DOD Transformation
Challenges and Opportunities Gao ID: GAO-07-226CG November 8, 2006This is a Comptroller General Presentation delivered to the Defense Acquisition University's PEO/SYSCOM at Ft. Belvoir, Virginia on November 8, 2006. Major topics of this presentation include: composition of federal spending, the surplus or deficit as a share of GDP, GAO's high-risk list 2006, active duty personnel pay and benefits, potential DOD transformations, and systemic defense acquisition challenges.
GAO-07-226CG, DOD Transformation: Challenges and Opportunities
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United States Government Accountability Office:
DOD Transformation: Challenges And Opportunities:
The Honorable David M. Walker:
Comptroller General of the United States:
Defense Acquisition University's PEO/SYSCOM:
Ft. Belvoir, Virginia:
November, 8 2006:
The Case for Change:
The federal government is on a "burning platform," and the status quo
way of doing business is unacceptable for a variety of reasons,
including:
Past fiscal trends and significant long-range challenges:
Rising public expectations for demonstrable results and enhanced
responsiveness:
Selected trends and challenges having no boundaries:
Additional resource demands due to Iraq, Afghanistan, incremental
homeland security needs, and recent natural disasters in the United
States:
Numerous government performance/accountability and high risk
challenges:
Outdated federal organizational structures, policies, and practices:
Composition of Federal Spending:
[See PDF for image] - graphic text
3 pie charts with 5 items each.
1965:
Defense: 43.0%;
Social Security: 15.0%;
Medicare & Medicaid: 0%;
Net interest: 7.0%;
All other spending: 35.0%.
1985:
Defense: 27.0%;
Social Security: 20.0%;
Medicare & Medicaid: 9.0%;
Net interest: 14.0%;
All other spending: 30.0%.
2005:
Defense: 20.0%;
Social Security: 21.0%;
Medicare & Medicaid: 19.0%;
Net interest: 7.0%;
All other spending: 32.0%.
Source: Office of Management and Budget.
[End of Figure]
Federal Spending for Mandatory and Discretionary Programs:
[See PDF for image] - graphic text
3 pie charts with 3 items each.
1965:
Discretionary: 66%;
Mandatory: 27%;
Net Interest: 7%.
1985:
Discretionary: 44%;
Mandatory: 42%;
Net Interest: 14%.
2005:
Discretionary: 39%;
Mandatory: 54%;
Net Interest: 7%.
Source: Office of Management and Budget.
[End of Figure]
GAO-07-226CG 4:
Surplus or Deficit as a Share of GDP Fiscal Years 1962*2005:
[See PDF for image] - graphic text:
Line/Stacked Bar combo chart with 1 line (Unified) and 43 bars.
Fiscal year: 1962;
On-budget: -1%;
Off-budget: -0.2%;
Unified: -1.3%.
Fiscal year: 1963;
On-budget: -0.7%;
Off-budget: -0.1%;
Unified: -0.8%.
Fiscal year: 1964;
On-budget: -1%;
Off-budget: 0.1%;
Unified: -0.9%.
Fiscal year: 1965;
On-budget: -0.2%;
Off-budget: No data;
Unified: -0.2%.
Fiscal year: 1966;
On-budget: -0.4%;
Off-budget: -0.1%;
Unified: -0.5%.
Fiscal year: 1967;
On-budget: -1.6%;
Off-budget: 0.5%;
Unified: -1.1%.
Fiscal year: 1968;
On-budget: -3.2%;
Off-budget: 0.3%;
Unified: -2.9%.
Fiscal year: 1969;
On-budget: -0.1%;
Off-budget: 0.4%;
Unified: 0.3%.
Fiscal year: 1970;
On-budget: -0.9%;
Off-budget: 0.6%;
Unified: -0.3%.
Fiscal year: 1971;
On-budget: -2.4%;
Off-budget: 0.3%;
Unified: -2.1%.
Fiscal year: 1972;
On-budget: -2.2%;
Off-budget: 0.3%;
Unified: -2%.
Fiscal year: 1973;
On-budget: -1.2%;
Off-budget: No data;
Unified: -1.1%.
Fiscal year: 1974;
On-budget: -0.6%;
Off-budget: 0.1%;
Unified: -0.4%.
Fiscal year: 1975;
On-budget: -3.5%;
Off-budget: 0.1%;
Unified: -3.4%.
