United States General Accounting Office 

Washington, DC 20548 

October 20, 2003 

The Honorable Donald H. Rumsfeld 

The Secretary of Defense 

Subject: Military Personnel: DFAS Has Not Met All Information 

Technology Requirements for Its New Pay System 

In early January 2003, we initiated a review of the Defense Integrated 

Military Human Resource System (DIMHRS) to get an understanding of 

the program, its goals, its present status, and the problems it is designed to 

resolve. During this review, we became aware that in April 2003 the 

Department of Defense (DOD) authorized the Defense Finance and 

Accounting Service (DFAS) to initiate a pilot project to demonstrate its 

ability to develop an interim military pay system, called Forward 

Compatible Military Pay, before DIMHRS is fully operational. DFAS 

maintains that an interim system should be developed as soon as possible 

for two reasons: (1) the planned personnel and pay system that DOD is 

currently developing as part of the larger DIMHRS1

 will be implemented 

later than its projected target date of December 2006 and (2) the current 

military pay system—the Defense Joint Military Pay System—is aging, 

unresponsive, and fragile and has become a major impediment to efficient 

and high quality customer service. It is estimated that the Forward 

Compatible Military Pay system could be operational by March 2006 at a 

design and development cost ranging from about $17 million to 

$30 million.2 

1

 DOD is currently developing the DIMHRS that is designed to provide DOD and the 

services one integrated, standardized personnel and pay system that will track service 

members and their dependents. 

2

 DFAS program officials estimate the cost at $16.8 million, but a Program Analysis and 

Evaluation estimate came in at $29.9 million because it included costs that had been left 

out of the program officials’ estimate. 

Page 1 GAO-04-149R Military Personnel 
Since the planned interim Forward Compatible Military Pay system is 

considered an information technology acquisition program under DOD 

Acquisition Regulations, DFAS must comply with specific legal and 

administrative requirements before moving forward with the development 

of this project. In this regard, DFAS must comply with requirements 

contained in 

• the Bob Stump National Defense Authorization Act for Fiscal Year 2003;

3 

• 	 Office of the Under Secretary of Defense (Comptroller) Memorandum;4 

and 

• the Clinger-Cohen Act of 1996.

5 

We reviewed DFAS’s development of the Forward Compatible Military Pay 

system pilot project to determine whether DFAS had complied with the 

above requirements. We did not evaluate the cost and benefit, return on 

investment, or break-even point analyses that were prepared by DFAS. 

We conducted our review from June 6, 2003, to September 15, 2003, in 

accordance with generally accepted government auditing standards. 

Results in Brief 	 In moving forward with the development of the Forward Compatible 

Military Pay system, DFAS has not complied with specific legal and 

administrative requirements applicable to DOD’s information technology 

investments. It did complete cost and benefit, return on investment, and 

break-even point analyses as required by the Comptroller’s memorandum. 

However, DFAS has not submitted the forward pay proposal to the 

responsible domain to determine its compliance with DOD’s Business 

3

 Public Law 107-314 (Dec.2, 2002), section 1004, Development and Implementation of 

Financial Management Enterprise Architecture, which requires that the investment in 

excess of $1 million to improve a defense financial system be consistent with DOD’s 

enterprise architecture, among other things. 

4

 The memorandum (dated Mar. 7, 2003) provides additional information on how DOD will 

determine compliance with section 1004 of the Bob Stump National Defense Authorization 

Act. 

5

 The Federal Acquisition Reform Act of 1996 (FARA) and the Information Technology 

Management Reform Act of 1996 (ITMRA) were renamed the Clinger-Cohen Act of 1996 by 

the 1997 Omnibus Consolidated Appropriations Act P.L. 104-208 (Sept. 30, 1996). Both the 

FARA and the ITMRA were passed as sections D and E in the National Defense 

Authorization Act for Fiscal Year 1996, P.L. 104-106 (Feb. 10, 1996), which requires federal 

agencies to maximize the value and assess and manage the risks associated with 

investments in information technology. 

Page 2 GAO-04-149R Military Personnel 
Background 

Enterprise Architecture,6 which guides DOD’s investments in financial 

systems. Because DFAS has not submitted the proposal to the responsible 

domain, the DOD Comptroller has not met its responsibility under the 

authorization act to ensure compliance with the Business Enterprise 

Architecture. Further, DFAS has not completed the necessary documents 

to support compliance with the Clinger-Cohen Act. For example, DFAS 

has not completed the Acquisition Strategy or the Acquisition Program 

Baseline document, as required by DOD Acquisition Regulations. By 

failing to complete all required studies and analyses, DOD lacks assurance 

that it is meeting its goal of making quality information technology 

investments, as required. We are recommending that DFAS complete all 

required steps before proceeding with the Forward Compatible Military 

Pay project. 

