Defense Management: DOD Needs to Address Inefficiencies and Implement Reform across Its Defense Agencies and DOD Field Activities

DOD spends billions of dollars annually to maintain business functions that support the warfighter. Many of these functions are performed by the DAFAs—DOD's 19 defense agencies and 8 field activities intended to provide department-wide consolidated support functions. GAO has previously identified instances of fragmentation, overlap, and duplication among the DAFAs.

Senate Report 115-125, accompanying a bill for the National Defense Authorization Act for Fiscal Year 2018, included a provision that GAO review the DAFAs. This report evaluates the extent to which (1) DOD has assessed the continuing need for each DAFA; (2) any overlap or fragmentation among the DAFAs that provide human resources services has affected service delivery; and (3) DOD has monitored and evaluated the results of its efficiency initiatives that affect the DAFAs. GAO reviewed legal requirements, assessed prior DOD reports, and analyzed DOD's human resources activities and documentation tracking past efficiency initiatives.

The Department of Defense (DOD) does not comprehensively or routinely assess the continuing need for its defense agencies and DOD field activities (DAFAs). DOD was statutorily required to review the services and supplies each DAFA provides to ensure there is a continuing need for each and that the provision of services and supplies by each DAFA, rather than by the military departments, is more effective, economical, or efficient. A DOD directive requires the recording of the review. DOD previously issued biennial reports to Congress to record its review. Since 2012, DOD has relied on existing processes to fulfill the requirement; such as the annual budget process and the day-to-day management of the DAFAs. However, DOD did not provide sufficient evidence that these processes satisfy the statute. For example, while DOD reviews the DAFAs during the budget process, it does not specifically review the provision of services by the DAFAs rather than the military departments. Further, DOD does not have internal guidance that provides clear direction for conducting and recording its response to the statutory requirement. Without such guidance, DOD is limited in its ability to clearly define or target the scope of its reviews and any resulting reports. As such, DOD and congressional decision makers may not have reasonable assurance of a continuing need for the DAFAs, or that the provision of services and supplies is effective, economical, and efficient.

There is fragmentation and overlap within the DAFAs that provide human resources services to other defense agencies or organizations within DOD. At least six DOD organizations, including three DAFAs, perform human resources services for other parts of the department. One DAFA receives human resources services from all six organizations. This has resulted in negative effects, such as inconsistent performance information regarding hiring, fragmented information technology systems, and inefficiencies associated with overhead costs. For example, DOD officials stated that there are over 800 fragmented information technology systems used to store and record training records across the department, which are costly to maintain. DOD established a reform team to reduce inefficiencies within this business function. However, the team lacks comprehensive information on overhead costs that could guide reform and does not have time frames or deliverables for completing certain reform initiatives. With consistent human resource performance information, comprehensive information on overhead costs, and clear time frames in place, the team would be better positioned to thoroughly assess the department's system for human resources service delivery and develop and implement long-term solutions for better coordination or consolidation of this function.

DOD has taken some steps to monitor and evaluate the results of key efficiency initiatives that affect the DAFAs. However, DOD has not always established baselines or performed ongoing monitoring of its initiatives. Further, DOD has focused on whether steps have been taken, rather than outcomes achieved. For example, DOD did not evaluate whether a prior efficiency initiative called the Core Business Process Review achieved any of its intended savings or led to expected efficiencies. Without ensuring that efficiency initiatives are fully monitored and evaluated against established baselines over time, DOD lacks a systematic basis for evaluating whether its various initiatives have improved the efficiency or effectiveness of its programs or activities.

GAO is making five recommendations, including for DOD to develop internal guidance to conduct and record its reviews of DAFAs; collect consistent performance information and comprehensive overhead cost information; establish time frames and deliverables for key reform efforts; and ensure routine and comprehensive monitoring and evaluation of ongoing efficiency initiatives. DOD concurred with GAO's recommendations.

The Department of Defense (DOD) maintains military forces with  unparalleled capabilities; however, it continues to confront organizational  and management challenges that hinder collaboration and integration  across the department. Further, DOD spends billions of dollars each year  to maintain the business functions designed to support the warfighter,  such as managing finances, information systems, contracts, and weapon  systems. DOD is in the midst of significant management reorganization  and reform intended to address long-standing weaknesses in its business  operations. As part of this reorganization, the newly established Chief  Management Officer (CMO) is responsible for improving the quality and  productivity of the business operations of the department. The defense  agencies and DOD field activities (DAFAs) play a critical role in  supporting the department’s business operations. DOD’s 19 defense  agencies and 8 field activities are intended to perform consolidated  supply and service functions on a department-wide basis. According to a  November 2017 DOD memo, 22 DAFAs were funded at more than $106  billion for fiscal year 2017.

In prior work, we have identified numerous instances of fragmentation,  overlap, and duplication and have recommended actions to increase  coordination or consolidation to address related inefficiencies that affect  the DAFAs. For example, we previously recommended that DOD should  minimize unnecessary overlap among the eight organizations that  account for missing persons from past conflicts and improve the  effectiveness of that mission. Subsequently, DOD addressed this  fragmentation and reorganized the mission into one defense agency, the  Defense POW/MIA Accounting Agency.

Senate Report 115-125 accompanying a bill for the National Defense  Authorization Act for Fiscal Year 2018 included a provision that we review  the DAFAs. This report evaluates the extent to which (1) DOD has  assessed the continuing need for each DAFA; (2) any overlap or  fragmentation among the DAFAs that provide human resources services  has affected the delivery of those services; and (3) DOD has monitored  and evaluated the results of its efficiency initiatives that affect the DAFAs.

For our first objective, we reviewed DOD’s efforts to fulfill a statutory  requirement that the department periodically review the continuing need  for its DAFAs and the associated provision of services and supplies. As  such, we reviewed the biennial reports that DOD issued on the DAFAs to  address the statute from 1987, the first year after enactment of the  requirement, through 2012, the most recent year of DOD’s reporting. We  also interviewed officials from the Office of the CMO (OCMO) regarding  DOD’s current processes for reviewing and recording their assessment of  the DAFAs, and we evaluated DOD’s current response against the  relevant statute. Further, we reviewed the most recent DOD reports on  combat support agencies, issued in 2016 and 2017, as there is a  comparable statutory requirement for DOD to review this subset of the  DAFAs, and we interviewed relevant Joint Staff officials regarding the  processes used to develop those reports. We compared DOD’s biennial  reports and combat support agency reports with key elements of quality  evaluations, which we identified in prior work and compiled as part of this  review.

