oversight

DOD High-Risk Areas: Eliminating Underlying Causes Will Avoid Billions of Dollars in Waste

Published by the Government Accountability Office on 1997-05-01.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                          United States General Accounting Office

GAO                       Testimony
                          Before the Committee on Governmental Affairs, U.S.
                          Senate




For Release
Expected at
10:00 a.m., EST
                          DOD HIGH-RISK AREAS
Thursday,
May 1, 1997

                          Eliminating Underlying
                          Causes Will Avoid Billions
                          of Dollars in Waste
                          Statement of Henry L. Hinton, Jr., Assistant Comptroller
                          General, National Security and International Affairs
                          Division




GAO/T-NSIAD/AIMD-97-143
                       Mr. Chairman and Members of the Committee:

                       We are pleased to be here today to discuss the Department of Defense
                       (DOD) programs and operations that we have identified as high risk
                       because of vulnerabilities to waste, fraud, abuse, and mismanagement. In
                       1990, we began reviewing and reporting on high-risk areas throughout the
                       federal government, and in February 1997, we issued a series of reports
                       providing the status of such areas. Of the 25 areas we identified as high
                       risk, 6 are within DOD. (See app. I for a list of our 1997 high-risk reports
                       involving DOD.) DOD’s inability to effectively address problems in its
                       high-risk areas has resulted in billions of dollars being wasted and places
                       billions of dollars in future spending at similar risk.

                       My statement today discusses the

                   •   high-risk areas of financial management, information technology, weapon
                       systems acquisition, contract management, infrastructure, and inventory
                       management;
                   •   underlying causes of these high-risk areas; and
                   •   overall strategy we believe is needed to eliminate them.


                       To avoid the risk of waste, fraud, abuse, and mismanagement, we have
Results in Brief       made hundreds of recommendations to DOD over the last few years to help
                       correct problems in high-risk areas, and the Congress has held oversight
                       hearings and enacted specific legislative initiatives. DOD has taken our
                       suggestions and congressional direction seriously and has initiated actions
                       that resulted in some progress in each of the high-risk areas. However,
                       eliminating these problems requires that their underlying causes be
                       addressed.

                       Effectively attacking the underlying causes will require congressional
                       support and a commitment by senior-level DOD managers to a multilevel
                       strategy that (1) implements our recommendations to correct specific
                       problems in each of the high-risk areas and (2) develops and implements a
                       strategic plan that addresses actions for eliminating the six high-risk areas.
                       This strategic plan should include goals, performance measures, and time
                       frames for completing corrective actions; identify organizations and
                       individuals accountable for accomplishing specific goals; and fully comply
                       with legislative requirements of the Chief Financial Officers Act, the
                       Government Performance and Results Act, the Paperwork Reduction Act,
                       and the Clinger-Cohen Act. To help ensure success of the multilevel



                       Page 1                              GAO/T-NSIAD/AIMD-97-143 DOD High-Risk Areas
                            strategy, top-level management within DOD needs to be held accountable
                            and have the authority and flexibility to achieve the desired results.

                            If DOD is successful in attacking the underlying causes of the problems, the
                            Congress should expect to see positive outcomes, including the successful
                            completion of full-scale financial audits; reductions in operation and
                            support costs; and the fielding of major weapon and computer systems
                            that meet cost, schedule, and performance estimates. If DOD’s multilevel
                            strategy does not result in the elimination of high-risk areas, the Congress
                            may wish to consider the need for incentives to reach that goal.


DOD’s High-Risk Areas Are   DOD has severe management weaknesses in six high-risk areas: financial
Vulnerable to Waste,        management, information technology, weapon systems acquisition,
Fraud, Abuse, and           contract management, infrastructure, and inventory management. Due to
                            its lingering financial management problems, which are among the most
Mismanagement               severe in government, DOD does not have accurate information to use in
                            managing its budget of over $250 billion and reported $1 trillion in assets.
                            DOD’s efforts to develop and modernize its computer systems and
                            networks have yielded poor returns in reducing its operating costs,
                            improving performance, and supporting sound financial management.

                            DOD  continues to generate and support acquisition of new weapon systems
                            that will not satisfy the most critical requirements at the least cost to the
                            government and commit more procurement funds to programs than can
                            reasonably be expected to be available in future defense budgets. Many
                            new weapon systems cost more and do less than anticipated, and
                            schedules are often delayed.

                            In spite of budget reductions and other changes, DOD’s contracting activity
                            remains substantial, amounting to about $110 billion in fiscal year 1995.
                            The risks associated with this level of contracting activity alone are high.
                            The risk increases substantially when this activity is coupled with
                            (1) continuing fundamental changes in the acquisition and contracting
                            processes that have yet to be fully implemented or evaluated and (2) a
                            contract administration and auditing resource base that has already been
                            substantially reduced.

                            Although it has undergone substantial downsizing in force structure, DOD
                            has not achieved commensurate reductions in operation and support
                            costs. For example, our analysis of the Army depot system showed that
                            the Army is not effectively downsizing its remaining depot maintenance



                            Page 2                             GAO/T-NSIAD/AIMD-97-143 DOD High-Risk Areas
                               infrastructure to reduce costly excess capacity. In the case of Army’s
                               tactical missile workload, consolidating the workload at the Tobyhanna
                               depot would improve the utilization of the depot’s capacity and decrease
                               costs by as much as $27 million annually. Expenditures on wasteful or
                               inefficient infrastructure activities divert limited defense funds from
                               pressing defense needs such as the modernization of weapon systems.

                               Because of fundamental inefficiencies in inventory management systems
                               and procedures, DOD is vulnerable to wasting billions of dollars on excess
                               supplies. For example, it is for these inefficiencies that we find about
                               one-half of DOD’s $69.6 billion inventory is beyond the level needed to
                               support war reserve or current operating requirements, and DOD continues
                               to buy inventory in excess of what it needs.


Underlying Causes of the       To its credit, DOD has taken actions to correct problems in the high-risk
High-Risk Areas Have Not       areas and made progress in some of these areas. For example, in response
Been Fully Addressed           to our recommendations, DOD implemented certain commercial practices
                               in its inventory management area, such as direct vendor delivery for
                               medical and food items. However, even though this and other actions are
                               very important, the task of eliminating the high-risk areas altogether
                               remains to be accomplished. Key to accomplishing this task is attacking
                               the following underlying causes of the high-risk areas:

                           •   Cultural barriers and parochialism limit opportunities for change. Cultural
                               resistance to change and service parochialism have contributed to the
                               difficulty of implementing corrective actions to improve DOD’s financial,
                               infrastructure, inventory, and acquisition systems that are at risk. For
                               example, some weapon systems are being developed and produced, even
                               though the Soviet threat upon which they were justified has diminished. It
                               is not unusual for DOD, due to its culture to continually generate and
                               support the acquisition of new weapons, to override the need to satisfy the
                               most critical weapon requirements at minimal cost.
                           •   Incentives for seeking and implementing change are lacking. DOD
                               managers have few incentives to improve the Department’s financial,
                               acquisition, and infrastructure management approaches. For example, in
                               DOD’s culture, the success of a manager’s career depends more often on
                               moving programs and operations through the DOD process rather than on
                               improving the process. The fact that a given program costs more than
                               estimated, takes longer to complete, and does not generate results or
                               perform as promised is secondary to implementing a new program.




                               Page 3                            GAO/T-NSIAD/AIMD-97-143 DOD High-Risk Areas
                            •   Management data are deficient. DOD decisionmakers are severely affected
                                by the lack of comprehensive and reliable data for measuring program
                                costs and results and making well-informed decisions. For example, better
                                information on the quantity and location of items in the Department’s
                                inventory would help prevent DOD managers from procuring additional
                                items at one location that are already on hand at another location. In
                                addition, reliable information would greatly aid DOD officials in resolving
                                problems with erroneous contract payments, weapon system cost
                                overruns, and excessive infrastructure.
                            •   Clear, results-oriented goals and performance measures are lacking. In
                                some cases, DOD’s strategic goals and objectives are not linked to those of
                                the military services and defense agencies, and DOD’s guidance tends to
                                lack specificity. Moreover, several DOD managers said that the
                                Department’s strategic goals are too broad for their organizations to
                                readily align their activities in support of those goals. Without clear,
                                hierarchically linked goals and performance measures, DOD managers lack
                                straightforward road maps showing how their work contributes to
                                attaining DOD’s strategic goals and risk operating autonomously rather than
                                collectively.
                            •   Management accountability and follow through have been inadequate. DOD
                                does not routinely link its performance measures to specific organizational
                                units or individuals that have sufficient flexibility, discretion, and authority
                                to accomplish the desired results. In some departments and agencies,
                                DOD’s top political and career leaders have not encouraged accountability
                                by providing managers at each level in the organization with the authority
                                and flexibility to obtain those results. At both the organizational and
                                managerial levels, accountability requires results-oriented goals and
                                performance measures through which to gauge progress. This
                                accountability helps to guarantee that daily activities remain focused on
                                achieving the outcomes that DOD is trying to attain.


DOD Needs a Multilevel          To eliminate the high-risk areas, DOD needs a multilevel strategy that
Strategy to Eliminate the       implements our recommendations to correct specific problems in each of
High-Risk Areas                 the six high-risk areas and develops a strategic plan for eliminating those
                                areas. This strategic plan should include goals, performance measures, and
                                time frames for completing corrective actions; identify organizations and
                                individuals that are accountable for accomplishing specific goals; and
                                provide for annual progress reports to the Congress on outcomes
                                achieved. In developing the plan, DOD should comply with the legislative
                                requirements of the Chief Financial Officers Act, the Government
                                Performance and Results Act, the Paperwork Reduction Act, and the



                                Page 4                              GAO/T-NSIAD/AIMD-97-143 DOD High-Risk Areas
                               Clinger-Cohen Act. To help ensure success of the multilevel strategy,
                               top-level management within DOD needs to be held accountable and have
                               the authority and flexibility to achieve the desired results. We believe that
                               the Deputy Secretary of Defense is the appropriate management level to
                               develop and implement such a strategy.

