First,  DOD plans more weapons acquisition programs than it can afford. Organizations  that follow these practices assess product investments collectively from an enterprise level,  rather than as independent and unrelated initiatives; continually make go/no-go decisions through a gated review process  to rebalance portfolios based on investments that add the most value; use an integrated approach to prioritize needs and allocate resources  in accordance with strategic goals;  rank and select investments using a disciplined process to assess the  costs, benefits, and risks of alternative products; empower leadership to make investment decisions and hold  leadership accountable for investment outcomes; and provide sustained leadership for portfolio management. Portfolio Reviews

Portfolio management best practices and the Project Management  Institute’s portfolio management standards also state that organizations  should conduct regular reviews to adjust to strategic changes or changes  in the mix of products within a portfolio, among other reasons. DOD Is Not Using an Integrated Portfolio Management Approach to Optimize Its Weapon System Investments at the Enterprise Level

DOD is not using an integrated portfolio management approach to  optimize its weapon system investments at the enterprise level, as called  for in best practices. DOD lacks the governance structure, sustained  leadership, and policy to do so. DOD has numerous enterprise-level processes,  organizations, and decision makers to oversee its weapon system  investments, which generally operate as stove-pipes, not as an integrated  whole. DOD has taken some  steps to integrate its requirements, acquisition, and budget processes. DOD Lacks a Portfolio Management Policy That Reflects Best Practices

DOD does not have a policy to guide portfolio management across the  department that fully reflects key best practices. The policy is also not  current and DOD is not implementing it, but it has not been rescinded. In the policy, DOD also did not identify an  office to be responsible for its overall implementation. Perceived Lack of Enterprise-Level Decision- Making Authority over the Services Is an Impediment to Portfolio Management

Enterprise-level involvement is important to optimize investments  collectively across the military because the military services tend to focus  on optimizing their own investments. Lack of Resources and Analytical Tools Limits DOD’s Ability to Effectively Conduct Portfolio Reviews

The Joint Staff, AT&L, and CAPE reported that resource limitations have  affected their ability to regularly conduct portfolio reviews. Joint Staff officials said that past efforts relied  on repeated data calls, which were a drain on resources and time  consuming. However, these reviews also lacked some of  the key acquisition, requirements, and funding information that would  better position the services to conduct sound investment planning. The military  services have used portfolio reviews and other assessments to reduce  redundancies, realign resources, produce more analytically rigorous  budget proposals, and plan for budget uncertainty. Key elements of this recommendation would include designating the Deputy Secretary of Defense or some appropriate  delegate responsibility for implementing the policy and overseeing  portfolio management in DOD;  requiring annual enterprise-level portfolio reviews that incorporate key  portfolio review elements, including information from the  requirements, acquisition, and budget processes; directing the Joint Staff, AT&L, and CAPE to collaborate on their data  needs and develop a formal implementation plan for meeting those  needs either by building on the database the Joint Staff is developing  for its analysis or investing in new analytical tools; and  incorporating lessons learned from military service portfolio reviews  and portfolio management activities, such as using multiple risk and  funding scenarios to assess needs and re-evaluate priorities. Second, to help ensure the military services’ portfolio reviews are  conducted regularly and effectively integrate information from the  requirements, acquisition, and budget communities, the Secretary of  Defense should direct the Secretaries of the Army, Navy, and Air Force to  update or develop policies that require them to conduct annual portfolio  reviews that incorporate key portfolio review elements, including  information from the requirements, acquisition, and budget processes. In its written  comments, which are reprinted in full in appendix IV, DOD partially  concurred with our two recommendations. However, as discussed below,  DOD’s planned actions will not fully address the issues we raised in this  report. Key contributors to  this report are listed in appendix V.

