An important element of this reform initiative is that the Secretary has established the Defense Management Council to, in effect, serve as DOD’s internal board of directors. Risk in Reducing Budget Before Savings Are Achieved

DOD is planning to reduce out-year operations and maintenance budgets in anticipation of the savings that will accrue from the DRIs. Consequently, reducing out-year budgets before savings are more clearly known increases the risk that operating units and field commanders will not have sufficient funds to meet their readiness needs. If they do not, one of two things could happen. Either money will have to be moved from other parts of the defense budget to pay for shortfalls in operations and maintenance accounts or support functions will be underfunded. Rather, they are being counted on to improve the quality of service provided to the warfighters and other defense business customers and to meet personnel reduction targets that have already been planned. In past reform initiatives, DOD took the savings from future year budgets. Reengineering Initiatives Show Promise, but Implementation Challenges Remain

We have either completed or have ongoing work associated with several of the reengineering initiatives in the DRI report. As shown in table 1, DOD expects the travel reengineering initiative to result in significant processing improvements and cost savings. This has not been an easy process. Military Services and Defense Agencies Need to Capitalize on Consolidation and Regionalization Opportunities

The DRI report includes several military service and support agency consolidation, restructuring, and regionalization initiatives that are intended to make DOD activities more efficient and support DOD’s planned personnel reductions. As with the reengineering initiatives, most of these initiatives have been going on for several years but still face implementation challenges. The program was to be implemented in three overlapping phases during fiscal years 1995-99 and was expected to save substantial amounts of money. The DISA megacenters operate as part of the defense working capital fund and bill their customers for the processing support they provide. Implementing DRI Requires DOD to Address the Underlying Causes of Its Management Problems

As we have reviewed DOD programs and management initiatives over the years, we have made hundreds of recommendations to help DOD correct its problems. It is not clear from the DRI report, however, how these initiatives will collectively eliminate the paper that is passed among the many DOD systems and it is not clear if, and to what extent, savings and productivity will be realized.
Why GAO Did This Study

GAO discussed its work on the Department of Defense's (DOD) latest reform initiatives, focusing on: (1) risks associated with reducing budgets before savings are achieved; (2) challenges associated with implementing DOD's various business process reengineering initiatives; (3) opportunities to capitalize on consolidation and regionalization opportunities; and (4) underlying management problems that need to be addressed in implementing the reform initiatives.

What GAO Found

GAO noted that: (1) DOD's plans to reduce outyear budgets before the magnitude of savings is clearly known are not without risks; (2) this risk is that operating units and field commanders will not have sufficient funds to meet their readiness needs; (3) past reform initiatives, like the Defense Management Review of the early 1990s, started with much the same hope and promise of the Defense Reform Initiative (DRI); (4) however, for a number of reasons, they were not able to sustain themselves and fully achieve hoped for results; (5) in many cases, DOD reduced its operations and maintenance budgets up front, in anticipation that the savings would be realized; (6) when these savings did not materialize as quickly or to the extent expected, two things happened; (7) either money was deferred from other parts of the defense budget to pay for shortfalls in operations and maintenance accounts or support functions were unfunded; (8) GAO sees the same type of risk with the DRI; (9) many of the DRI business process reengineering initiatives must overcome significant challenges if they are to be implemented in a timely, efficient, and effective manner; (10) while DOD expects these initiatives to save an unspecified amount of money, it is also counting on them to bring world-class business processes to DOD and improve the quality of service provided to defense customers; (11) GAO's overall impression is that the initiatives have the potential to save significant amounts of money and improve the quality of service they provide; (12) however, in some cases, DOD either faces significant implementation challenges or is not thinking broadly enough in implementing the reform; (13) significant opportunities exist to achieve savings from consolidating, restructuring, and regionalizing initiatives; (14) however, GAO's past work on these initiatives shows that DOD has not been able to fully capitalize on the potential offered by such consolidations; and (15) achieving success in the DRIs requires DOD to address the underlying causes of its systemic management problems.