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entitled 'Defense Business Transformation: Status of Department of 
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GAO-09-272R: 

January 9, 2009: 

Congressional Committees: 

Subject: Defense Business Transformation: Status of Department of 
Defense Efforts to Develop a Management Approach to Guide Business 
Transformation: 

This letter formally transmits the attached briefing on work performed 
under the authority of the Comptroller General to conduct evaluations 
on his own initiative and as part of our work for GAO's High-Risk 
Series, January 2009 update. 

We are sending copies of this letter and briefing slides to the 
appropriate congressional committees. We are also sending copies to the 
Secretary of Defense and the Under Secretary of Defense for 
Acquisition, Technology, and Logistics, and the Secretaries of the 
Army, Air Force, and Navy. This letter and briefing will also be 
available on our Web site at [hyperlink, http://www.gao.gov]. Should 
you or your staff have any questions concerning this product, please 
contact me at (202) 512-9619 or pickups@gao.gov. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of the briefing slides. 

Signed by: 

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

Enclosures: 

List of Congressional Committees: 

The Honorable Carl Levin:
Chairman:
The Honorable John McCain:
Ranking Member:
Committee on Armed Services:
United States Senate: 

The Honorable Joseph I. Lieberman:
Chairman:
The Honorable Susan M. Collins:
Ranking Member:
Committee on Homeland Security and Governmental Affairs:
United States Senate: 

The Honorable Thad Cochran:
Ranking Member:
Committee on Appropriations:
United States Senate: 

The Honorable Ike Skelton:
Chairman:
The Honorable John M. McHugh:
Ranking Member:
Committee on Armed Services:
House of Representatives: 

The Honorable Edolphus Towns:
Chairman:
The Honorable Darrell Issa:
Ranking Member:
Committee on Oversight and Government Reform:
House of Representatives: 

The Honorable Daniel K. Akaka:
Chairman:
The Honorable George V. Voinovich:
Ranking Member:
Subcommittee on Oversight of Government Management, the Federal 
Workforce, and the District of Columbia:
Committee on Homeland Security and Governmental Affairs:
United States Senate: 

[End of section] 

Enclosure I: Status of Department of Defense Efforts to Develop a 
Management Approach to Guide Business Transformation: 

Briefing for Congressional Committees: 

January 9, 2009: 

Overview: 

* Background: 

* Objectives: 

* Scope and Methodology: 

* Preliminary Observations: 

- The Department of Defenseís (DOD) progress in developing a 
comprehensive management framework for business transformation; 

- DOD's progress in establishing a strategic management plan for 
business operations;
 
* Appendix I: 

[End of Overview] 

Background: 

DOD spends billions of dollars to maintain key business operations that
support the warfighter. 

We have reported on weaknesses in DODís business operations that result 
in billions of dollars being wasted annually, reduced efficiencies, 
ineffective performance, inadequate accountability, and a lack of 
transparency. 

* Currently, DOD has sole responsibility for 8, and shares 
responsibility for another 7, of the federal governmentís 27 programs 
or activities we have identified as being at high risk for fraud, 
waste, abuse, and mismanagement. 

* In 2005, we added DODís management approach to business 
transformation to our high-risk list because: 

1) DODís improvement efforts were fragmented, 

2) DOD lacked an integrated and enterprisewide transformation plan and 
investment strategy, and, 

3) DOD had not designated a senior management official at an 
appropriate level with the authority to be responsible and accountable 
for enterprisewide business transformation. 

In prior reports and testimonies, we recommended the following: 

* Congress consider enacting legislation to establish a separate, full-
time chief management officer (CMO) position with the authority and 
experience and a sufficient term to provide focused and sustained 
leadership over DODís business transformation efforts. 

* DOD institutionalize in directives the roles, responsibilities, and 
relationships among the various business-related entities and 
committees that comprise its management framework and expand that 
framework beyond business systems modernization to all business 
transformation efforts. 

* DOD develop a comprehensive strategic planning process for business
transformation that results in a comprehensive, integrated, and
enterprisewide plan or set of plans that covers all key business areas 
and provides a clear strategic direction, prioritizes initiatives, and 
monitors progress across the department. 

