- [H.A.S.C. No. 112-83]DOD'S ENTERPRISE RESOURCE PLANNING (ERP) SYSTEM IMPLEMENTATION EFFORTS

[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]

[H.A.S.C. No. 112-83]

DOD'S ENTERPRISE RESOURCE PLANNING
(ERP) SYSTEM IMPLEMENTATION EFFORTS

__________

HEARING

BEFORE THE

PANEL ON DEFENSE FINANCIAL MANAGEMENT

AND AUDITABILITY REFORM

OF THE

COMMITTEE ON ARMED SERVICES

HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

FIRST SESSION

__________

HEARING HELD

OCTOBER 27, 2011

[GRAPHIC] [TIFF OMITTED] TONGRESS.#13

U.S. GOVERNMENT PRINTING OFFICE
71-454 WASHINGTON : 2012
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing Office,
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center, U.S. Government Printing Office. Phone 202�09512�091800, or 866�09512�091800 (toll-free). E-mail, [email protected].

PANEL ON DEFENSE FINANCIAL MANAGEMENT
AND AUDITABILITY REFORM

K. MICHAEL CONAWAY, Texas, Chairman
SCOTT RIGELL, Virginia ROBERT ANDREWS, New Jersey
STEVEN PALAZZO, Mississippi JOE COURTNEY, Connecticut
TODD YOUNG, Indiana TIM RYAN, Ohio
Paul Foderaro, Professional Staff Member
William Johnson, Professional Staff Member
Lauren Hauhn, Research Assistant

C O N T E N T S

----------

CHRONOLOGICAL LIST OF HEARINGS
2011

Page

Hearing:

Thursday, October 27, 2011, DOD's Enterprise Resource Planning
(ERP) System Implementation Efforts............................ 1

Appendix:

Thursday, October 27, 2011....................................... 23
----------

THURSDAY, OCTOBER 27, 2011
DOD'S ENTERPRISE RESOURCE PLANNING (ERP) SYSTEM IMPLEMENTATION EFFORTS
STATEMENTS PRESENTED BY MEMBERS OF CONGRESS

Andrews, Hon. Robert, a Representative from New Jersey, Ranking
Member, Panel on Defense Financial Management and Auditability
Reform......................................................... 2
Conaway, Hon. K. Michael, a Representative from Texas, Chairman,
Panel on Defense Financial Management and Auditability Reform.. 1

WITNESSES

Fanning, Eric, Deputy Under Secretary of the Navy and Deputy
Chief Management Officer, U.S. Navy............................ 6
Khan, Asif A., Director, Financial Management and Assurance,
Government Accountability Office............................... 9
Lewis, Mark, Deputy Chief Management Officer, U.S. Army.......... 4
McGrath, Hon. Elizabeth, Deputy Chief Management Officer, U.S.
Department of Defense.......................................... 3
Tillotson, David, III, Deputy Chief Management Officer, U.S. Air
Force.......................................................... 8

APPENDIX

Prepared Statements:

Conaway, Hon. K. Michael..................................... 27
Fanning, Eric................................................ 47
Khan, Asif A................................................. 62
Lewis, Mark.................................................. 38
McGrath, Hon. Elizabeth...................................... 29
Tillotson, David, III........................................ 54

Documents Submitted for the Record:

``Best Practices in Data Conversion,'' by the DOD Office of
the Deputy Chief Management Officer........................ 83

Witness Responses to Questions Asked During the Hearing:

Mr. Andrews.................................................. 99
Mr. Young.................................................... 99

Questions Submitted by Members Post Hearing:

Mr. Conaway.................................................. 103
DOD'S ENTERPRISE RESOURCE PLANNING (ERP) SYSTEM IMPLEMENTATION EFFORTS

----------

House of Representatives,
Committee on Armed Services,
Panel on Defense Financial Management and Auditability
Reform,
Washington, DC, Thursday, October 27, 2011.
The panel met, pursuant to call, at 8:00 a.m. in room 2212,
Rayburn House Office Building, Hon. K. Michael Conaway
(chairman of the panel) presiding.

OPENING STATEMENT OF HON. K. MICHAEL CONAWAY, A REPRESENTATIVE
FROM TEXAS, CHAIRMAN, PANEL ON DEFENSE FINANCIAL MANAGEMENT AND
AUDITABILITY REFORM

Mr. Conaway. Well, good morning, everybody. We will go
ahead and start. The clock on the back of the wall has
officially gone to 8:00. I would like to welcome each of our
witnesses to the hearing this morning on Enterprise Resource
Planning Systems, the implementation efforts. In all of our
previous hearings, regardless of topic, ERP [Enterprise
Resource Planning] systems are always an integral part of the
discussion.
Whether the discussion is centered around the skills needed
within the management workforce, accountability of assets or
the controls needed to prevent potential Antideficiency Act
violations. So it is fitting that the panel today hold a
separate hearing on the Department of Defense Enterprise
Resource Planning Systems.
Today we will examine the scope of the ERP efforts and the
status of implementation of the ERPs and their ability to
improve the Department's financial management. According to DOD
[Department of Defense], the successful implementation of the
ERPs is a key element to addressing longstanding weaknesses in
financial management and achieving audit readiness. Yet, GAO
[Government Accountability Office] has reported over the years
that the Department has not effectively employed acquisition
management controls to ensure the ERPs deliver the promised
capabilities on time and within budget.
The GAO has also reported that delays in the successful
implementation of ERPs have extended the use of existing
systems and continue the funding of these legacy systems longer
than was planned. The Department of Defense OIG [Office of
Inspector General] noted in its testimony before the Panel in
September, that the development, implementation and
effectiveness of these ERP systems are questionable at this
point.
With billions of taxpayer dollars at stake, it is critical
that the Department of Defense take the necessary actions to
ensure that ERPs are successfully implemented. The Secretary of
Defense directed the Department to move up the audit readiness
date of the statement of budgetary resources from 2017 to 2014.
However, certain of the ERPs are not scheduled to be fully
deployed until near or during 2017.
In order to meet the 2014 deadline, will the Department
move up the ERP deployment dates, make enhancements to the
existing legacy systems, improve manual controls or some
combination of the three? Also will the DOD need additional
resources for these efforts? We will be interested in getting
some insight today for the Department of Defense's approach to
accomplishing this goal.
One of the key responsibilities of the Department of
Defense deputy CMO [Chief Management Officer] and the military
department CMOs and their respective deputies is to support
business system modernization efforts in a manner that
synchronizes these efforts with the financial improvement
activities of the reporting entities. This becomes all the more
important as DOD works toward achieving audit readiness of the
SBR [Statement of Budgetary Resources] by 2014, while also
keeping on track to achieve auditability for the full set of
financial statements by 2017.
I want to thank our witnesses for coming today. We have
with us today the Honorable Elizabeth McGrath, Deputy Chief
Management Officer, Department of Defense, Mark Lewis, Deputy
Chief Management Officer of the United States Army, Eric
Fanning, Deputy Undersecretary of the Navy and Deputy Chief
Management Officer for the United States Navy, David Tillotson,
III, Deputy Chief Management Officer for the United States Air
Force and Asif Khan, Director, Financial Management and
Assurance, GAO.
Rob, any comments you would like to make before we start?
[The prepared statement of Mr. Conaway can be found in the
Appendix on page 27.]

STATEMENT OF HON. ROBERT ANDREWS, A REPRESENTATIVE FROM NEW
JERSEY, RANKING MEMBER, PANEL ON DEFENSE FINANCIAL MANAGEMENT
AND AUDITABILITY REFORM

Mr. Andrews. Well good morning, Mr. Chairman. Good morning
to my colleagues and to the panel this morning. We really
appreciate the seriousness and devotion that members of this
panel have given to this joint enterprise. You have all
contributed in a very valuable way already and we are anxious
to hear from you this morning.
The problem with the enterprise systems is the best case
study as to why we need auditable financial statements. We
spend a lot of money, a lot of time, very mixed results and we
really can't quite figure out why. Now people have theories and
they have ideas, but one of the reasons we can't really quite
figure out why is because the data that would lead us to the
conclusions as to why we have had trouble, aren't themselves
reliable because we don't have a system that can generate the
right data.
It is a classic chicken-and-egg problem. You can't figure
out why we couldn't get the enterprise systems right until you
have a system that tells you what happened. And you can't have
a system that tells you what happened until you get the
enterprise systems right. So I am glad that we have identified
the problem. I am quite confident that the men and women that
we have working on solving the problem have very high skills
and very good intentions and are very devoted to the cause.
So we are very glad to hear from you this morning, but
several of the panel members have said a number of times, how
do I explain to people back in my district what we are trying
to do here and what the problem is? And the way I look at
boiling this down to its most simplistic form is that over the
last decade or so, I guess longer, the taxpayers have spent
billions of dollars to collapse dozens or hundreds of systems
that aren't compatible into 10 that--I guess it is 10, that
work.
And we are not quite there yet. And there are a lot of
bumps in the road and they would be astonished at that. They
wouldn't be very happy about that. And I don't think anybody
here is either. So, our collective mission is to figure out
where we are, how to get to where we need to be and I think our
job as members of Congress is to give you the tools and
resources to get you there.
So I look forward to hearing the testimony this morning and
asking questions. And I thank you Mr. Chairman for calling the
hearing.
Mr. Conaway. Thanks, Rob. I appreciate that.
Ms. McGrath. Your opening statement.

STATEMENT OF HON. ELIZABETH MCGRATH, DEPUTY CHIEF MANAGEMENT
OFFICER, U.S. DEPARTMENT OF DEFENSE

Ms. McGrath. Good morning. Chairman Conaway, Congressman
Andrews, other members of the panel, thank you for the
opportunity to return to this panel and discuss the role of the
Enterprise Resource Planning Systems in achieving our audit
readiness goals at DOD. Secretary of Defense Panetta recently
highlighted the importance of auditability for the Department.
He discussed it earlier this month in his testimony before
the full House Armed Services Committee, also in his October
13th policy memorandum to the Department, which mandated the
acceleration of certain aspects of the Department's Financial
Improvement and Audit Readiness plan in order to ensure we
achieve the Congressionally mandated audit of 2017.
He noted auditability is a goal every commander, manager,
functional specialist must understand and embrace to improve
efficiency and accountability. DOD has made substantial
progress over the last 2 years to improve its business
processes, financial controls, workforce and defense business
systems. But a significant amount of work still lies ahead.
Implementation of systems to include ERPs is an important
component of our progress as the chairman noted. As Secretary
Panetta said, while the department systems do tell us where we
are spending taxpayer funds, we do not yet have the details and
controls necessary in place to pass an audit. The Secretary's
mandate underscores the partnership between the Under Secretary
of Defense, Comptroller's office, my office, the military
department Chief Management Officers and the Department's other
functional business owners.
All of which will be required to achieve our audit goals.
We consistently work together to ensure that we are effectively
synchronizing our broader business improvement efforts with the
Department's audit readiness goal. It is a part of our broader
business conversation. By improving our business systems
environment by implementing ERPs, modernizing legacy systems
when there is a business case that supports it and certainly
sunsetting legacy systems not aligned with our business
objectives.
The design principles within ERP directly enable key
elements of auditability such as, enforcing process and
execution standardization among implementing organizations,
managing consolidated business data into a single repository
that allows centralized access control and handles transactions
from an end-to-end perspective. As Congressman Andrews noted,
it is all about the data.
Enabling traceability of transactions, documenting
repeatable processes and procedures and demonstrating
compliance with laws, regulations and standards, all part of a
broader business conversation end-to-end processes which
systems play a role. Implementing ERPs requires sustained
commitments from our senior leaders and often requires--I would
say always requires change of processes and policies to achieve
successful implementation.
We have placed significant emphasis on orienting our
business environment, utilizing our business enterprise
architecture, defining end-to-end processes that support our
audit goals like procure-to-pay and budget-to-report. We are
improving the usability implementation of the architecture
because if an architecture isn't usable, nobody will use it.
Very important for us, again documenting the processes,
understanding the standards and internal controls. Finally we
are also improving our approach to acquiring and implementing
our business IT [Information Technology] systems, our new
acquisition model for defense business systems called the
Business Capabilities Lifecycle is in use today for a growing
number of programs across the Department.
It aligns requirements, investment and acquisition
processes under an integrated government framework and focuses
on incremental delivery of capability within 12 to 18 months.
Achieving auditability across the Department not only requires
successful modernization of systems, but that we apply a
consistent level of process controls across our organization
and functional areas.
DOD leadership understands this and is committed to
achieving our audit goal. Thank you again for having me here
today.
[The prepared statement of Ms. McGrath can be found in the
Appendix on page 29.]
Mr. Conaway. Thanks, Ms. McGrath.
Mr. Lewis.

