DOD Transformation Challenges and Opportunities
Gao ID: GAO-08-323CG November 29, 2007This is a Comptroller General Presentation delivered to the Department of Defense FY 2008 Managers' Internal Control Program Conference at Fort McNair, in Washington D.C. on November 29, 2007. Major topics of this presentation include: federal spending, DOD's High Risk Areas, DOD contract management challenges, examples of waste, DOD's regular budget, and systemic defense acquisition challenges.
GAO-08-323CG, DOD Transformation Challenges and Opportunities
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United States Government Accountability Office:
GAO:
DOD Transformation Challenges and Opportunities:
The Honorable David M. Walker: Comptroller General of the United
States:
Department of Defense: FY 2008 Managers‘ Internal Control Program
Conference:
Fort McNair, Washington, DC:
November 29, 2007:
GAO-08-323CG:
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;
* 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* Outdated federal organizational structures, policies, and practices;
* Rising public expectations for demonstrable results and enhanced
responsiveness.
Composition of Federal Spending:
[See PDF for image] - graphic text:
There are three pie charts, containing the following compositions of
spending by category:
Year: 1966;
Defense: 43%;
Social Security: 15%;
Medicare and Medicaid: 1%;
Net Interest: 7%;
All Other: 34%.
Year: 1986;
Defense: 28%;
Social Security: 20%;
Medicare and Medicaid: 10%;
Net Interest: 14%;
All Other: 29%.
Year: 2006;
Defense: 20%;
Social Security: 21%;
Medicare and Medicaid: 19%;
Net Interest: 9%;
All Other: 32%.
Source: Office of Management and Budget and the Department of the
Treasury.
Note: Numbers may not add to 100 percent due to rounding.
[End of figure]
Federal Spending for Mandatory and Discretionary Programs:
[See PDF for image] - graphic text:
There are three pie charts, containing the following compositions of
spending by category:
Year: 1966;
Discretionary: 67%;
Mandatory: 26%;
Net Interest: 7%.
Year: 1986;
Discretionary: 44%;
Mandatory: 42%;
Net Interest: 14%.
Year: 2006;
Discretionary: 38%;
Mandatory: 53%;
Net Interest: 9%.
Source: Office of Management and Budget.
[End of figure]
Table: Fiscal Year 2005 and 2006 Deficits and Net Operating Costs:
On-Budget Deficit, Fiscal Year 2005 ($ Billion): (494);
On-Budget Deficit, Fiscal Year 2006 ($ Billion): (434);
Unified Deficit[a], Fiscal Year 2005 ($ Billion): (318);
Unified Deficit[a], Fiscal Year 2006 ($ Billion): (248);
Net Operating Cost[b], Fiscal Year 2005 ($ Billion): (760);
Net Operating Cost[b], Fiscal Year 2006 ($ Billion): (450);
Sources: Office of Management and Budget and Department of the
Treasury.
[a] Includes $173 billion in Social Security surpluses for fiscal year
2005 and $185 billion for fiscal year 2006; $2 billion in Postal
Service surpluses for fiscal year 2005 and $1 billion for fiscal year
2006.
[b] Fiscal year 2005 and 2006 net operating cost figures reflect
significant but opposite changes in certain actuarial costs. For
example, changes in interest rates and other assumptions used to
estimate future veterans‘ compensation benefits increased net operating
cost by $228 billion in 2005 and reduced net operating cost by $167
billion in 2006. Therefore, the net operating costs for fiscal years
2005 and 2006, exclusive of the effect of these actuarial cost
fluctuations, were ($532) billion and ($617) billion, respectively.
[End of table]
Potential Fiscal Outcomes Under Alternative Simulation; Revenues and
Composition of Spending as a Share of GDP:
[See PDF for image] - graphic text.
This is a line/stacked bar graph with one line (revenue) and four
stacked bars containing four spending items (Net interest, Social
Security, Medicare and Medicaid, and All other spending). The vertical
axis represents Percent of GDP and the horizontal axis represents
fiscal years 2006, 2015, 2030, and 2040.
