a

GAO

United States Government Accountability Office

Report to the Subcommittee on 

Readiness and Management Support, 

Committee on Armed Services, U.S. 

Senate

December 2005 DOD SYSTEMS 

MODERNIZATION

Uncertain Joint Use 

and Marginal 

Expected Value of 

Military Asset 

Deployment System 

Warrant Reassessment 

of Planned Investment

GAO-06-171
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

December 2005

DOD SYSTEMS MODERNIZATION

Uncertain Joint Use and Marginal 

Expected Value of Military Asset 

Deployment System Warrant 

Reassessment of Planned Investment 

Highlights of GAO-06-171, a report to the 

Subcommittee on Readiness and

Management Support, Committee on 

Armed Services, U.S. Senate 

Because of the importance of the 

Department of Defense’s (DOD)

adherence to disciplined

information technology (IT)

acquisition processes in 

successfully modernizing its 

business systems, GAO was asked

to determine whether the 

Transportation Coordinators’ 

Automated Information for 

Movements System II (TC-AIMS II)

program is being managed

according to important aspects of 

DOD’s acquisition policies and 

guidance, as well as other relevant

acquisition management best 

practices. TC-AIMS II was initiated

in 1995 as a joint services system to 

help manage force and equipment 

movements within the United

States and abroad. The U.S.

Department of the Army has the

lead responsibility for managing

the system’s acquisition and 

estimates its life-cycle cost to be 

$1.7 billion over 25 years. 

What GAO Recommends

GAO is making recommendations 

to the Secretary of Defense to,

among other things, develop the 

analytical basis needed to

determine if continued investment 

in TC-AIMS II, as planned,

represents prudent use of limited 

defense resources. In written 

comments on a draft of this report, 

DOD concurred or partially 

concurred with GAO’s 

recommendations. It also described 

planned actions that are largely 

consistent with GAO’s 

recommendations. 

The Army has managed the TC-AIMS II program in accordance with some, 

but not all, key aspects of DOD’s system acquisition management policies 

and related guidance. These policies and guidance are intended to 

reasonably ensure that investment in a given IT system represents the right 

solution to fill a mission need—and, if it does, that acquisition and 

deployment of the system are handled in a manner that maximizes the 

chances of delivering defined system capabilities on time and within budget. 

The Army has not managed the program in accordance with those DOD 

policies and related guidance, including related federal and other best 

practice guidance, that are intended to reasonably ensure that a proposed 

system is the right solution to meet mission needs. Specifically:

• The Army has not economically justified its investment in TC-AIMS II on 

the basis of reliable estimates of costs and benefits. For example, the 

most recent economic justification included cost and benefit estimates 

predicated on all four military services using the system. However, two 

services (U.S. Department of the Air Force and U.S. Marine Corps) have 

stated that they do not intend to use it. 

• The Army has not invested in TC-AIMS II within the context of a welldefined enterprise architecture, which is an institutional blueprint to 

control program investment decisions in a way that promotes 

interoperability and reduces redundancy among systems. The Army has 

instead focused on aligning TC-AIMS II with its logistics architecture; 

this means that even though TC-AIMS II is intended to be a DOD-wide 

program, it has been based on a service-specific architecture rather than 

a DOD-wide architecture. As a result, it may not properly fit within 

departmentwide plans. 

To its credit, the Army has largely managed the program in accordance with 

key policies and related guidance that are intended to reasonably ensure that 

the acquisition and deployment of a given system are handled in a manner 

that maximizes the chances of delivering defined capabilities on time and 

within budget. However, some aspects of this policy and guidance have not 

been followed. For example, the Army has not fully implemented risk 

management and has not adhered to a key feature of performance-based 

contracting.

Reasons the Army cited for not following policies and guidance ranged from 

management inattention to lack of training. As a result, the Army, among 

other things, does not know whether the system is the right solution. Until 

this uncertainty and the previously discussed problems are addressed, it will 

remain unclear whether further planned investment in TC-AIMS II is 

warranted, and certain aspects of the program’s management will be limited.

www.gao.gov/cgi-bin/getrpt?GAO-06-171.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Randolph C. 

Hite at (202) 512-3439 or hiter@gao.gov. 
Page i GAO-06-171 DOD Systems Modernization

Contents

Letter 1

Results in Brief 2

Background 4

TC-AIMS II Has Not Been Managed in Accordance with Certain DOD 

System Acquisition Policies and Related Guidance 10

Conclusions 24

Recommendations for Executive Action 25

Agency Comments and Our Evaluation 26

Appendixes

Appendix I: Objective, Scope, and Methodology 32

Appendix II: Assessment of Problem Reports 36

Appendix III: Comments from the Department of Defense 38

Appendix IV: GAO Contact and Staff Acknowledgments 46

Table Table 1: TC-AIMS II Management Entities and Their Roles and 

Responsibilities 8

Figures Figure 1: TC-AIMS II Acquisition, Operations, and Maintenance 

Timeline, by Fiscal Year 7

Figure 2: Number of Problem Reports, Fiscal Years 1999 through 

2005 37

Abbreviations

DOD Department of Defense

IT information technology

TC-AIMS II Transportation Coordinators’ Automated Information for 

 Movements System II

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Page 1 GAO-06-171 DOD Systems Modernization

United States Government Accountability Office

Washington, D.C. 20548

A

December 15, 2005 Letr

The Honorable John Ensign

Chairman

The Honorable Daniel K. Akaka

Ranking Minority Member

Subcommittee on Readiness and Management Support

Committee on Armed Services

United States Senate

Because it is so important that the Department of Defense (DOD) adhere to 

disciplined information technology (IT) acquisition processes in order to 

successfully modernize its business systems, you requested that we 

determine whether the department is following its own IT acquisition 

policies and guidance, which were recently revised.1

 As part of our 

response to your request, we agreed to review the Transportation 

Coordinators’ Automated Information for Movements System II (TC-AIMS 

II) program. TC-AIMS II was initiated in 1995 by DOD as a joint services 

system with the goal of helping to manage the movement of forces and 

equipment within the United States and abroad. Assigned the lead 

responsibility for acquiring the system, the U.S. Department of the Army 

estimates the system has a 25-year, life-cycle cost of $1.7 billion. 

Our objective was to determine whether TC-AIMS II is being managed 

according to important aspects of DOD’s acquisition policies and guidance 

as well as other relevant acquisition management best practices. We 

focused on the program’s (1) economic justification; (2) architectural 

alignment; (3) risk management; (4) requirements development and 

management; (5) commercial component management; and (6) contract 

management, including contractor oversight and performance-based 

contracting. 

We conducted our work between October 2004 and October 2005, in 

accordance with generally accepted government auditing standards. 

Details of our objective, scope, and methodology are included in

appendix I. 

1

DOD, Department of Defense Directive Number 5000.1, The Defense Acquisition System 

(May 12, 2003); Department of Defense Instruction Number 5000.2, Operation of the 

Defense Acquisition System (May 12, 2003); and Defense Acquisition Guidebook, Version 

1.0 (Oct. 17, 2004).
Page 2 GAO-06-171 DOD Systems Modernization

Results in Brief The Army has managed the TC-AIMS II program in accordance with some, 

but not all, key aspects of DOD’s system acquisition management policies 

and related guidance. Collectively, DOD’s acquisition management policies 

and guidance are intended to reasonably ensure that investment in a given 

IT system represents the right solution to fill a mission need—and, if it 

does, that acquisition and deployment of the system are handled in a 

manner that maximizes the chances of delivering defined system 

capabilities on time and within budget. In particular, the Army has not 

managed TC-AIMS II in accordance with DOD policy and related guidance, 

including related federal and other best practice guidance, that are 

intended to reasonably ensure that a proposed system is the right solution 

to meeting mission needs. 

• The Army has not economically justified its investment in TC-AIMS II on 

the basis of reliable estimates of costs and benefits. The most recent 

economic justification included cost and benefit estimates predicated 

on all four military services using the system. However, two services 

(U.S. Department of the Air Force and U.S. Marine Corps) have stated 

that they do not intend to use it. Even with costs and benefits for all four 

services included, the analysis showed a marginal return on investment; 

that is, for each dollar spent on the system, slightly less than one dollar 

of benefit would be returned.

• The Army has not invested in TC-AIMS II within the context of a welldefined enterprise architecture, which is an institutional blueprint to 

guide and constrain program investment decisions in a way that 

promotes interoperability and reduces redundancy among related and 

dependent systems. As we recently reported,2

 the version of the 

department’s business enterprise architecture that has been available to 

the program has not contained sufficient context (depth and scope of 

operational and technical requirements) to effectively guide and 

constrain system investments. The Army has instead focused on aligning 

TC-AIMS II with the Army’s logistics architecture; this means that even 

though TC-AIMS II was to be a DOD-wide program, it has been based on 

a service-specific architecture, rather than a DOD-wide architecture. As 

2

GAO, DOD Business Systems Modernization: Long-standing Weaknesses in Enterprise 

Architecture Development Need to Be Addressed, GAO-05-702 (Washington, D.C.: July 22, 

2005).
Page 3 GAO-06-171 DOD Systems Modernization

a result, the system, as defined, may not properly fit within a DOD-wide 

enterprise architecture.

At the same time, the Army has largely managed the program in accordance 

with key policies and related guidance that are intended to reasonably 

ensure that the acquisition and deployment of a given system solution are 

handled in a manner that maximizes the chances of delivering defined 

capabilities on time and within budget. However, aspects of this policy and 

guidance have not been followed. 

