[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]



 
     STRENGTHENING OVERSIGHT OF DOD BUSINESS SYSTEMS MODERNIZATION

=======================================================================


                             JOINT HEARING

                               before the

                   SUBCOMMITTEE ON NATIONAL SECURITY,
                  EMERGING THREATS, AND INTERNATIONAL
                               RELATIONS

                                and the

                SUBCOMMITTEE ON TECHNOLOGY, INFORMATION
                POLICY, INTERGOVERNMENTAL RELATIONS AND
                               THE CENSUS

                                 of the

                     COMMITTEE ON GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 31, 2003

                               __________

                           Serial No. 108-44

                               __________

       Printed for the use of the Committee on Government Reform


  Available via the World Wide Web: http://www.gpo.gov/congress/house
                      http://www.house.gov/reform






                        U.S. GOVERNMENT PRINTING OFFICE
89-166                          wASHINGTON  : 2003
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                     COMMITTEE ON GOVERNMENT REFORM

                     TOM DAVIS, Virginia, Chairman
DAN BURTON, Indiana                  HENRY A. WAXMAN, California
CHRISTOPHER SHAYS, Connecticut       TOM LANTOS, California
ILEANA ROS-LEHTINEN, Florida         MAJOR R. OWENS, New York
JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
JOHN L. MICA, Florida                PAUL E. KANJORSKI, Pennsylvania
MARK E. SOUDER, Indiana              CAROLYN B. MALONEY, New York
STEVEN C. LaTOURETTE, Ohio           ELIJAH E. CUMMINGS, Maryland
DOUG OSE, California                 DENNIS J. KUCINICH, Ohio
RON LEWIS, Kentucky                  DANNY K. DAVIS, Illinois
JO ANN DAVIS, Virginia               JOHN F. TIERNEY, Massachusetts
TODD RUSSELL PLATTS, Pennsylvania    WM. LACY CLAY, Missouri
CHRIS CANNON, Utah                   DIANE E. WATSON, California
ADAM H. PUTNAM, Florida              STEPHEN F. LYNCH, Massachusetts
EDWARD L. SCHROCK, Virginia          CHRIS VAN HOLLEN, Maryland
JOHN J. DUNCAN, Jr., Tennessee       LINDA T. SANCHEZ, California
JOHN SULLIVAN, Oklahoma              C.A. ``DUTCH'' RUPPERSBERGER, 
NATHAN DEAL, Georgia                     Maryland
CANDICE S. MILLER, Michigan          ELEANOR HOLMES NORTON, District of 
TIM MURPHY, Pennsylvania                 Columbia
MICHAEL R. TURNER, Ohio              JIM COOPER, Tennessee
JOHN R. CARTER, Texas                CHRIS BELL, Texas
WILLIAM J. JANKLOW, South Dakota                 ------
MARSHA BLACKBURN, Tennessee          BERNARD SANDERS, Vermont 
                                         (Independent)

                       Peter Sirh, Staff Director
                 Melissa Wojciak, Deputy Staff Director
                      Rob Borden, Parliamentarian
                       Teresa Austin, Chief Clerk
              Philip M. Schiliro, Minority Staff Director

 Subcommittee on National Security, Emerging Threats and International 
                               Relations

                CHRISTOPHER SHAYS, Connecticut, Chairman

MICHAEL R. TURNER, Ohio
DAN BURTON, Indiana                  DENNIS J. KUCINICH, Ohio
STEVEN C. LaTOURETTE, Ohio           TOM LANTOS, California
RON LEWIS, Kentucky                  BERNARD SANDERS, Vermont
TODD RUSSELL PLATTS, Pennsylvania    STEPHEN F. LYNCH, Massachusetts
ADAM H. PUTNAM, Florida              CAROLYN B. MALONEY, New York
EDWARD L. SCHROCK, Virginia          LINDA T. SANCHEZ, California
JOHN J. DUNCAN, Jr., Tennessee       C.A. ``DUTCH'' RUPPERSBERGER, 
TIM MURPHY, Pennsylvania                 Maryland
WILLIAM J. JANKLOW, South Dakota     CHRIS BELL, Texas
                                     JOHN F. TIERNEY, Massachusetts

                               Ex Officio

TOM DAVIS, Virginia                  HENRY A. WAXMAN, California
            Lawrence J. Halloran, Staff Director and Counsel
                Thomas Costa, Professional Staff Member
                        Robert A. Briggs, Clerk
           David McMillen, Minority Professional Staff Member
   Subcommittee on Technology, Information Policy, Intergovernmental 
                        Relations and the Census

                   ADAM H. PUTNAM, Florida, Chairman
CANDICE S. MILLER, Michigan          WM. LACY CLAY, Missouri
DOUG OSE, California                 DIANE E. WATSON, California
TIM MURPHY, Pennsylvania             STEPHEN F. LYNCH, Massachusetts
MICHAEL R. TURNER, Ohio

                               Ex Officio

TOM DAVIS, Virginia                  HENRY A. WAXMAN, California
                        Bob Dix, Staff Director
                 Chip Walker, Professional Staff Member
                      Ursula Wojciechowski, Clerk
           David McMillen, Minority Professional Staff Member






                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on March 31, 2003...................................     1
Statement of:
    Boutelle, JoAnn, Director Deputy Chief Financial Officer, 
      Department of Defense; John R. Landon, Principal Director, 
      Deputy Assistant Secretary of Defense, Command, Control, 
      Communications, and Intelligence Surveillance, 
      Reconnaissance, Space and IT Programs; and Thomas Bloom, 
      Director, Defense Finance and Accounting Service [DFAS], 
      Department of Defense......................................    34
    Hite, Randolph, Director, Information Technology Architecture 
      and Systems Issues, General Accounting Office, accompanied 
      by Gregory Kutz, Director, Financial Management and 
      Assurance, General Accounting Office; and Darby Smith, 
      Assistant Director, Financial Management and Assurance, 
      General Accounting Office..................................     5
Letters, statements, etc., submitted for the record by:
    Bloom, Thomas, Director, Defense Finance and Accounting 
      Service [DFAS], Department of Defense, prepared statement 
      of.........................................................    51
    Boutelle, JoAnn, Director Deputy Chief Financial Officer, 
      Department of Defense, prepared statement of...............    36
    Hite, Randolph, Director, Information Technology Architecture 
      and Systems Issues, General Accounting Office, prepared 
      statement of...............................................     8
    Landon, John R., Principal Director, Deputy Assistant 
      Secretary of Defense, Command, Control, Communications, and 
      Intelligence Surveillance, Reconnaissance, Space and IT 
      Programs, prepared statement of............................    43
    Putnam, Hon. Adam H., a Representative in Congress from the 
      State of Florida, prepared statement of....................    68
    Shays, Hon. Christopher, a Representative in Congress from 
      the State of Connecticut, prepared statement of............     3


     STRENGTHENING OVERSIGHT OF DOD BUSINESS SYSTEMS MODERNIZATION

                              ----------                              


                         MONDAY, MARCH 31, 2003

                  House of Representatives,
        Subcommittee on National Security, Emerging Threats 
            and International Relations, joint with the 
            Subcommittee on Technology, Information Policy, 
            Intergovernmental Relations and the Census, 
            Committee on Government Reform,
                                                    Washington, DC.
    The subcommittees met, pursuant to notice, at 1 p.m., in 
room 2154, Rayburn House Office Building, Hon. Christopher 
Shays (chairman of the Subcommittee on National Security, 
Emerging Threats and International Relations) presiding.
    Present: Representatives Shays, Turner, Putnam, Duncan, 
Kucinich and Ruppersberger.
    Staff present from the Subcommittee on National Security, 
Emerging Threats and International Relations: Lawrence 
Halloran, staff director and counsel; J. Vincent Chase, chief 
investigator; Thomas Costa, professional staff member; Robert 
A. Briggs, clerk; David McMillen, minority professional staff 
member; Earley Green, minority chief clerk; and Teresa Coufal, 
minority assistant clerk.
    Staff present from the Subcommittee on Technology, 
Information Policy, Intergovernmental Relations and Census: Bob 
Dix, staff director; John Hambel, senior counsel; Chip Walker, 
professional staff member; Ursula Wojciechowski, clerk; and 
David McMillen, minority professional staff member.
    Mr. Shays. A quorum being present, this joint hearing of 
the Subcommittee on National Security, Emerging Threats and 
International Relations and the Subcommittee on Technology, 
Information Policy, Intergovernmental Relations and the Census 
entitled, ``Strengthening Oversight of DOD Business Systems 
Modernization,'' is called to order.
    Central elements of the President's management agenda call 
for improved financial performance, more effective use of 
information technology [IT], and closer integration of budget 
and performance data by Federal departments and agencies. 
Today, the General Accounting Office [GAO], concludes the 
Department of Defense [DOD], has made little progress in 
imposing that agenda on a sprawling, inefficient reform-
resistent financial management system.
    Last June, DOD witnesses promised a sustained, far-reaching 
effort to reform and transform the Pentagon financial 
management into a precision tool of program formulation, 
program execution and detailed accountability. To measure the 
depth of that commitment, we asked GAO to follow the fate of 
four specific business systems under development at DOD, 
focusing on IT investment management and oversight.
    The results of their investigation, released this morning, 
describe ambitious plans but limited progress at DOD toward 
effective business system modernization. An area designated by 
GAO as possessing a high risk of fraud, waste and abuse since 
1995, DOD financial systems still fail to yield certifiable 
audit results or useful management information. Reform efforts 
threaten to compound the problem by adding yet more complexity 
to an already preposterous matrix of incompatible systems.
    This year, the Department requested $18 billion to 
maintain, operate and improve business data systems. But GAO 
finds that investment at risk of being misspent, feeding a 
dysfunctional status quo. Hundreds of millions of dollars have 
already been committed to projects without the economic 
justification and close management oversight required by law, 
administrative guidance and commercial best practices. One of 
the systems GAO studied was terminated earlier this year after 
7 years of development. That failed effort cost $126 million.
    The business of the Department of Defense is to train, 
equip and deploy military forces to secure vital national 
interests. That critical enterprise cannot be planned or 
executed successfully on paper-based, error-prone management 
systems. The citizen-soldiers we call upon today and in the 
future to conduct the Nation's most dangerous business deserve 
to be supported by 21st century business systems as smart as 
the weapons they wield.
    We appreciate the continued assistance, and the 
persistence, of the GAO in their ongoing oversight of DOD 
business system modernization. We welcome all our witnesses 
today and look forward to their testimony. We know that all our 
witnesses are trying to do the best for our country, and we all 
are going to be working together to see that happens.
    At this time, the Chair would just recognize and call on 
the vice chairman of the committee, Mr. Turner from Ohio.
    [The prepared statement of Hon. Christopher Shays follows:]
    [GRAPHIC] [TIFF OMITTED] 89166.001
    
    [GRAPHIC] [TIFF OMITTED] 89166.002
    
    Mr. Turner. Thank you, Mr. Chairman. I appreciate your 
efforts in bringing forward these issue of efficiency and 
management and, of course, the issue of costs.
    One of the issues that I am also interested in is the 
process of making certain that we are able to obtain the 
information processing systems that we need and to what extent 
our acquisition systems limit that ability.
    I was recently at an event, a panel discussion where NCR 
was leading a discussion of data mining. They were talking 
about, in the private sector, that the efforts to acquire 
information technologies begin with a series of questions that 
they need to have answered and then in the private sector 
looking for solutions, rather than trying to dictate a solution 
and then seeing if it provides you with the answers. I am 
interested in that it seems that many times when we are--when 
government is pursuing IT solutions that processes, not just 
fraud and abuse, might contribute to some of the inefficiencies 
and the waste; and I will look forward to your discussion on 
that aspect of this issue.
    Mr. Shays. I thank the gentleman.
    Note for the record this hearing is a joint committee, and 
Mr. Putnam will be here when his plane lands at 2. Then he will 
be taking over part of this hearing.
    To get some housekeeping done, I ask unanimous consent that 
all members of the subcommittee be permitted to place an 
opening statement in the record and that the record remain open 
for 3 days for that purpose. Without objection, so ordered.
    I ask further unanimous consent that all witnesses be 
permitted to include their written statements in the record; 
and without objection, so ordered.
    At this time, the Chair would recognize the participants on 
our first panel. They are Mr. Randolph Hite, Director, 
Information Technology Architecture and Systems Issues, General 
Accounting Office; Mr. Gregory Kutz, the Director of Financial 
Management and Assurance, General Accounting Office; and Mr. 
Darby Smith, the Assistant Director of Financial Management and 
Assurance, General Accounting Office. And it's one testimony, I 
think, from Mr. Hite--yes--backed up by two experts on either 
side.
    OK. What we do is we do the 5 minutes, and then we roll it 
over another 5 minutes. So it is important that you put your 
testimony in the record vocally as well.
    So happy to have you here. Happy to have all three of you 
here.

