Report: Defense underestimated cost of personnel overhaul
Some indirect costs, such as those for administrative services, were not taken into account, auditors say.
The Defense Department has underestimated the cost of implementing a new personnel system for civilian employees, an issue that could hamper the system's management, according to a new report by the Government Accountability Office.
Defense's November 2005 estimate that it will cost $158 million through 2008 to implement the National Security Personnel System does not include indirect costs associated with its design and implementation, the report (GAO-07-851) said. Items left out include the full salaries for civilian and military personnel charged with putting the system in place, along with the cost of general administrative services, research and technical support, rent, maintenance costs for buildings, equipment and utilities.
"Without a cost estimate that includes all costs the department expects to incur as a result of implementing the new system, decision-makers -- within DoD and Congress -- will not have the complete cost information they need to make decisions about whether adequate resources are being provided," the report said.
GAO said federal financial accounting standards hold that reliable information on costs of federal programs is essential to effective management. It is also important in helping Congress and executives make informed funding decisions.
But Defense's pervasive financial management deficiencies have been the basis for the designation of this as a high-risk area since 1995, GAO stated.
Auditors recommended that Defense define all direct and indirect costs of NSPS, prepare a revised estimate of these costs in accordance with federal financial accounting standards, and develop a comprehensive oversight framework to ensure that all funds are fully captured and reported.
Defense officials concurred with most of GAO's recommendations, but noted that the department already has launched an effort to better identify overall costs -- an effort that is not reflected in the draft report.
Defense agreed, however, to develop a revised estimate of applicable costs for implementing NSPS from fiscal 2008 to 2011. "As is true for the first estimate . . . the revised estimate could be affected by congressional changes to the authorities that govern the system," Defense said.
Congress granted the department authority in the 2004 Defense authorization act to create a new human resources system, based on the notion that the current one was too rigid and outdated to allow an effective response to modern threats of terrorism.
But NSPS has been the subject of much controversy, with critics arguing that the system illegally curtails the collective bargaining rights of employees. An appeals court ruled in May that the 2004 law grants the agency the authority to scale back collective bargaining rights until November 2009. A petition submitted by federal labor unions for a review of that decision by the full appeals court is pending.
In the meantime, unions have been lobbying Congress to pass language to block aspects of NSPS. In May, the House passed the 2008 Defense authorization bill, which includes language that would repeal the existing authority of Defense to move forward on the labor relations portions of the system. The Senate Armed Services Committee passed similar language late that month.