For our second objective, we selected one business function of the  department—the provision of human resources services—and reviewed  the department’s implementation of this function to identify any potential  inefficient fragmentation or overlap in the services provided. For  example, we reviewed the client bases serviced by each DAFA to identify  any inefficient duplication or overlap, and we reviewed the performance  measures used by each DAFA to examine for any fragmentation in their  respective approaches to performance measurement. We compared  DOD’s provision of human resources by DAFAs against statutory  requirements that DOD’s DAFAs provide services in a manner that is  effective, economical, or efficient. Further, we assessed DOD’s provision  of human resources, using our fragmentation, overlap, and duplication  evaluation guide. We also interviewed relevant DOD and DAFA officials  about the provision of human resources and current plans to reform this  business function.

For our third objective, we selected and assessed DOD’s monitoring and  evaluation of department-wide efficiency initiatives. Specifically, we selected a subset of efficiency initiatives that affected DAFAs and that we  have reported on since 2014. We obtained documentation and spoke with  officials from the OCMO, and we selected DAFAs regarding DOD’s  monitoring, assessing, and tracking of the selected reform initiatives. We  also obtained information and documentation from the OCMO regarding  DOD’s ongoing reform efforts, including plans for monitoring and  assessing efforts, and we evaluated this information using Standards for  Internal Control in the Federal Government, which states that  management should establish and operate monitoring activities and  evaluate the results. See appendix I for additional details.

We conducted this performance audit from August 2017 to September  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.

DOD’s 19 defense agencies and 8 DOD field activities are defense  organizations separate from the military departments. They are intended  to provide a common supply or service across more than one DOD  organization. The services and supplies provided by the DAFAs are  broad; they range from intelligence to human resources services, to  providing secure networks and buildings, to developing cutting edge  research and technological advancements, to missile defense, to  providing groceries for military families. DOD estimates that the DAFAs  employ more than 380,000 military and civilian personnel across the  department, not including contractors.

Each head of a DAFA reports to a principal staff assistant within the  Office of the Secretary of Defense, who in turn reports directly to the  Deputy Secretary of Defense or the Secretary of Defense. The principal  staff assistants who provide oversight to the DAFAs include the CMO, the  Chief Information Officer, the heads of DOD’s Offices of General Counsel  and Public Affairs, and all of the Under Secretaries within the department,  depending on the mission of the DAFA. In addition to providing advice to  the Secretary on assigned matters, each principal staff assistant plays an  important role in the development and review of key aspects of the  DAFA’s submissions as part of DOD’s annual budget process, called the  Planning, Programming, Budgeting, and Execution process.

A subset of the DAFAs consists of the combat support agencies, which  have, in addition to their other functions, focused missions to support the  combatant commands. These eight agencies are jointly overseen by their  respective principal staff assistants and the Chairman of the Joint Chiefs  of Staff. Figure 1 details the organizational structure and reporting  relationships of the DAFAs, including the eight combat support agencies.

DOD’s CMO Reorganization and Related Reform Efforts

Section 901 of the Fiscal Year 2017 National Defense Authorization Act  established a CMO within DOD, effective on February 1, 2018, and the  Secretary established the position, as directed, on that date. The Fiscal  Year 2018 National Defense Authorization Act, Section 910, clarified the  role and expanded the responsibilities of the DOD CMO. Further, it  elevated the position to take precedence in the department after the  Secretary of Defense and the Deputy Secretary of Defense. This  section also gave the CMO authority to direct the secretaries of the military departments and the heads of other defense organizations with  regard to business operations and department-wide shared services. The  expanded authority of the CMO includes oversight, direction, and control  over DAFAs providing shared business services for the department, to be  determined by the Secretary of Defense or the Deputy Secretary of  Defense. In January 2019 the CMO will assume some of the Chief  Information Officer responsibilities, duties, and powers related to business  systems or management, including the management of the enterprise  business operations and shared services of the department, as required  by law. Additionally, the CMO will serve as the DOD performance  improvement officer.

Since 2011, we have issued annual reports on opportunities to reduce or  better manage fragmentation, overlap, and duplication, as well as to  achieve cost savings and enhance revenue for the federal government.  The federal government faces a long-term, unsustainable fiscal path  based on an imbalance between federal revenues and spending. Figure  2 defines fragmentation, overlap, and duplication.

DOD Has Not Comprehensively or Routinely Assessed the Continuing Need for Its DAFAs

DOD’s Past and Current Efforts to Assess the DAFAs Have Limitations

Although DOD has taken some steps to assess the continuing need for  the DAFAs, we found that these steps have been neither comprehensive  nor routine, especially since 2012. At the time of our review, section  192(c) of title 10 of the United States Code required the Secretary of  Defense to review the services and supplies each DAFA provides to  ensure that (1) there is a continuing need for each DAFA; and (2) the  provision of services and supplies by each DAFA, rather than by the  military departments, is a more effective, economical, or efficient manner  of providing those services and supplies or of meeting the requirements  for combat readiness.

From 1987 to 2012, DOD issued biennial reports to Congress to record its  response to this statute, but the methodology and quality of those reports  varied. Regarding the methodology of the past reports, for the first five  biennial reports, from 1987 to 1995, DOD relied on a research team to  identify findings and provide recommendations on the structure and  composition of the DAFAs. The four reports issued from 1997 to 2004  relied on a survey of the DAFAs’ customers across DOD. From 2005 to  2010, DOD issued three reports that alternated between a senior  management assessment of the DAFAs and the customer survey  approach. In addition, the 2009-2010 report recorded activities relevant to  the statutory review requirement, with a focus on a major DOD efficiency  initiative that was ongoing at that time.

Regarding quality, we found that the most recent report, dated 2012,  generally did not reflect key elements of quality evaluations, which we  identified in our prior work and compiled as part of this review. Table 1  below details these key elements.

