Defense Management: Impediments Jeopardize Logistics Corporate
Information Management (Chapter Report, 10/21/94, GAO/NSIAD-95-28).

In 1992, the Defense Department (DOD) projected that its Corporate
Information Management (CIM) initiative would help it to save $36
billion by fiscal year 1997. According to the Joint Logistics Systems
Center, which was created to help achieve CIM goals, as much as $28
billion would be saved by improving DOD's logistics functions. Today,
however, DOD is neither projecting nor tracking CIM savings. DOD
officials acknowledge that the CIM initiative will be difficult to
implement, and it may be years before most of the savings materialize.
As part of GAO's review of the CIM initiative, this report focuses on
the DOD logistics function of materiel management. GAO discusses (1)
improvements made to business processes and supporting information
systems and (2) impediments to achieving CIM results.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  NSIAD-95-28
     TITLE:  Defense Management: Impediments Jeopardize Logistics 
             Corporate Information Management
      DATE:  10/21/94
   SUBJECT:  Management information systems
             Inventory control systems
             Defense cost control
             Systems conversions
             Defense procurement
             Information systems analysis
             Logistics
             Systems management
             Strategic information systems planning
             ADP procurement
IDENTIFIER:  DOD Corporate Information Management Initiative
             CIM
             DOD Enterprise Model
             DLA Cataloging Tools On-Line System
             DOD Logistics Corporate Information Management Migration 
             Master Plan
             DOD Materiel Management Standard System
             DOD Depot Maintenance Standard System
             Air Force Depot Maintenance Management Information System
             
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Cover
================================================================ COVER


Report to the Chairman, Committee on Governmental Affairs, U.S. 
Senate

October 1994

DEFENSE MANAGEMENT - IMPEDIMENTS
JEOPARDIZE LOGISTICS CORPORATE
INFORMATION MANAGEMENT

GAO/NSIAD-95-28

Defense Management


Abbreviations
=============================================================== ABBREV

  C3I - Command, Control, Communications, and Intelligence
  CIM - Corporate Information Management
  DLA - Defense Logistics Agency
  DMR - Defense Management Report
  DOD - Department of Defense
  GAO - General Accounting Office
  JLSC - Joint Logistics Systems Center
  PSA - Principal Staff Assistant

Letter
=============================================================== LETTER


B-257006

October 21, 1994

The Honorable John Glenn
Chairman, Committee on
 Governmental Affairs
United States Senate

Dear Mr.  Chairman: 

This report was prepared in response to your request that we review
implementation of the Department of Defense's Corporate Information
Management (CIM) initiative.  It focuses specifically on progress
made to improve the logistics functions of materiel management and
depot maintenance under the CIM initiative and identifies impediments
to further progress. 

Unless you publicly announce its contents earlier, we plan no further
distribution of this report until 7 days from its issue date.  At
that time, we will send copies to the appropriate congressional
committees; the Secretaries of Defense, the Army, the Navy, and the
Air Force; and the Director, Office of Management and Budget.  Copies
also will be made available to others on request. 

If you have any questions, please call me on (202) 512-8412.  Major
contributors to this report are listed in appendix IV. 

Sincerely yours,

Donna M.  Heivilin
Director, Defense Management
 and NASA Issues


EXECUTIVE SUMMARY
============================================================ Chapter 0


   PURPOSE
---------------------------------------------------------- Chapter 0:1

In 1992, the Department of Defense (DOD) projected that its Corporate
Information Management (CIM) initiative would enable it to save $36
billion by fiscal year 1997.  According to the Joint Logistics
Systems Center (JLSC), established to help achieve CIM goals, as much
as $28 billion would be saved by improving DOD's logistics functions. 
Today, however, DOD is neither projecting nor tracking CIM savings. 
DOD officials acknowledge that the CIM initiative will be difficult
to implement, and it may be many years before the majority of savings
materialize. 

Because of concerns about the CIM progress, the Chairman of the
Senate Committee on Governmental Affairs asked GAO to review the CIM
initiative, focusing on the DOD logistics function of materiel
management.  Because DOD had established one organization, JLSC, to
oversee the improvement of its logistics functions of materiel
management and depot maintenance, this report discusses these two
functions.  GAO's specific objectives were to identify (1)
improvements made to business processes and supporting information
systems and (2) impediments, if any, to achieving expected CIM
results. 


   BACKGROUND
---------------------------------------------------------- Chapter 0:2

In October 1989, DOD established the CIM initiative to improve
business practices, make better use of information technology, and
eliminate duplicate administrative systems in areas such as civilian
payroll, materiel management, and medical.  Since then DOD has
significantly broadened the initiative to encompass all DOD
functional areas, including procurement, logistics, finance, and
command and control.  Its primary objective is to dramatically
improve the way DOD conducts business, by adopting the best practices
used in the public and private sectors.  Nevertheless, developing
standard information systems to support improved business practices
remains an important CIM component. 

To implement CIM, DOD directed senior officials within the Office of
the Secretary of Defense, called Principal Staff Assistants to
identify--through a process known as business process
reengineering--major improvements to business practices.  At the same
time, service and agency managers are taking a bottom-up look to
identify and implement business process improvements that have
servicewide or agencywide application. 

To help identify and implement major improvements in materiel
management and depot maintenance, DOD established JLSC.  JLSC is
staffed with personnel from the military services and the Defense
Logistics Agency (DLA) and relies on the active participation of the
services and DLA to accomplish its efforts.  This report deals with
JLSC's progress toward implementing the CIM initiative, as well as
the status of the overall CIM effort. 


   RESULTS IN BRIEF
---------------------------------------------------------- Chapter 0:3

The CIM initiative has had little effect on materiel management and
depot maintenance business practices.  As directed by DOD, JLSC has
focused on selecting standard logistics information systems--called
migration systems--that the services and DLA are to implement by
mid-1997.  As a result, business process reengineering efforts (where
most savings occur) may be delayed several years.  JLSC believes,
however, that selecting and implementing migration systems are
necessary first steps in the reengineering process. 

Although some progress has been made, several impediments have
delayed JLSC's first steps.  Three critical impediments are (1) some
DOD managers in the services and DLA have not fully accepted the
initiative, (2) DOD has not integrated its various CIM efforts, and
(3) CIM management authority is unclear because of confusing DOD
guidance.  These impediments indicate fundamental weaknesses in DOD's
management of the CIM initiative.  For example, until recently DOD
had not developed either a strategic plan for improving business
operations nor a mechanism to handle cross-functional issues.  Also,
DOD has not devised a management strategy to encourage the active
participation and leadership of functional managers, particularly the
service Chiefs of Staff and the DLA Director, nor has it ensured that
its employees understand CIM objectives and implementation
strategies.  As a result, DOD has not made the cultural changes
needed to successfully implement CIM. 


   PRINCIPAL FINDINGS
---------------------------------------------------------- Chapter 0:4


      EMPHASIS ON SELECTING
      MIGRATION SYSTEMS MAY DELAY
      MAJOR CIM SAVINGS
-------------------------------------------------------- Chapter 0:4.1

DOD's focus on selecting migration systems has delayed reengineering
efforts.  DOD, however, believes that having migration systems is
necessary to (1) obtain short-term cost savings to offset recent
budget reductions and (2) develop a standard logistics environment
across the military services and DLA.  By June 1994, JLSC, working
with the services and DLA, had selected 32 migration systems for the
materiel management and depot maintenance business areas.  It has
also eliminated service and DLA funding requests ($22.7 million in
1993 and $320.6 million in 1994) for information system projects it
deemed redundant. 

Originally, JLSC planned to implement migration systems over a 7- to
8-year period, which exceeded the 3-year milestone mandated by the
Deputy Secretary of Defense.  Consequently, the Deputy Under
Secretary of Defense (Logistics), in March 1994, proposed that a new
organization replace JLSC.  This new organization, called the
Logistics Standard Systems Joint Program Office, is to provide
intensive management to meet the Deputy Secretary's 3-year mandate. 
As of September 1994, this proposed organization change had not been
approved.  This emphasis on deploying migration systems may further
delay significant improvements to the logistics processes.  In
addition, 3 years may not be enough time to ensure the migration
systems meet the services' and DLA's operational requirements. 


      IMPEDIMENTS TO FURTHER
      PROGRESS
-------------------------------------------------------- Chapter 0:4.2

In trying to implement the CIM initiative, JLSC has confronted (1)
DOD managers who have not fully accepted the methods for achieving
CIM objectives, (2) poor integration of CIM efforts across DOD
business areas, and (3) confusion about the authority over
development of information systems.  These three impediments have
delayed JLSC's implementation efforts and may be systemic to the
overall DOD CIM initiative. 

Although JLSC has tried to get support and commitment of DOD
logistics managers, it has encountered a strong bias against CIM. 
Independent organizations that have studied major reengineering
efforts have concluded that to succeed, an organization must make a
major shift in culture.  As discussed in a recent report on CIM,\1
GAO believes such a shift in DOD requires top management to develop
and clearly articulate its vision and goals to all employees.  In
addition, DOD needs to structure its organization to help transition
to the new culture, create a specific management strategy that
encourages active participation of functional managers (particularly
the service Chiefs of Staff and the DLA Director), and train its
employees to help them understand the organization's new business
principles and practices. 

DOD's efforts to reengineer its functions are to a great extent being
made in isolation from one another.  For example, in implementing CIM
across DOD's materiel management and depot maintenance functions,
JLSC has encountered duplication and conflict with other CIM efforts
such as procurement.  While JLSC has tried to resolve these problems,
it does not have the authority to arbitrate disputes among the CIM
efforts or enforce integration decisions. 

Clear lines of management authority over the development of migration
systems have also been a problem.  A DOD directive grants service and
DLA program managers the sole authority for managing their system
development projects.  However, JLSC has been directed to manage the
design, development, and implementation of materiel management and
depot maintenance systems.  According to JLSC officials, this dual
authority over system development projects has resulted in dissension
between JLSC and program managers.  While JLSC has sought compromise
with and assistance from these managers, conflicting lines of
authority remain. 

DOD officials told us that they have taken three actions to help
overcome these impediments.  First, in October 1993, the Deputy
Secretary of Defense reemphasized top-level support for CIM and
required senior managers to take specific remedial actions within
established time frames.  Second, DOD established a board, chaired by
the Deputy Secretary of Defense, and a supportive council to ensure
that cross-functional issues are resolved.  Third, on June 13, 1994,
DOD issued the CIM Strategic Plan to demonstrate clear, top-level
support for the initiative, provide guidance to DOD managers, and
establish clear lines of authority over CIM projects. 

These latest DOD actions are positive steps toward accomplishing CIM
objectives and goals.  The success of these actions, however, depends
on how they are implemented and whether DOD makes other important
changes to improve the management of its CIM initiative. 


--------------------
\1 Defense Management:  Stronger Support Needed for Corporate
Information Management Initiative to Succeed (GAO/AIMD/NSIAD-94-101,
Apr.  12, 1994). 


   RECOMMENDATIONS
---------------------------------------------------------- Chapter 0:5

To correct the fundamental weaknesses in CIM management, GAO
recommends that the Secretary of Defense promote understanding and
acceptance of cultural changes needed to implement CIM by (1)
revising the CIM management strategy to ensure that DOD functional
managers, particularly the service Chiefs of Staff and the DLA
Director, actively participate and lead efforts to reengineer DOD's
business processes under the CIM initiative; (2) training DOD
employees at all levels to ensure they understand the organization's
business operations, how those operations interrelate, why current
business practices must be improved, and what part they should play
in making the improvements; and (3) renaming the initiative to
accurately communicate its primary objective to all employees. 


