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GAO-11-181R:
United States Government Accountability Office:
Washington, DC 20548:
January 26, 2011:
Congressional Committees:
Subject: Defense Business Transformation: DOD Needs to Take Additional
Actions to Further Define Key Management Roles, Develop Measurable
Goals, and Align Planning Efforts:
The Department of Defense (DOD) spends billions of dollars each year
to maintain key business operations intended to support the
warfighter, including systems and processes related to the management
of contracts, finances, the supply chain, support infrastructure, and
weapon systems acquisition. We have designated a number of these areas
as high risk because of their vulnerability to fraud, waste, abuse,
and mismanagement and because of opportunities to achieve greater
efficiencies and free up resources for higher-priority needs.[Footnote
1]
In 2005, we identified DOD's approach to business transformation as a
high-risk area because (1) DOD had not established clear and specific
management responsibility, accountability and control over business
transformation-related activities and applicable resources; and (2)
DOD lacked a clear strategic and integrated plan for business
transformation with specific goals, measures and accountability
mechanisms to monitor progress.[Footnote 2] Because of the complexity
and magnitude of the challenges facing DOD in improving business
operations, we have reported the need for a chief management officer
(CMO) with significant authority and experience to focus the necessary
attention and sustain progress. We also recommended that DOD develop a
comprehensive, integrated, and enterprisewide transformation plan,
supported by a strategic planning process. Moreover, we recommended
that DOD institutionalize in directives the roles, responsibilities,
and relationships among the various business-related entities and
committees that comprise its management framework and expand that
framework beyond business systems modernization to all business
transformation efforts.[Footnote 3]
Both DOD and Congress have taken actions to address DOD's management
of business transformation efforts. For example, DOD designated the
Deputy Secretary of Defense as the CMO for DOD in May 2007. In the
National Defense Authorization Acts for Fiscal Year 2008[Footnote 4]
and Fiscal Year 2009,[Footnote 5] Congress took steps that included:
* designating the Deputy Secretary of Defense as the CMO for DOD;
* creating a deputy chief management officer (DCMO) position;
* requiring the secretaries of the military departments to designate
the department under secretaries as CMOs;
* requiring DOD to develop a strategic management plan (SMP); and:
* requiring the secretary of each military department to establish a
business transformation office and to develop business transformation
plans.
In January 2009, we reported on DOD's progress in implementing its
management framework and developing a strategic plan for business
transformation.[Footnote 6] For example, DOD had issued directives
broadly defining the responsibilities of the CMO and DCMO, established
an office of the DCMO, designated an Assistant DCMO, established
governance entities,[Footnote 7] and named CMOs or acting CMOs in the
military departments. However, DOD had not clearly defined the
authority, roles, and relationships for some positions and entities,
including decision-making authority for the DCMO, the relationship
between DOD's DCMO and the military department CMOs, and the
responsibilities of various governance entities. Further, the military
departments were in the early stages of responding to legislative
requirements, and DOD's first SMP, issued in July 2008, did not
identify specific business areas, strategic goals, objectives, or
performance measures.
Since we last reported, a DCMO has been confirmed by the Senate, DOD
has updated its SMP, and DOD and the military departments have
continued to refine their management approach to business
transformation. This report, which consists of this letter and the
enclosed slides, addresses their progress since January 2009. We
performed this review under the authority of the Comptroller General
to conduct evaluations on his own initiative. Our objectives were to
assess the extent to which DOD and the military departments have taken
additional steps to (1) implement management frameworks for business
transformation and (2) develop business transformation plans,
supported by a strategic planning process, that enable them to align
goals and planning efforts and to measure progress.
To assess progress in implementing management frameworks for business
transformation, we compared DOD and military departments' actions to
best practices for implementing CMO positions[Footnote 8] and related
statutory requirements in the National Defense Authorization Acts for
Fiscal Years 2008 and 2009. We also reviewed DOD and military
department guidance related to these positions and entities. To assess
progress in developing business transformation plans supported by
strategic planning process, we assessed DOD's updated 2009 SMP and the
Air Force's 2008 strategic plan by comparing them to results-oriented
management best practices and key elements of a strategic plan, which
we identified by reviewing prior GAO work[Footnote 9] and the
Government Performance and Results Act of 1993.[Footnote 10] We also
met with Army and Navy officials to determine the status of their
planning efforts. For both objectives, we interviewed DOD officials,
including the DCMO; the Director of the Business Transformation
Agency; the Under Secretaries of the Air Force, Army, and Navy in
their capacities as CMOs; and the Director of Business Transformation
for each military department. To determine the involvement of the CMO,
DCMO, and military department CMOs in the Secretary of Defense's
recent efficiency initiative and selected GAO high-risk areas, we met
with these officials and reviewed relevant documents and our prior and
ongoing work on the high-risk areas. We conducted this performance
audit from July 2009 through January 2011 in accordance with generally
accepted government auditing standards. Those standards require that
we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and
conclusions based on our audit objectives. We believe that the
evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
Summary:
DOD and the military departments have taken additional steps to
strengthen their management approach to business transformation.
Opportunities exist, however, for the CMO and DCMO to take on a
greater leadership role in implementing a departmentwide effort to
achieve more efficiencies in its operations and to ensure results in
individual business areas. Since January 2009, DOD has filled key
positions, such as the DCMO and military department CMOs; established
entities, such as a governance board to identify business process
improvements; and undertaken various activities. For example, in July
2009, the CMO issued an updated SMP which identifies business
priorities and related reform initiatives. In May 2010, the Secretary
of Defense announced a major initiative to reduce overhead costs,
intended to find more efficient and effective ways of doing business.
Our work shows that key strategies for successful implementation of
the CMO position include defining roles, responsibilities, structures,
processes, reporting relationships, and ensuring a high level of
authority. The CMO and DCMO have responsibilities, under statutes and
department guidance, related to improving the efficiency and
effectiveness of business operations, but they have not been assigned
specific roles for integrating, monitoring or otherwise
institutionalizing the ongoing efficiency initiative in the long term.
The military department CMOs are leading efforts to implement the
initiative in their organizations.
Without assigning a specific role for the CMO and DCMO, it is not
clear how DOD will establish accountability and leverage those
positions to provide the leadership necessary to implement, integrate,
and otherwise institutionalize the Secretary of Defense's recent
efficiency initiative and sustain momentum and progress in the long
term. Further, while DOD continues to take some actions to address
weaknesses in individual business areas, we continue to see
opportunities for the CMO and DCMO to provide the leadership needed to
implement reforms and achieve goals reflected in the SMP, including
those in areas we have identified as high risk. For example, DOD has
significantly improved the timeliness of processing personnel security
clearances but has yet to clearly define the specific roles and
responsibilities of the CMO, DCMO, and military department CMOs for
financial management improvement efforts, and to include clear
performance measurement information and resource needs in its
Logistics Strategic Plan, which guides efforts to improve supply chain
management and other logistics processes.
DOD and the military departments have made limited progress in
developing business transformation plans, supported by a strategic
planning process, which enable them to align goals and planning
efforts and to measure progress. We have previously reported that
agencies that are successful in achieving business transformation
strive to undertake strategic planning and establish a plan that
includes goals and measures that align at all levels and that links
resource needs to performance.[Footnote 11] DOD's 2009 SMP identifies
priorities and reform initiatives but lacks some key elements, such as
a description of the problems to be addressed, measurable goals, and
funding priorities. The military departments are in varying stages of
their planning efforts--the Army issued its plan in October 2010 and
the Navy issued its plan in November 2010. The Air Force has a 2008
strategic plan that according to Air Force officials covers business
transformation, but the plan does not define transformation or related
goals. Air Force officials expect to develop specific business
priorities and issue a separate plan in March 2011. DOD is in the
early stages of measuring progress. While the 2009 SMP describes a
strategic planning process, DOD has not set up internal mechanisms,
such as procedures and milestones, by which it can reach consensus
with the military departments and others on priorities, synchronize
the development of plans with each other and the budget process, and
guide efforts to monitor progress and take corrective action. Without
a strategic plan containing measurable goals and funding priorities,
supported by a clearly defined planning process, the department will
not have the tools it needs to set strategic direction for business
transformation efforts, fully align efforts to develop plans and
budget requests that reflect business priorities, measure progress in
implementing reform initiatives, and institutionalize its strategic
planning efforts across administrations.
Recommendations for Executive Action:
To establish ongoing accountability and better leverage the unique
positions of the CMO and DCMO to provide the leadership necessary to
follow up the Secretary's recent efficiency initiative for the long
term, we recommend that the Secretary of Defense take the following
action:
* Assign specific roles and responsibilities to the CMO and DCMO for
integrating the Secretary's efficiency initiative with ongoing reform
efforts, overseeing its implementation, and otherwise
institutionalizing the effort for the long term.
