This is the accessible text file for CG Presentation number GAO-11- 799CG entitled 'Maximizing DOD's Potential to Achieve Greater Efficiencies and Improve Business Operations' which was released on June 29, 2011. This text file was formatted by the U.S. Government Accountability Office (GAO) to be accessible to users with visual impairments, as part of a longer term project to improve GAO products' accessibility. Every attempt has been made to maintain the structural and data integrity of the original printed product. Accessibility features, such as text descriptions of tables, consecutively numbered footnotes placed at the end of the file, and the text of agency comment letters, are provided but may not exactly duplicate the presentation or format of the printed version. The portable document format (PDF) file is an exact electronic replica of the printed version. We welcome your feedback. Please E-mail your comments regarding the contents or accessibility features of this document to Webmaster@gao.gov. This is a work of the U.S. government and is not subject to copyright protection in the United States. It may be reproduced and distributed in its entirety without further permission from GAO. Because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately. GAO-11-799CG: Maximizing DOD's Potential to Achieve Greater Efficiencies and Improve Business Operations: DOD Performance Symposium: Lansdowne, VA: June 29, 2011: Gene L. Dodaro: Comptroller General of the United States: U.S. Government Accountability Office: Overview: * Long Term Fiscal Projections: * GPRA Modernization Act Goals: * Overlap, Fragmentation, and Duplication * GAO's High-Risk List: An Update. Long Term Fiscal Projections: Figure: Federal Budget Trends under Different Fiscal Policy Simulations: [Refer to PDF for image: multiple line graph] Percentage of GDP: Year: 2000; Baseline extended: 2.405%; Alternative: 2.405%. Year: 2001; Baseline extended: 1.254%; Alternative: 1.254%. Year: 2002; Baseline extended: -1.497%; Alternative: -1.497%. Year: 2003; Baseline extended: -3.439%; Alternative: -3.439%. Year: 2004; Baseline extended: -3.532%; Alternative: -3.532%. Year: 2005; Baseline extended: -2.558%; Alternative: -2.558%. Year: 2006; Baseline extended: -1.877%; Alternative: -1.877%. Year: 2007; Baseline extended: -1.157%; Alternative: -1.157%. Year: 2008; Baseline extended: -3.186%; Alternative: -3.186%. Year: 2009; Baseline extended: -10.021%; Alternative: -10.021%. Year: 2010; Baseline extended: -8.917%; Alternative: -8.917%. Year: 2011; Baseline extended: -9.843%; Alternative: -9.843%. Year: 2012; Baseline extended: -7.008%; Alternative: -7.14%. Year: 2013; Baseline extended: -4.294%; Alternative: -6.41%. Year: 2014; Baseline extended: -3.091%; Alternative: -6.421%. Year: 2015; Baseline extended: -3.027%; Alternative: -6.806%. Year: 2016; Baseline extended: -3.441%; Alternative: -7.523%. Year: 2017; Baseline extended: -3.078%; Alternative: -7.492%. Year: 2018; Baseline extended: -2.915%; Alternative: -7.666%. Year: 2019; Baseline extended: -3.182%; Alternative: -8.232%. Year: 2020; Baseline extended: -3.237%; Alternative: -8.635%. Year: 2021; Baseline extended: -3.206%; Alternative: -8.954%. Year: 2022; Baseline extended: -3.537%; Alternative: -9.63%. Year: 2023; Baseline extended: -3.702%; Alternative: -10.357%. Year: 2024; Baseline extended: -3.977%; Alternative: -11.115%. Year: 2025; Baseline extended: -4.375%; Alternative: -11.911%. Year: 2026; Baseline extended: -4.553%; Alternative: -12.513%. Year: 2027; Baseline extended: -4.837%; Alternative: -13.125%. Year: 2028; Baseline extended: -5.231%; Alternative: -13.851%. Year: 2029; Baseline extended: -5.527%; Alternative: -14.491%. Year: 2030; Baseline extended: -5.816%; Alternative: -15.131%. Year: 2031; Baseline extended: -6.103%; Alternative: -15.775%. Year: 2032; Baseline extended: -6.504%; Alternative: -16.422%. Year: 2033; Baseline extended: -6.677%; Alternative: -17.075%. Year: 2034; Baseline extended: -6.958%; Alternative: -17.735%. Year: 2035; Baseline extended: -7.234%; Alternative: -18.396%. Year: 2036; Baseline extended: -7.509%; Alternative: -19.063 Year: 2037; Baseline extended: -7.9%; Alternative: -19.849%. Year: 2038; Baseline extended: -8.159%. Year: 2039; Baseline extended: -8.413%. Year: 2040; Baseline extended: -8.661%. Year: 2041; Baseline extended: -8.908%. Year: 2042; Baseline extended: -9.153%. Year: 2043; Baseline extended: -9.398%. Year: 2044; Baseline extended: -9.645%. Year: 