[Senate Hearing 109-364]
[From the U.S. Government Publishing Office]
S. Hrg. 109-364
DEPARTMENT OF DEFENSE BUSINESS TRANSFORMATION AND FINANCIAL MANAGEMENT
ACCOUNTABILITY
=======================================================================
HEARING
before the
SUBCOMMITTEE ON READINESS AND MANAGEMENT SUPPORT
of the
COMMITTEE ON ARMED SERVICES
UNITED STATES SENATE
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
__________
NOVEMBER 9, 2005
__________
Printed for the use of the Committee on Armed Services
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COMMITTEE ON ARMED SERVICES
JOHN WARNER, Virginia, Chairman
JOHN McCAIN, Arizona CARL LEVIN, Michigan
JAMES M. INHOFE, Oklahoma EDWARD M. KENNEDY, Massachusetts
PAT ROBERTS, Kansas ROBERT C. BYRD, West Virginia
JEFF SESSIONS, Alabama JOSEPH I. LIEBERMAN, Connecticut
SUSAN M. COLLINS, Maine JACK REED, Rhode Island
JOHN ENSIGN, Nevada DANIEL K. AKAKA, Hawaii
JAMES M. TALENT, Missouri BILL NELSON, Florida
SAXBY CHAMBLISS, Georgia E. BENJAMIN NELSON, Nebraska
LINDSEY O. GRAHAM, South Carolina MARK DAYTON, Minnesota
ELIZABETH DOLE, North Carolina EVAN BAYH, Indiana
JOHN CORNYN, Texas HILLARY RODHAM CLINTON, New York
JOHN THUNE, South Dakota
Charles S. Abell, Staff Director
Richard D. DeBobes, Democratic Staff Director
______
Subcommittee on Readiness and Management Support
JOHN ENSIGN, Nevada, Chairman
JOHN McCAIN, Arizona DANIEL K. AKAKA, Hawaii
JAMES M. INHOFE, Oklahoma ROBERT C. BYRD, West Virginia
PAT ROBERTS, Kansas BILL NELSON, Florida
JEFF SESSIONS, Alabama E. BENJAMIN NELSON, Nebraska
SAXBY CHAMBLISS, Georgia MARK DAYTON, Minnesota
JOHN CORNYN, Texas EVAN BAYH, Indiana
JOHN THUNE, South Dakota HILLARY RODHAM CLINTON, New York
(ii)
?
C O N T E N T S
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CHRONOLOGICAL LIST OF WITNESSES
Department of Defense Business Transformation and Financial Management
Accountability
november 9, 2005
Page
Krieg, Hon. Kenneth J., Under Secretary of Defense for
Acquisition, Technology, and Logistics......................... 4
Jonas, Hon. Tina W., Under Secretary of Defense (Comptroller).... 10
Hite, Randolph C., Director of Information Technology,
Architecture, and System Issues, Government Accountability
Office......................................................... 14
(iii)
DEPARTMENT OF DEFENSE BUSINESS TRANSFORMATION AND FINANCIAL MANAGEMENT
ACCOUNTABILITY
----------
WEDNESDAY, NOVEMBER 9, 2005
U.S. Senate,
Subcommittee on Readiness
and Management Support,
Committee on Armed Services,
Washington, DC.
The subcommittee met, pursuant to notice, at 2:00 p.m., in
room SR-232A, Russell Senate Office Building, Senator John
Ensign (chairman of the subcommittee) presiding.
Committee members present: Senators Ensign, Thune, Akaka,
and Bayh.
Majority staff members present: William C. Greenwalt,
professional staff member; Ambrose R. Hock, professional staff
member; Gregory T. Kiley, professional staff member; Thomas L.
MacKenzie, professional staff member; and Derek J. Maurer,
professional staff member.
Staff assistants present: Micah H. Harris and Benjamin L.
Rubin.
Committee members' assistants present: D'Arcy Grisier and
Alexis Bayer, assistants to Senator Ensign; Darcie Tokioka,
assistant to Senator Akaka; and William K. Sutey, assistant to
Senator Bill Nelson.
OPENING STATEMENT OF SENATOR JOHN ENSIGN, CHAIRMAN
Senator Ensign. Good afternoon.
The Readiness and Management Support Subcommittee meets
today to receive testimony on the Department of Defense's (DOD)
business transformation and financial management efforts. We
are honored today to have with us the Under Secretary of
Defense for Acquisition, Ken Krieg; the Comptroller of the
Department of Defense, Tina Jonas; and the Director of
Information Technology for the Government Accountability Office
(GAO), Randy Hite. I welcome all of you.
This is the fourth hearing in the past 2 years on the
business systems and financial management of the Department of
Defense that Senator Akaka and I have held as chairman and
ranking member of this subcommittee. At the first hearing on
financial management, we committed to holding frequent hearings
to gauge the progress made. Sadly, from that first hearing to
today, only Senator Akaka and I are the same key participants.
Though, to be fair, the Comptroller General of the United
States, David Walker, did wish to be here, but is traveling
overseas. He has assured us that he will make the next hearing
on this subject.
I understand that people move on in government service and
that changeover can be a positive thing, but the continued lack
of accountability, the multiple plans for change over the years
that are never implemented, and the hundreds of millions of
dollars wasted are a disservice to the American taxpayer. They
deserve better.
Senator Akaka and I remain committed to continuing these
hearings, and I hope I can get the same commitment from the
witnesses here today.
As I said, not all change is bad. Just prior to the last
hearing in April, a new team took over primary responsibility
for the Department's business transformation and financial
management reform. The effort is now being led by Deputy Under
Secretary of Defense Paul Brinkley and Deputy Under Secretary
Tom Modly under the direction of Secretary Krieg and Secretary
Jonas.
At first, my staff and I were skeptical that this was just
one more attempt at rearranging the deck chairs on the Titanic.
However, in carefully watching their progress over the past 8
months, I am encouraged by their efforts.
On September 30, 2005, a new road map for business systems
transformation and improved financial management accountability
was delivered to Congress. The Enterprise Transition Plan
contains realistic time lines and matches plans to resources.
This plan was delivered on time, and it contains more detail
and meaningful metrics than previous efforts.
Last month a new organization was created under the Under
Secretary of Defense for Acquisition, run jointly by Mr.
Brinkley and Mr. Modly, called the Business Transformation
Agency. This agency is expected to provide consistency in DOD's
business transformation efforts, minimize redundancies in its
business systems, and reduce overhead for the Department.
Rather than creating a new bureaucracy, the agency is expected
to shift resources from existing business processes and system
modernization into a unified, focused organization. Mr.
Brinkley and Mr. Modly are to be commended for their hard work
to date, and I look forward to continuing the partnership with
the Department and the GAO and hearing more about the progress
from our witnesses.
While progress has been made, much still needs to be done.
One area that continues to concern me is jointly managed
programs--programs shared among the individual Services. These
programs pose significant management challenges. Many of these
programs are to be directly managed by the Business
Transformation Agency. While centrally managing these programs
seems to be the right direction, I hope the witnesses will go
into greater detail as to how we can be assured that such joint
programs are adequately managed and funded.
Thank you again for taking the time to prepare written
testimony and to appear before the subcommittee today, as
previously agreed. We will hear opening statements from Under
Secretary of Defense for Acquisition, Secretary Krieg; and
Comptroller of the Department Defense, Secretary Jonas; and the
Director of Information Technology for the GAO, Mr. Hite.
To our witnesses, your prepared statements will be made
part of the record. Therefore, I urge you to keep your oral
statements fairly short in order to allow sufficient time for
questions and really a discussion.
But first, I would like to turn to my ranking member,
somebody I have grown in admiration for in the years that we
have spent together on this committee, and I really enjoy our
working relationship.
Senator Akaka.
STATEMENT OF SENATOR DANIEL K. AKAKA
Senator Akaka. Thank you very much, Mr. Chairman. The
feeling is mutual, and I look forward to continuing to work
with you on this issue, as well as others, having to do with
readiness. I have enjoyed working with you, and we have been
working well together.
I thank you for holding these hearings on the shortcomings
of the financial management systems. This is a subject of vital
importance to the Department and to this committee because
without timely, accurate financial information, our senior
military and civilian leaders will continue to be severely
handicapped in making day-to-day management decisions and
ensuring that taxpayer dollars are well spent.
Over the first 4 years of this administration, senior DOD
officials promised us that they were making a serious effort to
address this problem. Unfortunately, as we learned at last
year's hearing, despite spending some $200 million on the
project to transform the Department's business operations, the
Department failed to take even the most basic steps to rectify
this problem. I remain deeply distressed that the Department
appears to have wasted the better part of 4 years on a dead-end
path that will yield no positive results for the Department or
for the taxpayers. But, I look forward with the chairman in
trying to find solutions and to bring that about.
I would like to note that I am also the ranking member on
the Oversight of Government Management Subcommittee where the
subcommittee's chairman, Senator Voinovich, and I have been
holding investigative hearings on DOD programs and on the GAO's
high risk list, including business modernization.
Since the time of last year's hearing, Secretary Gordon
England has brought new focus to defense management issues in
his new role as Deputy Secretary of Defense and has brought in
a team to work on fixing the Department's business systems.
This team, under the leadership of Paul Brinkley and Tom Modly,
has been a breath of fresh air. Instead of spending millions of
dollars on consultants as did their predecessors, Mr. Brinkley
and Mr. Modly have started to break down the problem into
manageable steps and work their way through them.
The Business Enterprise Architecture and Transition Plan
that we received from them on September 30 is just the first
step. The GAO indicates that the Architecture and Transition
Plan is still far from complete. It only partially addresses
the key requirements spelled out in our legislation. Months of
work still lie ahead for the Department to develop a more
mature Architecture and Transition Plan that will provide the
necessary detail to address its financial problems, and once
that Architecture and Transition Plan is in place, it will take
years to implement it.
Nonetheless, this document is a step in the right
direction. At least now we appear to have a sound foundation
upon which we can start building.
I believe that the most important step Congress can take
now is to institutionalize the process that finally seems to be
going in the right direction. Too many times we have seen a new
administration come in and scrap the work of its predecessor,
condemning DOD to start from scratch. I am sure I speak for the
chairman. We all like Secretary England and believe he will do
his best to improve the management of the Department. We are
pleased by what we have seen from Mr. Brinkley and Mr. Modly.
But these are individuals. They are not institutions. To be
successful, we need to develop structures that will remain in
place from one administration to the next. That is why I
believe we have done the right thing in codifying the Defense
Systems Business Management Committee.
In addition, I believe we should do what we can to
institutionalize the new Business Transformation Agency
established by the Department last month and support the
Comptroller General's recommendation to establish a new Deputy
Secretary for Management at the Department of Defense level.
The chairman has played a huge part in bringing this about.
In this effort, the Senate yesterday agreed to an amendment
offered by Senator Byrd, myself, Senator Ensign, the chairman
of this subcommittee, and Senator Lautenberg calling for two
federally funded research and development centers to conduct
independent studies of the feasibility and advisability of
establishing a Deputy Secretary of Defense for Management,
whose responsibility it would be to serve as the chief
management officer of the Department of Defense.
There are some who are uncertain as to the necessity of
this position, and those studies will examine the impact that
creating such a position would have on the management of the
Department. I am very pleased that the Senate has agreed to
further review this matter.
I look forward to the testimony of today's witnesses and
will continue to work with the chairman. Thank you very much,
Mr. Chairman.
Senator Ensign. Thank you, Senator Akaka.
We would be pleased to receive your testimony now,
Secretary Krieg.
STATEMENT OF HON. KENNETH J. KRIEG, UNDER SECRETARY OF DEFENSE
FOR ACQUISITION, TECHNOLOGY AND LOGISTICS
Mr. Krieg. Thank you, Senator. Chairman Ensign, Senator
Akaka, Senator Bayh, thank you for the opportunity to speak to
you today about the progress with business transformation and
financial management.
I am very proud of the progress we have made since my
predecessor, Mike Wynne, spoke to you all 6 months ago. On
September 30, 2005, as you noted, Mr. Chairman, we published
the Department of Defense Enterprise Transition Plan and
delivered it to both the House and the Senate. This plan
represents the first time the Department has delivered a plan
in layman's terms that allows the public to see exactly how we
are investing their tax dollars to modernize our business
information operations. This plan shows how we are supporting
the warfighter while improving financial accountability to the
taxpayer.
Publishing this plan is the first of five key actions we
have taken to restructure the Department's business
transformation efforts over the last 6 months. This plan tells
you what we are doing. It lays out costs, milestones, and goals
for transforming the way we do business.
On September 30, we also published our Business
Architecture, which includes data standards and business rules
for the Department. The architecture shows how we are going to
begin carrying out the plan. In other words, the two provide at
least an initial blueprint for our systems and business
processes to ensure they support the goals identified in the
plan.
The third action in restructuring is the establishment of
four business systems investment review boards, each aligned to
a functional business mission. The investment review board
reviews all business systems investments in excess of $1
million to make sure they are in line with our plan and the
architecture. Investment review is where we test our
investments to ensure that they are moving us toward the goals
outlined in our plan.
Our fourth action establishes accountability for
successfully executing our investment programs. As you noted,
with the recent creation of the Business Transformation Agency,
we have established an accountable organization for DOD-level
business systems investment. These investments in business
improvements will impact the entire Department as opposed to
the specific Service or agency-wide improvements, which are
also part of the Enterprise Transition Plan. The agency creates
a Department-wide accountable organization that collaborates
with Services and agencies that remain responsible for
investments impacting their organizations.
I would also note that I guess we have announced that Major
General Butch Pair will join that group as a defense business
systems acquisition executive, in my vernacular the sort of
joint Peace Enforcement Operation (PEO), joint program
executive officer, who is responsible for looking at those
executive-wide, Department-wide systems and development to make
sure that they are being run well by their program managers,
that they meet the needs of the various parts of the enterprise
that are part of it. It is part of your question of how we will
do these joint enterprise programs better. Butch comes to us
from Transportation Command (TRANSCOM), having been out as a
combatant commander recently, so he will have that voice of the
customer as he comes in to do his job.
Finally, we come to our fifth action, enforcement. As
required by Congress in the NDAA for Fiscal Year 2005--and also
a good idea--we established the Defense Business Systems
Management Committee. Since the last report to this committee,
we have fully exercised the committee under the leadership of
Deputy Secretary of Defense Gordon England. Once a month, we
meet at the senior management level, and so part of what is
happening is the senior management is getting engaged in this
activity. It is not just an action of staff. This committee,
chaired by the Deputy Secretary and vice chair by me in my
role, was created to ensure that we were part of the process
and that we had accountability in doing this work.
These five critical actions have been completed since our
last meeting with the subcommittee and represent, I believe, a
vast improvement over prior efforts at managing business
systems modernization and transformation.
I appreciate the continued attention and tenacity of the
chairman and ranking of this committee that you have shown to
this issue. I know that you have been frustrated by work that
we have done. However, I believe that by allowing us the time
and resources to focus and correctly position this
transformation effort, we can be positioned for success in the
future. I believe your tenacity has paid off.
But we are far from done, as you noted, and in chapter 4 of
the Enterprise Transition Plan, we begin to lay out the next
steps of activity. Much of it revolves around the challenge of
implementing programs successfully. Some of the challenge
revolves around getting the various integrated activities to
work together. Finally, some of the work revolves around
thinking through the broad-scale metrics that will link the
various efforts together to create customer success.
Before I close my remarks, I would like to thank my
colleagues at the GAO for their participation both in this
effort and in the broader work that we are doing in terms of
the high-risk management efforts. As Senator Akaka knows,
against the high-risk issues that are a part of the
Department's purview, we have developed a template of work
between the Department, between GAO, and between the Office of
Management and Budget (OMB) to try to put together an action
plan which we are responsible for implementing, that attempts
to go and implement the kinds of changes necessary. But the GAO
has been a very supportive partner in helping us think through
that process.
Lastly I would like to note the hard work of both Paul
Brinkley and Tom Modly over the last 6 or 7 months. Often
working against great adversity, they have done great work to
put us in a position for success, and I thank them for that
work.
We look forward to continuing to work on this project, to
work with the GAO and with this committee, as we move forward.
Thanks for your time, and I will be happy to take any questions
you might have.
[The prepared statement of Mr. Krieg follows:]
Prepared Statement by Hon. Kenneth J. Krieg
Chairman Ensign, Senator Akaka, and members of the committee: Thank
you for the opportunity to appear before you today to discuss the
Department's progress in the areas of business transformation and
financial management. My primary focus in Acquisition, Technology and
Logistics (AT&L) is on the customer--the warfighter of both today and
tomorrow. Customers expect our acquisition community to deliver the
capabilities they need to defend America and its interests, not only
today, but into the future. In doing so, we must also provide timely
information and analysis to assist Secretary Rumsfeld in his efforts to
balance resources against requirements. As stewards of the American
taxpayer, those of us in the acquisition community have a
responsibility to wisely invest and manage the hard-earned tax dollars
of our citizens to enhance and expand our national defense capability.
