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United States Government Accountability Office: 
GAO: 

Report to Congressional Committees: 

February 2013: 

Defense Business Transformation: 

GAO-13-267: 

GAO Highlights: 

Highlights of GAO-13-267, a report to congressional committees. 

Why GAO Did This Study: 

DOD spends billions of dollars each year to maintain key business 
operations intended to support the warfighter. In 2005, GAO identified 
DOD’s approach to business transformation as high-risk because DOD had 
not established management responsibility, accountability, and control 
over business transformation-related activities and resources, and it 
lacked a plan with specific goals, measures, and mechanisms to monitor 
progress. GAO previously reported that DOD has taken steps to develop 
a management approach. This report addresses DOD’s progress in (1) 
incorporating key strategic planning elements into its transformation 
plan; and (2) developing and implementing an approach for assessing 
DOD-wide progress toward business goals. GAO analyzed relevant DOD 
documents, reviewed prior and ongoing GAO work; and interviewed DOD 
officials. 

What GAO Found: 

The Department of Defense (DOD) has improved its Strategic Management 
Plan (SMP) by including additional strategic planning elements that 
were lacking from previous plans; however, the fiscal year 2012-2013 
SMP still needs to incorporate some key information that would make it 
more useful for DOD decision makers as a guide for implementing 
business transformation efforts and for measuring progress. 
Improvements in the SMP include links between its business goals and 
DOD-wide goals, as well as milestone or target data that would enable 
DOD to better measure performance and assess progress in achieving SMP 
goals. However, the SMP does not fully describe the specific 
challenges the goals are intended to address and what the root causes 
of those challenges are. For example, the SMP states that the goal on 
strengthening DOD’s acquisition processes is aimed at obtaining 
greater efficiency and productivity in defense spending, but the 
accompanying narrative does not describe what is causing acquisition-
related cost growth and how the goal’s initiatives may address those 
causes. The SMP also lacks sufficient context for why business goals 
and strategies were chosen or changed from prior plans, such as 
whether sufficient progress had been made to warrant their removal. 
Also, the SMP includes performance measures that do not fully reflect 
core activities needed to assess progress for some business goals. For 
example, the SMP identifies measures related to planning for 
contractor support, but does not address other core activities such as 
those related to providing contractor oversight. Refining the SMP to 
include this key information could help DOD better prioritize and 
target its reform efforts to address the underlying causes of its 
systemic business challenges and to achieve results. 

DOD has broadly outlined a performance management approach for 
monitoring business transformation efforts, but has not used its 
governance structures to regularly review performance results or 
defined how these structures will routinely integrate various sources 
of performance data to assess department-wide progress. DOD has 
established governance structures to help monitor progress, such as 
the Defense Business Council (DBC), established in June 2012 to, among 
other things, review performance results to track progress against 
goals. However, the DBC has not regularly reviewed performance data 
and when reviews did occur, it did not have sufficient information to 
assess progress. For example, as of December 2012, the DBC had 
reviewed performance results only twice, and this information did not 
include data on all SMP measures, nor did it disclose the reasons why 
certain measures were at risk of missing quarterly targets. Also, 
these results provide only a partial picture of performance for any 
given business area. For example, for the area of operational energy 
efficiency, the SMP measures reviewed by the DBC covered only progress 
in reducing consumption, but not measures related to supply and 
security, which are key areas in DOD’s strategy for achieving 
operational energy efficiency. Better defining and implementing a more 
integrated approach to reviewing performance, such as including a 
broader range of performance information, will enhance DOD’s ability 
to assess progress toward its business goals. 

What GAO Recommends: 

GAO recommends that DOD add information to its SMP, such as a 
description of key challenges and context for why goals were chosen. 
GAO also recommends that DOD further define its performance management 
approach. DOD partially concurred with our first recommendation and 
concurred with our second recommendation. DOD stated that it would add 
information to the SMP as appropriate, and continue to improve and 
institutionalize DBC operations. As part of these efforts, GAO 
believes that DOD needs to identify specific steps it will take to 
integrate and regularly review performance data from various sources 
to assess progress towards its business goals. 

View [hyperlink, http://www.gao.gov/products/GAO-13-267]. For more 
information, contact Sharon Pickup at 202-512-9619 or pickups@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

DOD'S Business Transformation Plan Has Improved but Still Lacks Some 
Key Information: 

DOD is Limited in Its Ability to Assess Department-wide Progress 
Toward Achieving Business Transformation Goals: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Scope and Methodology: 

Appendix II: Business Goals, Initiatives, and Measures in the 
Department of Defense's (DOD) Fiscal Year 2012-2013 Strategic 
Management Plan: 

Appendix III: Comments from the Department of Defense: 

Appendix IV: GAO Contact and Staff Acknowledgments: 

Table: 

Table 1: Business Goals from DOD's Fiscal Year 2012-2013 Strategic 
Management Plan (SMP): 

Abbreviations: 

CMO: Chief Management Officer: 

DBC: Defense Business Council: 

DCMO: Deputy Chief Management Officer: 

DMAG: Deputy's Management Action Group: 

DOD: Department of Defense: 

GPRA: Government Performance and Results Act: 

QDR: Quadrennial Defense Review: 

SMP: Strategic Management Plan: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

February 12, 2013: 

Congressional Committees: 

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] Given the complexity and 
magnitude of the challenges facing DOD in improving business 
operations,[Footnote 3] we 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 enterprise-wide 
transformation plan, supported by a strategic planning process. 

Since 2005, both DOD and Congress have taken various actions to 
address DOD's management of business transformation efforts. For 
example, in May 2007, DOD designated the Deputy Secretary of Defense 
as the CMO for DOD. Moreover, in the National Defense Authorization 
Acts for Fiscal Year 2008[Footnote 4] and Fiscal Year 2009,[Footnote 
5] Congress took steps that included: 

* codifying 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. 

Since 2005, we have reported periodically on DOD's progress in 
implementing its management approach and developing a strategic plan 
for business transformation. For example, in January 2011, we reported 
that DOD had taken positive steps, including filling key positions, 
such as the DCMO and military department CMOs, and establishing 
governance structures, but had made limited progress in its strategic 
planning efforts. Specifically, in its 2009 update, DOD improved its 
initial SMP issued in 2008, by identifying business priorities, but 
the plan still lacked several key elements such as including some 
measurable goals and funding priorities. We also reported that DOD was 
in the early stages of collecting performance data and had described a 
strategic planning process in its 2009 plan update, but had still not 
set up internal mechanisms to implement this process.[Footnote 6] 

Since we last reported in January 2011, DOD issued another update to 
its plan, dated September 2011, which covers fiscal years 2012-2013. 
We performed this review under the authority of the Comptroller 
General to conduct evaluations on his own initiative. Our objectives 
for this report were to assess the extent to which DOD has taken 
additional steps to (1) incorporate key strategic planning elements 
into its business transformation plan; and (2) develop and implement 
an approach for assessing progress on a department-wide basis toward 
business transformation goals. 

To assess what additional steps DOD has taken to incorporate key 
strategic planning elements into its business transformation plan, we 
reviewed and analyzed relevant documents, such as DOD's current 
Strategic Management Plan for fiscal year 2012-2013 and prior 
versions; DOD's annual performance plans for fiscal years 2011 to 
2013; and relevant DOD directives and memos. We assessed whether the 
fiscal year 2012-2013 Strategic Management Plan included key elements 
that we have previously identified as needed for effective strategic 
planning. We also relied on prior and ongoing work we have conducted 
in individual DOD business areas in order to assess the extent to 
which the plan addresses key business-related challenges. To assess 
the extent to which DOD has developed an approach for assessing 
department-wide progress toward business transformation goals, we 
reviewed relevant documents and interviewed senior DOD officials about 
the department's performance assessment approach and its related 
governance mechanisms for monitoring business transformation progress. 
For example, we reviewed DOD's Strategic Management Plans; quarterly 
performance results; memorandums; directives; meeting agendas; and 
briefing documents. We evaluated the department's performance 
assessment approach in light of roles and responsibilities laid out in 
DOD's 2009 Strategic Management Plan[Footnote 7] and in the Government 
Performance and Results Act of 1993, as amended, and in light of key 
practices in results-oriented management, as identified in our 
previous work. For both objectives, we interviewed the Deputy 
Secretary of Defense, the DOD DCMO, the military department CMOs and 
DCMOs; and officials from the offices of several Under Secretaries of 
Defense and business transformation offices within the military 
departments to obtain their perspectives on DOD's efforts to further 
refine its plan and performance management approach and to achieve 
progress toward business transformation goals. 

We conducted this performance audit from February 2012 to February 
2013 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. We discuss 
our scope and methodology in more detail in appendix I. 

Background: 

Since the designation of DOD's approach to business transformation as 
a high-risk area in 2005, we have issued several reports that discuss 
the development of this approach and highlight key areas for 
improvement, particularly in the areas of strategic planning and 
performance management. With regard to strategic planning, 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 department-wide goals and cascading goals 
and measures to lower organizational levels.[Footnote 8] We have 
periodically reported on DOD's progress in incorporating these 
elements into its Strategic Management Plan (SMP) and highlighted key 
areas for improvement. Specifically, in January 2009, we reported that 
DOD issued its first SMP in July 2008; however, the plan did not 
identify specific business areas, strategic goals, objectives, or 
performance measures.[Footnote 9] In January 2011, we reported that 
DOD updated its initial SMP in 2009.[Footnote 10] DOD's 2009 SMP 
identified priorities and reform initiatives but lacked several key 
elements, such as a description of the problems to be addressed, some 
measurable goals, and funding priorities. Accordingly, we recommended, 
in revising its SMP, that DOD ensure that the plan contains measurable 
goals and funding priorities linked to those goals. DOD concurred with 
our recommendation. 

With regard to developing a performance management approach to measure 
progress, we have identified several key management practices 
regarding the effective use of performance information. Specifically, 
we found that the full benefit of collecting performance information --
improved decision making and results--is only fully realized when this 
information is used to support management planning and decision-making 
functions.[Footnote 11] In January 2009, we reported on DOD's 
continued progress in implementing its management framework for 
monitoring business transformation.[Footnote 12] We noted, for 
example, that 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 structures, 
and named CMOs or acting CMOs in the military departments. However, 
DOD had still not clearly defined the authority, roles, and 
relationships for some entities and positions, including the unique 
and shared responsibilities of various governance structures for 
monitoring business transformation progress, as well as decision-
making authority for the DCMO, and the relationship between DOD's DCMO 
and the military department CMOs. 