• The Army has not fully implemented the department’s risk management 

policy and guidance. While the program office has developed a risk 

management plan, it has not effectively implemented it. For example, 

the program office identified 22 active risks to the program but only 

developed mitigation strategies for 16 of these risks, increasing the 

probability that program risks will lead to cost, schedule, and 

performance problems. 

• The Army has not implemented a key feature of performance-based 

contract management. Specifically, the most recent contract to acquire 

TC-AIMS II does not specify effective disincentives or penalties for the 

contractor if it fails to meet performance criteria. Among other things, 

this limits the Army’s ability to effectively influence contractor 

performance. 

Reasons that the Army cited for not following relevant policies and 

guidance include lack of management attention and training. By not 

following them, the Army does not have an adequate basis to know 

whether TC-AIMS II is the right systems solution to meet DOD’s asset 

deployment support needs, and, thus, it is unclear whether planned 

investment in TC-AIMS II is warranted. Even if the uncertainty is 

adequately addressed, the manner in which the system is being acquired 

can be strengthened. Accordingly, we are making recommendations to the 

Secretary of Defense that are aimed at first developing the basis for 

determining whether continued investment in TC-AIMS II is a prudent use 

of limited resources. We are also making recommendations, conditional 

upon a decision by DOD to proceed with further investment in TC-AIMS II, 

to further enhance the department’s adherence to other acquisition 

practices. 

The Office of the Assistant Secretary of Defense for Networks and 

Information Integration provided written comments on a draft of this 
Page 4 GAO-06-171 DOD Systems Modernization

report. In its comments, the department stated that it either concurred or 

partially concurred with our recommendations. It also described efforts 

initiated or planned to bring the program into compliance with applicable 

guidance. In our view, the department’s comments are largely consistent 

with our report. These comments, along with our responses, are discussed 

in detail in the Agency Comments and Our Evaluation section of this 

report. The DOD comments are also reprinted in their entirety in appendix 

III. 

Background As one of the largest and most complex organizations in the world, DOD 

spends billions of dollars each year to operate, maintain, and modernize IT 

systems that support core business operations. These business operations 

consist of various interrelated and interdependent business functions, 

including logistics management, procurement, health care management, 

and financial management. Further, execution of these business operations 

span a wide range of defense organizations, including the military services 

and their respective major commands and functional activities, defense 

agencies and field activities, and combatant and joint operational 

commands that are responsible for military operations in geographic 

regions or theaters. For fiscal year 2005, DOD requested approximately $13 

billion to operate, maintain, and modernize about 4,150 business systems 

and related IT infrastructure. The Army’s share of this funding and systems 

is about $2.7 billion and 727 systems.

In 1995, we designated DOD’s business systems modernization efforts as a 

high-risk program, and we continue to designate it as such today3

 for 

several reasons, including the department’s challenges in implementing 

effective IT investment management structures and processes, developing 

and implementing an enterprise architecture, and implementing effective 

IT system acquisition and development processes.

Overview of TC-AIMS II 

Genesis, Purpose, and 

Acquisition Strategy

In the early 1990s, DOD recognized the need to integrate defense IT 

systems by ordering the consolidation of systems that serve multiservice 

purposes. Accordingly, it directed that approximately 150 operating 

transportation systems be evaluated for consolidation opportunities. In 

1995, DOD initiated TC-AIMS II as one of a number of programs that were 

3

GAO, High-Risk Series: An Update, GAO-05-207 (Washington, D.C.: January 2005).
Page 5 GAO-06-171 DOD Systems Modernization

commenced following this evaluation to consolidate and replace existing 

systems, and to automate transportation management function areas for all 

services. In doing so, DOD designated the Army as the “executive agent” 

responsible for managing TC-AIMS II, including acquiring the system. 

Expected TC-AIMS II benefits included enhancing and improving the 

efficiency and effectiveness of the support planning needed to deploy and 

redeploy forces and equipment, both within the United States and abroad; 

improving the visibility of assets; and enhancing cargo and passenger 

receiving, controlling, and shipping. The system is also expected to enable 

decision makers at various command levels to access information about 

unit movement and installation transportation, and is to provide key shared 

functionality related, for example, to load planning. 

The Army defined the following five-block acquisition and implementation 

strategy for TC-AIMS II. According to the strategy, each block is to address 

a functional portion of the requirements. 

• Block 1: This block is to import data about assets (people, equipment, 

and supplies) from the services’ existing systems and is to manage 

these data to (1) plan and execute organizational moves (i.e., provide 

documentation, packing and shipping labels, and orders) and (2) request 

and schedule strategic and local transportation vehicles (e.g., trucks, 

ships, airplanes, motor pools, and trucks).

• Block 2: This block is to add Web access to permit automated data 

exchange with related systems, such as airlift load planning systems and 

global transportation networks. This increment is to link and track 

cargo and personnel (via DOD’s standard smart cards), and their 

corresponding transports. It also is to generate and manage the 

documentation associated with these functions. 

• Block 3: This block is to add interfaces to both supply and personnel 

systems to facilitate control over “in theater” operations, such as 

reception (unit arrival and off-loading in theater), staging (preparation 

for departure to assigned locations), onward movement (transit to 

assigned locations), and integration (coordinating and linking the 

movement of multiple related units). It also is to generate and manage 

documentation associated with these functions.

• Block 4: This block is to add the capability to manage maritime forces 

associated with prepositioned equipment and cargo (e.g., tank 
Page 6 GAO-06-171 DOD Systems Modernization

ammunition for an armored cavalry unit), including the ability to 

manage cargo logistics (loading and off-loading), as well as greater 

capability to manage theater operations, including the availability, 

distribution, and dispatch of vehicle fleets and drivers. It also is to 

generate and manage documentation associated with these functions. 

• Block 5: This block is to automate the management of transportation 

assets and traffic operations at military installations both in the United 

States and worldwide. At this point, TC-AIMS II is to be able to generate 

and manage all data and documentation related to moving units within 

DOD’s transportation system. As part of this block, the interfaces to 

systems that are to be integrated with TC-AIMS II are to be upgraded or 

created, as required, in response to changes in technology. 

Figure 1 shows the Army’s timeline for acquiring the five TC-AIMS II 

blocks. In particular, the Army reports that it is currently acquiring Block 3 

with the goal of making it operational by late 2006.
Page 7 GAO-06-171 DOD Systems Modernization

Figure 1: TC-AIMS II Acquisition, Operations, and Maintenance Timeline, by Fiscal Year

The Army estimates the total life-cycle cost of TC-AIMS II to be $1.7 billion 

over 25 years, including $569 million for acquisition and $1,168 million for 

operations and maintenance. The Army reports that it has spent 

approximately $751 million on TC-AIMS II since its inception.

Description of TC-AIMS II 

Roles and Responsibilities

A number of DOD and Army organizations are involved in managing the 

TC-AIMS II program and acquisition. Briefly, they are as follows:

• The Assistant Secretary of Defense for Network Information and 

Integration, who has overall responsibility for the program.

• The Army’s Program Executive Office for Enterprise Information 

Systems, Transportation Information Systems, oversees the 

1996

1997

1998

1999

2000

2001

2002

2003

20042005

2006

2007

2008

2009

2010

20112012

2013

2014

20152016

2017

2018

2019

2020

1

3

4

5

2

Source: GAO analysis based on DOD data.

Acquisition

Operations and maintenance

Block

Year
Page 8 GAO-06-171 DOD Systems Modernization

management of TC-AIMS II, which is managed on a day-to-day basis by 

the Project Manager, Joint Program Management Office. 

• The Joint Requirements Board represents TC-AIMS II users and includes 

stakeholders from the military services and other DOD organizations. 

The board is responsible for managing TC-AIMS II requirements 

development activities.

These and other key organizations and their roles and responsibilities are 

described in more detail in table 1. 

Table 1: TC-AIMS II Management Entities and Their Roles and Responsibilities

Source: GAO analysis of DOD data. 

a

Program officials provided data on, among other things, the number and type of problem reports that 

the program has encountered since system initiation. For details, see appendix II.

Entity Roles and responsibilities

Assistant Secretary of Defense for Network 

Information and Integration

Serves as the chair of the TC-AIMS II IT integrated product team and is the milestone 

decision authority. Assigned overall responsibility for the TC-AIMS II program; approves the 

program to proceed through its acquisition cycle on the basis of a review of key documents, 

such as an acquisition plan, an independently evaluated life-cycle cost-and-benefit 

estimate, Acquisition Program Baseline documents, and Defense Acquisition Executive 

Summary reports.

Department of the Army, Program 

Executive Office for Enterprise Information 

Systems, Transportation Information 

Systems

Serves as the program executive office. Assigned overall responsibility for TC-AIMS II 

program oversight; reviews the component cost analysis, acquisition strategy, and 

Acquisition Program Baseline prior to approval by the milestone decision authority.

Joint TC-AIMS II Management Board Provides guidance and vision for TC-AIMS II. This board includes representatives from the 

Joint Command, Transportation Command, and the Military Services, including the U.S. 

Departments of the Air Force, Army, and Navy and the U.S. Marine Corps.