To ensure that the American people stay informed, we must make sure
that Congress is well informed of our efforts.
As part of our Quadrennial Defense Review (QDR), the Secretary
directed General Duncan McNabb and me to lead a review of our
acquisition and other business processes to ensure they are capable of
meeting customer needs. To improve our ability to acquire capability
efficiently, I have identified a number of key principles I believe we
must follow:
First, we must understand and define success in terms
of the customers' success. In other words, we must be
successful in the customers eyes, not simply our own.
Second, we must align authority, responsibility, and
accountability--all conceived in a joint context with
associated standards. This will facilitate delegation of
authority and decentralization of execution, while ensuring
accountability consistent with identified standards.
Third, we must base our decisions on authoritative
data captured in a comprehensive management information
approach linked not only to acquisition, but also to
requirements, and the Planning, Programming, Budgeting, and
Execution system. This will help us to achieve insight and
clarity, and honestly balance risks at the portfolio level to
get the best value for the taxpayer.
We must develop policy that allows even greater
agility so we can acquire, mature, transition, and field
advanced technology in ever shorter cycle times.
Finally, we must accept the fact that our acquisition environment
is in constant change and our acquisition system must also change
consistent with that dynamic. Change is not the exception; it is a
constant that we must manage. History has proven to us that those that
respond to changing conditions survive and succeed and those that don't
will inevitably fail. I am very much aware of that fundamental lesson
and will do all I can to develop an acquisition system capable of
responding to the rapidly changing world we live in. We must ensure
that the Department's business operations must be more flexible and
adaptable than ever in order to effectively support our warfighters
with the information and resources they need, when they need them.
SENIOR LEADERSHIP OVERSIGHT
In February of this year, the Defense Business Systems Management
Committee (DBSMC) was established to oversee Department-wide business
transformation efforts. The DBSMC is chaired and actively led by the
acting Deputy Secretary of Defense and includes senior leaders, both
civilian and military, from across the Department. I sit on this
committee as the vice-chairman, and I can say to you that the
Department's senior leadership is fully engaged in making real,
measurable progress in transforming our business operations. This
committee meets to set the business information and process priorities
for the Department; it discusses and evaluates how to organize and
integrate efforts to produce results across functional and hierarchical
structures; and to review and approve investment certifications. While
much work remains to be done, the senior leadership represented on the
committee is committed to ensuring that transformation of our business
operations remains a top priority.
In addition, I have appointed the Deputy Under Secretary of Defense
for Business Transformation who reports directly to me as the Under
Secretary of Defense (AT&L) and the Comptroller has appointed the
Deputy Under Secretary of Defense for Financial Management--who reports
directly to her to serve in a joint capacity, overseeing defense
business transformation efforts on a daily basis. These key steps, as
well as the acting Deputy Secretary's active involvement, ensure
executive leadership and oversight of our transformation efforts at the
most senior levels of the Department.
SIGNIFICANT PROGRESS TO DATE
This year the Department has made significant progress in the
evolution of its business transformation efforts. First, with the
establishment of the Defense Business Systems Management Committee
(DBSMC), we have continual oversight of business systems modernization
efforts. Second, investment control is now exercised by a series of
Investment Review Boards, led by the appropriate Under Secretaries of
Defense and guided by a consistent set of policies and procedures.
Finally, I'm pleased to say, that on September 30, 2005 the DBSMC
delivered the Departments' Business Enterprise Architecture v3.0, to
guide and constrain business capability development and investment, and
Enterprise Transition Plan, which outlines the Department's priorities
and initiatives supporting transformation.
To guide transformation going forward, the DBSMC established the
Defense Business Transformation Agency (BTA) to support the DBSMC and
Principal Staff Assistants in their efforts to define Department-wide
business transformation goals and objectives. This organization
includes a Defense Business Systems Acquisition Executive (DBSAE) to
manage the execution of identified programs delivering Department-wide
capabilities.
INVESTMENT CONTROL
Responsibility for driving business transformation decisions within
the five core business missions of the Department's Business Mission
Area is assigned to the appropriate Under Secretary of Defense as
Principal Staff Assistants (PSAs) to the Secretary. The PSAs have
established Investment Review Boards (IRBs) that form the
decisionmaking bodies for the Core Business Missions. Using standard
procedures and guidelines, and with representation from the relevant
Services, defense agencies, and combatant commands, each IRB assesses
modernization investments relative to their impact on end-to-end
business process improvements supporting warfighter needs and makes
recommendations to the DBSMC for systems certification approvals.
There are currently four IRBs, including two that I directly
oversee as Under Secretary of Defense (AT&L). The first combines Weapon
Systems Lifecycle Management and Materiel Supply and Services
Management Mission Area Leadership in order to ensure that, when we are
reviewing business system investments that provide capabilities in
areas of acquisition of weapon systems, we consider all the impacts and
issues across the lifecycle, and from the factory to the foxhole. The
Deputy Under Secretary of Defense for Business Transformation chairs
this IRB for me, and it includes senior leadership from my staff, the
Joint Staff and the Deputy Commander of United States Transportation
Command (USTRANSCOM). The second IRB under my purview is the Real
Property and Installations Lifecycle Management IRB. This IRB reviews
all business systems that provide business capabilities used to manage
the Department's Real Property and Installations. It is chaired for me
by my Deputy Under Secretary of Defense for Installations and
Environment, and membership includes the Joint Staff, Services, and the
DOD CIO. The remaining IRBs are overseen by my peers, Tina Jonas, who
chairs the IRB for Financial Management and Dr. David Chu, the Under
Secretary of Defense for Personnel and Readiness, who chairs the IRB
for Human Resources Management.
On June 3, 2005, the Department issued IRB policy guidance that
incorporated the National Defense Authorization Act for Fiscal Year
2005-required governance structure and outlined standard procedures to
ensure consistency and compliance. This policy outlines a standard
certification process, and provides a standard certification template
and certification criteria and reporting.
To date, the IRBs have reviewed more than 180 business systems
certification packages received from the Services, Defense Agencies,
USTRANSCOM, and the five Business Mission Areas leaders and recommended
approval of those certification requests. The investment dollars
reviewed to date totals approximately $3.3 billion.
BUSINESS ENTERPRISE ARCHITECTURE/ENTERPRISE TRANSITION PLAN
With the release of the Business Enterprise Architecture v.3.0
(BEA) and the Enterprise Transition Plan (ETP) on September 30, 2005,
the Department has a clearly defined blueprint and roadmap to guide its
transformation efforts. Within both the BEA and ETP, these efforts are
focused and framed at the DOD Enterprise level around six strategic
Business Enterprise Priorities (BEPs): Personnel Visibility,
Acquisition Visibility, Common Supplier Engagement, Materiel
Visibility, Real Property Accountability, and Financial Visibility.
These BEPs represent those areas where increased focus will bring the
most dramatic and immediate positive impact on the Core Business
Missions of the Department of Defense.
Within the overall plan, we have identified these enterprise
priorities for such measurable program and business capability
deliverables spread over the next several years. They will provide
enduring improvements to the Department's business infrastructure,
benefiting the warfighter through integration of enterprise business
processes, reducing system redundancies, and continuously improving
financial visibility.
ESTABLISHMENT OF THE BUSINESS TRANSFORMATION AGENCY
A key to success of our business transformation efforts going
forward will be centralized management and coordination of the
corporate level of capabilities determined to be corporate-level, while
allowing freedom to manage within the Services and Agencies.
The Acting Deputy Secretary and the Defense Business System
Management Committee approved the establishment of a defense agency to
lead and coordinate business transformation efforts across the
Department of Defense (DOD).
The BTA shifts the existing resources working on business process
and system modernization into a unified, focused organization. In doing
this, the Department is encouraging further collaboration, and
achieving centralized visibility to investments in DOD-wide business
modernization efforts. The agency will be responsible for supporting
and integrating the work of the OSD principal staff assistants in the
areas of business process re-engineering, core business mission
activities and Investment Review Board (IRB) matters, as determined by
the DBSMC.
Another responsibility of the agency will be the execution of those
programs that make up the corporate level of shared services provided
to the entire Department. These programs will no longer be managed by
disparate executive agents across the Department, but by the Defense
Business Systems Acquisition Executive (DBSAE) within the agency
THE NEXT 6 MONTHS
Over the next 6 months, the central focus of the Department's
business transformation efforts will be shifting towards execution and
delivery. With the establishment of the Business Transformation Agency
and institution of the Defense Business Systems Acquisition Executive,
we will begin to focus efforts on delivering DOD Enterprise
capabilities outlined in the Enterprise Transition Plan (ETP). We will
continually monitor progress of programs and initiatives described in
the ETP, looking for opportunities to accelerate delivery of specific
capabilities that will allow us to affect the transformation of the
Department's business operations faster.
Additionally, in order to better gauge the success of our efforts
across the Department, we will be initiating a comprehensive metrics
program. This will allow the Department to monitor performance of how
each of our end-to-end core business missions is improving warfighter
support, reducing costs, improving financial stewardship, and enabling
better informed decisions. This program is currently in development and
will be rolled out with the next update of the Enterprise Transition
Plan that we plan to deliver at the end of the second quarter in 2006 .
GAO CONTRIBUTIONS TO BUSINESS TRANSFORMATION
I would like to recognize the contributions made by the GAO in
working with us to identify and address many issues related to Business
Transformation. The GAO made many recommendations over the past few
years regarding architecture, investment control and the governance of
the Department's business transformation effort. We have incorporated
many of these recommendations into our programs and products and
believe the vast majority of their issues are addressed in the
Department's new Business Transformation governance and investment
review structures and newly issued Business Enterprise Architecture and
Enterprise Transition Plan. Additionally, with the establishment of the
Business Transformation Agency, the Department has taken an important
step towards ensuring continuity and consistency of leadership for DOD
Business Transformation. We look forward to a continued, healthy dialog
with the GAO.
GAO HIGH RISK AREAS WITHIN DOD
All but one of the Department's High Risk Areas fall under my
purview. The Acting Deputy Secretary asked me to track the progress on
each High Risk Area goal and milestone and provide him with periodic
updates on our progress. I am committed to aggressively addressing the
High Risk Areas under our purview. The respective Department leads have
collaborated with both the Office of Management and Budget (OMB) and
GAO staff to develop plans and identify appropriate milestones and
metrics to reduce risks in these areas critical to DOD, and I provided
those to OMB this fall. Likewise, I have committed to the acting Deputy
Secretary to monitor the milestones and metrics for progress for each
area and will begin quarterly review this month.
CONCLUSION
All the progress I've just described demonstrates the level of
commitment the Department's senior leadership has toward business
transformation. The Department has established clear and specific
management responsibility, accountability, and control over overall
business transformation-related activities and applicable resources. In
addition, we have developed a clear and integrated strategic plan for
business transformation with specific goals, measures, and
accountability mechanisms to monitor progress, including a well-defined
blueprint, our business enterprise architecture. We have put in place a
comprehensive and integrated business transformation plan; and are
moving to centralize the people with the needed skills, knowledge,
experience, responsibility, and authority to implement the plan within
the Business Transformation Agency. The Enterprise Transition Plan
documents program and capability milestones that will measure our
performance and that link institutional, unit, and individual
performance goals and expectations to promote accountability for
results. These actions collectively demonstrate the Department's
commitment to Business Transformation and Business Systems
Modernization.
In closing, Mr. Chairman, thank you for the opportunity to testify
before the committee about our Business Transformation efforts. I would
be happy to answer any questions you and the members of the committee
may have.
Senator Ensign. Secretary Jonas.
STATEMENT OF HON. TINA W. JONAS, UNDER SECRETARY OF DEFENSE
(COMPTROLLER)
Ms. Jonas. Sir, as you have noted, my statement is
submitted for the record, so I will try to be brief.
Under Secretary Krieg has articulated a number of things
that have already been put in place. I would like to focus a
little bit on what we are going to be doing over the next month
or so that pertains more clearly to the financial management
area and some of the progress we have made there.
We hope next month to be submitting to you what we believe
is the third piece of this effort, which is a plan called the
Financial Improvement and Audit Readiness (FIAR) plan. Just as
Tom and Paul have done great work, sitting behind me is Terri
McKay, who is my Deputy Chief Financial Officer. She has been
hard at work with a number of other financial professionals to
put this plan together.
But primarily, this will be the foundation for improved
financial management across the Department, and I have some
things in the testimony that you can look at, but let me just
outline a few things for you today.
We think that we have measurable progress already achieved
by the draft plan that we have together. We are focusing on the
various financial statement line items and the 11 material
weaknesses that we have, including--for example--military
equipment. This has been a very perplexing problem. Valuation
of military equipment has been a longstanding issue for the
Department and with government accounting, and we have made
substantial progress on the valuation there. Fully, 96 percent
of our equipment has been valued at this point, and we expect
to finish the last 4 percent this year. So that is a
significant achievement.
We are working on real property that represents 7 percent
of our assets, or $78 billion. We are also working on our
Medicare Eligible Retiree Health Care Fund liabilities and our
environmental liabilities. We have made great progress in those
areas as well.
For example, we expect to be able to work toward an
unqualified opinion on the Medicare Eligible Health Care Fund
liabilities that will lead us to 78 percent of our total
liabilities will be unqualified. So that would be a significant
achievement, and we are working toward that.
On our environmental liabilities, we have identified and
estimated the future cost of cleaning up to be $17.1 billion,
or 27 percent of the Department's total environmental
liabilities. We are ready for auditors to verify those numbers.
We are also working with the Marine Corps. We want to use
the Marine Corps as a model as to how we might gain a better
understanding of the challenges that are going to be involved
in preparing for and auditing an entire Service.
So those are some of the things that we are doing. As I
said, we hope to have the complete plan to you next month
sometime, but this is really a third leg for us in the
financial community, a very important piece of what we need to
do.
We have also been undertaking some other improvements in
the area of day-to-day operations, including pay. We have
established the Personnel Pay Council. When I visited this
committee last, there were a number of issues related to pay.
The two communities that deal with this, the financial
community and the personnel and readiness community, have
gotten together and we are resolving a number of issues there.
We put in additional internal controls, and reviewed a number
of accounts, and have prevented a lot of overpayments to date
and are correcting issues related to Reserve and mobilization
issues.
So we believe we have made a lot of progress, as Ken
articulated, over the last 6 months, but we hope to continue
making progress. I just wanted to let you know what we expect
to be working on in the next 6 months.
[The prepared statement of Ms. Jonas follows:]
Prepared Statement by Hon. Tina W. Jonas
Mr. Chairman, members of the committee, thank you for the
opportunity to update you on the progress the Department has made in
business transformation and financial management.
I would also like to thank the members of the committee for your
continued strong support of the men and women of America's Armed Forces
and their families.
Since our last hearing on April 13, 2005, we have made clear and
measurable progress in improving the financial management of the
Department of Defense.
A COMPREHENSIVE PLAN IS IN PLACE AND UNDERWAY
Today, a comprehensive plan for business transformation and
financial management improvement is in place and underway.
The plan has three major components, two of which were described in
some detail by Under Secretary of Defense Krieg. The Business
Enterprise Architecture is the blueprint that details how all of the
various systems will work together. The Enterprise Transition Plan
details how we will develop and implement new financial management
systems and standards, when systems will come on line, and how they
will talk to one another.
The Financial Improvement and Audit Readiness Plan, which I expect
to provide to you at the end of next month, takes the information
related to systems and couples it with the financial improvement plans
of the military Services to create a single roadmap for financial
management improvement and, ultimately, auditability.
Already, we are actively using the Financial Improvement and Audit
Readiness Plan to eliminate our financial management material weakness,
and to establish higher standards of financial discipline and control.
THE FINANCIAL IMPROVEMENT AND AUDIT READINESS PLAN
The Financial Improvement and Audit Readiness Plan provides a
foundation for improved financial management across the entire DOD
organization.
Using the Financial Improvement and Audit Readiness Plan we:
Identify the actions necessary to resolve our
financial management weakness;
Outline the steps necessary to complete those actions;
and we will
Analyze the effects of those actions to ensure they
are producing the intended result.
In the near term, the Financial Improvement and Audit Readiness
Plan will focus on needed improvements in four key areas:
Military Equipment (which represents 27 percent of all
assets);
Real Property (which represents 7 percent of all
assets);
Military Retiree Eligible Health Care Fund Liabilities
(which represents 29 percent of all liabilities);
Environmental Liabilities (which represents 4 percent
of all liabilities).
