DOD Business Systems Modernization
Longstanding Management and Oversight Weaknesses Continue to Put Investments at Risk Gao ID: GAO-03-553T March 31, 2003The Department of Defense's (DOD) management of its business systems modernization program has been an area of longstanding concern to Congress and one that GAO has designated as high risk since 1995. Because of this concern, GAO was requested to testify on (1) DOD's current inventory of existing and new business systems and the amount of funding devoted to this inventory; (2) DOD's modernization management capabilities, including weaknesses and DOD's efforts to address them; and (3) GAO's collective recommendations for correcting these weaknesses and minimizing DOD's exposure to risk until they are corrected. In developing this testimony, GAO drew from its previously issued reports on DOD's business systems modernization efforts, including one released today on four key Defense Finance and Accounting Service (DFAS) projects.
As of October 2002, DOD reported that its business systems environment consisted of 1,731 systems and system acquisition projects spanning about 18 functional areas. This environment is the product of unrelated, stovepiped initiatives supporting nonstandard, duplicative business operations across DOD components. For fiscal year 2003, about $18 billion of DOD's IT funding relates to operating, maintaining, and modernizing these nonintegrated systems. To DOD's credit, it recognizes the need to modernize, eliminating as many of these systems as possible. The future of DOD's business systems modernization is fraught with risk because of longstanding and pervasive modernization weaknesses, three of which are discussed below. GAO's report on four DFAS systems highlights some of these weaknesses, and GAO's prior reports have identified the others. DOD has stated its commitment to addressing each and has efforts under way that are intended to do so. Lack of departmentwide enterprise architecture: DOD does not yet have an architecture, or blueprint, to guide and constrain its business system investments across the department. Nevertheless, DOD continues to spend billions of dollars on new and modified systems based the parochial needs and strategic direction of its component organizations. This will continue to result in systems that are duplicative, are not integrated, are unnecessarily costly to maintain and interface, and will not adequately address longstanding financial management problems. Lack of effective investment management: DOD does not yet have an effective approach to consistently selecting and controlling its investments as a portfolio of competing department options and within the context of an enterprise architecture. DOD is also not ensuring that it invests in each system incrementally and on the basis of reliable economic justification. For example, for the four DFAS projects, DOD spent millions of dollars without knowing whether the projects would produce value commensurate with costs and risks. Thus far, this has resulted in the termination of one of the projects after about $126 million and 7 years of effort was spent. Lack of effective oversight: DOD has not consistently overseen its system projects to ensure that they are delivering promised system capabilities and benefits on time and within budget. For example, for the four DFAS projects, oversight responsibility is shared by the DOD Comptroller, DFAS, and the DOD chief information officer. However, these oversight authorities have largely allowed the four to proceed unabated, even though each was experiencing significant cost increases, schedule delays, and/or capability and scope reductions and none were supported by adequate economic justification. As a result, DOD invested approximately $316 million in four projects that may not resolve the very financial management weaknesses that they were initiated to address.
GAO-03-553T, DOD Business Systems Modernization: Longstanding Management and Oversight Weaknesses Continue to Put Investments at Risk
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Testimony:
Before the House Subcommittee on National Security, Emerging Threats,
and International Relations, and Subcommittee on Technology,
Information Policy, Intergovernmental Relations and Census, Government
Reform Committee:
United States General Accounting Office:
GAO:
For Release on Delivery Expected at 1 p.m.
Monday, March 31, 2003:
DOD Business Systems Modernization:
Longstanding Management and Oversight Weaknesses Continue to Put
Investments at Risk:
Statement of Randolph C. Hite, Director:
Information Technology Architecture and Systems Issues:
Gregory D. Kutz, Director:
Financial Management and Assurance:
GAO-03-553T: Business Systems Modernization:
GAO Highlights:
Highlights of GAO-03-553T, a testimony to House Subcommittee on
National Security, Emerging Threats, and International Relations, and
Subcommittee on Technology, Information Policy, Intergovernmental
Relations and Census, Government Reform Committee
Why GAO Did This Study:
The Department of Defense‘s (DOD) management of its business systems
modernization program has been an area of longstanding concern to
Congress and one that GAO has designated as high risk since 1995.
Because of this concern, GAO was requested to testify on (1) DOD‘s
current inventory of existing and new business systems and the amount
of funding devoted to this inventory; (2) DOD‘s modernization
management capabilities, including weaknesses and DOD‘s efforts to
address them; and (3) GAO‘s collective recommendations for correcting
these weaknesses and minimizing DOD‘s exposure to risk until they are
corrected.