STATEMENT OF MARK LEWIS, DEPUTY CHIEF MANAGEMENT OFFICER, U.S.
ARMY

Mr. Lewis. Chairman Conaway, Congressman Andrews, members
of the panel, thank you for the opportunity to testify today
regarding the Army's efforts to implement its Enterprise
Resource Planning Systems and other actions related to audit
readiness. This is an important topic with regard to the
Department of Defense's effort to achieve auditability by FY
[fiscal year] 2017.
And I am honored to have that opportunity to represent the
Army before your panel. The Army believes it has set the
conditions towards achieving auditability. At this point we
believe that the Army will be able to comply with both the
interim target, specified in the fiscal year 2010 National
Defense Authorization Act which states for 2015 and to assert
audit readiness by fiscal year 2017.
We have increased leader involvement and emphasis from the
Secretary of Defense through the Secretary of the Army and the
Under Secretary of the Army in his role as the Chief Management
Officer. The Secretary of Defense most recently indicated his
intent with his 13 October memo directing the Department to be
able to assert audit readiness for the statement of budgetary
resources by 2014.
We are currently in the 60-day period for review of our
plans as he directed. The Army has implemented enterprise
governance over business processes and systems involving all
the key members of the Army staff and Army commands. These
forums bring together the experts and manpower, personnel,
logistics, facilities and intelligence in addition to, of
course, the financial management and comptroller personnel and
functions.
Under the guidance and direction provided by the assistant
Secretary of the Army for financial management and comptroller,
we have created and implemented the Army's Financial
Improvement Plan, FIP, which is the Army's roadmap to audit
readiness and ensures alignment with the OSD [Office of the
Secretary of Defense] Financial Improvement and Audit
Readiness, FIAR, Guidance.
The Army is developing and fielding four ERPs which will
greatly support audit readiness as has been mentioned, by
providing traceability of actions from source to statement
using documented and disciplined processes and demonstrating
compliance with laws, directives and standards. Using our
business governance forms, we are conducting end-to-end process
mapping and continuous process improvement to optimize our
business processes and identify gaps and redundancies in our
systems.
These actions are continuous and ongoing efforts. With your
support and assistance, the Army has provided adequate funding
to our ERPs and remaining legacy systems for development and
sustainment. Finally, we have established a culture with
ongoing training in business case management, cost containment
to help ensure that we use our resources efficiently and
effectively. Good stewardship of the taxpayers' dollars is
nonnegotiable.
Being financially auditable requires input from many
financial feeder systems. However the ERPs are the glue that
supports the financial auditability.
GFEBS [General Fund Enterprise Business System] will
consolidate the management and reporting of our general funds
and assets across the Army enterprise. GFEBS is on track to be
deployed to 160 locations later this year and will replace over
106 legacy systems when they are audited and certified for
removal. GFEBS also provides for real property accountability.
Next, the global combat systems support Army. GCSS [Global
Combat Support System]-Army is presently undergoing initial
operating tests at Fort Bliss, Texas. This is the first
location where both GFEBS and GCSS-Army are deployed jointly
and offers us the opportunity to test the financial interfaces
between the two ERPs in a live environment.
GCSS-Army contains the master database for Army equipment
and will enhance asset transparency and visibility. A key
aspect of our 2017 auditability goals. Right now initial
indications from that test, things are going as expected, well.
LMP [Logistics Modernization Program] is fully deployed
within the Army material command. In December of this year, we
will complete the software upgrades to LMP that will update the
financial functionality and bring that system into compliance
with FISCAM [Federal Information System Controls Manual]
standards.
LMP contains the ledger for the Army working capital and
should be for an independent audit evaluation later this year.
Finally the Integrated Personnel Pay System-Army, IPPS-
Army, our integrated personnel and pay system of the future is
in its beginning stages.
The first increment is to create a consolidated data base
that brings together the military personnel information from
our active duty, United States Army Reserve and Army National
Guard soldiers. This database will be the single consolidated
source for military pay and personnel and will be delivered by
2013, the database.
While IPPS-Army will continue to be developed for several
years when fully deployed, it will be able to calculate
military pay directly.
For my part, I bring over 40 years of continuous service to
the United States Army both as a commissioned officer and now
as a senior civilian for 10 years. I have had numerous staff
jobs on the Army and Deputy G-1, Deputy G-3 and now the DCMO
[Deputy Chief Management Officer].
I look forward to your questions. Thank you very much.
[The prepared statement of Mr. Lewis can be found in the
Appendix on page 38.]
Mr. Conaway. Thank you, Mr. Lewis.
Mr. Fanning.

STATEMENT OF ERIC FANNING, DEPUTY UNDER SECRETARY OF THE NAVY
AND DEPUTY CHIEF MANAGEMENT OFFICER, U.S. NAVY

Mr. Fanning. Mr. Chairman, Congressman Andrews, members of
the Panel, thank you for the opportunity to discuss the role of
ERPs and supporting the Department of the Navy's efforts to
achieve financial auditability. I am particularly honored to be
testifying before the committee where I started my professional
career almost 20 years ago to the day.
Financial auditability is one of the top priorities the
Department has set out and the Department of the Navy's
strategic objectives signed out annually by the Secretary, the
Commandant of the Marine Corps and the Chief of Naval
Operations.
Auditability is also one of the four main focus areas of
the Department's business transformation plan which is
administered by my office. And as Ms. Commons, our Assistant
Secretary for Financial Management and Comptroller has already
testified, auditability is a key part of the performance
measures for any leader who has any role, large or small, in
achieving this goal including my boss, the Under Secretary of
the Navy.
The Department of the Navy's financial improvement plan
timeline is also in compliance with Secretary Panetta's
directive to accelerate a validated statement of budgetary
resources. The Department had already planned to assert its SBR
by the end of fiscal year 2013. We are currently reviewing our
strategy to see where we can accelerate our plan in order to
mitigate any risk resulting from the new schedule.
Of course we are here today to answer questions on how our
investments in ERPs are supporting our efforts to achieve
auditability. While the Department is committed to achieving
auditability in a legacy environment, deployment of ERPs makes
this goal easier to reach, more affordable and is critical to
sustaining any audit ready environment.
The Department has three IT efforts that contribute to
audit readiness success. The first, Navy ERP provides improved
financial discipline, improved accuracy with automated entry of
key data fields and an audit trail associating users and
electronic documents with transactions. It provides a single
system for budgeting, funds availability, and execution across
all major acquisition commands.
In addition to financial controls, it results in single
data source with common data structures, standardized processes
and improved compliance across these commands.
The second is our future personnel and pay solution which
is on track to better support our financial improvement plan.
After reset the effort in order to reprioritize the business
problems it was developed to fix. Instead of a big bang
solution delivering the long term future date we have reworked
the plan to develop incremental capabilities so as to address
our most pressing problems first.
Financial improvements are in the highest priorities in
this new construct and the financial management community is
much more integrated into this effort than it was before.
The third is the Marine Corps global combat support system.
It is currently deployed to 7700 users and is demonstrating
business value in several areas. For example, the time to first
supply status, the primary measure for logistics responsiveness
has been reduced from over 24 hours to an average of 1.5 hours.
Additionally, order shipment times have been reduced by
29.1 percent and maintenance repair cycle time has been reduced
48.5 percent.
But systems and technology alone, of course will not get us
to clean audit statements. It is just as easy to automate bad
processes as good ones and the work of improving our processes,
standardizing our data and enforcing our controls is where we
will meet success. And it is in these efforts that the DCMOs
and the comptrollers are most closely aligned. Those goals the
financial management community needs to accomplish in order to
achieve financial improvement are in complete sync with the
steps the business transformation community needs to take in
order to make our business operations as efficient and
effective as possible in support of the warfighter and as good
stewards of taxpayer dollars.
Thank you, and I look forward to your questions.
[The prepared statement of Mr. Fanning can be found in the
Appendix on page 47.]
Mr. Conaway. Thank you, Mr. Fanning.
Mr. Tillotson.

STATEMENT OF DAVID TILLOTSON III, DEPUTY CHIEF MANAGEMENT
OFFICER, U.S. AIR FORCE

Mr. Tillotson. Thank you, Mr. Chairman, Mr. Andrews and
members of the panel. It is a privilege to be here today to
talk to you about the Army or pardon me, the Air Force's ERP
systems--I will talk about the Army's systems, too--and the
impact on our progress towards auditability and financial
readiness.
The implementation of the enterprise resource programs,
which my colleagues have already discussed, is an essential
implementation step in achieving the audit readiness goals.
Having said that, the Air Force leadership recognizes that
IT systems alone do not actually get us to audit readiness. We
also have to address management challenges, process controls
and the kind of things Mr. Chairman, you addressed in your
opening question.
For the Air Force in particular, that will become a very
relevant question because as this panel is well aware, the Air
Force schedules for achieving audit readiness tended toward the
end of the objective period.
So the goal that Secretary Panetta has recently set will
cause us to fundamentally relook at our strategies going
forward. And the result of that will be to not only consider
what we are doing with the ERP deployments but we are going to
have to go back and reconsider legacy remediation as well as
increased process controls. And that work is under way as part
of the 60-day planning cycle that the Department's--the DOD
Comptroller has laid in place.
I have submitted to the panel my written testimony a
summary of the three Air Force ERPs that span financial supply
chain logistics and human resource management, those systems
are the Defense Enterprise and Accounting Management Systems,
DEAMS, the Expeditionary Combat Support System, ECSS, and Air
Force Integrated Personnel and Pay System.
DEAMS will replace nine legacy systems. It is operational,
at Scott Air Force Base. In its first instance, it has actually
achieved its second end-of-year closeout, much better than I
will report from the previous years.
More importantly from a mission execution point of view and
a benefits point of view it has begun to point to the kinds of
things that that GAO has suggested we should be finding all the
time as we improve audit controls. We have reduced our interest
penalty payments which were in fact substantially reduced
previously, but we have maintained that record with the new
deployment. More importantly, we have highlighted overaged,
unmatched disbursements and delinquent account receivable, all
of which was good financial management practice and would
improve cash flow within the Department so we are seeing the
benefits at least at that base and certainly to expand that out
to make that more significant.
ECSS, our logistic and supply chain system, is targeted to
underpin a wholesale transformation of our logistic supply
chain and maintenance processes. This is a very ambitious
project. It is scheduled to replace 240 legacy core systems and
ranges from depot level activities, wholesale supply down
through flight line maintenance kinds of activities.
Having said that, we have recently undergone some
programmatic issues with the ECSS program. We reported it to
Congress at the beginning of the year, a change in this
program. We have since had to address changes since that report
because of program performance. So on a positive note, we have
implemented the kinds of management direction that the GAO has
suggested back in their November 2010 report for providing
better oversight of the ERP program execution. The bad news is
when you have bad execution then you have to actually go back
and adjust your plans. So we are in the process of doing that.
Bluntly, the re-plan for that is still underway, we report
back to the Department by next month, by November. We would be
reporting back out more publicly in the December time period
about a way ahead for the ECSS program.
The Integrated Personnel and Pay System will integrate 105
personnel and pay processes. We have mapped those quite
extensively. We are actually in the early phases of that
program. We are in the process of generating the request for
proposal that is due to go out here in the next 30 days or so,
and we are anticipating a contract award on that program
sometime in the Spring/Summer of next year. And that is on
schedule so that is not a revised schedule, that is the current
schedule for that program.
It will replace ultimately nine legacy systems. Within the
Air Force, the Chief Management Officer, the Under Secretary
and the CFO [Chief Financial Officer] partner closely on all
auditability goals and business transformation goals. And in
fact at my level, I co-chair panels with Dr. Morin, our CFO,
and recently in our audit acceleration process, it will be me
and one of his key directors who will co-chair the acceleration
process. So we are coupled at the hip from our point of view on
the auditability goals.
And I thank you for the time.
[The prepared statement of Mr. Tillotson can be found in
the Appendix on page 54.]
Mr. Conaway. Thank you, Mr. Tillotson.
Mr. Khan.

