VA Acquisition Management: Supply Chain Management and COVID-19 Response

VA spends hundreds of millions of dollars annually to meet the health care needs of about 9 million veterans. In March 2019, GAO added VA Acquisition Management to its High Risk list due to longstanding problems such as ineffective purchasing of medical supplies and lack of reliable data systems.

This statement summarizes findings from GAO's 2017 MSPV-NG report and 2019 High Risk report and preliminary observations from two ongoing GAO performance audits to discuss VA's progress in building a more resilient supply chain. For the ongoing work, GAO reviewed VA documentation and interviewed VA officials, and VA medical center staff. Finally, GAO met with senior VA officials on June 5, 2020, to obtain agency views on the new observations GAO discusses in this statement.

The Department of Veterans Affairs (VA) has taken some steps in recent years to modernize its processes to acquire hundreds of millions of dollars-worth of medical supplies annually. However, implementation delays for key initiatives, including a new, enterprise-wide inventory management system, limit VA's ability to have an agile, responsive supply chain. Prior to the Coronavirus Disease 2019 (COVID-19) pandemic, in November 2017 and in GAO's High-Risk report in March 2019, GAO reported on weaknesses in VA's acquisition management. For example, GAO reported that VA's implementation of its Medical-Surgical Prime Vendor-Next Generation (MSPV-NG) program—VA's primary means for purchasing medical supplies—lacked an effective medical supply procurement strategy, clinician involvement, and reliable data systems. GAO also found that several of VA's medical supply management practices were not in line with those employed by private sector leading hospital networks.

VA is developing another iteration of its MSPV program, called MSPV 2.0, which GAO's preliminary observations show is intended to address some of the shortfalls GAO has identified in its past and ongoing program reviews. In November 2017, GAO recommended that VA develop, document and communicate an overarching MSPV-NG strategy—to include how the program office will prioritize categories of supplies and increase clinician involvement in this process. Preliminary observations from GAO's ongoing work indicate that VA has taken some steps, as it implements MSPV 2.0, to address this priority recommendation. However, GAO's preliminary observations also indicate that the MSPV 2.0 program implementation is delayed and some of these existing program challenges may not be remedied.

Based on preliminary observations from GAO's ongoing work, VA's implementation of a new supply and inventory management system is delayed. As a result, VA had to rely on an antiquated inventory management system, and initial, manual spreadsheets to oversee the stock of critical medical supplies at its medical centers. This limited the ability of VA management to have real-time information on its pandemic response supplies, ranging from N95 face masks to isolation gowns, to make key decisions. As of April 2020, VA has an automated tool to manage its reporting process, but the information must be gathered and manually reported by each of VA's 170 medical centers on a daily basis.

GAO's preliminary observations also show that in response to COVID-19, VA is using various contracting organizations and mechanisms to meet its critical medical supply needs. These include using national and regional contracting offices to obtain supplies from existing contract vehicles, new contracts and agreements, and the Federal Emergency Management Administration's Strategic National Stockpile to respond to the pandemic.

GAO has made 40 recommendations since 2015 to improve acquisition management at the VA. VA agreed with those recommendations and has implemented 22 of them. Further actions are needed to implement the remaining recommendations, such as GAO's recommendation that VA implement an overarching MSPV strategy, and demonstrate progress toward removing this area from GAO's High-Risk list.

Thank you for having me here today to discuss our past work and  observations on the Department of Veterans Affairs (VA) medical supply  chain. VA spends hundreds of millions of dollars annually on medical  supplies to meet the health care needs of about 9 million veterans and  has one of the most significant acquisition management functions in the  federal government.

Since 2015, we have issued five reports on VA’s acquisition management  challenges, with 40 recommendations, and we elevated this issue to  GAO’s High-Risk List in 2019, due to longstanding problems such as  ineffective purchasing of medical supplies and lack of reliable data  systems. VA has addressed 22 of our prior recommendations. For  example, in November 2017, GAO recommended that VA develop,  document, and communicate an overarching Medical-Surgical Prime  Vendor-Next Generation (MSPV-NG) strategy—to include how the  program office will prioritize categories of supplies and increase clinician  involvement in this effort. Our preliminary observations from our ongoing  work indicate that although VA has taken some steps to address this  priority recommendation, it has yet to fully implement it. Further, VA has  also begun efforts to modernize its supply chain, but our ongoing work  indicates that several key initiatives are delayed, further limiting VA’s  ability to have an agile, responsive acquisition management system.

Like most medical institutions nationwide, VA has faced difficulties  obtaining personal protective equipment (PPE) for its medical workforce  during the Coronavirus Disease 2019 (COVID-19) pandemic, and VA’s  antiquated inventory management system hampered its ability to identify  the extent to which each of its 170 medical centers faced these  shortages. VA officials reported that they had difficulty obtaining sufficient  supplies from their existing supply chain and associated contracting  vehicles; thus, VA used new contracts and agreements to fill some of this  void.

My remarks today are based on two issued reports—our 2019 High Risk  report segment on VA Acquisition Management and our 2017 report on  VA’s MSPV-NG program—as well as our ongoing audits of VA’s COVID- 19-related medical expenditures and VA’s MSPV program. Today, I will  summarize a few key findings from these reports and some of our initial  observations from this ongoing work related to VA’s progress toward  building a more resilient supply chain.