The following data is depicted:
Fiscal year 2006:
Net interest: 1.7%;
Social Security: 4.2%;
Medicare & Medicaid: 3.9%;
All other spending: 10.6%;
Revenue: 18.4%.
Fiscal year 2015:
Net interest: 2.3%;
Social Security: 4.8%;
Medicare & Medicaid: 5.7%;
All other spending: 9.6%;
Revenue: 18%.
Fiscal year 2030:
Net interest: 5.8%;
Social Security: 6.6%;
Medicare & Medicaid: 8.8%;
All other spending: 9.6%;
Revenue: 18.6%.
Fiscal year 2040:
Net interest: 11.6%;
Social Security: 7.2%;
Medicare & Medicaid: 10.8%;
All other spending: 9.6%;
Revenue: 18.6%.
Source: GAO‘s August 2007 analysis.
Notes: AMT exemption amount is retained at the 2006 level through 2017
and expiring tax provisions are extended. After 2017, revenue as a
share of GDP returns to its historical level of 18.3 percent of GDP
plus expected revenues from deferred taxes, i.e. taxes on withdrawals
from retirement accounts. Medicare spending is based on the Trustees
April 2007 projections adjusted for the Centers for Medicare and
Medicaid Services alternative assumption that physician payments are
not reduced as specified under current law.
[End of graph]
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. Improve Financial Reporting, Public Education, and Performance
Metrics.
2. Strengthen Budget and Legislative Processes and Controls. 3.
Fundamentally Reexamine & Transform for the Twenty-first Century (i.e.,
entitlement programs, other spending, and tax policy).
Solutions Require Active Involvement from both the Executive and
Legislative Branches.
Twenty-first 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.
Source: GAO.
Twelve Reexamination Area:
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.
Illustrative Twenty-first Century Questions: National Defense:
National defense questions relate to such issues as:
* The allocation of resources across services and programs to reflect
threat/risk assessments;
* Investments in transformational systems and legacy systems,
considering cost growth and historic schedule delays;
* Identification and protection of critical technologies;
* Recruitment, retention, and compensation strategies to ensure that
DOD maintains a total military and civilian workforce with the right
mix of skills;
* The role, size, and structure of forces and capabilities comprising
the strategic triad;
*The creation of a CMO.
GAO‘s High-Risk List:
* Started in 1990 with focus on fraud, waste, abuse, and mismanagement;
* Evolved to include major economy, efficiency, effectiveness, and
broad-based transformations needed to address twenty-first century
challenges;
* Current focus is on identifying inherent risks, systemic problems, or
key management functions;
* Updates issued at the start of each new Congress.
Table: GAO's High-Risk List 2007:
Addressing Challenges in Broad-based Transformations:
* Strategic Human Capital Management[a]: Year Designated: 2001;
* Managing Federal Real Property[a]: Year Designated: 2001;
* Protecting the Federal Government‘s Information Systems and the
* Nations‘ Critical Infrastructures: Year Designated: 1997;
* Implementing and Transforming the Department of Homeland Security:
Year Designated: 2003;
* Establishing Appropriate and Effective Information-Sharing Mechanisms
to Improve Homeland Security: Year Designated: 2005;
* DOD Approach to Business Transformation[a]: Year Designated: 2005;
- DOD Business Systems Modernization: Year Designated: 1995;
- DOD Personnel Security Clearance Program; Year Designated: 2005;
- DOD Support Infrastructure Management; Year Designated: 1997;
- DOD Financial Management; Year Designated: 1995;
- DOD Supply Chain Management; Year Designated: 1990;
- DOD Weapon Systems Acquisition; Year Designated: 1990;
* FAA Air Traffic Control Modernization; Year Designated: 1995;
* Financing the Nation‘s Transportation System[a] (New); Year
Designated: 2007;
* Ensuring the Effective Protection of Technologies Critical to U.S.
