Defense Headquarters:

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.

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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 Defense’s efficiency initiative, DOD components were asked to focus in particular on headquarters and administrative functions, support activities, and other overhead in their portfolios. DOD’s 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. GAO’s 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 GAO’s 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 DOD’s 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 Defense’s (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 DOD’s 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 GAO’s first recommendation and partially concurred with GAO’s second recommendation.

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Recommendations for Executive Action

  1. Status: Open

    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. The fiscal year 2015 President's budget request stated that DOD's efforts to reduce management headquarters staffs should result in savings of $5.3 billion through fiscal year 2019. 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 Section 904 report notes that the Deputy Secretary of Defense has directed additional reviews of headquarters to find further streamlining opportunities, including a review of business processes and supporting information technology systems within the Office of the Secretary of Defense and their associated Defense Agencies and the DOD Field Activities. The report states that in fiscal year 2016, the department plans to broaden this review to functions associated with headquarters across DOD, including all the military departments. Similarly, section 346 of the NDAA for Fiscal Year 2016 directs the Secretary of Defense to modify the headquarters reduction plans required by Section 904 of the fiscal year 2014 NDAA to ensure that the department achieves savings in total funding for major headquarters activities by fiscal year 2020 that are not less than 25 percent of the amount authorized to be appropriated in fiscal year 2016. In addition, the act requires that the Secretary of Defense implement a plan by March 2016 to ensure the department achieves not less than $10 billion in cost savings from the headquarters, administrative, and support activities of the department by the end of fiscal year 2019. Finally, the act also requires the department to conduct a comprehensive review of DOD headquarters and administrative and support activities for purposes of consolidating and streamlining headquarters functions by March 1, 2016. As of June 2016, DOD had not issued the results of this comprehensive review, and had not specified how it would achieve the $10 billion in headquarters-related cost savings or the 25% headquarters reduction. As the department looks ahead to fulfilling these requirements, it should take steps to ensure that these and other planned headquarters 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

  2. Status: Open

    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 they intend to begin revising the instruction in June 2016. In addition, DOD has not yet identified an approach to include contractors as part of its major DOD headquarters reporting. In December 2011, DOD issued guidance on how components should account for contracted services. To implement its guidance, DOD has established a single application, the Enterprise-wide Contractor Manpower Reporting Application (ECMRA), which is intended to facilitate overall management oversight of contracted services reporting and reviews. As of May 2016, DOD has not resolved issues with implementing ECMRA. For example, DOD has not outlined the relationships between a management support office, military departments, and other stakeholders to facilitate the collection and use of data from DOD's inventory of contracted services in decision-making processes. In addition, DOD is in the process of defining the roles and responsibilities of the support office that is intended to help manage the inventory of contracted services reporting processes, and the department continues to explore options for an enhanced reporting system that may better meet user needs. 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.

    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


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