To enhance DOD's ability to set strategic direction for its business
transformation efforts, and better align and institutionalize its
efforts to develop and implement plans and measure progress against
established goals, we recommend that the Secretary of Defense direct
the CMO to take the following two actions:
* Ensure that DOD's revised SMP contains measurable goals and funding
priorities linked to those goals.
* Issue guidance to establish a strategic planning process with
mechanisms--such as procedures and milestones--for routinely updating
the SMP and military department business transformation plans. In
particular, this guidance should include elements such as how DOD and
the military departments--including the CMO, DCMO, and military
department CMOs--will reach consensus on business priorities,
coordinate review and approval of updates to plans, synchronize the
development of plans with the budget process, and monitor the
implementation of reform initiatives, and report progress, on a
periodic basis, towards achieving established goals.
Agency Comments and Our Evaluation:
In commenting on a draft of this report, DOD concurred with two of our
recommendations and partially concurred with one. DOD's comments are
reprinted in their entirety in Enclosure II.
DOD concurred with our recommendation that the Secretary of Defense
assign specific roles and responsibilities to the CMO and DCMO for
integrating the Secretary's efficiency initiative with ongoing reform
efforts, overseeing its implementation, and otherwise
institutionalizing the effort for the long term. While DOD did not
specify the action it planned to take to implement our recommendation,
we would expect that once the Secretary determines the roles and
responsibilities to be assigned to the CMO and DCMO, these would be
clearly communicated within the department.
DOD also concurred with our recommendation that the Secretary direct
the CMO to ensure that DOD's revised SMP contains measurable goals and
funding priorities linked to those goals. DOD agreed that the SMP
should contain measurable goals linked to the budget, and stated that
the draft fiscal year 2011 SMP accomplishes this goal. DOD also stated
that the fiscal year 2011 SMP is tightly integrated with the fiscal
year 2011 Performance Budget and directly links performance measures
to the budget through Forces and Infrastructure Category codes. DOD
further noted that each goal in the fiscal year 2011 SMP is supported
by quantifiable performance measures and that results against these
measures will be briefed on a quarterly basis to the DBSMC. On
December 30, 2010, DOD issued an updated plan, which covers fiscal
year 2011. We plan to evaluate the updated plan to assess whether it
contains key elements, such as measurable goals, funding priorities,
and resource needs.
DOD partially concurred with our recommendation that the Secretary
direct the CMO to issue guidance to establish a strategic planning
process with mechanisms--such as procedures and milestones--for
routinely updating the SMP and military department business
transformation plans. DOD agreed that it is important for its
strategic planning process to ensure alignment between the various
documents that comprise the department's "family of plans" and the
officials that are responsible for those plans. DOD identified this
"family of plans" to include the SMP, Performance Budget, Financial
Improvement and Audit Readiness Plan, DOD Logistics Strategic Plan,
individual GAO High Risk Area Remediation Plans, and Military
Department Business Transformation and Transition Plans. DOD, however,
stated that it is focused on using its existing governance bodies and
natural planning cycles associated with these documents to ensure
alignment while maintaining the ability to respond to changing
circumstances in an agile way that the establishment of formal policy
would not allow. It noted these governance bodies include the DBSMC,
the Performance Budget Senior Review Group, and a variety of
functional and organizational boards throughout the department.
We recognize that DOD relies on existing governance bodies and
planning cycles to develop and align the SMP and other related plans,
and agree it is important for DOD to be able to respond to changing
circumstances. However, we do not believe that establishing formal
policy to govern its strategic planning efforts would hinder the
department in any manner. Rather, we believe that issuing formal
guidance to clearly define the planning process will help the
department achieve a common understanding and approach among the
various planning entities and therefore enhance its overall ability to
set strategic direction, better align and institutionalize its
planning efforts, and measure progress against established goals. Over
the past few years, the department and military departments have
gained momentum in achieving consensus on business priorities and
maturing their planning efforts. To sustain this momentum and to
ensure continuity for the long term, we believe it is important that
the CMO clearly outline the process that will guide strategic planning
efforts, including elements such as how DOD and the military
departments--including the CMO, DCMO, and military department CMOs--
will reach consensus on business priorities, coordinate review and
approval of updates to plans, synchronize the development of plans
with the budget process, and monitor the implementation of reform
initiatives, and report progress, on a periodic basis, towards
achieving established goals. Given DOD's statements about the need to
maintain the ability to respond to changing circumstances, the CMO
could also include specific provisions to allow for the flexibility
needed to make adjustments as circumstances dictate.
We are sending copies of this report to the appropriate congressional
committees. We are also sending copies to the Secretary of Defense,
the Deputy Secretary of Defense, the DOD Deputy Chief Management
Officer, and the Under Secretaries of the Army, Air Force, and Navy.
This report will also be available on our Web site at [hyperlink,
http://www.gao.gov]. Should you or your staff have any questions
concerning this product, please contact me at (202) 512-9619 or
pickups@gao.gov. Contact points for our Offices of Congressional
Relations and Public Affairs may be found on the last page of this
report.
Key contributors to this report were Donna Evans, Assistant Director;
Joseph Capuano; Gabrielle Carrington; Tom Gosling; Nicole Harms;
Evelyn Logue; Elizabeth McNally; Suzanne Perkins; Richard Powelson;
Terry Richardson; Rebecca Rygg; and Darby Smith.
Signed by:
Sharon L. Pickup:
Director, Defense Capabilities and Management:
Enclosures:
List of Congressional Committees:
The Honorable Daniel K. Akaka:
The Honorable Thad Cochran:
The Honorable Susan M. Collins:
The Honorable Daniel K. Inouye:
The Honorable Carl Levin:
The Honorable Joseph I. Lieberman:
The Honorable John McCain:
United States Senate:
The Honorable Harold Rogers:
Chairman:
The Honorable Norman Dicks:
Ranking Member:
Committee on Appropriations:
House of Representatives:
The Honorable Howard McKeon:
Chairman:
The Honorable Adam Smith:
Ranking Member:
Committee on Armed Services:
House of Representatives:
[End of section]
Enclosure I:
Defense Business Transformation:
DOD Needs to Take Additional Actions to Further Define Key Management
Roles, Develop Measurable Goals, and Align Planning Efforts:
Briefing for Congressional Committees:
January 26, 2011:
Overview:
* Background:
* Objectives:
* Scope and Methodology:
* Summary of Findings:
* Objective 1: Management Framework:
* Objective 2: Strategic Planning:
* Conclusions:
* Recommendations for Executive Action:
* Agency Comments and Our Evaluation:
* Related GAO Products:
Background:
The Department of Defense (DOD) spends billions of dollars each year to
maintain key business operations intended to support the warfighter,
including systems and processes related to the management of contracts,
finances, the supply chain, support infrastructure, and weapon systems
acquisition.
We have designated a number of these areas as high risk because of
their vulnerability to waste, fraud, abuse, and mismanagement and
because of opportunities to achieve greater efficiencies and free up
resources for higher-priority needs.[Footnote 12]
In 2005, we identified DOD's management approach to overall business
transformation as a high-risk area because:
* DOD had not established clear and specific management responsibility,
accountability and control over business transformation-related
activities and applicable resources; and:
* DOD lacked a clear strategic and integrated plan for business
transformation with specific goals, measures and accountability
mechanisms to monitor progress.[Footnote 13]
In prior reports and testimonies, we recommended the following:
* That Congress consider enacting legislation to establish a separate,
full-time chief management officer (CMO) position with the authority
and experience and a sufficient term to provide focused and sustained
leadership over DOD's business transformation efforts.
* That DOD institutionalize in directives the roles, responsibilities,
and relationships among the various business-related entities and
committees that have a role in implementing business transformation
efforts.
* That DOD develop a strategic planning process for business
transformation that results in a comprehensive, integrated, and
enterprisewide plan or set of plans that covers all key business areas
and provides a clear strategic direction, prioritizes initiatives, and
monitors progress across the department.
Both DOD and Congress have taken actions to address DOD's management of
business transformation efforts. Specifically:
* In May 2007, the Secretary of Defense designated the Deputy Secretary
of Defense as the CMO for DOD.
* Congress enacted the National Defense Authorization Act for Fiscal
Year 2008,[Footnote 14] which:
- designated the Deputy Secretary of Defense position as the CMO for
DOD;
- created a deputy chief management officer (DCMO) position to assist
the CMO;
- required the secretaries of the military departments to designate the
department under secretaries as CMOs with primary management
responsibility for business operations; and:
- required the Secretary of Defense, acting through the DOD CMO, to
develop a strategic management plan (SMP) that contains certain
elements, such as performance goals and measures and key initiatives to
achieve performance goals together with resource needs.
* Congress enacted the Duncan Hunter National Defense Authorization Act
for Fiscal Year 2009,[Footnote 15] which required the secretary of each
military department to establish a business transformation office no
later than 180 days after enactment of the act and, acting through the
department CMOs, to develop comprehensive business transformation
plans.
