GAO -“-,__*L_I.._“----_-..- Ih~<*t~llltwr l!M DEFENSE MANAGEMENT Efforts to Streamline Acquisition Management Structure III Ill 142881 RELEASED RISTRICTED-- Not to be released outside the General Accounting Office unless specifically approved by the Office of CongrelPsional Relations, 55013 I GAO/NSTAI)-!)I-15 IN ___-_ .I ____.-_ -_ _...__. -.. _ .._. - .._ .._. -.. ._. ._ _ “. _-._._- .._...-.” .--... ------- United States GAO General Accounting Office Washington, D.C. 20548 National Security and International Affairs Division B-240729 December 6,199O The Honorable William V. Roth, Jr. United States Senate Dear Senator Roth: As you requested, we have reviewed the military services’ efforts to streamline their acquisition management structures as called for in the Secretary of Defense’s July 1989 Defense Management Report (DMR). The goal of such efforts, according to the DMR, is to confine accounta- bility for all cost, schedule, and performance features of major defense programs’ within a streamlined three-tier management structure. This report describes the services’ implementation of the DMR three-tier initia- tives. We found that it was too early to determine if the revised three- tier structure, as described to us, actually functions in a manner that achieves the desired goals. In 1986, the President’s Blue Ribbon Commission on Defense Manage- Background ment (the Packard Commission) reported that the Department of Defense’s (DOD) acquisition management had become so encumbered and unproductive that weapons historically cost more than planned and took too long to develop and deliver. The Commission stated that the DOD acquisition system lacked, among other things (1) clear accountability for acquisition execution and (2) unambiguous lines of authority for individuals with program management responsibilities. To correct these deficiencies, the Commission recommended that each service establish a streamlined three-tier acquisition management struc- ture for all major defense programs. The structure consists of a Service Acquisition Executive (SAE), responsible for all service acquisition mat- ters; Program Executive Officers (PEO), individually responsible to the SAE for a defined and limited group of major programs; and Program Managers (PM) responsible exclusively to their respective PEO for all mat- ters relating to their individual major program. ‘Major programs are defined by Department of Defense Directive 5000.1 as those having $200 million in research and development funding or $1 billion in total procurement cost. The directive also designates major programs based on the urgency of need, development risk, joint funding, significant congressional interest, or other considerations. Page 1 GAO/NSIAD-91-16 Defense Management B-240729 External reports of the services’ implementation of these recommenda- tions concluded that efforts to establish this structure were far from sat- isfactory. These reports stated that (1) the new titles were assigned to existing positions in the old chain of command, (2) the new three-tier positions did not have the authority and control the Packard Commis- sion had envisioned, and (3) intermediate management layers still existed throughout the three-tier structure. In February 1989, following the above studies, the President directed the Secretary of Defense to review DOD management and develop a plan to fully implement the Commission’s recommendations, improve the acquisition process, and more effectively manage DOD resources. The Secretary’s July 1989 DMR responded to this directive. The DMR specified that, among other things, revisions be made to (1) the services’ three-tier structure-also called the PEO structure and (2) the materiel and sys- tems commands’ roles that relate to the structure. The services’ plans for implementing the DMR directives were approved and made public in .January 1990. As prescribed in the July 1989 DMR, each military service has taken Results in Brief actions to revise (1) its three-tier structure and (2) the roles of its mate- riel and systems commands. These revisions, if fully implemented as intended, will more clearly separate the streamlined acquisition struc- ture from the services’ existing structure by (1) appointing SAES and PROSthat devote full time to acquisition matters, (2) giving three-tier officials more control over acquisition resources, and (3) removing unnecessary review layers from the acquisition process. DOD has not yet issued guidance-revised DOD Directive 5000.1 and Instruction 5000.2-implementing the DMR changes. The services, pending issuance of such guidance, have not updated their policies and procedures to reflect the DMR changes. However, some services have issued guidelines concerning the responsibilities of certain three-tier acquisition officials. Until DOD provides guidance and the services’ poli- cies and procedures are updated, issued, and implemented, we cannot determine, at this time, whether or not DOD'S management accountability goal will be fully achieved. ‘Defense Acquisition Observations Two Years After the Packard Commission, The Institute for Defense Analyses (Washington, D. C.: Nov. 1988); Report R-347 and Making Defense Reform Work, The *JohnsHopkins Foreign Policy Institute and the Center for Strategic and International Studies (Washington, D. C.: Nov. 1988). Page 2 GAO/NSIADdl-15 Defense Management _-..