Defense Business Transformation
Achieving Success Requires a Chief Management Officer to Provide Focus and Sustained Leadership Gao ID: GAO-07-1072 September 5, 2007In 2005, GAO added the Department of Defense's (DOD) approach to business transformation to its high-risk list because (1) DOD's improvement efforts were fragmented, (2) DOD lacked an integrated and enterprisewide business transformation plan, and (3) DOD had not designated a senior official at the right level with the right authority to be responsible for overall business transformation efforts. This report assesses (1) the progress DOD has made in setting up a management framework for overall business transformation efforts and (2) the challenges DOD faces in maintaining and ensuring the success of those efforts. GAO conducted this work under the Comptroller General's authority to conduct evaluations under his own initiative. In conducting its work, GAO compared DOD's actions to key practices of successful transformations.
Although DOD has made progress toward establishing a management framework for overall business transformation, the framework currently focuses on business systems modernization and does not fully address broader business transformation efforts. In 2005, DOD set up the Defense Business Systems Management Committee to review and approve the business enterprise architecture--a transformation blueprint--and new business systems modernization investments. It also established the Business Transformation Agency, which currently reports to the Vice Chair of the Defense Business Systems Management Committee, to coordinate and lead business transformation across the department. Despite these steps, DOD has not clearly defined or institutionalized interrelationships, roles and responsibilities, or accountability for establishing a management framework for overall business transformation. For example, differences of opinion exist within DOD about the roles of various senior leadership committees. Until DOD's business transformation management framework is institutionalized and encompasses broad responsibilities for all aspects of business transformation, it will be challenging for DOD to integrate related initiatives into a sustainable, enterprisewide approach to successfully resolve weaknesses in business operations that GAO has shown are at high risk of waste, fraud, and abuse. DOD also must overcome two critical challenges, among several others, if it is to maintain and ensure success. Specifically, DOD does not have (1) a comprehensive, integrated, and enterprisewide plan or set of linked plans, supported by a planning process that sets a strategic direction for overall business transformation efforts, prioritizes initiatives and resources, and monitors progress, and (2) a full-time leadership position at the right level dedicated solely to the planning, integration, and execution of overall business transformation efforts. A broad-based consensus exists among GAO and others, including the Institute for Defense Analyses and the Defense Business Board, that the status quo is unacceptable and that DOD needs a CMO to provide leadership over business transformation efforts. In a May 2007 letter to Congress, however, DOD stated its view that a separate position is not needed as the Deputy Secretary of Defense can fulfill the chief management officer (CMO) role. Although the Deputy Secretary may be at the right level with appropriate authority to transform business operations, the demands placed on this position make it difficult for the Deputy Secretary to focus solely on business transformation--nor does the position have the necessary term of appointment to sustain progress across administrations. Further, DOD plans to leave the assignment of the CMO role to the discretion of the Secretary of Defense. In GAO's view, codifying the CMO position in statute as a separate, full-time position at the right level with an extended term is necessary to provide sustained leadership, further DOD's progress, and address challenges the department continues to face in its business transformation efforts.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
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Report to Congressional Committees:
United States Government Accountability Office:
GAO:
September 2007:
Defense Business Transformation: Achieving Success Requires a Chief
Management Officer to Provide Focus and Sustained Leadership:
Defense Business Transformation:
GAO-07-1072:
GAO Highlights:
Highlights of GAO-07-1072, a report to congressional committees.
Why GAO Did This Study:
In 2005, GAO added the Department of Defense‘s (DOD) approach to
business transformation to its high-risk list because (1) DOD‘s
improvement efforts were fragmented, (2) DOD lacked an integrated and
enterprisewide business transformation plan, and (3) DOD had not
designated a senior official at the right level with the right
authority to be responsible for overall business transformation
efforts. This report assesses (1) the progress DOD has made in setting
up a management framework for overall business transformation efforts
and (2) the challenges DOD faces in maintaining and ensuring the
success of those efforts. GAO conducted this work under the Comptroller
General‘s authority to conduct evaluations under his own initiative. In
conducting its work, GAO compared DOD‘s actions to key practices of
successful transformations.
What GAO Found:
Although DOD has made progress toward establishing a management
framework for overall business transformation, the framework currently
focuses on business systems modernization and does not fully address
broader business transformation efforts. In 2005, DOD set up the
Defense Business Systems Management Committee to review and approve the
business enterprise architecture”a transformation blueprint”and new
business systems modernization investments. It also established the
Business Transformation Agency, which currently reports to the Vice
Chair of the Defense Business Systems Management Committee, to
coordinate and lead business transformation across the department.
Despite these steps, DOD has not clearly defined or institutionalized
interrelationships, roles and responsibilities, or accountability for
establishing a management framework for overall business
transformation. For example, differences of opinion exist within DOD
about the roles of various senior leadership committees. Until DOD‘s
business transformation management framework is institutionalized and
encompasses broad responsibilities for all aspects of business
transformation, it will be challenging for DOD to integrate related
initiatives into a sustainable, enterprisewide approach to successfully
resolve weaknesses in business operations that GAO has shown are at
high risk of waste, fraud, and abuse.
DOD also must overcome two critical challenges, among several others,
if it is to maintain and ensure success. Specifically, DOD does not
have (1) a comprehensive, integrated, and enterprisewide plan or set of
linked plans, supported by a planning process that sets a strategic
direction for overall business transformation efforts, prioritizes
initiatives and resources, and monitors progress, and (2) a full-time
leadership position at the right level dedicated solely to the
planning, integration, and execution of overall business transformation
efforts. A broad-based consensus exists among GAO and others, including
the Institute for Defense Analyses and the Defense Business Board, that
the status quo is unacceptable and that DOD needs a CMO to provide
leadership over business transformation efforts. In a May 2007 letter
to Congress, however, DOD stated its view that a separate position is
not needed as the Deputy Secretary of Defense can fulfill the CMO role.
Although the Deputy Secretary may be at the right level with
appropriate authority to transform business operations, the demands
placed on this position make it difficult for the Deputy Secretary to
focus solely on business transformation”nor does the position have the
necessary term of appointment to sustain progress across
administrations. Further, DOD plans to leave the assignment of the CMO
role to the discretion of the Secretary of Defense. In GAO‘s view,
codifying the CMO position in statute as a separate, full-time position
at the right level with an extended term is necessary to provide
sustained leadership, further DOD‘s progress, and address challenges
the department continues to face in its business transformation
efforts.
What GAO Recommends:
GAO recommends that DOD:
(1) institutionalize an expanded management framework and (2) develop a
planning process that results in an integrated and enterprisewide plan
or set of plans. Congress should consider enacting legislation to
establish a chief management officer (CMO) at DOD. DOD generally agreed
with GAO‘s recommendations, but did not agree with the matter for
Congress. GAO continues to believe that DOD needs a CMO, established in
statute, to provide focus and sustained leadership.
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-1072].
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Sharon Pickup at (202)
512-9619 or pickups@gao.gov.
[End of Section]
Contents:
Letter:
Results in Brief:
Background:
DOD Has Made Progress in Establishing a Management Framework upon Which
to Develop Overall Business Transformation, but the Framework Focuses
on Business Systems Modernization:
Two Critical Challenges Affect DOD's Success in Maintaining and
Furthering Its Progress in Overall Business Transformation:
Conclusions:
Recommendations for Executive Action:
Matter for Congressional Consideration:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: Comments from the Department of Defense:
Appendix III: GAO Contact and Staff Acknowledgments:
Related GAO Products:
Table:
Table 1: Years When Specific DOD Areas on GAO's 2007 High-Risk List
Were First Designated as High Risk:
United States Government Accountability Office:
Washington, DC 20548:
September 5, 2007:
Congressional Committees:
The Department of Defense (DOD) spends billions of dollars to maintain
key business operations intended to support the warfighter, including
systems and processes related to the management of contracts, finances,
the supply chain, support infrastructure, and weapons systems
acquisition. However, we have reported for years that weaknesses in
these business operations result in billions of dollars being wasted,
reduced efficiencies, ineffective performance, inadequate
accountability, and lack of transparency.[Footnote 1] Currently, DOD
bears responsibility, in whole or in part, for 15 of the federal
government's 27 programs or activities that we have identified as being
at high risk of waste, fraud, abuse, and mismanagement. Specifically,
in 2005, we identified DOD's approach to overall business
transformation as a high-risk area because (1) DOD's improvement
efforts and control over resources are fragmented, (2) DOD lacks an
integrated and enterprisewide business transformation plan, and (3) DOD
has not designated a senior official at the right level with the right
authority to be responsible and accountable for business
transformation. Accordingly, DOD's business area weaknesses result in
inadequate accountability to Congress and the American people, wasting
billions of dollars each year at a time when DOD is competing for
resources in an increasingly fiscally constrained environment. Our
nation is not only threatened by external security threats but also
from within by growing fiscal imbalances primarily due to our aging
population and rising health care costs. As a result, it is important
that DOD get the most from every dollar it invests.