We found that some key elements were included in the most recent  report, but other key elements were not reflected. We reviewed that report  against all elements and found that the report’s purpose was aligned with  the relevant statutory requirements, which is a key element. Further, the  report relied on data obtained from appropriate sources for the evaluation,  to include survey information from the DAFA directors and military  department officials. However, we found that the report did not assess the  reliability of the data used, define key terms, clearly state criteria used for  analysis, or make recommendations. For example, OCMO officials  familiar with the report told us that some DAFAs and military departments  surveyed for the report provided more detail and information in their  responses than others, but there was no assessment of the reliability of  this information. Overall, OCMO officials acknowledged that the report  was more of a collection of information, rather than an in-depth  assessment.

At the time of our review, section 192(c) of title 10, United States Code,  did not explicitly require that DOD develop and issue a written report as  part of the required periodic review. According to DOD officials, they  discontinued issuing biennial reports in 2012 because the reports were  not a leadership priority, given the resources required to produce them. In  addition, OCMO officials acknowledged that the department does not  currently record fulfillment of the statutory requirement through a  centralized process, such as the development of a report that responds to  the requirement. However, a DOD directive tasks the former Director of  Administration and Management, whose functions have now been  integrated into the CMO office, to oversee the biennial review of the  DAFAs and to record the fulfillment of that review. Further, Standards  for Internal Control in the Federal Government states that documentation  is a necessary part of an effective internal control system and is required  for effective operations. OCMO officials told us that they are considering  renewing the issuance of biennial reports, but that there are no firm plans  to do so at this time, nor are there any associated time frames.

In the absence of biennial reports, OCMO officials stated that since 2012  they have relied on existing departmental processes to address the  statutory requirement to review the DAFAs. Senior level OCMO officials  expressed some disagreement about which of these existing processes  ensure that they have fulfilled the statutory requirement. When we  assessed the processes, we determined that DOD did not provide  sufficient evidence that it has met the statutory requirement. These  processes include the following:

Annual budget process: Some OCMO officials stated that DOD’s  annual budget process is a means of addressing the statutory  requirement to review the DAFAs, but one senior official from the  OCMO disagreed. Although DOD reviews the budget proposals for  each DAFA, DOD could not provide evidence that the annual budget  process includes a specific review of the continuing need for each  DAFA, or that the use of the DAFAs ensures the most efficient  provision of services across DOD.

Day-to-day management of the DAFAs: One OCMO official stated  that day-to-day management of the DAFAs provides a means of  addressing the statutory requirement to review the DAFAs. However,  we found that the documentation provided by OCMO officials does not  demonstrate that a review and recording of DAFA services and  supplies takes place through day-to-day management of the  department. Moreover, some OCMO officials stated that the day-to- day management activities of a large organization can actually detract  from leadership’s ability to focus on needed reviews and reform.

Reform or efficiency initiatives: Some OCMO officials stated that prior  reform efforts that were focused on the DAFAs exemplify the  department’s response to the statute. However, although certain  reform initiatives, such as the Business Process and Systems  Reviews, affected the DAFAs, we found that the stated purposes of  these reform initiatives, discussed in more detail later in this report, do  not reference the continuing need for DAFAs or examine whether  services should be performed instead by the military departments.  Further, some OCMO officials acknowledged that prior reform efforts  did not examine the continuing need for DAFAs.

DAFA reorganizations: OCMO officials cited certain reorganizations of  the department as evidence that they review the DAFAs. However,  the examples they cited were congressionally mandated  reorganizations, such as the replacement of the Under Secretary of  Defense for Acquisition, Technology, and Logistics with two new  Under Secretary positions. As these were congressionally mandated  reorganizations and therefore required, we found that they do not  demonstrate that changes resulted from an internal comprehensive  assessment of the continuing need for the DAFAs or their provision of  services and supplies.

Management of services through executive agents: Finally, OCMO  officials stated that the existence of executive agents throughout the  department shows that DOD focuses on ensuring efficient delivery of  services and supplies. Multiple heads of DAFAs serve as  designated executive agents. However, OCMO officials did not  provide documentation that these executive agents assess the  continuing need for the DAFAs. Further, we have previously reported  on weaknesses in the use of DOD executive agents in management  arrangements. For example, we previously reported that DOD had not  defined continued need, currency, effectiveness, or efficiency in  satisfying requirements for executive agents.

DOD Has Established Guidance That Results in Quality Evaluations of Its Combat Support Agencies but Lacks Guidance for Its Review of All DAFAs

Under a separate statute, 10 U.S.C. § 193(a), DOD is required to  periodically report on the responsiveness and readiness of the eight  combat support agencies, a subset of the DAFAs. In contrast to DOD’s  biennial reports on DAFAs for 10 U.S.C. § 192(c), we found that the DOD  combat support agency reports for 10 U.S.C. § 193(a) we reviewed  generally reflect key elements of quality evaluations that we identified.  For example, the most recent combat support agency reports we  reviewed generally have clear evaluation questions, use sufficient and  appropriate data, and support conclusions with data and analysis. Last,  all of the DOD combat support agency reports we reviewed contain  actionable recommendations.

Recommendations from the Joint Staff included in combat support  agency reports resulted in reported efficiencies. For example, in response  to the findings and recommendations of a combat support agency report,  officials from the Defense Information Services Agency created a new  office to serve as a single point of contact for its customers. These  officials reported that the office has reduced paperwork and helped to  build relationships with customers. Joint Staff officials reported a variety  of other positive results from combat support agency report  recommendations. These results include an increase in the speed of  specific deliveries from the Defense Logistics Agency (DLA) to DOD  customers outside the continental United States; improved navigational  charts provided by the National Geospatial Intelligence Agency to the  Combatant Commands to ensure safety; and the establishment of clear  policy related to fuel additives, including the clarification of specific roles  and responsibilities.

OCMO officials stated that the statutory requirement for combat support  agency reports is more specific and smaller in scope than the statutory requirement to review the DAFAs. As a result, the officials told us that  they have not been able to conduct targeted and potentially more useful  analysis for DAFAs, such as the evaluations they conduct of the combat  support agencies. However, we found that while the statutes differed in  some ways—for example, a report is specifically required for the combat  support agencies, but was not for the DAFAs—both statutes prescribed  broad requirements for the review processes.