The National Defense Authorization Act (NDAA) for Fiscal Year 2008 
[Footnote 1] designated the Deputy Secretary of Defense as the CMO for 
DOD and created a Deputy CMO (DCMO) position to assist the CMO. The act 
also required the Secretaries of the military departments to designate 
the department Under Secretaries as CMOs with primary responsibility 
for business operations. Additionally, the act required the Secretary of
Defense, acting through the DOD CMO, to develop a strategic management 
plan that contains certain elements including: 

* performance goals and measures, 

* key initiatives to achieve performance goals together with resource 
needs, 

* procedures to monitor progress in meeting performance goals and 
measures, 

* procedures to review and approve plans and budgets for changes in 
business operations, and, 

* procedures to oversee the development, review, and approval of all 
budget requests for defense business systems. 

The Duncan Hunter NDAA for Fiscal Year 2009[Footnote 2] requires the 
Secretary of each military department to establish a business 
transformation office no later than 180 days after enactment of the act 
and, acting through the department CMOs, to develop comprehensive 
business transformation plans. 

Objectives: 

1. To what extent has DOD made progress in developing a comprehensive 
management framework for business transformation? 

2. To what extent does DODís initial Strategic Management Plan (SMP) 
contain key elements of a strategic plan, including goals, objectives, 
and performance measures? 

Scope and Methodology: 

We reviewed DODís progress in transforming its business operations 
under the authority of the Comptroller General to conduct evaluations 
on his own initiative. 

We reviewed the SMP and various other DOD documents related to business
transformation, and interviewed DOD officials from the Office of the 
Deputy Chief Management Officer, the Business Transformation Agency 
(BTA), and the military departments. We compared DODís actions in 
developing its CMO management framework to key strategies identified 
for implementing CMO positions in our previous work. We also reviewed 
DODís SMP to identify key elements of a strategic plan as identified by 
our previous work and by the Government Performance and Results Act of
1993[Footnote 3] (see app. I for a detailed methodology). 

We conducted this performance audit from August 2008 through December 
2008, 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 assessment based on our audit objectives. We believe that 
the evidence obtained provides a reasonable basis for our assessment 
based on our audit objectives. 

Objective 1: Management Framework for Business Transformation: 

DOD has made some progress in further developing its management
framework for business transformation; however, implementation is not
complete because key aspects have yet to be defined. 

Prior to NDAA for Fiscal Year 2008, DOD: 

* Designated Deputy Secretary of Defense as CMO. 

* Issued a directive[Footnote 4] broadly defining the responsibilities 
of the CMO, which are to: 

- develop and maintain a departmentwide strategic plan for business
reform, 

- ensure business missions are aligned to support warfighter mission, 

- establish performance goals and measures for improving and evaluating 
overall economy, efficiency, and effectiveness and monitor and measure 
the progress of the department, and, 

- ensure departmentwide capability to carry out the DOD strategic plan 
in support of national security objectives. 

* Established entities such as the Defense Business Systems Management 
Committee (DBSMC) and BTA. 

After NDAA for Fiscal Year 2008, DOD: 

* Established an office of the DCMO, designated an Assistant DCMO, and 
issued a directive[Footnote 5] broadly defining the responsibilities of 
the DCMO, including to: 

- recommend to the CMO methodologies and measurement criteria to better 
synchronize, integrate, and coordinate the business operations to 
ensure alignment in support of the warfighting mission, 

- develop and maintain the SMP, through the DBSMC, and, 

- advise the Secretary of Defense on performance goals and measures and 
assessing progress against those goals. 

* Designated governance bodies (the Deputyís Advisory Working Group, 
Senior Leader Review Group, and Defense Senior Leadership Conference) 
to assist in the alignment of business operations to strategic goals. 

* Named CMOs or acting CMOs in the military departments, and DCMOs in 
the Departments of the Air Force and Navy. 

Figure 1 shows DODís management framework and the relationships among 
senior-level leadership positions and bodies. 