STATEMENT OF ASIF A. KHAN, DIRECTOR, FINANCIAL MANAGEMENT AND
ASSURANCE, GOVERNMENT ACCOUNTABILITY OFFICE

Mr. Khan. Thank you Mr. Chairman, Mr. Andrews, members of
the panel, good morning. It is a pleasure to be here today to
provide a perspective on the status of DOD's business
modernization.
Effective implementation of enterprise resource planning
systems is a key in DOD's efforts to reach auditability, to be
audit ready and to be audit ready by fiscal year 2017, and now,
as you have discussed, to meet the interim goal of preparing an
auditable Statement of Budgetary Resources by a new department-
wide date of 2014, as Secretary Panetta recently announced
before the full Armed Services Committee.
Today I will summarize three conditions holding back DOD
from achieving its goals in ERP implementation.
First, I will discuss the problems in scheduling and in
estimating costs. Second, gaps in functions the systems are
able to perform. And finally, a lack of compliance with
standards.
My statement today is based primarily on our prior work.
First, scheduling and costs. In October 2010, we reported
on 10 ERPs that DOD identified as critical in transforming its
business operations. Our review of DOD's data found delays in
implementation of these systems ranging from 2 to 12 years.
Five systems had incurred cost increases totalling an estimated
$6.9 billion.
In our detailed analysis of four ERPs, we found that the
development programs for these systems had omitted certain
elements of risk analysis called for in scheduling and cost
guidelines issued by DOD, GAO or OMB [Office of Management and
Budget].
The DOD IG reported in 2011 that, in estimating $2.4
billion in \1\ costs for implementing its general ledger ERP,
GFEBS-Army had not identified all the project's requirements
and costs. Had they all been included, the costs might have
been significantly higher.
---------------------------------------------------------------------------
\1\ The written testimony did not include the word ``additional''
in the sentence. GAO confirmed that the word ``additional'' should be
deleted from the transcript.
---------------------------------------------------------------------------
Unreliable schedules can increase costs with additional
time and rework needed before the system is fully functional.
And as costs for ERP rise above estimates, funding is extended
for the legacy systems that cannot yet be replaced.
Second, gaps in functionality. We found significant gaps
between needed ERP functions and those delivered. In November
2010 we reported that Army's Logistics Modernization Program,
LMP, had not fully developed the capabilities that LMP needed
to perform certain basic logistical tasks. For example,
maintaining accountability for ammunition.
Officials of the Joint Munitions and Lethality Life Cycle
Management Command told us in contrast to the systems LMP was
slated to replace, LMP did not enable staff to record the
shipping, receiving or transfer of ammunition to another site.
Army, to compensate, had planned to hire 172 additional
personnel to perform manual data entry until the software could
be modified to perform the required functions.
In preliminary results from an ongoing review, we also
found problems in our Army GFEBS and Air Force's general ledger
system, DEAMS. For example, financial personnel had to devise
manual workarounds because of deficiencies in ERPs' ability to
accept data directly from other systems, including two-thirds
of the data from an invoicing and receiving system. Such manual
workarounds are cumbersome, error-prone, expensive and
ultimately not sustainable.
Army and Air Force officials told us that they have plans
to address the issues that we raised.
Finally, lack of compliance with U.S. Standard General
Ledger. To be efficient and effective as a financial management
tool, an ERP must be able to process information according to
accounting and financial reporting standards, a basic
requirement for consistent reporting of financial information
and the preparation of financial reports.
But in November 2010 the DOD IG found that after more than
10 years in development and a cost of $1.1 billion, Army's LMP
system was not compliant with the U.S. Standard General Ledger.
For example, the Standard General Ledger contains 11 budget
records related to contract authority for working capital
funds, but LMP contained only three. As such, as a result it
was not recording all the data needed for the Statement of
Budgetary Resources.
With a history of slow-moving improvement programs that
fall short of their goals, DOD now faces the additional
challenge of responding to urgent fiscal demands and serious
deadlines. DOD leadership has taken encouraging steps toward
positive change. But in order for DOD to achieve its goals, it
is critical that leadership sustain its commitment to progress
and its involvement in oversight to ensure that capable systems
and effective processes are established throughout the
Department.
Mr. Chairman, Mr. Andrews, members of the panel, this
concludes my prepared statement. I will be happy to answer any
questions. Thank you.
[The prepared statement of Mr. Khan can be found in the
Appendix on page 62.]
Mr. Conaway. Thank you, Mr. Khan.
We will start our questioning with Mr. Todd for 5 minutes.
Todd? Oh, Mr. Young, excuse me. Todd?
Mr. Young. Thank you, Mr. Chairman.
Thank you to all of our panelists for being here this
morning bright and early. I think we will, I am certainly
hopeful we will have all the leadership at the highest levels
in the Pentagon, especially with Mr. Secretary's recent
indication that we are going to accelerate this whole process.
And I know that that will probably be a great point of focus
for this working group in the future trying to figure out the
implications that has on all aspects of this larger effort. So,
I look forward to that.
Ms. McGrath, I know that many years of effort and millions
of dollars were invested in an effort to put together a
department-wide integrated personnel and payment system, and
that that effort wasn't successful. Ultimately there were some
complications, some challenges. And instead the military
services pursued their own integrated personnel and payment
systems.
First, why did that effort fail? And then secondarily, what
sort of lessons were learned? And how might those lessons help
us as we move forward in developing these ERP systems?
And after you are done, if anyone else would like to add,
that would be welcome. Thank you.
Ms. McGrath. So the system that you are referring to, the
Defense Integrated Military Human Resources System, commonly
referred to as DIMHRS, within the Department provides an
opportunity for us to learn many lessons. And I think a lot of
the opening statements--you have heard some of those lessons
actually being conveyed in the opening statements.
The challenges that were identified in DIMHRS
implementation started with data. To Mr. Andrews' comments
earlier, all about the understanding the authoritative source
of the data. How clean is it? Who defines it? So, that we had
consistency not only within the components, but across the
defense enterprise.
We are not standard across the defense enterprise in the
military pay. The way we define certain things like leave, and
it is just not standard. And so what DIMHRS was also looking to
do is not only pay but achieve standardization of data,
processes.
We don't have consistent processes in this space. And so in
order to successfully implement a solution, an IT solution, the
fundamental aspects of both process and data had to be
achieved. And I think that as that system, and Army was the
first Service identified for implementation, and we learned
through testing, that the Army had a lot of challenges in their
data.
And I'll say have heeded that lesson. And so the first
aspect of their integrated purse pay solution is establishing
the authoritative data within the Army that will feed, I will
say the rest of the business processes. And so I would say not
only did we learn it, but it is being applied in the Army's
integrated purse pay solution.
Now, governance too----
Mr. Young. Could I stop you there just to clarify? I was a
management consultant for a period of time, and I tend to focus
on business process redesign because the whole ERP systems was
an area a bit abstruse for me. But I know the two are very much
related.
And one challenge to adopting a department-wide system, it
sounds like you are saying, was the difficulty of getting the
different services, say, to recognize different pay categories
by the same names or to change certain processes. Is that
incorrect?
Ms. McGrath. It is processes. Again, with good reason we
execute differently across the military departments. And so to
then bring all that into a single solution adds complexity and
challenge. And so the getting a standard definition of an end-
to-end process, and there are many within an integrated purse
pay solution because you are dealing with how do I calculate
entitlements, to how do I pay?
Mr. Young. Right.
Ms. McGrath. And so it is processes across the Services. It
is also then the governance required to actually enable those
process definitions to happen. Cross-functionally, if you will,
you need the personnel folks and the pay to then decide you
know how do we come up with a single end-to-end process to
effectively execute this business?
Mr. Young. Okay. So, you know maybe we will talk offline
here. I think my time is expired. But I would be interested in
some of the lessons learned, how you are going to apply them to
future success. So, thank you.
[The information referred to can be found in the Appendix
on page 99.]
Mr. Conaway. Mr. Andrews.
Mr. Andrews. Thank you.
Mr. Khan, the GAO looked at the 10 ERPs. And my
understanding is that six of them had delays ranging from 2 to
12 years in implementation. Does that mean the other four were
on schedule?
Mr. Khan. Yes, sir. At least as of last year, from the
information we were provided the other four were----
Mr. Andrews. So, this is in the 2010 report.
Mr. Khan. Correct. Yes.
Mr. Andrews. And then on cost that 5 of the 10 were
generating cost overruns, aggregating the $6.9 billion.
Mr. Khan. That is correct.
Mr. Andrews. Does that mean the other five were within
budget?
Mr. Khan. Well, we didn't have information for the others.
Mr. Andrews. So, we are not sure about that?
Mr. Khan. We are not sure about those ones.
Mr. Andrews. Okay.
I just want to look at GFEBS for a minute. Mr. Lewis, I am
not picking on GFEBS, but there is frankly more data about it.
So, I just want to kind of walk through this.
The history of GFEBS is that it starts in 2004, right, Mr.
Khan?
Mr. Khan. Correct.
Mr. Andrews. When was it originally supposed to be fully
fieldable and implemented? Mr. Lewis, do you know? I know you
weren't there to--believe me, I understand you walked into this
story in the middle and not the beginning, so I get that. But
when was it supposed to be done?
Mr. Lewis. I don't know that date. I do know it was some
years before that.
Mr. Andrews. Before now. It started in 2004, right?
Mr. Lewis. Right.
Mr. Andrews. That is when the--okay. Mr. Khan, do you know?
Maybe if you just supplement the record for us.
Mr. Khan. I will do that.
[The information referred to can be found in the Appendix
on page 99.]
Mr. Andrews. How much of the $6.9 billion in cost overruns
is attributable to the GFEBS?
Mr. Khan. That was one of the systems where we didn't have
data, the cost overrun data for GFEBS at that point in time.
Mr. Andrews. Okay.
Mr. Khan. That doesn't mean that there aren't any cost
overruns----
Mr. Andrews. Well, let's look at the projection. If I
understand this correctly, that the GAO report says that there
is an estimate of a $2.4 billion cost to finish the program----
Mr. Khan. Correct.
Mr. Andrews. But you have some doubts about whether that is
accurate. What is the cause of those doubts?
Mr. Khan. Because not all the aspects what goes into
building up a cost were considered when those estimates were
developed. And I am reporting this information per the--what
the IG had reported earlier on this year.
Mr. Andrews. If you had to give a professional judgment as
to what you think the cost will turn out to be, you think it is
higher than 2.4?
Mr. Khan. I would imagine so, just based on some of the
problems that I have highlighted in my oral statement.
Mr. Andrews. Do you have an opinion about how much higher
it is going to be?
Mr. Khan. I would not guess at this point in time.
Mr. Andrews. When are you next scheduled to go in and
examine that program?
Mr. Khan. As part of our ongoing work we continue to look
at these systems. We will be following up on our prior
recommendations.
Mr. Andrews. Now, Mr. Lewis, as someone who served both in
uniform and the civilian sector, thank you. I would be
interested, if we could wind the clock back to before GFEBS got
started, knowing what you know about where we are now in terms
of delay and potential cost overruns, how would you do it
differently? If you were working with a blank slate of paper--
sheet of paper, excuse me, and could take us from the beginning
of this idea, this enterprise system, where we are now, what
would you do differently?
Mr. Lewis. Mr. Andrews, thank you for that question. With
these systems, as all systems, it has been alluded to and
referred to in some of the statements here this morning
starting with a good requirement. You have to get your
requirements down and what do you want that system to do.
Mr. Andrews. In this case did we--was the requirement
overinclusive, underinclusive? What did we do wrong on the
requirement in this case?
Mr. Lewis. Anecdotal--this conversation--on paper, but we
didn't have all the requirements, all the interfaces. Remember,
our ERPs in the Army were all started at a different time,
mainly for functional purposes. And the good news is that the
three of them are SAP-based and so now----
Mr. Andrews. So we were underinclusive in our requirement
process? We didn't ask for all the stuff that we needed.
Mr. Khan, is that part of the reason we have the present
problems that you observed about this manual entry of data that
I read about, which seems to be--must be an enormous hassle for
the men and women who work--is that the reason why we have that
problem do you think?
Mr. Khan. I mean that is part of the issue that we had
highlighted, that the requirements up-front have not been
correctly ascertained. So once the development progresses,
additional requirements come to light.
Mr. Andrews. Now, Mr. Lewis, this is not a rhetorical
question, but it--why do you think we got the requirements
wrong? How did we mess that up?
Mr. Lewis. Well these systems, as you know, are very
complex and nobody has a--you know, all the knowledge on this
and they are incrementally developed. And as we rolled them
out, you know, we got--thank goodness we got most of it right,
but there are that around the fringes that everybody talks here
and we just have to pull those back in as we go along.
And things grow over time. Technology changed over time----
Mr. Andrews. Yes.
Mr. Lewis [continuing]. So the more----
Mr. Andrews. My time has expired. I will just mention to
the chairman that the work that we have done together on
procurement, that this is an echo what we are hearing this
morning that--that the good work the GAO has done on cost
overruns in major weapons systems generally that--in my view
the main part of that story is getting the requirements wrong
consistently.
And you know, we all blame the contractors and sometimes
they deserve it. But sometimes we need to blame ourselves
because we keep changing the requirements on people and it
tends to create these cost overruns so I--if I could do one--I
will answer my own question--if I could do one thing in this
area, it would be to figure out how we could all get the
requirements consistent and right more often in this process. I
think it would help us. Thank you.
Mr. Conaway. Thank the gentleman.
Mr. Rigell, 5 minutes.
Mr. Rigell. Good morning and welcome to everyone. Thank you
Mr. Chairman for holding the hearing and good to see my
colleagues this morning. It is a very, very big topic and some
of my question is more to help me just simply understand the
issue as much as it is to maybe provide guidance here. But Ms.
McGrath, could you help me to understand, if we had for example
a matrix chart and on the vertical column was the different
functions.
For example, transportation, supply, maintenance,
engineering, payroll and then across the top of the matrix was
the different Services, could you tell me where there would be
alignment. For example on compensation, is there a common
vendor? Have we tried to seek a common vendor to help with
compensation almost specialized in that? Or is the work of
these ERPs and our vendors more by service and--I am trying to
understand the degree to which the DOD has sought commonality
between different functions and vendors.
Ms. McGrath. So, I think we are more trying to define
common standards across the enterprise and then acquire
solutions that will help enable implementation of the common
standard vice, buying one solution that has standards embedded
in it that we then all use. Because then that allows for
competition, certainly if the Department is defining its
business standards and processes and then publishing----
Mr. Rigell. Okay, so we----
Ms. McGrath [continuing]. Vendors can----
Mr. Rigell. And it makes sense as big as DOD is that we
have more than--certainly more than one vendor helping us with
pay issues for example across different Services. But then that
leads to, to what degree are we seeking like best practices
from one, if we are having real success. This company has
really got this down, they are doing really well. Do you all
meet together on a regular basis to say, ``Hey this company X
is doing a great job for us. They are on track. They have got a
low cost solution.''
Ms. McGrath. Certainly we use past performance and data in
awarding contracts, but I think that the lessons learned in
sharing, especially in these ERP--big ERP programs is we do
have venues where we bring all of the ERP program managers
together to identify lessons learned in terms of
implementation. There are network issues. There are standard
issues. We certainly understand the measures we are putting in
place.
Not only with the vendor but with ourselves in terms of,
you know, best practices and lessons learned. We are adopting