We have long advocated the need for a chief management officer (CMO) at
DOD with significant authority and experience and a term of office that
would focus the necessary attention on enterprisewide business
transformation and sustain progress across administrations. Within DOD,
business transformation is broad, encompassing people, planning,
management, structures, technology, and processes in several key
business areas. Our previous work has shown that two key practices--a
comprehensive, integrated, and enterprisewide plan and focused and
sustained leadership--are at the center of successful organizational
transformation.[Footnote 2] These practices can serve as a basis for
federal agencies such as DOD, which seek to transform their cultures
and business operations, to become more results-oriented, customer-
focused, and collaborative in nature. The Deputy Secretary of Defense
establishes the overall strategic direction and priorities for business
transformation, according to a DOD directive. Recent initiatives
started under the Deputy Secretary's leadership hold potential to
improve DOD's business operations; however, concerns remain about DOD's
ability to sustain and ensure the success of overall business
transformation efforts and related management reform initiatives across
administrations in the absence of a CMO who is focused full time and
over the long term on defense business transformation efforts.
The Fiscal Year 2006 National Defense Authorization Act directed DOD to
commission one or two studies on the feasibility and advisability of
establishing a Deputy Secretary of Defense for Management to serve as a
CMO at DOD, and required the results of each study to be reported to
Congress.[Footnote 3] The studies were to examine the effects of
establishing a CMO, the appropriate relationship between the CMO and
other defense officials, and the appropriate term of service. The
Institute for Defense Analyses and the Defense Business Board conducted
CMO studies at the behest of DOD and concluded that a CMO in some form
was needed at the department to focus on integration and enterprisewide
business transformation. In a May 11, 2007, letter to Congress,
however, DOD recommended that the Deputy Secretary of Defense serve as
the CMO for the department and further stated that DOD would formalize
the Deputy Secretary's CMO role and transformation duties in a DOD
directive. As of July 2007, both the House and Senate Armed Services
Committees had introduced legislation that would require DOD to provide
increased leadership and direction over its business transformation
efforts. While each committee has taken a different approach, both
committees agree that the status quo at DOD is unacceptable.
We performed this review under the authority of the Comptroller General
to conduct evaluations on his own initiative to contribute to the
ongoing discussion on the need for overall business transformation and
a CMO at DOD. Specifically, our two objectives were to assess (1) the
progress DOD has made in establishing a management framework for
overall business transformation and (2) the challenges DOD faces in
maintaining and ensuring the success of those efforts.
To assess the progress DOD has made in its business transformation
efforts, we reviewed and analyzed relevant documents and plans,
interviewed key DOD senior leaders and defense experts, and reviewed
current literature about the department's business transformation
efforts. These included DOD's 2006 Quadrennial Defense Review, updates
to DOD's enterprise transition plan, DOD's annual reports on business
transformation to Congress, and meeting minutes and briefing documents
from various DOD boards and committees. To assess the challenges DOD
faces in maintaining and building upon this progress, we reviewed
documentation and interviewed DOD officials involved in DOD's business
transformation efforts. We also compared DOD progress against key
practices we have found to be at the center of successful
organizational mergers and transformations.[Footnote 4] See appendix I
of this report for a more detailed discussion of our scope and
methodology. We conducted our work from September 2006 through July
2007 in accordance with generally accepted government auditing
standards.
Results in Brief:
Although DOD has made progress toward establishing a management
framework upon which to develop overall business transformation, the
framework currently focuses on business systems modernization and does
not fully address broader business transformation efforts. As part of
its progress, the department has established new entities and developed
various tools and plans for these entities to use in managing its
business systems modernization efforts. For example, DOD established
the Defense Business Systems Management Committee to review and approve
the defense business enterprise architecture--a transformation
blueprint--and the obligation of funds for defense systems
modernization. Further, DOD established the Business Transformation
Agency to support the committee by, for example, coordinating and
leading business transformation across the department. Despite these
steps, DOD has not clearly defined or institutionalized
interrelationships, roles and responsibilities, or accountability for
establishing a management framework for overall business
transformation. For example, differences of opinion within DOD exist
regarding which of the various senior leadership committees within the
department will function as the primary body responsible for overall
business transformation. Until DOD's business transformation management
framework is institutionalized and encompasses broad responsibilities
for all aspects of business transformation, it will be challenging for
DOD to integrate related initiatives into a sustainable, enterprisewide
approach and to successfully resolve weaknesses in business operations
that we have shown are at high risk of waste, fraud, and abuse.
DOD must overcome two critical challenges if it is to maintain and
build upon the progress it has made toward achieving overall business
transformation. First, DOD does not have a comprehensive, integrated,
and departmentwide plan or set of linked plans supported by a planning
process that sets a strategic direction for overall business
transformation. This plan or set of plans should cover all key business
functions and contain results-oriented goals, measures, and
expectations that link organizational, unit, and individual performance
goals, and also clearly link to DOD's overall investment plans. Second,
DOD lacks a full-time leadership position at the right level dedicated
solely to the planning, integration, and execution of business
transformation efforts. Without this dedicated leadership, DOD's
progress on business transformation is at risk of not being able to
sustain and ensure the success of overall business transformation
efforts across administrations. A broad-based consensus exists among
GAO and others, including the Institute for Defense Analyses and the
Defense Business Board, that the status quo is unacceptable and that
DOD needs a CMO to provide leadership over business transformation
efforts, although there are different views concerning the
characteristics of a CMO, such as whether the position should be
codified in statute, established as a separate position from the Deputy
Secretary of Defense, designated as Executive Level II or Level III,
subject to a term appointment, or supported by a deputy CMO. In a May
2007 letter to Congress, however, DOD outlined its position that the
Deputy Secretary of Defense be designated as the CMO and plans to
formalize this in a DOD directive. The department's letter also stated
that codifying the CMO duties would restrict the flexibility of future
Presidents and Secretaries of Defense to build an integrated management
team. Although the Deputy Secretary may be at the right level with
appropriate authority to transform business operations, the demands
placed on this position make it difficult for the Deputy to focus
solely on business transformation--and the position does not have the
necessary term in office to sustain progress across administrations.
We recommend that DOD institutionalize in directives the roles,
responsibilities, and relationships among various business-related
entities and committees and expand its management framework to capture
overall business transformation efforts, rather than just business
systems. In official comments on a draft of this report, DOD agreed
with this recommendation and stated that the department is a strong
advocate for institutionalizing in directives the functions,
responsibilities, authorities, and relationships of its principal
officials and the management processes they oversee. We also recommend
that DOD develop a comprehensive, strategic planning process for
business transformation that results in a comprehensive, integrated,
and enterprisewide plan or set of plans. DOD partially concurred with
this recommendation, stating that the department has already begun to
expand the scope of the enterprise transition plan to become a more
robust enterprisewide planning document and to evolve this plan into
the centerpiece strategic document for transformation.
DOD did not agree with the matter for congressional consideration
regarding the creation of a separate CMO position at DOD, stating that
the Deputy Secretary of Defense is to be designated as the CMO, and
that an internal directive is being revised to that effect. Among other
things, DOD stated that the Deputy Secretary has sufficient officials
available to help manage the department and the authority necessary to
refine DOD's management structure to continue business management
reform and integrate transformation activities. Further, DOD stated
that establishing an additional official at the under secretary level
to lead business transformation would generate dysfunctional
competition among the five other Under Secretaries by creating
confusion and redundancy in their roles and responsibilities. We
recognize that the Deputy Secretary has officials and institutional
structures available to support the transformation process; however,
transformation cannot be achieved through a committee approach.
Ultimately, a person at the right level, with the right type of
experience, in a full-time position with a term appointment, and with
the proper amount of responsibility, authority, and accountability, is
needed to lead the effort. Further, contrary to DOD's view, we believe
the establishment of a separate CMO position would bring leadership,
accountability, focus and direction to the department's efforts rather
than creating competition and causing confusion. The CMO would not
assume the responsibilities of the Under Secretaries of Defense or any
other officials. Rather, the CMO would be responsible and accountable
for planning, integrating, and executing the department's overall
business transformation effort, and would be able to give full-time
attention to business transformation. We believe DOD's position
essentially represents the status quo and will, in fact, not adequately
address the long-standing management weaknesses in DOD's business
operations. In the interest of the department and American taxpayers,
DOD needs a CMO to help transform its key business operations and avoid
billions of dollars in waste each year. We, therefore, continue to
believe that Congress should consider enacting legislation to establish
a CMO to provide full-time focus and sustained leadership attention to
DOD's business transformation efforts, and have retained the matter in
our report. DOD's comments and our evaluation are discussed in detail
in a later section of this report, and the department's comments are
reprinted in appendix II.
Background:
DOD is perhaps the largest and most complex organization in the world
and spends billions of dollars each year to maintain key business
operations intended to support the warfighter, including systems and
processes related to the management of contracts, finances, the supply
chain, support infrastructure, and weapons systems acquisition. We have
reported for years that inefficiencies in these business operations
result in reduced efficiencies, ineffective performance, inadequate
accountability, and lack of transparency. Despite various reform
initiatives, DOD continues to face weaknesses in business operations
that not only adversely affect the reliability of reported financial
data, but also the economy, efficiency, and effectiveness of DOD's
operations.