Figure 1: Management Framework for Business Transformation: 

[Refer to PDF for image] 

This figure depicts DODís management framework and the relationships 
among senior-level leadership positions and bodies, as follows: 

Secretary of Defense: 
Deputy Secretary of Defense CMO: Direct reporting relationship from: 
* DBSMC; Chair-CMO; Vice-Chair: DCMO; 
* Under Secretary of Defense (Acquisition, Technology and Logistics); 
* Under Secretary of Defense (Comptroller); 
* Under Secretary of Defense (Intelligence); 
* Under Secretary of Defense Personnel and Readiness); 
* DCMO; direct reporting relationship from: 
- Director BTA; 
- BTA; 
* Secretary of Army; 
- Under Secretary of Army CMO; 
* Secretary of Navy; 
- Under Secretary of Navy CMO; 
* Secretary of Air Force; 
- Under Secretary of Air Force CMO. 

The relationships between the DCMO and the military departments' CMOs 
have yet to be fully defined. 

Source: GAO, DOD data. 

[End of figure] 

DOD has not yet completed implementation of its management framework. 

* Key strategies for successful implementation of a CMO management
framework include defining roles, responsibilities, authority, 
structures, and processes, etc.[Footnote 6] 

* Authority, roles, and relationships for some positions and entities 
have not been clearly defined, including: 

- clearly defined decision-making authority for the DCMO, 

- a clearly defined relationship between DODís DCMO and the CMOs of the 
military departments, and, 

- clearly defined unique and shared responsibilities of various 
governance entities, such as the Deputyís Advisory Working Group and 
the DBSMC. 

Table 1 compares DODís actions in developing its management framework to
key strategies for implementing a CMO position and provides a summary 
of our observations. 

Table 1: 

Selected key strategies for implementing CMO positions[A]: Ensure a 
high level of authority and clearly delineated reporting relationships; 
DODís actions: DOD has designated the Deputy Secretary of Defense as 
the CMO to act for the Secretary of Defense, who has clear authority to
make and enforce decisions. Although the CMO can choose to delegate 
some authority to the DCMO, the DCMO position does not have decision-
making authority inherent to the position. The DCMO reports to the CMO 
and the BTA Director reports to the DCMO. The DCMO is an executive 
level III position, similar to most Under Secretaries of Defense. 
Summary of observations: The CMO has comprehensive decision-making 
authority, but is not a separate, full-time position. The DCMO position 
provides assistance to the CMO and is full-time; however, the DCMO 
position appears to be advisory and does not appear to have clear 
decision-making authority. It is unclear how the creation of the 
position changes the existing structure of DODís senior leadership 
since all decision-making authority remains with the CMO. Furthermore, 
it is unclear how the DCMO position will work with other senior leaders 
that are at the same level or higher within the department, such as the
Under Secretaries of Defense and the military department CMOs. 

Selected key strategies for implementing CMO positions[A]: Define 
specific roles and responsibilities; 
DODís actions: DOD defined the general roles and responsibilities for 
its CMO and DCMO positions. The CMO is, for example, to develop and 
maintain a departmentwide strategic plan for business reform. The DCMO 
is, for example, to assist the Deputy Secretary in his capacity as CMO 
and advise the Secretary of Defense on performance goals and measures 
and assessing progress against those goals. 
Summary of observations: DOD broadly defined the roles of the CMO and 
DCMO. However, the directive that established the DCMO position stated 
that the creation of the position does not subsume, realign, or replace 
the functions, responsibilities, or authorities of other senior leaders 
as prescribed by law for certain key business management functions, 
such as fiduciary, acquisition, and procurement activities. As stated 
above, it is unclear how the DCMO will work with these senior leaders. 

Selected key strategies for implementing CMO positions[A]: Establish 
integration and transformation structures and processes; 
DODís actions: DOD established structures, such as the BTA, DBSMC, 
Deputyís Advisory Working Group, Senior Leader Review Group, and 
Defense Senior Leadership Conference. Currently, DOD is revising the 
roles and responsibilities of the DBSMC. 
Summary of observations: DOD has not clearly defined the unique and 
shared roles and responsibilities of various entities, such as 
identifying how they would manage and integrate business transformation 
efforts. Since DOD has not developed a strategic plan supported by a 
planning process, it is unclear how governance structures will 
prioritize their agendas and make informed decisions. 

