a

GAO

United States General Accounting Office

Report to Congressional Requesters

May 2004 DOD BUSINESS 

SYSTEMS 

MODERNIZATION

Billions Continue to 

Be Invested with 

Inadequate 

Management 

Oversight and 

Accountability

GAO-04-615
www.gao.gov/cgi-bin/getrpt?GAO-04-615. 

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Gregory Kutz, 

(202) 512-9505 (kutzg@gao.gov) or Keith 

Rhodes, (202) 512-6412 (rhodesk@gao.gov). 

 Highlights of GAO-04-615, a report to 

 congressional requesters 

May 2004

DOD BUSINESS SYSTEMS 

MODERNIZATION 

Billions Continue to Be Invested with 

Inadequate Management Oversight and 

Accountability 

DOD requested approximately $19 billion for fiscal year 2004 to operate, 

maintain, and modernize its reported 2,274 business systems. This 

stovepiped and duplicative systems environment evolved over time as DOD 

components—each with its own system funding—developed narrowly 

focused, parochial solutions to their business problems. 

DOD’s Fiscal Year 2004 Business System Budget Request 

As a result of this uncontrolled spending, DOD reported over 200 inventory 

systems and 450 personnel systems. DOD’s fundamentally flawed business 

systems affect mission effectiveness and can contribute to the fraud, waste, 

and abuse that GAO continues to identify. Further, the number of business 

systems is likely understated in part because DOD does not have a central 

systems repository or a standard business system definition. 

DOD does not have an effective management structure for controlling 

business systems investments and the business domains’ roles and 

responsibilities have not been defined. Further, DOD does not have 

reasonable assurance that it is in compliance with the National Defense 

Authorization Act for Fiscal Year 2003, which requires the DOD Comptroller 

to determine that system improvements exceeding $1 million meet the 

criteria specified in the act. Based on limited information provided by DOD, 

system improvements with at least $479 million of obligations over 

$1 million were not reviewed by the DOD Comptroller. 

GAO’s two case studies are examples of DOD spending hundreds of millions 

on business systems that will not result in corporate solutions to its longstanding inventory and related financial management problems. While these 

efforts should provide some improvement to the Defense Logistics Agency’s 

and the Army’s business operations, implementation problems have resulted 

in schedule slippages, cost increases, and critical capabilities not being 

delivered. These issues can be attributed, in part, to the lack of disciplined 

processes in the areas of requirements management and testing. If not 

corrected, the problems will result in two more costly, nonintegrated 

systems that only marginally improve DOD business operations and further 

impede DOD’s transformation as envisioned by the Secretary of Defense. 

Despite its significant investment in 

business systems, the Department 

of Defense (DOD) continues to 

have long-standing financial and 

inventory management problems 

that prevent it from producing 

reliable and timely information for 

making decisions and for 

accurately reporting on its billions 

of dollars of inventory. GAO was 

asked to (1) identify DOD’s fiscal 

year 2004 estimated funding for its 

business systems, (2) determine if 

DOD has effective control and 

accountability over its business 

systems investments, and 

(3) determine whether selected 

business systems will help resolve 

some of DOD’s long-standing 

problems and whether they are 

being effectively managed. 

GAO makes four recommendations 

to DOD, including the following: 

(1) develop a standard business 

system definition and system 

repository and (2) have reasonable 

assurance that all weaknesses 

associated with the two case study 

systems—BSM and LMP—have 

been resolved prior to further 

deployments. GAO also proposes 

four matters for congressional 

consideration, including the 

following: establish management 

control, accountability, and 

oversight of business system 

funding with DOD’s functional 

areas—referred to as domains. 

DOD agreed with GAO’s four 

recommendations to DOD, but 

disagreed with two of the matters 

for congressional consideration. 
Page i GAO-04-615 DOD Business Systems

Contents

Letter 1

Results in Brief 3

Background 8

Fiscal Year 2004 Budget for DOD’s Stovepiped, Duplicative Business 

Systems Is Nearly $19 Billion 15

DOD Continues to Have Ineffective Control and Accountability over 

Business System Investments 23

BSM and LMP May Have Difficulty Achieving Cost, Schedule, and 

Operational Goals 34

Conclusions 62

Matters for Congressional Consideration 62

Recommendations for Executive Action 63

Agency Comments and Our Evaluation 64

Appendixes

Appendix I: Scope and Methodology 68

Appendix II: Comments from the Department of Defense 71

Appendix III: DOD Business Systems Obligations in Excess of $1 Million 

Approved by the DOD Comptroller 76

Appendix IV: DOD Business Systems Obligations in Excess of $1 Million 

for Modernizations Not Submitted to the DOD 

Comptroller 77

Appendix V: GAO Contacts and Staff Acknowledgments 79

GAO Contacts 79

Acknowledgments 79

Tables Table 1: DOD Fiscal Year 2004 IT Budget Request for Business 

Systems by DOD Component 16

Table 2: Reported DOD Business Systems by Domain and 

Functional Area 18

Table 3: DOD Budget Request for Business Systems Modernization 

That May Exceed the $1 Million Threshold 28

Table 4: System Improvements Not Submitted to the DOD 

Comptroller for the Mandated Review 30

Figures Figure 1: Distribution of DOD’s Nearly $28 Billion IT Budget 

Request (Dollars in Billions) 15

Figure 2: BSM Required System Interfaces 39
Contents

Page ii GAO-04-615 DOD Business Systems

Figure 3: Examples of LMP Required System Interfaces 40

Figure 4: BSM Schedule Slippages and Cost Increases 45

Figure 5: LMP Schedule Slippages and Cost Increases 47

Figure 6: Relationship between Requirements Development and 

Testing 53

Abbreviations

AMC Army Materiel Command

BDO Battle Dress Overgarment

BEA Business Enterprise Architecture

BMMP Business Management Modernization Program

BMSI Business Management and Systems Integration

BSM Business Systems Modernization

CECOM Communications and Electronics Command

CFO Chief Financial Officer

CIO Chief Information Officer

COTS commercial-off-the-shelf

DFAS Defense Finance and Accounting Service

DISA Defense Information Systems Agency

DJAS Defense Joint Accounting System

DLA Defense Logistics Agency

DOD Department of Defense

DPPS Defense Procurement Payment System

DSDS Defense Standard Disbursing System

ERP Enterprise Resource Planning

FFMIA Federal Financial Management Improvement Act

FOC Full Operational Capability

GAO General Accounting Office

GCSS – A Global Combat Support System – Army 

IDE Integrated Data Environment

IEEE Institute of Electrical and Electronics Engineers

IFS Integrated Facilities System

IG Inspector General

IT information technology

ITMA Information Technology Management Application

JCALS Joint Computer Aided Acquisition and Logistics Support

JFMIP Joint Financial Management Improvement Program
Contents

Page iii GAO-04-615 DOD Business Systems

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. It may be reproduced and distributed in its entirety without further 

permission from GAO. However, because this work may contain copyrighted images or 

other material, permission from the copyright holder may be necessary if you wish to 

reproduce this material separately.

JSLIST Joint Service Lightweight Integrated Suit Technology

LMP Logistics Modernization Program

MOCAS Mechanization of Contract Administration Services

OMB Office of Management and Budget

PLM+ Product Lifecycle Management Plus

SAMMS Standard Automated Materiel Management System

SGL U.S. Government Standard General Ledger

SPS Standard Procurement System

WORCS Work Ordering and Reporting Communications Systems
Page 1 GAO-04-615 DOD Business Systems

United States General Accounting Office

Washington, D.C. 20548

A

May 27, 2004 Letr

The Honorable Christopher H. Shays

Chairman

Subcommittee on National Security, Emerging Threats,

and International Relations

Committee on Government Reform

House of Representatives

The Honorable Adam H. Putnam

Chairman

Subcommittee on Technology, Information Policy,

Intergovernmental Relations and the Census

Committee on Government Reform

House of Representatives

The Honorable Todd R. Platts

Chairman

Subcommittee on Government Efficiency

and Financial Management

Committee on Government Reform

House of Representatives

The Department of Defense (DOD) spends billions of dollars annually to 

operate, maintain, and modernize its business systems.1

 As we have 

reported for years, DOD does not have the ability to produce accurate, 

reliable, and timely information to make sound decisions and to accurately 

report on its billions of dollars of inventory and other assets. In addition, 

the department’s stovepiped, duplicative systems contribute to its 

vulnerability to fraud, waste, and abuse. Such problems led us in 1990 to 

put DOD inventory management on our list of high-risk areas in the federal

1

 Business systems include those that are used to support civilian and military personnel, 

finance, logistics, procurement, and transportation.
Page 2 GAO-04-615 DOD Business Systems

government2 and in 1995 to add financial management and business 

systems modernization at DOD—designations that continue today. 3

This report responds to your request for information on the magnitude of 

DOD’s enormous investment in business systems, its control and 

accountability over these investments, and its management of certain key 

business systems modernization projects that are essential to the 

department transforming its business systems and operations. As agreed 

with your offices, our objectives were to (1) identify the amount of funding 

DOD requested in fiscal year 2004 to operate, maintain, and modernize its 

business systems; (2) determine whether DOD has effective control and 

accountability over its business systems modernization investments; and 

(3) determine whether selected business systems investments will help 

resolve some of the department’s long-standing financial and inventory 

management problems and whether these projects are being effectively 

managed. 

To determine how much DOD plans to spend on the operation, 

maintenance, and modernization of its business systems in fiscal year 2004, 

we analyzed DOD’s information technology (IT) budget request and met 

with officials in the office of the DOD Chief Information Officer (CIO) and 

military service representatives to obtain an overview of how the IT budget 

request is developed. Additionally, we met with DOD officials and 

reviewed available documentation to determine the effectiveness of the 

department’s efforts to control and account for its business systems 

investments. Further, we reviewed documentation provided by DOD to 

determine if all systems improvements with obligations exceeding 

$1 million were reviewed by the DOD Comptroller in accordance with the

2

 U.S. General Accounting Office, High-Risk Series: An Overview, GAO/HR-95-263 

(Washington, D.C.: February 1995).

3

 U.S. General Accounting Office, High-Risk Series: An Update, GAO-03-119 (Washington, 

D.C.: January 2003).
Page 3 GAO-04-615 DOD Business Systems

fiscal year 2003 defense authorization act.4 In addition, we selected two 

logistics systems modernization efforts—the Defense Logistics Agency’s 

(DLA) Business Systems Modernization program (BSM) and the Army’s 

Logistics Modernization Program (LMP)—as case studies to determine if 

they will help resolve some of the department’s long-standing financial and 

inventory management problems. These two system projects represent 19 

percent of the $770 million modernization funding requested in fiscal year 

2004 for logistics systems. In reviewing these two systems, we relied on 

project documentation provided by DOD and discussions with program 

management officials related to two key processes, requirements 

management and testing. Our work was performed from August 2003 

through March 2004 in accordance with U.S. generally accepted 

government auditing standards. Details on our scope and methodology are 

included in appendix I. We requested comments on a draft of this report 

from the Secretary of Defense or his designee. Written comments from the 

Acting Under Secretary of Defense (Comptroller) are reprinted in appendix 

II.

Results in Brief DOD requested approximately $19 billion for fiscal year 2004 to operate, 

maintain, and modernize its reported 2,274 business systems. Despite a 

substantial investment over many years, DOD’s business systems remain 

fundamentally flawed, unable to provide timely, reliable information and 

leaving DOD vulnerable to fraud, waste, and abuse. The duplicative and 

stovepiped nature of DOD’s systems environment is illustrated by the 

numerous systems it has in the same functional areas. For example, DOD 

reported that it has over 200 inventory systems. These systems are not 

integrated and thus have multiple points of data entry, which can result in

4

 Subsection 1004(d) of the Bob Stump National Defense Authorization Act for Fiscal Year 

2003, Pub. L. No. 107-314, 116 Stat. 2629 (Dec. 2, 2002), provides that any amount in excess 

of $1 million may be obligated for financial system improvements before approval of its 

enterprise architecture and a supporting transition plan only if the DOD Comptroller makes 

a determination that the improvement is necessary for (1) critical national security 

capability or critical safety and security requirements or (2) prevention of significant 

adverse effect on a project that is needed to achieve an essential capability. The act further 

provides that after the architecture is approved, the DOD Comptroller must determine 

before making obligations that exceed $1 million for system improvements, that such 

improvements are consistent with the enterprise architecture and the transition plan. 
Page 4 GAO-04-615 DOD Business Systems

data integrity problems. Moreover, the number of reported systems is 

likely understated, in part, because DOD does not have a central repository 

or systematic process for identifying all of the department’s systems—

business and national security5

—and a standard definition for what 

constitutes a business system does not exist. In fact, the DOD Comptroller 

recently acknowledged that the actual number of business systems could 

be twice as many as previously reported. As a result, DOD cannot provide 

reasonable assurance to Congress that it has identified all of its business 

systems and that its IT budget request includes funding for all department 

business systems. 

To identify the reported 2,274 business systems, DOD relied on a manual 

“data call” process. However, each of DOD’s designated business 

functional domains6

 is currently refining its respective inventory of 

systems. For example, the logistics domain recently identified an 

additional 3,000 potential systems and validated that over 1,900 are actual 

systems7

—that is, they are not merely a spreadsheet or a report. However, 

only 565 logistics systems are presently included in DOD’s reported 2,274 

business systems. According to logistics domain officials, they, like the 

DOD components, are currently determining the actual number of systems 

that should be reported for their domain. 

Without an accurate inventory of existing systems and with uncertainty as 

to whether all business system funding is reflected in the IT budget, it is not 

surprising that DOD has yet to establish an effective management oversight 

structure and processes to control its ongoing and planned business 

systems investments. Currently, DOD components receive funding from 

multiple appropriations and continue to make their own parochial 

investment decisions. While the domains have been designated to oversee 

business systems investments and to ensure that they are consistent with 

5

 These systems are intelligence systems, cryptologic activities related to national security, 

military command and control systems, and equipment that is an integral part of a weapon 

or weapons system or is critical to the direct fulfillment of military or intelligence missions.

6

 The department has established seven domains in support of its business functions. The 

domains are acquisition, accounting/finance, human resource management, logistics, 

strategic planning and budgeting, installations and environment, and enterprise information 

environment. 

7

 The logistics domain defines a system as one that performs a logistics business process 

and has any one of the following characteristics: has annual operating costs of over $50,000, 

has over 50 users, or operates on a network.
Page 5 GAO-04-615 DOD Business Systems

the goals and objectives of the business enterprise architecture (BEA), 

their specific roles and responsibilities have not yet been clearly defined. 

While a recently approved IT portfolio management policy establishes 

general departmental policies and assigns responsibility to the domains, 

specific procedures, including developing standard criteria for system 

reviews, have not been finalized. 

Additionally, DOD does not have the processes and controls in place to 

provide reasonable assurance that it is in compliance with the fiscal year 

2003 defense authorization act, which requires the DOD Comptroller to 

review all system improvements with obligations exceeding $1 million. We 

also found that the DOD Comptroller does not have an effective process in 

place to identify projects with obligations in excess of $1 million for system 

modernizations. As a result, DOD was not able to satisfy our request for 

information on all obligations in excess of $1 million for system 

modernizations since passage of the act. Based upon limited information 

reported by the military services for fiscal years 2003 and 2004, the military 

services did not submit for the DOD Comptroller’s review the majority of 

the system improvements with total obligations exceeding $1 million. 

Based upon the reported information, obligations totaling $479 million 

were made by the military services for system improvements that were not 

referred to the DOD Comptroller for the required review. Further, our 

analysis of budgetary information indicated that system improvements 

totaling potentially several billion dollars were not referred to the DOD 

Comptroller for review.

Our two case study projects—BSM and LMP—are examples of how DOD’s 

lack of control and accountability over business systems investments 

continues to result in the department spending hundreds of millions of 

dollars on systems that will not result in integrated corporate solutions to 

some of its long-standing inventory and related financial management 

problems. For example, neither BSM nor LMP will provide total asset 

visibility8

 over DOD’s billions of dollars of inventory, such as repair parts 

and chemical and biological protective clothing. The lack of total asset 

visibility is a key gap in the department’s ability to track and locate 

inventory. According to DLA and Army officials, enhancing the 

8

 DOD defines total asset visibility as “the capability to provide users with timely and 

accurate information on the location, movement, status, and identity of units, personnel, 

equipment, material, and supplies.” It also includes the capability to act upon that 

information to improve overall performance of DOD’s logistics practices.
Page 6 GAO-04-615 DOD Business Systems

department’s visibility over its assets depends on the successful 

development and implementation of other systems, for which 

implementation schedules and cost estimates have not been fully 

developed. Further, the first deployment of LMP did not have the capability 

to accurately value inventory at the Tobyhanna Army Depot in accordance 

with departmental guidance. According to the DOD Comptroller’s office, it 

became aware of the problem subsequent to LMP becoming operational 

and has directed that further deployments be delayed until this capability is 

provided. 

