Further Efforts to Examine Resource Needs and Improve Data Could Provide Additional Opportunities for Cost Savings
GAO-12-345, Mar 21, 2012
What GAO Found
The Department of Defense (DOD) has taken some steps to examine its headquarters resources for efficiencies, but additional opportunities for cost savings may exist by further consolidating organizations and centralizing functions. For purposes of the Secretary of Defenses efficiency initiative, DOD components were asked to focus in particular on headquarters and administrative functions, support activities, and other overhead in their portfolios. DODs fiscal year 2012 budget request included several efficiencies related to headquarters organizations or personnel. GAO found that these efficiencies generally fell into two categories: (1) consolidating or eliminating organizations based on geographic proximity or span of control and (2) centralizing overlapping functions and services. The DOD efficiencies that GAO reviewed to reduce headquarters resources are expected by DOD to save about $2.9 billion through fiscal year 2016, less than 2 percent of the $178 billion in savings DOD projected departmentwide. GAOs work indicates that DOD may be able to find additional efficiencies by further examining opportunities to consolidate organizations or centralize functions at headquarters. DOD may not have identified all areas where reductions in headquarters personnel and operating costs could be achieved because the department was working quickly to identify savings in the fiscal year 2012 budget and used a top-down approach that identified several targets of opportunity to reduce costs, including headquarters organizations, but left limited time for a detailed data-driven analysis. In February 2012, DOD proposed $61 billion in additional savings over fiscal years 2013 to 2017, but provided limited information as to what portions of these savings were specific to headquarters. Without systematic efforts to reexamine its headquarters resources on a more comprehensive basis, DOD may miss opportunities to shift resources away from overhead.
An underlying challenge facing DOD is that it does not have complete and reliable headquarters information available for use in making efficiency assessments and decisions. According to GAOs internal control standards, an agency must have relevant, reliable, and timely information in order to run and control its operations. DOD Instruction 5100.73 guides the identification and reporting of headquarters information. However, GAO found that this instruction is outdated and does not identify all headquarters organizations, such as component command headquarters at U.S. Africa Command and certain Marine Corps headquarters. Also, although some of the services and functions performed by contractors could be considered as headquarters activities, the instruction does not address the tracking of contractors that perform these functions. DOD has delayed updating the instruction to allow time for components to adjust to the statutory changes enacted by Congress in 2009 that created new headquarters reporting requirements. According to DOD officials, ever-changing statutory reporting requirements have contributed to DODs failure to report to Congress about the numbers of headquarters personnel. As the department did not have reliable headquarters data, DOD compiled related information from other sources to inform its 2010 efficiency initiative. Because of the short timelines given to identify efficiencies and limitations on the sharing of information, this information was not validated before decisions were made. As a result, some of the information used to identify headquarters-related efficiencies was inaccurate and some adjustments in resource allocations will have to be made during implementation to achieve planned savings. Looking to the future, until DOD has updated its instruction to ensure that it has complete and reliable headquarters data, the department will not have the information it needs, which could affect its efforts to direct resources to its main priorities during future budget deliberations.
Why GAO Did This Study
The Department of Defenses (DOD) headquarters and support organizations have grown since 2001, including increases in spending, staff, and numbers of senior executives and the proliferation of management layers. In 2010, the Secretary of Defense directed DOD to undertake a departmentwide initiative to reduce excess overhead costs. In response to a mandate, GAO evaluated the extent to which DOD (1) examined its headquarters resources for efficiencies and (2) has complete and reliable headquarters information available for use in making efficiency decisions. For this review, GAO analyzed documents and interviewed officials regarding DODs headquarters resources and information.
What GAO Recommends
GAO recommends that DOD continue to examine opportunities to consolidate organizations and centralize functions and services and revise DOD Instruction 5100.73 to include all headquarters organizations, specify how contractors performing headquarters functions will be identified and included in reporting, clarify how components are to compile information needed to respond to headquarters reporting requirements, and establish time frames for implementing these actions. DOD concurred with GAOs first recommendation and partially concurred with GAOs second recommendation.
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- Closed - implemented
- Closed - not implemented
Recommendations for Executive Action
Recommendation: To further DOD's efforts to reduce overhead-related costs in light of the recent changes in DOD's strategic priorities, the Secretary of Defense should direct the secretaries of the military departments and the heads of the DOD components to continue to examine opportunities to consolidate or eliminate military commands that are geographically close or have similar missions, and to seek further opportunities to centralize administrative and command support services, functions, or programs.