Fiscal year: 1976;
On-budget: -4.1%;
Off-budget: -0.2%;
Unified: -4.2%.
Fiscal year: 1977;
On-budget: -2.5%;
Off-budget: -0.2%;
Unified: -2.7%.
Fiscal year: 1978;
On-budget: -2.5%;
Off-budget: -0.2%;
Unified: -2.7%.
Fiscal year: 1979;
On-budget: -1.5%;
Off-budget: -0.1%;
Unified: -1.6%.
Fiscal year: 1980;
On-budget: -2.7%;
Off-budget: No data;
Unified: -2.7%.
Fiscal year: 1981;
On-budget: -2.4%;
Off-budget: -0.2%;
Unified: -2.6%.
Fiscal year: 1982;
On-budget: -3.7%;
Off-budget: -0.2%;
Unified: -4%.
Fiscal year: 1983;
On-budget: -6%;
Off-budget: No data;
Unified: -6%.
Fiscal year: 1984;
On-budget: -4.8%;
Off-budget: No data;
Unified: -4.8%.
Fiscal year: 1985;
On-budget: -5.3%;
Off-budget: 0.2%;
Unified: -5.1%.
Fiscal year: 1986;
On-budget: -5.4%;
Off-budget: 0.4%;
Unified: -5%.
Fiscal year: 1987;
On-budget: -3.6%;
Off-budget: 0.4%;
Unified: -3.2%.
Fiscal year: 1988;
On-budget: -3.9%;
Off-budget: 0.8%;
Unified: -3.1%.
Fiscal year: 1989;
On-budget: -3.8%;
Off-budget: 1%;
Unified: -2.8%.
Fiscal year: 1990;
On-budget: -4.8%;
Off-budget: 1%;
Unified: -3.9%.
Fiscal year: 1991;
On-budget: -5.4%;
Off-budget: 0.9%;
Unified: -4.5%.
Fiscal year: 1992;
On-budget: -5.5%;
Off-budget: 0.8%;
Unified: -4.7%.
Fiscal year: 1993;
On-budget: -4.6%;
Off-budget: 0.7%;
Unified: -3.9%.
Fiscal year: 1994;
On-budget: -3.7%;
Off-budget: 0.8%;
Unified: -2.9%.
Fiscal year: 1995;
On-budget: -3.1%;
Off-budget: 0.9%;
Unified: -2.2%.
Fiscal year: 1996;
On-budget: -2.3%;
Off-budget: 0.9%;
Unified: -1.4%.
Fiscal year: 1997;
On-budget: -1.3%;
Off-budget: 1%;
Unified: -0.3%.
Fiscal year: 1998;
On-budget: -0.3%;
Off-budget: 1.1%;
Unified: 0.8%.
Fiscal year: 1999;
On-budget: No data;
Off-budget: 1.4%;
Unified: 1.4%.
Fiscal year: 2000;
On-budget: 0.9%;
Off-budget: 1.5%;
Unified: 2.4%.
Fiscal year: 2001;
On-budget: -0.3%;
Off-budget: 1.6%;
Unified: 1.3%.
Fiscal year: 2002;
On-budget: -3.1%;
Off-budget: 1.5%;
Unified: -1.5%.
Fiscal year: 2003;
On-budget: -4.9%;
Off-budget: 1.5%;
Unified: -3.5%.
Fiscal year: 2004;
On-budget: -4.9%;
Off-budget: 1.3%;
Unified: -3.6%.
Fiscal Year: 2005;
On-Budget: -4.0%;
Off-Budget: 1.4%;
Unified: -2.6%.
Source: Office of Management and Budget:
[End of Figure]
Fiscal Year 2004 and 2005 Deficits and Net Operating Costs:
Dollars in billions.
On-Budget Deficit;
Fiscal Year 2004: ($568);
Fiscal Year 2005: ($494).
Off-Budget Surplus*;
Fiscal Year 2004: $155;
Fiscal Year 2005: $175.
Unified Deficit;
Fiscal Year 2004: ($413);
Fiscal Year 2005: ($318).
Net Operating Cost;
Fiscal Year 2004: ($616);
Fiscal Year 2005: ($760).
*Includes $151 billion in fiscal year 2004 and $173 billion in fiscal
year 2005 in Social Security surpluses and $4 billion in fiscal year
2004 and $2 billion in fiscal year 2005 in Postal Service surpluses.
