Transforming DOD Business Operations
Gao ID: GAO-09-160CG October 27, 2008This is an Acting Comptroller General presentation given to the Defense Finance 2008 on October 27, 2008. Major topics of this presentation include: GAO's role in financial rescue, GAO simulations on the federal fiscal path, composition of federal spending, GAO's objectives on the presidential transition, opportunities to improve DOD business operations, and DOD contract management challenges.
GAO-09-160CG, Transforming DOD Business Operations
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160CG entitled 'Transforming DOD Business Operations' which was
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Transforming DOD Business Operations:
Gene L. Dodaro:
Defense Finance 2008:
October 27, 2008:
GAO-09-160CG:
Outline:
* GAO Efforts to Assist Upcoming Transition;
* Fiscal Challenges Facing DOD;
* Opportunities to Improve DOD‘s Business Operations.
No Ordinary Transition: Dynamics Shaping our Environment:
* A nation at war and facing first homeland security change;
* Near-term and long-term economic challenges:
- Financial Turmoil;
- Economic Slowdown;
- Long-term fiscal imbalance as backdrop;
* Personnel and Performance Challenges.
Near Term: GAO Role in Financial Rescue:
* Oversight role critically important in Economic Stabilization Act;
* Congress turned to GAO;
* Auditors of FDIC, FHFA and government wide statements;
* Advice and analysis in reassessing regulatory structure.
Long Term: GAO Simulations on Federal Fiscal Path:
* Short term issues require responses;
* Long term unsustainable path will ultimately need attention;
* Need to reexamine base, reform entitlements and review revenue
structures.
Composition of Federal Spending:
[See PDF for image]
There are three pie charts, containing the following compositions of
spending by category:
Year: 1967;
Defense: 45%;
Social Security: 14%;
Medicare and Medicaid: 2%;
Net Interest: 7%;
All Other: 32%.
Year: 1987;
Defense: 28%;
Social Security: 21%;
Medicare and Medicaid: 10%;
Net Interest: 14%;
All Other: 27%.
Year: 2007;
Defense: 20%;
Social Security: 21%;
Medicare and Medicaid: 21%;
Net Interest: 9%;
All Other: 29%.
Source: GAO analysis of data from the Office of Management and Budget.
[End of figure]
Social Security, Medicare, and Medicaid Spending as a Percent of GDP:
[See PDF for image]
This is a line graph with three stacked lines (Social Security,
Medicaid, and Medicare). The vertical axis represents Percent of GDP
and the horizontal axis represents fiscal years 2008 through 2080.
The following data is depicted:
2008:
Social Security: 4.32;
Medicaid: 1.5;
Medicare: 3.236;
Total: 9.056.
2009:
Social Security: 4.35;
Medicaid: 1.525;
Medicare: 3.277;
Total: 9.152.
2010:
Social Security: 4.39;
Medicaid: 1.6;
Medicare: 3.323;
Total: 9.313.
2011:
Social Security: 4.44;
Medicaid: 1.6;
Medicare: 3.367;
Total: 9.407.
2012:
Social Security: 4.52;
Medicaid: 1.625;
Medicare: 3.446;
Total: 9.591.
2013:
Social Security: 4.61;
Medicaid: 1.7;
Medicare: 3.568;
Total: 9.878.
2014:
Social Security: 4.7;
Medicaid: 1.725;
Medicare: 3.618;
Total: 10.043.
2015:
Social Security: 4.8;
Medicaid: 1.825;
Medicare: 3.713;
Total: 10.338.
2016:
Social Security: 4.9;
Medicaid: 1.9;
Medicare: 3.819;
Total: 10.619.
2017:
Social Security: 5.01;
Medicaid: 1.925;
Medicare: 3.967;
Total: 10.902.
2018:
Social Security: 5.1;
Medicaid: 1.962;
Medicare: 4.122;
Total: 11.184.
2019:
Social Security: 5.2;
Medicaid: 2.002;
Medicare: 4.281;
Total: 11.483.
