Incentive Programs To Improve Productivity Through Capital Investments Can Work

AFMD-81-43: Published: Apr 20, 1981. Publicly Released: Apr 20, 1981.

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The primary source of improved national productivity has traditionally been new and technologically advanced capital equipment. Recognizing this, the Department of Defense (DOD) established a number of programs in the 1970's to simplify the procurement of productivity enhancing capital equipment. One such program entailed the establishment by Congress of special funds for buying equipment that would pay for itself in 2 years through cost savings. Now called the Productivity Enhancing Incentive Fund (PEIF), the program was reviewed by GAO in 1978. Concurrently, Congress temporarily stopped funding the program because of its concern over circumvention of the normal budget process. In the 1978 report, GAO supported the PEIF concept and recommended its reestablishment, while simultaneously pointing out program deficiencies. As a result, Congress reinstituted the program in 1979.

Except for the Navy, the services' program management has improved since the 1978 review. The Air Force and Army efforts have demonstrated that, under the program, good ideas can be quickly evaluated and funded and savings made promptly. However, the full potential of this fast payback program has not been realized because of inadequate management attention. The Air Force and the Army need to improve their postinvestment analysis and reporting to clearly demonstrate PEIF program benefits and meet congressional requirements. The Navy particularily has not devoted the management resources and emphasis needed to ensure a successful and credible PEIF program. GAO found that: (1) the Navy's program was not being adequately promoted; (2) Navy guidance did not fully comply with DOD and congressional guidance; (3) extensive delays occurred between investment identification and installation; (4) the justification for many approved projects was invalid or insupportable; and (5) postinstallation analyses were inadequate.

Recommendations for Executive Action

  1. Status: Closed

    Comments: GAO has no information on the actions taken in response to this recommendation.

    Recommendation: The Secretaries of the Air Force and Army should take action to enhance the program's credibility by (1) establishing a system of independent, onsite postaudits to validate savings achieved; and (2) submitting, as part of the budget process, the required reports on where savings have been realized and applied.

    Agency Affected: Department of Defense: Department of the Air Force

  2. Status: Closed

    Comments: GAO has no information on the actions taken in response to this recommendation.

    Recommendation: The Secretaries of the Air Force and Army should take action to enhance the program's credibility by (1) establishing a system of independent, onsite postaudits to validate savings achieved; and (2) submitting, as part of the budget process, the required reports on where savings have been realized and applied.

    Agency Affected: Department of Defense: Department of the Army

  3. Status: Closed

    Comments: GAO has no information on the actions taken in response to this recommendation.

    Recommendation: The Secretary of the Navy should request no additional funding for the PEIF program until an action plan for improving program management is developed and then reviewed and approved by the Secretary of Defense.

    Agency Affected: Department of Defense: Department of the Navy

  4. Status: Closed

    Comments: GAO has no information on the actions taken in response to this recommendation.

    Recommendation: The Secretary of Defense should require the Director of the Defense Productivity Program Office to evaluate the relative merits of all capital investment incentive programs for which it has responsibility to determine whether or not resources needed to ensure proper program implementation and guidance can be made available to the PEIF program. If needed resources cannot be found with the Defense Productivity Program Office, the Secretary should consider other alternatives such as reallocating resources from other programs, hiring additional personnel, or terminating the PEIF program.

    Agency Affected: Department of Defense

 

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