In developing this testimony, GAO drew from its previously issued
reports on DOD‘s business systems modernization efforts, including one
released today on four key Defense Finance and Accounting Service
(DFAS) projects.
What GAO Found:
As of October 2002, DOD reported that its business systems environment
consisted of 1,731 systems and system acquisition projects spanning
about 18 functional areas. This environment is the product of
unrelated, stovepiped initiatives supporting nonstandard, duplicative
business operations across DOD components. For fiscal year 2003, about
$18 billion of DOD‘s IT funding relates to operating, maintaining, and
modernizing these nonintegrated systems. To DOD‘s credit, it recognizes
the need to modernize, eliminating as many of these systems as
possible.
The future of DOD‘s business systems modernization is fraught with risk
because of longstanding and pervasive modernization weaknesses, three
of which are discussed below. GAO‘s report on four DFAS systems
highlights some of these weaknesses, and GAO‘s prior reports have
identified the others. DOD has stated its commitment to addressing each
and has efforts under way that are intended to do so.
Lack of departmentwide enterprise architecture: DOD does not yet have
an architecture, or blueprint, to guide and constrain its business
system investments across the department. Nevertheless, DOD continues
to spend billions of dollars on new and modified systems based the
parochial needs and strategic direction of its component organizations.
This will continue to result in systems that are duplicative, are not
integrated, are unnecessarily costly to maintain and interface, and
will not adequately address longstanding financial management problems.
Lack of effective investment management: DOD does not yet have an
effective approach to consistently selecting and controlling its
investments as a portfolio of competing department options and within
the context of an enterprise architecture. DOD is also not ensuring
that it invests in each system incrementally and on the basis of
reliable economic justification. For example, for the four DFAS
projects, DOD spent millions of dollars without knowing whether the
projects would produce value commensurate with costs and risks. Thus
far, this has resulted in the termination of one of the projects after
about $126 million and 7 years of effort was spent.
Lack of effective oversight: DOD has not consistently overseen its
system projects to ensure that they are delivering promised system
capabilities and benefits on time and within budget. For example, for
the four DFAS projects, oversight responsibility is shared by the DOD
Comptroller, DFAS, and the DOD chief information officer. However,
these oversight authorities have largely allowed the four to proceed
unabated, even though each was experiencing significant cost increases,
schedule delays, and/or capability and scope reductions and none were
supported by adequate economic justification. As a result, DOD invested
approximately $316 million in four projects that may not resolve the
very financial management weaknesses that they were initiated to
address.
What GAO Recommends
GAO has previously made a series of recommendations related to putting
in place (1) an enterprise architecture to guide and constrain system
investments; (2) an investment management structure to ensure that
systems are aligned with the architecture and economically justified
and approved on an incremental basis; (3) effective oversight to ensure
that project commitments are met; and (4) limited investment spending
until these recommendations are implemented.
www.gao.gov/cgi-bin/getrpt?GAO-03-553T.
To view the full report, including the scope and methodology, click on
the link above. For more information, contact Randolph C. Hite at (202)
512-5555 or hiter@gao.gov or Gregory D. Kutz at (202) 9505 or
kutzg@gao.gov.
[End of section]
GAO-03-553T:
Messrs. Chairmen and Ranking Members of the Subcommittees:
We are pleased to be here today to discuss the Department of Defense‘s
(DOD) management of its business systems[Footnote 1] modernization
program, an area of longstanding concern to the Congress, and one that
we first designated as a high risk program in 1995[Footnote 2] and
continue to do so today.[Footnote 3] As we have said,[Footnote 4] DOD‘s
existing systems cannot provide reliable financial data to support
informed decisionmaking and promote accountability, thus leaving DOD at
a high risk of fraud, waste, and abuse. In addition, we have said that
DOD‘s business systems modernization will remain at risk until the
department has implemented proven modernization management controls
that are embodied in the Clinger-Cohen Act, federal guidance, and
commercial best practices. These controls include investing in new and
existing systems within the context of a departmentwide modernization
blueprint, commonly called an enterprise architecture; investing in
these systems in an incremental or modular fashion, and only when they
can be economically justified on the basis of costs, benefits, and
risks; and overseeing these system investments to ensure that they are
delivering promised system capabilities and benefits on time and within
budget.