While each statute requires a periodic assessment, we found differences  in the direction that DOD provides to guide the department’s response to  these statutes. Specifically, a Joint Staff Instruction describes  requirements for the combat support agency reports and provides  direction for the associated process. In many cases, the Joint Staff  Instruction requirements reflect the key elements for evaluations that we  identified. For example, the instruction provides general guidance on the  criteria that reports should use, as well as specific examples. To ensure  data reliability, the instruction requires validation of findings, issues,  recommendations, and observations. Further, the instruction describes  key terms included in the statute, such as responsiveness, readiness, and  operating forces. In contrast, DOD has not issued internal guidance that  details requirements for the required review of DAFAs.

The Joint Staff has also developed a strategy for scoping and timing its  combat support agency reviews to make the work manageable and the  outcome of the reviews useful to the combatant command. Specifically,  the Joint Staff focuses each report on one combat support agency at a  time, rotating the focus so that each agency is reviewed every several  years. Joint Staff officials stated that the focus areas of the reports also  vary depending on the needs of warfighter, senior leader direction, and  actions taken as a result of the previous assessments. Additionally, when  conducting its reviews, the Joint Staff primarily assesses the combat  support missions within each combat support agency, rather than all  functions implemented by the agency.

Conversely, DOD has not developed any internal guidance for a similar  process that would allow for a more manageable approach to the  requirement to review the DAFAs. As a result, previous biennial reviews  examined all services and supplies of all DAFAs in each report, an  approach that CMO officials acknowledged prohibited more detailed  analysis. Through the development of internal guidance that provides  clear direction for conducting and recording DOD’s response to the  required review of the DAFAs, the department could more clearly define  or target the scope of those reviews and any resulting reports to make  effective use of the resources devoted to that process. For example, DOD  could choose to follow a risk-based approach, focus on the department’s  key priorities for reform, or rotate the focus of each report as the Joint  Staff does with the combat support agency reports.

Without clear internal guidance that defines the requirements for a high- quality review of its DAFAs and the associated recording of the results of  those reviews, DOD and congressional decision makers may not have  reasonable assurance that there is a continuing need for the DAFAs and  that the provision of services and supplies is effective, economical, and  efficient. Such information could assist decision makers when  considering any future reorganizations of the DAFAs, or the realignment  of functions among the DAFAs or other defense organizations, or when  seeking greater efficiencies.

Fragmentation and Overlap among the DAFAs That Provide Human Resources Services Have Negative Effects, and Related Reform Efforts Have Limitations

Fragmentation and Overlap Occur among the DAFAs That Provide Human Resources Services

DOD currently has a service delivery model in which there are numerous  human resources providers offering varying levels of quality and  transparency of costs. Section 191 of title 10, United States Code,  states that the Secretary of Defense may provide for the performance of a  supply or service activity that is common to more than one military  department by a single agency of DOD when it would be more effective,  economical, or efficient. Nevertheless, at least six organizations within  DOD, including three DAFAs and the three military departments, provide  human resources services to other defense agencies or organizations.  Specifically, DLA, the Defense Finance and Accounting Service (DFAS),  and the Washington Headquarters Service (WHS) perform human  resources services for other organizations, such as other DAFAs; offices  within the Office of the Secretary of Defense; or parts of the military  departments. All perform the same types of human resources services,  such as those related to civilian workforce hiring across DOD.  Additionally, the Departments of the Army, Navy, and Air Force each has  a human resources command or personnel center.

Below is a count of the number of customers served by the DOD  agencies providing human resources services as of May 2018, as  reported by agency officials.

DLA provides human resources services for about 70,000 customers,  including 25,000 of its own employees and 45,000 civilians from  across DOD outside of DLA.

DFAS provides human resources services for about 26,000 DOD  civilians, including 12,000 DFAS employees and about 14,000  customers from across DOD.

WHS performs nearly all types of human resources services for some  DAFAs, such as the Defense POW/MIA Accounting Agency and the  Defense Legal Services Agency, as well as all senior executives and  presidential appointees across the department, totaling about 170,000  individuals. However, WHS performs only certain human resources  services for its own employees, such as recruitment and training.  WHS pays DLA to perform other types of human resources services,  such as personnel action processing, pre-employment drug testing,  and the processing of certain travel orders and allowances, among  other functions, for more than 7,000 WHS employees.

Through our assessment of documents detailing the human resources  service customer bases of DFAS, DLA, and WHS, we found that there is  overlap in the human resources services that they provide. For example,  DOD officials reported that three DAFAs and the military departments  provide human resources servicing to personnel employed by the  Defense Security Cooperation Agency, depending on the location, rank,  or other characteristics of the staff (see figure 3). Moreover, although  each military department has its own human resources command or  personnel center, we have identified some instances of DAFAs providing  human resources services to military department civilian employees or  servicemembers. For example, the Army pays DFAS to provide broad  human resources support to the Army’s Financial Management  Command, even though it could use its own human resources servicing  organization. Additionally, WHS officials stated that the agency provides  certain human resources services to all presidential appointee civilian  positions across the military departments, rather than having the  appointees’ military departments’ own human resources commands or  personnel centers do so. Also, DLA provides human resources services  to the military department civilians and servicemembers assigned to DLA.

Inefficient Overlap and Fragmentation Have Resulted in Negative Effects to the Department

The fragmentation and overlap among the DAFAs that provide human  resources services to other defense offices or organizations have resulted  in negative effects, such as inconsistent performance information,  inefficiencies resulting from fragmented information technology (IT)  systems, and inefficiencies related to overhead costs.

In the current service delivery model with multiple human resources  service providers, DOD agencies choose a human resources provider.  DFAS, DLA, and WHS differ in how they measure and report their  performance data, which results in inconsistent information and limits  customers’ ability to make informed choices about selecting a human  resources service provider to meet their needs. DFAS, DLA, and WHS  submit data in department-wide information systems, as required. This  information is used to develop an overall DOD time-to-hire measure of the  department’s performance against the government-wide goal of 80 days  to fill a job opening. However, the ways in which each DAFA develops  this measure, and other measures to assess its own performance, differ.  For instance, one DAFA measures 12 different phases of the entire  process to fill a job opening, with a different measure for each of the 12  phases. Other DAFAs choose to begin or end their measurement process  at different points within the hiring process. As such, the measures used  by human resources providers to determine the timeliness and quality of  the services provided to customers are not consistent across the  providers. The inconsistent performance data do not allow DOD  customers to make fully informed comparisons in selecting a service  provider.

