IT Investment Management Is Critical to Achieving Successful Systems Modernization

A corporate approach to IT investment management is characteristic of  successful public and private organizations. Department of the Navy Has Not Yet Established the Management Structures Needed to Effectively Manage Business System Investments and Has Not Fully Defined Many of the Related Policies and Procedures

Although DOD relies on its components to execute investment  management policies and procedures, the Department of the Navy has  not yet established the management structures needed to effectively  manage its business system investments or fully developed many of the  related policies and procedures outlined in our ITIM framework. Relative  to its business system investments, the department has implemented two  of the nine key practices that call for project-level management structures,  policies, and procedures and none of the five key practices that call for  portfolio-level policies and procedures. Department officials stated that  they are currently working on guidance to address these weaknesses. Until the department establishes the necessary management structure and  fully defines policies and procedures for both individual projects and the  portfolios of projects, it risks not being able to select and control these  business system investments in a consistent and complete manner, which  in turn reduces the chances that these investments will meet mission  needs in the most effective manner. ITIM Stage 2  critical processes include (1) defining investment board operations, (2)  identifying the business needs for each investment, (3) developing a basic  process for selecting new proposals and reselecting ongoing investments,  (4) developing project-level investment control processes, and (5)  collecting information about existing investments to inform investment  management decisions. According to department officials, they are aware of the absence of  documented policies and procedures in certain areas of project-level  management, and plan to issue new policies and procedures addressing  these areas by March 2008. Recommendations for Executive Action

To strengthen the Department of the Navy’s business system investment  management capability and address the weaknesses discussed in this  report, we recommend that the Secretary of Defense direct the Secretary  of the Navy to ensure that well-defined and disciplined business system  investment management policies and procedures are developed and  issued. Analyzing, selecting, and maintaining business system investment  portfolios. Our analysis was based on the best practices contained in  GAO’s Information Technology Investment Management (ITIM)  framework and the framework’s associated evaluation methodology, and  focused on the department’s establishment of policies and procedures for  business system investments needed to assist organizations in complying  with the Clinger-Cohen Act of 1996 (Stages 2 and 3).
Why GAO Did This Study

In 1995, GAO first designated the Department of Defense's (DOD) business systems modernization program as "high-risk," and continues to do so today. In 2004, Congress passed legislation reflecting prior GAO recommendations that DOD adopt a corporate approach to information technology (IT) business systems investment management, including tiered accountability for business systems at the department and component levels. To support GAO's legislative mandate to review DOD's efforts, GAO assessed whether the investment management approach of one of DOD's components--the Department of the Navy--is consistent with leading investment management best practices. In doing so, GAO applied its IT Investment Management (ITIM) framework and associated methodology, focusing on the stages related to the investment management provisions of the Clinger-Cohen Act of 1996.

What GAO Found

The Department of the Navy has yet to establish the management structures needed to effectively manage its business systems investments or to fully develop many of the related policies and procedures outlined in GAO's ITIM framework. The department has implemented two of the nine key practices that call for project-level management structures, policies, and procedures, and none of the five practices that call for portfolio-level policies and procedures. Specifically, it has developed procedures for identifying and collecting information about its business systems to support investment selection and control, and assigned responsibility for ensuring that the information collected during project identification meets the needs of the investment management process. However, the department has not established the management structures needed to support effective investment oversight. It also has not fully documented business system investment policies and procedures for directing Investment Review Board operations, selecting new investments, reselecting ongoing investments, integrating the investment funding and investment selection processes, and developing and maintaining complete business system investment portfolio(s). Department officials stated that they are aware of the lack of an Investment Review Board and the absence of documented policies and procedures in certain areas of project and portfolio-level management, and are currently working on new guidance to address these areas. According to these officials, the new policies and procedures are expected to be approved by March 2008. However, until the department assigns responsibility for overseeing project-level management and portfolio management to a departmentwide review board and fully defines policies and procedures for both individual projects and portfolios of projects, it risks selecting and controlling these business system investments in a way that is inconsistent, incomplete, and ad hoc, which in turn reduces the chances that these investments will meet mission needs in the most effective manner.