While BSM and LMP are intended to transform the logistics operations for 

DLA and the Army, respectively, the initial deployment of each system has 

not provided key capabilities. For example, we found that because the 

Army did not test LMP’s over 70 interfaces end to end with Army and 

external systems—such as those operated by the Defense Finance and 

Accounting Service (DFAS)—to ensure they operate correctly, operational 

problems occurred. For instance, contract data had to be manually 

reentered into the Mechanization of Contract Administration Services 

(MOCAS) system—the department’s contract administration system. 

Similarly, BSM’s interfaces were not operating properly. Users experienced 

difficulties in processing orders, resulting in incorrect information on 

customer orders, customer orders never being sent, and vendor invoices 

not being paid on time. In large part, these operational problems occurred 

because DLA and the Army did not have in place effective requirements 

management9

 and testing processes.

We have previously recommended10 specific actions that are needed to 

effectively control ongoing and planned business systems investments. 

However, the department has not fully implemented these 

9

 According to the Software Engineering Institute, requirements management is a process 

that establishes a common understanding between the customer and the software project 

manager regarding the customer’s business needs that will be addressed by a project. A 

critical part of this process is to ensure that the requirements development portion of the 

effort documents, at a sufficient level of detail, the problems that need to be solved and the 

objectives that need to be achieved.

10 U.S. General Accounting Office, Information Technology: Architecture Needed to Guide 

Modernization of DOD’s Financial Operations, GAO-01-525 (Washington, D.C.: May 17, 

2001); DOD Business System Modernization: Improvements to Enterprise Architecture 

Development and Implementation Efforts Needed, GAO-03-458 (Washington, D.C.: Feb. 28, 

2003); and DOD Business Systems Modernization: Important Progress Made to Develop 

Business Enterprise Architecture, but Much Work Remains, GAO-03-1018 (Washington, 

D.C.: Sept. 19, 2003).
Page 7 GAO-04-615 DOD Business Systems

recommendations, and therefore we are reiterating those 

recommendations because they are so critical to the success of the 

department’s transformation efforts. We are also making four 

recommendations to the Secretary of Defense aimed at improving the 

department’s ability to (1) identify the number of business systems and 

improve the accuracy and completeness of its related IT budget request, 

(2) effectively control its business system investments, and (3) deliver the 

intended capability of LMP and BSM. This report also suggests that 

Congress may wish to consider four legislative initiatives to establish 

specific management oversight, accountability, and control of business 

system funding to business function domains. 

In its comments on a draft of this report, DOD agreed with the four 

recommendations to the Secretary of Defense and two of the four matters 

for congressional consideration. DOD did not agree that the responsibility 

for the planning, design, acquisition, deployment, operation, maintenance, 

modernization, and oversight of business systems should be assigned to 

domain leaders (e.g., the Under Secretary of Defense for Acquisition, 

Technology and Logistics and the DOD CIO). The department stated that 

the development of the business enterprise architecture and the business 

IT investment management structure would provide the necessary 

management and oversight responsibility. In our view, this position ignores 

the fact that DOD’s tradition of having components responsible for these 

functions has resulted in the existing duplicative, nonintegrated, 

stovepiped business system environment that we have today that cannot 

provide accurate information on the results of DOD’s operations. Shifting 

responsibility for these functions to the domains would be one way of 

overcoming lingering cultural resistance in order to obtain corporate 

solutions to common problems within reasonable time and cost 

parameters. 

DOD also did not agree that funds for business systems should be 

appropriated to the domains. DOD stated that improved control and 

accountability over business system investments would be obtained 

through the domains guiding IT investments and establishing investment 

review boards. These are positive steps and we would agree that the 

domains may be able to influence business system investment decisions. 

Our concern is about the extent of influence they can exert given that they 

will not have the means to effect real change because they will not control 

the funding. See the “Agency Comments and Our Evaluation” section of 

this report for a more detailed discussion of the agency comments. We 

have reprinted DOD’s written comments in appendix II.
Page 8 GAO-04-615 DOD Business Systems

Background DOD is one of the largest and most complex organizations in the world. In 

fiscal year 2003, DOD reported that its operations involved over $1.1 trillion 

in assets, over $1.5 trillion in liabilities, approximately 3.3 million military 

and civilian personnel—including guard and reserve components, and 

disbursements of over $416 billion. Execution of these operations spans a 

wide range of defense organizations, including the military services 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 for 

specific geographic regions or theaters of operations. 

To execute these military operations, the department performs an 

assortment of interrelated and interdependent business functions, 

including logistics management, procurement, health care management, 

and financial management. To support its business functions, DOD 

reported in April 2003 that it relied on about 2,274 business systems, 

including accounting, acquisition, logistics, and personnel systems.11 To 

support its existing systems environment, DOD requests billions of dollars 

annually. The Assistant Secretary of Defense for Networks and 

Information Integration—DOD’s CIO—is responsible for compiling and 

submitting the department’s IT budget reports to Congress and the Office 

of Management and Budget (OMB). According to a DOD CIO official, the 

information in the IT budget request is initially prepared by various DOD 

components and processed through their respective CIOs and 

comptrollers. The information is then forwarded to the DOD CIO office, 

where it is consolidated before being sent to OMB and Congress. The DOD 

component CIOs and comptrollers are responsible for, and are required to 

certify, the reliability of the information about their respective initiatives 

that is included in the IT budget request. 

Serious Financial 

Management Weaknesses 

Persist 

DOD continues to confront pervasive, decades-old financial and business 

management problems related to its systems, processes (including internal 

controls), and people (human capital). These problems have (1) resulted in 

a lack of reliable information needed to make sound decisions and report 

11 DOD excludes from its business systems those designated as national security systems 

under section 2315 of Title 10, United States Code. These systems are intelligence systems, 

cryptologic activities related to national security, military command and control systems, 

and equipment that is an integral part of a weapon or weapons system or is critical to the 

direct fulfillment of military or intelligence missions.
Page 9 GAO-04-615 DOD Business Systems

the status of DOD’s activities through financial and other reports; 

(2) hindered its operational efficiency; and (3) left the department 

vulnerable to fraud, waste, and abuse. For example:

• Of the 481 mobilized Army National Guard soldiers from six GAO case 

study Special Forces and Military Police units,12 450 had at least one pay 

problem associated with their mobilization. DOD’s inability to provide 

timely and accurate payments to these soldiers, many of whom risked 

their lives in recent Iraq or Afghanistan missions, distracted them from 

their missions, imposed financial hardships on the soldiers and their 

families, and has had a negative impact on retention.13

• Some DOD contractors have been abusing the federal tax system with 

little or no consequence and DOD is not collecting as much in unpaid 

taxes as it could. Under the Debt Collection Improvement Act of 1996, 

DOD is responsible—along with the Department of the Treasury—for 

offsetting payments made to contractors to collect funds owed, such as 

unpaid federal taxes. However, we found that DOD had collected only 

$687,000 of unpaid taxes as of September 2003. We estimated that at 

least $100 million could be collected annually from DOD contractors 

through effective implementation of the levy and debt collection 

program.14

• Our review of fiscal year 2002 data revealed that about $1 of every $4 in 

contract payment transactions in DOD’s MOCAS system was for 

adjustments to previously recorded payments—$49 billion of 

adjustments out of $198 billion in disbursement, collection, and 

adjustment transactions. According to DOD, the cost of researching and 

12 The six case study units reviewed are the Colorado B Company Special Forces, Virginia B 

Company Special Forces, West Virginia C Company Special Forces, Mississippi 114th Military 

Police Company, California 49th Military Police Headquarters and Headquarters Detachment, 

and the Maryland 200th Military Police Company. In addition, our limited review of pay 

experiences of soldiers in the Colorado Army Guard’s 220th Military Police Company, which 

recently returned from Iraq, indicated that some of the same types of pay problems that we 

found in our case studies had also affected soldiers in this unit.

13 U.S. General Accounting Office, Military Pay: Army National Guard Personnel 

Mobilized to Active Duty Experienced Significant Pay Problems, GAO-04-89 (Washington, 

D.C.: Nov. 13, 2003).

14 U.S. General Accounting Office, Financial Management: Some DOD Contractors Abuse 

the Federal Tax System with Little Consequence, GAO-04-95 (Washington, D.C.: Feb. 12, 

2004).
Page 10 GAO-04-615 DOD Business Systems

making adjustments to accounting records was about $34 million in 

fiscal year 2002, primarily to pay hundreds of DOD and contractor 

staff.15

• Tens of millions of dollars are not being collected each year by military 

treatment facilities from third-party insurers because key information 

required to effectively bill and collect from third-party insurers is often 

not properly collected, recorded, or used by the military treatment 

facilities.16

The long-standing problems continue despite the significant investments 

made in DOD business systems each year. The challenges continue, in part, 

because of DOD’s inability to effectively modernize its business systems. 

For example, our March 2003 report and testimony17 concluded that DOD 

had not effectively managed and overseen its planned investment of over 

$1 billion in four DFAS systems modernization efforts. DOD has 

terminated two of the four DFAS systems modernization projects—the 

Defense Procurement Payment System (DPPS) and the Defense Standard 

Disbursing System (DSDS). The DOD Comptroller terminated DPPS in 

December 2002 after more than 7 years of effort and an investment of over 

$126 million, citing poor program performance and increasing costs. DFAS 

terminated DSDS in December 2003 after approximately 7 years of effort 

and an investment of about $53 million, noting that a valid business case for 

continuing the effort could not be made. These two projects were planned 

to provide DOD the capability to address some of its long-standing contract 

and vendor payment problems.

15 U.S. General Accounting Office, DOD Contract Payments: Management Action Needed to 

Reduce Billions in Adjustments to Contract Payment Records, GAO-03-727 (Washington, 

D.C.: Aug. 8, 2003).

16 U.S. General Accounting Office, Military Treatment Facilities: Improvements Needed to 

Increase DOD Third-Party Collections, GAO-04-322R (Washington, D.C.: Feb. 20, 2004).

17 U.S. General Accounting Office, DOD Business Systems Modernization: Continued 

Investment in Key Accounting Systems Needs to be Justified, GAO-03-465 (Washington, 

D.C.: Mar. 28, 2003) and DOD Business Systems Modernization: Longstanding 

Management and Oversight Weaknesses Continue to Put Investments at Risk, GAO-03-

553T (Washington, D.C.: Mar. 31, 2003).
Page 11 GAO-04-615 DOD Business Systems

Long-standing Inventory 

Management Deficiencies

Since 1990, we have identified DOD’s management of secondary 

inventories (spare and repair parts, clothing, medical supplies, and other 

items to support the operating forces) as a high-risk area. One primary 

factor contributing to DOD’s inventory management weaknesses is its 

outdated and ineffective systems. These system deficiencies have hindered 

DOD’s ability to (1) support its reported inventory balances; (2) provide 

inventory visibility; and (3) provide accurate financial and management 

information related to its property, plant, and equipment. For example:

• DOD incurred substantial logistical support problems as a result of 

weak distribution and accountability processes and controls over 

supplies and equipment shipments in support of Operation Iraqi 

Freedom activities, similar to those encountered during the prior Gulf 

War. These weaknesses resulted in (1) supply shortages, (2) backlogs of 

materials delivered in theater but not delivered to the requesting 

activity, (3) a discrepancy of $1.2 billion between the amount of materiel 

shipped and that acknowledged by the activity as received, 

(4) cannibalization of vehicles, and (5) duplicate supply requisitions.18

• Inadequate asset visibility and accountability resulted in DOD selling 

new Joint Service Lightweight Integrated Suit Technology—the current 

chemical and biological protective garment used by our military 

forces—on the Internet for $3 each (coat and trousers) while at the 

same time buying them for over $200 each.19 DOD has acknowledged 

that these garments should have been restricted to DOD use only and 

therefore should not have been available to the public. 

18 U.S. General Accounting Office, Defense Logistics: Preliminary Observations on the 

Effectiveness of Logistics Activities during Operation Iraqi Freedom, GAO-04-305R

(Washington, D.C.: Dec. 18, 2003).

19 U.S. General Accounting Office, DOD Management: Examples of Inefficient and 

Ineffective Business Processes, GAO-02-873T (Washington, D.C.: June 25, 2002). 
Page 12 GAO-04-615 DOD Business Systems

• Our analysis of data on more than 50,000 maintenance work orders 

opened during the deployments of six battle groups indicated that about 

29,000 orders (58 percent) could not be completed because the needed 

repair parts were not available on board ship. This condition was a 

result of inaccurate ship configuration records and incomplete, 

outdated, or erroneous historical parts demand data. Such problems not 

only have a detrimental impact on mission readiness, they may also 

increase operational costs due to delays in repairing equipment and 

holding unneeded spare parts inventory. 20 

Efforts to Modernize DOD 

Business Systems

Transformation of DOD’s business systems and operations is critical to the 

department having the ability to provide Congress and DOD management 

with accurate and timely information for use in the decision-making 

process. One of the key elements we have reported21 as necessary to 

successfully execute the transformation is establishing and implementing 

an enterprise architecture. In this regard, the department has undertaken a 

daunting challenge to modernize its existing business systems environment 

through the development and implementation of a BEA or modernization 

blueprint. This effort is an essential part of the Secretary of Defense’s 

broad initiative to “transform the way the department works and what it 

works on.” As previously noted, the department has designated seven 

domain owners to be responsible for implementing the BEA, which 

includes (1) performing system reviews and approving initiative funding as 

part of investment management and (2) enforcing compliance with the 

BEA. 

20 U.S. General Accounting Office, Defense Inventory: Opportunities Exist to Improve 

Spare Parts Support Aboard Deployed Navy Ships, GAO-03-887 (Washington, D.C.: Aug. 29, 

2003).

21 U.S. General Accounting Office, Department of Defense: Status of Financial 

Management Weaknesses and Progress Toward Reform, GAO-03-931T (Washington, D.C.: 

June 25, 2003).
Page 13 GAO-04-615 DOD Business Systems

In April 2003, DOD reported that its business systems environment 

consisted of 2,274 systems and systems acquisition projects spanning 

numerous business operations that were divided into the seven domains 

and established a domain leader for each area.22 DOD’s efforts to manage 

the modernization initiative include a strategy to vest the domains with the 

authority, responsibility, and accountability for business transformation, 

extension and implementation of the architecture, and investment 

management. We have also recommended23 that DOD establish an 

investment management structure to gain control over business system 

investments by (1) establishing a hierarchy of investment review boards 

from across the department, (2) establishing a standard set of investment 

review and decision-making criteria for its ongoing IT system projects, and 

(3) directing the boards to perform a comprehensive review of all ongoing 

business system investments. 

Two of the business systems modernization efforts DOD has under way to 

address some of its inventory problems are DLA’s BSM and the Army’s LMP. 

These two business systems represent approximately 19 percent of the 

$770 million of the modernization funding requested in fiscal year 2004 for 

logistics systems. DLA and the Army are using the same commercial-offthe-shelf (COTS) enterprise resource planning24 software package. DLA 

and the Army are using the inventory management portion of the package. 

BSM. In November 1999, DLA initiated an effort to replace its materiel 

management systems—the Standard Automated Materiel Management 

System (SAMMS) and the Defense Integrated Subsistence Management 

System—with BSM. DLA has used the two existing systems for over 30 

22 The seven domains and the respective domain leaders are (1) acquisition—Under 

Secretary of Defense (Acquisition, Technology and Logistics); (2) accounting and finance—

Under Secretary of Defense (Comptroller)/Chief Financial Officer; (3) human resources 

management—Under Secretary of Defense (Personnel and Readiness); (4) installations and 

environment—Under Secretary of Defense (Acquisition, Technology and Logistics); 

(5) logistics—Under Secretary of Defense (Acquisition, Technology and Logistics); 

(6) strategic planning and budgeting—Under Secretary of Defense (Comptroller)/Chief 

Financial Officer; and (7) enterprise information environment—Assistant Secretary of 

Defense (Networks and Information Integration)/Chief Information Officer. 

23 GAO-03-458 and GAO-03-1018.

24 These commercial products are referred to as enterprise resource planning (ERP) 

solutions. ERP products consist of multiple, integrated functional modules that do different 

tasks, such as track payroll, keep a standard general ledger, manage supply chains, and 

organize customer data.
Page 14 GAO-04-615 DOD Business Systems

years to manage its inventory. BSM is intended to transform how DLA 

conducts its operations in five core business processes: order fulfillment, 

demand and supply planning, procurement, technical/quality assurance, 

and financial management. BSM was deployed in July 2002 and is 

operating at the Defense Supply Center Columbus—Columbus, Ohio; the 

Defense Supply Center Philadelphia—Philadelphia, Pennsylvania; the 

Defense Supply Center Richmond—Richmond, Virginia; the Defense 

Distribution Center—New Cumberland, Pennsylvania; the DLA Logistics 

Information Service—Battle Creek, Michigan; and DLA headquarters—Fort 

Belvoir, Virginia. The initial deployment included low-volume, low-dollarvalue items. BSM has about 900 users and is populated with over 170,000 

inventory items valued at about $192 million. Once it becomes fully 

operational, BSM is expected to have about 5,000 users and control and 

account for about 5 million inventory items valued at about $12 billion. 