DOD Needs to Address Our       Although DOD’s actions on many of our recommendations have resulted in
Recommendations                significant financial savings and improvements in DOD’s operations,
                               numerous recommendations have not been fully implemented.1 (See
                               Related GAO Products at the end of this testimony.) In our 1997 high-risk
                               reports, we recommended that

                           •   DOD implement a focused, sustained effort to fully realize meaningful
                               financial management improvements, including integrating accounting and
                               financial management systems, accumulating accurate cost information,
                               resolving problem disbursements, upgrading the financial management
                               workforce and organization, strengthening internal controls, and
                               reengineering business practices;
                           •   DOD establish (1) performance measures to link the use of information
                               technology to improvements in productivity, efficiency, and effectiveness
                               of their operations and (2) a structured process for selecting, controlling,
                               and evaluating their capital investments in technology to maximize
                               mission-related benefits and control risks;
                           •   DOD take much stronger actions to effectively control the influence of the
                               acquisition culture, such as planning weapon programs and resources on a
                               joint mission basis, examining cost and performance tradeoffs among
                               alternatives more rigorously before a particular approach is chosen,
                               making the war fighters responsible for participating in the selection of
                               weapon systems, linking program decisions in a more durable way to DOD’s
                               long-term budget, and aggressively pursuing high-risk (breakthrough)
                               technology before weapon system research and development;
                           •   DOD seek to reengineer and streamline its contracting and acquisition
                               processes, including the use of new business process techniques;
                           •   the Secretary of Defense and the Secretaries of the Army, the Navy, and
                               the Air Force consider using a variety of means to achieve infrastructure
                               reductions, including consolidations, privatization, outsourcing,
                               reengineering, and interservicing agreements; and
                           •   DOD (1) establish aggressive milestones for substantially expanding the use
                               of modern commercial practices; (2) provide managers with the tools
                               critical to managing inventory efficiently; and (3) continue to explore

                               1
                                Status of Open Recommendations: Improving Operations of Federal Departments and Agencies
                               (GAO/OP-97-1, Jan. 24, 1997).



                               Page 5                                      GAO/T-NSIAD/AIMD-97-143 DOD High-Risk Areas
                                 other alternatives, such as business case analysis to identify opportunities
                                 for outsourcing logistics functions.

DOD Needs a Strategic Plan       To attack the underlying causes of the high-risk areas, DOD also needs to
                                 develop a strategic plan that establishes results-oriented goals,
                                 performance measures, and time frames for completing corrective actions;
                                 identifies organizations and individuals that are responsible for
                                 accomplishing specific goals; and provides for annual progress reports to
                                 the Congress on outcomes achieved. In developing the plan, DOD should
                                 comply with the following legislation:

                             •   The expanded Chief Financial Officers Act of 1990 (P.L. 101-576) provides
                                 the framework for identifying and correcting financial management
                                 weaknesses and reliably reporting on the results of financial operations.
                             •   The Government Performance and Results Act of 1993
                                 (P.L. 103-62) emphasizes managing for results and pinpointing
                                 opportunities for improved performance and increased accountability.
                             •   The Paperwork Reduction Act of 1995 (P.L. 104-13) requires federal
                                 agencies to use information resources to improve the efficiency and
                                 effectiveness of their operations and fulfillment of their missions. As such,
                                 it is the overarching statute dealing with the acquisition and management
                                 of information resources.
                             •   The Clinger-Cohen Act of 1996 (P.L. 104-106) focuses on the application of
                                 information resources in supporting agency missions and improving
                                 agency performance and sets forth requirements for improving the
                                 efficiency and effectiveness of operations and the delivery of services to
                                 the public through the effective use of information technology.
                                 Specifically, the act requires that DOD establish performance measures that
                                 measure how well its information technology supports its missions and
                                 programs and that evaluations be made of the results achieved from its
                                 information technology investments.

                                 This strategic plan and annual progress reports should be presented to the
                                 Congress to provide a basis for overseeing DOD’s improvement efforts and
                                 allow other stakeholders to agree on what actions should happen and
                                 when they should occur. It is important that the Congress be adequately
                                 informed of DOD’s plans and outcomes and hold top officials accountable
                                 for implementing the reforms needed to eliminate all six areas from the
                                 high-risk category.




                                 Page 6                             GAO/T-NSIAD/AIMD-97-143 DOD High-Risk Areas
The Congress Should        If DOD is successful in eliminating the underlying causes of the six high-risk
Expect Certain Outcomes    areas, the Congress should expect to see, over time, outcomes showing
                           DOD’s progress. These outcomes could include (1) the successful
and Precise Measures of
                           completion of full-scale financial audits, a primary catalyst for increasing
Performance                the reliability of financial data and improving financial operations; (2) the
                           development of information technology investment processes and
                           performance measures that link return-on-investment dollars to mission
                           and program objectives; (3) the acquisition of major weapon systems
                           within fiscal realities and the fielding of weapon systems without
                           excessive cost overruns, schedule delays, or performance shortfalls;
                           (4) the utilization of proven acquisition and contracting processes that
                           increase accountability and result in cost savings and other benefits;
                           (5) reductions in operation and support activities that are commensurate
                           with force structure reductions; and (6) significant reductions in the
                           amount of unneeded inventory and annual expenditures for new
                           inventory.


Incentives May Be Needed   If DOD does not make progress in eliminating the underlying causes of the
                           high-risk areas, the Congress may wish to consider the need for incentives
                           to stimulate change. We believe that, one of the best incentives the
                           Congress can apply to foster results-oriented management is to use
                           performance measurement data in its policy, program, and resource
                           allocation decisions.2 Another incentive could be to allow DOD to use
                           savings from eliminating waste in the high-risk areas to further improve
                           operations or satisfy other defense priorities, such as modernization,
                           readiness, and quality-of-life needs.


                           Long-standing weaknesses in DOD’s financial operations continue to
Long-Standing              severely limit the reliability of the financial information it provides to the
Weaknesses in              Congress. These weaknesses also result in wasted resources that
Financial                  undermine DOD’s ability to carry out its stewardship responsibilities, which
                           in fiscal year 1997 included a budget of over $250 billion and $1 trillion in
Management                 assets. No military service or major defense component has withstood the
                           scrutiny of an independent financial statement audit. DOD has
                           acknowledged many weaknesses and has a number of financial
                           management reform initiatives underway to address them. However, it still
                           has a long way to go to meet the challenges of managing its vast and



                           2
                            Executive Guide: Effectively Implementing the Government Performance and Results Act
                           (GAO/GGD-96-118, June 1996).



                           Page 7                                      GAO/T-NSIAD/AIMD-97-143 DOD High-Risk Areas
                               complex operations with the business-like efficiency demanded by the
                               Congress and the public.


Financial Management           In its annual reports to the President and the Congress, DOD acknowledged
Weaknesses Fall Into Six       a series of financial management problems confronting the Department,
Areas                          including billions of dollars in disbursements not matched to specific
                               obligations, overpayments to contractors, Anti-Deficiency Act violations,
                               and issuance of paychecks to soldiers after their discharge. While these
                               signs of DOD top leadership acknowledgement of the Department’s
                               financial management problems are encouraging, DOD must effectively
                               address challenges in the following six critical areas if its envisioned
                               financial reforms are to be realized.

                           •   Accounting and financial management systems need to be integrated.
                               DOD’s existing accounting and financial management systems are not
                               integrated and lack a standard general ledger. An integrated, general
                               ledger controlled system is necessary to provide oversight and control to
                               ensure accurate and complete accounting for DOD’s resources. Under an
                               integrated system structure, DOD’s accounting, finance, logistics,
                               personnel, and budgetary systems would be closely tied together.
                               However, DOD acknowledged that its operations are constrained by the
                               military services operating unique systems, many of which are
                               incompatible. An example of the effect of DOD’s nonintegrated systems is
                               in the inventory management area. Auditors found that DOD components
                               purchased unneeded materials, at least in part because DOD’s accounting
                               and logistics systems were not integrated.
                           •   Accurate cost data are needed. DOD has acknowledged fundamental
                               problems with the Department’s ability to accumulate reliable cost data.
                               DOD does not have accurate cost data for almost all of its assets, such as
                               inventories, equipment, aircraft, and missiles. In addition, DOD cannot
                               accumulate reliable information on the costs of its business activities and
                               critical operations, such as the cost associated with maintaining its
                               weapon systems in a high state of readiness, or costs related to its
                               contingency operations. It is critical that managers have accurate
                               information on actual costs to consider when making decisions, such as
                               whether to replace or upgrade weapon systems.
                           •   Disbursement problems need resolution. DOD cannot confirm that
                               disbursements are charged to the correct appropriation accounts and that
                               billions of dollars in disbursements can be promptly or accurately
                               matched with related obligations. DOD has recognized this as a major area
                               of concern and has a number of initiatives underway to reduce current



