GAO: Defense business transformation showing signs of progress

After years of insufficient oversight and attention, the Pentagon has taken steps to reform its business operations, but more needs to be done to integrate those efforts with initiatives to reduce overhead costs and to eliminate troubled programs, a federal watchdog has concluded.

In a Jan. 26 report to congressional committees, the Government Accountability Office offered generally high marks for the Defense Department's revamped approach to business transformation -- an area that has landed the department on the watchdog's high-risk list since 2005.

The report noted Defense has filled key positions such as deputy chief management officer and named chief management officers for each of the military departments. Pentagon officials also have created a governance board to identify business process improvements and have developed an updated strategic management plan that outlines business priorities and related reform initiatives.

While the Pentagon appears to be moving in the right direction, GAO found opportunities for Defense's chief management officer and deputy chief management officer to assume greater leadership roles in ongoing efforts to reduce costs and to streamline processes departmentwide.

Although the deputy chief management officer has been placed in charge of evaluating options for eliminating the Business Transformation Agency and transferring its functions to other organizations, the department's top two management officials have not been assigned specific responsibilities for implementing and monitoring the larger efficiency initiative, GAO found. The military department CMOs, meanwhile, are leading the reform efforts at their respective service agencies.

"Without assigning a specific role for the CMO and DCMO, it is not clear how DoD will establish accountability and leverage those positions to provide the leadership needed to implement, integrate, and otherwise institutionalize the Secretary of Defense's recent efficiency initiative and sustain momentum and progress in the long term," the report said. "Furthermore, without a continuous focus on identifying and implementing efficiencies, DoD may be challenged in funding its highest priority programs in light of DoD's fiscal challenges."

GAO also said Defense has not finished implementing its management framework for business transformation because it has yet to clearly define the authority, roles and relationships for its senior leadership officials.

For example, the department's top business transformation officials have not been assigned specific functions related to Defense's financial management improvement efforts. GAO also identified questions surrounding the decision making of the deputy chief management officer and that official's relationship with the chief management officers of the respective military departments.

The report recommended that Defense issue new guidance establishing a process for routinely updating its strategic management plan, as well as the military departments' business transformation plans. The guidance also would indicate how the department's leadership -- including its top management officers -- will reach consensus on business priorities, synchronizing the development of plans with the budget process and monitoring the implementation of reform initiatives.

"Over the past few years, the department and military departments have gained momentum in achieving consensus on business priorities and maturing their planning efforts," the report stated. "To sustain this momentum and to ensure continuity for the long term, we believe it is important that the CMO clearly outline the process that will guide strategic planning efforts."

The Defense Department largely agreed with GAO's analysis and recommendations.