 STATEMENT OF RANDOLPH HITE, DIRECTOR, INFORMATION TECHNOLOGY 
  ARCHITECTURE AND SYSTEMS ISSUES, GENERAL ACCOUNTING OFFICE, 
ACCOMPANIED BY GREGORY KUTZ, DIRECTOR, FINANCIAL MANAGEMENT AND 
    ASSURANCE, GENERAL ACCOUNTING OFFICE; AND DARBY SMITH, 
ASSISTANT DIRECTOR, FINANCIAL MANAGEMENT AND ASSURANCE, GENERAL 
                       ACCOUNTING OFFICE

    Mr. Hite. Thank you, Chairman Shays, Vice Chairman Turner, 
for the opportunity to testify on DOD's business systems 
modernization, an area that we first designated as high risk.
    Mr. Shays. You know what? I have never done this before to 
my knowledge. I let you start without swearing you in. So 
everything you said, we have to start all over again.
    If you would all stand and raise your right hands, please.
    [Witnesses sworn.]
    Mr. Shays. Note for the record our witnesses have said yes 
to that oath.
    I would say that, had I let you get away with that, you 
would have been in the very exclusive company of Senator Byrd, 
because he is the only one I have ever chickened out and not--I 
did chicken out. I fess up, and you can put it on the record.
    OK, why don't you start again, Mr. Hite.
    Mr. Hite. Thank you, chairman, vice chairman. We are happy 
to be here to testify on business systems modernization at the 
Department of Defense, an area that we first designated as high 
risk in 1995 and we continue to do so today.
    With me today is Greg Kutz, as you mentioned, who is GAO's 
Director of Financial Management Issues at the Department of 
Defense, and Darby Smith, who managed our evaluation of the 
four DFAS systems that are also the subject of this hearing and 
are the subject of this report being released today at your 
request, Chairman Shays.
    As requested, I will summarize my written statement by 
making three points: Point one, the need for DOD to modernize 
is undeniable. DOD's existing systems environment is the by-
product of many years of unrelated, stove-piped initiatives, 
each pursued to support nonstandard and duplicative business 
functions. The result is represented on the display board. 
Namely, that shows that there are 1,731 existing and new system 
investments spanning 18 functional areas in the Department.
    How much is being spent on this proliferation of systems? 
Our analysis of DOD's reported IT budget for fiscal year 2003 
pegs the number at about $18 billion. Clearly, such a situation 
is, according to the old saying, no way to run a railroad; and 
one can speculate that if DOD was a private sector corporation 
its systems would be driving it to chapter 11.
    Restated, DOD does not currently do business the way 
business does business. You know this, we know this, and, most 
importantly, DOD knows this, and its leadership is not only 
committed to changing this, but I can attest to the fact that 
there are a number of men and women at DOD working hard to do 
so.
    Nevertheless, commitment, hard work and even $18 billion a 
year are not a complete recipe for successful systems 
modernization. Which brings me to point two of our testimony, 
namely that DOD does not currently have the means in place to 
achieve the desired end, that end being effectively investing 
in modern systems. Why? Because it has yet to implement the 
kind of modernization management controls advocated in 
legislation and Federal guidance and grounded in proven 
commercial best practice.
    Three examples of these controls are investing in new and 
existing systems within the context of a DOD-wide modernization 
blueprint commonly called an enterprise architecture; investing 
in these systems in an incremental or modular fashion and only 
when they can be justified via a compelling business case--that 
was the second example--and the third example is overseeing 
these investments to insure that they are delivering promised 
capabilities and benefits on time and within budget.
    Chairman Shays, at your subcommittee hearing last year on 
DOD's modernization program, we highlighted and the Department 
acknowledged these weaknesses. Moreover, it committed to 
addressing each of them. Since then, it has begun a number of 
efforts to do so. For example, it plans to issue the first 
version of its enterprise architecture in 2 months, and it is 
creating a new investment governance and oversight approach. We 
view these efforts as positive systems, and we would note the 
DOD leadership has constructively engaged with us on both.
    Having said this, the fact remains that, as of today, the 
above-cited weaknesses still exist. As a result, the $18 
billion that DOD plans to spend in fiscal year 2003 remains at 
risk. To illustrate, this report shows that DOD's oversight of 
four key projects has been limited, resulting in hundreds of 
millions of dollars being spent without adequate economic 
justification and without action to address material shortfalls 
in meeting expectations. In fact, Mr. Chairman, as you 
mentioned, during the course of our working DOD terminated one 
after spending $126 million in 7 years of effort.
    So what needs to be done? This is point three of our 
statement. Over the last 2 years, we have made a series of 
recommendations that collectively provide a framework for 
modernization management improvement. In short, they define a 
series of steps aimed at developing and effectively 
implementing a modernization blueprint in a way that should 
minimize risk and maximize results. Moreover, they define 
categories of system projects that DOD should confine its IT 
spending to, pending correction of its weaknesses.
    In summary, the state of DOD's business systems environment 
makes a compelling argument for modernization, but the mammoth 
cost and the enormous importance of organizations argue even 
more about making absolutely sure that DOD does the right thing 
and it does it the right way. To achieve this, to be right, if 
you will, DOD should fully implement our recommendations and 
insure that it adheres to relevant Federal guidance and 
recognized best practices. Anything less will continue to put 
the modernization at high risk of failure, which in turn will 
force the Department to continue to rely on existing systems 
that do not support effective and efficient business operations 
and do not provide timely and reliable information for 
decisionmaking.
    In closing, we would like to commend the subcommittee for 
their oversight of DOD's efforts.
    This concludes my oral summary. I'd be happy to answer any 
questions that you have at this time.
    Mr. Turner [presiding]. Thank you, Mr. Hite.
    [The prepared statement of Mr. Hite follows:]
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    Mr. Turner. Mr. Chairman.
    Mr. Shays. When I see a number that says the Department 
fiscal year 2004 IT budgetary request is approximately $28 
billion, that seems like an extraordinary sum; and it seems 
like a misprint. Tell me what 28--first, is the $28 billion 
accurate; and, second, fill it in a little bit. Explain to me 
where $28 billion goes.
    Mr. Hite. Yes, sir. Is the $28 billion accurate? I would 
submit it's DOD's number, the $28 billion. I would submit 
that's probably understated. That is not a number, a top-down 
derived number. That's a number that's derived through data 
calls out to the multiple components within the Department to 
try and put together a collective number for IT spending in the 
Department.
    Those IT dollars are embedded in multiple appropriation 
accounts for a wide range of DOD component organizations across 
the Department. So $28 billion is DOD's number.
    Then what we did through our analysis was try to determine, 
as you asked last year, Mr. Chairman, as to what is that money 
going for, to identify what portion of that is going toward 
business systems modernization as opposed to command and 
control systems, for example, or embedded systems and weapons 
systems. And that's how our analysis allowed us to derive the 
$18 billion number.
    Mr. Shays. $18 billion is for business systems?
    Mr. Hite. Yes, sir.
    Mr. Shays. OK. And the balance, whatever that is, is for 
weapons systems and so on.
    Mr. Hite. Yes, sir.
    Mr. Shays. OK. Then let's just take the $18 billion. Over a 
nearly $400 billion budget, is that about what you would see in 
a larger organization, percentagewise? If you don't know, I 
don't want you to tell me and give me an answer. If you don't 
know, then I'd like you to check. But do you have a sense of it 
or do you----
    Mr. Hite. I could research that, but I don't believe there 
is a standard out there in the private sector or in the public 
sector for IT budgets.
    Mr. Shays. I can't believe there wouldn't be. I mean, it 
would seem to me you would always want to kind of be able to 
compare yourself to others. If I was--since it's such a large 
cost, I would want to know, if I were running a business. I 
mean, how does it compare to our competitors?
    Mr. Kutz. It's hard to imagine in a competitive environment 
paying for systems that are duplicative, that store the same 
data multiple times, etc., would be economical or be allowed to 
remain and a business to continue; and I think that's pretty 
safe to say. But we don't have empirical data for that.
    Mr. Shays. From that I could make an assumption, since they 
are duplicative and so on, that we obviously are adding 
significant costs. Not only do they not necessarily work well, 
but Mr. Kutz's--the implication I get from your answer is that 
it would likely be more because we are not spending it well.
    Mr. Kutz. There are significant inefficiencies, and if you 
take the $18 billion that's almost $50 million a day being 
spent to operate these systems and to maintain and modernize 
them. So $50 million a day is a substantial amount of money.
    Mr. Hite. Another variable is keep in mind there is when I 
said there's not a standard, it's because it depends on the 
state of the IT environment of the given enterprise that you 
would be looking at. If an enterprise that already has in place 
modern, effective and efficient systems, their costs would 
probably be much lower. If it is an IRS, for example, who's in 
the process of modernizing their systems and they have on the 
order of an annual budget of about $9 billion, they spend 
about--between operation and maintenance of existing systems 
and modernized systems, they spend closer to $2 billion on IT. 
So that's a huge percentage there.
    So it is going to depend on the nature of the organization, 
the operations it performs, the extent to which it depends on 
IT and then the state of those IT assets at that particular 
point in time.
    Mr. Shays. Can you put a number on the amount of wasted 
dollars, the $18 billion? In other words, you can demonstrate 
that the programs aren't working as well as they could, aren't 
up to date and so on, they are not integrated, they are not 
coordinated and all of those things. But can you put a number 
on the amount of dollars you think are being wasted?
    Mr. Hite. No, sir, I can't put a figure on that.
    Mr. Kutz. Mr. Chairman, Secretary Rumsfeld has said the 
Department could save up to 5 percent of its budget through 
effectively modernizing. So if you take 5 percent of roughly 
$400 billion, you're talking about $20 billion. I think that 
this would be a part of that $20 billion, certainly probably 
billions of dollars. If you look at the environment today of 
over 2,000 systems and where they hopefully will be if we are 
successful with this effort, which would be maybe several 
hundred systems, you could see at the end of the day 
substantial multibillions of dollars of savings. This would 
seem to be a large part of what Secretary Rumsfeld is talking 
about in the savings for modernization.
    Mr. Shays. Right. But I can basically make an inference 
that you have waste by a system that doesn't work well, the 
waste connected to that system; and then you have a waste 
because systems are supposed to help you allocate other 
resources better. So we're not managing other resources as well 
as we could. So it's kind of a twofer here. If we could get a 
better system, it should be more cost effective. It should also 
help us make other parts of DOD be more cost effective. I mean, 
is that a fair assumption?
    Mr. Kutz. Absolutely. You're buying items that you don't 
need. And you may recall from our JSLIST hearing last year that 
DOD was selling items actually needed, for pennies on the 
dollar on the Internet; at the same time DOD was buying brand 
new chem/bio suits. So you're absolutely right.
    In addition to the inherent inefficiency of the systems 
spending, this does cause a whole other series of other 
inefficiencies in the Department.
    Mr. Shays. I also, besides inferring things, make some 
general assumptions. One is that we have very talented people 
at DOD. We have very dedicated people at DOD. We have, you 
know, people who want to do right by their government. But it's 
such a big government that it's hard to identify probably who's 
doing some good things and who's not. But I guess what I want 
to know is if you were to--where do you think the major 
problems lie? You've said it, but say it for the testimony. Not 
documenting the problems but documenting what are some of the 
major solutions. Therefore, I can figure out what the problems 
are.
    Mr. Kutz. One of them would be the sustained leadership 
that I think we've talked about in other hearings of yours. I 
believe Comptroller General Walker talked about a concept of a 
chief management officer that you would bring in that would 
have significant qualifications in successfully doing this that 
you would bring in potentially for a term of, let's say, 5 to 7 
years that would be renewable that would provide you the 
sustained leadership. The average tenure of the political 
appointees at DOD--and this might be a little bit dated 
information--is about 1.7 years.
    Mr. Shays. And the political folks are the ones ultimately 
calling the shots on this.
    Mr. Kutz. Yes.
    So that is one issue. I mean, you have a myriad of other 
issues. Let's use the incentive system that we have right now. 
The $18 billion we're talking about, as you said, we're 
spending that or we have, for example, the DPPS system which 
will not result in any measurable benefits for the government 
after $126 million. What's happening next year? They're going 
to get more money. I mean, is that the right incentive system 
for spending that much money and not showing measurable 
progress? But that is, in fact, the incentive system we have 
today from a monetary perspective.
    So there's an issue of incentives and accountability for 
how the money's being spent.
    Mr. Shays. I'm seeing a green light that keeps going on 
green. Did it get flipped over? OK. Thanks.
    What would a chief manager, chief financial manager or 
chief--how do we define that?
    Mr. Kutz. It could be a second deputy. It could be a chief 
management officer. We talk about this in our----
    Mr. Shays. What would someone in the private sector be 
paid?
    Mr. Kutz. For that? Millions of dollars a year. It would be 
someone similar to Charles Rossotti, who was brought into the 
Internal Revenue Service. He had a past management history. He 
was not a tax attorney, which was the history of leadership at 
IRS before. He was brought in for a 5-year term, and he had a 
set of credentials from the private sector.
    Mr. Shays. But he took a major salary reduction in joining.
    Mr. Kutz. Substantial. Probably 90 or 95 percent pay cut, 
yes.
    Mr. Shays. So this person needs to, obviously, have 
qualifications. This person needs to have some tenure and, 
ideally, you know, paid fairly well but being given extensive 
authority. In other words, when he asks are--or she asks for 
this information, they would--the rest of the Department would 
have to know they need to be responsive.
    Mr. Kutz. They would have to have the clout to make things 
happen not only within the Office of the Secretary but within 
the services.
    Mr. Shays. Thanks.
    Mr. Chairman, I might like to come back afterwards in a 
second round, but I am done for this one.
    Mr. Turner. In listening to your testimony concerning 
oversight and in some of the examples that you discussed, it 
seems like there are problems both in the inception and how 
projects are defined and approved in the design process in what 
the requirements are and how that process changes while the 
project is ongoing. Then, also, implementation, buying, making 
certain that it's used and that the organization is going to be 
a partner with the organization that is putting the system in 
place. That pretty much is soup to nuts for the whole thing. Is 
there a process part that's working or is there one of these 
that you could identify that you think is more a problem than 
the others?
    Mr. Hite. Congressman Turner, my experience in working at 
the Department of Defense unfortunately points to the fact that 
there are a number of things that are not being done correctly 
on a number of fronts; and, to be honest with you, I can't 
point to one where historically it has been done correctly. 
There are probably pockets of that within the Department.
    But the kind of systematic change that we're talking about 
and that the Department is trying to pursue now where and how 
they approach modernization provides, in my recollection, for 
the first time introducing this concept of having one blueprint 
that everyone builds to.
    The concept of when you invest in one of these projects 
within the context of that blueprint you insure that it is 
justified on the basis of cost benefit and risks, that you take 
these large systems that involve doing many things over many 
years and spending hundreds of millions of dollars, that you 
break those into incremental pieces and you invest in those 
incremental parts and insure that they are delivering value 
commensurate with cost over their life-cycle, that you employ 
rigorous and disciplined acquisition practices in how you 
engage with the contractor in delivering those and insuring 
that when they are implemented they are working properly, these 
are things that in some respects have been embodied in DOD 
policy over the years, in some respects have not.
    The real issue in my experience at the Department is in the 
zeal to try and do the right thing. Everyone over there who's 
in charge of one of these projects is trying to do the right 
thing in the--and that zeal and the pressure that's brought 
upon them to meet milestones and that being the No. 1 driver, 
there is a tendency to sidestep some of the rigor and 
discipline that you traditionally see in successful programs in 
the haste to meet milestones; and in my mind that's a recipe 
for failure.
    I do see now, and I'd have to say for the first time in the 
20-some years that I have been doing work there, a recognition 
and an acknowledgment that can't continue and we have to change 
the way we define what we are going to buy, how we are going to 
buy it, how we are going to implement it, how we are going to 