                               Page 8                             GAO/T-NSIAD/AIMD-97-143 DOD High-Risk Areas
    problem disbursements. However, until the Department’s problems in this
    area are corrected, its ability to detect and correct illegal acts and ensure
    that funds are spent as directed by the Congress will continue to be
    impaired.
•   Financial management workforce and organization need upgrading. DOD
    faces a considerable challenge if it is to put in place a quality, professional
    financial management workforce with clear organizational accountability.
    DOD has acknowledged that, no matter how skilled its financial personnel,
    its manifold financial failures reflect a large, complex, antiquated
    bureaucratic organization structure. For example, the Department has
    stated that a dozen organizations are involved in making a single progress
    payment on a complex weapon system. In addition, deficiencies in DOD’s
    financial workforce, such as the lack of accounting experience,
    competencies, and adequate training, have diminished its effectiveness.
    For example, only 58 percent of the key managers at critical DOD
    accounting locations had more than the minimum number of accounting
    hours necessary to be classified as an accountant in the federal
    government.
•   Internal controls need strengthening. Many basic required control
    procedures are either not in place, or are not followed, such as critical
    reconciliations, physical counts of inventories, and reviews of abnormal
    balances. In its reporting under the Federal Managers’ Financial Integrity
    Act, DOD acknowledged over 30 material control weaknesses across a
    broad spectrum of its operations. Adherence to basic controls is necessary
    to help ensure that DOD’s assets are properly safeguarded against
    unauthorized acquisition, use, or disposition. For example, pervasive
    weaknesses in DOD’s general computer controls place it at risk of improper
    modification, theft, inappropriate disclosure, and destruction of sensitive
    personnel, payroll, disbursement, or inventory information. Also, DOD paid
    millions of dollars in unauthorized military payroll payments because
    basic control procedures were not followed.
•   Financial processes need reengineering. DOD’s financial management
    operations are plagued with duplicative processes and business practices
    that are complex, slow, and error-prone. For example, before DOD decided
    to reengineer its travel processes, they were extremely complicated with
    over 700 processing centers and 1,300 pages of regulations. The processes
    required DOD employees to go through some 40 steps to get their travel
    authorized and reimbursed. DOD acknowledged that it confronts
    decades-old problems deeply grounded in the bureaucratic history and
    operating procedures developed piecemeal over a period of decades to
    accommodate different organizations, each with its own policies and




    Page 9                              GAO/T-NSIAD/AIMD-97-143 DOD High-Risk Areas
                            procedures. Without reengineering, DOD will have little chance of radically
                            improving these cumbersome and bureaucratic processes.


Initiatives to Address      Since 1990, we and DOD auditors have made over 400 recommendations
Deficiencies in Financial   aimed at correcting the Department’s most pressing financial management
Management and              weaknesses. The past few years have been marked by DOD’s financial
                            management leadership recognizing the importance of tackling the broad
Reporting                   range of problems confronting the Department in this area. Through his
                            5-Year Plan, the Chief Financial Officer has put in place a vision statement
                            to guide DOD’s financial management reform efforts. As a result, the
                            importance of greater financial accountability is now clearer throughout
                            DOD.


                            DOD  has begun a number of short- and long-term initiatives intended to
                            address the Department’s long-standing financial management
                            weaknesses. For example, DOD is working to resolve its problems in
                            accounting for disbursements, including short-term initiatives focusing
                            primarily on preventing additional problem disbursements. Long-term
                            initiatives include projects to consolidate and standardize selected
                            financial systems and DOD-wide data, including implementing the U.S.
                            Government Standard General Ledger, a basic requirement. In addition,
                            DOD has begun several efforts to enhance the professional skills of its
                            financial personnel and has consolidated responsibility for accounting
                            systems development into the Defense Accounting System Program
                            Management Office.

                            As it looks to the future, DOD must effectively address challenges in all six
                            critical areas—systems, cost accounting, disbursements, personnel,
                            internal controls, and business processes—if its envisioned financial
                            reforms are to realize meaningful financial management improvements.
                            Specifically, DOD must (1) develop a comprehensive financial systems
                            inventory and a target financial management systems architecture,
                            including systems interfaces and data flows; (2) ensure that the
                            Department’s financial management systems improvement effort has a
                            comprehensive, DOD-wide scope and sufficient top management
                            involvement and support; (3) determine the appropriate numbers and
                            skills of personnel needed to implement financial reforms and utilize an
                            independent board of experts to advise DOD on its reform efforts;
                            (4) address deep-rooted organizational emphasis on maintaining “business
                            as usual” across the Department; and (5) ensure that its initiatives
                            intended to address the Department’s problem disbursements provide for



                            Page 10                            GAO/T-NSIAD/AIMD-97-143 DOD High-Risk Areas
                        establishing base line data and comprehensive reporting standards and
                        controls, and prioritizing the various initiatives to ensure that resources
                        are allocated to the most severe problem disbursement areas. It will take a
                        focused, sustained effort for DOD to fully resolve these challenges.


                        As with most agencies, DOD faces significant challenges in managing its
Improvements            information resources. However, the Department’s challenges are
Needed in               amplified by the sheer size of its technology investment, the vast number
Information             of systems (over 10,000) put in place to provide mission support, and the
                        lack of a clearly articulated and directed management approach to dealing
Resources               with the problems. Our work over the past several years has highlighted
Management              problems in the department’s control over investment dollars, managing
                        risks associated with computer hacking, and—most recently—dealing
                        with the challenges of the year 2000 problem.

                        The Paperwork Reduction Act and the Clinger-Cohen Act provide the
                        framework for managing investments in information technology. These
                        acts require, in part, a strong Chief Information Officer organization,
                        defined controls over information technology investment, and
                        performance measures that better link information technology investment
                        decisions to program results. Proper implementation by DOD could result
                        in reducing the risks we have identified.


Technology Investment   DOD spends billions yearly on information technology—about $10 billion
Results Have Been       yearly on business systems alone—to provide support for every aspect of
Disappointing           its operations. In 1989, the Department started its Corporate Information
                        Management initiative to take better advantage of its information
                        technology investments by streamlining operations and implementing
                        standard information systems supporting such important business areas as
                        supply distribution, material management, personnel, finance, and
                        transportation. The results have not been as anticipated by DOD. While DOD
                        projected $36 billion in savings, its failure over the past 8 years to
                        implement sound business practices to control investment dollars and link
                        system modernization practices to business process improvement efforts
                        has led to an outlay of over $20 billion with no corresponding savings in
                        return.

                        DOD is now concentrating on its migration projects, which are being
                        carried out to reduce the number of legacy systems providing similar
                        functions by “migrating” to a fewer number of more efficient systems



                        Page 11                           GAO/T-NSIAD/AIMD-97-143 DOD High-Risk Areas
                          providing the same or enhanced service. We have found that billions of
                          dollars have been spent on these projects with little analytical justification.
                          Rather than relying on a rigorous decision-making process for information
                          technology investments—as used in leading organizations, DOD is making
                          system selections without appropriately analyzing costs, benefits, and
                          technical risks; establishing realistic project schedules; or considering
                          how business process improvements could affect technology investments.
                          For example, in material management, DOD abandoned its system
                          modernization strategy after spending over $700 million. In the
                          transportation area, DOD made some investments that are likely to result in
                          a negative return on investment.3


Computer Systems and      Malicious attacks on computer systems are an increasing threat to our
Data Are Vulnerable to    nation’s welfare. We have found throughout government that billions of
Disruption and            dollars in assets are at risk and vast amounts of sensitive data are
                          vulnerable to unauthorized disclosure. DOD, with its thousands of
Unauthorized Disclosure   integrated systems and sensitive data, provide an inviting target to
                          computer hackers. In May 1996, we reported that DOD computer systems
                          may have experienced as many as 250,000 attacks during 1995 with over
                          60 percent of these attacks successful in gaining access.


DOD Faces Challenges of   After midnight on January 1, 2000, many DOD and defense contractor
the Year 2000 Problem     computer systems will either fail to run or malfunction simply because the
                          equipment and software were not designed to accommodate the change of
                          the date to the new millennium. If not corrected, this problem has the
                          potential to severely impact key operations, such as command and
                          control, mission planning, supply and maintenance support, payroll, and
                          contract management. This problem is rooted in the way dates are
                          recorded and computed in those computer systems that typically use two
                          digits to represent the year, such as “97” representing 1997, to conserve
                          electronic data storage and reduce operating costs. Thus, the year 2000
                          will be indistinguishable from 1900, 2001 from 1901, and so on, in these
                          systems. As a result of this ambiguity, defense systems or application
                          programs that use two-digit dates to perform calculations, comparisons, or
                          sorting may generate incorrect results or may not work at all when
                          working with dates after 1999.



                          3
                           Defense IRM: Critical Risks Facing New Material Management Strategy (GAO/AIMD-96-109, Sept. 6,
                          1996) and Defense Transportation: Migration Systems Selected Without Adequate Analysis
                          (GAO/AIMD-96-81, Aug. 29, 1996).



                          Page 12                                      GAO/T-NSIAD/AIMD-97-143 DOD High-Risk Areas
                         There is no easy fix for this problem. Every line of software code,
                         operating system, and piece of computer hardware must be checked. As a
                         result, DOD’s year 2000 program will likely be the largest and most complex
                         system conversion effort the Department has ever undertaken. Strong and
                         effective program management through the five phases needed to address
                         the year 2000 problem (awareness, assessment, renovation, validation, and
                         implementation) are essential if defense agencies are to be successful. DOD
                         has a formidable task: it has an infrastructure of thousands of systems,
                         millions of lines of software, more than 2 million computers, and over
                         10,000 networks that must all be assessed—and time is running out. DOD
                         has not yet fully completed the assessment phase, and the more difficult
                         and time-consuming phases of renovation, validation (testing), and
                         implementation are yet to come. We estimate that defense agencies must
                         complete the renovation phase by the end of 1998 at the latest if they are
                         to allow sufficient time for the validation and implementation phases.