Last year, your hearing[Footnote 5] brought additional attention and
focus to DOD‘s business systems modernization program. In our testimony
at that hearing, we highlighted the department‘s modernization
management weaknesses, and the department testified that it was
committed to addressing each. Since then, DOD has begun a number of
efforts to follow through on its stated commitment. For example, it
plans to issue the first version of its enterprise architecture in May
2003, it is creating a new investment governance and oversight
approach, and it is revising its system acquisition guidance. We view
each of these as positive steps. However, the fact remains that today,
with but isolated exceptions, DOD‘s management and oversight of its
hundreds of new and existing system investments is largely unchanged
from where it was last year. As a result, the $18 billion that DOD has
designated for business systems in fiscal year 2003 continues to be at
risk. In particular, our report that you are releasing today shows that
for four key accounting system projects, DOD oversight has been limited
and has allowed hundreds of millions of dollars to be spent without
adequate economic justification.[Footnote 6] Thus far, this has
resulted in one of these systems being terminated after about $126
million and 7 years of effort has been spent.
As you requested, our testimony today discusses (1) DOD‘s current
business systems environment, including a profile of (a) the number and
types of systems that have proliferated over the years and (b) the
enormous amounts of funding that are being spent to operate and
maintain existing systems and to introduce new systems; (2) DOD‘s
institutional modernization management weaknesses, including specific
system investments that are at risk because of them, such as the above-
mentioned accounting systems, and (3) a framework for overcoming these
modernization management weaknesses and limiting DOD‘s exposure to
investment risk until they are resolved, which is based on our open
recommendations to the department.
In developing this testimony, we drew from our previously issued
reports on DOD‘s business systems modernization efforts, as well as the
report being released today.
DOD Is Investing Billions of Dollars Annually to Operate, Maintain, and
Modernize Its Amalgamation of Business Systems:
As part of its ongoing business systems modernization program, and
consistent with our past recommendation,[Footnote 7] DOD has created an
inventory of its existing and new business system investments. As of
October 2002, DOD reported that this inventory consisted of
1,731[Footnote 8] systems and system acquisition projects across DOD‘s
functional areas. In particular, DOD reported that it had 374 separate
systems to support its civilian and military personnel function, 335
systems to perform finance and accounting functions, and 221 systems
that support inventory management. Table 1 presents the composition of
DOD business systems by functional area.
Table 1: Reported DOD Business Systems by Functional Area:
[See PDF for image]
Source: DOD Business Modernization Systems Integration Office.
[A] There are 29 reported duplications within the DOD inventory (e.g.,
systems shown in multiple functional areas). Taking this duplication
into account provides the reported 1,731 business systems.
Note: More recent DOD data indicate that the number of systems is
2,114.
[End of table]
As we have previously reported,[Footnote 9] this systems environment is
not the result of a systematic and coordinated departmentwide strategy,
but rather is the product of unrelated, stovepiped initiatives to
support a set of business operations that are nonstandard and
duplicative across DOD components. Consequently, DOD‘s amalgamation of
systems is characterized by (1) multiple systems performing the same
tasks; (2) the same data stored in multiple systems; (3) manual data
entry and reentry into multiple systems; and (4) extensive data
translations and interfaces, each of which increases costs and limits
data integrity. Further, as we have reported, these systems do not
produce reliable financial data to support managerial decisionmaking
and ensure accountability. To the department‘s credit, it recognizes
the need to eliminate as many systems as possible and integrate and
standardize those that remain. In fact, three of the four Defense
Finance and Accounting Service (DFAS) projects that are the subject of
the report being released today were collectively intended to reduce or
eliminate all or part of 17 different systems that perform similar
functions. For example,
* the Defense Procurement Payment System (DPPS) was intended to
consolidate eight contract and vendor pay systems;
* the Defense Departmental Reporting System (DDRS) is intended to
reduce the number of departmental financial reporting systems from
seven to one; and:
* the Defense Standard Disbursing System (DSDS) is intended to
eliminate four different disbursing systems.
The fourth system, the DFAS Corporate Database/Corporate Warehouse
(DCD/DCW),[Footnote 10] is intended to serve as the single DFAS data
store, meaning it would contain all DOD financial information required
by DFAS and be the central point for all shared data within DFAS.
For fiscal year 2003, DOD has requested approximately $26 billion in IT
funding to support a wide range of military operations and business
functions. This $26 billion is spread across the military services and
defense agencies--each receiving its own allocation of IT funding. The
$26 billion supports three categories of IT--business systems, business
systems infrastructure, and national security systems--the first two of
which comprise the earlier cited 1,731 new and existing business
systems projects.