In January 2011, we reported on additional steps DOD had taken to 
strengthen its management approach to monitoring business 
transformation.[Footnote 13] For example, DOD filled key positions, 
such as the DCMO and military department CMOs; established entities, 
such as a governance board to identify business process improvements; 
and undertook various activities, such as issuing an updated SMP in 
July 2009, and announcing in May 2010 a department-wide effort to 
reduce overhead costs. We reported that DOD was in the early stages of 
measuring progress, and that, DOD had not set up internal mechanisms, 
such as procedures and milestones, by which it could 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. 
Therefore, we recommended that DOD issue guidance to set up a 
strategic planning process with such internal mechanisms. DOD 
partially concurred with our recommendation, stating that the 
department was focused on using its existing governance bodies and 
planning cycles to accomplish these goals. 

DOD'S Business Transformation Plan Has Improved but Still Lacks Some 
Key Information: 

DOD has improved its SMP by including additional strategic planning 
elements previously recommended by GAO, but the SMP still lacks some 
key information that would make it more useful for DOD decision makers 
as a guide for targeting and implementing business transformation 
efforts, measuring progress, and positioning the department to achieve 
results in addressing longstanding business challenges. 

DOD's Fiscal Year 2012-2013 SMP Reflects an Improvement over Previous 
SMPs: 

In September 2011, DOD issued its fourth update to the SMP for fiscal 
years 2012 and 2013. This plan identifies seven overarching business 
goals, as shown in table 1. 

Table 1: Business Goals from DOD's Fiscal Year 2012-2013 Strategic 
Management Plan (SMP): 

Goal 1: Strengthen and right-size the DOD total workforce mix 
(military, civilian, and contracted support) to accomplish the DOD 
mission and sustain superior performance in a time of constrained 
resources: 

Goal 2: Strengthen DOD financial management to respond to warfighter 
needs and sustain public confidence through auditable financial 
statements. 

Goal 3: Build agile and secure information technology capabilities to 
enhance combat power and decision-making while optimizing value. 

Goal 4: Increase the buying power of the DOD acquisition system and 
processes, spanning requirements determination, development, 
procurement, and support to ensure that the force structure is 
modernized, recapitalized, and sustained within available resources. 

Goal 5: Increase operational and installation energy efficiency to 
lower risks to our warfighters, reduce costs, and improve energy 
security. 

Goal 6: Re-engineer/use end-to-end business processes[A] to reduce 
transaction times, drive down costs, and improve service. 

Goal 7: Create agile business operations that plan for, support, and 
sustain contingency missions. 

Source: DOD. 

[A] According to DOD, end-to-end business processes are business 
processes that span core business areas, cutting across functional 
areas and organizations. There are 15 end-to-end business processes, 
such as Hire-to-Retire and Procure-to-Pay. 

[End of table] 

Each of these goals has associated initiatives for achieving specific 
outcomes as well as measures for assessing progress. In addition, for 
each goal, DOD identified goal owners--senior leaders with 
responsibilities for ensuring success and reporting quarterly progress 
on SMP goals. The goal owners are the Under Secretary of Defense 
(Personnel and Readiness); Under Secretary of Defense (Acquisition, 
Technology, and Logistics); the Comptroller; DOD Chief Information 
Officer, and the DOD Deputy Chief Management Officer. See appendix II 
for a more-detailed overview of DOD's fiscal year 2012-2013 SMP. DOD 
officials stated that they used a collaborative process to develop the 
fiscal year 2012-2013 SMP. According to DOD officials, the DCMO 
solicited input from across the department, including the offices of 
the Under Secretary of Defense for Personnel and Readiness; the Under 
Secretary of Defense for Acquisition, Technology and Logistics; the 
Comptroller; the DOD Chief Information Officer; and the military 
departments. The Under Secretaries identified the goals, initiatives, 
and measures to be included in the SMP. Military department officials 
stated that they provided input on the SMP goals and believe that 
these goals are consistent with the military departments' business 
priorities. 

Our analysis shows that the fiscal year 2012-2013 SMP now includes 
some key strategic planning elements that were lacking from previous 
plans. Specifically, as discussed below, we note that the fiscal year 
2012-2013 SMP aligns business goals to department-wide goals, links 
its business goals to other business-related plans, and contains 
improved performance measures. 

SMP Goals Align to Department-wide Goals: 

The 2009 SMP did not clearly link its business goals with department-
wide goals because, at the time, the department was midway through its 
development of the 2010 Quadrennial Defense Review (QDR). However, the 
fiscal year 2012-2013 SMP now states how each business goal is linked 
to high-level departmental goals in the 2010 QDR. For example, the SMP 
links DOD's business goal 1, "Strengthen the DOD Total Workforce Mix" 
with three of the QDR's strategic goals: strategic goal 1, "Prevail in 
Today's Wars"; strategic goal 3, "Prepare to Defeat Adversaries and 
Succeed in a Wide Range of Contingencies"; and strategic goal 4, 
"Preserve and Enhance the All-Volunteer Force." These efforts are 
consistent with our prior work stating that performance goals should 
align with an agency's long-term strategic goals and department-wide 
priorities in order to provide managers and staff with a road map 
showing how their work contributes to achieving strategic goals. 
[Footnote 14] 

SMP Identifies Other Business-Related Plans: 

In addition to the SMP, DOD has other strategic plans that support 
individual business areas. Linking SMP business goals to other 
strategic plans provides a more complete picture of DOD's efforts in 
its various business areas. Although previous SMPs noted that DOD 
utilizes a family of plans to guide its business-related efforts and 
generally described the existence of such other departmental plans, 
they did not specifically identify these plans or link them to SMP 
business goals. The fiscal year 2012-2013 SMP now identifies some 
plans and explicitly links them to some of the goals. For example, the 
description of the SMP business goal on DOD's information technology 
management mentions DOD's Information Technology Enterprise Strategy 
and Roadmap as the guide for achieving the initiatives associated with 
this business goal. Similarly, the narrative describing a business 
goal on increasing DOD's operational and installation energy 
efficiency states that DOD's recently published Operational Energy 
Strategy provides guidance for achieving operational energy 
efficiencies in support of this overarching SMP goal. As another 
example, the fiscal year 2012-2013 SMP goal on strengthening DOD 
financial management identifies the Financial Improvement and Audit 
Readiness Plan as providing the strategy and methodology to integrate, 
among other things, the department and components' financial plans. 

SMP Contains Performance Measures with Milestones and Target Data: 

The fiscal year 2012-2013 SMP also includes some improvements to 
performance measures, specifically to include milestone or target data 
that would enable DOD to assess progress in achieving SMP goals. In 
our prior work, we found that 20 of the 76 performance measures in the 
2009 SMP, or 26 percent, contained target data. The fiscal year 2012-
2013 SMP improves upon this by providing milestones and target data 
for 58 of its 62 performance measures, or 94 percent. For example, the 
2009 SMP calls for DOD to generally monitor the percent of Major 
Automated Information Systems that experienced cost and schedule 
increases per fiscal year. However, the fiscal year 2012-2013 SMP 
provides two measures that establish specific numerical targets by 
fiscal year for the number of "significant" and "critical" breaches 
for Major Automated Information Systems.[Footnote 15] Such milestone 
or target data is useful because it facilitates future assessments of 
whether overall goals and objectives are being achieved. 

DOD's SMP Continues to Lack Some Key Information Needed to Provide 
Strategic Direction For Department-wide Business Transformation 
Efforts: 

While DOD has made some improvements to the fiscal year 2012-2013 SMP, 
it still lacks some key information, including (1) a description of 
key challenges and underlying root causes of systemic weaknesses the 
plan is intended to address; (2) sufficient context explaining why 
business goals and strategies in the current plan were chosen, and why 
those from prior SMPs were not included; (3) performance measures that 
fully reflect core activities needed to assess progress; and (4) 
funding priorities linked to goals. Until DOD takes steps to address 
these issues, it may not be fully focused on addressing the underlying 
causes that are contributing to its business challenges. 

SMP Does Not Describe Scope of Business Transformation Challenges for 
Some Goals and Initiatives: 

The fiscal year 2012-2013 SMP does not fully describe the specific 
challenges that DOD's business goals are intended to address and what 
the root causes of those challenges are. Such information would 
establish a clear and common understanding of the systemic weaknesses 
the SMP is trying to address, and could allow the SMP to serve as a 
basis for establishing priorities to reform business operations and 
address any gaps. We found that the seven business goals in the SMP 
varied in the extent to which they described the scope of challenges 
and root causes of systemic weaknesses being addressed. For example: 

* According to the fiscal year 2012-2013 SMP, the business goal on 
strengthening DOD's acquisition processes is aimed at obtaining 
greater efficiency and productivity in defense spending, but the SMP 
narrative accompanying this goal does not provide any information on 
what is causing the cost growth for DOD's major defense acquisition 
programs or on how the goal's initiatives may address those causes. 
Our work has shown that many factors contribute to cost growth, 
including the lack of well-defined requirements and sufficient 
information on technology at key points in the acquisition process. 
[Footnote 16] 

* In addition, the fiscal year 2012-2013 SMP narrative for the 
business goal on building agile and secure information technology 
capabilities states that the department must provide a synchronized 
and responsive capability for the DOD information enterprise, but does 
not describe the challenges to be addressed. Our work has shown that 
such challenges include that the department lacks a reliable, 
comprehensive inventory of all defense business systems, and has not 
fully defined and established a family of business system 
modernization management controls that is vital to ensuring that its 
business system investments are the right solutions for addressing its 
business needs and that its business system investments are managed to 
produce expected capabilities efficiently and cost-effectively. 
[Footnote 17] 

* The fiscal year 2012-2013 SMP also includes a business goal to 
reengineer and use business processes to reduce transaction times, 
drive down costs, and improve services. Associated with this goal is 
an initiative to "improve the supply chain end-to-end process" as well 
as measures that relate to the percentage of filling orders and 
customer wait time. However, the narrative describing the goal does 
not discuss the supply chain, including what aspects of the process 
need improvement. Our work has shown that deficiencies exist in 
several areas of the supply chain, such as materiel distribution, 
requirements forecasting, and asset visibility.[Footnote 18] 

* The plan includes a business goal to create agile business 
operations that plan for, support, and sustain contingency missions. 
This goal includes an initiative to "institutionalize operational 
contract support." However, the plan does not explain the challenges 
DOD is encountering in the area of operational contract support and 
what aspects of this area need to be addressed. Our work has shown 
that such challenges include insufficient capacity to oversee 
contractors and inadequate planning for contractor support during 
contingency operations.[Footnote 19] Further, the plan does not 
address the challenges confronted by DOD in other contract management-
related areas, including how DOD acquires services, ensuring the 
appropriate use of contracting approaches, and enhancing the capacity 
of the acquisition workforce. 

