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789CG entitled 'DOD Transformation: Challenges and Opportunities' which 
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United States Government Accountability Office: 

DOD Transformation: Challenges And Opportunities: 

The Honorable David M. Walker: 

Comptroller General of the United States: 

Acquisition Community Conference: 
Defense Acquisition University: 
Fort Belvoir, VA: 

April 17, 2007: 

The Case for Change: 

The federal government is on a "burning platform," and the status quo 
way of doing business is unacceptable for a variety of reasons, 
including: 

Past fiscal trends and significant long-range challenges: 

Selected trends and challenges having no boundaries: 

Additional resource demands due to Iraq, Afghanistan, incremental 
homeland security needs, and recent natural disasters i n the United 
States: 

Numerous government performance/accountability and high risk 
challenges: 

Outdated federal organizational structures, policies, and practices: 

Rising public expectations for demonstrable results and enhanced 
responsiveness: 

Composition of Federal Spending: 

[See PDF for image] - graphic text 
	
3 pie charts with 5 items each. 

1966: 
Defense: 43.0%; 
Social Security: 15.0%; 
Medicare & Medicaid: 1.0%; 
Net interest: 7.0%; 
All other spending: 34.0%. 

1986: 
Defense: 28.0%; 
Social Security: 20.0%; 
Medicare & Medicaid: 10.0%; 
Net interest: 14.0%; 
All other spending: 29.0%. 

2006: 
Defense: 20.0%; 
Social Security: 21.0%; 
Medicare & Medicaid: 19.0%; 
Net interest: 9.0%; 
All other spending: 32.0%. 

Source: Office of Management and Budget. 

Note: Numbers may not add to 100 percent due to rounding. 

[End of figure] 

Federal Spending for Mandatory and Discretionary Programs: 

[See PDF for image] - graphic text 

3 pie charts with 3 items each. 

1966: 
Discretionary: 67%; 
Mandatory: 26%; 
Net Interest: 7%. 

1986: 
Discretionary: 44%; 
Mandatory: 42%; 
Net Interest: 14%. 

2006: 
Discretionary: 38%; 
Mandatory: 53%; 
Net Interest: 9%. 

Source: Office of Management and Budget. 

[End of figure] 

Major Reported Long-Term Fiscal Exposures ($ trillions): 

Explicit liabilities (Publicly held debt, military & civilian pensions 
& retiree, health, other); 	
2000: $6.9; 
2006: $10.4; 
Percent Increase: 52%. 
	
Commitments & Contingencies: e.g., PBGC, undelivered orders; 
2000: $0.5; 
2006: $1.3; 
Percent Increase: 140%. 

Implicit exposures; 
2000: $13.0; 
2006: $38.8; 
Percent Increase: 197%.

Implicit exposures: Future Social Security benefits; 
2000: $3.8; 
2006: $6.4; 
Percent Increase: [Empty]. 

Implicit exposures: Future Medicare Part A benefits; 
2000: $2.7; 
2006: $11.3; 
Percent Increase: [Empty]. 

Implicit exposures: Medicare Part B benefits; 
2000: $6.5; 
2006: $13.1; 
Percent Increase: [Empty]. 

Implicit exposures: Medicare Part D benefits; 
2006: $8.0; 
Percent Increase: [Empty]. 

Total; 
2000: $20.4; 
2006: $50.5; 
Percent Increase: 147%. 

Sources: 2000 and 2006 Financial Reports of the United States 
Government. 

Note: Estimates for Social Security and Medicare are at present value 
as of January 1 of each year, and all other data are as of September 
30. Totals may not add due to rounding. Percentage increases are based 
on actual data and may differ from increases calculated from rounded 
data shown in table. 

[End of table] 

Potential Fiscal Outcomes Alternative Simulation-Discretionary Spending 
Grows with GDP and Expiring Tax Provisions Extended (January 2007) 
Revenues and Composition of Spending as a Share of GDP: 

[See PDF for image] - graphic text: 
		
Line/Stacked Bar combo chart with 4 groups, 1 line (Revenue) and 4 bars 
per group. 	