____- ~.- B-240729 The services have taken actions to revise their acquisition structures in Acquisition Roles and an effort to streamline the acquisition process and to clarify manage- Responsibilities ment accountability for major acquisition programs. In complying with Clarified the DMR, they have clarified the acquisition roles and responsibilities of their SAES, PEOS, PMS, and materiel and systems commands. -- SAEs Our 1989 report3 and other external evaluations4 of DOD’S efforts to streamline its acquisition management system revealed that some of the services had created SAE positions by superimposing the title on existing positions and some had not given the SAES the authority envisioned by the Packard Commission. Our report pointed out that some SAES (1) did not devote full time to acquisition matters, (2) were not authorized to issue acquisition policy, (3) could not appoint or appraise PEOS, and (4) did not control acquisition resources. To ensure SAES would be full-time acquisition officials and would possess the authority and control envisioned by the Commission, the DMR stated that each SAE will l be a civilian official at the assistant secretary level; l devote full time to service acquisition functions; l perform acquisition functions that are not duplicated in the service chief’s organization; . have primary responsibility for rating the performance of PEOs; and * select PMS, with the advice of the PEO who has primary responsibility for rating PMs. The newly established SAE positions, as described by service officials, conform with these requirements. For instance, officials stated the Army and the Navy have appointed SAES at the assistant secretary level that devote full time to service acquisition matters. The Air Force SAE, prior to the DMR, was already an assistant secretary and was devoting full time to acquisition. “Acquisition Reform: DOD’s Efforts to Streamline Its Acquisition System and Reduce Personnel (GAO/NSIAD-90-21, Nov. 1, 1989). 4DefenseAcquisition Observations and Making Defense Reform Work. Page 3 GAO/NSIAD-91-15 Defense Management B-240729 Prior to the DMR, the Army and Navy SAES were service under secre- taries,” as the Packard Commission had recommended. But, contrary to the Commission’s recommendation, these under secretaries had numerous other responsibilities and could not devote full time to acqui- sition matters. The Commission, according to its Chairman, intended to give the services latitude in implementing this recommendation. The Chairman stated that the key issues regarding the SAE position were that the appointed individuals should devote full time to acquisition matters and have the requisite authority over these matters. Accordingly, we believe a full-time SAE at the assistant secretary level is consistent with the Commission’s intent, provided the SAE’S role, responsibility, and authority are clearly stipulated in DOD directives, regulations, or other formal guidance. We noted in our 1989 report that the Air Force and Navy SAES shared acquisition responsibilities with other service officials and did not have the authority and control intended by the Commission. According to officials in each of the three services, the new SAES do not share acquisi- tion responsibilities with any other service official, and their functions are not duplicated in any of the service chief’s organizations-including the materiel and systems commands. These SAES, through service guide- lines and regulations, also have the authority to issue acquisition policy, appraise PEOS, and manage their resources. Service officials further told us that SAES also have primary responsi- bility for rating the Direct Reporting Program Managers assigned to the three-tier structure. These managers, according to service officials, report directly to the SAE because they control broad or complex sys- tems. For example, the PMS for the Navy’s Aegis missile and the Air Force’s B-Z bomber are considered Direct Reporting Program Managers. At the time of our review, the Air Force had one Direct Reporting Pro- gram