To address long-standing management problems, we began our "high-risk"
program in 1990 to identify and help resolve serious weaknesses in
areas that involve substantial resources and provide critical services
to the public. Historically, high-risk areas have been designated
because of traditional vulnerabilities related to their greater
susceptibility to fraud, waste, abuse, and mismanagement. As our high-
risk program has evolved, we have increasingly used the high-risk
designation to draw attention to areas associated with broad-based
transformation needed to achieve greater economy, efficiency,
effectiveness, accountability, and sustainability of selected key
government programs and operations. For example, we first added DOD's
overall approach to business transformation to our high-risk list in
2005 because DOD had not taken the necessary steps to achieve and
sustain business reform on a broad, strategic, departmentwide, and
integrated basis. Furthermore, DOD continues to dominate the high-risk
list. Specifically, DOD currently bears responsibility, in whole or in
part, for 15 of our 27 high-risk areas. Of the 15 high-risk areas, the
8 DOD-specific high-risk areas cut across all of DOD's major business
areas. Table 1 lists the 8 DOD-specific high-risk areas. Also, as shown
in table 1, many of these management challenges have been on the high-
risk list for a decade or more. In addition, DOD shares responsibility
for 7 governmentwide high-risk areas.[Footnote 5] Collectively, these
high-risk areas relate to most of DOD's major business operations that
directly support the warfighter, including how servicemembers get paid,
the benefits provided to their families, and the availability and
condition of the equipment they use both on and off the battlefield.
Table 1: Years When Specific DOD Areas on GAO's 2007 High-Risk List
Were First Designated as High Risk:
Area: DOD approach to business transformation;
Year designated as high risk: 2005.
Area: DOD personnel security clearance program;
Year designated as high risk: 2005.
Area: DOD support infrastructure management;
Year designated as high risk: 1997.
Area: DOD business systems modernization;
Year designated as high risk: 1995.
Area: DOD financial management;
Year designated as high risk: 1995.
Area: DOD contract management;
Year designated as high risk: 1992.
Area: DOD supply chain management;
Year designated as high risk: 1990.
Area: DOD weapons systems acquisition;
Year designated as high risk: 1990.
Source: GAO.
[End of table]
Congress passed legislation that codified many of our prior
recommendations related to DOD business systems modernization; this
includes the establishment of various bodies and plans. Also as
required by Congress, DOD commissioned studies examining the
feasibility and advisability of establishing a CMO to oversee the
department's business transformation process. As part of this effort,
the Defense Business Board, an advisory panel, examined various options
and, in May 2006, endorsed the CMO concept. In December 2006, the
Institute for Defense Analyses also endorsed the need for a CMO
position at DOD. In May 2007, DOD submitted a letter to Congress
outlining its position regarding a CMO at DOD, stating that the Deputy
Secretary of Defense should assume the CMO responsibilities.
DOD Has Made Progress in Establishing a Management Framework upon Which
to Develop Overall Business Transformation, but the Framework Focuses
on Business Systems Modernization:
Although DOD has made progress in establishing a management framework
upon which to develop overall business transformation efforts, this
framework currently focuses on business systems modernization rather
than broader business transformation efforts. Congress included
provisions in the National Defense Authorization Acts for Fiscal Years
2005 and 2006[Footnote 6] to assist DOD in addressing financial
management and business systems modernization challenges--two of our
high-risk areas--and DOD's leadership has taken steps to comply with
these provisions. For example, to improve financial management, DOD
issued the initial Financial Improvement and Audit Readiness Plan in
December 2005, which was last updated in June 2007, to guide financial
improvement and financial audit efforts within the department. Also, to
address its business systems modernization challenges, DOD has
established the following:
* Defense Business Systems Management Committee: The Ronald W. Reagan
National Defense Authorization Act for Fiscal Year 2005 required DOD to
set up a committee to review and approve major updates of the defense
business enterprise architecture--or transformation blueprint--and the
obligation of funds for defense systems modernization. Prior to the
enactment of this legislation, we reported that DOD had not established
a governance structure and the process controls needed to ensure
ownership and accountability of business systems investments.[Footnote
7] Subsequently, Congress directed DOD to establish the Defense
Business Systems Management Committee to oversee DOD business
transformation. In February 2005, the Deputy Secretary of Defense
chartered the Defense Business Systems Management Committee, which
consists of senior defense military and civilian leaders. The Deputy
Secretary of Defense serves as the chair of this committee and the
Under Secretary of Defense for Acquisition, Technology, and Logistics
serves as the vice chair of the committee. The committee is intended to
establish strategic direction and plans for DOD's business mission,
oversee implementation of systemic performance in DOD's business
operations, approve business transformation plans and initiatives,
ensure that funds are obligated for defense business systems
modernization in accordance with the law, and recommend policies and
procedures to the Secretary of Defense that enable efficient business
operations throughout DOD.
* Investment review boards: The Ronald W. Reagan National Defense
Authorization Act also required DOD to set up investment review boards
to evaluate systems' consistency with the business enterprise
architecture and to provide oversight of the investment review process
for business systems. Prior to the establishment of investment review
boards, we had reported that billions of dollars were being spent on
business systems investments with little oversight.[Footnote 8] DOD
established the investment review boards in 2005 to serve as the
oversight and investment decision-making bodies for business system
investments in their respective areas of responsibility. These boards
assess modernization investments over$1 million and determine how the
investments will improve processes and support the warfighter.
* Business Transformation Agency: DOD established the Business
Transformation Agency in October 2005 with the intent for it to support
the Defense Business Systems Management Committee and coordinate
business transformation by ensuring adoption of DOD-wide information
and process standards as defined in the business enterprise
architecture. The Business Transformation Agency reports to the Under
Secretary of Defense for Acquisition, Technology, and Logistics in his
capacity as the vice chair of the Defense Business Systems Management
Committee. The Business Transformation Agency's charter includes
responsibilities such as identifying urgent warfighter needs that can
be addressed by business solutions, articulating the strategic vision
for business transformation, exercising executive oversight for DOD-
wide programs, and implementing plans and tools needed to achieve DOD
business transformation.
In addition, the department has developed various tools and plans to
enable these entities to manage its business systems modernization
efforts. The tools and plans the Defense Business Systems Management
Committee approves, the Business Transformation Agency implements, and
the investment review boards use to assess compliance include the
following:
* Business enterprise architecture: DOD's business enterprise
architecture is a tool or a blueprint to guide and constrain
investments in DOD organizations and systems as they relate to business
operations. The business enterprise architecture provides the thin
layer of corporate policies, capabilities, standards, and rules and
focuses on providing tangible outcomes for a limited set of enterprise-
level (DOD-wide) priorities, and the components are responsible under
the department's tiered accountability approach for defining their
respective component-level architectures that are aligned with the
corporate business enterprise architecture. According to DOD,
subsequent releases of the business enterprise architecture will
continue to reflect this federated approach and will define enforceable
interfaces to ensure interoperability and information flow to support
decision making at the appropriate levels.
* Enterprise transition plan: DOD guidance states that the enterprise
transition plan is intended to lay out a road map for achieving DOD's
business transformation by implementing changes to technology,
processes, and governance consistent with DOD's business enterprise
architecture. According to DOD, the enterprise transition plan is
intended to summarize all levels of transition planning information
(milestones, metrics, resource needs, and system migrations) as an
integrated product for communicating and monitoring progress--
resulting in a consistent framework for setting priorities and
evaluating plans, programs, and investments. The enterprise transition
plan contains time-phased milestones, performance metrics, and a
statement of resource needs for new and existing systems that are part
of the business enterprise architecture. Business Transformation Agency
officials said that they see the enterprise transition plan as the
highest level plan for DOD business transformation. DOD released its
first enterprise transition plan in September 2005. DOD updates the
enterprise transition plan twice a year, once in March as part of DOD's
annual report to Congress and once in September.
While our prior work has acknowledged this progress, we also have
reported on limitations. For example, while the latest version of the
business enterprise architecture focuses on DOD-wide corporate
policies, capabilities, rules, and standards, which are essential
elements to meeting legislative requirements, this version has yet to
be augmented by the DOD component organizations' subsidiary
architectures that are also essential to meeting these requirements and
the department's goal of having a federated family of architectures.
While the latest version of the enterprise transition plan provides
performance measures for the enterprise and component programs,
including key milestones (such as initial operating capability), it
does not include other important information needed to understand the
sequencing of these business investments and does not address DOD's
complete portfolio of business system investments. While the department
has established and begun implementing the investment review structures
and processes that are consistent with legislation, it has yet to fully
define the related portfolio-based information technology investment
management practices.[Footnote 9]
Furthermore, DOD's efforts have been mainly focused on business systems
modernization. During our review, we examined key documents, such as
DOD's enterprise transition plan, business transformation guidance, and
minutes from the meetings of the Defense Business Systems Management
Committee, and our analysis found that DOD has not yet expanded the
focus beyond business systems. In addition, DOD officials stated that
the Defense Business Systems Management Committee has mainly focused on
providing oversight for business systems investments, rather than
overall business transformation efforts, because this is what
legislation has required it to do. Similarly, DOD officials stated that
the enterprise transition plan also is focused on business systems and
does not provide enough detail about overall business transformation.
