The Department of Defense’s (DOD) 2014 portfolio of 78 major weapon system programs had total estimated acquisition costs of over $1 trillion, yet DOD has not consistently managed these investments as a portfolio to ensure they are strategy driven, affordable, and balance near- and long-term needs. Rather, DOD and the military services plan to acquire more weapons than they can afford given anticipated levels of funding. Furthermore, as GAO has reported since at least 2011, when multiple services have weapon system needs in common, they sometimes develop separate, rather than common, solutions that result in inefficient and, in some cases, potentially duplicative investments.
Weapon system investment decision making in DOD is highly complex. It involves numerous entities, levels, and policies at the military service and enterprise level. The military services make initial decisions regarding what to buy, how to buy it, and how much it will cost. These decisions are made by the military service organizations responsible for determining weapon system requirements, managing the acquisition of those systems, and developing defense budgets and go through multilayered review processes within the services. For major investments, the military services’ decisions may be reviewed and approved or disapproved at the enterprise level.
Leading commercial companies use portfolio management—a disciplined process that helps optimize investments by ensuring organizations have the right mix of new products that meet customer needs within available resources—to make a wide variety of decisions, including capability and funding trade-offs, to achieve the optimal capability mix for a given investment. Rather than optimizing individual programs, portfolio management focuses on products collectively at an enterprise level and involves evaluating, selecting, prioritizing, and allocating limited resources to projects that best accomplish strategic or organizational goals.
In August 2015, GAO found that DOD is not effectively using portfolio management to optimize its weapon system investments and improve agency-wide governance of weapon system investment decisions. Best practices recommend assessing investments collectively from an enterprise-wide perspective and integrating requirements, acquisition, and budget information, but DOD’s fragmented governance structure for making weapon system investment decisions makes implementing these practices difficult. As GAO reported in August 2015, DOD has numerous fragmented processes, organizations, and decision makers to oversee its weapon system investments, which generally do not operate as an integrated whole. As a result of this fragmentation, most weapon system investment decisions are made on a piecemeal basis within DOD’s requirements, acquisition, and budget processes.
Best practices also call for providing sustained leadership for portfolio management, which as GAO reported in August 2015, DOD has lacked. DOD leadership made a concerted effort to implement portfolio management by initiating portfolio management pilots in 2006 to improve strategic decisions on resource allocation across programs and by issuing DOD Directive 7045.20 on capability portfolio management in 2008. However, soon afterward, leadership priorities shifted away from portfolio management. DOD eliminated the pilots, did not document the results of the pilots, and stopped implementing that directive, although it has not been rescinded. This was attributed to a variety of factors, including the lack of a senior-level champion for the effort as political leadership changed, which can happen every few years in DOD. Officials from the acquisition and requirements communities told GAO in 2015 that DOD no longer has a champion for portfolio management.
In addition to lacking sustained leadership, GAO reported in August 2015 that DOD does not have a policy to guide portfolio management across the department that fully reflects key best practices, nor has department leadership assigned an appropriate office to ensure its implementation. For example, best practices state that leadership should be empowered to make investment decisions. However, under DOD Directive 7045.20, the department's current policy, portfolio managers do not have sufficient authority to effectively influence weapon system investment decisions. Leadership responsibilities in DOD Directive 7045.20 are also fragmented, and there is no one office responsible for ensuring the policy’s implementation. The office with primary responsibility for the directive, the Office of the Under Secretary of Defense for Policy, does not have direct management authority over the organizations responsible for implementing it.
Portfolio management best practices and the Project Management Institute’s portfolio management standard also state that organizations should conduct regular reviews to adjust to strategic changes or changes in the mix of products within a portfolio, among other reasons. However, DOD does not conduct regular enterprise-level portfolio reviews that integrate the requirements, acquisition, and budget communities. Instead, the requirements, acquisition, and budget communities each have their own limited portfolio review efforts, some of which are still being developed. As a result, DOD may be missing opportunities to better leverage its resources and identify investment priorities that best reflect DOD-wide needs. Regular, DOD-wide portfolio reviews can help increase return on taxpayers’ substantial investments in weapon systems by helping ensure that those investments align with national security and military strategies, prioritizing the most important investments, selecting the optimum mix of investments, identifying and eliminating unwarranted duplication, and determining whether investments are affordable.