Improvements in these areas will produce financial statements that
more accurately depict the value of our assets and liabilities. Greater
accuracy, in turn, will enable better business decisions and better
support of Defense operations.
MEASURABLE PROGRESS IN ALL FOUR FOCUS AREAS
Measurable progress in all four focus areas has already been
achieved--most significantly in the area of military assets.
Military Equipment
Military equipment alone represents 27 percent of our assets. To
date, we have calculated the value of 96 percent of all military
equipment programs--everything from combat vehicles to ships to
aircraft. Ninety-six percent, and we expect to complete the remaining 4
percent by the end of 2005.
This is especially significant because the Department has never
before had an accurate valuation of its military equipment. Because of
this work, we will soon have a baseline value of one of the most
important assets on our balance sheet.
Progress in the other focus areas is proceeding with the full
cooperation of the Services, whose individual improvement plans are
integrated and managed through the Financial Improvement and Audit
Readiness Plan.
Real Property
Longstanding issues regarding the best way to value real property
assets have now been resolved, and the process of identifying and
accurately reporting the value of real property assets is now moving
forward. We have defined key milestones for establishing the value of
real property assets, as well as the actions that must be taken
throughout the Department to achieve an accurate picture of this
category of assets.
Military Retiree Eligible Health Care Fund Liabilities
We have now received a qualified audit opinion on Military Retiree
Eligible Health Care Fund liabilities for the third year in a row. We
established procedures to reconcile outstanding issues, and defined
timelines for implementing those procedures throughout the Department.
Once those improvements are validated, we will have an unqualified
opinion on 78 percent of our total liabilities.
As with military assets, a more accurate picture of liabilities
also enables better business decisions, and better support of defense
operations.
Environmental Liabilities
Environmental liabilities are the next largest liability after
Military Retiree Eligible Health Care Fund liabilities. Environmental
liabilities are the costs we expect to pay in the future to clean up or
dispose of hazardous materials. Without an accurate estimate of future
costs, it is difficult to calculate the amount of funding required to
meet our clean up responsibilities.
We continue to make steady progress in both identifying and
estimating the future cost of DOD's environmental liabilities. We are
now ready for audit verification of $17.1 billion or 27 percent of the
Department's total environmental liabilities, and we continue to make
steady progress on estimating the cost of the rest.
Preparing the Way for Audits of the Military Services
In addition to the four focus areas, another near-term objective of
the Financial Improvement and Audit Readiness Plan is achieving a
sustainable clean audit opinion for the Marine Corps. To achieve this
goal we are focusing on all of the balance sheet items in the Marine
Corps, using the Corps as a crucible for gaining a better understanding
of the challenges involved in preparing for, and auditing, an entire
military service.
To help us reach this goal, the Marine Corps has already eliminated
more than 600 different business processes, and replaced them with one
standardized set of 57 business processes--thereby greatly simplifying
day-to-day financial management operations.
These three major components--the Business Enterprise Architecture,
the Enterprise Transition Plan, and the Financial Improvement and Audit
Readiness plan--put us firmly on the path to business transformation
and improved financial management.
IMPROVEMENTS IN DAY-TO-DAY FINANCIAL MANAGEMENT
While we are working on near- and long-term solutions, we are also
solving day-to-day problems that cannot wait. For example, military
pay.
Personnel and Pay Council
We established the Personnel and Pay Council to help eliminate
problems and delays in resolving pay issues.
Composed of senior executives from Offices of Personnel and
Readiness and Comptroller at the Deputy Under Secretary level, the
Council provides a forum for resolving policy or procedural issues.
Improper Vendor Payments
The Department has also aggressively addressed the problem of
improper vendor payments. Application of a DFAS-Internal Review process
allowed us to recoup $119 million in duplicate payments in fiscal year
2003, and $30 million in fiscal year 2004. Fiscal year 2005 data is
currently being compiled.
Military Pay
In addition,
We trained and certified technicians at all 26
mobilization sites to handle war-time pay issues for mobilized
Guard and Reserve members.
We automated the way records are updated to reduce
human error, and instituted a process to review the accuracy of
records on a regular basis.
We trained the finance teams that regularly assist
finance personnel in theater. Reserve and Guard Finance units
are now fully trained before they deploy.
We also regularly sent teams to military hospitals to
ensure wounded soldiers do not face hardships related to pay or
government debt.
We monitor wounded soldiers to ensure they receive the
right pay and entitlements, and
We have suspended the automated collection of debts of
wounded soldiers until a case-by-case review can be conducted
by their Service.
As a result of the Army's improvements, $2.8 million in entitlement
overpayments were prevented, and over 1,700 pay accounts were corrected
prior to the mobilization or demobilization of Guard and Reserve
members to ensure that errors in personnel processing did not adversely
impact actual pay.
Steady Progress
The results of these, and many other dedicated efforts to improve
DOD financial management practices, have borne fruit over the past 6
months and, cumulatively, over the past 4 to 5 years. Much of this
progress is the result of a more disciplined approach to good business
practices.
Over the past 6 months, I believe we have made solid progress in
advancing our business transformation goals. As we continue down this
road, I have no doubt that more improvement will follow. We look
forward to reporting our progress in the coming months.
Mr. Chairman, I thank you for the opportunity to discuss our
progress in financial management, and on behalf of the Department of
Defense, I thank the committee for its support.
Senator Ensign. Mr. Hite.
STATEMENT OF RANDOLPH C. HITE, DIRECTOR OF INFORMATION
TECHNOLOGY, ARCHITECTURE AND SYSTEM ISSUES, GOVERNMENT
ACCOUNTABILITY OFFICE
Mr. Hite. Thank you, Mr. Chairman. It is a pleasure to be
here today to discuss DOD's efforts to comply with the National
Defense Authorization Act for Fiscal Year 2005 and other
matters relating to business systems modernization and overall
business transformation.
Before I summarize my statement, I would like to pass along
Comptroller General Walker's personal regrets for not being
able to be here today. He very much wanted to. He had a
commitment outside the country that he could not change.
But let me start by saying what the Comptroller General has
stated many times, that DOD maintains unparalleled military
capabilities. However, the Department has a long way to go
before its business operations are on par with its warfighting
operations.
Almost 15 years ago, we first designated certain key DOD
business areas as high-risk, and since then, we have added
other areas to this list, to the point where today the
Department is either fully or partially responsible for 14 out
of the 25 high-risk areas we have across the Federal
Government.
The need to overhaul the Department's business operations
and systems has long been recognized, and prior administrations
have tried in vain to do so. In 2001, Secretary Rumsfeld
launched the latest attempt, stating that successful
improvements in this area could save the Department 5 percent
of its annual budget, and for fiscal year 2006, that would be
about $21 billion. At that time, the Secretary established the
Business Management Modernization Program (BMMP), and since
then we have issued a series of reports, testified many times
on this program and weaknesses associated with it, and we have
made a number of recommendations. Our most recent reports,
which we issued around the time of this last hearing, were
quite critical of the program at that time, observing that
after investing about 4 years and $318 million on BMMP, the
Department had very little show for it.
So where is the DOD today with respect to business systems
modernization and its more broad-based business transformation
efforts? Has the Department made progress? What remains to be
done?
As requested, my statement will address these questions by
focusing on three issues: first, whether the Department has
satisfied the business systems modernization management
requirements that are in the National Defense Authorization
Act; second, whether the Department's newly established
Business Transformation Agency (BTA) can help in modernizing
the Department's business systems and operations; and third,
whether the Department's efforts, relative to the act's
requirements and this new agency, fill two overall business
transformation needs that we have identified, those being the
need for an integrated, strategic business transformation plan
and the need for a chief management official.
With respect to the first issue, let me preface my remarks
by saying that my observations are based on our ongoing work.
Nevertheless, having said that, I would submit that DOD has
made more progress since the fiscal year 2005 act's passage
than they had made in the prior 4 years combined. Six months
ago, I would have described where the Department stood on this
front as largely an empty glass, but today the glass could be
described as half full.
To illustrate, we reported that the version of the Business
Enterprise Architecture (BEA) that existed 6 months ago was
poorly developed and had little, if any, utility. We reported
at that time that the Department did not even have a transition
plan for implementing its target architectural environment. In
contrast, the latest version of the BEA and the accompanying
transition plan, while not yet sufficiently complete on several
fronts, such as with respect to the BEA's integration and
alignment with the military service and defense agency
architectures, is nevertheless a good start and a reasonable
foundation upon which to build.
Similarly, 6 months ago, a corporate portfolio-based
investment decision-making process was not in place, and today
one has largely been established, although how effective this
approach will ultimately be will depend on several important
factors, such as the degree to which the military services and
the defense agencies adopt this approach and the extent to
which it is actually implemented on each and every business
system investment.
With respect to the second issue concerning the new BTA,
let me first say that the name is a misnomer. The agency's
immediate focus is on business systems modernization and not
overall business transformation. In this regard, I believe that
the BTA offers potential benefits if it is, among other things,
properly organized, resourced, and empowered. While doing so
for any new agency is a challenge, making it happen for the BTA
by November 21, 2005, which is the date that DOD has committed
to, is a challenge that will take more than the next 11 days to
pull off.
Other challenges to realizing this potential include making
sure that it has the authority commensurate with its
responsibilities relative to system investments that are
controlled by military services and defense agencies and making
sure that the agency's relationship with key system
modernization players, such as the DOD chief information
officer and the Defense Information Systems Agency, are clearly
defined.
With respect to the third issue concerning the Department's
overall business transformation efforts, I would first say that
the Department's leadership has clearly shown commitment to
addressing the business transformation challenges it faces, and
it has taken various steps toward this end. However, I would
also reiterate two critical steps that Comptroller General
Walker has said the Department needs to take, namely having a
strategic plan for business transformation that serves to
integrate the many people, process, and technology
transformation activities going on and planned across the
Department and establishing a chief management official (CMO)
to provide focused, sustained leadership to the business
transformation over a 7-year period. Neither the modernization
management actions taken in response to the National Defense
Authorization Act for Fiscal Year 2005 or the newly defined and
established BTA satisfy those needs.
In closing, let me commend the subcommittee for its active
role in DOD's transformation efforts through both its
legislative initiatives and its regular oversight of these.
Further, let me say that this transformation will require at
least 5 to 7 years to achieve. Under the hands-on leadership of
the acting Deputy Secretary, Gordon England, DOD has recently
begun taking some positive steps in this direction,
particularly with respect to business systems modernization.
However, I would describe DOD at this juncture as being in the
first few miles of a business transformation marathon, meeting
its considerable people, process, and technology change to
effect before it will complete the race.
To assist the Department as it moves forward, we encourage
it to fully implement the recommendations that we have made,
and we pledge to continue working constructively with the
Department to make this happen.
Mr. Chairman, members of the subcommittee, this concludes
my statement. I would be happy to answer any questions you may
have.
[The prepared statement of Mr. Hite follows:]
Prepared Statement by Randolph C. Hite
Mr. Chairman and members of the subcommittee: I appreciate the
opportunity to be here today to discuss business systems modernization
and overall business transformation at the Department of Defense
(DOD)--two areas that are on our high-risk list of Federal programs and
activities that are at risk of waste, fraud, abuse, or mismanagement
and in need of broad-based transformation.\1\ At the onset, I would
like to pass on Comptroller General Walker's gratitude to this
subcommittee for your continued oversight of key government operations
and management issues, including DOD's business transformation
activities. The active role of this subcommittee is essential to
ultimately assuring DOD's continued progress in business
transformation, while enhancing public confidence in DOD's stewardship
of the hundreds of billions of taxpayer funds it receives each year.
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\1\ GAO, High-Risk Series: An Update, GAO-05-207 (Washington, DC:
January 2005).
---------------------------------------------------------------------------
Given its size and mission, DOD is one of the largest and most
complex organizations to effectively manage in the world. While DOD
maintains military forces with significant capabilities, it continues
to confront pervasive, decades-old management problems related to its
business operations, including outdated and ineffective systems and
processes that support these forces. At a time when DOD is challenged
to maintain a high level of military operations while competing for
resources in an increasingly fiscally constrained environment, DOD's
business area weaknesses continue to result in reduced efficiencies and
effectiveness that waste billions of dollars every year. Of the 25
areas on our 2005 high-risk list, 8 are DOD programs or operations and
6 are government-wide high-risk areas for which DOD shares some
responsibility. These areas touch on all of DOD's major business
operations. In some cases, such as DOD's financial management, weapons
acquisition, and business systems modernization areas, we have been
highlighting high-risk challenges for a decade or more.
This year we added DOD's overall approach to business
transformation to our list of high-risk areas because (1) DOD's
business improvement initiatives and control over resources are
fragmented; (2) DOD lacks a clear and integrated business
transformation plan and investment strategy; and (3) DOD has not
designated an appropriate level senior management official--such as a
chief management official (CMO)--with the authority to be responsible
and accountable for overall business transformation reform and related
resources. In particular, GAO has suggested the need for a chief
management official \2\ to provide the sustained top-level leadership
and accountability needed by DOD to better leverage plans, processes,
systems, people and tools to achieve the needed transformation.
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\2\ S.780, 109th Cong., 1st Sess. introduced in the U.S. Senate on
April 15, 2005, would create a statutory Chief Management Officer.
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Many past administrations have tried to address the deficiencies we
have identified at DOD, with the latest attempt being launched in 2001
when Secretary Rumsfeld outlined a vision for transforming the
department that called for dramatic changes in management, technology,
and business practices. At that time, the Secretary established the
Business Management Modernization Program (BMMP) to effect this change.
Since then, we have reported a litany of program weaknesses and made
scores of recommendations. Our latest reports on this program, which
were issued about the same time as this subcommittee's last oversight
hearing in April 2005 on DOD business transformation and financial
accountability, were quite critical of the program, observing that
after investing about 4 years and $318 million on the BMMP, the
department had made very little progress.
To its credit, Congress, and this subcommittee in particular, has
become increasingly focused on improving DOD's business operations by
holding several oversight hearings, such as this one, and enacting
legislation. The recent requirements in the Ronald W. Reagan National
Defense Authorization Act for Fiscal Year 2005 aimed at strengthening
DOD's management of its business systems modernization efforts--
developing a business enterprise architecture and transition plan, and
establishing system investment management structures and processes--are
particularly important ingredients to addressing DOD's business systems
modernization high-risk area. The act requires GAO to review and report
on this transition plan within 60 days of its approval by the Secretary
of Defense.
Senior administration leaders and advisors--including the Secretary
of Defense, the acting Deputy Secretary of Defense, the Deputy Director
of the Office of Management and Budget (OMB), various senior level
officials, and members of the Defense Business Board--have demonstrated
a commitment to addressing DOD's business management weaknesses. OMB
and DOD are working together to develop a plan to improve supply chain
management that could place the department on the path toward removal
of this area from our high-risk list. For example, OMB and DOD are also
consulting GAO as they develop action plans for other high-risk areas
as well as a business architecture and related enterprise transition
plan. Further, DOD has taken actions intended to comply with the act by
establishing system investment review structures and processes, and it
has also established a Business Transformation Agency to bring
increased management focus to its business systems modernization area.
Today, I would like to provide our preliminary perspectives on (1)
DOD's efforts to satisfy the business systems modernization
requirements in the National Defense Authorization Act for Fiscal Year
2005; (2) the Business Transformation Agency's potential to help
strengthen business systems modernization; and (3) whether DOD efforts
to establish management structures and its business enterprise
transition plan provide the leadership and planning needed to effect
business transformation.
My statement is based upon our ongoing assessment of DOD's efforts
to comply with the 2005 defense authorization act, as required under
the act. As such, the statement provides our preliminary views on DOD's
efforts. It is also based on our analysis of DOD's enterprise
transition plan relative to our published work on successful
organizational transformation efforts and each of DOD's high risk
areas, as well as analysis of DOD's directives establishing the Defense
Business Transformation Agency, our previous reports and testimonies,
and discussions with DOD senior executives. Our work was performed in
accordance with U.S. generally accepted government auditing standards.
SUMMARY
In summary, let me reiterate what Comptroller General Walker has
stated on many occasions--transforming the department's business
operations is an absolute necessity given the long-term fiscal outlook,
and accomplishing this transformation will require sustained and
persistent leadership for at least 5 to 7 years. The department, under
the leadership of Acting Deputy Secretary England, recently began
taking some positive steps in this direction, particularly with respect
to the business systems modernization management changes called for in
the National Defense Authorization Act for Fiscal Year 2005, as well as
with certain other DOD high-risk areas. As of today, our preliminary
work suggests that progress has been made in complying with the
provisions in the act, but more needs to be done. DOD agrees, and it
intends to do more. With respect to DOD's compliance with the
authorization act's requirements, we will be issuing a full report to
this and other defense congressional committees by November 25, 2005.
