However, in 2000, we reported that DOD’s  approach to prior force reductions was not oriented toward shaping the  makeup of the workforce, resulting in significant imbalances in terms of  shape, skills, and retirement eligibility. We also have reported that the approaches DOD has relied on to  accomplish past civilian workforce downsizing have sometimes had  unintended consequences, such as workforce skills imbalances. The tools  available to DOD to manage its civilian downsizing helped mitigate some  adverse effects of force reductions. However, DOD’s approach to civilian  workforce reductions was less oriented toward shaping the makeup of the  workforce than was the approach it used to manage its military  downsizing and resulted in significant imbalances in terms of shape,  skills, and retirement eligibility. Eleven consecutive years of downsizing produced  serious imbalances in the skills and experience of the highly talented and  specialized civilian acquisition workforce, putting DOD on the verge of a  retirement-driven talent drain. Further, we also found that attrition is often not sufficient to reduce  employment levels in the short term. In 1995, we reported that the savings realized from  government downsizing efforts are difficult to estimate. In  addition, the ultimate savings would depend on what happened to the  work previously performed by the eliminated personnel. For example, if  some of the work was contracted out to private companies, contract costs  should be considered in determining whether net savings resulted from  workforce reductions. According to the department, as  of January 2012, DOD’s total civilian workforce had grown to include  about 783,000 civilians. To  facilitate effective workforce planning, we and the Office of Personnel  Management have identified six leading principles such workforce plans  should incorporate, including: aligning workforce planning with strategic planning and budget   involving managers, employees, and other stakeholders in planning;  identifying critical skills and competencies and analyzing workforce  gaps; employing workforce strategies to fill the gaps; building the capabilities needed to support workforce strategies  through steps to ensure the effective use of human capital flexibilities;  and monitoring and evaluating progress toward achieving workforce  planning and strategic goals. For example, the National Defense  Authorization Act for Fiscal Year 2006 directed DOD to create and  periodically update a strategic human capital plan that addressed, among  other things, the existing critical skills and competencies of the civilian  workforce as well as projected needs, gaps in the existing or projected  civilian workforce, and projected workforce trends. Subsequent acts  established additional requirements for the human capital plan, including  requirements to assess issues related to funding of its civilian  workforce. In our September 2010 review of DOD’s 2009 update to its  human capital strategic plan we found that, although DOD had  demonstrated some progress in addressing the legislative requirements  related to its Civilian Human Capital Strategic Workforce Plan, several  key elements continued to be missing from the process—including such  elements as competency gap analyses and monitoring of progress. Our  work found that DOD’s plan addressed the requirement to assess critical  skills. Specifically, the overall civilian workforce plan identified 22 mission- critical occupations that, according to the department, represent the  results of its assessment of critical skills. Competency gap analyses  enable an agency to develop specific strategies to address workforce  needs and monitoring progress demonstrates the contribution of workforce  planning to achieving program goals. We currently have ongoing work assessing DOD’s 2010 Strategic  Workforce Plan, which the department released in March 2012. The results  of this review are expected to be released in September 2012. Our reviews of DOD’s acquisition, information technology, and financial  management workforces—which include a number of DOD’s identified  mission-critical occupations—amplifies some of our overarching  observations related to strategic workforce planning. In fiscal year 2011  alone, DOD obligated about $375 billion to acquire goods and services to  meet its mission and support its operations in the United States and  abroad. While DOD has acknowledged that rebuilding its acquisition workforce is a  strategic priority, our most recent review of the Defense Acquisition  Workforce Development Fund found that DOD continues to face  challenges in strategic workforce planning for its acquisition workforce. However, we also reported in July 2011 that DOD’s strategic  workforce plan lacked a competency gap analysis for its financial  management workforce, thus limiting the information DOD has on its  needs and gaps in that area and the department’s ability to develop an  effective financial management recruitment, retention, and investment  strategy to address other financial management challenges. DOD Civilian Personnel: Competency Gap Analyses and Other Actions  Needed to Enhance DOD’s Strategic Workforce Plans. GAO-11-827T. Defense Civilian Downsizing: Challenges Remain Even With Availability  of Financial Separation Incentives.
Why GAO Did This Study

