DOD’s Efficiencies Include Headquarters- Related Reductions, but Additional Opportunities for Cost Savings May Exist

DOD has taken some steps to examine its headquarters resources for  efficiencies, but additional opportunities for cost savings may exist by  further consolidating organizations and centralizing functions. For the  purposes of the Secretary of Defense’s efficiency initiative, DOD  components, including the military departments, were asked to focus in  particular on headquarters and administrative functions, support activities,  and other overhead in their portfolios. In reviewing these headquarters-related efficiency initiatives, however, we  found that they generally fell into two categories: (1) consolidating or  eliminating organizations based on geographic proximity or span of  control, and (2) centralizing overlapping functions and services (see figs. The DOD efficiencies that GAO reviewed to reduce headquarters  resources are expected by DOD to save about $2.9 billion through fiscal  year 2016, less than 2 percent of the $178 billion in savings DOD  projected departmentwide. Our work indicates that DOD may be able to  find additional efficiencies by further examining opportunities to  consolidate organizations or centralize functions at headquarters. DOD may not have identified all areas where reductions in headquarters  personnel and operating costs could be achieved because, according to  DOD officials, the department was working quickly to identify savings in  the fiscal year 2012 budget. To accomplish this quickly, DOD used a top- down approach that identified several targets of opportunity to reduce  costs, including headquarters organizations, but left limited time for a  detailed data-driven analysis. In February 2012, in DOD’s fiscal year 2013  budget request, the department proposed an additional $61 billion in  savings from fiscal years 2013 to 2017 through reductions in overhead  and support requirements, and improved business practices. However, it  provided limited information as to what portions of these savings were  specific to headquarters and how they would be achieved. Without  systematic efforts to reexamine its headquarters resources on a more  comprehensive basis, DOD may miss opportunities to shift resources  away from overhead. Lack of Complete and Reliable Headquarters Information Hinders Efforts to Identify and Implement Efficiencies

DOD does not have complete and reliable major DOD headquarters  activity data available for use in making efficiency assessments and  decisions because the department continues to have challenges in  identifying and tracking personnel and other resources devoted to  headquarters. DOD officials stated that they have delayed  updating the instruction to allow time for components to adjust to the  statutory changes enacted by Congress in 2009 that created new  reporting requirements for major DOD headquarters activity personnel. According to DOD officials, the ever-changing statutory reporting  requirements have contributed to DOD’s failure to report to Congress  about the numbers of headquarters personnel. The DOD Instruction Does Not Include All Major DOD Headquarters Activity Organizations or Address Tracking of Contractors

According to our internal control standards, an agency must have  relevant, reliable, and timely information in order to run and control its  operations. Some of  the services and functions performed by contractors could be considered  part of major DOD headquarters activities. Some Information DOD Used to Identify Headquarters-Related Efficiency Initiatives Was Inaccurate and Some Resource Adjustments Will Be Made during Implementation

As the department did not have reliable major DOD headquarters activity  data, DOD gathered information from multiple sources to compile  headquarters-related information for the Secretary of Defense’s 2010  efficiency initiative. Because of the short timelines given  to identify efficiencies and limitations on the sharing of information  imposed on personnel by DOD to prevent disclosure of the decisions, this  information was not validated with the DOD officials responsible for  implementing the decisions to ensure that it was accurate. As a result,  some information used to identify headquarters-related efficiency  initiatives was inaccurate and some adjustments in resource allocations  will have to be made during implementation to achieve planned savings. Without updating its guiding  instruction to ensure that it has complete and reliable data on  headquarters personnel and operating costs, DOD will not have the  information it needs, which could affect its efforts to direct resources  toward its main priorities. To improve DOD’s ability to identify how many headquarters personnel it  has, including military, civilian and contractor personnel, and improve the  information Congress and DOD need to ensure that headquarters  organizations are appropriately sized and overhead positions are reduced  to the extent possible, we recommend that the Secretary of Defense  direct the Director of Administration and Management, in consultation with  the Under Secretary of Defense for Personnel and Readiness, to revise  DOD Instruction 5100.73, Major DOD Headquarters Activities, to  include all major DOD headquarters activity organizations,  specify how contractors performing major DOD headquarters activity  functions will be identified and included in headquarters reporting,  clarify how components are to compile the major DOD headquarters  activities information needed to respond to the reporting requirements  in section 1109 of the fiscal year 2010 National Defense Authorization  Act, and establish time frames for implementing the actions above to improve  tracking and reporting headquarters resources. This report evaluated the extent to  which the Department of Defense (DOD) (1) examined its headquarters  resources for efficiencies and (2) has complete and reliable headquarters  information available for use in making efficiency decisions.
Why GAO Did This Study