Sources: The Office of Management and Budget and the Department of the
Treasury.
[End of table]
Estimated Fiscal Exposures ($ trillions):
Explicit liabilities (Publicly held debt, military & civilian pensions
& retiree health, other);
2000: $6.9;
2005: $9.9.
Commitments & Contingencies: e.g., PBGC, undelivered orders;
2000: $0.5;
2005: $0.9.
Implicit exposures;
2000: $13.0;
2005: $35.6.
Implicit exposures: Future Social Security benefits;
2000: $3.8;
2005: $5.7.
Implicit exposures: Future Medicare Part A benefits;
2000: $2.7;
2005: $8.8.
Implicit exposures: Medicare Part B benefits;
2000: $6.5;
2005: $12.4.
Implicit exposures: Medicare Part D benefits;
2005: $8.7.
Total;
2000: $20.4;
2005: $46.4.
Source: U.S. government's consolidated financial statements (CFS).
Note: Estimates for Social Security and Medicare are at present value
as of January 1 of each year as reported in the CFS and all other data
are as of September 30.
[End of table]
How Big is Our Growing Fiscal Burden?
Our total fiscal burden can be translated and compared as follows:
Our total fiscal burden can be translated and compared as follows:
Total Fiscal exposures: $46.4 trillion;
Total Household net worth[1]: $51.1 trillion;
* Burden/Net worth ratio: 91 percent;
Burden[2]:
Per person: $156,000;
Per full-time worker: $375,000;
Per Household: $411,000;
Income:
Median Household income[3]: $44,389;
Disposable personal income per capita[4]: $30,431;
Notes: (1) Federal Reserve Board, Flow of Funds Accounts, Table B.100,
2005:Q3 (Dec. 8, 2005); (2) Burdens are calculated using total U.S.
population as of 9/30/05, from the U.S. Census Bureau, full-time
workers for 2004, reported by the Bureau of Economic Analysis, in NIPA
table 6.5D (Aug. 4, 2005); and households for 2004, reported by the
U.S. Census Bureau, in Income Poverty & Health Insurance Coverage in
the US: 2004 (Aug. 2005); (3) U.S. Census Bureau, Income Poverty &
Health Insurance Coverage in the US: 2004 (Aug. 2005); and (4) Bureau
of Economic Analysis, Personal Income and Outlays: October 2005, table
2, 2005:Q3, (Dec.1, 2005).
Sources: GAO analysis.
[End of figure]
Composition of Spending as a Share of GDP Under Baseline Extended:
[See PDF for image] -graphic text:
Line/Stacked Bar combo chart with 4 groups, 1 line (Revenue) and 4 bars
per group.
2005;
Net interest: 1.5%;
Social Security: 4.2%;
Medicare & Medicaid: 3.9%;
All other spending: 10.5%;
Revenue: 17.5%.
2015;
Net interest: 1.6%;
Social Security: 4.6%;
Medicare & Medicaid: 5.3%;
All other spending: 8.5%;
Revenue: 19.7%.
2030;
Net interest: 2.6%;
Social Security: 6.4%;
Medicare & Medicaid: 8.3%;
All other spending: 8.4%;
Revenue: 19.8%.
2040;
Net interest: 5.5%;
Social Security: 6.9%;
Medicare & Medicaid: 10.3%;
All other spending: 8.4%;
Revenue: 19.8%.
Notes: In addition to the expiration of tax cuts, revenue as a share of
GDP increases through 2016 due to (1) real bracket creep, (2) more
taxpayers becoming subject to the AMT, and (3) increased revenue from
tax-deferred retirement accounts. After 2016, revenue as a share of GDP
is held constant.
Source: GAO's August 2006 analysis.
[End of Figure]
Composition of Spending as a Share of GDP:
(Assuming Discretionary Spending Grows with GDP After 2006 and All
Expiring Tax Provisions are Extended):
[See PDF for image] -graphic text:
Line/Stacked Bar combo chart with 4 groups, 1 line (Revenue) and 4 bars
per group.
2005;
Net interest: 1.5%;
Social Security: 4.2%;
Medicare & Medicaid: 3.9%;
All other spending: 10.5%;
Revenue: 17.5%.
2015;
Net interest: 2.4%;
Social Security: 4.6%;
Medicare & Medicaid: 5.3%;
All other spending: 9.9%;
Revenue: 17.5%.
