oversight

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

Published by the Government Accountability Office on 2019-03-14.

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

             United States Government Accountability Office
             Report to Congressional Addressees




             DEFENSE
March 2019




             BUSINESS
             OPERATIONS

             DOD Should Take
             Steps to Fully
             Institutionalize the
             Chief Management
             Officer Position




GAO-19-199
                                             March 2019

                                              DEFENSE BUSINESS OPERATIONS
                                              DOD Should Take Steps to Fully Institutionalize the
                                              Chief Management Officer Position
Highlights of GAO-19-199, a report to
congressional addressees




Why GAO Did This Study                       What GAO Found
DOD spends billions of dollars each          The Department of Defense (DOD) has taken steps to implement its Chief
year to maintain key enterprise              Management Officer (CMO) position which has been given the responsibility for
business operations intended to              managing DOD’s business operations; however, unresolved issues remain for
support the warfighter, including            DOD to fully institutionalize the CMO’s authorities and responsibilities. DOD has
systems and processes related to the         restructured the Office of the CMO (OCMO) to more closely align with the CMO’s
management of contracts, finances,           statutory authorities and responsibilities. Further, the OCMO is working to
the supply chain, and support                strengthen its data capabilities and has hired a Chief Data Officer and formed a
infrastructure. The 2018 National            Data Management and Analytics Steering Committee. Additionally, OCMO
Defense Strategy identified reform of
                                             officials told us they are establishing cost baselines for each of DOD’s major
DOD’s business practices as one of
                                             business functions.
DOD’s three strategic goals. GAO has
previously reported that weaknesses in
these business operations have               However, DOD has not fully addressed three key issues related to the CMO’s
resulted in inefficiencies and billions of   authorities and responsibilities:
dollars wasted. GAO has also
identified the need for a CMO with           •       The CMO’s authority to direct the military departments on business
significant authority and experience to              reform issues. The law gave the CMO authority to direct the secretaries
focus concerted attention on DOD’s                   of the military departments on matters over which the CMO has
long-term business transformation                    responsibility. However, DOD has not determined how the CMO will
efforts. Congress initially established              exercise this authority, particularly when there is disagreement between
such a position in the National Defense              the departments and the CMO.
Authorization Act for Fiscal Year 2017.
                                             •       The CMO’s oversight responsibilities of the Defense Agencies and
This report evaluates the extent to                  DOD Field Activities (DAFAs). The CMO is responsible for exercising
which DOD has implemented its CMO                    authority, direction, and control over the designated DAFAs that provide
position and issued guidance to                      shared business services—those business functions, such as supply
communicate within the department                    chain and logistics and human resources operations, that are provided
the authorities and responsibilities of
                                                     across more than one DOD organization. However, DOD has not
the position. GAO analyzed the
                                                     determined how the CMO will exercise this authority, such as which
statutory authorities and
responsibilities assigned to the CMO                 DAFAs will submit their proposed budgets for CMO review.
position and evaluated DOD’s actions         •       Transfer of responsibilities from the Chief Information Officer to the
to implement them.                                   CMO. Under the law, the CMO will exercise responsibilities relating to
What GAO Recommends                                  business systems and management that previously belonged to the
                                                     Chief Information Officer. However, DOD has not determined which, if
GAO is making four recommendations,                  any, responsibilities will transition from the Chief Information Officer to
including that DOD should address                    the CMO or assessed the impact of such a transition on associated
each of the three unresolved issues                  resources.
that impede its progress in
institutionalizing statutory authorities     In part because these issues remain unresolved, DOD agreed that it does not
and responsibilities, and issue              have department-wide guidance that fully and clearly articulates how the CMO’s
guidance, such as a chartering               authorities and responsibilities should be operationalized. Making determinations
directive that addresses how the
                                             on the three unresolved issues and issuing guidance would help ensure a
CMO’s authorities should be
                                             shared understanding throughout the department of the CMO’s role in leading
operationalized. DOD concurred with
GAO’s recommendations.                       DOD’s enterprise-wide business reform efforts.

View GAO-19-199. For more information,
contact Elizabeth Field at 202-512-2775 or
fielde1@gao.gov.

                                                                                     United States Government Accountability Office
Contents


Letter                                                                                     1
               Background                                                                  5
               DOD Has Taken Some Steps to Implement the CMO Position, but
                 Key Issues Related to Authorities and Responsibilities Remain
                 Unresolved                                                                9
               Unresolved Issue #1: The CMO’s Authority to Direct the Military
                 Departments on Business Reform Issues                                   14
               Unresolved Issue #2: The CMO’s Oversight Responsibilities for
                 the Defense Agencies and DOD Field Activities (DAFA)                    17
               Unresolved Issue #3: The Transfer of Responsibilities from the
                 Chief Information Officer to the CMO                                    20
               Conclusion                                                                23
               Recommendations for Executive Action                                      24
               Agency Comments and Our Evaluation                                        24

Appendix I     Scope and Methodology                                                     26



Appendix II    Summary of Key Authorities and Responsibilities for the
               Department of Defense Chief Management Officer                            28



Appendix III   Comments from the Department of Defense                                   32



Appendix IV    GAO Contact and Staff Acknowledgments                                     35


Tables
               Table 1: Summary of Key Statutory Authorities and
                       Responsibilities of the Department of Defense’s Chief
                       Management Officer                                                  7
               Table 2: Comparison of Selected Chief Management Officer
                       Statutory Authorities and Responsibilities in Fiscal Years
                       (FY) 2018 and 2019 National Defense Authorization Acts
                       (NDAA)                                                            28
               Table 3: Summary of Preceding Department of Defense (DOD)
                       Deputy Chief Management Officer Authorities and
                       Responsibilities                                                  30



               Page i                                  GAO-19-199 Defense Business Operations
Table 4: Summary of the Department of Defense Chief
        Management Officer Authorities and Responsibilities
        Outlined in DOD Memorandums                                                       31




Abbreviations

CAPE              Cost Assessment and Program Evaluation
CIO               Chief Information Officer
CMO               Chief Management Officer
CAG               CMO Action Group
DAFA              Defense Agencies and DOD Field Activities
DCMO              Deputy Chief Management Officer
DLA               Defense Logistics Agency
DOD               Department of Defense
IT                information technology
NDAA              National Defense Authorization Act
OCMO              Office of the Chief Management Officer
RMG               Reform Management Group
WHS               Washington Headquarters Services




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Page ii                                          GAO-19-199 Defense Business Operations
                       Letter




441 G St. N.W.
Washington, DC 20548




                       March 14, 2019

                       The Honorable Ron Johnson
                       Chairman
                       Committee on Homeland Security and Governmental Affairs
                       United States Senate


                       Dear Mr. Chairman:

                       The Department of Defense (DOD) faces several key challenges that
                       significantly affect its ability to accomplish its mission, including achieving
                       greater efficiencies in defense business operations. 1 DOD spends billions
                       of dollars each year to maintain key business operations intended to
                       support the warfighter, including systems and processes related to the
                       management of contracts, finances, the supply chain, and support
                       infrastructure. 2 However, we have previously reported that weaknesses in
                       these business operations result in billions of dollars being wasted,
                       reduced efficiencies, ineffective performance, inadequate accountability,




                       1
                        GAO, Department of Defense: Actions Needed to Address Five Key Mission Challenges,
                       GAO-17-369 (Washington, D.C.: June 13, 2017). GAO has reported on five key
                       challenges DOD faces that significantly affect the department’s ability to accomplish its
                       mission. These include the need to (1) rebalance forces and rebuild readiness; (2)
                       mitigate threats to cyberspace and expand cyber capabilities; (3) control the escalating
                       costs of programs, such as certain weapon systems acquisitions and military health care,
                       and better manage its finances; (4) strategically manage its human capital; and (5)
                       achieve greater efficiencies in defense business operations.
                       2
                        Enterprise business operations refers to those activities that constitute the cross-cutting
                       business operations used by multiple DOD components, but not those activities that are
                       directly tied to a single military department or DOD component. The term includes
                       business-support functions designated by the Secretary of Defense or the Deputy
                       Secretary of Defense for purposes of section 132a of title 10, United States Code, such as
                       aspects of financial management, healthcare, acquisition and procurement, supply chain
                       and logistics, certain information technology, real property, and human resources
                       operations. See 10 U.S.C. § 132a(e).