   AGENCY COMMENTS
---------------------------------------------------------- Chapter 0:6

In commenting on a draft of this report, DOD generally agreed with
most of GAO's findings.  DOD, however, was concerned about the tone
of the report and GAO's interpretation of CIM plans, expert advice,
and reviews.  DOD also disagreed with GAO's recommendation to rename
the CIM initiative.  GAO changed the report where appropriate based
on clarifications to DOD's positions and updates to its efforts. 
Also, GAO revised recommendations in the draft report to reflect
actions DOD has taken to address CIM impediments.  Additional
comments and responses appear in chapter 4 and in appendix III. 


INTRODUCTION
============================================================ Chapter 1

The Department of Defense (DOD), faced with constraints on its
budget, is seeking ways to improve operations and manage resources
more efficiently.  The Corporate Information Management (CIM)
initiative is a major part of that effort.  DOD launched CIM in 1989
as a way to improve business practices, make better use of
information technology, and eliminate duplicative information systems
across seven administrative areas, including civilian payroll,
materiel management, and medical.  Initial DOD efforts to implement
CIM focused on eliminating separate service systems and providing
integrated systems across DOD. 

Since that time, the CIM scope has broadened dramatically to include
all DOD functional areas, including procurement, logistics, finance,
and command and control.  Today, its primary objective is to
significantly improve business processes of all functional areas
through such techniques as business process reengineering and
continuous process improvements.  Nevertheless, standardization and
improvement of DOD's supporting information systems remains a major
CIM objective. 


   THE CIM INITIATIVE
---------------------------------------------------------- Chapter 1:1

CIM has its origins in the recommendations of the President's Blue
Ribbon Commission on Defense Management (the Packard Commission). 
The Commission's overall objectives were to identify ways to
streamline and restructure DOD business operations.  In July 1989,
the Secretary of Defense issued the Defense Management Report (DMR)
to implement the Commission's recommendations.  DMR estimated that
DOD could save about $70 billion by improving its management and
organization. 

In October 1989, DOD initiated CIM as a management method for
achieving DMR objectives.  In November 1989, the Deputy Secretary of
Defense issued the DMR Decision 925, which announced the initiative. 
He said, "Corporate Information Management (CIM) will enhance the
availability and standardization of information in common areas and
provide for the development of integrated management information
systems." He characterized CIM activities as a unique opportunity to
capture savings while at the same time dramatically improving
efficiency and effectiveness of operations. 

By eliminating separate service information systems and providing
integrated systems across DOD, it expected to avoid the cost of
developing and supporting redundant systems designed to perform the
same basic functions.  For example, each service had developed its
own process and system for paying active military personnel.  While
there were procedural differences that had evolved among the
services, there was no justification for the multiple systems that
perform the same function. 

On February 26, 1990, the Deputy Secretary of Defense convened the
Executive Level Group of high-level industry and DOD officials to
evaluate DOD's business practices and suggest an overall direction
for the DOD.  The group noted that government agencies had
traditionally viewed information management as merely automating
existing business methods in order to cut costs.  Little effort was
made to improve the methods, themselves.  The group recommended that
DOD adopt a management philosophy that emphasized continuous
improvement of business methods before identifying specific computing
and communication technologies. 

It stated, "Forward-looking organizations took a path which put
primary emphasis on continuously improved business methods. 
Computing and communication technology played a subordinate role, and
only now is being applied to the superior business methods that have
evolved."

In January 1991, the Deputy Secretary of Defense endorsed a plan
where DOD would "reengineer," or thoroughly study and redesign, its
business processes before it standardized its information systems. 
DOD believed this CIM implementation concept would emphasize the
importance of improving the way it does business rather than merely
standardizing old, inefficient business processes.  DOD expected this
new focus on business improvement to offer opportunities for
substantial savings. 

In April 1992, DOD projected that these efficiency and productivity
improvements would account for $36 billion of the more than $70
billion in anticipated DMR savings.  A number of studies\1 have since
found that these DMR and CIM projections were overly optimistic.  DOD
now acknowledges that this $36 billion estimate is obsolete and no
longer projects CIM savings.  There is agreement, however, that CIM
improvements can save DOD tens of billions of dollars over the next
10 years. 

In November 1992, DOD shifted CIM's implementation emphasis back to
information systems.  Looking for ways to offset significant defense
budget reductions, the DOD Comptroller recommended that CIM
implementation efforts in the logistics functional area focus on
selecting standard, or "migrating," information systems that could be
used departmentwide.  Under this new implementation strategy,
business process improvements would be done concurrently with the
selection and implementation of the migration systems.  DOD has since
implemented this CIM migration strategy across all CIM efforts. 


--------------------
\1 See FY 1994-99 Future Years Defense Plan, Defense Science Board
Task Force (May 1993); Acquisition Reform:  Defense Management Report
Savings Initiatives (GAO/NSIAD-91-11, Dec.  4, 1990.); and Defense
ADP:  Corporate Information Management Savings Estimates Are Not
Supported (GAO/IMTEC-91-18, Feb.  22, 1991). 


   CIM INVOLVES BOTH A TOP-DOWN
   AND A BOTTOM-UP LOOK AT DOD
---------------------------------------------------------- Chapter 1:2

The Assistant Secretary of Defense for Command, Control,
Communication, and Intelligence (C3I) is responsible for providing
overall technical direction for the CIM effort.  Principal Staff
Assistants (PSA) are responsible for providing guidance and oversight
for implementing the initiative within their assigned functional
areas.\2 PSAs are to develop a "corporate" view of their areas and
identify major changes to improve business processes.  DOD believes
that this top-down review offers the best opportunity for innovative
improvements that have the greatest potential for significant cost
savings. 

Meanwhile, under the DOD enterprise model,\3 service and Defense
Logistics Agency (DLA) managers are taking a bottom-up look at their
organizations to identify and implement business process improvements
that have service or agencywide application.  While such improvements
have smaller cost savings potential, they usually can be achieved
sooner.  They also help achieve acceptance of CIM changes by actively
involving more managers and staff in the change process. 


--------------------
\2 PSAs include the Under Secretaries, Assistant Secretaries, General
Counsel, Inspector General, Comptroller, Assistants to the Secretary
of Defense, and the Office of the Secretary of Defense Directors or
equivalents, including the Chairman of the Joint Chiefs of Staff, who
report directly to the Secretary or Deputy Secretary of Defense. 

\3 In January 1994, DOD issued the "DOD Enterprise Model" to provide
a common view of all defense activities.  The model is the principal
mechanism for senior managers to understand their missions and
functions, plan and direct improvements from a DOD- wide perspective,
and measure overall progress toward CIM goals. 


   JOINT OFFICE CREATED TO IMPROVE
   DOD'S MATERIEL MANAGEMENT AND
   DEPOT MAINTENANCE
---------------------------------------------------------- Chapter 1:3

In November 1991, the PSA for logistics\4 established the Joint
Logistics System Center (JLSC) to achieve CIM goals for the materiel
management and depot maintenance business areas.  Simply stated,
JLSC's charter is to work with the services and DLA to identify
business process improvements and the appropriate application of
information systems.  Under this concept, JLSC serves primarily as a
facilitator; the services and DLA design, develop, integrate, and
implement the new corporate logistics systems. 

Recognizing the importance of active participation by the services
and DLA in the CIM process, the PSA staffed JLSC with about 250
personnel from all four military services and DLA.  In addition, the
services and DLA provide experts to ensure JLSC fully addresses
mission requirements. 


--------------------
\4 When JLSC was created, the PSA for logistics was the Assistant
Secretary of Defense for Production and Logistics.  Following a
reorganization in the Office of the Secretary of Defense, the PSA for
logistics is now the Deputy Under Secretary of Defense for Logistics. 


   LOGISTICS IMPROVEMENTS EXPECTED
   TO PROVIDE SIGNIFICANT CIM
   SAVINGS
---------------------------------------------------------- Chapter 1:4

JLSC expects that improvements to DOD's logistics functions will
provide most of the CIM-related cost savings.  Logistics is the
acquisition, management, movement, and maintenance of the material in
the DOD inventory.  This report focuses on two logistics functions: 
materiel management and depot maintenance.\5

Materiel management includes deciding what supply items to stock,
determining how many of each are needed, purchasing needed items from
private vendors or manufacturing agencies within DOD, storing the
items, and tracking them from the time they are ordered until they
are used.  Depot maintenance includes manufacturing, overhauling, and
repairing parts, assemblies, subassemblies, and end items such as
aircraft, ships, and tanks. 


--------------------
\5 DOD logistics also includes the areas of distribution and
transportation.  DOD has the CIM efforts ongoing in each of these
areas. 


   OBJECTIVES, SCOPE, AND
   METHODOLOGY
---------------------------------------------------------- Chapter 1:5

The Chairman of the Senate Committee on Governmental Affairs asked us
to review DOD's implementation of the CIM initiative.  In response to
his request, we focused our review on the logistics functions of
materiel management and depot maintenance because the Committee had
expressed particular interest in materiel management and because one
organization, JLSC, had been established to oversee the
implementation of CIM in these two areas.  Our specific objectives
were to identify (1) CIM improvements made to business processes and
supporting information systems and (2) impediments, if any, to
achieving expected CIM results. 

To identify CIM improvements in materiel management and depot
maintenance, we analyzed implementation plans, project information
maintained by JLSC managers, and progress briefings given to senior
DOD officials.  Further, we interviewed DOD officials who are
implementing CIM across DOD, officials who are managing CIM efforts
in the logistics areas, and project managers responsible for specific
efforts under the initiative.  We also examined analyses that JLSC
used to establish cost and benefit projections, budget documents, and
updates of cost and benefit estimates.  We did not independently
validate JLSC's savings estimates for its initiatives. 

To identify major impediments to achieving expected CIM results, we
reviewed guidance provided by the Deputy Under Secretary of Defense
(Logistics), including DOD's logistics objectives, strategic business
plans, the Logistics CIM Migration Master Plan, and DOD memorandums
establishing and implementing the initiative.  Also, we interviewed
JLSC officials responsible for the overall progress of the
implementation and reviewed correspondence and briefings concerning
delays.  We also reviewed independent studies and prior audits and
held discussions with DOD officials responsible for overall CIM
implementation, as well as those responsible for logistics processes. 

We performed our work at the Office of the Assistant Secretary of
Defense for C3I, Washington, D.C.; the Office of the Assistant
Secretary of Defense for Production and Logistics, Alexandria,
Virginia; and the Joint Logistics Systems Center, Wright-Patterson
Air Force Base, Ohio.  We conducted our work between October 1992 and
July 1994 in accordance with generally accepted government auditing
standards. 


DOD DIRECTED JLSC TO DEVELOP
MIGRATION SYSTEMS
============================================================ Chapter 2

When activated, JLSC took actions to achieve quick, identifiable cost
savings through CIM, primarily by facilitating the deployment of
business processes and supporting information systems from one of the
services or DLA--where they had been successfully implemented--to the
others.  JLSC identified 20 of these near-term projects during late
1992 and early 1993 and had begun implementing 7 of them before it
was directed by DOD to refocus its efforts. 

As directed by DOD, JLSC focused its CIM implementation efforts on
selecting and testing migration information systems for materiel
management and depot maintenance.  This strategy runs counter to
expert advice received by DOD concerning how to best improve its
business practices.  DOD believes the selection and implementation of
migration systems is necessary to achieve quick cost savings and
critical to forming a foundation upon which major business process
improvements can be made.  While we have no basis to question the
need for migration systems, we are concerned that the implementation
strategy may delay significant improvement of the logistics
processes, result in the deployment of information systems that do
not meet services' and DLA's operational requirements, and divert
funds from ongoing improvement projects. 


   JLSC SELECTED AND DEPLOYED
   NEAR-TERM INITIATIVES
---------------------------------------------------------- Chapter 2:1

In March 1992, JLSC identified 20 improvement projects--15 in
materiel management and 5 in depot maintenance--that it termed
near-term initiatives.  JLSC selected these projects because they
could make current business processes more efficient and effective
and because they were doable; that is, they could be quickly
implemented at a few service and DLA sites to achieve quick cost
savings.  According to JLSC, it was also important to have some early
successes to get the services and DLA to accept the CIM concept. 
These projects primarily involved the expanded deployment of business
processes and supporting information systems that were used
successfully by one service or DLA.  Overall, JLSC projected that
implementation of the 20 projects would save the services more than
$2 billion over time periods ranging from 5 to 20 years. 