2006; 
Net interest: 1.7%; 
Social Security: 4.2%; 
Medicare & Medicaid: 3.9%; 
All other spending: 10.5%; 
Revenue: 18.4%. 

2015; 
Net interest: 2.1%; 
Social Security: 4.6%; 
Medicare & Medicaid: 4.9%; 
All other spending: 9.6%; 
Revenue: 17.6%. 

2030; 
Net interest: 5.9%; 
Social Security: 6.8%; 
Medicare & Medicaid: 8.3%; 
All other spending: 9.5%; 
Revenue: 17.8%. 

2040; 
Net interest: 12.1%; 
Social Security: 7.6%; 
Medicare & Medicaid: 10.3%; 
All other spending: 9.5%; 
Revenue: 17.8%.

Source: GAO's January 2007 analysis. 

Notes: AMT exemption amount is retained at the 2006 level through 2017 
and expiring tax provisions are extended. After 2017, revenue as a 
share of GDP is held constant-implicitly assuming that action is taken 
to offset increased revenue from real bracket creep, the AMT, and tax- 
deferred retirement accounts. 

[End of figure] 

Current Fiscal Policy Is Unsustainable: 

The "Status Quo" Is Not an Option: 

* We face large and growing structural deficits largely due to known 
demographic trends and rising health care costs: 

* GAO's simulations show that balancing the budget in 2040 could 
require actions as large as: 

- Cutting total federal spending by 60 percent or: 

- Raising federal taxes to two times today's level: 

Faster Economic Growth Can Help, but It Cannot Solve the Problem: 

* Closing the current long-term fiscal gap based on reasonable 
assumptions would require real average annual economic growth in the 
double-digit range every year for the next 75 years: 

* During the 1990s, the economy grew at an average 3.2 percent per 
year: 

* As a result, we cannot simply grow our way out of this problem. Tough 
choices will be required: 

The Way Forward: A Three-Pronged Approach: 

1. Improve Financial Reporting, Public Education, and Performance 
Metrics: 

2. Strengthen Budget and Legislative Processes and Controls: 

3. Fundamentally Reexamine and Transform for the 21St Century (i.e., 
entitlement programs, other spending, and tax policy): 

Solutions Require Active Involvement from both the Executive and 
Legislative Branches: 

DOD Faces the Challenge of Balancing Near Term and Long Term Wants, 
Needs, and Affordability: 

In FY 2007 constant dollars, DOD's regular budget has grown from about 
$351 billion in FY 2001 to over $431 billion in FY 2007. Supplemental 
funding for the Global War on Terrorism (GWOT) has added hundreds of 
billions of dollars to DOD's available budgetary resources: 

Near term, DOD is paying for the GWOT and facing challenges in 
maintaining readiness: 

Long term, DOD must address military pay and benefits and weapons 
modernization and force transformation, which may not be affordable or 
sustainable: 

DOD's efforts to transform its business systems and processes will take 
many years to achieve, but could free up resources through efficiencies 
and reduction in waste: 

DOD's Regular Budget Growth: (Excluding GWOT): 

DOD Regular Appropriation FY 2001-2007: 

Dollars in billions: 

[See PDF for Image]- graphic text: 

Bar graph. 

Dollars in billions. 

Year: 2001; 
Amount: $351.4. 

Year: 2002; 
Amount: $378.1. 

Year: 2003; 
Amount: $409.8. 

Year: 2004; 
Amount: $411.5. 

Year: 2005; 
Amount: $422.5. 

Year: 2006; 
Amount: $425.5. 

Year: 2007; 
Amount: $377.6. 

Source: GAO analysis of Congressional Research Service and 
appropriations data. Note: All amounts are in constant 2007 dollars. 

[End of figure] 

Total Budgetary Resources Provided to DOD Total Defense Resources FY 
2005-2007 (as of April 2007): 

[See PDF for Image] - graphic text: 

Bar graph each divided into 3 or 4 sections. 

