The Department of Defense (DOD) has many organizations with multiple layers of headquarters management, and at times these organizations possess complex and overlapping relationships. At the departmental level, such layers include, but are not limited to, the Office of the Secretary of Defense (OSD), the Joint Staff, and the military service secretariats and staffs, which are the highest level organizations in DOD responsible for managing and overseeing the major elements of the department. Beyond these organizations, DOD has other commands, such as the functional combatant commands, which assist in carrying out DOD’s worldwide responsibilities and providing unique capabilities, such as conducting global operations to deter and detect strategic attacks against the United States and its allies, in support of DOD’s six geographic combatant commands and four military services.
The total authorized positions and costs to support the headquarters operations for OSD, the Joint Staff, the military service secretariats and staffs, and the functional combatant commands was almost 27,000 authorized military and civilian positions and $4.7 billion in fiscal year 2013. Total personnel and costs to support headquarters operations have grown at many organizations; for example, authorized positions at the functional combatant commands increased from about 5,700 personnel in fiscal year 2004 to more than 10,500 personnel in fiscal year 2013, and costs to support headquarters operations increased from about $215 million in fiscal year 2001 to about $1.2 billion in fiscal year 2013.
Like the rest of the federal government, DOD is operating in a constrained budget environment and is facing difficult decisions about how to allocate its resources to meet its global mission requirements. Acknowledging the significant growth in headquarters, the department has sought to reduce its headquarters staff across the department. In July 2013, the Secretary of Defense directed a 20 percent cut in management headquarters spending throughout the department. The reduction included spending within headquarters organizations such as OSD, the Joint Staff, the military services’ secretariats and military staffs, and the combatant commands. These cuts, according to the Secretary’s guidance, were designed to streamline DOD’s management of its headquarters through efficiencies and elimination of spending on lower-priority activities. In 2014, DOD reported that reductions to management headquarters staffs across the department would result in a savings of $5.3 billion over 5 years (through fiscal year 2019).However, the specific details about how DOD will achieve these reductions were not clear as of January 2015.
GAO has identified several actions related to DOD’s management of its headquarters resources. In its February 2012 annual report on duplication, overlap, and fragmentation, GAO reported that DOD should review and identify further opportunities for consolidating or reducing the size of headquarters organizations. In March 2012, GAO recommended that DOD revise DOD Instruction 5100.73, Major DOD Headquarters Activities, to include all major DOD headquarters activity organizations. DOD has begun the process of updating this Instruction, but had not revised it as of January 2015. GAO also reported that DOD should continue to examine opportunities to consolidate or eliminate defense headquarters organizations that are geographically close or have similar missions. Moreover, in its April 2014 annual report on duplication, overlap, and fragmentation, GAO reported that DOD should conduct comprehensive, periodic evaluations of whether the combatant commands are sized and structured to efficiently meet assigned missions; DOD has not addressed this suggested action. DOD’s progress to address these actions can be found in GAO’s Action Tracker.
 For purposes of this report section, authorized positions refer to military and civilian positions that have been approved by DOD components for funding for a specific fiscal year. Costs to support headquarters operations primarily reflect the costs for civilian personnel and contract services. These costs do not include the costs associated with military personnel basic pay and allowances and other military personnel costs. It excludes obligations of funding provided for DOD’s overseas contingency operations. All costs in this report section are in nominal dollars.
 GAO limited its analysis of authorized military and civilian positions to fiscal years 2004 through 2013 because U.S. Special Operations Command could not provide data on its authorized military and civilian positions for fiscal years 2001 through 2003.
 Among other constraints, the Budget Control Act of 2011 established requirements for automatic budget sequestration, setting caps on the levels of DOD spending from fiscal years 2013 to 2021. See Pub. L. No. 112-25 (2011).
 Some DOD officials use the terms management headquarters and major DOD headquarters activities interchangeably. For purposes of this report section, GAO also uses the terms interchangeably.
 Deputy Secretary of Defense Memorandum, 20% Headquarters Reductions (July 31, 2013).