The Department of Defenses (DOD) headquarters and support organizations have grown since 2001, including increases in spending, staff, and numbers of senior executives and the proliferation of management layers. In 2010, the Secretary of Defense directed DOD to undertake a departmentwide initiative to reduce excess overhead costs. In response to a mandate, GAO evaluated the extent to which DOD (1) examined its headquarters resources for efficiencies and (2) has complete and reliable headquarters information available for use in making efficiency decisions. For this review, GAO analyzed documents and interviewed officials regarding DODs headquarters resources and information.

What GAO Found

The Department of Defense (DOD) has taken some steps to examine its headquarters resources for efficiencies, but additional opportunities for cost savings may exist by further consolidating organizations and centralizing functions. For purposes of the Secretary of Defenses efficiency initiative, DOD components were asked to focus in particular on headquarters and administrative functions, support activities, and other overhead in their portfolios. DODs fiscal year 2012 budget request included several efficiencies related to headquarters organizations or personnel. GAO found that these efficiencies generally fell into two categories: (1) consolidating or eliminating organizations based on geographic proximity or span of control and (2) centralizing overlapping functions and services. The DOD efficiencies that GAO reviewed to reduce headquarters resources are expected by DOD to save about $2.9 billion through fiscal year 2016, less than 2 percent of the $178 billion in savings DOD projected departmentwide. GAOs work indicates that DOD may be able to find additional efficiencies by further examining opportunities to consolidate organizations or centralize functions at headquarters. DOD may not have identified all areas where reductions in headquarters personnel and operating costs could be achieved because the department was working quickly to identify savings in the fiscal year 2012 budget and used a top-down approach that identified several targets of opportunity to reduce costs, including headquarters organizations, but left limited time for a detailed data-driven analysis. In February 2012, DOD proposed $61 billion in additional savings over fiscal years 2013 to 2017, but provided limited information as to what portions of these savings were specific to headquarters. Without systematic efforts to reexamine its headquarters resources on a more comprehensive basis, DOD may miss opportunities to shift resources away from overhead.
An underlying challenge facing DOD is that it does not have complete and reliable headquarters information available for use in making efficiency assessments and decisions. According to GAOs internal control standards, an agency must have relevant, reliable, and timely information in order to run and control its operations. DOD Instruction 5100.73 guides the identification and reporting of headquarters information. However, GAO found that this instruction is outdated and does not identify all headquarters organizations, such as component command headquarters at U.S. Africa Command and certain Marine Corps headquarters. Also, although some of the services and functions performed by contractors could be considered as headquarters activities, the instruction does not address the tracking of contractors that perform these functions. DOD has delayed updating the instruction to allow time for components to adjust to the statutory changes enacted by Congress in 2009 that created new headquarters reporting requirements. According to DOD officials, ever-changing statutory reporting requirements have contributed to DODs failure to report to Congress about the numbers of headquarters personnel. As the department did not have reliable headquarters data, DOD compiled related information from other sources to inform its 2010 efficiency initiative. Because of the short timelines given to identify efficiencies and limitations on the sharing of information, this information was not validated before decisions were made. As a result, some of the information used to identify headquarters-related efficiencies was inaccurate and some adjustments in resource allocations will have to be made during implementation to achieve planned savings. Looking to the future, until DOD has updated its instruction to ensure that it has complete and reliable headquarters data, the department will not have the information it needs, which could affect its efforts to direct resources to its main priorities during future budget deliberations.

What GAO Recommends

GAO recommends that DOD continue to examine opportunities to consolidate organizations and centralize functions and services and revise DOD Instruction 5100.73 to include all headquarters organizations, specify how contractors performing headquarters functions will be identified and included in reporting, clarify how components are to compile information needed to respond to headquarters reporting requirements, and establish time frames for implementing these actions. DOD concurred with GAOs first recommendation and partially concurred with GAOs second recommendation.