Joint Program Management Office Serves as the program office. Assigned responsibility for day-to-day program management 

of TC-AIMS II and, as such, is the single point of accountability for managing the program’s 

objectives through development, production, and sustainment, including risk management, 

management of commercial components, and contractor tracking and oversight. Manages 

cost, schedule, and performance reporting. Prepares and updates the acquisition strategy, 

component cost analysis, and acquisition program baselines. Coordinates all testing 

activities with requirements, including measuring system quality and managing problem 

reportsa

 and change requests.

Joint Requirements Board Represents the system users. Participates in the process of establishing functional 

requirements. Consists of key system stakeholders and representatives and is chaired by 

the Joint Forces Command. The board is responsible for managing requirements 

development activities for TC-AIMS II. Among other things, the board’s duties include 

defining, reviewing, validating, prioritizing, and approving the system’s requirements.
Page 9 GAO-06-171 DOD Systems Modernization

The Army uses a system integration contractor to support the program 

office in managing the acquisition of TC-AIMS II. Most recently, it awarded 

a firm, fixed-price contract to a contractor in April 2004 to deliver the Block 

3 solution. The contract has 5 option years, which are 1 year in duration. To 

help it oversee contractor activities, the program office has employed the 

help of the General Service Administration’s Federal Systems Integration 

and Management Center, whose mission is to provide acquisition 

management expertise and support to DOD and other federal agencies on 

large, complex IT projects.

Prior Review Identified 

Strengths and Weaknesses 

in DOD’s Acquisition 

Policies and Guidance

In July 2004, we reported4 that DOD’s revised systems acquisition policies 

and guidance incorporated many best practices for acquiring business 

systems, such as (1) justifying system investments economically, on the 

basis of costs, benefits, and risks, and (2) continually measuring an 

acquisition’s performance, cost, and schedule against approved baselines. 

However, the revised policies and guidance did not incorporate a number 

of other best practices, particularly those associated with acquiring 

commercial component-based business systems, and DOD did not have 

documented plans for incorporating these additional best practices into its 

policies. We also reported that the department’s revised acquisition policies 

did not include sufficient controls to ensure that military services and 

defense agencies would appropriately follow these practices. We 

concluded that until these additional best practices were incorporated into 

DOD’s acquisition policies and guidance, there was increased risk that 

department system acquisitions would not deliver planned capabilities and 

benefits on time and within budget, and increased risk that DOD 

organizations would not adopt and use best practices that were defined. 

Accordingly, we made 14 recommendations to the Secretary of Defense 

that were aimed at strengthening DOD’s acquisition policy and guidance by 

including additional IT systems acquisition best practices and controls for 

ensuring that these best practices were followed. DOD agreed with most of 

our recommendations and has since issued additional system acquisition 

guidance.

4

GAO, Information Technology: DOD’s Acquisition Policies and Guidance Need to 

Incorporate Additional Best Practices and Controls, GAO-04-722 (Washington, D.C.: 

July 30, 2004).
Page 10 GAO-06-171 DOD Systems Modernization

TC-AIMS II Has Not 

Been Managed in 

Accordance with 

Certain DOD System 

Acquisition Policies 

and Related Guidance

The Army, as DOD’s acquisition agent for TC-AIMS II, has not managed this 

program in accordance with certain department acquisition policies, and 

related guidance, that are intended to reasonably ensure that a proposed 

system is the right solution to meet mission needs. In particular, the Army 

has not economically justified the program on the basis of reliable 

estimates of life-cycle costs and benefits, and it has not ensured that this 

program, which is intended to produce a departmentwide military 

deployment management system, is aligned with a departmentwide 

business enterprise architecture or an integrated blueprint for business 

systems modernization. As a result, the Army does not know that 

investment in TC-AIMS II as planned is warranted, represents a prudent use 

of limited DOD resources, and will be interoperable with and not be 

duplicative of related systems.

Even if TC-AIMS II happens to be the right system, both economically and 

architecturally, the Army has not fully implemented risk management and 

has not fully employed performance-based contracting practices. However, 

it has largely managed system requirements, commercial components, and 

contractor tracking and oversight in accordance with DOD policies and 

related guidance. If the program can be economically justified and 

architecturally defined, then fully addressing these key acquisition 

management areas will be essential to the program’s success. 

Investment in TC-AIMS II 

Has Not Been Adequately 

Justified on the Basis of 

Costs and Benefits

DOD’s acquisition management policy and related guidance5 recognize the 

importance of developing reliable economic analyses to support 

investment decision making. Accordingly, they describe how these 

analyses should be developed and used. For TC-AIMS II, the Army has not 

adhered to important aspects of departmental policy and related guidance, 

such as updating analyses to reflect material changes in program scope and 

justifying investment in large, multiyear programs on an incremental basis. 

As a result, the Army currently lacks an adequate basis to justify its planned 

investment in TC-AIMS II.

5

For example, see DOD, Department of Defense Directive 5000.1; Department of Defense 

Instruction 5000.2; Department of Defense Instruction 7041.3, Economic Analysis for 

Decision Making (Nov. 7, 1995); and Office of Management and Budget, Circular No. A-94, 

Guidelines and Discount Rates for Benefit-Cost Analysis of Federal Programs (Oct. 29, 

1992).
Page 11 GAO-06-171 DOD Systems Modernization

Latest Economic Analysis Does 

Not Recognize System’s 

Uncertain Joint Use and Shows 

Marginal Expected Value

DOD policy and guidance state that projects should be economically 

justified on the basis of reliable analyses of expected life-cycle costs and 

benefits and that cost and benefit estimates should be based on realistic 

plans for the program’s scope. Federal guidance also advocates 

economically justifying proposed investments on the basis of a benefit-tocost ratio that is greater than 1, basing that ratio on reliable analyses of 

expected, quantifiable life-cycle benefits, costs, and risks. The guidance 

also promotes the calculation and consideration of qualitative benefits in 

preparing an economic analysis. Further, the guidance calls for updating 

the analysis when significant program changes occur. These practices help 

to continually ensure a positive return on investment—even as program 

changes occur. 

The program office developed economic analyses to justify investment in 

the system in August 2002 and again in December 2003. The program office 

was supported in its efforts by the Office of the Deputy Assistant Secretary 

of the Army’s Office of Cost and Economics and the Office of the Secretary 

of Defense’s Office of Program Analysis and Evaluation, whose missions 

include verifying and validating the reliability of cost and benefit estimates 

found in Army and other services’ economic analyses. However, this most 

recent economic analysis is not based on reliable estimates of life-cycle 

costs and benefits. Specifically, the analysis was based on the assumption 

that TC-AIMS II would be used by all four military services, and, thus, it 

included life-cycle cost estimates showing all of the services’ data—as well 

as the benefits that would accrue through its use by all four. However, this 

assumption is not valid. Specifically, the Air Force’s Assistant Deputy Chief 

of Staff, Installations and Logistics, informed the program office in a 

September 2002 correspondence that it would not use the system, stating 

that the Air Force would rely instead on its existing system capabilities. 

Similarly, in March 2004, the Marine Corps’ Deputy Commandant for 

Installations and Logistics informed the program office that the Corps 

would not use the system because of concerns about whether the system 

would, among other things, deliver expected capabilities. Program officials 

told us that the latest economic analysis includes the costs and benefits for 

all services because, despite communications to the contrary from the Air 

Force and Marine Corps, the program office still considers TC-AIMS II to 

be a multiservice program and has not yet been directed to assume and 

plan otherwise. 

In addition to the unreliable cost and benefit estimates, the latest analysis 

does not show a benefit-to-cost ratio that is greater than 1. Specifically, the 

analysis identified present value, total expected benefits of $928 million 
Page 12 GAO-06-171 DOD Systems Modernization

versus present value, and total estimated costs of $929 million, for a 

benefit-to-cost ratio of slightly less than 1. This means that for each dollar 

spent on the system, slightly less than one dollar of benefit is returned. In 

addition, the analysis cited various qualitative benefits (e.g., increasing 

commander visibility of assets and enhancing worker productivity) that 

would be derived from the system. However, the analysis did not provide 

any underlying support or analysis for these qualitative benefits. 

Program officials said that they recognize that the system’s expected return 

on investment is marginal, but they nevertheless have been directed by the 

milestone decision authority—the Assistant Secretary for Defense, 

Networks and Information Integration—to deliver the system’s capabilities 

as planned. According to the officials in the Assistant Secretary’s office, the 

decision to continue investing in TC-AIMS II was based on quantitative and 

qualitative benefits, which they stated together exceeded costs, thus 

making the investment justified. However, these officials did not provide 

supporting justification for their qualitative benefit claims. In addition, 

their position does not recognize the intended change in the program’s 

scope that is not reflected in the latest analysis. Thus, the Army lacks the 

basis for knowing whether its planned investment in TC-AIMS II is justified.

Investments Have Not Been 

Incrementally Justified

DOD policy and guidance, as well as other related federal and best practice 

guidance,6

 state that large projects, such as TC-AIMS II, should be divided 

into a series of smaller, incremental subprojects or releases so that 

investment decisions can be made on each increment. By doing this, the 

tremendous risk associated with investing large sums of money over many 

years in anticipation of delivering system capabilities and associated 

expected business value far into the future can be spread across project 

increments that are smaller, of shorter duration, and capable of being more 

reliably justified and more effectively managed against cost, benefit, and 

risk expectations. 