                       Page 1                                            GAO-19-199 Defense Business Operations
and lack of transparency. 3 The 2018 National Defense Strategy also
highlighted this issue, identifying reform of the department’s business
practices for greater performance and affordability as one of DOD’s three
strategic goals.

Given the complexity and magnitude of the challenges facing DOD in
improving its business operations, in 2005 we identified the need for a
Chief Management Officer (CMO) with significant authority and
experience to sustain progress on these issues. 4 We recommended that
Congress consider enacting legislation to establish a separate, full-time
CMO position at DOD with significant authority and experience and a
sufficient term of office to provide focused and sustained leadership over
business transformation efforts. 5 DOD first took steps to establish a CMO
role in May 2007, when it designated the Deputy Secretary of Defense as
the department’s CMO. Subsequently, Congress included a provision in
the National Defense Authorization Act (NDAA) for Fiscal Year 2008 to
codify the Deputy Secretary of Defense as the DOD CMO, and to
establish a new position known as the Deputy Chief Management Officer
(DCMO) to assist the Deputy Secretary. 6 In 2007, we highlighted the
importance of a full-time CMO position separate and distinct from that of
the Deputy Secretary to help elevate, integrate, and institutionalize




3
 See for example, GAO, High-Risk Series: An Update, GAO-07-310 (Washington, D.C.:
Jan. 2007); Defense Business Transformation: A Comprehensive Plan, Integrated Efforts,
and Sustained Leadership Are Needed to Assure Success, GAO-07-229T (Washington,
D.C.: Nov. 16, 2006); Department of Defense: Sustained Leadership Is Critical to Effective
Financial and Business Management Transformation, GAO-06-1006T (Washington, D.C.:
Aug. 3, 2006); DOD’s High-Risk Areas: Successful Business Transformation Requires
Sound Strategic Planning and Sustained Leadership, GAO-05-520T (Washington, D.C.:
Apr. 13, 2005); and DOD Financial Management: Integrated Approach, Accountability,
Transparency, and Incentives Are Keys to Effective Reform, GAO-02-497T (Washington,
D.C.: Mar. 6, 2002).
4
GAO, High-Risk Series: An Update, GAO-05-207 (Washington, D.C.: Jan. 2005).
5
 GAO-05-207. Given the nature and complexity of the overall business transformation
effort, and the need for sustained attention over a significant period of time, we also
recommended that this position be a term appointment (e.g., 5-7 years) and that the
person in the position be subject to a performance contract.
6
Pub. L. No. 110-181, § 904 (2008).




Page 2                                            GAO-19-199 Defense Business Operations
responsibility for key management functions and focus concerted
attention on long-term business transformation efforts. 7

In 2016, Congress included a provision in the NDAA for Fiscal Year 2017
to create a CMO position effective February 1, 2018 that would be distinct
from the Deputy Secretary of Defense and provided a number of key
responsibilities. In December 2017, Congress repealed and replaced this
provision in the NDAA for Fiscal Year 2018 and later added additional
responsibilities and functions in the John S. McCain NDAA for Fiscal Year
2019. 8 The CMO’s current responsibilities are codified in section 132a of
title 10, United States Code. Section 132a provides that the CMO is
responsible for, among other things, managing DOD’s enterprise
business operations and shared services and exercising authority,
direction, and control over the designated defense agencies and DOD
field activities (DAFA) that provide shared business services for the
department. 9 Furthermore, in the NDAA for Fiscal Year 2018, effective on
Jan. 1, 2019, the CMO exercises any responsibilities, duties and powers
relating to business systems or management that are exercisable by a
Chief Information Officer (CIO) for the department. In an August 2017
report to Congress, DOD announced its plans to establish a CMO
position separate from the Deputy Secretary of Defense in order to
improve the quality and productivity of the business operations of the
department, thereby reducing the costs of those operations. 10 The report
stated that DOD would use the establishment of the CMO organization as
an opportunity to renew its focus on business operations reform and to
shift its business operations to enterprise services in order to reduce the

7
 GAO, Defense Business Transformation: Achieving Success Requires a Chief
Management Officer to Provide Focus and Sustained Leadership, GAO-07-1072,
(Washington, D.C.: Sept. 5, 2007).
8
 See Pub. L. No. 114-328, § 901 (2016); Pub. L. No. 115-91, § 910 (2017), and Pub. L.
No. 115-232, § 921 (2018) respectively and codified as amended at 10 U.S.C. § 132a.
9
 DOD’s 19 defense agencies and eight DOD field activities are defense organizations
separate from the military departments. They are intended to provide a common supply or
service across more than one DOD organization, but not to those activities that are
directly tied to a single military department or DOD component. The term includes
business-support functions, including aspects of financial management, healthcare,
acquisition and procurement, supply chain and logistics, certain information technology,
real property, and human resources operations.
10
  DOD, Report to Congress: Restructuring the Department of Defense Acquisition,
Technology and Logistics Organization and Chief Management Officer Organization In
Response to Section 901 of the National Defense Authorization Act for Fiscal Year 2017
(Public Law 114 - 328).(August 2017).




Page 3                                          GAO-19-199 Defense Business Operations
cost of business operations. On February 1, 2018, the Secretary of
Defense announced the establishment of a CMO position with
responsibility for directing all enterprise business operations of the
department and other duties as set forth in section 132a of title 10, United
States Code. With the resignation of DOD’s first CMO in November 2018,
the DCMO assumed the role of the Acting CMO in December 2018. 11

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

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

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



11
  John Gibson was confirmed as DOD’s first Chief Management Officer in February 2018.
On November 5, 2018, DOD announced that Mr. Gibson had submitted his resignation,
effective November 30, 2018. On December 1, 2018, Lisa Hershman, Deputy Chief
Management Officer, assumed the role of the Acting Chief Management Officer.




Page 4                                        GAO-19-199 Defense Business Operations
                     We conducted this performance audit from February 2018 to March 2019
                     in accordance with generally accepted government auditing standards.
                     Those standards require that we plan and perform the audit to obtain
                     sufficient, appropriate evidence to provide a reasonable basis for our
                     findings and conclusions based on our audit objectives. We believe that
                     the evidence obtained provides a reasonable basis for our findings and
                     conclusions based on our audit objectives.



Background
History of the CMO   DOD first took steps to establish a CMO role in May 2007, when it
Position             designated the Deputy Secretary of Defense as the department’s CMO.
                     Subsequently, Congress included a provision in the NDAA for Fiscal Year
                     2008 to codify the Deputy Secretary of Defense as the DOD CMO,
                     establish a new position known as the Deputy Chief Management Officer
                     (DCMO) to assist the Deputy Secretary, and name the Under Secretaries
                     of the military departments as CMOs of their respective organizations. 12
                     The military departments also established DCMO positions to assist the
                     CMOs with overseeing their business operations. In addition, the NDAA
                     for Fiscal Year 2009 required the secretary of each military department to
                     establish an office of business transformation and develop business
                     transformation plans, with measurable performance goals and objectives,
                     to achieve an integrated management system for the business operations
                     of each military department. 13 Further, DOD’s guidance states that the
                     DOD DCMO should coordinate with the military department CMOs to
                     identify and exchange information necessary to facilitate the execution of
                     the Deputy Secretary of Defense’s responsibilities in his role as the DOD
                     CMO. 14

                     In October 2008, DOD issued Department of Defense Directive 5105.82
                     to assign the authorities and responsibilities of the DCMO. Among other
                     duties, the DCMO was responsible for recommending methodologies and
                     measurement criteria to better synchronize, integrate, and coordinate the

                     12
                      Pub. L. No. 110-181, § 904 (2008).
                     13
                      Pub. L. No. 110-417, § 908 (2008).
                     14
                       DOD Directive 5105.82, Deputy Chief Management Officer (DCMO) of the Department
                     of Defense (Oct. 17, 2008).