At last year‘s hearing, DOD was asked about the makeup of its $26
billion in IT funding, including what amounts relate to business
systems and related infrastructure, at which time answers were
unavailable. As we are providing in the report being released today and
as shown in figure 1, approximately $18 billion--about $5.2 billion for
business systems and $12.8 billion for business systems infrastructure-
-relates to the operation, maintenance, and modernization of the 1,731
business systems that DOD reported having in October 2002. Figure 2
provides the allocation of DOD‘s business systems modernization budget
for fiscal year 2003 budget by component.
Figure 1: Allocation of DOD‘s Fiscal Year 2003 Information Technology
(IT) Budget:
[See PDF for image]
[End of figure]
Figure 2: Proposed Allocation of DOD‘s Fiscal Year 2003 Business
Systems Modernization Budget by Component (dollars in billions):
[See PDF for image]
[End of figure]
However, recognizing the need to modernize and making funds available
are not sufficient for improving DOD‘s current systems environment. Our
research of successful modernization programs in public and private-
sector organizations, as well as our reviews of these programs in
various federal agencies, has identified a number of IT disciplines
that are necessary for successful modernization. These disciplines
include having and implementing (1) an enterprise architecture to guide
and constrain systems investments; (2) an investment management process
to ensure that systems are invested in incrementally, are aligned with
the enterprise architecture, and are justified on the basis of cost,
benefits, and risks; and (3) a project oversight process to ensure that
project commitments are being met and that needed corrective action is
taken. These institutionalized disciplines have been long missing at
DOD, and their absence is a primary reason for the system environment
described above.
Key Modernization Management Weaknesses Continue, But DOD Plans to
Correct Them:
The future of DOD‘s business systems modernization is fraught with
risk, in part because of longstanding and pervasive modernization
management weaknesses. As we have reported, these weaknesses include
(1) lack of an enterprise architecture; (2) inadequate institutional
and project-level investment management processes; and (3) limited
oversight of projects‘ delivery of promised system capabilities and
benefits on time and within budget. To DOD‘s credit, it recognizes the
need to address each of these weaknesses and has committed to doing so.
DOD Is Developing, But Still Is Without, a Departmentwide Enterprise
Architecture:
Effectively managing a large and complex endeavor requires, among other
things, a well-defined and enforced blueprint for operational and
technological change, commonly referred to as an enterprise
architecture. Developing, maintaining, and using architectures is a
leading practice in engineering both individual systems and entire
enterprises. Government-wide requirements for having and using
architectures to guide and constrain IT investment decisionmaking are
also addressed in federal law and guidance.[Footnote 11] Our experience
has shown that attempting a major systems modernization program without
a complete and enforceable enterprise architecture results in systems
that are duplicative, are not well integrated, are unnecessarily costly
to maintain and interface, do not ensure basic financial
accountability, and do not effectively optimize mission
performance.[Footnote 12]
In May 2001,[Footnote 13] we reported that DOD had neither an
enterprise architecture for its financial and financial-related
business operations nor the management structure, processes, and
controls in place to effectively develop and implement one. Further, we
stated that DOD‘s plans to continue spending billions of dollars on new
and modified systems independently from one another, and outside the
context of a departmental modernization blueprint, would result in more
systems that are duplicative, noninteroperable, and unnecessarily
costly to maintain and interface; moreover, they would not address
longstanding financial management problems. To assist the department,
we provided a set of recommendations on how DOD should approach
developing its enterprise architecture.
In September 2002, the Secretary of Defense designated improving
financial management operations (including such business areas as
logistics, acquisition, and personnel management) as one of the
department‘s top 10 priorities. In addition, the Secretary established
a program to develop an enterprise architecture, and DOD plans to have
the architecture developed by May 2003. Subsequently, the National
Defense Authorization Act for Fiscal Year 2003 directed DOD to develop,
by May 1, 2003, an enterprise architecture, including a transition plan
for its implementation.[Footnote 14] The act also defined the scope and
content of the enterprise architecture and directed us to submit to
congressional defense committees an assessment of DOD‘s actions to
develop the architecture and transition plan no later than 60 days
after their approval. Finally, the act prohibited DOD from obligating
more than $1 million on any financial systems improvement until the DOD
comptroller makes a determination regarding the necessity or
suitability of such an investment.
