[Senate Hearing 110-533]
[From the U.S. Government Publishing Office]
S. Hrg. 110-533
BUSINESS TRANSFORMATION AND FINANCIAL MANAGEMENT AT THE DEPARTMENT OF
DEFENSE
=======================================================================
HEARING
before the
SUBCOMMITTEE ON READINESS AND MANAGEMENT SUPPORT
of the
COMMITTEE ON ARMED SERVICES
UNITED STATES SENATE
ONE HUNDRED TENTH CONGRESS
SECOND SESSION
__________
FEBRUARY 7, 2008
__________
Printed for the use of the Committee on Armed Services
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COMMITTEE ON ARMED SERVICES
CARL LEVIN, Michigan, Chairman
EDWARD M. KENNEDY, Massachusetts JOHN McCAIN, Arizona
ROBERT C. BYRD, West Virginia JOHN WARNER, Virginia,
JOSEPH I. LIEBERMAN, Connecticut JAMES M. INHOFE, Oklahoma
JACK REED, Rhode Island JEFF SESSIONS, Alabama
DANIEL K. AKAKA, Hawaii SUSAN M. COLLINS, Maine
BILL NELSON, Florida SAXBY CHAMBLISS, Georgia
E. BENJAMIN NELSON, Nebraska LINDSEY O. GRAHAM, South Carolina
EVAN BAYH, Indiana ELIZABETH DOLE, North Carolina
HILLARY RODHAM CLINTON, New York JOHN CORNYN, Texas
MARK L. PRYOR, Arkansas JOHN THUNE, South Dakota
JIM WEBB, Virginia MEL MARTINEZ, Florida
CLAIRE McCASKILL, Missouri ROGER F. WICKER, Mississippi
Richard D. DeBobes, Staff Director
Michael V. Kostiw, Republican Staff Director
______
Subcommittee on Readiness and Management Support
DANIEL K. AKAKA, Hawaii, Chairman
ROBERT C. BYRD, West Virginia JOHN THUNE, South Dakota
EVAN BAYH, Indiana JAMES M. INHOFE, Oklahoma
HILLARY RODHAM CLINTON, New York SAXBY CHAMBLISS, Georgia
MARK L. PRYOR, Arkansas ELIZABETH DOLE, North Carolina
CLAIRE McCASKILL, Missouri ROGER F. WICKER, Mississippi
(ii)
C O N T E N T S
__________
CHRONOLOGICAL LIST OF WITNESSES
Business Transformation and Financial Management at the Department of
Defense
february 7, 2008
Page
Walker, Hon. David M., Comptroller General of the United States.. 4
Brinkley, Paul A., Deputy Under Secretary of Defense for Business
Transformation................................................. 24
Kunkel, Peter E., Principal Deputy Assistant Secretary of the
Army for Financial Management and Comptroller.................. 29
Brook, Hon. Douglas A., Assistant Secretary of the Navy for
Financial Management and Comptroller........................... 34
Gibson, Hon. John H., Assistant Secretary of the Air Force for
Financial Management and Comptroller........................... 39
(iii)
BUSINESS TRANSFORMATION AND FINANCIAL MANAGEMENT AT THE DEPARTMENT OF
DEFENSE
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THURSDAY, FEBRUARY 7, 2008
U.S. Senate,
Subcommittee on Readiness and
Management Support,
Committee on Armed Services,
Washington, DC.
The subcommittee met, pursuant to notice, at 2:33 p.m. in
room SR-222, Russell Senate Office Building, Senator Daniel K.
Akaka (chairman of the subcommittee) presiding.
Committee members present: Senators Akaka and Thune.
Majority staff members present: Peter K. Levine, general
counsel; Michael J. McCord, professional staff member; and
William K. Sutey, professional staff member.
Minority staff members present: Gregory T. Kiley,
professional staff member; and Lucian L. Niemeyer, professional
staff member.
Staff assistants present: Benjamin L. Rubin and Brian F.
Sebold.
Committee members' assistants present: Bonni Berge,
assistant to Senator Akaka; Dahlia Reed, assistant to Senator
Bayh; and Stephen C. Hedger, assistant to Senator McCaskill.
OPENING STATEMENT OF SENATOR DANIEL K. AKAKA, CHAIRMAN
Senator Akaka. The Readiness and Management Support
Subcommittee meets today to address the issues of business
transformation and financial management at the Department of
Defense (DOD).
For as long as I've been serving on this committee, we have
been working to address this issue. This has been an entirely
bipartisan effort in which I have been joined, first, by
Senator Inhofe--and then by Senator Ensign--and we have served
well together in both cases and now with Senator Thune. I want
you to know that we stand together on this issue, because we
know that, without timely, accurate financial information, our
senior military and civilian leaders will continue to be
severely handicapped in making day-to-day management decisions
and ensuring that taxpayer dollars are well spent.
I am pleased to have the Comptroller General here with us
today, because the Government Accountability Office (GAO) has
played an invaluable role in advising both Congress and DOD in
what we need to do to make progress on this issue. I want to
say, also, that I've worked with the Comptroller General over
the years, we've worked well together, and we've worked on what
we call ``high-risk areas,'' and continue to do that. This is
one of those areas.
I also am pleased to see Paul Brinkley, who has made a
tremendous contribution to the business transformation effort
during his time at the DOD.
Over the last 4 years, the senior leadership at DOD has
demonstrated a commitment to business systems modernization by
establishing a Defense Systems Management Committee, a Business
Transformation Agency (BTA), and a new federated architecture
for the Department's defense system. The establishment of Chief
Management Officers (CMOs) for the DOD in each of the military
departments, in accordance with section 904 of the National
Defense Authorization Act (NDAA) for Fiscal Year 2008, should
further advance this effort.
Despite these signs of progress, we still have a long way
to go. I remain gravely concerned that the military departments
have not yet followed DOD's lead in establishing new governance
structures to address business transformation, have not yet
developed comprehensive enterprise architectures and transition
plans that plug into DOD's federated architecture in a manner
that meets statutory requirements; and, instead, continue to
rely upon old stovepipe structures to implement piecemeal
reforms. The establishment of CMOs for the military departments
may help address these problems, but will not, alone, be
enough.
The last time we had a transition from one administration
to another, we started from scratch on business modernization,
throwing years of hard work out the window. DOD then floundered
for the better part of 4 years before finding the more
promising road that we are now on.
I look forward to working with Senator Thune and DOD to
ensure that, regardless of who our next President may be, the
Department's business modernization efforts do not skip a beat
in the next transition between administrations.
Senator Thune, your statement?
STATEMENT OF SENATOR JOHN THUNE
Senator Thune. Thank you, Mr. Chairman. I appreciate you
calling this hearing.
I look forward to helping build on the record of strong
bipartisan oversight that this subcommittee created during the
last 5 years over financial management reform efforts at DOD.
The goal of reform is to provide timely, accurate financial
information to our senior military and civilian leaders in
order for them to make sound day-to-day management decisions.
The importance of this goal cannot be understated. Ensuring the
taxpayers' dollars are well spent is all our responsibility; in
a time of war, it's even more so. Every dollar wasted is one
less dollar for armored vehicles, one less dollar for body
armor, one less dollar for ammunition, or one less dollar for
medical supplies. It's important that we not forget that.
Reviewing the record of this subcommittee and the GAO's
oversight, progress has been made on the Office of the
Secretary of Defense (OSD) level. Mr. Walker, I want to thank
you and your staff for your continued engagement on this vital
topic. I also would like to recognize the efforts of Mr.
Brinkley and the staff of the BTA for their continued
commitment to business systems modernization within the
Department.
Sadly, not all the news, as you noted, Mr. Chairman, is
good. At the Service level, much still needs to be done. A
little over a year ago, this subcommittee held its last
financial management hearing, focusing on the lack of progress
within the military departments in developing business systems
architectures and fielding modern business systems. To our
knowledge, the Services have not followed the OSD's lead in
developing new government structures to better address business
transformation, nor have they developed detailed comprehensive
enterprise architectures and transition plans that fit into
OSD's federated structure.
It appears little progress has been made over the past
years, and this is troubling. I understand that people move on
in government service. Administrations come and administrations
go, and that changeover can be a positive thing, but the
continued lack of accountability, the multiple plans for change
over the years that are never implemented, and the hundreds of
millions of dollars wasted is a disservice to the American
taxpayer. They deserve better.
Senator Akaka and I remain committed to continuing these
hearings, and continuing on the path of reform upon which we
are currently traveling.
On a positive note, I would like to recognize the
contribution of Ellsworth Air Force Base, in my home State of
South Dakota, towards the financial reform within the Air
Force. A new Air Force Financial Services Center opened just
this past October at Ellsworth Air Force Base. It will
transform most of the military and travel pay operations of the
Air Force by centralizing transactions from 93 bases into one
centralized location. The opening of the Air Force Financial
Services Center will improve the effectiveness and efficiency
of the Air Force financial services and customer service.
I look forward to hosting Secretary Gibson in the near
future when he comes to visit, and we hope to see more of this
sort of positive progress in the coming year.
So, Mr. Chairman, again, thank you for taking time to hold
the hearing today, and I appreciate, very much, those who are
appearing before the subcommittee. We welcome your testimony
and look forward to having you respond to some of the questions
that we have prepared for you.
Thank you, Mr. Chairman.
Senator Akaka. Thank you, Senator Thune, for your
statement.
Let me introduce our panel: The Honorable David M. Walker,
who's Comptroller General of the United States; Paul A.
Brinkley, Deputy Under Secretary of Defense for Business
Transformation; Peter E. Kunkel, Principal Deputy Assistant
Secretary of the Army for Financial Management and Comptroller;
The Honorable Douglas A. Brook, Assistant Secretary of the Navy
for Financial Management and Comptroller; and The Honorable
John H. Gibson, Assistant Secretary of the Air Force for
Financial Management and Comptroller.
Welcome, to all of you. I'd like to ask the Comptroller
General to begin.
STATEMENT OF HON. DAVID M. WALKER, COMPTROLLER GENERAL OF THE
UNITED STATES
Mr. Walker. Chairman Akaka, Senator Thune, thank you for
the opportunity to come back for this regular 6-month update on
where things stand on business transformation within the
Department.
I've submitted a statement for the record. I assume that
you will enter it into the record, and I'll just move to
summarize the highlights now, if that's okay with you.
Senator Akaka. All of your statements will be included in
the record.
Mr. Walker. Thank you.
I would first like to commend this subcommittee for its
continued efforts over a number of years, and hopefully it will
continue in the future. I agree, this is a nonpartisan issue,
this is about good government. This is economy, efficiency, and
effectiveness, and that doesn't have a party label.
Let me say, at the outset, in my opinion significant
progress has been made in the last 2 to 3 years at the OSD
level, and I think that needs to be acknowledged. We have a
number of people that have dedicated significant time and
effort, and it's been evident, and it's achieved results at the
OSD level. That has not, however, been replicated at the
military department level, and that's the reason we are here
today.
Within the last 6 months, there have been several key
events. I'll mention just a few.
You mentioned, Mr. Chairman, the NDAA, which included a
statutory requirement for the Department to have a strategic
and integrated business transformation plan, which we had
advocated for some time. It also created a deputy CMO and a CMO
in each of the military departments.
Furthermore, through the DOD's own efforts, a number of
significant items occurred during the last 6 months. In
financial management, they have moved, under their Financial
Improvement and Audit Readiness (FIAR) Plan, which is their
audit readiness plan, from a line-item approach to a segment
approach, which is consistent with GAO's recommendation and
makes a lot more sense. They've made some progress on
standardizing data across the DOD, although much more needs to
be done. They also are creating more emphasis on real success
in financial management, which is not to achieve a clean
opinion on your financial statements; that should come after
you achieve the basics. The basics are: timely, accurate, and
useful, financial and other management information to make
informed decisions on a day-to-day basis. That's, ultimately,
what you need. You need that first, and they are refocusing on
that fundamental need.
In the information technology area, they've issued their 6-
month update on the enterprise architecture and the enterprise
transformation plan. But, in summary, significant progress has
been made at the enterprise level, but that has not been
replicated at the military department level, which is why we're
here today. My two major concerns at this point in time are:
(a) to accelerate progress at the military department level;
and (b) continuity, which applies both at the enterprise-wide
and the military department level, concerns with regard to the
changeover that we know is before us in January in this next
year, whoever wins the Presidential election, and the fact that
it doesn't appear that there is going to be a reasonable degree
of continuity on some of these key positions. Obviously, we
have career officials who are there, and I'd be interested in
knowing what's been done by DOD to try to provide some
continuity through that vantage point.
But, I would note one of the things that we've talked about
before, Mr. Chairman and Senator Thune, is that, in our view,
the chief operating officer or chief management official (CMO),
department-wide, needs to be a term appointment, because that's
the only way that you're going to provide continuity within and
between administrations. While that person might need to be
politically acceptable, they shouldn't be primarily chosen for
political considerations, they need to be a professional who
can end up helping to run and achieve business transformation
success for the largest, most complex, and most important
entity on the face of the Earth, the DOD.
We are fortunate today in having Deputy Secretary Gordon
England, who's an extraordinary individual, and he clearly is
the kind of person that we need to have in that type of role.
But, there is no guarantee whatsoever, absent statutory
qualification requirements and other actions, that that will
continue.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Walker follows:]
Prepared Statement by Hon. David M. Walker
Mr. Chairman and members of the subcommittee: I am pleased to be
here today to discuss the status of the Department of Defense's (DOD)
efforts to transform DOD's business operations and the actions that DOD
needs to take to maintain continuity of effort, change the status quo,
and achieve sustainable success, both at the enterprise-wide level and
within DOD's many components. Before I go further, I also want to
commend the subcommittee for its continued focus, oversight, and
legislative initiatives to address these critical issues.
Since the first financial statement audit of a major DOD component
was attempted almost 20 years ago, we have reported that weaknesses in
business operations not only adversely affect the reliability of
reported financial data, but also the economy, efficiency, and
effectiveness of these operations. DOD continues to dominate our list
of high-risk programs designated as vulnerable to waste, fraud, abuse,
and mismanagement, bearing responsibility, in whole or in part, for 15
of 27 high-risk areas.\1\ Eight of these areas are specific to DOD and
include DOD's overall approach to business transformation, as well as
business systems modernization and financial management, which are the
focus of this hearing. Collectively, these high-risk areas relate to
DOD's major business operations that directly support the warfighters,
including how they are paid, the benefits provided to their families,
and the availability and condition of equipment they use both on and
off the battlefield.
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\1\ Government Accountability Office (GAO), High-Risk Series: An
Update, GAO-07-310 (Washington, DC: January 2007).
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Given the current security environment and growing long-range
fiscal imbalance facing our Nation, DOD, like other Federal agencies,
will need to ensure prudent and proper stewardship of the resources it
is provided to perform its mission. Commitments are clearly growing
both abroad, with our involvement in ongoing operations in Iraq and
Afghanistan, as well as at home, with efforts to provide homeland
security. However, our Nation is threatened not only by external
security threats, but also from within by large and growing fiscal
imbalances, due primarily to our aging population and rising health
care costs. Absent policy changes to cope with rising health care costs
and known demographic trends, a growing imbalance between expected
Federal spending and revenues will mean escalating and ultimately
unsustainable Federal deficits and debt levels. As I have stated
previously, our Nation is on an imprudent and unsustainable fiscal
path. Given this scenario, DOD cannot afford to continue to rely on
ineffective and inefficient business processes, controls, and
technology to support its mission. With about $546 billion in
discretionary budget authority provided thus far in fiscal year 2008,
along with total reported obligations of about $492 billion to support
ongoing operations and activities related to the global war on
terrorism since the September 11, 2001, attacks through September 2007,
the department has been given stewardship of unprecedented amounts of
taxpayer money. DOD must do more to ensure proper stewardship and
accountability of the resources it is given.
Transforming business operations in any organization is a long-
term, difficult process, especially in an organization as large and
complex as DOD. Congress, under the leadership of this subcommittee and
others, has been instrumental in transforming DOD through oversight and
through legislation that has codified many of our prior
recommendations, particularly with respect to the modernization of
DOD's business systems.\2\ While transformation will never be easy, our
work shows that DOD will certainly continue to face difficulty in
achieving better outcomes in its business operations and, ultimately,
optimizing support to the warfighters until it adopts a better
leadership approach to guide its business transformation efforts. My
testimony today will provide perspectives on the progress DOD has made
and the challenges it faces in its approaches to overall business
transformation, business systems modernization, and financial
management capabilities improvements. In particular, I will focus on
the progress DOD has made in developing its business enterprise
architecture (BEA), enterprise transition plan (ETP), and Financial
Improvement and Audit Readiness (FIAR) Plan; DOD's investment controls
for new business systems; the extent to which DOD is complying with
applicable legislation; and the degree to which the department has
integrated the roles of the military Services in these efforts. My
statement is based largely on previous reports and testimonies;
however, some portions are based upon ongoing work. All of this work
was performed in accordance with generally accepted government auditing
standards.
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\2\ Ronald W. Reagan National Defense Authorization Act for Fiscal
Year 2005, Pub. L. No. 108-375, Sec. 332 (2004) (codified in part at 10
U.S.C. Sec. Sec. 186 and 2222).
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summary
DOD's senior leadership has demonstrated a commitment to
transforming the department's business operations, and has taken many
steps in the last few years to further this effort. For example, DOD
has made progress in creating transformational entities to guide its
efforts, such as the Defense Business Systems Management Committee and
the Business Transformation Agency,\3\ as well in developing plans and
other tools. However, two critical actions, among others, are still
needed to put DOD on a sustainable path to success. DOD has yet to
establish: (1) a strategic planning process that results in a
comprehensive, integrated, and enterprise-wide plan or set of plans to
help guide transformation; and (2) a senior official who can provide
full-time attention and sustained leadership to the overall business
transformation effort.
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\3\ The Business Transformation Agency is the DOD agency
responsible for DOD's business transformation and the development and
implementation of the ETP.
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Congress has clearly recognized the need for executive-level
attention to these matters as well as sound planning, and has taken
important action to codify key responsibilities. Specifically, the
National Defense Authorization Act for Fiscal Year 2008 designates the
Deputy Secretary of Defense as the department's Chief Management
Officer (CMO), creates a Deputy CMO position, and designates the
undersecretaries of each military department as CMOs for their
respective departments. The act also requires the Secretary of Defense,
acting through the CMO, to develop a strategic management plan that
among other things is to include a detailed description of performance
goals and measures for improving and evaluating the overall efficiency
and effectiveness of the business operations of the department.
In light of this legislation, it will be important for DOD to
define the specific roles and responsibilities for the CMO, Deputy CMO,
and the service CMOs; ensure clearly delineated reporting relationships
among them and other department and service officials; foster good
executive-level working relationships for maximum effectiveness;
establish appropriate integration and transformation structures and
processes; promote individual accountability and performance; and
provide for continuity. With less than a year before a change in
administrations, DOD should focus significant effort in the months
ahead to institutionalize as many of these actions as possible.
However, in the absence of more permanence, DOD will still face
challenges in sustaining continuity of leadership. In that respect, we
continue to believe the CMO should be codified in statute as a separate
position with an appropriate term to span administrations.
With regard to business systems modernization, which is a critical
enabler to enhancing overall business transformation, DOD continues to
take steps to comply with legislative requirements. However, much
remains to be accomplished before the full intent of this legislation
is achieved. In particular, DOD continues to update its BEA, which
while addressing several issues previously reported by us, is still not
sufficiently complete to effectively and efficiently guide and
constrain business system investments across all levels of the
department. Most notably, the architecture does not yet include well-
defined architectures for DOD's component architectures. In addition,
the scope and content of the department's ETP do not address DOD's
complete portfolio of information technology (IT) investments. As part
of its approach to incrementally improving its BEA, DOD issued a
strategy for ``federating'' or extending its architecture to the
military departments and defense agencies. In our view, much remains to
be accomplished before a well-defined federated architecture is in
place, particularly given the limitations in the federation strategy
(e.g., including information on how the component architectures are to
align with the latest version of the BEA) and the immature state of the
military department architecture programs. DOD has since developed an
updated version of its federation strategy, which according to DOD
officials, addresses some of our recommendations.
The department has also established and has begun to implement
legislatively directed corporate investment review structures and
processes needed to effectively manage its business systems
investments, but neither DOD nor the military departments have done so
in a manner that is fully consistent with relevant guidance. For
example, the department has not yet established business system
investment policies and procedures for ensuring that investment
selection decisions are aligned with investment funding decisions,
which increases the chance of inconsistent and uninformed
decisionmaking. Nevertheless, DOD components are continuing to invest
billions of dollars in thousands of new and existing business system
programs. As we previously stated, the risks associated with investing
in systems ahead of having a well-defined architecture and investment
management practices are profound and must be managed carefully, as
must the wide assortment of other risks that we have reported relative
to specific DOD business systems investments. Our work and research has
shown that establishing effective systems modernization management
controls, such as an architecture-centric approach to investment
decisionmaking, while not a guarantee, can increase the chances of
delivering cost-effective business capabilities on time and within
budget. As such, we have made recommendations aimed at improving these
institutional and program-specific controls, and DOD has largely agreed
with these recommendations.
Regarding financial management, DOD has taken steps toward
developing and implementing a framework for addressing the department's
longstanding financial management weaknesses and improving its
capability to provide timely, reliable, and relevant financial
information for analysis, decisionmaking, and reporting, a key defense
transformation priority.\4\ Specifically, this framework, which is
discussed in both the department's ETP and the FIAR Plan,\5\ is
intended to define and put into practice a standard DOD-wide financial
management data structure as well as enterprise-level capabilities to
facilitate reporting and comparison of financial data across the
department. While these efforts should improve the consistency and
comparability of DOD's financial reports, a great deal of work remains
before the financial management capabilities of DOD and its components
are transformed and the department achieves financial visibility.\6\
Examples of work remaining that must be completed as part of DOD
component efforts to support the FIAR and ETP include data cleansing;
improvements in current policies, processes, procedures, and controls;
and implementation of integrated systems. Further, in 2007, DOD
introduced refinements to its approach for achieving financial
statement auditability. While these refinements reflect a clearer
understanding of the importance of the sustainability of financial
management improvements and the department's reliance on the successful
completion of component (including military Services and defense
agencies) and subordinate initiatives, they are not without risks,
which I will discuss later.
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\4\ DOD has identified six business enterprise priorities for
transforming the department: personnel visibility, acquisition
visibility, common supplier engagement, materiel visibility, real
property accountability, and financial visibility.
\5\ DOD's FIAR Plan was issued in December 2005 and had been
updated periodically is intended to provide DOD components with a
framework for resolving problems affecting the accuracy, reliability,
and timeliness of financial information and obtaining clean financial
statement audit opinions.
\6\ DOD defines financial visibility as providing immediate access
to accurate and reliable financial information (planning, programming,
budgeting, accounting, and cost information) in support of financial
accountability and efficient and effective decisionmaking through the
department in support of the warfighters.
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background
DOD is one of the largest and most complex organizations in the
world. Overhauling its business operations will take many years to
accomplish and represents a huge and possibly unprecedented management
challenge. Execution of DOD's operations spans a wide range of defense
organizations, including the military departments and their respective
major commands and functional activities, numerous large defense
agencies and field activities, and various combatant and joint
operational commands that are responsible for military operations in
specific geographic regions or theaters of operation. To support DOD's
operations, the department performs an assortment of interrelated and
interdependent business functions--using thousands of business
systems--related to major business areas such as weapon systems
management, supply chain management, procurement, health care
management, and financial management. The ability of these systems to
operate as intended affects the lives of our warfighters both on and
off the battlefield.
To address longstanding management problems, we began our high-risk
series in 1990 to identify and help resolve serious weaknesses in areas
that involve substantial resources and provide critical services to the
public.\7\ Historically, high-risk areas have been designated because
of traditional vulnerabilities related to their greater susceptibility
to fraud, waste, abuse, and mismanagement. As our high-risk program has
evolved, we have increasingly used the high-risk designation to draw
attention to areas associated with broadbased transformation needed to
achieve greater economy, efficiency, effectiveness, accountability, and
sustainability of selected key government programs and operations. DOD
has continued to dominate the high-risk list, bearing responsibility,
in whole or in part, for 15 of our 27 high-risk areas. Of the 15 high-
risk areas, the 8 DOD-specific high-risk areas cut across all of DOD's
major business areas. Table 1 lists the eight DOD-specific high-risk
areas and the year in which each area was designated as high risk. In
addition, DOD shares responsibility for seven governmentwide high-risk
areas.\8\
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\7\ See GAO, High-Risk Series: An Update, GAO-07-310 (Washington,
DC: January 2007).
\8\ DOD shares responsibility for the following seven
governmentwide high-risk areas: (1) disability programs, (2) ensuring
the effective protection of technologies critical to U.S. national
security interests, (3) interagency contracting, (4) information
systems and critical infrastructure, (5) information-sharing for
homeland security, (6) human capital management, and (7) real property
management.
TABLE 1: YEARS WHEN SPECIFIC DOD AREAS ON GAO'S 2007 HIGH-RISK LIST WERE
FIRST DESIGNATED AS HIGH RISK
------------------------------------------------------------------------
Year designated as
DOD area high risk
------------------------------------------------------------------------
DOD approach to business transformation............. 2005
DOD personnel security clearance program............ 2005
DOD support infrastructure management............... 1997
DOD business systems modernization.................. 1995
DOD financial management............................ 1995
DOD contract management............................. 1992
DOD supply chain management......................... 1990
DOD weapon systems acquisition...................... 1990
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Source: GAO.