                     Page 5                                       GAO-19-199 Defense Business Operations
                            business operations of the department and advising the Secretary of
                            Defense on performance goals and measures and assessing progress
                            against those goals. For a full list of the DCMO authorities and
                            responsibilities identified in DOD Directive 5105.82, see appendix II.


CMO Statutory Authorities   In December 2016, Congress initially established the standalone CMO
and Responsibilities        position to be effective on February 1, 2018 in section 901(c) of the NDAA
                            for Fiscal Year 2017. In December 2017, Congress repealed and
                            replaced this provision in the NDAA for Fiscal Year 2018 and later added
                            additional responsibilities and functions in the John S. McCain NDAA for
                            Fiscal Year 2019. 15 Table 1 summarizes key CMO statutory authorities
                            and responsibilities, and appendix II provides a more detailed comparison
                            of these authorities and responsibilities.




                            15
                              Section 910 of the NDAA for Fiscal Year 2018 repealed and replaced section 901(c) of
                            the NDAA for Fiscal Year 2017, and expanded and codified the role and responsibilities of
                            the DOD CMO, establishing it as taking precedence after the Secretary and Deputy
                            Secretary of Defense. See 10 U.S.C. § 132a.




                            Page 6                                          GAO-19-199 Defense Business Operations
Table 1: Summary of Key Statutory Authorities and Responsibilities of the Department of Defense’s Chief Management Officer

 Statute                                     Authorities and Responsibilities
 Section 901 of the                          Established the Chief Management Officer (CMO) position effective February 1, 2018.
 National Defense                            Provided various duties and powers such as supervising all business operations of the Department of
 Authorization Act for                       Defense (DOD).
 Fiscal Year 2017a
 Section 910 of the                          Assigned the CMO the responsibility for performing such duties and exercising such power as the
 National Defense                            Secretary and Deputy Secretary of Defense may prescribe, including:
 Authorization Act for                       •   serving as the CMO of the DOD with the mission of managing enterprise business operations and
 Fiscal Year 2018                                shared services of the department;
                                             •   serving as the principal advisor to the Secretary and the Deputy Secretary of Defense on
                                                 establishing policies for, and directing all enterprise business operations of the department,
                                                 including business transformation, planning and processes, performance measurement and
                                                 management, and business information technology management and improvement activities and
                                                 programs, including the allocation of resources for enterprise business operations, and unifying
                                                 business management efforts across the department;
                                             •   exercising authority, direction, and control over the Defense Agencies and Department of Defense
                                                 Field Activities (DAFA) providing shared business services for the department that are designated
                                                 by the Secretary or Deputy Secretary of Defense;
                                             •   serving as the official with principal responsibility in the department for providing for the availability
                                                 of common, usable, defense-wide data sets with applications such as improving acquisition
                                                 outcomes and personnel management;
                                             •   exercising authority to direct the secretaries of the military departments and the heads of all other
                                                 elements of the department with regard to matters for which the CMO has responsibility under
                                                 section 132a of title 10 of the United States Code; and
                                             •   serving as the Chief Information Officer (CIO) of the department for defense business systems (as
                                                 of January 1, 2019).
 Section 912 of the                          Designated the CMO as the department’s primary decision-making authority with respect to the
 National Defense                            development of common enterprise data.
 Authorization Act for
 Fiscal Year 2018
 Section 903 of the John                     Amended section 142(b)(1) of title 10 of the United States Code to recognize the transfer of certain CIO
 S. McCain National                          business systems and management responsibilities to the CMO.
 Defense Authorization
 Act for Fiscal Year 2019
 Section 921 of the John                     Directed that, beginning in fiscal year 2020, the CMO review the proposed budget of certain DAFAs
 S. McCain National                          designated by the Secretary of Defense, submit to the Secretary of Defense a report containing the
 Defense Authorization                       CMO’s comments with respect to all such proposed budgets, and certify whether each such proposed
 Act for Fiscal Year 2019                    budget achieves the required level of efficiency and effectiveness for enterprise business operations,
                                             consistent with guidance for budget review established by the CMO.
                                             Directed that not later than January 1, 2020, and not less frequently than once every 5 years thereafter,
                                             the Secretary of Defense, acting through the CMO, reform enterprise business operations of DOD
                                             through reductions, eliminations, or improvements, across all organizations and elements of the
                                             department with respect to any activity relating to civilian resources management, logistics
                                             management, services contracting or real estate management in order to increase effectiveness and
                                             efficiency of mission execution.
Source: GAO analysis of Pub. L. No. 114-328, § 901 (2016), Pub. L. No. 115-91, § 910 (2017), Pub. L. No. 115-91, § 912 (2017), Pub. L. No. 115-232, § 903 (2018), Pub. L. No. 115-232, § 921 (2018).
|GAO-19-199




                                                                  Page 7                                                                  GAO-19-199 Defense Business Operations
                     a
                      In Section 901 of the NDAA for Fiscal Year 2017, Congress first established the CMO position to be
                     effective February 1, 2018. However, this provision was repealed and replaced by Section 910 of the
                     NDAA for Fiscal Year 2018.




Key Strategies for   In November 2007, we reported on key strategies for implementing CMO
Implementing CMO     positions. 16 We developed these strategies based on our work, in which
Positions            we (1) gathered information on the experiences and views of officials at
                     four organizations that rely on chief management officials and (2)
                     convened a forum to gather insights from individuals with experience and
                     expertise in business transformation, federal and private sector
                     management, and change management. 17 The forum brought together
                     former and current government executives and officials from private
                     business and nonprofit organizations to discuss when and how a CMO or
                     similar position might effectively provide the continuing, focused attention
                     essential for integrating key management functions and undertaking
                     multiyear organizational transformations.

                     Our work identified the following six key strategies:

                     •    Define the specific roles and responsibilities of the CMO position.
                     •    Ensure that the CMO has a high level of authority and clearly
                          delineated reporting relationships.
                     •    Foster good executive-level working relationships for maximum
                          effectiveness.
                     •    Establish integration and transformation structures and processes in
                          addition to the CMO position.
                     •    Promote individual accountability and performance through specific
                          job qualifications and effective performance management.



                     16
                       GAO, Organizational Transformation: Implementing Chief Operating Officer/Chief
                     Management Officer Positions in Federal Agencies, GAO-08-34 (Washington, D.C.: Nov.
                     1, 2007).
                     17
                       The four organizations included in our review were three federal agencies and one
                     nonprofit organization: the Department of the Treasury, the Internal Revenue Service, the
                     Department of Justice, and the Massachusetts Institute of Technology. We selected the
                     four organizations because each had a senior-level official who was responsible for
                     integrating key management functions, including, at a minimum, human capital, financial
                     management, information technology, and acquisition management.




                     Page 8                                                GAO-19-199 Defense Business Operations
                           •     Provide for continuity of leadership in the CMO position. 18


DOD Has Taken
Some Steps to
Implement the CMO
Position, but Key
Issues Related to
Authorities and
Responsibilities
Remain Unresolved
DOD Has Begun to           In February 2018, DOD formally established the position of the CMO and
Implement Its CMO          an office in support of the CMO (OCMO). In establishing the office, the
                           Secretary of Defense stated that all resources and personnel (military,
Position and Restructure
                           civilian, and contractor) assigned within the existing DCMO office were to
the OCMO, with a Focus     transfer to the OCMO. Generally, the department has been focused on
on Data Responsibilities   updating organizational structures and strengthening the OCMO’s data
                           capabilities, as described below.

Updating Organizational    When the office was first established, its organizational structure mirrored
Structures                 that of the office of the DCMO, with five directorates focused on the
                           responsibilities that had been in place under the DCMO. 19 According to
                           the CMO, however, that structure was not ideal for accomplishing the
                           OCMO’s mission of delivering optimized enterprise business operations
                           to assure the success of the National Defense Strategy, given the
                           evolving nature of the CMO’s authorities and responsibilities under recent
                           legislation. 20 Therefore, the office began an effort to restructure itself to
                           more closely align with statutory authorities and responsibilities. On
                           December 7, 2018, the Acting CMO issued a memorandum announcing

                           18
                               We have previously recommended a term appointment of 5-7 years for CMO positions.
                           19
                            The five directorates were: (1) Administration; (2) Planning, Performance, and
                           Assessment; (3) Defense Business Management, Analysis, and Optimization; (4)
                           Oversight and Compliance; and (5) Organizational Policy and Decision Support.
                           20
                             The draft vision for the restructured OCMO is “efficiency for Lethality by leading
                           business operations for the Department through innovative processes and services, data
                           driven solutions, and mission focused funding.”