Selected key strategies for implementing CMO positions[A]: Promote 
accountability and performance based on job qualifications and
performance management; 
DODís actions: The Deputy Secretary of Defense has stated that 
appointment by the President and confirmation by the Senate provides 
assurance that experienced executives are put into leadership positions.
Summary of observations: DOD has not established a performance 
agreement for its CMO or DCMO. While DOD broadly defined the 
responsibilities of the positions in directives, a performance 
agreement that includes measurable goals for the CMO and DCMO would 
establish a means for measuring accountability and progress. Individual 
goals and performance measures have yet to be defined. 

Selected key strategies for implementing CMO positions[A]: Provide for 
continuity of leadership; 
DODís actions: DOD issued a directive to guide its overall transition 
to a new administration, and named an Assistant DCMO to lead the
establishment of the DCMO office. 
Summary of observations: There may not be continuity of leadership 
across administrations because the CMO and DCMO positions are appointed 
with undefined terms of office. Furthermore, although the DBSMC is a 
senior governance body in the business transformation area established 
by law, many leadership positions and members of this and other 
governance bodies are appointee positions that may change with 
administrations. 

Source: GAO analysis. 

[A] See GAO-08-34 for criteria. 

Note: The criteria for fostering effective working relationships were 
not added because it is too early to determine the effectiveness of the 
working relationships. 

[End of table] 

The military departments have also taken steps to establish a management
framework for business transformation. 

* The NDAA for Fiscal Year 2008 required the Secretaries of the military
departments to designate their Under Secretaries as CMOs with 
responsibility for business operations. The military departments have 
identified a CMO or acting CMO and have taken different actions to 
establish DCMO positions. 

- The Air Force named an acting CMO due to a vacant Under Secretary
position and has named a DCMO. 

- The Under Secretary for the Department of the Army is the departmentís
CMO; the Army has not named a DCMO. 

- The Navy named an acting CMO due to a vacant Under Secretary position
and has named a DCMO. 

* The Duncan Hunter NDAA for Fiscal Year 2009 requires the military
departments to develop comprehensive business transformation plans 
acting through their CMOs, and to establish business transformation 
offices to assist their CMOs. 

* The military departments are in the early stages of responding to 
these legislative requirements. 

The new administration needs to move quickly to nominate and fill key
leadership positions, including the Deputy Secretary of Defense (now 
statutorily designated as the CMO), the DCMO, the Under Secretaries of 
Defense, and the military department CMOs. 

In light of the transition, it will be important for senior leaders in 
the next administration to further define and clarify these roles, 
responsibilities, and relationships among the various positions and 
governance entities within DODís management framework for business 
transformation in order to sustain and further DODís progress. 

DOD has taken some positive steps towards developing a management
framework. Because of the complexity and long-term nature of DODís 
business transformation efforts, we have reported on the need for a CMO 
as a separate, full-time position with significant authority, 
experience, and a term to provide sustained leadership. We recognize 
that DOD plans to take additional actions and remain open to the 
possibility that these efforts will have a positive impact. At this 
point, however, it remains unclear how DOD's actions to date and its
future plans will provide the long-term sustained leadership needed to 
address the significant challenges facing DOD in its business 
operations. 

Objective 2: Strategic Planning: 

Agencies that are successful in achieving business management 
transformation undertake strategic planning and strive to establish a 
plan that contains key elements such as goals and measures that align 
at all levels of the agency. A strategic plan should: 

* align goals and measures with departmentwide goals and cascade goals
and measures to lower organizational levels, 

* assign accountability for achieving results, 

* demonstrate results, 

* provide a comprehensive view of performance, and, 

* link resource needs to performance. 