GAO designated DOD's approach to business transformation as high
risk in 2005 because: (1) DOD's improvement efforts were fragmented,
(2) DOD lacked an enterprise-wide and integrated business
transformation plan, and (3) DOD had not appointed a senior official at
the right level with an adequate amount of time and appropriate
authority to be responsible for overall business transformation
efforts. Collectively, these high-risk areas relate to DOD's major
business operations, which directly support the warfighter, including
how servicemembers get paid, the benefits provided to their families,
and the availability of and condition of the equipment they use both on
and off the battlefield.
DOD's pervasive business systems and related financial management
deficiencies adversely affect its ability to assess resource
requirements; control costs; ensure basic accountability; anticipate
future costs and claims on the budget; measure performance; maintain
funds control; prevent and detect fraud, waste, and abuse; and address
pressing management issues. Over the years, DOD initiated numerous
efforts to improve its capabilities to efficiently and effectively
support management decisionmaking and reporting, with little success.
Therefore, we first designated DOD's business systems modernization and
financial management as high-risk areas in 1995, followed by its
approach to business transformation in 2005.
Overview of DOD Business Systems Modernization High-Risk Area
The business systems modernization high-risk area is large,
complex, and integral to each of the other high-risk areas, as
modernized systems are pivotal enablers to addressing longstanding
transformation, financial, and other management challenges. DOD
reportedly relies on approximately 3,000 business systems to support
its business functions. For fiscal year 2007, Congress appropriated
approximately $15.7 billion to DOD, and for fiscal year 2008, DOD has
requested about $15.9 billion in appropriated funds to operate,
maintain, and modernize these business systems and the associated
infrastructures, of which approximately $11 billion was requested for
the military departments. For years, DOD has attempted to modernize its
many systems, and we have provided numerous recommendations to help it
do so. For example, in 2001, we provided the department with a set of
recommendations to help in developing and using an enterprise
architecture (modernization blueprint) and establishing effective
investment management controls to guide and constrain how the billions
of dollars each year are spent on business systems. We also made
numerous project-specific and DOD-wide recommendations aimed at
ensuring that the department follows proven best practices when it
acquires IT systems and services.
Enterprise Architecture and IT Investment Management Are Two Keys to
Successfully Modernizing Systems
Effective use of an enterprise architecture, or modernization
blueprint, is a hallmark of successful public and private
organizations. For more than a decade, we have promoted the use of
architectures to guide and constrain systems modernization, recognizing
them as a crucial means to a challenging goal: agency operational
structures that are optimally defined in both the business and
technological environments. Congress has also recognized the importance
of an architecture-centric approach to modernization: the E-Government
Act of 2002,\9\ for example, requires the Office of Management and
Budget (OMB) to oversee the development of enterprise architectures
within and across agencies.
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\9\ E-Government Act of 2002, Pub. L. No. 107-347 (2002).
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In brief, an enterprise architecture provides a clear and
comprehensive picture of an entity, whether it is an organization
(e.g., a Federal department) or a functional or mission area that cuts
across more than one organization (e.g., financial management). This
picture consists of snapshots of both the enterprise's current or ``As
Is'' environment and its target or ``To Be'' environment. These
snapshots consist of ``views,'' which are one or more architecture
products (models, diagrams, matrices, text, etc.) that provide logical
or technical representations of the enterprise. The architecture also
includes a transition or sequencing plan, based on an analysis of the
gaps between the ``As Is'' and ``To Be'' environments; this plan
provides a temporal road map for moving between the two that
incorporates such considerations as technology opportunities,
marketplace trends, fiscal and budgetary constraints, institutional
system development and acquisition capabilities, the dependencies and
life expectancies of both new and ``legacy'' (existing) systems, and
the projected value of competing investments. Our experience with
Federal agencies has shown that investing in IT without defining these
investments in the context of an architecture often results in systems
that are duplicative, not well integrated, and unnecessarily costly to
maintain and interface.\10\
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\10\ See, for example, GAO, Homeland Security: Efforts Underway to
Develop Enterprise Architecture, but Much Work Remains, GAO-04-777
(Washington, DC: Aug. 6, 2004); DOD Business Systems Modernization:
Limited Progress in Development of Business Enterprise Architecture and
Oversight of Information Technology Investments, GAO-04-731R
(Washington, DC: May 17, 2004); and Information Technology:
Architecture Needed to Guide NASA's Financial Management Modernization,
GAO-04-43 (Washington, DC: Nov. 21, 2003).
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A corporate approach to IT investment management is also
characteristic of successful public and private organizations.
Recognizing this, Congress developed and enacted the Clinger-Cohen Act
in 1996,\11\ which requires OMB to establish processes to analyze,
track, and evaluate the risks and results of major capital investments
in information systems made by executive agencies.\12\ In response to
the Clinger-Cohen Act and other statutes, OMB developed policy for
planning, budgeting, acquisition, and management of Federal capital
assets and issued guidance.\13\ We have also issued guidance in this
area,\14\ in the form of a framework that lays out a coherent
collection of key practices that when implemented in a coordinated
manner, can lead an agency through a robust set of analyses and
decision points that support effective IT investment management. This
framework defines institutional structures, such as investment review
boards, and associated processes, such as common investment criteria.
Further, our investment management framework recognizes the importance
of an enterprise architecture as a critical frame of reference for
organizations making IT investment decisions. Specifically, it states
that only investments that move the organization toward its target
architecture, as defined by its sequencing plan, should be approved
(unless a waiver is provided or a decision is made to modify the
architecture). Moreover, it states that an organization's policies and
procedures should describe the relationship between its architecture
and its investment decisionmaking authority. Our experience has shown
that mature and effective management of IT investments can vastly
improve government performance and accountability, and can help to
avoid wasteful IT spending and lost opportunities for improvements.
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\11\ The Clinger-Cohen Act of 1996, 40 U.S.C. Sec. Sec. 11101-
11704. This act expanded the responsibilities of OMB and the agencies
that had been set under the Paperwork Reduction Act, which requires
that agencies engage in capital planning and performance and results-
based management. 44 U.S.C. Sec. 3504(a)(1)(B)(vi) (OMB); 44 U.S.C.
Sec. 3506(h)(5) (agencies).
\12\ We have made recommendations to improve OMB's process for
monitoring high-risk IT investments; see GAO, Information Technology:
OMB Can Make More Effective Use of Its Investment Reviews, GAO-05-276
(Washington, DC: Apr. 15, 2005).
\13\ This policy is set forth and guidance is provided in OMB
Circular No. A-11 (section 300) and in OMB's Capital Programming Guide,
which directs agencies to develop, implement, and use a capital
programming process to build their capital asset portfolios.
\14\ GAO, Information Technology Investment Management: A Framework
for Assessing and Improving Process Maturity, GAO-04-394G (Washington,
DC: March 2004).
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Financial Management
A major component of DOD's business transformation strategy is its
FIAR Plan, issued in December 2005 and updated annually in June and
September. The FIAR Plan was issued pursuant to section 376 of the
National Defense Authorization Act for Fiscal Year 2006.\15\ Section
376 limited DOD's ability to obligate or expend funds for fiscal year
2006 on financial improvement activities until the department submitted
a comprehensive and integrated financial management improvement plan to
congressional defense committees. Section 376 required the plan to: (1)
describe specific actions to be taken to correct deficiencies that
impair the department's ability to prepare timely, reliable, and
complete financial management information; and (2) systematically tie
such actions to process and control improvements and business systems
modernization efforts described in the BEA and transition plan. The
John Warner National Defense Authorization Act for Fiscal Year 2007
continued to limit DOD's ability to obligate or expend funds for
financial improvement until the Secretary of Defense submits a
determination to the committees that the activities are consistent with
the plan required by section 376.\16\
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\15\ Pub. L. No. 109-163, Sec. 376 (2006).
\16\ Pub. L. No. 109-364, Sec. 321 (2006).
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DOD intends for the FIAR Plan to provide DOD components with a road
map for resolving problems affecting the accuracy, reliability, and
timeliness of financial information, and obtaining clean financial
statement audit opinions. As such, the FIAR Plan greatly depends on the
actions taken by DOD components, including efforts to: (1) develop and
implement systems that are in compliance with DOD's BEA; (2) implement
sustained improvements in business processes and controls to address
material weaknesses; and (3) achieve clean financial statement audit
opinions. The FIAR Plan uses an incremental approach to structure its
process for examining operations, diagnosing problems, planning
corrective actions, and preparing for audit. Although the FIAR Plan
provides estimated timeframes for achieving auditability in specific
areas or components, it does not provide a specific target date for
achieving a clean audit opinion on the department-wide financial
statements. Rather, the FIAR Plan recognizes that its ability to fully
address DOD's financial management weaknesses and ultimately achieve
clean audit opinions will depend largely on the efforts of its
components to successfully implement new business systems on time,
within budget, and with the intended capability.
dod has made progress in addressing its business transformation
efforts, but critical actions are needed to provide comprehensive,
integrated, and strategic planning and focused, sustained leadership
DOD's leaders have demonstrated a commitment to making the
department's business transformation a priority and made progress in
establishing a management framework for these efforts. For example, the
Deputy Secretary of Defense has overseen the establishment of various
management entities and the creation of plans and tools to help guide
business transformation at DOD. However, our analysis has shown that
these efforts are largely focused on business systems modernization and
that ongoing efforts across the department's business areas are not
adequately integrated. In addition, DOD lacks two crucial features that
are integral to successful organizational transformation: (1) a
strategic planning process that results in a comprehensive, integrated,
and enterprise-wide plan or interconnected plans; and (2) a senior
leader who is responsible and accountable for business transformation
and who can provide full-time focus and sustained leadership.\17\
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\17\ See GAO, Defense Business Transformation: Achieving Success
Requires a Chief Management Officer to Provide Focus and Sustained
Leadership, GAO-07-1072 (Washington, DC: September 5, 2007).
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DOD Has Made Progress in Addressing Its Business Transformation
Challenges
DOD's senior leadership has shown commitment to transforming the
department's business operations, and DOD has taken a number of
positive steps to begin this effort. Because of the impact of the
department's business operations on its warfighters, DOD recognizes the
need to continue working toward transforming its business operations
and providing transparency in this process. The department has devoted
substantial resources and made important progress toward establishing
key management structures and processes to guide business systems
investment activities, particularly at the department-wide level, in
response to legislation that codified many of our prior recommendations
related to DOD business systems modernization and financial
management.\18\
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\18\ Ronald W. Reagan National Defense Authorization Act for Fiscal
Year 2005, Pub. L. No. 108-375, Sec. 332 (2004) (codified in part at 10
U.S.C. Sec. Sec. 186 and 2222).
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Specifically, in the past few years, DOD has established the
Defense Business Systems Management Committee, investment review
boards, and the Business Transformation Agency to manage and guide
business systems modernization. The Defense Business Systems Management
Committee and investment review boards were statutorily required by the
Ronald W. Reagan National Defense Authorization Act for Fiscal Year
2005 to review and approve the obligation of funds for defense business
systems modernization, depending on the cost and scope of the system in
review. The Business Transformation Agency was created to support the
top-level management body, the Defense Business Systems Management
Committee, and to advance DOD-wide business transformation efforts.
Additionally, DOD has developed a number of tools and plans to
enable these management entities to help guide business systems
modernization efforts. The tools and plans include the BEA and the ETP.
The ETP is currently considered the highest-level plan for DOD business
transformation. According to DOD, the ETP is intended to summarize all
levels of transition planning information (milestones, metrics,
resource needs, and system migrations) as an integrated product for
communicating and monitoring progress, resulting in a consistent
framework for setting priorities and evaluating plans, programs, and
investments.
Our analysis of these tools, plans, and meeting minutes of the
various transformational management entities shows that these efforts
are largely focused on business systems modernization, and that this
framework has yet to be expanded to encompass all of the elements of
overall business transformation. Furthermore, DOD has not clearly
defined or institutionalized in directives the interrelationships,
roles and responsibilities, or accountability for the various entities
that make up its management framework for overall business
transformation. For example, opinions differ within DOD as to which
senior governance body will serve as the primary body responsible for
overall business transformation. Some officials stated that the Defense
Business Systems Management Committee would serve as the senior-most
governance entity, while others stated that the Deputy's Advisory
Working Group, a group that provides department-wide strategic
direction on various issues, should function as the primary
decisionmaking body for business transformation.
Additionally, opinions differ between the two entities regarding
the definition of DOD's key business areas, with the Defense Business
Systems Management Committee and the Business Transformation Agency
using a broader definition of business processes than that of the
Deputy's Advisory Working Group and its supporting organizations. Until
such differences are resolved and the department institutionalizes a
management framework that spans all aspects of business transformation,
DOD will not be able to integrate related initiatives into a
sustainable, enterprisewide approach and to resolve weaknesses in
business operations.
Critical Actions Are Needed to Provide Comprehensive, Integrated, and
Strategic Planning and Focused, Sustained Leadership for DOD's
Overall Business Transformation Efforts
As we have testified and reported for years, a successful,
integrated, department-wide approach to addressing DOD's overall
business transformation requires two critical elements: a
comprehensive, integrated, and enterprise-wide plan and an individual
capable of providing full-time focus and sustained leadership both
within and across administrations, dedicated solely to the integration
and execution of the overall business transformation effort.
DOD Lacks a Strategic Planning Process That Results in a
Comprehensive, Integrated, and Enterprisewide Plan or Set of
Plans
DOD continues to lack a comprehensive, integrated, and enterprise-
wide plan or set of linked plans for business transformation that is
supported by a comprehensive planning process and guides and unifies
its business transformation efforts. Our prior work has shown that this
type of plan should help set strategic direction for overall business
transformation efforts and all key business functions; prioritize
initiatives and resources; and monitor progress through the
establishment of performance goals, objectives, and rewards.\19\
Furthermore, an integrated business transformation plan would be
instrumental in establishing investment priorities and guiding the
department's key resource decisions.
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\19\ See for example, GAO-07-1072; GAO, Defense Business
Transformation: A Comprehensive Plan, Integrated Efforts, and Sustained
Leadership Are Needed to Assure Success, GAO-07-229T (Washington, DC:
Nov. 16, 2006); Department of Defense: Sustained Leadership Is Critical
to Effective Financial and Business Management Transformation, GAO-06-
1006T (Washington, DC: Aug. 3, 2006); and DOD's High-Risk Areas:
Successful Business Transformation Requires Sound Strategic Planning
and Sustained Leadership, GAO-05-520T (Washington, DC: Apr. 13, 2005).
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While various plans exist for different business areas, DOD's
various business-related plans are not yet integrated to include
consistent reporting of goals, measures, and expectations across
institutional, unit, and individual program levels. Our analysis shows
that plan alignment and integration currently focus on data consistency
among plans, meaning that plans are reviewed for errors and
inconsistencies in reported information, but there is a lack of
consistency in goals and measurements among plans. Other entities such
as the Institute for Defense Analyses, the Defense Science Board, and
the Defense Business Board have similarly reported the need for DOD to
develop an enterprise-wide plan to link strategies across the
department for transforming all business areas and thus report similar
findings.
DOD officials recognize that the department does not have an
integrated plan in place, although they have stated that their
intention is to expand the scope of the ETP so that it becomes a more
robust enterprise-wide planning document and to evolve this plan into
the centerpiece strategic document. DOD updates the ETP twice a year,
once in March as part of DOD's annual report to Congress and once in
September, and DOD has stated the department's goal is to evolve the
plan into a comprehensive, top-level planning document for all business
functions. DOD released the most recent ETP update on September 28,
2007, and we will continue to monitor developments in this effort.
The National Defense Authorization Act for Fiscal Year 2008
requires the Secretary of Defense, acting through the CMO, to develop a
strategic management plan to include detailed descriptions of such
things as performance goals and measures for improving and evaluating
the overall efficiency and effectiveness of the business operations of
the department, key initiatives to achieve these performance goals,
procedures to monitor progress, procedures to review and approve plans
and budgets for changes in business operations, and procedures to
oversee the development, review, and approval of all budget requests
for defense business systems. While these provisions are extremely
positive, their impact will depend on DOD's implementation. We continue
to believe that the key to success of any planning process is the
extent to which key stakeholders participate, and whether the ultimate
plan or set of plans is linked to the department's overall strategic
plan, reflects an integrated approach across the department, identifies
performance goals and measures, shows clear linkage to budgets, and
ultimately is used to guide business transformation.
Recent Legislation Takes Important Step to Provide Executive-Level
Attention to Business Transformation Matters
We have long advocated the importance of establishing CMO positions
in government agencies, including DOD, and have previously reported and
testified on the key characteristics of the position necessary for
success.\20\ In our view, transforming DOD's business operations is
necessary for DOD to resolve its weaknesses in the designated high-risk
areas and to ensure that the department has sustained leadership to
guide its business transformation efforts. Specifically, because of the
complexity and long-term nature of business transformation, DOD needs a
CMO with significant authority, experience, and a term that would
provide sustained leadership and the time to integrate its overall
business transformation efforts. Without formally designating
responsibility and accountability for results, DOD will face
difficulties reconciling competing priorities among various
organizations, and prioritizing investments will be difficult and could
impede the department's progress in addressing deficiencies in key
business areas.
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\20\ See, for example, GAO-07-1072, GAO-07-310, GAO-07-229T, and
GAO-06-1006T.
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Clearly, Congress has recognized the need for executive-level
attention to business transformation matters and has taken specific
action in the National Defense Authorization Act for Fiscal Year 2008
to codify CMO responsibilities at a high level in the department--
assigning them to the Deputy Secretary of Defense--as well as other
provisions, such as establishing a full-time Deputy CMO and designating
CMO responsibilities within the military departments.\21\ From a
historical perspective, this action is unprecedented and represents
significant steps toward giving business transformation high-level
management attention. Now that this legislation has been enacted, it
will be important for DOD to define the specific roles and
responsibilities for the CMO, Deputy CMO, and the service CMOs; ensure
clearly delineated reporting relationships among them and other
department and service officials; foster good executive-level working
relationships for maximum effectiveness; establish appropriate
integration and transformation structures and processes; promote
individual accountability and performance; and provide for
continuity.\22\
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\21\ Pub. L. No. 110-181, Sec. 904 (2008).
\22\ See GAO, Organizational Transformation: Implementing Chief
Operating Officer/Chief Management Officer Positions in Federal
Agencies, GAO-08-322T (Washington, DC: Dec. 13, 2007).
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Further, in less than 1 year, our government will undergo a change
in administrations, which raises questions about continuity of effort
and the sustainability of the progress that DOD has made to date. As we
have said before, business transformation is a long-term process, and
continuity is key to achieving true transformation. One of the
challenges now facing DOD, therefore, is establishing this continuity
in leadership to sustain progress that has been made to date. In the
interest of the department and the American taxpayers, we continue to
believe the department needs a full-time CMO over the long-term in
order to devote the needed focus and continuity of effort to transform
its key business operations and avoid billions more in waste each year.
As such, we believe the CMO position should be codified as a separate
position from the Deputy Secretary of Defense in order to provide full-
time attention to business transformation and subject to an extended
term appointment. The CMO's appointment should span administrations to
ensure that transformation efforts are sustained across
administrations. Because business transformation is a long-term and
complex process, a term of at least 5 to 7 years is recommended to
provide sustained leadership and accountability.
Moreover, the fact that the National Defense Authorization Act for
Fiscal Year 2008 modifies politically appointed positions by codifying
a new designation for the Deputy Secretary of Defense, creating a new
Deputy CMO of DOD, and adding a new designation to the military
departments' under secretary positions to serve as the military
departments' CMOs raises larger questions about succession planning and
how the executive branch fills appointed positions, not only within
DOD, but throughout the government. Currently, there is no distinction
in the political appointment process among the different types of
responsibilities inherent in the appointed positions. Further, the
positions generally do not require any particular set of management
qualifications, even though the appointees may be responsible for non-
policy-related functions. For example, appointees could be categorized
by the differences in their roles and responsibilities, such as by the
following categories:
those appointees who have responsibility for various
policy issues;
those appointees who have leadership responsibility
for various operational and management matters; and
those appointees who require an appropriate degree of
technical competence or professional certification, as well as
objectivity and independence (for example, judges, the
Comptroller General, and inspectors general).
We have asked for a reexamination of the political appointment
process to assess these distinctions as well as which appointee
positions should be presidentially appointed and Senate confirmed
versus presidentially appointed with advance notification to
Congress.\23\ For example, those appointees who have policy leadership
responsibility could be presidentially appointed and Senate confirmed,
while many of those with operational and management responsibility
could be presidentially appointed, with a requirement for appropriate
congressional notification in advance of appointment. In addition,
appropriate qualifications for selected positions, including the
possibility of establishing specific statutory qualifications criteria
for certain categories of appointees, could be articulated. Finally,
the use of term appointments and different compensation schemes for
these appointees should be reviewed.
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\23\ GAO, A Call for Stewardship: Enhancing the Federal
Government's Ability to Address Key Fiscal and Other 21st Century
Challenges, GAO-08-93SP (Washington, DC: December 2007), and Suggested
Areas for Oversight for the 110th Congress, GAO-07-235R (Washington,
DC: Nov. 17, 2006).
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dod is continuing to improve its approach to modernizing business
systems, but challenges remain
Despite noteworthy progress in establishing institutional business
system and management controls, DOD is still not where it needs to be
in managing its department-wide business systems modernization. Until
DOD fully defines and consistently implements the full range of
business systems modernization management controls (institutional and
program-specific), it will not be positioned to effectively and
efficiently ensure that its business systems and IT services
investments are the right solutions for addressing its business needs,
that they are being managed to produce expected capabilities
efficiently and cost effectively, and that business stakeholders are
satisfied.
For decades, DOD has been attempting to modernize its business
systems. We designated DOD's business systems modernization program as
high risk in 1995. Since then, we have made scores of recommendations
aimed at strengthening DOD's institutional approach to modernizing its
business systems, and reducing the risks associated with key business
system investments. In addition, in recent legislation, Congress
included provisions that are consistent with our recommendations, such
as in the Ronald W. Reagan National Defense Authorization Act for
Fiscal Year 2005. In response, the department has taken, or is taking,
important actions to implement both our recommendations and the
legislative requirements and as a result has made noteworthy progress
on some fronts in establishing corporate management controls, such as
developing a corporate-level BEA, including an ETP, establishing
corporate investment management structures and processes, increasing
business system life cycle management discipline and leveraging highly-
skilled staff on its largest business system investments.
However, much more remains to be accomplished to address this high-
risk area, particularly with respect to ensuring that effective
corporate approaches and controls are extended to and employed within
each of DOD's component organizations (military departments and defense
agencies). To this end, our recent work has highlighted challenges that
the department still faces in ``federating'' (i.e., extending) its
corporate BEA to its component organizations' architectures, ensuring
that the scope and content of the department's business systems
transition plan addresses DOD's complete portfolio of IT investments,
as well as establishing institutional structures and processes for
selecting, controlling, and evaluating business systems investments
within each component organization.\24\ Beyond this, ensuring that
effective system acquisition management controls are actually
implemented on each business system investment also remains a
formidable challenge, as our recent reports on management weaknesses
associated with individual programs have disclosed.\25\ Among other
things, these reports have identified program-level weaknesses relative
to architecture alignment, economic justification, performance
management, requirements management, and testing.
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\24\ DOD Business Systems Modernization: Progress Continues to Be
Made in Establishing Corporate Management Controls, but Further Steps
Are Needed, GAO-07-733 (Washington, DC: May 14, 2007).
\25\ See, for example, GAO, DOD Business Transformation: Lack of an
Integrated Strategy Puts the Army's Asset Visibility System Investments
at Risk, GAO-07-860 (Washington, DC: July 27, 2007); Information
Technology: DOD Needs to Ensure That Navy Marine Corps Intranet Program
Is Meeting Goals and Satisfying Customers, GAO-07-51 (Washington, DC:
Dec. 8, 2006); Defense Travel System: Reported Savings Questionable and
Implementation Challenges Remain, GAO-06-980 (Washington, DC: Sept. 26,
2006); DOD Systems Modernization: Uncertain Joint Use and Marginal
Expected Value of Military Asset Deployment System Warrant Reassessment
of Planned Investment, GAO-06-171 (Washington, DC: Dec. 15, 2005); and
DOD Systems Modernization: Planned Investment in the Navy Tactical
Command Support System Needs to Be Reassessed, GAO-06-215 (Washington,
DC: Dec. 5, 2005).
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DOD Continues to Improve Its Corporate BEA and ETP, but Component
Architectures Remain a Challenge
In May 2007,\26\ we reported on DOD's efforts to address a number
of provisions in the National Defense Authorization Act for Fiscal Year
2005.\27\ Among other things, we stated that the department had adopted
an incremental strategy for developing and implementing its
architecture, including the transition plan, which was consistent with
our prior recommendation and a best practice. We further stated that
DOD had addressed a number of the limitations in prior versions of its
architecture. However, we also reported that additional steps were
needed. Examples of these improvements and remaining issues with the
BEA and the ETP are summarized below:
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\26\ GAO-07-733.
\27\ Ronald W. Reagan National Defense Authorization Act for Fiscal
Year 2005, Pub. L. No. 108-375, Sec. 332 (2004) (codified in part at 10
U.S.C. Sec. 2222).
The latest version of the BEA contained enterprise-
level information about DOD's ``As Is'' architectural
environment to support business capability gap analyses. As we
previously reported,\28\ such gap analyses between the ``As
Is'' and the ``To Be'' environments are essential for the
development of a well-defined transition plan.
