Defense Business Operations: DOD Should Take Steps to Fully Institutionalize the Chief Management Officer Position

DOD spends billions of dollars each year to maintain key enterprise business operations intended to support the warfighter, including systems and processes related to the management of contracts, finances, the supply chain, and support infrastructure. The 2018 National Defense Strategy identified reform of DOD's business practices as one of DOD's three strategic goals. GAO has previously reported that weaknesses in these business operations have resulted in inefficiencies and billions of dollars wasted. GAO has also identified the need for a CMO with significant authority and experience to focus concerted attention on DOD's long-term business transformation efforts. Congress initially established such a position in the National Defense Authorization Act for Fiscal Year 2017.

This report evaluates the extent to which DOD has implemented its CMO position and issued guidance to communicate within the department the authorities and responsibilities of the position. GAO analyzed the statutory authorities and responsibilities assigned to the CMO position and evaluated DOD's actions to implement them.

The Department of Defense (DOD) has taken steps to implement its Chief Management Officer (CMO) position which has been given the responsibility for managing DOD's business operations; however, unresolved issues remain for DOD to fully institutionalize the CMO's authorities and responsibilities. DOD has restructured the Office of the CMO (OCMO) to more closely align with the CMO's statutory authorities and responsibilities. Further, the OCMO is working to strengthen its data capabilities and has hired a Chief Data Officer and formed a Data Management and Analytics Steering Committee. Additionally, OCMO officials told us they are establishing cost baselines for each of DOD's major business functions.

However, DOD has not fully addressed three key issues related to the CMO's authorities and responsibilities:

The CMO's authority to direct the military departments on business reform issues . The law gave the CMO authority to direct the secretaries of the military departments on matters over which the CMO has responsibility. However, DOD has not determined how the CMO will exercise this authority, particularly when there is disagreement between the departments and the CMO.

The CMO's oversight responsibilities of the Defense Agencies and DOD Field Activities (DAFAs) . The CMO is responsible for exercising authority, direction, and control over the designated DAFAs that provide shared business services—those business functions, such as supply chain and logistics and human resources operations, that are provided across more than one DOD organization. However, DOD has not determined how the CMO will exercise this authority, such as which DAFAs will submit their proposed budgets for CMO review.

Transfer of responsibilities from the Chief Information Officer to the CMO. Under the law, the CMO will exercise responsibilities relating to business systems and management that previously belonged to the Chief Information Officer. However, DOD has not determined which, if any, responsibilities will transition from the Chief Information Officer to the CMO or assessed the impact of such a transition on associated resources.

In part because these issues remain unresolved, DOD agreed that it does not have department-wide guidance that fully and clearly articulates how the CMO's authorities and responsibilities should be operationalized. Making determinations on the three unresolved issues and issuing guidance would help ensure a shared understanding throughout the department of the CMO's role in leading DOD's enterprise-wide business reform efforts.

GAO is making four recommendations, including that DOD should address each of the three unresolved issues that impede its progress in institutionalizing statutory authorities and responsibilities, and issue guidance, such as a chartering directive that addresses how the CMO's authorities should be operationalized. DOD concurred with GAO's recommendations.

The Department of Defense (DOD) faces several key challenges that  significantly affect its ability to accomplish its mission, including achieving  greater efficiencies in defense business operations. DOD spends billions  of dollars each year to maintain key business operations intended to  support the warfighter, including systems and processes related to the  management of contracts, finances, the supply chain, and support  infrastructure. However, we have previously reported that weaknesses in  these business operations result in billions of dollars being wasted,  reduced efficiencies, ineffective performance, inadequate accountability,  and lack of transparency. The 2018 National Defense Strategy also  highlighted this issue, identifying reform of the department’s business  practices for greater performance and affordability as one of DOD’s three  strategic goals.

Given the complexity and magnitude of the challenges facing DOD in  improving its business operations, in 2005 we identified the need for a  Chief Management Officer (CMO) with significant authority and  experience to sustain progress on these issues. We recommended that  Congress consider enacting legislation to establish a separate, full-time  CMO position at DOD with significant authority and experience and a  sufficient term of office to provide focused and sustained leadership over  business transformation efforts. DOD first took steps to establish a CMO  role in May 2007, when it designated the Deputy Secretary of Defense as  the department’s CMO. Subsequently, Congress included a provision in  the National Defense Authorization Act (NDAA) for Fiscal Year 2008 to  codify the Deputy Secretary of Defense as the DOD CMO, and to  establish a new position known as the Deputy Chief Management Officer  (DCMO) to assist the Deputy Secretary. In 2007, we highlighted the  importance of a full-time CMO position separate and distinct from that of  the Deputy Secretary to help elevate, integrate, and institutionalize  responsibility for key management functions and focus concerted  attention on long-term business transformation efforts.

In 2016, Congress included a provision in the NDAA for Fiscal Year 2017  to create a CMO position effective February 1, 2018 that would be distinct  from the Deputy Secretary of Defense and provided a number of key  responsibilities. In December 2017, Congress repealed and replaced this  provision in the NDAA for Fiscal Year 2018 and later added additional  responsibilities and functions in the John S. McCain NDAA for Fiscal Year  2019.  The CMO’s current responsibilities are codified in section 132a of  title 10, United States Code. Section 132a provides that the CMO is  responsible for, among other things, managing DOD’s enterprise  business operations and shared services and exercising authority,  direction, and control over the designated defense agencies and DOD  field activities (DAFA) that provide shared business services for the  department. Furthermore, in the NDAA for Fiscal Year 2018, effective on  Jan. 1, 2019, the CMO exercises any responsibilities, duties and powers  relating to business systems or management that are exercisable by a  Chief Information Officer (CIO) for the department. In an August 2017  report to Congress, DOD announced its plans to establish a CMO  position separate from the Deputy Secretary of Defense in order to  improve the quality and productivity of the business operations of the  department, thereby reducing the costs of those operations. The report  stated that DOD would use the establishment of the CMO organization as  an opportunity to renew its focus on business operations reform and to  shift its business operations to enterprise services in order to reduce the cost of business operations. On February 1, 2018, the Secretary of  Defense announced the establishment of a CMO position with  responsibility for directing all enterprise business operations of the  department and other duties as set forth in section 132a of title 10, United  States Code. With the resignation of DOD’s first CMO in November 2018,  the DCMO assumed the role of the Acting CMO in December 2018.

We performed our work under the authority of the Comptroller General to  conduct evaluations to assist Congress with its oversight responsibilities.  In this report, we evaluate the extent to which DOD has implemented its  CMO position and issued guidance communicating within the department  the authorities and responsibilities of the position.

To evaluate the extent to which DOD has implemented its CMO position  and issued guidance, we reviewed relevant laws, such as the NDAAs for  Fiscal Years 2017 through 2019, to understand the authorities and  responsibilities that Congress assigned to this position. We also reviewed  DOD’s August 2017 report to Congress and its April 2018 National  Defense Business Operations Plan, as well as memorandums issued by  the Secretary of Defense that outline the CMO’s authorities and  responsibilities.

We interviewed DOD’s CMO, who served from February to November  2018, as well as the current Acting CMO. Additionally, we interviewed the  individuals who were chiefs of the five directorates within the Office of the  CMO (OCMO) as of July 2018, in order to understand the responsibilities  of these directorates. To understand how the CMO collaborates with  other DOD entities to lead business operation reform and how the  responsibilities of the CMO and the CIO may change, we met with the  CMO, officials from the Office of the CIO, and an official from DOD’s Cost  Assessment and Program Evaluation (CAPE) Office. To learn how the  CMO is interacting with and influencing the military departments’ business  operations, we met with officials from the Army, Air Force, and Navy CMO  and CIO offices. More details on our objectives, scope, and methodology  can be found in appendix I.