2030;
Net interest: 6.9%;
Social Security: 6.7%;
Medicare & Medicaid: 8.3%;
All other spending: 9.9%;
Revenue: 17.6%.
2040;
Net interest: 13.7%;
Social Security: 7.5%;
Medicare & Medicaid: 10.3%;
All other spending: 9.9%;
Revenue: 17.6%.
Source: GAO's August 2006 analysis.
[End of Figure]
Current Fiscal Policy Is Unsustainable:
The "Status Quo" is Not an Option:
* We face large and growing structural deficits largely due to known
demographic trends and rising health care costs.
* GAO's simulations show that balancing the budget in 2040 could
require actions as large as:
- Cutting total federal spending by 60 percent or:
- Raising federal taxes to 2 times today's level:
* Faster Economic Growth Can Help, but It Cannot Solve the Problem:
* Closing the current long-term fiscal gap based on reasonable
assumptions would require real average annual economic growth in the
double digit range every year for the next 75 years.
* During the 1990s, the economy grew at an average 3.2 percent per
year.
* As a result, we cannot simply grow our way out of this problem. Tough
choices will be required.
The Way Forward: A Three-Pronged Approach:
1. Strengthen Budget and Legislative Processes and Controls:
2. Improve Financial Reporting and Performance Metrics:
3. Fundamental Reexamination & Transformation for the 21St Century
(i.e., entitlement programs, other spending, and tax policy):
Solutions Require Active Involvement from both the Executive and
Legislative Branches:
GAO-07-226CG 12:
Key National Indicators:
What: A portfolio of economic, social, and environmental outcome- based
measures that could be used to help assess the nations and other
governmental jurisdictions position and progress:
Who: Many countries and several states, regions, and localities have
already undertaken related initiatives (e.g., Australia, New Zealand,
Canada, United Kingdom, Oregon, Silicon Valley (California) and
Boston):
Why: Development of such a portfolio of indicators could have a number
of possible benefits, including:
* Serving as a framework for related strategic planning efforts:
* Enhancing performance and accountability reporting:
* Informing public policy decisions, including much needed baseline
reviews of existing government policies, programs, functions, and
activities:
* Facilitating public education and debate as well as an informed
electorate:
Way Forward: Consortium of key players housed b -r the National
Academies domestically and related efforts by the OED and others
internationally.
Key National Indicators: Where the World's Sole Superpower Ranks:
The United States may be the only superpower, but compared to most
other OECD countries on selected key economic, social, and
environmental indicators, on average, the U.S. ranks:
16 0ut Of 28:
OECD Categories for Kev Indicators:
* Population/Migration;
* Energy;
* Environment;
* Quality of Life.
* Macroeconomic Trends;
* Labor Market;
* Education;
* Economic Globalization.
* Prices;
* Science & Tech;
* Public Finance;
Source: 2006 OECD Factbook:
GAO's Strategic Plan:
Serving The Congress And The Nation GAO's Strategic Plan Framework:
Mission GAO exists to support the Congress in meeting its
constitutional responsibilities and to help improve the performance and
ensure the accountability of the federal government for the benefit of
the American people.
Goals and Objectives:
Provide Timely, Quality Service to the Congress and the Federal
Government to.
Address Current and Emerging Challenges to the Well-Being and Financial
Security of the American People related to.
* Health care needs and financing:
* Education and protection of children:
* Work opportunities and worker protection:
* Retirement income security:
* Effective system of justice:
* Viable communities:
* Natural resources use and environmental protection:
* Physical infrastructure:
Respond to Changing Security Threats and the Challenges of Global
Interdependence involving.
* Emerging threats:
* Advancement of U.S. interests:
* Military capabilities and readiness:
* Global market forces:
Help Transform the Federal Government's Role and How It Does Business
to Meet 21st Century Challenges by assessing.
* Roles in achieving federal objectives:
* Government transformation:
* Key management challenges and program risks:
* Fiscal position and financing of the government:
Quality of Life:
Maximize the Value of GAO by Being a Model Federal Agency and a World-
Class Professional Services Organization in the areas of.
* Client and customer satisfaction:
* Strategic leadership:
* Institutional knowledge and experience:
* Process improvement:
* Employer of choice:
Themes:
Long-term Fiscal Imbalance:
National Security:
Global Interdependence:
Changing Economy:
Demographics:
Science and Technology:
Quality of Life:
Governance:
Core Values:
Accountability:
Integrity:
Reliability:
Source: GAO.
