    [Senate Hearing 118-657]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 118-657

                     POTENTIAL BUDGETARY EFFICIENCIES ACHIEVED
                        THROUGH IMPROVEMENT TO MANAGEMENT
                        AND PLANNING PROCESSES WITHIN DEPART-
                        MENT OF DEFENSE PERSONNEL PROGRAMS

    =======================================================================

                                    HEARING

                                   BEFORE THE

                                SUBCOMMITTEE ON
                                   PERSONNEL

                                     OF THE

                          COMMITTEE ON ARMED SERVICES
                              UNITED STATES SENATE

                        ONE HUNDRED EIGHTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 JULY 26, 2023

                                   __________

             Printed for the use of the Committee on Armed Services

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                     Available via: http://www.govinfo.gov

                                    __________

                       U.S. GOVERNMENT PUBLISHING OFFICE
    60-411 PDF                  WASHINGTON : 2025

    -----------------------------------------------------------------------------------

                          COMMITTEE ON ARMED SERVICES

                      JACK REED, Rhode Island, Chairman

    JEANNE SHAHEEN, New Hampshire		ROGER F. WICKER, Mississippi
    KIRSTEN E. GILLIBRAND, New York		DEB FISCHER, Nebraska
    RICHARD BLUMENTHAL, Connecticut		TOM COTTON, Arkansas
    MAZIE K. HIRONO, Hawaii			MIKE ROUNDS, South Dakota
    TIM KAINE, Virginia			JONI ERNST, Iowa
    ANGUS S. KING, Jr., Maine		DAN SULLIVAN, Alaska
    ELIZABETH WARREN, Massachusetts		KEVIN CRAMER, North Dakota
    GARY C. PETERS, Michigan		RICK SCOTT, Florida
    JOE MANCHIN III, West Virginia		TOMMY TUBERVILLE, Alabama
    TAMMY DUCKWORTH, Illinois		MARKWAYNE MULLIN, Oklahoma
    JACKY ROSEN, Nevada			TED BUDD, North Carolina
    MARK KELLY, Arizona                  	ERIC SCHMITT, Missouri

    		    Elizabeth L. King, Staff Director
      		John P. Keast, Minority Staff Director
    _________________________________________________________________

                           Subcommittee on Personnel

     ELIZABETH WARREN, Massachusetts,
                 Chairman
    RICHARD BLUMENTHAL, Connecticut		RICK SCOTT, Florida
    MAZIE K. HIRONO, Hawaii			MIKE ROUNDS, South Dakota
    TIM KAINE, Virginia			DAN SULLIVAN, Alaska
    TAMMY DUCKWORTH, Illinois            	TED BUDD, North Carolina

                                      (ii)

                             C O N T E N T S

    _________________________________________________________________

                                 July 26, 2024

                                                                       Page

    Potential Budgetary Efficiencies Achieved Through Improvement to      1
      Management and Planning Processes Within Department of Defense
      Personnel Programs.

                               Members Statements

    Statement of Senator Elizabeth Warren............................     1

    Statement of Senator Rick Scott..................................     4

                               Witness Statements

    Mosher, David E., Assistant Director for National Security,           7
      Congressional Budget Office.

    Roark, Michael J., Deputy Inspector General, Evaluations             15
      Component, Department of Defense, Office of Inspector General.

    Field, Elizabeth, Director, Defense Capabilities and Management,     20
      Government Accountability Office.

    Questions for the Record.........................................    57

                                     (iii)

       POTENTIAL BUDGETARY EFFICIENCIES ACHIEVED THROUGH IMPROVEMENT TO
        MANAGEMENT AND PLANNING PROCESSES WITHIN DEPARTMENT OF DEFENSE
                               PERSONNEL PROGRAMS

                                  ----------

                            WEDNESDAY, JULY 26, 2023

                          United States Senate,
                             Subcommittee on Personnel,
                                   Committee on Armed Services,
                                                        Washington, DC.
        The Subcommittee met, pursuant to notice, at 4:03 p.m., in
    room 106, Dirksen Senate Office Building, Senator Elizabeth
    Warren (Chairman of the Subcommittee) presiding.
        Subcommittee Members present: Senators Warren, Blumenthal,
    Kaine, Scott, and Budd.

             OPENING STATEMENT OF SENATOR ELIZABETH WARREN

        Senator Warren. This hearing will come to order. Good
    afternoon. I want to welcome our witnesses for today's
    Personnel Subcommittee hearing, and I want to offer a very
    special thank you to Ranking Member Scott for helping on this
    Committee and doing it on rather short notice.
        Also, for our other Members for joining us as we examine
    opportunities to save money at the Pentagon. Members of
    Congress, and this Committee in particular, have a
    responsibility to root out waste and price gouging in Pentagon
    spending.
        We owe it to the men and women of the military who rely on
    us to fund the equipment activities they need to defend us, and
    we owe it to the taxpayers who foot the bill. I don't think it
    will be a surprise to anybody when I tell you, we have a lot of
    work to do on this front. This year, the Department of Defense
    requested $842 billion in funding.
        Just last month, negotiators had barely agreed as part of
    the bipartisan deal to lift the Nation and avoid default on the
    Nation's debt, to limit this year's Department funding to only
    100 percent of the amount that the Department actually
    requested in the budget. While the defense industry howled that
    $842 billion was simply not enough.
        Now, some of my colleagues have already pledged that by the
    end of the year they will pass a supplemental budget to give
    the Department of Defense more money and are currently drawing
    up plans for billions more in spending. If another huge
    supplemental is approved by Congress, the total could be the
    largest Pentagon budget since World War II.
        I support funding our military so that it can do its job to
    keep Americans safe. I support making sure that servicemembers
    have the pay and benefits they deserve and the high quality
    equipment they need to do their work safely.
        I support adequate resources for the whole Department of
    Defense to operate without cutting corners. I support ensuring
    that Ukraine has the support it needs from the United States to
    resist Russia's illegal war.
        But reports from Pentagon watchdogs and budget experts,
    both inside and outside Government, have repeatedly shown that
    there are serious problems at the Department of Defense (DOD)
    with wasting taxpayer dollars.
        Reports from the Government Accountability Office (GAO),
    the Department of Defense Inspector General, the Special
    Inspector General for Afghanistan Reconstruction, the
    Congressional Budget Office (CBO), the Cost Assessment and
    Program Evaluation Office, I have now run out of fingers, and
    the Pentagon's own auditors have all identified billions and
    billions and billions of dollars that do nothing more than line
    the pockets of giant defense contractors, often with little or
    no oversight from the Pentagon.
        When the Department of Defense comes to Congress to ask for
    more money, we should be asking why they aren't putting in
    place a few basic oversight tools to stop defense industry
    price gouging.
        Before DOD gets another dollar, they need to put checks in
    place to stop paying $1,500 for a medical device that can be
    purchased at Wal-Mart for $192, and just stop paying $1,800 for
    vaccines that everyone else pays $125 for. Pentagon officials
    themselves estimate that savings just from tightening up our
    practices in hiring contractors, just that one area alone,
    would be about $44 billion over 10 years.
        Before we provide more money to the Pentagon, DOD needs to
    explain to the American people why it is failing to implement
    basic safeguards regularly employed by both families and
    businesses. This hearing will focus on a few of the key
    findings from budget experts. I appreciate their willingness to
    appear as witnesses.
        They have identified cost savings across the Pentagon's
    work. But because this is the Personnel Subcommittee, we are
    going to focus today on issues of waste related to how DOD buys
    personnel related goods and services.
        I will note as a measure of how little congressional
    oversight there has been, and how determined Senator Scott and
    I are to reel this back in, that this is only the second time
    in the last 15 years that the Inspector General (IG) has been
    invited to testify before this Committee. Before turning to our
    witnesses, let me briefly highlight two key problems in this
    Subcommittee's jurisdiction that clearly require congressional
    oversight.
        First, DOD fails to prevent price gouging by private
    defense contractors, period. There is no real dispute about
    this. One report after another from independent Inspector
    General has documented that DOD contracting officers agree to
    pay excessive prices without asking companies for
    justifications and that companies delayed or refused to provide
    cost data when requested.
        Without that pushback, the U.S. taxpayer is just a sitting
    duck for defense industry price gouging. By now, most people
    know that over-the-top price gouging occurs on spare parts and
    weapons systems. Earlier this year, I called out Boeing for its
    failure to provide basic cost data for almost 11,000 items.
        In other examples where that price data has been made
    public, we learned that Boeing charged the Army $71, $71 for a
    pin that should have cost $0.04. In another case, they charged
    nearly $1,700 for a ramp gate roller assembly that DOD could
    have purchased for $8--$1,700 for $8 item.
        A recent investigation by 60 Minutes found that even after
    adjusting for inflation, we are paying seven times more for
    each missile we send to Ukraine than we paid in the 1990's. But
    price gouging isn't limited to spare parts and weapons systems.
    It also happens when DOD is paying for health care.
        This week I wrote a letter to the Defense Health Agency
    (DHA) highlighting pricing on health care items. For example,
    DOD was paying $1,500 for breast pumps that Wal-Mart sold for
    less than $200. The agency was paying over $1,800 for vaccines
    that could be purchased for $125. Multiply that price gouging
    by the high volume of purchasing in the military, and it is
    clear that taxpayers are getting seriously ripped off.
        Another way that taxpayers get gouged is through its
    contractor workforce. Our Nation's defense is often supported
    through contractors who feed our troops, house our military
    families, transport needed equipment, and perform a ride range
    of tasks that in past years were either done by Active Duty
    military or by civilian employees.
        Over the past quarter century, DOD spending on service
    contracts has more than doubled, reaching over $205 billion in
    fiscal year 2022. This has created a huge industry of military
    contractors, turning them into billion dollar businesses. But
    in many cases, hiring a contractor cost more than simply paying
    a Federal employee to perform exactly the same function.
        At a minimum, DOD should be examining each contract to make
    certain the prices are reasonable and that the work cannot be
    done directly by Federal employees for a whole lot less money.
    But that is not what is happening. Instead of carefully
    reviewing each Government contract, the GAO has determined that
    DOD does not even know how many contractors it has and does not
    effectively analyze long term costs.
        DOD has failed to safeguard taxpayer money, and it has
    opened the door to price gouging by Government contractors. It
    is DOD's job to stop these rip offs. As I noted earlier, this
    hearing will focus on cost savings and the jurisdiction of this
    Subcommittee. We will also primarily focus today on places
    where DOD can use authorities it already has.
        But let me be crystal clear, if the Pentagon wants more
    funding this year, above 100 percent of their budget request
    that has already been fulfilled by Congress, then Congress
    should at a minimum give DOD more access to cost and pricing
    data from contractors, tie any increases in upfront payments to
    contractors to requirements that they deliver goods and
    services on time, remove a requirement in current law that
    military services must send Congress pricey wish lists for
    extra spending on top of their annual budget requests, require
    contractors to disclose changes in average prices and gross
    margins, and require any DOD component that fails to pass an
    audit to return 1 percent of its budget back to Treasury.
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        For many of these proposals, bipartisan legislation already
    exists to make these changes. If other Senators want to dump
    more money into the Department of Defense on top of fully
    funding the budget they already have, then they should also
    support including these commonsense measures to fight back
    against price gouging.
        So, I am pleased that we are here to talk about this, and I
    call on Ranking Member Scott for an opening statement.

                    STATEMENT OF SENATOR RICK SCOTT

        Senator Scott. First off, thanks for being here. I want to
    thank Chairwoman Warren for doing this. You know, I am a
    business guy, so you have to invest to get what you want done,
    but you sure as heck don't want to waste any money. The easiest
    way to spend money on something is through savings. It is a lot
    easier than have to come up with new capital or borrow more
    money, whatever you are doing.
        I want to thank Chairwoman Warren for doing this, and we
    have talked about doing another hearing in, I think, September,
    we want to hear from other Members if they have anything they
    want to talk about. But there has to be a hell of life savings
    here, right?
        The Department Defense is the Nation's largest employer.
    Over 2 million people serve in our military in either an Active
    or Reserve capacity. We have another 824,000 people who work as
    DOD civilian employees. An additional 800,000 people support
    the DOD through contract mechanism. That is a lot of people.
        Between military personnel, civilian employees, contracted
    labor, nearly 50 percent of the total defense budget is spent
    on the DOD workforce, which in fiscal year 2023 equates to more
    than $400 billion.
        They are Americans. It is not just money in numbers.
        They are serving our country, and I think every one of them
    probably feels like they have a good, important mission to get
    done. Each one of them is the reason why the work of this
    Subcommittee is so important. There has been plenty of talk in
    Washington that have excused the waste and inefficiencies of
    the Department of Defense, saying, oh gosh, it is a big place.
    I don't know if you can really do this there.
        I think most of us think that is pretty ridiculous. We all
    have to do it in our homes. We have to do it in our businesses.
    Our families are doing it every day, especially at a time where
    we are seeing ridiculous inflation. So, I think that we can
    figure this out, and there are ways to save a lot of money. I
    used to be in business at one time. I ran the seventh biggest
    U.S. employer. We had to do it every day.
        We had to keep coming up with efficiencies. None of our
    customers says, ``I want to give you more money.'' None of our
    shareholders said, ``we would like you to give us less of a
    return.'' So, we had to constantly come up with this. As a
    matter of fact, in some of the manufacturing companies I had,
    by contract, by written contract, every year I had to cut 2
    percent of my price--my cost, by contract.
        Every year I was required to get 2 percent productivity
    gains or make less money, and nobody wanted to get paid less,
    nobody wants to make less. You just had to do it. It is all
    doable.
        I just want to thank you guys for what you do. I have only
    been up here 4\1/2\ years, but I think every one of your
    agencies actually is a real help to what we do in our jobs.
        The report you put out, the information you put out is
    actually very helpful to me. I think the DOD is in desperate
    need of real, thorough, and consistent audits. I can't imagine
    not doing an audit, a thorough audit. In the private sector,
    when you have an audit and there is anything in the audit that
    says ``we need to fix it,'' you have to fix it, you have to fix
    it.
        Your shareholders are going to hold you accountable, and
    you are not going to keep your job if you don't go through that
    audit and try to eliminate as many, if not all of the problems
    before the next audit, not in 5 years. The next audit, you had
    to try to get anything that was in there, and you had to get a
    clean audit, or if you are the CEO, you would not have a job.
        I think we have got to make sure that--this is a lot of
    money. We want to have a lethal military. We want to support
    our military. But it has got to be done where we don't waste
    any dollars.
        This is not about cutting spending. It is about spending
    money efficiently and making sure that whatever we spend, it
    means we are going to take care of our servicemembers and we
    are going to have the most lethal force possible, so hopefully
    nobody ever wants to do anything against us.
        I don't think it's a hard concept. I think we all do it
    every day in our life. The more efficiencies we can find--
    either we can save money for the taxpayers of this country, or
    we can make bigger investments to make sure we have a better
    military. I don't think any of us want to slow down our
    investments in defense, but also understand that we shouldn't
    be doing things that we don't get a return on.
        We ought to be hell bent on getting that done. We also have
    to understand that it is getting harder and harder to recruit
    in the military, so everybody there is more and more important.
    If you look at it, just like in companies, we are spending more
    dollars training people now than at any time. When my dad went
    in, he was an ace in the Airborne.
        They just sent him to the front lines. I don't know how
    much training he got. I got a little bit, and then swabbed the
    decks, cleaned the latrines a lot. Today, I think they are
    getting a lot more training than when I got when I was in. In a
    perfect world, our servicemembers would be used exclusively for
    military-specific tasks.
        But some jobs need to be done, and the uniformed
    servicemember is the only person available to do it. But I
    agree with Chairman Warren, we use a lot of civilians, and it
    just can't cost as much money.
        You come up here and you see how many companies have just
    been created by provide services to sometimes it is our Federal
    Government, sometimes it is just our military. The margins on
    this stuff, I mean, we didn't make margins in the business I
    was in that were like this.
        We have got to make it easier for our servicemembers abroad
    to find fulfilling work for their supporting spouses. I was
    just traveling, and we had one individual that was telling me
    that she had a very well-trained husband and couldn't get a job
    where they were.
        There is some crazy rule that was preventing--when I was
    Governor of Florida, we tried to, and I am sure Senator Kaine
    did the same thing, you are trying to make your State the most
    military friendly State, and so you figure out how do you wave
    everything you can so all the spouses can get a job because it
    has a big impact on these, the ones that serve there, but also
    their livelihood every day. We can't pay exorbitant salaries
    for our military.
        A lot of their spouses have to make a decent income to
    survive. I recently heard--so this was just about the spouse, I
    guess there is--with some of the individuals overseas, they
    apply through USA Jobs. It is difficult that they can't get
    jobs overseas to do telework in the United States. Some of the
    stuff just doesn't make any sense.
        We got to make this all easier. I think we have got to do a
    review of all of our laws governing Federal civil service. We
    want to make sure that it works like the private sector. You
    want to be able to hire people when you want to hire them as
    quickly as you can, but you want to be able to hold people
    accountable.
        If you can't hold people accountable, then unfortunately
    you end up with the bad actors, not with the best employees. No
    one wins in that situation. I think both Republicans and
    Democrats have proposed things over--just even since I have
    been up here, to try to make that better, but often there is
    some special interest to try to prevent that. Hopefully we can
    go through all these things.
        I think this is going to be a good hearing, but I think
    there is more to be done to try to find efficiencies and force
    these efficiencies so we can make sure we make good
    investments. Thanks for being here. Thanks for what you do
    because your reports are really good.
        Senator Warren. Thank you very much. Terrific opening
    statement. I also want to say thank you to our witnesses for
    appearing and thank you for your work. We are going to have one
    panel today that is composed of Government watchdogs and budget
    experts.
        Mr. David Mosher, the Assistant Director for National
    Security for the Congressional Budget Office, is with us. Mr.
    Michael Roark, who is Deputy Inspector General for the
    Evaluations Component of the Department of Defense Inspector
    General, and Ms. Elizabeth Field, the Director for Defense
    capabilities and Management at the Government Accountability
    Office. Thank you all again for appearing today.
        Mr. Mosher, you are recognized for 5 minutes for an opening
    statement.