In interviews for GAO's August 2015 report, officials from DOD’s requirements, acquisition, and budget communities said they lacked the resources, readily accessible data, and analytical tools to regularly or effectively conduct integrated portfolio reviews. GAO has previously found that one way to better manage fragmented activities is to improve collaboration and coordination. This includes engaging in key practices such as defining and articulating common outcomes, agreeing on roles and responsibilities, and identifying and addressing needs by leveraging resources. Without better coordination and collaboration, DOD will likely struggle both from an information and resource perspective to implement integrated portfolio reviews. In addition, GAO reported that the Joint Staff was developing a database to provide it with a better analytical tool to support portfolio management, but the database was difficult to populate with requirements, acquisition, and budget information, and there has been limited coordination to determine if and how it could be useful to others. DOD does not have a formal implementation plan for improving the Joint Staff database or investing in other means, such as new analytical tools, to meet agency-wide portfolio management data needs. Without establishing this planning foundation, the Joint Staff may not be in a sound position to effectively monitor and evaluate the implementation of its efforts to provide quality information for reviews.
In August 2015, GAO recommended that DOD take the following four actions to increase accountability for portfolio management efforts and enable more integrated portfolio reviews and analyses of weapon system investments at the department-wide level:
Taking these actions should enable DOD to better manage weapon system investments at the portfolio level by ensuring that weapon system funding is spent on the programs that contribute most to achieving DOD’s short-term and long-term strategic goals and reducing the risk of potentially overlapping and duplicative investments across the military services. In general, these actions could result in a more efficient use of the more than $100 billion dollars the department spends annually on its weapon system investments. However, the precise cost savings associated with such efficiencies is not possible to quantify because the actual cost of inefficient and unnecessary duplicative weapon system investments across DOD is unknown.
The information contained in this analysis is based on findings from the products listed in the related GAO product section. To perform this work, GAO compared DOD’s weapon system investment policies and decision-making processes, which include the requirements, acquisition, and budget processes, to portfolio management best practices. GAO identified these best practices in prior GAO reports and conducted a literature review to ensure they were still current. To determine the extent to which DOD conducts integrated portfolio reviews at the enterprise level, GAO analyzed enterprise-level portfolio reviews and other portfolio-level analyses. GAO also interviewed DOD requirements, acquisition, and budget officials.
Table 2 in appendix V lists the program GAO identified that might have similar or overlapping objectives, provide similar services, or be fragmented across government missions. Overlap and fragmentation might not necessarily lead to actual duplication, and some degree of overlap and duplication may be justified.
In commenting on the August 2015 report on which this analysis is based, DOD partially concurred with GAO’s recommendation to revise DOD Directive 7045.20 on Capability Portfolio Management in accordance with best practices and promote the development of better tools to enable more integrated portfolio reviews and analyses of weapon system investments. However, DOD’s planned actions will not fully address the issues we raised in our report. DOD agreed with the need to further develop portfolio management tools and ensure access to authoritative data, but stated that other aspects of our recommendation were redundant to and would conflict with other processes and activities in place to perform portfolio management. DOD’s response presumed that its existing portfolio management processes and activities have been effective and failed to acknowledge that they have not successfully addressed affordability issues in some portfolios and potential duplication among some programs. We continue to believe that our recommendations to revamp DOD’s portfolio management policy to align with best practices, establish clear leadership responsibility for its implementation, and conduct annual portfolio reviews would provide the foundation for improved weapon system investment planning and management.
GAO provided a draft of this report section to DOD for review and comment. The department did not provide comments on this report section.
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The Department of Defense (DOD) is not effectively using portfolio management to optimize its weapon system investments, as evidenced by affordability challenges in areas such as shipbuilding and potential duplication among some of its programs. Best practices recommend assessing investments collectively from an enterprise-wide perspective and integrating requirements, acquisition, and budget info...
Over the next several years, the Department of Defense (DOD) plans to invest $1.4 trillion in major weapons programs. While DOD produces superior weapons, GAO has found that the department has failed to deliver weapon systems on time, within budget, and with desired capabilities. While recent changes to DOD's acquisition policy held the potential to improve outcomes, programs continue to experienc...