Table 2 shows the differences among the respective reported time-to-hire  averages of the three DAFAs that provide human resources services for  civilians who are hired by the three military departments. The averages  range from 65 days to 120 days, which shows a considerable variance in  performance. However, as described previously, these reported averages  were not calculated in a consistent manner across the department’s  human resources providers. In addition, these time-to-hire averages do  not reflect the quality of the hiring or reflect that some types of positions  are difficult to fill, which could affect results. For example, DOD reports  that it takes an average of 118 days to fill a civilian intelligence and  counterintelligence position department-wide.

With more consistent information, DOD leadership could better assess  what changes, if any, need to be made to improve hiring practices. As  DOD officials told us, delays in hiring can result in failing to hire the best  candidates and can negatively affect program success. Further, DOD  organizations could better weigh decisions on obtaining human resources  services.

Fragmented Information Technology (IT) Systems

Each human resources provider within DOD uses a common IT system,  called the Defense Civilian Personnel Data System, to store and process  civilian human resources data. However, each uses a separate  connection to the system, resulting in some inefficiency. For example,  when an employee in a defense agency serviced by multiple human  resources providers transfers to a different part of the same agency or  another part of DOD, the employee is treated as if he or she has been  newly hired. The employee’s personnel data must be re-entered through  a different connection to the data system, and other administrative steps  are re-performed, such as providing the employee a new Common  Access Card, the department’s identification badge used for facility and  computer system access.

Additionally, DOD officials stated that there are more than 800 learning  management systems employed across the department, which are used  to deliver training to personnel and store and record training records.  DAFA and OCMO officials stated that these fragmented learning  management IT systems are duplicative in nature and are costly to the  department to maintain, although officials were not able to provide an  estimate of those costs.

In January 2018, DOD officials stated that all human resources providers  were expected to move to a common connection to the IT system by  October 2018, which was expected to eliminate redundant data entry and  other duplicative administrative inefficiencies. However, as of June 2018,  DOD officials stated that this effort is on hold, as the department is  currently reexamining the best strategy to provide IT solutions for human  resources. According to officials, that strategy might be to use a cloud- based solution, as opposed to changes to the legacy system of the  Defense Civilian Personnel Data System.

Inefficiencies Resulting from Multiple Providers Charging Overhead

We found that defense agencies or other organizations that use more  than one human resources service provider are paying overhead costs  charged by each provider, which results in unnecessary expenses and  inefficiencies. DOD officials agreed that the fragmented system of service  delivery with multiple providers allows for possibly redundant overhead  charges, and that a more consolidated service delivery model could  reduce expenses associated with overhead. The DAFAs that charge  human resources customers by using a fee-for-service structure apply a  certain percentage of the total cost as a “general and administrative cost”  or “non-labor costs” to each customer. Agency officials stated that these  overhead costs pay for management salaries, other personnel-related  costs, and administrative costs, such as IT support and facilities costs.  These overhead costs are separate from the “direct labor” costs that  represent the personnel and other expenses required to perform the  service requested. For example, DFAS officials stated that about 7  percent of the fees charged by DFAS to human resources service  customers goes for “general and administrative costs” that are separate  from the direct labor expense required to perform services. Similarly,  about 20 percent of the costs charged to DLA’s human resources  customers covers indirect costs. As such, organizations pay overhead  and administrative expenses for several human resources providers,  thereby using financial resources that could be diverted to higher priority  needs. According to DOD officials, using one provider would likely reduce  inefficient expenses for human resources services paid by defense  organizations. However, according to those officials, more comprehensive  information and analysis is needed to determine the extent of inefficient  overhead costs that occur. Comprehensive information about the extent  of these and other possibly redundant or otherwise inefficient expenses  would help identify a human resources service delivery model that is  effective, economical, and efficient.

DOD’s Efforts to Reform Human Resources Have Some Limitations

In January 2018, the Deputy Secretary of Defense established a Human  Resources Management Reform Team to initiate key reform efforts within  the department.  This team is one of nine cross-functional teams  established by the Deputy Secretary of Defense to drive reform  throughout the department. The human resources management reform  team is led by a senior DOD human resources official and comprised of  representatives from DFAS; DLA; WHS, the Departments of the Army, Air  Force, and Navy; and the OCMO, among others. According to the  team’s charter, the team will work to modify human resources processes  and move toward enterprise service delivery of human resources  services, which is expected to reduce costs. Team members told us that  their initial focus is to carry out projects focusing on high-priority  challenges, such as pursuing the optimal IT systems for DOD human  resources services department-wide and identifying legislative and  regulatory changes needed to streamline processes and procedures.  After progress is made in these areas, the team plans to review service  delivery across the department and determine the most effective and  efficient system. Senior leaders from the human resources directorates of  DFAS, DLA, and WHS all stated that increased consolidation was  possible, if properly reviewed and implemented, especially for tasks such  as entering personnel data and other hiring-related tasks, which could be  conducted through a shared service model. This work may lead to  increased coordination among, or consolidation of one or more,  organizations.

DOD has not assessed or identified the most effective, economic, or  efficient provision of this business function. DOD officials stated that  assessing the provision of human resources in the department has not  previously been a priority of senior leadership. A memorandum from the  Deputy Secretary of Defense that established the human resources  management reform team required that the team move the department  toward a shared service delivery model. Specifically, this required a “time- phased way forward,” with outcomes and time frames for converting the  mission to an enterprisewide service delivery model. The new reform  team reflects a commitment from senior leaders within the department to  address longstanding problems in the human resources area. However,  we identified limitations in how the human resources management reform  team is planning and managing its work.

First, one goal of the reform team is to reduce the time-to-hire averages  across the department and determine a method to measure the quality of  hiring. DOD officials stated that performance measure improvements are  an important focus of their efforts and that they will share best practices  for time-to-hire and will require a standard measure of quality of hiring.  However, team plans we reviewed do not include steps for ensuring that  the DAFAs and military departments adopt standardized processes to  develop a consistent time-to-hire measure. Standardized quality  information would be valuable in determining which organizations may be  best placed to provide department-wide human resources service  delivery, and without this information DOD may not have assurance that  its hiring practices are effective and efficient. Standards for Internal  Control in the Federal Government emphasizes that managers should  identify the information required and obtain it from relevant and reliable  sources.