By the end of fiscal year 2003, DOD estimates that it will have spent about 

$360 million to conceptualize and plan a major new departmentwide 

integrated military pay and personnel system, known as DIMHRS. In 2002, 

DOD estimated that DIMHRS would be fully deployed by fiscal year 2007 

at a development cost of about $577 million. However, our review of the 

fiscal year 2004 information-technology budget request shows the amounts 

required for fiscal years 2003 and 2005 are $121.76 million for 2004 and 

$94.60 million for 2005. (When added to the amount spent through fiscal 

2003, the amounts round to the total of $577 million.) DOD further 

estimates that it would cost about $1.5 billion to operate and maintain 

DIMHRS through fiscal year 2017. However, DOD expects that the winning 

contractor will revise the deployment schedule and cost estimates by early 

2004. Although the development of DIMHRS has not yet begun, the original 

schedule has already slipped by about 15 months. Among its various 

components, DIMHRS will include a military pay component. As a result of 

the schedule slippage, DFAS has decided that an interim military pay 

system is needed to meet its short-term needs until the DIMHRS’ military 

pay component is available, which is projected for calendar year 2006 

or 2007. 

6

 In May 2003, the DOD Comptroller changed the architecture name from the Financial 

Management Enterprise Architecture to the Business Enterprise Architecture to reflect the 

transformation of departmentwide business operations and supporting systems. The 

Business Enterprise Architecture is a “blueprint” to guide and constrain DOD’s investments 

in financial management operations and systems. 

Page 3 GAO-04-149R Military Personnel 
The development of the interim military pay system—the Forward 

Compatible Military Pay system—is considered an information technology 

acquisition program, according to DOD acquisition policy. Congress 

enacted laws to govern DOD’s information technology investments, 

e.g., Section 1004 of Bob Stump National Defense Authorization Act for 

Fiscal Year 2003 and the Clinger-Cohen Act of 1996. In addition to these 

laws, DOD’s acquisition policy also mandates sound information 

technology investment decisions. 

DFAS Has Not 

Completed All 

Required 

Documentation nor 

Obtained Necessary 

Approval for Forward 

Compatible Military 

Pay System 

In moving forward with the development of the interim military pay 

system, DFAS has not complied with the Bob Stump National Defense 

Authorization Act for Fiscal Year 2003, the Comptroller Memorandum, and 

the Clinger-Cohen Act requirements. GAO reported in March 20037

 that 

DFAS failed to complete the required documentation for four other 

systems undergoing modernization. In that report we recommended that 

all remaining DFAS information technology projects be evaluated to 

ensure they are being implemented at acceptable cost and within 

reasonable time frames. 

National Defense The Bob Stump National Defense Authorization Act for Fiscal Year 

Authorization Act for 2003 requires that any investment in excess of $1 million to improve a 

Fiscal Year 2003 and the defense financial system be consistent with DOD’s Business Enterprise 

Architecture,

8

 which lays out a frame of reference governing information Comptroller Memorandum 	 technology management. The DOD Comptroller’s March 2003 

memorandum details how compliance with the authorization act will be 

determined. Specifically, the memorandum requires several analyses to 

7

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

Continued Investment in Key Accounting Systems Needs to be Justified, 

GAO-03-465 (Washington, D.C.: Mar. 28, 2003). 

8

 GAO reported in September 2003 that DOD’s initial version of the Business Enterprise 

Architecture does not adequately address all the requirements in the National Defense 

Authorization Act for Fiscal Year 2003. Further, DOD has not yet defined and implemented 

an effective approach to select and control business systems investments for obligations 

exceeding $1 million while the architecture is being developed and after it is completed. 

See U.S. General Accounting Office, DOD Business Systems Modernization: Important 

Progress Made to Develop Business Enterprise Architecture, but Much Work Remains, 

GAO-03-1018 (Washington, D.C.: Sept. 19, 2003). 

Page 4 GAO-04-149R Military Personnel 
demonstrate the costs and benefits; return on investment; break-even 

point; and overall compliance with the enterprise architecture for any 

initiative in excess of $1 million. The Comptroller’s administrative 

requirements do not preclude or eliminate any other required approvals 

or processes within DOD. 