DOD first took steps to establish a CMO role in May 2007, when it  designated the Deputy Secretary of Defense as the department’s CMO.  Subsequently, Congress included a provision in the NDAA for Fiscal Year  2008 to codify the Deputy Secretary of Defense as the DOD CMO,  establish a new position known as the Deputy Chief Management Officer  (DCMO) to assist the Deputy Secretary, and name the Under Secretaries  of the military departments as CMOs of their respective organizations.  The military departments also established DCMO positions to assist the  CMOs with overseeing their business operations. In addition, the NDAA  for Fiscal Year 2009 required the secretary of each military department to  establish an office of business transformation and develop business  transformation plans, with measurable performance goals and objectives,  to achieve an integrated management system for the business operations  of each military department. Further, DOD’s guidance states that the  DOD DCMO should coordinate with the military department CMOs to  identify and exchange information necessary to facilitate the execution of  the Deputy Secretary of Defense’s responsibilities in his role as the DOD  CMO.

In October 2008, DOD issued Department of Defense Directive 5105.82  to assign the authorities and responsibilities of the DCMO. Among other  duties, the DCMO was responsible for recommending methodologies and  measurement criteria to better synchronize, integrate, and coordinate the  business operations of the department and advising the Secretary of  Defense on performance goals and measures and assessing progress  against those goals. For a full list of the DCMO authorities and  responsibilities identified in DOD Directive 5105.82, see appendix II.

CMO Statutory Authorities and Responsibilities

In December 2016, Congress initially established the standalone CMO  position to be effective on February 1, 2018 in section 901(c) of the NDAA  for Fiscal Year 2017. In December 2017, Congress repealed and  replaced this provision in the NDAA for Fiscal Year 2018 and later added  additional responsibilities and functions in the John S. McCain NDAA for  Fiscal Year 2019. Table 1 summarizes key CMO statutory authorities  and responsibilities, and appendix II provides a more detailed comparison  of these authorities and responsibilities.

Key Strategies for Implementing CMO Positions

In November 2007, we reported on key strategies for implementing CMO  positions. We developed these strategies based on our work, in which  we (1) gathered information on the experiences and views of officials at  four organizations that rely on chief management officials and (2)  convened a forum to gather insights from individuals with experience and  expertise in business transformation, federal and private sector  management, and change management. The forum brought together  former and current government executives and officials from private  business and nonprofit organizations to discuss when and how a CMO or  similar position might effectively provide the continuing, focused attention  essential for integrating key management functions and undertaking  multiyear organizational transformations.

Our work identified the following six key strategies:

Define the specific roles and responsibilities of the CMO position.

Ensure that the CMO has a high level of authority and clearly  delineated reporting relationships.

Foster good executive-level working relationships for maximum  effectiveness.

Establish integration and transformation structures and processes in  addition to the CMO position.

Promote individual accountability and performance through specific  job qualifications and effective performance management.

Provide for continuity of leadership in the CMO position.

DOD Has Taken Some Steps to Implement the CMO Position, but Key Issues Related to Authorities and Responsibilities Remain Unresolved DOD Has Begun to Implement Its CMO Position and Restructure the OCMO, with a Focus on Data Responsibilities

In February 2018, DOD formally established the position of the CMO and  an office in support of the CMO (OCMO). In establishing the office, the  Secretary of Defense stated that all resources and personnel (military,  civilian, and contractor) assigned within the existing DCMO office were to  transfer to the OCMO. Generally, the department has been focused on  updating organizational structures and strengthening the OCMO’s data  capabilities, as described below.

DOD Has Not Resolved Three Key Issues Related to the CMO’s Authorities and Responsibilities

Despite its efforts to establish and restructure the OCMO, DOD has not  fully addressed three key issues related to the CMO’s statutory authorities  and responsibilities, including: (1) how the CMO will exercise the authority  to direct the military departments; (2) how the CMO will exercise oversight  of the DAFAs; and (3) which responsibilities, if any, will transfer from the  CIO to the CMO.

Unresolved Issue #1: The CMO’s Authority to Direct the Military Departments on Business Reform Issues

The Secretary of Defense has charged the CMO with leading DOD’s  enterprise business operations and with unifying business management  efforts across the department and other responsibilities as set forth in  section 132a of title 10, United States Code. Moreover, the NDAA for  Fiscal Year 2019 directed the Secretary of Defense, acting through the  CMO, to reform DOD’s enterprise business operations across all  organizations and elements of the department with respect to any activity  relating to civilian resources management, logistics management,  services contracting, or real estate management. Fulfilling these  responsibilities depends, in part, on the CMO’s visibility into the business  operations of all components of the department, including the military  departments, as well as the ability to identify and execute DOD-wide  business reforms, including those that may affect the military  departments.

Congress addressed the issue of the CMO’s relationship to the military  departments in section 132a, which authorizes the CMO, subject to the  authority, direction, and control of the Secretary of Defense and Deputy  Secretary of Defense, to direct the secretaries of the military departments  and the heads of all other elements of DOD on matters for which the  CMO has responsibility under the statute. DOD leadership has provided  some guidance regarding the CMO’s responsibilities for efforts that are  department-wide and therefore involve the military departments. For  example:  In a May 2017 memorandum, the Deputy Secretary of Defense  directed all DOD components to conduct a thorough review of  business operations throughout the department and to propose  initiatives that drive increased effectiveness in pursuit of greater  efficiency. The memorandum identified the DCMO as the lead for this  effort and tasked the DCMO with integrating all initiatives. All  responsibilities and authorities assigned to the DCMO were  transferred to the CMO on February 1, 2018.

More recently, in May 2018, DOD issued its FY 2018-FY 2020  National Defense Business Operations Plan (Plan), which states that  the CMO is personally responsible for overseeing implementation of  business reforms. The Plan further establishes, and gives the CMO  responsibility for carrying out, a strategic objective to improve and  strengthen business operations through a move to DOD-enterprise or  shared services and reduce administrative and regulatory burden.

However, DOD leadership has not determined how the CMO will exercise  this authority in instances where the military departments have concerns  or disagree with decisions that the CMO makes. In our discussions with  the Army, Navy, and Air Force’s CMO offices, officials from each military  department explained that they frequently met with the CMO and were  involved in discussing business operation initiatives with potential for  implementation across multiple military departments. According to these  officials, these discussions were collaborative and the CMO did not have  to exercise his authority to direct the services. However, we found two  instances in which the lack of a determination as to how the CMO is to  direct the business-related activities of the military departments led to  questions about the respective roles and authorities of the CMO and the  military departments as they relate to business reform. In one case,  officials from the military departments questioned the CMO’s authority to  make binding decisions; in the other, the military departments sought to  pursue reform activities without CMO involvement and oversight, even  though the CMO has responsibility for leading DOD’s enterprise business  reform efforts.

First, officials told us that in a July 2018 meeting of the Reform  Management Group (RMG) the CMO approved a decision to consolidate  DOD’s contract writing systems into a single system. According to  OCMO officials, the effort to move to a single contract writing system  would increase data visibility, lessen or eliminate redundant contracting  needs, provide for greater management insight, and increase the buying  power of the department. However, officials told us the military  departments, which had voiced concerns about moving to one  consolidated system in a previous RMG meeting, expressed reservations.  Specifically, a DOD official who participated in the RMG meetings told us  the military departments cited a concern about loss of individual  authorities and requirements, among other issues. Several DOD officials  we spoke with described the RMG meeting as the first time the question  of the CMO’s authority to make decisions for enterprise-wide business  reform and to direct the military departments had been raised at an RMG  meeting. According to officials who were present at the meeting,  participants discussed whether the RMG is a voting body and what  authority the CMO has to make unilateral decisions for the RMG. When  we spoke with officials about this matter in January 2019, they said this  question was still unresolved.

Second, the Secretaries of the Army, Navy, and Air Force, in a December  10, 2018 memorandum to the Secretary of Defense, requested the  Secretary direct the military departments to jointly review organizations,  activities, processes, and procedures that might be reformed or  restructured to enhance lethality and readiness or reduce cost. While the  departments asked for support the Secretary deemed appropriate from  the Joint Staff, the Office of the Secretary of Defense, and others, it did  not request support or involvement from the CMO. Further, the  memorandum stated that the military department secretaries envision a  process where they would make recommendations directly to the  Secretary. However, the memorandum made no mention of CMO  involvement in the review, notwithstanding Congressional, Secretary of  Defense, and Deputy Secretary of Defense direction that calls for the  CMO to oversee DOD’s business reform efforts.