Manager, the Navy had four, and the Army had two. PEOs Prior to the DMR, PEO titles in the Navy and Air Force were superimposed on existing command chain6 positions. Both services assigned PEO titles “On May 13, 1989 (2 months before t,he DMR was issued), the Secretary of the Army appointed an assistant secretary to replace the Under Secretary as SAE. The Navy did not appoint an Assistant Secretary as SAE until March 1990. “This chain consists of the services’Secretary and Under Secretary, Chief of Staff, and commanders of the materiel and systems commands and their subordinate commands. Page 4 GAO/NSIAD-91-15 Defense Management B-240729 to commanders of systems acquisition commands. Under this arrange- ment, the PEOS did not devote full time to acquisition matters and reported through two chains of command-the three-tier PEO chain and the existing chain. As we reported in 1989, the Army created full-time PEO positions separate from the existing command chain. However, these PEOS also reported through two chains of command. To ensure that PEOS would report through clear, unambiguous chains of command and possess the characteristics envisioned by the Packard Commission, the DMR directed each service to establish PEOS that l are selected by the service secretary with advice from the SAE; . are only responsible for acquisition matters; . are accountable to their respective SAES; l individually, devote full time to managing a defined and limited group of major programs and related technical support resources; . collectively, manage all major acquisition programs; and l provide advice, along with the SAE, on the selection of PMS and evaluate them. The DMR also stated that funding and personnel authorizations for PEO offices, and those of PMS reporting to them, should be administered sepa- rately from the materiel and systems commands. Excluding the criterion of “managing all major acquisition programs,” which is discussed below, each service, as described by their officials, has revised its PEO positions’ consistent with the above criteria. According to these officials, the three-tier chain is now designed to give PEOS, PMS, and where applicable, Direct Reporting Program Managers, more authority and control over acquisition funds and personnel allo- cated to their respective programs. We were told that three-tier acquisition funds now flow from the DOD and services’ comptroller offices to the SAE, and ultimately to the PEOs/ PMS. Under this new funds flow process, the materiel and systems com- mands’ comptroller offices serve as “banks” for the three-tier structure. These commands do not have the authority to manage or reprogram these funds. Such management decisions, according to service officials, are made by the three-tier officials. The acquisition funds administered 7At the time of our review, there were 6 PEO positions in the Air Force, 6 in the Navy, and 12 in the Army. Page 5 GAO/NSIAD-91-16 Defense Management B-240729 by these officials include monies for (1) procurement, (2) operations and maintenance, and (3) research, development, testing, and evaluation. Officials also stated that PEOS now have more control over their perma- nently assigned staff and the support staff provided by the materiel and systems commands. According to the officials, PEOs now rate their per- manent staff and provide written advice on the ratings of support staff supplied by these commands. Prior to DMR implementation, the materiel and systems commands controlled such resources. PEOsAre Not Managing All Contrary to DMRcriteria, PEosare not managing all major acquisition Major Acquisition Programs programs. According to officials from all three services, certain types of major acquisition programs are, or will be, managed by their materiel and systems commands rather than their PEOs. After DMR implementa- tion, the Navy and Air Force requested permission from the Under Sec- retary of Defense for Acquisition (USD(A)) to retain certain major programs in their systems and logistics commands. This action was taken in accordance with the 1989 DOD Directive 5134.1, which gives the IJSD(A) authority to designate the type of oversight for major defense acquisition programs. As a result of this action, the Navy’s systems com- mands retained management authority for 21 of its 51 major acquisition programs. The Air Force’s systems/logistics commands kept similar authority for ‘7 of its 30 major and selected nonmajor” programs. The Army, according to one official, transferred management authority for its mature, major programs from the Army Materiel Command to its three-tier acquisition system when the latter was established in 1987. In late 1988, management authority for mature, major programs was