2020:
Social Security: 5.3;
Medicaid: 2.044;
Medicare: 4.445;
Total: 11.789.
2021:
Social Security: 5.39;
Medicaid: 2.087;
Medicare: 4.616;
Total: 12.093.
2022:
Social Security: 5.48;
Medicaid: 2.133;
Medicare: 4.797;
Total: 12.41.
2023:
Social Security: 5.56;
Medicaid: 2.181;
Medicare: 4.982;
Total: 12.723.
2024:
Social Security: 5.64;
Medicaid: 2.231;
Medicare: 5.166;
Total: 12.976.
2025:
Social Security: 5.71;
Medicaid: 2.284;
Medicare: 5.351;
Total: 13.345.
2026:
Social Security: 5.78;
Medicaid: 2.338;
Medicare: 5.537;
Total: 13,655.
2027:
Social Security: 5.84;
Medicaid: 2.395;
Medicare: 5.725;
Total: 13.96.
2028:
Social Security: 5.9;
Medicaid: 2.45;
Medicare: 5.910;
Total: 14.26.
2029:
Social Security: 5.95;
Medicaid: 2.506;
Medicare: 6.088;
Total: 14.544.
2030:
Social Security: 6;
Medicaid: 2.564;
Medicare: 6.258
Total: 14.882.
2031:
Social Security: 6.03;
Medicaid: 2.622;
Medicare: 6.417;
Total: 15.069.
2032:
Social Security: 6.06;
Medicaid: 2.681;
Medicare: 6.568;
Total: 15.309.
2033:
Social Security: 6.08;
Medicaid: 2.741;
Medicare: 6.716;
Total: 15.537.
2034:
Social Security: 6.09;
Medicaid: 2.802;
Medicare: 6.681;
Total: 15.573.
2035:
Social Security: 6.09;
Medicaid: 2.86;
Medicare: 7.003;
Total: 15.953.
2036:
Social Security: 6.09;
Medicaid: 2.92;
Medicare: 7.142;
Total: 16.152.
2037:
Social Security: 6.08;
Medicaid: 2.978;
Medicare: 7.268;
Total: 16.326.
2038:
Social Security: 6.06
Medicaid: 3.038;
Medicare: 7.380;
Total: 16.478.
2039:
Social Security: 6.04
Medicaid: 3.095;
Medicare: 7.484;
Total: 16.619.
2040:
Social Security: 6.02;
Medicaid: 3.151;
Medicare: 7.583;
Total: 16.754.
2041:
Social Security: 5.99;
Medicaid: 3.205;
Medicare: 7.676;
Total: 16.871.
2042:
Social Security: 5.97;
Medicaid: 3.26;
Medicare: 7.764;
Total: 16.994.
2043:
Social Security: 5.94;
Medicaid: 3.311;
Medicare: 7.848;
Total: 17.099.
2044:
Social Security: 5.92;
Medicaid: 3.365;
Medicare: 7.930;
Total: 17.215.
2045:
Social Security: 5.89;
Medicaid: 3.417;
Medicare: 8.013;
Total: 17.32.
2046:
Social Security: 5.87;
Medicaid: 3.471;
Medicare: 8.095;
Total: 17.436.
2047:
Social Security: 5.85;
Medicaid: 3.521;
Medicare: 8.174;
Total: 17.545.
2048:
Social Security: 5.84;
Medicaid: 3.572;
Medicare: 8.249;
Total: 17.661.
2049:
Social Security: 5.82;
Medicaid: 3.62;
Medicare: 8.323;
Total: 17.763.
2050:
Social Security: 5.81;
Medicaid: 3.666;
Medicare: 8.397;
Total: 17.873.
2051:
Social Security: 5.8;
Medicaid: 3.71;
Medicare: 8.472;
Total: 17.982.
2052:
Social Security: 5.79;
Medicaid: 3.753;
Medicare: 8.546;
Total: 18.089.
2053:
Social Security: 5.78;
Medicaid: 3.798;
Medicare: 8.619;
Total: 18.197.
