Summary
The Department of Defense (DOD) has long been challenged in implementing key information technology (IT) management controls on its thousands of business system investments. For this and other reasons, GAO has designated DOD's business systems modernization efforts as high-risk. One of the larger business system investments is the Department of the Navy's Enterprise Resource Planning (Navy ERP) program. Initiated in 2003, the program is to standardize the Navy's business processes, such as acquisition and financial management. It is being delivered in increments, the first of which is to cost about $2.4 billion over its useful life and be fully deployed in fiscal year 2013. GAO was asked to determine whether key IT management controls are being implemented on the program. To do this, GAO analyzed, for example, requirements management, economic justification, earned value management, and risk management.
DOD has implemented key IT management controls on its Navy ERP program to varying degrees of effectiveness. To its credit, the control associated with managing system requirements is being effectively implemented. In addition, important aspects of other controls have at least been partially implemented, including those associated with economically justifying investment in the program and proactively managing program risks. Nevertheless, other aspects of these controls, as well as the bulk of what is needed to effectively implement earned value management, which is a recognized means for measuring program progress, have not been effectively implemented. Among other things, these control weaknesses have contributed to the more than 2-year schedule delay and the almost $600 million cost overruns already experienced on the program since it began, and they will likely contribute to future delays and overruns if they are not corrected. Examples of the weaknesses are: (1) Investment in the program has been economically justified on the basis of expected benefits that far exceed estimated costs ($8.6 billion versus $2.4 billion over a 20-year life cycle). However, important estimating practices, such as using historical cost data from comparable programs and basing the cost estimate on a reliable schedule baseline were not employed. While these weaknesses are important because they limit the reliability of the estimates, GAO's analysis shows that they would not have altered the estimates to the point of not producing a positive return on investment. (2) Earned value management has not been effectively implemented. To its credit, the program office has elected to implement program-level earned value management. In doing so, however, basic prerequisites for effectively managing earned value have not been executed. In particular, the integrated master schedule was not derived in accordance with key estimating practices, and an integrated baseline review has not been performed on any of the first increment's releases. (3) A defined process for proactively avoiding problems, referred to as risk management, has been established, but risk mitigation strategies have not been effectively implemented for all significant risks, such as those associated with data conversion and organizational change management, as well the risks associated with the above-cited weaknesses. The reasons that program management and oversight officials cited for these practices not being executed range from the complexity and challenges of managing and implementing a program of this size to limitations in the program office's scope and authority. Notwithstanding the effectiveness with which important aspects of several controls have been implemented, the above-cited weaknesses put DOD at risk of investing in a system solution that does not optimally support corporate mission needs and mission performance, and meet schedule and cost commitments.
Recommendations
Our recommendations from this work are listed below with a Contact for more information. Status will change
from "In process" to "Implemented" or "Not implemented" based on our follow up work.
Director:
Team:
Phone:
Randolph C. Hite
Government Accountability Office: Information Technology
(202) 512-6256
Recommendations for Executive Action
Recommendation: To strengthen Navy ERP management control and better provide for the program's success, and to improve the reliability of Navy ERP benefit estimates and cost estimates, the Secretary of Defense should direct the Secretary of the Navy, through the appropriate chain of command, to ensure that future Navy ERP estimates include uncertainty analyses of estimated benefits, reflect the risks associated with not having cost data for comparable ERP programs, and are otherwise derived in full accordance with the other key estimating practices, and economic analysis practices discussed in this report.
Agency Affected: Department of Defense
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To strengthen Navy ERP management control and better provide for the program's success, and to enhance Navy ERP's use of earned value management (EVM), the Secretary of Defense should direct the Secretary of the Navy, through the appropriate chain of command, to ensure that (1) an integrated baseline review on the last two releases of the first increment is conducted, (2) compliance against the 32 accepted industry EVM practices is verified, and (3) a plan to have an independent organization perform surveillance of the program's EVM system is developed and implemented.
Agency Affected: Department of Defense
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To strengthen Navy ERP management control and better provide for the program's success, and to increase the quality of the program's integrated master schedule, the Secretary of Defense should direct the Secretary of the Navy, through the appropriate chain of command, to ensure that the schedule (1) includes the logical sequencing of all activities, (2) reflects whether all required resources will be available when needed, (3) defines a critical path that integrates all three releases, (4) allocates reserve for the high-risk activities on the entire program's critical path, and (5) incorporates the results of a schedule risk analysis for all three releases and recalculates program cost and schedule variances to more accurately determine a most likely cost and schedule overrun.
Agency Affected: Department of Defense
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To strengthen Navy ERP management control and better provide for the program's success, and to improve Navy ERP's management of program risks, the Secretary of Defense should direct the Secretary of the Navy, through the appropriate chain of command, to ensure that (1) the plans for mitigating the risks associated with converting data from legacy systems to Navy ERP and positioning the commands for adopting the new business processes embedded in the Navy ERP are re-evaluated in light of the recent experience with Naval Air Systems Command (NAVAIR) and adjusted accordingly, (2) the status and results of these and other mitigation plans' implementation are periodically reported to program oversight and approval authorities, (3) these authorities ensure that those entities responsible for implementing these strategies are held accountable for doing so, and (4) each of the risks discussed in this report are included in the program's inventory of active risks and managed accordingly.
Agency Affected: Department of Defense
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