The Army has neither analyzed TC-AIMS II costs and benefits, nor made 

associated investment decisions, on an incremental basis. Specifically, 

while the program office divided the system’s acquisition into five smaller 

increments (blocks), the economic analyses addressed life-cycle costs and 

benefits for the entire system. The analyses did not identify separately the 

6

See, for example, the Clinger-Cohen Act of 1996, 41 U.S.C. §§ 434, and Office of 

Management and Budget, Circular No. A-130, Management of Federal Information 

Resources (Nov. 30, 2000).
Page 13 GAO-06-171 DOD Systems Modernization

costs and benefits for each of the five increments, and, thus, this 

information was not considered as program officials made decisions about 

TC-AIMS II at key milestones. Program officials stated that they have not 

analyzed costs and benefits on an incremental basis because once the 

program had been approved and initiated, they did not see the need 

thereafter to justify each increment. By not determining the costs and 

benefits of each of the system’s increments, the Army runs the risk of 

discovering too late (i.e., after it has invested hundreds of millions of 

dollars) that TC-AIMS II is not cost-beneficial. 

TC-AIMS II Has Not Been 

Defined and Developed 

within the Context of a DOD 

Enterprise Architecture

DOD’s acquisition policies and guidance,7 as well as federal and best 

practice guidance,8 recognize the importance of investing in IT business 

systems within the context of an enterprise architecture. Our research and 

experience in reviewing federal agencies show that not doing so often 

results in systems that are duplicative, are not well integrated, are 

unnecessarily costly to interface and maintain, and do not optimally 

support mission outcomes.9

 TC-AIMS II has not been defined and 

7

DOD, Department of Defense Directive Number 5000.1 and Department of Defense 

Architecture Framework, Version 1.0, Volume 1 (February 2004).

8

Clinger-Cohen Act of 1996, 40 U.S.C. §§ 11312 and 11315(b)(2); E-Government Act of 2002, 

Public Law 107-347 (Dec. 17, 2002); GAO, Information Technology: A Framework for 

Assessing and Improving Enterprise Architecture Management (Version 1.1),

GAO-03-584G (Washington, D.C.: April 2003); Chief Information Officer Council, A Practical 

Guide to Federal Enterprise Architecture, Version 1.0 (February 2001); and Institute of 

Electrical and Electronics Engineers, Standard for Recommended Practice for 

Architectural Description of Software-Intensive Systems 1471-2000 (Sept. 21, 2000).

9

See, for example, GAO, Information Technology: FBI Is Taking Steps to Develop an 

Enterprise Architecture, but much Remains to Be Accomplished, GAO-05-363

(Washington, D.C.: Sept. 9, 2005); Homeland Security: Efforts Under Way to Develop 

Enterprise Architecture, but Much Work Remains, GAO-04-777 (Washington, D.C.: Aug. 6, 

2004); DOD Business Systems Modernization: Limited Progress in Development of 

Business Enterprise Architecture and Oversight of Information Technology Investments, 

GAO-04-731R (Washington, D.C.: May 17, 2004); Information Technology: Architecture 

Needed to Guide NASA’s Financial Management Modernization, GAO-04-43 (Washington, 

D.C.: Nov. 21, 2003); 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); Business Systems Modernization: Summary of GAO’s 

Assessment of the Department of Defense’s Initial Business Enterprise Architecture, 

GAO-03-877R (Washington, D.C.: July 7, 2003); Information Technology: DLA Should 

Strengthen Business Systems Modernization Architecture and Investment Activities, 

GAO-01-631 (Washington, D.C.: June 29, 2001); and Information Technology: INS Needs to 

Better Manage the Development of Its Enterprise Architecture, GAO/AIMD-00-212

(Washington, D.C.: Aug. 1, 2000).
Page 14 GAO-06-171 DOD Systems Modernization

developed in the context of a DOD enterprise architecture. Instead, the 

Army has pursued the system on the basis of an Army logistics-focused 

architecture. This means that TC-AIMS II as a DOD-wide program is based 

on a service-specific architecture and not a DOD-wide architecture, thus 

increasing the risk that TC-AIMS II, as defined, will not properly fit within 

the context of future DOD enterprisewide business operations and IT 

environments.

Well-defined DOD Enterprise 

Architecture to Guide and 

Constrain TC-AIMS II Has Not 

Existed 

A well-defined enterprise architecture provides a clear and comprehensive 

picture of an entity, whether it is an organization (e.g., a federal 

department) or a functional or mission area that cuts across more than one 

organization (e.g., personnel management). This picture consists of 

snapshots of both the enterprise’s current or “As Is” environment and its 

target or “To Be” environment, as well as a capital investment road map for 

transitioning from the current to the target environment. These snapshots 

consist of integrated “views,” which are one or more architecture products 

that describe, for example, the enterprise’s business processes and rules; 

information needs and flows among functions, supporting systems, 

services, and applications; and data and technical standards and structures.

DOD has long operated without a well-defined enterprise architecture for 

its business environment. In 2001, we first reported that DOD did not have 

such an architecture, and we recommended that it develop one to guide 

and constrain IT business systems, such as TC-AIMS II.10 Over the next 4 

years, we have reported that DOD’s architecture development efforts were 

not resulting in the kind of business enterprise architecture that could 

effectively guide and constrain business system investments,11 largely 

because the department did not have in place the architecture management 

structures and processes described in federal guidance. In particular, we 

most recently reported in July 200512 that despite spending about $318 

million producing eight versions of its architecture, DOD’s latest version 

still did not have, for example, a clearly defined purpose that could be 

10GAO, Information Technology: Architecture Needed to Guide Modernization of DOD’s 

Financial Operations, GAO-01-525 (Washington, D.C.: May 17, 2001).

11GAO, DOD Business Systems Modernization: Improvements to Enterprise Architecture 

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

2003); Information Technology: Observations on Department of Defense’s Draft Enterprise 

Architecture, GAO-03-571R (Washington, D.C.: Mar. 28, 2003); GAO-03-877R; GAO-03-1018;

and GAO-04-731R.

12GAO-05-702.
Page 15 GAO-06-171 DOD Systems Modernization

linked to the department’s goals and objectives, and a description of the 

“As Is” environment and a transition plan. Further, we reported that the 

description of the “To Be” environment was still missing important content 

(depth and scope of operational and technical requirements) relative to, for 

example, the actual systems to be developed or acquired to support future 

business operations and the physical infrastructure (e.g., hardware and 

software) that would be needed to support the business systems. Over the 

last several years, we have also reported that DOD’s efforts for determining 

whether ongoing investments were aligned to its evolving architecture 

were not documented and independently verifiable.13 On September 28, 

2005, DOD’s Under Secretary of Defense for Acquisition, Technology, and 

Logistics and Under Secretary for Defense (Comptroller) issued the next 

version of its business enterprise architecture,14 which we are required to 

review, along with other things, such as the department’s efforts to review 

certain investments’ alignment with the architecture, pursuant to the Fiscal 

Year 2005 National Defense Authorization Act.15

According to program officials, the system has not been assessed against 

DOD’s business enterprise architecture because one has yet to be 

completed. Instead, as described in more detail below, program officials 

told us they have aligned TC-AIMS II with the Army’s enterprise 

architecture for logistics. However, without a well-defined architecture that 

sets the DOD-wide context within which a DOD-wide system is to fit, and a 

firm understanding of the extent to which TC-AIMS II, as defined, fits 

within that context, the program office risks acquiring a system that does 

not meet DOD business needs and introduces redundancies and 

incompatibilities that require costly and time-consuming rework to fix. 

Army Reports That TC-AIMS II Is 

Aligned with an Army-Specific 

Architecture

In the absence of a DOD-wide architecture, program officials told us they 

have developed the system in the context of the Army’s enterprise 

architecture for logistics—the Single Army Logistical Enterprise, which is 

managed by the Army’s Chief Information Officer. For example, in 2004, 

13GAO, DOD Business Systems Modernization: Billions Being Invested Without Adequate 

Oversight, GAO-05-381 (Washington, D.C.: Apr. 29, 2005).

14The Under Secretary of Defense for Acquisition, Technology, and Logistics and the Under 

Secretary of Defense (Comptroller) are responsible for overseeing the development of 

DOD’s business enterprise architecture. 

15Ronald W. Reagan National Defense Authorization Act for Fiscal Year 2005, Public Law 

108-375, § 332, 118 Stat. 1811, 1851-1856 (Oct. 28, 2004) (codified in part at 10 U.S.C. § 2222).
Page 16 GAO-06-171 DOD Systems Modernization

program officials requested the Army’s Chief Information Officer to 

determine whether TC-AIMS II was aligned with the logistic architecture. 

The Office of the Chief Information Officer conducted an analysis during 

the fall of 2004 that focused on, among other things, tracing TC-AIMS II 

business processes and requirements to those specified in the logistics 

architecture. The Chief Information Officer reported in March 2005 that 

TC-AIMS II, as defined in Blocks 1 to 3, was aligned with the logistics 

architecture. We did not review, and thus do not question, this analysis 

because TC-AIMS II is intended to be a joint system, and thus aligning it 

solely with the Army’s logistics architecture will not provide the program 

with sufficient basis for managing the risk of not being able to adequately 

ensure that a DOD-wide system aligns with a DOD-wide architecture. 

Risk Management Has Not 

Been Effectively 

Implemented

Effective risk management is vital to the success of any system acquisition. 

Accordingly, DOD acquisition management policies and guidance,16 as well 

as other relevant best practice guidance,17 advocate proactively identifying 

facts and circumstances that can increase the probability of an acquisition’s 

failing to meet cost, schedule, and performance commitments and then 

taking steps to reduce the probability of their occurrence and impact. 