In addition, DOD's Business Transformation Agency offers potential
benefits relative to the department's business systems modernization
efforts if the agency can be properly organized, resource, and
empowered to effectively execute its roles and responsibilities and is
held accountable for doing so. The agency faces several challenges,
including standing up a functioning acquisition organization within a
short period of time. As DOD moves forward with implementing this
agency, it will be important for it to address these issues.
Furthermore, DOD has taken several actions intended to advance
transformation, such as establishing management structures like the
Business Transformation Agency, and developing the enterprise
transition plan. While these steps are positive, their primary focus
appears to be on business system modernization. Business transformation
is much broader and encompasses planning, management, structures, and
processes related to all key business areas. As DOD continues to evolve
its transformation efforts, critical to successful reform are sustained
leadership, structures, and a clear strategic and integrated plan that
encompass all major business areas. We, therefore, continue to believe
that a CMO position along with an integrated strategic plan for the
overall business transformation effort, remain essential ingredients
for better ensuring that overall business transformation is
successfully implemented and sustained.
BACKGROUND
DOD is one of the largest and most complex organizations in the
world to manage effectively. While DOD maintains military forces with
unparalleled capabilities, it continues to confront pervasive, decades-
old management problems related to its business operations--which
include outdated systems and processes--that support these forces.
These management weaknesses cut across all of DOD's major business
areas, such as human capital management; the personnel security
clearance program; support infrastructure management; financial
management; weapon systems acquisition; contract management; supply
chain management; and last, but not least, business systems
modernization. All of these DOD areas are on our high-risk list.
For years, DOD has attempted to modernize its business systems, and
we have provided numerous recommendations to help guide its efforts,
including a set of recommendations to help DOD develop and implement an
enterprise architecture (or modernization blueprint) and establish
effective management controls. To achieve successful transformation, we
have also recommended the need for a CMO, and a strategic integrated
action plan for the overall business transformation effort.
Enterprise Architecture and Information Technology Investment
Management Are Critical to Achieving Successful Systems
Modernization
Effective use of an enterprise architecture, or modernization
blueprint, is a hallmark of successful public and private
organizations. For more than a decade, we have promoted the use of
architectures to guide and constrain systems modernization, recognizing
them as a crucial means to a challenging goal: agency operational
structures that are optimally defined in both the business and
technological environments. Congress has also recognized the importance
of an architecture-centric approach to modernization: the E-Government
Act of 2002,\3\ for example, requires OMB to oversee the development of
enterprise architectures within and across agencies.
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\3\ The E-Government Act of 2002, Pub. L. No. 107-347, Sec. 101(a),
116 Stat. 2899, 2903-05, (Dec. 17, 2002), Sec 44 U.S.C. Sec. 3602 (e),
(f).
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In brief, an enterprise architecture provides a clear and
comprehensive picture of an entity, whether it is an organization
(e.g., a Federal department) or a functional or mission area that cuts
across more than one organization (e.g., financial management). This
picture consists of snapshots of both the enterprise's current or ``As
Is'' environment and its target or ``To Be'' environment. These
snapshots consist of ``views,'' which are one or more architecture
products (models, diagrams, matrices, text, etc.) that provide logical
or technical representations of the enterprise. The architecture also
includes a transition or sequencing plan, based on an analysis of the
gaps between the ``As Is'' and ``To Be'' environments; this plan
provides a temporal roadmap for moving between the two that
incorporates such considerations as technology opportunities,
marketplace trends, fiscal and budgetary constraints, institutional
system development and acquisition capabilities, the dependencies and
life expectancies of both new and ``legacy'' (existing) systems, and
the projected value of competing investments. Our experience with
Federal agencies has shown that investing in information technology
(IT) without defining these investments in the context of an
architecture often results in systems that are duplicative, not well
integrated, and unnecessarily costly to maintain and interface.\4\
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\4\ See, for example, GAO, Homeland Security: Efforts Under Way to
Develop Enterprise Architecture, but Much Work Remains, GAO-04-777
(Washington, DC: Aug. 6, 2004); DOD Business Systems Modernization:
Limited Progress in Development of Business Enterprise Architecture and
Oversight of Information Technology Investments, GAO-04-731R
(Washington, DC: May 17, 2004); and Information Technology:
Architecture Needed to Guide NASA's Financial Management Modernization,
GAO-04-43 (Washington, DC: Nov. 21, 2003).
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A corporate approach to IT investment management is also
characteristic of successful public and private organizations.
Recognizing this, Congress developed and enacted the Clinger-Cohen Act
in 1996,\5\ which requires OMB to establish processes to analyze,
track, and evaluate the risks and results of major capital investments
in information systems made by executive agencies.\6\ In response to
the Clinger-Cohen Act and other statutes, OMB developed policy for
planning, budgeting, acquisition, and management of Federal capital
assets and issued guidance.\7\ We have also issued guidance in this
area,\8\ in the form of a framework that lays out a coherent collection
of key practices that, when implemented in a coordinated manner, can
lead an agency through a robust set of analyses and decision points
that support effective IT investment management. This framework defines
institutional structures, such as investment review boards, and
associated processes, such as common investment criteria. Further, our
investment management framework recognizes the importance of an
enterprise architecture as a critical frame of reference for
organizations making IT investment decisions: specifically, it states
that only investments that move the organization toward its target
architecture, as defined by its sequencing plan, should be approved
(unless a waiver is provided or a decision is made to modify the
architecture). Moreover, it states that an organization's policies and
procedures should describe the relationship between its architecture
and its investment decisionmaking authority. Our experience has shown
that mature and effective management of IT investments can vastly
improve government performance and accountability, and can help to
avoid wasteful IT spending and lost opportunities for improvements.
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\5\ The Clinger-Cohen Act of 1996, 40 U.S.C. sections 11101-11704.
This act expanded the responsibilities of OMB and the agencies that had
been set under the Paperwork Reduction Act, which requires that
agencies engage in capital planning and performance and results-based
management. 44 U.S.C. Sec. 3504(a)(1)(B)(vi) (OMB); 44 U.S.C.
Sec. 3506(h)(5) (agencies)
\6\ We have made recommendations to improve OMB's process for
monitoring high-risk IT investments; see GAO, Information Technology:
OMB Can Make More Effective Use of Its Investment Reviews, GAO-05-276
(Washington, DC: Apr. 15, 2005).
\7\ This policy is set forth and guidance is provided in OMB
Circular No. A-11 (section 300) and in OMB's Capital Programming Guide,
which directs agencies to develop, implement, and use a capital
programming process to build their capital asset portfolios.
\8\ GAO, Information Technology Investment Management: A Framework
for Assessing and Improving Process Maturity, GAO-04-394G (Washington,
DC: March 2004).
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Recent Reviews of DOD's Business System Modernization Efforts Have
Raised Concerns
Since 2001, we have regularly reported \9\ on DOD's efforts to
(among other things) develop an architecture and to establish and
implement effective investment management structures and processes. Our
reports have continued to raise concerns about the department's
architecture program, the quality of the architecture and the
transition plan, and the lack of an investment management structure and
controls to implement the architecture. Our most recent reports, which
were issued in the third and fourth quarters of fiscal year 2005,\10\
made the following points:
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\9\ GAO, Information Technology: Architecture Needed to Guide
Modernization of DOD's Financial Operations, GAO-01-525 (Washington,
DC: May 17, 2001); DOD Business Systems Modernization: Improvements to
Enterprise Architecture Development and Implementation Efforts Needed,
GAO-03-458 (Washington, DC: Feb. 28, 2003); Information Technology:
Observations on Department of Defense's Draft Enterprise Architecture,
GAO-03-571R (Washington, DC: Mar. 28, 2003); Business Systems
Modernization: Summary of GAO's Assessment of the Department of
Defense's Initial Business Enterprise Architecture, GAO-03-877R
(Washington, DC: July 7, 2003); DOD Business Systems Modernization:
Important Progress Made to Develop Business Enterprise Architecture,
but Much Work Remains, GAO-03-1018 (Washington, DC: Sept. 19, 2003);
DOD Business Systems Modernization: Limited Progress in Development of
Business Enterprise Architecture and Oversight of Information
Technology Investments, GAO-04-731R (Washington, DC: May 17, 2004).
\10\ GAO, DOD Business Systems Modernization: Billions Being
Invested without Adequate Oversight, GAO-05-381 (Washington, DC: Apr.
29, 2005); DOD Business Systems Modernization: Longstanding Weaknesses
in Enterprise Architecture Development Need to Be Addressed, GAO-05-702
(Washington, DC: July 22, 2005).
DOD had not established effective structures and
processes for managing the development of its architecture.
DOD had not developed a well-defined architecture. The
products that it had produced did not provide sufficient
content and utility to effectively guide and constrain ongoing
and planned system investments.
DOD had not developed a plan for transitioning from
the ``As Is'' to the ``To Be'' architectures.
DOD did not have an effective department-wide
management structure for controlling its business investments.
DOD had not established common investment criteria for
system reviews.
DOD had not included all reported systems in its
fiscal year 2005 IT budget request.
The Under Secretary of Defense (Comptroller) had not
certified all systems investments with reported obligations
exceeding $1 million, as required by the National Defense
Authorization Act for Fiscal Year 2003.\11\
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\11\ Bob Stump National Defense Authorization Act for Fiscal Year
2003, Pub. L. No. 107-314, Sec. 1004, 116 Stat. 2458, 2629-2631 (Dec.
2, 2002).
Our recommendations to DOD provide a comprehensive roadmap for
addressing these problems. DOD has largely agreed with the
recommendations and as we recently reported, has defined a framework
intended to do so.
Successful Business Transformation Requires Sound Strategic Planning
and Sustained Leadership
In testimony before this subcommittee earlier this year,
Comptroller General Walker emphasized that there are three key elements
that DOD must incorporate into its business transformation efforts to
successfully address its systemic business challenges.\12\ First, these
efforts must include an integrated strategic business transformation
plan, including an enterprise architecture to guide and constrain
implementation of such a plan. Second, control of system investments is
crucial for successful business transformation. Finally, a CMO is
essential for providing the sustained leadership needed to achieve a
successful and lasting transformation effort. The CMO would not assume
the day-to-day management responsibilities of other DOD officials nor
represent an additional hierarchical layer of management but would lead
DOD's overall business transformation efforts. Additionally, a 7-year
term would also enable the CMO to work with DOD leadership across
administrations to sustain the overall business transformation effort.
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\12\ See GAO, Defense Management: Key Elements Needed to
Successfully Transform DOD Business Operations, GAO-05-629T
(Washington, DC: Apr. 28, 2005).
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dod's efforts to comply with national defense authorization act for
fiscal year 2005 indicate progress and a foundation upon which to build
As defined in section 332 of the National Defense Authorization Act
for Fiscal Year 2005,\13\ DOD is required to satisfy several conditions
relative to its approach to managing its business systems modernization
program. Generally speaking, DOD is required to do the following:
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\13\ Ronald W. Reagan National Defense Authorization Act for Fiscal
Year 2005, Pub. L. No. 108-375, Sec. 332, 118 Stat. 1811, 1851-1856
(Oct. 28, 2004) (codified in part at 10 U.S.C. Sec. 2222).
1. By September 30, 2005, develop a business enterprise
architecture that meets certain requirements.
2. By September 30, 2005, develop a transition plan for
implementing the architecture that meets certain requirements.
3. Identify each defense business system proposed for funding in
the budget submissions for fiscal year 2006 and subsequent years, and
for each system, among other things, identify whether funding is for
current services or business systems modernization.
4. Take a number of actions regarding the review and approval of
investments, including delegating responsibility for business system
review and decisionmaking to designated approval authorities,\14\
establishing investment review boards and supporting process that
employ common steps and criteria, and obligating funds for Defense
Business System Modernizations after October 1, 2005, only for systems
that have been certified and approved.
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\14\ Approval authorities include the Under Secretary of Defense
for Acquisition, Technology, and Logistics; the Under Secretary of
Defense (Comptroller); the Under Secretary of Defense for Personnel and
Readiness; and the Assistant Secretary of Defense for Networks and
Information Integration/Chief Information Officer of the Department of
Defense. These approval authorities are responsible for the review,
approval, and oversight of business systems and must establish
investment review processes for systems under their cognizance.
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The act also requires us to assess DOD's efforts to comply with the
act within 60 days after approval of the business enterprise
architecture and transition plan. On September 28, 2005, the acting
Deputy Secretary of Defense approved Version 3.0 of the business
enterprise architecture and approved the associated enterprise
transition plan. Accordingly, we are currently in the process of
conducting our assessment, and we plan by November 25, 2005, to issue a
report containing the results of our assessment to defense
congressional committees, as specified in the act. As agreed, this
statement contains only preliminary observations based on our ongoing
work, meaning that these observations may change as we conclude our
ongoing assessment.
For purposes of this statement, we have grouped the act's
requirements, and our preliminary observations, into four categories:
business enterprise architecture, enterprise transition plan, fiscal
year 2006 budget submission, and investment review and approval.
Business Enterprise Architecture Requirements
The act requires that DOD develop, by September 30, 2005,\15\ a
business enterprise architecture. According to the act, this
architecture must satisfy three major requirements:
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\15\ Ronald W. Reagan National Defense Authorization Act for Fiscal
Year 2005, Pub. L. No. 108-375, Sec. 332, 118 Stat. 1811, 1851-1856
(Oct. 28, 2004) (codified in part at 10 U.S.C. Sec. 2222).
1. Include an information infrastructure that, at a minimum, would
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enable DOD to
comply with all Federal accounting, financial
management, and reporting requirements;
routinely produce timely, accurate, and reliable
financial information for management purposes;
integrate budget, accounting, and program information
and systems; and
provide for the systematic measurement of performance,
including the ability to produce timely, relevant, and reliable
cost information.
2. Include policies, procedures, data standards, and system
interface requirements that are to be applied uniformly throughout the
department.
3. Be consistent with OMB policies and procedures. According to
DOD, this version is intended to provide a blueprint to help ensure
near-term delivery of needed capabilities, resources, and materiel to
the warfighter. To do so, this version focused on six Business
Enterprise Priorities (see table 1), which DOD states are short-term
objectives to achieve immediate results. According to the department,
these priorities will evolve and expand in future versions of the
architecture.
TABLE 1: BUSINESS ENTERPRISE PRIORITIES
------------------------------------------------------------------------
Business Enterprise Priority Description
------------------------------------------------------------------------
Personnel Visibility...................... Providing access to
reliable, timely, and
accurate personnel
information for warfighter
mission planning.
Acquisition Visibility.................... Providing transparency and
access to acquisition
information that is
critical to supporting life-
cycle management of the
department's processes for
delivering weapon systems
and automated information
systems.
Common Supplier Engagement................ Aligning and integrating
policies, processes, data,
technology, and people to
simplify and standardize
the methods that DOD uses
to interact with commercial
and government suppliers.
Materiel Visibility....................... Improving supply chain
performance.
Real Property Accountability.............. Acquiring access to real-
time information on DOD
real property assets.
Financial Visibility...................... Providing immediate access
to accurate and reliable
financial information that
will enhance efficient and
effective decisionmaking.
------------------------------------------------------------------------
Source: DOD.
In addition to focusing version 3.0 on these priorities, according
to DOD, the department also limited the extent to which the
architecture was to address each priority, focusing on four questions:
Who are our people, what are their skills, and where
are they located?
Who are our industry partners, and what is the state
of our relationship with them?
What assets are we providing to support the
warfighter, and where are these assets deployed?
How are we investing our funds to best enable the
warfighting mission?
To produce a version of the architecture within the above scope,
DOD created 12 of the 23 recommended products included in the DOD
Architecture Framework--the structural guide that the department has
established for developing an architecture.\16\ These 12 products
included all 7 products that the framework designates as essential.\17\
For example, one essential product is the Operational Node Connectivity
Description, which is a graphic showing ``operational nodes''
(organizations) and including a depiction of each node's information
exchange needs.
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\16\ The Department of Defense Architecture Framework recommends
that the architecture include 23 of the 26 possible architecture
products to meet the department's stated intention to use the
architecture as the basis for department-wide business and systems
modernization.
\17\ DOD, Department of Defense Architecture Framework, Version
1.0, Volume 1 (August 2003) and Volume 2 (February 2004).
