We have advocated  that the federal government, including DOD, adopt a comprehensive threat  or risk management approach as a framework for decision making that  fully links strategic goals to plans and budgets, assesses values and risks  of various courses of actions as a tool for setting priorities and allocating  resources, and provides for the use of performance measures to assess  outcomes. Despite Positive Steps, Additional Actions Needed to Fully Implement the Risk Management Framework

Despite positive steps, DOD needs to take additional actions before the  risk management framework is fully implemented and DOD can  demonstrate real and sustainable progress in using a risk-based and  results-oriented approach to strategically allocate resources across the  spectrum of its investment priorities. In addition, the framework’s performance  goals and measures are not clearly linked to DOD’s current strategic plan  and strategic goals. Second, DOD’s department-level performance measures are still a work in  progress in that these measures do not provide a well-rounded depiction  of DOD’s performance. Although Risk Considered, Linkages Between the Risk Management Framework and Budget Are Unclear

According to DOD officials, the department has begun to consider risk in  its investment decision making; however, the full extent to which the  framework’s risk-based and results-oriented approach has been linked to  the fiscal year 2006 budget cycle is unclear. However, the fiscal year 2006 budget submission does not include any  specific information on how DOD systematically identified or assessed  departmental risks to establish DOD-wide investment priorities. The fourth challenge— integrating the risk management framework with decision support  processes and related reform initiatives, into a coherent, unified  management approach for the department—relates to key results-oriented  management practices. Unless DOD addresses these challenges and  successfully implements the risk management framework, or a similar  approach, it may continue to experience (1) a mismatch between  programs and budgets, and (2) the proportional, rather than strategic,  allocation of resources to the services. Without better  measures, clear linkages, and greater transparency, DOD will be unable to  fully measure progress in achieving strategic goals or demonstrate to  Congress and others how it considered risks and made trade-off decisions,  balancing needs and costs for weapon programs and other investment  priorities. Recommendations for Executive Action

To address the challenges associated with implementing the risk  management framework, or a similar risk-based management approach,  we recommend that the Secretary of Defense take the following four  actions:    develop or refine department-level performance measures so that they  clearly demonstrate performance results and cascade those measures  down throughout the department,    assign clear leadership with accountability and authority to implement and  sustain the risk management framework,    develop implementation goals and timelines, and    demonstrate the integration of the risk management framework with  DOD’s decision support processes and related reform initiatives to  improve investment decision making and manage performance results.
Why GAO Did This Study

The Department of Defense (DOD) is simultaneously conducting costly military operations and transforming its forces and business practices while it is also competing for resources in an increasingly constrained fiscal environment. As a result, GAO has advocated that DOD adopt a comprehensive threat or risk management approach as a framework for decision making. In its 2001 strategic plan, the Quadrennial Defense Review (QDR), DOD stated its intent to establish an approach--the risk management framework--to balance priorities against risk over time and monitor results against its strategic goals. GAO was asked to (1) assess the extent to which DOD has implemented the framework, including using it to make investment decisions, and (2) identify the most significant challenges DOD faces in implementing the framework, or a similar approach.

What GAO Found

DOD has taken some positive steps to implement the framework, but additional actions are needed before DOD can show real and sustainable progress in using a risk-based and results-oriented approach to strategically allocate resources across the spectrum of its investment priorities. For example, DOD defined four risk areas, and developed performance goals and department-level measures, but it needs to, among other things, further develop and refine the measures so that they clearly demonstrate results and provide a well-rounded depiction of departmental performance. DOD's current strategic plan and goals also are not clearly linked to the framework's performance goals and measures, and linkages between the framework and budget are also unclear. While DOD officials stated that risk was considered during the fiscal year 2006 budget cycle, DOD's budget submission does not specifically discuss how DOD identified or assessed risks to establish DOD-wide investment priorities. Without better measures, clear linkages, and greater transparency, DOD will be unable to fully measure progress in achieving strategic goals or demonstrate to Congress and others how it considered risks, and made trade-off decisions, balancing needs and costs for weapon programs and other investment priorities. DOD faces four challenges that have affected the implementation of the framework. First, DOD's organizational culture resists department-level approaches to priority setting and investment decisions. Second, sustained leadership, adequate transparency, and appropriate accountability are lacking. Further, no one individual or office has been assigned overall responsibility or sufficient authority for the framework's implementation. DOD also has not developed implementation goals or timelines with which to establish accountability, or measure progress. Finally, integrating the risk management framework with decision support processes and related reform initiatives into a coherent, unified management approach for the department is a challenge that DOD plans to address during the 2005 QDR. However, GAO has concerns about DOD's ability to follow through on this integration, because of its limited success in implementing other management reforms. Unless DOD successfully addresses these challenges and effectively implements the framework, or a similar approach, it will likely continue to experience (1) a mismatch between programs and budgets, and (2) a proportional, rather than strategic, allocation of resources to the services.