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“Ladies and Gentlemen, our hearing today is focused on improving the management of the Department of Defense. We have with us Deputy Secretary of Defense Gordon England, a seasoned executive and one of the most capable managers serving in government. Here also today are Mr. David Patterson, the Principal Deputy Under Secretary of Defense Comptroller, and Mr. Paul Brinkley, the Deputy Under Secretary of Defense for Business Transformation. These gentlemen will outline the management challenges confronting the Department and tell us how they are addressing them.
“DOD has acknowledged that it has significant management challenges, including managing people and business systems at over 3,000 locations worldwide; managing $1.4 trillion in assets and $2.0 trillion in liabilities; and managing annual operating costs in excess of $700 billion. For example, in 2006 DOD had information sufficient to obtain either a clean or qualified audit opinion on only 21 percent of its assets and 77 percent of its liabilities. This results partly from the fact that the Department still has over 770 legacy business systems in service, few of which are capable of sharing information with each other.
“DOD has some high profile programs to correct these management problems, however, these programs themselves have experienced significant challenges. In 2005, GAO designated DOD’s approach to business transformation as high risk. GAO had previously designated DOD’s business systems modernization and financial management modernization programs as high risk in 1995. These programs are extremely complex undertakings involving literally thousands of moving parts. Their success depends on careful management, yet the GAO has also identified significant management weaknesses which have impeded the Department.
“Congress has worked to spur change in DOD’s business processes. The FY05 Defense Authorization Act mandated the creation of the Defense Business Systems Management Committee (DBSMC) to oversee business functions. The FY06 Defense Authorization Act required the Secretary of Defense to conduct a study on whether to establish a Chief Management Officer for the Department. The study was performed by the Institute for Defense Analyses (IDA) and delivered to Congress on December 4, 2006.
“The House and Senate passed defense authorization bills take different approaches to implementing the IDA report’s recommendations. The House bill would provide significant flexibility to the Secretary of Defense in structuring his management team, however, it would hold the Department accountable for meeting essential management goals. These goals would include modernizing and integrating DOD’s business systems to better support the warfighter, and preparing the Department’s books to pass an independent financial audit. The Senate bill is more prescriptive in assigning specific management roles to certain individuals at DOD. Hopefully, we will leave here today better prepared to finalize our legislative work with the Senate on this topic
“Mr. Secretary I look forward to hearing from you and your colleagues, and I turn now to my friend and colleague from California, Duncan Hunter, for his opening statement.”
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