Answer: Defense considered only a narrow range of alternatives for improving personnel operations before deciding to regionalize personnel centers. After it decided to regionalize, Defense did not follow a sound process for selecting regions, it did not require services and agencies to base their decisions on data-driven analyses. Before embarking on a major, costly initiative to improve personnel management, sound practices call for examining a range of improvement options, including those that would radically change the current way of doing business. For example, in addition to, or instead of regionalizing, Defense could have considered (1) outsourcing its personnelist computer operations or all of its civilian personnel management services, (2) integrating its personnel/payroll management systems, (3) creating regions that cross-service between agencies and the military services, (4) consolidating local personnel offices that are near each other to provide face-to-face services to multiple bases or installations out of the same office, and/or (5) centralizing all, or portions of, civilian personnel management in DOD. Instead, it considered only the possibility of outsourcing computer operations with the National Finance Center. This option was determined to be infeasible.Defense did not analyze other alternatives, including cross-servicing, integrating payroll/personnel systems, collocating personnel offices, DOD-wide management of personnel operations, or outsourcing all of its personnel operations. CPMS officials held that this did not allow time to develop objective data and rigorously examine alternatives. Some Defense components have already found this alternative to be beneficial. In fact, after considering the potential benefits of this alternative and its feasibility, the Defense Science Board recommended it as a solution for military personnel in 1996. However, Defense did not perform an economic analysis before acquiring the new system. Answer: DCPDS is not a duplicate of OPM’s Employee Express system. Answer: Defense has not identified and mitigated significant risks associated with its acquisition. Additionally, because Defense did not adequately estimate and evaluate costs, benefits, and returns, there is not adequate assurance that its decision to replace the legacy system with the Oracle COTS package is optimal. Specifically, business alternatives considered should include (1) use of regions and local offices to serve specific agencies or services, (2) use of regions or local offices to serve multiple agencies and services, (3) centralizing all or parts of personnel management operations that currently operate at component headquarters and major commands, (4) integrating DOD’s civilian personnel and payroll management systems, (5) outsourcing civilian personnel computer operations, (6) outsourcing all civilian personnel management services, and (7) acquiring other commercially available products. However, because these analyses did not fully consider the costs and benefits of numerous alternative business and systems approaches for improving the servicing ratios, the Department may not have selected the most cost-effective improvement approach. 6. 8. 9. Scope and Methodology

To analyze how Defense determined the number and locations for civilian personnel regional service centers and why there is a wide disparity in the number of regional centers among the services, we interviewed Office of the Secretary of Defense, military service, and Defense agency officials and reviewed guidance mandating regionalization, the services’ and Defense agencies’ regionalization studies, and their rationale for determining the number and location of regions. These five centers were Ft. Riley, Kansas; Aberdeen Proving Ground, Maryland; Silverdale, Washington; Randolph AFB, Texas; and Washington, D.C.
To assess whether Defense is applying the Clinger-Cohen Act in overseeing, managing, and developing DCPDS, we compared Defense’s actions taken on DCPDS to the investment principles included in the act. To determine whether (1) Defense’s civilian personnel management requirements are sufficiently different to require extensive modification of the commercial-off-the-shelf software (COTS) application which Defense selected as the foundation for developing DCPDS and (2) Defense leadership was aware of the extent and cost of modifications that would be needed, we interviewed the Functional and Acquisition Program managers and their staff as well as representatives of the Oracle Corporation to solicit information on the selection, acquisition, and modification of the Oracle COTS product.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed the Department of Defense's (DOD) efforts to reduce the costs associated with civilian personnel management, focusing on: (1) how DOD determines the number and locations for civilian personnel regional service centers and why is there a wide disparity in the number of regional centers among the services; (2) whether DOD is applying the investment principles of the Clinger-Cohen Act in overseeing, managing, and developing the Defense Civilian Personnel Data System (DCPDS); (3) whether DCPDS duplicates the Office of Personnel Management's (OPM) Employee Express System: (4) whether DOD leadership is aware of the extent and cost of the needed modifications to the commercial-off-the-shelf (COTS) software applications; and (5) whether DOD identified and mitigated the risks associated with the major COTS modifications.

What GAO Found

GAO noted that: (1) DOD's current initiative can potentially improve civilian personnel operations and achieve cost savings; (2) however, because the Department has not examined other business process alternatives that could have potentially achieved even greater savings and process efficiencies, there is no assurance that this is the best alternative for civilian personnel operations; (3) before embarking on its costly initiative to improve personnel management, DOD examined two alternatives: (a) outsourcing personnel computer operations to the Department of Agriculture's Finance Center; and (b) regionalizing personnel centers; (4) DOD determined that it would take the National Finance Center about 6 years to prepare for transferring computer operations and that some new functionality built into its legacy system would be lost; (5) however, DOD did not examine several other potentially effective alternatives, including: (a) continuing to centralize all or parts of its personnel management operations to reduce duplicative layers of oversight at the components and ensure more consistent operations DOD-wide; (b) integrating its personnel and payroll management systems; (c) restructuring its regional offices to serve multiple components rather than perpetuating regional offices dedicated to only one component; (d) restructuring local personnel offices to serve multiple bases or installations (they now serve only one base or installation); and (e) outsourcing all civilian personnel operations to the private sector; (6) these alternatives are feasible and may have helped DOD to achieve even greater savings and efficiencies than the current approach; (7) in addition, the Defense Science Board determined that integrating payroll and personnel systems was a viable and cost beneficial option for military personnel; (8) the Civilian Personnel Management Service (CPMS) officials who were responsible for the personnel initiative said that they did not consider these business processing alternatives because: (a) CPMS did not have authority to require the military services and DOD agencies to adopt such approaches; (b) DOD did not allow sufficient time to rigorously examine alternatives; and (c) DOD lacked basic cost and performance data needed to study the alternatives; (9) after it decided on its approach, DOD did not follow a sound process for selecting regions; (10) DOD did not adequately consider a full range of technical options before deciding to replace its legacy system with the Oracle COTS product; and (11) after DOD acquired the Oracle system, it did not mitigate critical technical risks.