Year: 2005; 
Regular: $422.5; 
Bridge: $26.3; 
Supplement: $83.2; 
Estimated Supplement Request: $0. 

Year: 2006; 
Regular: $425.5; 
Bridge: $51.2; 
Supplement: $75.8; 
Estimated Supplement Request: $0. 

Year: 2007; 
Regular: $377.6; 
Bridge: $70. 
Supplement: $0. 
Estimated Supplement Request: $99.7. 

Source: GAO analysis of Congressional Research Service and 
appropriations data. 

Notes: Bridge, or Title IX, is the section of DOD's regular defense 
appropriation that outlines emergency spending provisions for 
operations in support of GWOT. For fiscal year 2007, DOD requested an 
emergency supplemental appropriation of $93.4 billion, which is still 
being considered by the Congress. All amounts are in constant 2007 
dollars. 

[End of figure] 

DOD's Reported GWOT Obligations for FY 2001 thru 2006 and for FY 2007 
through February 2007: 

Dollars in billions: 

[See PDF for Image] - graphic text: 

Bar graph. 

Dollars in billions. 

FY01: $0.2. 
FY02: $28.4. 
FY03: $67.1. 
FY04: $71.3. 
FY05: $84.8. 
FY06: $98.4. 
FY07: $55.3.  

Source: GAO analysis of DOD data. 

Note: Reported GWOT obligations include Operation Noble Eagle, 
Operation Enduring Freedom, and Operation Iraqi Freedom. Figures 
include about $17.9 billion obligated in FY 2002 - 2003 that DOD did 
not include in its cost reports. Figures do not include any obligations 
for classified activities. GAO has assessed the reliability of DOD's 
obligation data and found significant problems, such that they may not 
accurately reflect the true dollar value of GWOT obligations. 

[End of figure] 

21st Century Challenges Report: 

Provides background, framework, and questions to assist in reexamining 
the base: 

Covers entitlements & other mandatory spending, discretionary spending, 
and tax policies and programs: 

Based on GAO's work for the Congress: 

Issued February 16, 2005:  

Source: GAO. 

Twelve Reexamination Areas: 

Mission Areas: 

* Defense: 
* International Affairs: 
* Education and Employment: 
* Natural Resources, Energy and Environment: 
* Financial Regulation and Housing: 
* Retirement and Disability: 
* Health Care: 
* Science and Technology: 
* Homeland Security: 
* Transportation: 

Crosscutting Areas: 

* Improving Governance: 
* Reexamining the Tax System: 

Illustrative 21st Century Questions: National Defense: 

How should the historical allocation of resources across services and 
programs be changed to reflect the results of a forward-looking 
comprehensive threat/risk assessment as part of DOD's capabilities- 
based approach to determining defense needs? 

Can DOD afford to invest in transformational systems such as the Future 
Combat System and national missile defense at the same time it 
continues to pursue large investments in legacy systems such as the F- 
22A and new systems like the Joint Strike Fighter, especially if cost 
growth and schedule delays continue at historical rates? 

Given the global availability of rapidly advancing technology, does DOD 
need to reconsider its approach for identifying critical technologies 
and protecting those technologies from being exploited in order to 
maintain its military superiority? 

Given the growing encumbrance of pay and benefit costs, especially 
health care, within DOD's budget, how might DOD's recruitment, 
retention, and compensation strategies (including benefit programs) be 
reexamined and revised to ensure that DOD maintains a total military 
and civilian workforce with the mix of skills needed to execute the 
national security strategy while using resources in a more targeted, 
evidence-based, and cost-effective manner? 

Do the role, size, and structure of forces and capabilities comprising 
the strategic triad need to be adjusted to meet the challenges of 
providing strategic deterrence in the new security and fiscal 
environment? 

Does DOD need to create a senior management position responsible and 
accountable for taking a strategic, integrated, and sustained approach 
to managing the day-to-day business operations of the department, 
including ongoing efforts to transform DOD's business operations and 
address the many related and longstanding high-risk areas? Should 
specific qualifications requirements and periods of tenure or terms be 
established for selected DOD positions related to key business 
operations? 