National Security Interests[a] (New): Year Designated: 2007;
* Transforming Federal Oversight of Food Safety[a] (New): Year
Designated: 2007;
Managing Federal Contracting More Effectively:
* DOD Contract Management: Year Designated: 1992;
* DOE Contract Management: Year Designated: 1990;
* NASA Contract Management: Year Designated: 1990;
* Management of Interagency Contracting: Year Designated: 2005;
Assessing the Efficiency and Effectiveness of Tax Law Administration:
* Enforcement of Tax Laws[a]: Year Designated: 1990;
* IRS Business Systems Modernization: Year Designated: 1995;
Modernizing and Safeguarding Insurance and Benefit Programs:
* Modernizing Federal Disability Programs[a]: Year Designated: 2003;
* Pension Benefit Guaranty Corporation Single-Employer Pension
Insurance Program: Year Designated: 2003;
* Medicare Program[a]: Year Designated: 1990;
* Medicaid Program[a]: Year Designated: 2003;
* National Flood Insurance Program[a]: Year Designated: 2006.
[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.
Source: GAO.
[End of table]
DOD‘s High Risk Areas (see GAO-07-310):
Assessing Challenges in Broad-based Transformation:
* DOD Approach to Business Transformation;
- Business Systems Modernization;
- Personnel Security Clearance Program;
- Support Infrastructure Management;
- Financial Management;
- Supply Chain Management;
- Weapon Systems Acquisition.
Managing Federal Contracting More Efficiently:
* Contract Management.
DOD Faces the Challenge of Balancing Near Term and Long Term Wants,
Needs, Sustainability, and Affordability:
* DOD's regular budget has grown from about $296 billion in FY 2001 to
about $460.3 billion in FY 2008. Funding for the Global War on
Terrorism (GWOT) has added hundreds of billions of dollars to DOD‘s
available budgetary resources;
* Near term, DOD is paying for the GWOT and facing challenges in
maintaining readiness;
* Long term, DOD must address military pay and benefits and weapons
modernization and force transformation, which may not be affordable or
sustainable;
* DOD‘s efforts to transform its business systems and processes will
take many years to achieve, but could free up resources through
efficiencies and reduction in waste.
Inflation Adjusted Spending on National Defense (in 2000 Dollars):
[See PDF for image]
The figure is a line graph depicting inflation adjusted spending on
national defense. The vertical axis of the graph represents dollars in
billions from 0 to 800. The horizontal axis of the graph represents
fiscal years, from 1940 through 2006. The data depicted is as follows:
Inflation Adjusted Spending on National Defense: 1940: 16.97;
1941: 63.46;
1942: 235.61;
1943: 573.51;
1944: 654.62;
1945: 669.61;
1946: 321.39;
1947: 87.37;
1948: 56.69;
1949: 79.22;
1950: 83.94;
1951: 136.77;
1952: 257.19;
1953: 289.33;
1954: 266.88;
1955: 229.48;
1956: 222.52;
1957: 229.1;
1958: 229.15;
1959: 236.22;
1960: 229.19;
1961: 232.87;
1962: 243.01;
1963: 244.84;
1964: 248.11;
1965: 225.48;
1966: 253.43;
1967: 301.72;
1968: 334.26;
1969: 321.88;
1970: 302.23;
1971: 277.91;
1972: 266.4;
1973: 247.12;
1974: 238.49;
1975: 235.53;
1976: 227.57;
1977: 229.72;
1978: 231.29;
1979: 238.31;
1980: 252.34;
1981: 270.18;
1982: 297.49;
1983: 322.73;
1984: 337.21;
1985: 362.99;
1986: 383.68;
1987: 385.72;
1988: 385.04;
1989: 387.49;
1990: 368.41;
1991: 324.19;
1992: 345.23;
1993: 329.36;
1994: 311.96;
1995: 295.15;
1996: 282.87;
1997: 282.98;
1998: 277.22;
1999: 280.34;
2000: 294.39;
2001: 297.73;
2002: 334.05;
2003: 380.32;
2004: 417.52;
2005: 440.25;
2006: 449.94.