test it and how we are going to make sure that it's successful.
    Mr. Turner. In my opening statement, one of the things that 
I mentioned is my an interest in the acquisition process itself 
and how it might lend to the outcomes that you're seeing. In 
the private sector--and you mention in your presentation the 
process that the private sector goes through--the issue of 
oversight is, of course, one that is handled differently than 
it might be in the government.
    But also the issue of acquisition, what you're going to 
buy, working in partnership with the company that's providing 
you the system and defining the solution instead of providing a 
specification in which you then look to multiple users to try 
to present a solution when it may not exactly be the one that 
you need for the outcome you're looking for, what are your 
thoughts on the government's acquisition process of IT versus 
the private sector and does that in and of itself inherently 
cause a problem in designing these systems?
    Mr. Hite. I agree 100 percent. That causes a problem in 
acquiring these systems.
    Traditionally, and to a great extent today, in the Federal 
Government the approach to acquiring systems now--and they're 
commercial-based, component-based systems now. They are not 
home-grown, one-of-a-kind, unique systems anymore where you're 
writing millions of lines of code. You're building systems from 
commercially available components, hardware and software; and 
the approach to doing that successfully is far different than 
the traditional approach has been to customized solutions.
    My experience across the Federal Government shows that, 
more times than not, those private-sector practices for 
acquiring commercial components systems where you don't have 
requirements drive the solution. You tradeoff requirements 
against what's available in the commercial sector. So your 
decisions are based on not just what I need but what is 
available. Those kinds of practices are not employed, to a 
large extent.
    I can say, in talking to the leadership on this 
modernization program, that's what they want to get to. They 
want to have the commercial environment drive their solutions 
so they're not introducing customized solutions as they have in 
the past. That's the approach they're taking with the 
architecture development, and it is my understanding that's the 
approach they're going to be taking with prototyping system 
solutions as they move forward with implementing the 
architecture. Those are all proper courses of action in our 
mind.
    Mr. Turner. In the private sector, one of the other issues 
that is prevalent that you indicated here is a problem for DOD 
is the concept of buy-in of those who have to utilize the 
system and indicating one of the systems that had been 
abandoned was--had competing systems that people were unwilling 
or departments were unwilling to abandon. Is the modernization 
program--is the leadership going to have the authority 
necessary to bring those various departments and programs 
together and then also the authority to assist in the buy-in 
process?
    Mr. Hite. Right now, in my mind, no, they don't have the 
authority to do that. We've got recommendations on the books 
trying to create that kind of authority to insure that happens. 
I mean, your question is right on target. This is not an 
afterthought when you're introducing commercial systems. You've 
got to think about how are we going to introduce the change 
that's embedded in those systems. You have to think about those 
kind of issues from the outset, and you have to position your 
organization to accept that level of change.
    What I can say is, based on my discussions with the 
individuals who are leading this modernization program, is that 
they recognize that, as of yet, at this stage of the 
modernization, I haven't seen on-the-ground processes to 
provide for that. But I wouldn't necessarily expect to yet.
    Mr. Turner. Mr. Chairman, do you have additional questions?
    Mr. Shays. Yes, thank you.
    Just sort this out for me, just briefly. The reason why you 
don't see us moving forward with a manager not co-continuous 
with the President is that just a political disagreement that 
we're having with the administration? No one's picking it up? 
Have you had any response from DOD whether they like the idea, 
etc., follow--tell me how to sort that one out.
    Mr. Kutz. You don't have a chief management officer 
concept. Actually, Dave Walker, I believe, the Comptroller 
General, introduced that to one of the business councils over 
at DOD; and they did embrace that as one option to move 
forward. I don't know where it's gone since then. So this has 
been introduced to the Secretary and some of the senior 
business councils over there and was received well.
    Mr. Shays. How long ago?
    Mr. Kutz. Several months ago.
    Mr. Shays. OK. When you speak to the higher-ups in DOD 
about your report, walk me through their reaction on your 
presentation, the waste.
    Mr. Kutz. With respect to the management of these four 
systems, I think that there's a recognition that these are for 
the DFAS system. But there is a recognition that the project 
management investment, management controls necessary to bring 
these kinds of projects home within cost schedule and 
performance targets are not there right now; and there's a 
recognition that they need to be there for them to successfully 
modernize. You can build a blueprint for modernization, but if 
you can't actually build the projects out you're not going to 
get there. So there's a recognition that this is a DOD wide and 
not a DFAS issue.
    Mr. Shays. Has GAO had much interaction with the 
appropriations subcommittee of DOD on this issue?
    Mr. Hite. Not on this particular issue, no.
    Mr. Shays. OK. What I would love to do is set up a meeting 
with the staff of that subcommittee with all of you and see if 
we can kind of gauge their interest in this issue.
    Mr. Chairman, I'm all set.
    Mr. Turner. Chairman Shays has indicated that in the past 
he's provided opportunities for staff that are present who have 
also worked on these issues to ask questions that might be 
helpful for--both for the purposes of the hearing and the work 
that they are doing. So at this time if there are staff members 
who have an interest in asking questions, and we can begin to 
my left. Mr. Chase.
    Mr. Chase. Your report makes a very strong point regarding 
oversight of the four business systems that you analyzed.
    First of all, a general question. What's preventing 
meaningful project oversight at DOD?
    Mr. Hite. The short answer is, in my mind nothing's 
preventing meaningful oversight. I mean, that's a conscious 
decision as to whether you want to exercise it or not. In the 
case of these four projects, there was nothing to preclude it, 
at least ostensibly nothing to preclude it.
    One thing that could preclude it is nobody holds you 
accountable for your oversight whether you do it or whether you 
don't do it. And, you know, people are like, as any human 
being, they're going to react to what they are measured and 
graded on. But the bottom line is there's nothing to preclude 
it.
    Mr. Chase. How would you hold the Department accountable 
then?
    Mr. Hite. Well, you would--I mean, individuals within an 
organization are assigned accountability for discharging this 
kind of oversight; and they need to be accountable up their 
chain of command for executing their responsibilities. If 
nobody pays any attention to it, the tendency is it doesn't get 
done.
    Mr. Chase. Could you describe for us the kind of oversight 
that should have taken place for these four systems by both the 
Controllers Office and the DCI?
    Mr. Hite. Yes. In responding to that, one of the things I'd 
like to lay out is the way DOD's acquisition process works, 
which is you have major milestones for acquiring or delivering 
huge, monolithic systems. Their approach is not to break it 
into incremental deliverables and to measure progress against 
those deliverables.
    So in terms of how it should be done, any of these large 
systems, you break it into its incremental parts, its modular 
parts. You measure, you define what you're going to provide on 
the basis of those increments, the--what it is going to cost 
you, what value are you going to derive for it, what kind of 
capabilities are going to be provided, and you measure the 
delivery and the satisfaction of those incremental parts, and 
you have milestones associated with each one so you don't have 
to learn after 2 years of a major milestone not presenting 
itself that things aren't on track. That's the way a successful 
organization does it.
    Now DOD's acquisition process historically has not provided 
for that. It provides for oversight at major milestones. What 
happens is years can pass in between those major milestones, 
and there's a whole lot of activity and a whole lot of money 
that can be spent in a year's worth of time.
    Mr. Chase. OK. Thank you, Mr. Chairman.
    Mr. Shays. I next understand John Hambel, counsel for the 
Subcommittee on Technology, Information Policy, 
Intergovernmental Relations and Census will be asking 
questions.
    Mr. Hambel. Thank you, Mr. Chairman.
    Mr. Kutz, last week you testified before the Subcommittee 
on Technology at its hearing on data mining; and at that time 
you testified that the poor quality of Federal Government 
systems is a significant impediment to making full use of tools 
such as data mining. Now we're hearing at DOD we have over 
2,000 business systems, and I was wondering how this impacts 
your ability to use data mining techniques, audit and 
investigate various programs.
    Mr. Kutz. I think the first thing that you'd have to look 
at with all these systems is identifying the systems that 
actually had the information in them from which you might want 
to data mine. You have for example, in the vendor pay area up 
to 18 systems that have information or transaction-based 
information on them related to vendor payments. With respect to 
personnel and logistics, you've got hundreds of systems.
    First of all, one challenge would be identifying which 
systems have the information.
    A second challenge would be reconciliation. When you do 
data mining, you typically reconcile control totals before you 
actually do the data mining, such as $10 billion is in this 
system and a million transactions. That's often a challenge 
because you don't have general ledgers oftentimes with which to 
compare control totals. You've also got systems here that have 
lots of errors in them, and errors create false positives when 
you're doing data mining, looking for anomalies, etc., which 
could require you to spend considerable amounts of time 
following up and not getting anything for your investment.
    The other thing that I would mention here with respect to 
data mining, some of these systems you may not be able to data 
mine. Again, I'll go back to the example from our hearing here 
last year on the JSLIST where, if I was asked to go into DOD's 
systems and do data mining on the chem/bio suits and identify 
how many there were, where they are, what the expiration date 
is on the package that says when the suits are no longer good, 
I couldn't do that data mining because the DOD's systems don't 
have the data in them from which to do that.
    So there's a lot of implications of all these systems in 
the area of data mining.
    Mr. Hambel. Thank you.
    Just going for a moment to the question of annual funding, 
what are the cultural and procedural issues that currently 
exist in attempting to manage funding flow to the various 
departments, agencies and bureaus within the DOD in order to 
actually establish and measure accountability? In other words, 
who is watching the henhouse and just how many henhouses are 
there?
    Mr. Kutz. There's lots of henhouses.
    There's, again, money all over the place. Dozens of 
locations and buckets of money are out there being spent on 
these 2,000 systems, and so there's not a lot of transparency 
for us to go in and determine that there was $18 billion spent 
on business systems. It was not a trivial task. We had to go 
through six inches of paper and data mine out of the paper the 
actual information that showed us that. So there's not a lot of 
transparency there.
    A lot of the projects or most of the projects right now are 
being developed from the ground up without an architecture. 
People are out there making narrowly focused, parochial-type 
decisions on what kind of systems that they want to develop. 
There is not a lot of strong oversight and accountability right 
now with money spread all over the place, with little 
accountability in centralized corporate control.
    Mr. Hambel. Thank you, Mr. Chairman.
    Mr. Turner. We want to recognize Congressman Duncan from 
Tennessee who has joined us.
    Mr. Duncan. I have no questions, Mr. Chairman. I'm here 
just to listen to the witnesses. Thank you.
    Mr. Turner. OK. Thank you.
    Mr. Chairman, do you have any additional questions?
    Mr. Shays. Yes, I'd like another round here.
    What oversight does the Office of Controller provide to 
insure IT projects stay within costs and on schedule?
    Mr. Smith. Basically, Mr. Chairman, what we found, looking 
at the four DFAS project, was there was a very limited review 
by the DFAS and the OSD Comptroller. Basically, they look at 
the budget justifications that come in; and, unless there is 
large anomalies from year to year, that was the extent of the 
budget justification. They were not aware of the huge increases 
in the Defense Procurement Payment System in terms of cost 
increases and scheduling runs until we brought it to their 
attention.
    Mr. Shays. OK. What oversight does the chief information 
officer provide to insure IT projects stay within cost and on 
schedule?
    Mr. Smith. Again, on these, the two projects, the Defense 
Procurement Payment System and the DFAS corporate data base and 
DFAS corporate warehouse, we found very limited oversight by 
the CIO's office, even though these two projects fall under 
their responsibility. We asked for documentation to look at 
what they had done to question the cost increases and schedule 
slippages. We were not provided with any.
    Part of the problem they told us was that there's this view 
that the CIO does not have the clout to really terminate these 
projects. So that may be--that was pointed out several years 
ago in another GAO report about the CIO's oversight review and 
responsibility, particularly in regard to the Clinger-Cohen 
act.
    Mr. Shays. Let me ask this. How would you characterize 
DOD's oversight of DFAS business systems and modernization 
efforts?
    Mr. Smith. I would have to say, based on these four 
projects again, very limited oversight once you get outside of 
DFAS; and even within DFAS we found very little rationale or 
questioning of the cost increases and the schedule slippages.
    Mr. Kutz. Mr. Chairman, they're trying. I mean, they 
recognize these issues. They're working on this architecture. 
They're trying to go from a situation where you have 
uncontrolled proliferation of systems--I mean, you can see when 
you get to 2,000 systems, that is uncontrolled proliferation of 
systems. They're trying to go from an environment where you had 
that to an environment where you're trying to tightly control, 
and they have taken some interim steps. They're not there yet. 
Not even close, probably, to being where they have tight 
control over it. But it is a process, and they do recognize 
this, I believe. Certainly when they come up to testify I 
assume they will be telling you about what they specifically 
are doing.
    But it is very difficult to move from that environment I 
just mentioned to the kind of tight controls that you would 
want to see when you're talking about this kind of money.
    Mr. Shays. Yes, it's a huge amount of money. If systems 
worked better, we would save a fortune.
    So, Mr. Chairman, the only thing I would want to say is 
that I am concerned--we have such good questions from the 
staff. I just want to make sure from the staff that they don't 
feel we need to ask any others on this.
    Vinnie, are we OK? OK. All set.
    Mr. Chase. Yes. Greg, can you just describe for us how this 
new system of control, the enterprise architecture that you're 
trying to implement, will--how do the four systems that you 
reviewed at DFAS, how will this interface or how will it fit 
into the new enterprise architecture plan?
    Mr. Smith. We aren't certain yet and neither is DOD where 
these four systems are going to fit within the architecture. 
Definitely, DPPS won't be part of it, since it has already been 
terminated. The other three are going through an evaluation 
process now to determine which of the existing 2,000 systems 
will be part of the architecture. That decision has not been 
made yet, so we don't have an answer yet, and that's, you know, 
because we're kind of waiting to see where they fall out.
    Mr. Kutz. Mr. Chase, from an oversight standpoint where I 
believe they're trying to go is they've established in their 
modernization seven domains, which would include like a 
logistics domain, etc., and this would fall under a comptroller 
domain. As I would understand it, that accountability for these 
systems would fall under a hierarchy of oversight boards. There 
would be one at the domain level. There would be higher ones, 
and potentially there would be subcommittees from that domain.
    They're trying to control this within these seven domains, 
and so this would fall under the financial--one of the 
financial domains. They would try to control it there with the 
series of hierarchical boards that they have in addition to and 
including the control of the Chief Information Officer.
    Mr. Chase. Thank you.
    Mr. Turner. Yes, Mr. Chairman.
    Mr. Shays. I would just hope that at least one of you would 
be able to stay for the other panel so--in case we would want 
to call you back just to understand maybe comments that are 
made by the next panel. It would be helpful.
    Thank you.
    Mr. Turner. Are there any additional questions?
    Do any of the members of the panel have anything they wish 
to add or to include?
    OK. Thank you very much. Appreciate your taking the time 
and the insightfulness of your testimony.
    Next, we will be turning to our second panel, which will 
include Ms. JoAnn Boutelle, Director Deputy Chief Financial 
Officer, Department of Defense; Mr. John R. Landon, Principal 
Director, Deputy Assistant Secretary of Defense, Command, 
Control, Communications, and Intelligence Surveillance, 
Reconnaissance, Space and IT Programs; and Mr. Thomas Bloom, 
Director of Defense Finance and Accounting Service, Department 
of Defense. And also included in the panel will be Audrey 
Davis, Director of Information Technology and Chief Information 
Officer.
    If the panel would please stand to be sworn in.
    [Witnesses sworn.]
    Mr. Turner. I believe we are starting with Ms. Boutelle.