In June 2014, GAO found that DOD’s headquarters reduction plans were based on unreliable information and also could be excluding much of the total resources devoted to headquarters because the department focused its efforts on the portion of the headquarters designated as management headquarters. DOD defines management headquarters, or major DOD headquarters activities, as headquarters whose primary mission is to manage or command the programs and operations of DOD and its components and their major military units, organizations, or agencies. DOD officials told GAO that the Secretary of Defense provided general guidance about what should be considered management headquarters for the commands to use when identifying their total headquarters budgets, directing that organizations should identify reductions amounting to 20 percent of management headquarters budgets. The guidance focused on budgets but also stated that organizations should strive to reduce personnel by a like amount. However, because the department did not have complete and reliable information on the resources being devoted to management headquarters, DOD relied on self-reported and potentially inconsistent data from each individual component when implementing planned headquarters reductions.
GAO found that DOD considers less than a quarter of the positions at the functional combatant commands—2,500 of 10,500 total authorized positions—to be management headquarters even though many positions appear to be performing management headquarters functions such as planning, budgeting, and developing policies. As such, more than three quarters of the headquarters positions at the functional combatant commands are potentially excluded from DOD’s directed reductions. DOD officials reported that many of these positions were excluded from management headquarters totals because they were performing tasks and functions that were more operationally focused. However, GAO found that the commands excluded resource management personnel that manage component command funding and personnel that manage and support the development, acquisition, and fielding of critical items for select forces, even though these personnel perform headquarters-specific functions.
GAO found differences, as well, in what proportion of personnel were considered management headquarters among DOD organizations. Compared to the functional combatant commands, the service component commands had a larger percentage of authorized positions included in their management headquarters totals—about 80 percent of their total headquarters authorized positions—even though their primary mission is to support the functional combatant command, and many have an operationally focused mission. DOD acknowledged that its management headquarters data were not complete and reliable, but noted that it does not have a reliable alternate source for capturing this information.
GAO concluded that the department may not achieve meaningful savings unless it re-evaluates its decision to base its headquarters reduction plans on unreliable management headquarters information. Given that unreliable information on management headquarters formed the foundation of DOD’s reduction efforts, the department did not have a reliable starting point for its headquarters reductions in the functional combatant commands and also across the department. GAO based its conclusion, in part, on the long-standing issues with accounting for such headquarters resources that date back to at least 1997. When evaluating organizational consolidation, the key to any consolidation initiative is the identification of and agreement on specific goals, with the goals of the consolidation being evaluated against a realistic assessment of how the consolidation can achieve them. GAO further noted that any consolidation initiatives must be grounded in accurate and reliable data.As a result, unless DOD reevaluates its decision to focus reductions to management headquarters and establishes a clearly defined and consistently applied starting point on which to base reductions, the department will be unable to track and reliably report its headquarters reductions and ultimately may not realize significant savings.
In a second report, published in January 2015, GAO found that other top-level DOD headquarters organizations it reviewed—OSD, the Joint Staff, and the secretariats and staffs for the Army, Navy, and Air Force, and Headquarters, Marine Corps—do not determine their workforce requirements as part of a systematic requirements-determination process, nor do they have procedures in place to ensure that they periodically reassess these requirements as outlined in DOD and other guidance. GAO noted that current personnel levels for these headquarters organizations are traceable to statutory limits enacted in the 1980s and 1990s to force efficiencies and reduce duplication. Although Congress set these statutory limits, GAO reported that the President has declared a national emergency each year since fiscal year 2002, which had the effect of waiving the limits for the military departments. If the limits had been in force in fiscal year 2013, the Army and Navy would have exceeded them by 17 percent and 74 percent, respectively. Moreover, the limits have little practical utility because of statutory exceptions for certain categories of personnel and because the limits exclude personnel in supporting organizations that perform headquarters-related functions. For example, the organizations that support the Army Secretariat and Army Staff are almost three times as large as the Secretariat and Staff, but personnel who perform headquarters-related functions in these organizations are excluded from the limits.
