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Congress from seeking logical and important consolidations in government agencies and programs in order to improve homeland security missions. Rather, it is meant to suggest that reorganizations of government agencies frequently encounter start up problems and unanticipated consequences that result from the consolidations, are unlikely to fully overcome obstacles and challenges, and may require additional modifications in the future to effectively achieve our collective goals for defending the country against terrorism."

Organizational Principles and Criteria

The Congress faces a challenging and complex job in its consideration of DHS. On the one hand, there exists a certain urgency to move rapidly in order to remedy known problems relating to intelligence and information sharing and leveraging like activities that have in the past and even today prevent the United States from exercising as strong a homeland defense as emerging and potential threats warrant. Simultaneously, that same urgency of purpose would suggest that the Congress be extremely careful and deliberate in how it creates a new department for defending the country against terrorism. The urge to “do it quickly" must be balanced by an equal need to "do it right" in order to ensure a consensus on identified problems and needs, and to be sure that the solutions our government legislates and implements can effectively remedy the problems we face in a reasonably timely manner. It is clear that fixing the wrong problems, or even worse, fixing the right problems poorly, could cause more harm than good in our efforts to defend our country against terrorism.

The federal government has engaged in numerous reorganizations of agencies in our nation's history. Reorganizations have occurred at various times and for various reasons, and have been achieved through executive order, through recommendations by landmark commissions subsequently approved by the Congress, such as the Hoover Commission chaired by former President Herbert Hoover in the late 1940s, and by the Congress through its committee structure. The prevailing consensus on organizational management principles changed considerably during the course of the 20th century and through the various approaches to reorganization, but Hoover's Commission clearly articulated that agencies and functions of the executive branch should be grouped together based on their major purposes or missions. The government has not always followed Hoover's lead uniformly, but in recent years most departments except those serving a specific clientele, such as veterans, generally have been organized according to this principle."

GAO's own work on government restructuring and organization over the years has tended to support the overall tendency to emphasize consolidations of agencies as ways to improve the economy, efficiency and effectiveness of government operations. GAO has previously recommended that reorganizations should emphasize an integrated approach, that reorganization plans should be designed to achieve specific, identifiable goals, and that careful attention to fundamental public sector management practices and principles, such as strong financial, technology and human capital management are critical to the successful implementation of government reorganizations. Similarly, GAO has also suggested that reorganizations may be warranted based on the significance of the problems requiring

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Implementation: The Missing Link in Planning Reorganizations, March 20, 1981(GAO-GGD-81-57).
Reorganizing the Executive Branch in the 20th Century: Landmark Commissions (Congressional Research
Service, June 10, 2002) and Principles of Federal Organization (National Academy of Public
Administration, January, 1997)

Government Reorganization Issues and Principles, May 17, 1995 (GAO/T-GGD/AIMD-95-166).

resolution, as well as the extent and level of coordination and interaction necessary with other entities in order to resolve problems or achieve overall objectives."

Of course, there are many lessons to be learned from the private sector, which over the past 20 years has experienced an extraordinary degree of consolidation through the merger and acquisition of companies or business units. Among the most important lessons, besides ensuring that synergistic entities can broaden organizational strengths more than limit them, is the need to pay critical attention to the employees impacted by the reorganization, and to align the human capital strategies and core competency components of the organization in order to meet expectations and achieve results. 10 GAO has made similar conclusions and recommendations for the federal government." These observations are particularly apt to the proposed structure of DHS, which would combine an estimated 170,000 employees into a single department, making it the third largest government department in terms of personnel behind DOD and the Department of Veterans Affairs.

GAO, based on its own work as well as a review of other applicable studies of approaches to the organization and structure of entities, has concluded that Congress should consider utilizing specific criteria as a guide to creating and implementing the new department. Specifically, GAO has developed a framework that will help Congress and the Administration create and implement a strong and effective new cabinet department by establishing criteria to be considered for constructing the department itself, determining which agencies should be included and excluded, and leveraging numerous key management and policy elements that, after completion of the revised organizational structure, will be critical to the department's success. The following chart depicts the proposed framework:

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Environmental Protection: Observations on Elevating the EPA to Cabinet Status, March 22, 2002 (GAO-02

522T).

10

R.J. Kramer, Post Merger Organization Handbook (The Conference Board, 1999); and A.R. Lajoux, The

Art of M&A Integration (McGraw Hill, 1998) and James Brian Quinn, Intelligent Enterprise: A Knowledge and Service Based Paradigm for Industry (Free Press, 1992).

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Human Capital: A Self-Assessment Checklist for Agency Leaders, September 2000 (GAO/OCG-00-14G).