 STATEMENTS OF JOANN BOUTELLE, DIRECTOR DEPUTY CHIEF FINANCIAL 
   OFFICER, DEPARTMENT OF DEFENSE; JOHN R. LANDON, PRINCIPAL 
   DIRECTOR, DEPUTY ASSISTANT SECRETARY OF DEFENSE, COMMAND, 
    CONTROL, COMMUNICATIONS, AND INTELLIGENCE SURVEILLANCE, 
   RECONNAISSANCE, SPACE AND IT PROGRAMS; AND THOMAS BLOOM, 
   DIRECTOR, DEFENSE FINANCE AND ACCOUNTING SERVICE [DFAS], 
                     DEPARTMENT OF DEFENSE

    Ms. Boutelle. Thank you, Mr. Chairman, and members of the 
committees. My name is JoAnn Boutelle, and I am the Deputy 
Chief Financial Officer for the Department of Defense. I am 
pleased to be here to update you on the course of financial and 
business management reform within the Department. Strengthening 
oversight of business systems modernization is a key element in 
the transformation of the Department.
    Secretary Rumsfeld is committed to transforming the way the 
Department does business--from the way it fights wars to the 
way it orders parts. It is one of his top priorities. This 
transformation effort is fundamentally different from past 
efforts because it is being driven from the top by the 
Secretary and all of his senior leaders. This top-down 
leadership strategy attacks the stovepiped support culture 
entrenched in the Department, which today is unable to provide 
timely and key data to decisionmakers.
    Transformation emphasizes rearranging the financial and 
business processes within and across business lines. 
Understanding that sound management information is not possible 
without comprehensive business process reform and top-level 
management support are what truly distinguishes this reform 
effort from those of the past.
    Our strategy to increase the efficiency of the Department's 
business processes and for creating sound management 
information consists of the following four elements: First, 
build a DOD-wide architecture that prescribes the use of 
standard business and financial rules. Second, employ a DOD-
wide oversight process, consisting of DOD's senior leadership, 
to implement the architecture and to monitor Departmental 
spending. Third, refine and extend architecture to create a 
seamless connection between it and other Federal and DOD 
transformation initiatives. And, fourth, use performance 
measures, based on the President's Management Agenda, to 
oversee the entire process.
    Supporting our troops is the main reason we are pushing 
this transformation. There must be no retreat in our question 
to optimize that support. Productivity gains from the 
Department's transformation efforts will not only free up more 
resources for the front-line troops, it will also give 
decisionmakers the management information they need.
    Guided by the recommendations of a prominent financial 
expert, the Secretary created the DOD-wide Financial Management 
Modernization Program. Its fundamental aim is to overhaul our 
nonstandardized financial and nonfinancial systems and business 
processes. Many of issues brought to light in the General 
Accounting Office audit report discussing the Defense Finance 
and Accounting Service's systems are being addressed in the 
financial management enterprise architecture and the new 
governance process.
    The Department is developing a defense-wide architecture 
that incorporates leading business practices. The architecture 
defines an improved DOD business environment by prescribing the 
use of standard business practices, rules, data and attributes. 
It is, in essence, an engine of transformation as well as 
standardization. The architecture also link business process 
reengineering to management information needs of the 
Department's decisionmakers.
    The consistent use of standard processes throughout DOD 
will enable our systems to provide timely and accurate 
financial management information to decisionmakers at all 
levels. Auditable financial statements and a clean audit 
opinion will be by-products of this transformation effort.
    We are also ensuring that our architecture meets the 
requirements of the governmentwide Federal enterprise 
architecture. In doing so, we move closer to our ultimate 
goal--improving the Department's business processes. The 
Department awarded a contract for this architecture development 
to IBM in April 2002. We have made steady progress in the 
development of the architecture since that time.
    The key to the success of transformation is making it self-
perpetuating--the Department is embedding an ethic of change 
and constant improvement into its culture. We are working hand 
in hand with the owners of the Department's major business 
lines to implement the architecture. We are constructing a 
corporate DOD approach in the way we develop and field our 
business processes and systems. DOD's senior leaders have 
agreed on a high-level governance process to control our 
investments in information systems.
    We clearly understand that successful business and 
financial reform requires the commitment and support of all 
those who maintain the Department business infrastructure.
    In closing, Mr. Chairman, I want to restate that the 
Department's business and financial transformation initiative 
has Secretary Rumsfeld's complete support. We are working 
closely with OMB and GAO. Our partners from those agencies have 
been participating in our reform effort from the beginning. We 
will also need your continued support. Only by working 
cooperatively with our partners within and outside of the 
Department can we build an improved business support 
infrastructure.
    That concludes my formal remarks, and I will be happy to 
answer any questions.
    [The prepared statement of Ms. Boutelle follows:]
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    Mr. Turner. Thank you. Mr. Landon.
    Mr. Landon. Mr. Chairman and members, I appreciate the 
opportunity to respond to your request for information--are we 
not on. I am sorry. Let me try again.
    Mr. Chairman and members, I appreciate the opportunity----
    Mr. Shays. If I may interrupt, I think you did this just 
out of courtesy to the first speaker. But, Mr. Bloom, you don't 
have to do the first thing.
    Mr. Landon. Mr. Chairman, I work for the Assistant 
Secretary of Defense for C3I and the DOD chief information 
officer, Mr. John Stenbit, who regrets he could not be here 
today in person to speak with you. However, he has charged me 
with executing his responsibilities in the areas of acquisition 
and program execution oversight, and I am prepared to address 
this topic with you.
    I have responsibility for overseeing major acquisitions in 
the command, control, communications, intelligence and space 
functional areas. In the summer 2002, Mr. Stenbit asked that I 
take on the additional responsibility of overseeing information 
technology programs for which he has acquisition and milestone 
decision authority.
    This portfolio includes 37 major automated information 
system programs, or MAIS programs as we call them, ranging from 
business systems in the area of logistics, finance, health and 
personnel, to command and control systems. I perform this 
function in cooperation with the Offices of Primary 
Responsibility or Principle Staff Assistance within the Office 
of Secretary of Defense staff and other offices within OSD who 
provide functional expertise on any given area.
    In the case of financial America and accounting systems, 
the Office of Primary Responsibility is the comptroller.
    Approximately a year ago, Mr. Stenbit recognized the need 
for more rigor and discipline in the acquisition of information 
technology programs and they asked that I apply the same degree 
of oversight for these programs that I do with major defense 
acquisition programs for which I already have responsibility.
    The common characteristics of these two groups of programs 
is they are software-insensitive in nature, and the fact that 
many of the same development approaches apply to both.
    As I reviewed the GAO's report, I found that I agreed with 
many of their findings. Programs were being initiated without 
appropriate justification, review of the development progress 
was not occurring on a frequent and regular basis, and programs 
were allowed to continue when they exceeded established 
baseline performance.
    In cooperation with the Comptroller's Office, I want to 
assure you we are taking steps to rectify these discrepancies.
    In the area of rigorous acquisition discipline, we are 
assuring that proposed programs are reviewed for compliance 
with statutory and regulatory requirements before they receive 
authorization to proceed into each phase of development. This 
means that business process reengineering and an analysis of 
alternatives has been accomplished, and economic analysis of 
the calculated return on investment is conducted and that there 
are clearly established measures and accountability for program 
progress.
    In addition, the acquisition strategy must reflect an 
incremental or spiral development with well-defined 
deliverables and a testing regimen that validates results.
    Once a program passes the criteria for entering 
development, I work with the designated principal staff 
assistant, the executive agent, and the program manager to 
ensure programs are being executed properly and that 
expectations are being met.
    I accomplish this activity by requiring program managers to 
provide quarterly status reports on execution metrics, which I 
personally review with my staff. Deviations from the 
development plan are highlighted and corrective action 
assigned.
    At a more fundamental level, we are initiating reviews of 
the acquisition structure and processes within each of the 
executive agent organizations to ensure qualified personnel are 
performing acquisition functions and the internal structure 
supports established acquisition principles. We have recently 
completed our review of the Defense Information Services Agency 
and will proceed to DFAS in our next review.
    In closing, I want to assure you that we are taking 
positive steps to ensure we are applying the necessary 
discipline and rigor for development of these critical 
information technology programs.
    Thank you for allowing me this opportunity to outline our 
approach.
    Mr. Turner. Thank you.
    [The prepared statement of Mr. Landon follows:]
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    Mr. Turner. Mr. Bloom.
    Mr. Bloom. Test. It works.
    Chairman Turner, Chairman Shays, distinguished Members and 
dedicated staff, my name is Tom Bloom. I am the Director of 
DFAS, and with me is Audrey Davis, who is the DFAS Chief 
Information Officer.
    Chairman Shays knows me from my past life as an Inspector 
General at the Department of Education. Let me assure you that 
it is a lot easier to criticize than to be correct. I am 
finding that out every day.
    Let me first tell you a little bit about DFAS and what we 
do. We are the largest accounting and finance organization in 
the words. We pay almost 6 million individuals each and every 
month. We pay over 11 million contract or invoices each year. 
We record over 124 million accounting transactions, account for 
267 active DOD appropriations, and manage $175 billion in 
retirement assets for the military.
    We are very proud of some of the recent accomplishments 
that we have had in DFAS, including in fiscal year 2002, we 
reduced the cost to our customers, the men and women who defend 
America, by $144 million from our 2001 amount. We are 
forecasting that we will reduce our bill in 2003 by another 
$108 million. To put it another way, comparing 2001 to 2003, we 
will be saving over $250 million for the American taxpayer.
    We have reduced our work force by almost 4,500 individuals 
since fiscal year 1999. We have done all this while increasing 
our service and quality. We have put almost 2 million, 1.7 
million on our Web-based pay system, so that 24/7 our folks can 
access their pay information. We have lowered by 30 percent the 
amount of interest penalties paid to contractors in the last 
year. We have been achieving a 99.96 on-time rate for 
accounting reports while decreasing by 1 day the time period to 
deliver those reports, and we have decreased problem 
disbursements by 90 percent from the 1998 levels.
    DFAS is an obvious success story. However, an area where we 
have much work to do is in the area of systems modernization. 
We are neither as good as we need to be nor as bad as the tone 
of the draft GAO report would suggest.
    We certainly agree with the recommendations made by the GAO 
in the draft report that we saw, and we have really already 
started to implement most of those suggestions as of today. 
Certain disagreements of fact have been pointed out by us in 
our comment letter back to the GAO and in this written 
testimony.
    Obviously, DFAS must be doing plenty right in order to 
achieve what we have been able to achieve in the last 2 or 3 
years. Much work needs to be done, and we believe that we now 
have the right oversight structure working with the Department 
to accomplish this.
    Ms. Davis and I stand ready to answer any and all 
questions. Thank you.
    Mr. Turner. Thank you.
    [The prepared statement of Mr. Bloom follows:]
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    Mr. Turner. Chairman Shays.
    Mr. Shays. Thank you, Mr. Chairman.
    Mr. Turner. Since we have a limited number of people here, 
can we do a 10-minute round?
    Mr. Shays. We can still do 10 minutes.
    Mr. Turner. Great.
    Mr. Shays. This is to all of you, what oversight does the 
Office of the Comptroller provide to ensure IT projects stay 
within cost and on schedule?
    Mr. Landon. Sir, if I might address that question from the 
C3I perspective, what our office does is looks at more the 
acquisition process, because there is a great number of 
similarities between one program and another. You can look at 
the types of execution metrics that are required. Since taking 
on this responsibility, I have instituted quarterly reviews of 
each of the programs and program managers are responsible for 
submitting these metrics for us to review. The types of metrics 
we are looking at are established based on the baseline for the 
program, in other words, what are the expectations of the 
program. So we can look at a, for instance, for example, the 
schedule that the program manager has predicted, and see if his 
actual is equal to his predicted.
    We are conducting these reviews quarterly, as I said, and 
we are getting more and more data and insight into the programs 
as we do that. And we share that with the Comptroller, of 
course, do that in conjunction with the Comptroller.
    Mr. Shays. So the answer is you share all this information 