Many of the DOD organizations GAO reviewed have recognized problems with requirements determination and are beginning to take steps to modify their related requirement-determination processes. For example, GAO reported that OSD, the Navy, and the Marine Corps are taking steps to modify their processes, but their efforts are not complete. Without a systematic determination of workforce requirements and periodic reassessment of them, DOD will not be well positioned to proactively identify efficiencies and limit personnel growth within these headquarters organizations. Moreover, until DOD determines workforce requirements, Congress will not have critical information needed to re-examine statutory limits enacted decades ago.
Based in part on GAO’s body of work on DOD headquarters, Congress required DOD to report on how it intended to address management challenges across a range of headquarters organizations not limited to those organizations GAO reviewed. Specifically, Congress directed DOD to develop a plan for implementing a periodic review and analysis of DOD’s personnel requirements for management headquarters in section 905 of the Carl Levin and Howard P. ‘Buck’ McKeon National Defense Authorization Act for Fiscal Year 2015 and report on this plan no later than 120 days after enactment. The review is to include a description of current headquarters size, structure and critical capabilities; an assessment of current systems to track how headquarters personnel are managed; and a proposed timeline on how they would go about adopting a periodic reassessment. The review not only applies to the organizations that GAO reviewed, but also the Defense Agencies, such as the Defense Finance and Accounting Service and the Defense Intelligence Agency; the combatant commands; DOD field activities such as the Defense Human Resource Activity and the DOD Education Activity; and the National Guard Bureau. Providing the information required by Congress could increase visibility into the size and structure of DOD headquarters organizations, but it may not capture all headquarters personnel because of the fundamental challenges with how DOD defines management headquarters. GAO previously reported that focusing reductions on management headquarters budgets and personnel, which tend to be inconsistently defined and often represent a small portion of the overall headquarters, shields much of the resources identified for potential reduction. GAO reported that focusing reductions on management headquarters did not provide a good designation of total headquarters resources and made recommendations to improve DOD’s management headquarters reduction efforts. At a time of growing economic and fiscal constraints and changing national security challenges, it is critical for DOD to take a comprehensive approach in its headquarters reductions to ensure meaningful savings are achieved.
 Department of Defense Instruction 5100.73, Major DOD Headquarters Activities (Dec. 1, 2007) (incorporating change 2, June 12, 2012).
 The 20 percent reduction applied to the total headquarters budgets to include government civilian personnel who work at headquarters and associated costs including contract services, facilities, information technology, and others that support headquarters functions.
 See Pub. L. No. 113-291, § 905 (2014).
To improve the management of DOD’s headquarters-reduction efforts and to allow the department to respond to congressional reporting requirements, GAO recommended in June 2014 that the Secretary of Defense take the following three actions:
To ensure that OSD, the Joint Staff, and the military secretariats and staff are properly sized to meet their assigned missions and use the most cost-effective mix of personnel, and to better position DOD to identify opportunities for more efficient use of resources, GAO recommended in January 2015 that the Secretary of Defense take the following two actions:
Estimating definitive cost savings in this area is challenging because net savings will depend on how DOD defines and implements headquarters reductions. GAO previously noted that the total costs devoted to support headquarters operations at the commands it reviewed—OSD, the Joint Staff, the military service secretariats and staffs, and the functional combatant commands—was $4.7 billion in fiscal year 2013. If the department broadened its headquarters-reduction efforts to total headquarters budgets at these commands GAO reviewed, DOD could potentially save $47 million less any implementation costs for every 1 percent it reduces those headquarters. Importantly, these organizations represent a small fraction of the total headquarters resources of the department, so department-wide savings could be much larger if DOD altered its approach. Therefore, if the department were to implement significantly larger reductions to total headquarters budgets, once the reductions were in place and after implementation costs, DOD could potentially have net savings in the hundreds of millions of dollars a year.