With additional information on the scope and root causes of 
challenges, DOD would more effectively communicate business priorities 
and focus initiatives to ensure that the department is addressing long-
term systemic challenges in business areas. Moreover, without a 
description of key business challenges, the department cannot be 
assured that it has identified the appropriate initiatives and 
performance measures to assess progress in addressing those challenges. 

SMP Does Not Always Provide Sufficient Context for Business Goals: 

The fiscal year 2012-2013 SMP does not include sufficient context 
explaining the basis for selecting the seven overarching business 
goals, such as why these goals were considered high priorities for 
DOD. According to guidance from the Office of Management and Budget 
(OMB) on developing agency strategic plans, plans should provide 
sufficient context to explain the basis for why specific goals and 
strategies are chosen.[Footnote 20] However, some business goals and 
strategies have changed with each SMP without any context for why 
these changes have occurred, such as whether sufficient progress has 
been made to warrant the changes. For example, prior SMPs included 
goals that addressed the business area of support infrastructure 
management, which includes the maintenance, support, and disposal of 
installation facilities. DOD's infrastructure is critical to 
maintaining military readiness, with the cost to build and maintain 
this infrastructure representing a significant financial commitment. 
The 2009 SMP contained an objective on improving real property 
installation management under the financial management goal. The 2011 
SMP contained the same objective, but placed it under its goal on 
reforming the DOD acquisition and support processes. However, the 
fiscal year 2012-2013 SMP no longer lists a goal or objective related 
to support infrastructure and does not explain why the area has been 
removed, such as any assessment done on progress in the area to 
justify its removal. Support infrastructure management has been on 
GAO's high-risk list since 1997. Moreover, we have recently reported 
that DOD continues to face significant challenges in this area, 
specifically in reducing excess facilities and in achieving 
efficiencies and cost savings in implementing joint bases and common 
support base standards.[Footnote 21] Without sufficient context on why 
this area has been removed despite ongoing challenges, it is unclear 
whether DOD believes that support infrastructure--related objectives 
in the prior SMPs were achieved, or whether its priorities have 
changed. Moreover, without clear criteria for removing or changing key 
goals, particularly those related to high-risk areas, it may be 
difficult for DOD to demonstrate tangible results. 

Similarly, the fiscal year 2012-2013 SMP does not discuss the military 
departments' business priorities and how they link to the SMP's 
business goals. Previous SMPs included information on each of the 
military departments' top priorities, which, they stated, were aimed 
at achieving integrated management of business operations. The 
military departments play a key role in DOD's efforts to transform its 
business operations, representing a significant portion of DOD's 
organization and resources. The Under Secretary of each military 
department serves as its CMO with primary responsibility for business 
operations and for developing and executing a business transformation 
plan for that military department. The Army and Navy have business 
transformation plans, and Air Force officials stated that they have a 
draft business transformation plan. Given these responsibilities, it 
is important that DOD's plan outline the expected contribution of the 
military departments and the accountability of their CMOs in achieving 
department-wide business goals. However, the fiscal year 2012-2013 SMP 
does not discuss the military departments' business-related priorities 
or explain why this information is no longer included. In the absence 
of such information, DOD decision makers lack context to fully 
understand how the military departments' business-related activities 
contribute to department-wide business transformation efforts. 

SMP Performance Measures Do Not Fully Reflect Core Activities Needed 
to Assess Progress: 

The fiscal year 2012-2013 SMP includes performance measures that, in 
many cases, do not fully reflect core activities that are needed to 
address longstanding challenges and assess progress against DOD's 
business goals. While the SMP does not need to include all possible 
business transformation measures, our prior work has shown that 
performance measures should focus on core activities that would help 
managers assess whether they are achieving organizational 
goals.[Footnote 22] However, we identified several examples where 
DOD's measures do not address some key challenges. 

* The fiscal year 2012-2013 SMP includes one initiative on improving 
the supply chain end-to-end process. The performance measures 
associated with this initiative focus on customer wait time and 
delivery of the right part to the customer on time, in the correct 
quantity, and with no material deficiencies (typically referred to as 
perfect order fulfillment). While these are important performance 
measures, other issues that we have identified as focus areas for 
improvement in GAO's supply chain management high-risk area, such as 
asset visibility and requirements forecasting, are not fully addressed 
by these performance measures. We have previously reported that, 
although performance measures monitoring customer wait time and 
perfect order fulfillment allow DOD to track many aspects of supply 
chain performance, these measures do not allow DOD to assess the 
overall effectiveness and efficiency of the supply chain across the 
enterprise.[Footnote 23] Additionally, we have reported that these 
measures are limited in their ability to guide the department's 
improvement efforts for supply chain management, specifically the 
focus areas for improvement--requirements forecasting, materiel 
distribution, and asset visibility--in GAO's supply chain high-risk 
area.[Footnote 24] Customer wait time, for example, could fail to 
accurately measure the impact of supply chain management improvement 
initiatives, as this measure is influenced by many external factors. 
Further, our work demonstrates that DOD continues to face other 
problems in supply chain management.[Footnote 25] For example, in the 
area of asset visibility, DOD has incomplete data on the number of 
items in its inventory that qualify for marking with Item Unique 
Identification technology[Footnote 26] labels and lacks assurance that 
contractors are sufficiently marking newly-acquired items.[Footnote 
27] We have also reported on a number of challenges regarding DOD's 
ability to accurately forecast inventory needs.[Footnote 28] Although 
DOD has a separate inventory management improvement plan, none of the 
measures for this area are included in the SMP. 

* The fiscal year 2012-2013 SMP's performance measures for DOD's 
workforce-related goal also do not fully address core elements of 
DOD's workforce, such as civilian and contractor components of the 
total workforce. For example, the SMP contains a goal on strengthening 
and right-sizing the DOD total workforce mix, and a related initiative 
to recruit and retain the right quality skilled personnel to meet 
mission requirements. The plan includes measures related to DOD's 
progress in recruiting sufficient numbers of military personnel 
against prescribed end-strength goals and the percentage of military 
recruits that have high school diplomas and meet other criteria. 
However, the plan does not include additional measures to assess 
whether DOD is recruiting and retaining civilian staff with the right 
mix of skills and competencies, such as financial management and 
acquisition skills. Our past work has shown that this is an important 
challenge and that DOD has not yet fully completed statutorily 
mandated gap assessments of its skills and competencies needed to 
develop the right recruiting and retention goals.[Footnote 29] 
Further, the fiscal year 2012-2013 SMP does not have measures for 
evaluating any aspect of the contractor workforce or any aspect of the 
civilian workforce beyond the Civilian Expeditionary Workforce. 
[Footnote 30] Therefore, the plan does not have a balanced set of 
measures to help address whether DOD has the core activities needed to 
assess progress toward strengthening and right-sizing DOD military, 
civilian, and contractor personnel who constitute the total workforce. 

* In the area of operational contract support, the fiscal year 2012-
2013 SMP identifies some measures related to planning for contractor 
support, including the percent of geographic combatant command plans 
that have been reviewed and analyzed with regard to determining the 
nature of contractor support that may be needed in future 
contingencies, but does not address other challenges that affect DOD's 
contingency operations, including the lack of trained contract 
oversight personnel.[Footnote 31] 

SMP Does Not Include Funding Priorities: 

We previously reported that DOD's 2009 SMP did not identify funding 
priorities or resources needed to achieve goals, and therefore, we 
recommended that the revised SMP contain funding priorities linked to 
goals.[Footnote 32] However, the fiscal year 2012-2013 SMP does not 
discuss resource needs or funding priorities among the business goals 
and initiatives. Our prior work has shown that agencies are successful 
in achieving business management transformation when they strive to 
establish strategic plans that prioritize initiatives and resources, 
The SMP lists key initiatives for achieving each business goal, but it 
does not discuss resource needs or prioritize initiatives so that 
activities can be linked to funding decisions. Rather, the SMP 
contains a general statement that DOD reviews and approves plans and 
budgets for business operations through the department's established 
budget cycle. Without including a description of funding priorities or 
resource needs, DOD decision makers cannot be assured that they are 
developing plans and budget requests that reflect business priorities. 
Therefore, we continue to believe that our prior recommendation to 
include this information has merit. 

Further refining the SMP to include key information--such as a 
description of the scope of key business challenges, sufficient 
context for its goals, improved performance measures, and funding 
priorities--would more effectively assist DOD decision makers in 
targeting reform efforts to address systemic business challenges and 
in making investment decisions that reflect business priorities. DOD 
officials acknowledged that the SMP lacks some key information, but 
stated that the SMP is still maturing and that they will address these 
limitations in future refinements of the SMP. For example, the 
military department CMOs agreed that the next SMP should clarify the 
linkage between the business priorities of the military departments 
and DOD as a whole. Also, with regard to performance measures, 
officials from the office of the DCMO stated that, in developing the 
SMP, they recognized that the performance measures did not represent 
the complete scope of measures needed to assess progress against 
business goals. Officials from the office of the DCMO stated they will 
rely on continuous collaboration with the Under Secretaries of Defense 
and the military departments to further refine performance measures 
that more fully address business goal challenges and include these 
refined measures in future SMPs. 

DOD is Limited in Its Ability to Assess Department-wide Progress 
Toward Achieving Business Transformation Goals: 

DOD has broadly outlined a performance management approach for 
business transformation and begun to collect performance information, 
but has not fully demonstrated how its governance structures will use 
available performance information from various sources to assess 
department-wide progress against business goals. 