Initiatives to Improve   Our reports and congressional hearings chronicled numerous system
Return on Information    development efforts that suffered from multimillion dollar cost overruns,
Technology Investments   schedule slippages measured in years, and dismal mission-related results.
                         Recognizing the urgent need for improvement, the Congress passed key
                         reforms in information technology management. The Paperwork
                         Reduction Act and Clinger-Cohen Act directed agencies to implement a
                         framework for modern technology management that is based on practices
                         followed by leading public and private sector organizations that have
                         successfully used technology to dramatically improve performance and
                         meet strategic goals. DOD has plans to improve its current Planning,
                         Programming, and Budgeting System and incorporate the management
                         improvements that have been dictated by congressional actions, such as
                         the Government Performance and Results Act, the Paperwork Reduction
                         Act, and the Clinger-Cohen Act. We believe that if DOD is to achieve
                         success in this area, which has proven to be extremely difficult in the past,
                         it will need to have incentives to motivate decisionmakers into making the
                         necessary changes over its management of information technology
                         investments.

                         We made specific recommendations to DOD for mitigating risks and
                         improving its management framework and controls in areas such as
                         information management, information technology investment, system
                         development, and technical infrastructure. Although DOD has made some
                         progress, the level of improvement has not yet been sufficient to bring the
                         problems under control.



                         Page 13                            GAO/T-NSIAD/AIMD-97-143 DOD High-Risk Areas
                             Even though DOD’s expenditures have produced many of the world’s most
Costly and Inefficient       capable weapon systems, its processes for acquiring weapon systems have
Processes for Weapon         often proven costly and inefficient. Although DOD’s leadership has
Systems Acquisition          emphasized its commitment to reforming its processes, wasteful practices
                             still add billions of dollars to defense acquisition costs.


Many Weapon Systems          Despite its efforts to reform defense weapon systems acquisition, DOD
Cost More and Do Less        continues to (1) generate and support acquisition of new weapon systems
Than Anticipated             that do not satisfy the most critical weapon requirements at minimal cost
                             and (2) commit more procurement funds to programs than can reasonably
                             be expected to be available in future defense budgets. In addition, many
                             new weapon systems cost more and do less than anticipated, and
                             schedules are often delayed. Moreover, the need for some of these costly
                             weapons, particularly since the collapse of the Soviet Union, is
                             questionable. Pervasive problems persist regarding questionable
                             requirements and solutions that are not the most cost-effective available;
                             unrealistic cost, schedule, and performance estimates; questionable
                             program affordability; and the use of high-risk acquisition strategies. Our
                             work indicates the following:

                         •   Some requirements and solutions are questionable and not the most
                             cost-effective. Although the military services conduct considerable
                             analyses in justifying major acquisitions, these analyses can be narrowly
                             focused and may not fully consider alternative solutions, including the
                             joint acquisition of systems with the other services. In addition, because
                             DOD does not routinely develop information on joint mission needs and
                             aggregate capabilities, it has little assurance that decisions to buy, modify,
                             or retire systems are sound. Our reviews of air power mission areas found
                             that some planned modernization programs will add only marginally to
                             already formidable capabilities, and the need for other weapon systems
                             has been lessened by the changed national security environment.
                         •   Cost, schedule, and performance estimates are unrealistic. To keep cost
                             estimates as low as possible and present attractive milestone schedules,
                             DOD program sponsors have used unreasonable assumptions about the
                             pace and magnitude of the technical effort, material costs, production
                             rates, and savings from competition. The fact that a given weapon system
                             costs more than estimated, takes longer to field, and does not perform as
                             promised is secondary to fielding a new system.
                         •   Program affordability is questionable. DOD’s tendency to overestimate the
                             funding that would be available in the future, coupled with the tendency to
                             underestimate program costs, have resulted in the advent of more



                             Page 14                             GAO/T-NSIAD/AIMD-97-143 DOD High-Risk Areas
                                programs than can be executed. As a result, DOD often has to reduce, delay,
                                and stretch out programs, substantially increasing the cost of each system.
                                In addition, numerous problems exist with DOD’s budgeting and spending
                                practices for weapon system acquisitions. For example, our review of the
                                Future Years Defense Program found no significant net infrastructure or
                                acquisition savings to DOD between fiscal years 1997 and 2001.
                                Nonetheless, DOD is pursuing a number of major system acquisition
                                programs on the assumption that such savings will materialize.
                            •   Acquisition strategies are high risk. DOD continues its practice of beginning
                                production of a weapon system before development, testing, and
                                evaluation are complete. When this strategy is used, critical decisions are
                                made without adequate information about a weapon’s demonstrated
                                operational effectiveness, reliability, logistics supportability, and readiness
                                for production. Also, by rushing into production before critical tests have
                                been successfully completed, DOD has purchased weapon systems that do
                                not perform as intended. These premature purchases have resulted in
                                lower-than-expected availability for operations and have often led to
                                expensive modifications.

                                In today’s national security environment, proceeding with low-rate
                                production without demonstrating that the system will work as intended
                                should rarely be necessary. Nevertheless, DOD still begins production of
                                many major and secondary weapons without first ensuring that the
                                systems will meet critical performance requirements. For example, the
                                F-22 aircraft program involves considerable technical risk because it
                                embodies technological advances that are critical to its operational
                                success. Nevertheless, DOD plans to begin producing the F-22 aircraft well
                                before beginning initial operational testing and commit to the production
                                of 70 aircraft at a cost of over $14 billion before initial operational testing
                                is complete.


Initiatives to Reform the       Since 1990, we reported that cultural changes were needed to (1) control
Weapon Acquisition              interservice competition and self-interest that have led to the acquisition
System                          of unnecessary, overlapping, or duplicative capabilities; (2) discourage the
                                overselling of programs through optimistic cost, schedule, and
                                performance estimates and the use of high-risk acquisition strategies; and
                                (3) limit the incorporation of immature technologies into new weapons to
                                reduce the risk of technological failures. These problems were discussed
                                in detail in our cross-cutting reports4 and reports on individual programs.

                                4
                                 Weapons Acquisition: A Rare Opportunity for Lasting Change (GAO/NSIAD-93-15, Dec. 1992) and
                                Weapons Acquisition: Low-Rate Initial Production Used to Buy Weapon Systems Prematurely
                                (GAO/NSIAD-95-18, Nov. 21, 1994).



                                Page 15                                     GAO/T-NSIAD/AIMD-97-143 DOD High-Risk Areas
                              DOD’s leadership has emphasized its commitment to reforming its weapon
                              system acquisition processes. DOD’s goal is to become the world’s smartest
                              buyer, continuously reinventing and improving the acquisition process
                              while taking maximum advantage of emerging technologies that enable
                              business process reengineering. Concerning “what to buy,” DOD is focusing
                              its efforts on (1) greater reliance on commercial products and processes
                              and (2) more timely infusion of new technology into new or existing
                              systems. Concerning “how to buy,” DOD’s efforts have been directed at,
                              among other things, increasing teamwork and cooperation, encouraging
                              risk management rather than risk avoidance, reducing reporting
                              requirements, and reducing layers of review and oversight that do not add
                              any value.

                              DOD is also striving to reduce costs through an initiative known as “cost as
                              an independent variable.” This initiative’s assumption is that, once the
                              system performance and target cost are decided, the acquisition process
                              will make cost more a constant and less a variable. This approach to
                              developing new systems is more consistent with commercial practices,
                              which use market forces to determine the price at which a new system can
                              be offered. Even though these initiatives are commendable, the
                              fundamental reforms needed to improve the weapon systems acquisition
                              process have not yet been formulated or instituted by DOD.


                              Over the last few years, changes have occurred in the defense contracting
Long-Standing                 environment—both within DOD and the private contractor community. DOD,
Weaknesses in                 recognizing that it could no longer afford to conduct business as it had in
Contract Management           the past, began broad-based changes to its acquisition and contracting
                              processes. However, these changes are not yet complete.


Contract Management           Despite budget reductions and other changes, DOD’s contracting activities
System Needs to Be            remain substantial, amounting to about $123 billion in fiscal year 1996. The
Improved and Simplified       risk of waste, fraud, abuse, and mismanagement increases when these
                              activities are coupled with the following weaknesses:

                          •   Contract payment process is costly and prone to errors. DOD continues to
                              pay contractors millions of dollars erroneously as a result of financial
                              management and accounting control problems. In recent years, we have
                              reported on DOD’s numerous problems in making accurate payments to
                              defense contractors and identified millions of dollars in government
                              overpayments, underpayments, and interest on late payments. Moreover,



                              Page 16                            GAO/T-NSIAD/AIMD-97-143 DOD High-Risk Areas
    as of May 1996, DOD reported that its problem disbursements totaled
    $18 billion.
•   Cost-estimating systems are not reliable. We and the Defense Contract
    Audit Agency continue to find significant problems with contractors’
    cost-estimating systems. Although DOD administrative contracting officers
    are responsible for determining the adequacy of the contractors’
    cost-estimating systems and requiring correction if the systems are
    deficient, we found that contracting officers were reluctant to use all
    available sanctions to encourage contractors to correct deficiencies. The
    failure to correct these deficiencies creates a variety of problems for DOD,
    including increased costs and delays in contract award.
•   Participation in DOD’s Voluntary Disclosure Program has been limited.
    Defense contractors’ participation in the Voluntary Disclosure Program
    has been relatively limited, and the dollar recoveries have been modest.
    From the program’s inception in 1986 through September 1994, DOD
    reported that, of the thousands of defense contractors, 138 made 325
    voluntary disclosures of potential procurement fraud. In addition, DOD
    reported recoveries from these disclosures to be $290 million. However,
    this $290 million figure is overstated because it included $75 million in
    premature progress payments and amounts from disclosures made before
    the program.5
•   Growth in workload requires a new management approach. DOD plans to
    increase its procurement budget from $43 billion in fiscal year 1996 to
    $60 billion by fiscal year 2001. As procurement activity increases, the
    amount of contracting and the demands for contract administration and
    audits are also likely to increase. However, unlike future procurement
    budgets, contract administration and audit resources are expected to be
    cut back further. By fiscal year 2001, staffing at the Defense Contract
    Management Command and the Defense Contract Audit Agency are
    expected to be reduced to around 12,650 and 4,200, respectively, a
    decrease of about 41 and 32 percent, respectively, from fiscal year 1991
    levels.6 DOD will need to be creative in finding ways to meet an expected
    increase in demand for contract oversight and be more efficient in using
    its existing resources.