For DODís business transformation, our prior work has shown that a plan 
should be supported by a strategic planning process and should set 
strategic direction for overall business transformation efforts and all 
key business functions; prioritize initiatives and resources; establish 
investment priorities and guide the departmentís key resource 
decisions; and monitor progress through the establishment of 
performance goals and objectives.[Footnote 7] 

DOD characterizes the inaugural, or initial, SMP as: 

* a first step towards providing the Congress with the comprehensive 
plan required by law, and; 

* a primer for incoming officials that describes newly established 
institutional and governance reforms, and the existing structures and 
processes within DOD to be used by the CMO for delivering effective and 
efficient support to the warfighter. 

Purpose of SMP: 

* Focus Secretary of Defenseís senior leadership team on key 
priorities. 

* Ensure DODís governance processes allow senior leaders to make 
informed decisions on the steps that must be taken to achieve those 
priorities. 

* Provide transparency needed to measure whether priorities are metóand 
if notóto provide the information needed to quickly improve 
performance. 

Expected use of SMP: 

* By senior civilian and military managers to align business operations 
with performance priorities. 

* By military departments, defense agencies, and combatant commanders to
assess whether the results achieved support performance goals. 

In its current form, the initial SMP lacks key information and 
elements. 

* It does not identify any strategic goals, objectives, and performance
measures. 

* While it states a purpose, the plan does not provide detailed 
information about business operations. 

* Without strategic goals and objectives, the SMP: 

- cannot be linked to the Quadrennial Defense Review, DODís overall 
strategic plan, which defines reshaping the defense enterprise as a key
priority, 

- cannot be linked to other existing plans and tools for individual 
business areas, such as the Enterprise Transition Plan and the 
Financial Improvement and Audit Readiness Plan, which are focused 
largely on business systems modernization and financial management,
respectively,[Footnote 8] and, 

- cannot be used to provide direction to the efforts of the military
departments to develop compatible, lower-level business transformation 
plans and ensure linkage. 

The SMP does not identify accountability for achieving desired results, 
such as the roles of the CMO, the DCMO, the CMOs for the military 
departments, and other senior leaders in monitoring implementation and
execution of the SMP. 

The SMP does not demonstrate results, provide a comprehensive view of
performance for business operations, or link resource needs to 
performance. 

* DOD has yet to define performance measures for approving and 
evaluating the efficiency and effectiveness of business operations and
key initiatives to be undertaken in meeting performance goals and
measures. 

* The SMP contains discussions about existing processes for resource
decision making, such as the Planning, Programming, Budgeting, and
Execution System and the Defense Acquisition System, but it does not
address how these processes will be used to formulate investment
priorities and decisions for business operations. 

DOD plans to update the SMP in July 2009 and every 2 years thereafter as
required in the NDAA for Fiscal Year 2008; however, it has not yet 
developed a strategic planning process to guide future updates of the 
SMP. DOD indicated in the SMP that: 

* The plan did not address two legislative requirements: 

1) Performance goals and measures for business operations, and; 

2) Key initiatives to meet performance goals and measures. 

* DOD expects the incoming administration to address these remaining
requirements in the July 2009 update. 

Without a strategic plan with clearly defined and aligned goals, 
objectives, and performance measures that is supported by a 
comprehensive, strategic planning process, 

* DOD will continue to face challenges in developing an integrated 
approach to manage and transform its business operations. 

* It is unclear how: 

- DOD will measure progress, establish investment priorities, and link
resource needs to performance. 

- Military departments and other DOD entities will develop plans for 
their programs and activities for business operations in the absence of
departmentwide direction from the SMP. 

Agency Comments: 

DOD provided written comments on a draft of this briefing product. Our
summary and evaluation of DODís comments are included in enclosure II, 
and DODís written comments are reprinted in their entirety in enclosure 
III. DOD also provided technical comments on a draft of this product, 
which we incorporated. 

GAO Contact: 

Should you or your staff have any questions on the matters discussed in 
this briefing, please contact Sharon L. Pickup at (202) 512-9619 or 
pickups@gao.gov. 

In addition to the contact listed above, key contributors to this 
product were Deborah Yarborough, Assistant Director; Grace Coleman, K. 
Nicole Harms, Suzanne Perkins, Terry Richardson, Joseph Watkins, and 
Angela Watson. 

