Defense Management:

Additional Actions Needed to Enhance DOD's Risk-Based Approach for Making Resource Decisions

GAO-06-13: Published: Nov 15, 2005. Publicly Released: Nov 15, 2005.

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The Department of Defense (DOD) is simultaneously conducting costly military operations and transforming its forces and business practices while it is also competing for resources in an increasingly constrained fiscal environment. As a result, GAO has advocated that DOD adopt a comprehensive threat or risk management approach as a framework for decision making. In its 2001 strategic plan, the Quadrennial Defense Review (QDR), DOD stated its intent to establish an approach--the risk management framework--to balance priorities against risk over time and monitor results against its strategic goals. GAO was asked to (1) assess the extent to which DOD has implemented the framework, including using it to make investment decisions, and (2) identify the most significant challenges DOD faces in implementing the framework, or a similar approach.

DOD has taken some positive steps to implement the framework, but additional actions are needed before DOD can show real and sustainable progress in using a risk-based and results-oriented approach to strategically allocate resources across the spectrum of its investment priorities. For example, DOD defined four risk areas, and developed performance goals and department-level measures, but it needs to, among other things, further develop and refine the measures so that they clearly demonstrate results and provide a well-rounded depiction of departmental performance. DOD's current strategic plan and goals also are not clearly linked to the framework's performance goals and measures, and linkages between the framework and budget are also unclear. While DOD officials stated that risk was considered during the fiscal year 2006 budget cycle, DOD's budget submission does not specifically discuss how DOD identified or assessed risks to establish DOD-wide investment priorities. Without better measures, clear linkages, and greater transparency, DOD will be unable to fully measure progress in achieving strategic goals or demonstrate to Congress and others how it considered risks, and made trade-off decisions, balancing needs and costs for weapon programs and other investment priorities. DOD faces four challenges that have affected the implementation of the framework. First, DOD's organizational culture resists department-level approaches to priority setting and investment decisions. Second, sustained leadership, adequate transparency, and appropriate accountability are lacking. Further, no one individual or office has been assigned overall responsibility or sufficient authority for the framework's implementation. DOD also has not developed implementation goals or timelines with which to establish accountability, or measure progress. Finally, integrating the risk management framework with decision support processes and related reform initiatives into a coherent, unified management approach for the department is a challenge that DOD plans to address during the 2005 QDR. However, GAO has concerns about DOD's ability to follow through on this integration, because of its limited success in implementing other management reforms. Unless DOD successfully addresses these challenges and effectively implements the framework, or a similar approach, it will likely continue to experience (1) a mismatch between programs and budgets, and (2) a proportional, rather than strategic, allocation of resources to the services.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: To address the challenges associated with implementing the risk management framework, or a similar risk-based management approach, the Secretary of Defense should develop implementation goals and timelines.

    Agency Affected: Department of Defense

    Status: Closed - Not Implemented

    Comments: In its 2001 Quadrennial Defense review, the Department of Defense (DOD) stated its intent to establish an approach--the risk management framework--to balance priorities against risk over time and monitor results against its strategic goals. In November 2005, GAO reported that DOD had taken some positive steps to implement this approach but that additional actions were needed before DOD could show real progress in using a risk based and results oriented approach to strategically allocate resources across the spectrum of its investment priorities. We recommended that DoD develop or refine performance measures, assign leadership with clear accountability, develop implementation goals and timelines, and integrate the risk management framework with other decision support processes and related reform initiatives to improve investment decisionmaking and manage performance results. During its 2006 Quadrennial Review and in subsequent management reviews, DOD decided to subsume the risk management framework into other initiatives to improve budgeting and performance management, which are in various stages of development and do not directly resemble the risk management framework. Therefore, we are closing our 2005 report recommendations.

    Recommendation: To address the challenges associated with implementing the risk management framework, or a similar risk-based management approach, the Secretary of Defense should assign clear leadership with accountability and authority to implement and sustain the risk management framework.

    Agency Affected: Department of Defense

    Status: Closed - Not Implemented

    Comments: In its 2001 Quadrennial Defense review, the Department of Defense (DOD) stated its intent to establish an approach--the risk management framework--to balance priorities against risk over time and monitor results against its strategic goals. In November 2005, GAO reported that DOD had taken some positive steps to implement this approach but that additional actions were needed before DOD could show real progress in using a risk based and results oriented approach to strategically allocate resources across the spectrum of its investment priorities. We recommended that DoD develop or refine performance measures, assign leadership with clear accountability, develop implementation goals and timelines, and integrate the risk management framework with other decision support processes and related reform initiatives to improve investment decisionmaking and manage performance results. During its 2006 Quadrennial Review and in subsequent management reviews, DOD decided to subsume the risk management framework into other initiatives to improve budgeting and performance management, which are in various stages of development and do not directly resemble the risk management framework. Therefore, we are closing our 2005 report recommendations.

    Recommendation: To address the challenges associated with implementing the risk management framework, or a similar risk-based management approach, the Secretary of Defense should develop or refine department-level performance measures so that they clearly demonstrate performance results and cascade those measures down throughout the department.

    Agency Affected: Department of Defense

    Status: Closed - Not Implemented

    Comments: In its 2001 Quadrennial Defense review, the Department of Defense (DOD) stated its intent to establish an approach--the risk management framework--to balance priorities against risk over time and monitor results against its strategic goals. In November 2005, GAO reported that DOD had taken some positive steps to implement this approach but that additional actions were needed before DOD could show real progress in using a risk based and results oriented approach to strategically allocate resources across the spectrum of its investment priorities. We recommended that DoD develop or refine performance measures, assign leadership with clear accountability, develop implementation goals and timelines, and integrate the risk management framework with other decision support processes and related reform initiatives to improve investment decisionmaking and manage performance results. During its 2006 Quadrennial Review and in subsequent management reviews, DOD decided to subsume the risk management framework into other initiatives to improve budgeting and performance management, which are in various stages of development and do not directly resemble the risk management framework. Therefore, we are closing our 2005 report recommendations.

    Recommendation: To address the challenges associated with implementing the risk management framework, or a similar risk-based management approach, the Secretary of Defense should demonstrate the integration of the risk management framework with DOD's decision support processes and related reform initiatives to improve investment decision making and manage performance results.

    Agency Affected: Department of Defense

    Status: Closed - Not Implemented

    Comments: In its 2001 Quadrennial Defense review, the Department of Defense (DOD) stated its intent to establish an approach--the risk management framework--to balance priorities against risk over time and monitor results against its strategic goals. In November 2005, GAO reported that DOD had taken some positive steps to implement this approach but that additional actions were needed before DOD could show real progress in using a risk based and results oriented approach to strategically allocate resources across the spectrum of its investment priorities. We recommended that DoD develop or refine performance measures, assign leadership with clear accountability, develop implementation goals and timelines, and integrate the risk management framework with other decision support processes and related reform initiatives to improve investment decisionmaking and manage performance results. During its 2006 Quadrennial Review and in subsequent management reviews, DOD decided to subsume the risk management framework into other initiatives to improve budgeting and performance management, which are in various stages of development and do not directly resemble the risk management framework. Therefore, we are closing our 2005 report recommendations.

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