As part of our work for our November 2017 and March 2019 reports and  our ongoing MSPV 2.0 work, we reviewed VA policies, communications,  briefings, prior GAO reports on best practices for organizational  transformation, relevant legislation, and other documents. We conducted  interviews with VA officials responsible for Veterans Health Administration  (VHA) and VA-wide procurement and logistics, program office managers,  and supply chain managers, among other VA officials. We also conducted  site visits to 12 medical centers, selected based on highest total spending  on medical and surgical supplies, among other things. As part of our work  on VA’s response to the COVID-19 medical procurements, we reviewed  VA memoranda, briefings, Federal Procurement Data System-Next  Generation (FPDS-NG) procurement data, and we met with key VA  personnel responsible for the agency’s response to COVID-19. Finally,  we met with senior VA officials on June 5, 2020, to obtain agency views  on the new observations we discuss in this statement.

We conducted the work on which this statement is based 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.

Longstanding Problems in VA Acquisition Management and Medical Supply Management Posed Additional Challenges in VA’s COVID-19 Response

The issues VA experienced during the height of the COVID-19 pandemic  were a result of global supply chain challenges, but longstanding  problems that our work has previously identified posed additional  challenges to VA’s response.

In November 2017, we reported weaknesses in VA’s implementation of its  MSPV-NG program—VA’s primary means for purchasing medical  supplies. These included the lack of an effective medical supply  procurement strategy, clinician involvement, and reliable data systems.  We also found that several of VA’s medical supply management practices  were not in line with those employed by private sector leading hospital  networks. We recommended, among other things, that VA develop,  document, and communicate to stakeholders an overarching strategy for  the program. This strategy, originally planned for completion by  December 2017, was delayed to March 2019, and then further delayed  due to VA’s implementation of its new MSPV 2.0 program, which is also  delayed. We also found that VA’s initial formulary consisted of around  6,000 items at launch, and, according to senior VA contracting officials,  many items on the formulary were not those needed by medical centers.  These factors resulted in an initial formulary that did not meet the needs  of VA’s medical centers (VAMC).

The MSPV-NG program office subsequently took steps to expand the  formulary, growing it to over 22,000 items, and is developing the next  iteration of the program, called MSPV 2.0. MSPV 2.0 is intended to  address some of the shortfalls we previously identified in MSPV-NG,  including more than doubling the number of items on the formulary, to a  planned 49,000. VA’s MSPV 2.0 prime vendor procurement has been  subject to multiple bid protests. After three protests challenged the terms  of the solicitation, VA responded by voluntarily taking corrective action  and revising the solicitation. The terms of the revised solicitation were  challenged in a subsequent protest that was sustained, resulting in VA  further revising the solicitation to address the matter. Because of these  events, agency officials told us that VA has altered its MSPV 2.0  procurement plans several times and there has been significant delay in  program implementation from the originally planned March 2020 date to  as late as February 2021.

Based on preliminary observations of our ongoing work, some of the  current MSPV-NG challenges persist and may not be remedied by MSPV  2.0. Specifically, medical center staff we interviewed from May 2019  through October 2019 cited continued problems with consistently  receiving the supplies they order through MSPV-NG, such as backorders  on frequently ordered items. For example, preceding the COVID-19  pandemic, supply chain problems with one of VA’s prime vendors created  supply shortages for infection control gowns, and staff at one VAMC we  visited in June 2019 had to obtain gowns from its emergency cache as a  temporary measure. Further, VA’s plans for MSPV 2.0 give no indication  that they will update their practice of manually maintaining the formulary  using spreadsheets, which, based on our discussions with several VAMC  logistics officers, can lead to errors such as inadvertent omission of items  from the formulary. We plan to issue a report on our review of the MSPV  2.0 program in fall 2020.

VA’s Antiquated Inventory Management System Limited VA Management’s Ability to Oversee Real-Time Supply Data at Its 170 Medical Centers

According to senior VA procurement and logistics officials interviewed  during our ongoing review of VA’s COVID-19 procurement for critical  medical supplies, VA experienced difficulty obtaining several types of  supplies needed to protect its front-line workforce during the COVID-19  response, ranging from N95 masks to isolation gowns. According to  senior VA acquisition and logistics officials, beginning in late February to  early March 2020, VA requested that medical centers provide daily  updates via spreadsheets to try to obtain the most real time information  possible on the levels of PPE on hand, usage, and gaps. These  spreadsheets, which were reported manually on a daily basis from each  of the VAMCs, were the primary means by which Veterans Health  Administration (VHA) leadership obtained detailed information on the  stock of critical supplies at its VAMCs in real-time. The insight provided by  these spreadsheets was not something that VHA leadership had in any  type of ongoing or systematic way, prior to the COVID-19 pandemic. In  April 2020, VA developed an automated tool to manage this reporting  process, but, according to officials, the information must still be gathered  and manually reported by each of the 170 VAMCs on a daily basis.

In May 2019, the VA Inspector General found that proper inventory  monitoring and management was lacking at many VAMCs, noting that  inventory management practices ranged from inaccurate to nonexistent.  In 2013, we also reported on weaknesses in VA’s inventory management  systems and made recommendations to VA to evaluate its efforts to  improve in this area.