DODs workforce of 783,000 civilians performs a wide variety of duties, including some traditionally performed by military personnel, such as mission-essential logistics support and maintenance, as well as providing federal civilian experts to Afghanistan and other theaters of operations.
With the long-term fiscal challenges facing the nation, reductions to the civilian workforce may be considered to achieve cost savings. Human capital has remained a critical missing link in reforming and modernizing the federal governments management practices, even as legislation and other actions since 1990 have been put in place to address major management areas. In the past, GAO has observed that the federal government has often acted as if people were costs to be cut rather than assets to be valued. DOD previously experienced significant downsizing in the 1990s where it did not focus on reshaping the civilian workforce in a strategic manner. Particularly as decision makers consider proposals to reduce the civilian workforce, it will be critical to DODs mission for the department to have the right number of federal civilian personnel with the right skills.
This testimony discusses DODs 1) prior experience with civilian workforce downsizing, and 2) current strategic human capital planning efforts.
This testimony is based on GAO reviews issued from March 1992 through June 2012.

What GAO Found

Prior Department of Defense (DOD) civilian workforce downsizing efforts in the 1990s were not oriented toward shaping the makeup of the workforce, resulting in significant imbalances in terms of shape, skills, and retirement eligibility. Specifically, in a series of reviews GAO found that DODs efforts in the 1990s to reduce its federal civilian workforce to levels below that of 1987 were hampered by incomplete data and lack of a clear strategy for avoiding skill imbalances and other adverse effects of downsizing. For instance, in 1992, GAO found that DOD used incomplete and inconsistent data related to workers, workload, and projected force reductions. Further, the approaches DOD has relied on to accomplish downsizing have sometimes had unintended consequences. The use of voluntary attrition, hiring freezes, and financial separation incentives allowed DOD to mitigate some adverse effects of civilian workforce reductions, but were less oriented toward shaping the makeup of the workforce than was the approach the department used to manage its military downsizing. For DOD, this was especially true of the civilian acquisition workforce. The department, which in 2011 obligated about $375 billion to acquire goods and services, was put on the verge of a retirement-driven talent drain in this workforce after 11 consecutive years of downsizing, according to a DOD report. Finally, GAO has found that the use of strategies such as financial separation incentives makes it difficult to document or estimate the actual cost savings of government downsizing efforts, especially in cases where the work previously performed by the eliminated personnel continues to be required. For example, if the work continues to be required, it may need to be contracted out to private companies and contract costs should be considered in determining whether net savings resulted from workforce reductions.
DOD has taken positive steps towards identifying its critical skills, but there are opportunities to enhance the departments current strategic workforce plans. GAO and the Office of Personnel Management have identified leading principles to incorporate into effective workforce plans, such as the need to identify and address critical skills and competencies. DOD has been required to have a civilian strategic workforce plan since 2006. Currently, DOD is required to develop a strategic workforce plan that includes, among other things, an assessment of the skills, competencies and gaps, projected workforce trends, and needed funding of its civilian workforce. GAO has found improvements in DODs efforts to strategically manage its civilian workforce. For instance, GAO reported in 2010 that DODs 2009 strategic workforce plan assessed critical skills and identified 22 mission-critical occupations, such as acquisition and financial management. However, DODs plan only discussed competency gap analyses for 3 of its 22 mission-critical occupations, which GAO has reported is key to enabling an agency to develop specific strategies to address workforce needs. For example, GAO found that DOD had not conducted a competency gap analysis for its financial management workforce, and GAO remains concerned that DOD lacks critical information it needs to effectively plan for its workforce requirements. GAO is currently reviewing DODs latest strategic workforce plan, which was released in March 2012. The results of this review are expected to be released in September 2012.