Our prior work has shown that key strategies for successful
implementation of the CMO position include defining roles,
responsibilities, structures, processes, and reporting relationships
and ensuring a high level of authority.[Footnote 16]
In addition, agencies that are successful in achieving business
management transformation undertake strategic planning and strive to
establish a plan that contains key elements such as measurable goals
and quantifiable measures that align at all levels of the agency. A
strategic plan should:
* align goals and measures with departmentwide goals and cascade goals
and measures to lower organizational levels,
* assign accountability for achieving results,
* demonstrate results,
* provide a comprehensive view of performance, and link resource needs
to performance.
In January 2009,[Footnote 17] we reported on DOD's progress in
implementing its business transformation management framework and
developing a strategic plan for business transformation, including the
following:
* DOD's senior leadership has shown a commitment to transforming
business operations and taken steps to strengthen its management
approach. For example, DOD did the following:
- Issued a directive broadly defining the responsibilities of the CMO.
- Established or designated governance entities, such as the Defense
Business Systems Management Committee, the Deputy's Advisory Working
Group, and the Business Transformation Agency.[Footnote 18]
- Established an office of the DCMO, designated an Assistant DCMO, and
issued a directive broadly defining the responsibilities of the DCMO.
- Issued its first SMP in July 2008.
- Named CMOs or acting CMOs in the military departments and DCMOs in
the Departments of the Air Force and the Navy.
DOD nevertheless had not completed implementation of its management
framework for business transformation because authority, roles, and
relationships for some positions and entities had not been clearly
defined, including:
* clearly defined decision-making authority for the DCMO,
* a clearly defined relationship between DOD's DCMO and the CMOs of the
military departments, and:
* clearly defined unique and shared responsibilities of various
governance entities, such as the Defense Business Systems Management
Committee and the Deputy's Advisory Working Group.
DOD's first SMP, issued in July 2008, did not identify any strategic
goals, objectives, or performance measures and did not provide detailed
information about business operations.
The military departments were in the early stages of responding to the
requirements in the National Defense Authorization Acts for Fiscal
Years 2008 and 2009.
Objectives:
This briefing report addresses the progress DOD and the military
departments have made since January 2009 to strengthen their management
approach to business transformation.
Our specific objectives were to assess the extent to which DOD and the
military departments have taken additional steps to:
* implement management frameworks for business transformation, and:
* develop business transformation plans, supported by a strategic
planning process, that enable them to align goals and planning efforts
and to measure progress.
Scope and Methodology:
To assess progress in implementing management frameworks for business
transformation, we compared DOD and military departments' actions to
best practices for implementing CMO positions[Footnote 19] and related
statutory requirements in the National Defense Authorization Acts for
Fiscal Years 2008 and 2009. We also reviewed DOD and military
department guidance related to these positions and entities.
To assess progress in developing business transformation plans
supported by a strategic planning process, we assessed DOD's 2009 SMP
and the Air Force's strategic plan by comparing them to results-
oriented management best practices and key elements of a strategic
plan, which we identified by reviewing prior GAO work[Footnote 20] and
the Government Performance and Results Act of 1993.[Footnote 21] We
also met with Army and Navy officials to determine the status of their
planning efforts.
For both objectives, we interviewed DOD officials, including the DCMO;
the Director of the Business Transformation Agency; the Under
Secretaries of the Air Force, Army, and Navy in their capacities as
CMOs; and the Director of Business Transformation for each military
department.
To determine the CMO, DCMO, and military department CMO involvement in
the Secretary of Defense's recent efficiency initiative and selected
GAO high-risk areas, we met with these officials and reviewed relevant
documents and our prior and ongoing work on the high-risk areas.
We conducted this performance audit from July 2009 through January 2011
in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
Summary of Findings: Objective 1: Management Framework:
DOD and the military departments have taken additional steps to
strengthen their management approach to business transformation.
Opportunities exist, however, for the CMO and DCMO to take on a greater
leadership role in implementing a departmentwide effort to achieve more
efficiencies in its operations and to ensure results in individual
business areas.
* DOD has filled key positions, such as the DOD DCMO and military
department CMOs, and established entities and undertaken activities to
address business transformation, including creating a new governance
board, coordinating efforts among senior leaders to establish top-level
priorities, updating its SMP, and initiating a departmentwide effort to
achieve greater efficiencies, including in business operations.
* The CMO and DCMO have responsibilities, under statutes and department
guidance, related to the improvement of the efficiency and
effectiveness of business operations, but they have not been assigned
specific roles for integrating, monitoring or otherwise
institutionalizing the ongoing Secretary of Defense efficiency
initiative. In contrast, the military departments CMOs are leading
efforts to implement the initiative in their organizations.
* Without assigning a specific role for the CMO and DCMO, it is not
clear
how DOD will establish accountability and leverage those positions to
provide the leadership needed to implement, integrate, and otherwise
institutionalize the Secretary of Defense's recent efficiency
initiative and sustain momentum and progress in the long term.
Furthermore, without a continuous focus on identifying and implementing
efficiencies, DOD may be challenged in funding its highest-priority
programs in light of DOD's fiscal challenges.
* DOD continues to take some actions to address weaknesses in
individual business areas; however, we continue to see opportunities
for the CMO and DCMO to provide the leadership needed to implement
reforms and achieve goals reflected in the SMP, including those in
areas we have identified as high risk.
* For example, DOD has significantly improved the timeliness of
processing personnel security clearances but has yet to clearly define
the specific roles and responsibilities of the CMO, DCMO, and military
department CMOs for financial management improvement efforts, and to
include clear performance measurement information and resource needs in
its Logistics Strategic Plan, which guides efforts to improve supply
chain management and other logistics processes.
Summary of Findings: Objective 2: Strategic Planning:
DOD and the military departments have made limited progress in
developing business transformation plans, supported by a strategic
planning process, which enable them to align goals and planning efforts
and to measure progress.
DOD's 2009 SMP identifies priorities but lacks some key strategic plan
elements. Specifically, some of the goals are not measurable, and it
does not include funding priorities or a description of the problems
and gaps the plan is trying to address.[Footnote 22]
The military departments are in varying stages of their planning
efforts.
* The Army issued its business transformation plan in October 2010. The
Navy issued its business transformation plan in November 2010. Army and
Navy officials stated that they used the SMP's priorities as the
starting point for developing their individual business transformation
plans.
* The Air Force has an overarching 2008 strategic plan that it states
covers business transformation; however, this Air Force plan does not
define business transformation and does not identify which of its goals
are related to business transformation. Air Force officials stated that
they planned to update their strategic plan and establish business-
related priorities by December 2010 and to formally issue their
business transformation plan in March 2011.
Although the 2009 SMP describes a strategic planning process, DOD has
not set up internal mechanisms, including procedures and milestones, by
which it can reach consensus with the military departments and others
on priorities, synchronize the development of plans with each other and
the budget process, and guide efforts to monitor progress and take
corrective action.
Without a strategic plan containing measurable goals and funding
priorities, supported by a clearly defined planning process, the
department will not have the tools it needs to set strategic direction
for business transformation efforts, fully align efforts to develop
plans and budget requests that reflect business priorities, measure
progress in implementing reform initiatives, and institutionalize its
strategic planning efforts across administrations.
Objective 1: Management Framework:
DOD and the military departments have taken additional steps to
strengthen their management approach to business transformation.
Opportunities exist, however, for the CMO and DCMO to take on a greater
leadership role in implementing a departmentwide effort to achieve more
efficiencies in its operations and in ensuring results in individual
business areas:
* Key strategies for successful implementation of the CMO position
include defining roles, responsibilities, structures, processes, and
reporting relationships and ensuring a high level of authority.
[Footnote 23]
* Since our January 2009 report, DOD has filled key positions,
established entities, and undertaken activities to address business
transformation:
Positions and Entities:
- In July 2009, the CMO authorized the Assistant DCMO to perform the
duties of the DCMO until the DCMO position was filled. In July 2010,
the Assistant DCMO was confirmed as the DCMO. In October 2010, DOD
appointed a new Assistant DCMO.
- In addition, the DCMO is currently serving as DOD's Performance
Improvement Officer, in which capacity she supervises DOD's performance
management activities and leads the department's personnel security
clearance reform efforts.
- In June 2010, the DCMO created the End-to-End Process Governance
Board,[Footnote 24] whose role is to advise the DBSMC on opportunities
to enhance the management and execution of the end-to-end business
processes across DOD. The board includes the military department DCMOs
and representatives from various DOD offices such as the Offices of the
Under Secretaries for Acquisition, Technology and Logistics;
Comptroller; and Personnel and Readiness.
* All of the military departments have CMOs in place and have issued
related guidance to incorporate the CMO into existing governance
structures.