Appendix I: Objectives, Scope, and Methodology

Our objectives were to assess the extent to which (1) the Department of  Defense (DOD) uses portfolio management to optimize its weapon  system investments, (2) DOD conducts integrated portfolio reviews at the  enterprise level to optimize their weapon system investments, and (3) the  military services conduct integrated portfolio reviews to optimize their  weapon system investments and their experiences offer potential lessons  for DOD.
Why GAO Did This Study

DOD's weapon system acquisition programs have a total estimated acquisition cost of over $1.4 trillion. Portfolio management is an approach used by organizations to evaluate, select, prioritize, and allocate resources to projects that best accomplish strategic or organizational goals. In March 2007, GAO recommended that DOD implement a department-wide portfolio management approach for weapon system investments.
Senate Report 113-44 accompanying the National Defense Authorization Act for Fiscal Year 2014 included a provision that GAO review DOD processes for identifying duplicative and inefficient acquisitions. This report assesses the extent to which (1) DOD uses portfolio management to optimize weapon system investments; (2) DOD conducts integrated portfolio reviews; and (3) the military services conduct portfolio reviews. GAO compared DOD and military service policies and portfolio reviews with best practices and standards for portfolio management.

What GAO Found

The Department of Defense (DOD) is not effectively using portfolio management to optimize its weapon system investments, as evidenced by affordability challenges in areas such as shipbuilding and potential duplication among some of its programs. Best practices recommend assessing investments collectively from an enterprise-wide perspective and integrating requirements, acquisition, and budget information, but several factors inhibit DOD's ability to do so.
Fragmented governance: DOD has numerous processes, organizations, and decision makers to oversee weapon system investments that operate in stove-pipes, not as an integrated whole. The requirements and acquisition processes also focus on individual programs rather than assessing investments collectively, as best practices recommend.
Lack of sustained leadership and policy: DOD stopped implementing its portfolio management efforts and policy, in part due to changes in leadership. DOD's policy is also dated, does not fully reflect best practices, and does not identify an office with sufficient authority to implement it.
Perceived lack of decision-making authority: Enterprise-level involvement is key to optimizing investments across DOD because the military services prioritize needs and optimize investments within their services rather than across the military. Title 10, which gives the services responsibility over equipping the force, does not preclude enterprise-level influence over service investment decisions, but some DOD officials said it limits their influence.
DOD's enterprise-level requirements, acquisition, and budgeting communities, meaning those at the at the Office of the Secretary of Defense, Joint Chiefs of Staff, and Joint Staff level, are not consistently conducting portfolio reviews or collaborating to integrate key information. As a result, DOD may be missing opportunities to better leverage its resources and identify investment priorities that best reflect DOD-wide needs. Best practices and portfolio management standards state that organizations should conduct regular reviews to adjust to strategic changes, among other reasons. The Joint Staff, which is responsible for validating warfighting needs, has taken the most concrete actions to conduct portfolio reviews, but even these efforts did not integrate key requirements, acquisition, and budget information. Requirements and acquisition officials said they lacked the resources, readily accessible data, and analytical tools to effectively conduct reviews. For example, the Joint Staff lacks a database that pulls together current information to help it manage its portfolios and has to rely on repeated data calls, which are inefficient and time consuming.
The military services have conducted reviews more consistently than the enterprise level and their experiences at the service level may offer lessons for DOD. They have used the reviews to reduce redundancies, plan for budget uncertainty, and realign resources. Nevertheless, their reviews lack some of the key information needed to provide an integrated assessment of needs, investments, and resources and are limited to the services' own programs. A more integrated approach to portfolio reviews at both the enterprise and military-service levels would better position DOD to conduct sound investment planning.

What GAO Recommends

GAO recommends that DOD update its portfolio management policy, designate a senior official responsible for its implementation; conduct annual portfolio reviews that integrate key information from the requirements, acquisition, and budget processes; and invest in analytical tools to support its portfolio management efforts. DOD partially concurred with the recommendations. However, as discussed in the report, DOD's planned actions will not fully address the issues GAO identified.