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\28\ GAO, DOD Business Systems Modernization: Important Progress
Made in Establishing Foundational Architecture Products and Investment
Management Practices, but Much Work Remains, GAO-06-219 (Washington,
DC: Nov. 23, 2005).
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The latest version included performance metrics for
the business capabilities within enterprise priority areas,
including actual performance relative to performance targets
that are to be met. For example, currently 26 percent of DOD
assets are reported by using formats that comply with the
Department of the Treasury's United States Standard General
Ledger,\29\ as compared to a target of 100 percent. However,
the architecture did not describe the actual baseline
performance for operational activities, such as for the
``Manage Audit and Oversight of Contractor'' operational
activity. As we have previously reported,\30\ performance
models are an essential part of any architecture and having
defined performance baselines to measure actual performance
provides the means for knowing whether the intended mission
value to be delivered by each business process is actually
being realized.
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\29\ The United States Standard General Ledger provides a uniform
chart of accounts and technical guidance used in standardizing Federal
agency accounting.
\30\ GAO, Information Technology: A Framework for Assessing and
Improving Enterprise Architecture Management (Version 1.1), GAO-03-584G
(Washington, DC: April 2003), and GAO-04-777.
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The latest version identified activities performed at
each location/organization and indicates which organizations
are or will be involved in each activity. We previously
reported that prior versions did not address the locations
where specified activities are to occur and that doing so is
important because the cost and performance of implemented
business operations and technology solutions are affected by
the location and therefore need to be examined, assessed, and
decided on in an enterprise context rather than in a piecemeal,
systems-specific fashion.\31\
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\31\ Business Systems Modernization: DOD Continues to Improve
Institutional Approach, but Further Steps Needed, GAO-06-658
(Washington, DC: May 15, 2006).
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The March 2007 ETP continued to identify more systems
and initiatives that are to fill business capability gaps and
address DOD-wide and component business priorities, and it
continues to provide a range of information for each system and
initiative in the plan (e.g., budget information, performance
metrics, and milestones). However, this version still does not
include system investment information for all the defense
agencies and combatant commands. Moreover, the plan does not
sequence the planned investments based on a range of relevant
factors, such as technology opportunities, marketplace trends,
institutional system development and acquisition capabilities,
legacy and new system dependencies and life expectancies, and
the projected value of competing investments. According to DOD
officials, they intend to address such limitations in future
versions of the transition plan as part of their plans for
addressing our prior recommendations.\32\ In September 2007,
DOD released an updated version of the plan which, according to
DOD, continues to provide time-phased milestones, performance
metrics, and statement of resource needs for new and existing
systems that are part of the BEA and component architectures,
and includes a schedule for terminating old systems and
replacing them with newer, improved enterprise solutions.
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\32\ See GAO-07-733.
As we have also reported, the latest version of the BEA continues
to represent the thin layer of DOD-wide corporate architectural
policies, capabilities, rules, and standards. Having this layer is
essential to a well-defined federated architecture, but it alone does
not provide the total federated family of DOD parent and subsidiary
architectures for the business mission area that are needed to comply
with the act. The latest version had yet to be augmented by the DOD
component organizations' subsidiary architectures, which are necessary
to meeting statutory requirements and the department's goal of having a
federated family of architectures. Under the department's tiered
accountability approach, the corporate BEA focuses on providing
tangible outcomes for a limited set of enterprise-level (DOD-wide)
priorities, while the components are to define and implement their
respective component-level architectures that are aligned with the
corporate BEA.
However, we previously reported that well-defined architectures did
not yet exist for the military departments, which constitute the
largest members of the federation, and the strategy that the department
had developed for federating its BEA needed more definition to be
executable.\33\ In particular, we reported in 2006,\34\ that none of
the three military departments had fully developed architecture
products that describe their respective target architectural
environments and developed transition plans for migrating to a target
environment, and none was employing the full range of architecture
management structures, processes, and controls provided for in relevant
guidance. Also, we reported that the federation strategy did not
address, among other things, how the component architectures will be
aligned with the latest version of the BEA and how it will identify and
provide for reuse of common applications and systems across the
department.
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\33\ GAO, Business Systems Modernization: Strategy for Evolving
DOD's Business Enterprise Architecture Offers a Conceptual Approach,
but Execution Details Are Needed, GAO-07-451 (Washington, DC: Apr. 16,
2007); and Enterprise Architecture: Leadership Remains Key to
Establishing and Leveraging Architectures for Organizational
Transformation, GAO-06-831 (Washington, DC: Aug. 14, 2006).
\34\ GAO-06-831.
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According to DOD, subsequent releases of the BEA will continue to
reflect this federated approach and will define enforceable interfaces
to ensure interoperability and information flow to support
decisionmaking at the appropriate level. To help ensure this, the BTA
plans to have its BEA independent verification and validation
contractor examine architecture federation when evaluating subsequent
BEA releases. Use of an independent verification and validation agent
is an architecture management best practice for identifying
architecture strengths and weaknesses. Through the use of such an
agent, department and congressional oversight bodies can gain
information that they need to better ensure that DOD's family of
architectures and associated transition plan(s) satisfy key quality
parameters, such as completeness, consistency, understandability, and
usability, which the department's annual reports have yet to include.
We made recommendations aimed at improving the management and
content of the military departments' respective architectures; ensuring
that DOD's federated BEA provides a more sufficient frame of reference
to guide and constrain DOD-wide system investments; and facilitating
congressional oversight and promoting departmental accountability
through the assessment of the completeness, consistency,
understandability, and usability of its federated family business
mission area architectures. DOD agreed with these recommendations and
has since taken some actions, such as developing an updated version of
its federation strategy, which according to DOD officials, addresses
some of our recommendations. We have ongoing work for this Subcommittee
on the military departments' architecture programs, and plan to issue a
report in early May 2008.
DOD Has Largely Established Key Investment Management Structures, but
Related Policies and Procedures at Both the Corporate and
Component Levels Are Missing
The department has established and has begun to implement
legislatively directed corporate investment review structures and
processes needed to effectively manage its business system investments,
but it has yet to do so in a manner that is fully consistent with
relevant guidance, both at a corporate and component level.\35\ To its
credit, the department has, for example, established an enterprisewide
investment board (Defense Business Systems Management Committee
(DBSMC)) and subordinate boards (investment review boards (IRB)) that
are responsible for business systems investment governance, documented
policies and procedures for ensuring that systems support ongoing and
future business needs through alignment with the BEA, and assigned
responsibility for ensuring that the information collected about
projects meets the needs of DOD's investment review structures and
processes.
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\35\ GAO, Business Systems Modernization: DOD Needs to Fully Define
Policies and Procedures for Institutionally Managing Investments, GAO-
07-538 (Washington, DC: May 11, 2007).
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However, the department has not developed the full range of
project- and portfolio-level policies and procedures needed for
effective investment management. For example, policies and procedures
do not outline how the DBSMC and IRB investment review processes are to
be coordinated with other decision-support processes used at DOD, such
as the Joint Capabilities Integration and Development System; the
Planning, Programming, Budgeting, and Execution system; and the Defense
Acquisition System.\36\ Without clear linkages among these processes,
inconsistent and uninformed decisionmaking may result. Furthermore,
without considering component and corporate budget constraints and
opportunities, the IRBs risk making investment decisions that do not
effectively consider the relative merits of various projects and
systems when funding limitations exist.
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\36\ The Joint Capabilities Integration and Development System is a
need-driven management system used to identify future capabilities for
DOD. The Planning, Programming, Budgeting, and Execution process is a
calendar-driven management system for allocating resources and
comprises four phases--planning, programming, budgeting, and
executing--that define how budgets for each DOD component and the
department as a whole are created, vetted, and executed. The Defense
Acquisition System is an event-driven system for managing product
development and procurement that guides the acquisition process for
DOD.
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Examples of other limitations include not having policies and
procedures for: (1) specifying how the full range of cost, schedule,
and benefit data accessible by the IRBs are to be used in making
selection decisions; (2) providing sufficient oversight and visibility
into component-level investment management activities, including
component reviews of systems in operations and maintenance; (3)
defining the criteria to be used for making portfolio selection
decisions; (4) creating the portfolio of business system investments;
(5) evaluating the performance of portfolio investments; and (6)
conducting post implementation reviews of these investments. According
to best practices, adequately documenting both the policies and the
associated procedures that govern how an organization manages its IT
investment portfolio(s) is important because doing so provides the
basis for having rigor, discipline, and repeatability in how
investments are selected and controlled across the entire organization.
Accordingly, we made recommendations aimed at improving the
department's ability to better manage the billions of dollars it
invests annually in its business systems and DOD largely agreed with
these recommendations but added that while it intends to improve
departmental policies and procedures for business system investments,
each component is responsible for developing and executing investment
management policies and procedures needed to manage the business
systems under its tier of responsibility.
According to DOD's tiered accountability approach, responsibility
and accountability for business investment management is tiered,
meaning that it is allocated between the DOD corporate level (i.e.,
Office of the Secretary of Defense) and the components based on the
amount of development/modernization funding involved and the
investment's designated tier.\37\
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\37\ More specifically, DOD corporate is responsible for ensuring
that all business systems with a development/modernization investment
in excess of $1 million are reviewed by the IRBs for compliance with
the BEA, certified by the principal staff assistants, and approved by
DBSMC. Components are responsible for certifying development/
modernization investments with total costs of $1 million or less. All
DOD development and modernization efforts are also assigned a tier
based on acquisition category, the size of the financial investment, or
both.
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However, as our recent reports show \38\ the military departments
also have yet to fully develop many of the related policies and
procedures needed to execute both project-level and portfolio-level
practices called for in relevant guidance for their tier of
responsibility. For example, they have developed procedures for
identifying and collecting information about their business systems to
support investment selection and control, and assigned responsibility
for ensuring that the information collected during project
identification meets the needs of the investment management process.
However, they have yet, for example, to fully document business systems
investment policies and procedures for overseeing the management of IT
projects and systems and for developing and maintaining complete
business systems investment portfolio(s). Specifically, policies and
procedures do not specify the processes for decisionmaking during
project oversight and do not describe how corrective actions should be
taken when the project deviates or varies from the project management
plan. Without such policies and procedures, the agency risks investing
in systems that are duplicative, stovepiped, nonintegrated, and
unnecessarily costly to manage, maintain, and operate. Accordingly, we
made recommendations aimed at strengthening the military departments'
business systems management capability, and they largely agreed with
these recommendations. Department officials stated that they are aware
of the absence of documented policies and procedures in certain areas
of project and portfolio-level management, and are currently working on
new guidance to address these areas.
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\38\ GAO, Business Systems Modernization: Air Force Needs to Fully
Define Policies and Procedures for Institutionally Managing
Investments, GAO-08-52 (Washington, DC: Oct. 31, 2007), and Business
Systems Modernization: Department of the Navy Needs to Establish
Management Structure and Fully Define Policies and Procedures for
Institutionally Managing Investments, GAO-08-53 (Washington, DC: Oct.
31, 2007).
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Until DOD fully defines department-wide and component-level
policies and procedures for both individual projects and portfolios of
projects, it risks selecting and controlling these business systems
investments in an inconsistent, incomplete, and ad hoc manner, which in
turn reduces the chances that these investments will meet mission needs
in the most cost-effective manner.
The department has recently undertaken several initiatives to
strengthen business system investment management. For example, it has
drafted and intends to shortly begin implementing a new Business
Capability Lifecycle approach that is to consolidate management of
business system requirements, acquisition, and compliance with
architecture disciplines into a single governance process. Further, it
has established an Enterprise Integration Directorate in the Business
Transformation Agency to support the implementation of enterprise
resource planning systems \39\ by ensuring that best practices are
leveraged and BEA-related business rules and standards are adopted.
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\39\ An enterprise resource planning solution is an automated
system using commercial off-the-shelf software consisting of multiple,
integrated functional modules that perform a variety of business-
related tasks such as payroll, general ledger accounting, and supply
chain management.
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Implementing Effective Modernization Management Controls on All
Business System Investments Remains a Key Challenge
Beyond establishing the above discussed institutional modernization
management controls, such as the BEA, portfolio-based investment
management, and system life cycle discipline, the more formidable
challenge facing DOD is how well it can implement these and other
management controls on each and every business system investment and IT
services outsourcing program. In this regard, we have continued to
identify program-specific weaknesses as summarized below.
With respect to taking an architecture-centric and
portfolio-based approach to investing in programs, for example,
we recently reported that the Army's approach for investing
about $5 billion over the next several years in its General
Fund Enterprise Business System, Global Combat Support System-
Army Field/Tactical,\40\ and Logistics Modernization Program
(LMP) did not include alignment with Army enterprise
architecture or use of a portfolio-based business system
investment review process.\41\ Moreover, we reported that the
Army did not have reliable processes, such as an independent
verification and validation function, or analyses, such as
economic analyses, to support its management of these programs.
We concluded that until the Army adopts a business system
investment management approach that provides for reviewing
groups of systems and making enterprise decisions on how these
groups will collectively interoperate to provide a desired
capability, it runs the risk of investing significant resources
in business systems that do not provide the desired
functionality and efficiency.
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\40\ Field/tactical refers to Army units that are deployable to
locations around the world, such as Iraq or Afghanistan.
\41\ GAO-07-860.
With respect to providing DOD oversight organizations
with reliable program performance and progress information, we
recently reported that the Navy's approach for investing in
both system and IT services, such as the Naval Tactical Command
Support System (NTCSS) \42\ and Navy Marine Corps Intranet
(NMCI),\43\ had not always met this goal. For NTCSS, we
reported that, for example, earned value management, which is a
means for determining and disclosing actual performance against
budget and schedule estimates, and revising estimates based on
performance to date, had not been implemented effectively. We
also reported that complete and current reporting of NTCSS
progress and problems in meeting cost, schedule, and
performance goals had not occurred, leaving oversight entities
without the information needed to mitigate risks, address
problems, and take corrective action. We concluded that without
this information, the Navy cannot determine whether NTCSS, as
it was defined and was being developed, was the right solution
to meet its strategic business and technological needs. For
NMCI, we reported that performance management practices, to
include measurement of progress against strategic program goals
and reporting to key decisionmakers on performance against
strategic goals and other important program aspects, such as
examining service-level agreement satisfaction from multiple
vantage points and ensuring customer satisfaction, had not been
adequate. We concluded that without a full and accurate picture
of program performance, the risk of inadequately informing
important NMCI investment management decisions was increased.
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\42\ GAO-06-215.
\43\ GAO-07-51.
Given the program-specific weaknesses that our work has and
continues to reveal, it is important for DOD leadership and Congress to
have clear visibility into the performance and progress of the
department's major business system investments. Accordingly, we support
the provisions in section 816 of the John Warner National Defense
Authorization Act for Fiscal Year 2007 that provide for greater
disclosure of business system investment performance to both department
and congressional oversight entities, and thus increased accountability
for results. More specifically, the legislation establishes certain
reporting and oversight requirements for the acquisition of major
automated information systems (MAIS) that fail to meet cost, schedule,
or performance criteria. In general, a MAIS is a major DOD IT program
that is not embedded in a weapon system (e.g., a business system
investment). Going forward, the challenge facing the department will be
to ensure that these legislative provisions are effectively
implemented. To the extent that they are, DOD business systems
modernization transparency, oversight, accountability, and results
should improve.
We currently have ongoing work for this subcommittee looking at the
military departments implementation of a broad range of acquisition
management controls, such as architectural alignment, economic
justification, and requirements management, on selected business
systems at the Departments of the Air Force and Navy.
dod has made progress in establishing a framework for improving
financial management capabilities, but more work remains
DOD has taken steps toward developing and implementing a framework
for addressing the department's longstanding financial management
weaknesses and improving its capability to provide timely, reliable,
and relevant financial information for analysis, decisionmaking, and
reporting, a key defense transformation priority. Specifically, this
framework, which is discussed in both the department's ETP and the FIAR
Plan is intended to define and put into practice a standard DOD-wide
financial management data structure as well as enterprise-level
capabilities to facilitate reporting and comparison of financial data
across the department. While these efforts should improve the
consistency and comparability of DOD's financial reports, a great deal
of work remains before the financial management capabilities of DOD and
its components are transformed and the department achieves financial
visibility. Examples of work remaining that must be completed as part
of DOD component efforts to support the FIAR Plan and ETP include data
cleansing; improvements in current policies, processes, procedures, and
controls; and implementation of integrated systems. We also note DOD
has other financial management initiatives underway, including efforts
to move toward performance-based budgeting and to continually improve
the reliability of global war on terrorism cost reporting.
In 2007, DOD also introduced refinements to its approach for
achieving financial statement auditability. While these refinements
reflect a clearer understanding of the importance of the sustainability
of financial management improvements and the department's reliance on
the successful completion of component (including military Services and
defense agencies) and subordinate initiatives, they are not without
risk.
Given the department's dependency on the efforts of its components
to address DOD's financial management weaknesses, it is imperative that
DOD ensure the sufficiency and reliability of: (1) corrective actions
taken by DOD components to support management attestations as to the
reliability of reported financial information; (2) activities taken by
DOD components and other initiatives to ensure that corrective actions
are directed at supporting improved financial visibility capabilities,
beyond providing information primarily for financial statement
reporting, and are sustained until a financial statement audit can be
performed; and (3) accomplishments and progress reported by DOD
components and initiatives.
Key DOD Financial Management Transformation Efforts Recognize the Need
for an Integrated Approach
Successful financial transformation of DOD's financial operations
will require a multifaceted, cross-organizational approach that
addresses the contribution and alignment of key elements, including
strategic plans, people, processes, and technology. DOD uses two key
plans, the DOD ETP and the FIAR Plan, to guide transformation of its
financial management operations. The ETP focuses on delivering improved
capabilities, including financial management, through the deployment of
system solutions that comply with DOD and component enterprise
architectures. The FIAR Plan focuses on implementing audit-ready
financial processes and practices through ongoing and planned efforts
to address policy issues, modify financial and business processes,
strengthen internal controls, and ensure that new system solutions
support the preparation and reporting of auditable financial
statements. Both plans recognize that while successful enterprise
resource planning system implementations are catalysts for changing
organizational structures, improving workflow through business process
reengineering, strengthening internal controls, and resolving material
weaknesses, improvements can only be achieved through the involvement
of business process owners, including financial managers, in defining
and articulating their operational needs and requirements and
incorporating them, as appropriate, into DOD and component BEAs. DOD
officials have acknowledged that integration between the two
initiatives is a continually evolving process. For example, the June
2006 FIAR Plan update stated that some of the department's initial
subordinate plans included only limited integration with Business
Transformation Agency initiatives and solutions. According to DOD
officials, the use of end-to-end business processes (as provided by its
segment approach) to identify and address financial management
deficiencies will lead to further integration between the FIAR Plan and
ETP.
Two key transformation efforts that reflect an integrated approach
toward improving DOD's financial management capabilities are the
Standard Financial Information Structure (SFIS) and the Business
Enterprise Information System (BEIS), both of which are discussed in
DOD's ETP and FIAR Plan.
SFIS. Key limitations in the department's ability to
consistently provide timely, reliable, accurate, and relevant
information for analysis, decisionmaking, and reporting are:
(1) its lack of a standard financial management data structure;
and (2) a reliance on numerous nonautomated data transfers
(manual data calls) to accumulate and report financial
transactions. In fiscal year 2006, DOD took an important first
step toward addressing these weaknesses through publication of
its SFIS Phase I data elements and their subsequent
incorporation into the DOD BEA. In March 2007, the department
issued a checklist for use by DOD components in evaluating
their systems for SFIS compliance.\44\ SFIS is intended to
provide uniformity throughout DOD in reporting on the results
of operations, allowing for greater comparability of
information. While the first phase of SFIS was focused on
financial statement generation, subsequent SFIS phases are
intended to provide a standardized financial information
structure to facilitate improved cost accounting, analysis, and
reporting. According to DOD officials, the department has
adopted a two-tiered approach to implement the SFIS data
structure. Furthermore, they stated that SFIS is a mandatory
data structure that will be embedded into every new financial
management system, including enterprise resource planning
systems, such as the Army's General Fund Enterprise Business
System and the Air Force's Defense Enterprise Accounting and
Management System (DEAMS). Further, recognizing that many of
the current accounting systems will be replaced in the future,
the department will utilize a common crosswalk to standardize
the data reported by the legacy systems.
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\44\ Department of Defense Business Transformation Agency,
Transformation Priorities and Requirements Division: Compliance
Checklist for the Standard Financial Information Structure, (March 15,
2007).
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BEIS. A second important step that the department took
toward improving its capability to provide consistent and
reliable financial information for decisionmaking and reporting
was to initiate efforts to develop a DOD-level suite of
services to provide financial reporting services, cash
reporting, and reconciliation services. As an interim solution,
financial information obtained from legacy component systems
will be crosswalked from a component's data structure into the
SFIS format within BEIS. Newer or target systems, such as
DEAMS, will have SFIS imbedded so that the data provided to
BEIS will already be in the SFIS format.
According to DOD's September 2007 FIAR Plan update, the department
prepared financial statement reports using SFIS data standards for the
Marine Corps general and working capital funds, the Air Force general
and working capital funds, and the Navy working capital funds. The
department plans to implement SFIS-compliant reporting for the Army
working capital funds, the Navy general funds, and its defense agencies
in fiscal year 2008. The development and implementation of SFIS and
BEIS are positive steps toward standardizing the department's data
structure and expanding its capability to access and utilize data for
analysis, management decisionmaking, and reporting, including special
reports related to the global war on terrorism.
However, it is important to keep in mind that a great deal of work
remains. In particular, data cleansing; improvements in policies,
processes, procedures, and controls; as well as successful enterprise
resource planning system implementations are needed before DOD
components and the department fully achieve financial visibility. Our
previous reviews of DOD system development efforts have identified
instances in which the department faced difficulty in implementing
systems on time, within budget, and with the intended capability.\45\
For example, as previously noted, the Army continues to struggle in its
efforts to ensure that LMP will provide its intended capabilities. In
particular, we reported that LMP would not provide the intended
capabilities and benefits because of inadequate requirements management
and system testing. Further, we found that the Army had not put into
place an effective management process to help ensure that the problems
with the system were resolved. Until the Army has completed action on
our recommendations, it will continue to risk investing billions of
dollars in business systems that do not provide the desired
functionality or efficiency.
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\45\ GAO, DOD Business Systems Modernization: Billions Continue to
Be Invested with Inadequate Management Oversight and Accountability,
GAO-04-615 (Washington, DC: May 27, 2004), and Army Depot Maintenance:
Ineffective Oversight of Depot Maintenance Operations and System
Implementation Efforts, GAO-05-441 (Washington, DC: June 30, 2005).
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DOD Refines Its Audit Strategy
In fiscal year 2007, DOD introduced key refinements to its strategy
for achieving financial statement auditability. These refinements
include the following:
Requesting audits of entire financial statements
rather than attempting to build upon audits of individual
financial statement line items.
Focusing on improvements in end-to-end business
processes, or segments \46\ that underlie the amounts reported
on the financial statements.
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\46\ DOD defines a segment as a component of an entity's business
and financial environment. A segment can include: (1) complete or
partial business processes; (2) financial systems, business systems, or
both; or (3) commands or installations. According to DOD, the
environment's complexity, materiality, and timing of corrective actions
are all factors that are taken into consideration when defining a
segment.
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Using audit readiness validations and annual
verification reviews of segment improvements rather than
financial statement line item audits to ensure sustainability
of corrective actions and improvements.
Forming a working group to begin auditability risk
assessments of new financial and mixed systems, such as
enterprise resource planning systems, at key decision points in
their development and deployment life cycle to ensure that the
systems include the processes and internal controls necessary
to support repeatable production of auditable financial
statements.
To begin implementing its refined strategy for achieving financial
statement auditability, DOD modified its business rules for achieving
audit readiness to reflect the new approach.\47\ Recognizing that a
period of time may pass before an entity's financial statements are
ready for audit, the revised business rules provide for an independent
validation of improvements with an emphasis on sustaining improvements
made through corrective actions. Sustainability of improvements will be
verified by DOD components through annual internal control reviews,
using OMB's Circular No. A-123, Appendix A,\48\ as guidance.
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\47\ Prior to its change in strategy, DOD used five business rules:
discovery and correction, validation, assertion, assessment, and audit.
\48\ OMB Circular No. A-123, Management's Responsibility for
Internal Control, Appendix A, ``Internal Control over Financial
Reporting,'' prescribes a method for Federal agencies, including DOD,
to assess, document, and report on internal control over financial
reporting at each level.
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The department's move to a segment approach provides greater
flexibility in assessing its business processes and in taking
corrective actions, if necessary, within defined areas or end-to-end
business processes that individually or collectively supports financial
accounting and reporting. However, DOD officials recognize that
additional guidance is needed in several key areas. For example, DOD
has acknowledged that it needs to establish a process to ensure the
sufficiency of segment work in providing, individually or collectively,
a basis for asserting the reliability of reported financial statement
information. DOD officials indicated that they intend to provide
additional guidance in this area by March 2008. Additionally, DOD
officials acknowledged that a process is needed to ensure that DOD's
annual internal control reviews, including its OMB No. A-123, Appendix
A reviews, are properly identifying and reporting on issues, and that
appropriate corrective actions are taken when issues are identified
during these reviews. To its credit, the department initiated the Check
It Campaign in July 2006 to raise awareness throughout the department
on the importance on effective internal controls.