                           Page 9                                          GAO-19-199 Defense Business Operations
the reorganization of the OCMO which, according to the memorandum,
was expected to be completed by January 31, 2019. In February 2019, an
OCMO official told us that the design of the OCMO reorganization was
completed, but that the OCMO was still working to realign personnel
within the new organization, as applicable. The memorandum indicated
the office would be reorganized into five directorates: 1) Administration
and Organizational Management, 2) Data Insights, 3) Fourth Estate
Management, 4) Oversight and Compliance, and 5) Transformation and
Reform. 21 OCMO officials also provided us draft charters that described
each directorate’s areas of responsibility. The duties of some of the new
directorates are directly related to the CMO’s statutory responsibilities,
while others are tied to duties carried over from the DCMO, which are
more administrative in nature. For example, the Data Insights, Fourth
Estate, and Transformation and Reform directorates have duties directly
related to the CMO’s statutory responsibilities, such as:

•   establishing policy and governance for common enterprise data
    related to business operations and management (Data Insights);
•   developing, executing, and tracking business management reform
    throughout the Fourth Estate, while building on-going management
    structures to manage DAFAs designated as providing shared services
    (Fourth Estate); and
•   supporting the Secretary of Defense, Deputy Secretary of Defense,
    and CMO with reform and business transformation initiatives
    regarding organizational alignment, process improvement, and
    resource efficiencies through policy and expertise in best practices for
    business operation improvements (Transformation and Reform).

The Administration and Organizational Management and Oversight and
Compliance directorates were charged with a multitude of administrative
duties carried over from the DCMO, to include:

•   exercising signature authority for the Deputy Secretary of Defense to
    cancel, approve administrative changes, and reissue DOD issuances,
    in accordance with DOD Instruction 5025.01, DOD Issuances


21
  DOD has defined Fourth Estate organizations as DOD organizations, other than the
military services, that have DOD manpower resources. These organizations include the
Office of the Secretary of Defense, the Joint Staff, the defense agencies, DOD field
activities, and the Combatant Commands. The OCMO has excluded the Combatant
Commands for purposes of CMO management of Fourth Estate organizations.




Page 10                                        GAO-19-199 Defense Business Operations
    Program (Aug. 1, 2016) (change 2, Dec. 22, 2017) (Administration
    and Organizational Management); and
•   managing and overseeing multiple DOD programs such as
    intelligence oversight, privacy and civil liberties, and Freedom of
    Information Act (Oversight and Compliance).

While the OCMO is being restructured to more closely align with the
CMO’s expanding responsibilities, OCMO officials emphasized that they
are committed to ensuring that the size of the office does not increase. In
November 2018, OCMO officials told us the office had 110 civilian
personnel. 22 According to OCMO officials, they have taken steps to limit
the office’s size, in part, because they are responsible for leading the
department’s efforts to reduce its management and headquarters
activities. 23 Officials also said that increasing the office’s budget and
workforce would be inconsistent with their mission of achieving
efficiencies and cutting costs. Budget data indicate that DOD is reducing
the size of the OCMO. Specifically, DOD requested about $54 million for
fiscal year 2017 for the DCMO (the last full year of the DCMO’s




22
  According to OCMO officials, the number of civilian personnel does not include 14
civilian employees detailed to the office; two military personnel, and contractors.
23
  Department of Defense Instruction 5100.73, Major DOD Headquarters Activities (Dec. 1,
2007) (incorporating change 2, Jun. 12, 2012) defines Major Headquarters Activities
(MHA) as “those headquarters (and the direct support integral to their operation) whose
primary mission is to manage or command the programs and operations of the
Department of Defense, the DOD Components, and their major military units,
organizations, or agencies.” MHA includes Management Headquarters, Combatant
Headquarters, and Direct Support as defined in DOD Instruction 5100.73. Management
Headquarters, a subset of MHA, is defined as “those headquarters primarily responsible
for overseeing, directing, and controlling subordinate organizations or units through: (1)
developing and issuing policies and providing policy guidance, (2) reviewing and
evaluating performance, (3) allocating and distributing resources, and (4) conducting mid-
and long-range planning, programming, and budgeting.” Management Headquarters is
generally taken to exclude the Combatant Headquarters and Direct Support elements.
Subsection 346(a) of the National Defense Authorization Act for Fiscal Year 2016 required
DOD, among other things, to implement a plan to achieve not less than $10 billion in cost
savings from headquarters, administrative, and support activities from fiscal year 2015
through fiscal year 2019. GAO has issued correspondence dealing with MHA, Defense
Efficiency Initiatives: Observations on DOD’s Reported Reductions to Its Headquarters
and Administrative Activities, GAO-18-688R (Washington D.C.: Sep.24, 2018).




Page 11                                          GAO-19-199 Defense Business Operations
                            operation); and about $48 million and $36 million for the OCMO in fiscal
                            years 2018 and 2019, respectively. 24

                            To help the office carry out its new responsibilities within its current
                            personnel levels, the OCMO established a new CMO Action Group
                            (CAG). According to OCMO officials, the CAG serves as a central point to
                            determine how to most efficiently carry out new requirements within the
                            CMO organization. The CAG has three primary roles: (1) conduct
                            strategic engagement with the department’s legislative and public affairs
                            personnel to ensure that the CMO can effectively message its role and
                            work both inside and outside the department, (2) serve as an “incubator”
                            to assess how to implement new authorities assigned to the OCMO that
                            do not have a natural home in the organization, and (3) help integrate and
                            oversee the CMO’s organizational structure.

Strengthening OCMO’s Data   OCMO officials said that steps to strengthen the office’s data capabilities
Capabilities                formed a key element of their reorganization plan. For example, OCMO
                            officials told us that, in addition to creating a new directorate charged with
                            overseeing management of enterprise-wide data, OCMO added a Chief
                            Data Officer position and established a Data Management and Analytics
                            Steering Committee. Immediate tasks of this committee, which is chaired
                            by the Chief Data Officer, were to develop a charter, relevant DOD policy,
                            and a data governance process. As of October 2018, OCMO officials said
                            that the committee had ratified a charter detailing the data governance
                            process, and the charter was going through the DOD review and
                            concurrence process. OCMO officials said that they had also prepared a
                            draft policy on common enterprise data, which was being circulated
                            among stakeholders before being submitted for review.

                            The new Chief Data Officer told us that his initial steps are to understand
                            the maturity of DOD’s data environment and to establish cost baselines
                            for its major lines of business, such as supply chain and medical. Based
                            on information OCMO officials told us in a July 2018 demonstration of
                            DOD’s cost baseline, their goal is to populate the cost model for the lines

                            24
                               President’s Budget Request Fiscal Year 2019, Operations and Maintenance, Defense-
                            Wide. OCMO officials explained that the decrease in the budget from fiscal year 2018 to
                            fiscal year 2019 was due, in part, to a reduction in the number of lines of business that it is
                            seeking to reform. In November 2018, the Acting CMO informed us that the OCMO was
                            going to reduce the focus of its business reform effort from nine categories to four. While
                            the OCMO budget requests have been declining, the OCMO is able to utilize contract
                            support to augment its personnel, and has used contractors to perform tasks such as its
                            review of the DAFAs.




                            Page 12                                             GAO-19-199 Defense Business Operations
                           of business and to have a single source of cost data that is available to
                           everyone in the department. According to these officials, they began
                           developing a cost baseline for real property, which was completed in
                           2016. 25 Medical and information technology (IT) cost baselines had also
                           been completed as of July 2018, and the OCMO was working on supply
                           chain, financial management, and acquisition. Several functional areas
                           like community services, human resources, and science and technology
                           had not yet been completed, but officials told us they expected to
                           complete them in the 2019-2020 timeframe. In November 2018, the Chief
                           Data Officer said that the OCMO has established a cost baseline for half
                           of the lines of business. OCMO officials also told us that it takes about
                           300 days to create a cost baseline for each line of business, and that they
                           expect to complete another two to three additional cost baselines in fiscal
                           year 2019.

