The Army has plans to expand the capabilities of LMP. LMP Supports AMC’s Industrial Operations, but Additional Development Is Needed to Meet Certain Critical Requirements

AMC is using LMP to support its industrial operations, but additional  development of LMP is necessary, according to the Army, because the  current system does not support certain critical requirements that have  emerged since the initial development of LMP and because the current  system will not enable the Army to generate auditable financial  statements. Officials at the 14 AMC sites we visited stated that LMP  provided the core functionality they needed to support their operations. They stated that over time they are improving in their ability to use LMP,  and some sites have locally developed tools to augment its capabilities. Army officials stated that although LMP is functional, the current system  does not support certain critical requirements, such as requirements  related to automatically tracking repair and manufacturing operations on  the shop floor of depots and arsenals. In addition, according to Army  officials, the current system will not enable the Army to generate financial  statements validated as ready for audit by 2017, the statutory deadline for  this goal. Increment 2 is intended to address these shortcomings. LMP product office and  AMC officials told us that the Army cannot meet this requirement with the  functionality currently provided by Increment 1, and the Army’s fiscal year  2013 and 2014 working capital fund budget documents state that  although LMP is functional at AMC’s life cycle management commands, it  requires the enhancements and upgrades of Increment 2 to generate  auditable financial statements. As a further justification for expanding LMP,  the Army estimates that Increment 2 will cost $730 million through fiscal  year 2026 but achieve approximately $1.4 billion in financial benefits. LMP Has Provided Some Benefits to the Army, but the Extent of Financial Benefits to Date Is Unknown

The use of LMP has provided the Army some benefits, but whether the  system has delivered the expected financial benefits to date is unknown  because AMC does not have a process to track these benefits. For example,  because LMP relies on accurate data to perform effectively and  efficiently, the Army has made data accuracy a priority. Additionally, the use of LMP has improved  accountability for inventory stored at AMC depots and has increased  visibility over Army assets. Federal guidelines and standards  outline the need for assessing whether expected benefits from an  investment are achieved. We also found that, since our prior reviews, AMC has made progress in  improving the accuracy of LMP data that it uses to support industrial  operations by conducting data assessments, correcting data problems,  and placing management emphasis on data accuracy. Data accuracy is  necessary in order for enterprise resource planning systems such as LMP  to perform effectively and efficiently. Finally, AMC officials stated that LMP has enabled them to develop and  begin to implement a set of standardized, enterprise-wide performance  measures to better assess the business operations of AMC sites. They  told us that the measures previously used to assess AMC performance  were inadequate, in part because they were not standardized. Without a process in place to track  financial benefits associated with LMP, the Army does not have a way to  determine whether LMP’s projected financial benefits are materializing. The Army expected significant financial benefits from the deployment of  LMP Increment 1 across AMC, which was completed in October 2010. According to a 2009 study prepared by the Army to support the fiscal year  2010 Investment Review Board certification of LMP, the system was  expected to lead to over $750 million in financial benefits by fiscal year  2012 and eventually achieve more than two dollars in benefits for every  dollar spent. Officials did not provide an explanation for why they did not have a  process to track financial benefits, but they stated that the inability to  quantify financial benefits from LMP-driven performance improvements  was due in part to the fluctuations in AMC workload resulting from  operations in Iraq and Afghanistan. Specifically, the Army is in the process of developing  an initial operational performance baseline for sites that will pilot  Increment 2. Recommendation for Executive Action

To determine whether the Army is achieving its estimated financial  benefits in LMP, we recommend that the Secretary of Defense direct the  Secretary of the Army to develop and implement a process to track the  extent of financial benefits realized from the use of LMP during the  remaining course of its life cycle. This process should be linked with the  LMP performance baseline now being developed by the Army for use at  AMC industrial sites. To determine the extent to which the Army has realized expected benefits  from deploying the system, we obtained and reviewed Army  documentation describing the expected benefits to be achieved from  deploying LMP, including briefings describing the expected benefits and  functionality of the system, a 2009 study supporting the fiscal year 2010  Investment Review Board certification of LMP, Army budget documents,  and evidence that AMC headquarters, the individual sites, and the LMP  Product Office were able to provide regarding actual benefits, if any,  achieved to date. Defense Logistics: Observations on Army’s Implementation of the  Logistics Modernization Program.
Why GAO Did This Study