DLA currently estimates that it will invest approximately $850 million to 

fully deploy BSM.

LMP. In February 1998, the U.S. Army Materiel Command (AMC) began an 

effort to replace its existing materiel management systems—the 

Commodity Command Standard System and the Standard Depot System—

with LMP. The Army has used the existing systems for over 30 years to 

manage its inventory and depot maintenance operations. LMP is intended 

to transform AMC’s logistics operations in six core processes: order 

fulfillment, demand and supply planning, procurement, asset management, 

materiel maintenance, and financial management. LMP is a 12-year 

acquisition requirements contract.25 LMP became operational at the U.S. 

Army Communications and Electronics Command (CECOM), Fort 

Monmouth, New Jersey, and Tobyhanna Army Depot, Tobyhanna, 

Pennsylvania, in July 2003. The initial deployment of LMP consisted of 

inventory items such as electronics; electronic repair components; and 

communications and intelligence equipment such as night vision goggles, 

electronic components such as circuit boards, and certain munitions such 

as guidance systems included in missiles. Currently, LMP has 4,500 users at 

12 locations and is populated with over 2 million inventory items valued at 

about $440 million. When LMP is fully implemented, its capacity is 

expected to include more than 15,000 users at 149 locations and will be 

populated with 6 million Army-managed inventory items valued at about 

25 A contract in which the buyer agrees to purchase all requirements from one party when 

the exact time and/or exact quantities of future deliveries are not known at the time of the 

contract award.
Page 15 GAO-04-615 DOD Business Systems

$40 billion. The Army currently estimates that it will invest approximately 

$1 billion to fully deploy LMP.

Fiscal Year 2004 

Budget for DOD’s 

Stovepiped, 

Duplicative Business 

Systems Is Nearly 

$19 Billion 

For fiscal year 2004, DOD requested approximately $28 billion in IT funding 

to support a wide range of military operations as well as DOD business 

system operations, of which approximately $18.8 billion26 is for the 

reported 2,274 business systems—$4.8 billion for business systems 

development/modernization and about $14 billion for operation and 

maintenance. As shown in figure 1, the $28 billion is spread across the 

military services and defense agencies. The $28 billion represents a 

$2 billion increase over fiscal year 2003. 

26 The remaining $9 billion is for National Security Systems. 
Page 16 GAO-04-615 DOD Business Systems

Figure 1: Distribution of DOD’s Nearly $28 Billion IT Budget Request (Dollars in 

Billions)

a

DFAS is the centralized accounting agency for DOD.

b

DLA is DOD’s logistics manager for all consumable and some repair items; its primary business 

function is providing supply support to sustain military operations and readiness.

c

TRICARE is the health care system for DOD’s active duty personnel, their dependents, and retirees.

d

Other DOD components include entities such as the Office of the Secretary of Defense and the 

Defense Contract Management Agency.

e

The Defense Information Systems Agency provides DOD and other organizations a wide range of 

information services, such as data processing, telecommunications services, and database 

management.

The department’s business systems are used to record the events 

associated with DOD’s functional areas, such as finance, logistics, 

personnel, and transportation. Table 1 shows how business system 

funding is spread across the various DOD components.

1.8% DFASa $.5 billion

22.0%

Navy

$6.1 billion

20.2%

Army

$5.6 billion

15.9%

DISAe

$4.4 billion

23.3%

Air Force

$6.5 billion

10.4% All other DOD componentsd

 $2.9 billion

3.6% TRICAREc $1 billion

2.8% DLAb

 $.8 billion

Source: GAO analysis of DOD IT budget request for fiscal year 2004.
Page 17 GAO-04-615 DOD Business Systems

Table 1: DOD Fiscal Year 2004 IT Budget Request for Business Systems by DOD 

Component 

Source: GAO analysis based on DOD’s fiscal year 2004 IT budget request.

OMB requires that funds requested for IT projects be classified as either 

steady state (referred to by DOD as “current services”) or as 

development/modernization. Current services are funds for operating and 

maintaining systems at current levels (i.e., without major enhancements). 

The development/modernization budget category represents funds for 

developing new IT systems or making major enhancements to existing 

systems. 

Some systems, such as BSM, have both current services and 

development/modernization funding. For BSM, while current services are 

to be used for operating the system at various DLA locations, 

development/modernization funds are to be used for activities such as 

developing additional system functionality. For fiscal year 2004, DLA’s IT 

budget request, including BSM, was $452 million for current services and 

$322 million for development/modernization. Generally, current services 

are financed through the Operation and Maintenance appropriations, 

whereas development/modernization funding can come from any one or 

combination of several funding sources, such as the Research, 

Development, Test, and Evaluation appropriations; the Procurement 

appropriations; or the Defense Working Capital Fund. 

As part of DOD’s ongoing business systems modernization efforts, DOD’s 

Business Management Modernization Program (BMMP) and Business

Dollars in millions

Component Current services

Development/ 

modernization Total

Army $2,400 $1,252 $3,652

Navy $3,221 $557 $3,778

Air Force $2,747 $990 $3,737

DISA $3,145 $793 $3,938

TRICARE $736 $244 $980

DLA $452 $322 $774

DFAS $399 $103 $502

Other DOD components $895 $545 $1,440

Total $13,995 $4,806 $18,801
Page 18 GAO-04-615 DOD Business Systems

Management and Systems Integration (BMSI) office27 are creating a 

repository of the department’s existing business systems. DOD reported 

that as of April 2003, this environment consisted of 2,274 systems and 

system acquisition projects. To provide for investment management, DOD 

assigned the systems to the seven domains. For example, DOD assigned 

565 systems to the logistics domain, 210 of which primarily perform 

inventory functions and 32 of which perform transportation functions. 

Similarly, the accounting and finance domain has 542 systems of which 240 

primarily perform finance and accounting functions. Table 2 presents the 

composition of DOD’s reported business systems by domain and functional 

area.

27 BMMP is the department’s business transformation initiative encompassing defense 

policies, processes, people, and systems that guide, perform, or support all aspects of 

business management, including development and implementation of the BEA. The Under 

Secretary of Defense (Comptroller) established a DOD-wide program management office, 

BMSI, to oversee and manage BMMP. 
Page 19 GAO-04-615 DOD Business Systems

Table 2: Reported DOD Business Systems by Domain and Functional Area

Domain Functional area Air Force Army

Navy/ 

Marine 

Corps DFAS Other Total

Acquisition 

Acquisition 20 13 42 0 11 86

Procurement 4 5 10 0 3 22

Other functions combined 3 13 9 3 7 35

Subtotal 27 31 61 3 21 143

Accounting and finance

Finance and accounting 22 31 60 103 24 240

Budget formulation/execution 3 5 61 2 7 78

Cost 9 21 29 0 4 63

Management information 2 12 6 36 3 59

Vendor payment 1 2 2 9 2 16

Other functions combined 6 17 37 15 11 86

Subtotal 43 88 195 165 51 542

Human resources management

Personnel 53 311 37 20 31 452

Health 0 3 0 0 40 43

Time and attendance 2 3 11 3 0 19

Travel 3 10 20 1 1 35

Other functions combined 13 60 18 9 16 116

Subtotal 71 387 86 33 88 665

Installations and environment

Real property management 8 35 2 1 2 48

Personnel 1 9 0 0 0 10

Inventory 0 5 3 0 1 9

Logistics 1 4 0 0 3 8

Other functions combined 2 45 4 0 2 53

Subtotal 12 98 9 1 8 128

Logistics

Inventory 50 90 42 4 24 210

Logistics 57 44 28 2 29 160

Transportation 8 11 2 0 11 32

Personal property management 6 5 5 0 2 18

Real property management 3 3 4 0 0 10

National defense property management 2 0 1 0 0 3
Page 20 GAO-04-615 DOD Business Systems

Source: GAO analysis of BMMP April 2003 data.

Table 2 clearly indicates that there are numerous redundant systems 

operating in the department today. For example, DOD has reported that it 

has 16 vendor pay systems that are used to pay contractors for services 

provided. A further illustration is the department’s statement that the 

Defense Integrated Military Human Resources System, which is to serve as 

DOD’s integrated military personnel and pay system, will replace a 

reported 79 existing systems. 

BMSI officials stated that they are validating the 2,274 different systems 

and related functional area categories, as illustrated in table 2, with the 

domains. Although the systems are different, functional area categories 

may be the same among the domains. For example, the Accounting and 

Finance and Strategic Planning and Budgeting domains both report having 

systems that perform finance and accounting functions. BMSI officials 

have stated that through the BMSI office’s validation efforts, the functional 

area categories may be renamed or systems may be reclassified to other 

functional areas. For example, BMSI officials explained that the finance 

and accounting functional area within the Strategic Planning and Budgeting 

domain may be changed to Budgetary Financial Data.

Although the BMSI office has created an initial repository of 2,274 business 

systems to support DOD’s systems modernization efforts, its systems 

inventory is currently neither complete nor informative enough for 

decision making. For example, according to logistics domain officials, 

Other functions combined 51 30 21 5 11 118

Acquisition 3 8 1 0 2 14

Subtotal 180 191 104 11 79 565

Strategic planning and budgeting

Budget formulation/execution 15 45 74 12 8 154

Finance and accounting 1 4 7 3 1 16

Other functions combined 7 14 17 0 2 40

Subtotal 23 63 98 15 11 210

Enterprise information environment

Other functions combined 1 5 2 3 10 21

Subtotal 1 5 2 3 10 21

Total 357 863 555 231 268 2,274

(Continued From Previous Page)

Domain Functional area Air Force Army

Navy/ 

Marine 

Corps DFAS Other Total
Page 21 GAO-04-615 DOD Business Systems

there are currently about 3,000 systems just within the logistics domain. Of 

that amount, about 1,900 systems have been validated by the DOD 

components as logistics systems—that is, they are not merely a 

spreadsheet or a report. Such a determination has not been made for the 

other 1,100. Our analysis showed that of the 1,900 systems, 253 systems are 

included in DOD’s reported 2,274 business systems. According to logistics 

domain officials, they are in the process of determining if the remaining 

systems should be classified as a business system or a national security 

system.

The BMSI office has not reported additional systems since April 2003 

because it is continuing to reconcile its inventory with two other 

databases—the IT Registry and the Information Technology Management 

Application (ITMA). This reconciliation is necessary because the three 

databases are not integrated. The IT Registry is a database of missioncritical28 and mission-essential29 IT systems maintained by the DOD CIO.30

As reported by the DOD Inspector General (IG),31 each DOD component 

could determine whether a system should be reported as mission critical or 

mission essential in the IT Registry. Since the definitions were subject to 

interpretation, the DOD IG concluded that the IT Registry would not 

necessarily capture the universe of DOD business systems. The ITMA is an 

application used by the DOD CIO to collect system information for the 

development of the department’s annual IT budget request. Each of these 

databases—the IT Registry, the ITMA, and the BMMP systems inventory—

contains varying information, some of which overlaps. For example, the IT 

Registry includes warfighting systems as well as some business systems, 

while the BMMP inventory includes only systems related to the 

28 A mission-critical system is a system that if lost would cause the stoppage of warfighter 

operations or direct mission support of warfighter operations. 

29 A mission-essential system is a system that the component head determines is basic and 

necessary for the accomplishment of the organizational mission.

30 On December 1, 2003, the DOD CIO issued an IT Registry policy memorandum that would 

expand the IT Registry to provide information about all DOD IT systems and required all 

component CIOs to add all non-mission-critical and non-mission-essential IT systems to the 

IT Registry at a rate determined by the responsible CIO each year, to ensure that all IT 

systems are registered in the DOD IT Registry no later than September 30, 2006.

31 U.S. Department of Defense, Office of the Inspector General, Information Technology: 

Systems Inventory to Support the Business Enterprise Architecture, D-2003-117 

(Arlington, Va.: July 10, 2003).
Page 22 GAO-04-615 DOD Business Systems

department’s business operations. The ITMA includes initiatives and 

programs, such as the department’s BEA effort, that are not IT systems. 

Although DOD recognizes that it needs an integrated repository of systems 

information in order to control and prioritize its IT investments, the 

difficulty of developing a single source is compounded by the fact that DOD 

has not developed a universal definition of what should be classified as a 

business system. Lacking a standard definition that is used consistently 

across the entire department, DOD does not have reasonable assurance 

that it has identified all of its business systems. As a result, DOD does not 

have complete visibility over its business systems to permit analysis of gaps 

and redundancies in DOD’s business systems environment and to assist in 

preventing the continuing proliferation of redundant, stovepiped business 

systems. 

Furthermore, DOD cannot provide reasonable assurance to Congress that 

its IT budget request includes all funding for the department’s business 

systems. For example, we reported32 in December 2003, that DOD’s IT 

budget submission to Congress for fiscal year 2004 contained material 

inconsistencies, inaccuracies, or omissions that limited its reliability. We 

identified discrepancies totaling about $1.6 billion between two primary 

parts of the submission—the IT budget summary report and the detailed 

capital investments reports on each IT initiative. These problems were 

largely attributable to insufficient management attention and limitations in 

departmental policies and procedures, such as guidance in DOD’s Financial 

Management Regulation, and to shortcomings in systems that support 

budget-related activities.

32 U.S. General Accounting Office, Information Technology: Improvements Needed in the 

Reliability of Defense Budget Submissions, GAO-04-115 (Washington, D.C.: Dec. 19, 2003).
Page 23 GAO-04-615 DOD Business Systems

DOD Continues to 

Have Ineffective 

Control and 

Accountability over 

Business System 

Investments

DOD continues to lack effective management oversight and control over 

business systems modernization investments. While the domains have 

been designated to oversee business systems investments, the actual 

funding, as shown in table 1, continues to be spread among the military 

services and defense agencies, thereby enabling the numerous DOD 

components to continue to develop stovepiped, parochial solutions to the 

department’s long-standing financial management and business operation 

challenges. Furthermore, the department does not have reasonable 

assurance that it is in compliance with the fiscal year 2003 defense 

authorization act, which provides that obligations in excess of $1 million 

for systems improvements may not be made unless the DOD Comptroller 

makes a determination that the improvements are in accordance with the 

criteria specified in the act.33 Lacking a departmentwide focus and 

effective management oversight and control of business systems 

investment, DOD continues to invest billions of dollars in systems that fail 

to provide integrated corporate solutions to its business operation 

problems. 

DOD Is Working to Finalize 

Management Oversight 

Structure and Guidance 

In response to our September 2003 report, DOD said that it was taking 

several actions to improve the control and accountability over business 

systems investments. However, as of March 2004, many of these actions 

had not been finalized. As a result, the department has not put into place 

the organizational structure and process controls to adequately align 

business system investments with the BEA. Each DOD component 

continues to make its own investment decisions, following different 

approaches and criteria. The lack of an institutionalized investment 

strategy has contributed to the department’s current complex, error-prone, 

nonintegrated systems environment and precluded the development of 

corporate system solutions to long-standing business problems. In 

particular, DOD has not clearly defined the roles and responsibilities of the 

domains, established common investment criteria, and conducted a 

33 As noted earlier, the act provides that any amount in excess of $1 million may be obligated 

for financial system improvements before approval of its enterprise architecture and a 

supporting transition plan only if the DOD Comptroller makes a determination that the 

improvement is necessary for (1) critical national security capability or critical safety and 

security requirements or (2) prevention of significant adverse effect on a project that is 

needed to achieve an essential capability. The act further provides that after the 

architecture is approved, the DOD Comptroller must determine before making obligations 

that exceed $1 million for system improvements that such improvements are consistent 

with the enterprise architecture and the transition plan. 
Page 24 GAO-04-615 DOD Business Systems

comprehensive review of its ongoing IT investments to ensure that they are 

consistent with the BEA. 

As we have previously reported,34 best practices recommend that 

investment review boards be established to control an entity’s systems 

investments and that the boards use a standard set of investment review 

and decision-making criteria to ensure compliance and consistency with 

the architecture. We have also recommended that the department establish 

investment review boards to better control investments and that each 

board be composed of representatives from across the department. 

DOD has decided that in lieu of the investment review boards, the domains 

will be responsible for investment management. In March 2004, the Deputy 

Secretary of Defense signed an IT portfolio investment management policy 

and assigned overall responsibility to the domains. However, the specific 

roles and responsibilities of the domains had not been formalized and 

standard criteria for performing systems reviews have not been finalized. 

According to DOD officials, the related detailed directive and instructions 

will outline the specific roles and responsibilities of the domains and how 

they are to be involved in the overall business systems investment 

management process. The department is drafting a memorandum that will 

require the domains to develop a plan for implementing the investment 

management policy. 