However, our preliminary observations from our ongoing review of VA’s  MSPV program indicate that VA will likely rely on its antiquated system for  the foreseeable future. Specifically, VA plans to transition to the Defense  Logistics Agency’s (DLA) inventory management system, called Defense  Medical Logistics Standard Support (DMLSS). DMLSS serves as DLA’s  primary MSPV ordering system and supports DLA’s inventory  management, among other things. According to DLA officials, DMLSS  produces data that VAMCs could use to analyze their order history and  find recommendations for future purchases. VA’s implementation  schedule shows that it will take seven years to roll out DMLSS and its  successor at all VAMCs. In the near-term, VA had planned to implement  DMLSS at three medical centers in mid-to-late 2019. However, due to  technology integration issues between VA’s financial system and the  DMLSS system, implementation at these three VAMCs is delayed.  According to the Chief Supply Chain Officer at one of these VAMCs, the  original DMLSS implementation date has changed several times from an  initial start date of August 2019, which may be delayed to at least October  2020.

VA uses a “just in time” inventory supply model—a practice employed by  many hospital networks where only limited stock is maintained on-site.  However, for this model to succeed, VA needs both visibility into current  stock and consistent deliveries from the MSPV-NG program. Based on  our preliminary observations, VA faces challenges with both visibility and  delivery. VA acquisition leadership has recognized the shortcomings in its  medical supply chain management, and has identified supply chain  modernization as a priority. As part of our ongoing review of VA’s MSPV  program, we reviewed VHA’s Modernization Campaign Plan, dated March  2019, and VHA’s Modernization Plan briefing slides, dated February  2020, which describe several modernization initiatives including MSPV 2.0 and DMLSS. VHA’s February 2020 update on its modernization effort  identified both its DMLSS deployment and MSPV 2.0 program at critical  risk of not meeting system modernization milestones.

VA’s COVID-19 Emergency Procurement Included Various VA Contracting Organizations and Mechanisms

Based on our preliminary observations from our ongoing review of VA’s  procurement of critical medical supplies, in response to COVID-19, VA is  using various existing and new contracting organizations and  mechanisms to try to meet its PPE needs. These include using national  and regional contracting offices to procure supplies and services, and  using existing contract vehicles and new sources. In response to the  pandemic, VA’s Office of Acquisition and Logistics also issued a  memorandum on March 15, 2020, to implement emergency flexibilities  available under the Federal Acquisition Regulation, such as increasing  the micro-purchase threshold to $20,000.

Our analysis of contracting activity in the Federal Procurement Data  System-Next Generation (FPDS-NG) indicates that VHA’s Network  Contracting Offices—which support the various regions of VA’s hospital  network—increased their supply purchases, mostly by entering into new  contracts. Department-wide contracting organizations that would  normally not make individual supply purchases—such as VHA’s Program  Contracting Activity Central and VA’s Strategic Acquisition Center—also  played a substantial role. In addition, logistics staff at VAMCs continued  to use the MSPV-NG program to order supplies. VA had existing clauses  in MSPV-NG contracts that established terms for the suppliers to maintain  support to VA in the event of a catastrophe. But, according to senior VA  acquisition officials, because those suppliers faced the same shortages in  the broader market, they were not able to provide enough supplies to  meet VA’s surging demand.

Figure 1 shows the COVID-19-related contract obligations, from March  13, 2020 through June 3, 2020, made by the various VA contracting  offices. These obligations include both supplies, such as PPE, and  services, such as information technology systems to support  telemedicine.

Our analysis of preliminary data on orders placed directly by VAMC staff  for COVID-19-related items found that, in April 2020, the value of VA’s  reported COVID-19-related purchases through the MSPV-NG program  began to decrease relative to the values reported in prior months.

According to senior VA acquisition and logistics officials, in part, because  MSPV-NG and other existing VA supply contracts and agreements did  not meet VA’s needs, its acquisition workforce had to make purchases  through other contracting mechanisms, such as micro-purchases using  government purchase cards, to fill the gap. Between March 13, 2020 and  June 3, 2020 VA obligated more than 51 percent ($687 million) of the  $1.3 billion it spent on products and services for the COVID-19 response  through purchases made outside the MSPV-NG program and other  established VA contracting mechanisms. About 27 percent of this $1.3  billion ($364 million) was for veteran-owned small business set-aside  purchases, under VA’s Veterans First program.

VA Collaborated with the Federal Emergency Management Agency (FEMA) in Response to COVID-19

On April 17, 2020, VA placed its first supply requests through the Federal  Emergency Management Administration’s (FEMA) Strategic National  Stockpile program, according to VA senior acquisition and logistics  officials. As of June 5, 2020, according to information provided by the  VA, it had received shipments of several different types of supplies  through FEMA from these requests, as shown in Table 1.

According to VA senior procurement and logistics officials, VA’s  Emergency Management Center has an existing relationship with FEMA.  However, these senior procurement and logistics officials noted that VA  support services officials—who had primary responsibility for requesting  medical items through FEMA—did not have an existing relationship with  FEMA or a process in place prior to the COVID-19 pandemic for placing  medical supply requests through FEMA. Officials said that this led to a  brief, initial delay in processing VA’s first request.

In summary, VA experienced many of the same challenges obtaining  medical supplies as most private sector hospitals and other entities in  responding to this devastating pandemic. This situation put stress on an  already overburdened acquisition and logistics workforce—resulting in  staff initially scrambling to address supply chain shortfalls while  simultaneously working with VA’s antiquated inventory system, through  manual, daily reports on PPE levels to VA leadership. While VA has  made progress in addressing some of the issues that have led us to  identify VA acquisition management as high risk, it will take many years  for VA to put in place a modern supply chain management system that  would position it to provide the most efficient and effective service to our  nations veterans.

Chairman Moran, Ranking Member Tester, and Members of the  Committee, this concludes my prepared statement. I would be pleased to  respond to any questions that you may have at this time.