Without a determination by the Secretary or Deputy Secretary of Defense  about how the CMO is to direct the business-related activities of the  military departments, the CMO’s ability to lead DOD’s reform of its  enterprise business operations and to direct the military departments may  be limited, potentially leading to fragmented business reform efforts.

Unresolved Issue #2: The CMO’s Oversight Responsibilities for the Defense Agencies and DOD Field Activities (DAFA)

DOD’s 19 defense agencies and eight DOD field activities are intended to  perform many of DOD’s business operations, including consolidated  supply and service functions such as human resources services, on a  department-wide basis. We have previously 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, in  September 2018, we reported that there is fragmentation and overlap  within the DAFAs that provide human resources services to other defense  agencies or organizations within DOD. Our September 2018 report on  the DAFAs also found that DOD does not comprehensively or routinely  assess the continuing need for its DAFAs.

GAO-18-592. DOD was statutorily required to periodically 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 (See 10 U.S.C. § 192 (c)). Since 2012, DOD has  relied on existing processes, such as its annual budget process, to fulfill this review  requirement. 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. that provide shared business services for the department, as designated  by the Secretary or Deputy Secretary of Defense. In January 2018, the  Deputy Secretary reported to Congress that the Secretary of Defense  formally identified the Pentagon Force Protection Agency and  Washington Headquarters Services (WHS) as the DAFAs that provide  shared business services, and directed that they would fall under the  authority, direction, and control of the CMO. However, both of these  organizations had already been identified as providing shared business  services and aligned under the previous DCMO. In addition, the Deputy  Secretary’s January 2018 report to Congress did not explain why these  two DAFAs, but not others, were designated as providing shared  business services.

In the January 2018 report to Congress, the Deputy Secretary of Defense  also stated that, under his direction, the DCMO and Director of CAPE  were leading defense reform work that would result in recommendations  on, among other things, any required organizational changes. According  to DOD’s report, such changes would include the designation of, and  oversight arrangements for, other DAFAs providing shared business  services that require CMO oversight. The recommendations were  expected in late summer 2018. However, when we asked OCMO officials  for a status update in November 2018, they acknowledged that they had  not yet conducted the review.

In November 2018, OCMO officials told us they had recently begun a  review of the DAFAs but had not designated any additional DAFAs as  providing shared business services. OCMO officials explained that the  DAFAs were prioritized for review, with WHS being selected to be the first  reviewed. The review will assess what role WHS performs and how  efficiently it is performing that role, and will compare WHS performance to  commercial benchmarks, according to OCMO officials. As of January  2019, officials said they expected to complete the review of WHS on  February 16, 2019. According to officials, the next DAFAs to be reviewed  will be DLA, the Defense Finance and Accounting Service, and the  Defense Information Systems Agency. In addition, OCMO officials said  that they plan to conduct a review of business functions performed in  multiple DAFAs to identify opportunities to consolidate shared services for  greater efficiency. For example, because WHS performs some human  resource functions, as do certain other DAFAs, the OCMO is assessing  how human resources management can be improved across the  department. OCMO officials indicated they expect additional DAFAs to be  identified as shared business services as a result of this review.  Additionally, officials said they expect that the review will be completed in  January 2020, but have not determined when or how the Secretary of  Defense will designate additional DAFAs as providing shared business  services. They have also not determined what those decisions would  mean for the OCMO’s management of its responsibility to provide direct  authority, control, and direction over those DAFAs.

In section 921 of the John S. McCain NDAA for Fiscal Year 2019,  Congress also expanded and codified the CMO’s authority over the  DAFAs by requiring the Secretary of Defense, acting through the Under  Secretary of Defense, Comptroller, to direct the head of each DAFA  specified by the Secretary for the purpose of section 921, to transmit its  proposed budget for enterprise business operations for a fiscal year to the  CMO for review, beginning in fiscal year 2020. Section 921 further  provides that the CMO shall submit a report to the Secretary containing  the CMO’s comments and certification of whether each proposed budget  achieves a required level of efficiency and effectiveness for enterprise  business operations, consistent with guidance for budget review  established by the CMO. Under section 921, the Secretary of Defense  has discretion to determine which DAFAs’ proposed budgets are subject  to CMO review. In November 2018, OCMO officials told us that the  Secretary of Defense had not yet designated any DAFAs as required to  submit their budgets for review. However, they stated that the OCMO is  working with the DOD Comptroller to determine how the DAFA budget  review will be conducted. They also said that they have hired consultants  under an existing blanket purchase agreement contract to assist with  developing a methodology for this review. OCMO officials told us they  believed they would be ready to conduct the required review by fiscal  year 2020, as required by the statute. However, it is unclear whether this  review will result in a determination of which DAFAs are required to  submit their proposed budgets for review.

Until the Secretary of Defense makes a determination regarding the  CMO’s relationship to the DAFAs, including whether additional DAFAs  should be identified as providing shared business services and which  DAFAs will be required to submit their proposed budgets for CMO review,  the CMO’s ability to effectively oversee and streamline the DAFAs’  business operations may be limited.

Unresolved Issue #3: The Transfer of Responsibilities from the Chief Information Officer to the CMO

As described in table 1 of this report, section 910 of the NDAA for Fiscal  Year 2018 provided that, effective January 1, 2019, the CMO would  assume certain responsibilities for business systems and management  that were formerly performed by the CIO. Section 903 of the John S.  McCain NDAA for Fiscal Year 2019 clarified this provision by amending  the statute (10 U.S.C. § 142) which established and provides  responsibilities for the DOD CIO. However, in July 2018, DOD officials  told us no formal action had been taken to determine which, if any,  responsibilities would transition or to assess the resource impact this  would have on both offices because they had concerns about the  statutory requirement and how it would affect IT management at the  department. For example, CMO officials expressed the belief that all IT  roles and responsibilities should be consolidated under one position. We  have previously found that having department-level CIO responsibilities  performed by multiple officials could make the integration of various  information and technology management areas, as envisioned by law,  more difficult to achieve.

The CMO told us in July 2018 that he had begun engaging informally with  Congress to discuss the department’s concerns about the transition of  certain responsibilities from the CIO to the CMO, and that he would  engage further once the newly confirmed CIO felt prepared to join those  discussions. However, in November 2018, the Acting CMO told us that  the OCMO was still exploring all of the authorities that Congress had  provided, and, as such, felt that further engagement with Congress was  premature at this point. The Acting CMO added that she and the CIO had  worked out an informal agreement regarding which areas they would  each manage, but did not identify specific tasks that would transfer to the  CMO or provide any details of this agreement. At the same time, OCMO  officials acknowledged in November 2018 that the OCMO had not  conducted an analysis to determine which responsibilities should formally  transfer or what resource ramifications, if any, this transfer would have on  both offices. Without an analysis to help DOD determine which duties  should transfer from the CIO to the CMO, including identifying any  associated resource impacts, DOD will remain reliant on this informal  agreement. Such reliance could cause confusion within the department  about who is responsible for key IT functions. Moreover, section 3506 of  title 44, United States Code states that in similar circumstances, where a  CIO is designated for DOD and for each military department, the  respective duties of the CIOs shall be clearly delineated.

DOD Lacks Guidance That Institutionalizes All of the CMO’s Authorities and Responsibilities

In part because the issues identified above have not been resolved, DOD  agreed that it does not have department-wide guidance, such as a  chartering directive, that fully and clearly institutionalizes the CMO  position by articulating how all of the CMO’s authorities and  responsibilities are to be operationalized. The department has issued  several documents that refer to some of the CMO’s authorities and  responsibilities, but these documents were issued as the CMO’s role  under the statute was evolving, and none of them, either individually or  collectively, encompass all of the CMO’s current authorities and  responsibilities. For example:

DOD Directive 5105.82 (Oct. 17, 2008) established the  responsibilities and authorities of the DCMO. These responsibilities  included, among others, advising the Secretary of Defense on  performance goals and measures and assessing progress against  those goals; and ensuring that strategic plans, performance goals,  and measures were aligned with, and assured accountability to, DOD  strategic goals. However, this document is now outdated—for  example, it assigns the DCMO responsibilities related to the Defense  Business Transformation Agency, which an OCMO official agreed no  longer exists. Moreover, the directive does not reflect the additional  authorities and responsibilities for the CMO position that are  delineated in section 132a of title 10, United States Code, as  amended. Table 3 at appendix II summarizes all authorities and  responsibilities included in this directive.

