DOD Competitive Sourcing:

Plan Needed to Mitigate Risks in Army Logistics Modernization Program

NSIAD-00-19: Published: Oct 4, 1999. Publicly Released: Oct 4, 1999.

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Pursuant to a congressional request, GAO reviewed the Army's decision to contract for its Wholesale Logistics Modernization Program.

GAO noted that: (1) the Army's plans for implementing its Wholesale Logistics Modernization Program initiative by contracting with the private sector include actions to respond to the congressional notification requirements contained in legislation and the guidance contained in Office of Management and Budget Circular A-76; (2) significant uncertainties about the Army's abilities to execute its modernization program as planned, particularly within preset funding levels, exist; (3) in July 1998, the Army provided advance notification to Congress, under 10 U.S.C. 2461, concerning its plans to consider contracting for the operation of its existing system and development of a modernized system; (4) it subsequently notified Congress in April 1999 concerning approval of a waiver of a detailed cost comparison between the public and private sector under Circular A-76; (5) while the Army has not yet provided Congress with cost information and certifications required under section 2461 and section 8014 of the Department of Defense Appropriations Act for Fiscal Year 1999 (P.L. 105-262), it expects to do so prior to entering into a contract for the modernization effort; (6) to date, the Army has taken actions to comply with legislative and A-76 requirements for the plan to contract for the wholesale logistics modernization; (7) however, affected employees have filed four appeals of the A-76 waiver with the Assistant Secretary of the Army for Installations and Environment which are pending; (8) because it was granted an A-76 waiver, the Army did not conduct a detailed cost comparison, but it did complete a business case analysis to assess prospective costs of various alternatives and as a basis for selecting its planned approach; (9) however, various factors suggest that much uncertainty exists over the Army's ability to achieve its modernization objectives within preset funding levels and whether a new system would be put in place as quickly as initially anticipated to reduce operating costs; (10) thus, the Army could be faced with making future tradeoffs between Wholesale Logistics Modernization Program investment costs and its modernization objectives; (11) additionally, the Army faces uncertainties regarding the number of employees who may be willing to accept employment with the private sector to maintain the existing system while a new system is being developed; and (12) limited system documentation of the existing system increases the importance of existing employees to continue maintenance of the legacy system while a new system is being developed.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In preparing for the conversion from in-house operation to contractor operation, the Army developed a transition plan based on risks associated with the project and developed risk mitigation strategies. The transition plan and risk mitigations extend to the transfer of functions and also to the migration of converting the legacy software system to the modernized system.

    Recommendation: The Secretary of Defense should require the Secretary of the Army to develop a transition plan based on an assessment of the quantitative and qualitative risks associated with this project and what actions are planned to mitigate those risks.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: There are currently 3 separate entities which provide oversight to the Logistics Modernization program. There is a Corporate Board of Directors, headed by a General officer, which monitors the strategic direction of the program; an Operational Board of Directors, composed of senior logisticians, which provides functional oversight; and, at the DOD level, the Deputy CIO/ASD(C3I) oversees the program through portfolio management of GCSS Army. Performance metrics were incorporated into the contract, which was let 29 Dec 1999. Whenever possible, commercial standards were used for the metrics. Additional metrics will be added through the IPTs, as appropriate.

    Recommendation: The Secretary of Defense should require the Secretary of the Army provide for sufficient oversight with quantifiable performance measures to track the success of the modernization program.

    Agency Affected: Department of Defense

 

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