GAO's High-Risk List 2007: 

High Risk Areas: Addressing Challenges in Broad-based Transformations: 
Strategic Human Capital Management[A]; 
Designated High Risk: 2001. 

High Risk Areas: Addressing Challenges in Broad-based Transformations: 
Managing Federal real Property[A]; 
Designated High Risk: 2003. 

High Risk Areas: Addressing Challenges in Broad-based Transformations: 
Protecting the federal government's Information Systems and the 
Nation's Critical Infrastructures; 
Designated High Risk: 1997. 

High Risk Areas: Addressing Challenges in Broad-based Transformations: 
Implementing an transforming the Department of Homeland Security; 
Designated High Risk: 2003. 

High Risk Areas: Addressing Challenges in Broad-based Transformations: 
Establishing appropriate and effective information-sharing mechanisms 
to improve Homeland Security; 
Designated High Risk: 2005. 

High Risk Areas: Addressing Challenges in Broad-based Transformations: 
DOD approach to business transformation[A];  
Designated High Risk: 2005. 

High Risk Areas: Addressing Challenges in Broad-based Transformations: 
DOD approach to business transformation[A]: DOD Business Systems 
Modernization;  
Designated High Risk: 1995. 

High Risk Areas: Addressing Challenges in Broad-based Transformations: 
DOD approach to business transformation[A]: DOD Personnel Security 
Clearance Program; 
Designated High Risk: 2005. 

High Risk Areas: Addressing Challenges in Broad-based Transformations: 
DOD approach to business transformation[A]: DOD Support Infrastructure 
Management; 
Designated High Risk: 1997. 

High Risk Areas: Addressing Challenges in Broad-based Transformations: 
DOD approach to business transformation[A]: DOD Financial Management; 
Designated High Risk: 1995. 

High Risk Areas: Addressing Challenges in Broad-based Transformations: 
DOD approach to business transformation[A]: DOD Supply Chain 
Management(formerly Inventory Management); 
Designated High Risk: 1990. 

High Risk Areas: Addressing Challenges in Broad-based Transformations: 
DOD approach to business transformation[A]: DOD Weapon Systems 
Acquisition; 
Designated High Risk: 1990. 

High Risk Areas: Addressing Challenges in Broad-based Transformations: 
FAA Air Traffic Control Modernization; 
Designated High Risk: 1995. 

High Risk Areas: Addressing Challenges in Broad-based Transformations: 
Financing the Nation's Transportation System[A] New; 
Designated High Risk: 2007. 

High Risk Areas: Addressing Challenges in Broad-based Transformations: 
Ensuring the Effective Protection of Technologies Critical to U.S. 
National Security Interests[A] New; 
Designated High Risk: 2007. 

High Risk Areas: Addressing Challenges in Broad-based Transformations: 
Transforming Federal Oversight of Food Safety[A] New; 
Designated High Risk: 2007. 

High Risk Areas: Managing Federal Contracting More effectively:  DOD 
Contract Management; 
Designated High Risk: 1992. 

High Risk Areas: Managing Federal Contracting More effectively:  DOE 
Contract Management; 
Designated High Risk: 1990. 

High Risk Areas: Managing Federal Contracting More effectively:  NASA 
Contract Management; 
Designated High Risk: 1990. 

High Risk Areas: Managing Federal Contracting More effectively:  
Management of Interagency Contracting; 
Designated High Risk: 2005. 

High Risk Areas: Assessing the Efficiency and Effectiveness of Tax Law 
Administration: Enforcement of Tax Laws[A]; 
Designated High Risk: 1990. 

High Risk Areas: Assessing the Efficiency and Effectiveness of Tax Law 
Administration: IRS Business Systems Modernization; 
Designated High Risk: 1995. 

High Risk Areas: Modernizing and Safeguarding Insurance and Benefit 
Programs: Modernizing Federal Disability Program[A]; 
Designated High Risk: 2003.  

