Last week, the Defense Department inspector general’s office issued this alarming report: Six business modernization projects are running combined cost overruns of $8 billion — a whopping 110 percent over their original life-cycle cost estimates.
All should have been fully operational by now. Only one is even close: The Army’s $1.4 billion General Fund Enterprise Business System (GFEBS) is scheduled for full deployment this year.
One of the systems is now 12 years behind schedule.
There’s no shortage of critics yelling about billions in overruns for supersonic aircraft and massive shipbuilding programs. But the complex computer systems that aim to overhaul logistics, finance, accounting and other business functions attract little attention.
That must change.
The DoD IG blames Pentagon leaders — specifically Deputy Chief Management Officer Beth McGrath — for failing to provide the aggressive oversight needed to keep these projects on track, even as she and others approved hundreds of million more for these projects last year.
Specifically, the report cited McGrath and other senior Pentagon officials for approving $303 million in additional funding even though project managers failed to submit required “process maps,” which explain in detail how the new systems will make business processes more efficient.
The reasons cited for the cost overruns and schedule setbacks are as numerous as they are familiar. Unique requirements were imposed on commercial, off-the-shelf (COTS) systems, requiring costly change orders. Requirements were ill-defined or continually refined. There were unanticipated complexities in delivering a COTS solution on such a large scale. The participation of subject-matter experts was inconsistent. Initial schedules were overly aggressive. And so on.
To be fair, these massive projects are extraordinarily complex, and each would challenge even the most capable team of experts. For example, the Army’s GFEBS is a financial management system that will replace 107 legacy systems and serve 53,000 users. The Navy’s $1.6 billion Enterprise Resource Planning system, an integrated business management system, will replace 98 legacy systems and serve 72,000 users.
But it is because of their complexity and scale that strict and aggressive oversight must be applied.
ERP projects are complex and difficult. But overruns of $8 billion and 110 percent are inexcusable. They reflect not only mismanagement by key players, but also an acquisition process that is, despite many efforts at reform, clearly broken.