DOD Business Transformation: Preliminary Observations on the	 
Defense Travel System (29-SEP-05, GAO-05-998T). 		 
                                                                 
The Department of Defense (DOD) has been working to develop and  
implement a standard end-to-end travel system for the last 10	 
years. Congress has been at the forefront in addressing issues	 
related to DOD's travel management practices with the hearing	 
today being another example of its oversight efforts. Because of 
widespread congressional interest in the Defense Travel System	 
(DTS), GAO's current audit is being performed under the statutory
authority given to the Comptroller General of the United States. 
GAO's testimony is based on the preliminary results of that audit
and focuses on the following three key questions: (1) Has DOD	 
effectively tested key functionality in DTS related to flights	 
and fare information? (2) Will DTS correct the problems related  
to DOD travel previously identified by GAO and others? and (3)	 
What challenges remain in ensuring that DTS achieves its goal as 
DOD's standard travel system? In addition, the Subcommittee asked
that GAO provide a description of the intellectual property	 
rights of DOD in DTS. Subsequent to this testimony, GAO plans to 
issue a report that will include recommendations to the Secretary
of Defense aimed at improving the department's implementation of 
DTS.								 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-05-998T					        
    ACCNO:   A38697						        
  TITLE:     DOD Business Transformation: Preliminary Observations on 
the Defense Travel System					 
     DATE:   09/29/2005 
  SUBJECT:   Data integrity					 
	     Performance measures				 
	     Schedule slippages 				 
	     Systems analysis					 
	     Systems design					 
	     Systems evaluation 				 
	     Systems management 				 
	     Systems testing					 
	     Travel						 
	     Travel vouchers					 
	     Defense Travel System				 

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GAO-05-998T

United States Government Accountability Office

GAO Testimony

Before the Permanent Subcommittee on Investigations, Committee on Homeland
Security and Governmental Affairs, U.S. Senate

For Release on Delivery

Expected at 9:30 a.m. EST DOD BUSINESS

Thursday, September 29, 2005

TRANSFORMATION

             Preliminary Observations on the Defense Travel System

Statement of McCoy Williams
Director, Financial Management and Assurance

Keith A. Rhodes
Chief Technologist, Applied Research and Methods
Center for Engineering and Technology

GAO-05-998T

[IMG]

September 29, 2005

DOD BUSINESS TRANSFORMATION

Preliminary Observations on Defense Travel System

                                 What GAO Found

DTS development and implementation have been problematic, especially in
the area of testing key functionality to ensure that the system will
perform as intended. Consequently, critical flaws have been identified
after deployment, resulting in significant schedule slippages as shown
below.

DTS Schedule Slippages

GAO's recent analysis of selected requirements disclosed that system
testing was ineffective in ensuring that the promised capability has been
delivered as intended. For example, GAO found that DOD did not have
reasonable assurance that DTS properly display flight and airfare
information. This problem was not detected prior to deployment, since DOD
failed to properly test system interfaces. Accordingly, DOD travelers
might not have received accurate information which, could have resulted in
higher travel costs.

DTS has corrected some of the previously reported travel problems but
others remain. Specifically, DTS has resolved the problem related to
duplicate payment for airline tickets purchased with the centrally billed
accounts. However, problems remain related to improper premium class
travel, unused tickets that are not refunded, and accuracy of traveler's
claims. These remaining problems cannot be resolved solely within DTS and
will take departmentwide action to address.

GAO identified two key challenges facing DTS in becoming DOD's standard
travel system: (1) developing needed interfaces and (2) underutilization
of DTS at sites where it has been deployed. While DTS has developed 32
interfaces with various DOD business systems, it will have to develop
interfaces with at least 17 additional systems-not a trivial task.
Furthermore, the continued use of the existing legacy travel systems
results in underutilization of DTS and affects the savings that DTS was
planned to achieve. Components incur additional costs by operating two
systems with the same function-the legacy system and DTS-and by paying
higher processing fees for manual travel vouchers as opposed to processing
the travel vouchers electronically through DTS.

                 United States Government Accountability Office

Mr. Chairman and Members of the Subcommittee:

Thank you for the opportunity to discuss our preliminary results of the
Department of Defense (DOD) efforts to develop and implement a new
standard end-to-end travel system.1 Over 10 years ago, the DOD Task Force
to Reengineer Travel issued a report that pinpointed three principal
causes for DOD's inefficient travel system: (1) travel policies and
programs were focused on compliance with rigid rules rather than mission
performance, (2) travel practices did not keep pace with travel management
improvements implemented by industry, and (3) the travel system were not
integrated. To address these concerns, DOD established the Project
Management Office-Defense Travel System (PMO-DTS) to acquire travel
services that would be used DOD-wide. This Subcommittee has been at the
forefront in addressing issues related to DOD's travel management
practices. Continued oversight activities such as this hearing can help
ensure that DOD achieves its long-standing goal of successfully
implementing a standard travel management system. We look forward to
continuing to work with the Subcommittee.

Because of widespread congressional interest in the Defense Travel System
(DTS), our current audit is being performed under the statutory authority
given to the Comptroller General of the United States. Our testimony today
is based on the preliminary results of that audit. Although we discussed
the preliminary findings included in our testimony with DOD officials, we
have not yet provided the department with our draft report for comment.
Subsequent to this testimony, we plan to issue a report that will include
recommendations to the Secretary of Defense aimed at improving the
department's management and oversight of DTS.

1 DOD expects DTS to perform all functions related to travel or ensure
that other systems are provided with adequate information to provide this
functionality. For example, obligating funds associated with travel is a
necessary function and DTS is expected to (1) make sure that adequate
funds are available before authorizing travel either through information
contained in its system or by obtaining the necessary information from
another system, (2) obligate funds through issuance of approved travel
orders, and (3) provide DOD's financial management systems with the
necessary information so that those systems can record the obligation.
Since DTS is required to ensure that all travel related functionality is
properly performed, DOD commonly refers to DTS as an "end-to-end system."

Today, our testimony will focus on the following three key questions:

o  	Has DOD effectively tested key DTS functionality related to flights
and fare information?

o  	Will DTS correct the internal control weaknesses and improper payments
previously identified?

o  	What challenges remain in ensuring that DTS achieves its goal as DOD's
standard travel system?