Further, the department has developed draft system review and 

certification process guidance that outlines the criteria that are to be used 

by the domains and program managers to assess system compliance with 

the BEA. The systems covered in the review process consist of new system 

initiatives, ongoing system developmental projects, and systems in 

sustainment. According to DOD, once a system is placed in sustainment, 

modernization funding cannot exceed $1 million. The system review and 

certification process guidance has been integrated with the department’s 

existing acquisition guidance35—commonly referred to as the DOD 5000 

series. The acquisition guidance requires that certain documentation be 

prepared at different stages—known as milestones—within the system’s 

life-cycle process. This documentation is intended to provide relevant 

information for management oversight and for decision making on whether 

34 GAO-03-458.

35 DOD Instruction 5000.2, Operation of the Defense Acquisition System (May 12, 2003).
Page 25 GAO-04-615 DOD Business Systems

the investment of resources is cost beneficial and technically feasible. 

DOD officials noted that the system review process would be further 

enhanced because the DOD Comptroller will have to certify that the 

proposed investment is consistent and aligned with the BEA at each 

milestone decision. According to DOD, the certification process will help 

ensure that the obligation of funds of over $1 million for the modernization 

of a system are in accordance with the criteria set forth in the fiscal year 

2003 defense authorization act.

While these actions are aimed at improving the control and accountability 

over business systems investments, we have previously reported that the 

department did not adhere to the milestone decision-making and oversight 

processes it established to ensure the economical and technical risks 

associated with systems modernizations have been mitigated. For 

example, our March 2003 report36 noted that DOD had not effectively 

managed and overseen its planned investment of over $1 billion in four 

DFAS system modernization efforts. One project’s estimated cost had 

increased by as much as $274 million, while the schedule slipped by almost 

4 years. For each of these projects, DOD oversight entities—DFAS, the 

DOD Comptroller, and the DOD CIO—could not provide documentation 

that indicated they had questioned the impact of the cost increases and 

schedule delays, and allowed the projects to proceed in the absence of the 

requisite analytical justification. Such analyses provide the requisite 

justification for decision makers to use in determining whether to invest 

additional resources in anticipation of receiving commensurate benefits 

and mission value. Two of the four projects—DPPS and DSDS—were 

terminated in December 2002 and December 2003, respectively, after an 

investment of approximately $179 million that did not improve the 

department’s business operations.

36 GAO-03-465.
Page 26 GAO-04-615 DOD Business Systems

While DOD is continuing to work toward establishing the structure and 

processes to manage its business systems investments, it has not yet 

conducted a comprehensive system review of its ongoing IT investments to 

ensure that they are consistent with its BEA efforts. The domains have 

raised concerns that they did not have sufficient staff to perform the 

system reviews. To assist the domains with their system reviews, in 

December 2003, the Deputy Secretary of Defense allotted the domains 54 

additional staff. Despite concerns over the sufficiency of staff resources 

and the lack of organizational structure and processes for controlling 

system investments, the department has acted to curtail the funding for 

some systems. For example, effective October 2003, the DOD Comptroller 

directed that the Defense Joint Accounting System (DJAS)37 be put into 

sustainment. That is, funding would be provided to operate and maintain 

the system, but not to upgrade or modernize the system. In June 2000, the 

DOD Inspector General (IG) reported38 that DFAS was developing DJAS at 

an estimated life-cycle cost of about $700 million without demonstrating 

that the program was the most cost-effective alternative for providing a 

portion of DOD’s general fund accounting. DJAS is only being operated at 

two locations—Fort Benning, Georgia, and the Missile Defense Agency—

and there are no longer any plans to implement the system at other 

locations.

Another system that DOD has placed into sustainment is the Joint 

Computer Aided Acquisition and Logistics Support (JCALS) system. 

JCALS was initiated in June 1992 to enable the services to streamline 

DOD’s logistical and acquisition functions through business process 

reengineering and eliminating existing systems. In May 2003, Gartner, Inc., 

reviewed the cost, efficiency, and effectiveness of JCALS and reported that 

the program is costly to operate and maintain. The study recommended 

freezing all software and technology spending. According to DOD’s fiscal 

year 2004 IT budget, over $1 billion had been invested in JCALS since the 

inception of the program. 

37 The original name of the system was the Corps of Engineers Financial Management 

System (CEFMS). After it was determined that CEFMS could be modified to satisfy Army 

customers and had the potential for supporting the Defense Working Capital Fund, DFAS 

selected CEFMS to meet the DJAS requirements.

38 U.S. Department of Defense, Office of the Inspector General, Acquisition of the Defense 

Joint Accounting System, Report No. D-2000-151 (Arlington, Va.: June 16, 2000).
Page 27 GAO-04-615 DOD Business Systems

Placing DJAS and JCALS in sustainment is a step in the right direction. 

However, execution of a comprehensive review of all modernization efforts 

by DOD before substantial money has been invested will reduce the risk of 

continuing the department’s track record of business systems 

modernization efforts that cost more than anticipated, take longer than 

expected, and fail to deliver intended capabilities. 

Further, in developing the fiscal year 2005 budget request, the DOD 

Comptroller denied DFAS’s request for approximately $32 million for the 

development of an accounting and budget execution system. The DOD 

Comptroller appropriately noted that there should not be investments in a 

new system before the domains define the requirements and the system is 

justified through the appropriate DOD approval process. The DOD 

Comptroller also denied DFAS’s request for funding of the Disbursing 

Transformation Program, which was a proposed $41 million initiative 

through fiscal year 2009. According to DFAS, the program was to be 

funded from resources that were budgeted for DSDS, which, as previously 

mentioned, was terminated in December 2003. The DOD Comptroller noted 

that the department should not pay for salaries, software development, and 

systems modernization for a disbursing system before disbursing 

functionality is defined according to the BEA. It was further stated that it is 

premature for DFAS to create a new disbursing system when it cannot 

explain any of the program’s requirements in broad or detailed terms and 

numerous disbursing systems already exist. 

It is encouraging to see the DOD Comptroller acting to eliminate budget 

requests by DFAS for systems that are not justified. However, DFAS, which 

is under the auspices of the DOD Comptroller, represents a very small 

percentage—slightly over 2 percent ($103 million of $4.8 billion)—of the 

total modernization funding. Given that the department lacks a 

comprehensive inventory of its business systems, it is unknown how many 

other modernization projects should be questioned. However, since the 

roles and responsibilities of the domain owners have not been clarified, 

they have not been empowered to make investment decisions similar to 

those of the DOD Comptroller. As we have previously recommended,39 the 

department needs to assess its current systems and limit current 

investments to

39 GAO-01-525.
Page 28 GAO-04-615 DOD Business Systems

• deployment of systems that have already been fully tested and involve 

no additional development or acquisition cost;

• stay-in-business maintenance needed to keep existing systems 

operational;

• management controls needed to effectively invest in modernized 

systems; and

• new systems or existing system changes that are congressionally 

directed or are relatively small, cost-effective, and low risk and can be 

delivered in a relatively short time frame.

As noted in our September 2003 report,40 DOD had not yet defined and 

implemented an effective approach for selecting and controlling business 

system investments. Absent the rigors of these stringent criteria, DOD will 

continue to invest in systems that perpetuate its existing incompatible, 

duplicative, and overly costly systems environment that does not optimally 

support mission performance.

DOD Lacks Reasonable 

Assurance That It Is in 

Compliance with Statutory 

Investment Management 

Controls

DOD has not yet defined and implemented an effective investment 

management process to proactively identify and control system 

improvements exceeding $1 million in obligations. DOD officials have 

acknowledged that the department does not have a systematic means to 

identify and determine which systems improvements should be submitted 

to the DOD Comptroller for review and, in essence, depend on system 

owners coming forward to the domain owners and requesting approval. 

DOD was unable to provide us comprehensive information on all systems 

improvements with obligations greater than $1 million since passage of the 

act. However, based upon limited information provided by the military 

services for fiscal years 2003 and 2004, we found that modernizations with 

obligations totaling at least $479 million were not submitted to the DOD 

Comptroller for any factual determination. 

The act states that as a condition of making any obligation in excess of 

$1 million for system improvements, the obligation be reviewed by the 

DOD Comptroller who must make a determination whether the request is 

40 GAO-03-1018.
Page 29 GAO-04-615 DOD Business Systems

in accordance with criteria specified in the act. To comply with the 

legislative requirement, the DOD Comptroller issued a memorandum on 

March 7, 2003, to DOD’s component organizations stating that the BMSI 

office—which is responsible for overseeing the development and 

implementation of the BEA—must review all system improvements with 

obligations in excess of $1 million. In addition, the memorandum directs 

the DOD components, as an integral part of the review and approval 

process, to present information to DOD Comptroller officials and relevant 

domain owners that demonstrates that each investment (1) complies with 

the BEA and (2) is economically justified. To support that the investment is 

economically justified, information on the cost and benefit and return on 

investment, including the break-even point, must be provided. 

DOD officials acknowledge that the department could utilize the IT budget 

to assist in the identification of systems that could be subject to the act’s 

requirements. While we recognize that this is budgetary data, rather than 

the obligational data referred to in the act, this information could provide a 

starting point for the domains identifying potential projects that should be 

submitted to the DOD Comptroller. For example, we analyzed the DOD IT 

budget request for fiscal years 2003 through 2005 and identified over 200 

systems in each year’s budget, totaling over $4 billion per year that could 

involve obligations of funds that exceed the $1 million threshold. Table 3 

presents our summary analysis by DOD component.

Table 3: DOD Budget Request for Business Systems Modernization That May 

Exceed the $1 Million Threshold 

Dollars in millions

Fiscal year 2003 Fiscal year 2004 Fiscal year 2005

Component Amount Number Amount Number Amount Number

Army $1,046 39 $1,196 41 $1,255 42

Navy 455 34 487 32 420 29

Air Force 808 30 927 31 1,060 33

DFAS 121 26 80 18 48 13

DISA 912 14 793 20 329 17

DLA 315 18 234 16 104 13

Transportation Command 89 16 80 18 105 18

TRICARE 227 6 244 10 300 11

Missile Defense Agency 15 5 17 6 19 6
Page 30 GAO-04-615 DOD Business Systems

Source: GAO analysis based on DOD’s fiscal years 2003 through 2005 IT budget requests.

The list in table 3 may not be complete. According to the DOD CIO and 

military service officials, the “All Other” category in the IT budget exhibits 

includes system projects that do not have to be identified by name because 

they fall below the $2 million reporting threshold for budgetary purposes.

In an attempt to substantiate that the obligations for business systems 

modernization were in accordance with the act, we requested that DOD 

activities provide us with a list of obligations greater than $1 million for 

fiscal year 200341 and fiscal year 2004, as of December 2003. As of February 

2004, we received responses from the Army, the Navy, and the Air Force, 

but did not receive responses from any of the defense agencies such as 

Defense Threat Reduction 

Agency 29 5 24 4 27 4

Washington Headquarters 

Services 55 2 61 3 33 3

Office of the Secretary of 

Defense 113 2 104 3 185 3

Joint Chiefs of Staff 28 3 22 2 20 2

Defense Commissary 

Agency 12 2 39 2 77 2

Defense Human Resources 

Activity 14 1 14 1 15 1

Defense Contract 

Management Agency 18 1 12 1 11 1

Defense Security Service 17 1 10 1 11 2

Defense Contract Audit 

Agency 11 1 10 1 7 1

American Forces 

Information Services 7 1 5 1 6 1

Special Operations 

Command 8 1 3 1 1 1

DOD IG 2 1 2 1 2 1

Total $4,302 209 $4,364 213 $4,035 204

41 We requested the obligational data for fiscal year 2003 for the period December 2, 2002, 

the date of enactment of the act, through September 2003. 

(Continued From Previous Page)

Dollars in millions

Fiscal year 2003 Fiscal year 2004 Fiscal year 2005

Component Amount Number Amount Number Amount Number
Page 31 GAO-04-615 DOD Business Systems

DFAS and DLA. To ascertain if the DOD Comptroller had made the 

determination required in the act, we compared a list of system approvals 

provided by the BMSI office with the obligational data (by system) 

provided by the military services. Based upon a comparison of the limited 

information available, we identified $479 million in reported obligations 

over $1 million by the military services for system improvements that were 

not submitted to the DOD Comptroller for review and determination as 

required by the act. Table 4 summarizes our analysis. 

Table 4: System Improvements Not Submitted to the DOD Comptroller for the 

Mandated Review

Source: GAO analysis based upon information provided by DOD.

Examples of DOD system improvements included in table 4 that were not 

submitted include the Air Force obligating over $9 million in fiscal year 

2003 and about $4 million in fiscal year 2004 for the Integrated Maintenance 

Data System, the Navy obligating about $18 million in fiscal year 2003 and 

about $6 million in fiscal year 2004 for the Electronic Military Personnel 

Records System, and the Army obligating about $22 million in fiscal year 

2003 and about $10 million in fiscal year 2004 for the Transportation 

Coordinators' Automated Information for Movements System. Appendix III 

provides a list of modernization projects with obligations totaling over 

$1 million that were reviewed by the DOD Comptroller as required by the 

act. Appendix IV provides a detailed list of the individual systems not 

submitted to the DOD Comptroller and the related amount of the total 

obligations for fiscal years 2003 and 2004. 

The act places limitations on the legal authority of individual program and 

government contracting officials to obligate funds in support of the 

systems for which they are responsible, but DOD has yet to proactively 

manage investments to avoid violations of the limitations and to review 

investments in any meaningful way to enforce these statutory limitations. 

Dollars in millions

Military service

Fiscal year 2003 

obligations 

Fiscal year 2004 

obligations Total

Army $172 $30 $202

Navy $166 $47 $213

Air Force $58 $6 $64

Total $396 $83 $479
Page 32 GAO-04-615 DOD Business Systems

Until DOD strengthens its process for selecting and controlling business 

system investments and adopts an effective governance concept, it remains 

exposed to the risk of spending billions of dollars on duplicative, 

stovepiped, nonintegrated systems that do not optimize mission 

performance and accountability and, therefore, do not support the 

department’s transformation goals.

We also identified inconsistencies in how the military services categorized 

systems. For example, the Air Force did not categorize its Global Combat 

Support System as a business system, while the Army and the Navy 

consider their respective Global Combat Support Systems business 

systems. Additionally, the Navy categorized the Defense Message System 

as a business system, but the Army and the Air Force did not. This 

inconsistency further reiterates the need for a standard database and 

uniform definition of a business system that properly categorizes DOD’s 

numerous systems. 

For those systems that were submitted for review, we found that most had 

the supporting documentation called for in the DOD Comptroller’s March 7, 

2003, memorandum. For example, the return on investment was identified. 

However, the one common element lacking was the assertion that the 

system projects were compliant with the BEA or otherwise met the criteria 

set out in the act. As noted earlier, BMMP has developed a draft BEA 

system compliance assessment certification for program managers to use; 

however, the process has not been finalized. The inability to assert 

compliance with the BEA is consistent with our September 2003 report,42

which noted that the BEA lacked the details needed to provide DOD with a 

common vision and constrain or control investments. We also identified 

instances in which the justification for the approval was questionable. 

These investments were made without DOD knowing whether these 

systems are aligned or consistent with part of DOD’s long-term system 

modernization strategies. For example: 

42 GAO-03-1018.
Page 33 GAO-04-615 DOD Business Systems

• In October 2003, the DOD Comptroller approved obligations of 

$8 million for the Standard Procurement System (SPS) even though the 

supporting documentation noted that there was insufficient 

documentation to validate all requirements and some were found to be 

noncompliant with the BEA. We43 and the DOD IG44 have previously 

reported concerns with the overall management and implementation of 

SPS and the ability to deliver its intended capability. Initiated almost 10 

years ago in November 1994, the system was to provide DOD with a 

single automated system to perform all functions related to contract 

management within DOD’s procurement process for all DOD 

organizations and activities. The system was also intended to replace 

the contract administration functions currently performed by MOCAS, a 

system implemented in 1968 and still operating today. Further, as will be 

discussed later in this report, difficulty with the implementation of SPS 

is one of the factors that contributed to the slippage in DLA’s BSM 

implementation schedule. 

• In May 2003, the DOD Comptroller approved funding of about $4 million 

for the Army’s Integrated Facilities System (IFS). Initially, the Director 

of the BMSI office denied the funding request in part because it was 

noted that the system would be replaced by an enterprise solution. In 

response, the installations and environment domain noted that a final 

system solution had not been determined and stated that if IFS was 

found to be compliant with the “yet to be determined revised business 

process,” it could be designated the enterprisewide solution. The 

response also noted that IFS “might prove to have the best functionality 

and technical capabilities for a DOD real property inventory solution.” 

However, until the department’s BEA becomes more robust, it remains 

unclear if this system will be part of the ultimate system solution. Until 

that decision is made, it is unknown what benefit will be derived from 

further investment in this system. 

