oversight

Military Personnel: DFAS Has Not Met All Information Technology Requirements for Its New Pay System

Published by the Government Accountability Office on 2003-10-20.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

United States General Accounting Office
Washington, DC 20548




                                   October 20, 2003



                                   The Honorable Donald H. Rumsfeld
                                   The Secretary of Defense

                                   Subject: Military Personnel: DFAS Has Not Met All Information
                                   Technology Requirements for Its New Pay System

                                   In early January 2003, we initiated a review of the Defense Integrated
                                   Military Human Resource System (DIMHRS) to get an understanding of
                                   the program, its goals, its present status, and the problems it is designed to
                                   resolve. During this review, we became aware that in April 2003 the
                                   Department of Defense (DOD) authorized the Defense Finance and
                                   Accounting Service (DFAS) to initiate a pilot project to demonstrate its
                                   ability to develop an interim military pay system, called Forward
                                   Compatible Military Pay, before DIMHRS is fully operational. DFAS
                                   maintains that an interim system should be developed as soon as possible
                                   for two reasons: (1) the planned personnel and pay system that DOD is
                                   currently developing as part of the larger DIMHRS1 will be implemented
                                   later than its projected target date of December 2006 and (2) the current
                                   military pay system—the Defense Joint Military Pay System—is aging,
                                   unresponsive, and fragile and has become a major impediment to efficient
                                   and high quality customer service. It is estimated that the Forward
                                   Compatible Military Pay system could be operational by March 2006 at a
                                   design and development cost ranging from about $17 million to
                                   $30 million.2




                                   1
                                    DOD is currently developing the DIMHRS that is designed to provide DOD and the
                                   services one integrated, standardized personnel and pay system that will track service
                                   members and their dependents.
                                   2
                                    DFAS program officials estimate the cost at $16.8 million, but a Program Analysis and
                                   Evaluation estimate came in at $29.9 million because it included costs that had been left
                                   out of the program officials’ estimate.



                                   Page 1                                                    GAO-04-149R Military Personnel
                         Since the planned interim Forward Compatible Military Pay system is
                         considered an information technology acquisition program under DOD
                         Acquisition Regulations, DFAS must comply with specific legal and
                         administrative requirements before moving forward with the development
                         of this project. In this regard, DFAS must comply with requirements
                         contained in

                     •   the Bob Stump National Defense Authorization Act for Fiscal Year 2003;3
                                                                                             4
                     • 	 Office of the Under Secretary of Defense (Comptroller) Memorandum;
                         and
                     • the Clinger-Cohen Act of 1996.5

                         We reviewed DFAS’s development of the Forward Compatible Military Pay
                         system pilot project to determine whether DFAS had complied with the
                         above requirements. We did not evaluate the cost and benefit, return on
                         investment, or break-even point analyses that were prepared by DFAS.
                         We conducted our review from June 6, 2003, to September 15, 2003, in
                         accordance with generally accepted government auditing standards.


                         In moving forward with the development of the Forward Compatible
Results in Brief 	       Military Pay system, DFAS has not complied with specific legal and
                         administrative requirements applicable to DOD’s information technology
                         investments. It did complete cost and benefit, return on investment, and
                         break-even point analyses as required by the Comptroller’s memorandum.
                         However, DFAS has not submitted the forward pay proposal to the
                         responsible domain to determine its compliance with DOD’s Business



                         3
                          Public Law 107-314 (Dec.2, 2002), section 1004, Development and Implementation of
                         Financial Management Enterprise Architecture, which requires that the investment in
                         excess of $1 million to improve a defense financial system be consistent with DOD’s
                         enterprise architecture, among other things.
                         4
                          The memorandum (dated Mar. 7, 2003) provides additional information on how DOD will
                         determine compliance with section 1004 of the Bob Stump National Defense Authorization
                         Act.
                         5
                          The Federal Acquisition Reform Act of 1996 (FARA) and the Information Technology
                         Management Reform Act of 1996 (ITMRA) were renamed the Clinger-Cohen Act of 1996 by
                         the 1997 Omnibus Consolidated Appropriations Act P.L. 104-208 (Sept. 30, 1996). Both the
                         FARA and the ITMRA were passed as sections D and E in the National Defense
                         Authorization Act for Fiscal Year 1996, P.L. 104-106 (Feb. 10, 1996), which requires federal
                         agencies to maximize the value and assess and manage the risks associated with
                         investments in information technology.