trans- ferred back to the Army Materiel Command, where it remains today. This official also told us that, at the time of our review, the Army Mate- ~ riel Command was managing 9 of the Army’s 39 major programs. According to Navy officials, programs retained by their systems com- mands included those that were (1) in mature, stable production, (2) not subject to any planned major upgrades, and (3) not presently involved in any substantial matters of controversy or significant Defense Acquisi- tion Board9 issues. Examples of systems meeting this criteria and retained are the SSN 688 submarine, and the Phoenix and Sparrow mis- siles Three of the 21 programs retained by the Navy system commands, ‘The nonmajor programs were selected by the Secretary of the Air Force, SAE, and USD(A) as requiring major I’M procedures. “This board is the primary DOD forum for resolving issues, providing and obtaining guidance, and making recommendations to the Secretary of Defense on all acquisition matters. Page 6 GAO/NSIAD-91-16 Defense Management B-240729 did not meet these criteria, but involved other special factors according to Navy officials. The Air Force took a similar approach to the Navy. In a March 13, 1990, memorandum to the USD(A), the Air Force identified its criteria for retaining major programs in its systems and logistics commands. This memorandum stated that these commands should manage certain cate- gories of programs. These categories included programs that (1) are in the early stages of development-pre-milestone I (pre-concept) approval, (2) have minimal development risks, (3) have passed mile- stone III (post-production) and are operational, and (4) are stable, mature, and have met all Defense Acquisition Board requirements. Examples of systems meeting this criteria, and retained under the Air Force’s systems and logistics commands, are the KC-135 aerial refueling tanker, and the Maverick missile. In addition to giving the materiel and systems commands control over certain major acquisition programs, officials from all three services stated that programs presently under the three-tier structure will even- tually be transferred to their materiel and systems commands. Navy and Air Force officials stated that such a transfer will be made when these programs meet their above stated criteria. Navy officials told us that future transfers of this kind will be done on a case-by-case basis and only with the ~JSD(A)'S approval. Officials within the Air Force stated that the decision for this transfer will be made on a case-by-case basis, but unlike the Navy, with approval from the SAE once the USD(A) has designated the program as a service responsibility. According to an Army official, transfers from the three-tier structure to its materiel command and major subordinate commands have occurred since late 1988. This shift occurs after a system has been provided to the end user on a permanent basis following completion of operational testing and low-rate production. We were told that criteria for this tran- sition are also established on a case-by-case basis. However, this deci- sion, as currently stipulated in Army regulations, is made with final approval by the SAE. According to an Army official, the Army did not interpret DOD Directive 5134.1 to be applicable to the transfer of mature, major programs. Examples of systems transferred from the three-tier structure are the UH-1 helicopter, M-60 battle tank, and the M-l 13 armored personnel carrier. Although the DMH did not address transferring three-tier programs to the materiel and systems commands, an official from the IJSD(A)'S office told Page 7 GAO/NSIAD-91-16 Defense Management B-240729 us that the revised DOD Instruction 5000.2 will establish uniform criteria and procedures for these actions. PMs Prior to DMR implementation, PMS were briefing existing command offi- cials. For example, in November 1989, we reported that some Army PMS were briefing officials of the Army Materiel Command and its major subordinate commands because these commands controlled the resources PMs needed for executing their programs. To minimize the number of briefings that PMs must provide and to ensure that they possess the characteristics envisioned by the Packard Commission, the DMR required the services to establish PMS that . report all matters of program cost, schedule, and performance only to their respective PEO and*” 0 have broad responsibility for, and commensurate authority over, assigned major acquisition programs. According to service officials, each PM now reports directly to his or her respective PEO or SAE on all matters relating to program cost, schedule, and performance. In addition, we found that three-tier PMS were given more authority