with the Comptroller?
    Mr. Lantos. Yes, sir.
    Mr. Shays. And that is it?
    Mr. Lantos. No, sir.
    Mr. Shays. So they have it, you send it over to them?
    Mr. Lantos. No, sir. What we do is we conduct the review 
jointly.
    Mr. Shays. I am interested in what they do.
    Mr. Landon. It depends. When you look at the program, what 
you do ask you see how the metrics are being executed. If you 
see deviations, then we step back, we take a look at what is 
the root cause of the deviation, and then try to establish 
criteria for getting well.
    If we do not see it, we ask the program manager or the 
agency, executive agent, to provide us with that data. But, in 
other words, we open that dialog in order to address the 
problem.
    Mr. Shays. How about the chief financial officer?
    Ms. Boutelle. What Mr. Landon was explaining to you is the 
process that we go through for reviewing the high dollar level 
items that we bring under a certain review, and then we have 
the rest of the systems which are the majority of the systems.
    The process we go through in the Comptroller area for the 
high leveling systems he was talking about is we are a partner 
with him in that review, and are supposed to be questioning the 
costs and the performance of the development initiative.
    Now, I cannot speak to what the Comptroller was doing for 
these systems prior to my arrival last summer, but I can tell 
you since then that we have an active person that is 
participating in doing the reviews, and it was part of that 
effort that eventually led to DPPS being eliminated.
    So, we have room for improvement there.
    For the other systems, what we do, those are pretty much 
under the components review, and those we do review through the 
budget process, and we do question to a certain level on their 
budget execution, but not on the functionality and capability 
of systems through that process.
    Mr. Shays. How would you characterize DOD's oversight of 
the DFAS business systems modernization effort?
    Ms. Boutelle. I would say that what we are doing now is the 
right thing, that standing up the financial management 
modernization program and standing up the domain owners in the 
governance process and bringing the systems underneath 
different domain owners for review, and that would be all of 
the systems we have just gone through, doing an inventory of 
those systems and breaking them out by domain, which has never 
been done before. They have always been reviewed and controlled 
by the service or the component.
    So, I think that what we are doing in that respect, we have 
setup reviews with DFAS for what we refer to as their D 
systems, the ones that were established to do corporate 
applications, so we have those scheduled. I think there is a 
lot more oversight going on now than there was in the past, and 
you will even see more as we mature through this domain 
governance process.
    Mr. Shays. Anybody else?
    Ms. Davis. Mr. Chairman, from the DFAS perspective, since 
the inception of the financial management modernization program 
in 2001, there has been a tremendous amount of oversight from 
the comptroller's staff and from the Financial Management 
Modernization program. Insofar as we received guidance in 2001 
to constrain all of our investments in our systems that were 
enhancements to only focus on those critical changes to keep 
our systems operational so that we have actually been 
presenting our systems changes to the Comptroller, showing 
benefit costs, and they have been holding us to a return on 
investment of 18 months or less before we have gotten approval. 
So any enhancements to our systems beyond just maintaining them 
and keeping them operational to support our mission have 
actually been approved by the Comptroller.
    Mr. Shays. Thank you for these answers, but why was the 
development of the DFAS corporate data base, corporate 
warehouse business system, allowed to proceed without the 
required economic analysis?
    Ms. Davis. For the corporate data base and the corporate 
warehouse, while we did not do an economic analysis, what we 
did do however was a cost-benefit analysis, which included a 
return on investment. The reason we choose to do a cost-benefit 
analysis on the DCD in particular was because it is an 
infrastructure component. The benefits to using that 
infrastructure component really accrue to the applications that 
use it.
    So, the economic analysis was not particularly appropriate, 
so we used the cost-benefit analysis. So when you see in the 
report that there was not an economic analysis, that is true, 
but we did do a cost-benefit analysis for the corporate data 
base.
    Mr. Shays. I tend to expose my ignorance at times, but it 
helps me understand things. What would be the difference 
between an economic analysis versus a cost-benefit analysis?
    Ms. Davis. The primary difference is in the economic 
analysis the benefits accrue to the application for which you 
are doing the economic analysis. Because we couldn't show other 
than qualitative benefits to the DCD, because it is being used 
by other applications. So when another application needs to 
use, for instance, an interface that is already built to an 
existing accounting system, that benefit really accrues to the 
application that is using that capability and not to the DCD.
    It is like when you put in place a network, the network in 
and of itself doesn't provide--doesn't accrue any benefits, but 
everyone who uses it benefits from it.
    Mr. Shays. I think it was a good answer, but I don't 
understand it. That is not your fault.
    Ms. Davis. I apologize.
    Mr. Shays. You don't need to apologize. I am going to think 
about what you said here.
    What is the justification for the continuing investment in 
the corporate data base and the corporate warehouse system?
    Ms. Davis. If I can try to help clarify a little bit, 
because it is along the same lines.
    The corporate data base, for instance, the capabilities 
that it offers today, provides a single source of electronic 
funds transmission information so that all applications that 
need to transmit, to make a payment using electronic funds 
transmittals, come to the corporate data base to do that. So 
they don't have to build that or keep that information 
themselves. Well, the applications that pull that data, they 
are getting the benefit. The DCD, the corporate data base, is 
just a repository in that sense.
    Also the corporate warehouse, which is an extension of the 
corporate data base, is being used to support special 
operations command as a part of their efforts to manage their 
financial information in support of the war.
    Mr. Bloom. That has been a tremendous success. In the past, 
special operations command had been getting information really 
from five or six different sources, and not being able to make 
heads or tails of that. By using the corporate data base and 
the corporate warehouse, they are now able, in a very short 
period of time, to get the kind of information they need to 
manage the special operations forces. General Holland has been 
particularly complimentary of the DCD for helping him do that.
    Ms. Davis. So the simple answer to your question really is, 
Mr. Chairman, the need to continue investing in DCD and DCW 
really is as other applications need to use the capabilities it 
offers.
    Mr. Shays. I know we have other Members here, so I will go 
a second round later. Thank you, Mr. Chairman.
    Mr. Turner. Thank you.
    Mr. Kucinich, we are on a 10-minute round of questions.
    Mr. Kucinich. Thank you very much. Thank you, Mr. Chairman.
    A question for Mr. Bloom: Last week the Department of 
Defense Inspector General issued a report that revealed the A-
76 competition for the DFAS military and annuitant pay 
functions was erroneously awarded to the private contractor 
ACS.
    Now, in your testimony, you state that you are proud of 
DFAS's success in reducing costs to the taxpayers. In fact, the 
in-house public team won the award by at least $31.8 million. 
The error began with Mevatec, the consultant hired by DFAS, to 
prepare the in-house bid, and was repeated by DFAS and the 
Department of Defense Inspector General. Only queries from my 
office led the Department of Defense Inspector General to find 
the error after the contract was awarded to ACS. As I 
understand it, the contract is for 10 years, but gets renewed 
every year.
    Now, according to the Department of Defense Inspector 
General, DFAS, which you say is proud of its success in 
reducing costs to taxpayers, knew of the error of $31.8 million 
in June 2002. However, DFAS chose to renew the contract in 
January 2003.
    Why, Mr. Bloom, did DFAS knowingly renew this contract, 
when the in-house team was $31 million cheaper?
    Mr. Bloom. The process, if we had chose to do a rebid, 
would have taken certainly longer than the 6 months that we 
would have had to rebid that. We were really left in a 
position--and while the IG let us know that there was a 
potential of this in June, frankly, it wasn't proven to me 
until July. So we really had no choice at that point, other 
than to renew the contract for another year.
    As you mentioned, we do have the opportunity each year to 
decide whether we would and can or should renew the contract, 
and we will look at that and do the economic analysis each and 
every year before going forward with a renewal.
    Mr. Kucinich. So you are saying that you knew in July, and 
you nevertheless renewed the contract, even though you knew the 
other one was cheaper?
    Mr. Bloom. I had no choice at that point, sir. The only 
thing I could have done, we could only rebid the situation. It 
took us 2.5 years to do the first contract. There is no way we 
could have gotten this done in a 6-month period.
    Mr. Kucinich. There was no need to rebid though, because 
you could have returned it back to DFAS.
    Mr. Bloom. My lawyers tell me, sir, that is not legal to do 
that. That once the contract was extended, that is what we were 
doing.
    Mr. Kucinich. You are going to tell this committee and the 
American taxpayer, who you say you are here to protect that you 
knew the taxpayers were going to get hit for $31 million, and 
there was no need to rebid?
    Mr. Bloom. There may be a need to rebid. I am not saying 
there is not a need to rebid. I am saying there wasn't time to 
rebid. We will look at that contract each and every year.
    Mr. Kucinich. If you know the taxpayers are going to lose 
money on this contract, are you going to renew the contract in 
January 2004?
    Mr. Bloom. If it is proven that the taxpayers would indeed 
be better off, we will do the correct thing.
    Mr. Kucinich. Now, the A-76 competition process typically 
employs a 5-year contract period to make comparisons. That time 
period can only be changed if no bidder gains any advantage. 
However, ACS only won the competition in year 9 of the 
contract. By extending the contract to 10 years, ACS clearly 
gained a competitive advantage.
    Mr. Bloom, can you tell this committee why the competitive 
bid was modified in such a way that only benefited ACS.
    Mr. Bloom. It was not modified. The decision to go 10 years 
was made long before we knew there were going to be any bidders 
for the contract. So it is not correct that it was modified for 
ACS, to the benefit of the contractor.
    We choose 10 years as the timeframe because it gives us an 
option. A 10-year option is always better than a 5-year option. 
I would always rather have a 10-year option, because we are the 
ones with the ability to have the option. So, you know, 10 
years having a stable base of 10 years was really what is best 
for the government and clearly----
    Mr. Kucinich. Except in this case it wasn't.
    Mr. Bloom. I am not sure that is the case, sir.
    Mr. Kucinich. You have two scenarios here. One is the 
contract that was awarded erroneously, and the second case is 
the contract that was awarded when you didn't know there was an 
error. I am saying even when you didn't know there was an 
error, that it was only in year 9 that ACS was able to show any 
kind of success, and those numbers were wrong.
    Mr. Bloom. Well, that is how ACS chose to bid it, based on 
a 10 year comparison. We have no idea how they would have bid 
it had we made it a 5 year option, 6 year option or 7 year 
option.
    Mr. Kucinich. Let me ask you this: Are you aware of a 
certification by your office that no competitor would benefit 
from a contract of longer than 5 years? Are you aware of this?
    Mr. Bloom. Yes, I am aware. I think that was signed by a 
Mr. Carnes.
    Mr. Kucinich. Your name is printed on the line. What is his 
name?
    Mr. Bloom. Mr. Carnes was acting for me at that time.
    Mr. Kucinich. Why didn't you sign that certification?
    Mr. Bloom. I would have signed it. I must not have been in 
town at the time. I would have signed it had I been there.
    Mr. Kucinich. So you stand behind this certification?
    Mr. Bloom. I do. I do.
    Mr. Kucinich. Is Mr. Carnes with you now?
    Mr. Bloom. Mr. Carnes is no longer with the Department of 
Defense.
    Mr. Kucinich. Can you tell me how many A-76 competitions 
DFAS has performed?
    Mr. Bloom. I believe we have completed six. We have another 
one in the process right now.
    Mr. Kucinich. And how many of those resulted in a private 
bidder winning?
    Mr. Bloom. Only one.
    Mr. Kucinich. Now, DFAS has performed a total of eight A-76 
competitions, is that correct?
    Mr. Bloom. I think it is six plus one, but I don't have the 
numbers.
    Mr. Kucinich. Until this one, all were won by the in-house 
public team, is that correct?
    Mr. Bloom. That is correct, yes.
    Mr. Kucinich. I assume you are aware of the President's 
desire to have many government functions be privatized?
    Mr. Bloom. I know what I have read, yes.
    Mr. Kucinich. OK. And consider DFAS's record of A-76 
competitions not resulting in the stated goals of the 
President, have you ever indicated to anyone your desire to see 
DFAS lose a competition to a private bidder?
    Mr. Bloom. Absolutely not.
    Mr. Kucinich. Have any of your superiors ever communicated 
to you a desire to see the in-house bid lost in an A-76 
process?
    Mr. Bloom. No.
    Mr. Kucinich. No further questions.
    Mr. Turner. Thank you. We have been joined by Adam Putnam, 
the chairman of the Subcommittee on Technology, Information 
Policy, Intergovernmental Relations and the Census. Mr. Putnam.
    Mr. Putnam. Thank you, Mr. Chairman. I ask unanimous 
consent to insert my written statement in the record in the 
appropriate place.
    [The prepared statement of Hon. Adam H. Putnam follows:]
    [GRAPHIC] [TIFF OMITTED] 89166.042
    