     STATEMENT OF DAVID E. MOSHER, ASSISTANT DIRECTOR FOR NATIONAL
                 SECURITY, CONGRESSIONAL BUDGET OFFICE

        Mr. Mosher. Thank you very much, Senator. Thank you,
    Senator Scott and the committee for inviting me to come
    testify. I appreciate the opportunity to talk a little bit
    about reducing DOD's compensation costs.
        The size of DOD's compensation budget actually is not very
    well defined. I know we have a nice pie chart there, and the
    challenge is like, what is that $205 billion number? It is not
    well-defined.
        It is better defined on the military side and on the
    civilian compensation side, but definitely in the biggest hole
    and is the biggest uncertainty is service contractor workforce,
    and that is because DOD really collects and publishes very
    incomplete data about that workforce. DOD's total workforce
    consists of three types of labor, military personnel, both full
    time and part time, Federal civilians, as well as service
    contractors.
        DOD refers to this is their total force. It is something
    you try to manage and balance and get the right capabilities to
    the right needs. Compensation for the three types of labor is
    largely found in the military personnel account, as well as the
    operations and maintenance (O&M) account, although there is
    some--operation and maintenance--although there is some in the
    research and development (R&D) account as well.
        I am focusing on service contract labor, and just to be
    clear here, these are contractors who are personnel who are
    hired by private companies under service contracts awarded
    expressly to augment civilian and military personnel within
    DOD. Service contractors provide a wide range of activities.
        As you alluded to, Senator Warren, you can't go to a
    military base without running into a large number of service
    contractors doing very important functions. So just to be
    clear, though, I am not talking about people who are hired by
    companies who produce goods and weapons that the Department
    buys. I am focusing on that other group. How big is DOD's
    workforce? We actually don't know.
        We know that DOD plans to have at the end of this year
    about 2.2 million full time personnel, 1.4 on the military side
    and about 800 million on the civilian side. But there is no
    centralized accounting for the service contractors, and
    estimates range widely from sort of 250,000 was the number that
    the Congressional Research Service (CRS) published a year or
    two ago, to numbers that are two to three times that amount.
        But we don't know, and on that higher end, it rivals the
    duty civilian workforce in size. What is the cost of DOD's
    workforce? Again, we don't know. We can't get all the pieces of
    it. Roughly one-third of annual--DOD's annual budget is devoted
    to compensation for military and civilian personnel working
    directly for the Department.
        That is about $279 billion in 2023. If you include service
    contractors, that number could be, as Senator Warren suggested,
    close to half of DOD's annual budget. We can't be more precise
    in--precisely because we do not get data from DOD that allows
    us to do that, in the same way that we get very good data about
    military personnel and civilians.
        DOD, for example, reports that the budget authority for
    service contracts in 2022 was about $95 billion. But Office of
    Management and Budget (OMB) data indicates this number could be
    as high as $274 billion. This is for the contract dollars, not
    necessarily the labor costs.
        I will get to that in a moment. We have looked, CBO,
    throughout the years at reports at how to reduce DOD's
    compensation costs by changing policies mostly. A good example
    of that is our options for reducing the deficit budget volume
    we reduce--we produce every 2 years. I have highlighted some of
    those in my written testimony.
        But savings from that for these kinds of policy changes
    would be roughly $1 to $3 billion for each of those a year over
    10 years, which is 1 to 2 percent of DOD's compensation budget
    for the military.
        Small changes, but those compound over time with pay
    raises, etcetera, that can grow into larger savings. We haven't
    been able to look at that for service contractors. One other
    thing I want to note and a very important piece of compensation
    for the military are veterans benefits.
        They are essential to how DOD recruits and retains staff.
    It is an important promise that we make to our servicemen and
    women. The Department of Veterans Affairs (VA's) budget
    requests this year, just for some context, was $320 billion.
    So, it is the highest it has ever been for 2024--about twice
    the size of DOD's military compensation budget. CBO's options,
    we do options looking at that, we have come up with options
    that range from about $1 billion a year on average, to more
    than $25 billion a year if you make some policy changes.
        So, what would be the value of more comprehensive data on
    service contractors? First, I think, and my colleagues from GAO
    can go into this at great length much better than I can, but it
    helps the Department manage its workforce, understand where the
    costs are and then what the important things are.
        It also provides some transparency so that if we make
    changes, DOD makes changes in personnel policy where it wants
    to, say, cut military personnel or civilians, that you don't
    see costs grow up in service contracts in a way that you can't
    anticipate. If you can't track numbers, it is hard to follow
    that, and of course, it helps with congressional oversight,
    which is a very important one.
        We have some specific suggestions about how to do that in
    our about changes we would like to see in the way DOD reports
    data to the Congress, and that would help with us in our
    analysis and understanding the service contractor workforce.
    That concludes my remarks, and I want to thank you for the
    opportunity, and welcome your questions.
        [The prepared statement of Mr. Mosher follows:]

        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Senator Warren. Thank you very much. Thank you for being
    with us, Mr. Mosher. Mr. Roark, you are recognized for 5
    minutes.

       STATEMENT OF MICHAEL J. ROARK, DEPUTY INSPECTOR GENERAL,
        EVALUATIONS COMPONENT, DEPARTMENT OF DEFENSE, OFFICE OF
                           INSPECTOR GENERAL

        Mr. Roark. Good afternoon, Chairman Warren, and Ranking
    Member Scott, and distinguished Members of the Subcommittee.
    Thank you for inviting me to appear before you today to discuss
    our important oversight work on Department of Defense
    healthcare.
        Today, I will discuss three reports: two reports where we
    identified that additional procedures were needed to contain
    healthcare costs, and one report that showed that the DOD
    effectively implemented procedures to control costs.
        In April 2018, we issued a report on TRICARE payments for
    breast pumps and replacement parts. In December 2014, public
    law authorized the Defense Health Agency (DHA) to pay for
    manual and standard electric breast pumps and replacement
    parts.
        However, the DHA did not implement maximum reimbursement
    rates for standard electric breast pumps and replacement parts.
    Instead, DHA paid the amount that suppliers billed, unless
    TRICARE regional contractors had negotiated a rate with
    suppliers. We determined that the DHA overpaid $16.2 million
    for breast pumps and replacement parts for TRICARE
    beneficiaries in 2016.
        Specifically, DHA overpaid for over 91 percent of breast
    pumps and nearly 57 percent of replacement parts. We made two
    recommendations to address the deficiencies we identified.
    Specifically, we recommended that the DHA only use suppliers
    that have entered into agreements and have fixed reimbursement
    rates to provide breast pumps and replacement parts.
        We also recommended the DHA recoup payments from the
    suppliers that billed excessive amounts for breast pumps and
    replacement parts. In August 2019, we issued a report on
    TRICARE payments for various healthcare services and equipment.
        Specifically, we focused on claims for which the DHA paid
    the amount the provider billed, or also known as paid as
    billed, for items with high claim costs such as vaccines,
    contraceptive systems, compression devices, oral appliances for
    the treatment of sleep apnea, charges for the installation of
    durable medical equipment, and costs associated with obtaining
    stem cells that were provided to beneficiaries in the TRICARE
    regions in 2017.
        We determined that the DHA regularly paid more than pricing
    benchmarks for services and equipment where it did not
    establish or use existing TRICARE maximum allowable
    reimbursement rates. For example, the DHA paid $3.1 million
    more than pricing benchmarks for 65 percent of vaccines.
        We identified examples of the DHA paying more than pricing
    benchmarks for other items such as durable medical equipment
    and costs associated with obtaining stem cells. For example,
    the DHA paid one supplier as much as $5,000 a month to rent a
    vascular compression device, while two other suppliers rented
    the same device for only $700 a month.
        We made a total of seven recommendations to DHA, including
    identifying the reasons why TRICARE region contractors were not
    using the existing maximum allowable reimbursement rates,
    reviewing opportunities to implement maximum allowable
    reimbursement rates, periodically reviewing those rates, and
    updating TRICARE policy.
        We also recommended that the DHA recoup overpayments and
    seek voluntary refunds from TRICARE providers where the DHA
    paid more than pricing benchmarks. Finally, in September 2020,
    we issued a special report on the actions the DHA took to
    control costs for healthcare claims associated with COVID-19,
    including eliminating co-payments and cost shares for COVID-19
    diagnostic testing, clarifying access to behavioral health
    services via telehealth, and implementing temporary TRICARE
    regulation changes in response to COVID-19.
        As a result, managed care support contractors deferred or
    manually paid claims pending system and pricing updates and
    created dashboards to share information and perform data
    analytics on health care claims related to COVID-19.
        The DHA also implemented other initiatives to monitor that
    COVID-19 claims were paid and tracked properly, and that
    potentially fraudulent COVID-19 related services were
    identified.
        Through these actions, the DHA reduced the risk of medical
    providers exploiting the pandemic for personal gain and
    possibly preventing improper payments before they could occur.
    This concludes my statement, and I would be happy to answer any
    questions you may have.
        [The prepared statement of Mr. Roark follows:]

                     Prepared Statement by Michael J. Roark
        Good afternoon Chairwoman Warren, Ranking Member Scott, and
    distinguished Members of the Subcommittee. Thank you for inviting me to
    appear before you today to discuss our oversight work on the Department
    of Defense (DoD) health care.
        Providing for the health and well-being of Service members and
    their families is critical to DOD recruitment, retention, and
    readiness. The annual DOD OIG DOD top management and performance
    challenge reports have consistently highlighted the important
    challenges facing DOD health care, including rising health care costs.
    For example, in 2020, the DOD OIG reported that the DOD must reduce
    vulnerabilities for health care fraud within the Military Health System
    and control rising health care costs. In 2021, the DOD OIG reported
    that the DOD faced challenges, such as fraud, acquisition reforms, and
    payments for health care services with limited or no cost controls.
        One of the leading contributors to increasing health care costs is
    fraud. Health care fraud continues to be one of the top investigative
    priorities for the DOD OIG's Defense Criminal Investigative Service
    (DCIS). DCIS investigations span the spectrum of health care fraud, to
    include pharmacy services, TRICARE, public health, medical facilities,
    medical practitioners, health care kickbacks, and pharmaceutical fraud.
    DCIS is primarily responsible for most TRICARE related fraud
    investigations, and currently has an investigative case count of over
    600 cases up from 565 cases in fiscal year 2022.
        The DOD OIG also conducts audits and evaluations to provide
    oversight of DOD health care. Today I will discuss three audit reports,
    two reports where we identified that additional procedures were needed
    to contain health care costs, and one report that showed that the DOD
    effectively implemented procedures to control costs.
            tricare payments for breast pumps and replacement parts
        On April 25, 2018, we issued a report on TRICARE payments for
    breast pumps and replacement parts. \1\ The objective of this audit was
    to determine whether the DOD paid reasonable prices for standard
    electric breast pumps and replacement parts from suppliers in the
    TRICARE program.
    ---------------------------------------------------------------------------
        \1\ DOD OIG Report No. DODIG-2018-108, ``TRICARE Payments for
    Standard Electric Breast Pumps and Replacement Parts,'' April 25, 2018.
    ---------------------------------------------------------------------------
        In December 2014, Public Law authorized the Defense Health Agency
    (DHA) to pay for manual and standard electric breast pumps and
    replacement parts. \2\ The DHA implemented a policy, effective December
    19, 2014, allowing beneficiaries to obtain either one manual breast
    pump or one standard electric breast pump per birth event. This policy
    also permitted beneficiaries to receive breast pump replacement parts,
    including tubing, adapters, bottle caps, shields, bottles, and locking
    rings, as necessary for up to 36 months.
    ---------------------------------------------------------------------------
        \2\ Public Law 113-291, ``Carl Levin and Howard P. `Buck' McKeon
    National Defense Authorization Act for 2015,'' December 19, 2014.
    ---------------------------------------------------------------------------
        The DHA reimburses medical procedures, services, and supplies using
    various reimbursement methodologies to establish maximum reimbursement
    rates to ensure that payments are reasonable. A TRICARE maximum
    allowable reimbursement rate is the payment ceiling for reimbursement
    to providers. However, the DHA did not implement maximum reimbursement
    rates for breast pumps and replacement parts. Instead, the DHA paid the
    amount that the suppliers billed for the breast pumps and replacement
    parts, unless the TRICARE regional contractor had a negotiated rate
    with the suppliers.
        We determined that the DHA overpaid for standard electric breast
    pumps and replacement parts for TRICARE beneficiaries in the three
    TRICARE regions in 2016. Specifically, the DHA overpaid for:

          54,006 of 59,241 breast pumps (91.2 percent); and

          380,911 of 671,112 replacement parts (56.8 percent).

        This occurred because the DHA did not require contractors for the
    three TRICARE regions to use only suppliers that had fixed
    reimbursement rates for breast pumps and replacement parts. As a
    result, we calculated that the DHA overpaid $16.2 million for standard
    electric breast pumps and replacement parts provided to TRICARE
    beneficiaries in all three TRICARE regions in 2016.
        We made two recommendations to address the deficiencies we
    identified. We recommended that the DHA Director use only suppliers
    that have entered into agreements that have fixed reimbursement rates
    to provide standard electric breast pumps and replacement parts
    throughout all TRICARE regions. We also recommended that the DHA
    Director review and pursue appropriate action, such as recouping any
    overpayments from the suppliers that billed excessive amounts for
    breast pumps and replacement parts. Both recommendations are closed.
            tricare payments for health care services and equipment
        On August 20, 2019, we issued a report on TRICARE payments for
    various health care services and equipment. \3\ The objective of this
    audit was to determine whether the DHA paid higher prices than
    necessary for TRICARE health care services and equipment where it did
    not establish or use existing TRICARE maximum allowable reimbursement
    rates.
    ---------------------------------------------------------------------------
        \3\ DOD OIG Report No. DODIG-2019-112, ``Audit of TRICARE Payments
    for Health Care Services and Equipment That Were Paid Without Maximum
    Allowable Reimbursement Rates,'' August 20, 2019.
    ---------------------------------------------------------------------------
        We focused on claims for which the DHA paid the amount the provider
    billed (paid-as-billed) for vaccines and contraceptive systems, such as
    human papillomavirus (HPV) vaccines and intrauterine devices;
    compression devices; oral appliances for the treatment of obstructive
    sleep apnea; charges for the installation of medical equipment; and
    costs associated with obtaining stem cells that were provided to
    beneficiaries in the TRICARE North, South, and West Regions in 2017. We
    selected those services for review because of their high claim costs.
        We determined that the DHA regularly paid more than other pricing
    benchmarks for services and equipment where it did not establish or use
    existing TRICARE maximum allowable reimbursement rates. Specifically,
    the DHA paid more than other pricing benchmarks for vaccines,
    contraceptive systems, compression devices, oral appliances, costs
    associated with the installation of medical equipment, and stem cell
    acquisition provided to TRICARE beneficiaries in the three TRICARE
    regions in 2017. For example, the DHA paid more than other pricing
    benchmarks for 70,248 of 107,953 vaccines (65 percent), and 1,341 of
    5,450 contraceptive systems (25 percent).
        This occurred because the DHA did not:

          use existing TRICARE maximum allowable reimbursement
    rates or other industry pricing benchmarks to pay TRICARE claims for
    vaccines and contraceptive systems;

          identify services and equipment that were paid at prices
    that exceeded other pricing benchmarks;

          define in TRICARE guidance what would constitute an
    excessive payment for TRICARE services and equipment, and provide
    instructions to its TRICARE contractors to identify and limit these
    charges; or

          consistently revise TRICARE reimbursement methodology to
    align with Medicare reimbursement methodologies when paying for TRICARE
    services and equipment.