Effective risk management includes 

• developing written policies and procedures; 

• assigning roles and responsibilities for managing risk; 

• developing a risk management plan that provides for (1) identifying and 

prioritizing risks, (2) developing and implementing the appropriate risk 

mitigation strategies, and (3) tracking and reporting on progress in 

implementing the strategies; and 

• executing the plan.

16DOD, Department of Defense Instruction Number 5000.2.

17Software Engineering Institute, Software Acquisition Capability Maturity Model® 

version 1.03, CMU/SEI-2002-TR-010 (Pittsburgh, PA: March 2002).
Page 17 GAO-06-171 DOD Systems Modernization

To its credit, the program office has satisfied the first three of these four 

key practices. First, it has adopted and uses the risk policies and 

procedures specified in DOD’s major IT systems acquisition guidance.18

Second, the program office has assigned risk management roles and 

responsibilities to the Government Risk Manager, who chairs the program’s 

Risk Management Board. The board, which consists of key program 

managers and stakeholder representatives,19 is responsible for ensuring 

that the risk management program is implemented according to the risk 

management plan. Among other things, this includes assigning individuals 

who are to develop and implement risk mitigation plans for all newly 

identified risks. Third, the program office has a risk management plan, 

dated October 2004, and this plan provides for (1) identifying and 

prioritizing risks, (2) developing and implementing the appropriate 

mitigation strategies, and (3) tracking and reporting on progress in 

implementing the strategies. For example, the plan defines procedures for 

program staff and the board to follow in prioritizing risks, including 

assessing its “risk exposure” on the basis of a probability of occurrence and 

potential impact. On the basis of the assessment, “risk exposure” is 

designated as either high, medium, or low.20 As of May 2005, the TC-AIMS II 

program office had identified 22 active risks in its risk inventory with the 

following exposures—1 high, 18 medium, and 3 low.

Fourth, since the program office has not fully implemented its risk 

management plan, it has not satisfied the fourth risk management 

practice—execution. For example, of the 22 active risks, 6 did not have 

mitigation strategies. Of these 6, 1 is high exposure and 5 are medium 

exposure risks. As another example, the program office’s inventory does 

not include all key risks, such as the lack of reliable economic justification 

and alignment to a DOD-wide architecture as previously described in this 

report.

18DOD, Department of Defense Instruction Number 5000.2.

19The Risk Management Board consists of key program officials, including the deputy 

program manager, system development manager, operations manager, user support and 

deployment manager, performance assurance manager, and business manager as well as the 

contractor’s program manager.

20According to the risk plan, risk exposure is a function of a risk’s projected impact and its 

probability of occurrence. It can be expressed as a relative function—the higher the level of 

exposure, the greater the risk to the program. Risk exposure is calculated by multiplying the 

impact by the probability of occurrence.
Page 18 GAO-06-171 DOD Systems Modernization

Program office officials stated that these risk management practices have 

not been fully implemented because of other competing priorities. Further, 

officials attributed the lack of risk mitigation strategies to staff turnover, 

which resulted in relatively few staff receiving training on how to use the 

automated tool employed by the office to document and track risks. In 

particular, program officials stated that only about 20 percent of the 

program staff (40 individuals) has attended the program’s training on how 

to use the automated tool. 

When we concluded our audit work, program officials acknowledged the 

missing risk mitigation strategies and stated that they are in the process of 

addressing them. Until the program fully implements effective risk 

management practices, there is increased probability that program risks 

will become actual problems leading to program cost, schedule, and 

performance shortfalls.

System Requirements Are 

Being Effectively Managed

DOD policy and guidance, as well as other relevant best practices,21

recognize the importance of effectively developing and managing system 

requirements. According to the policy and guidance, well-defined 

requirements are important because they establish agreement among the 

various stakeholders on what the system is to do, how well it is to do it, and 

how it is to interact with other systems. Having this agreement is key to 

acquiring a system that meets end-user needs and performs as intended.

Effective requirements development and management involve, among 

other things, (1) establishing a written policy on establishing and 

conducting requirements development and management activities; (2) 

eliciting desired and required system capabilities from users and 

translating them into system requirements; (3) documenting the 

requirements, including having users validate that they have been 

accurately captured; (4) ensuring that requirements changes are controlled 

as the system is developed and implemented; and (5) maintaining 

bidirectional traceability, meaning that a given requirement can be traced 

backward to its source and forward to both the component or increment 

that will satisfy the requirement and the test that will verify that it is 

satisfied. 

21See, for example, DOD, Department of Defense Instruction Number 5000.2, and Software 

Engineering Institute, CMU/SEI-2002-TR-010.
Page 19 GAO-06-171 DOD Systems Modernization

The program office is managing TC-AIMS II requirements in accordance 

with these five practices. First, the program office adopted DOD 

Instruction 5000.2 and related guidance,22 as the program’s policy for 

requirements development and management activities. The directive and 

guidance are also incorporated in program office plans that detail how the 

office develops and manages requirements during their life cycle—that is, 

from when requirements are first documented to when system 

responsibility is transferred to operations and maintenance support. 

According to program officials responsible for managing requirements, 

they use the guidance and plans to perform their work. 

Second, program officials elicited required system capabilities from end 

users through the program’s Joint Requirements Board, which consists of 

key system stakeholders and representatives and is chaired by the Joint 

Forces Command. The board is responsible for managing requirements 

development activities. Among other things, the board’s charter states that 

its duties include defining, reviewing, validating, prioritizing, and approving 

the system’s requirements. Board meeting minutes show evidence of it 

performing these duties, including, for example, reviewing the Block 3 

baseline requirements document on September 8, 2004. 

Third, program officials showed us how they document the requirements, 

using an automated tool. Further, the Joint Requirements Board approved 

the requirements baseline for each of the three blocks. 

Fourth, to manage system requirement changes, the program office 

established a change control structure (configuration control board) and 

supporting processes, which are documented in its 2004 configuration 

management plan. Consistent with the plan, the board has six voting 

members and includes representatives from the four services. As shown in 

board meeting minutes and supporting documentation, the board meets 

monthly to consider and decide on change requests. 

Fifth, the program maintains bidirectional traceability for the requirements 

using an automated tool.23 Specifically, program officials demonstrated to 

us how each requirement can be traced back and to its source (e.g.,

22DOD, Department of Defense Instruction Number 5000.2, and Defense Acquisition 

Guidebook, Version 1.0.

23Dynamic Object Oriented Requirements System. 
Page 20 GAO-06-171 DOD Systems Modernization

TC-AIMS II’s operational requirements document) and forward to the block 

in which the requirement is to be satisfied.

Important Steps Have Been 

Taken to Effectively 

Leverage Commercial 

Components

The quality of the processes and practices followed in acquiring softwareintensive systems greatly influences the quality of the systems produced. 

Moreover, acquiring custom-developed system solutions is sufficiently 

different from acquiring commercial component-based systems that 

adherence to certain practices unique to the latter is key to their success. 

As we have previously reported,24 DOD’s revised systems acquisition 

policies and guidance25 require that commercial components be used to the 

maximum extent that is feasible. Collectively, they also provide for the 

following commercial component acquisition management best practices:

• modifying components only after a thorough analysis of life-cycle costs 

and benefits, 

• ensuring that integration contractors are explicitly evaluated on their 

ability to implement commercial components, and

• ensuring that project plans provide for the time and resources needed to 

integrate commercial components with existing (legacy) systems.

The Army has largely complied with these practices for TC-AIMS II. First, 

program officials stated that it is their policy to discourage component 

modifications, which they have communicated in meetings and other 

program management directives. In addition, the program has established a 

joint configuration control board and supporting processes to limit and 

control changes to the commercial products being used. As stated in the 

program’s configuration management plan (dated June 30, 2005), the board, 

which consists of key program managers and stakeholder representatives, 

only approves proposed changes to those products if the change is justified 

by a thorough analysis of costs, benefits, and risks. The board meets 

monthly to discuss and decide upon such changes, and, according to 

program officials, this approach has resulted in no major modifications to 

date. 

24GAO-04-722.

25DOD, Department of Defense Instruction Number 5000.2.
Page 21 GAO-06-171 DOD Systems Modernization

Second, the program office evaluation of competing contractors included 

consideration of their ability to implement commercial components. For 

example, the TC-AIMS II request for proposal specified that the 

contractor’s ability to implement commercial products was to be a 

significant factor in evaluating overall performance. 

Third, the program’s work breakdown schedule (dated Nov. 9, 2004) 

specifies the time and resources needed for integrating commercial 

components with existing systems.

By following these best practices associated with acquiring commercialbased systems, the program is increasing the likelihood that TC-AIMS II 

will be successfully implemented and effectively used.

Effective Contractor 

Management Practices Have 

Not Been Fully Employed 

DOD policy and guidance and other relevant system acquisition 

management best practices recognize the importance of effectively 

managing contractor activities. To this end, policy and guidance call for, 

among other things, performing contractor tracking and oversight activities 

and using performance-based contracts to the maximum extent 

practicable. To its credit, the Army has performed key activities related to 

tracking and oversight. However, it has not fully implemented one key 

aspect of performance-based contracting. By not doing so, the program 

office has limited its ability to effectively influence contractor 

performance. 