* The Navy Under Secretary was confirmed in May 2009.
- The Navy has issued an instruction stating that the Navy Under
Secretary is the CMO, and creating a Deputy Under Secretary position to
serve as the DCMO, to supervise the Office of Business Transformation,
and to oversee and coordinate Navy business processes.
* The Army Under Secretary was confirmed in September 2009.[Footnote
25]
- The Army has issued an order stating that the CMO is a senior advisor
to the Secretary of the Army and plans to issue additional guidance.
* The Air Force Under Secretary was confirmed in March 2010.
- The Air Force has issued a directive for the CMO stating that the CMO
is to direct and oversee the activities of the DCMO and that the DCMO
exercises the CMO's responsibilities by effectively and efficiently
organizing the Air Force's business operations and providing relevant
information to DOD's CMO and DCMO.
- According to officials, the Air Force is in the process of updating
other guidance to clarify that the CMO and DCMO are now co-chairs of
entities within the Air Force's existing governance structure.[Footnote
26]
It is unclear whether this guidance will further define the CMO's
roles, responsibilities, and relationships to other key Air Force
leaders, such as the Assistant Secretaries of the Air Force for
Acquisition and for Financial Management and Comptroller.
* Each of the military departments has established an Office of
Business Transformation.
* The Navy established its Office of Business Transformation in
December 2008. This office's Director serves as both the Navy DCMO and
the Deputy Under Secretary of the Navy for Business Operations and
Transformation.
* The Air Force established its Office of Business Transformation in
June 2009. Its Director also serves as the Air Force DCMO.
* The Army established its Office of Business Transformation in April
2009. This office has an Acting Director who is also the Army's Acting
DCMO.
Activities:
* On behalf of the CMO, the Assistant DCMO coordinated with the Under
Secretaries of Defense to achieve consensus on top-level business
priorities and with the military departments to obtain input on their
respective priorities. The CMO formalized these priorities in the July
2009 update to the SMP.
* As discussed later, the DCMO is working with various DOD offices to
collect data needed to assess progress against business-related
measures. In January 2010, DOD began quarterly reporting to the DBSMC
on progress against these business-related measures.
The CMO chairs the DBSMC, which also includes the DCMO (Vice Chair),
several Under Secretaries of Defense, and the military department CMOs.
The DBSMC meets periodically to discuss issues related to business
transformation, such as audit readiness, acquisition, and performance
management. The DBSMC also reviews quarterly performance reports on
progress in meeting performance measures for both business and
nonbusiness priorities. It also serves as an investment review and
decision-making body for business systems modernization activities.
* DOD has stated that the DBSMC is considered the primary forum for
addressing business transformation issues, although the 2005 charter
for the DBSMC has not yet been revised to fully reflect this role. We
have previously recommended that DOD institutionalize the roles,
responsibilities, and relationships among various business-related
entities, including the DBSMC.[Footnote 27] DOD stated that it is
currently in the process of updating the DBSMC charter.
According to the DCMO, she meets regularly with key DOD personnel,
including representatives from various offices in the Office of the
Secretary of Defense and the CMOs and DCMOs of the military
departments, to discuss business operations, including progress in
addressing problems identified in GAO's high-risk areas. She stated
that she also regularly briefs the CMO on business-related topics, both
individually and as part of the DBSMC. The DCMO views herself as an
integrator and as a facilitator of discussions to identify solutions,
such as addressing weaknesses in business operations identified in
GAO's high-risk areas.
* In addition, the military department CMOs and DCMOs meet with each
other on a regular basis to share information and ideas on business
reform.
CMO, DCMO, and Military Department CMO Role in DOD Efficiency
Initiative:
In May 2010, the Secretary of Defense announced the need for DOD to
reduce overhead costs and subsequently called for a 5-year effort to
cut $100 billion from the department's budget in order to finance
sustainment of the current force and modernize its weapons portfolio.
As part of this effort, the Secretary has stated that the department
must "take a hard look" at every aspect of how it does business.
[Footnote 28]
* Since then, DOD has embarked on a four-track approach intended to
achieve a more efficient, effective, and cost-conscious way of doing
business. One of these tracks addresses specific areas where DOD could
take immediate action to reduce inefficiencies and overhead, in
particular, initiatives to reduce headquarters and support
bureaucracies and to instill a culture of cost-consciousness and
restraint in the department.[Footnote 29] To see these initiatives
through to action and to produce measurable results in the near term,
the Secretary established a task force chaired by his Chief of Staff.
This task force has chartered study groups to develop action plans and
is overseeing the implementation of these plans and their eventual
transition to the appropriate department leadership. The Secretary of
Defense intends to personally approve all action plans.
According to the DCMO, the DOD CMO and DCMO are involved in the
Secretary of Defense's ongoing efficiency initiative. For example:
* The CMO recently testified before Congress to provide information on
the department's efficiency efforts, and the DCMO has been given
specific responsibilities to evaluate options for eliminating the
Business Transformation Agency and transferring its functions to other
organizations.
* According to the DCMO, the CMO accompanies the Secretary of Defense
to all meetings on the status of efforts related to the efficiency
initiative.
* However, notwithstanding their responsibilities related to improving
the efficiency and effectiveness of business operations, neither the
CMO nor DCMO has been assigned any specific role for integrating,
monitoring or otherwise institutionalizing the ongoing efficiency
initiative.
Without assigning a specific role for the CMO and DCMO for the
efficiency initiative, it is not clear how DOD will establish
accountability and leverage those positions to provide the leadership
necessary to implement, integrate, and otherwise institutionalize the
initiative and sustain momentum and progress in the long term.
Furthermore, without a continuous focus on identifying and implementing
efficiencies, DOD may be challenged in funding its highest-priority
programs in light of DOD's fiscal challenges.
According to the military department CMOs, they were tasked to lead the
Secretary of Defense's efficiency initiative within their respective
departments. For example:
* The Army CMO has issued guidance to implement this initiative that
provides specific efforts, goals, milestones, and responsibilities to
ensure that the Army synchronizes and integrates its adjustments to the
budget.
* The Air Force has also issued guidance on how to implement efficiency
initiatives within the service and is using its existing governance
structure--including entities co-chaired by the Air Force CMO and
DCMO--to monitor progress in implementing these initiatives.
* The Navy CMO and DCMO are overseeing working groups to implement DOD
efficiency-related initiatives and are identifying additional military
department-specific efficiency initiatives.
* Each military department has identified areas for savings in its
respective budget submission as part of efforts to meet the Secretary
of Defense's goal for each military department to shift $28.3 billion
over the next 5 years (fiscal year 2012 through fiscal year 2016) in
overhead costs to force structure and future modernization.
In addition, the three military department CMOs meet with both the DOD
DCMO and each other on a regular basis to discuss implementation of the
efficiency initiatives and overall business issues.
CMO and DCMO Role in Selected High-Risk Areas:
DOD has had a CMO since 2007. While the CMO and DCMO, along with
others, have taken additional actions in the past few years--including
developing a strategic plan, implementing reform initiatives, and
measuring progress--our work indicates that additional opportunities
exist for the CMO, assisted by the DCMO, to provide the leadership
needed to ensure that actions to implement reforms are completed and to
achieve goals reflected in the SMP, including those in areas we have
identified as high risk.
* With respect to specific business areas, we focused on a few high-
risk areas--personnel security clearances, financial management, and
supply chain management--to illustrate the involvement of the CMO and
DCMO and additional actions needed to address long-standing challenges
in these areas.
Personnel Security Clearances:
In 2005, we placed DOD's personnel security clearance program on our
high-risk list and continued that designation in 2007 because of
problems such as processing delays and incomplete documentation.
[Footnote 30] In response to our recommendations and to
congressional concerns, DOD has taken steps to implement specific
reforms to its processes for granting personnel security clearances to
address timeliness and quality issues. For example:
* The DCMO has been an active member of the Joint Security Clearance
Process Reform Team, which was formed to improve the security clearance
process governmentwide, and the Suitability and Security Clearance
Performance Accountability Council, which guides governmentwide
personnel security clearance reform efforts. The DOD DCMO stated that
she is the Vice Chair of the Performance Accountability Council.
* In 2007, we reported that a sample of initial clearances for DOD
industry personnel took an average of 325 days to complete.[Footnote
31] In 2008, we reported that DOD had made significant improvements in
reducing delays, with the average of the fastest 80 percent of initial
clearances taking 87 days to complete, well below the statutory
requirements in effect at that time.[Footnote 32]
* In 2009, we recommended that the Performance Accountability Council
establish a strategic framework that includes outcome-focused
performance measures.[Footnote 33] In response, the DCMO played a key
role in developing both the Performance Accountability Council's
Strategic Framework for Congress in February 2010 that articulated the
goals of the reform efforts and participated in the Performance
Accountability Council's proposed quality measures for the Subcommittee
on Oversight of Government Management, the Federal Workforce and the
District of Columbia, Senate Committee on Homeland Security and
Governmental Affairs.