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Our preliminary work suggests that Version 3.0 of DOD's business
enterprise architecture may partially satisfy the major conditions
specified in the act. For example, Version 3.0 could enable DOD's
compliance with many but not all Federal accounting, financial
management, and reporting requirements. To this end, the architecture
includes the Standard Financial Information Structure (SFIS) and the
Standard Accounting Classification Structure (SACS), which together
could allow DOD to standardize financial data elements necessary to
support budgeting, accounting, cost/performance management, and
external reporting. Both SFIS and SACS are based upon mandated
requirements defined by external regulatory entities, such as the
Treasury, OMB, the Federal Accounting Standards Advisory Board, and the
Joint Financial Management Improvement Program.\18\ Moreover, SFIS has
in turn been used to develop and incorporate business rules in the
architecture for such areas as managerial cost accounting, general
ledger, and federally owned property. Business rules are important
because they explicitly translate important business policies and
procedures into specific and unambiguous rules that govern what can and
cannot be done.
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\18\ JFMIP was a joint and cooperative undertaking of the
Department of the Treasury, GAO, the Office of Management and Budget
(OMB), and the Office of Personnel Management (OPM), working in
cooperation with each other and other Federal agencies to improve
financial management practices in the Federal Government. Leadership
and program guidance were provided by the four Principals of JFMIP--the
Secretary of the Treasury, the Comptroller General of the United
States, and the Directors of OMB and OPM. Although JFMIP ceased to
exist as a stand-alone organization as of December 1, 2004, the JFMIP
Principals will continue to meet at their discretion.
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However, it is not apparent that the architecture provides for
compliance with all Federal accounting, financial, and reporting
requirements. For example, it may not contain the information needed to
achieve compliance with the Treasury's United States Standard General
Ledger \19\ or a strategy for achieving this compliance.
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\19\ The United States Standard General Ledger provides a uniform
Chart of Accounts and technical guidance to be used in standardizing
Federal agency accounting.
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As another example, Version 3.0 may partially enable DOD to produce
timely, accurate, and reliable financial information for management
purposes. Specifically, according to the architecture financial
information is to be produced through (1) SFIS, which can support data
accuracy, reliability, and integrity requirements for budgeting,
financial accounting, cost and performance management and external
reporting across DOD, and (2) a ``Manage Business Enterprise
Reporting'' system function, which is intended to support the reporting
of financial management and program performance information, including
agency financial statements.
However, timely, accurate, and reliable information depends, in
part, on using standard definitions of key terms, which the
architecture does not appear to include in all cases. For example, in
Version 3.0 of the architecture, terms such as ``balance forwarded''
and ``receipt balances'' were not defined in the integrated dictionary
although these terms were used in process descriptions. In the absence
of standardized definitions, components (military services, defense
agencies, and field activities) may use terms and definitions that a
locally meaningful but which cannot be reliably and accurately
aggregated to permit DOD-wide visibility, which is critical to
achieving DOD's stated business enterprise priorities. This inability
to aggregate has historically required DOD to create information for
management purposes using inefficient methods, such as data calls and
data conversions, that have limited the information's reliability and
timeliness.
Our preliminary work also suggests that Version 3.0 may partially
satisfy the act's requirement that it be consistent with OMB policies
and procedures. For example, Version 3.0 appears to include information
flows and relationships, as required by OMB guidance. OMB guidance also
requires the architecture to describe the ``As Is'' and ``To Be''
environments and a transition plan; however, Version 3.0 does not
include an ``As Is'' environment. Without this element, DOD would not
be able to develop a gap analysis identifying performance shortfalls,
which as discussed in the next section critical input to a
comprehensive transition plan. In addition, OMB guidance requires that
the architecture include, among other things a description of the
technology infrastructure; such a description is not apparent in
Version 3.0, in that it does not identify such needed technology
components as wide-area networks, databases, and telecommunications.
Similarly, Version 3.0 does not appear to include a security
architecture, although OMB guidance require agencies to incorporate
security into the architecture of their information and systems to
ensure the security of agency business operations.
Version 3.0 may also contain other limitations. For example, it may
not yet be fully integrated with the enterprise transition plan. In
particular, we are currently attempting to determine why 21 system
identified in the architecture are not included in the ``Master List of
Systems and Initiatives'' in the transition plan (the master list
serves as the baseline of currently planned--``To Be''--systems that
begin to address the transformational objectives of the program). In
addition, DOD has itself disclosed certain limitations. For example, it
reported that the architecture is not adequately linked to the
component \20\ architectures and transition plans. This omission is
particularly important given the department's newly adopted federated
approach to developing and implementing the architecture. In addition,
according to DOD, the architect be improved to better designate
enterprise data sources, business services, and IT infrastructure
services, such as enterprise data storage. This is important because
each of these greatly affects to scope and design of specific systems.
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\20\ DOD components include the military services, defense
agencies, and field activities.
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According to DOD officials, the department is taking an incremental
approach to developing the architecture and meeting the act's
requirements. Accordingly, they said that Version 3.0 was appropriately
scoped to provide for that content which could be produced in the time
available to both lay the foundation for fully meeting the act's
requirements and provide a blueprint for delivering near-term
capabilities and systems to meet near-term business enterprise
priorities. Based on these considerations, they asserted that Version
3.0 fully satisfies the intent of the act.
We support DOD's taking an incremental approach to developing the
business enterprise architecture, as we recognize that adopting such an
approach is both a best practice and a prior GAO recommendation. In
addition, our preliminary work suggest Version 3.0 may provide a
foundation upon which to build a more complete architecture.
Nevertheless, the real question that remains is whether this version
contains sufficient scope, detail, integration, and consistency to
serve as a sufficient frame of reference for defining a common vision
and transition plan to guide and constrain system investments.
Enterprise Transition Plan
The act requires that DOD develop, by September 30, 2005, a
transition plan for implementing its business enterprise architecture.
According to the act, this plan must meet three conditions:
1. Include an acquisition strategy for new systems that are
expected to be needed to complete the defense business
enterprise architecture.
2. Include listings of the legacy systems that will and will
no part of the target business systems environment, and a
strategy for making modifications to those systems that will be
included.
3. Include specific time-phased milestones, performance
metrics, and a statement of the financial and nonfinancial
resource needs.
On September 28, 2005, the Acting Deputy Secretary of Defense
approved the transition plan. Our preliminary work on this plan the
plan appears to include elements of an acquisition strategy for new
systems and describe a high-level approach for modernizing department's
business operations and systems. Further, it includes detailed
information on about 60 business systems (ongoing programs) that are to
be part of the ``To Be'' architectural environment, as well as an
acquisition strategy for each system. However, the plan does not appear
to be based on a top-down capability gap analysis between the ``As Is''
and ``To Be'' architectures that describes capability and performance
shortfall and clearly identifies which system investments (such as the
60 identified programs) are to address these shortfalls. This is
important because a transition plan is to be an acquisition strategy
that recognizes timing and technological dependencies among planned
systems investments, as well as such other considerations as market
trends and return on investment.
Similarly, our preliminary work suggests that the plan identifies
some of the legacy systems that are to be replaced by ongoing programs
(for example, it identifies the Defense Cash Accountability System as a
target system and lists several legacy systems that it would replace),
and it provides a list of legacy systems that will be modified to
provide capabilities associated with the target architecture
environment. However, the plan's listings of legacy systems that will
and will not be part of the target architecture do not appear to be
complete. For example, the plan identified 145 legacy systems that
would be migrating to one target system (the Expeditionary Combat
Support System), but other DOD documentation \21\ shows that this
target system includes over 659 legacy systems, suggesting that 514
systems may not be accounted for.
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\21\ DOD, Expeditionary Combat Support System Sources Sought
Synopsis (May 10, 2004).
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Finally, the plan appears to include some of the required
information on milestones, performance metrics, and resource needs. The
plan includes key milestone dates for the 60 systems/programs
identified (such as the Defense Travel System), but it does not show
specific dates for terminating or migrating many legacy systems (such
as the Cash Reconciliation System), and but it does not include
milestone dates for some ongoing programs (such as the Navy Tactical
Command Support System). Similarly although the plan includes
performance metrics for some systems,\22\ it does not include for each
system measures and metrics, focused on benefits or mission outcomes
that can be linked to the plan's strategic goals. In addition,
according to program officials, the resource needs in the transition
plan for some programs are not current, as these needs are reflective
of the fiscal year 2006 budget, which was developed before a recent
reevaluation of how these programs will fit into the ``To Be''
environment.
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\22\ For example, for DOD's military personnel and pay system, the
Defense Integrated Military Human Resources System (DIMHRS), the plan
cites a goal of reducing manual workarounds for military pay by 9
percent.
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Our preliminary work also suggests that in addition to the
limitations just described, the plan may be missing relevant context
and be inconsistent with the architecture in various ways. For example,
it identifies 60 systems as target systems (for example, the Defense
Cash Accountability System), but the ``To Be'' architecture appears to
include only 23 of these. In addition, the plan includes a list of 66
systems that are characterized as nonpriority enterprise or component
programs that will be part of the target architecture, but the target
architecture does not appear to identify all these systems.
According to DOD officials, the transition plan is evolving, and
any limitations will be addressed in future iterations of the plan.
They also stated that the department has taken an incremental approach
to developing a transition plan, and that the plan, as constrained by
the scope of Version 3.0 of the architecture, satisfies the intent of
the act's requirements.
As with the architecture, we support an incremental development
approach. Moreover, this plan represents DOD's first ever enterprise
transition plan, and thus constitutes progress. However, questions
remain as to whether it is of sufficient scope and content to
effectively and efficiently manage the disposition of the department's
existing inventory of systems or to sequence the introduction of
modernized business operations and supporting systems.
Fiscal Year 2006 IT Budget Submission
The National Defense Authorization Act for Fiscal Year 2005
specifies information that the department is to incorporate in its IT
budget request for fiscal year 2006 and each fiscal year thereafter.
Generally, the act states that each budget request for business systems
must:
1. Identify each defense business system for which funding is
being requested.
2. Provide information on all funds, by appropriation, for
each business system, including funds by appropriation
specifically for current services (Operation and Maintenance)
and systems modernization (Procurement; Research, Development,
Test, and Evaluation; and Defense Working Capital Fund).
3. Identify the designated approval authority for each
business system.
On the basis of our preliminary work, it appears that DOD's fiscal
year 2006 IT budget submission may partially satisfy these conditions.
For example, although the fiscal year 2006 budget may not identify each
business system for which funding is requested, DOD is taking steps to
ensure that subsequent fiscal year budget requests are more
comprehensive. This situation arose because DOD's fiscal year 2006
budget submission was submitted in February 2005, when the department
did not yet have a single inventory of all of its business systems. As
a result, DOD officials could not guarantee that all business systems
were included in the submission. Currently, the department is updating
its single database for its inventory of business systems, as we had
recommended,\23\ which is scheduled to be completed by September 30,
2006. Finally, DOD officials stated that the fiscal year 2007 IT budget
submission will be derived from a separate DOD authoritative IT budget
database.
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\23\ GAO, DOD Business Systems Modernization: Billions Continue to
Be Invested with Inadequate Management Oversight and Accountability,
GAO-04-615 (Washington, DC: May 27, 2004).
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There may be additional areas of uncertainty regarding the
completeness of DOD's IT budget submission. One source of uncertainty
is inconsistencies in the way that DOD classifies systems: as business
systems or as national security systems.\24\ For example, as we
previously reported,\25\ DOD reclassified 56 systems in its fiscal year
2005 budget request from business systems to national security systems,
resulting in a decrease of approximately $6 billion in the fiscal year
2005 budget request for business systems and related infrastructure.
Similarly, in the fiscal year 2006 submission, 13 systems previously
classified as business systems were reclassified as national security
systems, and 10 systems previously classified as national security
systems were reclassified as business systems. We understand that DOD
is currently reviewing its reclassifications.
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\24\ National security systems are intelligence systems,
cryptologic activities related to national security, military command
and control systems, and equipment that is an integral part of a weapon
or weapons system or is critical to the direct fulfillment of military
or intelligence missions.
\25\ GAO-05-381.
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Our preliminary work also indicates that DOD may not have ensured
that budget requests for all business systems identify the type of
funding--by appropriation--being requested and whether the funding was
for current services or modernization. In the fiscal year 2006 budget
submission, systems identified are categorized by type of funding
(appropriation) being requested and whether the funding is for current
services or modernization; however, not all systems may be
identifiable. In particular, it is not clear what is covered by one
funding type or category referred to as ``All Other.'' For fiscal year
2006, this category totaled about $1.2 billion and included, for
example, about $22.6 million specifically for financial management.
According to DOD officials,\26\ this category in the IT budget includes
system projects that do not have to be identified by name because they
fall below the $2 million reporting threshold for budgetary purposes.
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\26\ GAO-04-615.
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Investment Review and Approval Requirements
The National Defense Authorization Act for Fiscal Year 2005
specifies actions that the department is to take regarding the review
and approval of investments in business systems. Generally, the act
sets up three requirements for the department:
Delegate the authority and accountability for defense
business systems to designated approval authorities within the
Office of the Secretary of Defense.
By March 15, 2005, require each approval authority to
establish an investment review process to review the planning,
design, acquisition, development, deployment, operation,
maintenance, modernization, and project cost benefits and risks
of all defense business systems for which the approval
authority is responsible.
Effective October 1, 2005, obligate funds for a
defense business system modernization project with total cost
exceeding $1 million after the approval authority designated
for that system certifies to the Defense Business Systems
Management Committee (DBMSC) that the system project meets
specific conditions that are called for in the act, and the
certification by the approval authority is approved by the
DBSMC.
On the basis of our preliminary work, it appears that DOD has
satisfied some aspects of these conditions, and is potentially in the
process of satisfying other aspects. First, on March 19, 2005, the
Acting Deputy Secretary of Defense issued a memorandum that delegated
the authority for the review, approval, and oversight of planning,
design, acquisition, deployment, operation, maintenance, and
modernization of the department's business systems. Designation of
these approval authorities is consistent with the act. Further, our
research and evaluations, as reflected in the guidance that we have
issued, shows that clear assignment of senior executive investment
management responsibilities and accountabilities are key aspects of
having an effective institutional approach to IT investment management.
Second, DOD has established investment review structures and
processes, including a hierarchy of investment review boards with
representation from across the department, as well as a standard set of
investment review and decisionmaking criteria for these boards to use
to ensure compliance and consistency with the business enterprise
architecture. Further, the DBSMC was chartered in February 2005 as the
highest ranking system modernization governance body, as required by
the act.\27\ Further, DOD has designated the chair and membership of
the boards consistent with the act, and all but one of designated
approval authorities have established investment review boards for
their areas of responsibility, which the act requires each to do. The
one approval authority that does not appear to have established a
review process is the Assistant Secretary of Defense (Networks and
Information Integration)/Chief Information Officer.
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\27\ See 10 U.S.C. Sec. 186.
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To support its investment review structures, DOD has also
established investment review processes that include, among other
things, the use of business enterprise architecture compliance
procedures, common decision criteria, threshold criteria to ensure
appropriate levels of review and accountability. Notwithstanding these
investment review structures and processes, it remains uncertain to
what extent DOD components have established similar investment review
bodies and will adopt common investment review and decisionmaking
processes. DOD components are expected to establish their own
structures and processes. Under the department's concept of ``tiered
accountability,'' significant responsibility and accountability for
business system investments is to reside with the military services and
defense agencies. The extent to which the components establish and
consistently implement common investment management structures and
processes is important, because doing so is a best practice. Without
such structures and processes, investment decisions could potentially
perpetuate the existence of overly complex, error-prone, nonintegrated
system environments and limit introduction of corporate solutions to
longstanding business problems.
Finally, our preliminary work indicates that the department is in
the process of ensuring that defense business system modernizations
\28\ costing greater than $1 million are certified and approved in
accordance with the act. Specifically, the department has identified
210 systems with costs greater than $1 million, thus requiring
certification and approval. Of these 210, DOD reports that 166 were
certified and approved in accordance with the act before September 30,
2005. This means that 44 were not, and according to the act, the
department cannot make further obligations for any of these other than
with funding left over from previous fiscal years, until they are
certified and approved.
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\28\ The term `defense business system modernization' is defined in
10 U.S.C. Sec. 2222(j)(3) as ``(A) the acquisition or development of a
new defense business system; or (B) any significant modification or
enhancement of an existing defense business system (other than
necessary to maintain current services).''
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One potential issue with regard to the department's system
certification and approval efforts to date is whether it has identified
all business system modernizations with costs greater than $1 million.
Doing this requires, among other things, proper classification of
systems as national security systems or as business systems. If a
business system is improperly classified, it may not be reviewed,
certified, and approved in accordance with the act. As stated earlier,
questions persist regarding whether the department has properly
classified all business systems as such.
Another potential issue is whether DOD has followed the act's
criteria for DBSMC review and approval in all of the aforementioned 166
systems. Specifically, it appears that the DBSMC approved the
certification of at least six business systems in August 2005 that had
been previously reviewed in accordance with earlier criteria;\29\
however, the current criteria under the act do not provide for the
DBSMC to approve a certification based upon such previous
certification. According to DOD officials, these six systems will go
through the current review process no later than February 2006. In
addition to these six, DOD officials told us that several other systems
investments, which were certified and approved on the grounds that they
were mission essential,\30\ will also be resubmitted for DBSMC
approval.