43 U.S. General Accounting Office, DOD Systems Modernization: Continued Investment in 

the Standard Procurement System Has Not Been Justified, GAO-01-682 (Washington, D.C.: 

July 31, 2001), and DOD’s Standard Procurement System: Continued Investment Has Yet to 

Be Justified, GAO-02-392T (Washington, D.C.: Feb. 7, 2002).

44 U.S. Department of Defense Office of the Inspector General, Information Technology: 

Allegations Regarding the DoD Education Activity’s Use of the Standard Procurement 

System, D-2003-26 (Arlington, Va.: Nov. 25, 2002). 
Page 34 GAO-04-615 DOD Business Systems

We also identified some instances in which the DOD Comptroller’s 

approval depended on specific actions being taken by a given date. 

However, prior to December 2003, the BMSI office did not have a process in 

place to track and follow up on required actions and did not have 

reasonable assurance that the required actions were taken. For example:

• In April 2003, the DOD Comptroller approved the expenditure of about 

$53 million for the convergence of four separate Navy enterprise 

resources planning solutions into one initiative. This approval was 

subsequent to an approval in February 2003 of about $21 million for the 

continuance of two of the four Navy efforts. The approval 

memorandum outlined three specific actions that needed to be taken 

and established time frames for the completion of each action. As of 

February 2004, BMSI officials were not able to attest to whether these 

actions had been completed. However, the Navy continues to move 

forward with this effort. 

• The DOD Comptroller approved a pilot project for the National Security 

Agency on March 7, 2003, for $13.4 million. The approval depended on 

the completion of an overall planning document that outlined the 

various areas that were to be addressed. This document was to be 

completed by March 16, 2003. As of February 2004, BMSI officials stated 

that only minimal supporting documentation had been provided.

Thus, even for the systems modernization efforts approved by the DOD 

Comptroller, serious questions remain as to whether these investments are 

justified.

BSM and LMP May 

Have Difficulty 

Achieving Cost, 

Schedule, and 

Operational Goals

BSM and LMP were initiated in November 1999 and February 1998, 

respectively, prior to DOD undertaking the BEA and establishing the 

domains. As such, they are not directed toward a corporate solution to 

resolving the department’s long-standing weaknesses in the inventory and 

logistics management areas, such as total asset visibility or an integrated 

systems environment. Both projects are more focused on DLA’s and the 

Army’s respective inventory and logistics management operations. If 

effectively implemented, BSM and LMP are expected to provide benefits 

associated with private industry’s logistics reengineering efforts, such as 

inventory reduction, improved cycle time, improved customer satisfaction, 

and increased response time. Additionally, BSM and LMP are intended to 

improve supply and demand forecast planning, maintenance workload 

planning, provide a single source of data, and improve data quality.
Page 35 GAO-04-615 DOD Business Systems

However, the initial deployment of BSM and LMP did not operate as 

intended and, therefore, did not meet DLA’s and Army’s component-level 

needs. In large part, these operational problems were due to DLA and the 

Army not effectively implementing the disciplined process that are 

necessary to manage the development and implementation of BSM and 

LMP in the areas of requirements management and testing. DLA and Army 

program officials have acknowledged that requirements and testing defects 

were factors contributing to these operational problems as well as 

schedule slippages and cost increases. Further, BSM and LMP have 

accumulated numerous lessons learned and have assembled teams to 

analyze these lessons and to develop an implementation strategy for 

corrective action. Additionally, to their credit, DLA and the Army have 

decided that future deployments of BSM and LMP will not go forward until 

they have reasonable assurance that the deployed systems will operate as 

expected for a given deployment. 

BSM and LMP Are Not 

Corporate Solutions to 

Long-standing Operational 

Problems

Effectively managing and overseeing the department’s $19 billion 

investment in its business systems is key to the successful transformation 

of DOD’s business operations. The transformation also depends on the 

ability of the department to develop and implement business systems that 

provide users and department management with accurate and timely 

information on the results of operations and that help resolve the 

numerous long-standing weaknesses. As DOD moves forward with 

continued development and implementation of its BEA, it needs to ensure 

that the department’s business systems modernization projects are part of a 

corporate solution to preclude the continued proliferation of duplicative, 

stovepiped systems. 

Three of the long-standing problems in logistics and inventory management 

have been related to total asset visibility, integrated systems, and valuation 

of inventory. We found that BSM and LMP will not resolve problems 

associated with total asset visibility and integrated systems and the first 

deployment of LMP did not provide for the valuation of inventory at the 

depot in accordance with federal accounting standards and departmental 

guidance. Details on each of these areas follow. 
Page 36 GAO-04-615 DOD Business Systems

Total Asset Visibility Although BSM and LMP are enterprise resource planning systems based on 

commercial software that incorporates best business practices for logistics 

supply chain management,45 their planned capabilities do not provide a 

corporate solution for total asset visibility—a key gap in DOD’s capabilities 

to track and locate items across the department. A corporate solution for 

total asset visibility depends on the successful development and 

implementation of other systems. The time frame and costs associated 

with these other system projects have not been fully defined. 

To illustrate the lack of asset visibility, in October 2002, a DLA official 

testified that BSM would provide improved control and accountability over 

the Joint Service Lightweight Integrated Suit Technology (JSLIST)—a 

chemical/biological suit. The official stated that the JSLIST suits would be 

included in BSM at the earliest practicable date, which was estimated to be 

December 2003. BSM, however, is not designed to provide the corporate 

total asset visibility necessary to locate and track the suits throughout 

DOD’s supply chain. While the suits are expected to be included in a future 

deployment of BSM, program officials have not yet specified a date when 

they will be included. Even when the suits are included, BSM is designed to 

provide visibility over the suits only within the DLA environment—

something DLA has stated already exists within its current legacy system 

environment. 

As we have previously reported,46 the lack of integrated systems hinders 

DOD’s ability to know how many JSLIST it has on hand and where they are 

located once they leave the DLA warehouse. For example, we found that 

military units that receive JSLIST from DLA warehouses maintained 

inventory data in nonstandard, stovepiped systems that did not share data 

with DLA or other DOD systems. The methods used to control and 

maintain visibility over JSLIST at the units we visited ranged from standalone automated systems, to spreadsheet applications, to pen and paper. 

One military unit we visited did not have any inventory system for tracking 

JSLIST. BSM does not address asset visibility outside of DLA’s supply chain 

for the JSLIST, and thus cannot provide total asset visibility for this critical 

inventory item.

45 An area of business operations that is concerned with the management of material 

planning, material acquisition/procurement, material logistics, and order fulfillment.

46 GAO-02-873T.
Page 37 GAO-04-615 DOD Business Systems

Having the ability to readily locate sensitive items, such as JSLIST, is 

critical, particularly if a defect is found and the items must be recalled. A 

case in point is the JSLIST predecessor, the Battle Dress Overgarment 

(BDO). Over 700,000 of these suits were found to be defective and were 

recalled. Since DOD’s systems did not provide the capability to identify the 

exact location of each suit, a series of data calls were conducted, which 

proved to be ineffective. We reported in September 200147 that DOD was 

unable to locate approximately 250,000 of the defective suits and therefore 

was uncertain if the suits were still in the possession of the military forces, 

or whether they had been destroyed or sold. Subsequently, we found that 

DOD had sold many of these defective suits to the public as excess, 

including 379 that we purchased in an undercover operation.48 In addition, 

DOD may have issued over 4,700 of the defective BDO suits to local law 

enforcement agencies. This is particularly significant because local law 

enforcement agencies are most likely to be the first responders to a 

terrorist attack, yet DOD failed to inform these agencies that using these 

suits could result in death or serious injury. BSM will not provide DOD with 

the capability to readily locate JSLIST for any reason, including the need to 

recall defective suits.

Similar to BSM, LMP will not provide the Army with total asset visibility 

until a suite of other systems has been developed and implemented. 

Specifically, Army officials have stated that LMP will require integration 

with other Army systems that are under development in order to achieve 

total asset visibility within the Army. These additional systems are the 

Product Lifecycle Management Plus (PLM+) and Global Combat Support 

System—Army (GCSS–A). According to the Army, PLM+ is to integrate 

LMP and GCSS–A to create a seamless end-to-end solution for Army 

logistics. According to information provided by the Army, PLM+ was 

initiated in December 2003. No estimates have been developed as to the 

cost of this project, nor has a time frame for development and 

implementation been established. 

47 U.S. General Accounting Office, Chemical and Biological Defense: Improved Risk 

Assessment and Inventory Management Are Needed, GAO-01-667 (Washington, D.C.: 

Sept. 28, 2001).

48 U.S. General Accounting Office, DOD Excess Property: Risk Assessment Needed on 

Public Sales of Equipment That Could Be Used to Make Biological Agents, GAO-04-81TNI

(Washington, D.C.: Oct. 7, 2003).
Page 38 GAO-04-615 DOD Business Systems

The Army has stated that GCSS–A will provide visibility of supplies and 

equipment in storage and in transit. The Army began development of 

GCSS–A in fiscal year 1997 and since then has invested approximately 

$316 million in this effort. In May 2003, the Army decided to pursue a COTS 

solution for GCSS–A rather than continue to develop the system in house. 

The Army recently stated that the total cost of GCSS–A cannot be 

accurately estimated until all of the “to be” business processes are 

identified, which is expected to occur in October 2004. However, the fiscal 

year 2004 capital investment report shows that the Army estimates that it 

will invest over $1 billion in GCSS–A through fiscal year 2009.

To help provide for departmentwide total asset visibility, DLA is 

undertaking the implementation of the Integrated Data Environment (IDE) 

program. According to DLA, this initiative is intended to provide the 

capability for routing data from multiple systems within DLA and DOD into 

one system. According to DLA, the contract was signed in September 2003, 

and IDE is expected to reach full operational capability in August 2007. 

The current estimated cost of the effort is approximately $30 million. 

However, the completion date of August 2007 depends on other 

departmental efforts being completed on time, for example, PLM+, for 

which a completion date has not been established.

Integrated Systems One of the long-standing problems within DOD has been the lack of 

integrated systems. This is evident in the many duplicative, stovepiped 

systems among the 2,274 that DOD reported as its systems environment. 

Lacking integrated systems, DOD will have a difficult time obtaining 

accurate and reliable information on the results of its business operations 

and will continue to rely on either manual reentry of data into multiple 

systems, convoluted system interfaces, or both. These system interfaces 

provide data that are critical to day-to-day operations, such as obligations, 

disbursements, purchase orders, requisitions, and other procurement 

activities. For BSM and LMP, we found that the system interfaces were not 

fully tested in an end-to-end manner, and therefore DLA and Army did not 

have reasonable assurance that BSM and LMP would be capable of 

providing the intended functionality. 

We previously reported49 that Sears and Wal-Mart, recognized as leadingedge inventory management companies, had automated systems that 

electronically received and exchanged standard data throughout the entire 

49 GAO-02-873T. 
Page 39 GAO-04-615 DOD Business Systems

inventory management process, thereby reducing the need for manual data 

entry. As a result, information moves through the data systems with 

automated ordering of inventory from suppliers; receiving and shipping at 

distribution centers; and receiving, selling, and reordering at retail stores. 

Unlike DOD, which has a proliferation of nonintegrated systems using 

nonstandard data, Sears and Wal-Mart require all components and 

subsidiaries to operate within a standard systems framework that results in 

an integrated system and do not allow individual systems development.

For the first deployment, DLA has had to develop interfaces that permit 

BSM to communicate with more than 23 systems, including 3 DFAS, 6 DODwide, and 14 DLA systems. The Army has had to develop 215 interfaces 

that permit LMP to communicate with more than 70 systems, including 13 

DFAS, 6 DLA, 2 Navy, 5 Air Force, and over 24 Army systems. Figures 2 and 

3 illustrate BSM’s and LMP’s numerous required system interfaces. 
Page 40 GAO-04-615 DOD Business Systems

Figure 2: BSM Required System Interfaces

Distribution Standard

System

Defense Automated Address

System

Fresh Fruit and Vegetable Ordering

and Receipt System

DLA Integrated

Database

Web-based Customer Account

Tracking System

DLA Contract Action Reporting

System

Federal Logistics Information

System

Subsistence Total Order and

Receipt Electronic System

Distribution and Pricing

Agreement

Defense Supply Expert

System

Environmental Reporting

Logistics System

Automated Best Value

System

Commercial and

Government Entity

Central

Contractor

Mechanization of Contract

Administration Services

Standard Finance System

Redesign - Subsystem 1

Defense Business Management

Systems

Logistics Management

Program

Joint Total Asset

Visibility

Global Combat Support

System

Uniform Automated Data

Processing System

Stock Control

System

Federal Business

Opportunities

Business Systems

Modernization

DLA systems

Non-DLA systems

Source: GAO analysis based on data provided by DLA.
Page 41 GAO-04-615 DOD Business Systems

Figure 3: Examples of LMP Required System Interfaces

When BSM and LMP became operational, it became evident that the system 

interfaces were not working as intended. Such problems have led BSM, 

LMP, and organizations with which they interface—such as DFAS—to 

perform costly manual reentry of transactions, which can cause additional 

data integrity problems. For example:

Command Commodity

Standard System

Standard Depot

System

Army Electronic Product

System

Depot Maintenance Operations

Planning System

Foreign Military Sales Concurrent

Spare Parts

Joint Hazardous Classification

System

Equipment Release Priority

System

Automated Storage and Retrieval

System

Army Workload and Performance

System

Army Flow

Model

Requisition

Validation

Operating and Support Management

Information System

Work Ordering and Reporting

Communications System

Interfund

Billing

Standard Operations and Maintenance

Army Research and Development

Standard Financial System

Redesign 1

Conventional Ammunition Inventory

Management System

Distribution Standard

System

Combat Ammunition

System

Interservice Materiel Accounting

and Control System

Worldwide Ammunition Reporting

System

Commercial Asset

Visibility

Data Element Management Accounting

and Reporting System

Mechanization of Contract

Administration Services

Automated Time, Attendance and

Production System

Standard Automated Material

Management System

Defense Civilian Payroll

System

Logistics Management

Program

Source: GAO analysis based on data provided by the Army.

Selected Army systems Selected non-Army systems
Page 42 GAO-04-615 DOD Business Systems

• BSM's functional capabilities were adversely affected because a 

significant number of interfaces were still in development or were being 

executed manually once the system became operational. Since the 

design of system interfaces had not been fully developed and tested, 

BSM experienced problems with receipts being rejected, customer 

orders being canceled, and vendors not being paid in a timely manner. 

At one point, DFAS suspended all vendor payments for about 2 months, 

thereby increasing the risk of untimely payments to contractors and 

violating the Prompt Payment Act.50 

• In January 2004, the Army reported that due to an interface failure, LMP 

had been unable to communicate with the Work Ordering and Reporting 

Communications System (WORCS) since September 2003. WORCS is 

the means by which LMP communicates with customers on the status of 

items that have been sent to the depot for repair and initiates 

procurement actions for inventory items. The Army has acknowledged 

that the failure of WORCS has resulted in duplicative shipments and 

billings and inventory items being delivered to the wrong locations. 

Additionally, the LMP program office has stated that it has not yet 

identified the specific cause of the interface failure. The Army is 

currently entering the information manually, which as noted above, can 

cause additional data integrity errors.

While these numerous interfaces are necessary because of the existing 

stovepiped, nonintegrated systems environment, they should have been 

fully developed and tested prior to BSM and LMP being deployed. In 

moving forward with the future deployments of BSM and LMP, it is critical 

that program officials ensure that the numerous system interfaces are 

operating as intended. Additionally, until the business enterprise 

architecture is further developed and DOD has decided which systems will 

be part of the future business systems environment, there is uncertainty as 

to the number of these systems with which BSM and LMP will continue to 

interface. 

Valuation of DOD Inventory Federal accounting standards require inventories to be valued based on 

historical costs or a method that approximates historical costs. DOD’s 

50 The Prompt Payment Act, 31 U.S.C. chapter 39, as implemented in 5 C.F.R. Part 1315 

(2003), provides for agencies, among other things, to pay interest and penalties under 

various circumstances for late payments, generally when payments are not made within 30 

days of the payment due date. 5 C.F.R. §§ 1315.4 and 1315.10-.14 (2003).
Page 43 GAO-04-615 DOD Business Systems

inability to account for and control its huge investment in inventories 

effectively has been an area of major concern for many years. DOD’s 

antiquated, duplicative systems do not capture the information needed to 

comply with federal accounting standards. BSM and LMP are to provide 

DOD the capability to comply with federal accounting standards in the 

valuation of its billions of dollars of inventory. DLA has stated that BSM 

has the capability to compute the value of inventory in accordance with 

federal accounting standards. Based upon information provided by DLA 

and our analysis, we found that the value of the inventory recorded in BSM 

changed each time new items were procured to reflect a moving average 

(historical) cost valuation of the inventory—which is an acceptable method 

permitted by federal accounting standards and is in accordance with DOD’s 

stated policy. 