GAO Strategic Plan 2004-2009:
GAO's High-Risk List 2006:
High Risk Areas: Addressing Challenges in Broad-based Transformations:
Protecting the federal government's Information Systems and the
Nation's Critical Infrastructures;
Designated High Risk: 1997.
High Risk Areas: Addressing Challenges in Broad-based Transformations:
Strategic Human Capital Management[A];
Designated High Risk: 2001.
High Risk Areas: Addressing Challenges in Broad-based Transformations:
U.S. Postal Service Transformation Efforts and Long-Term Outlook[A];
Designated High Risk: 2001.
High Risk Areas: Addressing Challenges in Broad-based Transformations:
Managing Federal real Property[A];
Designated High Risk: 2003.
High Risk Areas: Addressing Challenges in Broad-based Transformations:
Implementing an transforming the Department of Homeland Security;
Designated High Risk: 2003.
High Risk Areas: Addressing Challenges in Broad-based Transformations:
Establishing appropriate and effective information-sharing mechanisms
to improve Homeland Security;
Designated High Risk: 2005.
High Risk Areas: Addressing Challenges in Broad-based Transformations:
DOD approach to business transformation[A];
Designated High Risk: 2005.
High Risk Areas: Addressing Challenges in Broad-based Transformations:
DOD approach to business transformation[A]: DOD Supply Chain
Management(formerly Inventory Management);
Designated High Risk: 1990.
High Risk Areas: Addressing Challenges in Broad-based Transformations:
DOD approach to business transformation[A]: DOD Weapon Systems
Acquisition;
Designated High Risk: 1990.
High Risk Areas: Addressing Challenges in Broad-based Transformations:
DOD approach to business transformation[A]: DOD Business Systems
Modernization
Designated High Risk: 1995.
High Risk Areas: Addressing Challenges in Broad-based Transformations:
DOD approach to business transformation[A]: DOD Financial Management;
Designated High Risk: 1995.
High Risk Areas: Addressing Challenges in Broad-based Transformations:
DOD approach to business transformation[A]: DOD Support Infrastructure
Management;
Designated High Risk: 1997.
High Risk Areas: Addressing Challenges in Broad-based Transformations:
DOD approach to business transformation[A]: DOD Personnel Security
Clearance Program;
Designated High Risk: 2005.
High Risk Areas: Managing Federal Contracting More effectively: DOE
Contract Management;
Designated High Risk: 1990.
High Risk Areas: Managing Federal Contracting More effectively: NASA
Contract Management;
Designated High Risk: 1990.
High Risk Areas: Managing Federal Contracting More effectively: DOD
Contract Management;
Designated High Risk: 1992.
High Risk Areas: Managing Federal Contracting More effectively:
Management of Interagency Contracting;
Designated High Risk: 2005.
High Risk Areas: Assessing the Efficiency and Effectiveness of Tax Law
Administration: Enforcement of Tax Laws[A,B];
Designated High Risk: 1990.
High Risk Areas: Assessing the Efficiency and Effectiveness of Tax Law
Administration: IRS Business Systems Modernization[C];
Designated High Risk: 1995.
High Risk Areas: Modernizing and Safeguarding Insurance and Benefit
Programs: Medicare program[A];
Designated High Risk: 1990.
High Risk Areas: Modernizing and Safeguarding Insurance and Benefit
Programs: HUD Single-family Mortgage Insurance and Rental Housing
Assistance Programs;
Designated High Risk: 1994.
High Risk Areas: Modernizing and Safeguarding Insurance and Benefit
Programs: Medicaid program[A];
Designated High Risk: 2003.
High Risk Areas: Modernizing and Safeguarding Insurance and Benefit
Programs: Modernizing Federal Disability Program[A];
Designated High Risk: 2003.
High Risk Areas: Modernizing and Safeguarding Insurance and Benefit
Programs: Pension Benefit Guaranty Corporation Single-Employer
Insurance Program[A];
Designated High Risk: 2003.
High Risk Areas: Modernizing and Safeguarding Insurance and Benefit
Programs: National Flood Insurance Program;
Designated High Risk: 2006.
High Risk Areas: Other: FAA Air Traffic Control Modernization;
Designated High Risk: 1995.
[A] Legislation is likely to be necessary, as a supplement to actions
by the executive branch, in order to effectively address this high-risk
area.