Effective Contractor Tracking 

and Oversight Practices Have 

Been Followed

Department policy and guidance and related best practices guidance26

identify effective contractor tracking and oversight as a key contract 

management activity and define a number of associated practices to follow, 

including

• establishing a written policy on contract tracking and oversight;

• designating responsibility for contract tracking and oversight activities 

and having contracting specialists perform these activities; and

26See, for example, DOD, Department of Defense Instruction Number 5000.2, and Software 

Engineering Institute, CMU/SEI-2002-TR-010. 
Page 22 GAO-06-171 DOD Systems Modernization

• using approved contractor planning documents as part of periodic 

reviews and interchanges with the contractor, during which actual cost 

and schedule performance is compared with the contractor’s planned 

budgets and schedules to identify variances and issues. 

The program office’s tracking and oversight of the systems integration 

contractor from Block 3 largely satisfies these three practices. First, the 

program office has adopted the department’s acquisition management 

polices and guidance as its written program-specific policy on contractor 

tracking and oversight. 

Second, the program office assigned responsibility for contract tracking 

and oversight to its Budget Management Division, which has three staff 

devoted to these duties. The devoted staff are contracting specialists on 

detail from the General Services Administration’s Federal Systems 

Integration and Management Center. 

Third, the program office uses approved contractor planning documents as 

the basis for overseeing the contractor. These planning documents are 

specified in the contract and include a program management plan, a master 

project schedule, and program status reports. Collectively, these 

documents delineate when and how products and services are to be 

delivered. According to program officials, these planning documents are 

used during monthly status meetings with the contractor to track progress. 

In particular, they are used to compare actual cost and schedule 

performance to date with planned budgets and schedules to identify 

potential variances. 

Program officials attribute the state of their contract tracking and oversight 

capability to two factors. First, the program has been in existence for about 

10 years, thus allowing time for the office to develop disciplined processes 

in this area. Second, in hiring the Federal Systems Integration and 

Management Center contract specialists, the program has subject matter 

experts who know the importance of, and who actively advocate, 

rigorously following the processes. By employing key contract tracking and 

oversight practices, the program office is increasing the likelihood that the 

contractor will perform as expected. 
Page 23 GAO-06-171 DOD Systems Modernization

Performance-Based Contracting 

Approach Is Not Fully Consistent 

with Policy and Best Practices

Department policy, federal acquisition regulations, and other relevant best 

practices27 also advocate the use of performance-based contracting when 

acquiring services. Effective performance-based contracting includes

• defining clearly the work to be performed,

• specifying performance standards (quality and timeliness) that are tied 

to contractual requirements,

• establishing positive and negative incentives that are tied to the 

contractor’s performance, and

• having a quality assurance plan that describes how the contractor’s 

performance in meeting requirements will be measured against 

standards.

The program office’s approach to managing the contract is largely 

consistent with these four practices. First, the contract for Block 3 (dated 

Apr. 30, 2004) includes a statement of objectives that define the work to be 

performed. For example, the contract identifies specific project tasks (e.g., 

establishing a Block 3 development help desk for system users) and 

associated project management products (e.g., program management plan, 

program schedule, and program status reports) that the contractor is to 

perform and deliver, respectively, in accordance with the contract. 

Second, the contract includes performance standards (measures) that are 

contractually required. For example, it states that the help desk is to be 

staffed 24 hours per day, 7 days a week, with help operators capable of 

resolving 80 percent of user calls within 1 hour, while limiting caller onhold time to 3 minutes or less. 

Third, the contract provides positive incentives that are tied to contractor 

performance. That is, in addition to the base contract (cost plus fixed fee) 

amount, the contract includes an additional 8 percent fee that can be 

awarded to the contractor for satisfying specified performance criteria. 

27See, for example, Federal Acquisition Regulation, section 37.102(a); DOD, Department of 

Defense Directive Number 5000.1; and Software Engineering Institute, CMU/SEI-2002-TR010.
Page 24 GAO-06-171 DOD Systems Modernization

Fourth, the latest quality assurance plan, dated August 2004, describes how 

the contractor’s performance will be measured and what remedial steps are 

to be taken in case the contractor does not meet contractual requirements. 

However, the contract does not specify effective disincentives or penalties 

for failing to meet the performance criteria. More precisely, the contract 

does not provide for forfeiting all or part of the fee if the contractor fails to 

perform as expected. Instead, program officials stated that their practice of 

withholding the additional award fee when expectations are not met, 

constitutes a disincentive. For example, they said that they withheld the 

award fee for the contractor’s first performance period (which totaled 

about $900,000) because the contractor failed to develop two deliverables 

on time (the program management plan and the performance metrics). 

We do not agree that this practice constitutes an effective negative 

incentive because it does not penalize performance that fails to meet 

expectations. Moreover, program officials told us that in the above 

example, withholding the award fee was not a forfeiture, because it was 

actually deferred to the second performance period when the contractor 

had another opportunity to earn it. According to program officials, during 

the second performance period, the contractor earned almost $780,000 of 

the withheld fee from the first period by completing, among other things, 

first period tasks. 

In the absence of specific negative incentives that are tied to intended 

performance, the program is at increased risk of contractor 

nonperformance. This practice puts the program at risk of taking more 

time and spending more money than necessary to acquire contract 

deliverables and services. 

Conclusions It is unclear whether the Army’s planned investment in TC-AIMS II is 

warranted. Of critical concern is the absence of reliable analysis showing 

that further investment will produce future mission benefits commensurate 

with estimated costs. This is due in large part to the evident change in the 

scope of the program, which was initiated on the basis of the four military 

services using TC-AIMS II but has not been revised to reflect that two 

services have stated their intentions not to use the system. Compounding 

this uncertainty is the inherent risk of defining and developing this 

multiservice system outside the context of a well-defined DOD-wide 

enterprise architecture. Without this information, the Army cannot 

currently determine whether TC-AIMS II, as defined and as being 
Page 25 GAO-06-171 DOD Systems Modernization

developed, is the right solution to meet its strategic business and 

technological needs.

If these uncertainties are addressed and the Army demonstrates that

TC-AIMS II plans are the right course of action, the department largely has 

the capabilities that are essential to successful system acquisition and 

deployment, although there is room for strengthening its practices related 

to risk management and performance-based contracting. 

It is vital that Army and DOD authorities responsible and accountable for 

ensuring prudent use of limited resources first reassess whether allowing 

TC-AIMS II to continue as planned is warranted, and that the decision on 

how to proceed be based on reliable data about program costs, benefits, 

risk, and status.

Recommendations for 

Executive Action 

We recommend that the Secretary of Defense direct the Secretary of the 

Army to determine if continued investment in TC-AIMS II as planned 

represents a prudent use of the department’s limited resources. To 

accomplish this, the Secretary of the Army should take the following three 

actions:

• collaborate with the Office of the Assistant Secretary of Defense for 

Networks and Information Integration/Chief Information Officer, the 

Office of Program Analysis and Evaluation, and the Army Cost Analysis 

Division to prepare a reliable economic analysis;

• ensure that development of this economic analysis (1) complies with 

cost-estimating best practices and relevant Office of Management and 

Budget cost benefit guidance, (2) incorporates available data on 

whether deployed TC-AIMS II capabilities are actually producing 

benefits, and (3) addresses that the Air Force and Marines are not 

planning to use the system; and

• collaborate with the Undersecretary of Defense for Acquisition, 

Technology, and Logistics and the Under Secretary of Defense 

(Comptroller) to ensure that TC-AIMS II is adequately aligned with the 

evolving DOD business enterprise architecture.

In addition, we recommend that the Secretary of Defense direct the 

Secretary of the Army to present the results of these analyses to the Deputy 

Secretary of Defense, or his designee, and seek a departmental decision on 
Page 26 GAO-06-171 DOD Systems Modernization

how best to proceed with the program. Until this is done, we recommend 

that the Secretary of Defense direct the Secretary of the Army to limit 

future investment in already deployed applications to essential operation 

and maintenance activities and only developmental activities deemed 

essential to national security needs.

If—on the basis of reliable data—a decision is made to further develop

TC-AIMS II, we recommend that the Secretary of Defense direct the 

Secretary of the Army to ensure that the program implements effective 

program management activities related to risk management and 

performance-based contracting. 

Agency Comments and 

Our Evaluation

In its written comments on our draft report, signed by the Deputy to the 

Assistant Secretary of Defense for Networks and Information Integration 

(Command, Control, Communications, Intelligence, Surveillance, and 

Reconnaissance and Information Technology Acquisition) and reprinted in 

appendix III, DOD either agreed or partially agreed with our 

recommendations, and it stated that some of our findings have merit and 

that it has significant efforts ongoing to comply with applicable guidance. 

For example, while DOD agreed that TC-AIMS II was originally defined and 

implemented without a complete and formal enterprise architecture and 

that the program had not identified the lack of a mature architecture as a 

program risk, it stated that the program is taking steps to ensure alignment 

to relevant enterprise architectures and is thereby mitigating this risk. In 

addition, although the department agreed that the latest economic analysis 

shows a negative return on investment, it said that other intangible benefits 

not included in the analysis, such as improved planning and equipment 

tracking, bolster the value of TC-AIMS II. Further, it agreed that the system 

was originally envisioned as a single DOD-wide solution and that the Air 

Force and Marine Corps are no longer intending to use the system, but 

added that it was now evaluating whether these two services’ existing 

(legacy) systems should be enabled to share data with TC-AIMS II, rather 

than be replaced in their entirety by a joint system as was originally 

envisioned. According to DOD, the results of this evaluation are to be 

considered at the next milestone review, which is planned for early to mid2006. 