DOD Has Broadly Outlined a Performance Management Approach: 

DOD has assigned performance responsibilities and broadly outlined its 
performance management approach, including steps for setting 
performance targets, reporting and assessing performance data, and 
taking corrective action. Under GPRA, the Deputy Secretary of Defense, 
as CMO, is responsible for improving the management and performance of 
the agency.[Footnote 33] GPRA also gives the DCMO responsibility for 
advising and assisting the CMO in areas like goal-setting, planning, 
and performance measurement.[Footnote 34] In addition, the 2009 SMP 
generally describes the performance management roles and 
responsibilities of the CMO and DCMO. The CMO is to define performance 
goals for business operations and review progress periodically against 
those goals, and the DCMO is to advise the CMO on performance goals 
and measures, and to assess progress. 

DOD has also identified key steps and various governance structures 
that are a part of its performance management approach to advance 
business initiatives throughout the department. The 2009 SMP outlined 
six steps reflecting key decision points within DOD's performance 
management approach: planning; setting targets; cascading measures so 
that they align to a common set of priorities; aligning processes; 
assessing and reporting results; and taking corrective action. In this 
plan, DOD listed the governance structures that are, among other 
things, responsible for assessing and monitoring progress being made 
toward achieving the department's business goals. For example, the 
plan identified the Defense Business Systems Management Committee as a 
key senior-level board for assisting the CMO in his performance 
management responsibilities.[Footnote 35] The fiscal year 2012-2013 
SMP further outlined this performance management approach by 
identifying governance structures associated with each goal that, 
combined with the Defense Business Systems Management Committee, will 
form the mechanism through which DOD leaders review business 
priorities. For example, the plan states that DOD will use governance 
structures, such as the Senior Readiness Oversight Council, to help 
oversee and monitor progress toward achieving the goal on 
strengthening the DOD workforce. 

Following the issuance of the fiscal year 2012-2013 SMP, DOD 
established two governance structures that are intended, in part, to 
monitor business transformation progress. Specifically, in October 
2011, the Deputy Secretary of Defense established the Deputy's 
Management Action Group (DMAG);[Footnote 36] a senior-level forum that 
meets several times a month to discuss various department-wide 
management issues. According to the memorandum establishing the DMAG, 
the Deputy Secretary of Defense will use the DMAG to develop a common 
management approach to disparate topics and processes to ensure that 
management actions are synchronized and fully coordinated across the 
defense enterprise. In addition, DOD established the Defense Business 
Council (DBC), which is chaired by the DCMO and began meeting in June 
2012.[Footnote 37] According to the DBC's charter, which was issued in 
October 2012, the DBC will recommend certification of business systems 
investments and is also responsible, among other things, for improving 
the department's business activities and management 
structures.[Footnote 38] In addition, officials from the Office of the 
DCMO stated that the DBC, rather than the Defense Business Systems 
Management Committee, will now serve as the primary forum for 
reviewing SMP quarterly performance results and discussing business-
related performance topics. 

DOD Is Collecting and Reporting Business-Related Performance 
Information and Undertaking Various Business-Related Reform Activities: 

The Office of the DCMO has a process in place whereby goal owners 
responsible for implementing SMP goals report progress on SMP measures 
on a quarterly basis. For example, the Under Secretary of Defense for 
Personnel and Readiness is responsible for ensuring the success of the 
SMP goal related to strengthening the DOD total workforce mix. In 
order to assess progress toward this goal, the Under Secretary of 
Defense for Personnel and Readiness reports quarterly to the Office of 
the DCMO on the status of the 10 measures associated with the goal. 

In addition to collecting SMP performance information, DOD has set up 
procedures and assigned responsibility for collecting and reporting 
business -related performance information related to other plans for 
specific business areas, the department's annual performance plan, 
agency priority goals, and numerous business reform activities as 
described below. 

* DOD collects and reports performance information on other business-
related plans, which may contain additional measures beyond those 
included in the SMP. For example, the Under Secretaries of Defense for 
Acquisition, Technology, and Logistics and the Comptroller 
respectively collect performance data on measures from separate 
business-related plans, such as the Logistics Strategic Plan and the 
Financial Improvement and Audit Readiness Plan. Similarly, the 
military departments collect information on the business priorities 
outlined in their respective business transformation or departmental 
plans. 

* DOD also collects and reports business-related performance 
information as part of its annual performance plan--a plan called for 
by GPRA,[Footnote 39] which requires federal agencies to, among other 
things, prepare annual performance plans that establish objective, 
quantifiable, and measurable goals for the upcoming fiscal year; 
describe how those goals contribute to the agency's long-term 
strategic goals; as well as provide the indicators the agency will use 
to measure performance against the goals. The Office of the Secretary 
of Defense Principal Staff Assistants,[Footnote 40] which include the 
Under Secretaries of Defense, collect and report quarterly on progress 
on measures for the department's five strategic goals, one of which 
focuses on reforming DOD's business and support functions. 

* The Under Secretaries of Defense also report quarterly on progress 
toward achieving DOD's five agency priority goals. GPRA, as amended, 
requires the heads of certain executive agencies to identify a subset 
of the performance goals from their agency performance plan as "agency 
priority goals."[Footnote 41] These goals are intended to reflect the 
highest priorities of the agency. In addition, the "agency priority 
goals" are required to have ambitious targets that can be achieved 
within a 2-year period and are to have clearly defined quarterly 
milestones. According to DOD, these goals are intended to reflect 
priorities or near-term improvements that advance progress toward the 
longer-term outcomes identified in DOD's performance plan. For 
example, DOD has a priority goal on audit readiness that sets a 
specific near-term milestone for improving the accuracy and 
reliability of the department's recorded appropriated funds, which 
supports DOD's broader performance plan goal of reforming the business 
and support functions of the department. 

In addition, at any given time, DOD is undertaking and monitoring 
implementation of various reform activities across the department in 
order to improve business operations. For example, the Under Secretary 
of Defense for Acquisition, Technology and Logistics has multiple 
efforts underway to improve the department's acquisition processes 
known as the Better Buying Power initiative. Similarly, the military 
departments have specific initiatives aimed at improving acquisition 
processes, enhancing financial auditability, and consolidating 
information technology investments. Further, the Office of the DCMO 
has taken steps to standardize approaches, such as establishing a new 
process for overseeing defense business system investments, 
collaborating with the Deputy Chief Financial Officer to develop 
guidance on improved financial information, and working with some 
combatant commands to improve visibility of contract information. 

DOD Has Not Fully Demonstrated How its Governance Structures Will 
Routinely Integrate Performance Information to Assess Department-wide 
Progress against Business Goals and Achieve Measurable Results: 

According to its charter, the DBC is responsible for, among other 
things, overseeing DOD's performance management programs.[Footnote 42] 
More specifically, the charter states that the DBC is to review DOD's 
performance results to track progress against strategic goals and hold 
department leaders accountable for results. The DBC can also raise 
business and performance management issues to the DMAG as necessary. 
Our prior work has shown that management can promote the use of 
performance information by leading frequent, regular performance-
review meetings to discuss progress made toward achievement of 
results, which can assist in identifying performance problems and in 
developing corrective actions.[Footnote 43] According to DOD 
officials, the DBC will serve as the primary forum for discussing 
business related performance topics and for reviewing SMP quarterly 
results, and as necessary will raise issues to the DMAG for higher 
level review and action. 

As discussed above, DOD collects performance information on SMP 
measures as well as from a variety of other sources. However, DOD has 
not used its governance structures to regularly review performance 
information or demonstrated how these structures will routinely 
integrate various sources of performance information to assess 
department-wide progress towards business goals. For example, DOD has 
assigned responsibility to the DBC to review performance results and 
track progress. As of December 2012, the Office of the DCMO has 
provided performance information to the DBC on two occasions. This 
information was focused on results related to the SMP and the annual 
performance plan. Specifically, in October 2012, the DBC reviewed 
summary information on third quarter of fiscal year 2012 performance 
results related to the SMP and DOD's annual performance plan. With 
regard to the SMP, the summary information consisted of a slide that 
indicated that, of the 61 performance measures in the fiscal year 2012-
2013 SMP, 31 were on track, 11 were at risk of not meeting their 
targets, and 19 measures were either unavailable or only reported 
annually. In addition, the slide named the SMP measures at risk of not 
meeting quarterly targets or not being reported by goal owners. This 
information did not include a discussion of why the SMP measures were 
at risk or unavailable. Similarly, with regard the department's annual 
performance plan, the DBC was provided with a slide that indicated 
that, of the 23 performance measures in the fiscal year 2012 annual 
performance plan related to the plan's goal to reform business and 
support functions, 14 were on track and 9 were at risk of not meeting 
their targets. Prior to the establishment of the DBC, DOD relied on 
the Defense Business Systems Management Committee to review SMP 
performance information. The Defense Business Systems Management 
Committee reviewed SMP quarterly performance three times in fiscal 
year 2010 and twice in fiscal year 2011. 

The performance information provided to the DBC provides a partial 
picture of the department's performance in various business areas, 
limiting the ability of DOD to assess overall progress towards 
business goals. For example: 

* Operational contract support: The fiscal year 2012-2013 SMP includes 
two measures related to its initiative on institutionalizing 
operational contract support. The third quarter fiscal year 2012 
performance results briefed to the DBC indicate that these measures 
are on track to meet their targets. However, the measures provide a 
partial picture of the department's ongoing efforts to improve this 
business area. According to an official from the Office of the Under 
Secretary of Defense for Acquisition, Logistics, and Technology 
responsible for this initiative, the two measures reflect an important 
aspect of DOD's work in the area of operational contract support, but 
there are other issues that DOD needs to address in this area that the 
measures do not cover. For example, one of the measures pertains to 
the extent to which a particular database captures contract 
information; however, according to the goal owner, this database 
captures only a subset of DOD's contractors, and DOD is currently 
using an additional system that is not mentioned in the SMP. Further, 
this official stated that there are a number of other efforts underway 
to improve operational contract support and that the measures in the 
SMP were intended to be a starting point for tracking progress in this 
business area. As a result, although the performance results briefed 
to the DBC indicate that the operational contract support initiative 
is on track, they do not address the department's progress or 
potential challenges regarding other ongoing efforts that affect 
operational contract support. 