However, the first deployment of LMP did not have the capability to value 

all inventory in accordance with federal accounting standards. In its 

evaluation of LMP, the Army Audit Agency found that it had the capability 

to compute the value of inventory in accordance with federal accounting 

standards at the command level—CECOM—but not at the depot level. The 

Army decided to proceed with deployment of LMP, recognizing that the 

issue would have to be resolved prior to further deployments to the other 

depots. The Office of the DOD Comptroller has also directed that there is 

to be no further deployment of LMP until the inventory valuation problem 

has been fixed. 

Significant Problems Appeared 

Once BSM and LMP Became 

Operational

BSM and LMP experienced significant problems once they became 

operational at the first deployment sites. Although BSM and LMP were not 

designed to provide a corporate enterprise solution for inventory and 

logistics management, the first deployment did not address DLA’s and 

Army’s component-level operational needs as intended. These problems 

have resulted in schedule slippages and cost increases. Detecting such 

problems after the system is placed into operation leads to costly rework 

due to factors such as (1) fixing the defect, (2) entering transactions 

manually, and (3) adjusting reports manually. Furthermore, the manual 

processes required to enter the transactions and adjust related reports may 

introduce data integrity errors. Our analysis indicated that many of the 

operational problems experienced by DLA and the Army can be attributed 

to their inability to effectively implement the disciplined requirements 

management and testing processes, as discussed in this report. In fact, 

DLA and Army program officials acknowledged that requirements and 

testing defects were factors contributing to the operational problems and 

stated that they are working to develop more effective processes. DLA and 
Page 44 GAO-04-615 DOD Business Systems

the Army recognized that serious operational problems exist and have 

decided that future deployments will not go forward until they have 

assurance that the deployed system operates as expected for a given 

deployment. Operational problems include the following:

• Army and DFAS officials reported that LMP’s operational difficulties at 

CECOM and Tobyhanna Army Depot have resulted in inaccurate 

financial management information. More specifically, the depot is not 

(1) producing accurate workload planning information; (2) generating 

accurate customer bills; and (3) capturing all repair costs, which is 

impeding the Army’s ability to calculate accurate future repair prices. 

These problems can also hinder the Army’s ability to accurately report 

the results of its depot operations and limits customers’ ability to 

develop accurate budget estimates.

• LMP users experienced difficulty in providing contract information to 

MOCAS.51 Due to the operational problems, DFAS was unable to 

electronically process contract modifications and contract payment 

terms and make disbursements to contractors, thereby increasing the 

risk of not making timely payments to contractors and violating the 

Prompt Payment Act. 

• BSM experienced significant data conversion problems associated with 

purchase requisitions and purchase orders that were created in SAMMS. 

Moving the data from SAMMS to BSM proved difficult because BSM 

required more detailed information, which was not identified during the 

requirements phase. This additional information needed to be manually 

entered into BSM, resulting in numerous errors that caused vendors not 

to be recognized and shipments from the depot to be rejected. As a 

result of these problems, additional tables, such as vendor master files, 

were created within BSM to process orders for the converted purchase 

requisitions and purchase orders. 

• BSM users experienced a number of problems, such as incorrect 

information on customer orders, customer orders never being sent, and 

vendor invoices not being paid in a timely manner. 

51 MOCAS maintains contractual information and processes contractor invoices and 

payments and provides its users with information relative to shipments, material receipts, 

and funds availability.
Page 45 GAO-04-615 DOD Business Systems

These operational problems have been at least partially responsible for 

schedule slippages and cost increases for both systems. In the case of 

BSM, it was originally scheduled to achieve full operational capability 

(FOC)52 in September 2005. However, BSM is now expected to reach FOC 

during the second quarter of fiscal year 2006. Further, BSM’s estimated cost 

has increased by approximately $86 million since the program was initiated 

in November 1999. Figure 4 shows the schedule slippages and cost 

increases. 

52 The FOC date represents the date that a system will be operating at all intended locations.
Page 46 GAO-04-615 DOD Business Systems

Figure 4: BSM Schedule Slippages and Cost Increases

FY 05

FY 06

Dollars in millions FOC schedule

Cost estimate

FOC schedule

November

1999

approval

Source: GAO analysis based on data provided by DLA.

July

2003

$850

2nd

quarter

FY 06

July

2000

4th

quarter

FY 05

$764

0

100

200

300

400

500

600

700

800

900
Page 47 GAO-04-615 DOD Business Systems

Part of the schedule slippage and cost increase can be attributed to 

problems encountered with DLA’s effort to implement SPS, which was to 

provide BSM with the required procurement functionality. Since a large 

part of DLA’s overall business is the procurement of inventory items, 

difficulties in establishing a viable system solution for this critical aspect of 

its business seriously impaired DLA’s ability to meet BSM’s schedule and 

cost goals. We have previously reported that DOD’s ineffective 

management approach for SPS put the project at risk.53

During the initial implementation of BSM, program officials found that SPS 

did not have the capability to handle DLA’s large volume of procurement 

requisitions. According to BSM program officials, DLA will spend about 

$9 million to resolve the shortcoming in SPS. Since SPS will not meet its 

needs when BSM is fully operational at all sites, DLA has negotiated with 

the BSM software developer to purchase new procurement software as the 

long-term solution. DLA estimated that this software would cost 

approximately $30 million, which contributed to the increased BSM 

program costs. 

Similar to BSM, LMP has also experienced schedule slippages and cost 

increases since the project was approved in February 1998. Figure 5 shows 

the schedule slippages and cost increases. 

53 GAO-01-682 and GAO-02-392T.
Page 48 GAO-04-615 DOD Business Systems

Figure 5: LMP Schedule Slippages and Cost Increases

As shown in figure 5, as of March 2004, the current estimated cost of LMP is 

over $1 billion, with more than $400 million spent to fund the project 

during the past 5 years. In October 1999, we reported54 that the Army’s 

estimated cost of LMP over the 10-year period of the contract was 

approximately $421 million. However, as discussed in that report, the 

$421 million estimate did not include an additional $30.5 million per 

contract year that would be needed for data processing. The amount 

54 U.S. General Accounting Office, DOD Competitive Sourcing: Plan Needed to Mitigate 

Risks in Army Logistics Modernization Program, GAO/NSIAD-00-19 (Washington, D.C.: 

Oct. 4, 1999).

2003

2004

Dollars in millions FOC schedule

Cost estimate

FOC schedule

February

1999

approval

Source: GAO analysis based on data provided by the Army.

0

200

400

600

800

1,000

1,200

FY 05

or later

March

2004

$1,051

Adjusted

estimate

$400

spent

as of

3/04

$856

FY 04
Page 49 GAO-04-615 DOD Business Systems

allowed for data processing in the original estimate was based directly on 

the percentage of data processing performed by the contractor, with the 

Defense Information Systems Agency performing the residual processing. 

Further, the original estimate was based on a 10-year contract and the 

current estimate is based on a 12-year contract, and each additional 

contract year can be as much as $65 million. Considering these two 

factors, a more accurate cost estimate in 1999 would have been 

approximately $856 million. 

In our discussions with LMP program officials, additional factors were 

identified that have caused the cost of LMP to increase to over $1 billion. 

For example, since the initiation of LMP, the Army has directed that the 

program be (1) integrated with the Army Single Stock Fund effort and 

(2) extended to the Army depot maintenance operations. These additional 

capabilities were not part of the standard LMP software package and were 

not envisioned to be part of LMP when the original cost estimate was 

developed. Therefore, additional development and implementation costs 

were incurred and increased the overall cost of the program by over 

$91 million. Further, the LMP program manager acknowledged that the 

1999 estimate did not include adequate DOD program management costs. 

The additional program management costs are estimated to be about 

$104 million and include such items as personnel and travel. 

Additionally, as shown in figure 5, the original FOC date was scheduled for 

fiscal year 2004. However, because of the operational problems that were 

identified with the first deployment, the Army is in the process of 

developing a new deployment schedule, and as of March 2004, no future 

deployment dates had been established.
Page 50 GAO-04-615 DOD Business Systems

Project Management of BSM 

and LMP Did Not Follow 

Disciplined Processes

The problems we identified in the areas of schedule, cost, and performance 

of the two systems can be linked, at least in part, to DLA’s and the Army’s 

failure to follow disciplined processes in the key areas of requirements 

management and testing. While there may have been contributing factors 

in other areas of the system acquisition efforts, we selected these two areas 

because our assessments, as well as others, have shown that agencies do 

not invest adequately for success in these areas, which form the foundation 

for success or failure. Lacking such disciplined processes exposes these 

projects to the unnecessary risk that costly rework will be required, which 

in turn, will continue to adversely affect these projects’ cost, schedule, and 

performance goals. Our analysis of selected BSM and LMP key 

requirements55 and testing processes found that (1) the functionality to be 

delivered was not adequately described or stated to allow for quantitative 

evaluation; (2) the traceability among the various process documents (e.g., 

operational requirements documents, functional or process scenarios, and 

test cases) was not maintained; and (3) system testing was ineffective. 

Because of the weaknesses in these key processes, program officials do not 

have reasonable assurance that (1) the level of functionality that will be 

provided by a given deployment is understood by the project team and 

users and (2) the resulting system will provide the expected functionality. 

We have previously reported56 concerns with BSM’s lack of a documented 

requirements development and management plan. Such a plan provides a 

road map for completing important requirements development and 

management activities. Without it, projects risk either not performing 

important tasks or not performing them effectively. Historically, projects 

that experience the types of requirements and testing process weaknesses 

found in BSM and LMP have a high probability of not meeting schedule, 

cost, and performance objectives. 

55 BSM and LMP have identified and documented 202 and 293 system requirements, 

respectively. For BSM, we reviewed 13 requirements related to finance, order fulfillment, 

planning, and procurement. For LMP, we reviewed 12 requirements related to planning and 

budget development, asset management, inventory management, and perform maintenance 

analysis and planning.

56 U.S. General Accounting Office, Information Technology: Inconsistent Software 

Acquisition Processes at the Defense Logistics Agency, GAO-02-9 (Washington, D.C.: 

Jan. 10, 2002).
Page 51 GAO-04-615 DOD Business Systems

Disciplined Processes Are Key to 

Successful System Development 

and Implementation

Disciplined processes have been shown to reduce the risks associated with 

software development and acquisition efforts to acceptable levels and are 

fundamental to successful systems acquisition. Said another way, a 

disciplined software development and acquisition process can maximize 

the likelihood of achieving the intended results (performance) within 

established resources (costs) on schedule. Although a “standard 

cookbook” of practices that will guarantee success does not exist, several 

organizations, such as the Software Engineering Institute57 and the Institute 

of Electrical and Electronics Engineers (IEEE),58 and individual experts 

have identified and developed the types of policies, procedures, and 

practices that have been demonstrated to reduce development time and 

enhance effectiveness. Key to having a disciplined system development 

effort is to have disciplined processes in multiple areas, including project 

planning and management, requirements management, configuration 

management, risk management, quality assurance, and testing. Effective 

processes should be implemented in each of these areas throughout the 

project’s life cycle since constant changes occur. In reviewing BSM and 

LMP, we focused on requirements management and testing.

Requirements represent the blueprint that system developers and program 

managers use to design, develop, and acquire a system. Requirements 

should be consistent with one another, verifiable, and directly traceable59 to 

higher-level business or functional requirements. It is critical that 

requirements be carefully defined and that they flow directly from the 

organization’s concept of operations (how the organization’s day-to-day

57 SEI is a federally funded research and development center operated by Carnegie Mellon 

University and sponsored by DOD. The SEI objective is to provide leadership in software 

engineering and in the transition of new software engineering technology into practice.

58 IEEE develops standards for a broad range of global industries, including the IT and 

information assurance industries.

59 Traceability allows the user to follow the life of the requirement both forward and 

backward through these documents and from origin through implementation. Traceability is 

also critical to understanding the parentage, interconnections, and dependencies among the 

individual requirements. This information in turn is critical to understanding the impact 

when a requirement is changed or deleted.
Page 52 GAO-04-615 DOD Business Systems

operations are or will be carried out to meet mission needs).60 Improperly 

defined or incomplete requirements have been commonly identified as a 

cause of system failure and systems that do not meet their costs, schedules, 

or performance goals. Without adequately defined requirements that have 

been properly reviewed and tested, significant risk exists that the system 

will need extensive and costly changes before it will achieve its intended 

capability. 

According to IEEE—a leader in defining the best practices for such 

efforts—good requirements have several characteristics, including the 

following:61

• The requirements fully describe the software functionality to be 

delivered. Functionality is a defined objective or characteristic action of 

a system or component. For example, for inventory, key functionality as 

previously discussed includes total asset visibility and valuation in 

accordance with federal accounting standards.

• The requirements are stated in clear terms that allow for quantitative 

evaluation. Specifically, all readers of a requirement should arrive at a 

single, consistent interpretation of it.

• Traceability among various requirement documents is maintained. 

Requirements for projects can be expressed at various levels depending 

on user needs. They range from agencywide business requirements to 

increasingly detailed functional requirements that eventually permit the 

software project managers and other technicians to design and build the 

required functionality in the new system. Adequate traceability ensures 

that a requirement in one document is consistent with and linked to 

applicable requirements in another document.

Industry best practices, as well as DLA’s and Army’s own system planning 

documents, indicate that detailed system requirements should be 

60 According to IEEE Standard 1362-1998, a concept of operations document is normally one 

of the first documents produced during a disciplined development effort since it describes 

system characteristics for a proposed system from the user's viewpoint. This is important 

since a good concept of operations document can be used to communicate overall 

quantitative and qualitative system characteristics to the user, developer, and other 

organizational elements. This allows the reader to understand the user organizations, 

missions, and organizational objectives from an integrated systems point of view.

61 IEEE 830-1998.
Page 53 GAO-04-615 DOD Business Systems

documented to serve as the basis for effective system testing. Both 

projects documented their high-level or operational requirements and had 

designed hierarchical processes for documenting the various requirements 

and related documents needed to build and design tests at the transaction 

level as well as tests of chains of transactions that flow together to support 

multiple business functions and processes. 

Because requirements provide the foundation for system testing, 

specificity and traceability defects in system requirements preclude an 

entity from implementing a disciplined testing process. That is, 

requirements must be complete, clear, and well documented to design and 

implement an effective testing program. Absent this, an organization is 

taking a significant risk that its testing efforts will not detect significant 

defects until after the system is placed into production. Industry 

experience indicates that the sooner a defect is recognized and corrected, 

the cheaper it is to fix. As shown in figure 6, there is a direct relationship 

between requirements and testing.
Page 54 GAO-04-615 DOD Business Systems

Figure 6: Relationship between Requirements Development and Testing

Although the actual testing activities occur late in the development cycle, 

test planning can help disciplined activities reduce requirements-related 

defects. For example, developing conceptual test cases based on the 

requirements derived from the concept of operations and functional 

requirements stages can identify errors, omissions, and ambiguities long 

User acceptance testing

Verifies that system operates

correctly with operational hardware

and meets users' needs

Concept of operations

Specifies how system is used in

operation

System acceptance testing

Verifies that the complete system

satisfies functional requirements

Functional requirements

Specifies the high-level functions

of the system

Integration testing

Verifies that units of software, when

combined, work together as

intended

Design requirements

Specifies the tasks each software

component must perform

Unit testing

Verifies that each component of the

software faithfully implements the

detailed design

Detailed design and coding

Specifies the detailed steps for

each software component and

implements those steps

Stages of system development Stages of testing

Source: GAO.

For projects such

as ERPs, these

items are normally

handled by the

COTS vendor
Page 55 GAO-04-615 DOD Business Systems

before any code is written or a system is configured. Disciplined 

organizations also recognize that planning testing activities in coordination 

with the requirements development process has major benefits.

BSM and LMP Functionality to 

Be Delivered Was Not 

Adequately Described

Our analysis and evaluation of DLA’s and the Army’s requirements 

management and testing processes found that BSM and LMP program 

officials did not effectively implement the disciplined processes associated 

with requirements management and testing in developing and 

implementing their systems. We identified numerous instances in which 

each documented requirement used to design and test the system did not 

build upon the next in moving through the hierarchy. Specifically, the 

requirements (1) lacked the specific information necessary to understand 

the required functionality that was to be provided and (2) did not describe 

how to determine quantitatively, through testing or other analysis, whether 

the systems would meet DLA’s and Army’s respective needs. One reason 

that users have not been provided with the intended systems capabilities is 

because of the breakdown in the requirements management process. As a 

consequence, DLA and the Army have been forced to implement errorprone, time-consuming manual workarounds as a means to minimize 

disruption to critical operations. DLA and Army officials acknowledged 

that improvements in their requirements management processes are 

needed and have stated that they are working to develop more specific 

requirements that better describe required system functionality and 

support more effective system testing.
Page 56 GAO-04-615 DOD Business Systems

DLA’s basic hierarchical approach to developing BSM requirements was to 

(1) define high-level requirements, commonly referred to as operational 

requirements; (2) define more specific blueprint requirements; (3) develop 

functional scenarios; (4) define functional designs; (5) define technical 

designs; (6) create test cases; and (7) define test conditions. Similarly, the 

Army’s basic approach to developing LMP system requirements was to 

(1) develop a blueprint of its business processes following the Integration 

Definition for Function modeling standards established by the National 

Institute of Standards and Technology62 and IEEE, (2) define high-level 

requirements, (3) develop process scenarios, (4) develop test cases, and 

(5) use subject matter experts63 to determine whether the application met 

the business processes envisioned by the users and as developed by a 

contractor to provide the functionality currently provided by the Army’s 

existing systems. If effectively implemented, either methodology can be 

used to develop and implement a system. The key is that each step of the 

process builds upon the previous one. Accordingly, unidentified defects in 

one step migrate to the subsequent steps where they are more costly to fix 

and increase the risk that the project will experience adverse impacts on its 

schedule, cost, and performance objectives. The following are examples of 

the BSM and LMP requirements that we reviewed that lacked the 

specificity necessary to describe the functionality to be delivered. 

