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As stated in GAO's 2015 High Risk report, the Department of Defense (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, support infrastructure, and weapons systems acquisition. Weaknesses in these areas adversely affect DOD's efficiency and effectiveness, and hinder its ability to free up resources for higher priority needs. As a result, many of DOD's key business areas were designated as high risk due to their vulnerability to waste, fraud, abuse, and mismanagement. These areas, and DOD's overall approach to business transformation, are inextricably linked to DOD's ability to perform its overall mission, directly affecting the readiness and capabilities of U.S. military forces.

The scope of DOD's approach to the business transformation high-risk area  encompasses the activities of the Chief Management Officer and Deputy Chief Management Officer in engaging with responsible leaders to influence and provide oversight of business transformation across DOD’s business functions to achieve progress. DOD's business functions include: financial management, acquisition, defense security enterprise, installations and environment, logistics, human resources and healthcare management, security cooperation, and enterprise information technology infrastructure.  DOD's overall approach to managing business transformation was added as a high-risk area in 2005 because DOD had not taken the necessary steps to achieve and sustain business reform on a broad, strategic, department-wide, and integrated basis. Further, DOD's historical approach to business transformation has not proven effective in achieving meaningful and sustainable progress in a timely manner. For example, DOD had not established clear and specific management responsibility, accountability, and control over business transformation-related efforts and applicable resources across business functions. Also, DOD did not have an integrated plan for business transformation with specific goals, measures, and accountability mechanisms to monitor progress and achieve improvements.

GAO's high-risk updates have noted that DOD has taken some actions toward improving its business transformation efforts. For example, DOD developed and issued its first strategic plan in 2008 and has continued to update the plan for its business functions, including issuing an Agency Strategic Plan in 2015. However, given the magnitude of the funds devoted to DOD's business functions—billions of dollars each year—the impact any failures of these functions can have on national security and on the ability of DOD to meet its missions, and given the long-standing issues identified that impact these business functions,  this area remains high risk.

This High Risk Report is updated every two years, at the start of each new Congress. For more information on this High Risk Issue, see What We Found and What Remains to Be Done.

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