LMP is an Army enterprise resource planning system that supports industrial operations conducted by AMC at its life cycle management commands and its maintenance, manufacturing, and storage sites. Increment 1 of LMP was fully deployed in October 2010, and the Army has spent approximately $1.4 billion on LMP through fiscal year 2012. In order to expand the system's capabilities, the Army plans to deploy a second increment of LMP. The life cycle cost for LMP Increment 1 and Increment 2, from fiscal year 2000 through 2026, is estimated to be over $4 billion. GAO was asked to evaluate AMC's use of LMP. This report assesses the extent to which (1) LMP supports AMC's industrial operations and (2) the Army has realized the expected benefits from deploying LMP. GAO reviewed Army documents regarding LMP usage and interviewed officials from AMC headquarters, the LMP product office, and 14 AMC sites that use LMP to conduct their operations.

What GAO Found

The Army Materiel Command (AMC) is using the Logistics Modernization Program (LMP) Increment 1 to support its industrial operations, but additional development is necessary, according to the Army, because the current system does not support certain critical requirements, including enabling the Army to generate auditable financial statements by fiscal year 2017. Officials at the 14 AMC sites GAO visited stated that LMP provided the core functionality they needed to support their operations and that they are improving in their ability to use the system. Additionally, some sites have locally developed tools to augment LMP capabilities. Army officials stated that although LMP is functional, it currently does not support certain critical requirements that have emerged since its initial development, such as automatically tracking repair and manufacturing operations on the shop floor of depots and arsenals. In addition, according to Army officials, the current system will not enable the Army to generate auditable financial statements by 2017, the statutory deadline for this goal. Increment 2, which is estimated to cost $730 million through fiscal year 2026, is expected to address these shortcomings. The Army is in the process of developing Increment 2 and expects to complete fielding by September 2016.
The use of LMP Increment 1 has provided the Army some benefits, but whether the system has delivered the expected financial benefits to date is unknown because AMC does not have a process for tracking financial benefits realized. Since its deployment, LMP has provided some benefits to the Army. For example, because LMP relies on accurate data to perform effectively and efficiently, the Army has made data accuracy a priority and improved the accuracy of its data by conducting data assessments, correcting data problems, and placing management emphasis on data accuracy. Additionally, the use of LMP has improved accountability for inventory stored at AMC depots, increased visibility over Army assets, and resulted in other efficiencies--such as providing faster access to information. AMC officials also stated that LMP has enabled them to develop and begin to implement a set of standardized, enterprise-wide performance measures to better assess the business operations of AMC sites. The officials stated that these performance measures, which were being used during AMC leadership reviews in June 2013, were necessary because the measures previously used to assess AMC performance were inadequate. However, the extent to which financial benefits have been realized from deploying LMP is unknown. The Army expected LMP to lead to over $750 million in financial benefits by fiscal year 2012 and eventually achieve more than two dollars in benefits for every dollar spent. Army officials told us that there currently is no accurate process in place to track financial benefits associated with LMP. Officials stated that the inability to quantify benefits from LMP-driven performance improvements was due in part to the fluctuations in AMC workload resulting from operations in Iraq and Afghanistan. The Army is in the process of developing a performance baseline for sites that will pilot Increment 2, and it intends to apply these metrics to other AMC sites before May 2015. Federal guidelines and standards outline the need for assessing whether the benefits expected from an investment are achieved. Without a process in place to track the financial benefits associated with LMP, the Army does not have a way to determine whether LMP's projected financial benefits are materializing.

What GAO Recommends

To enable the Army to determine whether the expected financial benefits of LMP are being achieved, GAO recommends that the Army develop and implement a process to track the extent of financial benefits realized from the use of LMP during the remaining course of its life cycle. This process should be linked with the LMP performance baseline now being developed by the Army for use at AMC industrial sites. The Army concurred with GAOs recommendation.