2054:
Social Security: 5.78;
Medicaid: 3.841;
Medicare: 8.697;
Total: 18.318.
2055:
Social Security: 5.77;
Medicaid: 3.885;
Medicare: 8.781;
Total: 18.436.
2056:
Social Security: 5.77;
Medicaid: 3.93;
Medicare: 8.869;
Total: 18.569.
2057:
Social Security: 5.77;
Medicaid: 3.974;
Medicare: 8.956;
Total: 18.7.
2058:
Social Security: 5.77;
Medicaid: 4.02;
Medicare: 9.042;
Total: 18.832.
2059:
Social Security: 5.77;
Medicaid: 4.061;
Medicare: 9.126;
Total: 18.957.
2060:
Social Security: 5.77;
Medicaid: 4.106;
Medicare: 9.209;
Total: 19.085.
2061:
Social Security: 5.77;
Medicaid: 4.151;
Medicare: 9.292;
Total: 19.213.
2062:
Social Security: 5.77;
Medicaid: 4.193;
Medicare: 9.374;
Total: 19.337.
2063:
Social Security: 5.76;
Medicaid: 4.237;
Medicare: 9.456;
Total: 19.453.
2064:
Social Security: 5.76;
Medicaid: 4.282;
Medicare: 9.539;
Total: 19.581.
2065:
Social Security: 5.76;
Medicaid: 4.329;
Medicare: 9.625;
Total: 19.714.
2066:
Social Security: 5.76;
Medicaid: 4.376;
Medicare: 9.709;
Total: 19.845.
2067:
Social Security: 5.77;
Medicaid: 4.442;
Medicare: 9.789;
Total: 20.001.
2068:
Social Security: 5.77;
Medicaid: 4.469;
Medicare: 9.867;
Total: 20.106.
2069:
Social Security: 5.77;
Medicaid: 4.516;
Medicare: 9.946;
Total: 20.232.
2070:
Social Security: 5.77;
Medicaid: 4.562;
Medicare: 10.025;
Total: 20.582.
2071:
Social Security: 5.78;
Medicaid: 4.605;
Medicare: 10.100;
Total: 20.485.
2072:
Social Security: 5.78;
Medicaid: 4.651;
Medicare: 10.170;
Total: 20.601.
2073:
Social Security: 5.78;
Medicaid: 4.693;
Medicare: 10.240;
Total: 20.713.
2074:
Social Security: 5.79;
Medicaid: 4.738;
Medicare: 10.309;
Total: 20.837.
2075:
Social Security: 5.79;
Medicaid: 4.784;
Medicare: 10.377;
Total: 20.951.
2076:
Social Security: 5.79;
Medicaid: 4.827;
Medicare: 10.442;
Total: 21.059.
2077:
Social Security: 5.8;
Medicaid: 4.87;
Medicare: 10.505;
Total: 21.205.
2078:
Social Security: 5.8;
Medicaid: 4.915;
Medicare: 10.567;
Total: 21.282.
2079:
Social Security: 5.81;
Medicaid: 4.955;
Medicare: 10.627;
Total: 21.392.
2080:
Social Security: 5.81;
Medicaid: 4.995;
Medicare: 10.686;
Total: 21.491.
Source: GAO analysis of data from the Office of the Chief Actuary,
Social Security Administration, Office of the Actuary, Centers for
Medicare and Medicaid Services, and the Congressional Budget Office.
Note: Social Security and Medicare projections based on the
intermediate assumptions of the 2008 Trustees‘ Reports. Medicaid
projections based on CBO‘s January 2008 short-term Medicaid estimates
and CBO‘s December 2007 long-term Medicaid projections adjusted to
reflect excess cost growth consistent with the 2008 Trustees
intermediate assumptions.
[End of figure]
DOD Budget Authority FY 2001-2009 (Excluding Global War on Terror)
[See PDF for image]
This figure is a vertical bar graph depicting the following data:
Fiscal Year: 2001;
DOD Budget Authority (Excluding Global War on Terror): $289.9 billion.