In addition, for the hearing today, you asked us for a description of
DOD's property rights in DTS. We address this issue in appendix I.

To address the first key question, we reviewed two key DTS flight-related
requirements and the related testing to determine if the desired
functionality was effectively implemented. To address the second key
question, we analyzed (1) our prior reports and testimonies, (2) selected
Defense Finance and Accounting Service (DFAS) reports, and (3) DOD
congressional testimonies to identify the specific problems that DTS was
intended to resolve. We also randomly selected for detailed review travel
vouchers and transactions drawn from the first quarter of fiscal year 2005
(October-December 2004) to determine if DTS calculation problems
identified by DFAS had been resolved.2 To address the third key question,
we discussed with the PMO-DTS the deployment of DTS as it relates to the
transmission of data such as finance and accounting information, between
DTS and the other systems belonging to DOD, as well as the private sector.

We also analyzed DOD data related to the utilization of DTS throughout
DOD. We determined that the DOD data we used as the basis for the
preliminary evaluation in the testimony were sufficiently reliable by (1)
performing electronic testing of required data elements, (2) reviewing
existing information about the data and the system that produced them, and
(3) interviewing agency officials knowledgeable about the data. We
performed our work from October 2004 through September 2005 in accordance
with U.S. generally accepted government auditing standards. Details of our
scope and methodology are included in appendix II.

Summary 	DTS's development and implementation have been problematic,
especially in the area of requirements and testing key functionality to
ensure that the

2 Defense Finance and Accounting Service, Statistical Operations and
Review Branch, Military and Civilian Pay Services Defense Travel System:
Results of Post Payment Reviews, 1st Quarter, FY 2004 (Kansas City, Mo.:
undated).

system would perform as intended. Thus, it is not surprising that critical
flaws have been identified after deployment, resulting in significant
schedule slippages. As originally envisioned, the initial deployment of
DTS was to commence within 120 days after the effective date of contract
award in September 1998, with complete deployment to approximately 11,000
locations by April 2002. However, that date has been changed to September
2006-a slippage of over 4 years. Our recent analysis of selected
requirements for one key area disclosed that system testing was
ineffective in ensuring that the promised capability was delivered as
intended. For example, we found that DOD did not have reasonable assurance
that flight information was properly displayed.3 This problem was not
detected prior to deployment since DOD failed to properly test the system
interfaces through which the data is accessed. Accordingly, DOD travelers
might not have received accurate information on available flights, which
could have resulted in higher travel costs. PMO-DTS officials have
acknowledged that the problem has existed since the implementation of the
system. PMO-DTS officials have indicated that the problem was corrected in
an August 2005 release of the software. We are in the process of following
up to determine whether the corrective actions have resolved the problem
and will include the results in our report that will be issued subsequent
to the testimony.

DTS has corrected some of the previously reported internal control
weaknesses, while others remain. We previously reported that as a result
of a breakdown in internal controls and a weak control environment, DOD
has (1) paid for improper premium class travel, (2) failed to redeem
unused airline tickets, and (3) paid twice for the same airline ticket
when using the centrally billed accounts (CBA). 4 In commenting on our
reports and in congressional testimony, the department has stated that
DTS, to varying degrees, will help resolve these problems. In addition to
our audit related issues, DFAS's Kansas City Statistical Operations and
Review

3 Flight information includes items such as departure and arrival times,
airports, and the cost of the airline ticket.

4 GAO, Travel Cards: Internal Control Weaknesses at DOD Led to Improper
Use of First and Business Class Travel, GAO-04-88 (Washington, D.C.: Oct.
24, 2003); GAO, Travel Cards: Internal Control Weaknesses at DOD Led to
Improper Use of First and Business Class Travel, GAO-04-229T (Washington,
D.C.: Nov. 6, 2003); GAO, DOD Travel Cards: Control Weaknesses Led to
Millions of Dollars Wasted on Unused Airline Tickets, GAO-04-398
(Washington, D.C.: Mar. 31, 2004); GAO, DOD Travel Cards: Control
Weaknesses Led to Millions of Dollars of Improper Payments, GAO-04-576
(Washington, D.C.: June 9, 2004); GAO, DOD Travel Cards: Control
Weaknesses Led to Millions in Fraud, Waste, and Improper Payments,
GAO-04-825T (Washington, D.C.: June 9, 2004).

Branch has previously reported inaccuracies with DTS's travel payments of
airfare, lodging, meals, and incidental expenses.5 First, although DOD has
taken numerous actions to improve existing guidance and controls related
to premium class travel, including system changes in DTS, our preliminary
results indicate that unauthorized premium class travel continues. This
continuing problem is not the fault of DTS but rather the lack of
adherence to departmental policy. Second, as currently designed, DTS
cannot determine whether a traveler has not used all or a portion of an
airline ticket, unless the traveler requests that the commercial travel
office (CTO) process a credit for the unused portion of the airline
ticket. To address the problem, the department now requires certain CTOs
to run unused ticket reports that identify tickets that were not used
within a specified time period, usually 30 days past the trip date. Third,
in regard to duplicate payment for the same ticket, we have observed that
DTS is designed to ensure that tickets purchased through the CBA cannot be
claimed on the individual's travel voucher as a reimbursement to the
traveler, thus eliminating this problem.

Finally, we randomly sampled 170 travel vouchers6 for the period October
1, 2004, to December 31, 2004,7 to ascertain if the problems previously
reported by DFAS had been resolved. From our preliminary results for the
attributes tested, we found that DTS calculated the lodging and meal
reimbursements correctly based upon information provided by the traveler.
However, we identified instances in which human error, either by the
travelers or the authorizing officials (AO), resulted in the amount of
reimbursement to the traveler being questionable. For example, the
department's policy prescribes the use of a compact car as the norm,
unless otherwise authorized by the AO. We found eight cases in which the
traveler rented a vehicle other than a compact without the proper
authorization. We found no evidence that the AOs questioned why
departmental policy was not followed.

5 Defense Finance and Accounting Service, Statistical Operations and
Review Branch, Military and Civilian Pay Services Defense Travel System:
Results of Post Payment Reviews, 1st Quarter, FY 2004 (Kansas City, Mo.:
undated).

6 We randomly selected 173 travel vouchers for detailed review, but at the
time of our review, 3 vouchers had not yet been completed and submitted
for review.