DOD officials added that the Business Transformation Agency is also
limited to focusing mainly on business systems because its role is to
support the Defense Business Systems Management Committee, which
primarily provides oversight for business systems initiatives as
specified in the Ronald W. Reagan National Defense Authorization Act.
Additionally, DOD has not clearly defined or institutionalized
interrelationships, roles and responsibilities, or accountability for
establishing a management framework for overall business
transformation. For example, the Deputy Secretary of Defense chairs an
advisory board called the Deputy's Advisory Working Group, which DOD
officials have stated has a role in overall business transformation.
The Deputy's Advisory Working Group started in 2006 as an ad hoc
committee, co-chaired by the Deputy Secretary of Defense and Vice
Chairman of the Joint Staff, to manage the planning process for DOD's
strategic plan, the Quadrennial Defense Review.[Footnote 10] According
to DOD officials, this working group is to provide departmentwide
strategic direction on various issues that it chooses. Many of the same
individuals who sit on the Defense Business Systems Management
Committee also serve on the Deputy's Advisory Working Group. However,
opinions differ within DOD as to whether the committee or the working
group will function as the primary body responsible for overall
business transformation, and the relationship between these two
entities has not been formalized. In addition, opinions differ between
the two entities regarding the definition of DOD's key business areas,
with the Defense Business Systems Management Committee and the Business
Transformation Agency using a broader definition of business processes
than the Deputy's Advisory Working Group and its supporting
organizations. These differences hinder DOD's ability to leverage the
business systems modernization management framework to fully address
broader business transformation efforts. Until the department
institutionalizes a management framework that encompasses all aspects
of business transformation, including establishing overall
responsibility for and defining what is included in business
transformation, DOD will be unable to integrate related initiatives
into a sustainable, enterprisewide approach and to resolve weaknesses
in business operations that we have shown are at high risk of waste,
fraud, and abuse.
Two Critical Challenges Affect DOD's Success in Maintaining and
Furthering Its Progress in Overall Business Transformation:
DOD faces two critical challenges to achieving successful business
transformation. First, DOD does not have a comprehensive, integrated,
and enterprisewide plan or set of linked plans supported by a planning
process that sets a strategic direction for overall business
transformation efforts and monitors progress. Second, DOD lacks a full-
time leadership position dedicated solely to the planning, integration,
and execution of business transformation efforts. Until the department
establishes a comprehensive, integrated planning process and
establishes full-time sustained leadership, DOD will be challenged to
integrate related initiatives into a sustainable, enterprisewide
approach and to resolve weaknesses in business operations that we have
shown are at high risk of waste, fraud, and abuse.
DOD Has Not Developed a Comprehensive, Integrated, and Enterprisewide
Plan or Set of Plans Supported by a Planning Process for Business
Transformation Efforts:
DOD continues to be challenged in its business transformation efforts
because it has not developed a comprehensive, integrated, and
enterprisewide action plan or set of linked plans for business
transformation that is supported by a comprehensive planning process.
Such a plan or set of plans would help set strategic direction for
overall business transformation efforts, prioritize initiatives and
resources, and monitor progress through the establishment of
performance goals, objectives, and rewards. Our prior work has shown
that this type of plan should cover all of DOD's key business
functions; contain results-oriented goals, measures, and expectations
that link institutional, unit, and individual performance goals and
expectations to promote accountability; and establish an effective
process and related tools for implementation and oversight.[Footnote
11] Furthermore, such an integrated business transformation plan would
be instrumental in establishing investment priorities and guiding the
department's key resource decisions.
Our analysis shows that DOD does not have an integrated plan in place
and has not fully developed a comprehensive planning process. For
example, we analyzed the enterprise transition plan and determined that
the goals and objectives in the enterprise transition plan were not
clearly linked to the goals and objectives in the Quadrennial Defense
Review, DOD's highest level strategic plan. In addition, the enterprise
transition plan is not based on a strategic planning process. For
example, it does not provide a complete assessment of DOD's progress in
overall business transformation efforts aside from business systems
modernization. Furthermore, while the enterprise transition plan
contains goals and milestones related to business systems, the plan
does not contain results-oriented goals and measures that assess
overall business transformation. Finally, we determined that DOD's
business transformation efforts are currently guided by multiple plans
that are developed and maintained by various offices within DOD.
DOD officials acknowledged our analysis that DOD does not have an
integrated plan in place. Business Transformation Agency officials see
the enterprise transition plan as the highest level plan for business
transformation but acknowledge that it does not currently provide an
assessment of the department's overall approach to business
transformation. Business Transformation Agency officials also
acknowledged that they are challenged to work across various offices to
develop an integrated planning process and results-oriented measures to
assess overall business transformation. These officials added that DOD
is starting to develop a family of linked plans to guide and monitor
business transformation. Specifically, DOD's March 2007 update to the
enterprise transition plan includes an approach that is intended to
align other business plans with the enterprise transition
plan,[Footnote 12] establish working relationships among plan owners
across DOD's major business areas, and identify interdependencies among
their products. However, according to Business Transformation Agency
officials and others within DOD, the alignment currently involves only
ensuring data consistency across DOD's major business plans and does
not yet encompass the full integration they envision. In addition, it
is not clear from discussions with these officials which committee or
office within DOD will be responsible for developing a family of linked
plans and a supporting comprehensive planning process.
The Defense Science Board,[Footnote 13] the Defense Business
Board,[Footnote 14] and the Institute for Defense Analyses[Footnote 15]
agree with our analysis. These organizations have issued reports
supporting DOD's need for an integrated planning process for business
transformation. In a February 2006 report on military
transformation,[Footnote 16] the Defense Science Board concluded that
DOD needed, but did not have, a multiyear business plan capable of
relating resources to mission purposes. In addition, the report said
that confusion existed over roles in identifying needs, proposing and
choosing solutions, executing programs, and overseeing performance. The
Defense Science Board concluded that an effective business plan would
give decision makers a clear understanding of the impact of resource
decisions. The Defense Business Board arrived at a similar conclusion.
In a May 2006 report on governance at DOD,[Footnote 17] the Defense
Business Board reported that a challenge facing DOD's business
activities was the move from a hierarchical, functional approach to an
enterprisewide, cross-functional, horizontal approach. The Defense
Business Board recommended that DOD develop a strategic plan that
contains clear goals and supporting objectives, including outcome-based
metrics. In a December 2006 report about the need for a CMO at
DOD,[Footnote 18] the Institute for Defense Analyses recommended that
DOD adopt a planning structure that would ensure that the strategic-
level directions and priorities drive day-to-day planning and
execution. The Institute for Defense Analyses said that the planning
structure should contain top-level goals, approaches, and resources and
link these goals to the required resources within the executing
activities.
DOD Has Not Established a Full-time Leadership Position at the Right
Level Dedicated Solely to Business Transformation Efforts:
DOD continues to lack sustained leadership focused solely on business
transformation. We have reported that as DOD and other agencies embark
on large-scale organizational change initiatives, similar to defense
business transformation, there is a compelling need to, among other
things, (1) elevate attention on management issues and transformational
change efforts, (2) integrate various key management and transformation
efforts into a coherent and enterprisewide approach, and (3)
institutionalize accountability for addressing transformation needs and
leading change. Without such leadership, DOD is at risk of not being
able to sustain and ensure the success of its overall business
transformation efforts, and its progress is at risk of being another in
a long line of unsuccessful management reform initiatives.[Footnote 19]
The Deputy Secretary of Defense has elevated the attention paid to
business transformation efforts, and he and other senior leaders have
clearly shown a commitment to business transformation and to addressing
deficiencies in the department's business operations. For example, the
Deputy Secretary has been actively engaged in monthly meetings of both
the Defense Business Systems Management Committee and the Deputy's
Advisory Working Group, and directed the creation of the Business
Transformation Agency to support the Defense Business Systems
Management Committee. However, these organizations do not provide the
sustained leadership needed to successfully achieve overall business
transformation. The Defense Business Systems Management Committee's
representatives consist of political appointees whose terms expire when
administrations change and the roles of the Deputy's Advisory Working
Group have not been institutionalized in DOD directives or charters.
Without this, the committee's very existence and role could change
within or between administrations.
A broad-based consensus exists among GAO and others that the status quo
is unacceptable and that DOD needs a CMO to provide leadership over
business transformation efforts, although there are different views
concerning the characteristics of a CMO, such as whether the position
should be codified in statute, established as a separate position from
the Deputy Secretary of Defense, designated as Executive Level II or
Level III, subject to a term appointment, or supported by a deputy CMO.
As required by Congress, DOD commissioned studies of the feasibility
and advisability of establishing a deputy secretary of defense for
management to oversee the department's business transformation process.
As part of this effort, the Defense Business Board, an advisory panel,
examined various options and, in May 2006, endorsed the CMO concept.