2045; Baseline extended: -9.897%. Year: 2046; Baseline extended: -10.286%. Year: 2047; Baseline extended: -10.547%. Year: 2048; Baseline extended: -10.806%. Year: 2049; Baseline extended: -11.064%. Year: 2050; Baseline extended: -11.192%. Year: 2051; Baseline extended: -11.597%. Year: 2052; Baseline extended: -11.876%. Year: 2053; Baseline extended: -12.159%. Year: 2054; Baseline extended: -12.45%. Year: 2055; Baseline extended: -12.752%. Year: 2056; Baseline extended: -13.061%. Year: 2057; Baseline extended: -13.229%. Year: 2058; Baseline extended: -13.679%. Year: 2059; Baseline extended: -13.993%. Year: 2060; Baseline extended: -14.166%. Source: GAO. Note: Data are from GAO's January 2011 simulations based on the Trustees' assumptions for Social Security and the Trustees' and the CMS Actuary's assumptions for Medicare. [End of figure] Figure: Debt Held by the Public Under Two Fiscal Policy Simulations: [Refer to PDF for image: multiple line graph] Percent of GDP: Historical high: 109 percent in 1946. Fiscal year: 2000; Baseline extended: 34.7%; Alternative: 34.7%. Fiscal year: 2001; Baseline extended: 32.5%; Alternative: 32.5%. Fiscal year: 2002; Baseline extended: 33.6%; Alternative: 33.6%. Fiscal year: 2003; Baseline extended: 35.6%; Alternative: 35.6%. Fiscal year: 2004; Baseline extended: 36.8%; Alternative: 36.8%. Fiscal year: 2005; Baseline extended: 36.9%; Alternative: 36.9%. Fiscal year: 2006; Baseline extended: 36.5%; Alternative: 36.5%. Fiscal year: 2007; Baseline extended: 36.2%; Alternative: 36.2%. Fiscal year: 2008; Baseline extended: 40.2%; Alternative: 40.2%. Fiscal year: 2009; Baseline extended: 53.52%; Alternative: 53.52%. Fiscal year: 2010; Baseline extended: 62.14%; Alternative: 62.14%. Fiscal year: 2011; Baseline extended: 69.38%; Alternative: 69.38%. Fiscal year: 2012; Baseline extended: 73.90%; Alternative: 74.04%. Fiscal year: 2013; Baseline extended: 75.52%; Alternative: 77.77%. Fiscal year: 2014; Baseline extended: 75.30%; Alternative: 80.77%. Fiscal year: 2015; Baseline extended: 74.88%; Alternative: 83.84%. Fiscal year: 2016; Baseline extended: 75.01%; Alternative: 87.61%. Fiscal year: 2017; Baseline extended: 75.20%; Alternative: 91.65%. Fiscal year: 2018; Baseline extended: 75.31%; Alternative: 95.81%. Fiscal year: 2019; Baseline extended: 75.75%; Alternative: 100.43%. Fiscal year: 2020; Baseline extended: 76.22%; Alternative: 105.26%. Fiscal year: 2021; Baseline extended: 76.66%; Alternative: 110.24%. Fiscal year: 2022; Baseline extended: 77.45%; Alternative: 115.73%. Fiscal year: 2023; Baseline extended: 78.1%; Alternative: 121.48%. Fiscal year: 2024; Baseline extended: 79.19%; Alternative: 127.72%. Fiscal year: 2025; Baseline extended: 80.59%; Alternative: 134.58%. Fiscal year: 2026; Baseline extended: 82.15%; Alternative: 141.82%. Fiscal year: 2027; Baseline extended: 83.91%; Alternative: 149.33%. Fiscal year: 2028; Baseline extended: 86.00%; Alternative: 157.28%. Fiscal year: 2029; Baseline extended: 88.39%; Alternative: 165.64%. Fiscal year: 2030; Baseline extended: 90.96%; Alternative: 174.36%. Fiscal year: 2031; Baseline extended: 93.70%; Alternative: 183.32%. Fiscal year: 2032; Baseline extended: 96.74%; Alternative: 192.57%. Fiscal year: 2033; Baseline extended: 99.84%. Fiscal year: 2034; Baseline extended: 103.11%. Fiscal year: 2035; Baseline extended: 106.5%. Fiscal year: 2036; Baseline extended: 110.12%. Fiscal year: 2037; Baseline extended: 113.95%. Fiscal year: 2038; Baseline extended: 117.85%. Fiscal year: 2039; Baseline extended: 121.90%. Fiscal year: 2040; Baseline extended: 126.05%. Fiscal year: 2041; Baseline extended: 130.30%. Fiscal year: 2042; Baseline extended: 134.63%. Fiscal year: 2043; Baseline extended: 139.05%. Fiscal year: 2044; Baseline extended: 143.54%. Fiscal year: 2045; Baseline extended: 148.12%. Fiscal year: 2046; Baseline extended: 152.91%. Fiscal year: 2047; Baseline extended: 157.78%. Fiscal year: 2048; Baseline extended: 162.72%. Fiscal year: 2049; Baseline extended: 167.73%. Fiscal year: 2050; Baseline extended: 172.76%. Fiscal year: 2051; Baseline extended: 178.04%. Fiscal year: 2052; Baseline extended: 183.39%. Fiscal year: 2053; Baseline extended: 188.83%. Fiscal year: 2054; Baseline extended: 194.36%. Fiscal year: 2055; Baseline extended: 199.97%. Source: GAO. Note: Data are from GAO's January 2011 simulations based on the Social Security Trustees' assumptions for Social Security and the Medicare Trustees' and the Centers for Medicare & Medicaid Services Office of the Actuary's assumptions for Medicare. [End of figure] Figure: Potential Fiscal Outcomes: Revenues and Composition of Spending under Baseline Extended Simulation: [Refer to PDF for image: combined stacked vertical bar and line graph] Percentage of GDP: Fiscal year: 2010; Net interest: 1.4%; Social Security: 4.8%; Medicare & Medicaid[A]: 5%; All other spending: 12.6%; Revenue: 14.9%. Fiscal year: 2020; Net interest: 3.3%; Social Security: 5.2%; Medicare & Medicaid[A]: 6.3%; All other spending: 9.1%; Revenue: 20.7%. Fiscal year: 2030; Net interest: 4.2%; Social Security: 6%; Medicare & Medicaid[A]: 7.6%; All other spending: 8.9%; Revenue: 20.8%. Fiscal year: 2040; Net interest: 5.7%; Social Security: 6.2%; Medicare & Medicaid[A]: 8.7%; All other spending: 8.9%; Revenue: 20.8%. Note: Data are from GAO's January 2011 simulations based on the Trustees' assumptions for Social Security and Medicare. [A] This also includes spending for insurance exchange subsidies and CHIP. Source: GAO. [End of figure] Figure: Potential Fiscal Outcomes: Revenues and Composition of Spending under Alternative Simulation: [Refer to PDF for image: combined stacked vertical bar and line graph] Percentage of GDP: Fiscal year: 2010; Net interest: 1.4%; Social Security: 4.8%; Medicare & Medicaid[A]: 5%; All other spending: 12.6%; Revenue: 14.9%. Fiscal year: 2020; Net interest: 4.4%; Social Security: 5.2%; Medicare & Medicaid[A]: 6.7%; All other spending: 10.7%; Revenue: 18.3%. Fiscal year: 2030; Net interest: 7.8%; Social Security: 6%; Medicare & Medicaid[A]: 8.6%; All other spending: 10.8%; Revenue: 18%. Fiscal year: 2040; Net interest: 12.5%; Social Security: 6.2%; Medicare & Medicaid[A]: 10.4%; All other spending: 10.8%; Revenue: 18%. Source: GAO. Note: Data are from GAO's January 2011 simulations based on the Trustees' assumptions for Social Security and the CMS Actuary's assumptions for Medicare. [A] This also includes spending for insurance exchange subsidies and CHIP. [End of figure] Figure: DOD Budget Authority FY 2001-2011 (Excluding Contingency Operations): DOD’s Budget Authority for Fiscal Years 2001–2010 (Excluding Contingency Operations): [Refer to PDF for image: combined vertical bar and line graph] Fiscal year: 2001; Nominal dollars: $289.9 billion; Constant FY 2010 dollars: $355.3 billion. Fiscal year: 2002; Nominal dollars: $331.1 billion; Constant FY 2010 dollars: $399.2 billion. Fiscal year: 2003; Nominal dollars: $368.5 billion; Constant FY 2010 dollars: $435.2 billion. Fiscal year: 2004; Nominal dollars: $376.6 billion; Constant FY 2010 dollars: $433.6 billion. Fiscal year: 2005; Nominal dollars: $400.9 billion; Constant FY 2010 dollars: $447.0 billion. Fiscal year: 2006; Nominal dollars: $418.5 billion; Constant FY 2010 dollars: $451.2 billion. Fiscal year: 2007; Nominal dollars: $431.9 billion; Constant FY 2010 dollars: $452.5 billion. Fiscal year: 2008; Nominal dollars: $450.5 billion; Constant FY 2010 dollars: $461.3 billion. Fiscal year: 2009; Nominal dollars: $513.3 billion; Constant FY 2010 dollars: $517.9 billion. Fiscal year: 2010; Nominal dollars: $534.0 billion; Constant FY 2010 dollars: $534 billion. Fiscal year: 2011; Nominal dollars: $526.1 billion; Constant FY 2010 dollars: $526.1 billion. Source: Department of Defense. [End of figure] DOD's Fiscal Situation: DOD faces fiscal pressures as it attempts to balance competing 9 demands from within. For example: * While overall costs are declining as forces redeploy from Iraq, ongoing operations will still continue to require substantial amounts of resources. * Extended military operations have taken a toll on readiness, and rebuilding our force will entail significant costs. * Personnel and health care costs are increasing. * Growth in cost to acquire and operate weapon systems remains a significant problem. Building on DOD’s Ongoing Efforts to Identify Efficiencies: DOD is becoming more focused on identifying efficiencies and potential cost savings. * In May 2010, Secretary Gates directed DOD to undertake a departmentwide initiative to assess how it is staffed, organized, and operated with the overarching goal of significantly reducing excess overhead costs and reinvesting these savings in sustaining the current force structure and modernizing its weapons portfolio. * In January 2011, the Secretary announced the results --- projected savings of about $154 billion over 5 years that will be integrated into DOD’s budget beginning in fiscal year 