As of October 1992, JLSC had begun implementing seven of the
near-term initiatives (five materiel management and two depot
maintenance).  Before JLSC could implement the remaining 13 near-term
initiatives, however, DOD officials questioned the viability of the
near-term strategy and redirected JLSC's implementation approach to
CIM.  According to JLSC, the initiatives had saved at least $7.7
million and located previously lost or unaccounted government assets
worth about $12.7 million by October 1993.  Although additional
savings may have accrued, JLSC had not validated all cost and benefit
projections.  Following are two examples of the seven near-term
initiatives that have been implemented.  (App.  I describes all seven
initiatives.)


      CATALOGING TOOLS ON-LINE
-------------------------------------------------------- Chapter 2:1.1

This initiative is a materiel management productivity aid for DOD
catalogers.  When DOD introduces a new supply item into its
inventory, the item is listed in a catalog provided to the services
and DLA.  Currently, catalogers use paper technical drawings,
specifications, vendor catalogs, guidebooks, procedural manuals, and
regulations to complete cataloging steps such as writing a brief
description of the supply item, using drawings, and assigning it a
stock number. 

Cataloging Tools On-Line, a DLA system, enables the cataloger to
electronically access reference documents, simultaneously compare
technical data with drafted descriptions, and automatically check for
errors.  Catalogers using this automated aid are expected to create
catalog entries much faster and more accurately than is currently
done. 

JLSC projects that the 10 new sites receiving the Cataloging Tools
On-Line system will save about $71.7 million over the next 8 years
through the elimination of manual processes, reduced rejection rates
of transactions, and better availability of and access to cataloging
information. 


      DEPOT MAINTENANCE--HAZARDOUS
      MATERIAL MANAGEMENT SYSTEM
-------------------------------------------------------- Chapter 2:1.2

This depot maintenance initiative is intended to reduce the amount of
money maintenance depots spend for hazardous materials such as paint
thinner, oils, and chlorine.  Currently, the depots spend more than
$300 million each year to buy hazardous materials used in the repair
and maintenance of end items.  Officials acknowledge that a
significant portion of these materials is wasted. 

In 1992, the Air Force implemented the Depot Maintenance-- Hazardous
Material Management System at its Ogden Air Logistics Center to
provide information about who received hazardous materials; which and
how much they received; and when, where, and how the materials were
used.  With this information, Ogden managers identified wasteful
practices, such as workers receiving more material than needed for
the job.  In addition, they found that workers were storing excess
material in their lockers and that stored materials were being
improperly sealed. 

Depot management subsequently changed the methods for handling
hazardous materials.  For example, materials are now issued only in
the amount needed.  As a result, Ogden reduced the amount of
hazardous materials purchased in 1992 by nearly 39 percent, or a $7.7
million net cost savings. 

JLSC plans to install the Depot Maintenance--Hazardous Material
Management System at 27 maintenance depots and projects that they
will save between $83.3 million and $202.3 million over a 6-year
period.  As of September 1993, the system had been installed at seven
sites. 


   JLSC DIRECTED TO REFOCUS ON A
   MIGRATION STRATEGY
---------------------------------------------------------- Chapter 2:2

In October 1992, the Acting DOD Comptroller (responsible for
reviewing the justification for any requests for capital budget
funding) expressed concern that JLSC's CIM approach would not produce
the cost savings needed to help offset significant defense budget
reductions.  He favored an approach where JLSC would quickly select
and implement standard information systems.  By doing this, the
Comptroller hoped that DOD could transition to a standard logistics
system within a reasonable period of time at an affordable cost.  The
Comptroller recommended that JLSC immediately select a functionally
and technically integrated information system from those being
operated by one of the services and DLA for each of the materiel
management and depot maintenance business areas. 

In November 1992, the PSA for logistics (at that time the Assistant
Secretary of Defense for Production and Logistics) issued the
Logistics CIM Migration Master Plan.  This plan established the
selection of migration systems as the CIM implementation strategy
within the logistics area.  As a result, JLSC shifted its focus from
implementing the near-term initiatives to selecting migration systems
for materiel management and depot maintenance.  Although JLSC
continued to implement the 7 near-term initiatives it had started, it
incorporated the remaining 13 projects into the analysis used to
select migration systems. 

JLSC also developed a three-step strategy designed to gradually
evolve the services and DLA from their multiple and often redundant
materiel management and depot maintenance business practices to a
single, or corporate, DOD logistics process.  As presented in its DOD
Logistics CIM Migration Plan, the three steps of the migration
strategy are as follows: 

  Select and deploy migration systems--either single information
     systems or groups of information systems--in each functional
     area.  The systems are to be linked together to satisfy users'
     total requirements. 

  Improve current business processes and add new functions to fill
     voids. 

  Combine the improved and new business processes with the new
     information systems to form a corporate logistics process. 

Once the selected migration systems are deployed (step 1 of the
strategy), JLSC plans to work with the services and DLA to add needed
functions and make incremental improvements to logistics business
processes (step 2).  Developing a corporate logistics process (step
3) is where JLSC expects to use such tools as reengineering to
identify and implement major and innovative changes in the logistics
area.  While the strategy appears to be sequential, JLSC is
concurrently working on all three steps.  Later in this report, we
discuss JLSC's work to identify how to improve current materiel
management and depot maintenance business processes. 

In October 1993, the Deputy Secretary of Defense, noting the
necessity to offset declining resources, reemphasized the priority
given to information systems by directing that senior DOD managers
accelerate the selection and deployment of migration systems.  The
Deputy Secretary stated, "We must accelerate the pace at which we
define standard baseline process and data requirements, select and
deploy migration systems, implement data standardization and conduct
functional process improvements, reviews and assessments (business
process re-engineering) within and across all functions of the
Department."

Although he stated that the acceleration of all these actions was key
to containing the functional costs of performing the DOD mission
within constrained budgets, he established specific milestones only
for the selection and implementation of migration systems and the
completion of data standardization.  The Secretary stated that "our
near-term strategy requires:  the selection of migration systems
within six months, with follow-on DOD-wide transition to the selected
systems over a period not to exceed three years." He also stated that
data standardization was to be accomplished within 3 years.  The
remaining activities such as functional process improvement were to
continue on an expedited basis, but their completions were not to be
"prerequisites" to implementation of the migration systems and data
standardization acceleration strategy. 

Because JLSC's migration strategy would take 7 to 8 years to
complete, the Deputy Under Secretary of Defense (Logistics) in March
1994 proposed changing JLSC's management structure and mission.  He
recommended the replacement of JLSC with a Logistics Standard Systems
Joint Program Office.  This new office would be staffed with
personnel specializing in automated information systems to provide
intensive focus on information systems improvement and deployment. 
At the end of our audit work in July 1994, the services and DLA were
commenting on this proposal. 


   EXPERTS ADVISE DOD TO FOCUS ON
   BUSINESS PROCESSING
   REENGINEERING
---------------------------------------------------------- Chapter 2:3

Industry experts who have studied organizations that have
successfully improved their business practices advised DOD to focus
its efforts on reengineering its business processes before improving
the automated information systems supporting these processes. 
Reengineering, these experts believe, offers DOD the best opportunity
to move to a new plateau of performance

As stated in chapter 1, this was articulated by the Executive Level
Group in November 1989, when CIM was being initiated.  The group
recommended that DOD adopt a management philosophy that emphasized
continuous improvement of business methods before identifying
specific computing and communications technologies.  This
recommendation was endorsed by the Information Technology Association
of America, in its July 1993 study on "enterprise integration" within
DOD.\1 According to the study, companies that had experience in
enterprise integration took steps to ensure that their corporatewide
focus was on process improvement first and on technology improvements
last.  They stated that "Reengineered business processes reflect how
the corporation truly functions.  Automation was applied only after
processes were analyzed and cross-functional integration achieved."

In reviewing the CIM initiative, the association observed that DOD's
definition of enterprise integration did not differ from the
industry's.  DOD's view on implementation and objectives, however, is
different.  The association stated, "For instance, the Corporate
Information Management initiative in DOD seems to be primarily driven
by cost avoidance, rather than on BPR [business process
reengineering] in order to meet mission requirements." Noting DOD's
migration phase focused on near-term cost avoidance, the association
recommended that DOD accelerate out of this migration phase as
quickly as possible and move directly into their target objective
phase.  According to the association, the sooner DOD makes this move
the more money it will save and the sooner war-fighting capability
will be enhanced. 

We also reported on potential problems DOD faces if too much emphasis
is placed on improving information systems, rather than business
process reengineering.  In our 1992 report,\2 we concluded that
business improvements needed to be made concurrent with technology
selection.  To select technology alone invited risk and created only
an illusion of progress.  We also concluded that by selecting
information systems before improving business processes, DOD may be
wasting money modifying and implementing systems to support old,
inefficient ways of doing business. 

DOD, in its early estimates, acknowledged that business process
improvements held the greatest potential for significant cost
savings.  In April 1992, DOD officials projected that CIM-related
business process improvements would provide about $30 billion, or 83
percent, of cost savings expected, whereas better use of information
technology would account for only $6 billion, or 17 percent, of these
savings. 

Although DOD no longer projects CIM savings, it concluded in the
January 1994 DOD enterprise model that information systems alone
could not yield the dramatic business improvements necessary to
achieve a new plateau of performance required to respond to major new
challenges of the post-Cold War era.  Yet, DOD continues to focus on
information technology and migration systems.  As described in the
following section, DOD believes that selecting a common set of
information systems is necessary to make functional integration and
interoperability possible so that all DOD activities can work
together more efficiently and effectively. 


--------------------
\1 Enterprise Integration in the Department of Defense (July 1993). 
Enterprise integration embraces CIM principles and calls for
redesigning the existing DOD (the enterprise) mission activities to
eliminate redundant or low-value functions and processes, enhance
war-fighting capabilities, and achieve significant cost savings. 

\2 Defense ADP:  Corporate Information Management Must Overcome Major
Problems (GAO/IMTEC-92-77, Sept.  14, 1992). 


   DOD BELIEVES MIGRATION SYSTEMS
   ARE CRITICAL TO BUSINESS
   PROCESS IMPROVEMENT
---------------------------------------------------------- Chapter 2:4

In its Logistics CIM Migration Master Plan, DOD gives two reasons why
the selection and implementation of migration systems are critical
first steps toward business process improvement.  First, they provide
needed quick cost recoveries.  Second, they establish a common
business environment to reengineer business processes. 

According to JLSC, the CIM migration strategy resulted from a request
from the service secretaries.  The service secretaries, concerned
about the slow progress of the CIM effort and the amount of funding
stripped from their fiscal years 1993 through 1997 budgets as a
result of multiple DMR savings targets, asked the DOD Comptroller to
come up with a technique for getting more immediate cost savings. 
This request was the genesis for the CIM strategy of studying current
information systems and selecting a few for use across DOD. 

DOD officials have stated that the vast number of different logistics
processes and supporting information systems in DOD must be reduced
before it can make significant improvements.  For example, the Deputy
Director for Materiel and Logistics Functional Information Management
stated, "While it is the intent of the Corporate Information
Management (CIM) program to determine the Business Process
Improvements (BPI) prior to automation efforts, in the case of the
Logistic systems, we must first 'standardize' the existing process to
be improved." The Deputy Director cited the experience of General
Telephone and Electronics Corporation as support for this position. 
He said that in moving toward an integrated system the company first
selected a single migration system. 