These comments are largely consistent with our report. Specifically, the 

report makes clear that DOD is managing TC-AIMS II in accordance with 

some key practices and has efforts under way, such as those previously 

cited, intended to bring the program into compliance with other key 
Page 27 GAO-06-171 DOD Systems Modernization

practices. However, the report also points out noncompliance in areas 

intended to provide sufficient information to determine how the TC-AIMS 

II program should proceed. Accordingly, it contains recommendations to 

ensure that the economic analysis is updated to (among other things) 

reflect current operating assumptions, and that the program is adequately 

aligned with the department’s evolving enterprise architectures. It is 

precisely because the program does not have this information that, despite 

having invested $751 million over 11 years, the department does not know 

whether the program as defined is the right solution to meet DOD-wide 

asset deployment needs. 

DOD offered five detailed comments on our four recommendations. The 

department’s comments and our responses are as follow:

1. DOD stated that the TC-AIMS II program has used best practices and 

followed all economic analysis requirements specified in relevant DOD 

and OMB guidance, and has successfully passed milestone reviews at 

which it was required to show costs and benefits for both the entire 

system and its increments. In addition, the department stated that even 

though its economic analysis showed a slight negative return on 

investment, the system’s intangible benefits bolster the program’s 

overall value. According to DOD, the program identified these 

intangible benefits to obtain department milestone approval, and this 

documentation was provided to us on October 31, 2005. This 

notwithstanding, the department stated the program will (1) conduct, 

in coordination with the Office of the Secretary of Defense’s Program 

Analysis and Evaluation, an analysis to determine the relationship of 

TC-AIMS II and other programs, such as the Global Combat Support 

System, that may provide similar functionality to ensure optimal return 

on investment and (2) brief the Networks and Information Integration 

Overarching Integrated Product Team in preparation for the next major 

milestone decision review. It also stated that these results will be used 

to justify further investment. 

We do not agree that the program has used all best practices and 

followed all requirements specified in relevant guidance. In particular, 

the Army did not economically justify its TC-AIMS II investment on the 

basis of reliable estimates of costs and benefits and did not invest in 

TC-AIMS II within the context of a well-defined architecture, both of 

which are recognized best practices as well as DOD and OMB 

requirements. In addition, while it is appropriate to consider intangible 

benefits in economically justifying an investment, these benefits are not 
Page 28 GAO-06-171 DOD Systems Modernization

in the economic analysis, and the separate document provided on 

October 31, 2005, did not contain sufficient rationale and justification 

for claimed qualitative benefits. Rather, the information provided was a 

restatement of the quantitative benefits in the economic analysis. 

Further, by stating that it is to conduct an analysis of the relationships 

of TC-AIMS II to other programs that provide similar functionality and 

use the results of this analysis to justify further system development, 

DOD is recognizing that it does not have the information it needs to 

make informed investment decisions. If done thoroughly, the analysis, 

which the department committed to conduct, should help to inform 

future program decisions. 

2. Consistent with our report, DOD stated that TC-AIMS II was 

established as a joint military service program. However, in explaining 

why the Air Force and Marine Corps are not intending to use TC-AIMS 

II, it added that changes to operations throughout the world since then 

have necessitated changes to the services’ deployment processes. In 

light of this, the department stated it will evaluate other options for 

data exchange among Air Force and Marine Corps existing asset 

deployment systems and TC-AIMS II, instead of having all the services 

use a single, joint system. Further, the department said it will have the 

program, in coordination with Program Analysis and Evaluation, 

develop an economic analysis for TC-AIMS II that is based on the 

system being used solely by the Army and the Navy. DOD also 

commented that our report assumed a positive cost-benefit impact 

from including the Air Force and Marine Corps in the program.

We support the department’s decision to develop an economic analysis 

that reflects this material change in the program’s scope, which is what 

we recommended. However, we would note that DOD’s comments do 

not explain how unspecified changes to operations throughout the 

world caused unspecified changes to each of the services’ deployment 

processes, which in turn required DOD to have to interface multiple 

service-unique systems, rather than adopting a joint system. We would 

expect such an explanation to be an integral part of updating the 

economic analysis, as will the costs of pursuing service-unique courses 

of action. 

With regard to the comment that we assumed the inclusion of the Air 

Force and Marine Corps would have a positive cost-benefit impact, we 

do not agree. We made no assumption about the impact of the 

program’s scope on the cost-to-benefit or return on investment ratios. 
Page 29 GAO-06-171 DOD Systems Modernization

Rather, our point is that DOD policy and related guidance state that 

programs should be economically justified by, among other things, cost 

and benefit estimates that are based on realistic plans for the program’s 

scope. Such realistic plans did not exist because DOD’s justification 

was based on the four services using the system, when in reality the Air 

Force and Marine Corps do not intend to do so. Relevant guidance calls 

for updating economic analyses when significant program changes 

such as these occur. Accordingly, we recommended that the 

department follow this guidance to ensure it had adequate information 

for informed decision making.

3. DOD commented that it has worked over the past several years to 

develop an enterprise architecture and is on a path to fully defining and 

effectively managing its enterprise architecture. It also said that it is 

working to align TC-AIMS II with relevant evolving architectures. In 

particular, DOD stated that Blocks 1 through 4 are aligned with the 

Joint Deployment Operational Architecture and the program office 

continues to work to align the program with the Joint Deployment and 

Distribution Architecture, which it said is currently aligning to the 

evolving Business Enterprise Architecture. 

We do not take issue with the comments that work has been and is 

under way in this area. Our point is that the Business Enterprise 

Architecture is still a work in progress and what has been available to 

guide and constrain business system investments, such as TC-AIMS II, 

has not been sufficient. Moreover, program officials told us that

TC-AIMS II has not been assessed against the Business Enterprise 

Architecture because this architecture has not yet been completed. 

Without a well-defined DOD-wide architecture that sets the context 

within which such a joint military service system is to fit, and a firm 

understanding of the extent to which TC-AIMS II, as defined, fits within 

that context, the program office risks, among other things, acquiring a 

system that does not meet DOD’s strategic business needs. 

4. DOD stated that while comprehensive mitigation and contingency 

strategies were not developed for all of the 22 risks cited in our report, 

the program office has subsequently developed strategies for them. 

DOD also commented that subsequent risk management data, along 

with evidence that risks are continuously reviewed and updated, was 

provided to us on October 28 and November 3, 2005. 
Page 30 GAO-06-171 DOD Systems Modernization

We acknowledge that program officials orally stated that this had 

occurred. However, we have yet to receive any documentation to 

substantiate these statements. 

5. DOD stated that while the current TC-AIMS II contract does not include 

direct disincentives for contractor failure to meet performance criteria, 

its semiannual award fee mechanism serves a similar purpose. 

Nonetheless, DOD commented that it will address its award fee 

implementation on future TC-AIMS II contract reviews. 

We do not agree that this semiannual award fee approach is an effective 

disincentive because award fees are only being withheld when 

contractor performance does not exceed certain targets; conversely, 

direct disincentives penalize poor performance that falls short of 

meeting contractually required levels of performance. Without direct 

disincentives, the program is at increased risk of contractor 

nonperformance, and thus taking more time and spending more money 

than necessary to acquire contract deliverables and services. We 

support the department’s stated commitment to address this issue. 

We are sending copies of this report to interested congressional 

committees. We are also sending copies to the Director, Office of 

Management and Budget; the Secretary of Defense; the Deputy Secretary of 

Defense; the Undersecretary of Defense for Acquisition, Technology, and 

Logistics; the Assistant Secretary of Defense (Networks and Information 

Integration)/Chief Information Officer; the Secretaries of the Air Force, 

Army, and Navy; the Commandant of the Marine Corps; the Department of 

the Army’s Chief Information Officer; and the Program Executive Officer, 

Enterprise Information Systems, Transportation Information Systems, 

Department of the Army. We are also sending copies to other interested 

parties. This report will also be available at no charge on our Web site at 

http://www.gao.gov. 

Should you have any questions about matters discussed in this report, 

please contact me at (202) 512-3439 or hiter@gao.gov. Contact points for 

our Offices of Congressional Relations and Public Affairs may be found on 
Page 31 GAO-06-171 DOD Systems Modernization

the last page of this report. A GAO contact and staff who made major 

contributions to this report are listed in appendix IV.

Randolph C. Hite

Director, Information Technology Architecture 

 and Systems Issues
Page 32 GAO-06-171 DOD Systems Modernization

Appendix I

Objective, Scope, and Methodology AAppenednxidexiIs

Our objective was to determine whether the Transportation Coordinators’ 

Automated Information for Movements System II (TC-AIMS II) was being 

managed according to important aspects of the Department of Defense’s 

(DOD) acquisition policies and guidance, as well as other relevant 

acquisition management best practices. To accomplish this, we focused on 

the program’s (1) economic justification; (2) architectural alignment;

(3) risk management; (4) requirements development and management;

(5) commercial components; and (6) contract management, including 

contractor oversight and performance-based contracting. 

To determine whether the Department of the Army had economically 

justified its investment in TC-AIMS II, we reviewed the latest economic 

analysis to determine the basis for the cost and benefit estimates and net 

present value calculations. This included evaluating the analysis against 

DOD policies and guidance1

 as well as other relevant best practices 

guidance.2 It also included interviewing responsible program officials, 

including the program and deputy program managers, regarding their 

respective roles, responsibilities, and actual efforts in developing and/or 

reviewing the economic analysis. In addition, we also interviewed the 

program and deputy program manager and the Office of the Assistant 

Secretary of Defense for Network Information and Integration about the 

purpose and use of the analysis for managing the Army’s investment in the 

TC-AIMS II program, including the extent to which measures and metrics 

showed that benefits projected in the economic analysis were actually 

being realized. 