DFAS has not fully complied with the Comptroller’s March 7, 2003, 

memorandum. While DFAS briefed a cost and benefit, return on 

investment, and break-even point analysis to the DOD Comptroller’s 

Office, the briefing did not include a determination that the Forward 

Compatible Military Pay initiative is in compliance with the enterprise 

architecture. Such a determination has not been made because, to date, 

DFAS has not submitted the proposal to the domain9

 owner for its 

evaluation of compliance with the architecture. By determining 

compliance with the architecture DOD can be sure that the Forward 

Compatible Military Pay initiative will not result in a system that 

performs the same tasks or stores the same data as existing systems, 

cannot communicate with other DOD systems, and is costly to operate 

and maintain. 

In addition, the Secretary of Defense’s Office of Program Analysis and 

Evaluation raised concerns over the accuracy of the information in the 

presentation. Specific areas of concern included cost, schedule, and the 

underlying assumptions made in support of the initiative. 

Clinger-Cohen Act and The Clinger-Cohen Act of 1996 requires agencies to establish a process 

DOD Acquisition to maximize value and assess and manage the risks of information 

Regulations technology investments, including specific quantitative and qualitative 

criteria for comparing and prioritizing alternative information technology 

9

 As outlined in DOD’s Business Management Modernization Program governance 

guidance, domains are based on existing functional business lines. The 7 domains 

are: (1) Acquisition; (2) Finance, Accounting Operations and Financial Management; 

(3) Human Resource Management; (4) Installations and Environment; (5) Logistics; 

(6) Strategic Planning and Budgeting; and (7) Technical Infrastructure. Domain owners 

have the authority, responsibility, and accountability for business transformation, 

implementation of the Business Enterprise Architecture, and portfolio management 

within their domains. Owners’ responsibilities include: leading business transformation; 

establishing and maintaining a domain governance process; performing system reviews 

and approving initiative funding; assisting in the extension of the architecture; enforcing 

compliance with the architecture; guiding implementation activities; and representing the 

domain on cross-domain issues. 

Page 5 GAO-04-149R Military Personnel 
projects. The primary objective of DOD’s acquisition-implementing 

policy is to acquire quality products that satisfy user needs and contain 

measurable improvements to mission capability and operational support, 

in a timely manner and at a fair and reasonable price. 

DFAS has not met all of the requirements of the Clinger-Cohen Act 

applicable to its forward compatible pay initiative. The act requires a 

variety of actions, and DOD, in its acquisition regulations, requires 

evidence that the actions have been completed. For example, the act 

requires clearly established measures and accountability for program 

progress. Documents such as the Acquisition Strategy and Acquisition 

Program Baseline documents would contain this information. 

Conclusion 
 DFAS has not complied with each of the Bob Stump National Defense 

Act, Clinger-Cohen, and administrative requirements for information 

technology investments. As a result, DOD lacks assurance that it is 

meeting its goal of making quality information technology investments. 

Further, the Forward Compatible Military Pay system proposal has 

not been reviewed for compliance with DOD’s Business Enterprise 

Architecture. As a result, the system may duplicate the functions of 

existing systems, may not be able to communicate with other DOD 

systems, and may add to overall operating and maintenance costs. 

Recommendations for 	 To ensure that the proposed investment in the Forward Compatible 

Military Pay system is a prudent business decision for DOD, you

Executive Action should direct 

• 	 DFAS to submit its Forward Compatible Military Pay system proposal 

to the domain owner for determination that it is in compliance with 

DOD’s Business Enterprise Architecture; 

• 	 the DOD Comptroller to meet its responsibility under the Bob 

Stump National Defense Authorization Act for Fiscal Year 2003, 

Public Law 107-314, to determine compliance with the Business 

Enterprise Architecture; and 

• 	 the DOD Comptroller to require DFAS to demonstrate that it has 

complied with its responsibilities under the Clinger-Cohen Act of 1996, 

Public Law 104-106. 

The DOD Comptroller and DFAS should complete these steps before the 

final decision is made to invest in the Forward Compatible Military Pay 

system. 

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


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


Senate Committee on Governmental Affairs and the House Committee on 


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


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


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


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


Deputy and Deputy Under Secretary of Defense (Management Reform) 


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


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


DFAS will finalize the appropriate documentation to satisfy requirements 


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


Architecture, the DOD acquisition lifecycle management process, and 


provisions of current governing legislation. The Forward Compatible 


Military Pay system then will be reviewed through the Business 


Management Modernization Program process. DOD’s comments appear 


in their entirety in enclosure I. 


We are sending copies of this report to the appropriate congressional 


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


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


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


Snyder on (202) 512-7204. 


Sincerely yours, 


Derek B. Stewart 


Director, Defense Capabilities and Management 


Enclosure 


Agency Comments 

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

of Defense 

Note: Report number 

was changed to 

GAO-04-149R. 

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

of Defense 

Note: Page numbers in 

the draft report may differ 

from those in this report. 

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