With respect to criteria that Congress should consider for constructing the department itself, the following questions about the overall purpose and structure of the organization should be evaluated:

Definition: Is there a clear and consistently applied definition of homeland security that will be used as a basis for organizing and managing the new department?

Statutory Basis: Are the authorities of the new department clear and complete in how they articulate roles and responsibilities and do they sufficiently describe the department's relationship with other parties?

Clear Mission: What will the primary missions of the new DHS be and how will it define success?

Performance-based Organization: Does the new department have the structure (e.g., COO, etc.) and statutory authorities (e.g., human capital, sourcing) necessary to meet performance expectations, be held accountable for results, and leverage effective management approaches for achieving its mission on a national basis?

Congress should also consider several very specific criteria in its evaluation of whether individual agencies or programs should be included or excluded from the proposed department. Those criteria include the following:

Mission Relevancy: Is homeland security a major part of the agency or
program mission? Is it the primary mission of the agency or program?
Similar Goals and Objectives: Does the agency or program being considered
for the new department share primary goals and objectives with the other
agencies or programs being consolidated?

Leverage Effectiveness: Does the agency or program being considered for the
new department create synergy and help to leverage the effectiveness of other
agencies and programs or the new department as a whole? In other words, is
the whole greater than the sum of the parts?

· Gains Through Consolidation: Does the agency or program being considered for the new department improve the efficiency and effectiveness of homeland security missions through eliminating duplications and overlaps, closing gaps and aligning or merging common roles and responsibilities?

Integrated Information Sharing/Coordination: Does the agency or program
being considered for the new department contribute to or leverage the ability of
the new department to enhance the sharing of critical information or otherwise
improve the coordination of missions and activities related to homeland
security?

Compatible Cultures: Can the organizational culture of the agency or
program being considered for the new department effectively meld with the
other entities that will be consolidated? Field structures and approaches to
achieving missions vary considerably between agencies.

Impact on Excluded Agencies: What is the impact on departments losing components to DHS? What is the impact on agencies with homeland security missions left out of DHS?

In addition to the criteria that Congress should consider when evaluating what to include and exclude from the proposed DHS, there are certain critical success factors the new department should emphasis in its initial implementation phase. GAO over the years has made observations and recommendations about many of these success factors, based on effective management of people, technology, financial and other issues, especially in its biannual Performance and Accountability Series on major government departments.' These factors include the following:

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Strategic Planning: Leading results-oriented organizations focus on the process of strategic planning that includes involvement of stakeholders, assessment of internal and external environments, and an alignment of activities, cores processes and resources to support mission-related outcomes.

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* Major Management Challenges and Program Risks: A Government wide Perspective, January 2001 (GAO01-241).

Organizational Alignment: The organization of the new department should be
aligned to be consistent with the goals and objectives established in the
strategic plan.

Communication: Effective communication strategies are key to any major
consolidation or transformation effort.

Building Partnerships: One of the key challenges of this new department will be the development and maintenance of homeland security partners at all levels of the government and the private sector, both in the United States and

overseas.

Performance Management: An effective performance management system fosters institutional, unit and individual accountability.

• Human Capital Strategy: The new department must ensure that that its homeland security missions are not adversely impacted by the government's pending human capital crisis, and that it can recruit, retain and reward a talented and motivated workforce, which has required core competencies, to achieve its mission and objectives. The people factor is a critical element in any major consolidation or transformation.

Information Management and Technology: The new department should leverage state-of-the art enabling technology to enhance its ability to transform capabilities and capacities to share and act upon timely, quality information about terrorist threats.

Knowledge Management: The new department must ensure it makes
maximum use of the collective body of knowledge that will be brought together
in the consolidation.

Financial Management: The new department has a stewardship obligation to
prevent fraud, waste and abuse, to use tax dollars appropriately, and to ensure
financial accountability to the President, Congress and the American people.
Acquisition Management: Anticipated as one of the largest of new federal
departments, the proposed DHS will potentially have one of the most extensive
acquisition requirements in government. Early attention to strong systems and
controls for acquisition and related business processes will be critical both to
ensuring success and maintaining integrity and accountability.
Risk Management: The new department must be able to maintain and
enhance current states of homeland security readiness while transitioning and
transforming itself into a more effective and efficient structural unit. The
proposed DHS will also need to immediately improve the government's overall
ability to perform risk management activities that can help to prevent, defend
against and respond to terrorist acts.

Homeland Security Reorganization

Prior to the terrorist attacks of September 11th, the United States in recent years had made what must be characterized as limited progress in strengthening its efforts to protect the nation from terrorist attacks. Mainly through the mechanisms of executive orders and presidential decision directives (PDD), the President has sought to provide greater clarity and leadership in homeland security areas. For instance, PDD 39 in June 1995 assigned the Department of Justice, through the FBI, responsibility as the lead federal agency for crisis