Defense Efficiency Initiatives: DOD Needs to Improve the Reliability of Cost Savings Estimates
Highlights
What GAO Found
DOD has not identified $10 billion in cost savings through fiscal year 2019 as required and does not have a reliable cost savings estimate to support the cost savings it has identified. According to DOD documents, the department estimates that it will save about $13.1 billion from fiscal years 2015 through 2021. It based its cost savings estimate on savings DOD (1) identified in May 2015 and (2) reported to Congress in its March 2016 interim update (see table below).
Department of Defense (DOD)-Identified Efficiency-Related Cost Savings Estimates, Fiscal Years 2015-2021
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In billions of dollars |
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Total |
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Estimated cost savings identified in DOD's May 2015 Section 904 Reporta |
5.3 |
|
Estimated cost savings DOD reported to Congress in its March 2016 interim updateb |
7.8 |
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Totalc |
13.1 |
Source: DOD | GAO-17-724
Note: GAO determined the cost savings estimate are unreliable because the DOD-provided supporting documentation was not sufficiently detailed to support the estimate.
aPub. L. No. 113-66 § 904 (2013). See Department of Defense, Plan for Streamlining DOD Management Headquarters: Section 904 Initial and Status Report to Congress (May 14, 2015).
bCost savings from headquarters, administrative, and support activities as required by Pub. L. No. 114-92, § 346(a) (2015).
cIn a letter from DOD commenting on a draft of this report, the department stated it identified additional savings that it intends to count toward the required cost savings but did not provide a timeframe for achieving these savings.
DOD's projected cost savings estimate is unreliable because DOD-provided documentation, when compared with best practices for cost estimates, was not sufficiently detailed to support the estimate. According to DOD's internal assessment, the $5.3 billion in cost savings identified in the May 2015 report were “not auditable” because the baseline for reductions had not been established, among other reasons. The March 2016 update identified additional cost savings in categories of efficiencies, and the level of detail in DOD's documentation related to these categories varied. For example, for one category, documentation showed cost savings estimates by organization, how estimates were calculated, and actions organizations planned to take to achieve the cost savings. In contrast, for two categories, documentation identified cost savings by fiscal year but did not include information on specific actions planned to achieve them. Without detailed documentation allowing someone unfamiliar with the program to easily recreate or update the cost savings estimate, the estimate is not reliable and, thus, does not allow for clear tracking of cost savings.
Why GAO Did This Study
Section 346(a) of the National Defense Authorization Act for Fiscal Year 2016 requires that DOD implement a plan to achieve no less than $10 billion in cost savings from headquarters, administrative, and support activities for fiscal years 2015 through 2019. Congress further mandated DOD to report on that plan with its budget submissions for fiscal years 2017 through 2019, and for GAO to examine each report.
DOD has not submitted the report that was required with the department's fiscal year 2017 budget submission but did submit a letter to Congress in March 2016 with an interim update on its plan. GAO examined the extent to which DOD has identified the cost savings required through fiscal year 2019 using reliable cost savings estimates.
GAO reviewed DOD's interim update and related documentation, including DOD budget and guidance documents. GAO also interviewed DOD officials about the status of the plan and related efficiency efforts.
This is a public version of a sensitive report that is being issued concurrently. Information on budget data that DOD deemed sensitive has been redacted from this report.
Recommendations
GAO recommends that DOD develop reliable cost savings estimates that include detailed information and documentation. DOD partially concurred with this recommendation but did not address how it intended to implement the recommendation. GAO continues to believe the recommendation is warranted.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Defense | As the department seeks to report on and achieve required cost savings, the Secretary of Defense should direct the Deputy Chief Management Officer to develop reliable cost savings estimates that include detailed information and documentation to allow for clear tracking of cost savings by DOD and Congress. |
As of November 2019, DOD had not provided the detailed information and documentation to allow for clear tracking of cost savings, as recommended. This recommendation was specifically related to section 346 of the National Defense Authorization Act for Fiscal Year 2016, which required DOD, among other things, to implement a plan to ensure that the department achieves at least $10 billion in cost savings from the headquarters, administrative, and support activities of the department, beginning with fiscal year 2015 and ending with fiscal year 2019. As we reported in September 2018, (Defense Efficiency Initiatives: Observations on DOD's Reported Reductions to Its Headquarters and Administrative Activities, GAO 18-688R, September 2018), DOD's May 2018 progress report in response to this requirement had several shortcomings. Specifically, according to its own report, DOD did not meet the required $10 billion in savings and we found inconsistencies in the report's numbers that raised questions about the accuracy of those claimed savings. Further, the May 2018 progress report did not contain the level of detailed information on each of the specific savings identified in the report that would allow us to independently validate them. Finally, when we asked DOD officials for any additional analyses used to develop the May 2018 progress report, the officials did not provide any and said they saw limited value in trying to improve past savings estimates, noting that such an effort would be fraught with challenges. Instead, they said they are focusing on accounting for efficiency efforts moving forward. However, because the deadline for achieving the savings referenced in this recommendation has passed, and because DOD plans no further action to document savings it reported, this recommendation has been closed as not implemented.
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