    5
     DOD Procurement: Use and Administration of DOD’s Voluntary Disclosure Program
    (GAO/NSIAD-96-21, Feb. 6, 1996).
    6
    The Defense Contract Management Command administers defense contracts, and the Defense
    Contract Audit Agency audits them.



    Page 17                                    GAO/T-NSIAD/AIMD-97-143 DOD High-Risk Areas
Initiatives to Strengthen   DOD has acknowledged the necessity to improve its contract management
DOD’s Contract              through initiatives such as testing and adopting some best practices. In the
Management                  long term, DOD is developing procurement and payment systems that are
                            linked by sharing common data. This linkage is expected to allow one-time
                            entry of contract data critical to making correct payments. DOD plans to
                            implement the payment system in fiscal year 1999 and make both systems
                            fully operational in 2004. In the meantime, DOD is enhancing its current
                            technologies to further automate the payment process. DOD is also testing
                            streamlined payment practices.

                            In addition, DOD has taken steps to strengthen oversight of its contractors’
                            estimating systems. Specifically, it issued new internal guidance for
                            monitoring contractors’ cost-estimating systems and established positions
                            within Defense Contract Management Command district offices to serve
                            as focal points for overseeing the status of contractors’ cost-estimating
                            systems. DOD now requires a biannual status report from administrative
                            contracting officers on the status of outstanding deficiencies in
                            contractors’ estimating systems. According to these reports, the number of
                            estimating system deficiencies has declined. However, Defense Contract
                            Audit Agency reports continue to identify proposals that lack complete,
                            accurate, and current data. According to the Agency, its audits of
                            proposals saved $5.3 billion over the last 3 fiscal years.


                            Despite actions over the last 10 years to reduce operation and support
Wasteful and                costs, DOD has wasted billions of dollars annually on inefficient and
Inefficient                 unneeded infrastructure activities. Although DOD has recently downsized
Infrastructure              its force structure substantially, it has not achieved commensurate
                            reductions in support activities. These activities, which DOD generally
Activities                  refers to as its support infrastructure, include maintaining installation
                            facilities, providing nonunit training to the force, providing health care to
                            military personnel and their families, repairing equipment, and buying and
                            managing spare part inventories. DOD is faced with transforming its Cold
                            War operating and support infrastructure in much the same way it has
                            been working to transform its military force structure. Making this
                            transition is a complex, difficult challenge that will affect hundreds of
                            thousands of civilian and military personnel at activities across the nation
                            and overseas.


Excess Support              DOD officials have repeatedly recognized the importance of using resources
Infrastructure Diverts      for the highest priority operational and investment needs rather than
Limited Defense Funds       maintaining unneeded property, facilities, and overhead. Expenditures on


                            Page 18                             GAO/T-NSIAD/AIMD-97-143 DOD High-Risk Areas
    wasteful or inefficient activities divert limited defense funds from pressing
    defense needs, such as the modernization of weapon systems. DOD has
    programmed reductions in installation support funding; however, overall
    infrastructure funding is projected to remain relatively constant through
    2001.

    Our work has identified the following areas in which infrastructure
    activities can be eliminated, streamlined, or reengineered to be made more
    efficient:

•   Laboratory infrastructure includes excess capacity. Although studies have
    shown that DOD’s laboratories and centers have excess capacity, the
    studies have generally recommended management efficiencies rather than
    infrastructure reductions. Despite four base realignment and closure
    rounds, DOD states that its research and development laboratory
    infrastructure still has an excess capacity of approximately 35 percent.
•   Training costs could be reduced. Since 1972, DOD has obtained physicians
    from two sources: the Health Professional Scholarship Program and DOD’s
    Uniformed Services University of Health Sciences. However, the cost to
    educate a physician in DOD’s university program is more than twice as
    much as the $1.5 million cost of providing scholarships to students in
    civilian medical schools. DOD pays tuition, fees, and a monthly stipend for
    students enrolled in civilian medical schools, and the students are
    obligated to serve 1 year of active duty for each year of benefits. Medical
    students in DOD’s university program are on active duty military service,
    receive pay and benefits while attending medical school, and incur a
    10-year service obligation.
•   Depot maintenance infrastructure includes excess capacity. At the time of
    the 1995 base realignment and closure process, the DOD depot system had
    an excess capacity of 40 percent. In addition, DOD’s efforts to shift
    workloads to the private sector without downsizing overall depot
    infrastructure will exacerbate existing excess capacity problems. For
    example, our analysis of the Army depot system showed that the Army is
    not effectively downsizing its depot maintenance infrastructure. Its plans
    to privatize in-place workloads at closing facilities rather than transferring
    them to remaining underutilized facilities would increase excess capacity
    in Army depots from 42 to 46 percent, thus increasing the Army’s
    maintenance depot costs.
•   Overhead costs for transportation services are excessive. DOD’s overhead
    costs for transportation services are frequently two to three times the
    basic cost of transportation. The U.S. Transportation Command retains an
    outdated and inefficient, mode-oriented organizational structure with



    Page 19                             GAO/T-NSIAD/AIMD-97-143 DOD High-Risk Areas
                            some collocated facilities. Each separate component command incurs
                            operation and support costs, and customers receive bills from each
                            component command for each mode of transportation rather than a single
                            intermodal bill from only one component. The separate billing systems are
                            inefficient, adding people and costs to the process.


Initiatives to Reduce       Although we have not completed an in-depth analysis of all the categories
Inefficient and Unneeded    of infrastructure, our work to date has identified numerous areas in which
Infrastructure Activities   infrastructure activities can be eliminated, streamlined, or reengineered to
                            be made more efficient. For example, we previously identified 13 options
                            that, according to the Congressional Budget Office, could result in savings
                            of about $11.8 billion during fiscal years 1997 through 2001. However, DOD
                            found that infrastructure reductions are a difficult and painful process
                            because achieving significant cost savings requires up-front investments,
                            the closure of installations, and the elimination of military and civilian
                            jobs. Breaking down cultural resistance to change, overcoming service
                            parochialism, and setting forth a clear framework for a reduced
                            infrastructure are key to avoiding waste and inefficiency.


                            DOD has wasted billions of dollars on excess supplies because inherent in
Wasteful Inventory          DOD’s culture is the belief that it is better to overbuy items than to manage
Management Systems          with just the amount of stock needed. If DOD had used effective inventory
                            management and control techniques and modern commercial inventory
                            management practices, it would have had lower inventory levels and
                            avoided the burden and expense of storing excess inventory. DOD has
                            clearly had some success in addressing its inventory management
                            problems, but much remains to be done.


Excess Inventory Costs      DOD has reduced its inventory from $92.5 billion in 1989 to $69.6 billion in
Billions of Dollars         1995, a $22.9 billion reduction. However, DOD has not been as aggressive as
                            possible in implementing modern commercial practices. It has addressed
                            only about 3 percent of the items for which commercial practices could be
                            used and is still in the midst of changing its inventory management culture.
                            About one-half of DOD’s $69.6 billion inventory is beyond the level needed
                            to support war reserve or current operating requirements. Additionally,
                            DOD spends millions of dollars each year to manage and maintain
                            unnecessary inventory. DOD still lacks adequate oversight of its inventory,
                            financial accountability remains weak, and requirements continue to be
                            overstated. Our work shows the following:



                            Page 20                             GAO/T-NSIAD/AIMD-97-143 DOD High-Risk Areas
                           •   Visibility over inventory is not adequate. The lack of adequate visibility
                               over operating materials and supplies substantially increases the risk that
                               millions of dollars will be unnecessarily spent. For example, in
                               August 1996, we reported that Navy managers did not have adequate
                               visibility over $5.7 billion in operating materials and supplies on board
                               ships and at 17 redistribution sites. We estimated that because of the lack
                               of oversight in the first half of 1995, item managers ordered or purchased
                               items in excess of operating level needs and that as a result, the Navy will
                               incur unnecessary costs of about $27 million.
                           •   Requirements are overstated. DOD commonly overstates requirements and
                               understates the amount of inventory on hand when budgeting for and
                               buying spare parts and supplies because of questionable policies for
                               determining needs and poor accountability. The Defense Logistics Agency
                               and the Navy stock millions of dollars of unnecessary “insurance items”
                               (i.e., parts that are not expected to fail through normal usage). The
                               unnecessary inventories accrued because these DOD components do not
                               periodically review insurance items to confirm that they are mission
                               essential and stocked in appropriate quantities. In addition, DOD could
                               reduce its lead time by 25 percent over a 4-year period and save about
                               $1 billion by renewing its emphasis on prompt implementation of its 1990
                               lead time reduction initiatives, periodically validating and updating old
                               data for long lead time items, and considering lead time reductions as a
                               factor in deciding whether to continue purchasing spare parts from the
                               prime contractor or the manufacturer.
                           •   Financial accountability and internal controls are weak. DOD lacks
                               financial accountability and control over its inventory. The Secretary of
                               Defense identified several financial and internal control weaknesses
                               within DOD, such as (1) inventory systems that are not integrated or cannot
                               respond rapidly to change, (2) difficulties in reconciling physical
                               inventories and valuating properties and equipment, and (3) lack of
                               indicators that measure performance and costs.