7 The vouchers selected for review were those trips in DTS where (1) the
trip started on or after October 1, 2004, and (2) the trip ended on or
before December 31, 2004.

To become the standard travel system within DOD, DTS has faced and will
continue to face challenges-some of which are beyond the control of the
DTS program. Our testimony today focuses on two of those challenges: (1)
developing needed interfaces and (2) underutilization of DTS at sites
where it has been deployed. To date, DTS has developed 32 interfaces with
various DOD business systems and going forward interfaces will have to be
developed with 17 additional business systems. According to the PMO-DTS, a
reported $30 million has been spent on developing and testing the
interfaces. Some of these systems, such as the Army's General Fund System,
are critical to DOD's modernization of business systems and operations.
According to the PMO-DTS, the availability of funding to develop the
interfaces is uncertain. Unless these interfaces are successfully
developed and implemented, it will be virtually impossible for DTS to be a
truly end-to-end business system.

The continued use of the existing legacy travel systems at locations where
DTS is already deployed underutilizes DTS and reduces the savings the DTS
was planned to achieve. For example, the Army has acknowledged that legacy
systems are operating at locations where DTS has been deployed. As a
result, DOD is spending funds on duplicative systems- legacy systems and
DTS. Additionally, because of the continued operation of the legacy
systems at locations where DTS has been fully deployed, DOD components may
pay DFAS a higher processing fee for processing manual travel vouchers as
opposed to processing the travel voucher electronically through DTS. For
example, for the period October 1, 2004, to February 28, 2005, the Army
paid DFAS approximately $6 million to process 177,000 travel vouchers
manually-$34 per travel voucher, versus about $186,000 to process 84,000
travel vouchers electrically-$2.22 per voucher. Overall, for this 5-month
period, it cost the Army about $5.6 million more to process these travel
vouchers manually as opposed to electronically using DTS.

Background 	Twelve years ago, in September 1993, the National Performance
Review called for an overhaul of DOD's temporary duty (TDY) travel system.
In response, DOD created the DOD Task Force to Reengineer Travel to
examine the process. In January 1995, the task force issued the Report of
the Department of Defense Task Force to Reengineer Travel.8 The Task

8 DOD, Report of the Department of Defense Task Force to Reengineer Travel
(Washington, D.C.: January 1995).

Force's report pinpointed three principal causes for DOD's inefficient
travel system: (1) travel policies and programs were focused on compliance
with rigid rules rather than mission performance, (2) travel practices did
not keep pace with travel management improvements implemented by industry,
and (3) the travel system was not integrated.

On December 13, 1995, the Under Secretary of Defense for Acquisition,
Technology, and Logistics and the Under Secretary of Defense
(Comptroller)/Chief Financial Officer issued a memorandum, "Reengineering
Travel Initiative," establishing the PMO-DTS to acquire travel services
that would be used DOD-wide. Additionally, in a 1997 report to the
Congress, the DOD Comptroller pointed out that the existing DOD TDY travel
system was never designed to be an integrated system.9 Furthermore, the
report stated that because there was no centralized focus on the
department's travel practices, the travel policies were issued by
different offices and the process had become fragmented and "stovepiped."
The report further noted that there was no vehicle in the current
structure to overcome these deficiencies, as no one individual within the
department had specific responsibility for management control of the TDY
travel system.

To address these concerns and after the use of competitive procedures, the
department awarded a firm fixed-price, performance-based services contract
to BDM International, Inc. (BDM) in May 1998. In September 1998, we upheld
the department's selection of BDM.10 Under the terms of the contract, the
contractor was to start deploying a travel system and to begin providing
travel services for approximately 11,000 sites worldwide, within 120 days
of the effective date of the contract, completing deployment approximately
38 months later. The contract specified that, upon DTS's achieving initial
operational capability (IOC),11 BDM was to be

9 Office of the Under Secretary of Defense (Comptroller): Department of
Defense Travel Reengineering Pilot Report to Congress (June 1997).

10 The competitor, Electronic Data Systems Corporation (EDS), had alleged
that the department improperly evaluated the two offers by: (1)
undervaluing the estimated savings to the department by EDS's proposed
accelerated DTS deployment schedule; (2) failing to hold "discussions"
with EDS on the proposed accelerated deployment schedule; and (3) omitting
from consideration certain department evaluation team members' concerns
about EDS's staffing level for operation and maintenance of the DTS.
Matter of Electronic Data Systems Corporation, B-280133; B-280133.2 (Sept.
3, 1998).

11 IOC represents the first attainment of the minimum capability to
effectively employ a system of approved specific characteristics.

paid a one-time deployment fee of $20 for each user and a transaction fee
of $5.27 for each travel voucher processed. The estimated cost for the
contract was approximately $264 million. Prior to commencing the work, BDM
was acquired by TRW Inc. (TRW), which became the contractor of record.

The operational assessment of DTS at Whiteman Air Force Base, Missouri,
from October through December 2000, disclosed serious failures. For
example, the system's response time was slower than anticipated, the
result being that it took longer than expected to process a travel
order/voucher. Because of the severity of the problems, in January 2001, a
joint memorandum was issued by the Under Secretary of Defense
(Comptroller) and the Deputy Under Secretary of Defense (Acquisition,
Technology & Logistics) directing a functional and technical assessment of
DTS. The memorandum also directed that a determination be made of any
future contract actions that would be necessary, based on the assessment
results. In July 2001, the Under Secretary of Defense (Comptroller) and
the Under Secretary of Defense (Acquisition, Technology & Logistics)
approved proceeding with the DTS program and restructuring the contract
with TRW.

The TRW contract was restructured through a series of contract
modifications which were finalized on March 29, 2002. The Government
agreed to provide TRW consideration in the amount of about $44 million for
restructure of the contract. TRW agreed to release and discharge the
Government from liability and agreed to waive any and all liabilities,
obligations, claims and demands related to or arising from its early
performance efforts under the original contract. Northrop Grumman
subsequently acquired TRW in December 2002, and, as such, is now the
contractor of record.