Furthermore, in December 2006, the Institute for Defense Analyses
issued a study that reported on various options for the creation of a
CMO position and recommended that a CMO is needed at DOD. In response
to the Institute for Defense Analyses report, DOD submitted a letter to
Congress in May 2007 outlining the department's position on a CMO at
DOD. However, this position does not adequately address the key
leadership challenge that we discuss in this report--that is, the lack
of a senior leader, at the right level, with appropriate authority, to
focus full time on overall business transformation. In summary, DOD is
proposing to Congress that the role of a CMO be assigned to the Deputy
Secretary of Defense. While the Deputy Secretary may be at the right
level, with the appropriate authority and responsibility to transform
business operations, we have testified that the demands placed on him
and other senior leaders make it difficult for them to maintain the
oversight, focus, and momentum needed to resolve business operational
weaknesses, including the high-risk areas. Finally, DOD does not agree
with codifying the CMO role in legislation, stating that doing so would
restrict the flexibility of future Presidents and Secretaries of
Defense to build an integrated management team. DOD would rather leave
the assignment of the CMO role to the discretion of the Secretary of
Defense, and DOD plans to formalize the Deputy Secretary's CMO and
business transformation duties in a DOD directive.
Because of the complexity and long-term nature of business
transformation, we have long advocated the establishment of a CMO
position at DOD with significant authority and experience and a term
that would provide sustained leadership and the time to integrate the
department's overall business transformation efforts. Major
transformation initiatives often take at least 5 to 7 years in large
private and public sector organizations. Codifying a separate, full-
time CMO position in statute would ensure continuity and help to create
unambiguous expectations and underscore congressional desire to follow
a professional, nonpartisan, sustainable, and institutional approach to
this position. Without formally designating responsibility and
accountability for results, reconciling competing priorities among
various organizations and prioritizing investments will be difficult
and could impede the department's progress in addressing deficiencies
in key business areas. A full-time and separate CMO position could
devote the necessary time and effort to further and sustain DOD's
progress and would be accountable for planning, integrating, and
executing the department's overall business transformation efforts.
Further, we believe that the CMO should be at Executive Level II and
report directly to the Secretary of Defense so that the position has
the stature needed to successfully address integration challenges,
address DOD's high-risk areas with a strategic and systematic approach,
and prioritize investments across the department. By subsuming the CMO
duties within the Deputy Secretary of Defense position as DOD
advocates, the CMO would be at level II, but not subject to a term or
able to focus full-time attention on business transformation. Finally,
we advocate an extended term appointment for the CMO of at least 5 to 7
years so that the position could span administrations to sustain
business transformation when key personnel changes occur.
Conclusions:
DOD's efforts at business transformation consist of various entities
whose interrelationships are not clearly articulated and numerous plans
that are not integrated across the department. Currently, there is no
single individual, office, or integrated plan within DOD to provide a
complete and focused assessment of the department's business
transformation efforts. DOD continues to face formidable challenges,
both externally with its ongoing military operations and internally
with the long-standing problems of fraud, waste, and abuse. Pervasive,
decades-old management problems related to its business operations
affect all of DOD's major business areas. While DOD has taken positive
steps to address these problems, our previous work has shown a
persistent pattern of limited scope of focus and a lack of integrated
planning and sustained leadership. In this time of growing fiscal
constraints, every dollar that DOD can save through improved economy
and efficiency of its operations is important to the well-being of our
nation and the legitimate needs of the warfighter. DOD can no longer
afford to address business transformation as it has in the past. Unless
DOD elevates and integrates its efforts, billions of dollars will
continue to be wasted every year. Furthermore, without strong and
sustained leadership, both within and across administrations, DOD will
likely continue to have difficulties in maintaining the oversight,
focus, and momentum needed to implement and sustain the needed reforms
to its business operations. In this regard, we continue to believe that
a CMO whose sole focus is to integrate and oversee the overall
transformation of the department's business operations remains key to
DOD's success.
Recommendations for Executive Action:
To ensure successful and sustained business transformation at DOD, we
recommend that the Secretary of Defense take the following two actions:
* Institutionalize in directives the roles, responsibilities, and
relationships among various business-related entities and committees,
such as the Defense Business Systems Management Committee, investment
review boards, the Business Transformation Agency, and the Deputy's
Advisory Working Group, and expand the management framework to capture
overall business transformation efforts, rather than limit efforts to
modernizing business systems.
* Develop a comprehensive strategic planning process for business
transformation that results in a comprehensive, integrated, and
enterprisewide plan or set of interconnected functional plans that
covers all key business areas and provides a clear strategic direction,
prioritizes initiatives, and monitors progress across the department.
Matter for Congressional Consideration:
Given DOD's view that the Deputy Secretary of Defense should be
assigned CMO duties, Congress should consider enacting legislation to
establish a separate, full-time position at DOD with the significant
authority and experience and a sufficient term to provide focused and
sustained leadership and momentum over business transformation efforts.
Agency Comments and Our Evaluation:
In written comments on a draft of this report, DOD generally concurred
with our recommendations that the department institutionalize a
management framework and develop a comprehensive strategic planning
process for business transformation, and disagreed with our matter for
congressional consideration that Congress enact legislation to
establish a separate, full-time CMO position. The department's comments
are reprinted in appendix II. In its overall comments, DOD expressed
concern about what it characterized as GAO's belief that the department
placed improper emphasis on business systems modernization to the
detriment of overall business transformation efforts. In particular,
DOD stated that business systems modernization is a critical step in
achieving overall business transformation, and that lessons learned and
governance structures developed for modernizing business systems
acquisition processes are being evaluated for implementation beyond the
business side. It further stated that the Deputy's Advisory Working
Group and the Defense Business Systems Modernization Committee both
focus more broadly on defense business transformation. DOD also
believed we had overstated the nature of "broad-based consensus"
between GAO, the Institute for Defense Analyses, and the Defense
Business Board about the need for a CMO in DOD, noting that the
Institute for Defense Analyses had examined four alternate methods for
institutionalizing the roles of the CMO and ultimately supported the
department's position that those duties be vested in the Deputy
Secretary of Defense.
We disagree with DOD's characterization of our report with respect to
the emphasis of the department's efforts and the nature of the broad-
based consensus on the need for a CMO. The report specifically gives
DOD credit for progress to date on setting up an overall framework for
broader business transformation, and in no way suggests that any
specific steps taken regarding modernizing business systems are
detrimental to this progress. Rather, we note that the framework, as
currently structured and implemented, focuses on business systems, is a
foundation to build upon, and needs to be expanded to more fully
address broader transformation issues. The report also recognizes the
establishment of the Deputy's Advisory Working Group and the Defense
Business Systems Modernization Committee. While DOD suggests these two
groups focus more broadly on business transformation, our work shows
that DOD has not clearly defined or institutionalized
interrelationships, roles and responsibilities, or accountability for
broader business transformation among these entities. Also, differences
of opinion exist within DOD about the roles and scope of the various
entities. Further, contrary to DOD's view, we did not overstate the
nature of the "broad-based consensus" regarding the need for a CMO. In
fact, the Defense Business Board, Institute for Defense Analyses, and
the department are on record in their support for establishing a CMO at
DOD. Specifically, the board endorsed the CMO concept in a study
completed in May 2006, the Institute for Defense Analyses identified
the need for a CMO in its study completed in December 2006, and DOD, in
a May 2007 letter, informed Congress of its view that the Deputy
Secretary of Defense should assume CMO responsibilities. The Institute
for Defense Analyses also recommended that Congress establish a new
deputy CMO position with an Executive Level III term appointment of 7
years to provide full-time support to the Deputy Secretary in
connection with business transformation issues. We believe these
actions demonstrate a broad-based consensus regarding the need for a
CMO and, therefore, that the status quo is unacceptable.
Notwithstanding these positions, we also recognize, as stated in the
report, that there are different views concerning the characteristics
of a CMO, such as whether the position should be codified in statute,
established as a separate position from the Deputy Secretary,
designated as Executive Level II or Level III, or subject to a term
appointment. As stated in this report and numerous testimonies, we
believe the CMO position should be codified in statute as a separate
and full-time position, designated as Executive Level II, and subject
to an extended term appointment.
In addition to its overall comments, DOD provided detailed comments on
our two recommendations. Specifically, DOD concurred with our first
recommendation that the department institutionalize in directives the
roles, responsibilities, and relationships among various business-
related entities and committees and expand the management framework
beyond business systems modernization to capture overall business
transformation efforts. In fact, DOD stated explicitly in its comments
that the department is a strong advocate for institutionalizing, in its
DOD Directives System, the functions, responsibilities, authorities,
and relationships of its principal officials and the management
processes they oversee. DOD added that the Deputy Secretary of Defense
has issued a directive-type memorandum on the management of the
Deputy's Advisory Working Group and that a draft DOD directive has been
prepared to define the functions of the Defense Business Systems
Management Committee and elaborate its relationships with the Defense
Business Transformation Agency and other key business-related entities
in the department. We recognize that directives and memorandums, in
some cases, do exist, and that DOD plans to finalize additional
directives, particularly for the Defense Business Systems Management
Committee. As noted in our report, during the course of our review, we
found that DOD has not clearly defined or institutionalized
interrelationships, roles and responsibilities, or accountability for
establishing a management framework for overall business
transformation, and that differences of opinion exist within the
department regarding which of the various senior leadership committees
will function as the primary body responsible for overall business
transformation. Therefore, we encourage DOD to ensure that its efforts
to institutionalize its management framework for business
transformation in directives specifically address these matters, and
once directives are finalized, to take steps to clearly communicate the
framework and reinforce its implementation throughout the department.
