DOD Systems Modernization:

Continued Investment in the Standard Procurement System Has Not Been Justified

GAO-01-682: Published: Jul 31, 2001. Publicly Released: Sep 4, 2001.

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This report reviews the Department of Defense's (DOD) ability to contract for goods and services by acquiring and implementing a standard procurement system (SPS). DOD's management of SPS is a lesson in how not to justify, make, and monitor the implementation of information technology investment decisions. Specifically, DOD has not (1) ensured that accountability and responsibility for measuring progress against commitments are clearly understood, performed, and reported; (2) demonstrated, on the basis of reliable data and credible analysis, that the proposed system solution will produce economic benefits commensurate with costs; (3) used data on progress against project cost, schedule, and performance commitments throughout a project's life cycle to make investment decisions; and (4) divided this large project into a series of incremental investment decisions to spread the risks over smaller, more manageable components. Because it has yet to effectively apply any of these basic tenets of effective investment management to SPS, DOD lacks the basic information needed to make informed decisions on how to proceed with the project. Nevertheless, DOD continues to push forward in acquiring and deploying additional versions of SPS. Continuing this approach involves considerable risk. GAO summarized this report in testimony before Congress; see DOD's Standard Procurement System: Continued Investment Has Yet to Be Justified, by Joel C. Willemssen, Managing Director for Information Technology Issues, before the Subcommittee on National Security, Veterans Affairs, and International Relations, House Committee on Government Reform. GAO-02-392T, Feb. 3 (13 pages).

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: According to the SPS Program Manager, DOD has begun to monitor the state of progress against program commitments and has used this information in investment decisions such as the replacement of 5 legacy systems.

    Recommendation: The Secretary of Defense should direct the Assistant Secretary of Defense for C3I to take the necessary actions, in collaboration with the SPS program manager, to immediately determine the current state of progress against program commitments addressed in this report and to ensure that such information is used in all future investment decisions concerning SPS.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: According to SPS program officials, Progam Analysis and Evaluation officials have reviewed the business case analyses for increments 2 and 3 of the system.

    Recommendation: The Secretary of Defense should direct the Director, Program Analysis and Evaluation, to validate any analysis produced to justify further investment in SPS and to report any validation results to the Assistant Secretary of Defense for C3I, and that no further decisions to invest in SPS be made without these validation results.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: According to DOD, two business case analyses (BCA) of SPS version 4.2, increment 2 and one for increment 3 have been conducted. In addition, DOD stated that a productivity and enhancement study was conducted that enabled them to determine that, through development and deployment of SPS, DOD is realizing annualized benefits from 17 benefits validated from the economic analysis. According to DOD, the most recent economic analysis leveraged the results of all the previous ones and focused on costs and benefits of all increments combined as one monolithic program. DOD stated that the BCAs for the version 4.2 increments support the economic justification of the SPS program until the economic analysis is updated for the full deployment decision review for increment 3 scheduled for spring 2006.

    Recommendation: The Secretary of Defense should direct the Assistant Secretary of Defense for C3I, as the designated approval authority for SPS, to make investment in each new release, or each enhancement to an existing release, conditional upon (1) validating that already implemented releases of the system are producing benefits that exceed costs and (2) demonstrating on the basis of credible analysis and data that (a) proposed new releases or enhancements to existing releases will produce benefits that exceed costs and (b) operation and maintenance of already deployed releases of SPS will produce benefits that exceed costs.

    Agency Affected: Department of Defense

  4. Status: Closed - Implemented

    Comments: DOD has established and communicated to applicable DOD organizations SPS' chain-of-command and defined each organization's responsibilities. In addition, the Assistant Secretary of Defense for Networks and Information Integration (ASD/NII)/DOD CIO (formerly C3I) has clarified organizational accountability and responsibility for the program.

    Recommendation: The Secretary of Defense should direct the Assistant Secretary of Defense for Command, Control, Communications, and Intelligence (C3I), as the designated approval authority for SPS, to clarify organizational accountability and responsibility for measuring SPS progress against commitments and to ensure that these responsibilities are met.

    Agency Affected: Department of Defense

  5. Status: Closed - Implemented

    Comments: ASD NII issued a report that documented the lessons learned and the potential mitigating actions that the department could take to avoid making similar mistakes on future programs.

    Recommendation: The Secretary of Defense should direct the Assistant Secretary of Defense for C3I to report by October 31, 2001, to the Secretary and to DOD's relevant congressional committees on lessons learned from the SPS investment management experience, including what actions will be taken to prevent a recurrence of this experience on other system acquisition programs.

    Agency Affected: Department of Defense

 

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