Ultimately, DOD's success in addressing its financial management
deficiencies, resolving the longstanding weaknesses that have kept it
on GAO's high-risk list for financial management, and finally achieving
financial visibility will depend largely on how well its transformation
efforts are integrated throughout the department. Both the ETP and FIAR
Plan recognize that successful transformation of DOD's business
operations, including financial management, largely depends on
successful implementation of enterprise resource planning systems and
processes and other improvements occurring within DOD components. Such
dependency, however, is not without risk. To its credit, DOD recently
established a working group to begin auditability risk assessments of
new financial and mixed systems, such as enterprise resource planning
systems. The purpose of these planned assessments is to identify
auditability risks that, if not mitigated during the development of the
system, may impede the component's ability to achieve clean audit
opinions on its financial statements.
Furthermore, the department has implemented and continually expands
its use of a Web-based tool, referred to as the FIAR Planning Tool, to
facilitate management, oversight, and reporting of departmental and
component efforts. According to DOD officials, the tool is used to
monitor progress toward achieving critical milestones identified for
each focus area in component initiatives, such as financial improvement
plans or accountability improvement plans, or department-wide
initiatives. Given that the FIAR Planning Tool is used to report
results to OMB through quarterly update reports to the President's
Management Agenda and to update accomplishments in the FIAR Plan, it is
critical that the FIAR Directorate ensure the reliability of reported
progress. During a recent meeting with DOD officials, we discussed
several areas where FIAR Plan reporting appeared incomplete. Our
observations included the following:
FIAR Plan updates, including the 2007 update, do not
mention or include the results of audit reports and studies
that may have occurred within an update period and how, if at
all, any issues identified were addressed. For example, the DOD
Inspector General has issued reports in recent years that raise
concerns regarding the reliability of the military equipment
valuation methodology and the usefulness of the valuation
results for purposes beyond financial statement reporting.\49\
In 2007, the Air Force Audit Agency also issued reports
expressing concerns regarding the reliability of reported
military equipment values at Air Force.\50\ These audit reports
and actions, if any, taken in response to them have not been
mentioned to date in updates to the FIAR Plan. Further,
although both the June and September 2006 FIAR Plan updates
report that an internal verification and validation (IV&V)
study was completed to test the military equipment valuation
methodology, including completeness and existence of military
equipment assets, neither of these reports disclosed the
results of the review or corrective actions taken, if any. The
absence of relevant audit reports or study results may mislead
a reader into believing that no issues have been identified
that if not addressed, may adversely affect the results of a
particular effort, such as the department's military equipment
valuation initiative. For example, the IV&V study \51\
identified several improvements that were needed, in varying
degrees, at all the military Services and the Special
Operations Command in the following areas: (1) documentation of
waivers;\52\ (2) documentation of support for authorization,
receipt, and payment; (3) estimated useful life; and (4)
existence of the asset. In its conclusion statement, the IV&V
study reported that if the weaknesses identified by the IV&V
review are pervasive throughout DOD, the department will have a
significant challenge to establish control over its resources
and get its military equipment assets properly recorded for a
financial statement audit. Recognition of audits and other
reviews in the FIAR and subordinate plans would add integrity
to reported accomplishments and further demonstrate the
department's commitment to transforming its financial
management capabilities and achieving financial visibility.
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\49\ Department of Defense Inspector General, Financial Management:
Report on Development of the DOD Baseline for Military Equipment, D-
2005-114 (Arlington, VA: Sept. 30, 2005), and Financial Management:
Report on the Review of the Development of the DOD Baseline for
Military Equipment, D-2005-112 (Arlington, VA: Sept. 30, 2005).
\50\ Air Force Audit Agency, Air Force Military Equipment Baseline
Valuation, F2007-0009-FB3000 (May 29, 2007), and Military Equipment
Baseline--Electronic Pods, F2007-0003-FB3000 (Jan. 19, 2007).
\51\ Department of Defense, Property and Equipment Policy, Office
of Under Secretary of Defense for Acquisition, Technology, and
Logistics, Internal Validation and Verification Project: Military
Equipment Valuation (June 13, 2006).
\52\ Waivers refer to military equipment programs that were
intentionally not valued as part of the military equipment valuation
initiative.
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While the FIAR Plan clearly identifies its dependency
on component efforts to achieve financial management
improvements and clean financial statement audit opinions, it
does not provide a clear understanding of further links or
dependency between its subordinate plans, such as between the
financial improvement plans, accountability improvement plans,
and department-wide initiatives, such as the military equipment
valuation effort. For example, while the 2007 FIAR Plan updates
indicate that Army, Navy, and Air Force developed
accountability improvement plans that detail steps required for
asserting audit readiness on military equipment, they do not
clearly articulate the relationship of these plans to other
plans, such as component financial improvement plans or the
department's plan to value military equipment. Clear linking of
individual plans and initiatives is important to ensuring that
efforts occurring at all levels within the department are
directed at achieving improved financial visibility in the most
efficient and effective manner.
While we are encouraged by DOD's efforts to implement capabilities
that improve comparability of reported financial information, a
significant amount of work remains before the department or its
components have the capability to provide timely, reliable, and
relevant information for all management operations and reporting. We
caution the department that going forward it will be important to
ensure that its financial management modernization efforts do not
become compliance-driven activities resulting in little to no benefit
to DOD managers. It is critical that the department ensure that its
oversight, management, implementation, and reporting of transformation
efforts and accomplishments are focused on the implementation of
sustained improvements in DOD's capability to provide immediate access
to accurate and reliable financial information (planning, programming,
budgeting, accounting, and cost information) in support of financial
accountability and efficient and effective decision making throughout
the department.
Mr. Chairman and members of the subcommittee, this concludes my
statement. I would be happy to answer any questions you may have at
this time.
gao contact
For questions regarding this testimony, please contact Sharon L.
Pickup at (202) 512-9619 or [email protected]. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this statement.
Senator Akaka. Thank you very much, Mr. Walker.
Secretary Brinkley.
STATEMENT OF PAUL A. BRINKLEY, DEPUTY UNDER SECRETARY OF
DEFENSE FOR BUSINESS TRANSFORMATION
Mr. Brinkley. Chairman Akaka and Senator Thune, it's a
great honor to be here today. I will also keep my remarks
brief, given my statement's been entered for the record.
I want to express gratitude to the committee and to
Comptroller General Walker for the ongoing direction, passion,
leadership, and interest that's been provided for the past
several years on this topic. I also want to express gratitude
for the acknowledgment we've already heard today of the
progress that's been made. I think, too often, we're all
focused on continuous improvement and making things better, but
it is equally important that we pause once in a while and
reflect, in government, on the good things that we do. This
builds confidence in the organizations that we can achieve
great things in government, and I appreciate the feedback that
we've already received today.
Comptroller General Walker has been a steadfast and
extremely engaged observer of our efforts in the DOD. He and
his staff continue to provide a great amount of stimulus to our
efforts, in terms of continuous improvement; and, for that, we
continue to be grateful, and we're thankful for his positive
and negative feedback, which he provides with great regularity.
I will focus on a couple of areas that I think are worthy
of reiteration before I turn over to my colleagues.
Specifically--and it has been mentioned today that we have made
significant progress in the Department in recognizing two
things. Even some of the terms that have been used here today,
terms like ``federated,'' terms like ``accountability,''
``structure''--align to the title 10 legal structures that are
in place for how we train, equip, and support our Armed Forces.
We have recognized, and put in place, governance processes and
structures that have leveraged those legal structures, as
opposed to try to conflict with them.
But the other thing I will say, that I know my colleagues
here with me today share, is a great passion for introducing
into government and into DOD the things that we take for
granted in private life, in the Internet Age, is, just, people
today. We are accustomed to fingertip access to information
that informs decisions in all walks of our life. We go home, we
bank online, we buy online, we demand instantaneous access to
information online, and then we come back to work in
government, and, too often, because of our legacy systems and
our stovepipes and our processes, we don't have that access.
Certainly for us, the most important customers we seek to
satisfy are in the desert today, in places like Afghanistan and
Iraq, and they certainly deserve the same access to information
to inform their decisionmaking that we take for granted in
daily life. So, our shared objective is to introduce and to
ensure that our information environment in the DOD provides
that sort of speed, agility, and transparency to our
decisionmaking, and we're making progress at that, and progress
remains to be made.
Some specific points I will emphasize: We have defined data
standards for our financial information in the DOD. Under the
leadership of Comptroller Tina Jonas, significant progress has
been made in standardizing our accounting. Just simple things,
how we account for information, how we account for the dollars
that the taxpayer invests in defense. We have standardized our
transaction codes, our accounting codes, and those are being
fielded at systems at the Department level and in the Services,
and that took a significant amount of effort.
Some systems that have been poster-children for hearings
and GAO audits, the Defense Travel System; programs that are
about to field, like the Defense Integrated Military Human
Resources System (DIMHRS) for personnel pay, such a critical
area, to provide uniform access to our talent in the
Department, ensuring also that they are paid in a timely way,
whether they're Guard, Reserve, or Active Duty. That system
will begin to field this year and that represents major
progress for the DOD.
I'll also emphasize our direct support to the warfighter.
The Department fielded a system a year ago to enable our
contracting in Iraq and Afghanistan to be transparent and to
facilitate economic development in those critical areas. The
Joint Contingency Contracting System today has over 1,000
active users in theater, thousands of companies have been
registered in Afghanistan and in Iraq, hundreds of millions of
dollars in contracts are now being awarded in a way that
stimulates economic growth in those areas, and that's a direct
result of the work that's taken place in the business
transformation effort.
We have not limited out efforts to systems. We have fielded
and put in place a Lean Six Sigma continuous process
improvement team--this is driving world-class business
transformation practices at the DOD and is focused, even at the
Federal level now, on re-engineering the Federal security
clearance process, in collaboration with the Office of
Management and Budget (OMB), Office of Personnel Management,
and other organizations; teamworking on detainee operations and
how to make that work more efficiently for our Federal
Government at such a critical time in national security;
assessing our secondary defense agencies and their financial
practices, and ensuring that those secondary defense agencies
have world-class systems and access to information to enable
their decisionmaking to be more efficient. I've already
mentioned our efforts in support of the warfighter, including
our task force, fielded in Iraq today, working on economic
development in a broad way in support of Multinational Force-
Iraq.
I do have a couple of announcements to make. We did
announce, recently, the appointment of David Fisher, who comes
to us, with a Silicon Valley background, as the Director of the
BTA. But, I'm pleased to announce--and, again, this is in
direct response to a longstanding area of passion for David
Walker--the appointment of Elizabeth McGrath as the first
performance improvement officer for the DOD. Beth is my
principal deputy. She is a career leader. She represents what I
believe is the best of government. We have brought in world-
class talent from outside of government, and melded it with
world-class talent from inside government. Beth will be part of
the critical group of human resources who must carry forward,
in this transition of administrations, our effort. Deputy
Secretary England signed a memo recently, appointing her to
this position. She is with us today, and we look forward to her
leadership in this transition as the first performance
improvement officer for the DOD.
With that, I will turn over to my colleagues, and thank you
for your time.
[The prepared statement of Mr. Brinkley follows:]
Prepared Statement by Paul A. Brinkley
Chairman Akaka, Senator Thune, and members of the subcommittee,
thank you for this opportunity to provide information on the progress
and direction of Defense Business Transformation.
Our Nation faces diverse challenges and greater uncertainty about
the future global security environment than ever before. The
Department's mission requires that its business operations adapt to
meet these challenges and react with precision and speed to support our
Armed Forces.
Over the past few years, Department of Defense (DOD) has built a
strong foundation of agile business practices and management that ably
supports the warfighter and provides transparent accountability to the
taxpayer. By focusing on Investment Management and Governance and
Performance Management and Improvement, the Department has made
significant progress in its business transformation. I would like to
note that much of the Department's success in its business
transformation efforts can be attributed to the strong engagement of
our senior leadership. Under the direction of the Deputy Secretary of
Defense, Gordon England, the senior leadership of the Department has
been engaged and accountable for the performance of our business
operations. Secretary England has devoted extensive time and energy to
this effort and the Deputy Secretary's role in managing the business
operations of the Department was codified in a September 18, 2007,
directive designating the position of Deputy Secretary of Defense as
Chief Management Officer for the Department. I would like to take this
opportunity to review with you our major successes and recent
accomplishments.
investment management and governance
Defense Business Systems Management Committee
As Deputy Secretary of Defense, Secretary England has worked
tirelessly to improve the Department's business operations, most
notably in his role as the Chair of the Defense Business System
Management Committee (DBSMC), the overarching governance board for the
Department's business activities. Since its inception in 2005, the
DBSMC, in concert with the Investment Review Boards (IRBs), has served
as the governance structure that guides the transformation activities
of the business areas of the Department, such as finance, acquisition,
etc. As authorized by the National Defense Authorization Act for Fiscal
Year 2005 and reiterated in the DBSMC Charter, the DBSMC has
responsibility for approving: business systems information technology
(IT) modernizations over $1 million, the Business Enterprise
Architecture (BEA), and the Enterprise Transition Plan (ETP).
Additionally, the DBSMC Charter extends the authority of the DBSMC
beyond statutory requirements to include responsibility for ensuring
that the strategic direction of the Department's business operations
are aligned with the rest of DOD, and for measuring and reporting the
progress of defense business transformation. The DBSMC has also been an
integral driving force behind the Department's adoption of Continuous
Process Improvement (CPI)/Lean Six Sigma (LSS) methodology and the
Department's shared focus on Enterprise Resource Planning (ERP)
strategy. The DBSMC has provided invaluable top level direction for the
business transformation efforts of the Department.
The DBSMC/IRB governance structure has produced significant
improvements across a broad range of business systems, including two
major enterprise-level programs--the Defense Travel System (DTS) and
the Defense Integrated Military Human Resources System (DIMHRS). Based
on a combination of additional DTS fielding, DOD-wide emphasis, and a
significant upgrade to the reservation module in February 2007, DTS
usage of the tool has increased dramatically. Fiscal year 2007 showed
an approximately 72 percent increase over the previous year in the
number of vouchers processed. The next phase of the program will add
additional types of travel to the tool's capability, which will further
increase usage. We are also preparing to make the use of DTS mandatory
for all trip types that the tool has the capability to handle. Finally,
we are partnering with General Services Administration to capture
governmentwide travel data that can then be used to make more effective
strategic sourcing decisions. Under the direct leadership of the DBSMC,
the DIMHRS program has achieved effective governance to keep the
program on track for initial operating capability for the Army in
October 2008.
Business Capability Lifecycles
The DBSMC has overseen the development and implementation of the
Business Capability Lifecycle (BCL), which, when fully implemented,
will integrate requirements determination, acquisition, and compliance
to the BEA under a consolidated governance structure for all business
systems at the Major Automated Information System level. The BCL will
help resolve longstanding challenges that have impacted the delivery of
business capabilities in a timely, well-informed manner--fragmented
governance and reporting, a need for better-defined requirements and
more robust upfront solution analysis, and a need for continual access
to comprehensive information to enhance visibility for all process
stakeholders. Under BCL process rules, initial operational capability
of a program must be reached within 12-18 months of the contract award
or the business case will not be approved.
Business Enterprise Architecture
The BEA has allowed us to establish clear benchmarks for the
alignment of business systems to the Department's future business
environment. It has also allowed us to make important and measurable
progress, as acknowledged by recent Government Accountability Office
(GAO) reports.
As we continue to evolve the BEA, a key objective is to produce an
architecture that can be harnessed as an executive decisionmaking
mechanism while simultaneously supporting the implementation of IT
systems and services. The recently released Concept of Operations for
BEA Requirements addresses this objective by: 1) outlining a further
maturation of the Department's architecture development approach that
addresses both top-down strategic requirements and bottom-up tactical
requirements, and 2) expanding the governance process to encourage
users and stakeholders to shape architecture form and content. This
approach is already drawing from new sources of requirements, better
evaluating the priority of requirements, and providing improved
governance for the BEA development cycle.
When BEA 5.0 is released in March 2008, it will help achieve
interoperable, efficient, transparent business operations by including
and integrating data standards, required business rules and system
interface requirements for the enterprise systems and ERP target
programs.
performance management and improvement
Enterprise Transition Plan
With the publication of the September 2005 ETP, the Department, for
the first time, provided its internal and external stakeholders a
comprehensive view of the systems and initiatives that will transform
the largest business entity in the world. The ETP reflects the
strategic and tactical partnership between the enterprise- and
component-levels by providing a big picture view of defense business
transformation efforts at every level within the business mission area.
On September 30, 2007, we released the latest ETP, again delivering on
our commitment to Congress to update this plan every 6 months. The
September 2007 ETP included new sections describing DOD's strategy for
achieving its six Business Enterprise Priorities and Component
Priorities. With each release, the plan continues to mature,
communicating our transformation plans and providing senior management
with a tool for monitoring progress against those plans. Significant
milestones in the ETP are shown in 6-, 12-, and 18-month increments.
For example, our most recent publication reflected success on over 83
percent of the Enterprise milestones detailed in the first version of
the ETP. The ETP has also been expanded to include the progress of the
Department's CPI/LSS efforts. The next update to the ETP is scheduled
for release on March 15, 2008.
Defense Agencies Initiative
The Defense Agencies Initiative (DAI) is a significant initiative
within the Department's overall effort to modernize the Defense
Agencies' financial management processes including streamlining
financial management capabilities, eliminating material weaknesses, and
achieving financial statement auditability for the Agencies and field
activities across the DOD. The DAI implementation approach is to deploy
a standardized system solution that effectively addresses the
requirements in the Federal Financial Management Improvement Act,
Office of Management and Budget (OMB) Circular A-127, and the BEA, by
leveraging the out-of-the-box capabilities of the selected commercial
off-the-shelf product. The benefits of DAI include a single Financial
System Integration Office certified solution; \1\ common business
processes and data standards; access to real-time financial data
transactions; significantly reduced data reconciliation requirements;
enhanced analysis and decision support capabilities; standardized line
of accounting with the use of Standard Financial Information Structure
(SFIS); and use of United States Standard General Ledger Chart of
Accounts to resolve DOD material weaknesses and deficiencies.
---------------------------------------------------------------------------
\1\ The Financial Systems Integration Office was formerly known as
the Joint Financial Management Improvement Program staff office. FSIO
has responsibility for core financial systems requirements development,
testing, and product certification for the executive branch.
---------------------------------------------------------------------------
Capitalizing on the business acumen of 28 defense agencies and/or
field activities, DAI will implement a compliant business solution with
common business processes and data standards for the following business
functions within budget execution requirements: procure to pay; order
to fulfill; acquire to retire; budget to report; cost accounting;
grants accounting; time and attendance; and resales accounting. Each
defense agency is committed to leveraging its resources and talents to
build an integrated system that supports standardized processes and
proves that the DOD is capable of using a single architecture and
foundation to support multiple, diverse components.
Continuous Process Improvement/Lean Six Sigma
LSS is an important part of the Department's CPI effort. A
disciplined improvement methodology, LSS has been endorsed by DOD
leadership as the means by which the Department will become more
efficient in its operations and more effective in its support of the
warfighter. By focusing on becoming a ``lean'' organization, the DOD
will eliminate waste, improve quality and put its resources and capital
to the best use in meeting the goals of the ETP. On April 30, 2007, the
Deputy Secretary of Defense instructed the Office of the Deputy Under
Secretary of Defense-Business Transformation to create a DOD CPI/LSS
Program Office to drive DOD-wide CPI/LSS activities. The Department has
made significant progress in implementing LSS. In cooperation with the
Defense Acquisition University, Green Belt, Black Belt, and Executive
training class have been created, training and project metrics from all
OSD and Component organizations are being tracked, and many DOD-wide
projects that will drive wholesale change are being executed.
LSS is being adopted at all levels of the Department. The Army, for
instance, estimates that in calendar year 2007 alone, they achieved an
estimated savings of $1.3 billion through the use of CPI. Furthermore,
the components as a whole have almost 20,000 active and completed LSS
projects.
One of the most ambitious process improvement projects that has
been undertaken to date is an end-to-end reform of the governmentwide
security clearance process. DOD is working in close cooperation with
the Director of National Intelligence, the Office of Management and
Budget, and the Office of Personnel Management on this effort. The
interagency team has been charged with creating a new clearance process
that is fair, flexible, and adaptive, managed and highly automated end-
to-end, reciprocal, and delivering timely, high-assurance security
clearances at the lowest reasonable cost.
Component Accountability
In partnership with the components, the Department has taken major
strides in business transformation at all levels. The Department has
created an environment in which each level of the DOD organizational
structure, component, enterprise, or other, can focus on those
requirements specific to their level, with oversight and assistance
provided by the Office of Business Transformation and the Business
Transformation Agency. This system of tiered accountability encompasses
the broad area of policy setting; the detailed establishment of process
and data standards; as well as the ultimate execution of business
operations.
Business Transformation Agency
The Business Transformation Agency continues to be an integral part
of our business transformation efforts. In the span of less than 2
years, the BTA has gained a significant robust and organic capability
to manage and oversee the Department's transformation efforts. In
February 2006, the first permanent BTA Director was selected, providing
a constancy of leadership and a focus for enterprise-wide
decisionmaking across the Department. Additionally, using the
congressional special hiring authority for highly qualified experts
(HQEs), BTA has created a complementary workforce composed of career
civilians, term-appointed civilians, military members and contractors
who have collectively contributed to our continuing progress in
assuring standardization and mitigating the risk associated with large
business systems implementations across the DOD. We appreciate
Congress' recognition of the need to develop a multi-dimensional
workforce and the continued support for hiring HQEs as an integral part
of maintaining transformation momentum.
Working Relationship with the Government Accountability Office and the
Office of Management and Budget
DOD regularly and proactively engages with GAO and OMB to
communicate its progress and achievements in defense business
transformation, and both organizations continue to be constructive
partners in our overall transformation effort.
GAO has acknowledged the Department's progress in several reports
over the past 2 years. GAO's May report, entitled ``DOD Business
Systems Modernization: Progress Continues to Be Made in Establishing
Corporate Management Controls but Further Steps are Needed'' (GAO-07-
733) was the most positive NDAA Compliance report the Department has
received to date, and contained a single new recommendation and
officially closed 10 others. GAO stated the following:
Given the demonstrated commitment of DOD leadership to
improving its business systems modernization efforts and its
recent responsiveness to our prior recommendations, we are
optimistic concerning the likelihood that the department will
continue to make progress on these fronts.
The Department has also been in regular dialogue with OMB regarding
a number of transformation initiatives. DOD and OMB are working closely
together to bring increased capabilities to the entire Federal
Government. OMB is also helping DOD leverage lessons learned from
initiatives across the Federal space.
We continue to welcome GAO and OMB's insight, as well as that of
all our government partners, as we work together to accomplish our
transformation priorities and achieve our shared goals.
conclusion
We are pleased with our progress in our business transformation
efforts and that this progress has been recognized by our oversight
bodies. However, aligning the strategy, controls, people, processes,
and technology to truly effect enterprise-wide change in an
organization as large and complex as the DOD is an enormous
undertaking, which has also been recognized by GAO and OMB. The
challenges that business transformation faces should not be
underestimated. We believe that our persistent focus on accelerating
the pace of change the Department will continue to make steady and
significant progress, achieving tangible results and positive business
outcomes.
We appreciate and value the support of Congress over the last
several years as we have established new governance and discipline in
our business transformation efforts. We are anxious to demonstrate that
this support will reap benefits for both the taxpayers who fund our
efforts and for the warfighters who defend this Nation. Mr. Chairman,
we thank you and the members of the subcommittee for your continued
support.
Senator Akaka. Thank you very much, Secretary Brinkley.
Now Secretary Kunkel.
STATEMENT OF PETER E. KUNKEL, PRINCIPAL DEPUTY ASSISTANT
SECRETARY OF THE ARMY FOR FINANCIAL MANAGEMENT AND COMPTROLLER
Mr. Kunkel. Chairman Akaka, Senator Thune, my name is Peter
Kunkel, and I'm the Principal Deputy Assistant Secretary of the
Army for Financial Management and Comptroller.
Thank you for this opportunity to address the Army's
business systems modernization and financial management
accountability results. My statement for the record addresses a
variety of financial management improvement efforts, but I'll
focus my comments today on four achievements since the last
hearing in November 2006, and three improvements planned for
this year.
First, in November 2006 we reported that the General Fund
Enterprise Business System (GFEBS) completed a successful
technology demonstration, and we committed to completing the
full GFEBS blueprint by May 2007. This blueprint guides
software development and identifies additional opportunities
for business process improvements. The GFEBS blueprint is
complete. Furthermore, we have increased the number of systems
marked for retirement, once GFEBS is implemented, from the 87
reported in November 2006 to 90 today.
Second, since November 2006, the Army has significantly
increased the amount of business transacted via electronic
commerce. For example, electronic processing of travel claims
grew by 44 percent; and electronic invoicing by 150 percent.
Furthermore, with support from the Treasury and the Federal
Reserve Bank, we have completed deployment of stored-value card
technology in Iraq and in Afghanistan, resulting in a 70
percent reduction in cash payments, and nearly $630 million in
electronic funds transfers.
Third, in November 2006 the Army Corps of Engineers
submitted its fiscal year 2006 civil works financial statements
to the DOD Inspector General. The audit work is complete, we
expect to receive formally a qualified opinion this March.
Qualification concerns treatment of certain assets balances for
property acquired prior to 1998. Based on corrective actions
implemented, we are confident that the qualification will be
removed, enabling an unqualified opinion for the fiscal year
2007 statements.
It's important to note this achievement. The Army Corps of
Engineers receives nearly $6 billion in annual civil works
appropriations, and manages nearly $40 billion in total assets,
making it one of the largest executive branch entities to
receive a favorable audit opinion.