If you or your staff have any questions about this testimony, please  contact Shelby S. Oakley at 202-512-4841 or OakleyS@gao.gov. Contact  points for our Offices of Congressional Relations and Public Affairs may  be found on the last page of this statement. GAO staff who made key  contributions to this testimony are Lisa Gardner, Assistant Director;  Teague Lyons, Assistant Director; Daniel Singleton, Analyst-in-Charge;  Jeff Hartnett, Nicolaus Heun, Kelsey M. Carpenter, Sara Younes,  Matthew T. Crosby; Suellen Foth, Lorraine Ettaro, Rose Brister, Susan  Ditto, Roxanna Sun, Carrie Rogers, and Helena Johnson.

This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately.

We testified on the Department of Veterans Affairs’ ability to provide its medical centers with critical medical supplies during its response to the COVID-19 pandemic.

Our initial observations found that VA’s long-standing problems with its antiquated inventory management system limited how efficiently the agency could oversee the stock of critical medical supplies—such as N95 facemasks and isolation gowns—at its medical centers.

The VA has taken steps to improve its response efforts, but fully resolving the problem at the agency level is at least 7 years away.


Defense Management: DOD Should Set Deadlines on Stalled Collaboration Efforts and Clarify Cross-Functional Team Funding Responsibilities

DOD continues to confront organizational challenges that hinder collaboration. To address these challenges, section 911 of the NDAA for Fiscal Year 2017 directed the Secretary of Defense to, among other things, issue an organizational strategy that identifies critical objectives that span multiple functional boundaries; establish cross-functional teams to support this strategy; and provide related guidance and training.

The NDAA for Fiscal Year 2017 also included a provision for GAO to assess DOD's actions in response to section 911. This report assesses the extent to which DOD has made progress in implementing the requirements of section 911, including establishing a new cross-functional team on electromagnetic spectrum operations.

GAO reviewed documentation, interviewed cross-functional team members and other DOD officials, and compared DOD's actions to section 911 requirements and leading practices for cross-functional teams.

The Department of Defense (DOD) is up to 21 months late in fully addressing five of seven requirements of section 911 of the National Defense Authorization Act (NDAA) for Fiscal Year 2017. These remaining five requirements are designed to strengthen collaboration within the department to foster effective and efficient achievement of objectives and outputs (see figure).

DOD has not addressed most of these remaining requirements of section 911 largely because the Chief Management Officer (CMO) has not approved the documents drafted to meet the requirements or coordinated department-wide review of the documents and provided them for Secretary of Defense issuance. According to Office of the CMO (OCMO) officials, some of the draft documents were provided to the CMO for review and approval as early as August 2018. After providing a draft of this report to the department for comment, GAO learned that the organizational strategy was circulated for department coordination in July 2019, with components expected to provide input by August 2019. However, while the OCMO has set an internal time frame for the organizational strategy, it has not set similar time frames for completing the other four remaining requirements, such as delivering guidance and training on cross-functional teams. GAO previously reported that establishing internal deadlines with key milestones and deliverables is important for tracking progress and implementing actions effectively.

DOD established a cross-functional team pursuant to section 911 on electromagnetic-spectrum operations (EMSO), but according to a team official, funding for the team was delayed. EMSO refers to those activities consisting of electronic warfare and joint electromagnetic-spectrum management operations used to exploit, attack, protect, and manage the electromagnetic operational environment to achieve the commander's objectives. According to the memorandum establishing the team, the CMO is required to provide administrative support to and coordinate with the team to ensure adequate resources are immediately available. However, team officials stated that this funding was delayed in part because of disagreements over responsibility for funding the team under the terms of this memorandum. Moreover, according to a team official, plans for funding in future fiscal years have not been developed. If DOD does not clarify roles and responsibilities for funding the team, the CMO and the EMSO team may face additional delays securing funding, which could negatively affect the team's ability to conduct its work and meet its objectives.

GAO is making six recommendations, including that DOD set and ensure that it meets specific internal deadlines for review and approval of outstanding requirements of section 911, and that DOD clarify roles and responsibilities for providing funding for the EMSO cross-functional team. DOD concurred with GAO's recommendations and set deadlines for addressing the remaining requirements.

The Department of Defense’s (DOD) National Defense Business  Operations Plan for Fiscal Years 2018–2022 highlights that collaboration  and communication among the Office of the Secretary of Defense,  military services, and combatant commands are essential to ensuring the  success of the readiness program across the department. However,  DOD has faced organizational, management, and cultural challenges that  can limit effective and efficient collaboration needed to accomplish  departmental objectives. For example, we reported in August 2017 that  DOD’s efforts to implement a hierarchical, portfolio-based approach to  strategically acquire contracted services had not been successful. This  effort failed for various reasons, including that it was met with strong  cultural resistance to changing DOD’s traditional decentralized approach  to managing services. We have highlighted these challenges in additional  reports, including our High-Risk report, which calls attention to agencies  and program areas that are high risk because of their vulnerabilities to  fraud, waste, abuse, and mismanagement, or are most in need of  transformation.

Section 911 of the National Defense Authorization Act (NDAA) for Fiscal  Year 2017 contained multiple requirements to help advance a more  collaborative culture within DOD. DOD’s Chief Management Officer  (CMO) is leading the department’s efforts to implement section 911. This  section directed the Secretary of Defense to do the following, among  other things:

Formulate and issue an organizational strategy for DOD that identifies  the critical objectives and other organizational outputs that span  multiple functional boundaries and would benefit from the use of  cross-functional teams to ensure collaboration and integration across  the department.