Second, the team has not set clear time frames for some of its work. As  we reported in July 2018, agency reform efforts should have  implementation plans with key milestones and deliverables to track  implementation progress, and clear outcome-oriented goals and  performance measures for the proposed reforms. While one of the  team’s projects is to determine the best strategy for providing IT solutions  for human resources, the team has not identified time frames for  completing the assessments needed to inform a new strategy, or  deliverables for finalizing and implementing the IT strategy. DOD officials  stated that they will develop project plans for completing assessments  needed and identify time-frames with the reform team focused on broader  department-wide IT. The human resources management reform team has  also not set clear time frames or deliverables for developing and moving  toward an optimal service delivery model for the department, which may  be a long-term effort that goes beyond the expected 2 year duration of the  reform team. Draft documents of the team we reviewed discussed  obtaining relevant data in 2018, reviewing the effects of policy changes in  2019, and pursuing undefined pilot projects in 2020. However, DOD  officials told us that the team plans to begin focusing on assessing  optimal service delivery models possibly in 2019. No specific time frames  for completion of this effort have been identified, and team members  stated that completion of IT efforts and regulatory reforms takes  precedence. Further, it is unclear how implementation of long-term efforts  will be managed.

Third, although one of the team’s charges is to determine the optimal  model for department-wide delivery of human resources services, team  members are not considering key pieces of information that would be  useful in doing so. For example, team members we contacted were not  aware that some DOD organizations were making potentially redundant  and inefficient payments to the DAFAs for human resources services as  overhead charges collected by multiple providers. As discussed  previously, Standards for Internal Control in the Federal Government  emphasizes the importance of quality performance information. When  we raised the issue of overhead charges with team members, they noted  that if such redundant payments are occurring, that would occur only  within the department’s “Fourth Estate,” and that they are initially focusing  on issues that affect the department as a whole. However, considering  the size and scope of the Fourth Estate, which DOD reported includes  more than $100 billion in funding annually, identifying comprehensive  information regarding the extent of inefficient overhead costs would be  important information for the reform team to consider in addressing  inefficiencies and pursuing enterprise-wide solutions to determine the  most effective, economical, and efficient model of service delivery.

With consistent human resources performance information, clear time  frames in place, and comprehensive information on overhead costs, the  team would be better positioned to thoroughly assess the department’s  system for human resources service delivery, and to develop and  implement long-term solutions for better coordination or consolidation of  this function. Further, DOD decision-makers would have assurance that  any changes they make, such as consolidation of certain organizations or  functions, would be based on sound and complete analysis.

DOD Has Not Consistently Monitored and Evaluated the Results of Its Efficiency Initiatives That Affect the DAFAs

DOD Has Implemented Several Previous Efficiency Initiatives Related to the DAFAs

DOD has undertaken several efficiency initiatives since 2011 that are  intended to improve the efficiency of headquarters organizations,  including the DAFAs, and to identify related cost savings. These initiatives  include the Secretary Gates Efficiencies, the More Disciplined Use of  Resources, the Core Business Process Review, the Business Process  and Systems Reviews, and a series of initiatives related to the savings  required by the National Defense Authorization Act for Fiscal Year 2016.  Table 3 describes each efficiency initiative we assessed as part of this  review and includes an estimated cost savings that the department  expected to achieve for each initiative.

DOD Has Taken Some Steps to Monitor its Efficiency Initiatives but Does Not Consistently Establish a Baseline and Evaluate Results

DOD has taken some steps to monitor and evaluate the results of its  efficiency initiatives, but it has not consistently done so. For some of the  efficiency initiatives, DOD ensured that there was ongoing monitoring and  worked to evaluate results. For example, as part of the former Secretary  Gates Efficiencies initiative, the military departments and the Special  Operations Command were required to prepare briefings on the status of  initiatives, and the offices of the then Deputy CMO and Comptroller  directed them to enter information regarding their efficiency initiatives into  a database designed to capture performance management data.  Officials stated that this information was designed to allow them to track  the progress of the initiatives, including milestones, risk assessments,  and the roles and responsibilities of those implementing the initiatives.

While implementing its More Disciplined Use of Resources initiative, DOD  took some ad hoc steps to evaluate the effect of some of the efforts, such  as establishing performance measures to assess their effect on achieving  desired outcomes. An official in the office of the Under Secretary of  Defense (Comptroller) later issued a memorandum that established a  requirement to report on the initiatives, including performance goals,  measures, and accomplishments. This memorandum was issued based  on a recommendation we made in a prior report that the military  departments and the Special Operations Command develop approaches  for evaluating the effect of their efficiency initiatives, such as establishing  performance measures or other indicators, collecting related performance  information, and using this information to measure progress in achieving  intended outcomes associated with their initiatives until implemented.

However, for other efficiency initiatives, DOD did not consistently ensure  that the agency established a baseline from which to measure progress,  use ongoing monitoring, or evaluate results. For example, in the case of  DOD’s Core Business Process Review initiative, DOD has not evaluated  whether the effort achieved any of its intended savings or led to expected  efficiencies. According to OCMO officials, DOD ultimately concluded that  potential savings opportunities identified as part of this review could not  entirely be achieved through these means. As a result, it is unclear what  savings, if any, the department achieved. DOD’s Business Process and  Systems Reviews ended with a briefing to the Deputy Secretary of  Defense and Vice Chairman of the Joint Chiefs of Staff that included a  summary of how the organizations would measure progress toward  outcomes. While the office of the then Deputy CMO and the principal staff  assistants were responsible for monitoring the effort up to the briefing,  officials from the Deputy CMO’s office stated that following the briefing  any monitoring that occurred would be the responsibility of the principal  staff assistants. However, not all principal staff assistants continued  monitoring. For example, although the CMO is the principal staff assistant  for two of the agencies reviewed—WHS and the Pentagon Force  Protection Agency—OCMO officials were unable to provide a list of  initiatives related to each agency and the status of those initiatives.