Secretary of Defense Memorandum (Feb. 1, 2018) established the  CMO position and outlined its authorities and responsibilities  consistent with section 132a of title 10, United States Code. The  authorities and responsibilities outlined in this memorandum align  closely with those specified for the CMO in the statute, but the  memorandum does not explain how these authorities and  responsibilities are to be operationalized. For example, this  memorandum does not address how the CMO will interact with other  DOD organizations, such as the military departments, as DOD  traditionally has done through its chartering directives. Table 4 at  appendix II summarizes authorities and responsibilities included in  Secretary of Defense memorandums.

Secretary of Defense Memorandum (July 12, 2018) addressed the  CMO’s role in supporting the Deputy Secretary of Defense on  enterprise management and performance accountability. According to  this memorandum, the CMO supports the Chief Operating Officer to  ensure all DOD leaders are unified and aligned across all assigned  responsibilities and functions, through strong management practices,  integrated processes, and best value business investments, and to  support the Deputy Secretary of Defense in his capacity as the  department’s Chief Operating Officer. However, the CMO’s  responsibilities in supporting the Deputy Secretary of Defense as the  Chief Operating Officer outlined in this memorandum are not specified  by any other relevant guidance documents.

CMO Action Memorandum (July 27, 2018) responded to the  Secretary’s February 1, 2018 memorandum and restated several of  the CMO’s authorities and responsibilities, consistent with 132a of title  10, United States Code, and provided information on the plans to  restructure the OCMO and to establish the CMO Action Group.

The Secretary of Defense’s July 12, 2018 Memorandum directed the  Deputy Secretary of Defense to provide amplifying guidance on CMO  responsibilities and authorities emanating from statute as well as  delegating additional discretionary authorities or responsibilities to the  CMO. Issuance of this amplifying guidance would be consistent with one  of the key strategies we identified for implementation of a CMO position— clearly defining roles and responsibilities of the position and communicating them throughout the organization. In November 2018,  however, officials told us that they expected the CMO vacancy to delay  progress on codifying any decisions on the CMO’s statutory and  discretionary authorities in a chartering directive. Additionally, in  November 2018, a senior OCMO official stated that the office needed to  complete its reorganization prior to the department issuing updated  guidance.

Until the Deputy Secretary of Defense resolves the issues previously  discussed and issues guidance (such as a chartering directive) to codify  the CMO’s authorities and responsibilities and specify how those are to  be operationalized, questions regarding the extent of the CMO’s authority  and responsibility are likely to persist, preventing a shared understanding  across the department of the CMO’s role. Further, the lack of guidance  could affect the ability of the department to make progress in conducting  necessary business reforms—one of three key priorities identified in the  2018 National Defense Strategy.

DOD has made progress in implementing some of the authorities and  responsibilities Congress has provided the CMO. However, DOD has not  resolved several key issues that limit its ability to implement all statutory  authorities and responsibilities. Specifically, DOD has yet to resolve key  issues, such as how the CMO will exercise authority to direct the military  departments and exercise direction and control over DAFAs that provide  shared business services. Additionally, without analyzing the authorities  and responsibilities that will transfer from the CIO to the CMO and the  resource impact, if any, those new responsibilities will have on the  OCMO, DOD risks creating confusion within the department about which  official is responsible for key information technology functions. While DOD  has issued several documents delineating some of the CMO’s authorities  and responsibilities, the department does not currently have formal and  current guidance, such as a DOD chartering directive, that  institutionalizes all the CMO’s authorities and responsibilities. Considering  the evolution of the CMO’s authorities and responsibilities since the  position was created, guidance that fully encompasses all CMO  authorities and responsibilities and explains how they are to be  operationalized could help to institutionalize and sustain the position  beyond the tenure of the current acting CMO.

We are making the following four recommendations to the Secretary of  Defense:  The Secretary of Defense should ensure that the Deputy Secretary of  Defense makes a determination as to how the CMO is to direct the  business-related activities of the military departments. (Recommendation  1)

The Secretary of Defense should ensure that the Deputy Secretary of  Defense makes a determination regarding the CMO’s relationship with  the DAFAs, including whether additional DAFAs should be identified as  providing shared business services and which DAFAs will be required to  submit their proposed budgets for enterprise business operations to the  CMO for review. (Recommendation 2)

The Secretary of Defense should ensure that the CMO and CIO conduct  an analysis to determine which responsibilities should transfer from the  CIO to the CMO, including identifying any associated resource impacts,  and share the results of that analysis with the Congress.  (Recommendation 3)

The Secretary of Defense should ensure that the Deputy Secretary of  Defense, on the basis of the determinations regarding the CMO’s  statutory and discretionary authorities, codify those authorities and how  they are to be operationalized in formal department-wide guidance.  (Recommendation 4)

We provided a draft of this report to DOD for review and comment. In its  written comments, which are reproduced in Appendix III, DOD concurred  with our recommendations and described ongoing and planned actions to  address them.

We are sending copies of this report to the Acting Secretary and Acting  Deputy Secretary of Defense, the Acting DOD Chief Management Officer,  the DOD Chief Information Officer, the Director, Cost Assessment and  Program Evaluation, and appropriate congressional committees. In  addition, the report is available at no charge on the GAO 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. Key contributors to this report are listed in appendix  IV.

To examine the extent to which DOD has implemented the authorities  and responsibilities of its Chief Management Officer (CMO) position and  issued guidance communicating within the department the authorities and  responsibilities of the position, we reviewed related laws and key  documents such as memorandums issued by the Secretary of Defense  that outline some of the CMO’s authorities and responsibilities. To  understand the authorities and responsibilities that Congress and DOD  have assigned to this position, we reviewed section 901 of the National  Defense Authorization Act (NDAA) for Fiscal Year 2017, which initially  created the CMO position effective February 1, 2018; section 910 of the  NDAA for Fiscal Year 2018, which codified and expanded the CMO’s  authorities and responsibilities; and section 921 of the John S. McCain  NDAA for Fiscal Year 2019, which further expanded the CMO’s  authorities and responsibilities. We reviewed DOD’s August 2017 Report  to Congress and its April 2018 National Defense Business Operations  Plan. We also reviewed our November 2007 report on key strategies for  implementing CMO positions.

To understand ongoing actions to implement the authorities and  responsibilities given to the CMO position, we interviewed DOD’s former  CMO, who served from February to November 2018, as well as the  current acting CMO and the chiefs of the five directorates or their  representatives within the Office of the CMO (OCMO) in July 2018, to  understand the responsibilities of these directorates. We also met with the  nine reform teams charged with implementing initiatives to, among other  things, move DOD toward an enterprise-wide, shared-service model.  Additionally, we reviewed documentation from the reform teams to  understand what business operation reform initiatives the CMO has  prioritized and what progress has been made to implement and monitor  these initiatives. To understand key initiatives DOD is pursuing to improve  its business operations and how it monitors implementation of those  initiatives, we attended demonstrations of DOD’s cost management  framework and its reform team portal. We also met with an official from  DOD’s Cost Assessment and Program Evaluation (CAPE) Office to gain  additional insights on oversight of the reform teams from one of the co- chairs on the Reform Management Group. Additionally, we reviewed  documentation from the OCMO containing personnel numbers and  funding levels to determine the level and type of resources available to  the CMO to assist in carrying out his responsibilities. To understand how  the CMO collaborates with other DOD entities to lead business operation  reform and how the responsibilities of the CMO and Chief Information  Officer (CIO) may change, we met with officials from the Office of the  DOD CIO. To understand how the CMO is interacting with and influencing  the military departments’ business operations, we met with officials from  the Army, Air Force, and Navy CMO and CIO offices.

We performed our work under the authority of the Comptroller General to  conduct evaluations to assist Congress with its oversight responsibilities.  We conducted this performance audit from February 2018 to March 2019  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.

Appendix II: Summary of Key Authorities and Responsibilities for the Department of Defense Chief Management Officer

Appendix III: Comments from the Department of Defense

Appendix IV: GAO Contact and Staff Acknowledgments

Elizabeth A. Field, (202) 512-2775 or fielde1@gao.gov.