        As a result, of the $18.1 million reimbursement that we reviewed,
    the DHA paid $3.9 million more than other pricing benchmarks for
    vaccines and contraceptive systems provided to TRICARE beneficiaries in
    the three TRICARE regions in 2017.
        We also identified examples of the DHA paying more than other
    pricing benchmarks for durable medical equipment, and costs associated
    with obtaining stem cells. While we were unable to quantify the total
    magnitude, the examples showed that the DHA paid excessive prices and
    continues to waste funds on other services and equipment that are paid-
    as-billed. For example, the DHA paid a supplier as much as $5,000 per
    month to rent a vascular compression device while two other suppliers
    rented the same device for approximately $700 per month.
        Finally, DHA policy requires beneficiaries in certain TRICARE
    categories to pay cost shares for equipment. Therefore, TRICARE
    beneficiaries will continue to pay higher out-of-pocket costs if the
    DHA does not establish or use existing TRICARE maximum allowable
    reimbursement rates. For example, DHA policy requires beneficiaries in
    certain TRICARE categories to pay a 20-percent cost share for durable
    medical equipment. TRICARE beneficiaries paid costs of $1,000 when a
    TRICARE supplier billed $5,000 for the vascular compression device
    rental discussed earlier. This $1,000 cost share far exceeded the
    prices offered by two other DME suppliers that rented the same device
    for approximately $700.
        We made a total of 7 recommendations to the DHA Director:

          identify the reasons why TRICARE region contractors did
    not use existing TRICARE maximum allowable reimbursement rates, take
    immediate actions to confirm that TRICARE claims for vaccines and
    contraceptive systems are paid using the TRICARE maximum allowable
    reimbursement rates, and recoup overpayments;

          determine whether TRICARE region contractors applied
    TRICARE maximum allowable reimbursement rates to health care services,
    other than just vaccines and contraceptive systems;

          determine whether the DHA should adopt vaccine
    manufacturer rates as reported by the CDC when reimbursing TRICARE
    claims for vaccines, and if adopted, regularly update rates to stay
    current with the vaccine manufacturer rates;

          conduct annual reviews to identify health care services,
    supplies, and equipment for which TRICARE paid higher prices, and
    establish and implement new TRICARE maximum allowable reimbursement
    rates accordingly;

          revise TRICARE policy to incorporate wording regarding
    reasonable cost and being a prudent buyer similar to the related
    clauses in 42 Code of Federal Regulations (CFR) 405.502 and Centers for
    Medicare and Medicaid Services Publication 15-1, ``Provider
    Reimbursement Manual'';

          revise TRICARE reimbursement methodologies to align with
    the Medicare program, and establish an annual process to identify
    recent changes to Medicare reimbursement methodologies; and

          seek voluntary refunds from TRICARE providers where the
    DHA paid more than other pricing benchmarks identified in this report.
    As of March 2023, 6 recommendations were closed, and one recommendation
    is resolved, but open.

       dha controls implemented to control costs for tricare covid-2019
                                related services
        On September 3, 2020, we issued a special report on the actions the
    DHA took to control costs for health care claims in the first year of
    the coronavirus disease-2019 (COVID-19) pandemic. \4\
    ---------------------------------------------------------------------------
        \4\ DOD OIG Report No. DODIG-2020-125, ``Special Report: Controls
    Implemented by the Defense Health Agency to Control Costs for TRICARE
    Coronavirus Disease-2019 Pandemic Related Services,'' September 3,
    2020.
    ---------------------------------------------------------------------------
        The DHA issued several letters to the managed care support
    contractors (MCSCs) providing guidance on claims processing for COVID-
    19 related claims. The letters included clarifying guidance and various
    new requirements for the MCSCs to implement related to:

          eliminating co-payments and cost shares for COVID-19
    diagnostic testing;

          clarifying access to behavioral health services via
    telehealth;

          eliminating co-payments and cost shares for COVID-19
    serology testing; and

          implementing temporary TRICARE regulation changes in
    response to COVID-19.

        As a result, the MCSCs deferred or manually paid claims pending
    system and pricing updates and created dashboards to share information
    and perform data analytics on health care claims related to COVID-19.
    The DHA also implemented other initiatives. For example, the DHA:

          established work groups to monitor and address COVID-19
    issues related to DOD healthcare;

          updated the pricing system and instituted special
    processing codes to ensure COVID-19 claims are paid and tracked
    properly; and

          added parameters to the annual risk registry that allows
    the DHA to monitor and track potential fraudulent COVID-19-related
    services.

        Through these actions, the DHA took steps to reduce the risk of
    medical providers exploiting the pandemic for personal gain and
    possibly prevented potential improper payments before they could occur.
    With the elimination of co-payments and cost shares and the expansion
    of telehealth and behavioral management services, the DHA provided more
    flexibility for providers and beneficiaries during the COVID-19
    pandemic, which enabled beneficiaries to receive the care they needed.
        This concludes my statement and I would be happy to answer any
    questions you have.

        Senator Warren. Thank you, Mr. Roark. Ms. Field, you are
    recognized for 5 minutes.

     STATEMENT OF ELIZABETH FIELD, DIRECTOR, DEFENSE CAPABILITIES
            AND MANAGEMENT, GOVERNMENT ACCOUNTABILITY OFFICE

        Ms. Field. Thank you. Chairwoman Warren, Ranking Member
    Scott, and Members of the Subcommittee, thank you for inviting
    me to testify on GAO's work regarding the many challenges and
    opportunities that DOD faces related to personnel management.
        With a total of almost 3 million Active Duty
    servicemembers, Reservists, and civilians, not to mention
    countless contracted personnel, the Department of Defense is
    one of the Nation's biggest employers.
        That also means that DOD's workforce is one of its biggest
    cost drivers. In determining personnel requirements, the charge
    to defense officials is clear, use the least costly mix of
    personnel while ensuring the workforce is sufficiently sized
    and comprised of the appropriate mix of military, civilian, and
    contractor personnel with the right skills to carry out the
    mission. I want to emphasize that first part, the using the
    least costly mix.
        As you know, the Federal Government is on an unsustainable
    long term fiscal path. At the end of fiscal year 2022, debt
    held by the American public was about 97 percent of GDP.
    Moreover, the fiscal year 2022 Federal budget deficit was the
    fourth largest in U.S. history. As the largest single category
    of discretionary spending, the defense budget deserves
    scrutiny.
        At the same time, we know that ensuring DOD can carry out
    its mission is vitally important. The military services are
    today facing what some have called the greatest recruiting
    challenge in a generation, all while we encounter increasingly
    complex and bold threats from China, Russia, and non-State
    actors.
        Through our work at GAO, we have identified obstacles that
    can hinder defense officials' ability to strike the correct
    balance between efficiency and effectiveness in shaping their
    workforce: things like unreliable data, overly complicated
    hiring mechanisms, arbitrary staffing cuts, and antiquated
    Department processes.
        We have also identified ways in which DOD could potentially
    cut costs by better managing its resources. In an organization
    as large and complex as DOD, it can be hard to appreciate what
    these challenges and opportunities really look like, so I would
    like to briefly offer one example.
        The military health system relies on more than 240,000
    Active Duty, Reserve, civilian, and contractor personnel to
    provide both operational medical care in support of war and
    contingencies, and to provide beneficiary care to about 9.4
    million eligible people. In 2018, we identified weaknesses in
    DOD's approach to managing its workforce for both operational
    medical care and beneficiary care.
        For example, we reported that in determining medical
    personnel requirements for operational care, the Army, Navy,
    and Air Force were relying solely on military personnel, even
    though civilian and contractor personnel had been used in
    operational settings. We also found that the Military
    Departments were not considering the full cost of Active
    personnel compared to Reservists.
        This is significant because Reserve forces are generally
    less costly than similar Active component units. In terms of
    beneficiary care at military medical treatment facilities, or
    MTFs, we reported that DOD faced numerous challenges
    implementing its planned workforce mix but had not developed a
    strategic workforce plan for managing them.
        For example, we found that DOD had not clearly determined
    how it planned to mitigate the effect of military personnel
    deployments on MTF operations. In one instance, we learned that
    due to overlapping deployments, eight of nine general surgeons
    at a military hospital were deployed at the same time, leading
    to a gap in coverage.
        We also found that DOD had not developed a sound strategy
    for addressing vacancies in civilian positions, a problem that
    has led some MTFs to discontinue providing certain medical care
    due to patient safety concerns or to backfill positions with
    military personnel, which can be unnecessarily costly and erode
    morale.
        We further reported in 2018 that in planning for the
    transition of MTFs from the military Departments to the then
    new Defense Health Agency, DOD had not validated headquarters
    level personnel requirements or conducted a comprehensive
    review that considers the least costly mix of personnel.
        Although DOD concurred with the many recommendations we
    made, the Department has yet to fully implement them. Doing so,
    especially now that the MTF transition has occurred, is even
    more important for ensuring that DOD strikes that difficult
    balance between ensuring medical readiness and providing sound
    patient care on the one hand and cutting unnecessary costs on
    the other.
        In fact, GAO has estimated that DOD could save millions of
    dollars by implementing some of these recommendations. Thank
    you, and I look forward to your questions.
        [The prepared statement of Ms. Field follows:]