[B] Two high-risk areas-Collection of Unpaid Taxes and Earned Income
Credit Noncompliance-have been consolidated to make this area.
[C] The IRS Financial Management high-risk area has been incorporated
into this high-risk area.
21St Century Challenges Report:
Provides background, framework, and questions to assist in reexamining
the base:
Covers entitlements & other mandatory spending, discretionary spending,
and tax policies and programs:
Based on GAO's work for the Congress:
Issued February 16, 2005:
Twelve Reexamination Areas:
Mission Areas:
* Defense:
* Education & Employment:
* Financial Regulation & Housing:
* Health Care:
* Homeland Security:
* International Affairs:
* Natural Resources, Energy & Environment:
* Retirement & Disability:
* Science & Technology:
* Transportation:
CROSSCUTTING AREAS:
* Improving Governance:
* Reexamining the Tax System:
Generic Reexamination Criteria and Sample Questions:
relevance of purpose and the federal role:
Why did the federal government initiate this program and what was the
government trying to accomplish?
Have there been significant changes in the country or the world that
relate to the reason for initiating it?
measuring success:
Are there outcome-based measures? If not, why?
If there are outcome-based measures, how successful is it based on
these measures?
targeting benefits:
Is it well targeted to those with the greatest needs and the least
capacity to meet those needs?
affordability and cost effectiveness:
Is it using the most cost-effective or net beneficial approaches when
compared to other tools and program designs?
best practices:
Is the responsible entity employing prevailing best practices to
discharge its responsibilities and achieve its mission?
Illustrative 21St Century Questions: National Defense:
How should the historical allocation of resources across services and
programs be changed to reflect the results of a forward-looking
comprehensive threat/risk assessment as part of DOD's capabilities-
based approach to determining defense needs?
Can DOD afford to invest in transformational systems such as the Future
Combat System and national missile defense at the same time it
continues to pursue large investments in legacy systems such as the F-
22A and new systems like the Joint Strike Fighter, especially if cost
growth and schedule delays continue at historical rates?
Given the global availability of rapidly advancing technology, does DOD
need to reconsider its approach for identifying critical technologies
and protecting those technologies from being exploited in order to
maintain its military superiority?
Given the growing encumbrance of pay and benefit costs, especially
health care, within DOD's budget, how might DOD's recruitment,
retention, and compensation strategies (including benefit programs) be
reexamined and revised to ensure that DOD maintains a total military
and civilian workforce with the mix of skills needed to execute the
national security strategy while using resources in a more targeted,
evidence-based, and cost-effective manner?
Do the role, size, and structure of forces and capabilities comprising
the strategic triad need to be adjusted to meet the challenges of
providing strategic deterrence in the new security and fiscal
environment?
Does DOD need to create a senior management position responsible and
accountable for taking a strategic, integrated, and sustained approach
to managing the day-to-day business operations of the department,
including ongoing efforts to transform DOD's business operations and
address the many related and longstanding high-risk areas? Should
specific qualifications requirements and periods of tenure or terms be
established for selected DOD positions related to key business
operations?
DOD Lacks An Affordable Plan to Balance Current Requirements With
Investments in New Capabilities:
DOD needs to reexamine its force strategies as well as its structure
and business processes to meet 21St century challenges:
DOD's plans to transform its military capabilities may not be
affordable or sustainable:
DOD's efforts to transform its business systems and processes will take
many years to achieve:
Active Duty Personnel Pay and Benefits Need To Be Reexamined and
Revised:
* The cost of active duty pay and benefits was $158 billion in fiscal
year 2004 and growing.
* Enhanced pay and benefits, including health care costs, increased
costs to an average of $111,783 per person.
* DOD needs to assess the affordability and sustainability of the
compensation system and the reasonableness and appropriateness of the
allocation to cash and benefits and whether changes could more
efficiently achieve recruiting and retention goals.
Total Compensation Costs for Fiscal Years 2000-2004:
[See PDF for image] -- graphic text:
Bar graph with five items.
2004 constant dollars.
2000: $123;
2001: $131;
2002: $141;
2003: $155;
2004: $158.
Source: GAO-05-798:
*Our calculations include supplemental funding for the Global War on
Terrorism. Since fiscal year 2002 over 100,000 mobilized reservists
were paid out of the cash compensation. If you considered these
personnel, the average costs to provide compensation would be about
$5,000 per capita lower.