In addition to the contact named above, Sally Newman (Assistant  Director), Tracy Barnes, Margaret Best, Arkelga Braxton, William Carpluk,  Timothy DiNapoli, Michael Holland, Chad Johnson, Kristi Karls, William  Lamping, Ned Malone, Jared Sippel, Susan Tindall, Sarah Veale, and  Lillian Yob made key contributions to this report.

We made a previous recommendation that DOD should have a chief management officer (CMO) with significant authority to help reduce inefficiencies and save billions of dollars.

Congress established the position. However, DOD has not developed guidance that explains how the CMO's authorities and responsibilities should be put into practice. For example, it has not determined how the CMO will exercise authority when there is a disagreement with a military department on business reform issues.

We made 4 recommendations, including that DOD decide how the CMO will direct military department business activities.


Depot Maintenance: DOD Has Improved the Completeness of Its Biennial Core Report

DOD uses both military depots and contractors to maintain its complex weapon systems and equipment. Recognizing the depots' key role and the risk of overreliance on contractors, section 2464 of title 10 of the U.S. Code requires DOD to maintain a core logistics capability that is government-owned and operated, involving a combination of personnel, facilities, equipment, processes, and technology. Section 2464 requires DOD to provide a Biennial Core Report to Congress that addresses 10 reporting elements, including information on its core capability requirements and projected workload for the next fiscal year.

Section 2464 includes a provision that GAO review DOD's Biennial Core Reports for compliance and completeness. In reviewing the 2018 Biennial Core Report, GAO assessed the extent to which DOD's report (1) addressed the 10 reporting elements required by section 2464(d), and (2) is complete. GAO reviewed and analyzed relevant legislation, DOD guidance, and the 2018 Biennial Core Report, and met with DOD and military service officials to discuss the processes used to develop the information in DOD's 2018 Biennial Core Report.

In its 2018 Biennial Core Report, the Department of Defense (DOD) addressed 8 of 10 reporting elements. Specifically, DOD reported, by military service, its:

depot maintenance workload required to sustain core maintenance capability requirements, based on contingency planning scenarios;

projected fiscal year 2019 depot maintenance workloads; and

projected fiscal year 2019 shortfalls (i.e., insufficient workload to sustain the required level of capability) and rationales and mitigations for those shortfalls.

The Army reported a projected workload for fiscal year 2019 that would meet about 84 percent of its identified core capability—a shortfall of 2.9 million direct labor hours (see figure). The Army identified numerous reasons—such as newly established software depot maintenance requirements—for its shortfalls. Furthermore, the Army presented mitigation plans for its shortfalls, such as moving software-related work from contractor to military sources.

The other services did not report overall shortfalls, but some services reported shortfalls associated with specific types of work. For example, the Air Force reported a shortage associated with the repair of tactical missiles. As a mitigation plan, the Air Force stated that it plans to use workload associated with repairing strategic missiles to maintain this capability, since the electronics on the two types of missiles are very similar and require the same maintenance skill set.

DOD did not address two required reporting elements—progress in implementing mitigation plans from the 2016 biennial core report, and the degree to which projected workload reported in the 2016 biennial core report was executed. According to DOD officials, changes in its guidance and processes for developing the 2018 report resulted in the 2016 and 2018 reports not being directly comparable. However, DOD officials stated that they plan to address these two elements in the 2020 Biennial Core Report.

DOD's 2018 Biennial Core Report is generally complete, in that it lacks obvious errors and aligns with supporting information provided by the services. DOD's concerted efforts to implement better guidance and procedures—in part, according to DOD officials, by implementing GAO's prior recommendations from 2012, 2014, and 2016—assisted in improving the completeness of the report.

The Department of Defense (DOD) has many complex weapon systems  and equipment that require regular and emergency maintenance to  continue meeting national security goals. Maintaining the capability to  sustain these systems and equipment is critical for DOD. DOD uses its  military depots—public-sector facilities that are government-owned and- operated—and its personnel to sustain its complex weapon systems and  equipment, both in peacetime and in support of operations. DOD also  uses private-sector contractors to help sustain these systems and  equipment.

To ensure that this capability to sustain weapon systems and equipment  is preserved within the government, section 2464 of title 10 of the United  States Code requires DOD to maintain a core depot-level maintenance  and repair capability that is government-owned and -operated.  Maintaining this capability provides a ready and controlled source of  technical competence and resources to enable effective and timely  response to mobilizations, contingencies, or other emergencies.  Additionally, DOD must assign these government-owned and -operated  facilities (the depots) sufficient workload to ensure cost efficiency and  technical competence during peacetime, while preserving the surge  capacity and reconstitution capabilities necessary to fully support the  strategic and contingency plans prepared by the Chairman of the Joint  Chiefs of Staff.

Section 2464 also requires DOD, among other things, to submit to  Congress a biennial report providing information on its core depot-level  maintenance and repair capability requirements and workload.  Specifically, subsection (d) of section 2464 identifies 10 elements that  DOD must address for each of the armed services in its biennial report  concerning depot-maintenance requirements and workload. Section 2464 also requires us to review DOD’s report for compliance with section  2464, and to assess the completeness of the report. DOD submitted its  most recent biennial core report to Congress on May 23, 2018.

In this report, we assessed the extent to which DOD’s 2018 Biennial Core  Report (1) addressed the 10 reporting elements required by section  2464(d), and (2) is complete. We provided a briefing to your staff on July  19, 2018 of our preliminary observations on the extent to which DOD  addressed the 10 reporting elements required by section 2464(d). This  report provides the final results of our analysis.

For objective one, we analyzed the report, compared the content of the  report with the elements required by the statute, and obtained information  on the process by which DOD identified its core capability requirements  and the projected workload needed to sustain its core maintenance  capability for fiscal year 2019. When the report explicitly included all  parts of the required reporting element, we determined that DOD  “addressed” the element. When the report did not explicitly include any  part of the element, we determined that DOD “did not address” the  element. If the report included some aspects of an element, but not all,  then we determined that DOD “partially addressed” the element. We also  discussed our assessment of each element with department and military  service officials to gain additional insight into their analysis and efforts to  address the statutory requirements.

For objective two, we obtained and analyzed the fiscal year 2019 data  used in compiling DOD’s 2018 Biennial Core Report, including core  capability requirements and projected sustaining workload. We also  reviewed other information, such as projected workload shortfall data  (that is, the amount by which core capability requirements exceed  projected workload for fiscal year 2019) and reasons for it, which the  Office of the Secretary of Defense (OSD) required the military service  headquarters to submit in support of the report. In order to determine  whether these data and information were complete, we performed a  number of data check steps to identify transposition inconsistencies or  errors, and we discussed our analyses with OSD and military service  officials. We also discussed the department’s guidance and the  processes used to collect the data for the report with department and  military service officials. As in our previous reviews of DOD’s biennial  core reports, we did not assess the reliability of the underlying data  provided by the military services for the 2018 DOD Biennial Core Report.  Lastly, we reviewed DOD’s actions to address our prior recommendations  that were targeted at improving the completeness of DOD’s biennial  reports. We discuss our scope and methodology in more detail in  appendix III.

We conducted this performance audit from May 2018 to November 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.

Determining and Reporting on Core Capability Requirements

DOD Instruction 4151.20, Depot Maintenance Core Capabilities  Determination Process, requires the military services to apply a  methodology to determine their core capability requirements—that is, to  identify what core capabilities are required and what workload would be  necessary to enable them to sustain these core capabilities at the depots.  DOD’s instruction also requires the military services to determine the  estimated cost of workloads to sustain the core capability requirement.

The instruction describes a series of mathematical computations and  adjustments that the military services are required to use to compute their  core capability requirements, and to identify the projected workload  needed to support these requirements. Specifically, the instruction  requires that the military services identify the weapon systems required to  execute the Chairman of the Joint Chiefs of Staff’s strategic and  contingency plans, which, among other things, guide the use and  employment of the military forces across all geographic regions and  sustain military efforts over different durations of time. After the systems  are identified, the military services compute annual depot maintenance  capability requirements for peacetime, in direct labor hours, to represent  the amount of time they will regularly take to execute required  maintenance. A military service may adjust calculated direct labor hours  to address redundant capability requirements that are so similar to one  another that they share common base repair processes.