    Mr. Putnam. I read the GAO testimony. I apologize for 
missing the first panel. I read it over the weekend and on the 
flight up. You guys have frittered away more money than the GDP 
of a bunch of developing nations. It is troubling that we will 
consider a $74 billion supplemental this week on the heels of 
record funding for the Department of Defense for very important 
laudable goals, but it is troubling to see how much waste there 
truly is, and just how big those figures are.
    One of OMB's IT program performance goals, and that is 
where I am really coming from as chairman of the Subcommittee 
on Technology, one of OMB's IT program performance goals is 
that on average, all major IT modernization projects are 
operating within 90 percent of their cost schedule and 
performance projects.
    How many IT modernization projects does DOD have and how 
many are within that 90 percent range?
    Mr. Landon. Sir, I would like to give you a number right 
now, but if I could, I would like to take that one for the 
record and I can provide it to you more accurately.
    Mr. Putnam. I look forward to that.
    Could you identify the major projects off the top of your 
head that are not achieving the 90 percent goal, along with any 
cost overruns or schedule slippages and the corrective actions 
that are being taken. Do any leap to your mind?
    Mr. Landon. Yes, sir. I can name a few. In fact, for 
instance, the program, DFAS program we have spoken to earlier, 
DPPS, has been terminated because it was approximately 50 
percent over cost.
    There are other programs that we are taking steps to either 
truncate or have redefined. Some of these are the Standard 
Procurement System, which is being truncated. By that I mean 
the development is, we are seizing the development until we can 
start a redefinition process of what the real goals and 
requirements of that program are.
    There are others, the JCALS program, JDAS program, that are 
also major developments that were over cost and have been--I 
don't want to say terminated, but they have been put into what 
I would call a maintenance status or sustainment status until 
we can work out the issues with the program and make sure it is 
defined properly.
    Mr. Putnam. Could you just briefly elaborate on what JDAS 
and JCALS stand for, for the record?
    Mr. Landon. Yes, sir. The JCALS program is really a program 
that was automated tech order program. In other words, a 
digitized tech order program for common--it was a logistics 
program for common data among the various services and users 
that use common information.
    JDAS, I am sorry, you are going to----
    Mr. Putnam. I am glad to see you guys get mired down in 
your own acronyms too. I thought it was just Congressmen that 
couldn't keep them all straight.
    Mr. Landon. Let's see here, I mentioned the defense 
message, I did not mention defense messaging system, which is a 
program for digitizing messaging. We have asked that be 
redefined in that it applies to a new architecture based on 
enterprise services. So that has been an ongoing program for a 
number of years, and it is at this point we are redefining the 
program.
    Also there is a program called TCAIMS, Transportation 
Coordinators Automated Information for Movement System. This is 
a system that service is used to provide information on 
movements of equipment.
    Mr. Putnam. That is an example of a program that has been 
terminated?
    Mr. Landon. No, sir, that has not been terminated. It is 
being reevaluated simply because it has--the initial stages of 
that program were not developed in an incremental fashion and 
what we have done is we have gone back to look at the 
deliverables, and what is a better way of introducing that 
capability for each of the services. So it is being reevaluated 
at this time.
    Mr. Putnam. The DPPS system that has been eliminated, we 
have lost money that was sunk into that, but we are also back 
to square one. So what is the current status quo, how many 
procurement systems are now back out there because the one 
whose goal to unify it has been terminated? Where are we now 
with regards to that?
    Mr. Landon. I will defer to Mr. Bloom for that.
    Mr. Bloom. DPPS was a procurement payment system, and so we 
have to continue to maintain the legacy systems that we had. I 
think is that seven----
    Ms. Davis. There would be eight.
    Mr. Bloom. Eight legacy systems.
    Mr. Putnam. If you would, I know that you wanted to respond 
in writing, if you could get us that listing of those major 
projects not achieving the 90 percent goal, along with cost 
overruns, schedule slippages and planned corrective actions.
    In December of last year, the DOD Comptroller terminated 
DPPS. They noted that, as you have said, it was being 
terminated due to poor program performance and cost overruns. 
Do we have anything to show for the $126 million that was spent 
on that program and who, if anyone, was held responsible for 
that program and the failure of that program?
    Mr. Bloom. Well, let me start off, I guess, by answering 
the question. There is probably little measurable meaningful 
asset left out of that $126 million. There may be certainly 
lots of lessons learned, but no meaningful asset there.
    I am the Director of DFAS, so I am ultimately accountable 
for that failure.
    DPPS, I guess to get biblical on you, was really a system 
that the foundation was built on sand instead of built on rock. 
When it was designed, when the thought was brought forward 
many, many years ago, long before either Ms. Davis or I were 
there, they made some assumptions that were just incorrect 
assumptions, and so when we built a system based on a 
foundation where we thought that we could get the whole 
Department to work under one standard, to work under one 
system, that was not going to be achievable.
    We built it on a foundation thinking we could use an off-
the-shelf product. We bought the off-the-shelf product and 
found in order to accommodate the different business processes, 
the different business practices, we were going to have to 
modify that, not the 30 percent that we had originally hoped, 
but 70 percent was ultimately where we ended up.
    Then ultimately it turned out the program took so long, 
that as we worked on the architecture, the overarching 
architecture that we have talked about here, we realized that 
it just wasn't going to fit in the architecture.
    One of the things that the GAO report, at least the draft I 
saw, failed to mention, was that I believe the most important 
reason DPPS was killed is that it just wasn't going to fit into 
that overall architecture, the new architecture that we should 
have had, that foundation we should have had, before we started 
such a project.
    Mr. Putnam. Let me drop back to 40,000 feet for just a 
second, because I know that you go to work every day and are 
doing absolutely the best that you can for the men and women 
out there who are dependent upon these logistics and the 
information and all the things that go into these IT systems 
and the logistics systems and the procurement programs and all 
that.
    The track record of DOD on business management is 
horrendous, under any kind of administration, and we keep 
writing you the checks to continue buying new systems, adding 
on to systems. There really hasn't been much accountability 
from our end either.
    What do you think the solution is? If you could take a 
blank piece of paper and a fresh sharp pencil, knowing how 
frustrated you must be to have to sit there and answer for 
losing billions of dollars, what is the answer, in your 
opinion?
    Mr. Bloom. Well, I think that we have hit upon the answer, 
and we are working hard for that answer, which is having the 
overall architecture, the enterprise architecture that the 
Office of Comptroller has been working on for the last year.
    Having that architecture and having the executive support, 
the support of the Secretary, the support of the secretaries of 
the services and the support of the under- secretaries to make 
that happen, I think we are moving toward that. So if I could 
start with a blank piece of paper, that certainly is how I 
would start. We talk about it as a blueprint. I guess you could 
call it a blueprint. I think it is a foundation or rock that 
you have and you can go back to, and that you have the correct 
oversight, the kind of oversight we have talked about here.
    Ms. Boutelle. If I can expand on that, I came from an 
operational environment coming in to the Comptroller, and what 
we are doing with the enterprise architecture is exactly what 
we need. We are for once stopping and getting the support to 
build business processes, and we have brought together the 
business line owners and we have formed a governance group. It 
is tough, I don't mean to imply that this change is easy, but 
for the first time we are actually looking at defining end to 
end processes and making that, the rule book along with the 
data elements we are going to use, what management information, 
the decisionmakers need, capturing that and having that as our 
blueprint to move ahead.
    In the past what we had, and DPPS is one example, we 
attempt to adhere to Clinger-Cohen, but we only do pieces of 
it. So we went out and bought commercial off-the-shelf 
products, but we didn't do business reengineering. So what we 
did was we attempted to customize the cuts, very costly, and 
then to think about upgrading it would have been just something 
that none of us, I think, could stomach.
    So where we are now, it is doing the business process re-
engineering first, coming up with as many commercial business 
practices as we can, and then looking for a technical solution 
to support those business requirements. But it is not 
decomposing a process down to be a DOD process. That is not 
what we are doing.
    So I think where we are at now is exactly where we needed 
to be. We have just not had this type of support in the past to 
do this.
    Mr. Putnam. Thank you.
    Mr. Turner. Mr. Ruppersberger of Maryland.
    Mr. Ruppersberger. Mr. Bloom, I came late, but when you 
asked the question Congressman Kucinich asked about the 
contract, where there was a breach in the contract, but if you 
didn't move forward with the contract, it would have taken a 
year or two for you to get someone else, so which means there 
would have been a lack of performance. Is that basically what 
your testimony was? That is how I interpret it.
    Mr. Bloom. I am not sure I understand your question.
    Mr. Ruppersberger. The question about the issue of when 
there was a breach in the contract, the lack of performance, 
and why did you go ahead and continue to move on with that 
contract, you said if you would have had gone to rebid it, 
would have taken 2\1/2\ years to get to where you needed to be.
    Mr. Bloom. No, there was no breach in the contract. What 
actually happened was there was a mistake made in evaluating 
the two bids, and so the award went to a contractor instead of 
staying in-house, so the work went to the contractor. The 
people, by the way, the contractor hired any and all people 
that wanted to go to work there, all the government employees 
who wanted to work for the contractor went to work for the 
contractor.
    Many of them retired, took the buyout. So putting it all 
back together certainly would have taken more than a year, 
certainly more than the 6 months. I would suggest it might have 
taken more than a year, a year and a half to put it all back 
together. But the fact of the matter is the lawyers tell me we 
actually, that the contract signed, it is a valid contract. We 
have the option to terminate, but we would have to have a new 
bidding process in order to get--in order to move back.
    Mr. Ruppersberger. I understand that. Really, it is almost 
a culture that we have, and because we deal in government and 
we have the bidding processes, sometimes maybe our contracts do 
not have the protections that we need so that we have to go 
back to that process. Especially now, while we are at war, we 
need to perform. So it is an operation versus an efficiency.
    What would you in the scenario you talked about, because 
what we try to do here in Government Reform is investigate, ask 
questions, but hopefully by doing this, we will come to a 
bottom line where we can try to at least determine what would 
be more efficient.
    Sitting in your position, what would you recommend that 
could be done to avoid this type of situation that you talked 
about so we don't get to that position? Because reading through 
the GAO report, there are a lot of issues you have to deal with 
here. It starts at the top. You know, we are not here to 
criticize, we are here to try to look at government reform, so-
to-speak, to see what you can do better.
    In your position on that specific scenario, what would you 
have done ahead of time if you could to make the contract in a 
situation where we wouldn't have been put in that position to 
continue to move out and using taxpayers' money that maybe we 
could have saved in another way?
    Mr. Bloom. Actually, the system is probably pretty good. It 
just didn't work. This was a situation where we didn't have the 
competency in house to do the evaluation. We hired a contractor 
to help us, an independent contractor, to help us. Under the 
system, the IG comes in and essentially redoes it to certify 
that what we have done was correct.
    So not only was an error made to begin with, there was an 
error made in the certification. This was just two errors being 
made. I am not sure you should build a system where you have to 
check it a third time. I think while everybody tried to do the 
right thing, there were just two significant errors made.
    Mr. Ruppersberger. Reading the notes throughout the weekend 
and what we have here, there seems to be a lot of issues 
generally, and what we are talking about here today. I think 
there has to be more focus on why there is a problem, what GAO 
says and what the plan to fix that. There has to be a change in 
thinking about the accountability issue, and not just talking 
about we have to perform, which we do. We need to perform, and 
we need to move forward.
    I only have a couple of seconds to go, I see the light. I 
am not going to be able to develop this much further. But my 
point is these are serious issues that have to be dealt with. 
We want our Department of Defense to be extremely strong. But 
it is a management issue. It is an accountability issue. It is 
going to take some time to fix it, but it has to be done.
    Mr. Turner. Thank you. In the previous testimony from GAO, 
they talked in terms of the problems of oversight of these 
projects being an issue of effort, and they talked in terms of 
it being at all levels; in the inception of the projects; with 
those projects that were approved; evaluating whether a project 
should go forward, the design or system construction process as 
a result of shifting needs; or perhaps lack of oversight in the 
products that are being undertaken; and then implementation, 
their utilization of the lack of buying in.
    I certainly understand and appreciate your efforts to look 
at the oversight function, making certain that people are doing 
their job and making certain the projects are doing their job. 
But I wonder to what extent the current system of acquisition, 
the process itself and not just individuals that are not 
adequately reviewing processes you have in place, could be 
hampering the ability of the Department to get efficient and 
effective systems, and what your thoughts are on this?
    In my opening comments, I was relating that in the private 
sector, they indicate that they start with not what system they 
want designed, but what questions do they want answered, what 
need do they have in the IT arena, and then work in partnership 
with an IT provider who actually then provides the solution. 
Where it seems many times in the government acquisition process 
for IT, that the overspecification of the system itself might 
provide lack of flexibility, lack of partnership, and lack of 
some of the give and take that you might find in the oversight 
communication process.
    Ms. Boutelle. You are absolutely right. Today what we do is 
we define it down to the how that we want, so that we end up 
with systems that don't always deliver what we meant to say.
    We have those communication problems, I guess. But what we 
are doing on the architecture is we are following best 
commercial practices. We are defining the architecture down 
again to a level where it is very clear on what the different 
types of functionality would be that require, but it doesn't go 
down to the how do you make it happen. So it doesn't take it 
down to the desktop. So it stops at a higher level, and then 