and control over their acquisition programs. As previ- ously stated in the PEO section of this report, PMS, along with their respective PEOS, have more control over their personnel and funding since their resource authorizations are now separate from the materiel and systems commands, According to service officials, PMS are no longer required to brief the materiel and systems commands, since these commands do not have con- trol of the three-tier acquisition system. However, service officials indi- cated that some briefings to these commands, by PMS, may be desired to ensure adequate coordination and communication. They believed, how- ever, that the three-tier structure would not be hindered by these actions. In a related effort to reduce briefings, the USD(A), along with the SAES, issued policy to decrease the number of briefings required at the Office of the Secretary of Defense and service levels. They directed that PMs give no more than two briefings within the Secretary’s office prior to “‘In addition, the services established Direct Reporting Program Managers that report directly to their respective SAIL Page 8 GAO/NSIAD-91-16 Defense Management B-240729 briefing the Defense Acquisition Board, and no more than two formal briefings within the service once PMS are ready to go before this board. Materiel and Systems We reported in 1989 that the Air Force Systems Command and Army Commands Materiel Command continued to have major acquisition management, oversight, and policy-making responsibilities within their respective ser- vices. In an effort to clarify management accountability and streamline the major acquisition management process, the Defense Secretary directed that the roles and responsibilities of the materiel and systems commands for major weapons acquisitions be limited to supporting the three-tier structure. The DMR limits the materiel and systems commands’ acquisition roles to . providing logistical support to the three-tier chain, l managing programs other than those in the three-tier chain,” and l providing support service&* to PEW and PMS while duplicating none of their management functions. According to service officials, as a result of the DMR, the materiel and systems commands are no longer involved in three-tier acquisition man- agement, and they are not duplicating three-tier management functions, thus reducing a layer of management and related oversight levels. These commands are providing logistical and service support to the three-tier acquisition structure, especially in the form of support staff, and are managing all acquisition programs not assigned to the three-tier chain. For these programs, the materiel and systems commands are account- able to the SAE. Progress has been made in implementing the DMR-directed three-tier Implementation Status acquisition structure. However, the future success of this structure is far from certain. Historically, efforts to overcome a cultural change of this kind have proven difficult, especially if such actions are not institu- tionalized through formal, written directives and formal guidance. Since the DMR was issued, the Navy and the Air Force have issued some guidance/charters concerning the responsibilities of their SAES and PEOS. The Navy has also (I) drafted charters that define the roles and respon- sibilities of its systems commands and (2) issued memorandums of 1‘These include less than mdor programs and mature, major programs that were retained by or transferred to the materiel and systems commands. ‘*These services include financial, technical, personnel, and administrative support Page 9 GAO/NSL4D-91-16 Defense Management E-240729 understanding, called operating agreements, that describe the interac- tion between the three-tier structure and these commands. The Air Force has not updated its regulations to reflect the DMRchanges. In February 1990, the Air Force issued its regulation on acquisition management that implements DOD'S1987 guidance (DODDirective 5000.1 and DODInstruction 5000.2) and other related material prior to the DMR. This regulation defines the responsibilities, authority, and structure of the Air Force’s acquisition system. Memorandums of understanding between the Air Force PEOSand system commands were not prepared because, according to a service official, the SAEdid not believe they were necessary. According to an Army official, the Army had not updated its acquisition guidance or revised its charters since publication of the DMR.This offi- cial stated the Army was awaiting publication of DOD'Srevised DOD Directive 5000.1 and DODInstruction 5000.2 before updating their detailed acquisition policies and procedures. Although the Navy and the Air Force have issued some implementing