The first deployment of DTS was at Ellsworth Air Force Base, South Dakota,
in February 2002. As of September 2005, DTS has been deployed to
approximately 5,600 locations. The department currently estimates that DTS
will be fully deployed to all 11,000 locations by the end of fiscal year
2006, with an estimated total development and production cost of
approximately $474 million. Of this amount, the contract for the design,
development, and deployment of DTS, as restructured is worth approximately
$264 million-the same amount as specified in the original contract that
was agreed to with BDM. The remaining costs are DOD internal costs
associated with areas such as the operation of the program management
office, the voucher payment process, and management of the numerous CTO
contractors.

Previously Reported DOD Travel Issues

o

o

o

  Ongoing DTS Testing Remains a Concern

Over the past several years, we have reported pervasive weaknesses in
DOD's travel program. These weaknesses have hindered the department's
operational efficiencies and have left it vulnerable to fraud, waste, and
abuse. These weaknesses are highlighted below.

On the basis of statistical sampling, we estimated that 72 percent of the
over 68,000 premium class airline tickets DOD purchased for fiscal years
2001 and 2002 were not properly authorized and that 73 percent were not
properly justified. During fiscal years 2001 and 2002, DOD spent almost
$124 million on airline tickets that included at least one leg of the trip
in premium class-usually business class. Because each premium class ticket
costs the government up to thousands of dollars more than a coach class
ticket, unauthorized premium class travel resulted in millions of dollars
of unnecessary costs annually.12

Because of control breakdowns, DOD paid for airline tickets that were
neither used nor processed for refund-amounting to about 58,000 tickets
totaling more than $21 million for fiscal years 2001 and 2002. DOD was not
aware of this problem before our audit and did not maintain any data on
unused tickets. Based on limited data provided by the airlines, it is
possible that the unused value of the fully and partially unused tickets
that DOD purchased from fiscal year 1997 through fiscal year 2003 with
DOD's CBA could be at least $100 million.13

We found that DOD sometimes paid twice for the same airline ticket-first
to the Bank of America for the monthly DOD credit card bill, and second to
the traveler, who was reimbursed for the same ticket. Based on our mining
of limited data, the potential magnitude of the improper payments was
27,000 transactions for over $8 million. For example, DOD paid a Navy
GS-15 civilian employee approximately $10,000 for 13 airline tickets he
had not purchased.14

DTS development and implementation have been problematic, especially in
the area of requirements and testing key functionality to ensure that the
system would perform as intended. Given the lack of adherence to such a
key practice, it is not surprising that critical flaws have been
identified after deployment, resulting in significant schedule slippages.
As originally envisioned, the initial deployment of DTS was to commence
120 days after

12 GAO-04-88 and GAO-04-229T.
13 GAO-04-398.
14 GAO-04-576.

the effective date of the contract award in September 1998, with complete
deployment to approximately 11,000 locations by April 2002. However, that
date has been changed to September 2006-a slippage of over 4 years. Our
recent analysis of selected requirements disclosed that the testing of DTS
is not always adequate prior to updated software being released for use by
DOD personnel. System testing is a critical process utilized by
organizations to improve an entity's confidence that the system will
satisfy the requirements of the end user and will operate as intended.
Additionally, an efficient and effective system testing program is one of
the critical elements that need to be in place in order to have reasonable
assurance that an organization has implemented the disciplined processes15
necessary to reduce project risks to acceptable levels in software
development. In one key area, our results to date have identified
instances in which the testing of DTS was inadequate, which precluded DOD
from having reasonable assurance that DTS displayed the proper flights and
airfares. This occurred because the PMO-DTS failed to ensure that the
appropriate system interfaces were tested. Additionally, because a system
requirement covering this had never been defined, there was not reasonable
assurance that DTS displayed the accurate number of flights and related
airfares within a given flight window.16 As a result of these two
weaknesses, DOD travelers might not have received accurate information on
available flights and airfares, which could have resulted in higher travel
costs. Specific details on these two weaknesses are discussed below.

o  	The DOD tests for determining whether DTS displayed the proper flights
and airfares did not provide reasonable assurance that the proper (1)
flights were displayed and (2) airfares for those flights were displayed.
DTS uses a commercial product to obtain information from the database that
contains the applicable flight and airfare information (commonly referred
to as a Global Distribution System or [GDS]). In testing whether DTS
displayed the proper flights and airfares, the information returned from
the commercial product was compared with the information displayed in DTS
and was found to be in agreement. However, the commercial product did not
provide all of the appropriate flights or

15 Disciplined processes for software development and implementation
include a wide range of activities, including project planning and
oversight, requirements management, risk management, and testing.

16 A flight window is the amount of time before and after a specified time
and is used for determining the flights that should be displayed. For
example, if the flight window is 4 hours and estimated departure time is
9:00 a.m., then the flight window that is used for displaying available
flights is from 7:00 a.m. to 11:00 a.m.

airfares to DTS that were contained in the GDS. Since the PMO-DTS

neither performed an end-to-end test17 nor made sure that the information
returned from this commercial product was in agreement with the
information contained in the GDS, it did not have reasonable assurance
that DTS was displaying the proper flights and airfares information to the
users. According to DOD officials, this system weakness was detected by
users complaining that DTS did not display the proper flights and
airfares.

o  DOD officials stated that prior to the August 2005 system update, DTS

should have displayed 12 flights, if that many flights were available,
within

a flight window.18 DTS program officials and Northrop Grumman personnel
acknowledged that this particular system requirement had never been tested
because DOD failed to document the requirement until January 2005.
Therefore, DOD did not have reasonable assurance that DTS displayed the
required number of flights and related airfare information. The inability
to ensure that the proper number of flights was displayed could have
caused DOD to incur unnecessary travel cost. As we have noted in previous
reports, requirements that are not defined are unlikely to be tested.19

PMO-DTS officials acknowledged that these two problems have been ongoing
since the initial implementation of DTS. PMO-DTS officials have stated
that the two problems were corrected as part of the August 2005 DTS system
update. We are in the process of verifying whether the actions taken by
DOD will correct the problems.

Of the four previously reported DOD travel problems, DTS has corrected one
of the problems while the others remain. However, the remaining problems
are not necessarily within the purview of DTS and may take departmentwide
action to fully address.

17 The purpose of end-to-end testing is to verify that a defined set of
interrelated systems, which collectively support an organizational core
business area or function, interoperate as intended in an operational
environment.

18 Prior to the August 2005 system update, DTS used a 4-hour flight window
for domestic flights and a 12-hour flight window for foreign flights. The
current window is 12-hours for domestic flights and 24-hours for foreign
destinations.