those, embedding them into the oversight, not necessarily
looking at one particular vendor's performance.
Mr. Rigell. Well, I have been impressed by the--really the
quality of the people that I have interacted with in my short
time here. And I am sure you are doing that. I have learned in
life that you really can't over communicate and getting people
together, sharing best practices is just a terrific way to
improve performance, so I just encourage you to pursue that.
In the 2 minutes that I have left, Mr. Khan I wanted to
shift over to you sir and to ask you--I wanted to follow up on
some comments that were made by the Ranking Member, Congressman
Andrews, and--related to some of the ERPs are on track, a few
aren't. Let's talk about--I wish I had time to talk about the
successes. Let's talk about the ones that are having trouble.
Is there any commonality among those? Is there a company
that is giving us a bumpier time than others? Could you explain
that to us? Give us a--just a quick overview?
Mr. Khan. The commonality primarily is in requirements--
requirements management, collecting requirements, up-fronts and
how those requirements are actually developed into the system
itself. So that is the----
Mr. Rigell. So it is more our side--it is more the
government is that--I want to make sure I understand your point
here. Is it more that we have not been clear? It is almost like
a change order on a house. You start remodeling your house and
the builder gives you a certain date and you go, no I really
want to do this and you start doing change orders and you are
off-track.
Mr. Khan. That is correct, but it is hard to distinguish
whether it is the government's issue or the contractor issue
because for the most part, teams usually are integrated to be
able to collect this information. I was just answering your
question that the--one of the major issues that we--when we
were doing our work we found was the up-front requirement
collection was a problem.
Mr. Rigell. Okay. Well in the 20 or so seconds that I have
left, I just would encourage all of you to, you know, to reward
those who are doing good work and to hold accountable those who
are not. And that has to be brought into our procurement
process, evaluation of vendors and I--as time goes on I would
like to--for us to explore and see and identify those companies
that are not performing as well and understand why.
Thank you. I yield back.
Mr. Conaway. Thank you gentleman.
Mr. Ryan, 5 minutes.
Mr. Ryan. Thank you Mr. Chairman. I just kind of want to
piggy back a little bit on where the discussion just went as
far as it sounds like the crux of it is incentives or can be
incentives. Whether you are talking about the scheduling and
the cost like Mr. Khan was talking about, or the lack of
compliance. Can you help us identify some carrots and possibly
some sticks that we need to look at in order to expedite this?
Especially when you are talking about the scheduling and
the cost. You know, as we are moving into austerity I guess and
cuts within the military, and every other program across the
board, I think it is important for us to know early on what the
exact numbers are. So, Mr. Khan can you give us some advice
from your vantage point going through this with a fine tooth
comb on what some carrots would be and what some possible
sticks would be?
And then Ms. McGrath, too, if you could comment on that?
Mr. Khan. Yes, sir. One of the key aspects is additional
oversight, especially as far as investment management is
concerned to make sure that a particular project, especially
ERP development doesn't go forward, until they are meeting the
initial requirements, or the requirements of a particular
phase. That is where government and oversight becomes critical.
Mr. Ryan. What would the numbers look like? What
investments would we have to make into that kind of oversight?
How many people would we need for example?
Mr. Khan. I mean that is hard for me to say. I think we
have got the structure in place now with the CMOs at the
various components itself. There is a government structure in
place under the leadership of the DCMO who are providing this
oversight at this point in time. Other than that, I think as we
go along it will be--I mean just the results will speak for
themselves whether the projects are moving forward and what the
results are.
Mr. Ryan. So we have the manpower in place to be able to do
this?
Mr. Khan. I cannot answer that question. We haven't looked
into that.
Mr. Ryan. If anyone else on the panel would like to comment
on that?
Ms. McGrath. I would be happy to. So I think the shift over
the last couple of years, in particular with all the tools that
Congress has given us in terms of oversight and architecture
development, investment review boards, the chief management
officer, legislation and the business process re-engineering,
have all helped in terms of enabling better execution of these
programs.
Another shift that has happened is that previously it was
just the acquisition team, the acquisition oversight, the
service acquisition or component acquisition executives looking
at the, you know, is the program doing cost, schedule and
performance. With the introduction of the CMOs and in
particular my role with the acquisition oversight for these
programs coupled with the investment reviews, you actually have
everybody at the table who needs to be at the table to
understand the impact of this particular--a particular
investment.
So you have got all the functional areas represented. You
have the corporate business, you know, the folks at the table
here represented to say, you know, how does this thing fit into
my broader business conversations? So I actually do think if
you looked over the last 2 years as opposed to the last 10, I
would hope that you would see actually more implementation of
systems, delivering capability closer to on time and at cost
than they had been previously.
Because we better understand, you know, the implementation
aspects from a much broader perspective. Another lesson learned
frankly, to get back to a couple of questions is the
requirements piece. I mean that is the thing that bites us
every time. And part of what we have learned is we overrequire.
We think this is the only time we are ever going to have a shot
at putting all the requirements in so the programs are big and
complex.
And part of the business capability's lifecycle is a
different acquisition approach, if you will, to IT and business
is to say, okay we know you want sort of this big thing, but
can you chunk it such that we can, you know, talk about it in
smaller terms and deliver it in smaller--understanding that it
is incomplete when we first deliver it, but it is part of the
broader plan.
And I think part of the better buying power initiatives
that AT&L [Acquisition, Technology and Logistics] and Dr.
Carter have been promoting and part of the broader business is
to figure out, you know, how do we structure the contracts
using the right balance of incentive fees and firm fixed price
versus time materials? I mean, we sometimes issue a firm fixed
price contract when the requirements aren't yet baked enough to
really communicate to the vendor what it is we want.
And so I think it is a balance of I am going to say all
those things that we are really embedding into this entire
conversation. And so you see--you will see changes in the way
that some of the contracts--ECSS is actually a very good
example from a contracting perspective.
And so yes, I do think we have the oversight. And I would
hope that if we did look from a shorter term that progress
would be much, much better than it has been from a 10-year
cycle. And I do think that it is every aspect that is required
to make it better.
Mr. Ryan. Thank you.
Thank you, Mr. Chairman.
Mr. Conaway. Thank the gentleman. Again, thank you
everybody for coming this morning. I want to make sure we try
to get as much of everybody as we can. Talk about a statement.
Mr. Lewis, the GFEBS and the rollout, one of the things
that we have been told is that legacy data, or much of the data
from the legacy systems won't necessarily be converted into the
GFEBS systems for some period of time. Can you help us
understand the--is that--obviously a planned decision. But from
a manager's standpoint, a cost standpoint is that the most
effective way to manage that transition over time?
Mr. Lewis. Mr. Chairman, thank you. We would like that
transition, as this was the first year that we closed out with
using GFEBS. We would like all that to be seamless and
electronic, but there are some interfaces that need a little
extra help, that need some manpower to make that data move
over. We have got eyes on target.
That is one of those things, as Ms. McGrath said, large,
complex systems, as we get experience using these systems we
got to fix that. But yes, we would like to have it all be
inputted into GFEBS and be resident in there, be manipulated in
the system. And that also----
Mr. Conaway. But are you tracking--is there enough pressure
from the cost of maintaining legacy systems that are extra to
the system to make sure that you do in fact move everything as
expeditiously as possible into GFEBS?
Mr. Lewis. Oh, most affirmative. In an era here of
declining resources, everybody is after legacy systems, lots of
people, budgeters, programmers, those of us in the functional
management types, and the people that run the systems. The
pressure is on there. We have them scheduled. As soon as they
are certified, the system certified they can handle it, we will
take the legacy and shut it down.
Mr. Conaway. All right.
Mr. Tillotson, the stop order for the--your ECSS program,
especially your comments I was going to ask a question relative
to that, but apparently you are going to have more information
on that next month. One of the carrots in this thing is savings
associated with doing things better, doing things quicker and
faster. And you have got an estimate out there for almost $3
billion of savings over a 10-year period once these things are
implemented.
Present value of those savings get smaller and smaller as
that 10-year window gets beyond the 2017 date. Can you visit
with us about where you are in terms of the 2014 date? Could
you get there by 2017?
Mr. Tillotson. So, from a broad Air Force point of view,
the 2017 date, as Dr. Morin reported I think to this panel some
weeks ago, is a moderate risk state for the Air Force as a
whole for the total audit readiness condition. For the
statement of budgetary resource we are aggressively looking now
at what changes we need to make.
As I indicated in my opening remarks, because of ECSS
program performance even before the 2014 mandate from Secretary
Panetta we were having to reconsider a mix of legacy process
and ECSS deployment in order to stay on track to meet the audit
goal, even at 2017. So, we will be doing more of that as we go
forward.
So, monthly we are looking at all of the above, and we
actually have done a very detailed deep dive on this.
Mr. Conaway. Okay. Thanks, Mr. Tillotson.
Ms. McGrath, given the things that are going on with the
Air Force, where in that broad array of organization chart, is
the Office of the Secretary responsibility for watching what
the Air Force is doing and understanding what they are--
watching what the Army is doing with respect to that. Is that
your office that will be monitoring and helping us with the
oversight? Where does that oversight lie within your system?
Ms. McGrath. With the acquisition--milestone decision
authority for all but the logistic systems resides with me. And
then for the logistic systems like ECSS and some of the GCSSs
that you have heard today, they are within AT&L. And then I run
the subordinate body. But all of them come into the Investment
Review Board. And so it is both the Investment Review Board and
the acquisition oversight. Again, most of them are with me, the
logistic systems are with AT&L.
Mr. Conaway. Okay.
We have heard across the panels at some of these hearings
that performance evaluations next year will be somewhat driven
by success against getting this done. Is that--is a similar--we
are looking forward to seeing how that works. I wanted to hear
your comments about what your perspective is on that. But is
the responsibility for watching, for the lack of a better
phrase, Mr. Tillotson and Mr. Lewis' efforts is that a
performance requirement with whoever that performance review,
whoever that Investment Review Board is. Because the point is,
if everybody is in charge of something then nobody is in charge
of it. And so comment first on the individual performance
review standards particular within the system on getting the
details, but also on the folks who are watching it to make sure
that they are held accountable for their role as well.
Ms. McGrath. I think as we testified when Mr. Hale and I
were here last time we ensure that audit readiness is part of
the strategy of the Department. It is in the strategic
management plan that we just recently released. Also in the
Department's organizational guidance, which establishes the
priorities for the Departments, which are cascaded into
performance plans, which is why it is important.
So, we have measures from a strategic perspective that
cascade throughout the Department. And then we report on those
on a quarterly basis. How is it going with regard to, you know,
the Statement of Budgetary Resources or some of the milestones
identified in the FIAR plan. And so institutionally we have
those baked in, which I think is extremely important.
Also, we are looking at cost schedule and performance of
these ERPs, and also how they achieve the business goals. That
is done through I think multiple governance bodies, not the
least of which is the FIAR governance body that both Mr. Hale
and I co-chair, and also from an acquisition perspective. Some
of the things I just mentioned, do we have the right contract
strategy and those kinds of things. And so it is both the
investment review, acquisition oversight and the overarching
total performance.
Mr. Conaway. Okay.
Ms. McGrath. Your face says I didn't answer your question.
Mr. Conaway. Well, yes. Part of it is just as you mentioned
baked into the system. If you looked at the organization chart,
and we have had this conversation before with others, there is
nobody in charge. But the whole package, other than Mr.
Panetta.
I guess we will just have to hold Mr. Panetta in charge
because if you look at the way it is bifurcated, you have got
the audit responsibility going this direction. You have got
ERPs under a different group of folks. And so I am having a
hard time figuring out who I need to hold accountable other
than Mr. Panetta to make this thing work. And so, there are a
lot of folks who have a little piece of a bunch of it.
Ms. McGrath. Well, I think that is both part of the
challenge and the opportunity is that achieving a clean audit
is not just one person or one organization or one functional
area's responsibility. It really does take the Department----
Mr. Conaway. I understand that part. But--anyway.
We have got--left. Do you want to do another round, Mr.
Andrews?
Mr. Andrews. I do. More than a question I have a
suggestion. And that would be before the full committee begins
its deliberations on next year's authorization bill, we should
get this year's done first. But before we being our
deliberations on next year's authorization bill, I think it
would be helpful if the GAO would revisit its review of these
10 systems so we would have in front of us----
Mr. Conaway. Mr. Khan, you didn't actually--you said you
would do it. Is there something on the books right now to
update your November 10 analysis?
Mr. Khan. No, not specifically. What I meant was that as
part of our recommendation follow up we do----
Mr. Conaway. I understand. But you don't have a----
Mr. Khan. I do not, no.
Mr. Andrews. I would like us to be in a position when the
full committee considers the fiscal year 2013 authorization
bill that we have the current state of play with these 10
systems as to where they are, where they are going so that any
resources we need to add to try to make them succeed or
subtract because they are not succeeding, we could make an
intelligent decision about that.
I mean, I come back to the beginning of this that I think
Secretary McGrath said this. This is the glue that holds this
whole thing together. And you know we have some problems here.
And I think in order for us to assess how to best address
those problems I would like to think the committee would
benefit from a current state of affairs, as stated by the GAO,
before we get to the decisionmaking phase in next year's bill.
So, that would be my suggestion to the chairman if we could
accomplish that.
Mr. Conaway. All right----
Thank you for coming this morning.
You know, part of the oversight role is to not second-guess
and Monday morning quarterback too much. It is clear that you
are looking at the personnel system for the entire Department
of Defense. You know in hindsight that might have been clearly
too big of a project to try to make happen and busting it up
into smaller pieces makes more sense. And we are doing those
kinds of things. And so you are looking at the way--to see
where the system--Department got to decide let's just do one.
You know, it is kind of intuitive to start with. But making
it a requirement that the Standard General Ledger be a piece of
the--be one of the things that comes out of it, I mean in the
comments that Mr. Khan made that the logistics management
piece, the LMP thing didn't meet the Standard General Ledger
issues on the front end. I don't know how you missed that one.
So, we are going to try--you know, obviously that is water
under the bridge and our focus really is from where we are
today going forward. Unless there are some lessons to be
learned about things that we have done.
But I appreciate the panel being here this morning. You
guys do great work on behalf of the taxpayers of our country.
And you have got a tough, tough job to make this all happen.
And our role is to, again, try to not Monday morning
quarterback too much, but at least try to help us understand so
that we can communicate back to the folks who pay all our
salaries that you are doing the best job you can with the
resources you have got.
And so if there are no other comments, again, thank you
very much for being here this morning.
This hearing is adjourned.
[Whereupon, at 9:00 a.m., the panel was adjourned.]
?

