DOD Business Systems Modernization:

Billions Continue to Be Invested with Inadequate Management Oversight and Accountability

GAO-04-615: Published: May 28, 2004. Publicly Released: Jul 7, 2004.

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Despite its significant investment in business systems, the Department of Defense (DOD) continues to have long-standing financial and inventory management problems that prevent it from producing reliable and timely information for making decisions and for accurately reporting on its billions of dollars of inventory. GAO was asked to (1) identify DOD's fiscal year 2004 estimated funding for its business systems, (2) determine if DOD has effective control and accountability over its business systems investments, and (3) determine whether selected business systems will help resolve some of DOD's long-standing problems and whether they are being effectively managed.

DOD requested approximately $19 billion for fiscal year 2004 to operate, maintain, and modernize its reported 2,274 business systems. This stovepiped and duplicative systems environment evolved over time as DOD components--each with its own system funding--developed narrowly focused, parochial solutions to their business problems. As a result of this uncontrolled spending, DOD reported over 200 inventory systems and 450 personnel systems. DOD's fundamentally flawed business systems affect mission effectiveness and can contribute to the fraud, waste, and abuse that GAO continues to identify. Further, the number of business systems is likely understated in part because DOD does not have a central systems repository or a standard business system definition. DOD does not have an effective management structure for controlling business systems investments and the business domains' roles and responsibilities have not been defined. Further, DOD does not have reasonable assurance that it is in compliance with the National Defense Authorization Act for Fiscal Year 2003, which requires the DOD Comptroller to determine that system improvements exceeding $1 million meet the criteria specified in the act. Based on limited information provided by DOD, system improvements with at least $479 million of obligations over $1 million were not reviewed by the DOD Comptroller. GAO's two case studies are examples of DOD spending hundreds of millions on business systems that will not result in corporate solutions to its longstanding inventory and related financial management problems. While these efforts should provide some improvement to the Defense Logistics Agency's and the Army's business operations, implementation problems have resulted in schedule slippages, cost increases, and critical capabilities not being delivered. These issues can be attributed, in part, to the lack of disciplined processes in the areas of requirements management and testing. If not corrected, the problems will result in two more costly, nonintegrated systems that only marginally improve DOD business operations and further impede DOD's transformation as envisioned by the Secretary of Defense.

Matters for Congressional Consideration

  1. Status: Open

    Comments: The Congress has not yet acted upon our recommendation.

    Matter: To improve management oversight, accountability, and control of the DOD's business systems funding, Congress may wish to consider appropriating funds to operate, maintain, and modernize DOD's business systems to domain leaders rather than the military services and defense agencies.

  2. Status: Closed - Implemented

    Comments: Our report points out that the department has yet to establish an effective management oversight structure and processes to control its ongoing and planned business system investments. To address this continuing lack of oversight over billions of dollars, the Congress enacted the Ronald W. Reagan National Defense Authorization Act for Fiscal Year 2005, Public Law 108-375, which directs the Secretary of Defense to establish an investment review process that is responsible for reviewing the planning, design, acquisition, development, deployment, operation, maintenance, modernization, and project cost benefits and risks of all defense business systems. The act further directs that the review of defense business systems under the investment review process shall include the following: (1) review and approval by an investment review board of each defense business system as an investment before the obligation of funds on the system; (2) periodic review, but not less than annually, of every defense business system investment; (3) representation on each investment review board by appropriate officials from among the armed forces, combatant commands, the Joint Chiefs of Staff, and defense agencies; and (4) use of threshold criteria to ensure an appropriate level of review within the department and accountability for defense business system investments. The action taken by the Congress is in accordance with the intent of our recommendation.

    Matter: To improve management oversight, accountability, and control of the DOD's business systems funding, Congress may wish to consider directing that each domain establish a business system investment review board that is to be composed of representatives from the military services and defense agencies who will be responsible for review and approval of all business system investments.

  3. Status: Closed - Implemented

    Comments: DOD spends billions of dollars annually to operate, maintain, and modernize its business systems. In this regard, each military service and defense agency receives its own funding and is largely autonomous in deciding how to spend these funds, thereby enabling multiple system approaches to problems common within DOD. This funding structure has contributed to the duplicative, nonintegrated, error-prone systems environment that exists today. To improve management oversight, accountability, and control of the department's business systems funding, the Congress enacted the Ronald W. Reagan National Defense Authorization Act for Fiscal Year 2005, Public Law 108-375, which directed that the Secretary of Defense delegate authority for the planning, design, acquisition, development, deployment, operation, maintenance, modernization and oversight of defense business systems as follows to DOD's domain leaders (e.g., the Under Secretary of Defense for Acquisition, Technology, and Logistics and the DOD CIO). The action by the Congress is in accordance with the intent of our recommendation.

    Matter: To improve management oversight, accountability, and control of the DOD's business systems funding, Congress may wish to consider assigning responsibility for the planning, design, acquisition, deployment, operation, maintenance, modernization, and oversight of business systems to domain leaders (e.g., the Under Secretary of Defense for Acquisition, Technology and Logistics and the DOD CIO).