        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Senator Warren. Thank you, Ms. Field. I appreciate your
    being here and appreciate your testimony. I recognize Senator
    Kaine for 5 minutes.
        Senator Kaine. Thank you, Chairwoman Warren, and thank you
    to our witnesses. I think I am going to make my comments maybe
    a little bit more for my colleagues and--but also to share with
    these witnesses or experts some frustrations I have and why I
    am glad that the chair and ranking Member have decided to do
    this hearing and then hopefully embrace others.
        I have been very frustrated in my 10 years on the Committee
    about the absence of real analysis of major initiatives that we
    undertake within the Pentagon, and I am just going to use two,
    military housing, and then the formation of the DHA and the
    military medical services that Ms. Field discussed.
        The Pentagon made a decision, no doubt, for both cost and
    quality reasons in the 1990's, to push a privatized housing
    model. It is not our core expertise. Why don't we let housing
    companies do it? It is not warfighting, let others do it, and
    if they do it, they may be able to save us money and also offer
    higher quality accommodations to military members and families.
        It has been a pretty big failure, and I think the failure
    is more on the Pentagon side of the ledger even than the
    private provider side of the ledger, because the contracts that
    were set up gave the Pentagon significant oversight
    responsibility.
        For example, on a base, the base commander was to hold back
    payment until the end of the year to some certain percentage
    and then decide whether the provider had merited some, or all,
    or none of that payment based on performance. Instead, the
    pattern was essentially for the base commanders to just release
    all the money at year end, regardless of performance.
        The contracts with the private providers were set up so
    that at some midpoint in these long term contractual periods,
    the Pentagon could step back and do an assessment, are you
    meeting the needs of our families? If not, we need to
    renegotiate the contract. That midpoint came. There was no
    renegotiation done.
        Just steady State, it is now off our shoulders, so it is on
    the shoulders of these housing providers, and the housing
    providers weren't being incentivized to really treat our
    military family members the way that they would treat
    commercial clients, because all these providers also had
    commercial business.
        They treat their commercial clients better because they
    would leave and go somewhere else if they didn't. They started
    to treat our military families sort of as hostages. We ended up
    making it worse. We had as a key theme to the NDAA [National
    Defense Authorization Act] a few years ago, there was an effort
    to push cut in headquarter staff, a non-defined, across the
    board cut in headquarters staff without really digging into who
    are headquarters staff.
        I fought very hard against an across the board headquarters
    staff cut. I was unsuccessful. A couple of years later, this
    housing thing blew up in our face, and we went back and looked
    at what was the headquarters staff that was cut. In all of the
    offices that were charged with the responsibility of overseeing
    these housing contracts, they were losing 30, 40, 50, 60
    percent of their staff, and surprise, surprise.
        To quote a famous Marine, Gomer Pyle, surprise, surprise,
    when you cut all the housing staff, suddenly the oversight gets
    worse, and the quality gets worse. A program that was designed
    to save money and a program that hopefully was going to lead to
    a better result, ended up, frankly, probably doing neither.
        We have had to come in, and we are making progress, but we
    are still not really where we are. We ought to have great both
    cost and quality tools to assess a program like this.
    Similarly, the different service branches had their own
    military expertise. The decision was made based on a study that
    was done in 2011 to try to put this together in a combined DHA.
        I still hear all kinds of constituent complaints from
    servicemembers in Virginia and their families about waiting
    lists and insufficient access to services from the DHA. Ms.
    Field, you talked about areas where the DHA is spending more
    than they need to or having a hard time recruiting people into
    key positions.
        Where I hear about it is from our military members and
    their families who have a hard time getting access to services,
    particularly in the mental health space. We have had a raft of
    military suicides at the mid-Atlantic Regional Maintenance
    Center in Norfolk and in ships that are in dry-dock for
    extended periods, and often the availability of mental health
    services is weak.
        One of my staffers went on a carrier avail recently, and on
    the entire carrier there were two mental health psychologist
    positions for this huge group of people, and one was vacant. My
    staffer asked, okay, how long has this position been vacant?
    For a very long time. Well, what is the salary that you would
    pay this psychologist?
        The salary is $85,000. You would make so much more than
    that having a psychology practice in suburban Arlington,
    Virginia, or virtually anywhere in the country, and you
    wouldn't have to be deployed on a carrier for months at a time
    away from your family. We are not going to fill that position
    at that salary.
        These are two instances of big initiatives, transitioning
    healthcare into a DHA environment. Transitioning housing from
    the military provides it, to let's get the housing experts to
    do it. Both are continuing to show major problems. I am not
    sure either really produce savings or produce better quality of
    service to our military men and women.
        I don't really have a question for you, but I guess Senator
    Scott asked me, do you have some issues that are on your mind
    that can inform future discussions?
        I would like to know when we embrace these major
    initiatives, how do we measure them to make sure they are doing
    what we say and how do we maybe get hold of it quicker if it is
    going the wrong direction, to turn it in a positive direction
    rather than just keep investing in something that is not
    bearing out as it should?
        I will just stop there, but I am really happy that you are
    doing this, and I do want to make sure we focus on the dollars,
    but I also want to focus on the bang for the buck. If the
    dollars are being wasted and we are not getting the service
    that we need to either promote lethality or protect our people,
    then I think we have got a lot of work to do, and I appreciate
    the Committee for tackling this.
        Senator Warren. Thank you very much, Senator Kaine, and the
    reminder, this is the first of more than one hearing as we try
    to dig in better on these issues. I really appreciate your
    comments here and the points you highlight. Senator Scott.
        Senator Scott. To followup with one other thing Kaine said.
    I come from a business background, so my first reaction is, it
    is not that the business was bad, right? Was the structure of
    the deal wrong?
        Was there no accountability? Was there no measurement? Did
    it never make, you know--and we don't even have a conversation
    like that. It is like we just want to blame somebody, whoever
    we want to blame. It is not something that should be hard to
    figure out.
        In business, you have the ability and there are all these
    organizations now that you can compare your costs, all this
    stuff to somebody else now. There are all these comparative
    groups that you can buy into, and I wonder, I have never heard
    of any part of the Federal Government, especially DOD, ever
    doing that.
        Going back to Mr. Roark, let me ask you a question. When I
    became Governor of Florida back in 2011, our Medicaid program--
    we bid it out, and the benefit of doing it is we knew our cost
    and we also could hold somebody accountable for access and
    quality, right, and outcomes. But you had to put all this
    measurement in there.
        One thing that surprised me, we didn't have any program
    where somebody could say, okay, so I wasn't responsible for
    buying after that. If you are talking about breast pumps, I
    didn't have to buy breast pumps, it was their responsibility to
    do that.
        They have a contract with TRICARE, they bid it out, and
    then the Government is responsible for the purchase of
    equipment?
        Mr. Roark. Senator, in this case, when Congress passed the
    law that enabled breast pumps, I think what happened was that a
    lot of suppliers set up websites and so forth and let military
    spouses and military members know that this benefit was
    available to them, but they didn't have the prices on the
    website.
        Then they--DHA hadn't set up the price ceiling or the price
    cap, if you will, and so, therefore, if there is no price cap
    in place, then it just goes into this paid as billed category,
    as I mentioned in my statement.
        Senator Scott. It is outside of the contract?
        Mr. Roark. Correct, and so, the contractor in that case
    just pays as billed. If there is a cap, then they can only go
    up to that amount. I think that that is the key point here.
        Senator Scott. Do they not use any of these group
    purchasing organizations? Because there are a bunch of them
    now. Now in fact one of my own companies has the biggest in the
    country, and I mean all that stuff, you are guaranteed the
    lowest price. They don't do that?
        Mr. Roark. What we did as the OIG to try to oversee this
    particular item is that we went to look for other benchmarks,
    like you said. Whether that is other Federal health care
    programs, Medicare, Medicaid, or whether that is retail prices,
    you know, we were kind of searching for, you know, what would
    be a reasonable price for these items.
        However, I think that that is the concern and to some
    degree the frustration with the pay to billed model, which is,
    you know, there is a competing interest where DHA wants to get
    the item out to servicemembers in a timely manner, so there is
    the kind of--some incentive to do that quickly. On the other
    side, we also want to ensure that we get what we paid for, and
    we pay a fair price, and so achieving that balance is
    critically important.
        Senator Scott. So, in your report when you look at DHA
    overpayments, was it a little bit of money? Was it--and so, you
    have the numbers on how much it is? Are we talking about quite
    a bit of money?
        Mr. Roark. Correct. For breast pumps, the total amount that
    was paid in 2016 was about $28 million, and we have calculated
    that the excessive charges or the overpayments were about $16
    million.
        Senator Scott. What is the total value of DHA overpayments
    found by the Inspector General? How much money for everything.
    Do you have a total number?
        Mr. Roark. Across the entire health system? I don't have
    that number, but maybe I can speak to these examples. Again, I
    think we highlight these examples as a way of showing that
    there is much more out there, and that great efficiencies could
    be achieved across the board if some of these lessons learned
    are applied across the board.
        Senator Scott. Thanks.
        Senator Warren. I really appreciate this direction on the
    conversation because it is about what information is available
    to us. Here we are, we are talking about civilian employees,
    servicemembers, and as we see up here, the contractors.
        The idea that when we talk about defense contractors, most
    people think about Lockheed Martin or Boeing, these giant
    companies that win these huge contracts to build fighter jets
    or bombs.
        But the DOD relies a lot on what it calls service
    contractors. These are contractors like Booz Allen, McKinsey,
    and CACI International Inc., hired to do things like
    accounting, legal services, consulting. Over the past two
    decades, the Department of Defense has gone from spending about
    $100 billion a year on service contractors, to $205 billion in
    2022.
        This is the point. It is not quite half of the entire
    budget that we are spending, but it sure starting to crowd in
    on it. Mr. Mosher, you lead the National Security Division for
    the Congressional Budget Office, and you have decades of
    experience in budget analysis.
        We know from public reports that DOD currently employs 2.1
    million military personnel and about 770,000 civilian
    personnel. I am going to ask you something I think you answered
    in your original testimony, but it is important enough here. I
    want to underscore it. Do we know how many contractors DOD
    employees?
        Mr. Mosher. In a word, no. We just don't know yet.
        Senator Warren. We don't know, and I think I heard you in
    talking that the estimates that the estimates are from here--it
    is not that we don't know down to the last person. We don't
    even know what the ballpark is here, I take it from what you
    said.
        Mr. Mosher. That is correct. We don't know what the maximum
    number is. OMB provides data in their object class analysis
    that gives the size of the service contracts themselves. One
    way of cutting it would be about $274 billion in 2022, I
    believe. But that tells you what the cost of the contract is.
    It doesn't tell you either the number of the people or how much
    we are paying in labor.
        There will be labor and non-labor costs. One thing that
    is--there are different types of contracts. There are people
    who mow lawns and much of their costs would probably be labor.
    There are people who sit in chairs next to civilians and
    military in the Pentagon. Their costs are probably mostly
    labor.
        But there are also service contracts that provide
    maintenance of tanks and such like that, where you would expect
    a smaller portion of their costs would be labor, and they are
    buying parts.
        Senator Warren. Here we are spending more than $200 billion
    on service contractors. We don't really know how many people we
    are hiring or what we are paying these people.
        We accepted the GAO estimate of $200 billion. I just want
    to point out, CBO has said it may be closer to $300 billion.
    The inability of Government accountants even to estimate how
    much we are spending is a sign that Pentagon contracting is
    badly broken.
        Every time that DOD decides to hire a contractor to perform
    a service for the Department, they are supposed to, by law, be
    taking that on because it is the cost effective way to get the
    job done.
        Ms. Field, this is right in your wheelhouse. Does DOD
    collect data that would allow its managers or allow someone
    doing oversight to conduct a cost comparison to figure out
    whether or not the Department should contract something out or
    do that work in-house?
        Ms. Field. No. So, it is a source of cost savings, in fact,
    to in-source positions, to convert them from contractor to
    civilian. The Department used to have a data base that provided
    some fairly detailed information about contractors that would
    potentially help that sort of analysis. Recently, DOD shifted
    to a Federal Government wide data base system that has less
    data.
        Senator Warren. We now know less than we used to. We spend
    more and have less information about it. The Department of
    Defense's Cost Assessment and Program Evaluation Office found
    that in some cases, defense contractors can cost two or three
    times as much as civilian employees doing exactly the same
    work.
        As you say, people sitting side by side. In other cases,
    they are just outright fraud. In 2014, the Department of
    Defense Inspector General found that defense contractor
    Northrop Grumman improperly billed the Government more than
    $100 million for employees to provide training and logistics
    support for counter-narco terrorism technology program.
        Sounds like an important program. Northrop Grumman was
    charging the Government an average of 100 billable hours a day
    for a single employee. Ms. Field, pretty clearly, nobody can
    work more than 24 hours in a day, so it is a pretty clear sign
    that fraud is going on. When you see something like that,
    right? No one should have any doubt. There is fraud here. Can
    DOD or DODIG easily detect these kinds of overcharges or
    excessive rates?
        Ms. Field. I am not familiar with that particular case, but
    I can absolutely tell you that it is very hard to detect and to
    prove fraud. That is why things like hotlines are so valuable
    for Inspectors General and GAO.
        I will also note very briefly that GAO has recommended some
    improvements to DOD's Fraud Risk Management Program. Their
    guidance Department wide currently does not require routine
    fraud risk assessments. That is something that should be going
    on.
        Senator Warren. Okay, so they don't know how many
    contractors they employ, and they don't have systems in place
    that will catch even blatant fraud. Unfortunately, it gets
    worse from here.
        When DOD submits its annual budget, it has to include a
    projection of the long term cost of its programs so that we
    know not just what something is going to cost in year one, but
    what it is going to look like down the road.
        Ms. Field, can DOD estimate what its future costs are for
    service contracts that go beyond this fiscal year?
        Ms. Field. Not nearly as well as we would like. The
    Department did not used to include services contracting at all
    in the FYDP [Fiscal Year Defense Program], as you mentioned,
    the 5-year future defense program. That was astounding to us
    because service contracts represent consistently about half of
    the Department's contracting costs.
        They have made some improvements in this space, but there
    are many more they could make. Will be issuing a report soon
    with some recommendations.
        Senator Warren. I appreciate that. In fact, the GAO has
    reported that DOD has ``limited visibility'' into DOD's future
    spending plans. If DOD can't track this, I don't know how it is
    that the rest of us are supposed to exercise oversight. So let
    me ask you one more, Ms. Field.
        The GAO has put DOD service acquisitions, meaning how DOD
    manages and makes decisions about hiring outside contractors to
    perform duties like program analysis or engineering advice, on
    your high risk list. That is what you call it, your high risk
    list. What does that mean?
        Ms. Field. The high risk list is a report we put out every
    2 years of the areas of the Federal Government that are most
    vulnerable to fraud, waste, and abuse and, or are in need of
    significant management. DOD has more areas on the high risk
    list that any other agency.
        Senator Warren. All right. So, thank you. I just want to
    summarize here what you all have just told me. DOD doesn't know
    how many contractors it hires.
        DOD can't track whether those contractors will cost more
    money or less money than having a Federal employee do the same
    job. DOD does not have systems in place to catch even the most
    blatant frauds when contractors try to cheat the American
    taxpayer.
        DOD cannot estimate the long term costs of hiring
    contractors, and DOD recognizes that the decisions it makes
    about service contractors run a high risk, one of the highest
    risks in Government that the taxpayer is getting cheated.
        The Department of Defense is not in a position to make
    smart decisions about how to spend taxpayer dollars. It doesn't
    have basic data about what things cost. If Congress doesn't
    have this information, then we can't exercise appropriate
    oversight.
        We should require the Pentagon to put better systems in
    place to collect these data and then make these data available
    to you and us. Thank you. Senator Blumenthal.
        Senator Blumenthal. Amen. I think that is a very powerful
    summary of what we need to do with respect to contracting and
    personnel, nonmilitary service contracting, and other similar
    kinds of DOD contracting. But I want to come back to the
    recruitment issue. Because I think of all the challenges to our
    military right now, the clear and present danger is we are not
    going to get enough good people to wear the uniform.
        The statistic that you provide, 72 percent, that is the
    Army's percentage in meeting its recruiting goal. I had
    breakfast this morning with the commandant to be, hopefully he
    will be confirmed soon and--of the Marine Corps, and he was
    very proud of the fact Marine Corps meets its recruiting goals.
        Senator Kaine and I had some experience with Marines. Our
    two sons served as Active Duty in the Marine Corps. I have
    another son who was a Navy SEAL whom Senator Warren knows. They
    didn't go into it for the money. At the time they were single,
    so they didn't really care that much about the housing and
    schools for kids.
        I notice that you make some recommendations about how to
    address this issue, get more reliable data, monitor plans and
    strategies for effectiveness, goals, plans, and strategies. But
    I think that something more fundamental is needed here because
    you can monitor, you can strategize, but unless you are
    reaching the people you want to recruit, it just won't work.
        I wonder if any of you have insights, for example. We are
    going to raise--if we can get this NDAA approved, we will raise
    military pay 4 percent, 5 percent. I don't know whether that
    will make a difference.
        What is the key here? Should we look to the Marine Corps as
    an elite service? Do we need more of the kind of spirit,
    image--I don't know. You know, there are plenty of ads that try
    to recruit young people. So, tell me what your thoughts are.
        Ms. Field. If I could begin, I would just offer two quick
    thoughts. The first is I think quality of life in the military
    is incredibly important for recruitment because in all of our
    work, we often hear that young, enlisted servicemembers talk
    about their experience with their buddies back home or with
    their families.
        When they hear, for example, that they are living in
    housing, barracks that is in very poor condition, their buddies
    and their family members get the message, don't go into the
    military. So that is my first thought, quality of life, which
    can cover a lot of things to include housing, but also things
    like pay, compensation, food.
        My second thought just for your awareness is that we are
    right now conducting an audit, looking at the recruiting
    programs across the services that will include a look at their
    use of digital and social media. I don't have any results from
    that audit yet, but we will certainly provide them as soon as
    we have.
        That might illuminate why the Marine Corps is more
    successful than other services, particularly the Army.
        Senator Blumenthal. Any others?
        Mr. Roark. For me. I think just to echo the points that my
    colleague Ms. Field made. I think that health care is an
    important part of taking care of the soldiers that we have and
    making sure that their quality of life is as good as possible.
        I think that efficiencies that we can gain in the health
    system to make every dollar count is critically important, and
    I think that is why we are all here today to explore
    opportunities to do that.
        Then on the housing side, I know we have done a number of
    projects on housing hazards, health hazards and so forth, that
    military families face in privatized housing.
        Then we are also completing a series of evaluations right
    now on the Fiscal Year 2020 NDAA provisions for privatized
    housing. We are in the third year of a 3-year series of
    evaluations on that.
        Senator Blumenthal. Well, I look forward to the audit. It
    can't come soon enough, but I want to add one more perspective.
    You know, I recently visited Groton, where our army is training
    Ukrainians to fight.
        I have never seen American troops more motivated and
    engaged than they were in training these young Ukrainians. We
    are about to go fight and die. These are young people who were
    bakers and teachers and computer scientists, and they are being
    taught by our Army who have incredible skills and the challenge
    of teaching those Ukrainians their profession. It is a
    profession.
        Elicited such motivation. The food isn't great, the housing
    is okay, but not great. But the mission is really what drives
    them. I don't know how we attract people. I have seen some of
    the social media, some of the ads about the mission. But that's
    just a thought, not an original thought by any means, but one
    that struck me thinking about recruitment.
        Those young troops from our American troop are going to
    talk about that experience their whole lifetime. The same
    happened, you know, Senator Kaine and I visited one of the
    bases where Ukrainian refugees were brought back, and there
    were marines there. These Marines had never been deployed. But
    working with the refugees is an experience, again, a mission
    for them.
        It is not a combat mission, but it is something where their
    sense of purpose is really fulfilled. So just a thought and I
    don't know how we put it into the recruitment program, but it
    just struck me that that is going to be a selling point if we
    want to get the best and brightest.
        Mr. Mosher. Senator, if I could, on your question about
    recruiting and such. As sort of the data guy, one of the things
    I think you need to look at is, are the services putting the
    money that they should be into the recruiting budgets? How does
    the Army's recruiting budget and numbers of recruiters this
    year compared to 1 year ago or 2 years ago?
        Are they actually sort of doing what you would think they
    would do, and that is putting more money against that. So, look
    at the numbers. Also, don't forget, we are in a boom economy in
    terms of employment and the military always has trouble
    recruiting when you can make good money on the outside. So that
    is another thing to keep in mind as you are looking at this.
        Senator Blumenthal. We are in a boom economy. But you know
    what? What the Marine Corps does is they take some of their
    best people and they put them on recruiting. It is not a
    backwater for them.
        It is essential. They put it as a priority. You know, you
    are great at what you do as a marine? We are going to put you
    out to get more great marines. It is not kind of the fallback
    for a well, you know, so-and-so can't really do the job, let's
    put him into recruiting.
        We will send them out, you know, Hartford, Connecticut. The
    marine who goes to Hartford, Connecticut, is among the best
    because he has to attract the best. So, just another thought.
        Senator Warren. It is a powerful point, Senator Blumenthal.
    Senator Scott.
        Senator Scott. I just want to followup with what Senator
    Blumenthal said. I joined the Navy at 18. They didn't tell me I
    was going to sleep in barracks, we didn't have barracks. We had
    a ship, 57--3 racks up. I think it was 7 feet tall. So, we had
    a rack that was as long as I am tall. Everything we owned was
    in a container that size. That was it.
        The showers actually didn't work that much because when we
    out to sea, because the desalinization stuff didn't work a lot
    of times, and they shut it off right in the middle of the
    shower, which is really nice. Right when you had soaped down.
    Food, not the best.
        Better than what my dad had. He was in the Army. So, I
    think it goes back to mission, and we had a hearing on this,
    and I don't know if you remember hearing much about how they
    were selling mission. I didn't. But the truth is, if you are in
    business, if you can't sell a mission, you are not going to
    recruit good people.
        Actually, our offices I bet can find really good people
    because we have a mission. I think it goes back to, we got to
    really sell why we are doing what we are doing, and I think our
    military leadership and whoever is the President has got to
    sell the fact that we are doing this for a very specific reason
    and purpose, and how important it is.
        If we don't, I think it is going to continue to be hard,
    and you have to admire what the Marines are doing because they
    figured it out. So, can I ask you a question, does anybody meet
    with you all? I mean, you put out these nice reports. Does
    anybody care from the military? Who talks to you guys?
        Ms. Field. I would say, yes. We, for the most part, have a
    good working sort of collegial relationship with DOD officials.
    They do implement many of our recommendations, but I will also
    note DOD has the lowest implementation rate in terms of
    implementing GAO recommendations compared to other agencies.
        So, yes, they meet with us. I think many of them are
    committed, hardworking civil servants, but we would like to see
    our recommendations implemented at a higher rate.
        Senator Scott. Same thing?
        Mr. Roark. For us, same thing for us. So, I think we do a
    lot of outreach with senior officials and with others, and
    whether that is around the world. I travel around the world to
    meet with folks in different organizations and different
    commands and understand what their challenges are and so forth.
        I think we get very positive, candid feedback there, and
    then once we issue a report, or I believe that for the most
    part, DOD handles it in a very professional way and takes it
    seriously. Sometimes recommendations are, you know, a little
    harder to implement. For the most part, I think the
    relationship is positive.
        Mr. Mosher. We are not really a recommendation generating
    agency. We don't make recommendations and kind of till more
    with policy, options, and choices. So, it is a little less
    direct.
        But we certainly do hear from DOD when they don't like
    things that we have written or when they like things that we
    have written. We hear from Members or staff on the Committee.
    So, I think it just really depends for us on the study.
        Senator Scott. Well in business, the shareholders, the
    board--I mean, you don't keep your job if you don't do your
    audit, right? Right, I mean, it is the most basic thing you
    have to do. Or the CEO is not going to stay there. Because if
    you get a bad audit, I mean, you can be delisted if you are a
    public company.
        So, I guess part of it is we have got to hold people
    accountable on our part at the senior level. If they are--if we
    expect them to follow what you guys do. Ms. Field, can I ask
    you a question. Can you tell me what the difference between--
    like, take an officer that has Active Duty military working for
    them, and then they hire an outside firm to do the work.
        So, you end up with either a civilian that works for part
    of the Federal Government or a civilian that works for Booz
    Allen or whatever. How do they manage them?
        Because it sure seems like it would be awfully difficult if
    they are not in the military and you are an officer, how do you
    manage these people? Can you fire them? Can you say ``you are
    not going to get a promotion?'' What do you get to do?
        Ms. Field. Yes, that is a great question. I think it is
    difficult, and I think part of the issue, and I will go back to
    the health system just because it is an example that I think
    people can really grasp and identify with. The contracting
    companies, so let's say Booz Allen, they get to decide who they
    are going to send to fill a contract.
        What we heard when we went around to military treatment
    facilities is, if we don't like the candidate that they send--
    and they, by the way, have--the companies have 30 to 60 days to
    propose a candidate, they can send that candidate back, but
    then that company has another 30, sometimes 60 days----
        Senator Scott. You are paying all this time?
        Ms. Field. The contract, yes, and so, what we heard from
    MTF was that in some cases they have to decide between filling
    a position with a subpar candidate or leaving that position
    vacant. So, it is a real problem.
        Senator Scott. What about if they are a Federal employee?
    So, if the choice is between a Federal employee and a military
    member, how do you manage them? What would be the differences?
        Ms. Field. I think my understanding, and I have certainly
    observed this, is that Active Duty military try to treat
    everybody as part of the team. It is not surprising, given the
    emphasis on leadership in the military.
        But they do still face the same struggles that we see sort
    of across the civilian workforce, and so Senator Warren pointed
    out the GAO's high risk list. Federal strategic human capital
    is on that high risk list because it is so hard to manage the
    Federal workforce, civilian workforce in the way that would be
    most effective.
        Senator Scott. Thank you.
        Senator Warren. Thank you. I want to talk a bit more about
    healthcare, and just so anybody who is watching this knows,
    servicemembers and their families get their health care
    coverage through TRICARE that we have talked about some today.
    This is the DOD's managed health care program, and it is run,
    you guessed it, by private contractors, including one of the
    largest health insurance companies in the country. The cost of
    this health care coverage is shared by taxpayers, and in some
    cases by servicemembers and their families who have co-pays on
    some of the care that they get.
        The Defense Health Agency is responsible for managing these
    contractors, and it provides the reimbursements for medical
    procedures, services, supplies, whatever is purchased under
    this. Years of support show that TRICARE is allowing rampant
    price gouging by health care providers, driving up costs for
    beneficiaries and ripping off taxpayers.
        The Department of Defense Inspector General has long warned
    about the costs of letting TRICARE fraud continue unchecked. We
    have talked about two examples today, breast pumps that are for
    sale at Wal-Mart for $192. The Federal Government, through
    TRICARE and a private contractor, ends up paying as much as
    $1,500. Vaccines that everywhere else can be purchased for
    $127. What happens through TRICARE? It reimburses $1,848 for
    exactly the same vaccine.
        Now, medical supply companies make a profit when they can
    sell items to private insurance companies. That is how they
    stay in business. But insurance companies typically set a cap
    on what they will reimburse for a product.
        Your audit found that the reason DHA was paying these
    clearly inflated prices was either because the Federal
    Government had failed to set price caps or maximum
    reimbursement rates for these products. In other words, DHA had
    effectively told these companies that they were willing to pay
    whatever it was the company wanted to charge.
        Even in cases where the DHA has set those rates, the DHA
    continually failed to enforce the caps or to claw back money
    when they had been overcharged from the original agreement.
    Now, Mr. Roark, when TransDigm overcharged DOD for spare parts,
    let's get out of health care for a second, your office
    recommended that DOD ask for a refund.
        DOD did, they asked for the refund, and the American
    taxpayer got $16 million back. But what did DHA, let's go back
    to health care, what did DHA say when you recommended asking
    for a refund for TRICARE price gouging, both in areas where
    they had never set a rate to begin with or where there was a
    cap, but DOD had not enforced it? What happened when you asked
    them, go get the money back, or at least some of it?
        Mr. Roark. In our two reports, we kind of covered this in
    two ways. First, we asked them to seek voluntary repayments for
    instances where very high prices had been charged for services
    or for items.
        Then in other cases, we asked them to recoup money for
    instances where they did not enforce the cap, as you mentioned.
    In the end, about $712 was the kind of the total amount that
    they recouped.
        Senator Warren. I am sorry, did you say $712?
        Mr. Roark. Yes--$712,000--$712,000.
        Senator Warren. Okay. All right, $712,000, okay.
        Mr. Roark. In terms of the amount of voluntary repayments,
    it was zero.
        Senator Warren. Voluntary repayments was zero. In fact, I
    have the quote here from your report. DHA said--this is when
    they have been overcharged. DHA said, ``the idea of voluntary
    payments is not realistic.''
        In other words, we just aren't going to do it. Why was it
    in many cases here that DHA didn't even try to get the money
    back? It feels like a failure of both oversight and will.
        Interestingly enough, the former head of DHA, the one who
    made these decisions not to seek voluntary repayments because
    they said we are just not going to get anything from that,
    retired from the agency in 2019 and a year later joined the
    board of the largest TRICARE contractor.
        Mr. Roark, how much do you estimate that DOD could save if
    it just set maximum prices caps, like ordinary insurance
    companies do, and then actually enforced those caps?
        Mr. Roark. I can't say across the entire health system
    because that is just a lot of different areas. However, for
    these two reports that we are here discussing today, we
    calculate that the savings that could be achieved by
    implementing our recommendations was around $100.7 million.
    That is $81.2 million for the breast pumps report and $19.5
    million for the second report.
        Senator Warren. Okay. I just want to underscore this. It is
    $100 million for breast pumps, which is important, but I mean,
    and vaccines, and that is it. We have got $100 million there,
    and we have to assume this problem exists all the way across. I
    am very concerned that DHA is failing to protect TRICARE
    beneficiaries and allowing these companies to rip off
    taxpayers.
        Yesterday, I sent a letter to both the DOD and DHA asking
    both agencies to improve oversight and transparency around
    current TRICARE spending and put new rules in place to prevent
    price gouging of our military families in the future. I think
    we are going to have a lot more work to do in this area.
        Do you have another question you would like to ask? You
    mind if I do one more and then I will be finished? Okay. I have
    got one more round that I want to ask here. During the Obama
    administration, Ash Carter, who was then head of acquisitions
    at the Pentagon, led an initiative to identify improvements in
    how DOD contracts for services. This initiative was called,
    Better Buying Power, and it identified $90 billion in potential
    savings over 12 years. Let me say that again $90 billion.
        One of the biggest recommendations was changing the way
    that DOD writes contract requirements when it buys services,
    everything from cleaning buildings to management consultants.
    The GAO wrote, and I want to quote what the GAO said,
    ``determining whether to contract for such services,
    eliminating duplicative or unnecessary services, and
    effectively managing and overseeing contractors is vital to DOD
    achieving its missions.''
        Ms. Field, help me translate those recommendations into
    terms that people who don't do acquisitions policy for a living
    will understand. Is this the basic idea that you can protect
    your budget when you are buying a service by being clear about
    what you expect from whomever you hire, and that you should
    probably do an assessment on the front end to determine whether
    or not you need that work at all. Is that about right?
        Ms. Field. That is exactly right, and maybe to give an
    example in DOD. This would be, for example, one of the
    services, let's take the Army, deciding that it needs to figure
    out how much it is spending on grounds maintenance, right,
    which is something that happens at military installations
    across the world.
        Under this practice, the Army should figure out how many
    contracts does it have for grounds maintenance? How many does
    it need? How can it cut costs by perhaps consolidating
    contracts? It is pretty simple. It is something that we all do
    in our own households.
        Senator Warren. Ask for a volume discount----
        Ms. Field. Right, absolutely. So that is the idea.
        Senator Warren. Okay. Okay. It is a really important
    insight because we are talking about things that pretty much
    every business in America does and pretty much every family by
    figuring out in advance what they are getting and what they are
    paying for it.
        Do you have any idea, Ms. Field, how much money DOD would
    save if they conducted these reviews before they shoveled the
    money out the door?
        Ms. Field. I don't have an across the board estimate for
    you, but I will offer two points. The first is that we know
    that when two of the smaller DOD components used this practice,
    specifically the Defense Logistics Agency and the Defense
    Threat Reduction Agency, DTRA, when they did this, they saved
    hundreds of millions of dollars. Those were----
        Senator Warren. Hundreds of millions for just the smaller--
    --
        Ms. Field. Just two small components.
        Senator Warren. Okay.
        Ms. Field. My second point I would offer is that if you
    think about the amount that DOD writ large is spending on
    services contracting, $205 plus billion, if they were able to
    save just 1 percent of that, there is $2 billion right there.
    So, there is a lot of potential.
        Senator Warren. That is a 1-year.
        Ms. Field. That is 1 year.
        Senator Warren. It compounds over time, as you were talking
    about, the effects of this. You know, it is great that DLA and
    other agencies are saving money, but it is the military
    services who buy the lion's share of the services here.
        I just want to make sure that I understand, that the
    military services are not doing similar reviews to the kind you
    talked about across other areas to eliminate duplicative
    contracts and try to save money.
        Ms. Field. So originally really were not doing it, which is
    problematic because, as you mentioned, they account for about
    three-quarters of the service contracting dollars for DOD. GAO
    recommended that the services adopt this practice.
        They have begun implementing it to varying degrees of
    success. We are just about to issue a new report in the coming
    weeks that will identify some recommendations for the services
    to do it better, to hopefully get better results.
        Senator Warren. You are going to make this recommendation
    to the same services that you said have the lowest rate of
    picking up your recommendations. Is that right?
        Ms. Field. Our hope is that they will take them seriously
    and implement them.
        Senator Warren. We will find ways to make them take this
    more seriously. I just want to underscore here about how we are
    leaving money on the table here.
        The Better Buying Power Initiative that I talked about a
    minute ago estimated that sharpening DOD's pencils on review
    requirements alone could save $44 billion over 10 years on
    consulting and research and development contractors. If we got
    even a 10th of that savings, we would be talking about real
    money here.
        When DOD asks for supplemental funding, we should remind
    them that by following a few basic accounting and oversight
    practices, they would have another $44 billion to spend, and
    ask why, if they really need this money, they haven't already
    done that.
        This is just one area where DOD could score huge savings.
    You start to multiply that in other areas and we are talking
    about significant money here. So, I am going to make a closing
    statement. You have closing statement, anything you want to
    say?
        I just want to thank all of our witnesses. I want to thank
    you for your service. I want to thank you for testifying today.
    I want to thank you for continuing to make recommendations, and
    to stay on this. I also want to thank Jon Clark, and Gary
    Leeling, and Andy Scott, and Sofia Kamali, and Noah Sisk, and
    Sean O'Keefe, and Katie Magnus, and Brendan Gavin for their
    work in helping put this hearing today.
        I really appreciate your contributions. I am looking
    forward to working with all of you. We are committed to
    ensuring that servicemembers and their families receive all of
    the resources and all of the support that they need. It is
    clear from today's hearing that DOD has a lot of work to do to
    make sure that we have the right cost efficient mix of Federal
    employees, military personnel, and contractors.
        Those failures add up. DOD's own estimates say that we
    could save $90 billion over the next 12 years, and our
    witnesses today have identified other areas where we can save,
    and we know there are more reports coming on this.
        I remain concerned that the Pentagon is too focused on
    increasing its budget and neglecting to exercise due diligence
    to prevent waste and fraud in the money that we have already
    allocated. Senator Scott.
        Senator Scott. First off, think about what we can do, all
    right, take Mr. Roark, what you said that they didn't get
    voluntary. What if we asked about it, all right. So, if you
    guys will think about that.
        I will give you just some of my business background. This
    was 26 years ago. I ran a hospital company. Our revenue base
    was $24 billion. My savings over--took me a few years to get
    there--was $2.4 billion. It is how much, then how much costs I
    cut out of--and that was out of, our cost structure would have
    been out of 25 percent of the cost. Something like that.
        So much of my savings there. I mean, this is staggering,
    the dollars that you can save. When you have the Government's
    buying power, I mean, it is not a little bit. It is staggering,
    the dollar numbers. I don't want to speak on behalf of the
    chairwoman, but if there are things that would be helpful that
    we can ask for, I think both of us are in the same position.
        We support our military. The fund issue--and I am not--I am
    not sitting here, and I wouldn't say, gosh, I am here to cut
    military spending. I want to make the military spending smart,
    efficient, and have a lethal force. But we do have $32, I think
    you said it, Ms. Fields, we got $32 trillion of the debt.
        We have to spend our money better. We have got problems.
    So, if you guys have any ideas. Do you want to say something,
    Ms. Field?
        Ms. Field. Yes. If I may, I do want to point out that GAO
    issues what we call ``matters for congressional
    consideration.''
        These are recommendations to Congress of improvements that
    we think should be made to programs, many of them that could
    save money. We just issued a report estimating the total
    amount, which was billions that the Government could save.
        There is one that is relevant to the discussion today that
    we have made and has not yet been implemented, and that was a
    recommendation that Congress eliminate the Secretary of
    Defense's authority to contract with U.S. Family Health Plan
    providers.
        This is a very small, little known program, but when we
    assessed it back in 2014, we found that that program largely
    duplicated providing the same benefit to the same beneficiaries
    and many of the same areas as participate in the TRICARE prime
    program.
        The problem with the U.S. Family Health Plan, besides the
    fact that it is duplicative, is that the contractors or the
    companies that provide services under this do not need to
    compete in the same way that you typically would, nor do they
    have to have transparency in how they price out their services.
        That is one matter for congressional consideration that
    remains unimplemented, and if implemented, could save hundreds
    of millions of dollars.
        Senator Scott. You said, Mr. Mosher, this bastion is on the
    service contracting, that you don't have data. Think about how
    much data there is. All that is available. They are just not
    giving it to you. All that data is out there because it has to
    be in the contract, right?
        Mr. Mosher. Well, I think that is the issue, how much is in
    actually in the contract in terms of labor costs and on labor
    costs. There is actually hope in the sense that the Army, we
    think, kind of cracked this.
        They had for several years data that they were looking at
    service contractors, they were demanding from the contractors
    information of the sort that we think would be very useful up
    until about 2015, and then it got wrapped up into the broader
    DOD system, and now we are getting less than we had before.
        You could look back to the way the Army reported and try to
    use that as a model. We think that the OP-8, which is one of
    the budget displays that DOD provides to the Congress, which
    deals with civilians and other labor, does not really capture
    much.
        If you could do something parallel for service contractors,
    that would be data we could use. I mean, I guess my sense is
    the best way to start controlling these sorts of things is to
    have better data. So, and you can ask for that.
        Senator Scott. Good job. Everybody gets a good job today.
        Senator Warren. Thank you.
        Mr. Roark. Can I add one point? One the consistent themes
    that we emphasized across our reports was emphasizing to the
    DOD how important volume discounts are and using our
    negotiating power to see if we can achieve better prices and
    lower cost through that as well.
        I think that regarding some of the points that we have all
    discussed today, I think that for me, the lessons that we can
    learn from the two reports today is just being proactive,
    taking a look at the data for trends to try to identify
    problems before they become a crisis and a lot of money is
    spent, and using those benchmarks, as we talked about, to make
    sure that we are getting the best price possible.
        Then periodically reviewing and monitoring it to make sure
    that we follow through and ensure that those steps that we
    implement are effective.
        Senator Warren. Thank you very much, all three of you.
    Thank you for your service to the country. Thank you for being
    in here today. I hope we will all stay in touch. Thank you.
    This hearing is adjourned.
        [Whereupon, at 5:34 p.m., the Subcommittee adjourned.]