guidance, as noted above, offi- cials from these two services stated they too were awaiting issuance of revised DODacquisition guidance before updating their service-level gui- dance. DODDirective 5000.1 and DODInstruction 5000.2, according to DOD officials, will set forth the managerial policies and procedures for the entire acquisition system. DODDirective 5000.1 and Instruction 5000.2 were last published in September 1987 and, according to officials in the USD(A)'SOffice, the updated versions are in the final stages of revision. At the time of our review, DODofficials in the USD(A)'SOffice told us that the revised gui- dance would be issued by the end of calendar year 1990. Since the ser- vices have made considerable modifications in their materiel and systems commands and in their PEOstructure, especially within the Navy and Air Force, revising DODguidance within the targeted time frame is important. We reviewed the 1986 Packard Commission’s report, the Secretary of Scope and Defense’s DMR,service-related implementation plans, DOD'SJanuary 1990 Methodology DMR implementation status report, and applicable DODand service-issued DMR guidance. In addition, we studied some of our previously issued Y reports on DOD'S acquisition system, as well as studies performed by other organizations external to DOD.To gain a better understanding of Page 10 GAO/NSIAD-91-15 Defense Management B-240729 how the services planned to implement the DMR, we attended a series of DOD briefings. To determine the implementation status of DMRacquisition-related rec- ommendations, we obtained information on each services’ revised three- tier acquisition structure. We also interviewed senior officials in the Office of the Secretary of Defense and in each of the services. These officials were from the USD(A)'SOffice and the services’ headquarters, materiel and systems commands, and SAEand PEOoffices, all located in the Washington, D.C., area. We did not interview PMS,as the services’ initial DMRimplementation actions were primarily centered on the SAE and PEOpositions and the materiel and systems commands. Our review was performed between January and August 1990 in accor- dance with generally accepted government auditing standards. We did not obtain formal comments from DODon this report. However, DODofficials did review a draft of this report and, where appropriate, their comments were incorporated in our final report. Unless you publicly announce its contents earlier, we plan no further distribution of this report until 30 days from the date of this letter. At that time, we will send copies of this report to the Secretary of Defense and to other interested parties upon request. This report was prepared under the direction of Paul Math, Director, Research, Development, Acquisition, and Procurement Issues, who may be reached on (202) 275-8400, if you or your staff have any questions. Other major contributors are listed in appendix I. Sincerely yours, Frank C. Conahan Assistant Comptroller General Page 11 GAO/NSIAD-91-15 Defense Management Appendix I Major Contributors to This Report Michael E. Motley, Associate Director National Security and James F. Wiggins, Assistant Director International Affairs William M. McPhail, Evaluator-in-Charge Division, Washington, Marion A. Gatling, Evaluator D. C. Page 12 GAO/NSIAD-91-15 Defense Management Page 13 GAO/NSIAD-91-16 Defense Management Page 14 GAO/NSIAD-91-16 Defense Management Page 15 GAO/NSIAD-91-15 Defense Management Related GAO Reports Acquisition Reform: Authority Delegated the Under Secretary of Defense for Acquisition (GAO~NSIAD-90.183, June 6, 1990). Defense Acquisition: Perspectives on Key Elements for Effective Man- agement (GAOINSIAD-90-90,May 14, 1990). Acquisition Reform: DOD'SEfforts to Streamline Its Acquisition System and Reduce Personnel (GAO/NSIAD-~~-~~,N~~.1, 1989). (B9672H) Page 16 GAO/NSIAD-91-15 Defense Management Otxkring Information ‘1’1~~first five copies of’ each GAO report are free. Additional copies art’ $2 tbach. Orders should be sent to the following address, accom- panied by a check or money order made out to the Superintendent of I)oc*umtv~ts, when necessary. Orders for 100 or mow copies to be mailed to a single address are discounted 25 percent. lJ.S. Gneral Accounting Office PA). Hex 6015 Gaitht+rsburg, MD 20877 Orders may also be placed by calling (202) 275-6241. c 8. --I---- l_--l__l.,... ll,.-” ..l.l-l~ --ll_.. ~.-_l.l-“l-.“. -l_.ll(-l”--___--- L FirstClass Mail PosCage 82 Fees Paid GAO Permit No. GlOO 1:
Defense Management: Efforts to Streamline Acquisition Management Structure
Published by the Government Accountability Office on 1990-12-05.
Below is a raw (and likely hideous) rendition of the original report. (PDF)