Lack of training also affects the ability of contract oversight  personnel to perform their duties. In a report we issued in July  2008, however, we identified a serious noncompliance with generally  accepted government auditing standards at three field audit offices  responsible for billions of dollars of contracting. As a  result, DCAA cannot assure that these audits provided reliable information  to support sound contract management business decisions or that contract  payments are not vulnerable to significant amounts of fraud, waste, abuse,  and mismanagement. Congress is also  emphasizing the need to address government-wide contracting related  challenges. While DOD has taken a number of positive steps toward improving its  supply chain management, such as consolidating certain inventories in  regional hubs and improving transportation management of military  freight, it has continued to experience weaknesses in its ability to provide  efficient and effective supply support to the warfighter. DOD Has Made Progress in Establishing Key Management Positions for Business Transformation, but Critical Actions Are Still Needed

Without sustained leadership and comprehensive strategic planning,  DOD’s ability to achieve and sustain measurable progress in addressing  high-risk areas and thereby improving its business operations is at risk. DOD’s senior leadership has shown a commitment to  transforming business operations and taken many steps to strengthen its  management approach, both in response to congressional requirements  and on its own accord. The National Defense Authorization Act for Fiscal Year 2008 subsequently  codified the position, created a Deputy CMO, directed that CMO duties be  assigned to the Under Secretary of each military department, and required  DOD to develop a strategic management plan for business operations. These positions include the Deputy  CMO and military department CMOs. As DOD continues to develop its approach and  carries out planned additional actions, we remain open to the possibility of  further progress and that these efforts will have a positive impact. However, because of the current statutory requirements and the roles and  responsibilities currently assigned to key positions, it is still unclear  whether DOD will provide the long-term sustained leadership needed to  address these significant challenges in its business operations. As DOD and DOE compete for resources in a constrained fiscal  environment, they can no longer afford to miss opportunities to achieve  greater efficiencies and free up resources for higher priority needs. It will be important within the first  year of this administration, that the Deputy Secretary of Defense clearly  articulate the department’s expectations for this position, clarify the roles,  responsibilities, and relationships among all individuals and entities that  share responsibility for transforming DOD’s business operations, and  establish a strategic planning process to guide efforts and assess progress  across the department.
Why GAO Did This Study

The Department of Defense (DOD) spends billions of dollars to sustain key business operations intended to support the warfighter. In January, GAO released its 2009 high-risk series update report for the 111th Congress. This series emphasizes federal programs and operations that are at high risk because of vulnerabilities to fraud, waste, abuse, and mismanagement and has also evolved to draw attention to areas associated with broad-based transformation needed to achieve greater efficiency, effectiveness, and sustainability. Of the 30 high-risk areas identified by GAO across government, DOD bears sole responsibility for eight defense specific high-risk areas and shares responsibility for seven other high-risk areas--all of which are related to its major business operations. The Committee asked GAO to provide its views on (1) actions needed to achieve measurable outcomes in DOD's high-risk areas and (2) DOD's progress in strengthening its management approach for business transformation, including establishing the Chief Management Officer (CMO) position. GAO was additionally asked to highlight information regarding the high-risk area related to contract management at the Department of Energy's (DOE) National Nuclear Security Administration.

What GAO Found

Longstanding weaknesses in DOD's business operations adversely affect the department's economy, efficiency, and effectiveness, and have resulted in a lack of adequate accountability. As a result, DOD continues to experience cost growth in many of these areas and wastes billions of dollars annually that could be freed up for higher priority needs. DOD's senior leadership has shown a commitment to transforming business operations, and taken many steps to address weaknesses. However, additional actions are needed to achieve and sustain progress. DOD has taken some steps to establish the CMO and other key positions, but still lacks some critical elements to strengthen its management approach. The National Defense Authorization Act for Fiscal Year 2008 codified the CMO position, created a Deputy CMO, directed that CMO duties be assigned to the Under Secretary of each military department, and required a strategic plan for business operations. DOD has yet to clearly define the roles, responsibilities, and relationships among key positions, including the Deputy CMO and military department CMOs. Also, its first plan, issued in July 2008, lacks clear goals, objectives, and performance measures. As DOD's approach continues to evolve, GAO remains open to the possibility of further progress. However, because of the roles and responsibilities currently assigned to key positions, it is still unclear whether DOD will provide the long-term sustained leadership needed to address significant challenges in its business operations.