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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 Defense’s efficiency initiative, DOD components were asked to focus in particular on headquarters and administrative functions, support activities, and other overhead in their portfolios. DOD’s 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. GAO’s 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 GAO’s 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 DOD’s 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 Defense’s (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 DOD’s headquarters resources and information.

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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 GAO’s first recommendation and partially concurred with GAO’s second recommendation.

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Defense 1. 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.
Closed - Implemented
DOD concurred with the recommendation, and stated that it will continue to seek opportunities to realign personnel and organizations to support evolving operations, missions, and threats. In response to our recommendation, the department stated that it would continue to assess its organizational structure and personnel to optimize output and eliminate efficiencies. However, DOD provided few details on how it would conduct this assessment. Based in part on GAO's body of work on DOD headquarters, Congress required DOD to develop a plan for streamlining its management headquarters. Specifically, in section 904 of the National Defense Authorization Act for Fiscal Year 2014 Congress directed DOD to develop a plan for streamlining by changing or reducing the size of staffs, eliminating tiers of management, cutting functions that provide little or no added value, and consolidating overlapping and duplicative programs and offices, and to report on this plan no later than 180 days after enactment. The plan is to include a description of the planned changes or reductions in staffing and services provided by military personnel, civilian personnel, and contractor personnel, a description of the planned changes or reductions in management, functions, and programs and offices, the estimated cumulative savings to be achieved over a 10-fiscal-year period beginning with fiscal year 2015, and estimated savings to be achieved for each of fiscal years 2015 through 2024. DOD was also directed to submit a status report on the implementation of its plan along with the President's budget materials for fiscal years 2016 through 2024. In May 2015, DOD's Plan for Streamlining DOD Management Headquarters was issued, reflecting its initial and first status report to Congress. The actions taken by Congress and DOD, partly in response to our work, should help DOD to more efficiently manage headquarters resources and find cost savings as it seeks to resource its strategic priorities. As the department looks ahead to fulfilling these requirements, it should take steps to ensure that these and other planned headquarters reductions are realized while continuing to look for further efficiencies at headquarters across the department.
Department of Defense 2. 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.
The department partially concurred with this recommendation, stating that while it supports the refinement and update of DOD Instruction 5100.73, it uses the major headquarters activity designation to identify and manage the size of organizations in order to comply with statutory limits on headquarters personnel, not as tool to manage the organizational efficiency of the department or its components. With regard to the third element of the recommendation DOD clarified how it would respond to section 1109 of the fiscal year 2010 National Defense Authorization Act-requiring the information in the Defense Manpower Requirements Report in fiscal years 2012 and 2013-to satisfy this part of the recommendation. However, as of May 2021, DOD had not completed actions to address the remaining three elements of this recommendation. Specifically DOD had not: 1) Updated DOD Instruction 5100.73 to reflect all major DOD headquarters activity organizations, despite completing a revised framework for major DOD headquarters activities in September 2017. 2) Revised DOD Instruction 5100.73 to identify an approach to include contractors as part of its major DOD headquarters reporting. DOD had previously stated that it would use its Inventory of Contracts for Services to improve overall visibility and accountability of all contracted services, including those performed in support of major DOD headquarters activities. DOD currently relies on the System for Award Management (SAM) as its basis for collecting information on contracted services. However, an October 2020 DOD report on service contracting acknowledged that SAM does not collect certain relevant data, such as the organization requiring a service acquisition or direct labor costs associated with contractor manpower. The DOD report recommended additional analysis to identify the data elements and most appropriate and cost-effective method to collect contractor-related cost data that will facilitate better workforce decisions. Until the department completes this analysis and takes action to improve data collection, these limitations will hinder DOD's efforts to use the inventory of contracted services to help inform workforce planning and decision-making, as well as its approach to include contractors as part of major DOD headquarters reporting. 3) Established time frames for updating DOD Instruction 5100.73 or for determining how contractor personnel are to be included in major DOD headquarters activity reporting.

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