In our February 2003 report[Footnote 15] on DOD enterprise architecture
efforts, we stated our support for the Secretary‘s decision to develop
the architecture and recognized that DOD‘s architecture plans were
challenging and ambitious. However, we also stated that despite taking
a number of positive steps toward its architecture goals, such as
establishing a program office responsible for managing the enterprise
architecture, the department had yet to implement several key
recommendations and certain leading practices for developing and
implementing architectures. For example, DOD had yet to (1) establish
the requisite architecture development governance structure needed to
ensure that ownership of and accountability for the architecture is
vested with senior leaders across the department; (2) develop and
implement a strategy to effectively communicate the purpose and scope,
approach to, and roles and responsibilities of stakeholders in
developing the enterprise architecture; and (3) fully define and
implement an independent quality assurance process. We concluded that
not implementing these recommendations and practices increased DOD‘s
risk of developing an architecture that would be limited in scope,
would be resisted by those responsible for implementing it, and would
not support effective systems modernization. To assist the department,
we made additional recommendations with which DOD agreed. We plan to
continue reviewing DOD‘s efforts to develop and implement this
architecture pursuant to our mandate under the fiscal year 2003 defense
authorization act.
DOD Has Yet to Implement Effective Investment Management Processes:
The Clinger-Cohen Act, federal guidance, and recognized best practices
provide a framework for organizations to follow to effectively manage
their IT investments. Collectively, this framework addresses IT
investment management at the institutional or corporate level, as well
as the individual project or system level. The former involves having a
single, corporate approach governing how the organization‘s portfolio
of IT investments is selected, controlled, and evaluated across its
various components, including assuring that each investment is aligned
with the organization‘s enterprise architecture. The latter involves
having a system/project-specific investment approach that provides for
making investment decisions incrementally and ensuring that these
decisions are economically justified on the basis of current and
credible analyses.
Corporate investment management approach: DOD has yet to establish and
implement an effective departmentwide approach to managing its business
systems investment portfolio. In May 2001,[Footnote 16] we reported
that DOD did not have a departmentwide IT investment management process
through which to assure that its enterprise architecture, once
developed, could be effectively implemented. We therefore recommended
that DOD establish a system investment selection and control process
that treats compliance with the architecture as an explicit condition
to meet at key decision points in the system‘s life cycle and that can
be waived only if justified by compelling written analysis.[Footnote
17]
Subsequently, in February 2003, we reported that DOD had not yet
established the necessary departmental investment management structure
and process controls needed to adequately align ongoing investments
with its architectural goals and direction.[Footnote 18] Instead, the
department continued to allow its component organizations to make their
own parochial investment decisions, following different approaches and
criteria. In particular, DOD had not established and applied common
investment criteria to its ongoing IT system projects using a hierarchy
of investment review and funding decisionmaking bodies, each composed
of representatives from across the department. DOD also had not yet
conducted a comprehensive review of its ongoing IT investments to
ensure that they were consistent with its architecture development
efforts. We concluded that until it takes these steps, DOD will likely
continue to lack effective control over the billions of dollars it is
currently spending on IT projects. To address this, we recommended that
DOD create a departmentwide investment review board with the
responsibility and authority to (1) select and control all DOD
financial management investments and (2) ensure that its investment
decisions treat compliance with the financial management enterprise
architecture as an explicit condition for investment approval that can
be waived only if justified by a compelling written analysis. DOD
concurred with our recommendations and is taking steps to address them.
Project/system-specific investment management: DOD has yet to ensure
that its investments in all individual systems or projects are
economically justified and that it is investing in each incrementally.
In particular, none of the four DFAS projects addressed in the report
being issued today had current and reliable economic justifications to
demonstrate that they would produce value commensurate with the costs
and risks being incurred. For example, we found that although DCD was
initiated to contain all DOD financial data required by DFAS systems,
planned DCD capabilities had since been drastically reduced. Despite
this, DFAS planned to continue investing in DCD/DCW without having an
economic justification showing whether its revised plans were cost
effective. Moreover, DOD planned to continue investing in the three
other projects even though none had current economic analyses that
reflected material changes to costs, schedules, and/or expected
benefits since the projects‘ inception. For example, the economic
analysis for DSDS had not been updated to reflect material changes in
the project, such as changing the date for full operational capability
from February 2003 to December 2005--a schedule change of almost 3
years that affected delivery of promised benefits. Similarly, the DPPS
economic analysis had not been updated to recognize an estimated cost
increase of $274 million and schedule slip of almost 4 years. After
recently reviewing this project‘s change in circumstances, the DOD
Comptroller terminated DPPS after 7 years of effort and an investment
of over $126 million, citing poor program performance and increasing
costs. Table 2 highlights the four projects‘ estimated cost increases
and schedule delays.
Table 2: Reported Cost Increases and Schedule Delays for the Four
Pojects (Dollars in Millions):
[See PDF for image]
Source: GAO, based on information provided by DFAS.