DOD also did not consistently ensure that the agency monitored and  evaluated efforts associated with the National Defense Authorization Act  for Fiscal Year 2016 requirement to save at least $10 billion from  headquarters, administrative, and support activities for fiscal years 2015  through 2019. One of the efforts that DOD took pursuant to this  requirement was for DAFAs to review their service contracts and present  recommendations for cuts to a Senior Review Panel. Under this initiative,  called the Service Requirement Review Boards, the panel either  approved the proposed cuts or directed alternative reductions, and  DCMO then monitored the organizations to ensure that the cuts were  taken. However, other efforts DOD took pursuant to the requirement  were not well monitored. For example, as part of the required savings,  DOD identified approximately $5.3 billion that it later determined to be  “not auditable” because the baseline for the reductions had not been  established. Congress mandated DOD to report on its efforts with its  budget submissions for fiscal years 2017 through 2019. DOD submitted  its first report on May 22, 2018, and it included the $5.3 billion in savings  that it had deemed “not auditable.”

According to Standards for Internal Control in the Federal Government,  agencies should monitor and evaluate the quality of performance over  time. As part of this effort, agencies should establish a baseline from  which to measure progress, use ongoing monitoring, and evaluate  results. Further, the GPRA Modernization Act of 2010 requires agencies  to regularly monitor their progress in achieving goals. Our previous work  has noted that having a process with written guidance for monitoring  achieved savings from efficiency initiatives can help organizations  evaluate actual performance against planned results. We have also  previously noted that without guidance that clearly outlines the  information to be provided for evaluation, DOD cannot be assured that  senior leaders are getting complete information needed to enhance their  visibility over the status of efficiency initiatives.

Although DOD has not consistently ensured that the agency established a  baseline from which to measure progress, use ongoing monitoring, or  evaluate results, OCMO officials stated that the department is working to  do so. The officials stated that previous efforts to track reform had been  more focused on assessing whether steps had been taken, rather than on  measuring progress and evaluating the results. In its most recent budget  request, DOD emphasized the importance of using goals and  performance measures to assess the benefit and value of reforms, along  with the importance of relevant, accurate, and timely data. In addition,  the chartering documents for DOD’s reform teams highlight the  importance of monitoring and evaluation, and senior DOD officials are  echoing this point. We recently reported that outcome-oriented goals and  performance measures and an implementation plan with key milestones  and deliverables are important when considering agency reform. While  the reform teams’ focus on monitoring and evaluation is a positive step,  officials stated that the teams are expected to exist for approximately 2  years, and monitoring and evaluating results of some reform efforts may  take a significant amount of time to appropriately assess the effects of the  reform. In addition, OCMO officials have not provided evidence of plans  to fully monitor efforts that began before the reform teams were created  and should still be in process. These efforts include savings related to the  requirement to save at least $10 billion from headquarters, administrative,  and support activities for fiscal years 2015 through 2019. Without  ensuring that efficiency initiatives are fully monitored and evaluated  against established baselines over time, DOD lacks a systematic basis for  evaluating whether its various initiatives have improved the efficiency or  effectiveness of its programs or activities.

While DOD has long been required to periodically review the DAFAs to  ensure, among other things, that the provision of their services and  supplies are economical, efficient, and effective, it has relied on existing  processes to fulfill this requirement, rather than with comprehensive and  routine assessment. Without internal guidance that results in quality  evaluations of the DAFAs, DOD decision makers remain limited in the  information they have about what efficiencies the DAFAs could pursue  and how they could cut costs. With establishment of the new CMO  position, the department has an opportunity to address long-standing  weaknesses in its business operations, including those performed by the  DAFAs. The department’s effort to establish reform teams that can drive  change, as well as a senior-level reform management group to direct and  oversee these efforts, is a positive step forward. Having comprehensive  and quality information would help the CMO and other senior leaders  make important decisions regarding the direction of reform efforts and to  assess whether efforts are achieving desired results. However, the  human resources management reform team has not collected  comprehensive information, such as performance information on hiring  time frames and overhead costs for providing human resources services  and time frames for these efforts, which would enable the department to  best address inefficiencies among the DAFAs that provide human  resources services. Moreover, DOD has not consistently ensured that the  agency established a baseline from which to measure progress, used  ongoing monitoring, or evaluated results. While OCMO officials are  focused on the reform teams, full monitoring is necessary for all efficiency  initiatives. Without routinely and comprehensively monitoring and  evaluating ongoing efficiency initiatives across all of its reform efforts,  DOD cannot have assurance as to whether its efforts have achieved  desired outcomes, are saving resources, and are improving effectiveness.

We are making five recommendations to DOD.

The Secretary of Defense should ensure that the CMO develops internal  guidance that defines the requirements and provides clear direction for  conducting and recording reviews of the DAFAs in response to10 U.S.C.  § 192(c). This guidance, which could be similar to the guidance that exists  for assessments of the combat support agencies, should reflect the key  elements of quality evaluations. (Recommendation 1)

The Secretary of Defense should ensure that the CMO, with input from  the human resources management team, requires that all DOD human  resources providers adopt consistent time-to-hire measures, as one  process for assessing performance. (Recommendation 2)

The Secretary of Defense should ensure that the CMO, through the  human resources management reform team, identifies time frames and  deliverables for identifying and adopting optimal IT solutions for human  resources and fully assessing, identifying, and implementing the most  effective and efficient means of human resources service delivery.  (Recommendation 3)

The Secretary of Defense should ensure that the CMO, through the  human resources management reform team, collects information on the  overhead costs charged by all DOD human resources service providers  to assist in determining the most effective, economical, and efficient  model of human resources service delivery within the department.  (Recommendation 4)

The Secretary of Defense should ensure that the CMO routinely and  comprehensively monitors and evaluates ongoing efficiency initiatives  within the department, including those related to the reform teams. This  monitoring should include establishing baselines from which to measure  progress, periodically reviewing progress made, and evaluating results.  (Recommendation 5)

We provided a draft of this report to DOD for review and comment. DOD  concurred with our five recommendations and noted planned actions to  address each recommendation. In its written comments, DOD stated that  the National Defense Authorization Act for Fiscal Year 2019 gives the  CMO additional specific authorities; substantially rewrites the  requirements of section 192(c); and addresses the findings and  recommendations in our report. Further, DOD stated the department is on  track to achieve substantial savings through its reform team efforts and  CMO emphasis on strong management practices, integrated processes,  and best value business investments. DOD’s comments are reprinted in  their entirety in appendix II. DOD also provided technical comments,  which we incorporated into the report as appropriate.