Financial Management:
Based on our review of the process for developing the SMP and
discussions with the DCMO, the CMO and DCMO have interacted with the
DOD Comptroller on issues related to improving financial management.
For example:
* The Secretary of Defense, acting through the CMO, has statutory
responsibility for developing the SMP. The 2008 SMP identified the need
to modernize and integrate critical financial management and internal
control systems as one of several departmentwide improvement areas
within the DOD transformation priorities established by the plan.
* To develop the 2009 SMP update, the DOD Comptroller provided
financial management goals to the DCMO. The DCMO ultimately included
these goals in the plan, which was then approved by the CMO.
* The DCMO has been involved in discussions with other senior leaders
at DBSMC meetings to discuss efforts to improve financial management.
* The CMO and DCMO reviewed and provided comments on DOD's May 2010
Financial Improvement and Audit Readiness (FIAR) Plan Status Report, a
key plan for transforming the department's financial management
operations and achieving audit readiness.
In May 2009, based on our review of the FIAR Plan, we reported that the
plan did not identify and describe the oversight roles and
responsibilities of DOD's CMO and military service CMOs over the
financial improvement efforts occurring within the department.
[Footnote 34] In particular, we noted that integration of
the CMO and other senior leaders into the FIAR Plan's efforts to
transform DOD financial management operations is critical in enabling a
process by which DOD can more timely identify and address cross-
functional issues and ensure that other business functions, such as
acquisition and logistics, fully acknowledge and are held accountable
for their roles and responsibilities in achieving DOD's financial
management improvement goals and audit readiness.[Footnote 35] We made
several recommendations to increase the FIAR Plan's effectiveness as a
strategic and management tool for guiding, monitoring, and reporting on
financial management improvement efforts and increasing the likelihood
of meeting the department's goal of financial statement auditability,
which were incorporated into the National Defense Authorization Act for
Fiscal Year 2010.
* In response to our recommendations, DOD has taken several actions to
improve its FIAR Plan as a strategic and management tool for guiding,
monitoring, and reporting on the department's financial management
improvements. For example, DOD took steps to improve its governance
framework for monitoring and overseeing financial management
improvement efforts by expanding its FIAR governance board participants
to include the DOD DCMO and the military department CMOs.
* However, as we testified in September 2010,[Footnote 36] DOD still
needs to define the specific roles and responsibilities for these
individuals, including when and how they and other leaders are expected
to become involved in problem resolution or efforts to (1) ensure
cross-functional area commitment and support for financial management
improvement efforts, (2) effectively execute its plans, (3) gauge
actual progress against goals, (4) strengthen accountability, and (5)
make adjustments as needed.
Supply Chain Management:
We have previously identified problems related to the effectiveness and
efficiency of DOD supply chain management. Key aspects of supply chain
management include inventory management, requirements forecasting,
asset visibility, and materiel distribution, as well as logistics-
related strategic planning efforts.
* In 2008 and 2009, we reported that the Army and Navy had billions of
dollars of spare parts inventories that were not needed to meet current
requirements.[Footnote 37] We noted at the time of our reports that
both the Army and Navy had an opportunity to enhance oversight of
inventory management as well as gauge the effectiveness of inventory
improvement efforts as they developed the roles and responsibilities of
the newly designated CMOs. We recommended that the Army and Navy CMOs
exercise appropriate oversight of inventory management to align these
efforts with overall business transformation and to reduce support
costs. We also recommended that the Army and Navy identify and correct
any systemic weakness in demand forecasting procedures; the services
concurred with this recommendation. According to DOD, the department
began a two-phased evaluation of life cycle forecasting approaches in
June 2009 and included the issue as a key initiative in its 2009 SMP.
DOD has developed a plan to improve inventory management practices,
including the forecasting of demand for inventory items. The DOD DCMO
stated that she was not involved in developing or reviewing this plan.
In July 2010, we reported that DOD issued a new Logistics Strategic
Plan to provide a framework for logistics improvement efforts,
including supply chain management.[Footnote 38] The Logistics Strategic
Plan is intended to support strategic planning efforts such as the SMP
and includes two of the SMP's business priorities: support contingency
business operations to enhance support to the deployed warfighter and
reform the department's acquisition and support processes. We also have
reported that DOD needs to sustain top leadership commitment and long-
term institutional support for its strategic planning efforts for
supply chain management. Such a leadership commitment is needed to
successfully resolve ongoing supply chain management problems. The DOD
DCMO stated that she reviewed the draft Logistics Strategic Plan to
ensure that it was aligned with the SMP. However, the plan lacks clear
performance measurement information, definition of key concepts,
identification of problems and capability gaps, and discussion of
resources needed to achieve goals.
Objective 2: Strategic Planning:
DOD and the military departments have made limited progress in
developing business transformation plans, supported by a strategic
planning process, that enable them to align goals and planning efforts
and to measure progress.
Our prior work has shown that implementing significant organizational
change--such as DOD is attempting to do with business transformation--
requires a comprehensive, integrated strategic plan that sets a clear
direction and contains key elements, such as measurable performance
goals and objectives, funding priorities that are linked to goals, and
aligning of goals and measures with departmentwide goals and cascading
goals and measures to lower organizational levels.[Footnote 39]
DOD's July 2009 Strategic Management Plan identifies priorities but
still does not contain some key strategic plan elements. Specifically,
it does not include funding priorities and some of the goals were not
measurable.
The 2009 SMP, an update to the original SMP issued in 2008, represents
an improvement in that the plan identifies five business priorities
with associated outcomes, goals, measures, and initiatives. Those five
business priorities are as follows:
* Support the All-Volunteer Force:
* Support Contingency Business Operations:
* Reform the DOD Acquisition and Support Processes:
* Enhance the Civilian Workforce:
* Strengthen DOD Financial Management:
Nevertheless, our analysis shows that the 2009 SMP:
* Contains some goals that are difficult to measure.
- Our prior work has shown that a performance goal should be expressed
in an objective, quantifiable, and measurable form.[Footnote 40]
- Of the 43 goals in the 2009 SMP, 15 are not expressed in a measurable
form, for example,
-- "improve business process internal controls in Afghanistan."
* Contains some measures that do not allow for assessment of progress
toward overall goals.
- Our prior work has shown that a performance measure should have
quantifiable, numerical targets or other measurable values to
facilitate future assessments of whether overall goals and objectives
were achieved.[Footnote 41]
- Of the 76 measures in the 2009 SMP, 56 lack information--
specifically, baseline or target data--that would enable DOD to assess
progress in achieving SMP goals. For example:
-- "increase contract oversight" and:
-- "apply lessons learned in Iraq to Afghanistan."
* Does not identify time frames for completing key initiatives or
funding priorities or resources needed to achieve goals.
* On December 30, 2010, DOD issued an updated plan, which covers fiscal
year 2011. We plan to evaluate the updated plan to assess whether it
contains key elements, such as measurable goals, funding priorities,
and resource needs.
In addition, the 2009 SMP does not include a discussion about overall
departmentwide or DOD component-specific business transformation
problems or challenges, nor does it indicate the extent or severity of
any identified capability gaps. Such information is necessary to
establish a clear and common understanding of what problems and gaps
the plan is trying to address.
Although the 2009 SMP does not specifically refer to GAO's high-risk
areas, it does include outcomes, goals, measures, or initiatives that
relate to aspects of the high-risk areas that we have identified as
needing improvement.
Moreover, it is unclear how the goals in the 2009 SMP relate to other
DOD business-related plans, in particular the Business Enterprise
Architecture (BEA) and Enterprise Transition Plan (ETP).
* For example, the fiscal year 2010 ETP, which is an element of the
BEA, contains six business enterprise priorities, but these are not
clearly aligned with the SMP's five business priorities. According to
DOD officials, they are working to better align the ETP, BEA, and SMP
in future updates.
Although some performance goals and measures could be improved, DOD has
begun using performance measures to monitor progress against business-
related goals.
Best practices for successfully implementing strategic plans include
collecting data to measure performance and using that information to
continuously improve organizational processes.[Footnote 42]
DOD has begun to collect and use performance data to measure progress
against business-related goals.
- DOD initially used the performance measures developed for its fiscal
year 2010 performance plan,[Footnote 32] rather than the measures
included in the 2009 SMP, to monitor progress against business goals.
- In October 2009, DOD revised the fiscal year 2010 performance plan
measures to align them with the priorities and goals contained in the
July 2009 SMP.[Footnote 33]
- In January 2010, DOD began reporting quarterly to the DBSMC on
progress on the fiscal year 2010 performance plan measures, which it
can track according to GAO's high-risk areas.
- In October 2010, DOD continued this quarterly reporting using the
fiscal year 2011 performance plan measures.