JLSC supports the migration system concept as a necessary tool to
eliminate multiple information systems supporting the same business
functions.  According to the migration plan, standard information
systems will form the foundation upon which significant improvements
to current logistics practices can be made.  This foundation of
migratory systems will eliminate the need to implement significant
changes across the multitude of systems and processes that exist
throughout the services and DLA.  More importantly, the resulting
standardization of the best of the existing logistics processes
across DOD will, in itself, result in significant business process
improvements. 


   CONCERNS ABOUT THE MIGRATION
   SYSTEM STRATEGY
---------------------------------------------------------- Chapter 2:5

Although DOD and JLSC believe that selecting migration systems is a
necessary first step in the reengineering process, we have several
concerns about this strategy.  First, people familiar with business
process reengineering believe that the focus should be on process
improvement first and on technology improvements last.  We believe
that by doing otherwise DOD increases the risk of locking itself into
inefficient ways of doing business and not achieving the cost savings
that it needs in the current environment of shrinking budgets. 

Second, DOD's requirement to select and implement migrating systems
within 3 years adds a new dimension of risk to the CIM process. 
Without some flexibility in this schedule, the services and DLA may
have to implement migration systems that are not capable of meeting
their needs.  DLA officials told us, for example, that the migration
system for materiel management--as currently configured--does not
meet its operational requirements.  Unless additional capabilities
are added to this system to handle DLA's requirements, these
officials predicted that it will be a major failure. 

Nevertheless, JLSC believes that the accelerated migration system
schedule is what the CIM initiative needed.  The JLSC Commander
stated that the accelerated schedule forced JLSC and others to stop
their analysis and actually begin to implement change.  He conceded
that the first versions of the migration systems will not likely
include all the capabilities the services and DLA need or desire. 
His goal, however, is to make the systems functional for all users
before they are deployed in 3 years.  Under CIM's continuous
improvement concept, additional capabilities can be incorporated in
later versions of the systems. 

As discussed previously, DOD has proposed a major reorganization of
JLSC to meet its accelerated CIM schedule.  Under this proposal, the
number of personnel assigned to the new joint program office would be
reduced from about 250 (JLSC staffing) to 120.  It is unclear how
this new smaller office will be able to deploy materiel management
and depot maintenance migration systems in half the time planned by
JLSC. 

Third, some DLA managers also believe that CIM in general, and JLSC's
focus on selecting and implementing migration systems in particular,
is affecting their ability to implement business process
improvements.  DLA, for example, is attempting some innovative pilot
projects to find better, more efficient ways of doing business. 
Encouraged by a series of reports we issued over the past 3 years,
which compared DLA practices to the best in the private sector, DLA
is looking at concepts such as direct vendor delivery and supplier
parks.  If these concepts prove successful, DLA could significantly
reduce its inventories, storage space requirements, and the number of
supply depots.  Eventually, DLA may be able to eliminate supply
depots altogether--at least as DOD knows them today. 

To effectively carry out the pilot projects, however, DLA officials
said they will need funds to develop supporting information systems
or help from JLSC to ensure the selected migration systems satisfy
their new process requirements.  At the time we met with DLA
officials, however, they said that JLSC had not provided assistance. 
They were concerned that the pilot projects might have to be stopped
or significantly curtailed.  Subsequent to our meeting with DLA
officials, JLSC officials told us they had met with DLA officials and
were taking steps to arrive at a mutual solution to the problem. 


JLSC HAS MADE PROGRESS
IMPLEMENTING THE MIGRATION SYSTEMS
============================================================ Chapter 3

As directed by DOD, JLSC selected migration systems for materiel
management and depot maintenance functions.  JLSC also began
documenting current logistics processes to identify opportunities for
improvements, although it has not yet made major changes to current
processes.  Finally, in accordance with its mandate, JLSC eliminated
service and DLA funding requests ($22.7 million in 1993 and $320.6
million in 1994) for information system projects that it deemed
redundant. 


   JLSC HAS SELECTED MIGRATION
   SYSTEMS
---------------------------------------------------------- Chapter 3:1

By June 1994, JLSC--in cooperation with teams of service and DLA
experts--had selected 32 migration systems from among the more than
200 information systems currently being used to support major
materiel management and depot maintenance business processes. 

Before the systems were selected, JLSC gave each service and DLA the
opportunity to identify the system (or combination of systems) that
it used to support its logistics business area.  Service and DLA
experts for materiel management and depot maintenance presented their
candidate systems in an open forum for consideration.  These
presentations included detailed information on their systems'
capabilities, interfaces with other logistics systems, and other
information, such as cost, benefit, and technical data. 

On the basis of this information, service, DLA, and JLSC
representatives reached consensus on 32 candidate systems--24 for
materiel management and 8 for depot maintenance.  The selections of
these systems was later approved by Deputy Under Secretary of Defense
for Logistics.  (App.  II describes each of the 32 selected systems.)


      MATERIEL MANAGEMENT
      MIGRATION SYSTEMS
-------------------------------------------------------- Chapter 3:1.1

The 24 migration systems for materiel management support the four
major materiel management business processes:  asset management,
supply and technical data, and requirements determination.  Together,
they form what JLSC calls the Materiel Management Standard System. 
JLSC planned to deploy the first version--functional release 1--of
this combined system at one site--the Marine Corps Logistics Base,
Albany, Georgia--beginning in July 1994.  Upon successful deployment
of this first version, JLSC will assist the services and DLA in
implementing the new DOD standard system at additional sites. 

As of September 1993, on the basis of a preliminary functional
economic analysis, JLSC projected that improved business processes
and reductions in the number of systems would help the services and
DLA recover as much as $12 billion over a 10-year period ending in
fiscal year 2005.  While we did not review the support behind this
estimate, JLSC cautioned that it is their first look at potential
savings. 

JLSC must do much additional data collection and analysis before cost
recoveries can be predicted with any certainty.  However, it believes
that the standard system will eventually result in numerous
improvements to materiel management business processes, primarily
because it incorporates general business improvements from DOD
initiatives such as DMR, prior CIM efforts, and a compilation of best
practices identified in numerous DOD, service, and DLA initiatives. 


      DEPOT MAINTENANCE MIGRATION
      SYSTEMS
-------------------------------------------------------- Chapter 3:1.2

The eight migration systems selected for depot maintenance support
the three major depot maintenance business processes of project
management (planning and allocating labor, material, and capital
resources for repairing major end items, such as airplanes, ships,
and tanks), reparables management (activities for making labor and
equipment more productive on the shop floor), and specialized support
(various individual functions such as tracking hazardous materials,
tools and test samples).  These eight migration systems, along with a
system yet to be selected, form the Depot Maintenance Standard
System.  JLSC plans to test this combined system at the
Warner-Robbins Air Logistics Center beginning in January 1995.  Upon
successful completion of the test, JLSC will assist the services' and
DLA's implementation of the new system at additional sites. 

On the basis of a preliminary functional economic analysis completed
in January 1994, JLSC expected that improvements to depot maintenance
processes and reductions in the number of systems would help the
services and DLA recover as much as $4 billion over the period ending
in fiscal year 2003.  This estimate, however, assumed a 7-year
implementation period, not the 3-year period later mandated by DOD. 


   JLSC HAS BEGUN PRELIMINARY WORK
   FOR IMPROVING BUSINESS
   PROCESSES
---------------------------------------------------------- Chapter 3:2

While it facilitated the selection of migration systems under the
first step of its CIM implementation strategy, JLSC also took
preliminary steps to identify how it could improve current materiel
management and depot maintenance business processes--the second step
of its CIM implementation strategy.  As of September 1993, JLSC, in
conjunction with service and DLA representatives, had developed
models documenting 484 logistics practices used by the services and
DLA to accomplish materiel management and depot maintenance
activities.  Service and DLA officials are now analyzing these JLSC
models to further define their current business environment,
establish business requirements, and identify the best business
practices. 

When complete, these models are to serve two purposes.  In the near
term, they form a basis for understanding and discussing logistics
processes, evaluating their effectiveness, and identifying
opportunities for improvement.  In the longer term, JLSC plans to use
the models to help reengineer business processes, control this
evolution, integrate new technologies, and communicate new functions
of reengineered business processes. 


   JLSC REDUCED BUDGET REQUESTS
   FOR INFORMATION SYSTEMS
---------------------------------------------------------- Chapter 3:3

As part of the CIM strategy, the Assistant Secretary of Defense for
Production and Logistics gave JLSC review authority over the
services' and DLA's budget requests for development of new materiel
management and depot maintenance information systems.  Under this
authority, JLSC is to identify funding that could be eliminated from
a budget request for any information system development project that
duplicates a project or operational system of another service. 

JLSC reviewed the services' and DLA's requests and justifications for
fiscal year 1993 project funds and compared the proposed new
information systems to those (1) already existing or being developed
by other services and (2) selected by JLSC as near-term initiatives. 
As shown in table 3.1, JLSC reduced the requests by $22.7 million, or
about 36 percent.\1



                          Table 3.1
           
             JLSC Reductions of Fiscal Year 1993
                       Budget Requests

                    (Dollars in millions)

                                  Amount
                                requeste    Amount  Differen
Component                              d  approved        ce
------------------------------  --------  --------  --------
Air Force                          $16.9      $8.1      $8.8
Army                                12.5       5.2       7.3
DLA                                 20.2      14.1       6.1
Navy                                13.7      13.2       0.5
Marine Corps                           0         0         0
============================================================
Total                              $63.3     $40.6     $22.7
------------------------------------------------------------
In 1993, JLSC performed the same type of analysis on fiscal year 1994
budget requests from the services and DLA.  The only difference was
that JLSC analyzed these requests to determine if any systems
overlapped with the systems selected as the migration systems for
materiel management and depot maintenance.  As shown in table 2.2,
JLSC reduced the budget requests by $320.6 million, or about 96
percent. 



                          Table 3.2
           
             JLSC Reductions of Fiscal Year 1994
                       Budget Requests

                    (Dollars in millions)

                                  Amount
                                requeste    Amount  Differen
Component                              d  approved        ce
------------------------------  --------  --------  --------
Air Force                          $70.6      $3.4     $67.2
Army                               203.7       4.4     199.3
DLA                                 22.4       1.8      20.6
Navy                                34.6       3.1      31.5
Marine Corps                         2.3       0.3       2.0
============================================================
Total                             $333.6     $13.0    $320.6
------------------------------------------------------------
According to JLSC officials, the reduction of these requests may not
directly equate to cost savings of the same amount because (1) the
requests could have been overstated (which sometimes happens early in
a budget request cycle), (2) the requested funds may not have been
approved by DOD under the traditional budget process, and (3) the
services or DLA may have received funding for their projects through
other budget submissions. 

JLSC, however, believes this type of drastic reduction in budget
requests can be sustained only for a short period of time--2 or 3
years.  According to the JLSC commander, the downsizing of DOD has
resulted in the services and DLA having fewer people to run their
current business processes.  Over the short term, he believes that
the services and DLA can manage the situation.  It cannot, however,
be sustained over the longer term.  For this reason, the commander
said that JLSC must provide more efficient materiel management and
depot maintenance information systems to the services and DLA or,
once again, allow them some amount of funding to improve or replace
their existing systems. 


--------------------
\1 Fiscal year 1992 funds were used to fund near-term initiatives in
early fiscal year 1993.  Additionally, the services and DLA made
their fiscal year 1993 budget requests before JLSC was established. 


IMPEDIMENTS TO FURTHER PROGRESS
============================================================ Chapter 4

Three critical impediments are jeopardizing JLSC's ability to
successfully implement its strategy for improving business practices. 
First, some DOD functional and technical managers have not fully
accepted CIM.  Second, DOD has not integrated its various CIM
efforts, including those of JLSC.  Third, program management
authority is unclear because of confusing DOD guidance.  These
impediments are not confined to materiel management and depot
maintenance but cut cross DOD's overall management of the CIM
initiative. 