                         Page 2                                                    GAO-04-149R Military Personnel
             Enterprise Architecture,6 which guides DOD’s investments in financial
             systems. Because DFAS has not submitted the proposal to the responsible
             domain, the DOD Comptroller has not met its responsibility under the
             authorization act to ensure compliance with the Business Enterprise
             Architecture. Further, DFAS has not completed the necessary documents
             to support compliance with the Clinger-Cohen Act. For example, DFAS
             has not completed the Acquisition Strategy or the Acquisition Program
             Baseline document, as required by DOD Acquisition Regulations. By
             failing to complete all required studies and analyses, DOD lacks assurance
             that it is meeting its goal of making quality information technology
             investments, as required. We are recommending that DFAS complete all
             required steps before proceeding with the Forward Compatible Military
             Pay project.


             By the end of fiscal year 2003, DOD estimates that it will have spent about
Background   $360 million to conceptualize and plan a major new departmentwide
             integrated military pay and personnel system, known as DIMHRS. In 2002,
             DOD estimated that DIMHRS would be fully deployed by fiscal year 2007
             at a development cost of about $577 million. However, our review of the
             fiscal year 2004 information-technology budget request shows the amounts
             required for fiscal years 2003 and 2005 are $121.76 million for 2004 and
             $94.60 million for 2005. (When added to the amount spent through fiscal
             2003, the amounts round to the total of $577 million.) DOD further
             estimates that it would cost about $1.5 billion to operate and maintain
             DIMHRS through fiscal year 2017. However, DOD expects that the winning
             contractor will revise the deployment schedule and cost estimates by early
             2004. Although the development of DIMHRS has not yet begun, the original
             schedule has already slipped by about 15 months. Among its various
             components, DIMHRS will include a military pay component. As a result of
             the schedule slippage, DFAS has decided that an interim military pay
             system is needed to meet its short-term needs until the DIMHRS’ military
             pay component is available, which is projected for calendar year 2006
             or 2007.




             6
               In May 2003, the DOD Comptroller changed the architecture name from the Financial
             Management Enterprise Architecture to the Business Enterprise Architecture to reflect the
             transformation of departmentwide business operations and supporting systems. The
             Business Enterprise Architecture is a “blueprint” to guide and constrain DOD’s investments
             in financial management operations and systems.




             Page 3                                                  GAO-04-149R Military Personnel
                           The development of the interim military pay system—the Forward
                           Compatible Military Pay system—is considered an information technology
                           acquisition program, according to DOD acquisition policy. Congress
                           enacted laws to govern DOD’s information technology investments,
                           e.g., Section 1004 of Bob Stump National Defense Authorization Act for
                           Fiscal Year 2003 and the Clinger-Cohen Act of 1996. In addition to these
                           laws, DOD’s acquisition policy also mandates sound information
                           technology investment decisions.


                           In moving forward with the development of the interim military pay
DFAS Has Not               system, DFAS has not complied with the Bob Stump National Defense
Completed All              Authorization Act for Fiscal Year 2003, the Comptroller Memorandum, and
                           the Clinger-Cohen Act requirements. GAO reported in March 20037 that
Required                   DFAS failed to complete the required documentation for four other
Documentation nor          systems undergoing modernization. In that report we recommended that
                           all remaining DFAS information technology projects be evaluated to
Obtained Necessary         ensure they are being implemented at acceptable cost and within
Approval for Forward       reasonable time frames.
Compatible Military
Pay System