Establish cross-functional teams that, among other things, address  the critical objectives and outputs outlined in the department’s  organizational strategy.

Issue guidance on cross-functional teams and provide training to  members of those established teams and their supervisors on  elements of successful cross-functional teams.

Provide training on leadership, modern organizational practice,  collaboration, and the operation of cross-functional teams to  individuals who have been appointed by the President and confirmed  by the Senate to a position within the Office of the Secretary of  Defense, or request waivers from this requirement.

Central to these requirements is the use of cross-functional teams.  According to academic literature and subject-matter experts with whom  we spoke, cross-functional teams rely on individuals with different types  of expertise to work toward a common, well-defined goal, and are thought  to deliver better and faster solutions to complex and fast-moving  problems. As of our January 2019 report, DOD had established one  cross-functional team under section 911, which has since been  disestablished. The team had been responsible for managing the  transfer of background investigations for certain DOD personnel from the  Office of Personnel Management to DOD. Because those responsibilities  were transferred to a newly created Personnel Vetting Transformation  Office within DOD, department officials made the decision to disestablish  the team. According to a DOD official, the team was disestablished as of  January 2019.

The John S. McCain NDAA for Fiscal Year 2019 subsequently introduced  new requirements on DOD’s implementation of section 911. Among other  things, sections 918 and 1053(c) of the act required the Secretary of  Defense to establish a cross-functional team pursuant to section 911 of  the NDAA for Fiscal Year 2017 on electronic warfare in order to identify  gaps in electronic warfare and joint electromagnetic spectrum operations,  capabilities, and capacities within the department across personnel,  procedural, and equipment areas.

Section 911 also included a provision for us—every 6 months after the  date of enactment on December 23, 2016, through December 31, 2019— to submit to the defense committees a report setting forth a  comprehensive assessment of the actions that DOD has taken pursuant  to section 911 during each 6-month period and cumulatively since the  NDAA’s enactment. We have issued four reports to date and made five  recommendations to DOD. In our most recent report, issued in January  2019, we reported that DOD had made limited progress in addressing the  remaining statutory requirements from section 911 and was reducing the  number of cross-functional teams it considered responsive to section  911. We also reported that DOD’s enterprise business reform efforts  were driven by nine cross-functional teams, but progress had been  uneven. We recommended, and DOD concurred, that DOD establish a  process to identify and prioritize funding for implementing these business  reform teams’ initiatives. Appendix I provides information on these four  reports, including the status of DOD’s implementation of  recommendations made in these reports.

In this report, we describe the extent to which DOD has made progress in  implementing the requirements of section 911 of the NDAA for Fiscal  Year 2017, including the establishment of a new cross-functional team on  electromagnetic spectrum operations.

To assess DOD’s progress in implementing the section 911 requirements,  we reviewed documentation and interviewed Office of the Chief  Management Officer (OCMO) officials on DOD’s efforts to finalize its draft  organizational strategy; DOD’s guidance on cross-functional teams; its  training for cross-functional team members, their supervisors, and  presidential appointees; and its report on the successes and failures of  cross-functional teams. We compared DOD’s efforts to the requirements  in section 911 of the NDAA for Fiscal Year 2017. To assess DOD’s efforts  to establish the new cross-functional team on electromagnetic spectrum  operations, we interviewed OCMO and other officials involved in the  establishment of the team to discuss their efforts and reviewed  documentation associated with the establishment of the team. We  evaluated these efforts against the requirements for cross-functional  teams in section 911 of the NDAA for Fiscal Year 2017, as well as leading  practices from our prior work on implementing effective cross-functional  teams. To assess the team against these requirements, two analysts  independently reviewed the testimony and documents provided and  compared them to these requirements. In any cases where there was a  disagreement, the analysts discussed any differences. If they were not  resolved, a third analyst reviewed the assessments and made a  determination.

We conducted this performance audit from December 2018 to August  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.

DOD’s Efforts to Implement Section 911 Requirements Have Largely Stalled, and Funding Delays Have Slowed DOD’s Newest Cross- Functional Team

DOD Has Continued to Delay Full Implementation of Section 911 Requirements

DOD is up to 21 months late in fully addressing five remaining  requirements of section 911 related to DOD’s organizational strategy and  cross-functional teams, as shown in figure 1 and discussed below.