To help resolve these impediments, DOD has taken several actions,
including issuance of a strategic plan to demonstrate top-level
support for the initiative and guide its implementation and creation
of a board chaired by the Deputy Secretary of Defense to exchange
views about cross-functional issues.  These actions are good "first
steps," but more must be done.  Private companies that have
successfully reengineered their business operations generally agree
that changing their organizational cultures to support new ways of
doing business was critical to their success.  While DOD recognizes
that it needs to change its organizational culture to overcome CIM's
impediments, it has been slow to make these changes. 


   DOD OFFICIALS HAVE NOT FULLY
   ACCEPTED CIM
---------------------------------------------------------- Chapter 4:1

Independent studies have shown that for major improvement initiatives
such as CIM to succeed, employees from all levels in an organization
must accept and actively participate in the changes.  For example,
the Information Technology Association of America, in its July 1993
report, said that DOD must ensure that all parties buy into the
enterprise integration effort and are willing to work wholeheartily
to form and implement the enterprise integration plan.  Similarly,
the Policy Analysis Center of the Institute of Public Policy, in its
November 1993 report, Functional Process Improvement Implementation: 
Public Sector Reengineering, stated that even the best constructed
improvement plans are likely to fail unless employees are involved at
all stages of the reengineering effort. 

Recognizing that "buy in" was a critical success factor, JLSC took
actions to involve the services and DLA in implementing CIM.  For
instance, more than 250 logistics personnel from the services and DLA
were brought together to work at JLSC.  Also, JLSC has tried to
maintain a continual dialogue with the Office of the Secretary of
Defense, service, and DLA managers responsible for DOD logistics. 
Nevertheless, JLSC officials said they have still encountered a
strong institutional bias against the changes posed by CIM, primarily
because managers view these changes as a threat to their authority
over logistics business decisions. 

This lack of acceptance, according to JLSC officials, has slowed
implementation of CIM.  For example, during the evaluation of the Air
Force's Combat Ammunition System as a proposed migration system, JLSC
representatives visited the Air Force program office developing the
system to obtain needed cost and requirements data.  However, program
management officials were unwilling to provide the data because,
according to the JLSC Deputy Commander, Air Force officials would
have to relinquish some of their authority and control over the
system's development.  Air Force officials eventually provided the
data but only after the JLSC Commander notified them that due to the
lack of cooperation JLSC intended to select a competing Army system. 
JLSC officials did not estimate the length of delay caused by this
lack of cooperation. 

Resistance to the CIM initiative is not limited to JLSC's efforts. 
The DOD Inspector General, in its report, Defense Corporate
Information Management Initiative, Program Evaluation (Jan.  1993),
concluded that the lack of consensus and support for the overall CIM
initiative by DOD functional and technical managers had severely
hampered its implementation.  The Inspector General attributed this
lack of support to the absence of an overall CIM plan that was
clearly presented to and understood by the managers.  The Inspector
General stated: 

     "Based on our interviews with both functional and technical
     areas managers, we found there is no clear and consistent
     definition or understanding of the CIM initiative and its
     respective elements .  .  .  While they accept the broad
     precepts of the CIM Initiative, they are reluctant to give full
     support until they see and fully understand the complete CIM
     plan.  That reluctance manifested itself in two broad
     areas--support for organizational realignments and for selection
     of technical solutions."

Because this impediment appeared to affect more than JLSC's efforts
within materiel management and depot maintenance, we discussed it
with DOD officials responsible for implementing CIM across logistics
areas, as well as those responsible for all CIM efforts.  These
officials confirmed that service and DLA managers agree with the
intent of CIM, which is to improve business operations, but not with
the manner in which it was being implemented. 

DOD officials in C3I agree that for CIM to succeed, employees should
understand the nature of the changes that must be made.  They did not
agree, however, that the lack of consensus and support for the
overall CIM initiative by DOD managers was hampering its
implementation.  They said that executive level commitment,
involvement, and authority were sufficient for CIM to succeed and
that the Secretary of Defense, the Deputy Secretary of Defense, their
Principal Staff Assistants, and the military departments strongly
supported the initiative.  On October 13, 1993, for example, the
Deputy Secretary of Defense issued a memorandum that reemphasized
top-level support for CIM and required senior managers to take
specific actions within established milestones to help implement the
initiative.  DOD officials also noted that clear, top-level support
and guidance for the initiative were given in the CIM Strategic Plan
issued on June 13, 1994. 

While DOD may have top-level management support and commitment for
CIM, which are critical prerequisites for a major reengineering
effort, we do not believe that is enough to overcome the type of
cultural barriers impeding the initiative.  If CIM is to succeed, we
believe that DOD needs to change its management strategy to get
service and DLA managers, particularly the service Chiefs of Staff
and DLA Director, more actively involved in managing CIM and leading
the reengineering efforts.  This action is particularly important for
DOD to undertake because service secretaries and other top-level
managers in the Office of the Secretary of Defense, who are currently
leading the CIM initiative, typically change on a regular basis. 
Because CIM is a long-term effort that will likely transcend many
management reorganizations, it is important to have support of CIM
principles and ideals throughout all levels of the organization,
particularly in the military services and DLA. 

In February 1992, for example, we reported that private companies
that had undergone massive changes (such as DOD is proposing in its
CIM initiative) had to overcome cultural barriers.  Those companies
that succeeded in changing their cultures\1 not only had
top-management support and commitment but also created specific
management styles and organizational structures that were compatible
with and reinforced their desired visions and goals.  They also
trained their employees to instill in them the organizations' new
missions, values, and guiding principles. 

Our studies of organizational change also support more active
participation by functional managers in major reengineering efforts. 
In our April 1994 report\2 on the CIM initiative, for example, we
stated that "unless Defense's executive-level leadership and
mid-level managers take a more active and visible role, broad
acceptance and understanding of CIM will not occur and cultural
opposition to change will continue." The importance of functional
managers to the overall success of major reengineering efforts was
again highlighted in a recent executive guide\3 we prepared on using
information technology to improve mission performance.  We observed
that in every successful organization studied, senior executives
realized that getting managers to work differently meant putting them
in charge of the change process.  The Information Technology
Association of America in its study on enterprise integration in DOD
also noted that in the view of functional managers, CIM efforts are
being directed by DOD's information technology offices.  In private
industry, information technology is used as a tool to facilitate
enterprise integration, not as an end in itself.  Functional managers
must lead the effort with the information technology community in
support. 

DOD, in its June 13, 1994, strategic plan and elsewhere, has
recognized the need to change its culture and management strategy to
build consensus throughout the Department, but implementation (and
actual change) has been slow.  For example, today the Assistant
Secretary of Defense for C3I is responsible for implementing
CIM--overseeing and integrating business process innovation within
and across all DOD functional areas.  The Assistant Secretary,
however, is also the Senior Information Management Official for DOD. 
We believe that this has contributed to functional managers'
misunderstanding of the CIM initiative and has reenforced their view
that CIM is primarily an information technology initiative. 

In addition to changing the CIM management strategy and providing
training to all employees, DOD may need to rename the initiative. 
Contrary to what its name implies to many DOD managers, CIM is much
more than an information technology initiative.  As designed, CIM is
supposed to be a major effort to reengineer business processes, with
information technology being a necessary support function.  As
discussed previously, however, many defense managers view it as
either a budget-cutting or information technology initiative and have
not given it their full support and cooperation.  While top-level
support, strategic planning, changing management strategy, and
training would help solve this problem, we believe a name change
would also give the improvement effort a fresh start. 


--------------------
\1 Organization Culture:  Techniques Companies Use to Perpetuate or
Change Beliefs and Values (GAO/NSIAD-92-105, Feb.  27, 1992). 

\2 Defense Management:  Stronger Support Needed for Corporate
Information Management Initiative to Succeed (GAO/AIMD/NSIAD- 94-101,
Apr.  12, 1994). 

\3 Executive Guide:  Improving Mission Performance Through Strategic
Information Management and Technology (GAO/AIMD-94-115, May 1994). 


   CIM EFFORTS REMAIN ISOLATED
   FROM ONE ANOTHER
---------------------------------------------------------- Chapter 4:2

In draft CIM guidance dated January 1993, DOD recognizes that no DOD
function can be accomplished in isolation from other functions.  For
example, improvements to weapon systems management could cut across
several business areas, including logistics, finance, and
procurement.  Consequently, when trying to improve DOD functions, it
is important to address all related business areas. 

We found that the CIM improvement efforts are to a great extent being
made in isolation from one another.  According to JLSC officials,
there is continual overlap of CIM issues across the efforts underway
in the different DOD business areas.  However, the integration
requirements of the related business areas have not been fully
identified and established.  Nor is any one office overseeing the
integration of CIM business process improvements across these areas. 
While JLSC has sought to resolve integration issues among CIM efforts
and maintains liaisons with offices responsible for CIM efforts in
finance and procurement, it does not have the authority to arbitrate
disputes between CIM efforts or enforce integration decisions. 

Because of this isolation, or "stovepiping," CIM improvements made in
one business area can duplicate or conflict with those made in
another business area even though the function being improved is
common to both.  According to JLSC officials, stovepiping impeded its
progress in selecting migration systems for the materiel management
and depot maintenance business areas.  For example, JLSC reviewed the
practices involved in buying supply items.  Functions involved in
preparing procurement requests, such as determining the type and
amount of supplies needed, fall under the logistics CIM effort. 
Functions performed after a supply contract is awarded are the
responsibility of the procurement CIM effort. 

In consultation with service and DLA representatives, JLSC chose the
Integrated Technical Item Management and Procurement information
system as the migration system for supply contract pre-award
practices.  However, the Procurement CIM Council reviewed the
practices performed after a supply contract is awarded and chose the
Defense Procurement and Contracting System.  Although the
pre-contracting and post-contracting activities are part of the
larger procurement process, the logistics and procurement CIM efforts
were not integrated. 

While they did not estimate the resources involved, JLSC officials
stated that much time has been spent working on such integration
issues with various service and DLA representatives.  Without some
direct attention by top-level management in this area, we believe
that DOD will likely develop, deploy, operate, and maintain two
automated systems to provide information on different parts of the
procurement process.  Such a result would be inconsistent with the
stated CIM purpose of streamlining business processes and
standardizing their supporting information systems. 

Recognizing the need to integrate CIM efforts, DOD established a
number of boards and councils to facilitate their integration, but
these efforts have not succeeded.  For example, DOD established the
Information Policy Council to facilitate the integration of
information management functions, activities, and systems.  According
to DOD officials, this Council was not successful because it did not
meet frequently enough and did not include in its membership the
officials needed to decide integration issues, nor did it have
decision-making authority.  Also, in January 1992, the Assistant
Secretary of Defense for C3I established the Corporate Functional
Integration Board to build more active CIM participation.  While this
Board has identified some cross-functional issues, DOD said that a
higher level body with decision-making authority was needed to
successfully resolve integration issues. 

DOD, in April 1994, established the Enterprise Integration Executive
Board, chaired by the Deputy Secretary of Defense, to resolve
cross-functional integration issues.  As established, this Board and
its supporting Enterprise Integration Corporate Management Council
are to exchange information and views about cross-functional
management concepts, policies, and plans to achieve CIM goals.  With
membership of DOD senior-level managers, service secretaries, and the
Chairman of the Joint Chiefs of Staff, this Board has the membership
and authority to make decisions on cross-functional and integration
issues. 

Commenting on a draft of this report, DOD officials stated that DOD
is moving aggressively to integrate its CIM efforts.  They cited the
Deputy Secretary of Defense's issuance of the DOD Enterprise
Integration Implementing Strategy to support the CIM Strategic Plan
as evidence of actions being taken. 

These latest actions, we believe, are important steps toward
resolving cross-functional issues.  According to DOD officials, the
success of the Enterprise Integration Executive Board and its
supportive Enterprise Integration Corporate Management Council will
depend on the level of interest and commitment from the members, as
well as the quality and implementation of their decisions.  Success
of additional actions also will depend on their quality and
implementation. 