• One BSM requirement stated that the system should be able to reconcile 

inventory between the depots (where inventory items are located) and 

the inventory control point64 and that the reconciliation should be 

performed daily. It also stated that the inventory control point must 

request that the depot perform a physical count once inventory 

differences have met certain criteria, such as dollar value or large 

quantities. However, the various requirement documents did not 

(1) define what is meant by “large” or (2) specify how the notification of 

62 Federal Information Processing Standard Publication 183.

63 Using subject matter experts depends on them being available throughout the process and 

on whether the experts remember the undocumented requirements completely and 

consistently. Specifically, an individual assigned to develop a test case is relied on to 

understand the detailed requirements associated with all facets of that test case and then to 

ensure that the test will provide the information needed to understand whether the 

functionality was actually provided.

64 An inventory control point is an organizational unit or activity within a DOD supply 

system assigned a primary responsibility for materiel management of a group of items either 

for a particular service or for DOD as a whole.
Page 57 GAO-04-615 DOD Business Systems

the requirement to conduct the inventory was to be accomplished, for 

example, by e-mail. Without such specificity, it is unclear how this 

requirement could be tested since an evaluator would not be able to 

design a test of the trigger for a physical count because the quantity 

difference had not been defined. 

• For LMP, the operational activity “Manage Assets” did not adequately 

describe how to maintain visibility over all assets. Specifically, the 

requirement states that the system “maintains wholesale and retail asset 

balances and provides visibility of On-Hand Asset Balances by 

identifying assets being repaired, modified, or tested at depots, 

contractor and intermediate level repair facilities as well as those onhand at storage sites, retail activities and other services.” However, 

there is no further information that specifies how asset visibility is 

maintained or the sources that are to be used in accumulating these 

data. Therefore, the risk is increased that the Army will not be able to 

maintain asset visibility over all Army-managed assets. In fact, in 

January 2004, the Army reported that it was having difficulty obtaining 

accurate data related to material movement (in-transit), assets received, 

and assets issued or shipped. 

Requirements Traceability Was 

Not Maintained 

In reviewing the process documents that DLA and Army used to define 

their requirements, that is, operational requirement, functional scenario, 

functional design, technical design, and test case, we found that the 

forward and backward traceability defined by IEEE, and as described by 

BSM’s and LMP’s hierarchical approaches and management plan, was not 

always maintained. Traceability allows the user to follow the life of the 

requirement both forward and backward through these documents and 

from origin through implementation. Traceability is also critical to 

understanding the parentage, interconnections, and dependencies among 

the individual requirements. This information, in turn, is critical to 

understanding the impact when a requirement is changed or deleted. 

Without an effective traceability approach, it is very difficult to perform 

actions such as (1) accurately determining the impact of changes and 

making value-based decisions when considering requirement changes, 

(2) maintaining the system once it goes into production, (3) tracking the 

project's progress, and (4) understanding the impact of a defect discovered 

during testing. For almost all of the requirements we analyzed, we found 

that traceability was not maintained. For example:

• An operational requirement stated that BSM maintain the effective date 

for pricing information. The subsequent requirements document stated 
Page 58 GAO-04-615 DOD Business Systems

that all amendments/modifications to the award instrument—purchase 

orders and requisitions—should be documented on the prescribed 

General Services Administration form. In our analysis, we were only 

able to trace portions of the requirements through BSM’s hierarchical 

process. Since traceability was not maintained through the key 

documents, it was unclear why the testing documents included 

requirements that were not included in the functional scenarios, 

technical design, or test conditions, since these documents should have 

provided the detailed information necessary to test the requirements. 

Further, since traceability is lacking, it is uncertain how DLA will ensure 

that BSM will meet this requirement. 

• One capability of LMP is to support workload planning for the Army’s 

depot maintenance facilities. Data related to scheduled and historical 

depot maintenance activities that should be considered in developing 

budget requirements, such as assets due in for repair or maintenance, 

price data, assets in stock, and maintenance schedules, were included in 

the requirement. However, we found that only the prior month’s sales 

data were used in designing the test case—not the information specified 

in the requirement. As a result, the risk is increased that LMP is 

determining workload-planning requirements for the Army’s depot 

maintenance facilities using incorrect data. This resulted in the Army 

reporting in January 2004 that Tobyhanna Army Depot was unable to 

develop its working capital fund budget submissions for its operations 

and that it will have to perform complex manual calculations to satisfy 

its budgetary planning requirements.

System Testing Was Not 

Effective

BSM and LMP did not implement disciplined testing activities. Not 

carrying out this recognized best practice materially increases the risk that 

defects would not be detected until the systems were placed into 

production and that costly rework will be needed to satisfy end-user 

requirements, including materiel readiness in support of military 

operations. Testing is the process of executing a program with the intent of 

finding errors.65 Furthermore, if a requirement has not been adequately 

defined, it is unlikely that a test will discover a defect. System testing is a 

critical process utilized by disciplined organizations and improves an 

entity’s confidence that the system will satisfy the requirements of the end 

65 U.S. General Accounting Office, Indian Trust Fund: Challenges Facing Interior’s 

Implementation of New Trust Asset and Accounting Management System, GAO/T-AIMD99-238 (Washington, D.C.: July 14, 1999).
Page 59 GAO-04-615 DOD Business Systems

user and will operate as intended. Since requirements provide the 

foundation for system testing, requirement defects discussed earlier, such 

as the lack of specificity, significantly impaired and will continue to impair 

the ability of DLA and the Army to detect defects during system testing. As 

a result of requirement defects and ineffective testing, DLA and the Army 

testing activities did not achieve the important goal of reducing the risk 

that BSM and LMP would not operate as intended. For example:

• One BSM requirement involved preparing customer payments. The 

system, according to the test case, was required to (1) prepare a 

summary bill and (2) present the sales summary report in federal supply 

class sequence. The actual result for one test stated that the system 

passed this test even though only one item was used to generate the 

summary bill. It was unclear from this test case whether the system 

(1) could summarize multiple items and (2) had any limitations on the 

number of items that could be summarized. Furthermore, the test that 

evaluated the sorting of items by federal supply class divided the cost of 

the sales summary report by two. If this result matched the expected 

result, BSM passed the test. However, documentation was not available 

to explain why the item cost needed to be divided by two. Based on our 

review of the test cases linked to this requirement, we could not validate 

that the requirement had been adequately tested. Therefore, DLA does 

not have reasonable assurance that BSM can perform this required 

functionality. 

• Based on our analysis of LMP’s December 2003 and January 2004 project 

status reports, we found that the Army continued to experience 

problems with the accuracy of data related to budgeting; workload 

planning and forecasting and depot maintenance operations; and 

accounting records such as customer orders, purchase orders and 

requisitions, obligations, and disbursements. DFAS and Army officials 

acknowledged that these problems were attributable to relying on 

subject matter experts to develop tests for their respective functional 

areas, such as budgeting, accounting, and workload planning, and not 

performing testing end to end across the various functional areas. 

Rather, the testing was stovepiped in that subject matter experts 

performed tests for their own respective areas. 
Page 60 GAO-04-615 DOD Business Systems

Accuracy of Financial 

Reporting May Not Be 

Improved by BSM and LMP 

As a result of the specific problems discussed in this report related to BSM 

and LMP, such as the lack of total asset visibility, DLA and the Army cannot 

be assured that BSM and LMP will routinely generate timely, accurate, and 

useful financial information. The inaccuracy and unreliability of financial 

information has been a long-standing DOD weakness. As mentioned 

previously, BSM and LMP rely on information received from and sent 

through the various systems. However, the interfaces with these multiple 

systems were not fully developed, nor were they tested when BSM and 

LMP become operational. As a result, DLA and the Army do not have 

reasonable assurance that their respective systems are capable of 

providing the intended capability. In fact, the reported operational 

problems clearly indicate that BSM and LMP are not providing accurate 

data. For example, the manual workarounds that were required to 

compensate for the data conversion problems associated with SAMMS 

caused additional errors, which affected the accuracy of data produced. In 

the case of LMP, the Army has acknowledged that accurate information on 

its depot operations is not readily available. This problem severely impairs 

the Army’s ability to develop accurate prices for its depot operations. 

Inaccurate prices could result in customers being charged too much or too 

little for the services provided. Furthermore, the overall concerns we 

raised with regard to DLA and the Army not following disciplined 

processes in the key areas of requirements management and testing further 

expose BSM and LMP to unnecessary risks. Specifically, the resulting 

systems will not provide the accurate and complete information that is 

crucial to making informed decisions and controlling assets so that DOD’s 

mission and goals are efficiently and effectively accomplished. 

Further, although DLA and the Army have asserted that BSM and LMP, 

respectively, are compliant with the requirements of the Federal Financial 

Management Improvement Act of 199666 (FFMIA), we have concerns with 

the methodology followed in reaching that conclusion. FFMIA builds on 

the foundation laid by the Chief Financial Officers Act (CFO) of 199067 by 

emphasizing the need for agencies to have systems that can generate 

reliable, useful, and timely information with which to make fully informed 

decisions and to ensure accountability on an ongoing basis. FFMIA 

66 Federal Financial Management Improvement Act of 1996, Pub. L. No. 104-208, div. A., 

§101(f) title VIII, 110 Stat. 3009, 3009-389 (Sept. 30, 1996).

67 Pub. L. No. 101-576, 104 Stat. 2838 (Nov. 15, 1990), (codified, as amended, in scattered 

sections of title 31, United States Code).
Page 61 GAO-04-615 DOD Business Systems

requires the 23 major departments and agencies covered by the CFO Act to 

implement and maintain financial management systems that comply 

substantially with (1) federal financial management systems requirements, 

(2) applicable federal accounting standards,68 and (3) the U.S. Government 

Standard General Ledger (SGL)69 at the transaction level.

DLA’s and the Army’s assertions are based upon self-assessments of the 

financial management requirements that were reviewed by independent 

parties. For both systems, testing of transactions was not performed to 

validate that they would be able to process the data as intended. For 

example, in the case of BSM, for one requirement the contractor stated that 

“a sample of transactions were reviewed, [and] it appears that BSM 

properly records transactions consistent with the SGL posting rules.” 

However, we found no indication that this requirement was tested, and 

therefore, we cannot conclude whether BSM has the capability to meet this 

requirement. 

In the case of LMP, we found that the Army relied upon Joint Financial 

Management Improvement Program (JFMIP)70 testing for 147 requirements 

because JFMIP had validated these requirements when it tested the 

vendor’s commercial software used for LMP during fiscal year 1999. JFMIP 

testing should not be considered a substitute for individual system testing 

of the actual data that will be used by the entity. Further, JFMIP’s tests of 

the software do not address entity-specific integrated tests of end-to-end 

transactions or system interfaces. Because the Army had to make 

modifications to the basic commercial software package to accommodate 

some of its business operations, the Army cannot be assured, without 

retesting, that these 147 requirements will produce the intended results. 

68 The American Institute of Certified Public Accountants recognizes the federal accounting 

standards promulgated by the Federal Accounting Standards Advisory Board as generally 

accepted accounting principles.

69 The SGL provides a standard chart of accounts and standardized transactions that 

agencies are to use in all their financial systems. 

70 JFMIP is a joint and cooperative undertaking of the Department of the Treasury, the 

General Accounting Office, the Office of Management and Budget, and the Office of 

Personnel Management working in cooperation with each other and other agencies to 

improve financial management practices in government. The Program Management Office, 

managed by the Executive Director of JFMIP, tests vendor COTS packages and certifies that 

they meet certain federal financial management systems requirements for core financial 

systems. 
Page 62 GAO-04-615 DOD Business Systems

Without adequate documentation to support testing of the FFMIA 

requirements and based on our findings, it is questionable whether BSM 

and LMP are substantially compliant with FFMIA. As a result, DLA and the 

Army cannot provide reasonable assurance that BSM and LMP will 

routinely generate timely, accurate, and useful information with which to 

make informed decisions and to ensure accountability on an ongoing basis. 

Conclusions DOD has made limited progress in achieving effective management 

oversight, control, and accountability over its $19 billion in business system 

investments. As a result, DOD cannot provide Congress reasonable 

assurance that the billions of dollars being spent annually on system 

modernizations are not being wasted on projects that will perpetuate the 

current costly, nonintegrated, duplicative systems environment. Our two 

cases studies—BSM and LMP—are prime examples of DOD business 

system modernization projects costing billions of dollars that are not 

directed toward a corporate solution for resolving some of DOD’s longstanding financial and inventory management problems. Rather, these 

efforts are more narrowly focused on DLA’s and the Army’s business 

operations, but even within that more restricted scope, weaknesses in 

project management have resulted in problems in delivering the intended 

capabilities. As the department moves forward with the continued 

development and implementation of the business enterprise architecture, it 

is critical that actions be taken to gain more effective control over business 

system funding. Maintaining the status quo of permitting each of the 

military services and DOD agencies to manage and oversee its business 

systems investments only serves to perpetuate the existing nonintegrated 

and duplicative systems environment and continues to impede the 

department’s overall transformation as envisioned by the Secretary of 

Defense.

Matters for 

Congressional 

Consideration

The manner in which business system funding is currently controlled 

hampers the development and implementation of broad-based, integrated 

corporate system solutions to address DOD-wide problems. Each military 

service and defense agency receives its own funding and is largely 

autonomous in deciding how to spend these funds, thereby enabling 

multiple system approaches to common problems. This funding structure 

has contributed to the duplicative, nonintegrated, error-prone systems 

environment that exists today. To improve management oversight, 
Page 63 GAO-04-615 DOD Business Systems

accountability, and control of the department’s business systems funding, 

Congress may wish to consider the following four legislative initiatives: 

• Assign responsibility for the planning, design, acquisition, deployment, 

operation, maintenance, modernization, and oversight of business 

systems to domain leaders (e.g., the Under Secretary of Defense for 

Acquisition, Technology and Logistics and the DOD CIO).

• Direct the Secretary of Defense, in coordination with the domain 

leaders, to develop a defense business system budget that (1) identifies 

each business system for which funding is being requested, (2) identifies 

all funds by appropriation type and whether they are for current 

services or modernization, and (3) provides justification for expending 

funds on system(s) that are not in compliance with the department’s 

business enterprise architecture.

• Appropriate funds to operate, maintain, and modernize DOD’s business 

systems to domain leaders rather than the military services and defense 

agencies.

• Direct that each domain establish a business system investment review 

board that is to be composed of representatives from the military 

services and defense agencies who will be responsible for review and 

approval of all business system investments.

Recommendations for 

Executive Action

To help improve the department’s (1) control and accountability over its 

business systems investments and (2) future deployments of BSM and LMP, 

we are making the following four recommendations. We recommend that 

the Secretary of Defense direct: 

• The Under Secretary of Defense (Comptroller) and the Assistant 

Secretary of Defense for Networks and Information Integration to 

develop a standard definition for DOD components to use to identify 

business systems.

• The Assistant Secretary of Defense for Networks and Information 

Integration to expand the existing IT Registry to include all business 

systems.

• The Under Secretary of Defense (Comptroller) to establish a mechanism 

that provides for tracking all business systems modernization 
Page 64 GAO-04-615 DOD Business Systems

conditional approvals to provide reasonable assurance that all specific 

actions are completed on time. 

• The Director, Defense Logistics Agency, and the Commanding General, 

Army Materiel Command, to take the following actions:

• Develop requirements that contain the necessary specificity to 

reduce requirements-related defects to acceptable levels. The 

requirements management process used to develop and document 

the requirements should be adequate to ensure that each requirement 

(1) fully describes the functionality to be delivered; (2) includes the 

source of the requirement; (3) is stated in unambiguous terms that 

allow for quantitative evaluation; and (4) is consistent, verifiable, and 

traceable.

• Conduct thorough testing before (1) making further deployment 

decisions and (2) adding functionality to existing deployment 

locations.