The information contained in this analysis is based on findings from the reports listed in the related GAO products section. For its June 2014 report, GAO analyzed data on functional combatant command resources, to include authorized positions and costs to support headquarters operations. GAO reviewed guidance and documentation on DOD’s planned headquarters reductions and examined whether this information addressed some key questions GAO previously had developed for an agency to consider when evaluating proposals to consolidate management functions. GAO also interviewed officials at the functional combatant commands and their respective service component commands to discuss specific headquarters positions and organizations that could be affected by DOD’s planned reductions. For its January 2015 report, GAO analyzed data on authorized positions and costs to support headquarters operations for OSD, the Joint Staff, and the military service secretariats. GAO also reviewed guidance and documentation on steps to implement DOD’s 20 percent reductions to headquarters budgets starting in fiscal year 2015, the first budget for which DOD was able to include the reductions.
Table 10 in appendix V lists the programs GAO identified that might have opportunities for cost savings.
In commenting on GAO’s June 2014 report on which this analysis is based, DOD partially concurred with the recommendation that the Secretary of Defense re-evaluate the decision to focus reductions on management headquarters to ensure the department’s efforts ultimately result in meaningful savings. DOD stated that this department-wide recommendation would garner greater savings, but raised concerns that the recommendation seemed to be outside the scope of the review, which focused on the functional combatant commands. DOD also raised concerns with GAO’s distinction between management headquarters and the functions that personnel in these positions perform. The department stated that while the Secretary of Defense’s reductions were focused on management headquarters, the military services were allowed to reduce below-the-line organizations—those not designated as management headquarters—which includes elements of the combatant commands. While GAO’s review was focused on the functional combatant commands, the issue it identified is not limited to these commands and illustrates a fundamental challenge facing the department in its efforts to reduce headquarters overhead. Moreover, the intent of the recommendation was to focus on positions not included in the commands’ assessment of management headquarters positions. Given the long-standing issues with accounting for management headquarters, GAO maintains that the recommendation for the Secretary to re-evaluate the decision to focus the department’s reduction efforts on management headquarters is appropriate.
In commenting on GAO’s January 2015 report, DOD partially concurred with the recommendation that the Secretary of Defense direct that OSD, the Joint Staff, and the military service secretariats and staff conduct a systematic determination of their workforce requirements. DOD stated that the January 2015 report lacks perspective when characterizing the department’s headquarters staff, stating that it is appropriate for the department to have a complex and multilayered headquarters structure given the scope of its missions. However, the department has repeatedly recognized the need to streamline its headquarters structure. For example, in 2010, the Secretary of Defense expressed concerns about the dramatic growth in DOD’s headquarters and support organizations that had occurred since 2001, and initiated a series of efficiency initiatives aimed at stemming this growth. DOD further stated that it will continue to use the processes and prioritization that is part of the Planning, Programming, Budgeting, and Execution process to determine workforce requirements, and will also investigate other methods for aligning personnel to missions and priorities. DOD stated that it is currently conducting Business Process and System Reviews of the OSD Principal Staff Assistants, defense agencies, and DOD field activities to aid in documenting mission responsibilities to resource requirements, but the department did not provide any details specifying whether any of these actions would include a workforce analysis to systematically determine workforce requirements rather than continuing to rely on historic personnel levels and existing statutory limits as the basis for those requirements. Moreover, according to DOD’s implementation guidance for the Business Process and Systems Review, which GAO references in its report, this review is focused on business processes and supporting information technology systems within certain defense headquarters organizations, rather than a systematic determination of workforce requirements for those organizations. Given the importance of being well positioned to identify opportunities for efficiencies and to reduce the potential for headquarters-related growth, GAO maintains that the recommendation for the Secretary to direct OSD, the Joint Staff, and the military service secretariats and staff to conduct a systematic determination of their workforce requirements is appropriate.
GAO provided a draft of this report section to DOD for review and comment. DOD provided technical comments, which were incorporated as appropriate.
For additional information about this area, contact John H. Pendleton at (202) 512-3489 or email@example.com.
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