19 GAO, Indian Trust Funds: Challenges Facing Interior's Implementation of
New Trust Asset and Accounting Management System, GAO/T-AIMD-99-238
(Washington, D.C.: July 14, 1999).

  DTS Has Corrected Some Previously Reported Travel Problems

Improper Premium Class Travel

While DOD has taken actions to improve existing guidance and controls
related to premium class travel, including system changes in DTS, we
identified instances in which unauthorized premium class travel continues.
In November 2003, the Under Secretary of Defense (Personnel and Readiness)
formed a task force to address our prior recommendations20 that focused on
three major areas: (1) policy and controls of travel authorization, (2)
ticket issuance and reporting, and (3) internal control and oversight.
Subsequently, several policy changes were made to improve the control and
accountability over premium class travel. For example, the approval level
for first class travel was elevated to a three-star general and for
business class travel to a two-star general or civilian equivalent. Other
changes included strengthening the description of circumstances when
premium class travel may be used to more clearly show that it is an
exceptional circumstance and not a common practice. In all cases,
approving officials must have their own premium class travel approved at
the next level. These changes also set a broad policy that CTOs are not to
issue premium class tickets without proper authorization. In September
2004, the PMO-DTS made system changes to DTS that blocked seven fare codes
that were considered to be premium class fare codes from being displayed
or selected by the traveler through DTS. According to the PMO-DTS, the
airline industry does not have standardized fare code indicators to
identify first class, business class, and economy class. Subsequently, DOD
found that economy class fare codes were being blocked using the seven
codes and in May 2005, reduced the list to three codes.

Despite these various changes in policy and to DTS, we continue to
identify instances in which premium class travel is occurring without the
proper authorization. To date, our preliminary analysis disclosed at least
68 cases that involved improperly approved premium class travel.21 In one
case, we found that a Department of the Army civilian employee (GS-12)
flew from Columbia, South Carolina via Atlanta, Georgia to Gulf Port,
Mississippi to attend a conference. On the return trip, one leg included

20 GAO-04-88.

21 To assess the use of premium class travel, we obtained databases from
Bank of America and the PMO-DTS, which provided information on the actual
travel transactions and traveler information for the period
October-December 2004. The Bank of America database contained all DOD
transactions for the first quarter of fiscal year 2005, and the PMO-DTS
database contained all vouchers processed by DTS for the same time period.
We identified potentially 419 cases that could involved premium class
travel. We are still in the process of reviewing information requested
from DOD to ascertain if there are other cases of improper premium class
travel.

first class accommodations. From our review and analysis of Bank of
America data and the travel voucher, DOD paid $1,107 for the airfare. The
cost of a GSA city pair round trip airfare was $770. According to
information provided by the Army, the traveler informed the Army that he
was meeting another traveler at the destination and they were going to
share a rental car and there were no seats available on the flight the
other traveler had booked. Therefore, the individual selected a flight
arriving as close as possible to the time of the traveler he was meeting.
This is not a valid justification, and the premium class fare was not
approved by the appropriate official. Additionally, the premium class fare
occurred on the return flight. Furthermore, based upon our review to date,
none of the 68 cases that involved improper premium class travel had the
required approval.

                             Unused Airline Tickets

DTS still does not have the capability to determine whether a traveler
does not use all or a portion of an airline ticket. To address this
problem, DOD directed that all new CTO contract solicitations require CTOs
to prepare that unused ticket reports which identify tickets that were not
used within a specified time period, usually 30 days past the trip date,
so that they can be cancelled and processed for refund. Additionally, the
various DOD components were directed to modify existing CTO contracts to
require the CTOs to process refunds for unused airline tickets. At the
five locations we visited22 we found that the Army and Air Force CTOs
prepared daily and monthly reports. The Navy CTOs produced the unused
ticket report on a weekly basis, and the Marine Corps CTOs prepared the
report monthly. However, according to DOD officials, this requirement has
not yet been implemented in all the existing CTO contracts.

Duplicate Payments Related to Centrally Billed Accounts (CBA).

Our preliminary observations indicate that DTS was designed to ensure that
tickets purchased through the CBA cannot be claimed on the individual's
travel voucher as a reimbursement to the traveler. As part of our
statistical sample discussed later, we found 14 travel vouchers in which
an airline ticket purchased with the CBA was included on the voucher;
however, the traveler did not receive reimbursement for the claim.

22 Aberdeen Proving Ground, Md.; Buckley Air Force Base, Colo.; Defense
Logistics Agency, Va.; Headquarters Marine Corps, Va.; and Naval
Operations Headquarters, Va.

Accuracy of Travel Vouchers

  DTS Faces Challenges in Achieving the Goal of a Standard DOD Travel System

DFAS has previously reported problems with the accuracy of DTS travel
payments. For the first quarter of fiscal year 2004, DFAS reported a 14
percent inaccuracy rate in the DTS travel payments of airfare, lodging,
and meals, and incidental expenses. Our preliminary analysis of 170 travel
vouchers23 disclosed that for the two attributes that are directly related
to the operation of the DTS system-computation of lodging reimbursement
and meals and incidental expenses (per diem)-the DTS calculations were
correct in all instances on the basis of the information provided by the
traveler. However, we continue to identify numerous instances in which
employee errors led to inaccurate reimbursements. In some cases, errors
occurred because incorrect data were entered into DTS by the traveler. In
other cases, the reviews by the AOs were inadequate. In regard to the AO
reviews, our preliminary analysis indicates that approximately 66 travel
vouchers or 39 percent were paid even though there was not reasonable
assurance that the amount of the reimbursement was accurate. More
specifically, 49 of 66 travel vouchers lacked adequate receipts for the
amounts claimed. Receipts are required for all expenses of $75 or more and
for lodging, regardless of the amount. However, for the 49 vouchers, we
saw no evidence that the AO was provided with the appropriate receipts by
the traveler. In one case, the traveler was reimbursed for expenses
claimed in excess of $500, even though none of the required receipts were
available for review and approval by the AO. According to DOD regulations,
"the AOs signature on the expense report certifies that the travel was
taken, that the charges are reasonable...and that the payment of the
authorized expenses is approved." While the signature of the AO signifies
that the payment is approved, it falls short of ensuring that amounts
claimed are reasonable in the cases in which receipts for airfare and
lodging are not provided. Until the overall review process is improved,
travel payment problems will continue to occur.