[End of figure]
DOD‘s Regular Budget: DOD Regular Appropriation FY 2001-2007 (Excluding
GWOT):
{See PDF for image]
This figure is a combination line and vertical bar graph depicting DOD
regular appropriation, FY 2001-2007 (Excluding GWOT). The vertical axis
of the graph represents dollars in billions from 0 to 500. The
horizontal axis of the graph represents nominal dollars for fiscal
years 2001 through 2007. The line represents constant 2007 dollars. The
following data is depicted:
FY01:
Nominal: $296.42;
Constant 2007: $351.4;
FY02:
Nominal: $327.86;
Constant 2007: $378.1.
FY03:
Nominal: $365.33;
Constant 2007: $409.8.
FY04:
Nominal: $377.50;
Constant 2007: $411.5.
FY05:
Nominal: $400.93;
Constant 2007: $422.5.
FY06:
Nominal: $415.45;
Constant 2007: $425.5.
FY07:
Nominal: $431.30;
Constant 2007: $431.3.
Source: GAO analysis of Congressional Research Service and
appropriations data.
[End of figure]
Total Budgetary Resources Provided to DOD: Total Defense Resources
FY2005 - FY 2007:
{See PDF for image]
This figure is a stacked bar graph depicting total defense resources
for FY 2005 through FY 2007. The vertical axis of the graph represents
dollars in billions from 0 to 600. The horizontal axis of the graph
represents fiscal years 2005 - 2007. For each year, the stacked bar
depicts regular, bridge, and supplemental resources. The following data
is depicted:
2005:
Regular: 400.93;
Bridge: 25;
Supplemental: 75.9.
2006:
Regular: 415.45;
Bridge: 50;
Supplemental: 66.
2007:
Regular: 431.34;
Bridge: 70.5;
Supplemental: 95.2.
Source: GAO analysis of Congressional Research Service and
appropriations data.
Notes: Bridge, or Title IX, is the section of DOD's regular defense
appropriation that outlines emergency spending provisions for
operations in support of GWOT.
[End of figure]
DOD‘s Reported GWOT Obligations for FY 2001 through FY 2007:
[See PDF for image]
This figure is a vertical bar graph depicting DOD‘s reported GWOT
obligations for FY 2001 through FY 2007. The vertical axis of the graph
represents dollars in billions from 0 to 160. The horizontal axis of
the graph represents fiscal years from 2001 through 2007. The following
data is depicted:
FY 01: $0.20;
FY 02: $29.90;
FY 03: $67.10;
FY 04: $71.30;
FY 05: $84.80;
FY 06: $98.40;
FY 07: $139.75.
Source: GAO analysis of DOD data.
Note: Reported GWOT obligations include Operation Noble Eagle,
Operation Enduring Freedom, and Operation Iraqi Freedom. Figures
include about $19.4 billion obligated in FY 2002 –FY 2003 that DOD did
not include in its cost reports. Figures do not include any obligations
for classified activities. GAO has assessed the reliability of DOD‘s
obligation data and found significant problems, such that they may not
accurately reflect the true dollar value of GWOT obligations.
[End of figure]
Increased Budget Transparency Needed:
* Changes in DOD‘s funding guidance have resulted in billions of
dollars being added to GWOT requests for what DOD calls the ’longer war
against terror,“ making it difficult to distinguish between incremental
costs to support specific contingency operations and regular budget
costs;
* As a result, FY 2007 and 2008 GWOT requests include funding for items
generally requested in the regular budget, such as future weapons
systems, transformation, and increases in end strength;
* Similarities between DOD‘s GWOT and base funding requests, along with
the duration of GWOT operations, indicate that DOD has reached the
point where it should build more funding into its base budget to
increase transparency (between incremental and regular budget costs)
and to facilitate trade-off decisions;
* DOD needs to take stronger actions to control GWOT costs by setting
general parameters to guide commanders‘ and services‘ cost control
efforts;
* GAO has found significant reliability problems with the GWOT cost
data, which impedes the ability of Congress and others to make informed
decisions about GWOT costs and related funding needs.
