Elizabeth McGrath, the Defense Department's deputy chief management officer, at a Federal Times editorial board meeting in Springfield, VA, June 6, 2011. (Army Times)
Six Defense Department modernization projects are a combined $8 billion — or 110 percent — over budget and suffering years-long schedule delays — in one case, more than 12 years — a new audit report finds.
The projects, known as enterprise resource planning systems, aim to replace numerous small-scale systems with department-wide systems that will modernize the management of finances, logistics and other business operations.
The projects are intended to bring greater efficiency and cost savings to the department’s internal management. The delays not only set back any anticipated cost savings but also risk throwing the department behind schedule in its goal to clean up its bookkeeping, the Pentagon’s inspector general said in the report released last week.
The department is racing to meet a statutory September 2017 deadline for passing a full financial audit. Defense Secretary Leon Panetta’s 2014 goal of successfully completing a budget audit — one of four steps involved in meeting the full audit-readiness goal — is also in jeopardy, the report said.
The IG report said Defense managers need to be more proactive and provide more oversight of the six projects.
Within the last year, department officials approved almost $303 million in funding for the projects without verifying program managers’ assertions that the money would be spent effectively, the report said.
The Air Force’s Defense Enterprise Accounting and Management System (DEAMS), for example, was supposed to be fully deployed by October 2009. That milestone has slipped to April 2017, while the projected price tag has quintupled from $420 million to almost $2.2 billion.
Similarly, the Army’s Logistics Modernization Program is scheduled to be fully deployed in September 2016 — more than 12 years later than originally scheduled.
In both cases, program managers blamed the delays on the challenge of customizing commercial off-the-shelf software. DEAMS managers cited the need to address more than 3,400 “problem reports” during testing, the report said.
Of the remaining four systems, the Army’s General Fund Enterprise Business System, or GFEBS, is scheduled for full deployment this month; the Navy’s Enterprise Resource Planning system, in August 2013; the DoD Enterprise Business System, in June 2014; and the Defense Agencies Initiative, in January 2016.
The Defense Department concurs with the IG’s recommendations, but disagrees with the final report, in part because it contains “incorrect statements and technical errors,” Beth McGrath, the department’s deputy chief management officer, said in an emailed statement. While most of the enterprise resource planning systems have experienced challenges, she said, they are already yielding improvements in business operations and the Pentagon has taken steps to put them “on a path to success.”
Prime contractors on the projects were generally tight-lipped on the factors behind the overruns and schedule slippages.
Computer Sciences Corp. developed the Logistics Modernization Program “and delivers the services in accordance with government-directed requirements,” a spokesman said in an email.
At Accenture, which has the lead for GFEBS, DEAMS and the Enterprise Business System, spokeswoman Joanne Veto referred questions about the audit to the Pentagon. GFEBS, however, has already led to the retirement of 20 older systems and is processing more than 1 million transactions daily, she said.
Spokeswomen for IBM and CACI, the prime contractors for the Navy ERP and the Defense Agencies Initiative respectively, either had no comment or could not be reached.
The new IG report echoes the findings of a February review by the Government Accountability Office, which warned that the Pentagon risks throwing away money without getting the desired improvements in business operations.
The state of the Pentagon’s books has been a persistent worry on Capitol Hill. Last year, an ad hoc panel of the House Armed Services Committee held a series of hearings dedicated to the subject. The panel’s chairman, Rep. Michael Conaway, R-Texas, is aware of the IG’s findings, a spokesman said last week, “and looks forward to engaging with members of the [Defense Department] financial community to learn more about these troubling issues.”