DOD's goal of making DTS the standard travel system within the department
depends upon the development, testing, and implementation of system
interfaces with the myriad of related DOD systems, as well as
private-sector systems such as the system used by credit card company that
provides DOD military and civilian employees with travel cards. While DOD
has developed 32 interfaces, the PMO-DTS is aware of at least 17

23 We randomly selected 173 travel vouchers for detail review, but at the
time of our review 3 vouchers had not yet been completed and submitted for
review. The selected vouchers were drawn from the first quarter of fiscal
year 2005 (October-December 2004).

additional DOD business systems for which interfaces must be developed. To
date, the development and testing of the interfaces has cost DOD
reportedly over $30 million. Developing the interfaces is time consuming
and costly. Additionally, the underutilization of DTS at the sites where
it has been deployed is also hindering the department's efforts to have a
standard travel system throughout the department. Furthermore, the
underutilization impacts the estimated savings that are to be derived from
the use of DTS departmentwide.

Interfaces Are Critical to Implementing an End-to-End System

One of DOD's long-standing problems has been the lack of integrated
systems. To address this issue and minimize the manual entry of data,
interfaces between existing systems must be developed to provide the
exchange of data that is critical for day-to-day operations. For example,
DTS needs to know before permitting the authorization of travel that
sufficient funds are available to pay for the travel-information that
comes

from a non-DTS system-and once the travel has been authorized, another
system needs to know this information so that it can record an obligation
and provide management and other systems with information on the funds
that remain available. Interfaces are also needed with private-sector
systems, such as the credit card company that provides DOD personnel with
travel cards. Figure 1 illustrates the numerous DTS system interfaces that
have already been developed and implemented with the department's business
systems.

Figure 1: DTS System Interfaces Operating Today

Figure 2 shows the DTS system interfaces that must be developed in the
future with the department's business systems.

Figure 2: Future DTS System Interfaces That Need to be Developed

While DOD was able to develop and implement the interfaces with the 32
systems, the development of each remaining interface will present the
PMO-DTS with challenges. For example, the detailed requirements for each
of the remaining interfaces have not yet been defined. Such requirements
would define (1) what information will be exchanged and (2) how the data
exchange will be conducted. This is understandable in some cases such as
the Army General Fund Financial enterprise resource planning (ERP),24
which is a relatively new endeavor within the department and it will be
some time before DOD is in position to start

24 An ERP solution is an automated system consisting of multiple,
integrated functional modules that perform a variety of business-related
tasks such as payroll, general ledger accounting, and supply chain
management.

development of the interface. Additionally, the development of the DTS
interfaces depends on other system owners' achieving their time frames for
implementation. For example, the Navy ERP is one of the DOD systems with
which DTS is to interface and exchange data. Any difficulties with the
Navy's ERP implementation schedule could adversely affect DTS's interface
testing and, thereby, result in a slippage in the interface being
implemented. The above two factors also affect DTS's ability to develop
reliable cost estimates for the future interfaces.

Underutilization of DTS Affects Estimated Savings

Another challenge for DTS in achieving its goal of a standard travel
system within DOD is the continued use of the existing legacy travel
systems, which are owned and operated by the various DOD components.
Currently, at least 31 legacy travel systems are continuing to be operated
within the department. As we have previously reported, because each DOD
component receives its own funding for the operation, maintenance, and
modernization of its own systems, there is no incentive for DOD components
to eliminate duplicative travel systems. 25 We recognize that some of the
existing travel systems, such as the Integrated Automated Travel System
version 6.0, cannot be completely eliminated because it performs other
functions, such as permanent change of station travel claims that DTS
cannot process. However, in other cases, the department is spending funds
on duplicative systems that perform the same function as DTS. The funding
of multiple systems that perform the same function is one of the reasons
why the department has 4,150 business systems.26 Since these legacy
systems are not owned and operated by DTS, the PMO-DTS does not have the
authority to discontinue their operation. This is an issue that must be
addressed from a departmentwide perspective.

Because of the continued operation of the legacy systems at locations
where DTS has been fully deployed, DOD components pay DFAS higher
processing fees for processing manual travel vouchers as opposed to
processing the travel vouchers electronically through DTS. According to an
April 13, 2005, memorandum from the Assistant Secretary of the Army
(Financial Management and Comptroller), DFAS was charging the Army $34 for
each travel voucher processed manually and $2.22 for each travel voucher
processed electronically-a difference of $31.78. The

25 GAO, DOD Business Systems Modernization: Billions Being Invested
without Adequate Oversight, GAO-05-381 (Washington, D.C.: Apr. 29, 2005).

26 GAO-05-381.

memorandum further noted that for the period October 1, 2004, to February
28, 2005, at locations where DTS had been deployed, the Army paid DFAS
approximately $6 million to process 177,000 travel vouchers manually-$34
per travel voucher, versus about $186,000 to process 84,000 travel
vouchers electronically-$2.22 per voucher. Overall, for this 5month
period, the Army reported that it spent about $5.6 million more to process
these travel vouchers manually as opposed to electronically using DTS.

The military services have recognized the importance of utilizing DTS to
the fullest extent possible. The Army issued a memorandum in September
2004 directing each Army installation to fully disseminate DTS to all
travelers within 90 to 180 days after IOC at each installation. The
memorandum included a list of sites that should be fully disseminated and
the types of vouchers that must be processed through DTS. Furthermore, the
memorandum noted that travel vouchers that could be processed in DTS
should not be sent to DFAS for processing. In a similar manner, in
February 2005, the Marine Corps directed that upon declaration of DTS's
IOC at each location, commands will have DTS fully fielded within 90 days
and will stop using other travel processes that have the capabilities of
DTS. The Air Force issued a memorandum in November 2004 that stressed the
importance of using DTS when implemented at an installation. The Navy has
not issued a similar directive.

Despite these messages, DTS remains underutilized by the military
services. The military services, and in particular, the Army, have taken
steps to monitor DTS's usage, but others, such as the Marine Corps, do not
capture the data necessary to assess the extent to which DTS is being
underutilized. The lack of pertinent data hinders management's ability to
monitor its progress toward the DOD vision of DTS as the standard TDY
system.