Initiatives to Eliminate       Since 1990, we have recommended major changes in all levels of DOD’s
Wasteful Inventory             inventory management system. We reported that DOD’s top managers
Management Systems             needed to take long-range actions to (1) change the organizational culture
                               to eliminate the overstocking of items, (2) increase the use of commercial
                               practices, (3) establish and monitor improved performance measures that
                               stress cost-effectiveness and inventory reductions, and (4) improve the
                               computer systems used in inventory management. Even though we
                               continue to see some improvement, DOD has made little overall progress in




                               Page 21                            GAO/T-NSIAD/AIMD-97-143 DOD High-Risk Areas
                            correcting systemic problems that have traditionally resulted in large
                            unneeded inventories.

                            DOD has acknowledged the necessity to change its inventory management
                            culture but has been slow in taking steps to do so. For example, DOD has
                            been slow to implement its plans for improving asset visibility in such
                            areas as in-transit assets, retail-level stocks, and automated systems. The
                            implementation of DOD’s asset visibility plans was expected to be
                            completed by 1996, but will not occur until 2001. In addition, the Defense
                            Logistics Agency has implemented, in a limited manner, certain
                            commercial practices, such as direct vendor delivery for medical and food
                            items. However, this initiative addresses only about 3 percent of the items
                            for which direct vendor delivery could be used. Because of the lack of
                            progress with some of the key initiatives, it has become increasingly
                            difficult for inventory managers to oversee DOD’s multibillion dollar
                            inventory supply system efficiently and effectively.


                            Our high-risk reports indicate that DOD has made progress in addressing
Underlying Causes of        specific problems within each of the six high-risk areas but that the key
the High-Risk Areas         underlying causes of these problems have not been effectively addressed.
Have Not Been Fully         These causes include cultural resistance to change and service
                            parochialism, inadequate incentives for seeking change, lack of
Addressed                   comprehensive and reliable data, lack of results-oriented goals and
                            performance measures, and lack of management accountability for
                            correcting problems and following through to confirm performance
                            results.


Cultural Barriers and       Cultural resistance to change, service parochialism, and public and
Parochialism Limit Change   congressional concern about the effects on local communities and
                            economies have contributed to the difficulty of improving DOD’s financial,
                            infrastructure, inventory, and acquisition processes and systems that are
                            at risk. For example, DOD officials have repeatedly recognized the
                            importance of using resources for the highest priority operations and
                            investment needs rather than maintaining unneeded properties, facilities,
                            and overhead. However, DOD found that infrastructure reductions are a
                            difficult and painful process because achieving significant cost savings
                            requires up-front investments, the closure of installations, and the
                            elimination of military and civilian jobs. The 1988, 1991, and 1993 base
                            realignment and closure rounds produced decisions to fully or partially
                            close 70 major domestic bases and resulted in a 15-percent reduction in



                            Page 22                            GAO/T-NSIAD/AIMD-97-143 DOD High-Risk Areas
                           plant replacement value. DOD’s goal during the 1995 base realignment and
                           closure round was to reduce the overall domestic base structure by a
                           minimum of another 15 percent, for a total 30-percent reduction in
                           DOD-wide plant replacement value. However, the 1995 closures and
                           realignments will increase the total reduction to approximately 21 percent,
                           or 9 percent short of DOD’s goal.

                           In addition, some weapon systems are being developed and produced,
                           even though the Soviet threat upon which they were justified has
                           diminished. The underlying cause of this problem is DOD’s prevailing
                           culture, which continually generates and supports the acquisition of new
                           weapons. Inherent in this culture are powerful incentives and interests
                           that influence and motivate the behaviors of participants in the process,
                           including DOD components, the Congress, and industry. It is not unusual
                           for these incentives and interests to override the need to satisfy the most
                           critical weapon requirements at minimal cost. Furthermore, in the
                           inventory management area, DOD’s culture believed that it was better to
                           overbuy items than to manage with just the amount of stock needed. As a
                           result of this and other inventory management weaknesses, about one-half
                           of DOD’s current inventory of spare parts, clothing, medical supplies, and
                           other secondary inventory items is not needed to support war reserves or
                           current operating requirements.

                           DOD has also acknowledged that its operations are constrained by the
                           military services’ unique operating processes and systems, many of which
                           are incompatible. For example, the lack of integration between DOD’s
                           accounting and logistics systems has contributed to the purchasing of
                           unneeded materials.


Lack of Incentives for     Traditionally, DOD has focused most of its attention on justifying its need
Seeking and Implementing   for funding rather than on the outcomes that its programs produced. DOD
Change                     generally measures its performance by the amount of money spent,
                           number of people employed, or number of tasks completed. Also,
                           incentives for DOD decisionmakers to implement changed behavior have
                           been minimal or nonexistent. However, the changing national security
                           threat and increasing fiscal constraints require that these issues be
                           addressed. Regardless of the specific actions DOD decisionmakers take to
                           effect change, we believe the objectives of the actions should (1) break
                           down parochialism and award behavior that meets DOD goals and
                           (2) develop incentives that motivate decisionmakers to initiate and
                           implement efforts that are consistent with better program outcomes.



                           Page 23                            GAO/T-NSIAD/AIMD-97-143 DOD High-Risk Areas
                        Congressional incentives can include fostering results-oriented
                        management and using performance measurement data when making
                        resource allocation decisions.

                        DOD managers have few incentives to change their behaviors to improve
                        the Department’s financial, acquisition, and infrastructure management
                        approach. In DOD’s culture, the success of a manager’s career depends
                        more on moving programs and operations through the DOD process rather
                        than on achieving better program outcomes. As a result, the desire of
                        managers to keep cost estimates as low as possible and present attractive
                        milestone schedules encourages the use of unreasonable assumptions
                        about the pace and magnitude of the effort, material costs, production
                        rates, savings, and other factors. Accordingly, overselling a program works
                        in the sense that programs are started, funded, and eventually fielded. The
                        fact that a given program costs more than estimated, takes longer to
                        complete, and does not generate results or perform as promised is
                        secondary to fielding a new, improved program.


Lack of Comprehensive   DOD’s financial management problems result in a lack of visibility over a
and Reliable Data       substantial portion of its resources. Correction of these widespread and
                        severe financial management problems is critical to the resolution of DOD’s
                        high-risk areas. Reliable financial management information would greatly
                        aid the resolution of problems with tracking computer system costs and
                        benefits, weapon system cost overruns, erroneous contract payments,
                        excessive infrastructure, and unneeded inventories.

                        DOD decisionmakers are severely affected by the lack of comprehensive
                        and reliable data for measuring program costs and results and making
                        well-informed decisions. For example, better information on the quantity
                        and location of items in its inventory would help prevent DOD managers
                        from procuring additional items at one location that are already on hand at
                        another location. In addition, the lack of complete information on the
                        costs incurred to acquire and operate weapon systems has caused DOD
                        managers to initiate more weapon programs than the Department can
                        execute as planned. To address funding realities, DOD often reduces,
                        delays, or stretches out programs—substantially increasing the cost of
                        each weapon system. More reliable and relevant financial data would
                        enable DOD to make more informed decisions for its programs.




                        Page 24                           GAO/T-NSIAD/AIMD-97-143 DOD High-Risk Areas
Lack of Clear,                   In some cases, DOD’s strategic goals and objectives are not linked to those
Results-Oriented Goals and       of the military services and defense agencies, and DOD’s guidance tends to
Performance Measures             lack specificity. Moreover, several DOD managers said that DOD’s strategic
                                 goals were too broad for their organizations to readily align their activities
                                 in support of those goals. Without clear, hierarchically linked goals and
                                 performance measures, DOD managers lack straightforward road maps
                                 showing how their work contributes to attaining DOD’s strategic goals, and
                                 they risk operating autonomously rather than collectively. For example:

                             •   According to Atlantic Fleet officials, the Fleet’s goals were only remotely
                                 connected to one of DOD’s goals—to provide flexible, ready military
                                 structure.
                             •   The military services’ analyses in justifying weapon system acquisitions
                                 can be narrowly focused and may not fully consider alternative solutions,
                                 including the joint acquisition of systems with the other services. In
                                 addition, because DOD does not routinely develop information on joint
                                 mission needs and aggregate capabilities, it has little assurance that
                                 decisions to buy, modify, or retire weapon systems are sound. In the air
                                 power mission area, some planned modernization programs will add only
                                 marginally to already formidable capabilities, and the need for other
                                 capabilities has been lessened by the changed national security
                                 environment.
                             •   DOD has not developed performance measures that would allow it to track
                                 whether its efforts to modernize and optimize its central
                                 telecommunications program—the Defense Information Systems
                                 Network—are achieving their goals. Without this information, DOD has no
                                 way of knowing whether it will be spending billions of dollars acquiring,
                                 operating, and maintaining network facilities and services that efficiently
                                 and effectively meet its needs.


Lack of Management               DOD does not routinely link its performance measures to specific
Accountability and Follow        organizational units or individuals that have sufficient flexibility,
Through                          discretion, and authority to accomplish the desired results. In some
                                 departments and agencies, DOD’s top political and career leaders have not
                                 encouraged accountability by providing managers at each level in the
                                 organization with the appropriate authority and flexibility to obtain those
                                 results. At both the organizational and managerial levels, accountability
                                 requires results-oriented goals and appropriate performance measures
                                 through which to gauge progress. This accountability helps to guarantee
                                 that daily activities remain focused on achieving the outcomes that DOD is
                                 trying to attain.



