In addition, DOD shares responsibility for 7  governmentwide high-risk areas. GAO designated DOD’s approach to business transformation as high risk  in 2005 because (1) DOD’s improvement efforts were fragmented, (2) DOD  lacked an enterprisewide and integrated business transformation plan, and  (3) DOD had not appointed a senior official at the right level with an  adequate amount of time and appropriate authority to be responsible for  overall business transformation efforts. DOD’s Pervasive and Long-standing Financial Management and Business Weaknesses Affect the Department’s Efficiency and Effectiveness and Ultimately Impact DOD’s Ability to Support the Warfighter

The persistence and magnitude of DOD’s business transformation  challenges underscore the fact that the status quo is unacceptable, and  without focused and sustained leadership to guide business  transformation, the department will continue to waste billions of dollars  every year. Within DOD, business transformation is broad, encompassing  people, planning, processes, organizational structures, and technology in  all of DOD’s major business areas. DOD’s  pervasive and long-standing weaknesses in its financial management and  business operations adversely affect the economy, efficiency, and  effectiveness of DOD’s operations, and have resulted in a lack of adequate  accountability across all the department’s major business areas. DOD Has Made Progress in Addressing Its Business Transformation Efforts, but Critical Actions are Needed to Provide Comprehensive, Integrated, and Strategic Planning and Focused and Sustained Leadership

Due to the impact of the department’s business weaknesses on both the  department and the warfighter, DOD’s leaders have demonstrated a  commitment to making the department’s business transformation a  priority and have made progress in establishing a management framework  for these efforts. In addition, DOD lacks two  crucial features that are integral to successful organizational  transformation—(1) a strategic planning process that results in a  comprehensive, integrated, and enterprisewide plan or interconnected  plans, and (2) a senior leader who is responsible and accountable for  business transformation and who can provide full-time focus and  sustained leadership. Furthermore, a broad-based consensus exists among GAO and others that  the status quo is unacceptable and that DOD needs a full-time and term- based senior management official to provide focused and sustained  leadership for its overall business transformation efforts, although  differing views exist concerning the specifics of the position, such as term  limit and the level of the position within the department. Most recently, DOD  issued a directive on September 18, 2007, that assigned CMO  responsibilities to the current Deputy Secretary of Defense. Furthermore, the  assignment of CMO duties to an individual with a limited term in the  position does not ensure continuity of effort or that sustained success will  be ensured both within and across administrations. Therefore, we continue to believe that the CMO position at  DOD should be:    Codified in statute as a separate and full-time position. In the absence of a CMO with these characteristics to focus solely on the  integration and execution of business transformation efforts, and an  enterprisewide plan to guide these efforts, it is highly unlikely that DOD  will ever resolve its pervasive weaknesses and get the most out of every  dollar it invests in these times of growing fiscal constraint to better  support the warfighter. Each area was added to our high-risk list due to  weaknesses that make DOD more vulnerable to waste, fraud, and abuse. Appendix I: Systemic Acquisition Challenges at the Department of Defense

1.
Why GAO Did This Study

The Department of Defense (DOD) continues to face significant challenges in resolving its many long-standing business challenges. DOD is solely responsible for eight high-risk areas and shares responsibility for another seven governmentwide areas on GAO's high-risk list. GAO designated DOD's approach to business transformation as high risk in 2005 because (1) DOD's improvement efforts were fragmented, (2) DOD lacked an enterprisewide and integrated business transformation plan, and (3) DOD had not appointed a senior official at the right level with an adequate amount of time and appropriate authority to be responsible for overall business transformation efforts. A recent DOD directive designated the current Deputy Secretary of Defense as DOD's chief management officer (CMO). Successful overall business transformation, however, will require full-time leadership that is focused solely on the integration and execution of these efforts, over the long term, to resolve pervasive weaknesses that have left DOD vulnerable to waste, fraud, and abuse at a time of increasing fiscal constraint. This testimony is based on previous and ongoing GAO work and discusses (1) the impact of DOD's long-standing business challenges on DOD and the warfighter, and (2) the progress DOD has made and actions needed to achieve sustainable success in its business transformation efforts. This testimony also provides an update on DOD-specific high-risk areas.

What GAO Found

The persistence and magnitude of DOD's business transformation challenges highlight the fact that the status quo is unacceptable and that, without focused and sustained leadership to guide the overall business transformation effort, the department will continue to waste billions of dollars annually. Within DOD, business transformation is broad, encompassing people, planning, processes, organizational structures, and technology. DOD's pervasive and long-standing business weaknesses adversely affect the department's economy, efficiency, and effectiveness, and have resulted in a lack of adequate accountability across all of its major business areas. Ultimately, these weaknesses affect the department's ability to support the warfighter, including the availability of equipment and weapon systems, the cost and performance of contractors supporting the warfighter, and the assessment of resource requirements. DOD's senior leadership has shown a commitment to transforming the department's business operations. Two critical actions, among others, however, are still needed to change the status quo. DOD has yet to establish (1) a strategic planning process that results in a comprehensive, integrated, and enterprisewide plan or set of plans to help guide transformation, and (2) a senior official who can provide full-time attention and sustained leadership to transformation. Broad-based consensus exists among GAO and others that DOD needs a full-time and term-based senior management official to provide focused and sustained leadership over its overall business transformation efforts, both within and across administrations. Also, various legislative proposals call for senior-level attention to these efforts. While DOD recently assigned CMO duties to the current Deputy Secretary of Defense, this does not ensure full-time attention or continuity of leadership. GAO continues to believe a CMO position should be codified in statute as a separate position, at the right level, and with the appropriate term in office. In the absence of a CMO with these characteristics, and an enterprisewide plan to guide business transformation efforts, it is highly unlikely that DOD will ever get the most out of every taxpayer dollar it invests to better support the warfighter in times of growing fiscal constraint.