        [Questions for the record with answers supplied follow:]

                Questions Submitted by Senator Elizabeth Warren
                        dod organization and management
        1. Senator Warren. Ms. Field, there have been many efforts to make
    the Pentagon more efficient. In 2010, the then Secretary of Defense
    introduced an initiative to reduce overhead costs and reinvest the
    saved funds into warfighting. Years later, it was reported the
    Department of Defense had a study which found $125 billion that could
    be saved over 5 years in its back-office bureaucracy. Additionally in
    2015, the National Defense Authorization Act for Fiscal Year 2016,
    required the DOD to cut $10 billion in costs from headquarters,
    administrative, and support activities. What are the impacts--financial
    and otherwise--of reducing costs in headquarters, administrative, and
    support activities?
        Ms. Field. Reducing unnecessary costs should always be a key
    objective for DOD. The issues identified in the above referenced DOD
    study are similar to some of GAO's longstanding high-risk areas at DOD,
    including our business transformation, financial management, and
    contract management high-risk areas. \1\ For example, the Defense
    Business Board study noted that DOD could realize savings by optimizing
    spending on contracts, developing a change strategy that includes
    identifying skills gaps in the workforce, and optimizing information
    technology through application rationalization and consolidation.
    Similarly, GAO has called for DOD to be more strategic in how it
    acquires services, including making greater use of category management
    techniques to identify opportunities to meet the department's needs at
    lower costs; to address the causes and solutions of skill gaps in the
    workforce; and to develop an information technology architecture with
    sufficient information about business activities to allow for more
    effective identification of overlap and duplication.
    ---------------------------------------------------------------------------
        \1\ GAO, High Risk Series: Efforts Made to Achieve Progress Need to
    Be Maintained and Expanded to Fully Address All Areas, GAO-23-106203
    (Washington D.C.: April 20, 2023).

        2. Senator Warren. Ms. Field, can cost saving be achieved without
    requiring layoffs of civil servants or a reduction of military
    personnel?
        Ms. Field. Yes. Our prior work has found that efforts to review
    service requirements prior to contract award can result in cost savings
    by reducing or eliminating duplicative requirements. For example, we
    reported that defense agencies--such as the Defense Logistics Agency
    and Defense Threat Reduction agency, among others--saved hundreds of
    millions of dollars from fiscal years 2017 to 2019 through holistically
    reviewing their service requirements for efficiencies.
        We have also reported that improvements in DOD's and other Federal
    agencies' use of category management--an Office of Management and
    Budget-led initiative intended to help agencies buy more strategically
    and achieve efficiencies--has resulted in more than $35 billion in cost
    savings across contracts for goods and services. DOD spent $414 billion
    on contracts for goods and services in fiscal year 2022, so savings
    identified on just 1 percent of that total through improved use of
    service requirements reviews or category management initiatives would
    amount to over $4 billion.\2\
    ---------------------------------------------------------------------------
        \2\ Contract obligations based on GAO's analysis of Federal
    Procurement Data System data.