[End of Figure]
DOD Continues to Confront Pervasive, Longstanding Management Problems
Related to Its Business Operations:
Management weaknesses cut across all of DOD's major business areas, and
its approach to business transformation was designated as high risk in
2005:
Examples of longstanding issues include:
* Supply chain management has been designated high risk since 1990:
* Weapons System Acquisition was also designated high risk in 1990:
* Financial Management has been designated as high-risk since 1995:
Selected Potential DOD Transformation Related Actions:
Revise the current approach to developing national military strategy
(e.g., order, integration):
Take a longer range, and more enterprise-wide approach to program
planning and budget integration (e.g., life cycles, opportunity costs):
Employ a more strategic and integrated approach to business information
system efforts and financial audit initiatives:
Differentiate between war fighting and business systems development,
implementation, and maintenance (e.g., resource control, project
approval):
Focus on achieving real success in connection with financial management
efforts (e.g., systems, controls, information, compliance and
opinions):
Employ a total force management approach to planning and execution
(e.g., military, civilian, contractors):
Get the design and implementation of the NSPS right, including
modernizing and integrating the DOD, Service, domain, unit, and
individual performance measurement and reward systems:
Revise the process for developing and communicating key changes (e.g.,
DOD transformation, NSPS):
Reduce the number of layers, silos, and footprints:
Recognize the difference between approving and informing:
Review and revise current military compensation policies and practices
(e.g., more targeted and market-based):
Strengthen emphasis on horizontal and external activities (e.g.,
partnerships):
Create a Chief Management Officer to drive the business transformation
process:
Systemic Defense Acquisition Challenges:
1. Service budgets are allocated largely according to top line
historical percentages rather than Defense-wide strategic assessments
and current and likely resource limitations.
2. Capabilities and requirements are based primarily on individual
service wants versus collective Defense needs (i.e. based on current
and expected future threats) that are both affordable and sustainable
over time.
3. Defense consistently over-promises and under-delivers in connection
with major weapons, information, and other systems (i.e. capabilities,
costs, quantities, schedule).
4. Defense often employs a "plug and pray approach" when costs escalate
(i.e. divide total funding dollars by cost per copy, plug the number
that can be purchased, then pray that Congress will provide more
funding to buy more quantities).
5. Congress sometimes forces the department to buy items (e.g. weapons
systems) and provide services (e.g. additional health care for non-
actives that he department does not want and we cannot afford.
6. DOD tries to develop high risk technologies after programs start
instead of setting up funding, organizations, and processes to conduct
high risk technology development activities in low cost environments
(i.e. technology development is not separated from product
development). Program decisions to move into design and production are
made without adequate standards or knowledge.
7. Program requirements are often set at unrealistic levels, then
changed frequently as recognition sets in that they cannot be achieved.
As a result, too much time passes, threats may change, and/or members
of the user and acquisition communities may simply change their mind.
The resulting program instability causes cost escalation, schedule
delays, fewer quantities and reduced contractor accountability.
8. Contracts, especially service contracts, often do not have
definitive or realistic requirements at the outset in order to control
costs and facilitate accountability.
9. Contracts typically do not accurately reflect the complexity of
projects nor appropriately allocate risk between the contractors and
the taxpayers (e.g. cost plus, cancellation charges).
10. Key program staff rotate too frequently thus promoting myopia and
reducing accountability (i.e. tours based on time versus key
milestones). Additionally, the revolving door between industry and the
Department presents potential conflicts of interest.
11. The acquisition workforce faces serious challenges (e.g. size,
skills, knowledge, succession planning).
12. Incentive and award fees are often paid based on contractor
attitudes and efforts versus positive results (i.e. cost, quality,
schedule).
13. Inadequate oversight is being conducted by both the Defense
Department and the Congress which results in little to no
accountability for recurring and systemic problems.
14. Some individual program and funding decisions made within the
Department and by the Congress serve to undercut sound policies.
15. Lack of a professional, term-based CIVIO at DOD serves to slow
progress on defense transformation and reduce the chance of success in
the acquisitions/contracting and other key business areas.
Key Leadership Attributes Needed for These Challenging and Changing
Times:
* Courage:
* Integrity:
* Creativity:
* Stewardship:
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U.S. Government Accountability Office 441 G Street NW, Room 7149
Washington, D.C. 20548:
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