The military departments are in varying stages of their planning
efforts.
Army and Navy officials stated that they used the SMP's priorities as
the starting point for developing their respective business
transformation plans. The Army issued its business transformation plan
in October 2010. The Navy issued its plan in November 2010.
The Air Force has an overarching 2008 strategic plan that it states
covers business transformation; however, this Air Force plan does not
define business transformation and does not identify which of its goals
are related to business transformation.
* For example, one goal in the Air Force 2008 strategic plan is to
"ensure an accountable, credible, and transparent institution." Because
this goal is stated in broad terms, it is unclear whether this goal is
related to any of the business priorities identified in DOD's July 2009
SMP.
* Air Force officials stated that they planned to update their
strategic plan and establish business-related priorities by December
2010 and then formally issue their business transformation plan in
March 2011.
Prior work on results-oriented management best practices has shown that
a key attribute of success is that performance goals and measures--such
as those in the military departments' business transformation plans--
should align with higher-level departmentwide priorities, with the
relationship clearly articulated.[Footnote 45]
* Such linkage is important in ensuring that agency efforts are
properly aligned with goals (and thus contribute to their
accomplishment) and in assessing progress toward achieving goals.
Although the 2009 SMP describes a strategic planning process, DOD has
not established mechanisms, including procedures and milestones, by
which DOD is to reach consensus with the military departments on
priorities, synchronize development of the respective plans with each
other and with the budget process, obtain review and approval by senior
leaders, and guide efforts to monitor progress and take corrective
action.
* Therefore, it is unclear to what extent the business transformation
priorities for the military departments will be aligned with the
priorities identified in DOD's SMP or how these business transformation
priorities will influence the department's budget requests.
Without a strategic plan containing measurable goals and funding
priorities, supported by a clearly defined planning process, the
department will not have the tools it needs to set strategic direction
for business transformation efforts, fully align efforts to develop
plans and budget requests that reflect business priorities, measure
progress in implementing reform initiatives, and institutionalize its
strategic planning efforts across administrations.
Conclusions:
Since January 2009, DOD and the military departments have taken some
positive steps toward further developing and implementing a management
approach to business transformation. Clearly, filling key positions,
establishing governance entities, and developing business plans at the
departmentwide and military department levels will enhance the
department's ability to achieve successful and sustainable
transformation. However, in order to establish accountability and fully
leverage the potential of the CMO and DCMO positions and supporting
governance entities to provide the leadership necessary to guide reform
efforts, roles and responsibilities must be clear.
Given their responsibilities, under statute and department guidance,
related to improving the efficiency and effectiveness of business
operations, the CMO and DCMO are uniquely positioned to monitor,
integrate, and otherwise institutionalize the Secretary of Defense's
ongoing efficiency initiative. In the absence of specifically defining
their roles and responsibilities related to this initiative, it is
unclear how DOD will establish accountability and leverage those
positions to provide the leadership necessary to sustain momentum and
progress in achieving reforms in the long term.
DOD has now identified business priorities in its updated strategic
plan, which is clearly an improvement over its initial plan, but it
still lacks certain elements, such as a complete set of measurable
goals linked to funding priorities. Furthermore, it has not yet set up
mechanisms necessary to guide and align its strategic planning efforts.
Without a comprehensive strategic plan, supported by a clearly defined
planning process, DOD will not have the tools it needs to set strategic
direction, fully align plans and budgets that reflect business
priorities, measure progress against goals, and institutionalize its
strategic planning efforts across administrations.
Recommendations for Executive Action:
To establish ongoing accountability and better leverage the unique
positions of the CMO and DCMO to provide the leadership necessary to
follow up the Secretary's recent efficiency initiative in the long
term, we recommend that the Secretary of Defense take the following
action:
* Assign specific roles and responsibilities to the CMO and DCMO for
integrating the Secretary's initiative with ongoing reform efforts,
overseeing its implementation, and otherwise institutionalizing the
effort for the long term.
To enhance DOD's ability to set strategic direction for its business
transformation efforts, and better align and institutionalize its
efforts to develop and implement plans and measure progress against
established goals, we recommend that the Secretary of Defense direct
the CMO to take the following two actions:
* Ensure that DOD's revised SMP contains measurable goals and funding
priorities linked to those goals.
* Issue guidance to establish a strategic planning process with
mechanisms--such as procedures and milestones--for routinely updating
the SMP and military department business transformation plans. In
particular, this guidance should include elements such as how DOD and
the military departments--including the CMO, DCMO, and military
department CMOs--will reach consensus on business priorities,
coordinate review and approval of updates to plans, synchronize the
development of plans with the budget process, and monitor
implementation of reform initiatives, and report on progress, on a
periodic basis, towards achieving established goals.
Agency Comments and Our Evaluation:
In its written comments, DOD concurred with two of our recommendations
and partially concurred with one.
DOD concurred with our recommendation that the Secretary of Defense
assign specific roles and responsibilities to the CMO and DCMO for
integrating the Secretary's efficiency initiative with ongoing reform
efforts, overseeing its implementation, and otherwise
institutionalizing the effort for the long term. While DOD did not
specify the action it planned to take to implement our recommendation,
we would expect that once the Secretary determines the roles and
responsibilities to be assigned to the CMO and DCMO, these would be
clearly communicated within the department.
DOD concurred with our recommendation that the Secretary direct the
CMO to ensure that DOD's revised SMP contains measurable goals and
funding priorities linked to those goals. DOD agreed that the SMP
should contain measurable goals linked to the budget, and stated that
the draft fiscal year 2011 SMP accomplishes this goal. DOD also stated
that the fiscal year 2011 SMP is tightly integrated with the fiscal
year 2011 Performance Budget and directly links performance measures to
the budget through Forces and Infrastructure Category codes. DOD
further noted that each goal in the fiscal year 2011 SMP is supported
by quantifiable performance measures and that results against these
measures will be briefed on a quarterly basis to the DBSMC. On December
30, 2010, DOD issued an updated plan, which covers fiscal year 2011. We
plan to evaluate the updated plan to assess whether it contains key
elements, such as measurable goals, funding priorities, and resource
needs.
DOD partially concurred with our recommendation that the Secretary
direct the CMO to issue guidance to establish a strategic planning
process with mechanisms--such as procedures and milestones--for
routinely updating the SMP and military department business
transformation plans. DOD agreed that it is important for its strategic
planning process to ensure alignment between the various documents that
comprise the department's "family of plans" and the officials that are
responsible for those plans. DOD identified this "family of plans" to
include the SMP, Performance Budget, Financial Improvement and Audit
Readiness Plan, DOD Logistics Strategic Plan, individual GAO High Risk
Area Remediation Plans, and Military Department Business Transformation
and Transition Plans. DOD, however, stated that it is focused on using
its existing governance bodies and natural planning cycles associated
with these documents to ensure alignment while maintaining the ability
to respond to changing circumstances in an agile way that the
establishment of formal policy would not allow. It noted that these
governance bodies include the DBSMC, the Performance Budget Senior
Review Group, and a variety of functional and organizational boards
throughout the department.
We recognize that DOD relies on existing governance bodies and planning
cycles to develop and align the SMP and other related plans, and agree
that it is important for DOD to be able to respond to changing
circumstances. However, we do not believe that establishing formal
policy to govern its strategic planning efforts would hinder the
department in any manner. Rather, we believe that issuing formal
guidance to clearly define the planning process will help the
department achieve a common understanding and approach among the
various planning entities and therefore enhance its overall ability to
set strategic direction, better align and institutionalize its planning
efforts, and measure progress against established goals. Over the past
few years, the department and military departments have gained momentum
in achieving consensus on business priorities and maturing their
planning efforts. To sustain this momentum and to ensure continuity for
the long term, we believe it is important that the CMO clearly outline
the process that will guide strategic planning efforts, including
elements such as how DOD and the military departments--including the
CMO, DCMO, and military department CMOs--will reach consensus on
business priorities, coordinate review and approval of updates to
plans, synchronize the development of plans with the budget process,
and monitor implementation of reform initiatives, and report progress,
on a periodic basis, towards achieving established goals. Given DOD's
statements about the need to maintain the ability to respond to
changing circumstances, the CMO could also include specific provisions
to allow for the flexibility needed to make adjustments as
circumstances dictate.
Related GAO Products:
DOD Business Transformation: Improved Management Oversight of Business
System Modernization Efforts Needed. [hyperlink,
http://www.gao.gov/products/GAO-11-53]. Washington, D.C.: October 7,
2010.
Department of Defense: Financial Management Improvement and Audit
Readiness Efforts Continue to Evolve. [hyperlink,
http://www.gao.gov/products/GAO-10-1059T]. Washington, D.C.: September
29, 2010.
DOD's High-Risk Areas: Observations on DOD's Progress and Challenges in
Strategic Planning for Supply Chain Management. [hyperlink,
http://www.gao.gov/products/GAO-10-929T]. Washington, D.C.: July 27,
2010.