  4. Status: Closed - Implemented

    Comments: We reported that Congress does not have reasonable assurance that DOD has identified all of its business systems and that its information technology budget requests includes funding for all of the department's business systems. The report further notes that DOD has not yet established an effective management oversight structure and processes to control its ongoing and planned business systems investments. To help resolve these weaknesses the Congress enacted the Ronald W. Reagan National Defense Authorization Act for Fiscal Year 2005, Public Law 108-375, which directs that in the information presented in support of the department's fiscal year 2006 budget request and each fiscal year thereafter, the Secretary of Defense shall include the following information: (1) identification of each defense business system for which funding is proposed in that budget; (2) identification of all funds, by appropriation, proposed in that budget for each such system, including (a) funds for current services (to operate and maintain the system); and (b) funds for business systems modernization, identified for each specific appropriation; (3) identification of the official who has been delegated as being responsible for the system; and (4) for each such system, whether it is compliance with the business enterprise architecture. The action by Congress is in accordance with the intent of our recommendation.

    Matter: To improve management oversight, accountability, and control of the DOD's business systems funding, Congress may wish to consider directing the Secretary of Defense, in coordination with the domain leaders, to develop a defense business system budget that (1) identifies each business system for which funding is being requested, (2) identifies all funds by appropriation type and whether they are for current services or modernization, and (3) provides justification for expending funds on system(s) that are not in compliance with the department's business enterprise architecture.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Our report pointed out that DOD did not have a standard business system definition that is used consistently across the department. Therefore, DOD does not have reasonable assurance that it has identified all of its business systems. Furthermore, the report noted that lacking a standard definition, DOD does not have complete visibility over its business systems to permit analysis of gaps and redundancies in DOD's business system environment and to assist in preventing the continuing proliferation of redundant, stovepiped business systems. To correct this problem, we recommended that the Secretary of Defense direct the Under Secretary of Defense (Comptroller) and the Assistant Secretary of Defense for Networks and Information Integration to develop a standard definition for DOD components to use to identify business systems. In the department's comments on the draft report, they concurred with the recommendation. In July 2004, the department issued guidance that is to be followed by all DOD components in defining whether a system is to be considered a business system or a national security system. Subsequently, the Ronald W. Reagan National Defense Authorization Act for Fiscal Year 2005 defined what is to be considered a defense business system. These actions are keeping with the intent of our recommendation.

    Recommendation: To help improve the department's (1) control and accountability over its business systems investments and (2) future deployments of BSM and LMP, the Secretary of Defense should direct the Under Secretary of Defense (Comptroller) and the Assistant Secretary of Defense for Networks and Information Integration to develop a standard definition for DOD components to use to identify business systems.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: On July 13, 2004, the ASD(NII)/CIO directed establishment of the DOD Information Technology Portfolio Repository (DITPR). According to BTA officials, all identified business systems have been entered into the DITPR. As of April 2006, the department reported that it had 3,717 business systems. The department's actions meet the intent of this recommendation.

    Recommendation: To help improve the department's (1) control and accountability over its business systems investments and (2) future deployments of BSM and LMP, the Secretary of Defense should direct the Assistant Secretary of Defense for Networks and Information Integration to expand the existing IT Registry to include all business systems.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: The Department of Defense established the DOD Information Technology Portfolio Repository (DITPR) as its single authoritative system inventory. It is being used to track and monitor investment decisions. For example, if the Defense Business Systems Management Committee notes that a business system must show how it is compliant with the Standard Financial Information Structure, that action is maintained in the DITPR and, on completion, the completion date is entered into DITPR.

    Recommendation: To help improve the department's (1) control and accountability over its business systems investments and (2) future deployments of BSM and LMP, the Secretary of Defense should direct the Under Secretary of Defense (Comptroller) to establish a mechanism that provides for tracking all business systems modernization conditional approvals to provide reasonable assurance that all specific actions are completed on time.

    Agency Affected: Congress

  4. Status: Open

    Comments: The Army has efforts underway to help ensure that the discipline processes, including requirements determination processes, are developed and implemented as part of the Logistics Modernization Program (LMP). Adhering to the discipline processes--which are considered best business practices--should help ensure that areas such as requirements determination and system testing are effectively implemented and that the system can provide the intended functionality. On July 2009, we reported (GAO-09-852R) that although Army has started to act upon our recommendation, issues still remain. We will continue to follow-up on this recommendation in our ongoing review of the Logistics Modernization Program (LMP).

    Recommendation: To help improve the department's (1) control and accountability over its business systems investments and (2) future deployments of BSM and LMP, the Secretary of Defense should direct the Director, Defense Logistics Agency, and the Commanding General, Army Materiel Command, to (a) develop requirements that contain the necessary specificity to reduce requirements-related defects to acceptable levels. The requirements management process used to develop and document the requirements should be adequate to ensure that each requirement (1) fully describes the functionality to be delivered; (2) includes the source of the requirement; (3) is stated in unambiguous terms that allow for quantitative evaluation; and (4) is consistent, verifiable, and traceable; and (b) conduct thorough testing before (1) making further deployment decisions and (2) adding functionality to existing deployment locations.

    Agency Affected: Congress

 

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