        3. Senator Warren. Ms. Field, the DOD was able to identify over $9
    billion in cost savings for headquarters, administrative, and support
    activities. Has the DOD implemented changes to save the $9 billion it
    has identified? If not, why has it not done so?
        Ms. Field. I believe this question refers to a DOD report that it
    had identified a total of $9.2 billion in cost savings from fiscal year
    2015 through fiscal year 2019. However, we found that DOD did not have
    a reliable cost estimate to support these estimated savings.\3\
    Further, according to DOD's internal assessment, $5.3 billion of these
    cost savings were ``not auditable'' because the baseline for reductions
    had not been established, among other reasons. In addition,
    documentation supporting cost savings estimates from other efficiencies
    was not sufficiently detailed.
    ---------------------------------------------------------------------------
        \3\ GAO, Defense Efficiency Initiatives: DOD Needs to Improve the
    Reliability of Cost Savings Estimates, GAO-17-724 (Washington, DC: July
    24, 2017).
    ---------------------------------------------------------------------------
        Reducing the resources devoted to headquarters activities has been
    a long-standing challenge for DOD, but our subsequent work has shown
    some progress in that area. In our November 2020 report on DOD's reform
    efforts, we found that DOD's savings estimates were generally reflected
    in its budget materials. \4\ In addition, through implementation of its
    Performance Improvement Framework, which DOD issued in October 2022,
    the department has put in place a process that may help to collect and
    validate information on the costs and savings associated with reform
    efforts.
    ---------------------------------------------------------------------------
        \4\ GAO, Defense Reform: DOD Has Made Progress, but Needs to
    Further Refine and Formalize Its Reform Efforts, GAO-21-74 (Washington,
    DC: November 5, 2020).

        4. Senator Warren. Ms. Field, the DOD increased and improved its
    acquisition workforce after an almost 50 percent reduction between 1989
    and 1999. How can the DOD improve efficiency and reduce waste in its
    acquisition management?
        Ms. Field. DOD can continue its efforts to attract, hire, sustain,
    and improve the defense acquisition workforce and provide clear
    guidance on ways to more strategically and efficiently buy goods and
    services. GAO's prior work has found that a larger acquisition
    workforce has allowed DOD to bolster support for critical functions,
    such as program management, engineering, and contracting. DOD has also
    continued to take steps to ensure the acquisition workforce has needed
    skills and training to perform key tasks by completing competency
    assessments for each of its acquisition career fields and transforming
    its credentialing processes for acquisition career fields.
        DOD can continue to support its acquisition workforce by making
    sure it has clear and up to date guidance on managing acquisitions. For
    example, DOD plans to issue guidance by the end of this fiscal year on
    better managing its service acquisitions through the use of category
    management--an Office of Management and Budget-led initiative intended
    to help agencies buy more strategically and achieve efficiencies. We
    have reported that improvements in DOD's and other Federal agencies use
    of category management has resulted in more than $35 billion in cost
    savings across contracts for goods and services. In September 2023, we
    also made recommendations to update Air Force and Army service
    acquisition policies to ensure data on service acquisitions are
    aggregated and reviewed to identify broader cost savings and
    efficiencies.

        5. Senator Warren. Ms. Field, what would be the financial and
    management impact for DOD reducing its acquisition and auditing
    workforce?
        Ms. Field. Maintaining a skilled acquisition workforce is vital to
    maintaining military readiness, increasing DOD's buying power,
    achieving savings, and meeting emerging challenges and complexities.
    Following reductions in the size of DOD's acquisition workforce in the
    1990's due to decreasing defense budgets and concerns about skill gaps
    and growing reliance on contractors to perform tasks, GAO included
    DOD's acquisition workforce as an area on GAO's High Risk list. DOD has
    taken steps to rebuild its acquisition workforce since 2009. For
    example, DOD leveraged the Defense Acquisition Workforce Development
    Fund to hire, train, and retain a workforce that grew from around
    126,000 in fiscal year 2008 to nearly 183,000 in fiscal year 2020, and
    has implemented recommendations GAO made to improve how it selects,
    trains, and mentors program managers--a critical acquisition career
    field. These steps, among others, allowed GAO to remove DOD's
    acquisition workforce from GAO's High Risk list in 2021. We have
    ongoing work to assess DOD's financial management workforce and expect
    to issue a report early next year.

        6. Senator Warren. Mr. Roark, you mentioned a 2021 report where DOD
    Office of Inspector General (OIG) found the DOD faced challenges to
    acquisition reforms in health care services. What are the challenges
    the DOD faces in acquisition management?
        Mr. Roark. My statement was from the OIG Management Challenges list
    2021, it was just a general statement on an overall risk. Nothing
    further to report.

        7. Senator Warren. Mr. Roark, how can the DOD overcome these
    challenges?
        Mr. Roark. The two main reports discussed at the hearing were DOD
    OIG reports DODIG-2018-108, ``TRICARE Payments for Standard Electric
    Breast Pumps and Replacement Parts,'' and DODIG-2019-112, ``Audit of
    TRICARE Payments for Health Care Services and Equipment That Were Paid
    Without Maximum Allowable Reimbursement Rates.'' The recommendations
    from these two DOD OIG reports, discussed in the response to question
    10 below, can help the DOD avoid improper payments for health care.

        8. Senator Warren. Ms. Field, the DOD has not passed an audit since
    they started the independent reviews in 2017. The Government
    Accountability Office (GAO) reported that the DOD ``remains the only
    major agency that has never been able to accurately account for and
    report on its spending or physical assets.'' What value can be gained
    from the DOD passing its independent audit?
        Ms. Field. The financial statement audit has value far beyond the
    audit opinion. It can help to identify vulnerabilities and ways to
    improve operations. As DOD reported, financial audits have resulted in
    short-and long-term benefits. The audits have increased transparency
    and visibility of financial management issues, and are providing a
    positive return on investment from value gained through independent
    auditor insight into DOD's business processes. These audit insights
    help DOD to assess what is performing well and what areas still need
    improvement. The audits have also helped identify assets that DOD did
    not know existed. For example, as DOD reported in its June 2020
    Financial Information and Audit Remediation report, the Navy identified
    and added nearly $2.4 billion of unrecorded inventory, operating
    materials and supplies, and general equipment. The Navy subsequently
    used those items to fill over 12,000 requisitions, which otherwise
    would have cost $50 million. DOD reported that as a result of increased
    transparency and visibility of financial management, it improved its
    operations and business processes, which should lead to the preparation
    of reliable financial statements and help DOD's mission by providing
    accurate information for decisionmaking. For example, in fiscal year
    2022, the Air Force identified and corrected approximately $5.2 billion
    worth of variances in its general ledger for equipment and accumulated
    depreciation. DOD reported that this increased level of visibility
    allows for greater control and oversight of financial transactions
    related to military equipment.

        9. Senator Warren. Ms. Field, what are the greatest challenges for
    DOD passing an audit?
        Ms. Field. Issues and risks that hinder DOD's ability to achieve a
    clean audit opinion include (1) material weaknesses, (2) ongoing
    deficiencies with DOD's financial management systems, and (3)
    introduction of new systems and challenges associated with
    implementation of those systems.\5\
    ---------------------------------------------------------------------------
        \5\ A material weakness is a deficiency, or combination of
    deficiencies, in internal control over financial reporting, such that
    there is a reasonable possibility that a material misstatement of the
    entity's financial statements will not be prevented, or detected and
    corrected, on a timely basis.

          While it is possible for any audited entity to receive a
    clean audit opinion and still have material weaknesses, some material
    weaknesses prevent the auditor from performing procedures to draw a
    conclusion on the financial statements. DOD consolidated 16 of its
    identified material weaknesses into 10 categories the department now
    tracks and reports, which includes Information Technology, Fund Balance
    ---------------------------------------------------------------------------
    with Treasury, property, and reporting entity.

          DOD has wide-ranging weaknesses in its financial
    management systems that prevent it from collecting and reporting
    financial and performance information that is reliable, useful, and
    timely. DOD's financial management and business systems modernization
    efforts have been on GAO's list of high-risk programs and initiatives
    since 1995. DOD management recognizes the risk that legacy systems pose
    to its operations and related accounting, and is in the process of
    identifying, retiring, and replacing legacy systems. However, DOD must
    first produce a complete inventory listing of systems before it can
    ensure retirement of all noncompliant systems.

          For over 30 years, DOD has initiated a variety of efforts
    and undergone several changes in organizational responsibility to help
    modernize its business and financial systems and improve the quality of
    data. However, DOD rarely processes financial transactions using only
    one IT system. For example, in fiscal year 2021, DOD reported that it
    used 299 separate IT systems to support its financial statements. The
    audit requirement for supportable transactional data is speeding the
    pace of system improvements, including new system implementation, which
    will eventually provide management with insights, metrics, analytics,
    and a common operating picture from which to make informed decisions.
                                    tricare
        10. Senator Warren. Ms. Field and Mr. Roark, there are a series of
    DOD Inspector General (IG) reports finding that the DOD is failing to
    prevent price gouging and overpayments to contractors in the TRICARE
    health program. One contributor to these excess healthcare costs is
    improper payments. What recommendations does your organization have for
    the DOD to better manage improper payments?
        Ms. Field. In 2015, GAO found that the Defense Health Agency's
    (DHA) method for measuring TRICARE improper payments only examines the
    claims processing performance of the contractors that process TRICARE's
    purchased care claims and does not examine the underlying medical
    record documentation to discern whether each sampled payment was
    supported.\6\ As a result, we reported that TRICARE's reported improper
    payment estimates may underState the amount of improper payments for
    the program. To better assess and address the full extent of improper
    payments in the TRICARE program, we recommended that the Secretary of
    Defense direct the Assistant Secretary of Defense (Health Affairs) to
    implement a more comprehensive TRICARE improper payment measurement
    methodology that includes medical record reviews, as done in other
    parts of its existing post-payment claims review programs. Since that
    time, DHA has taken some action to incorporate medical record reviews
    into its improper payment estimates, including completing 2 years of
    such review. However, the agency has not taken steps to continue
    medical reviews or incorporate the results of such reviews into the
    TRICARE improper payment estimates. Relatedly, we recommended that the
    Secretary of Defense direct the Assistant Secretary of Defense (Health
    Affairs) to develop more robust corrective action plans that address
    underlying causes of improper payments, as determined by the medical
    record reviews. By fully implementing these recommendations, DOD would
    be better positioned to understand and address the extent of TRICARE
    improper payments.
    ---------------------------------------------------------------------------
        \6\ GAO, Improper Payments: TRICARE Measurement and Reduction
    Efforts Could Benefit from Adopting Medical Record Reviews, GAO-15-269
    (Washington, DC, Feb 18, 2015).
    ---------------------------------------------------------------------------

        Mr. Roark. In DOD OIG reports DODIG-2018-108 and DODIG-2019-112,
    the DOD OIG made a total of 9 recommendations, 3 of which pertain to
    improper payments. For report DODIG-2018-108, we recommended that the
    Defense Health Agency use only suppliers that have fixed reimbursement
    rates for electric breast pumps, and that it pursue actions, such as
    recouping overpayments, from suppliers that billed excessive amounts
    for breast pumps and replacement parts. For report DODIG-2019-112, we
    recommended that the Defense Health Agency identify reasons why
    contractors did not use existing TRICARE maximum reimbursement rates
    for vaccines and contraceptive systems. Further, we recommended that
    the Defense Health Agency update policy, conduct periodic reviews of
    reimbursement rates, and seek recoupment for overpayments.

        11. Senator Warren. Ms. Field and Mr. Roark, how much could the DOD
    be saving by more effective improper payment management?
        Ms. Field. With respect to TRICARE, we do not have an estimate of
    the financial savings that would result from DOD implementing our
    recommendation for improved improper payment reporting or of other
    efforts by DOD to improve TRICARE improper payment management.
        Mr. Roark. For OIG reports DODIG-2018-108 and DODIG-2019-112, we
    identified a total of $116.9 million in potential monetary benefits.
    Specifically, for report DODIG-2018-108, we identified $81.2 million in
    funds put to better use and $16.2 million in questioned costs. For
    report DODIG-2019-112, we identified $19.5 million in funds put to
    better use.

        12. Senator Warren. Ms. Field, what lessons can be learned from how
    the Department of Health and Human Services' (HHS) Centers for Medicare
    & Medicaid Services' (CMS) approach to improper payments?
        Ms. Field. In 2015, we found that DOD uses a methodology for
    measuring TRICARE improper payments that is less comprehensive than the
    methodology used to measure improper payments in Medicare. We reported
    that CMS's approach to measuring Medicare improper payments examines
    medical records associated with a sample of claims to verify support
    for the payment. This methodology more completely identified improper
    payments beyond those resulting from claim processing errors, such as
    those related to provider noncompliance with coding, billing, and
    payment rules.
        Additionally, CMS we reported that reports more comprehensive
    information about root causes of improper Medicare payments than DOD
    does for TRICARE, develops corrective actions that more directly
    address root causes, and uses the information to address the agency's
    goal of reducing future improper payments.

        13. Senator Warren. Ms. Field, which other departments or agencies
    that manage improper payments better than the DOD?
        Ms. Field. We have not specifically assessed whether other
    departments or agencies manage improper payments better than DOD.
    However, agency inspectors general report annually on their agencies'
    compliance with criteria included in the Payment Integrity Information
    Act of 2019 (PIIA) and related Office of Management and Budget
    guidance. PIIA includes six criteria for compliance, which OMB guidance
    expands to 10. OMB instructs inspectors general to report on whether
    agencies complied with these criteria, such whether agencies conducted
    improper payment risk assessments, reported estimates, and developed
    corrective actions plans, as required.
        In March 2023, we noted that for fiscal year 2021, only 10 of the
    24 agencies specified in the Chief Financial Officers Act of 1990 (CFO
    Act), as amended, were compliant with PIIA and related OMB criteria, as
    reported by their inspectors general.\7\ These agencies were: (1) U.S.
    Agency for International Development, (2) Department of Commerce, (3)
    Department of Energy, (4) Department of Interior, (5) Department of
    Justice, (6) Department of State, (7) Department of Transportation, (8)
    General Services Administration, (9) National Science Foundation, and
    (10) Nuclear Regulatory Commission. The total of 10 compliant agencies
    was a decrease from 12 agencies in fiscal year 2020, and the lowest
    number of compliant CFO Act agencies since fiscal year 2017.
    ---------------------------------------------------------------------------
        \7\ GAO, Improper Payments: Fiscal Year 2022 Estimates and
    Opportunities for Improvement, GAO-23-106285 (Washington, DC: March 29,
    2023).

        14. Senator Warren. Ms. Field, are there best practices DOD should
    adopt?
        Ms. Field. We have issued several resources for use in managing
    improper payments. These include:

          Standards for Internal Control in the Federal Government
    (known as the Green Book). \8\ The Green Book provides managers
    criteria for designing, implementing, and operating an effective
    internal control system, which is key to preventing and reducing
    improper payments.
    ---------------------------------------------------------------------------
        \8\ GAO, Standards for Internal Control in the Federal Government,
    GAO-14-704G (Washington, DC: September 10, 2014).

          A Framework for Managing Fraud Risks in Federal Programs.
    \9\ This framework identifies and conceptualizes leading practices to
    aid program managers in managing fraud, including fraud that results in
    improper payments.
    ---------------------------------------------------------------------------
        \9\ GAO, A Framework for Managing Fraud Risks in Federal Programs,
    GAO-15-593SP (Washington, DC: Jul. 28, 2015).

          A Framework for Managing Improper Payments in Emergency
    Assistance Programs.\10\
    ---------------------------------------------------------------------------
        \10\ GAO, A Framework for Managing Improper Payments in Emergency
    Assistance Program, GAO-23-105876 (Washington, DC: July 13, 2023).

        This framework provides principles that can help Federal program
    managers mitigate improper payments in emergency assistance programs,
    and it can also be useful for managing improper payments in non-
    emergency assistance programs or during normal program operations.
        In addition, in a June 2023 report, we examined programs with
    reported reductions in estimated improper payment rates since fiscal
    year 2017. \11\ We identified examples of 19 programs across eight
    agencies with reported reductions, according to fiscal year 2022
    reporting. Based on our review of agencies' financial reports and
    interviews with agency officials, including DOD, we found that
    strategies and efforts for mitigating improper payments varied.
    However, we found that the most commonly reported mitigation efforts
    fell under two broad categories: (1) establishing accountability and
    facilitating internal collaboration, and (2) providing technology,
    tools, and training targeted to root causes. Efforts related to these
    categories may have contributed to reductions in programs' estimated
    improper payment rates.
    ---------------------------------------------------------------------------
        \11\ GAO, Improper Payments: Programs Reporting Reductions Had
    Taken Corrective Actions That Shared Common Features, GAO-23-106585
    (Washington, DC: June 30, 2023).
    ---------------------------------------------------------------------------
        DOD has taken some steps to adopt practices that could help reduce
    improper payments. For example, for our June 2023 report noted above,
    DOD told us the department had established senior accountable officials
    at the senior executive service level in each of the military services
    and defense agencies to promote accountability for the DOD payment
    integrity efforts. In addition, according to DOD, the department
    developed and implemented processes and tools to evaluate, monitor, and
    measure improper payments for DOD Travel Pay, including developing
    performance metrics and tracking them via spreadsheets and data base
    dashboards, performing periodic quality assurance reviews of metrics
    and corrective action implementation, and monitoring recovery of
    overpayments.
        DOD is also using Advana, an enterprise data platform, across the
    department for advanced analytics. Specifically, according to DOD
    officials, DFAS utilizes the Advana Improper Payment Detection (IPD)
    tool for the early identification and prevention of improper payments
    in seven entitlement systems (i.e., contractual payment systems). DOD
    officials told us that the Advana IPD tool has identified and prevented
    more than 7,000 potential improper payments since it was implemented in
    December 2020. We are working with DOD to obtain more information on
    the savings generated from the tool.
                                 privatization
        15. Senator Warren. Ms. Field, there has been an effort to
    privatize commissaries on military installations or at least study the
    effects of privatizing commissaries. Would privatizing commissaries
    improve their quality for military personnel and provide cost-savings
    for the DOD?
        Ms. Field. GAO has not directly assessed whether privatization
    would improve the quality for military personnel and provide cost-
    savings for DOD. However, GAO has issued several reports on the Defense
    Commissary Agency's (DeCA) management of the commissaries, in which we
    identify the ways in which DeCA does not operate like a business
    because it is required to provide certain benefits to service members,
    their families, and retirees.