* Operational and installation energy efficiency: The fiscal year 2012-
2013 SMP includes seven measures related to its goal on increasing 
operational and installation energy efficiency. In the third quarter 
fiscal year 2012 performance results briefed to the DBC, two of these 
measures were reported as being at risk of not meeting quarterly 
targets. According to officials from the Office of the Under Secretary 
of Defense for Acquisition, Logistics, and Technology --the goal owner 
responsible for operational and installation energy efficiency --these 
two measures only reflect a subset of the department's overall efforts 
to improve operational energy efficiency. For example, according to 
the officials, there is an Operational Energy Strategy and an 
Operational Energy Implementation Plan that lay out the department's 
approach to utilizing energy resources; however, the fiscal year 2012-
2013 SMP measures only cover a portion of what is outlined in the 
Operational Energy Strategy. Specifically, the fiscal year 2012-2013 
SMP addresses reducing operational energy consumption, but does not 
address issues related to operational energy supply and operational 
energy security, which are included in the Operational Energy 
Strategy. As a result, the performance results briefed to the DBC do 
not provide sufficient information to assess the department's progress 
on ongoing efforts that affect operational energy efficiency. 

* Supply chain management: Both the fiscal year 2012-2013 SMP and the 
department's annual performance plan include four measures related to 
improving the supply chain process. The third-quarter fiscal year 2012 
performance results briefed to the DBC indicated that these four 
measures were on track to meet their targets. In addition, the 
department's annual performance plan contains two measures related to 
inventory management, but, according to fourth-quarter fiscal year 
2012 performance results on the annual performance plan, no 
information is available on these two measures until March 2013. 
However, as discussed earlier, these measures do not fully address the 
focus areas for improvement in GAO's supply chain high-risk area, such 
as some aspects of asset visibility and requirements forecasting, and 
our work demonstrates that DOD continues to face problems in supply 
chain management. DOD has a number of efforts underway to improve 
supply chain management, including efforts undertaken under separate 
business-related plans such as the Logistics Strategic Plan. 
Information on the department's progress under these efforts may not 
be fully reflected in the measures provided to the DBC, potentially 
limiting the department's understanding of other challenges in supply 
chain management. 

Without integrating performance information from a broader range of 
sources to provide a more comprehensive picture of the department's 
performance across key business areas and regularly reviewing this 
integrated information, DOD cannot be assured that it is well-
positioned to assess the overall impact of its efforts to achieve 
business transformation. 

Conclusions: 

DOD business operations, such as management of finances, the supply 
chain, support infrastructure, and weapon systems acquisition provide 
essential support to the warfighter. Longstanding management 
weaknesses related to these business operations adversely affect DOD's 
efficiency and effectiveness and hinder its ability to free up 
resources for higher-priority needs. DOD has clearly taken steps to 
improve its management approach to business transformation, including 
further refining its SMP and collecting and reporting business-related 
performance information. However, additional information is needed in 
the plan to set strategic direction and therefore make it a more 
useful tool for decisionmakers as they target and implement reform 
initiatives. Furthermore, developing a performance management approach 
that enables DOD to integrate and assess business-related performance 
information in a holistic manner will further enhance DOD's ability to 
strategically focus the department's transformation efforts on the 
highest priority areas, assess department-wide progress against 
business goals, take corrective action to stay on course, and 
ultimately demonstrate tangible improvements in key business areas, 
including those that we have designated as high risk. 

Recommendations for Executive Action: 

To enhance DOD's ability to set strategic direction for its business 
transformation efforts, better assess overall progress toward business 
transformation goals, and take any necessary corrective actions, we 
recommend that the Secretary of Defense direct the Deputy Secretary of 
Defense, in his capacity as the Chief Management Officer (CMO), to 
take the following actions: 

* Ensure that the SMP includes a description of the key business 
transformation challenges to be addressed, sufficient context for why 
specific goals and strategies were chosen, and measures to address 
core activities. 

* Further define DOD's performance management approach, by outlining 
elements such as how it will consider the various sources of 
performance information along with SMP performance results to monitor 
progress in achieving business goals and identify corrective actions 
and ensure this information is reviewed on a regular basis. 

Agency Comments and Our Evaluation: 

In written comments on a draft of this report, DOD partially concurred 
with our first recommendation and concurred with our second 
recommendation. The full text of DOD's written comments is reprinted 
in appendix III. 

In its overall comments, DOD stated the department appreciates our 
recognition of the significant progress that has been made since first 
designating the DOD Approach to Business Transformation as a high-risk 
area in 2005. DOD noted that, at that time, we stated we made the 
designation because "DOD had not established management 
responsibility, accountability, and control over business 
transformation-related activities and resources, and it lacked a plan 
for business transformation with specific goals, measures, and 
mechanisms to monitor progress." DOD added that, while the department 
recognizes that more work is needed to fully mature the SMP and its 
performance management system, it believes that it has fully 
remediated each of these original root causes. We will be providing 
our assessment of the department's progress in strengthening its 
approach to business transformation in the upcoming update to our high-
risk series. 

DOD partially concurred with our first recommendation that the 
Secretary of Defense direct the Deputy Secretary of Defense to ensure 
that the SMP includes a description of the key business transformation 
challenges to be addressed, sufficient context for why specific goals 
and strategies were chosen, and measures to address core activities. 
In its comments, DOD stated that future releases of the SMP will 
include this information. However, DOD expressed concern that we 
appear to advocate for an expansive vision of the SMP that 
misunderstands the broader management framework surrounding it, and 
made a number of observations about our report. DOD stated that the 
SMP, and the subsequent tracking of the department's performance 
against it, is not intended to capture every important business 
improvement activity. Rather, DOD stated, the SMP exists within the 
context of a broader family of plans that supports and aligns to the 
SMP's highest-level business goals. It also noted that, while 
performance measures can be improved, it is important to acknowledge 
that even an improved SMP will include only a small set of measures 
and that other important measures will continue to be managed through 
the department's established management framework. 

We agree that the SMP is part of DOD's broader management approach. 
For example, our report recognizes that DOD utilizes a broader family 
of plans to guide its business transformation, and that the SMP showed 
improvement by linking to some of these plans. We also agree that the 
SMP will include a smaller set of measures than those used by various 
organizations throughout the department. For example, our report 
recognizes that DOD collects and reports progress against other 
business related plans, which may contain additional measures beyond 
those included in the SMP. While we agree the SMP does not need to 
include all possible measures, our prior work has shown that 
performance measures should focus on core activities that would help 
managers assess whether they are achieving organizational goals. 
However, we identified several examples where DOD's measures in the 
SMP do not address core activities in some key business areas, such as 
asset visibility and requirements forecasting for the supply chain 
management area, and the availability of trained contract oversight 
personnel for the operational contract support area. To focus 
attention on those activities that are needed to address longstanding 
challenges and help DOD assess progress against its goals, we continue 
to believe that measures included in the SMP should reflect the core 
activities of the department's business goals. 

Further, DOD concurred with our second recommendation that the 
Secretary of Defense direct the Deputy Secretary of Defense to further 
define DOD's performance management approach by outlining elements 
such as how it will consider the various sources of performance 
information along with SMP performance results to monitor progress in 
achieving business goals and identify corrective actions, and ensure 
that this information is reviewed on a regular basis. In its comments, 
DOD stated that the department will continue to improve and 
institutionalize operations of the Defense Business Council to provide 
unified direction and leadership to efficiently and effectively manage 
the DOD business mission area. As part of these efforts, GAO believes 
that DOD needs to identify specific steps it will take to integrate 
and regularly review various sources of performance information along 
with the SMP performance results to monitor progress and identify 
corrective actions. Without integrating performance information from a 
broader range of sources to provide a more comprehensive picture of 
the department's performance across key business areas and regularly 
reviewing this integrated information, DOD cannot be assured that it 
is well-positioned to assess the overall impact of its business 
transformation efforts. 

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 (DCMO), and the Under Secretaries of the Army, Navy, and Air 
Force. In addition, the report will also be available on our website 
at [hyperlink, http://www.gao.gov]. If you or your staff have 
questions about this report, 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 are listed in appendix IV. 

Signed by: 

Sharon L. Pickup: 
Director: 
Defense Capabilities and Management: 

List of Committees: 

The Honorable Carl Levin: 
Chairman: 
The Honorable James M. Inhofe: 
Ranking Member: 
Committee on Armed Services: 
United States Senate: 

The Honorable Tom Carper: 
Chairman: 
The Honorable Tom Coburn: 
Ranking Member: 
Committee on Homeland Security and Governmental Affairs: 
United States Senate: 

The Honorable Howard P. McKeon: 
Chairman: 
The Honorable Adam Smith: 
Ranking Member: 
Committee on Armed Services: 
House of Representatives: 

The Honorable Darrell E. Issa: 
Chairman: 
The Honorable Elijah Cummings: 
Ranking Member: 
Committee on Oversight and Government Reform: 
House of Representatives: 

[End of section] 

Appendix I: Scope and Methodology: 

To assess what additional steps the Department of Defense (DOD) has 
taken to incorporate key strategic planning elements into its business 
transformation plan, we evaluated relevant documentation and 
interviewed knowledgeable officials. Specifically, we reviewed DOD's 
Fiscal Year 2012-2013 Strategic Management Plan, as well as DOD's 
previous Strategic Management Plans for 2008, 2009, and Fiscal Year 
2011. We assessed whether the Fiscal Year 2012-2013 Strategic 
Management Plan included key elements that we have previously 
identified as needed for effective strategic planning, such as 
alignment with higher-and lower-level organizational plans, successful 
performance measures, inclusion of funding priorities, description of 
the scope of the problem, and inclusion of sufficient context. In 
assessing this plan, we also relied on prior and ongoing work we have 
conducted in individual DOD business areas, namely, DOD workforce 
management, financial management, business systems modernization, 
supply chain management, energy efficiency, support infrastructure 
management, weapon systems acquisition, and contract management. In 
addition, we reviewed other DOD documentation, such as the 2010 
Quadrennial Defense Review; DOD's annual performance plans for fiscal 
years 2011, 2012, and 2013; DOD's annual reports on business 
transformation to Congress; and relevant DOD directives and memos. We 
also reviewed strategic planning documents and annual reports to 
Congress issued by the business transformation offices of the Army, 
Navy, and Air Force. 