Specifically, DOD has not fully addressed the following statutory  requirements:  1.  Issue an organizational strategy: DOD has not issued its  organizational strategy, which as of June 2019 is 21 months past the  statutorily required issuance date of September 1, 2017. In January  2019, we reported that OCMO officials had revised the draft  organizational strategy, incorporating, among other things, the criteria  that distinguish cross-functional teams established under section 911  from other types of cross-functional working groups, committees,  integrated product teams, and task forces, as required by section  918(b) of the John S. McCain NDAA for Fiscal Year 2019. The  revised draft of the organizational strategy also includes steps DOD  plans to take to advance a collaborative culture. As we reported in our  June 2018 report, these steps, as outlined in the draft strategy, align  with our leading practices for mergers and organizational  transformations, which we recommended that DOD incorporate into  its strategy. Based on our review of OCMO’s current draft of the  organizational strategy, we found that it addresses all required  elements laid out in section 911 of the NDAA for Fiscal Year 2017.  That January 2019 draft strategy, according to an official from  OCMO’s Administration and Organizational Policy Directorate, was  provided to OCMO leadership for review as early as August 2018, but  has not been approved. A senior OCMO official stated that approval  of the draft was delayed to ensure it aligned with the National Defense  Strategy, issued in January 2018, and the National Defense Business  Operations Plan, issued in May 2018, and to incorporate additional  requirements of the John S. McCain NDAA for Fiscal Year 2019,  which was enacted in August 2018. In addition, according to senior  OCMO and Office of the Deputy Secretary of Defense officials, the  Acting CMO and the Deputy Secretary of Defense informally  discussed the draft organizational strategy, but those conversations  did not lead to the Acting CMO formally approving the draft for  department-wide coordination. In May 2019, a senior OCMO official  told us that the Acting CMO was fully committed to completing  department-wide coordination of the draft strategy in June 2019 and  advancing it for issuance by the Secretary of Defense in July 2019.  After providing a draft of this report to the department for comment,  we learned that the organizational strategy was circulated for  department-wide coordination on July 12, 2019, with components  expected to provide input by August 5, 2019.     2.  Issue guidance for cross-functional teams: DOD has not issued  guidance for cross-functional teams, which, as of June 2019, is 20  months past the required date of September 30, 2017. In June 2018,  we reported that OCMO officials had revised the draft guidance to  fully address all section 911 requirements and incorporate leading  practices for effective cross-functional teams in the guidance,  consistent with our February 2018 recommendation. Based on our  review of this draft, we found that it addresses all required elements  from section 911 of the NDAA for Fiscal Year 2017, as well as all of  the leading practices for effective cross-functional teams. That draft  guidance, according to an official from OCMO’s Administration and  Organizational Policy Directorate, was provided to OCMO leadership  for review as early as August 2018, but has not been approved by the  CMO.  3.  Provide training to cross-functional team members and their  supervisors: OCMO officials have provided some of the required  training to members and leaders of a recently established cross- functional team described later in this report. The training included  several required elements, including information on the characteristics  of successful cross-functional teams, conflict resolution, and how to  appropriately represent the views and expertise of functional  components. However, OCMO officials have not provided training to  supervisors in team members’ functional organizations as required.

We reported in February 2018 that DOD had developed a draft  curriculum for this training that addressed the section 911  requirements. An OCMO official told us it has not altered the  curriculum since then, but that the department has still not provided  the training to team members’ supervisors because the curriculum  has not been approved by the Acting CMO or the Secretary of  Defense. Such approval, though not required by statute, would  demonstrate senior leadership support for cross-functional teams, a  leading practice we have identified. Further, according to an OCMO  official, department-wide coordination and approval would serve to  strengthen the effectiveness of the training. However, the need for this  training is evident. For example, when we observed one of the training  sessions, a member of a cross-functional team stated that he did not  believe his supervisors knew what cross-functional teams were.  4.  Provide training to presidential appointees: OCMO has not  provided the required training to individuals filling presidentially  appointed, Senate-confirmed positions in the Office of the Secretary  of Defense. Section 911 requires these individuals to complete the  training within 3 months of their appointment or DOD to request  waivers. As of June 2019, 24 of 36 such officials had been appointed  and in their positions for more than 3 months, and, according to an  OCMO official, none had received their training or been granted a  training waiver. An OCMO official told us in October 2018 he had  revised the draft training curriculum following our February 2018  report to include all the required elements in section 911. However,  as of May 2019, OCMO officials had not provided a copy of the  revised curriculum for our review. After the curriculum is approved, the  officials stated that they plan to recommend to the Secretary of  Defense that all presidential appointees in the Office of the Secretary  of Defense receive the training, rather than request waivers.  5.  Report on successes and failures of cross-functional teams:  OCMO has not completed an analysis of the successes and failures  of DOD’s cross-functional teams, which, as of June 2019, is 3 months  past its required completion date. Section 911 requires that an  analysis of the success and failures of the teams and how to apply  lessons learned from that analysis is completed 18 months after the  establishment of the first cross-functional team. With the  establishment of the first cross-functional team on personnel vetting in  August 2017, the required completion date for the report was  February 25, 2019. An OCMO official stated that OCMO planned to  conduct an analysis on the personnel vetting team, but had not yet  begun and had not set a time frame for doing so.

DOD has not addressed most of these remaining requirements of section  911 because, according to an OCMO official, the Acting CMO has not  approved the draft documents prepared by OCMO staff to satisfy the  requirements. Moreover, the Acting CMO has not coordinated most of the  documents department-wide and provided them to the Secretary of  Defense for review and issuance. Specifically, according to an OCMO  official, the Acting CMO has not reviewed or approved the guidance on  cross-functional teams or curricula for cross-functional team members,  their supervisors, and presidential appointees. These delays occurred in  part because the department has not established and communicated  internal deadlines for reviewing, coordinating, and approving these  documents. According to OCMO officials, the primary reason they have  not met these other outstanding requirements, including the guidance and  training for cross-functional teams, is that they would like to have the  organizational strategy approved and issued first, so that it can be  reflected in the accompanying materials. However, while the OCMO has  set an internal time frame for the organizational strategy, it has not set  similar time frames for completing the remaining requirements.

Standards for Internal Control in the Federal Government emphasize the  need to establish time frames to implement actions effectively. In  addition, as we reported in June 2018, establishing time frames with key  milestones and deliverables to track implementation progress are  important for agency reform efforts. By not setting and following clear  internal deadlines for meeting the outstanding section 911 requirements,  DOD has continued to fall short in meeting statutory requirements and  missed opportunities to effectively implement its cross-functional teams  and advance a collaborative culture that could bolster broader efforts  within the department, such as reforming its business operations.