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\29\ The six systems were reviewed under the criteria set forth in
the National Defense Authorization Act for Fiscal Year 2003.
\30\ See 10 U.S.C. Sec. 2222 (a)(1)(C).
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DOD'S BUSINESS TRANSFORMATION AGENCY COULD HELP STRENGTHEN SYSTEMS
MODERNIZATION MANAGEMENT AND OVERSIGHT IF IT IS EFFECTIVELY IMPLEMENTED
On October 7, 2005, DOD established the Business Transformation
Agency (BTA) to advance defense-wide business transformation efforts in
general but particularly with regard to business systems modernization.
BTA reports directly to the vice chair of the DBMSC.\31\ Among other
things, BTA includes an acquisition executive who is to be responsible
for 28 DOD-wide business projects, programs, systems, and initiatives.
In addition, the BTA is to be responsible for integrating and
supporting the work of the Office of the Secretary of Defense (OSD)
principal staff assistants, who include the approval authorities that
chair the business system investment review boards.
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\31\ The vice chair of the DBSMC is the Under Secretary of Defense
for Acquisition, Technology and Logistics.
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In our view, BTA offers potential benefits relative to the
department's business systems modernization efforts, if the agency can
be properly organized, resourced, and empowered to effectively execute
its roles and responsibilities, and if it is held accountable for doing
so. In this regard, the agency faces a number of challenges as
described below.
According to DOD, this agency is expected to have a functioning
acquisition organization by November 21, 2005. While such a timeline is
daunting in and of itself, it is particularly challenging given that
DOD is estimating up to 12 months to establish a permanent director.
Moreover, there are numerous key acquisition functions that would need
to established and made operational to effectively assume 28 DOD-wide
projects, programs, systems, and initiatives, and our experience across
the government shows that these functions can take considerable time to
establish.
Among other things, the agency is to be responsible for ensuring
consistency and continuity across the department's core business
missions with respect to, for example, business process reengineering
and related business system matters. While the agency should be able to
accomplish this relative to the DOD-wide efforts that it can control,
it does not appear to have the requisite authority to carry out this
responsibility relative to DOD component system investments, which it
does not have investment control over. At best, the agency will be able
to support the DBMSC in its efforts to ensure such consistency and
continuity.
As currently structured, the agency does not include support to an
OSD principal staff assistant and approval authority--the Assistant
Secretary of Defense for Networks Integration and Infrastructure, who
is responsible for DOD information technology infrastructure, such as
wide-area networks, local-area networks, telecommunications, and
security services. In addition, the agency's relationship to the
Defense Information Systems Agency, which is also responsible for
certain DOD-wide system capabilities and services, is not specified. As
the department moves forward with implementing this new agency, it will
important for it to address these issues.
EFFECTIVE DOD BUSINESS TRANSFORMATION WILL REQUIRE BROADER FOCUS THAN
RECENTLY LAUNCHED BUSINESS SYSTEMS MODERNIZATION MANAGEMENT STRUCTURES
AND ACTIVITIES
For DOD to successfully transform its overall business operations,
it will need senior level management accountability, a comprehensive
and integrated business transformation plan that covers all of its key
business functions; people with needed skills, knowledge, experience,
responsibility, and authority to implement the plan; an effective
process and related tools; and results-oriented performance measures
that link institutional, unit, and individual performance goals and
expectations to promote accountability for results. Over the last 3
years, GAO has made several recommendations that if implemented
successfully could help DOD move forward in establishing the means to
successfully address the challenges it faces in transforming its
business operations. For example, as the Comptroller General testified
before this subcommittee earlier this year, DOD needs a full-time CMO
position, created through legislation, with responsibility and
authority for DOD's overall business transformation efforts.\32\ The
CMO must be a person with significant authority and experience who
would report directly to the Secretary of Defense. Given the nature and
complexity of the overall business transformation effort, and the need
for sustained attention over a significant period of time, this
position should be a term appointment and the person should be subject
to a performance contract.
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\32\ S.780, 109th Cong., 1st Sess. introduced in the U.S. Senate on
April 15, 2005, would create a statutory Chief Management Officer.
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The Secretary of Defense, Acting Deputy Secretary of Defense, and
other senior leaders have clearly shown commitment to business
transformation and addressing deficiencies in the Department's business
operations. As I discussed earlier, DOD has taken several actions,
including setting up the DBSMC, publishing a business enterprise
transition plan and most recently, establishing the Business
Transformation Agency. Moreover, DOD is examining various aspects of
its business operations as part of the ongoing Quadrennial Defense
Review. While these management structures and plan are positive steps,
their primary focus, at this point, appears to be on business systems
modernization. Clearly, maintaining effective and modern business
systems is a key enabler to transformation. However, business
transformation is much broader and encompasses not only the supporting
systems, but also the planning, management, organizational structures,
and processes related to all DOD's major business areas. Such areas
include support infrastructure management, human capital management,
financial management, weapon systems acquisition, contract management,
planning and budgeting, and supply chain management. Recognizing that
DOD is continuing to evolve its efforts to plan and organize itself to
achieve business transformation, critical to the success of these
efforts will be management attention and structures that focus on
transformation from a broad perspective and a clear strategic and
integrated plan that, at a summary level, addresses all of the
department's major business areas. This strategic plan should contain
results-oriented performance measures that link institutional, unit,
and individual goals, measures and expectations, and would be
instrumental in establishing investment priorities and guiding the
department's resource decisions.
Finally, the lynchpin to ensure successful business transformation
is the presence of strong and sustained executive leadership with
appropriate responsibility, authority, and accountability. The central
authority we had envisioned to allow for strong and sustained executive
leadership over DOD's business management reform efforts is a full-
time, executive-level II position for a CMO, who would serve as the
Deputy Secretary of Defense for Management. This position would divide
and institutionalize the functions of the Deputy Secretary of Defense
by creating a separate Deputy Secretary of Defense for Management. As
we envision it, the CMO would feature a term of office that spans
administrations, which would serve to underscore the importance of
taking a professional, nonpartisan, institutional, and sustainable
approach to the overall business transformation effort. As I understand
it, DOD's position is that the acting Deputy Secretary of Defense, who
also serves as the chair of the DBSMC, has the requisite position,
authority, and purview to perform the functions of a CMO. Under the
acting Deputy's leadership, DOD expects to be able to demonstrate
progress towards achieving business reform. Comptroller General Walker
continues to believe a CMO is necessary to provide the sustained
leadership needed to achieve true business transformation. In light of
DOD's position, we would encourage the subcommittee to require DOD to
periodically report on its efforts, including describing the specific
goals and measures against which it is measuring its progress in
achieving business reform.
In closing, the department as made important progress in the last 6
months in establishing the kind of business systems modernization
management capabilities that our research and evaluations show are
essential to a successful modernization program--namely, an
architecture, a transition plan, and system investment decisionmaking
structures and processes. But more needs to be done to complete each of
these areas, and most importantly, to ensure that they are reflected in
how each and every business system investment is managed. While the new
business transformation agency can help get this done, much remains to
be accomplished before this agency is functioning as intended. Beyond
systems modernization, overall business transformation remains a major
challenge. The creation of a CMO position, and the development of a
strategic transformation plan to integrate and guide the department's
people, process, and technology change initiatives, would go a long way
in helping the department meet this challenge.
Mr. Chairman and members of the subcommittee, this concludes my
prepared statement. I would be happy to answer any questions you may
have at this time.
Senator Ensign. I thank all the witnesses for their
testimony. This is, far and away, the most encouraging news
that we have had as far as this subcommittee on this subject
since we have been having these hearings, although the bar was
pretty low before. [Laughter.]
I should not have probably said that last part. I should
have just left a good compliment because we should reward
people with praise when they deserve that praise, and I
certainly think that all of you deserve kudos, job well done,
up to this point. Having said that, we all know the ship is
very, very difficult to turn, and we are just making that first
slow turn, but at least now we are making a slow turn to head
in the right direction.
So I just want you to know Senator Akaka and I on this
subcommittee, while we have been bird-dogging this issue, will
continue to because it is so absolutely critical for the
warfighter and the taxpayer that we get these systems right.
Those taxpayer dollars out there--people are talking how do we
build enough ships, how do we build enough war planes, how do
we equip our warfighters the right way. If budgets are getting
tight, with all of the various things that we are going
through, and the more efficient that the Department of Defense
can use those tax dollars, the better off that we can all be. A
lot of the money that we all know right here does not help any
warfighter. It is just wasted. It is wasted in bureaucratic
nonsense, and we just need better systems so that we are not
wasting that kind of money.
With that as just a quick introduction, let me address a
few questions. Secretaries Krieg and Jonas, while with the
Enterprise Transition Plan the scope is limited and has content
limitations, and under an incremental approach to developing
the architecture, later versions will add the missing scope and
content, if you could maybe just address what are the
Department's plans for achieving full compliance with the
congressional requirements as laid out in the 2005 defense
authorization bill?
Mr. Krieg. I will start. Senator, we decided that the best
thing to do was to get started.
Senator Ensign. Also, how long do you think it might take
to fully comply with the 2005 DOD?
Mr. Krieg. I do not know if I can answer that question
because I do not know if I fully understand the implications of
what complying means, since complying is often in the eyes of
the beholder.
But our notion was to begin to lay a framework and a
structure. We have the overall Enterprise Transition structure
laid out. You can see how the major services fit inside it. You
can see how several of the large agencies fit inside it. There
are more agencies to include, as we go through it. There is
more depth in the linkages as we go through it. But our plan is
that every 6 months, we will bring out a new version that will
continue to add both breadth of content and depth of content.
We felt that was much better than writing you a note saying
give us another 6 months and we will come back to you because
this was the fundamental framework. We saw this as the
beginning point to begin getting everybody to look at it. So I
would say it will probably take several 6-month periods to get
it fully scoped out, to get all of the agencies participating
so that you can see from 360 degrees.
But I will also note that it is very interesting. In
Defense Business Systems Committee meetings, we can now see
senior managers who see the same program from different places.
Nordy Swartz at TRANSCOM will tell you he needs Defense
Enterprise Accounting and Management System (DEAMS), his
financial management system, in order to build the enterprise
that he wants. The Comptroller will tell you DEAMS is one of
the key programs to build a basis to be able to do the kind of
financial management that she needs. The Air Force will tell
you we are relying now on Nordy Swartz to begin to build out
their capability.
So I think my long answer to your short question is we see
the framework. It will take us several 6-month periods to build
it out, but we think the direction is correct.
Ms. Jonas. As I laid out in my short statement, clearly we
owe you the FIAR plan which I indicated we will have to you,
hopefully, next month. We are working on that, working toward
that. So that is a key piece for us.
I would just echo that this Defense Business Management
Council has been a terrific addition to our efforts to get the
Department on track, and it is really taken as a very serious
meeting. That has been so beneficial to all of us, and the
acting Deputy Secretary's leadership on this has been critical.
I think one of the problems faced by the fellow that had my
job previously, Dov Zakheim, was that many of the financial
transactions that we have to have a handle on start in logistic
systems. They start in systems that are owned by somebody else.
So it was kind of difficult for us to be pushing the rest of
the Department. What Ken has outlined for you is a leadership
that has now come to the view that there is substantial
business benefit to implementing these systems. It is not just
for the sake of a clean opinion, and we are seeing improvements
in that area.
I agree with you, sir, on your comments with respect to the
defense budgets. We have to make the best use of every dollar
that we have. I cannot do that as Comptroller without
sophisticated financial tools, and I will not have those until
I can get some of the systems in place that we are trying to
pursue here.
Senator Ensign. My time has expired. I just want to make
one quick comment. It is fairly unrelated to what we are
talking about today, but it is along the same lines of
financial accountability and doing the best with the taxpayers'
dollars. Secretary Krieg, I am going to be asking you to make
sure that Phil Grone meets with us on an issue that the Federal
Government really does not do now. It is starting to happen a
lot more in construction. This has to do with military
construction.
The private sector is starting to use more and more the
idea of construction management and a third party doing
construction management. There is software and it is all
accountable. They are web-based programs. There are several
companies out there right now that produce the software and
there are companies out there that use that software. There are
time lines laid out. Who is supposed to deliver what, when,
where? It would seem to me that all governmental entities could
benefit from this, but obviously, the DOD with the massive
amount that we spend on construction every year and perhaps
even the principles could be transferred over to other areas.
But the beautiful thing about this is that there is already
commercially available software out there, and what I would
like to do is work with the DOD on trying to come up with
legislative language that would require this type of a third-
party entity to be on all the construction projects because for
a very small fee, you can hold down the costs tremendously. It
can all be web-based. Therefore, the accountability is out
there for all of the public to see.
So I look forward to working with you. I just wanted to lay
that out today and let you know that it is an area that we want
to pursue.
Senator Akaka.
Senator Akaka. Thank you very much, Mr. Chairman.
Secretary Krieg and Secretary Jonas, as I indicated in my
opening statement, I am pleased by the work of Mr. Brinkley and
Mr. Modly and what they have done as they took over the
Department's business systems transformation effort. As I also
indicated, I remain concerned that the entire effort appears to
remain dependent on two people.
My question to you is, what steps have you taken or
somebody taken there to empower Mr. Brinkley and Mr. Modly to
ensure that they have the authority that they need to get the
job done? I am asking that question because in the past this
concern by people who have been in these positions has been
they really did not have the authority. So that is my question
to you. What steps have been taken to give them this kind of
authority?
Mr. Krieg. First of all, their authority emanates from the
Deputy Secretary, from me, and from Tina. We spend a lot of
time with them and spend a lot of time with their folks going
through things. So they have a lot of support and a lot of
backing to do what they do. I think, as you noted, the fact
that this exists when it did not exist 6 months ago is a
testament to their ability to use that authority.
Second, I would note that while the two often do feel, I
think, that they are a pair of lone rangers out working
together on hard issues, they will also be the first to tell
you that there are a lot of people in the Department who are
seeing this come together and are bringing their capabilities
and resources together. Part of what we decided we needed to do
was put the formal structures in, so formal structure of the
Defense Business Systems Management Committee, formal structure
of the investment review boards. Tina chairs one. I chair two
of them. David Chu chairs one. So they are integrated into the
approach. The creation of the agency was to formalize
management relationships to continue driving this forward, take
it out of the ad hoc, move it into the formal structure. So I
think what you are seeing is the Department in transition to
institutionalize the approach going forward.
Ms. Jonas. If I could just add to that, Senator Akaka. I am
sure Tom and Paul would be the first to admit they have a
significant team of people behind them. I would love to be able
to submit the names of the people who have been helping put
this effort together. It is not just a two-man show. They would
be the first to admit it because they could not do what they do
without the additional people. David Fisher and Radha Sekar
come to mind. I have mentioned Terri McKay.
But behind Tom, Paul, Terri, and all others are thousands
of dedicated career financial professionals in our area who are
committed to this and have been really waiting for the kind of
leadership we are trying to provide to make the kind of
progress we are making. I think we have a very proud community
of financial professionals in the Department, and your interest
helps us with them. Their morale is hugely boosted when they
know they are making progress. These are things that frustrate
them on a day-to-day basis. So lack of proper controls on
things, wastefulness are all things that pain a lot of people,
and they are all very encouraged, I think, by the work that, as
a team, we have all done to try to get to this point. We have
to carry that through.
We appreciate the support of Congress on this. This is
hugely beneficial to us to sort of charge up our work force on
the need for this.
Mr. Krieg. Can I note one more thing? Congress gave us the
authority, I think in the last National Defense Authorization
Act, to go out and hire highly qualified experts from civilian
life to come in for a limited term, to bring their skills in.
We have hired or are in the process of hiring a number of
people who have real systems integration and real business
systems development experience and 15-20 years of experience in
the private sector into the Government under the highly
qualified expert legislation that you gave us either last year
or the year before. So that has been extremely helpful.
Senator Akaka. I am also, as I mentioned in my statement,
concerned about institutionalizing the process. So my question
to you, if you want to answer both, what additional steps do
you think Congress or the Department should take to
institutionalize the process started by Mr. Brinkley and Mr.
Modly?
Ms. Jonas. I think clearly the establishment of the BTA is
that we are looking for a career professional to ultimately
direct that. Ken talked about Butch Pair who is coming in as a
senior military commander to help carry that along. But I think
really as we make progress, the Department itself, the military
services will start to see the business benefit, the
efficiency, and that will continue to drive a lot of change.
We have focused on a number of things in the financial
area, and let me just give you a small example because it is a
good example. When we started out, we were paying interest
penalties to contractors because we were not paying on time.