   PROGRAM AUTHORITY IS UNCLEAR
---------------------------------------------------------- Chapter 4:3

With the establishment of JLSC, DOD created two separate lines of
authority for managing the development of logistics information
systems.  DOD Directives 5000.1, "Defense Acquisition," and 5000.2,
"Defense Acquisition Management Policies and Procedures," grant
service program managers sole authority for managing their assigned
programs.  However, under authority granted by the Assistant
Secretary of Defense for Production and Logistics, JLSC is to manage
the design, development, implementation, and maintenance of logistics
information systems and to exercise funding control over these
acquisitions. 

According to JLSC officials, this dual authority has resulted in
dissension between JLSC and program offices about which office has
overall authority over the development and implementation of
information systems.  For example, the Air Force's Depot Maintenance
Management Information System was selected as a migration system to
be installed at the Warner-Robbins Air Logistics Center test site in
January 1995.  The Air Force project manager, however, believed that
the development project is under the Air Force acquisition program
and, as such, must follow the direction of the senior project
manager. 

Under this direction, the new information system could not be
exported to other installations until it passed 90 days of
operational testing and evaluation and obtained approval from the
Major Automated Information Systems Review Council.  The operational
tests, originally scheduled for August 1993, were delayed until
December 1993.  As of April 1994, the data collection phase of the
test was complete but the final report had not been issued and
reviewed by the Major Automated Information Systems Review Council. 
According to the Deputy Under Secretary of Defense (Logistics)
official responsible for logistics CIM, this program authority
problem will be remedied by making JLSC, not the Air Force,
responsible for managing the system project. 

In late 1993, a DOD logistics review group found that current program
management direction divides the responsibility and accountability
for developing CIM migration systems.  The core issue, the review
group said, was the need to "minimize management layering and
delegate review and milestone approval authority commensurate with
the resources and risks involved." Although the group reviewed the
problem within logistics, it identified four options for assigning
program management responsibilities in all CIM efforts to a
particular organizational unit or senior DOD manager. 

In its comments on a draft of this report, DOD officials said they
did not agree that the current guidance was conflicting; it was just
misunderstood by those responsible for implementing it.  However, DOD
cited the issuance of its CIM Strategic Plan as a recent effort that
should clarify program authority under the CIM initiative. 

Private industry and our studies show that a strategic plan that
clearly articulates responsibilities and describes how the initiative
fits with other organizational priorities is critical.  We have
stated in the past that the Office of Secretary of Defense would need
to provide strong leadership and establish a stable organization with
clear lines of authority and accountability for CIM to succeed.\4 To
the extent that DOD's CIM Strategic Plan establishes clear lines of
authority, we believe that it can successfully resolve conflicts over
who manages projects to develop migratory information systems. 


--------------------
\4 Defense ADP:  Corporate Information Management Must Overcome Major
Problems (GAO/IMTEC-92-77, Sept.  14, 1992); and Defense Management: 
Stronger Support Needed for Corporate Information Management
Initiative to Succeed (GAO/AIMD/NSIAD-94-101, Apr.  12, 1994). 


   CONCLUSIONS
---------------------------------------------------------- Chapter 4:4

The impediments JLSC faces illustrate fundamental problems in DOD's
management of the overall CIM initiative.  While DOD has taken some
important steps to address these problems, more needs to be done. 
First, DOD needs to ensure that functional service and DLA managers
actively participate in the management and implementation of the
initiative with the information technology community in support. 
Private companies that have reengineered their business operations
cite the active participation of their line managers as critical to
their success. 

Second, DOD needs to take specific action to build the support and
commitment of all DOD employees for the cultural changes that must be
made to implement CIM.  Although DOD has taken actions to demonstrate
top-level support and commitment to the initiative, the DOD employees
are the ultimate key to CIM's success.  As private companies have
learned by implementing massive changes in their organizations,
employee support and commitment is essential to overcome deeply
entrenched barriers to change.  To build this support and commitment,
employees must be trained to ensure that they understand why business
practices need to be changed, how changes will improve business
operations, and what they must do to implement needed changes. 

While training may be the most comprehensive method for ensuring
employee understanding, renaming the initiative could greatly
increase its acceptance.  Because of the evolution of the initiative
and the shifts in its emphasis, many employees are confused and
misunderstand CIM's primary purpose.  Renaming the initiative to
clearly communicate its primary objectives, would help remove
employees' confusion and serve as a first step for building their
support and commitment. 


   RECOMMENDATIONS TO THE
   SECRETARY OF DEFENSE
---------------------------------------------------------- Chapter 4:5

To overcome the fundamental weaknesses in the management of the CIM
initiative and to further encourage cultural changes needed to
support the new DOD business operations, we recommend that the
Secretary take the following actions: 

  Revise the CIM management strategy to ensure that functional
     managers, particularly the service Chiefs of Staff and DLA
     Director, actively participate and lead efforts to reengineer
     DOD's business processes under the CIM initiative. 

  Train DOD employees at all levels to promote understanding and
     acceptance of changes needed to their current ways of doing
     business. 

  Change the name of the CIM initiative to lessen the confusion
     created as the initiative has evolved and to more accurately
     communicate the primary CIM objective. 


   AGENCY COMMENTS AND OUR
   EVALUATION
---------------------------------------------------------- Chapter 4:6

DOD appreciated our overall support for the CIM initiative and our
recognition that JLSC had made progress toward developing logistics
standard systems and reengineering processes in support of the
materiel management and depot maintenance functions.  DOD, however,
was concerned about the tone of the report and the differences
between our and its interpretation of CIM plans, expert advice, and
reviews.  Consequently, we modified our draft report where
appropriate.  A number of modifications were designed to present a
balanced view of the CIM initiative while others were made to clarify
our interpretation of CIM plans, expert advice, and reviews.  When
differences in interpretation remained, we added DOD's view to the
report.  Finally, DOD has taken several actions since we completed
our audit work that addressed strategies to management and implement
CIM.  In view of these actions, we deleted two recommendations and
modified a third to more precisely identify the actions we believe
the Secretary should take. 

DOD concurred with our recommendation on training but did not concur
with our recommendation on renaming the initiative.  According to
DOD, renaming the initiative would create confusion because it would
signal a change in the initiative or in management that has not taken
place.  Our review showed, however, that DOD managers are already
confused about the initiative's primary objective.  This confusion
has resulted in a negative perception about CIM and the failure by
many service and DLA managers to fully accept and support the effort. 
Despite DOD arguments, we continue to believe that renaming the
initiative to more accurately communicate its primary objective would
promote understanding and acceptance.  The risk of creating some
additional confusion is more than offset by the advantages that a
name change should produce.  Additional DOD comments and our
responses appear in appendix III. 


DESCRIPTION OF ONGOING NEAR-TERM
INITIATIVES
=========================================================== Appendix I

This appendix provides a brief description of the five materiel
management and two depot maintenance near-term initiatives that are
being implemented through the logistics Corporate Information
Management (CIM) initiative.  Each description includes information
on the purpose, expected costs and benefits, and schedule. 


   MATERIEL MANAGEMENT INITIATIVES
--------------------------------------------------------- Appendix I:1


      CATALOGING TOOLS ON-LINE
------------------------------------------------------- Appendix I:1.1

This initiative is a materiel management productivity aid for the
Department of Defense (DOD) catalogers.  When DOD introduces a new
supply item into its inventory, the item is listed in a catalog
provided to the services and the Defense Logistics Agency (DLA). 
Currently, catalogers use paper technical drawings, specifications,
vendor catalogs, guidebooks, procedural manuals, and regulations to
complete cataloging steps such as writing a brief description of the
supply item and assigning it a stock number. 

Cataloging Tools On-Line, a DLA system, enables a cataloger to
electronically access reference documents, simultaneously compare
technical data with drafted descriptions, and automatically check for
errors.  Catalogers using this automated aid are expected to create
catalog entries much faster and more accurately than is currently
done. 

The Joint Logistics System Center (JLSC) projects that the 10 sites
receiving the Cataloging Tools On-Line system will save about $71.7
million over the next 8 years through the elimination of manual
processes, reduced rejection rates of transactions, and better
availability of and access to cataloging information. 


      COMMERCIAL ASSET VISIBILITY
------------------------------------------------------- Appendix I:1.2

This initiative enables DOD supply item managers to better monitor
the repair of government-owned equipment by private contractors.  DOD
routinely contracts with private companies to repair government
equipment and usually provides the equipment and the material a
contractor needs to make the repairs.  The Commercial Asset
Visibility system, which combines parts of automated systems
operational at Navy and Air Force sites, provides item managers with
automated records on a contractor's repair process.  Using these
automated records, item managers can compare on a daily basis
contractor and government records of equipment status, condition,
location, and quantity. 

JLSC expects that with more timely and accurate information, the
Army, which currently does this process manually, will gain better
visibility over its assets that are located at contractor sites.  As
a result of this increased visibility, the Army might be able to
reduce its equipment losses by one-third (from 1.5 percent of the
total value of reparables to 1 percent).  JLSC projects that this
reduction will save the Army about $22.8 million over a 20-year
period. 

Also, item managers can use equipment status information in the
system to ensure contractors are provided with the right material
needed to repair the equipment in a more timely manner.  Based on a
preliminary analysis, JLSC believes this can reduce the average time
Army contractors spend making repairs from 120 days to 118 days. 
This 2-day reduction could save the Army about $5.5 million over a
20-year period. 

As of September 1993, the Commercial Asset Visibility system was
operating at 10 Army contractor sites.  As a by-product of this
implementation, item managers have found that contractors had about
$12.7 million more in government-owned equipment than shown in DOD
records.  JLSC is assessing whether this found equipment can be used
to reduce the amount of equipment the Army expected to buy for use by
the contractors. 


      CONFIGURATION AND LOGISTICS
      INFORMATION PROGRAM
------------------------------------------------------- Appendix I:1.3

This program enables service users to make more accurate and timely
purchases of replacement and repair parts for weapon systems and
equipment.  The services maintain various versions (configurations)
of the same weapon system and equipment tailored to a unit's specific
mission requirements.  Each of these configurations require unique
replacement and repair parts.  Currently, most service users rely on
manual documentation, which is often inaccurate and out of date. 

The Configuration and Logistics Information Program is an automated
information system used by the Marine Corps and the Navy.  It
provides users with detailed information to build, procure, maintain,
and repair each of the various weapon system and equipment
configurations.  It enables the users to purchase the right parts for
each weapon system or piece of equipment.  Although JLSC expects the
system to be installed at various sites across all services, it has
not yet projected the overall cost savings.  However, as of September
1993, it had projected that one Marine Corps site would save from
$1.8 million to $2.8 million from fiscal years 1992 through 2000. 


      DEFENSE EXPERT SUPPLY SYSTEM
------------------------------------------------------- Appendix I:1.4

This initiative is intended to enable supply centers to provide
better customer service with fewer employees.  Currently, supply
center customers can order supplies, check stock numbers, and receive
status information on their supply orders over the telephone. 
However, they must wait for supply personnel to become available to
manually query the automated supply information system. 

The Defense Expert Supply System, in operation at some DLA supply
centers, allows customers using touch-tone telephones to directly
access the automated supply system for answers to their questions. 
As of September 1993, the system had been installed at 4 of the 10
planned sites.  Although system benefits have not yet been validated,
JLSC expects that customer service costs at each of these sites will
be reduced by about $400,000. 


      INTEGRATED TECHNICAL ITEM
      MANAGEMENT AND PROCUREMENT
------------------------------------------------------- Appendix I:1.5

This initiative decreases the time needed to prepare and award
contracts for commonly used supplies such as nuts, bolts, fuses, and
electronic parts.  Currently, most services must manually obtain and
compile documents into purchase requests needed to buy supplies from
manufacturers; identify manufacturers that produce the supply items;
solicit bids from available manufacturers; select the manufacturer to
be used; and print, sign, and award contracts.  Because of the manual
intervention required to develop and compile these purchase requests,
the process is time-consuming and error prone. 