DOD Established a Cross- Functional Team on Electromagnetic Spectrum Operations, but the Team’s Efforts Have Been Slowed by Delayed Funding Decisions

Sections 918 and 1053(c) of the John S. McCain NDAA for Fiscal Year  2019 required the Secretary of Defense to establish a cross-functional  team pursuant to section 911 of the NDAA for Fiscal Year 2017 on  electronic warfare to identify gaps in electronic warfare and joint  electromagnetic spectrum operations, capabilities, and capacities within  the department across personnel, procedural, and equipment areas. In  addition, section 1053(d) of the act required the electronic warfare cross- functional team to, among other things, (1) update the department’s  Electronic Warfare Strategy in coordination with the Electronic Warfare  Executive Committee by February 9, 2019, and (2) provide assessments  of the electronic warfare capabilities of the Russian Federation and the  People’s Republic of China in consultation with the Director of the  Defense Intelligence Agency by May 10, 2019.

Section 918 of the John S. McCain NDAA for Fiscal Year 2019 required  the team’s establishment by November 11, 2018; however, DOD did not  establish an electromagnetic spectrum operations cross-functional team  until February 2019, and the team did not begin its work until April 2019.

An official from the team told us that the standup of the team was delayed  due to the extensive department-wide review of the February 2019  memorandum that established the team. Because of the delayed  establishment of the team, DOD officials estimated that the required  update to DOD’s Electronic Warfare Strategy would be completed by the  end of September 2019—7 months after the statutory deadline—and that  the required assessments would be provided by fall 2019. According to  the team’s establishment memorandum, the team will continue its work  until at least fiscal year 2022.

In addition to the requirements discussed above, section 911 of the  NDAA for Fiscal Year 2017 includes specific requirements for cross- functional teams established under that section, including that each  team’s objectives be clearly established in writing and that the team  should establish a strategy to achieve those objectives. We found that  DOD and the electromagnetic spectrum operations cross-functional team  have addressed 10 of 11 of those requirements for cross-functional  teams. We also found that the team demonstrates several of the leading  practices for cross-functional teams. For example, we found that the  team has a well-defined team structure and well-defined team goals.  However, as previously discussed, DOD has not fully addressed the  section 911 requirement for training for cross-functional team members’  supervisors.

We were also told by team officials that DOD was delayed in providing  administrative support and funding to support the team’s operations.  According to the memorandum establishing the electromagnetic spectrum  operations team, the CMO is responsible for providing administrative  support to the new team, to include providing the team with office space,  information technology equipment, contracting, human resources,  security, cross-functional team training, and other services, as  appropriate. The memorandum also requires the team to work with the  CMO to develop resource requirements for team operations for fiscal  years 2019 and 2020 to ensure adequate resources are immediately  available.

However, according to a team official, funding was not provided to the  team until late May 2019—over 3 months after the team was established  and over 1 month after most of the team members were provided by their  home units to work on the team full time. According to a team official, this  funding was to be used for several team requirements, including  dedicated office space, computer systems, travel funds, and contractor  support. This funding was delayed in part because of disagreements over  responsibility for funding the team under the terms of the memorandum  establishing the team. Specifically, according to a team official, OCMO  officials believed that funding should be provided by another organization,  such as the Joint Staff. Team and Joint Staff officials told us that they  believed the OCMO was responsible for this funding based on the  memorandum establishing the team. A team official further stated that  funding was provided only when the Deputy Secretary of Defense  directed that funding be provided to the team. OCMO officials told us that  because the team was not a budgeted activity for fiscal year 2019, the  team was added to DOD’s unfunded requirements list. The Under  Secretary of Defense (Comptroller) identified funds for the team via the  unfunded requirements process at the end of April 2019.

However, a team official told us funding for the team for future fiscal years  has not been identified and responsibility for providing that funding is still  unclear. OCMO officials told us that the team will continue to rely on the  unfunded requirements process for funding, since the team is not a  budgeted activity for fiscal year 2020, and would need to compete for  funding through DOD’s program budget review process for fiscal year  2021 and later fiscal years. Those officials also told us that the team has  not yet signed a memorandum of agreement that is required to execute  transfer of the funds to the team. A team official told us the team had not  yet signed the memorandum because it believed the memorandum would  transfer responsibility for funding the team from OCMO to the team. As  noted previously, team officials believe the OCMO is responsible for this  funding based on the memorandum establishing the team.

According to a team official, this delay in funding hampered the team’s  ability to achieve full operating capability. For example, until late May the  team was working from the Pentagon Conference Center and OCMO  conference rooms with only one secure laptop. A team official told us in  June 2019 that though the team has moved into its own office space, that  space does not have the level of security required for the team to work on  a third of its initiatives. As a result, the team was also delayed in  conducting mission analysis, work plan development, organizational  design, and production of executive-level briefings. A team official told us  the team expects to be at full operating capability in late July 2019.

Leading practices for implementing effective cross-functional teams  highlight the importance of senior management providing teams with  access to resources. In addition, Standards for Internal Control in the  Federal Government state that agencies’ management should assign  responsibility to achieve the entity’s objectives. If DOD does not clarify  roles and responsibilities for providing funding for the new cross- functional team, the Acting CMO and the electromagnetic spectrum  operations team may continue to have delays in funding and those delays  may negatively affect the team’s ability to conduct its work and to meet its  objectives.

