Defense Efficiency Initiatives:
Observations on DOD's Reported Reductions to Its Headquarters and Administrative Activities
GAO-18-688R: Published: Sep 24, 2018. Publicly Released: Sep 24, 2018.
What GAO Found
The Department of Defense (DOD) has not fully met statutory requirements of section 346 of the National Defense Authorization Act for Fiscal Year 2016 (2016 NDAA).
Subsection 346(a) of the 2016 NDAA required DOD to, among other things, implement a plan to achieve not less than $10 billion in cost savings from headquarters, administrative, and support activities from fiscal year 2015 through fiscal year 2019, and required DOD to submit progress reports with its fiscal year 2017, 2018, and 2019 budget requests. DOD reports several actions it has taken to meet these statutory requirements. However, the department’s actions do not fully meet the 2016 NDAA requirements, and GAO found that these actions have the following shortcomings:
DOD has not fully met the requirement to save $10 billion by fiscal year 2019. DOD reports that it has identified $9.2 billion of the required $10 billion in cost savings from fiscal year 2015 through fiscal year 2019. In 2017, GAO reported that DOD does not have a reliable cost estimate to support these estimated savings.
DOD was required to submit its first progress report when it submitted its fiscal year 2017 budget request in February 2016. However, DOD did not submit its first required progress report until May 2018.
GAO found inconsistencies in DOD’s May 2018 progress report that raise additional questions about the accuracy of DOD’s cost savings estimates. For example, in some sections in the May 2018 progress report, DOD refers to $5.3 billion in savings between fiscal years 2015 and 2019, while in another section it refers to $8.25 billion in savings for the same period. The department’s report offers no explanation as to why the figures differ. DOD officials acknowledged these inconsistencies but said they saw limited value in trying to improve this past savings estimate, focusing instead on accounting for efficiency efforts moving forward.
Subsection 346(b) of the 2016 NDAA required DOD to (1) modify an existing plan to ensure that savings for major DOD headquarters activities are not less than 25 percent of a defined baseline amount, by fiscal year 2020, and (2) revise applicable guidance on DOD’s major headquarters activities as needed, including to incorporate the definition of the term “major DOD headquarters activities” to reflect language in subsection 346(b). However, DOD has not fully met the requirement to ensure that it modifies its existing plan to achieve the required savings. Specifically, while DOD’s May 2018 progress report includes a table that shows more than a 25 percent reduction of a baselined amount by fiscal year 2020, DOD has previously stated that part of these estimated cost savings are not auditable. GAO previously reported that the cost savings estimate was unreliable. Without a reliable cost savings estimate, DOD will not be able to ensure that it achieves the required savings. Further, while DOD has made progress in revising its applicable guidance on DOD’s major headquarters activities, it has not fully met the requirement of subsection 346(b). In August 2015, DOD published a framework describing the major headquarters activities and stated that it has established a new definition for its DOD headquarters in response to the section. However, DOD has not revised one of its instructions that is specifically related to major headquarters activities to reflect this new definition.
Subsection 346(c) of the 2016 NDAA required DOD to conduct a comprehensive review of its management and operational headquarters for the purposes of consolidating and streamlining headquarters functions and administrative support activities, and provide a report on the review. DOD’s August 2016 report in response to this requirement addressed all of the elements in the section. The report describes DOD’s review of its organization and of management and operational headquarters, among other things. More recently, as DOD stated in its May 2018 report, the department has been pursuing reform initiatives to consolidate business activities to achieve greater efficiencies.
Why GAO Did This Study
Section 346 of the 2016 NDAA directed DOD to, among other things, implement a plan to ensure that the department achieves at least $10 billion in cost savings from headquarters, administrative, and support activities of the department, from fiscal year 2015 through fiscal year 2019. It also required DOD to submit reports on its progress toward implementing the plan and achieving the required cost savings. The act also included a provision for GAO to assess and report on DOD's progress reports and the extent to which DOD is in compliance with section 346 of the act.
For this report, GAO addressed the extent to which DOD's reported actions on reductions in headquarters, administrative, and support activities meet the requirements of section 346 of the 2016 NDAA. To address this objective, GAO analyzed DOD's May 2018 progress report, including DOD budget and guidance documents, and interviewed DOD officials about the status of the department's efficiency efforts related to section 346.
What GAO Recommends
GAO is not making recommendations. GAO provided a draft of this report to DOD for review and comment. DOD stated it had no comments on the report.
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