Further, DOD partially concurred with our second recommendation that
the Secretary of Defense develop a comprehensive strategic planning
process for business transformation that results in a comprehensive,
integrated, and enterprisewide plan or set of plans. Specifically, DOD
stated that it has already begun to expand the scope of the enterprise
transition plan to become a more robust enterprisewide planning
document and to evolve this plan into the centerpiece strategic
document for transformation. DOD added that as the enterprise
transition plan evolves, it will continue to improve in aligning
strategy with outcomes, identifying business capability gaps,
prioritizing future needs, and developing metrics to measure
achievement. DOD also stated that it will continue to evolve its family
of plans to address our recommendation. While DOD's proposed actions to
address both of our recommendations appear to be positive steps, the
key to their success will be in the details of their implementation.
Moreover, we continue to believe that these efforts alone will not be
sufficient to bring about the desired transformation. More
specifically, efforts to institutionalize and broaden the scope of a
management framework and develop a comprehensive strategic planning
process for business transformation will not be successful without a
CMO to guide and sustain these efforts.
However, DOD disagreed with our matter for congressional consideration
that Congress consider enacting legislation to establish a separate,
full-time CMO position at DOD to provide focused and sustained
leadership and momentum over business transformation efforts, stating
that no official below the Secretary of Defense, except the Deputy
Secretary, has the rank and perspective to provide the strategic
leadership and authoritative decision making necessary to ensure
implementation of departmentwide business activities. DOD stated that
the Deputy Secretary of Defense is to be designated as the CMO and that
an internal directive is being revised to that effect. DOD also stated
its belief that the continuity of business transformation is best
ensured by institutionalized processes and organizations, the knowledge
and perspective of DOD's career workforce, clear and mutually agreed to
economy and efficiency goals, and the due diligence of future
administrations and Members of Congress to nominate and confirm highly
qualified executives to serve at DOD. Further, DOD stated that the
establishment of an additional official at the under secretary level to
lead business transformation would generate dysfunctional competition
among the five other Under Secretaries by creating confusion and
redundancy in their roles and responsibilities. DOD added that the
Deputy Secretary of Defense as the CMO has sufficient officials
available to assist in managing the department and the authority
necessary to refine the department's management structure to continue
business management reform and integrate business transformation
activities with the operational work of the department.
Because of the complexity and long-term nature of business
transformation, we have consistently reported and testified that DOD
needs a CMO with significant authority and experience, a term that
would provide sustained leadership, and the time to integrate overall
business transformation efforts. In our view, DOD's plan to subsume the
CMO duties within the Deputy Secretary of Defense position and to
establish this action by directive would place the responsibilities at
the appropriate level--Executive Level II--but would result in a
position not subject to a term or able to focus full-time attention on
business transformation. Transformation is a long-term process,
especially for large and complex organizations such as DOD. Therefore,
a term of at least 5 to 7 years is recommended to provide sustained
leadership and accountability. To ensure continuity, it should become a
permanent position, with the specific duties authorized in statute. As
stated in our report, we believe codifying a separate, full-time CMO
position in statute would also help to create unambiguous expectations
and underscore congressional desire to follow a professional,
nonpartisan, sustainable, and institutional approach to this position.
We recognize that the Deputy Secretary of Defense has officials and
institutional structures available to support the transformation
process; however, transformation cannot be achieved through a committee
approach. Ultimately, a person at the right level, with the right type
of experience, in a full-time position with a term appointment, and
with the proper amount of responsibility, authority, and accountability
is needed to lead the effort. Contrary to DOD's view, we believe the
establishment of a separate CMO position would bring leadership,
accountability, focus, and direction to the department's efforts rather
than creating dysfunctional competition and causing confusion. The CMO
would not assume the responsibilities of the Under Secretaries of
Defense or any other officials. Rather, the CMO would be responsible
and accountable for planning, integrating, and executing the
department's overall business transformation effort, and would be able
to give full-time attention to business transformation. As such, the
CMO would be a key ally to other officials in the department in dealing
with the business transformation process. Without formally designating
responsibility and accountability for results, reconciling competing
priorities among various organizations and prioritizing investments
will be difficult and could impede progress in addressing deficiencies
in key business areas. We believe DOD's position essentially represents
the status quo, and that in the interest of the department and American
taxpayers, the department needs a CMO to help transform its key
business operations and avoid billions of dollars in waste each year.
We are encouraged that this matter is now before Congress as it
prepares to deliberate on pending legislation that calls for
statutorily establishing a CMO for DOD. In particular, we believe any
resulting legislation should include some important characteristics for
the CMO position. Specifically, a CMO at DOD should be codified in
statute as a separate and full-time position that is designated as an
Executive Level II appointment and reports directly to the Secretary of
Defense so that the individual in this position has the stature needed
to successfully address integration challenges, adjudicate disputes,
and monitor progress on overall business transformation across defense
organizations. In addition, the position should be subject to an
extended term appointment such that the CMO would span administrations
to sustain transformation efforts when key personnel changes occur.
Transformation is a long-term process, especially for large and complex
organizations such as DOD. Therefore, a term of at least 5 to 7 years
is recommended to provide sustained leadership and accountability. In
addition, we would recommend a requirement for advance notification
should the Secretary decide to remove an individual from the CMO
position.
We are sending copies of this report to interested congressional
committees and the Secretary of Defense. We will also make copies
available to others upon request. This report is also available at no
charge on GAO's Web site at [hyperlink: http://www.gao.gov].
If you or your staff have any questions regarding this report, please
contact me at (202) 512-9619 or pickups@gao.gov. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this report. Other staff members who made key
contributions to this report are listed in appendix III.
Signed by:
Sharon L. Pickup:
Director, Defense Capabilities and Management:
[End of section]
List of Committees:
The Honorable Daniel K. Inouye:
Chairman:
The Honorable Ted Stevens:
Ranking Member:
Subcommittee on Defense:
Committee on Appropriations:
United States Senate:
The Honorable Carl Levin:
Chairman:
The Honorable John S. McCain:
Ranking Member:
Committee on Armed Services:
United States Senate:
The Honorable Joseph I. Lieberman:
Chairman:
The Honorable Susan M. Collins:
Ranking Member:
Committee on Homeland Security and Governmental Affairs:
United States Senate:
The Honorable Daniel K. Akaka:
Chairman:
The Honorable George V. Voinovich:
Ranking Member:
Subcommittee on Government Management, the Federal Workforce, and the
District of Columbia:
Committee on Homeland Security and Governmental Affairs:
United States Senate:
The Honorable John P. Murtha:
Chairman:
The Honorable C.W. Bill Young:
Ranking Member:
Subcommittee on Defense:
Committee on Appropriations:
House of Representatives:
The Honorable Ike Skelton:
Chairman:
The Honorable Duncan L. Hunter:
Ranking Member:
Committee on Armed Services:
House of Representatives:
[End of section]
Appendix I: Scope and Methodology:
To assess the progress the Department of Defense (DOD) has made in
setting up a management framework for business transformation, we
reviewed and analyzed relevant documents and current literature about
the department's business transformation and interviewed key DOD senior
leaders and defense experts. Documents that we used for our review
included, but were not limited to, (1) GAO reports related to DOD's
high-risk areas, including business systems modernization, development
of the business enterprise architecture, and organizational
transformation; (2) DOD products, including the 2006 Quadrennial
Defense Review and updates to DOD's enterprise transition plan; (3)
DOD's annual reports on business transformation to Congress (and
biannual updates); (4) DOD testimony to Congress on the status of
business transformation; and (5) meeting minutes and briefing
documents, such as those from the Defense Business Systems Management
Committee, the Deputy's Advisory Working Group, and the Defense
Business Board, related to DOD's business transformation, governance,
and management reforms. We obtained testimonial evidence from officials
representing the Business Transformation Agency, offices within the
Office of the Secretary of Defense (including the Program Analysis and
Evaluation Directorate; Office of the Director, Administration and
Management; and the Office of Business Transformation), the Joint
Staff, the military departments, and defense experts.