                                 Page 25                             GAO/T-NSIAD/AIMD-97-143 DOD High-Risk Areas
                            The Government Performance and Results Act, with its statutory planning
                            and reporting requirements, provides the possibility that the commitment
                            of DOD’s top management to improving performance results will be
                            sustained. Nonetheless, DOD experiences suggest that top management
                            does not have a proactive, consistent, and continuing role in building
                            capacity, creating incentives, and integrating daily operations for
                            achieving performance goals. For example, DOD decisionmakers have
                            recognized the urgent need to improve the Department’s financial
                            management practices but have not created and maintained the
                            momentum for implementing reform.

                            Sustaining top management commitment to performance goals is a
                            challenge for DOD because of the general turnover rate among political
                            appointees. In 1994, we reported that the median tenure of top political
                            appointees in the Office of the Secretary of Defense was 1.7 years.7 We
                            also found that mean vacancy periods for top positions in the Departments
                            of the Air Force and the Navy were 9 and 11 months, respectively. As a
                            result, turnover among DOD political appointees has hindered long-term
                            planning and follow-through activities.


                            Effectively attacking the underlying causes will require congressional
A Multilevel Strategy       support and a commitment by senior-level DOD managers to a multilevel
Attacking the               strategy that (1) implements our recommendations to correct specific
Underlying Causes Is        problems in each of the high-risk areas and (2) develops and implements a
                            strategic plan that addresses actions for eliminating the six high-risk areas.
the Key to Eliminating      If DOD is successful in attacking the underlying causes of the problems, the
the High-Risk Areas         Congress should expect to see positive outcomes, including the successful
                            completion of full-scale financial audits; reductions in operation and
                            support costs; and the fielding of major weapon and computer systems
                            that meet cost, schedule, and performance estimates. If DOD’s multilevel
                            strategy does not result in the elimination of high-risk areas, the Congress
                            may wish to consider the need for incentives to reach that goal.


DOD Needs a Multilevel      To eliminate the high-risk areas, DOD needs a multilevel strategy that
Strategy to Eliminate the   implements our recommendations to correct specific problems in each of
High-Risk Areas             the high-risk areas and develops a strategic plan for eliminating the six
                            high-risk areas. This strategic plan should include goals, performance
                            measures, and time frames for completing corrective actions; identify

                            7
                             Political Appointees: Turnover Rates in Executive Schedule Positions Requiring Senate Confirmation
                            (GAO/GGD-94-115FS, Apr. 21, 1994).



                            Page 26                                       GAO/T-NSIAD/AIMD-97-143 DOD High-Risk Areas
                               organizations and individuals accountable for accomplishing specific
                               goals; and provide for annual progress reports to Congress on outcomes
                               achieved. In developing the plan, DOD should comply with legislative
                               requirements of the Chief Financial Officers Act, the Government
                               Performance and Results Act, the Paperwork Reduction Act, and the
                               Clinger-Cohen Act. To help ensure success of the multilevel strategy,
                               top-level management within DOD needs to be held accountable and have
                               the authority and flexibility to achieve the desired results. We believe that
                               the Deputy Secretary of Defense is the appropriate management level to
                               develop and implement such a strategy.

DOD Needs to Address Our       Although DOD’s actions on many of our recommendations have resulted in
Recommendations                significant financial savings and improvements in DOD’s operations,
                               numerous recommendations have not been fully implemented. In our 1997
                               high-risk reports, we recommended that

                           •   DOD implement a focused, sustained effort to fully realize meaningful
                               financial management improvements, including integrating accounting and
                               financial management systems, accumulating accurate cost information,
                               resolving problem disbursements, upgrading the financial management
                               work force and organization, strengthening internal controls, and
                               reengineering business practices;
                           •   DOD establish (1) performance measures to link the use of information
                               technology to improvements in productivity, efficiency, and effectiveness
                               of their operations and (2) a structured process for selecting, controlling,
                               and evaluating their capital investments in technology to maximize
                               mission-related benefits and control risks;
                           •   DOD take much stronger actions to effectively control the influence of the
                               acquisition culture, such as planning weapon programs and resources on a
                               joint mission basis, examining cost and performance tradeoffs among
                               alternatives more rigorously before a particular approach is chosen,
                               making the war fighters responsible for participating in the selection of
                               weapon systems, linking program decisions in a more durable way to DOD’s
                               long-term budget, and aggressively pursuing high-risk (breakthrough)
                               technology before weapon system research and development;
                           •   DOD seek to reengineer and streamline its contracting and acquisition
                               processes, including the use of new business process techniques;
                           •   the Secretary of Defense and the Secretaries of the Army, Navy, and Air
                               Force consider using a variety of means to achieve infrastructure
                               reductions, including consolidations, privatization, outsourcing,
                               reengineering, and interservicing agreements; and




                               Page 27                             GAO/T-NSIAD/AIMD-97-143 DOD High-Risk Areas
                             •   DOD (1) establish aggressive milestones for substantially expanding the use
                                 of modern commercial practices; (2) provide managers with the tools
                                 critical to managing inventory efficiently; and (3) continue to explore
                                 other alternatives, such as business case analysis to identify opportunities
                                 for outsourcing logistics functions.

DOD Needs a Strategic Plan       To attack the underlying causes of the high-risk areas, DOD also needs to
                                 develop a strategic plan that establishes results-oriented goals,
                                 performance measures, and time frames for completing corrective actions;
                                 identifies organizations and individuals that are responsible for
                                 accomplishing specific goals; and provides for annual progress reports to
                                 Congress on outcomes achieved. In developing the plan, DOD should
                                 comply with the following legislation:

                             •   The expanded Chief Financial Officers Act of 1990 (P.L. 101-576) provides
                                 the framework for identifying and correcting financial management
                                 weaknesses and reliably reporting on the results of financial operations.
                             •   The Government Performance and Results Act of 1993
                                 (P.L. 103-62) emphasizes managing for results and pinpointing
                                 opportunities for improved performance and increased accountability.
                             •   The Paperwork Reduction Act of 1995 (P.L. 104-13) requires federal
                                 agencies to use information resources to improve the efficiency and
                                 effectiveness of their operations and fulfillment of their missions. As such,
                                 it is the overarching statute dealing with the acquisition and management
                                 of information resources.
                             •   The Clinger-Cohen Act of 1996 (P.L. 104-106) focuses on the application of
                                 information resources in supporting agency missions and improving
                                 agency performance and sets forth requirements for improving the
                                 efficiency and effectiveness of operations and the delivery of services to
                                 the public through the effective use of information technology.
                                 Specifically, the act requires that DOD establish performance measures that
                                 measure how well its information technology supports its missions and
                                 programs and that evaluations be made of the results achieved from its
                                 information technology investments.

                                 This strategic plan and annual progress reports should be presented to the
                                 Congress to provide a basis for overseeing DOD’s improvement efforts and
                                 allow other stakeholders to agree on what actions should happen and
                                 when they should occur. It is important that the Congress be adequately
                                 informed of DOD’s plans and outcomes and hold top officials accountable
                                 for implementing the reforms needed to eliminate all six areas from the
                                 high-risk category.



                                 Page 28                            GAO/T-NSIAD/AIMD-97-143 DOD High-Risk Areas
Congress Should Expect         If DOD is successful in attacking the underlying causes of the six high-risk
Certain Outcomes and           areas, the Congress should expect to see, over time, outcomes showing
                               DOD’s progress. Among those outcomes are the following:
Precise Measures of
Performance                •   Financial management: Military services and DOD components successfully
                               undergo full-scale financial audits, a primary catalyst for increasing the
                               reliability of financial data and improving financial operations.
                           •   Information management and technology: DOD effectively implements the
                               tenets of the Paperwork Reduction Act and the Clinger-Cohen Act,
                               including a strong Chief Information Officer organization, effective
                               investment control processes, and the development of performance
                               measures that link return-on-investment dollars to mission and program
                               objectives.
                           •   Weapon systems acquisition: DOD purchases major weapon systems within
                               fiscal realities and fields weapons without cost overruns, schedule delays,
                               or performance shortfalls.
                           •   Contract management: DOD increases the use of proven acquisition and
                               contracting processes that improve accountability and result in cost
                               savings and other benefits.
                           •   Infrastructure: DOD achieves reductions in operation and support activities
                               that are commensurate with its force structure reductions.
                           •   Inventory management: DOD significantly reduces the amount of unneeded
                               inventory and annual expenditures for new inventory.


Incentives May Be Needed       If DOD does not make progress in eliminating the underlying causes of the
                               high-risk areas, the Congress may wish to consider the need for incentives
                               to stimulate change. We believe that one of the best incentives the
                               Congress can apply to foster results-oriented management is to use
                               performance measurement data in its policy, program, and resource
                               allocation decisions. Another incentive could be to allow DOD to use
                               savings from eliminating waste in the high-risk areas to further improve
                               operations or satisfy other defense priorities, such as modernization,
                               readiness, and quality-of-life needs.


                               Mr. Chairman, this concludes my statement. I would be happy to respond
                               to any questions you or other members of the Committee may have.




                               Page 29                             GAO/T-NSIAD/AIMD-97-143 DOD High-Risk Areas
Appendix I

1997 High-Risk Series Reports Involving
DOD

               Defense Financial Management (GAO/HR-97-3, Feb. 1997).

               Defense Contract Management (GAO/HR-97-4, Feb. 1997).

               Defense Inventory Management (GAO/HR-97-5, Feb. 1997).

               Defense Weapon Systems Acquisition (GAO/HR-97-6, Feb. 1997).

               Defense Infrastructure (GAO/HR-97-7, Feb. 1997).

               Information Management and Technology (GAO/HR-97-9, Feb. 1997).