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

A P P E N D I X

October 27, 2011

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

PREPARED STATEMENTS SUBMITTED FOR THE RECORD

October 27, 2011

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

Statement of Hon. K. Michael Conaway

Chairman, Panel on Defense Financial Management and Auditability Reform

Hearing on

DOD's Enterprise Resource Planning (ERP) System Implementation Efforts

October 27, 2011

I'd like to welcome everyone to today's hearing on DOD's
Enterprise Resource Planning (ERP) System Implementation
Efforts. In all of our previous hearings, regardless of the
topic, the Enterprise Resource Planning systems were always an
integral part of the discussion, whether the discussion
centered around the skills needed within the financial
management workforce, accountability of assets, or the controls
needed to prevent potential anti-deficiency act violations. So,
it is fitting that the Panel hold a separate hearing on DOD's
Enterprise Resource Planning systems. Today, we will examine
the scope of the ERP efforts, the status of the implementation
of the ERPs, and their ability to improve DOD's financial
management.
According to DOD, the successful implementation of the ERPs
is a key element to addressing long-standing weaknesses in
financial management and achieving audit readiness. Yet, GAO
has reported over the years ``that the Department has not
effectively employed acquisition management controls to help
ensure the ERPs deliver the promised capabilities on time and
within budget.'' GAO has also reported that delays in the
successful implementation of ERPs have extended the use of
existing systems and continued the funding of these legacy
systems longer than planned. The DOD Office of Inspector
General noted in its testimony before the Panel on September
22, 2011, that ``The development, implementation and
effectiveness of these ERP systems are questionable at this
point.'' With billions of taxpayer dollars as stake, it is
critical that DOD take the necessary actions to ensure that the
ERPs are successfully implemented.
The Secretary of Defense directed the Department to move up
the audit readiness date of the Statement of Budgetary
Resources (SBR) from 2017 to 2014. However, certain of the ERPs
are not scheduled to be fully deployed until near or during
2017. In order to meet 2014, will the Department move up ERP
deployment dates, make enhancements to existing legacy systems,
improve manual controls, or some combination of the three?
Also, will DOD need additional resources for this effort? We
will be interested in getting some insight today on DOD's
approach to accomplishing this goal.
One of the key responsibilities of the DOD Deputy CMO and
Military Department CMOs (and their respective deputies) is to
support business system modernization efforts in a manner that
synchronizes these efforts with the financial improvement
activities of the reporting entities. This becomes all the more
important as DOD works towards achieving audit readiness of the
SBR by 2014, while also keeping on track to achieve
auditability on the full set of financial statements by 2017.
I would like to thank our witnesses in advance for their
testimony and agreeing to be with us this morning. We have with
us today:

LThe Honorable Elizabeth McGrath, Deputy Chief
Management Officer, U.S. Department of Defense;

LMr. Mark Lewis, Deputy Chief Management Officer,
United States Army;

LMr. Eric Fanning, Deputy Under Secretary of the
Navy and Deputy Chief Management Officer, United States Navy;

LMr. David Tillotson III, Deputy Chief Management
Officer, United States Air Force; and

LMr. Asif A. Khan, Director, Financial Management
and Assurance, Government Accountability Office.

