Further Efforts to Examine Resource Needs and Improve Data Could Provide Additional Opportunities for Cost Savings
GAO-12-345: Published: Mar 21, 2012. Publicly Released: Mar 21, 2012.
What GAO Found
The Department of Defense (DOD) has taken some steps to examine its headquarters resources for efficiencies, but additional opportunities for cost savings may exist by further consolidating organizations and centralizing functions. For purposes of the Secretary of Defenses efficiency initiative, DOD components were asked to focus in particular on headquarters and administrative functions, support activities, and other overhead in their portfolios. DODs fiscal year 2012 budget request included several efficiencies related to headquarters organizations or personnel. GAO found that these efficiencies generally fell into two categories: (1) consolidating or eliminating organizations based on geographic proximity or span of control and (2) centralizing overlapping functions and services. The DOD efficiencies that GAO reviewed to reduce headquarters resources are expected by DOD to save about $2.9 billion through fiscal year 2016, less than 2 percent of the $178 billion in savings DOD projected departmentwide. GAOs work indicates that DOD may be able to find additional efficiencies by further examining opportunities to consolidate organizations or centralize functions at headquarters. DOD may not have identified all areas where reductions in headquarters personnel and operating costs could be achieved because the department was working quickly to identify savings in the fiscal year 2012 budget and used a top-down approach that identified several targets of opportunity to reduce costs, including headquarters organizations, but left limited time for a detailed data-driven analysis. In February 2012, DOD proposed $61 billion in additional savings over fiscal years 2013 to 2017, but provided limited information as to what portions of these savings were specific to headquarters. Without systematic efforts to reexamine its headquarters resources on a more comprehensive basis, DOD may miss opportunities to shift resources away from overhead.
An underlying challenge facing DOD is that it does not have complete and reliable headquarters information available for use in making efficiency assessments and decisions. According to GAOs internal control standards, an agency must have relevant, reliable, and timely information in order to run and control its operations. DOD Instruction 5100.73 guides the identification and reporting of headquarters information. However, GAO found that this instruction is outdated and does not identify all headquarters organizations, such as component command headquarters at U.S. Africa Command and certain Marine Corps headquarters. Also, although some of the services and functions performed by contractors could be considered as headquarters activities, the instruction does not address the tracking of contractors that perform these functions. DOD has delayed updating the instruction to allow time for components to adjust to the statutory changes enacted by Congress in 2009 that created new headquarters reporting requirements. According to DOD officials, ever-changing statutory reporting requirements have contributed to DODs failure to report to Congress about the numbers of headquarters personnel. As the department did not have reliable headquarters data, DOD compiled related information from other sources to inform its 2010 efficiency initiative. Because of the short timelines given to identify efficiencies and limitations on the sharing of information, this information was not validated before decisions were made. As a result, some of the information used to identify headquarters-related efficiencies was inaccurate and some adjustments in resource allocations will have to be made during implementation to achieve planned savings. Looking to the future, until DOD has updated its instruction to ensure that it has complete and reliable headquarters data, the department will not have the information it needs, which could affect its efforts to direct resources to its main priorities during future budget deliberations.
Why GAO Did This Study
The Department of Defenses (DOD) headquarters and support organizations have grown since 2001, including increases in spending, staff, and numbers of senior executives and the proliferation of management layers. In 2010, the Secretary of Defense directed DOD to undertake a departmentwide initiative to reduce excess overhead costs. In response to a mandate, GAO evaluated the extent to which DOD (1) examined its headquarters resources for efficiencies and (2) has complete and reliable headquarters information available for use in making efficiency decisions. For this review, GAO analyzed documents and interviewed officials regarding DODs headquarters resources and information.
What GAO Recommends
GAO recommends that DOD continue to examine opportunities to consolidate organizations and centralize functions and services and revise DOD Instruction 5100.73 to include all headquarters organizations, specify how contractors performing headquarters functions will be identified and included in reporting, clarify how components are to compile information needed to respond to headquarters reporting requirements, and establish time frames for implementing these actions. DOD concurred with GAOs first recommendation and partially concurred with GAOs second recommendation.