The Integrated Technical Item Management and Procurement system,
being used by two Navy inventory control points, automates the DOD
supply contract development and award process.  The system
consolidates information on the quantity, quality, and type of supply
items being purchased; the manufacturers of the item; and the
contract bid and award procedures.  It allows supply managers to
automatically develop supply contracts and send them to
manufacturers. 

As of September 1993, the latest version of the system had been
installed at two Navy and one Marine Corps sites.  Data were being
collected to validate costs and benefits at these sites. 


   DEPOT MAINTENANCE INITIATIVES
--------------------------------------------------------- Appendix I:2


      DEPOT MAINTENANCE--HAZARDOUS
      MATERIAL MANAGEMENT SYSTEM
------------------------------------------------------- Appendix I:2.1

This depot maintenance initiative is intended to reduce the amount of
money maintenance depots spend for hazardous materials such as paint
thinner, oils, and chlorine.  Currently, the depots spend more than
$300 million each year to buy hazardous materials used in the repair
and maintenance of end items.  Officials acknowledge that a
significant portion of these materials is wasted. 

In 1992, the Air Force implemented the Depot Maintenance-- Hazardous
Material Management System at its Ogden Air Logistics Center to
provide information about who received hazardous materials; which and
how much they received; and when, where, and how the materials were
used.  With this information, Ogden managers identified wasteful
practices, such as workers receiving more material than needed for
the job.  In addition, they found that workers were storing excess
material in their lockers and that stored materials were being
improperly sealed.  Depot management subsequently changed the methods
for handling hazardous materials.  For example, materials are now
issued only in the amount needed.  As a result, Ogden reduced the
amount of hazardous materials purchased in 1992 by nearly 39 percent,
or a $7.7 million net cost savings. 

JLSC plans to install the system at 27 maintenance depots and
projects that they will save between $83.3 million and $202.3 million
over a 6-year period.  As of September 1993, the system had been
installed at seven sites. 


      PROGRAMMED DEPOT MAINTENANCE
      SCHEDULING SYSTEM
------------------------------------------------------- Appendix I:2.2

This initiative is intended to streamline the planning, scheduling,
and production repair, overhaul, and modification of major end items
by maintenance depots.  Currently, many depots use manual procedures
or antiquated automated systems to plan, schedule, and manage their
repair activities.  Accordingly, these plans and schedules are not
easily changed.  They must include extensive and detailed information
such as descriptions of work tasks to be performed, time required for
the work, skills and materiel needed to do the work, and the sequence
in which the work should be done to optimize available resources. 

To manage the repair activities, managers track information such as
the status of work done, work planned, resources used, and resources
available.  However, the depots often experience unanticipated
changes such as an increase in work to be done, fewer resources
available to do the work, or a shift in work priorities.  These
changes usually result in significant delays to the repair work. 

The Programmed Depot Maintenance Scheduling System, operating at the
Air Force's San Antonio Air Logistics Center, automates and
integrates the maintenance depot's repair planning, scheduling, and
management information processes.  Using the system, depot management
can plan and schedule the most optimum use of available resources to
perform repair work.  As unanticipated changes to workload,
resources, and work priorities occur, the system allows depot
managers to quickly develop new plans and schedules that optimize
operations.  In addition, the system provides managers with
up-to-date status information, including work completed, resources
used, work to be done, and resources needed to do it. 

Based on the then-planned workloads at the specific depots, JLSC
projected that use of the automated system at 16 maintenance depots
would reduce DOD costs by at least $126.8 million over the 6-year
period ending in fiscal year 1997.  As of September 1993, the system
had been installed at seven maintenance depots.  JLSC was collecting
cost and benefit data at these operational sites to validate its
savings projections. 


DESCRIPTION OF MIGRATION SYSTEMS
========================================================== Appendix II

This appendix provides brief descriptions of the 27 CIM migration
systems selected to support the logistics functions of materiel
management and depot maintenance. 


   MATERIEL MANAGEMENT
-------------------------------------------------------- Appendix II:1

Automated Inventory Management Support System:  Enables item managers
to automatically process recommended buys, simulate changes, and view
historical data.  Provides the capability to modify recommended
acquisition quantities or levels and add or delete delivery/storage
locations. 

Cataloging System (DO43):  Receives on-line descriptions of federal
and service supply items and sends them to the Defense Logistics
Service Center. 

Cataloging Tools On-Line:  Automates paper copy guidebooks,
procedures, and regulations needed to catalog new consumable items. 

Central Secondary Item Stratification:  Automates the retrieval,
analyses, adjustment, and arrangement of supply requirements data
used to budget procurement and repairs, report inventory, stratify
assets by need (operational, war reserve, long supply), display
readiness of supply position, and manage the inventory. 

Commercial Asset Visibility:  Enables users to monitor the status of
government-owned equipment in the possession of commercial
contractors.  Automates the reconciliation of contractor and
government records of equipment condition, location, and quantity. 

Configuration and Logistics Information Program:  Allows users to
collect and record engineering data, engineering change proposals,
and directives; provides documentation and technical data for every
configured item; and enables users to record the implemented
configuration on weapon systems and equipment. 

Defense Supply Expert System:  Allows users to requisition supply
items over the telephone.  Users can create and modify asset
requisitions, access asset requisition status and stock availability,
and reach a customer service representative. 

Deficiency Reporting System:  Automates the collection, processing,
and storage of deficiency and discrepancy data on weapon systems and
equipment. 

Generic Configuration Status Accounting System:  Provides status of
accounting information and interfaces with retail-level maintenance
systems.  Changes made to aircraft configurations are also captured
and forwarded to a data repository. 

Integrated Technical Item Management and Procurement:  Automates
pre-procurement functions, including purchase request processing, and
passes validated requirements information to procurement personnel. 

Interactive Computer Aided Provisioning System:  Automates initial
provisioning functions and allows users to track design change
notices on a personal computer. 

Initial Provisioning Management Information System:  Develops and
supports contract and planning information used to track initial
provisioning schedules and milestones.  Provides the capability to
review funding and item requirements. 

Logistics Planning and Requirements Simplification System:  Provides
provisioning, processes data item selection sheets, and generates
logistics support plans. 

Joint Engineering Data Management Information Control System:  Stores
engineering drawings in a standardized format for use by all
services. 

Maintenance Planning and Execution System:  Automates the computation
of repair schedules and budgets; gives workload management data;
tracks the value of unserviceable assets; serves as the central
repository for depot-level maintenance requirement and resource data,
including schedule rates, staff-hours, and dollar requirements; and
provides program status for aircraft, missiles, and support
equipment. 

Modification Management Information System:  Tracks engineering
change proposals from their initiation through the approval process
and, if approved, through implementation. 

Multi-User Engineering Change Proposal Automated Review:  Automates
the receipt and storage of proposed engineering changes made by
contractors and the government. 

Pre-Procurement Support System (J090A/B):  Enables logistics
personnel to develop and move a complete procurement requirements
package from requirements identification to contract approval. 

Repair Priority and Distribution:  Allows item managers to prioritize
repairs by item, optimize weapon system availability through marginal
analysis, and direct redistribution of repaired items.  Reallocates
assets in support of weapons. 

Requirements Determination and Execution System:  Automates the
calculation of requirements for procurement cycles and safety level
of supplies. 

Statistical Demand Forecasting System:  Enables item managers to
track observed demands against expected demands and indicates which
significant dollar items have legitimate changes in demand pattern. 
Identifies items requiring reforecasting using statistical and
workload parameters. 

Stock Control System:  Processes information from requisitions and
receipts; assists in requirements determination; integrates materiel
management, depot maintenance, and retail data; provides requisition
status, disposal management, financial inventory reporting, pricing
and tracking, and deficiency reporting; and serves as a repository
for information necessary for transportation links. 

Technical Data Management System:  Builds supply requests, screens
transactions, creates and modifies federal catalog items, maintains
freight data, and processes annual price changes. 

Total Asset Visibility:  Provides for total visibility of assets from
storage, production, and repair to delivery during both wholesale and
retail activities. 


   DEPOT MAINTENANCE
-------------------------------------------------------- Appendix II:2

Depot Maintenance Management Information System:  Provides depot
maintenance managers with an automated capability to forecast
workloads; schedule repair activities; track and control inventories;
program staffing, materials, and other resources; and track and
manage production costs. 

Enterprise Information System:  Provides the ability to interface to
existing data sources, extract relevant data, and package the
information to support decisionmakers with timely summary
information. 

Facilities and Equipment Maintenance:  Provides an integrated
tracking and control system for equipment and facility maintenance,
preventive maintenance, and calibration of precision measurement
equipment. 

Hazardous Material Maintenance System:  Records the receipt and issue
of all hazardous material within a maintenance depot.  Provides
inventory visibility of all hazardous material to control the issue
of hazardous material to authorized users. 

Interservice Material Accounting and Control System:  Tracks Depot
Maintenance Interservice Support agreements and visibility and
control for interservice workloads. 

Laboratory Information Management System:  Monitors and controls
laboratory data such as sample order status, order tracking, backlog,
scheduling, location tracking, workload prediction, pricing, and
invoicing.  Automates tracking and archiving for depot material
samples and test results. 

Programmed Depot Maintenance Scheduling System:  Supports the
planning, scheduling, and management of programmed depot maintenance
of major end items. 

Tool Inventory Management Application:  Provides total inventory
tracking and accountability of both hard and perishable (consumable)
tools and tooling assets.  Tracks issues and receipts of assets to
both individuals and in tool kits. 




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COMMENTS FROM THE DEPARTMENT OF
DEFENSE
========================================================== Appendix II



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The following are GAO's comments on the Department of Defense's
letter dated August 18, 1994. 


   GAO COMMENTS
-------------------------------------------------------- Appendix II:3

1.  DOD disagrees with our depiction of the evolution of the CIM
initiative and believes it is a properly balanced program that has
not changed objectives or emphasis since its inception in October
1989.  However, the facts do not support that position.  We agree
that the current objectives of the CIM initiative are to improve DOD
business practices, make better use of information technology, and
eliminate duplicative information systems.  Early in its
implementation, however, DOD clearly emphasized information systems
improvement.  As early as November 1989, the Deputy Secretary of
Defense in the Defense Management Report Decision 925, stated that
"Corporate Information Management (CIM) will enhance the availability
and standardization of information in common areas and provide for
the development of integrated management information systems."
Further, in his March 6, 1990, testimony before the Senate Committee
on Governmental Affairs, the Deputy Secretary stated that he had
launched a "Corporate Information Management initiative to integrate
the data flow within common functional areas." Stating that Defense
Management Report and CIM initiatives were changing management
techniques and structures, as well as information system
requirements, he identified seven initiatives that described "efforts
intended to eliminate separate Service systems and provide integrated
systems that can relate to each other, as well as across all DOD."
Finally, the fact CIM started as an information technology initiative
was supported in the DOD Enterprise Model, Volume II:  Using the DOD
Enterprise Model--A strategic View of Change in DOD--A White Paper,
January 1994.  In this model, DOD states: 

     "The Office of the Secretary of Defense established the
     Corporate Information Management (CIM) program to leverage DOD
     information resources to help make the activities of the
     Department far more effective and efficient.  ASD (C3I) has been
     assigned to lead this program.  In response to the major new
     challenges and opportunities facing the Department, the CIM
     initiative has broadened its focus to address strategic
     re-engineering of defense activities using a DOD-wide approach
     and enterprise model."