1

These policies and guidance included DOD, Department of Defense Directive Number 

5000.1, The Defense Acquisition System (May 12, 2003); Department of Defense Instruction 

Number 5000.2, Operation of the Defense Acquisition System (May 12, 2003); and Defense 

Acquisition Guidebook, Version 1.0 (Oct. 17, 2004).

2

See, for example, Office of Management and Budget, Circular No. A-94: Guidelines and 

Discount Rates for Benefit-Cost Analysis of Federal Programs (Oct. 29, 1992); and GAO, 

Information Technology: DOD’s Acquisition Policies and Guidance Need to Incorporate 

Additional Best Practices and Controls, GAO-04-722 (Washington, D.C.: July 30, 2004).
Appendix I

Objective, Scope, and Methodology

Page 33 GAO-06-171 DOD Systems Modernization

To determine whether the Army had aligned TC-AIMS II to the DOD 

business enterprise architecture,3

 we relied on our prior reports addressing 

DOD and Army architecture development and implementation efforts and 

documents on the Army’s efforts to align TC-AIMS II with its logistics 

architecture (the Single Army Logistics Enterprise), as well as documents 

on the Army’s efforts to align the logistics architecture with DOD’s business 

enterprise architecture. We also interviewed officials from the TC-AIMS II 

joint program management office, the Office of the Assistant Secretary of 

Defense for Networks and Information Integration/Chief Information 

Officer, and the Office of the Army’s Chief Information Officer about DOD 

and Army architecture efforts and TC-AIMS II’s alignment to them.

To determine whether the Army was effectively managing key system 

acquisition activities, namely risk management, requirements development 

and management, commercial components, and contract management, we 

did the following:

• To assess risk management, we reviewed the program’s risk policies, 

processes, management plan, and related documentation. We also 

observed how the program used an automated tool (database) to 

document and track risks, including developing risk mitigation 

strategies. In addition, we analyzed a version of the database to 

determine, among other things, the state of risk mitigation strategies. We 

then compared these activities with DOD policy, guidance, and related 

best practices to determine whether variances existed, and if so, why. 

Moreover, we interviewed Army officials involved with risk 

management, including the program manager and risk manager, to 

discuss their roles and responsibilities for managing risk associated 

with acquiring and implementing TC-AIMS II.

3

GAO, DOD Business Systems Modernization, Long-standing Weaknesses in Enterprise 

Architecture Development Need to Be Addressed, GAO-05-702 (Washington, D.C.: July 22, 

2005); Information Technology: Enterprise Architecture Use across the Federal 

Government Can Be Improved, GAO-02-6 (Washington, D.C.: Feb. 19, 2002); and 

Information Technology: Leadership Remains Key to Agencies Making Progress on 

Enterprise Architecture Efforts, GAO-04-40 (Washington, D.C.: Nov. 17, 2003).
Appendix I

Objective, Scope, and Methodology

Page 34 GAO-06-171 DOD Systems Modernization

• To assess requirements development and management capabilities, we 

reviewed program documentation, such as the official list of 

requirements, and system specifications and evaluated them against 

these relevant best practices4

 for several characteristics, including 

traceability and prioritization. We observed program office staff trace 

requirements to both higher level documents and lower level 

specifications using an automated tool. We interviewed Army officials 

involved in the requirements development process, including the 

program and deputy program managers, to discuss their roles and 

responsibilities for developing and managing requirements.

• To evaluate the management of commercial components, we reviewed a 

variety of documents, such as program and contractor studies of 

commercial components’ products, as well as the program office’s 

project plans, and contract task order documentation. Additionally, we 

conducted interviews with the program officials, including the program 

and deputy program managers, responsible for selecting the commercial 

components for planned TC-AIMS II blocks, to determine whether the 

commercial component products had been acquired in accordance with 

DOD policy, guidance, and related best practices. 

• To assess contract management, we focused on the program office’s 

contract tracking and oversight activities as well as its use of 

performance-based contracting. For tracking and oversight, we 

reviewed program management plans, contractor monthly status 

reports, and related documentation of the program office’s policies, 

processes, and activities for overseeing its system integration contractor 

for Block 3. We then compared these with DOD policies, guidance, and 

related best practices. We also interviewed program offices responsible 

for managing these activities. For performance-based contracting, we 

reviewed the Block 3 contract (issued in April 2004) and related 

documentation, such as contract modifications, quality assurance plan, 

and reports on determining contractor award fee, and then compared 

them with department policy and guidance, federal acquisition 

regulations, and related best practices. We also interviewed program 

management officials, including the contract specialist from the General 

Service Administration’s Federal Systems Integration and Management 

Center, who are responsible for performing these activities. 

4

Software Engineering Institute, Software Acquisition Capability Maturity Model® 

version 1.03, CMU/SEI-2002-TR-010 (Pittsburgh, PA: March 2002). 
Appendix I

Objective, Scope, and Methodology

Page 35 GAO-06-171 DOD Systems Modernization

We did not independently validate information on the program’s cost and 

budget as well as the number of problem reports. 

We conducted our work at DOD headquarters in the Washington, D.C., 

metropolitan area and at the Army’s Joint Program Management Office in 

Northern Virginia. We performed our work from October 2004 through 

October 2005, in accordance with generally accepted government auditing 

standards.
Page 36 GAO-06-171 DOD Systems Modernization

Appendix II

Assessment of Problem Reports ApendxiI

One indicator of system quality is defect density, which can be measured in 

a number of ways, including the trend in the number of system defects 

being reported and resolved. The program office prepares problem reports 

to document and prioritize system defects, and it established a database to 

manage and track these reports. Further, the program office assigns 

priority (i.e., criticality) levels to problem reports, with category 1 being the 

most critical, and category 5 being the least critical. The program office’s 

definition of each category is as follows:

Category 1: The system or function does not work and the problem must 

be addressed immediately, before any further work can be completed.

Category 2: The system or function may work, but the problem is severe 

and must be addressed before the end of the current block.

Category 3: Essentially, this is a category 2 problem with a known solution 

that would provide a temporary fix.

Category 4: A routine problem that does not pose a significant threat and 

thus no immediate action is required.

Category 5: A minor problem that does not pose a significant threat to 

system functionality.

As depicted in figure 2, the data show that the number of open (yet to be 

resolved) problem reports over the first two development blocks has 

decreased. In particular, the total number of open problem reports has 

decreased by 321 (or 75 percent), from 426 in fiscal year 1999 to 105 at the 

end of fiscal year 2004. During the same period, categories 1 and 2 problem 

reports decreased by 216 (or about 100 percent), from 217 to 1. This 

downward trend reversed for the less critical defects in fiscal year 2005. 

Specifically, as of September 30, 2005, there were 534 total defects, 25 of 

which were categories 1, 2, and 3. Program officials attributed this reversal 

of categories 4 and 5 defects to current Block 3 testing activities and stated 

that they anticipated the increase and are actively managing it. In addition, 

they stated that while overall defects have recently increased, the number 

of critical defects has increased only slightly, and program staff are 

working to resolve these increases, with the goal of having permanent 

solutions implemented before Block 3 is deployed, which is scheduled to 

begin in October 2006. 
Appendix II

Assessment of Problem Reports

Page 37 GAO-06-171 DOD Systems Modernization

Figure 2: Number of Problem Reports, Fiscal Years 1999 through 2005

0

100

200

300

400

500

600

Open problem reports

1999 2000 2001 2002 2003 2004 2005

Total problem reports

Category 1 (Critical)

Category 2 (High)

Category 3 (Medium)

Category 4 (Low)

Category 5 (Enhancement)

Block 1 Block 2 Block 3

Source: GAO analysis of DOD data.

Year
Page 38 GAO-06-171 DOD Systems Modernization

Appendix III

Comments from the Department of Defense ApendxiI
Appendix III

Comments from the Department of Defense 

Page 39 GAO-06-171 DOD Systems Modernization
Appendix III

Comments from the Department of Defense 

Page 40 GAO-06-171 DOD Systems Modernization
Appendix III

Comments from the Department of Defense 

Page 41 GAO-06-171 DOD Systems Modernization
Appendix III

Comments from the Department of Defense 

Page 42 GAO-06-171 DOD Systems Modernization
Appendix III

Comments from the Department of Defense 

Page 43 GAO-06-171 DOD Systems Modernization
Appendix III

Comments from the Department of Defense 

Page 44 GAO-06-171 DOD Systems Modernization
Appendix III

Comments from the Department of Defense 

Page 45 GAO-06-171 DOD Systems Modernization
Page 46 GAO-06-171 DOD Systems Modernization

Appendix IV

GAO Contact and Staff Acknowledgments ApendxiIV

GAO Contact Randolph C. Hite, (202) 512-3439 or hiter@gao.gov

Staff 

Acknowledgments

In addition to the contact named above, Gary Mountjoy, Assistant Director; 

Justin Booth; Hal Brumm Jr.; Joanne Fiorino; Anh Le; Kush K. Malhotra; 

Teresa M. Neven; Dr. Rona Stillman; Amos Tevelow; and Bill Wadsworth 

made key contributions to this report.

(310295)
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