DOD tracks core capability requirements using the following two metrics: direct labor hours, each of which represents 1 hour of effort directly  allocated to a category of work; and work breakdown structure categories, which bundle types of work  according to weapon systems and equipment.

DOD uses work breakdown structure categories to organize data on its  various core capability requirements and workloads, as well as to manage  and report on its core capabilities. There are 10 first-level work  breakdown structure categories, and these in turn are broken down into  second-level subcategories, which are the major elements that make up  the system or equipment in the first-level category. Figure 1 shows the 10  first-level categories of DOD’s work breakdown structure. For the full work  breakdown structure, see appendix IV.

Finally, the instruction requires the military services to provide a reason  for all projected shortfalls, strategies to mitigate the effects of each  projected shortfall, and actions taken by the services to rectify any  projected workload or capability shortfall. A projected shortfall exists if a  military service does not expect to have sufficient workload to sustain the  required level of capability that has been identified. For example, an  armed service may have identified 10,000 direct labor hours of core  capability requirements for ground vehicles, but have only 4,000 hours of  projected depot maintenance work for ground vehicles—resulting in a  projected workload shortfall of 6,000 hours.

DOD’s Biennial Core Reports and Our Prior Reviews

In 2012 DOD submitted its first biennial core report to Congress, and we  found that DOD did not provide sufficient explanations when reporting on  the military services’ shortfalls in core capability requirements. In 2014  DOD submitted its second biennial core report to Congress, and we found  that DOD did not have accurate and complete data in the report. In 2016  DOD submitted its third biennial core report to Congress, and we found  (1) data errors; (2) inaccurate inter-service workload across the military  services due to lack of coordination in reporting this information; (3)  inconsistent calculations or display of workload shortfalls across the  military services; and (4) inconsistent calculations of the estimated cost of  planned workload across the military services. We made  recommendations to address each issue. Further, we identified  additional information that could increase the report’s transparency, and  we suggested that Congress consider amending section 2464 to include  additional elements to increase the transparency of future biennial core  reports. Consistent with our recommendations, Congress amended  section 2464 and added additional reporting requirements. We discuss  DOD’s actions to address our specific recommendations to improve the  completeness of its 2018 Biennial Core Report later in this report.

DOD Addressed Eight of the Ten Reporting Elements and Plans to Address the Remaining Two in the 2020 Biennial Report

In the 2018 Biennial Core Report, DOD and the military services  addressed 8 of 10 required reporting elements, as shown in table 1 and  discussed in more detail below. According to department officials, the  department did not address two of the elements because changes to its  guidance and processes for developing the 2018 report resulted in the  2016 and 2018 reports not being directly comparable. DOD officials  stated that they plan to address these two elements in the 2020 Biennial  Core Report.

Military Services Identified Core Capability Requirements and Projected Workloads

To address reporting elements 1 and 2, the military services presented  their respective requirements and projected workloads in direct labor  hours and associated costs, using the work breakdown structure. Table 2  shows DOD’s reported direct labor hours for the depots’ core  requirements, as well as projected maintenance workloads and costs of  workloads to sustain core requirements by military service.

Military Services Identified Key Information by Work Breakdown Structure

The military services presented core requirements and workloads, down  to the second-level subcategories, to address reporting element 7. This  structure represents all of the sub-specialties required to maintain core  depot-level capabilities across the 10 categories of the work breakdown  structure. For example, the aircraft category is broken down into 7  second-level subcategories: rotary, vertical/short take-off and landing,  cargo/tanker, fighter/attack, bomber, unmanned systems, and aircraft  engines.

The Army, Navy, and Air Force also identified the items they placed into  the “Other” category to address reporting element 9. The Marine Corps  did not place any core requirements in the “Other” category in the 2018  Biennial Core Report and therefore was not required to address this  reporting element. Specifically:

The Army identified requirements associated with items such as air  conditioners, food service hygiene equipment, chemical defense  equipment, and water purification;

The Navy identified requirements associated with specialty aircraft  and aircraft components that are common across multiple platforms;  and

The Air Force identified requirements associated with specialty items  such as surveillance aircraft, missile components, and  communications/electronic equipment that do not fall under other  distinct work breakdown structure subcategories.

Military Services Identified Projected Shortfalls and Mitigation Plans

The military services each identified projected shortfalls at the first- and  second-levels of the work breakdown structure (elements 3 and 4),  reasons for those shortfalls (element 3), and mitigation plans for the  projected shortfalls (element 3). This includes—in some cases— leveraging excess core capabilities in one workload category to mitigate  projected shortfalls in another category (elements 5 and 8). Specifically:  Army: The Army reported a total projected shortfall of about 2.9 million  direct labor hours, as shown in table 3. It identified projected shortfalls in  5 of the 10 first-level work breakdown structure categories, and in 13 of  the 33 second-level categories.

The Army identified a number of reasons for these projected shortfalls.  Army officials stated that these reasons generally contributed to shortfalls  across the various work breakdown categories. They also noted the  challenge of calculating shortfalls based on comparing current workloads  with predicted workloads that were based on potential future Army  strategies. The Army identified the following specific reasons for  shortfalls:

DOD’s updated defense planning scenarios increased the Army’s  equipment requirements. These additional requirements resulted in a  greater total core depot requirement for the Army, which in turn  contributed to projected shortfalls.

The Army noted that DOD’s most recent Future Years Defense  Program lacked sufficient depot maintenance funding (that is, money  to pay for direct labor hours) to meet core capability requirements.

The Army cited newly established software depot maintenance  requirements as one of the reasons for its shortfall. Specifically, DOD  updated requirements for reporting depot resources associated with  upgrading and maintaining software in weapon systems. According to  the Army’s 2018 core report submission, the Army previously  determined this requirement based on the number of people assigned  to the Army’s software sustainment activities. However, the Army  revised its methodology for calculating its software sustainment  workload to reflect actual workload, not just the number of people  conducting the work.

After identifying projected shortfalls, officials used that information to  determine how best to close gaps and mitigate risks in future  implementation. Specifically, the Army is currently working to move  software-related direct labor hours from contractor to military sources,  which will help the Army mitigate—that is, shrink—its projected shortfall  by fiscal year 2020. The Army reported that it plans to mitigate many of its  projected core shortfalls by using skill sets similar to those required for maintaining a core capability in repairing equipment for foreign militaries.  Officials stated that the Army plans to hire and train maintenance  personnel to conduct maintenance work associated with the foreign  military sales program. This workload will also assist the Army in meeting  its core capability requirements for Army systems, increasing the total  projected workload, and decreasing estimated shortfalls. Additionally, the  Army identified mitigations for specific shortfalls—for example, replacing  old generators with a new system by fiscal year 2025 will mitigate its  shortfall in support equipment.

Navy: The Navy reported that it did not project an overall shortfall, nor did  it project any shortfalls at the first- or second-level of the work breakdown  structure, and therefore it did not provide mitigation plans. Navy and OSD  officials noted that the Navy and the department differ regarding the  definition of software sustainment. Specifically, a Navy official stated that  the service views software sustainment as an engineering function, not a  depot maintenance function. This official observed that while the Navy  believes software sustainment to be critical to maintaining its weapon  systems, it believes that managing software sustainment as depot  maintenance is not the most effective approach for the Navy. As a result,  the Navy did not report any software core capability requirement or  projected workload for fiscal year 2019. OSD defined software  maintenance and reporting requirements in its guidance requesting data  from the military services for the biennial core report. In spite of differing  perspectives between OSD and the Navy, OSD accepted the Navy’s core  report submission, in which the Navy reported no core software  maintenance capability requirements.