High Risk Areas: Modernizing and Safeguarding Insurance and Benefit 
Programs: Pension Benefit Guaranty Corporation Single-Employer 
Insurance Program; 
Designated High Risk: 2003. 

High Risk Areas: Modernizing and Safeguarding Insurance and Benefit 
Programs: Medicare program[A]; 
Designated High Risk: 1990. 

High Risk Areas: Modernizing and Safeguarding Insurance and Benefit 
Programs: Medicaid program[A]; 
Designated High Risk:  2003. 

High Risk Areas: Modernizing and Safeguarding Insurance and Benefit 
Programs: National Flood Insurance Program[A]; 
Designated High Risk: 2006. 

Source: GAO. 

[A] Legislation is likely to be necessary, as a supplement to actions 
by the executive branch, in order to effectively address this high-risk 
area. 

[End of table] 

Key Oversight Areas for the 110th Congress: 

Examples of targets for near-term oversight: 

Addressing governmentwide acquisition and contracting issues: 

Transforming the business operations of the Departments of Defense: 

Examples of policies and programs that are in need of fundamental 
reform and re-engineering: 

Reviewing U.S. and coalition efforts to stabilize and rebuild Iraq and 
Afghanistan: 

Ensuring a strategic and integrated approach to prepare for, respond 
to, recover, and rebuild from catastrophic events: 

Examples of governance issues that should be addressed to help ensure 
an economical, efficient, ethical, and equitable federal government 
capable of responding to the various challenges and capitalizing on 
related opportunities in the 21 century: 

Reviewing the need for various budget controls and legislative process 
revisions in light of current deficits and our long-range fiscal 
imbalance: 

Reviewing the impact and effectiveness of various management reforms: 

Suggested DOD Related Oversight Areas for the 110th Congress: 

Address acquisition and contracting issues: 

Transform business operations, including addressing all related "High 
Risk" areas: 

Enhance information sharing, accelerate transformation, and improve 
oversight related to the Nation's intelligence agencies: 

Strengthen efforts to prevent proliferation of nuclear, chemical, and 
biological weapons and their delivery systems (missiles): 

Ensure a successful transformation of the nuclear weapons complex: 

Review U.S. and Coalition efforts to stabilize and rebuild Iraq and 
Afghanistan, including how these efforts are to be funded: 

Assess overall military readiness, transformation efforts, and existing 
plans to assure the sustainability of the All-Volunteer Force: 

Note: From November 17, 2006 letter to the 110th Congress (GAO-07- 
235R): 

Transformation: 

Webster's definition: 

An act, process, or instance of change in structure appearance, or 
character: 

A conversion, revolution, makeover, alteration, or renovation: 

The Objective of Transformation for DOD: 

Creating the future of warfare and protecting our national security 
while improving how the department, including all of its various 
component parts, does business in order to support and sustain our 
position as the world's preeminent military power within current and 
expected resource limits: 

Definition of Waste: 

Waste involves the taxpayers as a whole not receiving reasonable value 
for money in connection with any government funded activities due to an 
inappropriate act or omission by players with control over or access to 
government resources (e.g., executive, judicial, or legislative branch 
employees, contractors, grantees, or other recipients): 

Importantly, waste represents a transgression that is less than fraud 
and abuse and most waste does not involve a violation of law. Rather, 
waste relates primarily to mismanagement, inappropriate actions, or 
inadequate oversight: 

Examples of Waste: 

Illustrative examples of underlying causes of waste in the acquisitions 
and contracting area could include: 

Unreasonable, unrealistic, inadequate, or frequently changing 
requirements: 

Failure to use competitive bidding in appropriate circumstances: 

Failure to engage in selected pre-contracting activities for contingent 
events (e.g., hurricanes, military conflicts): 

Congressional directions (e.g., earmarks), and agency spending actions 
where the action would not otherwise be taken based on an objective 
value and risk assessment and considering available resources: 

Systemic Defense Acquisition Challenges: 

1. Service budgets are allocated largely according to top line 
historical percentages rather than Defense-wide strategic assessments 
and current and likely resource limitations: 