from there we will be making acquisition decisions on what the 
right technology should be, if that helps.
    Mr. Turner. Yes. In talking about functionality, I know 
many times in IT projects, when you take a survey of what 
people would like to see in a system, you get an array of 
different options. Some of them are: ``I have got to have,'' 
and some of them are ``I would like to see this.''
    Ms. Davis, you were talking about the issue of cost-benefit 
analysis of the economics. Does your process pursue an option 
cost so you actually get breakouts to understand what the 
additional functionality might be so that when you are making 
these funding decisions, you are not making it just in one 
whole bulk, but that people can actually see if there are items 
that might be causing your project financially to go astray?
    Ms. Davis. Yes. Initially, we do look at alternatives and 
do an analysis of alternatives before proceeding. I think you 
are correct in terms of our processes, they, to some extent, 
limit us. The Department has a very structured development 
acquisition process for acquiring technology. It was really 
designed for major weapons systems development, which is very 
complex, and then we try to apply it to the development of 
business systems, and then now we have moved beyond trying to 
develop our own business systems, and we are trying to acquire 
off-the-shelf capabilities and trying to apply that same 
acquisition process. It just doesn't fit well.
    Over the years, there have been improvements made to that 
acquisition process, but we will do well to learn from what 
industry is doing in terms of how they are buying more off-the-
shelf capabilities rather than building them.
    Mr. Turner. That takes me to my next area of interest, 
which is the financial management modernization program. One of 
the questions I asked the GAO representatives and panel members 
is to what extent do they have the authority that is going to 
be necessary for this change? Have they been given enough 
authority to effectuate the change both at the inception, the 
design of the system, the construction phase, also the 
implementation or buy-in phase?
    Ms. Boutelle. I think that is up equivocally the answer is 
yes, they have been given the authority. Secretary Rumsfeld 
expects us to make this happen, and he has charged his senior 
management officials with the responsibility. They have taken 
the responsibility as the domain owners, business line owners, 
to have that type of a governance process put in place to where 
we are managing across the Department the business processes 
and determining what those business rules will be.
    The review of the funding of the legacy systems that are 
out there and what needs to be funded, as opposed to 
maintained, until we bring on the technical solution for the 
architecture, will be reviewed by the domain owners and will 
have to be approved before that goes into the budget.
    So, the processes are in place to give them the authority 
that they need, and they certainly I think have all stepped up 
to embrace this.
    It is something we are really excited about. Like I said 
earlier, we have never had this opportunity before to do it the 
right way. People are getting very excited about that now. 
Again, I don't want to make you think this is going to be easy, 
because, again, like I said, we have just done the inventory of 
the 2000 systems and breaking them out by the domain, so it is 
going to be a lot of tough work, but I think we do have the 
authority to make the decisions.
    Mr. Turner. Does that include addressing issues? Ms. Davis 
pointed out about some of the processes themselves in 
acquisition of weapons systems versus IT.
    Ms. Boutelle. Yes. We are going to use, going into the 
process, the current regulation that Mr. Landon had talked 
briefly about. We are going to use that to manage by. But where 
it makes sense to change, we are going to change it.
    Ms. Davis. Mr. Chairman, if I could add to that, having an 
enterprise architecture will actually allow us to do the more 
modular and incremental development, because the plan will be 
there and we will be able to determine whether or not the 
solutions actually fit in with that.
    Mr. Turner. Thank you.
    Going then to a second round of questions, Mr. Chairman, do 
you have additional questions or comments?
    Mr. Shays. Thank you very much. I am looking at the title 
of GAO's remarks, and it is called, ``Long-standing Management 
and Oversight Weaknesses Continue to Put Investments at Risk,'' 
and the title of their document that we have been talking about 
is called, ``DOD Business Systems Modernization: Continued 
Investment in Key Accounting Systems Needs to Be Justified.''
    On page 18 of this document, I want to just come back to 
the whole issue of DFAS and the economic analysis. As I view 
your description of economic analysis, Ms. Davis, what I got 
from it was that somehow in economic analysis, you have to 
justify it within the stovepipe and your cost-benefit. You can 
go out and say we can do good things here, here, here and here, 
and the costs are this and the benefits are this, therefore it 
is a positive. That is how I sorted out what you are telling 
me, what probably is not accurate.
    Let me just read you what they said, and then just get your 
response.
    They basically said on page 18, a key piece of information, 
the economical analysis, was never completed for the DCD/DCW 
project. In May 2000, the Director of DFAS granted approval to 
continue with development of DCD with a condition that a cost-
benefit analysis be completed by June 2000. DFAS completed a 
draft cost-benefit analysis for DCD in October 2000. This 
document was not finalized, and in November 2000, DCD/DCW were 
combined into one program.
    Since that time DCD/DCW has continued without a valid, 
well-supported economic justification to support continued 
investments in DCD/DCW. DCD project management officials stated 
that the economic analysis has not been finalized because they 
were unable to agree on how to compute the return on investment 
and demonstrate that benefits exceeded costs. That to me is--I 
mean, what they suggest is that even the cost/benefit wasn't 
done.
    Ms. Davis. The cost/benefit was actually done, and we 
provided a copy of that to GAO.
    Mr. Shays. For the combined programs?
    Ms. Davis. Not for the combined program. For DCD.
    Mr. Shays. So what about the combined programs?
    Ms. Davis. The combined programs we are in the process of 
completing an economic analysis for that, for the combined 
programs. Right now we've taken a step back. Because of the 
termination of DPPS and the interrelationship that the DCD and 
DCW have with DPPS, we're relooking at strategy for DCD/DCW and 
working with our oversight authorities from C-3I and the 
comptroller to determine how much additional investment we need 
to make in that.
    Mr. Shays. Mr. Landon, you had--I had written down--I'm not 
sure I can get what I wrote down, but it sounded like Yogi 
Berra to me. Or it may have been you, Mr. Bloom. I'm not sure 
who.
    Mr. Bloom. I love Yogi Berra.
    Mr. Shays. Yes. It was the program really works well, but 
it just--you said the program is really a good program, but it 
just doesn't work. That was kind of your quote. Which one of 
you was that? Do you remember that quote?
    Mr. Bloom. I can't take----
    Mr. Shays. Someone said that, and I would have loved to 
have jumped at that time. So it's rather unfair to you. Neither 
one wants to take ownership of that statement?
    Mr. Landon. It wasn't my comment, sir.
    Mr. Shays. It was your comment.
    Mr. Landon. No, it was not.
    Mr. Shays. OK. Was it the gentleman to your left?
    OK. Do you remember in what context you were making that?
    Ms. Boutelle. Oh, I do. It was that the A-76 process itself 
wasn't broken. It was when you were addressing that the breach 
of contract----
    Mr. Bloom. Oh. It had to do with----
    Mr. Shays. I honestly do think Yogi Berra is kind of 
brilliant. I do. But it did strike me as kind of fun.
    Mr. Bloom. No. We were telling you about the A-76. You 
know, the process probably works, it just didn't work in this 
case. I did say that.
    Mr. Shays. OK. I wanted to get you to qualify it.
    The bottom line, this is not a new story what we're hearing 
here. I want you to, each of you, to tell me in our meeting 
with the Appropriations Committee what should we be asking them 
to do to get our information systems to work better? One of the 
suggestions clearly is that we have, you know, a strong 
centralized management that has--extends beyond the 
Presidential term, that is not a political appointee with 
some--but, you know, with the clout of being able to say no and 
yes. What would you all be suggesting?
    Ms. Boutelle. Well, there's a couple of things that have 
already been requested of us, and I think these are excellent 
requests. And it's--one is that we deliver the architecture 
that we said we were going to deliver, that Team IBM will be 
delivering the end of April, 1st of May, and then that we 
deliver a transition plan that shows how we get from the ``as 
is'' to the ``to be.''
    Now, that will be at a high level because we don't know 
where we're going yet. We don't know what the technical 
solution will be. But I think that they need to ask us to 
continue to give them updates on our progress on the 
architecture and the implementation, and that we perhaps even 
give them updates on the systems that we have reviewed. Again, 
we go back to that inventory that the GAO showed, and it's 
really close to 2000 now, that we're not going to do the review 
of that inventory overnight, but we should be breaking that by 
high-dollar systems and taking the high-dollar systems first, 
and we should be able to report to them how many we have 
inventoried and done the reviews on, and compared to the 
architecture.
    So I think those are valid things for them to ask us to 
manage or to monitor our progress toward controlling the IT 
investments, and that we're not investing in the future for 
anything that doesn't comply with the architecture unless 
there's a good business case to support it.
    Mr. Landon. Yes, sir. I think Ms. Boutelle has the key, 
which is, in my mind, the fact that we have to establish 
architectures that programs understand they build to. If you 
set the standards, then you are more likely to, in turn, get 
the desired result that you want. We're doing this with the 
financial management enterprise architecture, other 
architectures, and we are really not in a good position to say 
we have very many, but the global information grid is another 
key architecture that's been established. It is into version 2 
at this time. But it is really a key about how we move 
information within the Department of Defense and even outside 
the Department.
    Mr. Shays. Are any of you political appointees, or are you 
long-term employees?
    Mr. Landon. No, sir.
    Mr. Shays. OK. So the answer is no for all of you. So you 
really can't speak on a policy issue, I gather. So asking you 
about the benefit, the cost/benefit of the chief--asking you 
for an economic analysis of chief management officer, you're 
not really in a position to suggest whether there's logic to 
that or not. The earlier panel--I have been a little facetious 
here. It's Monday, but the earlier panel said almost without 
any hesitation that if you really want to come to grips with 
some of our IT problems in general, we need a chief management 
officer who is, you know, in a position of tremendous power, 
but has some longevity and so on. And is that a recommendation 
you are comfortable responding on? Any of you.
    Mr. Landon. Sir, I'd like to make a comment, I guess, in 
terms of the structure of the Department. I've always viewed 
the Deputy Secretary as our chief management officer, and he is 
responsible to a large part for running the day-to-day business 
of the Department.
    Mr. Shays. Great. But in a sense, though, the Secretary of 
Defense is your--obviously in my judgment, the chairman of the 
board runs--the person, the chief executive officer, it seems, 
strikes me as your Deputy in all your Defense departments, but 
shouldn't there be a part that's broken up, given the gigantic 
size of this Department? And shouldn't there be some 
continuity, because isn't the Deputy someone who basically 
comes and goes with whomever is the new President?
    So you have really almost answered my question without even 
having to. The answer, it seems to me, is yes, and the reason 
it's yes is because that key position of running the 
government, that person leaves.
    Mr. Landon. Yes, sir.
    Mr. Shays. OK. So that was very astute of you.
    Mr. Landon. I think, though, actually the Department--and I 
think Ms. Boutelle may be able to talk to you more about this, 
but the establishment of the SEC, or the Senior Executive 
Committee, by the Department was put in place to look at 
business processes, and I think that may be a step toward what 
you're asking.
    Mr. Shays. OK. Mr. Chairman, thank you very much. I'm all 
set. Thank you. I thank all of our witnesses. I do know, 
though, before we leave, Mr. Chairman, the second round, I 
don't know if it would make--I do think it would make sense 
just to have GAO make comments of what they've heard before we 
adjourned.
    Mr. Turner. Mr. Ruppersberger.
    Mr. Putnam.
    Mr. Putnam. Thank you, Mr. Chairman. Just to pick up very 
briefly where Chairman Shays left off, I was operating on the 
understanding that they were all political appointees as well. 
Since they are not, I would ask how long each of you have been 
in your current position.
    Ms. Boutelle. I have been the Deputy CFO since the end of 
July 2002.
    Mr. Putnam. Mr. Landon.
    Mr. Landon. Sir, in the acquisition oversight role it's 
been several organizations, but it's been approximately the 
last 7 years.
    Mr. Putnam. Mr. Bloom.
    Mr. Bloom. I have been the Director at DFAS since late May 
1999.
    Ms. Davis. And I've been the DFAS Chief Information Officer 
since January 2001.
    Mr. Putnam. Thank you.
    As DOD moves forward to implement this enterprise 
architecture that we discussed when I had my last opportunity, 
it's my understanding that the governance structure that you 
envision to control the investments in IT will have multiple 
boards to effectively oversee the different IT projects. Have 
you developed some kind of uniform criteria to be used by each 
board so that they're operating on the same page? And do you 
have that standardized criteria in place?
    Ms. Boutelle. We're in the process of putting that entire 
structure in place. We're working with Team IBM to help us 
define criteria, and we're using the domain owners as we're 
going through the process of establishing these governance 
rules. So we're making progress, but it's not defined and in 
place yet because again, it's a new concept for us.
    Mr. Putnam. When do you expect it'll be in place?
    Ms. Boutelle. I expect that you will see benefits from the 
investment review process this year, this fiscal year. Will it 
be perfect? No. We will have some criteria. We will have some 
guidance for how the domain owners should go about doing the 
different levels of reviews, and we'll go through the first 
round of reviews of them taking their inventory, again going 
through high-dollar systems until they eventually work through 
that inventory. But I expect that we will have something in 
place and that we will have done part of the reviews this 
fiscal year.
    Mr. Putnam. Will you use the OMB criteria that is part of 
the e-gov initiative and the President's management initiative? 
Will they be your model for making the business case for any IT 
investment?
    Ms. Boutelle. You know--it will be a requirement to make a 
business case. It will be a requirement--these are the ones 
that I know we've talked about, and that's why I feel 
comfortable saying that these, I'm pretty sure, will come out 
in the end; that there'll have to be a business case that will 
show a return on investment at some period in time based on the 
scenario of what makes sense. It will have to comply with the 
architecture. We're going to limit the number of interfaces and 
extensions, cut reports and things that--an initiative that's 
ongoing, we would allow it to have, because, remember, we want 
to stay back with the commercial system as much as possible and 
not customize it.
    So there is a group of criteria that we're working through 
that much of it, I would suspect, would conform with what the 
Federal enterprise architecture folks are doing.
    Mr. Putnam. Are you familiar with that?
    Ms. Boutelle. Not in details on what they're doing. I'm 