               Page 30                            GAO/T-NSIAD/AIMD-97-143 DOD High-Risk Areas
Related GAO Products


              Contract Management: Fixing DOD’s Payment Problems Is Imperative
              (GAO/NSIAD-97-37, Apr. 10, 1997).

              Defense IRM: Investments at Risk for DOD Computer Centers
              (GAO/AIMD-97-39, Apr. 4, 1997).

              Defense Inventory Management: Problems, Progress, and Additional
              Actions Needed (GAO/T-NSIAD-97-109, Mar. 20, 1997).

              Defense Logistics: Much of the Inventory Exceeds Current Needs
              (GAO/NSIAD-97-71, Feb. 28, 1997).

              Financial Management: DOD Inventory of Financial Management Systems Is
              Incomplete (GAO/AIMD-97-29, Jan. 31, 1997).

              Air Force Depot Maintenance: Privatization-In-Place Plans Are Costly
              While Excess Capacity Exists (GAO/NSIAD-97-13, Dec. 31, 1996).

              Defense IRM: Strategy Needed for Logistics Information Technology
              Improvement Efforts (GAO/AIMD-97-6, Nov. 14, 1996).

              Acquisition Reform: Implementation of Title V of the Federal Acquisition
              Streamlining Act of 1994 (GAO/NSIAD-97-22BR, Oct. 31, 1996).

              DOD Accounting Systems: Efforts to Improve System for Navy Need Overall
              Structure (GAO/AIMD-96-99, Sept. 30, 1996).

              Information Security: Opportunities for Improved OMB Oversight of
              Agency Practices (GAO/AIMD-96-110, Sept. 24, 1996).

              Combat Air Power: Joint Mission Assessments Needed Before Making
              Program and Budget Decisions (GAO/NSIAD-96-177, Sept. 20, 1996).

              Army Depot Maintenance: Privatization Without Further Downsizing
              Increases Costly Excess Capacity (GAO/NSIAD-96-201, Sept. 18, 1996).

              Navy Depot Maintenance: Cost and Savings Issues Related to
              Privatizing-in-Place at the Louisville, Kentucky, Depot (GAO/NSIAD-96-202,
              Sept. 18, 1996).

              1997 DOD Budget: Potential Reductions to Operation and Maintenance
              Program (GAO/NSIAD-96-220, Sept. 18, 1996).



              Page 31                             GAO/T-NSIAD/AIMD-97-143 DOD High-Risk Areas
Related GAO Products




Defense Acquisition Infrastructure: Changes in RDT&E Laboratories and
Centers (GAO/NSIAD-96-221BR, Sept. 13, 1996).

Defense IRM: Critical Risks Facing New Materiel Management Strategy
(GAO/AIMD-96-109, Sept. 6, 1996).

Defense Transportation: Migration Systems Selected Without Adequate
Analysis (GAO/AIMD-96-81, Aug. 29, 1996).

Best Practices: Commercial Quality Assurance Practices Offer
Improvements for DOD (GAO/NSIAD-96-162, Aug. 26, 1996).

Navy Financial Management: Improved Management of Operating
Materials and Supplies Could Yield Significant Savings (GAO/AIMD-96-94,
Aug. 16, 1996).

Inventory Management: Adopting Best Practices Could Enhance Navy
Efforts to Achieve Efficiencies and Savings (GAO/NSIAD-96-156, July 12, 1996).

CFO Act Financial Audits: Navy Plant Property Accounting and Reporting
Is Unreliable (GAO/AIMD-96-65, July 8, 1996).

Navy Aviation: F/A-18E/F Will Provide Marginal Operational Improvement
at High Cost (GAO/NSIAD-96-98, June 18, 1996).

Financial Management: DOD Needs to Lower the Disbursement
Revalidation Threshold (GAO/AIMD-96-82, June 11, 1996).

Defense Infrastructure: Costs Projected to Increase Between 1997 and
2001 (GAO/NSIAD-96-174, May 31, 1996).

Information Security: Computer Attacks at Department of Defense Pose
Increasing Risks (GAO/AIMD-96-84, May 22, 1996).

Military Bases: Opportunities for Savings in Installation Support Costs Are
Being Missed (GAO/NSIAD-96-108, Apr. 23, 1996).

Acquisition Reform: Efforts to Reduce the Cost to Manage and Oversee
DOD Contracts (GAO/NSIAD-96-106, Apr. 18, 1996).


Defense Depot Maintenance: Privatization and the Debate Over the
Public-Private Mix (GAO/T-NSIAD-96-146, Apr. 16, 1996).



Page 32                             GAO/T-NSIAD/AIMD-97-143 DOD High-Risk Areas
Related GAO Products




Defense Business Operations Fund: DOD Is Experiencing Difficulty in
Managing the Fund’s Cash (GAO/AIMD-96-54, Apr. 10, 1996).

Military Bases: Closure and Realignment Savings Are Significant, But Not
Easily Quantified (GAO/NSIAD-96-67, Apr. 8, 1996).

Defense Infrastructure: Budget Estimates for 1996-2001 Offer Little
Savings for Modernization (GAO/NSIAD-96-131, Apr. 4, 1996).

CFO Act Financial Audits: Increased Attention Must Be Given to Preparing
Navy’s Financial Reports (GAO/AIMD-96-7, Mar. 27, 1996).

Defense Logistics: Requirement Determinations for Aviation Spare Parts
Need to Be Improved (GAO/NSIAD-96-70, Mar. 19, 1996).

Managing for Results: Achieving GPRA’s Objectives Require Strong
Congressional Role (GAO/T-GGD-96-79, Mar. 6, 1996).

Defense Transportation: Streamlining of the U.S. Transportation
Command Is Needed (GAO/NSIAD-96-60, Feb. 22, 1996).

Best Management Practices: Reengineering the Air Force’s Logistics
System Can Yield Substantial Savings (GAO/NSIAD-96-5, Feb. 21, 1996).

DOD Procurement: Use and Administration of DOD’s Voluntary Disclosure
Program (GAO/NSIAD-96-21, Feb. 6, 1996).

Financial Management: Continued Momentum Essential to Achieve CFO
Act Goals (GAO/T-AIMD-96-10, Dec. 14, 1995).

Financial Management: Challenges Facing DOD in Meeting the Goals of the
Chief Financial Officers Act (GAO/T-AIMD-96-1, Nov. 14, 1995).

DODProcurement: Millions in Contract Payment Errors Not Detected and
Resolved Promptly (GAO/NSIAD-96-8, Oct. 6, 1995).

Inventory Management: DOD Can Build on Progress in Using Best Practices
to Achieve Substantial Savings (GAO/NSIAD-95-142, Aug. 4, 1995).

Defense Management: Selection of Depot Maintenance Standard System
Not Based on Sufficient Analyses (GAO/AIMD-95-110, July 13, 1995).




Page 33                            GAO/T-NSIAD/AIMD-97-143 DOD High-Risk Areas
           Related GAO Products




           Managing for Results: Status of the Government Performance and Results
           Act (GAO/T-GGD-95-193, June 27, 1995).

           Managing for Results: Critical Actions for Measuring Performance
           (GAO/T-GGD/AIMD-95-187, June 20, 1995).

           Financial Management: Challenges Confronting DOD’s Reform Initiatives
           (GAO/T-AIMD-95-146, May 23, 1995).

           Comanche Helicopter: Testing Needs to be Completed Prior to Production
           Decisions (GAO/NSIAD-95-112, May 18, 1995).

           Financial Management: Control Weaknesses Increase Risk of Improper
           Navy Civilian Payroll Payments (GAO/AIMD-95-73, May 8, 1995).

           Tactical Aircraft: Concurrency in Development and Production of F-22
           Aircraft Should Be Reduced (GAO/NSIAD-95-59, Apr. 19, 1995).

           Military Bases: Analysis of DOD’s 1995 Process and Recommendations for
           Closure and Realignment (GAO/NSIAD-95-133, Apr. 14, 1995).

           Defense Business Operations Fund: Management Issues Challenge Fund
           Implementation (GAO/NSIAD-95-79, Mar. 1, 1995).

           Defense Supply: Inventories Contain Nonessential and Excessive
           Insurance Stocks (GAO/NSIAD-95-1, Jan. 20, 1995).




(709257)   Page 34                          GAO/T-NSIAD/AIMD-97-143 DOD High-Risk Areas
Ordering Information

The first copy of each GAO report and testimony is free.
Additional copies are $2 each. Orders should be sent to the
following address, accompanied by a check or money order
made out to the Superintendent of Documents, when
necessary. VISA and MasterCard credit cards are accepted, also.
Orders for 100 or more copies to be mailed to a single address
are discounted 25 percent.

Orders by mail:

U.S. General Accounting Office
P.O. Box 6015
Gaithersburg, MD 20884-6015

or visit:

Room 1100
700 4th St. NW (corner of 4th and G Sts. NW)
U.S. General Accounting Office
Washington, DC

Orders may also be placed by calling (202) 512-6000
or by using fax number (301) 258-4066, or TDD (301) 413-0006.

Each day, GAO issues a list of newly available reports and
testimony. To receive facsimile copies of the daily list or any
list from the past 30 days, please call (202) 512-6000 using a
touchtone phone. A recorded menu will provide information on
how to obtain these lists.

For information on how to access GAO reports on the INTERNET,
send an e-mail message with "info" in the body to:

info@www.gao.gov

or visit GAO’s World Wide Web Home Page at:

http://www.gao.gov




PRINTED ON    RECYCLED PAPER
United States                       Bulk Rate
General Accounting Office      Postage & Fees Paid
Washington, D.C. 20548-0001           GAO
                                 Permit No. G100
Official Business
Penalty for Private Use $300

Address Correction Requested