
[5] U.S. General Accounting Office, Defense Reform Initiative:
Organization, Status, and Challenges, GAO/NSIAD-99-87 (Washington,
D.C.: Apr. 21, 1999).
[6] GAO/NSIAD-00-108.
[7] GAO/NSIAD-99-87.
[8] Total asset visibility involves the use of automatic identification
technology to access the location of DOD assets throughout the supply
and distribution systems.
[9] U.S. General Accounting Office, Logistics Planning: Opportunities
for Enhancing DOD‘s Logistics Strategic Plan, GAO/NSIAD-97-28
(Washington, D.C.: Dec. 18, 1996), Defense Logistics: Actions Needed to
Enhance Success of Reengineering Initiatives, GAO/NSIAD-00-89
(Washington, D.C.: June 23, 2000), and Defense Logistics: Strategic
Planning Weaknesses Leave Economy, Efficiency, and Effectiveness of
Future Support Systems at Risk, GAO-02-106 (Washington, D.C.: Oct. 11,
2001).
[10] The Results Act (P.L. 103-62) requires agencies to develop
periodic strategic and annual performance plans. Among other things,
the performance plans provide agencies with a vehicle to identify their
long-term goals and objectives for all major functions and operations,
the measures they will use to gauge performance, and the strategies
and resources they will use to achieve their performance goals.
[11] Both we and the department have recognized that the disparate
approaches to dealing with logistics planning in the past resulted in
the initiation of some 400 different service-or DOD-sponsored logistics
improvement initiatives.
[12] Our high-risk status reports are provided at the start of each new
Congress. Historically, we have designated federal programs and
operations as high risk because of their greater vulnerabilities to
fraud, waste, abuse, and mismanagement.
[13] In February 2002, the BIC approved an effort that complements part
of the DRI electronic mall initiative.
[14] U.S. General Accounting Office, Defense Management: Electronic
Commerce Implementation Strategy Can Be Improved, GAO/NSIAD-00-108
(Washington, D.C.: July 18, 2000).
[15] A public key infrastructure is a system of hardware, software,
policies, and people that, when fully and properly implemented, can
provide information security assurances that are important in
protecting sensitive communications and transactions.
[16] Three broad goals were identified in the May 1999 Electronic
Business/Electronic Commerce Plan. They were to achieve (1) global
flexibility, increased productivity, and a dynamic working environment
through the application of electronic business/electronic commerce; (2)
efficient and effective responses to changing environments by the rapid
introduction of business process improvements or reengineering and the
exploitation of electronic business/electronic commerce technologies;
and (3) cultural changes and shifts from current business practices
through guidance and the attainment of necessary skills for
implementation of electronic business/electronic commerce.
[17] Strom Thurmond National Defense Authorization Act for Fiscal Year
1999, Pub. L. 105-261, Oct. 17, 1998.
[18] Middleware is a layer of software between the network and
applications that provides services, such as identification,
authentication, authorization, directories, and security.
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