To assess the extent to which DOD has developed an approach for 
assessing department-wide progress toward business transformation 
goals, we reviewed relevant documents and interviewed senior DOD 
officials about the department's performance assessment approach and 
its related governance mechanisms for monitoring business 
transformation progress. Specifically, we reviewed DOD's Strategic 
Management Plans for 2009 and Fiscal Years 2012-2013; DOD's annual 
performance plans for fiscal years 2011, 2012, and 2013; DOD's 
quarterly performance results for these performance plans and for the 
Strategic Management Plan for fiscal years 2011 and 2012; DOD memos 
and directives; DOD guidance, meeting agendas, and briefing documents 
related to the Defense Business Systems Management Committee, the 
Defense Business Council, and the Deputy's Management Action Group; 
and other business-related strategic plans, such as the Logistics 
Strategic Plan and the Defense Installations Strategic Plan. We also 
evaluated the department's performance assessment approach in light of 
roles and responsibilities laid out in DOD's 2009 Strategic Management 
Plan and in the Government Performance and Results Act Modernization 
Act of 1993, as amended, and in light of key practices in results-
oriented management, as identified in our previous work. 

We visited or contacted the following organizations during our review: 

* Office of the Deputy Secretary of Defense; 

* Office of the Deputy Chief Management Officer; 

* Office of the Under Secretary of Defense (Acquisition, Technology 
and Logistics); 

* Office of the Under Secretary of Defense (Personnel and Readiness); 

* Office of the Under Secretary of Defense (Comptroller)/Chief 
Financial Officer; 

* Office of the Chief Information Officer; 

* Offices of the Chief Management Officers and Deputy Chief Management 
Officers of the departments of the Army, Navy, and Air Force; and: 

* Business Transformation Offices within the departments of the Army, 
Navy, and Air Force. 

We conducted this performance audit from February 2012 through 
February 2013 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. 

[End of section] 

Appendix II: Business Goals, Initiatives, and Measures in the 
Department of Defense's (DOD) Fiscal Year 2012-2013 Strategic 
Management Plan: 

Business Goal 1: Strengthen and right-size the Department of Defense 
(DOD) Total Workforce mix (military, civilian, and contracted support) 
to accomplish the DOD mission and sustain superior performance in a 
time of constrained resources: 

Initiatives: 
* Recruit and retain the right-quality skilled personnel to meet 
mission requirements; 
Measures[A]: 
* Percent variance (3% to 0%) in Active Component end-strength; 
* Percent variance (3% to -3%) in Reserve Component end-strength; 
* Percent of Tier 1 (High School Diploma Graduates) non-prior service 
Active Component accessions; 
* Percent of Tier 1 (High School Diploma Graduates) non-prior service 
Reserve Component accessions; 
* Percent of Category I-IIIA non-prior service Active Component 
accessions; 
* Percent of Category I-IIIA non-prior service Reserve Component 
accessions; 
* Percent of Category IV non-prior service Active Component accessions; 
* Percent of Category IV non-prior service Reserve Component 
accessions. 

Initiatives: 
* Improve the readiness of the Civilian Expeditionary Workforce; 
Measures[A]: 
* Percent of Emergency-Essential and Non-Combat Essential Civilian 
Expeditionary Workforce employees qualified as "ready", per the 
Civilian Expeditionary Workforce Readiness Index. 

Initiatives: 
* Increase the number of Special Forces personnel; 
Measures[A]: 
* Cumulative percent increase in DOD Special Forces and Navy SEAL 
personnel achieved. 

Initiatives: 
* Develop and institutionalize a transparent, systemic, decision-
making process to appropriately balance the DOD Total Workforce to 
ensure mission readiness; 
Measures[A]: 
* Develop the initiative, milestones, and measures, and provide to the 
DOD Deputy Chief Management Officer not later than September 30, 2011. 

Business Goal 2: Strengthen DOD Financial Management to respond to 
warfighter needs and sustain public confidence through auditable 
financial statements. 

Initiatives: 
* Execute the Financial Improvement and Audit Readiness (FIAR) 
strategy and plans to achieve audit readiness by FY 2017; 
Measures[A]: 
* Percent DOD Statement of Budgetary Resources Appropriations Received 
validated; 
* Percent of DOD Funds Balance with Treasury validated; 
* Percent of DOD Statement of Budgetary Resources validated; 
* Percent of DOD mission-critical assets (Real Property, Military 
Equipment, General Equipment, Operating Materials and Supplies, and 
Inventory Balances) validated for existence and completeness. 

Initiatives: 
* By fiscal year 2012, once detailed supporting documentation is 
finalized, the DOD will ensure processing of Joint Urgent Operational 
Needs reprogrammings to meet a goal of approval within 2 congressional 
calendar months; 
Measures[A]: 
* None provided. 

Initiatives: 
* By fiscal year 2012, DOD will achieve a commercial payment improper 
payment of 0.11 percent or less; 
Measures[A]: * None provided. 

Initiatives: 
* By fiscal year 2013, the DOD will complete 16 interim milestones, 
which include validations of entities where Enterprise Resource 
Planning systems have been integrated, Major Defense Acquisition 
Programs, Fund Balance with Treasury Reconciliations, and Existence, 
and Completeness; 
Measures[A]: 
* None provided. 

Business Goal 3: Build agile and secure information technology (IT) 
capabilities to enhance combat power and decision-making while 
optimizing value. 

Initiatives: 
* Execute the DOD IT Enterprise Strategy and Roadmap; 
Measures[A]: 
* Reduce data centers by 18 percent in fourth quarter of fiscal year 
2012 and an additional 12 percent in fourth quarter of fiscal year 
2013; 
* Reduce networks by 10 percent in fourth quarter of fiscal year 212 
and an additional 10 percent in fourth quarter of fiscal year 2013; 
* Percentage of services transitioned to, or designed as, Enterprise 
Services. 

Initiatives: 
* Strengthen the oversight of IT investments; 
Measures[A]: 
* Percentage of component networks compliance with resilient network 
architecture and standards by all new investments and technology 
refresh activities by fourth quarter of fiscal year 2015. 

Initiatives: 
* Integrate cyber security across the DOD Information Enterprise; 
Measures[A]: 
* Create and maintain strong boundary defenses across DOD NIPRNet 
Perimeter; 
* NIPRNet Hardening allowing robust protection capabilities; 
* Enforce Cryptographic Logon with PKI Hardware Tokens on SIPRNet; 
* Reduce time to effect DOD network configuration changes. 

Initiatives: 
* Develop long-term strategy to provide for and protect mission 
critical access to radio frequency spectrum; 
Measures[A]: 
* None provided. 

Business Goal 4: Increase the buying power of the DOD acquisition 
system and processes, spanning requirements determination, 
development, procurement, and support to ensure that the force 
structure is modernized, recapitalized, and sustained within available 
resources. 

Initiatives: 
* Implement and enforce affordability-based constraints on program 
acquisition and sustainment costs; 
Measures[A]: 
* Mandate affordability as a requirement. Establish an affordability 
target as a Key Performance Parameter equivalent for all Acquisition 
Category I programs. 

Initiatives: 
* Improve acquisition processes to reduce costs and improve 
productivity for major defense acquisition programs, major automated 
information systems, and services; 
Measures[A]: 
* Drive productivity by establishing; 
* "Should Cost" targets as management tools for all Acquisition 
Category I programs; 
* Ensure service contracts that exceed $1 billion contain contract 
provisions to achieve productivity improvements and cost efficiencies 
throughout the contract term; 
* Make production rates economical and hold them stable; 
* Percent of enterprise level IT software and hardware national 
security and business systems deployed within 18 months of the 
capability business cases approval; 
* Number of Major Automated Information System; 
* "significant" breaches (equal to or greater than 15% of Acquisition 
Program Baseline total cost or with schedule slippages greater than 6 
months); 
* Number of Major Automated Information System; 
* "critical" breaches (equal to or greater than 25% of Acquisition 
Program Baseline total cost or with schedule slippages of one year or 
more). 

Initiatives: 
* Increase the use of competition to control costs of goods and 
services; 
Measures[A]: 
* Percentage of contract obligations that are competitively awarded; 
* Competitive strategy to be provided as part of each Acquisition 
Category program's milestone acquisition strategy. 

Initiatives: 
* Improve the Department's rate of successful execution of buying 
plans reflected in the Future Years Defense Program; 
Measures[A]: 
* Increase the percentage of Major Defense Acquisition Program items 
procured relative to the quantities requested over the previous year. 

Initiatives: 
* Increase the return on investment on science and technology spending; 
Measures[A]: 
* Percent of completing demonstration programs transitioning each year. 

Initiatives: 
* Identify and preserve essential capabilities in the U.S. defense 
industrial base; 
Measures[A]: 
* Complete first phase of Sector-by-Sector Tier-by-Tier effort; 
* Identify and correct high visibility deficiencies in supplier base 
for critical weapon system components; 
* Create a clearing house and repository of industrial base analyses 
for the Department and make it available to all services and 
organizations to reduce redundant efforts and establish best practices. 

Initiatives: 
* Provide incentives to industry to seek economies that drive down DOD 
procurement and life-cycle costs; 
Measures[A]: 
* Include the incentive strategy behind the fee strategy in all 
acquisition strategies for all Acquisition Category 1D programs tying 
incentives to production and sustainment cost control; 
* Increase the percentage of all efforts using Fixed Price Incentive 
Firm Target contracts that are moving from development to production 
and low-rate to full-rate production over the previous year's 
percentage. 

Initiatives: 
* Increase the productivity of each military department's acquisition 
system; 
Measures[A]: 
* Demonstrate progress at reversing the trend to increasing unit costs 
in procured end items. 

Business Goal 5: Increase operational and installation energy 
efficiency to lower risks to our warfighters, reduce costs, and 
improve energy security. 

Initiatives: 
* Improve DOD's capability to measure and verify individual facility 
energy use; 
Measures[A]: 
* Increase the number of facilities with installed meters. 

Initiatives: 
* Improve timeliness and accuracy of DOD's facility energy business 
decisions by exposing effective data to every authorized user in an 
automated and integrated manner; 
Measures[A]: 
* Percent of enterprise energy systems fully utilizing the first 
module of the Enterprise Energy Information Management solution. 

Initiatives: 
* Reduce the risk from potential disruptions to the commercial grid to 
improve the energy security of installations; 
Measures[A]: 
* Define and begin reporting standards for the following important 
energy security attributes: 
* (1) Contingency of operational planning (fiscal year 2012); 
* (2) Building design considerations (fiscal year 2012); 
* (3) Metering (fiscal year 2012); 
* (4) Smart grid systems and load management (fiscal year 2013); 
* (5) On-site generation (generators, renewables, etc.) (fiscal year 
2013); 
* (6) Microgrid and system islanding (fiscal year 2013). 

