In light of the nation’s fiscal imbalance, the Department of Defense
(DOD) will face competing demands for resources as it continues to support ongoing
operations and prepare for future threats. With an annual appropriation of about
$512 billion in fiscal year 2009, and supplemental funding of about $807 billion
over the past several years to support the global war on terror, the department
has a larger budget than any other federal agency. To maximize its use of resources
and minimize wasteful spending, the department needs to become more disciplined
in its approach to developing plans and budgets. It also needs to take greater
steps to improve the efficiency and effectiveness of its programs and operations,
particularly with respect to weapon systems acquisition and contract management.
With tightened budgets likely governmentwide, better fiscal discipline is
essential and will require sustained leadership at the highest levels of the
department, with clear accountability for achieving results.
The department’s current approach to planning and budgeting is based
on overly optimistic planning assumptions and lacks a strategic, risk-based
framework for determining priorities and making investment decisions. As a
result, it continues to experience a mismatch between programs and budgets,
and it does not fully consider long-term resource implications and the opportunity
cost of selecting one alternative over another.
While the combat effectiveness of U.S. forces is unparalleled, DOD has not
been as effective in managing its ongoing business operations, resulting in
substantial waste and inefficiency that have adversely affected mission performance
and increased the vulnerability of programs to fraud, waste, abuse, and mismanagement.
The department's senior leadership has shown a commitment to transforming business
operations, but challenges remain in sustaining and building on this momentum,
particularly during a period of transition to a new administration.
The department continues to rely heavily on emergency funding requests to
cover the costs of contingency operations that have been ongoing for several
years, even though some of these costs are the same ones it incurs for base
needs. Specifically, changes in DOD’s funding guidance have resulted
in billions of dollars being added to the global war on terrorism funding requests
for what DOD calls the “longer war against terror, “ making it
difficult to distinguish between incremental costs to support specific contingency
operations and longer-term costs typically associated with DOD’s baseline
budget.
The department’s major weapon system programs continue to take longer
to develop, cost more, and deliver fewer quantities and capabilities than originally
planned. The total acquisition cost of DOD’s 2007 portfolio of major
programs has grown by nearly $300 billion over initial estimates. At the strategic
level, DOD’s processes for identifying needs, allocating resources, and
buying weapon systems are fragmented and broken. At the program level, weapon
system programs are initiated without sufficient knowledge about requirements,
technology, and design maturity. Instead, managers rely on assumptions that
are consistently too optimistic.
The department spent more than $315 billion acquiring goods and services
in fiscal year 2007, more than double the amount it spent 6 years earlier.
It is increasingly relying on contractors to provide services to help meet
critical missions and support acquisition functions. However, the lack of well-defined
requirements, the use of ill-suited business arrangements, and the lack of
an adequate number of trained acquisition and contract oversight personnel
contribute to unmet expectations and schedule delays and place the department
at risk of potentially paying more than necessary for contract arrangements.
The new administration needs to move quickly to nominate and fill key leadership
positions, including the Deputy Secretary of Defense (now statutorily designated
as the Chief Management Officer), the Deputy Chief Management Officer, the
Undersecretaries of Defense, and the Secretaries and the Undersecretaries in
the military departments (now statutorily designated as each department’s
Chief Management Officer). DOD senior leaders must have sufficient authority
to make trade-offs between competing near-term and long-term demands, get the
highest return from the funding choices that are made, and put sufficient controls
in place to manage an increasingly large and involved contractor workforce.
DOD needs to adopt a risk-based approach to investment decision making that
links strategic goals to plans and budgets; assesses the values and risks of
various courses of actions as a tool for re-examining defense programs, setting
priorities, and allocating resources; and uses performance measures to assess
outcomes.
DOD needs to identify what costs are related to the war on terror and, in
consultation with the Office of Management and Budget, build these costs into
the base defense budget instead of continuing to fund these costs with emergency
funding requests.
DOD needs to review its existing and planned weapon system acquisition programs
to (1) determine the right mix of programs to invest in by making better decisions
as to which programs should be pursued given existing and expected funding
and, more importantly, by deciding which programs should not be pursued; (2)
ensure that programs that are started are executable by matching requirements
with resources and locking in those requirements; and (3) make it clear that
programs will then be executed based on knowledge and holding program managers
responsible for that execution.
DOD needs to determine the appropriate mix of contractor, civilian, and
military personnel and ensure it retains a sufficient institutional capacity
to provide effective management and oversight.
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
Military Base Realignments and Closures: DOD Faces Challenges in Implementing Recommendations on Time and Is Not Consistently Updating Savings Estimates
Depot Maintenance: DOD's Report to Congress on Its Public-Private Partnerships at Its Centers of Industrial and Technical Excellence (CITEs) Is Not Complete and Additional Information Would Be Useful
Military Operations: Implementation of Existing Guidance and Other Actions Needed to Improve DOD's Oversight and Management of Contractors in Future Operations
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
Global War On Terrorism: Fiscal Year 2006 Obligation Rates Are Within Funding Levels and Significant Multiyear Procurement Funds Will Likely Remain Available for Use in Fiscal Year 2007