          First, as we reported in 2022, DeCA's two primary
    objectives of generating savings and increasing margin can be in
    tension with one another, particularly if the targets set for each are
    incompatible. \12\ Specifically, if DeCA raises the prices on certain
    items to generate more margin (and therefore reduce its reliance on
    appropriations), the savings to the customer on those items decreases.
    Conversely, if DeCA lowers prices to provide more savings to customers,
    DeCA's ability to generate a margin decreases. Since fiscal year 2016,
    DeCA has had a global target customer savings rate of 23.7 percent,
    meaning that it expects its customers to save, on average across all
    commissary locations, over 20 cents on the dollar by shopping at a
    commissary instead of making similar purchases at other local grocery
    stores.
    ---------------------------------------------------------------------------
        \12\ GAO, Defense Commissaries: Actions Needed to Clarify
    Priorities and Improve Program Management, GAO-22-104728 (Washington,
    DC: June 28, 2022).

          Second, DeCA operates commissaries throughout the United
    States, including in isolated or more remote areas, as well as at
    overseas locations in 13 countries. This means that DeCA operates
    commissaries in some locations that would not necessarily be considered
    profitable by the private grocery industry, but that are important to
    the customer population. Whereas a private grocery store chain might
    close a location based on lack of profitability, DOD must follow clear
    criteria defined in a DOD instruction to close a commissary. \13\
    ---------------------------------------------------------------------------
        \13\ DOD Instruction 1330.17, DOD Commissary Program (June 18,
    2014) (incorporating change 2, effective Sept. 14, 2018)

        Given these factors, any assessment of the potential effects of
    privatizing commissaries would need to determine if a private company
    could both deliver the full intended benefit to all consumers,
    including those in remote and rural locations, and provide the intended
    customer savings, or whether those benefits and savings should be
    ---------------------------------------------------------------------------
    adjusted.

        16. Senator Warren. Ms. Field, did the privatization of military
    housing improve the quality of housing for military personnel and
    provide cost-savings for the DOD?
        Ms. Field. In seeking the authorities granted to DOD under the
    Military Housing Privatization Initiative (MHPI) in 1996, department
    officials posited that leveraging private sector financing would allow
    them to eliminate inadequate housing more economically and faster than
    could be achieved through traditional military construction financing.
    As such, GAO's work in the early years of MHPI sought to assess the
    validity of this assumption. A number of complicating factors made
    doing so difficult. In 1996, for example, GAO reported that because DOD
    was using new construction standards to assess the condition of
    military-owned housing units, many housing units that DOD classified as
    inadequate were not dilapidated, but only lacked modern amenities, such
    as a separate utility room or a carport. \14\ In other words, there was
    no reliable baseline with which to compare the condition of the new,
    privatized housing to the old, government-owned housing. Based on this
    work, we further stated in 1998 that while we recognized that DOD faced
    significant housing problems, we did not fully agree with DOD on the
    magnitude of the problem. \15\ Further, in 2000, we reported that,
    because no projects under the program had been completed, there was
    little basis for evaluating the effectiveness of the program in
    eliminating inadequate housing more economically and faster than could
    be achieved through traditional military construction financing.\16\
    ---------------------------------------------------------------------------
        \14\ GAO, Military Housing: Privatization Off to a Slow Start and
    Continued Management Attention Needed, GAO/NSIAD-98-178 (Washington,
    DC, July 17, 1998).
        \15\ GAO/NSIAD-98-178.
        \16\ GAO, Military Housing: Continued Concerns in Implementing the
    Privatization Initiative, GAO/NSIAD-00-71 (Washington, DC: March 30,
    2000).
    ---------------------------------------------------------------------------
        However, we were able to evaluate DOD's estimated cost savings.
    When GAO analyzed the complete life-cycle cost estimates that DOD had
    prepared for individual projects, we found that, overall, the cost
    savings were likely to be more modest than predicted. For example, in a
    1998 analysis of two privatized housing projects, GAO's review showed
    that although privatization was less costly for each project, the
    overall estimated cost savings to the Government were considerably less
    than the military services' estimates--about $54 million less, or about
    7 percent, at one of the two installations, and $15 million less, or
    about 10 percent, at the other. GAO also found in a subsequent review
    of 12 projects that privatization, on average, should cost the
    government about 11 percent less than military construction financing.
    For 10 of the projects, we calculated that the estimated savings ranged
    from 38 percent to 5 percent. For the remaining two projects, we
    estimated that privatization would cost more than military
    construction--about 9 percent and about 15 percent more,
    respectively.\17\
    ---------------------------------------------------------------------------
        \17\ 17GAO/NSIAD-00-71.
    ---------------------------------------------------------------------------
        In recent years, as questions about whether privatization was the
    right policy choice have transitioned to questions about how
    privatization is working, GAO's work has focused on assessing the
    financial health of privatized housing projects and DOD's oversight of
    the condition of the housing.
                                   __________
                   Questions Submitted by Senator Joe Manchin
                        government accountability office
        17. Senator Manchin. Ms. Field, the Government Accountability
    Office (GAO) recommended in 2005 that the position of Chief Management
    Officer (CMO) be created within the Department of Defense. Does GAO
    still believe a CMO position is necessary?
        Ms. Field. Yes, we believe a CMO function or its equivalent, as
    discussed below, is needed to ensure that DOD can effectively manage
    business reform to achieve progress. Our work has identified the need
    for DOD to have dedicated leadership at a very senior level, with
    significant authority, clearly defined roles and responsibilities, and
    resources to successfully drive business reform. There are different
    models that DOD and Congress could adopt to ensure that a fully
    empowered senior leader focused on business operations and
    transformation is in place. For example, the U.S. Department of State
    has adopted a ``two deputies'' model, in which one Deputy Secretary of
    State focuses on management and resources issues, while the other
    focuses on the more traditional mission responsibilities of the Deputy
    Secretary of State. The CMO model is another structure that DOD could
    adopt to address DOD's longstanding weaknesses in managing its business
    operations, if the position is sufficiently empowered and resourced to
    perform these duties.
        For more than a decade, DOD and Congress have experimented with
    different organizational structures to try to facilitate successful
    business reforms within the department, and to address longstanding
    weakness that have resulted in reduced efficiencies and ineffective
    performance. We have assessed many of these structures and the reform
    initiatives that have come out of them, and have found that these
    characteristics--senior leader with sufficient authority, clearly
    defined roles and responsibilities, and sufficient resources--to be
    critical to success.

        18. Senator Manchin. Ms. Field, how would GAO characterize the
    Department of Defense handling of that 2005 recommendation to create a
    CMO until it was formally created by Congress in the Fiscal Year 2018
    National Defense Authorization Act?
        Ms. Field. DOD's response to GAO's recommendation to create a CMO
    reflected progress in some areas, but challenges in others, and was not
    fully successful. 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. In September 2007, we found that while the Deputy
    Secretary was at the appropriate level with sufficient authority and
    responsibility to transform business operations, the demands placed on
    the position made it difficult for them to maintain the oversight,
    focus, and momentum needed to resolve business operational
    weaknesses.\18\
    ---------------------------------------------------------------------------
        \18\ GAO, DEFENSE BUSINESS TRANSFORMATION; Achieving Success
    Requires a Chief Management Officer to Provide Focus and Sustained
    Leadership, GAO-07-1072, (Washington, DC: September 5, 2007).
    ---------------------------------------------------------------------------
        Subsequently, Congress included a provision in the National Defense
    Authorization Act 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. \19\ The military departments also
    established DCMO positions to assist the CMOs with overseeing their
    business operations. In addition, the National Defense Authorization
    Act 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.\20\
    ---------------------------------------------------------------------------
        \19\ Pub. L. No. 110-181, Sec.  904 (2008).
        \20\ Pub. L. No. 110-417, Sec.  908 (2008).
    ---------------------------------------------------------------------------
        While these structures resulted in enhancements in DOD's business
    operations, we found that DOD had not defined the relationship between
    the DCMO and military departments, and that the DCMO was advisory and
    not held accountable for results. We also found that DOD needed to
    further define how the CMO and DCMO would monitor and assess
    information to measure department-wide progress against goals, among
    other things.\21\
    ---------------------------------------------------------------------------
        \21\ See GAO, High-Risk Series: An Update, GAO-13-283 (Washington,
    DC: February 2013); High-Risk Series: An Update, GAO-11-278
    (Washington, DC: February 16, 2011); and High-Risk Series: An Update,
    GAO-09-271 (Washington, DC: January 22, 2009).

        19. Senator Manchin. Ms. Field, would you say the Department in any
    serious way attempted to address the concerns raised by GAO that lead
    the Office to recommend the creation of that position?
        Ms. Field. One key reason that DOD's Approach to Business
    Transformation has remained on our High Risk List since 2005 is that
    the department has not fully implemented our recommendations designed
    to position DOD for success in this area. For example, in 2005 we found
    that a lack of sustained leadership attention and appropriate
    accountability had challenged DOD's progress in implementing a risk
    management framework, and that such leadership was needed for
    transformational efforts.\22\ We made several recommendations related
    to assigning clear leadership with accountability, and developing
    performance measures, among others, but DOD did not fully implement
    them.
    ---------------------------------------------------------------------------
        \22\ See GAO, Defense Management: Additional Actions Needed to
    Enhance DOD's Risk-Based Approach for Making Resource Decisions, GAO-
    06-13 (Washington, DC: November 15, 2005).
    ---------------------------------------------------------------------------
        In 2007, we reported that while DOD had made progress establishing
    a management framework for overall business transformation, it did not
    fully address broader business transformation efforts.\23\ We concluded
    that DOD's efforts at business transformation consisted of various
    entities whose interrelationships were not clearly articulated and
    numerous plans that were not integrated across the department. We
    further found that there was no single individual, office, or
    integrated plan within DOD to provide a complete and focused assessment
    of the department's business transformation efforts. We recommended
    that DOD institutionalize in directives the roles, responsibilities,
    and relationships among various business-related entities and
    committees and expand the management framework to capture overall
    business transformation efforts, rather than limit efforts to
    modernizing business systems. DOD did not implement this
    recommendation.
    ---------------------------------------------------------------------------
        \23\ GAO-07-1072.
    ---------------------------------------------------------------------------
        Although DOD has taken some actions over the years to act on GAO's
    recommendations in this area, key recommendations remain unimplemented.
    Among them are that DOD routinely and comprehensively monitor and
    evaluate ongoing efficiency initiatives, and consistently report reform
    savings based on definitions of reform.

        20. Senator Manchin. Ms. Field, what does GAO attribute the
    supposed ``failures'' of the CMO to as identified in the May 6, 2020
    Defense Business Board Independent Assessment?
        Ms. Field. We found that the absence of a chartering directive,
    cultural resistance to enterprise-wide transformation efforts, a lack
    of resources, and sustained challenges in delivering material reform
    limited the effectiveness of the position. In its 2020 assessment of
    the CMO position, among other things, the Defense Business Board
    concluded that the CMO position was not set up for success, and we
    agree. In addition, a June 2023 report from the Defense Management
    Institute echoed these structural and cultural challenges, and
    concluded that they hindered the ability of the CMO to drive business
    reform.
        As we reported in 2019, while Congress had given the CMO both
    significant responsibilities and authorities--subject to the authority,
    direction, and control of the Secretary and Deputy Secretary of
    Defense--DOD had not resolved unanswered questions about how the CMO's
    responsibilities and authorities would be carried out. \24\ For
    example, the National Defense Authorization Act for Fiscal Year 2019
    directed the Secretary of Defense, acting through the CMO, to reform
    DOD's enterprise business operations 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. \25\ Fulfilling these
    responsibilities depended, 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.
    ---------------------------------------------------------------------------
        \24\ GAO, Defense Business Operations: DOD Should Take Steps to
    Fully Institutionalize the Chief Management Officer Position, GAO-19-
    199 (Washington, DC: March 14, 2019).
        \25\ Pub. L. No. 115-232, Sec.  921 (2018).
    ---------------------------------------------------------------------------
        We found that DOD leadership had not fully determined how the CMO
    would exercise its authority to direct the secretaries of the military
    departments and the heads of all other elements of DOD on matters for
    which the CMO had responsibility. We identified instances in which the
    lack of a determination as to how the CMO was to direct the business-
    related activities of the military departments led to questions about
    respective roles and authorities of the CMO. In one case, officials
    from the military departments questioned the CMO's authority to make
    binding decisions; in another, the military departments sought to
    pursue reform activities without CMO involvement and oversight.
        We also identified instances in which the CMO's efforts to
    implement reforms were hampered by a lack of resources. We reported
    that DOD had established reform teams led by senior officials
    throughout the department charged with identifying and implementing
    initiatives to consolidate the department's business operations. \26\
    However, the Office of the CMO did not request funding for reform team
    initiatives, in part because officials had initially planned to use
    available funding from the savings generated by the initiatives to fund
    the development and implementation of other initiatives. Office of the
    CMO officials later recognized the need for the initiatives to obtain
    funding separate from any savings realized, but had not developed an
    approach to do so. As a result, reform teams reported lacking the
    funding needed to implement some of their initiatives.
    ---------------------------------------------------------------------------
        \26\ GAO, Defense Management: DOD Needs to Implement Statutory
    Requirements and Identify Resources for Its Cross-Functional Reform
    Teams, GAO-19-165 (Washington, DC: January 17, 2019).

        21. Senator Manchin. Ms. Field, does GAO believe the Department's,
    and specifically multiple Secretaries of Defense, failure to supply a
    Department Charter to the position of CMO confirming its authority
    contributed to the assessments outlined in the Defense Business Board
    Independent Assessment of the CMO?
        Ms. Field. Yes, the lack of a chartering directive directly
    contributed to the department's inability to successfully implement the
    CMO position. In March 2019, we reported that the absence of a
    chartering document to codify the CMO's authorities and
    responsibilities and specify how those are to be operationalized, would
    raise continued questions about the extent of the CMO's authority and
    responsibility, and would prevent a shared understanding across the
    department of the CMO's role. We concluded that guidance that fully
    encompasses all CMO authorities and responsibilities and explains how
    they are to be operationalized could help institutionalize and sustain
    the position beyond the tenure of the current acting CMO. We
    recommended that DOD codify the CMO's authorities and how they are to
    be operationalized in formal department-wide guidance. DOD concurred
    with this recommendation, but did not implement it, and subsequently
    the CMO position was disestablished by the William M. (Mac) Thornberry
    NDAA for fiscal year 2021.

        22. Senator Manchin. Ms. Field, does GAO believe the current
    delineation of business modernization, cost assessment, and cost
    efficiency responsibilities are held by offices within the Department
    at a sufficient seniority level, and does GAO believe those duties are
    effectively coordinated within the Department?
        Ms. Field. It is too soon to tell whether the current delineation
    of DOD's business operations responsibilities is effective in driving
    sustained and meaningful business transformation.
        With the disestablishment of the CMO in January 2021, the Deputy
    Secretary of Defense reestablished the Director of Administration and
    Management (DA&M), who was subsequently designated the department's
    Performance Improvement Officer (PIO). The Deputy Secretary also
    transferred a number of former CMO responsibilities to DA&M and other
    organizations throughout the department, including the Under Secretary
    of Defense (Comptroller) and the Chief Information Officer. Table 1
    shows selected responsibilities for each of these officials as
    prescribed in the Deputy Secretary of Defense's guidance.