Appendix I: Scope and Methodology: 

To determine the extent of progress the Department of Defense (DOD) has
made in developing a comprehensive management framework for business
transformation, we: 

* reviewed documentation related to the establishment and 
implementation of business transformation entities, such as DOD's July 
2008 Strategic Management Plan (SMP), July 2008 Section 904 
Implementation Report, directives on DOD senior governance councils and 
the establishment of the Chief Management Officer (CMO) and Deputy 
Chief Management Officer (DCMO) positions, and military departmentsí 
documents such as strategic plans, 

* interviewed DOD officials from the Office of the Deputy Chief 
Management Officer, the Business Transformation Agency (BTA), and the 
Departments of the Army, Air Force, and Navy about actions taken by DOD 
to establish its CMO and DCMO positions and expand and institutionalize 
its management framework for business transformation, such as the 
creation of the CMO and DCMO positions and the role of senior 
governance bodies, and, 

ē compared actions taken by DOD in establishing and implementing its CMO
and DCMO management framework to key strategies identified in a prior
GAO report for implementing CMO positions. 

To determine to what extent DODís inaugural SMP contains key elements 
of a strategic plan, we: 

* reviewed the SMP for evidence of inclusion of strategic goals, 
objectives, and performance measures, which are key elements for 
strategic plans identified in our previous work and by the Government 
Performance and Results Act of 1993, 

* reviewed business-related goals, objectives, and measures included in 
the Quadrennial Defense Review and functional plans, such as the 
Enterprise Transition Plan, to determine the degree of alignment with 
the SMP, 

* reviewed DODís July 2008 Section 904 Implementation Report and the
legislative requirements in the National Defense Authorization Act for
Fiscal Year 2008, 

* interviewed DOD officials from the Office of the Deputy Chief 
Management Officer and the Office of the Director of Administration and 
Management about the process they used to develop the SMP, such as 
aligning the SMP with other plans, and, 

* interviewed officials from the BTA and Departments of the Army, Air 
Force, and Navy to get their perspectives about the purpose and use of 
the SMP. 

We conducted this performance audit from August 2008 through December 
2008, 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 assessment based on our audit objectives. We believe that 
the evidence obtained provides a reasonable basis for our assessment 
based on our audit objectives. 

Related GAO Products: 

DOD Business Transformation: Air Forceís Current Approach Increases 
Risk That Asset Visibility Goals and Transformation Priorities Will Not 
Be Achieved. GAO-08-866, Washington, D.C.: August 8, 2008. 

DOD Business Systems Modernization: Progress in Establishing Corporate
Management Controls Needs to Be Replicated within Military Departments.
GAO-08-705. Washington, D.C.: May 15, 2008. 

Defense Business Transformation: Sustaining Progress Requires 
Continuity of Leadership and an Integrated Approach. GAO-08-462T. 
Washington, D.C.: February 7, 2008. 

Organizational Transformation: Implementing Chief Operating 
Officer/Chief Management Officer Positions in Federal Agencies. GAO-08-
322T. Washington, D.C.: December 13, 2007. 

Organizational Transformation: Implementing Chief Operating 
Officer/Chief Management Officer Positions in Federal Agencies. GAO-08-
34. Washington, D.C.: November 1, 2007. 

Achieving Success Requires a Chief Management Officer to Provide Focus 
and Sustained Leadership. GAO-07-1072. Washington, D.C.: September 5, 
2007. 

DOD Business Transformation: Lack of an Integrated Strategy Puts the 
Armyís Asset Visibility System Investments At Risk. GAO-07-860. 
Washington, D.C.: July 27, 2007. 

High-Risk Series: An Update. GAO-07-310. Washington, D.C.: January 31, 
2007. 

[End of enclosure] 

Enclosure II: Agency Comments and Our Evaluation: 

We provided our draft briefing to the Department of Defense (DOD). In 
response to this draft, we received written comments from DOD (see 
enclosure III) which we summarize below. DOD also provided technical 
comments which we incorporated as appropriate. 