2012. * Also, as part of its fiscal year 2012 budget request, DOD identified $78 billion in savings that could be reduced from its topline over a 5 year period beginning in fiscal year 2012. Of this amount, DOD stated about $54 billion came from the Secretary’s efficiency initiative. In April 2011, President Obama set a goal of cutting $400 billion from national security spending over the next 12 years. To support this goal and build on the Secretary’s initiative, it will require DOD to: * reexamine the need for programs and activities, including making tough choices to adjust or terminate those that are outmoded or not performing; * set priorities and allocate resources accordingly; * adopt sound business practices; and; * eliminate inefficient ways of doing business, particularly in core functions and processes. GPRA Modernization Act Goals: GPRA Modernization Act Goals: * Adopting a more coordinated and crosscutting approach to achieving common goals, * Addressing weaknesses in major management functions. * Ensuring performance information is both useful and used in decision making. * Instilling sustained leadership commitment and accountability for achieving results. * Engaging Congress in identifying management and performance issues to address. Coordinated and Crosscutting Approaches to Achieve Common Goals: The act requires OMB, in coordination with 13 agencies, to: * Develop long-term, outcome-oriented goals for a limited number of crosscutting policy areas. * Provide information annually on how these crosscutting goals will be achieved. Effective implementation of these requirements could help inform reexamination or restructuring efforts. Addressing Weaknesses in Major Management Functions: Agencies need more effective management capabilities to better implement programs and policies. The act requires OMB to develop goals to improve management functions across the government, including in the following areas: * Financial management. * Human capital. * Information technology. * Procurement and acquisition. * Real property. Ensuring Performance Information is Useful and Used: To ensure performance information will be both useful 15 and used, it must meet various users' needs for completeness, accuracy, validity, timeliness, and ease of use. The act has several requirements that could help meet these needs: * Agencies to disclose more information on the accuracy and validity of their performance data, such as data sources. * Quarterly, rather than annual, reporting for priority goals. * Information to be posted on a governmentwide website. To ensure that federal officials have the knowledge and 16 skills necessary to use the information they are gathering, the act requires OPM to: * Identify key skills and competencies needed to carry out performance management activities. * Incorporate those skills and competencies into relevant position classifications and agency training. Sustained Leadership Commitment and Accountability for Results: The act creates several new leadership structures and 17 responsibilities aimed at sustaining attention on improvement efforts: * At the agency level, a Chief Operating Officer and Performance Improvement Officer at each agency. * A governmentwide Performance Improvement Council to assist in carrying out the governmentwide performance and reporting requirements of the act. * Quarterly reviews for the governmentwide and agency priority goals that involve top leadership. Engaging Congress: The act significantly enhances requirements for agencies to consult with Congress when establishing or adjusting governmentwide and agency goals. * OMB and agencies are to consult with relevant committees, obtaining majority and minority views, about proposed goals at least once every 2 years. * In addition, OMB and agencies are to describe how they incorporated congressional input into their goals. GAO's Role in Evaluating Implementation of the GPRA Modernization Act: The act includes provisions requiring GAO to evaluate implementation over time: * By June 2013, GAO is to report on implementation of the act's planning and reporting requirements at both the governmentwide and agency levels. * By September 2015 and 2017, GAO is to evaluate how performance management is being used by federal agencies to improve their results. * Also by September 2015 and 2017--and every 4 years thereafter—-GAO is to evaluate implementation of the federal government priority goals and performance plans, and related