Marine Corps: The Marine Corps reported that it did not project a total  shortfall, but did project a shortfall of 82,971 direct labor hours in one  second-level subcategory—that is, construction equipment—that falls in  the ground vehicle first-level category. The Marine Corps identified a  rationale and mitigation plan for its projected shortfall in construction  equipment. The Marine Corps reported that general factors affecting  maintenance workload and funding contributed to the shortfall, including:  (1) After drawdowns from Iraq and Afghanistan, the Marine Corps  repaired equipment to a desired level of combat effectiveness in line with  current mission requirements and available resources. This led to fewer  current maintenance needs and therefore reduced core maintenance  workloads, creating projected shortfalls in some skill sets; and (2) The  Marine Corps made changes to its force structure, which led to having  more equipment in inventory, less equipment in use, and therefore less  required maintenance. This created a shortfall in the skill set for  construction equipment. To address this shortfall, the Marine Corps plans  to use the excess workload in amphibious vehicles to mitigate the  projected shortfall in construction equipment. Marine Corps officials  stated that these second-level subcategories involve similar, tracked  vehicles, which can be maintained using the same skill set.

Air Force: The Air Force reported that it did not project a total shortfall, but  did project shortfalls within the work breakdown structure, as shown in  table 4. The Air Force identified projected overall shortfalls in 1 of the 10  first-level work breakdown structure categories, and in 7 of the 33  second-level work breakdown structure categories.

The Air Force identified reasons and provided detailed explanations, as  well as mitigation plans, for each projected shortfall. For example, it  projected a shortfall in rotary workload according to Air Force officials  because of staffing and supply issues with HH-60 Pave Hawk  maintenance at Corpus Christi Army Depot. According to these officials,  these maintenance issues have resulted in the Air Force’s using more  contracted depot maintenance work on the HH-60 Pave Hawk in order to  meet demand. As a result of the more extensive contracting of  maintenance, planned workload at Corpus Christi Army Depot has been  reduced, thereby creating a projected shortfall. The Air Force, Army, and  Navy formed a team to address this projected shortfall. Air Force officials  stated that contracts are being reduced and that they expect to resolve  the maintenance issues before the 2020 Biennial Core Report. To  address its projected shortfall in tactical missiles, the Air Force plans to  identify Letterkenny Army Depot as the Technology Repair Center for this  requirement, as the workloads are small in volume and the Letterkenny  Army Depot can meet this requirement. In addition, the Air Force  projected an overage of about 176,000 direct labor hours in strategic  missiles. The Air Force believes that its projected workload in strategic  missiles will allow it to maintain capability to repair tactical missiles—an  area in which it projects a shortfall of about 42,000 direct labor hours.  According to Air Force officials, the electronics on these two types of  missiles are very similar and require the same skill set.

DOD Did Not Address the Two Elements Concerning Progress in Implementing Mitigation Plans and Executing Reported Workloads

DOD in the 2018 Biennial Core Report did not address progress made in  implementing mitigation plans from the prior core report (element 6), nor  did they address the degree to which projected workload reported in the  prior core report was executed (element 10). According to Office of the  Assistant Secretary of Defense for Logistics and Materiel Readiness  (OASD L&MR) officials, they did not address these elements because the  elements require DOD to compare information in the 2018 Biennial Core  Report with information in the 2016 Biennial Core Report. Since DOD  updated its guidance and processes for developing the 2018 Biennial  Depot Core Report—in response to new statutory requirements and our  prior recommendations—a meaningful comparison was not possible in  the 2018 Biennial Core Report, according to OSD and military service  officials. Additionally, DOD did not fully provide mitigation plans in its  2016 Biennial Core Report, as we reported in 2016. Therefore, DOD  was unable to provide progress reports on 2016 mitigation plans.

DOD officials told us that they plan to use the 2018 Biennial Core Report  as a baseline for future biennial core reports, which will allow them to  address elements 6 and 10. Specifically, they stated that they plan to  provide progress reports on the mitigation plans they identified in the  2018 Biennial Core Report. Additionally, officials stated their intent to  provide a comparison of the fiscal year 2019 projected workload reported  in the 2018 Biennial Core Report with the actual workload for fiscal year  2019 contained in the 2020 Biennial Core Report.

DOD’s 2018 Biennial Core Report Is Generally Complete

DOD’s 2018 Biennial Core Report is generally complete in that it lacks  any obvious errors and aligns with supporting information provided by the  military services. Specifically, unlike previous biennial core reports, data  submissions provided to DOD by the military services are identical to the  data in the 2018 Biennial Core Report, and there are no transposition  errors. Further, based on our review of the services’ submissions to  OSD, data and other information provided by the military services were  accurately and appropriately included in DOD’s 2018 Biennial Core  Report. Finally, our analysis of the report and the military services’  submissions did not identify errors in the summation of the data.

DOD’s focused efforts in 2017 and 2018 to develop better guidance and  procedures assisted in improving the completeness of DOD’s 2018  Biennial Core Report—in part, according to DOD officials, due to our prior  recommendations. Specifically, in 2017 the OASD L&MR began drafting  new guidance to identify required depot maintenance core capabilities  and the associated workloads needed to sustain those capabilities. This  guidance was finalized and issued by the Office of the Under Secretary of  Defense for Acquisition and Sustainment in May 2018. Officials from  OASD L&MR and the military services told us that they used the  methodology in this new guidance to complete the 2018 Biennial Core  Report in late 2017 and early 2018.

Officials told us that our prior recommendations, based on our reviews of  the 2012, 2014, and 2016 biennial core reports, served to guide DOD’s  update of its guidance and procedures. The changes made by Congress  to section 2464 were also incorporated into DOD’s new guidance to  ensure compliance with the 10 reporting elements, as we previously  discussed. During the course of our review, we found that DOD had  addressed all of the recommendations from our prior reports on the 2012,  2014, and 2016 Biennial Core Reports.

First, in our review of the 2012 Biennial Core Report, we found that DOD  did not include explanations for each identified projected shortfall. We  recommended that DOD include in its biennial core report to Congress  detailed explanations for why the military services did not have the  workloads to meet core maintenance requirements for each projected  shortfall identified in the report. Officials with OASD L&MR said that the  May 2018 updated version of DOD Instruction 4151.20 was revised to  require the submission of a detailed rationale for any and all shortfalls,  and a plan to either correct or mitigate the effects of the shortfalls. The  instruction states further that the detailed rationale and plan will identify  the reason for the shortfall; contain a strategy to mitigate the effects of the  shortfall (for example, specific transferrable workload, transfer of private- sector workload); and include actions to rectify any capability or workload  shortfalls, including a description of planned capital investment, timing,  and planned workarounds until the new capabilities or workloads are  available. DOD’s 2018 Biennial Core Report as previously discussed  provided rationales for shortfalls.

Second, in our review of the 2014 Biennial Core Report, we found that  some data were incomplete. We recommended that DOD review its  processes and implement needed improvements to help ensure accuracy  and completeness. In response to this and our other prior  recommendations, DOD updated DOD Instruction 4151.20 to include  additional steps and more controls that ensure more complete and  accurate data submissions. According to OSD officials, changes to the  guidance included deleting data fields unrelated to core requirements;  streamlining and clarifying reporting instructions; ensuring that service  submissions be reviewed and approved by general, flag, or senior  executive service officials; determining the weapon systems or other platforms that are in the Chairman of the Joint Chiefs of Staff strategic  and contingency plans; addressing inter-service workloads; having the  worksheet automatically calculate shortfalls; and defining “software” and  “software maintenance.”

Most recently, in our review of the 2016 Biennial Core Report, we found  (1) data errors; (2) inconsistent capture of inter-service workloads across  the military services; (3) inconsistent calculations or transpositions of  projected workload shortfalls across the military services; and (4)  inconsistent calculations of the estimated cost of projected workloads  across the military services. We recommended that DOD update its  guidance—in particular DOD Instruction 4151.20—to require future  biennial core reports to include instructions to the reporting agencies on  how to (1) report additional depot workloads performed that have not  been identified as core requirements; (2) accurately capture inter-service  workloads; (3) calculate projected shortfalls; and (4) estimate the cost of  projected workloads. DOD took steps to address each of these issues.  Specifically, DOD did the following:  Issued guidance stating that the total adjusted core capability  requirements and the total projected public-sector depot maintenance  workloads both reflect core workloads, as well as workloads that have  not been identified as sustaining core.

Developed and provided to each of the military services a worksheet  on which to submit their projected inter-service workloads. OSD also  held a meeting with all of the military services to resolve any  discrepancies between their respective submissions.