    ----------------------------------------------------------------------------------------------------------------
                        Department of Defense official                                   Responsibility
    ----------------------------------------------------------------------------------------------------------------
    Director of Administration and Management/ Performance Improvement                               Defense reform
     Officer                                                                                Performance improvement
                                                                                    Pentagon Reservation management
                                                                                               Defense-wide support
    ----------------------------------------------------------------------------------------------------------------
    Under Secretary of Defense (Comptroller)                                               Defense business systems

                                                                           Maintain Financial Improvement and Audit
                                                                                                   Remediation Plan
    ----------------------------------------------------------------------------------------------------------------
    Chief Information Officer                                                              Defense business systems
    ----------------------------------------------------------------------------------------------------------------
    Source: GAO

        DOD is in the process of collecting data and will be reporting on
    the results of its new coordination efforts as part of the fiscal year
    2025 and 2026 budget cycles. Specifically, ODA&M partnered with the
    Under Secretary of Defense (Comptroller) and the Cost Assessment and
    Performance Evaluation office to issue revisions to department's
    Integrated Program and Budget Guidance for fiscal year 2024-2028 in
    order to capture additional information on reform efforts. Further,
    ODA&M officials told GAO that they continue to engage with Under
    Secretary of Defense (Comptroller) and Cost Assessment and Performance
    Evaluation to identify opportunities for performance improvement
    initiatives in the department. According to those officials, full
    integration of the approach into the Planning, Programming, Budgeting,
    and Execution process will likely not occur until the fiscal year 2026
    budget cycle, which will be initiated in early 2024.
                       national defense authorization act
        23. Senator Manchin. Ms. Field, does GAO endorse or support section
    902 of S. 2226, the National Defense Authorization Act, and does this
    include endorsing or supporting this section's inclusion through the
    NDAA conference process and within the final version of the Fiscal Year
    2024 NDAA?
        Ms. Field. While this is a policy decision for the Congress to
    make, our work has demonstrated that DOD would benefit from a fully
    empowered, senior leader who is dedicated to driving meaningful and
    sustainable enterprise-wide business reform. This need could be filled
    through different organizational constructs as long as these conditions
    are met and the position is appropriately resourced.
        We recognize that DOD has recently undertaken a significant
    reorganization, pursuant to statutory direction associated with
    disestablishment of the CMO, and reassigned the roles and
    responsibilities of the position to other offices. DOD has also
    established and is also utilizing different governance structures to
    help manage departmental reform. Among other things, after the CMO was
    disestablished, DOD implemented a new approach to business reform
    focusing on a bottom-up approach that emphasizes DOD organizations'
    responsibility to initiate and implement business reforms. As recently
    as August 2023, the Deputy Secretary of Defense approved a list of
    crosscutting initiatives and DOD established a new senior governance
    structure for its business management and reform efforts. While DOD has
    made some progress laying the groundwork for collecting data associated
    with its business reforms under its new structure, it is too soon to
    determine if it will be successful. GAO will be reporting on DOD's
    initial efforts in implementing this new structure in the Fall 2023,
    and will continue to monitor its progress moving forward.

        24. Senator Manchin. Mr. Roark, does the DOD Office of Inspector
    General endorse or support section 902 of S. 2226, the National Defense
    Authorization Act (NDAA), and does this include endorsing or supporting
    this section's inclusion through the NDAA conference process and within
    the final version of the Fiscal Year 2024 NDAA?
        Mr. Roark. The DOD OIG does not endorse or support pending
    legislation.

        25. Senator Manchin. Mr. Mosher, does the Congressional Budget
    Office endorse or support section 902 of S. 2226, the National Defense
    Authorization Act (NDAA), and does this include endorsing or supporting
    this section's inclusion through the NDAA conference process and within
    the final version of the Fiscal Year 2024 NDAA?
        Mr. Mosher. CBO's role is to provide objective, nonpartisan
    information to support the budget process and to help the Congress make
    effective budget and economic policy. The agency does not make policy
    recommendations or take positions on legislation.
                                   __________
                  Questions Submitted by Senator Dan Sullivan
                             military compensation
        26. Senator Sullivan. Mr. Mosher, I and other Senators serving on
    the Senate Armed Services Committee (SASC) have repeatedly discussed
    the military's recruiting challenges with DOD officials during hearings
    this year. In fact we had an entire hearing on the subject in May, in
    which we heard from senior representatives from each branch. DOD
    officials have provided many reasons for the recruiting crisis from
    lack of interest and fitness among young people to their fear of
    leaving home and perception that military service puts life on hold.
    However, one reason most timely and fitting to your appearance here
    today is the belief that in good economic times military recruiting
    suffers as more economic opportunities are available. However, as you
    know Mr. Mosher, the military offers an attractive compensation plan
    that not only includes a competitive salary but medical and life
    insurance, housing allowances, and extensive paid leave. In your
    opinion, what could the DOD do to make the current military
    compensation plan more understandable to potential recruiting pools?
        Mr. Mosher. Although military personnel are well compensated when
    compared with their peers in the civilian sector, the structure of
    DOD's compensation package is complicated. Its mix of cash, noncash,
    and deferred compensation (which includes veterans' benefits) differs
    significantly from the more straightforward wages or salaries that
    potential recruits or servicemembers who are contemplating reenlistment
    might use for comparison. Thus, one concern is that prospective and
    current members of the military may undervalue the military
    compensation package. The armed services provide military personnel
    with an accounting of the value of their compensation each year, but it
    is not clear how well that information is understood or how it informs
    members' decisions about reenlisting.
        CBO has not specifically examined ways to make the current military
    compensation package more easily understood to potential recruits. In
    its broader analysis of military compensation, however, the agency has
    presented options for changing aspects of the current compensation
    system, such as relying more on cash bonuses, that could improve
    understanding.\2\ In a related effort undertaken at the request of the
    Senate Armed Services Committee, CBO is developing an infographic that
    will illustrate, in part, how military compensation compares with
    compensation in the private sector.
    ---------------------------------------------------------------------------
        \2\ See, for example, Congressional Budget Office, Approaches to
    Changing Military Compensation (January 2020), www.cbo.gov/publication/
    55648.

        27. Senator Sullivan. Mr. Mosher, in what ways could the DOD
    improve the military compensation plan to make it more attractive?
        Mr. Mosher. An analysis by CBO has found that compared with their
    peers in the civilian sector, military personnel are well
    compensated.\3\ On average, enlisted personnel receive cash
    compensation that is higher than that received by about 90 percent of
    civilians of the same age and education level (which surpasses DOD's
    goal that cash compensation meet or exceed the 70th percentile of
    civilian earnings). Moreover, the difference between military and
    civilian compensation is greater than that comparison suggests because
    military compensation includes noncash benefits, such as health care,
    that civilians must purchase using their cash compensation. And after
    leaving the service, military members may be eligible for deferred
    benefits from the Department of Veterans Affairs, such as the GI Bill,
    health care, and compensation for medical conditions incurred during
    their service.
    ---------------------------------------------------------------------------
        \3\ Ibid.
    ---------------------------------------------------------------------------
        One way to make the military compensation package more attractive
    may be to make it easier to compare with compensation in the private
    sector (as discussed in CBO's response to the previous question).
    Another solution may be to change the relative mix of cash, noncash,
    and deferred compensation to make the overall package more attractive
    to potential recruits and service members contemplating reenlistment.
        Servicemembers receive a larger share of their overall compensation
    in the form of noncash and deferred benefits than do most people
    employed in the private sector. And evidence suggests that many service
    members greatly underestimate the full value of those deferred
    benefits. In addition, because cash can give people more control over
    their spending choices, current and prospective service members may
    value cash compensation more than noncash compensation. Increasing the
    share of military compensation that cash pay represents could improve
    efforts to attract and retain military personnel--particularly younger
    people. (Research has shown that senior military personnel tend to
    value deferred compensation in the form of retiree benefits more than
    their younger colleagues do.)
        CBO recently examined several ways that DOD could change the
    structure of military compensation to reduce or slow the growth of
    spending while still attracting and retaining a high-quality force.\4\
    Some changes could also help DOD fill needed positions and make the
    compensation package more appealing. One approach would emphasize cash
    bonuses instead of other elements of compensation--including increases
    in basic pay--to give DOD more flexibility to respond to recruiting
    challenges and to increase enrollment in undersubscribed career fields,
    such as aircraft maintenance or cybersecurity. A second approach would
    introduce a salary system in which military personnel would pay for
    housing, food, and health care for their families, like civilians do.
    Such a system would give policymakers, service members, and--perhaps
    most importantly--potential recruits a more complete view of the amount
    of cash pay that military personnel can earn.
    ---------------------------------------------------------------------------
        \4\ Congressional Budget Office, Approaches to Changing Military
    Compensation (January 2020), www.cbo.gov/publication/55648.
    ---------------------------------------------------------------------------
        Under one scenario in a new salary system, cash pay could be higher
    for junior enlisted service members who are single, particularly young
    members living in barracks. Raising their cash pay would encourage
    those members to stay in the military longer, in part because it would
    compensate them for the hardship of residing in barracks (one of the
    least attractive aspects of military life, according to surveys). Some
    service members might be worse off, however, and transitioning to a new
    salary system would be complicated. DOD's most recent comprehensive
    review of military compensation examined some of the advantages and
    disadvantages of a salary system but did not recommend implementing
    such a system.\5\
    ---------------------------------------------------------------------------
        \5\ Department of Defense, Report of the Thirteenth Quadrennial
    Review of Military Compensation, Volume I: Main Report (December 2020),
    www.tinyurl.com/28jammjb20 (PDF).

              special pay to attract dod civilian first responders
        28. Senator Sullivan. Ms. Field, several DOD installations in my
    State have historically had trouble attracting DOD civilians to fill
    first responder positions, particularly firefighters. Some of these
    reasons have included the remoteness of duty locations, cost of living,
    availability and affordability of housing, high cost of moving
    expenses, late declinations by applicants, and physical relocation to
    Alaska. However, more recently Fort Greely and Fort Wainwright have
    begun applying special pays to attract and retain DOD civilians in key
    first responder positions, which so far seems to be working. What
    hiring tools does the DOD currently have to hire DOD civilians into
    hard to fill positions?
        Ms. Field. While we have not evaluated the full range of hiring
    tools currently available to DOD to hire civilians into hard-to-fill
    positions, we have previously reviewed the department's use of specific
    hiring authorities to hire science, technology, engineering, and
    mathematics (STEM) personnel at the defense laboratories; the
    availability of support services to personnel in remote locations; and
    suicide prevention efforts at remote locations outside the contiguous
    United States. \27\ Our 2018 review of DOD's use of hiring authorities
    found that certain factors--such as the high demand for science and
    technology workers, competition with ]the private sector, the
    requirement for U.S. citizenship, and the need for security clearances,
    among other things--resulted in hiring challenges and prompted concern
    about the outlook for a workforce that is vital to the department's
    mission. \28\ To address some of those concerns, the Senate Armed
    Services Committee noted that it had taken steps to provide the defense
    laboratories with certain flexibilities from Federal rules and
    regulations that had the potential to hinder the laboratories' ability
    to carry out their critical missions. Those flexibilities included
    greater pay-setting authority and the ability to hire qualified
    candidates who meet certain criteria using direct hire. \29\ Laboratory
    officials we surveyed identified certain direct hiring authorities as
    both helpful in hiring STEM personnel and doing so in a timely manner.
    Laboratory officials also told us, however, that despite the
    availability of the hiring authorities, challenges to hiringqualified
    candidates remained.
    ---------------------------------------------------------------------------
        \27\ GAO, DOD Personnel: Further Actions Needed to Strengthen
    Oversight and Coordination of Defense Laboratories Hiring Efforts, GAO-
    18-417 (Washington, DC: May 30, 2018); Military Installations: DOD
    Should Consider Various Support Services when Designating Sites as
    Remote or Isolated, GAO-21-276 (Washington, DC: Jul. 29, 2021); and
    Suicide Prevention: DOD Should Enhance Oversight, Staffing, Guidance,
    and Training Affecting Certain Remote Installations, GAO-22-105108
    (Washington, DC: Apr. 28, 2022).
        \28\ GAO-18-417.
        \29\ These authorities are intended to expedite the hiring process
    and facilitate efforts to compete with the private sector.
    ---------------------------------------------------------------------------
        In 2021, we reported on challenges with obtaining support services
    at remote installations in the United States. \30\ While this report
    did not specifically cover first responders, remote installation
    officials identified challenges in general with filling and retaining
    civilian employees. For example, officials at the four installations
    included in our review stated that they gauge the interests of service
    members in specific morale, welfare, and recreation (MWR) programs and
    work with regional and service-level MWR officials to maximize the
    programs that the installation is able to offer. However, officials
    also stated that their ability to provide MWR services is negatively
    affected by factors such as low pay, commute time, and cost of living
    that impact their ability to fill and retain civilian employees at
    installations in remote or isolated areas. For example, officials at
    Clear Air Force Station, Alaska, told us that it is difficult to find
    civilian workers to support the food and beverage services on the
    installation because of low salaries, such as $11 an hour, and the
    commute from the nearest community, which is about 25 miles from the
    installation. In addition, officials from two of the four installations
    and respondents to our survey identified the lack of employment
    opportunities for their spouses as a concern. For example, at Marine
    Corps Mountain Warfare Training Center, Bridgeport, California, service
    members have to choose between living in family housing or in
    communities located another 30 miles from the installation so that
    their spouses can find employment. If they live in family housing, both
    the service member and the spouse face total commutes of over an hour a
    day; the service members face a commute of over 2 hours a day if they
    live in the nearest community.
    ---------------------------------------------------------------------------
        \30\ GAO-21-276.
    ---------------------------------------------------------------------------
        Additionally, in April 2022, we reviewed the department's suicide
    prevention policies, programs and activities for service members and
    dependents, including those assigned to remote locations outside the
    contiguous United States. \31\ We found that, while the department had
    taken steps to integrate suicide prevention into primary care, it
    experienced challenges in fully staffing the primary care behavioral
    health positions. According to Defense Health Agency (DHA) officials,
    these challenges included high demand for behavioral health providers,
    difficulties in recruiting behavioral health personnel that want to
    work in a primary care setting, undesirable locations, and prolonged
    hiring and on-boarding processes. However, while DHA officials were
    aware of the challenges, the agency had not addressed the shortages.
    ---------------------------------------------------------------------------
        \31\ GAO-22-105108.

        29. Senator Sullivan. Ms. Field, what improvements would you like
    to see in the previously mentioned area?
        Ms. Field. As noted, we have not evaluated the full range of hiring
    tools available to DOD to hire civilians into hard-to-fill positions.
    However, the previously discussed reviews of hiring at the defense
    laboratories, support services at remote installations, and the
    department's suicide prevention efforts at remote installations outside
    the contiguous United States identified steps the department could take
    to be better positioned to address associated personnel challenges.
    \32\
    ---------------------------------------------------------------------------
        \32\ GAO-18-417; GAO-21-276; and GAO-22-105108.
    ---------------------------------------------------------------------------
        For example, our 2018 review of the defense laboratories' use of
    hiring authorities found that the department needed to strengthen the
    oversight and coordination of its efforts to hire science, technology,
    engineering, and mathematics personnel at the defense laboratories.
    \33\ As a result, we recommended that the department obtain and monitor
    defense laboratory hiring data to improve oversight, and develop
    performance measures for evaluating the effectiveness of the
    laboratories' hiring. \34\ While DOD has since taken the necessary
    actions to address those recommendations, our findings and
    recommendations underscore the need for and importance of establishing
    proper oversight mechanisms, including obtaining and monitoring
    relevant data on hiring and developing performance measures, to better
    understand the use and efficacy of any hiring authorities.
    ---------------------------------------------------------------------------
        \33\ GAO-18-417.
        \34\ In GAO-18-417, we also recommended that DOD establish
    timeframes to guide hiring authority approval and implementation. DOD
    has implemented this recommendation.
    ---------------------------------------------------------------------------
        During our 2021 review of support services at remote installations,
    we recommended, among other things, that the Secretary of Defense, in
    collaboration with the Secretaries of the military departments and the
    Commandant of the Marine Corps, should systematically assess the risks
    associated with not having needed support services for service members
    and their dependents stationed in remote or isolated areas and
    subsequently develop strategies to better meet those needs as
    appropriate. \35\
    ---------------------------------------------------------------------------
        \35\ GAO-21-276.
    ---------------------------------------------------------------------------
        Our 2022 review of the department's suicide prevention efforts
    recommended that DOD develop a strategy to address the previously noted
    primary care behavioral health provider staffing shortages, including
    those at remote installations. \36\ Having such a plan is key to
    resolving shortages. In response to this recommendation, DOD provided
    us with standardized contract language for primary care behavioral
    health personnel and stated that it expects this language will improve
    recruitment and retention of these personnel by including an accurate
    position description and recommending the inclusion of certain
    incentives in the contract. However, to fully implement this
    recommendation, DOD should provide documentation that it has developed
    a strategy that comprehensively addresses challenges staffing those
    personnel. By developing such a strategy, DOD can help ensure the
    military services' ability to provide more comprehensive and effective
    behavioral health care to service members and dependents through
    primary care resources.
    ---------------------------------------------------------------------------
        \36\ GAO-22-105108.
    ---------------------------------------------------------------------------
        We also have direction from the Joint Explanatory Statement
    accompanying the NDAA for Fiscal Year 2023 that we assess civilian
    support at remote locations and provide a report. Specifically, the
    Joint Explanatory Statement directs GAO to assess 1) the average number
    of vacancies for civilian support services positions at remote or
    isolated military installations in comparison to vacancies for such
    positions at other military installations, and 2) the average number of
    days required to fill such a vacancy at a remote and isolated military
    installation in comparison to filling a vacancy of a position with the
    same duties at such other installations.

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