Warfighter Support: Actions Needed to Improve the Joint Improvised
Explosive Device Defeat Organization's System of Internal Control.
[hyperlink, http://www.gao.gov/products/GAO-10-660]. Washington, D.C.:
July 1, 2010.
Warfighter Support: DOD Needs to Improve Its Planning for Using
Contractors to Support Future Military Operations. [hyperlink,
http://www.gao.gov/products/GAO-10-472]. Washington, D.C.: March 30,
2010.
Warfighter Support: Actions Needed to Improve Visibility and
Coordination of DOD's Counter-Improvised Explosive Device Efforts.
[hyperlink, http://www.gao.gov/products/GAO-10-95]. Washington, D.C.:
October 29, 2009.
DOD Personnel Clearances: Comprehensive Timeliness Reporting, Complete
Clearance Documentation, and Quality Measures Are Needed to Further
Improve the Clearance Process. [hyperlink,
http://www.gao.gov/products/GAO-09-400]. Washington, D.C.: May 19,
2009.
DOD Business Systems Modernization: Recent Slowdown in
Institutionalizing Key Management Controls Needs to Be Addressed.
[hyperlink, http://www.gao.gov/products/GAO-09-586]. Washington, D.C.:
May 18, 2009.
Financial Management: Achieving Financial Statement Auditability in the
Department of Defense. [hyperlink,
http://www.gao.gov/products/GAO-09-373]. Washington, D.C.: May 6, 2009.
DOD's High-Risk Areas: Actions Needed to Reduce Vulnerabilities and
Improve Business Outcomes. [hyperlink,
http://www.gao.gov/products/GAO-09-460T]. Washington, D.C.: March 12,
2009.
Defense Inventory: Army Needs to Evaluate Impact of Recent Actions to
Improve Demand Forecasts for Spare Parts. [hyperlink,
http://www.gao.gov/products/GAO-09-199]. Washington, D.C.: January 12,
2009.
Defense Business Transformation: Status of Department of Defense
Efforts to Develop a Management Approach to Guide Business
Transformation. [hyperlink, http://www.gao.gov/products/GAO-09-272R].
Washington, D.C.: January 9, 2009.
High-Risk Series: An Update. [hyperlink,
http://www.gao.gov/products/GAO-09-271]. Washington, D.C.: January
2009.
Defense Inventory: Management Actions Needed to Improve the Cost
Efficiency of the Navy's Spare Parts Inventory. [hyperlink,
http://www.gao.gov/products/GAO-09-103]. Washington, D.C.: December
12, 2008.
DOD Business Transformation: Air Force's Current Approach Increases
Risk That Asset Visibility Goals and Transformation Priorities Will Not
Be Achieved. [hyperlink, http://www.gao.gov/products/GAO-08-866].
Washington, D.C.: August 8, 2008.
DOD Business Systems Modernization: Progress in Establishing Corporate
Management Controls Needs to Be Replicated Within Military Departments.
[hyperlink, http://www.gao.gov/products/GAO-08-705]. Washington, D.C.:
May 15, 2008.
Defense Management: More Transparency Needed over the Financial and
Human Capital Operations of the Joint Improvised Explosive Device
Defeat Organization. [hyperlink, http://www.gao.gov/products/GAO-08-
342]. Washington, D.C.: March 6, 2008.
Defense Business Transformation: Sustaining Progress Requires
Continuity of Leadership and an Integrated Approach. [hyperlink,
http://www.gao.gov/products/GAO-08-462T]. Washington, D.C.: February
7, 2008.
Organizational Transformation: Implementing Chief Operating Officer/
Chief Management Officer Positions in Federal Agencies. [hyperlink,
http://www.gao.gov/products/GAO-08-322T]. Washington, D.C.: December
13, 2007.
Organizational Transformation: Implementing Chief Operating Officer/
Chief Management Officer Positions in Federal Agencies. [hyperlink,
http://www.gao.gov/products/GAO-08-34]. Washington, D.C.: November 1,
2007.
Defense Business Transformation: Achieving Success Requires a Chief
Management Officer to Provide Focus and Sustained Leadership.
[hyperlink, http://www.gao.gov/products/GAO-07-1072]. Washington,
D.C.: September 5, 2007.
DOD Business Transformation: Lack of an Integrated Strategy Puts the
Army's Asset Visibility System Investments at Risk. [hyperlink,
http://www.gao.gov/products/GAO-07-860]. Washington, D.C.: July 27,
2007.
Defense Logistics: Efforts to Improve Distribution and Supply Support
for Joint Military Operations Could Benefit from a Coordinated
Management Approach. [hyperlink,
http://www.gao.gov/products/GAO-07-807]. Washington, D.C.: June 29,
2007.
High-Risk Series: An Update. [hyperlink,
http://www.gao.gov/products/GAO-07-310]. Washington, D.C.: January
2007.
[End of section]
Enclosure II: Comments from the Department of Defense:
Deputy Chief Management Officer:
9010 Defense Pentagon:
Washington, DC 20301-9010:
December 21, 2010:
Ms. Sharon L. Pickup:
Director, Defense Capabilities and Management:
U.S. Government Accountability Office:
441 G Street, NW:
Washington, DC 20548:
Dear Ms. Pickup:
This is the Department of Defense (DoD) response to the Government
Accountability Office draft report GAO-11-181R, "Defense Business
Transformation: DoD Needs to Take Additional Actions to Further Define
Key Management Roles, Develop Measurable Goals, and Align Planning
Efforts," dated November 17, 2010 (GAO Code 351377). The Department
acknowledges receipt of the draft report and appreciates the
opportunity to review your findings. The Department's detailed
comments on the recommendations are attached.
Signed by:
Elizabeth A. McGrath:
Attachment: As stated:
[End of letter]
GAO Draft Report Dated November 17, 2010:
GAO-11-181R (GAO Code 351377):
"Defense Business Transformation: DOD Needs To Take Additional Actions
To Further Define Key Management Roles, Develop Measurable Goals, And
Align Planning Efforts"
Department Of Defense Comments To The GAO Recommendations:
Recommendation 1: The GAO recommends that the Secretary of Defense
assign specific roles and responsibilities to the CMO and DCMO for
integrating the Secretary's efficiency initiative with ongoing reform
efforts, overseeing its implementation, and otherwise
institutionalizing the effort for the long term. (See pages 4-5/GAO
Draft Report.)
DoD Response: Concur.
Recommendation 2: The GAO recommends that the Secretary of Defense
direct the CMO to ensure that DoD's revised SMP contains measurable
goals and funding priorities linked to those goals. (See page 5/GAO
Draft Report.)
DoD Response: Concur.
The Department agrees the Strategic Management Plan (SMP) should
contain measurable goals linked to the budget. The draft Fiscal Year
(FY) 2011 SMP, now in formal coordination within the Department,
accomplishes this goal. The FY 2011 SMP is tightly integrated with the
FY 2011 Performance Budget and directly links performance measures to
the budget through the use of Forces and Infrastructure Category
("FIC") codes. Additionally, each goal in the FY 2011 is supported by
quantifiable performance measures. Results against these measures will
be briefed on a quarterly basis to the Defense Business Systems
Management Committee (DBSMC).
Recommendation 3: The GAO recommends that the Secretary of Defense
direct the CMO to issue guidance to establish a strategic planning
process with mechanisms — such as procedures and milestones — for
routinely updating the SMP and military department business
transformation plans. In particular, this guidance should include
elements such as how DoD and the military departments — including the
CMO, DCMO, and military department CMOs — will reach consensus on
business priorities, coordinate review and approval of updates to
plans, synchronize the development of plans with the budget process,
and monitor and report progress in implementing reform initiatives and
achieving established goals. (See page 5/GAO Draft Report.)
DoD Response: Partially concur.
The Department agrees that it is important for the Department's
strategic planning process to ensure alignment between the various
documents that comprise the Department's "family of plans" and the
officials that are responsible for those plans. The Department's
"family of plans" includes the SMP, Performance Budget, Financial
Improvement and Audit Readiness (FIAR) Plan. DoD Logistics Strategic
Plan, individual GAO High Risk Area Remediation Plans and Military
Department Business Transformation and Transition Plans. However, DoD
is focused on using its existing governance bodies and the natural
planning cycles associated with these documents to ensure alignment
while maintaining the ability to respond to changing circumstances in
an agile way that the establishment of formal policy would not allow.
These governance bodies include the DBSMC, the Performance Budget
Senior Review Group, and a variety of functional and organizational
boards throughout the Department.
[End of section]
Footnotes:
[1] See for example, GAO, High-Risk Series: An Update, [hyperlink,
http://www.gao.gov/products/GAO-09-271] (Washington, DC.: Jan. 2009).
