The long-standing problems continue despite the significant investments  made in DOD business systems each year. The challenges continue, in part,  because of DOD’s inability to effectively modernize its business systems. As a result, DOD does not  have complete visibility over its business systems to permit analysis of gaps  and redundancies in DOD’s business systems environment and to assist in  preventing the continuing proliferation of redundant, stovepiped business  systems. DOD Continues to Have Ineffective Control and Accountability over Business System Investments

DOD continues to lack effective management oversight and control over  business systems modernization investments. Furthermore, the department does not have reasonable  assurance that it is in compliance with the fiscal year 2003 defense  authorization act, which provides that obligations in excess of $1 million  for systems improvements may not be made unless the DOD Comptroller  makes a determination that the improvements are in accordance with the  criteria specified in the act. Based upon a comparison of the limited  information available, we identified $479 million in reported obligations  over $1 million by the military services for system improvements that were  not submitted to the DOD Comptroller for review and determination as  required by the act. BSM and LMP Are Not Corporate Solutions to Long-standing Operational Problems

Effectively managing and overseeing the department’s $19 billion  investment in its business systems is key to the successful transformation  of DOD’s business operations. These problems  have resulted in schedule slippages and cost increases. Therefore, DLA does  not have reasonable assurance that BSM can perform this required  functionality. Our two  cases studies—BSM and LMP—are prime examples of DOD business  system modernization projects costing billions of dollars that are not  directed toward a corporate solution for resolving some of DOD’s long- standing financial and inventory management problems. DOD components being responsible for these functions  has resulted in the existing business system environment of at least 2,274  systems that are not capable of providing DOD management and Congress  accurate, reliable, and timely information on the results of the department’s  vast operations. We also reviewed and analyzed the DOD budget  requests for fiscal years 2003 through 2005 to identify the business systems  investments that could be subject to the requirements of the Bob Stump  National Defense Authorization Act for Fiscal Year 2003, which requires  the DOD Comptroller to review all system improvements with obligations  exceeding $1 million and make a determination whether the improvement  is in accordance with criteria specified in the act. To determine if selected DOD business system projects are being  effectively managed and will help resolve some of DOD’s long-standing  business operation problems, we selected the logistics domain from which  we chose individual case studies for detailed review. To assess whether DLA and the Army had established and implemented  disciplined processes related to requirements management and testing, we  reviewed DLA’s and the Army’s procedures for defining requirements  management frameworks and compared these procedures to their  current practices;  reviewed guidance published by the Institute of Electrical and  Electronics Engineers and the Software Engineering Institute and  publications by experts to determine the attributes that should be used  for developing good requirements;  reviewed BSM’s system requirement documents related to finance,  order fulfillment, planning, and procurement and LMP’s system  requirement documents related to planning and budget development,  asset management, inventory management, and maintenance analysis  and planning; and  selected 13 of BSM’s 202 system requirements and 12 of LMP’s 293  system requirements and performed an in-depth review and analysis to  determine whether they had the attributes normally associated with  good requirements and whether these requirements traced between the  various process documents. We requested comments on a draft of this report from the Secretary of  Defense or his designee. GAO posts this list, known as “Today’s Reports,” on its Web site  daily.
Why GAO Did This Study

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.

What GAO Found

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.