familiar with some of the initiatives that they have going on.
    Mr. Putnam. And will all of you hold them accountable to 
making those business cases and staying on time and on budget? 
I mean, that's part of the GAO report also, that it keeps 
getting waived. And I assume that you're the people who make 
that decision; is that correct?
    Ms. Boutelle. In some cases, as the Director of DFAS said, 
that is correct, and we will do a better job of holding folks 
to those numbers.
    Ms. Boutelle. I think it's the process that we put in place 
that's going to force the controls, and that we have criteria 
defined to where it's--removes more of the subjectivity from 
the decisionmaking process to where there are certain things 
that we are looking for, and they must be there. You know, I've 
often said that we know on our stock portfolios when to fold, 
but we don't know when to draw the line on the system 
investment. We need more defined criteria, and that's what 
we're working to put in place.
    Mr. Putnam. I know that the Pentagon is big, and I know 
that it's unwieldy, and I know that it is slow, and I know that 
it's difficult to institute change, and GAO actually 
specifically cited that, that a lot of these issues are human 
challenges as much as they are technical challenges. But Wal-
Mart is big, too, and we heard testimony last week that you 
could go to Bentonville, AR, and they can tell you how many 
tubes of toothpaste are in their Tyson's Corner shop, and yet 
we buy F-16 parts without any regard to who else in the 
neighborhood might have the same exact F-16 part that we could 
borrow.
    And so it is somewhat frustrating that we always set 
government aside as being an exception, that government can't 
follow these same procedures, they can't make the same business 
case because they're different, they're unique, they have 
separate issues to deal with. And to an extent that's true, but 
it's less and less true, and it becomes more difficult, I 
think, to defend that position when you see Fortune 100, 
Fortune 50 companies that are able to successfully implement 
these emerging technologies for information technology and 
logistics and financial management.
    The President's 2004 budget notes that, No. 1, very few IT 
investments have significantly improved mission performance, 
few agencies have plans demonstrating and documenting the 
linkage between IT capabilities and business needs, and that 
many major IT projects do not meet cost schedule and 
performance goals. How many IT investment projects do you have 
under way? And given that a lot of them fall into those three 
categories that the President mentioned, what process do you 
have in place to give us some reasonable assurance that the 
system projects that will be part of the enterprise 
architecture will not suffer the same fate?
    Ms. Boutelle. Part of what we're putting in place for the 
architecture is to do the linkage with the strategic plan that 
has not been done in the past, just as you mentioned, to where 
we had not tied the systems back to what the strategy is. So 
one of the things that we have Team IBM working for us is 
actually to help us lay in place how to do that linking so that 
we start at the top of the Department with the strategy, and we 
link down through the Department and through the business lines 
so that we know what we're doing, actually goes back and 
supports the goals and objectives of the Department. So that is 
a process that we are working on and going to put in place.
    Mr. Putnam. How long is Team IBM's contract for?
    Ms. Boutelle. We have four 1-year options.
    Mr. Putnam. And what was the size of that contract?
    Ms. Boutelle. What is the dollar amount of the contract? 
It's $95 million.
    Mr. Putnam. Per year?
    Ms. Boutelle. That is per year, right? The BPA is $95 
million, 5 years.
    Mr. Putnam. At what point, you know, getting back to this 
issue of the criteria that you're working on for governance and 
the standardization of that criteria, at what point can we hold 
another subcommittee hearing and you could provide us that 
criteria?
    Ms. Boutelle. I would say you could hold one in 6 months, 
and we could give you the criteria that we are using. I would 
say you could hold one 6 months after that, and we could give 
you improved criteria; and 6 months after that, and it would 
even be better. Again, we are in an infantile state here. We 
have never done investment review boards. We have never gone 
through this process, so it is a learning process for us. And I 
think, you know, even GAO acknowledges in their different 
stages that one goes through in developing this type of an 
investment review process that it's a growing process.
    Mr. Putnam. What about the human side of this? Who are your 
counterparts in human resources or personnel, and how are you 
all connecting to make sure that the culture changes, that the 
people are better trained, that they are better informed to 
make contracting and outsourcing decisions and procurement 
decisions? What's going on in that regard?
    Ms. Boutelle. You know, when we met with IBM officials--
because, remember, we hired Team IBM because IBM had done this 
transformation to themself--and we just met with them again a 
couple of weeks ago, talked, and some of their senior folks 
said, you know, the hardest thing we did was the change 
management portion of this. Coming up with the business rules 
and figuring out how to run the business was not nearly as 
difficult. And the Department of Defense being so much larger, 
it is going to be so much harder, and we're aware of that.
    Our plan is that because we now have this business line 
domain focus is that we will be working those issues across the 
domains. However, we need an overall change management strategy 
that ensures that we are starting with a message from the top, 
and that this is being sent down throughout the Department of 
Defense to all levels, and it's made at a level to where the 
individual that's receiving the message understand why it's 
important to them that we implement architecture.
    So again, you know, we don't underestimate the difficulty 
of this. This change management is probably going to be without 
a doubt the hardest part of implementing this architecture.
    Mr. Putnam. Thank you.
    Thank you, Mr. Chairman.
    Mr. Turner. Chairman Putnam was talking about the issue of 
accountability, and I just wonder, in looking at the 
information that we have, and talking about the corporate 
information management program, that in 1989 the Department of 
Defense began the same program with the intent to implement the 
standard systems across DOD. We've discussed this several times 
in this hearing, and after 8 years and an investment of $20 
billion, the effort was abandoned.
    Looking at the issue of accountability, what accountability 
occurred as a result of that project losing $20 billion? In the 
private sector it wouldn't take the loss of $20 billion for 
there to be issues of someone's performance being held 
accountable, but during this hearing, as we discuss the 
Department of Defense or a program or a process, really loses 
the context of there are individuals that have responsibility. 
Could you tell me a little bit about that program, when it was 
canceled, or what did occur on the issue of accountability?
    Mr. Landon. I really am unable to speak to this program. I 
was not involved with it, and I'm afraid I have no background. 
Perhaps one of the others could, but we could try to get you 
that information.
    Mr. Turner. I would appreciate that, because one of the 
issues, you can create all the systems and process and all the 
great intentions, but if there is no way of enforcement of 
accountability, you're going to again have another project with 
cost overruns and other issues where we're referring abstractly 
about the Department of Defense or processes instead of the 
actual performance of individuals.
    And that leads me to the issue of looking at individuals, 
of whistleblowers or individuals who have information or 
advice, and programs or projects that need to be curtailed or 
impacted. What processes do you have in place for someone to go 
outside of the chain of command to raise the flag if there's a 
problem with a program or project in efforts to try to save 
money?
    Mr. Landon. At first blush I would say that one that comes 
to mind for me is the DOD hotline. This is a program that 
protects the individual, allows them to report abuses, and then 
provides an objective investigator to go look and see if those 
are, in fact, valid. It is the one that I am most familiar 
with. However, I think, on the other side, what we are trying 
to establish is an atmosphere where program managers feel free 
to be able to reveal problems they're running into.
    You know, none of these individuals do this on their own. 
They have the best intentions when they are given a program to 
manage. What we are trying to do is establish that atmosphere 
where they're able to come forward and say that they have 
problems in developing their program or need guidance or 
whatever else, and do that so that people don't feel like they 
have to do it under the cover of darkness.
    Mr. Bloom. At DFAS, we have all the traditional ways, but 
we also have a couple of additional things. We've established 
something called Rumor Has It, which you can submit something 
to me directly with total anonymity if you so choose, so if 
there's a rumor or a situation that you want to bring to my 
attention, and you don't want your name out there, you can send 
it through this Rumor Has It. Of course, everyone has my e-mail 
address, and there's not as much anonymity there, but they can 
send me an e-mail, and, frankly, I'll take phone calls from any 
DFAS employee that has something to say to me. Even though 
we've got over 16,000, you know, I try to make the environment 
as open as it can be.
    Mr. Turner. Are there any additional questions?
    Mr. Putnam. Very briefly, if I may.
    How frequently is that being used?
    Mr. Bloom. Rumor Has It? I get at least one rumor every 
day. So I was on vacation last week. I came back, there were 19 
for me to answer. By the way, I will answer those questions, 
the ones that aren't redundant and the ones that are. I've 
actually got a Web site that I send out an answer to, but 
people use it every day.
    Mr. Putnam. Thank you.
    Mr. Turner. Mr. Ruppersberger. No questions?
    I thank you.
    Are there any additional comments or statements that you 
wish to include in the record? No?
    Well, Chairman Shays had said that before he left, he 
wanted to give an opportunity for the--oh, I'm sorry. Mr. 
Platts is here. Do you have any questions?
    Mr. Platts. Thank you, Mr. Chairman. My apologies for the 
late arrival. No questions. Look forward to reviewing the 
testimony and working with various subcommittees on Government 
Reform on the issue of financial accountability and oversight. 
Thank you.
    Mr. Turner. Thank you.
    Chairman Shays, before his departure, had indicated that he 
wanted to give the representatives from GAO an additional 
opportunity to respond or add information to the record if they 
desired, so at this time I'll inquire as to whether or not you 
would like to take the table and to give us some additional 
information as a result of what you have heard.
    OK. I want to thank all of our panelists on the second 
panel. I will remind both of you that the oath that you took in 
the proceeding testimony you provided would continue through 
these comments.
    Mr. Kutz. Just a couple of things I want to mention, 
because some of you were not here when we gave our testimony 
earlier, but Chairman Shays had talked about the bringing on a 
Deputy for Management or Deputy Secretary for Management. That 
would be someone that would deal not only with the issues of 
the information technology, but would be an integrator 
basically for all of the areas such as acquisition, logistics, 
financial management, etc. So that concept is broader than the 
IT. And if you look at our high-risk series that was issued, 
DOD actually has eight areas on the high-risk list for GAO, so 
it would be someone who could integrate all of those various 
management challenges together.
    The other thing I think that would be useful, I know you 
talked about it, and Chairman Shays talked about contacting the 
Appropriations Committee. Back in the mid-1990's, the Internal 
Revenue Service, you may recall, had failure with the tax 
system modernization, where they spent $3 or $4 billion and had 
very little to show for it. One of the things that they put in 
place with respect to that was centralized funding from an 
appropriations standpoint into an investment management account 
that the Congress controlled very tightly. That's something 
that you may want to look at here.
    Right now, with respect to IT investment, the money for DOD 
is all over the place. There's money being appropriated and 
used; not only appropriations, but also working capital funds 
are using money also. So one thing that would be worth looking 
into is sharing with or talking to some of the Appropriations 
Committee folks that have dealt with the Internal Revenue 
Service, Customs and others, who followed that model.
    One other point with respect to the architecture and the 
architectural effort that they're doing is the right effort. 
It's a good effort. They've make a good attempt, and they've 
made good progress so far, but that alone does not really solve 
necessarily the issue of project management that we've talked 
about here today. These four individual projects. You could 
have an architecture that's been done properly, etc., but if 
these four projects are not coming in within cost, schedule, 
and promised capabilities, that is basically building out the 
blueprint. You have the blueprint, and you have building out 
the blueprint. They need to put in place effective controls 
over investments.
    So as Chairman Putnam asked them for the answer to how many 
projects were within the 90 percent, it will be interesting to 
see what the answer is, because we haven't seen a lot of 
success stories in the IT management area here. And again, we 
appreciate working with both of these subcommittees on these 
issues, and the DOD has been very good to work with, and I 
believe, again, that the people there are working very hard. 
They're trying to do the right thing, and they have made some 
progress, but, again, we're going from a situation of 
uncontrolled proliferation of systems to a situation hopefully 
of strong control over the IT systems at DOD.
    Mr. Smith. Mr. Shays, before he left, raised the question 
about the DCD/DCW cost/benefit economic analysis. The one thing 
I'd like to clarify that Ms. Davis did address is that within 
our final report, we did revise the report based on comments 
that came back from DOD to say that there was a cost/benefit 
analysis. What we were provided was as of October. It was a 
draft document, and it was only for the DCD. The report now 
goes on to say we have yet to see any type of justification 
done for the DCD/DCW, and the report was revised based on DOD's 
comments. We did clarify that in our final report.
    Mr. Turner. Thank you.
    Do any members of the committee have any questions of the 
panelists?
    Mr. Putnam. Mr. Chairman, I would just point out that 
Chairman Platts is here, who has tremendous responsibility over 
financial management and e-government. My jurisdiction as 
chairman of the Subcommittee on Technology and Information 
Policy certainly has a tremendous interest in this issue, and 
you're well acquainted with Chairman Shays' interest in this, 
so you have three subcommittee chairman who have made it very 
clear that this is on their radar screen.
    And I also serve on the Budget Committee, and when I got to 
Congress, we had allegedly projected $5 trillion in surpluses, 
and now we're in deficit for several years to come at best, and 
I feel guilty about that. And there's a lot of circumstances 
that led to that are beyond my control. I know that you're 
concerned about these things, but it is very unsettling how 
much money the Department of Defense and other departments--but 
the Department of Defense by virtue of it's size and the level 
of its appropriation certainly is in a league of its own, and 
it's something that we all three of us, and others, are 
extremely interested in seeing corrected in the near future.
    Mr. Turner. Mr. Ruppersberger.
    Chairman Platts.
    Gentlemen, thank you for participating and for your 
information provided. Obviously this is an important topic for 
us, and we thank you. We will be adjourned.
    [Whereupon, at 3:30 p.m., the joint subcommittee was 
adjourned.]

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