DOD concurred with our observations but expressed concern that we have 
not given full consideration to the structures that the department has 
in place or the actions that have been taken to date. DOD noted we 
recognized the directives that DOD has issued to institutionalize the 
broad responsibilities of the Chief Management Officer (CMO) and Deputy 
Chief Management Officer (DCMO), but that we had also observed that the 
DCMO has not been invested with decision-making authority and that it 
is unclear how the DCMO will work with the Under Secretaries of Defense 
and the CMOs of the military departments. DOD emphasized it was 
deliberate in defining the responsibilities and authorities of the DCMO 
to be consistent with the charters of the other Under Secretaries of 
Defense. Further, DOD stated that many responsibilities of these senior 
leaders are statutorily mandated and each of these officials and 
organizations is accountable to the Deputy Secretary of Defense, acting 
as the CMO, for the execution and improvement of the business 
operations within their areas of responsibility. Lastly, DOD stated 
that it believes that it is important that the DCMO act as an advisor 
to synchronize, integrate, and align business operations and management 
structures from an enterprise perspective. 

We recognize that several DOD senior leaders have statutorily defined 
responsibilities for certain business operations, and, as stated in our 
briefing, that the existence of the DCMO does not subsume, realign, or 
replace the functions, responsibilities, or authorities of other senior 
leaders as prescribed by law for certain key business management 
functions, such as fiduciary, acquisition, and procurement activities. 
However, by designating the DCMO as an advisor without clear decision- 
making authority or accountability for results, it is unclear how the 
DCMO will be able to provide effective leadership and ultimately effect 
change. Further, DOD has not clearly defined how the DCMO will work 
with other senior leaders that are at the same level or higher within 
the department, such as the Under Secretaries of Defense and the 
military department CMOs. If the DCMO is to have a role in 
synchronizing, integrating, and aligning business operations and 
management structures across the department, the DCMO will need to work 
closely with others. Therefore, in light of the transition, it will be 
important for DOD senior leaders in the next administration to further 
define and clarify these roles, responsibilities, and relationships 
among the various positions and governance entities within DOD's 
management framework for business transformation to sustain and further 
DOD's progress. 

In response to our observation that there may not be continuity of 
leadership across administrations because the CMO and DCMO positions 
are appointed with undefined terms in office, DOD emphasized it had 
acted in accordance with the National Defense Authorization Act for 
Fiscal Year 2008 while codifying the duties of the CMO and establishing 
the Office of the DCMO, and has taken a number of steps to ensure that 
career senior executive service members are positioned in both the 
Office of the Secretary of Defense and the military departments to 
ensure continued execution of business operations and focus on long- 
standing challenges. DOD also stated that it continues to maintain 
focus on business improvement and transformation issues as it strives 
to make the department more efficient, effective, and responsive. We 
recognize that DOD has taken a number of steps to further develop its 
management framework for business transformation. In the briefing, we 
specifically describe actions such as issuing directives related to the 
CMO and DCMO, establishing an office of the DCMO, naming an Assistant 
DCMO, and designating acting CMOs, as appropriate, for the military 
departments. Because of the complexity and long-term nature of DOD's 
business transformation efforts, we have reported the need for the CMO 
to be a separate position with significant authority, experience, and a 
term. As DOD continues to develop its management approach for business 
transformation, we remain open to the possibility of further progress. 
However, because of the roles and responsibilities currently assigned 
to key positions, it is still unclear that DOD will be able to provide 
the long-term sustained leadership needed to address significant 
challenges in its business operations. 

[End of enclosure] 

Enclosure III: Comments from the Department of Defense: 

Office Of The Deputy Secretary Of Defense: 
1010 Defense Pentagon: 
Washington, DC 20301-1010: 

December 31, 2008: 

Memorandum For Director, Report Followup & Gao Liaison, Office Of The 
Inspector General, Department Of Defense 

Subject: GAO Preliminary Observations, "Status of Department of Defense 
(DoD) Efforts to Develop a Management Approach to Guide Business 
Transformation," dated December 2008 (GAO Code 351262): 

Attached is DoD's proposed response to the GAO's Preliminary 
Observations. My point of contact is Michael Metzger, 
michael.metzger@osd.mil, 703-695-9715. 