[GRAPHIC] [TIFF OMITTED] T1454.001

[GRAPHIC] [TIFF OMITTED] T1454.002

[GRAPHIC] [TIFF OMITTED] T1454.003

[GRAPHIC] [TIFF OMITTED] T1454.004

[GRAPHIC] [TIFF OMITTED] T1454.005

[GRAPHIC] [TIFF OMITTED] T1454.006

[GRAPHIC] [TIFF OMITTED] T1454.007

[GRAPHIC] [TIFF OMITTED] T1454.008

[GRAPHIC] [TIFF OMITTED] T1454.009

[GRAPHIC] [TIFF OMITTED] T1454.010

[GRAPHIC] [TIFF OMITTED] T1454.011

[GRAPHIC] [TIFF OMITTED] T1454.012

[GRAPHIC] [TIFF OMITTED] T1454.013

[GRAPHIC] [TIFF OMITTED] T1454.014

[GRAPHIC] [TIFF OMITTED] T1454.015

[GRAPHIC] [TIFF OMITTED] T1454.016

[GRAPHIC] [TIFF OMITTED] T1454.017

[GRAPHIC] [TIFF OMITTED] T1454.018

[GRAPHIC] [TIFF OMITTED] T1454.019

[GRAPHIC] [TIFF OMITTED] T1454.020

[GRAPHIC] [TIFF OMITTED] T1454.021

[GRAPHIC] [TIFF OMITTED] T1454.022

[GRAPHIC] [TIFF OMITTED] T1454.023

[GRAPHIC] [TIFF OMITTED] T1454.024

[GRAPHIC] [TIFF OMITTED] T1454.025

[GRAPHIC] [TIFF OMITTED] T1454.026

[GRAPHIC] [TIFF OMITTED] T1454.027

[GRAPHIC] [TIFF OMITTED] T1454.028

[GRAPHIC] [TIFF OMITTED] T1454.029

[GRAPHIC] [TIFF OMITTED] T1454.030

[GRAPHIC] [TIFF OMITTED] T1454.031

[GRAPHIC] [TIFF OMITTED] T1454.032

[GRAPHIC] [TIFF OMITTED] T1454.033

[GRAPHIC] [TIFF OMITTED] T1454.034

[GRAPHIC] [TIFF OMITTED] T1454.035

[GRAPHIC] [TIFF OMITTED] T1454.036

[GRAPHIC] [TIFF OMITTED] T1454.037

[GRAPHIC] [TIFF OMITTED] T1454.038

[GRAPHIC] [TIFF OMITTED] T1454.039

[GRAPHIC] [TIFF OMITTED] T1454.040

[GRAPHIC] [TIFF OMITTED] T1454.041

[GRAPHIC] [TIFF OMITTED] T1454.042

[GRAPHIC] [TIFF OMITTED] T1454.043

[GRAPHIC] [TIFF OMITTED] T1454.044

[GRAPHIC] [TIFF OMITTED] T1454.045

[GRAPHIC] [TIFF OMITTED] T1454.046

[GRAPHIC] [TIFF OMITTED] T1454.047

[GRAPHIC] [TIFF OMITTED] T1454.048

[GRAPHIC] [TIFF OMITTED] T1454.049

[GRAPHIC] [TIFF OMITTED] T1454.050

[GRAPHIC] [TIFF OMITTED] T1454.051

[GRAPHIC] [TIFF OMITTED] T1454.052

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

DOCUMENTS SUBMITTED FOR THE RECORD

October 27, 2011

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

[GRAPHIC] [TIFF OMITTED] T1454.053

[GRAPHIC] [TIFF OMITTED] T1454.054

[GRAPHIC] [TIFF OMITTED] T1454.055

[GRAPHIC] [TIFF OMITTED] T1454.056

[GRAPHIC] [TIFF OMITTED] T1454.057

[GRAPHIC] [TIFF OMITTED] T1454.058

[GRAPHIC] [TIFF OMITTED] T1454.059

[GRAPHIC] [TIFF OMITTED] T1454.060

[GRAPHIC] [TIFF OMITTED] T1454.061

[GRAPHIC] [TIFF OMITTED] T1454.062

[GRAPHIC] [TIFF OMITTED] T1454.063

[GRAPHIC] [TIFF OMITTED] T1454.064

[GRAPHIC] [TIFF OMITTED] T1454.065

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

WITNESS RESPONSES TO QUESTIONS ASKED DURING

THE HEARING

October 27, 2011

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

RESPONSE TO QUESTION SUBMITTED BY MR. YOUNG

Ms. McGrath. The Department is actively applying its lessons
learned to the entire lifecycle of business systems. As a result of the
DIMHRS experience, we have implemented and reinforced several key
strategies to enable ERP integration.
First, business processes must be consistently applied and data
must be consistently defined so the Department can have the visibility
to make effective, informed decisions. We continue to improve business
system interoperability by sufficiently defining the business and
solution architectures using a standard methodology and with tools
based on open standards. Our Enterprise Information Web (EIW)
capability, for example, gives decision-makers enterprise visibility
and access to financial, personnel and asset data across the DOD
enterprise and its domains to support planning and policy development.
The EIW's semantically-based technology aggregates data using
established standards, regardless of code values or format, to support
analysis and decisions in a near real-time environment.
Second, the Department has instituted formal governance bodies to
enforce standards compliance. Three- and Two-Star level governing
councils were dedicated to resolving post-DIMHRS transition issues,
establishing rules of engagement for enterprise-level system
implementation, and proactively addressing emerging or potential
concerns. Finally, the Department remains committed to a transparent
and collaborative approach to communication. Both during and following
DIMHRS, the Department sought to make decisions openly and in
partnership with stakeholders and to facilitate expectation management.
Cross-Service and Department-wide teams at tiered levels have eased
collaboration by fostering an open forum for information sharing. The
recognition of consistent standards and data as the key to business
system interoperability, substantiated by governance and transparency,
has enabled the Department to use the lessons of DIMHRS as a platform
for successful ERP implementation. [See page 12.]
______

RESPONSE TO QUESTION SUBMITTED BY MR. ANDREWS

Mr. Khan. As discussed in our October 2010 report the originally
scheduled fiscal year for full deployment and the actual or latest
estimated fiscal year for full deployment were 2011, in both cases. As
noted in the report, the information was provided by the GFEBS program
management office. Subsequently, the Army's Deputy Chief Management
Officer's October 27, 2011 testimony before the Panel stated that GFEBS
will be fully fielded to all approved users by July 1, 2012. [See page
13.]
?

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

QUESTIONS SUBMITTED BY MEMBERS POST HEARING

October 27, 2011

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

QUESTIONS SUBMITTED BY MR. CONAWAY

General Funds Enterprise Business System (GFEBS)
fielding has resulted in 13 legacy systems being retired and an
additional six systems being partially subsumed. Upon
completion of GFEBS fielding, an additional 55 legacy systems
will be retired and 39 systems partially subsumed. The cost
savings/avoidance associated with GFEBS implementation is
estimated to be $60 million.

Logistics Modernization Program (LMP) fielding will
result in two legacy systems being retired. The cost saving/
avoidance is estimated to be $313 million.

Global Combat Support System-Army (GCSS-A) fielding
will result in seven legacy systems being retired. The cost
savings/avoidance is estimated to be $9 million.

Integrated Personnel and Pay System-Army (IPPS-A)
fielding will result in 56 legacy systems being retired. The
cost savings/avoidance has not yet been finalized, pending the
completion/approval of the cost-benefit analysis.