2. Capabilities and requirements are based primarily on individual 
service wants versus collective Defense needs (i.e. based on current 
and expected future threats) that are both affordable and sustainable 
over time: 

3. Defense consistently over-promises and under-delivers in connection 
with major weapons, information, and other systems (i.e. capabilities, 
costs, quantities, schedule): 

4. Defense often employs a "plug and pray approach" when costs escalate 
(i.e. divide total funding dollars by cost per copy, plug the number 
that can be purchased, then pray that Congress will provide more 
funding to buy more quantities): 

5. Congress sometimes forces the department to buy items (e.g. weapons 
systems) and provide services (e.g. additional health care for non- 
actives) that the department does not want and we cannot afford: 

6. DOD tries to develop high risk technologies after programs start 
instead of setting up funding, organizations, and processes to conduct 
high risk technology development activities in low cost environments 
(i.e. technology development is not separated from product 
development). Program decisions to move into design and production are 
made without adequate standards or knowledge: 

7. Program requirements are often set at unrealistic levels, then 
changed frequently as recognition sets in that they cannot be achieved. 
As a result, too much time passes, threats may change, and/or members 
of the user and acquisition communities may simply change their mind. 
The resulting program instability causes cost escalation, schedule 
delays, fewer quantities and reduced contractor accountability: 

8. Contracts, especially service contracts, often do not have 
definitive or realistic requirements at the outset in order to control 
costs and facilitate accountability: 

9. Contracts typically do not accurately reflect the complexity of 
projects nor appropriately allocate risk between the contractors and 
the taxpayers (e.g. cost plus, cancellation charges): 

10. Key program staff rotate too frequently thus promoting myopia and 
reducing accountability (i.e. tours based on time versus key 
milestones). Additionally, the revolving door between industry and the 
Department presents potential conflicts of interest: 

11. The acquisition workforce faces serious challenges (e.g. size, 
skills, knowledge, succession planning): 

12. Incentive and award fees are often paid based on contractor 
attitudes and efforts versus positive results (i.e. cost, quality, 
schedule): 

13. Inadequate oversight is being conducted by both the Defense 
Department and the Congress which results in little to no 
accountability for recurring and systemic problems: 

14. Some individual program and funding decisions made within the 
Department and by the Congress serve to undercut sound policies: 

15. Lack of a professional, term-based CIVIO at DOD serves to slow 
progress on defense transformation and reduce the chance of success in 
the acquisitions/contracting and other key business areas: 

DOD Increasingly Relies on Contractors for Mission-Critical Services: 

DOD's obligations on service contracts increased from $82.3 billion in 
fiscal year 1996 to $141.2 billion in fiscal year 2005 (expressed in 
constant FY05 dollars): 

In fiscal year 2006, DOD's obligations increased to $152.8 billion: 

According to DOD officials, the amount obligated on service contracts 
exceeded the amount the department spent on major weapon systems: 

Growth in services coincided with decreases in DOD's workforce: 

To a large extent, the growth in services was not a managed outcome: 

Growth in Services Poses Challenges to the Acquisition Workforce: 

DOD carried out this downsizing without ensuring it had the specific 
skills and competencies needed to accomplish DOD's mission: 

The amount, nature, and complexity of contracting for services have 
increased, challenging DOD's ability to: 

* maintain a workforce with the requisite knowledge of market 
conditions and industry trends, 

* the ability to prepare clear statements of work, the technical 
details about the services they procure, and: 

* the capacity to manage and oversee contractors: 

DOD Contract Management Challenges: 

DOD continues to experience poor acquisition outcomes and missed 
opportunities to improve its approach to buying goods and services. For 
example, DOD did not: 

* employ a strategic approach to acquiring services that enabled it to 
determine whether investments were achieving desired outcomes: 

* always make sound use of various techniques to acquire goods and 
services (i.e. award and incentive fees, competitive acquisition 
approaches): 

* have a comprehensive plan to ensure its workforce had the right 
skills and capabilities to manage and assess contractor performance: 

Effective Management of Services Requires Both Strategic and 
Transactional Efforts: 

Strategic Level: 

Effective service acquisition requires the leadership, processes, and 
information necessary for mitigating risks, leveraging buying power, 
and managing outcomes: 

Transactional Level: 

Individual service transactions must focus on buying the right thing, 
the right way, while getting the desired outcomes: 

A comprehensive approach would use the strategic and transactional 
factors in a complementary manner to tailor management activity to 
ensure preferred outcomes: 

Source: GAO (analysis). 