That is just a basic waste of funds, and it also irritated the
contractors because they were not getting paid on time. We have
driven that down to next to nothing. It is a savings of just
under $50 million a year just because we have gotten better at
that process. That is one small example of what we have been
able to do.
But the Department is seeing better the benefit of
implementing systems and automating. One of the things we did
on pay recently was we automated some functions which
eliminated 800,000 manual transactions. That is a lot. It means
that we can eliminate the lack of timeliness and inaccuracy and
the rework.
So with the structure that we have put in place, with your
help, the help of this committee specifically, and your
guidance and leadership, we have that in place. We have a
career professional that we are looking for. We have a career
military officer in place. I think we are starting to get some
momentum. We have a plan that can be followed.
Ken, you might want to add, but I just think that it is the
momentum and the success and the results of all this that are
going to be most important to the Department in continuing the
effort.
Senator Akaka. Secretary Krieg, would you have an addition?
Mr. Krieg. The only thing I know is I think you have given
us plenty of authority. We have authority. We need to
implement. So I would say the challenge for the next year, 6
months or a year, is does the performance track against what we
have laid out, does the second iteration of this in 6 months
and the iteration behind that begin to show more. I think we
have the authority. I think you have given us plenty of
authority. We have to execute it.
Senator Akaka. Thank you for your response.
Ms. Jonas. Could I just thank you for one other thing? This
committee, I believe, provided authority to hire Certified
Public Accountants (CPAs), and because of that we have been
able to increase the number of CPAs substantially. We have gone
from 152 to 203 in the Department under me. So the pride, the
professionalism is really important to our efforts. So again,
we thank you for all the things that you have done. You took a
little bit of a cut against our ability to audit in your mark.
We hope you would maybe take a look at that. But we appreciate
all the effort you have made on our behalf. It has made a huge
difference.
Senator Akaka. Thank you.
Mr. Hite. Senator Akaka, if I could add just one point to
that. Frankly, the legislation that this committee has put
through has institutionalized most of these processes, most of
the structures that are in place now. So congratulations on
doing that.
The one area that remains is to what extent are these
Institutional Review Boards (IRBs), these investment review
boards, and this consistent approach to conducting the business
of these IRBs going to be adopted by the military services and
the component defense agencies. I understand the intention is
that that will occur, but that is a to-be-done.
Mr. Krieg. Well, can I note that?
Mr. Hite. Certainly.
Mr. Krieg. In this last review, the Services and the
agencies actually reviewed them before they came to the IRB,
and we are still working on the exact numbers to understand it.
But something north of 40 systems were scrubbed out at the
Service and agency level because they said it does not meet the
requirements of the review. So we put them in the chain of
command in order to make them responsible, not have this be a
centrally managed million dollar level review, but put the
chain of command into it, and then oversee it at the enterprise
level. As soon as we have it, we will submit to you the exact
numbers.
Mr. Hite. I appreciate that comment. That is true. My point
deals more with using a consistent process throughout the
component agencies and the military services. I do not doubt
that reviews were done, and they were done by entities within
those component organizations. Are we using consistent
processes, top to bottom, for making these investment decisions
throughout the Department? That is a to-be-done.
Senator Akaka. Thank you, Director Hite. Thank you, Mr.
Chairman.
Senator Ensign. Thank you.
We will go to Senator Bayh next, just right after I remind
Secretary Krieg that I just asked the staff to write down your
last comment about we have given you plenty authority and now
you just have to do it. [Laughter.]
Mr. Krieg. I am sure I will hear that one again, will I
not? [Laughter.]
Senator Bayh. Are witnesses allowed to amend and revise?
[Laughter.]
I would like to thank all of you for your service.
Secretary Jonas, my questions are going to be, I think,
exclusively directed to you and they have to do with the
Defense Finance and Accounting Service (DFAS) process and the
allocation of additional jobs in Indianapolis vis-a-vis
Cleveland, Ohio.
Lee Krushinski; what role, if any, will he play in making
these decisions?
Ms. Jonas. I have not talked to Lee about it. Zack Gaddy is
the Director of the DFAS. He has been the one that has
exclusively put forward a base realignment and closure (BRAC)
plan.
Senator Bayh. Will he continue to be the one exclusively in
charge of this?
Ms. Jonas. Of course, now that the provisions are accepted
and have been adopted, he will brief me on that plan. I have
not been briefed on the plan yet.
Senator Bayh. That did not respond to my question. Will Mr.
Krushinski play any role in this going forward?
Ms. Jonas. I will have to talk to Zack about it. I will ask
him.
Senator Bayh. So you do not know.
Ms. Jonas. I will find out, sir, and get back with you on
that. Zack Gaddy is the Director of DFAS, and so he is the one
who has laid out the plan.
Senator Bayh. The reason I ask is Mr. Krushinski is from
Cleveland, Ohio, which you probably know.
Ms. Jonas. Actually I did not know that.
Senator Bayh. He is living there. Some of us would find it
difficult to believe he could be completely objective if he is
living in a community and he is making decisions about jobs
being added or not being added in that community.
Ms. Jonas. Yes, I understand, sir. We value, by the way----
Senator Bayh. Again, nothing disparaging about him.
Ms. Jonas. Sure.
Senator Bayh. But human nature being what it is, it would
just be very hard.
Ms. Jonas. Yes. Sir, the BRAC process is very difficult and
it is very tough on the various communities. I am committed to
making sure that, whatever we do, it is objective and fair, and
I think I may have corresponded with you to make sure that we
are doing the right thing by all our DFAS employees. We have
some terrific people, about 2,600 in Indianapolis. We have very
important things there. I have heard from many of your
delegation.
Senator Bayh. We have room for 1,700 more.
Ms. Jonas. I understand, sir, and it is a wonderful place
to live. I am from the Midwest also. But I understand your
concerns.
Senator Bayh. I have a couple other questions here. I think
we want the same things which are objectivity, transparency, we
want what is right for the Department, what is right for the
taxpayers, and not to allow parochial factors or extraneous
factors or, God forbid, political factors to get involved in
these kind of things. As I think we have had a chance to
express before, we just feel the cost of space, the
availability of space--there are a lot of objective factors
that argue in favor of Indiana.
Ms. Jonas. I understand.
Senator Bayh. So forgive us if we are zealous in pointing
some of these things out.
You would agree that a Congressman's position on Central
American Free Trade Agreement (CAFTA), for example, is
something that should have no bearing on DFAS decisions.
Ms. Jonas. I agree with that, yes.
Senator Bayh. Rumors circulate around this town from time
to time about things like that.
Ms. Jonas. What I can promise you is that we will be fair
and objective in our analysis. We want to be fair to the
people. We have wonderful people in DFAS. They have been
improving, as I mentioned. My deputy chief financial officer
came from DFAS, Terri McKay, who is behind me. I am very
committed to this work force. They are a great work force. They
give great value to the Department. They want to continue to
improve. As I say, I think the BRAC implementation will be
difficult. It will be hard on families. It will be hard on
communities. So we want to make sure that we are doing it
objectively, fairly, and I am committed to working with you.
Senator Bayh. I certainly agree with that, and we are both
in agreement that CAFTA should have no bearing on this. Things
get mentioned. I just want to make sure that that has not taken
place. It would probably be above your pay grade anyway.
Ms. Jonas. I think so.
Senator Bayh. I just want to make sure that that has not
happened and will not happen.
Secretary Jonas, I think your position had been, and
understandably, that you did not want to meet with the Indiana
delegation until the process had come to a conclusion, that was
today. When do you think we will have an opportunity to sit
down with you and talk about these things?
Ms. Jonas. I would be happy to come by your office any
time, sir.
Senator Bayh. With our complete congressional delegation?
Ms. Jonas. Absolutely. I would be happy to do that, sir.
Senator Bayh. I think that is all that I have. But again, I
hope you will get back to me on Mr. Krushinski's status.
Ms. Jonas. Certainly, and if there is any concern there at
all, I will take care of it.
Senator Bayh. Well, you can understand that.
Ms. Jonas. Yes, sir, absolutely.
Senator Bayh. I assume that other places would feel the
same way if we had somebody from Indianapolis who was----
Ms. Jonas. Any process has to be perceived as fair, and so
we are committed to fairness and fairness by the work force and
the communities that are involved.
Senator Bayh. Great.
Ms. Jonas. Thank you, Senator.
Senator Bayh. Thank you. Thank you all.
Senator Ensign. I guess this would be a bad time to inform
Senator Bayh that those DFAS jobs are all moving to Nevada.
[Laughter.]
Senator Bayh. Well, we would like to see the criteria, Mr.
Chairman.
Senator Ensign. It was all objective.
I have a question about the BTA for anyone who wants to
jump in, including Mr. Hite, on this. The BTA, as currently
structured, does not have complete representation of key
agencies such as Defense Information Systems Agency (DISA) and
the Assistant Secretary of Defense for Network and Integration
Information. Maybe you can just comment. Are you comfortable
with the lack of representation of such key agencies?
Mr. Krieg. Those individuals are on the Defense Business
Systems Management Committee (DBSMC). So both National
Information Infrastructure (NII) and DISA sit at the table of
the DBSMC.
Senator Ensign. Of the?
Mr. Krieg. Yes. Let me put it in English.
Senator Ensign. That would be appreciated.
Mr. Krieg. You all asked us to have a senior management
group led by the deputy secretary to look at this issue over
time, and that is the DBSMC. That includes me as vice chair,
Tina, all of the people, including DISA and NII, meeting
monthly to oversee the implementation of this. The BTA will do
the day-to-day management and implementation. It will not have
somebody from everywhere. It will not be that large, I hope. It
will be driving the process integrating everybody's activity
and using the DBSMC as its governance council, if you will, and
using our authority to get its work done. So it is not meant to
have everybody in it. I am not trying to make it a little
inner-agency activity in its own right. It is going to have its
own authority and its own activity, and it will work on issues
that pertain to DISA and pertain to the NII.
Senator Bayh. Obviously, you are comfortable with that.
Mr. Hite, any comments that you have on it?
Mr. Hite. Yes, sir. If you look at the way the organization
of BTA has been set up, there are organizational functions
there to support different principal staff assistants in the
Office of the Secretary of Defense like Mr. Krieg. There is not
one to support the Assistant Secretary of Defense for NII. So
that is a missing element within their own organization
structure. That Assistant Secretary, per the legislation, was
to be a member of the DBSMC. It was to be an approval authority
for business systems, which it has been designated by the
Department as being. It was to establish an IRB for those
systems that it is responsible for, which is largely
information technology (IT) infrastructure and information
assurance capabilities. It has not established that IRB, and so
you see an absence of their playing in this from an IRB
perspective and from representation by a function within the
BTA.
Senator Ensign. Okay, the structure may not be there. What
is just your own personal opinion or GAO's opinion on this? Why
do you think that that is not ideal or in the actual
functioning of the BTA?
Mr. Hite. Because the business systems that this
organization is going to be responsible for, whether they be
enterprise-level systems or component level systems, rely on
that IT infrastructure, information assurance capabilities to
execute. They run on the platforms that DISA and the DOD Chief
Information Officer (CIO) are responsible for putting in place.
They are an integral part to acquiring and deploying business
systems. There is a relationship there. There is an absolute,
necessary relationship there that is not explicit in the BTA
currently.
Senator Ensign. Go ahead, Secretary Krieg. I am just asking
the questions.
Mr. Krieg. I understand.
I think what Mr. Hite is referring to--and I will be glad
to work with him and get back to you with other details, but
what he is describing is a physical and virtual infrastructure
that is being built around the Department. Yes, the NII, as the
CIO, sets standards for how communication will take place
around that infrastructure. In my mind, as business managers
and as business systems managers, we are customers of those
kinds of standards as they come out, and they will participate
actively in the work we do, and we will participate actively in
the work they do, both to set up the infrastructure, which is
obviously what they are in the lead of, and to do the
information assurance/information protection role that they
take a lead in.
So, obviously, whatever systems we put in place, we will
have to have the information assurance standards of the DOD.
But I would view we are sort of a customer of their standard-
setting. Now, in this organization all customers participate in
cross-organizational groups to sort through standards, but the
CIO of the NII is an active participant in this work and we
would expect that it will continue to be.
Mr. Hite. We have wholehearted agreement that they should
be an active participant in this. The only issue is whether or
not they are recognized in the proposed structure of the BTA.
They currently are not. But it seems like we have agreement
that they should be.
Senator Ensign. We will look forward to you all working
together and getting back to us on it. How is that? Okay?
Senator Akaka, any other questions?
Senator Akaka. Yes, Mr. Chairman.
I would like to direct this to Director Hite. In the past,
the DOD has offered us financial management plans that did, at
that time, little more than aggregate together programs that
DOD components already had in progress, with little effort to
ensure that these programs would address the underlying
problems in the Department's systems and processes.
My question is, do you believe that the Department has put
in the hard work needed to review individual component plans
and make sure that they are consistent with the DOD
architecture and will provide the Department with the financial
and business management information that it needs? Do you
believe the Department has put in that what I call hard work
needed?
Mr. Hite. Two comments on that. With respect to the
financial management improvement plans that Ms. Jonas
mentioned--I think she referred to it as the FIAR plans--that
plan is due out, I believe, in December. So we have not looked
at it. So we do not have any comments at this time on that
particular plan.
But I can tell you, having looked at the architecture and
the associated transition plan, that there is capability
designed into the architecture to promote, for example,
financial management-related data standards and sharing of
financial management information that is accurate, reliable,
and timely. That kind of capability is being built into the
architecture which should drive investments in financial
systems to move them toward that end. So I do see progress in
this area based on the latest version of the architecture and
the transition plan.
Senator Akaka. What do you think more remains to be done to
complete that? That is if the Department is doing it right. How
much more needs to be done?
Mr. Hite. There are additional steps that probably need to
be taken around additional description of certain--well, let me
start over again.
One of the things, obviously, that needs to be done is
having the architecture and having the blueprint for putting in
place financial systems that are going to produce timely,
accurate, and reliable information. But this is just the
beginning. The real work is then taking the blueprint and
translating it into actual, on-the-ground system
implementations that operate and deliver promised capabilities.
That is a huge step. That is the last 23 miles of the marathon
that have to be done. So that is a huge yet-to-be-done. The
architecture will help provide standards and structure around
how that will happen.
Senator Akaka. Secretary Krieg and Secretary Jonas, on BEA,
GAO's testimony indicates that the latest version of the BEA is
an improvement over prior versions and--I am quoting--``may
provide a foundation upon which to build a more complete
architecture.''
However, GAO says that this version only partially
satisfies the requirements of the NDAA for Fiscal Year 2005.
For example, GAO says that the architecture does not provide
all of the standardized definitions that are needed. It fails
to include an as-is environment sufficient to identify
performance shortfalls, and it is not fully integrated with the
Enterprise Transformation plan.
The first question is, do you agree with GAO's assessment
that the architecture delivered on September 30 does not yet
fully meet the requirements set forth in the NDAA for Fiscal
Year 2005?
Mr. Krieg. I think we asserted, when we sent it, that it
was not a finally finished product, that we were not done, and
we would not have any more work to do. Again, I will get back
to you on the exact compliance because I cannot tell you that I
know exactly what it means to comply. That being said, I full-
well admit that there is a lot of work left to be done in the
architecture. But there is a lot of work to be done in
implementation.
Let me for a second, though, kind of push back at work on
the as-is. We spent a long time trying to architect the as-is,
and we tried to architect the as-is down several levels in the
architecture. We found it very hard to say how things related
to each other in the as-is, and we spent a lot of time and
effort trying to explain how things that did not relate to each
other related to each other. I think we found that further
exploration of the as-is to prove that we were not doing well
was a path we did not want to move down, and that is why we
moved to this path.
Now, we will work with GAO to see if there is a common
ground on the as-is, but I will tell you architecting the as-
is--we spent a lot of money doing that. I am not sure what
finishing the architecture for the as-is description will
necessarily add to the other 23 miles of the marathon we have
to run. So we will work that issue, obviously. They will make
comments. We will reply to their comments and we will come back
to you. But that is one concern I have as I look at that
thought.
Ms. Jonas. If I might, could I just address one thing? I
think what we have in place is something that is very important
to me as Comptroller and one of the concerns, I think, that was
originally raised by GAO was the amount of investment. What
systems were we investing in and why? Just as an example--we
were going to address this a little bit earlier--216 systems
were identified for certification this year. There were 182
systems that were certified and approved by the DBSMC, for an
investment value of $3.2 billion. There were 34 systems that
were not certified, and we are not allowing funds to be
obligated per the legislation. So that is very important. There
were another 290 systems that were identified for phase-out.