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Recommendations for Executive Action
Comments: DOD concurred with the recommendation, and stated that it will continue to seek opportunities to realign personnel and organizations to support evolving operations, missions, and threats. It further stated it would continue to assess these elements for opportunities to optimize output and eliminate inefficiencies. In July 2013, the Secretary of Defense directed a 20 percent reduction to headquarters budgets, designed to streamline management through efficiencies and elimination of lower priority activities. The directed reduction applies to headquarters across the department, to include the Office of the Secretary of Defense, the Joint Staff, the military service secretariats and staffs, combatant commands and corresponding service component commands, and associated defense agencies, among others. In February 2015, the fiscal year 2016 President's budget request for DOD was submitted to Congress, including the department's initial headquarters reductions. DOD stated that the specific reduction plans have been identified in the Future Years Defense Program and it is still on track to achieve $5.3 billion in headquarters reductions through fiscal year 2019, but DOD did not include its specific reduction plans for future years in the budget request. In May 2015, DOD issued the Section 904 report that was intended to provide some insight into these reduction plans; however, the report does not provide specific details about these plans for most of the components. Moreover, the Department notes in the Section 904 report that, moving into fiscal year 2016, the Deputy Secretary of Defense will broaden the review one step further and begin to look for Department-wide opportunities, to include reviewing functions associated with headquarters across all military departments, OSD staff and Defense Agencies/Field Activities. Additionally, in August 2015, the Deputy Secretary of Defense directed a 25 percent reduction to headquarters across all of DOD, granting credit for cost reductions already taken. While the department has identified some reductions at headquarters, it should take steps to ensure these planned reductions are realized while continuing to look for further efficiencies at headquarters across the department.
Recommendation: To further DOD's efforts to reduce overhead-related costs in light of the recent changes in DOD's strategic priorities, the Secretary of Defense should direct the secretaries of the military departments and the heads of the DOD components to continue to examine opportunities to consolidate or eliminate military commands that are geographically close or have similar missions, and to seek further opportunities to centralize administrative and command support services, functions, or programs.
Agency Affected: Department of Defense
Comments: DOD partially concurred with this recommendation based on their understanding of the instruction. In follow-up with DOD, officials confirmed that actions are still ongoing to address our recommendation. In August 2015, DOD stated that it has established a comprehensive definition of major DOD headquarters activities and will update the DOD Instruction defining major headquarters. According to DOD officials, this will include efforts to accurately and completely report all major DOD headquarters activity organizations. DOD officials stated that the timeframe for revising this instruction is December 2015. In addition, DOD officials identified further progress on including contractors performing major DOD headquarters activities in headquarters reporting. The department is in the process of establishing a single system, the Enterprise-wide Contractor Manpower Reporting Application (ECMRA), which will facilitate overall management oversight of contracted services reporting and reviews. Officials stated they are also establishing an ECMRA office to improve accountability over contracts for service, especially those in major headquarters activities, and that as ECMRA becomes fully operational they expect to update DOD Instruction 5100.73, Major DOD Headquarters Activities, to specify how contractors will be identified and included in headquarters reporting. Officials did not identify a timeframe for including contractors in headquarters reporting, but expect that, as the ECMRA is fully implemented through Fiscal Year 2018, contracted support to major DOD headquarters activities will be able to be more accurately captured and accounted for. While DOD has taken a number of actions in response to our recommendation, the updated instruction still does not include all major headquarters activity organizations and DOD has not specified how contractors will be identified and included in headquarters reporting nor has it identified a timeframe for this action.
Recommendation: To improve DOD's ability to identify how many headquarters personnel it has, including military, civilian and contractor personnel, and improve the information Congress and DOD need to ensure that headquarters organizations are appropriately sized and overhead positions are reduced to the extent possible, the Secretary of Defense should direct the Director of Administration and Management, in consultation with the Under Secretary of Defense for Personnel and Readiness, to revise DOD Instruction 5100.73, Major DOD Headquarters Activities, to (1) include all major DOD headquarters activity organizations, (2) specify how contractors performing major DOD headquarters activity functions will be identified and included in headquarters reporting, (3) clarify how components are to compile the major DOD headquarters activities information needed to respond to the reporting requirements in section 1109 of the fiscal year 2010 National Defense Authorization Act, and (4) establish time frames for implementing the actions above to improve tracking and reporting headquarters resources.
Agency Affected: Department of Defense