Fourth, over the past year, we have been engaged in an
effort to improve supply-chain management, and in June,
successfully implemented the so-called Funds Control Module.
The Funds Control Module is a bridge between unit-level
logistics and the Army financial system. This Federal Financial
Management Improvement Act-compliant system verifies funds
availability and provides real-time, auditable asset
accountability for the $20 billion expended annually by the
Army for supplies and equipment.
I'd now like to describe three financial management efforts
underway within the Army in 2008.
First, we are collaborating with the BTA to pilot
electronic funds transfer to Iraqi vendors through the
Commanders' Emergency Response Program. If successful, we will
expand electronic payments to boost the nascent Iraqi banking
infrastructure and reduce the need for cash in a deployed
environment.
Second, in another example of collaboration with the BTA,
we look forward to completing the first of five testing phases
on the DIMHRS. Progress in this first phase is positive, and
indicates that we will achieve successful deployment in
November. The Army fully resourced DIMHRS requirements in the
fiscal years 2008 and 2009 budgets to ensure that DIMHRS
progress stays on track.
Third, we've started to build GFEBS Increment 2, which will
deploy to installation management activities at Fort Jackson in
November of this year. Increment 2 fully complies with the most
current version of the BTA's Business Enterprise Architecture
and the DOD Standard Financial Information Structure, ensuring
interoperability across all business domains. GFEBS is fully
resourced in fiscal years 2008 and 2009.
Mr. Chairman, I want to thank you and the committee for
holding this hearing, and I'd like to emphasize that the Army
shares your objective of sustaining the existing momentum into
the next administration. With Congress's continued support and
stable funding, the BTA's leadership, and oversight within the
Army, we will improve our business systems and practices. We're
thoroughly committed to this effort, and I look forward to your
questions.
[The prepared statement of Mr. Kunkel follows:]
Prepared Statement by Peter Kunkel
Chairman Akaka, Senator Thune, distinguished committee members--I
would like to thank you for this opportunity to discuss Army business
transformation and financial management improvements. As the Principal
Deputy Assistant Secretary for Financial Management and Comptroller, I
assist the Assistant Secretary of the Army and the Secretary of the
Army with oversight of the Army's financial management and business
transformation activities.
As the Army continues combat operations in Iraq and Afghanistan, we
are also transforming business processes and improving financial
management. Our financial management transformation efforts support the
Department of Defense Enterprise Transition Plan and comply with the
Department's enterprise-wide standards, including the Business
Enterprise Architecture (BEA) and Standard Financial Information System
(SFIS). Our efforts are managed through a disciplined process that is
guided by our audit readiness plan.
Since the November 2006 hearing, we have achieved steady progress
in transforming the Army's financial management systems and processes.
The details of these improvements are enumerated in the Army's portion
of the September 2007 DOD Enterprise Transition Plan (ETP). I would,
however, like to take the opportunity to highlight a few of these
improvements.
The Army's Logistics Modernization Program (LMP) is the strategic-
level building block of the Army's transition to a single logistics
enterprise. We successfully improved LMP to comply with the majority of
applicable financial requirements directed by the Federal Financial
Managers Improvement Act (FFMIA) as validated by the U.S. Army Audit
Agency. Full FFMIA compliance permits fielding of LMP throughout the
Army.
The Deployed Theater Accountability System (DTAS) is the world's
first enterprise-wide Secret Internet Protocol Router Network personnel
tracking system. It provides commanders with real-time data for
deployed military personnel, civilians, contractors and foreign
nationals in theater. In the past year we rolled out an expanded
version to meet additional requirements from the current theater of
operations. We also successfully completed a Joint Chiefs of Staff-
sponsored pilot test of DTAS as a potential joint personnel
accountability solution.
I also would like to highlight the Army's embrace of Lean Six Sigma
(LSS) programs. One of our fundamental challenges is that, in spite of
the Army's dramatic growth in total obligation authority over the past
several years, we continue to confront a significant mismatch between
our resourcing requirements and our funding levels. We have turned to
LSS to help reduce these requirements while still accomplishing the
mission in a timely manner. LSS is transforming Army business processes
and functions so that we provide greater value and responsiveness to
customers while reducing cycle time and cost. LSS also encourages a
culture of continuous, measurable improvement. As one example, we
recently were able to reduce the time to publish permanent orders from
19.5 days to 3.7 days. Additionally, four Army depots have been awarded
the prestigious Shingo Prize for Excellence in Manufacturing in
acknowledgment of their reducing process cycle time, increasing
efficiency and productivity, and reducing defects through the
application of LSS principles.
In fiscal year 2007, the Army significantly increased the volume of
financial business transacted via electronic commerce. For example, we
processed nearly 800,000 travel orders and payments electronically
through the Defense Travel System. We submitted approximately 140,000
invoices electronically to the Defense Finance and Accounting Service
(DFAS) using Wide Area Work Flow. In addition, in partnership with the
Department of Treasury and the Federal Reserve, we implemented stored
value card electronic capabilities in the Iraq and Afghanistan
theaters. Stored value cards employ electronic funds transfer (EFT)
technology, thereby eliminating a soldier's need for check cashing and
cash payments at Army and Air Force Exchange Service facilities.
Improvements in all of these areas are planned for fiscal year
2008.
progress in developing and implementing business enterprise
architecture and transition plan
The Army's enterprise architecture is aligned with the Department's
federated approach to business system modernization. We established
business area domains in conformance with the Department's overall
domain structure. Each domain is responsible for developing a business
system transition plan and a systems architecture that aligns with the
Department's ETP and BEA. Mature architectures have been developed for
the financial management and logistics fields. We are adopting the DOD-
wide human resources solution in the form of the Defense Integrated
Military Human Resources System.
Under oversight of the Army's Chief Information Officer, we
implemented a disciplined portfolio management process that requires
each business domain to perform a complete inventory of all business
systems within its purview and to register the systems in a single
Army-wide portfolio. According to the Army's Chief Information Officer,
the portfolio management effort enabled the Army to reduce the total
system inventory by 1,500 systems from 3,200 to 1,700 systems. An
additional 300 Army-wide business systems have been marked for
retirement, pending the development and implementation of modern
replacements.
By adopting the Department's business domain construct and
federated approach to modernizing business systems; creating business
system transition plans; aligning architectures with the BEA; and
managing business systems investments through a disciplined portfolio
management process, the Army will be able to comply with section 332 of
the National Defense Authorization Act (NDAA) for Fiscal Year 2005. We
already have scrutinized more than 100 major business system
modernization efforts and received approval from the Defense Business
Systems Management Committee (DBSMC) to continue these important
transformational programs.
The Deputy Under Secretary of the Army is responsible for ensuring
effective execution of our enterprise architecture and modernization
efforts across all business domains. This senior official also is the
Army's DBSMC representative. Governance at the Deputy Under Secretary
level enables the Army to implement sustainable business process
improvements and to develop compliant business systems.
In this context the Army has developed and is implementing a
comprehensive financial improvement and audit readiness plan to guide
financial modernization activities. This integrated plan outlines 1,947
specific actions needed to improve financial accountability and
reporting, and assigns responsibility for completion of these tasks to
20 organizations within the Army and DOD. We have completed 673 of
these tasks with independent verification by the Army Audit Agency. The
Army's financial improvement plan is a component of the DOD Financial
Improvement and Audit Readiness Plan and the ETP.
The Department's Inspector General reviewed our audit readiness
plan and found that the plan sufficiently captures all actions
necessary to resolve problems in obtaining an audit opinion. The plan
provides a foundation to improve accountability and financial reporting
within the Army, and has yielded tangible, sustainable results. The
Inspector General reviewed our audit plan and identified areas needing
improvement. We have substantially resolved the Inspector General's
concerns, and are currently awaiting their final report, which we
expect will reflect favorably on the efficacy of our plan. The plan
provides a foundation to improve accountability and financial reporting
within the Army, and has yielded tangible, sustainable results.
For example, we anticipate, based on preliminary reports, that the
Army Corps of Engineers will receive a qualified audit opinion of its
fiscal year 2006 Civil Works financial statements when the Inspector
General releases its opinion in March 2008. Civil Works is a large
financial entity within the Army comprising $5.9 billion in annual
appropriations, $44.5 billion in total assets and $26.7 billion in
total property, plant and equipment. The Army Corps of Engineers has
the largest property, plant and equipment asset base of any agency
within the Executive Branch receiving a favorable audit opinion, and is
the seventh largest in terms of annual appropriations. We have
corrected the conditions linked to the qualified opinion of the fiscal
year 2006 financial statements, and expect to receive an unqualified
opinion for fiscal year 2007.
We continue to implement corrective actions identified in our
improvement plan. In November 2006 we reported to the committee the
completion of 150 of the plan's tasks during fiscal years 2005 and
2006, resulting in improved financial management across the Army. With
the successful implementation of the funds control module, we finished
an additional 95 tasks during fiscal year 2007, for a total of 673
tasks completed since the plan's inception. As a result of these
changes, obligations for $26 billion in annual supply transactions were
delivered in real time, auditable electronic commerce processes were
implemented, and accountability of general equipment and real property
was improved.
The Army's financial improvement and audit readiness plan is
important to ensuring compliance with U.S.C. 2222. U.S.C. 2222
prohibits the Department from obligating funds for preparing,
processing or auditing financial statements until the proposed
activities are consistent with the Department's financial improvement
plan, and are likely to provide sustained improvements to internal
controls. All 1,947 tasks contained in our financial improvement plan
are designed to provide sustainable improvements when implemented. Each
action is focused on correcting deficient processes and systems, and
will result in long-term benefits when completed, including generation
of reliable and complete financial management information.
progress in complying with legislative requirements for obligating
funds that support systems development and modernization
Section 332 of the fiscal year 2005 NDAA requires the approval of
the Defense Business System Management Committee (DBSMC) for all
obligations for business system modernization that exceed $1 million.
Additionally, modernization must align with the Department's BEA. The
Army implemented a tiered accountability process to meet this
requirement.
Army domain owners represent the first tier of accountability. They
are responsible for developing a transition plan and domain
architectures, and ensuring that all domain business systems are
categorized and included in the Army-wide business systems portfolio.
Each domain owner is accountable for ensuring that business system
investments comply with section 332 of the NDAA for Fiscal Year 2005.
Specifically, each domain owner must submit investment requests to the
Army's Chief Information Officer, who is the pre-certification
authority for systems modernization investments and the second
accountability tier, for review and approval. The Deputy Under
Secretary of the Army for Business Transformation is the third
accountability tier and serves as the Army's representative to the
DBSMC. The Deputy Under Secretary ensures that each modernization
request is aligned with the Army's Business Mission Area, presents the
Army's modernization requirements to the DBSMC for approval, and
requests DBSMC authorization to incur obligations supporting
modernization efforts.
This tiered approach ensures a thorough review of requirements and
that appropriate approvals are obtained for our modernization efforts,
thereby significantly improving business systems modernization.
cost culture
The Army also is making a concerted effort to inculcate a ``cost
culture'' throughout its leadership in order to manage costs
effectively. In a cost culture, the focus is: ``How do I get the most
readiness, the most output, the right materiel and the right personnel
for the dollars I am given?'' The mantra is ``accomplish the mission
considering cost.'' That means everyone at all leadership levels
actually understands, and takes into account during the decision-making
process, what things are going to cost. Spending decisions are no
longer made in a vacuum.
Instituting a cost culture is essential to the success of the Army.
Cost culture principles apply to both the operating and generating
forces. They will help us to transform more of the Army and to do so
more quickly.
The Army's Strategic Leadership Development Program has been
revamped to provide the Army's brigadier generals more instruction in
cost management. In addition, the Army is working to promote
consideration of cost throughout its operational leadership. The
Installation Management Command will provide cost management
instruction to garrison commanders, and recently conducted five
sessions of cost management training at the Installation Management
Institute.
activities planned during fiscal year 2008
The Army has three key financial improvement activities planned for
calendar year 2008. The first is to complete development and fielding
of General Fund Enterprise Business System (GFEBS) Increment 2. The
second is to complete all testing, fielding and organizational
restructuring in support of the Defense Integrated Military Human
Resource System (DIMHRS). Our third key activity is to implement a
pilot program supporting electronic payments for the Commander's
Emergency Response Program (CERP) in Iraq. All three efforts are fully
resourced in fiscal years 2008 and 2009.
GFEBS constitutes a significant undertaking in the modernization
and improvement of Army financial management. In November 2006, we
reported to the committee our positive results in completing the GFEBS
Increment 1 technology demonstration; committed to completing the full
GFEBS solution blueprint by May 2007; and identified how the Single
Army Financial Enterprise architecture was aligned with the DOD
enterprise architecture and guided overall program development.
The full GFEBS solution blueprint was finished and the Army has
begun to build Increment 2, which we expect to test and field at Fort
Jackson, SC, by November 2008. Increment 2 will manage the Army's $30
billion real property and general equipment portfolios and support
installation management activities, including financial processes for
command and staff, personnel and community, information technology,
operations, logistics, engineering, resource management, acquisition
and health services. It also will support financial activities at the
DFAS and Army headquarters activities. Increment 2 will fully subsume
90 legacy business systems.
GFEBS Increment 2 fully complies with the most current version of
the Business Transformation Agency (BTA) BEA. GFEBS also implements the
DOD SFIS, the Department's standard financial schema which enables
interoperability across the Department.
The Army is looking forward to the testing and implementation of
the DIMHRS this year. DIMHRS will eliminate 66 non-integrated legacy
systems, and will provide an integrated personnel and payroll system
that meets the human-resource management needs of the Active component,
the National Guard, and the U.S. Army Reserve. In addition to
integrating personnel and payroll activities for all Army components in
a single database, DIMHRS also will provide soldiers expanded self-
service capabilities that eliminate the need to wait in long lines for
personnel and financial services. Based on progress reported by BTA,
DIMHRS is on track for delivery in October. Preliminary results of the
first of five testing phases are encouraging.
The Army, in partnership with the DOD BTA and the DFAS, will begin
acceptance testing of DIMHRS in April and full DIMHRS fielding in
October 2008. The Army is working with BTA and DFAS to identify and to
change organizational and business constructs in order to leverage the
best business practices inherent in the DIMHRS solution.
The Army, BTA and DFAS also are collaborating on a pilot initiative
to make payments by EFT for activities associated with the CERP. CERP
is helping to win trust and rebuild civilian life in Iraq and
Afghanistan by providing payments from appropriated funds directly to
Iraqi and Afghan citizens engaged in civil infrastructure activities.
The preponderance of these payments is made in cash by U.S. service men
directly to the payee. To eliminate inefficiencies inherent in cash
transactions, the Army, DFAS, and BTA this year will try EFT payments
for CERP-related transactions. The pilot will be conducted in Iraq and
will make a material contribution to the creation of a modern banking
infrastructure there. There are many obstacles to overcome in this
effort, including local customs, banking infrastructure issues and
incorporation of robust management controls. We are firmly committed to
executing the pilot program to improve CERP's efficiency and to support
Iraq's nascent banking system.
conclusion
The Army appreciates the committee's support and oversight of
activities to improve and to modernize financial management and
transform business processes within the Army. We share the committee's
objectives in developing sustainable, enduring solutions designed to
augment the reliability, timeliness, and accuracy of the Army's
financial management information. I look forward to working with the
committee throughout the year. Thank you again for the opportunity to
be here today.
Senator Akaka. Thank you very much, Secretary Kunkel.
Now we'll hear from Secretary Brook.
STATEMENT OF HON. DOUGLAS A. BROOK, ASSISTANT SECRETARY OF THE
NAVY FOR FINANCIAL MANAGEMENT AND COMPTROLLER
Mr. Brook. Thank you very much Mr. Chairman and Senator
Thune. Thank you for inviting us here today to discuss our
respective Services' progress in transforming our business
processes.
The Department of the Navy has made progress, I believe,
but there is still much work ahead of us. For example, the Navy
is implementing a major Enterprise Resource Planning (ERP)
application with 14,000 users online today at 9 sites, and
plans to have 10,000 more online by the end of this year. But,
this implementation is not yet fully accomplished, and there
are issues remaining to be addressed.
Second, the Marine Corps is well-positioned to achieve a
favorable audit opinion on at least one financial statement by
the end of this year, but we have not achieved auditability,
and there is additional work to do.
The Navy has established, and is executing, an oversight
process that conforms with the investment review criteria first
mandated by Congress in the NDAA of 2005. Our transformation
activities are subject to oversight by the Defense Business
Systems and Management Committee, but we do not have a
governance structure for transformation that mirrors that of
OSD.
GAO has offered recommendations for process changes and
organization changes, and Congress has included provisions, in
the last several NDAAs, that align with those recommendations.
The Department of the Navy understands these recommendations,
we understand the provisions of law, and we continue to make
progress toward improving the business of the Navy and the
Marine Corps.
One of the recent criticisms by GAO of DOD's approach to
business transformation was a perceived overemphasis on
systems, perhaps at the expense of other aspects of
transformation. So, let me, accordingly, broaden the picture of
business transformation in the Department of the Navy, beyond
systems.
In 2002, the Chief of Naval Operations laid out the Sea
Power 21 Vision that included a business transformation
element, known then as Sea Enterprise. The goal of Sea
Enterprise was cost-consciousness, to find more efficient ways
of doing the Navy's business. Since then, the program has
matured into Navy Enterprise. Conceptually viewing the Navy as
a matrix of support providers and combat capability providers,
Navy Enterprise is looking beyond traditional functional and
organizational stovepipes, and, instead of mission at any cost,
Navy Enterprise is seeking readiness at the right cost. In my
mind, this represents a cultural transformation that involves
systems thinking with an eye on business functions, while still
ensuring operational needs are met.
Disciplined, documented, and controlled processes are the
hallmark of our Nation's maritime force. They are what make us
effective at sea and in expeditionary maneuvers ashore. Such
thinking has not always consistently translated into the
business environment, but I believe there is evidence that that
tide is turning. The Secretary of the Navy challenged the
Department to achieve greater efficiency, and the Department
responded by adopting Lean Six Sigma as the best-practice tool
of choice. Thousands of projects, large and small, have been
conducted, with positive results.
On the financial management side, the Department's
Financial Improvement Program (FIP) has identified areas where
enhanced internal controls and better-defined business
processes can support audit readiness. These improvements in
internal controls are consistent with OMB Circular A-123 and
are clearly in line with the spirit of the 2006 and 2007 NDAAs.
Not only is the Department working to create a culture and
attitude of business transformation, it is dedicated to
aligning its efforts with DOD. Navy's FIP integrates with DOD's
FIAR Plan, and we work closely with the OSD Comptroller and
other military Services to better align our processes and
internal control improvement efforts with the broader DOD
business transformation plans.
The Department of the Navy embraces DOD's federated concept
of tiered accountability. This federated approach requires that
enterprise-wide systems are used for enterprise-wide functions,
and that they adhere to DOD-wide standards, but also recognizes
the unique needs of the component in support of their Title 10
requirements.
The Navy believes it has partnered well with the BTA; most
recently and most specifically, in reviewing and validating
Navy's ERP processes.
Finally, in terms of organization, the Navy's Business
Transformation Council was chartered in 2006 to bring senior
executive leadership to business transformation issues and to
provide enterprise-wide policy direction and execution
oversight. It is chaired by the Under Secretary of the Navy.
This Council is positioned to undertake governance of business
transformation in the Department of the Navy.
In addition, the Navy has created the Functional Area
Management Council to involve process owners in enterprise
transformation. The functional area managers are senior leaders
within organizations responsible for acquisition, financial
management, and logistics. They are charged with overseeing the
reduction and consolidation of information technology (IT)
investments consistent with Department of the Navy and DOD
strategy and policy. These functional area managers are aligned
to their corresponding DOD investment review boards, with
constant communication maintained via our Chief Information
Officer's (CIO) staff.
Mr. Chairman, the Department of the Navy has taken
important steps in transforming its business, but recognizes
that much work remains to be done. In my recent return to the
Pentagon, I perceived that real progress has been made on
multiple fronts; systems, processes, organizational structures,
culture, and audit readiness. The Navy is balancing the
competing demands of doing it quickly and doing it well. The
Department is committed to the idea of business transformation
and to achieving transformation through a disciplined and
integrated approach. GAO and Congress have provided helpful
templates and recommendations, and BTA has been a valuable
partner.
We appreciate this committee's interest and support, and we
look forward to our continued cooperation with you and with our
colleagues here at the table. I would be pleased to respond to
your questions, Mr. Chairman.
[The prepared statement of Mr. Brook follows:]
Prepared Statement by Hon. Douglas Brook
Good afternoon Mr. Chairman, Senator Thune, and distinguished
members of the subcommittee on Readiness and Management Support. Thank
you for inviting me to be with you today and to discuss the Department
of the Navy's (DON) status and progress in transforming its business
processes in support of the Navy-Marine Corps team. The Department has
made progress but there is still much work ahead of us. For example:
The Navy is implementing a major Enterprise Resource
Planning (ERP) application with 14,000 users online today at 9
sites and plans to have thousands more online by the end of
this year.
The Marine Corps is well positioned to be the first
military Service in the Department of Defense (DOD) to achieve
a favorable audit opinion of at least one financial statement
and other material components of its statements by the end of
the year.
The Government Accountability Office (GAO) has devoted much
attention to the pressing issues related to business transformation in
DOD and has provided the Service components and DOD with
recommendations for process changes and organizational changes.
Specifically, GAO has recommended improvements in the areas of:
Management structures and policies for information
technology investment management, and
Service transformation plans and architectures that
are fully integrated with DOD plans and architectures
Provisions of the last several National Defense Authorization Acts
align with those recommendations. The DON understands these
recommendations and provisions and continues to make progress toward
improving the business of the Navy and Marine Corps.
systems
The last time Defense business transformation was discussed by this
committee, the DON's representative was the Chief Information Officer.
He related the Navy's and Marine Corps' plans and progress toward
creating a seamless infrastructure, process improvements for the
management of information technology investments, and enterprise-wide
governance bodies.
He spoke of the plans and promise of Navy ERP and I can report
today that implementation has begun. As we speak, 14,000 employees of
the Naval Air Systems Command (NAVAIR) are using an ERP system for
payroll, accounting, and other business functions. Valuable lessons
from the ERP pilot projects were incorporated. This investment provides
the cornerstone of a better integrated, more automated and better
controlled business environment. It is compliant with the processes and
accounting standards delineated in the DOD business enterprise
architecture. By the end of the year, DON plans to have approximately
10,000 additional employees using this ERP. With DOD oversight, this
Major Automated Information System achieved Milestone C approval
(limited deployment based on achieving programmatic objectives) on time
and is currently serving as the financial system of record at NAVAIR
for both general fund and working capital fund activities. The current
program of record, when completed in 2012 will account for nearly 50
percent of the Navy's total obligation authority. We are looking to
further develop this financial backbone as quickly as prudent
management and resources allow.
The DON has been an active participant in the Defense Business
Systems Management Committee (DBSMC), represented initially by the
former Under Secretary with continuity provided by the Chief
Information Officer (CIO). The DON has established and is executing an
oversight process to conform with the investment review criteria first
mandated by Congress in the National Defense Authorization Act for
2005.
The DON Business Transformation Council (BTC), which I will discuss
later in more detail, was chartered to bring senior executive
leadership to bear on business transformation issues and to provide
enterprise-wide direction and execution oversight. The Functional Area
Management (FAM) structure was created to involve process owners in
enterprise transformation.
The FAMs are led by senior leaders within organizations responsible
for functional areas such as acquisition, financial management, and
logistics, and are charged with overseeing the reduction and
consolidation of information technology investments in their areas
consistent with Departmental and DOD strategy and policy.
Progress continues to be made toward creating a seamless
infrastructure and to develop enterprise-wide standards. The benefit of
doing so is obvious. Given the myriad functional tasks of the
Department, its expeditionary nature, and organizational complexity,
creating a standard architecture is a challenge no corporate entity has
ever faced. The Department is moving forward, but the complexity cannot
be overcome quickly.
One of the recent criticisms by GAO of DOD's approach to business
transformation was a perceived overemphasis on systems and technology
at the expense of other aspects of transformation. Let me accordingly
broaden the picture of business transformation in the DON.
process and people
In 2002, the Chief of Naval Operations laid out the Sea Power 21
vision that included a business transformation element known as Sea
Enterprise. The goal was cost-consciousness, to find more efficient
ways of doing the Navy's business. Since then, the program has matured
into Naval Enterprise. Teams are actively seeking the links between
processes, funding levels, asset utilization, manpower and combat
readiness. Conceptually viewing the Navy as a matrix of support
providers and combat capability providers, they are seeing beyond
functional and organizational stovepipes. Instead of mission at any
cost, we are seeking readiness at the right cost. Such a cultural
transformation of improved systems thinking with an eye on business
functions is an important enabler and is critical for ensuring
operational needs are met while implementing change.
Disciplined, documented and controlled processes are the hallmark
of our Nation's maritime force; it makes them effective at sea and
expeditionary maneuver ashore. Such thinking has not consistently
translated into the business environment, but there is evidence that
tide is turning.
The Secretary of the Navy challenged the Department to achieve
greater efficiency and improved effectiveness. The Department adopted
Lean Six Sigma as a best practice tool of choice. Thousands of
projects, large and small, have been conducted with positive results.
For example:
The Naval Sea Systems Command conducted several value
stream analyses designed to achieve annual cost reductions of
$200 million in Virginia class submarine construction.
Streamlining construction planning processes can save over $69
million.
