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Highlights

What GAO Found

The Department of Defense (DOD) has improved its Strategic Management Plan (SMP) by including additional strategic planning elements that were lacking from previous plans; however, the fiscal year 2012-2013 SMP still needs to incorporate some key information that would make it more useful for DOD decision makers as a guide for implementing business transformation efforts and for measuring progress. Improvements in the SMP include links between its business goals and DOD-wide goals, as well as milestone or target data that would enable DOD to better measure performance and assess progress in achieving SMP goals. However, the SMP does not fully describe the specific challenges the goals are intended to address and what the root causes of those challenges are. For example, the SMP states that the goal on strengthening DOD's acquisition processes is aimed at obtaining greater efficiency and productivity in defense spending, but the accompanying narrative does not describe what is causing acquisition-related cost growth and how the goal's initiatives may address those causes. The SMP also lacks sufficient context for why business goals and strategies were chosen or changed from prior plans, such as whether sufficient progress had been made to warrant their removal. Also, the SMP includes performance measures that do not fully reflect core activities needed to assess progress for some business goals. For example, the SMP identifies measures related to planning for contractor support, but does not address other core activities such as those related to providing contractor oversight. Refining the SMP to include this key information could help DOD better prioritize and target its reform efforts to address the underlying causes of its systemic business challenges and to achieve results.

DOD has broadly outlined a performance management approach for monitoring business transformation efforts, but has not used its governance structures to regularly review performance results or defined how these structures will routinely integrate various sources of performance data to assess departmentwide progress. DOD has established governance structures to help monitor progress, such as the Defense Business Council (DBC), established in June 2012 to, among other things, review performance results to track progress against goals. However, the DBC has not regularly reviewed performance data and when reviews did occur, it did not have sufficient information to assess progress. For example, as of December 2012, the DBC had reviewed performance results only twice, and this information did not include data on all SMP measures, nor did it disclose the reasons why certain measures were at risk of missing quarterly targets. Also, these results provide only a partial picture of performance for any given business area. For example, for the area of operational energy efficiency, the SMP measures reviewed by the DBC covered only progress in reducing consumption, but not measures related to supply and security, which are key areas in DOD's strategy for achieving operational energy efficiency. Better defining and implementing a more integrated approach to reviewing performance, such as including a broader range of performance information, will enhance DOD's ability to assess progress toward its business goals.

Why GAO Did This Study

DOD spends billions of dollars each year to maintain key business operations intended to support the warfighter. In 2005, GAO identified DOD's approach to business transformation as high-risk because DOD had not established management responsibility, accountability, and control over business transformationrelated activities and resources, and it lacked a plan with specific goals, measures, and mechanisms to monitor progress. GAO previously reported that DOD has taken steps to develop a management approach. This report addresses DOD's progress in (1) incorporating key strategic planning elements into its transformation plan; and (2) developing and implementing an approach for assessing DOD-wide progress toward business goals. GAO analyzed relevant DOD documents, reviewed prior and ongoing GAO work; and interviewed DOD officials.

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Recommendations

GAO recommends that DOD add information to its SMP, such as a description of key challenges and context for why goals were chosen. GAO also recommends that DOD further define its performance management approach. DOD partially concurred with our first recommendation and concurred with our second recommendation. DOD stated that it would add information to the SMP as appropriate, and continue to improve and institutionalize DBC operations. As part of these efforts, GAO believes that DOD needs to identify specific steps it will take to integrate and regularly review performance data from various sources to assess progress towards its business goals.

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Defense 1. To enhance DOD's ability to set strategic direction for its business transformation efforts, better assess overall progress toward business transformation goals, and take any necessary corrective actions, the Secretary of Defense should direct the Deputy Secretary of Defense, in his capacity as the Chief Management Officer (CMO), to ensure that the SMP includes a description of the key business transformation challenges to be addressed, sufficient context for why specific goals and strategies were chosen, and measures to address core activities.
Closed - Implemented
DOD partially concurred with this recommendation, noting that future releases of the Strategic Management Plan will include key business transformation challenges, context for the inclusion of specific goals and strategies, and measures to address core activities. However, in its response, DOD also noted that the Department's senior leaders will continue to make strategic choices about which broad goals are most important and, within those goals, on which initiatives and key indicators they will focus their management attention. In July 2015, DOD issued its Agency Strategic Plan for Fiscal Years 2015-2018 in place of the Strategic Management Plan to comply with GPRA Act Modernization Act requirements. The Agency Strategic Plan was subsequently replaced by the National Defense Business Operations Plan for Fiscal Years 2018-2022, which was issued in May 2018. This plan establishes a strategic goal of reforming the department's business practices for greater performance and affordability. The strategic objectives supporting that goal are to: (1) improve and strengthen business operations through a move to DOD-enterprise or shared services and reduce administrative and regulatory burden; (2) optimize organizational structures; and (3) undergo an audit and improve the quality of budgetary and financial information. For each of these strategic objectives, the National Defense Business Operations Plan provides context and an associated implementation strategy. Further, DOD's Fiscal Year 2019 Annual Performance Plan identifies performance goals and measures to achieve the strategic goals and objectives described in the National Defense Business Operations Plan. The Annual Performance Plan has performance goals and measures that address the following lines of business: cyber defense and information technology management, financial management, acquisition and contract management, logistics and supply chain management, community services, real property management, human resources, and healthcare management. As a result, we have closed this recommendation as implemented.
Department of Defense 2. To enhance DOD's ability to set strategic direction for its business transformation efforts, better assess overall progress toward business transformation goals, and take any necessary corrective actions, the Secretary of Defense should direct the Deputy Secretary of Defense, in his capacity as the CMO, to further define DOD's performance management approach, by outlining elements such as how it will consider the various sources of performance information along with SMP performance results to monitor progress in achieving business goals and identify corrective actions and ensure this information is reviewed on a regular basis.
Closed - Implemented
DOD concurred with this recommendation. In July 2015, DOD issued its Agency Strategic Plan for Fiscal Years 2015-2018 in place of the Strategic Management Plan to comply with GPRA Act Modernization Act requirements. The Agency Strategic Plan was subsequently replaced by the National Defense Business Operations Plan for Fiscal Years 2018-2022, which was issued in May 2018. The National Defense Business Operations Plan presents the department's priority business operations goals and objectives with priority and performance goals. Further, as a supplement to the National Defense Business Operations Plan, the Annual Performance Plan identifies performance goals and measures to achieve the strategic goals and objectives described in the National Defense Business Operations Plan. According to the National Defense Business Operations Plan, the department monitors, reviews, and reports progress on its strategic goals, objectives, and associated performance goals and measures no less than a quarterly basis. The department also developed a strategic planning cycle with timeframes for updating the National Defense Business Operations Plan and the Annual Performance Plan and for conducting performance reviews through fiscal year 2020. In addition, DOD chartered the Reform Management Group as its governance forum responsible for implementing the Secretary of Defense's third line of effort-reform the department's business practices for greater performance and affordability-and is to meet on a bi-weekly basis. Chaired by the Chief Management Officer, the Reform Management Group is to identify, manage, and track all investments and savings associated with the reform initiatives through an institutionalized process within the department. The Office of the Chief Management Officer developed a dashboard to track the status of the investments, savings, and performance of DOD's business reform initiatives. As a result, we have closed this recommendation as implemented.

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