Examples of Shortcomings of DOD's Service Acquisition Approach: 

Lacked a strategic plan to gauge whether ongoing and planned efforts 
were achieving intended results: 

Lacked reliable information on the volume and composition of service 
acquisitions: 

Management and review structure provided only limited insight: 

* DOD was unable to determine which or how many transactions had been 
reviewed: 

* Military departments had reviewed proposed acquisitions accounting 
for less than 3 percent of service obligations in fiscal year 2005: 

* No post-award assessments: 

Focused on awarding contracts, with less attention paid to developing 
requirements and assessing contractor performance: 

Individual acquisitions generally not used to inform strategic 
direction: 

Determining the Appropriate Role of Contractors in Meeting DOD's Needs: 

Contractors have an important role to play in the discharge of the 
government's responsibilities, and in some cases the use of contractors 
can result in improved economy, efficiency, and effectiveness: 

There may be occasions when contractors are used to provide certain 
services because the government lacks another viable and timely option. 
In such cases, the government may actually be paying more and incurring 
higher risk than if such services were provided by federal employees: 

Examining the appropriate role for contractors is among the challenges 
in meeting the nation's defense and other needs in the 21 st Century: 

Selected Potential DOD Transformation Related Actions: 

Revise the current approach to developing national military strategy 
(e.g., order, integration): 

Take a longer range, and more enterprise-wide approach to program 
planning and budget integration (e.g., life cycles, opportunity costs): 

Employ a more strategic and integrated approach to business information 
system efforts and financial audit initiatives: 

Differentiate between war fighting and business systems development, 
implementation, and maintenance (e.g., resource control, project 
approval): 

Focus on achieving real success in connection with financial management 
efforts (e.g., systems, controls, information, compliance and 
opinions): 

Employ a total force management approach to planning and execution 
(e.g., military, civilian, contractors): 

Get the design and implementation of the NSPS right, including 
modernizing and integrating the DOD, Service, domain, unit, and 
individual performance measurement and reward systems: 

Revise the process for developing and communicating key changes (e.g., 
DOD transformation, NSPS): 

Reduce the number of layers, silos, and footprints:

Recognize the difference between approving and informing: 

Review and revise current military compensation policies and practices 
(e.g., more targeted and market-based): 

Strengthen emphasis on horizontal and external activities (e.g., 
partnerships): 

Create a Chief Management Officer (CMO) to drive the business 
transformation process: 

GAO's Recommendation for a CMO at DOD: 

GAO has recommended that DOD establish a CIVIO to provide strong and 
sustained leadership over all major business transformation efforts. 
The CIVIO should: 

* Have a proven track record as a business process change agent in a 
large, complex, and diverse organization: 

* Be a Deputy Secretary or Principal Under Secretary of Defense for 
Management: 

* Serve a set term (e.g., 5 to 7 years) that spans administrations with 
potential for reappointment: 

* Be a single point within the department with the perspective and 
responsibility, as well as authority, to develop an overall and 
integrated business transformation plan and help to ensure the 
effective implementation of related functional management and business 
transformation efforts: 

Key Leadership Attributes Needed for These Challenging and Changing 
Times: 

Courage: 
Integrity: 
Creativity: 
Stewardship: 
Partnership: 

On the Web: 

Web site: [Hyperlink, http://www.gao.gov/cghome.htm: 

Contact: 

Paul Anderson, Managing Director, Public Affairs AndersonP1@gao.gov 
(202) 512-4800: 

U.S. Government Accountability Office 441 G Street NW, Room 7149 
Washington, D.C. 20548: 

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