reporting requirements. Overlap, Fragmentation and Duplication: GAO Reporting on Overlap, Fragmentation and Duplication in Federal Programs: Section 21 of P.L. 111-139, enacted in February 2010, required that 21 the Comptroller General: * conduct routine investigations to identify programs, agencies, offices, and initiatives with duplicative goals and activities within Departments and government-wide, and; * report annually to Congress on the findings, including the cost of such duplication and with recommendations for consolidation and elimination to reduce duplication. Methodology for 2011 report (GAO-11-318SP): GAO drew on a variety of sources to identify potential areas of focus. GAO: * Over 200 reports that highlight the potential for duplication, overlap, or fragmentation. * Major cost saving opportunities identified on GAO Web site. * GAO High-Risk series. * Previous GAO work on government restructuring and reorganization. External Sources: * OMB's Program Assessment Rating Tool (PART). * President's Budget Terminations, Reductions, and Savings list. * CBO Budget Options. * Academia, public policy organizations, think tanks. Summary of 2011 report (GAO-11-318SP): * 34 areas where agencies, offices, or initiatives have similar or overlapping objectives or provide similar services to the same populations; or where government missions are fragmented across multiple agencies or programs. * 47 additional areas describing other opportunities for agencies or Congress to consider taking action that could either reduce the cost of government operations or enhance revenue collections for the Treasury. * Depending on the extent of actions taken, these savings and revenues could collectively result in tens of billions of dollars in annual savings. Examples of DOD-Related Duplication and Cost Savings or Revenue Enhancement Issues: Duplication, Overlap, or Fragmentation: * Military medical command structures; * Counter-IED Efforts; * Intelligence, Surveillance, and Reconnaissance Capabilities; * Warfighter Urgent Needs Processes; * Tactical Wheeled Vehicles Purchases; * Prepositioning Programs; * Business System Modernization Efforts. Cost Savings or Revenue Enhancement: * Assessing Costs and Benefits of Overseas Military Presence Options; * Developing a Total Compensation Approach to Manage Growth in Military Personnel Costs; * Opportunities to Better Manage DOD's Spare Parts Inventory and Weapons Systems Acquisition; * Improving the Cost-Effectiveness of Sustaining Weapon Systems; * Improving Corrosion Prevention and Control Practices. GAO High Risk List-An Update: 2011 High-Risk Update (GAO-11-278): 2011 List — 30 areas total * One DOD-specific area removed: - Personnel Security Clearances. * Seven DOD-specific areas related to business operations: - Management Approach to Business Transformation; - Business Systems Modernization; - Support Infrastructure Management (Narrowed in Scope); - Financial Management; - Supply Chain Management; - Weapon Systems Acquisition; - Contract Management. Removing High-Risk Designations: Five criteria for determining whether a high-risk area can be removed: * Demonstrated top leadership commitment to addressing the problems. * Capacity (people and resources). * Corrective action plan. * Demonstrated progress that is sustainable. * A program to monitor corrective measures. Closing Thoughts: The nation is facing the daunting challenges of recovering from a 28 serious recession while facing serious long-term fiscal challenges that simulations show —absent significant policy changes— growing deficits accumulating to an unsustainable increase in debt. In this fiscal environment, DOD cannot afford to miss opportunities to address inefficiencies in its key business areas as well as across the Department. In many areas, some of which I have outlined today, DOD can achieve tangible and sustainable outcomes that will ultimately provide better support to the warfighter and free up resources for higher priority needs. To do so, it will take strong leadership, sound plans, valid performance metrics and reliable data to measure progress, and tough choices to alter course if programs aren't performing. On the Web: Web site: [hyperlink, http://www.gao.gov/]. Contact: Chuck Young, Managing Director, Public Affairs, youngc@gao.gov: (202) 512-4800: U.S. Government Accountability Office: 441 G Street NW, Room 7149: Washington, D.C. 20548: Copyright: This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.