Section 911 of the NDAA for Fiscal Year 2017 called for organizational  and management reforms to assist DOD in addressing challenges that  have hindered collaboration and integration across the department. The  department has taken some steps to implement the section 911  requirements, but still has not met statutory time frames for implementing  key requirements intended to support its cross-functional teams and to  advance a more collaborative culture within the department. Setting  specific internal deadlines would help ensure action on these outstanding  statutory requirements. Moreover, DOD has established a new  electromagnetic spectrum operations cross-functional team under section  911—one of the only requirements for which the department has made  progress since our last report—but has not ensured that the team will  have the funding it needs beyond fiscal year 2019 to maintain full  operational capability and accomplish its assigned objectives. Senior  leadership commitment to fully supporting this team and fulfilling all  section 911 requirements could help the department make important  advances in the type of collaboration necessary for the department to  accomplish some of its most ambitious goals.

We are making the following six recommendations to DOD:  The Secretary of Defense should ensure that the CMO meets DOD’s  August 2019 deadline for final submission of the organizational strategy  to the Secretary of Defense for review and issuance. (Recommendation  1)

The Secretary of Defense should ensure that the CMO meets DOD’s  September 2019 deadline for review and approval of DOD’s guidance on  cross-functional teams and final submission to the Secretary for review  and issuance. (Recommendation 2)

The Secretary of Defense should ensure that the CMO meets DOD’s  September 2019 deadline for review and approval of DOD’s training  curriculum for cross-functional team members and their supervisors.  (Recommendation 3)

The Secretary of Defense should ensure that the CMO meets DOD’s  September 2019 deadline for review and approval of DOD’s training  curriculum for presidential appointees. (Recommendation 4)

The Secretary of Defense should ensure that the CMO meets DOD’s  November 2019 deadline for drafting, review, and approval of DOD’s  report on the success and failures of cross-functional teams and final  submission to the Secretary for review and approval. (Recommendation  5)

The Secretary of Defense should ensure that the CMO and the  electromagnetic spectrum operations cross-functional team clarify roles  and responsibilities for providing administrative support and funding for  the team beyond fiscal year 2019 in accordance with the memorandum  establishing the team. (Recommendation 6)

We provided a draft of this report to DOD for review and comment. In  written comments that are reproduced in appendix IV, DOD concurred  with our recommendations. DOD officials provided separate oral technical  comments, which we incorporated as appropriate.

In its response, DOD provided new information on a timeline for  completing the outstanding section 911 requirements. Specifically, DOD  updated its internal deadline for submission of the organizational strategy  to the Secretary of Defense from July 2019 to August 2019. DOD also  stated that it plans to issue the guidance on cross-functional teams and  training for cross-functional team members, their supervisors, and  presidential appointees by September 2019 and complete its report on  the successes and failures of cross-functional teams by November 2019.  We updated our first five recommendations to reflect this information.  Establishing these timelines is an important step forward in meeting the  statutory requirements under section 911 as well as addressing our  recommendations. As part of our next and final audit of DOD’s  implementation of section 911 requirements, we will assess the extent to  which the department has met these new internal deadlines and fully  addressed our recommendations in this report. Fully addressing these  outstanding requirements will strengthen DOD’s ability to effectively  implement its cross-functional teams and advance a collaborative culture  within the department.

We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, and DOD’s Deputy Chief  Management Officer. In addition, the report is available at no charge on  our 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. GAO staff who made key contributions to this report  are listed in appendix V.

Appendix I: Prior GAO Reports on the Department of Defense’s (DOD) Implementation of Section 911 of the National Defense Authorization Act (NDAA) for Fiscal Year 2017

Section 911 of the NDAA for Fiscal Year 2017 included a provision for  us—every 6 months after the date of enactment on December 23, 2016,  through December 31, 2019—to submit to the congressional defense  committees a report. Each report is to set forth a comprehensive  assessment of the actions that DOD has taken pursuant to section 911  during each 6-month period and cumulatively since the NDAA’s  enactment. Table 1 identifies our four prior reports on DOD’s  implementation of section 911 and the status of the five recommendations  from those reports.

Appendix II: Summary of Requirements in Section 911 of the National Defense Authorization Act for Fiscal Year 2017

Section 911 of the National Defense Authorization Act for Fiscal Year  2017 requires the Secretary of Defense to take several actions. Table 2  summarizes these requirements, the due date, and the date completed, if  applicable, as of June 2019.

Appendix III: Leading Practices for Implementing Effective Cross-Functional Teams

In February 2018, we reported on eight leading practices for  implementing effective cross-functional teams. Table 3 identifies these  leading practices and their related key characteristics.

Appendix IV: Comments from the Department of Defense

Appendix V: GAO Contact and Staff Acknowledgments

In addition to the contact named above, Margaret Best (Assistant  Director), Tracy Barnes, Arkelga Braxton, Sierra Hicks, Michael Holland,  Matthew Kienzle, Amie Lesser, Ned Malone, Judy McCloskey, Sheila  Miller, Richard Powelson, Daniel Ramsey, Ron Schwenn, and Sarah  Veale made key contributions to this report.

DOD's organizational and management challenges have made it hard for organizations within the department to collaborate in reaching shared goals. To address this issue, Congress required DOD to develop a strategy to improve collaboration and establish teams to address critical department-wide objectives.

We found that DOD is 21 months late issuing this strategy. In addition, though DOD established a new team on electronic warfare, the team's work has been slowed because it did not initially receive the funding it needed.

We recommended that DOD establish deadlines to meet requirements and clarify how this new team will be funded.