Some systems will not be retired because they are non-Army systems
that support other DOD Organizations, while some will continue to
provide some functionality that is not provided by the ERP solutions.
Others will be partially sunset because the native functionality will
be performed by the ERP.
Mr. Conaway. At what level are decisions made to retire/maintain
legacy systems and approve ERP customizations?
Mr. Lewis. Within the Army, the Secretary of the Army provides
oversight, but has delegated responsibility for retiring/maintaining
business systems management and approving customizations to the
functional proponent, HQDA 3 Star or higher. This is consistent with
statutory language found in 10 USC 2222 and DOD implementation
guidance. Given this authority, the functional proponent decides which
legacy systems to retire or sustain to support their business function.
The functional proponent incorporates senior level guidance provided
during the PPBE cycle, the capabilities required to execute their Title
10 responsibilities, cost-benefit analysis, and other Army initiatives
into their decision-making process.
During the systems review process, the functional requirements are
reviewed at proponent, Army and OSD levels for Major Automated
Information Systems (MAIS). As part of the acquisition review and
approval for MAIS systems, the cost benefit analysis for investment in
an ERP includes the benefits and savings associated with legacy
business systems that are being partially or fully subsumed by the new
system.
The Army also established the Business System Information
Technology Executive Steering Group (BSIT) in February 2011, to govern
enterprise resource planning (ERP) and other business systems using a
structure that fully reflects enterprise considerations and employs
business process analysis and systems portfolio management principles.
The governance structure will ensure end-to-end business processes
support mission requirements. The BSIT forums will review existing
governance forums and authorities for IT requirements, resourcing,
technical standards and acquisition and make recommendations to the
Chief Management Officer of how to improve and streamline IT
governance.
Mr. Conaway. Historically, the quality and integrity of the data
undergoing conversion is a major contributor to schedule slippages and
cost increases for ERP systems. What lessons are you applying from past
problems with data conversion and data cleanliness to improve future
outcomes for ERP deployments?
Mr. Lewis. The key lesson learned regarding the quality and
integrity of the data undergoing conversion is to ensure that extensive
planning is completed early enough in the program development to
accurately migrate and cleanse data.
The lessons learned from the initial release of LMP taught us a
great deal about data conversion/data cleansing, which we have
incorporated into all our ERP efforts. It is critical to have accurate
data prior to the fielding of ERP systems to ensure reliability. The
Army's Enterprise Data Management Office, a component of the US Army
Logistics Support Agency, are applying lessons learned from LMP
deployments to assist with cleansing legacy logistics systems' data in
support of GCSS-Army fielding development.
In addition, the Army has incorporated Army Enterprise System
Integration Program (AESIP) into the GCSS-Army program to serve as a
data broker between ERP and non-ERP logistics systems. AESIP provides a
degree of quality assurance for data and translates the data into the
common format.
The financial audit activities supporting our 2014 and 2017
auditability goals will provide assurances that GFEBS is an accurate
and reliable source for financial information. IPPS-Army will
eventually consolidate all components into one database, replacing
numerous legacy systems, and will consolidate personnel and pay.
Ensuring data quality and integrity data is the primary goal of
Increment 1. For that reason, the Army has placed the data
consolidation at the beginning of the acquisition lifecycle for IPPS-
Army.
Mr. Conaway. In your testimony, there is no mention of the Army
Enterprise System Integration Program (AESIP) system. What is it, and
why is it important to the Army's overall strategy for ERP
implementation?
Mr. Lewis. AESIP integrates business processes and systems by
serving as the Enterprise hub for the Army's logistics and financial
ERP business systems. It enables integration by linking business
processes and data across existing IT systems. This integration
optimizes business processes and supports Enterprise-level information
requirements. AESIP has successfully delivered a Web-based solution for
the creation and management of customer and vendor master data and
implemented an optimized messaging and hub services capability.
AESIP has been operational since 2006 delivering customer, vendor,
and material master data to systems across the Army and to the Defense
Logistics Agency--this includes the data flowing to legacy systems
currently being used in Iraq and Afghanistan. GCSS-Army and AESIP
program costs are evaluated and managed together (AESIP is part of
GCSS-Army). These costs have been validated by the Office of the
Secretary of Defense, Cost Analysis and Program Evaluation (CAPE)
division. Additionally, the Deputy Assistant Secretary of the Army for
Cost and Economics has approved these anticipated life cycle costs and
associated benefits.
The major systems supported by AESIP are: Global Combat Support
System-Army (GCSS-A), the tactical logistics system; Logistics
Modernization Program (LMP), the national logistics system; and General
Fund Enterprise Business System (GFEBS), the Army's financial system.
In addition, AESIP provides integration services for Non-Army systems
and enduring non-ERP systems.
Mr. Conaway. As the ERPs are implemented, what type of training is
each of the users receiving? Is this training incorporated into broader
training explaining the importance of good financial management?
Mr. Lewis. As each ERP is fielded, training is provided at all
levels, from the person entering data up to senior level management.
Training consists of new equipment training (both computer based (CBT)
and instructor led (ILT)), business process training, audit-readiness
training, post-deployment/sustainment training and refresher training.
The training provided is to standards and competencies demonstrating
proper internal controls.
The Project Manager for each of the new ERPs develops and delivers
``new equipment training'' which is focused on how to perform tasks in
the ERP. Functional training that focuses on end to end processes and
job-based scenarios is also provided. A key focus of business process
training has been on the development of cost management competencies to
leverage the power of the ERP decision support tools. However, the
training curriculum impacts more than just the tasks executed inside of
the ERP systems. As a key partner in ERPs implementations, DFAS
develops training on the business processes its employees perform which
are impacted by the changing ERP environment. To supplement OUSD(C)'s
audit-readiness training, the Army has also established Army specific
audit readiness and corrective action training for Command and
Installation-level staff. Fiscal responsibility and cost culture are
also topics in General Officer and SES training courses.
The Army, along with the DOD, has maintained an active professional
development program for its Comptroller career field including civilian
and military personnel. The Functional proponent for Financial
Management is working closely with the Army's Soldier Support Institute
to ensure course material provided to the financial management
workforce incorporates the new financial management systems. Course
materials would include, but are not limited to, use of the new ERPs,
principles of sound financial management, principles of cost
management, managerial accounting, etc. The context of these courses
reinforces efforts to satisfy audit standards, but go further to
developing a fiscally responsible workforce.
As an example, every course in our GFEBS curriculum (except those
focused on specific user groups, e.g., power users, Governance, Risk,
and Compliance (GRC) approvers, Army Learning Management System (ALMS)
training coordinators) is provided by GFEBS to the end-user. We engage
users through workshops, CBT and ILT delivery methods, and we do not
rely on the gaining organizations to take over the training delivery in
order to go live on GFEBS.
In addition to the formal training, GFEBS also provides 90 days of
on-site, over-the shoulder post deployment assistance to help the user
gain a confidence in their work and in use of the new system, answering
questions and resolving issues which the end user may encounter.
The Army Financial Management School (AFMS) Soldier Support
Institute (SSI) plans to provide sustainment GFEBS training starting in
FY12. GFEBS is already working with the AFMS to transition the training
materials and support their deployment of sustainment training. In
addition, GFEBS is also working with United States Army Financial
Management Command (USAFMCOM) and Defense Finance and Accounting
Service (DFAS) to ensure a complete business process transformation for
soldiers and their roles within the system.

Mr. Conaway. Please provide the number of ``legacy'' systems
currently in use to support business functions (e.g., financial
management, acquisitions, logistics, personnel, etc) for each Service
and the Fourth Estate. For each of the ERPs being implemented, please
provide the number of legacy systems that will be retired and the
estimated cost savings or cost avoidance once each of these ERPs are
implemented. Furthermore, provide an explanation for the reasoning for
not retiring the systems that will not be retired once the ERPs are
implemented.
Mr. Fanning.With the roll-out of Navy ERP, there has been a
retirement of 14 legacy systems to date, with 82 more to be retired by
2016. This has garnered a realized cost avoidance of $116M through
FY08-10 with an expected cumulative combined cost savings and avoidance
of $682M through FY2016.
The deployment of the Single Supply Solution enables projected
inventory savings of $276M through FY2017 and expected cost avoidance
of $456M for FY2018 through FY2023.
As the Navy ERP has been deployed to date, some receiving commands,
notably Naval Sea Systems Command, found it more cost effective to
maintain a few systems whose functions were assumed by the ERP on
reduced, maintenance levels to keep critical contract information
available for reference versus converting that data for Navy ERP.
In the present fiscal environment, the Department of the Navy and
Navy leadership has decided to complete the current Navy ERP program of
record, but to suspend any further development. Other system
functionalities may be added to the Navy ERP at some future dates, if a
business case supports that decision.
GCSS-MC is the Logistics Chain Management tool for the Marine
Corps. It is not an overarching ERP since the scope is limited to the
Logistics Chain. There are four legacy systems that will be retired
through GCSS-MC Increment 1 implementation after attaining Full
Deployment in 2nd Quarter, FY13. These systems are listed as follows:
SASSY, MIMMS, PC MIMMS, and ATLASS. The estimated cost savings or cost
avoidance is $2M/year. Looking forward, the Marine Corps is
adjudicating within the Expeditionary Force Development System (EFDS)
process the potential retirement of approximately 30+ legacy systems
identified within the Draft GCSS-MC Increment 2 Capabilities
Development Document/Business Capabilities Lifecycle (CDD/BCL). The
impact of this new capability on these systems still needs to be
assessed once a viable GCSS-MC Increment 2 material solution
(Capabilities Production Document (CPD)) is designed, developed,
tested, approved, and implemented.
Mr. Conaway. At what level are decisions made to retire/maintain
legacy systems and approve ERP customizations?
Mr. Fanning. Decisions as to what systems would be retired by Navy
ERP were made primarily by the Resource Sponsors for Navy ERP and the
systems in question; with input from the relevant Functional Area
Managers.
ERP configuration changes must be approved by the Navy ERP Senior
Integration Board, in which the Assistant Secretary of the Navy (RDA),
DON CIO, Deputy Under Secretary of the Navy DCMO, Deputy Assistant
Secretaries C4I and AP, the Naval Systems Commands and other receiving
commands (e.g., Office of Naval Research) participate.
The decision to retire/maintain legacy systems is made by the
Functional Advocate, Deputy Commandant, Installations and Logistics.
The approval of ERP customizations, specifically Change Requests (CRs),
are made by an Enterprise Configuration Control Board (E-CCB)
established by the Functional Advocate. Chaired by I&L, the E-CCB is
comprised of members from CD&I, the OpFors (MEFs), LOGCOM, and the
MARFORs (MARFORCOM, MARFORPAC), P&R, and C4 for their vetting/approval/
prioritization/resourcing of CRs. Other ERP customizations such as
Engineer Change Proposals (ECPs) are adjudicated by the E-CCB but
deferred to the GCSS-MC Future Requirements Working Group (G-FRWG) for
inclusion as a future increment in the draft CDD/BCL developed by CD&I
(requirements and capabilities).
Mr. Conaway. Historically, the quality and integrity of the data
undergoing conversion is a major contributor to schedule slippages and
cost increases for ERP systems. What lessons are you applying from past
problems with data conversion and data cleanliness to improve future
outcomes for ERP deployments?
Mr. Fanning. To document and leverage the lessons learned from each
deployment, Navy ERP developed and annually updates the Navy ERP
Command Implementation Guidance (CIG). This Guide provides details of
the Navy ERP implementation process and key information on structuring
a command's implementation teams and efforts for success. It also
identifies critical success factors and provides timelines and
checklists to help focus a command's resources on the right things at
the right time including data conversion and cleansing. Navy ERP
establishes Data Conversion Agreements (DCA) with each Command owning a
system from which data will be converted into Navy ERP to ensure the
accuracy and timeliness of data exchange between the respective
systems. Approximately 24 months prior to deployment, Navy ERP conducts
a Deployment Planning Kickoff Meeting with Command to discuss lessons
learned including data conversion and cleansing. Navy ERP communicates
the need to limit the conversion only to the data needed to execute in
Navy ERP. Additionally, Navy ERP hosts a Data Conversion Workshop with
Command to review the data conversion requirements, determine what data
objects are required from each legacy system data and finalize plans
for moving forward, to include the status of Command on-going data
cleaning efforts.
Navy ERP and the Command jointly developed a Data Conversion
Strategy and Data Load Plan. The Data Conversion Strategy documents the
data required to support the conversions and the activities to be
performed by the legacy data owners in preparation for the cutover,
including validation and reconciliation. The plan is a detailed,
networked schedule of data conversion activities from legacy data
extraction through data load into the Navy ERP solution. The strategy
and plan includes multiple mock conversions and cutover practice to
validate data. During the mock conversions Navy ERP provides a sandbox
for the Commands to test business process scenarios using their own
data allows them the opportunity to test and validate data quality. The
Command's extensive use of this environment to complete all data
cleansing activities prior to deployment significantly improved the
quality of converted data and enabled commands to use the converted
data as part of their training which increased user readiness.
Successful application of the lessons learned, the extensive data
cleansing work by the System Commands and their partnering with Navy
ERP resulted in 100% data accuracy for the 3,659,908 converted data
objects for the Naval Sea Systems Command Working Capital Fund sites,
and 100% data accuracy for the 22,241,247 converted data objects for
the Fleet Logistic Centers and their partner sites prior to their
deployments in October and November 2011 respectively. Achieving 100%
data accuracy for converted data enables commands to complete cutover
activities and resume full operations in Navy ERP in approximately six
weeks which minimizes impact to command business and ability to support
fleet operations.
The lessons learned from the contamination of ERPs by tainted data
is resolved up front prior to a unit's cutover into GCSS-MC. BLUF:
Contaminated data is NOT loaded into GCSS-MC. Questionable data is
``fenced off'' and arbitrated outside of the system. Once cleansed,
data is loaded in GCSS-MC. Procedurally, a thorough, 12-week cutover
process comprising of equipment accountability, personnel training, use
of a data cleansing tool, and testing (mock conversions) are conducted
before any equipment data is loaded into the system. This stringent
process screens/filters is attributable to a high level of data
cleanliness. As previously mentioned, all questionable data is
identified and segregated for causative analysis by the unit to
adjudicate outside of the system and, once the data is cleansed, it is
loaded into GCSS-MC. To date, using unit data accuracy is 99% and
Marine Corps Logistics Command data accuracy is 98% (with 1%-2% being
resolved outside of the system).
Mr. Conaway. As the ERPs are implemented, what type of training is
each of the users receiving? Is this training incorporated into broader
training explaining the importance of good financial management?
Mr. Fanning. Navy ERP end user training strategy incorporates best
practices learned from years of private industry experience in training
end users of ERP systems. Navy ERP's Business Process Experts, FMO and
DFAS participate in all financial functional testing to ensure the
system supports existing financial policy/guidance (FMR and U.S.
Treasury). Navy ERP training strategy is based on knowledge transfer
between the functional and business process experts at Navy ERP, Navy
Financial Management Office (FMO) and those at each of the Systems
Commands. That transfer begins with extensive business process
workshops 18-24 months prior to deployment. The transfer continues
through a Train-the-Trainer event generally scheduled four months prior
to go-live. The knowledge gained by the deploying command's business
process experts is transferred to the command's end users through just
in time training events generally scheduled from two months prior to
go-live to two months after. Finally, the knowledge transfer is
continued through Navy ERP Program Office functional experts deployed
to each command site providing over-the-shoulder support directly to
command end users from three months prior to deployment through six
months post-deployment to ensure effective business operations through
the transition period. Basic users, those using primarily time and
attendance functions, receive training through Web Based Training
course. Power Users, those using more functionality and may have
multiple roles, receive Instructor Lead Training provided by their
Command's trainers and business process experts. For example,
approximately 21,000 basic users and 9,854 power users were trained for
the NAVSEA Working Capital Fund deployment and approximately, 4,500
basic users and 807 power users were trained for the November
deployment of the Single Supply Solution to Fleet Logistics Centers and
their partner sites.
The Navy ERP Program Office develops and maintains standard
training materials. These incorporated both Navy standard financial
management guidelines from Navy FMO and industry best practices. The
training material consists of:

Presentations containing business processes and best
practice business rules

Step-by-step work instructions

Hands-on exercises and supporting data

Simulations of Navy ERP transactions

Deploying commands have the option of supplementing the standard
training materials with additional command-specific information,
generally in the form of local business rules and command-specific data
sets for hands-on exercises thereby enhancing the importance of the
command financial management practices. The Navy ERP Program Office
maintains a live training environment for hands-on exercise and
practice. The configuration of the training environment is updated to
mirror the Production environment once each quarter. The data is
revised regularly to reflect changed or new functionality.
GIT works with our Business Process in developing the training
materials. GIT is not the owner or lead of the functionality. We get
guidance from our BP Teams. Our BP Leads, including Financial BP Leads,
work with FMO on development, testing, review and validation of the
functionality and compliance matters. The implementation of training
and its development for GCSS-MC is twofold. First, training is
incorporated into the 12-week cutover process for using units to train
users on their Role-Based Access (RBAC) within GCSS-MC. Second, Marine
Corps, Training Education Command recently implemented a formal
training curriculum for the Formal MOS-producing schools at Marine
Corps Combat Service Support Schools (MCCSSS). As with any new
curriculum, revisions to the curriculum are being developed to closely
align usage of the system in the OpFors and Supporting Establishment.
The volume of training received is directly attributable to their
specific role within the system (e.g., entry-level users vs
supervisors/managers). The formal training developed by TECOM addresses
the macro-level issue of good financial management depending on RBAC
(e.g., supply or fiscal personnel) from an ethical perspective for
requisitions as stewards of taxpayer dollars.

Mr. Conaway. Please provide the number of ``legacy'' systems
currently in use to support business functions (e.g., financial
management, acquisitions, logistics, personnel, etc) for each Service
and the Fourth Estate. For each of the ERPs being implemented, please
provide the number of legacy systems that will be retired and the
estimated cost savings or cost avoidance once each of these ERPs are
implemented. Furthermore, provide an explanation for the reasoning for
not retiring the systems that will not be retired once the ERPs are
implemented.
Mr. Tillotson. LOGISTICS SYSTEMS: There were approximately 400
logistics legacy systems identified and analyzed for ECSS processes, of
which 240 will be retired following ECSS full deployment. We estimate
information technology savings of $2B (10-yr lifecycle costs) after
ECSS is fully deployed. The persistent systems are a mix of classified
systems (ECSS is unclassified only), command- or program-specific
systems which manage local processes (e.g., training records or
production tooling), outside the scope of ECSS (e.g., military
construction and environmental management), or are jointly owned/
operated with another DOD component.
PERSONNEL AND PAY SYSTEMS: There are 32 personnel & pay legacy
systems within the AF, of which, 20 will be retired following AF-IPPS
full operational capability. We estimate $60M annually in savings on
sustainment costs after AF-IPPS is fully deployed. The scope of AF-IPPS
is focused upon executing the Pers/Pay mission, and retiring those
systems with the highest sustainment costs (including the Air Force
Military Personnel Data System (MILPDS) and Defense Joint Military Pay
System (DJMS)), producing the most immediate return on investment. The
remaining 12 systems are tangential to the core AF-IPPS mission of
enabling and executing Personnel to Payroll outcomes (e.g., Wounded
Warrior support, promotion board management) and are not targeted to be
subsumed into AF-IPPS.
FINANCIAL MANAGEMENT SYSTEMS: The Air Force uses 36 Financial
Management systems, 9 of which will be retired from use by the Air
Force with Defense Enterprise Accounting and Management System (DEAMS)
Full Operating Capability (FOC). At FOC the Air Force expects to save
on average $18M annually by the replacement of legacy information
technology systems. The remaining systems are not being subsumed
because they contain core functionality outside the DEAMS program scope
(e.g., Budget Formulation, Funds Distributions), or are being addressed
by other ERP systems (e.g., Military Pay in AF-IPPS, and Working
Capital Fund Accounting in ECSS).
Mr. Conaway. At what level are decisions made to retire/maintain
legacy systems and approve ERP customizations?
Mr. Tillotson. Decisions to retire or maintain legacy systems are
made at the Deputy Chief of Staff (3-star level) in Headquarters Air
Force. As a matter of course, we do not customize ERPs, but address
requirements outside core ERPs through Reports, Interfaces, Conversions
and Extensions (RICE).
Mr. Conaway. Historically, the quality and integrity of the data
undergoing conversion is a major contributor to schedule slippages and
cost increases for ERP systems. What lessons are you applying from past
problems with data conversion and data cleanliness to improve future
outcomes for ERP deployments?
Mr. Tillotson. The Air Force Integrated Personnel & Pay System (AF-
IPPS), Defense Enterprise Accounting & Management System (DEAMS) and
Expeditionary Combat Support System (ECSS) actions described below help
summarize the three lessons that we have learned from other ERP
efforts. First, initiate the data cleansing effort as early in the
acquisition process as possible. Second, the government should take the
primary role in getting data cleansed--instead of handing the work off
to an external vendor. Third, connect the data effort back to the
business rules to make sure every business process performance metric
is achieved.
We have made data cleansing an early and very deliberate part of
our ERP initiatives. Using lessons learned from the Army and other ERP
efforts, ECSS has established a Data Management Organization (DMO)
which has implemented ongoing data quality improvements and
measurements. The ECSS DMO cooperates with the DEAMS program office in
gathering data for review. The processes of the DMO are focused on
identifying and executing cleansing tasks in existing operational
systems, and these repeatable processes are adapted as additional data
quality concerns/targets are identified.
The Air Force has embarked on an extensive clean-up and data
cleansing effort to support transition to DEAMS and our other major
ERPs in the area of financial management data, To promote consistency
among the ERPs, we are also working to ensure data business rules are
uniform. Our Financial Management data management team reviews old,
unstructured legacy data elements and values, understanding what each
data element was designed to represent, and provides structure (one
value to one definition) to translate to Standard Financial Information
Structure (SFIS). The Air Force Financial Management Data Quality
Service (FM DQS) is the Air Force repository for FM data elements and
data element values. The Air Force ERPs validate any FM Data request
thru FM DQS. A dashboard tracks the data cleansing efforts for
management oversight and action. The Air Force also created an
application to track the status of open documents (data clean-up) in
the accounting system. Tri-Annual Review (TAR) is an application which
resides in the FMSuite system. The 3 times a year reviews concentrate
on identifying dormant obligations. Resource Advisors (RAs) research
each document for validity or closure. Additionally, organizational RAs
continually monitor the Open Document List (ODL) and take follow-up
action to close unsupported, duplicative, remaining balances, or
erroneous documents in the accounting system.
The Air Force has initiated a process for the AF-IPPS
implementation well ahead of system development, to ensure that we have
a controlled, mature data cleansing operation in place when the data is
needed to support development, testing, and transition activities for
AF-IPPS. Further, the Air Force is also constructing a Data Management
Environment (DME) which will provide the venue and tools for cleansing
Personnel and Pay data, and hosting the Services to make the data
available to authorized consumers. The DME will be built and tested
prior to AF-IPPS contract award.
Mr. Conaway. As the ERPs are implemented, what type of training is
each of the users receiving? Is this training incorporated into broader
training explaining the importance of good financial management?
Mr. Tillotson. For all the ERPs, the Air Force conducts (or plans
to conduct) role-based training which is aligned with the
implementation of the ERP and the new business processes. Integral to
the training is instruction in the processes and controls that assure
the completeness of transactional information critical to ensuring
adherence to financial and materiel controls. These detailed,
controlled processes are the strength of ERPs.
The DEAMS program will continue role-based training as we move
forward with deployments. DEAMS-specific training is currently grouped
into four major categories--DEAMS/Oracle Familiarization Training,
Initial Deployment Training, Sustainment/Recurring Training, and Post
Deployment/Pipeline Training. DEAMS takes a blended-learning approach
to training, i.e., training is delivered using a variety of methods
including classroom Instructor Led Training (ILT), Web Based Training
(WBT), and Computer Based Training (CBT). Future options will include
delivery of instruction via Video Teleconferencing (VTC), Defense
Connect Online (DCO), or similar capabilities. DEAMS training will be
developed in accordance with AETC standards. In its final form, DEAMS
training will be hosted on the AF Learning Management System (LMS) and
accessed through the Financial Management Distance Learning Center
(FMDLC) which can be utilized for delivering computer based training
(CBT). Training materials will be made available via the FMDLC for
access across the enterprise during deployment and post-deployment
sustainment.
ECSS training will be conducted through a blended learning approach
to include a combination of role-based, instructor-led, and computer
based training courses. Training materials will be made available in a
centralized location to allow for management across the enterprise
during fielding and post-fielding sustainment. In addition, end users
will have access to training materials in the Online Performance
Support System (OPSS) within the ECSS application.
For AF-IPPS, we are addressing training as a subset of our
strategic change management effort, preparing the entire workforce for
the integration of Personnel and Pay. This will include training all
500,000+ Airmen as customers of AF-IPPS--and will include an extensive
effort to train each Personnel & Pay technician on how to operate the
new environment on behalf of the end-users. As noted above, the
training will be role-based, and focus not only the software, but also
upon how the end-to-end business process will execute. Each of the 105
Personnel and Pay business processes will be pre-defined to include the
specific performance metrics, along with the auditing standards
required to demonstrate financial control as transactions are engaged.
The AF-IPPS training materials and classes will be built around the
end-to-end processes to ensure our workforce is prepared to both run
and use AF-IPPS immediate upon deployment.