To assess the challenges DOD faces in maintaining and ensuring success
in its overall business transformation efforts, we compared DOD's
efforts to key practices we found to be consistently at the center of
successful organizational mergers and transformations, specifically,
establishing a coherent mission and integrated strategic goals to guide
the transformation and ensuring that top leadership drives the
transformation.[Footnote 20] We also reviewed relevant plans and
related documents to assess integration among DOD's various business-
related plans. These plans included DOD's Quadrennial Defense Review,
Performance and Accountability Report, Financial Improvement and Audit
Readiness Plan, Defense Acquisition Transformation Report to Congress,
Supply Chain Management Improvement Plan, Focused Logistics Joint
Functional Concept and the Focused Logistics Campaign Plan, Human
Capital Strategy, and the Defense Installations Strategic Plan. In
addition, we reviewed proposals for a chief management officer (CMO) at
the department and obtained testimonial evidence from key DOD officials
and defense experts. As part of this effort, we considered comments
raised by several public and private sector officials during a forum
sponsored by the Comptroller General in April 2007. The purpose of this
forum was to discuss the merits of a CMO or chief operating officer
concept. We also analyzed congressionally mandated CMO reports prepared
by the Defense Business Board and the Institute for Defense Analyses
and reviewed DOD's response to the study prepared by the Institute for
Defense Analyses.
We conducted our work from September 2006 through July 2007 in
accordance with generally accepted government auditing standards.
[End of section]
Appendix II: Comments from the Department of Defense:
Office Of The Under Secretary Of Defense:
Acquisition, Technology And Logistics:
3000 Defense Pentagon:
Washington, DC 20301-3000:
Aug 17 2007:
Ms. Sharon L. Pickup:
Director, Defense Capabilities and Management:
U.S. Government Accountability Office:
441 G Street, N.W.:
Washington, DC 20548:
Dear Ms. Pickup,:
This is the Department of Defense (DoD) response to the GAO draft
report GAO-07-1072, "Defense Business Transformation: Achieving Success
Requires a Chief Management Officer to Provide Focus and Sustained
Leadership," dated July 13, 2007, (GAO Code 350902).
The Department appreciates GAO's interest in the progress of Defense
Business Transformation and values our partnership as we strive to
achieve our mutual goal of agile, effective, and efficient defense
business operations.
Attached are the Department's responses to GAO's recommendations in the
draft report and comments on the Matter for Congressional
Consideration. The Department concurs with the first recommendation and
partially concurs with the second. However, we are concerned about
GAO's belief that we place an improper emphasis on business systems
modernization to the detriment of our overall business transformation
efforts, and that GAO overstated the nature of the "broad-based
consensus" between GAO, the Institute for Defense Analysis (IDA), and
the Defense Business Board about the need for a Chief Management
Officer in the DoD. The IDA report, for example, which praised the
Department's efforts to improve its business management, examined four
alternate methods of institutionalizing the roles of the CMO and
ultimately supported the Department's position that those duties be
vested in the Deputy Secretary of Defense.
Business systems modernization is a critical step in achieving overall
Defense business transformation. The lessons learned and new governance
structures developed through the modernization of the Department's
business systems acquisition process are already being evaluated for
implementation beyond the business side of the Department.
Additionally, the Deputy Secretary's Advisory Working Group and the
Defense Business Systems Modernization Committee both focus more
broadly on Defense business transformation than just business systems
modernization. The Deputy Secretary's Advisory Working Group oversees
management, integration, and performance across the Department. The
DBSMC is integral in driving the Department's focus on process
transformation and Continuous Process Improvement. It oversees the
development and implementation of the Business Capability Lifecycle and
Enterprise Risk Assessment Methodology to enable rapid delivery of
business capabilities. It also guides the evolution of the Enterprise
Transition Plan as it becomes a more robust and wide-reaching planning
document.
Finally, aligning the strategy, controls, people, processes, and
technology to truly effect enterprise-wide change in an organization as
large and complex as the Department of Defense is an enormous
undertaking. However, we believe that our persistent focus on overall
business transformation will enable continued progress. Again, the
Department appreciates GAO's interest in the progress of Defense
Business Transformation and values our partnership as we strive to
achieve our mutual goal of agile, effective, and efficient defense
business operations.
Signed by:
Paul A. Brinkley:
Deputy Under Secretary of Defense:
(Business Transformation):
Attachments:
As stated:
[End of section]
GAO Draft Report - Dated July 13, 2007:
GAO CODE 350902/GAO-07-1072:
"Defense Business Transformation: Achieving Success Requires a Chief
Management Officer to Provide Focus and Sustained Leadership":
Department Of Defense Comments To The Recommendations:
Recommendation 1: The GAO recommends that the Secretary of Defense
institutionalize in directives the roles, responsibilities, and
relationships among various business-related entities and committees,
such as the Defense Business Systems Management Committee, investment
review boards, the Business Transformation Agency, and the Deputy
Advisor's Working Group, and expand the management framework to capture
overall business transformation efforts, rather than limit efforts to
modernizing business systems.
DOD Response: Concur. The Department is a strong advocate for
institutionalizing in its DoD Directives System the functions,
responsibilities, authorities and relationships of its principal
officials and the management processes they oversee. The DoD Directives
System consists of directive-type memoranda, directives, instructions,
and other publications. These documents are essential internal controls
and as such are key elements of the Department's overall management
framework. The Deputy Secretary has issued a directive-type memorandum
on the management of the Deputy Secretary's Advisory Working Group and
a DoD directive is drafted to definitize the functions of the DBSMC and
elaborate its relationships with the Defense Business Transformation
Agency and other key business-related entities in the Department.
Additionally, both the DBSMC and the Investment Review Boards, which it
oversees, have had detailed charters from their inception. Also, the
DoD directive through which the Secretary of Defense assigns
responsibilities to the Deputy Secretary is being revised to provide
for the assignment of broad Chief Management Officer duties to the
Deputy Secretary.
Recommendation 2: The GAO recommends that the Secretary of Defense
develop a comprehensive strategic planning process for business
transformation that results in a comprehensive, integrated, and
enterprise-wide plan or set of interconnected functional plans that
covers all key business areas and provides a clear strategic direction,
prioritizes initiatives, and monitors progress across the Department.
DOD Response: Partially concur. The Department of Defense Enterprise
Transition Plan (ETP), initially developed in 2005, is one of a series
of foundation documents, including the Business Transformation
Guidance, which outlines the strategic planning process for the
Department's business transformation at all levels. The ETP currently
serves as the Business Mission Area Strategic Plan and as the central
document within the family of plans for DoD business transformation
efforts. The ETP is reviewed and approved by the Defense Business
Systems Management Committee (DBSMC) annually in September and updated
annually in March. The ETP describes a systematic approach for the
transformation of business operations within DoD and is driven by a
clear set of priorities and a targeted set of business capabilities
enabled by key programs.
The Department has already begun to expand the scope of the ETP to
become a more robust enterprise-wide planning document, including
Continuous Process Improvement initiatives. Currently, the ETP aligns
with the Quadrennial Defense Review and other planning papers. Near
term publications of the ETP will ensure alignment with the
Department's other high level strategy documents such as the
President's Management Agenda, the National Defense Strategy, and the
Strategic Planning Guidance to ensure accordance with the Department's
overall strategic vision. As the ETP evolves, it will continue to
improve in:
* Aligning strategy with outcomes through the implementation of
initiatives;
* Identifying business capability gaps;
* Prioritizing future needs;
* Developing metrics to measure achievement.
This process provides DoD with a repeatable process, alignment to
Department mission and vision, and delivery of capabilities rather than
systems. Maintaining focus on transformation allows DoD to support a
more capable military force, more financially accountable
organizations, and a more efficient use of taxpayer dollar.
DoD will continue to evolve its family of plans to address GAO's
recommendation. The ETP will continue to provide a unifying framework
and guidance at the enterprise, component, and program levels across
DoD as the centerpiece strategic document for transformation. The
Financial Improvement and Audit Readiness plan, Supply Chain Management
Improvement Plan, and others, both current and future, will augment the
ETP and provide further details specific to their respective business
areas.
Matter For Congressional Consideration
Given DoD's view that the Deputy Secretary of Defense be assigned Chief
Management Officer (CMO) duties, Congress should consider enacting
legislation to establish a separate, full-time position at DoD with the
significant authority, experience, and a sufficient term to provide
focused and sustained leadership and momentum over business
transformation efforts.
DOD Response: As the Deputy Secretary stated in his May 11, 2007 letter
to the Committees on Armed Services of the Senate and the House, no
official below the Secretary, except the Deputy Secretary, has the rank
and perspective to provide the strategic leadership and authoritative
decision making necessary to ensure implementation and integration of
Department-wide business activities. This position was also emphasized
by the Institute for Defense Analyses in its December 2006 report on a
Defense Chief Management Officer.
The Department believes that the continuity of business transformation
is best assured by four factors:
* Institutionalized processes and organizations that enable the diverse
elements of the enterprise to communicate, resolve differences, and
implement interdependent tasks;
* The knowledge and perspective of the Department's career workforce;
* Clear, mutually agreed to effectiveness and economy goals;
* The due diligence of future Administrations and members of Congress
to nominate and confirm highly qualified executives to serve in the
Department of Defense.
The Department does not believe that creating a tenured official is an
effective means to ensure progress in business transformation. For
example, the establishment of an additional official at the Under
Secretary level to lead business transformation would generate
dysfunctional competition among the five other Under Secretaries by
creating confusion and redundancy in their discretionarily-assigned and
statutorily-prescribed roles and responsibilities. Additionally, it
would accrue unnecessary administrative overhead into the headquarters
of the Department of Defense.