Overhauling DOD's financial management and business operations-one of the
largest and most complex organizations in the world-represents a daunting
challenge. DTS, intended to be the department's end-to-end travel
management system, illustrates some of the obstacles that must be overcome
by DOD's array of transformation efforts. With over 3.3 million military
and civilian personnel as potential travel system users, the sheer size
and complexity of the undertaking overshadows any such project in the
private sector. Nonetheless, standardized business systems across the
department will be the key to achieving billions of dollars of annual
savings through successful DOD transformation. As we have previously

  Concluding Remarks

reported, because each DOD component receives its own funding for the
operation, maintenance, and modernization of its own systems,
nonintegrated, parochial business systems have proliferated- 4,150
business systems throughout the department by a recent count. The
elimination of "stove-piped" legacy systems and cheaper electronic
processing, which could be achieved with the successful implementation of
DTS, are critical to realizing the anticipated savings.

In closing, we commend the Subcommittee for holding this hearing as a
catalyst for improving the department's travel management practices. We
also would like to reiterate that following this testimony, we plan to
issue a report that will include recommendations to the Secretary of
Defense aimed at improving the department's implementation of DTS.

Mr. Chairman and Members of the Subcommittee, this concludes our prepared
statement. We would be pleased to respond to any questions you may have.

Appendix I: Department of Defense Rights to Property in the Defense Travel
System

DOD has taken several steps to address its needs for the use of
intellectual and tangible property in the DTS, but it has not yet
completed the exercise of the rights it determined necessary for long-term
development and implementation of the DTS. While the original contract
awarded to BDM did not specifically address intellectual property rights,
TRW, as the successor to BDM, acquired in 2001 perpetual rights to use
three key commercial software programs to accommodate technology decisions
that necessitated modifying some software for use in DTS. When DOD and TRW
agreed to restructure the DTS contract, they modified the contract to
include several key provisions that provided DOD with rights to various
categories of intellectual and tangible property. As set out below, DOD
officials told us that they have yet to complete the exercise of some of
DOD's intellectual property rights and to secure title to hardware
necessary to meet its long-term acquisition needs, but those steps are in
progress.

Property Rights Under the Original DTS Contract

The original DTS contract awarded in 1998 did not specifically address the
Government's intellectual property rights because the contract was
structured primarily as a fixed-priced travel services contact rather than
as a government-funded development effort. As such, the contractor was
responsible for securing the necessary intellectual property rights in the
commercial software and other products being used, except for those
pertaining to existing DOD systems or used by DOD under other agreements.1
The fixed price for the services would include the cost to the contractor
to obtain or develop the necessary software, hardware, and technical data2
in order to provide the required travel services to DOD.

According to DOD officials, DOD and TRW determined in 2001 that three key
commercial software programs used in DTS would not meet DOD's requirements
without modification.3 Accordingly, in September 2001, TRW executed a
license agreement with the firm holding the copyright to the

1 Some software and technical data on existing DOD systems to be connected
to DTS were provided to the contractor as government-furnished equipment
or information.

2 "Technical data" means recorded information, regardless of the form or
method of the recording, of a scientific or technical nature (including
computer software documentation). The term does not include computer
software or data incidental to contract administration, such as financial
and/or management information.

3 In September 2001, DOD and TRW agreed to Modification No. 4 to Task
Order No. 10 to require software development work and, under this
modification, TRW was to provide DOD with a perpetual license for DTS
software.

software programs4 for TRW to use in developing and deploying DTS within
DOD.5 The firm charged TRW with a one-time fee for the rights under the
agreement.

Under the license agreement, TRW obtained a perpetual and exclusive
license to use the three software programs and related software
documentation to develop and deploy software and services for use in the
DTS. This license includes the authority to modify the source code to one
of the software programs. The license agreement authorizes the assignment
of TRW's rights under the agreement to DOD for the DTS project. The
license agreement does not expressly condition such an assignment on
payment of a fee. According to DOD officials, DOD has approached Northrop
Grumman Space & Mission Systems Corp. (Northrop Grumman), as the successor
to TRW, requesting assignment of those rights to DOD. In a September 22,
2005, letter to the DTS contracting officer, Northrop Grumman represented
that they would assign its rights under the license agreement to DOD at
the conclusion of the contract, if requested.

The license agreement also provides that Northrop Grumman may sublicense
its rights under the agreement to other entities in support of DTS. DOD
officials told us that they believe Northrop Grumman's assignment of these
rights to DOD would include the authority for DOD to sublicense the rights
to other DOD contractors for use in providing services related to DTS. The
DOD officials noted that they are in the process of modernizing the DTS
application to include a potential complete replacement of the licensed
software with custom developed software. The officials stated that they
are still evaluating whether an assignment of rights and issuance of any
sublicenses actually would be needed in light of these changes.

Property Rights Under the In the restructuring of the DTS contract, DOD
and TRW agreed to address

Restructured Contract 	a number of intellectual and tangible property
categories under the contract that DOD officials told us would satisfy
DOD's long-term DTS

4 The firm represented that it holds the copyright and title to one
commercial software program and acted as an authorized licensee with
respect to the other software programs and certain related data.

5 The license agreement also authorized limited use of the software,
source code and documentation on similar terms by the U.S. Treasury
Department and included terms for use of the software and executable code
by non-DOD federal government entities under the authority of "the Economy
Act."

development and implementation plans. The restructured contract
incorporated several standard DOD intellectual property rights clauses,
but DOD is still evaluating ownership rights related to key hardware used
in the DTS.

The restructured contract incorporates standard DOD intellectual property
rights clauses for a system being developed at government expense and it
specifically gives DOD perpetual rights to DTS software. The perpetual
rights for different categories of intellectual property generally depend
upon the source of the funding of their development. In particular, the
contract requires Northrop Grumman to "provide a perpetual license for DOD
use worldwide for DTS software" in accordance with certain standard
clauses or in accordance with standard commercial terms for commercial
software.6 Also, the contract incorporates a clause that requires Northrop
Grumman to grant or obtain for the government royalty free, world-wide,
nonexclusive, irrevocable license rights in technical data.7 Further,
these clauses include provisions that permit Northrop Grumman to assert
restrictions on the government's use, release or disclosure of technical
data and computer software, depending upon the funding of their
development.8 For commercial software used in the DTS, Northrop Grumman
has asserted restrictions applicable to commercial software licenses. Some
of the licenses Northrop Grumman obtained for use of commercial software
may be neither perpetual nor assignable to DOD, but DOD officials told us
that this does not cause risk to the project since there are available
alternative methods to acquire similar licenses. Table 1 sets out DOD's
rights in these categories. Finally, the contract incorporated a standard
clause governing restrictions DOD may place on information it provides to
Northrop Grumman for use under

9

the contract.