PEO (Aircraft Carriers) reviewed the Aircraft Carrier
Mid-Life Refueling Complex Overhaul designed to increase
aircraft carrier availability. Two major processes (delivery to
Post Shakedown Availability and Selective Restrictive
Availability) can be incorporated into other processes or
eliminated, resulting in 10 months of additional operational
time; the equivalent of an extra deployment over the life of a
carrier.
The Department's financial statement audit readiness plan
identified areas where enhanced internal controls and better defined
business processes can support audit readiness. Such improvements in
internal controls are consistent with Office of Management and Budget
Circular A-123 and are clearly in line with the spirit of the 2006
(section 376) and 2007 (section 321) authorization act provisions that
financial management improvement activities should improve controls and
result in sustained improvement.
The Department is not only working to create a culture and attitude
of business transformation within its military services, it is
dedicated to aligning its efforts with the rest of DOD. The DON
Financial Improvement Program integrates with the DOD Financial
Improvement and Audit Readiness (FIAR) Plan. We work closely with
Office of the Under Secretary of Defense (Comptroller) and other
military Services to better align our process and internal control
improvement efforts with the broader DOD business transformation plans.
In the Marine Corps, a focused financial improvement initiative is
positioning the Corps to be the first DOD military service that is
``audit ready.'' The Marine Corps has made process standardization and
increased internal controls the hallmark of its business transformation
efforts. They can point to tangible benefits in terms of reduced
reverted balances, reduced cost of financial processes, and improved
transparency of financial information to inform resource allocation
decisions.
The DON embraces DOD's federated concept of tiered accountability.
This federated approach requires that Enterprise wide systems are used
for enterprise wide functions and adhere to DOD-wide standards, while
also recognizing unique needs the components have to support title 10
requirements. The Navy believes it has partnered well with the Business
Transformation Agency, specifically in reviewing and validating Navy
ERP processes. The DON Financial Improvement Plan aligns with OSD's
FIAR Plan.
Finally, in terms of organization, the DON BTC I mentioned earlier
was chartered in 2006 to bring senior executive leadership to bear on
business transformation issues and to provide Enterprise-wide policy
direction and execution oversight. It is chaired by the Under Secretary
of the Navy. The BTC can serve a role in the DON similar that served by
the DBSMC for the DOD. The Functional Area Managers described
previously are aligned to their corresponding DOD Investment Review
Boards, and constant communication is maintained via the CIO's staff.
The CIO office meets regularly with senior financial leadership to
ensure projects are being executed under the framework of our emerging
architecture and transition plans.
The continuous efficiency-seeking activity of business
transformation should be understood as a stewardship issue in support
of the operating forces. The DON is responsible to the combatant
commanders, the President, Congress, and the public to be a good
steward of the resources it manages. DON is also responsible to support
the varied requirements of the operating forces. The policies and
processes of business transformation must align with and efficiently
support operational requirements.
Mr. Chairman, members of the subcommittee, the DON has taken
important steps in transforming its business, but recognizes that much
work remains. Real progress is being made on multiple fronts: systems,
processes, organizational structures, culture, and audit readiness. The
Navy is balancing the competing demands of doing it quickly and doing
it well. The DON is committed to the idea of business transformation
achieved through a disciplined and integrated approach. GAO has
provided helpful templates and recommendations; BTA has been a valuable
partner. The Department is dedicated to continuing to make
transformational change in the management of its business systems. We
appreciate this committee's interest and support in the matter and look
forward to our continued cooperation. I would be pleased to respond to
any questions you may have about the DON's business transformation
initiatives.
Senator Akaka. Thank you very much, Secretary Brook, for
your statement.
Now we'll hear from Secretary Gibson.
STATEMENT OF HON. JOHN H. GIBSON, ASSISTANT SECRETARY OF THE
AIR FORCE FOR FINANCIAL MANAGEMENT AND COMPTROLLER
Mr. Gibson. Mr. Chairman and Senator Thune, thank you for
the opportunity to appear before the committee today.
As the Under Secretary position within the Air Force is
currently vacant, it is my privilege to discuss with you the
Air Force's progress and support of DOD's business
transformation and financial management efforts. Although the
Air Force does not have an Under Secretary, the Air Force has
established, and maintains, consistent processes in leadership
emphasis to ensure successful and tiered governance of our
ongoing business transformation efforts, as well as a solid
architecture. This senior leadership oversight and emphasis
function is crucial to ensuring we meet our business
transformation and financial management challenges of the
future. The Secretary of the Air Force, Michael Wynne, is
actively involved with the governance and oversight of our
transformation efforts.
Since the last hearing on this issue, in November 2006, the
Air Force has continued transforming our business operations
and financial systems, and has made measurable progress.
Ultimately, our goal of financial management improvement is
timely, accurate, and reliable business information, as well as
improving our ongoing business practices, yielding a more
efficient and effective organization. Since 2006, we have
enjoyed numerous successes.
As an example, in late 2006 we completed an end-to-end
review of our Air Force personnel claims process, a complicated
set of procedures that regularly frustrated our servicemembers,
consuming a significant amount of their time. In fact, Air
Force personal claims processing had become so daunting that
many members chose to avoid it altogether, which led our Air
Force Judge Advocate Office to transform the universal
experience of filing a moving claim. Using Air Force Smart
Operations for the 21st Century principles, we stood up the
Centralized Air Force Claims Service Center in March 2007,
achieving final operating capability at Kettering, OH. With a
staff that will ultimately number 107, the center replaced over
300 personnel at 91 claims offices worldwide. But, most
importantly for our airmen, the claims process is now simple,
quick, and is being used in place of repeated trips to the
legal office for briefings and paperwork.
Today, airmen complete a streamlined form on the World Wide
Web from their desk, home computer, or anywhere with Internet
connectivity. The need for on-hand property inspections is
reduced, and if they have questions, they can still call the
Help Center, which is manned 24/7 by claims experts.
To date, the center has serviced over 5,000 claims, with an
average processing time of less than 10 days from online
submission to payment, instead of 5 weeks, under the old
process.
Another good-news business transformation story directly
relates to our troops serving in harm's way as we begin the
deployment of the EagleCash Program at Air Force locations
within the Operation Enduring Freedom and Operation Iraqi
Freedom theaters of operation in 2007. EagleCash is a
Department of Treasury stored-value card that eliminates the
need for cash in deployed locations and allows our military
personnel to link the card to their personal banking account.
As a result, troops can now load funds to the card by using a
self-service kiosk, and now our airmen don't have to carry hard
cash around with them, as the stored-value card serves as
electronic money. This program eliminates frequent visits from
our deployed airmen to finance offices, thus saving valuable
time of our deployed airmen, as well as our finance troops,
allowing us all to focus on other pressing mission
requirements. This program is expanding to seven additional
locations, including four within Iraq, and, as a result,
approximately 10,000 of our deployed troops are now using the
card in lieu of cash.
In September 2007, the new Air Force Financial Services
Center became a reality as the facility opened at Ellsworth Air
Force Base, SD. In its first phase, a central processing center
for pay and travel vouchers went operational. The Air Force was
honored that Senator Thune, Congresswoman Stephanie Sandlin, a
representative from Senator Tim Johnson's office, and the
Secretary of the Air Force, Mike Wynne, attended the ribbon-
cutting and recognized this significant accomplishment as we
centralized pay and travel processing from 93 locations around
the globe to a world-class, best-practice, shared service
center.
Going forward, we continue to work toward the second phase
of the services center, which is a 24/7 contact center to
handle pay and travel inquiries from over 300,000 military and
civilian customers. All told, the services center will return
598 manpower slots to the Air Force total force, valued at $210
million, and, just as importantly, improves the customer
service levels for all of our airmen.
Also, as we progress into the second quarter of fiscal year
2008, more than 200 airmen at the services center are now
providing timely financial services for the Air Force major
commands, covering 18 installations and 6 geographically
separated units. It is very important to note, though the Air
Force Financial Services Center allows for tremendous
efficiencies and represents a huge transformation in the way we
provide customer service in the backroom operations, we will
not abandon our people when a personal touch is required. Face-
to-face customer service will still be available at our Air
Force bases around the world so that our people can obtain the
financial services in a personal manner.
Finally, Mr. Chairman, I want to close by thanking you and
the members of this committee for your continued support to our
airmen and their families in so many areas, particularly by
providing them what they need to fight the global war on terror
and defend our great Nation. Air Force leadership and Air Force
financial managers, working together with our colleagues
throughout the DOD, continue our efforts to provide reliable,
timely, and accurate financial and management information and
analysis to enhance decisionmaking and continuous improvement
in business operations, to improve effectiveness, efficiency,
and customer service throughout the Air Force.
I would like to conclude today by thanking this committee
for your support during this important period of business
transformation, and assure you we are doing our best to finance
the fight.
Thank you, again, for your consideration, and I look
forward to your questions.
[The prepared statement of Mr. Gibson follows:]
Prepared Statement by Hon. John H. Gibson II
introduction
Chairman Akaka and members of the subcommittee, as the Under
Secretary position within the Air Force is currently vacant, I have the
privilege to appear before you today to discuss the Air Force's
progress in support of the Department of Defense's (DOD) business
transformation and financial management efforts.
Although the Air Force does not have an Under Secretary who would
be designated as the Chief Management Officer as identified through the
recently enacted 2008 National Defense Authorization Act legislation,
we maintain consistent processes to ensure proper governance of our
ongoing business transformation efforts. This Senior Leadership
oversight function is crucial to ensuring we meet our business
transformation and financial management challenges of the future. The
Secretary of the Air Force, the Honorable Michael Wynne, has fulfilled
this role and is actively involved with our transformation efforts.
Over the past 4 years, the Air Force has continued to strengthen
our enterprise governance process and ensured the involvement of Senior
Leadership as we transform the business of the Air Force. For instance,
cross-functional Senior Leadership participates in reviews of program
and legacy system migration milestones as identified in our Enterprise
Transition Plan (ETP). Through the established tiered accountability
mechanisms, this metric review provides the Senior Leaders insight into
potential impacts to deliver capabilities and costs that schedule
delays may create. In 2005, Air Force Smart Operations for the 21st
Century (AFSO21), launched by Secretary Wynne, extended common process
re-engineering approaches beyond the business and combat support
mission area and into the warfighting, intelligence and infrastructure
mission areas. The ETP links our business transformation initiatives,
monitored through our governance process, to strategy identified
through our AFSO21 efforts. Additionally, the milestones that are
reported in the ETP are tied to our Air Force Financial Improvement
Plan that directly supports the Financial Improvement and Audit
Readiness (FIAR) plan to achieve CFO Act compliance. Another area of
interest for the Air Force is streamlining the acquisition process for
business information systems, where we have been working with the
Business Transformation Agency on refining and implementing the
Business Capability Lifecycle (BCL) process. The Air Force nominated
and has included its major Enterprise Resource Planning (ERP) Systems,
Defense Enterprise Accounting and Management System (DEAMS) and
Expeditionary Combat Support System (ECSS), in the BCL process.
The Air Force has had significant operational successes in
accordance with financial management transformation as highlighted in
the ETP since late 2006 that I would like to also share with you today.
For instance, we established the Air Force Financial Services Center
(AFFSC) at Ellsworth Air Force Base (AFB), SD, that reached an Initial
Operational Capability in October 2007. All told, the AFFSC returned
598 manpower slots to the warfighter, valued at $210 million, and more
importantly, improved the customer service levels received by our
airmen. The Government Accountability Office in its October 2007 report
provided the Air Force with valuable comments regarding the Information
Technology Investment Management maturity model. Based on these
comments, we conducted a Rapid Improvement Event in November 2007 to
create an Air Force IT investment strategy. This strategy will link to
the budget cycle, align to strategic objectives and enterprise
architecture, and improve the Air Force's portfolio management process.
Finally, one of our ERP systems, the DEAMS successfully deployed an
initial spiral to users at Scott AFB.
In order to improve investment governance across all Air Force IT
systems, we are expanding upon the National Defense Authorization Act
(NDAA) 2005 guidance to evaluate the Air Force inventory, to include
Warfighting and Enterprise Information Environment Mission Area
systems.
I thank you again for this opportunity to share the great progress
that the Air Force has made towards achieving our business
transformation efforts.
governance
In 2003,\1\ the Air Force began major, coordinated efforts to
manage its business and combat support transformation across the
enterprise through implementation of a consistent structure for
business transformation. With the introduction of the NDAA of 2005, the
Air Force expanded upon this structure and energized associated
governance, programming and certification efforts. These enterprise-
level approaches grew with the implementation of AFSO21.
---------------------------------------------------------------------------
\1\ Creation of the cross-functional Commander's IPT (CIPT)
followed in 2004 by the Senior Working Group (SWG).
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Since the Air Force undertook these efforts, we have successfully
managed our business and combat support transformation across the
enterprise and now have a mature management environment, characterized
by the following five elements:
(1) Solid enterprise governance and senior leadership
involvement. The Secretary of the Air Force participates in the
Defense Business Systems Management Committee, which is an
Office of the Secretary of Defense level committee that
evaluates the development and modernization efforts of business
systems and investments, the actions of the Air Force Process
Council, and the operational decision process supported through
the Senior Working Group.
(2) Sound investment selection and tracking mechanisms. We
have implemented a consistent process that will go beyond the
requirements of NDAA 2005. This process allows us to review
information technology investments for business systems, and
national security systems, and evaluate sustainment expenses on
systems.
3) Enterprise methods for managing our processes and our
data. The Air Force methods consist of the Air Force Process
Council and AFSO21 on the process side and the Transparency
Integrated Product Team (TIPT) on the data side. The Secretary
of the Air Force is directly involved in the TIPT to emphasize
the importance of transparent, authoritative data.
(4) Clear priorities for business transformation, as
documented in the ETP.
(5) Strong engagement toward transformation within the
business information systems acquisition community. We have
established leadership forums created to support the deployment
of ERP systems and the migration towards a Service Oriented
Architecture (SOA). To emphasize the importance of this issue,
the Chief Air Force Acquisition Executive and Air Force Chief
Information Officer (CIO) outlined a commitment to the
application of open technology in the acquisition of
information technology assets in a joint memorandum issued this
past December.
This management and governance environment has allowed the Air
Force CIO to certify all business systems development and modernization
spending in excess of $1 million. We employ a rigorous and repeatable
review process that evaluates current and proposed investments to
ensure compliance with the Business Enterprise Architecture (BEA), to
eliminate unneeded or redundant capabilities, and to ensure that
spending is aligned to DOD and Air Force transformation priorities.
Additionally, the Air Force CIO has reviewed all IT business systems
that are spending modernization dollars.
When reviewing business system investments the Air Force seeks to
ensure compliance to the Air Force Agile Combat Support Architecture
(ACSA) in addition to the BEA. In 2007, we released the Air Force ACSA
v4.0, a sub-enterprise-level architecture based on the Agile Combat
Support Concept of Operations. It reflects corporate Air Force
priorities and requirements for business and operational support
systems, and provides a common framework for integration of functional
domain planning. The Air Force employs a federated architecture; based
on activity and capability alignment to both higher and lower level
architectures. With the release of ACSA 4.0, Air Force has completed
manual alignments of our enterprise architecture to the DOD BEA.
Specifically, the Air Force has aligned functional capabilities as
represented in the ACSA to DOD BEA Operational Activities. Functional
architects (from areas such as acquisition, financial management,
logistics, etc) contributed architecture content for functional
capabilities, and continue to produce functional-level products.
During fiscal year 2007, the Air Force developed a governance
compliance framework to facilitate the review of all statutory
requirements across all Air Force IT systems. The Air Force CIO has
incorporated the compliance review of Federal Information Security
Management Act, Privacy Act, Section 508, and Clinger-Cohen Act into
the NDAA certification review in addition to architecture and BEA
alignment. This repeatable process provides the Air Force with a
single-point review of our IT systems on an annual basis.
The Air Force maintains the Air Force Information Technology
Investment Review Guide, which outlines the requirements and processes
supported by the Air Force CIO on the certification and review of IT
systems. This document undergoes a yearly update to ensure new
requirements, procedures, improvements, and generally requested
information are quickly available for our IT community.
Now, I would like to take this opportunity to review with you our
major successes and recent accomplishments with regards to strategic
planning, business transformation, financial management and human
capital.
strategic planning
In the area of strategic planning, the Secretary of the Air Force
has instituted process and organizational change across Core Business
Mission areas, visibly committing our Service to continuous, efficient
process improvement through the AFSO21 program. We have identified
senior-level Process Owners, or Champions, across the Air Force to
shepherd our reengineering efforts under the auspices of an Air Force
Process Council chaired by the Air Force Secretary. To improve timely,
accurate, and reliable information and integration within and between
the Air Force and DOD, the Air Force Secretary has led the Transparency
initiative. This initiative will enable the Air Force to identify,
validate, and exploit data currently stored in systems throughout the
Air Force in a SOA environment. The TIPT, chaired by the Secretary of
the Air Force, oversees this effort that is focused on exposing
authoritative data to improve information availability and visibility.
Not only will information be available and visible, but there will be
business rules and common vocabularies to make the data understandable.
Currently, the Air Force is focused on:
(a) Unit and personnel readiness for accurate reporting and
streamlined deployment planning
(b) Flight Scheduling to reduce the financial burden posed by
duplicative systems and processes currently in place
(c) Force presentation in support of joint initiatives such
as Global Force Management and Force Management Integration
Project, assisting joint warfighter planning
(d) Personnel information demanded by all the other focus
areas and joint initiatives such as the Defense Integrated
Military Human Resource System
Another key aspect of our business transformation strategy is the
leveraging of information to transform global operations, one of our
ETP priorities. To this end, the Air Force is implementing
transformation through transparency using common, international
standards (as much as possible), commercial products, and process
reengineering to ensure the right data is available with the right
level of protection and safeguards. Our infrastructure will leverage
the work of the commercial sector--small reusable services registered
and accessed in a fully discoverable, searchable metadata environment
built using a SOA approach.
Activities are underway to develop presentation services utilizing
intuitive drag and drop methods to bind data to presentation objects,
to build on the success of the Air Force's Financial Management
Dashboard. Additionally, during summer 2007, the Air Force conducted a
pathfinder effort to prove Air Force Automated Metadata Tagging can
utilize a commercial off-the-shelf tool populated with an established
vocabulary to obtain an information asset's subject matter metadata in
a fraction of the time that it can be done manually--with more
precision and accuracy. The Automated Metadata Tagging Pathfinder does
this by inspecting the information within the asset and categorizing it
within the vocabulary. Based on the success of that effort, DOD-CIO
chartered a working group to develop the suite of services that could
automatically tag information assets and register the discovery
metadata into appropriate metadata registries.
Another key component to the Air Force's IT strategic vision is the
leveraging of process and vocabulary work being accomplished by
Communities of Interest (COI) in order to define information sharing
needs within the Air Force and DOD. COIs determine and document access
and control restrictions to ensure users are authorized to view the
data. COIs are governed through the Air Force TIPT under the direction
of the Secretary. As such, there are five key TIPT pathfinder projects
that will publish their vocabularies and data delivery services in the
initial Air Force Metadata Environment (MDE). These pathfinders cross
diverse information areas such as Finance, Individual Deployment
Readiness, Flight Scheduling, and Global Force Management, proving the
value of vocabulary development and data asset tagging as keys to
information exchange. Additionally, through a DOD tasking, the Air
Force will lead a multi-service project to further develop
specifications for an automated metadata tagging service, demonstrate
its use within a Joint COI, and deliver an acquisition strategy for the
DOD Enterprise. In fiscal year 2008, the results of these pathfinder
projects will be used to further develop and expand the Air Force MDE,
which will allow discovery and delivery of the data assets to users and
system developers throughout the Air Force and joint community. We will
also establish an infrastructure to enable the discovered data to be
presented in a flexible dashboard environment that can be customized
and tailored in real time to match a user's operational needs. Finally,
we will continue work with the DOD CIO, DISA, Services and others to
develop and implement Net-Centric Data Strategy and Core Enterprise
Services.
business transformation
In the broad area of business transformation, the Air Force has
also made great strides this past year. The Air Force has two ERP
systems for the future--the ECSS and the DEAMS. For example, the ECSS
initiated enterprise-level blueprinting, legacy system deconstruction,
and pathfinder assessment and analysis efforts to redesign the business
processes. ECSS also provides selection and configuration requirements
for deployable information technology products such as ERP components,
thereby providing the initial groundwork and planning to enable the
transformation of the entire Air Force logistics operation.
Additionally, a major business transformation success story is that
of the Air Force Claims Service Center (AFCSC). The personal claims
process had become so daunting that military members at times decided
to avoid the process, which led Air Force/JA to transform the universal
experience of filing a moving claim. Through JAG Corps 21, JA used
AFSO21 principles to stand up the AFCSC in March 2007. The AFCSC
achieved final operating capability at Kettering, OH. With a staff that
will ultimately number 107, the Center replaced 300+ personnel at 91
claims offices worldwide.
For airmen, the claims process is now simple and quick. In place of
repeated trips to the legal office for briefings and paperwork, airmen
complete a streamlined form on the Web--from their desk, home computer,
or anywhere with Internet connectivity. By uploading digital pictures
of damaged items, they reduce the need for inspections. If they have
questions, they can call an AFCSC help line, which is manned 24/7 by
claims experts. To date, the Center has serviced over 5,000 claims with
an average processing time of less than 10 days from online submission
to payment, instead of 5 weeks under the old process!
In addition, the Air Force has undertaken several key initiatives
via the eLog21 campaign to ensure synchronization of one of the largest
and most complex supply chains in the world. This will enable improved
support for multiple simultaneous operations. To expedite
transformation, the Air Force Global Logistics Support Center (GLSC) is
being established concurrently with process reengineering that will tie
together the re-engineered processes and coordinate provision of
materiel to the warfighter by the supporting activities. Establishment
of the GLSC is pivotal to eLog21 and begins the rational, incremental
centralization of supply chain management.
Additionally, the Enterprise Environmental Safety and Occupational
Health Management Information System is being developed to manage the
environmental liabilities, hazards, personnel exposure, and safety
needs for airmen at all levels. The Enhanced Technical Information
Management System (ETIMS) is being developed to provide immediate
improved warfighter capability to manage, store, electronically
distribute, and use both paper and digital technical orders. ETIMS will
shorten distribution timeframes and improve readiness by providing
weapon system maintainers with on-demand, current, accurate and
complete instructions to support maintenance activities.
The Air Force is participating in the BCL initiative with the
expectations of bringing new capabilities to the warfighter earlier.
The Air Force supports efforts that expedite the acquisition policy
process for business information systems while reducing redundant
processes, which is the directed goal of BCL. We currently have two
Major Automated Information System that are test cases for the BCL
process, DEAMS, and ECSS. We are in the early stages of the BCL process
and it is too early to predict success at this time but we remain
optimistic.
Financial Management
Air Force Financial Management made great strides in fiscal year
2007 as we continued our transformation efforts. The new AFFSC became a
reality in September 2007 as the facility opened at Ellsworth AFB, SD,
and its first phase--a central processing center for pay and travel
vouchers--went operational. We were honored that Senator John Thune,
Congresswoman Stephanie Herseth Sandlin, a representative from Senator
Tim Johnson's office, and Secretary of the Air Force Michael Wynne
attended the ribbon-cutting and recognized the center's value as we
centralize pay and travel processing from 93 locations around the globe
to a world-class, best-practice shared services center. Over the coming
months, we will continue to work toward the second phase of the AFFSC,
which is a 24x7 contact center to handle pay and travel inquiries from
over 300,000 military and civilian customers. All told, the AFFSC
returned 598 manpower slots to the warfighter, valued at $210 million,
and more importantly, improved the customer service levels received by
our airmen.
As we progress into the second quarter of fiscal year 2008, more
than 200 airmen (military members, civil servants and contractors) at
the AFFSC are now providing timely financial services for major
commands that encompass 18 installations and 6 geographically separated
units. Though the AFFSC allows for a drastic reduction in the number of
customers we see face-to-face for pay issues and represents a huge
transformation in the way we provide customer service, we will not
abandon our people when a personal touch is required. Face-to-face
customer service will still be available at our Air Force bases around
the world so that our people can obtain the financial services they
need in a manner that works best for them.
Another successful effort is one of our Joint initiatives with
Transportation Command, the DEAMS. DEAMS is part of the Air Force ERP
solution to re-engineer financial processes and will include the full
range of accounting functionality. In July 2007 DEAMS Increment 1,
Spiral 1 was deployed at Scott AFB and provides functionality to
approximately 400 end users. Spiral 1 workflow focuses on requisition
processing that creates a requisition, conducts automatic funds check,
receives validation by a budget reviewer, completes review and
validation by the contracting office and completes certification by the
funds certifying officer.
Additionally, under the leadership of the Secretary of the Air
Force, Michael Wynne, the Air Force has created a Financial Management
Dashboard. This dashboard provides Senior Leadership and Financial
Managers at all levels with financial data transparency to support
decisions and provide timely status of key financial metrics such as:
tracking budget spend plans vice actual execution of operation and
maintenance funds, working capital funds, and military personnel funds.
We have worked diligently to produce metrics that are valuable to the
decisionmaking process and define the metrics so that they are
understandable.
The Analytical Capability Transformation initiative, which includes
the financial management Center of Expertise (CoE) and the Acquisition
Cost Capability (ACC), has resulted in the most profound changes Air
Force cost analysis has seen in the past 20 years! The maturation of
our CoE continued in fiscal year 2007 with five-fold increase in
workload. It completed 57 different studies for 37 different
installations and all major commands. The CoE provides key analytical
support including cost estimating, economic and business case analysis,
and specialized financial analysis to major commands, base, and
installation decisionmakers. The CoE works on the concept of a few
highly qualified experts, with the right tools, serving as part time
consultants providing specialized, on-call analytical decision
support--without the expense and inefficiency associated with remote
locations trying to build and sustain this unique capability. While the
CoE analyzed over $300 million in investment dollars in fiscal year
2007, we anticipate even greater benefits as full operational
capability is reached in fiscal year 2008.