                           Additionally, the Chief Data Officer is leading efforts to institutionalize
                           data governance in order to make data more applicable to the day-to-day
                           decisions of DOD leadership. This effort will involve standardizing data
                           and establishing commonality in the data process across the department.
                           As DOD pursues commonality in its data, the Chief Data Officer told us
                           that the OCMO will coordinate with the Office of the Under Secretary of
                           Defense, Comptroller to ensure DOD’s financial management systems
                           are included in this undertaking.


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




                           25
                             DOD defines real property as lands, buildings, structures, utilities systems,
                           improvements, and appurtenances thereto. Real property includes equipment attached to
                           and made part of buildings and structures, but not movable equipment.




                           Page 13                                        GAO-19-199 Defense Business Operations
                         The Secretary of Defense has charged the CMO with leading DOD’s
Unresolved Issue #1:     enterprise business operations and with unifying business management
The CMO’s Authority      efforts across the department and other responsibilities as set forth in
                         section 132a of title 10, United States Code. Moreover, the NDAA for
to Direct the Military   Fiscal Year 2019 directed the Secretary of Defense, acting through the
Departments on           CMO, to reform DOD’s enterprise business operations across all
                         organizations and elements of the department with respect to any activity
Business Reform          relating to civilian resources management, logistics management,
Issues                   services contracting, or real estate management. Fulfilling these
                         responsibilities depends, in part, on the CMO’s visibility into the business
                         operations of all components of the department, including the military
                         departments, as well as the ability to identify and execute DOD-wide
                         business reforms, including those that may affect the military
                         departments.

                         Congress addressed the issue of the CMO’s relationship to the military
                         departments in section 132a, which authorizes the CMO, subject to the
                         authority, direction, and control of the Secretary of Defense and Deputy
                         Secretary of Defense, to direct the secretaries of the military departments
                         and the heads of all other elements of DOD on matters for which the
                         CMO has responsibility under the statute. DOD leadership has provided
                         some guidance regarding the CMO’s responsibilities for efforts that are
                         department-wide and therefore involve the military departments. For
                         example:

                         •   In a May 2017 memorandum, the Deputy Secretary of Defense
                             directed all DOD components to conduct a thorough review of
                             business operations throughout the department and to propose
                             initiatives that drive increased effectiveness in pursuit of greater
                             efficiency. The memorandum identified the DCMO as the lead for this
                             effort and tasked the DCMO with integrating all initiatives. All
                             responsibilities and authorities assigned to the DCMO were
                             transferred to the CMO on February 1, 2018.
                         •   More recently, in May 2018, DOD issued its FY 2018-FY 2020
                             National Defense Business Operations Plan (Plan), which states that
                             the CMO is personally responsible for overseeing implementation of
                             business reforms. The Plan further establishes, and gives the CMO
                             responsibility for carrying out, a strategic objective to improve and
                             strengthen business operations through a move to DOD-enterprise or
                             shared services and reduce administrative and regulatory burden.




                         Page 14                                   GAO-19-199 Defense Business Operations
However, DOD leadership has not determined how the CMO will exercise
this authority in instances where the military departments have concerns
or disagree with decisions that the CMO makes. In our discussions with
the Army, Navy, and Air Force’s CMO offices, officials from each military
department explained that they frequently met with the CMO and were
involved in discussing business operation initiatives with potential for
implementation across multiple military departments. According to these
officials, these discussions were collaborative and the CMO did not have
to exercise his authority to direct the services. However, we found two
instances in which the lack of a determination as to how the CMO is to
direct the business-related activities of the military departments led to
questions about the respective roles and authorities of the CMO and the
military departments as they relate to business reform. In one case,
officials from the military departments questioned the CMO’s authority to
make binding decisions; in the other, the military departments sought to
pursue reform activities without CMO involvement and oversight, even
though the CMO has responsibility for leading DOD’s enterprise business
reform efforts.

First, officials told us that in a July 2018 meeting of the Reform
Management Group (RMG) the CMO approved a decision to consolidate
DOD’s contract writing systems into a single system. 26 According to
OCMO officials, the effort to move to a single contract writing system
would increase data visibility, lessen or eliminate redundant contracting
needs, provide for greater management insight, and increase the buying
power of the department. However, officials told us the military
departments, which had voiced concerns about moving to one
consolidated system in a previous RMG meeting, expressed reservations.
Specifically, a DOD official who participated in the RMG meetings told us
the military departments cited a concern about loss of individual
authorities and requirements, among other issues. Several DOD officials
we spoke with described the RMG meeting as the first time the question
of the CMO’s authority to make decisions for enterprise-wide business

26
  The Reform Management Group oversees the business reform teams, including the
reform team focused on Information Technology. The Deputy Secretary of Defense chairs
the Reform Management Group, and the CMO facilitates regular meetings of the group.
The previous CMO wrote that the RMG serves as a venue to engage the department’s
functional leaders on the reform initiatives, allowing these leaders to stay informed of
reform team work and adjudicate any concerns. For a more detailed description of DOD’s
Reform Management Group and reform teams, see GAO, Defense Management: DOD
Needs to Implement Statutory Requirements and Identify Resources for Its Cross-
Functional Reform Teams, GAO-19-165 (Washington, D.C.: Jan. 2019).




Page 15                                         GAO-19-199 Defense Business Operations
reform and to direct the military departments had been raised at an RMG
meeting. According to officials who were present at the meeting,
participants discussed whether the RMG is a voting body and what
authority the CMO has to make unilateral decisions for the RMG. 27 When
we spoke with officials about this matter in January 2019, they said this
question was still unresolved.

Second, the Secretaries of the Army, Navy, and Air Force, in a December
10, 2018 memorandum to the Secretary of Defense, requested the
Secretary direct the military departments to jointly review organizations,
activities, processes, and procedures that might be reformed or
restructured to enhance lethality and readiness or reduce cost. While the
departments asked for support the Secretary deemed appropriate from
the Joint Staff, the Office of the Secretary of Defense, and others, it did
not request support or involvement from the CMO. Further, the
memorandum stated that the military department secretaries envision a
process where they would make recommendations directly to the
Secretary. However, the memorandum made no mention of CMO
involvement in the review, notwithstanding Congressional, Secretary of
Defense, and Deputy Secretary of Defense direction that calls for the
CMO to oversee DOD’s business reform efforts. 28

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




27
  Since that July meeting, the Acting CMO has, according to her office, been engaged
with the military departments and the leader of the Information Technology Business
Systems reform team to determine an approach that would align with the RMG’s decision,
while serving and maintaining service equities. As of January 2019, DOD had plans to
consolidate, through a phased approach, 18 unique contract systems into two systems,
and ultimately into one. The final date for consolidation into one system has not been
determined, but a plan for final consolidation is due to the Acting CMO in the second
quarter of Fiscal Year 2019.
28
 According to DOD officials, this matter was still under review as of January 2019.