[A] Full operational capability means the system is deployed and
operating at all intended locations.
[B] When DFAS initiated DCW in July 2000, a full operational capability
date was not established. The current full operational capability date
applies to both DCD and DCW since they were combined into one program
in November 2000.
[C] DSDS began in 1997; however, a cost estimate was not developed
until September 2000 and this estimate has not been updated.
[End of table]
Our work on other DOD projects has shown a similar absence of current
and reliable economic justification for further system investment. For
example, we reported that DOD‘s ongoing and planned investment in its
Standard Procurement System (SPS)[Footnote 19] was based on an outdated
and unreliable economic analysis, and even this flawed analysis did not
show that the system was cost beneficial, as defined. As a result, we
recommended that investment in future releases or major enhancements to
the system be made conditional on the department‘s first demonstrating
that the system was producing benefits that exceeded costs and that
future investment decisions be made on the basis of complete and
reliable economic justifications. DOD is currently in the process of
addressing this recommendation.
Beyond not having current and reliable economic analyses for its
projects, DOD has yet to adopt an incremental approach to economically
justifying and investing in all system projects. For example, we have
reported that although DOD had divided its multiyear, billion-dollar
SPS project into a series of incremental releases, it had not treated
each of these increments as a separate investment decision.[Footnote
20] Such an incremental approach to system investment helps to prevent
discovering too late that a given project is not cost beneficial.
However, rather than adopt an incremental approach to SPS investment
management, the department chose to treat investment in SPS as one,
monolithic investment decision, justified by a single, all-or-nothing
economic analysis. This approach to investing in large systems, like
SPS, has proven ineffective in other federal agencies, resulting in
huge sums being invested in systems that do not provide commensurate
value, and thus has been abandoned by successful organizations.
We also recently reported that while DOD‘s Composite Health Care System
II had been structured into a series of seven increments (releases),
the department had not treated the releases to date as separate
investment decisions supported by incremental economic
justification.[Footnote 21] In response to our recommendations, DOD
committed to changing its strategy for future releases to include
economically justifying each release before investing in and verifying
each release‘s benefits and costs after deployment.
Effective Oversight of IT Projects Remains an Unanswered Challenge:
The Clinger-Cohen Act of 1996 and federal guidance[Footnote 22]
emphasize the need to ensure that IT projects are being implemented at
acceptable costs and within reasonable and expected timeframes and that
they are contributing to tangible, observable improvements in mission
performance (that is, that projects are meeting the cost, schedule, and
performance commitments upon which their approval was justified). They
also emphasize the need to regularly determine each project‘s progress
toward expectations and commitments and to take appropriate action to
address deviations.
Our work on specific DOD projects has shown that such oversight does
not always occur, a multi-example case in point being the four DFAS
accounting system projects that are the subject of our report being
released today.[Footnote 23] For these four projects, oversight
responsibility was shared by the DOD comptroller, DFAS, and the DOD
chief information officer (CIO). However, these oversight authorities
have not ensured, in each case, that the requisite analytical basis for
making informed investment decisions was prepared. Moreover, they have
not regularly monitored system progress toward expectations so that
timely action could have been taken to correct deviations, even though
each case had experienced significant cost increases and schedule
delays (see table 2). Their respective oversight activities are
summarized below:
DOD Comptroller--Oversight responsibility for DFAS activities,
including system investments, rests with the DOD Comptroller. However,
DOD Comptroller officials were not only unaware of cost increases and
schedule delays on these four projects, they also told us that they do
not review DFAS system investments to ensure that they are meeting
cost, schedule, and performance commitments because this is DFAS‘s
responsibility.
DFAS--This DOD agency has established an investment committee to, among
other things, oversee its system investments.[Footnote 24] However, the
committee could not provide us with any evidence demonstrating
meaningful oversight of these four projects, nor could it provide us
with any guidance describing the committee‘s role, responsibilities,
and authorities, and how it oversees projects.
DOD CIO--Oversight of the department‘s ’major“ IT projects, of which
two of the four DFAS projects (DCD/DCW and DPPS) qualify, is the
responsibility of DOD‘s CIO. However, this organization did not
adequately fulfill this responsibility on either project because,
according to DOD CIO officials, they have little practical authority in
influencing component agency-funded IT projects.