So I am not a technician or a software engineer. I do not
know all the ins and outs about this Enterprise Architecture
from a technical point of view, but from an investment point of
view, I think we are substantially down the road to where we
need to be to try to control some of the investments, and I
think that is very important.
Senator Akaka. Yes. You continue to mention the systems. In
our discussions before, it was made clear to me that one huge
problem that you have there is the number of systems.
Ms. Jonas. Yes, sir.
Senator Akaka. To try to bring that together is going to be
very difficult, and you are suggesting that too.
I just want to add to my questions. What steps are there
that are left to come about to what we call full compliance
with the statutory requirements?
Ms. Jonas. I think the piece that I think we owe you from
the financial point of view is this FIAR Plan, which is
integrated with the Enterprise Transition Plan. So everything
fits together. You have the BEA, which tells you what your as-
is looks like. You have the transition plan that tells you
where you need to be, and then you have the audit piece that,
from a financial point of view, tells us how it will all work
to get us to resolving those 11 material weaknesses. We hope to
be able to give that to you next month.
Mr. Hite. Senator Akaka, I think what you are looking for
here under this incremental approach to developing the
architecture and transition plan which, by the way, we
support--it is a best practice. We have recommended it. That is
the way you approach these things. Frankly, you do it for major
systems too. You develop them incrementally, but when you
develop something incrementally, you have a plan that says what
is the capability, what are the attributes of those increments
that I am going to deliver by when. So one of the things we
have looked for, relative to incrementally developing this
architecture and incrementally developing this transition plan
is where is that plan that says what these increments are going
to contain. We have not seen that. That is what you are looking
for. That is what you want to know in order to see where we are
going to get to the end here.
Senator Akaka. Mr. Chairman, what Mr. Hite mentioned is one
of the concerns about the transition plan. GAO reports that the
DOD transition plan represents progress and is a foundation
upon which to build and also indicates that limitations appear
to exist with respect to investment-specific performance
outcome measures and metrics that are linked to strategic goals
and outcomes, current resource estimates, and consistency with
the architecture.
I am particularly concerned by GAO's statement that the
plan does not appear to be based on a capability gap analysis
that describes capability and performance shortfalls and
identifies which system investments will address these
shortfalls.
Again, do you agree with GAO's assessment that the
transition plan delivered on September 30 does not yet fully
meet the requirements set forth in last year's NDAA?
Mr. Krieg. Senator Akaka, let me do this. Given that I have
not read, nor has my staff read, the GAO's review of the plan,
I do not want to try and make it up as we are having a
conversation. I would like to go back and thoughtfully look at
what they have said. They have not even delivered us a draft
report yet to be able to comment on it. So I do not want to try
to comment on the details of it until we have had a chance to
go through it, understand what their views are, thoughtfully
represent it, be able to come back to you and come back to them
and say, here is what we agree with, here is what we do not
agree with, here is how we need to resolve this.
What we have tried to do in the other high-risk areas is to
sit down and get a mutual understanding between and among the
OMB, GAO, and DOD as to what we think the right path forward
is, and I would anticipate we will do the same kind of thing
here. We had to get this Enterprise Transition Plan down so
that people would have something to talk about. So we are a
little bit farther behind in the time scale than some of the
other high-risk areas, but I would anticipate that is what we
will do next. So if I may beg your indulgence, let me take
their work, let us go through it and understand it. We will,
obviously, be submitting back to GAO, but we will submit back
to you as well for the record our appraisal of their concerns
and where we think we need to go. Is that fair?
Senator Akaka. Secretary Krieg has spoken. [Laughter.]
Mr. Krieg. It was not that good. [Laughter.]
Senator Ensign. Just one wrap-up question. Best guess
estimate. What year will DOD be able to pass full financial
audits? I want both of you to maybe be on the record on this.
Ms. Jonas. Actually let me talk to this one. [Laughter.]
Senator Ensign. The Comptroller has spoken. [Laughter.]
Ms. Jonas. Wait till you get your budget mark. [Laughter.]
I think one of the problems with the approach previously
was that it was schedule-driven. If you look at most
acquisition programs, one of the larger criticisms you will see
from GAO is that things are schedule-driven as opposed to
event-driven. There was great concern about the missile defense
programs in past years, about them being schedule-driven as
opposed to event-driven.
I cannot tell you today when we will be able to get to that
point. I can tell you that we are closer. I can tell you that I
hope by 2009 we will have addressed a majority of our assets
and liabilities issues. I raised today the Medicare Eligible
Retiree Health Care Fund liabilities. I think we can make
enormous progress on that. We have a qualified opinion on that,
but if we can take these steps that I have outlined and will be
outlined to you and the committee, we will have covered 78
percent of our liabilities.
We are working on, as I mentioned, the military valuation
and other aspects that will allow us to get to 50 percent of
our assets being clean.
So we are working on it that way. We will be able to
provide progress to the committee as we make the incremental
progress. But I cannot tell you right now. So much of what we
do and getting at these 11 material weaknesses depend on the
success of the Department to get at these business systems. If
it were in my control to be able to do this, we would have done
it.
Senator Ensign. That is one of the reasons I wanted
Secretary Krieg to weigh in as well.
Ms. Jonas. Okay. We will let him pipe in, but that is what
I would say.
Mr. Krieg. I will disappoint you terribly by not giving you
a date.
But let me tell you something I see happening because of
the partnership we have going. I have several defense agencies
that report to me, and the defense agency managers come in
talking about getting to an auditable set of books not for the
sake of the auditable set of books, but because they want to
have the business management tools to understand what they need
to do and how they need to make changes. The reason I note that
is I think that is a culturally important step to take that the
business owners are now increasingly owning getting to
financial visibility because they want to run the business, not
because someone tells them they need to have a clean audit.
I cannot give you a date, but I think that is a huge change
in the way senior management is looking at the problem.
Senator Ensign. I actually would have been disappointed if
you would have given me a date because it would have been
wrong, and that would have been the first thing because I do
not know that there is a way to predict it.
I think you are exactly right. I think that it is a
cultural--that the Services and the service chiefs and
everybody have to buy in that this is not for bean counters,
that this is not a bean-counting exercise, that this is
actually practical tools that can actually make them have more
dollars to do the things that they want to do and also be
accountable to the taxpayers so everything is out in the open.
That is the purpose for all of this.
I am not one of those people that you just have systems in
place just so you can check things off. That is not the purpose
for doing this. The purpose for doing this is to ensure that
our warfighter has the resources that they need and our
taxpayer feels comfortable that we are using their money in the
best possible way. That is the purpose for doing these.
I want thank you. I think it has been a very, very
productive hearing. We look forward, once again, to working
with you between now and the next time we do these hearings.
One last comment. Obviously, you saw the Byrd amendment
yesterday. We will be following that very closely to find out
if this continues to have progress. I will fight to make sure
that you are allowed to go forward, and if not, then we may
take a different route. But we will look forward to working
with GAO, as well as the DOD, on that particular issue as we go
forward.
So thank you all very much for your excellent testimony.
The meeting is adjourned.
[Questions for the record with answers supplied follow:]
Questions Submitted by Senator Daniel K. Akaka
REVIEW AND APPROVAL OF BUSINESS SYSTEM INVESTMENTS
1. Senator Akaka. Secretary Krieg and Secretary Jonas, the
Department of Defense states that it has adopted a ``tiered
accountability'' approach to system investment review, certification,
and approval. Have the Department's military services and defense
agencies established investment review structures and processes
consistent with those at the Office of the Secretary of Defense level
as part of this approach?
Mr. Krieg. The Department adopted and successfully implemented the
tiered accountability approach for Business System Investment reviews.
Under this approach, program managers submit required certification
documents to their designated pre-certification authority (PCA). For
programs that are Service specific, the PCA resides in each respective
Service. The PCA has the responsibility to review the submission on
behalf of the Service and if they approve the effort, they prepare a
certification recommendation and forward it to the appropriate Office
of Secretary of Defense (OSD) level Investment Review Board (IRB). If
the IRB approves the investment, then the OSD Certification Authority
refers the investment to the Defense Business Systems Management
Committee (DBSMC) for final approval.
Due to the pre-certification requirement mentioned above, Services
and defense agencies have processes and structures in place to review
programs before they come forward to an OSD IRB. This allows for
``tiered'' review by the Service or defense agency before the OSD
review. The PCA is the individual accountable in the Service or defense
agency for the decision to submit the package into the OSD review
process. In some cases, after conducting their own pre-certification
review, Services or defense agencies have elected not to forward
systems to OSD because they were duplicative or merited further
examination of capabilities.
Ms. Jonas. Yes, in accordance with the Deputy Secretary of Defense
memorandum dated March 19, 2005, subject: ``Delegation of Authority and
Direction to Establish an Investment Review Process for Defense
Business Systems,'' DOD Services and agencies have established PCAs and
Investment Review processes. PCAs are headquarters-level approval
authorities who are assigned accountability for business systems
investments.
2. Senator Akaka. Secretary Krieg and Secretary Jonas, when will
this be accomplished?
Mr. Krieg. In accordance with the Deputy Secretary of Defense
memorandum dated March 19, 2005, subject: ``Delegation of Authority and
Direction to Establish an Investment Review Process for Defense
Business Systems,'' DOD Services and agencies have established PCAs and
Investment Review processes.
Ms. Jonas. This has already been accomplished. As of June 2, 2005,
the DOD has adopted a ``tiered accountability'' approach to investment
review, certification, and approval as required by the Investment
Review Concept of Operations (CONOPs). A list of DOD Service and agency
PCAs is attached.
----------------------------------------------------------------------------------------------------------------
PCA Name
Component ------------------------------------------------------------ Honorific/Title
First Middle Initial Last
----------------------------------------------------------------------------------------------------------------
Air Force....................... William........... T................. Hobbins........... Lieutenant General
Army............................ Gary.............. L................. Winkler........... Principal
Director,
Governance,
Acquisition, and
Chief Knowledae
Office
Navy............................ David............. M................. Wennergren........ Chief Information
Officer
CPMS............................ Janet............. ................ Hoffheins......... Deputy Director,
HR Automated
Systems
DFAS............................ Audrey............ ................ Davis............. Chief Information
Officer
DISA............................ John.............. ................ Garing............ Director for
Strategic
Planning and
Information
DISA............................ Diann............. ................ McCoy............. Component
Acquisition
Executive
DISA............................ Jimaye............ ................ Sones............. Chief Financial
Executive
DLA............................. Mae............... ................ De Vincentis......
FMTT............................ Christine......... ................ Wenrich...........
MDA............................. James............. E................. Armstrong, Jr..... Dr./Chief
Information
Officer
TRANSCOM........................ Paul.............. F................. Capasso........... Brigadier General
TRANSCOM........................ Virginia.......... L................. Williamson........ Alternate PCA
(TRANSCOM)
----------------------------------------------------------------------------------------------------------------
______
Questions Submitted by Senator Bill Nelson
MISREPRESENTING FUNDS
3. Senator Bill Nelson. Secretary Jonas, a recent Defense Criminal
Investigative Service (DCIS) investigation at U.S. Special Operations
Command (USSOCOM) established that in 2002 the command's budget
personnel, at the request of the OSD Comptroller's office,
misrepresented the command's annual budget request by $20 million in
order to ``hide'' or ``park'' funds that would be used by DOD for
unspecified purposes later. Statements by DOD and USSOCOM budget
professionals to DCIS investigators indicated that ``hiding'' or
``parking'' money in the Department's budget request is a common and
accepted practice. What is your interpretation of law with respect to
willfully misrepresenting budget numbers or justification in the annual
DOD funding request to Congress?
Ms. Jonas. Federal law makes it unlawful to knowingly and willfully
submit to Congress information relating to the Department's budget
request that is materially false. The Department makes every attempt to
ensure that the information we provide to Congress in connection with
the budget request is accurate in all respects.
4. Senator Bill Nelson. Secretary Jonas, what is your
interpretation of DOD regulation, directive, and policy with respect to
willfully misrepresenting budget numbers or justification in the annual
DOD budget estimate submission or program objective memorandum?
Ms. Jonas. The Department justifies its budget requests in
accordance with the procedures prescribed by the OMB in OMB Circular A-
11. In addition, the Department has promulgated several directives and
instructions defining its Planning, Programming, Budgeting, and
Execution System (PPBES). The Department's internal budget process
includes numerous reviews at multiple levels to ensure that all budget
requests are accurate and complete.
5. Senator Bill Nelson. Secretary Jonas, what specific action are
you taking to determine the scope of the practice of misrepresenting
the numbers or justifications in the Department's budget request?
Ms. Jonas. It is my understanding that the Department of Defense
Inspector General (DODIG) has reopened its audit regarding the matter.
Once the DODIG has issued a report and made its recommendations, the
Department will implement any recommendations resulting from the audit
that will improve our process.
6. Senator Bill Nelson. Secretary Jonas, what specific action are
you taking to uncover and correct instances of misrepresenting numbers
or justifications under current appropriated programs?
Ms. Jonas. The DODIG is required to audit and investigate programs
and activities of DOD organizations. The DODIG is currently looking
into allegations of inappropriate budget practices at SOCOM. Once the
DODIG has issued a report and made its recommendations, the Department
will implement any recommendations resulting from the audit that will
improve our process.
7. Senator Bill Nelson. Secretary Jonas, what specific actions are
you taking to ensure that misrepresenting budget request numbers or
justifications will not be tolerated in the annual Department budget
request to Congress?
Ms. Jonas. The Department's budget justifications are reviewed for
compliance with OMB Circular No. A-11.
A review of all budget justifications submitted by the Services and
DOD agencies is conducted prior to submission to the OMB and Congress.
______
Questions Submitted by Senator Evan Bayh
DEFENSE FINANCE AND ACCOUNTING SERVICE
8. Senator Bayh. Secretary Jonas, please provide details regarding
the timetable for making final decisions regarding Defense Finance and
Accounting Service (DFAS) consolidation, for implementing these
changes, and where this process stands today.
Ms. Jonas. The draft DFAS Base Realignment and Closure (BRAC)
Business Plan was submitted to OSD BRAC Office on November 21, 2005,
for review and comment. If approved, implementation will begin in
January 2006. However, the availability of BRAC funding will influence
the final implementation schedule.
9. Senator Bayh. Secretary Jonas, we know the floors set by the
BRAC Commission. What is the currently available capacity of each DFAS
location to go above these floors?
Ms. Jonas. Capacity exists at Cleveland, Columbus, and Indianapolis
to meet the floors set by the BRAC Commission. Capacity, without
construction at Cleveland is 2,262 full time equivalents (FTEs),
Columbus is 2,930 FTEs, and Indianapolis is 3,800 FTEs. Minor
renovation projects are needed to meet the mandated floors at Limestone
of 600 FTEs and at Rome of 1,000 FTEs.
10. Senator Bayh. Secretary Jonas, what criteria are being used to
determine the future size and functions of each DFAS location?
Ms. Jonas. The following criteria were used to determine the
location and size of functions:
1. Achieve economies of scale using the existing workforce by
aligning work where it is currently being performed.
2. Ensure backup exists of critical functions to mitigate
risks.
3. Optimize savings opportunities.
4. The pace of implementation should address high attrition
rates.
5. Meet BRAC 2005 staffing floors at the five sites:
a. 1,500 FTEs at Cleveland, OH.
b. 2,064 FTEs at Columbus, OH.
c. 2,632 FTEs at Indianapolis, IN.
d. 600 FTEs at Limestone, ME.
e. 1,000 FTEs at Rome, NY.
11. Senator Bayh. Secretary Jonas, what data (surveys, etc.) are
available regarding the preference of DFAS employees for relocation to
specific sites?
Ms. Jonas. None. All DFAS employees will be offered the option to
relocate to a continuing site and will receive Permanent Change of
Station reimbursement.
12. Senator Bayh. Secretary Jonas, does the DOD have any
information on the cumulative impact that loss of experience will have
on DFAS operations?
Ms. Jonas. Historically, approximately 10-20 percent of the
workforce will relocate as workload transitions. To mitigate the impact
of the loss of experience, DFAS has developed a risk management plan
that includes mitigation strategies such as advanced hiring, telework,
workforce augmentation, and parallel operations during migration of
customer work. These strategies have been successfully used during
previous workload realignments.
13. Senator Bayh. Secretary Jonas, are the 800 jobs that Director
Gaddy has announced for DFAS-Indianapolis new jobs?
Ms. Jonas. The projected jobs are additional permanent positions.
14. Senator Bayh. Secretary Jonas, would the 800 new jobs be a
permanent addition to the existing jobs, would they simply replace jobs
that may be slated for elimination, or are they expected to be
eliminated soon after they are added?
Ms. Jonas. The projected jobs are additional permanent positions.
[Whereupon, at 3:17 p.m., the subcommittee adjourned.]