	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, 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 systems and system  acquisition projects across DOD’s functional areas. As we have previously reported, 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. 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. Figure 2 provides the allocation of DOD’s  business systems modernization budget for fiscal year 2003 budget by  component. 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. 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. 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. Corporate investment management approach: DOD has yet to establish  and implement an effective departmentwide approach to managing its  business systems investment portfolio. 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. 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. Table 2 highlights the four projects’  estimated cost increases and schedule delays. 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. 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. DOD has taken steps to address some  of our recommendations. For example, it has clarified organizational  accountability and responsibility for the program.
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.