Page 16                                          GAO-19-199 Defense Business Operations
                       DOD’s 19 defense agencies and eight DOD field activities are intended to
Unresolved Issue #2:   perform many of DOD’s business operations, including consolidated
The CMO’s Oversight    supply and service functions such as human resources services, on a
                       department-wide basis. We have previously identified numerous
Responsibilities for   instances of fragmentation, overlap, and duplication and have
the Defense Agencies   recommended actions to increase coordination or consolidation to
                       address related inefficiencies that affect the DAFAs. 29 For example, in
and DOD Field          September 2018, we reported that there is fragmentation and overlap
Activities (DAFA)      within the DAFAs that provide human resources services to other defense
                       agencies or organizations within DOD. 30 Our September 2018 report on
                       the DAFAs also found that DOD does not comprehensively or routinely
                       assess the continuing need for its DAFAs. 31

                       Congress addressed the issue of the CMO’s relationship to the DAFAs in
                       the law establishing the CMO position. Under section 132a, the CMO is
                       responsible for exercising authority, direction, and control over the DAFAs

                       29
                         GAO, 2018 Annual Report: Additional Opportunities to Reduce Fragmentation, Overlap,
                       and Duplication and Achieve Other Financial Benefits, GAO-18-371SP (Washington, D.C.:
                       Apr. 26, 2018). For example, we previously identified instances of fragmentation, overlap,
                       and duplication among aspects of military healthcare and management of DOD’s
                       commissaries, among other areas. DOD has taken some actions to respond to associated
                       recommendations. For example, DOD established a Defense Health Agency to
                       consolidate the governance structure of the military health system.
                       30
                         GAO, Defense Management: DOD Needs to Address Inefficiencies and Implement
                       Reform across Its Defense Agencies and DOD Field Activities, GAO-18-592 (Washington,
                       D.C.: Sept. 6, 2018). We recommended DOD take several actions, including: 1)
                       developing time frames and deliverables for identifying and adopting optimal IT solutions
                       for human resources and fully assessing, identifying, and implementing the most effective
                       and efficient means of human resources service delivery; and 2) collecting information on
                       the overhead costs charged by all DOD human resources service providers to assist in
                       determining the most effective, economical, and efficient model of human resources
                       service delivery within the department. As of January 2019, DOD had not taken action to
                       implement our recommendations.
                       30
                         GAO-18-592. DOD was statutorily required to periodically review the services and
                       supplies each DAFA provides to ensure there is a continuing need for each, and that the
                       provision of services and supplies by each DAFA, rather than by the military departments,
                       is more effective, economical, or efficient (See 10 U.S.C. § 192 (c)). Since 2012, DOD has
                       relied on existing processes, such as its annual budget process, to fulfill this review
                       requirement. However, DOD did not provide sufficient evidence that these processes
                       satisfy the statute. For example, while DOD reviews the DAFAs during the budget
                       process, it does not specifically review the provision of services by the DAFAs rather than
                       the military departments.




                       Page 17                                          GAO-19-199 Defense Business Operations
that provide shared business services for the department, as designated
by the Secretary or Deputy Secretary of Defense. In January 2018, the
Deputy Secretary reported to Congress that the Secretary of Defense
formally identified the Pentagon Force Protection Agency and
Washington Headquarters Services (WHS) as the DAFAs that provide
shared business services, and directed that they would fall under the
authority, direction, and control of the CMO. However, both of these
organizations had already been identified as providing shared business
services and aligned under the previous DCMO. In addition, the Deputy
Secretary’s January 2018 report to Congress did not explain why these
two DAFAs, but not others, were designated as providing shared
business services.

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

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


Page 18                                   GAO-19-199 Defense Business Operations
January 2020, but have not determined when or how the Secretary of
Defense will designate additional DAFAs as providing shared business
services. They have also not determined what those decisions would
mean for the OCMO’s management of its responsibility to provide direct
authority, control, and direction over those DAFAs.

In section 921 of the John S. McCain NDAA for Fiscal Year 2019,
Congress also expanded and codified the CMO’s authority over the
DAFAs by requiring the Secretary of Defense, acting through the Under
Secretary of Defense, Comptroller, to direct the head of each DAFA
specified by the Secretary for the purpose of section 921, to transmit its
proposed budget for enterprise business operations for a fiscal year to the
CMO for review, beginning in fiscal year 2020. Section 921 further
provides that the CMO shall submit a report to the Secretary containing
the CMO’s comments and certification of whether each proposed budget
achieves a required level of efficiency and effectiveness for enterprise
business operations, consistent with guidance for budget review
established by the CMO. 32 Under section 921, the Secretary of Defense
has discretion to determine which DAFAs’ proposed budgets are subject
to CMO review. In November 2018, OCMO officials told us that the
Secretary of Defense had not yet designated any DAFAs as required to
submit their budgets for review. However, they stated that the OCMO is
working with the DOD Comptroller to determine how the DAFA budget
review will be conducted. They also said that they have hired consultants
under an existing blanket purchase agreement contract to assist with
developing a methodology for this review. OCMO officials told us they
believed they would be ready to conduct the required review by fiscal
year 2020, as required by the statute. However, it is unclear whether this
review will result in a determination of which DAFAs are required to
submit their proposed budgets for review.

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




32
 These provisions of section 921 were codified at 10 U.S.C. § 132a.




Page 19                                        GAO-19-199 Defense Business Operations
                        As described in table 1 of this report, section 910 of the NDAA for Fiscal
Unresolved Issue #3:    Year 2018 provided that, effective January 1, 2019, the CMO would
The Transfer of         assume certain responsibilities for business systems and management
                        that were formerly performed by the CIO. Section 903 of the John S.
Responsibilities from   McCain NDAA for Fiscal Year 2019 clarified this provision by amending
the Chief Information   the statute (10 U.S.C. § 142) which established and provides
                        responsibilities for the DOD CIO. However, in July 2018, DOD officials
Officer to the CMO      told us no formal action had been taken to determine which, if any,
                        responsibilities would transition or to assess the resource impact this
                        would have on both offices because they had concerns about the
                        statutory requirement and how it would affect IT management at the
                        department. For example, CMO officials expressed the belief that all IT
                        roles and responsibilities should be consolidated under one position. We
                        have previously found that having department-level CIO responsibilities
                        performed by multiple officials could make the integration of various
                        information and technology management areas, as envisioned by law,
                        more difficult to achieve. 33

                        The CMO told us in July 2018 that he had begun engaging informally with
                        Congress to discuss the department’s concerns about the transition of
                        certain responsibilities from the CIO to the CMO, and that he would
                        engage further once the newly confirmed CIO felt prepared to join those
                        discussions. However, in November 2018, the Acting CMO told us that
                        the OCMO was still exploring all of the authorities that Congress had
                        provided, and, as such, felt that further engagement with Congress was
                        premature at this point. The Acting CMO added that she and the CIO had
                        worked out an informal agreement regarding which areas they would
                        each manage, but did not identify specific tasks that would transfer to the
                        CMO or provide any details of this agreement. At the same time, OCMO
                        officials acknowledged in November 2018 that the OCMO had not
                        conducted an analysis to determine which responsibilities should formally
                        transfer or what resource ramifications, if any, this transfer would have on
                        both offices. Without an analysis to help DOD determine which duties
                        should transfer from the CIO to the CMO, including identifying any
                        associated resource impacts, DOD will remain reliant on this informal




                        33
                         GAO, Federal Chief Information Officers: Responsibilities, Reporting Relationships,
                        Tenure, and Challenges, GAO-04-823, (Washington, D.C.: July 21, 2004).




                        Page 20                                         GAO-19-199 Defense Business Operations
                               agreement. 34 Such reliance could cause confusion within the department
                               about who is responsible for key IT functions. Moreover, section 3506 of
                               title 44, United States Code states that in similar circumstances, where a
                               CIO is designated for DOD and for each military department, the
                               respective duties of the CIOs shall be clearly delineated.


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

                               •    DOD Directive 5105.82 (Oct. 17, 2008) established the
                                    responsibilities and authorities of the DCMO. 35 These responsibilities
                                    included, among others, advising the Secretary of Defense on
                                    performance goals and measures and assessing progress against
                                    those goals; and ensuring that strategic plans, performance goals,
                                    and measures were aligned with, and assured accountability to, DOD
                                    strategic goals. However, this document is now outdated—for
                                    example, it assigns the DCMO responsibilities related to the Defense
                                    Business Transformation Agency, which an OCMO official agreed no
                                    longer exists. Moreover, the directive does not reflect the additional
                                    authorities and responsibilities for the CMO position that are
                                    delineated in section 132a of title 10, United States Code, as
                                    amended. Table 3 at appendix II summarizes all authorities and
                                    responsibilities included in this directive.