Initiatives: 
* Pursue DOD procurement or lease of plug-in electric vehicles for non-
tactical fleet; 
Measures[A]: 
* Numbers of leased/purchased plug-in electric vehicles and charging 
stations. 

Initiatives: 
* Expand the use of third party financing for energy projects; 
Measures[A]: 
* Percentage of third party financed energy efficiency and renewable 
energy projects based on the DOD FY 2010 baseline. 

Initiatives: 
* Effectively manage Operational Energy use to reduce consumption; 
Measures[A]: 
* Establish an operational energy baseline for DOD based on credible, 
verifiable point-of-use data; 
* Establish and execute numerical energy reduction targets and 
timelines through rigorous data analysis and simulation efforts. 

Business Goal 6: Re-engineer/use end-to-end business processes to 
reduce transaction times, drive down costs, and improve service. 

Initiatives: 
* Improve the supply chain end-to-end process; 
Measures[A]: 
* Perfect Order Fulfillment percentage for Defense Logistics Agency-
stocked items; 
* Army Customer Wait Time; 
* Navy Customer Wait Time; 
* Air Force Customer Wait Time. 

Initiatives: 
* Improve the cycle time to hire civilian employees; 
Measures[A]: 
* Number of days for external civilian hiring (end-to-end timeline). 

Initiatives: 
* Reduce support process transaction time at all levels; 
Measures[A]: 
* None provided. 

Initiatives: 
* Improve business operations through optimal use of defense business 
systems and the Business Enterprise Architecture; 
Measures[A]: 
* Percentage of Defense Business Systems/Services represented in both 
the DOD Information Technology Portfolio Repository and the Business 
Enterprise Architecture; 
* Percentage of Defense Business Systems/Services represented in both 
the Select and Native Programming Data Input System - Information 
Technology and the Business Enterprise Architecture; 
* Percentage of Defense Business Systems/Services reporting to the 
Office of Management and Budget through the Business Enterprise 
Architecture. 

Initiatives: 
* Complete mapping of end-to-end processes ("Hire-to-Retire" and 
"Procure-to-Pay" in fiscal year 2012-2013); 
Measures[A]: 
* Complete mapping of "Hire-to-Retire" and "Procure-to-Pay" end-to-end 
processes by end of fiscal year 2012; Determine processes outcome 
measure to monitor process improvement; Establish performance 
reporting processes; 
* Determine next 2 end-to-end business processes to be completed by 
June 2013 and establish timelines for spirals of completion in fiscal 
year 2013; 
* Complete mapping of both selected end-to-end business processes, 
determine processes outcome measures to monitor process improvement; 
establish performance reporting processes; 
* Determine next 2 end-to-end business processes to be completed by 
end of fiscal year 2014 and establish timelines for spirals of 
completion in fiscal year 2014. 

Business Goal 7: Create agile business operations that plan for, 
support, and sustain contingency missions. 

Initiatives: 
* Institutionalize operational contract support; 
Measures[A]: 
* Percent of geographic combatant command plans that have been 
reviewed/analyzed for Overseas Contingency Support Equities; 
* Percent of contracts and contractor population properly registered 
in the Synchronized Pre-Deployment and Operational Tracker. 

Initiatives: 
* Establish complete visibility on contingency business operations to 
achieve accountability and build a comprehensive common operating 
picture; 
Measures[A]: 
* Percentage of system traceability for all DOD funds obligated in 
theater, electronically capturing DOD approved and funded 
requirements, obligations, entitlements, and disbursements. 

Initiatives: 
* Adapt business processes to include operational criteria in order to 
execute the Commander of the NATO International Security Assistance 
Force/U.S. Forces-Afghanistan campaign plan; 
Measures[A]: 
* Percentage of Afghan host nation vendors that are vetted and have 
with available past-performance information at contract close-out. 

Source: DOD. 

[A] DOD's Fiscal Year 2012-2013 Strategic Management Plan also 
contains milestone data for many of the measures, but we did not 
include milestone data in this table. 

[End of table] 

[End of section] 

Appendix III: Comments from the Department of Defense: 

Note: Page numbers in the draft report may differ from those in this 
report. 

Deputy Chief Management Officer: 
9010 Defense Pentagon: 
Washington, DC 20301-9010: 

January 23, 2013: 

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 (GAO) draft report GAO-13-267, "Defense Business 
Transformation: Improvements Made but Additional Steps Needed to 
Strengthen Strategic Planning and Assess Progress," dated December 20, 
2012, (GAO Code 351703). The Department partially concurs with the 
first recommendation and concurs with the second recommendation 
contained in the draft report. 

The Department appreciates GAO's recognition of the significant 
progress that has been made since first designating the DoD Approach 
to Business Transformation as a high risk area in 2005. At that time, 
GAO stated that they made the designation because "DoD had not 
established management responsibility, accountability, and control 
over business transformation-related activities and resources, and it 
lacked a plan for business transformation with specific goals, 
measures, and mechanisms to monitor progress." While DoD recognizes 
that more work is needed to fully mature the Strategic Management Plan 
(SMP) and improve our performance management system, we believe that 
we have fully remediated each of these original root causes. 
Additionally, the Department remains concerned that GAO appears to 
advocate for an expansive vision of the SMP that misunderstands the 
broader management framework surrounding it and cannot be achieved. 

The SMP, and the subsequent tracking of the Department's performance 
against it, is not intended to comprehensively capture each and every 
important business improvement activity taking place throughout the 
enterprise. Rather, the SMP exists within the context of a broader 
family of plans that supports and aligns to the SMP's highest level 
business goals. Through the crafting of SMP and in the execution of 
its performance management system, the Department's senior leaders 
make strategic choices about which broad goals are most important and, 
within those goals, on which initiatives and key indicators they will 
focus their management attention. 

On the one hand, this report seems to acknowledge this point when it 
says, "While the SMP does not need to include all possible business 
transformation measures, our prior work has shown that performance 
measures should focus on core activities that would help managers 
assess whether they are achieving organizational goals." However, at 
the same time, the report contradicts this sentiment time and again 
when it critiques the SMP for not containing a measure reflecting 
every core clement of every goal or not addressing every challenge in 
every business area. 

The Department fully recognizes that it can improve in selecting the 
right performance measures to best assess whether we are achieving 
success, but it is important to acknowledge that even an improved SMP 
will include only a small set of measures — some worthy and important 
measures will not be included and will continued to be managed through 
the Department's established management framework. In the areas that 
GAO critiques the Department along these lines, such as infrastructure 
management, contract management, and operational energy, robust 
improvement efforts are underway and more comprehensive strategic 
plans are in place for the individual area. In these cases, the 
Department's efforts must be considered as an integrated whole, rather 
than by just looking at the SMP. 

The Department appreciates the opportunity to comment on this draft 
report. Should you have any questions, please contact Mr. Thomas 
Cowley, 703-692-8170, thomas.cowley@osd.mil. 

Sincerely, 

Signed by: 

Elizabeth A. McGrath: 

Enclosures: As stated: 

GAO Draft Report Dated December 20, 2012: 
GAO-13-267 (GAO Code 351703): 

"Defense Business Transformation: Improvements Made But Additional 
Steps Needed To Strengthen Strategic Planning And Assess Progress" 

Department Of Defense Comments To The GAO Recommendations: 

Recommendation 1: The GAO recommends that the Secretary of Defense 
direct the Deputy Secretary of Defense, in his capacity as the Chief 
Management Officer, to ensure that the Strategic Management Plan (SMP) 
includes a description of the key business transformation challenges 
to be addressed, sufficient context for why specific goals and 
strategies were chosen, and measures to address core activities. (See
page 25/GAO Draft Report) 

DoD Response: Partially concur. Future releases of the SMP will 
include key business transformation challenges, context for the 
inclusion of specific goals and strategies, and measures to address 
core activities. However, in crafting the SMP and executing its 
performance management system, the Department's senior leaders will 
continue to make strategic choices about which broad goals are most 
important and, within those goals, on which initiatives and key 
indicators they will focus their management attention. 

Recommendation 2: The GAO recommends that the Secretary of Defense 
direct the Deputy Secretary of Defense, in his capacity as the Chief 
Management Officer, to further define DoD's performance management 
approach, by outlining elements such as how it will consider the 
various sources of performance information along with SMP performance 
results to monitor progress in achieving business goals and identify 
corrective actions and ensure this information is reviewed on a 
regular basis. (See page 25/GAD Draft Report.) 

DoD Response: Concur. The Department will continue to improve and 
institutionalize operations of the Defense Business Council (DBC) to 
provide unified direction and leadership to efficiently and 
effectively manage the DoD business mission area. By charter, the DBC 
integrates and reviews performance information to track progress 
against strategic goals and hold Department leaders accountable for 
results. Issues will continue to be raised to the Deputy's Management 
Action Group (DMAG), the mechanism created by the Deputy Secretary of 
Defense for executing a common management approach across the 
disparate topics and processes of the Department. 

[End of section] 

Appendix IV: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Sharon L. Pickup, (202)-512-9619 or pickups@gao.gov: 

Acknowledgments: 

In addition to the contact named above, James A. Reynolds, Assistant 
Director; Gabrielle A. Carrington; Laurie Choi; Grace Coleman; Aimee 
Elivert; Michael Silver; and Nicole Willems made key contributions to 
this report. 

[End of section] 

Footnotes: 

[1] GAO, High-Risk Series: An Update, [hyperlink, 
http://www.gao.gov/products/GAO-11-278] (Washington, D.C.: February 
2011). 

[2] GAO, High-Risk Series: An Update, [hyperlink, 
http://www.gao.gov/products/GAO-05-207] (Washington, D.C.: January 
2005). 

[3] According to DOD Directive 5105.82, DOD defines its business 
operations as the policies, processes, information, and systems 
relating to the end-to-end financial, logistical, facility management, 
human capital, acquisition, administrative, and other such functions 
of the DOD that support the warfighter. 

[4] Pub. L. No. 110-181, § 904 (2008). 

[5] Pub. L. No. 110-417, §§ 904, 908 (2008). 