Agency Affected: Department of Defense
Comments: 7/12: In its response to a draft of this report, the Department of Defense (DOD) stated that it concurred with the recommendation, and that it will continue to seek opportunities to realign personnel and organizations to support evolving operations, missions, and threats. It further stated it would continue to assess these elements for opportunities to optimize output and eliminate inefficiencies. 6/13: In follow-up with the department, DOD officials stated that several efforts had been made to consolidate or eliminate commands, or centralize administrative and command support services, functions, or programs. In fiscal year 2013, officials said the Washington Headquarters Service established a Single Enterprise Contracting Office to reduce contract fees and manage all Office of the Secretary of Defense contracting, for an estimated savings of $266 million from fiscal years 2013 through 2017. DOD officials also stated that it consolidated its seven Central Adjudication Facilities into a single organization under the Director, Administration and Management, eliminating 36 full-time equivalent positions for an estimated savings of $13 million from fiscal years 2015 through 2018. The military services also identified ongoing efforts to consolidate or eliminate headquarters organizations and functions. Army officials stated that at the end of fiscal year 2012 they deactivated Army Accessions Command, eliminating 65 military, 130 civilian, and 290 contractor positions for an estimated savings of $50 million from fiscal years 2013 through 2017. In addition, the Army anticipated saving an additional estimated $659 million from fiscal years 2013 through 2017 by reducing headquarters and administrative support. According to Army officials, they planned to review and identify headquarters functions that could be reduced, realigned, or eliminated, and were expected to complete their review by the end of January 2013, but have not yet identified any specific reductions or determined actions for achieving the estimated savings. The Navy is in the process of streamlining specific functions at Navy Installations Command and Naval Facilities Engineering Command to eliminate duplication within the management of Navy facilities. Navy officials stated that while they had originally identified savings of $342 million from fiscal years 2013 through 2017, that they do not expect to achieve all of these savings and are uncertain what the overall savings will be. The Air Force did not identify any new actions.
Recommendation: To improve DOD's ability to identify how many headquarters personnel it has, including military, civilian and contractor personnel, and improve the information Congress and DOD need to ensure that headquarters organizations are appropriately sized and overhead positions are reduced to the extent possible, the Secretary of Defense should direct the Director of Administration and Management, in consultation with the Under Secretary of Defense for Personnel and Readiness, to revise DOD Instruction 5100.73, Major DOD Headquarters Activities, to (1) include all major DOD headquarters activity organizations, (2) specify how contractors performing major DOD headquarters activity functions will be identified and included in headquarters reporting, (3) clarify how components are to compile the major DOD headquarters activities information needed to respond to the reporting requirements in section 1109 of the fiscal year 2010 National Defense Authorization Act, and (4) establish time frames for implementing the actions above to improve tracking and reporting headquarters resources.
Agency Affected: Department of Defense
Comments: 7/12:In its comments on our draft report the Department of Defense (DOD) partially concurred with our recommendation. According to DOD, it has developed guidance to improve visibility and accountability over contracted services, to include those contractors working at major DOD headquarters activities. This guidance, released in December 2011, describes steps to account for contracted services based on the function or activity the contractor is performing, which will allow for the collection and reporting of contractors supporting major DOD headquarters activities. DOD has also incorporated requirements to report military and civilian major DOD headquarters activity personnel, identified in section 1109 of the fiscal year 2010 National Defense Authorization Act, into the fiscal year 2012 Defense Manpower Requirements Report, which was published in April 2012. While DOD has taken a number of actions in response to our recommendations, and did update DOD's guiding instruction on major headquarters activities in June 2012, the updated instruction still does not include all major headquarters activity organizations, specify how contractors will be identified and included in headquarters reporting, or clarify how components are to report this information in the Defense Manpower Requirements Report. 6/13: In follow-up with DOD, officials identified some action that has been taken to address our recommendation. DOD officials stated that they have begun efforts to assess what organizations are not currently included in DOD Instruction 5100.73, and expect to begin the formal process of updating the instruction to include these organizations in July 2013. DOD officials also stated they have begun efforts to estimate contractor full-time equivalents for collection and inclusion in the Inventory of Contracts for Services, based on their December 2011 guidance. Officials stated that they expect to be fully compliant with the guidance by fiscal year 2016, and that once the guidance is fully implemented they would reassess how contractor full-time equivalents are accounted for within major DOD headquarters reporting. While DOD has begun the process of updating the instruction and has stated that they will assess how contractors are accounted for within major DOD headquarters reporting, they have not established timeframes for when these actions will be completed.