                               34
                                 GAO reported in April 2018 that DOD has not yet integrated its business and IT
                               enterprise architectures, or established a timeframe for doing so. DOD partially concurred
                               with our recommendation and the department stated that it agreed that the DOD CIO and
                               CMO should work together to establish a time frame and ensure coordination and
                               consistency of the IT and business architectures. See GAO, Defense Business Systems:
                               DOD Needs to Continue Improving Guidance and Plans for Effectively Managing
                               Investments, GAO-18-130, (Washington, D.C.: Apr. 16, 2018).
                               35
                                 Department of Defense, Directive 5105.82, Deputy Chief Management Officer (DCMO)
                               of the Department of Defense (October 17, 2008)




                               Page 21                                          GAO-19-199 Defense Business Operations
•    Secretary of Defense Memorandum (Feb. 1, 2018) established the
     CMO position and outlined its authorities and responsibilities
     consistent with section 132a of title 10, United States Code. The
     authorities and responsibilities outlined in this memorandum align
     closely with those specified for the CMO in the statute, but the
     memorandum does not explain how these authorities and
     responsibilities are to be operationalized. For example, this
     memorandum does not address how the CMO will interact with other
     DOD organizations, such as the military departments, as DOD
     traditionally has done through its chartering directives. Table 4 at
     appendix II summarizes authorities and responsibilities included in
     Secretary of Defense memorandums.
•    Secretary of Defense Memorandum (July 12, 2018) addressed the
     CMO’s role in supporting the Deputy Secretary of Defense on
     enterprise management and performance accountability. According to
     this memorandum, the CMO supports the Chief Operating Officer to
     ensure all DOD leaders are unified and aligned across all assigned
     responsibilities and functions, through strong management practices,
     integrated processes, and best value business investments, and to
     support the Deputy Secretary of Defense in his capacity as the
     department’s Chief Operating Officer. 36 However, the CMO’s
     responsibilities in supporting the Deputy Secretary of Defense as the
     Chief Operating Officer outlined in this memorandum are not specified
     by any other relevant guidance documents.
•    CMO Action Memorandum (July 27, 2018) responded to the
     Secretary’s February 1, 2018 memorandum and restated several of
     the CMO’s authorities and responsibilities, consistent with 132a of title
     10, United States Code, and provided information on the plans to
     restructure the OCMO and to establish the CMO Action Group.

The Secretary of Defense’s July 12, 2018 Memorandum directed the
Deputy Secretary of Defense to provide amplifying guidance on CMO
responsibilities and authorities emanating from statute as well as
delegating additional discretionary authorities or responsibilities to the
CMO. Issuance of this amplifying guidance would be consistent with one
of the key strategies we identified for implementation of a CMO position—
clearly defining roles and responsibilities of the position and

36
  As the Chief Operating Officer, the Deputy Secretary of Defense is the official
accountable for the strategic alignment of priorities and resources, and overall
performance management. In this role, he focuses on synchronizing top-level strategic
guidance across senior leadership for maximum results.




Page 22                                         GAO-19-199 Defense Business Operations
             communicating them throughout the organization. 37 In November 2018,
             however, officials told us that they expected the CMO vacancy to delay
             progress on codifying any decisions on the CMO’s statutory and
             discretionary authorities in a chartering directive. Additionally, in
             November 2018, a senior OCMO official stated that the office needed to
             complete its reorganization prior to the department issuing updated
             guidance.

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


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



             37
               GAO-08-34. In this report, we highlight six key strategies, which emerged from a panel
             of public and private entities convened by GAO, for implementation of CMO positions.




             Page 23                                          GAO-19-199 Defense Business Operations
                      operationalized could help to institutionalize and sustain the position
                      beyond the tenure of the current acting CMO.


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

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

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

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


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


                      We are sending copies of this report to the Acting Secretary and Acting
                      Deputy Secretary of Defense, the Acting DOD Chief Management Officer,
                      the DOD Chief Information Officer, the Director, Cost Assessment and
                      Program Evaluation, and appropriate congressional committees. In



                      Page 24                                   GAO-19-199 Defense Business Operations
addition, the report is available at no charge on the GAO website at
http://www.gao.gov.

If you or your staff have any questions about this report, please contact
me at (202) 512-2775 or fielde1@gao.gov. Contact points for our Offices
of Congressional Relations and Public Affairs may be found on the last
page of this report. Key contributors to this report are listed in appendix
IV.

Sincerely yours,




Elizabeth A. Field
Acting Director
Defense Capabilities and Management




Page 25                                  GAO-19-199 Defense Business Operations
Appendix I: Scope and Methodology
             Appendix I: Scope and Methodology




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

             To understand ongoing actions to implement the authorities and
             responsibilities given to the CMO position, we interviewed DOD’s former
             CMO, who served from February to November 2018, as well as the
             current acting CMO and the chiefs of the five directorates or their
             representatives within the Office of the CMO (OCMO) in July 2018, to
             understand the responsibilities of these directorates. We also met with the
             nine reform teams charged with implementing initiatives to, among other
             things, move DOD toward an enterprise-wide, shared-service model. 2
             Additionally, we reviewed documentation from the reform teams to
             understand what business operation reform initiatives the CMO has
             prioritized and what progress has been made to implement and monitor
             these initiatives. To understand key initiatives DOD is pursuing to improve
             its business operations and how it monitors implementation of those
             initiatives, we attended demonstrations of DOD’s cost management

             1
              GAO, Organizational Transformation: Implementing Chief Operating Officer/Chief
             Management Officer Positions in Federal Agencies, GAO-08-34 (Washington, D.C.: Nov.
             1, 2007).
             2
              DOD currently has nine cross functional teams focused on transforming DOD’s business
             operations that consist of team leaders and subject matter experts from the following
             functional areas: Community Services Management, Financial Management, Human
             Resources, IT & Business Systems, Health Care Management, Real Property
             Management, Service Contracts and Category Management, Supply Chain and Logistics,
             and Testing and Evaluation.




             Page 26                                       GAO-19-199 Defense Business Operations
Appendix I: Scope and Methodology




framework and its reform team portal. We also met with an official from
DOD’s Cost Assessment and Program Evaluation (CAPE) Office to gain
additional insights on oversight of the reform teams from one of the co-
chairs on the Reform Management Group. Additionally, we reviewed
documentation from the OCMO containing personnel numbers and
funding levels to determine the level and type of resources available to
the CMO to assist in carrying out his responsibilities. To understand how
the CMO collaborates with other DOD entities to lead business operation
reform and how the responsibilities of the CMO and Chief Information
Officer (CIO) may change, we met with officials from the Office of the
DOD CIO. To understand how the CMO is interacting with and influencing
the military departments’ business operations, we met with officials from
the Army, Air Force, and Navy CMO and CIO offices.

We performed our work under the authority of the Comptroller General to
conduct evaluations to assist Congress with its oversight responsibilities.
We conducted this performance audit from February 2018 to March 2019
in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.




Page 27                                  GAO-19-199 Defense Business Operations
Appendix II: Summary of Key Authorities and
                                           Appendix II: Summary of Key Authorities and
                                           Responsibilities for the Department of Defense
                                           Chief Management Officer


Responsibilities for the Department of
Defense Chief Management Officer
Table 2: Comparison of Selected Chief Management Officer Statutory Authorities and Responsibilities in Fiscal Years (FY)
2018 and 2019 National Defense Authorization Acts (NDAA)