The Department's view is that the Deputy Secretary of Defense as the
Chief Management Officer has sufficient officials available to him to
assist in managing the Department and has the authority necessary to
further refine the Department's management structure to continue
business management reform and integrate business transformation
activities with the operational work of the Department in defending the
Nation and supporting its fighting forces.
[End of section]
Appendix III: GAO Contact and Staff Acknowledgments:
GAO Contact:
Sharon Pickup, (202) 512-9619 or pickups@gao.gov:
Acknowledgments:
In addition to the contact named above, David Moser, Assistant
Director; Thomas Beall; Renee Brown; Donna Byers; Grace Coleman; Gina
Flacco; Barbara Lancaster; Julia Matta; and Suzanne Perkins made key
contributions to this report.
[End of section]
Related GAO Products:
DOD Business Systems Modernization: Progress Continues to Be Made in
Establishing Corporate Management Controls, but Further Steps Are
Needed. GAO-07-733. Washington, D.C.: May 14, 2007.
Business Systems Modernization: DOD Needs to Fully Define Policies and
Procedures for Institutionally Managing Investments. GAO-07-538.
Washington, D.C.: May 11, 2007.
DOD Transformation Challenges and Opportunities. GAO-07-500CG.
Washington, D.C.: February 12, 2007.
Business Systems Modernization: Strategy for Evolving DOD's Business
Enterprise Architecture Offers a Conceptual Approach, but Execution
Details Are Needed. GAO-07-451. Washington, D.C.: April 16, 2007.
High-Risk Series: An Update. GAO-07-310. Washington, D.C.: January
2007.
Defense Business Transformation: A Comprehensive Plan, Integrated
Efforts, and Sustained Leadership Are Needed to Assure Success. GAO-07-
229T. Washington, D.C.: November 16, 2006.
Department of Defense: Sustained Leadership Is Critical to Effective
Financial and Business Management Transformation. GAO-06-1006T.
Washington, D.C.: August 3, 2006.
Business Systems Modernization: DOD Continues to Improve Institutional
Approach, but Further Steps Needed. GAO-06-658. Washington, D.C.: May
15, 2006.
GAO'S High-Risk Program. GAO-06-497T. Washington, D.C.: March 15, 2006.
Defense Management: Additional Actions Needed to Enhance DOD's Risk-
Based Approach for Making Resource Decisions. GAO-06-13. Washington,
D.C.: November 15, 2005.
Defense Management: Foundational Steps Being Taken to Manage DOD
Business Systems Modernization, but Much Remains to be Accomplished to
Effect True Business Transformation. GAO-06-234T. Washington, D.C.:
November 9, 2005.
21ST Century Challenges: Transforming Government to Meet Current and
Emerging Challenges. GAO-05-830T. Washington, D.C.: July 13, 2005.
DOD Business Transformation: Sustained Leadership Needed to Address
Long-standing Financial and Business Management Problems. GAO-05-723T.
Washington, D.C.: June 8, 2005.
Defense Management: Key Elements Needed to Successfully Transform DOD
Business Operations. GAO-05-629T. Washington, D.C.: April 28, 2005.
Footnotes:
[1] See for example, GAO, High-Risk Series: An Update, GAO-07-310
(Washington, D.C.: January 2007); Defense Business Transformation: A
Comprehensive Plan, Integrated Efforts, and Sustained Leadership Are
Needed to Assure Success, GAO-07-229T (Washington, D.C.: Nov. 16,
2006); Department of Defense: Sustained Leadership Is Critical to
Effective Financial and Business Management Transformation, GAO-06-
1006T (Washington, D.C.: Aug. 3, 2006); DOD's High-Risk Areas:
Successful Business Transformation Requires Sound Strategic Planning
and Sustained Leadership, GAO-05-520T (Washington, D.C.: Apr. 13,
2005); and DOD Financial Management: Integrated Approach,
Accountability, Transparency, and Incentives Are Keys to Effective
Reform, GAO-02-497T (Washington, D.C.: Mar. 6, 2002).
[2] See for example, GAO-07-310, GAO-07-229T, GAO-06-1006T, and GAO-05-
520T.
[3] National Defense Authorization Act for Fiscal Year 2006, Pub. L.
No. 109-163, § 907 (2006).
[4] GAO, Results-Oriented Cultures: Implementation Steps to Assist
Mergers and Organizational Transformations, GAO-03-669 (Washington,
D.C.: July 2, 2003).
[5] The seven governmentwide high-risk areas that DOD shares
responsibility for are (1) strategic human capital management, (2)
managing federal real property, (3) protecting the federal government's
information systems and the nation's critical infrastructures, (4)
ensuring the effective protection of technologies critical to U.S.
national security interests, (5) management of interagency contracting,
(6) establishing appropriate and effective information-sharing
mechanisms to improve homeland security, and (7) modernizing federal
disability programs.
[6] Ronald W. Reagan National Defense Authorization Act for Fiscal Year
2005, Pub. L. No. 108-375, § 332 (2004) (codified in part at 10 U.S.C.
§§ 186 and 2222), and National Defense Authorization Act for Fiscal
Year 2006, Pub. L. No. 109-163, § 376 (2006).
[7] GAO, DOD Business Systems Modernization: Improvements to Enterprise
Architecture Development and Implementation Efforts Needed, GAO-03-458
(Washington, D.C.: Feb. 28, 2003).
[8] GAO-03-458.
[9] See for example, GAO, DOD Business Transformation: Lack of an
Integrated Strategy Puts the Army's Asset Visibility System Investments
at Risk, GAO-07-860 (Washington, D.C.: July 27, 2007); DOD Business
Systems Modernization: Progress Continues to Be Made in Establishing
Corporate Management Controls, but Further Steps Are Needed, GAO-07-733
(Washington, D.C.: May 14, 2007); Business Systems Modernization:
Strategy for Evolving DOD's Business Enterprise Architecture Offers a
Conceptual Approach, but Execution Details Are Needed, GAO-07-451
(Washington, D.C.: Apr. 16, 2007); and GAO-07-310.
[10] Congress mandated that DOD conduct a review every 4 years to
examine the national defense strategy, force structure, force
modernization, infrastructure, budget plan, and other elements of the
defense program and policies of the United States with a view toward
determining and expressing the defense strategy of the United States.
[11] See for example, GAO-07-310, GAO-07-229T, GAO-06-1006T, GAO-05-
520T, and GAO-02-497T.
[12] The plans that DOD is looking to align with the enterprise
transition plan are the (1) Quadrennial Defense Review, DOD's strategic
plan; (2) Performance and Accountability Report that provides an
overview of DOD's financial condition and includes an assessment of
annual program performance; (3) Financial Improvement and Audit
Readiness Plan that addresses DOD's financial management high-risk
area; (4) Defense Acquisition Transformation Report to Congress that
summarizes how implementation plans are used to reform DOD's
acquisition system; (5) Supply Chain Management Improvement Plan that
addresses DOD's supply chain high-risk area; (6) Focused Logistics
Joint Functional Concept and the Focused Logistics Campaign Plan that
address DOD's logistics strategy; (7) Human Capital Strategy that
addresses changes to DOD's personnel system; and (8) Defense
Installations Strategic Plan that addresses the evolution of the
strategic planning process for DOD real property and installations'
lifecycle assets.
[13] The Defense Science Board, composed of members designated from
civilian life by the Under Secretary of Defense for Acquisition,
Technology, and Logistics, advises the Secretary of Defense; the Deputy
Secretary of Defense; the Under Secretary of Defense for Acquisition,
Technology, and Logistics; and the Chairman of the Joint Chiefs of
Staff on scientific, technical, manufacturing, acquisition process, and
other matters of special interest to DOD.
[14] The Defense Business Board provides the Secretary of Defense,
through the Deputy Secretary of Defense, independent advice and
recommendations on effective strategies for the implementation of best
business practices of interest to DOD.
[15] The Institute for Defense Analyses is a nonprofit corporation that
administers three federally funded research and development centers to
provide objective analyses of national security issues, particularly
those requiring scientific and technical expertise, and conduct related
research on other national challenges.
[16] Defense Science Board, Defense Science Board Summer Study On
Transformation: A Progress Assessment Volume I (Washington, D.C.:
February 2006).
[17] Defense Business Board, Governance-Alignment and Configuration of
Business Activities Task Group Report (Washington, D.C.: May 31, 2006).
[18] Institute for Defense Analyses, Does DOD Need a Chief Management
Officer? (Alexandria, Va.: December 2006).
[19] For a discussion of DOD's prior management initiatives, see GAO,
Defense Management: Additional Actions Needed to Enhance DOD's Risk-
Based Approach for Making Resource Decisions, GAO-06-13 (Washington,
D.C.: Nov. 15, 2005), and Highlights of a GAO Roundtable: The Chief
Operating Officer Concept: A Potential Strategy to Address Federal
Governance Challenges, GAO-03-192SP (Washington, D.C.: Oct. 4, 2002).
[20] GAO, Results-Oriented Cultures: Implementation Steps to Assist
Mergers and Organizational Transformations, GAO-03-669 (Washington,
D.C.: July 2, 2003).
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