Fiscal Year: 2002;
DOD Budget Authority (Excluding Global War on Terror): $331.1 billion.
Fiscal Year: 2003;
DOD Budget Authority (Excluding Global War on Terror): $368.5 billion.
Fiscal Year: 2004;
DOD Budget Authority (Excluding Global War on Terror): $376.6 billion.
Fiscal Year: 2005;
DOD Budget Authority (Excluding Global War on Terror): $400.9 billion.
Fiscal Year: 2006;
DOD Budget Authority (Excluding Global War on Terror): $418.5 billion.
Fiscal Year: 2007;
DOD Budget Authority (Excluding Global War on Terror): $431.9 billion.
Fiscal Year: 2008;
DOD Budget Authority (Excluding Global War on Terror): $450.5 billion.
Fiscal Year: 2009;
DOD Budget Authority (Excluding Global War on Terror): $512.1 billion.
Source: DOD.
Note: amounts in nominal dollars.
[End of figure]
Transition: GAO Objectives:
* Provide insight into pressing national issues.
* Highlight the growing need for innovative, integrated approaches to
solve national and global challenges.
* Document targeted opportunities to conserve resources that can be
applied to new initiatives.
* Underscore critical capacity-building needs in individual agencies
that will affect implementation of whatever new priorities are pursued.
* Help inform the management improvement agendas of Congress and the
new administration.
* Update High Risk list.
DOD Faces Growing Fiscal Challenges:
DOD faces a number of near-term and long-term fiscal pressures:
* Extended operations have taken a toll on readiness; rebuilding will
be complex and costly;
* Rising personnel costs for pay, benefits, and health care;
* Significant cost growth in weapon systems programs;
* At same time, DOD is pursuing broad-based initiatives:
- Reshape and grow the force;
- Modernize and transform capabilities.
Opportunities Exist to Improve DOD‘s Business Operations:
* Achieving affordable defense plan requires greater fiscal discipline;
* Billions of dollars spent to sustain key DOD business operations;
* Since first attempt at financial statement audit of a major DOD
component 20 years ago, GAO has reported weaknesses in DOD‘s business
side.
DOD High Risk Areas:
* Overall (Management) Approach to Business Transformation.
* Business System Modernization.
* Personnel Security Clearance Program.
* Support Infrastructure Management.
* Financial Management.
* Supply Chain Management.
* Weapons Systems Acquisition.
* Contract Management.
Excess Secondary Inventory:
* DOD estimates investment in its supply chain is more than $150
billion a year;
* Value of secondary inventory (spare parts) has grown by tens of
billions of dollars, but substantial amounts are excess;
* Difficulties in estimating lead times cause inefficient use of funds,
and potential shortages/excesses;
* Need to strengthen accountability and management of secondary
inventory.
Weapons System Cost and Schedule Growth:
* Funding in DOD investment accounts (RDT&E and procurement) has
significantly increased since 2000;
* Problems, such as cost growth and schedule delays, continue;
* More money did not make existing programs well and additional
unexecutable programs got started;
* Across-the-board improvements require fundamental changes to
requirements, funding, and acquisition systems.
Table: Weapons System Cost and Schedule Growth:
Annual funding in investment accounts (fiscal year 2008 dollars):
FY 2002: $112 billion;
FY 2008: $184 billion.
Total commitments for Major Defense Acquisition Programs (fiscal year
2008 dollars):
FY 2002: $790 billion;
FY 2008: $1.6 trillion.
Source: GAO analysis of DOD data.
[End of table]
Contract Management Challenges:
* DOD is increasingly relying on contractors to provide services to
help meet critical missions and support acquisition functions.
* DOD spent more than $315 billion acquiring goods and services in
fiscal year 2007, more than double what it spent 6 years earlier.
* Weaknesses lead to poor outcomes:
- Lack of well defined requirements;
- Use of ill suited business arrangements;
- Inadequate number of trained acquisition/oversight personnel.
* Need to strengthen workforce training/capacity and reexamine mix,
roles, and responsibilities of military, civilian, and contractors.
[End of presentation]
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