In addition, the ACC achieved several milestones in its mission to
improve Air Force-wide cost analysis. Five Air Force Cost Analysis
Agency operating locations were opened and staffed at our Product
Centers and Major Commands to provide non-advocate cost assessments of
major Air Force programs. These operating locations will work hand-in-
hand with program offices to ensure high quality estimates are prepared
and maintained for budget and milestone decisions. In August 2007, we
issued cost estimating guidance with the Under Secretary of the Air
Force and the Service Acquisition Executive that improves the quality
and frequency of cost estimates and the accuracy of budget requests.
Finally, our team made progress improving the training and
certification of cost analysts. Working closely with Defense
Acquisition University and private estimating societies, we
restructured the course curriculum and certification requirements for
cost analysts. These changes will ensure future analysts are better
prepared for his challenging technical discipline.
The Air Force Financial Management Community has also been working
on identifying ways to share knowledge easily to support deployed
servicemen around the globe. To this end, we are heavily leveraging the
capabilities provided through the Air Force Knowledge Now and the
establishment of Communities of Practice, such as the Combat
Comptroller Community of Practice. This workspace provides a tremendous
amount of deployment related information at one site for deploying
Financial Management Personnel through a web-based collaborative
environment. Service men and women use shared information and
administrative and communications tools to conduct business, manage
projects, maintain awareness and solve group problems. With a
membership of over 850 and monthly web page views averaging 8,000, this
is a great source to supplement preparation efforts to deploy.
Additionally, by providing deployed site information, including
pictures, it helps the deploying airman to manage his expectations and
relieve pre-deployment anxiety.
To further support our deployed troops, we began the deployment of
the EagleCash program at Air Force locations within the Operation
Enduring Freedom and Operation Iraqi Freedom theaters of operation in
2007. EagleCash is a Department of the Treasury stored value card that
eliminates the need for cash in deployed locations and allows our
military personnel to link the card to their personal banking account.
As a result, troops can load funds to the card by using a self-service
kiosk. This eliminates frequent visits to Finance offices, and allows
our airmen to use these cards on an installation to obtain goods and
services. In May 2007, the first Air Force deployment of EagleCash took
place at Al Udeid Air Base, Qatar. We have since expanded this program
to seven additional locations, including four within Iraq. As a result,
approximately 10,000 of our deployed troops began using the card in
lieu of cash. Most importantly, EagleCash enhances the warfighting
troops' ability to focus on the mission versus spending time in line to
obtain cash for their everyday needs.
Of course, improved processes and systems mean little without the
people. On this front, financial management remains committed to
equipping its people with the skills to succeed via world-class
training curriculum and modern delivery methods. In fiscal year 2007,
we revamped over 80 percent of our schoolhouse training to ensure our
officers and civilians were receiving the latest in analytical,
decision support, contingency and leadership skills. In addition, we
continued our march toward using leading-edge delivery technologies
that increase the numbers receiving training while driving the delivery
costs down. Such an example is the Financial Management Distributed
Learning Center (FMDLC), a one-stop, electronic storefront to enable
the world-wide delivery and sharing of training events to airmen.
Having gone live in fiscal year 2007, FMDLC puts e-learning at airmen's
fingertips . . . anytime . . . anywhere. As a result, training
capabilities are opened to larger portions of the workforce, plus we
can quickly distribute important information and expert studies across
the financial management waterfront, and more agilely exploit
expertise, wherever located, to robust financial management skills.
This effort is part of the overarching Air Force Enterprise Learning
Management initiative.
financial audits
We wholeheartedly concur with the committee that the most effective
way to address the Air Force's financial management issues is to
continue to focus our efforts on our core business systems and
processes as embodied in section 313, S.2766, the John Warner National
Defense Authorization Act for Fiscal Year 2007. This focus is embodied
in the DOD FIAR Plan, a key component of which is the Air Force
Financial Improvement Plan (FIP), formerly known as the Air Force
Information Reliability and Integration Plan. The Air Force FIP is the
Air Force's roadmap toward financial transparency and details our
ongoing commitment to ensuring the absolute highest level of
stewardship of the taxpayers' investments in the Air Force.
As part of the June release of the DOD FIAR Plan, a revised DOD-
wide audit strategy was outlined. The revised audit strategy
transitions the DOD approach from one that focuses solely on a line-
item to one that focuses on end-to-end business processes. The Air
Force is currently in the process of modifying the areas of Military
Equipment and Real Property Accountability in the Acquire to Retire
end-to-end process, as well as developing a plan for the Civilian Pay--
Hire to Retire process. The Air Force's approach to these three areas
is in development and will be presented in the March 2008 version of
the FIAR plan. Regardless of the strategy the Air Force employs, the
primary objective remains the same: implement sustainable improvements
in order to deliver accurate, timely, reliable, and complete financial
management information.
The Air Force took the first step in validating that we are on our
way to audit readiness with submission of the Fund Balance with
Treasury assertion package and subsequent ongoing audit by an
independent public accounting firm that is scheduled for completion in
June 2008. Additionally, the DOD Inspector General will initiate audits
of the financial statement line items of Appropriations Received and
Non-expenditure Transfers; further confirming Air Force progress toward
improved financial information.
human capital
For our business transformation efforts, the Air Force realizes
there is more than the systems and processes that require
modernization. It is essential for us to ensure our personnel are
educated and supported to operate our modernized systems.
In addition to our Financial Management Service Delivery Model that
provided us with the framework to create the AFFSC, the Air Force has
created a Personnel Services Delivery initiative. Our Personnel
Services Delivery initiative dramatically modernizes the processes,
organizations, and technologies through which the Air Force supports
our airmen and their commanders. The goal is to deliver higher-quality
services with greater access, speed, accuracy, reliability and
efficiency. Our key enablers are maximizing automation and self-
service, centralizing work in Total Force Service Centers and
realigning the role of strategic advisors. In an effort to provide more
effective support to the airmen and their commanders, the Manpower,
Personnel, and Services community will be moving to a common platform
for personnel service centers.
These initiatives feed into our larger Air Force Enterprise
operational services delivery and enhance the Air Force's ability to
acquire, train, educate, deliver, employ, and empower airmen with the
needed skills, knowledge, and experience to accomplish Air Force
missions whether on station or in garrison. We will deliver the ``right
person at the right place at the right time.''
conclusion
As a result of our business efforts to date, we have been able to
shut down 26 unnecessary legacy systems affecting numerous Air Force
functional organizations. Furthermore, we are tracking seven additional
systems scheduled for shutdown in fiscal year 2008. The continued
combination of our careful focus on investments and new business
practices will create better information for decisionmakers while
eliminating or migrating additional stove-piped and redundant systems.
Finally, Mr. Chairman, I want to close by thanking you and members
of this committee, on behalf of the Secretary and Chief of Staff, for
your continued support of our airmen and their families in so many
areas, particularly by providing them what they need to fight the
global war on terror and defend our great Nation.
I assure you that the people of the United States can count on
their Air Force Financial Managers, working together with our
colleagues throughout the DOD to provide reliable, timely, and accurate
financial and management information and analysis to enhance
decisionmaking and customer service throughout the Air Force.
As financial managers, we understand that joint operations are not
exclusive to the battlefield. We must remain ready to tackle the ever-
changing budget realities of a fiscally constrained environment and a
vast array of unexpected events, especially those brought on by the
global war on terror, and disasters--manmade or natural--whether at
home or abroad. Public money is truly a public trust and we are
grateful to serve as Air Force stewards.
I would like to conclude today by thanking this committee for your
support during this important period of business transformation. We are
proud to stand by your side in support of our Nation at war.
Senator Akaka. Thank you for your statement, Secretary
Gibson.
Over the years, Mr. Walker has repeatedly told us that the
key to successful business transformation at the DOD is a
strategic planning process that results in a comprehensive,
integrated, and enterprise-wide plan, or set of plans, to help
guide transformation. Section 2222 of title 10, which we
enacted in the NDAA for Fiscal Year 2005, requires that this
strategic plan take the form of a Business Enterprise
Architecture (BEA) and transition plan. Mr. Walker's testimony
today indicates that DOD has begun to implement a BEA and
transition plan, but that--and I quote--``The latest version of
a BEA continues to represent the thin layer of DOD-wide
corporate architectural policies, capabilities, rules, and
standards, and well-defined architecture are not yet--do not
yet exist for the military departments.''
Mr. Walker, in your view, have the military departments
made significant progress over the last year? Are they close to
having the kind of enterprise architecture that they need at
this point?
Mr. Walker. They haven't made nearly as much progress as
the Department has, on an enterprise-wide basis. They need to
accelerate their efforts with regard to component architecture.
Let me clarify, Mr. Chairman, as to when I talk about a
business transformation plan. Clearly, an enterprise
architecture is a key part of that, but there's a lot of other
things dealing with business transformation that go beyond
systems. You deal with issues that deal with human capital, you
deal with issues that deal with contracting, you have issues
that deal with a whole range of issues, other than the
traditional financial management and systems necessary to
generate financial and other management information.
Senator Akaka. Secretary Brinkley, having heard the
statement Mr. Walker just made, do you agree or disagree with
his assessment of this issue?
Mr. Brinkley. I would agree with his assessment, but I want
to qualify it slightly.
The DOD--and, sir, in your reference you mentioned the
first 4 years and the struggle that took place with business
transformation. The absence of DOD having clearly defined and
articulated what was going to be common and corporate and
required Department-wide made it very, very difficult for a
Service, then, looking up at the DOD, to say, ``What do I have
to define?'' So, in many respects, the task of the Services had
been negated by our inability as a department to define a
common enterprise architecture for the DOD. We have done that
over the past 3 years, and that's been very clearly
articulated, which has enabled them to begin to respond and
decide for themselves what is--I'll use my colleague to the
left, here, as an example--What is the corporate Army? Then,
what is not corporate in the Army? They've begun that work in
what needs to be done in common, how do we integrate our
processes between finance, logistics, and acquisition in the
Army? So, this is going to be a multistage process for what is
the largest industrial enterprise in the world, by a factor of
three. That's why I think that they are lagging, but it is
understandable that they would lag.
Regarding the transition plan, we also believe the system
side of it has been well-architected, at the Department level.
Efforts are underway--as he pointed out, we have many high-risk
areas that have remedy plans that are being put in place. Are
they integrated at the Department level? Do we have a unified
business management transformation plan that encompasses more
than systems? We would agree that we have much work remaining
on this. One of the areas Ms. McGrath, under the direction of
Deputy Secretary England, is going to be pursuing is to tie
those together so that there is a clearly articulated
enterprise management transformation strategy worthy of the
Department, given the importance of its mission.
Senator Akaka. At our last hearing on this subject, GAO
told us that the Air Force had fully satisfied only 14 of 31
core framework elements of an enterprise architecture. The Navy
had fully satisfied only 10 of these elements. The Army had
fully satisfied only 10 of these--satisfied only a single core
framework element, just 3 percent of the total.
For the representatives of military departments, do your
respective architecture programs have a committee with
representation from across the Department that is responsible
for approving the architecture, ensure that architecture
products and management processes undergo independent
verification and validation, and ensure that your architecture
products address your current and future environments or
include a sequencing plan to guide the transition between these
two environments? Mr. Brinkley, how soon can we expect the
military departments who have business enterprise architectures
and transition plans in place that comply with the requirements
of section 2222?
Mr. Brinkley. I would defer to my colleagues, in terms of
committing them on time. I will say that each of the military
departments, in addition to the key business defense agencies--
Defense Finance and Accounting Service (DFAS) Defense Logistics
Agency, the Military Health System--do submit, as part of our
transition plan, a contribution--a section, specific to the
Service, that lays out their intent to transition to compliance
with the DOD's business enterprise architecture, as well as
their own architectures and their own process improvement
efforts.
I also want to emphasize that, in many respects, the job
of--again, I'll use my colleague, Mr. Kunkel, here, as an
example, in the Army--of defining an enterprise architecture,
and implementing it and executing it, in all honesty, is, in
many ways, harder than it is to do at the enterprise level,
because the Army has direct operational authority and
operational responsibilities, whereas OSD, in the Department-
wide effort, tends to be a headquarters function, where what
we're talking about is data standards and information and the
ability to access and report and make decisions quickly.
But, beyond that, I would defer to my colleagues to comment
on any commitments to timelines.
Senator Akaka. We will have another round of questions, so
let me ask Senator Thune for his questions.
Senator Thune. Thank you, Mr. Chairman.
Mr. Brinkley--and I direct this to the Services, as well--
but, how does the DOD, in each of the Services, intend to
implement the provisions of the NDAA for Fiscal Year 2008 with
respect to designating the Deputy Secretary of Defense as the
CMO, establish a Deputy CMO, and establishing a CMO within each
of the military Services?
Mr. Brinkley. The Director of Administration and
Management, Honorable Michael Donley, and my office have been
tasked by the Deputy Secretary of Defense to formulate a plan
to address resource reporting, resourcing, as well as a
timeline for implementation for implementing that critical
legislation. We have launched that team. They are working now.
The legislation, I believe, gave the Department 180 days to
respond to Congress with a detailed plan for implementation,
and we will have no problem meeting that deadline for you.
Senator Thune. Anybody else care to comment on that?
Mr. Kunkel. I would just offer that in the Army we look
forward to contributing to that plan. We think it's good
legislation.
Senator Thune. How will the Department and each of the
Services ensure that any actions it takes on that plan, if it's
180-day plan, will maintain momentum after the change of
administrations, next year? That's a concern, obviously. This
committee has been pursuing this subject area for a long time
now, and, I think, through a couple of presidential elections,
at least, and there's always a concern, when there's a change
of administrations, that some of these initiatives lose some of
their momentum.
Mr. Brinkley. I'll comment on a couple of thoughts. We
share the concern. There's nothing we worry about more than to
be somewhere else in 2009 and read about a restart of business
modernization. It's, as has been indicated, not a Republican
nor a Democratic issue, it is an American issue, and critical
to our efforts to support our forces and be accountable to the
taxpayer.
I believe the steps we have taken, and are continuing to
take, to identify career civil-servant leadership at the most
senior level, and to have Secretary England, again, appoint Ms.
McGrath, our appointment of David Fisher, the Director of the
BTA--these are people who are not going away, who are familiar
to your staffs and to this committee and other committees,
which brings me to my last point. I believe that the role of
Congress is instrumental here, in terms of holding a next
administration accountable. The plans that we have published--
our Enterprise Transition Plan, many of these high-risk plans--
they have milestones that go out for months and years into the
future. In a new administration, having them be accountable to
taking that plan and continuing to execute to it and, of
course, they will make changes, and they will adjust, and
they'll recast certain things, but to not allow for Congress
not to allow a complete restart, by holding accountable the
Department's leadership, to maintaining momentum, I believe,
could be a critical element of maintaining continuity. Those
would be my thoughts.
Senator Thune. Do you think, as Mr. Walker suggested, that
your position should be a nonpolitical, completely-sanitized-
of-the-political-process, so to speak, professional person?
Mr. Brinkley. I certainly believe, from a qualifications
perspective, that, in terms of qualifications, a concern one
has with any political appointee is the qualifications of the
individual involved. So, I would argue that, as long as the
individual is highly qualified, and we put a team around that
person who are empowered the way I believe we've empowered some
of our career leaders, again, who we've recruited from
industry, and some who are the best of government--then this
issue of this being a termed appointment may become less
critical. I believe I've read that the average tenure of a
political appointee in government is just over 18 months. So,
how one creates enough tenure in a leadership position in
government in the modern era, to me, is a challenge. Regardless
of whether you give the person a term or not, how do you incent
someone to stay? So, to me, building the structures around
them, and, again, the kind of transparent, accountable plans,
that you can hold the Department accountable to, regardless of
transitions in leadership, I think, may prove to be more
critical than even the issue of whether the position is termed
or not.
Senator Thune. Okay.
Mr. Walker?
Mr. Walker. Senator Thune, I would agree that there are two
aspects. One aspect is statutory qualification requirements. I
would note that they don't exist, and that's something that
Congress may want to consider: having statutory qualification
requirements for the Department-wide CMO and the military-
department CMOs and the deputy CMO, which would be consistent
with making sure you have the right kind of people in there.
The only position that we're talking about making a term
appointment--and it may have to be modified, given what
Congress has done--the only one we were talking about is the
CMO for the Department, not all of these positions.
Senator Thune. Right. No, I understand that.
Mr. Walker. Right. As somebody who actually has a term
appointment, I actually know that it does have an impact on
whether or not you're willing to stay longer than the normal
political appointee. As somebody who has good friends that have
other term appointments, such as the Commissioner of Social
Security, such as the Commissioner of IRS, such as the Director
of the FBI, current and former friends, I know it has an impact
on how long somebody's willing to stay. You can't require
somebody to stay the full term, but I think you could do a lot
better than 18 months.
Senator Thune. Mr. Brinkley, do you believe that each of
the Services could benefit from having a BTA-like office?
Mr. Brinkley. The thing that I think has helped the
Department in creating the BTA is that we had a real missing
piece at the top of the Department, because OSD does not
traditionally have an execution responsibility, yet it was
taking on more and more execution-oriented activity as we tried
to make more and more things common. You had a gap, you had a
missing piece, I would call it, at the top of the pyramid of
the Department's organization structure. So by creating the BTA
and pulling--it's a partner organization to OSD, accountable
for the DOD-wide activity. We filled a gap that existed. What
is less clear to me--and, again, I would defer to my
colleagues, and it may be even be a Service-specific answer--in
the current Services structure--because, under title 10, they
have execution responsibilities at all tiers of their
organizations--it's not clear to me whether that gap exists,
and, therefore, it needs to be filled. That very well may be a
Service-specific answer, there may not be a uniform solution to
that problem.
Senator Thune. Anybody else care to comment on that? [No
response.]
No? Okay. Thank you, Mr. Chairman.
Senator Akaka. Thank you.
In July 2007, GAO reported that the Department of the Army
would be investing approximately $5 billion over the next
several years to develop and implement the General Fund
Enterprise Business System (GFEBS), the Global Combat Support
System-Army, and the Logistics Modernization Program. The GAO
reported that this significant investment was being made
without the benefit of business enterprise architecture,
concept of operations, and effective portfolio management.
Mr. Walker, what, in your view are the likely consequences
of investing large amounts of money into business systems of
this kind without adequate planning? Do you believe that these
problems are limited to the Army, or are they likely to be
common to other military departments?
Mr. Walker. Mr. Chairman, the issue is, in the absence of
having the things that you referred to, it served to
significantly increase the risk of waste and delays and a lack
of success. This is an issue that exists, not just within DOD,
but in many other departments in government. As you undoubtedly
know, there have been at least a couple of circumstances that I
can think of, where, given the amounts involved, Congress has
asked GAO to do periodic reporting. IRS business systems
modernization being one example that I can give.
I've been slipped a note here, saying that the duplication
of functions and the lack of interoperability associated with
legacy systems is the issue that exists across government.
Senator Akaka. Secretary Brinkley, do you agree or disagree
with Mr. Walker's assessment on this issue?
Mr. Brinkley. The issue of interoperability? This is the
one that we're talking about? The issue of--again, as the
Services have been given--and I would use Logistics
Modernization Program, which is one of those that was mentioned
a moment ago, as an example of a program that has confronted
and addressed these issues successfully, that has integrated
the financial and the logistical elements of working-capital-
funded logistics, I think that's an actual model, which
struggled very greatly, and GAO was extremely active in
critiquing, early on. They are working through, today in the
Army, between GFEBS and Global Combat Support System-Army. The
remaining issues, in terms of interoperability--and, again, I
think that goes to the heart of the architecture comment we
made earlier, which is, they are moving in this direction as
quickly as possible, given, now, the corporate-level
requirements have been made clear.
Pete, I don't know if you want to add to that or not.
Mr. Kunkel. I'm delighted to address it.
With respect to interoperability, the Army's leadership has
placed a great deal of emphasis on business systems
transformation. I'll say that the GFEBS is actually compliant
with the most recent version of the Business Enterprise
Architecture. It's compliant with the Standard Financial
Information Standards. With respect to our Business Enterprise
Architecture, which is still under development, we have paid
the most emphasis to the touch points between the domains; that
is, between the logistics and financial domain and the human
resources domain. In fact, the human resources domain is a BTA-
built application that we look forward to using, late this
year.
With regard to systems redundancy, we have a rigorous
portfolio management process, conducted by our CIO-G6, that,
since it began its work, has eliminated 1,500 systems, from
3,200 to 1,700 systems. GFEBS alone eliminates 90 systems,
DIMHRS replaces 66 systems. We're working hard to address these
problems. We take it very seriously.
Senator Akaka. Let me ask the three Service representatives
three questions. Do you have responsibility, within your
department, for the development of a business enterprise
architecture and transition plan? Also, do you have
responsibility for making investment decisions for new business
systems? Do you believe that you can make sound investment
decisions in the absence of a robust enterprise architecture
and transition plan?
Mr. Brook. Mr. Chairman, I do not have that responsibility,
nor do I make investment decisions, but I think the question
that you pose is an excellent one, and that is whether or not,
in the absence of a comprehensive business enterprise
architecture, there is risk involved in investing in either
legacy systems or new systems. There certainly is. That risk
isn't eliminated by enterprise architecture, but it certainly
is reduced.
Although we don't have a business enterprise architecture
specific to Navy, we function inside the business enterprise
architecture that BTA and OSD have constructed. We mitigate
that investment risk as best we can. So we mitigate that risk
by subjecting investments in legacy systems or new systems to a
review and precertification process that involves the
Department's CIO, certification by BTA's investment review
boards, and, eventually, approval by the Defense Business
Systems Management Committee.
So, within that structure, we think we're performing a
responsible review of our investments inside the overall
department's business enterprise architecture.
Senator Akaka. Secretary Gibson?
Mr. Gibson. Senator, in this case, with regard to
governance, management, and oversight, we feel like we've
worked hard and created a very good news story here. We have
instituted a thorough, formal, and codified corporate and
governance structure, including enterprise architecture, in the
Air Force, which is supported by a dedicated and consistent
senior leadership guidance. We have a tiered structure, which
cascades down from the senior leadership level to the
functional levels. It provides checks and balances for
investments, as well as evaluating business investments for
risk, value, strategic alignment, and integration across the
Air Force.
Our structure mirrors DOD's, in a great way, beginning with
the functional domains, feeding up to a cross-functional
working group, which is supported by the CIO. All of this is
overseen by the Secretary. We do have IRBs at the local level.
This effort is consistently evolving, and, coincidentally,
in the spring of 2007, the Air Force CIO reorganized, merging
several disparate review organizations under a single
authority. We feel like the results of our management and
governance efforts are an Air Force with an integrated,
efficient, and effective governance and management of its IT
systems, yielding fewer IT systems, lower costs, and ultimately
providing better support to the Air Force and the Department.
Senator Akaka. Before I call on Mr. Walker for your
comment, let me call on Secretary Kunkel for your response.
Mr. Kunkel. I'll just respond briefly, that we do, indeed,
use the investment review board process. It's our measured
judgment that the best way to see to it that we conform to DOD
standards and governance is, indeed, to submit our business
system modernization and development projects through the DOD
Investment Review Board (IRB), as envisioned by the
legislation. However, I would like to just mention that our
business enterprise architecture is aligned to the DOD
federated approach. We have a three-tiered readiness structure,
where systems are aggregated into domains, and the domains have
to create their own enterprise architecture and transition
plan. That work is then overseen by the CIO-G6 in that
portfolio management process I mentioned before, where--with
the elimination of 1,500 systems. In turn, that process is
overseen by the Deputy Under Secretary of the Army, who is a
direct-report to the Executive Office of the Headquarters of
the Army. This Deputy Under Secretary is the Army's
representative on the Defense Business Systems Management
Committee. We leverage that process across the Army, and serve
it up to DOD. We're tightly coupled with DOD. As you've
mentioned, we do have a lot of programs underway, and they are
important ones.
So, the answer is yes, we do use the IRB process, but we
use DOD's also.
Senator Akaka. Thank you.
Mr. Walker, any further comment?
Mr. Walker. Thank you, Mr. Chairman.
Two things. One, I would agree with Mr. Brinkley that there
were certain practical restrictions imposed on the military
departments, unless and until the OSD defined the enterprise-
wide architecture. Second, to the extent that the military
departments follow the enterprise architecture, that serves to
reduce the related risk. Third, the report that you referred
to, the GAO report on DOD business transformation, of July
2007, we made five recommendations, and the Department
concurred with all five. That's very unusual, to get a concur
on five out of five, so I assume that they're moving to
implement.
Senator Akaka. Thank you very much.
Senator Thune.
Senator Thune. Thank you, Mr. Chairman.
I'm going to direct this to Secretary Gibson. Previous work
that's been done by GAO, the Air Force has been credited with
having progressed more than the other military departments in
building out its enterprise architecture. You've touched a
little bit on this. But, I would first direct the question to
Mr. Walker. Has the Air Force actually made more marked
progress, or is that a matter of definitions?
Mr. Walker. They've made more relative progress than the
other military departments, yes.
Senator Thune. If that progress has been made--and this is
the question I would direct to Secretary Gibson--what do you
attribute that to the success that the Air Force has
experienced?