Thus, the bad news is that these three oversight authorities have
jointly permitted approximately $316 million to be spent on the four
accounting system projects without knowing if material changes to the
projects‘ scopes, costs, benefits, and risks warranted continued
investment. The good news is that the DOD Comptroller recently
terminated one of the four (DPPS), thereby avoiding throwing good money
after bad, and DOD has agreed to implement the recommendations
contained in our report released today, which calls for DOD to
demonstrate that the remaining three projects will produce benefits
that exceed costs before further investing in each.
Our work on other DOD projects has shown similar voids in oversight.
For example, we reported that SPS‘s full implementation date slipped by
3 ½ years, with further delays expected, and the system‘s life-cycle
costs grew by 23 percent, from $3 billion to $3.7 billion.[Footnote 25]
However, none of the oversight authorities responsible for this
project, including the DOD CIO, had required that the economic analysis
be updated to reflect these changes and thereby provide a basis for
informed decisionmaking on the project‘s future. To address this issue,
we recommended, among other things, that the lines of oversight
responsibility and accountability of the project be clarified and that
further investment in SPS be limited until such investment could be
justified. DOD has taken steps to address some of our recommendations.
For example, it has clarified organizational accountability and
responsibility for the program. However, much remains to be done before
the department will be able to make informed, data-driven decisions
about whether further investment in the system is justified.
Our Recommendations Provide a Roadmap for Improving Management of
Business Systems Modernization:
We have made numerous recommendations to DOD that collectively provide
a valuable roadmap for improvement as the department attempts to create
the management infrastructure needed to effectively undertake a massive
business systems modernization program. This collection of
recommendations is not without precedent, as we have provided similar
ones to other federal agencies, such as the Federal Aviation
Administration, the Internal Revenue Service, and the former U.S.
Customs Service, to aid them in building their respective capacities
for managing modernization programs. In cases where these
recommendations have been implemented properly, we have observed
improved modernization management and accountability.
Our framework for DOD provides for developing a well-defined and
enforceable DOD-wide enterprise architecture to guide and constrain the
department‘s business system investments, including specific
recommendations for successfully accomplishing this, such as creating
an enterprise architecture executive committee whose members are
singularly and collectively responsible and accountable for delivery
and approval of the architecture and a proactive enterprise
architecture marketing and communication program to facilitate
stakeholder understanding, buy-in, and commitment to the architecture.
Our recommendations also provide for establishing a DOD-wide investment
decisionmaking structure that consists of a hierarchy of investment
boards that are responsible for ensuring that projects meet defined
threshold criteria and for reviewing and deciding on projects‘ futures
on the basis of a standard set of investment criteria, two of which are
alignment with the enterprise architecture and return on investment.
In addition, our recommendations include ensuring that return on
investment is analytically supported by current and reliable economic
analyses showing that benefits are commensurate with costs and risks,
and that these analyses and associated investment decisions cover
incremental parts of each system investment, rather than treating the
system as one, all-or-nothing, monolithic pursuit. Further, our
recommendations provide clear and explicit lines of accountability for
project oversight and continuous monitoring and reporting of progress
against commitments to ensure that promised system capabilities and
benefits are being delivered on time and within budget.
Until these recommended system modernization management capabilities
are in place and effectively functioning, our recommendations also
provide for minimizing the department‘s exposure to investment risk by
limiting its investment in new and existing systems to only projects
that (1) have successfully completed testing and involve little
additional investment; (2) are ’stay-in-business“ in nature, meaning
that they involve maintenance actions needed to keep a system
operational; (3) are congressionally directed; or (4) are relatively
small, cost-effective, low-risk, and can be delivered within a short
timeframe.
In summary, the state of DOD‘s business systems environment, coupled
with the billions of dollars that DOD spends each year on both existing
and new systems, makes a compelling argument for modernizing, but only
in a way that ensures that the department does the right thing, and
that it does it the right way. Historically, the department‘s approach
to its business systems modernization has not provided for either.
Moreover, while the department‘s leadership has stated its commitment
to improving, and it has begun efforts on a number of fronts to
improve, DOD still is investing in systems in much the same manner that
it has for years. This is demonstrated by our testimony today, along
with our just-released report on four DFAS system investments and our
recent reports on a number of modernization management topics and other
DOD system investments. It is therefore imperative, in our view, that
DOD move swiftly in implementing our collective set of recommendations
aimed at improving its capacity to manage its business systems
modernization program. While DOD has largely agreed with these
recommendations and has efforts under way intended to implement them,
until it does, it will be at high risk of spending billions of dollars
on systems that do not support effective and efficient business
operations and are unable to provide timely and reliable information
for decisionmaking.
Mr. Chairmen, this concludes our statement. We would be pleased to
answer any questions you or Members of the subcommittees may have at
this time.