National Defense           The Bob Stump National Defense Authorization Act for Fiscal Year
Authorization Act for      2003 requires that any investment in excess of $1 million to improve a
Fiscal Year 2003 and the   defense financial system be consistent with DOD’s Business Enterprise
                           Architecture,8 which lays out a frame of reference governing information
Comptroller Memorandum 	   technology management. The DOD Comptroller’s March 2003
                           memorandum details how compliance with the authorization act will be
                           determined. Specifically, the memorandum requires several analyses to


                           7
                            U.S. General Accounting Office, DOD Business Systems Modernization:
                           Continued Investment in Key Accounting Systems Needs to be Justified,
                           GAO-03-465 (Washington, D.C.: Mar. 28, 2003).
                           8
                            GAO reported in September 2003 that DOD’s initial version of the Business Enterprise
                           Architecture does not adequately address all the requirements in the National Defense
                           Authorization Act for Fiscal Year 2003. Further, DOD has not yet defined and implemented
                           an effective approach to select and control business systems investments for obligations
                           exceeding $1 million while the architecture is being developed and after it is completed.
                           See U.S. General Accounting Office, DOD Business Systems Modernization: Important
                           Progress Made to Develop Business Enterprise Architecture, but Much Work Remains,
                           GAO-03-1018 (Washington, D.C.: Sept. 19, 2003).




                           Page 4                                                  GAO-04-149R Military Personnel
                        demonstrate the costs and benefits; return on investment; break-even
                        point; and overall compliance with the enterprise architecture for any
                        initiative in excess of $1 million. The Comptroller’s administrative
                        requirements do not preclude or eliminate any other required approvals
                        or processes within DOD.

                        DFAS has not fully complied with the Comptroller’s March 7, 2003,
                        memorandum. While DFAS briefed a cost and benefit, return on
                        investment, and break-even point analysis to the DOD Comptroller’s
                        Office, the briefing did not include a determination that the Forward
                        Compatible Military Pay initiative is in compliance with the enterprise
                        architecture. Such a determination has not been made because, to date,
                        DFAS has not submitted the proposal to the domain9 owner for its
                        evaluation of compliance with the architecture. By determining
                        compliance with the architecture DOD can be sure that the Forward
                        Compatible Military Pay initiative will not result in a system that
                        performs the same tasks or stores the same data as existing systems,
                        cannot communicate with other DOD systems, and is costly to operate
                        and maintain.

                        In addition, the Secretary of Defense’s Office of Program Analysis and
                        Evaluation raised concerns over the accuracy of the information in the
                        presentation. Specific areas of concern included cost, schedule, and the
                        underlying assumptions made in support of the initiative.


Clinger-Cohen Act and   The Clinger-Cohen Act of 1996 requires agencies to establish a process
DOD Acquisition         to maximize value and assess and manage the risks of information
Regulations             technology investments, including specific quantitative and qualitative
                        criteria for comparing and prioritizing alternative information technology



                        9
                         As outlined in DOD’s Business Management Modernization Program governance
                        guidance, domains are based on existing functional business lines. The 7 domains
                        are: (1) Acquisition; (2) Finance, Accounting Operations and Financial Management;
                        (3) Human Resource Management; (4) Installations and Environment; (5) Logistics;
                        (6) Strategic Planning and Budgeting; and (7) Technical Infrastructure. Domain owners
                        have the authority, responsibility, and accountability for business transformation,
                        implementation of the Business Enterprise Architecture, and portfolio management
                        within their domains. Owners’ responsibilities include: leading business transformation;
                        establishing and maintaining a domain governance process; performing system reviews
                        and approving initiative funding; assisting in the extension of the architecture; enforcing
                        compliance with the architecture; guiding implementation activities; and representing the
                        domain on cross-domain issues.




                        Page 5                                                    GAO-04-149R Military Personnel
                        projects. The primary objective of DOD’s acquisition-implementing
                        policy is to acquire quality products that satisfy user needs and contain
                        measurable improvements to mission capability and operational support,
                        in a timely manner and at a fair and reasonable price.