Created worksheets with formulas to automatically calculate the  projected shortfalls at the subcategory level of the work breakdown  structure for each service.

Issued updated guidance to indicate that the estimated costs of the  projected workloads to sustain the core capability requirements were  to be included. According to OSD officials, these estimates are  developed in accordance with financial management regulations and  then applied to the estimated core sustaining workloads for each work  breakdown structure, thereby providing a common baseline and  process.

In meetings with OSD and the military services, officials offered ideas for  possible changes in future reports, such as including additional  information on inter-service workloads to increase congressional visibility  regarding coordination on depot maintenance across the military services.  Additionally, OSD officials noted that they were considering the inclusion  of additional information in future reports on how costs of projected  workloads are calculated. Information on this is provided in DOD  Instruction 4151.20, but not in its biennial core report. According to OSD  officials, the department plans to consider these and other proposed  changes from the military services and other stakeholders to its biennial  core reporting process and supporting guidance. Given that DOD has  made considerable progress by improving both the completeness of the  2018 Biennial Core Report and its guidance on the development of the  report, we are not making recommendations at this time.

We provided a draft of this report to DOD for comment. DOD provided  technical comments, which we included as appropriate.

We are sending copies of this report to appropriate congressional  committees, the Secretary of Defense, and the Secretaries of the Military  Departments. In addition, the report is available at no charge on the GAO  website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact  Diana Maurer at (202) 512-9627 or maurerd@gao.gov. Contact points for  our Office 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 V.

Appendix I: Complete Text of 10 U.S.C. § 2464(d)

Appendix I: Complete Text of 10 U.S.C. §  2464(d) (d) Biennial core report. Not later than April 1 of each even-numbered  year, the Secretary of Defense shall submit to Congress a report  identifying, for each of the armed forces (except for the Coast Guard), for  the fiscal year after the fiscal year during which the report is submitted,  each of the following:  1.  The core depot-level maintenance and repair capability requirements  and sustaining workloads, organized by work breakdown structure,  expressed in direct labor hours.  2.  The corresponding workloads necessary to sustain core depot-level  maintenance and repair capability requirements, expressed in direct  labor hours and cost.  3.  In any case where core depot-level maintenance and repair capability  requirements exceed or are expected to exceed sustaining workloads,  a detailed rationale for any and all shortfalls and a plan either to  correct or mitigate the effects of the shortfalls.  4.  Any workload shortfalls at any work breakdown structure category  designated as a lower-level category pursuant to Department of  Defense Instruction 4151.20, or any successor instruction.  5.  A description of any workload executed at a category designated as a  first-level category pursuant to such Instruction, or any successor  instruction, that could be used to mitigate shortfalls in similar  categories.  6.  A description of any progress made on implementing mitigation plans  developed pursuant to paragraph (3).  7.  A description of core capability requirements and corresponding  workloads at the first level category.  8.  In the case of any shortfall that is identified, a description of the  shortfall and an identification of the subcategory of the work  breakdown structure in which the shortfall occurred.  9.  In the case of any work breakdown structure category designated as a  special interest item or other pursuant to such Instruction, or any  successor instruction, an explanation for such designation.  10. Whether the core depot-level maintenance and repair capability  requirements described in the report submitted under this subsection  for the preceding fiscal year have been executed.

Appendix II: Timeline of 10 U.S.C. § 2464 and Related GAO Reports

In 1984 Congress passed legislation limiting the private contracting of  certain core logistics functions. This law required the Department of  Defense (DOD) to maintain a logistics capability to ensure a ready and  controlled source of technical competence and resources. In 1988  Congress codified this law, as amended, at section 2464 of title 10 of the  U.S. Code. While section 2464 has been amended multiple times since  then, the requirement for DOD to maintain a core logistics capability that  is government-owned and government-operated has persisted. In 2011  Congress added a requirement for DOD to provide a biennial core report.  Most recently, in fiscal year 2018 Congress added additional elements  that DOD is required to address in its biennial core reports. Among other  things, changes to the statute are illustrated in figure 2 below.

Section 2464(d) of Title 10 of the United States Code requires the  Department of Defense (DOD), among other things, to submit to  Congress a biennial report providing information on its core depot-level  maintenance and repair capability requirements and workload.  Specifically, section 2464(d) identifies 10 elements that DOD must  address for each of the armed services (except for the Coast Guard) in its  biennial report concerning depot-maintenance requirements and  workload. Section 2464 also requires us to review DOD’s report for  compliance with section 2464 and assess the completeness of the  report. DOD submitted its most recent biennial core report to Congress  on May 23, 2018.

To determine the extent to which the DOD 2018 Biennial Core Report  complies with section 2464(d), we analyzed the text of the report and  obtained supporting information on DOD’s process to determine its core  maintenance capability for fiscal year 2019. Two GAO analysts  independently reviewed DOD’s report to determine the extent to which it  addressed each element required by the statute. All initial disagreements  between the two GAO analysts were discussed and resolved through  consensus. For the military services, when the report explicitly included  all parts of the required reporting element, we determined that DOD  “addressed” the element. When the report did not explicitly include any  part of the element, we determined that DOD “did not address” the  element. If the report included some aspects of an element, but not all,  then we determined that DOD “partially addressed” the element. We  compared the types of information and data provided by each of the  military services with the data that the Office of the Secretary of Defense  (OSD) included in the 2018 Biennial Core Report, to assess consistency.  We also discussed our preliminary analyses with OSD and military  service officials to gain additional insight into their analysis and efforts to  address the statutory requirements.

To assess the report’s completeness, we obtained and analyzed the fiscal  year 2019 data used in compiling DOD’s 2018 Biennial Core Report,  including core capability requirements and projected sustaining workload  expressed in direct labor hours and cost and other information, such as  workload shortfall explanations. We compared the reporting agencies’  submissions with the reporting template in DOD Instruction 4151.20 in  order to determine the extent to which the reporting agencies submitted  the information required by DOD’s instruction, and we identified any  inconsistencies or errors. In order to determine whether these data and  information were complete, we performed a number of data check steps  to identify transposition inconsistencies or errors, and we discussed our  analyses with OSD and military service officials. These steps included (1)  reviewing each military service’s submission to verify that it had  consistently calculated and reported the direct labor hours identified as  the total adjusted requirements and the workload needed to sustain depot  maintenance core capability requirements; and (2) reconciling the  information in the report against each military service’s submission, for  accuracy. However, as in the past reviews of DOD’s biennial core reports,  we did not assess the reliability of the underlying data provided by the  military services for the 2018 DOD Biennial Core Report. The team also  met with OSD and reporting agency officials responsible for overseeing  the data collection and preparing the data submissions, to obtain  clarification and understanding of the content of the submissions, as well  as to discuss the department’s guidance and processes used to collect  the data for the report. Lastly, we reviewed DOD’s actions to address our  prior recommendations that were targeted at improving the completeness  of DOD’s biennial report.

Appendix IV: Category Levels from the Department of Defense’s (DOD) Depot Maintenance Core Capability Worksheet

Appendix IV: Category Levels from the  Department of Defense’s (DOD) Depot  Maintenance Core Capability Worksheet Work Breakdown Structure Category  1.  Aircraft  1.2 Vertical/Short Takeoff and Landing  2.

Appendix V: GAO Contacts and Staff Acknowledgments

Diana Maurer, (202) 512-9627 or maurerd@gao.gov.

In addition to the named contact above, John Bumgarner, Assistant  Director; Thomas Gosling, Assistant Director; Pat Donahue, Amie Lesser,  Shahrzad Nikoo, Bethann E. Ritter Snyder, Walter Vance, Cheryl  Weissman, and Melissa Wohlgemuth contributed to this report.

Defense Department personnel and contractors work in depots to keep weapons and equipment ready for use. These depots must have the ability to meet surges in demand in emergencies. They also must be able to maintain a core of capabilities without overreliance on contractors.

DOD reports to Congress every 2 years on the status of depot capabilities, including projected shortfalls. In past reviews, we found inaccuracies and other weaknesses in the reports and made recommendations for improving them.

We found considerable improvements in the 2018 report, which included a more complete accounting of capability gaps and the plans to fill them.