6 Specifically, these rights must be in accordance with Defense Federal
Acquisition Regulation Supplement (DFARS) clauses 252.227-7014, Rights in
Noncommercial Computer Software and Noncommercial Computer Software
Documentation, 252.2277019, Validation of Asserted Restrictions - Computer
Software, and 252.227-7037, Validation of Restrictive Markings, or
consistent with publicly available licenses for commercial computer
software and documentation.

7 DFARS clause 252.227-7013, Rights in Technical Data - Noncommercial
Items.

8 DFARS clauses 252.227-7013 and 252.227-7014.

9DFARS clause 252.227-7025, Limitations on the Use or Disclosure of
Government-Furnished Information Marked with Restrictive Legends. This
clause was added to the contract in June 2002.

Table 1: DOD Rights to Intellectual Property Under the DTS Contract

Category Intellectual Property in DTS DOD Rights

Noncommercial Technical All technical data delivered to Perpetual
Unlimited Data - Government funded DOD under the DTS contract Rightsa

Computer Software & Documentation

Noncommercial - Government Funded Software developed under Task Order
Numbers 10, 18, 20, and 26 Perpetual Unlimited Rights

       Commercial - Privately Several dozen software Northrop Grumman has

Funded (excluding 3 key programs discussed above)

                                    programs

restricted rightsb for use in DTS as set out in individual commercial

c

licenses

Source: GAO analysis based upon information provided by and discussions
with the PMO-DTS.

a"Unlimited rights" means the government's rights to use computer software
or technical data in any way and to authorize others to do so.

b"Restricted rights" means, generally, the right to use the software on
one computer at a time. TRW has more liberal rights than restricted rights
in some of these programs.

cAccording to DOD officials, Northrop Grumman has obtained perpetual and
assignable licenses for only some of these programs and DOD intends to
assess its needs and alternative acquisition methods available for all
commercial software as part of its long-term development and
implementation plans.

The restructured contract requires Northrop Grumman to provide all
hardware (and other equipment) necessary to deliver services under the
contract, but DOD officials told us that they are discussing delivery
schedules and ownership rights to hardware items, principally
configuration items. In a September 23, 2005, letter to the DTS
contracting officer, Northrop Grumman represented that they would assign
title to certain hardware at the conclusion of the contract, if requested.
Finally, DOD has leased some hardware items necessary to interface with
the airline Global Distribution Systems and it will need to evaluate the
terms of those leases.

                       Appendix II: Scope and Methodology

To determine if the Department of Defense (DOD) effectively tested key
Defense Travel System (DTS) functionality associated with flights and
airfares, we reviewed the applicable requirements and the related testing
prior to the August 2005 release to determine if the desired functionality
was effectively implemented.

To determine if DTS will correct the problems previously identified with
DOD travel, we analyzed past GAO reports and testimonies, selected Defense
Finance and Accounting Service (DFAS) reports, and DOD congressional
testimonies. In this regard, we focused on how DTS addresses issues
related to premium class travel, unused tickets, and centrally billed
accounts. We also randomly sampled 170 travel vouchers1 to ascertain if
some of the problems previously reported upon by DFAS have been resolved.
To be included within the selected sample, the travel vouchers had to be
for trips that were in DTS and for travel started on or after October 1,
2004, and ended on or before December 31, 2004. We have not yet finalized
our projections for the sample. To assess the use of premium class travel,
we obtained databases from Bank of America and the Project Management
Office-Defense Travel System (PMO-DTS), which provided information on the
actual travel transactions and traveler information for the period
October-December 2004. The Bank of America's database contained all DOD
transactions for the first quarter of fiscal year 2005, and the PMO-DTS
database contained all vouchers processed by DTS for the same time period.
We removed all transactions that were not specifically airline charges,
such as rail charges and commercial travel office fees, and then selected
all fare codes that corresponded to the potential issuance of a premium
class ticket. This resulted in 419 instances in which a premium class
ticket could have been issued. We have not finalized our analysis.

To identify some of the challenges confronting the department in making
DTS the department's standard travel system, we discussed with PMO-DTS
officials their implementation strategy and reviewed past GAO reports and
testimonies related to the department's efforts to improve the accuracy
and reliability of the information in its business systems.

1 We randomly selected 173 travel vouchers for detail review, but at the
time of our review 3 vouchers had not yet been completed and submitted for
review.

We briefed DOD officials on the contents of this testimony. We assessed
the reliability of the DOD data we used for our preliminary evaluation by
(1) performing electronic testing of required data elements, (2) reviewing
existing information about the data and the system that produced them, and
(3) interviewing agency officials knowledgeable about the data. We
determined that the data were sufficiently reliable for the purpose of
this testimony. We performed our audit work from October 2004 through
September 2005, in accordance with U.S. generally accepted government
auditing standards.

To describe DOD's property rights in the DTS we reviewed the DTS contract,
applicable acquisition regulations, DOD intellectual property guidance,
key DTS license agreements, and written responses from PMO-DTS to our
questions, and we met with PMO-DTS and contracting officials and with
their legal counsel.

Appendix III: GAO Contacts and Acknowledgments

For future information about this testimony, please contact McCoy Williams
at (202) 512-6906 or [email protected] or Keith A. Rhodes at (202)
512-6412 or [email protected].

Our contact points for our Offices of Congressional Relations and Public
Affairs may be found on the last page of this testimony. In addition to
the above contacts, the following individuals made key contributions to
this testimony: Darby Smith, Assistant Director; J. Christopher Martin,
Senior Level Technologist; Beatrice Alff; Francine DelVecchio; Francis
Dymond; Thomas Hackney; Gloria Hernandezsaunders; Wilfred Holloway; Jason
Kelly; Sheila Miller; Robert Sharpe; Patrick Tobo; and Adam Vodraska.

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