In January 1991, as cited in our report, the Deputy Secretary of
Defense endorsed a plan where DOD would reengineer its business
processes before standardizing its information systems.  We believe
this plan shifted more emphasis to business process improvement.  In
October 1993, however, the Deputy Secretary established specific
milestones for the selection and deployment of information systems. 
This direction reemphasized the priority given to information
systems.  Our analysis of JLSC's activities demonstrates the changes
in priorities and emphasis that have occurred throughout the history
of the CIM initiative.  As described in chapters 2 and 3 of our
report, JLSC was directed to change its priorities several times and
it is clear that its current focus is on selecting and implementing
migratory information systems.  In addition, DOD is currently
considering a reorganization that would concentrate on information
technology standardization. 

2.  We agree that it is important to compare the DOD initiative with
the process reengineering efforts of other organizations.  We made
such comparisons throughout the report and used "lessons learned" by
industry as a basis for our recommendations.  We recognized in our
report that DOD may have unique attributes by providing DOD's
position when it differed from industry. 

3.  We agree with DOD that the $36 billion estimate has no basis in
fact.  It was apparently developed with little or no analysis, which
DOD quoted (as late as April 1992) in several CIM documents and
communications with the Congress.  We understand DOD's desire to
disassociate itself from this estimate and, contrary to DOD's
comments, have pointed out in chapter 1 that the estimate is no
longer supported by DOD.  We continue to cite the estimate, however,
for two reasons.  First, it is a part of CIM history, which we
describe in chapter 1 so the reader fully understands the evolution
of the initiative.  Second, DOD does not have a more current estimate
of potential CIM savings and, as we point out in our report, is not
attempting to track savings that result from CIM efforts.  Therefore,
it is the only information that helps put the CIM savings potential
into some type of perspective.  Finally, contrary to DOD's comment,
our report also contains specific reference to the 1993 Defense
Science Board Task Force on Fiscal Year 1994-1999 Future Years
Defense Plan ("The Odeen Panel"). 

4.  We revised our draft report to use the same terminology as did
the Executive Level Group.  Our position, however, remains unchanged. 
We also modified our draft report to include the Executive Level
Group's statement that "Forward-looking organizations took a path
which put primary emphasis on continuously improved business methods. 
Computing and communication technology played a subordinate role, and
only now is being applied to the superior business methods that have
evolved."

5.  We agree with DOD that our report describes JLSC's logistics
migration strategy in three steps.  We presented the strategy as it
is contained in DOD's Logistics CIM Migration Plan and as described
to us by JLSC managers.  However, we also state in our report that
while the strategy generally focuses efforts sequentially, some work
is done concurrently on all three steps.  We revised our draft report
to more clearly state that JLSC is concurrently working on all three
steps. 

We agree that DOD is doing some work to improve business processes. 
DOD said, however, that it is not singling out the selection of
migration systems for emphasis in implementing the CIM initiative. 
We disagree.  To support its position, DOD cites the Deputy Secretary
of Defense's October 1993 memorandum.  However, as stated in chapter
2, the Deputy Secretary established time frames for the selection and
implementation of migrations systems and the completion of data
standardization.  He did not establish milestones for the completion
of process improvements.  On the contrary, he stated that the
remaining activities such as functional process improvement were to
continue on an expedited basis, but were not to be "prerequisites" to
implementation of the migration systems and data standardization
acceleration strategy. 

We should point out that we had many interviews with JLSC officials
who said that the Deputy Secretary's memorandum placed primary
emphasis on system consolidation.  As they explained to us, JLSC only
has a certain number of resources.  If DOD wanted to emphasize the
reengineering of business processes, it could do that.  But, that was
not the direction they had been given. 

We also recently talked with several DOD officials responsible for
implementation of the Depot Maintenance Standard System.  Because of
DOD's insistence that the CIM initiative was not singling out the
selection of migration systems for emphasis, we specifically asked
about their perception of the CIM program.  They said it is unusual
that DOD would officially take this position because it was clear to
them that they were directed to emphasize system selection and
implementation. 

6.  Despite DOD's comments, we did not take the statements of outside
experts out of context.  In fact, we provided direct quotes we
believe represented the underlying theme of the experts' reports to
DOD.  These experts advised DOD that successful organizations have
focused on reengineering their business processes before emphasizing
information systems.  While the Information Technology Association of
America did recommend that DOD accelerate out of its migration phase,
unlike DOD, we do not view this recommendation as support for DOD's
migration strategy.  On the contrary, the Association is telling DOD
that it must conclude this migration phase as soon as possible so
that it can focus on reengineering--where most savings can be made. 

7.  We recognized in our draft report DOD's view that the selection
and deployment of migratory information systems were critical to
business process improvement.  We agree that DOD cannot afford to
develop or maintain duplicative or overlapping systems.  In fact, we
have long recommended that DOD consolidate and standardize its
information systems for common functions, such as military pay. 
However, we disagree with the emphasis DOD has placed on information
systems under an initiative with the primary objective of business
process improvement. 

8.  As stated in our report, we recognize that DOD needs to eliminate
costly, duplicative information systems.  We continue to believe,
however, that if DOD is to achieve a maximum amount of savings from
the CIM initiative, it should emphasize business process
reengineering first and information system improvement last. 

We agree with DOD that the mandated 6-month selection and 3-year
transition periods for migratory system are ambitious.  However, we
disagree with DOD's philosophy that it is better to set tight time
frames with some potential slippage.  The former Director of Defense
Information, Principal Deputy Assistant Secretary of Defense for C3I,
and member of the Executive Level Group; in his October 17, 1993,
memorandum to the Deputy Secretary of Defense (now Secretary of
Defense) stated: 

     ".  .  .  I feel obligated to tell you that DOD cannot possibly
     deliver the stated results within three years.  The existing
     software technology platforms, software engineering practices
     and technical management skills are inadequate to cope with the
     challenge of migrating approximately 11,000 major applications
     and perhaps as many as 50,000 data bases to a lower cost,
     interoperable and integrated schema.  The current DOD inventory
     of software code exceeds well over 500 million lines.  The CIM
     goal to reverse engineer this inventory is 20 to 50 times bigger
     and twice as fast than anything ever attempted in the commercial
     sector.  Software errors and costs escalate exponentially with
     the scope of the effort.  The DOD record to date in delivering
     on time even one million lines of code on schedule and on budget
     shows a 100% failure rate."

Over the past 10 years, we have issued several reports that deal with
unsuccessful DOD attempts to develop major information systems. 
Consistently, DOD has significantly exceeded schedules and budgets
and failed to develop systems capable of performing as they were
originally intended.  Based on our experience on these assignments,
we agree with the former Director's view of DOD's 3-year migration
strategy. 

9.  DLA officials we spoke to did not view their innovative projects
as part of the CIM initiative.  In fact, they were concerned that
DOD's emphasis on migration systems would slow or even halt their
efforts.  Recognizing that these officials do not have the authority
to determine what projects DOD will consider to be under its
initiative, we removed the phase "outside the CIM umbrella" from our
draft report. 

10.  Contrary to DOD's position, we recognized in our draft report
that top-level management support and commitment were "critical
prerequisites" for success of any major reengineering
effort--including DOD's CIM initiative.  However, we believe that
executive level support and commitment alone are not sufficient to
overcome the cultural barriers we found.  The Association (on p.  8
of its report) states, "DOD must ensure that all parties buy into EI
[enterprise integration] and are willing to work wholeheartedly to
form and implement the EI plan." Further, the Association notes that
"It is important that the principals participate in the creation of
the plan.  This will prevent the plan from being 'imposed' on the
services, PSAs, and CINCs by an external organization." As cited in
the draft report, organizations that have successfully reengineered
their business operations realized early-on that getting active
participation by line managers and the support and commitment of all
their employees were critical factors to their success. 

We have modified the draft report to clarify our position on the
importance to CIM success of DOD obtaining active participation by
service and DLA managers and support and commitment from all
employees at all levels.  Also, we modified our proposed
recommendations to include revising the CIM management strategy to
ensure active participation by functional Defense managers. 

11.  We believe that the initiative's name reenforces negative views
currently held by many Defense managers.  Because of the evolution of
the initiative (during which CIM has undergone dramatic changes in
scope and emphasis, as well as management) many service and DLA
managers perceive CIM as either a budget-cutting initiative or an
effort to standardize information systems.  By renaming the
initiative, DOD could more clearly communicate the primary objective
of CIM and lessen the negative views of these managers.  This, in
turn, could help DOD gain needed participation of service and DLA
managers and the support and commitment from DOD employees. 

Concerning our April 1994 recommendation that DOD establish a Chief
Information Officer, DOD has misinterpreted the role we envisioned
for this position with regard to business process reengineering.  As
stated in our April 1994 report, the primary duties of the Chief
Information Officer would be to help strengthen DOD's information
technology management.  While the Chief Information Officer would
also support DOD's reengineering efforts, we anticipated that senior
DOD leadership, including the Deputy Secretary of Defense, the
military services, and the Principal Staff Assistants would lead
DOD's reengineering efforts.  In fact, industry experts consistently
state that it may not be appropriate for an organization's chief
information resources management official to manage the agencies'
reengineering efforts.  Doing so may cause the agencies to place too
much emphasis on technological solutions to problems rather than
attempting to reengineer their processes. 

12.  We have added information in the report to cite additional
actions that DOD has taken to more aggressively integrate its CIM
efforts. 

13.  We agree that we did not cite the Assistant Secretary of Defense
for C3I 1993 memorandum in our draft report.  We did cite, however,
the guidance causing the conflict between JLSC and the Air Force's
Depot Maintenance Management Information Systems' project office. 
Also, we do not believe that the memorandum and the directive cited
by DOD provided clear guidance because (1) officials from these
organizations, as well as a Defense logistics review group that also
found program authority was unclear, did not use this guidance to
resolve their confusion about project management authority and (2)
DOD states that it recently issued the CIM strategic plan to "clarify
program authority."

We modified our draft report to recognize DOD's latest actions to
clarify program management authority under its CIM initiative. 


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix IV


   NATIONAL SECURITY AND
   INTERNATIONAL AFFAIRS DIVISION,
   WASHINGTON, D.C. 
-------------------------------------------------------- Appendix IV:1

James E.  Hatcher
Jerome P.  Pederson


   CINCINNATI REGIONAL OFFICE
-------------------------------------------------------- Appendix IV:2

Bruce D.  Fairbairn
Sanford F.  Reigle
Roberto Rivera
Benjamin F.  Jordan
Shari A.  Kolnicki

RELATED GAO REPORTS

Defense IRM:  Management Commitment Needed to Achieve Defense Data
Administration Goals (GAO/AIMD-94-14, Jan.  21, 1994). 

Defense IRM:  Business Strategy Needed for Electronic Data
Interchange Program (GAO/AIMD-94-17, Dec.  9, 1993). 

Defense Transportation:  Commercial Practices Offer Improvement
Opportunities (GAO/NSIAD-94-26, Nov.  26, 1993). 

Defense Inventory:  Applying Commercial Purchasing Practices Should
Help Reduce Supply Costs (GAO/NSIAD-93-112, Aug.  6, 1993). 

Commercial Practices:  DOD Could Save Millions by Reducing
Maintenance and Repair Inventories (GAO/NSIAD-93-155, June 7, 1993). 

DOD Food Inventory:  Using Private Sector Practices Can Reduce Costs
and Eliminate Problems (GAO/NSIAD-93-110, June 4, 1993). 

DOD Medical Inventory:  Reductions Can Be Made Through the Use of
Commercial Practices (GAO/NSIAD-92-58, Dec.  5, 1991). 

Commercial Practices:  Opportunities Exist to Reduce Aircraft Engine
Support Costs (GAO/NSIAD-91-240, June 28, 1991). 

Defense Logistics:  Observations on Private Sector Efforts to Improve
Operations (GAO/NSIAD-91-240, June 13, 1991). 

Defense ADP:  Corporate Information Management Initiative Faces
Significant Challenges (GAO/IMTEC-91-35, Apr.  22, 1991). 

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