[6] See GAO, Defense Business Transformation: DOD Needs to Take 
Additional Actions to Further Define Key Management Roles, Develop 
Measurable Goals, and Align Planning Efforts, [hyperlink, 
http://www.gao.gov/products/GAO-11-181R] (Washington, D.C.: Jan. 26, 
2011); and 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] The Government Performance and Results Act of 1993 (GPRA), Pub. L. 
No. 103-62 (1993), as recently amended by the Government Performance 
and Results Modernization Act of 2010, Pub. L. No. 111-352 (2011). The 
relevant portions of GPRA, for purposes of this report, are codified 
in Title 31 of the United States Code. 

[8] 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-11-181R]. 

[9] [hyperlink, http://www.gao.gov/products/GAO-09-272R]. 

[10] [hyperlink, http://www.gao.gov/products/GAO-11-181R]. 

[11] GAO, Results-Oriented Management: Strengthening Key Practices at 
FEMA and Interior Could Promote Greater Use of Performance 
Information, [hyperlink, http://www.gao.gov/products/GAO-09-676] 
(Washington, D.C. Aug. 17, 2009); and Managing for Results: Enhancing 
Agency Use of Performance Information for Management Decision Making, 
[hyperlink, http://www.gao.gov/products/GAO-05-927] (Washington, D.C.: 
Sept. 9, 2005). 

[12] [hyperlink, http://www.gao.gov/products/GAO-09-272R]. 

[13] [hyperlink, http://www.gao.gov/products/GAO-11-181R]. 

[14] 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). 

[15] According to the fiscal year 2012-2013 SMP, a significant breach 
is defined as equal to or greater than 15 percent of the Acquisition 
Program Baseline total cost or with schedule slippages greater than 6 
months. A critical breach is defined as equal to or greater than 25 
percent of the Acquisition Program Baseline total cost or with 
schedule slippages greater than 1 year. 

[16] GAO, Defense Management: Guidance and Progress Measures Are 
Needed to Realize Benefits from Changes in DOD's Joint Requirements 
Process, [hyperlink, http://www.gao.gov/products/GAO-12-339] 
(Washington, D.C.: Feb. 24, 2012); and Defense Acquisitions: Strong 
Leadership Is Key to Planning and Executing Stable Weapons Programs, 
[hyperlink, http://www.gao.gov/products/GAO-10-522] (Washington, D.C.: 
May 6, 2010). 

[17] GAO, DOD Business Systems Modernization: Governance Mechanisms 
for Implementing Management Controls Need to Be Improved, [hyperlink, 
http://www.gao.gov/products/GAO-12-685] (Washington, D.C.: June 1, 
2012); and [hyperlink, http://www.gao.gov/products/GAO-11-278]. 

[18] GAO, Defense Logistics: DOD Has Taken Actions to Improve Some 
Segments of the Materiel Distribution System, [hyperlink, 
http://www.gao.gov/products/GAO-12-883R] (Washington, D.C.: Aug. 3, 
2012); Defense Logistics: Improvements Needed to Enhance DOD's 
Management Approach and Implementation of Item Unique Identification 
Technology, [hyperlink, http://www.gao.gov/products/GAO-12-482] 
(Washington, D.C.: May 3, 2012); and Defense Inventory: Defense 
Logistics Agency Needs to Expand on Efforts to More Effectively Manage 
Spare Parts, [hyperlink, http://www.gao.gov/products/GAO-10-469] 
(Washington, D.C.: May 11, 2010). 

[19] GAO, Iraq and Afghanistan: DOD, State, and USAID Face Continued 
Challenges in Tracking Contracts, Assistance Instruments, and 
Associated Personnel, [hyperlink, 
http://www.gao.gov/products/GAO-11-1] (Washington, D.C.: Oct. 1, 
2010); Warfighter Support: Cultural Change Needed to Improve How DOD 
Plans for and Manages Operational Contract Support, [hyperlink, 
http://www.gao.gov/products/GAO-10-829T] (Washington, D.C.: June 29, 
2010); and 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.: Mar. 30, 
2010). 

[20] Office of Management and Budget, Performance Improvement 
Guidance: Management Responsibilities and Government Performance and 
Results Act Documents, Memorandum M-10-24 (June 25, 2010). According 
to this memorandum, providing sufficient context is an important 
strategic planning element that should be included in Government 
Performance and Results Act (GPRA) documents to make them more useful 
to agency leadership, managers, and employees. While GPRA does not 
directly apply to the SMP, our prior work has identified many of 
GPRA's requirements as the foundation for effective strategic planning. 

[21] GAO, Excess Facilities: DOD Needs More Complete Information and a 
Strategy to Guide Its Future Disposal Efforts, [hyperlink, 
http://www.gao.gov/products/GAO-11-814] (Washington, D.C.: May 3, 
2012); and DOD Joint Bases: Management Improvements Needed to Achieve 
Greater Efficiencies, [hyperlink, 
http://www.gao.gov/products/GAO-13-134] (Washington, D.C.: Nov. 15, 
2012). 

[22] 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). 

[23] GAO, Defense Logistics: DOD Needs to Take Additional Actions to 
Address Challenges in Supply Chain Management, [hyperlink, 
http://www.gao.gov/products/GAO-11-569] (Washington, D.C.: July 28, 
2011). 

[24] GAO, DOD's High-Risk Areas: Progress Made Implementing Supply 
Chain Management Recommendations, but Full Extent of Improvement 
Unknown, [hyperlink, http://www.gao.gov/products/GAO-07-234] 
(Washington, D.C.: Jan. 17, 2007). 

[25] [hyperlink, http://www.gao.gov/products/GAO-12-883R]; [hyperlink, 
http://www.gao.gov/products/GAO-12-482]; and Defense Inventory: 
Actions Underway to Implement Improvement Plan, but Steps Needed to 
Enhance Efforts, [hyperlink, http://www.gao.gov/products/GAO-12-493] 
(Washington, D.C.: May 3, 2012). 

[26] Item Unique Identification technology allows DOD to assign a 
unique number to an individual item and then use that unique number to 
manage that item in a variety of logistics processes. 

[27] [hyperlink, http://www.gao.gov/products/GAO-12-482]. 

[28] GAO, Defense Inventory: Defense Logistics Agency Needs to Expand 
on Efforts to More Effectively Manage Spare Parts, [hyperlink, 
http://www.gao.gov/products/GAO-10-469] (Washington, D.C.: May 11, 
2010). 

[29] GAO, Human Capital: DOD Needs Complete Assessments to Improve 
Future Civilian Strategic Workforce Plans, [hyperlink, 
http://www.gao.gov/products/GAO-12-1014] (Washington, D.C.: Sept. 27, 
2012). 

[30] DOD established the Civilian Expeditionary Workforce in January 
2009 to serve as a source for deployable civilians. 

[31] [hyperlink, http://www.gao.gov/products/GAO-10-829T]. 

[32] [hyperlink, http://www.gao.gov/products/GAO-11-181R]. 

[33] 31 U.S.C. §1123. GPRA states that, at each agency, the deputy 
head of agency, or equivalent, shall be the chief operating officer of 
the agency. The CMO serves as the chief operating officer of DOD for 
purposes of GPRA. 

[34] 31 U.S.C. §1124. GPRA states that, at each agency, the head of 
the agency, in consultation with the agency chief operating officer, 
shall designate a senior executive of the agency as the agency 
performance improvement officer. The DCMO serves as the agency 
performance improvement officer for purposes of GPRA. For general 
information on the roles and responsibilities of the CMO and DCMO, see 
DOD Directive 5105.02, Deputy Secretary of Defense (Oct. 18, 2011) and 
DOD Directive 5105.82, Deputy Chief Management Officer (DCMO) of the 
Department of Defense (Oct. 17, 2008). 

[35] DOD established the Defense Business Systems Management Committee 
under the authority of section 332 of the Ronald W. Reagan National 
Defense Authorization Act for Fiscal Year 2005 and 10 U.S.C. §186, 
which required the department to set up a committee to review and 
approve major updates of the defense business enterprise architecture 
and to ensure that the obligation of funds for defense systems 
modernization is consistent with the criteria set out in 10 U.S.C. § 
2222. 

[36] Deputy Secretary of Defense Memorandum, Management Process for 
the Deputy Secretary of Defense (Oct. 6, 2011). 

[37] The DBC members are: Deputy Chief Management Officer; Assistant 
Secretary of Defense (Acquisition); Assistant Secretary of Defense 
(Logistics & Materiel Readiness); Deputy Under Secretary of Defense 
(Installations & Environment); Director, Defense Procurement and 
Acquisition Policy; Deputy Chief Financial Officer; Deputy Comptroller 
(Programs/Budgets); Director, Personnel and Readiness Information 
Management, Office of the Under Secretary of Defense (Personnel & 
Readiness); Director of Intelligence, Surveillance, and Reconnaissance 
Programs, Office of the Under Secretary of Defense (Intelligence); 
Chief Operating Officer, Office of the Under Secretary of Defense 
(Policy); Office of Joint Chiefs of Staff (J6); Deputy DOD Chief 
Information Officer; the Department of the Army DCMO; Department of 
the Navy DCMO; Department of the Air Force DCMO; Comptroller and 
Director of Administration and Management (National Guard Bureau); 
Deputy Director, Program Evaluation (Cost Assessment and Program 
Evaluation); Office of the General Counsel; and the Director, Office 
of Business Transformation (Army). 

[38] Deputy Chief Management Officer Memorandum, Defense Business 
Council (Oct. 18, 2012). 

[39] 31 U.S.C. §1115. 

[40] The Office of the Secretary of Defense Principal Staff Assistants 
are the Under Secretaries of Defense; the Assistant Secretaries of 
Defense; the Director, Operational Test and Evaluation; the General 
Counsel of the Department of Defense; the Inspector General of the 
Department of Defense; and the Office of the Secretary of Defense 
Directors or equivalents who report directly to the Secretary of 
Defense or the Deputy Secretary of Defense. 

[41] 31 U.S.C. §1120. 

[42] Deputy Chief Management Officer Memorandum, Defense Business 
Council. 

[43] GAO, Results-Oriented Management: Strengthening Key Practices at 
FEMA and Interior Could Promote Greater Use of Performance 
Information, [hyperlink, http://www.gao.gov/products/GAO-09-676] 
(Washington, D.C.: Aug. 17, 2009). 

[End of section] 

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