Balancing Wants, Needs, Sustainability, and Affordability: Maintaining
Near Term Readiness:
* Readiness is being measured against two different standards 1) the
traditional war time missions that units are expected to undertake
based on their structure, and 2) their currently directed
missions”primarily, supporting operations in Iraq and Afghanistan;
* Although there are some concerns with deployed units, the deployed
units are in better shape to undertake the currently directed missions
than non-deployed units because they receive priority for personnel and
equipment;
* When measured against traditional war time missions, there are
readiness concerns (equipment, personnel, and training) for both
deployed and non-deployed units.
Balancing Wants, Needs, Sustainability, and Affordability: Reexamining
Active Duty Personnel Pay and Benefits:
* The cost of active duty pay and benefits was $173 billion in fiscal
year 2006;
* Enhanced pay and benefits, including health care costs, increased
costs to an average of $126,239 per person in FY 2006 from $95,971in FY
2000;
* 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 and 2006:
[See PDF for image]
This figure is a vertical bar graph depicting total compensation costs
for fiscal years 2000 and 2006. The vertical axis represents FY 2006
constant dollars. The horizontal axis represents fiscal years 2000 and
2006. The following data is depicted:
2000: 132;
2006: 173.
Source: GAO-07-828.
Note: Our calculations include supplemental funding for the Global War
on Terrorism. Our calculations do not take into account 95,000
mobilized reservists who were paid out of active duty costs in fiscal
year 2006. The per capita costs would be lower if these reservists are
taken into consideration.
[End of figure]
Balancing Wants, Needs, Sustainability, and Affordability: Reexamining
Health Care Benefits:
* The cost of TRICARE more than doubled from FY01 to FY05;
* Costs have grown due to increases in enrollment, benefits, medical
inflation, and GWOT;
* TRICARE does not fully utilize market incentives to shape
utilization;
* TRICARE has low enrollment fees, deductibles, and other beneficiary
expenses compared to other plans.
TRICARE Beneficiaries in Fiscal Year 2005:
[See PDF for image]
This figure is a pie-chart, depicting the following data:
TRICARE Beneficiaries in Fiscal Year 2005:
TRICARE for Life retirees
and dependents (generally age 65 and older): 14%;
Active duty personnel and dependents; 42%;
Retirees and dependents (generally under age 65); 44%.
Source: GAO-07-48.
[End of figure]
DOD Estimates of Factors Contributing to Increases in DOD‘s Health Care
Costs, 2001-2005:
[See PDF for image]
This figure is a pie-chart, depicting the following data:
DOD Estimates of Factors Contributing to Increases in DOD‘s Health Care
Costs, 2001-2005
Other Congressionally-Mandated Benefit Changes: 5%;
TRICARE for Life: 49%;
GWOT: 6%;
Medical Inflation: 33%;
Increase in Retirees and Dependents Under 65: 7%.
Source: GAO analysis of DOD data.
[End of figure]
Balancing Wants, Needs,Sustainability, and Affordability: Funding
Weapons Modernization and Force Transformation:
* From fiscal years 2001 to 2006, DOD has doubled its planned
investments in new systems from about $700 billion to nearly $1.4
trillion, but this has not produced more stability or better outcomes;
* DOD is also restructuring forces to execute operations in the new
security environment more effectively. Although the Army originally
estimated it could largely equip and staff modular units by spending
$52.5 billion through fiscal year 2011, the Army now believes it will
require additional funding to equip modular units through fiscal year
2017.
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 the 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 CMO at DOD serves to slow
progress on defense transformation and reduce the chance of success in
the acquisitions/contracting and other key business areas.