Signed by: 

Elizabeth A. McGrath: 
Assistant Deputy Chief Management Officer: 

Attachment: As stated: 

Office Of The Deputy Secretary Of Defense: 
1010 Defense Pentagon: 
Washington, DC 20301-1010: 

December 31, 2008: 

Ms. Sharon L. Pickup: 
Director, Defense Capabilities and Management: 
U.S. Government Accountability Office: 
441 G Street, N.W. 
Washington, DC 20548: 

Dear Ms. Pickup: 

This is the Department of Defense (DoD) response to the GAO's 
preliminary observations, "Status of Department of Defense (DoD) 
Efforts to Develop a Management Approach to Guide Business 
Transformation," dated December 2008 (GAO Code 351262). 

The Department appreciates the GAO's interest in the progress of 
Defense Business Transformation and the opportunity to respond to these 
preliminary observations. The Department generally concurs with the 
GAO's observations; however, we are concerned that the GAO has not 
given full consideration to the structures that the Department has in 
place or the actions that have been taken to date. 

While the GAO recognizes the issuances that the Department has 
promulgated institutionalizing the broad responsibilities of the CMO 
and DCMO, they stated that the DCMO has not been invested with decision-
making authority and that it is unclear how the DCMO will work with the 
Under Secretaries of Defense and the CMOs of the Military Departments. 
The Department was deliberate in defining the responsibilities and 
authorities that it imparted to the DCMO consistent with the charters 
of the other Under Secretaries of Defense. Many of the responsibilities 
of the Under Secretaries of Defense and the Military Departments are 
statutorily mandated and each of these officials and organizations is 
accountable to the Deputy Secretary of Defense, acting as the CMO, for 
the execution and improvement of the business operations within their 
areas of responsibility. The Department believes that it is important 
that the DCMO act as an advisor to synchronize, integrate, and align 
business operations and management structures from an enterprise 
perspective. 

The GAO also stated that "there may not be continuity of leadership 
across administrations because the CMO and DCMO positions are appointed 
with undefined terms of office." The Department has acted in accordance 
with the 2008 National Defense Authorization Act while codifying the 
duties of the CMO and establishing the Office of the DCMO. The 
Department has also taken a number of steps to ensure that career 
senior executive service members are positioned both in OSD and the 
Military Departments to ensure continued execution of existing business 
operations improvement initiatives and focus on long-standing 
challenges. 

The Department continues to maintain focus on business improvement and 
transformation issues as we strive to make the Department more 
efficient, effective, and responsive. 

Signed by: 

Elizabeth A. McGrath: 
Assistant Deputy Chief Management Officer: 

[End of enclosure] 

Footnotes: 

[1] Pub. L. No. 110-181 ß904 (2008). 

[2] Pub. L. No. 110-417 ß908 (2008). 

[3] Pub. L. No. 103-62 (1993). 

[4] Department of Defense Directive 5105.02, Deputy Secretary of 
Defense (Sept. 18, 2007). 

[5] Department of Defense Directive 5105.82, Deputy Chief Management 
Officer (DCMO) of the Department of Defense (Oct. 17, 2008). 

[6] For key strategies for establishing and implementing CMO or chief 
operating officer positions, see GAO, Organizational Transformation:
Implementing Chief Operating Officer/Chief Management Officer Positions 
in Federal Agencies, [hyperlink, http://www.gao.gov/products/GAO-08-34] 
(Washington, D.C.: Nov. 1, 2007). 

[7] See GAO, Defense Business Transformation: Achieving Success 
Requires a Chief Management Officer to Provide Focus and Sustained 
Leadership, [hyperlink, http://www.gao.gov/products/GAO-07-1072] 
(Washington, D.C.: Sept. 5, 2007). 

[8] Some DOD business-related plans, such as the Enterprise Transition 
Plan, contain performance goals and measures that are used to track and 
monitor progress in an individual business area. 

[End of section] 

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