Contacts and Acknowledgement:
If you or your staff have any questions on matters discussed in this
testimony, please contact Randolph C. Hite at (202) 512-3439 or
hiter@gao.gov or Gregory D. Kutz at (202) 512-9505 or kutzg@gao.gov.
Individuals making key contributions to this testimony include Beatrice
Alff, Sophia Harrison, Tonia L. Johnson, Darby Smith, and Jenniffer
Wilson.
FOOTNOTES
[1] Business systems include those that are used to support civilian
personnel, finance, health, logistics, military personnel,
procurement, and transportation.
[2] U.S. General Accounting Office, High-Risk Series: An Overview, GAO-
HR-95-263 (Washington, D.C.: February 1995).
[3] U.S. General Accounting Office, High-Risk Series: An Update, GAO-
03-119 (Washington, D.C.: January 2003).
[4] U.S. General Accounting Office, DOD Business Systems Modernization:
Improvements to Enterprise Architecture Development and Implementation
Efforts Needed, GAO-03-458 (Washington, D.C.: Feb. 28, 2003) and
Information Technology: Architecture Needed to Guide Modernization of
DOD‘s Financial Operations, GAO-01-525 (Washington, D.C.: May 17,
2001).
[5] U.S. General Accounting Office, DOD Financial Management: Important
Steps Underway But Reform Will Require a Long-term Commitment, GAO-02-
784T (Washington, D. C.: June 4, 2002).
[6] U.S. General Accounting Office, DOD Business Systems Modernization:
Continued Investment in Key Accounting Systems Needs to be Justified,
GAO-03-465 (Washington, D.C.: Mar. 28, 2003).
[7] U.S. General Accounting Office, Financial Management: DOD
Improvement Plan Needs Strategic Focus, GAO-01-764 (Washington, D.C.:
Aug. 17, 2001).
[8] DOD continues to refine its inventory of systems. More recent data
indicate that the total number of systems is 2,114.
[9] GAO-02-784T.
[10] Originally, these were two separate projects, the DFAS Corporate
Database and Corporate Warehouse.
[11] Clinger-Cohen Act of 1996, P.L. 104-106; Office of Management and
Budget Circular A-130, Management of Federal Information Resources
(Nov. 30, 2000); A Practical Guide to Federal Enterprise Architectures,
Version 1.0, Chief Information Officers Council (February 2001); and
Federal Enterprise Architecture Framework, Version 1.1, Chief
Information Officers Council (September 1999).
[12] U.S. General Accounting Office, Air Traffic Control: Complete and
Enforced Architecture Needed for FAA Systems Modernization, GAO/AIMD-
97-30 (Washington, D.C.: Feb. 3, 1997) and Customs Service
Modernization: Architecture Must Be Complete and Enforced to
Effectively Build and Maintain Systems, GAO/AIMD-98-70 (Washington,
D.C.: May 5, 1998).
[13] GAO-01-525.
[14] Section 1004 of Public Law 107-314.
[15] GAO-03-458.
[16] GAO-01-525.
[17] The Defense Appropriation Act for Fiscal Year 2003, P.L. 107-248,
prohibits the use of funds appropriated by that act for a mission-
critical or mission-essential financial management IT system that is
not registered with the chief information officer of DOD.
[18] GAO-03-458.
[19] SPS is intended to replace 76 existing procurement systems with a
single departmentwide system to more effectively support divergent
contracting processes and procedures across its component
organizations.
[20] U.S. General Accounting Office, DOD Systems Modernization:
Continued Investment in Standard Procurement System Has Not Been
Justified, GAO-01-682 (Washington, D.C.: July 31, 2001) and DOD‘s
Standard Procurement System: Continued Investment Has Yet to Be
Justified, GAO-02-392T (Washington, D.C.: Feb. 7, 2002).
[21] U.S. General Accounting Office, Information Technology: Greater
Use of Best Practices Can Reduce Risks in Acquiring Defense Health Care
System, GAO-02-345 (Washington, D.C.: Sept. 26, 2002).
[22] Clinger-Cohen Act of 1996, Public Law 104-106; Office of
Management and Budget (OMB) Circular A-130 (Nov. 30, 2000); U.S.
General Accounting Office, Information Technology Investment
Management: A Framework for Assessing and Improving Process Maturity
(Exposure Draft) GAO/AIMD-10.1.23 (Washington, D.C.: May 2000).
[23] GAO-03-465.
[24] Chief Information Officers/Business Integration Executive
Council.
[25] GAO-02-392T.