Agency Comments and 

Our Evaluation

We received written comments on a draft of this report from the Acting 

Under Secretary of Defense (Comptroller) (see app. II). DOD agreed with 

our four recommendations to the Secretary of Defense and two of the four 

matters for congressional consideration. With regard to the 

recommendations to the Secretary of Defense, the department identified 

actions it has under way and planned to address the concerns discussed in 

the report. For example, the department stated that a system has been 

developed that will track all business systems modernization conditional 

approvals until all required actions are completed. In addition, the 

department acknowledged that the initial implementations of BSM and 

LMP experienced problems that could be attributed to the lack of adequate 

requirements determination and system testing. To address these 

inadequacies, the department noted that requirements analysis had been 

expanded to include greater specificity and to require the successful 

completion of comprehensive testing prior to further implementation of 

either system. The department also stated that industry best practices 

would be followed. 

With regard to our matters for congressional consideration, the department 

disagreed that (1) responsibility for the planning, design, acquisition, 

deployment, operation, maintenance, modernization, and oversight of 

business systems be assigned to domain leaders (e.g., the Under Secretary 
Page 65 GAO-04-615 DOD Business Systems

of Defense for Acquisition, Technology and Logistics and the DOD CIO) 

and (2) funds to operate, maintain, and modernize DOD’s business systems 

be appropriated to domain leaders rather than the military services and 

defense agencies. On the first matter, the department stated that it is 

developing its business enterprise architecture and its business IT 

investment management structure and that these structures will provide 

the necessary management and oversight responsibility. DOD also noted 

that business system portfolio management would be an integral part of its 

oversight efforts. Further, DOD noted that the domain leaders will work 

closely with component acquisition executives and the DOD CIO, who have 

statutory responsibilities for IT related investment activities.

We continue to believe that Congress may wish to consider assigning to the 

domains the responsibility for the planning, design, acquisition, 

deployment, operation, maintenance, modernization, and oversight of 

business systems. DOD components being responsible for these functions 

has resulted in the existing business system environment of at least 2,274 

systems that are not capable of providing DOD management and Congress 

accurate, reliable, and timely information on the results of the department’s 

vast operations. DOD has recently stated that the actual number of 

systems could be twice the amount currently reported.71 Further, because 

the various DOD components are largely autonomous, despite DOD’s 

assertion that component acquisition executives will work more closely 

with domain leaders under current statutory structure, there is no incentive 

for them to seek corporate solutions to problems. Our two case studies—

BSM and LMP—clearly demonstrate that these two system modernization 

efforts are not directed toward a corporate solution to resolving the 

department’s long-standing weaknesses in areas such as inventory and 

logistics management. Within the current departmental organization 

structure, DOD components are able to develop multiple system 

approaches to common problems. 

With regard to the funding being provided to the domains, the department 

stated that the portfolio management process being established—to 

include investment review boards—would provide the appropriate control 

and accountability over business system investments. DOD also noted that 

beginning with the fiscal year 2006 budget review process, the domains will 

71 U.S. General Accounting Office, Department of Defense: Further Actions Needed to 

Establish and Implement a Framework for Successful Business Transformation, GAO-04-

626T (Washington, D.C.: Mar. 31, 2004).
Page 66 GAO-04-615 DOD Business Systems

be actively involved in business system investment decisions. While the 

establishment of the investment review boards is consistent with our 

previous recommendations, we continue to believe that appropriating 

funds for DOD business systems to the domains will significantly improve 

accountability over business system investments. DOD’s comments 

indicate that the domains will be more accountable for making business 

system investment decisions, but unless they control the funding, they will 

not have the means to effect real change. Continuing to provide business 

system funding to the military services and defense agencies is an example 

of the department’s embedded culture and parochial operations. As a 

result of DOD’s intent to maintain the status quo, there can be little 

confidence that it will not continue to spend billions of dollars on 

duplicative, nonintegrated, stovepiped, and overly costly systems that do 

not optimize mission performance and accountability and, therefore, do 

not support the department’s transformation goals.

As agreed with your offices, unless you announce the contents of this 

report earlier, we will not distribute it until 30 days after its date. At that 

time, we will send copies to the Chairmen and Ranking Minority Members, 

Senate Committee on Armed Services; Subcommittee on Defense, Senate 

Committee on Appropriations; House Committee on Armed Services; 

Subcommittee on Defense, House Committee on Appropriations; Senate 

Committee on Governmental Affairs; and House Committee on 

Government Reform. We are also sending copies to the Director, Office of 

Management and Budget; the Under Secretary of Defense (Comptroller); 

the Under Secretary of Defense (Acquisition, Technology and Logistics); 

the Assistant Secretary of Defense (Network and Information Integration); 

the Director, Defense Logistics Agency; and the Commanding General, 

Army Materiel Command. Copies of this report will be made available to 

others upon request. The report is also available at no charge on GAO’s 

Web site at http://www.gao.gov. 

If you or your staff have any questions on matters discussed in this report, 

please contact Gregory D. Kutz at (202) 512-9505 or kutzg@gao.gov or 
Page 67 GAO-04-615 DOD Business Systems

Keith A. Rhodes at (202) 512-6412 or rhodesk@gao.gov. GAO contacts and 

key contributors to this report are listed in appendix V. 

Gregory D. Kutz

Director 

Financial Management and Assurance

Keith A. Rhodes

Chief Technologist

Applied Research and Methodology Center for Engineering and Technology
Page 68 GAO-04-615 DOD Business Systems

Appendix I

Scope and Methodology ApApenednxidexiIs

We reviewed the Department of Defense’s (DOD) $28 billion fiscal year 

2004 information technology (IT) budget request to determine what portion 

of the budget relates to DOD business systems. We reviewed the budget to 

determine, of the approximately $19 billion related to the department’s 

business systems, the amount allocated for operation, maintenance, and 

development. Additionally, we reviewed DOD’s business systems 

inventory, as reported by the department in April 2003, to ascertain if the 

systems were identified in the budget request. To obtain an overview of 

how an IT budget request is developed, we also met with officials in the 

offices of the DOD Comptroller and DOD Chief Information Officer (CIO), 

as well as CIO and financial management officials from the military 

services.

To determine the effectiveness of DOD’s control and accountability over its 

business systems investments, we met with DOD officials to obtain an 

update on the status of our prior recommendations. We also met with 

appropriate officials in the DOD Comptroller and DOD CIO offices to 

discuss the status of various draft policies and guidance that are aimed at 

improving the department’s control and accountability over business 

system investments. We also reviewed and analyzed the DOD budget 

requests for fiscal years 2003 through 2005 to identify the business systems 

investments that could be subject to the requirements of the Bob Stump 

National Defense Authorization Act for Fiscal Year 2003,1

 which requires 

the DOD Comptroller to review all system improvements with obligations 

exceeding $1 million and make a determination whether the improvement 

is in accordance with criteria specified in the act. To assess DOD’s 

compliance with the act, we also obtained and reviewed departmental 

guidance, memorandums, DOD Comptroller review decisions, and other 

documentation provided by the Business Management Systems Integration 

(BMSI) office. Additionally, we requested that DOD provide us obligational 

data in excess of $1 million for business systems for fiscal years 2003 and 

2004, as of December 2003. We received obligational data from the military 

services, but did not receive any information from the defense agencies. We 

then compared the obligation data provided by the military services with 

the information from the BMSI office to determine if the modernizations 

were reviewed as stipulated by the act. To augment our document reviews 

and analyses, we interviewed officials from various DOD organizations, 

including the Office of the Under Secretary of Defense (Comptroller); 

1

 Bob Stump National Defense Authorization Act for Fiscal Year 2003, Pub. L. No. 107-314, § 

1004, 116 Stat. 2630 (Dec. 2, 2002).
Appendix I

Scope and Methodology

Page 69 GAO-04-615 DOD Business Systems

Office of the Under Secretary of Defense (Network and Information 

Integration)/Chief Information Officer; Office of the Under Secretary of 

Defense (Acquisition, Technology and Logistics); and CIO and financial 

management officials from the military services.

To determine if selected DOD business system projects are being 

effectively managed and will help resolve some of DOD’s long-standing 

business operation problems, we selected the logistics domain from which 

we chose individual case studies for detailed review. We selected the 

logistics domain because it represents $770 million, or 16 percent, of 

modernization funding requested in fiscal year 2004 for the department’s 

business systems. The logistics domain was also selected because of its 

significance to DOD operations and its long-standing and inherent 

inventory and related financial management weaknesses, such as the 

inability to support its inventory balances and provide total asset visibility. 

We selected the Defense Logistics Agency’s (DLA) Business Systems 

Modernization (BSM) and the Army’s Logistics Modernization Program 

(LMP) for detailed review. For these two business systems, we focused on 

two key processes, requirements management and testing. 

To assess whether DLA and the Army had established and implemented 

disciplined processes related to requirements management and testing, we

• reviewed DLA’s and the Army’s procedures for defining requirements 

management frameworks and compared these procedures to their 

current practices;

• reviewed guidance published by the Institute of Electrical and 

Electronics Engineers and the Software Engineering Institute and 

publications by experts to determine the attributes that should be used 

for developing good requirements;

• reviewed BSM’s system requirement documents related to finance, 

order fulfillment, planning, and procurement and LMP’s system 

requirement documents related to planning and budget development, 

asset management, inventory management, and maintenance analysis 

and planning; and

• selected 13 of BSM’s 202 system requirements and 12 of LMP’s 293 

system requirements and performed an in-depth review and analysis to 

determine whether they had the attributes normally associated with 
Appendix I

Scope and Methodology

Page 70 GAO-04-615 DOD Business Systems

good requirements and whether these requirements traced between the 

various process documents. 

To augment these document reviews and analyses, we interviewed DLA 

and Army program officials and Defense Finance and Accounting Service 

(DFAS) officials. To identify the costs associated with BSM and LMP, we 

reviewed data provided by DLA and Army program officials. We also 

reviewed prior GAO, DOD Inspector General, and service auditors’ reports, 

as well as DOD’s agencywide financial statements to obtain further 

information on inventory costs. 

We conducted our work at the Office of the Under Secretary of Defense 

(Comptroller); the Office of the Under Secretary of Defense (Acquisition, 

Technology and Logistics); the Office of the Assistant Secretary of Defense 

(Network and Information Integration)/Chief Information Officer; DLA; the 

Army Materiel Command; and the CIO and financial management offices 

for the military services. We also visited two locations—the Defense Supply 

Center in Richmond, Virginia, and the Army’s contractor site (Computer 

Sciences Corporation) in Moorestown, New Jersey—to gain an 

understanding of user involvement in the development and operation of 

BSM and LMP, as well as the business processes associated with each 

system.

We conducted our work from August 2003 through March 2004 in 

accordance with U.S. generally accepted government auditing standards. 

We did not verify the accuracy and completeness of the cost information 

provided by DOD for the two projects we reviewed. 

We requested comments on a draft of this report from the Secretary of 

Defense or his designee. We received written comments on a draft of this 

report from the Acting Under Secretary of Defense (Comptroller), which 

are reprinted in appendix II.
Page 71 GAO-04-615 DOD Business Systems

Appendix II

Comments from the Department of Defense ApendxiI
Appendix II

Comments from the Department of Defense

Page 72 GAO-04-615 DOD Business Systems
Appendix II

Comments from the Department of Defense

Page 73 GAO-04-615 DOD Business Systems
Appendix II

Comments from the Department of Defense

Page 74 GAO-04-615 DOD Business Systems
Appendix II

Comments from the Department of Defense

Page 75 GAO-04-615 DOD Business Systems
Page 76 GAO-04-615 DOD Business Systems

Appendix III

DOD Business Systems Obligations in Excess 

of $1 Million Approved by the DOD 

Comptroller ApendxiI

Source: GAO analysis of DOD data.

a

A system change request (SCR) is a system life cycle documentation standard that documents a 

formal request for a change to an automated information system. The change may be for either a "fix" 

to a problem or an enhancement. 

Name of system Approval date

Air Force Financial Information Resource System January 2003

Navy Enterprise Resource Planning Pilots February 2003

National Security Agency Pilot Initiative March 2003

Reserve Component Automation System March 2003

Navy Enterprise Resource Planning Program April 2003

Defense Integrated Military Human Resources System April 2003

DFAS Mechanization of Contract Administration Services Rehost May 2003

DFAS PowerTrack (SCR)a May 2003

Army Integrated Facilities System (SCR)a May 2003

Navy Enterprise Maintenance Automated Information System July 2003

Global Combat Support System—Army August 2003

DFAS e-Biz Capital Investment Reprogramming August 2003

Defense Travel System October 2003

Standard Procurement System October 2003

DFAS Operational Data Store (SCR)a October 2003

Composite Health Care System II November 2003

DFAS General Accounting and Finance System Rehost November 2003

Air Force Reserve Travel System December 2003

DFAS Automated Time, Attendance and Production System (SCR)a December 2003

DFAS Defense Joint Military Pay System—Active Component (SCR)a December 2003

DFAS Defense Joint Military Pay System—Reserve Component (SCR)a December 2003

DFAS Defense MilPay Office (SCR)a December 2003

DFAS Defense Retired and Annuitant Pay System (SCR)a December 2003

DFAS Marine Corps Total Force System (SCR)a December 2003
Page 77 GAO-04-615 DOD Business Systems

Appendix IV

DOD Business Systems Obligations in Excess 

of $1 Million for Modernizations Not 

Submitted to the DOD Comptroller ApendxiIV

Dollars in millions

Amount

Component Name of system 2003 2004 Total

Army

Logistics Modernization Program $52.4 $7.4 $59.8

Transportation Coordinators’ Automated 

Information for Movements System II $21.7 $10.4 $32.1

Total Distribution Program $21.9 a $21.9

Army Recruiting Information Support System $24.3 $1.6 $25.9

Electronic Military Personnel System $10.2 $3.4 $13.6

Personnel Transformation $11.0 a $11.0

Defense Civilian Personnel Data SystemSustainment $3.4 $6.1 $9.5

MEPCOM Management Information 

Reporting System $6.0 a $6.0

Installation Support Modules $1.7 a $1.7

Joint Computer-Aided Acquisition and 

Logistics Support $19.7 $1.6 $21.3

Subtotal Army $172.3 $30.5 $202.8

Navy

Navy Tactical Command Support System $21.8 $20.3 $42.1

Marine Corps Common Hardware Suite $27.1 a $27.1

Defense Message System $21.3 $7.2 $28.5

Electronic Military Personnel Records 

System $17.8 $5.8 $23.6

Electronic Commerce/Electronic Data 

Interchange $8.9 $2.6 $11.5

Shipboard Management Information System $8.4 a $8.4

One Touch Supply $2.1 a $2.1

Navy Standard Integrated Personnel System $2.2 a $2.2

Conventional Ammunition Integrated 

Management System $4.3 $2.0 $6.3

Shipyard Management Information SystemsFinancials $3.1 a $3.1

SPAWAR Financial Management - ERP $3.7 $1.1 $4.8

MSC Afloat Personnel Management Center $5.3 $2.2 $7.5

NAVSEA Depot Maintenance System-L03 $1.2 a $1.2

Transportation Coordinators’ Automated 

Information for Movements System II $4.4 a $4.4
Appendix IV

DOD Business Systems Obligations in Excess 

of $1 Million for Modernizations Not 

Submitted to the DOD Comptroller

Page 78 GAO-04-615 DOD Business Systems

Source: GAO analysis of DOD data.

a

For fiscal year 2004, DOD did not report obligational data.

Business Process Reengineering $2.8 a $2.8

Depot Maintenance System $2.4 a $2.4

Joint Simulations System $4.3 a $4.3

Military Sealift Command Financial 

Management System $1.4 a $1.4

New Order Writing System $4.0 a $4.0

Asset Tracking Logistics and Supply System $2.3 a $2.3

USMC Operational Support Systems $17.5 $5.4 $22.9

Subtotal Navy $166.3 $46.6 $212.9

Air Force

Integrated Maintenance Data System $9.2 $3.7 $12.9

Stock Control System $8.0 a $8.0

Integrated Logistics System – Supply $7.1 $2.3 $9.4

Depot Maintenance Accounting and 

Production System $28.6 a $28.6

Supply Working Capital Fund Decision 

Support System (Keystone) $1.1 a $1.1

Reliability and Maintainability Information 

System $3.5 a $3.5

Subtotal Air Force $57.5 $6.0 $63.5

Total $396.1 $83.1 $479.2

(Continued From Previous Page)

Dollars in millions

Amount

Component Name of system 2003 2004 Total
Page 79 GAO-04-615 DOD Business Systems

Appendix V

GAO Contacts and Staff Acknowledgments ApendxiV

GAO Contacts Darby Smith, (202) 512-7803

Jenniffer Wilson, (202) 512-9192

J. Christopher Martin, (202) 512-9481

Acknowledgments Staff members who made key contributions to this report were Beatrice 

Alff, Johnny Bowen, Francine DelVecchio, Stephen Donahue, Francis 

Dymond, Jeffrey Jacobson, Jason Kelly, Mai Nguyen, Michael Peacock, 

David Plocher, and Katherine Schirano. 

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