[2] GAO, GAO's 2005 High-Risk Update, [hyperlink,
http://www.gao.gov/products/GAO-05-350T] (Washington, D.C.: Feb. 17,
2005).
[3] GAO, Defense Business Transformation: Achieving Success Requires a
Chief Management Officer to Provide Focus and Sustained Leadership,
[hyperlink, http://www.gao.gov/products/GAO-07-1072] (Washington,
D.C.: Sept. 5, 2007).
[4] Pub. L. No. 110-181, § 904 (2008).
[5] Pub. L. No. 110-417, §§ 904, 908 (2008).
[6] GAO, Defense Business Transformation: Status of Department of
Defense Efforts to Develop a Management Approach to Guide Business
Transformation, [hyperlink, http://www.gao.gov/products/GAO-09-272R]
(Washington, D.C.: Jan. 9, 2009).
[7] For example, DOD established the Defense Business Systems
Management Committee, the Deputy's Advisory Working Group, and the
Business Transformation Agency.
[8] GAO, Organizational Transformation: Implementing Chief Operating
Officer/Chief Management Officer Positions in Federal Agencies.
[hyperlink, http://www.gao.gov/products/GAO-08-34] (Washington, D.C.:
Nov.1, 2007).
[9] See for example, GAO, Defense Business Transformation: A Full-time
Chief Management Officer with a Term Appointment Is Needed at DOD to
Maintain Continuity of Effort and Achieve Sustainable Success,
[hyperlink, http://www.gao.gov/products/GAO-08-132T] (Washington,
D.C.: Oct. 16, 2007); [hyperlink,
http://www.gao.gov/products/GAO-09-272R]; and [hyperlink,
http://www.gao.gov/products/GAO-07-1072].
[10] Pub. L. No. 103-62 (1993).
[11] [hyperlink, http://www.gao.gov/products/GAO-09-272R].
[12] The DOD high-risk areas are: DOD approach to business
transformation, DOD personnel security clearance program, DOD support
infrastructure management, DOD business systems modernization, DOD
financial management, DOD contract management, DOD supply chain
management, and DOD weapons system acquisition.
[13] For a list of related GAO products, see the list at the end of
this briefing.
[14] National Defense Authorization Act for Fiscal Year 2008, Pub. L.
No. 110-181, § 904 (2008).
[15] Duncan Hunter National Defense Authorization Act for Fiscal Year
2009, Pub. L. No. 110-417, §§ 904, 908 (2008).
[16] For key strategies for establishing and implementing CMO or chief
operating officer positions, see GAO, Organizational Transformation:
Implementing Chief Operating Officer/Chief Management Officer
Positions in Federal Agencies, [hyperlink,
http://www.gao.gov/products/GAO-08-34] (Washington, D.C.: Nov. 1,
2007).
[17] GAO, Defense Business Transformation: Status of Department of
Defense Efforts to Develop a Management Approach to Guide Business
Transformation, [hyperlink, http://www.gao.gov/products/GAO-09-272R]
(Washington, D.C.: Jan. 9, 2009).
[18] The Business Transformation Agency supports the DCMO in leading
and coordinating business transformation efforts across the department,
including maintaining and updating the department's enterprise
architecture for its business mission area.
[19] [hyperlink, http://www.gao.gov/products/GAO-08-34].
[20] GAO, Defense Business Transformation: A Full-time Chief Management
Officer with a Term Appointment Is Needed at DOD to Maintain Continuity
of Effort and Achieve Sustainable Success, [hyperlink,
http://www.gao.gov/products/GAO-08-132T] (Washington, D.C.: Oct. 16,
2007); Defense Business Transformation: Achieving Success Requires a
Chief Management Officer to Provide Focus and Sustained Leadership,
[hyperlink, http://www.gao.gov/products/GAO-07-1072] (Washington,
D.C.: Sept. 5, 2007); and [hyperlink,
http://www.gao.gov/products/GAO-09-272R].
[21] Pub. L. No. 103-62 (1993).
[22] On December 30, 2010, DOD issued an updated plan, which covers
fiscal year 2011. We plan to evaluate the updated plan to assess
whether it contains key elements, such as measurable goals, funding
priorities, and resource needs.
[23] See [hyperlink, http://www.gao.gov/products/GAO-08-34].
[24] This board was originally the Procure-to-Pay Governance Board and
was established in October 2009. The DCMO expanded the scope of this
board to include all business processes, renamed it the End-to-End
Business Process Governance Board, and drafted a charter in June 2010.
[25] The previous Under Secretary of the Army, who served from July
2008 to December 2008, was also the Army CMO.
[26] The CMO co-chairs the Air Force Council and the DCMO co-chairs the
Air Force Board. Both of these entities are part of the governance
structure by which the Air Force makes servicewide decisions about all
matters, including business transformation.
[27] [hyperlink, http://www.gao.gov/products/GAO-07-1072].
[28] Remarks as delivered by Secretary of Defense Robert M. Gates,
Abilene, Kansas, May 8, 2010.
[29] The other three tracks are as follows: (1) the Secretary directed
that the military services find more than $100 billion in overhead
savings over the next 5 years; (2) the department is seeking ideas,
suggestions, and proposals regarding efficiencies from outside experts
and industry; and (3) the department is conducting a broad review of
how it is organized and operated to inform the President's 2012 budget
process.
[30] GAO, High-Risk Series: An Update, [hyperlink,
http://www.gao.gov/products/GAO-09-271] (Washington, D.C.: January
2009).
[31] GAO, High-Risk Series: An Update. [hyperlink,
http://www.gao.gov/products/GAO-07-310] (Washington, D.C.: January
2007).
[32] [hyperlink, http://www.gao.gov/products/GAO-09-271].
[33] GAO, DOD Personnel Clearances: Comprehensive Timeliness Reporting,
Complete Clearance Documentation, and Quality Measures Are Needed to
Further Improve the Clearance Process, [hyperlink,
http://www.gao.gov/products/GAO-09-400] (Washington, D.C.: May 19,
2009).
[34] GAO, Financial Management: Achieving Financial Statement
Auditability in the Department of Defense, [hyperlink,
http://www.gao.gov/products/GAO-09-373] (Washington, D.C.: May 6,
2009).
[35] GAO, Department of Defense: Financial Management Improvement and
Audit Readiness Efforts Continue to Evolve, [hyperlink,
http://www.gao.gov/products/GAO-10-1059T] (Washington, D.C.: Sept. 29,
2010).
[36] [hyperlink, http://www.gao.gov/products/GAO-10-1059T].
[37] GAO, Defense Inventory: Management Actions Needed to Improve the
Cost Efficiency of the Navy's Spare Parts Inventory, [hyperlink,
http://www.gao.gov/products/GAO-09-103] (Washington, D.C.: Dec. 12,
2008), and Defense Inventory: Army Needs to Evaluate Impact of Recent
Actions to Improve Demand Forecasts for Spare Parts, [hyperlink,
http://www.gao.gov/products/GAO-09-199] (Washington, D.C.: Jan. 12,
2009).
[38] GAO, DOD's High-Risk Areas: Observations on DOD's Progress and
Challenges in Strategic Planning for Supply Chain Management,
[hyperlink, http://www.gao.gov/products/GAO-10-929T] (Washington,
D.C.: July 27, 2010).
[39] GAO, Military Training: DOD Needs a Strategic Plan and Better
Inventory and Requirements Data to Guide Development of Language Skills
and Regional Proficiency, [hyperlink,
http://www.gao.gov/products/GAO-09-568] (Washington, D.C.: June 19,
2009), and [hyperlink, http://www.gao.gov/products/GAO-09-272R].
[40] GAO, The Results Act: An Evaluator's Guide to Assessing Agency
Annual Performance Plans, [hyperlink,
http://www.gao.gov/products/GAO/GGD-10.1.20] (Washington, D.C.: April
1998), and [hyperlink, http://www.gao.gov/products/GAO-09-568].
[41] GAO, Tax Administration: IRS Needs to Further Refine Its Tax
Filing Season Performance Measures, [hyperlink,
http://www.gao.gov/products/GAO-03-143] (Washington, D.C.: Nov.
22, 2002).
[42] GAO, Executive Guide: Effectively Implementing the Government
Performance and Results Act, [hyperlink,
http://www.gao.gov/products/GAO/GGD-96-118] (Washington, D.C.: June
1996).
[43] Under 31 U.S.C. § 1115, DOD is required to issue an annual
performance plan, in which performance indicators to be used in
measuring or assessing relevant outputs, service levels, and outcomes
of each program activity are established.
[44] We did not assess the quality of the fiscal year 2010 performance
plan measures.
[45] GAO, Defense Management: Tools for Measuring and Managing Defense
Agency Performance Could Be Strengthened, [hyperlink,
http://www.gao.gov/products/GAO-04-919] (Washington, D.C.: Sept. 13,
2004).
[End of section]
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