We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, and DOD’s Chief Management  Officer. In addition, the report is available at no charge on our website at  http://www.gao.gov.

If you or your staff have any questions about this report, please contact  me at (202) 512-2775 or FieldE1@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix III.

Appendix I: Objectives, Scope, and Methodology

This report evaluates the extent to which (1) the Department of Defense  (DOD) has assessed the continuing need for each defense agency and  DOD field activity (DAFA); (2) any overlap or fragmentation among the  DAFAs that provide human resources services has affected the delivery  of those services; and (3) DOD has monitored and evaluated the results  of its efficiency initiatives that affect the DAFAs.

For our first objective, we reviewed DOD’s biennial reports on the DAFAs  from 1987, the first year after enactment of the requirement, through  2012, the most recent year of DOD’s reporting. We also interviewed  officials from the Chief Management Officer’s (CMO) office regarding  DOD’s current processes for reviewing and recording its assessment of  the DAFAs. Further, we reviewed the most recent DOD reports on  combat support agencies, as there is a comparable statutory requirement  for DOD to review this subset of the DAFAs, and the corresponding Joint  Staff Instruction that guides those reports. We also spoke to relevant  Joint Staff officials regarding the processes used to develop those  reports. We compared DOD’s biennial reports and combat support  agency reports against key elements of quality evaluations, which we  identified in prior work and compiled as part of this review, as specified  below.

To analyze the quality of biennial reports and combat support agency  reports, we identified and selected key elements of quality evaluations  and compared reports against these key elements. We took four  major steps to identify and select key elements. First, we identified  criteria that assess the quality of agency evaluations and resulting  reports based on a review of relevant GAO reports and discussions  with a methodologist. Second, in collaboration with a methodologist,  we assessed the appropriateness of identified criteria for this analysis,  and we concluded that no single assessed criterion met the needs of  this review. Third, we identified relevant areas of overlap across the  criteria, and we excluded topics not relevant for our purposes, such as  statistical modeling for technical evaluations. Fourth, we selected a  set of elements encompassing relevant areas of overlap, and we  discussed and revised these elements in collaboration with a  methodologist.

For the analysis of reports against key elements, we gathered and  recorded evidence related to each question from a variety of DOD  sources including DOD reports, statements from DOD officials  representing the research team, and relevant DOD guidance related  to the reports. One analyst assessed the extent to which the reports  reflected the key elements, and a second analyst reviewed their  assessment. Where there was disagreement in the assessment,  analysts discussed their analysis and reached a consensus.

Last, for the first objective, we assessed DOD’s response to the statutory  requirement that it periodically review the continuing need for its DAFAs,  and whether the provision of services and supplies by the DAFAs, rather  than by the military departments, is more effective, economical, and  efficient. We interviewed Office of the Chief Management Officer  (OCMO) officials about the existing departmental processes that they  stated addressed the statute, and we reviewed associated documentation  provided by the OCMO officials, such as budget materials.

For our second objective, we reviewed the business functions of selected  DAFAs to identify possible inefficient duplication, overlap, or  fragmentation in the services provided by those selected DAFAs to other  organizations within the department. For our selection from the 27 DAFAs  within DOD, we excluded DAFAs that have been previously identified as  focus areas from our body of work on duplication, overlap, and  fragmentation. We selected 7 DAFAs that are larger in size and budget  than others and that focus on the traditional business areas of DOD, such  as logistics or financial management. From those 7 DAFAs we reviewed  the chartering directives for each of those agencies and DOD’s most  recent biennial report on DAFAs to identify terms and phrases that  appeared duplicative or repetitive in nature. Using that strategy, we  selected human resources as the business line of effort for the focus of  our review.

We reviewed the provision of human resources services by DAFAs to  identify any potential inefficient duplication, overlap, or fragmentation. For  example, we reviewed the client bases serviced by each DAFA to identify  inefficient duplication or overlap and reviewed the performance measures  used by each DAFA to examine for fragmentation in approach to  performance measurement. Pursuant to 10 U.S.C. § 191 , whenever the  Secretary of Defense determines that it would be more effective,  economical, or efficient to provide for the performance of a supply or  service common to multiple military departments by a single agency, then  the Secretary can create a DAFA to provide that supply or service.  Further, at the time of our review, section 192(c) of title 10, United States  Code, required, among other things, that the Secretary of Defense  periodically ensure that the provision of services and supplies by the  DAFAs, rather than by the military departments, is more effective,  economical, and efficient. As such, we assessed DOD’s provision of  human resources by DAFAs against GAO’s Duplication Evaluation Guide  to assess DOD’s provision of human resources. We interviewed officials  from DOD’s CMO office, the 3 DAFAs that provide human resources  services for the department (DFAS, DLA, and WHS), and the lead and  members of DOD’s human resources management reform team, and we  reviewed documents such as DOD’s human capital operating plan and  documents provided by the DAFAs that detailed their human resources  business functions.

For our third objective, we selected efficiency initiatives that affect  DAFAs, and that we have previously reported on since 2011. We  reviewed a selection of reform initiatives because DOD does not have a  comprehensive listing of the reform initiatives it has undertaken. For the  purposes of this review, we define “efficiency” as maintaining federal  government services or outcomes using fewer resources (such as time  and money) or improving or increasing the quality or quantity of services  or outcomes while maintaining (or reducing) resources. We obtained  documentation and spoke with officials from CMO and the DAFAs  selected for the second objective of this report regarding DOD’s  monitoring, assessing, and tracking of the selected reform initiatives. We  obtained information and documentation from CMO officials regarding  DOD’s ongoing reform efforts, including plans for monitoring and  assessing these efforts. We compared this information and  documentation against Standards for Internal Control in the Federal  Government, which states that management should establish a baseline  from which to measure progress, use ongoing monitoring, and evaluate  results.

Appendix II: Comments from the Department of Defense

Appendix III: GAO Contact and Staff Acknowledgments

In addition to the contact named above, Margaret Best (Assistant  Director), Miranda Cohen, Alexandra Gonzalez, Amanda Manning,  Richard Powelson, Suzanne Perkins, Andrew Stavisky, Amie Lesser,  Sarah Veale, and Cheryl Weissman made key contributions to this report.