                        DFAS has not met all of the requirements of the Clinger-Cohen Act
                        applicable to its forward compatible pay initiative. The act requires a
                        variety of actions, and DOD, in its acquisition regulations, requires
                        evidence that the actions have been completed. For example, the act
                        requires clearly established measures and accountability for program
                        progress. Documents such as the Acquisition Strategy and Acquisition
                        Program Baseline documents would contain this information.


                        DFAS has not complied with each of the Bob Stump National Defense
Conclusion 
            Act, Clinger-Cohen, and administrative requirements for information
                        technology investments. As a result, DOD lacks assurance that it is
                        meeting its goal of making quality information technology investments.
                        Further, the Forward Compatible Military Pay system proposal has
                        not been reviewed for compliance with DOD’s Business Enterprise
                        Architecture. As a result, the system may duplicate the functions of
                        existing systems, may not be able to communicate with other DOD
                        systems, and may add to overall operating and maintenance costs.


                        To ensure that the proposed investment in the Forward Compatible
Recommendations for 	   Military Pay system is a prudent business decision for DOD, you
Executive Action        should direct

                   •	  DFAS to submit its Forward Compatible Military Pay system proposal
                       to the domain owner for determination that it is in compliance with
                       DOD’s Business Enterprise Architecture;
                   • 	 the DOD Comptroller to meet its responsibility under the Bob
                       Stump National Defense Authorization Act for Fiscal Year 2003,
                       Public Law 107-314, to determine compliance with the Business
                       Enterprise Architecture; and
                   • 	 the DOD Comptroller to require DFAS to demonstrate that it has
                       complied with its responsibilities under the Clinger-Cohen Act of 1996,
                       Public Law 104-106.

                        The DOD Comptroller and DFAS should complete these steps before the
                        final decision is made to invest in the Forward Compatible Military Pay
                        system.



                        Page 6                                         GAO-04-149R Military Personnel
                  As you know, 31 U.S.C. 720 requires the head of a federal agency to submit 

                  a written statement of the actions taken on our recommendations to the 

                  Senate Committee on Governmental Affairs and the House Committee on 

                  Government Reform not later than 60 days after the date of this report. A 

                  written statement must also be sent to the House and Senate Committees 

                  on Appropriations within 60 days after the date of this report. 



                  DOD provided official comments on a draft of this letter. The Principal 

Agency Comments   Deputy and Deputy Under Secretary of Defense (Management Reform) 

                  concurred with the letter and recommendations. DOD stated that if the 

                  decision is made to pursue the Forward Compatible Military Pay system, 

                  DFAS will finalize the appropriate documentation to satisfy requirements 

                  of the Clinger-Cohen Act of 1996, the DOD Business Enterprise 

                  Architecture, the DOD acquisition lifecycle management process, and 

                  provisions of current governing legislation. The Forward Compatible 

                  Military Pay system then will be reviewed through the Business 

                  Management Modernization Program process. DOD’s comments appear 

                  in their entirety in enclosure I. 


                  We are sending copies of this report to the appropriate congressional 

                  committees. We will place a copy of this letter on GAO’s Web site at 

                  http://www.gao.gov. If you have any questions concerning the 

                  information provided, please call me on (202) 512-5559 or Donald C. 

                  Snyder on (202) 512-7204. 


                  Sincerely yours, 





                  Derek B. Stewart 

                  Director, Defense Capabilities and Management 


                  Enclosure 





                  Page 7                                         GAO-04-149R Military Personnel
Enclosure I: Comments from the Department
of Defense




Note: Report number
was changed to
GAO-04-149R.




                      Page 8   GAO-04-149R Military Personnel
                              Enclosure I: Comments from the Department
                              of Defense




Note: Page numbers in
the draft report may differ
from those in this report.




(350295)
                              Page 9                                      GAO-04-149R Military Personnel
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