Mr. Gibson. Senator, I would say that the progress comes
from several things. One is, you have a very receptive audience
that wants to improve. I think you have leadership that
understands the issues and emphasizes those, monitors those,
measures those, and holds people accountable to that. I think
what we've done is, we have taken something and structured it
in a tiered environment so that we have accountability at all
levels, and that we have woven this into our management
structure and the fabric of how we do business.
Senator Thune. I want to come back to this issue of
interoperability for a minute, because bureaucracies tend to
resist change, and, the bigger the bureaucracy, the harder and
the more I think they resist. The story in my State of South
Dakota about the employee at the Department of Agriculture who
was crying, and somebody asked him why, and he said, ``Because
my farmer died.'' There is a tendency, I think, for
bureaucracies to continue to get larger, and there are certain
territorial issues that are involved as you implement systems
and technology that will replace some of the existing ways of
doing things. The reason I raise this question, because it's
with regard to what the Air Force is doing at Ellsworth and
whether or not--if there were interoperability between the
Services, why could there not be one financial services center
that serves all the Services? If a record can be pulled up--and
the analogy I guess I would use, in terms of healthcare, is--
one of the things we've been trying to do is get electronic
medical records, so that someone can go visit a hospital in
Bakersfield, CA, who might live in Rapid City, SD, but they can
access a medical record so that they know what the history of
that particular patient has been. Why can't we know that the
universe of people who serve in the military? We all have the
same goal in mind. If there were interoperable systems between
the Services, would it not make a lot of sense to begin to
consolidate some of those services and eliminate what I would
perceive to be a considerable amount of redundancy in a world
that's gone largely paperless, at least in the private sector?
Anybody care to react to that ranting?
Mr. Walker. There's a lot of opportunity to improve
economy, efficiency, and effectiveness by leveraging
technology, by moving to a shared-services-oriented approach,
and taking other steps that the private sector has done for
many, many years. But, it is countercultural, and that is a
major challenge.
Senator Thune. Mr. Brinkley?
Mr. Brinkley. The only thing I would add is, Director Zack
Gaddy of the DFAS, sir, if he were here today, I think I'm
echoing what he would say, and that is--and I'll draw a broader
observation--under the most recent base reduction and closure
effort, there is a consolidation of DFAS finance and accounting
centers, and the effect that that's having is, it's stressing
the system and accelerating the exact system consolidation
we're talking about. One of the things that's a challenge in
government--in a company, you have a quarterly profit that
motivates change, and that's one of the things you use to help
overcome barriers to--resistance to change. In government, we
need these artificial inducements, sometimes. So, base
reduction serves as an inducement to stress the system and
force it to adapt quicker.
I would argue that our joint warfight that we're engaged in
has helped motivate a more rapid adoption of materiel data
standards. The need for instant access to our personnel has
helped motivate the agreement and the more rapid adoption of
the DIMHRS.
You mentioned healthcare; obviously, military health system
and the stress it's been under has motivated these changes.
So, I would say, in the financial arena, Base Realignment
and Closure is serving to help do that, in some respects, and I
think that's part of the vision Zack has for DFAS, is to
harvest the value out of system consolidation to help
streamline our financial accounting practices.
Senator Thune. Bottom line is, providing the best service
possible to the warfighter at the lowest cost to the taxpayer.
I would suspect that there are times when a soldier or a member
of the military needs to talk to somebody face-to-face and
needs to have an access point where they can go and ask
questions. But, a lot of these sorts of services are now
handled, if there is a portal that can be offered through some
sort of technology. It just seems like there's a tremendous
amount of savings that could be achieved there, and a lessening
of bureaucracy and redundancy. It requires a willingness on the
part of the institutions to develop these--this
interoperability that, culturally, I know, is hard to
implement.
What actions are the Services taking to reshape some of
those cultural barriers to change?
Mr. Kunkel. I can say, for the Army--you mentioned a
servicemember--in the case of the Army, a soldier--looking for
assistance on a financial topic. The Army will be the first
Service to implement the DIMHRS integrated personnel and
payroll system. That will be a quantum leap for the Army. It's
a DOD-built system. All three Services are going to use DIMHRS.
You mentioned having a person to answer questions that--
we're taking a look, right now, what, for the Army, that means.
We have defense military pay offices that are on our camps,
posts, and stations already, and--we're current--right now
we're looking at how those can be leveraged for the post-DIMHRS
environment.
So, I guess I would say, DIMHRS is just that, it's not an
organization, but it's a system that is going to be used by all
the Services, starting with the Army.
Senator Thune. This would be, for Mr. Walker and Mr.
Brinkley--but the time and commitment and the effort that
you've made to these types of improvements have not gone
unnoticed, and, I think, as was noted Senator Akaka and I both,
at the beginning, the committee thanks you for the progress
that has been made. I guess the question I would have is, as we
move into what will be a new administration next year, this is,
of course, the second year of this congressional session, and,
in an election year, arguably, we'll see what happens and gets
done around here. But, what suggestions would you have for us,
in terms of things that we might be able to focus on, or things
that we should be doing? Any ideas about possible legislation
that we might be pursuing to help accomplish the ends that I
think we all want to reach and to serve, here?
Mr. Walker. For any enterprise to be successful, you need
to focus on planning, people, process, technology, and the
environment, which includes incentive, transparency, and
accountability mechanisms. For transition, the first four are
particularly important--the plan and the people and the
processes and controls.
With regard to something I mentioned earlier, and that I
think Mr. Brinkley also touched on, the CMO and Deputy CMO
position at the Department-wide basis and the CMO positions at
the military department level do not currently have statutory
qualification requirements. I think that's something that you
ought to consider. I think it's a separate and distinct matter
as to whether or not you want to consider a term appointment
for the CMO. I still believe, for a variety of reasons, that
that makes sense, but I also acknowledge that, given where we
are in this administration, and that that's not likely to
happen during this Congress. But, I think the other ones, if
they could happen--in other words, statutory qualification
requirements for these key positions will increase the
likelihood that we'll get the right kind of people in the next
administration, no matter which administration that might be.
Senator Thune. Thank you all again very much.
Thank you, Mr. Chairman.
Senator Akaka. Thank you, Senator Thune.
In the area of management of business systems acquisition,
GAO has reported that the formidable challenge facing the
Department is ensuring that thousands of DOD business system
programs and projects actually employ acquisition management
rigor and discipline. GAO's work in reviewing business systems,
such as DIMHRS, the Naval Tactical Command Support System,
Transportation Coordinators Automated Information for Movement
System II, shows that implementation of these institutional
approaches on business system modernization programs and
projects is uneven, at best.
For the three Services' representatives, what steps are you
taking to ensure that the institutional management capabilities
and controls are reflected in how each and every business
system investment is managed?
Mr. Kunkel. I would just reiterate the three-tiered
accountability process. Each of the Army's domains has its own
enterprise architecture and transition plan, and then, above
the domains is the portfolio management process, managed by the
CIO-G6. They then report up to the Deputy Under Secretary of
the Army, who sits on the Defense Business Systems Management
Committee.
We are working very hard to get our investments built
quickly. We're also, of course, a great deal of emphasis on our
warfighter business mission area. That process is how the Army
vets its business systems investments and modernization
programs.
Mr. Brook. Senator, in the Navy, the investment decisions
for both legacy systems and new systems are vetted through an
investment review process that moves up through the Department
of the Navy CIO, eventually to the IRBs and the Defense
Business Systems Management Committee. It's also my
understanding that the timelines and milestones, that you
referred to, that apply to the acquisition programs, also apply
to major systems acquisitions inside the Navy.
Mr. Gibson. Senator, we have in our functional domains, we
manage our systems, and that all reports up through the IRBs up
to the senior working group, led by the CIO. We are constantly
tracking the systems milestones, and review those, and provide
the working group members reporting on that. This gives them
insight into impacts that might affect delivery, capabilities,
costs, and schedule delays. We're using a lot of the earned-
value management principles, as we look at this, to review
those systems, so that we can stay on top of them and deal with
them as quickly as possible.
Senator Akaka. Secretary Brook, with respect to the Navy's
ERP program, in particular, the life-cycle cost estimate went
from $1.6 billion in 2004 to $2 billion in 2007, and its full
operational capability schedule increased by 2 years, from 2011
to 2013. My question to you is, what steps are you taking to
mitigate further delays and cost increases?
Mr. Brook. Senator, the implementation of ERP in the Navy
is underway. Naval Air Systems Command went live on December
21, and we are operating there now--effectively, in four of the
five mission-critical areas. The fifth area is still not fully
satisfactorily functioning for us. We will have to invest, I
think, additional dollars, short-term, to make sure that we can
overcome the short-term difficulties that we're having in one
of our mission-critical areas.
Over the long-term, however, we have plans to roll out the
ERP to successive systems commands. I think that the lessons
that we have been able to learn, from both the pilot projects
that preceded the current ERP and from what we're learning at
Naval Air Systems Command, will allow us to implement the
successive rollout of ERP with better controls for both cost
and the quality of the implementation. It's a tremendous
challenge, however. No corporation in America has undertaken an
ERP of the size and complexity that we're undertaking, so
there's a great deal to be learned along the way.
Senator Akaka. Three years ago, the Secretary of Defense
established the BTA to ensure an organizational focus for
business transformation efforts within the Department. The
military departments do not have similar organizations.
Instead, it appears that new business systems continue to be
developed through stovepiped organizations which lack the
breadth and authority needed to address the entire job.
Mr. Walker, do you believe that the military departments
would benefit from having a single organization, like the BTA,
to serve as the focus for their business transformation
efforts?
Mr. Walker. Mr. Chairman, I basically agree with what Mr.
Brinkley said, and that is, taking the BTA approach at the
enterprise-wide level was essential, because the OSD really is
not an operational entity, it's not used to having to be
responsible for those types of activities, so, it was
essential. On the other hand, the military departments do have
to engage in those type of activities on an ongoing basis, and
I think it's really up to them as to what they think the most
efficient and effective approach is in order to achieve the
desired outcomes.
Senator Akaka. Thank you for that. Over the last several
years, this subcommittee has spent a lot of time working to
address concerns about the DOD acquisition workforce, but top
officials at the DOD have told us that there are critical gaps
in the Department's financial management workforce, as well.
Mr. Walker and Secretary Brinkley, do you believe that the
Department currently has the right number of financial
management experts with the right skills to accomplish its
business transformation mission?
Mr. Walker?
Mr. Walker. Mr. Chairman, GAO has not conducted a study
that focuses solely on the issue of the adequacy of the number
and the skills and knowledge base of DOD's financial management
team, so I really wouldn't be in a position to give you an
opinion on that, absent the work.
Senator Akaka. Secretary Brinkley?
Mr. Brinkley. I couldn't comment on whether we have the
right number of financial management professionals. I would
defer to my colleagues in the Comptroller's office for that
answer. We could take that for the record for you.
[The information referred to follows:]
The Department of Defense (DOD) recognizes the need to have a
qualified financial management workforce. Today, over 50 percent of the
DOD Comptroller staff has at least one professional certification. The
Department is introducing innovative strategies to maintain and develop
gifted employees. For example, Defense Finance and Accounting Service's
Leaders-in-Motion program prepares 280 Defense financial managers every
year with technical and leadership training. Furthermore, the
Department is working to achieve financial management outcomes by
aligning National Security Personnel System Individual Development
Plans to the Department's strategy. Finally, the Department is
investing in the workforce by initiating the Chief Financial Officer
Academy at the National Defense University which will provide
certifications and training to DOD and civilian agency financial
management workforce to ensure that they have the skills to resolve
existing and future financial management challenges.
Mr. Brinkley. Regarding the challenge, overall, with our
workforce, I would certainly agree that we need to continually
infuse the best and brightest talent into government. I would
make the point that that is a very hard thing to do in this
economy. I'll offer a point of view. What we've tried to focus
on is speed to deliver. Young, talented systems people want to
be able to move and work quickly to achieve an objective. Many
of our programs in government take many years, and that doesn't
motivate someone, a young engineer, a young systems analyst who
can go and work in the private sector and, in a year or 2
years, the examples abound of how quickly the technology cycle
moves in the private sector. So, our ability to accelerate the
ability for us to deliver and field technology doesn't just
affect our ability to deliver capability to the warfighter, but
it directly affects our ability to recruit the best and
brightest talent into government, because the best and
brightest talent wants to be able to work a high, rapid pace,
to work with cutting-edge technology; and to try to recruit
someone in to work on a system that's going to take 5 years to
field does not motivate talent to come and join the government.
So, I think the human-capital challenge is directly tied to
many of our other challenges with acquisition, which is, how do
we go faster? How we maintain, or get closer to, the private
sector's ability to field technologies quickly? That would be
my comment.
Senator Akaka. Secretary Brinkley, I understand that the
BTA has used the authority we gave you to hire highly qualified
experts (HQEs), to bring in skilled professionals to assist in
the business transformation effort. In your view, should the
military departments be taking similar steps to help in this
new expertise?
Mr. Brinkley. Yes, that's been an absolutely critical
element for the BTA. We've recruited dozens of people under
that authority into the BTA, that had the HQE authority, which
provides up to a 5-year term at senior-level paygrades for
talent to come into government and make a contribution. I also
know that my colleagues in the Services are beginning to use--
and have, in many cases, used that authority, and we're seeing
it accelerate, in terms of its adoption. There were some work-
rule definition and responsibility-definition things that had
to be worked through in the personnel management process, but
those have been resolved, and I do believe--and I'd ask my
colleagues to comment--but, I do believe we are seeing those
type of resources begin to be infused into the Services.
Senator Akaka. Yes. I'd like to have comments from the
representatives on this, whether you agree, disagree, or your
thoughts on it.
Mr. Kunkel. Working for the Deputy Under Secretary of the
Army is a staff of systems experts, architecture experts, and
governance experts. With respect to the Financial Management
workforce, the push is to automate. So, where we're staffing up
is, when we're building these automated systems. These
architects are working hard to see to it that the systems are
integrated with each other, and that the touch points are
correct. While we're building the systems, we're seeing to it
that our processes conform to the best business practices, but
also are informed by Army subject-matter experts. So, that's
our investment in human capital as we build these automated
systems, which will improve timely and accurate results.
Senator Akaka. Secretary Brook?
Mr. Brook. Mr. Chairman, we, also, are using HQEs. With
regard to the workforce, it's an interesting issue. In addition
to the technology side of it, which Mr. Kunkel mentioned, there
is the question of professional growth and professional
development. Of course, we need to talk about this in the
context of both civilian financial management staff and
military financial managers. The challenges in some places are
the same, in some places are different. With the military
members, there is the challenge to balance the development of
their warfighting capabilities and their non-warfighting
capabilities. We create a very crowded career path for our
military members, and it makes it difficult, sometimes, for
them to develop the building blocks in financial management
that are needed for senior positions.
In the civilian area, we have issues of career growth and
model career paths young people coming into financial
management can look at and see how they can progress through
their careers. I have commissioned an informal study of this
inside the Navy to see where the gaps are and where we need to
apply some effort and resources.
Overarching all of that is providing the adequate education
and training, including graduate education, for both civilians
and military members so that they have the appropriate skills
to match the assignments that we put them in.
Senator Akaka. Secretary Gibson?
Mr. Gibson. Senator, the Air Force greatly appreciates the
authority Congress has given us to hire outside assistance and
continues to expand our use of the HQEs. As a status update, we
have hired, to date, 12 HQEs, but not all of them have been in
business systems modernization. Our communities report back
that there are no real obstacles to hiring and using the HQEs,
but we would characterize that we're in the early stages of
deployment of this effort.
Senator Akaka. I talked about high risk, and mentioned it
in regard to Mr. Walker.
Mr. Walker, I'm concerned that, despite legislation we have
enacted in recent years, the Department still lacks the
comprehensive human-capital plan to guide the development of
its civilian workforce. In my view, this deficiency is so
serious that GAO should consider adding it to your list of
high-risk management concerns. What is your view on this issue?
Mr. Walker. I share your concern with the absence of that
plan, but I would also remind the chairman that we have the
lack of adequate strategic human capital planning and
management as a governmentwide high risk issue. When I end up
speaking about DOD, I don't just talk about the ones that
relate specifically to DOD. DOD also shares several--in fact,
all--of the governmentwide, high-risk areas, of which human
capital is one.
Senator Akaka. I want to thank our witnesses today for your
statements and your responses. It will be helpful to our
committee, and we look forward to continuing to work with you
to achieve expertise in these areas of business transformation
and financial management of DOD.
With that, the hearing is adjourned.
[Questions for the record with answers supplied follow:]
Questions Submitted by Senator Daniel K. Akaka
enterprise architecture program
1. Senator Akaka. Secretary Kunkel, section 2222 of title 10,
U.S.C., requires that the Secretary of Defense develop a comprehensive
business enterprise architecture and transition plan to guide the
development of its business systems and processes. The Department has
chosen to implement this requirement through a ``federated'' approach,
in which the Business Transformation Agency (BTA) has developed the top
level architecture, while leaving it to the military departments to
fill in most of the detail. The Government Accountability Office (GAO)
has laid out a set or core framework elements that should be met by an
enterprise architecture program. Three of the key elements are: (1) a
committee with representation from across the Department that is
responsible for approving the architecture; (2) a process for ensuring
that architecture products and management processes undergo independent
verification and validation; and (3) a process for ensuring that
architecture products address the Department's current and future
environments and include a sequencing plan to guide the transition
between these two environments. Does the Army's enterprise architecture
program meet the three requirements described above? If not, when can
we expect the Army to meet these requirements?
Mr. Kunkel. The Army's enterprise architecture program currently
meets, or will soon meet, all three of these requirements.
Requirement 1: A committee with representation from across the
Department that is responsible for approving the architecture. The Army
has made significant progress in implementing its accountability
requirements to support business systems management and modernization
efforts. The Deputy Under Secretary of the Army (DUSA) is the Army's
representative to the Defense Business Systems Management Council
(DBSMC). After the Investment Review Board (IRB) approval, the DUSA
represents the Army's modernization requirements to the DBSMC for
approval and authorization to incur obligations supporting
modernization efforts. In November 2007, the DUSA established the
Enterprise Resource Planning (ERP) Executive Steering Committee to
guide the development of the Army's ERP Integration Strategy and the
coordination of the preparation of two Army ERPs for a joint Milestone
B decision.
The duties of the ERP Executive Steering Committee have been
subsumed by the now established Business Mission Area Executive Board
(BMA EB), which is responsible for, among other things, guiding the
development of and approving the design for the Army Business
Enterprise Architecture (ABEA). The BMA EB is chaired by the DUSA. It
includes the GO/SES Leads of the Army BMA Domains, established in
conformance with the Department of Defense's (DOD) portfolio management
structure. The five Domains and their Leads are: Acquisition, ASA(ALT);
Financial Management, ASA(FM&C); Human Capital Management, ASA(M&RA);
Logistics (G-4), Installations and Environment, (ACSIM), the Army's
Chief Information Officer/G-6; and the Program Executive Office-
Enterprise Information Systems (PEO-EIS).
The domain owners are responsible for developing transition plans,
domain architectures, and ensuring all domain business systems are
categorized and included in the Army-wide business systems portfolio.
The domain owners comprise the next level of accountability.
Each domain owner is accountable for ensuring that all business
system investments comply with 10 U.S.C. Sec. 2222. Specifically, each
domain owner must submit investment requests through the Business
Mission Area to the Army's Chief Information Officer (CIO) for review
and approval. The Army's CIO is the Pre-certification Authority (PCA)
for systems modernization investments. In accordance with 10 U.S.C.
Sec. 2222, each system over $1 million in modernization funding is
certified for compliance with the DOD Business Enterprise Architecture
(BEA) before being submitted by the PCA to the IRB.
This approach has contributed significantly to improving business
systems modernization efforts by ensuring investments are based on a
thorough review of requirements. Accountability is assigned at each
successive layer, and ensures appropriate approvals are obtained for
modernization efforts.
Requirement 2: A process for ensuring that architecture products
and management processes undergo independent verification and
validation. The Army's architecture products and management processes
are aligned with like processes within the Department's BTA. A primary
method of assessment for very large programs is provided by the
Enterprise Risk Assessment Model (ERAM) process conducted by the BTA.
The ERAM independently assesses enterprise risk in a variety of areas
and reports findings and recommendations to the BTA and governing IRB.
The Army, IRB, and BTA jointly develop mitigation strategies to address
the risk identified.
In addition, the Army has engaged an Independent Verification and
Validation (IV&V) contractor to provide periodic reviews of the
management processes and products of ERP systems to ensure integration
among these programs. As the ABEA development matures, the Army will
establish IV&V reviews to ensure alignment with Federal and DOD
architecture requirements.
Requirement 3: A process for ensuring that architecture products
address the Department's current and future environments and include a
sequencing plan to guide the transition between these two environments.
The Army, in collaboration with the BTA, developed a federated approach
for ensuring architecture products and system developments meet the
Department's business transformation needs. The federated approach
employs a standard architectural construct to align the Army's four
major Enterprise Resourcing Planning (ERP) transformational programs.
The four programs include the Defense Integrated Military Human
Resource System (DIMHRS) supporting human resource management, the
Global Combat Support System-Army (GCSS-A) supporting field/tactical
requirements, the General Funds Enterprise Business System (GFEBS)
providing the Army's financial management backbone, and the Logistics
Modernization Program (LMP) supporting material and acquisition
management. Financial capabilities will be implemented in each ERP
guided by the GFEBS financial and cost management templates. Linkages
between the four ERP programs will be accomplished through a single
enterprise service bus. The solution will employ a business warehouse
for data consolidation and analytical capabilities. The DUSA is
responsible for enterprise governance to ensure architectural
alignment. The federated construct provides a coherent, executable plan
guiding the Army's enterprise transition efforts. Using this construct
and the existing domain architectures, the Army, through its BMA EB, as
chaired by the DUSA, and in collaboration with the BTA, will continue
to extend the ABEA to address new challenges in the Business Mission
Area as they arise.
2. Senator Akaka. Secretary Brook, does the Navy's enterprise
architecture program meet the three requirements described in question
#1? If not, when can we expect the Navy to meet these requirements?
Mr. Brook. The Department of the Navy is following a federated
approach in implementing the Navy's Enterprise Architecture (EA),
employing the DOD Global information Grid (GIG) Federation Strategy
(signed out in August 2007) and the BMA (Business Mission Area)
Federation Road Map (released October 25, 2007). The Navy followed a
``look before you jump approach'' with federation, and waiting for
definitive DOD guidance contributed to the Navy's receiving GAO review
scores of ``Partial'' in several areas. Before creating Navy federation
policy, guidance, and processes, the Navy, in conjunction with Office
of the Secretary of Defense Networks and Information Integration,
conducted a federation pilot to determine:
How will the Navy EA be federated?
Is there a repeatable process that can be used and
measured?
How will the federation be governed?
This pilot was recently completed, and we are expecting a formal
report with recommendations and results within the next month.
With respect to the three key elements:
1. ``A committee with representation from across the
department that is responsible for approving the
architecture'': The Navy Information Executive Committee (IEC)
oversees enterprise architecture.
2. ``A process for ensuring that architecture products and
management processes undergo independent verification and
validation'': This Navy process is currently in development
based on the principle of tiered accountability. It will be
published in fall 2008 and an initial implementation will occur
shortly thereafter.
3. ``A process for ensuring that architecture products
address the Department's current and future environments and
include a sequencing plan to guide the transition between these
two environments'': The necessary processes are in place and
the governance to execute this policy is currently being
developed. It will align with the Department's EA programs and
initiatives. The policy will establish EA metrics for quality,
reporting mechanisms, and a governance structure to oversee EA
development, approval, maintenance, and change management. The
policy will be integrated with our portfolio management process
that will require information systems investments to conform to
Navy and DOD architectures.
Additionally, the Functional Area Architectures (FAA) will describe
the current, or ``as is'' environment, as well as our target, or ``to
be'' state. The Navy IEC and Enterprise Architecture Coordination Board
(EACB) will oversee FAA development to maintain alignment within the
Department and with the DOD Enterprise Architecture. Functional Area
transition plans, also under development, will supplement the FAA and
aid in achieving the target state.
The EA work that we have completed, taken together with the
activities we have underway, will give the Navy a mature EA to guide
and constrain our information technology investments and ensure that
our business systems provide decision makers with timely, accurate, and
reliable information.
3. Senator Akaka. Secretary Gibson, does the Air Force's enterprise
architecture program meet the three requirements described in question
#1? If not, when can we expect the Air Force to meet these
requirements?
Mr. Gibson. The Air Force enterprise architecture program currently
meets two of the three requirements described in your question
(requirements 1 and 3). We expect to meet the third by the end of this
fiscal year. This is based both on our own assessment and the
preliminary results of the recent GAO assessment of the maturity of the
Army, Navy, and Air Force enterprise architectures that will be
published this coming May.
We have a governance committee with representation from across the
Department, called the Senior Working Group (SWG) that is acting under
the authority of the Secretary of the Air Force, and in support of the
Air Force CIO/PCA. The SWG is responsible for directing, overseeing,
and approving the business segment of our enterprise architecture. We
have a process for ensuring and have, in fact, published architecture
products that address the Department's current and future business
environments and a sequencing plan to guide the transition between
these two environments. Our enterprise architecture products have
undergone verification and validation, but not by an independent entity
as recommended by the GAO, however, our plans are to meet the objective
of independent verification and validation by the end of 2008. We have
published policy and guidance to address the GAO recommendation and are
in the process of implementing that guidance.
[Whereupon, at 4:09 p.m., the subcommittee adjourned.]