DOD Business Transformation:

Lack of an Integrated Strategy Puts the Army's Asset Visibility System Investments at Risk

GAO-07-860: Published: Jul 27, 2007. Publicly Released: Jul 27, 2007.

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The Department of Defense (DOD) established a goal to achieve total asset visibility (TAV) over 30 years ago, but to date it has been unsuccessful. GAO was requested to (1) determine whether the Army has a systems strategy for achieving TAV, (2) determine if the Army's business system investment governance structure is consistent with DOD guidance, and (3) evaluate the Army's effort to correct previously reported problems with the Logistics Modernization Program (LMP). GAO obtained an understanding of the Army's efforts to achieve TAV, oversee and manage its business system investments, and address previously reported LMP problems.

Supply chain management has been on GAO's high-risk list since 1990. One area that has contributed to this long-standing problem has been DOD's inability to maintain control and accountability over hundreds of billions of dollars of assets. DOD plans to improve its asset management through its business system modernization. In this regard, GFEBS, the Global Combat Support System-Army (GCSS-Army), and LMP are aimed at achieving TAV within the Army. The Army estimates that it will invest approximately $5 billion to develop and implement these systems. However, this investment is being made without a clear integrated strategy. GFEBS, GCSS-Army, and LMP are not being developed in the context of a well-defined Army-wide enterprise architecture. As a result, the Army does not have an informed basis for determining if these systems will fit within the context of future Army business operations and will efficiently and effectively address the Army's long-standing weaknesses associated with the lack of asset visibility. The Army lacks a concept of operations that would describe, at a high level, (1) how the three business systems relate to each other in achieving the Army's TAV goal, and (2) how information flows from and through these systems. Moreover, GAO found that the Army's lack of a concept of operations has contributed to its failure to take full advantage of business process reengineering opportunities that are available when using an enterprise resource planning solution. Without these key foundational elements, the Army is at risk of investing about $5 billion in business systems and still not achieving DOD's and the Army's goal of TAV. Furthermore, while the Army has established a governance structure that is consistent with DOD guidance, its processes are still maturing. The Army's governance structure is designed to certify and review individual business systems rather than to evaluate these investments from a portfolio perspective. Such a perspective permits investments to be viewed in a comprehensive manner to help ensure that the organization's missions and objectives are achieved. GAO also found that the Army did not have reliable processes and analyses, such as an independent validation and verification function or economic analyses, to support its oversight of individual business systems. Until the Army's investment processes mature, it runs the risk of investing in business systems that do not provide the desired functionality and efficiency. Additionally, LMP continues to be plagued by problems that have beset the system since its implementation in July 2003. LMP continues to experience problems with accurately recognizing revenue and billing customers, which can, in part, be attributed to ineffective system testing.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The National Defense Authorization Act for Fiscal Year 2008 established a Chief Management Officer (CMO) for the military services, who is to be responsible for overall business transformation. Subsequently, the Duncan Hunter National Defense Authorization Act for Fiscal Year 2009 requires the Secretary of each military department to establish a business transformation office and acting through the CMOs to develop comprehensive business transformation plan. As part of the Army's business transformation efforts, in January 2011, the Army's Office of Business Transformation developed an enterprise resource planning strategy that discussed how the three systems would be integrated and the business processes that would be performed by each system. Given the responsibility of the CMO for overseeing and monitoring the implementation of the Army's business systems, the Army's action addresses the intent of our recommendation.

    Recommendation: To improve the department's efforts to achieve TAV and further enhance its efforts to improve the control and accountability over business system investments, the Secretary of Defense should direct the Secretary of the Army and the Director, Business Transformation Agency (BTA), to jointly develop a concept of operations that (1) clearly defines the enterprise resource planning (ERP) vision for accomplishing total asset visibility within the Army; (2) addresses how its business systems and processes, individually and collectively, will provide the desired functionality to achieve TAV; and (3) determines the desired functionality among the selected systems.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: In June 2010, the Under Secretary of the Army established the Business Systems Information Technologies Executive Steering Group. The purpose of the group is to advise the Army Chief Management Officer on Army-wide requirements for the synchronization, integration, prioritization, and resourcing of Army business systems. Army's efforts to establish an enterprise-wide focus on systems investments addresses our recommendations and should improve the Army's ability to oversee the billions of dollars it is investing in its business systems.

    Recommendation: To improve the department's efforts to achieve TAV and further enhance its efforts to improve the control and accountability over business system investments, the Secretary of Defense should direct the Secretary of the Army and the Director, BTA, to jointly develop policies, procedures, and processes to support the oversight and management of selected groupings of business systems that are intended to provide a specific capability or functionality, such as TAV from a portfolio perspective, utilizing indicators such as costs, schedule, performance, and risks.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: The National Defense Authorization Act of 2008, established a Chief Management Office (CMO) for the military services, who is to be responsible for overall business transformation, including business systems modernization. In August 2009, the Army awarded a contract to carry out the IV&V function for these systems. Under the contract, the contractor is to provide reports on each of the systems to the Program Executive Office Enterprise Information Systems, who reports to the Army Chief Management Office (CMO). Best business practices provide that the use of an IV&V is valuable in overseeing and managing business system modernization investments, particularly with respect to helping identify any potential impacts on business system project schedule and cost. The Army's action to establish an IV&V function under the direction of the Army CMO, if fully and effectively implemented, should enable the Army to improve its management and oversight of its business systems investments. Given the responsibility of the CMO for overseeing and monitoring the implementation of Army's business systems, the Army's action meets the intent of our recommendation.

    Recommendation: To improve the department's efforts to achieve TAV and further enhance its efforts to improve the control and accountability over business system investments, the Secretary of Defense should direct the Secretary of the Army and the Director, BTA, to jointly establish an independent verification and validation (IV&V) function for GFEBS, GCSS-Army, and LMP. Additionally, direct that all IV&V reports for each system be provided to Army management, the appropriate investment review board (IRB), and BTA.

    Agency Affected: Department of Defense

  4. Status: Closed - Implemented

    Comments: Army concurred with this recommendation. Army stated that its Cost Review Board Working Group performed a sensitivity analysis, that included costs, to perform an analysis. The Working Group added into the estimate the uncertainty surrounding the costs of interfaces. According to the Army, the Group found that even if all the cited benefits were eliminated, the Benefit-Cost Ratio would still be 2.28, which would justify the investment. On July 1, 2012, the Army completed the final planned deployment of GFEBS. As such, no further economic analysis are required.

    Recommendation: To improve the department's efforts to achieve TAV and further enhance its efforts to improve the control and accountability over business system investments, the Secretary of Defense should direct the Secretary of the Army and the Director, BTA, to jointly require that any future GFEBS economic analysis identify costs and benefits in accordance with the criteria specified by DOD and OMB guidance, to include a sensitivity analysis.

    Agency Affected: Department of Defense

  5. Status: Closed - Implemented

    Comments: In February 2009, we observed that the Army was using system testers that were independent of the system developers. Such an independent test of the Logistics Modernization Program system addresses our recommendation and should help the Army ensure that the system is providing its users the intended capabilities.

    Recommendation: To improve the department's efforts to achieve TAV and further enhance its efforts to improve the control and accountability over business system investments, the Secretary of Defense should direct the Secretary of the Army and the Director, BTA, to jointly direct that LMP utilize systems testers that are independent of the LMP system developers to help ensure that the system is providing the users of the system the intended capabilities.

    Agency Affected: Department of Defense

 

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