DOD Contract Management Challenges:
DOD continues to experience poor acquisition outcomes and missed
opportunities to improve its approach to buying goods and services. For
example, DOD did not:
* Employ a strategic approach to acquiring services that enabled it to
determine whether investments were achieving desired outcomes;
* Always make sound use of various techniques to acquire goods and
services (i.e. award and incentive fees, competitive acquisition
approaches);
* Have a comprehensive plan to ensure its workforce had the right
skills and capabilities to manage and assess contractor performance.
Determining the Appropriate Role of Contractors in Meeting DOD‘s Needs:
* Contractors have an important role to play in the discharge of the
government‘s responsibilities, and in some cases the use of contractors
can result in improved economy, efficiency, and effectiveness;
* There may be occasions when contractors are used to provide certain
services because the government lacks another viable and timely option.
In such cases, the government may actually be paying more and incurring
higher risk than if such services were provided by federal employees;
* Examining the appropriate role for contractors is among the
challenges in meeting the nation‘s defense and other needs in the
Twenty-first Century.
Definition of Waste:
Waste involves the taxpayers as a whole not receiving reasonable value
for money in connection with any government funded activities due to an
inappropriate act or omission by players with control over or access to
government resources (e.g., executive, judicial, or legislative branch
employees, contractors, grantees, or other recipients).
Importantly, waste represents a transgression that is less than fraud
and abuse and most waste does not involve a violation of law. Rather,
waste relates primarily to mismanagement, inappropriate actions, or
inadequate oversight.
Examples of Waste:
Illustrative examples of underlying causes of waste in the acquisitions
and contracting area could include:
* Unreasonable, unrealistic, inadequate, or frequently changing
requirements;
* Failure to use competitive bidding in appropriate circumstances;
* Failure to engage in selected pre-contracting activities for
contingent events (e.g., hurricanes, military conflicts);
* Congressional directions (e.g., earmarks), and agency spending
actions where the action would not otherwise be taken based on an
objective value and risk assessment and considering available
resources.
Transformation:
Webster's definition:
* An act, process, or instance of change in structure appearance, or
character;
* A conversion, revolution, makeover, alteration, or renovation.
The Objective of Transformation for DOD:
Creating the future of warfare and protecting our national security
while improving how the department, including all of its various
component parts, does business in order to support and sustain our
position as the world‘s preeminent military power within current and
expected resource limits.
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 (CMO) to drive the business
transformation process.
Transformation is a Long-Term Process:
* DOD is perhaps the largest and most complex organization in the
world;
* Many of the department‘s weaknesses are decades in the making and
solutions are not easy;
* Hundreds of dedicated and hardworking DOD employees are focusing on
these issues;
* The establishment of the Defense Business Systems Management
Committee and the Business Transformation Agency are good first steps;
* A comprehensive strategic planning process and a full-time CMO are
necessary next steps.
Effective Management of Services Requires Both Strategic and
Transactional Efforts:
A comprehensive approach would use the strategic and transactional
factors in a complementary manner to tailor management activity to
ensure preferred outcomes.
Strategic Level:
Effective service acquisition requires the leadership, processes, and
information necessary for mitigating risks, leveraging buying power,
and managing outcomes.
Transactional Level:
Individual service transactions must focus on buying the right thing,
the right way, while getting the desired outcomes.
Source: GAO (analysis).
GAO‘s Recommendation for a CMO at DOD:
GAO has recommended that DOD establish a CMO to provide strong and
sustained leadership over all major business transformation efforts.
The CMO should be:
* Experienced with a proven track record as a business process change
agent in a large, complex, and diverse organization;
* Codified in statute as a separate and full-time position;
* Designated an Executive Level II appointment that reports directly to
the Secretary of Defense;
* Subject to an extended term (e.g., 5 to 7 years) that spans
administrations;
* A single point within the department with the perspective and
responsibility, as well as authority, to develop an overall and
integrated business transformation plan and help to ensure the
effective implementation of related functional management and business
transformation efforts.
Key Leadership Attributes Needed for These Challenging and Changing
Times:
* Courage;
* Integrity;
* Creativity;
* Stewardship;
* Partnership.
[End of presentation]
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