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

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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:

Environmental Protection: Observations on Elevating the EPA to Cabinet Status, March 22, 2002 (GAO-02522T).

"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.

12 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

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management, and FEMA as the lead federal agency for consequence management for domestic terrorist attacks. In May 1998, PDD 62 established the position of national coordinator for terrorism within the National Security Council. PDD 63 emphasized new efforts to protect the nation's critical infrastructure from attack. Through legislation, the federal government increased the availability of grants for first responder training and instituted more regular tabletop training exercises involving state and local governments.

A number of blue ribbon panels or commissions were also convened prior to September 11th and, after studying the government's structure and methods for protecting against terrorism, made many important and timely recommendations for improving our approach. Panels led by former Senators Gary Hart and Warren Rudman, as well as former Virginia Governor James Gilmore, made sweeping recommendations about remedying the gaps, overlaps and coordination problems in the government's ability to detect, prevent, and respond to terrorist attacks in a comprehensive manner across both the public and private sectors. Indeed, the Hart-Rudman Commission recommended the creation of a new department to consolidate many of the government's homeland security functions.

In recent years, GAO has also issued numerous reports and made many recommendations designed to improve the nation's approach to homeland security. We summarized our work in a report completed just prior to the September 11th attacks, in which we found that: (1) overall leadership and coordination needed to be addressed; (2) limited progress had been made in developing a national strategy and related guidance and plans; (3) federal response capabilities had improved but further action was still necessary; (4) federal assistance to state and local governments could be consolidated; and (5) limited progress had been made in implementing a strategy to counter computer-based threats." We have continued to re-iterate that a central focal point such as OHS be established statutorily in order to coordinate and oversee homeland security policy within a national framework. Today, we re-emphasize the need for OHS to be established statutorily in order to effectively coordinate activities beyond the scope of the proposed DHS and to assure reasonable congressional oversight.

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As mentioned previously, after the September 11th terrorist attacks, Congress and the Administration took a number of actions designed to improve our ability to combat terrorism and protect the nation. The President created OHS via executive order. Congress passed legislation creating the Transportation Security Administration (TSA) to better secure transportation and the USA Patriot Act to improve our capabilities to detect and prevent terrorist acts. Congress also introduced legislation to restructure a variety of homeland security related functions, and Senator Lieberman and Representative Thornberry proposed legislation to create a new cabinet department to consolidate many homeland security functions.

On June 6th, President Bush announced a new proposal to create a Department of Homeland Security and submitted draft legislation to Congress on June 18th. Like the congressional approaches to creation of a new department, the President's plan also reflected many of the recent commissions' suggestions and GAO's recommendations for improved coordination and consolidation of homeland security functions. As indicated by Governor Ridge is his recent testimony before Congress, the creation of DHS would empower a single

13 Combating Terrorism: Selected Challenges and Recommendations, September 20, 2001 (GAO-01-822). Homeland Security: Responsibility and Accountability for Achieving National Goals, April 11, 2002 (GAO02-627T).