Subject                 Sections 910 and 912, FY 2018 NDAA                         Section 903 and 921, FY 2019 NDAA
Direction of military   Exercising authority to direct the secretaries of the
departments             military departments and the heads of all other
                        elements of the Department of Defense (DOD) with
                        regard to matters for which the Chief Management
                        Officer (CMO) has responsibility under 10 U.S.C. §
                        132a.
Defense Agencies        Exercising authority, direction, and control over the      Beginning in fiscal year 2020, the CMO shall review
and DOD Field           DAFAs providing shared business services for the           the proposed budget of certain DAFAs, submit to
Activities (DAFA)       department that are designated by the Secretary or         the Secretary of Defense a report containing the
                        Deputy Secretary of Defense.                               CMO’s comments with respect to all such proposed
                                                                                   budgets, and certify whether each such proposed
                                                                                   budget achieves the required level of efficiency and
                                                                                   effectiveness for enterprise business operations,
                                                                                   consistent with guidance for budget review
                                                                                   established by the CMO.
Chief Information       The CMO will assume CIO responsibilities for               Provided clarification that the CMO would absorb
Officer (CIO) role      defense business systems (as of January 1, 2019).          certain responsibilities from the CIO, among them
                        The CMO shall have primary decision-making                 those information technology responsibilities
                        authority with respect to the development of common        previously performed by the CIO for business
                        enterprise data. (Sec. 912)                                systems and management.
CMO’s role within       Serving as the CMO of the DOD with the mission of
DOD                     managing the enterprise business operations and
                        shared services of the department.
                        The CMO takes precedence in DOD after the
                        Secretary of Defense and the Deputy Secretary of
                        Defense.
Other                   Serving as the principal advisor to the Secretary and      Not later than January 1, 2020, and not less
                        the Deputy Secretary on establishing policies for and      frequently than once every 5 years thereafter, the
                        directing all enterprise business operations of the        Secretary of Defense shall, acting through the CMO,
                        department, including planning and processes,              reform enterprise business operations across all
                        business transformation, performance measurement           organizations and elements of the department ,
                        and management, and business information                   through reductions, eliminations, or improvements,
                        technology management and improvement activities           with respect to covered activities in order to increase
                        and programs, including the allocation of resources        effectiveness and efficiency of mission execution.
                        for enterprise business operations, and unifying           Not later than January 1, 2020, the CMO shall
                        business management efforts across the department.         establish a consistent reporting framework to
                        Serving as the official with principal responsibility in   establish a baseline for the costs to perform any
                        the department for providing for the availability of       activity relating to civilian resources management,
                        common, usable, defense-wide data sets with                logistics management, services contracting, or real
                        applications such as improving acquisition outcomes        estate management.
                        and personnel management.                                  Not later than January 1 of every fifth calendar year
                                                                                   beginning with January 1, 2025, the CMO shall
                                                                                   submit to the congressional defense committees a
                                                                                   report that describes the activities carried out by the
                                                                                   CMO during the preceding 5 years, including an
                                                                                   estimate of any cost savings achieved as a result of
                                                                                   such activities.




                                           Page 28                                             GAO-19-199 Defense Business Operations
                                                                Appendix II: Summary of Key Authorities and
                                                                Responsibilities for the Department of Defense
                                                                Chief Management Officer




Legend: Text here to denote blank cells.
Source: GAO analysis of Pub. L. No. 115-91, §§ 910, 912 (2017) and Pub. L. No. 115-232, §§ 903,921 (2018) | GAO-19-199




                                                                Page 29                                                  GAO-19-199 Defense Business Operations
                                                              Appendix II: Summary of Key Authorities and
                                                              Responsibilities for the Department of Defense
                                                              Chief Management Officer




Table 3: Summary of Preceding Department of Defense (DOD) Deputy Chief Management Officer Authorities and
Responsibilities

Department of Defense
Directive (DODD)                          Authorities and responsibilities
DODD 5105.82: Deputy                      Assigned the DCMO the following duties and responsibilities:
Chief Management Officer                  •   assist the Deputy Secretary of Defense in his capacity as DOD CMO;
(DCMO) of the
Department of Defense                     •   recommend to the Deputy Secretary of Defense methodologies and measurement criteria to better
(October 17, 2008).                           synchronize, integrate, and coordinate the business operations of the DOD to ensure optimal
                                              alignment in support of the DOD warfighting mission;
                                          •   develop and maintain, through the Defense Business Systems Management Committee, the DOD
                                              Strategic Management Plan;
                                          •   advise the Secretary of Defense on performance goals and measures and assess progress against
                                              those goals;
                                          •   serve as the Capability Portfolio Manager for the Corporate Management and Support Portfolio;
                                          •   participate as a member of senior governance councils;
                                          •   oversee the functions of the Performance Improvement Officer;
                                          •   work in close coordination with the CMOs of the military departments to identify and exchange the
                                              information necessary to facilitate execution of the responsibilities of the DOD CMO;
                                          •   assist Office of the Secretary of Defense officials and heads of DOD components in ensuring that
                                              strategic plans, performance goals, and measures are aligned with, and assure accountability to,
                                              DOD strategic goals; and
                                          •   ensure that business transformation policies and programs are designed and managed to improve
                                              performance standards, economy, and efficiency.
Source: DODD 5105.82: Deputy Chief Management Officer (DCMO) of the Department of Defense (Oct. 17, 2008). | GAO-19-199




                                                              Page 30                                                     GAO-19-199 Defense Business Operations
                                                             Appendix II: Summary of Key Authorities and
                                                             Responsibilities for the Department of Defense
                                                             Chief Management Officer




Table 4: Summary of the Department of Defense Chief Management Officer Authorities and Responsibilities Outlined in DOD
Memorandums

Department of Defense
(DOD) Memorandums                         Authorities and Responsibilities
Secretary of Defense                      Gave the CMO the responsibility for duties and authorities as set forth in section 132a of title 10, United
Memo (Feb. 1, 2018)                       States Code, including:
establishing the Chief                    •    serving as the CMO with the mission of managing DOD’s enterprise business operations and
Management Officer                             shared services;
(CMO) position
                                          •    serving as the principal advisor to the Secretary and the Deputy Secretary on establishing policies
                                               for, and directing, all enterprise business operations of the department, including planning and
                                               processes, business transformation, performance measurement and management, and business
                                               information technology management and improvement activities and programs, including the
                                               allocation of resources for enterprise business operations and unifying business management
                                               efforts across the department;
                                          •    exercising authority, direction, and control over the Defense Agencies and DOD Field Activities
                                               providing shared business services for the department that are designated by the Secretary or the
                                               Deputy Secretary;
                                          •    serving as the official with principal responsibility in the department for providing common, usable,
                                               defense-wide data sets with applications such as improving acquisition outcomes and personnel
                                               management; and
                                          •    exercising authority to direct the secretaries of the military departments and the heads of all other
                                               elements of the department with regard to matters for which the CMO has responsibility.
                                          Additionally, effective 1 February, 2018, all responsibilities and authorities of the Deputy Chief
                                          Management Officer transfer to the CMO. This includes exercising authority, direction, and control over
                                          the Pentagon Force Protection Agency and the Washington Headquarters Services, both designated as
                                          shared business service providers.
Secretary of Defense                      Gave the CMO the responsibility of performing the following duties:
Memorandum (July 12,                      •   supporting the Chief Operating Officer (Deputy Secretary of Defense) to ensure that DOD leaders
2018) on Enterprise                           are unified and aligned appropriately across all assigned responsibilities and functions, through
Management and                                strong management practices, integrated processes, and best value business investments. As the
Performance                                   Chief Operating Officer, the Deputy Secretary is the accountable official for the strategic alignment
Accountability                                of priorities and resources, and overall performance management.
                                          Directed the Deputy Secretary of Defense:
                                          •   to provide amplifying guidance on CMO responsibilities and authorities emanating from statute as
                                              well as delegating additional discretionary authorities or responsibilities to the CMO.
Source: GAO analysis of Secretary of Defense Memorandums. | GAO-19-199




                                                             Page 31                                          GAO-19-199 Defense Business Operations
Appendix III: Comments from the
              Appendix III: Comments from the Department
              of Defense



Department of Defense




              Page 32                                      GAO-19-199 Defense Business Operations
Appendix III: Comments from the Department
of Defense




Page 33                                      GAO-19-199 Defense Business Operations
Appendix III: Comments from the Department
of Defense




Page 34                                      GAO-19-199 Defense Business Operations
Appendix IV: GAO Contact and Staff
                  Appendix IV: GAO Contact and Staff
                  Acknowledgments



Acknowledgments


                  Elizabeth A. Field, (202) 512-2775 or fielde1@gao.gov.
GAO Contact
                  In addition to the contact named above, Sally Newman (Assistant
Staff             Director), Tracy Barnes, Margaret Best, Arkelga Braxton, William Carpluk,
Acknowledgments   Timothy DiNapoli, Michael Holland, Chad Johnson, Kristi Karls, William
                  Lamping, Ned Malone, Jared Sippel, Susan Tindall, Sarah Veale, and
                  Lillian Yob made key contributions to this report.




(102628)
                  Page 35                                GAO-19-199 Defense Business Operations
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